Can we still trust US economic data? With Erica Groshen

Episode Summary

Executive Summary: The episode examines Trump’s firing of the BLS commissioner after a weak jobs report and argues the real threat to US economic statistics is not one commissioner’s removal but long-term underfunding, falling response rates, and pressure on statistical independence. Former BLS commissioner Erica Groshen warns that politicizing data could erode trust, worsen revisions, and damage policy and markets.

Main Topics: Trump’s firing of the BLS commissioner and political interference (Priority: 5/5): The conversation opens with Trump dismissing the BLS chief after disappointing jobs numbers. Groshen says the act is deeply concerning because it conflicts with the long-standing principle that federal statistics should be published without partisan influence. How the BLS commissioner’s role actually works (Priority: 4/5): Groshen explains that the commissioner’s job is to lead strategy, represent the agency externally, and guide difficult decisions—not to alter figures. The office is meant to protect data quality and agency integrity. Declining response rates and revisions in labor data (Priority: 5/5): The episode explores why payroll revisions can be larger at turning points, especially when companies respond more slowly. The discussion emphasizes that revisions are largely methodological, not political, and that granular data quality is deteriorating more than headline numbers. Funding cuts, staffing shortages, and modernization constraints (Priority: 5/5): Groshen argues that real damage comes from budget cuts, hiring freezes, staffing attrition, and the loss of advisory bodies and office resources. These pressures make it harder for agencies to modernize and maintain high-quality statistics. The future of US federal statistics: ‘StatsUSA’ reform idea (Priority: 4/5): Groshen proposes consolidating statistical agencies into a stronger independent 'StatsUSA' with multi-year funding, better IT, and authority to coordinate data standards and blended data products. Broader economic outlook and policy uncertainty (Priority: 4/5): The discussion links weaker statistics and current federal policy changes—especially tariffs and uncertainty—to a cooling economy, slowing growth, and rising inflation pressure, though not yet a clear recession signal. Risks of politicizing the Fed and lessons from abroad (Priority: 5/5): The episode extends the concern to potential pressure on Fed Chair Jerome Powell and compares data manipulation in countries like Venezuela, Argentina, and Greece, where tampering with statistics preceded severe economic harm.

Key Arguments: Firing a statistical agency head for bad numbers threatens the norm of fearless, nonpartisan publication of facts and may undermine confidence in all official data. The BLS commissioner’s actual role is to steward the agency, not to shape outcomes; the institution’s culture is designed to resist political manipulation. Most of the weakness in economic statistics comes from structural problems: falling survey response rates, reduced granularity, and difficulty measuring turning points. Downward revisions are often a feature of delayed reporting and imputation methods, not evidence of partisan bias or intentional fudging. The biggest operational threat to data quality is chronic underfunding: less money means less modernization, weaker systems, fewer staff, and less capacity to adapt. Sharing administrative data across agencies could improve statistics, but it must be done only for statistical purposes to preserve trust and legal/ethical safeguards. An independent, better-funded statistical system would improve timeliness, detail, and reliability; in contrast, politicization could trigger resignations, whistleblowing, and loss of trust. Weakening data quality would cascade into worse economic decisions by firms, households, policymakers, and markets. Attempts to pressure the Fed would likely provoke market resistance and/or legal checks, but would still add substantial uncertainty and harm investment and rates. Countries that politicized statistics suffered worse inflation and recession outcomes, showing that hiding bad data does not improve economic performance.

Data Points: Concern level about future quality of US economic statistics: 8/10 - Erica Groshen’s self-rated worry after Trump dismissed the BLS commissioner BLS funding change: around 20% down in real terms - Groshen says federal statistical agency funding has declined over more than 10 years, including BLS BLS staffing decline: close to 20% of staff lost - Groshen says hiring freeze and departure programs have reduced BLS staffing significantly BLS budget: about $700 million - Groshen characterizes the agency’s budget as very small relative to its importance Per-capita cost of BLS: about $4 per American - Used to illustrate how inexpensive the federal statistical system is Survey reporting window: three months / three requests - Companies are asked three times for employment totals for a given month, contributing to revisions UK labor force survey response rates: as low as 20% - The host compares US survey decline with the UK’s highly degraded survey response environment Federal advisory committee cost: almost no money - Groshen notes that ending advisory committees saves little and removes useful free expertise BLS commissioner quote origin: 1884 - Groshen cites the first BLS commissioner’s statement about fearless publication of facts Time of recording after dismissal: five days - The conversation is recorded five days after Trump fired the BLS commissioner Potential policy impact: 50% budget increase could yield major gains - Groshen says even a 50% increase in agency budget would be transformative Economic outlook: cooling; inflation creeping up; growth slowing - Groshen’s assessment of current US economic conditions

Pivotal Quotes: "I would say I'm at 8." — Erica Groshen: Her assessment of how worried she is about the future quality of US economic statistics after the commissioner’s firing "It is not to adjust the numbers." — Erica Groshen: Explaining the BLS commissioner’s role and the boundary between agency leadership and data manipulation "fearless publication of the facts without regard to the influence those facts may have upon any party's position or any partisan's views." — Erica Groshen: She quotes the first BLS commissioner to underscore the agency’s nonpartisan mission

Implications: Listeners should expect more scrutiny of official US data, especially if staffing, funding, or leadership becomes politicized. The episode argues that trust, not just methodology, is now a core economic asset; if it erodes, policy, markets, and business decisions will suffer.