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THE CHERRY ON THE CAKE: A JOBS REPORT DEEP DIVE

Wrapping up a week that was crammed to the rafters with mixed economic data, the Labor Department delivered some cheerful news in the form of its April employment report.

The U.S. economy added 177,000 jobs in April USNFAR=ECI, or 4.3% fewer than March's downwardly revised 185,000 gain and 47,000 more than analysts expected.

This marks the fifth upside surprise in the past 12 months, and the ninth reading below the 200,000 mark over the past year.

Digging beneath the headline, service-providing jobs accounted for 93.4% of the 167,000 private sector job adds. Manufacturing and retail sectors combined shed a negligible 2,800 positions, while government payrolls - which include state and local agencies unaffected by the mass DOGE-related firings - increased by 10,000. The construction sector added 11,000.

"The labor market continues to defy naysayers," writes Scott Helfstein, head of investment strategy at Global X. "This is the first meaningful economic data since the April 2 tariff announcement and reversal."

The report "should be welcome given new mounting concerns over tariff-driven business pullback," Helfstein adds.

The report also gave markets their first glimpse at April inflation, showing average hourly wages rose by 0.2% on a monthly basis and 3.8% year-on-year, both 10 basis points cooler than analyst expectations.

"Cooler than expected" is a welcome inflation data descriptor these days and it's a move in the right direction, but 3.8% remains well north of the Powell & Co's 2% annual inflation goal.

Last month's wage inflation "gives the Fed more time to assess the inflationary impact of tariffs," Peter Cardillo, chief market economist at Spartan Capital Securities tells Reuters. "This report supports the Fed staying on hold at next week's meeting, so that puts the June meeting in question again."

As anticipated, the jobless rate USUNR=ECI held firm 4.2%, while at the same time the labor market participation rate improved by just a smidgeon, rising 10 basis points to 62.6%, as it continues to rebound from February's two-year low.

When more Americans leave the sidelines and dive into the labor pool, that tends to put upward pressure on the unemployment rate; that fact that the jobless rate held firm suggests the labor market is absorbing new (or returning) workers.

On a sour note, average unemployment duration jumped last month to 24.9 weeks from 23.6 weeks, the longest this metric has been since April 2022.

This corresponds well with souring labor market confidence:

Finally, breaking down joblessness by race and ethnicity, unemployment among White and Black Americans ticked a bit higher, to 3.5% and 6.3%, respectively, leaving the White/Black unemployment gap unchanged at 2.5 ppts.

Joblessness among those who identify as Hispanic also inched up to 5.2% from 5.1%, while a sharp decrease in unemployment among Asian Americans - to 2.8% from 3.4% - kept the topline at an even keel.

(Stephen Culp)

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