The Bureau of Labor Statistics (BLS) reported a -501,000 job revision to its March 2019 total for non-farm employment in the U.S. This revision covers employment gains from April 2018 to March 2019 and when evenly distributed, amounts to 42,000 fewer jobs added each month.
While the revision is still preliminary, job gain could be reduced from 223,000 to 185,000, on average, per month in 2018. For 2019, the monthly job gain through August could be reduced to a monthly average of 117,000, down from 158,000.
The reductions in job gain are significant, but job gain or loss is a lagging indicator with little additional effect on the state of the economy now. But for the operators of small and medium-sized businesses (SMBs), the impact on their operations has already been felt. The principal problem that SMBs are dealing with is a tight labor market, making it difficult to find and retain talent.
The current revisions to job gain are further support for the trend of slowing job gain, which has occurred over at least the last five years. When the five-year annual average monthly job gain of 202,000 jobs is compared to the revised job gain of 117,000 jobs per month so far in 2019. The slowing trend in job gain is clearer. While the revisions are more evidence of slowing job gain, they are not singular proof of a slowing economy.
The economy is still going strong even if job gain has slowed. For SMBs planning for 2020, they should keep the following economic variables in mind.
Fewer people are unemployed. The unemployment rate of 3.7 percent in August 2019 is almost the lowest its been since 1969. The rate was 5.1 percent five years ago.
The labor force continues to expand. Since August of last year, the labor force has grown by 2.1 million persons, driven by more people being employed (2.3 million) and fewer people being unemployed (-0.153 thousand). Additionally, from August 2018 to August 2019, the labor participation rate has increased from 62.7 percent to 63.2 percent.
Consumers have more earnings to spend. Average hourly earnings for all employees on private non-farm payrolls are growing strongly, having risen by 3.2 percent over the past year.
Companies are posting a high number of job openings. This is a clear sign from SMBs that they are optimistic about their future growth because they need employees to grow their businesses. For July, the BLS reported that there were 7.2 million job openings, slightly less than that a year ago. There are now more job openings than unemployed persons (6.0 million) in the labor force.
Note on preliminary revisions. Every year around August, the BLS announces, a preliminary estimate of its annual revision to its national establishment survey employment series for March, referred to as the Current Employment Statistics-CES (National). The CES survey of employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. The final benchmark revision will be issued in February 2020 with the publication of the January 2020 Employment Situation news release. See https://www.bls.gov/web/empsit/cesprelbmk.htm.