There's still ongoing chatter about the huge revision to U.S. job growth seen yesterday and what it might signify for the economy and markets. 818,000 jobs were wiped out in the 12 months through March 2024 (or 68,000 per month), resulting in the biggest downward adjustment since the global financial crisis. Data revisions are common, but usually not to that degree, even with the large standard deviation typically assigned to non-farm payroll figures.
Not an exact science: The Bureau of Labor Statistics usually surveys 100K-150K businesses each month, but the department then extrapolates from those surveys to get an estimate of how many jobs were created in the entire economy. Later on, the quarterly re-estimation process looks at 60M business records, many of which were not available at the time of the initial monthly payroll releases. The records can include unemployment benefits, seasonal hiring for the holidays, and unavoidable lags, such as delayed payroll data, which can give a better picture of overall economic activity.
Technically, the BLS could publish the data once it has all the reports to avoid revisions. However, many participants need access to the earliest possible read on labor market developments, like policymakers and lawmakers, as well as business owners and investors. Initial estimates are generally in line with trends, but the accuracy of the BLS data has been called into question more recently, with requests to revise the birth-death models of corporations or other influential factors including undocumented migrants.
What it means: Despite the major revision that had largely been expected, trends still appear to be positive. Instead of 250K payroll additions per month, the figure was around the 185K-200K mark on average, which likely would have led to the same monetary policy regime from the Fed over the past year. That might look different going forward given the rising unemployment rate, thereby cementing a Fed rate cut in September. The dovishness even got markets excited on Wednesday, especially after FOMC minutes showed such an action was likely, with stocks rising amid chatter of deeper rate cuts.
See a full breakdown of the industry revisions, which largely focused on the most cyclically sensitive sectors.
