The Job Market Last Year Wasn’t As Hot As Everyone Thought

It turns out employers weren’t hiring last year at quite the breakneck pace that official government statistics originally reported.

On Wednesday, the Bureau of Labor Statistics downwardly revised the number of jobs added in the 12 months through March 2024, by 818,000, meaning that 0.5% fewer jobs were added than initial reports indicated.

The drop was in line with expectations of forecasters, who had predicted a downward revision of anywhere from 600,000 to 1 million jobs, according to economists at Goldman Sachs. Should the preliminary estimate (itself subject to further revisions) hold, it would be the largest downward revision since 2009 and would mean that the economy added an average of 178,000 jobs per month instead of 246,000.

While the revision was expected—the bureau revises its numbers every year based on data it receives from state unemployment tax records, usually downshifting what they initially reported—it could shift how policymakers at the Federal Reserve view the job market. The Fed has said it is increasingly focusing on the labor market as it weighs possible interest-rate cuts.

While the revised figure is “still a solid number,” it “raises the risk that the numbers we’re seeing now are in actuality lower,” Ernie Tedeschi, former chief economist at the White House, posted on X, the social media platform formerly known as Twitter. 

Jobs Growth Likely to be Muted

The job market has been one of the bright spots in an economy battered by higher-than-normal inflation and high interest rates from the Fed. Employers have continued hiring, keeping unemployment low and avoiding a recession. That’s despite the fact that borrowing costs on all kinds of loans have been pushed up by the Fed raising its benchmark interest rate to its highest since 2001 to combat inflation. 

The resilient job market has fueled hopes that inflation could simmer down without the wave of mass layoffs and recessions that have usually followed the central bank’s rate-hike campaigns historically.

Several economists said the large downward revision to hiring statistics could dim those hopes, but it doesn’t signal the economy is in a recession just yet. The revision comes at a time when the Fed is preparing to lower interest rates, shifting its focus from taming inflation to trying to prevent a spike in unemployment.

“This doesn’t challenge the idea we’re still in an expansion, but it does signal we should expect monthly job growth to be more muted and put extra pressure on the Fed to cut rates,” Robert Frick, corporate economist with Navy Federal Credit Union, wrote in a commentary.

Expectations for Interest-Rate Cut Grow

The Fed is widely expected to cut its benchmark interest rate  by at least a quarter point when its policy committee next meets in September. After the revision, financial markets raised their bets for the Fed to cut rates more steeply.

As of Wednesday afternoon, traders were pricing in a 34.5% chance the Fed would cut its rate by half a percentage point from its current range of 5.25%-5.50%, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Those chances are up from a 29% chance the previous day.

More aggressive rate cuts from the Fed would put more downward pressure on interest rates for all kinds of loans, including mortgages, car loans, and credit cards.