They're breathing easier in the Mariner S. Eccles Federal Reserve Board Building today, after the Federal Reserve Chair Jerome Powell and his colleagues got a dream jobs report.

It may not be so dreamy for the stock market, however.

This morning, the Bureau of Labor Statistics released its Employment Situation Summary for April, and it was a big surprise to the upside.

While the unemployment rate remained steady at 4.3%, the economy added 115,000 net new jobs during the month. That's more than double the 55,000 jobs economists were expecting.

In addition, the number of new jobs added in March was revised slightly higher, to 185,000. That makes March-April the best two-month stretch for jobs since 2024. And it suggests that after extremely slow growth for the labor market in 2025, it has regained momentum, with two consecutive months of more than 100,000 in employment growth.

Wage growth has moderated

Yet while monthly jobs added are rising, wage growth was just 3.6% year over year, below the 3.8% expected. Average hourly earnings for nonfarm employees stands at $37.41.

It's a very welcome number for the Fed, which watches wage growth closely for signs that the so-called "wage-price spiral" is kicking in. That's the self-reinforcing cycle in which rising prices cause workers to demand higher wages, which leads companies to increase prices further to cover their labor costs. It's a terrible situation for inflation and for any central bank.

Image source: Getty Images.

So, what does the April jobs report mean for investors and the stock market?

Well, while the wage data suggests inflation isn't spiraling out of control, it's still problematic. The Consumer Price Index (CPI) has been rising in recent months and is currently 3.3% higher year-over-year, well above the Fed's desired level of 2%.

And today's jobs report shows that unemployment remains very stable -- it's been hovering between 4.4% and 4.3% since December of 2025.

So overall, the Fed is likely to breathe a sigh of relief about unemployment and turn its attention back to inflation (the Fed's dual mandate means it has to both contain inflation and maximize employment, and those two goals are often at odds).

There were concerns that the war in the Middle East could negatively impact both the labor market and inflation. But after today's report, it appears that inflation is the bigger worry.

Next Tuesday, May 12, before market open, the Bureau of Labor Statistics will release the April CPI report. That data will be closely scrutinized for signs that inflation is continuing to rise.

At the April meeting of the Fed's interest rate-setting committee, the Fed didn't change its target interest rate. It did, however, include language that indicated a bias toward easing (cutting interest rates) in the near future.

But this morning's jobs report suggests that easing bias won't survive much longer. And if next week's CPI report comes in higher than expected, it will likely be the final nail in the coffin for a rate cut in 2026.

The futures market certainly thinks so. Right now, futures traders are pricing in a 73% chance that the Federal Funds rate will not change this year. It puts the chances of a rate cut at about 12% and a hike at around 15%.

So, while investors can probably rule out a rate hike this year, they're even less likely to see a rate cut.