There are two significant events taking place in the US economy. The the first is of a political nature: for weeks now administrative shutdown It is halting non-essential government activities, with delays in salaries, payments, and other public administration-related activities. However, this is a temporary event; there is no reason not to believe the shutdown will be postponed this time as well. The second issue concerns the possible effects of the Supreme Court's decision regarding the legitimacy of the tariffs. Even in this case, despite the judges' rulings, it seems unlikely that the US Administration will backtrack on the development of a new tariff and customs strategy for the country.
In the background, however, remains another question mark: how is the American economy doing? after almost a year since the inauguration of Trump II?
Lisa D. Cook: Inflation still high but under control
Some basic ideas can come from the last speech of Lisa D. Cook, member of the Fed and formerly senior economist at the Council of Economic Advisers during the presidency of Barack Obama, who a few days ago, guest of the Brookings Institution, he spoke about the US economic outlookIn front of the highly select audience of the Washington think tank, the influential Fed representative recalled that, among the effects of the government shutdown, there is also the failure to publish of many of the data that the Fed uses to monitor the performance of the real economy.
In any case, Fed economists have long been expanding their information sources, using alternative administrative databases and especially private sector providers that offer granular price data on significant goods and services, including housing and vehicles, and information on so-called high-frequency spending, such as credit cards. Based on data available in September, Cook said, it is estimated that underlying inflation (core inflation), which excludes the most volatile components, such as food and energy, grew by 2,8% in trend terms.
“From discussions with economic operators it emerges that the pass-through of duties to consumer prices (pass-through of tariffs) it has not yet been completedMany companies have chosen to sell off accumulated inventories at lower prices before raising their prices. Others prefer to wait for the uncertainty surrounding tariffs to resolve before adjusting prices. The release of new car models, new clothing collections, and other products will provide companies with further opportunities to realign prices. Therefore, I expect inflation to remain high next year.
The hope for policy makers is that the effects of tariffs manifest themselves in a one-off increase in prices, a scenario that, for now, is supported by most measures of long-term inflation expectations, which remain low and stable.
Inflation is on a path of gradually returning to 2%, provided these tariff effects do not prove persistent and monetary policy remains appropriately aligned to that objective. Let me be clear: I am determined to return inflation to our 2% objective. I will stand ready to act decisively if the effects of the tariffs prove larger or more lasting than expected, or if other signs emerge that higher inflation expectations are becoming entrenched.
Cooling labor market and growing social risk
For the latest data coming from the job market, the available indicators still outline a picture of employment stability, although some elements of gradual cooling are evident. unemployment rate has risen This summer, from 4,1% in June to 4,3% in August, a level that remains low, considering that the average unemployment rate in the fifty years preceding the pandemic had been 6,2%.
“At this juncture the hiring slowdown It seems to be mainly due to the slowdown in population growth, also linked to recent immigration policies. Since wage changes today primarily reflect these demographic factors, they do not offer a clear signal about the true resilience of the labor market.
A different issue is emerging among the most vulnerable social classes and among low- and middle-income families: on the employment front Youth and African-American unemployment rates have risen steadily from the spring through August, and sharp increases in default rates are being observed, economist Lisa D. Cook warned in her closing remarks.
Ultimately, we will have to wait until the first few months of 2026 to have a meaningful understanding of the effects of the tariffs on the American domestic economy.
