biedexmarkets.com – The monthly U.S. labor market report due later Friday, a release that could make or break the case for a first Federal Reserve rate cut in June.
The U.S. economy is expected to have added 212,000 in March, when the report is released at 08:30 ET (12:30 GMT), slowing from the 275,000 jobs added in February.
The report is also expected to show the remaining below 4% for 26 straight months, the longest such stretch since the late 1960s, while are expected to have gained 0.3%, up from the prior month’s 0.1% jump.
The Fed stuck to its view of three rate cuts this year at its March meeting, raising hopes for a June cut, but a number of officials, including Chair Jerome Powell, have recently stressed the need for the U.S. central bank to continue to study more data before a rate-cutting cycle is started.
Strong economic numbers, including surprise growth in U.S. at the start of the week, have reined in expectations that interest rate cuts will start as soon as June.
Minneapolis Fed President added to the doubts on Thursday, stating that if inflation continues to stall, an interest rate reduction may not be required at all this year.
With this in mind, all eyes are on the report, given optimism around a rate reduction has been a primary driver for gains in most developed market equities since late 2023.
“Investors are on edge the Fed may delay rate cuts from June until later in the summer (or late in 2024) if we get another hot employment report,” said analysts at Kinsale Trading, in a note.
Influential investment bank Goldman Sachs was looking for such a report, calling for payrolls to rise 240,000.
“Our forecast reflects a continued boost from above-normal immigration, as new entrants to the labour force are matched to open positions,” analysts at the bank said, in a note.
“Big Data measures also generally indicate a solid or strong pace of job gains, and our layoff tracker indicates that the pace of layoffs remains low.”
Morgan Stanley was also expecting something above consensus, looking for 245,000 jobs to have been created last month.
“Payrolls have reaccelerated since last fall, rising 265k per month on average over the past three months after a 212k per month pace in 4Q23 and 213k in 3Q2”, Morgan Stanley analysts said, in a note. “In general, continued rapid payroll growth is being supported by immigration flows.”
However, Citigroup has taken a less bullish approach, expecting nonfarm payrolls to have risen “a still-solid” 150,000 in March.
“Markets may still be underappreciating the potential for much softer Q2 labor market data that would prompt the Fed to begin rate cuts in June and continue to cut at every subsequent meeting,” analysts at the U.S. bank said, in a note.
