The Bureau of Labor Statistics (BLS) has found that the number of jobs created in the country this year was much lower than previously t...
The Bureau of Labor Statistics (BLS) has found that the number of jobs created in the country this year was much lower than previously thought – revealing that 818,000 of the new jobs reported in March were not real.
Recent updates to the U.S. job market data show that the employment situation is not as robust as previously thought for much of 2023 and early 2024. BLS disclosed that this means job growth averaged 174,000 per month – a notable decrease from the initially reported 242,000 jobs per month.
This adjustment comes after a weak employment report in July, which raised fears about the U.S. economyunder the strain of the highest interest rates in 23 years.
According to LPL Financial chief economist Jeffrey Roach, this weaker job market could push the Federal Reserve to consider adjusting its plans and potentially reduce interest rates sooner. The Fed’s dual mandate is to foster maximum employment while controlling inflation, which might prompt them to plan for a rate cut at their September meeting.
The updated numbers are based on state unemployment tax records which employers are required to file. This preliminary figure might be adjusted when the final data is released in February 2025. Significant downward revisions were noted in sectors like business and professional services, as well as hospitality, information, leisure and manufacturing.
Fed officials are carefully monitoring the labor market for signs of strain due to high interest rates. The disappointing July jobs report, which showed only 114,000 new jobs and an unexpected rise in the unemployment rate to 4.3 percent, has raised alarms. This increase triggered the Sahm rule – an indicator that signals potential recession when the three-month average of the unemployment rate exceeds its 12-month low by 0.5 percentage points.
Currently, the unemployment rate's three-month average of 4.13 percent is 0.63 percentage points higher than the 3.5 percent rate from July 2023. The Sahm rule has been accurate in predicting every recession since 1970.
Bill Adams, Comerica Bank's chief economist, noted that these revised job numbers could accelerate the Fed’s plans to cut interest rates. Investors widely expect the Fed to lower rates at their September 18 meeting – with about 67 percent anticipating a 0.25 percentage point reduction and 32.5 percent expecting a larger 0.50 percentage point cut.
Experts weigh in on job data revision
As part of its annual review, the government recently updated its job figures based on fresh data from the Quarterly Census of Employment and Wages (QCEW), which tracks employment and wages for over 95 percent of jobs in the United States. This process helps better reflect changes in the job market, including new businesses opening and others closing.
This year’s revision is more significant than usual. Historically, annual revisions have been quite small – changing by about 0.1 percent of total employment. This time, however, the adjustment is around -0.5 percent. One reason for this larger change could be that the QCEW data does not include unauthorized immigrants, who are typically not covered by unemployment benefits and may not be fully represented in the numbers.
The revisions show that some industries, such as professional services and hospitality, have weaker job growth than previously thought. On the other hand, sectors such as transportation and warehousing may see upward revisions. The hospitality industry, in particular, is known for its volatility.
It is important to note that these revisions do not affect the unemployment rate, which is calculated separately. As of July, the jobless rate rose to 4.3 percent, marking its fourth consecutive monthly increase.
Looking ahead, the weaker job data makes it likely that the Federal Reserve will lower its benchmark interest rate at its upcoming September 18 meeting.
Economists are divided on whether the cut will be 0.25 percent points or a larger 0.50 percentage points. Some believe the Fed will opt for a conservative 0.25 percentage point reduction, but if the August jobs report shows an even weaker job growth, calls for a larger cut may grow louder. The August jobs report is due on September 6.
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