Economy in Brief: May 2025

• Productivity declines with lower output.
• Compensation surge exacerbates labor market stress.
• Factory sector productivity surge lessens cost pressure.

• Home prices rise but mortgage rates decline.
• Median income improves.
• Affordability increases across the country.

• Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
• Insured unemployment rate returns to longstanding 1.2%.
• Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

• FOMC holds funds rate target at late-December level.
• Risk assessments include higher unemployment & inflation.

• Consumer credit rises close to expectations.
• Nonrevolving and revolving credit rise.

• Purchase & refinancing loan applications jump.
• Effective interest rates remain range-bound.
• Average loan size increases.

• Goods deficit grows as imports surge ahead of tariff imposition.
• Exports edge higher, led by autos.
• Petroleum product imports fall as crude oil prices decline.