In the institute’s April 4 briefing, Research Director Camelia Kuhnen heralded surprisingly strong employment numbers for March, dissected consumer confidence and sentiment data with an emphasis on the growing pessimism among young people, and answered questions on the potential effects of sweeping new tariffs on the economy.
Key Takeaways from the April 2025 Economic Briefing
“Consumers’ Darkening Mood”
With Kenan Institute Research Director Camelia Kuhnen
Each month, experts from the Kenan Institute of Private Enterprise interpret the latest employment report from the Bureau of Labor Statistics and what it means for our economy.
The Labor Market: Holding Steady – For Now
• The US economy added 228,000 jobs in March, well above expectations.
• Unemployment ticked up slightly to 4.2% but remains low by historical standards.
• Prime-age labor force participation is now at or above pre-COVID levels for both men and women.
Despite rising concerns, March’s report reflects a labor market still on solid footing, likely because firms postponed tough decisions, hoping tariff threats wouldn’t materialize.
Consumer Confidence: Trouble Ahead?
• Sentiment is slipping fast. The University of Michigan survey recorded one of the sharpest drops
in consumer expectations since 2021.
• Younger Americans are especially pessimistic, a reversal of the long-standing trend that saw them
more optimistic than older adults.
• Inflation expectations have jumped, with households now anticipating 5% inflation over the next
year, likely reflecting anxiety around new tariffs.
Tariffs and Uncertainty
• The Atlanta Fed’s GDPNow model projects -2.8% GDP growth for 2025.
• Uncertainty is rising sharply, especially among small businesses.
• JPMorgan places the probability of recession next year at 60%.
One possible buffer? Household balance sheets. Despite low savings rates, Kuhnen noted, many American households remain relatively well positioned: “Most Americans are homeowners … those homes increased in value tremendously – 48% since February 2020. That wealth, along with historically low mortgage rates, could help us shore up consumer spending.”
What We’re Watching
The Federal Reserve is expected to begin cutting interest rates by June to cushion the slowdown, even as inflation remains above target. In the near term, consumers may spend more to get ahead of price hikes. But a sharp pullback could follow, especially if inflation persists and confidence continues to erode.
For the full discussion, including Kuhnen’s deep dive into confidence and the implications of generational pessimism, watch the full briefing here.
Join us for our next economic briefing on Friday, May 2. Register HERE.