Trump fires data chief on bad job news, now gets chance to tilt Fed

NEW YORK – US President Donald Trump got some bad economic news on Aug 1, and responded by shooting the messenger.

Mr Trump fired Ms Erika McEntarfer, head of the Bureau of Labour Statistics (BLS), hours after a report that showed a dramatic slowdown in US hiring, which sent markets tumbling. It is an escalation of his campaign against economic institutions long held to be above partisan politics – one that until now has principally targeted the US Federal Reserve.

And Mr Trump got an unexpected opportunity that same afternoon to exert more influence at the central bank, when Governor Adriana Kugler announced her imminent resignation as investors were still digesting the jobs numbers and the BLS news. He will get to name a replacement, likely one who is inclined to support his drive for lower interest rates. 

For a President who touts a hot US economy, and claims his tariff hikes and tax cuts will make it stronger still, the job numbers were a setback, revealing the weakest employment growth since the Covid-19 pandemic. But his reaction – ousting Ms McEntarfer, whom he accused without evidence of political bias – drew condemnation, even from economists linked to his own party, and it is anxiety-inducing for investors, too.

There is already widespread concern about Mr Trump’s relentless pressure on the Fed and its chief Jerome Powell to cut rates, since the consensus is that central banks do a better job of taming inflation when politicians leave them alone.

His move against US data agencies now risks damaging the integrity of the world’s most important statistics – numbers that can move global markets by trillions of dollars at a time.

Mr Trump’s targeting of the BLS will “spark general anxiety in the market that politics may bleed over into future economic considerations”, said Mr Ma Yung-Yu, chief investment strategist at PNC Asset Management Group. “The bigger concern now for investors is what is the next step? Will Trump threaten to fire Fed chair Powell again after this?” 

And these questions arise with the US already facing a “nasty cycle”, Mr Ma said, where growth slows and inflation starts to rise.

Mr Trump used the latest hiring numbers to renew his attack on Mr Powell, who had cited a solid jobs market as one reason for holding interest rates steady last week. However, there was a silver lining for the President: Markets immediately started pricing in a September cut when the data came in.

Two-year Treasury bonds – which are tightly linked to short-term Fed rates – soared the most since 2023, sending yields down almost 30 basis points. The announcement of Ms Kugler’s departure, and the prospect of a Trump pick joining the Fed in her place, amplified rate-cut bets for later in the year.

The BLS on Aug 1 slashed its payroll estimates for the previous couple of months, as well as posted a below-forecast number for July. It is the latest in a series of unusually large revisions, which have drawn Mr Trump’s ire before – including in the run-up to 2024’s election.

But US data agencies enjoy a global reputation for “gold standard” statistics – one Mr Trump may now be putting in danger – and economists of all stripes dismissed the idea of politically motivated manipulation. Ms McEntarfer will be replaced at the BLS on an acting basis by Mr William Wiatrowski, currently the deputy chief, the administration said.

As for Ms Kugler, whose term was due to end in January, it is not clear who will be appointed to fill her seat – and it could be a decision with major consequences. Even before her early departure, Treasury Secretary Scott Bessent had suggested that the administration might nominate a replacement for Ms Kugler who would then be elevated to the post of Fed chair. 

The President told reporters he was “very happy” that he now has an open spot on the board – and posted that Mr Powell should follow Ms Kugler’s example and resign. BLOOMBERG