US Economy Adds Fewer Jobs Than Expected
The US economy added 911,000 fewer jobs than initial estimates had suggested in the year through March, according to preliminary data from the Labor Department. This routine annual report, a revision to payrolls data, showed that the jobs market had been growing at a slower pace than previously thought at the end of the Biden administration and in the first months of the Trump administration.
Impact on the Jobs Market
Economists had anticipated a large downward revision, but the weaker-than-expected figure bolstered concerns about the health of the world’s largest economy. The Federal Reserve is closely watching for signs of softness in the jobs market ahead of its meeting next week. The US central bank is expected to lower its benchmark interest rate after holding rates steady so far this year, as it weighs signs of a slowdown in the jobs market against fears that US President Donald Trump’s tariffs might reignite inflation.
Slowing Jobs Market
Last week, the Labor Department reported that employers added just 22,000 jobs in August, fewer than expected, while the unemployment rate ticked up from 4.2% to 4.3%. This data added to the picture of a slowing jobs market, reinforcing expectations that the US central bank will cut interest rates next week. The job growth revisions come at a politically fraught time for the Bureau of Labor Statistics, with President Trump having fired the head of the agency just weeks ago.
Political Implications
Analysts say the more recent troubles in the job market are partly due to the president’s sweeping changes to tariff and immigration policy, which economists have consistently warned would hurt the economy. However, the Labor Department revisions, which encompass part of the Biden administration, could serve as a boost for President Trump, who has pushed back against claims that his policies are fueling weakness in the jobs market. The White House press secretary, Karoline Leavitt, stated that "President Trump was right: Biden’s economy was a disaster and the BLS is broken," and reiterated calls for Jerome Powell, the chair of the Fed, to "cut the rates now".
Market Reaction
Wall Street largely looked past the jobs growth revisions, with the S&P 500 index holding steady in early trading on Tuesday. However, investors remain on edge, with fresh inflation data set to be released on Thursday. This could bring fears of stagflation – a situation in which economic growth slows while consumer prices rise – to the forefront. While a deteriorating jobs market "should make it easier for the Fed to cut rates this fall, it could also throw some cold water on the recent rally," said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
Conclusion
The Labor Department’s revisions were broad-based, with particularly large adjustments in services sectors including leisure and hospitality. With services being the last bastion of employment growth, this does not bode well for the overall health of the labor market. As Bradley Saunders, North America economist at Capital Economics, noted, "this does not bode well for the overall health of the labour market." The US economy’s slower-than-expected job growth has significant implications for the country’s economic health and the Federal Reserve’s decision-making process. As the economy continues to evolve, it is essential to monitor the jobs market and inflation data to understand the potential impact on the US economy and global markets.
