Economic historian Niall Ferguson believes inflation could be repeating history. He says inflation could be repeating the 1960s when former Fed chair, McChesney Martin, lost control of inflation expectations. August jobs data released on Friday shows that only 235,000 jobs were added back to the economy — the lowest number since January. The miscalculation caused gold prices to spike.


CNBC/Elliot Smith
Inflation could repeat the 1960s, when the Fed lost control, Niall Ferguson says

Inflation could be repeating the trajectory of the late 1960s, which laid the foundation for sustained high prices the following decade, according to economic historian Niall Ferguson.

Ferguson told CNBC on Friday that policymakers are facing a new challenge in the form of rising inflation as a result of responding to the Covid-19 pandemic in a fashion similar to their response to the Great Recession of 2008.

“What is interesting about disasters is that one can lead to another. You can go from a public health disaster to a fiscal, monetary and potentially inflationary disaster,” Ferguson said at the Ambrosetti Forum in Italy.

“It is not such a big disaster, it doesn’t kill people, but an inflation liftoff would be a problem.”

U.S. consumer prices rose 5.4% in July from a year earlier, marching the largest jump since August 2008.

The Federal Reserve and many economists maintain that the recent spike in inflation will be “transitory,” but Ferguson called this into question.

“How long is transitory? At what point do expectations fundamentally shift, especially if the Federal Reserve is telling people, ‘We have changed our inflation targeting regime and we don’t mind if inflation goes above target for a while’”? said Ferguson, the Milbank family senior fellow at the Hoover Institution, Stanford University.

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CNN Business/Anneken Tappe
Major jobs disappointment: America added only 235,000 jobs in August

America’s jobs recovery hit a major roadblock in August as the Delta variant threatened the labor market recovery, and the US economy added far fewer jobs than expected.

Only 235,000 jobs were added back to the economy last month, the lowest number since January, vastly missing economists’ expectations.

In normal times that would have been a reason to celebrate, but nowadays it’s a sharp slowdown from the buoyant jobs reports earlier in the summer. Friday’s report fell far short of economists’ already reduced expectations: Predictions for Friday’s jobs report had been revised down to 728,000 from 750,000 earlier after Wednesday’s ADP Employment Report, which count private payrolls, also disappointed.

Nearly a year and a half into the recovery, the US economy remains 5.3 million jobs short of where it was in February 2020, before Covid-19 threw a wrench into the gears.

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Kitco News/Neils Christensen
Gold price surges higher following big miss in U.S. employment 235K jobs created in August

The gold market is pushing significantly higher, following a significant miss in the U.S. labor market with fewer jobs created in August.

Friday, the U.S. Labor Department said that 235,000 jobs were created last month. The data was weaker than expected as consensus forecasts called for jobs gains of 720,000.

While the headline data saw a significant miss, the Labor Department included substantial revisions to its June and July numbers. June’s employment numbers were revised up by 24,000 to 962,000 from the previous estimate of 938,000. Meanwhile, July’s data was revised up to 1.053 million jobs compared to the initial estimate of 943,000.

However, some economists note that the strong revisions are not enough to take the full still out of the disappointing headline numbers.

Meanwhile, the U.S. unemployment rate dropped to 5.2%, down from July’s reading of 5.4%. The unemployment rate fell in line with expectations.

The gold market has broken through critical near-term support levels in initial reaction to the weaker-than-expected employment data. December gold futures last traded at $1,827.10, up nearly 1% on the day.

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