SIOUX FALLS, S.D. (KELO) – President Donald Trump has lashed out at Federal Reserve Chair Jerome Powell, saying he needs to go following Powell’s comments this week about tariff uncertainty.
“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects,” Powell said Wednesday in Chicago.
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Powell says that could include higher inflation, slower growth and higher unemployment. And although he didn’t use the term, those factors are leading some to worry about stagflation.
What is stagflation?
“It’s basically the worst of all worlds,” Jared McEntaffer, economist and CEO of Dakota Institute, said.
McEntaffer says stagflation is a combination of a contracting economy and rising inflation.
“When the economy starts contracting and growth slows, then you can end up having higher unemployment,” McEntaffer said. “When that happens it gets a lot harder for households to handle and combat the rising prices.”
The last time the United States saw high stagflation was in the 1970s when inflation and unemployment rose following oil embargoes. That led to people paying higher prices for gas, energy, food and more.
“That’s not the situation that we’re in right now. Inflation is higher than the Fed would like it, it’s about 2 and a half percent right now, obviously it was higher in the last few years, so it’s come down some,” McEntaffer said. “Unemployment right now is actually okay as well but we are seeing growth slowing pretty significantly. The Atlanta Fed has growth forecasted for the next quarter at negative 2.2 percent.”
Impact of tariffs
Of course, the thing on the minds of many right now is the impact of tariffs on the economy.
“So right now we have a 25 percent, nearly, tariff rate that’s imposed on all the goods we import,” McEntaffer said. “That’s a $783 billion tax increase on American consumers.”
McEntaffer says a slowing economy and those high taxes on imports will lead to a crunch on our pocketbooks.
“So that’s the thing that we worry about from the perspective of the economy,” McEntaffer said. “A big part of it is consumption and a lot of consumption goods and inputs into consumption are seeing price increases. So if the economy slows, income growth slows at the same time that we can see another push up in prices, that really can hurt people. Hurt the economy.”
South Dakota’s economy
When it comes to South Dakota’s economy specifically, McEntaffer says it’s possible we’re already in or heading toward a mini recession.
“Growth at the state level has been flat and negative for three out of the last four quarters,” McEntaffer said. “We’re seeing, across the board, the state and our major municipalities are seeing slower sales tax collections, which is a leading indicator for where the economy is going.”
In March, the sales tax revenue for Sioux Falls fell by 2.7 percent compared to March of 2024.
