On August 1, U.S. stocks lost $1.1 trillion, with the Dow Jones Industrial Average dropping more than 500 points (1.2%), the S&P 500 down 1.6%, and the Nasdaq Composite falling about 2.2%.
Disappointing employment report raises concerns
U.S. stocks lost $1.1 trillion on Friday, August 1, ending a volatile day when President Donald Trump reportedly fired the Commissioner of the Bureau of Labor Statistics (BLS) Erika McEntarfer for releasing employment figures that he called 'fake'.
The Dow Jones Industrial Average fell more than 500 points, about 1.2%, while the S&P 500 dropped 1.6%. The tech-heavy Nasdaq Composite fell about 2.2%. All three major indices posted weekly losses exceeding 2%, reflecting growing investor concerns about the direction of the U.S. economy.
The July report from the BLS, showing that the U.S. economy created only 79,000 jobs compared to the expected 104,000, raised concerns that Trump's tariff policy could be harming the U.S. economy. Aware of these concerns, Trump reacted to the disappointing data by targeting McEntarfer, who has been in this role since 2023. In a social media post, Trump claimed that the BLS released 'fake' employment figures to tarnish his and the Republican Party's reputation. A subsequent report by the BBC indicated that Trump followed through on his threat by firing McEntarfer.
According to a report, this decision has been criticized from all political sides. Larry Summers, who was Treasury Secretary during the Bush administration, warned that this move has the characteristics of a dictatorship rather than a democracy.
"Firing the head of a key government agency just because you don't like the numbers they report, collected from surveys using long-standing processes, is an action that occurs in dictatorial countries, not democratic ones," Summers warned.
Data reinforces the case for an interest rate cut, despite the firing
Some people have warned that firing McEntarfer for doing her job undermines trust in the agency and gives the impression that future data will not reflect reality on the ground. However, others have questioned Trump's move to fire McEntarfer, noting that the agency's data supports his call for the Federal Reserve to cut interest rates.
In a post on X questioning what they call self-destruction, a social media account named Real World Asset Watchlist stated that the 'fake' data released by the BLS is exactly what Trump needs. This account explained that the market immediately repriced the probability of an interest rate cut in September, increasing from 40% to over 80%. This caused the dollar to drop more than 1%.
"Some analysts are now calling for a 50 basis point cut instead of 25 basis points. This data is Trump's golden ticket to pressure Powell," the article added. The July employment data, instead of undermining his argument for an interest rate cut, reinforces Trump's case and increases pressure on the Federal Reserve, Real World Asset Watchlist added. The social media post also reiterated concerns that this 'direct attack' on the independence of statistical agencies will have negative long-term consequences.
