The previous week has seen tremendous impacts with the Trump administration’s recently revealed tariff policies, sparking widespread concern about their broad economic effects. These concerns have already led to rapid contractions in multiple markets.
Jerome Powell, Chairman of the Federal Reserve, has stated he is very uncertain about any moves made by the Federal Reserve and wants to wait for additional information before making decisions.
Uncertainty is at an all-time high, without much relief—even in light of positive data from previous months. Without any clear direction, there is growing speculation that inflation will only increase from here. Meanwhile, employment data has already shown a rapid increase in unemployment forecasts.
U.S. Employment Report
The U.S. added a bigger-than-expected 228,000 jobs in March. Good news to be sure, but that was before President Trump unveiled norm-shattering tariffs on the rest of the world, the repercussions of which are yet to be felt on the labor market. Economists polled by the Wall Street Journal had forecast an increase of 140,000 new jobs in March vs a revised 117,000 gain in February. The unemployment rate, meanwhile, moved up to 4.2% from 4.1%, matching the highest rate in five months.
ISM Manufacturing
According to the Institute for Supply Management (ISM), tariffs are driving up business costs and dampening economic activity. U.S. manufacturers appear to have slipped back into a slump, facing higher input prices and weaker demand due to President Donald Trump’s new metal tariffs and pending duties on other imported goods. ISM’s manufacturing index fell to 49% in March, down from 50.3% the previous month—any reading below 50% indicates a contraction in the sector.
Primary Mortgage Market Survey Index
• 15-Yr FRM rates saw a decrease of -0.07% with the current rate at 5.82%
• 30-Yr FRM rates saw a decrease of -0.01% with the current rate at 6.64%
MND Rate Index
• 30-Yr FHA rates saw a decrease of -0.15% for this week. Current rates at 6.03%
• 30-Yr VA rates saw a decrease of -0.15% for this week. Current rates at 6.05%
Jobless Claims
Initial Claims were reported to be 219,000 compared to the expected claims of 228,000. The prior week landed at 225,000.
What’s Ahead
Following reports that the tariff news has disrupted market expectations, we should anticipate that both the CPI and PPI forecasts will come in higher than expected.
The previous week had the Federal Reserve making their first rate decision since the Trump administration had taken office. With many uncertainties about the current direction of things, the Federal Reserve had decided there would not be any change necessary to the current rates. Stating that the current inflation and economic conditions have largely been a result of the Trump administration’s policies on tariffs. Chairman Powell has been strongly dovish at this point, stating they would need to “see how things actually work out.” There were a slew of other minor data releases but none were far reaching in their impact on the economy and current direction of things.
The inflation data report released last week showed a surprising result—it was cooler than expected across the board. This has led to a much more positive outlook, even in light of recent events regarding the Trump administration. While consumer sentiment reports from the University of Michigan still showed more dissatisfaction than expected, they were accompanied by largely positive data across various releases. There are strong expectations that there will be no interest rate increases, with some potential for rate cuts this year.
While the data releases were plentiful, many are made less significant in consideration of the current disruption with the administration and the oncoming inflation data reports with the CPI and PPI arriving next week. The largest and most noteworthy report this time is the Job Report numbers, which will help give a clearer idea on the state of the job market. With the mass federal layoffs, there is much uncertainty, but the labor market is still holding up in light of things. The most pressing data to be released is the predictions for GDP, which has shown to have shown a deflationary value. As long as the inflation data remains consistent then there is little chance the Federal Reserve will consider increasing the interest rates once again. The silver lining in all the reports is the Manufacturing PMI data is noting that the manufacturing sector is still showing strong growth.
The PCE Index has aligned with expectations, and as the Federal Reserve’s preferred measure of inflation, it eases the sense of urgency for policy action. GDP data has also indicated continued economic growth, though this is tempered by future forecasts predicting a potential economic contraction. This outlook is further reflected in the Consumer Confidence report, which has shown a significant decline since the change in administration. Uncertainty is evident across lending and broader markets, affecting all aspects of the economy.
The most impactful report released last week was the regular Consumer Sentiment reports, which have indicated the more recent concerns rising food costs have soured the view on the current state of the economy for the U.S. The talks between the Federal Reserve members have also slanted in a negative direction as they feel they still do not have a strong grip on inflation. With the Trump administration also shaking things up in the office with their views on Tariffs, the land lending and broader markets have seen a lot of turmoil and uncertainty about the future. There should be dampened expectations going forward across all markets.
The major inflation data reports have been released, and the initial readings indicate that inflation has exceeded expectations. While the data suggests that the Federal Reserve is unlikely to allow any further rate cuts beyond those already implemented, optimism remains in the broader lending markets. This optimism is driven by expectations that the new administration may introduce changes to monetary policy in the longer term. Although inflation has come in higher than expected, it remains to be seen what next week’s PCE Index—the Federal Reserve’s preferred inflation indicator—will reveal.
Last week’s reports were plentiful, but few had a greater impact on the lending and broader markets. The most significant among them were the Nonfarm Payrolls, Consumer Credit, and Consumer Sentiment reports.