Escalating trade tensions and market volatility triggered by President Donald Trump’s sweeping new tariffs have cast a shadow over the U.S. economic outlook, despite recent signs of strength in the labor market, according to a new report from the California Association of Realtors (CAR).
Last Wednesday’s tariff announcement — a 10% across-the-board tax on imports from nearly 90 countries, with elevated levies for certain nations — sent shockwaves through global markets. Though Trump called for a temporary “pause” in the broad application of tariffs, that move came with an increase in tariffs specifically targeting Chinese goods, prompting retaliatory measures from China and rattling investor confidence.
Federal Reserve Chair Jerome Powell, in his first public comments since the tariff rollout, cautioned that the economic fallout from such measures could be more severe than previously expected. He also warned that high inflation may persist, raising concerns about a cooling economy.
Markets reacted swiftly. Stock indices fell sharply, while bond market volatility surged. Mortgage rates, which had dropped late last week in response to the market instability, quickly rebounded by Monday. Economists and investors are now increasingly pricing in the possibility of a U.S. recession within the next year, with CAR noting a sharp rise in economic anxiety among consumers.
The labor market, however, offered a brief counterweight to the gloom. As CAR reported, the March jobs report showed U.S. employers added 228,000 nonfarm payroll jobs, outperforming expectations and marking the strongest monthly gain of 2025. February’s numbers were revised to 117,000, and the 12-month average now sits at 158,000.
Despite the strong hiring, the unemployment rate ticked up slightly from 4.1% to 4.2%. Federal government layoffs played only a minor role in the employment figures, though further reductions in public-sector jobs are anticipated in the coming months. Still, CAR cautioned that the employment data may now feel “backward-looking” given the rapid economic shift caused by the tariff developments.
Housing sentiment, a closely watched consumer confidence indicator, has suffered significantly in response to the trade uncertainty. The Fannie Mae Home Purchase Sentiment Index declined for the second straight month in March, hitting its lowest point since December 2023. The report attributes the drop to rising fears about job security and personal finances, with 32% of employed consumers expressing concern about losing their jobs — a record high in the survey’s history.
Additionally, 27% of respondents said they expect their financial situation to worsen over the next year, the highest level since July 2022. Sentiment around homebuying also dipped, with only 22% saying it’s a good time to buy a home — down from 24% in February.
Rising expectations for higher mortgage rates are also playing a role. The share of consumers who believe rates will increase in the next 12 months rose to 35%, the highest since late 2023.
As recession worries mount and trade policy uncertainty lingers, CAR reported a deepening sense of caution among consumers — a trend that could weigh heavily on housing demand in the months to come.
