Major jobs revision Tuesday could show the labor market is weaker than previously thought

The Bureau of Labor Statistics is poised to announce a significant downward revision on September 9th, potentially indicating 775,000-800,000 fewer jobs were added over the 12 months through March than initially reported, suggesting a substantially weaker labor market with average monthly growth for 2024 closer to 100,000. This expected recalibration, alongside anticipated higher August CPI figures, is bolstering market certainty for a Federal Reserve rate cut at its September 17th meeting, with some analysts even considering a 50 basis point reduction, while also drawing political attention to the BLS's data methodology.

Analysis

A significant downward revision to U.S. employment data is anticipated from the Bureau of Labor Statistics on September 9th, which could show 775,000 to 800,000 fewer jobs were created in the 12 months through March 2025 than previously reported. According to Comerica Bank estimates, this recalibration would lower the average monthly job growth in 2024 from 165,000 to a much weaker 100,000, aligning with the stark slowdown to just 29,000 average monthly additions from June to August. This annual benchmark revision is based on the more comprehensive Quarterly Census of Employment and Wages (QCEW), providing a more accurate picture than initial surveys. The faltering labor market, attributed partly to tariff costs and AI-driven labor replacement, has solidified market expectations for a Federal Reserve rate cut at its September 17th meeting, with a 100% probability priced in. The primary uncertainty is the magnitude of the cut—either 25 or 50 basis points—a decision that will be heavily influenced by the upcoming August CPI report on September 11th, which is forecast to show a rise in inflation to 2.9%. Compounding this economic uncertainty is a heightened political risk surrounding the BLS itself, following the President's criticism and the nomination of a replacement who has questioned the agency's methodology.

Key Decisions for Investors

• Given the near-certainty of a Fed rate cut, investors should position for a lower interest rate environment, potentially increasing exposure to duration-sensitive assets.
• The expected confirmation of a significantly weaker labor market warrants a cautious stance on economically sensitive cyclical stocks, as underlying growth appears to be faltering more than previously thought.
• Monitor the September 9th jobs revision and September 11th CPI report closely as they will dictate the size of the Fed's cut, and be aware that increased political pressure on the BLS introduces a new risk factor to the integrity of key economic data.