The Bureau of Labor Statistics reported Friday that nonfarm payrolls rose by 138,000 in April, modestly below the 165,000 consensus estimate, while the unemployment rate ticked up to 4.2% from 4.1% in March. Average hourly earnings grew 0.21% month-on-month and 3.6% year-on-year — the slowest annual wage-growth pace since June 2021 and now running below the 3.8% threshold many economists associate with PCE-consistent productivity-adjusted growth.
The print extends a clear cooling trend: the trailing three-month payroll average fell to 142,000, down from 178,000 at year-end and 232,000 a year ago. Job gains were concentrated in healthcare (+58k), leisure & hospitality (+24k), and government (+18k). Manufacturing employment was flat (-1k), construction added 6k, and professional & business services lost 12k — the third consecutive monthly decline in the white-collar cohort.
Fed Funds Futures Reaction
CME FedWatch implied probabilities shifted decisively dovish: the June 17-18 FOMC meeting now prices a 78% probability of a 25-basis-point cut to 4.00-4.25%, up from 54% pre-print, while the September 17 meeting implies a cumulative 64-bp of easing. The 2-year Treasury yield declined 14 bp to 3.92%, the 10-year yield fell 9 bp to 4.32%, and the 2s10s curve steepened to 40 bp from 35 bp. The dollar index (DXY) declined 0.6% to 102.41.
Equity Reaction Mixed
The rate-cut catalyst lifted small-caps and rate-sensitive sectors disproportionately: Russell 2000 (RUT) closed up 2.1%, the S&P 500 added 1.4% to 5,742, and the Nasdaq 100 climbed 1.8%. Rate-sensitive sectors led: KBW Regional Banking Index (KRX) rose 2.8% on net interest margin relief expectations, the SPDR Real Estate ETF (XLRE) added 2.4%, and the Russell 2000 Growth ETF (IWO) climbed 2.6%. Mega-cap tech was more measured given the AI-capex-driven multiple expansion already discounted: NVIDIA (NVDA) added 1.4%, Microsoft (MSFT) gained 0.9%.