Employment Escapades

Co-Author: Fall 2024 Intern Clark Rodgers

Background

Every month, the US Bureau of Labor Statistics (BLS) publishes a report on the state of the US labor market. Each report contains data for the most recent month as well as some changes to the previous month’s data as the BLS receives more data from businesses about their employment. In March 2024, the data were extremely strong, showing that nearly 2,900,000 jobs had been added since March 2023, not accounting for farm labor. This morning, after an uncharacteristic half hour delay, that sentiment was hampered by the BLS’s preliminary revision of their March 2024 report. The BLS revised their original estimate down by approximately 30%, the largest single downward revision since 2009. This lowered total job growth in the last year by 818,000, with the largest hits coming from Manufacturing (Revised from 24,000 new jobs to 91,000 lost jobs); Professional and Business Services (Revised from 154,000 new jobs to 201,000 lost jobs); and Leisure and Hospitality (Revised from 458,000 new jobs to 308,000 new jobs). Some sectors saw an increase in estimated payroll growth, albeit marginal, such as Healthcare and Government sectors. After all revisions are considered, approximately 2,082,000 new jobs were created between March 2023 and March 2024, a number greatly subsidized by growth in Government and Healthcare jobs which grew by 3.6% (Accounting for 84% of new jobs). The private sector only grew by a paltry 0.1% from last year (Accounting for 16% of new jobs), well below initial estimates of ~0.5% payroll growth. It is important to note that the new figures do not represent job losses; they are simply new estimates as to how many jobs were created in the last year.

Considerations

There are some factors to be considered, affecting the accuracy of these reports. First, they are not designed to verify the legal status of employees, meaning they likely underestimate job creation in the last 12 months. Because of the structure of the BLS’s employment surveys, it is impossible to determine how many undocumented immigrants are counted. Second, the survey uses a model rather than a sample to estimate the jobs impact of the birth and death of businesses, so there is an unavoidable lag between when the birth or death happens and when that statistic shows up on the survey. Since startup failures are up roughly 60% YoY simply due to running out of cash, this is a possible source of overestimation for the survey.

What does this mean for policy makers?

One of the Federal Reserve’s two mandates is keeping employment high, so a -30% revision to estimated job growth is sure to spark their attention. As the Jackson Hole Symposium approaches at the end of this week, Fed Chair Jerome Powell is set to speak with the new jobs data expected to be a key talking point. While nobody can be sure what Powell will say come Friday, we can theorize as to the Fed’s next steps. In 2023, it seemed as though the labor market shrugged off inflation and interest rates with ease, however, those days may be over. With CPI finally under 3% and unemployment creeping further north of 4%, it may be time for the Fed to begin cutting rates to restimulate the job market. Time will tell how aggressively the Fed acts in response to these data.

What does the future hold?

Despite the downward revisions to March, preliminary data from June and July still suggest growth in the job market, albeit weaker than similar timeframes in 2023. The labor market is not expected to completely stagnate, but it could require some help from the Fed and Congress to stay healthy.