Why Accurate Labor Statistics Matter For The US Economy

0:07The president of the United States on Friday fired the head of the government's main economic statistics agency. This after a report came out showing a more negative picture of U.S. employment than previous data suggested. The civil servant President Trump fired was the commissioner of labor statistics, Erika McEntarfer, a labor economist nominated to the role in 2023 by President Biden. The Senate overwhelmingly confirmed her in 2024. Commissioners often serve under multiple presidents. President Trump defended his reason for firing with no evidence to back up his claim.

0:43Erika McEntarfer:We had no confidence. I mean, the numbers were ridiculous, what she announced, but that was just one negative number. All of the numbers seemed to be great. But those numbers were not ridiculous, according to economists, and the numbers in jobs reports are often revised after the fact. Today, we'll look at the consequences of a president firing the head of the government's main agency for economic statistics. That firing raises new concerns about political influence from the president on data in the future. So what could that mean for the U.S. economy? We discuss all that and more after this short break.

1:17I'm Jen White. You're listening to the 1A Podcast. Stay with us. We've got a lot to get to.

1:26Joining us from New York City is Allison Morrow. She's a senior writer for CNN Business. Allison, welcome to the program. Thanks so much for having me. So, Allison, we went over the top line there. The president fired the commissioner who heads the Bureau of Labor Statistics. But walk us through exactly what happened starting on the morning of August 1st. Sure. So, as expected, you know, the first Friday of the month typically is when we get the jobs number. And for most Americans, that may be a very ho-hum day. But businesses and investors and government agencies, of course, are watching it very closely for signs of economic strength.

2:01When the labor market's doing well, the economy is doing well and vice versa. So on Friday morning on August 1st, we had the jobs numbers come in for July, and it showed 73 ,000 jobs were added in July. And that was disappointing but not catastrophic. Economists like to see the monthly jobs come in around 150 ,000 every month to keep up with population and churn and various things. But the big news was the revisions that came in for May and June. Those numbers had looked pretty strong in May and June when we first got the preliminary numbers from the BLS. But they were revised as more survey data came in showing that there were actually fewer jobs created than previously expected.

2:50And that was what President Trump was very upset about. Now, it's important to note that revisions happen all the time and they can be very volatile. And while these were unusually big revisions, they were not unprecedented. So it showed up that in May and June, the 250-some thousand jobs we thought we had added over those two months were not there. And so we only added a few thousand in May and June. And that's, you know, it's a bad sign. It's not great. And the president was clearly upset about it. And we should just note that the bureau says job gains in May were around 19 ,000 and 14 ,000 in June.

3:31Before the president spoke out about the jobs report, Allison, what was the reaction from economic experts to the data on its own, especially compared to what they were expecting the numbers would say? Yeah, it was below expectations and not a report that anyone wanted to see. Even the White House's top economic advisor from the Council of Economic Advisors went on TV and said, listen, this isn't great, but, you know, there are seasonal swings to be accounted for. And it seemed like a very kind of ho-hum report. Not ho-hum, but perhaps just slightly more negative than expected. Um, that was the morning.

4:08And then by the afternoon, it was quite clear that President Trump was, um, more upset than some of his own economic advisors were. Now, a Bureau of Labor Statistics spokesperson confirmed that the Labor Department fired Commissioner McIntyre on Friday after President Trump posted on Truth Social about her. What reaction did you hear from those who watched the economy for a living to the president's decision to fire a civil servant in this way? I can speak for myself and for several economists I've spoken to and several have spoken out on social media. It's shocking. I think many jaws hit the floor Friday afternoon when we saw the news that the firing had happened.

4:50And it's not so much that Trump fired Dr. McIntarfer, but that he's sowing doubt in the credibility of the data itself. You know, he didn't just fire her and say, I didn't I didn't like the job she was doing. He said, I didn't like the job she was doing and the numbers were rigged against me. You know, this was a vendetta against his administration. And that is just so far beyond anything the BLS has been accused of in the past. The BLS really is a civil servant run organization that is just there to collect the data and make it presentable and, you know, try to get tabs on this unwieldy massive economy.

5:34it's really just the messenger. And by sowing doubt in what they're doing and claiming some kind of political angle, you know, Trump's actually kind of setting himself up for disappointment because he wants those numbers to be reliable. But now by saying he's willing to fire anyone who gives him bad numbers, you know, that's going to create more doubt from businesses and agencies who are relying on that data. Well, it also makes me think about the difference between what the numbers say and how everyday Americans experience the economy. We saw this during the Biden presidency where the economic indicators were very positive, but people didn't feel like the economy was working in their favor.

6:25So if we start to see this shift towards more positive economic numbers because of political pressure, and that doesn't align with how people are experiencing the economy, what does that mean for President Trump's agenda? I think that's a great question, and it's a really uncharted territory. So it's hard to say. We've seen other economies in the past, notably Greece and Argentina, have gone through situations where the government was trying to put a positive spin on inflation numbers and debt numbers, and it doesn't go well. Like when you erode the trust in your federal statistics, then the rest of the global economy can't really trust that your economy is doing what you're saying it's doing.

7:18That can affect your credit rating and what you pay on interest. And, you know, due respect to Argentina and Greece, wonderful places, they are not the world's leading economy. you know, the number one economy in the world that, you know, everyone else relies on for, you know, it's worth stating that we've had the BLS for over 100 years, and they've been doing their work so meticulously and without political interference. And that credibility has taken, you know, a century to build. And it is considered the gold standard across the world. And that is why people kind of, I think, I think often Americans kind of take for granted that we have these tabs on the economy, but they're really hard to get.

8:04You don't just plug into a search engine, like what's the unemployment number? People have to really go out and do the surveys and get the data and analyze it. And it has to go through all these processes in order to be reliable and to make sense to lay people like us who are not economists. Well, as recently as last week, days before this firing, members of the Trump administration touted other BLS data. That included Vice President J.D. Vance. He reposted data about job gains among U.S.-born workers. But after the president expressed frustration about the jobs report in the commissioner, his economic advisors began echoing those concerns.

8:44Here's Kevin Hassett. He's the director of the White House's National Economic Council.

8:48Erika McEntarfer:Well, first of all, they could be politically manipulated because they're so untransparent. There's a black box system out there making the jobs numbers that needs to be improved. Indeed, the U.K. saw a similar circumstance like this a few years ago, and they actually shut down the data agency for a month or so until they got their ducks in a row. That was Kevin Hassett speaking to CNBC's Squawk Box. How do these arguments from the president's advisers, who now have also begun to express doubts about the data, compare to what economists say about how the BLS actually puts together these reports?

9:22It really doesn't comport with reality from what I can tell. There is absolutely no evidence that the BLS is manipulating or trying to put some kind of spin on the data. It's a more than 2 ,000-person organization, and there are many teams working in concert. And, you know, what's interesting is Dr. McIntyre was overseeing all of those people, of course, but she doesn't actually handle the numbers herself. And I talked to multiple economists who said that for one person or one team or any part of the massive operation that comprises the BLS, if any of them were to try to do something unorthodox, there would be alarm bells all over the place.

10:13There would be whistleblowers. People would be speaking to the media. It just wouldn't really happen. And, you know, I will say that is kind of the silver lining or the hope that a lot of economists and business leaders are holding on to, which is that even if Trump puts in someone to replace McIntyre for who's more of a loyalist and wants to put a positive spin on things, there's a whole institution there that is built around civil service and the desire to protect that data. Let's take a quick pause here. Coming up, we hear from economists about what the latest data from the BLS tells us about the U.S.

10:49economy and the importance of having reliable statistics from the agency. We'll be right back.

10:59Let's get back to the conversation and add a couple of new voices. Joining us from Washington, D.C., is Valerie Wilson. She's director of the Program on Race, Ethnicity, and the Economy at the Economic Policy Institute. She's also a trained labor economist. Valerie, welcome back to 1A. Thank you for having me. And joining us is Betsy Stevenson. She's a professor of public policy and economics at the University of Michigan. She was chief economist of the Labor Department from 2010 to 2011 in the Obama administration, and she served as a member of President Obama's Council of Economic Advisors. Betsy, welcome back to you as well.

11:33It's great to talk with you. Now, Betsy and Valerie, you're both economists. I'd love to briefly hear your reaction to President Trump's firing of the commissioner following the latest jobs report. Betsy, I'll come to you first. You know, I actually was on vacation with my family in Japan. And I woke up very early in the morning because of jet lag. I rolled over, looked at my phone and saw this news. and immediately woke up my husband and said, oh my God, the U.S. has reached a new level. And I think that it was something that was so far beyond what I expected would be possible. And that's, I should say, I wrote an op-ed in the first term that said, stop thinking that Trump's going to make up the data.

12:29our statistical system has too much integrity for anybody to be making up the data. So I don't care if you're on the left and you think it's Trump faking data, you're on the right and thinking that it is Obama or Biden faking data. There's no faking data because we have a very, very rigorous independent statistical system that's admired around the entire world. Ironically, I was in Japan to meet with a Japanese government to talk about statistics and government data and how to have good government data. And the reason you don't just fire the head of the statistical agency who, when you don't like the data, is because that rigorous statistical system gives us all sorts of benefits.

13:21And it really is about the best case of shooting the messenger as I have ever heard. Because the BLS commissioner, she's not the one out there designing the system, approving the funding, figuring out how to collect the data. She doesn't stamp the numbers and decide what's going to be released. She is overseeing the process of releasing the data, but she has very little to do with what numbers are actually released. Well, Valerie, what are the main sources of information that feed into the Bureau's monthly jobs report? So that jobs report is based on two surveys. There is the Current Population Survey, which is known as the Household Survey.

14:07They talk to about 60 ,000 eligible households each month to get information on employment, unemployment. It allows them to be able to collect information for different demographic groups. The other survey is the Current Employment Statistics Survey, and that's known as the Establishment Survey. BLS surveys about 120 ,000 businesses and government agencies that represents over 630 ,000 individual work sites. So the part of the report that he has taken issue with is the data that comes from that Current Employment Statistics Survey. That gives us information on non-payroll employment. And as has already been said in the broadcast, gets revised twice beyond the month that it is initially released.

15:01And the purpose of those revisions is accuracy, improved accuracy of that data as additional information becomes available. Well, we got this question from Tom who asks, why was there such a disparity between the initial job report and the corrected report for May and June? Betsy, your thoughts? Yeah, so let me just continue on with an explanation of this. The current employer, the CES, the Employer Survey, it's surveying employers and asking them a very specific question. How many employees did you have on your payroll in the week that includes the 12th of the month? And the reason it's that specific is we want numbers that are comparable over time and that are capturing a specific period and that don't have room for there to be fudging.

16:01You know, maybe the next week or the week before is a better week. You don't want the BLS picking that. No, it's always the week that includes the 12th. Now, let's think about that. The week that includes the 12th of the month, we want to know the answer within the next week or two. So when that data is released, it's like a week or two after these payrolls. And if you're a person who gets paid monthly, I happen to be one, your employer hasn't even finalized their payrolls for the week that includes the 12th of the month at the time they're being asked to send those responses back in. So we have several sources of error when we release the data that quickly.

16:44One is some employers have just simply not responded to the survey. They've just not told the BLS the answer because they haven't gotten around to it, because they're busy. And then there's a third possibility. Maybe they went out of business. The BLS doesn't have a lot of time in that week and a half before they're going to release the data to investigate which of those it is. So that's one reason that we get revisions is simply a lot of employers respond with information about who was on their payroll with a lag. They might be sending those forms into the BLS right now as we speak. It might even take them another month.

17:26If you've ever been delayed in responding to a request for information, not done it the second you get it, you can sort of understand. And businesses, their first priority is their business not responding to the government survey. So, Valerie, how often do we see revisions to the jobs report of this magnitude? What does that indicate to you about what's happening in the economy? Yeah, I think the magnitude of the revisions did catch a lot of people's attention. We don't often see revisions that large, although, again, revisions are not unusual. Betsy's already talked about some of the reasons why you may have large revisions.

18:10And I think in particular, given where we are now, may actually have a huge influence on that. We've been saying for months that the likelihood of a recession is increasing given the chaotic nature of the administration's economic policy. The business closings, business births aspect is very uncertain at the time. So a lot of that information is actually forecasted using econometric modeling that relies on past data. So if we are actually at an inflection point in the economy, then that past economic data that has been pretty good for most of this year is not as reflective of the current reality as things start to move in the opposite direction.

18:58So some would even argue that, you know, a large revision or at least revisions that tend to get worse than the ones we've seen in previous months are what we'd expect at an inflection point when we are nearing a recession. Well, while the president claims political motivation, his firing is being characterized exactly the same way now by many critics of the move. Here's William Beat, the BLS commissioner that Trump appointed during his first term speaking to the PBS NewsHour. And when you begin to say, well, you know, it's probably politically rigged or it's not right or something that throws aspersions on it, not just that it's inaccurate, it's going to take some time to correct that damage.

19:40Now, we heard earlier from Allison Morrow that we haven't seen this sort of reaction by a presidential administration to the jobs report or other statistics coming out of BLS, that there hasn't been this sort of politicization of the data. But we got this question from Tom who says, how can anyone feel confident in the next director of the BLS? And Betsy, as someone who was part of the agency, I'd briefly love to hear your answer. I don't know how—it's not about the next director. It's about how—the fact that Trump just told the entire statistical apparatus of the United States that if you don't release data I like, I will fire you.

20:25that that's I think why the whole um that news was so shocking to so many people is I still think it's going to be quite hard to get the thousands of people who do this data to all cheat um but I don't think we should have a lot of trust in the next BLS director that Trump appoints because he's going to be very clear to them that you should only release data I like or I'll fire you. We're talking to Betsy Stevenson. She's a public policy professor at the University of Michigan. Also with us, Valerie Wilson, director of the program on race, ethnicity, and the economy at the Economic Policy Institute, and Alison Morrow, a senior writer at CNN Business.

21:08So, Alison, when you look at the broad picture of the economic data we have right now, what does it tell us about where the U.S. economy stands? Sure. And I'm sure Betsy and Valerie will have, you know, more nuanced thoughts on this. But from what I can tell, you know, we're not in a crazy downward spiral. You know, it's not happening like as quickly as COVID, the last recession we had. But there is significant weakness. You know, many economists have said we're kind of on the precipice of a recession. The weakness in the job market is often the first thing that we see. And we've seen consumer spending also start to flatline, economic growth not being quite as robust as hoped for.

22:01So all of these things kind of add up to a, well, we're not, maybe not in a recession yet. Of course, we often don't know we're in a recession when we're in one. But there are a lot of flashing lights right now that suggest we are weakening, we are slowing. And that is, you know, of course, increasing pressure on the Federal Reserve to figure out how to operate in this climate. And, you know, without that reliable data, the Fed is kind of flying blind on how the employment situation is looking. So that opens up all kinds of problems. Well, Valerie, who so far is being most impacted by a softening in the job market?

22:42Well, in the latest BLS release, we saw an uptick in the Black unemployment rate in particular. You know, that series can be volatile. We have seen spikes occasionally over the last several years, but typically it, you know, corrects itself and sort of returns to the normal trend. Black unemployment has gone up for two consecutive months now, is now 7.2%, which is the highest it's been since 2021. Again, the unemployment rate alone isn't something that I necessarily just isolate as a reason for concern. But in addition to that rise in the unemployment rate, we're also seeing the employment population ratio decline, again, for consecutive months.

23:31And that means just the share of the civilian Black population with the job is declining. So those are actual employment losses. Many people look at that unemployment rate in particular as sort of a leading signal of where things may be going, because historically we tend to see the Black unemployment rate rise faster, rise more, and recovers more slowly. And do you know why, Valerie? I think it's a number of structural factors that come into play. Again, when we're in a recovery, that rate also falls more slowly. So African-Americans are typically the last to return to pre-recession unemployment, meaning they're the most recent people who have been hired.

24:19So when companies begin to lay off, people who were the last hired tend to be the first fired. Also, because industries that get impacted more and that are easier to, are more likely to cut people are also industries where African Americans tend to be overrepresented. So, Betsy, how does the view of the economy we have after this most recent jobs data compare to how economists and other economic watchers were describing the U.S. economy in the spring? And I'm thinking specifically of the period after President Trump's announcement of tariffs against dozens of countries in April. You know, the irony of this whole thing is that the employment report just was not that bad.

25:01Yes, there were some revisions. I think we're still seeing a labor market that is hanging in there and doing actually okay, particularly given the large number of immigrants who've been removed from the country are discouraged from work and the tariff situation. You know, it's impressive that it's doing as well as it is. Let's head to a quick break. Still to come, what happens to the economy if people, companies, and other countries stop trusting U.S. economic data due to perceived political interference? That's coming up next.

25:36Let's get back to our discussion. Let's help us better understand how these statistics impact businesses and their decision-making specifically, especially given that until this point, businesses operated under the assumption that those statistics are independent of political influence from a presidential administration. You know, one way to think about it is just it's another sense of uncertainty for companies. If they can't trust the data, what they want to know is, how much am I going to be able to sell? Is this an investment that I'm going to be able to start making a good return on? Where should I locate my next store?

26:13or where's the population growing, where is it shrinking, where are there a lot of people willing to work? Those are the kinds of things that businesses turn to the data for. And I want to just come back to this word certainty. The more information you have, the better able you are to make an investment with a known return. We have already seen a lot of uncertainty added to businesses in the United States through tariffs. They don't know how much they're going to be paying for their inputs. or for the things that, how much they're going to have to charge for what they're selling and therefore how much people might buy.

26:49And now we're adding another level of uncertainty. They don't know what American, whether Americans are going to have jobs, which affects their ability to buy things and whether they're going to be available to be workers for them. Alison, you mentioned this briefly earlier in our conversation, but give us an example of where we've seen political interference in economic statistics affect a country's economy? Yeah, I mean, I think, you know, I'm not a historian, but the sanctity of the U.S. federal stats has been pretty consistent in the last century or so. You know, there was a bit of a dust-up in the 70s when Nixon thought there was a conspiracy at the BLS against him and nothing really came of it.