The tariff issue has been front and center this week with commentary in almost any online or print publication available. Yet, no one is any clearer on what has or will happen. After postponing 25% tariffs on goods from Canada and Mexico for a month, the tariffs took effect on March 3. Within three days, the tariffs on auto products were given a 30-day reprieve while all products covered under the rules of the USMCA agreement would now be exempt. Corporate CEOs, economists, Wall Street investors and perhaps the general public are confused and anxious about what the back and forth politics mean. Wall Street’s reaction has been extreme–the S&P 500 index had its worst day this year and Treasury yields plummeted 10 basis points, to the lowest levels since October. The two-year Treasury note broke through 4% for the first time in five months. The futures market is forecasting multiple rate cuts, sooner rather than later. The tariff is not over, either for implementation or retaliation. The effect as of now, however, is a volatile financial market and growing concern for the U.S. economy. The ‘R’ word has come back this week and the Atlanta Fed GDPNow index is forecasting first quarter GDP to fall over 2%.

KEY INDICATORS THIS WEEK

Institute for Supply Management (ISM) – Activity in the manufacturing and services sectors was a tale of two economies. The only factor the two sectors had in common was higher prices; not a similarity anyone wants these days. Manufacturing orders fell into contraction territory for the first time since October as ISM survey respondents cited uncertainty over tariffs and business continuity for slower activity. The services sector, on the other hand, reported its eighth month of expansion with new orders and employment improving. Fourteen industries, including finance and insurance, reported growth.

Jobs – The U.S. added 151,000 jobs in February versus an estimated gain of 160,000. Not too bad in a big picture sense. The concern, however, is the 18,000 downward revision for February and the increase in the unemployment rate to 4.1%. The rise in the unemployment rate, which is calculated from a separate household survey, reflected a loss of 600,000 jobs, mostly Hispanic people and those without a high school diploma. Most of the jobs added were in health care, financial services and transportation activities. The government lost 10,000 jobs. The Labor Department’s data collection was done mid-month before most of the government layoffs occurred. Coupled with a decline in labor participation and an increase in the underemployment rate last month, the uncertainty of what lies ahead for jobs is increasing. Employers are likely to remain hesitant to hire or expand activity until the chaos over tariffs quiets down.