President Donald Trump said that he would fill two key leadership positions with significant oversight of the US economy as soon as this week.
The appointments are critical: The Bureau of Labor Statistics commissioner will be responsible for delivering reliable economic data to the thousands of businesses, employers and government agencies that rely on the statistics to make key investment and hiring decisions. And the member of the Federal Reserve Board of Governors will serve as a crucial vote in setting the central bank’s interest rates and possibly as a shadow Fed chair waiting in the wings to take the top job in May.
But Trump’s recent actions and statements about both positions may have already harmed the credibility of either hire. That risks damaging confidence in the US economy.
Trump on Friday fired Dr. Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, alleging without evidence that she had manipulated data to undermine his presidency. On Sunday, he said he would name a replacement in the next several days.
Kevin Hassett, a top White House economist, told CNBC Monday that a “fresh set of eyes” was needed at the BLS to modernize government data to make it more reliable and transparent.
But Trump and Hassett provided no evidence of anything nefarious taking place at the BLS. The recent revisions to jobs data that they complained about are indeed larger than average – but not without precedent – and can be explained by low response rates to surveys and jobs growth below BLS economists’ expectations.
As new survey responses come in, the BLS updates its estimates – just like a meteorologist who updates his or hertheir hurricane forecast based on new data.
“The firing of the Bureau of Labor Statistics commissioner is questionable, unless the numbers were manipulated, and we haven’t seen any evidence of that, so this seems to be a case of shooting the messenger,” said Robert Ruggirello, chief investment officer at Brave Eagle Wealth Management.
The revisions, though surprising for their sheer size, were not fully unexpected. They align with the other inputs that economists have been tracking, Goldman Sachs economists said in a note to clients Saturday, and they help paint a clearer picture of the economy.
Other key jobs indicators “have slowed significantly in recent months,” wrote Goldman Sachs economist Jan Hatzius. “Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace.”
In other words, Goldman Sachs isn’t shocked by the revisions. If anything, they fit with the broader puzzle pieces.
Crucially, many businesses and government organizations rely on the BLS data for their decision-making about investment, pay and hiring. The Federal Reserve, in particular, relies on the BLS data to help guide its monetary policy and rate-setting. Fed Chair Jerome Powell last week said the entire economy relies on strong data.
Without credible and accurate data, the Fed, CEOs and investors would be flying blind.
That’s why the next BLS commissioner will already be starting on shaky ground. Trump’s accusations raise the stakes for whoever replaces McEntarfer.
“It’s very important that whoever this person is can get confirmed by an overwhelming majority of the Senate,” said David Kelly, chief global strategist for JPMorgan. “If someone who is clearly partisan is put in this position, then people will have questions.”
Trump got a surprise last Friday when Fed Governor Adriana Kugler announced she would step down from her role early, effective August 8. With the open Fed seat, Trump can nominate someone to replace her, pending Senate confirmation.
For months, Trump has threatened to fire and replace Powell, only to repeatedly back off from his threat. Powell’s term is up in May 2026. But Kugler’s exit creates a vacancy that Trump can fill with someone who, like Trump, favors large-scale and immediate interest rate cuts.
That person could, in theory, become the next Fed chair when Powell steps down. Trump may even elect to preview that future role when announcing his appointment, creating a kind of “shadow Fed chair” that many economists have worried could undermine Powell’s authority and effectiveness.
Trump has routinely lambasted Powell and the Fed for keeping interest rates high – a decision Powell has said the majority of Fed governors made because the economy has remained robust and the impact of Trump’s tariffs on inflation remains uncertain. However, that decision to keep rates steady has come under renewed criticism after Friday’s jobs data showed the labor market has been considerably weaker than initially expected over the past several months.
So Trump’s consistent interference in the independent Fed’s policymaking has already thrust the next Fed governor into an uncomfortable position. It may be appropriate to cut rates in September at the conclusion of the Fed’s next meeting – the market overwhelmingly believes the Fed will do just that, and two Fed committee members broke ranks last month to vote for a rate cut. But no matter which way the Trump appointee votes, he or she could be accused of succumbing to politics, undermining the Fed’s independence.
“I already don’t trust the next Fed chair, and I don’t even know who it is,” said Dario Perkins, an economist at TS Lombard, told the New York Times last month.
The Fed prizes its independence. Powell and most economists inside and outside the Fed say that its ability to make nonpartisan and sometimes unpopular decisions remains a key factor in the strength of the overall US economy. The ability to make policy decisions that may hurt jobs but keep inflation in check – or vice versa – has been a hallmark of the Fed.
Case in point: While the Fed was late to realize that post-Covid inflation was a major problem, once it did, officials took historic steps to address it. The monster rate hikes in 2022 were not popular and risked a recession just before the 2024 election. But they did help get inflation back under control.
Trump claims that his economy is strong, and the data has mostly borne that out – with several important caveats – until the jobs report on Friday showed substantial weakening in the labor market.
A strong economy is important to any president, but especially Trump, who is embarking on a grand experiment to levy historically high tariffs, shaking up the global trade dynamics of the past century. Trump has said that his tariffs have not led to significant economic weakness or inflation, but economists say it’s only a matter of time.
The uncertainty Trump is creating by undermining the integrity of the Fed and the government economic data itself could erode business, investor and consumers’ faith in the US economy.
That could also undermine Trump’s key goal of lowering interest rates: A lack of trustworthy data could drive investors out of US Treasuries, sending bond yields higher, and increasing the cost of living for Americans.
“Any questions about government data tends to raise borrowing costs,” said Kelly. “If the president wants lower interest rates, it’s important that people believe in the fidelity of the data. It’s paramount that someone is picked who is viewed as impartial on both sides.”
Rather than addressing the cause of the problem, Trump chose to fire the scoreboard operator. That could make economic matters worse.
“If you’re trying to instill public confidence in both the economy and the data, this is not helpful,” Kelly said.