According to the preliminary benchmark revision data released by the U.S. Bureau of Labor Statistics on Wednesday, the total number of jobs in the U.S. for the past year up to March may be revised down by 818,000, equivalent to a monthly decrease of about 68,000. This is the largest downward revision since 2009.
Although economists generally expected a decline in employment figures, some even predicted a reduction of up to 1 million jobs. The final revised data is expected to be officially published early next year.
The preliminary data reported by the Bureau of Labor Statistics previously showed that employers added 2.9 million jobs by March this year, with a monthly average increase of 242,000. However, under the new revised estimate, the monthly average job increase might be adjusted to 174,000. While still reflecting a healthy hiring pace, this represents a significant slowdown compared to the peak of the job market after the COVID-19 pandemic.
Benchmark revisions are an annual routine conducted by the Bureau of Labor Statistics, but this year's revision is particularly closely watched by the market and the Federal Reserve to assess whether the cooling of the labor market is occurring faster than expected.
Economists point out that preliminary employment data may be influenced by various factors, including adjustments for business openings and closures, and the methodology for counting undocumented workers. These revisions could heighten concerns about the pace at which the labor market is deteriorating. The July employment report showed a slowdown in hiring and an increase in the unemployment rate for the fourth consecutive month, raising market alarms, although other indicators like unemployment claims and job vacancies suggest a more moderate slowdown.
Wednesday’s data indicate that the labor market slowdown might be more pronounced than previously expected, which could intensify concerns about the Federal Reserve’s lagging response to economic conditions.
Federal Reserve Chair Powell is set to deliver the latest assessment of the labor market at the annual central bank symposium in Jackson Hole, Wyoming, this Friday. With inflation receding from pandemic peaks, policymakers are increasingly focused on changes in the labor market.
In terms of industry classification, professional and business services accounted for nearly half of the downward revisions, with other affected sectors including leisure and hospitality, manufacturing, and retail.
The monthly employment report from the Bureau of Labor Statistics is based on two surveys, with Wednesday’s revisions involving payroll data from the establishment survey. These revisions do not affect the unemployment rate derived from household surveys. Every March, the Bureau of Labor Statistics benchmarks monthly payroll data against quarterly employment and wage census (QCEW) data based on state unemployment insurance tax records to ensure accuracy.
QCEW data released on Wednesday also showed a 1.3% increase in employment through March 2024, compared to a 1.9% annual growth rate in preliminary monthly payroll data.
The final revised data will be published in the January 2025 employment report, with monthly breakdowns of the revised data.
In recent years, preliminary monthly payroll data has typically shown stronger growth than QCEW data. Some economists attribute this to the Bureau of Labor Statistics' "birth-death model," which adjusts for new business openings and closures, but this model may have shown bias in the post-pandemic era. Other factors include immigration issues, as undocumented workers, who cannot apply for unemployment insurance, may not be counted in QCEW data.
U.S. stock markets saw a rebound in early Wednesday trading, with all three major indexes trending upward as of the time of writing: the Nasdaq was up 0.33%, the S&P 500 was up 0.29%, and the Dow Jones Industrial Average was up 0.07%.
