April’s non-farm payrolls release was met with a sigh of relief as it came in well above consensus expectations, up +177k versus the consensus estimate for +138k, and a number of strategies who had penciled in a print well below +100k. Driving the print were continued gains in health care (+51k) as well as job adds in financial activities (+14k), construction (+11k), and government (+10k). Gains in government were once again at the state and local level as federal employment fell -9k. Interestingly, there was a surge of hiring in transportation & warehousing (+29k) but declines in both manufacturing and retail trade – all three of which are likely tariff influenced. Despite the top line beat, however, revisions to February and March payrolls netted to a decrease of -58k versus the previously reported prints, bringing the year-to-date average to +144k, a modest decline from the +168k average in 2024.

As the Fed expresses concerns about an inflation surge, it was encouraging to see wage growth up only +0.2% month-over-month and +3.8% year-over-year, while average hours worked were steady (after the March revision) at 34.3. Employed persons rose by +436k while unemployed persons rose by only +82k, and individuals employed part time for economic reasons declined by -90k. The unemployment rate was stable at 4.2% even as the participation rate rose to 62.6% from 62.5%.

The report follows several employment data points this week that shed light on what might be on the horizon for U.S. jobseekers. Weekly jobless claims, which tend to be more forward looking than other employment measures, moved meaningfully higher for the week ended April 26, with new filings totaling 241k, 18k higher than the previous week and well ahead of the 225k estimate. Admittedly the gain was concentrated in claims from New York State and may be attributable to the recent school vacation week. However, continuing claims, which correlate more closely with the longer-term health of the labor market, were also higher by +83k to 1.92 million, marking the highest level since November 2021.

Challenger data, too, painted a less than rosy picture, as layoff announcements totaled 105.4k for April; admittedly, the figure was down from 275.2k in March and 172k in February, and was concentrated in the government and not-for-profit sectors. Also more constructive was the ISM Manufacturing PMI index’s employment measure which indicated an improvement to 46.5 from 44.7 in March despite a slight deterioration in the overall manufacturing picture.

Evidence of labor market stability is likely to offset, at least in today’s trading session, some of the skittishness in the equity and fixed income markets following Wednesday’s U.S. GDP release. Q1 2025 U.S. GDP fell by -0.3% on annualized basis, down significantly from +2.4% in the fourth quarter. The decline was led by an increase of +41.3% in imports, as companies acted aggressively ahead of the potential impact of expanded tariffs. Federal government spending declined by -5.1% following a +4.0% increase in Q4. Prices were also higher, as core PCE was up +3.5% from +2.4% in Q4, stoking stagflationary concerns. More constructive were the increases in business investment of +9.8% and consumer spending of +1.8%, which although was down from +4.0% in Q4, was still strong especially given the dour consumer confidence readings during the period. The caveat is that these stronger components are likely to weaken in the second quarter, particularly without further clarity on U.S. trade policy.

While one can take some comfort that today’s release was not as bad as feared, our view is that both the non-farm payrolls print and the GDP print are unlikely to meaningfully assuage concerns about tariff disruption, given both the timing of the Liberation Day announcement and the subsequent delay in implementation. Business confidence remains low, and there is little incentive to invest against the still very uncertain backdrop. Importers are likely to exhaust their inventories quickly given the sharp decline in shipments coming into U.S. ports and U.S. consumers are going to be faced with higher prices on goods that may become scarce as supply chains are adjusted. Successful negotiations and a clear path towards a rollback of most of the retaliatory tariffs announced on April 2^nd are likely necessary to shift sentiment more meaningfully. In addition, focus will shift in part to Congress as the stream of information pertaining to the extension and expansion of the 2017 Tax Cuts & Jobs Act is likely to turn into a torrent and questions about the Fed’s next move and how the Treasury will approach the next duel with the debt ceiling will further shape the narrative.

Equity markets are responding positively to today’s print, as it indicates that the U.S. labor market is entering this period of slowing economic growth from a strong starting point; yields are up modestly as well, with more movement on the long end of the curve. In terms of positioning, we are encouraging clients to continue to take advantage of the market fluctuations to deploy cash in a thoughtful manner, particularly given the volatility, and reallocate back to strategic long-term allocations, mindful of the opportunities we believe are available in small cap and non-U.S. equities as well as private markets. We also believe that this is an excellent time to review the approach to concentrated or low-cost basis positions, as recent declines – some of which have been well in excess of the broad market for certain names – could afford greater flexibility in crafting a multifaceted solution to further diversify portfolios and to mitigate unwanted idiosyncratic risk.