Labor market treads water in a choppy sea

The employment report from April showed a labor market that continues to tread water, even if the sea is choppy. The better-than-expected payroll print reflect continued strength in specific sectors (hospitality and healthcare) and boost from transportation and warehousing, likely reflecting increased staffing needs to grapple with looming tariffs. Wednesday’s GDP report showed resilient domestic demand in Q1 and we think that businesses will be inclined to hoard labor and not cut staff until forced to do so – both factors will help near-term labor dynamics. However, the full effects of the uncertain trade policy have not been felt and the trend in labor demand has weakened as the economic outlook has dimmed. We don’t envision a collapse in the labor market in the near-term , more of a controlled cooling over the next two months , but there is a fragile stasis in hiring that makes the unemployment rate susceptible to increased layoffs. However , at least for now, the Fed can take comfort in another resilient labor print and maintain neutral stance at next week’s FOMC meeting.