- Weak job creation data for July compounded by downward revisions for May and June
- Figures question the strength of the US economy and the value of the data
- Trump responds by firing the head of the Bureau for Labor Statistics
- That again raises the issue of his style of government and whether investors want exposure to it
- Poor jobs data could yet give Trump the interest rate cuts he craves
“Barely a week after a poll showed that 89% of economists surveyed said they had concerns over the quality of US economic data, President Trump has sacked Dr. Erika McEntarfer, commissioner of the Bureau of Labor Statistics (BLS),” says AJ Bell investment director Russ Mould.
“The survey could suggest he had just cause to make the change, especially as the monthly non-farm payrolls data remains subject to substantial revisions after initial publication, but it may be that those self-same economists – and investors – will be less than pleased by both the firing and the underlying message from the jobs figures.
“Some will defend Trump’s move, given how volatile the non-farm payrolls figure can be, especially in terms of the revisions that follow in the next two months. The jobs data may be just one part of a complex economic picture, but the US Federal Reserve has two mandates, employment being one and inflation the other. If the numbers going into the central bank’s thought processes are unreliable, then the risk of a policy error coming out of the other end can only be increased.
“The BLS has revised down its initial estimates for US job creation substantially for the second quarter of 2025.
Source: BLS data
“Trump is taking the view that this is designed to make him look bad and has opted to shoot the messenger, even if there is precious little difference in the average monthly revision to see, when his first term in office is compared with that of his successor, Joe Biden. This is despite the debilitating impact of Covid-19 in early 2020 in the final year of Trump’s first term. The absolute number of downward revisions was also similar: 22 during 2017-20 under Trump and 21 during 2021-24 under Biden.
Source: BLS data
“Investors shied away from the dollar and US equities on Friday, perhaps because of this latest example of his style of government, which some would see as capricious at best and even dictatorial at worst, given his penchant for acting by Executive Order rather than means of legislation approved by Congress.
“But there could be other reasons why investors were spooked by the numbers, even if they may be less inclined to take them entirely at face value.
“The July 2025 payrolls number was much weaker than expected, with just 73,000 added. More telling, perhaps, were the downward revisions to May and June, of 120,000 and 133,000 jobs, respectively.
“It would be entirely understandable had American corporations held back from taking major employment or investment decisions during the second quarter, given the uncertainty created by Trump’s tariff announcements and the manner in which deadlines were extended and negotiations conducted. The numbers could therefore snap back in the third and fourth quarters as trade deals are struck, final tariff levels established, and boardrooms get a clear view of what the new world looks like.
“But the weak jobs numbers may still matter for three reasons.
“First, downward revisions tend to come during economic slowdowns or even a recession. Again, US companies could be holding back as they wait for the tariff picture to become clearer.
“Second, the downward revisions have been huge. June was the eighth biggest downward revision since 2000 and May the tenth. To cap it, March was the eleventh largest drop from the initial estimate for job creation. The appearance in the list of June and September 2023 and January and June 2024 in the list of the twenty worst downward revisions may give grounds to question the reliability of the data, but the trend is ominous. The only months since January 2000 that have shown bigger downward changes all hail from 2008-2009 and 2020 when the Great Financial Crisis and Covid-19 respectively were battering the US economy. This is not good company to keep.
“Third, ironing out the month-to-month noise by using a twelve-month rolling average for non-farm payrolls revisions shows that America is mired in streak of 31 consecutive downward months, that dates back to December 2022. The only comparable losing runs are the twenty-two months, Great Financial Crisis-afflicted spell from January 2008 to October 2009, the thirteen-month slide between November 2016 and November 2017, and the twelve-month span of March 2020 to February 2021 that covered Covid.
“Again, these are not encouraging precedents. Perhaps the sugar rush provided by the post-Covid recovery, zero interest rates, Quantitative Easing and welfare support programmes is easing off and tariffs and trade uncertainties, plus something vaguely akin to a normalisation of monetary policy, are starting to weigh.
Source: BLS data
“The ultimate irony may be that weaker jobs numbers could be the catalyst for what Trump really craves, namely interest rate cuts from the US Federal Reserve. Inflation is still running above the Fed’s 2% target, and the personal consumption expenditure benchmark is showing no improvement at all in 2025, but a jobs downturn could easily be a trigger for embattled chair Jay Powell and colleagues to cut headline US borrowing costs.
“Those cuts could, though weigh on the dollar. Some investors already seen keen to diversify away from exposure to the US currency, judging by its consistent slide through 2025 and the strength of gold and Bitcoin. Perhaps this owes something to Trump’s style of government, perhaps it owes more to worries over the US economy and the impact upon it of its policies, but for the moment the dollar is doing exactly what it did during the Republican President’s first term – go lower after an initial gain upon his election victory.
Source: LSEG Refinitiv data
