Little warning signs are flashing across the economy. The big question is what to make of them.
With consumers growing more pessimistic, households and global businesses alike are yanking back on new spending and investments. And a growing pile of data points seems to be showing an economyinching away from a recovery that followed the worst of the pandemic.
But the challenge for economists, Wall Street analysts and businesses is figuring out what the gloomy indicators mean. Is the economy finding its footing amid President Donald Trump’s market-swinging trade war and government cuts? Or will these alarm bells turn out to have been the early signs of a recession on Trump’s watch?
Joe Brusuelas, chief economist at RSM, said that at least for now, “uncertainty is too pervasive, and uncertainty carries a cost.”
Airlines have also seen a significant pullback. Delta, American, Alaska, Southwest and Frontier all withdrew their financial forecasts entirely in the past few weeks, unable to say with certainty how 2025 would shake out. Delta, for one, said travel demand had “largely stalled,” and that even though the company still expected “solid” profitability, it was “premature” to offer an outlook for the full year. United Airlines took a slightly different approach and offered up two earnings estimates: one from the start of the year, and a revised option if there is a recession.
On Thursday, a key manufacturing index showed that companies lowered production, hiring and orders in April. Construction spending also fell in March.
The labor market has so far hung on as an economic bright spot since the recovery from the pandemic lows began, with employers adding more jobs than expected in March and the unemployment rate at a healthy 4.2 percent. But cracks could be emerging there, too. Fresh Labor Department data showed initial unemployment claims jumped to a seasonally adjusted 241,000 for the week ending April 26. That’s up 18,000 from the previous week and the highest total since late February. Continuing claims — which are on a slight lag but give a broader view of how many people have been laid off — rose to 1.92 million, the highest level since November 2021.
Even within the shakier sectors of the economy, there are reasons to stay confident. In a mid-April earnings call, United’s executive vice president and chief commercial officer, Andrew Nocella, said wealthier consumers can still probably book international vacations and leisure travel. In the case of McDonald’s, even if Americans start tightening their belts, they might swap out pricier restaurants for dollar menus.
Those scenarios increasingly look like bright spots against a darkening backdrop. The U.S. economy shrank at the beginning of 2025, contracting for the first time in three years. The Federal Reserve — after wrestling inflation within reach of normal levels — is warning that prices are poised to rise again because of Trump’s trade war. The Dow Jones Industrial Average is down 4.2 percent since the start of the year. The Nasdaq composite index has fallen almost 8.3 percent, and the S&P 500 4.7 percent. Major market indexes rose Thursday, but overall, stocks have not performed this poorly over a president’s first 100 days in office since the early 1970s.
But the pandemic threw a wrench into typical economic forecasts and the weight experts place on them — which means analysts still aren’t sure how to assess what they see now. When inflation took off in early 2021, economists and policy wonks puzzled over whether rising costs for used cars and homes were isolated shifts or the beginnings of something more pervasive. Most bet on the former, including at the Federal Reserve and in the Biden administration, and they turned out to be wrong.
On the flip side, when the Fed caught up to price hikes and vowed to keep interest rates as high as necessary to quash inflation even at the risk of economic pain, the consensus was that those aggressive policies would cause a recession. But that downturn never materialized, either.
In a Wednesday analyst note, Derek Tang, an economist at research firm LH Meyer/Monetary Policy Analytics, wrote that part of the Fed’s challenge now is to “untangle the signals from the more traditional and backward-looking hard data, as well as those from various less traditional measures.” Fed officials meet next week and are expected to leave interest rates steady as they see what happens with inflation and jobs.
Much of the underlying uncertainty stems from Trump’s trade war, which the administration says will rebalance global trade in a way that is more fair to the U.S. Last month, Trump imposed “reciprocal” tariffs on 75 countries, using a formula that many economists criticized. Soon after, he paused almost all of those levies to pursue individual trade deals, but the administration left in place a 10 percent tariff for most imports and ramped up taxes on goods from China. Tariffs on Chinese products are now at 145 percent.
On Thursday, the U.S. Chamber of Commerce sent a letter to Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer pushing for automatic exclusions for small business importers. The trade group also asked the administration to provide exclusions from tariffs for all products that can’t be produced or aren’t readily available domestically, like coffee, cocoa and certain minerals.
In a statement, chamber president and chief executive Suzanne P. Clark said her group supports many of Trump’s policy goals, including boosting American investment. But, she said, “we have heard from a historic number of small businesses who have made it clear: They need immediate relief from tariffs.”
“As each day goes by, small businesses are increasingly endangered by higher costs and interrupted supply chains that will cause irreparable harm,” Clark said.
Such pleas have sometimes been successful. This week, Trump signed an executive order softening tariffs on imported cars and parts, giving a reprieve for auto manufacturers that had pushed back hard on the levies. Officials from the Commerce Department said that while 25 percent taxes will remain on imported vehicles, those penalties would not be “stacked” on top of other levies, like those for imported steel and aluminum.
Still, that was not enough to stop General Motors on Thursday from lowering its 2025 guidance to make room for a possible $4 billion to $5 billion blow from the trade war. (On Tuesday, the American carmaker had pushed off an investor call and full-year guidance until it had greater clarity on the White House’s policies.)
Appearing Thursday morning on CNN, GM chief executive Mary Barra said the automaker was in constant communication with the administration and that there were ways to offset the uncertainty, like ramping up domestic production.
But the potential for a multibillion-dollar hit is based on “what we know now.”
Jonathan Smoke, chief economist at Cox Automotive Economic and Industry Insights, said flagging consumer sentiment shows that customers are getting wary. Speaking to the Automotive Press Association on Thursday, Smoke said shoppers have been through plenty over the past few years between the pandemic and sky-high inflation. But now they are also grappling with high rates and higher prices for all sorts of goods.
“We can see what the expectation of higher prices to come has led to,” Smoke said. “It’s led to a surge in sales as consumers rush to buy, before vehicles are completely impacted.”
