Some metrics indicate that the underlying health of the economy is good, even as President Donald Trump’s trade wars are setting off alarms in markets, consumers, and economists. 

Despite the widespread anxiety about tariffs, inflation has been falling, layoffs remain extremely low, and consumers are spending freely — all good signs. 

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Those indicators stand in dramatic contrast to the recent turmoil in financial markets. Consumer sentiment, too, has dropped precipitously. Some business economists have warned that the United States is verging on a recession. 

Greg McBride, chief financial analyst at Bankrate, emphasized that it is likely that many of these economic datapoints — inflation, home sales, retail sales, jobless claims — might start to sour in the coming months as the effects of Trump’s tariff agenda and falling consumer sentiment filter through.

“I think in majority of cases, it’s a timing issue, that these are data points that are looking at the rear-view mirror,” McBride told the Washington Examiner.

Here’s what to know about the gauges that are still providing hope for the economy: 

Inflation

Inflation has trended down early in Trump’s tenure, after soaring during President Joe Biden’s term and ultimately dooming Democrats in the 2024 elections. 

The consumer price index fell to 2.4% in March. Core inflation — inflation stripping out volatile food and energy prices — fell to its lowest rate since 2021. 

Economists generally anticipate that the added tariffs will put upward pressure on prices. In March, the bulk of the Trump tariffs had not yet been applied. Still, so far, the signal from inflation data has been surprisingly positive. 

McBride pointed out that the Federal Reserve is bracing for higher prices in the coming months as the tariffs continue. He said the timing and particular goods subjected to higher tariffs determine whether those higher prices will filter through to inflation.

“Agricultural items, to the extent that those are being tariffed, that gets passed along to consumers much quicker because it’s a perishable item,” he said.

But it might take longer to see the effect on goods like cars. That’s because dealer lots are pretty full right now and it might be a few months before that inventory is depleted and has to be replaced by future shipments that are subject to tariffs, McBride explained. He said that could take a few months.

Layoffs

Layoffs remain extremely rare by historical standards, despite all of the consternation generated by the tariffs and the actions taken by the Department of Government Efficiency. 

The number of new claims for unemployment benefits reported by the Department of Labor provides a good proxy for the rate of layoffs. The statistics are reported weekly, so they represent a real-time gauge of the economy’s health. 

The labor market itself is a lagging indicator. So unemployment claims rising might also take some time to show up in the data if the economy starts slowing, McBride said.

“In times of uncertainty, and there’s plenty of it now, the first step companies take is to hold off on new hiring. The first step is not layoffs,” McBride said.

He said that while it is good layoffs are low, it doesn’t really help economists determine what is in store a couple of months from now for the labor market.

Consumer spending

Consumer spending so far has held up. That’s a bit of a surprise, as consumer sentiment has plunged in surveys. 

In March, retail sales rose 1.4%, faster than expected.

Other measures of consumer spending have also shown strength. 

Some of that may be due to people trying to make big purchases before tariffs kick in. Auto purchases, for example, surged in March. Still, the spending suggests that families are not yet too scared about their own financial situations to open their wallets. 

“And so, if anything, we may be seeing better retail sales in some areas as people buy ahead,” McBride said.

Meanwhile, sentiment is deteriorating. The University of Michigan Consumer Sentiment Index for April, released on Friday, found that year-ahead inflation expectations jumped from 5% last month to a concerning 6.5% this month. That is the highest reading since 1981, when the Great Inflation was finally winding down.

Consumer sentiment dropped 8.4% over the month, falling for the fourth straight month. Sentiment has fallen more than 32% over the past year, a worrying sign for economists.

The larger background is that the odds of recession appear to be rising.

JPMorgan analysts put the chance of a global recession at 60% over the coming year if the tariffs are sustained. That is up from 40% before Trump announced the tariffs. Goldman Sachs also recently increased its projected odds of a recession from 20% to 45%.

A monthly survey of more than 300 CEOs from industry group Chief Executive found that 63% of them forecasted a recession or other economic downturn in the next six months. That’s an increase from 48% in March who said the same.