The US economy wasn’t as hot as it seemed between early this year and early 2023, according to revised figures released by the feds. The nation’s labor market likely created 818,000 fewer jobs during the 12 months ended in March, marking the largest preliminary downward revision to US payroll figures since 2009, as reported by the US Bureau of Labor Statistics on Wednesday.
This revelation means that the reported job growth during that period, which initially stood at 2.9 million non-farm payroll positions amounting to 242,000 jobs per month, was likely around 30% less, or 174,000 jobs per month, according to new data gathered from state unemployment tax records. The massive markdown, while short of the 1 million downward revision some economists had feared, still raises concerns about the Federal Reserve’s timing in cutting interest rates.
Robert Frick, corporate economist with the Navy Federal Credit Union, noted that while this doesn’t challenge the idea that the US is still in an expansion, it does signal that monthly job growth may be more muted, putting extra pressure on the Fed to cut rates. Fed Chair Jerome Powell is expected to provide more insight into the central bank’s rate cut plans in a speech in Jackson Hole, Wyoming, on Friday.
Investors are currently pricing in a quarter-point cut when the Fed meets in September, with a 20% chance of a half-point rate cut. Jobs numbers have become a political issue as the 2024 presidential race heats up, with former President Donald Trump calling the downward revision a „massive scandal.“
The weak July jobs report earlier this month had already sparked concerns about the health of the nation’s labor market, with the unemployment rate rising for four consecutive months. The yearly process of updating monthly employer surveys using more comprehensive data from state unemployment tax records is ongoing, with Wednesday’s report being preliminary and subject to a final revision in February.
Analysts had varying predictions about the extent of the downward revision, with Goldman Sachs anticipating up to 1 million fewer jobs and Wells Fargo predicting at least 600,000 fewer jobs. The largest downward revision was seen in professional and business services, followed by leisure and hospitality, manufacturing, and trade, transportation, and utilities.
Despite these downward revisions, some sectors saw upward revisions, including private education and health services, transportation and warehousing, and other services. The BLS revises its initial job estimates based on incomplete data and survey findings from a sample of businesses and households, with benchmark revisions often made after reviewing administrative documents like unemployment insurance tax records.
The Fed has maintained high interest rates in an effort to combat inflation without causing a recession, known as a „soft landing.“ The upcoming decisions by the Fed regarding interest rates will be closely watched by investors and economists alike as they navigate the changing landscape of the US economy.