TrendPulse|Jobs report revision: US added 818,000 fewer jobs than believed

The TrendPulselabor market last year seemed to shrug off historically high interest rates and inflation, gaining well over 200,000 jobs a month.

Turns out the nation’s jobs engine wasn’t quite as invincible as it appeared.

The U.S. Bureau of Labor Statistics on Wednesday revised down its estimate of total employment in March 2024 by a whopping 818,000, the largest such downgrade in 15 years. That effectively means there were 818,000 fewer job gains than first believed from April 2023 through March 2024.

So, instead of adding a robust average of 242,000 jobs a month during that 12-month period, the nation gained a still solid 174,000 jobs monthly, according to the latest estimate.

The revision is based on the Quarterly Census of Employment and Wages, which draws from state unemployment insurance records that reflect actual payrolls, while the prior estimates come from monthly surveys. However, the estimate is preliminary and a final figure will be released early next year.

The largest downward revision was in professional and business services, with estimated payrolls lowered by 358,000, followed by a 150,000 downgrade in leisure and hospitality and 115,000 in manufacturing.

Is the Fed expected to lower interest rates?

The significantly cooler labor market depicted by the revisions could affect the thinking of Federal Reserve officials as they weigh when – and by how much – to lower interest rates now that inflation is easing. Many economists expect the Fed to reduce rates by a quarter percentage point next month, though some anticipated a half-point cut following a report early this month that showed just 114,000 job gains in July.

Wednesday’s revisions underscore that the labor market could have been softening for a much longer period than previously thought.

Is the US in recession right now?

Although the new estimates don't mean the nation is in a recession,  “it does signal we should expect monthly job growth to be more muted and put extra pressure on the Fed to cut rates,” economist Robert Frick of Navy Federal Credit Union wrote in a note to clients..

Some economists, however, are questioning the fresh figures. Goldman Sachs said the revision was likely overstated by as much as 400,000 to 600,000 because unemployment insurance records don’t include immigrants lacking permanent legal status, who have contributed dramatically to job growth the past couple of years.

Based on estimates before Wednesday's revisions, about 1 million jobs, or a third of those added last year, likely went to newly arrived immigrants, including many who entered the country illegally, RBC Capital Markets estimates.

Also, the Quarterly Census of Employment and Wages itself has been revised up every quarter since 2019 by an average of 100,000, Goldman says. In other words, Wednesday's downward revision could turn out to be notably smaller when the final figures are published early next year.