Pressure is growing on the Federal Reserve and Fed Chair Jerome Powell to cut its benchmark interest rate next week, following a stunning new revision to employment data showing the labor market is much weaker than previously thought.
The Labor Department issued an annual revision to payroll estimates on Tuesday, saying that the economy added 911,000 fewer jobs in the 12 months through March 2025 than previously reported.
It marked the largest correction ever issued by the Bureau of Labor Statistics, exceeding the 902,000 downward revision the agency made in 2009, during the depths of the Global Financial Crisis.
The staggering annual revision follows concerning corrections to monthly jobs reports in the past few months. Employment growth in June was initially reported at +147,000, but is now estimated at -13,000 after two downward revisions, meaning the economy actually lost jobs that month.
President Donald Trump in August fired the commissioner of the Bureau of Labor Statistics (BLS), whom he accused of manipulating the jobs numbers “for political purposes” after major downward revisions to job figures for May and June.
Following Tuesday’s update to annual jobs numbers, White House Press Secretary Karoline Leavitt issued a statement saying the massive revision proved Trump was right to fire the BLS head and call for lower interest rates.
“Biden’s economy was a disaster and the BLS is broken,” she said. “Much like the BLS has failed the American people, so has Jerome ‘Too Late’ Powell—who has now officially run out of excuses and must cut the rates now.”
Citing fears of lingering inflation, the Fed has kept its benchmark ranged unchanged since December at a range of 4.25% to 4.5%, despite Trump’s calls for lower rates, which would juice the economy and reduce government borrowing costs.
Although the president has not welcomed the large negative revisions to recent jobs data, ironically they may be the thing that finally delivers the swift and significant interest rate cuts he has long demanded from a reluctant Fed.
Fed policymakers will meet next week to determine rate policy, and are widely expected to cut the central bank’s benchmark rate by a quarter-point. A larger half-point rate is also seen as possible, but less likely.
The Fed uses higher interest rates to tame inflation, and lower interest rates to stimulate job growth, the two halves of its dual mandate.
Although the Fed doesn’t set mortgage rates, those rates can move in anticipation of future Fed policy and financial conditions.
Mortgage rates have been falling in recent weeks in anticipation of Fed rate cuts, with the average 30-year mortgage rate hitting an 11-month low of 6.5% last week, according to Freddie Mac.
One potential complication will be the August inflation data set to be released on Thursday. A surge in inflation could complicate the Fed’s decision on rate cuts, making it more difficult to ease monetary policy and boost the labor market.
Why the jobs data was revised
The monthly job growth numbers released by the BLS are collected by a survey of about 122,000 businesses and government agencies, forming the basis of the key employment situation report released near the beginning of each month.
Often, those monthly Current Employment Statistics (CES) numbers are revised as late survey responses trickle in, giving BLS economists a more complete picture of the labor market that month.
Because they are based on a sample survey, not a full count, the initial estimates are subject to sampling error are recalibrated annually using the Quarterly Census of Employment and Wages (QCEW), which is based on state unemployment insurance tax records.
The QCEW covers nearly all U.S. employers (some 97% of jobs), making it extremely accurate, although not as timely as the monthly CES figures.
Each fall, BLS issues a preliminary revision to CES data for the 12 months through the prior March. A final revision to the same period is then issued the following January.
