Unadorned Notes: February 5-7, 2025
U.S. Job Growth Slows; Fed Signals Patience on Rate Cuts; Trump Delays Tariffs on Chinese Packages; Nippon Steel Drops US Steel Deal; U.S. Sanctions Iran Oil Network
Economics, Finance, and Business
U.S. Job Growth Slows: The U.S. economy added 143,000 jobs in January 2025, below economists’ expectations, as severe weather and uncertainty over President Donald Trump’s trade and immigration policies impacted hiring. Upward revisions to November and December 2024 figures painted a stronger labor market picture, while the unemployment rate fell to 4%, an eight-month low. Wage growth accelerated to 4.1% year-over-year, but economists noted that productivity gains could allow for higher pay without fueling inflation. Analysts anticipate job growth to slow further in 2025, as tariffs and labor supply constraints weigh on hiring.1
U.S. Jobless Claims Rise Slightly: U.S. initial jobless claims increased by 11,000 to 219,000 for the week ending February 1, 2025, signaling a gradual softening of the labor market. Layoffs remain low, but hiring has slowed, with U.S. employers announcing 6,089 new positions in January 2025, down 24% from December 2024. Worker productivity grew at a 1.2% annualized rate in the fourth quarter, while unit labor costs surged 3.0%, raising concerns about inflationary pressures.2
Federal Cuts Trigger Contractor Layoffs: Private-sector employers and nonprofits have begun layoffs following federal funding cuts and freezes enacted by the Trump administration, with several thousand jobs lost in the past two weeks. Government contractors, including Chemonics International and DAI Global, have furloughed or reduced hours for hundreds of employees due to halted USAID-funded projects. Economists estimate that each lost federal job could eliminate two additional jobs nationwide, with regions heavily dependent on government contracts, such as Washington, D.C., facing the most severe economic consequences.3
Fed Signals Patience on Rate Cuts: Federal Reserve officials indicated no urgency to cut interest rates, citing a stable labor market and persistent inflation. Fed Governor Adriana Kugler noted uncertainty over economic policies and the uneven progress in reducing inflation, which stood at 2.6% in December 2024, above the 2% target. Minneapolis Fed President Neel Kashkari emphasized a “wait and see” approach amid potential tariff and tax policy shifts, while Chicago Fed President Austan Goolsbee expects rates to be lower within 12–18 months. Market reactions saw stocks decline and traders adjusting rate-cut expectations, anticipating a single cut later in the year.4
U.S. Consumer Sentiment Declines: U.S. consumer sentiment fell to 67.8 in February 2025, the lowest level in seven months, as inflation expectations surged. The University of Michigan survey reported a sharp increase in one-year inflation expectations to 4.3%, the highest since November 2023. The decline in sentiment was broad-based across age, income, and political groups, with a significant drop in buying conditions for durable goods. Economists attribute the shift to concerns over President Donald Trump’s proposed tariffs and their potential impact on purchasing power.5
U.S. Sports Industry Expands: Household spending on spectator sports reached a record high in 2024, with the average American spending $1,122 annually on sports-related expenses. Live events continue to drive local economic growth, as seen during Super Bowl LVIII in Las Vegas, where visitor retail spending rose 8%. Streaming viewership is increasing, with households making streaming payments up 3.5% year-over-year in 2024. Major upcoming events, including Super Bowl LIX and the 2026 FIFA World Cup, are expected to sustain industry growth. Rising interest in women’s sports, alongside increasing discretionary spending by female consumers, is positioning women as a key demographic in the sector.6
U.S. Equity Funds Face Outflows: U.S. equity funds saw net outflows of $10.71 billion in the week ending February 5, 2025, marking the fourth outflow in five weeks amid investor concerns over new trade tariffs and weak technology earnings. Large-cap funds experienced the heaviest withdrawals at $6.44 billion, while small-, mid-, and multi-cap funds also saw declines. In contrast, sectoral funds attracted $1.2 billion, with financials and consumer discretionary sectors leading inflows. Bond funds remained strong for a fifth consecutive week, gaining $9.22 billion, while money market funds saw net inflows of $39.61 billion.7
Alphabet Shares Drop on AI Costs: Alphabet shares fell 8% after reporting slower-than-expected cloud revenue growth and announcing $75 billion in capital expenditures for AI and data centers. The company’s shift from a high-margin advertising model to a capital-intensive AI business has raised investor concerns about profitability. The spending plans, 29% above estimates, come amid rising competition from low-cost AI models and heightened scrutiny over Big Tech’s AI investments. Despite strong advertising revenue, Alphabet’s stock decline erased its year-to-date gains and pressured shares of cloud rival Amazon. Analysts lowered price targets, citing uncertainty over Google's ability to gain cloud market share and translate AI spending into long-term growth.8
Amazon Expands AI Investments Sharply: Amazon projected a significant rise in capital expenditures for 2025, estimating around $105 billion, a 35% increase from the previous year. This follows similar spending surges by Alphabet, Meta, and Microsoft, as Big Tech accelerates investments in AI and cloud infrastructure. Concerns over cost-efficient AI advancements from China’s DeepSeek led to market volatility, but Amazon dismissed fears that lower AI costs would reduce overall investment. Nvidia, impacted by the DeepSeek selloff, saw renewed optimism as analysts downplayed fears of a spending slowdown.9
Honeywell to Split Into Three: Honeywell announced plans to separate its Automation, Aerospace Technologies, and Advanced Materials businesses, creating three independent companies by the second half of 2026. The decision follows a strategic review aimed at enhancing operational focus and shareholder value. Honeywell Automation will focus on AI-driven industrial and building solutions, while Honeywell Aerospace, with $15 billion in 2024 revenue, will become one of the largest publicly traded aerospace suppliers. The Advanced Materials business will continue manufacturing specialty chemicals with a sustainability focus and a flexible capital strategy. CEO Vimal Kapur stated that the restructuring positions each entity for innovation, growth, and long-term success.10
BlackRock Expands India Operations: BlackRock plans to hire nearly 1,200 employees to expand its support hubs in Mumbai and Gurugram, increasing its workforce in India to approximately 4,700. The expansion aims to enhance the firm’s artificial intelligence capabilities and strengthen its engineering and data expertise. Additionally, BlackRock will inherit a global capabilities center in Bengaluru through its planned acquisition of data provider Preqin. The move underscores the asset manager’s growing focus on India as a key technology and operations hub.11
Gold Prices Expected to Rise: Leading banks forecast gold prices to remain elevated in 2025, with some predicting a rise to $3,000 per ounce due to geopolitical uncertainties and trade tensions. Citi raised its near-term target to $3,000, citing increased demand from central banks and investors seeking a hedge against economic risks. Global gold demand reached a record 4,974.5 metric tons in 2024, driven by higher investment and central bank purchases. Analysts note that future price trends will depend on fiscal policies, tariff developments, and global economic conditions.12
U.S. Politics, Policies, and Geopolitics
Trump Bans Trans in Women’s Sports: U.S. President Donald Trump signed an executive order barring transgender women from competing in female sports categories, citing fairness and safety concerns. The order directs the Department of Education to investigate schools’ compliance with Title IX and threatens funding cuts for violations. Trump also announced plans to prevent transgender athletes from competing in U.S.-hosted International Olympic Committee events, including the 2028 Los Angeles Olympics. The policy has drawn support from Republicans and some sports organizations. Human Rights Campaign president Kelley Robinson criticized the order, warning it could lead to harassment and exclusion of transgender youth in sports.13
Bessent Backs Strong Dollar Policy: U.S. Treasury Secretary Scott Bessent affirmed support for a strong dollar and stated there are no imminent changes to debt-issuance plans. Despite President Donald Trump’s past concerns about the currency’s strength, Bessent emphasized stability in financial markets and warned against foreign currency manipulation. The dollar remains elevated amid expectations that Trump’s tax and tariff policies will drive inflation and sustain high interest rates. Treasury yields rose slightly following Bessent’s remarks, while long-term borrowing sentiment improved after the department’s quarterly supply announcement. Bessent, who previously criticized former Treasury Secretary Janet Yellen’s debt strategy, acknowledged that borrowing levels are now declining.14
Judge Halts Federal Worker Buyouts: A U.S. judge temporarily blocked the Trump administration’s federal worker buyout program, delaying a plan that has already seen 60,000 employees accept voluntary departures. The buyout, offering pay through October 2025, is part of Trump’s broader effort to reduce the federal workforce, but concerns remain over funding beyond March 14, 2025. Labor unions and Democratic officials have challenged the initiative, arguing it violates worker rights and raises privacy concerns, particularly over Elon Musk’s involvement in reviewing personnel records. The administration has warned of potential job cuts for those declining the offer and ordered agencies to identify underperforming employees for dismissal. The White House maintains the initiative aligns with Trump’s campaign promise to streamline government operations and cut spending.15
Judge Halts USAID Worker Leave: A federal judge temporarily blocked the Trump administration from placing over 2,000 USAID employees on paid leave, delaying efforts to downsize the agency. The ruling follows a lawsuit by employee groups arguing that the move was unconstitutional and threatened U.S. humanitarian programs and national security. The administration’s broader effort, led by Elon Musk’s Department of Government Efficiency (DOGE), aims to restructure federal agencies and cut foreign aid spending. Confusion has surrounded the rollout, with workers uncertain about job security, relocation policies, and funding for aid programs. The White House and USAID have not issued clear guidance on how the freeze will affect global operations.16
Judge Shields FBI Agents’ Identities: A federal judge barred the Trump administration from publicly naming FBI agents involved in Jan. 6 investigations, citing safety concerns. The ruling follows lawsuits from agents who fear retaliation after the Justice Department ordered a review of personnel linked to the cases. The administration’s inquiry, part of Trump’s efforts to overhaul federal agencies, has sparked anxiety within the FBI, with officials urging staff to protect their online presence. Concerns escalated after Elon Musk’s Department of Government Efficiency (DOGE) gained access to other government data, raising fears of unauthorized disclosures. The court order remains in effect while legal challenges proceed.17
Judge Limits DOGE Treasury Access: A federal judge temporarily restricted staff from Elon Musk’s Department of Government Efficiency (DOGE) from accessing Treasury Department payment records amid legal challenges over privacy concerns. The lawsuit, filed by unions and retirees, argues that granting DOGE access to sensitive financial data violates federal privacy laws. The Justice Department denied claims that personal information was being shared outside Treasury but acknowledged that two DOGE appointees have limited “read-only” access. Critics, including Democratic lawmakers, accuse Musk of wielding excessive influence in reshaping government operations without oversight. The judge’s order remains in effect until a February 24 hearing on a preliminary injunction.18
Trump Delays Tariffs on Chinese Packages: U.S. President Donald Trump suspended tariffs on low-value packages from China after logistical issues disrupted postal services and e-commerce shipments. The initial order, part of broader 10% tariffs on Chinese goods, aimed to eliminate the “de minimis” exemption that allows duty-free imports under $800. The reversal followed industry pushback and a meeting with FedEx founder Fred Smith, as shipping carriers faced major disruptions. Trump stated the exemption would remain until systems are developed to efficiently process tariffs on small shipments. The decision comes amid broader trade tensions, with Trump planning new “reciprocal tariffs” on multiple countries.19
Nippon Steel Drops US Steel Deal: President Donald Trump announced that Nippon Steel abandoned its $15 billion acquisition of US Steel but plans to invest in the company instead. The United Steelworkers union remains opposed to Nippon’s involvement, citing concerns over past trade practices. While details of the investment remain unclear, negotiations may result in an agreement similar to the original deal, allowing US Steel to retain its name. Trump also reiterated his intention to impose tariffs on Japanese exports if the U.S. trade deficit with Japan is not reduced. Additionally, he confirmed plans to introduce “reciprocal tariffs” on multiple countries next week.20
EU Seeks Trade Deal With U.S.: The European Union plans to reduce tariffs on U.S. car imports, lowering its 10% rate closer to the U.S. 2.5% tariff, to prevent a trade war with President Donald Trump. The proposal includes increased EU purchases of American liquefied natural gas and military equipment to address trade imbalances Trump has criticized. EU officials believe key car-producing nations, including Germany, will support the move, while automakers like BMW and Mercedes have advocated for lower tariffs. If negotiations fail, the EU may use its new anti-coercion instrument to impose retaliatory measures on U.S. tech and financial firms. The European Commission is also preparing potential countermeasures, including suspending intellectual property rights and imposing duties on digital services.21
Trump Sanctions ICC Over Israel: President Donald Trump signed an executive order imposing sanctions on the International Criminal Court (ICC) over its arrest warrant for Israeli Prime Minister Benjamin Netanyahu. The order accuses the ICC of overreach and threatens sanctions against officials involved, including asset freezes and travel bans. Human rights groups criticized the move, arguing it undermines global accountability and could restrict investigations into war crimes. The U.S., like Israel, does not recognize the ICC and has long opposed its jurisdiction over non-member states. European nations, including the Netherlands, have opposed the sanctions, urging support for the court’s mandate.22
U.S. Sanctions Iran Oil Network: The U.S. Treasury imposed sanctions on an international network accused of shipping Iranian oil to China to fund Tehran’s military operations. The sanctions target Iran’s Armed Forces General Staff and Sepehr Energy Jahan Nama Pars for facilitating crude oil sales worth hundreds of millions of dollars. Treasury Secretary Scott Bessent stated that Iran uses oil revenue to support its nuclear program, ballistic missile production, and regional proxy groups. The sanctions align with President Donald Trump’s reinstated maximum pressure campaign, aimed at reducing Iran’s oil exports to zero. The White House has directed all government departments to design further sanctions targeting Iran’s nuclear and financial activities.23