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 US 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 is wrong with the US economy?

This inevitably brings up the old topic: Is the US statistical data accurate?

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

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

The Bureau of Labor Statistics, a department under the US Department of Labor, is responsible for collecting and releasing these two key data points: employment and price fluctuations.

In addition to the recent shock caused by the significant revision of employment numbers, the department has made three consecutive errors recently, allowing some investors to gain early knowledge of key data and raising public doubts about its credibility.

There is a reason for people's skepticism about the statistical data.

Middle-class and lower-income families do not feel that their income matches the increase in Gross Domestic Product (GDP), and the price increases of daily necessities make them believe that the Consumer Price Index (CPI) is not real.

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

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

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

On March 12th, vehicles were parked at a gas station in Vienna, Virginia, USA.

Photo taken by Xinhua News Agency reporter Liu Jie.

Most economists also believe that the recent errors may undermine people's confidence in official US 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 recover."

There is a knack to generating data.

US law has strict regulations on the generation and release of government data, and it is theoretically unlikely for statistical data to be manipulated in broad daylight, but there are tricks to generating this data.

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

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

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

Service-based industries, including professional and business services, real estate, finance, and healthcare, account for more than two-thirds of the US 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 US 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 US economy, while the manufacturing industry's contribution to GDP is only 10%.

The nominal GDP growth rate is the actual GDP growth rate after deducting the inflation factor.

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

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

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

Critics believe that this is a deliberate manipulation, allowing the US 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 data using different methods, reaching as high as 5.3% and 8.2%, respectively.

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

However, the outlook for manufacturing is not optimistic, and the balance sheets of consumers are also worrying, giving people "a sense of foreboding."

The risk of economic recession should not be underestimated.

The economic community has different views on the current state of the US economy, but most experts believe that it is facing the risk of recession.

US economist Claudia Sahm created the "Sahm Rule" in 2019, which suggests that an increase of 0.5 percentage points or more in the three-month moving average of the unemployment rate relative to the lowest three-month average in the previous 12 months means that a recession is coming.

According to this rule, the US 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.

Sahm himself believes that the US economy is not yet in a recession, but "the rise in unemployment rates 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 about the imminent economic recession to the media.

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

Although the stock index continues to hit historical highs, this increase 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 instead driven by a worrying decline in the personal savings rate.

Currently, the US 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 Federal Reserve Bank of Dallas, believes that the weak job market and the increasing number of bankruptcy filings 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 US economy is on the brink of recession, and it is expected that the Fed's rate cuts will not be enough to avoid a recession.

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

In recent months, Goldman Sachs and several other US investment banks have warned clients to prepare for a critical shift in the economy.

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

Another noteworthy signal is "Stock God" Buffett's accelerated reduction of stocks.

Over 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 surge 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 positions, it also indicates that turbulence lies ahead.

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