The U.S. jobs report has never been so under the gun. Here's

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Dow Jones NewsAug 19, 4:26 PM UTC
  MW The U.S. jobs report has never been so under the gun. Here's why fixing it won't be easy.  

 

By Jeffry Bartash

 

The pandemic worsened some problems and created new ones. Low budgets and staff shortages haven't helped.

 

President Donald Trump fired the chief of the Bureau of Labor Statistics after claiming the agency issued "phony" jobs numbers during the Biden administration to aid Democrats.

 

Something was wrong.

 

When the U.S. employment report came out a day before the July Fourth holiday, it showed a 73,000 spike in government jobs in June. The surprise gain accounted for half of all the 147,000 new jobs reportedly created during the month, making it seem like the labor market was still rock solid.

 

The leadership of the Federal Reserve saw the report as evidence the economy was strong enough to leave interest rates at relatively high levels, in case new U.S. tariffs spawned more inflation.

 

Wall Street economists were not nearly so reassured.

 

They knew the government-jobs bonanza was exaggerated and would probably be revised away. After all, the school year had just ended and the White House's DOGE initiative was cutting federal employment.

 

Sure enough, the government's updated estimate a month later showed just 11,000 government jobs were created in June. The reduction was part of a broader set of revisions that nearly wiped out all the reported job gains in June and May.

 

The large scale of the downgrades triggered an unprecedented move by President Donald Trump in early August to fire the top statistician at the Bureau of Labor Statistics. Trump accused the BLS, which is part of the Department of Labor, of rigging the numbers to hurt him politically.

 

The controversial move put a fresh spotlight on the employment report - why it has seemingly erred so often in recent years, and what can be done to improve it.

 

"It's going to be a challenge, especially under the current situation," said chief economist Richard Moody of Regions Financial.

 

Trouble in the making

 

For decades, the employment report released at the start of each month has offered the clearest window into how the economy is doing.

 

U.S. presidents, Wall Street investors, corporate CEOs, small-business owners and millions of workers and retirees have come to rely on the report to guide their decisions on investing, hiring, spending, job seeking and the crafting of federal laws.

 

"The employment report has always been the top-tier economic indicator that the market eagerly anticipates every month because of how much information it provides," said senior economist Sam Bullard of Wells Fargo.

 

Statisticians at the BLS have worked to fine-tune the report for years, making it more and more accurate. They would check their work at the end of every year against state employment and IRS tax records, updating their preliminary estimates as needed.

 

Then came COVID-19.

 

Pandemic fallout

 

The pandemic introduced new complications to the employment report and exacerbated others.

 

First and foremost, the pandemic sped up an emerging problem: Fewer companies and households were responding to the BLS employment survey in a timely manner.

 

The BLS compiles each monthly jobs report within a short window of two weeks or less. The agency depends on quick responses to its surveys to render the most accurate estimates on job creation and unemployment. Even under the best of conditions, it's no easy feat in the world's largest economy.

 

When fewer companies or individuals respond, the jobs report has a greater margin for error.

 

Consider the July report. Only 58% of the companies surveyed by the BLS sent their responses on time. Ten years earlier, the response rate was 83%.

 

Companies are given two additional months to submit their responses, and almost all of them eventually do so. The employment reports are then updated to make them more accurate.

 

The June and May revisions, economists say, actually showed that the process was working as intended. Yet the revisions were also among the biggest on record, inviting political backlash from a Trump White House already voicing suspicions about the federal bureaucracy.

 

Revised figures showed the economy only created a combined 34,000 new jobs in those two months - not 291,000 as previously reported.

 

The changes upset a White House narrative about a strong U.S economy powering through the introduction of the highest tariffs in decades.

 

The consequences didn't stop there.

 

The Federal Reserve voted against cutting interest rates in late July because officials believed the labor market was in good shape. That decision angered Trump and spurred another attack from him on the central bank.

 

Private-sector economists were also misled into thinking the economy was a bit stronger than it was.

 

"Those were big revisions that did change my thinking on the economy," said Gus Faucher, chief economist at PNC Financial Services.

 

Critics of the BLS who supported Trump's decision to fire Erika McEntarfer, the former agency chief, justified the move by pointing to the employment report's failings.

 

"The problems in the BLS data have been evident for three years now, and they still haven't been fixed," E.J Antoni, chief economist at the conservative Heritage Foundation, told Fox News.

 

Antoni was nominated by Trump shortly thereafter to be the next BLS commissioner. He is awaiting Senate confirmation hearings.

 

Labor market in flux

 

The pandemic didn't just worsen the already falling response rate to the BLS survey. It also upset longstanding seasonal employment patterns.

 

Put simply, companies are now hiring and firing workers at somewhat different times than they used to. And people are looking for work on a different timetable, as well.

 

These shifts in employment patterns haven't been huge, but they have been big enough to throw off the the process by which BLS adjusts the raw employment totals for seasonal swings.

 

Take the May and June jobs reports. The BLS assumed a certain number of school employees in state and local education would no longer be employed in those months, based on longstanding historical patterns.

 

As it turned out, state and local employment fell less than expected.

 

The seasonal adjustment process, however, made it look as if government employment rose sharply. It didn't.

 

Economists pointed out this problem at the time, and MarketWatch wrote about it.

 

Read: The June jobs report is grimy under the hood

 

The task ahead

 

So what can a new BLS commissioner do to fix the problem?

 

The Trump White House has ruled out providing more money and staff at the BLS, at least for now. Economists say that's a penny-wise, pound-foolish approach.

 

How come? The BLS has been starved for funds for years. The agency has also lost lots of key staff, and many top positions are vacant.

 

A private support group called Friends of the BLS, which includes two former commissioners, said the agency has lost 20% of its employees in this year alone. That's a lot of institutional knowledge gone.

 

The ongoing budget crunch and staff shortage has forced the BLS to cut back on some of the data it collects on employment and inflation, among other things.

 

"All the surveys have been reduced. It increases the uncertainty," said Keith Hall, a Republican who was BLS commissioner from 2008 to 2012.

 

Any real fix is going to require money, he said.

 

Take the low response rate, a phenomenon that has occurred in major economies around the world. "This is not just a U.S. thing," said senior economist Jennifer Lee of BMO Capital Markets.

 

One solution would be to pay businesses and households to respond more quickly to the volunteer survey, but that might be a hard sell politically.

 

Another option is require businesses to respond to the BLS survey by law. A few states do that already, but it's unclear if the rule is enforced.

 

Some economists wonder if the BLS can get access to IRS tax data sooner, but that would require changes in federal law due to privacy and confidentiality concerns.

 

A more likely solution would be technological upgrades that allow the BLS to send out and collect its surveys in a more timely manner. A modernized data-collection process could also make it easier for businesses and households to respond.

 

But that would also cost money.

 

"In the past 20 years, funding has not kept up with inflation," said Elizabeth Renter, chief economist NerdWallet. The BLS "is effectively losing money."

 

The seasonal-adjustment process, meanwhile, will likely improve as the pandemic continues to fade into the background and as the BLS formula better recognizes emerging patterns of employment. It's going to take more time, though.

 

At a crossroads

 

In the meantime, the agency's process leaves it susceptible to putting out information that is sometimes not credible. The government-jobs mirage in June was one such example.

 

Part of the reason the BLS sticks with what it knows, economists and former agency officials say, is that it is worried about tinkering with a process that has been tested by time and found to be quite accurate overall. Officials don't want to introduce too many sudden changes and make the report less reliable.

 

The firing of McEntarfer, moreover, has raised very real worries about whether the employment report will become politicized. Antoni is a conservative critic of the agency who has called for big changes in how the report is put together.

 

"What we are going through right now is harming the reputation of the data," Renter said. "Whether or not the data is accurate, we are likely to be more suspicious."

 

For now, economists say they still have faith in the BLS to try to put out the best, most accurate data it can.

 

They note the agency has always published changes to its methodology and been very transparent, allowing outsiders to check the quality of its work.

  
  19 Aug 2025, 4:26 MW The U.S. jobs report has never been so under -2-  

 

"I an confident the data is free of political influence," said PNC's Faucher. "If they continue to make all this information available that is available now, it would be a big reassurance."

 

What would worry Wall Street economists would be repeated news leaks about political pressure or a rash of high-level resignations at the BLS once a chief nominated by Trump nominee is in place.

 

But even if the BLS remains free of politics and the data is improved, economists say, it's simply not possible to get highly precise information quickly in a huge U.S. economy with 160 million workers. More large revisions are inevitable, even under a better process.

 

"There's always going to be challenges in getting the most up-to-date data as much as we would like in a timely manner," Wells Fargo's Bullard said.

 

-Jeffry Bartash

 

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08-19-25 1226ET

 
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