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This morning’s QCEW (Quarterly Census of Employment and Wages) Benchmark revisions for the period April ’24 to March ’25 were on the low end of already negative expectations. The preliminary estimate that March payroll employment was 911k below current estimates means that monthly payroll gains were ~76k lower than the ~150K monthly average job gains that were reported over the period.
While the BLS revisions are published with a significant lag, this morning’s revisions point to a weaker jumping off point. In recent months, it has become exceedingly difficult to ascertain what constitutes a weak NFP print, especially as structural changes have muted cyclical weakness that would typically flash red. Moreover, larger-than-usual monthly revisions have muddied the payrolls picture even further. In what follows, we answer a few key questions on this morning’s BLS revisions:
1. What is the significance of the QCEW Benchmark revisions and why are the monthly payroll numbers revised?
The BLS conducts annual benchmark revisions published with a six-month lag. Each quarter of revisions are published five times. This morning, we received the first release of Q1 data, but we expect to get four more revisions with the first revision coming in December.
Unlike the monthly nonfarm payrolls data, which is collected through the Establishment Survey (Current Employment Statistics) and samples 121,000 businesses and government agencies and represents 631,000 worksites, the QCEW uses administrative unemployment insurance tax records that cover over 95% of US jobs. Ultimately, the QCEW revisions give us a more accurate representation of job growth, while the CES data is more timely.
2. Why would we see a significant downside to monthly payroll growth suggested in the CES survey?
Typically, revisions are quite small (amounting to about 0.1% – vs. this morning’s revision of 0.6%). More sizeable revisions often come at a turning point in the labor market – were the birth-death model used to prepare monthly payroll employment estimates overstate business creation and understates dissolution.
3. Do these revisions alter how we interpret recent monthly NFP prints and larger-than-expected revisions?
This morning’s revisions suggest a weaker jumping off point than we had previously assumed. Moreover, our forecast had called for a breakeven employment rate of ~100k, implying that the US labor market would need to add roughly 100k jobs in order for the unemployment rate to hold steady (a jobs print below that number would result in an uptick in the unemployment rate).
Since QCEW benchmark revisions are revisions to job growth exclusively, and not the unemployment rate, this suggests that the breakeven rate is likely meaningfully lower than our initial forecast, especially when coupled with more stringent immigration policy.
This means that average payroll growth of 29k over the past three months is likely better than it seems against a lower breakeven rate. Still, the 22k August payroll print was undoubtedly below the new breakeven rate, and when we net out non-cyclical sectors, cyclical goods and services sectors together have shed jobs since April.
4. Does this change how we interpret the current state of the US labor market?
In short, no. The reality is, we have almost certainly reached a cyclical turning point in the US labor market – as evidenced by rising monthly NFP revisions against lower response rates and a stagnation in cyclical goods and services job growth. But economists and market participants have increasingly struggled to interpret nonfarm payrolls prints against the backdrop of significant structural changes to the labor market.
In our view, it is certainly possible to be in an environment of cyclical slowing and also recognize structural changes (a surge in retirements and more limited immigration) that will put a floor under how weak the labor market can become and/or allow it to bounce back more quickly.
This morning’s QCEW revisions suggest that the difference between monthly nonfarm payroll gains and the breakeven rate is a narrower margin. Still, over the past six months, the vast majority of jobs have been added in the health care sector – one that is not cyclically exposed. Looking at sectors exposed to cyclical weakness, growth has been minimal and we are more clearly living in a Tale of Two Labor Markets – where uncertainty paralysis and tariff exposure have limited hiring for sectors exposed to business cycle fluctuations, and on the other end of the spectrum, sectors that support aging demographics like health care, continue to hire.
The takeaway is that it is becoming all the more difficult to interpret labor market signals muddled by this bifurcation. Similar to the Fed, we will be focused on the trajectory (and magnitude) of movements in the unemployment rate as we hover in an “air pocket” of not knowing if tariffs will manifest as a job shock or an inflation shock or a mix of both (as we suspect).
About the Author
Carrie Freestone is an economist and a member of the macroeconomic analysis group. She is responsible for examining key economic trends including consumer spending, labour markets, GDP, and inflation.
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