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Hello and welcome to another episode of the All Thoughts Podcast.

I'm Tracy Alloway and I'm Joe Wisenthal.

Joe, I kind of missed this on Friday because I was not feeling very well, so I was out sick.

But what was Friday morning like when you were sat in front of your Bloomberg terminal.

Well, the jobs report was pretty shocking.

Obviously Friday was just a crazy day.

Yeah, So the jobs report, obviously it was bad.

I mean, the last two months massively revised down, all of this evidence of labor market momentum perhaps seems to be stalling the tariff effect.

Maybe we really are and it's sort of some sort of terriff and do slow down.

The only job creation is in healthcare and social service.

Not great, right, Okay, So I saw the initial jobs report headline.

So we had non farm payrolls coming in at plus seventy three thousand, which I think was like thirty percent lower than the average expectation.

We had the unemployment rate taking up to like four point three percent, four point almost four point three percent.

Oh, let me let me sorry, I'm rounding up here.

Okay, Okay, okay, although maybe I shouldn't.

Do that on a podcast all about labor market statistics.

But the big thing that seemed to catch everyone's attention was we also had these massive revisions to the report for May and June, so we had a combined two hundred and fifty eight thousand jobs basically lowered from the initial reports.

And this was like the biggest revision since the depths of the pandemic.

And then the headline that really caught my eye while I was, you know, laying in my sick bed on Friday afternoon, was Trump firing the head of the Bureau of Labor Statistics, so the agency responsible for putting out the non farm pay Roule Report every month.

Yeah, this is I would say.

The key thing is that a we've been used to these, you know, seeing significant revisions.

We've been talking you in particular, have been writing a lot in the newsletter about deteriorating quality of labor statistics.

Response rates to a lot of surveys have gone down over time, kind of like we're seeing in political opinion surveys and so forth.

So there's already been this sort of anxiety.

You have a lot of people online, including President Trumpet himself, you know, been like stoking sort of these conspiracy theories about these revisions, these attempts to actually be transparent, and then you get the first sort of like genuinely negative report under this administration.

It's the first one that was like, Okay, this was bad and boom, Trump fires the person responsible for it.

Now again, this is one of those things where sort of like Doge itself, where it's like, I like the idea of government efficiency, right, yeah, sure, Doge.

I like the idea of the BLS sort of doing a better job in some way or addressing these responses.

But like Doge, which you know, we all have seen how that's turned out.

I think there are a lot of more than a lot of questions, more than a lot of questions about whether firing to be less and replacing the head with someone who's you know, a Trumpet point t will you know, add a more credible transparent data clauding right.

One thing that we have learned from all our episodes on data collection in the US is that it is actually a really really insanely labor intensive thing to do.

You have to actually call up a bunch of people homeowners for instance, or you have to call up a bunch of businesses and ask questions.

You have to go out into the field and gather individual prices.

And we can have a debate over whether or not you could maybe use new technology or price scanning data to make all of that more efficient, but for the time being, that's how it's done, and so you need people to do it.

And if DOGE comes in and eliminates, you know, a big chunk of the budget, then it becomes harder to do.

Or if it just gets more costly and the budget's gone up, and then the one thing I would say is that in our conversations, and again you have talked to the BLS many times, they are really good.

They're professionals, and they take it very seriously.

They're very responsive, however, very transparent.

We could talk about this a little bit, but perhaps less responsive than they used to be in recent weeks.

So anyway, we should talk about all of this.

I think it's really important.

And as you said, there are big questions like what happens if a president ouse a BLS chief and then introduces a new one.

We have the perfect guests.

Someone we've spoken to before about the decline of America's data infrastructure.

We're going to be speaking with Bill Beach.

He is, of course, the former Commissioner of Labor Statistics, former head of the BLS.

So Bill, thank you so much for coming back on all thoughts.

Yeah, it's just really a pleasure to be back with you.

I wish we were talking about some other subject besides this termination.

I mean, it's just yeah, shocked.

Well, on that note, Friday, Trump tweets or posts that he wants to fire Erica mc Andterfer, the Commissioner of Labor Statistics.

What was going through your mind when you saw that news.

I was dumbcast.

I just finished a luncheon meeting at a very nice restaurant, and I was sitting in my pickup truck and I just couldn't believe.

And then I sat there for probably thirty forty minutes, car running and answering emails, people just sorting it out.

It isn't that he didn't have the authority to do so.

He does have the authority.

We all, you know, everyone in the executive branch serves as the pleasure of the president, except those that have been specifically exempted by statute, and where that statute has been signed by the President.

I think what was shocking about this is not that she was dismissed.

That's shocking enough.

It was the possibility that we could have now a sustained attack on official economic statistics, and that would undermine confidence in those statistics and put us in a path that other countries have followed.

I mean instantly people went to worst case.

After a while, that sort of settled down, and we began to look at the reasons for the dismissal, which then subsequently said on Twitter or x that they were they were unfounded.

And i haven't dropped that position since, so I'm happy to talk about it.

Well, why don't we just back up for a second.

We talked to you before, because you've been sounding the alarm about the capacity constraints to collect good data.

But just for people who haven't listened to or haven't followed you, you were a Trump appointing.

I mean, you served at the head of the BLS in twenty seventeen, and so I do you know, and it's tart of like, okay, your credibility.

Why don't you just give us a little bit of background about who you are, your position, and the concerns that you've been raising for some time about the constraints at the BLS.

So I was really honored to be the Commissioner of Labor Statistics from twenty nineteen until twenty twenty three.

So I served a little less than two years under President Trump.

He nominated me.

It is a presidential nomination, Senate confirmed positions, it has a statutory for your term.

And then I served the rest of my under President Biden.

So I was in both terms.

I think that's kind of important because the BLS Commissioner has been exempt from the normal turning over of the presidency by party.

And that's because the view as well, these data are so important they should not even be a part of the political appointment process except when they come to.

It's sort of like you know, the Federal Reserve chair or something of that nature has just seen as we want to keep it out of politics.

So I served over that period of time.

You know, that was the COVID period, so there were all kinds of real challenges from that, but I think the main thing that I drew from that period is how important it is crucial, almost were the crisis level, to modernize the way we collect data.

The response rates on the surveys are falling dramatically.

I've made that point on this program, and our costs arising dramatically, which makes it really difficult to conduct those surveys in the future and the way we have in the past, and then the future is kind of going in the direction of the employment survey, and I just said surveys are following with the employment surveys a little different.

It's not an in person survey, it is an electronic survey, and we need to invest more in the electronic side of statistical creation or production, blended data, etc.

I could do a whole program on this, but your point was well made.

BLS has had some challenges in front of it, as has the entire statistical system.

Unfortunately, for this particular episode, those challenges were really not I don't say relevant.

They're relevant, of course, but they're really not the reason why we should have had a change at the top.

Well, speaking of the employment report, talk to us about what exactly happens when the BLS is publishing the initial non farm payrolls and then what happens, you know, in the couple months or so before it publishes the revision, and why does it seem we are getting these large gaps at least in recent months and years.

Right, So the employment survey, the jobs numbers come from a survey of businesses.

The unemployment rate comes from a survey of households.

So there's two surveys involved in every First Friday report.

What we're talking about now is the survey that goes out to businesses, and it goes out to hundreds of thousands of businesses.

Well, of course there's still a probability sample, since there's well in excess of twelve million businesses in our Census of business, our business register.

Well, those businesses are supposed to turn their surveys in at the end of the month basically, but only about sixty eight percent usually that's the average do so, and so BLS keeps the window open for two more months, so sixty eight percent or so at the end of the first month they make the first estimate.

Then at the end of the second month we've get about eighty three percent completion, and they revise that number of the first month, and then by the third month we're into the nineties.

Usually end up around ninety three to ninety four percent of all the sent out returns.

Come back to us with information.

So it's a wonderful survey.

The revisions are done because we get more information from businesses.

Oftentimes big businesses answer first they have the capacity to do so, and then we get smaller entities, state and local governments, smaller businesses answer in those next two months.

We always have revisions.

There's there's even when we say the number did not change, it doesn't mean we didn't have revisions.

They just canceled each other out.

There's just all these revisions are coming in.

The revisions have been high recently, but this is not a typical of a period when the economy is either going back to growth or going down to subsidence.

So oftentimes turning points in the economy are accompanied by changes larger changes in the revisions.

Particularly in this case where we SUSPEC effect.

Smaller businesses are feeling the effects of the supply shock coming from the tariff policy and from immigration, and that these supply shocks are affecting smaller businesses more than they are larger businesses, and state and local governments are being affected by another factor, and that is the expiration of the COVID era money.

I think that was actually the root of a lot of the changes that you saw on Friday.

State and local governments are not able to hire at the levels they were going to hire at in previous years or did hire at in previous years because they did not have the subsidies that they had in previous years.

So these are important revisions.

Actually, the research shows, and this may shock you, that BLS is getting much better at its first estimate than it was thirty years ago.

In fact, it's really kind of almost a steady progress towards greater accuracy.

So the big revisions are indicative of not air of more information, and the bigger the revisions, the more likely we are in a turning point.

There's so much that was in that answer that I found to be very helpful and clarifying, so thank you.

I mean, just this idea, you know, a that actually over time, contrary to what people on Twitter might think, that the equality of that first pass has actually gone up is very striking.

You know.

Let's stipulate that, Okay, the BLIS could use some upgrading.

As you mentioned that there are these capacity constraints, non response, the cost of going out.

Maybe it needs to adopt more technology in some way to solve for this.

Does the BLS currently have that capacity, either budgetary wise or statutory authority such that a commissioner could just do that whatever it is that ideal state, or would it need either some sort of budgetary allocation or an Act of Congress to get to the point where it's you know, getting to the level that we are happy with.

Again, it has the authority to make the changes, it doesn't have the budget to do so.

And it isn't that BLS just needs more money, right.

As a matter of fact, I think Congress, if it paid more attention, would say, well, what are you spending your money on now?

And let's make sure that the low priority is canceled so that we can support the high priority.

I think BLS would be very happy with that.

But we do need more money.

And why Well, if you're going to change an official statistic, the unemployment rate, let's just take that.

You want to be really careful, right, You want to run tests, you want to test out your new idea.

You don't want to have a count the number of geese in the air, and that's the unemployment rate.

You want to make sure that that is a particularly good indicator of the employment market, and you want to test it in real time as well as experimental time.

You in real time, so run it parallel.

We these tests expand the costs of your unemployment statistics program because you're running essentially two systems simultaneously.

That to modify the current population survey, which is the survey of households, would cost around fifteen million to twenty million in experimental costs over a two year period.

It's not great.

The program itself costs about forty five million a year, but it does add to the cost for those two years or so.

Congress could could easily do that.

I mean, oh my gosh, Congress is spending a lot more money than that on things that we might disagree with.

But they need to allocate a little bit of money to CPS for that.

Does it have the authority?

Here's a really interesting story.

During COVID, we canceled all travel, all conferences, you know, and I was surprised at how many millions of dollars went into travel and conferences and meetings.

So this became for me couch money during the COVID years, and I was able to spend that money, you know, on important things I thought, So I did a lot of things, like I've built a new data center to get us out of the basement of one hundred and four year old building out to a wonderful above ground local location.

But I also started a number of research programs.

You know.

I made thirty one big modifications to do the CPI.

We started a whole new approach on looking at consumer expenditures, and I subsidized some experimentation on the Jobs Report well as it as COVID was over, we started to get congressionally mandated programs that then sucked up all that counch money.

If we had a little bit of extra, we I mean be only asked a little bit of extra to do these things.

Let's just think of the innovation that they would happen.

I think we would quickly be out of the problems that we are facing from a methodological standpoint, and that might then reduce the political pressure that we saw that was so evident on Friday.

So we're recording this August fourth, nine, five am in the morning and thirty three seconds.

I feel like I need to be that specific nowadays with the newsflow, so who knows what happens between now and when this episode actually comes out, but we are expecting the administration to announce a new BLS head in the coming days.

What happens now, you know, there's a Trump appointee for a new statistics commissioner after the President has specifically stated that he thinks the previous commissioner was politically motivated in some way.

Are people still going to believe the numbers that are coming out?

And how do you think that's actually going to play internally at the BLS, at an organization whose whole, you know, Raison Deutch is to find, you know, factual numbers and statistics to portray the American economy.

Well, I think there has been damage and it will take time to recover from that damage.

The last time, there was a serious political effort on BLSS during the Nixon administration and it took some time for BLS to recover from that, though the action taken by the President at that time visa BLS was not, I think as significant as this one.

So he just imagined that the President decides to appoint Saint Peter, you know, as the new BLS commissioner, and of course Saint Peter has a reputation for honesty and for clarity of thought.

Still it'll be the case because Saint Peter won't have any control over the way that the data are collected, the data are assembled, or the estimates that are done.

That's all done outside of the of the knowledge of the commissioner.

Commissioner has no control over that.

In fact, you're locked out of that whole process.

So it will be the case that Saint Peter will have a month come when the unemployment rate will be disappointingly low, could even be negative.

But I think given what has just happened, people will say, well, Saint Peter probably influenced that number and it's not as bad as it really is.

So for a while, that suspicion that the estimate that's in ount it's really not the real estimate, will be in the minds of some people, not in my mind, because I know that these people who work there, the professionals, the full time staff, the patriots that work there, the loyal Americans who are just extremely diligent in doing an absolutely objective job.

Those people are still in place.

But if you don't have my level of knowledge, or a reasonable level of knowledge of how internally BLS works, you're going to be subject to these falsehoods and accusations, and that will be damaging, That will reduce investment, that will reduce economic activity, That will make at least that will create greater uncertainty about what's happening inside the US economy.

Policymakers will be less clear in the direction that they take, So there will be a time when we need to recover.

No matter who's appointed, I hope that it will be a short lived time.

And my guess is, given the reputation of BLS, if someone you know, really reputable is appointed, then yeah, I don't think the period of transition will be that a lot.

All right, Well, Bill Beach really appreciate you coming back on the show.

Thank you so much for being on Off Box.

Thanks Bill, that was great.

Thank you very much for asking me.

Joe so good to get Bill back on to talk about this.

Really the perfect guest.

There are so many, I guess ironies involved in this whole conversation.

The big one, of course, is this idea that like, well, if Trump wants to convince everyone that the US economy is doing fantastic and job growth is great, then firing the head of statistics and having everyone distrust, you know, the subsequent numbers, because the subsequent head might be a political appointee who's you know, a loyalist to Trump.

It seems like you're sort of shooting yourself in the foot.

The other huge contradiction is that he says Powell is too late.

Yea wait, this is the other huge contradiction, which is every day he slams Powell, he's like, oh, you're too late, you need to cut rates.

Well, if the job numbers were weak, then I could understand this argument to some extent, oh the job But he's also casting expersions on the negative jobs numbers.

So how is Powell too late?

I mean, this is I mean, it's an irretrievable contradiction in the two criticism of both of the Fed and the BLS.

It's definitely a contradiction.

I don't think, however, that Trump necessarily draws a direct connection between the unemployment rate and interest.

Rates as well.

You know, he seems to just like low interest rates.

And he seems to perceive that low interest rates are basically a reward for an improving economy.

But yes, but I.

Mean, lots of other contradictions.

You're absolutely right.

So another one is this idea that Okay, a lot of the weakness came through on the revision side.

The revisions are mostly coming from small businesses who reply late.

And if you think about the Trump administration, you know, they always sort of portray themselves as a good business environment for smaller businesses, and it might be that that scenario that's seeing some weakness.

I thought your question about sort of internal morale, and as Bill said, you know, an agency staffed with patriots, I mean, I just you know, is Bilska going to be continue to be a destination for people who are patriots right or take their job seriously in the future is a really interesting question.

Also, the idea that like maybe we could like get high data quality for like twenty million dollars.

Given how much that's worth, it's just like drives you crazy if that's really all it took.

But also I really like this idea that it would have to always be done in parallel with the current thing, such that the new data is sort of provably backwards compatible with the old data.

Right, so if you're going to adopt a new methodology, you need some allocation, run two surveys at once, et cetera.

Anyway, even in a very short conversation.

Learned a lot from Bill.

Absolutely.

I do think it's worth pointing out out that there are other statistical agencies in the world that are experimenting with new technology for data sources.

The UK Statistics Agency in particular, they're going to start using you know, price scanning data for CPI.

Wait, have you heard about the whole thing though, with how they moved the Ons to Wales and no one wanted to go out there, And have you heard about this?

I have Wales.

It's all that bad.

Attribute the largest of the government across.

Everyone loves that idea.

Let's not have it all be concentrated in London.

They're like, okay, we're going to make everyone move to Wales and now it's a lot harder for the Ons to hire anyone.

Anyway, it's just a little interesting story out Maybe we'll cover it at.

Some point why people don't want to move to Wales.

No interesting, it's interesting, right, Like there's intuitively I love this idea of like, oh, why should all of the government spending on public sector stuff at the federal level in the richest city in the UK, or why should it all be in dc et cetera.

Should this idea of diffuse anyway, it's a separate thing.

It's actually some interesting challenges arise for.

Okay, shall we leave it there?

Yeah's leave it there.

This has been another episode of the oud Lots podcast.

I'm Tracy Alloway.

You can follow me at Tracy Alloway.

And I'm Joe Wisenthal.

You can follow me at the Stalwart.

Follow our guest William Beach, He's at Beach WW four five three.

Follow our producers Carmen Rodriguez at Kerman Ermann, Dashel Bennett at Dashbot, and Kale Brooks and Kale Brooks.

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