Unadorned Notes: May 30 – June 5, 2025

Jobless Claims Rise, Trade Deficit Narrows; China Factory Activity Contracts; India GDP Beats Expectations; CBO Flags $2.4T Deficit Spike; Trump Expands Mineral Emergency Powers

Economics, Finance, and Business

Labor Market Shows Early Strain: U.S. job openings rose by 191,000 to 7.391 million in April 2025, but layoffs posted their sharpest increase in nine months, suggesting growing labor market fragility. The quits rate declined to 2.0%, the steepest monthly drop since November 2024, reflecting reduced worker confidence amid ongoing trade policy uncertainty. Hiring improved modestly, with gains in construction and hospitality, though economists cautioned the uptick is likely temporary. Layoffs climbed to 1.786 million, largely in small and medium-sized businesses, despite remaining low by historical standards. The uneven implementation of tariffs and legal disputes over their legitimacy have compounded planning difficulties for employers, contributing to a climate of economic caution.¹

Jobless Claims Rise, Trade Deficit Narrows: Initial U.S. unemployment claims rose to 247,000 for the week ending May 31, 2025, reaching a seven-month high and indicating emerging labor market weakness. Economists attributed the increase partly to seasonal adjustment issues, but also to trade policy uncertainty, which has led to cautious hiring and layoffs in auto and manufacturing sectors. The Federal Reserve’s Beige Book and ISM surveys both noted reduced labor demand, hiring pauses, and heightened scrutiny of new positions. Despite labor market softening, the U.S. trade deficit narrowed sharply in April, driven by a record drop in imports and a rise in exports, potentially boosting second-quarter GDP growth. The goods trade deficit fell 46.2% to $87.4 billion, while exports hit a record $289.4 billion, led by gains in industrial materials and capital goods.²

Consumer Spending Slows, Savings Rise: U.S. consumer spending increased by 0.2% in April 2025, driven primarily by services such as housing and healthcare, while spending on goods declined amid growing economic uncertainty. Personal income rose 0.8%, contributing to a rise in the saving rate to 4.9%, the highest level in a year. Core inflation, measured by the Personal Consumption Expenditures (PCE) Price Index excluding food and energy, rose 2.5% year-over-year, the smallest increase since March 2021. Goods imports declined sharply, reducing the goods trade deficit by 46.0% to $87.6 billion, potentially boosting GDP in the second quarter following a first-quarter contraction of 0.2%. Despite subdued inflation in April, economists anticipate price pressures will mount later in the year as businesses pass on higher costs from recently imposed tariffs.³

Home Sellers Outpace Buyers Sharply: The U.S. housing market has 33.7% more home sellers than buyers, the widest gap since Redfin began tracking in 2013. Elevated mortgage rates and high prices have sidelined many buyers, particularly first-time purchasers, amid broader economic uncertainty. The national median home price reached $417,000 in early 2025, up 33% from the same period in 2019, far exceeding income growth and inflation. Home prices declined in 11 of the 50 largest metro areas through late April 2025, with Redfin projecting a modest 1% national price decline by year-end. The market is increasingly favoring buyers, though many sellers remain reluctant to adjust price expectations.⁴

OECD Slashes U.S. Growth Outlook: The Organisation for Economic Co-operation and Development (OECD) revised its 2025 U.S. GDP growth forecast downward to 1.6%, citing trade-related uncertainty, elevated inflation risks, and declining investment. The downgrade follows an earlier projection of 2.2% growth and coincides with broader global revisions, particularly in North America. U.S. inflation is now expected to reach 3.2% in 2025, with a potential rise toward 4% by year-end, diverging from a slight downward revision in the G20 average. The U.S. dollar index has fallen 8.4% year-to-date, the steepest drop on record, as foreign investors reduce exposure to long-term Treasuries amid rising hedging costs and fiscal concerns. The OECD noted that while technological advances such as AI may boost productivity, persistent trade barriers and uncertainty continue to constrain global economic momentum.⁵

China Factory Activity Contracts: China’s Caixin manufacturing PMI fell to 48.3 in May 2025, signaling the first contraction in eight months and the weakest reading since July 2023, as new export orders declined sharply amid escalating U.S. tariffs. The downturn was concentrated among small and medium-sized enterprises, with employment in the sector falling at the fastest pace this year and output contracting for the first time since October 2023. Official data showed a milder slowdown, but private firms continued to face tighter margins, registering a 3.59% profit rate compared to 6.59% for foreign-invested firms. Rising logistics costs and tariff burdens pushed export prices higher, even as domestic competition suppressed output prices for the sixth consecutive month. In response to trade tensions, Beijing tightened export controls on critical minerals, while broader economic weakness persisted due to real estate sector drag and a 14% year-to-date drop in oil imports from Russia.⁶

India GDP Beats Expectations: India’s GDP grew by 7.4% in Q4 FY25, bringing full-year growth to 6.5%, driven by strong performance in construction, services, and manufacturing sectors. Gross Fixed Capital Formation rose 9.4%, supported by government capital expenditure and firm-level inventory strategies ahead of anticipated tariff impacts. Rural demand remained robust due to favorable agricultural output and easing food inflation, while urban consumption continued to lag amid subdued wage growth. Despite a 4% contraction in central government capex during January–February, momentum from prior quarters sustained construction activity. Analysts project FY26 growth between 6.2% and 6.5%, as continued inflation moderation and monetary easing are expected to support demand amid global economic uncertainty.⁷

Meta Commits to Nuclear Energy: Meta has signed a 20-year agreement with Constellation Energy to purchase 1.1 gigawatts of nuclear power from the Clinton Clean Energy Center in Illinois, beginning in June 2027. The deal secures the plant’s continued operation and relicensing following the expiration of its zero-emissions credit, and includes a planned 30-megawatt output expansion. While the power will feed the regional grid, the agreement supports Meta’s goal of sourcing 100% clean electricity for its AI-driven data infrastructure. This marks Meta’s first direct investment in nuclear energy and aligns with broader tech sector moves toward long-term nuclear partnerships, including efforts by Microsoft, Google, and Amazon. The announcement follows recent U.S. policy shifts under President Donald Trump, including executive orders to quadruple nuclear output by 2050 and accelerate small modular reactor deployment.⁸

Fed Lifts Wells Fargo Cap: The U.S. Federal Reserve has lifted its 2018 asset cap on Wells Fargo, allowing the bank to exceed the $1.95 trillion limit imposed following the fake-accounts scandal. The decision marks a significant regulatory milestone and reflects progress under CEO Charlie Scharf, who has overseen the resolution of numerous consent orders since 2019. Shares of Wells Fargo rose over 2% to $77.43, their highest since March 2023, and have gained more than 10% year-to-date. With the cap removed, the bank is expected to prioritize expansion in credit cards, investment banking, and wholesale markets. Analysts anticipate a moderate near-term stock upside, with the firm also seen as well positioned for the upcoming Federal Reserve stress test.⁹

U.S. Politics, Policies, and Geopolitics

CBO Flags $2.4T Deficit Spike: The Congressional Budget Office estimated that President Donald Trump’s One Big Beautiful Bill Act would increase the federal deficit by approximately $2.4 trillion over the next decade, largely due to extended tax cuts reducing revenue by $3.7 trillion. Although the bill includes over $1.5 trillion in spending cuts, increased defense and border funding offsets part of the savings. Additional debt service costs could push the total deficit impact above $3 trillion, according to projections from the Committee for a Responsible Federal Budget. The legislation faces opposition in the Senate, with both Republican fiscal conservatives and Democrats criticizing provisions related to Medicaid and the debt ceiling. The U.S. debt-to-GDP ratio could rise to 125% by 2034, as interest payments threaten to exceed 25% of federal revenues, prompting bond market volatility and a shift away from long-duration Treasuries by major asset managers.¹⁰

Social Security Claims Surge: Social Security retirement claims are projected to rise 15% year-over-year in 2025, driven by the newly enacted Social Security Fairness Act and public concern over potential program changes. The law expands benefits to around 3 million state and local government workers previously excluded or undercompensated, contributing to a temporary spike in payments and overall personal income. High-income individuals are increasingly applying early, reflecting anxiety over administrative changes and political rhetoric surrounding the program. The Social Security Administration has prioritized processing claims, reducing the pending backlog by nearly 13% in two weeks. The expansion is estimated to cost $200 billion over a decade, raising concerns about the acceleration of trust fund depletion amid broader fiscal pressures.¹¹

Trump Reinstates Travel Ban: President Donald Trump announced a new travel ban targeting citizens from 12 countries and imposing restrictions on seven others, citing national security concerns and visa overstay rates. The proclamation, effective June 9, 2025, follows an executive order directing agencies to assess risks posed by travelers from nations with “hostile attitudes” or weak vetting systems. Notable inclusions are Afghanistan, Haiti, and the Republic of Congo, with exceptions for Special Immigrant Visa holders from Afghanistan. The move echoes Trump’s 2017 travel ban, which faced legal challenges but was ultimately upheld by the Supreme Court in 2018.¹²

Trump Suspends Harvard Student Visas: President Donald Trump signed a proclamation suspending international student visas for new enrollees at Harvard University, citing national security concerns and alleged administrative deficiencies. The order, effective for six months, also directs review and potential revocation of existing F, M, and J visas for current students meeting unspecified criteria. The administration accuses Harvard of failing to cooperate with federal data requests, inadequately addressing campus antisemitism, and prioritizing diversity, equity, and inclusion policies. The move follows a federal court order blocking previous attempts to revoke Harvard’s SEVP certification, and comes amid broader efforts to restrict funding and accreditation for elite universities.¹³

QZ’s Comment: Legacy elite universities, especially Harvard, have become de facto opposition institutions to the Trump administration. Their open resistance to compliance on both security and culture matters makes them high-leverage, politically optimal targets for escalation.

Supreme Court Unifies Bias Rules: The U.S. Supreme Court unanimously ruled in favor of Marlean Ames, an Ohio woman who alleged workplace discrimination based on her sexual orientation as a straight person. The Court struck down a legal standard used by the Sixth Circuit that imposed a higher burden of proof on majority-group plaintiffs, such as heterosexuals, whites, and men. Writing for the Court, Justice Ketanji Brown Jackson stated that Title VII of the Civil Rights Act of 1964 does not permit different standards based on group status. Ames had claimed she was passed over for promotion and later demoted in favor of LGBTQ+ colleagues at the Ohio Department of Youth Services. The ruling returns the case to the lower court, allowing Ames to proceed under the uniform standard applied to all discrimination claims.¹⁴

Trump Tariffs Here to Stay: Despite a court ruling that President Donald Trump overstepped his authority in imposing certain tariffs, administration officials have outlined multiple legal alternatives to maintain or reimpose them. Potential avenues include Section 232 of the Trade Expansion Act for sectoral tariffs on national security grounds, and Section 301 of the Trade Act of 1974 for retaliatory tariffs against unfair foreign trade practices. The administration is also considering Section 122 for short-term tariffs to address trade deficits, though its 150-day limit is viewed as restrictive. Trump’s team has initiated investigations into sectors such as critical minerals, pharmaceuticals, and semiconductors under these statutes. Officials emphasize that tariffs remain central to the administration’s ongoing bilateral trade negotiations, with alternative legal tools ready if emergency-based tariffs are struck down.¹⁵

China Tightens Rare Earth Exports: China has imposed export restrictions on seven rare earth elements critical to defense, energy, and automotive industries, intensifying strain on U.S. supply chains. The move, seen as retaliation for recent U.S. tariff hikes, adds to previous bans on gallium, germanium, and antimony, which are essential for semiconductors and military applications. China currently mines 70% and processes 90% of the world’s rare earth elements, leaving the U.S. heavily dependent despite over $400 million in Pentagon-backed domestic investment since 2020. The restrictions have disrupted production for U.S. and European firms, while escalating pressure in stalled U.S.-China trade talks.¹⁶

Trump, Xi Revive Trade Talks: U.S. President Donald Trump and Chinese leader Xi Jinping held a 90-minute phone call Thursday focused on resolving the ongoing trade war. Both sides agreed to resume negotiations, with top U.S. officials—including Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer—set to lead the American delegation. The discussion followed renewed tensions over Beijing’s delayed export approvals of rare earth minerals and U.S. export controls targeting Chinese semiconductors. China criticized recent U.S. visa restrictions on its students and accused Washington of undermining prior trade progress. Despite the sharp tariff escalations—reaching 145% on Chinese imports and 125% on U.S. goods—May’s Geneva talks marked a tentative thaw, which Thursday’s call appeared to reinforce.¹⁷

Trump Expands Mineral Emergency Powers: President Donald Trump is preparing to invoke emergency provisions under the Defense Production Act to accelerate domestic production of critical minerals, according to a document obtained by Reuters. The move would waive key legal requirements, including congressional funding approvals for projects exceeding $50 million and strict delivery deadlines. This action follows China’s recent suspension of critical mineral exports, which has disrupted global supply chains and intensified U.S. efforts to reduce dependence on Chinese resources. Trump previously invoked the Act in March to support the domestic mineral supply chain vital for advanced technology and defense systems. Experts note the U.S. remains strategically exposed in the near term, despite ongoing investments aimed at long-term independence.¹⁸

Trump Reacts to Ukraine Strike: President Donald Trump privately praised Ukraine’s recent drone strike on Russian airbases as “strong” and “badass”, though he expressed concern it could derail his ceasefire efforts. The operation, which reportedly destroyed up to 41 Russian aircraft, marked a significant escalation and targeted assets central to Russia’s nuclear deterrent. Trump stated that Russian President Vladimir Putin warned of impending retaliation, casting doubt on the viability of further peace talks. Ukrainian President Volodymyr Zelensky accused Putin of avoiding diplomacy and continuing aggressive military actions despite international calls for de-escalation. The strike has prompted NATO and Western defense firms to reassess air defense strategies, emphasizing expanded C5ISR capabilities and counter-drone technologies.¹⁹

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1. US labor market easing in the face of tariff uncertainty | Reuters

2. Weekly jobless claims at seven-month high; trade deficit posts record contraction | Reuters

3. US consumers pulling back spending; inflation slowing for now | Reuters

4. It's a homebuyer's market — if you can afford one (axios.com)

5. U.S. growth forecast cut further by OECD as Trump tariffs sour outlook (cnbc.com)

6. China's factory activity cools in May as US tariffs hit | Reuters

7. India GDP data Q4 FY25 Highlights: GDP growth accelerates to 7.4% in Q4, full year growth at 6.5%; Indian economy retains 'fastest growing' tag - The Times of India

8. Meta signs nuclear power deal with Constellation Energy (cnbc.com)

9. Wells Fargo shares hit three-month high as Fed ends growth freeze | Reuters

10. Trump's 'big beautiful' bill adds $2.4T to deficit, CBO concludes (nypost.com)

11. Social Security: Trump cuts spur more applications this year (axios.com)

12. Trump announces travel ban and restrictions on 19 countries | AP News

13. Trump signs proclamation to suspend visas for new Harvard international students | CNN

14. Supreme Court sides with straight Ohio woman who claimed workplace discrimination : NPR

15. 122, 232, 301, 338: The numbers key to Trump’s tariff revival | CNN Business

16. What to know about rare earth minerals in the China-U.S. trade dispute (axios.com)

17. Trump Xi call: U.S. China trade talks coming (cnbc.com)

18. Exclusive: Trump set to waive some legal requirements to boost critical minerals | Reuters

19. Trump admired Ukraine's "badass" drone attack inside Russia (axios.com)