Major Downward Revision to US Jobs Adds Pressure on FedMajorDownwardRevisiontoUSJobsAddsPressureonFed

US jobs growth was not as strong as initially believed early this year and for most of 2023, igniting a debate over the health of the labor market as Federal Reserve officials geared up for a pivotal summit in Jackson Hole. Updated figures from the Labor Department revealed on Wednesday that employers likely added 818,000 fewer jobs compared with official data between April 2023 and March 2024. That lowered overall employment at the time by 0.5%, the largest downward revision since 2009. While they will not be finalized until early next year, the revisions took some of the luster off an otherwise resilient period for the US economy amid elevated interest rates, inflation, and slower growth overseas.

A cooling labor market will serve as a troubling backdrop to this week’s Jackson Hole Economic Symposium. With expectations growing for a September rate cut of at least 25 basis points, investors will be watching whether Chair Jay Powell, who will give the keynote address on Friday morning, offers any clues on the central bank’s next move. Minutes for the Fed’s July meeting showed that officials discussed how payroll gains were likely overstated, while some policymakers saw a “plausible case” for an immediate rate cut. PGIM Fixed Income’s Weekly View from the Desk explores the Fed’s renewed focus on jobs, recent employment trends, and why labor market data could be the critical factor in determining the size of the next rate cut.