Brandon Sheridan's word for the U.S. economy is "sideways." Growth is weak, job gains are close to zero, and inflation is stuck well above target, while American consumers keep spending on borrowed runway. We dig into the numbers, follow the story to Japan, and close with advice for anyone teaching economics this year.
Three takeaways
- The consumer is carrying a sideways economy. Real GDP grew 1.5% last quarter, and consumer spending did most of the lifting. With real wages falling and car loan delinquencies rising, we both wonder how much runway people have left once lenders pull back.
- One jobs number is an estimate, so watch the trend. The July report showed a loss of 23,000 jobs when forecasters expected a gain of 88,000, and May and June were revised down by 100,000. The number worth losing sleep over is prime-age labor force participation, which fell about half a point, or roughly 800,000 workers aged 25 to 54.
- In the classroom, start small and own your mistakes. Brandon's advice for the semester is to try one new thing, and when you get a graph wrong in front of students, fix it out loud. Mine is to bring the world around your students into the room.
About this episode
Brandon and I recorded this in mid-August, right after the July jobs and inflation reports came out. We go around the horn on the U.S. data, then spend time on international economics, which is Brandon's home field and something many of you have asked us for more of. We finish with the start of the semester: what's new in economic education research and what to do in your first weeks in front of students.
An economy moving sideways
I've been saying for two years that the consumer would eventually have to stop spending. Brandon gently reminded me that a broken clock is right twice a day. Still, we land in the same spot. Growth is below its long-run average of about 2%, consumer spending is doing the work, and the money for that spending is increasingly borrowed at interest rates that aren't likely to fall soon. So if you're already carrying a balance, spending your way through this is not a plan.
The inflation report adds to the squeeze. Headline inflation dipped from 3.5% to 3.4%, which made for some cheerful headlines. But gasoline was up 24.6% from a year earlier, fuel oil was up 39.1%, and electricity was up 4.2%, while nominal wages grew 3.2%. If you drive to work or heat your home, your paycheck bought less this summer than last. Brandon's view is blunt: inflation was falling until tariffs and the war with Iran pushed it back up, and he calls the current rate a policy choice.
Who is leaving the labor force?
The labor force participation rate fell to 61.4%. Some decline is expected as baby boomers retire. What worries Brandon is the prime-age rate, people 25 to 54, which also fell. His early read of the BLS data (he's careful to call it preliminary) is that men account for the drop, which fits with recent job gains landing in health care, home health and education.
That led us to Planet Money's episode on whether the U.S. should bring back a mandatory retirement age. When we posted about it on our socials, many of you told us you'd retire tomorrow if not for the cost of health insurance. I think that makes health care policy a labor market policy. I also shared a story from Oman, where the government pushed out older workers to make room for young people, then hired many of them back as consultants within a year because the institutional knowledge walked out the door with them.
Why the Japanese yen matters to you
The yen has fallen from around 120 to 130 per dollar to around 160. Brandon walks through why: Japan imports its oil, oil is priced in dollars, and when oil prices jumped, Japan needed more dollars. Japan also has low interest rates, which pushes investors toward U.S. assets. Raising rates would help the yen but could slow an economy already hit by expensive oil.
An American should care because Japan is the largest foreign holder of U.S. government debt. If it sold those bonds to defend its currency, bond prices would fall and U.S. interest rates would rise, which shows up in your mortgage, your car loan and your credit card. Brandon describes a U.S. intervention to prop up the yen, carried out without telling European partners, that held for only a few weeks.
We also talk about why markets keep shrugging off tariffs and record borrowing. My fear, and Brandon's, is that when markets do react, it will happen all at once.
Advice for the first weeks of class
Brandon co-founded the Economic Education Network for Experiments (EENE), which runs the same study across many classrooms so instructors aren't stuck with results from one class at one school. Their academic mindset study surveys students at the start and end of the term on relevance, belonging, growth mindset and self-efficacy, across 25 to 30 institutions and several thousand students. The spoiler, in Brandon's words, is that the results are "probably not what we would hope." Students don't leave intro econ feeling better about their ability to do economics.
His advice for the semester is to resist doing everything you saw at a workshop. If you're new, get through the first semester and learn your students. If you've taught for years, try one new thing (AI is the obvious candidate) in a low-stakes way. And when a student points out that you shifted the demand curve the wrong way, walk through your mistake and correct it. If we want students to have a growth mindset, we have to show them one.
Our guest
Brandon Sheridan is an associate professor of economics at Elon University, where he works on international trade and economic growth. He is a co-founder of the Economic Education Network for Experiments, and he and I co-edited Teaching Economics Online (2024) with Parama Chaudhury. We went to grad school together and have been writing together ever since. Connect with Brandon on LinkedIn
What we cover
- 00:00Welcome, and why Brandon says the economy is moving sideways
- 01:30GDP growth of 1.5% and how long the consumer can keep spending
- 06:30The July jobs report: a loss of 23,000 jobs, and signal versus noise
- 09:40Labor force participation and the drop among prime-age workers
- 13:00Should the U.S. have a mandatory retirement age? Plus a story from Oman
- 19:50Inflation at 3.4%, energy prices and falling real wages
- 24:30International: the falling Japanese yen and why it matters for U.S. interest rates
- 30:15Tariffs, the bond market and why markets haven't reacted
- 35:15The JET conference, the power of peers and EENE's research
- 43:25Advice for starting the semester
For the classroom and your conversations
- If wages grew 3.2% and prices grew 3.4%, did you get a raise? What would you need to know about your own spending to answer that?
- Why might someone who wants to retire at 60 keep working until Medicare starts at 65? What does that do to jobs for younger workers?
- Japan needs dollars to buy oil. Walk through what that does to the price of the yen, and then to U.S. interest rates.
- Think of a time a teacher or boss admitted a mistake in front of you. Did you trust them more or less afterward?
What does the job market look like where you are? Do you read that loss of 23,000 jobs as a signal or as noise? Tell me in the comments.
Instructor resources
Use it Monday
Activity · 10 minutesPut the first July estimate on the board: a loss of 23,000 jobs against an expected gain of 88,000. Ask students whether the economy is shrinking. Then show them that the first survey only collects about 60% to 70% of responses, and that May and June were revised down by 100,000 once more came in. Finish by asking: how many months of data would you want before you changed your mind?
Pair it withThe BLS table of payroll revisions, which shows the first, second and third estimate for every month. Get it
Research mentioned in this episode
Cortinhas, C., Sadeh, J., McKee, D., Marshall, E., Sheridan, B., et al. (2026). International insights into the academic mindset of economics students. International Review of Economics Education, 53, 100357. An EENE study of students in eight countries outside the U.S. Read it
Sheridan, B. J., Hoyt, G., & Imazeki, J. (2014). A primer for new teachers of economics. Southern Economic Journal, 80(3), 839–854. Brandon's paper on moving past "chalk and talk." Read it
Gonzalez, S. (2026, August 7). Older workers aren't retiring. Should they be forced to? [Audio podcast episode]. In Planet Money. NPR. Listen
U.S. Bureau of Labor Statistics. (2026). The Employment Situation and Consumer Price Index news releases, July 2026 data. Jobs Prices