by Louis Navellier
May 6, 2025
Last Friday, the Labor Department announced that 177,000 payroll jobs were created in April, much more than the economists’ consensus estimate of 133,000 – and the market soared on this positive news – but these initial job totals are always guesswork, subject to wide revisions in future months. For instance, in last Friday’s report, the February and March payrolls were revised lower by a cumulative 58,000 jobs!
Also, the federal workforce declined by only 9,000 jobs in April, despite all the announced DOGE cuts, so we are not really cutting federal spending by significant amounts yet. The unemployment rate also remains unchanged at 4.2%. Average hourly earnings rose only 0.2% (6 cents) to $36.06 per hour in April and have risen 3.8% in the past year. The lack of any big wage inflation should reduce any inflation fears.
The other economic news released last week was mostly negative, including the other major employment survey. ADP reported on Wednesday that only 62,000 private payroll jobs were created in April. This was below the economists’ expectation of 120,000 jobs and the smallest monthly increase since July 2024.
Earlier, the Commerce Department reported on Tuesday that the trade deficit soared 9.6% in March to $162 billion, so there have now been three consecutive months of dumping of goods in America to try to beat tariffs. Wholesale inventories have risen 0.5% in the past two months, so as inventories build, their prices will most likely be discounted to move goods, which is deflationary. The soaring trade deficit, plus large gold shipments to America, have now pushed the first-quarter GDP estimate into negative territory.
Reflecting these one-time-only trade swings, the Commerce Department announced on Wednesday that its preliminary estimate for first-quarter GDP was an annual contraction of -0.3%, since the soaring trade deficit subtracted a whopping 4.8% from GDP calculations. Imports surged at a 41.3% annual pace in the quarter. A surge in inventories added 2.3% to the first-quarter GDP calculations, but consumer spending rose at a healthy 1.8% annual pace in the quarter, which was stronger than economists had fore-casted.
The Conference Board announced on Tuesday that its consumer confidence index for April plunged to 86, down almost 8 points from 93.9 in March. The “present situations” component slipped to 133.5 in April, down from 134.4 in March, while the expectations component plunged 12.5 points to 54.4 in April, from 66.9 in March. It is now at its lowest level since October 2011. This is the fifth consecutive decline in consumer confidence and frankly bodes poorly for the economy, due mostly to the sagging expectations component, so if the Fed is looking for reasons to cut key interest rates, this is one of the main reasons.
The Institute of Supply Management (ISM) on Thursday reported that its manufacturing index in April declined to 48.7 in April, down from 49 in March in the second straight monthly decline in that index after being above 50 (signaling an expansion) in January and February. The supplier delivery component slowed to 55.2 in April, down from 56.9 in March. The new exports component plunged to 43.1 in April, down from 49.6 in March, signaling that the chaos associated with tariffs may be impacting U.S. exports.
The ISM manufacturing index is at its lowest level since November, so I say the Fed must cut key interest rates to stimulate manufacturing orders, or else risk more criticism on Truth Social for being “too late.”
The U.S. Tariff Wars with China are Melting Away – But Not Fast Enough
After meeting with executives from many of our leading retailers, the President now knows he must try to avoid seeing “empty shelves” in stores, since that would be a powerful image his opposition could use against him, so do not be surprised if the President calls an audible and adjusts tariffs on Chinese goods.
Bloomberg reported that China has started to exempt some U.S. goods from tariffs, amounting to about $40 billion in imports, in what looks like an effort to soften the blow of the trade war on China. The list of exempted U.S. products covers 131 items, like pharmaceuticals and industrial chemicals, so the good news is that there is apparently a “thaw” beginning in the trade dispute between China and the U.S.
China’s National Bureau of Statistics on Wednesday announced that its purchasing managers index (PMI) declined to 49 in April, down from 50.5 in March. This is the worst monthly PMI contraction in China since December 2023, and worse than economists expected. Clearly the 145% tariffs on Chinese products are adversely impacting China’s economy. The National Bureau of Statistics said there are “no winners in trade wars.” Also, the Chinese yuan remains weak, and devaluation rumors persist. This game of chicken that China and the U.S. are having will have no winners, so I expect China’s PMI to remain under 50.
President Trump is now promising sweeping income tax cuts for people making less than $200,000 per year. On Truth Social, he said, “When Tariffs cut in, many people’s income taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year.”
The possibility of trade wars and continuing tariff uncertainties is also impacting earnings announcement season. Many companies are suspending guidance due to economic uncertainty. This lack of guidance is not a positive development, as it causes a wide dispersion of analyst estimates – much wider than normal.
I should add that when President Trump was in Michigan last Tuesday to celebrate his first 100 days, he lowered the reciprocal tariffs on non-U.S. content to 15% and delayed the 25% tariff hit for a year. Essentially, President Trump gave domestic auto manufacturers time to onshore operations in America.
One other interesting development is that VW Group (which includes Audi, Bentley, Lamborghini and Porsche) appears to be waiting for the EU to negotiate a more favorable deal before passing the 25% tariffs on its foreign-made vehicles, which was scheduled to begin last Saturday, May 3rd. VW Group is now Europe’s EV sales leader after its first quarter EV sales surged 113% in Europe and 51% in the U.S.
Overall, VW’s first quarter sales rose 1.4% to 2.13 million. However, VW’s earnings declined by 40.6% because EV sales are less profitable than vehicles with internal combustion engines (ICEs). Since the European Union (EU) is mandating that all vehicles be electric by 2035, VW should seriously consider moving its ICE operations to America to boost its profitability, since the U.S. does not have this mandate.
Despite this progress in trade news, negative economic news about the U.S. continues to emanate from Britain, especially about tariff uncertainties. The Financial Times interviewed former Treasury Secretary Janet Yellen, who was eager to talk about how the tariffs on major trading partners will have “tremendous adverse consequences” for American companies and consumers. Specifically, Yellen said that recession risks have “gone way up” after the Trump Administration’s proposed tariffs. Yellen also added that targeting Chinese goods could “hobble” American industries by curtailing the supply of critical minerals.
No offense, but it may help to remind Europe that Janet Yellen is no longer our Treasury Secretary.
In other earnings news, Super Micro Computer warned that a big March shortfall based on “delayed customer platform decisions” caused it to lower its quarterly revenue guidance to $4.5 billion – $4.6 billion, below the $5-$6 billion it had previously forecast. Furthermore, the company now expects 29 cents to 31 cents in operating earnings per share, below its previous guidance of 42 to 62 cents. Ouch.
There is no evidence that Super Micro Computer’s lower guidance is impacting Nvidia, since Nvidia has sold all the Blackwell chips that it can manufacture. Interestingly, Super Micro Computer said it saw “some order push-outs in the quarter, as customers appear to be opting for next-generation products over current-gen ones.” This comment just means that the demand for Blackwell chips remains strong.
Energy-Related News Out of Canada and Spain
Canadian Prime Minister Mark Carney’s Liberal Party won 43.5% of the vote and 155 seats, while the Conservate Party received 41.4% of the vote and 144 seats in Parliament. Pierre Poilievre said Canadians voted for a “razor-thin minority government, a virtual tie.” Alberta and Saskatchewan overwhelmingly voted for the Conservative Party, since they will suffer most from PM Carney’s Net Zero goal by 2050.
Canada’s provinces have a lot of autonomy, so it will be interesting to see how they work with Ottawa. Alberta must sell most of its oil to the U.S. due to a lack of Canadian pipelines. Saskatchewan can ship its agricultural goods by rail, but Net Zero’s mandate to eliminate chemical fertilizers remains contentious.
The massive blackout in Spain, which also enveloped Portugal and parts of France, remains a mystery. Initially, the blackout was blamed on abnormally hot weather, which is scary, since it gets much hotter than this in Spain, and electricity rationing is common during heatwaves. Spain has upgraded its electricity grid with predominately green energy, so the fragility of the grid frankly remains very scary.
The Wall Street Journal had an editorial on Wednesday that blamed Spain’s over-reliance on green energy for the grid’s collapse and said the “grid was also running with a low share of turbine-based generation—around 30%. Low inertia meant playing with fire (or, more accurately, with the sun, given that Spain’s policymakers minimized thermal generation).” Just days before, Spain’s government announced that its grid had for the first time run entirely on renewable power, with new records set almost daily for solar.
Navellier & Associates; own Nvidia Corp (NVDA), and Super Micro Computer, Inc. (SMCI), in managed accounts. We do not own Volkswagen (VWAGY), or Berkshire Hathaway Inc. in managed accounts. Louis Navellier and his family own Nvidia Corp (NVDA), and Super Micro Computer, Inc. (SMCI), via a Navellier managed account, and Nvidia Corp (NVDA), in a personal account. He does not personally own Volkswagen (VWAGY), or Berkshire Hathaway Inc.
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