CNN
—
U.S. job growth was much weaker than originally expected for most of last year, according to new data released Wednesday.
The Bureau of Labor Statistics’ preliminary annual benchmark review of employment data shows that there were 818,000 fewer jobs in March of this year than originally reported.
Each year, the BLS revises data from its monthly business payroll survey and then compares March employment figures with those from the quarterly Employment and Wage Census program.
The preliminary data represent the largest downward revision since 2009 and show that the labor market was not quite as hot as initially thought. However, employment growth was still historically strong.
An analysis of BLS data shows that the average monthly employment gain from April 2023 to March 2024 was 173,500 compared to nearly 242,000 a year earlier.
“It’s important for markets to remember that these are not job losses, but that jobs have simply never been this high,” wrote Chris Rupkey, chief economist at FwdBonds, in a note on Wednesday. “The economy apparently did not need this phantom workforce, as robust real consumer spending drove very strong growth in the second half of last year.”
The downward revisions were limited to the private sector. Almost half of these were in the professional and business services sector (downwardly revised by 358,000 or 1.6 percent). Other sectors with large negative fluctuations were the information industry (minus 68,000 or 2.3 percent), leisure and hospitality (minus 150,000 or 0.9 percent) and manufacturing (minus 115,000 or -0.9 percent).
The estimates published by the Ministry of Labour on Wednesday – with an atypical delay of more than half an hour – are preliminary and will not be finalised until February 2025.
While Wednesday’s revision will not change the existing monthly employment data for now, it serves as another important indicator of the overall health and activity of the U.S. labor market. Employment growth has fallen more than expected in recent months, making the situation even more delicate for the Federal Reserve and its considerations of interest rate cuts.
Fed Chairman Jerome Powell is scheduled to speak at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, on Friday. Economists and analysts say the changes are likely to put further pressure on the central bank to ease monetary policy.
“This could be the wake-up call for Powell and (the Fed policymakers) that they need to be more committed to cuts and clearer direction,” Michael Block, co-founder and chief strategy officer at AgentSmyth, told CNN.
Wednesday’s preliminary downward revision was as expected, economists say, noting that the lagged but far more accurate Quarterly Census of Employment and Wages (QCEW) has shown slower employment growth than the more timely but less comprehensive monthly employment surveys and estimates (more on that methodology and the revision process later).
However, the magnitude of the preliminary revision was somewhat surprising, said Ryan Sweet, chief U.S. economist at Oxford Economics, attributing it to the way the BLS tries to capture business creation and closures (known as the birth-death model).
The pandemic had a devastating impact on the U.S. economy and labor market, and its aftereffects are still being felt today. New claims soared, but births were accompanied by deaths, and the BLS model overestimated the number of new births and underestimated the number of deaths, Sweet told CNN.
In that sense, this is “really just a counting and measuring issue and not a warning signal about the health of the labor market,” Torsten Slok, chief economist at Apollo Global Management, told CNN.
“160 million people have jobs,” Slok said. “If you tell me that over the last 12 months it wasn’t 160 million, but only 159.2 million, that doesn’t change much how the Fed and the financial markets think about the economy.”
Other economists cautioned that Wednesday’s figures were still preliminary (final benchmark revisions will be released along with the January jobs report in February 2025) and that while the QCEW captures some of the impact of the recent surge in immigration, it may not fully capture the number of undocumented workers.
While that review suggests that job growth slowed somewhat earlier than previously thought, the job market was solid then, Sweet said. And there are still some good fundamentals for the job market today, he added. The unemployment rate has risen because more people are looking for work (rather than more layoffs) and the employment-to-population ratio remains high.
“I think the key will really be employment in August,” Sweet said, pointing to the employment report due in a few weeks.
Economic data are often revised – especially as more comprehensive information becomes available – to provide a clearer and more accurate picture of the underlying dynamics.
One of the most striking examples of this is the BLS labor market data and in particular the extremely important employment report.
The BLS’s monthly labor market snapshot consists of two surveys: one of households (which provides demographic data and is included in the all-important unemployment rate) and one of businesses (which measures employment, working hours, and income).
The latter business survey is responsible for the monthly estimates of how many jobs were created or lost.
It’s important to note the “estimates” part: This is, after all, a survey, albeit a fairly well-founded one (the BLS surveys well over 100,000 businesses and government agencies, representing about 629,000 individual workplaces).
When the market-moving jobs report is released, this first estimate is often based on incomplete data and is therefore revised twice more in the two subsequent jobs reports as the BLS receives more information.
In addition to surveys, the BLS also uses methods to capture employment activity in new and closed businesses.
Even then, the monthly figures are not final and complete.
This is where the annual benchmark revisions come in. And the first part of this process took place on Wednesday.
Each year, the BLS conducts benchmark revisions to replace these sample-based employment estimates with more comprehensive employment numbers as captured in the QCEW.
The QCEW provides a more comprehensive view of the number of businesses, employees and wages at the state, regional and county levels because it derives this data from the quarterly tax reports that businesses submit to their states.
Given this process, the QCEW comes with a significant delay: data for the first quarter of 2024 were also released on Wednesday and showed that national employment rose to 153.6 million in March 2024, up 1.3% from last year.
