The U.S. job market didn’t pack as much punch as we thought.
Fresh data from the Bureau of Labor Statistics reveals that the economy created 818,000 fewer jobs than previously reported from April 2022 to March 2023.
That’s a sizable downgrade, slicing monthly job gains to an average of 174,000—down from the 242,000 previously touted.
This revision, the biggest since 2009, comes from state unemployment tax records, the backbone of payroll data.
While the numbers are preliminary, with final figures set for release in February 2025, the early picture isn’t rosy.
“The labor market appears weaker than originally reported,” said Jeffrey Roach, chief economist at LPL Financial.
With the job market not as strong as once thought, the Fed may find itself edging closer to rate cuts as early as September.
Professional and business services bore the brunt of the downward adjustment, but manufacturing, leisure and hospitality, and information sectors weren’t spared either.
Federal Reserve policymakers are closely monitoring these labor market shifts amid persistent high interest rates.
The July jobs report, which disappointed with a mere 114,000 new jobs and a surprise jump in unemployment to 4.3%, has only fueled these concerns.
This uptick in unemployment set off the Sahm rule—a telltale sign of a looming recession.
The rule kicks in when the three-month average jobless rate is at least half a percentage point above its 12-month low.
With unemployment averaging 4.13% over the last three months, well above July 2023’s 3.5%, it’s a signal that can’t be ignored.
Bill Adams, chief economist at Comerica Bank, noted, “The Fed will see the revisions as another reason to pull forward plans to reduce interest rates.”
The June dot plot, which showed most FOMC members thought only one or two quarter percentage point cuts would likely be appropriate by year-end, looks quite stale after this release.
As September’s meeting approaches, the markets are bracing.
Investors are betting on a rate cut, with most leaning towards a 25-basis point reduction, though a significant chunk is preparing for a more substantial half-point cut.
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