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Investing.com -- Financial markets showed little reaction after President Trump dismissed the head of the Bureau of Labor Statistics (BLS) last week. The move, which under other circumstances might have rattled investors, was met with silence across the markets.
Following a weaker-than-expected labor market release, Trump announced via social media that the BLS commissioner would be removed. Yet the response across asset classes was subdued.
“The market reaction? A shrug. Equities remain close to all-time highs. Bond yields barely flickered,” Capital Economics said in a note.
While some may interpret the lack of reaction as a sign that institutional integrity carries limited weight in shaping economic outcomes, Capital Economics cautioned that “that would be a grave mistake.”
The macroeconomic research firm stressed that “accurate, impartial economic data is the lifeblood of sound policymaking,” and warned that “robust institutions – the rule of law, an independent judiciary, free media and credible public agencies – are cornerstones of economic progress.”
The muted response may partly reflect broader uncertainty about the practical consequences of the dismissal. “It’s unclear whether the firing will lead to any real change in how the BLS operates,” the report said, adding that if the goal was to “produce more flattering data, then – ironically – that could lead the Fed to run tighter monetary policy.”
The note also pointed to legitimate concerns around U.S. data quality. “A common issue in both countries is a decline in survey response rates which has accelerated post-COVID. The problem appears particularly acute with labour market data.”
Capital Economics contrasted the muted U.S. reaction with the turmoil in U.K. markets following the 2022 “mini” Budget. “
When Prime Minister Liz Truss and Chancellor Kwasi Kwarteng dismantled the UK’s fiscal guardrails... that was unequivocally negative for gilts... In contrast, if the quality of official statistics deteriorates... the implications for bonds and equities are perhaps less immediately obvious.”
Capital Economics also warned that markets could be overlooking the longer-term dangers, noting that institutional decline often unfolds gradually and without triggering an immediate market response. Investors may struggle to recognize such slow-moving shifts until the consequences become more severe.
Even so, the report stopped short of predicting imminent structural damage. “The U.S. institutional system is under strain, but not yet at risk of failure,” it said.
While the BLS incident raised eyebrows, more severe consequences could arise only if “attacks intensify – and especially if they morph beyond data and into the legal and corporate fabric.”
For now, the episode underscores the gap between political turmoil and market focus. As long as data continues to flow and monetary policy remains on track, markets may remain more focused on fundamentals than on institutional alarms.