The U.S. labor market likely saw a slowdown in hiring in April as transient supports from warmer weather and the return of striking health workers waned, yet economists do not interpret the shift as a major change in underlying conditions. The Labor Department's employment report for April is expected to show the unemployment rate holding steady at 4.3% and an increase in average hourly earnings, developments that would reinforce prevailing expectations in financial markets that the Federal Reserve will keep interest rates unchanged into 2027.
Forecasts compiled in a Reuters survey pointed to a net rise of 62,000 nonfarm payrolls in April, following a rebound of 178,000 jobs in March. Individual estimates in the survey ranged broadly from a loss of 15,000 positions to a gain of 150,000. Since mid-2025 payrolls have been uneven, oscillating between gains and declines.
Economists attribute part of this choppiness to an adjustment this year in the government's birth-and-death model, which estimates net job creation tied to business openings and closures in a given month. Some forecasters say the large turnover in newly created firms has complicated the Bureau of Labor Statistics' task of estimating jobs associated with new companies.
Beyond statistical adjustments, a number of temporary and policy-driven forces have added noise to monthly employment data. War-related disruptions - specifically the conflict described as the U.S.-Israeli war with Iran - have pushed up gasoline and diesel prices and raised costs for other commodities that transit the Strait of Hormuz, though economists say it is too soon for the conflict's effects to show in the labor market. Analysts also point to weather, strikes, government job cuts, and significant changes to the labor force resulting from stricter immigration enforcement as contributors to recent volatility.
"The status quo holds, we havent had sufficient time for the war to dislodge demand for labor, which is typically determined months in advance of actual hiring," said Joe Brusuelas, chief economist at RSM. "The Fed will take a look at the earnings ... and most importantly the unemployment rate, and it will confirm the new consensus, which is we are not going to get rate cuts based on weakness in the labor market this year."
Given the variability in monthly payroll readings, economists recommend focusing on three-month moving averages to gauge the underlying trend in hiring. "Averaging through recent months would still imply modestly positive job growth," said Veronica Clark, an economist at Citigroup. She added that, in the context of substantial changes in immigration flows that have produced a much lower average pace of job growth this year, modest positive gains are not necessarily concerning.
Job growth averaged 68,000 per month in the first quarter. Forecasters estimate the economy needs to add between zero and 50,000 jobs per month merely to keep pace with growth in the working-age population. With this lower breakeven level, a marked slowdown in employment gains would not necessarily translate into a sharp rise in the unemployment rate.
Sector-level patterns have been uneven. Healthcare and social assistance likely continued to contribute the most to employment growth last month, reflecting an aging population, although the pace of hiring in the sector has moderated. Diane Swonk, chief economist at KPMG, cited a series of headwinds for the sector: a lapse in Affordable Care Act subsidies, cuts to Medicaid in numerous states, tariffs, and a substantial rise in the cost of H-1B visas for immigrant doctors and nurses.
"Rural and poor urban hospitals rely most on H-1B doctors and nurses to fill open positions. They cannot afford the new $100,000 fee for visas. Many rural hospitals have already closed," Swonk said, pointing to the strain in parts of the healthcare system.
Manufacturing payrolls are expected to have risen as activity increased in part because businesses frontloaded orders amid concerns about higher prices and supply disruptions stemming from the conflict in the Middle East. Meanwhile, government payrolls are projected to have declined again - the ninth drop in the past 12 months - consistent with efforts by the White House to shrink the federal footprint, even as some agencies push to rebuild staff levels.
Wage dynamics also matter to policymakers. Average hourly earnings are projected to have climbed 0.3% in April, up from a 0.2% increase in March, which would raise the year-on-year gain to 3.8% from 3.5% in March. That nominal wage strength would be consistent with a labor market that remains intact, but some economists caution that part of the measured increase is mechanical and linked to a slightly shorter average workweek.
The average workweek slipped to 34.2 hours in March from 34.3 hours in February and was likely unchanged at 34.2 hours in April. "This is one piece of evidence suggesting strong job growth is more reflective of technical factors than a true pick-up in activity and demand for workers," said Citigroup's Clark.
On the consumer side, higher nominal wages are being eroded by persistent inflation. Gasoline prices have broken above $4.50 a gallon, a source of pressure on household budgets that particularly affects lower-income households.
Some economists say the apparent stability in the labor market masks strains among lower-income households that are cutting back as costs rise. The broader economy, they argue, is being propped up mainly by higher-income households whose wealth has benefited from gains in the stock market. "People in the low end of the income spectrum have been suffering and cutting back," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. "If people at the upper end of the income spectrum were to feel a similar way, the economy would be in trouble."
In sum, the April report is expected to show slower payroll growth compared with March, steady unemployment at 4.3%, and a pickup in nominal wage growth. Economists warn that monthly data remain noisy and that a clearer picture of underlying labor market health emerges only when looking across several months.