Weak economies, but no recession
Last week, markets were rattled by weak U.S. employment figures. These were widely interpreted as a sign that the American economy is growing much more slowly than previously thought. The same applies to Europe, where the latest data also disappointed — especially when factoring in the downward revisions to previous months’ figures, similar to the U.S.
In fact, the U.S. revisions prompted Trump to dismiss the head of the Bureau of Labor Statistics (BLS), the department responsible for compiling the data. Under normal circumstances, this might have been a justifiable action — but not now. Since the outbreak of the COVID crisis, the BLS has struggled with a sharp decline in survey response rates, and responses are now being returned much later than before. This poses a serious problem, as it means a significant share of the underlying figures must be estimated. That is risky enough on its own — though previously, at least, experts were appointed to do it. In recent years, budget cuts have weakened this process, and Musk has recently implemented even more drastic cuts. The root of the problem lies not with the BLS leadership, but with politics.
The key question now is: how should we interpret these weak figures? Read more...
