All eyes on US CPI report – Expected to show 'full on stagflation'

Matthew Ryan, CFA Ebury

The US labour report for August put to rest the debate as to whether the jobs market is stalling. Only 22k net jobs were created in the month, which is essentially a rounding error. Further, the revisions to past months numbers were negative again, and June turned out to be the first month that saw a net jobs loss since the COVID pandemic.

Unemployment ticked up, wage gains were anaemic, and the four-month moving average of job creation is now printing at its lowest level in fifteen years (once the pandemic period is excluded).

The negative impact of Trump's tariffs on the economy is now undeniable, as manufacturing employment has shrunk for the fourth month in a row and business surveys invariably mention tariff related disruption as a major headwind.

With a Fed cut in rates guaranteed later next week, all eyes are now on the September CPI inflation report. This is expected to show yet another month of above target inflation and confirm that the US is in the midst of full on stagflation.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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