Nonfarm Payrolls Record First Consecutive Positive Growth of the Year. U.S. Labor Market Stabilization Signals Emerge as Fed Policy Shifts to Inflation Data

TradingKey - At 8:30 AM ET on May 8, the U.S. Bureau of Labor Statistics released the April non-farm payroll (NFP) report. This marks the first time in nearly a year that non-farm payrolls have recorded consecutive monthly growth, providing further support for the Federal Reserve to maintain interest rates unchanged and shifting market attention toward inflation data.

【Source: U.S. Bureau of Labor Statistics】

Specifically, U.S. seasonally adjusted non-farm payrolls increased by 115,000 in April, exceeding the expected 62,000, while the previous figure was revised from 178,000 to 185,000.

Job growth was primarily concentrated in healthcare, transportation and warehousing, and retail.

Healthcare added 37,000 jobs, largely in line with the average monthly gain of 32,000 over the past 12 months; employment in the transportation and warehousing sector increased by 30,000, mainly driven by a rise in the number of couriers and messengers; the retail sector added 22,000 jobs, within which warehouse clubs, supercenters, and other general merchandise retailers added 18,000 jobs.

Job declines were mainly concentrated in the federal government and the information sector.

The downward trend in federal government employment continued, with a single-month reduction of 9,000. Since peaking in October 2024, federal government employment has decreased by a cumulative 348,000, a total drop of 11.5%. It should be noted that federal employees on temporary furlough during government shutdowns are still counted in the establishment survey's employment figures due to payroll accounting cycle methodologies.

Information sector employment decreased by 13,000 in a single month. Since reaching a recent peak in November 2022, the sector has seen a cumulative reduction of 342,000 jobs, a decline of 11.0%.

Notably, wage growth has slowed. Average hourly earnings in April grew 0.2% month-over-month to $37.41 and 3.6% year-over-year, both trailing market expectations. However, the average weekly hours worked increased slightly by 0.1 hours to 34.3 hours, which to some extent supported real household income.

Overall, U.S. non-farm payroll growth was higher than expected and the unemployment rate held steady at 4.3%, both indicating that the U.S. labor market remains robust. This further demonstrates that there is no conflict between the Fed's dual mandate (promoting maximum employment and maintaining price stability) and provides sufficient reason for the Fed to continue holding interest rates steady.

【Source: FedWatch】

Following the data release, market pricing for Fed rate cuts showed little change. CME "FedWatch" data shows: the probability of the Fed maintaining rates in June is 93.4% (vs. 96.9% before the release), with a 6.6% probability of a cumulative 25-basis-point cut (vs. 3.1% before the release). The probability of the Fed maintaining rates in July is 87.4% (vs. 90.7% before the release), with a 12.2% probability of a cumulative 25-basis-point cut (vs. 9.1% before the release).

The latest remarks from Chicago Fed President Austan Goolsbee reinforced the current view that the Fed's focus should shift to inflation data. He stated that the April employment data showed more stability in the labor market against a backdrop of concerning inflation. "On the other side of the Fed's dual mandate, the performance of inflation has not been ideal and has recently been moving in the wrong direction," he said, adding that it remains unclear how price pressures will ultimately evolve. He indicated that both rate cuts and rate hikes remain viable options.

Sharing this view is Nick Timiraos, often referred to as the "Fed mouthpiece." He stated that a major question facing the Fed four months ago—whether rate cuts were needed to support a seemingly shaky labor market—has now disappeared. The labor market has stabilized, while inflation is shifting from a previous deceleration to a re-acceleration, influenced by tariffs and the war in Iran.

With hiring activity remaining solid in April, the unemployment rate unchanged, and income growth staying firm, there is insufficient justification for a rate cut. As the labor market provides the Fed with room to continue waiting, the next step in policy discussions will be when and how to shift toward "neutral"—where the probability of a rate hike and a rate cut become roughly equal—and the answer will likely depend almost entirely on future inflation data.