(Reuters) – Federal Reserve policymakers on the alert for possible cracks in the labor market as businesses adjust to President Donald Trump’s erratic trade policy got some reassurance on Friday that so far there’s little weakness, and no reason to rush on rate cuts.
U.S. employers added a more-than-expected 177,000 jobs in April, the Labor Department reported, and the unemployment rate was unchanged at 4.2%. Both are signs the labor market remains in balance during a month when Trump announced the steepest tariffs in a century, sending stocks downward and convulsing the bond market before the administration paused many of those levies until July.
With the job market holding up and inflation still running above their 2% target, Fed policymakers are expected to stick to their plan to leave short-term borrowing costs where they are while they wait to see how the tariffs affect prices and economic growth. Hourly earnings rose 3.8% from a year earlier, the jobs report showed, the same pace as in March and in the range of what the Fed considers to be consistent with its 2% inflation target.
“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 and the risks remain that a weakening economy could see the Fed resume its easing cycle later in the year.”
Traders are now betting the Fed will wait until July to start cutting interest rates; earlier they had thought a June move was more likely. And they now see the Fed delivering a total of three quarter-point interest rate cuts by year-end, one fewer than previously.
Shortly after the report Trump reiterated his own call for the Fed to lower rates.
Fed policymakers, who say it will be the economy’s needs not the president’s desires that will dictate their moves, want to be sure that inflation won’t resurge. They have signaled that to do so they’ll keep the policy rate in the current 4.25%-4.50% range, as long as the job market doesn’t crumble.
And so far it’s not, despite sinking consumer and business sentiment on fears that tariffs will hamstring U.S. growth.
In April, the net number of people joining the labor market exceeded those leaving by the most since August 2023, a sign of a resilience.
“Big picture, the U.S. labor market has not yet capitulated to the negative sentiment building among consumers and businesses, though the full weight of the tariffs shock remains directly ahead of us,” wrote BMO Economics’ Scott Anderson.
(Reporting by Ann Saphir with reporting by Davide Babuscia; Editing by Emelia Sithole-Matarise, Chizu Nomiyama and Susan Fenton)
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