The Preliminary Benchmark Revision in Context

818 downward revision in March 2024 NFP.

Figure 1: Level of nonfarm payroll employment from CES (blue), implied from CES preliminary benchmark (red), from Philadelphia early benchmark (tan), Goldman Sachs estimate of preliminary revision (light blue). Early benchmark calculated using ratio of sum-of-states early benchmark to sum-of-states. Source: BLS via FRED, BLS, Philadelphia Fed, and author’s calculations.

How does this change the picture regarding business cycle indicators?

Figure 2: Nonfarm Payroll (NFP) employment from CES (blue), implied preliminary benchmark revision of NFP (bold blue), civilian employment (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold green), manufacturing and trade sales in Ch.2017$ (black), consumption in Ch.2017$ (light blue), and monthly GDP in Ch.2017$ (pink), GDP (blue bars), all log normalized to 2023M04=0. Source: BLS via FRED, BLS, Federal Reserve, BEA 2024Q2 advance release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (8/1/2024 release), and author’s calculations.

Update, 11am Pacific:

From Goldman Sachs today:

The BLS’s preliminary benchmark estimate for the revision to payroll growth between April 2023 and March 2024 is -818k, or -68k jobs/month, in line with our expectation of a 600k-1mn downward revision. As we have noted last week, we think that today’s downward revision to payroll growth exaggerates the degree to which job growth has been overstated by about 500k, both because the QCEW likely excludes many unauthorized immigrants who are not in the unemployment insurance system but were correctly picked up in payrolls initially, and because the QCEW itself has tended to be revised up in recent years. As a result, we think the true downward revision should be about 300k or 25k per month, which would imply that monthly job growth over this period was closer to 215-220k than the initially reported 242k, but not as low as the 174k pace implied by the revisions.