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Speaker 1: Joining us now with more from the White House is

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Speaker 1: Council of Economic Advisor's chair Jared Bernstein. Char Bernstein, thanks

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Speaker 1: very much for joining us on Bloomberg. As always, if

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Speaker 1: you look at the data, the labor market, at least

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Speaker 1: on the surface, looks quite strong. But how much longer

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Speaker 1: can this kind of job's growth and this low unemployment

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Speaker 1: be sustained.

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Speaker 2: Well, we've certainly seen the growth of payroll employment decelerate

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Speaker 2: over the years as the economy has transitioned from the

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Speaker 2: breakneck growth pace that prevailed coming out of the pandemic

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Speaker 2: induced procession to the kinds of more SETI growth we're

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Speaker 2: seeing now. So if you go back to twenty one,

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Speaker 2: the average monthly job gain was about six hundred thousand

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Speaker 2: per month. Twenty two, it was about four hundred thousand

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Speaker 2: this year, and we know this now as of this

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Speaker 2: morning's data, two hundred and twenty five thousand per month.

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Speaker 2: That's a solid number. It's actually above the break even

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Speaker 2: number you'd need to keep unemployment low. And in fact,

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Speaker 2: as you say, unemployment has been low three point seven

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Speaker 2: in December, three point six percent on average for the year,

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Speaker 2: both in twenty three and twenty two. What's I think

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Speaker 2: really interesting. I suspect we'll get into this is the

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Speaker 2: extent to which we've seen so much disinflation alongside that

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Speaker 2: low unemployment rate. That isn't what a lot of economists

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Speaker 2: were expecting. If you go back a year or.

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Speaker 1: So, I will return to the issue of inflation, Jared,

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Speaker 1: But first I want to ask you about maybe one

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Speaker 1: of the more troubling aspects of this report, which is

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Speaker 1: labor force participation dropped to sixty two and a half percent,

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Speaker 1: the lowest level since February of last year, and primege

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Speaker 1: women also fell to the lowest level in eleven months.

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Speaker 1: How much of that should be blamed on the fact

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Speaker 1: that we have now gone over the so called childcare cliff.

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Speaker 2: I don't think the childcare cliff is probably correctly associated

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Speaker 2: with one month's result from these household data. They're very

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Speaker 2: noisy data. We always try to smooth things out over

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Speaker 2: a few months. It doesn't mean I would dismiss any

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Speaker 2: of those numbers from the report. You already heard me

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Speaker 2: cite the unemployment rate. It just means that we want

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Speaker 2: to look over longer term trends before we make any conclusions.

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Speaker 2: When it comes to childcare, though, there is no question

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Speaker 2: that this president believes it's something critically important. Unfinished business

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Speaker 2: is precisely in this area of making childcare more affordable.

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Speaker 2: There's no doubt in my mind. In fact, there's solid

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Speaker 2: research supporting this that that would support the labor supply

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Speaker 2: of caretakers, who are disproportionately women. Of Course, over the

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Speaker 2: course of the year, though, we've seen solid labor force participation,

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Speaker 2: particularly from prime age workers, and I think that's something

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Speaker 2: that has helped us on the inflation side as well.

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Speaker 1: Okay, so let's talk about how the inflation and labor

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Speaker 1: sides of the equation work together here, Jared, is it

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Speaker 1: more optimal, optimal for the US economy or more specifically,

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Speaker 1: for the American voter, for the labor market to stay

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Speaker 1: this tight and strong, but that mean that interest rates

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Speaker 1: stay higher for potentially a longer period of time, or

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Speaker 1: for us to see a more material weakening in the

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Speaker 1: labor market, but that comes with lower borrowing costs.

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Speaker 2: Well, I think the labor market is behind a very

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Speaker 2: positive momentum that's prevailed now for quite a while. Basically

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Speaker 2: the combination of a persistently tight labor market, easing inflation,

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Speaker 2: and of course that easement has been quantitatively quite large

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Speaker 2: has led to real wage gains. That is, wages have

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Speaker 2: been beating prices for mid wage workers. The eighty one

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Speaker 2: percent of the payroll workers that are production workers are

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Speaker 2: blue collar or non managers and services. Their pay has

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Speaker 2: been beating inflation on a year over year basis for

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Speaker 2: nine months in a row. I can't say ten because

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Speaker 2: we don't have inflation for December yet, but we know

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Speaker 2: their wages grew north of four percent in December, and

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Speaker 2: I'm confident they'll beat inflation then, so that'll be ten

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Speaker 2: months in a row. That helps support consumer spending. We

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Speaker 2: have a seventy percent consumer spending economy. It is a

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Speaker 2: perpetual motion machine that has helped this economy move forward

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Speaker 2: into the transition that you and I have discussed towards

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Speaker 2: more steady, stable growth.

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Speaker 1: Well, let's talk a little bit more about Jared inflation though,

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Speaker 1: because you've raised it a few times, and in this

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Speaker 1: data comes a mid a week where we have seen

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Speaker 1: what many feel as an escalation or at least ramped

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Speaker 1: up tensions in the Middle East that have resulted in

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Speaker 1: disruptions to trade from the Red Sea, now potentially adding

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Speaker 1: to times higher freight rates, potentially higher energy prices. How

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Speaker 1: much inflation risk do you see in what's happening in

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Speaker 1: the Middle East or more specifically the Red Sea right now?

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Speaker 2: Well, before we get to that, let's look a little

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Speaker 2: bit at where inflation was and where it is. So look,

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Speaker 2: let's in fact start with gas prices, which very relevant

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Speaker 2: to your question. Go back to mid June of twenty

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Speaker 2: twenty two, and the gas price was north of five

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Speaker 2: dollars a gallon. When I woke up this morning, the

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Speaker 2: national gas price with three dollars and nine cents, so

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Speaker 2: almost a two dollars decline per gallon in the gas price.

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Speaker 2: There are thirty states with the gas price below three

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Speaker 2: dollars right now. That is very much helping in terms

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Speaker 2: of giving family some breathing room at the level of households,

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Speaker 2: but also of course helping to support those macro dynamics

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Speaker 2: I just reflected, with a strong labor market, supporting consumer spending. Now, look,

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Speaker 2: when it comes to the Red Sea, we're obviously working

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Speaker 2: with a coalition to try to keep those supply chains

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Speaker 2: open for commerce, and that's a different discussion with our

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Speaker 2: security folks. From my perspective, thus far, thus far, the

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Speaker 2: impact on energy prices has been quite mild. It's something

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Speaker 2: that we're going to continue to watch very closely. But

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Speaker 2: those energy numbers I just described to you WTI somewhere

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Speaker 2: in the seventy three range. I believe today still don't

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Speaker 2: see a ton of impact from that at this point,

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Speaker 2: but obviously on our watch list.

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Speaker 1: Finally, Jared, I only have about thirty seconds for this ansor.

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Speaker 1: I apologize, but I know you at the White House

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Speaker 1: like to tap gas prices. Why not play up the

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Speaker 1: stock market a little bit more?

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Speaker 2: Yeah, it's a fair point. I mean, the you know,

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Speaker 2: the fact is that most of the bottom half of

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Speaker 2: the income scale doesn't really own stock or doesn't own

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Speaker 2: much at all. But for people in the in the

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Speaker 2: upper half with portfolios, particularly with retirement earnings, it's definitely

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Speaker 2: a positive trend. I think one of the things that

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Speaker 2: we're very mindful of here is to not get too

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Speaker 2: hung up in the BIPs and bops of daily stock

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Speaker 2: market returns, So you know, that's important to us. We

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Speaker 2: tend to focus on the paycheck and some of the

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Speaker 2: more steady, you know, variables that you and I have

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Speaker 2: talked about. But yeah, that's in the mix. It's one

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Speaker 2: of the reason, it's one of the reasons why, you know,

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Speaker 2: net Worth, net Worth, net Well has been a solid

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Speaker 2: performer for us in the last year or so.

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Speaker 1: Yeah, all right, got to leave it there. Jared Bernstein

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Speaker 1: of the Council of Economic Advisors, thank you so much.