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Headline nonfarm payrolls rose by a higher-than-expected 177,000 jobs in April (consensus at 138,000, Federated Hermes at 176,000), as the anticipated chilling effect on hiring from President Trump’s tariffs have not yet made their way into the labor market. But February and March results were collectively revised down by 58,000 jobs, which reduces April’s gain to an adjusted 119,000 jobs, compared to gains of 185,000 jobs in March, 102,000 in February and 111,000 in January.

Similarly, private payrolls posted a stronger-than-expected gain of 167,000 jobs in April (consensus at 125,000), compared with gains of 170,000 in March, 107,000 in February and 79,000 in January. With the combined downward revision of 48,000 jobs over the previous two months, April’s adjusted private payroll gain is also 119,000. 

No DOGE impact yet Federal payrolls have declined by only 26,000 jobs over the past three months through April. But according to data from outplacement firm Challenger, Gray & Christmas, the Trump administration’s efforts to reduce government payrolls totaled more than 280,000 planned layoffs of federal workers and contractors over the past two months. So, these terminations will likely filter into the jobs report in the coming months. In the meantime, employees who are on paid leave or receiving severance are still counted as employed, and some workers may have already found new jobs in private industry. Bloomberg reported that at least a half million U.S. jobs could be impacted, as these job cuts extend to universities and others who rely on government funding.

Solid report across the board Household employment rose by 436,000 jobs in April, more than double March’s pace, which drove the participation rate up for the second consecutive month to 62.6%. Average hourly earnings remained steady at an eight-month low of 3.8% year-over-year (y/y), wages grew at a softer-than-expected pace of 0.2% month-over-month (m/m), and average hours worked posted a stronger-than-expected 34.3. 

Fed on hold next week Today’s solid jobs report with declining wage inflation did not signal an urgent need for the Federal Reserve to adjust its monetary policy at its next FOMC meeting on May 7. In our view, it has the luxury of time to evaluate incoming data in the aftermath Trump’s “Liberation Day” tariff announcement on April 2. Amid extreme volatility, in which the S&P 500 plunged by more than 21% from its record high on February 19 to its long-term support level on April 7, stocks have rebounded nearly 18% over the past month, reclaiming all the ground lost since April 2.

Other key labor-market indicators were soft:

• ADP private payroll survey April added a much weaker-than-expected gain of only 62,000 jobs (consensus at 115,000), a nine-month low that was half the pace of March’s gain of 147,000 jobs. Workers who changed jobs last month saw their wages rise by 6.9% y/y, up from 6.7% in March but less than half the cycle peak of 16.1% in April 2022. Job stayers in April earned a more modest 4.5% y/y raise, down from 4.6% in March and below the peak of 7.8% in September 2022. 
• Initial weekly jobless claims This high-frequency leading employment indicator declined to a two-month low of 216,000 for the April survey week, though they leapt to a two-month high of 241,000 for the week ended April 26, due to spring break school closings in New York. 
• Challenger, Gray & Christmas layoffs Employers announced that layoffs of 105,000 in April were 63% higher than a year ago, but 62% below March’s five-year high of 275,000 layoffs. Technology accounted for 26% of the total layoffs last month, with warehousing totaling 21%. 
• Job Openings & Labor Turnover Survey (JOLTS) March job openings surprisingly declined 3.9% m/m to 7.192 million, down from 7.48 million in February, and 41% below a record 12.182 million job openings in March 2022. The rate of job openings dropped to a six-month low of 4.3% in March from 4.5% in February and 4.7% in January, well below a record 7.4% in March 2022. The ratio of available job openings for every unemployed worker fell to a four-year low of 1.0 in March, down sharply from a peak of 2.0 in March 2022. 

Unemployment rate steady, participation rates rise, labor impairment rate falls Household employment (an important leading employment indicator) more than doubled to a gain of 436,000 workers in April, compared with 201,000 workers in March and a decline of 588,000 workers in February (its worst monthly performance since it lost 762,000 jobs in December 2023). The official unemployment rate (U-3) held steady at 4.2%, below July 2024’s three-year high of 4.3%, but still well above April 2023’s 53-year low of 3.4%. The Fed expects U-3 to rise to 4.4% by year-end.

The labor impairment rate (U-6) declined again for the second consecutive month to 7.8%, down from 7.9% in March and 8.0% in February, which was its highest reading since 2021, but still well above the cycle low (dating back to 1994) of 6.6% in December 2022. The participation rate surprisingly rose for the second consecutive month to a three-month high of 62.6% in April, up from 62.5% in March and a two-year low of 62.4% in February. That compares with a post-pandemic high of 62.8% in November 2023 and a pre-pandemic cycle high of 63.3% in February 2020. 

Wage inflation & hours worked are steady Average hourly earnings rose a better-than-expected 0.2% m/m gain in April, down from a 0.3% m/m gain in March. But wages held steady at a slower-than-expected 3.8% y/y pace (consensus at 3.9%) in April, down from 3.9% in both January and February, 4.0% y/y in December, and 4.2% in November. The Fed is targeting a 3% gain. 

Meanwhile, average weekly hours worked remained steady at 34.3 in April, up from 34.2 in February and 34.1 in January. Each change of 0.1 hour worked is the equivalent of adding or subtracting an estimated 350,000 jobs to or from the economy. This is important, as employers tend to change worker hours before they alter staff size. 

K-shaped recovery gap widens The unemployment rate for highly educated workers declined to 2.5% in April from 2.6% in March, but still up from September 2022’s cycle low of 1.8%. But that of less-educated workers leapt to 6.2% in April from 5.8% in March, well above its 31-year low of 4.4% in November 2022.

Sector details mixed:

• Temporary help (an important leading employment indicator) gained 4,000 jobs in April for the first time in four months, after losing 3,000 jobs in March, 2,000 jobs in February and 8,000 jobs in January. This sector has lost jobs in 33 of the past 36 months. 
• Manufacturing lost a better-than-expected 1,000 jobs in April (consensus at a loss of 5,000 jobs), down from gains of 3,000 in March and 8,000 in February, after sustaining losses in five of the previous seven months.
• Construction added 11,000 in April, after gaining 7,000 in March and 12,000 jobs in February, as the brutal winter weather has transitioned to spring. The sector lost 3,000 in January. In the aftermath of last year’s hurricanes and the wildfires, we still expect construction to accelerate in the spring from rebuilding. 
• Retail trimmed 2,000 in April, after adding 22,000 in a strong March and losing 4,000 in a weak February. Retail sales enjoyed a strong March due to the late Easter and Passover season. 
• Leisure & hospitality hiring rose by 24,000 in April and 38,000 in March, after shedding 34,000 in February and 14,000 in January, likely due to bad winter weather. The sector added 47,000 in December and 54,000 in November.