President Donald Trump has spent most of his first year in office pressuring the Federal Reserve Board to lower interest rates, arguing that high interest rates are the only factor constraining the American economy from resuming the rapid growth achieved during his first term in office. The Fed may be preparing to give Trump what he wants, but not for the reasons Trump hoped. Concerning signals from both the August jobs report and August inflation report signal that all is not well in the U.S. economy.

First, the September 5 jobs report showed that the U.S. economy grew by a measly 22,000 jobs in August. This continued a summer slump, with the U.S. economy recording job gains of 19,000 in May, 79,000 in July, and a decrease of 13,000 jobs in June. These combined for a net gain of 107,000 jobs over four months. For comparison, the U.S. economy grew steadily in the first four months of 2025, adding 491,000 jobs.

(What changed four months ago to make job growth stall out? President Trump’s “Liberation Day” tariffs were announced in April, prompting businesses to rethink their growth prospects and corresponding staffing needs.)

Poor statistics about job growth continued to pour in. For the week ending September 6, U.S. jobless claims rose to 263,000, an increase of 27,000 from the previous week, and 28,000 higher than economists estimated.

On September 9, the Bureau of Labor Statistics released a massive, downward revision in its jobs estimate for March 2024 to March 2025, calculating that the U.S. economy added 911,000 fewer jobs than previously estimated. This followed last August’s massive, downward revision for March 2023 to March 2024, when the Bureau of Labor Statistics (BLS) calculated that the U.S. economy added 818,000 fewer jobs than previously estimated. The only other time this century when the BLS annual jobs revision surpassed half a million came during the Great Recession, when the BLS reduced its jobs estimate for March 2008 to March 2009 by 902,000 jobs.

(The more recent downward revisions do not reflect on the Trump presidency, as they mostly showed that the Biden economy was weaker than previously estimated. However, they do suggest that the U.S. economy, on the whole, is in a far weaker position than previously thought.)

From Trump’s perspective, the silver lining amid these disappointing employment statistics is its effect upon the Fed. Investors now expect the Federal Reserve Board to make at least a small reduction in interest rates at its September meeting in hopes of staving off job losses that could lead to recession.

The BLS followed these reports with unwelcome news on another front. On September 11, the BLS reported that the Consumer Price Index (CPI) rose 0.4% in August, or 2.9% over the past 12 months. Core CPI, which excludes the volatile categories of food and energy, rose 0.3% in August and 3.1% over the past 12 months.

These numbers are well above the Federal Reserve’s target inflation rate of 2% and — what’s worse — are trending in the wrong direction. After a gradual climb-down from the historic highs in 2021 and 2022, inflation rates have hovered around or just below 3%. The rates hit a low point in April 2025 (with CPI at an annual 2.3% and core CPI at an annual 2.8%), but they have climbed back up since then.

The prospect of rising inflation, combined with rising unemployment (or at least stagnant employment), has raised fears of a return to the stagflation conditions of the 1970s. For now, those fears remain a distant possibility, as both measures of economic health are nearer to the targets than to the numbers America reached during the disastrous decade of malaise.

Still, the August inflation report offers little comfort from a careful study. Some of the categories where prices rose the highest include “food at home [groceries]” (0.6% in August alone) and gasoline (1.9%) in August. Housing (0.4%), clothing (0.5%), and vehicle repair (5.0%!) also rose. But as long as you do need any of those things to live, you’ll be fine.

Some of these rising prices are due to the residual effects of tariffs. “Tariffs aren’t being passed onto consumer prices all at once,” said Wells Fargo economist Sarah House. “But if you look at the overall trend, you’re still seeing goods prices go up.”

“Businesses report that they’ve run through inventory they stockpiled before Mr. Trump’s tariff barrage and are starting to pass on their higher costs to customers,” argue The Wall Street Journal editors. “Auto-repair shops are getting whacked by Mr. Trump’s 25% tariff on parts and 50% on steel and aluminum.”

Much less convincingly, they also blame President Trump’s efforts to deport illegal immigrants for driving up prices in agriculture, construction, and hospitality.

Another silent cause of inflation is federal deficit spending. This goes to the root of inflation as a monetary phenomenon where too many dollars are chasing too few goods. If the government stops spending money it doesn’t have, it will clamp down on inflation in a heartbeat. Unfortunately, this summer, some Republican senators looked at the $37 trillion hole (or rather, $158 trillion hole) America is in and chose to keep digging it deeper.

Whatever the economic causes, the reality is that inflation has reared its ugly head at a most opportune time. Will the Fed really lower interest rates while inflation is climbing? The WSJ editors believe the inflation report makes it a “more difficult” decision but still conjectures that “a 25 basis-point cut is probably in the bag.”

Thus, Trump will likely get what he wants from the Fed, but not under the conditions he had hoped. Trump spent months cajoling the Fed — even firing, or trying to fire, Federal Reserve Board Member Lisa Cook — into opening the throttle to the American economy to “let ‘er rip.” Now the Fed does indeed look poised to step on the gas — but only to run away from the storm.