Trump scores major own goal with labour official firing
Trump has spent six months attacking the Federal Reserve, and chair Jerome Powell in particular, for not cutting interest rates. The barbs culminated in Trump branding Powell a 'stubborn moron' in a social media post on Friday before the July jobs report was released.
The numbers, especially the net downward revision of 258,000 for May and June payrolls growth, were much weaker than expected. This was 'the largest two-month revision since 1968 outside NBER-defined recessions (assuming the economy is not in recession)', according to Goldman Sachs.
The release sparked a dramatic reaction in financial markets. Fed rate cut expectations soared, the two-year Treasury yield had its steepest fall in a year and the dollar tumbled.
A quarter-point rate cut next month and another by December were suddenly nailed-on certainties, according to rate futures market pricing. This was a huge U-turn from only 48-hours before when Powell's hawkish steer in his post-FOMC meeting press conference raised the prospect of no easing at all this year.
Trump's constant lambasting of 'too late' Powell suddenly appeared to have more substance behind it. The Fed chair's rate cut caution centres on the labour market, which appears nowhere near as 'solid' as he thought.
Trump could have responded by saying: 'I was right and Powell was wrong.'
Instead, on Friday afternoon he said he was firing the head of the bureau of labour statistics (BLS), commissioner Erika McEntarfer, for faking the jobs numbers. Trump provided no evidence of data manipulation.
Rather than point out that markets were finally coming around to his way of thinking on the need for lower interest rates, Trump has united economists, analysts and investors in condemnation of what they said is brazen political interference typically associated with underdeveloped and unstable nations rather than the self-proclaimed "leader of the free world".
'A dark day in, and for, the US,' economist Phil Suttle wrote on Friday.
'This is the sort of thing only the worst populists do in the worst emerging economies and, to use the style of President Trump, it never ends well.'
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