The Fed might actually slash rates next week after the Bureau of Labor Statistics’ report on Friday showed that nonfarm payrolls increased a seasonally adjusted 177,000 for the month, slightly below the downwardly revised 185,000 in March but above the Dow Jones estimate for 133,000.
Vicky Pryce, who works as chief economic adviser at the Center for Economics and Business Research, said the Fed will be watching these labor numbers closely ahead of their meeting next week. She said policymakers see these payroll figures as a clear signal of what the country’s business climate looks like right now.
Vicky pointed out that multiple surveys are already showing companies cutting back hiring plans sharply because of all the mess around trade policy. Nobody wants to take big risks when they don’t know what kind of trade barrier might hit next.
Vicky also mentioned a brewing problem that hasn’t even made it into the labor data yet. Some federal employees have already been told they’re losing their jobs, but those layoffs haven’t shown up in the job reports yet.
That hit is still coming unless there’s some kind of reversal. Vicky tied that to ongoing instability, including disruptions at companies like Tesla, where Elon Musk was recently rumored to leave. The whole economy feels unstable, and businesses are reacting by holding back.
Hiring freeze spreads as tariffs throw companies into chaos
Next week, the Fed will have to decide what to do about all this. Most people still expect them to hold steady. But Vicky’s not so sure. She said recent economic numbers are shaky enough that a rate cut can’t be ruled out. She reminded everyone that GDP shrank in Q1. Even though the annualized rate shows just a 0.3% drop, it’s still a big red flag. It’s not a sharp fall, but it means the economy isn’t really growing.
Vicky explained that April’s PMI data shows manufacturing is getting hit hard. Even the services sector, which had been more stable, is now slowing down. She said the services industry is “just growing”—barely moving forward. All of this signals that the economy is stalling, not gaining strength.
So what’s stopping the Fed from cutting already? Inflation. They’re still trying to keep a lid on it. But even with that concern, Vicky said a rate cut could still happen soon. If it doesn’t come next week, it’ll come soon after. “The economy is definitely showing signs of a slowdown,” she said.
Europe’s economy is also feeling the burn
The Eurozone is in a similar mess. Inflation held steady at 2.2%, which is technically near the ECB’s target. But Vicky made it clear that central bankers there are still nervous. Growth in the EU got a little bump in Q1.
But that was just importers trying to beat tariff deadlines. Companies rushed to ship goods before new charges landed. That built up inventories in the US and temporarily made Europe look stronger than it actually was.
The latest April data shows that growth isn’t sticking. Manufacturing is still shrinking. It’s not falling apart, but it’s not growing either. Services, which had been a stronger area in some countries, are now slowing down too.
Governments and the European Commission are already throwing more spending into the mix, trying to avoid a deeper slump. That includes budget boosts and new support packages. Vicky said rate cuts are still on the way, probably faster than people expect. She said we might even see another one in June. The ECB is already ahead of the Fed on that front, and Vicky said they’ve made the right call.
She pointed out that in countries where rates have already dropped, mortgage lending is picking up. People are surprised, but the math makes sense—cheap rates mean easier loans. And that trend is priced in now. Everyone expects low rates.
Vicky wrapped up by saying more rate cuts are “definitely coming,” both in Europe and the US, as policymakers scramble to manage the fallout.
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