Strong jobs report to keep Fed on hold as war and energy prices make inflation the bigger worry
Strong jobs report to keep Fed on hold as war and energy prices make inflation the bigger worry
Jennifer SchonbergerFri, May 8, 2026 at 1:57 PM UTC
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A stronger-than-expected April jobs report is expected to keep the Federal Reserve on hold as Kevin Warsh is expected to take over as chair in a week.
Payrolls added 115,000 jobs in April, trumping the 65,000 jobs analysts expected, as the unemployment rate held steady at 4.3%.
Job gains, which have been concentrated mostly in the healthcare sector, began to broaden to other sectors, with payroll gains in transportation and warehousing and retail. Manufacturing jobs slid, and federal government employment also continued to decline.
Job growth has been volatile this year. March data was revised higher by 7,000 to 185,000, an about-face from the newly revised 156,000 jobs lost in February and closer to the blockbuster 160,000 jobs created in January.
“These nonfarm numbers have been very, very volatile, but the unemployment rate has stayed between 4.3% and 4.5%. So I don't think it really alters the path in terms of what we feel the Fed might do,” Leslie Falconio, UBS Global Wealth Management head of taxable fixed income strategy, told Yahoo Finance.
Read more: How jobs, inflation, and the Fed are all related
Workers are seen at the Federal Reserve renovation site on Jan. 14, 2026, in Washington, D.C. (Alex Wong/Getty Images) (Alex Wong via Getty Images)
This week, several Fed officials have commented that the job market looks stable even before Friday’s report. However, they raised concerns about the conflict in the Middle East and whether that could hurt job growth, depending on how long higher energy prices are sustained.
Cleveland Fed president Beth Hammack said she worries that high energy prices could hurt consumer spending, in turn hurting businesses, which could pull back on hiring.
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St. Louis Fed president Alberto Musalem said that comments from companies and hiring managers indicate hiring would be stronger if not for the level of uncertainty around the economy.
“The CEO of a major company that produces inputs for industrial manufacturing said to me recently that uncertainty is so high and that's the reason why [he’s] not hiring,” Musalem said. “He said the best worker to fire is the one that I haven't hired, because of the uncertainty.”
The labor force participation rate clocked in at 61.8% and has been declining, down from 62.5% in January.
For now, with a job market showing solid signs, Fed officials’ attention could turn more toward inflation.
Both Hammack and Musalem said they are more concerned about inflation than the job market, given higher energy prices that are coming at a time when inflation has been running above the Fed’s 2% inflation goal for more than five years and tariffs have increased goods prices.
“More solid jobs data leaves the Fed where it’s been for a while — watching and waiting, focused on the inflation side of its mandate,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in a note. “Rate cuts still aren’t on the near-term horizon, but the absence of inflationary threats in today’s report should quiet some of the chatter about a potential hike.”
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Source: “AOL Money”
