The week of July 28, 2025: McEntarfer fired “Pour encourager les autres,” antitrust, tariffs, net zero, and more.
Skeptics of zombie McLinleyism have been already somewhat surprised that Trump’s tariff offensive had not weighed more heavily (some inflationary twitches aside) on the economy to date, not so much because of the tariffs themselves (many of which were on hold) but because of the uncertainty the switch on tariff policy had introduced into the economic landscape. Without knowing what the final levies would be, companies would not know what effect the tariffs might have on their plans. Capital expenditure that would make sense in a low tariff environment might now be a mistake. The more prudent course of action, particularly for businesses certain that they were destined for some kind of hit, would be to press pause on some new investments and, maybe, some existing spending too. Lower corporate spending typically means fewer jobs.
Meanwhile, while some companies will benefit from the movement of manufacturing to the U.S., the lack of certainty about where tariffs would eventually settle — and how companies would react to them — meant it would be premature for them too to start boosting their spending on their possibly brighter future. So, no new jobs there either. As for those foreign companies planning (they say) to invest in the U.S., the time between announcing a plan and actually starting work on it in the would certainly be more than a month or two.
So…
Meghan McArdle, writing in the Washington Post:
The Bureau of Labor Statistics, a unit of the Labor Department, revised its estimates for May and June payrolls sharply downward, by more than 250,000 jobs, and estimated that the economy added only 73,000 jobs in July, well below analysts’ expectations. Virtually all these new jobs came from health care and social services. The numbers contain no sign of the manufacturing boom that President Donald Trump has promised.
As implied above, I would not have expected the switch (or promised switch) to higher tariffs to have generated a manufacturing boom by now (whether it ever will a different question), although the prospect of those tariffs might have discouraged or postponed investment that might have otherwise happened.
That would have been easy enough to explain. The administration has previously conceded that higher tariffs might involve (temporarily) higher prices en route to the Golden Age. By extension, the same could be true of all those golden jobs. It would have been easy enough to argue that the disappointing manufacturing jobs were just a blip as the country headed toward the golden uplands.
Instead, the president chose to fire Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, claiming on Truth Social that the “Jobs Numbers were RIGGED in order to make the Republicans, and ME, look bad.” He also cited a downgrade of jobs numbers just after the election, “A TOTAL SCAM.”
Is there any evidence of this? No. Just Trump’s “opinion.”
Res ipsa loquitur, I suppose, but the res was not quite what Trump said it was. But where was the res?
As the New York Times’ Peter Baker pointed out:
“Days before the election, she came out with these beautiful numbers for Kamala,” Mr. Trump said, referring to his opponent, Vice President Kamala Harris. “Then right after the election — I think on the 15th, Nov. 15 — she had an eight or nine hundred thousand-dollar massive reduction.” What he meant was that the bureau revised downward its estimate of how many jobs had been created by 800,000 or 900,000 only after the election so as not to hurt Ms. Harris’s chances of victory.
Except that it actually happened the exact opposite way. Dr. McEntarfer’s bureau revised the number of jobs created downward by 818,000 in August 2024 — before the election, not after it. And the monthly report her bureau released just days before the election was not helpful to Ms. Harris but instead showed that job creation had stalled. The White House offered no comment when asked about the president’s false account.
Needless to say, it was not enough for the president to take aim at the BLS: “Jerome “Too Late” Powell is no better!” If the old BLS numbers were evidence of a strong economy “too late” seems a little inconsistent, but still…
The Washington Post’s McCardle quoted William Beach, a Trump nominee, who served as bureau commissioner during the Trump administration. He referred to the firing of McEntarfer, a Biden nominee (approved 86-8 by the Senate, including by a Senator J.D. Vance), as “totally groundless” and “a dangerous precedent.” Beach’s resume includes serving as the Chief Economist for the Senate Budget Committee, Republican Staff, and a stint as a Fellow in Economics at the Heritage Foundation.
Writing for the Wall Street Journal, Matt Grossman noted:
The BLS is a part of the Labor Department, but operates at arm’s length from what BLS staffers call “main Labor,” to insulate data integrity from political interference. As commissioner, McEntarfer would have been one of the few BLS staff to have regular interactions with the broader Trump administration, former officials said.
But its ability to gather information of late has been made more difficult by factors ranging from staffing shortages to the fact that fewer people return the survey forms since the Covid lockdowns (the unintended consequences of that piece of clumsily executed state intervention keep piling up), to the structural differences that mean the monthly numbers will always be subject to revision. Dominic Pino explains here:
There is a way to get very reliable information on all of this, and that’s to look at the data for unemployment insurance. But those data only come out once a year, for tax purposes. So the BLS uses that data to revise its monthly estimates after the fact, along with a different quarterly survey that is also of higher quality.
But people don’t want just one really good report on employment per year. They want to know every month. They want to be able to track trends. So the BLS does the monthly jobs report under the full knowledge that it isn’t as precise as other methods that are less frequent.
It can’t just put out a jobs report that says “good” or “bad” or “okay.” It has to report a number. All of those questions, all of that confusion, ultimately has to boil down to a number. Every month.
The original estimate for the number of jobs in the month of June was 159,724,000. Then, after the revision with better data, it was 159,466,000. That’s a 0.161 percent correction, based on higher-quality information that didn’t exist at the time of the original estimate.
The Federal Economic Statistics Advisory Committee (FESAC) was a team of unpaid statistical experts that was working to solve the issue of low response rates, among other things. FESAC was disbanded in February by Secretary of Commerce Howard Lutnick.
Given that the concerns over the deterioration in the BLS data referred to above were no secret thatseems strange (although there is evidence that the deterioration in the quality of the estimates has been overstated). While the reduction in number of state employees is often to be welcomed, was now (since January) the best time to cut BLS headcount by 15 percent? According to Reuters, “partly as a result,” BLS will cease calculating about 350 components of the Producer Price Index.
Partly can do a lot of work in stories such as these, but still…
As ought to be self-evident, the reliability of economic data matters in countless ways, and if the unreliability comes to be attributed partly to political interference the malign consequences will be even worse, and they will not be confined to employment statistics.
Take inflation.
If inflation figures are less accurate, or if investors suspect they’re subject to political influence, it could chill the $2 trillion market for Treasury Inflation-Protected Securities, or TIPS. Investors’ return is largely determined by what government statisticians report. And owners of the much larger markets for unprotected bonds and mortgage securities watch TIPS prices to glean how much inflation to expect in the future through so-called breakeven rates.
The U.S. has, as we all know, vast amounts of debt, and regularly has to issue large amounts more of it, either because existing debt has matured or because the country is running a deficit that demands ever more IOUs. Investors in “unprotected” inflation-proofed bonds will, when they fix the amount they will demand for lending Uncle Sam, calculate a price that will include an amount that reflects their expectations of inflation, a phenomenon that could reduce the real value of the money they have loaned. And if those lenders have some reason to believe that the inflation numbers even might be understated, are they more likely to err on the side of caution when pricing their debt, or give the government the benefit of the doubt? It is a question that answers itself.
And it is made more pressing by the fact that politically driven manipulation of economic data is the mark of, say, such stellar creditors as pre-Milei Argentina, Turkey, or of a China, countries ought to be charged more for their debt. This is not a neighborhood where the U.S. should be anywhere close to being, or, a mere immediate concern, where Uncle Sam’s actual or prospective lenders, even if far too gloomily, think the U.S. is headed. In a bad mood, they can be a paranoid bunch (and a good mood they can be absurdly optimistic, but that’s a different topic).
Moreover, such questions are not ones that the U.S. should want to see asked about its data at a time when the status of the dollar as a reserve currency, a massive strategic and economic asset, has come under some fire.
The Wall Street Journal:
Less-reliable inflation data also could raise suspicions among tens of millions of retired and disabled people whose Social Security checks are indexed to inflation. Ditto for taxpayers. All manner of payments and exemptions, from income brackets to deductions to retirement-account contribution limits, are indexed to the cost of living. Millions of state and local retirees’ pension benefits are, too.
And if they do not trust the inflation numbers, are they more or less likely to apply political pressure for higher payments, increasing the pressure on the budget even more?
Something similar goes for employees deciding how high a raise to push for, or for businesses deciding what prices to set.
There are many ways of increasing inflationary expectations, but undermining the reliability of the state’s inflation data is one of them.
And if businesses deciding on the viability of possible projects have doubts about the statistics showing the economy’s strength, are they more likely to err on the side of caution? Another question that answers itself.
There is another danger too. If McEntarfer has been fired for being the bearer of bad news, that will act as an incentive to other people within the administration not to make the same “mistake,” increasing the danger that the president is not told the news that he does not want to hear, the news that, in many cases, is the news he most needs to hear.
Capital Questions
Dominic Pino held the inaugural Capital Questions webinar, the first in a series continuing this fall. We discussed tariffs, trade dynamics, and what to expect next.
Please see the video here.
The Capital Record: Sound & Vision
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which is hosted by financier David L. Bahnsen makes use of another two formats to deliver Capital Matters’ defense of free markets. The original podcast continues, but if you want to watch David talk, please click on the YouTube link.
The 244th episode: (Podcast/YouTube)
David unpacks some really important lessons on the current state of U.S. manufacturing: why the electoral and the political cannot be confused with the economic, and why neither should be confused with the cultural. There is something in here for everyone to be bothered by, so jump on in to a reality check about U.S. manufacturing.
The 245th episode: (Podcast/YouTube)
David takes a look at certain efforts to undermine the spirit of the law, whether or not the letter of the law is followed, and what it means for our financial markets. This is a golden issue for Capital Record, an optimal application of where freedom and virtue must be juxtaposed.
The Capital Matters week that was . . .
Tax
Ohio has just joined the rising “flat tax revolution.” Since mid-2021, six states have revised their tax codes and adopted a flat tax. When Governor Mike DeWine signed Ohio’s new budget, it became the 15th state to abandon graduated, or “progressive,” income taxes in favor of the flat-rate model. And with a 2.75 percent rate, Ohio’s flat tax will be the second-lowest in the country. The move is good for Ohio, and the movement bodes well for the nation.
Fiscal Policy
The law also includes several underreported provisions that address some of the nation’s biggest challenges, including education outcomes, college debt, and health-care costs…
Donald Trump’s legislative legacy will be as a tax-cutter. He signed the Tax Cuts and Jobs Act in 2017 and signed the One Big Beautiful Bill Act this year that made most of the TCJA’s provisions permanent.
But apparently he wants Americans to think that the “Golden Age” will come because of tax increases…
Media
It would be interesting to know how a U.S. court would react if an equivalent to this proposed idea from Ofcom, a British regulator, were to be enacted by federal or state government in the U.S…
PBS and NPR finally got their federal funding cut — long overdue. What happens next?
Antitrust
As the Biden administration walked out the door, it left behind a flood of antitrust activity — dozens of actions rushed into motion in its final months, many of them built on shaky legal ground and thin economic logic. Now, the Trump administration is beginning to dig out from under that pile — and, in the process, is returning antitrust policy to something closer to normal focus on what’s best for consumers and not career-seeking regulators. Already, some of the most high-profile cases have been axed, and one can hope that the new Federal Trade Commission will follow up with similar decisions in the future…
Net Zero
More of those running the “race” to net zero greenhouse gas emissions may be getting a little weary…
Tariffs
The EU seems to have done no better than Japan with Trump, and considerably less well than the United Kingdom itself, which suffers only a 10 percent tariff rate on trade to the United States, rather than 15 percent….
Central planners, such as those trying to design an industrial policy, are not known for their ability to think everything through. That’s not always their fault. Life is complicated, business is complicated. What is their fault is their belief, let’s call it their fatal conceit, that they can think everything through.
Even so, there are occasions when not too much thinking goes on, either…
With President Trump’s new tariff strategy to take effect on August 1, countries hoping to strike a deal with the U.S. have to act quickly or face tariffs on their exports ranging from 15 percent to 50 percent. Trump already announced 35 percent duties for Canada, 50 percent for Brazil, and 30 percent for Mexico. Other countries — Japan, Indonesia, and the Philippines — have already reached arrangements to reduce certain duties. The EU joined this group on Sunday…
One underdiscussed part of President Trump’s tariff executive order from Thursday is that it creates a new effort to punish what the order calls “transshipment” to avoid the tariffs…
The good news for consumers is that U.S.-based companies have so far done their best to avoid passing on these costs to car buyers, manufacturing as many cars as they could before the tariffs hit (there’s a message there). They have also absorbed much of the cost: Ford’s current expectation is that its prices will only rise by 1 percent this year. Beyond that, it cannot say…
Of course, eating most of the higher tariff costs will mean that Ford’s profits will be lower than would have been the case. That could mean less money to pay and hire workers, less money to invest in new productive capacity, less money to spend on innovation, and less money to pay out to shareholders.
Rare Earths
One key element (so to speak) in U.S. efforts to end its reliance on China for the supply and processing of rare earths and other critical minerals will, surprise, surprise, be deregulation, whether with regard to the mining of new supplies or their processing. Scrabbling around in the back of the couch is also to be encouraged.
Economics
Abundance Is Not Market-Friendly: That’s my verdict on Ezra Klein’s and Derek Thompson’s latest book, which is part of a larger “abundance liberalism” movement that some on the left are trying to get off the ground. They have won some praise for rejecting the “degrowth” agenda, but as I say in my review of the book for Law & Liberty, I expect more from policy writers than merely being against poverty…
For the latest episode of my American Institute for Economic Research podcast, Econception, I talked to Professor Jeremy Horpedahl of the University of Central Arkansas about his one-man crusade against online economic doomerism. He regularly posts on X to dispel misplaced romanticism for the past and class warfare talking points from the left and the right. We discuss why such myths are popular and what’s effective for countering them…
The Fed
The Federal Open Market Committee, the monetary policy-setting arm of the Federal Reserve, voted 9–2 on Wednesday to keep the federal funds rate at 4.25 to 4.5 percent. FOMC decisions are usually unanimous, and this was the first time there has been more than one dissenting vote since 1993. Governors Chris Waller and Michelle Bowman wanted a 0.25 percentage point rate cut.
Press coverage has highlighted the disunity.
It’s not really a big deal. It is little more than a superstition to believe that central bank decisions must be unanimous…
Unemployment Statistics
On its face, it sounds like the Bureau of Labor Statistics has an easy task: Just count the jobs. A lot of people have jobs, some people don’t, they’re all out there, just count them up.
Of course, it can’t literally go and count every person each month, so it uses statistical methods to survey employees and employers. But people have been doing surveys forever. Just send them out and run it through a computer and write the report. Easy.
No. Not at all. Not even close…
This morning, the Bureau of Labor Statistics announced weaker-than-expected July jobs numbers, finding a gain of 73,000 jobs vs. expectations of 100,000. The report also downwardly revised prior months’ numbers. When I looked at the report, I thought the mild miss made it hard to draw too many conclusions, so I didn’t think it was worth getting overly excited about. President Trump clearly disagreed…
Trump is mad about inaccurate jobs reports. One of the top reasons the Bureau of Labor Statistics’ jobs reports have been more error-prone in recent years is that the response rate to one of its most important surveys fell off a cliff during Covid and has not recovered. The Federal Economic Statistics Advisory Committee (FESAC) was a team of unpaid statistical experts that was working to solve the issue of low response rates, among other things. FESAC was disbanded in February by Secretary of Commerce Howard Lutnick…
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