Jobs report revisions stoke US economy debate

Jobs growth in the US appears to have been weaker than previously understood last year, the Labor Department said Wednesday, an update that enflamed an already heated debate about the state of the US economy.

The Labor Department said its latest data suggested employers added about 818,000 fewer jobs than previously estimated over the 12 months prior to March.

The revision, which is preliminary, would reduce the total number of jobs created during that time by about 30%, compared with previous estimates – the biggest such update since 2009.

In an ordinary year, the publication of a new estimate would be marked by only the nerdiest of economic forecasters. But months before a presidential election, it quickly became political fodder.

The new estimates suggest monthly job growth of about 174,000, instead of the roughly 240,000 previously understood.

Most sectors were hit by downward revisions, including information – media and tech among other areas – retail, manufacturing, and the grab-bag category of “professional and business services.

That means job growth in the period was “even more dependent on government and education/healthcare than thought”, wrote Ryan Sweet at Oxford Economics.

Hiring was “still strong but less than that needed to keep up with growth in the working-age population” he noted.

At the end of the day, the revisions imply that the total number of jobs in the US is just 0.5% smaller than previously thought.

The Labor Department publishes estimates of job creation each month, based on surveys it sends out to employers.

It regularly revises the figures as it gets more information, with a final reset at the start of each year.

Its report Wednesday was a preview of that update, incorporating county-level unemployment insurance tax data.

This revision was “notably” larger than previous years, Mr Sweet noted.

But some analysts suggested it might be overblown, noting that the tax data would not reflect jobs going to unauthorized workers.

Given the recent surge in immigration in the US, they say that could lead to jobs growth being undercounted.

Over the last four years, the final estimates of job growth have ended up higher than indicated in August.

Strong jobs growth has been key to the Biden administration’s case that its policies helped the US emerge from the pandemic with the strongest economy in the world.

But on Wednesday, Republicans seized on the figures to argue that Democrats have been gaslighting voters about the state of the economy.

The Republican Party responded on social media writing: “BREAKING: 818,000 jobs that the Harris-Biden administration claimed to have “created” aren’t actually there”.

Donald Trump posted on Truth Social that it was a “MASSIVE SCANDAL!” claiming that the “real” numbers were “much worse than that”.

But Jared Bernstein, the chair of President Biden’s Council of Economic Advisers, said the revision, “doesn’t change the fact that this has been and remains a strong jobs recovery, powering real wage gains, solid consumer spending, and record small biz creation”.

For much of the last year, the US has reported strong jobs growth in defiance of economist expectations – and public sentiment.

The gains have surprised many because businesses and households are facing the highest borrowing costs in a generation, which would ordinarily trip-up growth.

As the Republican response underlined, the revisions bolster arguments that the labour market is on shakier ground than understood.

Many analysts said the new numbers would strengthen the case for the US central bank to cut interest rates at its next meeting in November. That is already expected, as it tries to head off further weakening in the job market.

But the change didn’t set off widespread alarms.

Financial markets, which were roiled by jitters about the economy earlier this month, took the latest data largely in stride, noting that they were in line with expectations.

“Non-farm payroll growth from April 2023 to March 2024 looks to be softer than first thought, but not worryingly so,” wrote Olivia Cross, North America economist at Capital Economics.