Should Asset Managers Trust Future BLS Data?

The president’s audacious firing of the head of the Bureau of Labor Statistics may not cause asset managers to mistrust government data — but much depends on who gets confirmed as successor for the agency. 

President Donald Trump last week shocked economists, market watchers and the wider financial services world when he announced the firing of BLS head Erika McEntarfer (no small accomplishment amid rumors of a UFC fight on the White House lawn next year). Trump disputed revisions to recent jobs reports, which he claimed were manipulated for political purposes, despite citing no evidence. The announcement called into question the future independence of BLS data, and perhaps government data more widely, which could have implications for asset managers.

“It’s a potentially serious problem. It’s kind of surprising to me that the markets haven’t responded with the horror you would expect,” said Hal Ratner, head of research at Morningstar Retirement. 

Revisionist History

It is common for the BLS to revise numbers in its reports, given that the initial figures are estimates based on early survey data. The changes it made Aug. 1 to jobs numbers in May, June and July dramatically cut the payroll numbers it reported earlier, representing the biggest revisions the agency had made to reports since 1968, Ratner noted in an analysis piece. However, the changes brought the figures in line with what economists had been predicting, as the tariffs had been expected to make employers uncertain in the near term and less likely to staff up, he said.

McEntarfer’s firing amounts to “shooting the messenger,” as the BLS has historically operated without political pressure, Que Nguyen, chief investment officer of equity strategies at Research Affiliates, said in a statement. “This is a culture and a process that has been embedded in the agencies that measure our economy. This culture is not easy to change.” Investors use a variety of indicators, especially given that initial BLS data are subject to revisions, Nguyen said.

BLS reports are critical to gauging inflation and setting rates:

• The jobs data help inform the Fed funds rate. Despite Trump’s claims about the revisions being rigged, the lower numbers help support a rate cut.
• The Consumer Price Index numbers released on Tuesday by the BLS showed annual inflation being relatively steady in July, at 2.7%.

Heritage Hire: On Monday evening, Trump announced on social media that he would nominate Heritage Foundation economist and Project 2025 contributor E.J. Antoni, who has been critical of the Fed and of BLS data, as McEntarfer’s replacement. Trump wrote that “our economy is booming, and E.J. will ensure that the numbers released are honest and accurate.” That statement isn’t the sentiment observers were hoping for, Ratner said. “Antoni is much more the political operative than the serious economist,” he said. “My hope is that he doesn’t clear Senate confirmation.”