The economy is on tenterhooks with both inflation and unemployment threatening to worsen.

More than tariffs are pushing up prices.

Services account for 61% of the Consumer Price Index and 76% of the Core CPI.

Services, which are not tariffed, have been rising 3.6 % a year and that pace shows few signs of abating.

Higher tariffs on goods imports do push up costs for materials and equipment for event promoters, dry cleaners and daycare centers, but those are second order effects.

The prices those businesses charge for events tickets, cleaning a dress or tending children depend much more on overall demand and the up to 70% of business costs paid for labor.

The top 20% of households account for more than three-fifths of consumer spending, and the most volatile portion of their income comes from stock market gains.

When stock prices rise, the wealth effect drives up demand for many discretionary items such as luxury accessories and cruise ship tickets.

President Donald Trump wants lower interest rates to boost an economy slowed by tariffs by taxing many of the everyday items ordinary folks must purchase like groceries.

Policymakers anticipate that lower mortgage rates would boost new home sales, but construction will be limited by the lack of immigrant workers.

More immediately, lower interest rates should further boost stock prices and aggregate demand with much of the benefits going to upper income households.

The labor market is a headache in multiple dimensions.

The natural rate of increase in the labor force is greatly curtailed by Mr. Trump’s immigration policies. He’s deporting both criminals and any other illegal immigrants ICE can scarf up.

Population growth and moderate legal immigration could give us up to 90,000 new workers each month, but he appears intent on limiting legal entries too.

Without additional foreign workers and with the economy near full employment, the workforce could add as few as 24,000 a month. That’s roughly equal to monthly jobs growth since May.

Without more immigrant workers, the agriculture, construction, manufacturing and many service businesses will continue to face chronic labor and skills shortages.

The economy could be challenged to grow at more than 2% a year, and many long-term unemployed will face bleak prospects.

Increasingly AI is eliminating mid-level, often college-educated, professional and white-collar positions.

In a nutshell, when computer programmers, editors or lawyers lose their jobs, many fewer new positions requiring their qualifications open somewhere else.

For new college graduates lacking a degree in a hot area like health care, it’s the toughest long-term jobs market since the Global Financial Crisis.

Trump will get significantly lower interest rates.

He can replace Federal Reserve Chairman Powell in May.

It’s unlikely, though not impossible, that the president can fire Fed Governor Cook to make the majority on the Board of Governors Trump appointees, but her plight must weigh on the minds of the other Fed policymakers.

Governors earn $225,700 a year. That’s a tidy sum to most Americans, but it can evaporate quickly when paying Washington lawyers to fend off a Justice Department investigation.

Together, lower interest rates and the fiscal stimulus of lower taxes from the One Big Beautiful Bill will lift demand more than his tariffs stifle it, but without substantially more workers inflation in services and elsewhere will continue.

Inflationary pressures in goods industries from tariffs could be transitory, but the persistence of labor shortages especially in the services sector will lock in inflation expectations above 3%.

The real threat to near-term prosperity is an economy flying at low altitude.

Creating as few as 24,000 jobs a month, it won’t take much of a shock to thrust the economy into a recession. For example, a prolonged rupture in trade with China that cuts off supplies of rare earth minerals and limits U.S. auto, defense and technology manufacturing or a crisis in the Middle East.

Trump’s economic strategy—federal tax and spending cuts, tariffs to shift the U.S. economy more into manufacturing, tight immigration policies to push more Americans into the resulting jobs market and lower interest rates to further boost stocks—should be unsettling even to Trump’s MAGA voters.

The top 10% or 20% of households could withstand a haircut from a downdraft in the stock market but for many of them, that may mean a few weeks in Florida instead of a Mediterranean vacation.

For other Americans, it’s a risky proposition.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.