THE DEEPER DIVE: How Deeply Corrupt and Chilling Was the Government's Inflation Report?

While inflation was—nearly everyone agrees—likely hotter than reported, the report, itself, was deeply chilling. You won’t have to trust me on how bad it was. I have many to quote from, and the usually mild-mannered economist I respect most says this report should chill you to the bone.

The Bureau of beLABORed Statistics (BLS) puts out both the jobs/unemployment reports and the CPI and PCE inflation reports. While I’ve always accused them of being the Bureau of Lying Statistics because their “seasonal adjustments” are usually unseasonably warm and cozy, making the incumbent government they serve (on either political side) look better than it deserves to look, I now no longer trust their output at all. In fact, I was already anticipating I was going to find the new report so bad it would actually deserve to be called corrupt.

A brief recap of my warnings regarding the current report

On December 18, I wrote:

Since one of Trump’s biggest claims in his speech was that he has been bringing down inflation, we’ll take a Deeper Dive this weekend into this week’s inflation report talked about in today’s headlines to see if it truly backs the president up…. (“Trump Toots”)

It does back him up with a slight downtick in the overall inflation rate, except that it doesn’t because WOW! was it ever more deeply faulty than even I thought it would be, which is why I also warned:

It will be important to dig into today’s vaguely calming inflation report to see what it’s really made of. With a precursory glance, I have almost zero doubt that it is as deeply flawed as I’ve assured you it would be for the past month; but it will be the facts about the report that matter. The devil will be in the details.

You may remember that I also gave the following warnings the day before (on December 17) based on the bureau’s unemployment report:

It does take awhile to turn things around, but remember that unemployment has probably actually risen worse than shown in the graph because even the Fed doesn’t believe those reports any longer. Nor should any of us. The BLS was full of bunk even before it was stripped down by the hatchet men and then put on leave for forty days, and the bunk has always been on the side of making the numbers look better than reality.

On December 16, I wrote the following about changes at the BLS that would call all of its future reports into question:

I don’t trust any of the numbers of this overDOGEd and shutdown government department that has also been ordered to give better news, or heads will roll. The biggest head already rolled over a less weak report than today’s. So, there may have been some fear in giving even this slowly withering data out. (“Big Storm Swirls around Trump and his Economy”)

In terms specifically aimed at the government’s inflation report, I made this statement in my December 14 Deeper Dive:

In addition to badly flawed and now completely lacking government job numbers, the Fed is also concerned about the underestimated and even largely lacking inflation numbers.

Contrary to the president’s boast about falling inflation in his recent speech as one of his great achievements, I claimed “the president toots” because really his speech was such a brazen lie that it is as insulting to everyone’s intelligence as if he farted in your face, the truth is clearly exactly the opposite of his claim, which I’ve showed along the way to where we now stand by using many non-government indicators and anecdotal evidence as well as logic about what tariffs do. That is something even the Fed admitted when it chose to lower interest rates ten days ago:

Federal Reserve Admits Job Market Is Collapsing As Inflation Continues To Rise

…the Fed admits that “Inflation has moved up since earlier in the year and remains somewhat elevated.”

First, consider that the Fed is loath to admit that inflation, which it started battling all the way back in March, 2022, is “continuing” to rise. After nearly four years of inflation fighting—weakly at first but gradually more intensely and finally tapering the battle—it is forced to admit failure so far at its prime mission, which indicates the Fed was wrong to start tapering its Fed Funds Rate back down.

Second, the Fed is loath to admit that it is going to cut interest rates again this month and go back to QE in order to save jobs at a time when inflation is continuing to rise. It is has to be very reluctant to admit that because it sounds suicidal in terms of protecting the value of your money, and it knows it will be intensely criticized if inflation goes back up since inflation was still going up by its own admission when it made its latest vote to cut rates more.

That means no agency is less likely to say inflation is continuing to rise if it is not continuing to rise than the Fed. The Fed would love to be able to say it has won that battle so it is safe to lower rates and go back to QE, but it cannot say that. It would not say that. Instead, with trepidation, Fed Chair Jerome Powell admitted the Fed is now walking a tightrope by deciding to lower interest rates further in the face of inflation that is actually slowly getting worse now, not better, claiming the Fed has to because jobs are getting so much worse.

Now, with this latest report from the Trump administration’s Bureau of Lying and Lazy Statistics, we get to see how bad the government lying has become.

How bad is it?

It is so bad, I have to conclude it is “corrupt,” not merely in error, and I will give strong support from a respectable conservative economist for that claim. This latest report is, in fact, as bad as the depths to which many communist countries have historically lied about their econometrics. The department could not have become this seriously bad overnight purely by mistake.

Even Wolf Richter, who usually accepts the government reports enough to work with them and often accepts many of them as the gold standard and whom I often quote because I think he’s one of the most reasonable economists even when I sometimes disagree with him, has said this report is “doctored” and is a “bad joke,” except that it is not funny at all but, in fact, is “very serious” in terms of how bad it truly is. And, as you’ll see, he winds up going even beyond that.

He summarizes this report as follows:

No CPI data for October, partially made-up CPI data for November, and now 3 months’ of doctored OER data which weighs 26% of overall CPI.

“OER” is “Owners Equivalent Rent,” which is the bureau’s way of tracking the rising or falling cost of homeownership by having owners GUESS at what their homes would rent for as a substitute for figuring out what it really costs to own a home. I’ve always pointed out what a dumb measure I think that is; but now it is a “doctored,” dumb measure, according to Richter. Thus, when we saw that one of Trump’s boasts in his speech was that housing prices are falling, the degree to which they are falling in terms of their impact on overall inflation (accounting for 26% of the overall inflation number) is now a “doctored” and dumb measure of inflation.

The Bureau of Labor Statistics explained today in its CPI report for November that most data for October was missing and some data for November was missing, and that it filled in the gaps in the November data, including by “approximating missing data points” with whatever, including for Owners Equivalent of Rent (OER), the biggest component of CPI, weighing 26% of overall CPI, for 33% of core CPI, and for 44% of core services CPI.

That resulted in what Richter calls …

a suspicious outlier-plunge in September, and that suspicious outlier-plunge in September was carried forward to October and November. And the BLS even explained some of it in separate notes, and so it’s not a secret.

So, something (OER) that was already the most questionable measure in CPI, as it results from extrapolations that are based entirely on a survey of homeowner guesses about their home’s rental value (and who knows LESS about what homes are renting for than home OWNERS?) is now built entirely on guesses by the bureau, itself, because it had incomplete data (surveys of guesses) for that month, and that guesswork became the basis for each of the months that follow.

Richter presents a screenshot for the data on which the current report was based and notes that nearly ALL entries for actual data are missing for both October and November. In fact, the only actual data was for new and used vehicles. The report, in other words, is complete garbage. It is based on air. And the most baloney number of all accounts for 26% of overall inflation.

That is what an overDOGEd, underfunded, shutdown, presidentially threatened (by the firing of its head due expressly to reporting unflattering numbers) gets you. This is exactly what departments under communist dictatorships do to avoid putting out information that makes the dictator look bad, lest someone’s head rolls.

In its summary report, BLS said: “BLS did not collect survey data for October 2025 due to a lapse in appropriations. BLS was unable to retroactively collect these data.”

Only for automobiles did the BLS have any collected data.

In fact, the best the BLS could say in its note was that it “attempted to collect data.”

Attempted.

Moreover,

the September data, which was used as base for the made-up October data, was marred by the total outlier plunge of OER

Maybe we should say “outliar” because …

… there was this suspicious outlier drop in September, and rather than bouncing back, as it should have done, it was carried forward to October and November, making for one heck of a funny chart below.

…this is what the now clearly doctored OER looks like….

Then Richter provides this suspicious looking graph for what happened to inflation in the cost of home ownership:

 

Wolf Street

It plunged almost straight down a huge cliff and hit the hardpan with a never-before seen splat. First of all, the sudden massive historic plunge should look suspicious to anyone. But a hard plunge to a flatlining singular number that covers three months looks so odd as to be seen nowhere else on the graph—a perfectly straight-and-level line for three monthly readings! How artificial!

I’ve said many times, “There are no straight lines in economics.” In the very least, they are very rare. This one, however, being established purely on guesses without data, is as bogus as they come. And this ain’t our first rodeo with government shutdowns, so it is odd even for a shutdown.

Richter is more emphatic on how bad the government reports now are than I’ve ever seen him be, and he’s a conservative economist:

But it’s not a bad joke, it’s much worse.

I told you he goes even further than the statements I led off with. What is worse than a bad joke? How about outright corruption?

First off, it’s worse because this number impacts so many things in our lives:

Lots of things depend on CPI, including the calculation of the “inflation protection” in Treasury Inflation Protected Securities (TIPS), I-series savings bonds the government sells to retail investors, Social Security COLAs, and other inflation adjustments paid to investors and beneficiaries, and they will all be underpaid for inflation.

That is not to mention the COLAs used by numerous employers to determine your pay this coming year. So, this huge downward change in housing inflation hits a broad sweep of income streams.

But it goes even broader than that; it corrupts other government data:

This data here also impacts broader economic data that is adjusted to inflation, including “real” consumer spending and “real” GDP because the BEA, which produces those overall economic indices, uses some of this CPI data, including OER, for its calculation of the PCE price index and the GDP deflator, among others.

Meaning, the more the Trump administration can get the official government inflation reading down, the more it can get GDP up, and that is essential to making it look numerically like we are NOT in a recession, which is why I’ve also said I no longer have ANY trust in reported “real GDP” as there is nothing “real” about it at this point.

A real accounting of the economy’s overall strength, at this point, will not simply be “lost in the fog;” it will be lost in the “smog” because this is a man-made smoke screen.

In starkly critical terms, Richter, who has been on the president’s side of one argument by claiming that the tariffs won’t cause inflation concludes,

BLS is now causing serious issues with all of them, with investors and beneficiaries getting short-changed on their inflation protection, and with inflation-adjusted economic data getting inflated, which would, of course, suit the administration’s narrative.

Again, that is from a guy who has been arguing against the idea that Trump’s tariffs will cause inflation. I’m not suggesting he has changed his mind on tariff-caused inflation, but he is clearly critical of this report that tries to provide evidence that would now support his view on tariff inflation, even though being critical leans a little against his own broader argument. He’s critical of the quality of the report—the deceptive nature of how it was made, so he doesn’t accept its claim that inflation dropped at all.

Without a true correction to the base that has now spread its error through three months of readings, all future measures of inflation will be corrupted by this report, under-reporting inflation in the most significant component of CPI. The month-on-month changes might become accurate again, but the year-on-year numbers will always be off because the base is off. We can only hope Team Trump gets such intense pressure over this that they are forced to go back and correct it all, making excuses for what they’ve just done; and a lot of economist are complaining.

America finally made it to its apparent goal of becoming a banana republic as I have been warning we were moving toward; and with our monetary policy being based on such corrupted numbers, we’ll have a fully bananas currency to go along with the blackened and bruised republic.

As one of Wolf’s readers concludes (who also is a paid subscriber here):

Brazil just threw a president in jail.

South Korea just threw a president in jail.

Greece just endured an economic collapse and managed NOT to descend into dictatorship.

It seems like the countries that suffered dictatorships in the 1970s and 80s are the ones accomplishing the greatest feats of governance during this internet-driven era of democratic decline. It’s as if the populations with living memory of living under dictatorships are inoculated against the empty promises of far right and far left.

Meanwhile, the old WW2 allies have gone from paragons of democracy to declining into authoritarianism, corruption, and oligarchy.

And that is why I wrote in harsh terms that the president’s speech about how great it all is was nothing better than a fart in your face because this is what you really got.

And, as if all that is not bad enough, Trump desperately wants to stack the already overly-loose-for-too-many-years Fed with people who will slam interest rates down to the ground. To get away with lowering interest rates further in order to goose your faltering economy with renewed Fed stimulus, you have to find some way to convince people the inflation they feel isn’t real. This report was that effort.

In terms of my “Trump Toots” analogy, another Richter reader writes,

By now the world at large should not be surprised at the breadth and width of corruption in the Trump Administration. Today’s announcement of the merger between Trump Media and fusion company TAE Technologies should offend the olfactory system of anyone with two nostrils.

If you’re not offended by all of this, you’re steeped in Trump Derangement Syndrome (which actually makes those who have it think everyone else is nuts) about how bad it truly is.

Another of Richter’s readers comments,

The trump family is making billions upon billions in paper profits well until crypto crashes…. People freaked out when Hunter sold paintings for 600k, trump JR is getting billions, no bid contracts, foreign government investing etc…. I am a proud capitalist but i hate Croney capitalism. DJT is straight out of atlas shrug novel the crooked government that gets paid for favors.

I have always found it odd that so many people who were SO incensed by the way Hunter and Papa Joe profiteered off of access to the presidency seem like they could not care less about how the whole Trump clan is profiteering by selling access to the presidency in far grander and more ambitious ways (at lavish Mar-a-Lago dinners at the price of $100-million per plate invested directly in Trump’s crypto currency, in a soon-to-be, new, gilded ballroom for billionaires, giving regular luxury access to dinners with the Prez for those with the bucks to build the ballroom, or even in all the enormous foreign development deals the Trump family is landing because Papa Trump is president, and even via what was—long before President Trump came along or even lived upon this earth—called fascist economics, where government partners with wealthy elites to create the new enterprises or facilities (including ballrooms) the dictator wants with major injections of public funding into private ventures. Trump now rules almost entirely by dictates and does all of these things far more brazenly than the Bidens ever did. But who cares?

I don’t know if Atlas Shrugged, but Republicans and those who once called themselves conservatives have sure shrugged in supporting and turning a deaf ear to all of this baloney and grift. Personally, I’ve had a belly full of baloney, and it sounds to me like the normally more sanguine Richter has, too, as have numerous commenters in his usually conservative readership.

Says one reader on the Richter scale of economic quakes,

I lost all trust in the integrity of the CPI data and sold all of my TIPS in August, when Trump fired the civil servant heading the BLS just because he didn’t like the inflation and jobs numbers. After seeing that, do you think the new BLS Commissioner is ever going to risk their job by reporting bad numbers?

Another Richter reader observes,

The scale is what’s unique, and this article deals with the scale of the disinformation. Some people only care about economic disinformation, but it is everywhere. I can’t trust many of the government agencies I went to for solid information just last year, and that is by design.

The transparency and impartiality in information will not recover in time for our salvation.

No, it will not, and that is clearly by design at this point as it just keeps getting more unreal every month, just as Trump’s lies become wilder. We are now far down the rabbit hole.

Whatever wokeness you complain about pales in comparison to the deliberate destruction of public institutions who formerly provided facts.

I don’t know how well those institutions ever provided objective facts, but now all they provide is farts … in your face. I won’t ever apologize for crassly pointing out the blatant corruption some still refuse to see (because that is the only accurate way to describe it), even if trying to break through the incredible denial here cost me every paying subscriber I have.

However, I’m trusting and believing that most of my readers want the hard truth, and can handle the truth; and it seems that most do and can, even though it costs me a slow-drip decline in readership. I’ve been clear from the beginning that unvarnished truth is all you’re going to get here. So, that is what you actually are paying for. I was hard on Biden all through his presidency, but I’ve had a belly fully of Trump’s continual diet of baloney and promises that never materialize, pardons of filthy rich criminals and truly foul people and especially the Epstain cover-ups (even if Trump didn’t participate in all the statutory rape and is only covering for his cronies who did) because its even driving staunch supporters like MTG against him and because …

to the extent that related business “deals” in other countries lead to better terms for those countries than they’d otherwise get, then the taxpayer is most definitely getting soaked.

I’ll focus on providing for the kind of reader who wrote all of that, which I believe (or, at least, hope) most of those who actually pay for The Daily Doom actually are expecting to get. That reader continues …

Yeah, I saw the same table as you with the missing data and immediately remembered your flagging of the weird OER data. Good catch by the way. I also thought to myself, why did Trump have his speech last night? Maybe he saw this data ahead of time? Maybe he made sure the data ended as it did? Lastly, I have NEVER been a fan of manipulated data. Thanks for what you do, I have learned from you.

I hope most of my readers are made of that fiber, taking their truth straight up.

When asked in the comments section what he thought when someone from the administration promised this week that the huge shelter deflation will overwhelm any goods inflation which would lower CPI next year? Richter, himself, responded,

All warning bells went off when I heard that. “From the top down” is what I heard between the lines, and what we’re looking at today confirms that and is truly chilling.

You SHOULD be chilled by this BLS report, not for what it tells but for how it gets there. The devil, as I promised would be in the details, and the big chill here is that nearly all the details were missing in order to provide a purely manufactured report!

Asked if there is any hope the information will be corrected now that the government is back in business, Richter finally went as far as I told you he would in saying how much worse this report is than his lead, negative as it was, suggested:

This assumes that there is a will in this administration to produce such inflation data… but today shows that it is not willing to do so. OER is now a three-month-long scandal. I gave them the benefit of the doubt in September. But benefit of the doubt doesn’t last three months.

A scandal!

Corrupt.

And reporting the delusion-shattering truth (as I try to do) matters because …

Wolf, this is perhaps one of the most important pieces of analysis you have ever written. If the bond market starts to lose trust in the integrity of the CPI data, all bets are off.

(Emphasis mine in agreement.)

When government economic data becomes this corrupted (“scandalous” because of executive intrusion “from the top down,” then economic collapse is fully enveloping us in government smog. So, I’ll keep telling you, even with the graphic-novel-style illustrations, clear truth like “Big Beautiful Bill” is not beautiful at all but is morbidly obese and hideous because he is a highway to hell for the now bloated US budget. He is not “Bill” but “bull” and represents unrestrained bloat beyond belief that is already rapidly accelerating the nation’s downward spiral into its long-forming debt oblivion.

I’ll keep revealing where you can find numeric evidence that the government is now actively hiding inflation and cloaking recession; and, if numeric evidence for inflation is unavailable because mostly the government provides that kind of data on inflation, then anecdotal evidence of what is really happening. For jobs, we may have to rely on ADP and other private-sector surveys.

What other economists said about this report

When even Richter declares this is an outright “scandal,” refusing to say it is just wrong due to errors, I’m inclined to find that is all the confirmation of my own opinion I need because I’ve never seen him write this intensely against government data. Still, just to be thorough, let’s recap some comments from those mainstream articles I ran in The Daily Doom about this report this past week:

• “The data is truncated, and we just don’t know how much of it to trust.’’ By disrupting the economy – especially government contracting – the shutdown may have contributed to a cooling in prices, she said (Diane Swonk, chief economist at the tax and consulting firm KPMG)
• “Noisy. The canceling of the October report makes month-on-month comparisons impossible, for example, while the truncated information-gathering process given the shutdown could have caused systematic biases in the data.” (Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management)
• “Inflation did not suddenly improve a lot between September and November. Anyone who has been to the grocery store or paid a utility bill knows this…. The November inflation report was like the data-nerd equivalent of the emperor-with-no-clothes story: We didn’t have basically any October data and limited November data.” (Heather Long, chief economist at Navy Federal Credit Union)
• “I don’t take it at face value…. It seems like the government shutdown had a big impact.” (Stephanie Roth, chief economist at Wolfe Research)
• “The November CPI report creates more questions than answers about the recent pace of price growth…. Take it with the entire salt shaker.” (Wells Fargo economists)
• “That was one flawed report.” Brusuelas said that price changes for rents and owners’ equivalent rent were in the vicinity of zero, and “That just doesn’t pass the smell test.” (Joe Brusuelas, RSM US’ chief economist)
• “Put in zero inflation in multiple categories” while calculating [i.e. extrapolating, not reporting] the OER for the approximately one-third of cities used. (Evercore ISI’s Krishna Guha)

If Team Trump has any inclination toward honesty, the direction of inflation will be hugely reversed next month to correct all the deficiencies in this report, according to Richter, but he also says he does not, in the least, expect to see that happen, given how brazenly falsehoods were reported as facts here, and especially given how the head of the department was fired back in August.

Trust what you know from your experience of prices. Don’t Trust what the Trump administration is feeding you. They doubled down against all the criticisms of their report by reiterating “inflation is falling” and even having their head economist call it a “blockbuster report.” More like a gut-buster report … but not the funny kind, as Richter noted. More like the gut-bomb kind. Most people’s own gut feelings about the inflation they are experiencing are likely right.

Trump, in his speech, called this “a golden age” with “prices falling fast.”

Hopefully, I primarily have readers who continue to want the facts, rather than the fake facsimile of truth. If you are one such reader, please support the continued writing of this little vessel of truth that tries hard to pierce the government smog. By becoming a paying subscriber, you can make up for the slow trickle of those that don’t want to hear it. But, either way, I’m staying straight to the truth at any cost, and I’m not about to couch such serious chilling concerns, as Richter calls them, softly.

In economic terms, the reality of what happened in this report was a cold wind through the cracks of our teetering house, bracing us to face the outside truth because when insiders in governments set forward policies based on their own current lies, even the bananas wind up frozen in the end.