NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: Stagflation Concerns Mount as Oil Prices and Unemployment Rise

3월 06, 2026
Shannon Saccocia, CFA, Chief Investment Officer - Wealth

We remain constructive on risk assets, seeing selective opportunities to modestly lengthen duration in fixed income and to begin dollar-cost averaging in equities given the volatility.

February non-farm payrolls were released today, missed estimates meaningfully and added fuel to a fire already burning hot following the escalation in the Middle East. Payrolls declined by -92k in the month, well below expectations for a +55k gain; this is the weakest payrolls print since October and the sharpest decline in private sector payrolls (-86k) since 2020. In addition, there was further downward revision to December’s payrolls, from +48k to -17k, with January lower as well by -4k; this implies that trailing three-month payrolls growth stands at less than +6k.

Breaking down the data, the decline in health care hiring (-28k) was the primary driver of this month’s weakness; the reversal of the strongly positive trend exacerbated the weakening in other industries at the aggregate level. Construction (-11k) and manufacturing (-12k) both fell in February, offsetting gains in January, and government payrolls (-6k) continued to move lower despite already meaningful losses over the prior twelve months. There were few bright spots in this month’s report, with the most notable gains in financial activities (+10k) and social assistance (+9k).

In addition, the unemployment rate ticked back up to 4.4% even with a meaningful decline in the participation rate from 62.5% to 62.0%. More concerning was the decline in employed persons of -185k, while the number of unemployed rose by +203k in the month. The unemployment rate increased across most demographic categories, reversing last month’s trend of broadening employment gains. Despite the downward payroll pressure, average hourly earnings rose by +0.4% month-over-month and +3.8% year-over-year while average hours worked were steady at 34.3.

Admittedly, there are several factors that likely amplified the weaker trend in today’s report. Specifically, a strike at Kaiser Permanente weighed on health care and the impact of widespread winter weather conditions is likely attributable to the weakness in construction and transportation & warehousing. (Admittedly, winter weather likely impacted retail sales more meaningfully; January retail sales declined by -0.2%, missing expectations for a flat print.) Even adjusting for these transitory factors, however, today’s report points to continued weakness in private payrolls, although admittedly there is minimal evidence of a read through to the oft-touted AI disintermediation theme.

Our view is that today’s release has increased the complexity of the situation for the Fed meaningfully. WTI crude is trading close to $90 per barrel in the early hours of today’s session and with President Donald Trump’s statement that there will be no deal with Iran until “unconditional surrender,” there are valid concerns that an extended period of higher energy prices will transmit to consumers and businesses and slow the pace of disinflation. However, higher prices at some point will also result in demand destruction, which would slow overall growth and release some of the potential economic pressure.

More importantly, continued weakness in the U.S. labor market likely offsets some of the likely shorter-term inflation concerns for the Fed, and, as a result, we still believe the Fed will cut at least two times in 2026. Should meaningful de-escalation in the Middle East come within the next 2-4 weeks, we surmise that the Fed could act as soon as June to combat labor market weakening. As such, we remain constructive on risk assets, with the acknowledgement that there may be opportunities to lengthen duration modestly in the fixed income markets, and for those clients with funds earmarked for equity investment, there exist opportunities to begin dollar-cost averaging in this volatile environment.

IMPORTANT INFORMATION:

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Diversification does not guarantee profit or protect against loss in declining markets. Investing entails risks, including possible loss of principal. Investments in private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in private equity are intended for sophisticated investors only. Unless otherwise indicated, returns shown reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.

Portfolio positioning views expressed herein are those of Neuberger Berman’s Private Wealth Investment Group, which may include those of the Neuberger Berman’s Asset Allocation Committee. Asset allocation and positioning views are based on a hypothetical reference portfolio. The Private Wealth Investment Group analyzes market and economic indicators to develop asset allocation strategies. The Private Wealth Investment Group works in partnership with the Office of the CIO. The Private Wealth Investment Group also consults regularly with portfolio managers and investment officers across the firm. The Asset Allocation Committee is comprised of professionals across multiple disciplines, including equity and fixed income strategists and portfolio managers. The Asset Allocation Committee reviews and sets long-term asset allocation models, establishes preferred near-term tactical asset class allocations and, upon request, reviews asset allocations for large, diversified mandates. Asset Allocation Committee members are polled on asset classes and the positional views are representative of an Asset Allocation Committee consensus. The views of the Asset Allocation Committee and the Private Wealth Investment Group may not reflect the views of the firm as a whole and Neuberger Berman advisers and portfolio managers may take contrary positions to the views of the Asset Allocation Committee or the Private Wealth Investment Group. The Asset Allocation Committee and the Private Wealth Investment Group views do not constitute a prediction or projection of future events or future market behavior. Defensive positioning generally means an underweight bias on allocations to risk assets such as equities and alternatives. Positioning views may change over time without notice and actual client positioning may vary significantly. Discussion of yield characteristics or total returns of different asset classes are for illustrative purposes only. Such asset classes, such as equities and fixed income, may have significantly different overall risk-return characteristics which should be consider before investing.

The information in this material may contain projections, market outlooks or other forward-looking statements regarding future events, including economic, asset class and market outlooks or expectations, and is only current as of the date indicated. There is no assurance that such events, outlook and expectations will be achieved, and actual results may be significantly different than that shown here. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Information on historical observations about asset or sub-asset classes is not intended to represent or predict future events. Historical trends do not imply, forecast or guarantee future results. Information is based on current views and market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.

Discussions of any specific sectors and companies are for informational purposes only. This material is not intended as a formal research report and should not be relied upon as a basis for making an investment decision. The firm, its employees and advisory accounts may hold positions of any companies discussed. Nothing herein constitutes a recommendation to buy, sell or hold a security. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. Investment decisions and the appropriateness of this content should be made based on an investor's individual objectives and circumstances and in consultation with his or her advisors.

Neuberger Berman Investment Advisers LLC is a registered investment adviser.

The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.