WEBVTT - Xi Will Welcome Distraction of U.S. in Middle East, Cook Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:28.480 SoundCloud and at Bloomberg dot com. Of course, of the 0:00:28.600 --> 0:00:32.640 United States overnight attacking in the Assyrian air field, Stephen 0:00:32.680 --> 0:00:35.519 Cook as a senior fellow for Middle Eastern Studies at 0:00:35.520 --> 0:00:39.479 the Council on Foreign Relations, and he joins us now. Stephen, 0:00:39.479 --> 0:00:41.680 thank you for being with me. Um. You know, this 0:00:41.760 --> 0:00:44.599 decision comes about three and a half years after President 0:00:44.640 --> 0:00:50.159 Obama's effort to threaten assad with Basher Alissa, the president 0:00:50.159 --> 0:00:53.720 of Syria, with military action after an earlier chemical weapons 0:00:53.760 --> 0:00:57.640 attack that killed hundreds of people. He even used the 0:00:57.800 --> 0:01:01.520 term a red line. What does this say about what's 0:01:01.520 --> 0:01:03.279 happened in the last three and a half years and 0:01:03.280 --> 0:01:07.000 whether there needs to be a policy change. Well, I 0:01:07.040 --> 0:01:11.240 think the last evening strike is a reflective effect that 0:01:11.240 --> 0:01:14.839 you have a different administration, uh, and that President Trump, 0:01:14.840 --> 0:01:18.960 who ran hard obviously against President Obama's record and ran 0:01:19.240 --> 0:01:24.040 on restoring American strength and credibility around the world. Couldn't 0:01:24.080 --> 0:01:31.560 ignore uhhar lassa chemical attack. Uh it is um. I 0:01:31.600 --> 0:01:34.200 think a strike that is intended to send a message 0:01:34.240 --> 0:01:36.600 to the Syrian leader as well as his Russian and 0:01:36.640 --> 0:01:39.759 Iranian backers, But I don't think it augurs a major 0:01:39.840 --> 0:01:43.880 shift in American policy towards Syria. Does it send a 0:01:43.920 --> 0:01:47.360 message to other nations such as China. We know that 0:01:47.400 --> 0:01:50.520 the President is a meeting with the President Jijing Ping 0:01:50.600 --> 0:01:53.840 of China and Mara Lago. Well, it's a that's a 0:01:53.920 --> 0:01:57.640 very interesting question. Certainly, the timing with a major world 0:01:57.720 --> 0:02:01.560 leader having bilateral meetings with the president is uh. It 0:02:02.040 --> 0:02:06.640 makes for an important demonstration of American resolve, especially since 0:02:06.680 --> 0:02:08.600 the President is going to be talking to the Chinese 0:02:08.680 --> 0:02:11.560 leader about North Korea. What my contacts in China are 0:02:11.560 --> 0:02:14.080 telling me is that she is probably going to shrug 0:02:14.120 --> 0:02:18.120 this off, take note of it, and actually welcome further 0:02:18.160 --> 0:02:22.840 American entanglement in the Middle East. Why is that because 0:02:22.840 --> 0:02:25.640 they feel that the United States will protect their oil 0:02:25.760 --> 0:02:29.639 lifeline in importing oil from the Middle East to China. Well, 0:02:29.680 --> 0:02:33.120 it tends the United States down in the Middle East. Um. 0:02:33.320 --> 0:02:37.400 While and takes its attention away from developments in for example, 0:02:37.400 --> 0:02:41.919 of the South China Sea or in relations to North Korea. UM. 0:02:41.919 --> 0:02:44.960 This is from the Chinese perspective. Those parts of the 0:02:45.000 --> 0:02:49.000 world are within China's um sphere of influence, and as 0:02:49.040 --> 0:02:51.639 long as the United States is engaged in the Middle East, 0:02:51.680 --> 0:02:54.200 there's less attention that can be paid to Asia. Well, 0:02:54.240 --> 0:02:56.280 you know, Steven, earlier in the program, I was speaking 0:02:56.320 --> 0:03:00.360 with Leonard Burschitsky, Bloomberview columnist joining us from Bear Lynn, 0:03:00.440 --> 0:03:04.560 and he made it clear that Russian President Vladimir Putin 0:03:04.639 --> 0:03:07.840 is not interested in a direct military confrontation with the 0:03:07.960 --> 0:03:14.359 United States. Having said that, then why place Russian troops 0:03:14.440 --> 0:03:19.080 and or aircraft in a particularly well in a harm's 0:03:19.120 --> 0:03:23.280 way perhaps, but also to play this kind of game 0:03:23.320 --> 0:03:29.120 of chicken flying over the Baltic and Eastern Europe. What 0:03:29.360 --> 0:03:32.880 is the intent? Well, I think it's clear that the 0:03:32.960 --> 0:03:37.120 Russian president is interested in re establishing Russia as a 0:03:37.120 --> 0:03:42.559 global power. UH. Syria in particular has been a bridgehead 0:03:42.680 --> 0:03:45.720 for the Russians to re establish their influence throughout the 0:03:45.720 --> 0:03:47.720 Middle East. During the Soviet era of the Russians were 0:03:47.800 --> 0:03:51.800 quite active in the Middle East. UH and Putin clearly 0:03:51.800 --> 0:03:57.280 has strategy UH in order to UM make Russia great 0:03:57.280 --> 0:03:59.520 again in the Middle East at the very least. Okay, 0:03:59.560 --> 0:04:01.320 but having us But I want I want to then 0:04:01.320 --> 0:04:03.320 turn that on to what you just said having to 0:04:03.360 --> 0:04:05.800 do with China. That if the Chinese are are in 0:04:05.840 --> 0:04:08.400 a sense happy that the United States is going to 0:04:08.480 --> 0:04:12.320 be pulled or is moving more into the Middle East 0:04:12.360 --> 0:04:14.680 in terms of its attention, that wouldn't the same be 0:04:14.880 --> 0:04:18.800 true for Russia. And if it is, then you know 0:04:18.960 --> 0:04:21.600 what does Vladimir Putin want? I mean, you give them 0:04:21.600 --> 0:04:24.240 a medal that says, all right, you are a world power. 0:04:24.440 --> 0:04:27.880 Great now stop trying to turn things into a fight. 0:04:28.400 --> 0:04:31.960 I think the Russians and the Chinese have very different calculations. 0:04:32.200 --> 0:04:35.160 The Chinese pursue a foreign policy that's essentially a mercantile 0:04:35.240 --> 0:04:37.640 ist one, and you alluded to it before, h that 0:04:37.839 --> 0:04:42.320 is to ensure UM that energy supplies flow out of 0:04:42.320 --> 0:04:44.480 the region, and thus for the United States has been 0:04:44.480 --> 0:04:47.680 willing to ensure that provide the kind of security for 0:04:47.720 --> 0:04:52.479 that UM that allows the Chinese to enjoy um, enjoy 0:04:52.560 --> 0:04:57.160 the energy resources of the Middle East unfettered. The Russians 0:04:57.160 --> 0:05:00.159 have a very different calculation UM, from the perspective of 0:05:00.600 --> 0:05:03.200 Vladimir Putin, the end of the Soviet Union was the 0:05:03.240 --> 0:05:06.000 worst day in the world, and that Russia is a 0:05:06.000 --> 0:05:09.240 great power that should be directly involved in the Middle 0:05:09.240 --> 0:05:11.440 East because the Middle East is relatively close to the 0:05:11.520 --> 0:05:16.839 Russian homeland. Russia has problems of its own with Islamic extremism, 0:05:16.880 --> 0:05:19.400 and well, you had the bomb blast in St. Petersburg, 0:05:19.480 --> 0:05:22.280 but Russia in the subway that began the week on Monday, 0:05:22.279 --> 0:05:27.719 that's exactly right. And the Russians believe that UM support 0:05:27.839 --> 0:05:32.920 for leaders like Bashar al assad Uh in contrast to 0:05:33.920 --> 0:05:36.240 UH the United States. And this is from the Russian perspective, 0:05:36.240 --> 0:05:40.880 which welcomed uprisings against these leaders UM. The Russians perceived 0:05:41.279 --> 0:05:44.520 that if these leaders follow these authoritarian dictators in the 0:05:44.560 --> 0:05:50.680 region fall, it'll bring to power Islamist Islamis Islamist extremists. 0:05:50.680 --> 0:05:53.279 De pardon me. It's kind of ironic, isn't it, though. 0:05:53.279 --> 0:05:57.240 I Mean, on the one hand, they're talking about combating terrorism, 0:05:57.320 --> 0:06:00.760 and yet the terrorism continues UH and then still keep 0:06:00.760 --> 0:06:03.040 the same people in place. That is an irony. Of course, 0:06:15.360 --> 0:06:18.920 the United States attack Syrian air base with a barrage 0:06:18.960 --> 0:06:23.360 of cruise missiles last night retaliation for this week's chemical 0:06:23.440 --> 0:06:27.600 weapons attack against civilians. President Donald Trump casting the US 0:06:27.640 --> 0:06:30.839 assault that's vital to deter future use of poison gas. 0:06:31.080 --> 0:06:33.520 He also called on other nations to join in seeking 0:06:33.560 --> 0:06:37.680 to quote end the slaughter and bloodshed in Syria. Here 0:06:37.680 --> 0:06:40.320 to tell us more is Tony Capacio. He is our 0:06:40.360 --> 0:06:43.680 Pentagon and National Security porter for Bloomberg and he joins 0:06:43.760 --> 0:06:48.159 us from Washington, d C. Tony, what can detail can 0:06:48.200 --> 0:06:52.400 you add to what we already know about these attacks? Okay? Well, 0:06:52.960 --> 0:06:55.159 I picked up this morning at the operation and the 0:06:55.200 --> 0:06:58.640 operation came together in about twenty four hours. So the 0:06:58.760 --> 0:07:01.839 Navy actually did two rehearsals of it. The two vessels 0:07:01.880 --> 0:07:05.479 involved the two rehearsals of it. And this is the 0:07:05.560 --> 0:07:08.240 US s ROSS in the US S Porter, correct, right, 0:07:08.680 --> 0:07:13.200 they I'll give you some detail. The Ross fired Dity 0:07:13.280 --> 0:07:17.640 six of the latest model rate theon Block four E 0:07:17.880 --> 0:07:23.360 Tomahawk cruise missiles. The porter fired thirty four of them. 0:07:23.520 --> 0:07:27.120 Each missile took up minutes to sixty minutes to hit 0:07:27.160 --> 0:07:30.680 its target. And there were backups in the with the 0:07:30.720 --> 0:07:33.200 Bush Strike Group in the Persian Gulf in case any 0:07:33.240 --> 0:07:36.800 of these missiles and malfunctions and those those both those 0:07:36.800 --> 0:07:39.480 ships took the two rehearsals from what I was told 0:07:39.480 --> 0:07:42.800 where they went to the dry runs of lunch sequence 0:07:42.840 --> 0:07:45.640 and actually launching. So it came together pretty fast. Now, 0:07:45.680 --> 0:07:49.640 the governor the Syrian government, uh, the governor of the 0:07:49.680 --> 0:07:54.760 homes of province Talala Bazari. He said that some Syrians 0:07:54.800 --> 0:07:56.880 had been killed and others wounded, but there were no 0:07:57.000 --> 0:08:01.240 precise details. Do we know anything about the results, not yet, 0:08:01.680 --> 0:08:06.360 but I mean, it's plausible they picked that time for 0:08:06.600 --> 0:08:11.040 forty am. Whenever is minimal would there the minimal activity 0:08:11.040 --> 0:08:13.800 of the air base. So that's pretty standard for these 0:08:13.800 --> 0:08:17.440 type of operations. You know, it's conceivable that some some 0:08:17.480 --> 0:08:19.800 people were killed. I'm not going to discount it, but 0:08:19.840 --> 0:08:21.920 I don't have any incident into that. Now, all right, 0:08:22.000 --> 0:08:26.680 and let's talk about the implications for this. With the 0:08:26.720 --> 0:08:29.600 meeting that President Donald Trump is currently having with Chinese 0:08:29.600 --> 0:08:32.360 President j Ping. What kind of signal do you think 0:08:32.400 --> 0:08:34.560 that sends to him about one of their big topics, 0:08:34.559 --> 0:08:39.520 which is North Korea's nuclear program. Well, I think the 0:08:39.600 --> 0:08:42.360 Chinese and North Koreans, now we'll have to reckon with 0:08:42.440 --> 0:08:46.480 the fact that They're dealing with a US president who 0:08:46.559 --> 0:08:51.480 moved pretty quickly, albeit with a precision limited strike. But 0:08:51.520 --> 0:08:56.720 he moved pretty quickly to retaliate with the minimal consultation 0:08:56.760 --> 0:09:00.520 with Congress he recalled during the Vietnam War, the Nixon 0:09:01.320 --> 0:09:03.960 wanted to invoke the kind of a madman theory with 0:09:04.120 --> 0:09:06.679 North North Vietnam in terms of whether he you know, 0:09:07.120 --> 0:09:09.760 just how much he would do what he would do. Well, 0:09:09.800 --> 0:09:14.120 maybe there's a madman theory at play here. Trump showing 0:09:14.160 --> 0:09:19.480 that he's quick, impulsive, fast on the draw, and that 0:09:19.600 --> 0:09:23.480 might ship send a chill of North Korea or China 0:09:23.559 --> 0:09:26.760 spins Well. Rex Tillis, and Secretary of States, says, it 0:09:26.800 --> 0:09:30.160 clearly indicates the president is willing to take decisive action 0:09:30.360 --> 0:09:32.880 when called for. What does this mean for the U. S. 0:09:32.920 --> 0:09:36.600 Relationship with Russia, because, of course the President has called 0:09:36.640 --> 0:09:40.520 for greater counter terrorism cooperation with Russia. I think the 0:09:40.600 --> 0:09:43.160 impact will be minimal because the U. S took pains. 0:09:43.679 --> 0:09:48.080 They contacted the Russians through they called this deconfliction link 0:09:48.160 --> 0:09:51.320 that was set up there because over air strikes. You know, 0:09:51.360 --> 0:09:54.680 we did we tipped the Russians off, and locally we 0:09:54.679 --> 0:09:57.360 didn't tip them off through at the Moscow level, but 0:09:57.440 --> 0:10:00.200 we tipped the Russians off locally that this was gonna 0:10:00.320 --> 0:10:03.800 happen the US, that those cruise misses were precise enough, 0:10:03.880 --> 0:10:07.280 they did not hit the airfield areas where the Russians 0:10:07.280 --> 0:10:11.080 were sleeping or are stationed. You know, we give him 0:10:11.120 --> 0:10:14.000 advanced warning, and you know, Pim, I think it's going 0:10:14.040 --> 0:10:16.600 to show that the Russians did not tip the Syrians off. 0:10:16.920 --> 0:10:19.559 That we don't know that definitively, will know that later today. 0:10:19.559 --> 0:10:21.920 But I don't think the Russians tipped the Syrians off. 0:10:21.960 --> 0:10:25.160 But there's no indications of planes taking off ahead of time. 0:10:25.840 --> 0:10:28.240 So I'm met sure what the long term implications on 0:10:28.240 --> 0:10:31.959 the US Russian relations are. I leaned towards it might 0:10:32.080 --> 0:10:35.439 reinforce the fact that we can be trusted allies. Does 0:10:35.480 --> 0:10:39.079 it also change the dynamic when it comes to Vladimir 0:10:39.080 --> 0:10:44.280 Putin's support of President bush are Alissa that indeed, perhaps 0:10:44.320 --> 0:10:48.600 they are not as strong allies as previously thought if 0:10:48.600 --> 0:10:51.600 the Russian reaction is muted. I tend to agree with 0:10:51.640 --> 0:10:54.440 you there that the rush the relationship with Syrias not 0:10:54.559 --> 0:10:57.880 as a close as we thought. I mean, it depends 0:10:57.880 --> 0:10:59.960 on the reaction from Russian and so far it's been 0:11:00.080 --> 0:11:04.520 freely muted. Well, the UN ambassador the Russians, a deputy 0:11:04.600 --> 0:11:08.040 UN Ambassador of Vladimir sorokof Is he warned that any 0:11:08.080 --> 0:11:10.600 negative consequences from the strike would be quote on the 0:11:10.600 --> 0:11:15.400 shoulders of those who initiated such a doubtful and tragic enterprise. 0:11:15.520 --> 0:11:17.800 Is he just using diplomatic language because he's got nothing 0:11:17.800 --> 0:11:20.640 else to say? Well, that's that's the first cut outrage. 0:11:20.760 --> 0:11:22.719 I mean the follow up will be more important in 0:11:22.800 --> 0:11:24.760 terms of what impact that's going to have in Syria. 0:11:25.559 --> 0:11:29.960 If the Russians start painting or illuminating US planes with 0:11:30.000 --> 0:11:35.640 their radars and act in an active peak or retaliation subtle, 0:11:36.040 --> 0:11:39.640 not subtle, but a retaliation short of firing missiles, that'll 0:11:39.679 --> 0:11:42.160 be more of a leading indicator than whatever words come 0:11:42.200 --> 0:11:45.839 out of the U. N Ambassador Tony, What about Steve 0:11:45.880 --> 0:11:50.440 Bannon and his departure for the National Security Council. He 0:11:50.840 --> 0:11:56.599 has previously spoken about the US being overextended outside America. 0:11:57.000 --> 0:12:00.280 Do you think that the National Security Council's changed anything 0:12:00.280 --> 0:12:03.400 to do with this? Yeah? I think one of one 0:12:03.520 --> 0:12:06.400 changes that the Pentagon was allowed to plan this on 0:12:06.440 --> 0:12:08.840 their own, really quickly, without a lot of back and 0:12:08.920 --> 0:12:12.959 forth was to National Security Council. I think that accounts 0:12:12.960 --> 0:12:15.680 in some respect for the fast, for the rapid nature 0:12:15.679 --> 0:12:18.840 of the the operation that the Pentagon was able to 0:12:18.840 --> 0:12:21.320 pose together on its own without without a lot of 0:12:21.600 --> 0:12:25.040 mother may I from the National Security Council. Indeed, just 0:12:25.080 --> 0:12:28.760 the last point to you, Tony, what's next? Do we 0:12:28.800 --> 0:12:30.880 just wait and see or is there going to be 0:12:30.960 --> 0:12:35.319 some detail about some change in policy? I think it 0:12:35.360 --> 0:12:37.439 will be a what what we're gonna learn more from 0:12:37.440 --> 0:12:40.679 the Pentagon? Today's the battle damage assessment, you know, the 0:12:41.120 --> 0:12:46.679 nuts and bolts of military attack aftermath. I think you're 0:12:46.679 --> 0:12:49.680 going to see maybe a letter to Congress from the 0:12:49.679 --> 0:12:53.120 White House asking for an authorization for the use of 0:12:53.160 --> 0:12:57.360 military force on Syria. I think that that's one possible 0:12:57.559 --> 0:13:00.520 the plausible follow up. All right, what we leave it there, 0:13:00.520 --> 0:13:02.880 but we look forward to you covering this topic for US. 0:13:02.920 --> 0:13:06.920 Tony Capacio as our Pentagon and National Security reporter for 0:13:07.160 --> 0:13:12.160 Bloomberg joining us from Washington, d C. This is Bloomberg. 0:13:24.559 --> 0:13:27.880 The unemployment rate falling to four and a half percent, 0:13:27.960 --> 0:13:31.600 that's down from four point seven percent. Why no, cheers? Well, 0:13:31.840 --> 0:13:36.439 payrolls only adding ninety eight thousand jobs last month. Economists, 0:13:36.440 --> 0:13:38.920 we're looking for about a hundred and eighty thousand to 0:13:39.040 --> 0:13:41.600 be added. Here to tell us more about the report 0:13:41.679 --> 0:13:45.000 and it's the factor of wages is al A Grissani. 0:13:45.080 --> 0:13:48.520 He is a former assistant Labor Secretary under President Ronald Reagan. 0:13:48.559 --> 0:13:51.120 Al thanks for being in the studio and also joining 0:13:51.200 --> 0:13:53.760 us is Carlick Godnna. He's the chief US economist for 0:13:53.840 --> 0:13:57.440 Bloomberg Intelligence out. Let's come to you first and just 0:13:57.520 --> 0:14:00.600 make your case about wage growth. Two point seven percent 0:14:00.800 --> 0:14:03.840 increase year over year. You say that's not enough, No, 0:14:03.960 --> 0:14:06.240 it's not. In good morning, pim um. If you look 0:14:06.280 --> 0:14:08.600 at wage growth over the last twenty years, it's been 0:14:08.640 --> 0:14:13.000 steadily going down. And there was hope that with this recovery, 0:14:13.040 --> 0:14:16.120 which really started eight years ago when the Fed ease 0:14:16.240 --> 0:14:19.560 monetary rates in the Obama administration, that now with the 0:14:19.600 --> 0:14:22.680 pickup in the with the Trump administration and the change 0:14:22.680 --> 0:14:24.840 and all the things people are talking about, that we 0:14:24.880 --> 0:14:27.680 would finally see wages get back to growth, which would 0:14:27.680 --> 0:14:31.320 be really an indication of a real, sustained, long term recovery. 0:14:31.400 --> 0:14:32.840 What kind of number are you looking for if you 0:14:32.880 --> 0:14:35.120 don't like two point seven percent? What what what do 0:14:35.160 --> 0:14:36.560 you think would work well? If you go back to 0:14:36.600 --> 0:14:39.840 the historical standards when really we were in real, real 0:14:39.960 --> 0:14:44.280 three to four percent GDP growth UH rates in the 0:14:44.640 --> 0:14:46.640 in the growing economy, you're looking at four to five 0:14:46.680 --> 0:14:50.000 percent wage growth that's needed to sustain a long term recovery. 0:14:50.040 --> 0:14:52.000 All right, let's go to car Record Dona, chief US 0:14:52.040 --> 0:14:54.400 economists for Bloomberg Intelligence. What do you think about this 0:14:54.480 --> 0:14:56.920 four to five percent wage increase? Do you think that 0:14:56.960 --> 0:14:59.640 would do it? I think that would certainly help four 0:14:59.720 --> 0:15:03.800 to economic momentum and maybe push us back towards UH 0:15:04.000 --> 0:15:07.680 let's say eighties or nineties style growth rates from the 0:15:07.720 --> 0:15:11.000 two percent which has plagued the economy over the last 0:15:11.280 --> 0:15:14.360 eight years. What's the what's the relationship though between wage 0:15:14.400 --> 0:15:19.560 growth and productivity? Well, as workers become more expensive than 0:15:19.680 --> 0:15:23.200 employers will look for ways to minimize that input cost, 0:15:23.280 --> 0:15:25.440 and so they invest in capital. And you're seeing it 0:15:25.680 --> 0:15:32.400 from automated UH register clerks at fast food joints or 0:15:32.480 --> 0:15:34.760 no clerks at all when you do the check out 0:15:34.880 --> 0:15:38.000 yourself that's increasingly exactly or self check out in a 0:15:38.240 --> 0:15:42.640 grocery or retail outlet. And so as wage pressures pick up, 0:15:42.680 --> 0:15:46.200 you'll get more productivity gains. But we've had relatively cheap 0:15:46.480 --> 0:15:49.480 labor over the last ten years or so, so there's 0:15:49.480 --> 0:15:51.640 not been a lot of incentive for employers to make 0:15:51.720 --> 0:15:54.560 those types of investments. That's changing now because we are 0:15:54.600 --> 0:15:58.080 seeing a bit more wage pressure. Alright, what, having having 0:15:58.200 --> 0:16:01.800 said that out to you, if indeed we are entering 0:16:01.880 --> 0:16:07.040 a period of more rapid automation, where will the wage 0:16:07.240 --> 0:16:11.800 growth come from. If indeed the wages that employers will 0:16:11.840 --> 0:16:17.239 have to pay can alternatively be put into artificial intelligence 0:16:17.440 --> 0:16:21.960 robots and even dare I say it offshore, Yes, well, 0:16:22.040 --> 0:16:25.160 we have a let's add this to the equation. We 0:16:25.320 --> 0:16:28.000 have a secular change going on in the economy that 0:16:28.120 --> 0:16:30.720 speaks to this. The secular change is what you're talking about, 0:16:31.080 --> 0:16:34.440 the move from labor to tomorrow automation, etcetera. And you 0:16:34.480 --> 0:16:36.760 can see it in the retail job numbers today thirty 0:16:36.800 --> 0:16:39.240 thou down. That may be the beginning of what we're 0:16:39.240 --> 0:16:42.160 starting to see as all these malls are closing and 0:16:42.200 --> 0:16:44.560 the retailers are pulling back. So that's a sign of 0:16:44.640 --> 0:16:47.000 what I'm talking about and the secular change. And do 0:16:47.040 --> 0:16:49.840 you think that that comes what from the competition from 0:16:49.960 --> 0:16:53.280 Amazon and other online retailers that that sort of stands 0:16:53.320 --> 0:16:56.200 in the way of this increases. And that's code for automation, 0:16:56.320 --> 0:16:59.000 isn't it. And I see it my business too. We're 0:16:59.040 --> 0:17:02.160 all data and from nation businesses and the turnaround business 0:17:02.520 --> 0:17:05.679 are now becoming commoditized. So where's the value add going 0:17:05.720 --> 0:17:08.320 to come from the drive's wages in the future. It's 0:17:08.320 --> 0:17:11.119 got to be from intellectual capital businesses. It's got to 0:17:11.160 --> 0:17:14.520 be from value add from people that are providing insights. 0:17:15.119 --> 0:17:17.080 And that's the only place that I see where you're 0:17:17.080 --> 0:17:19.320 going to have the ability to demand more wages. That 0:17:19.359 --> 0:17:23.199 sounds like high skilled workforce absolutely, Carca Donna. I mean, 0:17:23.320 --> 0:17:24.920 is there a chance that you're gonna see this wage 0:17:25.119 --> 0:17:28.800 increase of indeed what you just described increasing automation, so 0:17:28.960 --> 0:17:31.399 that really the only wage increase you're gonna see is 0:17:31.520 --> 0:17:35.760 people who have some kind of intellectual property that puts 0:17:35.840 --> 0:17:39.760 them in absolute that's where it will be concentrated. But 0:17:40.400 --> 0:17:44.240 I mean, there's less job security, whether it's lower union 0:17:44.320 --> 0:17:49.720 membership or robots taking jobs, or just the internationalization of 0:17:49.880 --> 0:17:52.560 the or the globalization of the workforce, and so that 0:17:52.680 --> 0:17:56.159 means that the Phillips curve still works. Uh, this is 0:17:56.200 --> 0:17:59.359 a trade off between unemployment and inflation, but it's flatter 0:17:59.480 --> 0:18:01.680 than it has bend in past economic cycles. And I 0:18:01.680 --> 0:18:03.520 don't want to make too much of us, because clearly 0:18:03.600 --> 0:18:05.479 this is not the focus of the wage the two 0:18:05.560 --> 0:18:09.080 point seven percent year over year wage increase. But we 0:18:09.280 --> 0:18:12.919 learned earlier in the week that black Rock, for example, 0:18:13.400 --> 0:18:16.520 moving away from some managed funds to replace them with 0:18:16.720 --> 0:18:21.280 more automated exchange traded fund or indexed products. That also 0:18:21.400 --> 0:18:23.880 is part of this trend. Absolutely. So the point here 0:18:24.040 --> 0:18:27.520 is that you're not getting as much inflation or wage 0:18:27.960 --> 0:18:31.160 bang for your buck as the unemployment rate moves lower 0:18:31.520 --> 0:18:35.040 compared to pass cycles, which means that maybe full employment 0:18:35.400 --> 0:18:38.560 going into the cycle were fed forecasters and whatnot. We're 0:18:38.600 --> 0:18:40.840 thinking it could be five and a quarter percent, was 0:18:40.960 --> 0:18:43.960 five percent, then it was just below five percent or 0:18:44.040 --> 0:18:45.719 four and a half, and so last of all, if 0:18:45.760 --> 0:18:49.280 you recall Janet Yellen throughout the idea in an academic 0:18:49.400 --> 0:18:54.040 forum that maybe full employment is materially lower than forecasters 0:18:54.119 --> 0:18:57.600 currently anticipate, and as we see unemployment rate grinding grinding 0:18:57.680 --> 0:19:00.119 down and we're not getting the wage pressures yet, that 0:19:00.280 --> 0:19:04.000 reinforces that notion. Al Agressoni, what's your prescription for an 0:19:04.080 --> 0:19:07.600 increase in wages? Well, I think that back to the 0:19:07.640 --> 0:19:10.520 secular trends. I mean, while there's a change moving on 0:19:10.600 --> 0:19:13.800 to automation and lower skilled jobs are going to be replaced, 0:19:14.040 --> 0:19:15.920 you have to look at the positive side of the 0:19:16.000 --> 0:19:18.240 secular trend. And we talked about this on one of 0:19:18.320 --> 0:19:20.720 your shows a couple of years ago, where we discussed 0:19:20.800 --> 0:19:23.679 that we could potentially become again a nation of entrepreneurs, 0:19:24.240 --> 0:19:27.439 people who are either and either have skills that are 0:19:27.800 --> 0:19:31.040 can command a higher wage like in the ellectual capital businesses, 0:19:31.359 --> 0:19:33.359 or people who have the ability to start and start 0:19:33.400 --> 0:19:35.360 and sustain and run their own business. But aren't those 0:19:35.400 --> 0:19:38.159 people already doing that? I mean by definition, I mean, 0:19:38.240 --> 0:19:40.200 what is going to move the two point seven percent 0:19:40.359 --> 0:19:43.280 number higher? Well, what's gonna what's gonna move it higher 0:19:43.440 --> 0:19:46.119 is if you're uh, if you're making a choice to 0:19:46.160 --> 0:19:48.399 become an entrepreneur, right and you're in a startup business, 0:19:48.880 --> 0:19:52.680 that you're going to have a more greater demand and 0:19:53.119 --> 0:19:56.320 to hire somebody than somebody who's in a big corporation 0:19:56.440 --> 0:19:59.120 like Walmart, who can replace that body at any point 0:19:59.119 --> 0:20:01.320 in time. So if you're looking for wage growth, I 0:20:01.359 --> 0:20:03.359 think it's going to come from the very high end 0:20:03.400 --> 0:20:05.640 of the intellectual scale, and it's going to come from 0:20:05.680 --> 0:20:08.640 the more entrepreneurial end of our economies. Thanks very much, 0:20:08.720 --> 0:20:12.160 Al Agrisani, he is the former assistant Labor Secretary under 0:20:12.200 --> 0:20:15.440 President Ronald Reagan. And our thanks of course to Carricka Donna, 0:20:15.520 --> 0:20:30.800 chief US economist for Bloomberg Intelligence. Always a pleasure. All right, 0:20:30.840 --> 0:20:34.359 let's turn our attention now to headline economic news. The 0:20:34.560 --> 0:20:37.520 unemployment rate down to four and a half percent from 0:20:37.600 --> 0:20:41.359 four point seven, the economy adding just ninety eight thousand 0:20:41.520 --> 0:20:44.480 jobs last month. Economists were looking to add about a 0:20:44.600 --> 0:20:47.680 hundred and eighty thousand jobs. One of those economists was 0:20:47.760 --> 0:20:51.639 Vincent Reinhardt. He is chief economist Standish Melon Asset Management. 0:20:51.960 --> 0:20:55.200 He joins us from Boston, home to Bloomberg twelve hundred. Vincent, 0:20:55.280 --> 0:20:57.280 thank you for being with us. How did you get 0:20:57.320 --> 0:21:01.920 it wrong? Great introduction, PIM, I like starting on the 0:21:02.000 --> 0:21:06.560 positive note, and the answer is most of us just 0:21:06.760 --> 0:21:10.560 forgot it was cold in March. Uh. Part of this weather. 0:21:11.080 --> 0:21:13.360 Part of it is let's calm down a little bit. 0:21:13.560 --> 0:21:17.879 The payroll employment is a erratic number. The Bureau of 0:21:18.000 --> 0:21:24.240 Labor Statistics tells us that a nine confidence interval around 0:21:24.560 --> 0:21:28.480 monthly changes and met payrolls is a hundred and a 0:21:28.560 --> 0:21:32.200 hundred thousand plus or minus. What does that mean? That 0:21:32.440 --> 0:21:34.480 means that if you thought it was a hundred and 0:21:34.600 --> 0:21:40.960 eighty thousand expected this month. Uh, you wouldn't be statistically 0:21:41.440 --> 0:21:44.760 proved to be wrong if the number came in between 0:21:44.960 --> 0:21:47.879 eighty and two undred and eighty thousand. Oh well, I 0:21:47.960 --> 0:21:50.240 guess that that makes it very easy, doesn't it. It 0:21:50.320 --> 0:21:54.200 makes it perfectly. The good news is, in a statistical sense, 0:21:54.280 --> 0:21:57.040 I wasn't wrong. Okay, all right, that's like bumpers, you know, 0:21:57.600 --> 0:22:00.040 in a bowling alley. All right, so your contains So 0:22:00.200 --> 0:22:03.920 if let's take the you know, let's take this in perspective. First, 0:22:04.119 --> 0:22:09.280 there were weather dislocations. Uh, that's and we see very 0:22:09.320 --> 0:22:13.920 strong employment growth from the household survey and week on 0:22:14.000 --> 0:22:18.200 the establishment survey. That's probably because when the BLS comes 0:22:18.240 --> 0:22:21.040 around to a household at at home because they're not 0:22:21.160 --> 0:22:24.520 working because of bad weather, they they believe they're employed. 0:22:24.920 --> 0:22:27.520 Whereas you go to the establishment and ask them, are 0:22:27.600 --> 0:22:30.520 you how many people are working for you today? Uh, 0:22:31.440 --> 0:22:34.080 they give them a lower number, so average the two 0:22:34.800 --> 0:22:37.800 UM a low number nine number. Okay, so we're not 0:22:37.800 --> 0:22:40.520 gonna go We're not gonna go crazy about this, UH 0:22:41.160 --> 0:22:43.640 seemingly what the bond market is doing with that big 0:22:43.760 --> 0:22:47.320 move higher in the long pond. If that's the case, 0:22:47.720 --> 0:22:50.600 then what are the particulars of the report that you 0:22:50.720 --> 0:22:56.280 think are specifically interesting? Is that the labor participation rate? 0:22:56.640 --> 0:22:59.439 Is that the two point seven wage growth year over 0:22:59.560 --> 0:23:02.200 year number, or what part of the report do you 0:23:02.280 --> 0:23:06.639 find most useful? That's a great thing about the peril Fridays. 0:23:06.720 --> 0:23:09.639 If the DLS puts out of twenty plus page report, 0:23:09.680 --> 0:23:12.480 there's always gonna be something that's interesting. I think there's 0:23:12.480 --> 0:23:16.400 a couple of things of note. One is Chenney Ellen's 0:23:16.440 --> 0:23:21.040 basically been right. You run accommodative monetary policy and you 0:23:21.160 --> 0:23:25.359 marry very well draw workers into the labor force. UH. 0:23:25.840 --> 0:23:31.600 In fact, there were very large games in household households, 0:23:32.200 --> 0:23:34.480 on the order of four hundred and seventy two thousand 0:23:34.560 --> 0:23:37.960 people coming into the labor force. UM. That's why the 0:23:38.040 --> 0:23:44.040 unemployment rate UH goes down. We have peril rather unemployment. UH. 0:23:44.520 --> 0:23:49.400 Persons in the household reports fell by thousand, So that's 0:23:49.400 --> 0:23:51.800 good news. That's so, that's good news. So why would 0:23:51.840 --> 0:23:54.120 people be bidding up the price of the thirty year 0:23:54.160 --> 0:23:56.680 by fifteen thirty seconds? Why are we at two point 0:23:56.800 --> 0:24:00.199