ECONMIC POLICYTrump Fired BLS Chief, but Skipped Causes of Weak Jobs Report
While the July U.S. jobs report last week was surprisingly bad—sending U.S. equities, bond yields, and the dollar all sharply lower—the reasons behind the labor-market developments have been pretty easy to see. The incontrovertible facts notwithstanding, Trump has fired a highly regarded, long-term government employee who received bipartisan backing to oversee the country’s labor-market statistics, bizarrely, and falsely, accusing her of “rigging” the figures he found to be inconvenient. Eroding trust in U.S. economic data and policymaking is a recipe for slower economic growth and even more challenging policymaking, whatever the data may say.
While the July U.S. jobs report last week was surprisingly bad—sending U.S. equities, bond yields, and the dollar all sharply lower—the reasons behind the labor-market developments have been pretty easy to see. What remains murkier is how politics, such as President Donald Trump’s pressure campaign on the U.S. Federal Reserve and his sudden decision to fire the Bureau of Labor Statistics (BLS) commissioner, will affect the economy and markets in the future.
The most recent jobs report [PDF] showed that non-farm employment rose by seventy-three thousand. That is a bit softer than expected, but the real shock came from the revisions to the previous two months: a reduction of 258,000 jobs. The unemployment rate rose from 4.1 percent to 4.2 percent in July, though economists noted the next decimal places which underscored a worrying trend upward (to 4.248 percent to be precise). Trump alleged without evidence that the numbers were “rigged” and made the extraordinary announcement that he had fired BLS Commissioner Erika McEntarfer in response.
But it’s a combination of government policy priorities—including immigration, government efficiency, and trade—along with the rapid development of artificial intelligence (AI) that explain a lot of what led to the ongoing slowdown in the U.S. labor market. This has also contributed to sticky wage inflation, which hasn’t yet followed the typical pattern of moderating in response to a cooling labor market.
To get to the core of the job report numbers, let’s start with immigration. President Trump campaigned on a pledge to strengthen the border and deport undocumented immigrants. Since taking office, deportations have indeed been ramping up. At the same time, programs to accept certain immigrants, enacted under President Joe Biden, are being wound down and U.S. border crossings have collapsed.
Together, these policies have and continue to reduce the country’s labor supply. Undocumented immigrants make up about 5 percent of the U.S. workforce, with larger shares represented in industries such as agriculture, construction, and hospitality. According to Pew Research, undocumented immigrants and immigrants under a temporary humanitarian or asylum status in 2022 totaled roughly eleven million people.
