Rising Costs and a Slowing job Market Fuel Fears of stagflation in US
WASHINGTON – The US economy is increasingly vulnerable to stagflation – a risky combination of rising prices and slowing economic growth – with economists pointing to the lasting impact of Trump-era tariffs and a shifting economic landscape. Concerns are mounting as firms begin to pass increased costs onto consumers, perhaps triggering a broader inflationary spiral, even as the labor market shows signs of weakening.
the specter of stagflation raises the stakes for American households and businesses alike. If realized, it coudl lead to widespread job losses, increased unemployment, and a significantly more challenging job market for those seeking work. Economists warn this scenario would create a “very depressive situation,” as described by Brown University economist Kalemli-Ozcan. the current situation stems, in part, from the lingering effects of tariffs implemented during the Trump administration, which have already been absorbed by consumers to a significant degree.
according to a Goldman Sachs analysis, US consumers have already absorbed 22% of the cost of tariffs, with the potential to shoulder 67% if current tariffs remain in place.This increased cost burden,coupled with a slowing labor market – as illustrated by recent jobs data – is creating a fertile ground for stagflation.
Kalemli-Ozcan explains that firms, facing increased demand, are likely to “pass through my higher costs on to more consumers,” ultimately driving inflation. The Yale Budget Lab estimates that Trump’s tariffs could push at least 650,000 more Americans into poverty, labeling tariffs as an “indirect tax.”
The Trump administration has consistently downplayed the negative impacts of the tariffs, urging patience and recently claiming that economic data is being “rigged” against the president. Trump has predicted future job numbers “like our country has never seen,” suggesting a turnaround is imminent. However, economists remain concerned about the potential for a prolonged period of economic stagnation and rising prices.
