Nonfarm Payrolls

The U.S. labor market held up surprisingly well in April, as employers continued to hire at a healthy pace even when faced with dramatically higher tariffs. Nonfarm payrolls grew by 177K in the U.S. in April, topping the +130K consensus, but moderated slightly from the 185K added in March, according to data released by the U.S. Bureau of Labor Statistics on Friday.

The previous month's number, though, was revised down from +228K in its initial print. The BLS also revised February's print down by 15K to +102K, meaning that for the first two months of the year, there were 58K fewer jobs than previously reported.

The unemployment rate remained at 4.2%, as expected.

"The 177,000 increase in jobs and unemployment rate unchanged at 4.2% will strengthen the Federal Reserve’s no-action plan. It will likely hold rates, compared to earlier forecasts for a 25 bps cut at its May 6-7 meeting," said Chris Lau, Investing Group Leader for DIY Value Investing.

The labor participation force rate ticked up to 62.6% from 62.5%.

Health care, transportation and warehousing, financial activities, and social assistance continued to see increases in hiring, while federal government employment fell, the U.S. BLS said.

"The job increases in health care, transportation and warehousing, financial activities," Lau said. "DOGE activities led to a drop in federal government jobs. The government cut 9,000 jobs last month and 26,000 since January. The auto parts market lost 4,700 jobs. Although the government will lessen tariffs, be wary of industries with such headwinds. Investors should avoid firms like Magna (MGA), Advance Auto Parts (AAP), and Aptiv (APTV)."

Average hourly earnings rose 0.2% M/M in April, less than the +0.3% consensus, and slowing from the 0.3% increase in March. Y/Y, average hourly earnings increased 3.8%, less than +3.9% expected and +3.8% prior.

"Taken at face value, the April employment data displayed remarkable stability, leaving aside the question of the sustainability of that feature," said Mark Hamrick, senior economic analyst at Bankrate.

Equities reacted positively, with Nasdaq futures, S&P futures, and Dow futures each pulling up 0.9%. Bonds fell. The 10-year Treasury yield rose 6 basis points to 4.28%.

"While many will dismiss this report as 'the past,' these numbers suggest US economic resilience going into an uncertain period," said economist Mohamed A. El-Erian in a post on X. "With favorable supply and demand signals from the jobs report, it becomes virtually a certainty that the Federal Reserve will not cut interest rates next week."

Fitch Ratings' head of economic research, Olu Sonola, warns that economic uncertainty hasn't diminished. "For now, we should curb our enthusiasm going forward given the backdrop of trade policies that will likely be a drag on the economy," he said. "The key message coming from the totality of the data this week is that the U.S. economy was fundamentally strong through the first week of April, however, the outlook remains very uncertain."

Source: Liz Kiesche, Seeking Alpha