1 00:00:00,080 --> 00:00:02,920 Speaker 1: We're going to attempt to answer the question just how 2 00:00:02,960 --> 00:00:06,320 Speaker 1: will we know from an economic standpoint if Trump is 3 00:00:06,360 --> 00:00:20,480 Speaker 1: actually making America great again. It's Bloomberg Benchmark, a podcast 4 00:00:20,520 --> 00:00:24,280 Speaker 1: about the global economy. I'm Scott Landman, an economics editor 5 00:00:24,320 --> 00:00:27,280 Speaker 1: with Bloomberg News in Washington, and I'm coming to you 6 00:00:27,320 --> 00:00:30,320 Speaker 1: by myself again today because Dan and Kate were unable 7 00:00:30,360 --> 00:00:33,959 Speaker 1: to join us, but fortunately I have two esteemed colleagues 8 00:00:33,960 --> 00:00:36,800 Speaker 1: with me today. Here in d C. Is Vince Gully, 9 00:00:36,880 --> 00:00:40,040 Speaker 1: a fellow editor who's been covering the U S economy 10 00:00:40,120 --> 00:00:42,920 Speaker 1: for two decades, and up in New York we have 11 00:00:43,040 --> 00:00:48,239 Speaker 1: Carl Ricka Donna, who's chief US economist for Bloomberg Intelligence. Gentlemen, 12 00:00:48,240 --> 00:00:50,920 Speaker 1: thanks for joining us today. My pleasure, glad to be 13 00:00:50,960 --> 00:00:54,720 Speaker 1: here now. Often on Benchmark we dig up unusual facts 14 00:00:54,800 --> 00:00:57,560 Speaker 1: or indicators to make a broader point about trends in 15 00:00:57,600 --> 00:01:01,520 Speaker 1: economies around the world. Today we're going back to basics. 16 00:01:01,840 --> 00:01:05,000 Speaker 1: It's our first show since Donald Trump took office as 17 00:01:05,160 --> 00:01:09,280 Speaker 1: forty president of the United States, and since Benchmark is 18 00:01:09,319 --> 00:01:12,200 Speaker 1: all about the economy and Trump has pledged to make 19 00:01:12,240 --> 00:01:15,240 Speaker 1: America great again, We're going to attempt to answer the 20 00:01:15,360 --> 00:01:19,000 Speaker 1: question just how will we know from an economic standpoint 21 00:01:19,240 --> 00:01:23,360 Speaker 1: if Trump is actually making America great again. Now, the 22 00:01:23,400 --> 00:01:26,920 Speaker 1: President has dismissed some traditional measures of the U. S economy, 23 00:01:27,240 --> 00:01:30,240 Speaker 1: such as the main unemployment rate. He called that measure 24 00:01:30,319 --> 00:01:34,679 Speaker 1: phony or fictional because he thinks it overestimates strength in 25 00:01:34,720 --> 00:01:37,680 Speaker 1: the labor market. So we're going to run down some 26 00:01:37,840 --> 00:01:41,560 Speaker 1: other economic indicators today. These are a bit more out 27 00:01:41,560 --> 00:01:44,600 Speaker 1: of the mainstream, maybe a bit down in the weeds, 28 00:01:44,640 --> 00:01:46,880 Speaker 1: but we think they'll show a good sense of the 29 00:01:46,880 --> 00:01:50,360 Speaker 1: degree of the success of the Trump administration during the 30 00:01:50,400 --> 00:01:53,640 Speaker 1: next four years. Uh So, obviously we're not going to 31 00:01:53,680 --> 00:01:57,400 Speaker 1: talk about unemployment or GDP, and instead we'll give you 32 00:01:57,680 --> 00:02:00,400 Speaker 1: first two ways of looking at the labor mark market, 33 00:02:00,800 --> 00:02:03,760 Speaker 1: then two ways of looking at the health of corporate 34 00:02:03,800 --> 00:02:07,880 Speaker 1: America and small businesses, and also one gauge of whether 35 00:02:07,920 --> 00:02:11,840 Speaker 1: if Trump is fulfilling his pledge to bring factory jobs 36 00:02:11,880 --> 00:02:15,399 Speaker 1: back to the US. So are you ready, guys, ready, 37 00:02:15,520 --> 00:02:18,440 Speaker 1: let's go all right, So, without further ado, here are 38 00:02:18,440 --> 00:02:22,239 Speaker 1: the first two. The first is called prime age labor 39 00:02:22,400 --> 00:02:27,320 Speaker 1: force participation. Now translate into English from Ecano speak, we 40 00:02:27,360 --> 00:02:30,000 Speaker 1: can say that is people in the peak of their 41 00:02:30,080 --> 00:02:34,399 Speaker 1: working years who have a job or are looking for one, 42 00:02:34,800 --> 00:02:37,440 Speaker 1: and the second one would be full time workers as 43 00:02:37,480 --> 00:02:40,800 Speaker 1: a percentage of the labor force. That refers to people 44 00:02:40,840 --> 00:02:43,480 Speaker 1: who have a full time job as a share of 45 00:02:43,600 --> 00:02:47,480 Speaker 1: everybody who has a job or is looking for work. Vince, 46 00:02:47,560 --> 00:02:50,360 Speaker 1: let me go to you first. Why are these good 47 00:02:50,400 --> 00:02:54,560 Speaker 1: gauges of both the economy and for Trump schools? Well, 48 00:02:54,600 --> 00:02:57,640 Speaker 1: Scott Um. Probably in the simplest terms, I'd say that 49 00:02:57,720 --> 00:03:02,359 Speaker 1: it boils down to potential. UM. People in this twenty 50 00:03:02,480 --> 00:03:06,000 Speaker 1: five to fifty four age bracket working a full week 51 00:03:06,600 --> 00:03:10,959 Speaker 1: have the best potential to gain work experience, UM, secure 52 00:03:11,000 --> 00:03:15,400 Speaker 1: better benefit packages like healthcare and four win K plans 53 00:03:15,520 --> 00:03:20,800 Speaker 1: that allow them to prepare for retirement. And perhaps most importantly, 54 00:03:20,880 --> 00:03:24,800 Speaker 1: they have greater earnings potential and they have the ability 55 00:03:24,840 --> 00:03:28,639 Speaker 1: to grow their earnings earn more, which contrasts with UH, 56 00:03:28,720 --> 00:03:31,880 Speaker 1: say teenagers who are more likely to work for minimum wage. 57 00:03:32,639 --> 00:03:36,800 Speaker 1: And the reason this is important is that, UM, these 58 00:03:36,840 --> 00:03:40,400 Speaker 1: are the folks who are most likely to spend, and 59 00:03:40,480 --> 00:03:43,480 Speaker 1: they'll probably spend big, whether it's buying a new car 60 00:03:43,840 --> 00:03:47,520 Speaker 1: or house or what have you. UM the more potential 61 00:03:47,560 --> 00:03:50,120 Speaker 1: to earn a good living will allow them to spend 62 00:03:50,480 --> 00:03:53,560 Speaker 1: and that in turn boost the economy and encourages more 63 00:03:53,640 --> 00:03:56,840 Speaker 1: hiring and more spending, and you get this sort of 64 00:03:57,360 --> 00:04:01,120 Speaker 1: virtual circle for the economy. Corrow, what's been going on 65 00:04:01,200 --> 00:04:05,839 Speaker 1: with primate labor force participation in recent years and why 66 00:04:05,920 --> 00:04:09,720 Speaker 1: is it cutting criticism from Trump and his team. Well, 67 00:04:09,800 --> 00:04:16,520 Speaker 1: the participation rate goes through longer term structural fluctuations. So 68 00:04:16,600 --> 00:04:21,320 Speaker 1: it climbed from the ninth late nineteen fifties up until 69 00:04:21,320 --> 00:04:25,080 Speaker 1: about two thousand UH. This was partly a phenomenon of 70 00:04:25,120 --> 00:04:29,039 Speaker 1: the baby boomers coming through the system. Also, while women 71 00:04:29,279 --> 00:04:35,320 Speaker 1: entering the workforce in increasingly large UH proportions. About the 72 00:04:35,480 --> 00:04:40,279 Speaker 1: time of two thousand UH, the participation rate peaked and 73 00:04:40,400 --> 00:04:44,279 Speaker 1: began to decline. At the time of the two thousand 74 00:04:44,320 --> 00:04:47,359 Speaker 1: and seven to two thousand and nine recession, the Great Recession, 75 00:04:48,000 --> 00:04:52,440 Speaker 1: it actually accelerated the pace of decline UH. And so 76 00:04:52,480 --> 00:04:56,560 Speaker 1: the question is how much of this UH is really 77 00:04:56,680 --> 00:05:00,480 Speaker 1: due to long term structural trends in the economy. If 78 00:05:00,480 --> 00:05:03,080 Speaker 1: we think of the baby boomers going through the system 79 00:05:03,200 --> 00:05:08,599 Speaker 1: like that python that swallowed an egg or some large objects, 80 00:05:08,600 --> 00:05:13,480 Speaker 1: so part of that is just an inevitable trend. But 81 00:05:13,520 --> 00:05:17,839 Speaker 1: the question is, UH, this acceleration since the end of 82 00:05:17,839 --> 00:05:20,400 Speaker 1: the Great Recession, and a lot of economists are wringing 83 00:05:20,440 --> 00:05:24,440 Speaker 1: their hands saying there's no way to forecast labor participation 84 00:05:25,000 --> 00:05:27,560 Speaker 1: and whatnot. And I think that if we take a 85 00:05:27,600 --> 00:05:31,360 Speaker 1: step back and take a very straightforward, common sense approach, 86 00:05:31,920 --> 00:05:35,240 Speaker 1: there is a way uh to actually model that out, 87 00:05:35,360 --> 00:05:38,520 Speaker 1: at least to some degree. And we can do that 88 00:05:38,560 --> 00:05:42,960 Speaker 1: by looking at economic conditions or getting back to the 89 00:05:43,160 --> 00:05:49,600 Speaker 1: uh UH prior comment the prospects of earning a good living. UH. 90 00:05:49,640 --> 00:05:53,400 Speaker 1: The health of the economy and strength of the economy 91 00:05:53,440 --> 00:05:57,640 Speaker 1: impacts how much workers are moving off of the sidelines 92 00:05:57,680 --> 00:06:00,960 Speaker 1: and into the economy. So over the past UH seven 93 00:06:01,279 --> 00:06:06,080 Speaker 1: uh ten years, economic conditions have not been great. Wage 94 00:06:06,120 --> 00:06:09,760 Speaker 1: stagnation has been a big problem, and the job prospects 95 00:06:09,760 --> 00:06:14,320 Speaker 1: have not been particularly strong. UH. And this means that 96 00:06:14,400 --> 00:06:17,960 Speaker 1: a lot of would be workers have remained on the 97 00:06:18,000 --> 00:06:23,160 Speaker 1: sidelines UH and that has taken a toll on participation. Now, 98 00:06:23,520 --> 00:06:26,520 Speaker 1: what Janet Yelling, Chair of the Federal Reserve, and UH 99 00:06:26,600 --> 00:06:30,600 Speaker 1: some other economists also on the Open Markets Committee UH 100 00:06:30,800 --> 00:06:36,240 Speaker 1: want to do is explore the potential of pursuing a 101 00:06:36,320 --> 00:06:40,080 Speaker 1: high pressure economy, as she terms it, or as New 102 00:06:40,120 --> 00:06:43,400 Speaker 1: York Fed President Bill Dudley mentions letting the economy run 103 00:06:43,440 --> 00:06:46,240 Speaker 1: a bit hot. Uh, And what they mean by this 104 00:06:46,400 --> 00:06:50,240 Speaker 1: is by letting the economy exceed its growth rate and 105 00:06:50,279 --> 00:06:54,160 Speaker 1: being slow to push back with the monetary policy or 106 00:06:54,200 --> 00:06:58,279 Speaker 1: interest rate policy. Uh, they can actually lead to a 107 00:06:58,360 --> 00:07:02,359 Speaker 1: pickup in inflation and wage pressures, and that will coax 108 00:07:02,720 --> 00:07:07,039 Speaker 1: folks off of the sidelines and possibly bend the trend 109 00:07:07,440 --> 00:07:11,280 Speaker 1: uh in terms of declining labor force participation. Now, this 110 00:07:11,360 --> 00:07:15,480 Speaker 1: is not something they completely can fix, but at the 111 00:07:15,520 --> 00:07:18,760 Speaker 1: margin they can influence it. Now, how do you square 112 00:07:19,200 --> 00:07:22,840 Speaker 1: the ability to get people off the sidelines, Say, if 113 00:07:23,240 --> 00:07:27,000 Speaker 1: you know the Fed supports accommodative policy, or if trumpettacts 114 00:07:27,080 --> 00:07:30,240 Speaker 1: fiscal stimulus with the idea that you know, I've read 115 00:07:30,240 --> 00:07:32,679 Speaker 1: these articles about one. You know, some of the reasons 116 00:07:32,680 --> 00:07:37,080 Speaker 1: why you have such a downturn and primate participation is 117 00:07:37,160 --> 00:07:42,520 Speaker 1: because maybe the prevalence of drugs, people on pain medication. Uh, 118 00:07:43,320 --> 00:07:46,000 Speaker 1: you know, men in their twenties and thirties playing too 119 00:07:46,000 --> 00:07:50,560 Speaker 1: many video games. Is an improving economy enough to reverse 120 00:07:50,760 --> 00:07:55,040 Speaker 1: trends that are maybe more baked into the economy at 121 00:07:55,120 --> 00:07:58,520 Speaker 1: this point, I think an improving economy is a critical 122 00:07:58,600 --> 00:08:02,600 Speaker 1: part of the picture Now, opioid addiction and a lot 123 00:08:02,640 --> 00:08:06,680 Speaker 1: of other factors certainly do extend a toll. But if 124 00:08:06,720 --> 00:08:09,440 Speaker 1: you're let's say, for example, you're sitting on your couch 125 00:08:09,880 --> 00:08:14,880 Speaker 1: playing video games or watching movies UH and collecting maybe 126 00:08:14,920 --> 00:08:18,160 Speaker 1: an unemployment check or maybe a welfare check or disability 127 00:08:18,200 --> 00:08:22,120 Speaker 1: payment UH, and suddenly you see your your your neighbor 128 00:08:22,160 --> 00:08:25,040 Speaker 1: across the street is buying a new car or renovating 129 00:08:25,040 --> 00:08:28,960 Speaker 1: their home or taking a nice vacation. UH. That type 130 00:08:29,000 --> 00:08:32,160 Speaker 1: of UH, for lack of a better term, envy UH 131 00:08:32,200 --> 00:08:36,319 Speaker 1: coaxes people to say, well, the welfare check is good enough, 132 00:08:36,800 --> 00:08:38,240 Speaker 1: but I'd like to do a little bit better, and 133 00:08:38,280 --> 00:08:40,840 Speaker 1: I'm willing to re enter the labor force. So you know, 134 00:08:40,920 --> 00:08:43,480 Speaker 1: in some sense there are people that will not be 135 00:08:43,559 --> 00:08:46,199 Speaker 1: able to re enter. But in a lot of instances, 136 00:08:46,480 --> 00:08:50,720 Speaker 1: for example, in a dual income household, one parent maybe 137 00:08:50,800 --> 00:08:54,600 Speaker 1: choosing to stay home UH to oversee childcare rather than 138 00:08:54,720 --> 00:08:58,520 Speaker 1: take a job that barely pays for the cost of 139 00:08:58,880 --> 00:09:02,560 Speaker 1: UH sending their children elsewhere full rock childcare. Now, let's 140 00:09:02,559 --> 00:09:05,760 Speaker 1: talk about the other indicator. I was discussing the share 141 00:09:05,800 --> 00:09:08,920 Speaker 1: of full time workers out of the labor force. You 142 00:09:08,920 --> 00:09:11,679 Speaker 1: can talk all you want about improving economy, getting people 143 00:09:11,760 --> 00:09:14,800 Speaker 1: off the sidelines and into the labor force. But if 144 00:09:14,840 --> 00:09:18,360 Speaker 1: those jobs are not the kinds of full time, good 145 00:09:18,400 --> 00:09:21,640 Speaker 1: paying jobs that Vince was talking about. Uh. You know, 146 00:09:21,679 --> 00:09:25,120 Speaker 1: one criticism we've heard from Trump and and and also 147 00:09:25,440 --> 00:09:28,560 Speaker 1: a lot of other economists about the economy in recent 148 00:09:28,640 --> 00:09:30,719 Speaker 1: years is that a lot of jobs that have been 149 00:09:30,760 --> 00:09:36,600 Speaker 1: created are actually either part time in services and low paid, 150 00:09:36,840 --> 00:09:39,839 Speaker 1: or they're in the gig economy with the rise of 151 00:09:39,880 --> 00:09:43,960 Speaker 1: such services as as uber. As we're all well aware 152 00:09:45,280 --> 00:09:47,760 Speaker 1: what's going on with the state of full time and 153 00:09:47,880 --> 00:09:51,120 Speaker 1: part time work, are there a lot of people Vince 154 00:09:51,160 --> 00:09:54,560 Speaker 1: who who are working part time who would rather have 155 00:09:54,720 --> 00:09:58,880 Speaker 1: full time jobs? Um? Well, we have seen um some 156 00:09:59,080 --> 00:10:03,920 Speaker 1: of that uh people that are working part time uh 157 00:10:03,960 --> 00:10:06,839 Speaker 1: that won a full time job. We have that, uh 158 00:10:07,360 --> 00:10:11,559 Speaker 1: seen that start to reverse here um lately, So I 159 00:10:11,600 --> 00:10:15,840 Speaker 1: think there is some improvement there. UM And a lot 160 00:10:15,920 --> 00:10:19,240 Speaker 1: of the um, A lot of this too, UM you 161 00:10:19,280 --> 00:10:25,160 Speaker 1: could probably attribute to a service economy. And um, some 162 00:10:25,240 --> 00:10:29,720 Speaker 1: people just want to work part time and not worry 163 00:10:29,760 --> 00:10:33,800 Speaker 1: about having work full time position. I know UM that 164 00:10:34,160 --> 00:10:38,680 Speaker 1: President Trump has mentioned the cost of childcare needing to 165 00:10:38,720 --> 00:10:43,280 Speaker 1: come down, and UM, a lot of you know, a 166 00:10:43,280 --> 00:10:46,959 Speaker 1: lot of housewives, if you will, are choosing to stay 167 00:10:47,000 --> 00:10:50,640 Speaker 1: home rather than uh, than than go seek a full 168 00:10:50,640 --> 00:10:53,040 Speaker 1: time employment. Carl, how do you see this playing out? 169 00:10:53,080 --> 00:10:56,240 Speaker 1: Are are we going to see more UH people getting 170 00:10:56,280 --> 00:10:59,160 Speaker 1: full time jobs or or is the trend toward more 171 00:10:59,200 --> 00:11:02,000 Speaker 1: part time work? Uh? You know something that that's just 172 00:11:02,400 --> 00:11:05,840 Speaker 1: effective life now, Well, I think we have two trends 173 00:11:05,840 --> 00:11:09,640 Speaker 1: moving in opposite directions. With the advent of the gig 174 00:11:09,679 --> 00:11:12,880 Speaker 1: economy and task grabbit and Uber and all these sorts 175 00:11:12,880 --> 00:11:17,360 Speaker 1: of things, UH, the availability of part time work becomes 176 00:11:17,520 --> 00:11:21,920 Speaker 1: UH significantly elevated, so that that will be a longer 177 00:11:22,040 --> 00:11:26,679 Speaker 1: term trend. But what we watch more closely as economists 178 00:11:27,400 --> 00:11:31,040 Speaker 1: is part time work for economic reasons. So this is 179 00:11:31,080 --> 00:11:33,360 Speaker 1: not someone who's driving Uber on the weekend for a 180 00:11:33,400 --> 00:11:37,600 Speaker 1: little extra cash. But these are workers who can only 181 00:11:37,720 --> 00:11:41,760 Speaker 1: find part time employment, although they would prefer full time employment. 182 00:11:42,200 --> 00:11:44,560 Speaker 1: And if we watch that trend, and this is something 183 00:11:44,880 --> 00:11:49,480 Speaker 1: again that that Cher Yelling has referenced at the FED. UH, 184 00:11:49,520 --> 00:11:52,240 Speaker 1: this is UH moving in the right direction but not 185 00:11:52,520 --> 00:11:56,679 Speaker 1: fully normalized. So UH, in a in a very odd sense, 186 00:11:57,200 --> 00:12:00,920 Speaker 1: cheer Yelling and President Trump are on the same page 187 00:12:00,960 --> 00:12:06,120 Speaker 1: in questioning the signal from the national unemployment rate. Cherryoh, 188 00:12:06,160 --> 00:12:10,040 Speaker 1: and long before President Trump was criticizing the unemployment rate, 189 00:12:10,080 --> 00:12:12,920 Speaker 1: that was making the same point, saying that that is 190 00:12:12,960 --> 00:12:18,000 Speaker 1: an incomplete measure of conditions in the labor market, and 191 00:12:18,280 --> 00:12:21,720 Speaker 1: so instead she looked at these other broader measures, one 192 00:12:21,760 --> 00:12:25,400 Speaker 1: of which was part time workers for economic reasons. Yeah, 193 00:12:25,679 --> 00:12:29,480 Speaker 1: Jannah and Donald are probably gonna find some common ground 194 00:12:29,480 --> 00:12:31,520 Speaker 1: the next time, you know, when they actually have their 195 00:12:31,559 --> 00:12:35,320 Speaker 1: first meeting together, despite uh Mr Trump's criticism of her 196 00:12:35,400 --> 00:12:39,240 Speaker 1: during the campaign. Let's move on to another indicator. This 197 00:12:39,280 --> 00:12:43,000 Speaker 1: one doesn't need much of much deciphering. It's the number 198 00:12:43,080 --> 00:12:47,360 Speaker 1: of manufacturing workers on payrolls in the economy. A lot 199 00:12:47,360 --> 00:12:50,880 Speaker 1: of Trump's campaign was about how NAFTA and China have 200 00:12:51,000 --> 00:12:53,920 Speaker 1: killed all these jobs over the last twenty years and 201 00:12:54,000 --> 00:12:56,840 Speaker 1: how he would restore them. Carl, what are the chances 202 00:12:56,880 --> 00:13:00,240 Speaker 1: that this is going to happen? Well, some of the 203 00:13:00,320 --> 00:13:03,920 Speaker 1: jobs are are gone and certainly are not coming back. 204 00:13:04,320 --> 00:13:09,040 Speaker 1: We are moving, uh, you know, in an increasingly automated 205 00:13:09,320 --> 00:13:12,960 Speaker 1: assembly lines. I've been reading recently about some assembly lines 206 00:13:13,000 --> 00:13:16,200 Speaker 1: where they don't even turn the overhead lights on until 207 00:13:16,720 --> 00:13:20,200 Speaker 1: something needs to repair because there are are basically only 208 00:13:20,320 --> 00:13:24,400 Speaker 1: robots who are happy to work in the uh, in 209 00:13:24,440 --> 00:13:27,600 Speaker 1: the dark, on those assembly lines. So uh, to some degree, 210 00:13:28,160 --> 00:13:31,080 Speaker 1: a lot of the manufacturing jobs that you imagine uh, 211 00:13:31,320 --> 00:13:35,640 Speaker 1: your your, your father, grandfather working at are probably not 212 00:13:35,760 --> 00:13:41,240 Speaker 1: coming back. However, if we are sourcing more production in 213 00:13:41,440 --> 00:13:44,800 Speaker 1: US factories, there will be an impact on manufacturing jobs. 214 00:13:44,840 --> 00:13:48,200 Speaker 1: So some jobs will come back. Uh. And the general 215 00:13:48,280 --> 00:13:52,200 Speaker 1: rule of thumb is that for every one manufacturing job, 216 00:13:52,200 --> 00:13:56,280 Speaker 1: there's about three service sector jobs that support it, whether 217 00:13:56,320 --> 00:14:01,200 Speaker 1: it's engineering, design, transportation, finance, etcetera. Uh. Uh So even 218 00:14:01,200 --> 00:14:04,800 Speaker 1: if we bring back some manufacturing jobs, that will have 219 00:14:04,920 --> 00:14:09,520 Speaker 1: a very powerful impact. Now I hear time and time again, 220 00:14:09,760 --> 00:14:12,240 Speaker 1: well the jobs aren't coming back, so what's the what's 221 00:14:12,240 --> 00:14:17,760 Speaker 1: the point in pursuing it? There are tremendous economic benefits 222 00:14:18,120 --> 00:14:23,440 Speaker 1: uh to manufacturing activity happening on US soil. So yes, 223 00:14:23,480 --> 00:14:26,120 Speaker 1: there's a question mark over how many jobs will actually 224 00:14:26,160 --> 00:14:32,000 Speaker 1: come back. But innovation happens on the shop room floor. Uh. 225 00:14:32,040 --> 00:14:35,680 Speaker 1: And so if the vehicles uh and widgets are being 226 00:14:35,720 --> 00:14:39,160 Speaker 1: assembled on US soil, UH, then the engineers and the 227 00:14:39,240 --> 00:14:45,760 Speaker 1: design folks and all of that other higher level sophisticated 228 00:14:45,840 --> 00:14:49,840 Speaker 1: doubt work tends to happen in close proximity to the factory. 229 00:14:49,920 --> 00:14:53,400 Speaker 1: So when the factory moves overseas, it's not long until 230 00:14:53,480 --> 00:14:57,960 Speaker 1: the engineering, design, and management jobs tend to follow. UH. 231 00:14:58,000 --> 00:15:02,480 Speaker 1: And so there's an intend will benefit uh much much 232 00:15:02,520 --> 00:15:06,200 Speaker 1: more comprehensive than just the actual job count from sourcing 233 00:15:06,240 --> 00:15:09,200 Speaker 1: production back on US soil. So we're at just over 234 00:15:09,320 --> 00:15:12,760 Speaker 1: twelve million manufacturing jobs right now. You don't really see 235 00:15:12,760 --> 00:15:15,360 Speaker 1: that moving a whole lot, but it could it could 236 00:15:15,400 --> 00:15:17,200 Speaker 1: go up. What are you thinking. I think it could 237 00:15:17,240 --> 00:15:23,160 Speaker 1: trend higher depending how aggressively President Trump pursues the initiative 238 00:15:23,200 --> 00:15:25,920 Speaker 1: of sourcing production. And uh, you know, we're only a 239 00:15:26,040 --> 00:15:29,200 Speaker 1: few days into the new administration, but based on the 240 00:15:29,240 --> 00:15:32,840 Speaker 1: tone of the inaugural address and some of the measures 241 00:15:33,280 --> 00:15:37,680 Speaker 1: he has emphasized early on whether it's uh, you know, 242 00:15:38,080 --> 00:15:45,440 Speaker 1: restrictions on manufacturers from reimporting partially manufactured goods to uh 243 00:15:45,480 --> 00:15:50,960 Speaker 1: trying to pressure pipeline construction to use US UH manufactured 244 00:15:51,360 --> 00:15:54,440 Speaker 1: materials where possible. Uh, it seems like it's going to 245 00:15:54,480 --> 00:15:58,080 Speaker 1: be a very high priority item for the for the 246 00:15:58,120 --> 00:16:01,520 Speaker 1: new administration. And mind you uh, you know, what we've 247 00:16:01,560 --> 00:16:05,800 Speaker 1: seen just in these first couple of days are already 248 00:16:05,880 --> 00:16:09,920 Speaker 1: likely the beginnings of the re election campaign for twenty twenty. 249 00:16:10,480 --> 00:16:15,160 Speaker 1: President Trump's path to the White House largely went through 250 00:16:15,200 --> 00:16:19,720 Speaker 1: the rust belt Pennsylvania, Ohio, Michigan, Wisconsin. And if he 251 00:16:19,760 --> 00:16:22,920 Speaker 1: wants to return to the White House in uh, he's 252 00:16:22,960 --> 00:16:26,400 Speaker 1: going to have to perform well in those states and 253 00:16:26,760 --> 00:16:32,920 Speaker 1: those uh disenfranchised workers who feel like they've been roadkill 254 00:16:33,000 --> 00:16:36,360 Speaker 1: on the path to globalization, that have to feel that 255 00:16:36,400 --> 00:16:40,040 Speaker 1: they have gotten some kind of benefit out of this administration. 256 00:16:40,480 --> 00:16:43,320 Speaker 1: All right, well, let's move on to a broader indicator 257 00:16:43,480 --> 00:16:50,200 Speaker 1: of corporate America and American business. That would be capital spending. Vince. 258 00:16:50,280 --> 00:16:53,520 Speaker 1: When we talk about capital spending, what does that refer 259 00:16:53,640 --> 00:16:56,200 Speaker 1: to and what's been happening with that in the last 260 00:16:56,200 --> 00:17:01,440 Speaker 1: few years. UM. It's basically spending by companies on like 261 00:17:01,640 --> 00:17:09,840 Speaker 1: plants and buildings and UM equipment, machinery. And from the 262 00:17:09,920 --> 00:17:15,480 Speaker 1: last part of fourteen through uh this last year's third quarter, 263 00:17:16,240 --> 00:17:19,359 Speaker 1: it's been averaging a basically a paltry uh, you know, 264 00:17:19,520 --> 00:17:23,520 Speaker 1: zero point two percent UM on average UM. Now, part 265 00:17:23,520 --> 00:17:26,399 Speaker 1: of this is owed to the slowdown in the oil patch, 266 00:17:26,520 --> 00:17:29,200 Speaker 1: but not all of it. And on the flip side, 267 00:17:29,280 --> 00:17:33,480 Speaker 1: when when the energy industry was spending hand over fist 268 00:17:33,520 --> 00:17:37,359 Speaker 1: at the start of the recovery, investment was spending pretty 269 00:17:37,440 --> 00:17:42,760 Speaker 1: nicely now UM As for small businesses UM, it's a 270 00:17:42,920 --> 00:17:47,080 Speaker 1: little difficult to measure, but the National Federation of Independent 271 00:17:47,119 --> 00:17:52,080 Speaker 1: Business Data UM show that until recently optimism has been 272 00:17:52,480 --> 00:17:56,399 Speaker 1: fairly tepid, certainly well below the levels leading up to 273 00:17:56,400 --> 00:17:59,760 Speaker 1: the last recession. And part of that is due to 274 00:17:59,800 --> 00:18:03,760 Speaker 1: this dud to economic recovery, and UM, you know, a 275 00:18:03,840 --> 00:18:07,000 Speaker 1: good devil. A good deal of it can probably be 276 00:18:07,160 --> 00:18:11,600 Speaker 1: attributed to government policies, you know, from you know, Obamacare 277 00:18:11,680 --> 00:18:16,479 Speaker 1: to government regulation. They've they've actually mentioned that UM in 278 00:18:16,480 --> 00:18:19,720 Speaker 1: in the surveys that the n f i B does UM. 279 00:18:19,720 --> 00:18:24,359 Speaker 1: More recently, however, the UH the gauge, the NFIBS gauge 280 00:18:24,720 --> 00:18:28,879 Speaker 1: of optimism has shot up in this last report, but 281 00:18:29,000 --> 00:18:32,960 Speaker 1: actually by the most since nineteen eighty. Now small businesses 282 00:18:33,359 --> 00:18:37,040 Speaker 1: are liking what they hear from the Trump administration. They 283 00:18:37,160 --> 00:18:41,120 Speaker 1: just want less government intrusion and a clear path through 284 00:18:41,440 --> 00:18:45,680 Speaker 1: doing business. So obviously it hasn't it's been kind of 285 00:18:45,880 --> 00:18:49,879 Speaker 1: UH seen kind of poultry gains in recent years, but 286 00:18:50,040 --> 00:18:53,119 Speaker 1: optimism is picking up. Carl, is that going to be 287 00:18:53,320 --> 00:18:59,480 Speaker 1: enough to translate into higher spending that actually boost GDP. Well, 288 00:18:59,560 --> 00:19:03,840 Speaker 1: the jury is still out on that question. So absolutely, 289 00:19:04,240 --> 00:19:09,200 Speaker 1: animal spirits are a critical element of capitalist system. So 290 00:19:09,640 --> 00:19:14,119 Speaker 1: if everyone's feeling depressed, uh in assaulting away their paychecks 291 00:19:14,160 --> 00:19:19,080 Speaker 1: into savings, that can have dire economic consequences. Uh. Since 292 00:19:19,119 --> 00:19:23,400 Speaker 1: election Day, we've seen a significant rise in household sentiment, 293 00:19:23,600 --> 00:19:27,879 Speaker 1: home builder sentiments, small business sentiment, even other broader measures 294 00:19:27,920 --> 00:19:32,040 Speaker 1: of economic sentiment like the stock market for example. However, 295 00:19:32,440 --> 00:19:36,159 Speaker 1: we haven't seen much hard data yet to support that, 296 00:19:36,400 --> 00:19:39,600 Speaker 1: and that's because economic data is released with a lag. 297 00:19:40,440 --> 00:19:43,240 Speaker 1: That being said, uh, you know, vehicle sales were strong 298 00:19:43,400 --> 00:19:47,080 Speaker 1: at the end of December, retail activity seem to end 299 00:19:47,160 --> 00:19:50,280 Speaker 1: the year on relatively solid footing. So there seems to 300 00:19:50,359 --> 00:19:55,840 Speaker 1: be some evidence uh that positive sentiment is actually impacting 301 00:19:55,880 --> 00:19:59,159 Speaker 1: the economy, but again it's still very much in the 302 00:19:59,240 --> 00:20:03,879 Speaker 1: early stages. Let me give you a term net business births. 303 00:20:04,680 --> 00:20:06,920 Speaker 1: It sounds kind of odd, but it's just another way 304 00:20:07,040 --> 00:20:10,720 Speaker 1: of saying the number of businesses that are created in 305 00:20:10,800 --> 00:20:14,840 Speaker 1: a period, uh, minus the number that closed. It's another 306 00:20:15,000 --> 00:20:19,600 Speaker 1: indicator about of the health of the economy. Uh. You know, 307 00:20:19,720 --> 00:20:22,879 Speaker 1: as we can look at it under President Trump. Vince, 308 00:20:23,200 --> 00:20:25,720 Speaker 1: why did we pick this one and what's been happening 309 00:20:25,760 --> 00:20:29,000 Speaker 1: with that lately? Simply because you know, new businesses are 310 00:20:29,160 --> 00:20:32,240 Speaker 1: basically the lifeblood of the economy. I mean, you have 311 00:20:32,320 --> 00:20:36,600 Speaker 1: a new business created, they're successful, they hire, they get 312 00:20:36,680 --> 00:20:40,640 Speaker 1: even more successful. The more hiring will do UM. After 313 00:20:40,760 --> 00:20:43,880 Speaker 1: the recession ended in two thousand nine, UM, it wasn't 314 00:20:43,960 --> 00:20:48,399 Speaker 1: until a year later that business birth actually exceeded the 315 00:20:48,480 --> 00:20:51,360 Speaker 1: number of you know, firms that went out of business. 316 00:20:51,600 --> 00:20:55,960 Speaker 1: UM currently net burs or about where they were during 317 00:20:56,000 --> 00:20:58,960 Speaker 1: the last expansion, but they're well below the peak that 318 00:20:59,040 --> 00:21:01,440 Speaker 1: we had in two thous and five. So I think 319 00:21:01,480 --> 00:21:04,320 Speaker 1: that a pick up in UM, you know, company formation 320 00:21:04,840 --> 00:21:08,520 Speaker 1: will likely depend on how successful you know, Trump and 321 00:21:08,760 --> 00:21:13,520 Speaker 1: Condress are in making it easier for entrepreneurs to do business. 322 00:21:13,640 --> 00:21:15,880 Speaker 1: And Carl, how important would this be to to drive 323 00:21:15,920 --> 00:21:20,120 Speaker 1: the economy? Oh, it's absolutely critical. So business births tend 324 00:21:20,200 --> 00:21:24,479 Speaker 1: to be among small and medium sized businesses, which account 325 00:21:24,560 --> 00:21:28,760 Speaker 1: for the vast majority of jobs in the in the 326 00:21:28,840 --> 00:21:33,359 Speaker 1: private sector, I think roughly eighty five percent are attributed 327 00:21:33,440 --> 00:21:37,440 Speaker 1: to firms of five employees are less. Uh. Now, you 328 00:21:37,520 --> 00:21:41,640 Speaker 1: know business births and UH also business investments so two 329 00:21:41,760 --> 00:21:45,600 Speaker 1: themes that de Vince was hitting on both tend to 330 00:21:45,760 --> 00:21:50,359 Speaker 1: be late cycle components of the economy. So early on 331 00:21:50,560 --> 00:21:53,520 Speaker 1: in cycles, we tend to see UH growth driven by 332 00:21:53,640 --> 00:21:57,680 Speaker 1: things like a consumer spending and housing. And then later 333 00:21:57,800 --> 00:22:00,239 Speaker 1: on in the cycle, with the economy continuing to row, 334 00:22:00,920 --> 00:22:04,439 Speaker 1: businesses start to face capacity constraints and so they invest 335 00:22:04,560 --> 00:22:08,440 Speaker 1: in the equipment and software and structures that Vince was highlighting. 336 00:22:08,800 --> 00:22:10,800 Speaker 1: That also tends to be the stage where we see 337 00:22:10,920 --> 00:22:15,439 Speaker 1: more formation of businesses as folks are more confident uh 338 00:22:15,560 --> 00:22:18,960 Speaker 1: in the overall economic outlook. So the fact that we're 339 00:22:19,000 --> 00:22:23,520 Speaker 1: seeing both of those measures kind of only normalizing UH, 340 00:22:23,720 --> 00:22:27,359 Speaker 1: now we're starting to pick up maybe some clues that 341 00:22:27,880 --> 00:22:30,800 Speaker 1: this cycle is going to be unique and that it 342 00:22:31,000 --> 00:22:34,880 Speaker 1: is going to be much longer uh than the typical 343 00:22:35,359 --> 00:22:37,680 Speaker 1: UH post World War two or even in the modern 344 00:22:37,760 --> 00:22:43,040 Speaker 1: era business cycle in let's say UH present if we 345 00:22:43,080 --> 00:22:46,240 Speaker 1: can call that the modern era so UH in FED terms, 346 00:22:46,320 --> 00:22:50,960 Speaker 1: that's vocal green Span, Bernankey and yelling business cycles have 347 00:22:51,119 --> 00:22:55,560 Speaker 1: averaged about UH thirty two quarters were in the thirty 348 00:22:55,680 --> 00:22:59,480 Speaker 1: first quarter of the current cycle. So by that measure, 349 00:22:59,520 --> 00:23:01,760 Speaker 1: you would say a wow, UH. The next ro session 350 00:23:01,840 --> 00:23:04,440 Speaker 1: can't be too far off. But when we start to 351 00:23:04,520 --> 00:23:08,200 Speaker 1: look at underlying fundamentals, like what's driving the economy or 352 00:23:08,800 --> 00:23:12,239 Speaker 1: where are the late cycle indicators? Have they engaged yet? Uh, 353 00:23:12,320 --> 00:23:15,080 Speaker 1: They're not really there, and so this economy is not 354 00:23:15,359 --> 00:23:19,560 Speaker 1: as long in the tooth as a pure calendar based 355 00:23:19,640 --> 00:23:23,240 Speaker 1: measurement would otherwise suggest. So Carl, taking a big step 356 00:23:23,320 --> 00:23:25,359 Speaker 1: back and thinking about what you just said there and 357 00:23:25,440 --> 00:23:28,680 Speaker 1: what we've been talking about, what are the chances that 358 00:23:29,000 --> 00:23:33,160 Speaker 1: President Trump can fulfill his promises to make America great 359 00:23:33,240 --> 00:23:36,399 Speaker 1: again in the next four years? Well? Uh, you know 360 00:23:36,560 --> 00:23:39,879 Speaker 1: this is gonna be a an economist answer, but it 361 00:23:40,400 --> 00:23:43,680 Speaker 1: really depends on how you want to measure that. So 362 00:23:44,240 --> 00:23:46,720 Speaker 1: will GDP growth be stronger? I know you said we 363 00:23:46,760 --> 00:23:50,400 Speaker 1: can't talk about GDP at the start, but if we are, 364 00:23:51,040 --> 00:23:56,040 Speaker 1: you know, financing significant tax cuts and infrastructure spending by 365 00:23:56,160 --> 00:24:00,359 Speaker 1: borrowing more than that is a cheap sugar high. Uh, 366 00:24:00,480 --> 00:24:04,639 Speaker 1: that can elevate economic growth until it comes around to 367 00:24:05,200 --> 00:24:07,960 Speaker 1: actually paying the bill. So you know, there could be 368 00:24:08,000 --> 00:24:10,800 Speaker 1: a short to medium term acceleration in the pace of 369 00:24:10,880 --> 00:24:14,160 Speaker 1: growth purely for that reason. The unemployment rate. I'm gonna 370 00:24:14,160 --> 00:24:16,359 Speaker 1: break all the rules you said we can't talk about unemployment. 371 00:24:16,800 --> 00:24:20,440 Speaker 1: The unemployment rate is uh, you know, running below it's 372 00:24:20,560 --> 00:24:24,040 Speaker 1: a natural level. UH. And so you know, we're starting 373 00:24:24,080 --> 00:24:28,640 Speaker 1: to see increasing evidence of shortages of workers, which will 374 00:24:28,680 --> 00:24:32,439 Speaker 1: mean workers have greater bargaining power uh, and more wage 375 00:24:32,480 --> 00:24:35,880 Speaker 1: pressure and and wage creation as a result. So from 376 00:24:35,920 --> 00:24:39,560 Speaker 1: that perspective, it's also going to look better. So you know, 377 00:24:39,800 --> 00:24:44,399 Speaker 1: part of the economy or the country feeling greater, uh 378 00:24:44,640 --> 00:24:48,600 Speaker 1: is just the you know, the the inevitable result of 379 00:24:49,080 --> 00:24:53,320 Speaker 1: stretching on and prolonging the recovery from a very severe 380 00:24:53,640 --> 00:24:57,200 Speaker 1: economic downturn. On top of that, then the icing on 381 00:24:57,240 --> 00:25:01,320 Speaker 1: the cake will be things like trade uh policy which 382 00:25:01,400 --> 00:25:04,720 Speaker 1: could favor the rest belt states, and tax cuts which 383 00:25:04,800 --> 00:25:09,240 Speaker 1: could to help certain sectors of the economy. So in 384 00:25:09,359 --> 00:25:12,240 Speaker 1: some context, yes, I don't see a recession coming for 385 00:25:12,560 --> 00:25:16,119 Speaker 1: quite some time. So uh. The uh, the tone and 386 00:25:16,280 --> 00:25:20,320 Speaker 1: temperament of the economy will feel significantly better in the 387 00:25:20,440 --> 00:25:23,520 Speaker 1: next several years, in some part due to the new 388 00:25:23,560 --> 00:25:26,320 Speaker 1: administration and some part just due to where we stand 389 00:25:26,359 --> 00:25:28,359 Speaker 1: in the cycle. All right, Carl, we'll have to leave 390 00:25:28,400 --> 00:25:30,479 Speaker 1: it there. Thanks so much for joining us, my pleasure, 391 00:25:30,680 --> 00:25:33,159 Speaker 1: and Vince, thanks thank you for joining us too. For 392 00:25:33,320 --> 00:25:35,359 Speaker 1: more on this you can actually call up a graphic 393 00:25:35,440 --> 00:25:37,880 Speaker 1: we put together that you can find on Bloomberg dot 394 00:25:37,960 --> 00:25:41,320 Speaker 1: Com called how We'll know if Trump is making America 395 00:25:41,480 --> 00:25:45,000 Speaker 1: great again? And Benchmark will be back next week. Until then, 396 00:25:45,080 --> 00:25:47,400 Speaker 1: you can find us on the Bloomberg Terminal and Bloomberg 397 00:25:47,480 --> 00:25:50,719 Speaker 1: dot Com are newly revamped Bloomberg app, as well as 398 00:25:50,800 --> 00:25:54,280 Speaker 1: on iTunes, pocket casts, and Stitcher. While you're there, please 399 00:25:54,359 --> 00:25:56,720 Speaker 1: rate and review the show so more listeners can find 400 00:25:56,800 --> 00:25:58,880 Speaker 1: us and let us know what you thought of the show. 401 00:25:59,240 --> 00:26:02,280 Speaker 1: You can follow me on Twitter at at scott Landman. 402 00:26:02,800 --> 00:26:06,159 Speaker 1: Carl you are at reckon Omics R I C C 403 00:26:06,359 --> 00:26:09,920 Speaker 1: A N O M I X, and Vince you are 404 00:26:10,000 --> 00:26:14,840 Speaker 1: at double spelled out T Goalie in support of my 405 00:26:14,880 --> 00:26:18,760 Speaker 1: alma mater, Texas Tech University. All Right. Benchmark is produced 406 00:26:18,800 --> 00:26:22,760 Speaker 1: by Sarah Patterson. The head of Bloomberg Podcast is Alec McCabe. 407 00:26:23,119 --> 00:26:24,920 Speaker 1: Thanks for listening and we'll see you next time.