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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: We saw data this week encouraging I guess we could

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Speaker 2: say on inflation at least it hit targets sure, But

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Speaker 2: also today the first dropping consumer sentiment in four months.

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Speaker 3: Yeah, actually the biggest intra month drop, because this was

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Speaker 3: the final read we got today, which dropped from the

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Speaker 3: preliminary read by almost three points. That's the biggest inter

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Speaker 3: month intra month drop we've seen since March of twenty twenty.

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Speaker 3: And we all know what happened in March of twenty twenty,

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Speaker 3: that was the onset of the pandemic. So how much

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Speaker 3: of a concerning sign is that, especially as we're seeing

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Speaker 3: gas prices moving up. Oil hit eighty dollars a barrow

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Speaker 3: again on WTI for the first time since November. Today.

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Speaker 2: Well, I'm glad to say we have the voice of

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Speaker 2: an expert joining us with the view of the White

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Speaker 2: House today.

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Speaker 3: Indeed we do. Jared Bernstein, in the chair of the

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Speaker 3: White House Council of Economic Advisors, is joining us now

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Speaker 3: live from the White House North Lawn. Jared, always good

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Speaker 3: to have you on the show. Thank you very much

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Speaker 3: for joining us, mister chairman. When we look at data

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Speaker 3: like this, which suggests that after a lot of conversation

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Speaker 3: about consumer sentiment being on the upswing, maybe it is

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Speaker 3: not actually that steady, perhaps not that sustainable, potentially still

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Speaker 3: a little bit vulnerable. Does that make you nervous?

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Speaker 4: Well, the three month consumer sentiment index is up almost

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Speaker 4: twenty five percent, and that is a much more reliable

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Speaker 4: trend than this wiggle we got off of the movement

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Speaker 4: from the preliminary which was positive to the final which

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Speaker 4: was negative. Look, your point about the gas price is

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Speaker 4: a good one, and we're going to have to keep

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Speaker 4: watching this very carefully. But I don't think anyone should

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Speaker 4: change their view that consumer sentiment consumer confidence has been

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Speaker 4: moving in a pretty reliable way, in a direction suggesting

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Speaker 4: that economic improvements have been reaching people in a way

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Speaker 4: that they weren't a few months ago. And those improvements,

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Speaker 4: of course reflect easing inflationary pressures, a strong job market,

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Speaker 4: rising real wage growth, very strong consumer spending in GDP.

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Speaker 4: So any one month can wiggle and bounce one way

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Speaker 4: or another, but the trend remains a solid in that regard.

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Speaker 5: We're hearing talk, mister chairman. It's good to see you.

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Speaker 2: Welcome back of a world in which there are no

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Speaker 2: rate cuts in.

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Speaker 5: This calendar year.

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Speaker 2: You know, I wouldn't ask you about FED policy, but

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Speaker 2: I just wonder what that says about the strength of

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Speaker 2: this economy and whether it's a runaway train.

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Speaker 4: Well, I guess you have a lot of things going

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Speaker 4: in different directions here. I mean, we had some inflation

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Speaker 4: reports that came in above expectations, and then we had

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Speaker 4: an inflation report that hit expectations dead on. We had

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Speaker 4: a retail sales report that, if anything went the other way.

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Speaker 1: More cool than hot.

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Speaker 4: We have a job numbers that have been exceptionally strong.

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Speaker 4: I think you really have to again, I think it's

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Speaker 4: really important to look at the underlying trend. One of

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Speaker 4: the most important is the unemployment rate that's been below

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Speaker 4: four percent for two years running. That's a great number.

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Speaker 4: It's supporting as I mentioned earlier, nominal wage gains that

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Speaker 4: are beating inflation, so real wages up about ten months

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Speaker 4: in a row. Again, a pretty reliable trend there. So

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Speaker 4: one of my jobs is to of course look at

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Speaker 4: carefully and get all kinds of nervous about the high

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Speaker 4: frequency data flow, but to really keep an eye on

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Speaker 4: the underlying momentum, which remains strong.

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Speaker 3: Well, you say the underlying momentum remains strong. You point

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Speaker 3: to the strength of the labor market specifically, when you

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Speaker 3: look at this economy, mister chairman, do you see any

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Speaker 3: sign of easing being necessary.

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Speaker 4: Well, I'm not going to get into what the federal

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Speaker 4: reserves should do with monetary policy. What I will say

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Speaker 4: is I just was looking at some of the forecasts

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Speaker 4: for Q one GDP and I've seen numbers that are

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Speaker 4: in the two percent range. That's something like trend growth. Now, look,

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Speaker 4: the way these hydraulics works, as you too well know,

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Speaker 4: is that if the economy is growing a trend, the

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Speaker 4: unemployment rate tends to stay around where it is. And again,

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Speaker 4: my very broad theory of the case is that as

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Speaker 4: labor market remains strong and inflation continues to ease again,

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Speaker 4: on trend continues to ease. And that too, by the way,

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Speaker 4: is a very reliable forecast. Virtually every forecast I've seen

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Speaker 4: has inflation continuing to ease throughout the year. That's a

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Speaker 4: recipe for rising real wages. Now on a commy that's

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Speaker 4: seventy percent consumer spending, that's a good recipe for continued growth.

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Speaker 1: I don't I'm not going to say you.

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Speaker 4: Know anything about what the Fed should do there, but

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Speaker 4: that is and has been a reliable recipe to keep

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Speaker 4: things moving forward in a good way for American households.

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Speaker 2: Jared, I'm sure you're looking forward to the State of

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Speaker 2: the Union addressed.

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Speaker 5: This is a big week ahead for the White House.

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Speaker 2: I don't knoworder what extent you're involves in contributing to

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Speaker 2: the framing of the economic argument that the President is

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Speaker 2: going to make next week, but we're reporting that he's

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Speaker 2: going to call for some familiar ideas higher taxes on

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Speaker 2: the wealthy and businesses. There are some other things that

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Speaker 2: we can talk about outside of the economy, But I

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Speaker 2: wonder what it is that you're looking forward to message

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Speaker 2: to the American people next week.

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Speaker 4: One of the reasons I get to come out here

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Speaker 4: and talk to you is I don't get ahead of

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Speaker 4: the president, and I'm certainly not going to do that

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Speaker 4: when it comes to the State of the Union. But

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Speaker 4: what I can tell you is the last part of

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Speaker 4: your question is very much on point, which is the

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Speaker 4: message to the American people, not referring anything to so

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Speaker 4: to as we call it around here, state of the Union,

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Speaker 4: but just the ongoing economic recovery, and I guess I

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Speaker 4: do think that this narrative tends to get lost in

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Speaker 4: the hurly burly of the everyday news flow, which I understand.

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Speaker 4: I'm part of it, so are you, and we get it.

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Speaker 4: But let's pull back a second and think about where

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Speaker 4: we were and where we are. Okay, when we got here,

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Speaker 4: the vaccination rate was about zero, and we had a

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Speaker 4: great vaccine, but it wasn't getting out there. We had

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Speaker 4: families and businesses looking really worried about getting to the

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Speaker 4: other side of the pandemic. The President gets here, puts

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Speaker 4: the rescue plan in place, gets checks and pockets shots

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Speaker 4: and arms, massive improvement in the vax rate. And here

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Speaker 4: we are, now, all these years later, in the midst

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Speaker 4: of a remarkable recovery, particularly in the sense that people

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Speaker 4: said we couldn't do it. I mean economists, tony economists

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Speaker 4: said we couldn't get the inflation rate down by two

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Speaker 4: thirds without giving up a bunch of points.

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Speaker 1: On unemployment or on GDP.

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Speaker 4: Well, I just told you we had a GDP north

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Speaker 4: of three percent in Q four, tracking two percent in

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Speaker 4: Q one. Unemployment we've talked about, and all of this

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Speaker 4: with inflation down two thirds off of its peak. So

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Speaker 4: I would consider this pretty remarkable recovery. Now, for President Biden,

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Speaker 4: it only matters if it's reaching families at their kitchen tables,

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Speaker 4: full stop. If I go in and tell him, I

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Speaker 4: go in the oval and tell him about GDP in

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Speaker 4: the stock market, He's going to want to know, for me,

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Speaker 4: how is that helping families like the one I grew

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Speaker 4: up in, Jared, And I will explain to him that

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Speaker 4: we've got real wages growing for middle wage workers, growing

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Speaker 4: for low wage workers, and in fact they're growing faster

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Speaker 4: at the middle and the bottom of the high end.

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Speaker 4: So the economy is delivering the goods to a lot

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Speaker 4: of working families as prices ease. Now, we've got more

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Speaker 4: work to do, particularly on that price side, but moving

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Speaker 4: in the right direction, and sentiment indices starting to reflect

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Speaker 4: that well.

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Speaker 3: So on the price side, given everything that you just

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Speaker 3: told us about how wages have increased, the consumption engine

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Speaker 3: is still very much chugging along. GDP growth stronger than expected.

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Speaker 3: All of that indicates that the demand is not going

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Speaker 3: down in the way that perhaps was intended originally. And

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Speaker 3: I just wonder how great of a risk do you

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Speaker 3: think there is of a reacceleration in price cush because

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Speaker 3: demand has been so strong, Can you rule out that

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Speaker 3: we will see another upswing in inflation.

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Speaker 1: Well, I think one of.

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Speaker 4: The things that we often do, and again it's understandable,

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Speaker 4: especially with the high frequency reporting and scrutinizing every data report,

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Speaker 4: is that we're looking at all these bank shots. If

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Speaker 4: a happens, what will be in c mean for inflation. Sorry,

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Speaker 4: we've got some noise in the background.

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Speaker 3: Business goes on at the White House, we understand sir.

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Speaker 1: We love to see working people at work around here.

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Speaker 5: That's one of the game.

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Speaker 4: What I think we have to keep in mind is

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Speaker 4: that the best indicator of inflation is inflation, all right.

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Speaker 4: There are a lot of bank shots and a lot

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Speaker 4: of ways demand can play through this. But our own

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Speaker 4: analysis at the CEA has been quite clear, and I

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Speaker 4: think this is largely confirmed by many other economists who

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Speaker 4: have looked carefully at this, is that the disinflation we've

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Speaker 4: achieved thus far has largely come from improvements on the

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Speaker 4: economy supply side. In fact, that's almost axiomatic when you

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Speaker 4: think of inflation easing two thirds off of its peak

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Speaker 4: without giving much on the demand side. It kind of

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Speaker 4: almost has to be supply side contributions, and our own

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Speaker 4: work explains about eighty percent of the disinflation through supply

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Speaker 4: chain on snarling through improvements in the labor force. In

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Speaker 4: terms of labor supply, we think there's still more room

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Speaker 4: to run there. So it's not enough to just look

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Speaker 4: at the demand side of equation. You have to look

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Speaker 4: at the supply side as well, and you have to

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Speaker 4: look end of the day, beginning of the day, middle

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Speaker 4: of the day, look at the inflation in the case,

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Speaker 4: which again have been easing solidly with a bump here

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Speaker 4: or there in any given month.

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Speaker 2: I had an interesting encounter with Tom Swazi earlier this week,

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Speaker 2: mister Chairman, the newest Democrat in the House of Representatives.

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Speaker 5: He was sworn in Wednesday evening.

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Speaker 2: This of course, is George Santos's former seat, and he

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Speaker 2: was asked by many of the folks who were there

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Speaker 2: about how did he win. And he was talking mainly

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Speaker 2: about the economy, a little bit about the border as well,

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Speaker 2: but he seemed to have a sense of what drives

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Speaker 2: the angst, the frustration in many cases, the anger behind

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Speaker 2: the MAGA movement, Donald Trump supporters and many Republican voters

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Speaker 2: around the country, and he pointed to wages as the

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Speaker 2: first thing.

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Speaker 5: You make seven.

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Speaker 2: Dollars ten dollars minimum wage, even fifteen dollars an hour,

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Speaker 2: that means you're not pulling in more than twenty or

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Speaker 2: thirty grand a year.

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Speaker 5: You can hardly afford to live.

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Speaker 2: It's impossible to guarant see you can send your kids

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Speaker 2: to college, secure your family. And he said that is

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Speaker 2: the root of all of this. What's the message to

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Speaker 2: those voters who are looking to Donald Trump for relief.

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Speaker 4: I think he asked, you really have to ask yourself

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Speaker 4: who's fighting for whom. I think we saw this contrast

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Speaker 4: to the border yesterday. This president is consistently fighting to

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Speaker 4: solve the challenges that we face right now. I think

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Speaker 4: his track record in challenge solving on the economy is

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Speaker 4: extremely strong. That's what we've been talking about for the

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Speaker 4: last few minutes here. But I think the larger issue

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Speaker 4: here and answer your question, is which person which administration

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Speaker 4: is going out there and trying to solve exactly the

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Speaker 4: problem that newly minted Congressman Swazi was identifying. This president

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Speaker 4: wakes up every day trying to figure out new ways

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Speaker 4: to help families like the one he grew up, and

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Speaker 4: most recently that's been about lowering prices, going after junk fees,

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Speaker 4: actually legislating lower prices for prescription drugs for health coverage.

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Speaker 4: The opposition wants to take that legislation away. They want

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Speaker 4: to repeal it. Now, if you repeal something that's putting

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Speaker 4: downward pressure on costs, guess what Those pressures reverse and.

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Speaker 1: They go up.

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Speaker 4: So I think it's a very clear matter of who's

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Speaker 4: fighting for whom and who is essentially trying to create

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Speaker 4: a sense of chaos and.

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Speaker 1: And dysfunction.

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Speaker 4: This president is all about good, solid governance on behalf

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Speaker 4: of working families. I he's got a track record to

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Speaker 4: prove it. And we've got some great unfinished business in

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Speaker 4: the areas of housing, their childcare and their lower costs

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Speaker 4: that we'd like to keep working on.

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Speaker 1: Well.

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Speaker 3: And the ability to continue working on that will obviously

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Speaker 3: depend on the outcome of the election in November. And

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Speaker 3: on that note, Bloomberg together with Morning Consule, just released

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Speaker 3: a survey yesterday of the swing stage which shows Biden

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Speaker 3: is behind Trump and all seven of those that we pulled,

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Speaker 3: And on the issue of the economy, almost consistently in

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Speaker 3: every state. Within the data, the feeling of the national

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Speaker 3: economy is much worse than the feeling of the state

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Speaker 3: economy or the local economy. As you get closer to home,

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Speaker 3: people actually feel better. How do you make that resonate nationally?

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Speaker 3: How does what can the White House do to make

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Speaker 3: the feeling about the economy as a whole better if

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Speaker 3: it's not so bad when you're just looking at your neighborhood.

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Speaker 4: Well, first of all, let me just say that the

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Speaker 4: poll that matters the most is the one which happens

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Speaker 4: when folks pull the lever or fill in the voting forms,

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Speaker 4: and those polls have consistently favored Democrats. What I would

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Speaker 4: say is that we have to keep our heads down,

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Speaker 4: not pay, not get overly absorbed in the ups and

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Speaker 4: downs of the kinds of polls you just mentioned, which

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Speaker 4: have proven to be pretty unreliable. I think when it

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Speaker 4: comes to actual voting behavior, and focus on very much,

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Speaker 4: you know what we've accomplished and what we intend to

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Speaker 4: continue to accomplish. When we got here, we had an

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Speaker 4: unemployment rate that was unacceptably high, and the very first

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Speaker 4: speech economic speech that the President gave, he talked about

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Speaker 4: the importance of getting back to full employment.

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Speaker 1: Well he did that.

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Speaker 4: He got back to full employment very quickly, historically clicking.

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Speaker 1: And we've stayed there.

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Speaker 4: While we've stayed there, we've managed to work on improving

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Speaker 4: the economy. These supply side and unsnarl some of those chains,

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Speaker 4: helping to increase labor supply, helping to increase the flow

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Speaker 4: of goods into our retail sector, and that's helped to

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Speaker 4: ease inflation significantly. Meanwhile, he's legislated historic investments in the future,

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Speaker 4: in clean energy, in lower health care costs, in domestic

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Speaker 4: production of semiconductors, domestic production of ev cars and batteries.

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Speaker 4: So it's a fantastic track record and it's one we

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Speaker 4: will continue to talk about.

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Speaker 5: Now.

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Speaker 4: If you want to talk about some indices, you know,

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Speaker 4: I would argue that a good question three or four

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Speaker 4: months ago is why isn't everything you're telling me, Jared

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Speaker 4: reaching the consumer sentiment indexes. But you can't make that

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Speaker 4: argument so strongly anymore. We have the humish sentiments up

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Speaker 4: even with today's slip, it's up twenty five percent over

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Speaker 4: the past three months. So it looks to me like

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Speaker 4: the progress that we're made is actually starting to be

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Speaker 4: felt by more and more consumers.

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Speaker 1: We're going to keep our head down and do all

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Speaker 1: we can to continue to move in that direction.

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Speaker 3: And Jared, final question for you. You've been very generous

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Speaker 3: with your time today, sir, and we appreciate it. But

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Speaker 3: other news today comes from commercial real estate lender New

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Speaker 3: York Community Bank Corp. Plunging again saying it discovered material

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Speaker 3: weaknesses in how it tracks loan risks. Obviously, there are

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Speaker 3: some idiosyncratic factors at play here, specifically for NYCB, But

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Speaker 3: to what extent is the White House concerned more generally

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Speaker 3: about commercial real estate right now? Our broader knock on

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Speaker 3: effects that could have for the banking system.

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Speaker 4: CII has been on our watch list at CEA for

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Speaker 4: a long time now, so this is not a new

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Speaker 4: thing at all. What we try to do is get

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Speaker 4: away from any particular case and especially commenting on any

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Speaker 4: particular case, So we don't want to.

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Speaker 1: Influence market moves at all in this regard.

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Speaker 4: So what we're looking at is what we're looking at

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Speaker 4: is the impact on the economy, the dynamics, the narrative

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Speaker 4: that you and I have been discussing for the last

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Speaker 4: few minutes out here and what we see are bank,

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Speaker 4: household and corporate balance sheets all looking pretty strong. Now

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Speaker 4: there's been some increases in debt accumulation, there's been some

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Speaker 4: increases in some default rates, but many of those, if

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Speaker 4: you look at them historically, they're kind of coming off

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Speaker 4: the mat. They back to around where they were a

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Speaker 4: pre pandemic. I think from our perspective, the most important

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Speaker 4: thing is are those balance sheets as such that we

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Speaker 4: think that the risk of systemic contagion is quite low,

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Speaker 4: And I would argue that they are. If you look

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Speaker 4: at the debt service that folks are paying as a

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Speaker 4: share of their income, it still looks quite low, and

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Speaker 4: that gives us some faith that we're in a good

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Speaker 4: place with the buffers to absorb what we're seeing.

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Speaker 2: Mister Chairman, I feel like you brought us outside for

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Speaker 2: outdoor class today.

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Speaker 5: I feel like I'm back on Boston Common. It looks

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Speaker 5: like a beautiful one on the north lawn.

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Speaker 2: Thank you for the seminar and for always being so

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Speaker 2: generous with your time. Jared Bernstein is chair of the

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Speaker 2: White House Cantle of Economic Advisors.