US non-farm payrolls April 2025 preview: signs of labour market weakness?

​​​What to expect from April's non-farm payrolls report

​The April US non-farm payrolls (NFPs) report, set for release on Friday 3 May, is expected to confirm a cooling trend in America's labour market. Consensus estimates project job creation of 135,000-145,000 positions, a significant drop from March's 175,000 figure.

​Economists anticipate the unemployment rate will hold steady at 4.2%, maintaining the gradual upward drift from pandemic-era lows. This slow deterioration reflects growing caution among employers as broader economic conditions show signs of weakening across multiple sectors.

​Average hourly earnings, a key inflation barometer closely monitored by the Federal Reserve (Fed), are forecast to increase 0.3% month-on-month (MoM). This would keep annual wage growth around 4.0%, a level that remains somewhat elevated but has moderated from the hotter readings seen during 2022-2023.

​The April report carries particular significance following the surprise 0.3% gross domestic product (GDP) contraction in Q1 2025 and Wednesday's disappointing ADP private payrolls figure, which showed a meagre 62,000 jobs added by the private sector. These developments have heightened concerns about economic momentum and raised questions about the sustainability of labour market strength.

​Recent economic indicators point to broader slowdown

​A series of economic releases in recent weeks has painted an increasingly concerning picture of US economic health. The unexpected 0.3% contraction in first quarter (Q1) GDP caught many analysts off guard, marking the first negative reading since the brief pandemic-induced recession of 2020.

​The ADP private employment report severely undershot expectations with just 62,000 jobs added in April, far below the consensus forecast of approximately 160,000. This represents the weakest private sector job creation since January 2021, when Covid-19 restrictions were still hampering economic activity.

​Manufacturing data has shown persistent weakness, with the ISM Manufacturing purchasing managers index (PMI) remaining in contractionary territory below 50 for the seventeenth consecutive month in April. The services sector, while still expanding, has shown signs of moderating growth in recent readings.

​Weekly jobless claims have been trending higher, with initial claims consistently above 240,000 in recent weeks – well above the 200,000-215,000 range that characterised much of 2023. While not yet at levels typically associated with recession, this steady increase suggests growing stress in the labour market.

​Implications for Federal Reserve policy

​The employment situation has become increasingly central to the Fed's policy deliberations as inflation has shown tentative signs of moderating. With price pressures easing but not yet at target levels, the focus has shifted toward supporting the labour market.

​Markets are currently pricing in approximately a 65% probability of a rate cut at the June Federal Open Market Committee (FOMC) meeting, with expectations for 75-100 basis points of easing by year-end. A significantly weaker-than-expected jobs report could cement these expectations or even pull them forward.

​Fed Chair Jerome Powell's recent communications have acknowledged growing concerns about employment conditions, suggesting a subtle shift in the committee's risk assessment. The Fed appears increasingly willing to tolerate some inflation overshoot to avoid unnecessary damage to the labour market.

​Any signs of accelerating wage growth in Friday's report would complicate this narrative, potentially forcing the Fed to delay interest rate cuts. However, most analysts expect wage pressures to continue moderating, giving the central bank increased flexibility to pivot toward easing.

​Key components to watch beyond headline numbers

​While the headline jobs figure captures most attention, several other components of the report will provide crucial insights into labour market health. The labour force participation rate, currently at 62.5%, will be closely monitored for signs of workers entering or exiting the job market.

​Revisions to previous months' data could prove equally important as the April figures themselves. Significant downward adjustments to February and March would suggest the employment situation has been deteriorating more rapidly than initially understood.

​The sectoral breakdown will reveal which parts of the economy are holding up and which are struggling. Manufacturing employment, which has shed positions in several recent reports, will be scrutinised for further weakness, while the performance of leisure and hospitality sectors could indicate consumer spending health.

​The U-6 unemployment rate, a broader measure that includes discouraged workers and part-time employees seeking full-time positions, provides a more comprehensive view of labour market slack. Currently at 7.8%, any significant increase would signal deepening problems beneath the headline figures.

​Market reaction scenarios to consider

​A weaker-than-expected jobs report would likely trigger a rally in bond markets, pushing yields lower as investors price in earlier and potentially more aggressive Fed rate cuts. The US dollar would probably weaken against major currencies in such a scenario.

​Equity markets might initially react negatively to signs of economic weakness, but could quickly reverse if the data is seen as accelerating the path to monetary easing. Growth stocks and tech names might outperform cyclicals in this environment as lower discount rates boost valuations.

​Conversely, a surprisingly strong report could lead to a bond sell-off and higher yields, as markets reassess the timing of potential rate cuts. The dollar would likely strengthen, while equity markets might experience a mixed reaction with economically sensitive sectors potentially outperforming.

​Gold trading could see significant volatility following the release, as the precious metal responds to shifts in both real yields and economic uncertainty. A weak report might boost gold on expectations of imminent rate cuts, while a strong report could pressure prices by pushing back easing expectations.

Historical context and labour market trends

​The current employment situation represents a normalisation from the extremely tight labour market seen during the post-pandemic recovery. During 2021-2023, monthly job gains frequently exceeded 300,000, a pace that was clearly unsustainable as the economic cycle matured.

​The gradual increase in unemployment from 3.5% in early 2023 to the current 4.2% reflects a controlled cooling rather than a sharp deterioration. Historically, recessions have been characterised by more rapid increases in unemployment – the absence of such a spike has kept recession calls somewhat at bay.

​Job creation in the 100,000-150,000 range is broadly consistent with population growth and workforce expansion. However, sustained readings below 100,000, particularly if accompanied by rising unemployment, would signal more serious economic distress and could trigger recession concerns.

​Wage growth has shown remarkable persistence despite the Fed's aggressive tightening cycle. Annual growth around 4% remains above levels compatible with the Fed's 2% inflation target, suggesting some structural shifts in the labour market may be keeping wage pressures elevated even as overall conditions cool.

​How to trade the non-farm payrolls report

​The monthly jobs report typically generates significant market volatility, creating trading opportunities across multiple asset classes. Understanding potential market reactions can help you position appropriately ahead of this key data release.

​Risk management becomes particularly important during high-impact economic releases. Consider using stop losses to protect against adverse price movements, and determine your position sizes based on the heightened volatility typically seen around payrolls data.

​Focus on assets most sensitive to US economic data, including major US indices, dollar-denominated forex pairs, and Treasury yields through bond markets. These typically exhibit the strongest reactions to employment figures.

​Spread betting and CFD trading offer ways to speculate on short-term price movements following the report, while longer-term investors might consider how the data affects the broader economic outlook for their investment portfolios.

1. ​Do your research on how employment data typically affects your chosen markets 
2. ​Choose whether you want to trade or invest 
3. ​Open an account with us 
4. ​Search for the market you want to trade in our platform or app 
5. ​Place your trade