5 questions Trump faces after dismal jobs report; BLS commissioner firing

Yahoo

3 days ago

President Trump's economic pitch took a serious hit Friday after the latest federal jobs report revealed stunning weakness in the labor market.
He responded by firing the commissioner of the Bureau of Labor Statistics (BLS) for what he called politically motivated revisions that lobbed off hundreds of thousands of job gains earlier this summer.
The dismal jobs report raised serious questions about the strength of the U.S. economy, especially in light of looming tariffs causing anxieties in the global market.
Here are the five big questions facing Trump as he faces the fallout.
How much worse does it get?
After months of warnings from economists and weakening data from the private sector, federal jobs numbers have caught up to the concern.
The July jobs report dramatically changed the picture of the U.S. economy, ramping up concerns fueled by Trump's tariffs and the uncertainty they unleashed.
The U.S. added only 73,000 jobs in July and just 106,000 jobs since May — a three-month total barely enough to sustain the labor market for one month.
'Not only was this a much weaker than forecast payrolls number, the monster downward revisions to the past two months inflicts a major blow to the picture of labor market robustness,' Seema Shah, chief global strategist at Principal Asset Management, wrote in an analysis.
'More concerning is that with the negative impact of tariffs only just starting to be felt, the coming months are likely to see even clearer evidence of a labor market slowdown.'
The U.S. economy needs to add 80,000 to 100,000 jobs each month just to replace those who leave the workforce for retirement or incapacity. Without a significant turnaround, the unemployment rate could begin to rise, and the overall economy could slow drastically.
'The U.S. slowdown is starting to take shape,' Alexandra Wilson-Elizondo, global co-chief investment officer at Goldman Sachs Asset Management, wrote in a Friday analysis.
She added that a decline in labor force participation, which is also bad for the job market, was keeping the unemployment rate from rising further.
'While overall levels are not flashing red, the trend is cause for concern,' she wrote.
How does Trump adjust his tariff plans?
Trump and top White House officials spent months laughing off the dire projections of economists, who feared his tariffs would tank the job market and boost inflation.
That position may not be tenable after Friday.
The July jobs report came out on what was supposed to be the final deadline for the imposition of Trump's 'reciprocal' tariffs. After insisting for weeks that he would not delay the deadline further, Trump announced Thursday evening that some countries would have an additional week to strike deals with the U.S.
Trump's latest punt — which happened after the president is typically briefed on the jobs report — was the latest in a series of delays issued amid rough economic news or stock market turmoil. The president proposed much steeper tariffs during his 'Liberation Day' announcement in April, but he delayed and weakened his plan after two weeks of turmoil in financial markets.
Trump and top White House economic aides touted the benefit of federal revenue from import taxes, which are paid by the U.S. businesses and individuals who purchase foreign goods. But the growing pressure of his tariffs could prompt further delays from Trump.
Trump could also keep higher headline tariff rates while quietly making exemptions for key goods, undermining the overall goal of his import taxes while potentially avoiding some of the costs.
'A web of exemptions and, in the case of the deals, preferential rates means many key imports face lower tariffs or none. That significantly lowers the actual tariff rate, in many cases well below the quoted headline rate,' Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in a Friday analysis.
How does the Fed respond?
The stunning July jobs numbers will boost pressure on the Federal Reserve to cut interest rates at its next policy meeting in September and are raising questions about whether it should have cut rates already.
The Fed kept rates steady Wednesday as inflation continued to rise and the labor market appeared to be weakening at a much slower rate than seen in Friday's jobs report.
While Fed Chair Jerome Powell acknowledged Wednesday the risks that the job market could weaken quicker than expected under the bank's moderately high interest rates, he said he and his colleagues were still unsettled about how Trump's tariffs could drive inflation higher.
The Fed now appears to be in a quagmire with the country on track for both a weaker economy and higher inflation — a dynamic known as 'stagflation.'
Lower interest rates could stimulate the sluggish labor market but also drive inflation higher with additional money in the economy. Keeping interest rates unchanged could stave off inflation but suffocate the economy into higher unemployment and slower spending.
'With persistent policy uncertainty, tariffs, and diminished immigration flows paralyzing employers, the U.S. economy is now flirting with job losses, revealing a labor market that is much weaker than most Fed policymakers had believed,' Gregory Daco, chief economist EY-Parthenon, wrote in a Friday analysis.
'The Fed is now behind the curve.'
Will voters ding Trump as job approval sinks?
Trump is largely fulfilling his campaign promises on the economy, including instituting tariffs, though that policy proved to be much more widespread than what he suggested while running for a second term.
He's also making good on mass deportation plans, which the administration is using to sell what they see as a stronger economy for the American worker.
But some slices of voters don't appear to be singing Trump's praises.
Trump headed into the big week on the economy with his job approval rating slipping, with net approval dropping 15 points, according to an Economist/YouGov poll. And his net approval rating also fell 9 points to its lowest rating yet last week in the Decision Desk HQ average, with independents taking issue with Trump's actions on the economy and immigration.
Consumer confidence ticked up only slightly in July, a sign that anxieties over the economy could be coming to a head as a result of the president's policies. Consumers also expressed more negative assessments of their economic situations overall.
What impact will firing the BLS commissioner have?
Experts and economists were left reeling Friday afternoon when Trump announced he was firing the Commissioner of Bureau of Labor Statistics Erika McEntarfer.
That cast doubt on the bureau's reporting standards and the type of revisions it makes on previously released reports. When Trump was later asked if that decision meant anyone providing him data he doesn't agree with could risk losing their job, he responded: 'I've always had a problem with these numbers.'
In considering who could be McEntarfer's long-term replacement, Trump did not pinpoint experience in labor statistics as a qualification.
'We need people we can trust,' Trump said. 'I put somebody in who's going to be honest.'
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