The April employment report showed a significantly stronger-than-expected 115,000 gain in payrolls. This was bolstered by a positive revision to last month’s even stronger gain. Strong payrolls and a still-low unemployment rate demonstrate the labor market’s resilience despite the ongoing energy shock, easing concerns about recessionary conditions. Moreover, with wages trending lower, the risk of an inflationary spiral remains low, providing the Fed with some breathing room. 

• Total non-farm payrolls increased by 115,000 in April, significantly above expectations for a 65,000 gain. This comes as last month’s stellar increase was also revised higher to 185,000. Altogether, these demonstrate the resilience of the labor market amid the heightened uncertainty triggered by the ongoing Middle East conflict. Moreover, with wages trending lower, there are no signs yet of a problematic inflationary spiral.
• Job growth was evident across most industries, but was concentrated among healthcare, transportation & warehousing, and retail trade, making up over 90% of the increase in April. Other cyclically exposed industries also gained jobs, suggesting that the downstream impact from the energy shock likely remains muted for now. 
• On the other hand, the information industry led job shedding, its 16th consecutive month of losses. While any large-scale AI-related job displacement remains too early to tell, headwinds from the data infrastructure buildout have likely weighed on employment in the technology space. However, as this industry accounts for less than 2% of total payroll employment, its aggregate economic impact should be limited. Meanwhile, financial services, government, and manufacturing also lost jobs, the latter swinging back into contraction.
• The unemployment rate remained steady at 4.3%, while the labor force participation rate declined further to 61.8%, the lowest level since fall 2021. Structural factors, such as demographic shifts and stricter immigration policies, are weighing on labor supply. In effect, they have likely lowered breakeven employment—the level of job growth required to keep unemployment stable. As a result, even modest gains in total payrolls could pressure the unemployment rate lower, especially amid the continued absence of layoffs.
• Wages grew 3.6% from a year ago, slightly slower than expected, with last month’s figure also revised lower. The recent weakness in wages suggests that the energy shock has not yet translated into a sustained wage-price spiral that would concern the Fed most.

This month’s report points to yet again a surprisingly resilient picture of the labor market, especially amid the Middle East conflict. Alongside subdued layoffs, steady job gains—in addition to larger tax refunds this year—should help cushion consumption from the impact of higher energy prices.

However, today’s job report is hardly a signal of a reaccelerating job market. Wages have continued to soften in recent months, suggesting inflationary pressures from higher wages remain contained . As a result, the data support the view that policy tightening is not currently under consideration. It also leaves the Fed some breathing room as it continues to assess the impact of higher energy prices on the economy. Overall, we expect the incoming Federal Reserve Chair Warsh to delay the next policy rate cut until later this year.