April Jobs Report Comes In Hot: 5 Economists Discuss Fed's Next Step, Interest Rate Risks

The U.S. job market report for April was unexpectedly stronger than anticipated, with 253,000 non-farm payrolls (NFP) added compared to 180,000 expected, the unemployment rate falling to a 50-year low of 3.4%, and wage gains accelerating more rapidly than anticipated. 
Conditions in the labor market have remained tight. Coupled with inflation, that's a major factor the Fed considers when making monetary policy decisions. 

While investors broadly anticipate the Fed to leave interest rates unchanged at its next June meeting, they have now eliminated all expectations for a rate drop and marginally increased their wagers on a rate hike by 25 basis points. 

The SPDR S&P 500 ETF Trust SPY soared 1.4%, sustained also by the stronger-than-expected Apple, Inc.'s AAPL results last quarter.  

5 Economist And Analysts On Job Data

• Bank of America's Michael Gapen says it's "difficult to argue" that the labor market cooled in April, but "the downward revisions to prior months do take some luster off the beat on payrolls."

This job report will maintain upside-skewed risks on the near-term outlook for Fed policy and the Fed communications heading to the June meeting will preserve the statement's upward bias, according to Gapen.

• Comerica Bank's Bill Adams says employment and economic growth are losing steam, "but the US entered 2023 with a big overhang of unmet labor demand," keeping unemployment extremely low. This will keep the Fed's foot on the brake for the time being.
• According to Gina Bolvin, president of Bolvin Wealth Management Group, the market had been expecting an interest rate reduction in June or July, but after April's jobs data, those chances have been moved out to September.
• Chris Zaccarelli, CIO at Independent Advisor Alliance, thinks the April employment data shows we are in the midst of an inflationary regime, and the Fed will need to maintain rates high for a longer period of time. However, "the longer the Fed has to keep rates this high, the more likely we risk a financial market accident or crash in the economy," Zaccarelli said. 
• Sam Millette, fixed income strategist for Commonwealth Financial Network, pointed out that the robust job growth numbers show that the labor market held up well throughout the month, despite the uncertainty caused by the recent high-profile bank collapses. Given the robustness of the job market, this argues in favor of a Fed pause at the June FOMC meeting.

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