The United States ISM Services Employment Index rose to 48 in April. It was 45.2 in the previous month.
The index remains below 50, which can indicate a fall in employment activity in the services sector. The increase suggests the pace of decline eased in April.
Fed Policy Implications
The ISM services employment number improved to 48, and while still showing a contraction, the slowing pace of job losses is significant. This gives the Federal Reserve less reason to aggressively cut interest rates in the near term. We should therefore anticipate a more hawkish tone from the Fed in the coming weeks.
With the market now likely pricing out at least one rate cut for the second half of the year, we should look at options on interest rate futures. Buying puts on Treasury Note futures (ZN) could be a prudent way to position for yields remaining higher for longer. This is reminiscent of the market reaction we saw in late 2025 when similarly resilient data delayed the start of the expected easing cycle.
For equity indexes, this “less bad” news reduces the immediate tail risk of a sharp economic downturn, making it attractive to sell out-of-the-money puts on the S&P 500. With the VIX recently falling below 18 for the first time since February of this year, premiums are getting thinner, but this strategy can still capture income from abating recession fears. Recent jobless claims data supports this, having trended down for three consecutive weeks to 215,000, underscoring labor market resilience.
This shift in rate expectations should also provide a tailwind for the U.S. dollar. A stronger dollar is likely, especially against currencies whose central banks are more dovish. We can position for this by buying call options on the U.S. Dollar Index (DXY), which is currently up 1.5% over the last month.
