Banks and research firms that serve hedge funds managed to confirm a closely-watched economic data last week as much as 20 minutes before the data was posted online, giving them a possible jump on financial market trading — the latest in a series of lapses at the Bureau of Labor Statistics.
Now, details into what happened are beginning to emerge.
A technical issue prevented the data, which showed a large downward revision to job growth in 2023 and early 2024, from publishing on the agency’s website at 10 a.m. as scheduled last Wednesday, according to details provided by the Department of Labor.
In response, agency technology staff began to load the data onto the site manually. At that point, starting a bit after 10:10 a.m., other bureau staff could see the update on the website — even though it wouldn’t be visible to the public until 10:32 a.m. And bureau staff began replying to people, including Wall Street firms, who called or emailed with questions. That enabled some to get access to key data before others.
It isn’t clear how many investors got early access to the data, or whether anyone actually traded on the information. The revisions ultimately did not have a huge effect on stock markets. But the fact that Wall Street funds that make money by betting on every minor move in economic data — including reports like this one — managed to access the figures before the public at large has raised serious questions about what happened.
Part of the problem, according to the information provided by the department, is that the payroll revision data was not considered a “news release” like the monthly jobs data and inflation numbers. Those data are subject to strict to controls to avoid leaks. Instead, it was considered a “website release,” which has fewer guardrails.
Unlike with a news release, the bureau had no backup plan to make sure there was a way to quickly push a website update out to the broader public, such as with prepared social media posts of data highlights.
But that is now poised to change. Going forward, the labor bureau will no longer have separate protocols for news releases and website updates. And senior staff will verify that the data are available to the public before the bureau begins to respond to individual inquiries or to provide data related to a current release, among other changes to communications protocols, according to the information provided.
Still, outstanding issues persist.
Among them, it is not clear why someone within the labor bureau did not compose and post a social media alert about the data once it became obvious that the figures were circulating on Wall Street but still unavailable to the general public. Nor is it totally clear at what point people within the department recognized that issue.
Beyond that, the episode highlights the blurry relationship lines between the government data provider and the financial firms that are among its heaviest data users.
While sophisticated data analysts have long received technical assistance from government data providers to help them to understand releases, a series of mishaps this year have illustrated that those relationships can easily tip into the realm of unfair advantage in an era in which once-obscure data releases have become closely scrutinized.
In February, a Bureau of Labor Statistics employee sent information about housing inflation to a group of “super users” that included a number of hedge funds. The information turned out to be inaccurate, but housing was of interest to many investors at the time. Given that, agency leaders have said that it was inappropriate to share information selectively.
And in May, the agency inadvertently posted data on the Consumer Price Index 30 minutes before the scheduled release time. The report is closely-watched and heavily-traded, and some Wall Street firms and data platforms monitor the part of the bureau’s website — internally called “flat files” — where the data was accidentally published. Less sophisticated users do not.
The repeated 2024 lapses, all three of which could have given Wall Street an advantage, risks undermining public trust in the institution’s even handedness.