How to Read the Huge Job Growth Revision and What It Means for Investors

On August 1, 2025, the Bureau of Labor Statistics (BLS) delivered a surprise that rattled economists but left markets largely unfazed. The agency revised its May and June Nonfarm Payrolls data downward by a combined 258,000 jobs. June’s initially reported gain of 147,000 positions was slashed to just 14,000, while May’s already modest figure was revised lower as well.

The recalculated data suggests the slowdown in hiring began earlier than thought. The rolling three-month average of job gains plunged from 150,000 to just 35,000. President Donald Trump, objecting to what he considered an unflattering reflection on his administration, responded by dismissing BLS Commissioner Erika McEntarfer.

Market Response

If investors were rattled, they didn’t show it for long. The S&P 500 closed 0.8% higher on August 8 than it had on July 31, the day before the BLS release. In the bond market, the 10-year U.S. Treasury yield fell from 4.36% to 4.20% immediately after the news, before settling at 4.27%. Part of the reason for the muted market reaction was the interpretation of what the data meant for monetary policy. The softer labor trend reduced inflation fears and encouraged a shift toward easing. Two Federal Open Market Committee members joined two others already in favor of cutting interest rates as early as next month.

Cooling, But Not Collapsing

While the slowdown is sharp, from 158,000 new jobs in April to just 19,000 in May and 14,000 in June, it is not necessarily a prelude to an immediate recession. There is precedent for similar declines that were followed by years of continued growth. In October 2006, for instance, payrolls rose by only 17,000 after a 136,000 increase the month before. The next recession did not begin until January 2008. Likewise, after a drop from 81,000 jobs in December 2010 to 7,000 in January 2011, the U.S. economy avoided recession for another nine years.

New York Federal Reserve Bank President John Williams offered a measured assessment: “What we’re seeing I would describe over the past year as a gentle gradual cooling of the labor market but still leaving it in a still solid place.” Supporting his view, initial unemployment insurance claims have actually declined since early June, and hourly compensation edged up in the second quarter.

Why the Slowdown?

Economist Claudia Sahm sees the deceleration as “a complicated mix of supply and demand shocks, but an unsurprising outcome given the significant policy changes this year, including higher tariffs, less immigration, and downsizing the government.” In her view, the reduction in labor supply, especially from crackdowns on unauthorized immigration, is likely the key factor. Jed Kolko, chief economist at the Petersen Institute, supports this interpretation, noting that industries with a high proportion of unauthorized immigrants, such as construction and restaurants, have seen the sharpest job growth declines in 2025.

Why Revisions Happen and Why This One Was Big

Revisions to government statistics are nothing new. The BLS surveys more than 100,000 employers, but not all respond on time. Smaller businesses, in particular, often report late. Standard procedure is to revise initial payroll numbers in the second and third months after the reference month, once more data arrives.

There’s a tradeoff: waiting longer would yield more accurate numbers but would make the data far less timely for decision-makers. Since the COVID-19 pandemic, on-time response rates have declined in the U.S. and abroad, widening the range between preliminary and final numbers. Seasonal adjustment updates, applied to the new data, also contributed to the May–June revisions.

Although the downward adjustment of 258,000 jobs is among the largest in decades outside of recession periods, it is not unprecedented. Sahm points out that the June revision of -154,000 was not a record, and in percentage terms, larger revisions were common before 1990. Over the long term, average revisions have actually become smaller. What made this particular revision notable is that much of it was concentrated in state and local education, accounting for almost half of the June revision, due to hiring freezes tied to concerns about federal funding and the expiration of COVID-era education aid. Sahm remarked that “the real surprise was that the originally reported numbers did not show” this drop-off in the first place.

Other Data Confirms the Shift

Gene Epstein, former Barron’s economics editor and now manager of the Soho Forum debate series, emphasizes that the slowdown is not simply a statistical quirk. “The BLS’s finding of a substantial slowdown in job growth has been independently verified,” he notes, pointing to the Institute for Supply Management’s Manufacturing and Services surveys and private-sector data from ADP. This cross-verification gives investors confidence that the trajectory change in job growth is genuine.

What It Means for Portfolios

For now, markets appear to be treating the revision as evidence of a gradual cooling in labor demand, not a collapse. That distinction matters. A softer labor market could give the Federal Reserve more flexibility to cut rates, a potential tailwind for bonds and for rate-sensitive equity sectors such as real estate, utilities, and select growth industries. While the equity market reaction has been muted so far, it is worth monitoring upcoming payroll reports, ISM survey data, and inflation releases to gauge whether this is an isolated adjustment or the start of a sustained slowdown. Fixed income investors may find opportunities if yields push higher again toward 4.4–4.5%, where duration exposure becomes more attractive.