US Stagflation Fears Grow Amid Weak Job Gains and Trump's H-1B Shift

The US economic outlook weakens as August job growth stalls, inflation remains at 2.9%, and a new $100,000 H-1B visa fee shocks employers

A confluence of softening labor data, persistent inflation, and a sudden restrictive shift in immigration policy for high-skilled workers is reshaping the U.S. economic landscape, raising concerns among economists and businesses.

The latest economic reports present a challenging picture. The August jobs report revealed a dramatic slowdown, with the economy adding just 22,000 jobs, far below expectations and a stark contrast to the robust growth of recent years.

Meanwhile, the annual inflation rate remains at 2.9% as of August, a stubborn figure that continues to squeeze household purchasing power. This combination of weak job creation and elevated price growth has brought the term "stagflation" back into the economic discourse.

A Deteriorating Labor Market

The deterioration of the job market is becoming more pronounced. The unemployment rate has climbed to 4.3%, its highest level since 2021.

The situation is particularly difficult for younger workers; unemployment for 16-to-24-year-olds jumped to 10.5%, with recent college graduates facing a 9.3% jobless rate. A growing trend of "job hugging", where employees cling to their current positions out of fear of not finding new ones, underscores the pessimistic shift in worker sentiment.

This marks a significant reversal from the "Great Resignation" era and indicates a market that is increasingly employer-driven.

The data suggests companies have sharply cut back on hiring plans, though widespread layoffs have not yet materialized. This "low hiring, low firing" environment makes it difficult for new entrants to find opportunities and can lead to long-term stagnation for workers who feel unable to advance their careers.

New Hurdles for High-Skilled Labor

In a move that adds another layer of uncertainty, the Trump administration issued a proclamation imposing a $100,000 fee on new H-1B visa petitions.

Effective September 21, 2025, the policy aims to curb what it calls "systemic abuse" of the program that has undermined American workers. The administration argues the measure will protect national security and ensure the program is used only to hire "the best of the best".

While the fee does not apply to current H-1B holders or renewals, it is expected to significantly impact technology and other STEM-dependent sectors that have relied on this visa category to fill specialized roles.

The proclamation is anticipated to face legal challenges, and its implementation details, including a potential national interest waiver, remain unclear.

The U.S. economy faces a complex test in the coming months. The Federal Reserve is now under increased pressure to consider interest rate cuts to stimulate growth, with markets now anticipating a cut as early as September.

However, the interplay of slowing job growth, persistent inflation, and restrictive new policies on trade and labor creates a fragile environment. The ultimate impact of these forces will determine whether the U.S. can avoid a more significant economic downturn.