US Macro Insights: May 2025 NFP Preview
Will uncertainty clouds part, or will we finally start to see liberation day fallout?
Summary: Traditionally, the labor market reacts slowly to real-time economic developments, making the unemployment rate a lagging business cycle indicator. However, given existing cracks in the labor market and today’s high degrees of volatility and uncertainty, we may experience a fallout from April’s “liberation day” as early as in the May data, but it could also take months for the effects to materialize. A rise in temporary help workers could provide a short-term boost to NFP and labor hoarding could stave off a rise in job losses (for now), but the broader labor market picture is one of stagnation or further deceleration. The next few months of data will likely start to reflect the disruption to C-suite confidence (that historically results in less job hiring/freezes turned into layoffs).
Market Implication: While waiting for the Friday jobs numbers, the weak ADP and ISMs sparked the imagination of a very weak jobs report. Overall, this raises the bar on how weak NFP needs to be. Unless NFP is near or under the low end (~75k) and the unemployment rate barely moves up or stays unchanged, the market reaction will likely be subdued from current levels. That said, we doubt positioning is going in short, so an upside surprise skews the reaction big time.
