Trade Tensions and Job ⁢Market Drive Economic ⁣Uncertainty

Updated June ⁤4, ⁤2025
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Trade tensions are ⁣creating challenges ⁢for manufacturers, even as a relatively stable job market⁣ continues to support consumer spending. Though, rising long-term unemployment and persistent market volatility remain key concerns for investors.

Delivery times in the manufacturing sector increased in May, signaling supply chain issues ⁤linked to trade uncertainty. Industries such as transportation equipment, machinery, and primary metals are experiencing ‍pricing difficulties due ‍to ever-changing⁤ trade policies. Delays at ports and disputes over ⁣tariffs have pushed delivery times above 2019 levels.

Despite these challenges, real disposable income rose 0.7% in April, the fastest pace as January, indicating that the stable job market⁢ is providing ‍crucial support to the economy. However, the ratio of long-term ‍unemployed to total⁣ unemployed has risen⁢ for three consecutive months, reaching 23.5%—a potential warning sign.

While monthly‍ income data has rebounded,longer-term income growth may ⁤not be sufficient to sustain current spending levels. Spending growth‍ has outpaced income growth for several months, suggesting a possible slowdown in consumer spending. Demand for‍ artificial intelligence and power⁣ generation plants could help sustain broader economic growth.

LPL Research anticipates another encouraging inflation report for May, ⁢but expects‍ a possible reacceleration in consumer prices later in the summer. If‍ the job market remains strong, they still‍ expect economic growth⁣ in 2025, albeit at a slower pace.

The Strategic and Tactical Asset allocation⁢ Committee (STAAC) anticipates‍ continued market ⁣volatility. Despite the recent stock market rebound,‍ they acknowledge the possibility of a reversal amid ongoing tariff ⁢uncertainty.The Committee has upgraded emerging market equities⁤ to neutral⁣ and favors dialogue services and financials sectors.

Within fixed income, STAAC⁣ maintains a neutral weight in core ⁢bonds, with a slight preference for mortgage-backed securities (MBS) over investment-grade corporates. They believe the risk-reward for core bond ⁣sectors is ⁢more attractive than plus sectors and ⁤remain neutral on duration⁣ relative to benchmarks.

What’s next

Investors should monitor upcoming economic reports, especially those ‍related ⁤to employment and inflation, ‍to gauge the economy’s trajectory amid trade tensions‍ and evolving market conditions. The impact of trade policy on small ⁢businesses,a ⁤key driver of job creation,will be especially vital ⁣to watch.