Can we keep trusting US economic data?

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0:34We got some new jobs numbers from the U.S. Bureau of Labor Statistics this week, but this time they're under extra scrutiny. That's because it's the first major report we've received from the BLS since President Donald Trump fired its commissioner and nominated his replacement, a Trump loyalist and economist from the Conservative Heritage Foundation. And ever since then, some have been wondering if those figures will stay reliable. This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all of the things happening in U.S. politics, finance, and the economy. I'm Sonia Hudson, and this week we're asking, can we still trust federal economic data?

1:18Here with me to discuss is Erica Groshen, who served as former commissioner of the Bureau of Labor Statistics from 2013 to 2017. She's now Senior Economics Advisor at Cornell University's Industrial and Labor Relations School. Welcome, Erica. Thank you, Sonia. It's a pleasure to be here. Happy to have you. And we've also got Miles McCormick, the FT's U.S. economics correspondent. Hey, Miles.

1:42Myles McCormick: Hi, Sonia. Good to be back. Good to have you. So, Miles, tell me about these numbers that we got today. What did they say and why are they important? So, we had a pretty bleak jobs report come out this morning. BLS reported that there were job gains of just 22 ,000 in August, which was way less than the previous month and way less than analysts were expecting. Like 50 ,000 jobs less than last month, right? Exactly. I was sitting at my computer earlier, kind of messaging back and forth with editors, and we were expecting something similar to last month in the kind of 70 ,000s, but it was way, way below that.

2:28Myles McCormick: And then on top of that, the BLS also revised down its June numbers into negative territory. So saying that the U.S. actually shed jobs in June. And that's the first time that's happened since 2020 in the aftermath of the COVID-19 pandemic. Yeah. Erica, do you have any insights on these figures? I mean, what did they tell us about the U.S. economy? Well, it's hard to disagree with Miles. This is a pretty sobering jobs report. The U.S. economy hasn't created very many jobs the last three months. I mean, the three-month average change is 29 ,000, which is basically zero for an economy of the size that we have.

3:10So I think it's a signal that we have had a big decline in job creation in the U.S. And we don't know whether that's going to now go into negative territory or stay here for a while. But even if it stays here for a while, we would expect the unemployment rate to be rising because that's not creating enough jobs for the people who are entering the labor market. So flashing yellow now. Not sure it's red, but definitely flashing yellow. Now, Erica, when you were at the BLS, what was the process for calculating these numbers? And what influence did you have as the president's appointee on that process?

3:54So the employment situation is the product of two separate surveys. So I'm going to focus really on the payroll survey, because that's where we get the jobs numbers that we've been talking about. And that one goes out to over 100 ,000 employers, which covers over about a third of the jobs in the U.S. And the questions that they're asked are fairly simple. How many people did you have on your payroll for the pay period that contains the 12th of the month? BLS takes that information in and then it goes into a highly automated program that is checked a bit and then spits out the final products. I didn't see any number before it was final.

4:47The only thing that I could influence was the narrative, the paragraphs that accompany those tables and data. So I was asked to okay it or suggest any edits. And my edits were pretty minimal. Our goal is to get the numbers out there in it as objective a way as possible. Miles, give us some recent history here. Why did Trump oust the former commissioner? You know, what did she do wrong in his eyes?

5:22Myles McCormick: So this time last month, we had another fairly bleak jobs report and BLS put out numbers that showed job growth was slow not only in July, but it revised down in a pretty chunky way its numbers for the previous months. The president was furious and he took it personally. he claimed that the numbers were rigged against him and the Republican Party. And within hours of that report being put out, he had sacked the commissioner, taking a basically unprecedented step to wade in and oust the head of the BLS simply because he did not like the numbers. And I should say, there was no evidence or suggestion beyond what the president said that anything untoward had been done with the numbers.

6:17Myles McCormick: But because of his outrage at what the numbers said about the state of the US labor market, the state of the US economy, he took the ax out. And, you know, we should note here that E.J. Antony, who is Trump's pick for BLS commissioner, he has not started work yet. He still has to be confirmed by the Senate. The Bureau has an interim commissioner right now. Miles, do we know what the impact on data collection has been since the former commissioner was fired? Well, as Erica outlined earlier, there is a fairly rigorous process for how these numbers are pulled together. There's multiple steps that goes through multiple people involved.

6:59Myles McCormick: And yeah, there was significant concern when the president ousted the former commissioner, that there was going to be a politicization of the numbers, that the administration would try to meddle with the data and make the report reflect a better picture of the economy. But what I will say is that if the administration was meddling in the numbers, I don't think they'd put out the report that they've put out today, which, again, is a pretty bleak picture. So from my point of view, there's no suggestion that anything's changed. Well, let's talk a little bit about E.J. Antony himself, Trump's pick for BLS commissioner.

7:44He previously worked for the Heritage Foundation, which is a conservative think tank that famously drew up the Project 2025 manifesto. And, you know, Antony has not been shy about criticizing the BLS. Erica, what was your reaction when you heard he was the president's pick? Who?

8:08Frankly, I had never run across his work before. I had never heard of him before. So that was my first reaction. Who is this person? And then learning a little bit more. On the one hand, there was, oh, this is a person who's been very critical about the BLS. he made some mistakes about BLS processes and some allegations that I knew not to be true. And so that was worrisome. He does allege political interference, and those criticisms are totally baseless. Those I would disregard completely. Then there's another kind of criticism that he has that has some basis in truth, which is that the BLS has been slow to modernize.

9:02And this is true. However, you know, the fact that he's a conservative was not at all worrisome to me because my successor, Bill Beach, was also conservative and was a fine commissioner of the BLS. So his political leaning was irrelevant, but I was concerned about his work. And, you know, there's evidence of him not understanding various aspects of how BLS collects data and processes it. Those things can be learned. But I guess that was my reaction. Miles, what does this all tell us about the future of the BLS? I mean, do you think that we'll be able to trust the data coming from this agency going forward?

9:51I think, you know, a lot of people have pointed to, you know, the president says the numbers are bad. So he fires the BLS commissioner and then he brings on this new person who is really critical of the way that the data is collected. Do you think that we're going to be able to trust the data from the BLS going forward? How real is this fear that people are having?

10:13Myles McCormick: I mean, there are concerns. I mentioned earlier that when the president ousted Erica McIntyre, there were concerns in the economic community about the politicization of the BLS. And those politicization concerns were only escalated when the news came out that Anthony was going to be nominated as her successor. And, I mean, as Erica said just now, So it wasn't so much that he came from the right. I spoke to a lot of right-leaning economists and they said, even though they might agree with his policy positions on a lot of things, he was the last person they would have chosen because of his lack of experience, lack of qualifications.

11:01Myles McCormick: I mean, he was put in the role purely because he had been an outspoken critic of the BLS. So, I mean, in terms of what this means going forward, I suppose it'll be a real test of the kind of checks and balances that are in place. He's the president's man. But as Erica outlined earlier, the BLS has a very stringent and rigorous system for how data is collected and how it's put out. So his ability to meddle in the figures should, in theory, be limited. I mean, I should say it comes at a time of unprecedented political intervention. The president has shown himself willing to throw his weight around in a way that none of his predecessors really have when it comes to kind of taking on institutions and officials with whom he disagrees.

11:57Myles McCormick: So I suppose this situation at the BLS, we need to kind of view it in a holistic sense in terms of the direction of travel in this country, which in a lot of ways is very worrying. Oh, Erica, what do you think happens in a world where there isn't a universal consensus for economic data? If there is this concern that a new BLS commissioner could be meddling in the way these figures are calculated in a political way? I think there will be telltale signs if that kind of politicization or interference occurs. You know, there are things to watch out for, like delays or accelerations in news releases.

12:47Those are supposed to keep to a rigid schedule. They're not supposed to be monkeyed with. Unannounced or unexplained changes in methodology, formats or practices. And if that starts to happen, then what happens? Well, I think you get a cascade of really bad results. When people no longer trust that the data is objective, then they're not going to use it in the same way that they did before when they thought the data was trustworthy. Then you get what's technically known as lousy decisions, right? You also can get a degradation of the data itself. Because remember, we're talking about surveys. This is all voluntary participation on the parts of households and businesses.

13:38And if they think that the BLS isn't using them to make trustworthy data, then why would they take on the burden of responding? You get more uncertainty about the state of the U.S. economy and about critical information that people need to make decisions. So if you're talking about the inflation numbers being off, then you have people no longer signing long-term contracts that are indexed to the official measure of inflation because they don't trust the measure of inflation. And so you get a decline in economic activity and economic growth because of that. So there are a lot of really bad consequences that come from a choice in the information age to fly blind instead of with good information.

14:31I want to thank our guest. Erica Groshen is a senior economics advisor at Cornell University and former commissioner of the Bureau of Labor Statistics. Thanks so much for joining, Erica. You're welcome. My pleasure. And Miles McCormick, he's our U.S. economics correspondent. Thanks, Miles.

14:49Myles McCormick: Thanks, Sonia. And thanks, Erica. All right, we're going to take a quick break. And when we come back, we'll do exit poll.

15:20Myles McCormick: operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today.

15:39We are back with Exit Poll, where we ask an FT journalist one of your questions. This week, we have Antoine Gara, the FT's U.S. private equity and deals editor. Antoine, thanks for being here.

15:53Myles McCormick: Yeah, thank you for having me. This week's question comes from Stephen in Missouri. Let's play it real quick. Given the recent changes regarding alternative assets in 401ks, do you think that people may be seeing a different default investment rate? I know much of the world's retirement is currently sitting in the S &P. Do you think the changes in this might result in a slowdown in the growth of the S &P? I'm interested to hear your guys' thoughts on it. Antoine, what do you make of that? It's very early stages right now. But yes, the idea is that people might set a different default investment rate.

16:29Myles McCormick: If you went into a target date fund and that target date fund was now not just a mixture of stocks and bonds, but also a mixture of stocks, private equity, private credit, and public bonds, then yes, you effectively are sort of changing the kind of default mix of your retirement plan. And that's exactly how they're thinking about it. That being said, it's all going to be done via a professional fiduciary. So you would theoretically invest and a BlackRock target date fund, that target date fund now, they might offer target date funds with private market options with, let's say, a 10 or 15 % exposure.

17:12Thanks, Antoine. And Stephen, I hope that answers your question. If you are listening right now and have a question about U.S. politics and the economy, send me a message at the email in the show notes. Make sure to include your name and where you're from. And if you send us a voice memo, We may even play it on the show.

17:36This was Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes. Our show was produced by Henry Larson and mixed by Alex Higgins. We had help this week from Lauren Fedor. Special thanks to Pierre Nicholson. I'm Sonia Hudson. Our acting co-head of audio is Topher Forges, original music by Hannes Brown. We'll be back next week for more U.S. political analysis from the Financial Times. Capital raising is being redefined in real time, from macro disruptions and shifting investor expectations to AI-driven demand and the rise of private credit.

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