(Reuters) – U.S. employers added significantly fewer jobs in the period through March than initially reported, the U.S. Labor Department said on Wednesday, underscoring growing concerns about the health of the labor market at the Federal Reserve as it prepares to cut interest rates in September.

The ministry’s estimate for the total number of wage and salary earners for the period April 2023 to March 2024 was reduced by 818,000.

The significantly lower figure is the first of two annual “benchmark” revisions the department undertakes as it collects more accurate data that will not be available until the months following the release of the monthly payroll report.

If the figure remains unchanged after the last revision in February, it would be the largest downward revision since the employment decline of 902,000 in March 2009.

This is also consistent with the view of some economists who say that the strong employment gains have been systematically overestimated due to data collection problems, while the recent rise in unemployment may exaggerate the extent of the slowdown.

The revision meant a total downward change of about 0.5%.

Private sector employment growth was revised downward by 819,000, 0.6 percent less than the ministry’s previous estimate. The number of public sector employees remained essentially unchanged.

The largest job losses were in the professional and business services category, with 358,000 jobs, or 1.6%, lost from the previous estimate, followed by leisure and hospitality with 150,000 jobs, a decline of 0.9%. The hard-pressed manufacturing sector saw job losses of 115,000 jobs, also a decline of 0.9%.

The few sectors that saw upward revisions included transportation and warehousing, up 56,400 or 0.9 percent, private education and health services, up 87,000 or 0.3 percent, and utilities, up 1,700 or 0.3 percent.

Concerns about the FED

Fed policymakers may take into account evidence that the labor market is weaker than previously thought as they weigh the pace of rate cuts after the widely expected first cut in borrowing costs at their monetary policy meeting on September 17-18.

The central bank has kept its key overnight interest rate in the current range of 5.25 to 5.50 percent for over a year, after raising it by 525 basis points in 2022 and 2023 to curb high inflation.

But with inflation now within touching distance of the Fed’s 2 percent target, attention is turning to ensuring that the lagged effects of a prolonged period of high borrowing costs do not derail a labor market that was seen as gradually cooling.

Weaker-than-expected employment data for July fueled fears that the Fed may have waited too long to cut interest rates as the unemployment rate rose to a post-pandemic high of 4.3%.

The story continues

However, other data since then, including weekly unemployment figures, suggest that an orderly slowdown in the labor market continues.

The Labor Department will release its final benchmark revision for the March 2024 employment numbers in February 2025, when it releases the January 2025 employment report. The final revisions typically do not deviate far from the preliminary ones.

In last year’s second benchmark revision, published last February, the ministry revised its estimate for total employment in March 2023 downward by 40,000.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)