US Macro Insights: April 2025 NFP Preview
The damage has been done but a lot of negativity is priced-in (buy dips in rates)…
Summary: The effects of DOGE, though more acute, have led to a slowdown in federal government jobs. The travel industry has been sending signals that they likely need less workers. Meanwhile there is little historical precedent to gauge how the labor market may suffer from “liberation day” policies. Companies shed workers only as a last-ditch effort to maintain margins and we doubt that firms made drastic changes in April. It’s also hard to foresee companies expanding hiring (beyond any pre-existing plans) during the volatility that month. Overall, there are more cons than pros heading into the report. We will be watching the totality of the data, where the unemployment rate is the key factor for the Fed.
Market Implication: Given all the growth concerns, if NFP prints 100-150k jobs, it will likely be perceived positively, as that is the range needed to keep unemployment steady. Yet a bit of this “upside risk” to the data might have been captured by the rejection/reversal of rates up during the trading session one day ahead of NFP. That said, last month’s stronger than expected NFP was unable to offset the rise in unemployment. Bottom line for us: NFPs are always a challenge, especially at inflection points in the economy (which we are in now). Therefore, we would not be short duration. If the number is stronger than expected, we recommend buying a rates dip as a strong number would be dismissed. If it is especially weak, the Fed will turn dovish and line up a June cut.
