We know new business applications have been on the rise. What we don’t know is how it impacts job creation. (Photo by Thomas A. Ferrara/Newsday RM via Getty Images)
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The U.S. job market just got a big rewrite.
On Sept. 9, the Bureau of Labor Statistics (BLS) said the economy added 911,000 fewer jobs in the year ending March 2025 than previously thought. It is the largest downward revision on record.
The cut comes after last year’s 818,000 revision, which at the time was the second-largest ever going back to 2003. The prior record was a 902,000 drop in 2009.
The timing isn’t ideal. A record correction comes as the agency itself has been under fire. Former commissioner Erika McEntarfer was pushed out after a large revision earlier this year. President Trump accused her of manipulating data during the 2024 election and has said the BLS “rigged” its numbers. He replaced her with Heritage Foundation economist E.J. Antoni, a move Democrats condemned.
Nonfarm payrolls (the proper name for the official monthly jobs number) aren’t an actual count of every worker. It’s a survey of employers. The BLS asks firms how many people are on their payrolls. The survey then gets adjusted to try to capture the parts of the labor market the survey misses.
The weak link is new businesses. A survey has a hard time catching companies that spring up or shut down between reporting periods. The government needs a way to fill in the gaps.
That is the role of the birth-death model. Introduced in 2003, it uses historical patterns to estimate how many new firms are likely opening or closing each month. It works well in normal times. But not all times are normal. And for the last two years, it has looked out of step with reality.
Each year the BLS performs what’s known as a benchmark revision. It reconciles the monthly estimates with actual employment records filed by employers for unemployment insurance. Revisions are usually tiny—fractions of a percent. Lately they have been, relatively speaking, massive.
The reason is a surge in new business formation.
Census Bureau data show that before 2020, Americans were filing about 300,000 new business applications a month. The number was steady for years. Then the pandemic hit. Since then filings have averaged more than 400,000 a month. Some months have been higher. People want to work from home. More are willing to try entrepreneurship. New tools, including AI, make it easier to start.
Whatever the reason, it’s having a big impact on big ticket economic numbers. Heather Long, chief economist at Navy Federal Credit Union, pointed to the surge in new business formations in a post on X on Tuesday to explain the record change to the jobs numbers.
In a note, economists at Goldman Sachs said the monthly adjustment made to payroll numbers based on the birth-death model was “probably too generous in second half of 2024.” That’s to say, it anticipated these new businesses either weren’t dying off as fast as they were in reality or not adding the same number of jobs as they typically had in the past.
The BLS has not yet figured out how to adjust its models for the shift.
How many of these businesses will last? Low barriers to entry may mean more failures. Cheap tools lower the cost of trying. Some people may chase dreams they would not have risked before. What’s for sure is the past two years of record revisions show the birth-death model isn’t capturing the jobs picture as well as it once did.
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Source: https://www.forbes.com/sites/brandonkochkodin/2025/09/10/heres-what-explains-the-big-jobs-revision/
