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Labor Department's 500K Downward Jobs Revision Puts More Pressure On Fed

Wayne Duggan

A new report from the U.S. Bureau of Labor Statistics suggests the U.S. economy created about 500,000 fewer jobs in 2018 and early 2019 than previously estimated.

What Happened

On Wednesday, the BLS cut its March 2019 estimate of total non-farm U.S. jobs by 501,000, a downward revision of about 0.3%.

Why It’s Important

The new numbers come at a time when investors are growing increasingly concerned about the health of the U.S. economy. The BLS cut to previous estimates is the largest such downward revision in the past decade.

The largest cut came to the Leisure and Hospitality segment, which was reduced by 175,000 jobs. The estimate for Professional & Business Services was cut by 163,000 jobs, while the Retail segment estimate was cut by 146,000 jobs.

The updated estimate says little about the current state of the U.S. economy, but it suggests job creation in 2018 and early 2019 was not as strong as previously thought. 

Economists say the revision suggests the U.S. economy created between 180,000 and 185,000 jobs per month in 2018 rather than the 223,000 new jobs previously reported.

Even at the low end of the revised estimates, the economy added an estimated 2.16 million jobs in 2018. The BLS reported the U.S. economy added 2.2 million new jobs in 2017.

The U.S. economy added 156,000 jobs in the month of July, according to the ADP National Employment Report.

The silver lining to the new BLS report is that U.S. personal income growth in 2018 was revised higher from 4.4% to 5.6%.

With the economy expanding and the unemployment rate at 50-year lows, wages tend to rise at this point in an economic cycle as demand for workers outpaces supply.

What’s Next

Investors will be watching the next ADP employment report for the month of August, which is expected on Sept. 5.

Investors will also be watching to see if the downward revisions to job growth and the new employment number will be enough to push the Federal Reserve to cut interest rates once more in September.

So far, fears over a slowing economy haven’t impacted investors’ appetite for stocks in 2019. The SPDR S&P 500 ETF Trust (NYSE: SPY) is up 16.3% year-to-date.

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