US non-farm payroll data revised significantly downward! But Wall Street is not afraid

According to the revised data from the U.S. Bureau of Labor Statistics, from April 2023 to March 2024, the U.S. economy added 818,000 fewer jobs than initially reported.

This employment revision falls within Goldman Sachs' estimate range of 600,000 to 1 million, and is the largest downward revision since 2009, when the Bureau of Labor Statistics lowered job growth by 824,000 positions.

This means that the U.S. economy added 2.1 million jobs from April 2023 to March 2024, lower than the initial report of 2.9 million jobs, with an average monthly increase of 178,000 jobs instead of the reported 246,000. ING economist James Knightley stated, "This suggests that the U.S. labor market is weakening further on an already weak footing."

Despite the significant downward revision in employment data, Wall Street is not panicking. Jamie Cox, managing partner at Harris Financial Group, said in an email, "While the number is shocking, job growth remains positive. If you were in favor of a rate cut in September, these data almost seal the deal for the Fed to cut rates."

Yardeni Research stated that the downward revision in employment data is another sign of the labor market returning to pre-COVID-19 trends, when an average of about 175,000 jobs were added each month.

Yardeni Research emphasized in a recent report that the reports used for data revisions by the Bureau of Labor Statistics exclude immigrants. Given that immigration trends in recent years have helped drive job market growth, this is significant.

Regarding unemployment insurance, Yardeni Research stated, "We note that immigrants and new entrants to the labor force are unlikely to apply (or qualify)," as indicated by the unemployment insurance data. "This suggests that the labor market is stronger than this data suggests," Yardeni Research noted.

Yardeni Research also added that these data are "old news" and that employment data has been strong since March, despite some fluctuations in July.

"Since then, we have accumulated several months of data, and we expect the August nonfarm payrolls report to rebound after the July data declined due to Hurricane Berlyl, which hit Texas causing flooding and power outages," Yardeni Research stated.

Finally, the downward revision in employment growth data may imply an upward revision in worker productivity, further supporting the Fed's decision to cut rates.

"This could mean that productivity is being revised upwards," said Olivia Cross, economist at Capital Economics. "In either case, lower economic activity or stronger productivity growth will indicate that the Fed has more reasons to ease policy starting in September Yardeni Research stated that higher worker productivity could eventually become a positive factor for stocks by 2030.

"Given the strong momentum in the economy over the past two years, a smaller workforce will also support our theory of prosperity in the 2020s through increased worker productivity," Yardeni Research said