Last Friday, President Trump, in another of his disruptive actions as president, did something absolutely deplorable. More than an hour before the scheduled release of the monthly jobs report, he tweeted, “looking forward to seeing the employment numbers at 8:30 this morning.”
Securities traders, who respond nearly instantaneously to economics news, especially about jobs, could reasonably surmise that the jobs report would be positive because it is well known that the president does not broadcast bad news.
{mosads}To what extent traders acted on this tweet is not clear, but next time traders definitely will react to a pre-data-release tweet from the president.
Numerous commentators were quick to point out that this obviously positive signal about the upcoming jobs report broke long-established protocols for releasing economic data, going back to at least 1985 when the Office of Management and Budget issued a revised Statistical Policy Directive Number 3.
That policy directive was further revised in 2016. The rules and protocols governing the release of economic data are very, very precise and are not to be violated by anyone.
Clearly, substantial thought has been given over the decades to the manner in which market-sensitive statistical data is to be released. The president chose to ignore that well-developed reasoning.
One essence of a properly function democracy is full transparency on a level playing field. The game cannot be tilted in favor of those in the know or that country will quickly become a kleptocracy.
In order to maintain complete transparency, the release of economic data must be instantaneously available to all, with absolutely no advance signaling about what that data might be or what economic trend it might signal.
The president probably does not realize this, but he put himself in a box when he tweeted about what turned out to be a good jobs report. What will happen when an economic report is not good, such as a GDP number coming in well below estimates?
The absence of a tweet, especially from a good-news-only president, will be correctly viewed as bad news, and the markets will respond accordingly, possibly overshooting to the downside.
Far worse is the corruption potential in presidential tweets about soon-to-be-released economic data, specifically with regard to the timing of the tweet.
Through pre-arrangement, a tweet at a certain hour prior to the data release would signal positive news while a tweet at another hour would signal negative news. The timing of the tweet could be refined further to signal the magnitude of the good, or not so good, news.
The potential for inside trading would be substantial: It would be an incredible abuse of government data collection and publication. Cynicism about, and even contempt for the federal government, already made worse by the president’s repeated statements and actions, would soar. America would not be better for it.
According to a recent article, former National Economic Council Director Gary Cohn “would withhold jobs report data from President Trump until shortly before their release because he was worried the president couldn’t help but say something about them.” Director Cohn correctly read the president.
President Trump erred in tweeting last Friday about the May jobs report. It is not realistic to expect him to admit that he made a mistake, but he can correct the error of his ways by never tweeting again about as-yet-unreleased economic data.
Tweeting about good economic news, after the markets have had time to digest and act on the news is fine, but never before. We will soon see if the president has absorbed this most important feature of democratic governance and the rule of law.
Bert Ely is the principal of Ely & Company, Inc., where he monitors conditions in the banking industry, monetary policy, the payments system, and the growing federalization of credit risk. Prior articles by Ely on banking issues and cryptocurrencies can be found here. Follow him on Twitter: @BertEly.