US Dollar Finds Temporary Support Amid Mixed Jobs Data Signals

The US dollar faced a tug-of-war this week, edging higher briefly after the release of April jobs data but failing to shake off its broader downward trajectory. Investors parsed the report’s nuances, weighing whether the 177,000 nonfarm payrolls gain—a modest beat over consensus expectations—signaled sustained labor market resilience or merely confirmed a trend of gradual cooling. By Friday’s close, the dollar index (DXY) had retreated from intraday highs, underscoring lingering skepticism about the greenback’s near-term prospects amid muted inflation pressures and Federal Reserve policy uncertainty.

The BLS report offered a mosaic of resilience and soft spots. While April’s 177,000 payroll gain held steady with the 12-month average of 152,000, the headline figure masked downward revisions to prior months: February and March combined were trimmed by 50,000. Sectors like healthcare (up 51,000) and transportation (29,000) provided the bulk of gains, while federal employment fell for the fourth consecutive month. The unemployment rate held at 4.2%, a plateau since May 2024, though the share of long-term unemployed surged to 23.5% of the jobless total—a reminder of persistent labor market slack.

The data’s mixed signals left the dollar in a holding pattern. Initial optimism over the jobs number briefly buoyed the greenback, as traders eyed a 0.2% dip in the US 10-year Treasury yield—a sign of reduced recession fears. But the dollar’s rebound stalled as investors noted the report’s softer undertones. Wage growth, for instance, rose just 0.2% month-on-month to $36.06, with annual gains at 3.8%—a slowdown from the 4.3% peak in 2023.

Analysts highlighted that the Fed’s hands remain tied. With core inflation hovering at 4.6%—well above the 2% target—and the labor force participation rate stagnant at 62.6%, policymakers face a dilemma: further hikes risk stifling a still-fragile recovery, while inaction risks letting inflation linger. The April report’s “Goldilocks” tone—neither hot enough to force hikes nor weak enough to trigger stimulus—left traders little to act on.

Meanwhile, broader economic headwinds loom. The trade deficit, which widened to $80.6 billion in February, continues to weigh on the dollar. Add to that the yen’s 4.5% surge against the dollar this year as Japan’s economy outperforms expectations, and the dollar’s struggle becomes clearer.

The report’s most telling metric may be the long-term unemployed, now at 1.7 million—a 40% increase from April 2024. This suggests lingering mismatches between jobseekers’ skills and available roles, which could cap wage growth and keep inflation subdued. With the Fed’s next meeting in June, markets will scrutinize May’s jobs data for clues. A repeat of April’s tepid gains could cement the dollar’s downward bias, while a stronger-than-expected 250,000+ payroll figure might spark a greenback rebound.

In conclusion, the April jobs report provided only fleeting support for the dollar. While the 177,000 payroll gain and stable unemployment rate avert immediate recession fears, the data’s muted wage growth and persistent labor market slack highlight why the dollar’s rally lacks staying power. Investors are likely to stay cautious until inflation trends or Fed policy shifts provide clearer direction. For now, the dollar’s path remains dictated by a balance of modest labor market health and global macroeconomic crosscurrents—a recipe for continued volatility rather than sustained strength.