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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jai Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Due

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Speaker 1: to the urgency of time, I want to get right

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Speaker 1: to this our interview of the day on Iraq certainly,

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Speaker 1: and of course Stephen a Cook with a console on

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Speaker 1: Foreign Relations and foreign policy earlier this week, stopping the

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Speaker 1: debate with John Farrow. There is nothing left for Americans

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Speaker 1: to do in Iraq. It was an extraordinary essay and

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Speaker 1: lost in the drama of the events this week and

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Speaker 1: the clowns atensions between the United States and Iran. A

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Speaker 1: jet line up the crash, the Ukrainian jet line of

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Speaker 1: crash that Tehran insists was not shot down, putting out

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Speaker 1: at odds with Canada, the UK, and Australia as well

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Speaker 1: joining us now to discuss the Stephen Cook, SAFR, Senior

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Speaker 1: Fellow for Middle East and Africa Studies. Stephen, let's start

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Speaker 1: there the next steps in this investigation with Iran and

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Speaker 1: the rest of the world. Well, it is shocking that

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Speaker 1: a relatively brand new plane would just fall out of

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Speaker 1: the sky. I think it's obviously I'm not an aviation expert,

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Speaker 1: but the aviation experts I read say it's early to tell.

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Speaker 1: But there really needs to be a thorough investigation because

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Speaker 1: it is quite odd. Uh, As I said, a relatively

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Speaker 1: new airplane just falling out of the Scott Stephen, can

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Speaker 1: you walk through what the consequences are as we watch

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Speaker 1: these tensions built with Iran accusing Western governments of engaging

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Speaker 1: in quote psychological warfare, and President Trump saying, well, you know,

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Speaker 1: I have my suspicions. What's the potential political and energy

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Speaker 1: of inner politics, uh, fallout from this incident. Well, it

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Speaker 1: certainly is the case that the Iranians are going to

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Speaker 1: deny that they ever did anything like this if it is,

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Speaker 1: if it was shot down, those that they didn't do it. Um.

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Speaker 1: But it does raise tensions in the region. And even

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Speaker 1: though the Iranians have signaled when the President has signaled

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Speaker 1: that they want to de escalate after the Iranian missile

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Speaker 1: attack on on American forces in the Rock um, this

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Speaker 1: type of thing could encourage either governments or Iran's proxies

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Speaker 1: to take action against the United States the words of

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Speaker 1: the United States is engaging in psychological warfare. Is not

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Speaker 1: de escalating a potential conflict, it's actually raising tensions. Once again, Stephen,

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Speaker 1: Iran has been on the receiving end of a tragedy

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Speaker 1: like this in night when the U. S. Military accidentally

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Speaker 1: shot down in Iranian airliner, and that event has been

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Speaker 1: used at the epicenter of propaganda effort for the last

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Speaker 1: several decades by the Iranian regime. And I just wanted

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Speaker 1: to Stephen what that means for that propaganda effort. Eve. Indeed,

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Speaker 1: this was irund that shot down this airline. Well, it

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Speaker 1: is astonishing irony. I should note that the narrative about

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Speaker 1: the downing of that Iranian plane over the Persian Gulf

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Speaker 1: in the late eightieses UH is a disputed one, and

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Speaker 1: that the Navy's own investigation did point to UH problems

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Speaker 1: with the captain of the ship that shot down that plane.

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Speaker 1: But UH, if the Iranian did do this, the Iranian

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Speaker 1: people certainly will never know that it was something that

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Speaker 1: the Iranians did. It not a mechanical failure of this

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Speaker 1: of this blowing airplane. So go ahead, no, just so,

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Speaker 1: In other words, that is sort of remains to be seen,

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Speaker 1: but fast forwarding, I'm trying to understand right now in markets,

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Speaker 1: there is a perception that tensions are over, they have dissipated.

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Speaker 1: Even this is viewed as somewhat minor in this scheme

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Speaker 1: of geopolitical relations. I'm trying to understand what we should

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Speaker 1: be watching to determine a true flare up that could

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Speaker 1: impact global economic growth, among other things. Yeah, this is

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Speaker 1: a concern. I think people are getting lulled into a

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Speaker 1: sense of security the crisis is now or Iran has

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Speaker 1: proxy groups all over the Middle East and in fact

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Speaker 1: all over the world. Who can continue to uh go

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Speaker 1: after Americans or American targets. Um. Certainly the firing and

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Speaker 1: the missiles with a big spectacular show that was really

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Speaker 1: dedicated towards your rock Iranian people. Um, but I don't

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Speaker 1: believe that the Iranians are really actually done in terms

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Speaker 1: of retaliation for the killing of customes Sumani. Stephen Cook,

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Speaker 1: the charm of your work as you're on the ground

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Speaker 1: research is expressed in False Dawn, You're Wonderful book. If

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Speaker 1: we are in Baghdad, but we're up against all these

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Speaker 1: regional issues, do we become the US in Baghdad, literally

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Speaker 1: in an island where Iran takes over all of the

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Speaker 1: spirit of the of the nation on the tigers and

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Speaker 1: the Euphrates. I mean, do we basically hunkered down in Baghdad?

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Speaker 1: Is that where we're heading? That's in fact exactly where

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Speaker 1: we are. M I was in Bagdad a number of

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Speaker 1: weeks ago. And the American Embassy in the Green Zone,

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Speaker 1: which is itself isolated. The American Embassy is also isolated

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Speaker 1: within the Green Zone with diplomats who never get out

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Speaker 1: of that large compound um and have to rely on

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Speaker 1: other Western diplomats to keep them up to date on

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Speaker 1: what's going on in in a rock. Um it is

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Speaker 1: we we don't. We've spent enormous resources in a rock,

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Speaker 1: but we don't have the means UH to really understand

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Speaker 1: what's going on there because it's dangerous for American diplomats

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Speaker 1: to go out, and we don't have a political strategy

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Speaker 1: or an interest in helping a rock back Here in Washington,

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Speaker 1: everybody wants to turn the page and make it old news.

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Speaker 1: Stephen Cook, thank you so much. With the Council on

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Speaker 1: Foreign Relation, after a long going far away, there was

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Speaker 1: an economist chiseled out exquisite detail on the American consumer,

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Speaker 1: and people simply said, who is this Ellen Zetner? It

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Speaker 1: was that good. It's stuck out like a sore thumb.

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Speaker 1: Will we know? And now with us now Alexander Marchan,

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Speaker 1: Stanley Chief US Economists, and great to have you with us,

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Speaker 1: especially on pay rolls Friday. Let's just walk through the

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Speaker 1: headline numbers, shall we? What are you looking for in

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Speaker 1: forty minutes time? So we've got much higher than consensus

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Speaker 1: expectation to ten on the headline that's going to and

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Speaker 1: then I think consensus is around one sixty now. Uh,

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Speaker 1: but you know, we're pretty optimistic and what we're seeing

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Speaker 1: in the indicators that we tend to track and use

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Speaker 1: when modeling out what the Peril Report will hold. I

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Speaker 1: think the unemployment rate is going to remain at three

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Speaker 1: and a half percent with a nice blend of strong

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Speaker 1: headline growth but more movement back into the labor market

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Speaker 1: in those prime working age areas. And then average early

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Speaker 1: earnings and reason by point three this uh in in

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Speaker 1: December month to month um but the year over year

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Speaker 1: uh sort of flubs comes down just a little bit,

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Speaker 1: rounds down so you know, what you've got is a

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Speaker 1: combination of strong job steady unemployment, tame wage growth and

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Speaker 1: all that would reinforce the fetch judgment that monetary policy

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Speaker 1: is in a good place. And then let's get a

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Speaker 1: little bit more detail on that. What underpends the indicators

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Speaker 1: to underpin your optimism? What are they? So you know,

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Speaker 1: the Conference Boards Survey Consumer Confidence survey has a lot

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Speaker 1: of good meat in it about how consumers or how

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Speaker 1: households feel about the labor market. Um, and those labor

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Speaker 1: market conditions metrics are at their best level since two

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Speaker 1: thousand fifteen and just continue to get better. Now, that

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Speaker 1: can sometimes just tell you headline job growth is strong.

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Speaker 1: It can sometimes just tell you that more people came

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Speaker 1: into the labor market because they're more optimistic. Uh and

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Speaker 1: so uh if it's the if it's the former, then

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Speaker 1: that does translate well into a strong headline uh job count.

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Speaker 1: But I'm telling you, households tend to be pretty savvy

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Speaker 1: when it comes to how they feel about the labor market.

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Speaker 1: They're the ones out there being the pavement looking for jobs,

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Speaker 1: and they're the ones answering these surveys, and so that

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Speaker 1: can be a pretty powerful indication within a forecast jobless

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Speaker 1: claim is still very low. Uh so separations remain low.

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Speaker 1: Um still no indication that businesses are starting to broadly

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Speaker 1: lay off workers. Where where we aren't really good, UH

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Speaker 1: at predicting is if if there was some sort of halt,

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Speaker 1: temporary otherwise in hiring plans in the month of December.

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Speaker 1: And that's that's the part of this uh puzzle that

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Speaker 1: we're not very good at predicting. Ellen. There was a

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Speaker 1: story on the Bloomberg yesterday, h the Taco bell is

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Speaker 1: now offering a hundred thousand dollar salaries to restaurant managers

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Speaker 1: to attract and retain correct talent. And I'm wondering when

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Speaker 1: we're gonna start seeing some of the headlines bear out

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Speaker 1: in the numbers that we are getting in terms of

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Speaker 1: just how much wages are increasing. Yeah, you know, it's

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Speaker 1: it's interesting. Um it may start to bring up UM

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Speaker 1: average weekly average early earnings for supervisory workers. That's really

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Speaker 1: where earnings of flatlined, whereas the where your over year

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Speaker 1: growth for non supervisory workers has been increasing. So not

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Speaker 1: for management at Taco bell but the employees, the other

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Speaker 1: employees at Taco bell Um. That story yesterday UM was

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Speaker 1: really fun to pass around between us and our our

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Speaker 1: equity analysts covering restaurants. UH. And that's one area of

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Speaker 1: where our equity strategists and our restaurant analysts, John Glass

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Speaker 1: has been pointing out that margin pressures are pretty acute

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Speaker 1: in the industry and something that a lot of these

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Speaker 1: UM service sector industries are experiencing. This goes to your

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Speaker 1: economic analysis over the last number of years at ellen Zentner.

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Speaker 1: How many times a week do you eat at Taco Bell? Uh?

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Speaker 1: I used to love Mexican pizza, but that was when

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Speaker 1: I was in my early twenties and I could actually

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Speaker 1: burn it off and then I can see you manage

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Speaker 1: work on the coronation Corona before Corona. What I will

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Speaker 1: tell you is that when I first read that article,

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Speaker 1: the first thing that came to mind was in finance,

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Speaker 1: we already compete a lot with tech now for talent, uh,

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Speaker 1: and I thought to myself, now we have to compete

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Speaker 1: with Taco Bell. I mean, that's a pretty handsome salary.

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Speaker 1: Apparently really really gets it, so we shouldn't joke about it.

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Speaker 1: And just a final question for you on the unemployment

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Speaker 1: rate bit of a debate within the team at Bloomberg

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Speaker 1: Economics about just how low that can go. Bear in

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Speaker 1: mind that the feeders struggled consistently through this cycle to

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Speaker 1: work out how low the unemployment rate can go. Can

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Speaker 1: we go much lower this year? Allan? I think we can.

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Speaker 1: I mean, we could possibly get to three three three two. Um.

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Speaker 1: But the question is what is the magic level that

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Speaker 1: kicks off this sort of kink in the wage Phillips

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Speaker 1: curve that gets wages too xcelerat even further. I mean,

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Speaker 1: the argument that the set is right and it's around

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Speaker 1: four and we're below that. Uh. You know you can

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Speaker 1: see in the wage data again, if you slice the

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Speaker 1: wage data and you're just looking at non supervisory workers,

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Speaker 1: that's up much faster on a year over year basis

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Speaker 1: than all workers, which includes non supervisory It's it's basically

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Speaker 1: my my level. We've stagnated. We stagnated. A lot of

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Speaker 1: that is due to demographics dragging down those year over

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Speaker 1: year games. I mean, at some point, and Tom you

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Speaker 1: can probably appreciate this, we've peek, we peek in our

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Speaker 1: year over your rate of wage growth flattens out, uh,

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Speaker 1: and so um, you know there's a good deal of

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Speaker 1: those folks still in the labor market. And so no

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Speaker 1: matter how low the unemployment rate goes, I mean it's uh,

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Speaker 1: you get accelerations some parts of the labor market, but

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Speaker 1: not all. Ellen, thank you so much. Ellen's out there

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Speaker 1: with Morgan Stanley looking towards that call. Randall Crosser, the

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Speaker 1: former governor of the Feederal Reserve System, of course, holds

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Speaker 1: court at the Booth School in Chicago with Roging and

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Speaker 1: the rest with a great acuity on the total financial

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Speaker 1: system Global Wall Street, and now it does fold into

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Speaker 1: this labor economy. Governor Crosser, thank you so much for

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Speaker 1: joining us today, just simply to begin, Is this a

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Speaker 1: fully employed America? Uh? Well, uh, there are a lot

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Speaker 1: of debate over exactly what full employment means. But man,

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Speaker 1: when you've got a fifty year low in the unemployment rate,

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Speaker 1: high labor force participation, I think by any means it's

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Speaker 1: it's pretty fully employed. It's pretty fully employed. And we

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Speaker 1: see a statistic of three point five percent on the

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Speaker 1: unemployment rate, and there's lots of other things. Undemployment rate

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Speaker 1: comes in to a better number, is well is it?

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Speaker 1: Do you look at it? Is an aggregated labor economy

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Speaker 1: or like our listeners are there part actions to the

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Speaker 1: economy of the halves doing really well and maybe an

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Speaker 1: under employed or lesser employed group and even a part

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Speaker 1: of America that's simply not participating, Which is it well.

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Speaker 1: They certainly are parts that have done better and parts

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Speaker 1: that haven't done as well. But if you look, for example,

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Speaker 1: at the UH breakdown the labor market into people who

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Speaker 1: don't have a high school degree or no more than

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Speaker 1: a high school degree and people who have a bachelor's degree,

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Speaker 1: there's actually been a greater fall in the unemployment rate

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Speaker 1: for those with lower skills, with lower educational achievement and

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Speaker 1: UH and so they have actually done relatively well in

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Speaker 1: this market. It's often often forgotten. That doesn't mean that

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Speaker 1: the super high end hasn't also done very well. But

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Speaker 1: if you look broadly at people with low educational achievement

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Speaker 1: versus people with relatively high educational achievement, it's low achievers

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Speaker 1: who actually done uh see more more declined in the

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Speaker 1: unemployment rate. Right, Just to get some perspective here, So

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Speaker 1: wages rose at the weakest annual pace since two thousand

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Speaker 1: and eighteen, and that comes even with the unemployment rate

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Speaker 1: at three and a half percent. That is at the

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Speaker 1: half century low Right now, I'm very interested in the

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Speaker 1: market response. You're seeing equity futures gain and actually build

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Speaker 1: on future gains that we saw earlier. Today you're seeing

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Speaker 1: bond deals, particularly on the long end, go further lower.

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Speaker 1: I'm trying to understand what this means. Is it basically

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Speaker 1: that this just encourages the FED to stay on hold

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Speaker 1: and possibly cut rates, and that's giving equity traders a boost.

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Speaker 1: Or does this signal that they're going to have less

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Speaker 1: pressure on their on their on their profits based on

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Speaker 1: the fact that they're not necessarily paying that much more

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Speaker 1: to their workers. Could be a little bit of both.

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Speaker 1: My guess is it's more about the FED, because I

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Speaker 1: think the the markets tend to focus a lot on

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Speaker 1: what these numbers mean for the future paths of FIT

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Speaker 1: uh FIT rate changes. And I think you're exactly right.

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Speaker 1: Less inflation pressure UH that you FIT is more likely

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Speaker 1: to either stay on hold or move down rather than

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Speaker 1: move up. I mean, John, this goes to your conversation

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Speaker 1: with Lawrence Cardlow coming up at the nine o'clock hour,

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Speaker 1: not only the challenge of wage growth in America, but

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Speaker 1: buried in our Bloomberg story here the job formation of

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Speaker 1: two thousand and eleven and we're back there two point

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Speaker 1: one one million across all of the twelve months of

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Speaker 1: the year. That from Reid Pickard of Bloomberg News. The

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Speaker 1: slowest payrolls growth since two point one one million is

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Speaker 1: Tom points out, Professor, Your thoughts on that is that's

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Speaker 1: just a sign that we have got to full employment,

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Speaker 1: that payroll growth will mature, it will slow down, but

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Speaker 1: not necessarily a signal of anything too much dramatic, too

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Speaker 1: much more dramatic than that. I think that's right. I mean,

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Speaker 1: it's not like we've fallen off the cliff in in

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Speaker 1: the growth of weight, in the growth of wages, or

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Speaker 1: in the growth of employment. It certainly stepped down. But

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Speaker 1: when you're after a full decade of job growth, after

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Speaker 1: the order of nearly twenty million jobs being being added, um,

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Speaker 1: that's as a pretty good context, and it just becomes

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Speaker 1: harder and harder because the are and as many people

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Speaker 1: who are potentially ready to be employed, so you're naturally

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Speaker 1: going to see a slowdown in in job growth. I'm

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Speaker 1: going to talk to Larry Caddle about this a little

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Speaker 1: bit later, and I'm interested to see how we'll spin

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Speaker 1: the conversation professor, does two percent GDP growth get it done?

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Speaker 1: We're seeing consumer confidence at multi decade highs. We see

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Speaker 1: an employed America companies still adding to the payroll even

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Speaker 1: though we've gone through some real tension with a big

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Speaker 1: trade partner over the last twelve months, and we've generated

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Speaker 1: growth of in and around two percent. Does two percent

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Speaker 1: get it done? I guess it depends when you ask

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Speaker 1: get it done. My guess is my good friend Larry

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Speaker 1: will say it's not enough and that the administration would

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Speaker 1: like to see more and thinks that we can achieve

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Speaker 1: more with further regular to reforms and tax reforms. But

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Speaker 1: if you look at the underlying fundamentals, the underlying demographics,

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Speaker 1: let's probably roughly around what we can achieve and if

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Speaker 1: we want to continue to grow a relatively low inflation

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Speaker 1: and in a study way, that's probably the area we're

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Speaker 1: going to be in unless there is some quite major

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Speaker 1: change that effects productivity that could then kick up the

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Speaker 1: growth rate. And I want to go back to something

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Speaker 1: that you were saying, and given your experience on the FED,

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Speaker 1: I'm trying to understand the market's interpretation of the central bank.

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Speaker 1: Here uh the idea that the FED is more incentivized

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Speaker 1: to potentially even cut rates further in the light of

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Speaker 1: the lack of momentum that we're seeing in the job

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Speaker 1: in the jobs market, do you think that's justified? I mean,

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Speaker 1: in fairness, we would expect to see job gains sort

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Speaker 1: of ease off at this point in the cycle. The

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Speaker 1: key thing that the FED is looking at now is

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Speaker 1: is inflation. Inflation is still below it's two percent target. Historically,

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Speaker 1: if you had seen this kind of labor market, you

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Speaker 1: would be seeing FED you would see a US inflation

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Speaker 1: significant above that that sent target. And the FIT is

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Speaker 1: haunted by the specter of Japan um. Japan has had

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Speaker 1: a low unemployment rate UM and the Japanese cut interest

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Speaker 1: rates and negative territory have purchased an enormous number of assets,

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Speaker 1: far more than the FAID did relative sizes the economy,

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Speaker 1: and they still can't get inflation anywhere close to their

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Speaker 1: two percent target. So the FED wants to stay ahead

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Speaker 1: of the curve, and so even before inflation starts to fall,

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Speaker 1: they may want to uh fall significantly. They might want

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Speaker 1: to cut rates again, not because they're focusing on the

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Speaker 1: unemployer rate, but because they're focusing on the the inflation rates.

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Speaker 1: This is an incredibly important statement, Governor. The idea that

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Speaker 1: we are haunted by Japan, we have a dyningism, as

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Speaker 1: Ned Phelps would say, that is extraordinary. I think of

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Speaker 1: the spirit of your Chicago, of clearing markets and moving forward.

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Speaker 1: If we're haunted by Japan, what's the run rate of

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Speaker 1: our animals? You're it, what's the run rate of nominal GDP?

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Speaker 1: Where are we back to the fifties nine seven? Are

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Speaker 1: we back to the lethargy of another time and place? Well,

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Speaker 1: let's lethargy I think is not really quite fair, because

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Speaker 1: it would be that you know, we're we have an

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Speaker 1: inflation between let's say, around one and a half percent

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Speaker 1: and growth around two, so that adds up to about

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Speaker 1: three and a half percent. But when you have the

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Speaker 1: unemployment rate at such a little level that you have

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Speaker 1: starting to see some reasonable job games, uh wage games overall,

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Speaker 1: not gang busters, but but reasonable. I think it's a

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Speaker 1: little bit unfair to said that's lethargic, Professor. I just

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Speaker 1: want to get to the end game if if we can.

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Speaker 1: Like cycle is what many people refer to. This particular

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Speaker 1: part of the expansion, the recovery the last ten years.

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Speaker 1: Larry Sum is the former Treasury secretary, making some headlines

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Speaker 1: with our colleague David west Weston that will add on

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Speaker 1: Wall Street Way beginning at six pm Eastern today. Larry

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Speaker 1: said the following that he thinks it's pretty unlikely that

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Speaker 1: the Federal Reserve can respond to the next recession because

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Speaker 1: usually you would need five percentage points. Rates right now

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Speaker 1: below two. He doesn't believe QUEI and that kind of

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Speaker 1: stuff is worth anything like another three percentage points. What's

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Speaker 1: your assessment. I think the FIT is in a more

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Speaker 1: challenging position that has been in the past, but that's

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Speaker 1: one of the reasons why they've try to be so

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Speaker 1: proactive to to keep the economy moving along. I mean,

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Speaker 1: it really is quite amazing to see how long the

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Speaker 1: growth has has occurred given all of the geo political risks,

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Speaker 1: to political challenges, trade wars, other things that we've had

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Speaker 1: some positives on economic policy. I think the tax reforms

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Speaker 1: have been helpful in maintaining the the economic momentum. So

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Speaker 1: that's the set is only one piece of the puzzle,

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Speaker 1: but it's been an important piece. But that does mean

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Speaker 1: that the FAT as well as other center banks around

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Speaker 1: the world have less of the traditional tools than they

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Speaker 1: once had, but at least the fair has more tools

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Speaker 1: and almost any other central bank because most other major

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Speaker 1: central banks are in negative territory or in much lower

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Speaker 1: interest rates. So are we as good as the past?

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Speaker 1: But are we better than others? Yes? Renacross or thank

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Speaker 1: you so much? Now in place to say, we're joined

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Speaker 1: by Larry Cudlow, National Economic Council Director. He joined us

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Speaker 1: from outside of the White House. Larry, always great to

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Speaker 1: catch up with you. This is the last time I'm

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Speaker 1: going to say this, so happy New Year. We are

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Speaker 1: done now January tenth. After that, I don't think we

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Speaker 1: say it anymore, so, Larry, good to see you. Let's

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Speaker 1: start with wage growth just after three two nine. Haven't

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Speaker 1: seen these kind of numbers since the summer. Any reason

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Speaker 1: to be concerned about that, Larry, No, I don't think so.

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Speaker 1: I mean, there's a lot of ways to measure wage

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Speaker 1: growth besides average all the earnings measures like total compensation

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Speaker 1: have generally been rising at UH three and a half percent,

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Speaker 1: maybe four percent. And it's still the story even with

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Speaker 1: today's numbers, which I think we're very strong. I want

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Speaker 1: to get to today's numbers. But the fact remains that

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Speaker 1: the production workers and the service workers gains and wages

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Speaker 1: continue to outstrip the gains of their managers. With the

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Speaker 1: stock market rally, the gains in network. We've had fabulous

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Speaker 1: household net worth increases um I don't know, around ten

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Speaker 1: twelve trillion dollars in recent years. Most of the half

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Speaker 1: of those gains have gone uh to people at the

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Speaker 1: bottom fifty. So no, I don't see any problem at

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Speaker 1: all disposed blendcome after inflation rising beautifully at around three

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Speaker 1: and a half percent, very strong the whole report. I mean,

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Speaker 1: we always set expectations. We measure it against this market

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Speaker 1: forecast in that market for our past. But look, you're

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Speaker 1: running a hundred forty five thousand jobs. That's a great number.

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Speaker 1: Other point, Jonathan, is the unemployment rate is three point

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Speaker 1: five percent. It remains at a fifty or fifty one

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Speaker 1: year low. Is a remarkable number with no inflation. And

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Speaker 1: when you look at unemployment, you've got to look at

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Speaker 1: the household survey, which very few people do. But you

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Speaker 1: had a two hundred and sixty seven thousand gain in

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Speaker 1: the household survey, which excused to the smaller, younger businesses

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Speaker 1: to show the vitality of the economy. So I really

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Speaker 1: think this is a strong report. And I one last point.

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Speaker 1: You all were talking about the stock market, and um

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Speaker 1: Muhammad al Arian, who's a very bright fellow, was talking

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Speaker 1: about the resiliency and dynamism of the American economy. I

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Speaker 1: just want to add that point as a generic point,

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Speaker 1: if you will. The huge increase in the stock market

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Speaker 1: I have to believe is a signal of improving confidence

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Speaker 1: among consumers and businesses, and I think it's pointing towards

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Speaker 1: even faster growth in the next year. There's some hope

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Speaker 1: that business confidence picks up. No once the United States

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Speaker 1: and China sits around a cybling science that dalky and

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Speaker 1: next week, so let's talk about that document. Some confusion

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Speaker 1: in the last month Larry about whether this has been

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Speaker 1: translated or not. Secretary Manuchin said on December nineteenth that

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Speaker 1: it's already on paper, it's already translated. Then Petter Navarro

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Speaker 1: said at the end of the month, all we've waited

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Speaker 1: on is for the Chinese deal is to translate the

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Speaker 1: English version into the Chinese version. Can you just confirm

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Speaker 1: that we've both got this in Chinese and English ahead

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Speaker 1: of next week. Yes, look, I I spoke to Ambassador

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Speaker 1: Lighthouser last night to reconfirm all this um. The translation

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Speaker 1: has been authenticated. The Chinese are coming, as you probably know,

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Speaker 1: Vice Premierily you Hey, We'll be here next week, well

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Speaker 1: for two days. The signing ceremony will be on January.

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Speaker 1: I think it's a Wednesday. President Trump will sign Vice

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Speaker 1: Premierily or Hey will sign Uh. There'll be celebratory dinner

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Speaker 1: and lunches surrounding those signatures. Everything is completely in play.

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Speaker 1: I've seen some of these rumors. Let me just tell you.

430
00:25:03,560 --> 00:25:07,879
Speaker 1: Everything is completely in place. The translation worked, the signing

431
00:25:07,960 --> 00:25:13,680
Speaker 1: ceremony work. This is an historic, remarkable deal, and the

432
00:25:13,760 --> 00:25:17,320
Speaker 1: President was talking about it yesterday when he unveiled his

433
00:25:17,960 --> 00:25:21,000
Speaker 1: environmental deregulation. Maybe we'll get to that as pro growth.

434
00:25:21,240 --> 00:25:24,720
Speaker 1: But on this point, I mean, we really got a

435
00:25:24,920 --> 00:25:28,359
Speaker 1: lot in phase one, A lot in phase one. What

436
00:25:28,560 --> 00:25:31,040
Speaker 1: the percentage is that, I don't know. It could be,

437
00:25:31,920 --> 00:25:35,480
Speaker 1: it could be. And some people are saying, well, gosh,

438
00:25:35,880 --> 00:25:38,640
Speaker 1: we left the tough stuff for something called Phase two.

439
00:25:39,680 --> 00:25:41,840
Speaker 1: And I want to just quote and best for Leheiser

440
00:25:42,480 --> 00:25:45,840
Speaker 1: from our conversation last night. It's just such a wonderful fella,

441
00:25:46,080 --> 00:25:47,960
Speaker 1: and I always check in before I come out in

442
00:25:48,000 --> 00:25:52,440
Speaker 1: the air with you know, nobody ever thought we'd get

443
00:25:52,800 --> 00:25:56,960
Speaker 1: phase one. No one has ever done Phase one before.

444
00:25:57,080 --> 00:26:01,520
Speaker 1: There is nothing like this in Aid history, so that

445
00:26:02,359 --> 00:26:06,600
Speaker 1: the importance and significance of Phase one is enormous. And

446
00:26:06,800 --> 00:26:09,480
Speaker 1: that's the tough part, and we'll get to the rest

447
00:26:09,560 --> 00:26:11,760
Speaker 1: of it. But we covered a lot of ground. And

448
00:26:11,960 --> 00:26:14,960
Speaker 1: it is Jonathan, as you and I have discussed, this

449
00:26:15,240 --> 00:26:20,639
Speaker 1: is a pro growth trade deal. Assuming that the Chinese

450
00:26:20,840 --> 00:26:23,960
Speaker 1: comply with the conditions and so forth, it has the

451
00:26:24,119 --> 00:26:27,440
Speaker 1: capacity to add at least a half a point of

452
00:26:27,520 --> 00:26:29,880
Speaker 1: growth in the next year, if not more. Well, Larry,

453
00:26:29,880 --> 00:26:31,720
Speaker 1: I'd love to be able to verify everything you've just said,

454
00:26:31,760 --> 00:26:33,680
Speaker 1: but I can't because I've not seen the document. So

455
00:26:33,800 --> 00:26:36,040
Speaker 1: give me some detail. It is setting six pages long.

456
00:26:36,119 --> 00:26:39,000
Speaker 1: I understand that much. Let's start with commodities. What has

457
00:26:39,040 --> 00:26:43,840
Speaker 1: being agreed, the number, the time arizon, the details. Well,

458
00:26:43,920 --> 00:26:47,160
Speaker 1: I can't go through every detail, but I'll do my best.

459
00:26:47,280 --> 00:26:49,920
Speaker 1: Look the first of all, the fact sheet and the

460
00:26:50,040 --> 00:26:55,600
Speaker 1: document will be released, according to Ambassador Leiheiser on the Wednesday,

461
00:26:55,720 --> 00:26:59,920
Speaker 1: January UM So that's point number one point number to

462
00:27:00,640 --> 00:27:04,760
Speaker 1: UH in general terms on the commodity side, in terms

463
00:27:04,840 --> 00:27:09,679
Speaker 1: of purchases, that has increased US exports and increased Chinese

464
00:27:09,760 --> 00:27:13,760
Speaker 1: purchases UM. The number two hundred billion over the first

465
00:27:13,840 --> 00:27:18,160
Speaker 1: two years is UH still in play. That's very much

466
00:27:18,240 --> 00:27:21,480
Speaker 1: what the targeting is. That includes, by the way, a

467
00:27:21,640 --> 00:27:27,360
Speaker 1: number of areas UH, pork, soybeans, energy, wheat manufacturers. It's

468
00:27:27,400 --> 00:27:30,760
Speaker 1: across the board. And in addition just to the purchases,

469
00:27:31,240 --> 00:27:35,920
Speaker 1: there's a lot of market opening activity UH. They will

470
00:27:36,000 --> 00:27:39,720
Speaker 1: allow us to trade or sell them UH air in

471
00:27:40,080 --> 00:27:43,320
Speaker 1: commodity areas UH and finished good areas that prior to

472
00:27:43,480 --> 00:27:46,800
Speaker 1: that we couldn't sell. So there's market opening and there

473
00:27:46,880 --> 00:27:50,800
Speaker 1: will be purchasing. And and look, the building blocks of

474
00:27:50,880 --> 00:27:53,640
Speaker 1: these chapters are still in place. You know, we got

475
00:27:54,200 --> 00:27:58,720
Speaker 1: tremendous amount of progress on intellectual property and the avoidance

476
00:27:58,720 --> 00:28:03,240
Speaker 1: of theft and counterfeit, tremendous in that financial services. Not

477
00:28:03,400 --> 00:28:07,600
Speaker 1: only market opening, Jonathan, but you know ownership US ownership

478
00:28:07,680 --> 00:28:12,359
Speaker 1: of financial companies, currency stability, and with respect to the

479
00:28:12,400 --> 00:28:16,640
Speaker 1: forest transfer of technology, some progress has been made there too.

480
00:28:17,080 --> 00:28:19,920
Speaker 1: More will spill over Interface two. So I could go

481
00:28:20,080 --> 00:28:22,920
Speaker 1: through lots of details. It's not all inside my head.

482
00:28:22,960 --> 00:28:25,680
Speaker 1: It will be released totally together. I just want to

483
00:28:25,720 --> 00:28:27,479
Speaker 1: keep it focused on one particular area if we can

484
00:28:27,840 --> 00:28:30,840
Speaker 1: on the commodity side of things. You mentioned over two

485
00:28:30,920 --> 00:28:33,480
Speaker 1: years rest rest a ship. Let me just get the

486
00:28:33,560 --> 00:28:39,120
Speaker 1: question prove most E was back in it was billion.

487
00:28:39,440 --> 00:28:42,840
Speaker 1: The biggest year of imports of agricultural and agriculture related

488
00:28:42,920 --> 00:28:47,720
Speaker 1: goods from the United States into China was twenty nine billion,

489
00:28:47,960 --> 00:28:50,280
Speaker 1: and that was back in I'm just wondering how we

490
00:28:50,320 --> 00:28:54,000
Speaker 1: get anywhere near two hundred over two years. Well, we

491
00:28:54,080 --> 00:28:58,880
Speaker 1: will exceed that. I mean again, the volume of purchases

492
00:28:59,440 --> 00:29:03,880
Speaker 1: that aateegory of commodity purchases, and the market opening to

493
00:29:04,120 --> 00:29:08,560
Speaker 1: permit UH new items to be sold has all been

494
00:29:08,800 --> 00:29:13,400
Speaker 1: greatly expanded, Okay, greatly expanded. And I think here too,

495
00:29:14,120 --> 00:29:17,920
Speaker 1: one of the goodwill gestures that helped pave the way

496
00:29:18,120 --> 00:29:22,040
Speaker 1: for the successful negotiation of this great Phase one deal

497
00:29:22,520 --> 00:29:25,680
Speaker 1: was the fact that the Chinese, all along as we

498
00:29:25,920 --> 00:29:29,719
Speaker 1: were discussing UH picked up their purchases. All right, Now,

499
00:29:30,160 --> 00:29:34,960
Speaker 1: goodwill is goodwill, but you know, indicates seriousness. And you're

500
00:29:35,000 --> 00:29:39,120
Speaker 1: already building into these numbers, so I can't predict to

501
00:29:39,200 --> 00:29:44,640
Speaker 1: the dime nobody can. But those are the targets. And again,

502
00:29:44,760 --> 00:29:48,000
Speaker 1: I think it's part of this phase one that will

503
00:29:48,040 --> 00:29:52,000
Speaker 1: be enforced to keep jumping in and forgive me, I'm

504
00:29:52,000 --> 00:29:56,280
Speaker 1: gonna keep coming back with questions enforcement. What's the mechanism,

505
00:29:56,840 --> 00:29:59,239
Speaker 1: what's the time arising to evaluate whether the Chinese are

506
00:29:59,240 --> 00:30:03,440
Speaker 1: following through on they sign next week? Is it monthly? Accordingly?

507
00:30:03,560 --> 00:30:06,680
Speaker 1: Is annually? How's this going to be done? Again, the

508
00:30:07,080 --> 00:30:10,480
Speaker 1: specific details will be laid out, but essentially, Jonathan, it's

509
00:30:10,520 --> 00:30:15,200
Speaker 1: a multi layered process. Complaints complaints now can be brought

510
00:30:15,280 --> 00:30:18,120
Speaker 1: by the way American companies can bring a complaint to

511
00:30:18,360 --> 00:30:21,840
Speaker 1: US embassy staff, and then the two sides have a

512
00:30:21,960 --> 00:30:24,920
Speaker 1: series of levels I think two or three level, probably

513
00:30:24,960 --> 00:30:27,920
Speaker 1: three levels, and they will sift through the evidence and

514
00:30:28,000 --> 00:30:31,560
Speaker 1: the argumentation and it will eventually rise to the principles

515
00:30:31,640 --> 00:30:35,320
Speaker 1: level if it's not solved. And look, if if these

516
00:30:35,800 --> 00:30:39,280
Speaker 1: disputes are not resolved, all right, then we will take

517
00:30:39,480 --> 00:30:43,880
Speaker 1: proportionate action. We still will leave as you know, uh

518
00:30:44,480 --> 00:30:47,360
Speaker 1: over two hundred fifty nearly three hundred billions of tariffs,

519
00:30:47,600 --> 00:30:51,160
Speaker 1: so there could be proportionate action if but the the

520
00:30:51,280 --> 00:30:57,160
Speaker 1: resolution process, dispute resolution process is multi layered, and um,

521
00:30:57,600 --> 00:31:00,320
Speaker 1: we will see if the Chinese a calm, a deed

522
00:31:00,560 --> 00:31:04,000
Speaker 1: what they have agreed to, we may progress on China

523
00:31:04,200 --> 00:31:06,720
Speaker 1: quite clearly. Let's talk about Europe to wrap things up, Larry.

524
00:31:07,440 --> 00:31:11,040
Speaker 1: Back in November, we were expecting an evaluation from this

525
00:31:11,120 --> 00:31:14,760
Speaker 1: administration on the section to thirty two report on auto

526
00:31:14,880 --> 00:31:17,800
Speaker 1: imports specifically out of Europe. We heard nothing. Where are

527
00:31:17,880 --> 00:31:23,400
Speaker 1: we with that? Well? Of course, um, the USCR presented

528
00:31:23,720 --> 00:31:28,959
Speaker 1: its views on that to President Trump, and so did

529
00:31:29,000 --> 00:31:32,760
Speaker 1: the Commerce Department, and he has taken that into consideration,

530
00:31:33,320 --> 00:31:36,640
Speaker 1: and as you can see, no actions have been taken.

531
00:31:37,000 --> 00:31:39,200
Speaker 1: So to be clear, that's done, dusted, Larry. We move on.

532
00:31:39,280 --> 00:31:42,479
Speaker 1: There will be no auto tariffs on Europe as far

533
00:31:42,560 --> 00:31:45,400
Speaker 1: as the eyes can see. In your own words, as

534
00:31:45,440 --> 00:31:47,160
Speaker 1: far as the eye can see is fair enough. But

535
00:31:47,240 --> 00:31:49,880
Speaker 1: this is a presidential decisions and not a cutlog decision,

536
00:31:50,400 --> 00:31:53,000
Speaker 1: and it depends on a number of factors. We are

537
00:31:53,040 --> 00:31:55,880
Speaker 1: in constant discussions with Europe. But has he made that decision?

538
00:31:55,920 --> 00:31:59,680
Speaker 1: Has he made that decision? Larry? Well, as I said,

539
00:31:59,760 --> 00:32:03,040
Speaker 1: it's as you can see, the report was presented and

540
00:32:03,120 --> 00:32:07,120
Speaker 1: no action was taken. I can't say that's forever. We're

541
00:32:07,160 --> 00:32:10,960
Speaker 1: in constant bargaining and negotiating, and in fact, additional EU

542
00:32:11,240 --> 00:32:14,560
Speaker 1: U s TR trade negotiations are going to be occurring.

543
00:32:14,800 --> 00:32:17,800
Speaker 1: I think either next week or the week after. Mr

544
00:32:17,920 --> 00:32:20,680
Speaker 1: Hogan from the EU is coming over here to talk

545
00:32:20,800 --> 00:32:23,520
Speaker 1: to us. So we'll see. But thus far, no action

546
00:32:23,560 --> 00:32:25,800
Speaker 1: has been taken. Lotty, phase to your final question for you,

547
00:32:25,840 --> 00:32:29,840
Speaker 1: how long is this gonna take? Oh, that's very difficult.

548
00:32:29,920 --> 00:32:34,760
Speaker 1: The President talked briefly about it yesterday. Um. You know

549
00:32:35,480 --> 00:32:38,960
Speaker 1: one point here, apart from the timing of phase two,

550
00:32:39,520 --> 00:32:41,720
Speaker 1: Phase two is gonna depend a lot on how Phase

551
00:32:41,800 --> 00:32:45,800
Speaker 1: one goes. And again, if the Phase one deal is implemented,

552
00:32:46,320 --> 00:32:48,960
Speaker 1: you know, and there there will always be arguments in

553
00:32:49,080 --> 00:32:52,600
Speaker 1: some disputes, but with a minimal a minimal of disputes,

554
00:32:53,280 --> 00:32:55,560
Speaker 1: I think that will make it easier to get to

555
00:32:55,640 --> 00:32:59,880
Speaker 1: phase two, uh and beyond. But in terms of the timetable, uh,

556
00:33:00,000 --> 00:33:02,520
Speaker 1: the President, I believe yesterday said he was in no rush.

557
00:33:02,960 --> 00:33:05,080
Speaker 1: It might take the rest of the year, it could

558
00:33:05,120 --> 00:33:08,720
Speaker 1: happen after the election. So that's what that's what his

559
00:33:08,880 --> 00:33:12,440
Speaker 1: view is, and his is really the only view that counts.

560
00:33:12,720 --> 00:33:15,880
Speaker 1: Let's not forget, Jonathan, I know we're all pressed for time.

561
00:33:16,280 --> 00:33:18,760
Speaker 1: But you know the Chinese deal, we add to growth.

562
00:33:19,040 --> 00:33:21,800
Speaker 1: It's already helping confidence in certainty. You can see it

563
00:33:21,880 --> 00:33:24,320
Speaker 1: in the stock market and so forth. Let's not forget

564
00:33:24,480 --> 00:33:27,920
Speaker 1: U S M c A, which is another path breaking deal.

565
00:33:28,320 --> 00:33:31,360
Speaker 1: And when you look at the economic estimates, UH, the

566
00:33:31,440 --> 00:33:34,680
Speaker 1: midpoint of the range of those estimates, that's three quarters

567
00:33:35,080 --> 00:33:39,360
Speaker 1: of a percent of added g d PP with three

568
00:33:39,480 --> 00:33:42,400
Speaker 1: hundred fifty someow thousand new jobs and a lot of

569
00:33:42,480 --> 00:33:46,160
Speaker 1: new direct investments. And let's also not forget, please, we

570
00:33:46,320 --> 00:33:49,719
Speaker 1: had about a forty billion dollar deal negotiated with Japan

571
00:33:50,240 --> 00:33:54,800
Speaker 1: that covered e commerce and agriculture. Every single one of

572
00:33:54,880 --> 00:33:58,360
Speaker 1: these These are path breaking deals. These are historic deals.

573
00:33:58,400 --> 00:34:01,280
Speaker 1: And my judgment from a pre scident who was criticized

574
00:34:01,520 --> 00:34:04,200
Speaker 1: as someone who didn't want it. Look what's happened is

575
00:34:04,280 --> 00:34:08,720
Speaker 1: negotiating toughness has paid off and they're all pro growth deals,

576
00:34:08,920 --> 00:34:12,080
Speaker 1: every single one of these things. So I think the

577
00:34:12,160 --> 00:34:17,840
Speaker 1: outlook for American prosperity. Americans are working, Jonathan. Americans are working,

578
00:34:17,960 --> 00:34:20,920
Speaker 1: and Americans are getting paid, and the stock market is

579
00:34:21,000 --> 00:34:25,040
Speaker 1: telling me their retirement nest eggs are growing rapidly, perhaps

580
00:34:25,080 --> 00:34:27,000
Speaker 1: not as rapidly as the President suggested the other day,

581
00:34:27,080 --> 00:34:29,040
Speaker 1: but we'll let that slide yeaf with Larry. Larry, we

582
00:34:29,080 --> 00:34:32,360
Speaker 1: appredy sate your time as always and you're inside perspective

583
00:34:32,680 --> 00:34:36,640
Speaker 1: on job Stay Larry Caudlo, that National Economic Council director.

584
00:34:40,800 --> 00:34:44,880
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

585
00:34:45,080 --> 00:34:50,360
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

586
00:34:50,440 --> 00:34:54,640
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane. Before

587
00:34:54,719 --> 00:34:58,000
Speaker 1: the podcast, you can always catch US World one. I'm

588
00:34:58,040 --> 00:34:58,879
Speaker 1: Bloomberg Radio