Source: Wall Street News
Will the data support Powell's confidence in “releasing pigeons”?
Can tonight's non-farm payrolls report support expectations of interest rate cuts?
At 20:30 Beijing time on Friday, the US Department of Labor will release the April non-farm payrolls report. Currently, economists generally expect the number of new non-farm payrolls and wage growth to slow slightly in April, and the unemployment rate to remain stable.
The number of new non-agricultural workers will slow from 303,000 last month to 240,000;
The average hourly wage growth rate slowed from 4.1% to 4% year on year, and the month-on-month growth rate is expected to increase by 0.3%, the same as last month;
The unemployment rate remained flat last month, at 3.8% below 4% for the 24th consecutive month.
Some analysts pointed out that it is expected that the April non-agricultural report will slow down to a “still steady” level, or ease the concerns brought to the market by the “collapse” of GDP data for the first quarter to a certain extent.
The ADP data released earlier exceeded expectations, and the PCE price index did not show a downward trend in the first quarter and March, yet Federal Reserve Chairman Powell sent a dovish signal at the FOMC meeting this month, saying that the next interest rate move “is impossible”.
Boosted by Powell's biased remarks, after the Federal Reserve meeting, traders advanced their expectations for interest rate cuts from December to November. Tonight's non-farm payrolls data will be an important determining factor in the next step in pricing interest rate cuts.
The overall job market has slowed
Capital Economics (Capital Economics) said that overall employment is expected to slow down, benefiting from the subside of seasonal effects and widespread easing in labor demand.
The agency believes that despite the strong performance of the job market in the first quarter, this acceleration is unlikely to continue, especially when all jobs have gone to part-time workers and immigrants in recent months. At the same time, Kaitou Macro said:
“Employment numbers are likely to be boosted by the unusually mild winter weather that continued until March.”
“Despite the severe January storms that hit lodging and foodservice jobs, we believe the three sectors most sensitive to the weather — construction, retail trade, and lodging and food services — will still account for half of the three-month average increase in employment.”
Furthermore, the surge in immigration has also reduced the labor supply. According to economists' estimates, the monthly labor supply increased by about 80,000 people in 2023.
Goldman Sachs economist Spencer Hill said:
“Although we believe that the continued influx of new immigrants into the labor market boosted employment and household employment in the April report, we do not expect the unemployment rate to be affected as it offsets the increase in labor supply.”
Specifically, healthcare, government, construction, and leisure and hospitality are expected to remain the main industries driving employment growth, as these industries lost large numbers of workers during the COVID-19 pandemic.
Is inflation more important?
Some opinions point out that Powell's remarks and the expected cooling of non-farm payrolls data may increase the possibility that the Federal Reserve will cut interest rates this year.
This week, Powell said that the labor market is still relatively tight, but the supply and demand situation has reached a better balance, which also seems to confirm the confidence of senior Federal Reserve officials in the job market.
Sung Won Sohn, professor of finance and economics at Loyola Marymount University, said:
“The flowers of a strong job market have faded, but it's still beautiful.”
“The slow but healthy job market will continue until 2025. I think the only situation that will cause a sharp decline in employment data is that the Federal Reserve has kept interest rates high for too long.”
Goldman Sachs said in the report that investors are currently paying more attention to inflation than employment.
The April inflation data will be released on May 14 (PPI), May 15 (CPI), and May 31 (PCE prices), respectively.
edit/lambor