Labor Market Under Pressure: Forecast for the Coming Months

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Today it became known that the Bureau of Labor Statistics (BLS) revised U.S. employment data, causing real turbulence in the financial markets. Employment growth for the year through March 2025 turned out to be overstated by nearly 911,000 jobs. Initially, it was believed that the economy was creating an average of 149,000 jobs per month, but the revision showed the real figure — about 73,000 jobs per month.

Reasons for the Revision

• Incomplete unemployment insurance data: some state reports were unavailable at the time of the initial estimates.
• Exclusion of undocumented workers: the revision reduced the number of workers previously counted in the statistics.
• Errors in the “birth-death” model of firms: underestimation of closures and overestimation of new business formations inflated job growth.

Macroeconomic Implications

• Economic weakness: the data revision shows that the labor market is less resilient than analysts believed.

  
  

• Fed policy: a more dovish monetary stance is now expected. The baseline scenario is a 0.25% rate cut, but the market is also discussing 0.5%.
• Inflation indicators: investors’ focus shifts to PPI (tomorrow) and CPI (Thursday), as a weaker labor market could ease inflationary pressure.

Market Reactions

• Long-term bonds: 10-year Treasury yields remain at 4.07%, reflecting cautious optimism.
• Equities: UnitedHealth (UNH) is rising on corporate news. The tech sector and growth stocks may benefit from a potential rate cut.
• Banking sector: a weak labor market and lower rates could put pressure on bank and financial company profitability.

3-Month Outlook

1. Tech sector and growth stocks:
   • a softer Fed policy will support technology companies, especially those reliant on capital for expansion.
     
   • NASDAQ may show moderate growth if inflation data does not surprise markets.
     
2. Banking sector:
   • lower interest rates may compress banks’ margins, particularly in consumer lending.
   • In the short term, pressure on large bank stocks is expected.
3. Bonds and long-term assets:
   • a potential Fed rate cut creates support for bonds. 10-year Treasuries may temporarily rise in price while yields decline.
4. Inflation and consumer market:
   • a weaker labor market reduces wage pressures, which may slow consumer spending growth.
   • Investors will closely watch PPI and CPI, as these indicators will be decisive for monetary policy at the end of 2025.

💡 Conclusion

The employment data revision shows that the U.S. economy is more vulnerable than previously thought. A weak labor market combined with a possible rate cut supports tech stocks and risk assets, but at the same time weighs on the financial sector and bank equities.

For investors, it is essential to consider both macroeconomic data and corporate news in order to properly assess risks and opportunities in the short term.