Due to the recent intensive statements from many senior officials of the Federal Reserve, expectations for interest rate cuts have been suppressed one after another. The U.S. stock market has not had a satisfactory start to the second quarter. The non-farm payrolls report will become the "highlight" of the first trading week in April.
At 20:30 Beijing time this Friday, the US Department of Labor will release the March non-farm employment report. At present, economists generally expect that new non-farm employment and wage growth will slow down in March, but the unemployment rate will fall again.
The number of new non-agricultural employees will slow down significantly from 275,000 last month to 203,000;
The year-on-year growth rate of average hourly wages slowed to 4.1% for the second consecutive time, and the month-on-month growth rate rose from 0.1% to 0.3%;
The unemployment rate fell to 3.8% from the highest level in the past two years, still hovering near historical lows.
Following the "explosion" of non-agricultural data in January, the number of new non-agricultural jobs in February once again exceeded expectations, reaching 27.5. However, the unemployment rate rose to a two-year high and the recruitment situation was healthy, indicating that the labor market has cooled down.
In terms of inflation, the just-released inflation data has cooled down as expected. The core PCE price index increased by 2.8% year-on-year, the lowest since March 2023, but it has not yet fallen to the 2% Fed target.
Federal Reserve Chairman Powell said that although data in the past two months show that inflation levels are higher than in the second half of last year, the overall downward trend has not changed. The Federal Reserve has time to make interest rate decisions based on future data, and once again signaled that it is not in a hurry to cut interest rates.
At this point, inflation is still hovering above the Federal Reserve's target of 2%, and the labor market has not completely subsided. This week's non-agricultural data will become a key indicator to verify the inflation situation.
At present, the forecasts of the world's major investment banks for non-agricultural data in March are as follows:
However, after economists issued their forecasts, the newly released "small non-agricultural" ADP employment numbers in March surged more than expected, providing tonight's non-agricultural data. New uncertainties have been added. In March, "small non-agricultural workers" recorded the largest increase since July last year, and the year-on-year growth rate of job-hopping wages jumped to 10%, rising for the second consecutive month, showing that the labor market is still overheated.
New non-agricultural employment has slowed sharply
Although the specific forecasts of major investment banks on non-agricultural employment data vary, the median forecast shows that the number of new non-agricultural employment will continue to grow strongly in March, but the growth rate will be higher than the previous year. has slowed down in May, indicating that the labor market will cool down.
Nomura Securities Aichi Amemiya released a research report stating that there is no widespread evidence to support the recent acceleration of new employment, and it is expected that the number of new non-agricultural employment will slow down to 205,000 in March.
The Nomura report pointed out that leading indicators are currently mixed, but the overall trend is consistent with the improvement of the labor market. :
The employment sub-index of the S&P service PMI has remained stable in the expansion range, and the manufacturing PMI has accelerated its growth this year;
ism is not The manufacturing PMI fluctuated back and forth between the recession and prosperity lines, with the manufacturing PMI shrinking for five consecutive months; the
labor market difference index (the proportion of people who believe that job opportunities are sufficient - the proportion of people who believe that job opportunities are scarce) rose to a nine-month high of 32.2 .
However, some analysts believe that the labor market will continue to be strong.
"We expect employment data to continue the strong momentum of the past few months," Jefferies' Thomas Simons team wrote in a note on Thursday.
"The recent revisions have been very large, and the composition of the payrolls has not "The full year of 2023 is encouraging, but we don't see enough evidence in the peripheral labor market data to prove that employment growth will fall off a cliff,"
UBS analyst Jonathan Pingle also said in the latest report, considering. Unexpectedly warmer weather, seasonal adjustment and net corporate birth-death adjustment, non-farm employment will increase significantly by 240,000 in March.
Wage growth has stabilized or declined slightly.
Wage growth is generally expected by economists to stabilize, possibly slowing down slightly due to seasonal factors.
Nomura and UBS both predict that the average hourly wage growth in March will stabilize at 0.4% month-on-month, and the unemployment rate will fall back to 3.8% after hitting a two-year high last month.
However, the Nomura report pointed out that since the March data will be the first reading in several months that is not affected by weather-related factors, the month-on-month growth rate of average hourly earnings may increase.
Bank of America also believes that wage growth will slow down, as it has observed that wage growth in March has tended to be weaker than that in February in recent years. Therefore, the number of private sector wage employment in March will also increase from 223,000 in February. It has slowed to 150,000+ people, thus lowering the overall number of new jobs. The average hourly wage is expected to be 4.1% year-on-year, the month-on-month growth rate is 0.3%, and the unemployment rate remains at 3.9%.
Will the Fed’s “interest rate cut” plan remain unchanged?
As of the close of U.S. stocks overnight, CME Group's fedwatch tool and federal funds futures trading data showed that the probability of the Federal Reserve cutting interest rates at its June meeting was 58.5%, down from about 70% last week, and the number of interest rate cuts during the year is expected to be 3-4.
Nomura believes that even if the non-agricultural data cools down as expected, it will not cause the Federal Reserve to cut interest rates in advance , because the employment growth rate is still higher than the "sustainable rate" and the wage growth rate is only slightly slowing down, and the fight against inflation "finally" There is still resistance, and the Fed will remain patient about the timing of its first rate cut.
UBS also pointed out that although the overall non-farm payrolls in March are expected to exceed expectations, is "unlikely" to change the Federal Reserve's plan to cut interest rates at the June interest rate meeting.
