Turns out hiring wasn’t nearly as strong in 2018 and early 2019 as the government initially reported — by about a half-million jobs.
The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009.
The newly revised figures indicate the economy didn’t get a huge boost last year from President Trump’s tax cuts and higher federal spending. They also signal the economy is a bit weaker than previously believed and could give the Federal Reserve even greater reason to cut interest rates in September.
“This makes some sense, as the 223,000 average monthly increase in 2018 seemed too good to be true in light of how tight the labor market has become and how much trouble firms are said to be having finding qualified workers,” said chief economist Stephen Stanley of Amherst Pierpont Securities.
The average 223,000 monthly increase in employment in 2018 — the strongest in three years — could be trimmed to 180,000 to 185,000, economists estimate.
Fewer jobs were created in restaurants, hotels, retailers and professional business services. Leisure and hospitality employment was reduced by 175,000, business services by 163,000 and retail by 146,400.
New data reveals slower employment growth (we extrapolated revisions) going into 2020.
— Gregory Daco (@GregDaco) August 21, 2019
This annual “benchmark” revision is much larger than is typically the case. The preliminary revision in 2018, for example, showed the economy produced 43,000 additional jobs than initially reported.
The government’s employment report each month is compiled from a survey of almost 700,000 work sites, but the BLS updates its numbers every year after rechecking its results against company tax records. These record are not immediately available.
In most years the revisions are quite small, reflecting about one-tenth of 1% of total nonfarm employment and attesting to the accuracy of the BLS survey.
Yet the current revision reflects an adjustment of 0.3%, although the number is not final. The 2018 revision was eventually changed again to -1,000 from 43,000. The final results will be released in February 2020.
What remains to be seen is whether the lower employment figures end up showing that wage growth was a lot stronger in the past year than government figures now tell us.
Hourly wage growth has topped out at just slightly higher than 3% a year, a surprisingly modest increase given that the unemployment rate stands near a 50-year low of 3.7%. Tight labor markets usually lead to annual wage increases of up to 4%.