Episode #26: Revising the Labor Market: Uncovering the BLS Job Scandal and Its Impact on U.S. Manufacturing
In this episode of U.S. Manufacturing Today, powered by Veryable, the focus is on a massive scandal at the Bureau of Labor Statistics (BLS), where nearly a million jobs reported over the last year were found to be non-existent. The episode delves into how flawed modeling and outdated assumptions led to an inflation of job numbers, impacting decisions by the Federal Reserve, investors, and business owners. It also discusses the implications of these revised figures on the economy, especially on small and medium-sized manufacturers. Additionally, the podcast explores the role of tariffs in reshoring and strengthening domestic supply chains, highlighting recent tariff actions and their limited impact on inflation. Listeners are urged to focus on real data from their own operations and communities to navigate these challenges.
Links
Timestamps
- 00:00 Introduction to the Podcast
- 00:15 The BLS Scandal Unveiled
- 01:07 Economic Implications of Faulty Data
- 02:12 Manufacturing Sector's Reality Check
- 02:42 Department of Labor's Response
- 04:50 Tariffs and Their Economic Impact
- 08:16 Legal and Regulatory Landscape of Tariffs
- 12:18 Conclusion and Call to Action
Episode Transcript
Matt Horine: Welcome back to US Manufacturing today, the podcast powered by Veryable, where we talk with the leaders, innovators, and change makers, shaping the future of American industry, along with providing regular updates on the state of the industry, the changing landscape policies and more.
Today we're talking about something that cuts right to the heart of trust in our economy. The scandal at the Bureau of Labor Statistics, no guest today. We're just gonna walk through what's going on over at the BLS. We've just learned that nearly a million jobs reported over the last year didn't actually exist.
That's not a typo, and it should be the biggest scandal in the country. The BLS has now revised down its payroll estimates by 911,000 jobs between April of 2024 and March, 2025. Jobs that were trumpeted in headlines used in speeches, and relied on by investors and business owners as proof of a strong labor market and it vanished once real data came in.
There's a great article in Real Clear politics this week that reported that the BLS essentially hallucinated nearly a million [00:01:00] jobs through flawed modeling and outdated assumptions. This isn't just an embarrassing correction, it changes the entire picture of the economy. Great resource on X. If you follow the COI letter, they summed it up well by saying the US labor market was overstated by nearly 1 million jobs.
The Fed raised rates, investors deployed capital, and companies made hiring decisions based on a mirage. That's a real scandal and something that we should all be paying closer attention to. Think about it. Capital flows were the data points. If the job market looks strong on paper, companies expand. Banks lend more money and they lend more freely, and investors chase growth stocks.
But if those numbers are inflated, the capital isn't just misallocated. It's deployed under false pretenses. Investors poured money into sectors, supposedly riding a wave of hiring and growth companies borrowed, built and staffed up on the assumption demand would follow. The Fed based, their rate decisions on labor strength that didn't exist, part of that being too late.
This isn't just a statistical error, it's economic manipulation with real [00:02:00] world consequences. Entire business plans, capital budgets and hiring decisions were built on faulty numbers, and its America's small and medium sized manufacturers who've paid the price. 'cause they live in reality, not in spreadsheets.
If you've been in the trenches of manufacturing, you've seen this disconnect for years, orders have slowed down. Backlogs, thinnings, margins getting squeezed. But things seem to be turning around and many of you have said flat out, we've been in a recession for nearly three years and you've been right.
We've gotten a lot of sentiment on this show about that. Data may be one thing, but you can't revise away idle machines, canceled pos, or a workforce. You can't quite justify keeping it full hours without any feel flexibility built in. Manufacturers have been living the recession while policymakers have been spinning the numbers.
Now the Department of Labor has announced it will audit and review the S'S practices. An inquiry is underway into how models like the birth death adjustment, which tries to guess how many new businesses are created. Ended up overstating jobs so dramatically. For a little bit of background, the BLS produces its monthly employment report by [00:03:00] conducting separate surveys of households and businesses.
The labor department also taps other measures of how the job market is fairing, including state unemployment claims. The labor department frequently issues revisions to figures from prior months as more complete or accurate data is collected over time. That's usually within a couple of percentage points that are a couple of thousand numbers up or down.
The internal review of the BLS'S methods also will examine how it collects reports and revises data used in two closely washed gauges of inflation. The Producer price index or PPI and the consumer price index, which is CPI, and recent data show that inflation around the US has been pretty sticky over the past year, but it hasn't increased at the rate that it did in 22 and 23.
This review is long overdue. America deserves transparent, accurate, and timely data, not political cover stories or outdated survey models. There's also a lot of numbers that go into that growth over the past year that padded those results, which basically came from federal government jobs, state level jobs, and did not include citizenship as some type of [00:04:00] component in that survey.
So what's really happening in the economy? Here's the truth that the revisions confirm and manufacturers already know core inflation has stalled or it's falling. We've staved off stagflation, but growth is fragile. So high unemployment, high inflation equals stagflation. The employment numbers have not been right, which is what's gonna likely trigger a 75 basis point. Cut a conservative estimate this week. Tariff revenues are at record highs, 30 billion in August alone, which is the sixth straight month of increases. It's proof that decoupling from the old fragile global order isn't just rhetoric. It's happening in real time. So it's a major shakeup to the economic output.
And supply chains are shifting. Reshoring and nearshoring aren't theories anymore of their survival strategies based on the past five years, especially if you've been in manufacturing and distribution. You know this. But it is something that is now being incentivized and brought back on shore. This is America building resilience the hard way.
So let's dig in on tariffs a little bit more because there are some underlying headlines. The recent surge in US tariffs have produced measurable, but modest upward pressure on certain goods prices. [00:05:00] Small one-time level shifts, not persistent, generalized inflation, a big myth that they drive inflation.
Major central bank and academic work puts the effect on headline core inflation in probably around the tenths of a percentage point up or down. Meanwhile, tariffs have produced record federal revenue, which helps public finances and maybe closing the budget deficit and are being used strategically to retool supply chains, which, if done right, can strengthen domestic productive capacity without triggering any kind of inflation that moderate.
Adjustment on inflation is something that should be watched closely. The Federal Reserve's own analysis finds that 2025 tariff actions so far contributed about a 10th of a percentage point to core price inflation with somewhat larger effect on core goods prices, which is a small goods sector based increase.
In short, it's detectable, but barely and very small. The Boston Fed's modeling of previous US tariffs episodes like 2018. Similarly concluded that tariff effects on core inflation are extremely limited, and that's far from the multi-point inflation spikes the [00:06:00] public fears, or that's been trumpet about in the media.
Other Fed research also finds some pass through to goods prices, but it's localized to tariffs sensitive categories like appliances and electronics, but that's what the reshoring movement is for. There's no evidence of broad persistent economic economy, wide inflation as a direct result of tariffs. The impact looks concentrated and partly offset by market adjustments and things like revising the BLS reports.
Bottom line is that tariffs have raised some prices in some narrow goods categories, but the magnitude is small relative to overall inflation and something that is a shock to the system just to re retool supply chains. A largely onetime or short run effect, rather than a persistent inflator of wages or services in the economy.
A little bit more about why tariffs aren't behaving like broad inflationary policy. Tariffs are a price wedge on specific imports, but not direct money printing. Their inflationary effect depends on industry structure or how much of the tariff has passed through consumers substitution possibilities, and how quickly domestic or alternate supplies fill the gap.
[00:07:00] Studies show many firms absorb part of the tariff, restructure, sourcing, or pass a one-time price shift rather than ongoing price escalation. If you do see ongoing price escalation, it's highly likely that someone is taking advantage of the moment. There's numerous supply side benefits. Tariffs that accelerate reshoring and capacity investments can raise domestic productive supply in the medium term, which fights inflationary pressures and it does not fuel them.
In other words, tariffs can be stimulative to domestic output. Even if they raise certain import prices initially, tariff revenues and some of the hard numbers that we've seen over the past couple of months and why they matter beyond inflation. August, 2025 produced a record in customs duty receipts. The US Treasury reported about $30.1 billion in customs duties in August alone.
The highest monthly total on record and fiscal year duty receipts have jumped dramatically year over year. That's real cash going into the treasury and a material shift in federal receipts. The year to date receipts since the fiscal year began have risen by tens of billions compared with prior years.
[00:08:00] Some public estimates put the incremental term of revenue this fiscal year well into the tens of billions of ranges. That revenue can be used for budget priorities, industrial investment, or to offset other issues. It's not just a symbolic policy tool and something that our country for a long time, how they ran their budget.
Where tariffs stand right now, and the regulatory and legal timeline is still a little bit up in the air, but they appear to be around for good. The reciprocal tariff framework is being implemented via executive orders, which started in April and Liberation Day. If you remember that episode, and the subsequent administrative actions or further modifications were announced in July that gives the administration legal authority to set and modify reciprocal tariff rates and to target trans shipment and origin rules.
Which is critical to stamp out things moving from one country to another to bypass tariffs. The US government has been using a mix of immediate proclamations and phased enforcement. Some tariff plans include deadlines, short pauses or conditional extensions, tieds to negotiations, A great lever for negotiating on a number of issues, but for example, the [00:09:00] US China tariff truce has involved temporary extensions and negotiation windows 90 day extensions, et cetera.
While certain country specific rates like Vietnam trans shipment penalties were announced with immediate effect in July. Expect continued rolling updates and some legal challenges in court. But on the legal front, some commentators note that trade litigation or court rulings could require refunds or limited how duties are applied.
The revenue picture is large now, but not free of legal risk. Practitioners are watching the treasury and the courts closely, but right now they look like they're here to stay specifically on some of these countries and where these tariffs stand. China is of course, an ongoing issue. There's tariff posture in China, and it's layered a mixture of longstanding section 3 0 1 duties.
Now, reciprocal rates and product specific actions, the US and China have negotiated short tru extensions, 90 day truces. Tariff rates remain complex and overlapping across categories. Practically US policy targets both Chinese finished goods and trans shipment practices in Vietnam. On July 2nd, the administration announced a 20% tariff [00:10:00] on certain Vietnamese imports and a 40% tariff on trans shipments, which are goods routed through Vietnam from third party countries.
I've heard of a lot of manufacturers moving containers and cargo ships around, but the trans shipment provision is designed specifically to deter routing of Chinese goods through Vietnam to evade duties. Measure was aimed at stopping tariff avoidance and preserving the effectiveness of the trade policy.
And one of the highlights and one of the, the bigger things happening more recently that didn't have focus on it initially around Liberation day, but the tariff rates in India. New measures and proposed actions in 2025 have rapidly evolved Coverage includes retaliatory measures and tariffs levied by the US on certain Indian exports in some cases, and high profile diplomatic friction.
Some recent reports indicate very large proposed rates for selected Indian products up to 50%, and India is rapidly assessing impacts and policy options. One of their policy options would be to curb their use of Russian oil, which is a great geopolitical effect across the EU and the us. There's a lot of nuance to [00:11:00] this.
Some prices move, but broad inflation is under control and the Fed and academic work show tariffs have raised core goods prices barely within a 10th of percentage point again, and had only small net impacts on broad inflation measures like core PCI. Roughly a few tenths of a percentage point. Those are well within what central banks can look through, especially when supply responses and reshoring reduce reliance on volatile foreign suppliers.
So it has to go hand in hand. Tariffs are not the inflationary boogeyman that many fear. The measured effect on overall inflation is small, concentrated in certain goods. Tariff revenue is now material. August $30 billion. Record haul shows tariffs are a real fiscal lever that can fund industrial policy and offset deficits, which is critical for our overall fiscal health.
That revenue is tangible and changes the calculus for industrial investment and reshoring tariffs are part of a broader industrial strategy. When paired with the right incentives for reshoring workforce development and capital investment, they can accelerate domestic capacity building, which helps contain future inflationary risk by strengthening [00:12:00] supply.
Regulatory and legal uncertainty remains, however, and the policy is active, evolving via EO authority and negotiations and could face court challenges which have been numerous that affect final revenue flows. Practitioners should track both treasury, proclamations and litigation, but the betting on this is tending towards the administration overall.
Here's where we stand. It's a decoupling from the old order, and here's the big picture. These revisions expose the failure of the old order. For too long, we've outsourced our industrial base and relied on a financial system that props itself up on glossy data points that we don't know how they're getting, and that system is crumbling.
The new order is grounded in reality, tariffs and trade realignment, smart investments that empower workers rather than replace them and localized supply chains that don't collapse when a ship gets stuck in a canal. Or there's some type of global event manufacturing leaders who know the score because they feel it in their p and l every single week.
So what do we do with all this information? On a personal level, hold institutions accountable and trust your gut. Because manufacturing is leading from the front. Invest [00:13:00] in what's real. Manufacturers should double down on their resilience and automation and reshoring, and in building more supply chain visibility.
And with the one big, beautiful bill that was passed earlier this year. There are major incentives for CapEx. If you've been sitting on the sidelines, trust the ground truth. What in your factory, in your order book and in your community is more valuable than headline jobs reports and champion Transparency in American capacity, truth and resilience are the competitive advantage of the reshoring movement.
To stay ahead of the curve and to help plan your strategy, please check out our [00:26:00] website at www.veryableops.com and under the resources section titled Trump 2.0, where you can see the framework around upcoming policies and how it will impact you and your business. If you're on socials, give us a follow on LinkedIn, X, formerly Twitter, and Instagram. And if you're enjoying the podcast, please feel free to follow the show on Apple Podcasts, Spotify, or YouTube, and leave us a rating and don't forget to subscribe. Thank you again for joining us and learning more about how you can make your way.