The month of September kicks off with the economy in a familiar spot, facing more uncertainty over tariffs, the cornerstone of President Donald Trump’s economic policy.
A federal appeals court late Friday upheld a lower court ruling that Trump lacked the authority to impose his "reciprocal" tariffs on many nations but allowed them to remain in effect while the decision is appealed to the Supreme Court. Even if the court agrees that the tariffs were illegally applied by Trump because the power resides with Congress, Trump could still use different authority to reimpose them, but that would take much longer and be limited in how high they could be.
Tariffs are not the only thing for markets and the economy will face this week, with a key report from the Labor Department on Friday detailing how many new jobs were added in August.
Then there could be a court ruling on whether Lisa Cook, a member of the Federal Reserve’s board of governors, can legally be fired by Trump for what is an unproven allegation of mortgage fraud. Trump has been trying to restock the Fed with people who he expects would be more supportive of his calls for lower interest rates.
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Fed Chairman Jerome Powell, a target of some of Trump’s attacks on the central bank, noted last month that the labor market had softened, raising expectations for a quarter point cut at its meeting later this month. Concerns over inflation also persist.
But it is the job market that is the current worry, following a weaker-than-expected 73,000 jobs added in July along with revisions that lowered the prior two months of job gain by more than 250,000. Expectations are for a gain of about 60,000-70,000 jobs last month.
“I keep cautioning people not to confuse moderation with weakness,” says Amy Glaser, senior vice president at staffing firm Adecco. Glaser says companies are still hiring and have indicated plans to add to their workforces, but she is seeing “companies slower to pull the trigger and make the hire.”
Although the nation’s gross domestic product rose at an annual rate of 3.3% in the second quarter, forecasts call for a slowing of the economy in the rest of 2025 with weakness continuing into 2026. The combination of a slowing labor market and inflation that remains above the Fed’s 2% annual target presents a dilemma for a Fed facing continued attacks on its independence and the prospect of new members who may be more hospitable to lowering interest rates.
“As we approach the date of the Fed’s September meeting, markets appear firmly of the opinion that this time the bank will finally cut rates,” said Richard Potts, economist at foreign exchange firm Bondford. “Yet, we would warn against complacency.”
“It would be naive to consider a September cut a done deal,” Potts added. “U.S. data has had a nasty habit of surprising recently, and the current mix of contradictory economic signals means volatility around the dollar is likely to remain elevated as policymakers attempt to discern the best course of action.”
