TD Securities strategists forecast an 80k rise in US nonfarm payrolls for April, compared with a 65k consensus estimate. They break this down as 85k private-sector jobs and -5k government jobs.
They expect healthcare to be the main source of job growth, with a sector pattern similar to last year. The unemployment rate is projected to hold at 4.3%, matching the 4.3% consensus forecast.
April Jobs Outlook
They also say the unrounded unemployment rate may edge higher. Average hourly earnings are forecast to rise 0.2% month on month, versus a 0.3% consensus.
On a year-on-year basis, average hourly earnings are projected at 3.7%. The article notes it was produced with the help of an AI tool and reviewed by an editor.
The expectation for a cooling labor market with around 80,000 job gains was shattered by the actual April payrolls report released last week. The economy added a much stronger 175,000 jobs, challenging the view that the Federal Reserve would have a clear path to cut rates. This upside surprise forces us to reconsider defensive positioning.
Specifically, the unemployment rate unexpectedly ticked down to 4.2%, and average hourly earnings rose by a hot 0.4%, double the modest forecast. These figures, combined with a surprisingly resilient ISM Services report from earlier this week, suggest underlying economic momentum remains firm. We must now price in a more hawkish Fed for longer than we anticipated just a few weeks ago.
Positioning After The Surprise
The chances of a summer rate cut have now diminished significantly, pushing expectations toward the very end of the year, if at all. This repricing means we should look at options that benefit from sustained high short-term interest rates. This could involve selling out-of-the-money call options on December 2026 SOFR futures, a strategy that profits if the market continues to price out rate cuts.
This data surprise has also woken up market volatility, which had been trending down since March. The VIX index, a key measure of expected market turbulence, jumped from 13 to over 16 following the jobs report. We believe buying VIX calls with a June expiry offers a cheap way to hedge against further uncertainty surrounding upcoming inflation data and Fed commentary.
Looking at equity derivatives, the market dynamics have shifted away from the defensive posture we saw for much of 2025. The strong economic data suggests continued outperformance from cyclical sectors that are less sensitive to interest rates, like energy and industrials. We are using put options to hedge our exposure to rate-sensitive growth sectors, which now face stronger headwinds.
