Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
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Speaker 1: the Trump administration's views on the jobs report, now, I'm
Speaker 1: really pleased to say we joined on Bloomberg Television and
Speaker 1: on Bloomberg Radio by Larry Cudlo, National Economic Council Director.
Speaker 1: Larry great to catch up with you. A bit of
Speaker 1: confusion around the desk on the payrolls report. So let's
Speaker 1: start with your interpretation. Big freight number on the top line.
Speaker 1: Then wage growth is pretty solid. What do you see?
Speaker 1: I agree with you. I think that top line number
Speaker 1: of twenty thousand is an absolute fluke and there are
Speaker 1: a million reasons for that. Winter seasonals. The government shutdown
Speaker 1: the scoring of it, the um you know, classification of
Speaker 1: people working a non working I think it's crazy. More
Speaker 1: interesting was the household survey, which tends to pick up
Speaker 1: smaller businesses and from which unemployment is derived. So the
Speaker 1: household survey was up two hundred and fifty five thousand.
Speaker 1: That's a very big number. Hence, unemployment fell nicely from
Speaker 1: four to three point eight percent. And as you know
Speaker 1: to John, the wage rates average hourly earnings twelve month
Speaker 1: changes now up to three point four percent. That's a
Speaker 1: terrific number, biggest in quite some time. And I want
Speaker 1: to add one point to those people who incorrectly believe
Speaker 1: that higher wages and more people working cause inflation, that's
Speaker 1: wrong in my judgment. But if you buy that, just
Speaker 1: think of this. Earlier this week we had a number
Speaker 1: on productivity output per hour, really the heart of the
Speaker 1: growth of the market economy. One point eight percent increase
Speaker 1: for the four quarters in eighteen. John, that's a big number.
Speaker 1: We haven't seen that, right, It's been flirting with zero
Speaker 1: for years. So let's say your wages arising at three
Speaker 1: point four percent, I would argue the workforce is earning
Speaker 1: its pay increase with more productive than efficient activity. So
Speaker 1: if you take your three point four minus one point eight,
Speaker 1: you're one point six. There. It's not inflationary. That's actually
Speaker 1: below the FEDS targets if you follow that logic. So
Speaker 1: I'm quite happy with that, and I think it shows
Speaker 1: a very healthy economy. So Larry, I think the Federals
Speaker 1: at this point, but actually agree with a lot of
Speaker 1: what you've said, specifically on the wage growth number not
Speaker 1: meaning much for headline price pressures. At the moment. We
Speaker 1: just get this concern back on the table about global growth.
Speaker 1: Are you confident that the US is pretty well insulated
Speaker 1: to the slowdown with sing abroad? Yes, I am, I am.
Speaker 1: I'm not saying that we we live in a complete island.
Speaker 1: But look, we're the hottest economy in the world because
Speaker 1: we've made some important pro growth reforms. You and I
Speaker 1: have talked about lower tax rates, deregulation, opening up energy,
Speaker 1: and so forth. Good attitudes. You know, we're not there's
Speaker 1: no war against business here. That's good. The other trouble
Speaker 1: is Europe, the one I'm interested in. We'll probably get
Speaker 1: to China in the moment. But John, you know Mr
Speaker 1: Dragon is a very smart man. I'm not here to
Speaker 1: take his inventory. I'm just saying another round of that
Speaker 1: version of quei right concessionaire, cheap loans to banks. I
Speaker 1: believe this is the fourth round that that's not the answer, John.
Speaker 1: The answer is they've got to make labor and fiscal
Speaker 1: reforms throughout Europe, and most of those countries haven't really
Speaker 1: done it, so their growth rates are uncomfortably close to zero.
Speaker 1: I don't think Europe is in an outright recession, but
Speaker 1: the growth rates are so low. We are buying their goods.
Speaker 1: If it weren't for the US. You know, our consumers
Speaker 1: are buying their goods. Our businesses are by and their
Speaker 1: capital goods, right industrial goods. We're the only demand they have,
Speaker 1: so it's kind of working the other way. It's not
Speaker 1: that they're damaging us. We're trying to help them, but
Speaker 1: at some point they've got to take measures. Help comes
Speaker 1: to those who help themselves. So the European situation is
Speaker 1: the European situation. I wish him luck. We had trade
Speaker 1: talks this week. Well you know what, I'm going to
Speaker 1: use the term constructive uh Massador Lightheisers, our leader. I
Speaker 1: participated with the Secretary General the EU, Martin Selmayer. We're
Speaker 1: moving towards what some of us call an early harvest
Speaker 1: on things like l n G and soybeans and single
Speaker 1: standards on pharmaceuticals and so forth. There are a lot
Speaker 1: of issues here. We're moving in the right direction to
Speaker 1: show that the United States and the EU can in
Speaker 1: fact have a much better trade relationship. By the way
Speaker 1: the EU is helping us with China, the EU is
Speaker 1: going been China a very difficult time and exactly the
Speaker 1: same structural issues that we are discussing with the Chinese.
Speaker 1: So I'll just say the europe the European trade story
Speaker 1: looks better to me. So, Larry, let's talk about the
Speaker 1: Chinese story. There is a feeling from a lot of
Speaker 1: people I've been speaking to on Wall Street. I wonder
Speaker 1: whether you've been speaking to the same people that the
Speaker 1: President wants a quick deal, and he wants a quick
Speaker 1: deal because he's worried about the markets. Is that true?
Speaker 1: Does the President want a quick deal here? Larry, No,
Speaker 1: I've never understood that story. How many times the President
Speaker 1: have to say it has to be a good deal
Speaker 1: for the United States across the board. You know, I
Speaker 1: p theft, force, transfer of technology, cyber hacking, ownership enforcement,
Speaker 1: you know the issues as well as I do. He
Speaker 1: has said this time and again. Now, I think there's
Speaker 1: a lot of optimism from the President, and I share
Speaker 1: his optimism. The deal is not done yet. We're still
Speaker 1: working away this communications all this week. By the way,
Speaker 1: between the US team and the and the China team.
Speaker 1: But a quick deal. Heck no, he wants a good
Speaker 1: deal for the US workers, right, farmers, ranchers, small businesses,
Speaker 1: technology companies. He wants a good deal. Remember he walked
Speaker 1: out of the North Korean talks and it wasn't his liking.
Speaker 1: Is he prepared to walk away from these talks? Well,
Speaker 1: I'm not. I don't want to speculate. I'm just saying
Speaker 1: that he's making a point. If these things are not
Speaker 1: in the America's interests, whatever, whether it's a security deal
Speaker 1: or a trade deal, if they're not in America's interests,
Speaker 1: he will not accept it. That's the only point I'm making. Now,
Speaker 1: don't read me bearish. I'm not bearish. Now there's a president.
Speaker 1: But again, this idea of a quick deal just to
Speaker 1: get a pop in the stock market, I just wanted
Speaker 1: to strenuously disagree with would right now Larry Off to
Speaker 1: handle it? He said, sometimes he us have to walk away.
Speaker 1: There's a belief amongst a lot of people, and you
Speaker 1: can tell me and put that right. There's a belief
Speaker 1: among a lot of people that on this particular issue,
Speaker 1: he won't be willing to walk away because he's worried
Speaker 1: about the price action in the market. Are you saying
Speaker 1: that's just not true. The market action, the price action
Speaker 1: isn't a factor in these negotiations. That is just not true.
Speaker 1: That is just not true. He has to do what's
Speaker 1: best for American technology, for American workers, American manufacturers, American farmers,
Speaker 1: and it has to be enforceable, John, Yeah, it has
Speaker 1: to be enforceable. Ambassador Leheiser has put together very detailed
Speaker 1: and innovative enforcement procedure. Okay, the Chinese signed onto it
Speaker 1: when they were here two weeks ago. We are waiting
Speaker 1: to see if President she and the Politburo invasion will
Speaker 1: continue to stay signed on. Those are the factors we
Speaker 1: have to tech the United States. We have to act
Speaker 1: our own interests, our own technology, our own security. So no, no,
Speaker 1: a few points one way or another on the down
Speaker 1: is not driving his thinking. Never has been. Actually, I
Speaker 1: didn't know where that came from. I'm not saying. By
Speaker 1: the way again, let me underscore at this point the
Speaker 1: president is cautiously optimistic. So am I souls are you know,
Speaker 1: trade policy group, my colleagues. So I don't want to
Speaker 1: say that we're about to leave but if it's not
Speaker 1: the right deal for this country and this country's long
Speaker 1: term future, John, we won't take it, and the Potus
Speaker 1: has made that very clear. Let's talk about the the
Speaker 1: enforcement mechanism, Larry. A lot of people confused as to
Speaker 1: how you come up with a mechanism to enforce the
Speaker 1: Chinese to make sure they don't do anything funny with
Speaker 1: the currency. What's the thinking here, Larry, Just lift a
Speaker 1: little the negotiations. What is the enforcement mechanism there, aside
Speaker 1: from just a written agreement from the Chinese and a
Speaker 1: pledge not to do it. Well, look, um, I'm the
Speaker 1: currency point. We've asked for currency stability number one, no manipulation,
Speaker 1: and number two, we've asked for greater transparency, John. Where
Speaker 1: transparency in this case means we would like to know
Speaker 1: as quickly as possible any currency interventions undertaken by China.
Speaker 1: We'd like to know that that's part of the deal
Speaker 1: that was agreed to in the talks here in Washington.
Speaker 1: We'll see if we get a sign off from the
Speaker 1: top leaders in Beijing. Story. As you know, the trade
Speaker 1: deficit in the United States just came in at the
Speaker 1: widest level in a decade. The economy is strong, importing
Speaker 1: more here in the United States, that was inevitable. The President, though,
Speaker 1: wants to close that trading gap, and I'm just wondering
Speaker 1: how much of that is within your control and how
Speaker 1: much of that will actually be down to what happens
Speaker 1: in the FX market. Well, look at that point, I
Speaker 1: think the increase in the trade gap is largely a
Speaker 1: function of American growth, where the fastest growing economy of
Speaker 1: all the major countries, and that are uh supply side
Speaker 1: policies on low tax rates and deregulation and trade reform.
Speaker 1: By the way, we have a very good U. S
Speaker 1: m c. A trade deal cooking with Congress. Nobody ever
Speaker 1: wants to talk about that. I think it's really important
Speaker 1: and I think it's pro growth. So our growth right
Speaker 1: now is in fact generating a faster or a wider
Speaker 1: trade gap. You're quite right, but you know that's that's
Speaker 1: a good reason. I'd like to see these other countries
Speaker 1: grow faster. That would help us. But with regard to
Speaker 1: China or any other trading space, John, the key point
Speaker 1: for US is to break down barriers, so we have
Speaker 1: reciprocal tariffs and non tariff deals and allow American businesses
Speaker 1: right to export, give us the market openings to export.
Speaker 1: We are the most competitive economy in the world today.
Speaker 1: A and if you open the door, we will sell
Speaker 1: you tons and tons and tons of goods and that
Speaker 1: will shrink the trade deficit. That's a pro growth solution
Speaker 1: to trade. And I'm hoping and again I am guardedly
Speaker 1: optimistic as presidents with regard to China, I believe we
Speaker 1: are moving in that direction. Market openings for USA export sales,
Speaker 1: industrial commodities, agricultural mollities, and also again fair, fair, and
Speaker 1: legal uh technology discussions and laws. That's what we're aiming for.
Speaker 1: And by the way, don't I'm not there, believe me.
Speaker 1: I'm just saying to your point, there's no Willie Nelly
Speaker 1: fast deal here to get thirty points on the dab.
Speaker 1: This is a long term, historic, historic opportunity for the
Speaker 1: future of the United States. Do we have a date
Speaker 1: for meeting with President Jay? Larry, I beg your pardon.
Speaker 1: Do we have a date for meeting with President? Nothing
Speaker 1: in cement John, I can't report anything in cement um.
Speaker 1: The news reports of late March are uh, in a
Speaker 1: loose sense, accurate, but nothing in cement It could go
Speaker 1: into April. No strict here again, let me fall back.
Speaker 1: We want to get it right. So we made a
Speaker 1: lot of agreements here in Washington two weeks ago, very
Speaker 1: very fruitful, positive talks with Vice Premier leu Hey and
Speaker 1: his group. Now it has to go back and clear
Speaker 1: the top level. President she and the polup. You're in Beijing.
Speaker 1: But we want to get it right. John, You know what,
Speaker 1: that's the key, not the timing, not even the place.
Speaker 1: We have to get it right. So it's in America's interest. Hey, Larry,
Speaker 1: always great to get the inside from you and the administration.
Speaker 1: Thank you for always dropping by off the payrolls and
Speaker 1: recut like that. Joining us from Washington, d C. Thanks
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