Weak Non-Farm Payrolls In May Can Pull Rate Cuts Forward


  • Considering the Fed's close watch on labor market figures, the May figures will be key as they may well confirm that a slowdown is indeed underway.
  • After a weak April, the employment situation is forecast to be sluggish again. This ties in with muted economic trends seen in GDP, corporate profits and even other labor surveys.
  • Along with the likely start of a rate cut cycle for other central banks, this can pull the Fed's rate cuts forward too.
  • A weaker economy and lower interest rates suggest plenty of ideas on what to buy and what not to right now. For the short term, the broad indexes look avoidable, while geopolitically driven stocks are worth considering.


From a purely analytical perspective, the unfolding of macroeconomic trends in the US economy has been fascinating in recent times. The Fed has held rates steady, but the economy was surprisingly resilient, as seen in both the labor market and GDP growth

What to expect from the employment report

Chart 1: Unemployment Rate (Source: Trading Economics)

Chart 2: Non-farm Payrolls (Source: Trading Economics)

  • Economists expect unemployment rate to have remained unchanged in May from the previous month. Non-farm payrolls to see yet another month of below-average increase of 190,000. The actual figure could be even lower going by last month's trend. 240,000 job increases were forecast for April, but the number came in much lower.
  • The downward GDP growth revision for Q1 2024 on weaker consumer spending already signals a bigger slowdown than earlier estimated. But corporate profits fell by 1.7% quarter-on-quarter as well, a particular disappointment compared with expectations of a 3.9% increase. And the Job Openings and Labor Turnover Survey [JOLTS] also showed that job openings in April were down to the lowest levels in over three years.

Why it's important

Source: Statista

Where to invest

Avoid short-term index investing

Consider accumulating real estate

US Equities, Performance By Sector (Source: Seeking Alpha)

Selective defensives look good

Look towards the geopolitical cycle

In sum

# US Stocks Opportunities

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