The Bureau of Labor Statistics slashed reported job growth for the year through March 2025 by even more than Wall Street expected. The question markets are puzzling over is whether that could play into a supersize Federal Reserve rate cut next week — if inflation data cooperates.
The S&P 500 traded slightly higher in early Tuesday stock market action, with shares of UnitedHealth Group jumping as the embattled Dow Jones health care giant continues to rebound as it sticks by lowered earnings estimates and touts future Medicare Advantage bonus payments.
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How Did Job Growth Just Get Slashed By 50%?
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, called the downward revision to job growth "gargantuan." It implies that monthly payroll growth was 73,000 in the year through March, down from a reported 149,000.
Tombs thinks the revision may be overstated in two ways. First, the revised data is based on unemployment insurance records that are incomplete. Once late filing of those records is accounted for, the downward revision may be closer to 700,000 than the 911,000 figure cited by BLS on Tuesday.
Secondly, he says, "Some of this downward revision is likely due to unauthorized workers being effectively taken out of the numbers."
Tombs explains that unauthorized workers do not have unemployment insurance numbers, "so they are completely excluded" from the Quarterly Census of Employment and Wages. By contrast, the monthly jobs report is based on a survey of employers that include all workers in their payroll numbers.
Finally, Tombs says that the revision is a reflection of overinflated estimates by the BLS "faulty birth-death model."
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S&P 500 Edges Higher
Markets didn't initially react to the negative job revisions in a big way, but the S&P 500 edged slightly into positive territory. The 10-year Treasury yield initially fell, then moved slightly higher to 4.07%. That appears to reflect a possibility of more aggressive Federal Reserve rate cuts, which could offset economic weakness.
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BLS Revisions
BLS said employers added 911,000 fewer nonfarm payroll positions than previously reported in the year through March 2025.
This past February, BLS released its benchmark revisions showing that job growth over the year through March 2024 had been revised down by 589,000, or an average of 49,083 per month.
The preliminary benchmark revisions just provide a figure of how far March 2025 employment data diverged from reality. We won't get a clearer picture until next February's final release about whether the downward revisions were spread out fairly evenly, or if more of the cuts came following Election Day, in advance of the ramping up of Trump tariffs and tighter immigration policy.
BLS Preliminary Benchmark Revisions
The official monthly Bureau of Labor Statistics employment reports are based on a very broad survey of employers, but they still come with a margin of error. That's in part because new firms that aren't surveyed pop up, while other firms die off and don't respond to the survey.
BLS eventually updates the data based on a comprehensive Quarterly Census of Employment and Wages (QCEW). Now that the QCEW through the first quarter of 2025 is being published, BLS will provide an early estimate of how it expects to revise job growth in the year through March.
Economists are generally expecting more bad news for the job market. Deutsche Bank economists expect the reported average monthly job gain of 146,000 to be slashed by 50,000 to 60,000 per month.
Treasury Secretary Scott Bessent said on Sunday that jobs could be revised down by roughly 800,000 over the 12-month period.
Federal Reserve Rate-Cut Outlook
It's not clear how much the Fed will care about the revisions, since the data through March is relatively stale by now and not reflective of the current job market. Still, an argument could be made that the Fed would have started cutting already if they knew job growth was even weaker than it appeared.
Ahead of the BLS revisions, markets are fully pricing in a quarter-point Fed rate cut at next week's policy meeting. CME Group's FedWatch tool shows 8% odds of a 50-basis-point rate cut. Those odds could start to rise with big downward revisions in past job growth. However, this week's inflation data also looms large. The producer price index is out Wednesday at 8:30 a.m. and the consumer price index comes out at the same time on Thursday.
