Trump’s Firing of BLS Chief Carries Big Risks, Experts Warn

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Reuters
By Yuval Rosenberg and Michael Rainey

Happy Tuesday! President Donald Trump told CNBC today that he has narrowed down his list of potential successors to Federal Reserve Chair Jerome Powell to four candidates, including Kevin Hassett, director of the National Economic Council, and Kevin Warsh, a former member of the Fed's Board of Governors. Trump said Treasury Secretary Scott Bessent is not being considered for the position and wants to stay where he is.

Here's what else we're watching.

Trump's Firing of BLS Chief Carries Big Risks, Experts Warn

After President Donald Trump unceremoniously fired the head of the Bureau of Labor Statistics following Friday's disappointing jobs report, criticism and condemnation have come swiftly, as economists and politicians warn that the politicization of federal statistics and the agencies that produce them erodes confidence in data that is crucial to both government and business.

"Friday's presidential removal of Bureau of Labor Statistics (BLS) Commissioner [Erika] McEntarfer presents risks to the conduct of monetary policy, to financial stability, and to the economic outlook," JPMorgan Chief U.S. Economist Michael Feroli wrote in a Sunday note to clients, adding that private data providers are no substitute for high-quality federal data.

Feroli noted that the $2.1 trillion market for Treasury Inflation-Protected Securities, or TIPS, depends on Consumer Price Index data from BLS. "As such, the integrity of this data is at least as important as the employment data," he wrote. "Here, even seemingly innocuous technical changes can matter."

In a piece for The Washington Post on Tuesday, top economic advisers to Presidents George W. Bush and Joe Biden warn that the firing "will come back to haunt Trump" given that government and business leaders rely on the data to make decisions.

Politicizing the statistics and questioning the integrity of federal workers "compromises the ability of policymakers in the executive branch, Congress and the Federal Reserve to properly analyze the state of the economy and develop the best policies to ensure prosperity," write N. Gregory Mankiw, who led the Council of Economic Advisers under Bush, and Cecilia Rouse, who was CEA chair under Biden. "Federal statistics may seem like an arcane topic that interests only econ wonks like us. But the truth is that these statistical agencies have made it possible for business leaders and policymakers alike to analyze credible data and plan for the future. And that is something everyone should care about."

Trump administration slams BLS: Some administration officials and GOP lawmakers have defended the move and the president's baseless claim that the employment data was "phony" and "rigged" to make him and Republicans look bad. (Never mind that Trump and administration officials proudly touted numbers from the same agency when they told a story they liked.)

In television interviews over the weekend, Kevin Hassett, the director of the National Economic Council, claimed that BLS data has become "very unreliable" and that the size of recent revisions to the data indicate a problem that needs to be fixed. The July jobs report revised job growth for May and June sharply lower, cutting a combined 258,000 jobs from the initial numbers reported for those months, leaving a total of 33,00 jobs added over those months. The revisions were the largest in decades, excluding recessions - though one analysis shows that BLS's first estimates of payroll employment have gotten more accurate over time.

"The data can't be propaganda," Hassett said in an appearance on "Fox News Sunday." "If the data aren't that good, then it's a real problem for the U.S. And right now the data are - have become very unreliable with these massive revisions over the last few years."

When pressed repeatedly in an interview with NBC News's "Meet the Press" for any evidence that the data was "rigged" or manipulated for political reasons, Hassett argued that "the number itself" is the evidence and that he hadn't seen revisions like this in 40 years of following the data. He said that there have been several large revisions since the Covid-19 pandemic that could make people question the reliability of the numbers.

Kansas Republican Sen. Roger Marshall, who voted to confirm the fired BLS chief last year as part of a bipartisan 86-8 vote, said in a social media post that news reporters were missing the point. "Legacy media's wrong on why the BLS chief was fired," he wrote. "It's not 'bad numbers' - it's incompetence. She inflated job numbers by 800K pre-election, then missed by 250K last two months. How can the Fed make sound decisions with such flawed data? Trump was right to act."

The White House also accused McEntarfer of a "lengthy history of inaccuracies and incompetence" and said her work "has completely eroded public trust in the government agency charged with disseminating key data used by policymakers and businesses to make consequential decisions." The White House argued that the overly rosy initial jobs reports for May and June has enabled the Federal Reserve to hold off on cutting interest rates, counter to Trump's stated desire for dramatically lower borrowing costs.

Defending the data: Economists and former BLS officials have defended the agency and noted that rigging the numbers would be extremely difficult. The report is compiled by a large team of economists and statisticians, and the commissioner doesn't see the jobs data until it's already finalized, just a couple of days before it is released to the public. Erica Groshen, the BLS commissioner from 2013 to 2017, told the Associated Press that she was told that, if asked to describe a cup as half-empty or half-full, the bureau says "it is an eight ounce cup with four ounces of liquid."

Economists by and large also say that the revisions that have come into question reflect a process meant to ensure accuracy and transparency rather than any bias. Still, BLS has reportedly seen declining response rates to its surveys. "A decade ago, about 60% of companies surveyed by BLS responded. Now, only about 40% do," the Associated Press reports. "And earlier this year the BLS said that it was cutting back on its collection of inflation data because of the Trump administration's hiring freeze, raising concerns about the robustness of price data just as economists are trying to gauge the impact of tariffs on inflation."

Some experts have suggested that the BLS data-collection processes do need updating - and that lawmakers need to invest in modernizing the agency's methods. The AP's Christopher Rugaber points out that a July report from the American Statistical Association said that U.S. government statistical agencies have seen an inflation-adjusted 16% drop in funding since 2009.

The bottom line: Trump said he would name a new BLS commissioner this week. "If the president's nominee to lead BLS is widely viewed as a partisan actor who will seek to bend data to the president's will, there are big stakes for markets and policy," Axios's Neil Irwin writes.

Trump Threatens 250% Tariff on Pharma Imports

President Trump said Tuesday that he plans to impose tariffs on pharmaceutical imports as soon as next week as part of his effort to boost domestic manufacturing, with the levies potentially reaching as high as 250%.

"We'll be putting initially a small tariff on pharmaceuticals," Trump told CNBC. "But in one year, one and a half years maximum, it's going to go to 150% and then it's going to go to 250%, because we want pharmaceuticals made in our country."

Saying he is focused on sector-specific tariffs like those he has already imposed on steel and autos, Trump also threatened to slap tariffs on semiconductors and computer chips "within the next week or so."

Targeting pharma: Trump made a similar threat against drugmakers in early July, when he said he would impose a 200% tariff on pharmaceutical imports "very soon."

Since that date, multiple drugmakers, including Merck, Roche, and Eli Lilly, have announced plans to invest upwards of $250 billion in new facilities in the U.S.

However, according to industry analysts who spoke to CNN's Tami Luhby, those investments are unlikely to lower costs for U.S. consumers or reduce the country's reliance on imported goods. Many of the investments announced by drugmakers were already in the pipeline, analysts told Luhby, and there's no guarantee that the full investments pledged by the companies will ever come to pass.

"They are just reiterating it because they're probably trying to make sure that the president is aware that they have manufacturing here and that they are listening to him," Evan Seigerman of BMO Capital Markets said. "They're playing ball. It's all about the deal with President Trump."

Another problem is that the majority of medicines used by Americans are generics, and the margins on those products are so small that it would be difficult for manufacturers to operate in a high-cost country like the U.S.

"It's highly, highly unlikely we will see generic production expand in the US without significant incentives for these companies," Erin Fox, associate chief pharmacy officer at University of Utah Health, told Luhby. "If we do move production on some drugs to the U.S. because we want to be sure from a national security standpoint, that's fine, but that's going to cost money."

Number of the Day: $1.5 Billion

Heavy-equipment manufacturer Caterpillar Inc. said Tuesday that it expects to face tariff-related expenses of up to $1.5 billion this year, including $500 million during the third quarter alone. Analysts at Baird estimate that the costs will reduce profit margins by about 3%, Bloomberg reports.

The news comes on the heels of an announcement by Ford, the largest American automaker, that it paid $800 million in tariff-related expenses in the second quarter of 2025, helping swing the company to a quarterly loss for the first time since 2023. The company noted that tariffs are expected to reduce its profits by $3 billion this year.

The latest numbers serve as a reminder that the tariffs being imposed by President Trump are paid by U.S. importers, even if the ultimate cost is spread across various participants throughout the supply chain.

"Despite the president's insistence that tariffs are paid by other countries or non-US companies, taxes on imports are paid either by the importer or by an intermediary such as a customs broker acting on the importer's behalf," Bloomberg's Laura Curtis and Augusta Saraiva wrote Tuesday. "Studies have shown that the burden of tariffs, ultimately, is diffuse, with exporters, importers and consumers all bearing some of the cost."

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