Extra-murky economic data is dropping this week
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This is set to be a blockbuster week for economic data. Making sense of it will be even trickier than usual, given trade war-induced crosscurrents.
The big picture: New readings on GDP, employment, and more will shed some light on how the economy has fared heading into spring, but businesses' efforts to get ahead of tariffs — both in their supply chains and hiring decisions — will make for murky data readings.
- It's not just that the future is uncertain. More so than usual, the present and recent past are uncertain.
Driving the news: On Tuesday, we get data on job openings and hiring for March. Wednesday, the initial release of Q1 GDP is due out, as is the Employment Cost Index (the gold standard for measuring wage inflation) and data on March personal income and consumption.
- Then, on Friday, comes April data on payrolls and unemployment — the first "hard data" to cover the period after President Trump announced aggressive global tariffs on April 2.
- All of these carry unusual asterisks due to the overhang of trade policy uncertainty — but with uncertain magnitudes.
State of play: GDP is being affected by businesses importing goods to build a stockpile before tariffs go into effect.
- In the arithmetic of GDP, imports subtract from growth. But an inventory buildup increases growth. When businesses ramp up imports and build up inventories, those forces should offset and be neutral for GDP growth.
- But measurement challenges may mess up that relationship, Goldman Sachs chief economist Jan Hatzius said, as inventories are one of the less-reliable parts of the GDP data.
Zoom out: It's not just businesses that have been looking to get ahead of tariffs; it's consumers, too, which would show up in the consumption expenditures data out Wednesday.
- But the flip side of Americans pulling forward purchases of cars and other durable goods is a likely weak patch in demand in subsequent months, regardless of what else is happening in the economy.
What they're saying: "One issue in reading the data is pre-buying," Hatzius told reporters Friday. "That's going to make it very difficult to see in hard dollar numbers what is really going on with the economy."
- "Anecdotally, I'm sure you know people who bought a car because they're worried about tariffs," he said, noting a surge in March auto sales seen in recent retail sales data. "I know several people who bought a car because they were worried about tariffs."
Between the lines: In the labor market, different dynamics apply. There's scant evidence that companies are engaging in large-scale layoffs; weekly data on jobless claims has remained stable. But trade war dynamics and jittery markets may be making companies reluctant to hire.
- Whether that will be enough to affect April payrolls data, however, is an open question.
- The reference week for this report covered the time period just after Trump announced his so-called reciprocal tariffs and encompasses the period when he partially backed down.
- Still, hiring processes don't turn on a dime, so the data out Friday is more likely to reflect companies' longer-term economic outlook.
The bottom line: We're still in the economic calm before the storm. Data out this week should confirm that — but not as reliably as one might hope.
