Annual data may face record downward revisions! US non-farm payroll in January may reveal stagnant job growth. Is the US Federal Reserve facing a key turning point in interest rate policy?

The upcoming release of the US January non-farm payroll report will contain more information than before. The US January non-farm payroll report was originally scheduled to be released on February 6th, but was delayed due to the government shutdown. This report will reveal the extent of the recent slowdown in the US labor market - and may even show that its growth has stalled. In addition to the regular monthly data on non-farm payroll additions and unemployment rates, the January non-farm report to be released on Wednesday will also include the highly anticipated annual revision of non-farm payroll figures. Preliminary estimates show a record downward revision of 911,000 jobs in the annual employment figures up to March 2025, with this revision expected to show a significant slowdown in job growth. Scott Anderson, Chief US Economist at BMO Capital Markets, said, "This year's annual data revision will be more impactful than in previous years. The labor market currently appears to be in a delicate balance between net job creation and potential job losses." Annual employment data revision is expected to show more modest job growth Every January when the non-farm payroll report is released, the US Bureau of Labor Statistics (BLS) aligns non-farm payroll data with a more accurate but less timely data series called the Quarterly Census of Employment and Wages. This data is based on state unemployment insurance tax records and covers the vast majority of jobs in the US. In addition to announcing the adjusted employment levels as of March 2025, the BLS will also release revised data on non-farm employment changes for each month of the previous year. These revisions also reflect updates to their model, which factors in business openings and closings, as well as introducing new seasonal adjustment factors. Economists have previously widely believed that the labor market showed a gradual weakening trend last year, characterized as a "low hiring, low firing" environment. However, this revision may show that the slowdown in hiring is even greater than previously understood. This could change the Federal Reserve's view of the labor market. Fed Chair Powell has recently described the current labor market as showing signs of stabilization. He has stated that job growth may have been overestimated, but the overall economy remains strong enough for officials to temporarily maintain interest rates. However, his colleague, Fed Governor Waller, does not agree with this view. Waller explained why he voted to cut rates again at the Fed's January meeting, stating that the revised data will likely show that there was almost no job growth last year. Waller stated in a release, "Zero. Nothing. Absolutely nothing. This doesn't look like a healthy labor market at all." Data released last week supported Waller's view. The number of job cuts announced by US companies in January reached the highest level for any January since the depths of the Great Recession. At the same time, job openings fell to the lowest level since 2020 in December. January non-farm payroll data In terms of the more routine parts of the report, based on the median forecast of economists, January non-farm payrolls are expected to increase by 69,000 jobs; the unemployment rate is expected to remain at 4.4%, slightly lower than the 4.5% high point reached in November. Economists at Wells Fargo said in a report, "The January non-farm payroll report is unlikely to change the overall picture of a labor market that remains weak." This revision will not affect the unemployment rate data, as the unemployment rate is based on surveys of households, while non-farm payroll figures come from BLS surveys of businesses. Typically, BLS includes new population estimates in the household survey in the January employment report. However, due to last year's record-long government shutdown, this adjustment was delayed by a month. In recent years, revisions to employment data have generally been larger than before, with some economists attributing this to the unique economic dynamics following the pandemic. The revision issue has also become highly politicized, and largely contributed to former BLS director under President Trump being fired, as he claimed employment data was manipulated for political purposes. Upon appointing a new director recently, Trump once again criticized the BLS, calling the numbers they previously released "very inaccurate." However, most economists have dismissed this claim. Jed Kolko, Senior Researcher at the Peterson Institute for International Economics, said in a webinar on January 29th that revisions are inevitable as more source data becomes available, and these adjustments help providers balance speed and accuracy, as well as maintain comparability over time. Former Deputy Assistant Secretary of Economic Affairs at the US Department of Commerce, Jed Kolko, said, "Revisions can be confusing, sometimes feed conspiracy theories, and sometimes even lead to dismissals. But as long as the revision process is transparent, anticipated, and documented, revisions should actually make you trust official statistical data even more."