As we discussed last week, the launch of reciprocal tariffs on Wednesday will widen the reach, but the big bang already happened earlier this month, with tariffs implemented on the three biggest exporters to the U.S. (China, Canada and Mexico).
And keep in mind, it has now been nearly two months since Trump’s blanket 10% tariff on China (addition to any existing tariffs).
So, the exasperation over April 2nd has seemed overdone.
And we may have seen that play out in today’s sharp rebound in stocks. Add to that, later in the day, in an Oval Office press conference, Trump indicated that the reciprocal tariff plan wouldn’t be of equal scale, but rather they intend to be “very nice by comparison,” and “the numbers will be lower than what they’ve been charging us.”
Maybe more important than tariff week, its jobs week.
And we should begin to see DOGE job cuts reflected in this March report on Friday.
As a clue, remember the report last month from the recruitment firm Challenger, Gray showed the biggest layoffs in February since the covid lockdown era, and the depths of the global financial crisis.
It seems obvious that a labor market shock is coming, it’s a matter of when. The consensus view for Friday is around 140k jobs created and no change to the 4.1% unemployment rate.
It’s an optimistic view.
The question is, will the job market over the next couple of months force the Fed into a more dovish stance on interest rates?
Remember, the Fed has been telling us for the past year that signs of “cracks” in the labor market would be a condition to “react” (i.e. with rate cuts).
With the government job cuts well telegraphed, one would think that Jerome Powell would have acknowledged this labor market inevitability in his last post-FOMC press conference.
Here’s what he said about jobs …
First, he was asked about the Treasury Secretary’s observation that a large amount of the job growth under the Biden administration was government or “government adjacent” jobs.
His response, a dismissive “employment is employment.”
Well, now we have a rightsizing underway of government jobs, which makes this next commentary from Powell’s Q&A of interest: He said, “what we have is a low firing, low hiring situation,” so “if we were to see a meaningful increase in layoffs, then that would probably translate quickly into unemployment … because it’s not a big hiring market.”