What does stagflation mean? The concern casting a shadow over the economy.

Rising Oil Prices Spark Fears of Stagflation

As oil prices climb while the economy slows, many worry that history may be repeating itself. The prospect of stagflation—a troubling mix of persistent inflation and sluggish economic growth—has economists, analysts, and investors on edge. This scenario, reminiscent of the 1970s in the United States, brings to mind memories of long lines at gas stations and soaring interest rates.

Don Rissmiller, chief economist and partner at Strategas, noted in a March 8 report that the U.S. is currently experiencing both a slowdown in growth and a spike in inflation, largely driven by higher energy costs due to geopolitical tensions. He explained that while slow growth is generally easier to address than inflation, the risk of a recession in 2026 remains at 20% for now. However, he cautioned that a sustained increase in energy prices could quickly raise those odds, especially if trade disruptions in the Middle East worsen in the coming weeks.

On the same day, renowned economist Ed Yardeni increased the probability of his "Meltdown scenario"—which now includes the threat of 1970s-style stagflation—from 20% to 35%.

Oil prices have jumped nearly 40% since the conflict in Iran began, fueling inflation across the economy and reducing the likelihood of the Federal Reserve cutting interest rates soon. Most market participants now expect the Fed to keep rates unchanged at their March meeting, with few anticipating any rate cuts until later in the year.

Will inflation accelerate further as tensions in the Middle East persist?

Economic Uncertainty Grows

Concerns about the health of the economy have intensified following a surprising jobs report on March 6 that revealed a loss of 92,000 jobs in February. Under typical circumstances, such weak or negative job growth might prompt the Fed to lower rates to boost demand.

Chicago Fed President Austan Goolsbee told the Wall Street Journal that the current environment is "exactly the kind of stagflationary situation that is as challenging as any central bank could face."

More: ‘Too expensive.’ Americans worry about gas prices as the Iran war expands

Debate Over the Severity of the Situation

Despite the alarming headlines, not everyone believes the outlook is as grim. Peter Andersen, who oversees $500 million at Andersen Capital Management, described stagflation fears as exaggerated. "I think it’s more of a phantom threat and unlikely to materialize," he said. "The greater concern right now is what I call a slow grind economy."

In an interview with USA TODAY, Andersen acknowledged that slow economic growth combined with higher everyday costs can feel like stagflation for many families, even if it doesn’t meet the technical definition.

Looking Beyond Short-Term Data

Andersen recommends focusing on long-term economic trends rather than reacting to individual data points. He pointed out that while the February jobs report was troubling, it didn’t justify the sharp market reactions that followed.

Nonetheless, the overall trend in hiring remains weak. According to the Labor Department, only 181,000 jobs were added in 2025—an average of about 15,000 per month. Andersen noted that in a sluggish economy, especially with the rise of artificial intelligence, lower-wage workers are likely to feel the most pressure.

"From a distance, the economy appears robust, but for many on the ground, conditions are much more uneven," he observed.

Originally published by USA TODAY: 1970s all over again? Why everyone fears stagflation