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Speaker 1: This is Bloomberg Wall Street Week.

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Speaker 2: And we may not have an overall recession, we're having

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Speaker 2: a rolling recession. To Konye Roll looks pretty strongly when

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Speaker 2: it comes to jobs.

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Speaker 1: The financial stories that shape our world.

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Speaker 2: Three major regional bank failures send shockwaves through the banking system.

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Speaker 2: We're all trying to figure out what to make of

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Speaker 2: generative AI.

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Speaker 1: Through the eyes of the most influential voices.

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Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America,

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Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of

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Speaker 2: the Columbia Business School.

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Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 2: This is a special addition of Wall Street Week from Aspen, Colorado,

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Speaker 2: where we've come for the annual Aspen Economic Strategy Group meetings,

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Speaker 2: bringing together economic experts and business leaders for a nonpartisan,

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Speaker 2: detailed discussion some of the big economic issues in front

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Speaker 2: of us.

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Speaker 3: This year.

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Speaker 2: The focus is on building a more resilient US economy,

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Speaker 2: with a discussion ranging from things like the debt and deficit,

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Speaker 2: to tax policy to where we're headed with artificial intelligence.

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Speaker 2: We'll hear from special contributor Larry Summers of Harvard, his

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Speaker 2: fellow former Treasury secretaries Hank Paulson and Tim Geidner, former

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Speaker 2: Honeywell CEO Dave Cody, and regional Fed presidents Austin Goulsby

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Speaker 2: of Chicago and Raphael Bostic of Atlanta. But we start

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Speaker 2: with the distinguished labor economists who until recently was interpreting

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Speaker 2: these numbers for President Biden. She's Cecilia Rouse.

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Speaker 4: What the Department of Labor reported today was that the

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Speaker 4: US economy added about one hundred and eighty seven thousand

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Speaker 4: jobs last month, which is a robust number. It's the

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Speaker 4: kind of number that I'm confident my callings at the

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Speaker 4: Biden administration celebrated because what we've known is we had

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Speaker 4: the pandemic induced recession. We saw the fastest growth out

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Speaker 4: of that. But we also know that that kind of

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Speaker 4: growth of three hundred thousand jobs month is not sustainable.

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Speaker 4: That's not consistent with an economy that has reached its

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Speaker 4: you know, whether we want to call it steady state,

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Speaker 4: but it is a naturally, you know, robust economy, and

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Speaker 4: so we've been looking for in anticipating and kind of

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Speaker 4: a cooling last year, President Biden had an op ed

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Speaker 4: it was I think a Wall Street journal anticipating this,

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Speaker 4: But it's not even just about the president there, It's

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Speaker 4: just that that is what we've that's what we want

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Speaker 4: to see. That is what the Federal Reserve is looking for.

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Speaker 4: Is a labor market that remains remarkably resilient.

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Speaker 2: I will say that, so it is robust, but.

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Speaker 4: Where we have the annual jobs numbers looking more consistent

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Speaker 4: with just sort of typical turnover in a strong economy.

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Speaker 2: As you say, remarkably resilient as a labor conduct Have

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Speaker 2: you been surprised not to snap back after the pandemic

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Speaker 2: but at the continued robustness, because one hundred and eighty

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Speaker 2: seven thousand jobs may only be two hundred thousand, but

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Speaker 2: it's a lot more than you need to have just

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Speaker 2: to absorb the new additions of people to their workforce.

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Speaker 4: Absolutely, and it's slightly more than you would expect us

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Speaker 4: see with an unemployment rate of three point five percent,

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Speaker 4: and at this stage of the economic recovery, so it

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Speaker 4: has been markeably resilient. If you think about the changes

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Speaker 4: in the inflation rate over the past year, inflation has

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Speaker 4: come down quite a bit, and yet we've not seen

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Speaker 4: much evidence of any impact on the labor market. So

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Speaker 4: this for me, this goes back to the massive disruption

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Speaker 4: caused by the pandemic, which affected every aspect of our

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Speaker 4: economy in the US globally, and that it goes to that,

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Speaker 4: you know, the disruption was on the supply side. We

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Speaker 4: definitely had the robust assistance on the fiscal side, on

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Speaker 4: the monetary side to ensure that we could get through

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Speaker 4: the pandemic without too much disruption to our way of

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Speaker 4: life and to our economic you know, our economic health,

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Speaker 4: and that this is an economy that is knitting itself

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Speaker 4: back together, but it has been surprisingly resilient.

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Speaker 2: Wels I believe saw little bit of a reduction in

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Speaker 2: the average hours worked per week. Is that potentially indication

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Speaker 2: maybe the labor markets started to soften a little around

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Speaker 2: the edges.

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Speaker 4: So again we want to see a little bit of softening.

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Speaker 4: That's what the Federal Reserve is looking for. So you know,

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Speaker 4: it's important that we not focus on anyone month's numbers,

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Speaker 4: but that could be a sign that a little bit

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Speaker 4: of cooling here and there are unemployment insurance claims numbers

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Speaker 4: remain very low, that job openings numbers remain very high,

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Speaker 4: so we fundamentally have a strong labor market, with some

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Speaker 4: signs that there's some cooling as we would hope to see.

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Speaker 2: We've been through an extraordinary period of time for the

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Speaker 2: labor market among other markets, because of the pandemic we

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Speaker 2: now are coming back from that. Is it too early

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Speaker 2: to ask ourselves are there structural changes we think in

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Speaker 2: the labor market that may last well into the future.

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Speaker 5: I think it's a.

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Speaker 4: Little early to tell. I mean, we certainly hope there

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Speaker 4: will be. We do know, for example, if we look

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Speaker 4: at the economy more broadly, during the pandemic, we had

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Speaker 4: the massive rotation of consumption of goods over services that

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Speaker 4: is renormalizing, but we still see that our services consumption

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Speaker 4: isn't quite back where it was before. So we would

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Speaker 4: anticipate to see more employment growth there, maybe a little.

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Speaker 2: Bit less in goods.

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Speaker 4: So we expect to see some of those changes. You know,

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Speaker 4: here at Aspen we've been having a lot of discussion

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Speaker 4: about generative AI and technological change and what kinds of

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Speaker 4: changes that will bring to our labor market and our economy.

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Speaker 2: You mentioned the generative AI, which has been the subject

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Speaker 2: of a lot of discussion here at the Aspen Economic

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Speaker 2: Strategy Group, and it's early on. At the same time,

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Speaker 2: one of the things we're hearing is it's coming really

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Speaker 2: fast and very broadly, in a very broad sense. As

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Speaker 2: a labor commist, what will you be looking at in

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Speaker 2: terms of what we need to do to adjust our

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Speaker 2: workforce for a world of really broad based AI.

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Speaker 4: So we all embrace technology and in our economy and

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Speaker 4: over history we have all benefited from changes technological changes

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Speaker 4: such as this general AI. It can be disruptive in

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Speaker 4: the short term, and I think the hope is that

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Speaker 4: this will be more complementary with labor, meaning that this

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Speaker 4: kind of technological change allows workers to work better increased productivity,

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Speaker 4: as opposed being an absolute substitute for labor, so that

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Speaker 4: we see firms using the technology instead of workers. So

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Speaker 4: that is the challenge will be some of both. I

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Speaker 4: think we hope that it'll be more complementary than substituting

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Speaker 4: for labor, but that's what I think we'll be looking for.

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Speaker 4: We saw numbers about what fraction of occupations, you know,

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Speaker 4: in a certain fraction of the labor force, you know,

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Speaker 4: these kinds of technologies are substituting for particular tasks, but

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Speaker 4: not for complete jobs.

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Speaker 2: That maybe where it starts.

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Speaker 4: It's hard to imagine that's where it ends.

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Speaker 2: Doctor Czers, thank you so much for being holo. We

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Speaker 2: really appreciate it. My planning for this is a cio

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Speaker 2: Rose until recently was the chair of the Consuled Economic Advisor.

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Speaker 2: On Wednesday, we woke up to the unexpected news that

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Speaker 2: Fitch had downgraded US sovereign debt and then learned that

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Speaker 2: the Treasure we have to borrow yet more money to

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Speaker 2: cover the deficit that we're running, all of which made

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Speaker 2: the meetings at the Aspen Economic Strategy Group even more

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Speaker 2: timely because the subject this year was building a more

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Speaker 2: resilient US economy. So we met with the two chairs

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Speaker 2: of the organization. They are the former Treasury secretaries, Hank

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Speaker 2: Paulson and Tim Geidner, and we got their thoughts about

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Speaker 2: what they're trying to do to help the US get

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Speaker 2: back on the right fiscal track. Tim Geidner Hank Pulson

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Speaker 2: co chairs of the Aspen Economic Strategy Group. So Hank,

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Speaker 2: let me start with you. You've been at chairger a bit longer.

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Speaker 2: What do you have to accomplish this week in these meetings?

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Speaker 6: Well, David, when we set this up, our goal was

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Speaker 6: to create a forum where we had cutting edge economic research,

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Speaker 6: evidence space research, where we could discuss and debate it

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Speaker 6: on a non partisan basis. And a big one of

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Speaker 6: the things we really want to do is also a

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Speaker 6: creative forum where we can have economic leaders get to

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Speaker 6: know each other, build bonds, and do it across generations,

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Speaker 6: across sectors, and across parties. And then we want this

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Speaker 6: research to have a real world impact. So that's our goal.

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Speaker 6: And so far over the last six years, I think

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Speaker 6: the group has been coming together and I'm sort of

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Speaker 6: very pleased with the way it's.

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Speaker 2: Developed and tim the subject of the meetings is building

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Speaker 2: fiscal resilience in the US economy. Couldn't be more timely.

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Speaker 2: I want to talk about that. Even this week which

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Speaker 2: they have Fitch ratings is also bought varring more of

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Speaker 2: the strategy. Putting those on one side. What do we

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Speaker 2: need to do to build fiscal resilience.

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Speaker 7: Well, the topic is about economic resilience more broadly. Fiscal

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Speaker 7: resilience is one part of those things. And you know,

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Speaker 7: if you look at the economy day, it's a pretty

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Speaker 7: resilient economy. You know, we've been through a lot of

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Speaker 7: challenges and we look pretty strong today in a relative sense,

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Speaker 7: but we have a lot of long term challenge and

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Speaker 7: the fiscal channels are part of those challenges. And you know,

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Speaker 7: if you think about all the things we face in

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Speaker 7: this more dangerous world, and you know, a country with

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Speaker 7: very high levels of poverty and huge challenges and innovation,

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Speaker 7: it's important to make sure that we have people focused

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Speaker 7: on research that can help inform better public policy choices

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Speaker 7: at the national level and these things. And that requires

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Speaker 7: bringing people together from all sorts of disciplines, all parts

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Speaker 7: of the economy, both parties, trying to figure out how

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Speaker 7: to build trust and knowledge help shape those outcomes.

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Speaker 2: Thank clocking at the program. One of the issues we

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Speaker 2: can be talked about is how much money we're spending

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Speaker 2: the deficit, and that subject's been around for quite a while.

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Speaker 2: You've dealt with before. What are the prospects of actually

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Speaker 2: coming up with solutions that might be implemented.

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Speaker 6: Well, let me tell you something. I'm an optimist. You

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Speaker 6: need to be an optimist to do what we're doing.

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Speaker 6: And I believe what we're doing here is a major

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Speaker 6: step forward in doing this because if we can have

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Speaker 6: great research and get people together across parties and come

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Speaker 6: up with someprific ideas and get the facts out and

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Speaker 6: think tanks to both political parties. We can make progress. Now,

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Speaker 6: you're right the trajectory, our fiscal trajectory is concerning, but

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Speaker 6: we are a rich country and we've got time to

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Speaker 6: deal with it. But we need to do some things

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Speaker 6: in the next few years to change that trajectory. And

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Speaker 6: I think that's going to be very important, and to

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Speaker 6: do that, it's going to take doing things on both

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Speaker 6: the spending side and the revenue side. We're going to

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Speaker 6: need more revenues and we're going to need to figure

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Speaker 6: out how to deal with some difficult issues in areas

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Speaker 6: like the entitlements.

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Speaker 2: That was former Treasury Secretaries Hank Paulson and Tim Geidner.

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Speaker 2: Coming up, we'll hear from our special contributor here on

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Speaker 2: Wall Street Week, Larry Summers, about whether he thinks it's

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Speaker 2: time for him to start joining some of the others

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Speaker 2: like Bank of America economists and deciding that maybe we

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Speaker 2: won't have that recession after all. That's next on Wall

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Speaker 2: Street Week on Bloomberg.

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Speaker 1: This is Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio.

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Speaker 2: This is Wall Street Week. I'm David Weston. We are

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Speaker 2: joined here in Aspen, Colorado by our very special contributor

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Speaker 2: on Wall Street Week. He's Larry Summers of Harvard. So Larry,

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Speaker 2: great to be with you here in Aspen. At the

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Speaker 2: end of the week, we got the jobs numbers, and

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Speaker 2: they were a little light on the number of jobs

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Speaker 2: one hundred and eighty seven thousand as supposed to two

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Speaker 2: hundred thousand, a little heavy actually on the wage increases.

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Speaker 2: What do you make of them?

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Speaker 5: Look, nobody should change their minds fundamentally on the basis

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Speaker 5: of these numbers. They were pretty close to expectations. As

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Speaker 5: you said, economy was softer and inflation was bit stronger

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Speaker 5: than expected, So that's not terrific, but again not a

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Speaker 5: big deal from these numbers. Look, I think the big

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Speaker 5: story here all along is we're trying and to land

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Speaker 5: the plane on the runway where we're worried that the

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Speaker 5: plane would crash short of the runway. That certainly does

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Speaker 5: not look like it's going to happen. We've got a

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Speaker 5: very strong economy and we're worried that the plane will

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Speaker 5: overshoot the runway. If you look at wage inflation. It

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Speaker 5: was faster for the month then for the quarter, faster

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Speaker 5: for the quarter than for the year, and running for

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Speaker 5: the quarter at about four point nine percent, that's not

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Speaker 5: consistent with two percent underlying inflation or close. And unemployment

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Speaker 5: ticked down, vacancies ticked up. We still have a tight

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Speaker 5: labor market, a very tight labor market, and with one

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Speaker 5: hundred and eighty seven thousand jobs created and population growing

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Speaker 5: fifty to one hundred thousand a month, we have not

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Speaker 5: just a tight labor market, but a tightening labor market.

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Speaker 5: Now it's true, as someone will point out, that we're tightening,

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Speaker 5: we're tightening relative to a tight state at a slower

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Speaker 5: rate than we were before, and that's encouraging. But fundamentally,

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Speaker 5: the plane is not yet on a trajectory to a

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Speaker 5: soft landing within the runway.

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Speaker 2: And let's continue with your analogy about the plane trajectory.

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Speaker 2: Where do we need to get to to get on

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Speaker 2: the right trajectory to get to two percent within some

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Speaker 2: reasonable period of time. What sort of numbers do you

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Speaker 2: look for, for example, in wage increases. Right now we're

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Speaker 2: going about four point four percent year over year. What

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Speaker 2: sorts of numbers do you look for on unemployment rate,

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Speaker 2: what are the key factors in figuring that trajectory.

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Speaker 5: So the part of the issue is that it's four

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Speaker 5: point four year over a year, but it's four point

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Speaker 5: nine quarter over a quarter, and it's probably closer to

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Speaker 5: five point zero month over month, and so it's not

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Speaker 5: that it is on a decelerating Pathroadly badly. Broadly, inflation

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Speaker 5: is the difference between waste growth and productivity growth. And

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Speaker 5: you can argue about where productivity growth is going to be.

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Speaker 5: I would guess, but it's anybody's guess, somewhere between one

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Speaker 5: and one and a half percent. So that would tell

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Speaker 5: you that the kind of inflation we're having is ways

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Speaker 5: inflation we're having is pointing to an underlying inflation rate

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Speaker 5: in the three and a half range, and it may

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Speaker 5: not be decelerating. Those are numbers I'll be watching closely.

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Speaker 5: I'll be watching the core inflation numbers. Look, there's no

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Speaker 5: necessary unemployment. Nobody wants to see any unemployment, certainly not

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Speaker 5: any increase in unemployment. But what we know is that

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Speaker 5: if we don't contain inflation, it sets the stage for

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Speaker 5: all sorts of very serious problems elsewhere. And I don't

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Speaker 5: think we can yet be confident that we're not going

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Speaker 5: to see a reacceleration of inflation at some point.

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Speaker 3: Down the road.

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Speaker 5: And that's the thing that I'm focused on, not some

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Speaker 5: precise numerical target for inflation, but whether there's a sense

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Speaker 5: that this is under control. And I think we'll have

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Speaker 5: to wait and see again. The numbers have come in

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Speaker 5: a bit better over the last few months than I

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Speaker 5: would have guessed, but I find the primitive I find

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Speaker 5: the declarations of victory by some to be substantially premature.

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Speaker 5: I'm glad that the FED is not among those who

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Speaker 5: are declaring victory, and I find the idea that this

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Speaker 5: vindicates the view of those who have been unconcerned about inflation.

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Speaker 8: All along to be a bit bizarre, since what we

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Speaker 8: followed was very different policies than the ones that they

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Speaker 8: have been pushing.

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Speaker 2: You've already said you're not so sure of fits in

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Speaker 2: of a self. Is that sigid again? But is there

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Speaker 2: a fundamental underlying issue. You're out here as one of

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Speaker 2: the leaders of the Asthmen economic strategy, and there's a

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Speaker 2: lot of discussion now about what's going on fiscally with

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Speaker 2: the United States.

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Speaker 5: Ook David, I have written and said that I don't

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Speaker 5: think we're on a sustainable fiscal path. I think the

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Speaker 5: Congressional Budget Office is pretty pessimistic. It thinks the deficit's

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Speaker 5: going to be in the seven percent range once we

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Speaker 5: get out eight.

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Speaker 2: Or ten years.

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Speaker 5: They think we're going to be reducing defense spending relative

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Speaker 5: to GDP. I think that's wrong given the threats we face.

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Speaker 5: They think that Treasury bill interest rates can average in

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Speaker 5: the low two's. I think that's not close to right

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Speaker 5: given the strains that we face. They assume, because they're

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Speaker 5: required to, that all the Trump tax cuts will phase out.

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Speaker 5: I don't think that's going to happen. They haven't really

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Speaker 5: fully recognized that revenues are coming in well below expectation

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Speaker 5: this year. I think if you do the forecast right,

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Speaker 5: you're looking at a number close to ten. I don't

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Speaker 5: think the United States is going to tell bondholders they're

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Speaker 5: not getting money. I think the fact that we worked through,

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Speaker 5: even in an incredibly toxic political environment, the debt limit

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Speaker 5: settled that issue. I look at so called credit default

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Speaker 5: swaps on the United States and they haven't moved, so

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Speaker 5: I don't think Fitch really is contributing usefully to the

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Speaker 5: debate here. I think they're sort of flailing for relevance,

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Speaker 5: and in general, rating agencies have not proven very prescient.

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Speaker 5: They tend to follow markets rather than lead them. But

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Speaker 5: I do think for anyone who's concerned about inflation, for

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Speaker 5: anybody who's concerned about our resilience as a country and

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Speaker 5: as an economy. You know, we talk constantly these days

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Speaker 5: about the importance of resilience. Well, if you think about

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Speaker 5: a company, or you think about a household, not being

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Speaker 5: leveraged to the hilt is an important part of being resilient.

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Speaker 5: And I wish that aspect of resilience would preoccupy our

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Speaker 5: policy makers as much as the ones that can be

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Speaker 5: translated into arguments for creating some jobs in Ohio, because

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Speaker 5: I think that's something that is a very very important

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Speaker 5: aspect of resilience.

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Speaker 2: Very great to be with you here, as Larry Summer

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Speaker 2: is our very special archerer here on Wall Street Week.

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Speaker 2: A good part of the money that the US is

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Speaker 2: spending is on various infrastructure and clean energy project is

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Speaker 2: its part really of a new industrial policy? We ask

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Speaker 2: the former CEO of Honeywell, he's Dave Cody, about whether

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Speaker 2: that makes sense and how it should be done. That's

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Speaker 2: coming up next on Wall Street Week on Bloomberg Industrial policy.

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Speaker 2: It's been credited with Japan's remarkable economic growth after World

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Speaker 2: War Two, overseen by the famous, some might say infamous Meety,

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Speaker 2: the Ministry of International Trade and Industry. Now the United

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Speaker 2: States is trying out its own form of industrial policy,

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Speaker 2: as Congress passed first the Inflation Reduction Act, including three

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Speaker 2: hundred and seventy billion dollars for climate related investments.

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Speaker 7: We have deep plans for longer term investments and key sectors,

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Speaker 7: including standing up semiconductors, electric vehicles, electric batteries.

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Speaker 2: And then another fifty two billion dollars for the US

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Speaker 2: semiconductor industry.

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Speaker 9: The Chips Act is a seminal act for This may

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Speaker 9: be the most significant industrial policy legislation that's been put

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Speaker 9: in place since World War Two in the This is huge,

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Speaker 9: This is good for the industry, it's good for the

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Speaker 9: United States, and Intel will be a beneficiary there. And

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Speaker 9: I'm proud to have played a part in getting it

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Speaker 9: across the line, all.

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Speaker 2: Of which has triggered something of a subsidies competition between

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Speaker 2: the United States and allies such as Canada over the

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Speaker 2: IRA Yes.

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Speaker 10: The IRA is something that we've had to step up

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Speaker 10: to to make sure we're competitive. But we're going to

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Speaker 10: be a lot more strategic about how we pick and

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Speaker 10: choose the right investments. We can't just do a blanket

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Speaker 10: like the US CAMP.

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Speaker 2: And the European Union over chips micro chiefs.

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Speaker 11: They are the backbone of Europe's industrial competitiveness in a

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Speaker 11: digital world, the green and the digital transition where it

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Speaker 11: requires new advanced technological solutions, and this is why we

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Speaker 11: must increase Europe's own chips research developments, production capabilities.

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Speaker 2: But the biggest challenge may be making sure all this

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Speaker 2: money will make our economies stronger rather than simply some

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Speaker 2: companies richer.

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Speaker 11: The whole point of this is to increase innovation, research

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Speaker 11: and development in the industry, not you know, we're not

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Speaker 11: giving you taxpayer money to fluff your pillow and increase

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Speaker 11: your profit and give it away to your shareholders.

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Speaker 3: We're giving it to you to invest in our and dasent.

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Speaker 2: Here at the Aspen Economic Strategy Group, there's been a

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Speaker 2: lot of talk now about industrial policy, particularly the Inflational

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Speaker 2: Reduction Act as well as the Chips and Science Act,

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Speaker 2: and so we have somebody who has actually run some

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Speaker 2: things in his life. He is Dave Cody is the

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Speaker 2: former CEO, of course, of Honeywell, and he's now executive

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Speaker 2: chairman of Virtue. So Dave, great to have you here.

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Speaker 2: I always said, when it comes to industrial policy, if

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Speaker 2: we're going to have it, why don't we have Dave

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Speaker 2: Cody and Treasury? What do you think about the Chips

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Speaker 2: of Science Act When you think about some of the

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Speaker 2: big industrial policities that's coming out of Washingman Now, it's

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Speaker 2: a lot of money involved.

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Speaker 12: Yeah, Well, when you think about industrial policy, it tends

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Speaker 12: to be kind of a secular, mobilizing ef left or right,

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Speaker 12: and people are either absolutely for it or absolutely against it.

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Speaker 12: But the reality is there's always been some kind of

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Speaker 12: industrial policy in the country. You're going back to establishing

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Speaker 12: the railroads, establishing canals, the interstate system, NASA to put

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Speaker 12: somebody on the moon. I mean, there's always been that.

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Speaker 12: Kind of the trick is to not let it go

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Speaker 12: too far. So how do you find that kind of

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Speaker 12: right spot? So I'm not completely against it, but you've

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Speaker 12: got to be smart about it because it's very easy.

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Speaker 12: Once politics starts to intrude, politics will triumph. Good judgment

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Speaker 12: all the time, so you want to make sure you

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Speaker 12: don't lose the good judgment side of it. You asked

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Speaker 12: about the Chips Act, and I would say, you know,

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Speaker 12: I'm a bit ambivalent about the whole thing. In terms

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Speaker 12: of what they think it's going to accomplish.

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Speaker 3: I don't think they're even close.

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Speaker 12: And if you take a look at the percent of

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Speaker 12: chips that will actually affect it's estimates from three to

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Speaker 12: five percent of the total, it's not the super high

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Speaker 12: end difficult chips. And the know how required to make

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Speaker 12: those chips doesn't exist in the US anymore. Most of

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Speaker 12: it exists in Taiwan. And this, with the exception of

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Speaker 12: maybe the R and D spending that they're doing, it

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Speaker 12: doesn't really address any of that. So we're spending a

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Speaker 12: lot of money that doesn't exactly solve the problem, which

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Speaker 12: is how do you create a more domestic capability when

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Speaker 12: it comes to being able to produce these super high

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Speaker 12: end chips. We should be able to figure that out

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Speaker 12: because a lot of the equipment to make these chips

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Speaker 12: is made in the US.

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Speaker 3: So you would think that if.

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Speaker 12: We spend money in the right place. Is to say,

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Speaker 12: how do we really learn how to do this. That

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Speaker 12: would be I think much more efficient and effective spending

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Speaker 12: than just building plants to produce chips that really aren't

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Speaker 12: all that essentially.

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Speaker 2: So in general, Dave, a lot of people say we

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Speaker 2: should look to industrial policy for the things that only

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Speaker 2: the government can do. If the private sector can do it,

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Speaker 2: let them do it. In the area of chips, are

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Speaker 2: there things that only the government can do that we

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Speaker 2: actually have to turn to the government ask them to

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Speaker 2: do it for us.

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Speaker 12: Well, I think the better place for them to be

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Speaker 12: spending their money is more on the R and D

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Speaker 12: side or providing incentives for people to learn how to

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Speaker 12: produce those chips here, and.

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Speaker 3: I don't really see that.

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Speaker 12: One of the things I would like to talk about though,

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Speaker 12: on industrial policy is we spend a lot of time

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Speaker 12: talking about bringing manufacturing jobs back to the US, like

440
00:24:44,200 --> 00:24:47,320
Speaker 12: manufacturing jobs solve all our economic.

441
00:24:46,880 --> 00:24:50,000
Speaker 3: Problems, And that's a little backwards I think.

442
00:24:50,560 --> 00:24:54,360
Speaker 12: And we're in the agricultural age, went to the industrial leader,

443
00:24:54,400 --> 00:24:57,480
Speaker 12: and now we're in the digital age, and if we

444
00:24:57,480 --> 00:25:00,840
Speaker 12: were smart, we'd be doing the same thing that all

445
00:25:00,880 --> 00:25:03,119
Speaker 12: our counterparts did one hundred and one hundred and fifty

446
00:25:03,200 --> 00:25:06,760
Speaker 12: years ago when they said there's this shift to an

447
00:25:06,800 --> 00:25:10,040
Speaker 12: industrial economy. We need kids to be able to be

448
00:25:10,119 --> 00:25:12,840
Speaker 12: literate and numerate if they're going to be successful in

449
00:25:12,920 --> 00:25:17,760
Speaker 12: this kind of environment. Now we're going to the digital age,

450
00:25:18,080 --> 00:25:20,480
Speaker 12: and instead of saying, all right, how do we educate

451
00:25:20,480 --> 00:25:22,600
Speaker 12: our kids, how do we prepare them to be able

452
00:25:22,600 --> 00:25:26,440
Speaker 12: to be successful in a world like this? Instead we're saying, no,

453
00:25:26,640 --> 00:25:29,200
Speaker 12: let's make sure that we can keep all the manufacturing

454
00:25:29,280 --> 00:25:31,119
Speaker 12: jobs here because these will pay well.

455
00:25:31,720 --> 00:25:33,800
Speaker 3: It'd be a little like if one hundred thirty.

456
00:25:33,600 --> 00:25:37,680
Speaker 12: Years ago politicians and business people had said, god, you know,

457
00:25:37,880 --> 00:25:39,680
Speaker 12: with this industrial thing, man, that's going to be a

458
00:25:39,720 --> 00:25:40,280
Speaker 12: lot of trouble.

459
00:25:40,600 --> 00:25:42,040
Speaker 3: We need to find a way to keep people on

460
00:25:42,080 --> 00:25:42,800
Speaker 3: the farm.

461
00:25:43,240 --> 00:25:43,440
Speaker 5: Right.

462
00:25:44,080 --> 00:25:45,240
Speaker 3: It's totally backwards.

463
00:25:45,640 --> 00:25:48,680
Speaker 12: So I'd rather see an industrial policy that focused more

464
00:25:48,720 --> 00:25:51,240
Speaker 12: on education for all our kids, to say, how do

465
00:25:51,320 --> 00:25:53,800
Speaker 12: we prepare them for this digital age which is going

466
00:25:53,840 --> 00:25:56,480
Speaker 12: to go on for another eighty years or so until

467
00:25:56,520 --> 00:25:57,719
Speaker 12: something new comes around.

468
00:25:58,040 --> 00:25:59,359
Speaker 3: This is going to be with us for a while.

469
00:26:00,200 --> 00:26:02,439
Speaker 2: R and D Yeah, why can't the private sector do that?

470
00:26:02,480 --> 00:26:05,200
Speaker 2: I mean you had a big R and D budget, right,

471
00:26:05,280 --> 00:26:06,920
Speaker 2: I mean all the big corporates in a big R

472
00:26:06,920 --> 00:26:08,800
Speaker 2: and D dodge Why can't the private sector give us

473
00:26:08,800 --> 00:26:09,600
Speaker 2: the R and D do we need?

474
00:26:10,240 --> 00:26:13,080
Speaker 12: Yeah, I think that's one of the misconceptions about R

475
00:26:13,080 --> 00:26:15,360
Speaker 12: and D. Has always talked about like it's a single thing,

476
00:26:16,040 --> 00:26:21,320
Speaker 12: But it's two words, right. It's research development. Well, development

477
00:26:21,359 --> 00:26:24,159
Speaker 12: takes stuff that was developed in research and turns it

478
00:26:24,200 --> 00:26:27,160
Speaker 12: into viable products. If you were to take a look

479
00:26:27,240 --> 00:26:31,760
Speaker 12: at all companies spending on R and D together, I

480
00:26:31,800 --> 00:26:34,160
Speaker 12: wouldn't be surprised if you found ninety and ninety five

481
00:26:34,200 --> 00:26:38,000
Speaker 12: percent of it was spent on development. Because research is

482
00:26:38,080 --> 00:26:41,800
Speaker 12: just too iffy, too expensive, the chances of it turning

483
00:26:41,800 --> 00:26:44,760
Speaker 12: into something generally can be pretty small. And that's one

484
00:26:44,760 --> 00:26:47,040
Speaker 12: where I do think the government has a big role

485
00:26:47,080 --> 00:26:50,160
Speaker 12: to play and just doing this basic research that's available

486
00:26:50,200 --> 00:26:53,080
Speaker 12: to all US companies so that as they start finding

487
00:26:53,119 --> 00:26:55,840
Speaker 12: these things, companies can then take them and develop into

488
00:26:55,920 --> 00:26:58,720
Speaker 12: products and services that'll be useful. It's one of the

489
00:26:58,760 --> 00:27:01,199
Speaker 12: areas I think we're falling down a bit, and for me,

490
00:27:01,359 --> 00:27:04,160
Speaker 12: this would be good industrial policy. There's a lot more

491
00:27:04,200 --> 00:27:10,919
Speaker 12: money going into research, whether it's health anything, digital, bioengineering,

492
00:27:11,040 --> 00:27:13,000
Speaker 12: all those things that are going to be very important

493
00:27:13,000 --> 00:27:13,920
Speaker 12: to us in the century.

494
00:27:14,080 --> 00:27:16,639
Speaker 2: What about climate Another big aspect of industrial plus right

495
00:27:16,640 --> 00:27:19,800
Speaker 2: now is the move towards green energy. Essentially a lot

496
00:27:19,800 --> 00:27:22,080
Speaker 2: of money is going into that right now. Does that

497
00:27:22,119 --> 00:27:22,760
Speaker 2: make sense to you?

498
00:27:23,600 --> 00:27:27,679
Speaker 12: Well, I'm a fan of figuring out how do you

499
00:27:27,800 --> 00:27:30,119
Speaker 12: keep land, air and water as.

500
00:27:30,000 --> 00:27:32,480
Speaker 3: Neutral as possible. We're putting a lot.

501
00:27:32,320 --> 00:27:35,120
Speaker 12: Of CO two into the atmosphere, so figuring out how

502
00:27:35,119 --> 00:27:37,880
Speaker 12: can we do this in a more.

503
00:27:37,760 --> 00:27:39,639
Speaker 3: Neutral way I think is a good idea.

504
00:27:40,320 --> 00:27:42,760
Speaker 12: However, we shouldn't be thinking that this is going to

505
00:27:42,760 --> 00:27:46,600
Speaker 12: solve climate change. If you really believe that CO two

506
00:27:46,880 --> 00:27:49,240
Speaker 12: and believe all the models that CO two lasts for

507
00:27:49,240 --> 00:27:52,120
Speaker 12: one hundred years in the atmosphere is going to be there.

508
00:27:52,200 --> 00:27:55,600
Speaker 12: We don't get to net zero as a globe for

509
00:27:56,080 --> 00:27:58,800
Speaker 12: till twenty fifty or something. And remember the US is

510
00:27:58,840 --> 00:28:01,960
Speaker 12: only like fourteen or fifteen percent of all emissions. That

511
00:28:02,119 --> 00:28:05,640
Speaker 12: means global warming is coming. Whether we get to zero

512
00:28:05,840 --> 00:28:07,240
Speaker 12: or not, it's coming.

513
00:28:07,560 --> 00:28:10,320
Speaker 2: Let's assume, Dave, that we decide we need industrial policy,

514
00:28:10,359 --> 00:28:12,920
Speaker 2: whether it's in chips or whether it's in forms of climate,

515
00:28:13,119 --> 00:28:14,880
Speaker 2: and we decide we need to spend this much money

516
00:28:14,880 --> 00:28:16,520
Speaker 2: in how should we go about doing it? I mean,

517
00:28:16,560 --> 00:28:18,639
Speaker 2: I think back in World War Two, I think FDR

518
00:28:18,720 --> 00:28:21,879
Speaker 2: basically turned to US industry to help really drive a

519
00:28:21,880 --> 00:28:24,679
Speaker 2: lot of the industrialization that helped to the United States

520
00:28:24,680 --> 00:28:27,119
Speaker 2: and the Allies win the war. How would we go

521
00:28:27,200 --> 00:28:31,399
Speaker 2: about really figuring out who should administer the industrial policy?

522
00:28:32,000 --> 00:28:34,920
Speaker 12: Well, if you go back to that time, what they

523
00:28:34,960 --> 00:28:37,639
Speaker 12: actually did was take a number of business leaders and

524
00:28:37,960 --> 00:28:40,200
Speaker 12: brought them into government in order to run a lot

525
00:28:40,240 --> 00:28:42,640
Speaker 12: of these things, which I don't think I still don't

526
00:28:42,680 --> 00:28:44,920
Speaker 12: think is a bad idea. And I found myself thinking,

527
00:28:44,960 --> 00:28:47,160
Speaker 12: even when we were in the midst of COVID and

528
00:28:47,320 --> 00:28:50,640
Speaker 12: we couldn't find basic products that just weren't enough of them,

529
00:28:51,000 --> 00:28:53,200
Speaker 12: I often thought, why don't they assemble a group of

530
00:28:53,360 --> 00:28:57,040
Speaker 12: retired CEOs to assign them tasks to say, go figure

531
00:28:57,080 --> 00:28:59,520
Speaker 12: this out, as opposed to just having a bunch of

532
00:28:59,640 --> 00:29:01,520
Speaker 12: governments types do it.

533
00:29:02,160 --> 00:29:04,520
Speaker 3: And yeah, I'd say that possibility still exists.

534
00:29:04,520 --> 00:29:08,200
Speaker 2: Well, we have a retired CEO right here? Are you volunteering, Dave?

535
00:29:08,800 --> 00:29:11,800
Speaker 12: I don't know that I'm not retired retired enough to

536
00:29:11,840 --> 00:29:13,600
Speaker 12: be able to do that at this point, Dave.

537
00:29:13,640 --> 00:29:16,600
Speaker 2: Great to have you on Wall Street Week. Zave Cody.

538
00:29:16,720 --> 00:29:21,600
Speaker 2: He's the executive chair of Versive coming up a Stronger

539
00:29:21,640 --> 00:29:24,400
Speaker 2: Economy and a bit less inflation. What does that tell

540
00:29:24,400 --> 00:29:27,040
Speaker 2: the FED about where it should head next? On interest rates,

541
00:29:27,080 --> 00:29:29,760
Speaker 2: We're going to talk to two regional FED presidents, Austin

542
00:29:29,800 --> 00:29:33,040
Speaker 2: Goolsby of Chicago and Rafael Bok of Atlanta. Let's come

543
00:29:33,120 --> 00:29:35,280
Speaker 2: up next on Wall Street Week on Bloomberg.

544
00:29:37,680 --> 00:29:41,920
Speaker 1: This is Bloomberg Wall Street Week with David Weston from

545
00:29:42,040 --> 00:29:51,720
Speaker 1: Bloomberg Radio.

546
00:29:49,480 --> 00:29:53,040
Speaker 2: From Asma, Colorado for a Bloomberg Television radio audience is worldwide.

547
00:29:53,040 --> 00:29:55,200
Speaker 2: I'm David Weston. I'm delighted to be joined right now

548
00:29:55,320 --> 00:29:58,440
Speaker 2: by the president of the Chicago Fed. He is Austin Goolsby. Austin,

549
00:29:58,440 --> 00:29:59,240
Speaker 2: thanks for being here.

550
00:29:59,240 --> 00:29:59,600
Speaker 5: We've met.

551
00:30:00,000 --> 00:30:02,400
Speaker 2: We're out here for the Aspen Economic Strategy Group meetings.

552
00:30:02,480 --> 00:30:05,800
Speaker 2: A lot of talk about fiscal issues, monetary issues, but

553
00:30:05,920 --> 00:30:10,120
Speaker 2: we all I have now the key job figures a

554
00:30:10,120 --> 00:30:12,360
Speaker 2: little bit lighter than expected, one hundred and eighty seven thousand,

555
00:30:12,360 --> 00:30:15,120
Speaker 2: set of two hundred thousand, little heavier than expected on

556
00:30:15,200 --> 00:30:16,440
Speaker 2: the wages. What did you take on the.

557
00:30:17,840 --> 00:30:21,240
Speaker 13: Job market is cooling a little too kind of a

558
00:30:21,320 --> 00:30:25,880
Speaker 13: balanced level, but it's still extremely strong. That's the strongest

559
00:30:25,880 --> 00:30:28,440
Speaker 13: part of the economy by far, is how low the

560
00:30:28,480 --> 00:30:31,160
Speaker 13: unemployment rate is and people can get a job if

561
00:30:31,200 --> 00:30:31,920
Speaker 13: they want a job.

562
00:30:32,200 --> 00:30:35,200
Speaker 2: But what about the wages where now these numbers were

563
00:30:35,200 --> 00:30:37,880
Speaker 2: four point four percent year over year I believe it was.

564
00:30:38,560 --> 00:30:40,720
Speaker 2: That doesn't sound like something consistent with getting to two

565
00:30:40,720 --> 00:30:45,800
Speaker 2: percent inflation overall. The way I view it as two things.

566
00:30:45,840 --> 00:30:50,400
Speaker 13: One can't say anything about wages until you actually know

567
00:30:50,480 --> 00:30:54,000
Speaker 13: what's happening with productivity. We got some productivity numbers. They

568
00:30:54,080 --> 00:30:57,560
Speaker 13: were strong for the quarter. That's very noisy. But if

569
00:30:57,600 --> 00:31:00,720
Speaker 13: you have strong productivity growth, you can have wage growth

570
00:31:00,720 --> 00:31:03,920
Speaker 13: and it doesn't generate inflation. And the other thing about

571
00:31:03,960 --> 00:31:08,000
Speaker 13: wages is they're not a leading indicator of price inflation.

572
00:31:08,440 --> 00:31:12,160
Speaker 13: They're backward looking. They move, wages move more slowly. When

573
00:31:12,200 --> 00:31:15,560
Speaker 13: things happen, we get shocks, the prices move first and

574
00:31:15,600 --> 00:31:18,520
Speaker 13: then the wages. So when we see what's happening to

575
00:31:18,560 --> 00:31:21,520
Speaker 13: wages today, this is kind of an amalgam of a

576
00:31:21,560 --> 00:31:23,840
Speaker 13: bunch of stuff that already occurred.

577
00:31:24,440 --> 00:31:26,680
Speaker 2: What are those numbers telling you right now? Particularly goods inflation?

578
00:31:26,800 --> 00:31:28,960
Speaker 2: Is it a bit stickier than you're thing it.

579
00:31:29,000 --> 00:31:32,120
Speaker 13: Has been, But the last couple of readings have been

580
00:31:32,360 --> 00:31:38,240
Speaker 13: pretty positive. It's important that you raise this goods loosely.

581
00:31:38,360 --> 00:31:40,760
Speaker 13: If you look at core inflation. You got goods, you

582
00:31:40,800 --> 00:31:45,000
Speaker 13: got housing, you got services not including housing, And we've

583
00:31:45,200 --> 00:31:49,520
Speaker 13: much remarked on the stickiness and persistence of services inflation,

584
00:31:50,320 --> 00:31:54,480
Speaker 13: but we knew that that's not where we went wrong

585
00:31:55,040 --> 00:31:57,360
Speaker 13: over at the end of last year beginning of this year,

586
00:31:57,960 --> 00:32:01,680
Speaker 13: with inflation lasting a little longer than we thought, it

587
00:32:01,720 --> 00:32:05,280
Speaker 13: has been the goods prices, while down, have not gone

588
00:32:05,320 --> 00:32:08,960
Speaker 13: all the way down to where they were before the pandemic.

589
00:32:10,200 --> 00:32:13,160
Speaker 13: I feel like that's kind of started and that's put

590
00:32:13,200 --> 00:32:14,520
Speaker 13: the Fed on this line.

591
00:32:14,560 --> 00:32:16,400
Speaker 2: I mean, it's a thin line.

592
00:32:16,160 --> 00:32:19,680
Speaker 13: To walk, but getting the prices down without having a

593
00:32:19,680 --> 00:32:24,040
Speaker 13: big recession, We're gonna Johnny cash this thing and walk

594
00:32:24,080 --> 00:32:26,720
Speaker 13: that line, and that that's for sure the goal.

595
00:32:28,600 --> 00:32:30,600
Speaker 2: So we got the jobs numbers on Friday at the

596
00:32:30,720 --> 00:32:33,280
Speaker 2: end of the week, A little lighter on the number

597
00:32:33,320 --> 00:32:35,840
Speaker 2: of jobs, a little heavier on the wage increases. How

598
00:32:35,880 --> 00:32:36,800
Speaker 2: did you interpret them?

599
00:32:37,360 --> 00:32:39,840
Speaker 14: So they actually came in pretty much as I expected.

600
00:32:39,920 --> 00:32:42,960
Speaker 14: You know, I've expected the economy to slow down in

601
00:32:43,000 --> 00:32:47,040
Speaker 14: a fairly orderly way, and this number one eighty seven

602
00:32:47,120 --> 00:32:50,840
Speaker 14: comes in continuing that pace. Some folks would have liked

603
00:32:50,880 --> 00:32:54,360
Speaker 14: it to be faster and a larger gap but I'm comfortable.

604
00:32:54,400 --> 00:32:57,280
Speaker 14: I'm not expecting this to be over in a short

605
00:32:57,280 --> 00:33:00,480
Speaker 14: period of time. In terms of the wages, it doesn't

606
00:33:00,480 --> 00:33:02,760
Speaker 14: surprive me that wages are still strong. You know, during

607
00:33:02,800 --> 00:33:06,760
Speaker 14: this whole high inflation period, worker wages have trailed inflation

608
00:33:06,880 --> 00:33:08,920
Speaker 14: for quite some time, and so we're still in that

609
00:33:08,960 --> 00:33:11,400
Speaker 14: catch up period, and I expect that we will still

610
00:33:11,440 --> 00:33:14,600
Speaker 14: see strong wages. But I'll tell you, when I talk

611
00:33:14,640 --> 00:33:16,640
Speaker 14: to employers, the one thing they tell me is that

612
00:33:16,840 --> 00:33:19,600
Speaker 14: whatever they're setting their growth at this year, they're expecting

613
00:33:19,600 --> 00:33:22,080
Speaker 14: it to be lower next year and then lower again

614
00:33:22,520 --> 00:33:25,160
Speaker 14: after that to get back to where we're a pre pandemic.

615
00:33:25,240 --> 00:33:26,640
Speaker 14: So you know, we got to keep an eye on it,

616
00:33:26,720 --> 00:33:29,960
Speaker 14: of course, but I was not concerned too much about

617
00:33:30,000 --> 00:33:30,520
Speaker 14: that at this point.

618
00:33:30,600 --> 00:33:31,880
Speaker 2: And I'm sure you'd be the first to sem me

619
00:33:31,920 --> 00:33:33,960
Speaker 2: one data point isn't enough to make a decision. But

620
00:33:34,480 --> 00:33:36,680
Speaker 2: do you feel that the FED is on the trajectory

621
00:33:36,680 --> 00:33:38,719
Speaker 2: it needs to be on to get to two percent

622
00:33:38,960 --> 00:33:39,640
Speaker 2: at some point?

623
00:33:40,200 --> 00:33:41,080
Speaker 3: I do you know?

624
00:33:41,120 --> 00:33:44,960
Speaker 14: We are today in a restrictive stance, and as inflation

625
00:33:45,080 --> 00:33:49,440
Speaker 14: continues to fall, the degree to which it's restrictive actually grows.

626
00:33:49,720 --> 00:33:52,120
Speaker 14: As that gap between the inflation rate and our interest

627
00:33:52,160 --> 00:33:57,120
Speaker 14: rate widens, So I think that will put enough constraint

628
00:33:57,160 --> 00:33:59,840
Speaker 14: on the economy that it will continue to slow. But again,

629
00:34:00,040 --> 00:34:02,680
Speaker 14: I'm not expecting this to be a two month or

630
00:34:02,800 --> 00:34:06,280
Speaker 14: three month period. My outlook is that we'll still be

631
00:34:06,360 --> 00:34:09,360
Speaker 14: in a restrictive territory well into twenty twenty four, and

632
00:34:09,400 --> 00:34:11,800
Speaker 14: it will just take a while for the inflationary pressures

633
00:34:11,800 --> 00:34:13,800
Speaker 14: that we've seen over the last year and a half

634
00:34:14,080 --> 00:34:16,160
Speaker 14: to fully dissipate and get us back to two percent.

635
00:34:16,360 --> 00:34:19,359
Speaker 14: That's Raphael Boston. He is the president of the Atlanta FED.

636
00:34:19,800 --> 00:34:21,640
Speaker 14: That does it for this episode of Wall Street Week.

637
00:34:21,640 --> 00:34:24,400
Speaker 14: Coming to you from Aspen, Colorado. I'm David Weston. This

638
00:34:24,560 --> 00:34:26,799
Speaker 14: is Bloomberg. See you next week in New York.