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As predicted by Wall Street analysts, the U.S. Bureau of Labor Statistics (BLS) significantly revised job growth figures downward on Wednesday in its preliminary benchmark revisions, which showed that from Spring 2023 to Spring 2024, 818,000 fewer jobs were created than initially estimated.
The numbers suggest that the labor market cooled off much faster than was previously believed, and is not in as strong a current position. The Federal Reserve now also has a case for making a bigger cut in interest rates than initially anticipated come September.
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Previously, the U.S. reported the creation of 2.9 million jobs from Spring 2023 to Spring 2024. That figure was revised downward by about 30 percent to about 2.08 million, or roughly 173,500 jobs per month.
The -0.5 percent revision of total payrolls is the largest seen since 2009.
Still, the revision is not as severe as some analysts had anticipated — economists on Wall Street estimated a reduction of anywhere from 360,000 to 1 million jobs.
The largest downward revision was in professional and business services, where job growth was 358,000 less than previously reported. Leisure and hospitality saw a decline of 150,000, manufacturing a decline of 115,000, and trade, transportation and utilities a decline of 104,000.
Some sectors actually saw upward revisions, including private education and health services (87,000), transportation and warehousing (56,400) and other services (21,000).
In some years, the BLS’s revisions have shown movement in the opposite direction of what economists predicted.
The revisions are calculated from a survey conducted four times per year that polls all U.S. companies that participate in the state-federal system for providing unemployment benefits to those workers who lose their jobs. Those companies must provide staff numbers for tax purposes, which also helps the Bureau of Labor Statistics more accurately measure how many jobs are being created.
Results of the first three quarters of the survey suggested that job growth was overestimated by about 735,000, or roughly 82,000 jobs per month during the 12 months that ended March 2024.
In addition to its quarterly survey of businesses, the government takes into account additional factors that can sometimes throw off Wall Street estimates.
One such factor includes the number of new businesses that are created each year versus those that shut down.
“If new firms are being created faster or slower or if existing firms are closing faster or slower than the BLS assumes, then the true employment picture can differ from the monthly estimates,” Stephen Stanley, chief economist of Santander Capital Markets, told Market Watch.
Immigration is another factor that can impact job growth figures. The surge in immigrants coming into the U.S. in recent years has been huge, but that labor force is often difficult for the government to precisely measure.
Therefore, predicting which way revisions will go isn’t always as clear as it may seem. During the 12 months that ended in March 2021, for instance, economists predicted that employment gains would be lowered by 270,000 during the government’s benchmarking process. However, job gains were actually raised by 374,000 during that period.
The revisions announced on Wednesday will not be made official until early 2025.
