April nonfarm payrolls rose by 115,000, well above the expected 55,000, while the unemployment rate held steady at 4.3%. Although job gains remain heavily concentrated in health care which accounts for 81% of private-sector jobs over the past 24 months, the beat eases immediate recession fears.
However, consumer confidence hit a record low of 48.2 amid high prices and the ongoing US-Israel war on Iran, which continues to drive energy costs higher and complicate the inflation outlook. Economists note the labor market has see-sawed for over a year, with downward revisions to prior months and contraction in key sectors like federal government, tech and transportation.
This mixed picture supports the Fed’s cautious stance. With inflation risks elevated from the war, officials are likely to remain on hold for longer. Markets have already pushed back expectations for rate cuts in 2026. The April jobs data reinforces a “higher for longer” bias, lowering the expected total number of cuts for the remainder of the year.
Trade analysis
This longer-dated contract on the total number of Fed cuts in 2026 is sensitive to growth vs. inflation signals from the Iran war. The edge lies in separating headline jobs strength from underlying weaknesses and persistent energy-driven inflation.
Bearish (No cuts) signals:
- Hotter inflation data forcing the Fed to consider hikes or prolonged hold
- Stronger broad-based employment and growth
Bullish (1 to 2 cuts) signals:
- Persistent or re-accelerating inflation from energy prices, reinforcing “higher for longer”
- Fed maintaining a data-dependent tone with limited easing guidance
Bullish (More than 2 cuts) signals:
- Further consumer confidence declines leading to clear recession signals
- De-escalation in the Iran conflict with drop in oil prices
Our base case is 0 to 1 cut in 2026 at most, heavily back-loaded, and April data tilts probability toward the lower end. Traders should monitor upcoming inflation prints and war developments closely.