Please see below, an article from EPIC Investment Partners which analyses the latest data release for US employment. Received today – 08/05/2026
Later today, the US gets a payrolls number that may be harder to read than usual. In the old version of the trade, strong jobs were bad for bonds because they delayed rate cuts, while weak jobs were good because they brought the Fed closer to easing. This one is less tidy. The question is not just whether hiring is slowing; it is whether companies are learning to produce more while employing fewer people.
Consensus is for April payrolls to rise by about 60,000 to 70,000, with unemployment expected to remain at 4.3 per cent. That would be a clear slowdown from March’s 178,000 gain, but not yet a recessionary number. It would fit a labour market cooling without quite cracking. The difficulty is that the headline has become less useful. A modest gain may hide a sharp split between sectors still hiring and sectors quietly reducing staff.
ADP added to the ambiguity. Private employers created 109,000 jobs in April, stronger than expected, with annual pay still rising at 4.4 per cent. But the composition was less comforting. Education and health did much of the work, while professional and business services lost jobs. The economy is still hiring, but not necessarily in the higher-paid white-collar areas that signal corporate confidence.
Manufacturing is more revealing. The April ISM manufacturing index held at 52.7, above the expansion line. Yet the employment index fell to 46.4, its 31st consecutive month in contraction. At the same time, the prices index jumped to 84.6, the highest since April 2022. That is the uncomfortable mix: output up, labour down, costs up. It is not the clean disinflationary slowdown the Fed would like.
This is where the argument about artificial intelligence becomes useful. AI should ultimately be disinflationary by raising productivity. This view is politically convenient, but not obviously wrong. If firms can produce more with fewer people, weaker hiring need not carry the same recessionary message it once did. That may be disinflationary in time, though it is less helpful today if companies also report rising input costs.
The awkward part is the transition. Productivity stories are rarely painless for workers. Coinbase offered an example this week, with Brian Armstrong announcing roughly 700 job cuts—about 14 per cent of staff—while saying the company needed to become leaner and more AI-native. Crypto has its own cycle, but the corporate logic is universal: fewer people, more output from remaining staff.
That makes today’s payrolls report more interesting than the headline suggests. A weak number once pointed directly to softer demand. Now it may reflect companies choosing not to replace workers or using software to absorb tasks. A strong number, meanwhile, may show that healthcare and lower-wage sectors are adding staff while other parts of the economy are adjusting.
For markets, that distinction matters. If payrolls are weak because demand is falling, bonds should rally. If payrolls are weak because companies are defending margins while input prices remain high, the signal is less bond friendly. The Fed can look through a softer labour market more easily when inflation is also falling. It is harder when manufacturers report rising costs and shrinking headcount simultaneously.
The base case remains a “muddle through” number: soft enough to show cooling, but not enough to force a Fed rethink. The point is not that today’s release proves machines are replacing workers. Payrolls are too blunt for that. The point is that investors are reading the number in a different economy. For years, the question was whether the labour market was too hot or too cold. Today, there is a third possibility: it may be becoming thinner—still producing, but with fewer people needed to keep the machine running.
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Alex Kitteringham
8th May 2026