WEBVTT - Blame China for Not Playing Ball, Kudlow Says 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.600 Bloomberg dot Com, and of course, on the Bloomberg. Alan 0:00:33.640 --> 0:00:35.879 Krueger has been so generous at his time with us 0:00:35.880 --> 0:00:37.800 on Job's Day that we usually just bring him in 0:00:37.840 --> 0:00:40.360 and make jokes about you know this, that or the 0:00:40.400 --> 0:00:42.800 other thing. Let us remember that he is a former 0:00:42.920 --> 0:00:46.320 chairman of the President's Council of Economic Advisors and has 0:00:46.360 --> 0:00:50.839 had a distinguished career in thinking about American labor. He 0:00:50.880 --> 0:00:54.320 has been a lightning rod of debate on the minimum wage. 0:00:54.760 --> 0:00:58.080 His exceptionally important book What Makes a Terrorist was a 0:00:58.200 --> 0:01:01.920 mustard ten years ago and painful years ago, and is 0:01:01.960 --> 0:01:05.399 out again with a new redo by Professor Krueger, and 0:01:05.440 --> 0:01:08.800 he joins us on this Job's Day. Um this morning, 0:01:09.240 --> 0:01:13.640 we talked to Iowa. Yesterday, we talked to people who 0:01:13.680 --> 0:01:16.800 are working on the reality of labor in the field. 0:01:17.520 --> 0:01:21.119 Most of the debate seems to be esoteric, and within 0:01:21.240 --> 0:01:23.640 that the President seems to have what I would call 0:01:23.680 --> 0:01:29.160 a classical, more static view of labor versus The Miracle 0:01:29.560 --> 0:01:32.920 of the Marginal with a guy named William Stanley Jevons 0:01:32.920 --> 0:01:36.880 onto Alfred Marshall a hundred and thirty years ago. How 0:01:36.880 --> 0:01:42.920 do we drag Trump policy into modern economic theory? You know, 0:01:43.000 --> 0:01:45.720 I'd like to see the Justice Department become more active. 0:01:46.400 --> 0:01:48.480 How would they do that? Let me give you an example. 0:01:48.480 --> 0:01:51.240 At the end of the Obama administration, the Justice Department 0:01:51.280 --> 0:01:54.960 in the Federal Trade Commission issued guidelines to human resource 0:01:55.000 --> 0:01:59.080 professionals advising them that it's illegal for them to have 0:01:59.160 --> 0:02:03.480 agreements not the not not to rate each other's workers 0:02:03.520 --> 0:02:06.120 like Disney, Pixar and all that out in me exactly 0:02:06.280 --> 0:02:09.840 or what hospitals had been doing. And the current Assistant 0:02:10.360 --> 0:02:12.680 Attorney General for n I Trust has said that they're 0:02:12.720 --> 0:02:15.679 continuing to enforce those those guidelines, And just this week 0:02:15.720 --> 0:02:20.000 they brought charges against two companies agreed that they had 0:02:20.080 --> 0:02:26.120 violated the law or um uh rems UH Manufacturing company 0:02:26.120 --> 0:02:29.359 makes breaks for trains, and then Westinghouse Air Brake Technologies 0:02:29.400 --> 0:02:31.720 wob Tech, and there was a third company and tom 0:02:31.720 --> 0:02:33.600 this is actually kind of what's going on in the U. 0:02:33.639 --> 0:02:36.880 S economy, and a microcosm third company called FAVOLEI was 0:02:36.919 --> 0:02:40.520 part of its cabal, but Bob Tech took over Favoley, 0:02:40.840 --> 0:02:43.640 so now they could actually do what was illegal before 0:02:43.720 --> 0:02:46.200 because they're within the same company. And I think that's 0:02:46.240 --> 0:02:48.600 the sign of the lack of competition that workers are 0:02:48.600 --> 0:02:51.519 facing in the job market. John, you live this growing 0:02:51.560 --> 0:02:53.480 up in the United Kingdom, where they are all sorts 0:02:53.480 --> 0:02:56.639 of agreements, and Paul Krugman brings it up. Paul Kruman, 0:02:56.720 --> 0:03:01.160 I believe is no longer at Princeton. He's the the 0:03:01.280 --> 0:03:04.880 University of New York's June He's emeritus. He's emeritus. Are 0:03:04.880 --> 0:03:10.800 you emeritus? John Farrell is very sameritus to tell you 0:03:10.840 --> 0:03:13.079 that since you've been trying to get me a job 0:03:13.160 --> 0:03:15.680 at at at Deutsche Bank and god knows where else, 0:03:16.080 --> 0:03:18.120 watching to know I've got probably the best job I 0:03:18.120 --> 0:03:20.880 could possibly have. Alan just to get to the payrolls 0:03:20.880 --> 0:03:23.440 figures today and to white just most specifically, to what 0:03:23.520 --> 0:03:26.239 extent of the structural issues that you've identified and done 0:03:26.240 --> 0:03:28.680 so much research on, to what extent are they actually 0:03:28.680 --> 0:03:31.600 holding back those headline wage numbers that we look at 0:03:31.600 --> 0:03:34.160 every month. Now, I think wage growth has been a 0:03:34.160 --> 0:03:36.240 half a percent to a percent lower than you would 0:03:36.280 --> 0:03:41.000 predict based on the historical relationship. So something has changed 0:03:41.000 --> 0:03:43.040 in the job market, and I think the most obvious 0:03:43.360 --> 0:03:47.080 candidate is a lack of competition. The job markets less dynamic. 0:03:47.120 --> 0:03:50.720 We're seeing less mobility across areas. Workers aren't blowing to 0:03:50.880 --> 0:03:54.360 higher paying areas areas where there's greater demand. And we 0:03:54.480 --> 0:03:57.560 also have seen a proliferation of these practices by companies 0:03:57.600 --> 0:04:00.840 to require workers to sign non computer gree mints they 0:04:00.920 --> 0:04:04.040 enter into these no poaching agreements. Franchise companies have no 0:04:04.120 --> 0:04:08.200 poaching agreements, and I think that's restricting competition in the 0:04:08.240 --> 0:04:10.680 job market. And companies are not bidding up wages even 0:04:10.680 --> 0:04:13.560 though they say time after time they can't get enough workers. 0:04:13.720 --> 0:04:16.280 Every month, we have this discussion about whether the labor 0:04:16.320 --> 0:04:19.520 market is tight, whether we're at full employment. Just from 0:04:19.520 --> 0:04:22.520 a simple sort of layman point of view, if the 0:04:22.600 --> 0:04:25.559 labor market was that tight, how we able to add 0:04:25.839 --> 0:04:28.080 the payrolls figures that we are every single month? How 0:04:28.120 --> 0:04:30.560 can we have a month of three hundred and thirteen 0:04:30.600 --> 0:04:33.360 thousand when a couple of years ago, pretty much every 0:04:33.360 --> 0:04:36.040 single economist I spoke to said, get ready for something 0:04:36.040 --> 0:04:38.240 in the one hundreds. Every single month we can't keep 0:04:38.240 --> 0:04:40.520 this up, but we have. How we doing that? Well, 0:04:40.520 --> 0:04:42.919 that's what's driven the unemployment right down. Don't forget the 0:04:42.960 --> 0:04:47.040 unemployment rates come down very rapidly. We're not seeing workers 0:04:47.040 --> 0:04:49.000 come back who are out of the labor force. We're 0:04:49.000 --> 0:04:52.680 seeing workers who uh would otherwise retire early staying in 0:04:52.720 --> 0:04:56.000 the labor force longer. And we're seeing people move from 0:04:56.080 --> 0:05:00.400 unemployment to employment. Is their monopsidy, Professor crewe when it's 0:05:00.400 --> 0:05:02.920 a great phrase. It's been one of my pets study 0:05:02.960 --> 0:05:06.440 projects over the year. Not monopoly, folks, but think of 0:05:06.600 --> 0:05:09.840 a coal mine. A coal mine owner in a coal 0:05:09.880 --> 0:05:13.520 mining town is the only employer. Good Morning West Virginia 0:05:14.200 --> 0:05:17.520 for for listening in parts of Kentucky. But do you 0:05:17.560 --> 0:05:19.960 agree with Professor Krugman that there's a little bit of 0:05:20.000 --> 0:05:24.200 monopsony out there or a little bit too much? Absolutely, 0:05:24.240 --> 0:05:26.040 I've been saying that for twenty five years. You know, 0:05:26.120 --> 0:05:28.039 you go back to the book David Carton I wrote 0:05:28.279 --> 0:05:31.320 on the minimum wage, our explanation for why we did 0:05:31.320 --> 0:05:34.719 not find job losses from the minimum wage, but the 0:05:34.760 --> 0:05:37.560 Republican pushback to that. I'm not saying ed Lazio out 0:05:37.600 --> 0:05:40.800 of Stanford because i think Professor Lazier would agree with you. 0:05:41.160 --> 0:05:44.080 But the Republican pushback is everyone for themselves, the lockey 0:05:44.120 --> 0:05:47.000 in theory. You know, everybody's in this. They can move 0:05:47.040 --> 0:05:48.760 if they don't like West Virginia, they can move to 0:05:48.760 --> 0:05:51.360 New York City. But it's costly to move. And that's 0:05:51.400 --> 0:05:54.040 what gives the monopsony power. You know, in the in 0:05:54.160 --> 0:05:56.880 the classical neo classical model of the job market, if 0:05:56.880 --> 0:05:59.120 you have perfect competition, if a company were to cut 0:05:59.120 --> 0:06:01.600 it to pay by one any would lose its whole workforce. 0:06:01.880 --> 0:06:03.920 And we know that that's not the case. Or if 0:06:03.920 --> 0:06:06.839 a company is having trouble recruiting, which many companies are today, 0:06:07.000 --> 0:06:08.760 all they have to do is offer the going wage 0:06:08.760 --> 0:06:11.240 and they'll get a flood of qualified applicants. And that's 0:06:11.279 --> 0:06:14.159 not the case. So I think our understanding of the 0:06:14.240 --> 0:06:17.280 nature of monopsony has changed. We can have monopsony even 0:06:17.279 --> 0:06:19.240 if we don't have a company town. Okay, but within that, 0:06:19.360 --> 0:06:21.960 let's say health care is an example. Whether it's doctors, 0:06:22.000 --> 0:06:25.240 young doctors, or nurses or whatever, they're all screaming that 0:06:25.279 --> 0:06:29.520 they're paid. Compensations won't go up even though there's a 0:06:29.560 --> 0:06:32.760 shortage of their skill set. Well, that's a great example 0:06:32.800 --> 0:06:36.440 because that's an error where we've seen increased employer concentration, 0:06:36.960 --> 0:06:40.520 UH large number of mergers where in many cities now 0:06:40.880 --> 0:06:44.040 that industry is not competitive, so the doctors and the 0:06:44.120 --> 0:06:48.160 nurses are UH at risk of being Professor Krueger, are 0:06:48.160 --> 0:06:50.359 we going to become like the health system that John 0:06:50.360 --> 0:06:53.440 Farrell grew up with in England? I don't mean that disparagingly, John, 0:06:53.680 --> 0:06:56.719 but are we going to become a British system? I 0:06:56.760 --> 0:06:58.880 don't think where we are right now is stable, So 0:06:58.920 --> 0:07:00.520 I think we are going to move in one direction 0:07:00.640 --> 0:07:03.440 or another um. But I think we should also be 0:07:03.680 --> 0:07:05.800 very proud of the fact that we expanded coverage for 0:07:05.839 --> 0:07:08.960 so many other Americans. All of these issues sound like 0:07:09.080 --> 0:07:12.160 very structural issues to me. Alan. When the Fed Chess 0:07:12.160 --> 0:07:15.320 speaks later today and he reflects on the payrolls report 0:07:15.360 --> 0:07:17.040 not of today, but on the payrolls reports of the 0:07:17.120 --> 0:07:18.720 last few years, can he look at the labor market 0:07:18.720 --> 0:07:22.080 and safe for the Federal Reserve, it's mission complete. Look, 0:07:22.080 --> 0:07:24.440 the Federal Reserves mission is never complete, so I think 0:07:24.440 --> 0:07:26.440 he certainly wouldn't say that. But one of the real 0:07:26.520 --> 0:07:29.320 challenges for the FED is that monetary policy operates with 0:07:29.360 --> 0:07:31.280 the lag so they have to be thinking about what's 0:07:31.280 --> 0:07:33.080 going to happen six months from now, what's gonna happen 0:07:33.120 --> 0:07:36.960 nine months from now. They have to anticipate whether whether 0:07:37.360 --> 0:07:39.560 we're gonna have imbalances and whether they need to address 0:07:39.600 --> 0:07:42.240 them to keep the recovery going. Now. Uh, And I 0:07:42.280 --> 0:07:44.600 think that's the outlook that that the FED should have. 0:07:44.720 --> 0:07:46.280 So I understand there is that we can get him 0:07:46.280 --> 0:07:48.120 on the board of Governors at the FMC if he 0:07:48.120 --> 0:07:51.320 doesn't want the Deutsche Bank job. So so Alan, if 0:07:51.360 --> 0:07:53.120 you're on the board and you were advising them about 0:07:53.120 --> 0:07:55.200 the labor markets six to nine months out, what would 0:07:55.240 --> 0:07:58.679 you be saying. You know, we've seen over the past 0:07:58.680 --> 0:08:01.240 seven years there's graduate a healing of the job market. 0:08:01.320 --> 0:08:03.720 It's been painfully slow, but we're now we are at 0:08:03.720 --> 0:08:06.400 a point where all of that hard work is paid off. 0:08:06.440 --> 0:08:08.120 It took us a long time to get here. But 0:08:08.160 --> 0:08:11.320 the unappointment rate is poised to go below four percent. 0:08:12.160 --> 0:08:14.440 I'd like to see wage growth get above three percent, 0:08:15.120 --> 0:08:18.320 and from the feed standpoint, that is kind of kind 0:08:18.360 --> 0:08:21.400 of their target. And inflation is has been edging up. 0:08:21.440 --> 0:08:23.600 It's now looking like it's right around two percent. So 0:08:23.640 --> 0:08:25.480 I think the feed should be looking at things and saying, 0:08:25.520 --> 0:08:28.320 how can we keep this going? What's our best our 0:08:28.360 --> 0:08:30.880 best monetary policy to ensure that we can kind of 0:08:31.200 --> 0:08:35.720 uh keep this um recovery going and growing. Yeah, well 0:08:35.760 --> 0:08:37.640 this is good. We're trying to get your job because 0:08:37.640 --> 0:08:40.680 we know you're underemployed. We're going to four hour professorial work. 0:08:40.720 --> 0:08:43.200 We get Princeton. The other job we had for you 0:08:43.320 --> 0:08:47.439 was to coach a C. Milan, but they get out too. 0:08:48.480 --> 0:08:51.400 That's it. You ally doesn't want well, they but they 0:08:51.440 --> 0:08:53.520 advanced to John explained to me this guy who had 0:08:53.559 --> 0:08:55.160 to try out as a coach, and he's done so 0:08:55.200 --> 0:08:57.320 well with these I wouldn't say he's done that. He 0:08:57.440 --> 0:08:59.560 used to be a player a C. Malan, a fantastic 0:08:59.559 --> 0:09:01.920 player of a World Cup winner for Italy as well 0:09:01.960 --> 0:09:03.640 in two thousand and six, and I guess there's some 0:09:03.800 --> 0:09:07.079 nostalgia here or something. Tom, Will you stay around long 0:09:07.160 --> 0:09:09.800 enough to eat the panotoni? That's the question. That is 0:09:09.840 --> 0:09:12.800 a great question. Alan Kruger knows knows the Italian saying 0:09:12.800 --> 0:09:14.959 will he be around long enough to wake the panotoni? 0:09:15.040 --> 0:09:16.839 That is a joke. When you take the job at 0:09:16.840 --> 0:09:19.920 the start of the season, you were around until Christmas 0:09:20.280 --> 0:09:22.960 to have the Panotoni. That's a joke, Elyn. Have you 0:09:23.040 --> 0:09:26.040 know that the only professional soccer game I've ever gotten 0:09:26.040 --> 0:09:29.720 to Milan and I love Panatoni. So to fall asleep 0:09:30.800 --> 0:09:32.640 it was to nothing. It was there are a lot 0:09:32.720 --> 0:09:35.720 of people there, Yeah, it was. It was so different 0:09:35.720 --> 0:09:38.400 to watching American football that you couldn't get food. I 0:09:38.440 --> 0:09:41.840 couldn't believe it. At the halftime, it was almost impossible 0:09:41.880 --> 0:09:44.679 to answer my question. Did you fall asleep like I did? 0:09:45.720 --> 0:09:48.960 Thousand people at the san Cerro? There is no falling asleep. 0:09:49.160 --> 0:09:53.200 It's like it's like going to chanting coast to coast 0:09:53.240 --> 0:09:57.120 across America. We now have a debate going Bloomberg to 0:09:57.280 --> 0:10:00.400 play the Simpsons tape of the soccer game. Get to that. 0:10:00.840 --> 0:10:03.880 It is job today. We love having Professor Krueger with 0:10:04.040 --> 0:10:21.520 US of Princeton University. We're now welcome on Bloomberg Radio, 0:10:21.559 --> 0:10:24.880 Bloomberg Television worldwide. Good morning, William Gross with US of 0:10:25.000 --> 0:10:29.400 Janice Henderson. Bill Gross, is just one month's data. You 0:10:29.480 --> 0:10:31.760 take those moving averages. Do you look at the moving 0:10:31.800 --> 0:10:35.120 averages or do you give caution by a non farm 0:10:35.200 --> 0:10:38.920 statistic of one oh three and a two month payroll 0:10:39.360 --> 0:10:43.040 revision of negative fifty. Is it a fifty three thousand 0:10:43.240 --> 0:10:47.920 month lousy or is it a better report than that? Well, 0:10:47.960 --> 0:10:49.839 it's lows. And I do look at moving average. Is 0:10:50.120 --> 0:10:52.880 too many to tell you the truth to under day 0:10:53.000 --> 0:10:56.760 and uh several years in many cases, but uh yeah, 0:10:56.800 --> 0:11:00.040 I think this is a weakesh type of reef. What 0:11:00.280 --> 0:11:03.160 is true that? And I would have said, um, going 0:11:03.240 --> 0:11:06.720 in that wages where the key consideration point three was 0:11:06.760 --> 0:11:09.520 what was expected over a point one last month, so 0:11:09.600 --> 0:11:12.240 that average is that point too, and two point seven 0:11:12.240 --> 0:11:16.280 on an annual basis, which isn't much change, and so um, 0:11:16.320 --> 0:11:18.600 you know, I would think this makes for more cautious FED, 0:11:18.720 --> 0:11:22.600 especially in light of the global trade situation that we 0:11:22.640 --> 0:11:25.760 see on an overnight basis where we're just gonna have 0:11:25.840 --> 0:11:28.559 to see. But I think the FED will be cautious 0:11:28.600 --> 0:11:34.520 going forward. My forecast is one or two hike nineteen 0:11:34.800 --> 0:11:37.720 or two thousand and eighteen type of year bill gross. 0:11:37.760 --> 0:11:41.160 If we got wage growth is John Farrell mentioned spot on, 0:11:41.880 --> 0:11:44.240 you've got to take inflation out of that to get 0:11:44.280 --> 0:11:48.160 to real or inflation adjusted wage growth. Do we have 0:11:48.640 --> 0:11:54.000 inflation adjusted wage growth. Well, I don't think they have much. 0:11:54.040 --> 0:11:56.120 And I've got an interesting chart in front of me. 0:11:56.200 --> 0:11:58.920 You can't show it, but it starts. It looks good 0:11:58.960 --> 0:12:02.199 on it looks so good on radio. That chart on 0:12:02.400 --> 0:12:07.160 radios gorgeous. Bill continue, Well, let's talk about it then. 0:12:07.280 --> 0:12:11.920 Since real wages have flatlined, it's almost like this patient 0:12:12.080 --> 0:12:16.960 is dead and real output has basically doubled. And so 0:12:17.040 --> 0:12:20.880 where has that productivity gone to. Certainly hasn't gone to wages. 0:12:21.080 --> 0:12:23.440 It's going to corporations. And it's good for stocks, I 0:12:23.480 --> 0:12:26.400 suppose in terms of earnings. But if the Fed's goal 0:12:26.559 --> 0:12:29.079 basically is to get wages up and to get the 0:12:29.160 --> 0:12:32.720 inflation rate at two and war, I don't think they're 0:12:32.720 --> 0:12:34.720 really doing much of a job. Bill. I want to 0:12:34.720 --> 0:12:36.880 talk about how you positioned. You've talked about this short 0:12:36.920 --> 0:12:38.680 that you've got in high yield over the last couple 0:12:38.720 --> 0:12:42.120 of months with us Blomberg Radio and Don Blomberg TV. 0:12:42.440 --> 0:12:44.560 It's a shot that seems to be struggling to pay off. 0:12:44.600 --> 0:12:46.960 We've had risk appetite take a real hit over the 0:12:47.000 --> 0:12:49.000 last couple of months, but all the volatility or the 0:12:49.000 --> 0:12:51.839 downside seems to be in equities and high yield seems 0:12:51.880 --> 0:12:54.640 to be whether relative out performances in risk assets. Can 0:12:54.679 --> 0:12:58.000 you explain why you think that is, Bill, Yeah, hi 0:12:58.120 --> 0:13:01.040 yield is doing okay. Um, you know, hi yield tends 0:13:01.080 --> 0:13:04.839 to in terms of volatility, say the VIX is twenty um. 0:13:05.000 --> 0:13:08.640 High yield tends to have a VIX related volatility of 0:13:08.640 --> 0:13:11.240 about five, you know, about a quarter of what the 0:13:11.280 --> 0:13:13.880 stock market does. And uh, you know, it's a slower 0:13:13.880 --> 0:13:17.680 moving type of type of average. And the investors wait 0:13:17.840 --> 0:13:20.839 on how yield to see, you know, the expected number 0:13:20.840 --> 0:13:24.680 of defaults going forward, and so far they've been relative benign. Jonathan. 0:13:24.800 --> 0:13:28.479 So I think that's the main point. What I do say, 0:13:28.880 --> 0:13:30.800 in addition to that, and the things that are making 0:13:30.840 --> 0:13:33.600 the short work out over the past month or so, 0:13:33.840 --> 0:13:36.160 is that, you know, the global trade situation and the 0:13:36.200 --> 0:13:42.280 potential you know, economic problems. Uh that higher interest rates 0:13:42.320 --> 0:13:47.880 you know, place on low low quality corporate credits, you know, 0:13:48.400 --> 0:13:52.000 eventually forces those spreads a little wider. And that's basically 0:13:52.000 --> 0:13:54.320 what the beds about. I guess what I'm trying to watch, Bill, 0:13:54.400 --> 0:13:56.920 is there is there a more optimal way of expressing 0:13:57.040 --> 0:14:01.080 this sort of hit against risk appetite from credit insight 0:14:01.280 --> 0:14:04.160 equities where the volatility seems to be contained and isolated 0:14:04.240 --> 0:14:11.360 right now, well volatilely maybe contained. I guess, um, it's 0:14:11.360 --> 0:14:13.920 hard for me to make that description, but I think 0:14:13.920 --> 0:14:16.160 what I'm doing in high yield it's a little sophisticated, 0:14:16.200 --> 0:14:21.720 but basically I'm selling calls and selling puts on the 0:14:22.120 --> 0:14:24.760 h y c d X, which is the you know, 0:14:24.800 --> 0:14:26.880 the benchmark for the high yield market. And to the 0:14:26.880 --> 0:14:29.600 extent that it doesn't move by more than fifty basis 0:14:29.680 --> 0:14:31.880 points one way or the other over a month speriod 0:14:31.920 --> 0:14:34.920 of time, then you're captured a premium. So I'm expecting 0:14:34.960 --> 0:14:38.040 how yield to gradually move higher, but if it doesn't 0:14:39.120 --> 0:14:42.280 significantly move lower than the bed pays off Bill Gross 0:14:42.280 --> 0:14:45.440 with us of Janice Henderson and Bloomberg Television and Bloomberg Radio. 0:14:46.040 --> 0:14:47.760 This Morning, Bill, I do want to turn to the 0:14:47.760 --> 0:14:51.520 politics and folded into your decades of work in financial 0:14:51.600 --> 0:14:54.320 theory and economic theory, I'm going to cut to the 0:14:54.440 --> 0:14:56.920 chase that you're, my guests, a critic of what the 0:14:56.960 --> 0:15:00.800 presidents saying and maybe even doing. What does the president 0:15:00.920 --> 0:15:06.160 most get wrong? Well, he gets the trade deficit wrong. 0:15:06.200 --> 0:15:09.760 I mean the trade deficit is most economists would affirm, 0:15:09.800 --> 0:15:13.160 you know, as a result of over consumption and under 0:15:13.240 --> 0:15:15.960 saving on the part of the United States. Are our 0:15:16.000 --> 0:15:19.960 savings ratio is down to two percent, which is historically low. 0:15:20.280 --> 0:15:23.400 The trade deficit at three plus of g d P 0:15:23.760 --> 0:15:27.720 is um you know, basically relatively high. And to the 0:15:27.760 --> 0:15:30.880 extent that we like to buy things and not save, 0:15:31.440 --> 0:15:34.040 then we're gonna have a trade deficit because we buy 0:15:34.080 --> 0:15:36.400 things here in the United States and then when we 0:15:36.440 --> 0:15:38.720 can't buy enough, we buy it overseas. And so Trump 0:15:39.040 --> 0:15:41.400 basically has it wrong. It doesn't mean that we're not 0:15:41.440 --> 0:15:45.320 being gamed by some countries in terms of uh, you know, 0:15:45.760 --> 0:15:50.880 tariffs are in terms of technology or or cheaper goods 0:15:50.920 --> 0:15:53.880 and services. But it does mean that there's a little 0:15:53.920 --> 0:15:59.960 way to change this situation by imposing tariffs on four 0:16:00.040 --> 0:16:01.800 in good conservice. So then what do you need from 0:16:01.880 --> 0:16:04.760 Larry Cudlo. Mr Cudlo is going to join John Farrell 0:16:05.080 --> 0:16:07.720 here in about I'm guessing forty five minutes, maybe it's 0:16:07.760 --> 0:16:11.440 thirty five minutes. I'm serious, Bill, What does Lawrence Cudlow 0:16:11.880 --> 0:16:16.000 and other free traders, even Secretary Ross, what do they 0:16:16.040 --> 0:16:20.480 need to do to stop the discourse that has a 0:16:20.600 --> 0:16:24.359 political tinge. I understand that we all understand the president's 0:16:24.400 --> 0:16:28.360 angle on that, but it's effect on China. What does 0:16:28.440 --> 0:16:34.760 Cudlow need to do to jump start that process this weekend? Well, 0:16:34.800 --> 0:16:41.640 he needs to calm the verbal tweeting down, so to speak. 0:16:41.680 --> 0:16:46.840 He needs to basically acknowledge that Trump is a negotiator 0:16:46.920 --> 0:16:49.520 and that part of the process of negotiation is to 0:16:49.560 --> 0:16:52.000 go to extremes like you did last night with a 0:16:52.080 --> 0:16:55.200 hundred billion dollars more. You know, the question that the 0:16:55.200 --> 0:16:57.640 markets have to ascertain us whether or not you know, 0:16:57.680 --> 0:17:00.440 there's a semblance of truth to that and they're not. 0:17:00.760 --> 0:17:03.760 There might be a hundred billion behind that, and so 0:17:04.200 --> 0:17:07.480 you know, I think in the equity markets that there 0:17:07.520 --> 0:17:11.280 are risk premiums, as you know, and that you know, 0:17:11.320 --> 0:17:16.120 this continued type of verbalization and tweeting on the part 0:17:16.240 --> 0:17:21.080 of of trade and not only tweeting but real terrorists 0:17:21.119 --> 0:17:25.280 being imposed basically raises the equity premium by a half 0:17:25.280 --> 0:17:27.560 a percent or so relative to what it is, say 0:17:27.600 --> 0:17:30.439 it's a four to five percent premium. It raises it 0:17:30.520 --> 0:17:32.520 by a half of percent. What does that do to prices? 0:17:32.720 --> 0:17:35.040 It lowers it by about three or four percent in 0:17:35.119 --> 0:17:39.960 terms of the stock market bill gross of Jennas Henderson. Uh, 0:17:40.000 --> 0:17:43.080 this morning, futures at negative twenty down, futures negative two 0:17:43.200 --> 0:17:46.640 zero eight. Really the major impact off this jobs report 0:17:47.119 --> 0:17:52.400 with a MOULDI report in a lousy revision, but other 0:17:52.440 --> 0:17:54.920 than that, a pretty buoyant report, as we heard from 0:17:54.960 --> 0:18:08.840 Jim Glassman and Bill Grows. Yeah, I'm pleased to say. 0:18:08.840 --> 0:18:11.840 We're now joined on Bloomberg Television and on Bloomberg Radio 0:18:11.920 --> 0:18:15.680 by Larry Cudlow, the National Economic Council Director, who joins 0:18:15.760 --> 0:18:17.879 us from outside the White House. Larry, it's great to 0:18:17.920 --> 0:18:19.919 catch up with you and get your thoughts on the 0:18:19.920 --> 0:18:22.480 payrolls figure, the labor market, and what has been happening 0:18:22.760 --> 0:18:26.480 with the trade discussion. The back and forth continues over 0:18:26.560 --> 0:18:30.320 trade and the tensions continue to escalate as well. Larry, 0:18:30.359 --> 0:18:32.960 there is a risk that the damage could be done 0:18:33.000 --> 0:18:36.240 and undermine what this administration is done around things like 0:18:36.359 --> 0:18:39.280 the tax bill, around the deregulation push. Do you see 0:18:39.280 --> 0:18:42.600 the trade effort undermining those things? Larry, I sure don't. 0:18:42.720 --> 0:18:47.280 I absolutely do not. In fact, I think, Uh, to 0:18:47.440 --> 0:18:54.800 rephrase this narrative, China is the problem. Okay, China is 0:18:54.800 --> 0:18:58.760 the problem. President Trump is the solution. In my judgment, 0:18:59.440 --> 0:19:02.439 This is the first president twenty years to have the 0:19:02.480 --> 0:19:07.320 backbone to go in and challenge China on the kind 0:19:07.320 --> 0:19:11.040 of unfair and illegal trading practices that they have adopted 0:19:11.080 --> 0:19:13.680 for the past several decades. I just want to make 0:19:13.760 --> 0:19:18.200 that point, and second directly to your question about growth. Look, 0:19:18.880 --> 0:19:24.600 China is stealing our technology, all right, their intellectual property 0:19:24.640 --> 0:19:28.520 rights for being stone these forced technology transfers. I was 0:19:28.600 --> 0:19:32.160 on the phone last evening with my friend and trade 0:19:32.160 --> 0:19:35.240 ambassador Bob Lyheiser, have known for years in great person, 0:19:35.720 --> 0:19:38.240 and we kind of walked through you know, what is 0:19:38.280 --> 0:19:42.760 the heart of the American economy. It's entrepreneurship, it's innovation, 0:19:43.119 --> 0:19:45.679 and it's based on technology. I think this is a 0:19:45.800 --> 0:19:49.600 very important point, and I want to transmit his his 0:19:49.720 --> 0:19:52.919 views on this because they're terribly important and they're on target. 0:19:53.680 --> 0:19:57.920 We cannot allow our technology breakthroughs, which is what's made 0:19:57.960 --> 0:20:01.840 America competitive and great, and with lower taxes and regulations, 0:20:01.880 --> 0:20:04.080 it's going to be even better. But we cannot give 0:20:04.119 --> 0:20:09.280 them away to be stolen by the Chinese government anymore. 0:20:09.600 --> 0:20:12.159 It doesn't work. Larry, just to jump in the narrative 0:20:12.160 --> 0:20:16.000 of this last weeks important let me let me finish, 0:20:16.040 --> 0:20:18.359 because the narrative of this program has always been that 0:20:18.440 --> 0:20:20.760 China is a problem. China is a problem. The debate 0:20:20.800 --> 0:20:22.960 I want to have with you, the discussion I want 0:20:22.960 --> 0:20:25.359 to have with you, and what our audience needs is 0:20:25.400 --> 0:20:27.840 details on the approach and when you're gonna get results. 0:20:27.840 --> 0:20:29.439 So if we can spend less time talking about the 0:20:29.440 --> 0:20:32.199 problem that I want to talk about the approach. Are 0:20:32.240 --> 0:20:35.480 you actually having discussions with the Chinese? You're either gonna 0:20:35.560 --> 0:20:37.400 let me talk or you're not my friend. You're either 0:20:37.440 --> 0:20:39.320 gonna let me talk or that okay, you wanted me 0:20:39.359 --> 0:20:41.560 to come on, I'm happy to do it. Well, Larry Talks. 0:20:41.600 --> 0:20:43.199 I want you to give me the idea of what 0:20:43.320 --> 0:20:45.720 is happening behind the scenes. Are you having discussions with 0:20:45.760 --> 0:20:51.560 the Chinese? They're always ongoing discussions with the Chinese always. 0:20:51.640 --> 0:20:54.680 And President Trump, I traveled with him all day yesterday. 0:20:55.080 --> 0:20:59.040 President Trump indicated to me for the mpteen time that 0:20:59.119 --> 0:21:02.240 he has great respect for President She and she has 0:21:02.280 --> 0:21:07.320 respect for President Trump, and President Trump regards she as 0:21:07.359 --> 0:21:10.719 somebody who would be a very talented negotiator if and 0:21:10.800 --> 0:21:15.120 when negotiations begin. They have not really begun yet China's 0:21:15.240 --> 0:21:20.560 response to our complaints. Their response has been unsatisfactory, all right, 0:21:20.640 --> 0:21:24.320 and that's why we're looking. I used the word looking. 0:21:24.760 --> 0:21:30.600 We haven't proposed anything. They're considering a second round of 0:21:30.680 --> 0:21:33.880 tariff actions, but it has not come to pass. There 0:21:33.960 --> 0:21:37.720 is no execution of this. It's just consideration. It's really 0:21:37.800 --> 0:21:41.239 up to the U. S TR below the President, and 0:21:41.320 --> 0:21:45.200 so therefore the conversations go on as they always do. 0:21:45.840 --> 0:21:49.000 The President speaks to she, the second and third level 0:21:49.040 --> 0:21:53.359 speak to each other. Perhaps perhaps there will be some 0:21:53.400 --> 0:21:59.080 fruitful negotiations so far, but I would say they've been unsatisfactory. 0:21:59.359 --> 0:22:02.560 So we to see. So Larry, help me understand when 0:22:02.560 --> 0:22:05.240 the negotiations will actually begin, because people are trying to 0:22:05.280 --> 0:22:08.040 find out all the time. Aarris no timetable. There's no 0:22:08.080 --> 0:22:13.040 timetable whatsoever. So you can tell me what the sixty days, Larry, Right, 0:22:13.160 --> 0:22:16.960 that's the thing I really encourage everybody to read carefully. 0:22:17.080 --> 0:22:21.440 Uh the President's announcement yesterday, the White House press release 0:22:21.720 --> 0:22:28.640 and also Ambassador Lighthouses press release. We are considering adding 0:22:28.720 --> 0:22:32.199 tariff pressures considering I don't even want to call that 0:22:32.280 --> 0:22:35.840 a negotiating point. There may be negotiations in the next 0:22:35.880 --> 0:22:38.600 couple of months. I hope so. I think everybody hopes so, 0:22:39.000 --> 0:22:42.040 because I guess to your point in the beginning, UM, 0:22:42.080 --> 0:22:44.359