US Payrolls Revised Lower Every Month in 2023

A "now hiring" sign is displayed outside a resale clothing shop in Los Angeles on June 2, 2023. (Mario Tama/Getty Images)

Is the U.S. economy and labor market weaker than the government is reporting?

In recent weeks, federal agencies have announced revisions to various economic metrics, from gross domestic product to monthly jobs data.

While typically there isn’t anything unusual about revisions, the frequency and size of some of the changes have turned heads in economic circles, leading to speculation that the country may not be as strong as reported.

The labor market added 187,000 jobs in August, while the unemployment rate unexpectedly shot up to 3.8 percent, according to the Bureau of Labor Statistics (BLS).

But while the U.S. economy has added jobs for 39 consecutive months, a notable component of the latest report was the revisions.

The change in total payrolls for June was adjusted to 105,000—down by 80,000. The initial estimate showed that the labor market had created 209,000 jobs. Because of the revision, June represented the worst jobs report since December 2020.

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July employment figures were revised to 157,000—down by 30,000.

In the first seven months of 2023, employment revisions have totaled 355,000. The country hasn’t witnessed six consecutive months of downward revisions outside of recessions since the peak of the 2007 housing bubble.

“Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors,” the BLS states.

Peter Schiff, the chief economist and global strategist at Euro Pacific Capital, says this is “not random.”

“Every 2023 #jobs report has been revised significantly lower,” he wrote on X, formerly known as Twitter.

“Seven downward revisions in a row is not random. The Labor Department has been consistently overestimating job growth. No doubt that today’s August 187,000 job number will also be revised significantly lower next month.”

The BLS confirmed in a separate report that the U.S. jobs market was slower than reported in the 12 months ending in March.

According to the annual benchmark review of payroll data, U.S. employment growth was revised lower by 306,000, representing roughly 25,000 fewer net jobs per month in this 12-month period.

Private-sector job creation was adjusted lower by 358,000, while government payrolls were revised up by 52,000.

The overall benchmark revision totaled negative 0.2 percent, below the decade average of 0.1 percent.

“The deterioration is large. The significantly large revisions make me nervous. It distorts the kind of view we have and how much we’ve slowed over the last several-plus months,” CNBC on-air editor Rick Santelli said.

However, economists at the Federal Reserve Bank of St. Louis claim that “deviations should average out to zero over time.”

“In short, revisions to the monthly payroll employment estimates may be useful guides to the near-term strength or weakness of the economy, but should be considered within the context of overall economic conditions,” they wrote.

Will the August payrolls be revised lower, too?

Slower GDP Growth

The national economy expanded by 2.1 percent in the second quarter, down from the 2.4 percent initial estimate, the Bureau of Economic Analysis (BEA) reported on Aug. 30. Polled economists didn’t anticipate revisions.

Personal consumption’s contribution to the final gross domestic product (GDP) print inched slightly higher to 1.14 percent from 1.12 percent.

Fixed investment was adjusted lower to 0.66 percent from 0.83 percent.

Net exports were changed to negative 1.26 percent from negative 1.28 percent, and imports were lowered to 1.04 percent from 1.16 percent.

Government consumption rose to 0.58 percent from 0.45 percent, meaning that if this metric were unchanged, the second-quarter GDP growth rate would have been just under 2 percent.

The final second-quarter GDP estimate will be published on Sept. 28.

Gross domestic income (GDI)—an alternative tracker of economic growth—rose at an annualized clip of 0.5 percent, suggesting that growth is below the long-term trend.

“Despite the modest downward revisions, the second estimate of Quarter 2 GDP continued to show that economic growth expanded at an above-trend pace last quarter, with all the strength concentrated within domestic demand (i.e., consumption, fixed investment, and government),” TD Economics stated in a research note.

“The acceleration in Quarter 2 business investment is perhaps most notable, reflecting direct and indirect forces related to federal subsidies for green technology, and the delayed post-pandemic recovery trends in the transportation sector.”

Federal Reserve Chair Jerome Powell has insisted that the U.S. economy needs to experience below-trend growth and softer labor markets to bring inflation back down to the central bank’s 2 percent target.

“Getting inflation sustainably back down to 2 percent is expected to require a period of below-trend economic growth as well as some softening in labor market conditions,” Mr. Powell said in his keynote address at the Jackson Hole economic symposium in August.

“Restrictive monetary policy has tightened financial conditions, supporting the expectation of below-trend growth.”

Despite the GDP changes, the U.S. economy has still expanded at a solid pace, with the country reporting four straight quarterly gains.

The streak might grow to five, as the Federal Reserve Bank of Atlanta’s GDPNow Model estimate suggests 5.6 percent growth in the third quarter.