The US Bureau of Labor Statistics (BLS) has slashed job gains it announced in July and August by 60,000. Its earlier, more optimistic numbers were factors in the US Federal Reserve’s interest rate hike on September 16.
For the first time in three years, Fed governors made mortgages and credit more expensive with their benchmark rate hike, because they had decided “the labor side of the Fed’s congressional remit is in good shape,” affording them the luxury of slowing inflation.
The BLS reported a 21,000 gain when the Fed voted in July, but this figure now shows a 10,000 loss. The bureau also slashed 29,000 jobs from its estimate for August.
On September 16, the Fed’s own statement claimed, “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
“Job openings and weekly hours have been increasing,” Warsh told reporters in September. This was based on inaccurate data that claimed the US economy was “largely acting consistent with full employment.”
August was ‘nothing more than a rebound’
After August’s initially optimistic report about job openings, UBS said market odds of an interest rate hike climbed from 50% to 60%. Already expensive mortgages and credit would become even more expensive as benchmark interest rates continued rising.
September made the picture worse. US employers added only 29,000 jobs against a forecast of 84,000, as the unemployment rate rose to a concerning 4.2%.
Jefferies’ chief US economist downplayed any positive spin on the notional increase, explaining, “It appears that the August number was nothing more than a rebound from very weak hiring in June and July.”
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The Fed needed more accurate data
Financial blogger ZeroHedge argued that the Fed wouldn’t have even hiked in the first place if it had had accurate data.
The BLS attributes its downward revisions to additional business and government reports plus seasonal recalculations, so the lower numbers reflect more accurate information.
After September’s interest rate increase, 16 of 18 members of the Federal Open Market Committee were expecting to hike rates again before the end of the year. After these BLS revisions, that forecast is certainly under scrutiny.
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