Nonfarm payroll data is coming! If there are cracks in the US labor market, the probability of a rate cut by the Federal Reserve in June is expected to increase significantly.

Economists worldwide are closely watching the US April non-farm payroll report to be released on Friday. Some economists have warned that the US labor market may experience severe turbulence due to the tariff battle initiated by the Trump administration, leading to a significant increase in the likelihood of the Federal Reserve cutting interest rates for the first time this year in June. The new round of global trade war ignited by Trump's tariff policy has darkened the prospects for US and global economic growth. Economists generally expect that the global trade war launched by US President Trump will raise global prices, weaken consumer spending, and potentially have a significant impact on the labor market this year and next, ultimately pushing the US economy into a recession. Cleveland Fed President Harker recently stated that if the economic data in June provides a clear direction, the Fed may take action in June. Federal Reserve Board member Wall, who has long been hawkish on monetary policy, has recently shifted towards a more dovish stance, emphasizing that if the high tariffs imposed by the Trump administration force US companies to lay off workers on a larger scale, he would support a rate cut to protect the US labor market. Torsten Slok, Chief Economist at Apollo Global Management, a top Wall Street asset management firm, expressed cautious expectations for the US labor market before the release of the non-farm payroll data by the US Labor Statistics Bureau on Friday. "The April employment report to be released on Friday, May 2, may show a significant weakening trend in the US labor market in the coming months," Slok said. Slok's warning comes at a time of increasing economic uncertainty in the United States. It is worth noting that the survey period for this non-farm employment data coincided with the week following the announcement of Trump's tariff policy on April 2, which exacerbated market volatility (global stock markets evaporated more than $10 trillion in value at one point) and significantly undermined US business confidence. Both business and household surveys were conducted during this critical week. Although the Trump administration announced a 90-day moratorium on the harshest "reciprocal tariffs" shortly after "Liberation Day" on April 2 due to continued sharp declines in the US stock, bond, and currency markets, during which time most countries benchmark tariffs were adjusted to 10% except for China, Bloomberg's economic research team predicts that the current "effective tariff rate" in the US is close to 23% the highest level in over a century. This has already caused severe shocks to US consumers and business confidence. In the coming months, the non-farm data will be crucial! Especially the unemployment rate indicators. In terms of non-farm data expectations, economists generally expect US employers to add 130,000 jobs in April. However, Slok from Apollo Global Management stated that there is significant downside risk to this number, as Michigan surveys and regional Fed surveys show that households in the US are becoming increasingly pessimistic about the future, and their internal economic models even suggest that job growth may unexpectedly be negative in Slok's view, it is possible that job growth could be negative. Slok emphasized that the survey week for this non-farm employment data report coincided with the week following the announcement of reciprocal tariffs, meaning that institutional and household surveys were conducted during a week of extreme uncertainty for businesses. As for the unemployment rate, economists generally expect it to remain at 4.2% in April, but several economists, including Slok, predict that the likelihood of a higher-than-expected unemployment rate is increasing and could reach 4.5%. Nevertheless, the current US labor market still displays resilience. The previous April non-farm employment data exceeded expectations, with an addition of 228,000 jobs, far surpassing the economist's general prediction of 135,000, which surprised Wall Street. The latest data released by the US Department of Labor last Thursday showed that, as of the week ending April 19, seasonally adjusted initial claims for unemployment benefits rose by 6,000 people to about 222,000, in line with the median expectation of economists covered by Bloomberg's survey, and remained stable compared to the previous period, close to the lowest level in a year. This statistic reflects that despite inflation pressures resulting from the unprecedented tariff policy of the US government, the US labor market remains stable. The latest research from Goldman Sachs, a major Wall Street firm, shows that initial unemployment claims, the Philadelphia Fed manufacturing index, the ISM non-manufacturing index, and the unemployment rate indicators are the best indicators warning of a slowdown in the US economy or "economic recession". These economic indicators usually send significant negative signals only a month after a deep slowdown or recession begins, while hard data like GDP may take up to four months to show clear signs of weakness. These economic indicators perform better than other data because they are released frequently, have small adjustment margins, and are early released. For example, initial unemployment claims are released every Thursday. In past economic recession events with clear catalysts such as the 1973 oil shock, the 1979-1980 Volcker rate hikes, the 1990 Kuwait event causing a surge in oil prices, and the 2001 Internet bubble burst economic hard data (such as actual GDP) usually takes about four months to show clear signs of weakening in real-time data. If signs of a US economic recession become increasingly apparent, the probability of the Federal Reserve adopting a "preemptive rate cut" will also increase significantly. Therefore, labor market-related data such as initial jobless claims and unemployment rates 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 Fed may begin a new round of rate cuts. "If the economic slowdown becomes severe, or even if it enters a recession, I expect the FOMC to support faster and larger cuts in the Federal Reserve policy rate," said Wall, a Federal Reserve Board member who has voting rights on the FOMC's monetary policy during his term. 2026 FOMC voter and Cleveland Fed President Harker recently said, "If we receive clear and convincing data before June, as if...".If we know that taking action at that time is correct, then I believe the Federal Reserve Monetary Policy Committee will take action. The premise is that we are clear about the correct policy direction at that time." Hamack said when asked about the possibility of a rate cut in June.In 2025, is the US economy in crisis? The Trump administration has decided to impose a staggering 145% tariff on China (one of the top three trading partners of the US) and at least a 10% tariff on most other countries. Many forecasters have warned that as a result, the global economy will slow down significantly in the future, with some even predicting a deep economic recession in the US this year. This is partly because since the high inflation period in 2022, US households facing continued inflation pressure may see a significant downturn in demand, with some households struggling to save money, and household demand or consumption accounting for about two-thirds of US GDP. Bloomberg's latest survey report shows that, as a result of the Trump administration's global trade war, prominent economists consulted and interviewed generally believe that the probability of the US falling into an economic recession in the next 12 months has jumped from 30% shown in a March survey to 45%. This also means that the likelihood of the US economy entering a recession is almost equal to flipping a coin. According to the well-known research institution BCA Research on Wall Street, the probability of the US economy entering a recession has exceeded 50%, while J.P. Morgan predicts a high probability of a US economic recession reaching 60%. According to statistics compiled in a recent research report by Slough, the severe negative impact of Trump's tariff policy on US companies is already evident: new orders are declining, capital expenditure plans are decreasing, and inventories are increasing before tariffs take effect, and US companies are downgrading profit expectations. For the average American household, consumer confidence has fallen to an all-time low. In order to avoid price increases caused by tariffs, consumers have been rushing to buy goods before the tariffs take effect, undoubtedly overdrawing their future purchasing power. At the same time, the tourism industry, especially international travel and foreign consumers traveling to the US, is showing clear signs of slowing down. Apollo economists analyze the downward trajectory of the US economy from April to summer 2025, emphasizing that due to repeated adjustments in tariff policies and extended transportation times, the US supply chain may face major disruptions, affecting economic activities, and ultimately leading the US into an economic recession in the summer of 2025.