Economic forecast remains uncertain in 2025

Although talk of a recession was nearly absent from the Aug. 6 Springfield Area Chamber of Commerce annual Economic Outlook, an economist from the Federal Reserve Bank of St. Louis told attendees that economic uncertainty remains elevated as trade wars stretch into late summer.

Financial stress experienced in early April, which occurred after the Trump administration announced a rollout of tariffs against many U.S. trading partners, has largely dissipated but still carries a potential to impact consumer spending and business investment, said Kathleen Navin, senior business economist with the St. Louis Fed.

While the U.S.’s gross domestic product growth rate last year was 2.8%, according to the U.S. Bureau of Economic Analysis, the average of the first two quarters of this year is around 1.2%, Navin said.

“Now what we’ve seen in the last few quarters is a lot of volatility,” she said, noting Q1 GDP fell 0.5% before rebounding to 3% growth in the second quarter. “Pretty subdued growth over the first half of the year.”

Navin said a drag from net exports in the first quarter of the year was the result of imports surging, as people tried to get ahead of the anticipated tariffs.

“You saw that especially in businesses,” she said, adding that resulted in a buildup of inventories. “After the surge in imports in the first quarter, they fell off in the second quarter.”

Navin said the core of U.S. GDP is made up of three main components: Consumer spending, business fixed investment and residential investment in housing.

“What you see in the first quarter is that while we did get a healthy contribution from business fixed investment in the first quarter, a lot of that was pulled forward ahead of tariffs,” she said, adding that housing declined in both quarters.

While consumer spending has been solid the last two years, Navin said data indicates those healthy contributions to the economy are waning.

“We’re seeing a consumer that is more cautious, maybe sitting on the sidelines when looking at certain purchases, trying to build a little more clarity around the economic outlook,” she said. “When I look at these numbers, when I see that we are seeing growth softening, and we’re also seeing consumer spending softening, that gives me a little pause when thinking about the U.S. economy.”

Noting state and local data lags behind national figures, Navin said Missouri’s GDP rose 2.2% in Q1 from the same period a year prior. The U.S. economy over that same timeframe was about 2%.

Employment analysis
Navin said incorporating May through July, U.S. employment rose by an average of just 35,000 jobs per month. The most recent jobs report, released Aug. 1 by the U.S. Bureau of Labor Statistics, added just 73,000 jobs in July, which fell far short of the 104,000 forecast. Additionally, May and June data was revised down that previously reported a combined 258,000 jobs. The national unemployment rate in July was 4.2%.

“I don’t like to change all of my thinking around one data report, but this does give me pause and is something I’ll be looking at very closely as we get other indicators on the labor market,” she said.

Examining the jobs picture in Missouri, Navin said there’s a stable state unemployment rate at about 4% for June, while the Springfield metropolitan statistical area had a 3.7% jobless rate. Missouri overall had about 0.9% growth in payrolls over the last year, which was outpaced by Springfield at 1.5%.

“Overall, the picture is just a labor market that’s not churning,” she said. “You’re not seeing a lot of labor turnover. You’re kind of just seeing folks staying where they are in their employment situation – nothing like what we saw coming out of the pandemic.”

Tariff talk
At a roundtable with local reporters on Aug. 5, chamber President Matt Morrow discussed the local business community’s reactions to Trump administration tariffs that came online early on Aug. 7, which included 15% tariffs on many goods from the European Union, a 35% tariff on Canadian goods and a 90-day extension to negotiate rates with Mexico.

“There’s just a lot of dynamism in the economy right now. That’s probably the cleanest way I know to put it,” Morrow said. “I would say it’s pretty universal that tariffs aren’t good for business. ... They’re a challenge. They’re a barrier. So generally speaking, increased, especially significantly increased tariffs, are not something that businesses look forward to, and they’re nervous about.”

Jenny Carr, CEO and president of L&W Industries LLC, which manufactures products for the railroad industry, said the tariffs have been more of an annoyance for her business as opposed to having significant impact.

“I say annoyance in terms of trying to keep up with the changes and then trying to make sure that if there are tariffs that they’re captured so that when we’re pricing products, we make sure that we’re trying to recoup that,” she said. Carr added that L&W has been proactive in some instances to find substitutes for expensive, specialized hardware made in China: “We found some domestic sources for that. And then we’re looking for other alternative suppliers.”

Carr said tariffs fit into the labyrinth of government regulations manufacturers must navigate.

“Government regulations, they don’t do a very good job of working with businesses or planning in advance,” she said. “So, unfortunately, we’ve become somewhat accustomed to some of that.”

Grant Miller, president of the Springfield Contractors Association, said what he’s been hearing from members is “concern and uncertainty but not a lot of specific injuries.”

Miller is also president of commercial and residential glass installation firm Springfield Glass Co. He said he regularly gets cost increase notices as a matter of everyday business. But in recent times, he said only one product listed a price increase due to tariffs: Door hardware.

“Our other cost increases are just general economy-driven things,” Miller said, “at least as far as we’ve been told by the people increasing costs.” Miller said materials like aluminum, copper and steel could be impacted by new tariffs. “We use a lot of aluminum. We just haven’t seen it from our manufacturers that their cost is going up.”

Tariff impact on his business also remains uncertain, Miller said.

“I don’t know if it’s a matter of time that our manufacturers are going to work through stockpiles they already had, and then the impact is going to hit us, or they’ve just been able to source material domestically, and it’s just not going to hit us,” he said. “In fact, in response to me questioning them on what’s to come, they’ve been kind of vague – not that they’re withholding information, but because they don’t have it.”

Despite ongoing tariff uncertainties, Navin said economic growth is still happening – just at a slower pace than last year.

“A lot of that was to do with a more hesitant consumer,” she said, noting inflation hit 2.6% in June, remaining above the Fed’s 2% target. “So, we’ll see if different kind of fundamentals for the consumer that still look pretty solid will give them more confidence in the quarters to come.”

Navin spoke at the annual Economic Outlook event, which is organized by the Springfield Business Development Corp., the chamber’s economic development arm. Attendance at the Oasis Hotel & Convention Center was 400 people, a dip from last year’s turnout of 425, chamber officials said.

The chamber’s annual series continues with the Nonprofit Outlook, which is set for Nov. 12 at White River Conference Center.