Revision of Job Numbers Sparks Mixed Assessment on US Economy, Labor Market

A customer walks by a 'We're Hiring' sign posted in front of a Target store in Sausalito, Calif., on Nov. 3, 2023. Justin Sullivan/Getty Images

The Bureau of Labor Statistics (BLS) overestimated job growth by 1.1 million over the past year, sparking a debate about the health of the U.S. labor market and the broader economic landscape.

As part of its annual benchmark revisions, the Department of Labor revised employment growth down by 818,000 from April 2023 to March 2024.

This represented the sharpest downward adjustment since the global financial crisis in 2008–2009.

According to the changes, the economy created roughly 2.1 million jobs in the 12 months through March—instead of the 2.9 million reported by the federal government.

Various sectors witnessed lower job gains, such as professional and business services (358,000 lower), leisure and hospitality (150,000 lower), retail (129,000 lower), and manufacturing (115,000 lower).

The wave of developments in the jobs arena has initiated a conversation on the health of the labor market and the United States economy. Are the job revisions confirmation of a weakening economy or are they statistical errors?

Revisions have become a noticeable component of the monthly jobs report, with downward adjustments occurring nearly every month since January 2023.

So far this year, five out of the past six job reports have been revised lower.

Additionally, the BLS has recorded sizable revisions to the employment data before.

In 2023, the preliminary benchmark payroll revision showed 306,000 fewer jobs. In 2022, there were 462,000 more jobs than initially estimated.

The 10-year average shows that the BLS’s employment estimates versus tax data have been off by 0.1 percentage point.

However, the federal statistics agency’s recent revisions confirmed a 0.5 percentage point error on payrolls, up from last year’s 0.2 percentage point mistake.

“Today’s announced change is a big error and suggests there are some clear issues regarding some of the assumptions the BLS uses to complement its surveys of U.S. businesses,” said James Knightley, the chief international economist at ING, in a research note.

“The BLS has a good handle on what is going on amongst large employers, but has less visibility on the small business sector and has a ‘births-death’ model.”

The birth-death model is related to the birth and death of businesses, not individuals. The methodology has attracted considerable scrutiny over the years.

One of the chief criticisms is that the net gain or loss in jobs can eventually become inaccurate at the peaks of business cycles.

That said, for more than a year, there have been diverging assessments of the labor market.

In response to the sizable and frequent revisions to the monthly jobs report, it has been purported that adjusting past months’ employment figures can present a conflicting portrait of the labor market.

Fed Chairman Jerome Powell prepares to deliver remarks to The Federal Reserve's Division of Research and Statistics Centennial Conference in Washington, on Nov. 8, 2023. Chip Somodevilla/Getty Images

Because it marked the second-largest downward adjustment since the global financial crisis 15 years ago, it does suggest that the U.S. economy is performing weaker than previously thought, says Demian Brady, the vice president of research at the National Taxpayers Union Foundation.

“It was not surprising to see that BLS made this correction with consumers still cutting back on discretionary spending because of inflation, the number of chain stores and restaurants announcing closures and layoffs, and the increasing number of business bankruptcies,” Brady told The Epoch Times.

“The magnitude of the correction is surprising, raising questions about BLS’s methodology for producing its estimates. The reports touting robust job creation seemed overly optimistic at the time, especially given the persistent inflationary pressures.”

Despite the revisions generating enormous attention, they change little about the state of the world’s largest economy, says Dean Baker, the senior economist at the Center for Economic and Policy Research.

“What they tell us is that the economy is creating fewer jobs than we had previously believed,” he wrote in a report. “But if we have high levels of employment with fewer jobs, what exactly is the problem?”

Market observers have pointed to the total national employment volumes. Total non-farm payrolls stand at 158.723 million, up from 156.211 million a year ago.

Baker thinks there might even be a positive side to the latest news.

“Assuming that we have accurately measured output [there are issues here too], if we generated this output with fewer jobs than we had previously estimated, this means productivity growth has been faster than had previously been estimated,” he added.

Earlier this month, the Department of Labor reported that productivity grew at a higher-than-expected pace of 2.3 percent in the second quarter, up from 0.4 percent in the first three months of 2024.

Trouble Brewing

Even if the latest revisions do not indicate something concerning about the U.S. economy, there have been trends forming throughout the labor market that have caused some concern.

The July jobs report showed the unemployment rate rose to 4.3 percent, the highest level since October 2021.

The increase activated the widely cited Sahm rule.

This indicator, developed by former Federal Reserve economist Claudia Sahm, suggests that when the three-month moving average of the jobless rate is 0.5 percent or more above its low over the previous 12 months, the economy could be in the early stages of a recession.

In recent weeks, there have been discussions as to whether the recession indicator is flashing downturn signals.

Sahm does not think the U.S. economy is contracting, but she does believe the country is close to a recession.

“The rise in the unemployment rate over the past year, which my rule reflects, now looks like we are past normal and uncomfortably close to recession,” she wrote on social media platform X.

Fed Chair Jerome Powell is getting nervous about the labor market, conveying to economists, lawmakers, and the press in recent months that the central bank can now start concentrating on the employment side of the institution’s dual mandate.

“The cooling in labor market conditions is unmistakable. Job gains remain solid but have slowed this year,” Powell said in his speech at the Jackson Hole Economic Symposium on Aug. 23.

“We do not seek or welcome further cooling in labor market conditions.”

Monetary policymakers have debated where the unemployment rate could be headed.

The June Summary Economic of Projections (SEP) showed that Fed policymakers anticipate the unemployment rate will be above 4 percent in 2025 and 2026.

Full-time employment has been trending downward over the past year. Since the June 2023 peak, the country has lost about 1.1 million full-time jobs.

By comparison, the economy has created roughly 1.5 million part-time jobs in the same span.

Moreover, the Federal Reserve Bank of Philadelphia’s August full-time non-manufacturing employment index plunged to its lowest level since May 2020, marking the second consecutive month of a contraction.

It also highlighted that more than one-quarter (27 percent) had reported decreases in full-time jobs, the highest reading since May 2020.

“This matters because part-time jobs are overwhelmingly for economic reasons. People would rather work a full-time, stable job,” wrote Heritage Foundation economists EJ Antoni and Peter St Onge.

“But when those aren’t available, they’ll take what they can get, replacing a nine-to-five job with two or more part-time gigs. A consistent income stream has been replaced by several volatile ones.”

The number of people working two or more jobs has ballooned in recent years, touching an all-time high of 8.565 million in December 2023.

Last month, multiple jobholders were close to 8.5 million, representing more than 5 percent of those employed.

Since October 2019, there has been a divergence between United States-born and foreign-born workers.

In this span, the number of native-born workers has declined by approximately 700,000. Conversely, foreign-born employment levels have rocketed by more than 3.6 million.

According to the Department of Labor, the statistics include both legal and illegal immigrants.

Last year, foreign-born workers accounted for nearly 19 percent of the civilian labor force, up from about 15 percent in 2006.

A Nervous Workforce

Amid concerns about the U.S. economy, workers are becoming nervous and fearful of what will happen to the labor market in the coming months.

The New York Fed’s latest Labor Market Survey revealed that the share of individuals who think they will become unemployed in the next four months surged to a series high of 4.4 percent.

As a result, more people are scanning the job market. The share of workers who said they were actively searching for work in the past four weeks also rose to a series high of 28.4 percent.

The regional central bank launched this report in 2014.

In addition, the New York Fed’s July Survey of Consumer Expectations showed the median probability that the U.S. unemployment rate will be higher one year from now was 37 percent, above the pre-crisis level of 34 percent.

Fewer people are also handing in their resignation letters.

The BLS’s Job Openings and Labor Turnover Survey (JOLTS) report confirmed that the number of job quits slowed to 3.28 million in June, the lowest level since November 2020.

While business and academic economists do not anticipate a recession over the next 12 months, many Americans feel like the nation is facing economic difficulties.

A recent Affirm survey discovered that 59 percent of respondents say the U.S. economy is in a recession because of the high cost of living and persistent inflationary pressures.

The U.S. economy may not be in a technical recession, but market observers are calling the present landscape a “vibecession”—a disconnect between personal circumstances and the broader economy.

This sentiment could seep into the labor market and force individuals to refrain from quitting, ignite a pursuit for another job, or take on additional work.

It is a different kind of recession, according to RedBalloon’s latest Freedom Economy Index which surveyed employers and jobseekers.

“With the ongoing population growth slowdown and resulting worker shortage, recessions now look different, with more keeping their jobs while people are hurting financially,” the report stated.