Consumers Keep Spending Despite Inflation

August brought some mixed signals for the U.S. economy. Consumer spending was up 0.6%, which shows people are still willing to spend, and personal income rose slightly too. But the job market is losing steam—only 22,000 jobs were added, and unemployment stayed at 4.3%.

At the same time, inflation hasn’t cooled enough. The Fed’s PCE index rose 2.7% compared to last year, which keeps pressure on policymakers. The challenge is pretty clear: cut rates to help jobs, or keep rates high to get prices under control. If the balance tips the wrong way, we could end up with stagflation—slow growth and sticky inflation at the same time.

Sources:

• BEA – August 2025 Personal Income & Outlays
• Reuters – U.S. PCE Inflation Matches Expectations