Jobs Growth Slows in April: What the Experts Are Saying

Jobs growth slowed markedly in April and wage pressures eased. That's just the sort of bad-news-is-good news labor data the Federal Reserve wants to see if it's to begin cutting interest sometime later this year, experts say.

U.S. nonfarm payrolls increased by 175,000 last month, the Bureau of Labor Statistics said Friday, or the smallest gain in six months. Economists were looking for the addition of about 240,000 jobs. Keep in mind that the economy has added an average of 242,000 new positions a month over the past 12 months.

Other data in the release also pointed to cooling conditions in a still-strong labor market. Critically, average hourly earnings rose at their slowest pace in four years.

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Meanwhile, the unemployment rate, which is derived from a separate survey, remained at half-century lows, ticking up to 3.9% from 3.8%. The rate has remained in a narrow range of 3.7% to 3.9% since August 2023, the BLS noted. Moreover, the U.S. economy has logged 27 consecutive months of sub-4% unemployment, or the longest peacetime streak since the late 1960s. 

Federal Reserve Chair Jerome Powell on Wednesday affirmed the central bank's outlook, which suggests a series of quarter-point cuts to the short-term federal funds rate beginning sometime before year-end. Equally important, Powell shot down the idea that the Federal Open Market Committee (FOMC) would make a so-called hawkish pivot toward potentially tighter monetary policy. 

Powell's remarks were a welcome relief for traders and investors after a series of sticky inflation prints pushed back the expected timing of the first cut to December. Indeed, Friday's soft nonfarm payrolls report added further support to the idea the Fed could begin easing as early as September.

Put another way, the Fed's "higher for longer" stance on interest rates might not last as long as market participants expected just a session ago. 

With the April jobs report now a matter of record, we turned to economists, strategists and other experts for their thoughts on what the data means for markets, macroeconomics and monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

April jobs report: The experts weigh in

"Just what the Fed Chair wanted! Today's employment report was weaker than expected, the first material 'downside surprise' in over two years. Yet the weakness was not so weak to suggest that the labor market is rolling over. It was a slowdown that the Fed and many market participants have been wanting for some time. This moderation is welcome news as the economy had been running a bit hot. This cooldown will be viewed positively, and moderated wages will also be viewed favorably. Rate cuts will come back into focus, and investors should remain vigilant for larger slowdowns in the month ahead. But today, this small amount of bad news relative to expectations will be viewed as good news, and suggest the economy is moderating but remains on solid ground." – George Mateyo, chief investment officer at Key Private Bank

"This report is nothing like bad enough to trigger a wholesale rethink at the Fed, but things will be different if the July numbers are weaker still, as we expect. The downshift in payroll growth has come exactly when the NFIB [National Federation of Independent Business] suggested it would, and the signal for the future is unambiguous. We stick to our forecast of 100 basis points of easing [four quarter-point cuts] this year, starting in September." – Ian Shepherdson, chairman and chief economist at Pantheon Macroeconomics

"The softer-than-expected payroll report suggests there is no heat in the economy that should keep inflation persistently high, which increases odds for rate cuts this year. This report will re-emphasize the 'soft-landing' narrative. At the same time, the labor market remains strong: payroll growth averaging 242,000 over the last three months (above the 2019 average of 166,000); the unemployment rate has stayed below 4% for 27 straight months; even better, the prime-age (25-54) employment population ratio rose to 80.8%, which is higher than at any point between 2001 and 2019. This does raise the probability of a rate cut in September, though all eyes will remain on the crucial inflation reports to come." – Sonu Varghese, global macro strategist at Carson Group 

"The slower jobs report will be welcome news to the Federal Reserve and signals that interest rate hikes are impacting a labor market that has been extremely resilient over the past few years. The Fed clearly stated that it is taking a cautious approach on the timing of any interest-rate cuts to ensure that inflation is well contained, and this could lead to continued pressure on the jobs market in the months to come" – Joe Gaffoglio, president of Mutual of America Capital Management

"We received a very Fed-friendly employment report for April. U.S. payroll growth came in at a much more comfortable 175,000 jobs after an upwardly revised 315,000 in March, for once underperforming the consensus which was looking for a more gradual slowdown to 240,000 jobs. The report was light on almost every measure of labor market conditions, putting Fed rate cuts for 2024 back on the table for financial markets." – Scott Anderson, chief U.S. economist at BMO Capital Markets

"The Federal Reserve on Wednesday emphasized that market interest rates won't be cut until policymakers have 'greater confidence' that inflation is slowing sustainably to its desired 2% target. Today's employment report suggests job market fundamentals could be headed in a direction that is broadly supportive of achieving that goal." – Mike Schenk, chief economist at America's Credit Unions

"This may be one of those times where an economic number coming in a touch weaker than expectations is a good thing. This morning's unemployment report appears to have walked the tightrope. While job growth was a bit weaker than consensus and the headline unemployment rate rose to 3.9%, these numbers do not signal significant weakness, as the employment market should continue to support consumer spending. On the inflation front, average hourly earnings came in at 0.2%, a tenth less than expected, and we are now below 4% on a year-over-year basis. The chances of the Fed's next move being to raise rates are reduced this morning with stock markets higher and bond yields lower. The soft-landing scenario is still in play." – Steve Wyett, chief investment strategist at BOK Financial

"Worries about wage pressures have dragged on the market recently and today's number relieves some of those fears. The first quarter had several difficult numbers on the inflation front but the second quarter might be starting on a cooler footing. The case for rate cuts got a little stronger today. Goldilocks could be making a comeback." – David Russell, global head of market strategy at TradeStation

"The April Jobs Report was just what the market ordered. Job growth was solid and well distributed, but the pace eased considerably relative to the first quarter's surprisingly strong gains. Recent payroll gains have been looked at as providing upside support to inflation, thus weighing on the Fed's need to begin cutting interest rates anytime soon. Although there was a lot to like in today's release, investors should be careful as to not over-interpret and extend today's results into a belief that it's now the new normal. One report does not a pattern make. That said, various other employment measures have indeed indicated a downshift in hiring to be at hand. If a downshift is maintained, we wouldn't view it as a material threat to economic growth but rather a return of labor market conditions to a healthier supply and demand balance." – Russell Price, chief economist at Ameriprise Financial

"Today's jobs numbers came in lower than expected, but can be interpreted as a positive sign that the economy is not getting overheated. The unemployment rate remained unchanged and overall this was likely a welcome report for the Fed which will remain data dependent but with a slight shift toward focusing on the employment side of the dual mandate of maintaining low inflation and full employment." – Eric Merlis, managing director and co-head of global markets at Citizens

"The figure does not come as a surprise to us given other recent labor market data observations. However, it should be perceived by markets as a welcome breath of fresh air as it will hush the hawkish undertone in the market and any recent stagflation fears. We continue to look through the debate around timing of cuts to the fact that the data, in aggregate and observed over a longer time period, will drive a non-recessionary cutting cycle. This should be positive for risk assets and bonds. That said, this cutting cycle will not be symmetric (fewer and slower cuts) to the hiking cycle." – Alexandra Wilson-Elizondo, co-chief investment officer of the multi-asset solutions business in Goldman Sachs Asset Management

"This is exactly what the Fed needed to see to reduce rates before November. Small businesses are still absorbing the first quarter's economic slow-down, and now they're cautiously watching for signs of economic direction before placing their bets. We see this in the hiring space. Employers aren't hiring to expand, nor are they reducing staff. They are mostly filling existing openings in essential roles." – Andrew Crapuchettes, CEO at RedBalloon

"Markets clearly welcomed this as a no-drama report. The decline in the average hourly earnings numbers should ease some of the inflation fears that have been gripping the market's psyche and underscore confidence that the next Fed move will be a cut. For those grappling with renewed stagflation fears, this payrolls report supports what Powell said earlier this week about not seeing the 'stag' or the '-flation' right now. Solid job gains, cooler wage pressures. We take this report as all-around welcome news, but there could be a bearish take. The pessimists' perspective likely focuses on the magnitude of the miss, compounding the recent misses in GDP and manufacturing data, pointing to risks of a slowdown that the market isn't prepared for. The good news is that the Fed is already displaying a clear bias towards easing, and has plenty of room to cut rates if conditions demand that." – Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management

"Today's report does support a dovish pivot to an earlier cut by the Fed, offering another clear signal that holding interest rates higher for longer is not a long-term solution. However, the Fed will likely seek to maximize its time on the clock by waiting on a few more inflation reports, and may have to take a leap of faith by loosening rates before fully comfortable with the trajectory of price growth." – Noah Yosif, chief economist at the American Staffing Association

"In the same short period in which Jerome Powell stated that 'higher for longer' was likely to play out because inflation remained stubbornly higher than expected, we also saw a lower-than-expected Q1 GDP growth and, today, slightly disappointing jobs and wage growth. These data points have encouraged the dreaded term 'stagflation' out from under the rock it had been buried in for a long time, but at the same time fueled expectations that a rate cut or two could come this year. As usual, interpretation of the data is all about how it compares with expectations – on the surface the numbers look good for the economy. Slowing GDP growth came from lower inventories and strong imports, wage growth exceeded inflation and job gains remained strong, if not quite as high as expected. Earnings have been decent this quarter. Overall, mixed signals suggest the Fed will need more confirmation one way or the other to finalize decisions in its quest for low inflation and low unemployment." – Melissa Brown, head of applied research at SimCorp

"This morning's labor report should be supportive for stocks. While the headline number of 175,000 jobs added was lower than expected, employment remains strong overall and revisions to prior months were minor. Labor force participation and hours worked changed little. The most important information in the report is probably lower-than-expected average hourly earnings, increasing 0.2% month over month and 3.9% year over year. Moderating but still robust job growth and slowing wage increases are both good news for the Fed's efforts to bring inflation back to its target. More interest rate-sensitive stocks, such as housing specifically, as well as growth stocks generally, are likely to benefit from today's jobs data." – David Royal, chief financial and investment officer at Thrivent

"Today's job report may change the narrative for the Fed, as labor demand is slowing and wage inflation cooled more than expected. We think this increases the chance of a September rate cut as this may be a harbinger for weakness in the economy that will force the Fed to cut rates once or twice by the end of the year. In his press conference this week, Powell threw cold water on the stagflation narrative that started following sluggish first-quarter GDP growth. We think the Fed can continue to focus on winning the inflation battle but must continue to be mindful of the potential economic impacts of keeping policy tight for too long." – Austin Schaul, head of research at Avantax

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