Economists disagree about the extent of interest rate cuts the US Federal Reserve should make this year in light of the latest employment data.

The U.S. economy added 818,000 fewer jobs than originally reported from April 2023 to March of this year, the government said. The revised total is further evidence that the labor market is steadily slowing and is likely to reinforce the Federal Reserve’s plan to begin cutting interest rates soon.

The Labor Department estimated that job growth averaged 174,000 per month in the year through March — a decline of 68,000 per month from the 242,000 originally reported. The revisions released Wednesday were preliminary; final numbers are due to be released in February.

The downward revision follows a much worse-than-expected July jobs report, which had many economists suspecting the Federal Reserve waited too long before cutting interest rates to support the economy. The unemployment rate rose for the fourth month in a row to a still-low 4.3 percent, and employers added just 114,000 jobs.

The Federal Reserve raised its benchmark interest rate 11 times in 2022 and 2023 to combat inflation, which hit a four-decade high more than two years ago. Year-on-year inflation has fallen sharply since then – from 9.1 percent in June 2022 to 2.9 percent, clearing the way for the central bank to begin cutting rates at its next meeting in mid-September.

The revised hiring estimates are intended to better take into account companies that are starting up or going out of business.

“This does not challenge the notion that we are still in an expansion phase, but it does signal that we should expect more subdued monthly job growth and will put additional pressure on the Fed to cut interest rates,” said Robert Frick, economist at Navy Federal Credit Union.

“Pressure on the Fed”

The revisions show 358,000 new jobs were created in professional and business services, a broad category that also includes managers and technical workers, in the 12 months to the end of March. Employers in the leisure and hospitality sectors, including hotels and restaurants, created 150,000 fewer jobs than initially reported.

“There is a good chance that recent job growth is overstated, which will worry the Federal Reserve as the labor market may be a bit more fragile,” Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in an email to Al Jazeera. “Despite the corrections, the economy has added a lot of jobs and trend growth is strong but not enough to keep pace with the growth of the working-age population.”

This is less threatening than if the labor market were to weaken due to rising layoffs, Sweet said.

“For the central bank, prudent risk management is to start with rate cuts, otherwise it could risk worsening weaknesses in the labor market. The preliminary employment revisions do not change our forecast of a rate cut (by a quarter of a percentage point) in September, but we will focus on the pace of rate normalization after next month, which could be somewhat faster than we expect,” he said.