Fragility

Daily update

Last Friday’s US employment report revisions were in line with a fragile labor market narrative. The story is still “not hiring, not firing.” Falling manufacturing employment is consistent with policy uncertainty. The most troubling development on Friday was not the data, but US President Trump firing the Bureau of Labor Statistics commissioner.
Globally, economic data has become less reliable in recent years. Falling survey response rates, political polarization generating biased survey answers, rapid structural economic changes statisticians cannot keep up with, and underfunding statistical agencies have conspired to make revisions larger and more frequent. None of these introduces political interference, however.
Any suspicion of political interference in data means investors will assume positive numbers to be “rigged”, like countries where GDP miraculously beats the official growth target year after year. The risks of policy error increase. A gap between economic reports and economic reality makes business planning more difficult. In the case of the US, just the perception of political bias would further damage the dollar’s reserve status.
Trump nominates a Fed governor and a new BLS commissioner this week. The nominees risk being perceived as political puppets. The governor might be the nominee for Fed chair. Both posts require Senate confirmation. The outgoing commissioner was confirmed 86 to eight.