The data suggests that the labor market is cooling much faster than previously thought, and not as strongly as once thought. The Fed now also has reason to cut interest rates even more than initially expected in September.
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As Wall Street analysts predicted, the U.S. Bureau of Labor Statistics (BLS) on Wednesday slashed its job growth data in a preliminary benchmark revision, showing that 818,000 fewer jobs will be created from spring 2023 to spring 2024 than initially estimated. indivual.
The data suggests the labor market is cooling much faster than previously thought and that current conditions are not as strong. The Fed now also has reason to cut interest rates even more than initially expected in September.
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Previously, the United States reported that 2.9 million jobs were created from spring 2023 to spring 2024.
The -0.5% revision to total employment was the largest since 2009.
However, the adjustment is not as severe as some analysts expected – Wall Street economists estimate that employment will fall by 360,000 to 1 million jobs.
The largest downward revision was in professional and business services, where job growth was 358,000 fewer than previously reported. Leisure and hospitality fell by 150,000, manufacturing fell by 115,000, and trade, transportation and utilities fell by 104,000.
Some industries actually saw upward revisions, including private education and health services (87,000), transportation and warehousing (56,400), and other services (21,000).
In some years, BLS revisions showed the opposite direction than economists predicted.
The revisions are calculated based on a survey conducted four times a year of all U.S. companies participating in the state-federal system that provides unemployment benefits to unemployed workers. The companies are required to provide employee counts for tax purposes, which also helps the Bureau of Labor Statistics more accurately measure how many jobs are created.
Results for the first three quarters of the survey show that job growth in the 12 months to March 2024 has been overestimated by about 735,000 jobs, or about 82,000 jobs per month.
In addition to conducting quarterly surveys of businesses, the government also considers other factors that sometimes exceed Wall Street expectations.
One factor includes the number of new businesses created each year versus the number of businesses that close.
“If new firms are being created faster or slower than the BLS assumes, or if existing firms are closing at a faster rate than the BLS assumes,” said Stephen Stanley, chief economist at Santander Capital Markets, faster or slower, then true employment may differ from monthly estimates. market observation.
Immigration is another factor affecting job growth figures. The number of immigrants entering the United States has increased significantly in recent years, but it is often difficult for the government to accurately measure the size of the labor force.
So predicting where revisions will go is not always as clear as it seems. For example, in the 12 months to March 2021, economists forecast that job growth would fall by 270,000 during the government’s benchmarking process. However, employment opportunities actually increased by 374,000 during this period.
The revisions announced on Wednesday will not be officially announced until early 2025.
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