Banana republic? Trump puts credibility of US economic data on the line

The firing of a top United States statistics official by President Donald Trump last week has drawn concerns from economists and policymakers regarding the credibility of data in the world’s biggest economy.

Trump’s dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer after the release of disappointing employment figures on Friday has raised fears over the integrity of Washington’s economic data, which are relied on by countless businesses and investors in the US and across the world.The National Association for Business Economics warned that McEntarfer’s “baseless” ouster risked doing “lasting harm to the institutions that support American economic stability”.

“It could open the door to political meddling and certainly will undermine trust in federal statistics that businesses, policymakers and individuals use to make some of their most important decisions,” Erica Groshen, who led the Bureau of Labor Statistics under former President Barack Obama, told Al Jazeera.

If Trump’s dismissal of McEntarfer and other presidential appointees is allowed to stand, Groshen said, he could make a habit of firing any head of a statistical agency or other body that delivers “unwelcome news”.

“Then he is likely to replace them with appointees who prioritise serving his goals over serving the mission of their agencies, ethical standards or scientific integrity,” Groshen said.

Trump, who justified McEntarfer’s removal by claiming without evidence that the latest job figures were “rigged” to make him look bad, said on Sunday that he would announce a new Bureau of Labor Statistics head in three or four days.‘Economic data manipulation’
Some research suggests that countries run by strong-arm leaders are especially prone to misrepresenting the state of their economies.

A 2024 study published in the European Journal of Political Economy found that economic openness and democracy decreased the likelihood of governments manipulating statistics although there were no observable positive effects from media freedom or the independence of the statistical office.

In a 2022 paper that used satellite imagery of nighttime light as a proxy for economic development, Luis Martinez, a professor at the University of Chicago, estimated that autocratic countries artificially inflated their annual GDP growth by about 35 percent.

“Economic data manipulation is pervasive in history, especially in autocracies and dictatorships to create narratives for the people – typically to embellish standards of living,” Tomasz Michalski, an associate professor of economics at the HEC Paris business school, told Al Jazeera.

“What is rarer, though, is to find such deliberate behaviour in countries that strive to be democracies or are more developed.”

After Trump’s firing of McEntarfer, a career economist who was appointed in 2024 with overwhelming bipartisan support, critics were quick to note parallels to tactics attributed to strongman leaders seeking to bolster public approval for their policies.

“It’s one more step on our rapid descent into banana republic status,” Nobel Prize-winning economist Paul Krugman said on Substack, a subscription-based newsletter platform.