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- [00:00]
Galen Druk
Well, I'll be driving through on Thursday, so if you're close to the highway, we can record another econ podcast. You know, you can jump in the car and we can just.
- [00:10]
Ben Castleman
Economists in cars getting data. I don't know.
- [00:14]
Tara Sinclair
Yeah.
- [00:14]
Galen Druk
Oh, my goodness.
- [00:14]
Tara Sinclair
That's amazing. I love that.
- [00:27]
Galen Druk
Hello, and welcome to the GD Politics Podcast. I'm Galen Drouke. On Friday morning, the Bureau of Labor Statistics released its job numbers for July. The Nation provisionally added 73,000 jobs last month, shy of the 100,000 jobs expected. It wasn't particularly good news. More newsworthy, though, were the downward revisions for May and June. What had initially been reported as just shy of 150,000 jobs added each month turned out to be closer to 50, 15,000 jobs. Quite plainly bad news. The Trump administration went to work spinning the numbers as decent and the result of seasonal adjustments. But by the afternoon, President Trump claimed on social media that the numbers were manipulated for political reasons and said that he directed his team to fire the commissioner of the Bureau of Labor Statistics, Erica McEntarfer. I probably don't need to tell you, dear listener, that this raises red flags. If you're listening to this podcast, it's probably because, well, in addition to finding me charming, you value what data can tell us about the world as it is, not the world as we wish it would be. For now, the acting director of the BLS is William Wiatrowski, the former deputy director. But the administration has said they'll replace him within a matter of days. And the question now is whether that new person might apply pressure within the bureau to make economic data look more like the president wishes it to be. That's what we're going to talk about today, and we have an all star lineup to do it. Here with me is Economics Department Chair at George Washington University, Tara Sinclair. She's also been a visiting scholar at the St. Louis and Atlanta Fed banks, a technical advisor at the Bureau of Labor Statistics, and founding chief economist at the job search site. Indeed. Welcome to the podcast, Tara.
- [02:14]
Tara Sinclair
It's great to be back with you.
- [02:15]
Galen Druk
Folks may actually remember you from the forebearer to this podcast. So it's great to have a friendly face on the pod today. And we have another familiar face with us as well. That is Ben Castleman, who is now chief economics correspondent at the New York Times. But we formerly worked together at FiveThirtyEight back in the day. So, Ben, welcome to the podcast.
- [02:35]
Ben Castleman
So good to be back on the pod.
- [02:36]
Galen Druk
Galen, it's great to see your face I want to get right to the heart of the matter because I'm sure both of you have lots to say. I've talked with guests on this podcast before about funding challenges facing government data collection and plenty about the challenges for all types of surveys in the digital age. But this is a categorically different, different question, which is will American economic data need to come with an asterisk of potential political meddling? Tara, why don't we have you weigh in on this first?
- [03:08]
Tara Sinclair
Obviously, what happened on Friday is very distressing and moves us more in that concerning direction that we may be seeing political pressure affecting decisions at our, what I'd like to call our gold star statistical agencies. We've been respected around the world for the quality of data that we produce, and now there is definitely, you know, a new step of political pressure happening. At the same time, I am comforted to have Bill Wiatrowski there in that role, even if it is for, for a very short time, because he's been there for a long time and he is definitely going to continue to ensure that the data is collected and processed in the same way that it has been for, for a long time. And that means without any political influence. So we'll be watching for next steps as to what happens after the president names a successor there for Erica.
- [04:00]
Galen Druk
Yeah, Ben, another reassuring thing might be the fact that the person who was fired wasn't really responsible for creating this data to begin with. So how do you see the relationship between firing the commissioner and the process by which this data is created and any challenges or risks now to take a step back?
- [04:21]
Ben Castleman
Right. I have been asked repeatedly since Trump returned to office by friends, by colleagues, by people on social media, sort of whether I still trust the numbers coming out of this administration. I got those questions in the first Trump administration. I got those questions from the other side in the Biden administration. But I've gotten them really intensely under this administration. And my answer had always been sort of very consistently, there are lots of longstanding issues facing the statistics agencies, as you alluded to Galen, right around funding, around declining response rates. And there were reasons to be concerned that those would grow worse under this administration when it started rolling out hiring freezes and, you know, early retirement plans and then further budget cuts. But that for all of those concerns, there was no evidence of any political meddling in any of the data. And it was really important to distinguish those two things from one another and to say, you know, for all of these sort of longer run concerns about erosion of the data, there was really no evidence of political interference and meddling. I don't think I can say that now. And that doesn't mean that I think that the numbers that are gonna come out, the CPI numbers that come out next week, the jobs numbers that come out in September, that those are going to be manipulated. But I think that we have to look at all the numbers coming out now with a more skeptical eye than we did you 72 hours ago. I spoke over the weekend to Janet Yellen, former Treasury secretary, former Fed chair, and I asked her that directly, if we get a surprisingly good CPI report, a surprisingly good jobs report, does that raise red flags for you? And she said it has to at least a little. You have to at least sort of cast a slightly more skeptical eye. I don't know that I'm there quite yet, but I think that we're in new territory and we're all going to be looking at these numbers with just a little more skepticism than we had a week ago.
- [06:32]
Tara Sinclair
Yeah, I mean, as Galen, you mentioned, it is the case that the commissioner does not directly influence the construction of the data or the collection of the data. And so I'm hoping that this is mostly a symbolic point. And there was some sense that this firing could have happened earlier. There was a sense of President Trump wanting to bring in his own people to lead these statistical agencies. And so I did not like the timing of it, the association of IT with jobs numbers that he didn't like. I didn't think that connecting it to the data revisions and in any way suggesting that those data revisions revealed anything other than the normal data collection process. But I still think that as long as the career civil service is there, we are pretty safe. I think what I'm really watching for, and this is something actually that Bill Wiatrosky said in a panel a few months ago that I moderated. He said that civil servants are there doing the work and that they would quit en masse if they were pressured to move in a direction that in any way endangered the quality of the data. And so this is one of the reasons why I feel a little better today that he's still there. And obviously, as Ben pointed out, we're going to have to watch carefully for next steps. But I still think that there is kind of a breaker between the data and these more political decisions. At least I hope so. But admittedly, we do keep digging layer by layer towards that. And so the question is just when do we really start sounding the alarms? And maybe I'm willing to wait a little bit longer than Ben is for that.
- [08:17]
Galen Druk
Do we have any sense of who the Trump administration might try to install at the Bureau of Labor Statistics? And a reminder here that the president has some authority to appoint an acting commissioner of the Bureau of Labor Statistics, but that usually the actual commissioner is approved by the Senate. And in the case of Erica McIntarfer, she was approved overwhelmingly with bipartisan support, including support from folks like J.D. vance and Marco Rubio. So do we have a sense of who could be the acting director or who could ultimately be approved by the Senate?
- [08:53]
Ben Castleman
I don't think we have any reporting on that. I've heard speculation that he might appoint somebody like Scott Besant the Treasury secretary or Howard Lutnick the Commerce secretary in an acting capacity because they've already been Senate confirmed. Right. They have the, they could be moved over there, but I don't have any reporting to back that up. I think the thing that will be really interesting to watch, right, is who gets brought in here. And I can kind of think of, I want to say sort of three scenarios. Scenarios. One is that he brings in a totally traditional pick. Right. If I look at the person who ran the BLS under the last Trump administration, Bill beach, he's a conservative economist, very strong conservative credentials, but a very widely respected person. And if you listen to him talk, I've talked to him just on Friday after this happened. He is an absolutely by the book person. And I think that would be sort of a big sigh of relief from a lot of people if somebody like Bill were brought in the second bucket is somebody sort of way out there, Right. Somebody who is just a, you know, sort of obviously unqualified by traditional ways. A. You know, I hear Janice Piro recently.
- [10:05]
Galen Druk
Moved to D.C. i don't know if she's willing to take on two jobs.
- [10:10]
Ben Castleman
I'm not going to identify, I'm not going to name any names on who I put into this category. But you could imagine somebody who's, who's brought in and sort of is obviously just a Trump person. That would obviously be very concerning for a lot of people. I think there's another one that is in some ways the most concerning possibility, which is somebody who is both very much a person loyal to Trump, but also with a lot of sophistication about the way these data work. Because when I think about what Tara is saying, right. She's totally right. Right. The, the commissioner of the BLS doesn't produce these numbers, doesn't do the interviews, doesn't do the analysis, all of this. But There are policies, decisions, methodological decisions that the commissioner is involved in and ultimately has the right to make. And it would take somebody. I spoke to Katherine Abraham, a former BLS commissioner, over the weekend, and, you know, she made this point that it would take a lot of sophistication to kind of know where to put your thumb on the scale. But if you did right, there are decisions that you could make along the way about the way you handle seasonal adjustment and the way you handle revisions and the way you handle this industry and that industry that could, over time, nudge the numbers in a politically advantageous direction. That would be very hard to detect. And that, I think, would not have the sort of, like, mass exodus that Tara's referring to. Because if you can kind of sit there and say, well, I don't totally agree with that decision, but I can see the argument for it, right? And it chips away. It's the frog in the. In the water.
- [11:42]
Galen Druk
Yeah. Tara, so you have worked at the Bureau of Labor Statistics yourself. How does this process work? Like, if you wanted to excuse my French, like with the data, how could you do it? Where could you do it? What should we be on the lookout for?
- [11:57]
Tara Sinclair
I was on the technical advisory committee, which is a special service role not directly employed by the Bureau of Labor Statistics, but in that role, one of the things that I did was sit on these panels where the career staff would present different methodological choices and get input from these advisors in order to help guide the decisions. Now, as you may know, these technical advisory committees across all of the statistical agencies have been ended, so we already don't have that input coming. And so Ben's point is scarily well taken, that there probably is more opportunity for a commissioner to come in and push on some of these methodological issues. I do think, though, that that scenario doesn't really fit in with the Trump style, because that is pretty subtle. And I do think that what we should be looking for in the near term is just blatantly different numbers being presented separately or something like that, where there might be the numbers that are produced using the old methodology. And then the scary risk that I'm worried about is then there's an addition to the report that says, oh, but actually we created a million jobs this month, something more dramatic like that. I don't think these small thumb on the scale changes is really the direction that I'm worried about in the near term.
- [13:30]
Galen Druk
You know, to that end, was there any reason to believe that the revisions from May and June were out of the ordinary or Motivated by anything other than accuracy?
- [13:40]
Ben Castleman
Well, those are two different questions. Right? They were out of.
- [13:45]
Galen Druk
All right, let's. Let's parse them, then.
- [13:47]
Ben Castleman
They were out of the ordinary in the sense that these were unusually large revisions. It's rare.
- [13:53]
Galen Druk
Hold on, Ben, our boss, did an analysis of all of the revisions that we have on file, and he sort of lined them up from the largest revisions to the smallest revisions. And this was his conclusion. I'm quoting Silver Bulletin here. He said, quote, you have to sort down to the fifth page in the table of the biggest revisions before the June 2025 revision of minus 133,000 jobs pops into the window. Since 1979, the effective margin of error on the initially reported headline number, enough to cover 95% of the changes in the first two monthly revisions, has been around 160,000 jobs. So neither May nor June even counts as an outlier in the statistical sense. Okay, now do battle with our former boss.
- [14:39]
Ben Castleman
All right, so far be it from me to get into a war of statistics with Nate Silver, but I do think I maybe know a little more about Labor Department data than he does. I'm not sure exactly which sets of revisions he was looking at. If you include the benchmarks, the annual benchmarks, then the story becomes a little bit different. But, you know, we revise every month. I mean, just to step back quickly. Right. The way this happens, the monthly jobs numbers are based, as listeners of this podcast may be very familiar with a very large survey of employers, not all those employers respond in time for the initial data, the initial release on the. Typically the first Friday of the month. And so that first estimate is based on an incomplete sample of all of these businesses. Over the next two months, we get more data in and we get more complete numbers, and then we do a big annual benchmarking process that adjusts to kind of the hard data on the ground that isn't based on a survey. So these sort of standard monthly revisions, the individual ones for May and June, were relatively large, but certainly not outliers. I agree with Nate completely then. But we got both of them at once, right? We got two big monthly revisions, and those were large. If you count them together, it was an unusually large month for revisions. I don't wanna say that's an outlier. Right. There have been larger ones. There were some specific reasons, when you look under the hood for, you know, there were some oddities around seasonal adjustment to do with state and local government, which is an area where there are often large seasonal adjustments. I had said, right If Trump hadn't fired the BLS commissioner, we would by now be well into the news cycle. That said, well, actually, maybe these numbers weren't that bad. I don't think that these numbers were that bad, but they were a clear indication that the job market was slower earlier this year than we thought. And it is, it is the case that historically, large downward revisions tend to happen around turning points in the economy. And so that large downward revisions can be suggestive that the economy is slowing. Certainly not dispositive proof, but some evidence of that. So that was your first question, right? This unusual. There's some degree to. It's unusual. Politically biased? Absolutely not. Right. There's no indication of that. And I think it's really important. Trump has referred repeatedly to this big 818,000 revision from last year around the election and has sort of said repeatedly, like, look, they made the numbers look good before the election and they're making the numbers look bad now. This is a straight fault. And it's really important to say this very clearly. There was a big annual benchmark revision, preliminary benchmark revision announced last August before the election, at a very politically challenging moment for the administration. Right. The PLS comes out and says, actually, we added way fewer jobs than we thought. That was not a helpful announcement for the Biden and Harris administration and campaigns. Incidentally, we later learned that preliminary revision was too big. It actually we only needed to remove about 600,000 jobs from the total. So if anything, the big annual benchmark revision process looked particularly bad for the Biden and Harris administration. All of which is just to say there's no reason to think that the BLS was doing anything other than just playing this by the book. And they're trying to measure an economy in a very challenging time when there are a lot of moving pieces, a lot that's changing. They didn't get all the numbers right the first time through. But there's just absolutely no evidence of political bias or interference here.
- [18:21]
Tara Sinclair
I'll just jump on that as well, just to completely agree with everything that Ben just said and also highlight that one of the interesting things, if we study patterns of revisions in data around the world, I, a number of years ago, wrote a paper looking at Chinese data, which of course always has this air of questionability that people bring up on a regular basis about various government statistics coming from China. And one of the the things that I saw in their pattern of revisions is that they had very small revisions to the data. So in some sense, these larger revisions may actually be a clearer signal that the statistical agency is taking into consideration this new data that is coming in, rather than squashing it, hiding it, doing anything that might be politically influenced. And so I think one of the things that comes up all the time whenever we talk about these data revisions is, oh, is this about manipulation or making the numbers, particularly those preliminary estimates look better? Because those are the market movers. The point I keep wanting to make over and over again is that it is really a signal of data quality that they are improving these statistics over time. And there is this trade off between timeliness and reliability because of these delayed responses and the time it takes to process the data and all of that. And so being able to get these early releases and then improve them over time is one of the highlights and hallmarks of our statistical agencies here in.
- [19:53]
Galen Druk
The U.S. today's podcast is brought to you by 80,000 hours. You have 80,000 hours in your career. 40 hours a week, 50 weeks a year for 40 years. That's a lot of time. And it means that your career is probably your biggest opportunity to make a positive impact in the world. But how can you use it best? If you're a young person or were a young person, you've probably heard a lot of career advice. Follow your passion, do what you love, take the initiative. But a lot of advice out there doesn't take into account the best available evidence we have for what actually makes a high impact and fulfilling career. 80,000 Hours is a nonprofit that for the past 10 years has been researching the question of how you can find a fulfilling career that does good too. Everything they publish is based on careful consideration of the data, consultation with experts, and taking into account the best evidence they could find on the topic. If you join the newsletter now, you'll get a free copy of their in depth research led career guide sent to your inbox. Just sign up at 80,000 hours.org GDPolitics to get started planning a career that works on one of the world's most pressing problems. Sign up now at@80000hours.org GDPolitics that's 80000hours.org GDPolitics Speaking of China, and of course there are other countries that have gone down the road of either firing statistical chiefs or just straight up manipulating the data. I'm thinking of Turkey as an example, or Argentina or Greece. China has been a long standing example where every piece of economic data that comes from the Chinese asterisk next to it that I mentioned at the top of the show of you know, this may be politically motivated. What Are the consequences of investors, consumers, businesses and other countries losing faith in a nation's economic data or frankly, government data broadly?
- [21:56]
Tara Sinclair
People often come to me and say, okay, you've worked with private sector data for a number of years. Why can't we just have the data from the private sector fill in? Maybe we don't even need to be investing in government statistical data anymore. Maybe that's a way we can save money or replace it. If we are concerned about the political influence, and I categorically say we need the government statistics. That data is incredibly valuable and important, and it's obviously used by the Federal Reserve for making monetary policy decisions. It's used by everyday people in ways that they may not even really know how it's affecting them. But you know, everything from CPI adjustments being used for Social Security benefits to thinking about how businesses make decisions for hiring and for pricing, all of that is based on this government data. And so even if people think that it might not be really important to their daily lives, it really is. And if we see greater uncertainty around this data, that just adds to our greater uncertainty environment that we're in right now. And what we tend to see is that that's a drag on economic growth more generally. And so we really want to have as much high quality information as possible so that in particular, American businesses can make those investments that are going to lead to stronger economic growth going forward.
- [23:25]
Ben Castleman
Yeah, I mean, I spent some time over the last few days looking at some of these historical precedents. And Galen, you mentioned Argentina. Right? They did something very similar. Right. They fired the people who calculate their infl data because they didn't like the numbers. They sort of fudged the numbers for years to the point that basically international community completely lost faith in those numbers. And it had a very real consequence in terms of driving up their borrowing costs. Investors weren't going to lend to Argentina if they didn't trust the inflation numbers. And it contributed very directly ultimately to a really crippling debt crisis there. The Greece example to me is really interesting. Greece basically fudged its deficit numbers for years to try to hit some EU targets. They eventually brought in a economist to run their statistical agency. The sort of idea being he was gonna like clean things up and do it. Right. He discovered they've been underreporting it. He published those numbers, these accurate numbers, and he was ultimately criminally prosecuted and is still fighting criminal prosecution. He's now in the US been fighting criminal prosecution in Greece for years for accurately reporting these number. And I spoke to him over the weekend and he made the point to me like, yes, we need good data for the Fed to be able to make good decisions. We need good data for other policymakers, for businesses, for investors, all the things that Tara was just talking about. But also sort of fundamentally good data is core to democracy. Right. If you think about what happened in the last election, Kamala Harris lost in part because of a surge in inflation that voters very unhappy about. And obviously they knew about that because they went to the grocery store and they, you know, they experienced in their day to day lives. But we had data that we agreed on that said, you know, you can interpret it in a million ways, you can blame however you want to blame. But like we, we all agreed, like, look, these are what the inflation numbers were. You take that away, it removes a path for accountability from the citizens. And I think, you know, to Tara's point on the private data, you know, we can replace some of this with private data. We can't replace anywhere close to all of it. But also then you've got all these competing private sources and you know, one says that inflation is this and another says inflation is this. And how do you know who is right? The sort of core of there being like unanswer, however imperfect it might be, that is sort of the official set of statistics. If that erodes, that's a real blow to the sort of fundamental workings of our democratic system.
- [26:00]
Galen Druk
Yeah, I think that was such an important point by the Greek economist that you talk to. I think I'm saying his name correctly. Andreas Giorgio.
- [26:10]
Ben Castleman
You will notice that I avoided saying his name.
- [26:13]
Galen Druk
But yeah, that, you know, I, I think folks listening to this podcast will agree that data is a mirror. And it is through data that we can seek accountability or understand the parts of the world around us that we don't like and then seek to change them. To the point about private data, a lot of folks have said, you know, well, if we can no longer trust the public data, then we'll increasingly turn our gaze towards the private data. What kind of private data do we have? Does it currently align with the picture that the public data shows? Before we go down that rabbit hole, where does the picture stand today?
- [26:49]
Tara Sinclair
Obviously, if we're looking at labor market data, we're going to be looking at data from providers such as Indeed LinkedIn, ZipRecruiter, Glassdoor, there's a number of these different labor market companies that are collecting. One thing I will point out though, from the very beginning is that you're thinking about any concerns that we might have about political influence on government data. There are somewhat analogous concerns that we have about any private companies provided data, because they're typically doing it as a marketing project. And so they are going to release data that looks good for them and choose not to release data that looks bad for them and change their methodology at any time that suits them and their business model. And so that's a very different set of basically incentives that they're facing. And I think that's one of the key reasons why it's so important to have data that's collected for the purpose of tracking the whole US Economy rather than relying on these private sector inputs. I love private sector data, love working with it. I think it's very informative. But it's a complement, not a substitute for that government data. So it's additional input. And in certain places, the Bureau of Labor Statistics and also other statistical agencies such as the BEA are using this private data as an input into their production of statistics, but not as a replacement of it. And now just thinking more generally about what is it telling us about the economy? And we are seeing slowdowns in data pretty much across the board at this point. Whether we're looking at credit card data for spending, if we're looking at labor market data from these different labor market companies, they're all pretty consistently suggesting that the economy is not falling off a cliff, but is slowing, notably, which is very consistent with the government data that we're seeing as well.
- [28:54]
Galen Druk
Yeah, I mean, which leads me to the question of, you know, just how bad were Friday's jobs numbers and some of the other data that we might look at? Because, as you mentioned, Ben, had Trump not fired the commissioner of the bls, we would have moved on by now to, oh, these might not have been so bad. For this podcast purposes, we had already recorded a podcast on Friday about upcoming elections this fall, the, you know, the Senate elections for next year, who was jumping in and who was passing up a chance to run in 2020? So we wouldn't be talking about this right now had Trump not moved to fire Erica McIntar. But just how bad were those jobs numbers? And how does it play into all the other data that we look at, like inflation data or, you know, economic growth, trade, things like that, in many.
- [29:45]
Ben Castleman
Ways, that the monthly job gains had been the outlier in the data recently. Right. We had seen slowing in consumer spending. We had seen slowing in sort of a lot of measures of economic activity. We'd seen slowing, slowing in the job market by other measures. But we Kind of kept adding jobs at the steady pace. So on the one hand, these sort of downward revisions and the slower job growth in July just brought the labor market data, brought the job growth data sort of into line with a lot of our other evidence. Now, I mean, to the extent that you were leaning on that strong job growth as a sign that the labor market looked really strong, this weakens that. Right. And so I think there's a reason that people reacted strongly to those downward revisions. It was a real sign that things had been slower than we had realized. But I also think it's valid. You know, we'd heard some of the initial pushback from the. The White House before they fired the BLS commissioner, when they were sort of trying to spin the numbers. But they made some perfectly fair points, to be honest, that we were expecting a slowdown in job growth in part because of lower immigration. That if you've got fewer people coming into the country, coming into the labor force, than you just would expect to add fewer jobs, you need to add fewer jobs just to keep up. And so, although nobody had expected sort of this sudden, sharp downturn that we saw here, there had been a lot of projections that you would expect over the course of this year, job growth to slow significantly. The big focus for the Federal Reserve, for example, and for a lot of people exploring the economy has been on the unemployment rate, which isn't skewed in the same way by these shifts in immigration. And to say, hey, if what we really care about in the market is that everybody who needs and wants a job can get one, and the unemployment rate is sort of our measure for that. The unemployment rate did tick up in July, but I mean, it's still been staying in this very tight range. And so I think, like, was it bad? It was bad, but it was not any kind of fall off the cliff disaster. And we probably would not be talking about it on this podcast if it hadn't been for what happened with the commission.
- [31:53]
Tara Sinclair
Yeah, I'll just add on that I totally agree with Ben's point about highlighting the unemployment rate. And in general, if we're thinking about where we kind of thought the economy was in June versus where we now think it is in July, you know, a lot of that drop was in government jobs. And so they're right. I mean, again, I think this connects into this broader story of, you know, how much of this this is the supply side responses of policy that the Trump administration is pursuing, immigration being a notable one, but also those reductions in government employment. And so it's not a surprise that we got that data late. And it's not a surprise that it was a bigger negative than originally thought. And so this is one of those things that we can't have all the things, right. If we want to have slower immigration or even possibly net outmigration, then we're going to have slower job creation and that's going to be a lower monthly jobs number. And that's from a total aggregate gdp, a bad thing, but not necessarily. If we take that into consideration, if that's the policy goal, then that's what we're going to get.
- [33:17]
Galen Druk
Right. Because individually people may not be making less money. It just means there's less people participating in the economy. Where do tariffs figure into all of this?
- [33:27]
Tara Sinclair
Tariffs. Add in to this as well, particularly what we saw from the GDP release is that it does seem like firms are so far absorbing a lot of that. So they keep emphasizing this again and again, that this is kind of becoming a US Corporate tax, which I thought was not part of the Republican platform, but that that is how the, the tariff incident seems to be going so far. And so that is now resulting in lower investment by firms. And that's going to also be associated with lower job creation from firms as well.
- [34:02]
Galen Druk
You know, part of the irony here is that one of the ways that Trump could have played these job numbers is I've been right all along and Jerome Powell has, you know, taken too long to lower interest rates. And this is, I don't know, I guess you have to admit that the labor market is softening if you also want to take that stance. But whatever, we don't have to. Trump doesn't always sort of connect the two data points that need to be connected. Could have just said, you know, this is all Jerome Powell's fault. The Fed needs to lower interest rates. And I think, do we expect now that the Fed is likely to lower interest rates in September?
- [34:37]
Ben Castleman
The market clearly thinks it's more likely. Yeah, I think if he had, you know, just sort of kept stuck with the message that they'd had prior to the firing. Right. The argument is, you know, Powell should have cut. I think there were a lot of people who were saying when the numbers first came out, this suggests that Waller and Bowman, who were the two Fed governors who dissented on Wednesday, like this shows that they were right, you know, that the Fed is behind the curve here. We can argue about whether that's true or not. But this clearly sort of moved the narrative in the direction of the economy is weaker. And so The Fed is more likely to cut in September.
- [35:12]
Tara Sinclair
Yeah, I completely agree with that. Although my own take is that September is the right time to cut and not having these numbers a couple of days earlier shouldn't have really changed the outcome. But we'll see what the rest of. They're going to get more data by September. I think that's going to be really.
- [35:28]
Ben Castleman
Helpful if they trust it.
- [35:30]
Galen Druk
Well, to that end, I know you all have a lot of work to do today, particularly given the news environment that we're in, but it's a question for both of you, but it's rooted actually in something that you wrote, Ben, back when we were colleagues at FiveThirtyEight in 2016, you wrote a really prescient and accurate piece that was flying in the face of conventional wisdom at the time. Everyone was saying, you know, if, if Donald Trump is elected, he's gonna crash the U.S. economy. And you said, actually there's not good evidence to back that up. And you sort of laid out what, you know, it is a possible outcome. But everyone claiming this, both some Republicans and Democrats alike weren't basing their analysis in evidence. They were basing their analysis in sort of emotion or, you know, a desired political outcome. Which is all to say that you have not been an alarmist when it comes to the economy in the Trump era. How do you sort of rate this event in the now decade long sweep of all of the different kinds of things that Trump has thrown at the US Economy?
- [36:37]
Tara Sinclair
Economy.
- [36:38]
Ben Castleman
I mean, I think that if you're talking about the economy in the sense of sort of what it's going to mean for GDP over the next four quarters. Right. Or for unemployment over the next year, probably not that much. I don't think that like we fire the BLS commissioner and all of a sudden like the US Falls into a recession. And you know, I think if you look at the evidence on the US Economy right now, it is most of it points in the direction of a gradual slowdown, but probably not something recessionary. There are, I know, forecasters who have a recession in their forecast, but in general it's pretty mild. The things he's doing that might affect the economy are not the kinds of things that necessarily push growth off a cliff. I think what we're talking about here are longer run impacts about the credibility of, of the US As a borrower internationally, the credibility of the US as a partner to its allies, the credibility of the US to its citizens who live here. That shows up when we start thinking about trade. Not so Much in the, oh my goodness, tariffs are gonna drive up prices side. But on the, like, you're an ally of the U.S. but we suddenly go and, you know, slap 30% tariffs on you. Like why are we, you know, this isn't the thing that friends usually do to each other. There's sort of that piece of it. There's all these cuts to science funding, I think, which really raise a lot of concerns about like long term innovation in the US And I would put this BLS decision in that category as well. That, you know, data is infrastructure statistics, federal statistics are infrastructure. We build things on top of them and if those are weakened, then that has consequences. It doesn't mean that, you know, the tunnel collapses tonight, but it means that there are, you know, real long term risks that that pos. And I think that's the category that this falls into.
- [38:37]
Tara Sinclair
I completely agree with that and I think that that's what makes all of this particularly nefarious is because we're not going to touch the stove and immediately see that it's hot and pull our hand away from any of these damaging policies. Rather what we're going to see is this very slow degradation of our economic infrastructure across a number of different fronts and that's all going to add up over time and that's going to weaken our position in the world and it's going to weaken our economic strength.
- [39:08]
Galen Druk
All right, well, Tara and Ben, we're going to leave it there. Thank you so much for taking the time to join me today.
- [39:14]
Tara Sinclair
Thank you. Great to see you.
- [39:15]
Ben Castleman
Thanks for having us.
- [39:16]
Galen Druk
My name is Galen Druk. A moment of housekeeping as we head into August. There may be a week or two where we have just one podcast episode instead of two. So happy last month of summer. I hope you like I get to to try to forget about politics for a little bit. In any case, remember to become a subscriber to this podcast@gdpolitics.com and wherever you get your podcasts. Paid subscribers get about twice the number of episodes. You can also join our paid subscriber chat and pass along questions for us to discuss on the show. Most importantly, you keep this podcast running. Also be a friend of the podcast and go give us a five star rating wherever you listen to podcasts, maybe even tell a friend about us. Thanks for listening and we will see you soon.