Expectations for May jobs report rise as investors seek clarity on Fed rate policy

Expert opinions

Citigroup economist Andrew Hollenhorst notes that weaker job creation, below 175,000, and an unemployment rate above 4 percent, could signal a continued economic slowdown. Conversely, a more positive report could delay rate cuts and push Treasury yields higher. Citi projects an increase of 140,000 jobs with an unemployment rate of 4%, suggesting an earlier rate cut, possibly starting in July, with four reductions by the end of the year.

Goldman Sachs offers a slightly more optimistic view with a forecast of 160,000 jobs, attributing the limits to potential growth to seasonal adjustments. The company remains within consensus on wage gains, aligning with the Fed’s 2% inflation target.

Recent labor market performance

In April, 175,000 jobs were created, which is significantly lower than the 235,000 expected and the 315,000 in March. This matches pre-pandemic employment growth rates, reflecting a gradual slowdown in the labor market. The May report is expected to show 190,000 workers with an unemployment rate below 4%, a streak not seen since the 1950s.

The objectives of the Federal Reserve

The Fed aims for a balanced labor market to curb inflation without increasing unemployment or triggering a recession. Current data points to a soft landing scenario, in which job postings and hiring slow, but layoffs remain minimal. Experts suggest that this gradual descent is ideal, as it avoids drastic market disruptions.

If unemployment remains below 4% for the 28th consecutive month, that would be a significant milestone. However, a rate above 4% could have psychological consequences, particularly in a tight labor market. Initial unemployment claims remain low, with 229,000 new claims last week, and job losses are also down, indicating a stable market.

Market Forecast

Given the mixed signals and expert forecasts, the job market is showing signs of potential volatility. A weaker jobs report could lead to earlier rate cuts, while stronger data could delay those adjustments. Traders should stay prepared for fluctuations based on the next report.

Read Complete News ➤

Leave a Reply

Your email address will not be published. Required fields are marked *

18 − nine =