• “If you get a really bad employment print in September, markets could price more toward 50,” said Gregory Faranello, head of U.S. rates trading and strategy for AmeriVet Securities. “We are going to hear about it” from Powell, Faranello said about the revisions. “He is going to tell the market [that] the balance between inflation and employment is much more in line and we are probably too restrictive here.”

The U.S. job market was weaker than previously reported, bolstering the case for aggressive interest rate cuts by the Federal Reserve.

The Bureau of Labor Statistics Wednesday revised nonfarm payrolls for the 12months ended in March lower by 818,000, a 0.5% downward revision. The revision means U.S. payroll gains from April 2023 to March 2024 averaged around 174,000 per month, rather than the 242,000 that current data show, Olivia Cross, a North America economist at Capital Economics, said in a report.

Markets are mostly pricing a 25-basis point interest rate cut by the Federal Reserve in September, with some calls for an even deeper, 50 b.p. cut given the newly found weakness in the labor market. A lot will depend on August’spayrolls report.

“If you get a really bad employment print in September, markets could price more toward 50,” said Gregory Faranello, head of U.S. rates trading and strategy for AmeriVet Securities.

The new labor figures come as the Fed, which has a mandate to keep prices stable while maintaining unemployment low, looks set to start cutting interstates in September, after holding them at a decades-long high for more than a year. Employment data have gained relevance as inflation moves toward the Fed’s 2% target.

Following the data release, the 10-year Treasury yield fell, briefly reachingits lowest level since July 2023, at 3.78%. Since the revised data support the prospect of rate cuts, yields have one more reason to weaken, said Peter Cardillo, chief market economist at Spartan Capital.

The preliminary revision is part of the Quarterly Census of Employment and Wages program, a more comprehensive data set than other BLS data. A final assessment will be released in February 2025.

In July, job creation was reported at 114,000, well below expectations, andthe unemployment rate rose to 4.3% from 4.1%, sparking fears of economiccontraction and fueling calls for fast monetary easing. But more recent datahave quenched recession fears.

The revised data’s impact on monetary decisions is unclear, since it doesn’t affect more recent figures already indicating labor weakness. Fed minutes to be released Wednesday afternoon could also reveal how policymakers saw the state of labor markets in July. More clarity could come Friday, when Fed Chair Jerome Powell speaks at the Jackson Hole central-banking symposium.

“We are going to hear about it” from Powell, Faranello said about the revisions. “He is going to tell the market [that] the balance between inflation and employment is much more in line and we are probably too restrictive here.”