WRAPUP 4-US economy posts second straight month of strong job gains, but strains remain

U.S. employment increased more than expected in April, pointing to labor market stability and reinforcing expectations ​the Federal Reserve would keep interest rates unchanged for some time as the war with Iran ‌fans inflation. Despite the ​second straight month of strong job growth reported by the Labor Department on Friday, strains remained and economists warned the labor market was not out of the woods yet.

U.S. employment increased more than expected in April, pointing to labor market stability and reinforcing expectations ​the Federal Reserve would keep interest rates unchanged for some time as the war with Iran ‌fans inflation.

Despite the ​second straight month of strong job growth reported by the Labor Department on Friday, strains remained and economists warned the labor market was not out of the woods yet. The number of people working part-time for economic reasons increased by the most in 14 months and there were also more multiple job holders. Household employment decreased for a fourth consecutive month, but was offset by a continued contraction in the labor force, keeping the unemployment rate unchanged at 4.3% after ‌rounding.

The jobless rate is calculated from the household survey. "Labor demand and supply remain in an uneasy balance, however, and labor market conditions could weaken again swiftly as financial pressures from rising prices weigh on household purchasing power," said Scott Anderson, chief U.S. economist at BMO Capital Markets. "There is nothing in this report to move the Fed off the sidelines on future rate cuts."

Nonfarm payrolls increased by 115,000 jobs last month after an upwardly revised 185,000 advance in March, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls rising by 62,000 jobs after a previously reported 178,000 rebound in March. Estimates ranged from a loss of ‌15,000 jobs to a gain of 150,000 positions. The back-to-back rise shown in the survey of establishments offered hope payrolls were settling down following volatility since mid-2025, partly attributed by economists to an adjustment to the birth-and-death model, which the government uses to estimate how many jobs were gained or lost because of ‌companies opening or closing in a given month. Weather, strikes and government job cuts as well as big changes to the labor force amid an immigration crackdown by President Donald Trump's administration also added to the wild swings, economists said. They recommended looking at the three-month moving average of payrolls, which was 48,000 in April. That was down from a monthly average of 72,000 during the same period last year.

Economists say uncertainty wrought by Trump's trade policy has constrained hiring. Trump's sweeping tariffs early this year were struck down by the U.S. Supreme Court. The U.S. Court of International Trade ruled on Thursday that a replacement of those duties was unjustified. Economists said it was too early for the effects of the U.S.-Israeli war with Iran to show. The conflict has raised gasoline and diesel ⁠prices as well ​as the cost of other commodities that are shipped through the Strait of Hormuz. Financial ⁠markets increased bets that the U.S. central bank would not cut rates this year. The Fed last week left its benchmark overnight interest rate in the 3.50%-3.75% range, citing inflation worries. Stocks on Wall Street rose, with the S&P 500 and the Nasdaq indexes touching record highs. The dollar slipped against a basket of currencies. U.S. Treasury yields fell.

HEALTHCARE IS DOMINATING EMPLOYMENT GAINS The healthcare sector ⁠again led the increase in payrolls in April, adding 37,000 jobs, mostly at nursing and residential care facilities as well as home healthcare services, reflecting an aging population. Transportation and warehousing employment increased by 30,000, boosted by demand for couriers and messengers. Still, employment in the sector was down by 105,000 since peaking in February 2025. Retail payrolls rose by 22,000 jobs ​while the social assistance sector added 17,000 positions. Leisure and hospitality employment increased by 14,000 jobs.

But the federal government shed another 9,000 positions and employment is down by 348,000, or 11.5%, since hitting a peak in October 2024. The White House last year launched an unprecedented campaign to slash ⁠the federal workforce as it seeks to remake the government. But there has recently been a push in some agencies to rebuild staff levels. There were job losses in the information, manufacturing and financial activities industries. The share of industries reporting job growth fell to 53.8% from 56.8% in March. The average workweek lengthened to 34.3 hours from 34.2 hours in March. Wage growth improved, with average hourly earnings increasing ⁠3.6% ​year-on-year from 3.4% in March. The gains are likely to be eroded by gasoline prices, with the average national retail price surging more than 50% to about $4.55 a gallon since the war started. The University of Michigan's Surveys of Consumers on Friday showed sentiment hit a record low in early May, blamed on gasoline and import tariffs.

Labor market strains were highlighted by the household survey. The number of people working part-time for economic reasons jumped by 445,000, the largest increase since February 2025, to 4.9 million. Household employment dropped by 226,000 jobs and was down 1.37 million this year. Another 92,000 people dropped out of the ⁠labor force, bringing the tally so far this year to 1.5 million. The labor force participation rate fell to 61.8% from 61.9% in March, and has declined since December. Economists estimated that the unemployment rate would have risen to 4.4%, without the drop in participation. The jobless rate rose to 4.34% from 4.26% ⁠in March before rounding.

A broader measure of unemployment, which includes people who want to ⁠work but have given up searching and those working part-time because they cannot find full-time employment, increased to 8.2% from 8.0% in March. Lower immigration and an aging population meant the economy needed to create between zero and 50,000 jobs per month to keep up with growth in the working-age population, economists estimated. With the so-called breakeven level of job growth much lower than in prior years, they did not expect a surge in the unemployment rate, even if employment ‌gains slowed considerably.

"Slower population growth, aging demographics and a ‌sharp slowdown in immigration are keeping labor supply structurally tight," said Lydia Boussour, senior economist at EY-Parthenon. "This limited supply buffer is allowing unemployment to remain range-bound even ​as hiring slows."