Citi analysts now expect the Federal Reserve to delay its first rate cut to September, citing signs of a gradually cooling U.S. labor market despite headline job gains in May.
May Jobs Data: Mixed Signals Beneath the Surface
The U.S. economy added 139,000 nonfarm payrolls in May, slightly above consensus expectations of 126,000, according to the Labor Department. However, this was down from revised April figures of 147,000 and significantly below the initial April print of 177,000.
Notably, federal employment fell by 22,000, reflecting President Trump’s ongoing efforts to reduce government workforce size. Since January, federal jobs have declined by 59,000.
Other Key Highlights:

Unemployment rate held steady at 4.2%

Average hourly earnings rose 0.4% MoM, up from 0.2% in April

Strong hiring seen in health care, hospitality, and social assistance

Revisions to March and April data erased a combined 65,000 jobs

Citi’s Revised Forecast
Strategists at Citi, led by Andrew Hollenhort, noted that weakness in services and manufacturing activity, along with cooling labor momentum, supports a delayed policy pivot from the Fed.
Citi’s new forecast:

Fed to hold rates steady in June and July

First 25 bps rate cut expected in September

Further 25 bps cuts at every Fed meeting through March 2026

Total forecasted easing: 125 basis points

What to Track Next
Markets will likely shift focus to the upcoming Consumer Price Index (CPI) reading and the Federal Reserve’s June policy meeting for confirmation on the timing of the rate cycle pivot.
Track Economic Momentum with Real-Time Data
Monitor sector-wise employment trends and other macro indicators using the Economics Calendar. It gives real-time access to upcoming economic releases—ideal for gauging Fed policy direction.
Follow Federal Balance Sheet & Rates
Dig deeper into macro risk with the Commodities API to assess dollar impact and real rates via precious metals and oil trends—key to Fed calculus.