Last Wednesday, President Trump’s tariff announcement sent ripples through global financial markets and raised alarms about a possible U.S. recession in the next year. Although the March jobs report indicated solid labor market performance, the news of the tariffs overshadowed positive employment updates. In his first address since the announcement, Federal Reserve Chair Jerome Powell warned that the economic consequences of these tariffs might be more severe than anticipated, with high inflation potentially becoming a lasting issue. The full impact remains unclear, and much depends on how long these tariffs remain in place.
Market Turmoil Triggered by Tariff Announcement:
Last Wednesday, President Trump introduced sweeping tariffs, including a broad 10% tax on imports from roughly 90 countries, with higher, specific tariffs on goods from certain nations. The move sparked backlash from countries like China, which retaliated with tariffs as high as 34%. Stock markets reacted sharply, with major indices posting significant declines. Powell cautioned that the tariffs could lead to inflationary pressures and slower economic growth. The financial community is concerned about the broader economic fallout, with many raising the likelihood of a U.S. recession in the next year. The trade tensions also created volatility in the bond market, causing mortgage rates to drop sharply late last week, only to rise again on Monday.
Stronger-Than-Expected Job Growth Amid Rising Unemployment:
The latest jobs report exceeded expectations, showing an increase of 228,000 nonfarm payrolls in March, up from the revised 117,000 in February and well above the 158,000 monthly average over the past year. March’s job gains were the strongest for 2025, surpassing expectations of 140,000. However, the unemployment rate edged up slightly from 4.1% to 4.2%. While the labor market remains robust, federal government layoffs have started to impact employment, and further cuts in government payrolls could be expected in the coming months. Despite the strong data, the report feels somewhat outdated, as the tariff announcement has drastically altered the economic outlook.
Housing Sentiment Hits 15-Month Low:
Fannie Mae’s Home Purchase Sentiment Index fell for the second consecutive month in March, reaching its lowest level since December 2023. Heightened trade tensions and rising concerns about a recession have led to increased anxiety about job security and personal finances. The proportion of employed consumers worried about job loss in the next 12 months surged from 23% in February to 32% in March, a record high. Additionally, those expecting their financial situation to worsen over the next year jumped to 27%, the highest level since July 2022. Housing sentiment was also influenced by expectations of mortgage rate increases, with 35% of respondents anticipating higher rates in the next year. Consequently, the share of consumers who believed it was a good time to buy a home fell to 22% in March, down from 24% in February.
Construction Spending Surpasses Expectations:
U.S. construction spending rose by 0.7% in February, following a 0.5% revised decline in January, according to the latest report from the Commerce Department. The increase was larger than expected, as economists had anticipated a 0.3% rebound. On a year-over-year basis, construction spending grew by 2.9%, driven by a 1.6% increase in residential construction and a 3.9% rise in non-residential building. Lower financing costs in February likely helped boost spending, particularly in single-family homebuilding and private home improvement projects. However, multifamily construction remained flat and is down 11.6% compared to the previous year. Going forward, tariffs and stricter immigration policies are expected to push up building costs, which could create headwinds for developers and slow construction activity in the months ahead.
Boomers Dominate the Housing Market:
In a shifting housing market, baby boomers are now the largest group of homebuyers, surpassing millennials, according to the National Association of REALTORS®’ 2025 Home Buyers and Sellers Generational Trend Report. Boomers now account for 42% of all homebuyers, a significant increase from 38% last year. Meanwhile, the share of millennials has dropped to 29%. One key factor contributing to this shift is home equity, with many boomers purchasing homes outright using cash. In contrast, more than 90% of buyers under 44 years of age rely on financing. As borrowing costs have risen significantly over the past few years, boomers are increasingly using the equity from their current homes to make purchases, while younger buyers continue to face affordability challenges.