On September 5, 2025, the Bureau of Labor Statistics (BLS) released a sobering jobs report for August, revealing that payroll employment increased by just 22,000—an anemic figure by any standard. Unemployment ticked up to 4.3 percent, the highest since October 2021, according to The American Prospect. Despite this uptick in joblessness, labor force participation remained robust, and quit rates were nearly nonexistent. It seems anxious workers are clinging to whatever jobs they have, wary of an increasingly uncertain economic future.
Federal Reserve Chair Jay Powell, speaking at the annual Jackson Hole conference on August 22, 2025, described the current economic situation as an unusual equilibrium. "Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment," Powell warned, as reported by The American Prospect.
All eyes now turn to the upcoming Consumer Price Index (CPI) report, due for release on September 11, 2025. Forecasters expect the Bureau of Labor Statistics to announce that consumer prices rose 2.9% over the past 12 months through August—a jump that would mark the highest annual inflation since January, according to The Wall Street Journal and Dow Jones Newswires. "Core" inflation, which strips out volatile food and energy prices, is projected to have climbed 3.1% in the same period, tying the highest rate since February 2025. This persistent inflation remains well above the Federal Reserve's 2% target, signaling trouble ahead for American households already feeling the pinch.
What’s driving these rising prices? Economists point squarely at President Trump’s tariff policies. Tariffs implemented earlier in 2025 have pushed up prices as merchants, facing higher import costs, pass those increases onto consumers. This effect is particularly pronounced in so-called "core goods"—things like clothing and electronics—which have historically helped keep inflation in check due to cheap imports. But this summer, the prices for these goods have been climbing, a trend that experts expect to continue. Brett Ryan, senior U.S. economist at Deutsche Bank, noted in a commentary, "We will mainly be looking for continued signs of tariff impacts in core goods categories."
President Trump’s economic strategy, as explained by Treasury Secretary Bessent on September 8, 2025, is a radical departure from previous administrations. The first component of this new approach involves dismantling U.S. trade policies and international agreements that prioritize globalization—moves intended to strengthen the middle class. The administration is betting on high tariffs to create a pricing umbrella that will attract both domestic and foreign investment to American manufacturing. The hope is that these measures will revitalize U.S. industry, but so far, the immediate effect has been to raise prices for consumers and squeeze household budgets.
Meanwhile, the Federal Reserve is caught in a bind. The central bank is widely expected to cut its benchmark interest rate by 25 basis points at its September 16–17 meeting, reducing the current range from 4.25%–4.5% to stimulate the economy and prevent the summer’s hiring slowdown from snowballing into a full-blown unemployment surge, as reported by The Wall Street Journal. However, policymakers remain cautious: lowering rates too aggressively could further stoke inflation, which hasn’t dipped below 2% since 2021. David Seif, chief economist for developed markets at Nomura, wrote, "The combination of tariff-induced inflationary pressures on goods and relatively sticky service inflation are likely to result in policymakers remaining cautious about inflation risks."
Financial markets are already pricing in not just this rate cut, but two more quarter-point reductions by the end of 2025, according to CME Group’s FedWatch tool. Still, the Federal Reserve’s ability to counteract the negative effects of tariffs and other structural changes in the economy is limited. As The American Prospect observed, the Fed can only do so much in the face of rising prices and a shrinking job market.
Severe price hikes are not limited to consumer goods. Electricity and health care costs are also climbing sharply as of September 2025, further straining American families. The causes are complex, but corporate consolidation and the weakening of economic regulation and antitrust enforcement have allowed more price-gouging at the expense of consumers. As The American Prospect noted, "Severe price hikes are being extracted in electricity and in health care."
President Trump’s other policies are also taking a toll on the labor market. His administration’s intimidation of immigrant workers, along with cuts in direct federal employment and jobs subsidized by federal grant support—in areas like Medicaid and infrastructure projects—are weakening the job market. These moves, combined with the effects of tariffs, are contributing to a labor market that is, as Powell described, balanced only in the sense that both supply and demand for workers are dwindling.
The stock market, for now, seems unfazed. Investors appear to welcome a slack labor market, as it puts downward pressure on wage costs and helps sustain corporate profits. Even Trump’s abrupt firing of BLS director Erika McEntarfer in July did not rattle the markets. But this equilibrium may not last. As Matt Stoller pointed out in The American Prospect, a stock market bubble—combined with a real estate bubble—has been propping up demand. Should either burst, the resulting collapse in demand could be swift and severe.
Looking ahead, the economic outlook is clouded with uncertainty. By December 2025, some analysts project unemployment could rise above 5 percent, with inflation climbing past 4 percent, and the stock market well below its August peak. These outcomes are widely attributed to President Trump’s policies, including tariffs, job cuts, and the erosion of regulatory safeguards. Yet, in the world of politics, blame is a hot commodity. Trump and his allies are already pointing fingers at Democrats for not supporting his budget cuts, at the Fed for not slashing rates further, and at foreign leaders for retaliatory tariffs in response to his trade war.
As the 2026 midterm elections approach, the political stakes are rising alongside economic anxieties. Historically, a faltering economy spells trouble for incumbent presidents. But Trump’s strategy has always been to find scapegoats—and unless his opponents can present a clear, unified narrative and strategy, he may yet succeed in shifting blame. As The American Prospect put it, "The Democrats, above all, need a consistent account of what’s occurring, a coherent strategy, and a lot more unity and nerve. They have reality on their side. It’s a start."
For now, Americans face a landscape of rising prices, stagnant job growth, and mounting uncertainty. The next few months—marked by crucial economic data releases and pivotal policy decisions—will determine whether the economy can regain its footing or slips further into the stagflation scenario many now fear.
