Wait and See: Current economic uncertainty spurs cautionary approach, officials say

The latest move in the ongoing trade wars took place June 4 as U.S. President Donald Trump’s announced 50% levy on steel and aluminum imports went into effect. The continuing tariff activity is expected to impact U.S. domestic prices in industries such as manufacturing, which analysts say is contributing to an uncertain economic environment for both businesses and consumers.

Ahead of this month’s tariff activity, an April report from the Federal Reserve Bank of St. Louis noted uncertainty was significantly elevated. As a result, businesses were expending additional effort to estimate the impact of tariffs and determine how they were going to reduce costs and mitigate any supply chain disruptions.

Charles Gascon, economist and research officer for the St. Louis Fed, said businesses were unwilling to make changes because of the elevated uncertainty caused by the tariffs.

“So, they were kind of in this kind of wait and pause space. We described it in April as slightly pessimistic,” Gascon said. “And I think that’s a pretty fair assessment for where we’re at today.”

Gascon said the current uncertain environment makes projecting an economic outlook a tricky proposition.

“What we are hearing from a lot of business contacts really just kind of reflects that, which is uncertainty is very high right now and it makes it hard for them to make decisions,” he said. “They’re generally just kind of on hold in many cases.”

GDP projections
U.S. gross domestic product grew 2.8% in 2024, according to the U.S. Bureau of Economic Analysis, but the estimate for this year is only around 1.4%, according to the St. Louis Fed.

“That’s very much in line with kind of the national slowing of growth that we expect coming into 2025 as the prior few years were quite strong,” Gascon said, adding Missouri also is projected to have slower GDP growth this year.

Missouri GDP growth was up 2.3% in 2024, which placed it 30th in the U.S., according to the St. Louis Fed.

“Missouri’s long run growth rate, given very little population growth and pretty stagnant labor force growth, is probably around that 1%-1.5% window,” Gascon said, predicting the state’s decline in GDP. Missouri is yet to release first-quarter GDP data.

Unemployment analysis
While unemployment is largely considered a lagging indicator of economic activity, Colbert said the jobless rate has mostly stayed steady despite slowing job growth.

According to the latest report from the Missouri Department of Economic Development, nonfarm employment fell by 6,600 jobs in April, as the state unemployment rate ticked up to 3.9%. It remained below the national rate of 4.2%, a position it has held for roughly 10 years.

Missouri’s labor force participation rate in April at 63.4% also remains higher than the national mark of 62.6%. However, Scott Colbert, a St. Louis-based chief economist with Commerce Bank, said much of the workforce growth has been via immigration.

“We’re not going to have a massive amount of people looking for jobs,” he said, citing Census Bureau data that almost four million Americans are expected to turn 65 and leave the workforce through 2027. “I think it’s going to be a lot easier even with this slowdown to keep the unemployment rate very modest.”

Private sector job creation increased just 37,000 in May, hitting its lowest level in more than two years, according to payroll processing firm ADP.

As the Trump administration continues to crack down on immigration, Colbert said it likely means companies will continue to feel pressure to find employees, particularly in industries such as construction, agriculture and hospitality.

As for job growth sectors, Gascon said the short answer is health care.

“Normally, the health care industry just kind of makes it through any downturn in the economy and continues to add jobs. It’s not very cyclical,” he said, noting the industry took a hit during the COVID-19 pandemic.

An April 2022 report from the Missouri Chamber of Commerce and Industry said that the state had recovered 357,200 jobs, equating to 95% of those lost amid the pandemic.

“We are seeing some pretty healthy gains in the health care sector of the economy, and that’s historically been one of the strong drivers of growth across the state,” Gascon said, adding that growth is more concentrated in major metropolitan areas.

Population boost
The growing health care sector in Springfield is driving population growth amid job growth. The area’s two largest employers are health systems, CoxHealth and Mercy Springfield Communities. That industry’s strong presence in southwest Missouri is part of what led the Springfield metro area to be the fastest-growing metro in the state.

The Springfield metropolitan statistical area, encompassing Greene, Christian, Dallas, Polk and Webster counties, increased nearly 14,700 residents – roughly 3.1% – between July 1, 2020, and July 1, 2023, according to Census Bureau data released last year. Springfield MSA’s resident count was at 491,053 as of 2023, only behind St. Louis and Kansas City in metro area size.

Jonas Arjes, senior vice president of economic development for the Springfield Area Chamber of Commerce, said updated data is yet to be released, as he anticipates the area soon reaching the 500,000-resident mark.

“In terms of economic development, that’s a significant number,” he said, regarding companies evaluating areas of the state in which to expand or relocate. “It seems like at least that half million MSA number gives a level of comfort, mostly because of population and labor force size. And so unfortunately, we’ve learned through the years, some consultants and some companies, that’s their floor criteria.”

“From our side of the table where that’s important is that you can add to the labor force,” he said, noting there continues to be more local jobs than people to fill them. “So unfortunately, the demand is still outpacing the supply when it comes to filling those open positions with the folks coming in.”

While the Springfield MSA unemployment rate, which dipped in April to 3.5% from 4% a month prior, continues to run below the state and U.S. figures, Arjes said it also can pose a challenge for companies looking to move or invest in and around the Queen City.

“Companies that are looking to expand and relocate, they’re also looking at labor supply,” Arjes said. “With the lower unemployment rate, that means that labor supply is tighter.”

The ongoing trade war is exacerbating these challenges, officials say.

Tariff volatility
The Creighton University Mid-America Business Conditions Index, a leading economic indicator for a nine-state region including Missouri that extends from Minnesota to Arkansas, in May declined to 51.0 from April’s higher 53.3. Missouri was the only state to show a gain, jumping to 53.4 from 48.1 in April.

“The Creighton survey is recording significant volatility, much like other regional economic measures. Proposed and implemented tariffs are producing economic volatility as well as slower growth,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group and chair in the Heider College of Business, in a news release.

Colbert said the real question is: Are these tariffs enough to push us into a recession?

“It’s absorbable,” he said of the tariffs. “The uncertainty is worse than the actual tariff itself. Most businesses just want to get to the other side of this, what the new costs are, how to work through it. We need to get the administration to get to the ‘see’ part of this rather than the ‘wait’ part of this. Otherwise, they do risk slowing things down enough to let us go backwards.”