Our weekly podcast by Kevin Lings:

US economy adds 300 000 jobs in two months

In this podcast, STANLIB’s Chief Economist, Kevin Lings, focuses on recent US labour market data, which is key to the performance of the economy. Labour market conditions appear to have improved in the last two months, with the economy adding an impressive number of jobs, despite the Middle East conflict and investment in AI.

The focus areas during the week included:

• The S&P 500 index gained 2.3% (its sixth consecutive weekly increase), having risen by an incredible 16.6% since the low on 30 March (the Iran/US/Israel war started on 28 February). Year-to-date the S&P 500 is up 8.1%, driven primarily by strong corporate earnings and ongoing AI‑related investment. By 7 May, about 85% of the S&P 500 companies had reported their quarterly results. Data from FactSet indicates that a little less than 85% of these companies announced earnings that beat the consensus estimate.
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• The STOXX Europe 600 ended a volatile week with a modest gain of 0.1%. Sentiment improved early in the week on easing geopolitical tensions in the Middle East and generally strong corporate earnings results. However, President Trump’s threat to impose “much higher” tariffs on the EU if the bloc does not reduce its tariffs on US goods to zero had a negative impact on markets towards the end of the week. Japan’s equity markets were closed from Monday to Wednesday for the Golden Week holiday. In the shortened trading week, the Nikkei 225 surged 5.4%, reaching a record high on Thursday, while the broader TOPIX Index advanced 2.7%. Gains were led by a sharp rally in technology and semiconductor shares, supported by continued enthusiasm about AI-related demand and optimism that a potential US-Iran diplomatic breakthrough could ease geopolitical tensions. SA’s All-Share Index gained a welcome 2.4% in a volatile week, led by the Resource 10 Index, which gained 7.3%. 
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• ‍Emerging market currencies appreciated by 1.1% against the US dollar while the rand strengthened by 1.6%, despite increased market volatility that was largely driven by mixed signals on the de-escalation of the Middle East conflict. Year-to-date the rand remains mid-pack relative to its emerging market peers, appreciating 0.9% against the dollar compared with a 1.4% gain for the emerging market currency index.
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• In April, the US unemployment rate was unchanged at 4.3%, in line with expectations. The rate of unemployment has remained in a very narrow range of 4.3% to 4.5% in each of the past 10 months, helped by a meaningful reduction in the break-even employment rate. Critically, non-farm employment rose by 115 000 jobs in April, well above market expectations for an increase of 65 000 (Bloomberg). Health care and social assistance again provided a significant portion (37 000) of the job gains, but hiring broadened to additional sectors. Over the past six months the US has added an average of 55 000 jobs a month, which is a lot more encouraging than in February 2026, when the six-month average was -6 000 jobs. It is worth repeating that while the average monthly gain in the past year is low by US standards, the sharp decline in the ‘break-even’ monthly employment number to below 30 000 means that the rate of unemployment has remained acceptably low. Overall, the gain of 115 000 jobs and unemployment rate of 4.3% signifies a solid labour market, with no noticeable negative impact from the Iran war, the ongoing adoption of AI or the higher rate of inflation. Instead, a range of indicators suggests that the US labour market has strengthened in recent months. This will encourage the US Federal Reserve (Fed) to keep rates on hold in the near term while it waits to see how energy‑driven inflation pressures evolve.‍
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• US weekly jobless claims rose to 200 000 last week, below the 205 000 consensus estimate. Continuing claims - which reflect the total number of people receiving benefits - declined further to 1.77 million, suggesting more workers are finding new employment. Taken together, these datapoints are consistent with other recent data pointing to a stable US labour market.‍
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• US monthly data from Challenger, Gray & Christmas indicated that lay-offs increased 38% m/m in April but declined 21% y/y. A breakdown of the data shows that information technology companies announced the most job cuts, which is being attributed to the impact of AI investment.
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• According to the US Bureau of Labour Statistics, US labour productivity growth, measured by non-farm employee output per hour, slowed in the first quarter to a seasonally-adjusted and annualised rate of 0.8%. This is down from growth of 1.6% in the final three months of 2025 and well below the Q3 2025 gain of 5.2%. Year on year, US labour productivity increased by2.9%. Overall, US labour productivity has recorded exceptional growth over the past three years (for a variety of reasons) and is expected to remain strong, given the ongoing investment in AI.‍
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• The University of Michigan’s consumer sentiment index fell to 48.2 in early May, its lowest reading on record. The university’s press release said that roughly 33% of survey participants mentioned higher gasoline prices as a key concern, while about 30% cited tariffs as a negative factor. The range of questions in this survey has a bias towards exploring concerns about inflation. ‍
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• In SA the price of petrol (both grades) rose by R3.27/l while the price of diesel increased by R5.26/l. This is despite the Minister of Finance approving the R3/l extension of the fuel levy subsidy for petrol and increasing the fuel levy subsidy for diesel to R3.93/l. Over the past year the petrol price (95 octane) has increased by 27% while the diesel price is up a massive 64.9% y/y. The higher fuel price is not yet reflected in SA’s inflation data, which was last measured at 3.1% y/y in March 2026.‍
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• The Rating Dog China General Services PMI rose to 52.6 in April from 52.1 in March, which was above market expectations for a reading of 52. In addition, the composite PMI output index increased to 53.1 from 51.5.S&P Global said the improvement was driven mainly by stronger domestic demand and faster new business growth, although export orders declined for a second consecutive month. The data suggested that domestic activity is relatively resilient, despite ongoing tariff uncertainty and softer external demand.‍
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• Ahead of the planned 14-15 May meeting between Trump and President Xi Jinping in Beijing, US and Chinese officials reportedly intensified discussions on extending the current trade truce and exploring potential agreements related to agricultural purchases, AI safeguards, and supply chain resilience. Markets interpreted the preparations as a signal that both sides remain focused on preventing renewed escalation in tariffs and export restrictions, despite persistent tensions related to Taiwan, technology controls, and broader geopolitical issues. This includes expectations for continued dialogue on semiconductors and rare earth supply chains. However, policy officials on both sides cautioned that the likelihood of a significant breakthrough is limited.‍
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• According to China’s Ministry of Culture and Tourism, domestic trips during the 1-5 May Labour Day holiday rose 3.6% y/y while total domestic tourism spending increased by 2.9% from a year earlier to RMB 185.5billion. However, spending per trip declined modestly to RMB 571 from RMB 574 a year earlier, based on Reuters calculations using official data. The divergence between travel volumes and per-trip spending suggests that consumers remain cautious on discretionary expenditures despite stable travel demand.‍
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• Comments from Joachim Nagel, President of the Deutsche Bundes bank and a member of the European Central Bank (ECB), imply there isa higher chance that the Bank will raise interest rates at its next meeting. Here marked that the ECB must be prepared to act again unless it sees “a substantial and sustained improvement in the inflation outlook”.
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• PPI inflation in the Eurozone accelerated in March, rising by 3.4% m/m and by 2.1% y/y (data released by Eurostat, the official statistical office of the EU). This represents the biggest monthly increase since August 2022, driven by sharply higher energy prices.