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Commentary: How markets will punish Trump if he fudges the economic data

Yahoo

27 minutes ago

Yahoo

Commentary: How markets will punish Trump if he fudges the economic data

President Trump is laying the groundwork for replacing real economic data with his own numbers. It's a terrible idea that will blow up in his face if he tries it — and cause the Trump presidency more damage than any legitimate numbers could. Trump fired the economist in charge of the Bureau of Labor Statistics on Aug. 1 after the latest employment report showed a sharp slowdown in hiring. The problem isn't the data or the economists who produce it. The problem is that, right on schedule, Trump's disruptive policies are messing up the economy. His tariffs are raising costs and jamming up business operations with new inefficiencies. His workplace raids, meant to ensnare unauthorized migrants, are reducing the labor supply and leaving some companies disastrously short of workers. After firing the BLS commissioner, Erika McEntarfer, Trump said in a social media post that she 'rigged' the job numbers to make him look bad. Trump specifically cited revisions in the jobs data for May and June that cut total employment by 258,000. That put average job growth during the last three months at an anemic 35,000 — 80% below the average pace of job growth during Joe Biden's last year as president, an underperformance that Trump must find intolerable. There are legitimate concerns about the quality of the surveys BLS conducts to compute the jobs data. Those are huge surveys relying on accurate and complete responses from thousands of firms and regular people. The methodology is complicated. Trump's own cutbacks to the agency make mistakes more likely. One of the main reasons BLS revises the data in the first place is to provide more accuracy as it refines the results of a given month. The downward revisions for May and June were large, but hardly unprecedented. Trump isn't talking about any of that. The employment numbers aren't rigged, and the few serious economic people in Trump's administration — Treasury Secretary Scott Bessent, White House economist Kevin Hassett — ought to be telling him that. A lot of economic data is unflattering to Trump, however, and there's a good chance it will get worse as tariffs and migration raids further stifle the economy. Trump acts like he knows it, and has been thinking for some time about how to provide alternate data that's more flattering to the Trump economy. For most of his second term, Trump has been raging about Federal Reserve Chair Jerome Powell, demanding that the Fed slash interest rates and musing about firing Powell. Trump has also floated the idea of appointing a 'shadow' Fed chair who would give more upbeat assessments of the economy than the Fed's sober analysis, and perhaps replace Powell when his term expires next Trump's commerce secretary, Howard Lutnick, wants to change the way the government calculates economic growth. In June, the BLS, which also calculates inflation data, said it was reducing the collection of pricing data in some parts of the country. Starting Aug. 14, it will cut the number of wholesale prices it measures. The agency says staffing shortages are the main reason it's dialing back data collection. Trump, of course, has slashed staffing at myriad government agencies as part of the so-called DOGE efficiency commission's work. Trump makes no secret of seeking to exert maximum control over all facets of government, including agencies established to be independent of political manipulation. He could very well co-op economic data by putting loyalists in charge of the relevant agencies and instructing them to make the data friendlier. He clearly wants a Federal Reserve that will juice the economy on his command, and if he appoints the right people for the rest of his presidential term, he might get that too. If any of that happens, it will backfire, maybe spectacularly. The simple reality is that nobody, not even the president, can fool markets, at least not for very long. Official government data is important, but businesses, investors, and consumers rely on thousands of data points that tell them almost everything they need to know about how the economy's doing. Presidents have tried many times to generate a counternarrative meant to persuade voters they're better off than they think they are. It never works. Ordinary workers know how far their paycheck stretches and whether they're getting ahead or falling behind. Most can tell you that without knowing whether the inflation or unemployment rate is going up or down. Businesses know what's happening with their order book and cash flow, and spend more or less accordingly. Investors read pricing signals the government can't control and buy, sell, or hedge based on what they see. The bond market is the ultimate arbiter of economic truth, and right now it's expressing concerns about the Trump economy and Trump's own policies. Joe Brusuelas, chief economist at RSM, points out there's a 'risk' or 'fear' premium in markets right now that's pushing long-term interest rates about 0.65 percentage points higher than they'd otherwise be. That interest rate premium is the extra amount investors demand in order to lock up their money in longer-term bonds. It compensates them for what they think is the risk of higher inflation in the future, along with uncertainty over other factors that could affect the value of their investments. The current term premium is not historically high. But it's higher than it has been for most of the last 15 years. And not all of it involves Trump's policies. Last fall, for instance, long-term rates rose by about a full point while the Fed was cutting short-term rates by a full point. That was a very unusual move, suggesting investors foresaw higher inflation over a five- to 10-year time frame and demanded higher rates to buy bonds maturing during that time. Still, Trump has inherited a dyspeptic bond market, and his tariffs clearly contribute to inflation expectations because they're a tax on imports that literally raises prices paid by businesses and consumers. Another problem is the massive amount of US government borrowing, which may finally be approaching unsustainable levels. If or when the day arrives when there aren't enough buyers for Treasury securities, the only outcome can be higher rates for all bonds to entice buyers. And higher long-term interest rates raise costs for every business or consumer borrowing money. The weird pricing action from last fall shows that if Trump did manage to force the Fed to slash short-term rates, long-term rates might actually rise, because investors would anticipate higher inflation due to looser monetary policy. Trump doesn't care about short-term rates, which only apply to banks making overnight loans. What he really wants is lower long-term rates, so that businesses and consumers borrow and spend more, stoking growth. Trying to force that to happen would probably have the opposite effect. The same thing would happen if Trump tried to fool the world by publishing bogus data showing the economy doing better than it really is. Every serious investor would know it's a sham. Uncertainty would worsen as opacity on some facets of the economy replaced transparency. That would cause upward pressure on the interest rate risk premium, pushing rates higher. Brusuelas's data shows a risk premium of more than 2 percentage points during some periods during the last 25 years. If there were such a premium today, the typical mortgage rate would be more than 8%, instead of 6.7%. In 2008, during the financial crisis, the term premium approached 4%, which would push interest rates today above 10%. That's the range, or trouble, Trump could cause in bond markets if he tries to manipulate the economy and fails. Would it cause a recession? Nobody knows, but that may be the wrong question. Americans are in a foul mood largely because they think management of the economy stinks and they feel prosperity slipping away. When Joe Biden was president, he repeatedly touted record job growth and other things going right, convincing approximately nobody that they were better off than their personal finances led them to believe. Americans want to feel like they're getting ahead at home and at work. Legitimate data won't convince them if they don't see it happening in their own lives, and bogus data won't do any better. Consumer attitudes have been at recessionary levels for much of the last five years, and if Trump starts producing doctored data, it may depress people even more. Truth has value, even to Trump. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Sign in to access your portfolio

CNN data guru in twist calls Trump ‘most influential president' and reveals how he's ‘remaking the USA'

Yahoo

27 minutes ago

Yahoo

CNN data guru in twist calls Trump ‘most influential president' and reveals how he's ‘remaking the USA'

In a surprising TV moment, CNN data guru Harry Enten called Donald Trump the 'most influential president' of the century and revealed how he's 'remaking the United States of America.' Enten, the network's chief data analyst, recently talked with anchor Omar Jimenez on CNN Newsroom about Trump's controversial tariff and immigration policies as well as the flurry of executive orders he has signed in his second term. Trump announced sweeping global tariffs on April 2, which was dubbed 'Liberation Day,' but his tariff policy since then has been anything but predictable. A baseline 10 percent tariff was imposed on all imported goods on 'Liberation Day', with some countries facing additional reciprocal tariffs. These reciprocal tariffs were quickly suspended as the Trump administration attempted to negotiate trade agreements with other countries. Throughout this bumpy tariff ride, critics came up with a nickname for Trump: TACO or Trump Always Chickens Out. But Enten told Jimenez, 'I don't think that's true.' 'I think the theme of this segment is going to be, love it, like it, lump it, Trump's remaking the United States of America,' Enten said. The data guru said the effective tariff rate is at 18 percent, which is up from two percent last year and the highest since the 1930s. 'I can't think of a more influential president during this century, and it starts here with tariffs. He said he was going to raise tariffs, and despite the claims otherwise, he is in fact doing that,' Enten said. The CNN segment came after the Trump administration announced Thursday the 10 percent universal tariffs would remain in place but would only apply to countries where the U.S. exports more than it imports. Most counties face this levy, according to a senior administration official who spoke to CNN. Countries with which the U.S. has a trade deficit now face a 15 percent tariff. Some nations, which the senior official said had some of the highest trade deficits with the U.S., were hit with even higher levies. Enten then jumped into immigration statistics under Trump: 'How about net migration in the United States? Get this, it's down. It's gonna be down at least 60 percent.' 'We may be dealing with, get this, negative net migration to the United States in 2025. That would be the first time there is negative net migration in this country in at least 50 years. We're talking about down from 2.8 million in 2024,' Enten said. He continued: 'And that is a big reason why that I'm saying that Trump, at least in my mind, is the most influential president certainly this century and probably dating a good back chunk into the 20th century as well.' The data guru also talked about the 180 executive orders Trump has signed this year. 'You have to go all the way back to the FDR administration once again to find a year in which there were as many executive orders signed as we have this year. To give you an idea, [former President Joe] Biden, during his first year, signed 77. That's the entire year. We're only a little bit more than halfway through this year,' Enten said.

Commentary: How markets will punish Trump as he fudges the economic data

Yahoo

27 minutes ago

Yahoo

Commentary: How markets will punish Trump as he fudges the economic data

President Trump is laying the groundwork for replacing real economic data with his own numbers. It's a terrible idea that will blow up in his face if he tries it — and cause the Trump presidency more damage than any legitimate numbers could. Trump fired the economist in charge of the Bureau of Labor Statistics on Aug. 1 after the latest employment report showed a sharp slowdown in hiring. The problem isn't the data or the economists who produce it. The problem is that, right on schedule, Trump's disruptive policies are messing up the economy. His tariffs are raising costs and jamming up business operations with new inefficiencies. His workplace raids, meant to ensnare unauthorized migrants, are reducing the labor supply and leaving some companies disastrously short of workers. After firing the BLS commissioner, Erika McEntarfer, Trump said in a social media post that she 'rigged' the job numbers to make him look bad. Trump specifically cited revisions in the jobs data for May and June that cut total employment by 258,000. That put average job growth during the last three months at an anemic 35,000 — 80% below the average pace of job growth during Joe Biden's last year as president, an underperformance that Trump must find intolerable. There are legitimate concerns about the quality of the surveys BLS conducts to compute the jobs data. Those are huge surveys relying on accurate and complete responses from thousands of firms and regular people. The methodology is complicated. Trump's own cutbacks to the agency make mistakes more likely. One of the main reasons BLS revises the data in the first place is to provide more accuracy as it refines the results of a given month. The downward revisions for May and June were large, but hardly unprecedented. Trump isn't talking about any of that. The employment numbers aren't rigged, and the few serious economic people in Trump's administration — Treasury Secretary Scott Bessent, White House economist Kevin Hassett — ought to be telling him that. A lot of economic data is unflattering to Trump, however, and there's a good chance it will get worse as tariffs and migration raids further stifle the economy. Trump acts like he knows it, and has been thinking for some time about how to provide alternate data that's more flattering to the Trump economy. For most of his second term, Trump has been raging about Federal Reserve Chair Jerome Powell, demanding that the Fed slash interest rates and musing about firing Powell. Trump has also floated the idea of appointing a 'shadow' Fed chair who would give more upbeat assessments of the economy than the Fed's sober analysis, and perhaps replace Powell when his term expires next Trump's commerce secretary, Howard Lutnick, wants to change the way the government calculates economic growth. In June, the BLS, which also calculates inflation data, said it was reducing the collection of pricing data in some parts of the country. Starting Aug. 14, it will cut the number of wholesale prices it measures. The agency says staffing shortages are the main reason it's dialing back data collection. Trump, of course, has slashed staffing at myriad government agencies as part of the so-called DOGE efficiency commission's work. Trump makes no secret of seeking to exert maximum control over all facets of government, including agencies established to be independent of political manipulation. He could very well co-op economic data by putting loyalists in charge of the relevant agencies and instructing them to make the data friendlier. He clearly wants a Federal Reserve that will juice the economy on his command, and if he appoints the right people for the rest of his presidential term, he might get that too. If any of that happens, it will backfire, maybe spectacularly. The simple reality is that nobody, not even the president, can fool markets, at least not for very long. Official government data is important, but businesses, investors, and consumers rely on thousands of data points that tell them almost everything they need to know about how the economy's doing. Presidents have tried many times to generate a counternarrative meant to persuade voters they're better off than they think they are. It never works. Ordinary workers know how far their paycheck stretches and whether they're getting ahead or falling behind. Most can tell you that without knowing whether the inflation or unemployment rate is going up or down. Businesses know what's happening with their order book and cash flow, and spend more or less accordingly. Investors read pricing signals the government can't control and buy, sell, or hedge based on what they see. The bond market is the ultimate arbiter of economic truth, and right now it's expressing concerns about the Trump economy and Trump's own policies. Joe Brusuelas, chief economist at RSM, points out there's a 'risk' or 'fear' premium in markets right now that's pushing long-term interest rates about 0.65 percentage points higher than they'd otherwise be. That interest rate premium is the extra amount investors demand in order to lock up their money in longer-term bonds. It compensates them for what they think is the risk of higher inflation in the future, along with uncertainty over other factors that could affect the value of their investments. The current term premium is not historically high. But it's higher than it has been for most of the last 15 years. And not all of it involves Trump's policies. Last fall, for instance, long-term rates rose by about a full point while the Fed was cutting short-term rates by a full point. That was a very unusual move, suggesting investors foresaw higher inflation over a five- to 10-year time frame and demanded higher rates to buy bonds maturing during that time. Still, Trump has inherited a dyspeptic bond market, and his tariffs clearly contribute to inflation expectations because they're a tax on imports that literally raises prices paid by businesses and consumers. Another problem is the massive amount of US government borrowing, which may finally be approaching unsustainable levels. If or when the day arrives when there aren't enough buyers for Treasury securities, the only outcome can be higher rates for all bonds to entice buyers. And higher long-term interest rates raise costs for every business or consumer borrowing money. The weird pricing action from last fall shows that if Trump did manage to force the Fed to slash short-term rates, long-term rates might actually rise, because investors would anticipate higher inflation due to looser monetary policy. Trump doesn't care about short-term rates, which only apply to banks making overnight loans. What he really wants is lower long-term rates, so that businesses and consumers borrow and spend more, stoking growth. Trying to force that to happen would probably have the opposite effect. The same thing would happen if Trump tried to fool the world by publishing bogus data showing the economy doing better than it really is. Every serious investor would know it's a sham. Uncertainty would worsen as opacity on some facets of the economy replaced transparency. That would cause upward pressure on the interest rate risk premium, pushing rates higher. Brusuelas's data shows a risk premium of more than 2 percentage points during some periods during the last 25 years. If there were such a premium today, the typical mortgage rate would be more than 8%, instead of 6.7%. In 2008, during the financial crisis, the term premium approached 4%, which would push interest rates today above 10%. That's the range, or trouble, Trump could cause in bond markets if he tries to manipulate the economy and fails. Would it cause a recession? Nobody knows, but that may be the wrong question. Americans are in a foul mood largely because they think management of the economy stinks and they feel prosperity slipping away. When Joe Biden was president, he repeatedly touted record job growth and other things going right, convincing approximately nobody that they were better off than their personal finances led them to believe. Americans want to feel like they're getting ahead at home and at work. Legitimate data won't convince them if they don't see it happening in their own lives, and bogus data won't do any better. Consumer attitudes have been at recessionary levels for much of the last five years, and if Trump starts producing doctored data, it may depress people even more. Truth has value, even to Trump. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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Commentary: How markets will punish Trump if he fudges the economic data

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Commentary: How markets will punish Trump if he fudges the economic data

CNN data guru in twist calls Trump ‘most influential president' and reveals how he's ‘remaking the USA'

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