The Labor Department lowered its estimate of total payroll employment in March by 306,000 and of private employment by even more on Wednesday, indicating that the sweltering U.S. job market was not quite as scorching as previously reported for the year through March.
The reduction, the first of two annual “benchmark” revisions conducted by the department as it incorporates more data to provide as accurate a reading of the U.S. employment situation as possible, indicates that government and private employers employed approximately 155.17 million people in March, a decrease from the previously reported 155.47 million. The revision represented a total decrease of approximately 0.2%.
The private sector employment growth estimate was revised down by 358,000, or 0.3%, from the previous estimate. The revision increased government employment by 52,000, or 0.2%.
Nancy Vanden Houten, the chief U.S. economist at Oxford Economics, remarked, “The downward revision suggests only slightly cooler labor market conditions.”
According to her estimation, the revision reduces the average monthly job growth from April 2022 through the most recent report for July 2023 from 332,000 to 313,000. This is nearly double the average monthly growth rate in the decade preceding the coronavirus pandemic.
The transportation and storage industry, which has flourished since the pandemic, experienced the largest downward revision, tallying 146,400 positions, or approximately 2.2%. This was followed by a decrease of 116,000 in professional services, or 0.5%, and 85,000 in private education and health services, or 0.3%.
In addition to government employment, other sectors saw upward revisions, including wholesale trade (up 47,700 or 0.8%), financial services (up 47,000 or 0.5%), retail trade (up 38,200 or 0.2%), and construction (up 30,000 or 0.4%).
As they contemplate whether to raise interest rates at their meeting on September 19-20, Federal Reserve officials may be pleased to learn that the labor market is somewhat weaker than previously believed. Since March 2022, the U.S. central bank has increased interest rates by 5.25 percentage points to combat inflation, and many officials, including Fed Chair Jerome Powell, have stated that a deterioration of the labor market will likely be required to return inflation to the 2% target set by the central bank.
Vanden Houten stated that the revision is unlikely to significantly alter the debate.
She wrote in a note, “Fed officials may view downwardly revised data, along with moderating wage growth, as evidence that their policy decisions are having the desired effect.” Recent comments from Fed officials and the minutes of the July FOMC (Federal Open Market Committee) meeting indicate that Fed officials will hold rates constant at the upcoming September policy meeting, despite the fact that risks favor additional interest rate hikes.
In February 2024, when it releases the employment report for January 2024, the Labor Department will publish its final benchmark revision for March 2023 employment levels. Typically, final revisions are relatively similar to the initial draft.
In the benchmark revision published in February of this year, the department revised its estimate for total employment in March 2022 upward by 568 thousand.