Member Briefing May 1, 2025
U.S. Economy Shrank 0.3% In The First Quarter As Trump Policy Uncertainty Weighed On Businesses
The U.S. economy contracted in the first three months of 2025, as businesses rushed to stock up on imports ahead of tariffs. The Commerce Department said U.S. gross domestic product—the value of all goods and services produced across the economy—fell at a seasonally and inflation adjusted 0.3% annual rate in the first quarter. That was the steepest decline since the first quarter of 2022.
Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter. Also, GDP lower was government spending. Federal government spending in the quarter decreased by 0.35 from the same quarter in 2024.
Federal Reserve: Employment Costs Steady in Q1.
Labor compensation growth continues to moderate. The employment cost index (ECI), the Federal Reserve's preferred measure of employment costs, rose 0.9% in the first quarter, in-line with expectations. Although the quarterly run rate is still hotter than pre-pandemic norms, employment cost growth continues to trend lower. Over the past year, the ECI has risen 3.6%, the slowest pace since 2021. The gradual moderation is reflective of a cooled hiring environment that has eased the pressure on employers to raise compensation to attract and retain workers.
Leading the moderation in employment cost growth has been a downshift in the pace of wage & salary gains. Wages & salaries rose 0.8% in the first quarter, which brought the year-over-year change down to 3.5%. The ECI also includes benefit costs, which continue to grow at a robust clip. In the first quarter, the benefits for all civilian workers rose 1.2% to generate a 3.8% increase over the past year. Higher healthcare costs have been a primary culprit of the stubborn rate of benefit cost growth; employer-provided health insurance costs are up 5.4% year-over-year, the steepest annual change going back to 2005
US Consumer Spending Jumps While Key Inflation Gauge Slows Down
The Commerce Department’s personal consumption expenditures (PCE) index rose 2.3% from March 2024 through last month, slightly exceeding consensus economist forecasts of 2.2% headline PCE inflation. Core PCE inflation, the Federal Reserve’s preferred inflation measure as it excludes often volatile food and energy expenditures, was 2.6% in March, matching estimates of 2.6%. Core PCE inflation was its mildest since March 2021 last month, though it remains above the Fed’s 2% goal as it has been since early 2021.
Meanwhile consumer spending surged 0.7% last month after an upwardly revised 0.5% gain in February, the Commerce Department's Bureau of Economic Analysis said on Wednesday. Economists polled by Reuters had forecast consumer spending would rise 0.5% after a previously reported 0.4% increase in February. The economic data from the first quarter reinforces the "challenging scenario" for the months ahead, as outlined by Fed Chair Jerome Powell in a speech earlier this month. Powell said on April 16 that the central bank may find itself between a rock and a hard place, where its dual mandate to keep inflation stable and employment high are at odds as the president's tariffs push up prices while also lowering growth.
Global Headlines
Middle East
- US Unveils New Sanctions Over Iran Missile Program – The Hill
- US Backs Israel's Ban On UNRWA Gaza Aid Operations At World Court - Reuters
- Iran Executes Man Accused Of Spying For Israel - Newsweek
- Syrian Forces Deploy Near Damascus To 'Restore Security' After Deadly Sectarian Clashes - France 24
- Israel Says It Hit Extremists In Syria To Protect Druze - Reuters
- Israel Deploys Troops To Control Massive Wildfires Near Jerusalem – France 24
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Kremlin Says Putin Is Open To Ukraine Peace But Warns Against Rushing A Deal – Reuters
- US Threatens To End Mediation If Russia, Ukraine Fail To Offer 'Concrete Proposals' – France 24
- Ukraine, U.S. Close In on Controversial Economic Deal for Minerals - WSJ
- Russian Attacks On Ukraine Intensify In Make-Or-Break Week For Peace Talks - Fox
- Russia Outlines Ukraine Peace Demands As Drone Attacks Continue - ABC
- Points For Kills: How Ukraine Is Using Video Game Incentives To Slay More Russians - Politico
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- The Mechanics Behind Spain’s Mega-Blackout – Politico
- Pakistan Calls on Trump To Help Prevent Nuclear War With India - Newsweek
- Germany’s Center-Left Leader Will Be Finance Minister In The Merz Government - Politico
- Canadian Conservative Leader Loses His Own Seat – The Hill
- China-Egypt Ties Reach New Heights With Joint Air Exercises – Nikkei Asia
- North Korea Conducts First Test Firing Of Its New Warship's Weapons System - Reuters
- Next Pope Update: Four Main Contenders Emerge - Newsweek
- Trump Congratulates Carney Even As White House Repeats ‘51st State’ Taunt – The Independent
- Nvidia CEO Jensen Huang Warns China Is ‘Not Behind’ In AI– CNBC
Policy and Politics
A Day After Hochul Declared Budget Victory, School Aid And DOCCS Reform Are Among The Issues Still Unsettled
On Monday evening, 28 days after the state budget deadline and an undetermined number of days before it is passed, Gov. Kathy Hochul declared victory. Though Hochul’s top proposals for tightening the state’s discovery laws to avoid dismissals on technicalities, changes to involuntary commitment standards, a bell-to-bell cell phone ban, and legislation related to the wearing of face masks in the commission of a crime are largely settled, the announcement came before major issues were resolved. Those are not insignificant, including how a revamp of the Foundation Aid formula will take shape and a decision on how to address the staffing criss in state prisons.
The state Legislature passed an extender to fund state government through Thursday, and lawmakers said they were unsure the budget process would be wrapped up before early next week. On school aid, Senate Majority Leader Andrea Stewart-Cousins said she would still advise districts to plan for Hochul’s baseline proposal for a 2% increase in Foundation Aid, which is a full point below the Senate’s 3% proposal.
Read more at the NY State of Politics
Business Leaders: Lack Of $6.2B Unemployment Insurance Debt Payout In N.Y. Budget Is A Mistake
Gov. Kathy Hochul said the state budget that's nearing a final deal will not pay down $6.2 billion in outstanding federal unemployment insurance debt from the COVID pandemic — forcing New York employers to continue to shoulder the burden. Instead, the governor said the spending plan will include $165 million to cover the interest payments business owners across the state have absorbed for the last few years. New York is one of two states that still has COVID-related federal unemployment insurance debt after the state failed to use $25 billion in federal stimulus aid for unemployment tax relief.
State business leaders and a nonpartisan fiscal watchdog Tuesday criticized the decision, arguing it's not the best fiscal choice for business owners who have been paying down the principle of the $6.2 billion debt. "It hurts small businesses more than big businesses, and small businesses are the driver of the economy," Business Council of New York State President & CEO Heather Mulligan said. "It's a direct tax on employers, and the more in debt we are, the higher the taxes, because the rate goes up." Mulligan told Spectrum News 1 the state covering employers' interest payments is a nice gesture, but is insufficient after four years of state inaction.
Read more at NY State of Politics
The Megabill Has Mega Hurdles to Overcome
As lawmakers get into gear on extending President Donald Trump’s tax cuts, cracks are deepening on critical issues, including Medicaid, food aid and even lower-profile issues like transportation funding. Lawmakers are also getting impatient for more details about the plans from leaders, including on lifting caps on deductions for state and local taxes. Here are a few key issues they have to solve:
MEDICAID — House Speaker Mike Johnson has a deepening challenge on his hands: How to deal with the safety-net health program millions of Republican voters rely on. Couple that with blue-state Republicans’ push to boost the SALT cap, and he’s got a big math problem that could delay the GOP’s bid to extend Trump’s tax cuts.
SNAP — The White House won’t support a proposal to push some nutrition program costs onto states, House Agriculture Chair G.T. Thompson said Tuesday. That throws a wrench in his plans to scale back federal funding for the Supplemental Nutrition Assistance Program in order to reach their target of $230 billion in spending cuts.
FEDERAL PENSIONS — On Oversight, Rep. Mike Turner said he would oppose the committee’s proposal to slash federal employee retirement benefits as a way of offsetting the cost of the larger legislation. The panel is tasked with finding $50 billion in savings, much of which is expected to come from changes borne by the federal workforce.
CARRIED INTEREST — House Republicans might be souring on Trump’s proposal to kill a tax break favored by Wall Street. Ways and Means has privately indicated it’s not leaning toward closing so-called carried interest loophole in the package, according to one House Republican and another person familiar with the private conversations. One House Republican said they are “talking about it” but indicated it’s unlikely to survive.
Trump’s Next 100 Days
- Trump Says 'Be Patient' As US Economy Contracts On Tariff Disruption - Reuters
- Trump Discusses First 100 Days Of Historic Presidency In Exclusive ABC Interview - ABC
- The Most Consequential, Damaging, Head-Scratching Things Trump Did in His First 100 Days - Politico
- UN Agencies That Provide Aid Worldwide Slash Jobs Or Cut Costs As US Funding Drops - AP
- Voters Sour On Trump Job Performance At 100-Day Mark: DDHQ/Newsnation Poll – The Hill
- Columbia Student Detained at Citizenship Interview Released by ICE - Newsweek
- New Research Contradicts RFK Jr.’s Claim That Severe Autism Cases Are Rising - NBC
- Milwaukee Judge Charged With Obstructing Immigration Agents Is Relieved Of Duty - CNBC
- Trump Tracker: Keep Tabs On The Latest Announcements And Executive Orders - WSJ
Health and Wellness
Suicide Reverberates Among Young Doctors
Dr. Nakita Mortimer was always a leader. The first of four children to move to the U.S. from Haiti for college in 2012, she was a guiding light for each sibling as they followed her.In her medical residency in anesthesiology at Montefiore Medical Center in the Bronx, she helped organize a union for residents. She wanted relief from the punishing hours and pressure that challenge even the high achievers who become young doctors. Months later, she died by suicide. Her death was a reckoning for her peers as many young doctors are pushing for more mental-health support and improvements to their working conditions.
The end of a young life with so much promise amplifies suicide’s universal tragedy. Any individual suicide’s cause is, finally, unknowable. But a number of suicides among medical residents have fueled calls for hospitals and regulators to better support young doctors who say their well-being is at risk. Nearly a quarter of residents have considered self-harm, and a fifth know a peer or colleague who has considered suicide in the past year, according to a 2024 survey by the Physicians Foundation, an advocacy group.
Industry News
Trade War Updates
- China Quietly Exempts Key US Goods From Tariffs – Newsweek
- China Lifts Sanctions On EU Lawmakers Amid Transatlantic Strains Caused By Trump - SCMP
- Trump Signs Order Easing Some Auto Tariffs - CNBC
- China-to-U.S. Container Shipments Shrink as Tariffs Bite - WSJ
- Trump Softens Tariffs On Auto Parts For US-Assembled Cars – Automotive Dive
- Stanley Black & Decker Raising Prices to Offset Tariff Costs - WSJ
- Ford CEO Says Trump’s Tariff Reprieve Is Helpful, But More Changes Needed - CNBC
- Commerce Secretary Lutnick Says One Trade Deal Is Done, But Waiting On Approval From Unnamed Country’s Leaders – CNBC
IBM To Invest $150B In US Manufacturing, R&D
IBM plans to spend $150 billion in the United States over the next five years to accelerate its quantum computing push. The investment includes $30 billion for research and development and manufacturing capacity for mainframe and quantum computers, according to the company’s Monday announcement. IBM’s new investment adds to the string of major manufacturers doubling down on U.S. manufacturing since President Donald Trump took office. The president has embarked on an aggressive trade war in hopes of pushing manufacturers to invest in domestic production.
IBM houses much of its U.S. manufacturing at its site in Poughkeepsie, New York, where it’s operated since 1941. The facility is home to IBM’s mainframe computing production, and the company is also pushing to make Poughkeepsie “a global hub of the company’s quantum computing development.” The eastern New York region, including Poughkeepsie and Albany, has become increasingly popular for semiconductor manufacturing, including onsemi and GlobalFoundries’ growing fab campus in Malta. As part of its prioritization of the area, IBM announced plans in 2022 to invest $20 billion in the Hudson Valley region over the next decade.
Read more at Manufacturing Dive
China’s Export Orders Plunge, Hit by Trump’s Trade War
China’s economy showed its first big signs of damage from the trade war, as steep U.S. tariffs pummeled export orders and production at the country’s factories. A gauge of new export orders fell in April to its lowest reading since Covid-19 was ravaging the country in 2022, while overall manufacturing activity in China was the weakest in more than a year, according to surveys published Wednesday by China’s National Bureau of Statistics.
China’s official purchasing managers’ index for the manufacturing sector, a closely watched gauge of activity at China’s factories, came in at 49 in April, down sharply from the 50.5 reading recorded in March. A reading of 50 or above indicates factory activity is expanding, while below 50 points to a contraction. April’s reading was the weakest since December 2023. A similar measure of new export orders plunged even more steeply, sinking to 44.7 in April, the lowest reading since December 2022, an early sign that trade between the U.S. and China is in danger of drying up as American importers cancel or delay orders after a rush to bring in goods earlier this year before tariffs came into effect.
Mortgage Demand Drops Further, As Economic Uncertainty Roils The Housing Market
Applications for a mortgage to purchase a home dropped 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 3% higher than the same week one year ago, even though interest rates last year were considerably higher. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.89% from 6.90%, with points increasing to 0.67 from 0.66, including the origination fee, for loans with a 20% down payment. That rate is 40 basis points lower than the same week one year ago.
Applications to refinance a home loan dropped 4% for the week and were 42% higher than the same week one year ago. Refinance activity dipped again, as mortgage rates remained close to 7%, and borrowers hold out for a bigger decline in rates. Given the pullback in refinancing, the average loan size for refinances declined to just under $290,000, the lowest level in three months. Mortgage rates remained in limbo to start this week but could finally break out in either direction starting Wednesday, as a slew of economic data will be released, ending Friday with the all-important monthly employment report.
Nucor Executives Stick to Positive Demand Growth Outlook
During the first three months of this year, Charlotte-based Nucor produced a net profit of $156 million on net sales of more than $7.8 billion. In early 2024, those numbers were $845 million and about $8.1 billion; the biggest driver of the bottom-line drop was a more than $600 million increase in the company’s input costs. Looking to the second quarter, executives expect profits to rise in all three of the Nucor’s operating segments, with the steel mills segment forecast to produce the most notable jump from its $241 million pre-tax earnings in Q1 thanks to higher selling prices.
On their conference call Tuesday, Nucor chairman, president and CEO Leon Topalian and his lieutenants noted that the commercial construction market is slowing and said the railcar and barge sectors also are soft. There are some other headwinds to more growth, too, including high-level concerns about consumer confidence and labor trends. But overall, the executives—who have been supportive of President Donald Trump’s tariff strategy—see more support for than obstacles to Nucor’s plans. And they’re sticking to their $3.0 billion capital spending budget for 2025, which will advance a hatful of projects scheduled to come online between later this year and the end of 2027.
Stellantis Reports Q1 Loss, Suspends Full-Year Guidance Due To Uncertainties Over Tariffs
Auto giant Stellantis said it was withdrawing its full-year financial guidance due to uncertainties regarding the impact of U.S. President Donald Trump’s back-and-forth trade policy. The multinational conglomerate, which owns household names including Jeep, Dodge, Fiat, Chrysler and Peugeot, reported first-quarter net revenues of 35.8 billion euros ($40.7 billion), reflecting a 14% drop from the previous year.
“While Q1 2025 top-line results were below prior-year levels, other KPIs reflect early, initial progress on our commercial recovery efforts,” Doug Ostermann, chief financial officer at Stellantis, said in a statement. The carmaker said it would scrap its 2025 financial guidance due to tariff-related uncertainties, adding it is “highly engaged” with policymakers on tariff policies.
Porsche Rethinks EV Strategy
Porsche announces changes to its electrification plans, with a slower-than-expected uptake of all-electric models prompting a rethink of key investments. The German automaker confirms it will no longer expand its in-house battery production independently through its Cellforce subsidiary. The decision marks a clear shift in Porsche’s original product strategy and comes just months after it secured a majority stake in V4Smart, a joint venture with German battery specialist VARTA.
Porsche says it plans to redirect investment into a broader product and software offensive. The move, made public in an updated 2025 financial forecast released Tuesday, hints at a renewed focus on internal-combustion-engine (ICE) models as well as electrified derivatives of existing models, rather than an all-out expansion of dedicated electric models. Porsche reported a 1.7% decline in group revenue for Q1 2025 to €8.86 billion ($9.45 billion). More concerning, however, was its group operating profit, which dropped a significant 40.6% to €760 million ($810 million).
GLP-1s Can Help Employers Lower Medical Costs In 2 Years, New Study Finds
The growing demand for diabetes and weight loss drugs like Mounjaro, Ozempic and Wegovy has helped fuel higher health costs for large employers. For many, the big question is whether the pricey medications known as GLP-1s will pay off by improving worker health and lowering overall health costs over time. Analysts at Aon say it’s already happening. “We’ve never seen anything like this, really,” said Greg Case, CEO of Aon, an employer benefits services firm. “There was a 44% reduction in major cardiovascular issues. There was substantial reduction in osteoporosis. There was substantial reduction in pneumonia of multiple types.”
Aon researchers found that within two years, patients taking GLP-1 drugs saw improved health outcomes, which significantly slowed the growth rate of their medical costs. The rate of growth, known as the medical cost trend – was cut roughly in half, the researchers said. Aon analysts looked at medical claims data for 139,000 U.S.-based workers with employer health coverage who took GLP-1 medications between 2022 and 2024. Beyond the drug costs, the study found GLP-1 patients tend to incur higher medical costs in their first year on the drugs, with more doctor visits to monitor their treatment on the drug and to seek help for other issues such as sleep apnea and esophageal conditions like acid reflux. But by the end of the second year of treatment with the GLP-1 drugs, the medical cost trend for patients taking them slowed by 7% on average, compared to workers with similar chronic conditions and obesity characteristics who were not taking the drugs, Aon found. For those not taking the drug, the medical cost trend was 14%.