Written by Steve Andrews
Mixed Signals from the Economy
If you feel like you’re getting mixed signals from the economy in 2025, you’re not alone. The constant stream of conflicting headlines has created widespread uncertainty, leaving many wondering whether the economy is strong, weak, or somewhere in between. This confusion stems from a fundamental disconnect: traditional economic indicators no longer tell the full story.
Government statistics have become increasingly unreliable, with large revisions to initial estimates. A striking example is the Bureau of Labor Statistics’ recent downward revision of U.S. job gains by 911,000 for the 12 months through March 2025, following a similar 600,000 reduction the prior year. While job growth has softened, these revisions reveal an encouraging insight: the economy is far more efficient than previously thought. Fewer jobs are needed to maintain a stable unemployment rate, and productivity growth appears much stronger than earlier estimates suggested.
Old Indicators, New Reality
Several long-standing recession indicators have misfired. The inverted yield curve – once considered a reliable predictor – has corrected, and leading economic indicators remain weak, yet no recession has materialized. The key takeaway is that a technology-driven productivity boom is reshaping the relationship between growth and these “old reliable” gauges. The ability to achieve higher economic output with lower levels of hiring may represent a new normal for the American economy.
Tariffs and Inflation Fears
Earlier in the year, fears ran high that newly imposed tariffs on imported goods would trigger a painful spike in consumer inflation. Those fears have not materialized. While core inflation remains stubbornly close to 3.0%, above the Federal Reserve’s 2.0% target, the source of this persistence is domestic rather than global. Services such as rents, auto insurance, airfares, and utilities are driving the stickiness – not foreign trade.Producer Price Index data shows that businesses are largely absorbing higher costs from tariffs instead of passing them on to consumers. Durable goods prices have barely moved since January, underscoring that tariffs have not been the inflationary trigger many feared. Consumer price sensitivity has forced companies to find creative ways to manage costs, effectively neutralizing any inflationary impact from tariffs.
Government Shutdown: Minimal Market Impact
At mid-month, the U.S. federal government shutdown entered its third week, yet financial markets have largely shrugged it off. The private sector – the engine of economic and productivity growth – remains fully operational. While the shutdown creates hardship for federal workers and inconveniences for the public, history shows that shutdowns have never caused a recession. Even with delays in official government data releases, investors and analysts are not flying blind thanks to private data providers such as ADP for employment figures and the Institute for Supply Management for manufacturing and services data.
Commodities Signal Global Strength
Commodity markets offer additional clues about global economic activity. Gold continues its meteoric rise, up an astonishing 55% for the year and breaking above the $4,000 per ounce level. This rally, which began in earnest after Russia’s invasion of Ukraine in 2022, is driven by more than inflation. Nations like China and India have shifted away from sovereign assets such as U.S. Treasuries and aggressively purchased gold as a hedge against geopolitical risk. Individual investors in China are buying gold to protect wealth amid a housing market crash, while rising prosperity in India has fueled demand there. As the Federal Reserve resumes its rate-cutting cycle, gold also serves its traditional role as a hedge against a weakening U.S. dollar.
Silver has outshone even gold, surging 70% this year and reaching its first record high since 1980. While geopolitical factors play a role, silver’s industrial uses – in electronics, batteries, and solar panels – have amplified demand. Copper prices are also near record highs, driven by global efforts to electrify industry, expand renewable energy, and accelerate the transition to electric vehicles. These trends suggest that global activity and demand are on the rise.
Resilient Economy and Strong Markets
Despite tariff scares, government shutdowns, and other headwinds, the technology-fueled productivity boom has made the U.S. economy remarkably resilient. Stock markets sit near record highs, driven by better-than-expected corporate earnings and rising forward expectations for growth over the next 12 to 24 months.
Consumers remain in solid shape. Layoffs are low, wages continue to outpace inflation, and household net worth is at record highs. Debt burdens are modest, with debt-to-disposable-income ratios still historically low. Tax cut extensions and expanding regulatory relief provide additional tailwinds. While there will likely be bumps along the way as we navigate without the old roadmaps, the economy appears to have enough momentum to keep moving forward.
