Job growth hasn’t been as strong as we thought. But it’s still growth.
Job growth hasn’t been as strong as we thought. But it’s still growth.
Hear that? That’s the economic equivalent of squealing brakes and screeching tires from the Bureau of Labor Statistics — the government agency that told us, month after month, that hundreds of thousands of jobs were being added to the economy.
On Wednesday, the BLS said that fewer jobs were created than we thought between March of last year and March of this year. Like, 818,000 fewer.
Such updates are called payroll revisions, and they’re a normal part of the BLS process. They’re just not normally so big.
The job numbers the bureau releases every month are based on surveys, explained Elise Gould, a senior economist with the Economic Policy Institute.
“They survey payroll employment. They survey a series of businesses … and they put that into their initial jobs report that happens the first week of the following month,” she said.
But sometimes companies change their plans and hire fewer people than they said they would. Or they don’t bother getting back to the folks at the BLS. “They don’t get all the responses in, so they have to estimate based on the responses that they have,” Gould said.
So down the line, the BLS revises those estimates. In this case, actual job growth was almost 30% lower than originally reported. Still, 2.1 million more jobs! But, the largest revision since 2009.
“It sounds scary,” said Chris Rupkey at fwdbonds.com. “But you want to think of it as if the jobs were really not there in the first place.”
Rupkey said he saw this coming. Because there are two surveys, one of employers as we’ve described, and one of employees. And they didn’t line up.
“So you have one survey, the payroll jobs, saying 2.9 million, while the household survey says 600,000,” he said.
That doesn’t worry Frank Fiorille from the payroll company Paychex. After all, gross domestic product and consumer spending did fine without those “phantom jobs.” And the job market itself?
“It’s not as robust as maybe was first reported, but I still think it’s a pretty healthy number,” he said.
Fiorille said the revision does make the Federal Reserve’s next move easier to predict: “It probably just means more certainty in a rate cut,” he said.
By the way, nobody is really certain why this revision is so big. Some had guesses, but that’s all they are. Nevertheless, the economy is still adding jobs — 114,000 in July. That’s a good sign we haven’t hit recession territory.
CORRECTION (Aug. 23, 2024): A previous version of this story misidentified the speaker of one quote.
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