Forget about GDP, tonight's non-farm payroll is what matters

The unexpected contraction of 0.3% in the U.S. GDP data for the first quarter is disappointing; however, this data has not yet fully reflected the profound impacts of Trump's tariff policy, federal government spending cuts, and immigration policies. The market is closely watching the non-farm payroll report for April, which will be released on Friday (tonight), as this will be the first key "hard data" since Trump announced the reciprocal tariff policy on April 2, and its importance is self-evident. Wall Street analysts expect that the non-farm payrolls for April will add 133,000 jobs, which is a decrease compared to previous months but still in a healthy state, with the unemployment rate remaining at 4.2%. According to previously released data from ADP, private sector employment only grew by 62,000, and ADP's predictions often differ significantly from actual data. Michael Hartnett, an analyst at Bank of America, stated that as long as employment data remains resilient, optimistic expectations for lower tariffs, lower interest rates, and tax cuts may drive a market rebound and alleviate concerns about a U.S. economic recession. Under Elon Musk's leadership, DOGE has fully initiated cost-cutting measures, while immigration deportation actions are also accelerating, leading to a significant reduction in border crossings. In this context, if employment data shows weakness, it may provide strong arguments for Trump's critics; conversely, if the data is strong, it will at least silence critics in the short term. The Impact of Tariffs on the Economy Has Not Yet Been Fully Reflected The first quarter GDP hardly reflects the true state of the U.S. economy. Analysts believe that although the first quarter GDP fell by 0.3% year-on-year, this was mainly influenced by several statistical factors rather than a direct impact from Trump's policies. A surge in imports is one of the key factors, as companies stockpiled goods in advance to cope with tariffs, leading to a significant deduction of import data from GDP. Theoretically, this should be offset by an increase in inventory, but strangely, the data did not show this. Ben Herzon, an economist at S&P Global, estimates that without the assumptions of the Bureau of Economic Analysis, GDP could have actually contracted by 1.5% instead of 0.3%. Some analysts point out that despite widespread discussion about tariffs, very few tariff costs have actually been passed on to U.S. consumers. Retailers are currently striving to maintain price stability, perhaps because they hope Trump will make further concessions. It can be speculated that the early implementation of tariffs and expectations for more tariffs in the future may suppress companies' willingness to hire. However, there have not yet been any obvious signs of this, as the number of unemployment insurance claims has remained low. Investors Bet on Trump's Position Softening Hartnett from Bank of America stated that investors are now betting that Trump will take a more market-friendly stance in the coming months, and if tonight's non-farm report shows resilience, concerns about a U.S. economic recession may further diminish. Hartnett noted that market participants are betting on a scenario of "lower tariffs, lower interest rates, and lower taxes." A significant easing of financial conditions, combined with strong spending on artificial intelligence, will alleviate growth concerns, "as long as employment data does not collapse." ** U.S. stocks have rebounded in the past two weeks as the market optimistically believes that the U.S. will negotiate with major trading partners. However, weaker-than-expected economic data will keep market sentiment unstable. Risk Warning and Disclaimer The market is risky, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the individual user's specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk