Transitory higher inflation but a fragile US job market—will the Fed hike?
Overall, the US labor market may now be under various structural and cyclical issues, both positive & negative.
Although the US headline unemployment (U3) rate remains around 4.3% on average, U6 (true unemployment) remains around 7.9%.
The number of employed persons to working-age population ratio declined sharply to near 2008-10 GFC recession levels under Trump 2.0.
On August 7, 2026, apart from ongoing developments in Trump’s ‘Iran circus,' the market's focus was also on the US NFP/BLS job report for July '26 and the overall employment situation in the world’s biggest economy. Overall, at a glance, under Trump’s chaotic policies, from tariffs to the Iran war, the US economy may now be facing a stagflation-like scenario—higher inflation, lower economic growth, and a fragile employment situation. The US job market may now be under meaningful stress due to Trump’s uncertain, bellicose policies on tariffs, war with Iran, and immigration & deportation despite the perceived manufacturing, construction, and AI-led productivity thrust.
The BLS Establishment Survey
The latest BLS establishment survey flash data (seasonally adjusted) shows that the U.S. economy (private + public/government sector) subtracted -23K non-farm payroll (NFP) jobs in July '26. The market was expecting an addition of +80K NFP jobs despite the boost from the FIFA World Cup being over. The US NFP employment covers public (government) and private sector employees/jobs, excluding the farming/agriculture industry. The TTM average was around +29K in July '26, while the YTM average was +61K vs. +10K in 2025; +122K in 2024; and +178K pre-COVID (2018-19).
The BLS flash data also shows the U.S. private sector (only private establishment/business employees) added 30K payroll jobs in July '26. The market was expecting a +78K gain against ADP's private payroll job addition of +44K in July. The TTM average was around +50K in July '26, while the YTM average was +72K vs. +25K in 2025; +85K in 2024; and +164K pre-COVID (2018-19).
The ADP private payroll TTM and YTM averages were also around +50K and +72K in July '26.
Overall, the nominal number of US NFP private employees was around 135588K vs. 132763 for ADP in July '26.
The latest BLS Establishment survey flash data also shows the government payroll, i.e., employment in federal, state, and local governments, contracted by around -53K jobs in July '26. The market was expecting +2K government job additions in July '26. The TTM average was around -23K in July '26, while the YTM average was -11K vs. -15K in 2025; +37K in 2024; and +15K pre-COVID (2018-19).
Overall view: NFP Employment
In July, private-sector employment rose (+30k), led by health care and construction (data center/AI infrastructure). The headline decline was driven by a sharp drop in local government education plus the post-World Cup correction in leisure/hospitality and softer retail amid subdued discretionary spending due to K-shaped economic growth/prosperity and a higher cost of living.
In July '26, the US NFP job addition was dragged by
Leisure & hospitality: -40K
Fading of FIFA World Cup boost—The Post-World Cup "Hangovers": Following massive, front-loaded hiring surges in May and June to accommodate the tournament, venues faced an abrupt collapse in traffic once fans departed. Overstaffed establishments are instantly corrected by slashing hours and letting temporary contracts expire, including a flux of cheerleaders and dancing/singing troops.
Unprecedented Fuel & Event-Pricing Spikes: The cost of domestic travel surged due to high oil and hotel prices, resulting in a severe drop in normal summer family vacations, which "crowded out" local tourism revenues.
Local Government Education: -50K
The Post-COVID Stimulus/Funding Fading/Expired: School districts across the country faced the final, hard expiration of remaining federal emergency relief funds. With local tax revenues squeezed by economic cooling, districts aggressively eliminated open vacancies and downsized support staff.
Structural Fiscal Realignment and Structural Budget Pressure: Facing structural deficits, municipal boards prioritized trimming administrative and non-essential educational roles over raising property taxes during an election year.
Summer holidays in schools affected teachers' jobs—most of which are contractual in nature under a no-work, no-pay policy.
Retail Trade (Specifically Supercenters & Warehouses): -19K
Rapid AI-Driven Fulfillment & Inventory Control: Major retail giants aggressively accelerated the rollout of computer-vision inventory tracking and automated self-checkout ecosystems to permanently trim frontline floor counts.
Squeezed Consumer Discretionary Wallets: Higher general cost of living and surging gasoline prices from Trump’s Iran war ‘fun’ affected discretionary consumer spending—forcing consumers to restrict spending to bare essentials, suppressing summer retail demand, and prompting immediate retail hiring freezes. Also, the FIFA World Cup boost for retail (by foreign tourists) faded post-June/July.
General merchandise retailers dragged the job addition most (-21K), followed by food & beverages and gasoline stations & fuel dealers; but specialty retailers (+10K) and motor vehicle & parts dealers helped to some extent.
Financial Activities (Credit Intermediation & Insurance): -14K
Higher Borrowing Costs: Prolonged Fed restrictive monetary policy and higher bond yields because of the lingering Iran war affected fresh lending and refinancing volumes, rendering large swaths of mortgage and credit processing workforces redundant.
AI Disruption: Admin Algo Overhaul: The insurance sector faced a wave of consolidation and cost-cutting, replacing traditional, entry-level claims processing and underwriting positions with highly efficient generative AI compliance tools.
Commodity Volatility Desk Expansion: Prolonged high interest rates and algorithmic automation severely weighed down commercial banking (-9,000) and insurance carrier (-7,000) payrolls.
However, securities, commodity contracts, and investment desks bucked the trend, adding 1,000 jobs amid vibrant Wall Street.
Energy Risk Hedging: The maritime SOH (Strait of Hormuz) blockades amid escalating Iran wars caused extreme volatility in global energy markets. Wall Street trading firms, hedge funds, and energy brokers hired specialized risk analysts and quantitative traders to navigate and monetize the rapid fluctuations in Brent crude/WTI oil and global freight pricing.
Professional & Business Services and other services: +18K + 9K
Other Services: Corporate Policy Compliance
Regulatory & Structural Realignment: Pockets of growth within this catch-all sector were driven by legal services, corporate consulting, and business associations.
Navigating Uncertainty: U.S. corporations added corporate compliance, legal, and trade advisory personnel to restructure corporate supply chains around shifting customs enforcement, immigration policy updates, and structural workforce changes caused by AI deployment.
In July '26, the US NFP job addition was boosted by the following:
Private education & health services: +25K
Health Care & Social Assistance: Continued Surge—Aging Demographic Inelasticity: The structural demand of the aging Baby Boomer generation makes healthcare completely immune to short-term macroeconomic shocks, geopolitical friction, or tariff changes.
Nursing and Specialized Skill Deficits: Hospitals and outpatient facilities are still actively working through multi-year structural staffing shortages, meaning any available healthcare talent is absorbed into payrolls instantly, regardless of economic headwinds.
Continues as the most consistent source of private-sector job growth driven by structural demand: aging population, ongoing needs in ambulatory care services (+18k), nursing/residential care, and home health. Although recently the job addition pace slowed from the prior 12-month average (~36k), the underlying demographic and medical demand remains intact.
Construction jobs: +22K
Boosted by AI data centers and high-tech factories being built up across America amid an unprecedented AI CAPEX by big techs. Almost entirely non-residential, led by strong contribution from data center and AI-related infrastructure buildout (specialty trade contractors were a key driver). Residential construction stayed weak due to elevated borrowing costs, a weak labor market, subdued discretionary consumer spending, and soft housing demand. This continues a pattern seen earlier in 2026 of infrastructure/tech-driven construction offsetting residential softness.
The Specialty Trade "Gold Rush": Building an AI data center is highly labor-intensive, requiring 4-6K workers per hyperscale site. Of the 22K jobs added in July, 18,000 were filled by specialty trade contractors—with 15,400 of those concentrated strictly in nonresidential trades.
High-Density Systems Demand: AI processing requires specialized liquid cooling, advanced HVAC environmental controls, and dense electrical grids. This has triggered intense competition for specialized electricians, HVAC technicians, and steel framers who are commanding premium wages.
Advanced High-Tech Manufacturing Plants: Alongside data centers, the industry is seeing a persistent influx of work from high-tech manufacturing facility projects from RAMs to chips & magnets for national strategic security and to reduce dependence on China.
Labor supply headwinds: The data center construction industry faces a critical shortage of ~500K skilled workers in 2026. The issue isn't a lack of project funding or corporate demand; it is a lack of licensed skilled/specialized workers to pull wire and pour concrete. While many other sectors are laying off workers due to AI automation, tech companies are actively forced to hire skilled professionals at record-high rates for their AI data center construction work.
Information: +11K
Renewed Hollywood boost: Led by the Motion Pictures & Sound Recording sector (+10K) amid Trump’s 100% tariff threats last year on foreign film productions—forcing Hollywood studios to bring production back home from Canada, Australia, and New Zealand (despite the advantage of cheaper labor and huge tax incentives). But various state-level incentives (like California) are also helping Hollywood come back despite higher labor costs. Strict labor laws and the threat of counter-tariffs by the EU.
Cybersecurity Operations & "AI Guardrail" Hiring: Despite headline-grabbing structural layoffs amid AI disruptions across traditional media, streaming platforms, and middle-management tech roles, firms added heavy headcounts in specialized sub-sectors.
Geopolitical Defense Tech: The escalation of the Iran war sparked an immediate, severe wave of global, state-sponsored cyber warfare. This forced defensive hiring sprees across private infrastructure networks, enterprise security firms, and defensive aerospace software contractors to protect national utilities and cloud systems.
Manufacturing jobs: +5K
Defense Manufacturing & Aerospace: Resilient Sub-Sector Boost The Geopolitical Wartime Engine—While general manufacturing remained largely flat due to Trump's tariffs & other policy uncertainties, defense-related contracting surged.
Escalating Federal Procurement: The active & lingering military conflict involving Iran, along with supply commitments to Ukraine, forced massive emergency federal defense allocations, driving heavy hiring across munitions, naval defense technology, and aerospace engineering plants to restock domestic stockpiles (amid fast-depleting critical munitions).
The Defense & Domestic Chip Push: With the Iran conflict spiking global supply chain anxieties and President Trump's tariff threats prioritizing domestic production, there is an ongoing imperative to construct and expand specialized manufacturing plants—aerospace, semiconductor fabrication, and local munitions production facilities—to restock military hardware amid the lingering Iran & Ukraine war.
Specialty Retail (Sporting Goods, Hobbies, Music, Books): +10K
Niche Multi-Channel Consumer Resilience: While general supercenters suffered, specialty shops benefited from a consumer shift toward experiential and hyper-focused hobbyist spending—such as sporting gear post-World Cup or local recreational equipment.
Lower Exposure to Automation: Unlike a grocery store or warehouse club, specialty retail relies heavily on curated customer service and domain-specific product knowledge, making these front-facing roles much harder to replace with automated kiosks.
Wholesale Trade: +5K
The Tariff-Dodging "Front-Loading" Surge: Importers and B2B distributors aggressively hired logistics coordinators and account managers to clear backlogs before new, proposed universal tariffs by the Trump administration could fully take effect in the next few months.
Data Center Supply Chains: Job additions were heavily concentrated in the durable goods wholesale sector. Distributors hired account managers and technical sales reps to coordinate the delivery of massive industrial components—such as heavy transformer grids, raw steel, and fiber-optic cables—directly feeding the domestic AI data center building boom.
Industrial Supply Re-shuffling: While consumer wholesale (B2C) cooled, wholesale job additions concentrated heavily in the B2B segment, led by durable industrial goods—specifically distributing raw steel, heavy wiring, and advanced mechanical components. This hiring was fueled directly by the ongoing construction boom in domestic data centers and high-tech defense production plants.
Transportation & Warehousing: +10K
Infrastructure Project Redirection: Demand for labor did not disappear; it was heavily redirected. Job gains were highly concentrated in localized drayage, specialized heavy-haul trucking, and critical infrastructure logistics required to move materials to industrial job sites.
Specialized Material Transport: Despite cooling consumer shipping demand, hiring spiked for specialized heavy-haul trucking and localized industrial drayage. These workers were required to transport oversized cooling rigs, heavy turbine equipment, and prefabricated building modules to active manufacturing and technology job sites.
Infrastructure Asset Proximity: While retail giants reduced headcount in consumer fulfillment centers via robotics, tech infrastructure firms added localized logistics and material-moving roles to stage and house hyper-specific server equipment near newly established grid centers.
Overall, in the last three months (May-June-July), the US job market was
Boosted by
Private education & health services: +103K
Professional & business services: +58K
Construction: +29K
Manufacturing: +14K
Wholesale Trade: +11K
While dragged by:
Government (-61K), led by local governments (-65K)
Leisure & hospitality: -41K
Financial Activities: -36K
Retail trade: -18K
The 2M revision was -103K.
As per the latest revision in the establishment survey, the change in total nonfarm payroll (NFP) employment for May was revised down by -66K, and the change for June was also revised down by -37K. With these revisions, NFP employment in the last two months combined was revised down by -103K from what was previously reported. The 3MRA was around +80K in July '26 vs. +64K last year (y/y).
As per ADP Private Payroll:
Sector-level hiring was choppy last month, but pay sent a clear signal. Year-over-year pay for job changers accelerated to its fastest pace of growth in nearly a year.
Job changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market.
Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions.
July payroll growth is +4.4% (job stayers) to ~$62100/year.
Also in the last 6 months, the US job market was
Boosted by
Private education & health services: +216K
Professional & business services: +110K
Construction: +82K
Manufacturing: +29K
Wholesale Trade: +18K
Retail Trade: +15K
Transport & warehousing: +18K
Other services: +12K
While dragged by:
Government (-59K), led by local governments (-49K)
Leisure & hospitality: -35K
Financial Activities: -57K
Retail trade: -18K
Information: -35K
The BLS Household Survey
The latest BLS household (HH) survey data shows the nominal number of the US civilian non-institutional population (>16 years of age) increased by +116K to 275282K in July '26 (CAGR +0.4%), while the labor force decreased by -264K to 169094K (CAGR -1.6%).
The labor force participation rate was 61.4% in July '26 vs. 61.8% sequentially and 62.3% yearly, and the lowest since Oct '21. The pre-COVID average participation rate was around 63.1%, while 2006 levels were around 66.4% (pre-GFC days).
As per the BLS Household (HH) survey, the U.S. economy has shed -87K employed persons sequentially in July '26 to 162177K vs. 163831K in Jan '25, when Trump took charge of the White House for his epic 2nd term.
Trump’s chaotic policies, from trade/tariffs and immigrants to the Iran war, may have singlehandedly caused the net contraction of employed persons by around 2K. And at the same time, the number of active labor participants also decreased by around the same 2K to 169094K in July '26, ensuring the net level of the unemployment rate remains almost unchanged. The TTM average of the number of employed persons was at -88K vs. labor force -120K and civilian population +136K.
The pre-COVID (2018-19) average rate of addition of employed persons was around +206K/M. Post-COVID (2022-24) average was around +154K, which now plummets to -259K on average (2026-YTM) under Trump 2.0. The US BLS HH survey includes nonfarm payroll (NFP) employees (private + public/govt) and self-employed persons (including professionals, contractors, and agri-workers). The July '26 TTM average for employed persons was -88K/M vs. the labor force -129K/M.
As per household survey data, the nominal number of unemployed persons decreased by -177K sequentially to 6917K in July '26 (as the number of active persons looking for some types of jobs—labor market participants—decreased much more than the number of employed persons).
In July '26, the U.S. unemployment rate (U3) edged down to 4.1% from 4.2% sequentially (m/m) and 4.3% yearly (y/y) and below the market expectations of 4.2%. The YTM average was 4.3% vs. 4.0% in 2025 and 3.6% in 2024, while the pre-COVID level was also 3.6%. The U-6 unemployment rate, including discouraged & underemployed workers, often referred to as the ‘true unemployment rate,' was unchanged at 7.9% sequentially & yearly and at pre-COVID levels of 6.8%. All types of US unemployment rates fell or remained flat amid a significant reduction in the labor force participation rate.
On July 26, the US employment rate was 95.9% vs. 95.8% sequentially and 95.7% yearly. The YTM average was 95.7% in 2026 vs. 95.7% in 2025, 96.0% in 2024, and 96.3% in 2019 (pre-COVID).
In July '26, the US employment-to-population rate was 58.9% vs. 59.0% sequentially and 59.6% yearly, the lowest in over 4 years; the pre-COVID rate was 60.8%. The YTM (2026) average was 59.2% vs. the 2025 average of 59.8% and 60.1% in 2024.
The US employment-to-population ratio was 58.3% at the Dec '09 GFC end period; under Trump 2.0, this US employment/working age population ratio contracted from 60.2% at Jan '25 to 58.9% at July '26, i.e., a fall of -1.3%. At the current trend, it may end around 58.3-58.0% by Dec '26.
As per BLS data, overall at a glance, almost 89% of the US labor force are payroll (salaried) employees, while ~7% are self-employed persons.
As per BLS data, the number of US multiple job holders (excluding agri) increased by +139K in July '26. The July '26 TTM and YTM averages were +30K vs. +30K in 2025. Multiple job holders are now around 5.2% of employed persons vs. 5.4% in 2025.
The US multiple job holders (derived through the difference between private payrolls of BLS establishment and household + agricultural workers/self-employed persons) increased by +324K to 10265K. The TTM average was +123K against total employed persons, -88K. The US multiple job holders, including the agri sector & self-employed persons (freelancers/gig workers), are now around 5.8% of employed persons (YTM-June '26) vs. 5.3% in 2025 and 6.3-5.3% in 2024-23 amid labor supply constraints, growing outsourcing (cost cutting), and skill mismatch.
If we convert USAWH (average weekly hours) and AHE (average hourly earnings) monthly, the average/median NFP earnings for July '26 were around $5161.50 vs. $5164.20 sequentially (-0.01%) and $4989.10 yearly (+3.5%). The average US NFP wage growth was around +3.8% in July-YTM against average total CPI inflation +3.5% (June-YTM), translating to an average real wage growth of around +0.5%. Overall, the average US wage growth was +1.0% in 2025 and +0.7% in 2024.
Overall, the BLS household survey shows a declining US unemployment rate driven by a shrinking labor force, not by strong net job gains. Employment (household measure) fell by 87,000, while the labor force contracted by a larger 264,000. This mechanical effect pushed the unemployment rate down to 4.1% (lowest since mid-2025 in some comparisons). Labor force participation fell to 61.4%—its lowest level since early 2021—and the employment-population ratio slipped to 58.9%. Both measures have trended lower through 2026. The rise in “not in the labor force” (+381k) accounts for most of the participation decline. Flow data suggest a mix of people leaving employment and some unemployed exiting the labor force.
On the positive side, there was a sharp drop in the teenage unemployment rate (amid a lower participation rate) and improvement for Hispanic workers. Prime-age participation held up better than the overall rate.
Contrast with the establishment survey: Payrolls fell 23,000 (private +30k, government –53k), while the household survey showed a larger employment decline. The two surveys often diverge in any given month due to differences in coverage, concepts, sampling, and the rise in multiple job holders.
In summary, the household data reinforce a cooling/softening labor market picture. The lower unemployment rate is not a sign of robust labor demand; it reflects reduced labor-force attachment. Participation and employment-to-population ratios remaining well below pre-pandemic levels continue to signal slack or structural withdrawal from the workforce, even as the headline unemployment rate stays historically low. This aligns with the broader theme of a “low-hire, low-fire” environment amid policy, geopolitical, and AI uncertainty, affecting corporate/business CAPEX, hiring, and, in turn, discretionary spending too.
The labor market is starkly divided by three macro forces:
The AI Cleave: Tech giants are eliminating retail, banking, and insurance roles through automation while fueling a blue-collar "gold rush" in construction to build hyperscale AI data centers.
Wartime Energy Shock: The active Iran conflict spiked oil prices, squeezing corporate profit margins and freezing hiring across hospitality and general merchandise sectors.
Protectionist Re-shoring: President Trump's 100% tariff threats on foreign movie sets to manufacturing drugs and chips (strategic sectors for national security interest) forced a sudden re-shoring of film production, manufacturing, and construction jobs along with allied sectors like transportation & warehousing too.
Conclusions
Overall, under Trump 2.0, the nominal number of US employed persons decreased or was almost stagnant, along with a sharp decline in labor force participation and the employment/working-age population ratio. Despite the rise of multiple job holders, if we discount the sharp decline in the above ratios, the US unemployment rate should be around 5.0% instead of 4.3% on average.
The US labor force decline is a mix of policy-driven supply reduction BY Trump’s anti-immigration thrust, demographics (aging/retirements), behavioral exits (discouragement, caregiving), and some statistical effects. Soft job creation reflects cautious employers operating in a high-uncertainty environment (geopolitics, trade, and energy costs) while structural demand remains concentrated in health care and AI/infrastructure-related construction. Together, these forces produce a labor market that can show a low unemployment rate even as payroll growth is weak or negative—because the pool of available workers is also shrinking. This dynamic is likely to persist as long as immigration remains constrained and demographic trends continue.
Also, from Jan '25 to July '26, the number of US multiple job holders (including agri) increased by +1757K against the net decline in employed persons of -1654K in the same period. The US labor force also contracted by around -1602K in the same period. All these indicate an increasing number of multiple job holders (gig workers) to make up for labor shortages and skill mismatches amid an increasingly tech/AI-savvy economy/labor market.
The US labor market/employment situation is stable to fragile to some extent but definitely not solid amid various structural and cyclical issues. Also, Trump’s chaotic policies, from the immigrant war and trade & tariff war to the Iran war, are also significantly contributing to supply constraints and wage/goods inflation.
Overall, at a glance, under Trump’s unpredictable policies, the US economy may now be facing a stagflation-like scenario:
Higher cost of living/inflation (adverse effects of tariffs, supply chain disruptions, and higher cost of energy/fertilizers/commodities)
A lower number of employed persons and a lower number of the labor force (both supply and demand issues/a slowdown in fresh job creation due to Trump’s uncertain policies and increasing reliance on AI/automation)
Lower economic growth (2.1% in CY25 vs. 2.8% in CY24); ~2.2% expected in CY26.
The Fed has to act in a balancing way to bring down core inflation (average 3.0%) by around 100 bps for its inflation target. And at the same time, it has to ensure the headline unemployment rate stays below the 4.5% red line and further bring it down by around 50 bps to around 3.8% pre-COVID levels average (maximum inclusive employment).
Thus, overall, the Fed has to ensure neutral monetary policy—neither tight nor loose—to ensure a balancing act to bring down inflation without causing a sharp decline in employment. To ensure a soft landing, the Fed may continue to keep real interest rates around +1.0% above the average (12M/6M) core inflation (CPI+PCE). Thus, the Fed may be on hold at least till Dec '26 amid transitory hotter US inflation (due to the SOH blockade and higher oil) and a stable, but not solid, labor market.
At a 3.75% REPO rate and 3.0% average core inflation, the Fed is now 0.25% below neutral (1.0% core real rate). The Fed may be on hold till Dec '26-'27 to bring down both core inflation towards 2.0% and the UEPR to 4.0%, ensuring gradual price stability without causing a hard landing/employment crisis. The Fed is now 0.25% below the core neutral rate (REPO RATE 3.75% - 3.00% CORE INFLATION); the Fed may hike 0.25% as insurance and to show steadfast commitment to bringing down inflation at any cost to TGT. But in reality, any such rate hike will cause the US 10Y bond yield to soar above 5.0% ─ the recession panic line.
Moreover, the Trump admin has to roll over ~$10T in debt in early 2027 at the lowest possible coupon rate, and thus Trump can't afford to allow his Fed Chair Warsh to hike for any hike. Warsh & Co. will continue their hawkish jawboning as an effective (?) tool to manage bond yields and inflation expectations w/o any real action. But Central Bank jawboning is also a fine art, and Warsh has to learn it perfectly from his predecessor & much more experienced ex-Chair Powell.
New Fed Chair Warsh often looks & sounds blunt. He is trying to bring QT from 2027 to reduce the Fed’s B/S size and inflation structurally, while at the same time, it may reduce/exempt regulatory limits for banks & institutions in the form of SLR (supplementary leverage ratio) ─ so that US banks & financial institutions may buy a higher amount of US bonds to keep bond yields lower. Warsh may also justify higher economic growth along with higher productivity, resulting in lower/stable inflation and higher growth.
Various Fed officials are now also debating a flexible inflation targeting regime (like an inflation target of +2.0% with a band of +/- 1.0% on both sides (1.0%-2.0%-3.0%) for policy flexibility. Similarly, the Fed may employ unemployment rate targeting of 4.0% +/- 0.5% on both sides (3.5%-4.0%-4.5%) for the ease of overall policy implementation in a systematic way rather than rushing.
Ahead of the Nov '26 US midterm election, Trump is now trying to bring down prices of daily/essential goods for ordinary Americans (vote bank) by pressuring big grocery/FMCG retail giants like Walmart. This shows Trump may not allow the Fed (Chair Warsh) to make any rate hikes on the excuse of higher inflation. Officially, as a central bank, the Fed may be bound to hike rates in an effort to suppress demand while the supply capacity of the economy is constrained so that both match each other and bring down prices/inflation (whatever may be the underlying causes of lower/disrupted supply). But a central bank can always be in wait & watch mode if it feels that the underlying causes are cyclical/transitory rather than structural/permanent.
Market impact
A less hawkish Fed would be negative for the USD and US bond yields and positive for equities and gold. But the growing narrative of an AI bubble and overall stretched valuation (TTM PE well over 30, bubble zone) may also drag Wall Street irrespective of any Fed narrative. And the steady contraction in employed persons, along with a higher cost of living, may also impact US consumer spending, the backbone of the US economy. Also, a fragile Iran-war ceasefire may boost oil and drag equities. Ahead of the Oct '26 Israeli general election, Israeli PM Netanyahu (BB) may escalate Iranian tensions for domestic political compulsion. Similarly, depending upon the actual trajectory of Iran's nuclear and SOH deal negotiations, if Trump feels the Iran deal may not help him politically (Nov '26 midterm election), Trump may also launch a surgical or even an all-out strike on Iran despite the shortage of munitions.
Bottom line: Summary
Here, transitory hotter US inflation and a stable/fragile but not solid labor market, coupled with Trump’s policy uncertainty, mean the Fed may be in wait & watch (hold) mode for the rest of 2026 rather than any hike or cut. Although a less hawkish Fed should be positive for the stimulus-addicted Wall Street, in the short/near term, the trajectory will depend upon Trump’s morning moods, truths, and random 24/7 media bytes (reality shows) on Iran.
As a face-saving exit from his Iran war mess amid reported shortages of critical munitions ahead of the Nov. '26 midterm election, Trump may withdraw from any active war without even any nuclear deal with Iran if the latter agrees to open the SOH (Strait of Hormuz) without any preconditions and fees. But Iran may not oblige easily and may also instigate the US if Trump doubles down on the SOH blockade and other economic sanctions in an effort to cripple the Iranian economy so that it has to surrender to Trump’s whims & fancies.
Moreover, even if Trump officially withdraws from his Iran war ‘excursions’ (fun), Israeli PM Netanyahu (BB) may not agree easily ahead of the Oct '26 Israeli general election. For BB, the Iran war may now be his 'trump card’ for the election, although most of the Israeli voters may not be so amused with him. On the other side, Iran may also be divided into hard & soft lines. Iran may also be waiting for a weaker Trump after a potential heavy loss of Republicans in the forthcoming Nov. '26 midterm election, which may be a referendum on Trump’s bellicose policies.
And there are growing probabilities that the US VP Vance may lead the Republicans or even the White House to prepare for the 2028 Presidential Election, turning Trump into a lame duck (shadow) president to deal with the heavy anti-incumbent wave—both locally & globally.
Technical outlook: DJ-30, NQ-100, SPX-500, and gold
Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 54100) now has to sustain over 55100 for a further rally to 55500/56000-58500/59000 in the coming days; otherwise, sustaining below 55000-54800/54800-54500/54000, DJ-30 may fall to 53700/53500*-53200/52900-52500/51900 and 51300/51000-50500/50200 in the coming days.
Similarly, NQ-100 Future (29900) now has to sustain over 30200-30400* for a further rally to 30600/30800*, and only above sustaining 31000 may it further surge to 31200/31300-31500*/32000 and even 32400/32500 in the coming days; otherwise, sustaining below 30100-30000, it may fall to 29900/29500-29100/28300*-28100/27800, and it may fall to 27400-27000 and 26600/26300-26000/25600 in the coming days.
Looking at the chart, technically SPX-500 (CMP: 7790) now has to sustain over 7900 for a further rally to 8000/8150-8300/8500 in the coming days; otherwise, sustaining below 7875-7850, SPX-500 may again fall to 7750/7640* and 7550/7500-7300/7200 and 7100-6900 in the coming days.
Looking ahead, whatever may be the narrative, technically gold ($4337) now has to sustain over 4375 for 4000/4425-4450/4475-4500/4585 and 4725-4825 in the coming days; otherwise, sustaining below 4365-4350, gold may again fall to 4295/4275*-4175/4155 and 4090/4050-4050/4000*/3970 and 3925* in the coming days.
