Trump’s Firing of BLS Chief Is Bound to Backfire
When he suddenly fired well-respected BLS commissioner Erika McEntarfer on Friday over a jobs report he hated, Donald Trump showed everyone he still has the capacity to make shockingly terrible self-defeating decisions. While the president says he did it for the good of the country, there’s no evidence that’s true. In the days since the firing, economists, experts, and pundits have continued to warn about the damage he has done and what may come next. Here’s some of that commentary.
Trump and his administration are still trying to demonize the BLS
On Monday, Trump blasted out his baseless claims again, alleging the BLS had “CONCOCTED” data to make him look bad. On Sunday, he claimed McEntarfer “had the biggest miscalculations in over 50 years” and had perpetrated a scam against him. Also on Sunday, National Economic Council director Kevin Hassett insisted that Trump had not shot the messenger over bad news but that firing McEntarfer was about making BLS data “more transparent and more reliable.” He argued that the big revisions in jobs-report data damaged the BLS’s credibility and that McEntarfer hadn’t sufficiently explained why big changes were necessary. This was, of course, an after-the-fact rationalization that only partially tracked with Trump’s own explanations.
Trump said Sunday that he would select a new BLS commissioner this week.
There’s no evidence the statistics were cooked
Former BLS commissioner William Beach, whom Trump appointed during his first term in office, is one of the loudest people pushing back. Here’s what he said Sunday on CNN’s State of the Union regarding the president’s claim that McEntarfer had rigged the numbers:
There’s no way for that to happen. The commissioner doesn’t do anything to collect the numbers. The commissioner doesn’t see the numbers for — until Wednesday before they’re published. By the time the commissioner sees the numbers, they’re all prepared. They’re locked into the computer system.
The only thing the commissioner does on Wednesday is to kind of do the edits on the text. So there’s no hands-on at all for the commissioner. I was commissioner, and I was sometimes locked out of the process of actually where the people were working in the building. So there’s no way for doing that.
He also explained that, ahead of the firing, BLS was as credible as it has ever been:
Studies show that BLS is doing a better job now than they did 20 years ago, 20 and 30 years ago, in estimating the first number [they release in the jobs report]. So even though it’s revised two more times, that 73,000 will be revised two more times. They’re more accurate now than they were 30 years ago …
I know the people who work there. They are some of the most loyal Americans you can imagine. They have worked in every kind of political circumstance. They are completely devoted to producing the very best gold-standard data possible.
And that’s why BLS is the finest statistical agency in the entire world. Its numbers are trusted all over the world. So I will trust those numbers. I do believe, though, that the president’s attack on the commissioner and on the bureau is undermining that infrastructure and could undermine that trust over the long term.
Trump’s policies may be making the bureau’s job more difficult, in fact
In an op-ed for The Wall Street Journal, Allysia Finley explains how the jobs-report sausage gets made and why revisions are necessary:
The [BLS] surveys some 631,000 workplaces by a variety of media, including phone, web and even fax. Many businesses don’t respond every month, but the BLS continues to collect data and revise its findings over the next two months.
The survey’s overall response rate has declined to 43% from 60% before the pandemic, and small businesses are less likely than bigger ones to respond, especially in the first month. The jobs estimate can also be off in either direction by 136,000 in any given month because of statistical chance. Such variations tend to even out over several months.
The survey also doesn’t fully account for business births and deaths. The BLS attempts to do so by using a model that incorporates other government data. When the economy is rapidly expanding, this model tends to underestimate new businesses relative to failures. But when the economy is slowing, the model typically does the opposite.
The BLS adjusts its job numbers and models annually based on more-comprehensive records from state unemployment insurance agencies, but there’s a lag. That’s why the bureau last August revised its job estimates down by 818,000 over the 12 months that ended in March 2024. If Ms. McEntarfer were trying to help Kamala Harris, why would she have done this before the election?
One plausible explanation for last year’s big downward revision may be that the BLS model overestimated business formation and hiring by smaller establishments that didn’t respond to its surveys. Small businesses were especially harmed by the Biden regulatory blitz and inflation. The same is true of Mr. Trump’s tariffs and immigration raids.
It’s also plausible that small businesses that responded late to the BLS surveys this spring hired fewer employees or laid off more of them than bigger establishments. Mom-and-pop restaurants might have lost immigrant workers and struggled to replace them. Small manufacturers with tight margins might have reduced jobs in response to tariff costs and uncertainty.
History frowns upon this kind of thing
Reports the New York Times’s Ben Casselman:
When political leaders meddle in government data, it rarely ends well.
There is the case of Greece, where the government faked deficit numbers for years, contributing to a debilitating debt crisis that required multiple rounds of bailouts. The country then criminally prosecuted the head of the statistical agency when he insisted on reporting the true figures, further eroding the country’s international standing.
There is the case of China, where earlier this century the local authorities manipulated data to hit growth targets mandated by Beijing, forcing analysts and policymakers to turn to alternative measures to gauge the state of the country’s economy.
Perhaps most famously, there is the case of Argentina, which in the 2000s and 2010s systematically understated inflation figures to such a degree that the international community eventually stopped relying on the government’s data. That loss of faith drove up the country’s borrowing costs, worsening a debt crisis that ultimately led to it defaulting on its international obligations.
It is too soon to know whether the United States is on a similar path. But economists and other experts said that Mr. Trump’s decision on Friday to fire Erika McEntarfer, the Senate-confirmed head of the Bureau of Labor Statistics, was a troubling step in that direction.
Trumping up U.S. labor data will backfire politically, too
Nate Silver writes that he sees no gain for Trump or Americans out of this whole mess. For one thing, there are other sources of data, albeit not as good as the BLS:
If the government’s jobs data is considered biased or unreliable, Wall Street will have other places to look. ADP reports figures on private payrolls, for instance. (And it also tells a bearish story: ADP showed a net loss of jobs in June, for instance.) Meanwhile, Gallup once tracked employment numbers on a weekly basis based on its large-scale surveys and could resume that effort. Or investment banks like Goldman Sachs might conclude they could have a competitive edge by tracking their own economic data.
However, this data is likely to be lower quality, because private organizations usually have lower response rates to surveys than the government does. And no longer having any reliable “ground truth” for major American economic data series will create more uncertainty for businesses and investors overall, which will discourage the sort of healthy risk-taking that often fuels job growth. More generally, America benefits, particularly in our ability to borrow cheaply, from economic “soft power” in the form of being considered a reliable and transparent actor. Trump has eroded those foundations in his second term in a way he didn’t so much in his first, and I’ve been skeptical of the notion that markets will discipline him as much as others seem to assume.
And then there is the real-world data that people collect with their own eyes:
Nor are job-seekers likely to be fooled. They can assess the situation for themselves based on their success at finding employment or the experiences of their friends and neighbors. The same holds, perhaps even more so, when it comes to higher prices, which are literally visible any time they go to the grocery store or drive past a gas station.
There is far too much belief among political types that voters’ views of the economy reflect narrative or spin, rather than being cross-checked against the ground truth they’re experiencing in their own lives. The Biden White House was also guilty of this, chalking up voter concerns about inflation to “misinformation” when low consumer confidence numbers were not only highly understandable but also consistent with past periods of high inflation.
In the long run, reduced reliability of American economic data will not only harm the economy by increasing uncertainty for businesses but could also exacerbate the decades-long sense of negativity from voters in how the country is doing overall.
Trump may soon have recession-data messengers to shoot as well
Our old friend Eric Levitz notes at Vox that the country may be on the cusp of a recession thanks to the president’s trade and immigration policies:
The unemployment rate remains at 4.2 percent, a relatively low level by historic standards. And after falling by 0.3 percent in May, inflation-adjusted consumer spending ticked up by 0.1 percent in June. Meanwhile, aggregate weekly payrolls — the sum of all wages paid to private-sector workers in a given week — was 5.3 percent higher in July than one year earlier. This represents an improvement relative to June, when total weekly wages were up just 4.5 percent on the year.
US consumers still boast significant spending power. The AI arms race doesn’t appear to be ending anytime soon. And Trump’s recent package of tax cuts — while detrimental to growth in the long term — could boost demand in the short run. Perhaps for these reasons, betting markets currently give the US economy an 85 percent chance of avoiding a recession by year’s end.
Nevertheless, America’s economic outlook is much gloomier than it was one week ago. Trump’s trade policies have already nudged the US toward stagflation, a simultaneous rise in inflation and stagnation of growth. And most of Trump’s tariffs have yet to actually take effect.
Many sectors are already responding to rising import costs by shedding payroll. If that trend continues, and unemployment rises, consumer spending will likely dip. Faced with less demand, more employers will need to lay off staff, which would further erode spending. A recessionary spiral could ensue.
The Federal Reserve may try to preempt that dynamic by cutting interest rates in September. But if Trump’s tariffs continue to lift consumer prices, the central bank could find itself at an impasse: The Fed normally raises interest rates when prices are too high, and cuts them when job growth is too slow. If both those conditions prevail at once, the Fed will find itself with no good options.