Jobs Data Stabilizes, Giving Fed Hawks More Reason Not To Cut Rates

The jobs data is stabilizing, folks. The big slowdown in job creation in 2025, which led to the lowest job creation year this century outside a recession, has ended. The labor data isn’t getting worse — in fact it’s improving from the levels we saw in 2025.

This means the Fed hawks can focus on inflation, since there are a lot of Fed rate cuts already in the system, and mortgage spreads have improved as well. Kevin Warsh will have his work cut out for him as the new Fed chair, as he will face many vocal dissenters who only went along with rate cuts last year because the labor data was softening. With jobless claims low, job openings stabilizing and job creation now higher, certain Fed Hawks will want to have an open conflict with Kevin Warsh and others who want more rate cuts.

Let’s take a look at the jobs report to see what is really going on.

From BLS: Total nonfarm payroll employment edged up by 115,000 in April, and the unemployment rate was unchanged at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, transportation and warehousing, and retail trade. Federal government employment continued to decline.

The breadth of job creation has improved in 2026; it is still healthcare-heavy, but in this report, we saw a few job sectors show growth, as shown in the chart below. Which now makes back-to-back months we have seen this, and, in fact, all three months that were positive in 2026 have had better breadth than before.

Labor force growth ticked down a smidge in this report, and despite all the hype earlier this year that AI was going to take all the jobs, the unemployment rate is at 4.3%. I did a preview of the jobs report in today’s episode of the HousingWire Daily podcast, where I discuss my long-term theory about why we don’t need to worry about massive unemployment.

I look for two labor triggers before I get into my real recession talking points. One is jobless claims heading toward 323,000 on the 4-week average, and the other is residential construction jobs having a noticeable downtrend. Neither of those two things is happening now. In the chart below, you can see residential construction employment isn’t rising, but it’s not breaking either.

Conclusion

The labor market has stabilized and we are creating more jobs than we did at this time last year. Year-to-date job creation is slightly below my break-even number for keeping the unemployment rate from rising. Population growth is slowing; my break-even point is at 78,000 jobs per month and year-to-date job creation is 76,000. The Federal Reserve has a much lower break-even rate with population growth slowing. The hawks have used this as a talking point to avoid easing policy any further.

Now, this isn’t a booming labor market for sure, but it’s not breaking either, and the Federal Reserve believes its break-even point for job growth is around 30,000, which is my take on their talking points. While I might disagree with their take on that, what the Fed thinks is what matters, and with inflation above target before the Iran conflict started and with oil and food prices rising, the Fed hawks will have more ammunition to stay hawkish.

The 10-year yield ticked down slightly after the jobs report, as the Iran conflict remains at the center of economic talk. What this jobs report and others for 2026 have done is give the hawks cover to fight any rate cuts in 2026 as long as the conflict is going on and inflation data is not improving