Archive · 1 Oct 2026
US Economy Grows Despite Inflation, Jobs and Iran Risks
The US economy is still growing, but it has some important problems.
The economy grew faster than first estimated in the second quarter of 2026.
People are still spending money, which helps businesses.
However, prices are rising faster than the Federal Reserve wants.
Gasoline and other energy prices have become especially expensive.
Jobs are still being added, but hiring is slower than during the strongest part of the recovery.
Artificial intelligence is helping companies invest and build data centers, but some people worry it could reduce certain jobs.
These issues may make the economy an important concern for voters before the November midterm elections.
US GDP growth was revised up to an annualized 2.2% in the second quarter of 2026, from an earlier estimate of 1.5%.
Inflation remained above the Federal Reserve’s 2% target, with August CPI and PCE inflation both at 3.4%.
The US added 162,000 jobs in August, while unemployment held at 4.1% and private-sector hiring improved in September.
Consumer spending continued to support growth, but University of Michigan sentiment fell to 47.8, its second-lowest reading in the survey’s history.
AI investment and data-center construction are boosting business spending, while the Iran conflict has driven higher energy prices and increased economic uncertainty.
- Who
- US households, workers, businesses, the Federal Reserve and voters are central to the economic story; President Donald Trump’s economic approval ratings are also cited.
- What
- The US economy is growing, but persistent inflation, slower hiring, weak consumer confidence, AI-related uncertainty and higher energy prices are complicating the outlook.
- When
- The figures cover the second quarter of 2026 and data released in August and September, ahead of the November midterm elections.
- Where
- The United States, with energy-market effects linked to the Iran conflict.
- Why
- Economic growth remains resilient, but inflation is above target, borrowing costs remain high, energy prices have risen and the effects of AI on employment are uncertain.
More positive economic reading
More cautious economic reading
Growth and demand
More positive economic reading
Revised GDP growth, resilient consumer spending, stronger private-sector hiring and rising private domestic demand indicate that the economy retains momentum.
More cautious economic reading
Growth is not especially rapid, consumer confidence is weak and higher prices could reduce household purchasing power.
Inflation and interest rates
More positive economic reading
The Federal Reserve says economic activity and domestic spending remain solid, suggesting the economy can withstand continued efforts to control inflation.
More cautious economic reading
Inflation remains well above the Fed’s 2% target, while high interest rates burden households and businesses; higher energy prices could make inflation worse.
Artificial intelligence and employment
More positive economic reading
AI-related business investment and data-center construction are supporting economic growth and could eventually increase productivity.
More cautious economic reading
AI may put pressure on occupations such as coding and simultaneous translation, while some recent college graduates are reportedly finding entry-level work more difficult to obtain.
- Q2 2026 GDP growth
- 2.2% annualized, revised up from 1.5%
- August CPI inflation
- 3.4% year over year; core CPI was 2.4%
- August PCE inflation
- 3.4% year over year; core PCE was 3%
- Federal Reserve rate
- Target range of 3.75% to 4% after a 25-basis-point September increase
- August employment
- 162,000 jobs added; unemployment remained 4.1%
- Consumer sentiment
- University of Michigan September index fell to 47.8
- Gasoline price
- National average of about $4.48 per gallon on September 24, according to AAA