Fed will lose 'key insight' to the US statistical system with less data: William Beach

So right around 1797, a Philadelphia newspaper use the phrase the jig is up, which of course means that a scheme has been revealed or foiled. Now, for some reason, that phrase popped into my head when I hear Jay Powell. When I heard Jay Powell musing about the jobs report, Take a listen. You've got strong job creation. You have payroll jobs still coming in strong even though there's an argument that they may be a bit overstated, but still they're still there strong. So that's what we see. That's the most that the Federal Reserve can save right when they whenever they want to say that maybe BS. That's all that's what he was saying right now here's since then we've learned that the Bureau of Labor Statistics are going to reduce their sampling size of the household survey to 55,000 from 60,000 and start next year. They claim it's because of budget restraints. You know, listen, the timing, it was really peculiar for a lot of reasons, none, not the least of which was in this last jobs report. The household survey saw 408,000 jobs lost in May versus 272 gained by the establishment survey. So what's really happening here? Joining joining me now, former Commissioner of Labor statistics, Coolidge Fellow and economic policy innovation at Center senior Fellow, William Beach. Bill, it's hard for me to to buy into the notion that our federal government that writes checks all day long, billions and billions of dollars Willy nilly doesn't have enough money to to to will actually make the most important monthly economic data even less reliable. What's going on here? Yeah, Charles, I mean, you would put your finger right on it. You really can't see the economy without statistics. You really can't. The unemployment rate, you know, GDPCPI heard that mentioned just a little, little bit ago. And every time we cut back on that, we see less of the economy, we get less reliability. Just imagine what first Friday, you know, the 1st Friday of the month, but everybody is just waiting for the jobs number to come out, unemployment number. What if the unemployment announcement said, oh, we think it's about this, but it could be this. You know, that level of uncertainty comes in when you reduce what's called the sample size. It's a technical term and it's, it's, we're not talking about a lot of money, but I tell you, I ran BLS for four years and we squeezed every penny out of everything Congress gave us. And they gave us less in inflation adjusted terms every year. So we have to really think about the consequences here. We could lose key insight, key parts of the statistical system. We, we have a report coming out for the American Statistical Association mid-july and it's called basically our statistical system at risk. And we think it's overall. So yeah, you're confused about the jobs numbers. Just imagine if you had less reliable numbers. And, and, and to your point, you know, the fewer people that take the the survey, the less reliable is. The veracity is under question right now because there's been such a sharp decline in response rates. How do we account for that and at what level? We're down at 43 percent. At what level do we say, hey, maybe we shouldn't even post the results or post them in an asterisk? Well, clearly we have to integrate a lot of private data into the public data. That's called blended data. That's a technical term. And BLS is trying to do that, but they they don't have the funds to do the testing. I mean, you don't want anything to go out of BLS unless it's been tested and tested and tested. It has to be gold standard. And so even on the innovation front, trying to make things better, it's, it's a budget squeeze there as well. So, so it's, it's a big deal. Let me just say this about the jobs numbers. Those, those numbers, yeah, when Powell said that maybe a little bit on the high side, it's because they are revised for two months as more and more returns come in. There's a different survey, but, but, but the household survey crucial, absolutely crucial for US state local hiring has been really the hallmark of this big bump and, and and employment almost every every month we see government hiring. Now, my theory is that a lot of cash came from COVID. The the federal government watched gave a bunch of states money and I feel like they may be putting it to work. And I think what's intriguing is just this week the Senate nullified a rule that would have prevented states from spending that COVID money beyond 2024. Just your thoughts there. Yeah, at at EPIC, the economic policy Innovation Center, where I where I hang my hat on my policy matters. We did a big study and a lot of money that's Kovat related is now being spent at the state and local level, which I think explains a lot of the job increases. Now those job increases there are not connected to generally speaking, to the needs of the community, the needs of the state. And we didn't really watch that very click carefully so we don't misinterpret the jobs numbers. If government numbers are high, maybe the economy is not as strong as we think it is. You know, I, Bill, I can't let you go. I got 30 seconds. I know you're a fellow at the Coolidge Presidential Foundation. We're in an election year. There are calls for higher taxes and punishment and punishing, essentially punishing business. Just your thoughts as someone who knows history inside and out. OK, so the Harding Coolidge years, they had high inflation in the in 1920, high debt, a pandemic. Over the course of the next 10 years, they brought down the debt, they brought down spending. They had a 5% annual growth rate in the economy and they ended up in a much better situation by 19271928 than when they started. So it can be done. That was a modern economy can be done well, and and that's why they call it the roaring 20s. Bill, you are fantastic. You're better than I thought you would be. Thank you so much. You're gonna be invited back if you're not careful. Well, congratulations on 1010 years probably. Thank you. Appreciate it.