WEBVTT - Surveillance: Household Survey Was Up, Kudlow Notes

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keene

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<v Speaker 1>Jay Lee. We bring you insight from the best in economics, finance, investment,

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<v Speaker 1>and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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<v Speaker 1>Bloomberg dot Com, and of course, on the Bloomberg For

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<v Speaker 1>the Trump administration's views on the jobs report, now, I'm

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<v Speaker 1>really pleased to say we joined on Bloomberg Television and

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<v Speaker 1>on Bloomberg Radio by Larry Cudlo, National Economic Council Director.

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<v Speaker 1>Larry great to catch up with you. A bit of

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<v Speaker 1>confusion around the desk on the payrolls report. So let's

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<v Speaker 1>start with your interpretation. Big freight number on the top line.

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<v Speaker 1>Then wage growth is pretty solid. What do you see?

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<v Speaker 1>I agree with you. I think that top line number

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<v Speaker 1>of twenty thousand is an absolute fluke and there are

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<v Speaker 1>a million reasons for that. Winter seasonals. The government shutdown

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<v Speaker 1>the scoring of it, the um you know, classification of

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<v Speaker 1>people working a non working I think it's crazy. More

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<v Speaker 1>interesting was the household survey, which tends to pick up

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<v Speaker 1>smaller businesses and from which unemployment is derived. So the

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<v Speaker 1>household survey was up two hundred and fifty five thousand.

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<v Speaker 1>That's a very big number. Hence, unemployment fell nicely from

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<v Speaker 1>four to three point eight percent. And as you know

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<v Speaker 1>to John, the wage rates average hourly earnings twelve month

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<v Speaker 1>changes now up to three point four percent. That's a

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<v Speaker 1>terrific number, biggest in quite some time. And I want

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<v Speaker 1>to add one point to those people who incorrectly believe

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<v Speaker 1>that higher wages and more people working cause inflation, that's

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<v Speaker 1>wrong in my judgment. But if you buy that, just

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<v Speaker 1>think of this. Earlier this week we had a number

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<v Speaker 1>on productivity output per hour, really the heart of the

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<v Speaker 1>growth of the market economy. One point eight percent increase

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<v Speaker 1>for the four quarters in eighteen. John, that's a big number.

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<v Speaker 1>We haven't seen that, right, It's been flirting with zero

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<v Speaker 1>for years. So let's say your wages arising at three

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<v Speaker 1>point four percent, I would argue the workforce is earning

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<v Speaker 1>its pay increase with more productive than efficient activity. So

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<v Speaker 1>if you take your three point four minus one point eight,

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<v Speaker 1>you're one point six. There. It's not inflationary. That's actually

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<v Speaker 1>below the FEDS targets if you follow that logic. So

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<v Speaker 1>I'm quite happy with that, and I think it shows

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<v Speaker 1>a very healthy economy. So Larry, I think the Federals

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<v Speaker 1>at this point, but actually agree with a lot of

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<v Speaker 1>what you've said, specifically on the wage growth number not

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<v Speaker 1>meaning much for headline price pressures. At the moment. We

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<v Speaker 1>just get this concern back on the table about global growth.

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<v Speaker 1>Are you confident that the US is pretty well insulated

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<v Speaker 1>to the slowdown with sing abroad? Yes, I am, I am.

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<v Speaker 1>I'm not saying that we we live in a complete island.

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<v Speaker 1>But look, we're the hottest economy in the world because

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<v Speaker 1>we've made some important pro growth reforms. You and I

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<v Speaker 1>have talked about lower tax rates, deregulation, opening up energy,

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<v Speaker 1>and so forth. Good attitudes. You know, we're not there's

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<v Speaker 1>no war against business here. That's good. The other trouble

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<v Speaker 1>is Europe, the one I'm interested in. We'll probably get

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<v Speaker 1>to China in the moment. But John, you know Mr

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<v Speaker 1>Dragon is a very smart man. I'm not here to

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<v Speaker 1>take his inventory. I'm just saying another round of that

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<v Speaker 1>version of quei right concessionaire, cheap loans to banks. I

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<v Speaker 1>believe this is the fourth round that that's not the answer, John.

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<v Speaker 1>The answer is they've got to make labor and fiscal

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<v Speaker 1>reforms throughout Europe, and most of those countries haven't really

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<v Speaker 1>done it, so their growth rates are uncomfortably close to zero.

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<v Speaker 1>I don't think Europe is in an outright recession, but

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<v Speaker 1>the growth rates are so low. We are buying their goods.

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<v Speaker 1>If it weren't for the US. You know, our consumers

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<v Speaker 1>are buying their goods. Our businesses are by and their

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<v Speaker 1>capital goods, right industrial goods. We're the only demand they have,

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<v Speaker 1>so it's kind of working the other way. It's not

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<v Speaker 1>that they're damaging us. We're trying to help them, but

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<v Speaker 1>at some point they've got to take measures. Help comes

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<v Speaker 1>to those who help themselves. So the European situation is

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<v Speaker 1>the European situation. I wish him luck. We had trade

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<v Speaker 1>talks this week. Well you know what, I'm going to

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<v Speaker 1>use the term constructive uh Massador Lightheisers, our leader. I

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<v Speaker 1>participated with the Secretary General the EU, Martin Selmayer. We're

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<v Speaker 1>moving towards what some of us call an early harvest

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<v Speaker 1>on things like l n G and soybeans and single

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<v Speaker 1>standards on pharmaceuticals and so forth. There are a lot

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<v Speaker 1>of issues here. We're moving in the right direction to

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<v Speaker 1>show that the United States and the EU can in

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<v Speaker 1>fact have a much better trade relationship. By the way

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<v Speaker 1>the EU is helping us with China, the EU is

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<v Speaker 1>going been China a very difficult time and exactly the

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<v Speaker 1>same structural issues that we are discussing with the Chinese.

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<v Speaker 1>So I'll just say the europe the European trade story

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<v Speaker 1>looks better to me. So, Larry, let's talk about the

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<v Speaker 1>Chinese story. There is a feeling from a lot of

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<v Speaker 1>people I've been speaking to on Wall Street. I wonder

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<v Speaker 1>whether you've been speaking to the same people that the

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<v Speaker 1>President wants a quick deal, and he wants a quick

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<v Speaker 1>deal because he's worried about the markets. Is that true?

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<v Speaker 1>Does the President want a quick deal here? Larry, No,

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<v Speaker 1>I've never understood that story. How many times the President

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<v Speaker 1>have to say it has to be a good deal

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<v Speaker 1>for the United States across the board. You know, I

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<v Speaker 1>p theft, force, transfer of technology, cyber hacking, ownership enforcement,

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<v Speaker 1>you know the issues as well as I do. He

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<v Speaker 1>has said this time and again. Now, I think there's

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<v Speaker 1>a lot of optimism from the President, and I share

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<v Speaker 1>his optimism. The deal is not done yet. We're still

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<v Speaker 1>working away this communications all this week. By the way,

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<v Speaker 1>between the US team and the and the China team.

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<v Speaker 1>But a quick deal. Heck no, he wants a good

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<v Speaker 1>deal for the US workers, right, farmers, ranchers, small businesses,

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<v Speaker 1>technology companies. He wants a good deal. Remember he walked

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<v Speaker 1>out of the North Korean talks and it wasn't his liking.

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<v Speaker 1>Is he prepared to walk away from these talks? Well,

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<v Speaker 1>I'm not. I don't want to speculate. I'm just saying

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<v Speaker 1>that he's making a point. If these things are not

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<v Speaker 1>in the America's interests, whatever, whether it's a security deal

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<v Speaker 1>or a trade deal, if they're not in America's interests,

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<v Speaker 1>he will not accept it. That's the only point I'm making. Now,

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<v Speaker 1>don't read me bearish. I'm not bearish. Now there's a president.

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<v Speaker 1>But again, this idea of a quick deal just to

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<v Speaker 1>get a pop in the stock market, I just wanted

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<v Speaker 1>to strenuously disagree with would right now Larry Off to

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<v Speaker 1>handle it? He said, sometimes he us have to walk away.

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<v Speaker 1>There's a belief amongst a lot of people, and you

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<v Speaker 1>can tell me and put that right. There's a belief

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<v Speaker 1>among a lot of people that on this particular issue,

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<v Speaker 1>he won't be willing to walk away because he's worried

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<v Speaker 1>about the price action in the market. Are you saying

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<v Speaker 1>that's just not true. The market action, the price action

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<v Speaker 1>isn't a factor in these negotiations. That is just not true.

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<v Speaker 1>That is just not true. He has to do what's

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<v Speaker 1>best for American technology, for American workers, American manufacturers, American farmers,

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<v Speaker 1>and it has to be enforceable, John, Yeah, it has

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<v Speaker 1>to be enforceable. Ambassador Leheiser has put together very detailed

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<v Speaker 1>and innovative enforcement procedure. Okay, the Chinese signed onto it

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<v Speaker 1>when they were here two weeks ago. We are waiting

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<v Speaker 1>to see if President she and the Politburo invasion will

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<v Speaker 1>continue to stay signed on. Those are the factors we

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<v Speaker 1>have to tech the United States. We have to act

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<v Speaker 1>our own interests, our own technology, our own security. So no, no,

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<v Speaker 1>a few points one way or another on the down

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<v Speaker 1>is not driving his thinking. Never has been. Actually, I

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<v Speaker 1>didn't know where that came from. I'm not saying. By

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<v Speaker 1>the way again, let me underscore at this point the

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<v Speaker 1>president is cautiously optimistic. So am I souls are you know,

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<v Speaker 1>trade policy group, my colleagues. So I don't want to

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<v Speaker 1>say that we're about to leave but if it's not

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<v Speaker 1>the right deal for this country and this country's long

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<v Speaker 1>term future, John, we won't take it, and the Potus

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<v Speaker 1>has made that very clear. Let's talk about the the

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<v Speaker 1>enforcement mechanism, Larry. A lot of people confused as to

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<v Speaker 1>how you come up with a mechanism to enforce the

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<v Speaker 1>Chinese to make sure they don't do anything funny with

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<v Speaker 1>the currency. What's the thinking here, Larry, Just lift a

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<v Speaker 1>little the negotiations. What is the enforcement mechanism there, aside

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<v Speaker 1>from just a written agreement from the Chinese and a

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<v Speaker 1>pledge not to do it. Well, look, um, I'm the

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<v Speaker 1>currency point. We've asked for currency stability number one, no manipulation,

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<v Speaker 1>and number two, we've asked for greater transparency, John. Where

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<v Speaker 1>transparency in this case means we would like to know

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<v Speaker 1>as quickly as possible any currency interventions undertaken by China.

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<v Speaker 1>We'd like to know that that's part of the deal

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<v Speaker 1>that was agreed to in the talks here in Washington.

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<v Speaker 1>We'll see if we get a sign off from the

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<v Speaker 1>top leaders in Beijing. Story. As you know, the trade

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<v Speaker 1>deficit in the United States just came in at the

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<v Speaker 1>widest level in a decade. The economy is strong, importing

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<v Speaker 1>more here in the United States, that was inevitable. The President, though,

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<v Speaker 1>wants to close that trading gap, and I'm just wondering

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<v Speaker 1>how much of that is within your control and how

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<v Speaker 1>much of that will actually be down to what happens

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<v Speaker 1>in the FX market. Well, look at that point, I

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<v Speaker 1>think the increase in the trade gap is largely a

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<v Speaker 1>function of American growth, where the fastest growing economy of

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<v Speaker 1>all the major countries, and that are uh supply side

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<v Speaker 1>policies on low tax rates and deregulation and trade reform.

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<v Speaker 1>By the way, we have a very good U. S

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<v Speaker 1>m c. A trade deal cooking with Congress. Nobody ever

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<v Speaker 1>wants to talk about that. I think it's really important

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<v Speaker 1>and I think it's pro growth. So our growth right

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<v Speaker 1>now is in fact generating a faster or a wider

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<v Speaker 1>trade gap. You're quite right, but you know that's that's

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<v Speaker 1>a good reason. I'd like to see these other countries

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<v Speaker 1>grow faster. That would help us. But with regard to

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<v Speaker 1>China or any other trading space, John, the key point

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<v Speaker 1>for US is to break down barriers, so we have

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<v Speaker 1>reciprocal tariffs and non tariff deals and allow American businesses

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<v Speaker 1>right to export, give us the market openings to export.

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<v Speaker 1>We are the most competitive economy in the world today.

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<v Speaker 1>A and if you open the door, we will sell

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<v Speaker 1>you tons and tons and tons of goods and that

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<v Speaker 1>will shrink the trade deficit. That's a pro growth solution

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<v Speaker 1>to trade. And I'm hoping and again I am guardedly

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<v Speaker 1>optimistic as presidents with regard to China, I believe we

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<v Speaker 1>are moving in that direction. Market openings for USA export sales,

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<v Speaker 1>industrial commodities, agricultural mollities, and also again fair, fair, and

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<v Speaker 1>legal uh technology discussions and laws. That's what we're aiming for.

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<v Speaker 1>And by the way, don't I'm not there, believe me.

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<v Speaker 1>I'm just saying to your point, there's no Willie Nelly

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<v Speaker 1>fast deal here to get thirty points on the dab.

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<v Speaker 1>This is a long term, historic, historic opportunity for the

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<v Speaker 1>future of the United States. Do we have a date

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<v Speaker 1>for meeting with President Jay? Larry, I beg your pardon.

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<v Speaker 1>Do we have a date for meeting with President? Nothing

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<v Speaker 1>in cement John, I can't report anything in cement um.

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<v Speaker 1>The news reports of late March are uh, in a

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<v Speaker 1>loose sense, accurate, but nothing in cement It could go

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<v Speaker 1>into April. No strict here again, let me fall back.

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<v Speaker 1>We want to get it right. So we made a

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<v Speaker 1>lot of agreements here in Washington two weeks ago, very

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<v Speaker 1>very fruitful, positive talks with Vice Premier leu Hey and

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<v Speaker 1>his group. Now it has to go back and clear

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<v Speaker 1>the top level. President she and the polup. You're in Beijing.

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<v Speaker 1>But we want to get it right. John, You know what,

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<v Speaker 1>that's the key, not the timing, not even the place.

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<v Speaker 1>We have to get it right. So it's in America's interest. Hey, Larry,

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<v Speaker 1>always great to get the inside from you and the administration.

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<v Speaker 1>Thank you for always dropping by off the payrolls and

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<v Speaker 1>recut like that. Joining us from Washington, d C. Thanks

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<v Speaker 1>for listening to the Bloomberg Surveillance podcast. Subscribe and listen

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<v Speaker 1>to interviews on Apple podcast, SoundCloud, or whichever podcast platform

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<v Speaker 1>you prefer. I'm on Twitter at Tom Keane before the podcast.

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<v Speaker 1>You can always catch us worldwide. I'm Bloomberg Radio.