The U.S. job market might face significant losses as economists predict up to one million job cuts due to employment data revisions.
Predicted Job Losses
Economists from Goldman Sachs and Wells Fargo expect a significant drop in U.S. job numbers following the revision of employment data for the past year. Goldman Sachs suggests that the actual number of jobs could be up to one million lower than previously reported. Wells Fargo forecasts a downward revision of about 600,000 jobs, or roughly 50,000 jobs per month. JPMorgan Chase is more conservative in its estimates, projecting a decrease of around 360,000 jobs.
Federal Reserve Response
If the labor market has been weaker for longer and more intensely than originally thought, it might change the entire narrative for Federal Reserve Chair Jerome Powell's upcoming speech in Jackson Hole, Wyoming. Investors will be keenly listening to his statements to decipher when and by how much the Federal Reserve will start cutting interest rates.
Data Revision Process
The Bureau of Labor Statistics (BLS) conducts these annual revisions. They compare their initial payroll estimates with the Quarterly Census of Employment and Wages (QCEW), which is a more accurate but slower way of counting jobs, relying on state unemployment insurance records. The latest QCEW data, released in June, already hinted that the job market might not be as strong as previously thought. According to current BLS data, 2.9 million jobs were added between March 2023 and March 2024, averaging 242,000 jobs per month. However, if the predicted revisions come true, those monthly gains could drop to just 158,000 jobs.
Not all economists are convinced of such a severe revision. Some think the revision might end up on the lower side of estimates, thanks to the usual lag in reporting.
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