The U.S. Labor Department said Wednesday that the U.S. economy added 818,000 fewer jobs in the 12 months ending in March 2024 than initially reported.
The Bureau of Labor Statistics said that as part of its interim annual base revision of nonfarm payroll numbers, the actual employment gain from April 2023 to March of this year was about 30% lower than the 2.9 million initially reported.
The -0.5% revision to total employment is the largest since 2009. The figures are revised regularly every month, but the BLS makes more extensive revisions each year when it receives the results of its Quarterly Employment and Wages Census.
Wall Street had been eagerly awaiting the revised numbers, which many economists had expected to be significantly lower than the numbers initially released. If the new numbers hold up when the BLS releases its final revision in February, monthly payrolls for the period would have risen by 174,000, instead of the 242,000 increase originally expected.
Although the revised figure still represents over 2 million jobs created during the period, the report could be seen as an indication that the labor market is not as strong as previous BLS reports have indicated, which could provide further impetus for the Federal Reserve to begin cutting interest rates.
“The labor market appears weaker than initially reported,” said Jeffrey Roach, chief economist at LPL Financial. “The deterioration in the labor market could allow the Fed to emphasize both sides of its dual mandate, and investors should expect the Fed to prepare the market for a rate cut at its September meeting.”
Professional and business services had the largest downward revision, dropping employment gains by 358,000. Other sectors with downward revisions included leisure and hospitality (-150,000), manufacturing (-115,000) and trade, transport and utilities (-104,000).
In the commercial sector, the number of retail businesses fell by 129,000.
Several sectors saw upward revisions, including private education and health services (87,000), transportation and warehousing (56,400) and other services (21,000).
The number of government employees remained almost unchanged after the revision, increasing by just 1,000.
Nonfarm payrolls stood at 158.7 million through July, up 1.6% from the same period in 2023. But concerns that the labor market may be starting to weaken have been raised, as the unemployment rate rose 0.8 percentage point from a 12-month low to 4.3%, triggering the “sum rule,” a historically accurate indicator of an economic downturn.
However, much of the rise in unemployment has been attributed to more people returning to work, rather than a sharp increase in layoffs.
“This preliminary estimate does not change the fact that the jobs recovery has been historically strong, with solid job and wage growth, strong consumer spending and record small business creation,” White House economist Jared Bernstein said in a statement.
Indeed, Goldman Sachs economists said late Wednesday that the BLS may have overstated its revision by as much as 500,000 people. The firm said that undocumented immigrants who were initially registered as workers but are no longer registered in the unemployment insurance system account for some of the discrepancy, in addition to the tendency for initial revisions to be inflated.
Still, Federal Reserve officials are closely monitoring the employment situation and are expected to approve the first interest rate cut in four years when they next meet in September. Chairman Jerome Powell is scheduled to deliver a long-awaited policy speech on Friday at the Fed’s annual meeting in Jackson Hole, Wyoming, that could set the stage for future monetary easing.
