March 30, 2024

QuickTakes

LIBERATION WEEK: 

March 31–April 4

Trump's Reign of Tariffs will likely dominate the economic week ahead. The big event will occur on April 2 (dubbed "Liberation Day" by President Donald Trump). That's when the administration will impose reciprocal tariffs on a number of America's trading partners. However, it's very likely that tariff announcements will continue after that date, as bilateral negotiations are teased out and sectoral tariffs come into place later on. Thus, business and consumer uncertainty might be even higher after this week.

In any event, several key labor market indicators for March are due out. We expect this to be the first "clean" read on the Trump 2.0 jobs market, since bad weather in January and February prevented some employees from working (chart). So Friday's nonfarm payroll report may show a healthy rebound. We think monthly payroll gains will be far lower in Q2 and Q3, however, as businesses pause hiring and as the migrant labor force possibly starts to shrink. 

Here's more on what we're watching:

(1) Employment. The labor market continues to be fairly strong. A rebound in hours worked likely boosted aggregate incomes in March. Job gains were broadening out to more segments of the economy as goods producers started to ramp up activity (chart). There's a chance that onshoring props up the labor market, as manufacturers increase their capacity utilization to offset tariffs and appease Trump 2.0. But the potential for hiring to slow has increased substantially.

Challenger announced layoffs (Thu) surged in February, and likely remained elevated this month. However, we've yet to see weekly initial jobless claims (Thu) confirm notable job losses (chart). Thus, we expect March's unemployment rate will remain at or below 4.2%. We're also watching February's JOLTS (Tue) for a sense of how the pace of hiring is holding up amid Trump 2.0 uncertainty.

(2) Business surveys. We think March's ISM NM-PMI (Thu) will still be strong. That's because consumer spending on services probably won't slow until the labor market shows signs of stress. March's ISM M-PMI (Tue), on the other hand, is likely to show a worsening outlook. The current activity index may drop back below 50.0 as the manufacturing rolling recovery is put on pause (chart).

(3) International trade. February's trade report (Thu) will show imports remained at a record high according to the advance report released last week (chart). Apparently, gold imports have been a significant cause of the surge in imports. We expect the deficit to narrow in Q2 as gold imports slow, inventories are built up, and companies begin to produce more stateside (including intermediate goods).

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