Jobs Data Surprise Ignites 'Garbage' Argument Around Rate Cuts
President Trump fired a key labor statistics leader as it's clear investors and the government aren't working with the best information.
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Finally, the entire world seems to be talking about one of our favorite subjects: garbage in, garbage out.
Any long time reader will know that I spend a lot of time dissecting the data, looking for inconsistencies and whether, quite frankly, the data is realistic.
Many take the data at face value and rush to conclusion based on the data. But we often ponder, what if the data is wrong?
Friday’s payroll report seemed to ignite that argument to the nth degree.
It is reasonable to assume that, had the June jobs report published on July 3 been as bad as what it was revised down to, a rate cut would have been on the table. I’m not sure that one potential error in data, so soon after the fact, could have so easily affected monetary policy and markets, but it seems like this last month’s did.
President Trump fired the head of the Bureau of Labor Statistics' jobs department (I think that was their job title). I disagree with firing the messenger. I completely disagree with the idea that we should fire people who deliver bad (and accurate) data. That will not serve the economy, nor the country well over the long term.
I believe with AI, so much computing power and so much data readily available electronically, that there should be a serious examination of how to get better (more accurate and timely) jobs data.
It will be interesting to see how this develops, but I’m all for doing a lot more to eliminate garbage in, garbage out, so that individuals, policy makers, investors and corporations can all make decisions based on timely and accurate data. There will always be issues around data collection and adjustments, but I’m convinced we can do far better with the tools currently available.
Tariffs Rulings Ahead?
Are tariff rulings ahead? Last Thursday, a federal appeals panel heard arguments about the validity of current tariffs under the rules that they have been imposed. The appeal could uphold the original ruling that the tariffs effectively over-reached.
That would certainly be appealed by the administration, and this case will make it to the Supreme Court if the administration loses rulings on the way there
The administration would likely try to get another injunction to keep the tariffs in place, while the case winds its way up the ladder to the Supreme Court (I think this is the most likely outcome in event of a ruling against the administration, but I'm not entirely sure).
The appeal could overturn the earlier decision. Presumably, that would get appealed up the chain as well, as presumably the plaintiffs are backed by some deep pockets and would push the case.
In either case, there is likely to be some uncertainty around what level of tariffs will be imposed going forward.
There are allegedly trades occurring on “tariff rebate” claims. If, in the end, the existing tariffs are ruled as not being valid, then those that paid the claims would potentially be entitled to a refund (I think depending on the exact nature of the ruling). It does show that Wall Street will figure out a way to trade anything 😊.
The administration has already stated that it could implement tariffs under other rules. I do know that, in the Truth Social post regarding Brazil’s 50% tariffs, it mentioned at least two applicable rulings that the tariffs could be done under. We are still, generally, waiting for sectoral tariffs, which also seem to be getting implemented under different rules.
It is unclear if the administration can use other rules to impose the same scope and level of tariffs if this case is upheld through the Supreme Court. The administration has said that it expected existing deals to stay in place even if the tariffs are overturned, which is possible. (Does any country really want to pick another fight and go back to the negotiating table?) On the other hand, many of the deals seem to be little more than “outlines” and there could be some risk that finalizing those deals without the tariffs could be more difficult.
While that is all important (otherwise I wouldn’t have written about it) I think we need to be thinking about what the tariffs announced and in place as of today do for the economy, corporate earnings, inflation and markets.
I strongly believe that without more national production for national security and deregulation, we will start hearing about and feeling more negative impacts from tariffs. It will trickle in over time, as the tariffs do, but it will be real and a constant refrain. I continue to expect the data that exposes the issues related to tariffs to come from small- and mid-sized businesses first.
Offsetting this, which I think will continue to happen, is deregulation and investment led by the government to boost national production for national security.
As much as I wanted to buy the dip on Friday (and it looks like, as of Monday morning, that would have been smart), I still think we see more of a “reversal” where the big winners the past month give up some ground to the laggards.
Long-dated municipal bonds remain “cheap” on a tax-adjusted yield, and I continue to like being overweight municipal bonds (especially closed-end bond funds) on the income side of my portfolio.
