WASHINGTON (Reuters) -The office of the Labor Department's inspector general said on Wednesday it was initiating a review of challenges the Bureau of Labor Statistics (BLS) faces in collecting and reporting U.S. economic data following recent large downward revisions to nonfarm payrolls and cuts to inflation data collection.

Assistant inspector general for audit, Laura Nicolosi, sent a letter to acting BLS commissioner William Wiatrowski informing him of the review. The announcement followed on the heels of news from the BLS on Tuesday that payrolls could have been overstated by 911,000 jobs in the 12 months through March.

"Our focus will be on the challenges and related mitigating strategies for (1) collecting PPI and CPI data, and (2) collecting and reporting, including revising, monthly employment data," the letter said.

Sharp downgrades last month to May and June payrolls figures totaling 258,000 jobs angered U.S. President Donald Trump, who fired BLS Commissioner Erika McEntarfer, accusing her, without evidence, of faking the employment data. Trump has nominated E.J. Antoni, chief economist at the conservative think tank Heritage Foundation to replace McEntarfer.

The BLS has suffered from years of inadequate funding under both Democratic and Republican administrations. Like all government agencies, it has been severely affected by mass firings, voluntary resignations, early retirements and hiring freezes, part of an unprecedented campaign by the White House to drastically reduce the size of government and remake it.

The BLS has suspended consumer price data collection in three cities because of resource constraints. It last month ended the calculation and publication of about 350 indexes in the producer price report.