What’s going on with the US economy?
Image: UPenn Wharton
In recent weeks, economists and federal agencies have published a flurry of data that tell a conflicting story about how the US economy is performing.
On one hand, America is experiencing strong economic growth, solid consumer spending, and a roaring bull market. But at the same time, the US jobs market continues to weaken while inflation has settled in significantly above the Federal Reserve’s target rate of 2.0%.
A rundown
Inflation: Consumer prices rose 3.0% in September compared to a year earlier, up slightly from August (2.9%), according to the delayed CPI published Friday. It marks the highest US inflation pace since January, and a full percentage point higher than the Fed’s long-term target of 2.0%. Core inflation, which excludes the often-volatile categories of food and energy, also increased 3.0% in September, down from 3.1% the previous month.
- Overall, September’s inflation report found relatively muted annual increases for food (3.1%), energy (2.8%), commodities (1.5%), and shelter (3.6%).
- But certain products saw especially high annual price jumps, including coffee (18.9%), beef (14.7%), gardening/lawn care (13.9%), and long-term/elderly care (11.6%).
Jobs: Official Labor Department data has been on hold since the start of this month due to the government shutdown, forcing economists to turn to private reports for the most accurate current assessments.
- This data “shows the job market is weak and getting weaker,” Moody’s Analytics chief economist Mark Zandi wrote earlier this month.
- He cited two separate private reports—from ADP and Revelio Labs—which, when averaged together, suggest there was “essentially no job growth” in September.
GDP: Data released days before the gov’t shutdown showed the US economy grew by 3.8% in Q2 2025, higher than previous estimates (3.3%) and the fastest pace in nearly two years. Officials say the upgrade to Q2 GDP mostly reflected an upward revision to US consumer spending.
Stocks: All three major US indexes closed at all-time highs on Friday, as the yearslong bull market continues full steam ahead. The ongoing Q3 earnings season has helped boost stock values across the board, with 80+% of companies beating analysts’ expectations for earnings and revenue out of the 143 S&P 500 firms that have reported thus far.
Looking ahead…The Fed is widely expected to cut baseline US interest rates following the conclusion of its two-day meeting on Wednesday.
📊 Flash poll: To all working professionals: would you consider the growth outlook in your industry/sector of the economy to be positive or negative over the next 12 months?
See a 360° view of what pundits are saying →
Sprinkles from the Left
- Some commentators argue that the US economy is currently being bolstered by a remarkable investment boom in AI, which is serving to mask the risky Trump admin policies in recent months which have set off alarm bells with many economists.
- Others contend that US consumers should brace themselves for upcoming economic turbulence, since Fed policy, weak job creation, and President Trump’s tariffs are making things worse, especially for budget-conscious families.
- “There Are Two Economies: A.I. and Everything Else” –Natasha Sarin, NY Times
- “The economy is flashing red for many American consumers” –The Nation’s Press Editorial Board
- “Does the World Economy Even Know There’s a Trade War?” –Clive Crook, Bloomberg
Sprinkles from the Right
- Some commentators argue that recent tariffs, labor shortages, and surging service costs threaten to turn the Trump admin’s growth plan into a slow-burn inflation trap, where it doesn’t take much of a shock to thrust the economy into a recession.
- Others contend that the recent surge in gold prices is a word of advice to Mr. Trump and the Fed that investors are seeking reassurance on inflation, the dollar, and less manic economic policy.
- “Trump’s economy teeters between revival and recession” –Peter Morici, Washington Times
- “What Is the Price of Gold Telling Us?” –WSJ Editorial Board
- “America’s prosperity starts at the ports” –Pedro Rodriguez, Washington Examiner
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