The recent preliminary benchmark revision suggests U.S. nonfarm payrolls (NFP) for March 2025 could be revised down by 911,000, placing it at the weak end of expectations, according to Standard Chartered in a note this week.
The firm’s analysts highlight that published NFP growth has an upward bias beyond the benchmark month, which could influence Federal Open Market Committee (FOMC) policy decisions.
Standard Chartered notes that “monthly NFP growth is overestimated by about 70k because the BLS’ birth-death adjustment is not capturing the likely drop-off in net jobs created by newly opened less newly closed firms.”
The firm explained that th birth-death adjustment, which seasonally accounts for job creation by new firms, has been “remarkably steady at around 90-100k monthly even as continuing firms…show a steady decline in new job creation.”
This discrepancy is said to imply that job creation by new firms may not be as robust as reported.
The bank further points out that the softness in job creation by continuing firms has persisted beyond March 2025.
For instance, last month’s reported NFP growth of 22,000 reflected 98,000 seasonally adjusted jobs added by new firms but a decline of 76,000 jobs from continuing firms.
Standard Chartered considers its seasonal adjustment “unofficial but likely to be ballpark correct.”
This overstated NFP growth is expected to factor into the FOMC’s rate decisions. Analysts write that “a major factor behind” their revised September FOMC projection of a 50-basis-point cut is that Fed officials will likely account for the NFP bias, which “suggests that actual job creation is well below trend estimates of 50-100k.”
The downward revision highlights the importance of benchmark adjustments, showing that headline job numbers may overstate labor market strength, potentially prompting more accommodative monetary policy in the near term, according to Standard Chartered.
Source :
https://www.investing.com/news/economy-news/why-benchmark-revision-matters-for-fomc-4233299
