Job gains and free-spending shoppers lifted Wall Street in 2023, but new data tells another story
.Job gains and raises helped power solid economic growth in the U.S. last year, but what if those gains were a mirage? The Labor Department overestimated job gains last year by about 13%. That suggests some of Wall Street’s optimism last year was built...
NEW YORK — Job gains and raises helped power solid economic growth in the U.S. last year, but what if those gains were a mirage?
Gross domestic product jumped 4.9% during the third quarter on an annualized basis and economists expect an initial reading of 1% growth during the final quarter of 2023.
The Labor Department, though, has been noticeably revising its monthly employment data, resulting in fewer new jobs added each month than initially reported. Employers in the U.S. added 145,000 fewer jobs than initially reported between September and November. That figure grows to about 400,000 fewer jobs than initially reported, or an overestimation of about 13%, for almost all of 2023. That suggests some of Wall Street's optimism last year was built on sand.
While it's not unusual for the government's statisticians to go back and revise their data, the changes to last year's job gains was especially pronounced, and undermines one of Wall Street's main cases for GDP growth of up to 2% and continued stock gains this year.
“Historically, labor revisions for the prior year turning negative indicates an economic downturn is on the horizon," said Jeff Schulze, head of economic and market strategy at ClearBridge Investments, in a note to investors.
A resilient labor market has been the driving force behind strong consumer spending, which essentially propelled economic growth in the face of high inflation. More job openings, low unemployment and higher wages meant more money in
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