Benchmark Revision Reveals US Jobs Market Far Weaker, Fueling 'Labor Recession' Concerns
Preliminary government revision trims nearly 911,000 payrolls through March and follows weak August jobs report as economists warn of a broad economic downturn
A preliminary government benchmark revision released this week shows the U.S. economy added far fewer jobs in the year through March than previously reported, a change that economists say deepens concerns the country is already in a "labor recession" and could push the wider economy into a downturn.
The Bureau of Labor Statistics' preliminary annual benchmark revision indicates payrolls for the year through March may be about 911,000 lower than initially estimated — roughly 76,000 fewer jobs per month. The revision comes as other official data pointed to a weakening labor market: the Bureau reported just 22,000 jobs added in August, well below Wall Street's forecast of about 75,000, and June's figure was revised to a net loss of 13,000 jobs.
Economists said the combined signal from the benchmark revision and the soft monthly payrolls points to a substantial loss of momentum in hiring. "A labor recession is already underway," Mark Zandi, chief economist at Moody's Analytics, told Business Insider. Zandi warned that continued deterioration in employment could spill over into the broader economy, noting that layoffs have surged and are "already up 140 percent from a year ago." He cautioned that additional downward revisions or rising job cuts could tip the economy "over the edge," using a metaphor of the economy clinging to the lip of a cliff.
Federal Reserve Chair Jerome Powell has signaled growing concern about the labor market and indicated that weaker employment conditions are among factors the central bank will weigh when considering reductions to its benchmark interest rate. Still, some economists say prospective rate cuts may have limited near-term impact. "A lot of the benefit of the lower rates is already in the market because investors anticipated the rate cuts," Zandi said.
Worker sentiment reinforces the data's troubling picture. A New York Federal Reserve survey found respondents believe there is only about a 45 percent chance of finding another job if they were to become unemployed, a decline of nearly 6 percentage points from the prior month and the lowest reading in the survey's history. "Consumers are feeling down about job-finding opportunities, and those feelings are wholly appropriate," said Elizabeth Renter, a senior economist at NerdWallet, in comments reported by CNBC. She added that with employers hiring less, many workers are "job-hugging," reluctant to leave current positions because opportunities appear limited.
The weakness is not uniform across the economy. Zandi has previously cautioned that more than half of U.S. industries are cutting jobs and that roughly a third of states are already in or at high risk of recessionary conditions. Those industry- and region-specific stresses could accelerate if firms scale back staffing in response to slowing demand.
Policymakers face a delicate task. The Fed has sought to balance cooling inflation without precipitating a broad employment collapse; the new payroll revision complicates that calculus by revealing the labor market may have been softer for longer than official monthly estimates suggested. Financial markets have largely priced in expectations of eventual rate cuts, which influences the transmission of monetary easing to the real economy, but economists warn that expectations alone may not restore hiring if underlying demand weakens further.
Business groups and some corporate leaders have already signaled caution. Hiring freezes, targeted layoffs and slower pace of new openings have been reported across sectors in recent months, consistent with the downward revisions to payroll data. Observers said the latest benchmark adjustment will prompt closer scrutiny of upcoming labor reports and could alter both corporate staffing decisions and central-bank policy deliberations.
The Bureau of Labor Statistics typically completes an annual benchmark revision to align monthly payroll estimates with more comprehensive state unemployment insurance records; the agency plans to finalize benchmark adjustments later in the year. Until then, economists and policymakers will watch monthly employment, unemployment claims and other labor indicators for signs of stabilization or further decline.