Labor market was weaker than previously reported in big fix to jobs data

Job growth in the United States in the year ending in March was far less robust than previously reported by the federal government, giving ammunition to critics who suggest the Federal Reserve may be late to cutting interest rates.

The government reported Wednesday that the economy created 818,000 fewer jobs from April 2023 through March 2024, in the biggest revision to federal jobs data in 15 years, according to the Bureau of Labor Statistics.

The revisions could add to arguments that the Fed has been overly focused on curbing inflation, to the detriment of the labor market. The data offers a more dour snapshot of a labor market that had appeared incredibly strong, especially last summer and earlier this year, underscoring the case for rate cuts at the Fed’s next board meeting, in September. The Fed was already signaling such a move, but now officials will face calls to trim rates more aggressively.

“We already knew we had been living the best of consumers being discerning but not defeated. That narrative is contingent on the labor market holding up and layoffs remaining in check,” said Diane Swonk, chief economist at KPMG. “The Fed needs to cut if they want to sustain the Goldilocks scenario.”

To be sure, other labor market benchmarks for April 2023 through March 2024 still looked pretty strong. For example, the unemployment rate during this period was still at historic lows, under 4 percent. And weekly requests for unemployment benefits also remained near longtime lows.

The Biden administration was quick to point that out. Democrats emphasize the labor market’s strength as a pillar of economic resilience since the pandemic. Meanwhile, Republicans have been critical of the White House and Fed’s handling of the economy as inflation rose to the highest level in 40 years.

“This preliminary estimate doesn’t change the fact that the jobs recovery has been and remains historically strong, delivering solid job and wage gains, strong consumer spending, and record small business creation,” Jared Bernstein, chair of the White House’s Council of Economic Advisers, said in a statement.

Former president Donald Trump railed against the revisions data speaking at a campaign rally Wednesday in North Carolina. Telling his supporters there was a “massive scandal,” Trump falsely said the figures weren’t so much a “revision” as they were a “lie.” He also accused Harris and Biden of “fraudulently manipulating job statistics to hide the true extent of the economic ruin that they’ve inflicted on America.”

“They said they existed and they never did exist,” Trump told the crowd. “They built them up so that they could say what a wonderful job they’re doing.”

The Bureau of Labor Statistics releases revisions to data all the time, including during the Trump administration. But it’s unusual for revisions to be this large.

Economists say the shock of the pandemic that introduced new forces into the labor market from mass retirements to immigration pattern changes have made it difficult to assess labor market growth. This revision marks the largest adjustment to employment data since 2009, when the economy was in the throes of the worst recession in decades.

“What you’re seeing is an echo of the large shocks that we’re just working our way through,” said Joe Brusuelas, chief economist at RSM. “We’re trying to ascertain the size of the labor force and its flows.”

Investors shrugged off the revisions, and markets were mostly flat after the release.

But the revisions drew criticism, especially among those who have been calling for interest rate cuts.

Skanda Amarnath, executive director of the left-leaning think tank Employ America, said slower job growth ought to be reflected in lower rates moving forward. He said Fed officials have pointed to strong hiring as reason to hold off on rate cuts and stay focused on inflation.

“If these [Fed] members are actually going to maintain some intellectual consistency here, they should be ready to mark down both their labor market and their policy rate assessments accordingly,” Amarnath said. “Remains to be seen whether we’ll see any of that.”

Professional and business services – or white-collar jobs – was the industry with the biggest downward revisions, accounting for more than 40 percent of the lost jobs. Leisure and hospitality also lost jobs. Overall, the revisions translate into roughly 174,000 jobs created per month on average during that period, a decrease from the previously reported rate of 243,000 jobs per month. The revisions are considered preliminary and will be finalized in February.

More recent signs of a cooling labor market have appeared this year. The unemployment rate has gradually ticked up this year, hitting 4.3 percent in July, the highest rate since 2021. The number of job openings has also fallen over the year, and the rate at which people are quitting jobs has also fallen.

The new revision data comes as Federal Reserve officials are headed to Wyoming for the annual Jackson Hole Economic Symposium, a “who’s who” of global policymakers and economists. The financial markets were already eager for Fed Chair Jerome H. Powell’s speech there on Friday, anxious for hints about a September rate cut. But now, Fed officials will be pressed to explain how the pared-back jobs figures shape their understanding of an economy that continues to surprise.

It is unclear whether Powell will directly address the new jobs figures in his remarks, which are carefully calibrated and rarely fixate on an individual data point. But he has already acknowledged that jobs data may not be perfect.

Minutes released Wednesday from the Fed’s July meeting showed “several” Fed officials saw a path to a quarter-point cut last month, indicating that they could have supported such a move given easing inflation and an uptick of the unemployment rate.

That is notable because officials convened before the release of the disappointing July jobs report and the latest BLS revisions, suggesting some central bankers already thought the job market was slowing enough to justify a cut. Now, the consensus is for a move in September.

“The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the minutes read.