WSJ What’s News - U.S. Economy Shrank as Trade Turmoil Began to Hit

Episode Date: April 30, 2025

P.M. Edition for April 30. New data out today showed that the U.S. gross domestic product fell in its steepest decline since 2022. We hear from WSJ economics correspondent Harriet Torry about what this data, along with other metrics out today, say about the overall health of the economy. Plus, a growing number of companies are yanking their profit guidance for the coming quarter amid economic uncertainty. WSJ reporter Chip Cutter joins to discuss what this means for these companies and their investors. And a federal judge orders the release of a Columbia University student who was detained by the Trump administration. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Conditions apply to all benefits. Visit pcfinancial.ca for details. The U.S. economy shrank in the first quarter as imports surged ahead of tariffs. Plus, why a growing number of companies are shelving their financial guidance for the quarter ahead. Many executives began this Trump administration feeling really optimistic. And right now, the overwhelming mood is that it's just uncertain, it's tough to navigate, and companies don't know where things are headed. And a federal judge orders the release of a Columbia student detained by the Trump administration.

It's Wednesday, April 30th. I'm Alex Osceola for The Wall Street Journal. This is the PM edition. It's Wednesday, April 30th. I'm Alex Osila for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. The US economy shrank at the start of this year as the trade turmoil started to hit, prompting businesses to stock up on goods from overseas. The Commerce

Department said today that the U.S. gross domestic product, the value of all goods and services produced across the economy, had its steepest decline since the first quarter of 2022. Stocks fell broadly after the release of the data, before major indexes paired declines in the afternoon. In the end, major U.S. indexes ended the day mixed. The Dow was up 0.4%, the S&P 500 rose 0.2%, and the Nasdaq closed down about 0.1%. To tell us more about the GDP and other economic data out today, I'm joined by WSJ economic correspondent Harriet Torry. Harriet, as the Commerce Department said today,

the US GDP shrank in the first quarter by 0.3%. What does that tell us about the health of the economy now? Well, the data is a little bit old at this point because it looks at the period from January, February, March. And of course, now we're almost in May. And April was a huge month because that was the month that we saw the Liberation Day announcement. Having said that, there was definitely some anxiety about tariffs in the first quarter as well because

tariffs were beginning to be introduced pretty much as soon as the Trump administration took office. How we saw this reflected in GDP was that there was a big surge in imports in the first quarter and that was a drag on growth. But if you look at the underlying measures of growth in the economy, when you strip out trade and inventories and government spending, which was also down because of the doge cuts, that stayed pretty stable. So consumer spending slowed, but people did continue to spend on services and on various other things. So it wasn't a dramatic weakening in underlying demand in the economy, but the headline number was of course very impacted by this

big increase in imports. At the same time, we are in a dramatically different environment in the second quarter. Let's talk about inflation. The Commerce Department also said today that the personal consumption expenditures price index, the Fed's preferred gauge of inflation, rose by 2.3%. That's still higher than the Fed's 2% target, but it's the coolest reading since last fall. Does it seem likely that inflation will stay this way? Inflation was very, very weak in March, which is of course a good thing after so many years of rising prices. And we saw that in the CPI report from the Labor Department as well as

this report out today from Commerce. But it's unlikely that given tariffs, that inflation is going to continue to cool as it has in recent months. That's because tariffs raise the cost of imported goods and that will inevitably impact pricing for consumers at some point down the line. So we didn't see any evidence in March of this happening. In fact, spending was pretty strong in March and inflation was very moderate. We saw a big jump in spending on vehicles because people were keen to purchase new cars ahead of potential tariffs on imports. And finally, let's move on to discuss hiring. The ADP National Employment Report showed that hiring in the U.S. private sector slowed markedly in April.

62,000 jobs were created this month, down from 147,000 in March. Economists had expected hiring to slow less sharply. This is data for April, so it comes after the GDP report. But the labor market is definitely being eyed very, very closely because weakness in hiring is, of course, very bad for the economy because when people lose their jobs, they lose their incomes, they stop spending and it ripples throughout the economy. So the ADP report was definitely weaker than expected, but all eyes at this point will be on the jobs report on Friday. That was WSJ Economic correspondent Harriet Torry. Thanks so much, Harriet.

Thank you. No one is feeling the impact of a hiring slowdown more than the class of 2025. Companies have retreated from plans to boost college graduate hiring this spring. The federal government is contracting, and consulting firms, a potential first employer for many college grads, are also retrenching. Personal finance reporter Oyin Adedoyin told our Your Money Briefing podcast why this job market reality isn't quite what soon-to-be grads were expecting. According to the data, it looks like employers were actually expected to hire more graduates

this year. There was a 7.3% increase that employers were projecting in the fall, but now employers are saying that they expect to hire the same number of graduates as they did last year. This is according to a spring survey of more than 200 employers by the National Association of Colleges and Employers. We're also seeing a similar trend with the federal government, which is a place that a lot of graduates see

as a stable place to start their careers. Hiring freezes brought on by the Trump administration has meant that certain entry-level jobs in the federal government are no longer an option. To hear more from the conversation with Oyin, check out tomorrow's episode of Your Money Briefing. Coming up, some U.S. companies are yanking their guidance for the next quarter. More on what that means for them and their investors after the break.

If only life had a remote control, you could pause or rewind. AutoMaker Stellantis suspended its full year guidance today, citing U.S. tariffs and the difficulty in predicting their potential impact on market volumes and the competitive landscape. It's the latest of a number of companies to do so, including General Motors, JetBlue, Snap, and Volvo. For more, I'm joined by WSJ reporter Chip Cutter. Chip, I just rattled off a few companies that have pulled their guidance. What do they have in common? Right now, they're all fairly worried and uncertain about where the economy goes and

what's ahead. And I think that's why you see so many CEOs of big companies either pulling their guidance or just saying that they feel really unclear right now. And it's a couple of things. One is the shape shifting nature of the Trump administration's tariff policies. There's also this lingering fear that all of this noise is going to lead consumers to pull back on demand. And so in this sort of environment, a number of executives just say, it doesn't make sense

for us to give numbers because we just have no idea what scenario is going to play out. What does the lack of forward guidance mean for these companies and for their investors? It's a real sign that we are in a different moment. So pulling guidance really frustrates investors because it can make it harder to evaluate companies. Certainly Wall Street wants these numbers to be able to set their own expectations. And all of this just shows the degree to which executives

are really frustrated right now because they just don't know what's happening next. The last time we saw companies really pull forecasts in a meaningful way was right at the start of the pandemic in 2020, where you just saw hundreds of companies withdraw their guidance. And so we're not exactly in that moment just yet, but there is certainly a feeling that it's just gotten harder and harder to predict what's ahead.

For the companies that are still offering guidance, how are they doing it amid all this uncertainty? The example of United Airlines is a really good one, where they've offered two different paths where they say, okay, if things go this way, here's our profit expectations. Here's our business expectations. If it goes another path, here's what we might expect. So you see this like A-B testing a forecast. And Carol Tomei, the CEO of UPS, said this week that the only thing we're certain of

is we don't know which if any of our scenarios will play out. That's a comment that resonates with lots of executives across different industries right now. That was WSJ reporter Chip Cutter. Thank you, Chip. Thanks as always. Microsoft logged double-digit revenue growth in its fiscal third quarter. All three of the company's main business units topped internal projections, led by a 21% revenue increase in its cloud business. Overall profit rose to about $26 billion, up from roughly $22 billion a year earlier. And Facebook parent Meta Platforms posted revenue growth in the first quarter and indicated

growth would remain steady in the current quarter, squashing concerns that President Trump's tariffs would harm its global digital ads business. The social media giant said its sales grew by 16 percent, to more than $42 billion, ahead of analysts' expectations. Its net income for the January to March period was $16.6 billion. In other news, Google CEO Sundar Pichai has urged a judge to reject the extraordinary measures proposed by the Justice Department to curtail the company's dominance in online search.

The government has proposed to force a sale of Google's Chrome browser and require that Google share user data like search histories with rivals. The testimony came during a trial before U.S US district judge Amit Mehta in Washington, who ruled last year that Google had an illegal monopoly over online search. The judge is now hearing arguments and testimony over what remedy he should impose to restore competition and has said that he plans to rule by August. A federal judge in Vermont has ordered the government to release Columbia University student Mohsen Madhawi while his case proceeds, saying the Trump administration was threatening

to deport legal residents for stating their political views. Madhawi, a green card holder, organized pro-Palestinian demonstrations at Columbia. Judge Jeffrey Crawford ordered Madhawi's release on the condition he returned for all court hearings. And Ukraine and the U.S. are expected to sign a deal for access to Ukrainian mineral wealth in the next 24 hours. That's according to Kyiv officials. Central to the agreement is an investment fund

that both Ukraine and the U.S. will contribute to and oversee equally. President Trump has portrayed the deal as a way for the U.S. to recoup tens of billions of dollars in military aid to Ukraine. But in what appears to be a major concession to Ukraine, the latest draft doesn't require Kyiv to repay past military aid. The U.S. will, however, be able to count new military aid as a contribution to the fund.

And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Bansi and Pierre Bienamé, with supervising producer Michael Kosmides. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.