Takeaway: A mixed bag April jobs report will keep mortgage rates mostly steady as stronger-than-expected hiring lowers recession risk. But softer wage growth, a small underlying rise in unemployment, and the energy shock from the Iran war leave the Fed on hold for the foreseeable future.
April’s jobs report was stronger than expected, suggesting the labor market has firmed up somewhat since the fall. However, the underlying picture is still more stable than strong.
- Employers added 115,000 jobs in April, well above the roughly 62,000 expected by forecasters.
- The recent monthly payroll numbers have been extremely volatile, in large part because of changes to the BLS’s birth-death model, which estimates jobs created and lost from firm creation and destruction. That means we should continue to focus more on averages than any single month.
- The six-month average pace of hiring climbed to 55,000 jobs, the strongest since May 2025. That is still a modest pace historically, but better than last fall when recession risks looked higher. It is also around the breakeven rate needed to keep unemployment steady.
- Breadth of job creation improved somewhat. Less than half of April’s job gains came from health care and social assistance, compared with prior months when those sectors accounted for nearly all of the job creation.
The unemployment rate remains low, but the details were slightly softer than the headline suggests.
- The unemployment rate stayed at 4.3%, but unrounded it increased from 4.256% to 4.337%.
- That understates the deterioration a bit because the labor force participation rate declined from 61.9% to 61.8%, meaning fewer people were looking for work.
- In other words, unemployment remains steady and low, but some of that steadiness came from people leaving the labor force rather than finding jobs.
- This is broadly consistent with the message from jobless claims and JOLTS data: the labor market is not booming, but employers are also not laying workers off in large numbers.
For the Fed, this report reinforces the case for holding rates steady.
- Stronger-than-expected hiring and a still-low unemployment rate mean there is no clear reason for the Fed to cut.
- At the same time, wage growth was softer than expected, with average hourly earnings rising 0.2% month-over-month versus 0.3% expected, and 3.6% year-over-year versus 3.8% expected. That means there is also no clear reason to hike.
- The Iran war and associated energy shock complicate the outlook. Higher energy prices will put upward pressure on headline inflation while also weighing on consumers and eventually the labor market.
- Overall, the Fed is likely to stay on hold for the foreseeable future. Mortgage rates are therefore more likely to move with oil prices and developments in Iran peace negotiations than with today’s jobs report.
