Do you job, Morgan Stanley warns investors of negative job growth

Morgan Stanley told investors in a note that recent comments from Federal Reserve officials about the possibility of negative U.S. job growth may be overstating the degree of labor-market weakness, even as hiring cools and unemployment edges higher.

The debate intensified after Chair Jerome Powell said, “job creation may actually be negative,” citing concerns that payroll figures could be overstated.

Fed Governor Christopher Waller added that the economy is “close to zero job growth,” warning that this is “not a healthy labor market.”

Morgan Stanley’s Michael Gapen notes those remarks reflect officials’ “second-guessing the payroll prints since March.”

“In BLS estimates of the benchmark revision, payrolls are due to be revised down by about 76k per month in the 12 months through March 2025,” noted Gapen.

Powell said payrolls averaging 40,000 a month since April may be overstated by “about 60,000,” implying they “would be negative 20,000 per month.”

But Morgan Stanley says new data from the Census of Employment and Wages suggests the overstatement may be modest.