There has always been a class of contrarian investors who boldly believe that the economic data published by government agencies, such as the much-maligned Bureau of Labor Statistics (BLS), is faulty. Whether this inaccuracy is through incompetence or conscious design is up to interpretation.
Even though the Trump administration has wasted no time in shaking up Washington, one area where the executive branch may continue to err is in reporting "funny" economic numbers by tweaking the definitions and measurement methods used in the collection of this data.
What's In a Number?
On a host of different subjects, the government—or, essentially, the economists in its employ—choose their "favored" measurements for evaluating and communicating the health of the economy. This has been well-documented by those outside of the Beltway bureaucracy. As a matter of fact, Donald Trump has loudly criticized the government's use of "phony" or doctored statistics to make the economy appear better than it actually is. While still on the campaign trail, then-candidate Trump repeatedly asserted that the actual unemployment rate is many times higher than the chosen metric reported by the government.
It's undeniable that the state often reports headline data that obscures important context underlying the number. For instance, a significant chunk of private-sector job growth touted by the Obama administration came in the form of the already-employed taking on an addition part-time job. This distinction hardly comes through in the aggregate number for how many jobs were added each week or month.
The ironic twist here is that the new Trump administration is considering changing how the U.S. trade deficit is calculated. According to reports from the capital, the proposed changes would impact future calculations to the tune of making the trade deficit with Mexico appear twice as high as is currently understood. One wonders if this says more about biased government self-reporting or about Trump's own political agenda on trade and foreign affairs.
A large contingent of career bureaucrats is raising objections to the new way that the White House wants the trade data prepared.
Manipulating Economic Data
Really, this is just one shot fired in what could become an all-engulfing political war over economic statistics. Whether the debate is about how unemployment, inflation, gross domestic product (GDP), the national debt, or the trade deficit ought to be calculated—at a certain point, the entire economy becomes a political cudgel.
Moreover, as right as candidate Trump was for pointing out the shoddy integrity in government-reported statistics, it's beginning to look like the same will sadly be true of his administration. How might Trump's White House be held accountable if it decides to rely upon "alternative economic facts"? We'll have to wait and see.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.