With Friday's jobs data showing the U.S. economy added fewer jobs than anticipated in April, the question now turns to what the Federal Reserve will do next.

The report showed that nonfarm payrolls were 175,000 last month, lower than the upwardly revised total of 315,000 in March. The number was also below the 238,000 forecast and 243,000 consensus estimate.

Meanwhile, the unemployment rate came in at 3.9% in April, rising slightly from the 3.8% reported in the prior month.

Following the data, analysts at Bank of America told investors in a note that they see evidence that the "catch-up" effect in hiring may be slowing.

"In our view, this is not an outright negative sign for the economy. As high-touch services employment returns to pre-pandemic trends, employment growth should slow naturally whether monetary policy is restrictive or not," wrote the bank.

BofA continues to expect the first rate cut in December, followed by four-25 basis point rate cuts in 2025. They see a terminal rate of 3.5% to 3.75% being reached in mid-2026.

Elsewhere, analysts at DA Davidson stated that overall, payrolls were lower than expected and the unemployment rate was higher, which all suggests "the Fed tightening cycle may indeed be slowing the economy.“