U.S. Added Nearly a Million Fewer Jobs. What It Means for Interest Rates.

The Bureau of Labor Statistics released revised job figures Tuesday morning. Photo: Spencer Platt/Getty Images

Job growth for the year through March was significantly lower than the government had reported. Yet while the reduction in estimated annual hiring was the biggest in decades, it likely won’t push the Federal Reserve to go ahead with a jumbo rate cut next week.

The Bureau of Labor Statistics reported on Tuesday that it marked down previously reported net payroll gains by 911,000 in the 12 months through March. That means instead of adding about 1.8 million positions as originally reported, the U.S. economy created only 847,000 jobs. Economists’ estimates of how big the preliminary benchmark revisions would be varied widely, but most expected to see a reduction in previously reported monthly payroll growth.

The BLS releases benchmark revisions to align the monthly data collected via the Current Employment Statistics survey with more comprehensive payroll data that is available on a delay. The Quarterly Census of Employment and Wages (QCEW), which includes information from unemployment insurance programs, is a part of that.

Tuesday’s revision, however, is an initial estimate. Final benchmark revisions will be made in February 2026.

Because the latest update refers to conditions months ago and isn’t final, it likely won’t result in a half percentage-point rate cut at the Federal Open Markets Committee meeting next week. Still, it could add to the momentum for multiple, consecutive cuts.

Going back to 2019, preliminary benchmark revisions have been negative every year except 2022. The BLS noted that Tuesday’s revisions, which will be revised for a final time in February 2026, represented a decline of 0.6% from previously reported total nonfarm employment, which is higher than normal. The annual benchmark revisions over the past decade, for example, have represented an absolute average of 0.2% of total nonfarm employment, the BLS said.

On a “raw basis,” the downward revision of 911,000 is worse than any figure, preliminary or final, seen since at least 2000, according to the research shop Inflation Insights. On a percentage basis, the revision was a decline of 0.6%, in line with the preliminary benchmark revision seen in 2009.

The latest data suggests nearly 76,000 fewer jobs were added per month than previously reported from April 2024 through March 2025. That means between April 2024 and March 2025, monthly job gains averaged about 74,000, compared with the previously reported average of about 150,000 per month.

While Tuesday’s numbers don’t include month-by-month revisions, the sheer breadth implies that payroll growth in some months, likely August and October 2024, was likely negative. Looking at total private payrolls, the BLS revised down annual job gains by 880,000, with the trade, transportation, and utilities sector logging the biggest mark down.

The BLS said that the larger than typical estimated revisions are due to lower employer response rates, but that overestimation due to issues with the agency’s birth-death model are likely also to blame. The model is used to provide an estimate of the net number of monthly jobs that have been created by the birth of new businesses and lost to those that have closed.

“The BLS has a good handle on what is going on amongst large employers, but has less visibility on the small business sector and has a ‘births-death’ model,” writes James Knightley, chief international economist at ING. “In steady times, their assumptions are accurate, but at turning points in the cycle they can be significantly wrong.”

Tuesday’s revisions indicate that the slowdown in job growth experienced last summer was likely worse than previously thought and that hiring was likely weaker again at the start of the year. But the latest updates to the employment data don’t contribute much to the current labor picture—and likely won’t shift the calculus for Fed policymakers when they meet next week.

Odds for a rate cut didn’t shift much on the news Tuesday morning, with the probability of a half a percentage point interest rate cut dipping slightly and hovering below 10%, according to the CME FedWatch tool.

With inflation still trending above the Fed’s 2% target, Citi economist Andrew Hollenhorst said he doesn’t expect the revisions to lead to a larger, half-percentage-point interest-rate cut in September. But he writes that the revisions could push Fed Chair Jerome Powell and the committee to signal more rate cuts are in the pipeline than it has so far.

Tuesday’s revisions are only the preliminary estimate. They are likely to shift with the final benchmark levels that are set to be released in February. Last year, the preliminary benchmark revision revised down employment through March 2024 by 818,000. However, the final update was far less: It showed just 589,000 fewer jobs than initially reported for the 12 months ending in March that year.

It isn’t safe to assume that the downward revisions through March mean the job market has been weaker than reported in recent months, writes Stephen Stanley, chief economist for Santander. He points out that from April to August, the average monthly payroll gain has been 53,000.  Extending the level of average monthly revisions for the year through March would take those months into negative territory, which Stanley says seems at odds with the array of anecdotal and survey evidence.

“So do not assume that today’s revision will apply beyond March,” he says.

Write to Megan Leonhardt at megan.leonhardt@barrons.com