Letter -- Economy Moving Forward Cautiously During Uncertainty

DED Stakeholders,

The economy moves forward cautiously as it seeks some clarity.

Resilience has been the buzzword for the economy so far in 2025. If you were limited to just looking at the data and not the news, you might describe the current economy as performing at just about normal. When you factor in the news of the past few months, you might give the recent economic performance a bit more credit.

Let’s look at the key numbers that were released in July. We’ll start with GDP.

The U.S. economy posted a very strong 3% annualized growth rate in the second quarter. This was a rebound from the first quarter’s 0.5% contraction. This down and up pattern is mostly due to businesses importing more goods than usual in the first quarter to get ahead of tariffs (you can read more about this week’s GDP release below).

Looking past international trade, we see a couple of telling signs in the data. First, the U.S. consumer is still active as personal consumption grew at a 1.4% rate in Q2. However, investment from businesses (which grew at a 0.1% rate) was mostly flat. Business investments are typically large and require some sense of confidence in the direction of the economy and preferably, lower interest rates. These two items are in short supply right now as new international trade deals are being worked out and the Fed continues its wait and see approach.

Part of the Fed’s reasoning for not cutting rates is inflation. Lowering rates would boost the economy but it would also add inflationary pressure. The latest inflation figure showed a 2.7% increase in overall prices for the year ending in June. This is up from a 2.4% reading in May. This could be the early signs of tariff-driven inflation many economists had been worried about.

Elsewhere, today’s U.S. employment data release shows that businesses may be starting to pull back on hiring. In July, businesses added just 73,000 new jobs. More importantly, the employment data for May and June was revised significantly downward by a combined 258,000 jobs. Missouri’s employment data had shown good overall growth through June, adding nearly 15,000 new jobs, but this data will likely also be revised when the July data comes out.

All told, the economy seems to be moving ahead at a pace that's as fast as the current level of uncertainty will allow.

Jeff Pinkerton
Director of Economic Research
Missouri Department of Economic Development