Jeremy Siegel on the BLS: 'Who is reporting wrong and why?'

Key Concepts:

• Bureau of Labor Statistics (BLS) data accuracy and response rates
• Mandatory questionnaires with time limits for BLS surveys
• Transparency and explanation for statistical errors
• Impact of inaccurate data on monetary policy decisions (specifically, interest rate cuts)
• Inversion of the term structure (Fed funds rate vs. 10-year Treasury yield) as an indicator of economic conditions

BLS Data Accuracy and Response Rates:

The speaker expresses strong dissatisfaction with the current state of data collection by the Bureau of Labor Statistics (BLS). The core argument is that the BLS response rates, currently at 60%, are "unacceptable" for a statistic of such importance. The speaker suggests implementing mandatory questionnaires with time limits to improve response rates. The analogy of "fill it out when you can" attitude towards these surveys is used to highlight the perceived lack of seriousness.

Transparency and Accountability:

The speaker criticizes the lack of transparency and explanation following a significant error made by the BLS, described as "the biggest mistake in 50 years." The speaker questions why there was no clear explanation of who reported the data incorrectly and the reasons behind the error. The speaker does not comment on the firing or not of any personnel, but emphasizes the need for faster reporting in the age of the internet. The speaker finds the idea of reports coming in weeks late "totally unacceptable."

Impact on Monetary Policy:

The speaker argues that the inaccurate BLS data directly influenced monetary policy decisions. Specifically, the speaker believes that a rate cut would have occurred at the July meeting if the true weakness of the economic numbers had been known. This highlights the real-world consequences of unreliable economic data.

Inversion of the Term Structure:

The speaker discusses the inversion of the term structure, measured as the difference between the Fed funds rate and the 10-year Treasury yield. The speaker notes that the Fed funds rate is normally 120 basis points below the 10-year yield, but it is currently inverted. This inversion is presented as an argument for lower interest rates than the current 4.33%. The speaker concludes that "they need to move on," implying the Federal Reserve needs to adjust its monetary policy in response to these economic indicators.