Resilient Labor Market, but Deceleration Expected:

• The April 2025 jobs report indicated a stronger-than-expected gain of 177,000 jobs, beating estimates of 138,000. J.P. Morgan notes this “underscored the labor market’s resilience.”
• Despite upward revisions to the prior two months (totaling a net downward revision of 58,000), the three-month average payroll increased.
• The unemployment rate remained steady at 4.2%, and the labor force participation rate saw a slight uptick, with prime-age worker participation reaching a seven-month high.
• However, several sources anticipate a slowdown in job growth going forward. EY projects a deceleration from 160,000 per month in 2024 to around 50,000 in 2025, noting that “downside risks to the labor market have escalated significantly.”
• The “Pasted Text” summary also states that “job growth is expected to decelerate.”

• A major recurring theme is the significant impact of tariffs and related policy uncertainty. J.P. Morgan mentions the labor market’s resilience “in the face of trade policy uncertainties.”
• EY highlights the “on-off tariff policy” leading to a “confidence crisis” among businesses, with consumers front-running purchases of durable goods in anticipation of price hikes.
• The EY source indicates the US average tariff rate has risen significantly and is expected to remain elevated, even with anticipated trade deals.
• Vanguard explicitly states that the “anticipated impact of tariffs and related policy uncertainty led us recently to lower our forecast of economic growth and increase our forecasts for unemployment and inflation.”
• The “Pasted Text” summary reiterates that “Trump’s tariff escalations and retaliatory actions from trade partners are expected to negatively impact global and U.S. growth, potentially leading to supply chain disruptions and a slowdown in exports.”

• All sources predicting future GDP growth have revised their forecasts downward.
• Fannie Mae revised its real GDP growth outlook for 2025 to 0.5 percent on a Q4/Q4 basis, down from 1.7 percent.
• Vanguard now expects “Full-year 2025 economic growth of less than 1%, down by a percentage point.”
• EY has “cut our real GDP growth forecast to 1.1% for 2025… from 1.7%… in our prior baseline,” anticipating growth to “approach stall speed in Q4 with growth at only 0.2% year over year (y/y).”
• The “Pasted Text” summary provides a range of forecasts for 2025 GDP growth, from “less than 1% to 1.9%, down from 2.8% in 2024.”

• While recent CPI data may have shown moderation (according to EY, the March CPI report offered a “heartening albeit stale picture”), the consensus is that tariffs will lead to a renewed inflation impulse.
• Fannie Mae now expects CPI to rise 3.5 percent Q4/Q4 in 2025, up from 3.2 percent. They anticipate core CPI to rise 3.9 percent.
• Vanguard expects “Inflation of nearly 4% this year.”
• EY believes “higher tariffs will lead to a renewed inflation impulse in coming quarters, with core CPI inflation likely to end 2025 in the 3.5% to 4% range.”
• The “Pasted Text” summary also suggests core CPI inflation potentially ending the year in the 3.5% to 4% range due to higher tariffs.

• Consistent with expectations of slowing economic and job growth, the unemployment rate is projected to increase.
• Vanguard forecasts a year-end unemployment rate of about 5%, up from their prior forecast of 4.5%.
• EY anticipates the unemployment rate, currently 4.2%, is “poised to rise toward 5%.”
• The “Pasted Text” summary states the unemployment rate is “expected to rise, driven by slower job growth.”

• The prevailing view is that the Federal Reserve will maintain a cautious stance in the near-term due to the uncertainties surrounding tariffs.
• J.P. Morgan states the jobs report “reinforces our strategists’ view that the Federal Reserve will keep interest rates on hold in the near-term as it evaluates how recently enacted tariffs impact the health of the economy.”
• However, several sources anticipate interest rate cuts in the second half of 2025.
• Vanguard expects “Two interest rate cuts (each 0.25 percentage point) by the Federal Reserve in the second half of 2025.”
• EY believes the Fed will “eventually decide to ease policy in June with a total of three rate cuts in the second half of the year.”
• The “Pasted Text” summary also anticipates two rate cuts in the second half of the year.
• EY also notes the potential for “potential fissures among Fed officials” and the risk of political pressure on the Fed.

• Fannie Mae provides specific forecasts for the housing market, indicating adjustments based on recent data.
• Their home sales outlook for 2025 was revised downward to 4.86 million.
• Conversely, they expect home prices (as measured by the Fannie Mae Home Price Index) to rise slightly more in 2025 than previously anticipated (4.1% vs. 3.5%).
• Mortgage rates are forecasted to end 2025 and 2026 slightly lower than prior forecasts.
• Mortgage originations are projected to rise in both 2025 and 2026.

• Given the elevated market volatility and uncertainty, J.P. Morgan reiterates that “building a resilient, diversified portfolio is key.”
• They specifically recommend a “globally diversified multi-asset portfolio to mitigate potential market volatility and reduce being overly exposed to any single market or event.”
• Vanguard’s update includes revisions to expected returns for asset classes, with increases in expected returns for U.S. stocks driven by valuation changes. They also note lower forecasted returns from unhedged foreign equity investments due to currency factors.

• While not the base case for all, the possibility of a recession is acknowledged.
• J.P. Morgan “do not see a recession as the base case this year.”
• EY sees the “odds of a recession in the next 12 months around 45%,” with risks “tilted to the downside.”
• The “Pasted Text” summary notes that some analysts are “even suggesting a potential for a recession.”