Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining
Speaker 1: us in the studio, I'm really pleased to say here
Speaker 1: in New York it is Conrad de Quadros, r Q
Speaker 1: Economic Senior Economist and founding partner as well. Conrad, great
Speaker 1: to have you with us around the table on this
Speaker 1: play roads Friday. Let's go with the trade story. Just
Speaker 1: to begin with, we've talked about markets with Mixer, Let's
Speaker 1: talk about the economy in the United States. What's the
Speaker 1: methodology for calculating what this trade story right now means
Speaker 1: for the US economy. Well, I actually think the bigger
Speaker 1: difficulty is is not the standard methodologies where we're looking
Speaker 1: yet shares the economy and elasticities and all of that.
Speaker 1: I think the bigger question is is the supply chain
Speaker 1: and the impact on the supply chain and how that
Speaker 1: sort of feeds its way through the economy, and that
Speaker 1: could be a lot more problematic for me. The big
Speaker 1: question is what is the president's objective here? Does he
Speaker 1: want to address some of the intellectual property issues with
Speaker 1: American companies in China or does he just want to
Speaker 1: get the deficit get to a smaller deficit with China.
Speaker 1: If that is the objective, then I think we have
Speaker 1: a problem because, Um, if it's a smaller deficit with China,
Speaker 1: then it's going to be larger deficits elsewhere. And then
Speaker 1: do the targets then change other countries? Um, So the
Speaker 1: presence objectives I think have to be clearer and then
Speaker 1: we can have an idea where it's going. I would
Speaker 1: be shocked if, having seen China respond to this first
Speaker 1: round of tariffs, if we now don't see an upsizing
Speaker 1: and U S tariffs two d billion, I think that
Speaker 1: that's coming um and so then UM, that's just not
Speaker 1: the way the president responds to back down. What is
Speaker 1: the two billion number? Besides the amount of minutes nemars
Speaker 1: laying on the field, what is two under billion the
Speaker 1: amount of traders that the actual tariff No, No, that's that.
Speaker 1: I think that's the amount of Chinese products that will
Speaker 1: that the tariff will be will be placed on. UM.
Speaker 1: And so once we get that second round, which I
Speaker 1: think is coming. Since China did respond, um. You know,
Speaker 1: we did have the dollar for dollar response in the
Speaker 1: first round of tariffs. UM, then the response from China
Speaker 1: to that is going to be interesting because we, as
Speaker 1: your prior guests said, the China doesn't have the ability
Speaker 1: to put tariffs on that amount of US imports because
Speaker 1: China doesn't import that that much from the US. You're
Speaker 1: gonna have to forgive me for this, but it's kind
Speaker 1: of like a high level schoolyard fight where you go
Speaker 1: to the teacher at the end and you say, he
Speaker 1: hit me first. Because a lot of people will write
Speaker 1: up this story today and they'll say that China retaliates it.
Speaker 1: China retaliates it. But in the administration's mind and in
Speaker 1: some people's minds, quite justifiably so, it is the United
Speaker 1: States reciprocating. And until we sort this out who is
Speaker 1: reciprocating and who is retaliating, this is going to go
Speaker 1: on and on, isn't it. I think that's a very
Speaker 1: good point, and I think you're absolutely correct. It is
Speaker 1: it is the US that's responding, um to what it perceives.
Speaker 1: And I think that there's some validity to that that
Speaker 1: that the way the trade is, the US policies towards
Speaker 1: US trade are are are unfair, and they're looking to
Speaker 1: level the playing field. Um, now you know the the
Speaker 1: I think that the differences if we look, for example,
Speaker 1: that the W two does an estimate of trade weighted
Speaker 1: aggregate tariffs, and the differences between the tariffs that the
Speaker 1: US products face and the rest of the world is
Speaker 1: not that great. And I think that that's probably the
Speaker 1: reason why most economists don't think that this is going
Speaker 1: to become a full blown trade war, because you don't
Speaker 1: blow up the world economy because of small differences in
Speaker 1: in aggregate tariffs. About four weeks ago, John Ferrell, justin
Speaker 1: Wolfers in Michigan put this out and it's shocking how
Speaker 1: tight and how set low the tariffs are after forty
Speaker 1: years of negotiations. I mean, the President completely miss is
Speaker 1: that within his discourse, we do have low single to
Speaker 1: mid single digit tariffs in the United States and elsewhere
Speaker 1: in Europe as well. But this goes beyond tariff barriers.
Speaker 1: It's non tariff barriers to entry. And you strike a
Speaker 1: really important point on the intellectual property rights. This is
Speaker 1: something that comments Secretary Wilbur Ross has really been pushing
Speaker 1: quite aggressively. Can anything be done that, Conrad? I think so,
Speaker 1: because that's I mean that that's China just changing, changing
Speaker 1: its policies. And actually I actually think that that's how
Speaker 1: this plays out, and that that's where China has the
Speaker 1: ability to give a bit and and where it's likely
Speaker 1: to will see some give from China. Men, if China
Speaker 1: wants to be this move from the developing economy into
Speaker 1: a more developed economy, those are the kind of change
Speaker 1: of structural changes that they have to make. Kntcros with
Speaker 1: this with final thoughts on this jofter, he's already que economics.
Speaker 1: One of the things we know, Kinrad, is when unemployment
Speaker 1: improvement rate improves, we go from ten percent to five
Speaker 1: percent to four percent whatever. It's usually linear, and it
Speaker 1: happens a lot faster than things. It gets better faster
Speaker 1: than we usually perceive. You told us an hour ago
Speaker 1: we could drive under three percent. You're suggested to me
Speaker 1: that seven or eight point two percent of America would
Speaker 1: be employed. Yes, and that if we are not looking
Speaker 1: at and I don't know whether it is the case,
Speaker 1: but if we are not looking at a recession in
Speaker 1: then I think we are are probably going to see
Speaker 1: an unemployment rate that that moves below below three percent.
Speaker 1: And the reason is so we're sitting here at three
Speaker 1: three and a three percent right now. Um, if we
Speaker 1: look at the pace of job growth, which has been
Speaker 1: stronger than I thought it would be this year, and
Speaker 1: it would been averaging close to two labor force growth
Speaker 1: has also been stronger. But on the labor force side,
Speaker 1: we have the influence of demographics and those are going
Speaker 1: to continue to drive lower rates of labor force participation UM.
Speaker 1: And with the kind of job creation that we're seeing,
Speaker 1: I think that leads to an uneplumber rate that hits
Speaker 1: three and a half percent by the end of this year,
Speaker 1: three percent by the end of next year. And if
Speaker 1: the economy continues to grow, UM, we're we'll probably see
Speaker 1: a beat breach three once we get into mean, the
Speaker 1: thing to watch on the unemployment rate is when it
Speaker 1: moves in the other direction. And so you know if
Speaker 1: I'm wrong in the unemployment rate does not continue to decline.
Speaker 1: Once we see about a half a percentage point rise
Speaker 1: in the unemployment rate, that has been a true and
Speaker 1: tested signal that the economy has gone into recession. When
Speaker 1: you when you hear me talk about vector change, That's
Speaker 1: precisely what it means when Kind describes a vector flipping.
Speaker 1: So let me ask you a big question for this administration,
Speaker 1: who have been tremendous with the federal reserve. Then a
Speaker 1: crack a pit last week when Larry Kind, of the
Speaker 1: Economic Advisor to the President, suggested that the Federal Reserve
Speaker 1: should be perhaps conscious that good payrolls growth and a
Speaker 1: strong economy doesn't necessarily mean that inflation is going to
Speaker 1: run away. What do you think that message was all about. Well,
Speaker 1: I mean, I think on the on the comment, I
Speaker 1: think we just need to remember that this administration just
Speaker 1: does things differently. And um, you know, we when we
Speaker 1: look at that, that's not a message that the FED
Speaker 1: is not getting from elsewhere also, right, So, I mean
Speaker 1: it's on both sides of the aisle. I think there
Speaker 1: there's there is a level of concern that the Fed
Speaker 1: um is is tightening or might eventually tighten too much.
Speaker 1: I'm not concerned about that at all. And that, um,
Speaker 1: if we look at and it was very interesting common
Speaker 1: in the minutes yesterday that when they were talking about
Speaker 1: the yield curve, that they need to look at broader
Speaker 1: measures of financial conditions. And if we look at broader
Speaker 1: measures of financial conditions, and the one that I focused
Speaker 1: on is the one that the Chicago Fed puts together
Speaker 1: because I think that's what the FED looks at most closely. Um,
Speaker 1: that's not showing any tightening and financial conditions when we
Speaker 1: include um, not just the yield curve, but um levels
Speaker 1: of yield survey data on through the year. Yeah, that's
Speaker 1: an example of that. I mean, I think that's a
Speaker 1: that's a pretty strong signal that the Fed is is
Speaker 1: not materially tightening monetary policy. I would I would imagine
Speaker 1: that if monetary policy was getting tighter, financial conditions would
Speaker 1: also get tighter. And that's not happening. So I'm not
Speaker 1: concerned about the FED overdoing it here. The tightening we
Speaker 1: asking though, is maybe not the United States, it's in
Speaker 1: global financial conditions. Is that something they need to think
Speaker 1: about a little bit more. And the potential feedback loop
Speaker 1: that comes into the United States, well, and that's I
Speaker 1: think a function of primarily of what's happening with the dollar.
Speaker 1: And and you know, the FED is it kind of
Speaker 1: has its hands tied here because there I think they
Speaker 1: are going to be focused on feedback loops, feedback loops,
Speaker 1: I think that the right now, the feeling is that
Speaker 1: those feed feedback loops are not particularly large and are
Speaker 1: not going to change the track that the economy is on.
Speaker 1: But the FED needs to focus on its primary and
Speaker 1: congressionally mandated goals, which is the labor market and inflation,
Speaker 1: and those are arguing for continued moves higher in the
Speaker 1: FED funds. Right, are you going to watch the World
Speaker 1: Cup today? You ask him, absolutely, I'll watch. I'll watch
Speaker 1: the rock up today? Is how many times will flop?
Speaker 1: I mean, you know, it's a big source of study.
Speaker 1: I mean John Andrew beating over at the Wall Street journals.
Speaker 1: I mean Brazil winning, he flopped twenty four minutes, ten seconds,
Speaker 1: Brazil tied. It goes out to thirty four minutes with
Speaker 1: no falls, no falls. I mean, come on, this is
Speaker 1: tied into what brazils. It's not that he's hurt. It
Speaker 1: has to do with delaying or he has found a law.
Speaker 1: He's found a law. A lot of people kick name
Speaker 1: out all the time. I mean, I don't. I don't
Speaker 1: think the rolling around is justified. Colin rapid, he's also
Speaker 1: he's also a little guy. He's five foot, takes a
Speaker 1: hundred and forty pounds, and you know you get hit
Speaker 1: by a big mustard going to go down because I've
Speaker 1: seen they go right after him, big time, big time.
Speaker 1: They really do. Please, you're gonna watch it though it's France.
Speaker 1: Have any predictions, Mr Quadras, I that's not my as
Speaker 1: sophisticated as I know. I mean, if you look, if
Speaker 1: you look at my pool on Bloomberg and you see
Speaker 1: how badly I'm doing, that's why. Oh no, no, I
Speaker 1: have the trophy. I've done. I've done really well. The
Speaker 1: last two days they haven't played with us down. You know,
Speaker 1: John's got a zillion questions for Alan Krueger about the
Speaker 1: state of our labor labor economy. Professor Krueger is at
Speaker 1: Princeton University of former chairman of the President's Council of
Speaker 1: Economic Advisors, is public service to President Obama in the nation,
Speaker 1: but far more than that, one of our most interesting
Speaker 1: and acute labor economists. The number one feedback now I
Speaker 1: get Alan Krueger is not on Brazil, Belgium, not in
Speaker 1: the Red Sox. It's on guys are saying on this show,
Speaker 1: men and women that were fully employed, and not one
Speaker 1: single listener agrees. Are we fully employed by the traditional
Speaker 1: measure that economists would use. I would say we're at
Speaker 1: full employment, but as I've said on your show before, Tom,
Speaker 1: full employment does not mean perfection, and we are far
Speaker 1: away from perfection when it comes to the labor market.
Speaker 1: John Farrell that I don't know what it's like in
Speaker 1: the United Kingdom. It's visceral here. People get really upset
Speaker 1: when the year suits and tice a full employment. Of
Speaker 1: course they do, and that's the kind of campaign the
Speaker 1: President brand a couple of years back. Alan. It's also
Speaker 1: hard to reconcile with the payrolls growth that we're seeing.
Speaker 1: We're looking for another rest similar a hundred ninety thousand today.
Speaker 1: How is that possible if we're at full employment. Well,
Speaker 1: the unemployment rate has been heading down. You know, we
Speaker 1: haven't seen any recovery in labor force participation. In fact,
Speaker 1: the labor force participation rate has continued to decline since
Speaker 1: President Trump took office. He hasn't talked about that very much.
Speaker 1: Um So, the growth has been coming in employment from
Speaker 1: a decline and unemployment. People are staying in the labor
Speaker 1: force longer but they haven't been coming back, and we
Speaker 1: started to see that the labor market slank. The paper
Speaker 1: once thought was structural, it's actually perhaps cyclical. Uh. You know,
Speaker 1: I think we really are confronting structural problems now we
Speaker 1: we have uh and and and the business cycle, the
Speaker 1: deep recession made the structural problems worse that the laid
Speaker 1: our response to them. So the tremendous rise and inequality
Speaker 1: that we've seen since the nineteen eighties, the polarization that
Speaker 1: we have in terms of employer demand, the very heterogeneous
Speaker 1: quality of education of the skills of the workforce. I
Speaker 1: think those are all structural problems, and the business cycle
Speaker 1: has made them worse. So a lot of people will
Speaker 1: be asking where is the white growth if we're a
Speaker 1: full employment where is it allan Well, some of the
Speaker 1: wage growth is in bonuses, and we're seeing bonuses now
Speaker 1: that might not stick um after we we hit the
Speaker 1: peak of this recovery. Uh. And the wage growth has
Speaker 1: been more sluggish than one would predict from the historical
Speaker 1: relationship between how tight the labor market is in wage growth.
Speaker 1: And that's been a trend, to be honest. If you
Speaker 1: look at the nineties and the first decade of the
Speaker 1: two thousand's, the love all of unemployment that's consistent with
Speaker 1: real weage growth has been moving down, meaning that it
Speaker 1: takes an even tighter labor market to generate more real
Speaker 1: wage growth. A lot of people have argued over the
Speaker 1: last couple of years that the cost of employing someone
Speaker 1: has gone up by quite a lot. You have to
Speaker 1: pay for the healthcare and other adulans as well. Do
Speaker 1: you think that some of the story is just not
Speaker 1: being captured by base salary, that the cost to hire
Speaker 1: is actually incrementally a lot more expensive than it was
Speaker 1: ten years ago. Well, a couple of things that are first,
Speaker 1: employment costs index picks up, the full cost of hiring
Speaker 1: someone picks up, not only the health insurance costs but
Speaker 1: also vacation time. And the employment cost index is up
Speaker 1: but not three percent yet, still just below three percent.
Speaker 1: So that's part of the story. But we're also seeing
Speaker 1: a slowdown in the growth and healthcare costs has begun
Speaker 1: to pick up over the last year. But part of
Speaker 1: the story was we should have seen even stronger wage
Speaker 1: growth because health insurance costs were growing more slowly. I
Speaker 1: just put on Twitter with your Alan Krueger uh, monikers. Well,
Speaker 1: maybe it's not the article of the year, but it's
Speaker 1: the reporting of the year and the gig economy where
Speaker 1: you've done a lot of work. Elena Samuel's Alona Samuel
Speaker 1: Samuels rather at the Atlantic magazine and she actually went
Speaker 1: out and got a job with Amazon Flex and the
Speaker 1: article is devastating about the new American gig economy that
Speaker 1: basically it's a fraud. It's people working at near minimum wage,
Speaker 1: at minimum wage, net net net clean below minimum wage.
Speaker 1: What is your research? Does it agree with the reporting
Speaker 1: of of Alana Samuels. I think what we see in
Speaker 1: the gig economy by and large is very elastic supply,
Speaker 1: meaning this is a place where people can find work.
Speaker 1: She describes that they float into that sector and initially
Speaker 1: wages may have been higher than someone could earn as
Speaker 1: a taxi driver or other parts of the economy. But
Speaker 1: because of the elastic supply, I think we're seeing an
Speaker 1: equilibrium where the wages pushed pretty low, the wages pushed
Speaker 1: pretty low. Within the microeconomics, is an income in a
Speaker 1: substitute effect? Or is it the new atomization of unions.
Speaker 1: We started out with the guilds in Europe a million
Speaker 1: years ago. John Fair, I don't know if you know this.
Speaker 1: Alan Kruger does like a ten week trip every year
Speaker 1: doing research on the guilds of cafes in Venice. Spent
Speaker 1: a lot of time Italy. But whether it's your researching
Speaker 1: the guilds of Italy or it's the death of unions
Speaker 1: in America, my key question today is is the gig
Speaker 1: economy the new death of unions? Well, I think unions
Speaker 1: were already on their deathbed, and I think the recent
Speaker 1: Supreme Court decision in the Jana's case is going to
Speaker 1: make it even harder. For the one area where unions
Speaker 1: had some strength. We're gonna see a lot more free
Speaker 1: riding where workers get the benefits of what's left of
Speaker 1: unions and they're not paying for those services. I've supported
Speaker 1: for a long time new structures of unions which will
Speaker 1: enable gig workers to organize, to negotiate, to try to
Speaker 1: improve their terms and conditions. Forget about Detroit unions where
Speaker 1: you made a hundred and twenty eight thousand. You never
Speaker 1: thought you'd make that before. The fact is we've gone
Speaker 1: from sixty thousand a year union. You know, I'm just
Speaker 1: using old numbers down to twenty eight thousand non union,
Speaker 1: and now we're going to gig economy, which is somewhere
Speaker 1: below that twenty eight thousand. Is it is Mr Bezos
Speaker 1: and others taking advantage of this new wave of atomization
Speaker 1: of your American labor economy. Yeah. I think worker bargaining
Speaker 1: power has been declining for lots of reasons. Part of
Speaker 1: it's the decline in unions. Part of it is practices
Speaker 1: companies use. Amazon has non compete classes where you can't
Speaker 1: go work for another warehouse in some cases. UH fast
Speaker 1: food restaurants have no poaching agreements where they won't hire
Speaker 1: workers away from other restaurants in their chain. I think
Speaker 1: all of these practices have weakened reduced competition for work.
Speaker 1: I think it's a good too. I don't mean to interrupt, John,
Speaker 1: but I know you're over there calculating how much Namer
Speaker 1: has been on the field rolling around. No. I was
Speaker 1: looking at Juventus over the last five days. What are
Speaker 1: they doing with the stock? The stock is up. Is
Speaker 1: there any news not not at the moment, but they've
Speaker 1: added two and eighty something million euros to the market.
Speaker 1: We had to medicate Pharaoh yesterday. I don't know if
Speaker 1: you know this, Ellen, but he's a c Melanish act.
Speaker 1: But that we had to medicate John about eleven am.
Speaker 1: And it's got something to say about your tennis too.
Speaker 1: I think Allen's going to give you some lessons. Come on,
Speaker 1: I mean, you can't get a hotel room in London.
Speaker 1: I think Wimbledon needs its fair share of time on
Speaker 1: this show. Frances Teo follows into the third round, first
Speaker 1: time in a major. There you go, keep going on, stop,
Speaker 1: please keep going. Is Federer getting too old? It doesn't
Speaker 1: look like it on the court. You seriously, there's such
Speaker 1: a beautiful game. Okay. Now the new game at Wimbledon,
Speaker 1: where it's grass in the old days, is the grass
Speaker 1: today the same as you old grass where the ball
Speaker 1: slid like eight ft uh it stays awfully low. I
Speaker 1: don't know if it's the same, but it still stays.
Speaker 1: Does Nadal do it Wimbledon? Nadal is a clay guy
Speaker 1: who loves ruling garrows in France. Can he play at
Speaker 1: Wimbledon and win? Or is it just such a different
Speaker 1: game it's a harder game for him. I certainly wouldn't
Speaker 1: rule it out. I'll tell you one thing that amazes
Speaker 1: me about Nadal at the French Open and at the
Speaker 1: US Open. His speed is extraordinary, Billy to get around
Speaker 1: the court, that the way the birst he takes, it's unbelievable.
Speaker 1: This is a created credit important. This goes like the
Speaker 1: neighbor for amateurs and tennis. Read me, shade to our forehead?
Speaker 1: Which side? Did those guys shade to? Their back hands
Speaker 1: are so good they almost shade to go to the
Speaker 1: back end, don't they. Well, Nadal's backhand is really a
Speaker 1: two handed forehand, but you'll see you'll see them run
Speaker 1: around their back end. You know, they'll hit it inside
Speaker 1: out forehand by running around their back hand. And also
Speaker 1: look how fast they are to run around their back end.
Speaker 1: That's the best tennis player you ever saw. It has
Speaker 1: to be Federer, right. So Rosie Cassal's warm up at
Speaker 1: Forest Till she was a giant, like four ft ten inches.
Speaker 1: She would practice her leap and she would get she
Speaker 1: was like an NBA player. She would get literally a
Speaker 1: foot half off the ground. That was amazing. But yeah,
Speaker 1: that's one thing I like about tennis. You could be
Speaker 1: any size there. There there are female players on tour
Speaker 1: five ft two ft three. I mean, this is great, John.
Speaker 1: I had no idea how it's waking up to redux
Speaker 1: my tennis life. I didn't realize you have a played.
Speaker 1: Oh I'd love to know how many I would love
Speaker 1: to see. Do you know how many women's Davis records
Speaker 1: I snapped? Can we give a charity tennis match if
Speaker 1: you want to write in on Twitter at Pharaoh TV,
Speaker 1: we can raise some money to get to play tennis.
Speaker 1: It is now a great pleasure to bring two year
Speaker 1: from the University of Michigan, Betsy Stevenson, who does some
Speaker 1: exceptionally creative research on the American labor economy. Bessie, I'm
Speaker 1: gonna ask you the question. It has been a theme today,
Speaker 1: which is a lot of fancy people in fancy suits
Speaker 1: and try ties and dresses tell us that America is
Speaker 1: fully employed and aggressively our listening audience doesn't agree. Which
Speaker 1: is it? Yeah, Um, well that's a great question, and
Speaker 1: I think is that what happens is we take a
Speaker 1: look at the data and we see that unemployment rates
Speaker 1: are really low. So the issue about getting more Americans
Speaker 1: employed really isn't about bringing the unemployment right down lower.
Speaker 1: It's about bringing more people into the labor markets. But
Speaker 1: I think the thing that you hear from your listeners,
Speaker 1: that the average person hears or believes is that they
Speaker 1: don't have the job they necessarily want, or they don't
Speaker 1: have the hours they want, or they're not able to
Speaker 1: use their skills appropriately. So economists or us looking at
Speaker 1: how many people are out there looking for work that
Speaker 1: don't have any But of course you're not unemployed if
Speaker 1: you have uh, if you have a full time job.
Speaker 1: But it's not that in the career you were hoping
Speaker 1: to have the career you trained for, um, if there's
Speaker 1: ability to move up, um, or even if you're part time. Right,
Speaker 1: And we've we've paid a lot of attention to those
Speaker 1: part time numbers. Now that's not going on. We've still
Speaker 1: we've seen the number of people employed part time has
Speaker 1: come way down as well. Um, we do have a
Speaker 1: pretty tight labor market. The question is when our employer
Speaker 1: is going to start reacting to that by providing people
Speaker 1: more training, by giving them upward mobility, and by the
Speaker 1: big thing everybody wants, which is higher wages. But see
Speaker 1: I here for a couple of years now that we've
Speaker 1: got a tight labor market, but then we carry on
Speaker 1: printing scood jobs every single month in a payrolls report,
Speaker 1: and the participation rates tick tire again today. And I'm
Speaker 1: just wondering how much hit and unemployment there actually is
Speaker 1: and how many people that are available to come back
Speaker 1: into the work for um. You know that that's a
Speaker 1: really hard question because the people who are you know,
Speaker 1: a lot of people are choosing not to work whatever
Speaker 1: they're outside option is. Maybe it's staying home with their kids. Um,
Speaker 1: maybe it's you know, taking care of elderly relatives. Maybe
Speaker 1: it's living off of their savings. Whatever their options are,
Speaker 1: they've got to have something, a job that looks good
Speaker 1: enough that they want to give that up. And that's
Speaker 1: a really hard thing for us to measure. How many
Speaker 1: people out there are right on the cusp of thinking,
Speaker 1: if the right job comes along, I would change what
Speaker 1: I'm doing. You know, if you look at at the
Speaker 1: history of the United States labor market, I mean, our
Speaker 1: labor force participation searched in the eighties and nineties, but
Speaker 1: that's because women decided to give up staying home and
Speaker 1: come into the labor market. We've had a lot of
Speaker 1: men over the last fifty years decide that they have
Speaker 1: better things to do besides working, and we've had a
Speaker 1: lot of economists trying to figure out what going to
Speaker 1: do to turn that around. And that is a fifty
Speaker 1: year trends that we haven't seen turned around. I mean,
Speaker 1: if you just joined us, Betsy Stevenson with us with
Speaker 1: a Ford School, University of Michigan and exceptionally good at
Speaker 1: core economics, but linking it into policy, what should be
Speaker 1: the optimal policy? Professor Stevenson of the man's session? If
Speaker 1: there is a man's session, and yeah, it's better than
Speaker 1: it used to be, but a lot of people listening
Speaker 1: this is you correctly state, would say they're under employed.
Speaker 1: What's the policy to jump start this? Well, I would
Speaker 1: not call it a man session because again, a lot
Speaker 1: of this is um men who are who have other alternatives,
Speaker 1: who have people who are supporting them, parents or girlfriends
Speaker 1: or wives. And what we have to do, though, is
Speaker 1: make work appealing to them. We have to find ways
Speaker 1: in which they feel valued at work. And the problem
Speaker 1: is we've shifted from an economy where we make stuff
Speaker 1: to an economy where we do stuff for other people.
Speaker 1: And you know, that's what we're seeing in policy right
Speaker 1: now is trying to say, well, if we put up
Speaker 1: trade barriers, if we um, you know, do a bunch
Speaker 1: of things, we can start making stuff. But I feel
Speaker 1: very strongly that getting people jobs that pay them very
Speaker 1: little assembling things, um, you know, the kind of jobs
Speaker 1: that are currently being done in China is not going
Speaker 1: to bring these guys back into the labor market because
Speaker 1: for for them to have dignity in their jobs, it's
Speaker 1: not just about building something, it's about being paid a
Speaker 1: respectable wage. So what we've got to do is find
Speaker 1: a way is to make the new economy appealing to
Speaker 1: men who have very traditional notions of masculinity. I mean,
Speaker 1: Professor Stevenson. If I look at the Atlantic magazine article
Speaker 1: by Alona Samuels, which maybe is my reporting article of
Speaker 1: the year, I delivered packages for Amazon and it was
Speaker 1: a nightmare. In a lot of goes into excruciating granularity
Speaker 1: on the gig economy. Have we gone from the unions
Speaker 1: of your Detroit urine arbor, you're dearborn. Have we gone
Speaker 1: from the unions to the atomization of it down to
Speaker 1: the non union meal you We've been in for twenty
Speaker 1: years and now we're just something new with the gig
Speaker 1: economy that seems even sub below what we were doing
Speaker 1: years ago. Are we in a new round of atomizing
Speaker 1: over the labor economy. Well, one thing we know is
Speaker 1: it's taken us a long time to really firmly established
Speaker 1: the research. But unions reduced inequality and unions boost wages.
Speaker 1: And that's coming on the heels of the latest Supreme
Speaker 1: Court decision that has undermined unions. That unions are in
Speaker 1: massive decline in the United States. In fact, it's almost
Speaker 1: impossible to find a private sector unionized job nowadays. And
Speaker 1: you know, that means that we're removing a force that
Speaker 1: has traditionally served to give workers access to better jobs.
Speaker 1: So that's definitely happening the gig economy. It is not
Speaker 1: most people's primary job. So the BLS just had a
Speaker 1: data saw that. But what they did that that I
Speaker 1: think missed what people are seeing is that they were
Speaker 1: looking at primary jobs. What people are doing is scrambling
Speaker 1: to make a buck on the side, and that's because
Speaker 1: their primary job isn't delivering for them anymore, and so
Speaker 1: they're picking up something on the side. Maybe it's driving
Speaker 1: for Uber, maybe it's delivering packages. Um. You know, they're
Speaker 1: they're finding some sort of side hustle that you have
Speaker 1: to get a lot of fancy degrees, John Tucker, So
Speaker 1: you can side hustle is PhD, you know, side hustle, Betsy.
Speaker 1: This has been great, Thank you so much, greatly appreciated,
Speaker 1: Bessie Stevenson, and I do want to get her on
Speaker 1: more to to. I love that phrase. Side also exactly
Speaker 1: characterizes what Alona Samuel's captures. Here is our John Ferrell
Speaker 1: with Dr Hessett, the opportunity now for welcome our listeners
Speaker 1: on Bloomberg Radio and for our viewers on Bloomberg TV.
Speaker 1: I'm really placed to say that we can cross over
Speaker 1: to the White House now for the Trump administration's views
Speaker 1: on the payrolls report. We're joined by Kevin Hassett, the
Speaker 1: Council of Economic Advisors Chairman. Hey, Kevin, it's always great
Speaker 1: to catch up with you. Solid payrolls growth. Thanks for
Speaker 1: giving your time to Bloomberg TV and Bloomberg Radio this morning.
Speaker 1: I'm just wondering how you stop the President from tweeting
Speaker 1: again this morning. Hey, Like always, I briefed the President
Speaker 1: on the jobs report way ahead of time, and and
Speaker 1: you know, like before he did not reveal the numbers
Speaker 1: or anything. Hey, Kevin, let's not go there. Let's talk
Speaker 1: about how solid the payrolls growth looks and how unemployment
Speaker 1: starts to be taken a little bit higher. Do you
Speaker 1: think it's some evidence here that this is a labor
Speaker 1: market that needs to absorb some slacks still? Oh yeah,
Speaker 1: there's definitely still a lot of room for the labor
Speaker 1: market to absorb the slack. And again, this is a
Speaker 1: great jobs report. We through the year averaging about two
Speaker 1: hundred and fifteen thousand jobs per month, and we're pretty
Speaker 1: much right on that. I think that you had mentioned
Speaker 1: that the markets were moving a lot, and I think
Speaker 1: it's because this is a jobs report that was pretty
Speaker 1: much about what's been happening for the rest of the year.
Speaker 1: The one thing that was different is that the unemployment
Speaker 1: rate inched up. But the reason it did a is
Speaker 1: because there was almost, I guess we could almost call
Speaker 1: it a stampede of people back into the labor force.
Speaker 1: And that's something that President Trump is emphasized as a
Speaker 1: key objective of his policy is going all the way
Speaker 1: back to the campaign, and so it was really hardening
Speaker 1: to see it. I know, it looks like it's bad
Speaker 1: news and the unemployment rate goes up. But if it
Speaker 1: goes up because people are quitting their jobs more and
Speaker 1: heading back into the labor force, which is really what
Speaker 1: we saw on the data, then that means that it's
Speaker 1: a really, really strong market. Kevin. We say it quite
Speaker 1: cleaning that I see you sit in a participation. Right.
Speaker 1: There is one worry that's taken play, Iu swhere this economy.
Speaker 1: The headline numbers look rock solid. There is some nervousness
Speaker 1: from some of the officials in the Republican Party as well,
Speaker 1: and it's around the tarriffs story that could possibly negate
Speaker 1: the positive effect of the fiscal stimulus that your administration
Speaker 1: is introduced. You concerned about that, Kevin, Well, Look, make
Speaker 1: no mistake about it. The President has the right objective
Speaker 1: that he wants to make trade deals fair. He wants
Speaker 1: to make them better than they are right now. There's
Speaker 1: a heck of a lot of problems non teriff farriers.
Speaker 1: You mentioned them in the previous story out China. Bight
Speaker 1: raised non terif farriers in response to this, Well, they've
Speaker 1: already got them left and right. They're doing forced technology
Speaker 1: transfer and so on, and so the objective is to
Speaker 1: make trade deals better and that should be good for
Speaker 1: the economy. And I think, you know, the President wrote
Speaker 1: the Art of the Deal. I think that we're going
Speaker 1: to start to see those deals. And as an economist,
Speaker 1: I also look at the data. I guess that's why
Speaker 1: I'm here right And and one of the things that
Speaker 1: we've been watching for is negative impact in the data
Speaker 1: from the anxiety over over trade. And if you look
Speaker 1: at this jobs report, then one of the key places
Speaker 1: where you would see that would be in the metal
Speaker 1: using industries because the steel and aluminum tariffs are in place.
Speaker 1: And we actually saw an employment increase in the downstream
Speaker 1: industries in this jobs reported. So there isn't clear evidence
Speaker 1: in the data the anxiety over trade is being harmful
Speaker 1: to the industries that we would most watch for harm
Speaker 1: and and I think that that's probably because these people
Speaker 1: all understand that the President's driving the world towards a
Speaker 1: better equilibrium. Well, Kevin, I'm not sure businesses understand that,
Speaker 1: because the Federal Reserve in their minutes were pretty clear
Speaker 1: yesterday the following quote, contacts in some districts indicated the
Speaker 1: plans for capital spending had been scaled back or postponed
Speaker 1: as a result of uncertainty over trade policy. What do
Speaker 1: you make of that, Kevin, Well, that was an anecdote,
Speaker 1: And the question is what's of the data. And in
Speaker 1: the latest capital spending data we have capital spending is booming.
Speaker 1: And if we look at the industries that could be
Speaker 1: most negatively affected in theory from the trade dispute, they're
Speaker 1: actually booming as well and hiring more workers. And so
Speaker 1: if they were really concerned about it, we would have
Speaker 1: expected to see layoffs. Well, the administration is certainly hoping
Speaker 1: there's going to be the stimulus that drives a supply
Speaker 1: side response increased business investment. As you know, Kevin confident
Speaker 1: leads CAFEX decisions, and when the President came into the
Speaker 1: White House, confidence went through the roof. I haven't met
Speaker 1: a CEO that's too confident about this trade story as
Speaker 1: it evolves. Do you foresee any complications of it a
Speaker 1: common months? Why? Yeah, I think that the confidence is
Speaker 1: gonna skyrocket once the President starts to deliver deals, and
Speaker 1: I think in the coming months you're gonna start to
Speaker 1: see those deals. So in the coming months we're gonna
Speaker 1: see some deals, and it raises the question what is
Speaker 1: the minimum condition for success? Because I've spoke to many
Speaker 1: people around this table over the last few months that
Speaker 1: still quite can't can't get a handle on what the
Speaker 1: minimum condition for success is with this ambition to get
Speaker 1: better deals. What is the minimum condition for success? Kevin Well?
Speaker 1: I think the President has been pretty clear that he
Speaker 1: wants deals that are reciprocal. He wants other countries to
Speaker 1: reduce their barriers to the level that we have. And
Speaker 1: I think that, you know, minimum conditions, so the things
Speaker 1: that the negotiators work out. And I'm just the you know,
Speaker 1: the economic adviser. I'm not the negotiator, but I think
Speaker 1: that we want to move pretty much towards reciprocal deals.
Speaker 1: See the President at the G seven meetings said let's
Speaker 1: take everybody take our tariffs to zero. And it seems
Speaker 1: like some of our trading partners got pretty anxious about
Speaker 1: that offer. But it shows that the president's serious that
Speaker 1: he's going to make the deals better. It's to a
Speaker 1: real chance that we could take Harris down to zero.
Speaker 1: Let's talk about the autos. There's a report coming down
Speaker 1: to Germany recently that we could get auto tarrifs down
Speaker 1: to zero. Kevin do you actually see that being a
Speaker 1: real chance, And away from the hysteria on the front
Speaker 1: page of the newspaper, how much talks are happening behind
Speaker 1: the scenes, high level talks between trade negotiators on either side. Well,
Speaker 1: you'd have to interview the trade negotiators about what their
Speaker 1: talks look like. But the briefing that I've been getting
Speaker 1: is that things are moving forward, that there's a good
Speaker 1: chance that we're going to start to make deals. And
Speaker 1: it's very heartening to see that. As you mentioned that, say,
Speaker 1: the European automakers are saying, yeah, let's take the President
Speaker 1: at his word and let's move things towards zero. Now
Speaker 1: they might have to you know, they might be offering
Speaker 1: that while not wanting to reduce their non teriff barriers,
Speaker 1: and so we have to see, right like, how it
Speaker 1: all works out. But in the end, we have fully
Speaker 1: reciprocal deals and the President's approach will have proven correct. Kevin,
Speaker 1: I know it's not your turf, so I want to
Speaker 1: get away from it just for a moment to talk
Speaker 1: about the Federal Reserve, which, to be honest with you,
Speaker 1: is in your grounds and it's something that you watch
Speaker 1: and you carefully proceed with caution to talk about I'm
Speaker 1: sure it was really interesting recently for many people. This
Speaker 1: administration has been so careful about the federal reserve, nominated
Speaker 1: some great candidates to the FED, really not interfered with
Speaker 1: federal reserve policy. And then a crack emerged last week
Speaker 1: when Larry Cudlow, I'm sure a friend of yours, the
Speaker 1: economic advisor to the President, stepped in with a not
Speaker 1: too subtle message for the FED not to go too quickly.
Speaker 1: Is this administration concerned about the FED going too quickly?
Speaker 1: You know, we absolutely, on Larry and I and the President,
Speaker 1: we respect the independence of the FED. We've appointed great
Speaker 1: people to the FED. Some of them still have to
Speaker 1: be confirmed, and they they should hopefully be confirmed quickly.
Speaker 1: But we d respect the indepense to the FED. Larry
Speaker 1: always did, he did last week. I thought that story
Speaker 1: was miscovered. He was speculating about something that that you know,
Speaker 1: I guess I what's speculated about now. But the fact
Speaker 1: is that Larry a hund percent respects the indefense of
Speaker 1: the FED. We would never ever try to pressure them
Speaker 1: to do anything other than what they think is right,
Speaker 1: and we meet with them, you know, I have lunch
Speaker 1: with the J. Powell and the other governors once a
Speaker 1: month and we meet and we talked about how the
Speaker 1: economy is doing. But even at those private lunches, I'd
Speaker 1: never say, hey, come on and cut me some slack
Speaker 1: on interest rates. It would be totally inappropriate. Maybe not privately,
Speaker 1: but this took place quite publicly in an interview with
Speaker 1: the following quote, faster economic growth does not cause inflation.
Speaker 1: My hope is that they understand that they will have
Speaker 1: to move very slowly. That's pretty clear, isn't it. Larry
Speaker 1: was responding to a question, and without you know, giving
Speaker 1: the fat advice. Let me just say that as an economist,
Speaker 1: if you look at a cycle, let's even step outside
Speaker 1: of this one. So we're talking theoretically, if you have
Speaker 1: a capital spending boom, then that can put downward pressure
Speaker 1: on prices and allow late in a cycle for GDP
Speaker 1: growth to be high without creating a lot of inflation.
Speaker 1: And so if we see a capital spending boom, then
Speaker 1: economic theorists would tell you then that might be that
Speaker 1: there's less risk in prices. But I would never advise
Speaker 1: the FED about it, and they're more adept at looking
Speaker 1: at inflation than I am. They've got hundreds of economists
Speaker 1: and doing it for their whole careers, and we respect
Speaker 1: their independence. I know you respect their independence, and the
Speaker 1: econome with ay surely does make sense. But when you
Speaker 1: say the following words, my hope is that they understand
Speaker 1: that they will move very slowly. That's not subtle at all, Kevin,
Speaker 1: I want to reiterate that point. Come on, he's not
Speaker 1: lobbying them. But but but you can bring bring Larry
Speaker 1: on and ask him. But that I can say that
Speaker 1: what Larry is thinking in his head, which is what
Speaker 1: I'm thinking, is that we've got a capital spending boom
Speaker 1: going on and that that should hopefully make it in
Speaker 1: But we're gonna in the end, it's going to be
Speaker 1: the proof will be in the pudding. The proof will
Speaker 1: be in the data, just like we talked about, like
Speaker 1: do we see the trade the down the potential downside
Speaker 1: risks showing up in the job stata and they didn't.
Speaker 1: So ultimately it will be in the data. And I
Speaker 1: think what Larry is saying is he's hoping the data
Speaker 1: turn out to prove our theory is correct. Okay, Kevin
Speaker 1: has said, always great to get your thoughts. Pay Rolls
Speaker 1: looking solid, the economy looking good. Much more on the
Speaker 1: trade story, I'm sure from the White House in the
Speaker 1: coming months. Kevin Hassett there, the Economic Advisor to the President,
Speaker 1: and joining us the Chairman of the National Economic Council
Speaker 1: of Advisors, Muhammad Larry Joan Faro Joam ferroor with a
Speaker 1: spirited conversation there. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.