Market Awaits US April Non-Farm Payrolls Tonight, Focusing on the Degrees of Employment Cooling

The U.S. Bureau of Labor Statistics will release the April non-farm payroll report tonight. The market consensus expects an addition of 63,000 non-farm jobs, a significant drop from the 178,000 jobs added in March, with the unemployment rate expected to remain unchanged at 4.3%.

Aside from the number of jobs, wage growth is also not to be overlooked. The market expects the average hourly earnings to grow by 0.3% month-over-month, higher than the 0.2% growth in March, and the year-over-year growth is expected to rise from 3.5% to 3.8%. The stickiness of wage inflation has always been an important variable in the Federal Reserve's policy decisions. If hourly wage data remains high, even with a slowdown in job growth, the Federal Reserve may still be cautious on the issue of rate cuts.

The core focus of this data is whether the cooling speed of the job market exceeds expectations. If the data significantly weakens, market bets on Federal Reserve rate cuts within the year will further heat up, and the dollar may come under pressure. If the job performance is unexpectedly strong, rate cut expectations may be pushed back, and the dollar and U.S. Treasury yields could find support.

The background of tonight's non-farm report includes structural concerns over highly concentrated job growth in education and healthcare, inflationary pressures from Iranian conflict, and rare internal divisions within the Federal Reserve.

In the March non-farm payroll data, the education and healthcare services industry accounted for 91,000 new positions, contributing almost all of the job growth. Analysts bluntly stated that current job growth is "actually very narrow," with many industries not truly expanding beyond education and healthcare.

Bank of America believes that even if job data is weak, investors may not be willing to heavily bet on rate cuts before the situation in Iran becomes clearer. As long as the unemployment rate remains at 4.3% or lower, with inflation risks re-emerging, the Federal Reserve can continue to remain inactive with composure.

The internal division within the Federal Reserve became public at the meeting on April 29th. Although the final decision was to keep interest rates unchanged, four members voted against it, the most since 1992. Three of the dissenters disagreed with the phrase "maintaining an easing bias" in the statement, as it implies a higher probability of rate cuts than hikes.

The ADP data released on Wednesday showed that the U.S. private sector added 109,000 jobs in April, the fastest growth since early 2025, significantly higher than the market's expectation of 84,000, and also above the 61,000 jobs in March.

ADP's Chief Economist, Nela Richardson, pointed out that the growth in hiring was most significant for large and small businesses, with mid-sized businesses showing some weakness. In terms of industries, education and healthcare continued to lead with an additional 61,000 positions, while business and professional services reduced by 8,000 positions.

However, economist Raymond James cautions that the ADP data has significantly diverged from the official non-farm data in recent months on several occasions and should not be overinterpreted. NerdWallet's Senior Economist, Elizabeth Renter, also said that in the context of ongoing global conflicts, energy price shocks, and policy uncertainties, "a single strong employment report is not enough to indicate that the labor environment has undergone a fundamental change."