USA: Labor market growth overestimated by 818,000 jobs
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Earlier data had significantly overestimated the recent labor market recovery, the government said on Wednesday. This is a potentially worrying sign as slowing job growth shakes confidence in the economy. But some experts say the downward revisions are not as bad as they may seem at first glance.
From April 2023 to March 2024, employment growth was lower than previously reported.
Key data
According to the Bureau of Labor Statistics, 818,000 fewer jobs were created in the United States from March 2023 to March 2024 than previously estimated. The data was released about 30 minutes after its scheduled release at 10 a.m. EDT.
This means that total employment growth (excluding jobs in agriculture) over the 12-month period increases from 2.9 million to around 2.1 million, while the average monthly increase over this period falls from around 242,000 to around 174,000.
Stock markets reacted positively to the announcement, with the S&P 500 rising about 0.3 percent shortly after the revisions were released, bringing its daily gain to 0.5 percent and reaching its highest level since July 16.
Important background
The update came as part of the regularly scheduled first benchmark revision of the government’s monthly Nonfarm Payrolls data, the most widely cited measure of overall U.S. employment. The massive revisions were due to the government’s recalibration to more precise quarterly jobless claims data – as opposed to the monthly employer surveys used for the first monthly estimates. Economists had expected a sharp downward revision on Wednesday; Goldman Sachs economists forecast a correction of 600,000 to 1 million. Massive revisions have been fairly normal in recent years. Last August, for example, the government said it had overestimated job growth for the 12-month period ending in March 2023 by 306,000, and in August 2019 it underestimated job growth for the period ending in March 2022 by 462,000. The latest downward revision came as the increase in nonfarm payrolls slowed in the late spring and early summer, as the U.S. added an average of 154,000 jobs per month from April to July and unemployment rose to 4.3%, the highest since October 2021. The weak nonfarm payrolls report on August 2 briefly raised fears that the U.S. was heading for a recession, but more recent data has restored confidence in the economy’s trajectory.
Main critics
There’s little reason to worry about the headline revision number, according to some economists. Goldman economist Walker wrote ahead of the Labor Department’s report that the downward revision of 818,000 was likely “flawed” and “misleading.” He estimated that the new forecast likely overstated the error by 400,000 to 600,000, largely because of methodology that largely excludes illegal immigrants, a group that contributes heavily to overall job growth. “We’re not worried about this report,” wrote Ed Yardeni, founder of Yardeni Research, adding that the revision was mostly “old news” because it took into account jobs data from several months ago.
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