Trump dismissed a high official, which he accused of forging the labor market data, dismissal followed by the resignation of the Fed governor, Adriana Kugler, which would open the US President's door for the changes he has long wanted in the Federal Reserve (Fed).
Trump dismissed a high official, which he accuses of forging the labor market data. Foto AFP
President Donald Trump fired a high-ranking official from the Labor Department on Friday, following a shocking balance of the US Labor Market, accusing him of manipulating the figures and has amplified the already increasing concerns about the quality of the economic data published by the federal government.
In a second surprising evolution of the economic policy, the door for Trump to leave his mark on the federal reserve (FED) that he faces almost daily because he has not reduced the interest rates has opened much earlier than he had been anticipated, when the Fed Governor, Adriana Kugler, announced his resignation on Friday afternoon.
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The two developments have shocked a stock market that already faced the last series of tariff announcements and the weak data on jobs. The reference index S&P 500 (.SPX), opens a new tab by 1.6%, the highest daily decrease of the last two months.
Trump has accused Erika Mcentarfer, named by former President Joe Biden, of forging jobs. There is no evidence to support Trump's statements regarding data manipulation by the Labor Statistics Office (BLS), the statistical agency that compile the employment report, closely followed, as well as the consumer and production prices data, writes Reuters, specifying that the BLS representative did not respond to the request.
The labor market, in free fall
Friday began with a BLS report that reported that the US economy created only 73,000 jobs in July, but more surprising were the net decreasing reviews that show that in May and June 258,000 jobs were less than the previous ones.
“We need precise jobs on jobs. I ordered my team to immediately dismiss this person politically by Biden. Will be replaced with someone much more competent and qualified“, Trump said in a post on Social Truth.
People no longer want to respond to questionnaires
An official from the Trump administration, who requested anonymity, said that, although all economic data creates concern, the White House was dissatisfied with the extent of recent data reviews and problems related to the smaller number of polls. The problem began during the Covid pandemic and was not approached in the coming years.
“There are these background issues that have persisted for years and have not been remedied“Said the person. “Markets, companies and government need accurate data, and we simply did not receive them“Said the official.
BLS has already reduced the sampling of consumer prices data, as well as the production prices report, invoking resources constraints. The government questions about 121,000 companies and government agencies, representing about 631,000 individual jobs for the employment report.
The response rate dropped from 80.3% in October 2020 to about 67.1% in July, BLS data shows.
Analysts no longer trust the data provided officially
A Reuters poll conducted last month found that 89 out of 100 top political experts had at least some concerns about the quality of American economic data, most of which are worried that the authorities do not address the problem.
In addition to concerns about labor market data, BLS employees discounts have reduced the data collection field for consumer price index, one of the most important inflation indicators, followed by investors and decision makers worldwide.
Trump's movement has fueled concerns that politics could influence data collection and publication.
“Politicization of economic statistics is a self -destructive act“Said Michael Madowitz, a major economist at Roosevelt Forward at the Roosevelt Institute.
“Credibility is much easier to lose than to be rebuilt, and the credibility of American data of America is the foundation that we built the strongest economy in the world. The blindness of the public about the state of the economy has a long history and never ends well. ”
Trump could install someone faster at the Fed Peak
Meanwhile, Kugler's surprising decision to leave Fed at the end of next week gives Trump an opportunity earlier than expected to install a President President Jerome Powell in the Central Bank's Board Council.
Trump has repeatedly threatened to dismiss Powell, as the Fed chief has supervised a body to develop financial policies that did not reduce interest rates as Trump requested. Powell's mandate expires in May next year, although it could remain in the Fed Board of Directors until January 31, 2028, if he wishes.
Trump will now have the right to choose a FED governor to replace Kugler and end his mandate on January 31, 2026. A governor who occupies an unexpirated mandate can then be appointed for a full term of 14 years.
Some speculation focused on the idea that Trump could choose a potential future president to occupy this position, as a reserve. Among the main candidates for the next President of the EDD are Trump's economic counselor, Kevin Hassett, Treasury Secretary, Scott Besent, former FED Governor, Kevin Warsh, and Fed governor Chris Waller, a person named by Trump who this week did not agree with the decision of the Central Bank to maintain the rates of interest rates. unchanged, saying he prefers to start decreasing now.
While leaving the White House to spend the weekend at his property in Bedminster, New Jersey, Trump said he is happy to have the vacancy he can occupy.
“I would not interpret any political motivation in what it does [Kugler]although the consequence of what he does is that he unmasks Trump“Said Derek Tang, an analyst at LH Meyer, a research company.”Puts the ball in the field and says: Look, Put so much pressure on the Fed And you want a certain control over the candidates, well, here's the opportunity. ”
