Morning Bid: Fed soothes as Trump seethes

What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

U.S. stocks took heart from the Federal Reserve’s benign actions this week, taking solace in Chair Jerome Powell’s relatively sanguine view of the potential inflationary effects of rising trade tariffs and announcements of a sharp slowdown in the Fed’s balance sheet unwind.

Today I’ll discuss the effects of the Fed’s statements as well as President Donald Trump’s reaction. And then I’ll consider how the unemployment calculations the Fed uses to assess the nation’s health could be impacted by prospective retirees anxiously eyeing their falling 401ks. This and more market analysis is below.

Today’s Market Minute

* The Federal Reserve has signalled it is no rush to cut U.S. interest rates, drawing the ire of President Donald Trump, who demanded in a social media post the central bank “do the right thing”.

* Trump hosted a sit-down with top oil executives at the White House on Wednesday, charting plans to boost domestic energy production amid tumbling crude prices and a looming global trade war.

* Trump will sign a long-anticipated executive order on Thursday that aims to shut down the Department of Education, acting on a key campaign pledge, according to a White House summary seen by Reuters.

* Eli Lilly has launched its blockbuster diabetes and weight-loss drug Mounjaro in India, the world’s most populous country, which is seeing increasing rates of obesity and diabetes.

* European Union leaders will commit to doing more to make the bloc more competitive with more military muscle in the face of U.S. tariffs, other economic challenges and doubts over Washington’s future backing in defence.

Central banks on parade

After a parade of global central bank meetings on Thursday, attention will turns to April 2’s planned tariff hikes.

Wall Street stock futures held onto Wednesday’s gains overnight, and Treasury yields fell on news of the slowdown in quantitative tightening and Fed policymakers’ restated forecast for two rate cuts this year. Futures have now pushed up the odds of a third cut to 50%.

The dollar climbed against most currencies despite falling U.S. yields, perhaps because traders are positioning for next month’s tariff hikes. The currency moves may also reflect some profit-taking on the euro and euro zone stocks after the euphoric reception to Germany’s recent fiscal shock.

And yet, all told, the Fed’s actions were mostly underwhelming. Growth forecasts were cut compared to those made three months ago, while the inflation outlook rose. And the balance sheet maneuver was actually less that the full pause many in the market had expected.

Perhaps the most interesting element was President Donald Trump’s post-meeting intervention.

“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing.” His comments ended a relatively long period of not criticizing Fed policy

Although Treasury Secretary Scott Bessent has sought to calm fears about any challenge to the Fed’s operational independence, Washington analysts pointed to Trump’s firing this week of two Democratic commissioners at the Federal Trade Commission as a test of the independence of all agencies, including the Fed.

And now on to today deep dive, where I’ll examine how this year’s Wall Street stock swoon may affect prospective retirees’ decision on when to stop working – and possibly even the unemployment rate.

Wall Street jolt may jog jobless rate

In another potential feedback loop from falling stocks to the real economy, some economists now fear the risk of delayed retirement on the long-subdued U.S. unemployment rate.

One of the many reasons cited for the persistently low U.S. jobless rate in recent years has been the peaking wave of Americans reaching retirement age and leaving the workforce. Some may have left early during the pandemic, and others may have been encouraged to go by savings pots flush from years of booming stock prices.

But that decision has never affected more people than it will this year.

According to the Washington-based non-profit Alliance for Lifetime Income, a record 4.18 million U.S. workers hit retirement age in 2025, an average of 11,400 Americans turning 65 every day. And that record is set to hold for 20 years until the larger ‘Millennial’ cohort starts to trip over the line.

As is well known, many of these retirees haven’t stocked away enough cash. There are acres of reports on the inadequacy of retirement savings and the questionable viability of social security. Indeed, there’s a whole industry formed around encouraging people to save more.

The Alliance data shows more than half of ‘Baby Boomers’ turning 65 between 2024 and 2030 have assets of $250,000 or less, on average. And most can expect to live another 20 years.

Given this reality, the jarring shakeout in Wall Street stock indexes this year may force some would-be retirees to hang on in the workforce.

Michael Reid, U.S. Economist at RBC Capital Markets, reckons an enduring stock market retreat could well have a meaningful effect on the labor market and unemployment calculations.

“If you see a stock market correction, it could not only impact the spending from that cohort but we’re also talking about an upside risk to our unemployment forecast. Some of those folks may delay retirement by a year or two.”

Employers replacing workers who retire adds nothing to overall payroll growth, he added, but high rates of retirement remove people from the overall labor force, suppressing the participation rate and hence the jobless rate calculations.

By extension, delays to retirement may buoy the available labor force and potentially the rate of unemployment for a given level of payrolls.

PART-TIME AND PARTICIPATION

Multiple cross-currents complicate the employment picture, of course, including new limits on immigration, which has played a critical role in expanding the workforce in recent years.

Concern about worker shortages has been rising, partly due to immigration curbs, so many see higher labor force participation rates as warranted. Though prospective retirees are unlikely to fill factory roles or unskilled manual work often taken up by recent migrants.

High-frequency data on the scale of U.S. retirement is elusive, but the labor force participation rate has been declining of late, hitting a two-year low of 62.4% in February and still below pre-pandemic levels.

And at just 4.1%, the unemployment rate has now been pegged below 4.5% for more than three years.

However, other measures of unemployment aren’t so rosy. A broader measure, which includes those who want to work but have given up searching and those working part-time because they cannot find full-time employment, surged to 8% in last month’s jobs report – the highest since 2021.

The extent to which retirees are included in that part-time work calculation is unclear.

General anxiety is rising again within the economy – judging from business and household surveys, though not all the hard data yet. And how much of the angst translates into changed plans, decision-making and investment hinges largely on the government policy trajectory from here.

Anecdotally at least, Reuters reporting shows many older workers are sufficiently discombobulated by the combination of government upheavals and stock market volatility to worry about stopping work.

Stock values and savings pots are just one of many factors in this mix, of course, and stock corrections have come and gone quickly in the past.

But a longer-term market drawdown from such lofty levels may have more impact on the ageing U.S. population than it did in the past – adding a twist for the Federal Reserve and others to read employment market.

Chart of the day

Return to ZIRP? Most central banks insist monetary policy norms have shifted since the pandemic hit, geopolitical alliances were fractured and global supply chains ruptured. A return to zero interest rate policies of the decade after the 2008 banking crash, they argue, is highly unlikely in what’s likely a more inflationary world. But the Swiss National Bank may have missed the memo, cutting its main policy rates to just 0.25% on Thursday. It has also frequently declined to rule out a return to negative interest rates if needed.

Today’s events to watch

* Bank of England policy decision

* U.S. weekly jobless claims, Q4 current account, March Philadelphia Federal Reserve business survey, February existing home sales; Canada February producer prices

* Bank of Canada Governor Tiff Macklem speaks; European Central Bank policymakers Philip Lane, Klaas Knot and Robert Holzmann speak

* European Union summit in Brussels

* U.S. corporate earnings: FedEx, Micron Technology, Nike, Accenture, Lennar, Dardan Restaurants, Jabil, Factset

* U.S. Treasury sells 10-year inflation protected securities

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Mike Dolan; Editing by Stephen Coates)