BLS Admits to More Guesswork and Less Reliability

Stocks are lower and Mortgage Bonds higher to start the morning following news that President Trump and President Xi held a call.

WSJ BLS Reliability

The Wall Street Journal released an article discussing staffing shortages at the BLS and questions about the quality of inflation data.  Economists are beginning to question the accuracy of recent inflation data after the BLS said that staffing issues are impacting their ability to conduct the monthly survey.  To calculate the inflation rate the BLS utilizes hundreds of government workers called enumerators, who go out across cities every month to check prices businesses are charging for goods and services.

In cases where the enumerators aren't able to track down a specific price, they try and make a guess based on substitutions.  However, with fewer workers on hand the statisticians at the BLS had to base their guesses on less data through a process called different-cell imputation at a far higher rate than usual.  In April 29% of price guesses were made using this method, which is almost twice as high as any other month in the past five years.

Challenger Job Cuts

The Challenger Job Cut report showed that in the first five months of the year, announced layoffs are 80% higher than the first 5 months of 2024. Challenger said the "DOGE Impact" remains the leading reason for job cut announcements in 2025.  Other reasons cited were "market and economic conditions" and "closings of stores, units, or plants."

Beige Book

The Fed’s Beige Book showed declining economic activity with only 3 of the 12 regions showing growth and 6 showing decline.  This is in stark contrast to six weeks ago when 5 regions were showing growth and only 4 showing decline.  

On prices, districts are reporting that costs are increasing, with more price increases expected down the line from tariffs but it remains to be seen how much, if any, will get passed onto consumers.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose 8,000 to 247,000, which is the highest level in 7 months.

Continuing Claims, or those who continue to receive benefits after their initial claim, were unchanged at about 1.9M.

It shows that once someone is let go, they are staying on benefits longer because it’s harder to find a job, likely because there is less hiring.

Jobs Report Strategy

The stage is set for lower rates, but tomorrow’s BLS Jobs Report will dictate the near-term direction. Everything is pointing to a slowdown, less hiring, and higher unemployment, but we know the unreliability of the BLS. Last year they said 2.5M jobs were created, only to revise half of them out.

With that being said, the market is expecting 130,000 jobs to have been created in May, but after yesterday’s ADP Report, it sure seems like the figure could come in well below that. The BLS includes private sector jobs and government jobs, but especially with DOGE and the lack of government hiring/layoffs occurring in that sector, we don’t anticipate that to add much and could even see a subtraction from that component.

Technical Analysis

Mortgage Bonds are once again testing the ceiling at their 200-day Moving Average.  If MBS are able to get above this level there is room for improvement before reaching the ceiling at the 101.39 Fibonacci Level.

The 10-year is currently challenging the floor at their 50-day Moving Average.  If Yields can get below this level there is another floor very close by at the 4.332% Fibonacci Level.

Though important, the technicals will take a back seat to the Jobs Report tomorrow, which will drive market direction in the near term.