One of the great things about blogging is the frequent times one learns from commenters. The Trump tweet on the unemployment rate is a case in point.
When I posted about it, I thought, naively, as did co-blogger Scott Sumner, that Donald Trump had set a precedent by revealing something about the unemployment numbers before they were officially announced by the Bureau of Labor Statistics.
Wrong!
It turns out, according to commenter Viking, that President Obama did it also, and not on Twitter where everyone following him on Twitter had the same access, but to a select group of people of his own party. There are two other important differences. First, Obama did it many hours, not just 69 minutes, before the data came out. Second, he gave more information about the data than Trump did.
Here”s the link to the Wall Street Journal story about Obama’s leaks to a favored audience. And because the Journal is gated, here are some highlights:
While disclosures of economic data are rare, they aren’t unprecedented. In February 2009, with the U.S. economy in crisis and Congress debating a stimulus package, then-Senate majority leader Harry Reid (D., Nev.) heard from Mr. Obama around midnight that the following morning’s jobs report numbers “would be somewhat scary,” he told the Senate after the report’s release. The Labor Department reported a loss of 598,000 jobs in January.
Former Obama administration economist Larry Summers got all huffy about Trump’s tweet, saying, with his own tweet:
If during the Clinton or Obama Administrations there had been a statement from @POTUS or anyone senior official in the morning before the Employment Report it would have been a major scandal–with all sorts of investigations following on.
We now know that’s false. There was no such investigation of Obama and little talk, if any at all, about a scandal.
Now, Scott Sumner and I can, I think, be forgiven for not knowing about this history. I’m pretty sure that he, and I know I, don’t follow the D.C. machinations daily.
But Larry Summers has no such excuse. He was actually a high-level Obama administration economics official when Obama gave advance notice of the numbers. We might ask “What did Larry Summers know and when did he know it?” But we pretty much know the answer to that question. Larry must have known that Obama had done this. He, unlike Scott and I, has no excuse.
READER COMMENTS
jack pq
Jun 6 2018 at 10:24am
This information advantage is not limited to the President. There is evidence that US Senators also benefit financially from having more information than other investors.
“portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month”
https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/abnormal-returns-from-the-common-stock-investments-of-the-us-senate/A39406479940758D59E09FDCB8EE9BEC
Scott Sumner
Jun 6 2018 at 12:55pm
No need to “forgive” me, as I stand behind 100% of what I wrote in my post.
Victor
Jun 6 2018 at 1:07pm
I think the difference is vast between:
1. Telling some senators that “Hey the jobs number looks scary; you guys’d better work on that stimulus package pronto”
2. Gloating to the world “Look at how great MY jobs number is!”
zeke5123
Jun 6 2018 at 1:21pm
@Victor:
I don’t see the difference. The time delay wouldn’t accelerate in any meaningful the stimulus package; the only thing it could do is (i) allow Reid to trade on insider trading or (ii) allow Reid to get in-front of messaging.
Either suggests a form of corruption. Note the very concern raised by the critics of Trump is that he could be giving this info to a handful of private parties (stated without evidence) is because it speaks to corruption.
David R Henderson
Jun 6 2018 at 1:36pm
@Scott Sumner,
No need to “forgive” me, as I stand behind 100% of what I wrote in my post.
Are you saying that you would have written the same exact post you wrote if you had known that Obama had done worse, by your standards, than Trump?
Scott Sumner
Jun 6 2018 at 2:11pm
David, Yes, and BTW Obama’s actions were not worse. See my new moneyillusion post.
Lord
Jun 6 2018 at 2:18pm
Yes, Obama did it so early, he didn’t even have the facts yet. Some leak. More wishful.
Dylan
Jun 6 2018 at 2:23pm
Count me with Scott and Victor here in seeing a big difference between telling some senators at the depths of a crisis that are debating a stimulus bill, that the numbers are looking scary, and Trump tweeting to the general public for no reason at all except to let him look better.
And I disagree with Zeke that the time difference doesn’t matter to policy. I don’t know the details of this beyond what is posted here, but a few hours certainly could matter in terms of being able to be proactive and to use this info to get a few reluctant senators behind your stimulus plan (not that I necessarily agreed with whatever plan they were debating at the time).
JK Brown
Jun 6 2018 at 2:52pm
To be fair, Obama did also make a public announcement describing the jobs report as “dismal”. But how would the DC denizens be expected to know about something like that?
michael pettengill
Jun 6 2018 at 3:19pm
So the quote from the WSJ is fake?
The WSJ quote is fake news invented by the WSJ?
Or perhaps it reflects an investigation of Obama’s activities in great detail.
Commenting on the expected jobs number 6 days after the data release by payroll processor ADP which is always commented on the night before on lots of business news channels in their upcoming event review, so pulling Obama’s comment out of that noise means lots of investigations of every word Obama says.
I recall Obama getting slammed for saying something like “arresting Skip Gates was stupid” based on that being the top government official over all the government including courts/judges prosecution, and police employees, thus dictating legal outcomes. Not that the president has any authority over State government branch employees.
A second kerfuffle happened when Obama commented on soldiers in general or some transgression, this being an abuse of command to influence discipline processes, in response to a reporter query.
Obama did the opposite of Trump, judging less and less in his comments because of the idea that government serves the President in every word and phrase. President Trump has increasingly made it clear that everyone in government should be doing what he tells them, and anyone following their duty to the Supreme Law of the Land is part of a deep state conspiracy against the President.
Roland Martin
Jun 6 2018 at 3:59pm
Regardless of judicious or injudicious, put the subject word or phrase in the mouth of a conservative and it becomes ‘inexcusable’.
That same word or phrase from the mouth of a liberal becomes”excusable… even praiseworthy.
EB
Jun 6 2018 at 4:08pm
Thanks, David. You can prepare a list of many actions under “Obama trumped Trump”, but more important there is a list of Obama’s actions that so far Trump hasn’t done. My favorite list, however, is that of Trump’s actions that reversed Obama’s.
Now we know Larry and Scott (and perhaps many other economists) are not Keynesians. A true Keynesian changes his mind when he’s proved to be wrong.
Martin
Jun 6 2018 at 4:26pm
The article in the WSJ might not tell the full story.
However, I do not condone the title of this blog post.
Mark Z
Jun 6 2018 at 5:33pm
I don’t see the rationale for Obama doing it holding up. If the stimulus bill was on the verge of being passed (I don’t remember the timeframe personally) then there was nothing Reid could do in the span of a couple days that would’ve changed anything. If the bill wasn’t close to being passed, then there was no reason he couldn’t wait a couple more days.
I don’t think, in either Obama’s case or Trump’s, there was a calculated reason behind doing it, and I think, in both cases, it was particularly significant action. Conspiracy-minded people may speculate that this is evidence Trump might be selling insider information behind the scenes (or that Harry Reid would do the same) but this really seems like much ado about nothing. Ideally, the numbers would just be released to everyone at the same time. But I think you have to really hate Trump (or Obama, in the other case) to care much about this.
SeanM
Jun 6 2018 at 5:55pm
as a bond trader for whom this number is the most relevant release of the month by far, i can add something to this. Feb 2009 was the 4th of 6 consecutive months of worse than 700k job losses. the range of expectations was in the 600k-900k. [an aside, these numbers were all revised later, as is usual, and because of the magnitude the revisions were large. it does not change the point if the reported number at the time was 600 vs 500-700 range of expectations] both the best and worst case expectations could be fairly described by Obama as a “bad jobs report”. his saying it was bad did not actually convey useful information. yes there was some risk we would have had a -400k signaling a deceleration, but given the context of his conversation it’s far from clear he wouldn’t have still considered that a “bad jobs report”.
as for trumps situation, expectations were ~150-250. trump’s tweet definitively signaled that we were going to be in the top half of that distribution and likely beat expectations. to a market participant, it was many times more significant in terms of information revealed early. it happens to be the case now that wages matter more than jobs numbers, so it’s admittedly hard to actually trade off that single piece of information alone.
honestly David you should be super embarrassed by this post. or maybe you’re just far too trusting of WSJ opinion page (for which you should also be embarrassed). as an actual market participant these two things are not even close to being close. it would also be trivial for anyone with any numeracy to see that
Zeke5123
Jun 6 2018 at 6:12pm
@Dylan
Well, that’s a form of corruption, no? It is using assemtryic information to achieve desired political outcome. If the politician that is against the stimulus lacks that information because it isn’t publicly available yet, then he or she is at a disadvantage.
You might think that’s okay if stimulus is truly for the good of the country, but it seems that this kind of thing could be used to put pressure on certain politicians for less salutary reasons. Further, the whole point of having a deliberative body is that understanding what is in the public good is difficult to determine (ie there is a knowledge problem); the process is designed to lead to better outcomes. Thus, short circuiting that process by providing non-public government info to a select few seems bad.
So, again either the timing doesn’t matter (in which case why leak — insider trading perhaps?) or it does matter and it’s a corruption of the process.
David R Henderson
Jun 6 2018 at 7:08pm
@Lord,
Yes, Obama did it so early, he didn’t even have the facts yet. Some leak. More wishful.
Not true. He did it just around midnight. The President gets the facts the evening before, which means before he called Harry Reid and, according to Reid, others.
Bob Murphy
Jun 6 2018 at 7:14pm
It’s behind a paywall so I can’t read the full context, but from the quotes I’ve seen here and elsewhere, I don’t believe the WSJ story said, “When Obama tipped off some people about the contents of the upcoming report, he gave them more actionable investment information than what Trump did on Twitter.”
All I saw the WSJ saying was, “It isn’t true that what Trump just did was unprecedented. Obama talked about his briefing before the official release too.”
I also will mention that the analysis of Trump’s tweet seems to be very different from how we’d be discussing, say, high frequency trading. There, the issue would be the extra cost of equipment (“arms race”) versus the gain in nanoseconds of earlier information hitting the price system. Yet nobody is using that framework to talk about Trump’s tweet. It’s like watching people discuss externalities pre-Coase.
David R Henderson
Jun 6 2018 at 7:15pm
@EB,
Now we know Larry and Scott (and perhaps many other economists) are not Keynesians. A true Keynesian changes his mind when he’s proved to be wrong.
I think you’re being unfair to Scott. I think he changes his mind when he’s proved to be wrong. But he’s got to be convinced that someone has proven him wrong. He’s not convinced by me, just as I’m not convinced by him.
So I think you’re being unnecessarily nasty in the same way that SeanM is above.
Viking
Jun 6 2018 at 8:08pm
Regarding my claim that “Obama did the same”, there is more complete information, that in only one out of 4 cases, Obama’s statements seemed to be based on privileged information, and that was different from the audio clip I posted.
My intention was not to misrepresent anything, but it seems like I did that inadvertently. I assumed Obama had the numbers when speaking, and I was wrong.
That aside, there are some commenters that claims there was no effect on the 10 year treasury yield from Trump’s tweet, Sumner is treating that claim with extreme condescending ridicule. I will join those that claim there is no effect from the tweet, from looking at the graph:
1. I am assuming good jobs numbers (high increases in total payroll) will nudge the FED in direction of increasing short term rates and/or tighten monetary policy.
2. Thus, if the report indeed shows better than expected payroll gains, the expectation is that the 10 year treasury rates should increase.
3. Immediately after Trump’s tweet, there is a 0.5 basis point jump. This is not extraordinary, within trading day range has been 2-4 basis points during the last week.
4. If I wanted to support Sumner’s position, I would go back to 40 minutes before the tweet, and claim the trend was flat before, but started to slope up after the tweet. However, this claim would depend on extreme cherry picking of data, as the claim would totally fall apart if going 2 hours back to establish a baseline slope.
5. In the big scheme of things, there is no evidence that Trump’s tweet moved the 10 year rates closer to the level after the employment report.
6. According to 5 day day chart (6/6/2018) on cnbc, ( https://www.cnbc.com/quotes/?symbol=US10Y ) the 10 year treasury yield closed at 2.83% 5/31/2018, and opened at 2.91 0n 6/1/2018. Summner’s data seems to be after market US trading, or London trading, and the range is 2.87 to 2.92. At the time of Trump’s tweet, the rate was 2.89. The range for the US trading day 6/1 was 2.88 to 2.92. If one assumes the treasury rate move was solely the result of the jobs report (not my assumption), one would conclude that the majority of the move (from closing Thursday to opening Friday had already happened due to insider trading prior to Trump’s tweet, and the rate at the time of Trumps tweet was already inside Friday’s day range.
If Sumner wants to make the claim that Trumps tweet distorted the market, perhaps he should appeal to some neutral arbiter with high credibility and low tolerance for hand-waving BS, perhaps Andrew Gelman ( http://andrewgelman.com/ ). My impression after reading the prior ‘analysis’ is that numeracy among economists is sorely lacking compared to that of engineers and hard scientists.
SeanM
Jun 6 2018 at 11:15pm
“So I think you’re being unnecessarily nasty in the same way that SeanM is above.”
honestly i’m surprised that you are sticking to your guns. WSJ is not accurately conveying what actually happened.
I am telling you that as a bond trader at a major fixed-income hedge fund in 2009, if i had been told what Obama told people i would not have been able to gain any actual information. the entire range of possibilities (yes, the entire range) was all equally described as a “bad jobs report”. as a bond trader at a major fixed-income hedge fund in 2018, i can tell you that Trump’s tweet conveyed non-trivial information.
it is not necessary to rely on a market participant for this: simple numeracy and critical thinking is enough to see that these are materially different situations.
or you can maintain because i was mean you can ignore everything i said…
Zeke5123
Jun 6 2018 at 11:34pm
Bad has to be relative to expectations. So, yeah I would think it is useful info.
Bob Murphy
Jun 6 2018 at 11:46pm
SeanM wrote: “honestly i’m surprised that you [David R. Henderson] are sticking to your guns. WSJ is not accurately conveying what actually happened.”
SeanM, like I said above, it’s behind a paywall so maybe you’re thinking of something I can’t see. Can you quote the WSJ article saying that Obama provided a better investment tip than Trump? I didn’t think that’s what they were claiming.
David R Henderson
Jun 7 2018 at 12:07am
@SeanM,
So when I call you out for being nasty, all you get out of it is that I’m sticking to my guns?
David R Henderson
Jun 7 2018 at 1:09am
@Bob Murphy,
SeanM, like I said above, it’s behind a paywall so maybe you’re thinking of something I can’t see. Can you quote the WSJ article saying that Obama provided a better investment tip than Trump? I didn’t think that’s what they were claiming.
I can answer that because I can access the journal. No, the WSJ article never claimed that Obama provided a better investment tip than Trump. It didn’t address the quality of the investment tip.
DougT
Jun 7 2018 at 5:15am
David, I seem to remember President Reagan saying something like, “We’re going to have some good news tomorrow” to some reporters the day before a good jobs report came out. At the time, it wasn’t known whether the President was briefed before important economic releases. After that, we knew.
The waters of Lethe have clouded my recollection, but I also recall the financial press going a little crazy over this “disclosure.” It was an inadvertent slip, and it never happened again. I don’t thin the White House apologized, but the incident happened, I believe, over 30 years ago, and I could be mistaken.
Roosters crow, geese make warning honks, and two can keep a secret if one of them is dead. Secrecy is not in our nature, especially when we have extraordinary news.
Jon Murphy
Jun 7 2018 at 7:51am
At the risk of getting too far off topic, I feel like @SeanM misses the point with his own example.
Markets rarely move hard on expected information. Presumably, if you expect outcome X, you’ve already taken actions betting on outcome X (eg, if you expect the price of oil to rise tomorrow, then you’ll buy oil today and sell tomorrow. When tomorrow comes, you’ll sell).
The fact that SeanM expected a bad jobs report and subsequently would not have gained anything from Obama’s leak doesn’t tell us anything except that SeanM correctly anticipated the report. The situation would look radically different if SeanM incorrectly anticipated the report; in this case the “quality” of Obama’s leak would have risen.
In short, my point is SeanM’s comment is circumstantial, not objective evidence of a difference in quality. Obama’s actions do not differ in a substantial way from Trump’s regarding a premature discussion of embargoed numbers.
Mike W
Jun 7 2018 at 8:51am
Is it illegal for the president to leak the information? I don’t believe that it is. I don’t see anything in the news report that indicates that the information is legally “secret”.
Sumner’s reaction seems a bit overwrought, “Trump of all people, who has already shown an inability to keep highly confidential information secret?”
It appears that it was done by both Obama and Trump for the same reason, politics.
Sumner’s righteous indignation and straw man rationalization…”Can I use that excuse if the Feds ever prosecute me for conspiracy to trade on inside information?”…seems to be merely a case of a of his own mood affiliation.
It’s actually rather comical when academics succumb to this like the rest of us mere mortals.
SeanM
Jun 7 2018 at 9:18am
“The fact that SeanM expected a bad jobs report and subsequently would not have gained anything from Obama’s leak doesn’t tell us anything except that SeanM correctly anticipated the report. The situation would look radically different if SeanM incorrectly anticipated the report; in this case the “quality” of Obama’s leak would have risen.”
no, you missed my point. i’ve unsuccessfully spent 5 minutes trying to dig up a paper record for this, so if you don’t believe me then it is what it is it’s not important enough for me to waste more time on this. the expectations for the report ranged from “bad report” to “bad report”. the context of obama’s comment was “bad report” in an absolute sense while the market cared about relative expectations. beating the expected number (which was to lose over half a million jobs) by 200k would have been a huge thing, but also still a “bad report” since it meant the economy was still shedding jobs. it is possible obama was more specific in conversations with people with whom he was not cleared to discuss this. but the simple claim that obama saying it’ll be a “bad report” actually conveyed no useful information, not just to me, but to the entire market.
trump’s comment was obviously referring to beating relative expectations. as soon as the tweet went out everyone who understood how the numbers worked knew what he was hinting at. and it turned out to be true. this was not a coincidence. everyone in the market knew exactly what he had done. this month there was not a lot of leverage to the specific employment number (since all the leverage has been to wages recently). so you could maybe say no real harm done. but it was still a gross violation of standards nonetheless in my opinion.
Dylan
Jun 7 2018 at 10:25am
@Zeke,
It’s quite possible I’m looking at this in a very naive way, but beyond Harry Reid, we don’t have details of who else he told, right? My assumption is that he would have told this information to the leaders of both parties who were in a position to do something about it. Saying something like “look, the jobs report tomorrow is going to be somewhat scary, I really need you to get your people to support me on this stimulus bill,” doesn’t feel particularly corrupt to me.
I admit though that I’m doing a whole lot of filling in the blanks, and based on nothing more than my general perception of Obama and what the time period was like. While I disagreed strongly with a lot of Obama’s policies, he struck me as generally trying to do what he thought was best for the country. People more conservative than I am obviously saw things in a much more cynical light, and who knows, they could be right. But it speaks to the importance of perception, I’m generally willing to give Obama the benefit of the doubt when it comes to borderline cases where I don’t have all the facts, because he built up a certain reserve of goodwill based on his ability to speak eloquently towards the classically liberal ideals of America, which I think is one of the most important jobs of the “leader of the free world.” Trump on the other hand, in most of his words and deeds seems to actively attack those ideals, and if you can’t even pay lip service to the idea that all men are created equal and endowed with certain unalienable rights, well then your actions are going to receive a bit more skepticism than they otherwise would.
Asteroth
Jun 7 2018 at 10:33am
First time commenting, long time reader.
I saw this article on reddit. I’ve never heard of cepr.net before, but I thought it was interesting.
http://cepr.net/blogs/beat-the-press/no-you-assholes-obama-did-not-do-it-too
Zeke5123
Jun 7 2018 at 11:04am
@SeanM
Your post just seems wrong. There is a market difference between worse than the bad expected and just as bad as the bad expected. Suggesting that all bad ranges of the job report would lead to the same market outcome just seems spurious on its face. Stated differently, if everyone knew the job report was going to be bad and someone with foreknowledge says it’s going to be bad, it is reasonable to infer that the person met bad compared to expectations. This is the inverse of when everyone expects the job reports to be good and someone would leak info saying the job report is good — it is good vis-a-vis the expectation.
Why aren’t they different sides to th same coin?
MikeW
Jun 7 2018 at 2:11pm
SeanM — I don’t quite understand why you think that Trump’s tweet, which had no adjective (good, bad, or ugly) was “obviously referring to beating relative expectations”, but you think that Obama saying “scary” wasn’t suggesting that it was going to be worse than expected (or on the worse end of “bad”, if you will)?
EB
Jun 8 2018 at 8:09am
David, since I’m very humble, I never reluctant to change my views as soon as I assess new knowledge. Sometimes the changes are radical.
I think I’m fair with Scott (as well as Larry). In the past two years, I’ve been reading about the many people that “forced” by Trump have rediscovered the value of “our” principles. For example, I have just read this
https://twitchy.com/brettt-3136/2018/06/07/law-professor-concerned-about-defending-the-law-is-introduced-to-eric-holder-obama-administration/
and tomorrow I’m sure I will read about how Trump has violated another principle.
Anyway, there is a big difference between falsely arguing that Trump has been the first one to violate sacred principles and honestly challenging Trump’s strategies, as you attempt to do in your most recent post “Trump’s Dangerous Game” (I will comment on it later).
EB
Jun 8 2018 at 1:12pm
David, I want to be fair but sometimes it’s impossible. Read
https://www.bloomberg.com/news/articles/2018-06-08/trump-s-tweet-on-jobs-data-prompts-democrats-to-demand-probe
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