Significant modifications rocked the employment figures, while the upcoming inflation statistics may show signs of uncertainty on Tuesday.
The dismissal of BLS Commissioner Erika McEntarfer by the Trump administration, coupled with budget and staffing cuts, has sparked concerns about the accuracy and reliability of the Consumer Price Index (CPI) data.
President Trump accused the data of being "rigged" against him and replaced McEntarfer with a "more competent and qualified" person. This move was widely criticized by economists and former BLS officials as an unprecedented political interference threatening the independence and integrity of the federal statistical system.
The BLS has historically been known for producing some of the most reliable and independent economic data worldwide, including the CPI. The forced removal of McEntarfer—a career statistician nominated by a previous administration—and subsequent staffing and budget pressures have raised fears that political motivations could distort or bias CPI and other economic data.
The $2.1 trillion market for Treasury Inflation-Protected Securities (TIPS) depends critically on the trustworthiness of CPI data produced by the BLS. Even minor technical modifications to CPI calculation methods can materially affect inflation measures, underscoring the importance of maintaining statistical independence.
The BLS made a 15% wholesale reduction in collections across 72 coverage areas, affecting both the Commodity and Services Pricing survey and the Housing survey. This reduction in price observations and increase in imputations could make the CPI data less sharp, but not cause large variations similar to the survey-driven jobs report.
The July CPI is expected to provide further evidence of tariff-induced inflation eroding the purchasing power of consumer paychecks. The index is expected to rise 0.2% for the month and tick up to 2.8% on an annual basis, according to FactSet consensus estimates.
Despite the ongoing uncertainty about leadership and resources, the BLS continues to release crucial economic data, albeit with potentially increased volatility. The 15% reduction in price observations within the remaining sample is four times larger than the number of observations dropped from the three cities (Buffalo, New York; Lincoln, Nebraska; and Provo, Utah) where data collection was halted since April.
The impact of the reduction in price observations and increase in imputations is expected to be a slow deterioration in purchasing power rather than a sudden, large variation. The Consumer Price Index (CPI) is set to be released at 8:30 a.m. ET on Tuesday.
Experts warn that such politicization may undermine transparency, damaging economic decision-making and market trust. The issues of greater importance involving the CPI data are its implications for the trajectory of inflation and any potential pushback from the Trump administration on reports showing tariffs are driving prices higher.
In June, CPI rose to 2.7%, its highest level in four months, with price increases including those from tariffs. Trump baselessly claimed that McEntarfer "rigged" the data, an allegation disputed by Trump's former BLS head and a cadre of statisticians and economists.
The Biden administration's attempt to downplay price increases as inflation growth was slowing did not resonate with the public. As the July CPI is expected to show a similar trend—higher prices on a wider swath of goods due to tariffs, while falling gas prices and tepid consumer demand keep a lid on some services prices—the need for unbiased and reliable economic data remains paramount.
- The political interference in the federal statistical system, as seen by the dismissal of BLS Commissioner Erika McEntarfer and subsequent budget and staffing cuts, has heightened concerns among economists and businesses about the reliability of general-news such as the Consumer Price Index (CPI) data.
- The trustworthiness of the CPI data, produced by the BLS, is crucial for the $2.1 trillion market for Treasury Inflation-Protected Securities (TIPS), as even minor modifications to CPI calculation methods can significantly affect inflation measures.
- The ongoing political influences on the BLS, including the reduction in price observations and increase in imputations, could lead to a gradual deterioration in purchasing power, raising issues of transparency, damaging economic decision-making, and eroding market trust.
