Ready for more uncertainty?
President Donald Trump on Friday fired Bureau of Labor Statistics Commissioner Erika McEntarfer after what he claimed was an inaccurate July jobs report. The move may cast doubt on the accuracy and reliability of government statistics moving forward, experts told CFO Brew.
What’s that mean for businesses? If they feel uneasy about the data coming from the feds, they will likely rely more on other data sources to verify what those agencies are reporting. Organizations will also be more cautious in their forecasts and investments, the experts said.
“It is very disheartening and concerning to see the BLS commissioner fired over monthly jobs numbers,” Maria Flynn, a former senior executive at the Department of Labor and CEO of nonprofit group Jobs for the Future, told us. What she views as the politicization of BLS jobs data will have ripple effects that “ultimately compromise the integrity of all of the US federal statistical agencies,” including the Census Bureau, Flynn added.
In a social media post on Friday, Trump suggested the weak July jobs numbers and downward revisions of job gains in the previous two months were “manipulated for political purposes.” The White House posted a statement the same day claiming McEntarfer had “a lengthy history of inaccuracies and incompetence” as BLS chief.
Downward revisions of jobs reports are far from rare. The BLS regularly revises its reports from previous months, especially in January and July, according to Wafa Hakim Orman, an economics professor and associate dean of the college of business at the University of Alabama in Huntsville.
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“Certainly, his statement could give one the impression that he fired [McEntarfer] because he didn’t like what he was seeing, and that feels a little like firing your doctor because they tell you you’re sick,” Orman told us.
How businesses could be impacted: Businesses in all industries rely on government data for forecasting and to decide how many people to hire or make logistical decisions, Orman said.
Organizations that feel less certain about federal data will look to other sources from private entities like ZipRecruiter or Indeed, either to compare with the BLS or build into an aggregate estimate, Flynn said.
With McEntarfer’s firing, US investors may need to put a “political-interference premium” on government statistics, while economists and asset managers overseas may begin to view the official figures as “no longer the definitive reference,” Michael Ashley Schulman, partner and chief investment officer at financial services firm Running Point Capital, wrote in a message to CFO Brew.
“Credibility is fiscal and monetary policy’s invisible anchor,” he wrote. When that credibility is gone, “it risks higher funding costs and a softer dollar, even if the raw surveys stay methodologically sound.”
Business leaders will likely be more cautious in their decision-making if they feel less confident about the economic data they’re using, according to Orman.
“We could see businesses be slower to make big decisions, slower to make large investments [or] big commitments of any kind,” she said. “I would expect to see that increased caution go through the economy.”