Goldman Sachs is bearish on the US job market: Non-farm payrolls are expected to increase by only 85,000 in June.
Goldman Sachs believes that the June non-farm payroll report will confirm that the US labor market is slowing down, which should reinforce the trend of the Federal Reserve gradually shifting towards a more dovish stance.
Goldman Sachs predicts that the number of non-farm jobs in the United States will increase by 85,000 in June, which is much lower than the market's general expectation of 113,000 and lower than the average of 135,000 for the past three months. Goldman Sachs believes that factors dragging down the increase in non-farm jobs in the United States in June include weak large-scale data indicators, changes in immigration policies, and federal government layoffs. At the same time, Goldman Sachs predicts that the unemployment rate will rise from May's 4.24% to 4.3%, and average hourly wages are expected to increase by 0.3% month-on-month. The bank added that the end of worker strikes brought some good news, but it is not enough to substantially boost overall data.
Goldman Sachs believes that the June non-farm employment report will confirm that the U.S. labor market is slowing down, which should strengthen the trend of the Federal Reserve gradually shifting towards a dovish stance and continue to put downward pressure on the U.S. dollar, especially when wage growth further indicates signs of inflation slowing down.
The U.S. Department of Labor will release the June non-farm employment data at 20:30 Beijing time on Thursday. If the data released tonight shows signs of accelerated deterioration in the U.S. economy, the market will increase its bets on the Federal Reserve taking action earlier at the policy meeting scheduled for July 29-30.
Currently, according to the Chicago Mercantile Exchange's "Fed Watch" tool, the probability of the Fed keeping interest rates unchanged in July is 73.1%, while the probability of a 25-basis-point rate cut is 26.9%; the probability of the Fed keeping interest rates unchanged in September is 12.9%, with a cumulative probability of a 25-basis-point rate cut at 64.9% and a cumulative probability of a 50-basis-point rate cut at 22.1%.
Data released on Wednesday showed that the so-called "small non-farm" U.S. ADP employment numbers unexpectedly declined by 33,000 in June, far below the market's general expectation of an increase of 95,000 and also lower than the revised 29,000 in May. Nela Richardson, chief economist at ADP, said in a statement: "Although layoffs are still rare, employers are cautious about new hiring and unwilling to fill vacancies left by departing employees, leading to a contraction in employment last month."
It is worth noting that the accuracy of ADP's forecasts for subsequent official non-farm employment data has always been unstable, and the market generally pays more attention to the authoritative reports from the U.S. Labor Department. For example, the weak data from ADP in May significantly deviated from the official employment data released later that week.
Nancy Vanden Houten, chief U.S. economist at the Oxford Economics Research Institute, said: "The soft job market in June indicates future trends. We expect that due to tariffs and policy high uncertainty, employment growth trends will continue to weaken for the rest of the year."
It is important to note that earlier this week, Goldman Sachs advanced its prediction for the timing of the Fed rate cut, expecting the Fed to resume cutting rates in September instead of December, as the inflation impact of tariffs "appears to be smaller than expected." Goldman Sachs expects the Fed to cut rates by 25 basis points at its meetings in September, October, and December, and has revised its "final rate forecast from 3.5%-3.75%" to "3%-3.25%".
Goldman Sachs' economic team wrote: "We believe the likelihood of a rate cut in September is slightly higher than 50% because we see multiple paths to achieving this goal - the impact of tariffs is not significant, larger anti-inflationary offset factors, real labor market weakness, or panic caused by monthly fluctuations. We doubt that the Fed leadership shares our view that tariffs will only have a one-time price level impact."
Goldman Sachs analysts said, "If there is any motivation for rate cuts insurance, then cutting rates in consecutive meetings (as in 2019) is the most natural choice, we do not expect a rate cut in July unless this week's employment data is far below expectations." Goldman Sachs pointed out that the labor market remains "healthy" and said "finding a job is becoming increasingly difficult, seasonal factors and changes in immigration policy pose short-term downside risks to employment numbers."
Related Articles

Trading reminder: US stocks closed early today, and the market will be closed tomorrow.

The countdown begins for the Sino-US trade negotiations! Li Zaiming frankly admits that "both sides' demands are still unclear."

Knight Frank: It is expected that the total transaction volume of the Hong Kong property market will be similar to that of last year, with prices fluctuating within a range of plus or minus 3%.
Trading reminder: US stocks closed early today, and the market will be closed tomorrow.

The countdown begins for the Sino-US trade negotiations! Li Zaiming frankly admits that "both sides' demands are still unclear."

Knight Frank: It is expected that the total transaction volume of the Hong Kong property market will be similar to that of last year, with prices fluctuating within a range of plus or minus 3%.
