It happened in the 1970’s and it wasn’t fun. Are we setting up for repeat of Stagflation?
“Stagflation” has definitely been raised as a possibility. If it comes back, the Misery Index (unemployment rate + inflation rate) will surge.
Based on targeted 200,000 Federal layoffs, and many private layoffs taking place at this time, I think unemployment will go up in 2025.
Personally, I’m torn about inflation. Tariffs are inflationary, sending labor back home outside of the US is inflationary… but a recession is disinflationary. In the last month the 5-year US TIPS bond breakeven inflation rate has declined from 2.6% to 2.5%. It’s not always right, but it’s an unbiased real-time indicator about how market participants with skin in the game are viewing inflation over the next five years.
I think recession is a real possibility in 2025, but not a certainty, and inflation? Who knows. But a slowdown in 2025, really, really likely. A stock market bust worse into -20% bear market? Likely.
Historically stagflation came about for these reasons:
- Government policies, like hindering industrial output and tampering with the money supply.
- Supply shocks, like a sharp increase in energy and/or commodity prices.
- High unemployment.
All of those things appear to be a real possibility.
Hard to predict what will happen. I am concerned about some unforseen disaster – a natural disaster, another pandemic, an attack… We are not prepared to deal with such disasters, especially if relevant departments are being shuttered.
In ~2018, the global pandemic response team was downsized and supposedly spread out into other departments. Bottom line - we were unprepared for the pandemic.
I fear the same for a future unforseen disaster.
Time will tell.
I learned something recently… the very very bad GDPNow real-time GDP print of -2.8% was an anomaly… caused by the furious importation of things into the USA ahead of tariffs, especially London Gold moving to New York. Imports apparently decrease the GDP number. So it may not be as bad as first thought. But.. time will tell, indeed.
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“Confidence that the economy will continue to grow is fading, [ESPECIALLY] with a new management team in place.” Fixed the obvious typo. 
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With deficits under attack (unless the courts successfully torpedo wasteful spending cuts) I see no driver for an increase in inflation.
On the other hand, I believe we are already in recession, the numbers just lag to confirm. However, the recession will really be severe in overleveraged economies like China’s, compared to the US.
Recessions= decrease demand = no bidding up commodity prices. We see what is happening with the price of petroleum.
The reason we had stagflation in the 1970s was the truly massive spike in oil prices, from what, $3.50 per bbl to $40? More than 10x
Crude Oil Prices - 70 Year Historical Chart | MacroTrends
If we have another input price shock then it could happen again even during recession, and it seemed like in the 1970s we were ALWAYS in recession.
It would have to be BIG shock to make stagflation. Will tariffs be that shock? Could be. I don’t know. I don’t think anyone can say with any certainty. The most truthful honest answer is that stagflation is on the table.
FYI, I’m an oil industry insider, and we’re not going to Drill Baby Drill and crash oil prices to juice the economy. Crashing oil prices means we disappoint our shareholders, cut or eliminate the dividend, our share prices go down, and we have massive layoffs. That’s what oil executives say privately, in a survey where their identities are concealed:
Oil execs slam Trump’s tariffs and ‘drill, baby, drill’ in survey
Dr. Claudia Sahm, former FED economist, just dropped an article on stagflation:
I disagree about the 1970s. They believed in “cost-push” inflation back then. They thought increased petro prices NECESSITATED an increase in the money supply, so the Fed printed money like crazy. Also, France called our bluff and demanded gold for dollars. Nixon refused.The limitless faith in the USD ended.
So how does a 10x increase in the Dollar cost of a basic input (crude oil) not cause inflation? I’m not discounting your factors, though. I’m just wondering why you think I’m wrong.
I don’t remember oil prices going up 10X in the 1970s. Maybe they did. But If consumers and producers have to pay 10X more for gasoline, they have to reduce spending on other items. That causes recession, not inflation.
It caused both. Yes it happened! See the chart I posted .Imagine if oil went from $69 today to $750.
The catalyst creating stagflation is a major financial shock.
Things like a surge of unemployment or maybe Social Security checks drying up.
Hmmm… Nah! no chance of that in the near future… 
I’m not wedded to slowdown + inflation, I just hold it out there as possible. But I am wedded to slowdown whether with inflation or disinflation. If we don’t get a serious slowdown, possibly a recession, I’ll be gobsmacked.
And these things act with lags, so it may not show up for several quarters, maybe even early 2026.
This. Right now the data doesn’t support a recession…
However, people are earning more, spending less, and saving more, so they are certainly preparing for a downturn at some point…
As the mood gets darker, recession becomes a self fulfilling prophecy…