On Aug. 1, the Bureau of Labor Statistics released its monthly report on the U.S. employment situation for July. The report portrayed a labor market slowing far more than previous reports had suggested, eliciting an energetic social media response from the president.
In addition to a weaker-than-expected 73,000 new jobs created in July, the report included large downward revisions to the May and June estimates, essentially wiping out most of the previously reported gains based upon more recent and complete information. The revisions depict an economy clearly losing momentum.
President Donald Trump erupted on social media, accusing bureau Commissioner Erika McEntarfer of falsifying the report. “In my opinion, today’s jobs numbers were RIGGED in order to make the Republicans, and ME, look bad… A TOTAL SCAM.” The leader of the free world concluded the jeremiad with his signature non sequitur: “Thank you for your attention to this matter!”
The firing of McEntarfer was met with widespread alarm among economists of all political stripes, many of whom issued rare public condemnations and warned of the damage to confidence in U.S. government statistical releases.
Concerns deepened with the announcement of a successor: E. J. Antoni, a frequent Fox and Newsmax guest who has suggested “taking a chain saw” to the Bureau of Labor Statistics. Antoni has a thin resume, primarily consisting of a stint at the Heritage Foundation, where he contributed to the drafting of the Project 2025 blueprint.
To understand the angst among economists, let’s begin with a look at how the bureau works and why the suggestion of partisan tampering is absurd.
Created in 1884, the Bureau of Labor Statistics represents the gold standard in public data collection, analysis and reporting, and its work product includes some of the most widely anticipated measures of the nation’s economic status.
Each month, the U.S. Census Bureau conducts two separate surveys on behalf of the Bureau of Labor Statistics to piece together the employment picture. The first, called the Current Population Survey or the household survey, contacts 60,000 individual households to inquire about employment status. The household survey is the source of important statistics including the unemployment rate and the labor force participation rate.
The other major component is the Current Employment Situation, known popularly as the establishment survey. Here 631,000 separate nonfarm business and government establishments are surveyed to obtain data on hiring, layoffs and wages. The establishment survey informs the monthly tally of jobs created or lost that has sparked the current controversy.
The monthly BLS report includes a first estimate of the prior month’s job creation plus revisions to the two previous months. The initial estimate is necessarily incomplete, as many establishments report late or not at all, and the bureau must apply statistical modeling techniques to fill in the gaps.
The first estimate has become more challenging as survey response rates have declined markedly over the past decade, from over 60% in 2014 to around 40% since COVID-19. This complicates the Bureau’s task and requires more statistical interpolation. Imagine playing a hand of five card draw but opening with three cards face down.
The report also includes revisions to the two previous months, utilizing additional data as it comes in. The final survey response rate for the third monthly estimate is over 90%, providing for a significantly more accurate compilation. To borrow an overused trope, revisions are a feature, not a bug.
Historically, the jobs data has been remarkably accurate, especially considering the enormity of the task and the deepening budgetary constraints. Since 1979, the mean revision in nonfarm payroll employment between the first and third monthly estimates is just 12,000 jobs. That works out to less than 0.01% of all U.S. jobs. Positive revisions roughly offset negative corrections over time.
However, revisions tend to be larger at inflection points in the economy. During an economic expansion, the initial survey tends to underestimate employment growth, leading to larger positive revisions. During the 2021 recovery from the COVID recession, the final jobs number was revised upward in 10 of 12 months, by an average of 159,000 additional jobs per month.
Conversely, revisions tend to be negative as the economy slows. This certainly occurred in 2020: the final March revision was a whopping negative 672,000 jobs. Needless to say, the BLS commissioner was not fired or accused of cooking the books.
The revisions for May and June were quite large but hardly unprecedented, and the revised figures are more consistent with the picture of a generally slowing economy already evident in other economic data. Many economists were puzzled at the relatively robust growth numbers in the previous two reports. As more data arrived, it became apparent that factors including tariffs, government spending reductions, and productivity improvements from artificial intelligence were creating a drag on job creation that could not yet be detected in the first estimates. The subsequent revisions make much more sense.
The notion that the commissioner of the Bureau of Labor Statistics could fudge the numbers is ludicrous. First, the bureau follows a rigorous and highly transparent methodology that is defined in its publication called the BLS Handbook of Methods. The document is over 300 pages and is available on the bureau’s website.
Secondly, the commissioner is only shown a copy of the data nerds’ numbers a few days before their release and enters a blackout period with no public appearances until reporting day. An advance copy is also given to members of the President’s Council of Economic Advisors. This has been standard practice for decades.
On Aug. 1, the day of the report, Antoni appeared on Steve Bannon’s podcast calling for the firing of McEntarfer. Hours later, Trump gave her the boot.
If confirmed by the Senate, Antoni may face an intractable dilemma, given that many economists anticipate another downward revision in the next release in September. Perhaps he should not be too hasty in measuring the drapes?
Thank you for your attention to this matter.
Christopher A. Hopkins, CFA, is a co-founder of Apogee Wealth Partners in Chattanooga.