BentPine Capital - Hiring Decelerates as April Payrolls Take Center Stage

• Services and manufacturing surveys show hiring stagnated in April.

• However, the decrease looks marginal at best.

• A below average month will keep pressure on the Fed to support growth.

The upcoming payroll print may simply validate the softening in hiring already reflected across the Fed’s regional surveys…

This week delivers a meaningful read on the direction of U.S. growth. On Friday, the U.S. Bureau of Labor Statistics (“BLS”) publishes its April payroll report. Wall Street’s penciling in a gain of 73,000 jobs. If the number lands there, it’ll fall well short of the typical April increase of 218,000 since 2015. It would also mark another year where the labor market stumbles out of the gate…

Historically, April’s hiring pace runs right around the annual monthly average of 227,000. But recent Fed business surveys suggest hiring backed off a bit last month, following March’s 178,000‑job gain. If the national data echoes continued softness, it points to slow and steady growth, but a labor market that isn’t out of the woods. That backdrop reinforces the case for our central bank to stay put and possibly cut rates later this year, given a cessation of hostilities in the Middle East. That would support a continued grind higher in the S&P 500.

But don’t take my word for it, let’s look at what the data’s telling us…

Each month, several regional Fed banks survey manufacturing and services firms to gauge business conditions. I focus on the employment and inflation components from the Dallas, Kansas City, New York, and Philadelphia districts. Together, they represent roughly one-third of U.S. GDP. Their surveys offer an early read on national trends, especially since they’re released ahead of market‑moving reports like the BLS payrolls.

Today, I’m zeroing in on employment. Let’s break down the individual components before zooming out to the broader picture.

Starting with manufacturing…

The chart above tracks the sector’s hiring trend over the past seven years. After the pandemic collapse, factory hiring rebounded sharply, but momentum has gradually faded. Manufacturing employment held firm through most of last year, saw a brief pickup in July and August, then softened into year‑end. After a pullback in January, the sector’s hiring pace appears to be stabilizing. My gauge’s reading for April was in-line with March.

The more important services sector told a different story…

Hiring slipped again, with the gauge remaining in contraction territory. April marked the eighth straight negative reading. For the first time since October, each region had a weak result. The Dallas result was the strongest at -1, while Kansas City was the weakest at -5. Business respondents said slowing demand and cost uncertainty is weighing on hiring outlooks.

To get a cleaner national picture, I combined the manufacturing and services data into a single gauge. It’s weighted 80% services and 20% manufacturing, consistent with the U.S. employment mix. I also weighted each district by its GDP share…

As you can see, after a brief mid‑year bounce, the overall hiring picture is still soft. In April, my combined index remained in contraction territory. In fact, given the heavy services weighting, the combined index was also negative for the eighth consecutive month.

Now let’s compare the combined Fed employment gauge with nonfarm payrolls for historical context…

The chart above uses a three‑month rolling average to smooth volatility and highlight the trend. The combined Fed survey tends to lead national hiring. While the index moves through rolling peaks and valleys, the broader trend has been drifting lower. And although it was at -2.1 in April compared to the -3.3 November trough, that’s hardly a meaningful rebound.

At the end of the day, manufacturing and services employment remains weak. If the BLS confirms this pattern on Friday, it’ll show hiring running well below historical norms.

And if that happens, Wall Street will likely grow more confident in its expectation that the Fed is likely to leave interest rates unchanged for the foreseeable future. That would align with recent comments from policymakers who want to give last year’s adjustments more time to filter through the economy.

Ultimately, even lower rates by the end of 2027 would push borrowing costs down, free up cash for households and businesses, and support economic growth. That would help fuel a continued long‑term rally in the S&P 500.

Five Stories Moving the Market:

President Donald Trump said the U.S. would start guiding commercial ships out of the Strait of Hormuz where they have been trapped by the war between the U.S. and Iran, adding that talks continued with Tehran to find an end to the conflict – WSJ. (Why you should care – the White House said any interference with the shipping traffic will be dealt with ‘forcefully’)

U.S. President Donald Trump suggested Iran’s latest peace proposal might not be enough to satisfy him; Iran’s suggestions include setting a one-month deadline on talks for a deal to reopen the Strait of Hormuz and end both the U.S. naval blockade and the fighting in Iran and Lebanon – Bloomberg. (Why you should care – the White House has repeatedly said it’s uninterested in negotiating a separate nuclear agreement)

OPEC+ agreed a modest oil output hike for June, an increase that will remain largely on paper as long as the Iran war continues to disrupt Gulf oil supplies through the Strait of Hormuz; the group will raise oil output targets by 188,000 barrels per day in June, the third consecutive ​monthly increase – Reuters. (Why you should care – the increased in output is likely to weigh on oil prices once the conflict has ended)

The U.S. Defense Department estimates Iran has been denied nearly $5 billion in oil revenue because of the blockade in the Gulf of Oman, causing unprecedented pressure on Tehran's government – AXIOS. (Why you should care – the U.S. is attempting to force Iran to max out its oil storage facilities as a way to force the government back to the negotiating table)

The White House said it will raise tariffs on automobiles from the European Union to 25% from 15%, as President Donald Trump accused the 27-nation bloc of not complying with a trade agreement it signed last year – WSJ. (Why you should care – the White House is likely trying to pressure the European Union to move ratification of the deal forward on their side)

Economic Calendar:

Earnings: BWXT, L, LSCC, ON, VRTX, WMB

Markets in China, Japan, and the U.K. are Closed

Eurozone – HCOB Eurozone Manufacturing PMI (Final) for April (4:00 a.m.)

Eurozone – Sentix Investor Confidence for May (4:30 a.m.)

U.S. – Factory Orders for March (10:00 a.m.)

Treasury Auctions $89 Billion in 13-Week Bills (11:30 a.m.)

Treasury Auctions $77 Billion in 26-Week Bills (11:30 a.m.)

Fed’s Williams (New York, Voter) Speaks (12:50 p.m.)

ECB’s Nagel (Germany) Speaks (1:05 p.m.)

U.S. – NY Fed Loan Officer Survey (2:00 p.m.)

U.S. – Total Vehicle Sales for April (2:00 p.m.)