According to the Zhitong Finance APP, the U.S. labor market showed signs of slight cooling in May, with the non-farm payroll growth from previous months being slightly revised downward, indicating that U.S. employers are becoming more cautious about the economic growth outlook as they assess the economic policies of the Trump administration and the aggressive tariffs imposed externally.
However, for the financial markets, this non-farm data is exactly what individual and institutional investors want to see—this non-farm data brings a market scale that is &#34;just right,&#34; better than market expectations but not overly strong, reflecting that the momentum of the U.S. economy remains robust without any negative disturbances to the expectation of a &#34;soft landing&#34; for the U.S. economy, while also not triggering a dramatic shift in market expectations for Federal Reserve interest rate cuts (traders are still betting that the Federal Reserve will cut rates twice this year, with the first cut expected in September).
According to the latest data released by the U.S. Bureau of Labor Statistics on Friday, non-farm payrolls in the U.S. increased by 139,000 last month, the lowest since February, with the previous two months being revised down by a total of 95,000. The unemployment rate remained steady at 4.2%, while wage growth accelerated. Compared to the general expectations of economists, the non-farm payroll increase of 139,000 was around the expected range of 126,000 to 130,000, and the unemployment rate aligned with economists' expectations.
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Economists believe that this data may help ease market concerns about a potential recession in the U.S. and significantly reduce worries that U.S. companies would quickly cut jobs in the face of higher costs related to tariffs and a slowing economic activity outlook. The Trump administration's recent decision to suspend some very stringent import tariffs (including those on China) has boosted corporate and consumer sentiment.
As a result of the report, S&amp;P 500 futures rose significantly, and the dollar appreciated in response, with the stock prices of the seven major tech giants in the U.S., which are sensitive to risk appetite, all rising in pre-market trading.
This stronger-than-expected non-farm employment report, which highlights the resilience of the U.S. labor market, marks a satisfying conclusion to this week's economic data—previously released data had disappointed the market, raising concerns about an increased probability of a recession in the U.S., but the better-than-expected non-farm data largely alleviated those worries. Other indicators released during this period included an increase in initial jobless claims and an unexpected weakening in service sector activity.
The non-farm employment data shows that the highlight of job growth in May remained among service providers, with strong performances in healthcare and social assistance as well as the leisure and hospitality sectors.
Meanwhile, industries more affected by tariffs are flashing warning signs. Manufacturing employment unexpectedly decreased by 8,000, marking the largest decline this year; while the transportation and warehousing sector saw a slight rebound in May after significant declines in the previous two months.
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Another major issue that economists and Federal Reserve officials have faced this year is to what extent Trump's efforts to cut government spending will impact the job market. Employment data shows that the federal government cut 22,000 jobs in May, the largest reduction since 2020.
Economists generally point out that as federal spending cuts affect U.S. contractors, Ivy League universities, and other institutions reliant on public funding, at least 500,000 jobs in the U.S. may be at risk.
The labor force participation rate—the proportion of the working or job-seeking population to the total population—fell to 62.4% in May, the lowest in three months. The labor force participation rate for the prime age group of 25 to 54 also saw a slight decline.
Regarding the outlook for Federal Reserve interest rate cuts, officials have indicated that they are not in a hurry to announce cuts until the exact impact of Trump's tariff policies on the U.S. economy—primarily including the labor market and inflation data—is further clarified.
Other data paints a different picture of the labor market. Despite large U.S. companies like Microsoft and Disney implementing massive layoffs, the number of job vacancies in the U.S. unexpectedly increased in April, and the overall level of domestic layoffs remains at a historical low.
Economists are also closely monitoring how labor supply and demand dynamics affect wage growth—especially as recent inflation risks have resurfaced due to tariff policies. The non-farm payroll report shows that the average hourly wage in the U.S. rose by 0.4% month-on-month in May and increased by 3.9% year-on-year, both slightly above economists' expectations, presenting a resilient labor market picture.
What the market most wants to see from non-farm payrolls: solidifying soft landing expectations while maintaining strong rate cut expectations
Both Goldman Sachs and JP Morgan, in their forecasts before the May non-farm payrolls were released, indicated that the most favorable range for non-farm job additions for the U.S. stock market and even the global financial market lies between 115,000 and 140,000, and the latest figure of 139,000 perfectly falls within this range.
Goldman Sachs' forecast indicates that non-farm payrolls within this range could drive the S&amp;P 500 index up by 0.75%-1% on Sunday. JP Morgan's outlook suggests that the S&amp;P 500 index could rise by 0.25%-1% due to this data.
JP Morgan stated that even at the lower limit of this range (115,000), it would be sufficient to maintain the current market uptrend, but attention should be paid to the unemployment rate. If the unemployment rate rises to 4.3%, the intraday gain of the S&amp;P 500 index may converge to the estimated lower limit of such scenarios (0.25%), indicating that the unemployment rate may soon accelerate to rise by 0.1-0.2 percentage points per month, potentially worsening after the full impact of the trade war is felt. However, it should be noted that due to the almost weekly changes in trade policy, any predictions carry uncertainty.
For the expectations of a &#34;soft landing&#34; for the U.S. economy and interest rate cuts, this data is considered very perfect. From the trends of the three major stock index futures, the U.S. dollar index, and the 10-year Treasury yield, the market has become more optimistic about the U.S. economic growth outlook. The &#34;CME FedWatch Tool&#34; shows that interest rate futures traders are still betting that the Federal Reserve's first rate cut this year will occur in September, with the next cut expected in December
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Goldman Sachs' team of economists believes that the Federal Reserve is still expected to implement monetary policy normalization and cut interest rates after the negative effects related to tariffs dissipate and the temporary inflation shocks significantly ease. Goldman Sachs anticipates that the peak inflation effects of tariffs will be reflected in the inflation reports from May to August, and they initially predict that the first rate cut will occur in December. The team of economists from Goldman Sachs now expects the Federal Reserve to begin three rate cuts in December rather than the previously anticipated start in July.
Economists from another Wall Street giant, Barclays Bank, predict that the Federal Reserve will implement only one rate cut in 2025, followed by three rate cuts of 25 basis points each next year (expected to occur in March, June, and September 2026). Before a positive trade consensus is reached between China and the U.S. and significant reductions in each other's tariffs, Barclays' economists expect two rate cuts of 25 basis points each this year, occurring in July and September.
Federal Reserve officials remain concerned about the inflation outlook and may choose to continue observing
A study from the New York Fed this week shows that as some local businesses in the U.S. begin to cope with the higher costs brought about by Trump's trade policies, &#34;the rapid and significant increase in tariffs has had a certain degree of negative impact on the overall employment levels and capital investment of local businesses.&#34;
Federal Reserve policymakers, including Jerome Powell, are waiting for the uncertainties surrounding Trump's tariff policies and other policies to be fully resolved. Policymakers generally state that the U.S. economy remains solid so far, allowing them to maintain patience for an extended period. They also indicate that it is currently unclear how extensive the tariffs will ultimately be and how they will affect the economy. They expect that the U.S. unemployment rate and inflation may rise due to the negative impacts of tariff policies, but the ongoing uncertainty regarding tariff policies makes it difficult for them to assess how the U.S. economy will ultimately evolve, and they remain concerned that inflation may significantly heat up in the second half of the year.
Federal Reserve Chairman Powell emphasized at the press conference following the May interest rate meeting that the Federal Reserve does not need to rush to adjust the benchmark interest rate, as the U.S. economy continues to show resilience. He stated that the current policy is moderately restrictive and that the costs of further observation are relatively low, also noting that President Trump's calls for rate cuts will not influence the Federal Reserve's work.
After high-level economic and trade discussions between China and the U.S. announced a temporary reduction in tariff policies on various goods within 90 days while seeking a broader trade agreement, the Federal Reserve's decision to maintain its monetary policy stance appears increasingly prudent. Economists are currently shifting their predictive stance, believing that the probability of a recession in the U.S. has significantly decreased, but many still predict that economic activity will slow down. In contrast, before a positive trade consensus was reached between China and the U.S., most economists predicted that the U.S. would fall into recession this year

In May, the United States added 139,000 non-farm jobs, exceeding market expectations, while the unemployment rate remained at 4.2%. This data reflects expectations of a "soft landing" for the U.S. economy, alleviating market concerns about a recession. Although the employment growth was slightly revised down, the overall performance remains strong, supporting expectations for a Federal Reserve interest rate cut. As a result, S&P 500 index futures rose, the dollar appreciated, and technology stocks generally surged

- The U.S. labor market showed signs of slight cooling in May, with non-farm payrolls increasing by 139,000, the lowest since February, and previous months' figures revised downwards.  
- This data alleviated concerns about a potential recession and indicated resilience in the labor market, with strong performance in healthcare and leisure sectors, despite a notable decline in manufacturing jobs.  
- Financial markets reacted positively, with S&P 500 futures rising, as investors maintained expectations for two interest rate cuts by the Federal Reserve later this year.

Zhitong

Disney

JPMorgan Chase

Microsoft

Goldman Sachs

Barclays

This is what the market wants to see from the non-farm payrolls! U.S. employment exceeds expectations by 139,000, reinforcing the "soft landing" outlook