Analysts on April Non-Farm Payrolls: The Fed's focus will shift from employment to inflation.
2026-05-08 21:14:18
On Friday (May 8), data released by the U.S. Bureau of Labor Statistics showed that the U.S. economy added 115,000 jobs in April, exceeding Wall Street expectations for the second consecutive month. This figure was lower than the revised 185,000 jobs added in March, but higher than the 65,000 expected by economists in a survey.
US nonfarm payrolls in April far exceeded market expectations, thanks to strong corporate profits and companies' relatively good handling of supply chain disruptions caused by the Iran conflict; the unemployment rate remained unchanged at 4.3%, in line with economists' expectations. Despite challenges posed by policy changes in trade, immigration, and taxes, most companies did not engage in large-scale layoffs, instead remaining calm in the face of various adverse factors; robust consumer demand meant low hiring was accompanied by low layoffs, and strong hiring in healthcare and social assistance sectors also supported the overall data. Meanwhile, the high level of US stocks boosted CEO confidence. The full impact of the Iran conflict and rising energy prices has not yet been reflected in the labor market: rising oil prices have put more pressure on low-income households, potentially suppressing travel and service spending, thereby dragging down hiring in retail, leisure, and other sectors, especially impacting airlines, but these effects are not yet clearly reflected in the monthly employment data.
The market now estimates only an 18% probability of a rate hike at the Federal Reserve's December meeting, down from about 23% on Thursday evening. Meanwhile, the probability of the Fed keeping rates unchanged has risen from 70.1% to 74.1%.
Institutional Views
BlackRock portfolio manager Jeffrey Rosenberg stated that there is a "trade-off" between strong non-farm payroll data and weak hourly wage growth. From a broader perspective, the report doesn't actually signal any major changes and remains a "status quo" for the Federal Reserve. At a more macro level, current macroeconomic data is "dominated by the AI theme." "When we look at GDP data and spending, the driving factor is no longer primarily consumption, but more about capital expenditure. And when looking at financial markets, what's really important is the impact of AI."
Nick Timiraos, a vocal advocate for the Federal Reserve, stated that four months ago, a major question facing the Fed was whether to continue cutting interest rates to support a seemingly shaky labor market. This question no longer exists. The labor market has stabilized, and inflation, influenced by tariffs and the Iran war, is rebounding from its previous decline. The April non-farm payroll report highlighted this shift in outlook and means that market focus will clearly shift to inflation data when judging the Fed's next policy move, given its current firm stance of holding rates steady. Robust hiring activity, unchanged unemployment, and robust income growth in April are insufficient to justify a rate cut. With the labor market providing the Fed with room to wait, the next step in policy discussions will be when and how to shift to a "neutral" stance—where the likelihood of rate hikes and cuts becomes roughly equal—and the answer will likely depend almost entirely on future inflation data.
Analyst Chris Anstey stated that the US employment data actually comes from two surveys: one for businesses and the other for households. Looking at the household survey, US employment has declined for the fourth consecutive month. Notably, this is the longest consecutive decline since the 2009 Great Recession. This truly reflects the unique situation in the current US labor market: immigration restrictions combined with a slowdown in domestic births have collectively compressed the labor supply.
Interest rate strategist Ira Jersey recently commented that the stronger-than-expected non-farm payroll data highlights that the US is far from a recession. It's difficult to see the Federal Reserve choosing to cut interest rates under these circumstances. Given that the interest rate market has largely ruled out rate cuts, we believe that US Treasury yields will not fluctuate significantly.
US nonfarm payrolls in April far exceeded market expectations, thanks to strong corporate profits and companies' relatively good handling of supply chain disruptions caused by the Iran conflict; the unemployment rate remained unchanged at 4.3%, in line with economists' expectations. Despite challenges posed by policy changes in trade, immigration, and taxes, most companies did not engage in large-scale layoffs, instead remaining calm in the face of various adverse factors; robust consumer demand meant low hiring was accompanied by low layoffs, and strong hiring in healthcare and social assistance sectors also supported the overall data. Meanwhile, the high level of US stocks boosted CEO confidence. The full impact of the Iran conflict and rising energy prices has not yet been reflected in the labor market: rising oil prices have put more pressure on low-income households, potentially suppressing travel and service spending, thereby dragging down hiring in retail, leisure, and other sectors, especially impacting airlines, but these effects are not yet clearly reflected in the monthly employment data.
The market now estimates only an 18% probability of a rate hike at the Federal Reserve's December meeting, down from about 23% on Thursday evening. Meanwhile, the probability of the Fed keeping rates unchanged has risen from 70.1% to 74.1%.
Institutional Views
BlackRock portfolio manager Jeffrey Rosenberg stated that there is a "trade-off" between strong non-farm payroll data and weak hourly wage growth. From a broader perspective, the report doesn't actually signal any major changes and remains a "status quo" for the Federal Reserve. At a more macro level, current macroeconomic data is "dominated by the AI theme." "When we look at GDP data and spending, the driving factor is no longer primarily consumption, but more about capital expenditure. And when looking at financial markets, what's really important is the impact of AI."
Nick Timiraos, a vocal advocate for the Federal Reserve, stated that four months ago, a major question facing the Fed was whether to continue cutting interest rates to support a seemingly shaky labor market. This question no longer exists. The labor market has stabilized, and inflation, influenced by tariffs and the Iran war, is rebounding from its previous decline. The April non-farm payroll report highlighted this shift in outlook and means that market focus will clearly shift to inflation data when judging the Fed's next policy move, given its current firm stance of holding rates steady. Robust hiring activity, unchanged unemployment, and robust income growth in April are insufficient to justify a rate cut. With the labor market providing the Fed with room to wait, the next step in policy discussions will be when and how to shift to a "neutral" stance—where the likelihood of rate hikes and cuts becomes roughly equal—and the answer will likely depend almost entirely on future inflation data.
Analyst Chris Anstey stated that the US employment data actually comes from two surveys: one for businesses and the other for households. Looking at the household survey, US employment has declined for the fourth consecutive month. Notably, this is the longest consecutive decline since the 2009 Great Recession. This truly reflects the unique situation in the current US labor market: immigration restrictions combined with a slowdown in domestic births have collectively compressed the labor supply.
Interest rate strategist Ira Jersey recently commented that the stronger-than-expected non-farm payroll data highlights that the US is far from a recession. It's difficult to see the Federal Reserve choosing to cut interest rates under these circumstances. Given that the interest rate market has largely ruled out rate cuts, we believe that US Treasury yields will not fluctuate significantly.
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