Can U.S. economic data be trusted?
By David Enna, Tipswatch.com
Bloomberg carried an article last week with a stunning headline: “Distrust In US Inflation Data Threatens $2 Trillion Market.” The premise was that the $2 trillion market in Treasury Inflation-Protected Securities could crack if U.S. inflation data are politicized.
This comes as no surprise to Tipswatch readers, where commenter discussions have raged over the last week on the safety and value of TIPS and Series I Savings Bonds, which also rely on accurate inflation data. The fury was set off by President Trump’s firing of Erika McEntarfer, head of the Bureau of Labor Statistics, after a huge downward revision in jobs numbers. Some examples:
The firing of the BLS Commissioner for no reason will mark a seminal moment in our economy and markets. World markets and investors will question whether our data is being manipulated for political purposes. …
CPI stats will diverge completely from reality, and anyone who talks of it will be blacklisted and fired or their employer punished into firing them. TIP and i-bond payouts and all COLAs will be paid based on these opinion statistics. …
My worst fears as an I-bond and TIPS investor are about to be realized. Manipulated inflation data is on the way. …
I will definitely be holding off on new purchases until I see what happens with the BLS numbers. …
I’m NOT reaffirming my commitment to TIPS.
Reality check
The Bloomberg article (the link is outside the paywall), noted that government data have a major effect on asset prices and especially for TIPS, which rely on monthly inflation data to set ongoing principal adjustments and future coupon payments.
“If there is politicization of the BLS, and somehow the data is not credible it poses an enormous risk over time to the TIPS market,” said Amar Reganti, fixed income strategist at Hartford Funds.
That concern was echoed by Michael Feroli, chief US economist at JPMorgan Chase & Co. “The $2.1 trillion market for TIPS is built on a foundation of trust in the construction of the CPI data,” Feroli wrote.
Fear that the Trump administration will “cook the books” predates the firing of McEntarfer, but the firing set paranoia into overdrive. Is this fear realistic? About a month ago, I had a long talk with a now-retired high-level official of BLS who worked on the jobs reports. He noted that the economists and statisticians at the BLS would mightily resist any attempt to fake the numbers.
“It won’t happen,” he said. “There is only one political appointee at the BLS, the commissioner.” (Until Aug. 1, the one political appointee was McEntarfer. She has been replaced temporarily by William Wiatrowski, who has been deputy commissioner since 2015 and acting commissioner under both Trump and Biden.)
The retired BLS official did note that the BLS’s declining budgets, cuts in staffing and poor survey response levels could lead to inaccuracies. The BLS is relying more on “estimation” when full data aren’t available. “When you are estimating, you tend to go more with the status quo until you get a more complete picture,” he said.
This was the topic of a recent Bloomberg Odd Lots podcast, where hosts Joe Weisenthal and Tracy Alloway interviewed Bill Beach, BLS commissioner from 2019 to 2013. Listen to the podcast, titled “How Trump just politicized US economic data.”
A lot of the discussion is a deep dive into BLS operations, but here is one key point: Beach noted the BLS commissioner (up to this point) “plays no role whatsoever in massaging the data.” Trump accused McEntarfer of “faking” the jobs number and manipulating them for political purposes. I’d say with near 100% certainty that didn’t happen, and faking the numbers will be difficult for any future Trump appointee.
See also: A historical look at political influence over the BLS
Jack Hough’s Streetwise podcast also took on this topic this week, from an investor’s viewpoint, airing a fascinating interview with Thierry Wizman, a strategist at Macquarie Group and author of a recent report titled “How Do You Play the Data Integrity Mess?”
Wizman pointed out the poor jobs data for June actually worked in Trump’s favor, at least partially, because the Federal Reserve now seems likely to cut short-term interest rates two to three times this year, something Trump has been demanding. But surging inflation data would be viewed very negatively by Trump because it would be an indictment of his tariff policy.
Obviously, firing the head of the BLS is a way of acting upon his impulses, or at least his inherent view, that there is something wrong with these agencies. And that just changing the person who’s running the show is a way of fixing this. If you take this all at face value, what he wants is accuracy. Do we really believe that? Probably not.
What I think he wants, which is more consistent with his appointments generally speaking during this administration, is someone who is loyal. … And I mean politically loyal.
Hough asked Wizman specificially about TIPS from an investor’s point of view if inflation data becomes suspect.
That is a risk, and I would venture that if people start thinking this way about these changes, well then they’re not going to want to hold these TIPS. They certainly don’t want to hold the ones that mature during the period in which you believe that the physical agencies may corrupt the CPI calculation. But again, we’re in the realm of speculation here. We’re not yet at a point where we can say that the process will be affected.
The big picture
Will investors now look at all the BLS jobs and inflation reports with a wary eye?
Yes, of course they will. It is human nature. Every economic report we see going forward is going to have a faint stigma of manipulation, even if it isn’t true. From Barron’s columnist Randall Forsyth last week:
“In a scenario where TIPS are unable to provide a hedge against inflation because of the uncertainty around the CPI index published by BLS, its overall demand might start decreasing,” wrote Morgan Stanley fixed-income analysts Aryaman Singh and Matthew Hornbach in a client note.
In other words, if the market senses the CPI is being suppressed artificially, it will exact a penalty in the form of a lower price for the securities, which translates into a higher yield.
Forsyth goes on to note historical instances of data-manipulation in China, Argentina, Turkey, with mostly disastrous results. These are not models the United States should follow. He ends with investment advice:
The suppression of reported inflation would mean inflation-indexed investments such as TIPS would underperform. … A better hedge would be gold, which should benefit if the CPI is manipulated.
An alternate view
Michael Ashton, a reliable inflation watcher who tends to support Trump’s economic policies, dispelled some of the gloom and doom in a podcast posted Aug. 6. He also noted the problems in BLS data collection and admitted that economists worry the firing of McEntarfer “could diminish the credibility of the Bureau of Labor Statistics.”
Ashton asks, “Is this a sign that the end of government credibility (okay, stop laughing) is nigh?” Opposing views are important to hear, so here you go:
“This particular problem falls into the category of it doesn’t really matter,” Ashton says, noting that interim commissioners have headed the BLS about a quarter of the time since the 1990s. He makes the argument that CPI reports — even with some estimation — are much more reliable and consistent than the jobs data.
Ashton, by the way, has argued the Fed should not be cutting short-term interest rates in this current economy because the risks of inflation remain high.
My thoughts
Is the sky falling? No. But things are very cloudy.
Staffing, budget and process issues at the BLS have been called “a slow-moving train wreck” requiring immediate attention. Beyond TIPS and I Bonds, the CPI data are used to calculate Social Security benefit increases, some pension increases, wage increases, etc.
I remain committed to TIPS and I Bonds as investments. I don’t think inflation data will suddenly become an outright fantasy, but could be manipulated in minor ways. Budget and staff cuts could cause inaccuracies. And it could be that because of investor wariness over data, we will see real yields on medium- to longer-term TIPS begin to rise.
We will get the July inflation report at 8:30 a.m. EDT on Tuesday. Economists are forecasting an increase of 0.2%, a run-of-the-mill number. Whatever the result, I think we can trust that BLS staffers did their best. The interim commissioner has been at the BLS for a decade. Nothing has changed at this point.
It’s unfortunate that these two ultra-safe and ultra-useful investments — TIPS and I Bonds — are now called into question because of a rash decision by the president. Yes, the firing of McEntarfer could be justified after the massive jobs-number revisions. That was a big miss. But when Trump accused the BLS of “faking” and “manipulating” numbers for political reasons he opened a dangerous Pandora’s box.
Investors have noticed. The result could be declining demand for inflation-linked investments. That’s too bad.
Aug. 1: President Trump fires head of the Bureau of Labor Statistics
Aug. 4: Treasury reaffirms its commitment to TIPS
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Treasury Inflation-Protected Securities 
I’m trying not to fall prey to conspiracy theories about intent to “cook the books” on the CPI or other government statistics.
But, beyond the events of the past couple weeks, I also just remembered that the Trump administration had been in office barely a month when it abolished multiple longstanding committees of volunteer experts who were advising the federal government on measurement of inflation, the economy generally, and the census.
So, we now have the late February/early March firing of expert advisors (serving free of charge), followed a few months later by the firing of a BLS commissioner who had originally been confirmed by an overwhelmingly bipartisan Senate majority of 86, now followed by the nomination of a representative of the Heritage Foundation to replace her.
https://www.msn.com/en-us/money/markets/trump-administration-disbands-two-expert-committees-on-economic-statistics/ar-AA1BpQKa
https://apps.bea.gov/fesac/
https://www.science.org/content/article/panels-giving-scientific-advice-census-bureau-disbanded-trump-administration
Quote from the last link above: “The longtime head of the American Statistical Association (ASA), Ronald Wasserstein, says these panels also serve an important role as watchdogs. ‘Disbanding them eliminates an important check on how well the government is doing its work,’ he says. Last summer, ASA issued a report citing serious threats to the 13 federal statistical agencies, including inadequate budgets and political interference.”
These don’t seem like the actions of an administration sincerely dedicated to doing everything it can to ensure federal government statistical reporting that’s as objective and reliable as possible.
For anyone interested in reading, a Bogleheads thread on this subject, just begun Tuesday evening (08–12–2025) and still in progress.
Brain fog. Should know better than to post anywhere at this time of day, and forgot to include the link.
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=459455
How much does this new data collection method change the data provided. It seems if you are changing methodology in data collection it would have been nice to have seen both regular collection and new collection to see how much the data would skew.
“With this release, BLS has replaced survey data collected for the CPI’s wireless telephone services index with secondary source data and non-traditional index methods.”
I suspect that BLS tested this approach over several months and found it to be accurate enough and obviously more cost efficient.
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So sad. One of my favorite financial blogs, been following since the seekingalpha days…has turned political. Another one to stop following with all the others. Why?
Sounds like your fearless leader. Don’t like the facts, fire the messager.
If many formerly trustworthy analysts and reporters are suddenly sounding “political,” you really should ask yourself, “What has changed?”
There are two possibilities:
All these people have suddenly, and without obvious reason, turned into liberals.
The guy at the top is making questionable decisions – the kind of questionable decisions that kids who took Econ 101 know to be questionable decisions.
For sake of argument (not a prediction or an opinion) let’s take as given the CPI figure is manipulated such that the reported CPI-U is consistently 1% lower (just using a round number, and I’m ignoring how non manipulated CPI-U would be determined). What would that mean for the price and coupon (at auction) for TIPs? Assume for this exercise that nominal rates have ‘priced it all in’ so they stay at today’s levels.
It seems to me that if previously you wanted a 2% TIP yield to match a 4.25% nominal bond, since CPI is 1% manipulated you will need a 3% TIP yield to take into consideration the manipulated CPI.
Therefore one metric we can look at is to see if the spread between TIPs and nominal bonds is narrowing. Of course the spread could narrow if CPI is not manipulated (ie there is a recession and inflation falls).
Does this make sense or am I missing something? Basically I’d like to monitor to see if (a big if) this gets priced in,
That makes sense to me.
There’s another wrinkle. Let’s say the current administration cooks the books. Mere fear of that could lead to higher fixed rates. When sanity returns, TIPS will suddenly be more attractive, as they’d be paying Accurate Inflation Plus a Higher Rate, although as noted elsewhere, the principal balance for the first few years would be lower and the paid interest not as it should have been.
A wrinkle upon the wrinkle, however, is that a future Administration will be paying interest out on those TIPS than they should.
I was trying to decide whether or not to hold off on more TIPs but decided to go ahead with my plan. It’s only a small percentage of the portfolio and there’s ways this can adjust itself so disadvantages are not significant.
And, then, a bit less interest here and there on a TIPS is nothing compared to the dumpster fire that is my long-term bonds.
Oops… editing error. I meant to say, a future Administration will be paying MORE interest out on those TIPS than they should.
Yes that is a good point that it is primarily CPI U at maturity that will be the main driver (beyond current period CPI U for the cash coupon) so that could get priced in if the view was Uncooked CPI is returning . If we got Uncooked CPI that would be helpful at maturity but I’m not sure they would retroactively restate Cooked CPI that was used to calculate prior period cash coupons,
I was focused on the spread of nominal bonds vs TIPs but I’m sympathetic to the view that Cooked CPI would be directionally negative for nominal bonds. Massively over simplifying if the Fed targets 2% Cooked CPI that is the same as targeting 3% Uncooked CPI and nominal bonds would react accordingly.
News item this evening, currently under the headline “Seeking Friendlier Data, Trump Names New Commissioner for Statistics Bureau.” Still subject to Senate confirmation.
The person in question is described as the chief economist for the Heritage Foundation, the organization responsible for the Project 2025 plan.
For those of us concerned about politicization of BLS statistics, what could possibly go wrong?
https://www.nytimes.com/2025/08/11/business/economy/trump-bls-commissioner.html
I found this article educational…
https://thedailyeconomy.org/article/bad-news-but-not-bias-bls-bean-counters-got-it-mostly-right/
To me the key statement was:
For May, BLS officials overestimated the total number of nonfarm jobs in the US by a whopping 0.07 percent. For June, they overestimated it by a 0.16 percent.
Mathematically, they were trying to present a differential which notoriously sensitve to noise
This is bad news since the only thing we had going was In God we Trust, and a politician took over God. Im buying gold.
I figure the best place to stock up on gold is probably like you say – in God’s trust in heaven. For really long-term investors.
One can debate whether official inflation figures are distorted. (I would argue that they are not just distorted but grotesquely so.) TIPS, I-bonds and the social security COLA are based on fairy dust and that was true long before Trump. If you have made money and derived security through your ladder that is fine. Casinos are known to make some payouts.
An interesting aside regarding social security is the question: Has the COLA kept up with even official inflation, as lame as those figures are? The answer is that it did until about eleven years ago. Since then not so much. Why would that be? Ans: It’s a policy.
On the Social Security COLA vs official inflation: You can see the comparison going back to 2008 on this page: https://tipswatch.com/social-security-cola/
The COLA does often lag but for 2024 it was 2.5% versus 2.4% for official year-over-year inflation.
“If, while an inflation-protected security is outstanding, the CPI is (1) discontinued, (2) in the judgment of the Secretary, fundamentally altered in a manner materially adverse to the interests of an investor in the security, or (3) in the judgment of the Secretary, altered by legislation or Executive Order in a manner materially adverse to the interests of an investor in the security, Treasury, after consulting with the BLS, will substitute an appropriate alternative index.”
https://www.treasurydirect.gov/laws-and-regulations/auction-regulations-uoc/inflation-protected-securities/?utm_source=chatgpt.com
True, and the language is obviously meant to be reassuring, but notice all the “wiggle” language: “If” something happens to the CPI which in the “judgment” of the Secretary” is “considered” “materially” adverse to investors, Treasury, after “consulting” BLS, will switch to an “appropriate” alternative. . . . You can drive a truck through those loopholes.
I’m not saying the language is intentionally deceptive, and any reasonable person might expect that if the CPI is not accurately measuring “inflation,” then rates of inflation-indexed securities ought to be based on something which does.
But the language assumes a Treasury Secretary and BLS commissioner operating with a certain degree of autonomy and objectivity, rather than following the wishes of a president (any president) seeking to impose his own wishes on statistics, interest rates, international trade rules, and markets generally.
Yes, my wife and I do buy I Bonds and TIPS, but not because of that regulatory language, which I think sounds most excellent on its surface but, in practice, doesn’t guarantee anything in particular and therefore provides little true comfort.
In other words, the Secretary of the Treasury (a Trump appointee) can choose whatever he/she wishes or is ordered to use, which could be a Truth Social post by Trump.
@ernietedeschi has shown jobs revisions have improved not become worse since 1965. Also, although CPI is not subject to revision like jobs report, POTUS has a huge incentive to fudge CPI. The fortunate thing (perhaps) is that the CPI is not only important for TIPS but annual adjustment to Social Security annuities. The number of people who invest in TIPS is not enough to sway POTUS. The number of SS annuitants surely is. Those who are concerned with the integrity of BLS should focus on mobilizing SS annuitants.
“The number of people who invest in TIPS is not enough to sway POTUS. The number of SS annuitants surely is. Those who are concerned with the integrity of BLS should focus on mobilizing SS annuitants.”
I question the “surely is” concept with this man. It sounds like a constructive idea, in theory, but in practice it assumes a rational response from a leader who is “swayable” and receptive to a broad swath of the American public, some of whom did not vote for him. When you are a narcissist, you have no empathy so the motivating factor would have nothing to do with a concerned segment of the citizenry. Any criticism is an attack to be countered and a source to be destroyed. It’s a zero sum transactional game where, in order to win, someone else has to lose. In such a situation, I would not count on a rational response. If/when cornered, the playbook is to lie, blame, and distract. Expect that.
Bingo! The sad truth.
To my mind it’s a moot point whether or not the CPI data is politically manipulated. The four categories most every American needs (housing, food, energy, and health care) are not realistically depicted in the CPI data.
Examples: My health insurance costs (mainly premiums) go up 10-15% YoY reliably. Housing in my area has increased probably much more. Gasoline is steady but in January my electric utility provider raised their rates 8% “to account for increased raw material costs for maintenance” – just like they’ve done the past few years. Food is hit-or-miss and can be interpreted in different senses, but right now ground beef is $7.49/pound at the local supermarket. It wasn’t that high a year ago.
And yet – the CPI is only on track to increase 2.5-3% for the past trailing year? No way. I can cut my expenses and conserve, do without, etc., to stay level on expenses but on a year to year basis it’s way higher than that, and I have the receipts to prove it.
TIPS preserve buying power for some future need, but if you’re using them to fund future health care or housing needs, look elsewhere.
The good news is that so far is there isn’t anything for BLS to fix regarding CPI numbers. Economic calculations aren’t an exact science, but over time, with new data monthly, paint a picture of the state of various facets of the economy. Hopefully the course will be steady as she goes – no need for panic or make big changes from anything I have seen. To get more accurate numbers sooner, if that is a goal, requires more money and people working at BLS (not less) and upgrading data collection and analysis processes. Even just maintaining recent staffing levels and practices would aid consistency of outputs. It should become clear fairly quickly if the numbers are cooked or of lower quality from reductions of jobs and trained workers.
Great comments, just wanted to add a few facts that I hope add to the discussion, but more directly concerning publicly-traded companies.
In 2025, President Trump has:
These random interventions are not something that any other President has attempted, and the tariffs that he’s imposed under “emergency” powers are being wielded to force or impact all kinds of decisions.
Anyone who believes in free markets should understand the new, no longer free, Trump market structure – your businesses costs can go up, your profits can be eliminated, and your stock can be dropped quickly, all by Trump acting alone and for no ordinary reason. People voted for this man not knowing what he would actually do, and we still do not really know what he will do – when we are sleeping he could tweet some random thing with huge consequences, possibly to companies, possibly to TIPS and Treasuries, possibly to life and limb. No other President acted this way on either side of the aisle.
Anyone who invested in TIPS or i bonds automatically assumed this risk. To not have been aware prior to investing is irresponsible. Going forward, hopefully the BLS will fix the process. In the meantime, there are many other inflation metrics available to investors, plus personal experience as consumers that will reveal if the numbers are being seriously being cooked. Should this be the case, a firestorm would like ensue, not only from TIPS holders but social security beneficiaries as well. The politics around this matter could get real ugly as the cpi measurement could be weaponized by the opposition party. I have substantial TIPS holdings, but as part of a diversified portfolio. That is key. The academic who had been push concentrated TIPS holding for retirement may have done his followers a disservice. I hope not.
“Anyone who invested in TIPS or i bonds automatically assumed this risk.”
IMHO, that’s incorrect. Everything which Seaus stated was not a risk under previous Presidents.
An analogy would be that a family business has repeatedly chosen a meth head to run the business, and has allowed that person to get away with almost all choices, no matter how bad.
David, I was with you until, “Yes, the firing of McEntarfer could be justified after the massive jobs-number revisions.”
Really? Earlier you wrote:
The retired BLS official did note that the BLS’s declining budgets, cuts in staffing and poor survey response levels could lead to inaccuracies. The BLS is relying more on “estimation” when full data aren’t available. “When you are estimating, you tend to go more with the status quo until you get a more complete picture,” he said.
Who was responsible for cutting the BLS’s budget and staffing? McEntarfer? No. DOGE and Trump. And there have been downstream effects on the BLS from staffing cuts in other agencies. Here’s Mark Zandi’s take on it, aligned with other economists:
https://www.msn.com/en-us/money/markets/doge-cuts-act-like-a-corrosive-on-labor-stats-revisions-and-us-economy-warns-moody-s-mark-zandi/ar-AA1JXQYU?
So, whatever Trump loyalist is put in McEntarfer’s place, they will be stuck with the same limitations, and subject to being fired – like McEntarfer, unjustifiably.
McEntarfer was the BLS’s sole political appointee and could be replaced by Trump, just as he has done across the administration’s political appointees. That’s why there was no challenge to the firing. I am sure she is a very capable administrator. BLS made big downward revisions in job numbers last year, too, under Biden in March and August. That hurt the Harris campaign. Trump claimed those revisions were made after the election, but they were not. It’s true that the data collection problems will continue, and revisions will need to be made. This is very common.
“Justified” was the operative word. Allowable is a totally different thing.
Yes, the firing of McEntarfer could be justified after the massive jobs-number revisions. That was a big miss. But when Trump accused the BLS of “faking” and “manipulating” numbers for political reasons he opened a dangerous Pandora’s box.
I disagree. The firing is completely unjustifiable . Revisions are not caused by errors. They are caused by more information being received from business surveys.
And let’s be honest. Trump BASELESSLY accused the commissioner of rigging the numbers for political reasons in order to assuage his ego and distract from the terrible jobs numbers reflecting poorly on on him and his policies.
Under Trump, we have fraudulent governance by a narcissist .That is fundamentally incompatible with financial data and investment, among many other things. It’s a disgrace, not the worst example of it under his watch, but unforgivable when comparing it to the democratic norms that actually made our county great without him and before him.
it’s hard to say where we go from here with 7/8 of this term still to go. Insanely high tariffs, which Reagan famously derided as incompatible with capitalism, are not going away even with a few trade deals locking them in at still unprecedented levels. We’ve already seen American companies declare billions in losses in just the last quarter which is unsustainable and already leading to higher prices. We are in uncharted territory. The stock market is flush with AI. Without it, I have no doubt we’d be in correction territory. The avoidance of tariffs is now the priority of American business even if it is for appearances only (see Tim Cook’s masterclass last week).
it is possible we will see stagflation, Fed rate cuts despite rising inflation, and other seemingly contradictory financial effects. It makes for extreme unpredictability of how best to manage one’s investments. It’s already a bumpy ride. We just don’t know it yet.
Well said. To this, I’d only add that the health of the global financial system depends on one thing: Trust between and among all counterparties. To the extent that Trump’s capricious and volatile governance injects distrust in the very numbers that undergird the system, the result could be another global financial crisis, in the fullness of time.
On so many levels, our future is being put at risk. CPI and jobs data, and how policy makers and investors react to them, might just be the canary in the coal mine. We should all be on alert and tread carefully.
Can we put things in perspective here? Under the Biden administration, we literally do not know who was acting as President. The entire DC establishment assured us that Biden was “sharp as a tack” and making all his own decisions. And now his personal physician has refused to testify to Congress, pleading the 5th. So much for government accuracy during “normal times”!
So yes, government officials are highly partisan and do lie on a regular basis. I could cite a dozen more examples.
I also have a number of friends who are highly placed US government officials. They are all partisan Democrats who privately admit they loathe Trump and will do anything in their power to stymie him and his agenda. I have no doubt that, if they were approached by a reporter, they would proclaim themselves non-partisan and above reproach.
BLS Secretary McEntarfer, whether through incompetence or malice, repeatedly provided unreliable numbers, and richly deserved to be fired. If anything, Trump waited too long.
I’ve got to agree with you. These are the same people that told us that this inflation was transitory. Sorry, but I think the higher prices are here to stay. Just like not being able to get into the movies with popcorn, a drink and watch as many times as you wanted all for 25¢. Those days, which my dad got to enjoy, are never coming back. Some items will go down some, but most won’t. It would take a huge deflation for that to happen and we don’t want that either.
Inflation was over 20% higher from start to finish under Biden which averages out to about 5.2% per year. Trump’s first term was a total of about 7.4% which averages out to about 1.85% per year. Blame COVID or whatever else. People only had about 80% of their spending power before the 2024 election. It was hard for people to forget when their wallets were empty and they haven’t even bought groceries yet.
I have no crystal ball and I am not predicting Trump will do just as good since he’s dealing with the tariffs. However, 7.4% is much smaller than 20.8%.
Have you heard the phrase, “correlation does not imply causation”?
it is true inflation spiked (and then subsided back to historically below average inflation) during Biden’s term in office. But to say only that omits critical information and context.
The entire world experienced that same inflation spike, many worse and longer lasting than ours. That’s because the actual cause, when not playing politics of blame, was the pandemic reopening, pent up demand for goods and services, and the resulting supply chain issues caused by illness, absences, and fear up and down the supply chain.
So when you say 7.4% is better than 20%, part of that 7.4% was a complete shutdown of the American and global economy starting in March 2020 when COVID swept the world. When the world is shut down, of course there’s no inflation. Oil demand tanked, prices tumbled, and production slowed or halted, as did many businesses.
Inflation below or around 3% has been the norm in the latter year of the Biden Administration and the first year of Trump. However, tariffs have caused slightly higher inflation due three straight months (half of Trump’s first year) from 2.4% to 2.5% to 2.7%. In this case, it’s still modest but the trend is not our friend. Without the tariffs, Powell would’ve lowered interest rates months ago. So the elevation is directly tied to Trump, not the Fed.
The concern now is stagflation c higher indication, slower growth, and job losses. That’s will he the worst outcome of all. The months ahead are filled with uncertainty. We’ve never seen a situation quite like this.
Biden was not sharp enough to do any damage. We might miss him soon.
Maybe I am wrong, but I am going to “have faith” that the data is at least reasonably close and will not change my investment behavior with TIPS and I-Bonds. Someone said, they are long-term investments and it won’t make a difference over the long run. Fortunately, Trump won’t be here for the long run. An intermediate term bond will mature after Trump is gone.
I don’t see how it would be possible to hide real inflation for any extended period of time.
Add Greece to the list of nations whose data manipulations led to economic crisis. In 2009 revelations that government data about Greek debt and deficits was unreliable and, in fact, fraudulent, led to a major crisis for that country and the Eurozone.
Since 2022, when economists at the Federal Reserve noticed that GDP data from China was “implausibly smooth” (you think?), they have maintained an “Alternative China GDP ” database. Will we see an alternative “Trump era Data” index created in the future? More to the point it should be possible for economists to look at past US data and determine if it was faked, since that is the main argument of Trump and his sycophants.
The US is not Greece and its creditor nations have a lot to lose in this. One of them, China, plays the “long game” and is very happy to see confidence in the US slowly erode. For now, I would say the price of gold and foreign exchange rates on the dollar will be most telling as to the extent of that erosion.
Definitely no way to sugar-coat this firing, but if you step back, perhaps it is a symptom of larger problems: the true accuracy of the data, and the insatiable debt spending of the U.S. government. It does seem ridiculous that these revisions are so common from such “experts” on the topic (I heard that Biden had 44 revisions out of his 48 reports during his term). The size of them seems silly too. It’s like the weather man telling you that there is a 75% chance of rain tomorrow, and then it turns out to be sunny all day. The collection process sounds primitive too: who likes surveys? I checked out at a bar last night, and when using my credit card, the little Toast scanner wanted me to take a survey! At some point, those egregious errors and unpopular collection processes need to be held to account. Nevertheless, the politization of it is problematic, much like our increasing debt burdens. With the continuing debasement of our currency seemingly now in high gear, it’s no coincidence that gold and crypto are garnering so much investor interest. At some point, regardless of who is in charge of the BLS, it will be tougher and tougher to find new buyers of Treasuries, and the rates will go up, despite the Fed lowering them on the front end. So yes, the sky is slowly falling right now for sure.
One other thing that gives me some comfort is the duration of politically motivated distortions. In the months before an election, for example, I can imagine agency officials feeling intense pressure not to report (or, in the case of the Fed, to create) bad economic news. In the long term, however, it is much more difficult to conceal economic realities. TIPS and I-Bonds are vulnerable to short-term distortions in the data, but this is less of a concern for someone buying them as long-term investments.
David,
I’m enjoying the fun you’re having with fake images generated by AI, although, for general absurdity/stupidity/irrelevance, none (so far) have topped the ornately labeled soft drink can generated by “Social Security COLA.”
And the writing on the can was blurry. Like AI couldn’t figure out what to write like the aliens couldn’t completely read Dave Bowman’s mind in 2001 A Space Odyssey.
I was wondering if the woman having two thumbs on one hand was some sort of secret message David was sending us on this topic. 🙂
Very thorough, thanks.
Although I don’t regard any degree of information fudging as beyond this administration (which, for example, has been busy purging information about climate change from federal government websites), I have no idea how any of this will turn out.
But facing the possibility–and right now it’s still just a possibility–that the big institutional money may demand higher TIPS yields, i.e., lower TIPS prices, based on distrust in government inflation statistics, I do find myself more grateful than usual for one feature of our household’s I Bond portfolio: I Bonds are not marketable securities and their redemption value doesn’t fall, regardless of what may be happening in any given priced-to-market situation for TIPS. (Whether they continue to keep pace with inflation if Trumpist diddling causes statistics for “inflation” to depart from reality is, of course, a separate question.)
The government data has long been called into question: largest 2 month revision in history? = well some heads were gonna roll: welcome to the big leagues is what I would say to the commissioner. accurate inflation data is possibility; accurate job data is a possibility; accurate economic growth data is a possibility – Trump Derangement Syndrome is real so reflexive doom and gloom from the same crowd that brought us the same stale grool and said ‘thats the best we can do” = well personally glad to see some changes and major change is best started at the top. I look forward to continuing to enjoy the fruits of investing in America.
I agree. Funny no mention of the million job reporting “error” under Biden. The problem with government is government. These errors were once anomalies now they are to be expected. If this data is so important then outsource it. Remove the veil of politics. Just another utilization for AI and big data.
This seems so similar to the Dems gerrymandering for their benefit, only to complain about the Repubs doing it now. Both parties have manipulated the data for years and it will continue ad infinum.
Why do some people have such a narrow view of reality?
I agree that the expectations seem to be pretty low in terms of first-pass yield and overall accuracy. It seems like this problem would be well suited to AI and big data as you suggest.
I agree as well. What’s the definition of insanity? Doing the same thing over and over again and expecting a different result.
Something weird about trusting the government to “honestly” do its job. It reminds me of a child “honestly” grading his own test. Something just seems funny about that concept. Oh well. Must just be me.
I don’t agree. I think of “the government” as real people, workers, neighbors, mostly trying to do the best they can at their jobs with the resources provided and restrictions. “Government” is essential to society and the privileges available in the US and dismantling it won’t help workers. I am greatly concerned about administrations and political goals. The whipsaw and retaliation of the current administration is the reason why many reputable entities from individual citizens to bank institutions to experts are concerned about where the economy is headed. My view is that only so much “massaging” of numbers such as CPI is possible until it’s clear the numbers are fraud. And while I expect some of that will occur given the lies that daily come from this administration, I’m not significantly worried about faked and lower CPI numbers long-term affecting TIPS or I Bonds returns. I am more concerned about tariffs, immigration policies, protectionism, and a massive increase to the deficit and debt adversely effecting the overall economy.
Interesting discussion. Thanks!