Labor market weaker in 2023-24 than reported in big revision 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.

The Bureau of Labor Statistics releases revisions to data all the time, but it’s unusual for revisions to be this large. This set of revisions is considered preliminary; the figure will be finalized in February.

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

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. But, overall, the total 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 new 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. Speaking at a news conference in June, Powell said officials were keeping close watch on the job market, even as it had come into better balance since swinging wildly at the height of the coronavirus pandemic.

“You have payroll jobs still coming in strong, even though, you know, there’s an argument that they may be a bit overstated,” Powell said. “But still - they’re strong.”

Minutes released Wednesday from the Fed’s July meeting backed up that assessment, with “many” Fed officials noting that payroll gains “might be overstated.” Still, their broader confidence was still in tact.

“Participants generally assessed that, overall, conditions in the labor market had returned to about where they stood on the eve of the pandemic - strong but not overheated,” according to the minutes.