On Friday, President Donald Trump dismissed a senior official from the Labour Department following the release of disappointing job market figures that rattled the markets. He accused her, without providing evidence, of tampering with the data, further intensifying worries regarding the reliability of economic statistics released by the federal government.
In a notable turn of events regarding economic policy, President Trump finds an unexpected opportunity to influence the Federal Reserve, an institution he frequently criticises for its interest rate decisions. This development comes as Fed Governor Adriana Kugler announced her resignation on Friday afternoon, a move that was not anticipated to occur so soon.
The two developments intensified the turmoil in a stock market already struggling under the weight of recent tariff announcements and disappointing jobs data. The benchmark S&P 500 Index (SPX) experienced a significant decline, falling 1.6% in its largest daily drop in over two months.
Trump has levelled accusations against Erika McEntarfer, who was appointed by former President Joe Biden, claiming that she has falsified the job numbers. Trump’s assertions regarding data manipulation by the Bureau of Labour Statistics lack supporting evidence. This agency is responsible for compiling the highly scrutinised employment report, along with consumer and producer price data.
The Bureau of Labour Statistics did not respond to a request for comment.
On Friday, the Bureau of Labour Statistics released a report indicating that the U.S. economy added a mere 73,000 jobs in July. However, the more striking revelation came from net downward revisions, which revealed that 258,000 fewer jobs were created in May and June than earlier estimates suggested.
Accurate job numbers are essential. The directive has been issued to my team to terminate the Biden political appointee without delay. In a statement posted on Truth Social, Trump asserted, “She will be replaced with someone much more competent and qualified.”
Concerns regarding data
An official from the Trump administration, speaking on the condition of anonymity, expressed concerns regarding the recent economic data. They noted that while fluctuations are expected, the White House has been troubled by the significant revisions and the decline in survey response rates. The issue emerged during the COVID pandemic and has remained unaddressed in the subsequent years.
“Underlying problems have been festering here for years without being rectified,” the individual stated. “The markets, companies, and government require precise data, and we simply were not receiving that,” the official said.
The Bureau of Labour Statistics has announced a reduction in the sample collection for consumer price data and the producer price report, attributing this decision to resource constraints. The government conducts surveys involving around 121,000 businesses and government agencies, which collectively represent roughly 631,000 individual worksites for the employment report.
According to data from the Bureau of Labour Statistics, the response rate has decreased from 80.3% in October 2020 to approximately 67.1% in July.
A recent poll conducted by Reuters revealed that 89 out of 100 leading policy experts expressed concerns regarding the reliability of U.S. economic data. Furthermore, a majority of these experts believe that the authorities are not responding to this issue with the necessary urgency.
Concerns regarding job market data have been compounded by headcount reductions at the Bureau of Labour Statistics, which have led to a scaling back of data collection for the Consumer Price Index. This index serves as a crucial indicator of U.S. inflation, closely monitored by investors and policymakers around the globe.
Trump’s action has heightened worries that political considerations could impact the processes of data collection and dissemination.
“Politicizing economic statistics is a self-defeating act,” stated Michael Madowitz, principal economist at the Roosevelt Institute’s Roosevelt Forward.
“The loss of credibility is a swift process, one that is significantly more challenging to restore. The integrity of America’s economic data serves as the bedrock of the nation’s position as the strongest economy globally.” The practice of obscuring the actual state of the economy has a historical precedent, and the outcomes are consistently unfavourable.
The Federal Reserve may implement changes sooner than anticipated.
In a surprising turn of events, Kugler’s decision to depart from the Federal Reserve at the end of next week provides President Trump with an unanticipated chance to appoint a potential successor to Fed Chair Jerome Powell on the central bank’s Board of Governors.
Former President Trump has consistently threatened to dismiss Federal Reserve Chairman Jerome Powell, citing dissatisfaction with the Fed’s decision-making, particularly its refusal to lower interest rates as Trump has requested. Powell’s term is set to conclude next May; however, he has the option to stay on the Federal Reserve Board until January 31, 2028, should he decide to do so.
Trump is set to appoint a new Fed governor to succeed Kugler, who is finishing her term that concludes on January 31, 2026. A governor who completes an unexpired term is eligible for reappointment to a full 14-year term.
There has been considerable speculation regarding the possibility that Trump may select a potential future chair to occupy that position temporarily. The race for the next chair of the Federal Reserve is heating up, with prominent figures such as Trump economic adviser Kevin Hassett, Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh, and current Fed Governor Chris Waller in the spotlight. Waller, a Trump appointee, recently expressed dissent regarding the central bank’s decision to maintain interest rates, advocating instead for an immediate reduction.
As he departed the White House for a weekend at his Bedminster, New Jersey, estate, Trump expressed satisfaction with the opportunity to fill the open slot.
“I wouldn’t attribute any political motives to [Kugler’s] actions; however, the outcome of her approach is that she’s challenging Trump’s assertions,” stated Derek Tang, an analyst at LH Meyer, a research firm. She is effectively shifting the responsibility back to him, highlighting the immense pressure he is placing on the Federal Reserve. By stating that he desires influence over nominees, she presents him with an opportunity: here is a position available for consideration.
