Citibank Warns of 4.2% Unemployment Rate, 95,000 Job Additions in March

This week, the U.S. economy is under significant pressure, with analysts warning that the upcoming non-farm payrolls report could serve as a critical indicator of the economic landscape. citibank analysts have highlighted that the market is rapidly shifting towards pessimism, citing multiple factors including rising tariff costs, weak consumer spending, government funding cuts, and high levels of uncertainty. Despite these challenges, some economic indicators, such as the unemployment rate and average monthly job growth, have remained relatively stable.

Citibank's pre-report analysis suggests that the March non-farm payrolls data could be the first clear signal of an economic slowdown. The bank predicts that new job additions for March could be as low as 95,000, with the unemployment rate rising to 4.2%. This would mark a significant slowdown in the labor market, which could prompt the Federal Reserve to resume interest rate cuts as early as May, with a potential total reduction of 125 basis points for the year.

The analysts emphasize that while hard data has not yet shown widespread weakness, the labor market is expected to face its most significant slowdown between June and July. This period is traditionally marked by increased hiring, but this year, the pattern may be disrupted due to rising uncertainty, government layoffs, and increased tariff costs, which could further dampen corporate hiring intentions.

Citibank's report also notes that wage growth is expected to slow in March, with average hourly earnings projected to increase by only 0.2%. This deceleration in wage growth, combined with an anticipated rise in the unemployment rate, could serve as a catalyst for the Federal Reserve to adjust its monetary policy. The report suggests that the unemployment rate could rise to 4.19% in March, reflecting a slight increase in continuing unemployment claims.

Additionally, the report highlights that government layoffs could have a more immediate impact on the household survey data compared to the payroll statistics. The March data may show mild signs of government layoffs, with state and local government employment expected to decrease by 10,000 jobs. Further government job losses, estimated at around 300,000, could occur between May and September, potentially increasing the unemployment rate by 0.1 to 0.3 percentage points.

In summary, the upcoming non-farm payrolls report is crucial for assessing the health of the U.S. economy. While some indicators remain stable, the combination of rising tariff costs, weak consumer spending, and government funding cuts has raised concerns about a potential economic slowdown. Policymakers will need to closely monitor these developments and take proactive measures to mitigate the risks.

Ask Aime: What can we expect from the upcoming non-farm payrolls report on the U.S. economy?