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Jason Van Steenwyk
Jason Van Steenwyk

May 18, 2026

The Labor Market Looks Stable On The Surface. Underneath It, Something Is Shifting.

April payrolls came in well above forecast. But the same report that looks strong is also sending some quieter signals worth understanding.

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The Labor Market Looks Stable On The Surface. Underneath It, Something Is Shifting.

April payrolls came in well above forecast. But the same report that looks strong is also sending some quieter signals worth understanding.

The Jobs Report That Looks Better Than It Feels

On May 8, the Bureau of Labor Statistics released its April employment report. The economy added 115,000 jobs, well above the 55,000 to 65,000 most forecasters had expected. Unemployment held steady at 4.3%. It was the second straight month of six-figure job growth, the first back-to-back stretch like that in over a year.

Markets took it as a positive. And on the surface, it is. But the same report that beat expectations is also carrying some signals that are worth sitting with.

The Big Idea

The April number looks strong, partly because expectations had been set so low. The three-month average pace of job creation, smoothing out the volatility from strikes, weather, and revisions, is running at about 48,000 jobs per month. Before the pandemic, that pace would have raised serious alarm bells. Right now it's enough to keep the unemployment rate from rising, but not enough to suggest the labor market is accelerating.

The job gains in April were concentrated in a familiar set of sectors. Healthcare led with 37,000 new positions. Transportation and warehousing added 30,000. Retail and social assistance also contributed. These are the sectors that have been doing the heavy lifting for months. The rest of the economy was largely flat or declining.

The tech sector is the starkest example of what's happening underneath the headline. The information sector shed 13,000 jobs in April and is now down 342,000, or 11%, from its peak in November 2022. Financial activities lost another 11,000. Federal government employment fell 9,000 and is now at its lowest level since May 1966, down 348,000 from its October 2024 peak.

The tech layoff picture is accelerating in a specific direction. In April, employers announced 83,387 planned job cuts. The tech industry alone accounted for 33,361 of them. AI was cited as the leading reason for the second month in a row. About one in four companies that announced cuts in April listed AI as the driver. That's not a rounding error. It's a structural shift showing up in the data in real time.

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Quick Hits

  • April payrolls: 115,000, well above the 55,000 to 65,000 forecast. Unemployment held at 4.3%.

  • Three-month average job creation pace: 48,000 per month, well below pre pandemic norms.

  • Tech information sector shed 13,000 jobs in April, down 342,000 or 11% from its November 2022 peak.

  • Federal government employment at its lowest level since May 1966, down 348,000 from its October 2024 peak.

  • AI cited as the leading reason for tech layoffs for the second consecutive month in April.

What This Means for Orientation

The labor market right now is stable but not healthy in the traditional sense. It's holding together through strength in healthcare, transportation, and services, while the sectors most exposed to AI disruption and government contraction are quietly shrinking. The headline unemployment rate stays flat because the overall pace of new hiring and firing roughly balance out. But that stability masks a real redistribution of where jobs exist and where they don't.

For the Fed, this report doesn't change much. The labor market isn't weak enough to push toward cuts, and with inflation still running at 3.3% and an April CPI reading expected to come in even higher, there's no room to ease. The job market is stable. It just isn't growing fast enough to give anyone much confidence about where it goes from here.

Bottom Line

April's jobs report was a genuine beat. It was also a portrait of a labor market running on a narrow base of sectors while tech contracts and government shrinks. The headline number tells you the economy is still adding jobs. What it doesn't tell you is that the composition of those jobs is shifting in ways that don't show up in the unemployment rate. That shift, driven largely by AI and fiscal tightening, is the more consequential story developing quietly underneath the surface.

Until next time,
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