Merchants Macro: Steady Non-Farm Data Reduce Expectations of Rate Cuts in June

On May 2, 2025, the Bureau of Labor Statistics (BLS) of the United States released: In April 2025, the number of non-farm payroll employees increased by 177,000, down from 228,000 in the previous period; the unemployment rate was recorded at 4.2%, unchanged from the previous period. Core points are as follows: The April non-farm payroll data in the United States slightly exceeded expectations, with details reflecting the resilience of the labor market and a slowdown in wage growth. Expectations for a June rate cut by the Federal Reserve cooled in overseas markets, with the 2-year U.S. Treasury yield rebounding by 7.4 basis points to around 3.77% and the three major U.S. stock indices heading higher. Specifically: 1) Non-farm payrolls increased by 177,000 in April, higher than the expected 138,000, with significant downward revisions to the previous month, as March non-farm payroll data was revised down from the initial 228,000 to 185,000, and February data was revised downward from 117,000 to 102,000, totaling 58,000 downward revisions. 2) By industry, government employment increased by 10,000 (previously 15,000), with federal government employment down by -9,000 (previously -4,000), state government employment increasing by 6,000 (previously 2,000), and local government employment increasing by 13,000 (previously 17,000). Due to the impact of downsizing of the Department of Government Efficiency (DOGE), federal government employment has been negative for three consecutive months, with a total decrease of 26,000. BLS emphasizes that paid leave or continuous receipt of severance pay will be counted in employment figures. According to the JOLTS data released on April 29, the U.S. job vacancy rate in March cooled to 4.3% (previously 4.5%), with government job vacancy rate continuing to decline to 3.4% (previously 3.6%), and federal government job vacancies decreasing by 36,000. Business services and temporary support services rebounded, with business services adding 17,000 jobs (previously 3,000) and temporary support services adding 3,600 jobs (previously -2,700). Healthcare and social assistance remain the main drivers, adding 58,200 jobs in this period (previously 77,200). Leisure and hospitality added 24,000 jobs (previously 38,000). Retail added -18,000 jobs (previously 21,700), with significant fluctuations, mainly impacted by the end of a strike last month. Construction added 11,000 jobs (previously 7,000), with overall strength in the number of new construction starts in the U.S. in the first quarter, but the seasonally adjusted number of privately owned new housing starts fell in March to 1.324 million (previously 1.494 million), indicating marginal slowdown in construction employment over the month. 3) Details of data under the household survey show that the labor market still has resilience. Labor force participation rate rose to 62.6% (previously 62.5%), while the U3 unemployment rate in April remained at 4.2% (previously 4.2%), with the U6 unemployment rate, which covers the widest range of workers, continuing to fall to 7.8% (previously 7.9%). The prime-age labor force participation rate for ages 25-54 rose to 83.6% (previously 83.3%). According to the latest Beige Book from the Federal Reserve, labor supply has improved in most regions, with the impact of changes in immigration policy mainly seen in specific industries in certain regions. 4) The hourly wage growth rate fell to 3.77% year-on-year (previously 3.84%), with a month-on-month increase of 0.17% (previously 0.28%), slightly below the expected 0.3%. The average weekly hours worked in the private sector recorded 34.3 hours (previously 34.3 hours), with demand for labor showing some signs of recovery compared to the beginning of the year. Despite little pressure on wage growth, recent statements by Federal Reserve officials continue to reflect a cautious attitude towards the risk of tariff inflation on labor prices. After the data release, CME reflected that expectations of a rate cut in June by overseas markets fell below 50%, but still believed that it is highly probable for four rate cuts this year starting from July. Due to significantly lower-than-expected ADP employment data released on Wednesday, coupled with a turn to negative quarter-on-quarter real GDP in Q1, cooling consumption and government spending, the U.S. Treasury 2-year yield briefly fell, but rebounded by 7.4 basis points to around 3.77% after the data was released. The 10-year U.S. Treasury yield rose by 7 basis points to around 4.29%. The three major U.S. stock indices rebounded, while the decline in the U.S. dollar index slowed down, with ECB Governing Council member Yannis Stournaras warning against further rate cuts and expecting the euro area deposit facility rate to fall to 2%. Overall, although the U.S. dollar may have entered a long-term depreciation trend, with the pause in rate hikes by the Bank of Japan and the resonance of the oversold U.S. dollar since February, the U.S. dollar index rebounded somewhat this week and briefly touched the 100 level midweek. In addition, the Nasdaq has regained ground lost due to tariff impacts, with the U.S. stock market continuing to rise, the U.S. dollar index may temporarily extend its rebound in May and June.