The recent revision in the nonfarm payroll employment figures for March 2024 has left the economic landscape looking a bit different. This adjustment has implications for understanding the current state of business cycle indicators. Let’s dive into how this shift alters our perspective:
- The graph depicting the level of nonfarm payroll employment from various sources shows a notable downward trend. The blue line represents employment data from CES, while the red line indicates the implied numbers from CES preliminary benchmarks. The tan line illustrates figures from the Philadelphia early benchmark, and the light blue line represents Goldman Sachs’ estimate of the preliminary revision. This comparison highlights the discrepancy in the data sources and emphasizes the importance of accurate benchmarking.
- When we consider how this revision impacts business cycle indicators, it becomes apparent that the initial picture may have been slightly misleading. The second graph showcases nonfarm payroll employment alongside preliminary benchmark revisions, civilian employment, industrial production, personal income excluding current transfers, manufacturing and trade sales, consumption, monthly GDP, and overall GDP. These interconnected indicators paint a comprehensive picture of the economic landscape but are subject to revisions that can significantly impact our understanding of the economy’s health.
In light of this revision, Goldman Sachs provides valuable insights into the magnitude of the changes. The BLS’s preliminary benchmark estimate suggests a significant downward revision in payroll growth, totaling -818k jobs between April 2023 and March 2024. While this may seem alarming, Goldman Sachs believes that the actual impact may not be as severe. They argue that certain factors, such as the exclusion of unauthorized immigrants in the QCEW data, could skew the numbers. Taking these factors into account, Goldman Sachs suggests that the true downward revision should be around 300k jobs, translating to a monthly growth rate of approximately 25k. This nuanced understanding helps provide a more accurate representation of the job market during this period.
In conclusion, revisions to economic data can have far-reaching implications for our understanding of the business cycle. By closely analyzing these changes and considering the various factors at play, we can gain a more accurate assessment of the true state of the economy. It is essential to approach economic indicators with a critical eye and an understanding of the potential revisions that may alter our perception of the economic landscape. Stay informed, stay vigilant, and interpret economic data with caution to navigate the ever-evolving business cycle effectively.
