Fed’s Powell: policymakers noted ‘artificially high’ jobs data, revisions in rate cut decision

Federal Reserve Chair Jerome Powell said Wednesday that the central bank considered reports that recent jobs numbers may be “artificially high” and are set for downward revisions when policymakers assessed the health of the labor market ahead of their decision to lower interest rates by 50 basis points.

Powell explained during the post-meeting press conference that since the Fed’s last meeting at the end of July, policymakers have received two employment reports and inflation reports apiece, as well as the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW).

“We’ve had the two employment reports, July and August. We’ve also had two inflation reports, including one that came in during blackout. We had the QCEW report which suggests… that the payroll report numbers that we’re getting may be artificially high and will be revised down,” Powell said.

“So we took all of those and we went into blackout and we thought about what to do, and we concluded that this was the right thing for the economy, for the people that we serve. And that’s how we made our decision,” he said of the process that led to the rate cut.

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The Labor Department released the QCEW last month which covered the 12-month period from April 2023 to March 2024 and showed a downward revision of 818,000 jobs to payroll figures for that period.

It was the largest downward revision to payrolls in the report since 2009 and translated to 68,000 fewer jobs added per month over that period. The QCEW is preliminary and may undergo further changes when the annual adjustment is posted in February.

US ECONOMY CREATED 818,000 FEWER JOBS THAN PREVIOUSLY REPORTED

The most recent monthly jobs reports have also contained downward revisions to previous months’ payroll gains in the period after the QCEW’s release:

April’s estimated jobs gains stand at 108,000 after downward revisions of 10,000 in May and 57,000 in June.

May’s payroll gains were an estimated 216,000 after downward revisions of 54,000 in June and 2,000 in July.

US ECONOMY ADDED 142,000 JOBS IN AUGUST, MISSING EXPECTATIONS

An estimated 118,000 jobs were added in June after accounting for downward revisions of 27,000 in July and 61,000 in August.

July saw an estimated 89,000 jobs added following a downward revision of 25,000 jobs in August.

The Labor Department’s revisions to jobs reports are done to include additional information that wasn’t available at the time of the initial release to improve the accuracy of the revised estimate. 

The revised estimates account for data from businesses in the sample that hadn’t reported payroll data by the time of the Bureau of Labor Statistics’ initial release. The agency notes on its website that in 2012, for example, the average collection rate at the time of initial releases was 73.1% of businesses.