The US economy employed 818,000 fewer people than originally reported as of March 2024, indicating that the labor market may have been cooling long before initially thought. This revelation comes as a result of the Bureau of Labor Statistics‘ yearly practice of revising employment numbers, with final revised figures expected to be released early next year.
The report, released on Wednesday morning, highlighted significant downward revisions in various industries. The professional and business services sector saw the largest revision, with employment numbers being adjusted downward by 358,000. Following closely behind was the leisure and hospitality industry, which experienced a revision of 150,000 jobs.
These revisions have led to a decrease in the monthly job additions seen in the US economy during the specified period, bringing the figure down to 174,000 from the previously reported 242,000. Despite the substantial downward revision, economists like Omair Sharif, president of Inflation Insights, view this growth rate as still healthy in terms of monthly job additions to the economy.
Economists have cautioned investors not to read too much into the revised numbers, as they are backward-looking in nature. Michael Reid, a US economist at RBC Capital Markets, emphasized that while the economy may have created fewer jobs than initially estimated, broader trends in GDP growth, stock market performance, wealth gains, and consumption remain unchanged.
The release of this report comes at a crucial time for labor market data, with recent signs of slowing prompting discussions about the Federal Reserve’s monetary policy stance. A weak July jobs report, which showed the second-weakest monthly job additions since 2020 and the highest unemployment rate in nearly three years, has raised concerns about the state of the labor market.
Despite these challenges, recent updates on the labor market, such as weekly unemployment filings, suggest that layoffs remain relatively low. Economists argue that while the labor market may be softening, it is not rapidly deteriorating and is not heading for an outright downturn.
Federal Reserve Chair Jerome Powell is expected to address the labor market during the upcoming Jackson Hole Symposium, his first public appearance since the weak July jobs report. Economists anticipate that Powell may express more confidence in the inflation outlook and emphasize downside risks in the labor market, potentially leading to interest rate cuts in the coming months.
Overall, while the US economy may be experiencing some softening in the labor market, it is still growing. The Federal Reserve’s response to these challenges will be closely watched by investors and economists alike as they navigate the evolving economic landscape.