US job growth during much of the past year was significantly weaker than initially estimated, according to new data released Wednesday.
The Bureau of Labor Statistics’ preliminary annual benchmark review of employment data suggests that there were 818,000 fewer jobs in March of this year than were initially reported.
Every year, the BLS conducts a revision to the data from its monthly survey of businesses’ payrolls, then benchmarks the March employment level to those measured by the Quarterly Census of Employment and Wages program.
The preliminary data marks the largest downward revision since 2009 and shows that the labor market wasn’t quite as red-hot as initially thought. However, job growth was still historically strong.
When spread through the prior year, the average monthly job gain from April 2023 through March 2024 was 173,500 versus nearly 242,000, an analysis of BLS data shows.
“It is important for markets to remember that these are not job losses, it is just that the job count was never that high,” wrote Chris Rupkey, chief economist at FwdBonds in a note Wednesday. “The economy apparently did not need those phantom ‘lost’ workers, because robust real consumer expenditures powered very strong [economic] growth in the second half of last year.”
The downward adjustments were limited to the private sector, with nearly half in the professional and business services industry (revised down by 358,000, or 1.6%.) Other sectors showing large negative swings included the information industry (down 68,000, or 2.3%), leisure and hospitality (down 150,000, or 0.9%) and manufacturing (down 115,000, or -0.9%).
The estimates released by the Labor Department on Wednesday — after an uncharacteristic delay of more than half an hour — are preliminary and will not be finalized until February 2025.
While Wednesday’s revision won’t change the existing monthly employment data for now, it serves as another critical gauge for the overall health and activity of the US labor market. Job growth has dropped off more than expected in recent months, making for an even more tenuous situation for the Federal Reserve and its weighing of interest rate cuts.
Fed Chair Jerome Powell is scheduled to deliver a speech Friday in Jackson Hole, Wyoming, at the Kansas City Fed’s annual economic symposium. Economists and analysts say the revisions will likely put further pressure on the central bank to loosen its monetary policy.
“This may be the wake-up call for Powell and [Fed policymakers] that they need to commit to cuts and forward guidance more explicitly,” Michael Block, co-founder and chief strategy officer at AgentSmyth, told CNN.
‘This is really just a counting issue’
Wednesday’s preliminary downward revision was expected, economists say, noting the lagged but far more accurate Quarterly Census of Employment and Wages, or QCEW, has shown a slower pace of job gains than the more timely, but less comprehensive, monthly employment surveys and estimates (*more on that methodology and the revision process later).
However, the size of the preliminary revision was a little surprising, said Ryan Sweet, chief US economist at Oxford Economics. He attributed that to how the BLS tries to capture new business formation and the closure of establishments (known as the birth-death model).
The pandemic had a seismic impact on the US economy and the labor market, and its aftershocks still linger to this day. New business applications surged, but with births come deaths, and the BLS’ model has been overstating the new business formation and understating deaths, Sweet told CNN.
To that end, “this is really just a counting issue” and a measurement issue versus a red flag about the health of the labor market, Torsten Slok, chief economist at Apollo Global Management, told CNN.
“160 million people have a job,” Slok said. ”Telling me that over the last 12 months it wasn’t 160 million, it was only 159.2 million is not making too much of a difference to how the Fed and financial markets are thinking about the economy.”
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Other economists cautioned that Wednesday’s numbers are still preliminary (the final benchmark revisions will be released alongside the January jobs report in February 2025), and that while the QCEW does pick up some of the impact from the recent surge in immigration, it might not fully reflect undocumented workers.
While this rearview look suggests that job growth was softening a bit sooner than previously thought, the labor market was solid then, Sweet said. And it still has some good fundamentals going for it now, he added, noting that the unemployment rate increased because more people were looking for work (versus higher layoffs) and employment-to-population ratios remain high.
“I think the key is really going to be August employment,” Sweet said, noting the upcoming jobs report due out in a couple weeks.
Why the data is revised
Economic data is revised often — especially as more comprehensive information becomes available — to provide a clearer, more accurate, picture of the dynamics at play.
One of the most illustrative examples of this is the BLS’ labor market data and, specifically, the all-important jobs report.
The BLS’ monthly snapshot of the labor market is comprised of two surveys: One of households (which provides demographic data and feeds into the all-important unemployment rate) and the other of businesses (designed to measure employment, hours and earnings).
The latter establishment survey is responsible for the monthly estimates of how many jobs were added or lost.
It’s important to note the “estimates” part of this: It is a survey after all, albeit a fairly robust one (the BLS surveys well north of 100,000 businesses and government agencies, representing roughly 629,000 individual worksites).
When the market-moving jobs report is released, that initial estimate is often based on incomplete data and thus will be revised twice further in the two jobs reports that follow as the BLS receives more information.
In addition to the surveying, the BLS also incorporates methodology to try to capture employment activity at new businesses and those that have closed.
Even then, the monthly numbers aren’t final and fully comprehensive.
That’s where the annual benchmark revisions come in. And the first part of that process is what happened Wednesday.
Every year, the BLS conducts annual benchmark revisions to replace these sample-based employment estimates with fuller employment counts as recorded in the QCEW.
The QCEW provides a more comprehensive read on the number of businesses, employees and wages at the state, regional and county level because it derives that data from quarterly tax reports submitted by businesses to their states.
Given that process, the QCEW comes at a substantial lag: The data for the first quarter of 2024 was also released Wednesday and showed that in March 2024, national employment increased to 153.6 million, a 1.3% increase during the past year.
