Overestimated growth by 800,000? U.S. employment statistics face significant revisions for the second consecutive year

The annual employment growth in the United States as of March this year may not be as strong as the official data currently indicates.

Economists from several institutions predict that the upcoming benchmark revision from the U.S. Bureau of Labor Statistics (BLS) may significantly lower the employment figures by nearly 800,000, marking the second consecutive year of substantial revisions for this data.

Although this revised data reflects the employment situation at a certain point in the past, such a large downward adjustment would indicate that the cooling momentum of the U.S. labor market began much earlier than the hiring slowdown observed this summer, providing more support for expectations of a series of interest rate cuts by the Federal Reserve. The market widely expects the Federal Reserve to cut rates by 25 basis points at next week's meeting.

Meanwhile, the employment data facing significant revisions for the second consecutive year may again provoke President Trump's criticism of the accuracy of BLS data. Previously, Trump has expressed dissatisfaction with the issue of data revisions multiple times.

Data May Face Significant Revisions for the Second Consecutive Year

According to predictions from economists at Wells Fargo, Comerica Bank, and Pantheon Macroeconomics, the preliminary benchmark revision data that the BLS will release this Tuesday may show that the total number of jobs as of March this year is nearly 800,000 less than the current estimate, equivalent to an average monthly decrease of about 67,000 jobs. Predictions from Nomura Securities, Bank of America, and Royal Bank of Canada are even more pessimistic, suggesting that the downward revision could approach 1 million.

Comerica's Chief Economist Bill Adams stated:

“The significant downward revision of employment growth through March 2025 may have a direct impact on monetary policy that is less than the revisions to recent months' data, but it lays the groundwork for our understanding of the macroeconomic context. All else being equal, a downward revision in employment growth increases the pressure on the Federal Reserve to ease policy.”

Federal Reserve Governor Christopher Waller also expects the benchmark revision to reduce average monthly job growth by about 60,000. Notably, Waller voted in favor of a rate cut at the July Federal Reserve meeting, while most officials chose to keep rates unchanged at that time.

Although this revision will not change the market's understanding of the current labor market situation, it suggests that the hiring slowdown observed in recent months actually began earlier.

This revision may also carry political implications. Samuel Tombs, Chief U.S. Economist at Pantheon Macroeconomics, stated:

“This mainly reflects the job creation situation before Trump's term. Therefore, he can argue that this indicates the economy he inherited was actually much weaker than we all imagined.”

A month ago, an unusually large downward revision in monthly employment data prompted a strong reaction from the White House and led Trump to fire the head of the BLS. He expressed dissatisfaction not only with the monthly revisions but also criticized last year's preliminary benchmark revision, which was the largest since 2009.

What Are the Differences Between the Two Statistical Standards?

The BLS conducts a benchmark revision every year, comparing the wage levels in its monthly employment report with a more accurate but later-released data source—the Quarterly Census of Employment and Wages (QCEW). The QCEW is based on unemployment insurance tax records from each state and covers nearly all jobs in the United States.

In recent years, monthly wage data has often shown stronger employment growth than QCEW data. Some economists attribute this discrepancy in part to the so-called "birth-death model," an adjustment made by the BLS to estimate the net number of new businesses, which has become more difficult since the pandemic. Other views suggest that immigration issues are another reason for the discrepancy. The monthly wage report does not inquire about citizenship, while the unemployment insurance records on which the QCEW report is based cannot be accessed by undocumented immigrants.

Ultimately, economists and policymakers will use this preliminary benchmark data to assess the true pace of the labor market slowdown while awaiting the final revised data for 2025, which will be released in February next year. Carrie Freestone, an economist at the Royal Bank of Canada, stated:

"If I see significant revisions to last year's data, that will tell me what a new 'starting point' is."

However, she also emphasized that what Federal Reserve officials are most concerned about is the current momentum. Freestone said:

"I think the most worrying fact for Federal Reserve officials is that we are losing momentum—the labor market has likely reached a turning point."