Labor Market Adjustment Cuts Nearly One Million Jobs
The U.S. Department of Labor has issued a preliminary benchmark revision to its payroll data, revealing that job creation in the 12 months through March was overstated by about 911,000 positions. This adjustment suggests employment growth slowed much more sharply than earlier reports indicated.
The revised figures show nonfarm payroll gains averaging 71,000 jobs per month, far below the original estimate of 147,000. Economists had expected revisions in the range of 400,000 to one million jobs.
August Weakness Adds to Concerns
The announcement comes just days after the August employment report showed hiring nearly stalled and June’s job totals turning negative for the first time in more than four years. Taken together, the revisions and recent weakness point to a cooling labor market.
Industries Most Affected
Several key sectors are set for downward adjustments:
- Leisure and hospitality: 176,000 jobs cut from prior totals
- Trade, transportation, and utilities: 226,000 fewer jobs
- Professional and business services: 158,000 reduction
- Manufacturing: 95,000 jobs lost in revisions
- Government employment: 31,000 fewer positions
Method Behind the Revision
Each year, the Bureau of Labor Statistics (BLS) compares its monthly payroll survey to the more comprehensive Quarterly Census of Employment and Wages, which is drawn from unemployment insurance tax records covering about 95% of workers. The preliminary revision will be finalized in February, when the BLS updates historical data.
A significant factor in the downgrade was the “birth-death” model, which estimates job creation at new businesses and losses from closures. Economists noted that this model has overstated job growth, particularly as small firms face high borrowing costs and pressure from tariffs.
Policy Outlook
With labor market momentum proving weaker than earlier believed, analysts continue to expect the Federal Reserve to resume cutting interest rates next week, likely starting with a quarter-point move.
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