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The nation鈥檚 real gross domestic product declined at an annual rate of 0.3 percent in the first quarter of 2025. It was the weakest quarterly growth in three years, according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real GDP increased 2.4 percent.

Consumer spending, the economy鈥檚 main engine, rose at a 1.8% pace in the first quarter, the smallest increase since mid-2023.

Imports rose at the fastest pace since the third quarter of 2020, when the economy was reopening from pandemic lockdowns. Businesses rushed to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter. Spending by the federal government fell as the Department of Government Efficiency cut jobs and contracts.

But the main driver of the first-quarter contraction was President Donald Trump鈥檚 trade war. Net exports, the difference between what the U.S. imports and exports, subtracted nearly five percentage points from headline GDP. That was the biggest quarterly drag from net exports on record dating back to 1947.聽

In its last government jobs report of the first quarter, the U.S. Labor Department reported strong employment growth for the month of March.

The Labor Department鈥檚 report was delivered as the government announced a series of controversial tariffs on virtually all of America鈥檚 trading partners that provoked immediate retaliation. The job data indicates that the labor market is holding up so far, but the trade maneuvers raise the possibility that companies hold back on hiring as they assess the new commerce landscape.

The Bureau of Labor Statistics said nonfarm payrolls increased by 228,000 jobs, up from the revised 117,000 in February and better than the Dow Jones forecast of 140,000. However, the unemployment rate edged up 10 basis points to 4.2% as labor force participation also increased. It鈥檚 been roughly in the 4% range for the past several months, which shows the labor market has been on solid footing.

The March employment totals indicate a labor market that still is strong, although the January and February counts have been revised downward substantially: January totals were cut by 14,000 to 111,000 and by a 34,000 reduction in February to 117,000.聽

Federal Reserve officials voted unanimously at their March meeting to hold interest rates steady at 4.5%, citing lingering inflation as an overriding concern. The expected decision by central bankers followed a pause in January after three consecutive rate reductions that began last fall, lowering the Fed funds rate from 5.5% to 4.5%.

But the major news came after the Fed鈥檚 decision as President Donald Trump issued attacks and negative commentary on his opinion of Fed Chair Jerome Powell for holding firm on interest rates and calling controversial tariff plans inflationary. The Fed chair added that given the 鈥渟olid鈥� economic backdrop, the cost of waiting for 鈥渇urther clarity鈥� on the path of tariffs and policy was low.

Trump responded with concerning commentary regarding Fed Chair Powell鈥檚 continuing tenure saying Powell鈥檚 鈥渢ermination couldn鈥檛 come fast enough.鈥� President Trump鈥檚 comments on social media caused equities markets to dip temporarily. The Administration later confirmed that Trump had 鈥渘o intention of firing Fed Chair Powell鈥�.