Jobs Data Could Be Off By 1 Million When Labor Department Revises Figures: What It Means For The Fed

An upcoming revision of official jobs data could affect the Fed's September decision on interest rates.

New data to be released by the U.S. Bureau of Labor Statistics on Wednesday could have up to 1 million jobs disappearing from official payroll data, analysts say.

The release will likely affect a much-anticipated speech by Fed Chair Jerome Powell at the Federal Reserve's annual Jackson Hole Symposium on Friday.

What's Happening? The Bureau of Labor Statistics releases a quarterly revision of monthly payroll data, which is based on state unemployment insurance tax records, covering more than 95 percent of U.S. jobs at the county, state and national level.

The Quarterly Census of Employment and Wages offers a more detailed and accurate version than monthly jobs data published by the bureau.

On Wednesday, the agency will release its report covering the first quarter of 2024, from January through  March.

Analysts have estimated that the revised jobs data for the period is actually a lot weaker than initially published, which would mean that the rate of hiring had actually begun to slow down by early 2024.

What Analysts Are Saying: While analyst expectations vary in numbers, all firms believe that the upcoming data will reflect a downward correction against previous figures, meaning that the actual number of jobs added was lower than what payroll data has shown so far.

According to a Bloomberg report, in recent years, data from the Quarterly Census of Employment and Wages has been weaker than what monthly jobs data has reflected. 

This is attributable to the fact that the bureau uses a model called the "birth-death model" to calculate the number of businesses opening and closing at any given month. The model could be outdated as the rate of businesses opening and closing might have changed after the COVID-19 pandemic. 

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Goldman Sachs analysts expect the correction to show jobs data published in the period March 2023 through March 2024 were off by between 600,000 to 1 million jobs.

JPMorgan Chase & Co. predictions are more moderate, putting the figure at about 360,000. For Wells Fargo it will be 600,000 weaker than originally estimated.

Data published so far shows the market added 2.9 million jobs in the 12 months through March 2024. 

A correction of 1 million would mean over a third of those jobs were not there to begin with. Such a correction would put the average at 158,000 a month, against the 242,000 that is accounted for by current data.

What It Means For Interest Rates: Jobs data is a major input into monetary policy decisions by the Fed. Promoting maximum employment is one of the two main directives of the agency's dual mandate, along with guaranteeing stable prices.

Powell has said recently that keeping a healthy job market continues to be the priority, according to Bloomberg.

A revision showing a weaker jobs market would take the agency towards reconsidering its stance on the current state of the economy. 

The latest jobs figure puts U.S. unemployment at 4.3%.

Meanwhile, conflicting economic data makes it harder to predict Fed behavior. Retail sales unexpectedly rose by 1% in July, while inflation for the month came in at 2.9%, below expectations of 3%.

Earlier this month, a weak jobs report for July triggered a stock market sell-off earlier as investors feared the slight uptick in unemployment was indicative of a recession. The S&P 500 lost over 6% in less than a week but has already recovered, along with other major indices.

Analysts are still largely predicting an interest rate cut of 0.25% in September's FOMC meeting and investors are expected to be looking at the new jobs data in an effort to predict Fed behavior ahead of the meeting.

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