Economic Contractions, Jobs, and Jedi Wisdom

David Halseth
May 4
2 min read

For the week ended 5/3/2025.

Wow, lots to unpack this week, so let’s skip the pleasantries and dive right in.

First Up: The GDP Gut Punch

The biggest headline? First-quarter GDP came in at a negative 0.3%. And yes, this was before April’s D.C. fueled chaos even kicked in. For those who remember Econ 101, two consecutive quarters of negative growth = technical recession. But before you light your hair on fire and sprint down Main Street screaming “It’s happening!”, let’s look closer.

The real culprit? Net exports, which subtracted a jaw-dropping 4.8 percentage points from growth. That’s what happens when businesses hoard imports ahead of tariffs like it’s 1999. The rest of the GDP components? Five out of six were positive. So no, the economy isn’t falling off a cliff just yet. The headline just makes it look like it is.

Meanwhile, the Labor Market Says: “We’re Good”

In a more upbeat development, the U.S. economy added 177,000 jobs last month – well above expectations of 133,000. The unemployment rate held steady at 4.2%, which is nothing to sneeze at. The only notable downer was consumer confidence, which took a tumble from 93.9 in March to 86 in April. Blame the headlines, not the fundamentals (at least for now).

Markets: Smiling Through the Noise

Equities liked what they saw, with U.S. stocks climbing 2.9% last week and foreign markets up an even stronger 3.2%. Bonds, however, did their usual “good-news-is-bad-news” dance and dropped by 30 basis points. Remarkably, despite all the fireworks this year, domestic stocks are down just 2.9% in 2025, which also happens to make them the worst performing major asset class YTD. So if you're feeling down about your portfolio, just remember: it could be worse, much worse.

Looking Ahead: Fed Watch

All eyes now turn to the Fed. The FOMC is scheduled to announce its next move on Wednesday. Given the strong employment numbers, don’t expect a rate cut. If anything, the recent narrative feels more like “hike or hold” than “slash and burn.”

And with that, here’s hoping you have a productive week—and for the sci-fi faithful among you: May the Fourth have been with you.