Mark Lennihan/Associated Press
The US economy added 818,000 fewer jobs to the economy than initially reported from April 2023 through March 2024.
That's according to a data revision from the Bureau of Labor Statistics, which periodically revises job growth data based on its Quarterly Census of Employment and Wages (QCEW) report.
The jobs revision is in the middle range of Goldman Sach's 600,000 to 1 million estimate, and it represents the biggest downward revision since 2009, when the BLS revised employment growth lower by 824,000 jobs.
That means the US economy added 2.1 million new jobs from March 2023 through 2024, below the initially reported 2.9 million jobs, and that the average monthly payroll gain during this time period was closer to 178,000 instead of the reported 246,000, according to ING Economics.
"This means labour market momentum is being lost from a weaker position than originally thought," economist James Knightley as ING said.
US stocks initially moved higher following the data release just after 10:30 am, perhaps on the prospect that fewer jobs being added to the economy will push the Federal Reserve to be more dovish and cut interest rates faster, but the S&P 500 has since given up some of its gains and is trading up just 0.20% at the time of writing.
While the downward employment revision is a big one, Wall Street isn't necessarily freaking out about it.
"Even though this number is shocking, job growth is still positive. If you are in the rate cut in September camp, these data all but seal the deal on what Fed needed to cut rates," Harris Financial Group managing partner Jamie Cox said in an email.
Yardeni Research said the downward jobs revision is yet another sign that the labor market is simply normalizing towards its pre-pandemic trends when an average of about 175,000 jobs were added to the economy each month.
In a recent note, Yardeni Research highlighted that immigrants are excluded from the QCEW report on which the data revisions are based. This is significant given that immigration trends have helped grow the jobs market over the past few years.
"We've noted that immigrants and new labor market entrants rarely file (or qualify) for this insurance," Yardeni Research said of unemployment insurance, which the QCEW report is based on.
"That means payrolls are likely stronger than the QCEW will suggest," Yardeni Research said.
The data is also "old news," according to Yardeni Research, and employment data since March 2024 has been constructive despite a hiccup in July.
"We have several months of data since then, and we expect the August payrolls report will rebound after Beryl depressed the July data," Yardeni Research said, referencing Hurrican Beryl, which impacted Texas with flooding and power outages.
Finally, the downward revision to job growth could translate into worker productivity being revised higher, which would further support the Fed's decision to cut interest rates.
"It may mean that productivity is revised higher instead. Either way, softer activity or stronger productivity growth would both suggest that the Fed has more reason to begin loosening policy in September," economist Olivia Cross at Capital Economics said.
And higher worker productivity could ultimately be a boon for stocks through 2030, according to Yardeni Research.
"Considering the strength of the economy over the past two years, fewer payrolls would also support our Roaring 2020s thesis by raising the measure of worker productivity," Yardeni Research said.
