Strong job growth in April gives Fed room to pause as tariff uncertainty looms
Fed policymakers were careful about possible gaps in the labour market as businesses adapted to President Donald Trump’s unpredictable trade policy.
They got some relief on Friday that, so far, there’s minor weakness and no reason to hurry on rate cuts.
Robust Hiring Defies Market Jitters
U.S. employers added 177,000 jobs in April, exceeding economists’ forecasts and signaling continued strength in the labor market. The unemployment rate remained unchanged at 4.2%, according to data released by the Labor Department. These figures suggest the economy is maintaining momentum, even amid heightened trade tensions and market volatility sparked by new tariff policies.
The strong job numbers came during a month of major economic upheaval, as former President Donald Trump announced the steepest U.S. tariffs in a century. The move sent shockwaves through the financial markets—stocks dropped sharply, and bond yields fluctuated—before the administration walked back some of the immediate tariff threats, delaying enforcement on many of them until July.
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Fed Holds Steady as Inflation Stays Elevated
Despite persistent inflation running above the Federal Reserve’s 2% target, the central bank is not expected to raise interest rates in the near term. Instead, Fed policymakers are likely to maintain current borrowing costs as they assess the longer-term economic impact of the tariffs.
“In the here and now, solid labor market data provides the Fed with scope for patience,” said Lindsay Rosner, head of multisector fixed income investing at Goldman Sachs Asset Management. “With the forward-looking outlook having deteriorated, however, today’s data feels somewhat backward looking. The risks remain that a weakening economy could see the Fed resume its easing cycle later in the year.”
Rate Cut Expectations Shift to Mid-Year
Following the release of the jobs report, investor sentiment shifted. Traders, who had previously anticipated a possible interest rate cut in June, now expect the Federal Reserve to wait until July before taking action. This change in expectations underscores the central bank’s cautious stance as it weighs strong labor market data against rising economic uncertainty.