US job growth in year through March far lower than estimated

US employers added far fewer jobs than originally reported in the year through March, the labour Department said on Wednesday, underscoring the growing concerns the Federal Reserve has about the health of the labour market as it gears up to start cutting interest rates in September.

The department’s estimate for total payroll employment for the period from April 2023 to March 2024 was lowered by 818,000. The revision represented a total downward change of about 0.5% and means that monthly job gains during the period averaged roughly 174,000, compared to the previously reported figure of 242,000.

The sharply lower number is the first of two “benchmark” annual revisions undertaken by the department as it collects more accurate data only available in the months after it publishes the monthly payrolls report.

If the tally holds through the final revision in February, it would be the largest downward revision since the 902,000 reduction to employment in March 2009.

It also chimes with the view of some economists that data-gathering issues mean the strong job gains previously reported have been systematically overestimated.

Private employment growth was revised down by 819,000, or 0.6% below what had been previously estimated by the department. Government employment was basically unchanged.

The professional and business services category saw the biggest reduction of jobs, shedding 358,000, or 1.6%, from the prior estimate, followed by leisure and hospitality at 150,000 jobs, down 0.9%. The hard-pressed manufacturing sector saw a reduction of 115,000 jobs, also down 0.9%.

The few sectors that saw upward revisions included private education and health services, up 87,000, or 0.3%; transportation and warehousing, up 56,400, or 0.9%; and utilities, up 1,700, or 0.3%.

The revisions suggest government and private employers had about 157.3 million workers on their books in March on a seasonally adjusted basis, down from about 158.1 million as previously reported.

labour Department data will continue to reflect the original estimates until the final benchmark revision is published in February 2025. Final revisions are typically not far off the preliminary ones.

“This is a noticeably larger than a normal revision ... it wouldn’t be a stretch for the Fed to assume that recent job growth is also being overstated, strengthening its decision to shift attention from inflation toward the labour market,” said Ryan Sweet, chief US economist at Oxford Economics.

Fed policymakers could factor in the indication that the job market was softer than previously thought as they weigh the pace of rate reductions after the initial lowering of borrowing costs widely expected at their Sept. 17-18 policy meeting.

The central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for more than a year, having raised it by 525 basis points in 2022 and 2023 to quash high inflation.

But with inflation now in touching distance of the Fed’s 2% target rate, attention has turned to making sure that the lagged effects of a prolonged period of borrowing costs does not derail a labour market which had been seen as gradually cooling.

Weaker-than-expected payrolls data for July heightened fears the Fed may have waited too long to begin cutting rates, as the unemployment rate rose to a post-pandemic high of 4.3%.

However, other data since then, including weekly jobless claims, have suggested an orderly labour market slowdown remains in place.

In last year’s second benchmark revision, released this past February, the department revised down its estimate for total employment in March 2023 by 40,000.

Separately, US Treasury yields drifted lower on Wednesday as the interest rate outlook continued to point to the Federal Reserve’s easing cycle likely starting next month, with investors looking to Fed Chair Jerome Powell’s remarks later this week for clues about the size of the potential rate cuts this year and next. A report from the Bureau of labour Statistics on payrolls revisions for the April 2023-March 2024 period showed a reduction in jobs by 818,000, or 0.5% lower. This was on the higher end of market estimates, which had placed those revisions as high as one million.

The data overall solidified expectations of a rate move in September.

US 10-, 20-, and 30-year yields slid to two-week lows, while those on US two-year notes dipped to a one-week trough.