U.S. Economy Shows 1.2 Million Fewer Jobs, Increasing Pressure on Fed to Cut Rates

Revised Labor Data Reveals Weaker Job Growth

The U.S. economy has experienced significantly slower job growth than previously reported, with the Bureau of Labor Statistics (BLS) revising downward payroll figures by approximately 1.2 million jobs over the past 16 months ending March 2025. This substantial reduction highlights a more fragile labor market and raises concerns about the broader economic outlook.

Market Reaction and Federal Reserve Pressure

In response to the disappointing labor data, market expectations have shifted sharply toward the Federal Reserve cutting interest rates. According to the CME Group’s FedWatch tool, traders now fully price in a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting on September 17, with a non-negligible chance of a larger half-point reduction. Furthermore, markets anticipate rate cuts at the October and December meetings, reflecting growing investor concern about economic growth.

Analysts Weigh Policy Options

Citigroup economist Andrew Hollenhorst noted that had the Fed possessed this revised data in real time, policymakers would likely have adopted lower interest rates earlier. He argued the new figures could justify a more aggressive half-point cut in September, though he expects Chair Jerome Powell to pursue a more measured quarter-point reduction initially, signaling further cuts in subsequent meetings.

Disputes Over Data Interpretation

Despite the BLS revisions, some analysts remain skeptical about the full extent of labor market weakness. Goldman Sachs, using proprietary models and high-frequency indicators, estimates the job shortfall to be closer to 550,000, roughly half the BLS revision. The firm acknowledges a material softening in labor conditions but cautions that the revised data may not fully reflect the current employment environment.

Broader Economic Indicators and Political Context

The revised payroll figures come on the heels of a meager 22,000 nonfarm payroll increase in August and a New York Fed survey revealing record-low worker confidence in job mobility. These indicators underscore growing economic uncertainty. The White House has seized on the data to renew criticism of Fed Chair Powell, with Press Secretary Karoline Leavitt accusing him of being “too late” in adjusting policy and demanding immediate rate cuts. Additionally, economists emphasize the need for swift resolution of trade tensions with China to restore business confidence and stimulate hiring.