Inflation, Tariffs and Weak Job Growth: Navigating America's Uneven Recovery

In late October 2025, the U.S. economy is sending mixed signals. A slight cooling of inflation in September and steady consumer spending contrast with a labor market that is struggling to generate new jobs. Meanwhile, a government shutdown has delayed key data releases, leaving policymakers and ordinary Americans to navigate uncertainty.

Cooling Inflation but Persistent Price Pressures

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.3 % in September 2025, down from 0.4 % in August (www.bls.gov). On a year -over -year basis, inflation stands at 3.0 %, with gasoline prices surging 4.1 % during the month and food costs rising 0.2 % (www.bls.gov). Reuters reports that core inflation (which excludes food and energy) increased just 0.2 % and that a moderation in rents helped offset higher fuel costs (www.reuters.com). Still, tariffs on imported goods continue to push up prices for apparel, appliances and furniture (www.reuters.com).

These figures show that the inflation surge of 2022‑24 is easing, but not enough to bring relief to many households. Energy and food remain volatile, and tariff‑driven increases in consumer goods are eroding purchasing power.

Key Data Points

• Monthly inflation: CPI up 0.3 % in September (www.bls.gov).
• Annual inflation: 3.0 % over the last 12 months (www.bls.gov).
• Energy: Gasoline prices jumped 4.1 % (www.bls.gov).
• Food: Food index increased 0.2 % (0.3 % at home, 0.1 % away from home) (www.bls.gov).
• Core inflation: 0.2 % monthly increase; 3.0 % annual (www.reuters.com).

Labor Market Malaise

While consumer spending remains resilient, hiring has stagnated. Federal Reserve Chair Jerome Powell noted at a recent conference that both hiring and layoffs are at low levels, describing a “low‑hiring, low‑firing doldrums.” He acknowledged that the economy may be on a firmer footing than expected, but cautioned that job growth remains weak (www.reuters.com). Powell stressed that policymakers will decide interest‑rate moves on a “meeting‑by‑meeting” basis as they balance above‑target inflation against a slack labor market (www.reuters.com).

Comerica Bank’s October outlook paints a similar picture. The bank’s economists forecast that the Federal Reserve will cut its target rate again at the late‑October and mid‑December meetings to 3.50–3.75 % by year‑end. They cite weak payroll growth and downward revisions to jobs data as reasons for the Fed’s pivot to easing (www.comerica.com). The outlook warns that tariff‑induced inflation is squeezing corporate margins and discouraging hiring and investment, even as consumer spending received a temporary boost from electric‑vehicle subsidies that expired on September 30 (www.comerica.com).

Government Shutdown and Data Blackout

Complicating matters is the federal government shutdown, now in its fourth week. The shutdown has delayed key economic reports, including the September jobs report and some inflation data. The Bureau of Labor Statistics managed to release the September CPI by completing data collection before appropriations lapsed (www.bls.gov), but other statistics remain on hold. Without timely data, the Fed and other policymakers are operating in a partial vacuum, relying more heavily on private-sector indicators. This uncertainty filters down to businesses and households, which are hesitant to spend or hire amid unclear signals.

What This Means for American Households

The combination of cooling inflation and a weak job market leaves many Americans feeling uneasy. On one hand, price pressures are moderating, but not enough to restore purchasing power. Tariffs are lifting the costs of everyday goods such as clothing and appliances (www.reuters.com), while energy and food remain volatile (www.bls.gov). On the other hand, wage growth has slowed along with hiring. The government shutdown has suspended pay for hundreds of thousands of federal workers and contractors, further dampening consumer confidence.

For retirees, there is a silver lining: the Social Security Administration is still able to calculate cost‑of‑living adjustments, and beneficiaries will receive a 2.8 % increase in 2026 (www.reuters.com). However, that increase may not fully offset higher living costs, particularly if tariffs continue to push prices upward.

The Fed’s Dilemma

The Federal Reserve faces a tough balancing act. Lowering rates too aggressively could stoke inflation again, especially if tariffs keep goods prices elevated. But maintaining higher rates risks choking off an already fragile job market. Powell acknowledged there is “no risk‑free path,” and that policy projections should be viewed as a range of possible outcomes that will evolve as new data arrive (www.reuters.com).

Most economists expect the Fed to cut rates at the end of October by 25 basis points, but there is disagreement over how many additional cuts will follow. The presence of tariffs and the impact of the shutdown mean that any policy move must be flexible, with the Fed ready to adjust as conditions change.

Looking Forward

Despite the current headwinds, there are reasons for cautious optimism. Comerica’s economists expect the economy to regain momentum in 2026, driven by several factors (www.comerica.com):

• Monetary easing: As the Fed cuts rates and eventually ends quantitative tightening, financial conditions should become more supportive.
• Fiscal stimulus: A July 4 fiscal bill is set to raise spending on defense and immigration enforcement while cutting corporate and individual taxes (www.comerica.com).
• AI and technology investment: An ongoing boom in artificial‑intelligence–related spending on software, computing equipment and data centers is expected to drive capital formation (www.comerica.com).
• Housing market recovery: Lower mortgage rates could unlock pent‑up demand for homes, though prices may remain below early‑2025 peaks (www.comerica.com).

From a long-term perspective, America’s economic resilience has often hinged on its ability to innovate and adapt. Today’s challenges—tariff‑driven price distortions, a data‑starved policy environment, and anemic job growth—require creative solutions. Encouraging domestic production to reduce reliance on imports, investing in workforce training for AI‑driven industries, and adopting smart fiscal measures could help sustain growth while supporting American households.

Final Thoughts

At eSNAP, we view the current environment as a turning point. The easing of inflation is welcome, but the battle against price pressures is not over. Tariffs, supply shocks and a thin labor market still present risks. Policymakers must tread carefully, balancing rate cuts against inflation risks and navigating the uncertainties of a government shutdown. For the American people, the message is to stay informed and agile—budget wisely, advocate for policies that support working families, and look forward to opportunities that arise from emerging technologies.