GDP GROWTH:
The nation’s real gross domestic product declined at an annual rate of 0.3 percent in the first quarter of 2025. It was the weakest quarterly growth in three years, according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real GDP increased 2.4 percent.
Consumer spending, the economy’s main engine, rose at a 1.8% pace in the first quarter, the smallest increase since mid-2023.
Imports rose at the fastest pace since the third quarter of 2020, when the economy was reopening from pandemic lockdowns. Businesses rushed to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter. Spending by the federal government fell as the Department of Government Efficiency cut jobs and contracts.
But the main driver of the first-quarter contraction was President Donald Trump’s trade war. Net exports, the difference between what the U.S. imports and exports, subtracted nearly five percentage points from headline GDP. That was the biggest quarterly drag from net exports on record dating back to 1947. READ MORE >
EMPLOYMENT:
In its last government jobs report of the first quarter, the U.S. Labor Department reported strong employment growth for the month of March.
The Labor Department’s report was delivered as the government announced a series of controversial tariffs on virtually all of America’s trading partners that provoked immediate retaliation. The job data indicates that the labor market is holding up so far, but the trade maneuvers raise the possibility that companies hold back on hiring as they assess the new commerce landscape.
The Bureau of Labor Statistics said nonfarm payrolls increased by 228,000 jobs, up from the revised 117,000 in February and better than the Dow Jones forecast of 140,000. However, the unemployment rate edged up 10 basis points to 4.2% as labor force participation also increased. It’s been roughly in the 4% range for the past several months, which shows the labor market has been on solid footing.
The March employment totals indicate a labor market that still is strong, although the January and February counts have been revised downward substantially: January totals were cut by 14,000 to 111,000 and by a 34,000 reduction in February to 117,000. READ MORE>
MONETARY POLICY:
Federal Reserve officials voted unanimously at their March meeting to hold interest rates steady at 4.5%, citing lingering inflation as an overriding concern. The expected decision by central bankers followed a pause in January after three consecutive rate reductions that began last fall, lowering the Fed funds rate from 5.5% to 4.5%.
But the major news came after the Fed’s decision as President Donald Trump issued attacks and negative commentary on his opinion of Fed Chair Jerome Powell for holding firm on interest rates and calling controversial tariff plans inflationary. The Fed chair added that given the “solid” economic backdrop, the cost of waiting for “further clarity” on the path of tariffs and policy was low.
Trump responded with concerning commentary regarding Fed Chair Powell’s continuing tenure saying Powell’s “termination couldn’t come fast enough.” President Trump’s comments on social media caused equities markets to dip temporarily. The Administration later confirmed that Trump had “no intention of firing Fed Chair Powell”. READ MORE >
GLOBAL ECONOMY:
Forecasts for global growth have been reduced significantly by the International Monetary Fund since its January update, with downward revisions reflecting the United States’ unveiling a series of new nearuniversal tariffs at levels not seen in a century. Predictably, the U.S. moves triggered countermeasures by its trading partners.
The IMF called the tariffs a major negative shock to growth, declaring that the unpredictability with which these measures are unfolding has a negative impact on economic activity and the outlook. The controversial tariff and trade measures challenge the usual assumptions that the IMF said enable its researchers to develop an internally consistent and timely set of projections.
Nevertheless, the swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. Global growth is projected to drop to 2.8% in 2025 and 3% in 2026 – down from 3.3% for both years and much below the historical average of 3.7% from 2000 to 2019, the IMF said.
In its latest forecast, the IMF said growth this year in advanced economies is projected to be 1.4%. Growth in the United States is expected to slow to 1.8%, a pace that is 0.9 percentage point lower relative to the IMF’s January projection. READ MORE >
