The most significant revision to U.S. job growth since 2009 has occurred. What sets this time apart?

The 818,000 downward revisions to U.S. payrolls, the largest since 2009, have sparked debate about whether they indicate a recession.

A few facts worth considering:

• The National Bureau of Economic Research had declared a recession six months before the 2009 revisions revealed that 824,000 jobs were overstated.
• The number of jobless claims and the insured unemployment rate both reached record highs in the same month, with over 650,000 claims and a rate of 5%.
• The GDP had been negative for four consecutive quarters, and it was later revised higher in two of those quarters, with one being revised to show growth instead of contraction. Despite this, the economic weakness was evident in the GDP numbers, ISMs, and other data.

The Bureau of Labor Statistics' models may be overstating economic strength at a time of gathering weakness, as evidenced by the softening in the labor market and economy.

• No recession has been declared.
• The 4-week moving average of jobless claims and the insured unemployment rate have remained constant since March 2023, despite being significantly lower than their peak during the 2009 recession.
• Despite a quirk in the data for two quarters in early 2022, the reported GDP has remained positive for eight consecutive quarters.

This significant revision indicates that job growth has been overstated by an average of 68,000 per month during the revision period.

The BLS's revision of the employment growth rate has reduced it from 242,000 to 174,000. Determining how the weakness is distributed over the 12-month period will help assess if the revisions are more relevant to the current situation.

If the Fed had not raised rates as high, it is possible that the weakness would have persisted beyond the revision period. This is especially true if productivity numbers are expected to increase due to the same level of GDP being achieved with less work.

During the period in question, the Fed was more responsive to inflation numbers than job data.

The Fed may be more likely to cut interest rates in September due to new data suggesting a weaker labor market. The Fed will closely monitor growth and jobs data, but may place more weight on current jobless claims, business surveys, and GDP data rather than backward-looking revisions. In the past 21 years, revisions have only been in the same direction 43% of the time, with a negative revision often followed by a positive one the next year.

Sometimes, big mistakes are made by data agencies, but they frequently correct them, even if it's three months before an election.

Goldman Sachs economists believe that the BLS may have overstated the revisions by up to 500,000. The discrepancy was caused by unauthorized immigrants who were initially listed as employed but are not currently in the unemployment system, as well as a tendency for the initial revision to be overstated.

Although the jobs data may be influenced by immigrant hiring and can fluctuate, there is a wealth of macroeconomic data that would indicate an economic downturn if one were to occur, as seen in 2009. However, at present, this is not the case.