The Data is Broken — Fed Must Act NOW!

Key Concepts

• Bureau of Labor Statistics (BLS)
• JOLTS (Job Openings and Labor Turnover Survey)
• Government Shutdown
• Private Data Sources
• Artificial Intelligence (AI)
• Labor Market Weakness
• Federal Reserve (Fed)
• Basis Point Cuts (25 or 50)
• Fed Governor Moran
• Corporate Earnings
• Fiscal Irresponsibility

Antiquated BLS Data Collection Methods

The Bureau of Labor Statistics (BLS), responsible for weekly job numbers, JOLTS data, and overall employment figures, is criticized for its outdated data compilation methods. These methods involve sending physical forms via mail, which respondents are expected to complete voluntarily using a number two pencil and mail back. This process is described as "nonsense," leading to data that is both old and inaccurate.

Shift to Private Data Sources During Government Shutdown

The recent government shutdown has forced the Federal Reserve (Fed) to rely on private data sources. These are the same real-time and accurate data streams utilized by hedge funds and money managers on Wall Street. The speaker advocates for using this private data, deeming it more reliable than the BLS figures.

AI's Impact on the Labor Market

The private data observed during the government shutdown, in the absence of BLS data, has indicated a growing weakness in the jobs market. This weakness is attributed, not surprisingly, to the impact of artificial intelligence (AI).

Implications for Federal Reserve Policy

The observed weakness in the labor market, with cracks appearing in what was previously thought to be sustained corporate demand for employees, provides the Fed with further justification for interest rate cuts. Specifically, it strengthens the argument for a 25 or 50 basis point cut in December, as suggested by Fed Governor Moran.

Argument for December Rate Cut

The speaker argues that in light of the labor market weakness and the strength of corporate earnings thus far, failing to implement a rate cut in December would be fiscally irresponsible. The speaker expresses a strong desire for the Fed to enact this cut, even suggesting that a clip of this statement should be delivered to Fed Chair Jerome Powell.

Conclusion

The core takeaway is that the BLS's traditional data collection methods are obsolete and produce unreliable information. The government shutdown highlighted the value of private, real-time data, which reveals a weakening labor market, partly driven by AI. This evidence strongly supports the Federal Reserve's need to implement a rate cut in December to avoid fiscal irresponsibility.