The U.S. Bureau of Labor Statistics (BLS) announced on Tuesday (9th) that the employment figures from April of last year to March of this year were overestimated by 910,000 jobs. This revelation has sparked widespread discussion in the economic community as the data revision may necessitate a reassessment of the economic situation and directly impact the Federal Reserve’s decision on whether or not to cut interest rates at next week’s meeting.
Before the latest revision, the average monthly job openings stood at 147,000, which was then revised down to 71,000. Industries with the largest annual adjustments included a decrease of 176,000 jobs in the hospitality sector, a decrease of 158,000 jobs in professional and business services, a decrease of 110,000 jobs in wholesale trade, a decrease of 126,000 jobs in retail, a decrease of 95,000 jobs in manufacturing, a decrease of 67,000 jobs in information, and a decrease of 51,000 jobs in other services.
Heather Long, Chief Economist at the nonprofit credit union Navy Federal, remarked on social media that this significant revision implies that the labor market was already quite weak before the tariff measures took effect and that the job market in 2024 had almost come to a standstill.
Last August, the BLS reported a reduction of 818,000 job vacancies. Long reminded that this annual revision process is routine and conducted by the BLS every year.
On the same platform, U.S. Treasury Secretary Benson also commented, stating that the job growth in 2024 was inflated by nearly 1 million workers, on top of an already reported downward revision of 577,000, resulting in an astonishing overestimation of 1.5 million in the job data from the previous administration.
He wrote, “President Trump inherited an economy far worse than reported, and he was correct in saying that the Federal Reserve was stifling economic growth with high-interest rates.”
The employment report for July released earlier this month also painted a grim picture, with job openings in the U.S. standing at 7.18 million by the end of July, the first time since 2021 that the figure fell below the number of unemployed (7.2 million). Long pointed out that this marks a turning point in the labor market.
The Federal Reserve is set to hold its meeting next week to decide on maintaining the current policy of interest rates. The central bank has raised rates 11 times between March 2022 and July 2023, accumulating a total of 100 basis points (1%), and then cut rates three times between September and December 2024 by a total of 100 basis points; the federal funds rate has remained unchanged at a high level since the beginning of this year.
Following the release of the new employment data, market predictions suggest an 88% probability that the Federal Reserve will decide to cut rates by 25 basis points at its meeting next Wednesday. Fed Chair Powell indicated last month that a rate cut decision might be made at the policy meeting on the 16th and 17th of this month due to the increased risks in the labor market.
Reuters reported that Barclays Bank and Bank of America have recently predicted that the Federal Reserve will cut rates by 25 basis points at each of the remaining meetings this year. Standard Chartered Bank, on the other hand, expects a 50 basis point cut, which is double its earlier forecast.
Andrew Hollenhorst, Chief Economist at Citigroup, told CNBC that if Federal Reserve officials had real-time access to the lowered employment figures, today’s rates would be even lower. He believes that the latest statistical reports support a rate cut but not a significant adjustment of 50 basis points.
Meanwhile, the FedWatch tool from the Chicago Mercantile Exchange (CME) also supports the Federal Reserve cutting rates at each of the three remaining meetings this year.
White House Press Secretary Karoline Leavitt stated on Tuesday that the significant downward revision of employment data by the BLS proves that President Trump’s prior call for a rate cut was correct. She asserted that just as the BLS had failed the American people, Powell’s rate cut actions were too sluggish, and he had run out of excuses and must cut rates.