US Nonfarm Payrolls May Fall Due to Tariffs, Fed Rate Cut Likely

Global economists are closely monitoring the upcoming US April nonfarm payroll data report, scheduled for release on Friday. The market is concerned that the US labor market may face significant turbulence due to the tariff battle initiated by the Trump administration. This has led to an increased probability of the Federal Reserve implementing the year's first rate cut in June.

Apollo Global Management, a top asset management firm on Wall Street, has warned that the 145% tariffs imposed on other countries in early April, coupled with the escalation of global trade wars, could result in this month's nonfarm payroll data falling into negative territory. The unemployment rate is feared to surge to 4.5%, up from the expected 4.2%. During the survey period from April 7 to 13, the effective US tariff rate reached 23%, a new high since 1900. Both business confidence and consumer expectations have collapsed simultaneously.

The expectations for a Fed rate cut are rapidly increasing. Board Member Waller, a 2024 voter, stated that tariffs causing layoffs will support rate cuts. cleveland Fed President Mester, a 2026 voter, hinted that action will be taken if June data meets expectations. Goldman Sachs' model indicates that initial jobless claims, currently at 222,000, the ISM Services Index, and other high-frequency indicators are precursors of a recession. The probability of a 25 basis point rate cut in June has soared to 12.7% according to the CME's FedWatch tool.

Despite the current labor market showing resilience, with March nonfarm payrolls adding 228,000 jobs, far exceeding expectations, the lagging effects of tariffs are becoming apparent. There have been sharp declines in new orders for businesses, frozen capital expenditure plans, historically high levels of inventory backlog, and consumers are boosting purchasing power ahead of price hikes. A recent survey shows that economists have raised the probability of a US recession in the next 12 months from 30% to 45%, with some warning of a probability exceeding 50%. Apollo's model suggests that a supply chain breakdown triggered by tariffs could lead to an economic recession in the summer of 2025, making nonfarm payroll data a key turning point in predicting the "rate cut pace-economic hard landing" logic chain.