Will today's NFP data be trusted now that Trump fired the chief BLS statistician?

Outlook

Everybody knows by now that labor market data is delivering the softness that the Fed can use to justify the Sept 17 rate cut. Well, no. They may be able to talk a decent talk, but serious economists and savvy investment managers don’t believe it for a minute. A rate cut when the economy is already boomish (or so the Atlanta Fed says) is by definition inflationary. Add that to the tariff-induced inflation to come, and the Fed’s reputation is falling down the hole. Shorter-term yields may fall, but the longer ones are doomed to rise.

One bond expert says foreign bond markets are as worried about Fed independence as we are. One if Bank of England Bailey chief, who is “concerned.”  Let’s say Trump grabs the Fed by the throat, or it looks like he will. What happens to yields? He wants 300 bp in cuts. Reckless rate cutting leads to inflation, so we should assume the longer-end yields go up. About the shorter end, we are not so sure. They tend to follow the Fed funds rate , so down.

Bloomberg complains on one place that the bond vigilantes are nowhere to be seen, but also has this chart. To be fair, it is a bit tame.

Will today's NFP data be trusted now that Trump fired the chief BLS statistician? If the number is anything much over 100,000, yes.

But we would all be watching the auctions, whether new paper or re-opened, to see how foreign central banks behave. This is not as far out in the future as we think. Powell’s term is up in May, but Q1 2026 could be the beginning of the end. In Q1, the Fed meets to choose the regional bank govs and send some being replaced to the main Fed. This is another place where Trump interference can damage the Fed’s reputation, ad well as gain a form of control for many staff changes to come—Fed govs serve a 5-year term, specifically designed to insulate them from political pressure. One expires every two years.

Here the president can fire a regional Fed chief “at pleasure.” Let’s say he doesn’t like Chicago Goolsbee. Replaced by one of Trump’s sycophants, that would give him a 4-3 majority in the FOMC and as many rate cuts as he wants.

Forecast

Payrolls are forecast at about 75,000 (Bloomberg survey consensus) and that’s not enough to keep the economy trundling along at about 3% (the last Atlanta Fed GDPNow for Q3 from yesterday).

A bad series of Payrolls numbers is dollar-negative. If we get an upside euro breakout, the target would be 1.1775, the most recent highest high from July 23.

A potential offset is euro-negative sentiment taking off on the situation in France. The Monday vote of confidence is almost sure to fail and then Macron has to tapdance to get another president and fix the budget situation.  From left field comes the announcement from Fitch it will review its rating of France, now at !!-. It may not downgrade but can take away/change a letter. After all, France is violating the treaty requirements on the deficit, and has been for some time. Scylla and Charybdis.

Note that we have mixed signals all over the place. The dollar is fairly firm against the Swiss and CAD, for example. While in a sideways range-trading environment that has some pretty big churns, risk is way, way up. Keep your powder dry.  Trading on Payrolls day is never a good idea.

Tidbit: Lemons and lemonade. The NYT reports “Investors are offering to buy importers’ rights to any refunds of the administration’s levies. It’s a longshot wager that courts will overturn the tariffs.”

Tidbit: Musk wants a Tesla paycheck of $1 trillion. Trump will be jealous. All he is getting is some $5 billion from his crypto scam plus the bribes from the tech bros, which under the law he cannot accept for himself (but will, like those documents). Shame.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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