Article by The Financial Times Editorial Board: “Pity anyone tasked with delivering bad news about the US economy to Donald Trump. For months, Federal Reserve chair Jay Powell has drawn the president’s ire by failing to engineer cuts to interest rates — prompting childish name-calling and threats to his job. On Friday, it was the Bureau of Labor Statistics’ turn. The agency published sluggish non-farm payroll numbers for July, and reduced its estimates for job creation in the prior two months by a chunky 258,000. Erika McEntarfer, the agency’s commissioner, was spared the insults only to be fired on the spot. A replacement is expected to be announced soon.
Trump claimed, without evidence, that McEntarfer massaged the figures. The most likely explanation is that the US president simply did not like the numbers. It was only a matter of time before the administration’s cuts to civil service jobs, downbeat surveys of private sector hiring plans and the strain of elevated interest rates showed up in the headline numbers. And although last week’s data downgrades were large, non-farm payrolls are notoriously volatile and revisions are common. The president said: “Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes.” Yet by sacking the BLS chief on dubious grounds, he has undermined trust in America’s economic data, and politicised it.
First, the drastic move creates a culture of fear around the production of national economic statistics. This gives investors, businesses and the Fed reason to doubt whether concerns around a presidential backlash might influence forthcoming data releases not just from the BLS but also from other public bodies, including the Bureau of Economic Analysis, which produces the GDP numbers. Second, it is likely that Trump’s replacement for McEntarfer might be more pliant to his demands. That threatens the integrity of the BLS’s data itself, not just how it is perceived.
The president’s actions are unhelpful for his own ambitions too. The BLS produces reports on the labour market and inflation, which underpin the pricing of trillions of dollars in assets globally. While private data sources can plug some gaps, stoking doubts over the credibility of national data still erodes the ability of investors, businesses and policymakers to make informed decisions. Ironically, the central bank is looking for clear signs of weakness in the labour market before making the rate cuts that Trump so desires. Just as worrying is the imminent replacement of Fed governor Adriana Kugler — who, on Friday, stepped down early — with what Trump hopes will be a puppet rate-setter.
The BLS is not without flaws. Like many national statistics bodies, it has faced falling survey response rates, especially since the pandemic. This has raised questions over the representativeness of its samples and the accuracy of its aggregations. A funding squeeze — exacerbated by the Trump administration’s own public sector cutbacks — hasn’t helped. In February, several advisory councils to federal statistical agencies were also terminated. Rather than engaging in a useful revamp of national statistics, Trump has gone for the heavy-handed option.
The president isn’t alone. He joins a list of leaders, including from Turkey, Iran, Russia, Argentina and China, accused in recent years of meddling with economic institutions in order to control the public narrative…(More)”
