When economic data quality deteriorates: Two thoughts for investors
A version of this post first appeared on TKer.co
Policymakers, politicians, business leaders, and investors all use economic data. So, most people agree that any data being cited should be high quality.
But everyone relies on data differently depending on their goals and interests, which means the implications of data quality varies depending on who's using it.
Today, I'm going to provide some updates on deteriorating data quality and share some thoughts from the stock market investor's perspective.
We got some unsettling news about data quality last week.
From the Bureau of Labor Statistics (BLS) on Tuesday:
Due to minor errors to weights associated with the introduction of a redesigned Current Population Survey (CPS) sample, some April 2025 estimates will be corrected on June 6, 2025. Major labor force measures, such as the unemployment rate, labor force participation rate, and employment–population ratio were unaffected. While corrections will be made to many estimates, the impact is negligible.
In April 2025, the CPS began to phase in a redesigned sample that is based on information from the 2020 Census. During the introduction of this new sample in April, a derived geographic variable used in the weighting process was miscoded, treating micropolitan areas like metropolitan areas, which led to misapplied noninterview weights for some cases.
That doesn't instill confidence.
It didn't end there.
Here's the The Wall Street Journal on a BLS notice published on Wednesday:
The Bureau of Labor Statistics, the office that publishes the inflation rate, told outside economists this week that a hiring freeze at the agency was forcing the survey to cut back on the number of businesses where it checks prices. In last month's inflation report, which examined prices in April, government statisticians had to use a less precise method for guessing price changes more extensively than they did in the past.
Economists say the staffing shortage raises questions about the quality of recent and coming inflation reports. There is no sign of an intentional effort to publish false or misleading statistics. But any problems with the data could have major implications for the economy.
"These errors have consequences," UBS's Paul Donovan wrote on Friday. "Less understanding of U.S. inflation increases the chances of the Federal Reserve making a policy error (especially with the mantra of 'data dependency')."
The news only adds to ongoing concerns about the quality of government data, which relies on extensive surveys and analysis of those surveys.
One of the more discussed concerns in recent years has been the falling response rates to these surveys. The BLS publishes those response rates, and they've mostly been going down and to the right.
It takes a lot of resources to conduct these surveys. But the cost is justified by the value it brings to those making decisions about economic policy, monetary policy, and business.
It's not totally clear how much these developments are affecting the accuracy of the data. But it certainly has affected the robustness of the data and the confidence of those using it.
First, remember TKer's rule No. 1 of analyzing the economy: Don't count on the signal of a single metric.
Even when the response rates for these BLS surveys were higher, the results were still susceptible to revisions — and sometimes those revisions were significant.
And even when the data is accurate, it's possible that the bulk of other data tells a conflicting story that may actually be the correct one.
As always, I'd also caution against reading to much into one month's worth of data. Data can zig zag over short periods. The true picture always becomes more clear when you zoom out and examine trends, not single data points.
"For investors, it is important to remember that broad trends matter, and data precision is increasingly an illusion," Donovan said.
This is why when analyzing the economy, it's important to consider the confluence of data holistically and over time. (Kind of like how we do in TKer's weekly review of the macro crosscurrents.) It's extremely unlikely that all of the available data will be simultaneously wrong in the same direction over an extended period of time.
Second, the good news is that reported earnings from publicly traded companies are pretty much always accurate.
Recall TKer Stock Market Truth No. 5: "News about the economy or policy moves markets to the degree they are expected to impact earnings. Earnings (a.k.a. profits) are why you invest in companies."
What investors really care about are earnings because they're the most important driver of stock prices. And economic data has mattered because it has helped us calibrate our expectations for those earnings.
Every quarter, publicly traded companies report their earnings along with comprehensive financial statements. This information is not deduced from a sample like what we get in economic surveys. These quarterly statements cover all of the financial transactions that are executed, and the numbers are audited by third-party accountants. Outside of very rare occasions (e.g. accounting fraud, major failure of internal processes), these numbers are accurate and do not get revised.
So regardless of the accuracy of the economic data, what matters to investors is if companies are delivering on earnings.
To that second point, I like to think of quarterly earnings season as a time to reset and recalibrate my views as an investor in the stock market.
And it's not just because the reported financial figures are complete and accurate.
We also learn how successfully companies have been able to adapt and execute in what may arguably be a difficult business environment as defined by the economic data.
This is not to suggest we should be dismissive of economic data.
Rather we should just be mindful of what "hat" we're wearing as we consider data.
When we're wearing our stock market hat, economic data matters to the degree it's expected impact to earnings.
To be clear, deteriorating economic data quality is a negative development for investors.
While investors have the benefit of getting audited financial figures every quarter, the companies they invest in are affected by decisions made by policymakers.
If policymakers are acting on bad data, their decisions may create inefficiencies in the economy and hinder business activity.
Everyone should be in favor of preserving and improving the quality of economic data, especially when that data is informing policy decisions.
There were several notable data points and macroeconomic developments since our last review:
👍 The labor market continues to add jobs. According to the BLS's Employment Situation report released Friday, U.S. employers added 139,000 jobs in May. The report reflected the 53nd straight month of gains, reaffirming an economy with growing demand for labor.
Total payroll employment is at a record 159.6 million jobs, up 7.3 million from the prepandemic high.
The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — stood at 4.2% during the month. While it continues to hover near 50-year lows, the metric is near its highest level since November 2021.
While the major metrics continue to reflect job growth and low unemployment, the labor market isn't as hot as it used to be.
For more on the labor market, read: 💼 and 📉
💸 Wage growth could be lower. Average hourly earnings rose by 0.4% month-over-month in May, down from the 0.2% pace in April. On a year-over-year basis, this metric is up 3.9%.
For more on why policymakers are watching wage growth, read: 📈
💼 Job openings tick higher. According to the BLS's Job Openings and Labor Turnover Survey, employers had 7.39 million job openings in April, up from 7.20 million in March.
During the period, there were 7.17 million unemployed people — meaning there were 1.03 job openings per unemployed person. This continues to be one of the more obvious signs of excess demand for labor. However, this metric has returned to prepandemic levels.
For more on job openings, read: 🤨 and 📈
👍 Layoffs remain depressed, hiring remains firm. Employers laid off 1.79 million people in April. While challenging for all those affected, this figure represents just 1.1% of total employment. This metric remains below prepandemic levels.
For more on layoffs, read: 📊
Hiring activity continues to be much higher than layoff activity. During the month, employers hired 5.57 million people.
That said, the hiring rate — the number of hires as a percentage of the employed workforce — has been trending lower, which could be a sign of trouble to come in the labor market.
For more on why this metric matters, read: 🧩
🤔 People are quitting less. In April, 3.19 million workers quit their jobs. This represents 2.0% of the workforce. While the rate is above recent lows, it continues to trend below prepandemic levels.
A low quits rate could mean a number of things: more people are satisfied with their job; workers have fewer outside job opportunities; wage growth is cooling; productivity will improve as fewer people are entering new unfamiliar roles.
For more, read: ⚙️
📈 Job switchers still get better pay. According to ADP, which tracks private payrolls and employs a different methodology than the BLS, annual pay growth in May for people who changed jobs was up 7% from a year ago. For those who stayed at their job, pay growth was 4.5%.
For more on why policymakers are watching wage growth, read: 📈
💼 Unemployment claims tick higher. Initial claims for unemployment benefits rose to 247,000 during the week ending May 31, up from 239,000 the week prior. This metric continues to be at levels historically associated with economic growth.
For more context, read: 🏛️ and 💼
🏭 Business investment activity declines. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — declined 1.3% to $74.7 billion in April.
Core capex orders are a leading indicator, meaning they foretell economic activity down the road. The recent decline could portend slowing growth in the months to come.
For more on core capex, read: ⚠️
🤷🏻♂️ Services surveys were mixed. From S&P Global's May Services PMI: "Service sector growth has improved more than first estimated in May, with confidence about the year ahead also lifting higher, buoyed in part due to pauses on higher rate tariffs. Companies have matched that optimism with increased spending and hiring. That said, the improvements come from a low base, following a very gloomy April, which saw growth nearly stall as confidence sank to a two-and-half year low. Reports from companies underscore how uncertainty about the policy outlook continued to act as a deterrent to expansion plans in May."
The ISM's May Services PMI reflected contraction in the sector.
👎 Manufacturing surveys weren't great. From S&P Global's May Manufacturing PMI (emphasis added): "The rise in the PMI during May masks worrying developments under the hood of the US manufacturing economy. While growth of new orders picked up and suppliers were reportedly busier as companies built up their inventory levels at an unprecedented rate, the common theme was a temporary surge in demand as manufacturers and their customers worry about supply issues and rising prices. These concerns were not without basis: supplier delays have risen to the highest since October 2022, and incidences of price hikes are at their highest since November 2022, blamed in most cases on tariffs. Smaller firms, and those in consumer facing markets, appear worst hit so far by the impact of tariffs on supply and prices"
The ISM's May Manufacturing PMI reflected further contraction in the sector.
Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.
For more on soft sentiment data, read: 📊 and 🙊
🔨 Construction spending ticks lower. Construction spending decreased 0.4% to an annual rate of $2.152 trillion in April.
💳 Card spending data is holding up. From JPMorgan: "As of 30 May 2025, our Chase Consumer Card spending data (unadjusted) was 1.2% above the same day last year. Based on the Chase Consumer Card data through 30 May 2025, our estimate of the US Census May control measure of retail sales m/m is 0.45%."
From BofA: "Total card spending per HH was up 0.5% y/y in the week ending May 31, according to BAC aggregated credit & debit card data. Relative to last week, airlines & transit saw the biggest rise in spending growth. Furniture saw the biggest decline."
For more on consumer spending, read: 😵💫 and 🛍️
⛽️ Gas prices tick lower. From AAA: "The summer driving season is underway, and while gas prices normally peak this time of year, drivers are getting a reprieve. The national average for a gallon of regular is $3.14, down two cents from last week. Pump prices are 36 cents cheaper than last June, thanks to this year's consistently low crude oil prices. Currently, oil supply in the market is outweighing demand. June gas prices haven't been this low since 2021."
For more on energy prices, read: 🛢️
🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.85%, down from 6.89% last week. From Freddie Mac: "The average mortgage rate decreased this week, which is welcome news to potential homebuyers who also are seeing inventory improve and house price growth slow."
There are 147.8 million housing units in the U.S., of which 86.1 million are owner-occupied and about 34.1 million of which are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.
For more on mortgages and home prices, read: 😖
🏢 Offices remain relatively empty. From Kastle Systems: "Peak day office occupancy was 60.3% on Wednesday last week, as many workers extended the three-day holiday weekend. Occupancy on Tuesday after Memorial Day was 58.8%, down 3.4 points from the previous week. Washington, D.C. had the biggest drop around the holiday, falling 5.8 points to 30.3% on Friday and 4.5 points to 57.7% on Tuesday. The average low was on Friday at 30.6%, down 4.2 points from the previous week."
For more on office occupancy, read: 🏢
📈 Near-term GDP growth estimates are tracking positive. The Atlanta Fed's GDPNow model sees real GDP growth rising at a 3.8% rate in Q2.
For more on GDP and the economy, read: 📉 and 🤨
🚨 The Trump administration's view on tariffs threatens to disrupt global trade — with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get more clarity, here's where things stand:
Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.
Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market.
But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less "coiled" these days as major tailwinds like excess job openings and core capex orders have faded. It has become harder to argue that growth is destiny.
Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor's perspective, what matters is that the hard economic data continues to hold up.
Stocks are not the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.
Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.
Investing is never a smooth ride: There's also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened.
Think long-term: For now, there's no reason to believe there'll be a challenge that the economy and the markets won't be able to overcome over time. The long game remains undefeated, and it's a streak long-term investors can expect to continue.
A version of this post first appeared on TKer.co
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While Vertex believes the forward-looking statements contained in this press release are accurate, these forward-looking statements represent the company's beliefs only as of the date of this press release and there are a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by such forward-looking statements. Those risks and uncertainties include, among other things, that data from a limited number of patients may not be indicative of final clinical trial results, that data from the company's research and development programs may not support registration or further development of its potential medicines in a timely manner, or at all, due to safety, efficacy, that timelines for regulatory submissions may be longer than anticipated, and other risks listed under the heading "Risk Factors" in Vertex's most recent annual report and subsequent quarterly reports filed with the Securities and Exchange Commission at and available through the company's website at You should not place undue reliance on these statements, or the scientific data presented. Vertex disclaims any obligation to update the information contained in this press release as new information becomes available. (VRTX-GEN) Investor Event and Webcast Vertex will host an investor event on Friday, June 20, 2025, at 7:15 p.m. CT/8:15 p.m. ET, in Chicago, to discuss the positive zimislecel data in type 1 diabetes. A live webcast of the presentation and Q&A portions can be accessed through the Investor Relations section of Vertex's website at An archived webcast will be available on the company's website. View source version on Contacts Vertex Pharmaceuticals IncorporatedInvestors: InvestorInfo@ Media: mediainfo@ orInternational: +44 20 3204 5275
