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Economic Commentary

Weekly Economic Commentary

May 11, 2026 by Jeanette Garretty, Chief Economist

The healthy US job growth reported on May 8— not only the 115,000 net new jobs created but also the distribution of those jobs across a number of economic sectors — has had the effect of shining all the bright light on inflation trends and potential fiscal policy cures for rising prices.  As has been previously mentioned, Europe has taken a number of steps to modify some of the consumer price impact of rising energy costs attributable to the closure of the Strait of Hormuz, although warned by the IMF and various budget authorities about the risks of making federal budget deficits larger.  The United States has quietly debated doing something similar, but the magnitude of any change in prices through something such as reducing federal taxes is really quite small. “High” is now so high that reducing gasoline prices by 20 or 30 cents will still leave them ‘high.”  Furthermore, as the closure of the Strait enters its third month, price increases for a variety of commodities have now had time to seep into the the production of a wide variety of consumer goods and the provision of numerous services.  It is well-understood that consumers do not change fundamental behaviors, including spending decisions, in response to prices or policies that they judge to be temporary.  In contrast, consumers who perceive that new economic developments are , in fact , permanent can be expected to change behavior, sometimes substantially.  Circumstantial evidence suggests that US consumers may be moving to a view that higher energy prices, and higher prices for agricultural products, new cars, grocery items, etc., are long term developments that require more sustainable budget management.  Eliminated car trips, down-sized vacations, electric vehicles (again), shrunken home improvement projects and fewer grocery aisle splurges are all seemingly on the table.    Overall spending levels may not change much, but the economic consequences of “NACHO” attitudes — Not A Chance Hormuz Opens — may be noticeable in coming weeks and months.   

Data to Watch 

  • US Consumer Price Index for April, released Tuesday, May 12 
  • Euro Area Employment Growth, first Quarter (preliminary estimate) released Wednesday, May 13. 
  • US Producer Price Index for April, released Wednesday, May 13 

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