Mixed economic data persists with solid jobs data but an air pocket in auto sales

Trend watch

Weekly air passenger counts fell 1.3% to 17.9 million. It’s fairly typical for air passenger counts to be flat-to-down in early June. Thereafter, U.S. air traffic should continue to steadily climb through roughly the week of Independence Day. Nonetheless, it’s now lagging the year-to-date pace from 2024 by 0.5%.

The recent lull in freight imports during April and May has dinged rail volumes, which decreased for five consecutive weeks through May 31. (slide 6). That’s the longest weekly decline streak in total rail volumes since the lockdown months in March and April 2020. Prior to that, it’s only happened once in the past 15 years (in October 2015). This time it appears to be related to auto tariffs as rail carloads of motor vehicles dropped 11.1% in May and 12.0% in April. 

Our take

The U.S. economy has remained remarkably resilient – even in the face of tariff announcements and massive policy uncertainty. The latter is likely to get further complicated by the packed summer Congressional agenda, which is wrestling with the so-called “One Big Beautiful” tax bill, the debt ceiling, and funding appropriations for the next fiscal year, among other issues.

Furthermore, the economy’s resilience is even more stark considering the stubbornly grim consumer sentiment. The answer to “how are consumers doing it?” is clearly the result of continued wage and income growth. Additionally, prices largely haven’t reflected the tariff increases as many have been paused and rolled back. We anticipate that will change in the next couple of months as increased tariffs begin to bleed into prices.

Alas, the disorienting on-again/off-again nature of trade policy reinforces the notion that companies should stay in “wait & see” mode, which isn’t pro-growth for the economy or their business. Conversely, it likely doesn’t connote doom and gloom. Instead, we believe it translates into a “muddle-through” environment—where growth is slowing but not stalling. It also keeps the Federal Reserve (Fed) in a holding pattern for several more months.

Bottom line

We remain in a “muddle-through” environment—where growth is slowing but not stalling—and expect the Fed to stay in “wait & see” mode for now. We also anticipate U.S. economic data will continue to jostle about due to tariffs—replete with air pockets as demand normalizes following accelerated purchases in the early spring when consumers and businesses attempted to front run tariffs.