AILSA CHANG, HOST:
You know how economists have been reassuring us that the job market is relatively sturdy? Well, it may be a little shakier than we thought. Today, the Labor Department said that it actually added 818,000 fewer jobs to the market than it initially reported back in March. Now, it is normal for the federal government to revise reports like this. It's part of the standard process. But the size of the delta between this report and the one just a few months ago is kind of unusual. It shows the biggest downward revision since 2009. We should note that this is still a preliminary revision. That said, it is evidence that the labor market has been slowing down for a while now. Sarah House joins me now to help us make sense of these numbers. She's a senior economist at Wells Fargo. Welcome.
SARAH HOUSE: Thank you, Ailsa.
CHANG: So I mentioned that this is the biggest downward revision of job numbers in about 15 years. How surprising were these numbers to you today?
HOUSE: Yeah, so it is pretty surprising to see that sort of downward revision when the economy is in an expansion, which I think, by most indications, we still see. But in other ways, it's not surprising because we have seen a broad slowdown in terms of other jobs market data, and payrolls was really the outlier for a while there.
CHANG: Well, were there specific industries that suffered the most in terms of job growth?
HOUSE: So it was pretty broad-based in terms of most industries saw downward revisions. So you did get a sense of just how steep they were, where one of the biggest areas we saw was a decline in the level of employment in the information industry. So that includes a lot of tech workers who maybe are - work for software developers. So that was one notable standout, and then professional and business services was another. So they did tend to skew a little bit more towards some of the white-collar jobs. But overall, it was pretty broad across industries.
CHANG: Well, for financial markets, for Americans, I mean, news like what we're hearing today with this revision can create fears that there's going to be a real downturn in the economy. So let me ask you, are you at all worried about that?
HOUSE: So we are expecting the economy to slow. And I think, given the weakening momentum that we've seen as well as the fact that we still have a pretty tight stance of monetary policy, does indicate to us that the recession risk is elevated, but it's not over 50%. So our baseline expectation is that the economy continues to expand.
But what this does tell us is that the labor market has cooled off substantially from its very strong state in 2022 and 2023. And with inflation also coming down quite a lot over the past couple of years, it does tell us that the Fed does have room to ease its policy rate where they don't have to be stepping on the brake so hard as they have been over the past year.
CHANG: Well, let's talk about what the Fed might do because they're meeting in September. How will these numbers today impact the Fed's assessment of how much to cut interest rates?
HOUSE: Yeah. So this really adds, I think, to an array of jobs market data that points to a labor market that is really back to where it was before the pandemic, by some measures maybe even a little bit softer. And so I think this does give the Fed more evidence that it's appropriate to start dialing back its level of restrictive policy pretty soon. So I think on its own, this data is supportive of the Fed starting to cut rates at its next meeting on September 18.
CHANG: Well, we are still waiting for August job numbers. They come out in a couple of weeks. And they might change our understanding of the state of the economy, right? So what are you expecting there? I'm going to ask the economists for a prediction.
HOUSE: Yes, so it's a little bit early to have a point estimate for that. But I think, overall, we do see signs that the pace of job market growth has downshifted over the past few months. So the benchmark revisions data we got today, it still indicates that we're adding a pretty healthy number of jobs. But I think as we move through this year, we're going to see the monthly pace of job growth probably downshift closer to 100,000, 130,000. And so we are seeing a moderation in that trend, and that's going to have implications for aggregate income growth and aggregate spending growth in the economy as well.
CHANG: Sarah House is a senior economist at Wells Fargo. Thank you so much for joining us today.
HOUSE: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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