Paul Krugman’s Urgent 2025 Economic Forecast: What His New Warning Means for Inflation, Jobs, and Your Money

Nobel laureate economist Paul Krugman is sounding the alarm after the abrupt 1 August 2025 dismissal of Bureau of Labor Statistics (BLS) Commissioner Lisa Moser by former president Donald Trump. In a blistering Substack post titled “Caracas on the Potomac,” Krugman argues that the firing—announced just hours after a sharply weaker July jobs report—marks a turning point in the credibility of America’s economic data infrastructure. Jobs report triggers political firestorm The BLS survey showed payroll growth slowing to 32,000 positions in July, far below economists’ expectations and the slowest expansion since the pandemic rebound. Unemployment held at 4.7 percent, but wage growth cooled to 2.4 percent year-over-year—numbers that undercut Trump’s campaign narrative of a “red-hot” economy. Within hours, the White House accused Commissioner Moser of “suppressing positive data” and terminated her, a move first reported by CNN. Krugman: “Goodbye, reliable economic data” Krugman warns that putting loyalists in charge of the BLS threatens to politicize monthly jobs, inflation and wage statistics, echoing authoritarian tactics in Venezuela: “If stagflation breaks out under an authoritarian regime, but officials aren’t allowed to report the numbers, did it make a sound?” he writes. The Nobel laureate says analysts will now lean more heavily on private-sector surveys from ADP, Indeed and the Conference Board to cross-check any official release. Ripple effects for markets and households • Bond traders reacted swiftly: 10-year Treasury yields jumped 18 basis points on fears of data opacity and higher risk premiums. • Social Security recipients could see smaller cost-of-living adjustments if CPI figures are massaged lower, Krugman notes. • State budget offices, which rely on BLS employment series for revenue forecasting, may scramble for alternative indicators. Economists and lawmakers push back Former CBO director Maya MacGuineas called the firing “a direct hit on statistical independence,” while Senator Angus King introduced a bipartisan bill to insulate the BLS, Census and BEA from at-will dismissals of agency heads. The American Economic Association urged Congress to subpoena raw survey microdata if future releases appear “implausibly rosy.” What happens next The Labor Department says a new acting commissioner will be named “within days.” Krugman predicts an internal exodus: “Talented statisticians won’t stay in an agency where truth is a firing offense.” Analysts are already bracing for the 14 August CPI release, watching for discrepancies between official figures and private inflation trackers such as the Cleveland Fed’s “Nowcast.” Why this matters Investors, businesses and ordinary households depend on trusted numbers to make trillion-dollar decisions—from mortgage rates to COLA checks. If faith in official statistics erodes, the United States could face higher borrowing costs and a credibility gap that takes years to repair.