CMSC: The March non-farm payroll data in the United States exceeded expectations, leading to the market raising its expectation of a 100 basis point interest rate cut by the Federal Reserve within the year.

CMSC released a research report stating that the March US non-farm payroll data exceeded expectations, partially reflecting the impact of the end of the strike, with other data showing mixed details. The risk of recession caused by higher-than-expected tariffs and tightening financial conditions remains the main theme in overseas markets. US Treasury yields remain low, US stocks are under pressure, and market expectations for a Fed rate cut this year have increased to 100 basis points. Despite the strong non-farm payroll data in March, the deep adjustment of US stocks after the imposition of tariffs exceeded expectations, along with tightening financial conditions and recession expectations, remain the main theme in overseas markets. The 2-year US Treasury yield, sensitive to Fed policy, remains near 3.56%, while the 10-year US Treasury yield is around 3.95%, with the upward trend in US Treasuries temporarily halted. Events: On April 4th, the US Bureau of Labor Statistics (BLS) released that in March 2025, non-farm payroll employment in the US increased by 228,000, up from 151,000 in the previous month, and the unemployment rate stood at 4.2%, up from 4.1%. Key points from CMSC's analysis: The March US non-farm payroll data exceeded expectations, partly reflecting the impact of the end of the strike, with mixed details in other data. The risk of recession caused by higher-than-expected tariffs and tightening financial conditions remains the main theme in overseas markets. US Treasury yields remain low, US stocks are under pressure, and market expectations for a Fed rate cut this year have increased to 100 basis points. 1) Non-farm payrolls increased by 228,000 in March, well above the market's expected 140,000. However, previous month's data was significantly revised downwards, with February's non-farm payrolls revised from 151,000 to 117,000, and January's revised from 125,000 to 111,000, making a total downward revision of 48,000. 2) Looking at industries, the government sector added 19,000 jobs (up from 10,000), with 4,000 jobs lost in the federal government (down from 11,000) and gains in both state and local government employment. Healthcare and social assistance continue to be the main drivers of job growth, with 78,000 jobs added in this area. The leisure and hospitality industry saw an increase of 43,000 jobs. Retail also saw strong growth, adding 23,700 jobs due to the end of the strike. Construction maintained its job growth at 13,000, with job vacancies in the financial and insurance industry decreasing significantly. 3) The labor force participation rate increased to 62.5%, with the U3 unemployment rate rising slightly to 4.2% and the broader U6 unemployment rate falling slightly to 7.9%. 4) Wage growth remained stable, with hourly wage growth decreasing slightly to 3.8% year-on-year and increasing by 0.3% month-on-month. The average weekly hours in the private sector remained weak at 34.2 hours, indicating a slowdown in labor demand. Despite the strong non-farm payroll data, the deep adjustment in US stocks after the imposition of tariffs by the Trump administration, along with tightening financial conditions and recession expectations, remain the main theme in overseas markets. The 2-year US Treasury yield, sensitive to Fed policy, remains near 3.56%, while the 10-year US Treasury yield is around 3.95%, with the upward trend in US Treasuries temporarily halted. CME data shows that overseas markets now see a 100 basis point reduction in Fed rates as a probable scenario. The three major US stock indices remain under pressure, with the Nasdaq down 3.3% to around 16012, the S&P down 3.1% to around 5227, and the Dow down 2.7% to around 39470. The US Dollar Index has rebounded slightly to around 102.37. Of course, the risk of a US recession could still reverse, depending on three factors going forward: 1) any changes in US tariffs around April 9th, 2) the implementation of US monetary policy by the Fed, and 3) the progress of Trump 2.0 tax cuts. Risk Warning: Fed policy could exceed expectations.