The U.S. economy added far fewer jobs in 2023 and early 2024 than previously reported, a sign that cracks in the labor market are more severe — and began forming earlier — than initially believed.
On Wednesday, the Labor Department said that monthly payroll figures overstated job growth by roughly 818,000 in the 12 months that ended in March. That suggests employers added about 174,000 jobs per month during that period, down from the previously reported pace of about 242,000 jobs — a downward revision of about 28 percent.
The revisions, which are preliminary, are part of an annual process in which monthly estimates, based on surveys, are reconciled with more accurate but less timely records from state unemployment offices. The new figures, once finalized, will be incorporated into official government employment statistics early next year.
The updated numbers are the latest sign of vulnerability in the job market, which until recently had appeared rock solid despite months of high interest rates and economists’ warnings of an impending recession. More recent data, which wasn’t affected by the revisions, suggest job growth slowed further in the spring and summer, and the unemployment rate, though still relatively low at 4.3 percent, has been gradually rising.
Federal Reserve officials are paying close attention to the signs of erosion as they weigh when and how much to begin lowering interest rates. In a speech in Alaska on Tuesday, Michelle W. Bowman, a Fed governor, highlighted “risks that the labor market has not been as strong as the payroll data have been indicating,” although she also said that the increase in the unemployment rate could be overstating the extent of the slowdown.
Investors, too, had been watching the revisions closely because of their implications for Fed policy. They were forced to wait longer than expected, however: The data, originally scheduled for a 10 a.m. release, was not published until after 10:30 a.m.
The revisions were unusually large, and were on the upper end of forecasters’ expectations, although a few economists had predicted a reduction of as much as one million jobs.
The new numbers show that hiring was slower nearly across the board than originally reported. There were large downward revisions in white-collar sectors like professional services and information, as well as in hospitality and retail. The transportation and warehousing sector, which includes many businesses involved in e-commerce, was one of the few in which job growth was revised up instead of down.
Still, the big picture remains relatively unchanged: Job growth is slowing, but not collapsing. The unemployment rate is rising, but layoffs remain low.
Indeed, the revisions to some extent help bring the job growth numbers into line with other data showing a more significant cooling in the labor market. Job openings, hiring and employee turnover have all slowed significantly over the past two years. The robust monthly payroll figures were something of an outlier.
Some economists have also argued that the labor market is in better shape than recent data suggests. The unexpected slowdown in hiring and uptick in unemployment in July, for example, may have partly reflected the impact of Hurricane Beryl, which temporarily shut down businesses in Texas. And government data may not fully reflect the effect of increased immigration, which has provided employers with a supply of needed workers.