Pencils down, kids. If earnings reports are the pop quizzes of the business world, then last week was more like a midterm you meant to spend all semester preparing for, only to ultimately cram all your studying into a matter of days.
To give a sense of just how much new information came in, economists have called it everything from “a monster week” to “the Super Bowl for economic data.”
Good timing. We needed a better look at the state of the US economy, because a weird thing has been happening: While economists and other experts braced themselves for a sharp slowdown as a result of President Trump’s tariffs, that hasn’t exactly panned out. Instead, the state of the economy remained decidedly murkier, simultaneously looking more resilient than expected (though that resilience was overstated—more on that below), while also showing signs of cracks.
“We’re going to look back and either say, ‘Wow, the economy was super resilient and these things didn’t matter as much as we thought they would,’ or we’re going to say, ‘Yeah, you could kind of feel it was weakening,’” Louise Sheiner, an economist at the Brookings Institution, told the New York Times. “I think we just don’t know.”
Now, the picture is getting clearer—and it might have economists longing for the halcyon days of approximately one week ago.
GDP beat expectations, though there’s a catch: Gross domestic product grew at an annualized rate of 3% for the three months ending in June. That was better than economists anticipated, but the true usefulness of that figure was limited by abnormal trade patterns as a result of President Trump’s tariffs.
In anticipation of Trump’s second term, many companies stocked up on foreign goods and materials to get ahead of proposed tariffs. As a result, imports surged at the start of the year, and large swings in imports can muddle GDP data, which shouldn’t actually count imports at all, per the NYT.
“Measures of underlying activity, which remove the volatile trade and inventory components, show that growth slowed sharply in the first quarter, then weakened further in the second,” the Times reported. Economists anticipate GDP data will be revised in future months, so that’s a wait-and-see situation for now.
Consumer confidence ticks up: The day before the Fed’s decision last Wednesday to not lower interest rates, the other fresh data point to come in was consumer confidence, which climbed two points in July to a reading of 97.2, according to the Conference Board. That was an improvement from a precipitous drop in April, but remained “below last year’s heady levels,” according to Stephanie Guichard, senior economist of global indicators at the Conference Board, which conducts the survey.
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Guichard noted that US consumers’ outlook on current job availability weakened for the seventh month in a row, dropping to its lowest level since March 2021. In July, 18.9% of consumers said jobs were hard to get, compared with 14.5% in January.
Fed holds rates steady: That was something of a hint for Friday’s jobs report, which the Federal Reserve might have wanted to see before it decided to keep rates steady for the fifth time in a row. The central bank made the decision even as two Trump-appointed board officials voted against the majority in favor of a rate cut, marking the first disagreement of its kind in thirty years.
Before the Fed made its decision, Ryan Sweet, chief US economist at forecasting firm Oxford Economics, told the New York Times that the Fed might finally cut rates once it sees “a couple of job reports that aren’t overly encouraging,” noting that the central bank’s “North Star is still the unemployment rate.”
Jobs outlook got gloomy: Well, that star is dimming. On Friday, the Labor Department said job growth in the US slowed in July, with employers adding a seasonally adjusted 73,000 jobs, lower than the 100,000 jobs economists polled by the Wall Street Journal expected.
Worse yet: Revisions to May and June’s jobs reports “were larger than normal,” the Labor Department said. And they meant it: In May, new jobs were revised down 87% from 144,000 to 19,000, and in June the US economy only added 14,000 jobs, down 90% from the 147,000 the BLS initially reported. The Labor Department explained that “monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.”
In July, the unemployment rate rose to 4.2% from 4.1%, bringing the number of people unemployed for 27 weeks or longer to 1.83 million, up from 1.65 million in June.
While economists caution against reading too much into a single week, there’s now plenty of fuel for those arguing that the economy is starting to show cracks. Back to the midterm analogy: If last week was a test, your teacher would’ve handed it back face down.