Lies, damn lies and statistics

Chris Giles (0:06)

Pushkin.

Katie Martin (0:09)

A little bit of a summer break there, listeners, but we're getting back in the groove. And so much for a quiet August. There's loads going on with the most important institutions in US and indeed global finance. So to recap, this month, that guy, Donald Trump, fired the woman in charge of jobs data, because, well, he didn't like the jobs data, and replaced her with a loyalist. And for a job at the US Central Bank, he's nominated a pretty controversial advisor, Stephen Moran, who has argued for root and branch reform of the whole institution. Markets are weirdly relaxed about this, but today on the show, we're going to unpack what it all means and whether we should all be freaking out. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at the FT in London. Still got a bit of a tan from my sunny holidays. And I'm joined in the studio by a man who lives and breathes this stuff. He's a data nerds, data nerd, a central banking wonk, Chris Giles. Chris, what a time to be alive, hey.

Chris Giles (1:18)

What a time to be at work in August. We've got loads to talk about.

Katie Martin (1:24)

In the good old days, I used to spend August like going for boozy lunches and filing my nails.

Chris Giles (1:29)

I know. It was either some sort of financial crisis or very thin markets, so they managed to create a financial crisis.

Katie Martin (1:36)

Out of nothing.

Chris Giles (1:37)

Out of nothing. Or actually quite important news, and that's the latter this time around.

Katie Martin (1:42)

So quite important news. So we've got a massive test of US institutions going on right now, and it's not obvious to me that the system is passing the test, which is a bit scary. So lots going on. Let's do it in vaguely chronological order because it all also happened very quickly. The Bureau of Labor Statistics, they publish the most important piece of data in the global economic data calendar, which is non-farm payrolls. So jobs. It's the jobs data. People call it payrolls, non-farm payrolls. Why don't people care about farm payrolls? They don't. And these numbers really matter because the Fed pays attention. So the central bank pays attention to employment, as well as just to inflation. So it's got this dual mandate. So the jobs numbers are incredibly important. We got the numbers through for July and they undershot expectations.

Chris Giles (2:39)

But not by a huge amount. That would not have created any sort of stink whatsoever on their own.

Katie Martin (2:46)

So payrolls added 73,000 jobs for July. A bit of a miss, but not a big one. But there were some huge downward revisions for the previous data for May and June, and all told it was 258,000 jobs that got wiped from the record. How does that happen? That sounds bad.

Chris Giles (3:06)

It does sound bad, and it's been pretty common with Bureau of Labor Statistics data recently.

Revisions are normal. We shouldn't get excited by revisions.

Katie Martin (3:19)

Especially payrolls numbers. They get revised over and over.

Chris Giles (3:22)

People look too much at the most recent data and not enough at the trend. And financial markets are very guilty of that. But they didn't this time around. They look more at these big revisions than the latest data. And they were big. Let's just put them in context. Outside a recession, these were the biggest two-month revision since 1968 So that's quite a convoluted statistic. It gets rid of lots of other quite big revisions. But it does show that as two months next to each other, the consecutive revisions go, these were pretty large.

Katie Martin (3:58)

Lots of different types of data that rely on surveys, particularly around labor market data. It's the same in the UK to an extent, right? There are problems with how globally, authorities gather these numbers. But Donald Trump is not really interested in those kinds of intricacies, right? He looked at this revision and he said, I don't like this, I'm going to fire Erika McIntosh, who's the woman who runs the BLS. And he did.

Chris Giles (4:28)

And he did. And he can.

Katie Martin (4:29)

Sure.

Chris Giles (4:30)

So he did it. And he said, it's because it doesn't show the Trump economy is booming like he knows it is. I mean, forget the statistics. He knows it's booming. And if the statistics don't show that, they must be wrong, not him.

Katie Martin (4:44)