WEBVTT - NEC Director Kevin Hassett Talks Jobs Data & Inflation

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>In May, the US economy added one hundred and seventy

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<v Speaker 2>two thousand jobs, far exceeding all estimates. Let's bring in

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<v Speaker 2>White House National Economic Council Director Kevin Hassett, and I mean, frankly,

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<v Speaker 2>congratulations are in order, Kevin. This is an unambiguously good

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<v Speaker 2>jobs number and upward revision in the last month. Does

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<v Speaker 2>it foreshadow the risk of broadening inflation?

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<v Speaker 1>No, absolutely not, And in fact it's something that it's

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<v Speaker 1>a great question, Matt that the bottom line is that

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<v Speaker 1>what's going on.

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<v Speaker 3>Is because the President has recruited.

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<v Speaker 1>From companies around the world eighteen trillion dollars a new investment,

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<v Speaker 1>and we're seeing if you looked at the advanced Herbuls numbers,

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<v Speaker 1>you know, equipment investment through the roof up three percent.

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<v Speaker 1>You know in March one of the biggest months we've

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<v Speaker 1>ever seen. That people are building factories, creating jobs, jobs,

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<v Speaker 1>creating the Golden Age, the boom. That is a logical

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<v Speaker 1>supply side response to the big beautiful bill, the no

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<v Speaker 1>tax on tips and no tax on overtime and the rest.

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<v Speaker 1>And so we're seeing the benefit of that. And you

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<v Speaker 1>might recall that when we were talking about this a

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<v Speaker 1>year ago, there are a lot of naysayers who said, well,

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<v Speaker 1>we can't possibly even have positive jobs numbers because of

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<v Speaker 1>our immigration policy.

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<v Speaker 3>But the fact is that we're getting.

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<v Speaker 1>Positive jobs numbers because we've got high wage growth and

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<v Speaker 1>native born Americans are rushing into the labor market in droves,

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<v Speaker 1>and so that negative story has gone and find they

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<v Speaker 1>got to say, we really love going through the Bloomberg data,

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<v Speaker 1>and we have this thing that I like to look at,

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<v Speaker 1>which is the probability distribution of all the forecasts for

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<v Speaker 1>the job's number before it comes out. And when I

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<v Speaker 1>looked at it after I got these numbers, I saw

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<v Speaker 1>that the very very top person was low by about

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<v Speaker 1>forty thousand jobs, which shows that the Trump economy is

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<v Speaker 1>surprising Wall Street analysts over and over again, and they

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<v Speaker 1>need to maybe think about getting the supply side of

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<v Speaker 1>their model fixed.

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<v Speaker 2>It does surprise people to the upside, for sure. I

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<v Speaker 2>hear a lot of I have heard since it passed

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<v Speaker 2>a lot of positivity about the big beautiful bill and

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<v Speaker 2>the economic growth that it would create. We see one

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<v Speaker 2>hundred and seventy two thousand jobs, We see unemployment at

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<v Speaker 2>four point three percent, but we see inflation at three

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<v Speaker 2>point eight percent on the PCEE, so it.

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<v Speaker 3>Looks kind of like too late.

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<v Speaker 2>Powell was right on time, and now the market is

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<v Speaker 2>pricing in a hike.

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<v Speaker 3>Is that wrong? Yeah, I think that's terribly wrong.

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<v Speaker 1>The bottom line is that what you need to do

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<v Speaker 1>is look at the impact of oil price shocks on

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<v Speaker 1>core inflation, and the history of it is that they're temporary.

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<v Speaker 1>They don't lead to lasting inflation, that people see through

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<v Speaker 1>it and don't adjust upward their inflation expectations. And so

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<v Speaker 1>my advice to the FED, and I certainly respect their independence,

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<v Speaker 1>and I'm really thrilled to have a talented person like

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<v Speaker 1>Kevin Wurst there is watch the numbers, because what you're

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<v Speaker 1>going to see is that with a big supply side boom,

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<v Speaker 1>that you could have high growth without having runaway inflation.

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<v Speaker 1>It's not a Phillips curve event at all. And the

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<v Speaker 1>last time this happened was the nineties when Alan Greenspan

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<v Speaker 1>saw through that and gave us some of the best

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<v Speaker 1>years we ever had. And I think that we have

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<v Speaker 1>that opportunity right now if the FED, you know, pays

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<v Speaker 1>close attention to the data and thinks about why it

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<v Speaker 1>keeps surprising on the upside them especially and surprising on

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<v Speaker 1>the downside on inflation, I mean, absent the Gulf issue,

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<v Speaker 1>you know, the inflation basically would be completely under control

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<v Speaker 1>right now.

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<v Speaker 2>How soon do you expect that to be wrapped up?

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<v Speaker 2>Because that's almost completely within our power, right we went

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<v Speaker 2>in there, maybe at the behest of Israel, but it

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<v Speaker 2>was our decision to do that.

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<v Speaker 1>Well, the President will will make the call on that.

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<v Speaker 1>I mean, negotiations are ongoing, and I'm not a forecaster

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<v Speaker 1>for when it's all going to end. But the bottom

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<v Speaker 1>line is that global markets should understand that risk premia

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<v Speaker 1>are going to be much much lower going forward once

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<v Speaker 1>we successfully take away the option for Iran to.

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<v Speaker 3>Build a nuclear weapon. And you know, if you look

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<v Speaker 3>at this.

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<v Speaker 1>Sort of crazy actions that they're taking in the Straits,

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<v Speaker 1>you know, even attacking Chinese boats for goodness sakes, then

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<v Speaker 1>you can see how terrible it would be for the

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<v Speaker 1>world if they had ballistic missiles and nuclear weapons. And

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<v Speaker 1>President Trump thinks that's unacceptable. And you know, of course

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<v Speaker 1>there's a short term disruption and oil prices, but we expect.

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<v Speaker 3>It to be over soon.

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<v Speaker 2>Let's get back to the jobs picture because you mentioned

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<v Speaker 2>the investment and equipment, which makes sense following on the

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<v Speaker 2>legislation that you passed. Are we going to see manufacturing

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<v Speaker 2>jobs come back to the US economy because we don't

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<v Speaker 2>really see job creation in the goods producing sector yet.

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<v Speaker 1>You know it's inching up. But what is going way

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<v Speaker 1>up is construction. And remember in the Big Beautiful Bill

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<v Speaker 1>that President Trump did something that was really quite clever

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<v Speaker 1>where he said for four years, we're going to allow

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<v Speaker 1>people to expense factories. And so what's happening right now

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<v Speaker 1>is that people are racing to build the factories, and

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<v Speaker 1>then once those buildings are up, then they'll put the

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<v Speaker 1>machines in and create the jobs and so on. And

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<v Speaker 1>so construction employment is way way up, and we think

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<v Speaker 1>that that's like leading indicator for what's going to happen

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<v Speaker 1>to manufacturing work over the next year or so.

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<v Speaker 2>We have seen an optick in government jobs, which I

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<v Speaker 2>thought was surprising. I figured we were going to go

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<v Speaker 2>the other way, but we added fifty four thousand there,

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<v Speaker 2>and an uptick in hiring in a lot of healthcare services,

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<v Speaker 2>food and accommodations. Those are lower paid areas. Are you

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<v Speaker 2>worried about the lower half of the K.

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<v Speaker 1>Well, what we're seeing is that wages across the board

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<v Speaker 1>real wages are going up on average about.

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<v Speaker 3>Three thousand dollars since President Trump took office. And so

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<v Speaker 3>you know right now the.

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<v Speaker 1>Jobs, the government jobs that you talked about were really

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<v Speaker 1>state and local jobs, and there tend to be kind

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<v Speaker 1>of seasonal patterns in those things that aren't.

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<v Speaker 3>Completely captured by seasonal adjustment.

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<v Speaker 1>And so we have a lot of teachers that took

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<v Speaker 1>off for the summer and maybe took a job at

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<v Speaker 1>the boardwalk and so on, that kind of thing, and

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<v Speaker 1>then it gets offset in September is probably what's going on.

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<v Speaker 3>Because it's all local.

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<v Speaker 1>We in the federal government have cut federal government employment

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<v Speaker 1>by more than three hundred thousand workers, and that's like

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<v Speaker 1>tax savings that is going to accrue to the benefit

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<v Speaker 1>of the America people.

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<v Speaker 3>For a long long time we did.

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<v Speaker 2>I was just looking at the wage growth three point

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<v Speaker 2>four percent and PC was three point eight percent. So

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<v Speaker 2>how do you factor higher real wages?

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<v Speaker 1>You're looking at the latest number and I can send

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<v Speaker 1>you an email, but we've aggregated it through since when

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<v Speaker 1>Trump took office, and the UMBER was three thousand as

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<v Speaker 1>of a speech that we wrote for in a day

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<v Speaker 1>or two ago.

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<v Speaker 2>All right, well, that certainly is good news for the

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<v Speaker 2>workers in this country. Kevin, great to get some time

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<v Speaker 2>with you. Really appreciate your joining us. Kevin Hassett is

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<v Speaker 2>the White House National Economic Council Director, talking to us

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<v Speaker 2>on a day when the jobs numbers just came in

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<v Speaker 2>far higher, as he pointed out, than the highest estimate.