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President Trump just fired Dr. Erika McEntarfer, Commissioner of the Bureau of Labor Statistics (BLS), for obvious political purposes for allegedly manipulating the monthly jobs report for “political purposes.”
Dr. McEntafer is a distinguished economist, running an agency staffed by over 2000 extraordinarily dedicated professionals. The BLS was founded in 1884. In 1888, it was established as an independent department under the Department of Labor Act (25 Stat. 182). The agency has spent 141 years providing essential, unbiased economic data on the performance of our economy. These data include the number of new jobs added by the economy, our nation’s unemployment rate, and the Consumer Price Index (CPI), which measures the economy’s rate of inflation.
Dr. McEntarfer holds a PhD in economics from Virginia Tech. Prior to being named BLS Commissioner, she worked at the U.S. Treasury, the Bureau of the Census, and the Council of Economic Advisers. She was overwhelmingly confirmed as BLS Commissioner by the U.S. Senate.
So why was Dr. McEntarfer fired?
The answer has nothing to do with anything she did personally. The BLS simply issued its routine labor report. But the report shows the economy is in trouble. It added only 73,000 jobs in July. It also added 258,000 fewer jobs in the two prior months compared with what the BLS previously reported. This revision was larger than normal, but large revisions occur frequently due to lags in data collection — lags due, in part, to Congress’ long-term underfunding of the BLS as well as DOGE’s buzz-saw culling of the federal workforce, including that of the BLS.
The Inconvenient Truth about Employment Growth
Here’s a chart from the NY Times. It tells us two things. First, monthly employment changes are highly variable. Second, employment growth is currently very slow, which may signal a recession.
The President doesn’t like facts he doesn’t like. When they appear he invents his own. In this case, he wrote on Truth Social, “The Economy is BOOMING under ‘TRUMP.’”
Boomeranging may be more like it. Things were economically dicey enough before the President decided it was time to replace Commissioner McEntarfer with what will surely be a political lackey. If that lackey succeeds in overriding the BLS staff’s measurements, we’re in deep trouble. This is particularly the case with respect to the CPI. Understating inflation, which is surely heading our way due to the President’s economically suicidal tariffs, will depress financial markets, reduce real Social Security benefits, and raise everyone’s taxes — potentially far more than they were cut in the just-passed, hugely overhyped budget bill.
If lenders can’t count on learning the truth about the degree to which their loans are being repaid in watered-down dollars, they will add a risk premium to the interest rates they charge. Hence, look for McEntarfer’s firing to raise interest rates. If rates rise substantially, we’ll see major declines in both bond and stock markets. The associated decline in wealth will reduce consumer spending as will fear of under-indexation of Social Security benefits and bracket creep.
Over 70 million Social Security recipients expect proper annual inflation adjustments to their Social Security benefits. If they start worrying the system will be further under indexed (It’s already under indexed due to a very significant lag in calculating the adjustment.), they’ll lower their spending.
Bracket creep references being pushed into higher tax brackets by inflation. This is prevented by annual adjustments of tax-bracket levels based on the growth in the reported CPI. But if the CPI, properly calculated, rises by, say, 5 percent, but Trump’s new BLS Commissioner declares inflation was, say, only 2 percent, all of us will find ourselves in higher than appropriate tax brackets paying higher than appropriate taxes. This outcome or even the fear of this outcome will give households more pause when it comes to making purchases.
Do Tax Cuts in the Big, Beautiful Budget Bill Make Recession Fears Silly?
Republican members of Congress are trying to outcompete the President when it comes to lying. Here’s Congressman Smith, Chair of the House Ways and Means Committee, on the One, Big, Beautiful Bill. He declared it “The Largest Tax Cut in American History.” If this were remotely true, the recessionary impact of firing the BLS Commissioner might be second order. It’s not.
See the chart below from the Joint Committee on Taxation. The modifications to the Tax Cut and Jobs Act, which everyone knew would be renewed, are small. The Big, Beautiful Budget (BBB) bill is neither big nor particularly beautiful. Instead, it’s a big deal about very little.
The black bars show you the average taxes you would have paid in 2027 given your income range had Congress simply extended prevailing tax rules. The colored bars show the average taxes you’ll pay in 2027 under the BBB. The difference is very small. For the poorest one fifth of Americans, the BBB represents a tax hike. Any American thinking they’ll experience “the largest tax cut in American history” starting next year will be sorely disappointed.
The BBB does do one thing worth writing home about. It eliminates healthcare coverage for roughly 17 million Americans and, by extension all of us. Take a read of this warning about your own healthcare coverage and the BBB care of former Supreme Court Justice, Sandra Day O’Connor.
Related: When a Supreme Court Justice Said ‘I’m Uninsured’—What It Meant Then and Now