Trump Says He’ll Fire BLS Head After Weak Jobs Data

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2:46Pivotal week that was Mag 7 earnings, a Fed meeting, tariff deadline, lots of economic data. You know all this. The jobs report this morning. President Trump not happy with the labor report. We've got a Fed governor, right, that's leaving a Fed official. There's a lot. So let's get to our roundup of the week. We've got a great roundtable. Eric Wiener is Bloomberg News senior editor, Equities Americas, along with Bloomberg News economics editor, Molly Smith, both here in our Bloomberg Interactive Brokers Studio. We're not going to talk about Rolex watches. We're not going to talk about the great state of New Jersey.

3:18Molly's from New Jersey, though. Sure. It is a great state. Going there this weekend. All for it. Love it, love it. Molly, I want to begin with you. You continue to digest everything. We've had Mike McKee back in studio a total of three times because of everything that just kept happening and happening. Where to begin? What's front and center as you look at the week that was? Oh, boy. I guess it's really more the day that was for me at this moment. So really starting out with the jobs report this morning, weaker than expected for July. But really, the eye-catching figure was that downward revision to May and June.

3:49Biggest since biggest two month revision. Sorry, since the pandemic got a lot of people's attention, spoke to issues that we played out in a separate piece with seasonal adjustment issues, as well as what's been a broader issue of just declining response rates to surveys that makes, you know, the initial rate that BLS collects from firms, that can change a lot as they collect more sample in the subsequent months when they survey these firms and more of them respond. And then, of course, we get the big bombshell that he is going to fire the head of BLS, Erica McIntyre. This is a Biden era appointee, but really key to keep in mind here that BLS is very much an independent, nonpartisan institution.

4:29And anybody would tell you that that is why their statistics, as well as the really the breadth of U.S. statistics as a whole are so good, is because they are nonpartisan and they don't have political influence. So this really is just like a huge announcement that, you know, assuming that he does follow through with it, that it really could undermine a lot of public and market trust in the data. Well, the president piling on with a post at 345 saying, quote, in my opinion, today's jobs, jobs numbers were rigged. That's all in caps in order to make the Republicans in me look bad. He said that Jerome Tulate Powell is no better.

5:05But the good news is our country is doing great. Molly, I think you just told us it's a nonpartisan organization. I feel foolish even asking the question, but just respond to the president's accusation that the numbers were rigged. He presented without evidence. Yeah, that's definitely not how revisions work. Actually, we got a comment from BLS saying that revisions are needed in order to paint a more accurate picture of the jobs data. And this is just a normal part of data collection efforts. And if anything, this is being hampered now more by the fact that Trump has slashed budgets for a lot of these statistical agencies and cut their staffing, or a lot of the staffing rather has left through deferred resignations and other opportunities to leave, that the data collection efforts have been severely hampered.

5:51So this was not an issue of rigging numbers. That definitely is not what's at play here. And people on both sides of the aisle will tell you that this is like a really, gosh, how to say it, the data integrity is just so paramount to this institution and it's there to serve a public good. Well, it's paramount to the market trade and how everyone, global investors, look at the U.S. markets. Eric, come on in on that because I do think about what Molly said that if he, excuse me, this individual is fired, what that means in terms of undermining U.S. financial markets. Oh, all the traders are talking about this specifically.

6:27I mean, if you look at, to Molly's point, if you look at data from the U.S., we're the gold standard. We have the broadest variety. We have the most accurate reports. And it's been that way for a while. The struggle that, it was a great story, actually. The struggle that BLS has had getting responses speaks to what's going on in the markets right now with companies not wanting to give that data up. But the full faith and trust of what traders do is based upon us not inserting our political beliefs into what's going on in the economy and just really showing people all these different facets. And then you as a trader can make up your mind.

7:13If things start being manipulated or you start sensing that they're being manipulated, that becomes scary as a traitor. Eric, do you think that that could serve as some sort of guardrail against firing or politicizing this organization the same way that the bond market sort of served as a guardrail with post the so-called Liberation Day when the president referred to the bond market getting a little bit, quote, yippee? Well, what's interesting about this specific complaint is that he actually needs bad jobs data to get the rate cut that he wants. So, like, the complaint. He obviously hasn't checked out the warp function on the Bloomberg.

7:57So, yeah. So, yesterday was 40 % chance of a rate cut. Now it's over 80. It's like 86, I think. So, basically, everybody is now pricing in off of that jobs report. Everybody's pricing in a rate cut in September. So it actually works in his direction. So, I mean, in terms of what we're hearing about what how people will position off of this, it's so incoherent that you really don't know. The question becomes and it's this way with the Fed, too, because the Fed is a board. So we act he's acting like Powell tells the Fed, like in some sort of mafia, you know, The way that Gotti controlled the Gambinos, he tells them what to do.

8:42It doesn't work that way. So there's sort of a lot of hope that just in general, there's just too much noise and not enough action or not action really that's going to happen. But there's fear that he will start trying to influence. He will start actually influencing the numbers. And if that shows up, then people start questioning. Yeah. And similarly to what Eric just said there, it's a bit of a similar dynamic at BLS, too, right? It's not that Erica McIntyre has the sole discretion over what the jobs data says every month. This is an institution of roughly 2 ,000 people globally at BLS, or sorry, in the U.S., not globally, who compile these reports.

9:26And I mean, she certainly signs off on them, but like she is not at all. Like I even I honestly would question what role she in particular has in the data collection itself, which happens much beneath her level. But something else that is really interesting about this, too, when Eric's talking about how reports like this help Trump's chances to get the rate cut that he wants. So have all the other reports from BLS on inflation. The very reports that he's been saying are so great. So it's really interesting then that the initial report, the initial tweet, sorry, that he said that he just found out that McIntyre is a Biden era appointee.

10:03I mean, well, first of all, she's been there for like a year and a half. And also she's been the one overseeing these great inflation reports that he's been touting. And nothing political. But I asked this question to Mike McKee, too. I said when we got the numbers for the prior month, I know they've been revised downward. But when they initially came out, it's not like we heard from the White House saying, wait, we questioned this number. So it's just something we're trying to be smart about. Molly, I want to ask you one more time and just kind of wrap up here. 30 seconds. The U.S. economy, though, we are seeing weakness, but we still have some inflation signs.

10:36Yeah, I mean, I think I mean, if we're just looking at the jobs report today, I think a lot of the takeaway was for economists was that this really helped square up some of the weakness that we saw in the GDP report. about this underlying demand gauge being so weak, consumer spending softening. We get net. Why? Because we saw that job growth has been weaker for longer than we previously thought. I want to save 30 seconds for Eric. Last thoughts on the markets and kind of as we get ready for another trading week next week. Yeah, I mean, right now, it's how long does it take this stuff to filter through?

11:08If you look at tariffs, you know, the window was six months the earliest. We're not even there yet. So the question is what, yeah, what the numbers are going to show, because data now matters. Fed speak, though, we're going to start getting hearing a lot. Well, I mean, also the bombshell news that Fed Governor Adriana Kugler has stepped down, which I'm sure is another part of the program today. I told you, Mike was like, Mike was everywhere. Mike McKee was like a boomerang. He just came back and forth. Molly Smith, our thanks to you. And of course, our thanks to Eric Wiener as well. Guys, have a great, great weekend.

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14:07is moving to nuclear submarines to respond to what he called, quote, highly provocative statements from former Russian President Dmitry Medvedev. Trump didn't immediately provide details on what instigated his move, though his post Friday was the latest in a public exchange of heated rhetoric with the former Russian president, who currently serves as Russia's deputy chairman of the Security Council. We've got with us Wayne Sanders. He's Bloomberg Intelligence senior defense analyst. He joins us from Maryland. Wayne, it's situations such as this where we publicly hear about a declaration of these machines of war moving into a different position.

14:46How seriously do you take that in the context of escalating conflict with Russia? Yeah, I would say that I'm more concerned about the fact that President Trump actually said it out loud. It's probably the bigger piece of it. We have we have the Virginia class submarines. We've got Los Angeles-class submarines, both of which are these attack submarine types. And then we have the nuclear submarines, the ICBM types, the ballistic missile submarines, as they're known, right? We have a lot of these. And we have 24 Virginia-class. We have almost 50 of the attack. We've got 14 that are these ballistic missile submarines.

15:22And a lot of them are always operationally deployed and they are there to provide force projection for military power across for the United States around the world. Right. So these things are out there most of the time anyway. When you think about a carrier strike group, they normally come with a nuclear powered submarine as part of the complement whenever the president decides to move, you know, move one of those carrier strike groups anywhere. So the fact that he's talking about where he's parking it, I think, is the key indicator here is saying, hey, look, I've got these capabilities. I have these nuclear-powered submarines that you can't find, and I'm just telling you about where they're going to be.

16:00But at the end of the day, our technology is so good from a stealth perspective, and others were 10 years ahead of China and Russia at a minimum from that perspective. So I think we're actually doing pretty well. But he's making his statement clear. So you would argue that if this were like, what would be the difference in your view if he had kept this a secret, had done this in a way that wouldn't actually communicate to the world about this repositioning? Would that would that actually mean that the tensions are more heightened than they would be if he's publicly saying this? Since he's publicly saying this, can we read into this in a way that's like, OK, we shouldn't take it as seriously?

16:40Yeah, I mean, you know, we've talked previously in terms of there's diplomatic information, military and economic levers of power that you can use in the military side of the house and how you play a lot of those pieces. The fact that he's talking about it is probably a good sign from that perspective, because if you look at even Operation Midnight Hammer in the Iran strike, you know, nobody talked about the fact that there was an Ohio class ballistic or not the ballistic missile one. But they have four that are strike ones that fire 30 tomahawks, right? That part wasn't talked about a whole lot because everybody focused on the B-2 spirit in the massive ordnance penetrator.

17:16But that was a key portion of it. And it was one that wasn't just discussed. He didn't talk about, hey, I have this capability parked off of your shore, off of your coast, the way that he is right now. How do you read this? I can't make sense of the relationship between President Trump and President Putin. I don't know. Friends, not friends, back and forth, sanctions, that's still a threat. I'm just trying to understand it. No, I think the key is from the public view is making sure one of the best things that he can do is use his information platform to be able to make his intentions clear. And part of those intentions is I'm not happy with what Medvedev did, and I'm going to make sure that everybody knows about it.

18:01I don't believe that from the perspective of where where these are actually located, right? Like I said, these things are constantly operationally deployed anyway. So the fact that he said it, as long as he's not giving a latitude and longitude to where those locations are, you know, I think that, I think Putin knows right now that most of the time, there's probably some type of capability that is somewhere near strike distance of it anyway. The fact is, he's just mainly talking about it now. And is it significant that he didn't necessarily mention Putin in this, right? Somebody else that he's kind of ticked off at.

18:36And so is that the way of kind of keeping it safe and being like, hey, it wasn't about you. It was about this other dude that's, you know, Russian. Like, is that kind of the justification or gave President Trump the ability to do that? I would say yes, right? I think if you're looking at the difference between escalation of force and de-escalation of force with a clear deterrence, strategic deterrence message, this is a way to be able to do that. And like you said, I think that that gives him a little bit of an out if Putin were to say anything to come back and go, no, no, no. I was responding to Medvedev because Putin, I think, clearly knows that there is operational capability around the world that we constantly use.

19:18Do you think he gave Putin? Again, speculation, but I'm going to go there. Wayne, do you think he gave President Putin a heads up? I honestly don't know because I don't know the inner workings between Medvedev and Putin. I think that understanding better the relationship between those two and how easy it would be for President Trump to be able to say, I'm going to throw this out there at Medvedev, but it's not about you or if these two are partnered together. I'm going to read from the post that the president made on True Social. Quote, based on the highly provocative statements of the former president of Russia, Dmitry Medvedev, who says the deputy chairman of the Security Council, who's now the deputy chairman of the Security Council, the Russian Federation, I've ordered two nuclear submarines to be positioned in the appropriate regions, just in case these foolish and inflammatory statements are more than just that.

20:06When we started out the conversation with you explaining the way that these submarines are part of carrier strike groups, does it mean that they always travel together? They're always near one another? Does it mean the entire strike group is being repositioned or can these nuclear subs go without other naval vessels? They're able to go without it. Normally, what I was saying is that if you are going to put an aircraft carrier somewhere, as part of a defensive measure and part of the entire strike group package as you're talking about, you normally have your destroyers, your frigates, you have your nuclear-powered submarine that would go along with an aircraft carrier.

20:44So when you hear somebody say, I'm deploying the USS Gerald Ford and it's going to a specific location, normally you can assume that this is the rest of the complement that's going to go there to not only protect the aircraft that are on it, but the submarines can be free-flowing that are separate from that. Because obviously with 24 Virginia class, 24 Los Angeles class, and 14 of these Ohio class ballistic missile submarines, we have a lot more submarines than we do carrier strike groups. Okay, Wayne Sanders, got to leave it there. Bloomberg Intelligence Senior Defense Analyst. He's a career military officer, ultimately was a colonel in the U.S.

21:21Army now at Bloomberg Intelligence. We appreciate him joining us this afternoon.

21:44All right, folks, let's get now to certainly something that the equity markets have been focusing on all week, and that has to do with MAG7 earnings. Right now, I'm looking at Apple shares. They're down about 2.1%. They were higher earlier in the session, too. They were. They actually showed some gains. That wasn't the case for Amazon today. It's been down as much as 9%, right now down about 8.6%. Both reported after the close last night, Apple posting its fastest quarterly revenue growth in more than three years, and yet Amazon projecting weaker than expected operating income and trailing the sales growth of some of its cloud rivals.

22:19So we definitely are seeing some impact. It's all against the Mag 7 that we've heard over the last two weeks or so. A great time back with us, Laura Martin, senior analyst over at Anenam and Company, whose coverage of the media, entertainment, and internet spaces are a must read. She joins us from Los Angeles. Laura, I want to start with Apple and the pull forward or whatever we saw with the huge beat when it came to that iPhone number, and typically a time when people are not buying iPhones. How do you explain it? Was it all about pulling forward of demand to avoid tariffs? It is, really. I mean, that's what the market's telling you today.

22:52Apple admitted that 1 ,000 basis points, so 1 % of their revenue growth, which was 10%, well above average, was from pull forward. And the market's telling you they think that number was like half of the gain, basically. And Apple also said they had$800 million of costs from tariffs in that second quarter they just reported, and it's going to go up to$1.1 billion visibly in the September quarter. But I think the market's telling you they think that could be higher in the September quarter. Oh, so does this mean that we'll see fewer iPhones bought in the first fiscal quarter, but Apple's December quarter, which typically is its biggest quarter as a result of the pull forward that we saw in this quarter?

23:38I think it's worse. It's faster. So the June quarter over-delivered because they pulled forward demand from the September quarter. Those are all old iPhones. And then in late September, you typically get the new iPhone and then you start this new annual cycle of the new iPhone. And one of the things they said that's hurting the stock today is that Siri and Apple intelligence will only be integrated next year, by which they're probably talking calendar year, which means the earliest we'll see generative AI features drive an upgrade cycle for the iPhone would be not September of 25, it'd be September of 26.

24:13So then that tells you, so this is dead money again, right? There's nothing driving. And there's risk here. Not only China subsidies drove a really nice China growth number, 4.8 % China revenue growth, People are worried that that subsidy isn't going to recur. And we've had a couple negative litigation regulatory decisions, right? We've got the fee,$20 billion a year is what Google Search pays Apple to be the default search engine on all iOS devices. I think that's pretty clear from Channel Checks in DC that is not going to be allowed to persist. So that's$20 billion that will come out of services if it isn't allowed.

24:55And then similarly, we have the Epic. Apple got a negative Epic Games, which allows consumers to pay directly to apps and not have Apple share 30%. So that's another, that's an app store risk that over the next 12 months, not immediate, but over the next 12 months. You know, Laura, we've had the luxury of talking with you in the last week or two and talking specifically about Apple. You've got a hold rating on it. It doesn't sound like you have a lot of concerns, I guess I should say. Why not put a sell rating on it? You know, I mean, I think so. One of the issues is when you look at the other Mag7, they basically have a singular strategy, which is envision generative AI is disruptive.

25:40We, everyone else is going to spend$85 to$100 billion in CapEx in 2025 alone. and we're going to grow at 20 % in 2026. Every one of them has been pushed on what is that return on capital, incremental capital? They all say, we don't know. We just think it's going to be big. If you don't believe that, if you're an investor and you think that generative AI is overhyped or the economics are further off into the future, Apple is a great place to hide. They are spending$20 billion a year, not$85 billion a year. Generative AI is sometime in the future. they're not spending, they're not hiring people like Meta is for$100 million each to work on super intelligence.