Trump firing the head of the BLS after a poor jobs report was a major warning sign for the quality of upcoming economic data, but that’s not the only problem with non-farm payrolls right now.

A fresh report is coming up this upcoming Friday and it’s a minefield. The main problem for traders is accounting for immigration. There is a compelling argument that the sharp drop in US immigration along with self-deportation and enforced deportation is having material impacts on the labor market. It’s extremely hard to model but the Fed’s Barkin this week said he envisions 0-50K monthly jobs as a baseline for a stable market. That’s in contrast to 100-150K in the post-pandemic era.

There will be all kinds of downstream impacts from this but for traders, I think the risk is in over-reacting to jobs numbers close to zero. On the surface that may look ‘weak’ but unemployment may stay flat. That’s why I think the number to doubly focus on is unemployment while ignoring swings in the non-farm payrolls headline.

In addition, I fear that the Fed may over-react to low headline numbers and cut rates too low. That’s something that will plant the seeds of a future inflation shock or asset bubble.