JFrog stock rises as Cantor Fitzgerald maintains Overweight rating after strong Q2
Investing.com - Details from May’s nonfarm payrolls report likely indicate that the labor market could loosen in the coming months, analysts at Citi said in a note pushing back its call for the next Federal Reserve interest rate cut to September from July.
The U.S. added 139,000 jobs last month, falling from 147,000 in April but above economists’ estimates of 126,000, Labor Department data showed on Friday. April’s figure had originally stood at 177,000, while March’s total was also brought down by 65,000 to 120,000.
Federal employment declined by 22,000, reflecting an ongoing push by the White House to cut away at the size of the U.S. government workforce. Employment in the sector has slipped by 59,000 since January, when Trump returned to office for a second term in office.
Hiring in the health care, hospitality, and social assistance segments were trending up, the Labor Department’s Bureau of Labor Statistics said in a statement.
The unemployment rate was 4.2%, matching the previous month’s pace, while average hourly wage growth edged up to 0.4% month-on-month from 0.2%.
But the Citi analysts led by Andrew Hollenhort flagged that separate gauges showed contraction in services and manufacturing activity suggested a "cooling economy."
Factoring in these numbers, the strategists at Citi predicted that the Fed would leave borrowing costs on hold at a range of 4.25% to 4.5% at its meetings in June and July, before opting to slash rates in September. The brokerage is then pencilling in 25-basis point cuts at each subsequent meeting through March of next year, for a total of 125 basis points worth of reductions.
The Fed is "on hold, but cuts [are] still coming," the Citi analysts wrote in a note to clients.
Citi’s predictions roughly echo the wider market, with the CME Group’s (NASDAQ:CME) FedWatch Tool broadly pricing in no action by the Fed in June and July and a 54.5% chance of a 25-basis point drawdown in September.
The central bank recently pushed pause on a cycle of rate-cutting, partly citing uncertainty around the impact of U.S. President Donald Trump’s aggressive tariff agenda.