Employment data exaggerated! As of March, the total number of non-farm workers in the United States for the whole year may be revised down by 818,000

According to the Zhitong Finance and Economics APP, based on government data released on Wednesday, the year-on-year employment growth in the United States up to March may be far less robust than previously reported.

According to preliminary benchmark revision data from the Bureau of Labor Statistics, the number of employed persons in the United States for the 12 months up to March may be revised downward by 818,000, or a monthly decrease of about 68,000. This is the largest downward revision since 2009.

While most economists expected a decline, some predicted that employment could decrease by as much as 1 million. The final data is expected to be released early next year.

Prior to this report, preliminary wage data from the Bureau of Labor Statistics showed that employers added a total of 2.9 million jobs during this period, averaging an increase of 242,000 jobs per month. Now, assuming the changes are proportionally distributed, the average monthly increase in employment may be 174,000, still showing a healthy hiring pace but slower compared to the peak after the COVID-19 pandemic.

Benchmark revisions are conducted annually, but this year they are particularly closely watched by the market and Federal Reserve observers, looking for any signs indicating that the cooling of the labor market is faster than initially reported.

Several economists have stated that preliminary wage data may be influenced by multiple factors, including adjustments for business startups and closures, as well as the statistical methods for undocumented immigrant workers.

These revisions may reignite concerns among the market and economists about the labor market deteriorating at a faster pace than expected. The July employment report raised alarms due to weak hiring pace and the fourth consecutive month of rising unemployment rates, but other indicators such as unemployment claims and job vacancies suggest a more moderate slowdown.

These data may exacerbate concerns about the Federal Reserve falling behind the curve in lowering interest rates.

Wednesday's data will help shape Federal Reserve Chairman Powell's latest assessment of the labor market at the annual central bank symposium in Jackson Hole, Wyoming, this Friday. Policymakers have recently shifted their focus to the labor aspect of their dual mandate as inflation has eased from the peak of the COVID-19 pandemic.

Industry Classification

Professional and business services accounted for nearly half of the downward revisions. Other industries were also revised downward, including leisure and hospitality, manufacturing, and retail.

The Bureau of Labor Statistics' monthly employment report is compiled through two surveys. Wednesday's revisions involve wage data collected through the establishment survey, which will not affect the unemployment rate as the unemployment rate is derived from the household survey.

The agency annually compares March wage levels with Quarterly Census of Employment and Wages (QCEW) data based on state unemployment insurance tax records, covering nearly all U.S. jobs, to obtain more accurate employment data The QCEW data was also released on Wednesday, showing a 1.3% increase in employment as of March 2024. In contrast, preliminary monthly wage data showed an annual growth rate of 1.9%.

The revisions on Wednesday apply to the total wage level in March 2024 compared to the previous year. The final data will be released in the January 2025 employment report and will be further revised on a monthly basis.

In most of the recent years, preliminary monthly wage data has outperformed QCEW data. Some economists partially attribute this to the so-called birth-death model - adjustments made by the Bureau of Labor Statistics to account for the net number of new business openings and closures, but this model may have deviated in the post-pandemic era.

Others believe that immigration is also a factor contributing to this difference. Since QCEW reports are based on unemployment insurance records, undocumented immigrants cannot apply for these insurances, so these data may exclude tens of thousands of undocumented workers included in preliminary wage estimates.

After a slight decline the previous day, the U.S. stock market resumed its rise on Wednesday. As of the time of writing, the three major U.S. indices rose, with the Nasdaq up 0.33%, the S&P 500 up 0.29%, and the Dow up 0.07%