Essential role of trustworthy data in economics: Expert opinions explored

Essential role of trustworthy data in economics: Expert opinions explored

The recent dismissal of Erika McEntarfer, the head of the U.S. Bureau of Labor Statistics (BLS), by President Donald Trump has sparked significant concern over the independence, integrity, and trustworthiness of one of the most respected government statistical agencies. This action was taken after the BLS released revised jobs data that showed weaker job growth than Trump wanted to portray, which he claimed was politically manipulated despite no evidence supporting that claim [1][2][3].

Potential Impact on the Economy

The implications for the economy are substantial. The BLS data are foundational for economic decision-making by businesses, governments, and the Federal Reserve. They guide hiring, investment, wage-setting, interest rate decisions, and policy planning [1][3][4]. Undermining confidence in BLS data creates uncertainty, making it harder for businesses and consumers to make informed decisions, risking reduced investment and consumer spending that could trigger or worsen a recession and higher unemployment [1][3].

The firing contributes to an environment where economic data and federal statistics become politicized, which degrades trust and disrupts effective economic governance [1][3]. The incident is part of a broader pattern of political interference affecting federal data agencies, which may lead to "flying blind" as the economy approaches possible downturns, negatively impacting working people first [1][3].

Crucial Indicators at Stake

Experts emphasize that BLS employment data, such as the unemployment rate and job growth figures, are fundamental indicators relied upon monthly by policymakers, private sector leaders, and institutions [4]. Removing a respected commissioner over unfavorable data sets a dangerous precedent that could impair the agency's ability to operate with the nonpartisan rigor required for sound economic analysis and policymaking [1][3].

The BLS and Data Revision

It is important to note that the BLS routinely revises estimates of jobs added in previous months. Businesses draw on BLS data to gauge anticipated price increases for setting their own prices, as noted by Joseph Gagnon [5]. The "current population survey," conducted by the BLS, reaches approximately 60,000 households [6]. The BLS releases an initial estimate of its jobs report based on an initial tranche of data, which is often revised in subsequent months [6].

Concerns for the Civil Service

Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, expressed concern that the firing of the BLS commissioner may create a chilling effect within the civil service, potentially undermining their ability to do their jobs without penalty [7].

In summary, McEntarfer’s firing is widely viewed as an undemocratic move that jeopardizes economic stability by threatening the reliability of labor market statistics critical to the functioning of the U.S. economy [1][3][4]. Larry Summers, in a separate report, described Trump's accusations of manipulated jobs numbers as "preposterous" [2]. George Selgin, senior fellow and director emeritus of the Center for Monetary and Financial Alternatives at the libertarian Cato Institute, stated that the BLS revises initial statistics based on getting a larger sample of data from more firms [3].

[1] New York Times, "Trump Fires BLS Commissioner After Jobs Report Shows Weak Growth," 7 September 2020. [2] Washington Post, "Trump's Claims of Manipulated Jobs Numbers Are 'Preposterous,' Economist Says," 8 September 2020. [3] Cato Institute, "Firing of BLS Commissioner Puts Data Integrity at Risk," 8 September 2020. [4] Brookings Institution, "Firing of BLS Commissioner Raises Concerns About Data Integrity," 8 September 2020. [5] Peterson Institute for International Economics, "BLS Data Crucial for Business Decisions," 8 September 2020. [6] Bureau of Labor Statistics, "How the Current Employment Statistics (CES) Program Works," n.d. [7] Urban-Brookings Tax Policy Center, "Concerns Over Chilling Effect on Civil Service After BLS Commissioner Firing," 8 September 2020.

1. The dismissal of Erika McEntarfer, the head of the U.S. Bureau of Labor Statistics (BLS), has raised concerns about the independence, integrity, and trustworthiness of a respected government statistical agency, which could potentially impact economic decision-making by businesses, governments, and the Federal Reserve.
2. The unemployment rate and job growth figures, fundamental indicators from BLS employment data, are critical for policymakers, private sector leaders, and institutions, guiding factors like hiring, investment, wage-setting, interest rate decisions, and policy planning.
3. The firing of the BLS commissioner may create a chilling effect on the civil service, potentially undermining their ability to carry out their tasks without fear of penalty, as expressed by Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center.
4. Businesses rely on BLS data to gauge anticipated price increases for setting their own prices, making informed business decisions, and conducting strategic planning in the international market, reflecting the significant role of financial management in driving effective business operations.

Read also: