NFP: Goldilocks or a recession harbinger?

For today anyway, the latest jobs data has further fueled expectations of impending interest rate cuts and paints a picture of a soft landing on the economic horizon.

According to the BLS release on Friday, the US economy added 175,000 jobs in April, a figure that could be deemed within the "Goldilocks zone." Leading up to the release, there was a subtle and odd uptick in the "whisper" number, consequently, the 175,000 figure was perceived as a wider miss compared to the "official" consensus set at 240,000.

Of particular encouragement for the Federal Reserve was the subdued reading of Average Hourly Earnings (AHE). AHE increased by only 0.2% from March (0.2019% when unrounded), falling below consensus expectations. Similarly, the year-over-year (YoY) growth rate of 3.9% was cooler than anticipated.

This data should help alleviate concerns about "stagflation" prompted by the headline nonfarm payrolls (NFP) miss, as well as ease worries exacerbated by the Employment Cost Index (ECI) and Unit Labor Costs (ULC) overshooting in the first quarter.

While the extent of the headline miss might fuel concerns about a recession, for the time being, 175,000 represents a fundamentally robust pace of hiring. Any significant downward revisions next month alongside another substantial miss may warrant cause for concern.

Notably, Average Hourly Earnings (AHE) coming in below expectations marks the second consecutive moderate print in three months. This, at the very least, provides a counterbalance to worries about a potential wage-price spiral.

All in all the doves and bulls should relish the win.