The Federal Reserve announced on the 18th a rate cut of 50 basis points, exceeding the 25 basis points that many experts had anticipated.

The Fed's explanation for the unexpected rate cut is the decline in inflation data and a contraction in the job market.

The U.S. economy has rebounded rapidly after the pandemic, with official economic data looking impressive.

However, the substantial rate cut before the inflation rate has dropped to the target value of 2% has raised many questions: What exactly is wrong with the U.S. economy?

The Republican presidential candidate Trump told the media, "Such a significant rate cut means the economy must be very bad."

This inevitably brings up that old topic: Are the U.S. statistics accurate?

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Data revisions have raised doubts as the U.S. Department of Labor recently announced a downward revision of the number of new jobs added in the year up to the end of March by 818,000, almost cutting the previously announced number of new jobs by a third, raising questions about whether the government's data is fabricated.

Former President Trump, who is in a fierce campaign, accused the Biden administration of "manipulating job data."

The Bureau of Labor Statistics under the Department of Labor is responsible for compiling and releasing these two key data points: employment and price volatility.

In addition to the recent shock caused by the significant revision of employment figures, the department has made three consecutive errors recently, allowing some investors to gain early access to key data, which has also led to public doubts about its credibility.

There is a reason for people to question the statistics.

Middle-class and lower-income families do not feel that their income matches the increase in GDP, and the price increases of everyday necessities make them think that the Consumer Price Index is not realistic.

At the time of the "beautiful" job data release, many people have lost their jobs due to large-scale layoffs by major companies.

The latest consumer survey by the University of Michigan shows a general disconnect between the overall economic situation in the United States and people's feelings about the economy.

Despite the easing of inflation, historically low unemployment rates, and the stock market still in a bull market, consumer confidence remains below pre-pandemic levels.

Most economists also believe that recent errors may undermine people's confidence in U.S. official statistical data.

"The life and death of a statistical agency depends on trust," said Erica Groshen, who served as the Commissioner of the Bureau of Labor Statistics during the Obama administration, and once this trust is lost, "it is very difficult to restore."

There is a knack to generating data.

U.S. law has strict regulations on the generation and release of government data, and it is theoretically unlikely to manipulate statistical data openly, but there is a trick to how these data are generated.

For example, by adjusting the proportion of different industries in GDP and the weight of different consumer categories in the Consumer Price Index (CPI), different data can be generated.

The U.S. CPI consists of eight main parts, each including goods and services: food and beverages, housing, clothing, transportation, healthcare, recreation, education and communication, and other goods and services, but does not include life insurance, financing costs, securities, and other items.

The U.S. calculates GDP using four main components: personal consumption expenditure, business investment, government expenditure, and net exports.

Personal consumption expenditure usually accounts for nearly 70% of GDP, and the retail and service industries are important components of the U.S. economy.

Service-based industries, including professional and business services, real estate, finance, and healthcare, account for more than two-thirds of the U.S. GDP.

In 2023, the United States spent $4.8 trillion on healthcare, a 7.5% increase from the previous year, a growth rate higher than the expected annual growth rate of GDP.

The financial industry contributes about 20.7% to the U.S. GDP, making it the largest contributor to the overall GDP, indicating that the financial services sector, including banks, insurance, and real estate, plays an important role in the U.S. economy, while the contribution of the manufacturing industry to GDP is only 10%.

The actual GDP growth rate is the nominal GDP growth rate minus the inflation factor.

Therefore, if the CPI is wrong, then the actual GDP growth rate is also inaccurate.

The accuracy of the U.S. CPI is often questioned precisely because of the weight arrangement issues.

An article on the U.S. "Investopedia" website said that over the years, the U.S. CPI statistical method has been revised many times, constantly changing the weight of goods in the basket to "eliminate the bias of overestimating the inflation rate," and the overall result is often a lower CPI.

Critics believe that this is a purposeful manipulation, allowing the U.S. government to report a lower CPI.

The article cites the Bureau of Labor Statistics' CPI for the first 11 months of 2006 as 2.2%, while two other economists calculated the CPI using different methods, resulting in CPI data as high as 5.3% and 8.2%, respectively.

Jason Furman, a professor at Harvard University's Kennedy School and a former senior economic advisor to Obama, believes that the current U.S. economic situation is strange because the data for GDP, consumption, and business investment all show a booming trend, with the actual GDP growth rate for the second quarter calculated at an astonishing 3%.

However, the outlook for the manufacturing industry is not optimistic, and the consumer's balance sheet is also worrying, giving people "an ominous premonition."

The risk of economic recession should not be underestimated.

There are different views in the economic community about the current state of the U.S. economy, but most experts believe that it is facing the risk of recession.

U.S. economist Claudia Sahm created the "Sahm Rule" in 2019, which believes that if the three-month moving average of the unemployment rate rises by 0.5 percentage points or more relative to the lowest three-month average in the previous 12 months, it means that a recession is coming.

According to this rule, the U.S. economy is entering or has already entered a recession.

Looking back at the recessions since 1949, applying the Sahm Rule to calculate the relevant data has proven to be accurate in predictions.

Sahm himself believes that the U.S. economy is not yet in a recession, but "the rise in unemployment and the weakness in the labor market are worrying... we may fall into a recession in 3 or 6 months."

Renowned economist David Rosenberg recently expressed strong concerns to the media about the imminent economic recession.

He believes that the stock market performance is obviously disconnected from the economic fundamentals.

Although the stock index continues to hit historical highs, this rise is not mainly driven by strong profit growth.

He said that consumer spending exceeded expectations, but this spending is not driven by income growth, but is driven by a worrying decline in personal savings rates.

Currently, the U.S. personal savings rate has dropped to a historical low of 2.9%, which is extremely rare.

Danielle Dimartino Booth, CEO of "Quill Intelligence" and former advisor to the Dallas Federal Reserve Bank, believes that the weak job market and the increasing number of bankruptcy applications indicate that the United States is already in a recession, and it has been since last October.

Renowned investment research firm BCA Research believes that the U.S. economy is on the verge of a recession, and it is expected that the Fed's rate cut is not enough to avoid a recession.

The company's Chief Global Asset Allocation Strategist, Gary Evans, said that he believes the economy has already entered a recession.

In recent months, Goldman Sachs and several other U.S. investment banks have warned their clients to prepare for a key shift in the economy.

They believe that some changes in the macroeconomic landscape indicate that the probability of a recession has significantly increased, and the impact may spread worldwide.

Another noteworthy signal is that "Stock God" Buffett is accelerating the reduction of stocks.

In the past two years, he has sold off several core stocks that he has held for many years, causing the company's cash reserves to soar by 161%, reaching $276.9 billion, and he is still selling in the third quarter.

Historically, when Buffett's Berkshire Hathaway significantly increases its cash position, it also indicates that there will be turmoil in the future.

The last time the company's cash reserves accounted for such a high proportion of total assets was before the financial crisis.