The latest Consumer Price Index (CPI) data showed prices moderate near their lowest levels in three years during the month of August. However, many economists continue to have their eyes on the labor market, which has experienced significant cooling.

National Economic Council deputy director Daniel Hornung joins Catalysts to discuss the state of the US economy and its outlook given both the latest CPI and last week's August jobs report.

"I think we're in a resilient place in the economy right now. We've seen sustained job growth, the unemployment rate remaining at a historically low level. I do think, though, that as we've really seen this decline in inflation from more than 9% to 2.5% today, the focus is shifting to sustaining the progress that we've seen in the labor market. There's no question that that is the key question facing the economy right now," Hornung tells Yahoo Finance.

He argues that the focus for policymakers moving forward should be on strengthening the labor market. "As we look to the medium term, there's no question that we need to be, as a country, investing in workforce training, investing in education, investing in our people. We need to make sure we have a tax system that allows us to have the fiscal space to make those key investments," he explains.

He notes that the Biden-Harris administration has made investments to strengthen the labor market through the CHIPS and Science Act, spurring growth in key areas like semiconductors and clean energy.

Hornung concludes, "We need to really make sure that our economic policy is geared not just towards the moment and getting through the moment, but instead, five, 10 years down the road. What can we do to make sure that American industries are winning global competition and American workers continue to have good quality jobs that are leading to higher living standards?"

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl