Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: And we may not have an overall recession, we're having
Speaker 2: a rolling recession. To Konye Roll looks pretty strongly when
Speaker 2: it comes to jobs.
Speaker 1: The financial stories that shape our world.
Speaker 2: Three major regional bank failures send shockwaves through the banking system.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America,
Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of
Speaker 2: the Columbia Business School.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: This is a special addition of Wall Street Week from Aspen, Colorado,
Speaker 2: where we've come for the annual Aspen Economic Strategy Group meetings,
Speaker 2: bringing together economic experts and business leaders for a nonpartisan,
Speaker 2: detailed discussion some of the big economic issues in front
Speaker 2: of us.
Speaker 3: This year.
Speaker 2: The focus is on building a more resilient US economy,
Speaker 2: with a discussion ranging from things like the debt and deficit,
Speaker 2: to tax policy to where we're headed with artificial intelligence.
Speaker 2: We'll hear from special contributor Larry Summers of Harvard, his
Speaker 2: fellow former Treasury secretaries Hank Paulson and Tim Geidner, former
Speaker 2: Honeywell CEO Dave Cody, and regional Fed presidents Austin Goulsby
Speaker 2: of Chicago and Raphael Bostic of Atlanta. But we start
Speaker 2: with the distinguished labor economists who until recently was interpreting
Speaker 2: these numbers for President Biden. She's Cecilia Rouse.
Speaker 4: What the Department of Labor reported today was that the
Speaker 4: US economy added about one hundred and eighty seven thousand
Speaker 4: jobs last month, which is a robust number. It's the
Speaker 4: kind of number that I'm confident my callings at the
Speaker 4: Biden administration celebrated because what we've known is we had
Speaker 4: the pandemic induced recession. We saw the fastest growth out
Speaker 4: of that. But we also know that that kind of
Speaker 4: growth of three hundred thousand jobs month is not sustainable.
Speaker 4: That's not consistent with an economy that has reached its
Speaker 4: you know, whether we want to call it steady state,
Speaker 4: but it is a naturally, you know, robust economy, and
Speaker 4: so we've been looking for in anticipating and kind of
Speaker 4: a cooling last year, President Biden had an op ed
Speaker 4: it was I think a Wall Street journal anticipating this,
Speaker 4: But it's not even just about the president there, It's
Speaker 4: just that that is what we've that's what we want
Speaker 4: to see. That is what the Federal Reserve is looking for.
Speaker 4: Is a labor market that remains remarkably resilient.
Speaker 2: I will say that, so it is robust, but.
Speaker 4: Where we have the annual jobs numbers looking more consistent
Speaker 4: with just sort of typical turnover in a strong economy.
Speaker 2: As you say, remarkably resilient as a labor conduct Have
Speaker 2: you been surprised not to snap back after the pandemic
Speaker 2: but at the continued robustness, because one hundred and eighty
Speaker 2: seven thousand jobs may only be two hundred thousand, but
Speaker 2: it's a lot more than you need to have just
Speaker 2: to absorb the new additions of people to their workforce.
Speaker 4: Absolutely, and it's slightly more than you would expect us
Speaker 4: see with an unemployment rate of three point five percent,
Speaker 4: and at this stage of the economic recovery, so it
Speaker 4: has been markeably resilient. If you think about the changes
Speaker 4: in the inflation rate over the past year, inflation has
Speaker 4: come down quite a bit, and yet we've not seen
Speaker 4: much evidence of any impact on the labor market. So
Speaker 4: this for me, this goes back to the massive disruption
Speaker 4: caused by the pandemic, which affected every aspect of our
Speaker 4: economy in the US globally, and that it goes to that,
Speaker 4: you know, the disruption was on the supply side. We
Speaker 4: definitely had the robust assistance on the fiscal side, on
Speaker 4: the monetary side to ensure that we could get through
Speaker 4: the pandemic without too much disruption to our way of
Speaker 4: life and to our economic you know, our economic health,
Speaker 4: and that this is an economy that is knitting itself
Speaker 4: back together, but it has been surprisingly resilient.
Speaker 2: Wels I believe saw little bit of a reduction in
Speaker 2: the average hours worked per week. Is that potentially indication
Speaker 2: maybe the labor markets started to soften a little around
Speaker 2: the edges.
Speaker 4: So again we want to see a little bit of softening.
Speaker 4: That's what the Federal Reserve is looking for. So you know,
Speaker 4: it's important that we not focus on anyone month's numbers,
Speaker 4: but that could be a sign that a little bit
Speaker 4: of cooling here and there are unemployment insurance claims numbers
Speaker 4: remain very low, that job openings numbers remain very high,
Speaker 4: so we fundamentally have a strong labor market, with some
Speaker 4: signs that there's some cooling as we would hope to see.
Speaker 2: We've been through an extraordinary period of time for the
Speaker 2: labor market among other markets, because of the pandemic we
Speaker 2: now are coming back from that. Is it too early
Speaker 2: to ask ourselves are there structural changes we think in
Speaker 2: the labor market that may last well into the future.
Speaker 5: I think it's a.
Speaker 4: Little early to tell. I mean, we certainly hope there
Speaker 4: will be. We do know, for example, if we look
Speaker 4: at the economy more broadly, during the pandemic, we had
Speaker 4: the massive rotation of consumption of goods over services that
Speaker 4: is renormalizing, but we still see that our services consumption
Speaker 4: isn't quite back where it was before. So we would
Speaker 4: anticipate to see more employment growth there, maybe a little.
Speaker 2: Bit less in goods.
Speaker 4: So we expect to see some of those changes. You know,
Speaker 4: here at Aspen we've been having a lot of discussion
Speaker 4: about generative AI and technological change and what kinds of
Speaker 4: changes that will bring to our labor market and our economy.
Speaker 2: You mentioned the generative AI, which has been the subject
Speaker 2: of a lot of discussion here at the Aspen Economic
Speaker 2: Strategy Group, and it's early on. At the same time,
Speaker 2: one of the things we're hearing is it's coming really
Speaker 2: fast and very broadly, in a very broad sense. As
Speaker 2: a labor commist, what will you be looking at in
Speaker 2: terms of what we need to do to adjust our
Speaker 2: workforce for a world of really broad based AI.
Speaker 4: So we all embrace technology and in our economy and
Speaker 4: over history we have all benefited from changes technological changes
Speaker 4: such as this general AI. It can be disruptive in
Speaker 4: the short term, and I think the hope is that
Speaker 4: this will be more complementary with labor, meaning that this
Speaker 4: kind of technological change allows workers to work better increased productivity,
Speaker 4: as opposed being an absolute substitute for labor, so that
Speaker 4: we see firms using the technology instead of workers. So
Speaker 4: that is the challenge will be some of both. I
Speaker 4: think we hope that it'll be more complementary than substituting
Speaker 4: for labor, but that's what I think we'll be looking for.
Speaker 4: We saw numbers about what fraction of occupations, you know,
Speaker 4: in a certain fraction of the labor force, you know,
Speaker 4: these kinds of technologies are substituting for particular tasks, but
Speaker 4: not for complete jobs.
Speaker 2: That maybe where it starts.
Speaker 4: It's hard to imagine that's where it ends.
Speaker 2: Doctor Czers, thank you so much for being holo. We
Speaker 2: really appreciate it. My planning for this is a cio
Speaker 2: Rose until recently was the chair of the Consuled Economic Advisor.
Speaker 2: On Wednesday, we woke up to the unexpected news that
Speaker 2: Fitch had downgraded US sovereign debt and then learned that
Speaker 2: the Treasure we have to borrow yet more money to
Speaker 2: cover the deficit that we're running, all of which made
Speaker 2: the meetings at the Aspen Economic Strategy Group even more
Speaker 2: timely because the subject this year was building a more
Speaker 2: resilient US economy. So we met with the two chairs
Speaker 2: of the organization. They are the former Treasury secretaries, Hank
Speaker 2: Paulson and Tim Geidner, and we got their thoughts about
Speaker 2: what they're trying to do to help the US get
Speaker 2: back on the right fiscal track. Tim Geidner Hank Pulson
Speaker 2: co chairs of the Aspen Economic Strategy Group. So Hank,
Speaker 2: let me start with you. You've been at chairger a bit longer.
Speaker 2: What do you have to accomplish this week in these meetings?
Speaker 6: Well, David, when we set this up, our goal was
Speaker 6: to create a forum where we had cutting edge economic research,
Speaker 6: evidence space research, where we could discuss and debate it
Speaker 6: on a non partisan basis. And a big one of
Speaker 6: the things we really want to do is also a
Speaker 6: creative forum where we can have economic leaders get to
Speaker 6: know each other, build bonds, and do it across generations,
Speaker 6: across sectors, and across parties. And then we want this
Speaker 6: research to have a real world impact. So that's our goal.
Speaker 6: And so far over the last six years, I think
Speaker 6: the group has been coming together and I'm sort of
Speaker 6: very pleased with the way it's.
Speaker 2: Developed and tim the subject of the meetings is building
Speaker 2: fiscal resilience in the US economy. Couldn't be more timely.
Speaker 2: I want to talk about that. Even this week which
Speaker 2: they have Fitch ratings is also bought varring more of
Speaker 2: the strategy. Putting those on one side. What do we
Speaker 2: need to do to build fiscal resilience.
Speaker 7: Well, the topic is about economic resilience more broadly. Fiscal
Speaker 7: resilience is one part of those things. And you know,
Speaker 7: if you look at the economy day, it's a pretty
Speaker 7: resilient economy. You know, we've been through a lot of
Speaker 7: challenges and we look pretty strong today in a relative sense,
Speaker 7: but we have a lot of long term challenge and
Speaker 7: the fiscal channels are part of those challenges. And you know,
Speaker 7: if you think about all the things we face in
Speaker 7: this more dangerous world, and you know, a country with
Speaker 7: very high levels of poverty and huge challenges and innovation,
Speaker 7: it's important to make sure that we have people focused
Speaker 7: on research that can help inform better public policy choices
Speaker 7: at the national level and these things. And that requires
Speaker 7: bringing people together from all sorts of disciplines, all parts
Speaker 7: of the economy, both parties, trying to figure out how
Speaker 7: to build trust and knowledge help shape those outcomes.
Speaker 2: Thank clocking at the program. One of the issues we
Speaker 2: can be talked about is how much money we're spending
Speaker 2: the deficit, and that subject's been around for quite a while.
Speaker 2: You've dealt with before. What are the prospects of actually
Speaker 2: coming up with solutions that might be implemented.
Speaker 6: Well, let me tell you something. I'm an optimist. You
Speaker 6: need to be an optimist to do what we're doing.
Speaker 6: And I believe what we're doing here is a major
Speaker 6: step forward in doing this because if we can have
Speaker 6: great research and get people together across parties and come
Speaker 6: up with someprific ideas and get the facts out and
Speaker 6: think tanks to both political parties. We can make progress. Now,
Speaker 6: you're right the trajectory, our fiscal trajectory is concerning, but
Speaker 6: we are a rich country and we've got time to
Speaker 6: deal with it. But we need to do some things
Speaker 6: in the next few years to change that trajectory. And
Speaker 6: I think that's going to be very important, and to
Speaker 6: do that, it's going to take doing things on both
Speaker 6: the spending side and the revenue side. We're going to
Speaker 6: need more revenues and we're going to need to figure
Speaker 6: out how to deal with some difficult issues in areas
Speaker 6: like the entitlements.
Speaker 2: That was former Treasury Secretaries Hank Paulson and Tim Geidner.
Speaker 2: Coming up, we'll hear from our special contributor here on
Speaker 2: Wall Street Week, Larry Summers, about whether he thinks it's
Speaker 2: time for him to start joining some of the others
Speaker 2: like Bank of America economists and deciding that maybe we
Speaker 2: won't have that recession after all. That's next on Wall
Speaker 2: Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. We are
Speaker 2: joined here in Aspen, Colorado by our very special contributor
Speaker 2: on Wall Street Week. He's Larry Summers of Harvard. So Larry,
Speaker 2: great to be with you here in Aspen. At the
Speaker 2: end of the week, we got the jobs numbers, and
Speaker 2: they were a little light on the number of jobs
Speaker 2: one hundred and eighty seven thousand as supposed to two
Speaker 2: hundred thousand, a little heavy actually on the wage increases.
Speaker 2: What do you make of them?
Speaker 5: Look, nobody should change their minds fundamentally on the basis
Speaker 5: of these numbers. They were pretty close to expectations. As
Speaker 5: you said, economy was softer and inflation was bit stronger
Speaker 5: than expected, So that's not terrific, but again not a
Speaker 5: big deal from these numbers. Look, I think the big
Speaker 5: story here all along is we're trying and to land
Speaker 5: the plane on the runway where we're worried that the
Speaker 5: plane would crash short of the runway. That certainly does
Speaker 5: not look like it's going to happen. We've got a
Speaker 5: very strong economy and we're worried that the plane will
Speaker 5: overshoot the runway. If you look at wage inflation. It
Speaker 5: was faster for the month then for the quarter, faster
Speaker 5: for the quarter than for the year, and running for
Speaker 5: the quarter at about four point nine percent, that's not
Speaker 5: consistent with two percent underlying inflation or close. And unemployment
Speaker 5: ticked down, vacancies ticked up. We still have a tight
Speaker 5: labor market, a very tight labor market, and with one
Speaker 5: hundred and eighty seven thousand jobs created and population growing
Speaker 5: fifty to one hundred thousand a month, we have not
Speaker 5: just a tight labor market, but a tightening labor market.
Speaker 5: Now it's true, as someone will point out, that we're tightening,
Speaker 5: we're tightening relative to a tight state at a slower
Speaker 5: rate than we were before, and that's encouraging. But fundamentally,
Speaker 5: the plane is not yet on a trajectory to a
Speaker 5: soft landing within the runway.
Speaker 2: And let's continue with your analogy about the plane trajectory.
Speaker 2: Where do we need to get to to get on
Speaker 2: the right trajectory to get to two percent within some
Speaker 2: reasonable period of time. What sort of numbers do you
Speaker 2: look for, for example, in wage increases. Right now we're
Speaker 2: going about four point four percent year over year. What
Speaker 2: sorts of numbers do you look for on unemployment rate,
Speaker 2: what are the key factors in figuring that trajectory.
Speaker 5: So the part of the issue is that it's four
Speaker 5: point four year over a year, but it's four point
Speaker 5: nine quarter over a quarter, and it's probably closer to
Speaker 5: five point zero month over month, and so it's not
Speaker 5: that it is on a decelerating Pathroadly badly. Broadly, inflation
Speaker 5: is the difference between waste growth and productivity growth. And
Speaker 5: you can argue about where productivity growth is going to be.
Speaker 5: I would guess, but it's anybody's guess, somewhere between one
Speaker 5: and one and a half percent. So that would tell
Speaker 5: you that the kind of inflation we're having is ways
Speaker 5: inflation we're having is pointing to an underlying inflation rate
Speaker 5: in the three and a half range, and it may
Speaker 5: not be decelerating. Those are numbers I'll be watching closely.
Speaker 5: I'll be watching the core inflation numbers. Look, there's no
Speaker 5: necessary unemployment. Nobody wants to see any unemployment, certainly not
Speaker 5: any increase in unemployment. But what we know is that
Speaker 5: if we don't contain inflation, it sets the stage for
Speaker 5: all sorts of very serious problems elsewhere. And I don't
Speaker 5: think we can yet be confident that we're not going
Speaker 5: to see a reacceleration of inflation at some point.
Speaker 3: Down the road.
Speaker 5: And that's the thing that I'm focused on, not some
Speaker 5: precise numerical target for inflation, but whether there's a sense
Speaker 5: that this is under control. And I think we'll have
Speaker 5: to wait and see again. The numbers have come in
Speaker 5: a bit better over the last few months than I
Speaker 5: would have guessed, but I find the primitive I find
Speaker 5: the declarations of victory by some to be substantially premature.
Speaker 5: I'm glad that the FED is not among those who
Speaker 5: are declaring victory, and I find the idea that this
Speaker 5: vindicates the view of those who have been unconcerned about inflation.
Speaker 8: All along to be a bit bizarre, since what we
Speaker 8: followed was very different policies than the ones that they
Speaker 8: have been pushing.
Speaker 2: You've already said you're not so sure of fits in
Speaker 2: of a self. Is that sigid again? But is there
Speaker 2: a fundamental underlying issue. You're out here as one of
Speaker 2: the leaders of the Asthmen economic strategy, and there's a
Speaker 2: lot of discussion now about what's going on fiscally with
Speaker 2: the United States.
Speaker 5: Ook David, I have written and said that I don't
Speaker 5: think we're on a sustainable fiscal path. I think the
Speaker 5: Congressional Budget Office is pretty pessimistic. It thinks the deficit's
Speaker 5: going to be in the seven percent range once we
Speaker 5: get out eight.
Speaker 2: Or ten years.
Speaker 5: They think we're going to be reducing defense spending relative
Speaker 5: to GDP. I think that's wrong given the threats we face.
Speaker 5: They think that Treasury bill interest rates can average in
Speaker 5: the low two's. I think that's not close to right
Speaker 5: given the strains that we face. They assume, because they're
Speaker 5: required to, that all the Trump tax cuts will phase out.
Speaker 5: I don't think that's going to happen. They haven't really
Speaker 5: fully recognized that revenues are coming in well below expectation
Speaker 5: this year. I think if you do the forecast right,
Speaker 5: you're looking at a number close to ten. I don't
Speaker 5: think the United States is going to tell bondholders they're
Speaker 5: not getting money. I think the fact that we worked through,
Speaker 5: even in an incredibly toxic political environment, the debt limit
Speaker 5: settled that issue. I look at so called credit default
Speaker 5: swaps on the United States and they haven't moved, so
Speaker 5: I don't think Fitch really is contributing usefully to the
Speaker 5: debate here. I think they're sort of flailing for relevance,
Speaker 5: and in general, rating agencies have not proven very prescient.
Speaker 5: They tend to follow markets rather than lead them. But
Speaker 5: I do think for anyone who's concerned about inflation, for
Speaker 5: anybody who's concerned about our resilience as a country and
Speaker 5: as an economy. You know, we talk constantly these days
Speaker 5: about the importance of resilience. Well, if you think about
Speaker 5: a company, or you think about a household, not being
Speaker 5: leveraged to the hilt is an important part of being resilient.
Speaker 5: And I wish that aspect of resilience would preoccupy our
Speaker 5: policy makers as much as the ones that can be
Speaker 5: translated into arguments for creating some jobs in Ohio, because
Speaker 5: I think that's something that is a very very important
Speaker 5: aspect of resilience.
Speaker 2: Very great to be with you here, as Larry Summer
Speaker 2: is our very special archerer here on Wall Street Week.
Speaker 2: A good part of the money that the US is
Speaker 2: spending is on various infrastructure and clean energy project is
Speaker 2: its part really of a new industrial policy? We ask
Speaker 2: the former CEO of Honeywell, he's Dave Cody, about whether
Speaker 2: that makes sense and how it should be done. That's
Speaker 2: coming up next on Wall Street Week on Bloomberg Industrial policy.
Speaker 2: It's been credited with Japan's remarkable economic growth after World
Speaker 2: War Two, overseen by the famous, some might say infamous Meety,
Speaker 2: the Ministry of International Trade and Industry. Now the United
Speaker 2: States is trying out its own form of industrial policy,
Speaker 2: as Congress passed first the Inflation Reduction Act, including three
Speaker 2: hundred and seventy billion dollars for climate related investments.
Speaker 7: We have deep plans for longer term investments and key sectors,
Speaker 7: including standing up semiconductors, electric vehicles, electric batteries.
Speaker 2: And then another fifty two billion dollars for the US
Speaker 2: semiconductor industry.
Speaker 9: The Chips Act is a seminal act for This may
Speaker 9: be the most significant industrial policy legislation that's been put
Speaker 9: in place since World War Two in the This is huge,
Speaker 9: This is good for the industry, it's good for the
Speaker 9: United States, and Intel will be a beneficiary there. And
Speaker 9: I'm proud to have played a part in getting it
Speaker 9: across the line, all.
Speaker 2: Of which has triggered something of a subsidies competition between
Speaker 2: the United States and allies such as Canada over the
Speaker 2: IRA Yes.
Speaker 10: The IRA is something that we've had to step up
Speaker 10: to to make sure we're competitive. But we're going to
Speaker 10: be a lot more strategic about how we pick and
Speaker 10: choose the right investments. We can't just do a blanket
Speaker 10: like the US CAMP.
Speaker 2: And the European Union over chips micro chiefs.
Speaker 11: They are the backbone of Europe's industrial competitiveness in a
Speaker 11: digital world, the green and the digital transition where it
Speaker 11: requires new advanced technological solutions, and this is why we
Speaker 11: must increase Europe's own chips research developments, production capabilities.
Speaker 2: But the biggest challenge may be making sure all this
Speaker 2: money will make our economies stronger rather than simply some
Speaker 2: companies richer.
Speaker 11: The whole point of this is to increase innovation, research
Speaker 11: and development in the industry, not you know, we're not
Speaker 11: giving you taxpayer money to fluff your pillow and increase
Speaker 11: your profit and give it away to your shareholders.
Speaker 3: We're giving it to you to invest in our and dasent.
Speaker 2: Here at the Aspen Economic Strategy Group, there's been a
Speaker 2: lot of talk now about industrial policy, particularly the Inflational
Speaker 2: Reduction Act as well as the Chips and Science Act,
Speaker 2: and so we have somebody who has actually run some
Speaker 2: things in his life. He is Dave Cody is the
Speaker 2: former CEO, of course, of Honeywell, and he's now executive
Speaker 2: chairman of Virtue. So Dave, great to have you here.
Speaker 2: I always said, when it comes to industrial policy, if
Speaker 2: we're going to have it, why don't we have Dave
Speaker 2: Cody and Treasury? What do you think about the Chips
Speaker 2: of Science Act When you think about some of the
Speaker 2: big industrial policities that's coming out of Washingman Now, it's
Speaker 2: a lot of money involved.
Speaker 12: Yeah, Well, when you think about industrial policy, it tends
Speaker 12: to be kind of a secular, mobilizing ef left or right,
Speaker 12: and people are either absolutely for it or absolutely against it.
Speaker 12: But the reality is there's always been some kind of
Speaker 12: industrial policy in the country. You're going back to establishing
Speaker 12: the railroads, establishing canals, the interstate system, NASA to put
Speaker 12: somebody on the moon. I mean, there's always been that.
Speaker 12: Kind of the trick is to not let it go
Speaker 12: too far. So how do you find that kind of
Speaker 12: right spot? So I'm not completely against it, but you've
Speaker 12: got to be smart about it because it's very easy.
Speaker 12: Once politics starts to intrude, politics will triumph. Good judgment
Speaker 12: all the time, so you want to make sure you
Speaker 12: don't lose the good judgment side of it. You asked
Speaker 12: about the Chips Act, and I would say, you know,
Speaker 12: I'm a bit ambivalent about the whole thing. In terms
Speaker 12: of what they think it's going to accomplish.
Speaker 3: I don't think they're even close.
Speaker 12: And if you take a look at the percent of
Speaker 12: chips that will actually affect it's estimates from three to
Speaker 12: five percent of the total, it's not the super high
Speaker 12: end difficult chips. And the know how required to make
Speaker 12: those chips doesn't exist in the US anymore. Most of
Speaker 12: it exists in Taiwan. And this, with the exception of
Speaker 12: maybe the R and D spending that they're doing, it
Speaker 12: doesn't really address any of that. So we're spending a
Speaker 12: lot of money that doesn't exactly solve the problem, which
Speaker 12: is how do you create a more domestic capability when
Speaker 12: it comes to being able to produce these super high
Speaker 12: end chips. We should be able to figure that out
Speaker 12: because a lot of the equipment to make these chips
Speaker 12: is made in the US.
Speaker 3: So you would think that if.
Speaker 12: We spend money in the right place. Is to say,
Speaker 12: how do we really learn how to do this. That
Speaker 12: would be I think much more efficient and effective spending
Speaker 12: than just building plants to produce chips that really aren't
Speaker 12: all that essentially.
Speaker 2: So in general, Dave, a lot of people say we
Speaker 2: should look to industrial policy for the things that only
Speaker 2: the government can do. If the private sector can do it,
Speaker 2: let them do it. In the area of chips, are
Speaker 2: there things that only the government can do that we
Speaker 2: actually have to turn to the government ask them to
Speaker 2: do it for us.
Speaker 12: Well, I think the better place for them to be
Speaker 12: spending their money is more on the R and D
Speaker 12: side or providing incentives for people to learn how to
Speaker 12: produce those chips here, and.
Speaker 3: I don't really see that.
Speaker 12: One of the things I would like to talk about though,
Speaker 12: on industrial policy is we spend a lot of time
Speaker 12: talking about bringing manufacturing jobs back to the US, like
Speaker 12: manufacturing jobs solve all our economic.
Speaker 3: Problems, And that's a little backwards I think.
Speaker 12: And we're in the agricultural age, went to the industrial leader,
Speaker 12: and now we're in the digital age, and if we
Speaker 12: were smart, we'd be doing the same thing that all
Speaker 12: our counterparts did one hundred and one hundred and fifty
Speaker 12: years ago when they said there's this shift to an
Speaker 12: industrial economy. We need kids to be able to be
Speaker 12: literate and numerate if they're going to be successful in
Speaker 12: this kind of environment. Now we're going to the digital age,
Speaker 12: and instead of saying, all right, how do we educate
Speaker 12: our kids, how do we prepare them to be able
Speaker 12: to be successful in a world like this? Instead we're saying, no,
Speaker 12: let's make sure that we can keep all the manufacturing
Speaker 12: jobs here because these will pay well.
Speaker 3: It'd be a little like if one hundred thirty.
Speaker 12: Years ago politicians and business people had said, god, you know,
Speaker 12: with this industrial thing, man, that's going to be a
Speaker 12: lot of trouble.
Speaker 3: We need to find a way to keep people on
Speaker 3: the farm.
Speaker 5: Right.
Speaker 3: It's totally backwards.
Speaker 12: So I'd rather see an industrial policy that focused more
Speaker 12: on education for all our kids, to say, how do
Speaker 12: we prepare them for this digital age which is going
Speaker 12: to go on for another eighty years or so until
Speaker 12: something new comes around.
Speaker 3: This is going to be with us for a while.
Speaker 2: R and D Yeah, why can't the private sector do that?
Speaker 2: I mean you had a big R and D budget, right,
Speaker 2: I mean all the big corporates in a big R
Speaker 2: and D dodge Why can't the private sector give us
Speaker 2: the R and D do we need?
Speaker 12: Yeah, I think that's one of the misconceptions about R
Speaker 12: and D. Has always talked about like it's a single thing,
Speaker 12: But it's two words, right. It's research development. Well, development
Speaker 12: takes stuff that was developed in research and turns it
Speaker 12: into viable products. If you were to take a look
Speaker 12: at all companies spending on R and D together, I
Speaker 12: wouldn't be surprised if you found ninety and ninety five
Speaker 12: percent of it was spent on development. Because research is
Speaker 12: just too iffy, too expensive, the chances of it turning
Speaker 12: into something generally can be pretty small. And that's one
Speaker 12: where I do think the government has a big role
Speaker 12: to play and just doing this basic research that's available
Speaker 12: to all US companies so that as they start finding
Speaker 12: these things, companies can then take them and develop into
Speaker 12: products and services that'll be useful. It's one of the
Speaker 12: areas I think we're falling down a bit, and for me,
Speaker 12: this would be good industrial policy. There's a lot more
Speaker 12: money going into research, whether it's health anything, digital, bioengineering,
Speaker 12: all those things that are going to be very important
Speaker 12: to us in the century.
Speaker 2: What about climate Another big aspect of industrial plus right
Speaker 2: now is the move towards green energy. Essentially a lot
Speaker 2: of money is going into that right now. Does that
Speaker 2: make sense to you?
Speaker 12: Well, I'm a fan of figuring out how do you
Speaker 12: keep land, air and water as.
Speaker 3: Neutral as possible. We're putting a lot.
Speaker 12: Of CO two into the atmosphere, so figuring out how
Speaker 12: can we do this in a more.
Speaker 3: Neutral way I think is a good idea.
Speaker 12: However, we shouldn't be thinking that this is going to
Speaker 12: solve climate change. If you really believe that CO two
Speaker 12: and believe all the models that CO two lasts for
Speaker 12: one hundred years in the atmosphere is going to be there.
Speaker 12: We don't get to net zero as a globe for
Speaker 12: till twenty fifty or something. And remember the US is
Speaker 12: only like fourteen or fifteen percent of all emissions. That
Speaker 12: means global warming is coming. Whether we get to zero
Speaker 12: or not, it's coming.
Speaker 2: Let's assume, Dave, that we decide we need industrial policy,
Speaker 2: whether it's in chips or whether it's in forms of climate,
Speaker 2: and we decide we need to spend this much money
Speaker 2: in how should we go about doing it? I mean,
Speaker 2: I think back in World War Two, I think FDR
Speaker 2: basically turned to US industry to help really drive a
Speaker 2: lot of the industrialization that helped to the United States
Speaker 2: and the Allies win the war. How would we go
Speaker 2: about really figuring out who should administer the industrial policy?
Speaker 12: Well, if you go back to that time, what they
Speaker 12: actually did was take a number of business leaders and
Speaker 12: brought them into government in order to run a lot
Speaker 12: of these things, which I don't think I still don't
Speaker 12: think is a bad idea. And I found myself thinking,
Speaker 12: even when we were in the midst of COVID and
Speaker 12: we couldn't find basic products that just weren't enough of them,
Speaker 12: I often thought, why don't they assemble a group of
Speaker 12: retired CEOs to assign them tasks to say, go figure
Speaker 12: this out, as opposed to just having a bunch of
Speaker 12: governments types do it.
Speaker 3: And yeah, I'd say that possibility still exists.
Speaker 2: Well, we have a retired CEO right here? Are you volunteering, Dave?
Speaker 12: I don't know that I'm not retired retired enough to
Speaker 12: be able to do that at this point, Dave.
Speaker 2: Great to have you on Wall Street Week. Zave Cody.
Speaker 2: He's the executive chair of Versive coming up a Stronger
Speaker 2: Economy and a bit less inflation. What does that tell
Speaker 2: the FED about where it should head next? On interest rates,
Speaker 2: We're going to talk to two regional FED presidents, Austin
Speaker 2: Goolsby of Chicago and Rafael Bok of Atlanta. Let's come
Speaker 2: up next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: From Asma, Colorado for a Bloomberg Television radio audience is worldwide.
Speaker 2: I'm David Weston. I'm delighted to be joined right now
Speaker 2: by the president of the Chicago Fed. He is Austin Goolsby. Austin,
Speaker 2: thanks for being here.
Speaker 5: We've met.
Speaker 2: We're out here for the Aspen Economic Strategy Group meetings.
Speaker 2: A lot of talk about fiscal issues, monetary issues, but
Speaker 2: we all I have now the key job figures a
Speaker 2: little bit lighter than expected, one hundred and eighty seven thousand,
Speaker 2: set of two hundred thousand, little heavier than expected on
Speaker 2: the wages. What did you take on the.
Speaker 13: Job market is cooling a little too kind of a
Speaker 13: balanced level, but it's still extremely strong. That's the strongest
Speaker 13: part of the economy by far, is how low the
Speaker 13: unemployment rate is and people can get a job if
Speaker 13: they want a job.
Speaker 2: But what about the wages where now these numbers were
Speaker 2: four point four percent year over year I believe it was.
Speaker 2: That doesn't sound like something consistent with getting to two
Speaker 2: percent inflation overall. The way I view it as two things.
Speaker 13: One can't say anything about wages until you actually know
Speaker 13: what's happening with productivity. We got some productivity numbers. They
Speaker 13: were strong for the quarter. That's very noisy. But if
Speaker 13: you have strong productivity growth, you can have wage growth
Speaker 13: and it doesn't generate inflation. And the other thing about
Speaker 13: wages is they're not a leading indicator of price inflation.
Speaker 13: They're backward looking. They move, wages move more slowly. When
Speaker 13: things happen, we get shocks, the prices move first and
Speaker 13: then the wages. So when we see what's happening to
Speaker 13: wages today, this is kind of an amalgam of a
Speaker 13: bunch of stuff that already occurred.
Speaker 2: What are those numbers telling you right now? Particularly goods inflation?
Speaker 2: Is it a bit stickier than you're thing it.
Speaker 13: Has been, But the last couple of readings have been
Speaker 13: pretty positive. It's important that you raise this goods loosely.
Speaker 13: If you look at core inflation. You got goods, you
Speaker 13: got housing, you got services not including housing, And we've
Speaker 13: much remarked on the stickiness and persistence of services inflation,
Speaker 13: but we knew that that's not where we went wrong
Speaker 13: over at the end of last year beginning of this year,
Speaker 13: with inflation lasting a little longer than we thought, it
Speaker 13: has been the goods prices, while down, have not gone
Speaker 13: all the way down to where they were before the pandemic.
Speaker 13: I feel like that's kind of started and that's put
Speaker 13: the Fed on this line.
Speaker 2: I mean, it's a thin line.
Speaker 13: To walk, but getting the prices down without having a
Speaker 13: big recession, We're gonna Johnny cash this thing and walk
Speaker 13: that line, and that that's for sure the goal.
Speaker 2: So we got the jobs numbers on Friday at the
Speaker 2: end of the week, A little lighter on the number
Speaker 2: of jobs, a little heavier on the wage increases. How
Speaker 2: did you interpret them?
Speaker 14: So they actually came in pretty much as I expected.
Speaker 14: You know, I've expected the economy to slow down in
Speaker 14: a fairly orderly way, and this number one eighty seven
Speaker 14: comes in continuing that pace. Some folks would have liked
Speaker 14: it to be faster and a larger gap but I'm comfortable.
Speaker 14: I'm not expecting this to be over in a short
Speaker 14: period of time. In terms of the wages, it doesn't
Speaker 14: surprive me that wages are still strong. You know, during
Speaker 14: this whole high inflation period, worker wages have trailed inflation
Speaker 14: for quite some time, and so we're still in that
Speaker 14: catch up period, and I expect that we will still
Speaker 14: see strong wages. But I'll tell you, when I talk
Speaker 14: to employers, the one thing they tell me is that
Speaker 14: whatever they're setting their growth at this year, they're expecting
Speaker 14: it to be lower next year and then lower again
Speaker 14: after that to get back to where we're a pre pandemic.
Speaker 14: So you know, we got to keep an eye on it,
Speaker 14: of course, but I was not concerned too much about
Speaker 14: that at this point.
Speaker 2: And I'm sure you'd be the first to sem me
Speaker 2: one data point isn't enough to make a decision. But
Speaker 2: do you feel that the FED is on the trajectory
Speaker 2: it needs to be on to get to two percent
Speaker 2: at some point?
Speaker 3: I do you know?
Speaker 14: We are today in a restrictive stance, and as inflation
Speaker 14: continues to fall, the degree to which it's restrictive actually grows.
Speaker 14: As that gap between the inflation rate and our interest
Speaker 14: rate widens, So I think that will put enough constraint
Speaker 14: on the economy that it will continue to slow. But again,
Speaker 14: I'm not expecting this to be a two month or
Speaker 14: three month period. My outlook is that we'll still be
Speaker 14: in a restrictive territory well into twenty twenty four, and
Speaker 14: it will just take a while for the inflationary pressures
Speaker 14: that we've seen over the last year and a half
Speaker 14: to fully dissipate and get us back to two percent.
Speaker 14: That's Raphael Boston. He is the president of the Atlanta FED.
Speaker 14: That does it for this episode of Wall Street Week.
Speaker 14: Coming to you from Aspen, Colorado. I'm David Weston. This
Speaker 14: is Bloomberg. See you next week in New York.