Last year, the labor market appeared resilient against the backdrop of soaring interest rates and inflation, with job growth soaring over 200,000 positions per month.

However, it turns out that the job market wasn’t as strong as it seemed.

On Wednesday, the U.S. Bureau of Labor Statistics made a significant downgrade to its job estimates for March 2024, reducing its count by 818,000 jobs—the most substantial correction in 15 years. This indicates that the job gains from April 2023 through March 2024 were actually 818,000 lower than originally reported.

As a result, instead of a healthy average of 242,000 new jobs each month during that period, the revised number reflects a solid, yet lesser, growth rate of 174,000 jobs per month.

This adjustment stems from the Quarterly Census of Employment and Wages, which relies on actual payroll data from state unemployment records, contrasting with earlier estimates based on monthly surveys. It’s important to note that this is a preliminary figure, and a final count will be available early next year.

The most significant drop was observed in the professional and business services sector, where estimates were cut by 358,000 jobs. This was followed by reductions of 150,000 in leisure and hospitality and 115,000 in manufacturing.

Will the Fed consider lowering interest rates?

The substantial decline in job growth shown by the new figures could influence the decisions of Federal Reserve officials regarding when and how much to reduce interest rates, especially as inflation is starting to decrease. Many economists predict that the Fed will lower rates by a quarter percentage point next month, though some had hoped for a half-point reduction after a preliminary jobs report showed only 114,000 job additions in July.

Wednesday’s adjustments suggest that the labor market might have been declining for a longer time than previously recognized.

Is the US currently in a recession?

While the revised figures do not automatically indicate a recession, economist Robert Frick from Navy Federal Credit Union noted that it implies we should anticipate more modest monthly job growth and increases pressure on the Fed to reduce interest rates.

On the flip side, some economists are skeptical of the new numbers. Goldman Sachs suggested that the revisions might be overstated by 400,000 to 600,000 jobs because unemployment insurance records do not account for immigrants without permanent legal status, who have significantly contributed to job growth in recent years.

Prior to Wednesday’s adjustments, estimates indicated that roughly 1 million jobs—about a third of all jobs added last year—likely went to newly arrived immigrants, a significant number of whom may not have entered the country legally, according to RBC Capital Markets.

Furthermore, Goldman pointed out that the Quarterly Census of Employment and Wages has historically been revised upward by an average of 100,000 jobs every quarter since 2019. Consequently, the Wednesday revision could potentially be much smaller when final numbers are released early next year.