Employment growth in the United States during the year ending March 2025 may have been significantly weaker than currently published government figures suggest, indicating that the labor market had already begun cooling well before the hiring slowdown observed this summer.
Economists at Wells Fargo & Co., Comerica Bank, and Pantheon Macroeconomics anticipate that the Bureau of Labor Statistics (BLS) will release preliminary benchmark revision data on Tuesday showing that March non-farm payrolls were nearly 800,000 jobs lower than current estimates, representing an average monthly reduction of approximately 67,000 positions. Meanwhile, analysts at Nomura Securities, Bank of America Corp., and Royal Bank of Canada project that the downward revision could approach one million jobs.
While this represents a historical snapshot of employment growth, such a substantial revision would demonstrate that last year's labor market vitality was far weaker than previously understood, potentially reinforcing market expectations for a series of Federal Reserve interest rate cuts. The consecutive years of significant employment data revisions may also draw criticism from President Donald Trump, who has previously questioned the accuracy of Bureau of Labor Statistics data.
The Bureau of Labor Statistics conducts annual benchmark revisions to March non-farm payroll figures using data from the Quarterly Census of Employment and Wages (QCEW). Although QCEW data is updated less frequently, it offers greater accuracy as it is based on state unemployment insurance tax records covering nearly all employment positions in the United States. The Bureau also makes routine adjustments in monthly employment reports, with all these modifications aimed at improving data accuracy.
"Compared to recent employment growth data revisions, the significant downward revision of employment data through March 2025 has less impact on monetary policy, but it provides a broader context for understanding overall economic conditions," said Bill Adams, chief economist at Comerica Bank. "All else being equal, downward revisions to employment growth data increase pressure on the Federal Reserve to ease policy."
This revision would also support arguments that the Federal Reserve should have initiated accommodative policies months earlier. Federal Reserve Governor Christopher Waller, who voted for a rate cut at the July Fed meeting (though officials ultimately chose to maintain rates unchanged), indicated that he expects the benchmark revision to reduce average monthly non-farm employment growth by approximately 60,000 jobs. Markets widely anticipate that policymakers will lower borrowing costs at next week's meeting.
Political Implications
Although this revision will not alter current perceptions of the labor market, it will indicate that the hiring slowdown trend observed in recent months actually began much earlier. The Trump administration may use Tuesday's preliminary revision data through March 2025 as evidence that employment growth had already weakened significantly before he took office. Final revision data will be released early next year.
"This data primarily reflects job creation before Trump's term. Therefore, he can completely claim that this shows the economic conditions he inherited were actually weaker than everyone believed," said Samuel Tombs, chief US economist at Pantheon Macroeconomics.
A month earlier, monthly employment data showed unusually large downward revisions, prompting White House dissatisfaction and Trump's subsequent dismissal of the Bureau of Labor Statistics commissioner. At that time, he not only criticized the monthly revision data but also questioned last year's preliminary benchmark revision, which showed the largest downward adjustment to non-farm payrolls since 2009.
Despite Trump's criticism of data revisions, both monthly and benchmark revisions represent routine processes of updating estimates as more data becomes available. The increased magnitude of recent revisions is partly attributed to declining data response rates.
Birth-Death Model
In recent years, monthly non-farm employment data has consistently shown higher employment growth than indicated by Quarterly Census of Employment and Wages (QCEW) data. Some economists believe the discrepancy is partially due to the so-called "birth-death model" – an adjustment made by the Bureau of Labor Statistics to account for net employment changes from business openings and closures. This calculation has become significantly more challenging since the pandemic.
Another perspective suggests immigration as an underlying factor in the discrepancy. Monthly non-farm employment reports do not survey respondents' citizenship status, while QCEW reports rely on unemployment insurance records – undocumented immigrants cannot apply for unemployment insurance, potentially excluding this population from QCEW statistics.
Ultimately, while awaiting complete 2025 data (to be released in February with the government's final revision report), economists and policymakers will use preliminary benchmark data to assess the pace of labor market cooling.
"If last year's data shows significant revisions, I can better understand the current economic starting point," said Kelly Firestone, economist at Royal Bank of Canada. "However, I believe Federal Reserve officials are most concerned with the fact that economic momentum is dissipating – we have likely reached a turning point in the labor market."