Loading summary
Transcript61 lines
- [00:02]
Verizon Representative
Did my card go through?
- [00:03]
Joe Weisenthal
Oh no.
- [00:04]
Verizon Representative
Your small business depends on its Internet. So switch to Verizon Business and you can get LTE Business Internet starting at $39 a month when paired with select Business Mobile plans. That's unlimited data for unlimited business.
- [00:17]
Tracy Alloway
There we go.
- [00:17]
Verizon Representative
Get the Internet you need at the price you want. Verizon Business Starting price for lte Business Internet 25 Mbps Unlimited Data Plan with select Verizon Business Smartphone plan. Savings terms apply.
- [00:30]
Bill Beach
These days. AI can help you adopt better time management, but it can't stop colleagues booking meetings during lunch. But how about being able to easily adopt industrial AI to streamline your business? Siemens Xcelerator helps you find the right AI providers and easily understand what they offer so you can use modular solutions to quickly scale up and grow your business. That's AI for real. From the global market leader in industrial AI, Siemens. Learn more on USA.siemens.com AI this is.
- [01:01]
BlackRock Representative
What the market used to sound like. Pretty complex. But today with iShares by BlackRock, investing is easier. With over 450 ETFs, iShares gives you easy access to countless market opportunities. IShares by BlackRock the market is yours. Visit www.ishares.com to view a perspective which includes investment objectives, risks, fees, expenses and other information you should read and consider carefully before invest concludes principal laws. Prepared by BlackRock Investments LLC member Finn.
- [01:30]
Podcast Host
Row.
- [01:33]
Tracy Alloway
Bloomberg Audio Studios Podcasts Radio News.
- [01:49]
Podcast Host
Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
- [01:53]
Joe Weisenthal
And I'm Joe Weisenthal.
- [01:54]
Podcast Host
Joe, I kind of missed this on Friday because I was not feeling very well, so I was out sick. But what was Friday morning like when you were sat in front of your Bloomberg terminal?
- [02:04]
Joe Weisenthal
Well, the jobs report was pretty shocking. Obvious. Friday was just a crazy day. Yeah, so the jobs report obviously was. It was bad. I mean the last two months massively revised down. All of this evidence of labor market momentum perhaps seems to be stalling the tariff effect. Maybe we really are. And it's sort of some sort of tariff induced slowdown. The only job creation is in healthcare and social service. Not great, right?
- [02:31]
Podcast Host
Okay, so I saw the initial jobs report headline. So we had non farm payrolls coming in at plus 73,000, which I think was like 30% lower than the average expectation. We had the unemployment rate ticking up to like 4.3%. 4.2. 4 point. Almost 4.3%.
- [02:49]
Joe Weisenthal
Oh, let me, let me.
- [02:51]
Podcast Host
Sorry, I'm rounding up here.
- [02:52]
Joe Weisenthal
Okay, okay, okay.
- [02:53]
Podcast Host
Although maybe I shouldn't do that on a podcast all about labor market statistics. But the big thing that seemed to catch everyone's attention was we also had these massive revisions to the report for May and June. So we had a combined 258,000 jobs basically lowered from the initial reports. And this was like the biggest revision since the depths of, of the pandemic. And then the headline that really caught my eye while I was, you know, laying in my sick bed on Friday afternoon was Trump firing the head of the Bureau of Labor Statistics. So the agency responsible for putting out the non farm payroll report every month.
- [03:32]
Joe Weisenthal
Yeah, this is, I would say the key thing is that a. We've been used to these, you know, seeing significant revisions. We've been talking, you in particular have been writing a lot in the newsletter about deteriorating quality of labor statistics. Response rates to a lot of surveys have gone down over time, kind of like we're seeing in political opinion surveys and so forth. So there's already been this sort of anxiety. You have a lot of people online, including President Trump himself, you know, been like stoking sort of these conspiracy theories about these revisions, these attempts to actually be transparent. And then you get the first sort of like, genuinely negative report under this administration. It's the first one that was like, okay, this was bad, and boom, Trump fires the person responsible for it. Now, again, this is one of those things where sort of like DOGE itself, where it's like, I like the idea of government efficiency, right? Yeah, sure, doge. I like the idea of the BLS sort of doing a better job in some way or addressing these responses. But like doge, which we all have seen how that's turned out, I think there are a lot of, more than a lot of questions, more than a lot of questions about whether firing the BLS and replacing the head with someone who's, you know, a Trump appointee will, you know, add a more credible, transparent data quality.
- [04:50]
Podcast Host
Right. One thing that we have learned from all our episodes on data collection in the US Is that it is actually a really, really insanely labor intensive thing to do. You have to actually call up a bunch of people, homeowners for instance, or you have to call up a bunch of businesses and ask questions. You have to go out into the field and gather individual prices. And we can have a debate over whether or not you could maybe use new technology, price scanning data to make all of that more efficient. But for the time being, that's how it's done. And so you need people to do it. And if DOGE comes in and eliminates, you know, a big chunk of the budget, then it becomes harder to do.
- [05:28]
Joe Weisenthal
Or if it just gets more costly and the budget's going up. And then the one thing I would say is that in our conversations, and again, you have talked to the BLS many times. They are really good. They're professionals, and they take it very seriously.
- [05:40]
Podcast Host
They are very responsive, however, very transparent. We could talk about this a little bit, but perhaps less responsive than they used to be in recent weeks. So, anyway, we should talk about all of this. I think it's really important. And as you said, there are big questions like what happens if a president ousts a BLS chief and then introduces a new one? We have the perfect guest, someone we've spoken to before about the decline of America's data infrastructure. We're gonna be speaking with Bill Beach. He is, of course, the former Commissioner of Labor Statistics, head of the bls. So, Bill, thank you so much for coming back on All Thoughts.
- [06:13]
Bill Beach
Yeah, it's just really a pleasure to be back with you. I wish we were talking about some other subject besides this termination. I mean, it's just really shocking.
- [06:23]
Podcast Host
Well, on that note, Friday, Trump tweets or posts that he wants to fire Erica McEnterfer, the commissioner of Labor Statistics. What was going through your mind when you saw that news?
- [06:34]
Bill Beach
I was dumbass. I just finished a luncheon meeting at a very nice restaurant, and I was sitting in my pickup truck and I just couldn't believe. And then I sat there for probably 30, 40 minutes, car running and answering emails, people just sorting it out. It isn't that he didn't have the authority to do so. He does have the authority. We all, you know, everyone in the executive branch serves the pleasure of the president except those that have been specifically exempted by statute. And, and where that statute has been signed by the president. I think what was shocking about this is not that she was dismissed. That's shocking enough. It was the possibility that we could have now a sustained attack on official economic statistics, and that would undermine confidence in those statistics and put us in a path that other countries have followed. I mean, instantly people went to worst case. After a while, that sort of settled down and we began to look at the reasons for the dismissal, which I then subsequently said on Twitter or X that they were unfounded. And I haven't dropped that position since. So happy to talk about it.
- [07:41]
Joe Weisenthal
Well, why don't we just back up for a second? We talked to you before because you've been sounding the alarm about the capacity constraints to collect good data. But just for people who haven't listened to or haven't followed you, you were a Trump appointee. I mean, you served at the head of the BLS in 2017. And so I do, you know, and so I was like, okay, your credibility. Why don't you just give us a little bit of backgr about who you are, your position, and the concerns that you've been raising for some time about the constraints at the bls.
- [08:11]
Bill Beach
So I was, I was really honored to be the Commissioner of Labor statistics from 2019 until 2023. So I served a little less than two years under President Trump. He nominated me. It is a presidential nomination, Senate confirmed positions, it has a statutory four year term. And then I served the rest of my term under President Biden. So I was. In both terms, I think that's kind of important because the BLS commissioner has been exempt from the normal turning over of the presidency by party. And that's because the view is, well, these data are so important, they should not even be a part of the political appointment process except when they come due. Sort of like, you know, the Federal Reserve chair or something of that nature. It's just seen as we want to keep it out of politics. So I served over that period of time, you know, that was the COVID period. So there were all kinds of real challenges from that. But I think the main thing that I drew from that period is how important it is crucial almost. We're at a crisis level to modernize the way we collect data. The response rates on the surveys are falling dramatically. I've made that point on this program and, and our costs are rising dramatically, which makes it really difficult to conduct those surveys in the future in the way we have in the past. And then the future is kind of going in the direction of the employment survey. And I just said surveys are falling. But the employment survey is a little different. It's not an in person survey. It is an electronic survey. And we need to invest more in the electronic side of statistical creation or production, blended data, et cetera. I could do a whole program on this. But your point was well made. BLS has had some challenges in front of it, as has the entire statistical system. Unfortunately, for this particular episode, those challenges were really not, I don't say relevant. They're relevant, of course, but they're really not the reason why we should have had a change at the top.
- [10:12]
Podcast Host
Well, speaking of the employment report, talk to us about what exactly happens when the BLS is publishing the initial non farm payrolls and then what happens, you know, in the couple months or so before it publishes the revision? And why does it seem we are getting these large gaps at least in recent months and years?
- [10:32]
Bill Beach
Right. So the employment survey, the jobs numbers come from a survey of businesses. The unemployment rate comes from a survey of households. So there's two surveys involved in every first Friday report. What we're talking about now is the survey that goes out to businesses and it goes out to hundreds of thousands of businesses. Well, of course there's still a probability sample since there's well in excess of 12 million businesses in our census of business, our business register. Well, those businesses are supposed to turn their surveys in at the end of the month, basically, but only about 68%, usually, that's the average do so. And so BLS keeps the window open for two more months. So 68% or so. At the end of the first month they make the first estimate. Then at the end of the second month we get about 83% completion and they revise that number of the first month. And then by the third month we're into the 90s, usually end up around 93, 94% of all the sent out returns come back to us with information. So it's a wonderful survey. The revisions are done because we get more information from businesses. Oftentimes big businesses answer first. They have the capacity, capacity to do so. And then we get smaller entities, state and local governments, smaller businesses answer in those next two months. We always have revisions. There's, there's, I can't, I can't admit even when it, when we say the number did not change, that doesn't mean we, we didn't have revisions. They just canceled each other out. There's just, all these revisions are coming in. The revisions have been high recently, but this is not a typical of a period when the economy is either going back to growth or going down to subsidence. So oftentimes turning points in the economy are accompanied by changes, larger changes in the revisions, particularly in this case, where we suspect smaller businesses are feeling the effects of the supply shock coming from the tariff policy and from immigration and that these supply shocks are affecting smaller businesses more than they are larger businesses. And state and local governments are being affected by yet another factor, and that is the expiration of the COVID era money. I think that was actually the root of a lot of the changes that you saw on Friday. State and local governments are not able to hire at the levels they were going to hire at in previous years or did hire at in previous years because they did not have the subsidies that they had in previous years. So these are important revisions. Actually, the research shows, and this may shock you, that BLS is getting much better at its first estimate than it was 30 years ago. In fact, it's really kind of almost a steady progress towards greater accuracy. So the big revisions are indicative of not error, they're indicative of more information. And the bigger the revisions, the more likely we are in a turning point.
- [13:37]
Joe Weisenthal
There's so much that was in that answer that I found to be very helpful and clarifying. So thank you. I mean just this idea a that actually over time, contrary to what people on Twitter might think, that the quality of that first pass has actually gone up is very striking. Let's stipulate that, okay, the BLS could use some upgrading. As you mentioned that there are these capacity constraints, non response, the cost of going out. Maybe it needs to adopt more technology in some way to solve for this. Does the BLS currently have that capacity either budgetary wise or statutory authority such that a commissioner could just do that, whatever it is that ideal state? Or would it need either some sort of budgetary allocation or an act of Congress to get to the point where it's, you know, getting to the level that we are happy with?
- [14:28]
Bill Beach
Again, it has the authority to make the changes. It doesn't have the budget to do so. And it isn't that BLS just needs more money. Right. Matter of fact, I think Congress, if it paid more attention, would say, well, what are you spending your money on now? And let's make sure that the low priority is canceled so that we can support the high priority. I think BLS would be very happy with that. But we do need more money. And why? Well, if you're going to change an official statistic, the unemployment rate, let's just take that. You want to be really careful, right? You want to run tests, you want to test out your new idea. You don't want to have a, you know, count the number of geese in the air and that's the unemployment rate. You want to make sure that that is a particularly good indicator of the employment market. And you want to test it in real time as well as experimental time in real time. So run it parallel. Well, these, these tests expand the costs of your unemployment a statistics program because you're running essentially two systems simultaneously. We think that to modify the current population survey, which is the survey of households, would cost around 15 million to 20 million in experimental costs over a two year period. It's not great the program itself costs about 45 million a year, but it does add to the cost for those two years or so. Congress could, could easily do that. I mean, oh my gosh, Congress is spending a lot more money than that on things that we might disagree with, but they need to allocate a little bit of money to CPS for that. Does it have the authority? Here's a really interesting story. During COVID we canceled all travel, all conferences, you know, and I was surprised at how many millions of dollars went into travel and conferences and meetings. So this became for me, couch money during the COVID years. And I was able to spend that money on important things, I thought. So I did a lot of things like I built a new data center to get us out of the basement of 104 year old building and out to a wonderful above ground local location. But I also started a number of research programs. I made 31 big modifications to the CPI. We started a whole new approach on looking at consumer expenditures and I subsidized some experimentation on the jobs report. Well, as soon as Covid was over, we started to get congressionally mandated programs that then sucked up all that couch money. If we had a little bit of extra, we, I mean, BLS a little bit of extra to do these, these things. Let's just think of the innovation that way that would happen. I think we would quickly be out of the problems that we are facing from a methodological standpoint. And that might then reduce the political pressure that we saw that was so evident on Friday.
- [17:23]
Podcast Host
So we are recording this August 4, 9, 25am in the morning and 33 seconds. I feel like I need to be that specific nowadays with the news flow. So who knows what happens between now and when this episode actually comes out. But we are expecting the administration to announce a new BLS head in the coming days. What happens now? You know, if there's a Trump appointee for a new statistics commissioner, after the President has specifically stated that he thinks the previous commissioner was politically motivated in some way, are people still gonna believe the numbers that are coming out? And how do you think that's actually gonna play internally at the bls, at an organization whose whole, you know, raison d' etre is to find, you know, factual numbers and statistics to portray the American economy?
- [18:15]
Bill Beach
Well, I think there has been damage and it will take time to recover from that damage. The last time there was a serious political effort on BLS was during the Nixon administration and it took some time for BLS to recover from that. Though the action taken by the president at that time vis a vis BLS was not, I think, as significant as this one. So you just imagine that the President decides to, oh, no, no, appoint St. Peter, you know, as the new BLS commissioner. And of course, St. Peter has a reputation for honesty and for clarity of thought. Still, it'll be the case because St. Peter won't have any control over the way that the data are collected or the data are assembled or the estimates that are done. That's all done outside of the knowledge of the commissioner. Commissioner has no control over that. In fact, you're locked out of that whole process. So it will be the case that St. Peter will have a month come when the unemployment rate will be disappointingly low, could even be negative. But I think given what has just happened, people will say, well, St. Peter probably influenced that number and it's not as bad as it really is. So for a while, that suspicion that the estimate that's announced is really not the real estimate will be in the minds of some people. Not in my mind because I know that these people who work there, the professionals, the full time staff, the patriots that, that work there, the, the loyal Americans who are just extremely diligent in doing an absolutely objective job, those people are still in place. But if you don't have my level of knowledge or a reasonable level of knowledge of how internally BLS works, you're going to be subject to these falsehoods and accusations and that will be damaging. That will reduce investment, that will reduce economic activity. That will make at least that will create greater uncertainty about what's happening inside the US Economy. Policymakers will be less, less clear in the direction that they take. So there will be a time when we need to recover, no matter who's appointed. I hope that it will be a short lived live time. And my guess is given the reputation of bls, if someone, you know, really reputable is appointed, then yeah, I don't think the period of transition will be that long.
- [20:38]
Podcast Host
All right, well, Bill beach, really appreciate you coming back on the show. Thank you so much for, for being on. All thoughts.
- [20:44]
Joe Weisenthal
Thanks, Bill. That was great.
- [20:45]
Bill Beach
Oh, thank you very much for asking.
- [21:00]
Podcast Host
Joe. So good to get Bill back on to talk about this. Really the perfect guest. There are so many, I guess, ironies involved in this whole conversation. The big one, of course, is this idea that like, well, if Trump wants to convince everyone that the US Economy is doing fantastic and job growth is great, then firing the head of statistics and having everyone distrust, you know, the subsequent numbers because the subsequent Head might be a political appointee who's, you know, a loyalist to Trump. Seems like you're sort of shooting yourself in the foot.
- [21:30]
Joe Weisenthal
The other huge contradiction is that he says Powell is too late. Yeah, right. This is the other huge contradiction, which is every day he slams Powell, he's like, oh, you're too late. You need to cut rates. Well, if the job numbers were weak, then I could understand this argument to some extent. Oh, the job. But he's also casting aspersions on the negative jobs numbers. So how is Powell too late? There's, I mean, this is. I mean, it's an irretrievable contradiction in the two criticisms, both of the Fed and the bls.
- [21:59]
Podcast Host
It's definitely a contradiction. I don't think, however, that Trump necessarily draws a direct connection between the unemployment rate and interest rates as well. You know, he seems to just like.
- [22:10]
Joe Weisenthal
Low interest rates, and he seems to perceive that low interest rates are basically a reward for an improving economy. But.
- [22:18]
Podcast Host
Yes, but I mean, lots of other contradictions. You're absolutely right. So another one is this idea that, okay, a lot of the weakness came through on the revision side. The revisions are mostly coming from small businesses who reply late. And if you think about the Trump administration, you know, they always sort of portray themselves as a good business environment for smaller businesses, and it might be that that's an area that's seeing some weakness.
- [22:43]
Joe Weisenthal
I thought your question about sort of internal morale and as Bill said, you know, an agency staffed with patriots, I mean, I just, you know, is BLS going to be continue to be a destination for people who are patriots? Right. Or take their job seriously in the future is a really interesting question. Also, the idea that, like, maybe we could, like get high data quality for like $20 million, given how much that's worth, it just like drives you crazy if that's really all it took. But also, I really like this idea that it would have to always be done in parallel with the current thing, such that the new data is sort of provably backwards compatible with the old data. Right. So if you're going to adopt a new methodology, you need some allocation to run two surveys at once, et cetera. Anyway, even in a very short conversation, learned a lot from Bill.
- [23:29]
Podcast Host
Absolutely. I do think it's worth pointing out that there are other statistical agencies in the world that are experimenting with new technology for data sources. The UK Statistics Agency in particular. They're going to start using, you know, price scanning data for cpi.
- [23:43]
Joe Weisenthal
Wait, have you heard about the whole thing, though, with how they moved the ons to Wales and no one wanted to go out there. And have you heard about this?
- [23:51]
Podcast Host
I have. Wales is not that bad.
- [23:54]
Joe Weisenthal
Let's distribute the largesse of the government across. Everyone loves that idea. Let's not have it all be concentrated in London. They're like, okay, we're going to make everyone move to Wales. And now it's a lot harder for the ONS to hire anyone. Anyway. It's just a little interesting story. Maybe we'll cover it at some point.
- [24:10]
Podcast Host
Why people don't want to move to Wales?
- [24:11]
Joe Weisenthal
No, I just think it's interesting, right? Like there's intuitively I love this idea of like, why should all of the government spending on public sector stuff at the federal level be in the richest city in the UK or why should it all be in dc, et cetera. And so this idea of diffuse. Anyway, it's a separate thing. It's actually some interesting challenges arise from it.
- [24:31]
Podcast Host
Okay, shall we leave it there?
- [24:32]
Joe Weisenthal
Yeah, let's leave it there.
- [24:33]
Podcast Host
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me, Tracy Alloway.
- [24:38]
Joe Weisenthal
And I'm Joe Wiesenthal. You can follow me. Hestalwart. Follow our guest William Beach. He's each WW453. Follow our producers Carmen Rodriguez, Ermenarman, Dashiell Bennett, Ed Dashbot and K. Kale Brooks and Kalebrooks. For more Odd Lots content, go to bloomberg.com oddlots where we have a daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord Discord GG Oddlauts.
- [25:04]
Podcast Host
And if you enjoy Odd lots, if you like it when we talk about the future of economic statistic collection in the US Then please leave us a positive review on your favorite or the uk or the uk. And please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.
- [26:01]
Verizon Representative
Did my card go through?
- [26:03]
Joe Weisenthal
Oh, no.
- [26:03]
Verizon Representative
Your small business depends on its Internet. So switch to Verizon business and you could get LTE business Internet starting at 39amonth when paired with select business mobile plans. That's unlimited data for unlimited business.
- [26:16]
Tracy Alloway
There we go.
- [26:17]
Verizon Representative
Get the Internet you need at the price you want. Verizon Business Starting Price for LTE Business Internet 25 Mbps Unlimited Data Plan with select Verizon Business Smartphone Plan Savings terms.
- [26:27]
Joe Weisenthal
Apply.
- [26:30]
Tracy Alloway
Need branded gear Fast, on point and ready when you are, 4imprint has you covered with thousands of customizable products, from apparel and drinkware to tech and trade show gear. They help businesses stay prepared for anything planned or last minute. Many Items ship within 24 hours and every order is backed by 4imprint's 360 degree guarantee so it arrives exactly as expected right on time. You'll also get free samples, expert support and total confidence from start to finish. Explore your options@4imprint.com for Imprint for certain.
- [27:00]
Bill Beach
These days, AI can help you adopt better time management, but it can't stop colleagues booking meetings during lunch. But how about being able to easily adopt industrial AI to streamline your business? Siemens xcelerator helps you find the right AI providers and easily understand what they offer so you can use modular solutions to quickly scale up and grow your business. That's AI for real from the global market leader in industrial AI, Siemens. Learn more on USA.siemens.com AI.