The U.S. added 818,000 fewer jobs than previously reported from the spring of 2023 to the spring of 2024, indicating that the labor market began to cool off earlier and faster than it appeared at the time.
The lower number of new jobs created provides further impetus for the Federal Reserve to cut interest rates in September as widely expected. The central bank is required under the law to keep inflation low and employment high.
The government’s revised estimate of employment growth showed the economy gained about 2.1 million jobs from April 2023 to March 2024.
Originally, the increase in employment during that span was put at 2.9 million.
With inflation gradually slowing toward the Fed’s 2% target, the bank has put greater weight on the health of the labor market in considering when to reduce high U.S. interest rates.
The Fed jacked up a key short-term rate to a 23-year peak in 2022 and 2023 to quell the highest inflation in 40 years.
The updated employment figures mean the economy created an average of 173,000 jobs a month during the period in question, instead of 242,000 under the old estimates.
That rate of hiring was still pretty good historically. The U.S. added an average of 180,000 jobs a month, for instance, from 2010 to 2019.
The government revises its employment figures every year under its so-called benchmarking process. These revisions try to paint a more accurate picture of how many jobs were created in that period.
The revisions stem from a survey conducted four times a year of all U.S. companies that take part in the state-federal system for providing unemployment benefits to workers who lose their jobs. Companies are required to provide staff levels for tax purposes.
This information helps the Bureau of Labor Statistics more precisely measure the true number of jobs being created.
Wall Street had expected a big markdown in employment gains. Estimates for the reduction had ranged from 600,000 jobs to a record 1 million.
The revision might even be large enough to spur the Fed to make a bigger cut in interest rates in September than Wall Street now expects, or it could lead to a speedier reduction in rates in the months ahead, some economists say.
Why is that? The initially reported job gains during that stretch may have deterred the Fed from cutting interest rates sooner.
And what do the revisions tell us about the four months since March 2024?
Not much. The changes are backward looking and don’t tell us where the labor market and the economy are headed.
If the Fed cuts rates as expected, for instance, it could boost the economy and lead to somewhat faster hiring.
The revisions won’t be official until early next year.