How Is the Economy Doing?
The current economy is defined by strong economic growth, a softening labor market and slowing inflation.
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Updated on May 16.
Here’s what NerdWallet’s senior economist Elizabeth Renter will be watching for in economic news and data during the week of May 19:
The Week Ahead (week of May 19)
Imagine learning your car needs costly repairs, to the tune of $7,500 and you’ll be without access to it for two weeks. You make inconvenient arrangements to get where you need to be during that period, drop the car off on Monday morning, and begin the week under some financial (and other) stress. Then, the repair shop calls you with “good news!” As it turns out, the repair will only cost $3,000, and you can pick it up on Friday. Feels better, right? But you’re still coming out of pocket in a pretty significant way, and still inconvenienced for the week.
Tariffs that are significantly lower than initially instituted are still tariffs that can have immense effects. In part, because of implementation alone — that they happen at all and especially if they happen with a flair for the chaotic. But also because reducing them isn’t the same as eliminating them. We’re still facing a trade war the likes of which we haven’t seen in this lifetime. And the impact, even if the highest of the tariffs are negotiated down and narrowed, could be considerable.
In the coming weeks, we’ll all be watching for the continued evolution of tariffs and their impact — preemptively on consumer spending (which we’re beginning to see), as well as prices and the labor market. As it stands, tariffs will bump inflation, but the question remains whether that increase will be sustained.
Upcoming data releases:
Mon., May 19: SCE Household Spending Survey, NY Fed - I expect this survey to show people planning to spend less overall, and most sharply in discretionary categories as a result of the prevailing economic uncertainty.
Thurs., May 22: Weekly UI claims - I look at these each week, despite not typically mentioning them here. This close-to-realtime data can offer a lead on the direction of the unemployment rate, and potential cracks in the labor market. Thus far, weekly claims have been fairly steady and unremarkable.
The state of the U.S. economy is strong despite inflation remaining elevated. The economy is expanding at a crisp pace, the labor market is loosening slightly and inflation is slowing from its peak. The Federal Reserve looks at several economic indicators — along with the stock market — to form a better picture of the economy and make decisions on interest rates.
Is the U.S. in a recession?
The United States is not currently in a recession, but the impacts of new tariffs and a looming trade war have unsettled financial markets and raised fears of an economic downturn. Even President Donald Trump has said a recession is possible. For ongoing updates on recession news, see: Are we in a recession?
Is the U.S. economy growing?
Q1 2025 Real GDP: -0.3%
The U.S. economy has shown steady growth since it dropped to unprecedented levels during the second quarter of 2020 due to the pandemic — and then rebounded almost as quickly. A year later, in the second quarter of 2021, the rate of annual growth hit a high not seen since the 1950s.
But in the first quarter of 2025, growth declined for the first time in nearly three years, primarily due to an increase in imports — a result of businesses stocking up on goods before tariffs began.
» MORE:
Gross Domestic Product (GDP) is the market value — in current dollars — of all goods and services produced within the United States in a given period. The data that shows GDP adjusted for inflation is called Real GDP. All GDP changes are expressed on an annualized basis and reports are released quarterly by the Bureau of Economic Analysis.
» MORE: GDP Report
What is the U.S. unemployment rate?
April unemployment rate: 4.2%
The U.S. unemployment rate is the share of unemployed people as a percentage of the overall labor force. Unemployed people are those who are actively seeking work. The labor force doesn’t include the entire population; it’s just the number of people who are employed plus those who are unemployed but looking for jobs.
The unemployment rate has topped 4% since May 2024.
How fast are wages growing?
March wage growth rate: 4.3%
Wage growth is moderating from what it was at this time in 2024 and is much lower than its peak in 2022. Still, the most recent data from the Federal Reserve Bank of Atlanta shows that annual growth is pacing much faster than it did in 2020.
Below is the three-month moving average of median hourly wages over the last decade.
Is inflation going down?
April CPI inflation rate: 2.3%
Inflation measures the rate of price increases, on an annual basis. The Federal Reserve is targeting a 2% inflation rate.
Consumer price index (CPI)
The current inflation rate is typically a reflection of the consumer price index (CPI), which is released monthly by the Bureau of Labor Statistics. The CPI measures changes in prices that consumers pay for goods and services including food, gas and rent. The core measure of the consumer price index excludes two volatile factors: food and energy. The core CPI, as of April, is 2.8%.
Personal consumption expenditure (PCE)
March PCE inflation rate: 2.3%
March core PCE rate: 2.6%
The Federal Reserve’s preferred measure of inflation is the core personal consumption expenditure (core PCE), which is released monthly by the Bureau of Economic Analysis. The PCE follows the goods and services consumers buy and the price they pay for them. It also tracks changes in spending habits as prices fluctuate.
» MORE: What is the PCE?
Trump intensifies trade war
President Donald Trump has recently implemented tariffs that affect virtually all U.S. trading partners. For details, see:
How much is the U.S. dollar worth now?
The dollar index measures how the dollar compares to other currencies. The U.S. dollar is usually considered a safe haven, especially during times of market volatility and economic uncertainty. But in 2025, the value of the dollar is falling as investors sell off U.S. assets, largely due to uncertainty tied to Trump’s protectionist policies and broad sweeping tariffs.
What is the current U.S. trade deficit?
U.S. trade deficit in March: $140.5 billion — a 14% increase compared to February
The U.S. has run a trade deficit for decades. BEA data shows in 2024 the goods and services deficit was $918.4 billion, compared to $784.9 billion in 2023.
Source: U.S. Census Bureau and the Bureau of Economic Analysis (BEA).
» MORE: What is the U.S. trade deficit?
How much does the U.S. import and export?
Imports are goods that one country purchases from another country, while exports are goods that one country sells to another country. The latest U.S. Bureau of Economic Analysis (BEA) data shows:
Imports in March 2025: $419 billion — an increase of $17.8 billion compared to February.
Exports in March 2025: $278.5 billion — an increase of $0.5 billion compared to February.
Rent vs. inflation
Rent costs are a significant factor driving inflation. That’s because rent is included within the shelter price index and shelter comprises the biggest segment of the CPI. The rent portion of the CPI has outpaced overall inflation for decades.
However, there’s a lag in how rent data is reflected in the CPI, which means rental shifts — up or down — won’t immediately be reflected in the report. The lag is due to the cycle of lease renewals. Companies that track rental prices, like the housing website Zillow, show that rent increases have slowed down for nearly a year, but that slowdown has yet to show up in the CPI report.
» MORE: Rental market trends in the U.S.
When will interest rates go down?
Federal funds rate: 4.25% to 4.50%
The federal funds rate, also known as the Fed rate, is the interest rate that U.S. banks pay each other to borrow or loan money overnight. The federal funds rate affects interest rates on consumer lending products like credit cards and mortgages.
The fed rate is set by the Federal Open Markets Committee (FOMC), which is the monetary policymaking arm of the nation’s central bank known as the Federal Reserve. At the FOMC’s eight scheduled meetings each year, it takes action on the federal funds rate. That means it will hike, hold or lower rates, depending on economic conditions.
After a year of paused interest rates, the Fed made rate cuts at its September, November and December meetings. The FOMC paused rates at its January and March meetings.
» MORE: What is the federal funds rate?
Consumer confidence in the economy
Consumer confidence — or sentiment — is an index that reflects people’s perceptions about the economy in the short-term and the outlook for the future. There are two main consumer sentiment indexes: the University of Michigan’s Index of Consumer Sentiment and The Conference Board’s Consumer Confidence Index.
The University of Michigan’s Index of Consumer Sentiment: The first reading for May from the University of Michigan released on May 16 shows:
The Index of Consumer Sentiment went down to 50.2, compared to its April reading of 52.2
Current Economic Conditions registered at 57.6 compared to 59.8 in April.
The Index of Consumer Expectations was at 46.5 compared to 47.3 in April.
The Conference Board’s Consumer Confidence Index: The survey’s latest results showed the index declined for April (86) compared to March (93.9).
More readings:
The Present Situation Index fell to 133.5 from 134.4 in March.
The Expectations Index declined to 54.4 in April from 66.9 in March.
How’s the stock market doing?
The health of the stock market is represented by major stock market indexes like the Dow Jones Industrial Average, S&P 500 or the NASDAQ 100. These indexes include broad sections of the stock market, but aren’t entirely exhaustive. That means the performance of these indexes represents the fluctuations in the entire market. So when the stock market goes up that means stock market indexes have gained value and vice versa.
» MORE: S&P 500 Index (SPX)
Data may be delayed and is for informational purposes only.
Latest mortgage interest rates
Mortgage rates change daily according to what’s happening in the economy.
NerdWallet’s daily mortgage rates below are calculated as an average of the annual percentage rate (APR) with the lowest points from a selection of major national mortgage lenders. The APR is based on the interest rate and indicates all of the costs of getting a loan including mortgage origination fees and discount points.
» MORE: Current mortgage interest rates
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