U.S. employment growth slowed slightly in April, but employers continued hiring. Meanwhile, labor market prospects are worsening amid heightened economic uncertainty driven by President Donald Trump’s protectionist trade policy.
The Labor Department’s employment report released Friday showed the unemployment rate held steady at 4.2% last month, partially easing fears of an impending recession. This followed a GDP contraction in the first quarter due to tariff pressures on imports. However, the impact of Trump’s tariff policy on the labor market is not yet clear.
In a post on Truth Social, Trump again urged the Federal Reserve to “CUT THE RATE!!!” Despite rising uncertainty, the labor market’s resilience allows the Fed to maintain the benchmark interest rate at 4.25–4.50% next week.
“The ‘R’ word that best describes the labor market in this report is ‘resilience,’ not ‘recession,’” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “But we should temper our optimism considering the trade policy, which is likely to be a drag on the economy.”
According to the Bureau of Labor Statistics, nonfarm payrolls rose by 177,000 in April after a downwardly revised gain of 185,000 in March. Economists polled by Reuters had forecast an increase of 130,000 following a previously reported 228,000 in March.
The report also showed that February’s job growth was revised down by 15,000 to 102,000. A cumulative reduction of 58,000 over two months left April’s gains in line with expectations.
To sustain growth in the working-age population, the U.S. economy needs to add at least 100,000 jobs per month.
The strongest job gains were in healthcare — 51,000 new positions, primarily in hospitals and outpatient care. The transportation and warehousing sector added 29,000 jobs, reflecting increased imports in the first quarter, including in logistics, couriers, and air transport.
The financial sector created 14,000 jobs, social assistance 8,000, and the public sector 10,000. Construction saw 11,000 new jobs, and leisure and hospitality 24,000 — mainly in restaurants and bars.
Conversely, federal government employment dropped by 9,000, with a total decline of 26,000 since the start of the year. This is linked to the Trump administration’s campaign, led by Elon Musk’s Department of Government Efficiency (DOGE), to drastically shrink the federal workforce.
Despite reports of mass layoffs, wage bill reductions were moderate. This is because laid-off workers who were reinstated by court order or placed on paid leave are still counted as employed. Economists forecast significant cuts in government payrolls after September, when severance pay ends.
Manufacturing jobs declined by 1,000 due to losses in automotive and computer/electronics sectors — a trend expected to continue.
Even though Trump eased tariffs on imported auto parts this week, analysts at Anderson Economic Group estimate automakers will still incur tariff-related losses of $2,000 to $12,000 per vehicle. General Motors cut its 2025 profit forecast, expecting $4–5 billion in tariff costs.
The White House raised tariffs on Chinese goods to 145%, initiating a trade war with Beijing. China banned its airlines from accepting new Boeing aircraft. Ryanair threatened to cancel major orders if prices surge as a result.
U.S. stock markets rose, the dollar fell against a basket of currencies, and Treasury yields climbed.
Labor market resilience is partly due to employers’ reluctance to lay off workers after pandemic-era hiring challenges. But some economists doubt employment remains a reliable indicator of economic health.
They point to deteriorating business sentiment and companies revising or withdrawing 2025 profit forecasts as signs of a likely labor market slowdown.
Surveys from the Institute for Supply Management, Conference Board, and University of Michigan portray a pessimistic economic outlook. Economists expect the tariff burden to show up in real indicators — particularly employment and inflation — by summer.
“Depending on how things develop, we’ll likely see the full effect of April’s tariffs by summer,” said Stephen Stanley, chief U.S. economist at Santander US Capital Markets.
For now, the labor market remains stable. The average workweek in April was 34.3 hours, revised upward from 34.2 in March. Economists believe that in a slowdown, employers will first cut hours before laying off workers.
Average hourly earnings rose 0.2% after a 0.3% increase in March. Year-over-year growth held at 3.8% — enough to support consumer spending for now.
The household survey revealed both encouraging and concerning signs. Employment rose by 436,000, absorbing most of the 518,000 new labor force participants. The number of people working part-time for economic reasons declined.
However, long-term unemployment is on the rise: the median duration increased from 9.8 to 10.4 weeks — among the highest since the pandemic. More people are also working multiple jobs.
“If the labor market remains resilient and the Trump administration rolls back the harshest tariffs, the economy may still avoid a deep recession,” said Jeffrey Roach, chief economist at LPL Financial.