Trump's Pressure on Economic Data: A False Calm Before the Storm?

Reuters columnist Mike Dolan warns that President Trump's pressure on government statisticians and private-sector forecasters may push markets into a state of misdirection. While this may create a temporary calm, it carries the risk of triggering a drastic correction of reality in the future.

This month, the U.S. president launched a series of attacks on economists in both the public and private sectors. It started with the firing of the head of the Bureau of Labor Statistics (BLS) for what he called "falsifying" jobs data, followed by harsh criticism of Goldman Sachs for a research study he disagreed with regarding the impact of tariffs.

Despite some mitigating factors, these moves are concerning. Trump isn't the first to criticize the BLS employment data. The data has been scrutinized for years, but not due to concerns about bias, but due to low survey response rates and delays, often leading to significant revisions of past data. The latest report saw one of the largest downward revisions in decades. The BLS can argue it has been underfunded for years, but that's not a good excuse.

Additionally, similar questions about data collection point to the BLS's monthly consumer and producer price reports. These reports are now essential for assessing the impact of Trump's tariff policies on inflation.

These statistics, along with the U.S. jobs report, are among the most important monthly updates for financial markets, as they play a critical role in the decisions of the Federal Reserve, whose dual mandate is to maintain full employment and price stability.

This week, Trump appointed E.J. Antoni, an economist at the Heritage Foundation, to head the BLS. Antoni is a participant in the controversial "Project 2025," which lists the policy vision for Trump's second term.

Antoni recently suggested suspending the monthly jobs report until data problems are resolved, which could lead to a long data gap at a critical time for the U.S. economy, monetary policy, and markets. However, it's important to note that Treasury Secretary Scott Bessent has opposed this idea.

But then on Tuesday, Trump attacked Goldman Sachs CEO David Solomon, demanding that he appoint a new chief economist, stemming from a report released last Sunday by Goldman Sachs analyst Jan Hatzius. The report estimated that U.S. consumers are currently bearing less than a quarter of the costs of tariffs, but that could rise to two-thirds in the future.

This may just be Trump complaining about forecasts he disagrees with, but the move could jeopardize one of the market's most basic principles: diversity of opinion.

A False Calm?

One obvious concern is that these public attacks may intentionally or unintentionally lead to economic data, research, and forecasts being geared toward the government's position, or self-censorship by those who fear damaging their business or career due to presidential criticism.

To its credit, Goldman Sachs said it would continue to do its job regardless of political pressure. But aside from that, it's unlikely to say anything else.

More telling is that other economists have hardly protested publicly, even though they should reasonably worry that Trump's attacks on unfavorable forecasts represent a worrying trend for their industry and overall market transparency. Of course, they may simply think it's best to remain silent, believing the matter will soon pass.

In the long run, does all this matter?

Admittedly, by the standard of accuracy, economic forecasts are hard to regard as "sacrosanct."

A University of California, Berkeley study late last year analyzed more than 16,000 forecasts from banks and large companies, concluding that although 53% of forecasters were confident in their forecasts, the accuracy rate was only 23%.

But regardless of how accurate they are, economists' forecasts still play a role. Therefore, any form of bias (even unintentional) can have a significant impact on market judgments.

Of course, if people agree that official data may be biased to please the government, the process of forecasting these official data may simply mechanically move in that direction. But this will undoubtedly create confusion.

To get a more accurate understanding of the actual situation, investors may be more inclined to commission the collection of private economic data. But the cost of doing so frequently is prohibitively high for small institutions, which could lead to a widening information gap and overall reduced market efficiency.

If political bias appears in official data and forecasts in the current environment, it may show stronger job growth and more moderate inflation data. This may keep the market calm in the short term. But regardless of the official data, any weakness in the real economy will eventually show, at which point many may suddenly wake up.