Insights 
VT 
Goldman Sachs predicts a 125,000 increase in payroll growth for May, aligning with consensus expectations. The unemployment rate is anticipated to remain at 4.2%.
Wage growth is projected to rise by 0.3% month-on-month, with big data tracking tools indicating solid labor market gains. However, federal government hiring may decrease due to workforce cuts linked to tariff-related uncertainty.
Federal Government Payroll Decline
Approximately a 10,000 decline in federal government payrolls is expected due to staffing reductions amid trade policy uncertainty. Despite these cuts, the overall labor market is expected to maintain resilience.
Goldman Sachs foresees a steady labor report for May, with underlying risks from policy issues. The Federal Reserve is likely to remain patient without any immediate policy changes in response.
This report provides a fairly straightforward read on the jobs market for May, with Goldman Sachs forecasting a gain of 125,000 in nonfarm payrolls. That’s in line with what most analysts expect, suggesting no big surprises. The jobless rate is projected to stick at 4.2%, meaning overall unemployment should show no material shift. Usually, flatness there implies that hiring and job separation are broadly balanced. The predicted payroll growth may seem decent but doesn’t point to an acceleration in jobs expansion.
Consistent Labor Demand
Wages are seen increasing by 0.3% on the month, which, while not rapid, still points to consistent demand for staff. It’s worth noting that this specific bump in pay is corroborated by private data sources tracking hiring and wages in real-time. They point to healthy job gains across different sectors, even if not spectacular. That matters because steady pay growth acts as a cushion—supporting consumption even if hiring softens slightly in parts of the market.
Still, we’re watching a bit of pressure at the federal level. Cuts to government staffing, around 10,000 jobs by some estimates, are expected mainly due to uncertainty surrounding tariffs and trade policy. When departments feel unclear about funding or shifting priorities, they tend to freeze hiring or let fixed-term contracts expire quietly. This doesn’t spill over dramatically into the wider jobs picture just yet, but it’s a drag when trying to assess momentum across sectors.
Blankfein’s team highlights that despite these cuts, private employers are still hiring at a clip that’ll keep the labour setup stable. For us watching option pricing or setting positions in futures markets, calm on wages and jobs can reduce the near-term volatility tied to macro news.
Now, about the Fed. They’re likely to stay put. The central bank usually doesn’t change policy unless the data pushes it. What we’re seeing now—from the relatively even labour figures to steady earnings—isn’t enough to trigger a response. Powell and co. have shown us they’ll tolerate minor fluctuations, especially as inflation data softens. They aren’t in a hurry.
From our side, lower headline movement in the employment prints tends to limit the chance of sharp repricing in rate expectations. For volatility traders, that typically means keeping an eye on single-session data swings rather than wholesale changes to curves. Unless we see wage inflation jump or a payroll shock, skew and outright volatility are likely to reflect complacency. It’s environments like these where shifts surprise because expectations become ingrained.
Stay alert for discrepancies between realised data and models relying on big data tools—they’ve been helpful but are no replacement for confirmed prints. When they start to diverge, it can create quick moves in the short end. If realised labour data starts matching the softness implied in some trade-sensitive sectors, that may revive pricing around rate cuts. Until then, current ranges seem firm.
Traders have time on their side heading into this next print. There’s no immediate catalyst suggesting portfolio overturn is required, but there is reason to monitor specific exposures as we head into late Q2.
