Thie highlight of the week on the data calendar will be the US monthly labour market report for April, released on Friday. This will be the first major “hard” data point looking at the impact of the increased tariffs and uncertainty on the US economy. We’ve had a bunch of “soft” data signals, like business surveys pointing to a slowdown, but this hasn’t as yet been totally confirmed in other economic data releases. Expectations are generally that the US will be hit by a slowdown, or potentially recession due to the trade war, while inflation is set to rise as tariffs come into effect and businesses are forced to raise prices on US consumers.
Analyst Expectations and other indicators
Consensus expects headline April payrolls to rise130k, down from the blockbuster 228k in March. The range of analyst estimates is currently between 60k and 185k. The jobless rate is forecast to remain steady at 4.2% which is below the 2025 median Fed estimate of 4.4%. Average hourly earnings are also set to stay unchanged at 0.3% with the annual number just under 4%. April is normally a significant month for seasonally unadjusted job growth. That’s combined with the fact that April’s seasonal adjustment factor has tended to be among the highest on record in recent years compared to like months of April over time. Weather and strike effects will most likely ease back after having a big influence on the previous month.
Layoffs have been rising sharply, with April data pending on Thursday, but what’s unclear is the timing of when the layoffs that are heavily driven by DOGE cuts to the federal civil service will begin to show up. Claims data has been relatively muted so far and this probably carried on in the survey week. In addition, they could continue to be offset by ongoing hiring by state and local governments.
Market reaction
It seems that many economists are expecting the worst in the coming months in the US. Whether the recent easing in trade talk tensions shifts this theme is key going forward. US Treasury Secretary Bessent has been on the wires a lot this week – markets respect him, and the administration appears to be finally understanding this. Yet, a lot of damage has been done with so much uncertainty and now lack of trust in US policy making. More muted jobs data in the months ahead would mean the Fed likely starts to cut rates again. Rising unemployment was what finally provoked a 50bps rate cut last September.
There is currently around a 64% chance of a 25bps June rate reduction; this moved modestly higher after today’s ADP jobs report showed the weakest job growth since July 2024. There are near enough four 25bps rate cuts priced in for 2025. The issue for the Fed is their dual mandate of maximum employment and stable prices, and these could go in opposite directions in the months ahead. The dollar continues to trade around a key pivot point – the low from July 2023.