Latest news with #Erika McEntarfer
Yahoo
7 days ago
- Business
- Yahoo
Labor department's data upset may have sealed the deal for a Fed interest rate cut
As markets open this week, investors feel more confident about an incoming cut to the base rate—but that's about as far as their courage goes. July payroll growth came in far below forecasts, and May–June figures were revised down significantly, signaling deeper job market weakness. As a result, investors now see an 87% chance of a September cut. The resignation of FOMC member Adriana Kugler also opens the door for a more dovish Fed shift. Until Friday, analysts had little confidence that the U.S. Federal Reserve was about to deliver an interest rate cut, but last week's revisions to labor market data have led many to bet in favor of Jerome Powell cutting at the Fed's next meeting in September. On Friday the Labor Department reported payrolls grew by just 73,000 last month, well below forecasts for about 100,000. It also revised down estimates for May and June, by a cut of 258,000. With the average gain over the past three months now averaging only 35,000, the health of the labor market is in considerably worse shape than previously believed. Full employment is half of the Fed's dual mandate, so many now expect action (in the form of cheaper money) to spur economic activity to ensure jobs do not take any further hit. Analysts now expect the revisions to at last deliver the cut the Oval Office has been pushing for. A furious President Trump dismissed Erika McEntarfer, the commissioner of the Bureau of Labor Statistics (BLS), for the revisions to the employment numbers. As markets open today, investors are still digesting the ramifications of the data that suggests tariffs are biting harder than previously hoped. On top of that, speculators will also be bracing for further volatility as Trump's latest tariff deadline—Aug. 7—creeps closer. On top of that, analysts will also be working through the implications of the resignation of Adriana Kugler, one of the voting members of the Federal Open Market Committee (FOMC). This presents an opportunity for the president to appoint a member more open to his agenda of a lower base rate, further bolstering the hopes of analysts looking for a path toward interest normalization. Before markets open in New York this week, the S&P 500 was down 1.6% at Friday's close, and the Nasdaq down 2.24%. In Europe, London's FTSE 100 is up a mild 0.3% and Germany's DAX up 1.1%. S&P futures were up 0.65% this morning, suggesting that some investors are buying the dip. Over in Asia—where analysts have been given little hope for an imminent deal with China or India—Japan's Nikkei 225 was down 1.25% while India's Nifty 50 is up a respectable 0.65%. Looking ahead, analysts are piling in on the belief that Powell will cut at the FOMC's next meeting in September, and may even drop a hint about a change of course this month during the Jackson Hole Symposium. Volumes in the CME's 30 Day Federal Funds futures and options tripled between July 31 and Aug. 1 (the day the labor data was altered), up from 536,563 on Thursday to nearly 1.6 million a day later. The price currently equates for a base rate in the region of 3.75%—representing a cut of two measures from the Fed. Cut likelihood A surprise downgrade to the economic outlook isn't the scenario in which investors had hoped for a cut: Many had hoped stable enough inflation would have given the FOMC confidence to lower and support economic activity, as opposed to a forced reduction demanded by negative headwinds. But as Deutsche Bank's Jim Reid noted to clients this morning, the broader picture also suggests cuts: 'The resignation of Fed Governor Kugler on Friday has created an opportunity for President Trump to appoint a new board member. This individual could potentially be groomed as a successor to Chair Powell or, at the very least, represent another dovish voter. While last week's FOMC vote was 9-2 against a rate cut, it's worth noting that the two dissenters—[Christopher] Waller and [Michelle] Bowman—were both appointed during Trump's first term.' Reid continued, 'The significant revisions in Friday's payroll release have also increased the likelihood that other members may reconsider their hawkish positions. The probability of a rate cut in September surged to 87% on Friday, up from around 40% before the payroll data was released, and market pricing for cuts by year-end rose from 18 basis points to 41bps.' Indeed, Macquarie wrote Friday it had pulled forward its timeline for a cut as a direct result of the July employment report. David Doyle, Macquarie's head of economics, wrote: 'While we don't see significant further weakness in the labor market, the results of this report are likely to shift the FOMC's assessment of the balance of risks to the outlook. While a September cut has become more likely, it is not a certainty. The eventual decision will hinge on incoming inflation and labor market developments.' Even before the disastrous jobs rate announcement, Chairman Powell had warned about the Fed's need to balance inflation as close to 2% as possible, without squeezing employment from a monetary policy stance that was too tight. In his post-meeting press conference only a week ago, Powell said: 'We are attentive to risks on the employment side of our mandate. In coming months, we will receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.' Powell mentioned possible 'downside risks' to the job market no fewer than six times. But Bernard Yaros, lead U.S. economist at Oxford Economics, countered in a note this weekend: 'This week's events, namely the July jobs report, were the biggest challenge to our long-standing forecast assumption around monetary policy, but we're not yet ditching our call for a resumption of rate cuts to occur in December. 'Joblessness ticked higher, but reading the tea leaves from labor force flows and initial claims, there's little reason to expect a sharp increase in the unemployment rate over the next months.' Here's a snapshot of the action prior to the opening bell in New York: S&P 500 futures are up 0.7% premarket. STOXX Europe 600 was up 0.7% in early trading. The U.K.'s FTSE 100 was up 0.3 in early trading. Japan's Nikkei 225 was down 1.25%. China's CSI 300 was up 0.4%. India's Nifty 50 was up 0.65%. Bitcoin is relatively flat at $114,551. This story was originally featured on
Wall Street Journal
7 days ago
- Business
- Wall Street Journal
The Defenestration of the BLS Commissioner
Last week's dismal labor market report sent shock waves through U.S. markets. In 'Trump Claims the Jobs Report Was Rigged. Was It?' (Life Science, Aug. 4), Allysia Finley describes how President Trump accused the Bureau of Labor Statistics of publishing 'rigged' numbers and fired its well-respected commissioner, Erika McEntarfer. The bureau reported that only 73,000 nonfarm jobs were added in July, well below expectations. It also revised May and June numbers, erasing a combined 258,000 jobs from earlier employment estimates—the biggest downward revision since the pandemic.
Yahoo
7 days ago
- Business
- Yahoo
Facing facts about Trump and the jobs numbers
In announcing the firing of the government's chief labor statistician last week, President Trump condemned the works of Erika McEntarfer as 'phony.' McEntarfer was just the 16th commissioner of the U.S. Bureau of Labor Statistics since the position was created by Congress in 1884 to keep track of unemployment during an ongoing depression of a very Gilded Age variety. The job is to produce consistent, reliable data that Congress and other agencies can use for setting their own policies. What we have turned it into, however, is some kind of political rhabdomancer, an oracle on whose divinations the results of elections supposedly hang. But, like most good governance, it's actually really boring. McEntarfer was confirmed by the Senate by a richly bipartisan vote of 86-8 to a four-year term that began in 2024. But there's no doubt that Trump was within his powers to fire her. All of the other counters of beans at the bureau are civil servants, but not the bean-counter in chief, who has always been a political appointee — which McEntarfer became only after more than 20 years in various statistical gigs as a federal worker bee. Until Friday, she managed the bureau and her name was on the reports, but the numbers are churned out by a hive of statisticians and researchers working in the old Post Office building next to Washington's Union Station. The deputy commissioner, civil servant William Wiatrowski, will again serve as acting commissioner, as he has twice before during vacancies. We'll see what Trump thinks of Wiatrowski and the data nerds' August numbers when they come out on the first Friday of September. The president has vowed to pick an 'exceptional replacement' for McEntarfer, and that is probably true. There will be many exceptions concerning whomever Trump sends to the Senate for confirmation to the post. In the meantime, if the August numbers are as glum as the rest of this summers', Trump may start firing his way through acting commissioners until he finds one who sees the 'great Republican Success' the president claims McEntarfer was concealing. But he can burn that bridge when he comes to it. For now, let's think about why Trump fired McEntarfer and what he meant by 'phony.' 'Days before the election, [McEntarfer] came out with these beautiful numbers for Kamala, I guess Biden-Kamala, and she came out with these beautiful numbers trying to get somebody else elected,' Trump told reporters Friday. 'Then, right after the election, she had an [$800,000] or $900,000 massive reduction — said she made a mistake.' The fact is that the single poorest employment report of McEntarfer's tenure was the one she published three days before the 2024 election, in which the bureau reported Nov. 1 that the economy had created only 12,000 new jobs in October, a worrisome sign for former President Biden and former Vice President Kamala Harris. There was indeed a revision to those numbers after the election: a substantial increase to 43,000, reflecting the bureau's conclusion that the fall hurricane season had distorted the overall jobs picture. It is true, though, that Trump did complain bitterly 10 weeks before the election about the long-term revisions to the bureau's 2023 numbers that concluded the economy had added more than 800,000 fewer jobs in the previous year than initially estimated under McEntarfer's predecessor. Insofar as jobs numbers — rather than actual jobs — affect the attitude of voters, McEntarfer's bureau had given Trump a gift. But Trump was more focused on the revision itself, not the report, writing, 'the Harris-Biden administration has been caught fraudulently manipulating Job Statistics.' If the Biden-Harris administration had been cooking the books, then why on earth would it announce such a thing during the height of the campaign, on Aug. 21, the third day of the Democratic National Convention? If Trump's goal was to knock the incumbent administration's economic policies, McEntarfer & Co. had just served up a very juicy pitch, but Trump largely ignored it in favor of the allegation of corruption. It is possible that Friday, Trump confused the August downward revision with the November report, and that he unknowingly conflated the two events to fit his preferred narrative. But whether it was a premedicated lie or self-deception isn't really the essential point. The episode shows us what Trump thinks about data in general. Whether it is election returns or economic reports, none of it can be trusted, unless it has been provided by 'his own people.' Thus we come to a fork in the road: Is it that Trump believes it is possible for data to be unhappy for him and accurate, but only if he chooses the people who collect the data, or, is it closer to his way of thinking that data are mostly phony and he just prefers to be the one in whose favor it is being rigged? If it is the former, that comes with its own problems. Once a leader has installed loyalists in charge of data gathering, those loyalists out of some combination of love, ambition and fear will be motivated to hide bad news. A government that loses the ability to tell itself the truth is doomed, with terrible consequences for its citizens. But what if it's the latter, and Trump doesn't put much stock in data as anything more than a tool for marketing, messaging and politics? This is the kind of thinking that might be behind asking an elections official to 'find' enough votes to overturn an election. If Trump assumes that the blue state election returns are phony, why shouldn't Republicans provide phony vote totals for his benefit? Whether it's the Georgia secretary of state, the chair of the Federal Reserve, his own vice president or the commissioner of the Bureau of Labor Statistics, if Trump assumes that all findings are the work of political malfeasance, why shouldn't they be malfeasing in his favor? Unhappy findings, therefore, can't be matters of fact or sincere interpretation, they can only be, as Trump would say, 'nice' or 'not nice.' Writing in 1942 about his recollections of fighting in the Spanish Civil War years before, George Orwell framed out how first Spain and then all of Europe had been plunged into hellish madness over the course of less than a decade. What he concluded wasn't that old saw that 'truth is the first causality of war,' but rather that the death of truth is part of what leads us to war. 'I know it is the fashion to say that most of recorded history is lies anyway. I am willing to believe that history is for the most part inaccurate and biased,' he wrote. 'but what is peculiar to our own age is the abandonment of the idea that history could be truthfully written.' It's not that employment data aren't ever wrong, it's that in a functional republic, we believe that such data can be found through an imperfect, iterative process that is pointing at something real. If we abandon that idea, then all that's left is the party line. The would-be information czars of the COVID-era and the dis-disinformation apparatus that sprang up in response to the wilderness of online life, including that part of the wilderness planted by Trump himself, frequently devoted itself to fighting 'wrong' ideas and 'bad' opinions. It was often Orwellian in its own way, fact-checking subjective assessments. But the real fight for the future isn't about what people think, but rather what people believe can be known. We may already be living in a post-truth era, but God help us if we are beyond caring about facts. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
04-08-2025
- Business
- Yahoo
Fed Data Shake-Up Raises Policy Risks
SP500 jolts as J.P. Morgan warns abrupt BLS dismissal risks data integrity and policy clarity. Warning! GuruFocus has detected 7 Warning Sign with MSFT. J.P. Morgan flagged that firing Bureau of Labor Statistics Commissioner Erika McEntarfer early could politicize the data underpinning Fed decisions and the $2.1 trillion TIPS market. The bank pointed out that even swapping to an HICP-style CPI calculation would shave about 20 bps off reported inflation, and private big data lacks the federal survey's national representativeness, risking distorted signals. Analysts say this move creates overlap with an elevated Jerome Powell tenure, heightening friction on the FOMC after two dissents this week, the first dual break since 1993. Having a flawed instrument panel can be just as dangerous as having an obediently partisan pilot, they wrote, warning that data quality is as vital as policy guidance. This article first appeared on GuruFocus. Sign in to access your portfolio
Al Jazeera
04-08-2025
- Business
- Al Jazeera
Banana republic? Trump puts credibility of US economic data on the line
The firing of a top United States statistics official by President Donald Trump last week has drawn concerns from economists and policymakers regarding the credibility of data in the world's biggest economy. Trump's dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer after the release of disappointing employment figures on Friday has raised fears over the integrity of Washington's economic data, which are relied on by countless businesses and investors in the US and across the world. The National Association for Business Economics warned that McEntarfer's 'baseless' ouster risked doing 'lasting harm to the institutions that support American economic stability'. 'It could open the door to political meddling and certainly will undermine trust in federal statistics that businesses, policymakers and individuals use to make some of their most important decisions,' Erica Groshen, who led the Bureau of Labor Statistics under former President Barack Obama, told Al Jazeera. If Trump's dismissal of McEntarfer and other presidential appointees is allowed to stand, Groshen said, he could make a habit of firing any head of a statistical agency or other body that delivers 'unwelcome news'. 'Then he is likely to replace them with appointees who prioritise serving his goals over serving the mission of their agencies, ethical standards or scientific integrity,' Groshen said. Trump, who justified McEntarfer's removal by claiming without evidence that the latest job figures were 'rigged' to make him look bad, said on Sunday that he would announce a new Bureau of Labor Statistics head in three or four days. 'Global ramifications' A collapse in trust in official economic data about the US would have ramifications worldwide. Despite the growing influence of emerging economies such as China and India, the US remains the world's largest economy by some distance. The US gross domestic product (GDP) at about $30.3 trillion accounts for more than one-quarter of the global economy. China's estimated GDP is about two-thirds that amount. US government data on trade, employment, consumer spending and GDP are considered important signals for the direction of the global economy and are closely followed by businesses and investors from London to Dubai and Tokyo. Many countries, including democratic states, have faced accusations of fiddling with economic statistics for political reasons, often with serious reputational consequences. In 2010, the European Commission published a withering report accusing Greece of deliberately falsifying data to conceal the poor state of its public finances. In 2013, the International Monetary Fund officially censured Argentina for providing what it said was inaccurate data on inflation and economic growth. 'Economic data manipulation' Some research suggests that countries run by strong-arm leaders are especially prone to misrepresenting the state of their economies. A 2024 study published in the European Journal of Political Economy found that economic openness and democracy decreased the likelihood of governments manipulating statistics although there were no observable positive effects from media freedom or the independence of the statistical office. In a 2022 paper that used satellite imagery of nighttime light as a proxy for economic development, Luis Martinez, a professor at the University of Chicago, estimated that autocratic countries artificially inflated their annual GDP growth by about 35 percent. 'Economic data manipulation is pervasive in history, especially in autocracies and dictatorships to create narratives for the people – typically to embellish standards of living,' Tomasz Michalski, an associate professor of economics at the HEC Paris business school, told Al Jazeera. 'What is rarer, though, is to find such deliberate behaviour in countries that strive to be democracies or are more developed.' After Trump's firing of McEntarfer, a career economist who was appointed in 2024 with overwhelming bipartisan support, critics were quick to note parallels to tactics attributed to strongman leaders seeking to bolster public approval for their policies. 'It's one more step on our rapid descent into banana republic status,' Nobel Prize-winning economist Paul Krugman said on Substack, a subscription-based newsletter platform. Lawrence Summers, who served as US Treasury secretary under President Bill Clinton, described the firing as the 'stuff of democracies giving way to authoritarianism'. Scott Sumner, a professor of economics at Bentley University in Waltham, Massachusetts, said Trump's move made the US 'look more like a banana republic' although it remained to be seen whether he would seek to directly manipulate the government's economic figures. 'It's actually hard to fool the public, and almost no one was fooled by the Argentina manipulation,' Sumner told Al Jazeera. 'It's too soon to say whether Trump will try to do the same. Any attempt to do so would likely fail.' 'The quality of US economic statistics' The quality of US economic data has been a growing concern for some time due in part to the Trump administration's freeze on hiring federal employees and staff cuts at numerous agencies. In March, Commerce Secretary Howard Lutnick dissolved two expert committees that advised the government on its economic statistics, prompting concern among some economists. In June, the Bureau of Labor Statistics (BLS) announced that it had stopped collecting price-related data in three US cities – Buffalo, New York; Lincoln, Nebraska; and Provo, Utah – due to limitations in 'current resources'. But even before Trump's return to the White House in January, declining response rates to surveys among the public in recent years had made the collection of data increasingly difficult, raising concerns about accuracy. In a poll published by the Reuters news agency last month, 89 of 100 policy experts surveyed said they had at least some concerns about the quality of US economic statistics. 'Some data is just unreliable because people stopped responding to surveys or the responses became so biased given the nonhomogeneous response rates,' said Michalski, the HEC Paris associate professor. 'There are no easy remedies often for improving data collection given that many people are not using landlines, are unreachable or provide careless answers to investigators,' he said. Even with sound methodology, data are always at risk of manipulation once politicians get involved, Michalski added. 'Even with correct numbers, it is possible to spin a story about inflation or GDP growth by changing the base years or selecting some specific periods to weave narratives,' he said. 'The incentives to manipulate and falsify are clearly there. There is little or no punishment.' Groshen said that while she does not expect US economic data to stop being reliable in the immediate future, 'we seem headed in that direction.' 'For now, the BLS will continue to operate as it has before,' she said. 'We will need to start worrying if and when the president's people are embedded there.'
