US employers added far fewer jobs than originally reported in the year through March, the Labour Department said on Aug 21, underscoring the growing concerns the Federal Reserve has about the health of the labour market as it gears up to start cutting interest rates in September.
The department’s estimate for total payroll employment for the period from April 2023 to March 2024 was lowered by 818,000.
The sharply lower number is the first of two “benchmark” annual revisions undertaken by the department as it collects more accurate data only available in the months after it publishes the monthly payrolls report.
If the tally holds through the final revision in February, it would be the largest downward revision since the 902,000 reduction to employment in March 2009.
It also chimes with the view of some economists that data-gathering issues mean that strong job gains have been systematically overestimated while the recent rise in unemployment may be exaggerating the degree of cooling.
The revision represented a total downward change of about 0.5 per cent. Private employment growth was revised down by 819,000, or 0.6 per cent below what had been previously estimated by the department. Government employment was basically unchanged.
The professional and business services category saw the biggest reduction of jobs, shedding 358,000, or 1.6 per cent, from the prior estimate, followed by leisure and hospitality at 150,000 jobs, down 0.9 per cent. The hard-pressed manufacturing sector saw a reduction of 115,000 jobs, also down 0.9 per cent.
The few sectors that saw upward revisions included transportation and warehousing, up 56,400, or 0.9 per cent; private education and health services, up 87,000, or 0.3 per cent; and utilities, up 1,700, or 0.3 per cent.
Fed policymakers could factor in the indication that the job market was softer than previously thought as they weigh the pace of rate reductions after the initial lowering of borrowing costs widely expected at their Sept 17 to 18 policy meeting.
The central bank has maintained its benchmark overnight interest rate in the current 5.25 per cent-5.5 per cent range for more than a year, having raised it by 525 basis points in 2022 and 2023 to quash high inflation. But with inflation now in touching distance of the Fed’s 2 per cent target rate, attention has turned to making sure that the lagged effects of a prolonged period of borrowing costs does not derail a labour market that had been seen as gradually cooling.
Weaker-than-expected payrolls data for July heightened fears the Fed may have waited too long to begin cutting rates, as the unemployment rate rose to a post-pandemic high of 4.3 per cent. However, other data since then, including weekly jobless claims, have suggested an orderly labour market slowdown remains in place.
The Labour Department will issue its final benchmark revision for March 2024 employment levels in February 2025, when it releases the employment report for January 2025. Final revisions are typically not far off the preliminary ones.
In last year’s second benchmark revision, released this past February, the department revised down its estimate for total employment in March 2023 by 40,000. REUTERS
