EB SECURITIES: Non-farm data temporarily stable, alleviating market recession concerns.

EB Securities released a research report stating that despite pressure on the US economy, stronger than expected non-farm data has weakened concerns of a US economic recession, and the Federal Reserve may maintain more patience. In terms of employment data, although there may be risks of weakening in subsequent employment data, for the month of April, the unemployment rate did not rise, and the reading of 177,000 new jobs created was not bad. In the short term, the Federal Reserve may continue to wait and watch for more signals of economic weakness. The core points of the report are as follows: Event: On May 2, 2025, the US Department of Labor released the April 2025 non-farm data: 177,000 new non-farm jobs were added, higher than the expected 130,000, and the previous value was revised from 228,000 to 185,000; the April unemployment rate was 4.2%, in line with expectations, and the previous value was 4.2%; average hourly wages rose by 3.8% year-on-year, slightly lower than the expected rise of 3.9%, but the same as the previous value of 3.8%. Core Points: In April 2025, new job growth in the US declined, but was higher than market expectations. Structurally, under the impact of tariffs, employment in the retail and leisure/hospitality sectors weakened, indicating pressure on the US economy. However, there was a significant increase in new jobs in the transportation and warehousing sector in April, which partially offset the impact of tariffs on employment data. This may be due to US manufacturers rushing to recruit workers before the implementation of reciprocal tariffs, and the sustainability of this trend remains in question. Despite the structure of the non-farm data and the revised previous value, pressure still exists in the US job market. Although there is pressure on the US economy, stronger than expected non-farm data has reduced concerns of a US economic recession, and the Federal Reserve may maintain more patience. From the perspective of employment data, although there may be risks of weakening in subsequent employment data, for the month of April itself, the unemployment rate did not rise, and the reading of 177,000 new jobs created was not bad. In the short term, the Federal Reserve may continue to wait and watch for more signals of economic weakness. New non-farm job growth declined, while employment in transportation and warehousing sector rose and employment in retail and leisure/hospitality sectors weakened. (1) Transportation and Warehousing Sector: In April, the transportation and warehousing industry saw a significant increase in new jobs, with 29,000 new jobs created, significantly higher than the 3,000 new jobs in March, partially offsetting the impact of tariffs on employment data. (2) Retail and Leisure/Hospitality Sectors: New employment was -2,000 and +24,000, significantly lower than the previous values of +22,000 and +38,000. Labor force participation rate increased, and the unemployment rate remained stable compared to the previous value. In April 2025, the labor force participation rate was recorded at 62.6%, higher than the previous value of 62.5%, with an increase in labor force participation rate among the middle-aged and elderly population. In terms of the unemployed population, there was an increase of 82,000 people in April (an increase of 31,000 people in the previous month), and the employed population also increased by 436,000 people (an increase of 201,000 people in the previous month), leading to the U3 unemployment rate (unemployed people/labor force) remaining stable at 4.2% in April. In addition, the U6 unemployment rate in April was recorded at 7.8%, lower than the previous value of 7.9%, indicating an improvement in the part-time job market. In terms of interest rate cuts, although there is pressure on the US economy, stronger than expected non-farm data has reduced concerns of a US economic recession, and the Federal Reserve may maintain more patience. Looking ahead, from the perspective of employment data, although there may be risks of weakening in subsequent employment data, for the month of April itself, the unemployment rate did not rise, and the reading of 177,000 new jobs created was not bad. In the short term, the Federal Reserve may continue to wait and watch for more signals of economic weakness. After the release of the non-farm data, the yield on the 10-year Treasury bond rose by 8 basis points to 4.33%. According to the CME Fedwatch tool, the market expects a 25 basis point rate cut as early as July 2025 with a 55.2% probability, and a second rate cut in September with a 48.9% probability, totaling 3 rate cuts for the year. Risk Warning: US economic downturn exceeding expectations; Trade and geopolitical situations evolving beyond expectations.