Why the firing of Bureau of Labor Statistics boss is bad news for your money
The president ousted Bureau of Labor Statistics (BLS) Commissioner Dr. Erika McEntarfer on Friday, just hours after the release of weak jobs figures.
Trump believes the federal agency had previously manipulated figures to appear worse than they really were. The president accused McEntarfer of 'faking' jobs numbers in a blistering post to Truth Social that did not provide evidence to support the accusations.
The sacking undermines confidence that independent agencies are putting out accurate data, a fact that could have damaging effects on trillions of dollar of assets including 401(k)s.
Despite the potential severity of the situation financial markets did not appear to react much to the firing of McEntarfer, who was appointed to the role by former President Joe Biden.
Damaging the BLS's reputation could mean markets don't trust the economic data it puts out, which affects how they price assets and therefore the overall direction of stock indices.
As well as the political firing of McEntarfar the BLS has raised alarm bells over its collection of recent inflation data.
Due to staff shortages the agency stopped collecting figures from certain cities and began to estimate more prices rather than checking them directly with sold goods or services, the Wall Street Journal reported.
If investors believe this data is being tampered with politically or is simply not trustworthy it could reduce the allure of the $2 trillion Treasury Inflation-Protected Securities (TIPS) market.
The return on these Treasury bonds are largely determined by BLS reports.
Further to this investors who own other types of bonds and mortgage securities look to the TIPS market to determine their own rates of return versus inflation.
If inflation data is less trustworthy it could also cause dissent from the tens of millions of Americans who receive Social Security checks that are linked to inflation.
It could be the same case for millions of state and local retiree pension benefits.
Taxpayers could also sound the alarm if their exemptions, tax brackets, retirement-account contribution limits and deductions that are linked to the rising cost of living could be effected by untrusted data.
McEntarfar's firing comes after months of threats from Trump against Federal Reserve Chair Jerome Powell for not lowering interest rates fast enough.
Firing Powell before his term ends in May 2026 would likely cause a rout in financial markets who insist the independence of the Fed is critical for stability.
Trump has targeted Fed Chair Jerome Powell claiming he is 'too late' on lowering interest rates
A new Fed chair seen as under Trump's influence would also concern Wall Street.
'Whomever is appointed, the key thing to monitor is whether they are perceived as being a political appointee,' Eric Winograd, chief U.S. economist at Alliance Bernstein told Reuters.
'And by that, I mean someone whose views change with the whims of the president.'
Even if Trump does not fire Powell appointing a shadow chair could blur the Fed's message and direction.
Markets respond not just to official Fed decisions, but also to hints about future moves — meaning mixed signals could cause turmoil.
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