WEBVTT - No Need for the Fed to Panic, Coronado Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.160 Bloomberg dot Com, and of course on the Bloomberg Yeah. 0:00:34.280 --> 0:00:36.640 I'm really pleased to say on this pay Rolls Friday, 0:00:36.680 --> 0:00:39.280 we are joined by Marty foul Stein. Here is Harvard 0:00:39.400 --> 0:00:42.640 University economics professor and the former chairman of the Council 0:00:42.680 --> 0:00:46.879 of Economic Advisors under President Reagan. Marty, always great to 0:00:46.880 --> 0:00:48.440 have you with us on the program. Good morning to 0:00:48.520 --> 0:00:51.280 use sir, Good morning, happy to be here, Looking forward 0:00:51.360 --> 0:00:53.040 to talking to you about payrolls in just a moment. 0:00:53.120 --> 0:00:55.760 Want to begin with China and the prospect of a deal. 0:00:55.800 --> 0:00:58.680 We now have some decent transparency of what the United 0:00:58.720 --> 0:01:01.120 States would like from the Chinese. Let's talk about how 0:01:01.120 --> 0:01:05.480 realistic it is that this administration will get those things. Unfortunately, 0:01:05.480 --> 0:01:08.960 it's the wrong thing to be focusing on. Uh, It's 0:01:09.000 --> 0:01:12.280 something that the public can understand. It's something that President 0:01:12.319 --> 0:01:16.560 Trump can sell as our goal two hundred billion dollars. 0:01:16.640 --> 0:01:19.640 It's a big number. It would cut our bilateral trade 0:01:19.640 --> 0:01:23.120 deficit in half, and it really doesn't matter. What really 0:01:23.240 --> 0:01:27.440 is important is that the Chinese have been taken technology 0:01:27.560 --> 0:01:32.360 from American firms by requiring them to have joint ventures 0:01:32.360 --> 0:01:36.000 with Chinese firms. If they want to do business in China. 0:01:36.080 --> 0:01:40.640 That's against w t O rules and that is what 0:01:40.840 --> 0:01:44.880 we should be focusing on when we negotiate with the Chinese. 0:01:45.040 --> 0:01:48.480 So the administration is also focusing on that, as you know, professor, 0:01:48.520 --> 0:01:51.480 they aren't demanding that the Chinese changed this removal of 0:01:51.520 --> 0:01:56.200 restrictions on foreign ownership of companies. Also the technology transfer 0:01:56.240 --> 0:01:58.640 as well. Is your message that they're asking for too much. 0:01:58.680 --> 0:02:00.800 They should be focusing on just that and not the 0:02:00.840 --> 0:02:03.760 overall trade balance would be much better if they've focused 0:02:03.760 --> 0:02:06.960 on that. I mean that got brought into the discussion 0:02:07.120 --> 0:02:10.760 late in the game. Um, the original thing was about 0:02:10.840 --> 0:02:16.239 cutting the bilateral trade imbalance. And if the Chinese managed 0:02:16.280 --> 0:02:20.000 to do that and we say, great, you've given us 0:02:20.040 --> 0:02:23.200 what we wanted, will have missed the opportunity to deal 0:02:23.280 --> 0:02:26.959 with the serious problem, which is the technology transfer. Let's 0:02:26.960 --> 0:02:28.760 talk about the time horizon for all of this. They 0:02:29.000 --> 0:02:31.480 usually needs to be a credible threat at the other 0:02:31.560 --> 0:02:34.920 end of any negotiation. If we don't negotiate a better deal, 0:02:35.120 --> 0:02:36.760 this is what happens. And on the table at the 0:02:36.800 --> 0:02:39.400 moment is a proposal for a set of tariffs and 0:02:39.400 --> 0:02:42.520 considerations for another proposal of a set of tariffs against 0:02:42.560 --> 0:02:45.480 the Chinese. The Chinese themselves, Professor, have their own proposals 0:02:45.480 --> 0:02:47.880 on how they would respond. So we've got everything set 0:02:47.919 --> 0:02:50.040 up that way. Do you have any idea, any clarity 0:02:50.040 --> 0:02:52.040 at the moment on what the time horizon is to 0:02:52.120 --> 0:02:55.480 negotiate this deal with the prospect of tariffs at the 0:02:55.480 --> 0:02:58.120 other end of it, Well, I think tariffs are important. 0:02:58.280 --> 0:03:00.959 I think restrictions on what the Chinese can do in 0:03:01.000 --> 0:03:04.320 the United States, their ability to invest here, to buy 0:03:04.480 --> 0:03:08.239 US companies, all of those things that the Chinese would 0:03:08.320 --> 0:03:11.360 like to be able to do, we can say you 0:03:11.400 --> 0:03:14.359 can only do those things if you get in compliance 0:03:14.400 --> 0:03:18.160 with w t O rules that you had accepted, and 0:03:18.240 --> 0:03:23.480 that means allowing American companies to invest to sell in 0:03:23.639 --> 0:03:29.639 China without having to have a a Chinese partner. Professor, 0:03:29.760 --> 0:03:33.880 I have been stunned by the US centric coverage of 0:03:33.960 --> 0:03:37.280 these meetings and frankly, of this debate. Are we not 0:03:37.440 --> 0:03:40.560 talking about the Chinese view? On this because we don't 0:03:40.640 --> 0:03:43.880 know what the Chinese view is. Is there something unique 0:03:43.880 --> 0:03:48.560 to dealing with a totalitarian regime a dominant communist party 0:03:48.600 --> 0:03:53.200 there where we do a different dialogue just because they're Chinese. Well, 0:03:53.240 --> 0:03:57.760 the Chinese have said about this technology transfer that they're 0:03:57.800 --> 0:04:02.320 not doing anything illegal. They're violating w t O rules. 0:04:02.840 --> 0:04:08.640 They're not requiring American firms to transfer technology. If American firms, 0:04:08.680 --> 0:04:10.960 on the other hand, want to do business in China, 0:04:11.120 --> 0:04:13.760 well that's the price they have to pay. That is 0:04:13.920 --> 0:04:17.640 exactly a conventrary to w t O rules. But we 0:04:17.680 --> 0:04:20.640 have a president who doesn't want to respect a multilateral 0:04:20.800 --> 0:04:24.080 w t O structure. But this is a clear rule 0:04:24.600 --> 0:04:28.240 that the Chinese are violating. That's hurting us, and we 0:04:28.279 --> 0:04:30.880 ought to use the fact that they had signed on 0:04:31.040 --> 0:04:34.000 to that behavior in the time that we have with you, 0:04:34.400 --> 0:04:37.120 Professor Feldsteine, We need to go back to another time 0:04:37.160 --> 0:04:40.120 and place. I guess ever Dirkson would be a good 0:04:40.160 --> 0:04:43.520 place to start. Where was a billionaire A billionaire Martin 0:04:43.600 --> 0:04:49.720 Feldstein's reaction to a guns and butter certitude everyone's happy 0:04:49.839 --> 0:04:54.760 with a trillion dollar deficits, Well I'm not happy. Well, 0:04:54.880 --> 0:04:59.599 expand on that, please so we used to have not 0:04:59.720 --> 0:05:02.800 too long ago. Ten years ago, we had a national 0:05:02.880 --> 0:05:06.000 debt which was a less than fifty percent of our 0:05:06.080 --> 0:05:11.599 GDP around now it's about double that. And it's heading 0:05:11.640 --> 0:05:14.800 to a hundred perspectors going in the wrong direction, sure is. 0:05:14.960 --> 0:05:18.919 And and if we are actually heading, by the official 0:05:19.040 --> 0:05:23.760 statistics Congressional Budget Office statistics to a hundred percent by 0:05:23.760 --> 0:05:26.640 the end of the decade, the reality will be worse 0:05:26.680 --> 0:05:29.560 than that. In the distinction here in folks, this is 0:05:29.600 --> 0:05:32.600 really important. I'm going to let Professor Feldstone shows ability. 0:05:33.080 --> 0:05:37.240 We model it against a Japanese experience where their culture 0:05:37.400 --> 0:05:42.240 and ethos is totally different than this complex economy of 0:05:42.240 --> 0:05:45.840 the United States. We can't compare and contrast plus a 0:05:45.920 --> 0:05:50.080 hundred and deficits with Japan can wait, not at all. 0:05:50.160 --> 0:05:54.880 We cannot do that because the Japanese don't the Japanese 0:05:55.560 --> 0:06:00.800 are able to finance their deficits internally. The Japanese households 0:06:00.839 --> 0:06:05.080 are buying that debt um we sell. We trade in 0:06:05.120 --> 0:06:08.520 the global economy, and John this naivete which the professor 0:06:09.680 --> 0:06:12.640 describes beautifully, I think as much the same as with 0:06:12.640 --> 0:06:15.680 the United Kingdom. Americans want to compare and contrast with 0:06:15.720 --> 0:06:19.080 the United Kingdom, and they're just not the same economies. 0:06:19.279 --> 0:06:22.600 So my question, professor, should we really worry about this 0:06:22.640 --> 0:06:26.480 one trillion dollar deficit? It's of g d P. You're 0:06:26.520 --> 0:06:29.160 saying the debt dynamics are different to Japan. Our listeners 0:06:29.160 --> 0:06:31.159 would agree with you. That's in the data, it's in 0:06:31.200 --> 0:06:34.560 the facts. But still, this is the most liquid bond 0:06:34.600 --> 0:06:37.279 market on the planet, some of the most in demand 0:06:37.320 --> 0:06:41.040 debt on the planet. Why would the treasury markets suddenly 0:06:41.120 --> 0:06:43.080 dry up in terms of demand. No, they're not going 0:06:43.120 --> 0:06:45.120 to dry up, but the interest rates are going to 0:06:45.240 --> 0:06:47.760 be higher. So if at the end of ten years 0:06:47.800 --> 0:06:51.599 we're looking at a hundred to a hundred and pent 0:06:51.760 --> 0:06:55.400 debt to GDP, that's going to mean that interest on 0:06:55.520 --> 0:06:58.680 the government debt is the largest thing the government is 0:06:58.720 --> 0:07:02.039 spending money on, and it's gonna mean that there's going 0:07:02.080 --> 0:07:05.279 to be pressure for long term interest rates to rise, 0:07:06.040 --> 0:07:09.280 real long term interest rates to rise, and that is 0:07:09.279 --> 0:07:12.480 going to be very unhealthy for equity prices. Professor, we 0:07:12.480 --> 0:07:15.040 could probably have a long conversation about how effective markets 0:07:15.040 --> 0:07:17.880 hours a discounted mechanism, but all this information is out there, 0:07:17.880 --> 0:07:20.360 and traceries yield less than three on a US tenure. 0:07:20.400 --> 0:07:23.000 It's heartly dramatic, is it. It's amazing that it is 0:07:23.040 --> 0:07:25.840 so low. But it is moving up, and I think 0:07:25.880 --> 0:07:28.000 it will continue to move up. If you look back 0:07:28.120 --> 0:07:30.960 over the last six months or so, it's moved up, 0:07:31.040 --> 0:07:34.800 both in real terms and in nominal terms. Professor, thank 0:07:34.800 --> 0:07:37.280 you so much. Martin Feldstein joining us with Harvard University, 0:07:37.360 --> 0:07:40.320 of course of National Bureau of Economic Research. He's a 0:07:40.360 --> 0:07:59.040 former chairman of the President's Council of Economic Advisors. Back 0:07:59.120 --> 0:08:02.040 to Job's day, and we do that always with Alan 0:08:02.080 --> 0:08:06.680 Krueger of Princeton University, the former chairman of the President's 0:08:06.720 --> 0:08:10.200 Council of Economic Advisors. Allen, I know John wants to 0:08:10.240 --> 0:08:13.120 get more granular about the report. Let me go more 0:08:13.560 --> 0:08:17.400 at a higher elevation, and that is the effective technology 0:08:18.280 --> 0:08:23.400 on this labor economy. We don't have a clue, do we. Well. 0:08:23.480 --> 0:08:26.440 I think the effective technology has been profound if you 0:08:26.560 --> 0:08:29.960 look over the past several decades, far more important for 0:08:30.240 --> 0:08:36.240 what's happened in manufacturing than international trade. Um the fact 0:08:36.320 --> 0:08:38.800 that we've become much more productive in manufacturing. But our 0:08:38.920 --> 0:08:43.160 listeners feel that technology is their enemy when it comes 0:08:43.200 --> 0:08:47.800 to jobs and waiting growth right. Well, technology can be 0:08:47.920 --> 0:08:52.720 very disruptive in some industries. It's been extremely disruptive, like music. Finally, 0:08:52.800 --> 0:08:54.800 I think in the music industry they're getting their arms 0:08:54.840 --> 0:08:58.280 around how to take advantage of the technology. Not Spotify. 0:08:58.360 --> 0:09:00.400 They got crushed this week, but that's a separate story. 0:09:00.960 --> 0:09:03.319 But at least Latify is helping to generate more revenue 0:09:03.400 --> 0:09:07.920 for for the whole industry. UM. So, I think technology 0:09:07.960 --> 0:09:10.120 obviously can be disruptive. The question is how can we 0:09:10.200 --> 0:09:13.120 make transition to make technology work best for the most 0:09:13.160 --> 0:09:16.480 people in society. How can we do that? Well, I 0:09:16.520 --> 0:09:19.679 think it starts with education, and our education system hasn't 0:09:19.760 --> 0:09:23.720 kept up. And the irony is technology gives us tremendous 0:09:23.760 --> 0:09:28.840 opportunity and education UH to use technology to help improve teaching, 0:09:29.840 --> 0:09:33.240 and we haven't taken full advantage of technology and education yet, 0:09:33.640 --> 0:09:36.760 and our workforces is falling behind in terms of skills 0:09:36.800 --> 0:09:39.199 compared to the rest of the world. I want to 0:09:39.200 --> 0:09:41.679 take the opportunity to to shift towards the Wall Street 0:09:41.840 --> 0:09:44.720 side of the conversation, Alan, if you don't mind. Um, 0:09:44.880 --> 0:09:48.079 the story so far this year has been really, really 0:09:48.200 --> 0:09:51.839 mixed and quite radically different. Payrolls reports through so far. 0:09:52.160 --> 0:09:55.400 January we had the wage growth surprise. February we had 0:09:55.520 --> 0:09:59.360 just this monster payrolls report with three six pounsand jobs 0:09:59.400 --> 0:10:02.680 at it, and March was completely opposite at one oh three. 0:10:03.360 --> 0:10:05.200 Is it getting difficult? It's going to read on what's 0:10:05.200 --> 0:10:06.959 happening in the jobs market, in the labor market in 0:10:06.960 --> 0:10:09.719 the United States right now? The numbers are noisy, that 0:10:09.800 --> 0:10:13.240 they've always been noisy, and from just three or four months, 0:10:13.240 --> 0:10:16.480 it's hard to say that the sampling variability or non 0:10:16.559 --> 0:10:19.280 sampling variability is increased. But John, if you if you 0:10:19.360 --> 0:10:22.600 look at some of the other indicators like unemployment, insurance claims, 0:10:22.880 --> 0:10:28.080 or the KNAVE survey or the manufacturing surveys, the underlying 0:10:28.160 --> 0:10:31.120 job growth, underlying labor market looks like it's solid, continuing 0:10:31.200 --> 0:10:33.520 to improve, and it looks like we may end up 0:10:33.559 --> 0:10:37.040 with a three handle unemployment. Unemployment that is you point out, Alan, 0:10:37.240 --> 0:10:39.840 and I think many people might have missed. It's been really, 0:10:39.920 --> 0:10:42.240 really stable at four point one percent for quite a while, 0:10:42.280 --> 0:10:44.360 and many people are waiting for it to drop even lower. 0:10:44.400 --> 0:10:46.960 What's going on there? You know, it's been a remarkable 0:10:47.080 --> 0:10:49.440 run of four point one percent six months in a row. 0:10:50.160 --> 0:10:54.959 The sampling error on the unemployment rate is substantial. It 0:10:55.080 --> 0:10:57.280 takes about a two tense of a percentage point movement 0:10:57.320 --> 0:10:59.480 in the unemployment rate for the buer of labor statistics 0:10:59.559 --> 0:11:02.480 to say that it was a meaningful change. So the 0:11:02.520 --> 0:11:04.400 fact that has just been sitting at four point one, 0:11:04.440 --> 0:11:08.400 it has been a remarkable coincidence. Martin Feldstone today, who 0:11:08.440 --> 0:11:12.520 I would suggest has a different economic thesis than you UH, 0:11:12.720 --> 0:11:16.040 suggested that the FED really needs to focus on the 0:11:16.160 --> 0:11:20.240 employed part of the economy and that we are fully employed. 0:11:20.280 --> 0:11:23.599 You see that claims clearly. How do we address the 0:11:23.800 --> 0:11:27.839 huge body of America that's struggling. I hear it. I 0:11:27.920 --> 0:11:29.760 get it, John, and I get it every day in 0:11:29.840 --> 0:11:34.400 the emails from people. Is there a social requirement for 0:11:34.600 --> 0:11:38.920 the FED and for fiscal authorities to address that? I 0:11:39.040 --> 0:11:42.640 think it's the responsibility of government economic policymakers to address it, 0:11:42.920 --> 0:11:46.040 and the FED is part of that network. Now, the 0:11:46.120 --> 0:11:48.959 Fed's tools are more limited than what Congress can do. 0:11:49.840 --> 0:11:52.000 Congress has done some things to help that segment of 0:11:52.040 --> 0:11:55.360 the workforce. UH. The Affordable Care Act has helped to 0:11:55.400 --> 0:11:59.240 bring millions more people UH under health insurance coverage, which 0:11:59.280 --> 0:12:02.559 has been been beneficial for low income workers. UM, I 0:12:02.600 --> 0:12:05.320 think it's important that we build on that progress. Unfortunately, 0:12:05.880 --> 0:12:08.559 we're moving in the opposite direction with many decisions of 0:12:08.600 --> 0:12:11.480 the current administration. But just as one narrow example, and 0:12:11.559 --> 0:12:15.280 we've spoken to Sunder Deportment and others of ohio about 0:12:15.320 --> 0:12:19.079 opiated Most most people in Washington, I think can't spell opioid. 0:12:19.480 --> 0:12:21.640 I mean they're just running from it from what you know, 0:12:22.040 --> 0:12:26.679 not Republican Democrat. But we're basically spinning our wheels on 0:12:26.880 --> 0:12:30.680 what is what is a medical, social and economic issue. 0:12:31.320 --> 0:12:34.319 How do we affect a policy on opioid that is 0:12:34.400 --> 0:12:38.199 bipartisan and begins to address it. You know, I think 0:12:38.320 --> 0:12:41.600 this shows enormous failure of the current administration. They appointed 0:12:42.200 --> 0:12:46.080 Chris Christie to chair commission, which mostly made sensible recommendations. 0:12:46.679 --> 0:12:51.880 The administration hasn't followed through. So UM, I think that 0:12:52.080 --> 0:12:55.160 there's been tremendous neglect when it comes to the opioid crisis. 0:12:55.320 --> 0:12:57.040 I can tell you, Tom, I've done some research, as 0:12:57.080 --> 0:13:00.559 you know, on how the opioid crisis intersected the decliin 0:13:00.640 --> 0:13:04.400 in labor force participation. And I've never received such heartfelt 0:13:04.920 --> 0:13:07.880 responses from the public. But the folks this is important. 0:13:07.960 --> 0:13:09.920 Alan Krueger shows up and he's got a bunch of 0:13:10.000 --> 0:13:13.000 fancy titles and he pontificates about what we're going to 0:13:13.040 --> 0:13:15.559 see at a thirty. What you need to know is 0:13:15.960 --> 0:13:19.120 it was card In. Krueger and a guy named Daton 0:13:19.360 --> 0:13:24.440 have actually done John the grunt work on what people 0:13:24.559 --> 0:13:28.400 are really doing with their lives. It's called like micro research, 0:13:28.440 --> 0:13:31.079 and somebody's got to go out and do it, including 0:13:31.120 --> 0:13:33.960 the Laureate Angus Deton. We've tolked about your research before, 0:13:34.040 --> 0:13:35.920 but for our listeners that haven't heard it, um, just 0:13:36.000 --> 0:13:39.040 give us a synopsis, Professor, of what you have learned 0:13:39.040 --> 0:13:41.760 about the outpiold crisis and what it really means for 0:13:41.800 --> 0:13:45.079 the labor market at the moment, Well, almost half of 0:13:45.160 --> 0:13:47.760 the prime age men who are out of the labor 0:13:47.880 --> 0:13:52.199 force are taking pain medication regularly. Half and that's a 0:13:52.400 --> 0:13:55.640 remarkable figure that comes from Bureau of Labor statistic surveys. 0:13:55.840 --> 0:13:57.840 We don't know what type of pain medication. So one 0:13:57.840 --> 0:13:59.600 of the things I did was a follow up survey 0:13:59.640 --> 0:14:02.880 and I asked, and two thirds of those individuals are 0:14:02.920 --> 0:14:06.000 taking prescription medication. And I have to believe there's a 0:14:06.040 --> 0:14:09.319 lot of underreporting as Well, then I looked across the 0:14:09.360 --> 0:14:14.920 country and I found that areas where prescription opioid medication 0:14:15.520 --> 0:14:18.559 UH increase the most is the greatest. We've seen the 0:14:18.600 --> 0:14:23.480 biggest decline in labor force participation, and my estimates suggests 0:14:23.520 --> 0:14:26.320 that around a third of the decline in labor force 0:14:26.400 --> 0:14:30.040 participation over the last fifteen years can be accounted for 0:14:30.240 --> 0:14:34.040 by the spread of opioid medication. What should remedy Well, 0:14:34.480 --> 0:14:39.120 first of all, I think we need uh to uh 0:14:39.480 --> 0:14:43.240 make sure the medical profession doesn't overprescribe. And I think 0:14:43.400 --> 0:14:46.800 a lot of the responsibility falls on doctors who and 0:14:46.960 --> 0:14:51.600 pharmaceutical companies who pushed the medication unnecessarily, probably for good intentions, 0:14:51.960 --> 0:14:56.000 but the unintended consequences have been tremendous. UM. So I 0:14:56.080 --> 0:14:59.760 think that is should be the first line of defense. Then, 0:14:59.800 --> 0:15:02.400 we have a large number of people who are addicted 0:15:02.440 --> 0:15:07.040 to the medication, and we need better treatment facilities for them. UM. 0:15:07.200 --> 0:15:09.200 We need to treat it like a mental health problem, 0:15:10.240 --> 0:15:13.680 not like not like a crime. UH. And we think 0:15:13.720 --> 0:15:16.320 we vastly need to increase our mental health services for 0:15:16.360 --> 0:15:20.880 these individuals. Up to the job's day UH today, are 0:15:20.960 --> 0:15:23.800 we fully employed? I think we're pretty close to the 0:15:23.920 --> 0:15:27.520 textbook definition of full employment. Now, full employment doesn't mean 0:15:27.640 --> 0:15:30.960 that you can't continue to see job growth. Uh. Full 0:15:31.000 --> 0:15:35.680 employment doesn't mean that, um, the expansion has come to 0:15:35.800 --> 0:15:39.920 an end. But by the textbook definition of the unemployment 0:15:40.040 --> 0:15:42.360 rate solo that most people can find a job we're 0:15:42.400 --> 0:15:44.480 searching in a in a in a reasonable period of time, 0:15:44.600 --> 0:15:47.760 that the remaining unemployment is what we call frictional. Uh. 0:15:48.080 --> 0:15:51.240 In the aggregate. That's probably true for some populations. However, 0:15:51.320 --> 0:15:55.880 I think unemployment still remains much too high. Amazing. It's 0:15:55.880 --> 0:15:59.880 an amazing John This conversation off of Bloomberg surveillance seventy 0:16:00.080 --> 0:16:04.040 nine years ago, just extraordinary. It's phenomenal research as well 0:16:04.160 --> 0:16:06.080 from the professor. And if you want to find it, 0:16:06.160 --> 0:16:08.080 where can we find it? Professor? For our listeners that 0:16:08.120 --> 0:16:10.320 would like to have a read, well, I had much 0:16:10.360 --> 0:16:12.960 of it posted on my web page at www dot 0:16:13.000 --> 0:16:17.280 Krueger that Princeton Daddy do you there we go? Mr Plug? Now, 0:16:17.440 --> 0:16:19.280 I just thought, you know, I just thought for our 0:16:19.320 --> 0:16:21.360 listeners that might want to read the whole thing, um 0:16:21.720 --> 0:16:23.920 for the professor could plug his west are they going 0:16:24.000 --> 0:16:25.840 to see this? Also at the web page of the 0:16:25.960 --> 0:16:28.560 Real yield with John Ferrel. They might hear a little 0:16:28.560 --> 0:16:30.600 bit about it at one pm Eastern time on ploom 0:16:30.600 --> 0:16:34.720 Bag TV. You're welcome to link, and I think you'd 0:16:34.760 --> 0:16:40.600 like to plug some king Professor Ran Krueger, Princeton University 0:16:40.640 --> 0:16:44.120 professor and of course the former chairman of President Barack 0:16:44.160 --> 0:17:03.120 Obama's Council of Economic Advisors. Let's continue that dialogue with 0:17:03.240 --> 0:17:07.000 Julia Coronado with her work and a wonderful call on 0:17:07.119 --> 0:17:10.639 a more substued potential g d P as well. There's 0:17:10.680 --> 0:17:14.639 that that unemployment rate Dr Coronado, that is the efficient 0:17:14.920 --> 0:17:19.280 unemployment rate NEIL Data over Renaissance Macro drives for the 0:17:19.359 --> 0:17:24.480 analysis and says, look, under four percent unemployment rate, wage 0:17:24.520 --> 0:17:28.480 growth is basically nowhere. Is the new NEIGHRU, like the 0:17:28.560 --> 0:17:32.680 new potential g d P a small number. I think 0:17:32.760 --> 0:17:36.720 it's hard not to conclude that NEHRU is lower given 0:17:36.960 --> 0:17:40.040 the wage performance. And yes, we had a strong e 0:17:40.160 --> 0:17:43.040 c I, but it's strong relative to where it's been 0:17:43.160 --> 0:17:46.399 not in historical terms, right, it's still below three percent, 0:17:46.840 --> 0:17:49.239 and so I think it's hard to look at this. Yes, 0:17:49.320 --> 0:17:52.000 the labor market is strong, but it's just not generating 0:17:52.040 --> 0:17:55.440 a lot of wager inflationary pressures, no need for the 0:17:55.520 --> 0:17:59.359 FED to panic. In fact, from the set itself looked 0:17:59.480 --> 0:18:04.720 at um because of better educated population and an older population, 0:18:05.400 --> 0:18:10.840 NEHRU is probably lower. Those factors lower the equilibrium unemployment rate. 0:18:11.040 --> 0:18:15.119 So good news, but no panic for them. Okay, So 0:18:15.240 --> 0:18:19.080 the potential GDP number, like the efficient GDP number, is 0:18:19.160 --> 0:18:22.639 politically unacceptable the politicians because they want more spirit, they 0:18:22.680 --> 0:18:26.640 want more and all that is there a politically acceptable 0:18:26.760 --> 0:18:30.360 unemployment rate, I mean, is three point nine percent unemployment 0:18:30.640 --> 0:18:35.800 and Eisenhower like statistic? Is that good for Donald Trump? 0:18:36.119 --> 0:18:42.199 Is that good for Nancy Pelosi? Look, it's good for everybody, right, 0:18:42.240 --> 0:18:45.720 I mean, it is very good news that the labor 0:18:45.800 --> 0:18:48.440 market is strong. It's very good news that it's now 0:18:48.920 --> 0:18:52.080 you know, a seller's market if you will, that that 0:18:52.440 --> 0:18:56.760 people finally do have good job prospects. They're changing jobs. 0:18:57.200 --> 0:19:00.119 The quits rate has recovered, So there's a lot of 0:19:00.160 --> 0:19:04.159 indicators saying it's a healthy, healthy job market. Um. Politically, 0:19:04.720 --> 0:19:07.680 you know, anybody can grab that and run with it. Um. 0:19:07.960 --> 0:19:10.680 But I think for the economy it's great news. For 0:19:10.720 --> 0:19:12.680 the feed, it's great news. I think the fact that 0:19:12.760 --> 0:19:16.520 the unemployment rate drop does keep them marching higher on 0:19:16.640 --> 0:19:19.960 interest rates, but again sort of in the gradual pace 0:19:20.040 --> 0:19:23.280 that they've got planned out. So, um, I think it 0:19:23.400 --> 0:19:27.040 is kind of a sweet sweet spot right now. You know, 0:19:27.320 --> 0:19:30.440 we're it's a sweet spot right now. And the three 0:19:30.520 --> 0:19:34.000 point nine number is I'm sorry, Julie, to me, it's 0:19:34.080 --> 0:19:38.159 historically extraordinary in a yearly basis, it's back thee. We'll 0:19:38.160 --> 0:19:41.280 get the monthly granularity. Our team are Brendan Murray and 0:19:41.280 --> 0:19:44.600 our team in Washington will do that. But when you 0:19:44.880 --> 0:19:48.600 see Dr Coronado a three point nine statistic, particularly with 0:19:48.680 --> 0:19:55.119 your Texas background, that's that's a stunning statement. Shouldn't everybody 0:19:55.200 --> 0:19:59.400 stand up and celebrate today? Yes, absolutely, we should stand 0:19:59.480 --> 0:20:01.560 up and sell bread. I mean, I think again, Yes, 0:20:01.680 --> 0:20:06.680 it's great, great news that finally, after a very frustratingly 0:20:06.920 --> 0:20:12.320 halting recovery, we're kind of humming along. Um. And as 0:20:12.440 --> 0:20:15.719 Jim Glasman said, the fact that hiring has flowed a bit, 0:20:15.880 --> 0:20:20.760 it's still a healthy pace. There's nothing there that worries them. Um. 0:20:21.119 --> 0:20:24.840 So this is definitely a good news report. I mean, 0:20:24.960 --> 0:20:27.520 within this, Juliet, and I guess we can backtrack to 0:20:27.600 --> 0:20:30.399 wage growth as well. Get Neil dotta with a smart 0:20:30.440 --> 0:20:33.800 two sentence. Uh no, you know, the the idea of 0:20:33.920 --> 0:20:38.200 wage growth where it is, that's not acceptable. I mean, great, 0:20:38.600 --> 0:20:40.520 John Tucker to are biased because we live in three 0:20:40.600 --> 0:20:43.720 zip codes of Upstate, you know't you know, if we're 0:20:43.760 --> 0:20:46.840 making triple you're making, John, we still wouldn't be enough 0:20:46.880 --> 0:20:50.440 wage growth. But but with that said, Julius, two point 0:20:50.680 --> 0:20:54.320 two point six percent, two point six percent, it just 0:20:54.480 --> 0:20:57.520 doesn't get it done, does it. No, No, it doesn't 0:20:57.560 --> 0:21:00.399 because I mean, let's let's peel out inflation. In plation 0:21:00.640 --> 0:21:06.280 is starting to run close to the target. That's what point. Uh, 0:21:06.640 --> 0:21:08.720 you know, real wage growth. That's not a lot of 0:21:08.800 --> 0:21:12.200 purchasing power to sustain the economy. So I do think 0:21:12.240 --> 0:21:14.680 we want to see that number climb higher. I think 0:21:14.880 --> 0:21:18.280 policymakers will want to see that number climb higher. So 0:21:18.640 --> 0:21:22.320 that is a very good reason to you know, let 0:21:22.440 --> 0:21:26.000 this economy keep running. Juliet Coronado, thank you so much. 0:21:26.080 --> 0:21:29.959 From ten unemployment down to three point nine percent unemployment. Uh, 0:21:30.119 --> 0:21:32.320 that is fine. Just thrilled to have her with this. 0:21:32.520 --> 0:21:35.760 Dr Coronado of course, with years of good work and 0:21:35.920 --> 0:21:38.800 helping that with the program she is with macro policy 0:21:39.440 --> 0:21:55.359 perspectives as well. We have been honored this morning by 0:21:55.400 --> 0:21:59.040 the attendance of Martin Feldstein of Harvard, Alan Krueger from Princeton, 0:21:59.640 --> 0:22:03.600 James Lasting with us, Julia Cordado another Worthies. We continue 0:22:03.760 --> 0:22:06.800 strong out of the plant of Ned Gramblich in the 0:22:06.920 --> 0:22:11.520 University of Michigan. We are thrilled to bring you Betsy Stevenson, Yes, 0:22:11.600 --> 0:22:14.480 with the Console Economic Advisors who study under Greg Banko 0:22:14.640 --> 0:22:18.840 at Harvard. But far more importantly, she's actually dark in 0:22:18.920 --> 0:22:23.159 the halls of the Department of Labor. Betsy Stevenson with 0:22:23.280 --> 0:22:26.639 us from the University of Michigan. Betsy, what was it 0:22:26.760 --> 0:22:29.479 like the first day at the Department of Labor? I mean, 0:22:29.600 --> 0:22:32.959 people moufie, people on Wall Street talk about it as 0:22:32.960 --> 0:22:38.800 a dark, evil empire. What's it really like? I think 0:22:39.240 --> 0:22:42.760 the Department of Labor is a fantastic place. I mean, 0:22:43.000 --> 0:22:47.680 today we're celebrating one terrific aspect, which is the Bureau 0:22:47.680 --> 0:22:51.000 of Labor Statistics, which gathers all the data that we use. 0:22:51.560 --> 0:22:54.720 And you know, we sometimes take that for granted, but 0:22:54.880 --> 0:22:57.600 you you know, do you think back to the depression, 0:22:57.800 --> 0:23:02.679 when we weren't measuring unemployment. Politicians were arguing about how 0:23:02.760 --> 0:23:06.240 many people wanted jobs who couldn't find jobs, what unemployment was. 0:23:06.480 --> 0:23:10.240 We didn't have any idea. Um terrific is that we 0:23:10.400 --> 0:23:13.120 can count on the beer of labor statistics to tell 0:23:13.240 --> 0:23:16.159 us what's happening in the economy. Wall Street certainly relies 0:23:16.240 --> 0:23:19.120 on it. Within this is three point nine percent unemployment. 0:23:19.160 --> 0:23:23.720 And the partition is a without question fully employed America 0:23:24.320 --> 0:23:27.919 that's in the models of your textbooks years ago at Wellesley. Fine, 0:23:28.560 --> 0:23:31.560 the reality is there's a whole nother America out there. 0:23:31.880 --> 0:23:36.240 How do we reattach the America of yellings slack in 0:23:36.320 --> 0:23:42.080 the economy to the fully employed America. So here's what 0:23:42.200 --> 0:23:46.160 I think is the difficulty. And in modern times shall 0:23:46.200 --> 0:23:50.640 we say, which is that we in our textbooks we're 0:23:50.760 --> 0:23:54.199 thinking about the unemployment, the pool of the people who 0:23:54.240 --> 0:23:57.200 are unemployed as the only potential people who could take jobs. 0:23:57.680 --> 0:24:00.359 So if the business wants to hire, the with people 0:24:00.400 --> 0:24:02.800 they can hire are among the unemployed. But it turns 0:24:02.800 --> 0:24:04.679 out there's lots of people who don't get counted as 0:24:04.760 --> 0:24:07.680 unemployed because they're not looking for jobs. And we see 0:24:07.760 --> 0:24:10.719 lots and lots of people moving from what we call 0:24:10.840 --> 0:24:13.200 not in the labor force people not looking for jobs, 0:24:13.560 --> 0:24:16.800 that aren't indicating that they're willing to work straight into 0:24:16.920 --> 0:24:20.320 jobs as business is higher, and the puzzle for us 0:24:20.840 --> 0:24:23.639 is to try to figure out how many people who 0:24:23.680 --> 0:24:26.639 aren't working would work if the right job came along, 0:24:27.000 --> 0:24:29.200 and would move into those jobs. That's what when we 0:24:29.359 --> 0:24:32.360 talk about the flack in the labor market, we're wondering 0:24:32.440 --> 0:24:36.680 about those people who aren't working. Are they willing to 0:24:36.720 --> 0:24:39.080