The U.S. economy created 818,000 fewer jobs than originally reported during the period through March 2024, the Labor Department reported Wednesday.
In its initial annual benchmark revisions to nonfarm payrolls, the Bureau of Labor Statistics said actual job growth was about 30% below the 2.9 million jobs initially reported from April 2023 to March of this year.
The -0.5% revision to the overall payrolls level is the largest since 2009. The numbers are routinely revised every month, but the Bureau of Labor Statistics does a broader revision every year when it gets the results of the quarterly Census of Employment and Wages.
Wall Street had been waiting for the revised numbers, with many economists expecting a big drop from the originally reported numbers. If the new numbers hold up when the Bureau of Labor Statistics releases its final revisions in February, they would mean a monthly gain of 174,000 jobs during the period, compared with the initial indication of 242,000.
Even with the adjustments, the number of new jobs during the period was more than 2 million, but the report could be seen as an indication that the labor market is not as strong as previous BLS reports have shown. That in turn could provide more impetus for the Federal Reserve to start cutting interest rates.
“The labor market appears to be weaker than initially reported,” said Jeffrey Roach, chief economist at LPL Financial. “A deteriorating labor market will allow the Fed to highlight both sides of its dual mandate, and investors should expect the Fed to set the markets up for a rate cut at its September meeting.”
At the sector level, the largest downward revision came in professional and business services, where job growth fell by 358,000 jobs. Other areas that were revised downward included leisure and hospitality (-150,000 jobs), manufacturing (-115,000 jobs), and trade, transportation and utilities (-104,000 jobs).
In the trade category, retail trade figures decreased by 129 thousand.
Some sectors saw upward revisions, including private education and health services (87,000 jobs), transportation and warehousing (56,400 jobs), and other services (21,000 jobs).
Government jobs did not witness a major change after the amendments, as only 1,000 jobs were added.
Nonfarm payrolls totaled 158.7 million through July, up 1.6% from the same month in 2023. However, there were concerns that the labor market was beginning to weaken, with the unemployment rate rising to 4.3%, up 0.8 percentage points from a 12-month low and triggering a historically accurate measure known as the “Sahm rule” that indicates the economy is in recession.
However, the bulk of the increase in the unemployment rate is due to an increase in the number of people returning to the labor force rather than an outright increase in layoffs.
“This preliminary estimate does not change the fact that the jobs recovery has been and remains historically strong, resulting in strong job and wage gains, robust consumer spending, and a record number of small business creation,” White House economist Jared Bernstein said in a statement.
To be sure, Goldman Sachs economists said later Wednesday that they believe the Bureau of Labor Statistics may have overstated the revisions by as much as half a million. The firm said undocumented immigrants who are no longer on the unemployment system but were initially listed as employed account for part of the discrepancy, along with a general tendency to overstate the initial revision.
Still, Fed officials are closely monitoring the jobs situation and are expected to approve their first interest rate cut in four years when they meet in September. Fed Chairman Jerome Powell is scheduled to deliver a long-awaited policy speech Friday at the Fed’s annual retreat in Jackson Hole, Wyoming, that could lay the groundwork for future monetary policy easing.
