Imagine a scenario where an authoritarian taoiseach sacks the head of the Central Statistics Office (CSO) for publishing negative data about the economy?
It might seem like the plotline of a flimsy Netflix drama but that’s exactly what played out in the US last week.
Hours after the release of the Bureau of Labor Statistics’s (BLS) latest monthly employment numbers, which pointed to a marked slowdown in the jobs market there, President Donald Trump ordered his officials to sack the bureau’s chief Erika McEntarfer.
He claimed, without evidence, that McEntarfer, a qualified economist of some standing (she has a PHD in economics from Virginia Tech), manipulated the data to make him look bad.
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Her report indicated that the US economy generated 73,000 additional jobs in July, fewer than economists had expected, and that the economy had added 258,000 fewer jobs in May and June than the bureau had initially reported.
These large downward revisions, signs perhaps that US firms have begun to slow hiring in response to tariffs, fly in the face of Trump’s claim that the US economy is booming.
McEntarfer’s data had been “RIGGED in order to make the Republicans, and ME, look bad,” Trump said on Truth Social.
“Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes,” he said.
Trump’s economic adviser Kevin Hassett told Fox News that “data can’t be propaganda”, again without providing reasons why McEntarfer and the 40 BLS statisticians that compile the report would cook the books.
Trump and his team never questioned the figures when in previous months they were positive.
“GREAT JOB NUMBERS, STOCK MARKET UP BIG! AT THE SAME TIME, BILLIONS POURING IN FROM TARIFFS!!,” he posted after the BLS’s June numbers.
Delivering bad news to those of an autocratic bent is tricky.
Remember the Chinese doctor who tried to warn about a rapidly spreading Sars-like virus emanating from Wuhan back in 2020?
Li Wenliang was initially warned by Chinese police to “stop making false comments” and later investigated for “spreading rumours”.
He eventually fell victim to the disease himself before being posthumously lauded by the regime as a hero, a familiar arc in dictatorships.
The US’s 141-year-old BLS, which employs more than 2,000 staff, is one of the US federal government’s chief statistical agencies and its monthly jobs numbers, typically published on the first Friday of every month, are among the most picked-over data sets.
Trump claims the bureau’s methodology for collecting data via phone surveys and questionnaires (similar to how the CSO here compiles its quarterly Labour Force Survey) is antiquated and political.
Poor survey responses, particular in the wake of Covid, has made these reports more challenging to compile.
Trump has often tried to discredit facts inconvenient to his narrative. That doesn’t exactly single him out as a politician. But his conspicuous attempt to interfere with impartial economic data is a dangerous development.
Since the 1970s the Fed has acted independently of government and this separation of powers is viewed as sacrosanct. If Trump snaps this independence, he will provoke another confrontation with markets
Many see it as a prelude to a more combustible showdown with Federal Reserve chief Jerome Powell, who has become the president’s chief bugbear.
Powell has been resisting pressure from the White House to cut interest rates, eliciting a steady stream of invective in the process. Trump has called him a “loser” and “a stubborn MORON”.
Trump believes rate cuts will lead to stronger growth and lower debt-servicing costs while cushioning the impact of tariffs and he argues there is virtually no inflation to justify keeping rates elevated.
But Powell has been warning that Trump’s trade policies risk reigniting inflation and therefore complicate the path for US interest rates. In contrast to the European Central Bank it has left its benchmark lending rates unchanged since December.
Shortly after Trump sacked McEntarfer, Federal Reserve governor Adriana Kugler announced she was stepping down several months before her term ends.
The opening on the Fed’s policy-setting board paves the way for Trump to appoint someone to that role who could eventually take over from Powell, who is due to step down in May next year.
“‘Too Late’ Powell should resign, just like Adriana Kugler, a Biden Appointee, resigned,” Trump said. “She knew he was doing the wrong thing on Interest Rates. He should resign, also!”
Since the 1970s the Fed has acted independently of government and this separation of powers is viewed as sacrosanct. If Trump snaps this independence, he will provoke another confrontation with markets.
The president says he will shortly announce his pick for the open seat on the Fed’s board, his de facto candidate to succeed Powell.
“It’ll be one of four people,” Trump said, adding that he considered both Hassett and former Fed governor Kevin Warsh as “very good” possibilities.
Either way, the McEntarfer controversy obscured the latest jobs numbers and the precipitous decline in activity they seemed to point to. Perhaps that was the intention all along.
Whether this is the beginning of a more pronounced slowdown in the US economy on the back of Trump’s trade policies, we’ll have to wait and see.
