The Economy’s Warning Light Is Flashing Yellow

The job market is weakening, inflation is still too high, and we’re at serious risk of a once-in-50-years oil shock. This is almost the exact set of conditions that triggered the stagflation of the 1970s, which at the time was America’s worst economic crisis since the Great Depression. At the moment, the economy is still far from that kind of doomsday scenario, but the direction of travel is disquieting. The economy’s warning lights might not yet be flashing red, but they are certainly flashing yellow.

The jobs report released this morning showed that the U.S. labor market lost 92,000 jobs in February, causing the unemployment rate to rise to 4.4 percent. The numbers for the previous two months, which had suggested decent job growth, were also revised downward: January now showed fewer job gains than initially estimated and December showed overall job losses. These new numbers continue the trend of last month’s revisions, which showed that the economy had added just 181,000 jobs in all of 2025, a tenth of the jobs that had been added the year prior. Taken together, the numbers suggest that 2025 appears to have had the most months with negative job growth since 2010—the midst of the Great Recession—and that 2026 is off to a similarly slow start. The Trump administration sometimes claims that weak job numbers are the by-product of deporting undocumented workers, but the native-born unemployment rate has risen by half a percentage point since Trump took office.

[Rogé Karma: Would Trump risk an oil crisis?]

The labor market is not the only sign of trouble. A report released by the Commerce Department’s Bureau of Economic Analysis on February 20 showed that economic growth slowed dramatically in the final months of last year, from 4.4 percent in the third quarter down to just 1.4 percent, bringing total yearly growth to its lowest level since the pandemic decimated the economy in 2020. (The BEA estimated that one percentage point of the quarterly drop was caused by the federal-government shutdown.) On the same day, another report from the BEA showed that prices had risen by 3 percent in December compared with a year prior, the highest rate of inflation since April 2024.

The worst job numbers since the Great Recession, the slowest economic growth since COVID, and the worst inflation in nearly two years—these are not the signs of a healthy economy. And we haven’t even talked about oil yet.

As I wrote this morning, the U.S.-Iran war carries a very high risk of triggering an energy crisis if it lasts for more than a few weeks—the kind of crisis that experts believe could cause the price of oil to double or triple from its current level. That risk jumped almost immediately after my article was published, when Donald Trump posted on Truth Social that the war would not end without Iran’s “unconditional surrender.” The price of crude oil promptly shot up to about $90 a barrel and may go higher still. Meanwhile, Qatar’s energy minister, Saad al-Kaabi, has begun warning that oil prices could rise as high as $150 a barrel within weeks and that the situation could “could bring down the economies of the world.” As recently as yesterday, the oil markets were responding relatively calmly to the outbreak of war. Now panic might be setting in.

All of this looks eerily similar to the 1970s. At the beginning of the decade, the economy was already struggling. Inflation, after a period of decline, was starting to tick up again. The unemployment rate was low, about 5 percent, but higher than it had been just a few years prior. The economy was still growing, but less quickly than before.

[Annie Lowrey: Trump is a degrowther]

Then came the 1973 Arab oil embargo, and everything fell apart. Oil prices nearly quadrupled from late 1973 to early 1974. Because so much of the economy is dependent on energy, that caused the price of everything else to go up too. Inflation reached double digits. Meanwhile, consumers pulled back from spending, which, in turn, forced businesses to start laying off workers, setting off a vicious cycle. Economic growth plummeted, unemployment spiked, and the economy fell into recession. The Federal Reserve, facing both higher inflation and higher unemployment, hesitated to raise interest rates, making the inflation problem even worse. The crisis abated only at the end of the decade when, with inflation spiraling out of control, a new Fed chair jacked up interest rates to record levels and made the recession even deeper, with unemployment eventually reaching 11 percent and remaining high for most of the 1980s.

The current situation is not yet 1973 all over again, and it doesn’t have to be. The biggest difference between the situation then and the one we face now is that this time the pain is mostly self-inflicted. When Trump came into office, inflation was falling, job creation was strong, and the economy was projected to grow quickly. Only after the imposition of his global tariffs did things take a turn for the worse, and only after his decision to wage war on Iran did the world face the prospect of a full-blown energy crisis. Trump is old enough to remember the history that led to the bad old days of the ’70s. Perhaps that will keep him from repeating it.