A Federal Reserve board member resigned and the director of the Bureau of Labor Statistics was fired. What does this mean for the market?

Written by: Wall Street Journal

Trump fired the director of the Bureau of Labor Statistics, and almost at the same time a Federal Reserve board member announced his resignation. This series of personnel changes has caused market concerns, and the independence of the Federal Reserve and the credibility of its economic data are facing unprecedented doubts.

According to a report in Jianwen, Trump ordered the dismissal of Erika McEntarfer, director of the Bureau of Labor Statistics, hours after the release of the July non-farm payroll report, claiming that the employment data was "manipulated" and accusing McEntarfer of falsifying the numbers to make "the Republican Party and me look bad."

Almost at the same time, Federal Reserve Board Governor Adriana Kugler announced that she would resign on August 8, several months ahead of the end of her term. Trump wrote on social media: "'Mr. Too Late' Powell should resign, just like Kugler, who was appointed by Biden, resigned."

Analysts pointed out that the independence of the Federal Reserve and the authenticity of US economic data will be questioned after Trump appoints a new candidate .

Investors and analysts are generally worried that if the objectivity of economic data and the independence of the Federal Reserve are subject to political interference, the United States' "exceptionalism" status may be impacted, which in turn will affect global capital's confidence in the U.S. market.

Unprecedented intervention by data agencies

Without providing evidence, Trump said "important data must be fair and accurate and cannot be manipulated for political purposes" and that she (McEntarfer) would be replaced with "someone more capable and qualified."

Analysts said Trump's decision to fire the director of the Bureau of Labor Statistics shocked the economic community . The agency is responsible for publishing employment and inflation data that form the basis of global asset pricing.

The U.S. Department of Labor confirmed Friday evening that McEntarfer had been fired and that Deputy Director William Wiatrowski would serve as Acting Director. David Wilcox, former head of the Federal Advisory Committee on Economic Statistics, said:

Friends of the Bureau of Labor Statistics, a group of former agency heads, warned that " when other national leaders politicize economic data and undermine public trust in their data infrastructure, the consequences are dire ."

Steve Sosnick, chief market analyst at Interactive Brokers, said:

Friday’s nonfarm payrolls report showed a sharp slowdown in job growth over the past three months, with unusually large downward revisions to employment figures for May and June.

Analysts point out that data revisions of this scale are indeed rare, but it is also unprecedented for a president to fire officials without first investigating the reasons.

The Federal Reserve's independence faces challenges

Kugler's sudden resignation reportedly paves the way for Trump to appoint a successor to Powell, whose term as Fed chairman is due to expire in May 2026.

Trump wrote on his real social media platform, "She (Kugler) knows he (Powell) was wrong on interest rates. He (Powell) should resign too!"

Krishna Guha of investment bank Evercore noted:

Jamie Cox, Managing Partner of Harris Financial Group, said:

Last week, Trump visited the Fed's Washington headquarters and blasted Powell over monetary policy and cost overruns on a $2.5 billion renovation project, a rare public disagreement between the president and the Fed chairman.

“Wall Street will no longer pay attention to these numbers”

Investment institutions have expressed widespread concerns about this series of personnel changes.

If Trump appoints a very dovish head of the BLS, " Wall Street will stop paying attention to the data if they feel it's being manipulated to support the administration's position ," said Sam Stovall, chief investment strategist at CFRA Research.

Jody Calemine, AFL-CIO Communications Director, said:

Christopher Hodge, chief U.S. economist at Natixis, noted:

Juan Perez, Senior Director of Trading at Monex USA, said: