The accuracy of recent U.S. job growth data is facing a stiff revision, potentially wiping out nearly a million previously reported jobs within the year spanning March 2023 to March 2024.
Upcoming revisions to the U.S. job growth figures could significantly alter the Federal Reserve's interest rate decisions, Yahoo reported.
Economists from major financial institutions like Goldman Sachs Group Inc. and Wells Fargo & Co. expect the data to be revised downward significantly. Preliminary benchmarks suggest a reduction of at least 600,000 jobs or roughly 50,000 fewer jobs each month than previously reported.
The Bureau of Labor Statistics (BLS) uses data from the Quarterly Census of Employment and Wages (QCEW) to adjust annual March payroll numbers. These more accurate records from state unemployment insurance tax data tend to stabilize initial estimates.
Analysis from JPMorgan Chase & Co. presents a slightly less drastic forecast, estimating the number of jobs reduced by about 360,000. However, if the revisions decrease more than 501,000 jobs, it would mark the largest correction in 15 years, shedding light on a Labor market that has cooled more than initially understood.
Current reports from the BLS, which are based on less precise monthly survey data, show an addition of 2.9 million jobs from March 2023 through March 2024. These figures average to 242,000 jobs each month.
The initial June QCEW report presented a fragmented view of the previous year's labor data, pointing to weaker payroll gains than what was expected initially.
Even with significant revisions of up to one million jobs, the corrected figures would still represent a robust monthly growth average of 158,000 jobs. Nonetheless, the reassessment will significantly influence the economic policies of the Federal Reserve. Economists Sarah House and Aubrey Woessner from Wells Fargo highlighted the consequences of underestimated job data on Federal Reserve policies. They noted that a massive downgrade would imply a waning labor market strength that predates current data assessments.
A large negative revision would indicate that the strength of hiring was already fading before this past April, making risks to the full employment side of the Fed’s dual mandate more salient amid widespread softening in other labor market data.
Omair Sharif of Inflation Insights LLC, however, anticipates the downward revision to be moderate. Traditionally, analysts adjust the QCEW data upwards due to reporting delays, which could mitigate the extent of job count reductions seen.
For the Federal Reserve, led by Chairman Jerome Powell, these upcoming revised statistics could provide critical insight. Although not quoted directly regarding these revisions, the Fed’s responses, such as adjusting interest rates, will pivot on integrating this revised employment data into their economic evaluations.
Historically, upward revisions in the QCEW have slightly lessened the impact of projected job losses in preliminary reports. Still, a revision near the upper end of projections would emphasize the need to reevaluate ongoing economic policies. The final revision numbers, expected early next year, will offer a definitive look at the labor market's actual conditions throughout the previously evaluated period.
In conclusion, this adjustment to job growth figures could signal to policymakers that the U.S. job market was cooling more significantly and earlier than initially reported, prompting a potentially conservative shift in Federal Reserve interest rate policies. The large negative revision not only underscores changing dynamics within the labor market but also adjusts expectations concerning the overall health of the economy.
