I’m a big fan of Nobel Prize winner, economist Paul Krugman. Today he wrote about President Trump’s firing the (now former) head of the Bureau of Labor Statistics–for presenting the most recent monthly labor situation report.
The report itself was by no means a surprise. It showed that in a time of great uncertainty–on-again, off-again tariff declarations of sometimes high, sometimes higher, sometimes lower levies–employers were hesitating about hiring and employees were hesitating to take the risk of taking a new job. This shouldn’t have come as a shock to Mr. Trump, either. After all, he saw 48 of these during his first term. And, of course, he’s a graduate of the prestigious Wharton business school. It also appears to have surprised him that the long-standing procedure is for data to be collected over a three-month period, with two preliminary monthly reports followed by a final one. In any event, Trump shot the messenger.
This itself isn’t Mr. Krugman’s gripe. He seems to think that if the replacement will simply find a way to deliver the kind of numbers Trump wants, whether they’re reality-based or not.
If so, I think this would sooner or later be bad news for the Treasury bond market. Logically speaking, one might think that foreign holders of US government debt would be the first to be spooked by an administration effort to produce deeply flawed reports on the economy (and therefore on the country’s ability to repay government borrowings on time and in full). As I read history, though, it’s big US-based holders who are the first to abandon ship.
I’m not sure there’s a reading of this situation that’s good for Treasuries, since fudging the employment numbers seem to me to shift the burden of proof for all government reports from having to prove that a particular set of books are cooked to having to establish they’re not . For stocks, on the other hand, I think the winning formula is pretty much the same–foreign revenues and US costs. For down-and-out “value” stocks, though, one may have to hope for a foreign acquirer to step in, rather than a domestic rival.