National Bank of Canada’s analyst, Krishen Rangasamy asks if the benchmark revisions by the Bureau of Labor Statistics that suggested non-farm payrolls last March were 501K lower than earlier estimates, will cause a change of stance at the Federal Reserve?

Key Quotes:

“The U.S. labour market is strong, but less so than previously thought. We’ll get new revised series in February 2020, but yesterday’s benchmark revisions by the Bureau of Labor Statistics suggested non-farm payrolls last March were 501K lower than earlier estimates.”

“This means just under 2 million net new jobs were created in the twelve months to March 2019, 20% lower than the previous estimate. The downgrade to private sector job creation was slightly larger in percentage terms. Will the downgrades cause a change of stance at the Federal Reserve? FOMC doves could make the case that because job growth was slower, there’s more slack in the labour market than first thought. Hawks, in contrast, could say that even the lower 166K/month pace of job creation in the 12 months to March is more than enough to absorb new entrants in the labour force. They could also point to rising wage inflation to support the notion that those downgrades don’t change the overall picture of a tight labour market.”