Macro Monday – May 12, 2025

Last week marked a critical juncture for the U.S. economy, as strong labor data, monetary policy stability, and a major shift in international trade policy converged to shape a more complex but promising outlook.

The April jobs report delivered a positive surprise, with 177,000 new jobs added, surpassing expectations and reinforcing the labor market’s resilience. Unemployment held steady at 4.2%, with notable growth in healthcare, transportation, and financial services. However, federal employment declined by 9,000, reflecting continued government belt-tightening.

On the monetary front, the Federal Reserve held interest rates steady at 4.25%–4.50% during its May 7 meeting. Fed Chair Jerome Powell acknowledged economic progress but noted that “a great deal of uncertainty remains”, particularly around the trajectory of inflation and the implications of U.S. trade policy.

That uncertainty was partly addressed today, with the announcement of a new trade agreement between the U.S. and China. The deal suspends planned tariffs on electronics and semiconductors in exchange for expanded Chinese imports of American agricultural goods and clean-tech components. While full implementation details are pending, markets reacted positively, viewing the deal as a step toward stabilizing global supply chains and cooling inflationary pressures.

Markets responded with guarded optimism: the S&P 500 and Dow Jones posted modest gains midweek, while tech and manufacturing stocks rallied on today’s news. Still, investors remain cautious, watching closely for signs of durability in both the labor market and the new trade framework.

Why it matters: A steady Fed, solid job growth, and the easing of trade tensions could signal a path toward stabilization. But the global economy is still navigating fragile terrain, and long-term confidence will depend on how consistently these trends hold.

We’ll be watching closely.