The opinions expressed here are those of the author, a columnist for Reuters.

By Mike Dolan

LONDON, July 22 (Reuters) - While the market news has been fogged up with steam from the Iran war, a return of U.S. tariff threats and a new British prime minister, economists and strategists have been poring over some other big themes.

These include a labour market puzzle, shifting Fed goalposts and volatility divergence.

JOB CENTRE

It's mid-month, and all the focus has been on U.S. inflation updates of late. But the state of the labour market continues to be a potential decider as to what the Federal Reserve does next.

As it stands, stability in employment is allowing the Fed to focus squarely on its price stability mandate. But is the jobs market now so tight that it's actually stoking inflation pressures?

Apollo Chief Economist Torsten Slok points out that Fed staffers believe the Non-Accelerating Inflation Rate of Unemployment (NAIRU), theoretically the lowest jobless rate an economy can sustain without generating inflation, is about 4.5% or just below.

However, the U.S. unemployment rate in July may well set the record for the longest period below this level since World War Two at 58 consecutive months.

"That persistent tightness is a key reason inflation has remained elevated," Slok wrote last week.

Separately, Barclays economists have tried to figure out how more than half a million jobs were created in the first half of 2026. That's because the U.S. labour market has an assumed breakeven rate - the number of payrolls needed to keep the jobless rate steady - of roughly zero due to President Donald Trump's immigration crackdowns.

Barclays said what might square the issue this year is the reclassification of a portion of the 1 million immigrants who lost authorisation to work in 2025, as many may have become available to work again in the first half of 2026.

MOVING GOALPOSTS?

So where does that leave the Fed, which is now in its traditional blackout period before next week's policy decision?

Reams of copy have been written about new Chair Kevin Warsh and where he stands. And, partly because of his distaste for forward guidance, it's tough to work out exactly what he thinks of the rate path ahead.

But former Fed economist Claudia Sahm has expressed her concern about Warsh's lack of clarity - not on the policy direction but on what exactly the Fed is targeting.

In her latest blog post, Sahm said Warsh has pointedly not committed to using the Personal Consumption Expenditures (PCE) inflation gauge that the Fed has explicitly used to measure its 2% inflation target since 2012. Instead, he has continually referred to loose, undefined measures of underlying inflation.

Sahm makes the point that inflation targets are ultimately based on all the prices people have to pay.

Other cuts of that such as "core", "underlying" or "trimmed mean" are merely ways for the central bank to calibrate how it gets to that target and are not the target itself.

"Price stability is 2% PCE inflation. That’s the goal," she said. "PCE inflation is the yardstick for measuring the Fed’s success. Underlying inflation, regardless of its form or source, is a sideshow to that goal — an important one, but a sideshow."

SINGLE-STOCK VOLATILITY

As Wall Street's megacaps start to report second-quarter earnings this week and next - and after a recent correction in the stellar chip sector - investors are continuing to marvel at the relatively subdued levels of implied S&P 500 index volatility, captured by the VIX "fear index".

This is especially true given the much higher volatility reading for single-stock names, captured by the CBOE's index on S&P 500 constituent volatility.

Constituent volatility closed at its highest level this week since the "Liberation Day" tariff spat last April, even though the VIX itself remains almost two points below historical averages.

The gap between the two is more than twice the average of the 12-year history of the constituent volatility index.

That is great for so-called dispersion trades that thrive on the type of idiosyncratic stock moves that offset each other in the overall index.

But there still may be a chance that the single-stock seismograph is a leading indicator for where the VIX is headed next.

(The opinions expressed here are those of Mike Dolan, a columnist for Reuters.)

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