Matt Orton of Raymond James Investment Management explains on “Mornings with Maria” why he is optimistic about the U.S. economy.
According to new data released Wednesday, job growth in the U.S. was significantly weaker than previously reported for most of last year.
The Bureau of Labor Statistics revised its total downward Number of jobs As part of its preliminary annual benchmark review of payroll data, the company added 818,000 jobs in the year to March. This suggests the economy added an average of 174,000 new jobs per month during that period — less than the previous estimate of 242,000. On a monthly basis, that’s about 68,000 fewer jobs.
This is the strongest downward correction since 2009.
“The labor market appears weaker than initially reported,” said Jeffrey Roach, chief economist at LPL Financial. “A deteriorating labor market will allow the Fed to highlight both sides of the dual mandate, and investors should expect the Fed to prepare markets for a rate cut at the September meeting.”
US job growth slows to 114,000 in July as unemployment rises unexpectedly
More than 75 employers will accept resumes and speak to potential new employees at a career fair in Lake Forest, California on February 21. (Paul Bersebach/MediaNews Group/Orange County Register via Getty Images / Getty Images)
The revised data comes mostly from state unemployment tax records that employers must file. The preliminary figure may be updated when the government releases final numbers in February 2025.
Almost half of the downward revision was in professional and business services. Other sectors such as manufacturing, leisure, hospitality and information also saw strong downward revisions.
Federal Reserve policymakers are closely watching for signs that the labor market is beginning to weaken in the face of high interest rates.
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Markets began to worry about the state of the labor market after the worse-than-expected July employment report showed that employers added just 114,000 jobs last month and the unemployment rate rose unexpectedly to 4.3%.
The rise in unemployment led to the so-called Sahm rulean indicator used to provide an early recession signal. The rule states that a recession is likely when the three-month moving average of the unemployment rate is at least half a percentage point above the 12-month low.
A construction worker digs in Raleigh, North Carolina on July 17. (Allison Joyce/Bloomberg via Getty Images / Getty Images)
Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023. The Sahm rule has successfully predicted every recession since 1970.
“The Fed will see the changes as another reason to bring forward its plans to cut interest rates,” said Bill Adams, chief economist at Comerica Bank. “The June dot plot, which showed that most FOMC members only thought rate cuts of one or two quarter percentage points were appropriate by year-end, looks pretty stale after this release.”
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Investors widely expect the Fed to cut interest rates at its next meeting on September 18. About 67 percent of respondents believe the Fed will make the usual 25 basis point cut, while 32.5 percent are bracing for a deeper cut of half a percentage point.
