According to a recent announcement from the Department of Labor, the United States reported a substantial downward revision to job growth, with 818,000 fewer jobs added in the 12-month period ending in March 2024 than initially estimated.
The Bureau of Labor Statistics (BLS) has made its preliminary annual changes to its baseline nonfarm payroll data, revealing that actual job growth was nearly 30% lower than the 2.9 million previously reported for April 2023 through March 2024.
This revision, a 0.5 percent decrease in total wage figures, marks the largest adjustment since 2009. Although these figures are updated monthly, the BLS conducts a more extensive annual revision after receiving data from the Quarterly Census of Employment and Wage Information.
Wall Street financial analysts, who had expected a sharp decline from preliminary estimates, noted that the revised figures suggest an average monthly increase in jobs of 174,000 during the period, down from the 242,000 initially forecast.
Despite the downward revision, more than 2 million jobs were added during this time frame. However, this correction could suggest a weakening of labor market strength, possibly influencing the Federal Reserve’s next interest rate decisions.
Jeffrey Roach, chief economist at LPL Financial, noted: “The labor market appears weaker than initially believed, which could prompt the Federal Reserve to address both aspects of its dual mandate more vigorously, potentially setting up a rate cut in the September session.”
Significant job adjustments were noted in particular in the professional and business services sector, which saw a decrease of 358,000 jobs. Other sectors with notable downward adjustments included leisure and hospitality, manufacturing and trade, transportation, and utilities.
Conversely, some sectors saw job growth, such as private education and health services, transportation and storage, and other services.
Public sector employment remained essentially flat, with only a small increase of 1,000 jobs.
In July 2024, nonfarm payrolls stood at 158.7 million, up 1.6% year over year. However, with the unemployment rate rising to 4.3%, up 0.8 percentage points from its yearly low, concerns about a potential recession signaled by the “Sahm Rule” are growing.
Despite the preliminary revisions, White House economist Jared Bernstein maintained a positive outlook, emphasizing the strength of the job recovery, wage growth, consumer spending and new business creation.
Goldman Sachs analysts later speculated that the BLS may have overstated the revisions by about half a million, attributing part of the discrepancy to an error in counting illegal immigrants previously counted as employed.
As the Federal Reserve continues to monitor the employment landscape, it is expected to consider its first interest rate cut in four years at its September meeting. Fed Chair Jerome Powell is also expected to deliver a crucial policy speech at the annual Jackson Hole retreat, which could further clarify the future of monetary policy.
