NFP in the shadow of tariffs🔎

Labor market report in the background amid escalation of trade war 📌

Today at 14:30 we will learn about the U.S. employment report — NFP. Under normal circumstances, this would be one of the most important reports of the month. However, now the NFP takes more of a backseat after the announcement of new retaliatory tariffs by Donald Trump’s administration. Nevertheless, the data we will see may have significant importance for the Fed in the context of further efforts to fight inflation.

NFP forecasts (market consensus):

• Forecast: 140k
• Previous: 151k

Bloomberg Economics is predicting a slightly different NFP movement, expecting solid growth in nonfarm payrolls in March — by 200k seasonally adjusted jobs (versus 151k in February), which exceeds the market consensus by 60k.

• This increase is partly expected due to temporary factors such as improved weather (around 60k new jobs, mainly in construction and the leisure and hospitality sectors), resumed government grant payouts, and increased hiring in trade and transportation in response to the tariff announcement.

Unemployment is projected to rise to 4.2% (from 4.1% in February), and average hourly earnings likely increased by 0.2% m/m, which is less than in February (0.3%), explained by a higher share of low-paying sectors in the total number of new jobs.
Labor market data remains an important element shaping the overall market landscape, though compared to typical situations, its weight may be somewhat lower, especially given current market sentiment. Strong sell-offs and heightened investor concerns may lead to a calmer reaction to a higher reading, while a worse result could be interpreted as another trigger for deeper declines.
Despite market concerns, it's worth remembering that Powell emphasized the Fed is not in a rush — it’s hard to expect a fast response with rate cuts or additional stimulus unless hard data confirms a clear economic slowdown.

Longer-term outlook

In the short term, labor market prospects may remain optimistic. However, other macro data, such as the recent ISM reading or consumer sentiment, may suggest weakness in the longer term.

Higher ADP reading

On Wednesday, we saw higher-than-expected ADP readings for the private sector. The close correlation between this report and the NFP supports the case for similarly higher readings in today’s NFP.

TNOTE chart (1D)

10-year bonds are rising to their highest level since early October 2024. Movements in yields will depend heavily on sentiment around Fed policy, which may be influenced by the NFP reading. Capital flight to safer assets supports bond price increases, but it’s worth remembering that investor sentiment may be undermined by the outlook of a postponed recession.

Source: xStation 5