Firing the BLS chief was a petulant move, says former CEA chair Greg Mankiw

Key Concepts

• Accuracy and timeliness of government economic data
• Bureau of Labor Statistics (BLS) and its data collection methods
• Political influence on statistical agencies
• Modernization of data collection and analysis
• Funding for statistical agencies
• Data revisions and uncertainty in economic data
• Private sector data sources and their potential integration
• Credibility of economic statistics

Accuracy of Government Data

The discussion centers on the accuracy and timeliness of government economic data, particularly data from the Bureau of Labor Statistics (BLS). The current system relies on antiquated methods, such as sending out surveys via snail mail, which can lead to significant revisions in the data months after the initial release.

• Antiquated Systems: The data systems used by the BLS are described as "antiquated."
• Data Revisions: Significant revisions to economic data are common, with the example of a two-month revision being the largest in 50 years.
• Timeliness vs. Accuracy: There is a trade-off between getting data that is timely and getting data that is accurate. Waiting longer can improve accuracy but delays the availability of information.

Political Influence and the BLS

The firing of the BLS commissioner is a central point of contention. Greg Mankiw suggests that firing the head of the BLS was "not a smart move" and "seemed like a petulant move," especially if based on disagreement with the data. He argues that such actions can undermine the integrity and credibility of the statistical agencies.

• Integrity of Data: Mankiw emphasizes that there is "no evidence" that the numbers were rigged in any way.
• Political Interference: Firing people every time the data doesn't align with the president's expectations creates the "wrong set of incentives" for those running the agency.
• Elaine Chao's Perspective: Former Labor Secretary Elaine Chao stated that the commissioner oversees the BLS but doesn't get involved in the minutiae of the data, suggesting that rigging or political aspirations would be difficult.

Modernization and Funding

Mankiw advocates for modernizing the data collection and analysis methods used by statistical agencies. He suggests that this would require increased funding, which has been lacking in recent years.

• Need for Modernization: Modernizing data collection is seen as an "important task ahead."
• Funding Cuts: Statistical agencies have been facing funding cuts, making it difficult for them to maintain their current operations, let alone modernize.
• Consistency Over Time: Modernization needs to be done carefully to ensure that new data is broadly consistent with old data, allowing for meaningful comparisons over time.

Alternative Data Sources

The discussion touches on the potential for incorporating alternative data sources, such as private sector data, to improve the accuracy and timeliness of economic statistics.

• Billion Prices Project: An example is given of a project at Harvard Business School that uses internet prices to track inflation even before the CPI sees it.
• ADP Data: The ADP data on employment is mentioned as a potential source of information that has not been fully incorporated into official employment data.
• Hybrid Approach: The idea of a hybrid approach, combining public surveys with private sector data, is suggested as a way to create more accurate estimates.

Uncertainty and Economic Policy

The level of uncertainty in the economy is discussed as a factor affecting the accuracy and revisions of economic data.

• High Uncertainty: The current economic climate is described as a time of "very high uncertainty," partly due to policy decisions.
• Tariffs: Tariffs are mentioned as a specific source of uncertainty, with their frequent changes making it difficult to predict their impact.

Commission to Study Statistical Agencies

Mankiw proposes creating a commission to study the organization of statistical agencies and explore ways to improve data collection and analysis.

• Purpose of the Commission: The commission would study the organization of statistical agencies and explore ways to combine private sector data with public surveys.
• Alternative Poverty Measures: The example of alternative poverty measures created by the Census Bureau is given as an example of how data can be improved.

ADP vs. BLS Data

The discrepancy between ADP data and official BLS data is highlighted as a puzzle that warrants further study.

• Discrepancy: The ADP data and the official BLS data do not track as closely as one might expect.
• Convergence: It's noted that the two data sets have converged recently after being significantly different.

Conclusion

The discussion emphasizes the importance of accurate and timely government economic data for informed decision-making. It highlights the challenges of using antiquated systems, the potential for political influence, and the need for modernization and increased funding. The integration of alternative data sources and further study of discrepancies between different data sets are suggested as ways to improve the quality of economic statistics. Mankiw's central argument is that undermining the credibility of statistical agencies through political interference is detrimental to the process and that a commission should be formed to study and improve the system.