That change in payroll employment chart is dizzying.
"Supply shocks: bad luck, bad policy, or both?" 1% bad luck, 99% bad policy.
"The shock-and-awe approach of the current administration..." Mostly shock, not much awe, although one could argue that the magnitude of incompetence is sort of awesome in a "I can't believe they're actually doing this" way.
.
An example of what I've seen on the ground, while not scientific, does reflect what's happening across the every grocery store aisle: before the pandemic, I used to buy a 32oz. carton of Goldfish crackers for 7.99, and a "party size" bag of Reeses Peanut Butter Cups for 9.99. When the pandemic struck, the Goldfish went up to 9.99 and the Reeses went up to 14.99, representing an increase of 25% (!) and and 50% (!!!) respectively. Naturally they stayed at that level. The concept of "Prices are sticky" is just another way of saying "greed". It's pure gouging.
Lots of good material and the discussion of consumers' cognitive costs of dealing with shocks (deportations, too) is a plasuble part of the answer to the persistent "vibecession" and why still low unemployment rates are not supporting consumer confidence.
While the post is correct to focus on shocks as the impetus for inflation, it would help public understanding to explain that the Fed has a choice whether to allow the shocks to manefest in inflation or try to return to/stay on target and that the Fed made the wise choice to allow/engineer over-target inflation to facilitate adjustment of relative prices to the shock.
It might also have been worth raising what must be a growing concern at the Fed, de-anchoring. COVID was a truly exogenoud event and Putin's invasion little affected by policy. But tariffs (ongoing) deportations, and the Trump war/oil price gyrations are _policy_ shocks. If they persist, expectations could shift. Five-yer out TIPS expectations have been consitently above target in 2025-26 to date. They have been higher before, but maybe not so long wihtout returning to target. I'd say this is flashing yellow for de-anchoring.
Three questions. 1) "...the series of one-time shocks has contributed to five years of inflation above the Fed’s 2% target." How do we count the Biden "envy of the world" economy in this? I know inflation was between 2 and 3 percent during this time, but where would we be if we had stayed the course after the pandemic supply shocks? And, 2) How does the historic profits that corporations crowed about in earnings reports play into this? Lastly, 3) Can you possibly not use X to link your videos? Many of us don't use it anymore. And it's become kind of test about the politics of people who do use X. What you are telling me by linking financial news via X is that financial news and people in finance are perfectly OK with lies and harassment.
What your “whiplash economy” framing captures so well is that we are living through a period where the shocks themselves are only half the story. The other half — the part we rarely model — is the biological and sociological cost of adaptation. Humans are a species shaped by millions of years of responding to environmental volatility, but the pace and scale of recent shocks have outstripped the adaptive bandwidth of families and institutions.
From a sociobiological perspective, repeated disruptions — pandemic, supply chain breakdowns, geopolitical conflict, policy reversals, tariff cycles — trigger the same behavioral responses we see across species when environmental stability collapses. The nervous system prioritizes vigilance over exploration. Households shift from long‑term planning to short‑term survival heuristics. Even when headline indicators improve, the imprint of insecurity persists. That is not “vibes”; it is an evolved response to uncertainty.
Economists often treat expectations as a cognitive variable, but expectations are also biological. A population that has endured a once‑in‑a‑century pandemic, price spikes in essentials, and policy whiplash will not instantly revert to pre‑shock confidence simply because the data say they should. As you note, the cognitive load of constant adjustment is itself a tax — and one that compounds over time.
This is why the Golden Rule, understood not as moral sentiment but as an evolutionary strategy for cooperative survival, matters here. Stable societies depend on predictable, reciprocal behavior from leaders and institutions. When policy becomes erratic or performative, when shocks are amplified rather than buffered, the social contract frays. People retreat into defensive postures because the system no longer signals reliability.
The “feel‑bad economy” is not a mystery when viewed through this lens. It is what happens when the adaptive machinery of a species is overloaded and when institutions fail to provide the buffering that allows families to plan, invest, and trust. Until we rebuild that sense of collective stability — through consistent policy, functioning institutions, and leadership that reduces rather than multiplies uncertainty — the biological imprint of these years will continue to shape economic behavior.
Thank you for continuing to bring clarity to a moment when the data and the lived experience seem so far apart. The gap is real — but it is explainable once we remember that economics is ultimately a human behavioral science.
I find your view interesting. I already was a follower of the interpretation of economic data using as an additional lens the sociobiological prospective.
Another proof of this concept can be the actual situation in Africa as a response of the block of the Strait.
Countries in Eastern Africa have always had the tendency of storing. In their thousands of years of isolation to resist the eventual crisis and especially throughout and after colonization.
After the start of the Iran war and the subsequent blockade of the strait, the population started to buy and store even though the actual data don't put them in the situation that would justify the intensity they apply their measures with.
It's quite overlooked on the internet and main broadcasts, probably because they're already seen as countries in which inflation doesn't impact the international markets as much as the events who come about in the west and now East and south-east Asia.
From February 2025 to February 2026, 1.4% of the 2.4% rise in CPI-U came from shelter and medical. These segments get only passing mention from the Fed (minutes and BB), yet are far more impactful. I’ve seen charts that show these two have dominated inflation for over a decade. Yet we have all of our guns pointed elsewhere. Why do you think that is?
Also, both S&P profits and NIPA were strong last year. S&P 500 operating margins are at all time highs. Non-energy imports are about 13% of GDP, and lots of those had exemptions. Could tariff grumbling by corporations be a smokescreen to keep ebitda growth elevated (a la the Goldfish example above)?
Good post, as always. My only quibble is with "Consumer sentiment (CS) in early April 2026 hit an all-time low". Agree that Index of CS very low, but change in survey method in 2024 means June 2022 ICS = 50 still the all-time low after April 2026 ICS adjusted to be apples v. apples comparison.
The metric is "percentage of months with payroll declines" is obviously going to be incredibly sensitive to the labor force growth rate. It quickly goes to 0 if the labor force is growing, to 100 if shrinking, and 50 if the labor force size is stable. This would be true even in times of incredible stability and lack of shocks. Maybe this was your point, that this metric is simply uninformative if the labor force growth rate is zero, so we should stop paying attention to it?
It appears that some of the uncertainty effect of the tariffs (the ones ruled illegal by the Supreme Court) is wearing off. But there is still considerable uncertainty stemming from the new, time limited, tariffs. I have been expecting more supply shock drag on the labor market than we have seen so far.
Great opening graphic. Makes me feel like riding Space Mountain again 😅
That change in payroll employment chart is dizzying.
"Supply shocks: bad luck, bad policy, or both?" 1% bad luck, 99% bad policy.
"The shock-and-awe approach of the current administration..." Mostly shock, not much awe, although one could argue that the magnitude of incompetence is sort of awesome in a "I can't believe they're actually doing this" way.
.
An example of what I've seen on the ground, while not scientific, does reflect what's happening across the every grocery store aisle: before the pandemic, I used to buy a 32oz. carton of Goldfish crackers for 7.99, and a "party size" bag of Reeses Peanut Butter Cups for 9.99. When the pandemic struck, the Goldfish went up to 9.99 and the Reeses went up to 14.99, representing an increase of 25% (!) and and 50% (!!!) respectively. Naturally they stayed at that level. The concept of "Prices are sticky" is just another way of saying "greed". It's pure gouging.
Lots of good material and the discussion of consumers' cognitive costs of dealing with shocks (deportations, too) is a plasuble part of the answer to the persistent "vibecession" and why still low unemployment rates are not supporting consumer confidence.
While the post is correct to focus on shocks as the impetus for inflation, it would help public understanding to explain that the Fed has a choice whether to allow the shocks to manefest in inflation or try to return to/stay on target and that the Fed made the wise choice to allow/engineer over-target inflation to facilitate adjustment of relative prices to the shock.
It might also have been worth raising what must be a growing concern at the Fed, de-anchoring. COVID was a truly exogenoud event and Putin's invasion little affected by policy. But tariffs (ongoing) deportations, and the Trump war/oil price gyrations are _policy_ shocks. If they persist, expectations could shift. Five-yer out TIPS expectations have been consitently above target in 2025-26 to date. They have been higher before, but maybe not so long wihtout returning to target. I'd say this is flashing yellow for de-anchoring.
Three questions. 1) "...the series of one-time shocks has contributed to five years of inflation above the Fed’s 2% target." How do we count the Biden "envy of the world" economy in this? I know inflation was between 2 and 3 percent during this time, but where would we be if we had stayed the course after the pandemic supply shocks? And, 2) How does the historic profits that corporations crowed about in earnings reports play into this? Lastly, 3) Can you possibly not use X to link your videos? Many of us don't use it anymore. And it's become kind of test about the politics of people who do use X. What you are telling me by linking financial news via X is that financial news and people in finance are perfectly OK with lies and harassment.
Excellent overview!
Dr. Sahm,
What your “whiplash economy” framing captures so well is that we are living through a period where the shocks themselves are only half the story. The other half — the part we rarely model — is the biological and sociological cost of adaptation. Humans are a species shaped by millions of years of responding to environmental volatility, but the pace and scale of recent shocks have outstripped the adaptive bandwidth of families and institutions.
From a sociobiological perspective, repeated disruptions — pandemic, supply chain breakdowns, geopolitical conflict, policy reversals, tariff cycles — trigger the same behavioral responses we see across species when environmental stability collapses. The nervous system prioritizes vigilance over exploration. Households shift from long‑term planning to short‑term survival heuristics. Even when headline indicators improve, the imprint of insecurity persists. That is not “vibes”; it is an evolved response to uncertainty.
Economists often treat expectations as a cognitive variable, but expectations are also biological. A population that has endured a once‑in‑a‑century pandemic, price spikes in essentials, and policy whiplash will not instantly revert to pre‑shock confidence simply because the data say they should. As you note, the cognitive load of constant adjustment is itself a tax — and one that compounds over time.
This is why the Golden Rule, understood not as moral sentiment but as an evolutionary strategy for cooperative survival, matters here. Stable societies depend on predictable, reciprocal behavior from leaders and institutions. When policy becomes erratic or performative, when shocks are amplified rather than buffered, the social contract frays. People retreat into defensive postures because the system no longer signals reliability.
The “feel‑bad economy” is not a mystery when viewed through this lens. It is what happens when the adaptive machinery of a species is overloaded and when institutions fail to provide the buffering that allows families to plan, invest, and trust. Until we rebuild that sense of collective stability — through consistent policy, functioning institutions, and leadership that reduces rather than multiplies uncertainty — the biological imprint of these years will continue to shape economic behavior.
Thank you for continuing to bring clarity to a moment when the data and the lived experience seem so far apart. The gap is real — but it is explainable once we remember that economics is ultimately a human behavioral science.
A very thoughtful expansion on adaptation and the broader costs of dealing with shocks.
I find your view interesting. I already was a follower of the interpretation of economic data using as an additional lens the sociobiological prospective.
Another proof of this concept can be the actual situation in Africa as a response of the block of the Strait.
Countries in Eastern Africa have always had the tendency of storing. In their thousands of years of isolation to resist the eventual crisis and especially throughout and after colonization.
After the start of the Iran war and the subsequent blockade of the strait, the population started to buy and store even though the actual data don't put them in the situation that would justify the intensity they apply their measures with.
It's quite overlooked on the internet and main broadcasts, probably because they're already seen as countries in which inflation doesn't impact the international markets as much as the events who come about in the west and now East and south-east Asia.
Thanks for sharing your insight on Africa. I agree.
Yup Trump runs the country the same way he ran his businesses - poorly!
Thank you, Claudia.
From February 2025 to February 2026, 1.4% of the 2.4% rise in CPI-U came from shelter and medical. These segments get only passing mention from the Fed (minutes and BB), yet are far more impactful. I’ve seen charts that show these two have dominated inflation for over a decade. Yet we have all of our guns pointed elsewhere. Why do you think that is?
Also, both S&P profits and NIPA were strong last year. S&P 500 operating margins are at all time highs. Non-energy imports are about 13% of GDP, and lots of those had exemptions. Could tariff grumbling by corporations be a smokescreen to keep ebitda growth elevated (a la the Goldfish example above)?
Thanks again for your insight!
Good post, as always. My only quibble is with "Consumer sentiment (CS) in early April 2026 hit an all-time low". Agree that Index of CS very low, but change in survey method in 2024 means June 2022 ICS = 50 still the all-time low after April 2026 ICS adjusted to be apples v. apples comparison.
The metric is "percentage of months with payroll declines" is obviously going to be incredibly sensitive to the labor force growth rate. It quickly goes to 0 if the labor force is growing, to 100 if shrinking, and 50 if the labor force size is stable. This would be true even in times of incredible stability and lack of shocks. Maybe this was your point, that this metric is simply uninformative if the labor force growth rate is zero, so we should stop paying attention to it?
Yes, it is sensitive. Immigration policy is one of the supply shocks. Labor supply growth near zero very unusual, that's why negative payrolls historically have been associated with recessions (when demand is weak). The FEDS Note linked to explains this well: https://www.federalreserve.gov/econres/notes/feds-notes/labor-force-growth-breakeven-employment-and-potential-gdp-growth-20260402.html.
A “whiplash economy” is what it looks like when institutions are still interpreting reality with models calibrated for a smoother world.
The issue is not only repeated shocks. It is that adaptation itself becomes the hidden tax on the population.
It appears that some of the uncertainty effect of the tariffs (the ones ruled illegal by the Supreme Court) is wearing off. But there is still considerable uncertainty stemming from the new, time limited, tariffs. I have been expecting more supply shock drag on the labor market than we have seen so far.
"...but at the micro level on fixed incomes purchase options become somewhat limited". OMG, ain't that the truth!