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- The government shutdown will halt the release of economic data by the DOL.These datasets are crucial for top investors making macro bets.Data providers like ADP, Homebase, and MIT's Billion Prices Project are solid replacements, traders say.
Editor's note: This piece originally discussed concerns about the US administration potentially tampering with economic data from the Department of Labor's Bureau of Labor Statistics and where investors would turn if this data became unreliable.
We're resharing after the US Congress failed to pass a budget, resulting in the shutdown of the US government due to a lack of funding and furloughing many workers across different federal agencies. The DOL has warned that this will impact its ability to produce its economic reports, thus pushing investors in need of up-to-date information about the health of the world's largest economy to alternative sources.
No savvy investor makes a decision off a single data point, but there are some numbers that carry more weight than others.
For many macro investors, the North Star has long been the Bureau of Labor Statistics, the unit within the Department of Labor that measures, among other things, inflation, unemployment rates, and wage growth.
Those in charge of the BLS have long been non-partisan economists, but President Donald Trump's firing of Commissioner Erika McEntarfer on August 1 and his top pick for her replacement, chief economist at the right-leaning Heritage Foundation, EJ Antoni, have many concerned with the validity of future government data, especially as Antoni floated pausing monthly jobs reports.
It's concerning for macro traders who rely on this data to make their bets, but there are non-governmental data sources that many already use. While helpful, these alternative databases can't replicate the widespread foundation BLS numbers provided for decades, where all market participants worked for the same set of basic facts about the state of the world's biggest economy. Still, traders are ramping up their use of this data in light of Trump's moves.
"What's going to be tricky here is how to judge numbers coming out of the Bureau of Labor Statistics moving forward," said Andreas Steno Larsen, onetime macro investor and researcher, on his weekly podcast. He compared the firing to something that would happen "in Latin America" and predicted that investors would "look for alternative sources" to get a second opinion on the official data.
Four macro investors pointed to the well-known ADP jobs report, which comes out monthly and tracks payroll from private employers, and MIT's Billion Prices Project as ways to track employment and inflation, respectively, in the US. The investors declined to be named because their firms don't authorize them to speak publicly.
Some investors tap datasets that constantly scrape e-commerce prices, such as PriceStats, and track how different products rise and fall over time. This is a useful tool to understand the impact of Trump's tariff policies, given the volume of online goods that US consumers buy from overseas.
Payroll and scheduling company Homebase tracks more than 150,000 small businesses and produces monthly employment reports. LinkUp has tracked online job postings since 2007. Numerator has become a key source for in-person consumer data at places such as restaurants and home improvement stores.
"Given the recent BLS conversations, we've recently seen demand for our data increase," Homebase CEO John Waldmann said in a statement.
Not a replacement
These alternative data sources are just that — alternative. They were used to get a sneak peek or a deeper look at inflation or unemployment figures that the government would release, not replace them entirely.
They also sometimes vary. For example, ADP's payroll figures often diverge from the BLS's monthly jobs report, and MIT's Billion Prices Project can capture inflation trends sooner than the official CPI but is less comprehensive.
"We don't see them replacing economic statistics altogether in the near future," said Julia Meigh, the head of ESG & macro research at alt-data platform Neudata, about non-traditional datasets.
Even if BLS data becomes less trustworthy, the different macro investors who spoke with Business Insider said they'll still need to use it in some fashion unless there's a structural change in financial products.
For example, Treasury Inflation-Protected Securities, or TIPS, change when the Consumer Price Index from the government is announced. For those who have exposure to these types of assets, ignoring the BLS is not possible even if the data becomes untrustworthy.
As one trader at one of the world's biggest macro hedge funds said, he was surprised markets weren't more spooked by Trump's firing. Equity markets were near record highs, and bond yields stayed mostly steady.
"I think it's clear that institutions are not as strong as many had thought," this individual said.
