Why Friday's jobs report could cause widespread confusion

• The Bureau of Labor Statistics revises employment estimates annually with new data.
• This year's revisions could show much lower job growth in 2024 than previously reported.
• It's part of the BLS making employment estimates more accurate.

Friday's job numbers may not be what you expect.

The report is likely to show slower job growth from last year due to a regular update to the government's data — likely among the biggest payroll adjustments in years. But, if the numbers come as a surprise, they shouldn't raise alarm bells.

TL;DR: In the January jobs report, the Bureau of Labor Statistics revises the previous year's jobs figures with more complete numbers. This year, revisions are expected to show a double whammy of fewer jobs than previously measured and a larger overall population due to updates in Census Bureau numbers. It could all look like a weaker 2024 job market than previously measured.

The Bureau of Labor Statistics undertakes its benchmark revisions each year in the January employment report. The government recalibrates its basic estimates of job growth over the previous few years based on more complete data reported from businesses. This year's revisions are expected to show smaller job gains in 2024 than were previously reported.

The BLS has already provided an idea of how its new calibration will impact payroll data. A report released by the BLS in August showed that there were around 800,000 fewer jobs across the US economy in March 2024 than previously reported, a larger-than-usual decline relative to the earlier figure.

The headline monthly job growth numbers are based on a monthly survey of business establishments across the US. Any such survey measure represents an approximation of the underlying reality. The annual revisions recalibrate those surveys to more detailed but less timely measures of the full workforce based on administrative data like unemployment insurance records.

It's a bit like searching around for something in a dark room, versus turning on a light. While the initial jobs report gives the best and most timely estimate for employment across the world's biggest economy based on a relatively small sample of businesses, the revisions reflect additional and more complete information that takes a longer time to gather.

While these revisions happen every year, they've recently been relatively small. The below chart shows BLS payroll growth revisions for 2022 as reported in February 2023 and for 2023 as reported in February 2024. The revisions showed most months had larger job gains than reported earlier.

The household survey, which makes up the other half of the monthly jobs report, is also set to receive a major update.

That survey — which gathers information on Americans' socioeconomic health and provides the headline unemployment rate — will also be adjusted based on the Census Bureau's latest population estimates.

Updated Census estimates will likely result in a dramatic apparent uptick in population and employment after the Census Bureau improved how it measures immigration to the US, leading to a larger-than-usual adjustment to the underlying count of how many people live in the country. An apparent increase in employment between December and January would have more to do with those changes in the way the Census calculates population, not any real spike in the workforce. This also makes it difficult to compare household survey data accurately over time.

The likely upward jump in employment from the household survey and downward revision to payroll figures from the business survey could actually bring the two more in line with each other. For much of 2024, the business-derived employment figures suggested a rosier view of the labor market than those from the survey of workers. Combining the revisions together, we're likely to get a more coherent picture of a cooling but still decent job market.

Still, any substantial jumps in job numbers are likely a result of normal, regularly scheduled data recalibrations instead of unexpected economic conditions. Over time, recalibrations allow the Census and BLS to more accurately represent changes in America's workforce.