Government revises employment data: Private job loss at 306,000.
U.S. Employment Growth Revised Lower Than Expected
The latest data reveals that U.S. employment growth over the past year has been weaker than previously reported by the federal government. The Bureau of Labor Statistics (BLS) recently published its annual benchmark review of payroll figures, covering the 12 months ending March 2023. The report shows a revision of 306,000 jobs lower, indicating approximately 25,000 fewer net jobs added per month during this period.
Private non-agricultural payrolls were revised down by 358,000, while government payrolls saw an upward revision of 52,000.
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The preliminary benchmark revisions affected various sectors, with most experiencing lower job growth. Transportation and warehousing saw a decrease of 146,400 jobs, professional and business services decreased by 116,000, private education and health services decreased by 46,000, and manufacturing decreased by 43,000. The “other services” category saw a decline of 63,000 positions. On the positive side, retail and wholesale trade job gains were revised higher by 38,200 and 47,700, respectively, and construction positions were adjusted upward by 30,000.
Overall, the benchmark revision amounted to a negative 0.2 percent, according to the BLS. This is higher than the average adjustment of 0.1 percent over the past decade, with a range of negative 0.3 percent to 0.3 percent.
Revisions have played a significant role in monthly job reports, as employment gains have consistently been revised lower throughout this year. The July jobs report revised down the May and June employment gains by a combined 49,000. This marks the first time since 2007, during the housing bubble peak, that the U.S. economy has seen six consecutive months of downward revisions outside of recessions.
It’s important to note that the current preliminary revision will not impact existing employment numbers.
Putting Out the Fire
The U.S. labor market has been on fire since 2021, with the country recovering all jobs lost during the pandemic, a historically low unemployment rate of 3.5 percent, and significant nominal wage growth. However, as the Federal Reserve’s higher interest rates begin to affect the national economy, signs of cooling off are emerging in the labor market. Mark Zandi, the chief economist at Moody’s Analytics, points out that job growth has been slower than estimated, according to the BLS benchmark revisions. The revisions suggest that average monthly job growth in the year ending in March is around 300,000, and less than 200,000 since then. While still strong, the pace is slowing.
The July job report showed a figure below the monthly average gain of approximately 300,000 over the past 12 months, marking the lowest number since 2020.
The Department of Labor’s Diffusion Index, which measures the percentage of industries adding jobs, dropped to 57.2 in July from 72.2 a year ago (anything above 50 indicates expansion). The manufacturing component, monitoring 72 industries, also decreased to 53.5 from 67.4 in July 2022.
Temporary work employment has also eased, reaching a two-year low with a decline of 22,000 jobs in July and a total decrease of about 205,000 since the peak in March 2022. Economists consider this a leading indicator of a cooling labor market, as temporary staff are typically the first to be let go when growth slows or declines.
“The U.S. economy is expected to grow very little in 2023. This would lead to a jump in unemployment to as high as 4.6 percent, according to the Federal Reserve,” said Jill Gonzalez, a WalletHub analyst. “Both of these things would be signs of the Fed continuing to try and get a handle on inflation. If this ‘worst-case scenario’ comes true, it could mean that mill
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