The Labor Department reported on Wednesday that the U.S. economy had created 818,000 fewer jobs than originally reported in the 12-month period through March 2024. The Bureau of Labor Statistics, as part of its preliminary annual benchmark revisions to the nonfarm payroll numbers, revealed that the actual job growth was nearly 30% less than the initially reported 2.9 million from April 2023 through March of this year.
The revision to the total payrolls level of -0.5% is the largest since 2009. The Bureau of Labor Statistics conducts routine monthly revisions, but a broader revision is done each year when the results of the Quarterly Census of Employment and Wages are available.
Wall Street had been anticipating the revised numbers, with many economists expecting a significant reduction in the originally reported figures. The new numbers suggest monthly job gains of 174,000 during the period, compared to the initial indication of 242,000.
Despite the revisions, job creation during the period exceeded 2 million. However, the report may indicate that the labor market is not as robust as previously reported by the BLS, potentially prompting the Federal Reserve to consider lowering interest rates.
Chief economist at LPL Financial, Jeffrey Roach, stated, “The labor market appears weaker than originally reported.” He added that a weakening labor market could prompt the Fed to consider interest rate cuts.
The biggest downward revision at the sector level was in professional and business services, with job growth revised down by 358,000. Other sectors that saw downward revisions included leisure and hospitality (-150,000), manufacturing (-115,000), and trade, transportation, and utilities (-104,000).
Some sectors experienced upward revisions, such as private education and health services (87,000), transportation and warehousing (56,400), and other services (21,000). Government jobs saw minimal changes, increasing by just 1,000.
Nonfarm payroll jobs totaled 158.7 million through July, representing a 1.6% increase from the same month in 2023. Concerns have been raised about a potential weakening in the labor market, with the unemployment rate rising to 4.3%, triggering the “Sahm Rule,” which suggests an economy in recession.
White House economist Jared Bernstein emphasized that the jobs recovery has been strong, with solid job and wage gains, strong consumer spending, and record small business creation. However, economists at Goldman Sachs suggested that the BLS may have overstated the revisions by as much as half a million, attributing the discrepancy to factors like undocumented immigrants not in the unemployment system but initially listed as employed.
Federal Reserve officials are closely monitoring the job situation and are expected to approve their first interest rate cut in four years at their upcoming meeting in September. Chair Jerome Powell is set to deliver a policy speech at the Fed’s annual retreat in Jackson Hole, Wyoming, which could provide insights into future monetary policy adjustments.
