On Aug. 21, the U.S. Labor Department said that the number of jobs the American economy added in the year ending March 31 is likely 818,000 less than what was reported in the monthly reports during that period, indicating that the labor market is much softer than economists thought.
Analysts had originally projected that the Labor Department’s revised numbers would cut upwards of one million jobs from the total between April 2023 and March 2024 when it was thought that average monthly job growth was a strong 231,000.
The revised numbers result in approximately 70,000 jobs being slashed from the projections monthly, though the final revision will not be available until February 2025.
The new data may impact how the Federal Reserve approaches the issue of interest rates. In the Reserve’s upcoming September meeting, policymakers are expected to cut interest rates for the first time since the peak of the COVID-19 pandemic.
Some economists say that lower job growth indicates that an interest rate cut is in order to stimulate the economy and create more jobs, with some saying the cut could be as much as 50 basis points.
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The Chief Economist with LPL Financial, Jeffery Roach, told POLITICO, “If the labor market started to deteriorate sooner than 2024, I think there’s a case that the Fed could indeed cut by 50 basis points in September.”
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‘Fraudulent’ job numbers
The original job numbers were a feather in the hat for the current Biden administration, and provided a positive talking point for Harris’ presidential campaign.
Republican presidential candidate Donald Trump capitalized on the revision.
“There has been a report that the job numbers over the last period of time were fraudulent….That’s a terrible insult to our economy because we were seeing numbers that were OK, but not great, now we’re seeing numbers that — when they’re adjusted — are a disaster,” Trump said during a speech on Aug. 20.
However, it is not uncommon for the Labor Department to make such adjustments. During Trump’s term in office, in 2019, the Department shed 514,000 jobs off its total monthly estimates.
This revision does work in Trump’s favor, however, as he can continue to argue that the economy is not as strong as the Biden administration and Harris campaign claims. This also comes on the heels of a particularly poor July jobs report when only 114,000 jobs were created, much fewer than what economists consider to be strong growth.
However, according to Eric Wallerstein, formerly of the Wall Street Journal and current Chief Markets Strategist at Yardeni Research, “The labor market hasn’t somehow collapsed. If you’re going to point to data from 2023 that it is collapsing, good luck with that.”
The revised employment numbers, plus recent turbulence in the stock market following a rate hike by the Bank of Japan, have further driven concerns that the U.S. is headed towards — or already finds itself in — an economic recession.
