(NewsNation) — A trifecta of economic updates this week suggests uncertainty is here to stay — for now.
President Donald Trump’s trade war has unnerved Americans, sending consumer confidence plunging to its lowest level since the early days of the COVID-19 pandemic.
This week’s GDP report showed the U.S. economy shrank for the first time in three years in the first quarter, largely due to a surge in imports as businesses rushed to get ahead of the president’s tariffs.
Major brands flag consumer anxiety: McDonald’s, Chipotle, P&G
Meanwhile, Friday’s jobs data revealed solid growth, with American employers adding a better-than-expected 177,000 jobs in April. The unemployment rate also stayed low, unchanged at 4.2%.
That’s all to say: It’s too early to tell how Trump’s trade war will affect the quarters ahead, but here’s the good — and bad — from this week’s economic data.
Jobs report shows resilience, unemployment rate stable
Monthly jobs change: U.S. employers added 177,000 jobs in April (BLS data)
Unemployment rate: 4.2% in April (unchanged from the month prior)
The good news
The U.S. labor market continues to hold steady despite economic uncertainty, according to new Labor Department data released Friday.
American employers added 177,000 jobs, surpassing expectations. The unemployment rate was unchanged at 4.2%, near historic lows.
Health care companies added nearly 51,000 jobs, while bars and restaurants boosted hiring by 17,000. Transportation and warehousing companies also saw an uptick, adding 29,000 jobs last month — potentially a result of businesses boosting inventory ahead of Trump’s tariffs.
Average hourly earnings are up 3.8% from a year ago, outpacing the most recent inflation rate.
US employers added 177,000 jobs in April as job market shows resilience
The bad news
The latest report offers little insight into how Trump’s trade war will affect the labor market in the months ahead.
That’s because the April data mostly reflects hiring decisions that were made in February and March, before the so-called “Liberation Day” on April 2.
Labor market data is collected around the 12th day of each month, so the effects of Trump’s tariffs likely aren’t reflected in the current report and may take several months to fully appear.
The government also revised down its estimates for March and February, cutting a combined 58,000 jobs from the totals.
What experts are saying
“Taken at face value, the April employment data displayed remarkable stability, leaving aside the question of the sustainability of that feature,” Bankrate’s senior economic analyst, Mark Hamrick, said in an email.
Bill Adams, chief economist at Comerica Bank, called the April jobs report “reassuringly normal” in an analysis.
“The jobs data for April are reassuring, but a number of other economic indicators point to uncertainty ahead,” Adams wrote.
Consumer confidence falls to COVID-era low
Consumer confidence fell for the fifth straight month in April, pushing the Conference Board’s index to its lowest level since May 2020 — the early days of the COVID-19 pandemic.
Trump’s trade war appears to be weighing heavily on consumers’ minds, with mentions of tariffs hitting an all-time high in the latest survey.
Economists watch confidence levels closely because shifts in sentiment can impact consumer spending, the driving force behind roughly two-thirds of overall economic activity.
Consumer confidence falls to lowest level since COVID-19 pandemic
The good news
There wasn’t much to celebrate in the latest report, but one positive stood out: Consumers’ assessment of current conditions has largely held up.
The recent dip in consumer confidence has been driven mostly by concern about the future. Still, there was a slight uptick in optimism about the present — 19.2% of respondents said business conditions were good in April, up from 18.3% in March.
The bad news
Consumers are feeling increasingly pessimistic about what lies ahead, and the share expecting fewer jobs in the next six months is now approaching levels last seen in April 2009 during the Great Recession.
The Expectations Index, which gauges consumers’ short-term outlook for income, business and labor market conditions, is at its lowest level since 2011 — and well below the threshold that typically signals a recession ahead.
For the first time in five years, expectations about future income prospects turned “clearly negative,” which suggests that “concerns about the economy have now spread to consumers worrying about their own personal situations,” Stephanie Guichard, senior economist at The Conference Board, said in the report.
What experts are saying
“Unless the trade war cools off very (very) soon, recession appears dead-ahead,” wrote Mark Zandi, chief economist for Moody’s Analytics, in response to the latest consumer confidence report.
Zandi noted: “Present assessments are holding up better. This suggests confidence could recover quickly with good news on the trade war, heading off a recession.”
“Rattled consumers spend less than confident consumers,” Carl Weinberg, chief economist at High Frequency Economics, told The Associated Press in an email. “If confidence sags and consumers retrench, growth will go down.”
The economy shrank, but it’s not all doom and gloom
The U.S. economy shrank at an annual rate of 0.3% in the first quarter, marking the first decline in three years, according to the Commerce Department’s initial estimate released this week.
The decrease was primarily due to a surge in imports as companies rushed to stock up ahead of Trump’s tariffs. Lower government spending also contributed to the drop.
Economists had generally expected modest growth in the first quarter, though a slowdown from the 2.4% annual pace in the final quarter of 2024 was widely anticipated.
US economy shrinks 0.3% in first quarter of 2025
The good news
The first quarter contraction may prove to be just a blip — a short-term reaction to Trump’s trade war rather than a sign of deeper economic weakness.
Imports surged at a 41% annual pace, the fastest since 2020, subtracting 5 percentage points from first-quarter growth. Many analysts believe that pace won’t persist in the second quarter, suggesting net trade may be less of a drag on GDP moving forward.
A separate GDP category that measures consumer spending and private investment rose at a 3% annual rate in the first quarter, up slightly from 2.9% in the previous quarter.
In other words, aside from the significant import shock, key market fundamentals remained relatively strong.
The bad news
GDP is a backward-looking measure; it captures consumer behavior shaped by an economic reality that may already be shifting under the weight of Trump’s tariffs.
Accelerating purchases and investments, as many businesses and consumers seem to have done, could have negative ripple effects later on.
If shoppers and businesses are rushing to buy before Trump’s tariffs set in, the latest data might be overstating how strong demand really is.
“This artificial front-loading of demand sets the stage for a sharper demand cliff in Q2 — a far more troubling phase of the ongoing economic slowdown,” EY-Parthenon Chief Economist Gregory Daco wrote in an analysis.
What experts are saying
“This report did little to give any concrete clarity on what to expect going forward in a post-tariff world,” Dominic Pappalardo, chief multiasset strategist for Morningstar Investment Management, said in a report.
Pappalardo added: “If anything, [the report] did confirm that tariffs will have a major impact on consumer behavior and economic activity. The shifts seen today cannot continue through the remainder of 2025.”
Harvard economist Jason Furman said there’s “no doubt” the trade war had a major impact on first-quarter data and cautioned against projecting too far ahead.
“Absent the big April policy change I would have said the inertial numbers here are solid. But given that policy change would not extrapolate them forward,” Furman wrote on X.
