Last month, Trump surprised both voters and the market by firing the head of the government’s Bureau of Labor Statistics.
And this week, we may be seeing why he did it…
Because a new report released from the BLS just yesterday indicates that they missed the mark on jobs by a jaw-dropping margin — revising their previous estimates down by more than 911,000 jobs!
This is something we’ve been expecting (and preparing for) here at Moneyball Economics for months.
Now the question is, what comes next?
Watch today’s video to find out:
Video transcript:
This is Moneyball Economics. I’m Andrew Zatlin, and we have got to talk about this major bombshell that just dropped.
Remember — a month ago, Donald Trump fired the director of the Bureau of Labor Services or the BLS, that’s the government entity that every month releases payroll data. Remember, this payroll data is central to the Federal Reserve’s decision making when they talk about interest rate cuts.
So everything going on at the BLS is directly impacting whether or not interest rates are going to be cut, when they’re going to be cut, and by how much.
However, this is a “garbage in, garbage out” situation…
The BLS has been doing a terrible job of managing the payroll data and as a result, the Federal Reserve is getting a bad signal from that data. The data has been saying job growth’s good instead of bad. Well, as of today, they yet again repeated job growth very, very, very bad and has been very, very bad for at least 15 months, if not longer.
So let me explain what’s going on and what the implications are for next week. Interest rate cuts. Every year, the BLS takes their existing data and they refine it, they revise it, they do this and release it in February. Essentially, there are multiple sources of payroll information. The starting point for the BLS is they send out a survey to a hundred thousand companies and they say, how’s it going? Tell me about your payrolls. Well, guess what? Of those a hundred thousand over time, the number of companies actually responding has dropped precipitously down to barely 30,000 or 35,000. It’s not a lot of companies representing the entire spectrum of American businesses, but that’s what they’ve got.
Then once a year, they do a much more comprehensive look at payrolls that actually looks at tax data that says, regardless of what you’re telling us, we’re going to look at everybody’s payroll data based on the taxes being paid, so we’ll know exactly what the hiring headcount should be, and so once a year they come in and they say, okay, we’re going to kind of go back in time and revise this.
Well, guess what? Those revisions have been catastrophic.
If you were standing last year, December, looking back on 2024, the data that you were being given said somewhere around two and a half million jobs had been created under Joe Biden in 2024. Then you come forward, there’s a revision that got done just a couple months later this year in February, got done and it said, well, actually it wasn’t two and a half million. It was a little bit closer to one and a half million. Hey, that’s a big delta!
That’s the difference between saying we created 200,000 jobs per month and we created somewhere around 120,000 jobs per month. 120,000 is good, but that’s kind of organic growth. Well, guess what? They just released the bombshell that they are going to do an early revision preliminary revision, and they say, we’re going to release data in a few months, and that data’s going to say we’ve got a revision down again, what happened last year?
And guess what they’re going to do?
They’re going to take that preliminary two and a half million that got walked down closer to one and a half million. They’re going to now walk it down to barely half a million. Think about that for a second.
They started off telling the world and everybody, the economy’s great, it’s creating 200,000 jobs a month. Then they said, well, actually looking back, the economy’s good. It was creating 120,000 jobs a month. Now they’re having to come back and say, the economy was terrible. It barely created 40,000 to 50,000 jobs a month. Totally different story.
And remember, Trump takes this personally.
He thinks this is pumping up of the numbers. What we’re saying now is half a million to two and a half million really was material during the election that this was artificially pumped up. I don’t know that it was artificially pumped up to hurt him and benefit Joe Biden, but I do know that the methodology that they used to collect this data is so horrible and these statisticians are so focused on modeling it that it’s crazy stupid.
As a result, what we’re now finding out is last year was absolutely terrible. The economy growth, well, that’ll get revised down too, but basically payrolls stopped growing last year and we know this year payrolls have pretty much stopped growing as well.
So I don’t know if we’re looking at 18 months, all of last year and this year of no growth, but what we now have is a firm story that says the labor market is under massive pressure, incredibly weak. Federal Reserve. Your job is to boost jobs and you’re not doing your job. You’re so worried about this bugaboo of inflation. You’re ignoring the fact that the economy is stalling.
We’re going to see a major rate cut next week. It’s now 50 basis points. The market doesn’t see it. As of yesterday, there was maybe 13% of the market betting saying, yeah, a 50 basis point cut is possible.
We just don’t think it’s likely.
Folks, it is a done deal, and in fact, I think over the next six months we’re going to see not just 50 basis points, but at least a hundred basis points. The economy is stalling. A lot of this is self-inflicted because of Trump’s tariffs, but it doesn’t matter. The situation is getting uglier.
I guarantee you Donald Trump is going out not just for head hunting at the BBLs, which produces these numbers. He’s going after the Fed board for being so darn late and not seeing what he claims he saw coming in. If interest rates get cut, like I’m describing, this is a great time to be in the bond market. Prices are going to go up.
Also gold, as I’ve been saying, you definitely want to start thinking gold, but all these asset classes that are sensitive to rate cuts coming down at the same time, understand that we’re now talking fear of recession even more prominently.
And so it’ll be interesting to see how the stock market responds going forward. They may already have priced in weakness, and this is just not dialing up the weakness, but confirming the weakness. Stock market might just take it in stride. In other words, already priced in. I don’t think so. I think there are still some more negative hits to the economic body coming down the pipeline a few months. I think interest rates are going to be cut faster and deeper than the market expects, and that’s the opportunity we’re in it to win it. Zatlin out.
Andrew Zatlin
Editor, Moneyball Economics