An under-the-radar job market update will be released on Wednesday, and it could shake up the Federal Reserve and stocks this week.

The Bureau of Labor Statistics will release estimates for its 2024 Preliminary Benchmark Revision to Establishment Data on Wednesday morning. The report will cover non-farm payroll data from April 2023 through March 2024.

The report is expected to come with a large downward revision to jobs growth over the 12-month period, according to an estimate from Goldman Sachs.

Goldman economist Ronnie Walker said the report could deliver a downward revision to labor growth by as much as one million jobs.

"Based on the Quarterly Census of Employment and Wages (QCEW) — the key source data for the annual benchmark revision — a large downward revision seems likely; we estimate on the order of 600k-1mn (or a 50-85k downward revision to monthly payroll growth over April 2023-March 2024)," Walker said in a note last week.

Such a large figure would represent the largest downward revision to nonfarm payrolls since 2010, he added.

An amendment of that magnitude could put pressure on the Fed and chairman Jerome Powell ahead of his key speech at the Jackson Hole symposium on Friday. Downward revisions to the data could spur the central bank chief to come off as more dovish and signal steeper rate cuts than markets are expecting.

The CME FedWatch Tool on Wednesday afternoon showed that investors see a 72% chance of a 25 basis point rate cut at next month's policy meeting.

"Should the report reveal a considerably smaller number of jobs that were created than were initially announced in monthly payroll reports, the Fed Chair's concerns could be amplified in his comments," LPL strategist Quincy Krosby said in an e-mail to Business Insider.

A large downward revision in job growth could also shake up markets, putting negative pressure on stock prices as investors grapple with a potential growth scare in the economy and recession concerns following the weaker-than-expected July jobs report.

"Markets, having recently experienced a growth scare that led to concerns that the Fed is behind the curve, will be monitoring Wednesday's release of the benchmark revision to see if the market's initial reaction was, in fact, correct," Krosby said.

But there's a catch to the potential downward revision in jobs growth, according to Walker, and it's got to do with immigration trends.

The QCEW data that's heavily relied upon in the BLS payroll revisions report doesn't account for immigrants, which have fueled gains in the labor market and the economy in recent years.

That means any large downward revision in job growth could be materially overstated.

"We believe next week's likely downward revision will exaggerate the degree to which payroll growth has been overstated by as much as 400-600k," Walker said.

Walker added: "The QCEW is based on unemployment insurance records, it likely largely excludes unauthorized immigrants, who we believe have contributed strongly to employment growth over the last couple of years."

The BLS report will be released at 10 a.m. ET on Wednesday.

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