US job totals will likely be revised down by 818,000 as Trump cries fraud

The U.S. labor market was softer than many economists assumed over the last year.

The Labor Department said on Wednesday that the number of jobs the economy added in the year ending March 31 was likely 818,000 less than what was reflected in the monthly reports during that period.

Wall Street analysts had projected that the department's preliminary revision would cut as many as 1 million jobs from the tallies reported between April 2023 and March 2024, when average monthly job growth was a robust 231,000 . The revised estimate slashes that by nearly 70,000 positions per month. The final revision won't be released until February 2025.

The new data could weigh on how Federal Reserve Chair Jerome Powell will approach the central bank’s upcoming meeting in September when policymakers are widely expected to lower interest rates for the first time since the height of the Covid-19 pandemic.

Some investors say the revision will bolster the argument for the Fed to reduce borrowing costs by as much as half-a-percentage point — or 50 basis points — double its standard move.

“If the labor market started to deteriorate sooner than 2024, I think there's a case that the Fed could indeed cut by 50 basis points in September,” LPL Financial’s Chief Economist Jeffrey Roach told POLITICO.

Markets will be watching closely for any sign of the Fed’s next move when Powell delivers a speech at the Kansas City Fed’s annual conference at Jackson Hole in Wyoming, on Friday morning.

According to the minutes from the Fed's July meeting, which were released on Wednesday afternoon , a "vast majority" of Fed policymakers observed that "if the data continued to come in about as expected, it would likely be appropriate to ease policy" at next month's meeting. What's more, "many" of the meeting's participants said the reported payroll gains might be overstated and may be lower than what's necessary to keep the unemployment rate flat.

The strength of the labor market in the face of high interest rates and inflation provided a major economic boost to President Joe Biden and Vice President Kamala Harris in their efforts to defeat former President Donald Trump in November. The low unemployment rate, solid jobs growth and steady wage gains have powered consumer spending and helped keep the economy from falling into a slump.

“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," Biden's Council of Economic Advisers Chair Jared Bernstein said in a statement.

But as Wall Street prepared for a major revision, Trump charged that the previous monthly figures were "fraudulent."

“There has been a report that the job numbers over the last period of time were fraudulent,” Trump said in a speech in Michigan on Tuesday. “That’s a terrible insult to our economy because we were seeing numbers that were OK, but not great, now we’re seeing numbers that — when they’re adjusted — are a disaster.”

The bureau’s preliminary revisions are a regular, annual occurrence. Sizable downward adjustments are common — the Labor Department shaved 514,000 jobs off the totals reported in monthly estimates at the height of Trump’s term. But the former president’s claims of fraud will amplify a commonly held perception that the economy is weaker than many metrics suggest.

July’s weak jobs report already doused some of that enthusiasm. Markets were roiled by the report, which many administration allies took as a sign that Powell had missed his window to lower rates without damaging the labor market. Wednesday’s revision is unlikely to shake that perception.

The “holistic view of the labor market already has this priced in,” said Guy Berger, director of economic research at The Burning Glass Institute. “The labor market has cooled. … This revision doesn't change it either way.”

Still, Powell in June said the strength of monthly payroll reports might be overstated . Fed Gov. Michelle Bowman echoed those comments earlier this week, saying the soft July report — which sent markets reeling — was likely negatively affected by Hurricane Beryl.

“The rise in the unemployment rate in July was largely accounted for by workers who are experiencing a temporary layoff and are more likely to be rehired in coming months,” she said.

What’s more, the data used by the Labor Department relies on unemployment insurance records, which means the revision is unlikely to account for many undocumented immigrants in the workforce. Goldman Sachs economists this week estimated that could result in “erroneously” revising as many as 500,000 working unauthorized immigrants out of the payroll estimate, according to a client note.

“The labor market hasn't somehow collapsed,” said Eric Wallerstein, a former Wall Street Journal reporter who’s now the Chief Markets Strategist at Yardeni Research. “If you're going to point to data from 2023 that it is collapsing, good luck with that.”