Financial markets are gearing up for the most important data release of this week. The Labor Department’s Bureau of Labor Statistics releases its February nonfarm payrolls report Friday at 8:30 ET. Markets expect growth of 160,000 – 170,000 jobs, up from 143,000 in January, with the unemployment rate holding steady at 4%.
In February, layoff announcements reached their highest monthly level since July 2020, largely due to Elon Musk’s Department of Government Efficiency’s efforts to reduce the federal workforce. However, DOGE actions and worker angst indicators may not be reflected in Friday’s jobs number due to timing and methodology of BLS’ twin counts.
A strong job market means the US Fed may not hurry to cut rates. However, recent economic data shows a decline in consumer spending, retail sales, manufacturing, and construction, while housing activity remains stagnant, causing forecasts for economic growth in the first quarter to fall.
Markets anticipate three Federal Reserve interest rate cuts this year, up from the expected one or two following the February 7 jobs report release.
But, ignoring Trump’s policies could be financially damaging.
US stocks are in for a bumpy ride as President Trump’s policies are influencing global trades now. Trump’s unpredictable trade policies are causing concerns about high valuations and slowing growth in the US market, halting its bull run.
The global trade system is at risk and a shake-up in the world of currencies is looking imminent. Look at the Japanese yen that surged past 148 per dollar, reaching a five-month high due to increased safe-haven demand and global trade war concerns. This led traders to shift from the US dollar to the yen and Swiss franc. Domestically, the yen and Japanese government bond yields are supported by expectations of further interest rate hikes.
Overall, the markets are nervous amid rising concerns over the Trump administration’s trade policies, which fueled worries about US economic growth. The decision to delay tariffs on certain goods from Mexico and Canada for a month failed to reassure investors.
Trump announced he would postpone levies on Canadian and Mexican goods that comply with the U.S.-Mexico-Canada Agreement until April 2, the day he’s set to implement reciprocal tariffs on all trading partners.
If it was a tough battle for the US Fed to fight inflation from 2021 to 2024, the real task for US Fed begins now.
Wall Street is concerned that Trump’s tariffs—and the counter-tariffs they inspire—could reaccelerate inflation and slow economic growth. February 2025 CPI data are scheduled to be released on March 12, 2025.
Uncertainty has been heightened by Donald Trump’s start-stop tariff policies, which have reignited concerns of a period of “stagflation,” which is defined as poor growth coupled with rising inflation.
Trump’s proposed tariffs could potentially cause a recession in the second quarter of this year if fully implemented and not delayed. From now on, the Trump tariff trade war will continue to be the most crucial element for financial markets to manage.
Aggressive rate cuts by the US FED may reignite inflation at a time when Trump’s tariffs are perceived to be inflationary.
The US Fed’s decision on rates in the upcoming FOMC meeting on March 18-19 will be influenced by the state of the US job market.