An unprecedented overhaul effort by billionaire Elon Musk's Department of Government Efficiency has sparked fears that financial market-moving economic data may be compromised, potentially inhibiting monetary policy and future business decisions.
The Trump administration is planning widespread layoffs within the federal workforce, and Musk's team has worked to shut down federal programs and websites and has gained access to sensitive federal department systems.
Significant funding cuts to the federal agencies that issue inflation, unemployment and other economic data could upend decades of government statistical work, the former heads of these data-producing agencies said. Any harm to government statistical efforts could create hurdles for capital allocation decisions in the private sector or hinder the Federal Reserve's interest-rate decisions based on trends in inflation and labor market health.
"Deep cuts to the federal workforce could hurt the quality of official government data," said Jed Kolko, who served as undersecretary for economic affairs at the US Commerce Department during the Biden administration and oversaw the Census Bureau and the Bureau of Economic Analysis. "The statistical agencies need both budget and staff with technical expertise to produce high-quality data that policymakers, businesses, and investors use to make decisions."
Even private sector data seen as an alternative to government data depends on official statistics for validation and benchmarking, Kolko said.
The White House did not immediately respond to a request for comment.
Quality fears
Funding and staffing cuts at the federal agencies that produce inflation, jobs and other data are likely to lower productivity and increase economic and financial volatility, said Erica Groshen, a former commissioner of labor statistics and head of the US Bureau of Labor Statistics (BLS).
"Monetary policy, fiscal policy, and investment decisions will all be worse when data quality declines, or reports are delayed or absent," Groshen said. "If official inflation data is not as reliable, fewer long-term contracts will be signed, raising costs of business and financial transactions."
Without credible government statistics, multiple programs and policies, such as annual adjustments for Social Security benefits, may be inadequately targeted, Groshen said.
Representatives of the Department of Government Efficiency (DOGE) met remotely with officials of the US Labor Department, which houses the BLS, on Feb. 5, according to news reports. Shortly before that meeting, government employee unions and labor groups filed a lawsuit in the US District Court for the District of Columbia, claiming that Musk's DOGE would unlawfully fire agency workers, illegally gain access to agency systems and work to compromise government statistics for political gain.
"Political leaders may wish for a BLS that is less independent; one that, for example, is more willing to give the White House longer notice of economic data so that the President can prepare his messaging; or one that alters data to support the President's political needs," the lawsuit states. "A DOGE takeover of the type seen at other agencies could overturn over a century of the BLS's independence and turn it from a reliable source of data across the economy into a far less valuable political mouthpiece."
President Donald Trump has criticized BLS data in the past, incorrectly claiming that the Biden administration had been "caught fraudulently manipulating job statistics" when BLS released preliminary benchmark revisions for its employment data in August 2024, revising previous employment data downward by 818,000 jobs. There will be final benchmark revisions in the jobs report that will be released Feb. 7.
In Project 2025 — the federal government playbook put out by the conservative Heritage Foundation in anticipation of Trump's second term — there is a call to consolidate some of the statistical agencies, including the BLS, Bureau of Economic Analysis and the Census Bureau, into a "more manageable, focused, and efficient statistical agency."
Groshen, who served as head of the BLS from 2013 to 2017, said that her former agency's programs for producing inflation and jobs data had been "severely underfunded" for years, with cuts threatening the sample sizes of some of the sources for data on the unemployment rate, for example.
"If funds are cut, not flat, the sample size cut could be more severe," Groshen said. "Instead, the program needs a boost in funding to maintain sample size and to allow it to modernize."
