It’s been a big week for “the data.” At Wednesday’s FOMC press conference, Fed Chair Jerome Powell announced that the Fed was holding its policy interest rate steady at the current 4.5 percent. Powell noted that there was no need to cut the rate because the job market is “solid.” Powell engaged in the usual song and dance of declaring that the Federal Reserve’s monetary policy is data-driven or “data-dependent” and assured the attending members of the press that FOMC policy is carefully implemented in accordance with federal employment data (among other data points).

Then, less than 48 hours later, the Bureau of Labor Statistics (BLS) released its July report which revealed that the “solid” job numbers the Fed had allegedly been using for the past two months were actually very wrong. The Bureau of Labor Statistics had greatly overestimated job growth in its earlier reports for May and June. Then, mere hours after the BLS numbers went public, President Trump announced he was firing the head of the Bureau of Labor Statistics. But, he wasn’t firing her because the agency’s data has been initially wrong. Trump was firing her because Trump thought the revised BLS data was too low and made him look bad.

This leaves us with a couple of questions. The first is this: why are we still expected to take initial BLS job estimates seriously when they are often reduced by 75 percent or more upon later revisions?

The second question is this: what use is the Fed’s supposed devotion to being “data-driven” when the data itself is unreliable, and the Fed is basing its policies on data that turns out to be thoroughly wrong? The answer is: we can’t. The spectacle of the FOMC making policy based on wildly inaccurate employment numbers simply illustrates the absurdity of claims by Fed officials that the central bank can centrally plan the economy by divining the “correct” monetary policy based on government data. …

The lesson here is that the Fed’s repeated claims to be “data-driven” are mostly political theater. Even if the employment data represented amazingly accurate estimates, the Fed would still not be able to centrally plan or calculate the “correct” interest rates. As it is, the Fed doesn’t even have convincing employment numbers.

Trump Fires the BLS Commissioner

Within hours of the BLS’s new report going public, Trump announced that he would fire BLS commissioner Erika McEntarfer. This move was hailed by the usual MAGA-style disciples of the Trump administration, who joined Trump in claiming that McEntarger was manipulating jobs reports for “political purposes.” Trump insists that the BLS numbers are too low, and don’t reflect the fact the US economy, thanks to Trump’s economic brilliance, is booming. But one could be forgiven for being confused here. If Trump is firing McEntarfer for publishing inaccurate numbers, is she being fired for the initial estimates—which made the job market look good—or is she being fired for the revised numbers? After all, if she is trying to make Trump look bad, why did she first release numbers that made the job market look—to use Powell’s term—”solid”? After all, it’s that initial release of data that gets the most headlines, and its the revisions that are usually forgotten and swept under the run.

We know the answer to these questions of course. McEntarger is only being fired for inaccuracies that make trump look bad. Trump only cares about “inaccurate” job numbers when they are “too low.” So, we have no reason to expect the data to get any more accurate any time soon.