Month: May 2025

April saw solid job gains of 177 thousand according to today’s Employment Report from the BLS. While employment gains in April were lower than the revised figures for March (185 thousand, revised down from 228 thousand), April’s job gains easily exceeded those over the past 12 months (152 thousand).

While the government sector added 10 thousand jobs in April, the federal government shed 9 thousand jobs. In fact, in each of the past 3 months, federal govenment employment has fallen, presumably reflecting the efforts of DOGE to reduce the size of the federal government workforce. However, as noted in the BLS’s press release, employees on paid leave or receiving severance pay are considered employed in the establishment survey.

The household survey portion of the employment report showed a small uptick in the unemployment rate, from 4.15% in March to 4.19% in Aprl. The unemployment rate has varied in a fairly narrow band, between 4 and 4.2% since the middle of last year.

In Aprl, average hourly earnings rose 6 cents, to $36.06. However, workers ought to care about the goods and services that their wages garner — that is, their real wage. The figure below shows that real average hourly earnings have been increasing over the past couple of years. How much the real wage has gone up depends on the measure of prices, with flatter real wage growth when measured using either the CPI or core CPI, and somewhat faster real wage growth using the PCE or core PCE deflator.

Many economists are predicting a severe recession if Trump carries through with his planned tariffs. Thus far, we aren’t seeing these effects in the labor market. Nor does the Chauvet and Piger measure show any threat.

by paul gomme and peter rupert

In its advance estimate, the BEA announced that Q1 GDP declined 0.3% on an annualized basis. Total output (GDP) is the sum of consumption, investment, government spending and net exports (exports – imports). Given the turmoil from Washington, DC, investment and imports saw outsized gains, 21.9% and 41.3%, respectively.

Consumption grew 1.8% and government consumption fell 1.4%.

A different way to view the GDP numbers is in terms of contributions of the major components to output growth (that is, weighting the growth rates of the various components by their shares of GDP). Recall that output growth was -0.28% (annualized). Investment contributed 4.01 percentage points to output growth while consumption added 1.24 points. Exports chipped in a meager 0.2 percentage points. Negative contributions were recorded by government spending (-0.25 percentage points) and -6.48 points due to the surge in imports.

The BEA also released the Personal Income and Outlays report that showed an annualized decline of 0.53% in the personal consumption expenditures price index in March (down from 5.47% in February) while our preferred trend measure came in at 2.46% (a drop from February’s 3.96%). On a year-over-year basis, PCE inflation slipped from 2.69% to 2.29%. The core PCE inflation remained positive at 0.33%, a plunge from 6.14% in the previous month); our trend measure dropped from 4.03% to 2.80%; and the year-over-year rate dipped from 2.96% to 2.65%. Interestingly, these declines in PCE inflation were largely foreshadowed by similar declines in CPI inflation (released two weeks ago).

The large spike in imports could plausibly be caused by buying before the tariffs kick in and so would likely be transitory. The same might be said for investment as the largest component was equipment investment, rising 22.5% on an annualized basis. With the large effect from imports driving the decline in GDP and the fact that inflation remains above the Fed’s target presents a case for the Fed to keep the fed funds rate at its current level.