Will this recent data force the Federal Reserve to rethink its position regarding interest rates?<\/p>\n
A bad combination <\/p>\n
As many saw last Friday, the U.S. economy added 115,000 jobs to nonfarm payrolls in April, more than double the 55,000 estimate. The unemployment rate held steady at 4.3%.<\/p>\n
On the surface, this is all good news. But looking deeper within the report, there are some concerning trends. For instance, 37,000 new jobs were added in healthcare, while another 17,000 were added in social assistance.<\/p>\n
![\"Person](\"https:\/\/www.europesays.com\/news\/wp-content\/uploads\/2026\/05\/11b948d7536884a9f47697788fb248d5.jpeg\")
Image source: Getty Images. <\/p>\n
Economists do not view job additions in these categories to be representative of economic growth. They can also have a high churn rate and be overly reliant on government funding.<\/p>\n
Furthermore, information services jobs continue to bleed due to disruption from artificial intelligence<\/a>. The sector lost another 13,000 jobs in April, bringing total job losses to 11% since November 2022.<\/p>\n Perhaps even more concerning, average hourly earnings increased by 0.2% in April, 0.1% below economists’ expectations. So, the job gains weren’t as good as they looked on paper, and earnings came down.<\/p>\n Then you factor in a hot CPI report<\/a> this morning, May 12, and consumers are getting hit with a double whammy.<\/p>\n The CPI increased by 0.6% on a seasonally adjusted basis in April, in line with economists’ estimates. However, the year-over-year rate of 3.8%, or the headline number, was 0.1% higher than economists’ estimates.<\/p>\n The CPI has accelerated in recent months due to the Iran war, which has sharply increased gas prices, which can impact the entire economy. Core inflation, which strips out more volatile food and energy prices, rose 0.4% for the month, slightly higher than expected, and came in 2.8% higher year over year.<\/p>\n The core inflation number is probably most important right now, given how volatile energy and gas prices are these days. Still, it’s worth noting that, even though energy prices are not included in the core number, they can have a broad impact on the economy, and it will only get worse if the conflict in Iran persists.<\/p>\n Will the Federal Reserve rethink its stance on interest rates? <\/p>\n Heading into today’s hot inflation report, the market expected the Fed to keep interest rates steady through 2027. In fact, as of 11 a.m. today, the chance of an interest rate cut at the Fed’s next meeting declined slightly, although there was only a marginal chance to begin with. Keep in mind, these probabilities change frequently.<\/p>\n Elevated inflation and some small cracks in the labor market have made it difficult for the Fed to achieve its dual mandate of full employment and stable prices. Leaving rates where they are now — or perhaps even raising them — will help beat back inflation.<\/p>\n But it will also continue to put pressure on the consumer. The Fed is most likely to cut rates again if it sees ongoing or more severe weakness in the labor market.<\/p>\n Members of the rate-setting Federal Open Market Committee (FOMC) have been very divided in recent meetings. At the Fed’s April meeting, four members dissented: one wanted a rate cut, and three opposed the Fed’s use of language in its policy statement suggesting the next move might be a cut.<\/p>\n Ultimately, I’m not sure April inflation and jobs data changes a whole lot.<\/p>\n There are still some signs of weakness in the labor market, but inflation remains sticky and is likely to worsen the longer the conflict in Iran lasts, so I think the Fed will be slightly more hawkish after both data points.<\/p>\n But I still expect rates to remain steady for the foreseeable future, barring any sudden economic changes.<\/p>\n Don\u2019t miss this second chance at a potentially lucrative opportunity <\/p>\n Ever feel like you missed the boat in buying the most successful stocks? Then you\u2019ll want to hear this.<\/p>\n On rare occasions, our expert team of analysts issues a \u201cDouble Down\u201d stock<\/a> recommendation\u00a0for companies that they think are about to pop. If you\u2019re worried you\u2019ve already missed your chance to invest, now is the best time to buy before it\u2019s too late. And the numbers speak for themselves:<\/p>\n Nvidia:\u00a0if you invested $1,000 when we doubled down in 2009,\u00a0you\u2019d have $569,198!*<\/p>\n Apple: if you invested $1,000 when we doubled down in 2008, you\u2019d have $55,783!*<\/p>\n Netflix: if you invested $1,000 when we doubled down in 2004, you\u2019d have $460,826!*<\/p>\n Right now, we\u2019re issuing \u201cDouble Down\u201d alerts for three incredible companies, available when you join\u00a0Stock Advisor, and there may not be another chance like this anytime soon.<\/p>\n See the 3 stocks \u00bb<\/a><\/p>\n *Stock Advisor returns as of May 11, 2026<\/p>\n The Motley Fool has a disclosure policy<\/a>.<\/p>\n