Context:

Despite widespread warnings of an impending recession due to President Trump's trade wars, traditional economic indicators have yet to reflect significant downturns in consumer spending, layoffs, or business investments. Economists are turning to unconventional data sources, such as earnings calls and private-sector data, to find early signs of economic impact, reminiscent of the early pandemic period when alternative measures were sought. The Federal Reserve is maintaining interest rates amid uncertainty, while economists debate whether tariffs will primarily lead to higher prices or trigger layoffs and reduced consumer spending. Mixed signals from various industries, such as declining sales in some sectors and stability in others, complicate predictions about the future economic trajectory. Ultimately, economists and the Fed are waiting for hard data to confirm whether the tariffs will significantly affect the economy, as anecdotal evidence alone is insufficient for policy changes.

Dive Deeper:

• Economists are observing non-traditional data sources to gauge the impact of tariffs, similar to tactics used during the pandemic, due to inconsistencies in traditional economic data reflecting consumer behavior changes.

• The Federal Reserve is monitoring unconventional indicators and holding interest rates steady amid the uncertainty caused by volatile trade policies, waiting for solid evidence before making monetary policy adjustments.

• Debates among economists highlight differing opinions on whether tariffs will result in higher consumer prices or trigger spending reductions and layoffs, with potential scenarios including persistent inflation or economic slowdowns.

• Contradictory data points from industries like airlines, food services, and hospitality challenge the interpretation of economic health, as some companies report downturns while others maintain or increase sales.

• The Trump administration's upcoming meetings with Chinese officials and potential tariff reversals add to the uncertainty, as economists speculate on future economic impacts and the likelihood of a recession.

• Consumer sentiment measures have declined since Trump's tenure began, but past discrepancies between sentiment and actual spending behaviors caution against relying solely on these indicators.

• The Federal Reserve requires concrete data, such as increased unemployment or reduced consumer spending, to justify rate cuts, as anecdotal evidence alone does not provide sufficient grounds for altering monetary policy.