(Bloomberg) — There’s no shortage of market-moving events on the docket to keep Wall Street busy right now.
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But as traders and analysts game plan for Federal Reserve Chair Jerome Powell’s Jackson Hole speech and then Nvidia’s earnings and economic-growth data next week, many of them are stuck on Wednesday’s botched government release of jobs data and the way it sowed chaos across stock and bond markets.
And they didn’t mince words. “It’s just atrocious,” said Glen Capelo, a managing director at Mischler Financial Group. “There’s a big problem,” said Claudia Sahm, chief economist at New Century Advisors. “It’s crazy,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.
The problems began when the Bureau of Labor Statistics failed to release a key revision to jobs data at 10 a.m. New York time as had been expected.
That error was compounded when BLS officials then began to provide the data — which showed that job growth estimates will be marked down significantly — to analysts who called up the agency.
So for a few excruciating minutes, a handful of firms, including BNP Paribas and Mizuho Financial Group, had the data while everyone else was left in the dark as markets shot higher and lower. Rumors flew, with some regurgitating the correct number and others spreading incorrect figures. The BLS finally released the data on its website a little after 10:30 a.m., when it showed that the number of jobs created in the year through March was likely to be revised down by by 818,000, the most since 2009.
Brenner got ensnared in it all. He had heard an economist say on CNBC that the revised number was down 676,000 and quickly blasted it out to clients. “Then about 10 minutes later, everyone corrected me,” he said. The government is “using backward systems and I don’t think they have a clue as to how important some of these numbers are.”
The staccato swings in stocks and bonds made it difficult for anyone who had managed to get the number to profit from it but that’s little solace to Brenner. To him, the price action in some parts of the Treasuries market — like five-year and seven-year notes — made clear to him that some were trading off the data. “No question about it,” he said.
The botched release is the latest in a series of embarrassing mishaps involving the Labor Department’s data releases, which have long been a crucial guide for investors trying to discern the health of the economy and the direction of interest rates.
In May, the BLS inadvertently published consumer-price data 30 minutes early. A month before, records showed an agency economist answered numerous inquiries from major Wall Street firms like JPMorgan and BlackRock on details of data related to the inflation gauge, raising questions about the selective release of information. And in late 2022, stock futures surged in the moments before an inflation release — spurring speculation that the number had been leaked.
Hair-trigger financial markets have been rattled, of course, by all sorts of things over the years. Hoax press releases and premature corporate releases have frequently set off market moves. But US government data plays an outsized role in shaping the perception of the economy, making any breach or shortcoming a major cause of consternation.
A spokesperson told Bloomberg Wednesday that the agency’s inspector general has been asked to look into what happened, saying “the integrity of our data releases is BLS’s top priority and we are closely reviewing our procedures to ensure this does not happen in the future.” Representatives for BNP Paribas and Mizuho didn’t return phone calls seeking comment outside normal business hours.
The disgruntled on Wall Street, to be clear, aren’t directing their anger at the firms that managed to obtain the data. They all wanted to get it, too. Their frustration is almost solely with the government.
Few on Wall Street were as caustic in their assessment of the government’s data handlers as Capelo. “The fact that this was a number that had been talked about, they knew it was important and then to flub it like this,” said Capelo, who joined Mischler after stints at firms including Salomon Brothers and RBS Greenwich Capital.
A big part of what galls Capelo is the fact that these data release problems keep happening again and again, putting many in the market in a bind. “Is it completely unfair? Absolutely. Should it be changed? Absolutely. We are not living in the stone ages. It should be pretty easy to fix.’
The data involved usually doesn’t generate much interest outside economics circles.
This time, though, it drew far more attention. Both stocks and bonds had been gaining in recent weeks speculation the labor market is cooling so much that the Fed will finally start cutting interest rates. The figures wound up helping to confirm that picture, showing that the government had actually overestimated the number of jobs that had been created.
The trading that followed was erratic. It was hard to parse whether the figure was ultimately positive or negative for the stock market. For bonds, it was more clearly bullish. Yet even there, the moves were disjointed. What is clear, though, is that trading volumes spiked around that half-hour delay.
Vineer Bhansali, the founder of asset-management firm LongTail Alpha, just sat back and watched the chaos. He said he wasn’t actively trading in the Treasuries market just then. But still, he appreciated how bad it could have been for him or anyone else who had put a position on and was left in the dark.
“If you get caught off-sides because you don’t have the data, you can get super screwed,” Bhansali said.
And then he repeated something many others said: the government needed to take action to fix these glitches and fast. “This issue is definitely something people should be looking at.”
–With assistance from Boris Korby and Edward Bolingbroke.
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