In August the US economy managed to flex its economic muscle to the tune of a 22,000 job gain. This growth happened despite the unemployment rate rising to 4.3%. This uptick from July’s rate of 4.2% comes amidst a backdrop of economic uncertainty, as tariffs imposed by the Trump administration have begun to impact the nation’s economic growth. It’s been all that strong consumer spending working overtime to cover up all the economy’s terrible failures.
In Q1 2025, GDP contracted by 0.6%. It was the largest contraction so far that clearly scared a lot of the analysts and policymakers. New data released this week indicate that consumer spending has increased a whopping 2.5% over the year ending in June. That’s a huge upward revision from the previous estimate of only 1.6%. Strong consumer demand has been a major driver of economic expansion. In the second quarter, the economy rocketed ahead at a 3.8% annualized rate—far above expectations.
Declining imports were a major factor in propping up GDP numbers. The Commerce Department noted that the recent growth in GDP reflected “a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending.” That’s a highly encouraging sign pointing toward growing consumer confidence, especially as retail sales increased 0.6% during August from July.
Even with these positive indications, many economists are still wary of the economic forecast. Lydia Boussour warned that “with the impact of tariffs and policy uncertainty becoming increasingly visible, slower US growth and higher inflation are still on the horizon.” This powerful sentiment signals issues that still remain to plague sustainable economic progress.
Bill Adams expressed a more optimistic view, stating, “The latest economic data are considerably more upbeat than the droopy August jobs report.” He further added that “the latest GDP and jobless claims data should ease the bout of anxiety kicked off by the weak August jobs report.” What his comments reveal is a deep sense of optimism among economists. They point to what they think is an underlying strength of consumer spending as a potential brake on broader economic headwinds.
Surprisingly, new initial claims for unemployment insurance are at the lowest level since late July. This drop is an encouraging sign that the labor market is beginning to stabilize. This marked decline will help reassure consumers and investors with one another, offering greater backing to continuing improvements in our economy.