Data errors

The Bureau of Labor statistics is not having its best time. Yesterday they published the biggest negative revision on record on the employment benchmark. To pu it in simple terms, the BLS takes a sample to measure employment and then measures the error against the Quarterly Census of Employmet and Wages (QCEW). This revision published yesterday is basically the error in the methodology. The problem is the error is getting bigger, to a point, where the employment measure, may no longer be trusted. To give you an idea, the headline number for payroll growth between March 2024 and April 2025, was reported at 147,000 jobs per month, and it has been revised downward to 71,000. That shows a much weaker labor market, and the Fed looks at this data as an input to manage monetary policy, since full employment is one of its mandates. What happens now? The Fed cannot ignore this revision, and the White House is putting a lot of media pressure on them to lower rates. The former head of the BLS was fired by Trump, and the current team is supposed to amend the methodology to minimize the error. Prior to this adjustment, there was no doubt about a a rate cut next week. Perhaps now the question is not the direction, but the amount of cuts needed. Fed fund futures still assign a very low probability to a 50 bps cut next week, which means 25 bps is the most likely outcome. PPI todsy and CPI tomorrow, will provide more clues as to what the Fed will do next Wednesday.

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