Economics obviously affects our quality of life. It’s more obvious at the personal than at the macro level as income determines our ability to acquire needs, food, clothing, and shelter; and wants, including the useful and the frivolous. The macro economy is just as important even though consumers may not feel it.
For example, even though the economy under the Biden administration experienced a faster reduction in the inflation rate than the rest of the world, prices remained higher than pre-pandemic prices. As consumers felt these higher prices in grocery stores and at the gas pump, the popular perception was that the economy was just terrible. Trump and Republicans, with the aid of the media, capitalized on these perceptions, and won the 2024 election. In elections, perceptions often outweigh facts.
But facts still matter in politics and economics. Policies that affect individual and business decisions depend on facts that are reliable. Normally, the very process of gathering macroeconomic data gets even less attention than the data itself. Until lately, that is.
President Trump has just sacked the Commissioner of the Bureau of Labor Statistics (BLS) because he didn’t like its recent monthly report. He not only complained about its revision — the report is always revised as late data arrives — but he accused the BLS of “rigging the numbers” to deliberately put him at a disadvantage. His nominee for Commissioner is an enthusiastic Trump supporter who has long criticized the BLS and proposes radical changes. Any effort to politicize the BLS will definitely cast doubt on the legitimacy of its reports, and is opposed even by most, if not all, observers including conservative leaning economists.
Let’s briefly review the importance of the BLS and why this agency, normally obscure to the general public, must not be politicized.
The primary purpose of the BLS is to measure labor market activity, working conditions, and price changes in the U.S. economy. Its economists and statisticians analyze and disseminate data on employment, wages, prices, productivity, and more. It composes many different indices, but the BLS monthly “big three” gets the major attention of the media and policymakers. These are the Consumer Price Index (CPI), the Producer Price Index (PPI), and the Employment Situation Summary that includes jobs and the unemployment rate.
The work of BLS professionals has long been considered the gold standard for the complex task of compiling these numbers and reporting the results. Policy makers throughout the entire world pay attention to these reports, including the media, U.S. politicians, researchers, Wall Street money managers, and, of course, the Fed. This still leaves room for legitimate debate over such things as the weights of these numbers, their implications and meaning, and what policies these numbers suggest going forward. No reasonable critic has suggested that the BLS statisticians or the Commissioner have greased the books for political purposes. And no critic who understands the purpose and importance of accurate data has suggested that the BLS Commissioner must promote the President’s broader agenda.
But that’s certainly not Trump’s modus operandi. He has nominated E.J. Antoni, an economist at the conservative Heritage Foundation and contributor to Project 2025. Antoni has been especially critical of post-pandemic economic data that has slowed down. This, while he has applauded BLS employment cuts by the so-called Department of Government Efficiency.
Even the conservative Wall Street Editorial Board has warned of politicizing the BLS. So too, have corporate CEOs who recognize the importance of a BLS that has credibility — credibility that would be severely compromised with a Commissioner prioritizing loyalty to the president over accuracy of numbers. It’s not that Fortune 500 CEOs are founts of wisdom regarding what’s good for the economy other than tax cuts for them. But even they recognize the importance of reliable government statistics that are not seen as greased, and reported only as they please the president.
Which brings us to the independence of the Fed. President Trump has long criticized his own appointee, Fed Chair Jerome Powell, as being too slow to reduce short term interest rates. Even Wall Street money managers and the most myopic CEOs realize that the Fed must not be the tool of any president. Trump has publicly called Powell “Numbskull,” continues to call him “Too late Powell,” and has threatened to sack him. But as his term will be up next year has thus far refrained. What Trump obviously fails to realize is that by not reducing interest rates which would be expansionary and likely inflationary, Powell is saving Trump from himself.
So where are we now? Trump’s “on again-off again” tariff proposals has created uncertainty that Wall Street hates, and tariffs are expected to cause prices to rise. Trump’s supporters have reminded us that tariffs have not caused the feared inflation. The counter to that is that in anticipation of inflation, importers have stocked up on goods, and have not yet had to totally pass higher prices on to consumers. However, the latest BLS Producer Price Index has risen by 0.9 percent, the largest increase in three years. In addition, the core Consumer Price Index (excluding gas and food) has risen by 3.1 percent, suggesting continuing inflation. Wholesale food prices have risen by 38 percent, not yet reflected in retail prices, but stand by, especially as migrant farm workers are deported.
Even with all this uncertainty, including anticipated inflationary pressures when tariffs take effect, financial markets remain flirting with record highs. That is no doubt due to a combination of tariffs not yet taking full effect, but mostly due to high business earnings. Wall Street has been eagerly anticipating the Fed to reduce interest rates, beginning with one or two basis points in September. Powell is in no rush, depending on forthcoming data, much to Trump’s anger.
Complicating matters is that we have a “good news is bad news” situation. Good news with strong earnings indicating a strong economy, but bad news for financial markets in that a strong economy doesn’t need to be stimulated, hence no need to reduce interest rates. But there are signs of a softening job market. The likely inflationary effects of tariffs combined with softening job markets pose the threat of the worst of all worlds, stagflation that would put the Fed in an impossible dilemma. A soft economy would suggest reducing interest rates. But that would put upward pressure on prices already pressured by higher tariffs.
Even with a Trump-appointed Fed chair, decisions will be up to the twelve-member Board. Those decisions will depend on data, including that generated by, hopefully, a non-politicized BLS. It is in all our interests that such data be as reliable as humanly possible.
— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears monthly in the Monroe Times.
