The latest message from the data on the US economy is simple: So far, so good, until further notice.
The labor market remained in a healthy state of balance as America entered a global trade war in April. US employers added 177,000 jobs last month, the Labor Department reported Friday. And the unemployment rate was unchanged at 4.2 percent.
Both numbers were based on surveys taken in the immediate wake of the Trump administration’s move in early April to institute the highest level of tariffs on imports since the 1930s, although some of those levies have been paused for 90 days. The payroll gains extended the streak of US job growth to 52 months.
Data released earlier this week showed that the US economy contracted in the first three months of the year. But that was largely a result of a surge in imports as firms and households bought goods to try to get ahead of the tariffs. The trajectory of trade and consumer spending going forward remains unclear.
The picture of a steady job market, even if slightly backward looking, was reassuring for investors, who have been parsing through economic data for signs of a trade-induced deterioration. The S&P 500 rallied after the release and has now erased all its losses from early April.
“What we can take away from today is that the US economy has entered the trade war on strong footing,’’ said Rebecca Patterson, a senior fellow at the Council on Foreign Relations and former chief investment strategist at Bridgewater Associates. “But the longer tariffs are in place and the higher the tariff levels are, the greater the risk that this optimism quickly fates.’’
The vast majority of analysts say the eventual effect of President Trump’s high tariffs on the labor market will be fully felt only in the weeks and months to come. Still, the early impact is reverberating through currency markets, global freight patterns, and corporate business plans.
Ocean container bookings from China to the United States have dropped 60 percent since early April.
Many businesses reliant on shipments from China have halted inbound orders. Import taxes on Chinese goods, which are set at a minimum of 145 percent, are so high that in many cases the import taxes are effectively a trade embargo.
The US economy is more oriented than ever around services, which constitute about 70 percent of US commercial activity. Yet goods purchases still make up a major chunk of household spending, and more than 40 percent of US manufacturers rely on imported parts or finished goods.
Consumer sentiment has plunged in the past few months. And forecasters at major banks have dialed up the risk of recession and higher inflation this year.
The early rollout of other Trump administration policies — including the slashing of the federal civil service and of immigration inflows — will also be felt throughout the rest of the year. Federal government employment declined by 9,000 in April and is down by 26,000 since January — not enough to pull down overall employment. But once many of these workers run out of severance, they may find themselves as job seekers in a much weaker job market.
Average hourly earnings growth for US workers, which is up 3.8 percent over the past year, has kept up a solid pace since overtaking inflation in 2023. But a broad range of households continue to feel squeezed by the increased cost of living in recent years.
Tariffs, if kept in place, may worsen the strain.