Monthly Economic Insights
A clear-eyed view of the economy. Are tariff clouds lifting?
May 2025
The U.S. economy continues to navigate a complex landscape marked by persistent inflation, flat to slowing growth, and continued uncertainty stemming from ongoing policy shifts. However, recent breakthroughs in trade policy negotiations and easing of tariff pressures may give markets, businesses, and consumers what they are looking for in the coming weeks and months.
The most recent data indicates a U.S. inflation rate of 2.3% for April 2025. This is a decrease from 2.4% in March 2025, and also below the 2.4% economists had predicted. Core inflation, which excludes food and energy prices, remained at 2.8% in April, matching predictions. Though closer to the Fed’s 2% target, the stubborn elevation is enough to still make markets and consumers hesitant about long-term decisions on housing and other big-ticket items.
Despite these easing inflationary pressures, the Fed has maintained a cautious stance on interest rate adjustments, still projecting only two quarter-point rate cuts for the remainder of 2025.
The labor market remains relatively stable, with the unemployment rate holding at 4.2% as of April, with 177,000 nonfarm payroll jobs added. However, job growth has decelerated, averaging 150,000 new positions per month in the first quarter and we have also seen the JOLTS (Job Openings) to unemployed rate fall from a peak of 2.03 in July 2022 to now only 1.02 as of March 2025 (which shows the labor market is loosening on an underlying basis). Sectors such as manufacturing and construction are experiencing increased layoffs, partly due to rising input costs and policy-induced undulations in decision-making.
Existing home sales for the latest reporting period in March dropped 5.9%—the sharpest decline since November 2022—dimming hopes for a spring rebound. High prices and elevated mortgage rates continue to deter buyers, raising the prospect of a third consecutive year of sluggish sales. However, markets in Texas and Florida are beginning to see price declines as inventories climb.
Economic growth has weakened with first quarter 2025 GDP decreasing 0.3 percent, but the Federal Reserve Bank of Atlanta’s GDPNow estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 now sits at 2.3% as of May 8.
Bottom Line: The introduction of extensive tariffs (10% is the baseline) on imports from multiple countries will likely lead to increased costs for both businesses and consumers. However, new developments and policies with trade partners seem to be emerging and driving new optimism.
While the U.S. economy demonstrates resilience, it still faces significant challenges from trade policy fluctuations, international geopolitical instability, and slowed business decision-making.
Despite all these domestic and international economic pressures building, solutions still exist. Revised trade agreements, more disciplined federal deficit control, and evolving monetary policies can still improve certainty, shore up softness, and stimulate consumer and business spending.
The stock market needs more certainty, and as of today, it appears to be improving.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
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