September 1, 2026
For much of the Federal Reserve’s recent policy debate, investors have watched two areas closely: inflation and employment. New labor data may be changing the balance between them.
In a Bloomberg Markets Wrap article covering the September 2 market session, Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, pointed to a labor market that appears stable enough for the Federal Reserve to devote more attention to inflation.
“The labor market is pretty benign right now. There’s a strong argument to be made that the Fed has accomplished its mission on the employment front, and can now continue to pay more attention to inflation.”
The comment came as markets reacted to moderating private-sector job growth, lower oil prices, and continued uncertainty surrounding the conflict involving the Strait of Hormuz.
Rather than viewing the latest employment data as a warning sign by itself, Michael’s observation raises a different question: If employment no longer requires as much attention from policymakers, does inflation become the primary variable shaping the next phase of Federal Reserve policy?
Recent data showed U.S. businesses adding jobs at a more moderate pace in August.
That slowdown arrives against a labor market that Federal Reserve officials have continued to characterize as relatively healthy. Fed Chair Kevin Warsh recently acknowledged pockets of concern while describing overall employment conditions as consistent with full employment.
This distinction matters.
A labor market does not necessarily need rapid job creation to remain healthy. If employment is relatively stable and unemployment remains contained, the Fed may have less reason to use monetary policy specifically to support jobs.
That is the basis of Michael’s argument that attention can increasingly shift toward the other half of the Fed’s mandate.
Inflation had shown signs of easing, but the recent surge in energy prices introduced another source of uncertainty.
Oil prices climbed sharply as fighting involving the United States and Iran raised concerns over the Strait of Hormuz before retreating below $90 per barrel. That pullback provided some relief to both stock and bond markets.
Energy prices matter because sustained increases can eventually affect transportation, manufacturing, consumer prices, and inflation expectations.
For now, Federal Reserve Bank of New York President John Williams has indicated that there is evidence inflation continues to ease and that higher energy prices have not broadly spread into services.
The key issue is whether that remains the case.
If energy prices stabilize, the Fed may have more flexibility. If the geopolitical situation causes another prolonged increase in oil prices, inflation could once again become more difficult to contain.
Michael’s comment also highlights why individual employment reports may carry a different meaning depending on the broader economic environment.
When unemployment is rising sharply, weaker job creation can increase pressure on the Fed to support economic activity.
When employment is relatively stable, however, moderate job growth may simply indicate that the labor market is moving toward a more sustainable pace.
That could allow policymakers to evaluate interest rates primarily through the lens of inflation rather than responding aggressively to every change in employment data.
The result is a different policy environment: the Fed may have more room to remain patient on employment while watching closely for signs that inflation is reaccelerating.
The greatest uncertainty may not currently be coming from the U.S. labor market at all.
The conflict affecting the Strait of Hormuz has demonstrated how quickly geopolitical developments can influence energy markets, Treasury yields, and investor expectations.
A temporary increase in oil prices may have limited economic consequences. A prolonged disruption could be different.
That means investors may need to distinguish between two very different inflation scenarios:
The direction of that second scenario may depend more on geopolitical developments than domestic employment conditions.
We believe Michael’s Bloomberg comment highlights an important change in the economic discussion.
The labor market does not currently appear to be creating the same urgency for policymakers that it might during a period of rapidly rising unemployment. If employment remains relatively stable, inflation can become the more important variable in determining what the Federal Reserve does next.
That does not mean every increase in oil prices will result in a policy response. Policymakers will likely be watching whether higher energy costs persist and whether they begin spreading into other areas of the economy.
For investors, this makes it important to look beyond individual economic releases. Jobs, inflation, energy prices, geopolitical developments, and Federal Reserve policy are increasingly interconnected.
The employment side of the Fed’s mandate may be relatively settled for now. Inflation is the side that could still change the equation.
Source: Stocks, Bonds Bounce as Oil Halts War-Fueled Rally: Markets Wrap
(Needs subscription)
Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.
This is not an offer to buy or sell securities, nor should anything contained herein be construed as a recommendation or advice of any kind. Consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. No investment process is free of risk, and there is no guarantee that any investment process or investment opportunities will be profitable or suitable for all investors. Past performance is neither indicative nor a guarantee of future results. You cannot invest directly in an index.
These materials were created for informational purposes only; the opinions and positions stated are those of the author(s) and are not necessarily the official opinion or position of Hightower Advisors, LLC or its affiliates (“Hightower”). Any examples used are for illustrative purposes only and based on generic assumptions. All data or other information referenced is from sources believed to be reliable but not independently verified. Information provided is as of the date referenced and is subject to change without notice. Hightower assumes no liability for any action made or taken in reliance on or relating in any way to this information. Hightower makes no representations or warranties, express or implied, as to the accuracy or completeness of the information, for statements or errors or omissions, or results obtained from the use of this information. References to any person, organization, or the inclusion of external hyperlinks does not constitute endorsement (or guarantee of accuracy or safety) by Hightower of any such person, organization or linked website or the information, products or services contained therein.
Click here for definitions of and disclosures specific to commonly used terms.