Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: Interview of the Day on the American labor economy will
Speaker 1: occur in the nine o'clock hour with Kevin Hassett our
Speaker 1: John Farrell speaking with the Chairman of the President's Council
Speaker 1: of Economic Advisors. Except as not Hassett's lame duck. He's
Speaker 1: out the door and we all know in advance, depending
Speaker 1: on what the report is, what Dr Hassett will say.
Speaker 1: This is the Interview of the Day. Jason Furman links
Speaker 1: economics with policy like no one in America. He's the
Speaker 1: liberal the conservatives have to read on the American economy,
Speaker 1: and Dr Furman joins us right now, Jason, I'm gonna
Speaker 1: cut to the chase. Do we know what technology is
Speaker 1: doing to our labor economy? Technology is a good thing
Speaker 1: that creates a high class problem. It gives us more options,
Speaker 1: it gives us potentially higher incomes. But if we don't
Speaker 1: invest in education, training and the like. You know, we
Speaker 1: won't get that. Are we seeing the investment now? I
Speaker 1: mean this is something John and I were just traveling,
Speaker 1: and you see the investment in infrastructure of the investment
Speaker 1: in education. Uh. We had a David Rubinstein interview with
Speaker 1: Melinda Gates about investment in young kids? Where is the
Speaker 1: state of investment on a long term basis leads to
Speaker 1: a better labor economy? Too little? On all of those
Speaker 1: young kids were about twenty second in the O E
Speaker 1: C D in terms of preschool R and D. Private
Speaker 1: is great. Our companies are investing in research, but we're
Speaker 1: not doing the basic research on the government side that
Speaker 1: has been falling for decades as a share of the
Speaker 1: UM and our infrastructure. You know, in many ways it's
Speaker 1: very good. We have great ports in America UM, but
Speaker 1: there's there's a lot more we could do. Jason, I
Speaker 1: want you to give us a little bit of a
Speaker 1: clinic and it can almost clinic if possible, on the
Speaker 1: difference between g D P what is it versus g
Speaker 1: D I? What is it? And then walk me through
Speaker 1: the spread between them both right now and what that
Speaker 1: story is. Talent you you're all able bernanke this morning.
Speaker 1: That's very cool. This is this is one of my
Speaker 1: favorite topics, and I'm thrilled you asked. We can. As
Speaker 1: I teach my students, you can measure the economy two ways.
Speaker 1: You can add up everything everyone spends, or you can
Speaker 1: add up one's income, profits, etcetera. And in theory does
Speaker 1: come to the same number. In practice, both of them
Speaker 1: are measured with error, and so the actual measures you
Speaker 1: get are different. Right now, over the last year, GDP
Speaker 1: has grown at three point two. G d I, which
Speaker 1: adds up everyone's income, has only grown at one point eight.
Speaker 1: That is the biggest gap between those two measures that
Speaker 1: we've seen since the Great Recession. It's an unusually large
Speaker 1: gap for any time in the last seventy years. All
Speaker 1: the headline numbers are about the GDP at three point two.
Speaker 1: Based on my analysis, historically, the truth is about halfway between.
Speaker 1: When you have two bad measures, the best thing to
Speaker 1: imperfect measures, the best thing to do is combine them.
Speaker 1: In this case, combined them about fifty fifty. So I
Speaker 1: think our economy could be running more like a two
Speaker 1: two and a half percent growth rate route now rather
Speaker 1: than the three point to a lot of people seem
Speaker 1: to think it's growing up. And that's okay, Jason, that's
Speaker 1: not bad. But what is it about adverse scenarios that
Speaker 1: explains why there is this massive spread between both g
Speaker 1: d I and g d P. You know, it's just
Speaker 1: pure measurement. Art's not something you can explain because in
Speaker 1: theory are the same and you're just adding stuff up
Speaker 1: and it's a different set in the data and sometimes
Speaker 1: they give you different answers. And that's why, um, you
Speaker 1: want to combine. And that's actually especially important around turning points.
Speaker 1: I mean GDP. In the middle of two thousand seven,
Speaker 1: GDP was growing at nearly a five percent rate. It
Speaker 1: looks great. The economy looked really really hot, um, you know,
Speaker 1: as as late as December two thousand seven. But um,
Speaker 1: you know, but it actually was turning and that was
Speaker 1: showed up in the revised data years later. Along the
Speaker 1: lines of John's wonderful questions on how we Parsons split
Speaker 1: the economy, Dr Ferman, we have the idea of a
Speaker 1: better than good domestic economy and then you bolt on
Speaker 1: trade dynamics and it's not as pretty obviously trade war
Speaker 1: and all that. Do you, as an adviser to presidents
Speaker 1: aggregate in the sum of the economy, or right now,
Speaker 1: should our listeners and viewers should they partition a domestic
Speaker 1: performance verse is a really ugly trade side or external
Speaker 1: side right now? Yeah, I mean the external sides about
Speaker 1: of the US economy. So I think sometimes people make
Speaker 1: the mistake of overstating it. You know, the steel tariffs.
Speaker 1: I think they were a bad policy, but I never
Speaker 1: expected a large macro consequence of them. If you layer
Speaker 1: the Mexico on top of the China, you're now starting
Speaker 1: to talk about potentially more than a percent of GDP,
Speaker 1: at which point you're talking about phine up the difference
Speaker 1: between a boom and a recession, but definitely increasing the
Speaker 1: risks of a recession by by a reasoning in some ways, Jason,
Speaker 1: do you think the issue with Mexico might be more
Speaker 1: important for the domestic US economy than the tension with
Speaker 1: the Chinese at the moment? Oh? Yeah. Our exports to
Speaker 1: Mexico are about twice as large as a share of
Speaker 1: our economy, and that actually understates it. If you look
Speaker 1: at value added all of the things that move back
Speaker 1: and forth. Um, it's it's a lot more than that
Speaker 1: and a five percent tariff. If if only five percent
Speaker 1: of the content comes from Mexico, that's like a hundred
Speaker 1: percent on Mexico. Third of our auto parts are coming
Speaker 1: from there. I think it's a potentially really big deal
Speaker 1: for the U. S economy. What's the log linear function
Speaker 1: of five percent tears, ten percent tears and ump up
Speaker 1: up we go. What's the impact is President Trump increases
Speaker 1: the tariffs on Mexico over time? Yeah, I think it's
Speaker 1: I think it's not log linear. I think it goes
Speaker 1: the other way. Um that you know, for ver each
Speaker 1: increment you do up, um, it could potentially get even worse.
Speaker 1: Do we know that? Or is it a mystery? Oh? People?
Speaker 1: People were people turned through those numbers and and and
Speaker 1: and tend tend tend to find that what you is
Speaker 1: a mystery? Is what is it? Jeod expectations? You know,
Speaker 1: if this dread is pulled back later today on Mexico,
Speaker 1: will businesses that are building supply chains thinks that the
Speaker 1: thread is gone forever or will they feel they need
Speaker 1: to redo their supply chains just in case it comes back.
Speaker 1: I have a strong suspicion about the answer to that,
Speaker 1: but I can't prove it is Jason Furman. What a
Speaker 1: joy yesterday to speak to Austin gouls Be of Chicago
Speaker 1: about Alan Krueger's new book on rock eComics. This is
Speaker 1: the final book of Alan Krueger, who recently died, Jason Furman.
Speaker 1: When we look at Alan Kruger's work, it is about
Speaker 1: the minimum wage. Do you have any study of the
Speaker 1: fifteen dollars in our hour is causing harm? We've only
Speaker 1: done fifteen dollars an hour in high wage places. There
Speaker 1: was one study or Seattle. I think unfortunately it was
Speaker 1: flawed and I wouldn't take anything from good today. UM,
Speaker 1: I personally would be nervous if we very rapidly went
Speaker 1: to fifteen dollars an hour UM for Alabama, New Mexico
Speaker 1: and um Main those are much lower wage places than
Speaker 1: Seattle or the parts of Scala foreigners have gotten they're already. Jason,
Speaker 1: is great to catch out with your Friday. Really appreciate
Speaker 1: your time, really intri instance staff Jason firm. And there
Speaker 1: the former Council of Economics chair John Ferrell. Why don't
Speaker 1: you bring him Dr Cornado and the forty seven flavors
Speaker 1: of Jobs Day today. Let's do it right now, so
Speaker 1: payrolls Friday is what ten eleven minutes away the median
Speaker 1: estimate here at Bloomberg in our survey is one hundred
Speaker 1: and seventy five thousand is two hundred and sixty three, Julia,
Speaker 1: you're looking for ten k south of the median estimate.
Speaker 1: It's not a big move lower from there. But what
Speaker 1: has been impressive, and we usually discussed it every Friday
Speaker 1: of the first Friday of every single month here at Bloomberg,
Speaker 1: is just how strong this economy has been able to
Speaker 1: produce in and around every single month. Can we keep
Speaker 1: doing that way above what we think is sort of equilibrium,
Speaker 1: which is closer to a hundred to k. So that
Speaker 1: has been sustained by improvement in labor force participation amongst
Speaker 1: primate workers, and that kind of faded in the last
Speaker 1: couple of months, but I expect that to be one
Speaker 1: area where we see it returned this month. So I
Speaker 1: expect to pop up in primate participation. I still see
Speaker 1: an upward trend there and that that's what helps sustain
Speaker 1: these these gargantuan job games month after months. So I
Speaker 1: do think there's some room to run there too. I
Speaker 1: primate participation for both men and women. And again we're
Speaker 1: talking about twenty five fifty four year old tire. It's
Speaker 1: still below last cycle and certainly the nineties cycle. So
Speaker 1: there's no reason that these workers can't re engage with
Speaker 1: the workforce. Let's talk about that. Some people that think
Speaker 1: this may be unique, this cycle might be unique, and
Speaker 1: maybe the participation rate can stay somewhere in and around
Speaker 1: the low sixties. Where do you see a heading. Well,
Speaker 1: we do have the downward pressure from the retiring baby boomers.
Speaker 1: So that is sort of a demographic reality that may
Speaker 1: fluctuate to some greater or lesser degree depending on whether
Speaker 1: they retire earlier or later. But we know that's a
Speaker 1: depressing force. It's going to hold it relatively black. And
Speaker 1: the question really revolved around how much younger workers are
Speaker 1: able to engage um and and return after periods outside
Speaker 1: the labor force. Julia Mrs Keene emails in and says
Speaker 1: Dr Coronado, please define prime age? Is that is that
Speaker 1: fifty nine to sixty two? What's so? I don't mean
Speaker 1: to say that you're not prime in your prime time,
Speaker 1: because you certainly are you um and uh and in
Speaker 1: trime you know, probably should expand the definition. Yes, I
Speaker 1: agree with that. What is primate? Surely to to people
Speaker 1: like you? What is primates? The typical definition from the
Speaker 1: Bureau of Labor Statistics is people aged twenty five to
Speaker 1: thirty excuse me, to fifty four. So you're definitely post schooling.
Speaker 1: You know, whether you've gotten a and or a master's degree,
Speaker 1: you're probably largely done. And then uh, you're probably not
Speaker 1: yet moving into retirement. So that's that's when you should Well,
Speaker 1: I got that one nailed. What is the prime ates
Speaker 1: changed over thirty fifty years? I mean, do you shift
Speaker 1: that out and expand to an older audience like we're
Speaker 1: all doing with our kids. We I mean, so the
Speaker 1: BLF has not done that, but you know you can
Speaker 1: expand it certainly, you can look at whatever age groups
Speaker 1: that you're interested in. And we have seen a trend
Speaker 1: towards later retirements, both for economic reasons because people took
Speaker 1: a huge hit in the Great Recession and couldn't retire
Speaker 1: um and then also because people are you know, living longer,
Speaker 1: they're more in service after jobs where they can work longer. Uh,
Speaker 1: And so we are seeing people engage in the labor
Speaker 1: force for longer and longer. If you talk to people
Speaker 1: like David John at a RP who spoke at the
Speaker 1: Chicago He thinks there's a lot of scope for engagement
Speaker 1: of older workers, you know, even on a part time basis,
Speaker 1: Like a lot of people do want to engage in
Speaker 1: the labor force at older age. The Bloomberg And of
Speaker 1: course this is from a pewer of labor statistics. Folks.
Speaker 1: We're making jokes about it, but their granularity of participation
Speaker 1: is wonderful. They have here John and statistic US labor
Speaker 1: force participation for World War two, Korean War in Vietnam males,
Speaker 1: which has obviously been declining with death. But but I
Speaker 1: mean the granularity is extraordinaries some real day town. Yeah,
Speaker 1: Julia Cornado, thank you so much. Really appreciated than sticking
Speaker 1: with this, you know, as we approached the pay for
Speaker 1: I don't know, there's some quick reaction with Julia. So
Speaker 1: let's digest some of that data, shall we. Seventy five
Speaker 1: K the median estimate one seventy five A big downside
Speaker 1: surprise in the FX market a week a dollar down
Speaker 1: a third of one percent, back to a ninety six
Speaker 1: handle on the dollar index. In the bond market, this
Speaker 1: is how treasuries shape up. Yields coming in four basis
Speaker 1: points on tens, coming in seven basis points on a
Speaker 1: two year yield, Your two year yield one eighty one,
Speaker 1: your ten year two point zero eight percent. The interesting
Speaker 1: part though, risk assets hanging in their future still just
Speaker 1: about positive up five points and positive two tents of
Speaker 1: one percent. But looking at the economic data tom to
Speaker 1: Julius point earlier in the program, there were some concerns
Speaker 1: around the big census story and how volatile it might
Speaker 1: make the headline number. If you look at the change
Speaker 1: in private payrolls ninety k that's a massive downside surprise
Speaker 1: as well. The estimate was one and with revisions down
Speaker 1: as well. Dr Cornetta could help us with that, Julia.
Speaker 1: We get a report our that has some constructive elements.
Speaker 1: I think, I think we need to go to the
Speaker 1: ADP Mouldy double digit number over to non farm payrolls
Speaker 1: seventy five, the two month revision. This is something. This
Speaker 1: is important, folks. Negative seventy thousand one month doesn't make
Speaker 1: your report, but if this extrapolates out what happens. Yeah,
Speaker 1: this is a worrisome report. I mean, we're seeing the
Speaker 1: weakness isn't just doesn't look to be concentrated in one sector.
Speaker 1: It looks we got the expected weakness in manufacturing and
Speaker 1: goods producing sectors, but also weakness and private service sectors.
Speaker 1: So retail was job losses, information technology saw job losses,
Speaker 1: and the government actually subtracted seventeen excuse me, fifteen thousand
Speaker 1: workers instead of adding about this thing, which is what
Speaker 1: was mostly expected. Do you see your census in there?
Speaker 1: Did you have time? You have to see a sense
Speaker 1: of statistic So so it looks like census is not
Speaker 1: only not hiring, but the uh actually most of the
Speaker 1: job losses in the government sector were on the state
Speaker 1: and local side. So um, yeah, a lot of a
Speaker 1: lot of a lot of weakness here. You know. To
Speaker 1: see the service sector crack like this is is something
Speaker 1: we definitely need to keep an eye on. Okay, Julia Cornado,
Speaker 1: thank you so much, greatly, greatly appreciate the perspective today
Speaker 1: with the macro policy perspective, working in fixed income but
Speaker 1: with a wonderfully holistic and I should also point out
Speaker 1: mathematical bassis. Jeffrey Rosenberg of Black Rock, Jeff, I want
Speaker 1: to rip up the script right now and go to
Speaker 1: Walton out on Twitter. Who's got a brilliant observation. Let
Speaker 1: me quote it exactly, Jeff Rosenberg, just like we quote
Speaker 1: the President when he tweets. I wonder how retirees in
Speaker 1: Germany are supposed to live off of a negative fixed income.
Speaker 1: Where do people in Germany think the money for retirees
Speaker 1: comes from the tooth ferry? Jeff. This this was something
Speaker 1: in London a theme. How do savers exist in negative
Speaker 1: interest rate nations? Well, they camp with their savings into
Speaker 1: safe assets and um you basically force savers out of
Speaker 1: the currency, which means you know something U s and
Speaker 1: msters don't think a lot about. But in the rest
Speaker 1: of the world there's a lot more willingness. And when
Speaker 1: you have a negative interest rate structure, you're forced to
Speaker 1: take your money outside of the U outside of your
Speaker 1: home country. You know, you look in Japan where they've
Speaker 1: had zero interest rates for a much longer experience. It's
Speaker 1: just a much longer experience with foreign investing, and you're
Speaker 1: forced to do that. So you have to move out
Speaker 1: the risk spectrum. It's uncomfortable. Um or you have to
Speaker 1: change your expectations in terms of how you plan for
Speaker 1: retirement and what you're expected return is. And even though
Speaker 1: we don't face negative interest rates, we face the same
Speaker 1: issues of the lower expected returns. Jeff, I'm looking at
Speaker 1: the German tenure yield. I'm looking at, folks, what's called
Speaker 1: a two standard deviation study. You and I took this
Speaker 1: final year where you know, we had to take a
Speaker 1: break because we were going to Fort Lauderdale or whatever.
Speaker 1: Rosenberg did standard deviations in fourth grade. I mean, Jeff Rosenberg,
Speaker 1: I'm sorry. The vector on the German tenure yield speaks
Speaker 1: of instabilities to come. What are those instabilities? Well know,
Speaker 1: the German tenure yield has been declining alongside of the
Speaker 1: U S yield and global yields, all pricing in a
Speaker 1: global growth slow down, the differences. They're starting from a
Speaker 1: much lower point. So right now the German tenure yield
Speaker 1: is negative two point negative point to five five and
Speaker 1: it's done a very steep downward trajectory. A lot of
Speaker 1: the other stories in the rest of the world away
Speaker 1: from the US, is that the growth has been slowing
Speaker 1: there as well. Uh, there's a lot more challenge when
Speaker 1: when the ECB is at the effective lower bound um,
Speaker 1: they have fewer tools. This was yesterday's news in terms
Speaker 1: of the ECB meeting. UH, and they're they're going to
Speaker 1: have to continue to try to support with perpetually, you know,
Speaker 1: negative interest rates. Jeff Rozenberg, We're gonna fold you over
Speaker 1: to being a trade expert. We see futures advanced, they
Speaker 1: explode from flat, DWAL futures up, SMP futures up eleven.
Speaker 1: I think it's called a bull market, and the yields churn.
Speaker 1: Here is the sequence of headlines that have come out
Speaker 1: a moment ago. I'm going to be very careful with this, folks,
Speaker 1: because this is a moving UH target. The president of
Speaker 1: Mexico feels Mexico thinks economy is doing fine. We respect
Speaker 1: rating companies points of view, of course, to rating companies,
Speaker 1: UH modifying their constructive view on Mexico. The oil company
Speaker 1: paymex has no problem to restructure debt, the oil company
Speaker 1: to start producing more by year end. He goes on
Speaker 1: to say, um, I am optimistic. Will we will reach
Speaker 1: a deal with the United States. I will review my
Speaker 1: stance on US situation on Saturday, and Bloomberg would note
Speaker 1: that the Mexican pace erases losses as the US payrolls. Uh,
Speaker 1: excuse me. Information came in this show's Jeff Rosenberg. If
Speaker 1: we get constructive Mexico and Chinese trade talk, how markets
Speaker 1: flip on a dying doesn't it? Well, it's been the issue,
Speaker 1: and the issue is that, going back to May six
Speaker 1: and and the China breakdown, that markets were really expecting
Speaker 1: a very different outcome than what they got. They were
Speaker 1: expecting a deal to go through unnecessarily sure how much
Speaker 1: teeth that deal would have, and that whole expectation has
Speaker 1: been under mind and in the aftermath has been a
Speaker 1: ratcheting up. Now, the Mexico thing was a new development.
Speaker 1: Let's use tariffs to address a non trade related issue,
Speaker 1: which only further heightens uncertainty. But the but the punchline
Speaker 1: here is that policy has moved from expansionary and supportive
Speaker 1: to to contractionary through the degree it increases uncertainty, and
Speaker 1: businesses don't like uncertainty. Uncertainty is bad for growth. Jeff,
Speaker 1: I want to get a little wonky here. We can
Speaker 1: do that with a gentleman from Carnegie Mellon, and that
Speaker 1: is the left tail of all that we observe. We
Speaker 1: had a wonderful conversation this morning with our Cameron christ
Speaker 1: about the difference in yield between three months and two
Speaker 1: year and then the difference in yield between two year
Speaker 1: in tenure and the dynamics there are extraordinary. What do
Speaker 1: these extraordinary yield curve discontinuities, what do they mean to
Speaker 1: the stability of the real risk part of the curve
Speaker 1: of the left tail? Well, it's it's clearly and this
Speaker 1: has been the story for a while. But the bond
Speaker 1: market is telling you about its concerns. Everything we've been
Speaker 1: talking about this morning, from the payroll report to uncertainties
Speaker 1: created by trade is a decline in growth and a
Speaker 1: potential shock thank you growth, And that's what the bond
Speaker 1: market is, This is saying and expecting. This is why
Speaker 1: we have Jeff Rosenberg on, folks. This is so so
Speaker 1: so important. There are four or five, three, seven things
Speaker 1: that always make a determinant of price. And on the
Speaker 1: Fisherian rule going back a zillion years, Irving Fisher it's
Speaker 1: you see it in the bond market. Price up, you'll
Speaker 1: down or the other way as well. And Jeff, I
Speaker 1: agree with you that growth worries have overwhelmed every other analysis.
Speaker 1: Is that correct? That is correct, and it's a real
Speaker 1: pivot from where we were only you know, six seven
Speaker 1: weeks for where the pivot on trade that were the
Speaker 1: concern was on inflation and what that meant for the
Speaker 1: ability of the Fed to raise rates in the process
Speaker 1: of normalization. And and this is occurring again in an
Speaker 1: environment where global growth has been weakening, and with the
Speaker 1: weakening in the outlook from trade and uncertainty, you added
Speaker 1: to a sense that this is really a new risk
Speaker 1: to a recessionary outcome. And that's what the bond markets
Speaker 1: basically started pricing in. And then with that comes the expectation,
Speaker 1: of course that the it is going to react, and
Speaker 1: now all the narrative around the insurance cut and when
Speaker 1: will they move and how much will they move by
Speaker 1: and the bond markets pricing in a lot. Jeff Rosen,
Speaker 1: thank you so much. Kevin Hasset is out of the
Speaker 1: Wonderful Economics Program at the University of Pennsylvania. He has
Speaker 1: been on the show in different guys as many times
Speaker 1: recently as chairman of President Trump's Council of Economic Advisors.
Speaker 1: He has been someone who was always pushed for free trade.
Speaker 1: It is good to have a job today conversation with
Speaker 1: Kevin Hassett is leaving the White House. Here he is
Speaker 1: with John Pharaoh. Now we can get the Trump administration's
Speaker 1: views on the job for a called we joined on
Speaker 1: TV and on radio by Kevin Hassett, Council of Economic
Speaker 1: Advisors Chairman, Kevin. Great to see you, as it always.
Speaker 1: Let's just stop arose report your initial thoughts, Kevin on
Speaker 1: that downside surprise, Well, you know, I think that it
Speaker 1: was a little bit below our expectation and the market expectation,
Speaker 1: but there were some special factors. I think one of
Speaker 1: the special factors that we were following closely that have
Speaker 1: not seen a lot of people talk about is the
Speaker 1: impact of the flooding, which you know, shut down I
Speaker 1: twenty nine made it so that a whole bunch of
Speaker 1: the ports could not operate. And our estimate is that
Speaker 1: knocked maybe about forty thousand jobs off the number. And
Speaker 1: if you had that back in then you know, it's
Speaker 1: pretty much close to a normal up and down. For sure,
Speaker 1: there's a little bit of job slowing, but we're still
Speaker 1: looking at I think, you know, controlling for that a
Speaker 1: three month average that's probably you know, next week is
Speaker 1: going to look in the one range, which is about
Speaker 1: what we've had for the last two years, just in
Speaker 1: terms of a trade story and the damage that it
Speaker 1: may or may not be doing to certain industries. Right now,
Speaker 1: if you look at primary metal, steel, aluminum, metal fabricators
Speaker 1: all down for a third straight month. Here many economists
Speaker 1: predicted this would happen. Kevin, do you think that is
Speaker 1: a consequence and result of the tariffs of this administration
Speaker 1: wang on those sectors at the moment? Well, I think that,
Speaker 1: you know, for steel at aluminum, the tariffs definitely you
Speaker 1: to have help to the you know, I've looked at
Speaker 1: the numbers and they inflected quite a bit when they
Speaker 1: went in. The thing about the job's number just just
Speaker 1: a pivot. I've heard a lot of folks also talking
Speaker 1: about how well, maybe the job's number reflects, you know,
Speaker 1: the trade problems. But remember that this is May, and
Speaker 1: so this job's number comes before anything regarding Mexico. And
Speaker 1: also the only thing that really happened me was that
Speaker 1: the Chinese talks that are wood block, and so I
Speaker 1: think that it's hard to imagine that a roadblock of
Speaker 1: the Chinese talks could have a really big macroeconomic effects
Speaker 1: so I think that looking at the effect of trade
Speaker 1: on the numbers right now. For sure, there are specific
Speaker 1: things and specific industries, but overall, I don't think it's
Speaker 1: a really big part of the storage. Kevin sending that
Speaker 1: persistent tension that is wank on financial conditions, it's wank
Speaker 1: on confidence, and it seems to be wank on investment
Speaker 1: as well. There is quite a clear read through. Are
Speaker 1: you saying this no, Well, I think that absolutely uncertainty,
Speaker 1: you know, can be a negative for the economy, but
Speaker 1: there's upside risks and downside risks. And I think that
Speaker 1: with China, you know, if we if we remember how
Speaker 1: happy markets send it to me every day that we
Speaker 1: got closer to a deal, you know, if we at
Speaker 1: the G twenty talks, can can finally you know, get
Speaker 1: that thing over the hub. That's a really big upside
Speaker 1: risk with the outlook for I think that you know,
Speaker 1: we're trying, we're shooting for yeah, but we're shooting for reform,
Speaker 1: right and I think that reform is uncertain. But I
Speaker 1: think that if you look at how broke at our
Speaker 1: trade relationship with China was that it makes sense for
Speaker 1: the president to prioritize reform and many many economists would
Speaker 1: agree with you. It's an economic so for a positive
Speaker 1: economic accountcome. Mexico is very very different. It's an economic
Speaker 1: tool for a political outcome. So talk to me about
Speaker 1: what is happening with talks and why you think progress
Speaker 1: has been made. What is it about these talks where
Speaker 1: the progress has been made, Kevin, what specifically right? Well,
Speaker 1: the specifics are going to be presented to the President
Speaker 1: when he lands about four thirty today and then he's
Speaker 1: gonna weigh all his options. But but you know, they've
Speaker 1: been ongoing talks throughout the week. Secretary of Pompeo has
Speaker 1: been meeting for the Foreign Minister of Mexico, and you know,
Speaker 1: my briefing on their talks have been that they're they've
Speaker 1: made a lot of progress that a lot of the
Speaker 1: material things that our professionals have said that they need
Speaker 1: to be done by Mexico to help with secure the
Speaker 1: border that they're agreeing to do. I don't know if
Speaker 1: they're gonna go all the way to what the president wants,
Speaker 1: but I'm sure the President will have some important evidence
Speaker 1: to weigh when he lands at the end of the day.
Speaker 1: In the meantime, Kevin of the Council of Economic Advice
Speaker 1: has modeled the impact of tariffs on the U. S. Economy,
Speaker 1: tariffs on Mexico and what it means for U. S GDP.
Speaker 1: You know, our our job is to is to provide
Speaker 1: a material advice to the President on all of his decisions.
Speaker 1: But unless we publish it, then we're not meant to
Speaker 1: talk about it again. So yeah, I can't talk about
Speaker 1: what I've presented to the president or not. Well, you
Speaker 1: can told to me about a kind of advice you
Speaker 1: given to the president and the kind of damage you
Speaker 1: think it would do to the U. S. Economy. Do
Speaker 1: you think it could be positive for the U. S. Economy?
Speaker 1: You know, I think that that the crucial thing for
Speaker 1: the c h AIR is to advise the president, you know,
Speaker 1: and to make that advice, you know, be between them
Speaker 1: when decisions are made. No, it's true, and then would
Speaker 1: not a loyal team player. I can't disagree with the decision.
Speaker 1: You say you disagree with the decision, then no, that's
Speaker 1: what you're trying to know. I'm asking you, did you
Speaker 1: disagree with the decision. I think that the President's right
Speaker 1: to emphasize reform and with Mexico. I think we have
Speaker 1: a border crisis, and if you weigh the costs of
Speaker 1: of the border crisis, that it's very easy to think that,
Speaker 1: you know, the leverage that he's gained with Mexico could
Speaker 1: easily pass a cost spend of the test. Did you
Speaker 1: disagree on the tariff decision, Kevin? Did you disagree on
Speaker 1: the taff decision? Did you agree with him? Uh? I'm
Speaker 1: not supposed to talk about my my private conversations with
Speaker 1: the president, but not about the private conversations with Say,
Speaker 1: if you do this, let's let me talk. Please carry
Speaker 1: on to say, if you do this, here's what happens.
Speaker 1: If you do that, that's what happens. You come on
Speaker 1: this program to tell us what you also think about
Speaker 1: the damage that could be done from the tariffs. I mean,
Speaker 1: you don't have to reveal the private conversation with the president.
Speaker 1: Please tell me in your assessment do you think it
Speaker 1: could weigh on US GDP this year if these tariffs
Speaker 1: go into effect on Monday. I think that the five
Speaker 1: percent tariff is a much worse problem for Mexico, as
Speaker 1: I've said in previous interviews this week, than it is
Speaker 1: for the US. But I think that, you know, beyond that,
Speaker 1: we'll have to wait and see. I think Mexico is
Speaker 1: highly motivated because of that to make sure that that
Speaker 1: doesn't happen by helping us secure the border. Kevin. Many
Speaker 1: people think that you're stepping down because you do disagree
Speaker 1: with the President on the tariffs. Just put the record
Speaker 1: straight there for us as you are on your way out.
Speaker 1: What are your thoughts? What actually happened? Oh? I mean,
Speaker 1: what do you mean? What I actually have? But it's
Speaker 1: their utterly separate things. The chair is almost all you
Speaker 1: could go back and look surfer about two years. I've
Speaker 1: got a son who is about to be a senior
Speaker 1: in high school as the youngest, and it's a good
Speaker 1: time to spend more time with Bailey. And it's also
Speaker 1: a normal circle of life for c A to hand
Speaker 1: the slot off to somebody else after a couple of years.
Speaker 1: We'd love to know what's coming next for you, Kevin.
Speaker 1: What is coming next? And have you spoken to the President? Yeah?
Speaker 1: I really don't know yet, but thanks for for asking.
Speaker 1: But but you know, I really haven't made any friend.
Speaker 1: What about a job at the Fed? Would you be
Speaker 1: interested in a job at the Fed? Kevin? Absolutely not,
Speaker 1: absolutely not. You can rule that one out? Is there
Speaker 1: a chance you can rule that one out? Kevin has it.
Speaker 1: Always great to get your thoughts and your thoughts on
Speaker 1: the things you can't tell us as well. Kevin has
Speaker 1: it there. Thank you very much, good luck for the
Speaker 1: rest of the month before you step down. Thank you
Speaker 1: for joining us as always. John Ferroll in conversation with
Speaker 1: the Chairman Presidents Council of Economic Advisors. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.