Author: Wall Street Insights

Trump fired the head of the Bureau of Labor Statistics, and almost simultaneously, a Federal Reserve governor announced her resignation. This series of personnel changes has raised market concerns, leading to unprecedented doubts about the Federal Reserve's independence and the credibility of economic data.

According to the article, Trump ordered the dismissal of Bureau of Labor Statistics head Erika McEntarfer just hours after the release of the July non-farm payroll report, claiming that employment data had been "manipulated" and accusing McEntarfer of altering numbers to make "the Republican Party and me look bad."

Almost simultaneously, Federal Reserve governor Adriana Kugler announced she would resign on August 8, several months before her term was set to end. Trump wrote on social media: “'Too late, Mr.' Powell should resign, just like Biden-appointed Kugler did.”

Analysts pointed out that the independence of the Federal Reserve and the authenticity of U.S. economic data will face scrutiny following Trump's appointment of new candidates.

Investors and analysts are generally concerned that if the objectivity of economic data and the independence of the Federal Reserve are subject to political interference, the United States' status of "exceptionalism" may be undermined, which could affect global capital confidence in the U.S. market.

Unprecedented Intervention in Data Agencies

Without providing evidence, Trump stated, "Important data must be fair and accurate, and cannot be manipulated for political purposes," and noted that he would replace her (McEntarfer) with "more capable and qualified people."

Analysts indicated that Trump's decision to fire the head of the Bureau of Labor Statistics shocked the economic community. The agency is responsible for releasing employment and inflation data, which are fundamental to global asset pricing.

The U.S. Department of Labor confirmed on Friday evening that McEntarfer had been fired, and Deputy Commissioner William Wiatrowski will serve as acting commissioner. David Wilcox, former head of the Federal Economic Statistics Advisory Committee, stated:

“The firing of the head of the Bureau of Labor Statistics is a serious blow to the integrity of the U.S. statistical system.”

An organization called "Friends of the Bureau of Labor Statistics," composed of former agency heads, warned that "the consequences are dire when leaders of other countries politicize economic data and undermine public trust in their data infrastructure."

Steve Sosnick, chief market analyst at Interactive Brokers, stated:

"If the data collectors are influenced by the political will of the president, it could raise questions about the future accuracy and impartiality of the data."

The non-farm payroll report released on Friday showed a sharp slowdown in job growth over the past three months, with unusually large downward revisions to the employment data for May and June.

Analysts noted that such large-scale data revisions are indeed rare, but it is equally unprecedented for a president to fire officials without first investigating the reasons.

Challenges to Federal Reserve Independence

Reports indicate that Kugler's sudden resignation paves the way for Trump to appoint Powell's successor ahead of schedule. Powell's term as Federal Reserve Chair is set to expire in May 2026.

Trump wrote on the Truth Social platform, “She (Kugler) knows he (Powell) is wrong on interest rates. He (Powell) should resign too!”

Krishna Guha of investment bank Evercore pointed out:

"The immediate effect of Kugler's resignation is likely to accelerate the process of selecting the next Federal Reserve Chair. Such a person would effectively serve as a shadow Federal Reserve Chair before officially succeeding Powell."

Jamie Cox, managing partner at Harris Financial Group, stated:

"It is noteworthy that Kugler was absent from this week's meeting and did not vote; now we know the reason. Kugler's resignation allows the president to further shape the FOMC according to his own ideas."

Last week, Trump visited the Federal Reserve's Washington headquarters to criticize Powell over monetary policy and the cost overruns of a $2.5 billion renovation project, marking a rare public disagreement between the president and the Federal Reserve Chair.

"Wall Street Will No Longer Pay Attention to These Data"

Investment institutions have expressed widespread concern over this series of personnel changes.

Sam Stovall, chief investment strategist at CFRA Research, stated that if Trump appoints a very dovish head of the Bureau of Labor Statistics, "Wall Street will no longer pay attention to these data if they feel the data is being manipulated to support the government's position."

AFL-CIO communications director Jody Calemine stated:

"Today may be the last reliable employment report we see. This is not good for anyone trying to understand the state of the economy, not just for workers but for the entire business community."

Christopher Hodge, chief U.S. economist at Natixis, noted:

"If the accuracy of the data is compromised, it will put the market and the Federal Reserve in a very dangerous position. I expect the Federal Reserve will increasingly rely on anecdotal information collected from the Beige Book."

Juan Perez, senior trading director at Monex USA, stated:

"Regardless of the state of the U.S. economy, one factor supporting the strength of the dollar in the eyes of the world is the Federal Reserve's authority and independence. When anything threatens this, the dollar will spiral downwards."

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