Jobs data raise questions over Fed's interest rate cut delay

The recent massive downward revision of jobs created in the United States in a one-year period prompted political reaction and also raised questions on whether the Federal Reserve has waited too long to cut interest rates.

The US government reported on Aug 21 that the economy created 818,000 fewer jobs from April 2023 through March 2024. It was the largest revision to federal jobs data in 15 years, according to the Bureau of Labor Statistics, or BLS.

The revision represented a total downward change of about 0.5 percent, meaning that monthly job gains during the period averaged roughly 174,000, compared with the previously reported figure of 242,000.

If the number remains in place through a final revision in February, it would be the largest downward revision since the 902,000 downgrade to employment in March 2009.

"What you're seeing is an echo of the large (pandemic-era) shocks that we're just working our way through," said Joe Brusuelas, chief economist at RSM US, The Washington Post reported.

The administration of US President Joe Biden has maintained that the job market is still robust in the United States, with unemployment from April 2023 through March 2024 averaging less than 4 percent.

"This preliminary estimate doesn't change the fact that the jobs recovery has been and remains historically strong, delivering solid job and wage gains, strong consumer spending and record small business creation," Jared Bernstein, chair of the White House's Council of Economic Advisers, said in a statement.

Former US president Donald Trump and the 2024 Republican presidential candidate, however, seized on the revised BLS number at a campaign rally in North Carolina on Aug 21.

He accused both his Democratic opponent in the November election, Vice-President Kamala Harris, and Biden of "fraudulently manipulating job statistics to hide the true extent of the economic ruin that they've inflicted on America".

Jodey Arrington, a Texas Republican and the chair of the GOP-controlled House Budget Committee, said in an Aug 21 statement, "The economy is the top issue in this presidential race and the recent downwardly revised job numbers taken together with persistently high prices and interest rates (belies) a much weaker Biden-Harris economy than we were led to believe."

The revision also could change the Fed's rate-cutting timetable.

"It wouldn't be a stretch for the Fed to assume that recent job growth is also being overstated, strengthening its decision to shift attention from inflation toward the labor market," said Ryan Sweet, chief US economist at Oxford Economics.

Agencies contributed to this story.