US adds 115,000 jobs in April, shifting Fed focus to inflation

The US economy added 115,000 jobs in April, more than double economists’ forecasts, in a sign of a stabilizing labor market that shifts the Federal Reserve’s policy focus squarely toward inflation.

"The policy debate’s next turn will be about when and how to shift to a neutral stance," financial journalist Nick Timiraos wrote. "The answer likely depends almost entirely on the inflation data."

The better-than-expected report from the Bureau of Labor Statistics showed the unemployment rate held steady at 4.3 percent, reinforcing the view that the jobs market is on solid footing. The data helped lift the S&P 500 by 0.8 percent. Revisions for February and March subtracted a net 16,000 jobs from previous reports.

With hiring stable, the Fed has room to keep interest rates on hold as it confronts rising inflation, fanned by surging energy costs from the war in Iran. The debate is no longer about whether to cut rates to support a weak labor market, but when the central bank might have to act on prices.

Drilling into the April numbers, job gains were concentrated in a few sectors. Healthcare added 37,000 positions, in line with its recent average, while transportation and warehousing added 30,000. Retail also showed strength, which Thomas Ryan, an economist at Capital Economics, called a positive signal about discretionary spending.

However, some analysts pointed to underlying weaknesses. Average hourly earnings rose just 0.2 percent, trailing the rate of inflation with a 3.6 percent annual increase.

"Over the last 24 months, health care has created 81% of the private sector jobs," Dan North, senior economist at Allianz Trade, told AFP, calling it a "very risky way to run a railroad." Nancy Vanden Houten at Oxford Economics noted that excluding healthcare, "job growth was negative over the last 12 months."

Federal government employment continued its downward trend, shedding another 9,000 jobs in April. The sector has contracted by 348,000 positions, or 11.5 percent, since its peak in October 2024 under President Donald Trump’s agenda to shrink the federal workforce.

Looking ahead, economists are divided. Samuel Tombs, chief US economist at Pantheon Macroeconomics, expects job growth to slow and the unemployment rate to rise to 4.7 percent by the end of the year, which could prompt the Fed to begin cutting rates in December. For now, however, the solid top-line number gives Fed officials little reason to consider easing policy.

This article is for informational purposes only and does not constitute investment advice.