“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 2.5 percent on August 5, up from 2.1 percent on August 1. GDPNow
Predictions for third quarter GDP economic growth are again all over the map, per the Atlanta Fed graph, as were those for Q2, with no finalized tariff agreements. Both consumers and businesses are now attempting to time their purchases because of uncertain import prices.
That’s why the nation’s trade deficit in goods sank 11% in June to a 22-month low as U.S. companies timed when to buy imported goods with on-again, off-again Trump tariffs. a pattern that’s likely to play out over at least a few more months, if not the rest of the year.
It’s also why Q2 GDP grew at 3.0 percent in the initial estimate. Imports shrank (that are deducted from exports to calculate the foreign trade balance of payments and GDP) while Americans waited for TACO Trump to give trading partners another 90-day reprieve from his threatened retaliations.
The two-month GDP average was a 1.3% growth rate. The question will be how the tariff uncertainties play into growth for the rest of the year. And will the inflation already caused by the tariffs ever come down enough to warrant further Fed rate cuts?
The question on everyone’s mind is why President Trump is so erratic in his attempt to control world trade? He claims it is a negotiating tactic to rebalance the large trade imbalances with countries like China, but the import taxes are really meant to cover the $trillions being added to the federal debt from his big, beautiful tax bill.
The uncertainty over future import prices makes third quarter growth difficult to pin down, in other words. There was some good news as nonfarm business sector labor productivity increased 2.4 percent in the second quarter of 2025, the U.S. Bureau of Labor Statistics reported today, as output increased 3.7 percent and hours worked increased 1.3 percent.
Labor productivity had surged as high as 4 percent during the Biden administration’s New, New Deal surge in investments. But any massive loss of immigrant workers that make up 19 percent of the civilian labor force will harm labor productivity as well.
Higher labor productivity is a key ingredient for decent economic growth. We can only hope that there are enough workers to keep the U.S. economy growing as the new tariffs are finalized and begin to affect growth.
This is why the advance number for seasonally adjusted insured unemployment insurance during the week ending July 26 wasn’t good news.
It's why the 1,974,000 continuing jobless claims, an increase of 38,000 from the previous week's revised level, was so important as an indicator of the labor market. This is the highest level for insured unemployment since November 6, 2021 when it was 2,041,000 during the COVID-19 pandemic.
This is another alarming sign that will further slow growth at the same time more immigrants are leaving the labor force and not being replaced with the normal immigration flow. The hope is that AI can be the savior that will keep GDP growth from plunging if it boosts the labor productivity numbers.
But robots and software programs won’t replace those lower paying jobs in construction, manufacturing and the service sector of leisure and hospitality that immigrants have always occupied.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment