The labor market seemed to defy gravity last year, generating more than 200,000 jobs a month despite a historically low unemployment rate that made it harder for employers to find workers.
Turns out job growth wasn’t as robust as it appeared.
The Labor Department revised down total job gains from April 2018 to March 2019 by 501,000, the agency said Wednesday, the largest downward revision in a decade.
The agency’s annual benchmark revision is based on state unemployment insurance records that reflect actual payrolls while its earlier estimates are derived from surveys.
The large change means job growth averaged 170,000 a month during the 12-month period, down from the 210,000 initially estimated, according to JPMorgan Chase.
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Employment in several industries was revised down especially sharply. Payrolls dropped 175,000 in leisure and hospitality, and 146,000 in retail – two bellwether service sectors that depend heavily on consumer spending, the economy’s main engine.
Employment also fell by 163,000 in professional and business services and 69,000 in education and health services.
Some industries saw their job figures revised up modestly, with a gain of 33,000 in information – including movies, broadcasting, publishing, telecommunications and some technology services – and 20,000 in financial activities.
The revised payroll data is more in line with what economists had expected at the start of 2018 in light of the roughly 4% unemployment rate that signaled fewer available workers, and an aging population.
“The mystery was how the economy is continuing to get 200,000 jobs a month,” says economist James Marple of TD economics. “It’s less of a mystery now.”
The new figures also could have political implications. President Trump regularly touted last year’s blockbuster job figures, which many economists traced to the federal tax cuts and spending increases he spearheaded. The economy did grow 2.9% last year, matching its best performance since the 2007-09 recession. But growth has slowed this year and the jobs revisions indicate the economy may have had less momentum than believed heading into 2019.
“It’s a moderate economy,” says Joe Naroff, chief economist of Naroff Economic Advisors. “It’s not a strong economy.”
Now, many economists are forecasting a recession by next year, largely because of Trump’s trade war with China and a slowing global economy.