TLDR:
- Job growth in the US was significantly weaker than initially reported, with 818,000 fewer jobs in March 2024 than originally estimated
- This marks the largest downward revision since 2009
- The average monthly job gain from April 2023 to March 2024 was 173,500 instead of 242,000
- The private sector, particularly professional and business services, saw the largest downward adjustments
- The revision may put pressure on the Federal Reserve to consider loosening monetary policy
The U.S. job market experienced significantly weaker growth than initially estimated, according to new data released by the Bureau of Labor Statistics (BLS).
The preliminary annual benchmark review of employment data reveals that there were 818,000 fewer jobs in March 2024 than originally reported, marking the largest downward revision since 2009.
This substantial adjustment indicates that the labor market was not as robust as previously thought, although job growth remained historically strong.
When spread across the prior year, the average monthly job gain from April 2023 through March 2024 was 173,500, compared to the earlier estimate of nearly 242,000.
The downward revisions were primarily concentrated in the private sector, with the professional and business services industry experiencing the most significant adjustment.
This sector was revised down by 358,000 jobs, or 1.6%. Other industries showing large negative swings included information (down 68,000 or 2.3%), leisure and hospitality (down 150,000 or 0.9%), and manufacturing (down 115,000 or 0.9%).
Economists attribute this revision to the challenges in capturing new business formation and the closure of establishments, particularly in the wake of the COVID-19 pandemic. The BLS’s model for estimating these changes, known as the birth-death model, may have overstated new business formation and understated business closures.
It’s important to note that these revisions do not represent job losses but rather indicate that the job count was never as high as initially reported.
The U.S. economy continued to function effectively without these “phantom” workers, as evidenced by strong consumer spending and economic growth in the latter half of the previous year.
The labor market data revision process is a regular occurrence designed to provide a more accurate picture of employment trends. The BLS conducts annual benchmark revisions to replace sample-based employment estimates with more comprehensive employment counts recorded in the Quarterly Census of Employment and Wages (QCEW).
While this rearview look suggests that job growth was softening earlier than previously thought, economists emphasize that the labor market still maintains solid fundamentals. The unemployment rate increase is attributed to more people actively seeking work rather than higher layoffs, and employment-to-population ratios remain high.
The revised data may have implications for monetary policy. Some economists suggest that this new information could put additional pressure on the Federal Reserve to consider loosening its monetary policy.
The upcoming August employment report is expected to provide further insights into current labor market trends.
It’s worth noting that these revisions are preliminary, and the final benchmark revisions will be released in February 2025. While the QCEW data captures some of the impact of recent immigration surges, it may not fully reflect undocumented workers.
