The signal for interest rate cuts still needs to wait! Tariffs have not yet had an impact on the US labor market, with initial jobless claims remaining stable at low levels.

The latest data released by the US Department of Labor on Thursday showed that, for the week ending on April 19, the seasonally adjusted initial claims for unemployment benefits increased by 6,000 to approximately 222,000, in line with the median expectation of economists covered in a Bloomberg survey and consistent with the previous period, near the lowest level in a year. This data reflects that despite facing inflation pressures caused by the unprecedented tariff policies of the US government, the US labor market remains robust. A recent report released by Goldman Sachs showed that the initial claims for unemployment benefits will be one of the core data points that global financial markets will focus on in the near term. This statistical data can reflect the actual changes in the US economic conditions and labor market more early and accurately. If initial claims for unemployment benefits continue to significantly deteriorate, it could be an important signal that the US economy is entering a recession, as well as an important warning signal for an imminent interest rate cut by the Federal Reserve. Data shows that the number of people continuing to claim unemployment benefits in the week ending April 12 (measuring the total number of people receiving benefits long-term) had fallen to 1.84 million, the lowest level since the end of January, and much lower than the economists' general expectation of about 1.88 million people. Both the initial claims for unemployment benefits and the number of continuing claimants continue to reflect that the US labor market is in a healthy state, continuing the momentum of economic growth from the latest employment report, indicating that the timing for a rate cut by the Federal Reserve is not yet here. Recent labor market data is reflected that, despite the uncertainty of tariff policy and the economic outlook in the US, the recent initial claims for unemployment benefits and continuing claims data remain near historical lows. Tom Barkin, president of the Federal Reserve Bank of Richmond, stated in an event on Tuesday that most US companies "have not laid off employees, but they are in a defensive posture, including freezing hiring, delaying investments, or postponing spending plans." The four-week moving average of initial claims for unemployment benefits (a measure that can smooth weekly fluctuations) decreased slightly to 220,250, the lowest since mid-February. Unadjusted initial claims also saw a significant decrease last week, with Kentucky, Texas, and Oklahoma experiencing the largest declines. It is important to note that the data of unemployed federal government employees applying for benefits is not included in the total initial claims for unemployment benefits. Previous statistics from the week showed that the number of initial claims for unemployment benefits was close to the level before a wave of major layoffs at federal government agencies led by the Trump administration and the Department of Government Efficiency, headed by Musk. The latest data on federal employees will be updated later on Thursday. However, it has been reported that many federal layoffs caused by the Department of Government Efficiency have come with severance pay, making it difficult for employees to receive benefits immediately after being laid off. Another report released on Thursday showed that business equipment orders for US companies in March showed little to no growth, indicating that businesses are becoming increasingly cautious amid uncertainties surrounding external tariffs and domestic tax policies. The latest research from Goldman Sachs shows that initial jobless claims, the Philly Fed manufacturing index, ISM services index, and the unemployment rate are among the best indicators for warning signs of a slowdown or "economic recession" in the US. These economic indicators usually emit significant negative signals just one month after the start of an economic slowdown or recession, while hard data, such as GDP, takes about four months to show signs of weakness. These economic indicators perform better than other data points because they are released frequently, have small revisions, and are available earlier. For example, initial jobless claims are released every Thursday. In past economic recession events caused by clear catalysts, such as the 1973 oil shock, the 1979-1980 Volcker rate hikes, the 1990 Kuwait event leading to soaring oil prices, and the 2001 internet bubble burst, economic hard data (such as real GDP) usually showed clear signs of weakening about four months later in real-time data. Furthermore, financial markets are closely watching the meeting arrangements between Trump and business leaders. Previous statistics have shown that there are usually subtle shifts in policy tone after such meetings, and any interaction between Trump and American companies could provide key clues for future policy directions. Currently, Federal Reserve Chairman Powell and several Federal Reserve officials have sent clear signals through public comments and interviews that they are ruling out implementing a "precautionary rate cut" as a insurance policy for an economic slowdown. In order to minimize the inflationary risks caused by tariff policies, they may be prepared to maintain policy rates unchanged in the long term. However, if signs of a US economic recession become more apparent, the probability of the Federal Reserve implementing a "pre-emptive rate cut" will increase significantly, therefore labor market-related data, such as initial jobless claims and the unemployment rate, are crucial for investors to assess the health of the US economy. If both data points significantly exceed expectations in the short term, it may indicate that the US economy is starting to enter a recession, and the Federal Reserve may embark on a new round of rate cuts. "If the economic slowdown becomes severe, or even possibly if it enters a recession, I expect the FOMC to support faster and more extensive reductions in the Fed's policy rates." said Governor Wall, a member of the Federal Reserve's FOMC with voting power over monetary policy decisions, recently.