The interest rate cut signal is still to come! Tariffs have not yet affected the U.S. labor market, and initial jobless claims remain stable at a low level

According to the latest data released by the U.S. Department of Labor on Thursday, for the week ending April 19, the seasonally adjusted initial claims for unemployment benefits increased by 6,000 to approximately 222,000, consistent with the median expectations of economists surveyed by Bloomberg, and unchanged from the previous period, close to the lowest level in a year. This statistic reflects that despite facing inflationary pressures caused by the unprecedented tariff policies of the U.S. government, the U.S. labor market remains robust.

A recent research report from Goldman Sachs indicates that the number of initial unemployment claims will be one of the core data points of interest for global financial markets in the near term. This statistic can reflect the actual changes in the U.S. economy and labor market more quickly and accurately. If initial claims for unemployment benefits continue to deteriorate significantly, it could be an important signal that the U.S. economy is entering a recession, as well as a crucial warning signal for the Federal Reserve's impending interest rate cuts.

Statistical data shows that for the week ending April 12, the number of continuing claims for unemployment benefits (which measures the total number of people receiving benefits long-term) fell to 1.84 million, the lowest level since the end of January, and significantly below the approximately 1.88 million that economists generally expected. The results of initial claims and continuing claims both continue to reflect that the U.S. labor market is in a healthy state, sustaining the economic growth momentum brought by the latest employment report, which also indicates that the timing for the Federal Reserve to cut interest rates has not yet arrived.

Recent labor market data reflects that despite uncertainties surrounding tariff policies and the U.S. economic outlook, initial claims for unemployment benefits and continuing claims data remain near historical lows.

Tom Barkin, President of the Richmond Federal Reserve Bank, stated during an event on Tuesday Eastern Time that most U.S. companies "have not laid off employees, but they are taking a defensive posture, including freezing hiring, delaying investments, or postponing spending processes."

The four-week moving average of initial claims for unemployment benefits (which smooths out weekly fluctuations) slightly decreased to 220,250, the lowest since mid-February.

The unadjusted initial claims also saw a significant decline last week, with the largest decreases occurring in Kentucky, Texas, and Oklahoma.

However, it is important to note that the claims data from already unemployed federal government employees are not included in the total initial claims for unemployment benefits. Statistics from the previous week indicated that initial claims for unemployment benefits were still close to January levels—before the Trump administration and the efficiency department led by Musk (DOGE) began a wave of large layoffs across major federal government agencies. The latest data on federal employees will be updated later on Thursday. However, reports indicate that many federal layoffs caused by DOGE come with severance pay, which prevents employees from immediately receiving unemployment benefits after being laid off.

Another statistical report released on Thursday showed that orders for commercial equipment from U.S. businesses in March saw almost no growth, indicating that companies are increasingly cautious in the context of uncertainties surrounding external tariffs and domestic tax policies Goldman Sachs' latest research shows that initial unemployment claims, the Philadelphia Fed Manufacturing Index, the ISM Services Index, and the unemployment rate are the best indicators currently warning of a slowdown or "recession" in the U.S. economy. These economic data indicators typically emit significant negative signals just one month after a deep economic slowdown or recession begins, while hard data, such as GDP, may take up to four months to show clear signs of weakness.

The performance of these economic data indicators is superior to other data because they are released frequently, have small revisions, and can be published earlier. For example, initial unemployment claims are announced every Thursday. In past economic recession events with clear catalysts—such as the 1973 oil shock, the Volcker rate hikes in 1979-1980, the 1990 Kuwait crisis leading to soaring oil prices, and the 2001 internet bubble burst—hard economic data (like real GDP) typically takes about four months to show clear signs of weakening in real-time data.

Additionally, financial markets are closely monitoring the meeting arrangements between Trump and business leaders. Past statistics have shown that subtle changes in policy tone often occur after such meetings, so any interaction between Trump and American businesses could provide key clues about future policy directions.

Currently, Federal Reserve Chairman Jerome Powell and several Federal Reserve officials have sent clear signals through public comments and interviews, ruling out "preemptive rate cuts" as an insurance policy against a slowdown in the U.S. economy. To minimize the inflationary risks caused by tariff policies, they may be prepared to maintain policy rates unchanged for an extended period.

However, if signs of a recession in the U.S. economy become increasingly evident, the probability of the Federal Reserve taking "preemptive rate cuts" will also rise significantly. Therefore, labor market-related data, such as initial unemployment claims and the unemployment rate, are crucial for investors to assess the health of the U.S. economy. If both data points show a significant unexpected increase in the short term, it may indicate that the U.S. economy is beginning to enter a recession, and the Federal Reserve may initiate a new round of rate cuts. "If the economic slowdown is severe, and there is even a possibility of entering a recession, I expect the FOMC to support a faster and larger reduction in the Federal Reserve's policy rate," said Federal Reserve Governor Christopher Waller, who has voting rights on the FOMC during his term