Post-tax cut job gains weren't quite as great as initially thought

Key Points
  • The government revised its job growth totals for the year ending in March 2019 down 514,000.
  • That was higher than the original estimate but not as bad as some on Wall Street had feared.
  • Despite the slower pace of previously reported numbers, the jobs market remains strong, with a 225,000 addition to January payrolls.

That high-powered job growth following the 2017 tax cut lost a little of its sizzle Friday after the government released revised figures over the past year.

Benchmark revisions to the March 2019 payrolls number showed the economy created 514,000 fewer jobs than initially reported over the previous 12-month period. That was slightly more than the initial estimate and took monthly job creation below 200,000 in the months following the December 2017 reform bill that slashed corporate taxes and cut levies for many Americans.

"The increase in the pace of payroll growth visible in the previous data for 2018, which most analysts ascribed to the tax cuts, has disappeared," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. "The new data show that the trend in job growth stepped down in 2016 and has been little changed, net, since then."

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However, the pace is still a strong one.

Friday's report on nonfarm payrolls showed a gain of 225,000, much stronger than what Wall Street had anticipated and a sign that there is considerable slack left in the economy and room for more growth.

In addition, the subsequent months' revisions actually showed the labor market gaining momentum through 2019, with gains between April and December revised up a total of 92,000.

"That means the rebound in employment growth in the tail end of last year only looks stronger now, suggesting that the economy has more momentum than we previously believed," wrote Paul Ashworth, chief U.S. economist at Capital Economics. 

For all of 2019, job gains were 175,000 a month, according to monthly revisions the government also released Friday.

The annual revisions, then, appear more to be backward-looking data that don't portend any meaningful slowing ahead, according to multiple economists who reviewed the latest numbers.

"Much ado about nothing," was how Joseph LaVorgna, chief Americas economist at Natixis, said of the benchmark revisions. "Anybody who's talking about revisions is trying to spin a negative story. You've got job growth across the board, high participation. Manufacturing is weak and you're still getting this kind of growth? The labor market is booming."