CMS: In March, the U.S. non-farm payroll data exceeded expectations, and the market adjusted its expectations for the Federal Reserve's interest rate cuts this year to 100 basis points

According to the Zhitong Finance APP, CMS released a research report stating that the U.S. non-farm payroll data for March exceeded expectations, partly reflecting the impact of the end of strikes, while other data details were mixed. The recession risk caused by unexpected tariffs and tightening financial conditions remains the main logic in overseas markets, with U.S. Treasury yields maintaining low levels and U.S. stocks under pressure. The market has raised its expectations for the Federal Reserve to cut interest rates by 100 basis points within the year. Despite the strong non-farm payroll data, the deep adjustment of U.S. stocks after the unexpected tariffs from the Trump administration, tightening financial conditions, and recession expectations remain the main logic in overseas markets. The 2-year U.S. Treasury yield, sensitive to Federal Reserve policy, remains low around 3.56%, while the 10-year yield is around 3.95%, with only a pause in the upward trend of U.S. Treasuries.

Event:

On April 4, the U.S. Bureau of Labor Statistics (BLS) released: In March 2025, non-farm employment increased by 228,000, up from a previous value of 151,000; the unemployment rate recorded at 4.2%, up from a previous value of 4.1%.

CMS's main viewpoints are as follows:

The non-farm payroll data for March in the U.S. exceeded expectations, partly reflecting the impact of the end of strikes, while other data details were mixed. The recession risk caused by unexpected tariffs and tightening financial conditions remains the main logic in overseas markets, with U.S. Treasury yields maintaining low levels and U.S. stocks under pressure, and the market has raised its expectations for the Federal Reserve to cut interest rates by 100 basis points within the year.

1) In March, non-farm payrolls increased by 228,000, far exceeding the market expectation of 140,000, but the previous month's data was significantly revised down, with February's non-farm payrolls revised from an initial value of 151,000 down to 117,000, and January's non-farm payrolls revised from 125,000 down to 111,000, totaling a downward revision of 48,000.

2) By industry, government sectors added 19,000 jobs (previous value 10,000), with the federal government recording -4,000 (previous value -11,000), state governments adding 6,000 (previous value -4,000), and local governments adding 17,000 (previous value 16,000). Notably, the federal government has seen negative job growth for two consecutive months, reflecting the impact of the Department of Government Efficiency (DOGE). The BLS specifically noted that paid leave or continued severance pay would be counted in employment numbers. Excluding the federal government, commercial services and temporary support services were also weak, with commercial services recording 3,000 (previous value 7,000) and temporary support services recording -6,400 (previous value -10,000). Healthcare and social assistance remain the main driving sectors, adding 78,000 jobs this period (previous value 51,000). The leisure and hospitality sector showed signs of recovery, adding 43,000 jobs (previous value -17,000). Due to the resumption of strikes, the retail sector saw strong growth, adding 23,700 jobs (previous value -1,800). The construction sector maintained at 13,000 (previous value 14,000). According to the JOLTS data released on April 1, the job vacancy rate slightly fell to 4.5% (previous value 4.7%), with the financial and insurance sector cooling significantly, and the job vacancy rate dropping to 3.8% (previous value 4.9%), while the construction sector rebounded slightly to 3.1% (previous value 2.8%). In the first quarter, the number of new housing starts in the U.S. rebounded, with the seasonally adjusted annual rate of new private housing units started rising to 1.501 million in February (previous value 1.35 million) 3) With the labor participation rate rebounding to 62.5% (previous value 62.4%), the U3 unemployment rate slightly rose to 4.2% in March (previous value 4.1%), while the U6 unemployment rate, which covers the broadest range of workers, fell slightly from a high of 7.9% (previous value 8.0%).

4) Wage growth remains stable. The year-on-year growth rate of hourly wages slightly decreased to 3.8% (previous value 4.0%), with a month-on-month rate of 0.3% (previous value 0.2%), in line with expectations. The average weekly hours worked in the private sector remained flat at a relatively weak level of 34.2 hours, indicating a slowdown in labor demand.

Despite strong non-farm payroll data, the deep adjustment of U.S. stocks following the unexpectedly high tariffs imposed by the Trump administration, tightening financial conditions, and recession expectations remain the main logical threads in overseas markets. The 2-year U.S. Treasury yield, sensitive to Federal Reserve policy, remains low around 3.56%, while the 10-year U.S. Treasury yield hovers around 3.95%, with only a pause in the upward trend of U.S. Treasuries. CME data shows that overseas markets have raised expectations for four rate cuts by the Federal Reserve this year, totaling 100 basis points as a high-probability scenario. The three major U.S. stock indices remain under pressure, with the Nasdaq adjusting 3.3% to around 16,012, the S&P adjusting 3.1% to around 5,227, and the Dow adjusting 2.7% to around 39,470. The U.S. dollar index slightly rebounded to around 102.37.

Of course, the further warming of U.S. recession risks can still be reversed, depending on three subsequent factors: 1) Will there be any changes to U.S. tariffs around April 9? 2) How will the Federal Reserve's monetary policy be implemented? 3) How will the Trump 2.0 tax cut plan be advanced?

Risk Warning: Federal Reserve policy may exceed expectations