August 21, 2024
Employers added 818,000 fewer jobs than we first thought.
Now – while you’re seeing that headline everywhere – let me explain exactly what it means – it’s probably not what you think – and what these new numbers mean for the future of interest rates – a bigger rate cut may be coming next month.
First let me explain that big scary number of 818,000 fewer jobs. You need to understand – even this number is preliminary. It may go up it may also go down. But here are the facts of what we know today. The Labor Department puts out a jobs report every single month. That report shows the number of new jobs added to payrolls nationwide and how many people are collecting unemployment benefits. Those monthly numbers are based on surveys about the employment situation. But every single year those monthly numbers get revised after the labor department reconciles those monthly estimates with more accurate, but less timely tax records from employers and state unemployment offices. That revision report came today.
Now that you understand why this number came today – let’s talk about those 818,000 fewer jobs. First– these numbers are not for one month. They are for the months between March of 2024 and March of 2023. And they absolutely prove that the labor market was not as strong as we all thought. But this report does not mean the US jobs market had negative job growth. Not at all. Initially the labor department reported 2.9 million jobs were added to nationwide payrolls during the 12 months ending in March of 2024. This report revised that 2.9 million number down to 2.1 million jobs. That means instead of employers adding an average of about 242,000 jobs a month they may have added an average of about 174,000 jobs a month. 174,000 jobs is still a solid number and is still in the positive that is not a negative number.
According to this Labor Department revision report, professional business services jobs saw the biggest revision – 358,000 fewer jobs than first reported, manufacturing saw 115,000 fewer jobs than first reported, and leisure and hospitality saw 150,000 fewer jobs than first reported. It’s also worth noting a few job sectors were revised up including private education and health services which added an addition 87,000 jobs than first reported and transportation and warehousing which added more than 56,000 jobs than first reported.
Now – this revision is absolutely going to play into the Federal Reserve’s decision to cut interest rates. One of the pillars that the Fed relies on when making interest rate decision is how strong is the labor market. In fact – a strong labor market is one of the main reasons why the Fed chairman has said the Fed wasn’t going to cut rates yet. Well – this report is showing the labor market may not have been that strong – so it gives them more incentive to not only cut rates in September but maybe cut them more than the expected quarter of a percent.
