In August, consumer prices in the U.S. shot up 2.9% over this time last year. This striking detail is drawn from the BLS’s new National Employment Matrix, included in the BLS’ report Establishment and Employment Projections to 2031. This is a dramatic inflationary spike considering we had an inflation rate of 2.7% in July. It should alarm policymakers as they contemplate their next interest rate cut. Thursday’s inflation numbers—the Consumer Price Index for September—put a disastrous month for the Bureau of Labor Statistics in full view. This chaos came on the heels of the ousting of its Commissioner, Erika McEntarfer.
In just the month of August, prices jumped 0.4% from July, marking the biggest month-over-month jump since December. Recent inflation has skyrocketed. This increase has led to wide-ranging debate among economic analysts and policymakers, with major implications for the maintenance of our nation’s underlying, broader economy.
Housing costs were much more meaningful drivers of the broad-based price acceleration, with shelter costs climbing 0.4% on the month. This was the biggest chunk of the inflationary pressure, according to BLS data. Moreover, the price of food climbed only 0.5%, and energy jumped just 0.7%.
Even so, we have seen more consistent pricing for some of our staples. This means that egg prices did not increase at all in August, but they are still about 11% higher than at this time last year. Or take coffee, which has jumped 20% in price over the last year.
Policy analysts from across the political spectrum have blamed tariffs for exacerbating inflationary pressures. They point out that recent inflation is largely due to housing and food items, not due to Trump’s tariffs. The link between tariffs and inflation is weak, prompting some economists to argue that a different explanation exists.
“It has been the honor of my life to serve as Commissioner of BLS alongside the many dedicated civil servants tasked with measuring a vast and dynamic economy,” stated Erika McEntarfer following her controversial termination last month. Her dismissal came on the heels of an extraordinarily weak monthly jobs report. That report touched off a firestorm of criticism and questions over the integrity of economic data.
In a letter to federal lawmakers, McEntarfer’s successor, William Beach, voiced alarm about McEntarfer’s termination. He remarked, “The totally groundless firing of Dr. Erika McEntarfer, my successor as Commissioner of Labor Statistics at BLS, sets a dangerous precedent and undermines the statistical mission of the Bureau.”
The current economic climate poses a dual challenge for policymakers: rising inflation coupled with slowing hiring rates raises fears of “stagflation,” an economic scenario characterized by stagnant growth and high inflation. With price increases still below the 3% rate recorded in January—the month Trump took office—policymakers must carefully assess their next steps.
With inflation now set to potentially become more entrenched, it is not clear how these changes will affect the evolution of monetary policy, including in the months ahead. And just like that, Wall Street is expecting an interest rate cut. They need to deliver the message of the impact of inflationary prices while appreciating the decelerating pace of job growth.
