U.S. stock market traders entered May with a major data point: April’s jobs report showed the economy added a robust 177,000 jobs, even as President Trump’s sweeping tariffs started to bite and federal government layoffs widened. Wall Street had braced for a weaker number, with consensus predictions at just 135,000 job gains, but the Labor Department’s figures topped expectations and suggested the U.S. labor market remains resilient in the face of political and economic crosswinds.
The unemployment rate stayed unchanged at 4.2 percent, its sixth consecutive month in a tight range. For equity and bond investors, the steady joblessness figure—and a labor market resisting the dual headwinds of rising import costs and a historic wave of government job cuts—is a clear signal that recession fears remain on the back burner, at least for now. With nonfarm payroll growth averaging 143,000 a month in 2025, down from 168,000 last year, market participants are watching for any hint of slowing momentum as the market recalibrates expectations for Fed policy.
Sectors powering job growth included health care, with another 51,000 positions added, and transportation and warehousing, which jumped by 29,000 as companies raced to bring in goods ahead of tariff hikes. Leisure and hospitality saw 24,000 new jobs, professional services added 17,000, and financial activities grew by 14,000. However, manufacturing and retail felt the pinch, shedding 1,000 and 1,800 jobs respectively—a sign that tariffs are beginning to disrupt vulnerable sectors, with the risk of earnings compression and margin warnings growing for public companies exposed to global supply chains.
For traders focused on wage pressures and the Fed’s next move, average hourly earnings offered some relief, rising by just 6 cents to $36.06 and keeping annual wage growth at 3.8 percent. This figure aligns with the Federal Reserve’s inflation target and takes some heat off worries about a wage-price spiral. In her research note, economist Nancy Vanden Houten emphasized that “Fed officials no longer see wage growth as a source of inflationary pressure.” As a result, today’s report is unlikely to prompt the Fed to cut interest rates at next week’s meeting, and expectations for a rate cut in mid-2025 are likely to remain muted.
Market sentiment will also be shaped by forward-looking risks. While April’s job numbers were propped up by companies rushing to import goods before tariff deadlines, those same trade restrictions are set to weigh more heavily on hiring—and corporate earnings—in coming months. Analysts at Bank of America expect the full brunt of the tariffs to be felt in May and beyond, especially in manufacturing, retail, and consumer-facing industries. Meanwhile, layoffs are climbing: April saw 105,441 job cuts, the highest for that month since the pandemic low, with tech and government sectors leading reductions.
Potential labor market constriction due to mass deportations of undocumented immigrants in 2025 also looms large, adding complexity for investors parsing the outlook for sectors reliant on steady labor supply, such as hospitality and agriculture.
With GDP contracting at an annualized rate of 0.3 percent in the first quarter—a statistical anomaly driven by surging imports, rather than collapsing domestic demand—traders are left weighing whether resilience will hold or if the economy tips into a downturn later this year. Surveyed forecasters now put the odds of a recession at nearly 50 percent.
For investors and traders, today’s job numbers affirm the market’s resilience, but the months ahead promise fresh volatility as tariffs feed through to corporate profits and consumer spending. As always, stock selection and sector allocation will be key—especially as Fed policy, trade developments, and employment trends battle for center stage in the back half of 2025.
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