US economy before midterms: Numbers that explain GDP, inflation, jobs, AI fears and the Iran war

US growth is holding up, but inflation, a cooling jobs market, AI uncertainty and higher energy prices are complicating the economic picture ahead of the November midterms

The US economy is still growing, but the numbers tell a more complicated story than the headline GDP figure suggests. The latest data show stronger-than-expected economic growth in the second quarter, resilient consumer spending and a rebound in private-sector hiring. But inflation remains well above the Federal Reserve’s target, consumer confidence has weakened sharply and higher energy prices linked to the Iran conflict are creating a fresh risk.

Artificial intelligence is adding another layer to the picture. AI-related investment is helping drive business spending and data-centre construction, even as concerns grow over its impact on jobs.

Here are the numbers that explain the US economy as the November midterm elections approach.

GDP growth is stronger than first estimated

The US economy grew at an annual rate of 2.2 per cent in the second quarter of 2026, according to the latest estimate from the Bureau of Economic Analysis released on September 30.

That was an upgrade from the earlier estimate of 1.5 per cent. First-quarter GDP growth was also revised higher to 2.5 per cent from 2.1 per cent.

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The Q2 expansion was driven by consumer spending, investment and exports. The BEA said the upward revision to investment included stronger spending on non-residential structures, with data-centre construction an important contributor.

That makes the AI boom an increasingly important part of the US growth story.

Real final sales to private domestic purchasers, a measure of underlying domestic demand, rose at a 4.6 per cent annual rate in Q2. Real gross domestic income increased 2.6 per cent.

The numbers show that the economy retains momentum, even though growth is not particularly rapid by historical standards.

Inflation remains above the Fed’s target

The Consumer Price Index rose 3.4 per cent in August from a year earlier. Core CPI, which excludes food and energy, increased 2.4 per cent.

The Fed’s preferred measure tells a similar story. The personal consumption expenditures price index rose 3.4 per cent in August from a year earlier, while core PCE increased 3 per cent. The Fed’s long-term inflation target is 2 per cent.

Energy prices are adding to the pressure. Gasoline prices were 27.4 per cent higher in August than a year earlier, while fuel oil prices rose 52 per cent. Electricity prices increased 3.8 per cent.

That matters because households are dealing with today’s prices, not just the rate at which prices are increasing.

The Fed is keeping pressure on the economy

The Federal Reserve raised its benchmark interest rate by 25 basis points in September, taking the target range to 3.75 to 4 per cent.

The Fed said economic activity was expanding at a solid pace and domestic spending remained resilient. But it also said inflation remained elevated and uncertainty was high.

The central bank therefore faces a difficult balance.

Keeping rates high can help bring inflation down, but borrowing costs remain a burden for households and businesses. Cutting rates too quickly could make it harder to bring inflation back to 2 per cent.

The Iran conflict adds another complication because a prolonged rise in oil prices could push inflation higher even as it weakens household purchasing power.

Jobs are still growing, but more slowly

The labour market remains relatively stable. The US added 162,000 jobs in August and the unemployment rate stayed at 4.1 per cent, according to the Bureau of Labor Statistics.

Private-sector hiring also improved in September. ADP reported an increase of 90,000 private-sector jobs, up from 38,000 in August. Pay growth remained solid, with annual wage growth at 3.2 per cent.

But the labour market is cooler than during the strongest phase of the post-pandemic recovery.

The September government jobs report, due on October 2, will provide a more comprehensive picture. ADP data can differ significantly from the official BLS report.

Consumers are spending, but confidence is weak

American consumers continue to support growth. Personal consumption expenditures increased 0.9 per cent in August, while real consumer spending rose 0.6 per cent. Disposable personal income increased 0.3 per cent.

But consumer confidence is much weaker. The University of Michigan’s September sentiment index fell to 47.8, its second-lowest reading in the survey’s 74-year history. Only May’s reading was lower.

A September Marquette Law School poll found inflation and the cost of living were the biggest economic concerns for voters. Only 28 per cent approved of President Donald Trump’s handling of the economy, while 19 per cent approved of his handling of inflation and the cost of living.

These are measures of public opinion rather than economic output, but they show why the economy is likely to remain a central issue before the midterms.

AI is driving investment and raising job concerns

AI is one of the strongest parts of the investment story. The latest GDP revision highlighted data-centre construction as a contributor to investment growth. Businesses are spending heavily on computing infrastructure as they race to develop and deploy AI systems.

But the technology is also raising questions about employment. Federal Reserve Governor Lisa Cook said in a September 28 speech that there was still limited evidence that AI had caused major changes in the overall labour market.

At the same time, she pointed to signs of pressure in some occupations, including coding and simultaneous translation, and noted that some recent college graduates were finding it harder to secure entry-level jobs.

The long-term economic effect remains uncertain. AI could lift productivity and economic growth. But the transition could be difficult for workers whose tasks are increasingly automated.

Iran has made energy a new economic risk

The Iran conflict has added another problem for the US economy. US gasoline prices have climbed sharply as the conflict has disrupted global energy markets. AAA data showed the national average for regular gasoline at about $4.48 a gallon on September 24.

Higher oil prices can quickly feed into petrol and diesel costs. They can also increase transportation and production costs for businesses.

That creates a difficult combination for the Fed. A weaker economy would normally argue for lower rates. But an energy-driven rise in inflation could make policymakers more cautious about cutting rates.