Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's continue the conversation. We want to welcome to our
Speaker 2: global TV and radio audiences. I'm Danny Berger alongside Michael McKee.
Speaker 2: US employers unexpectedly cut twenty three thousand jobs in July,
Speaker 2: following a downward revision to May and June figures. Let's
Speaker 2: bring in White House National Economic Council Director Kevin Hassett. Director,
Speaker 2: has it great to see you this morning, And I
Speaker 2: know you've been saying post in reaction to this surprise
Speaker 2: loss and jobs that you're mostly looking at the unemployment
Speaker 2: figure and it fell. However, as Mike just pointed out,
Speaker 2: labor force participation also fell, which is the reason that occurred.
Speaker 2: So looking at the figures in the state of this
Speaker 2: jobs market, are there any areas at all that you
Speaker 2: are concerned about?
Speaker 3: Right?
Speaker 1: Well, first of all, you know, I've been talking about
Speaker 1: these numbers with Mike for how many years Mike twenty
Speaker 1: years and so like, he really does raise some the points.
Speaker 1: And the thing that I would say is that because
Speaker 1: of our border policy, and because of deportations and the
Speaker 1: retirement of the baby boomers, then labor force participation is
Speaker 1: kind of on a downward trajectory, which means that the
Speaker 1: break even jobs number, that is that the job's number
Speaker 1: you need so the unemployment rate doesn't go up, has
Speaker 1: gone from maybe one hundred and twenty hundreds thirty thousand
Speaker 1: a few years ago to maybe about forty thousand now.
Speaker 1: And so what it means is that what the market
Speaker 1: is used to look at, oh, it's like a normal
Speaker 1: tread the water kind of job's number if it's around
Speaker 1: one hundred, is no longer true. If you get a
Speaker 1: number like one hundred, that that's really like a great
Speaker 1: number and it should make the unemployment rate go way down.
Speaker 1: And so that's like the technical big picture. Digging into
Speaker 1: the numbers, there are some things that really jump out
Speaker 1: at me. That it was like private sector job creation
Speaker 1: was right about at the break even positive number. It
Speaker 1: was government employment that went down a lot, about fifty
Speaker 1: something thousand. And the other thing is that we see
Speaker 1: in the hospitality sector, you know, the end of the
Speaker 1: world cup is really clearly of the data too. If
Speaker 1: you exclude those two things, you had about one hundred
Speaker 1: thousand number, and that's consistent with all the other indicators,
Speaker 1: like the purchasing managers being really high unemployment, insurance claims
Speaker 1: being about the lowest they've been since World War Two,
Speaker 1: all these other indicators suggested, you know, the market was
Speaker 1: right what it expected around one hundred. And given that
Speaker 1: there's just a minor correction that gives you about one hundred,
Speaker 1: I think suggests that's what.
Speaker 3: The truth will be.
Speaker 1: But we need to see, you know, future numbers before
Speaker 1: we can make.
Speaker 3: A final judgment. And that's why it's.
Speaker 1: Great to have a person like Mic around to help
Speaker 1: us think about it.
Speaker 2: I agree, Kevin, for what it's wort, I absolutely agree.
Speaker 4: Well, predictions are hard, especially about the future. As Jogi
Speaker 4: Berra said, we're both economists. Let's get wonky here. The
Speaker 4: possible growth potential growth for the United States or any
Speaker 4: country based on the size of the labor force, whether
Speaker 4: it keeps growing and productivity. And you're taking credit now
Speaker 4: for the size of the labor force essentially going down
Speaker 4: because of the immigration policies of the administration. So is
Speaker 4: that a good thing for the economy overall?
Speaker 1: Yeah, I mean what's going on right now is if
Speaker 1: we do the old potential GDP calculations, then you add
Speaker 1: productivity plus capital deepening plus you know, labor force participation
Speaker 1: or labour's contribution. I think that one of the things
Speaker 1: you see in productivity is that it's probably running north
Speaker 1: of two and a half percent. Capital spending probably adds
Speaker 1: at least one percent to that. So before you get
Speaker 1: to the labor story, you're looking at a three three
Speaker 1: and a half percent GDP number, And I think the
Speaker 1: labor story is still going to be positive. I just
Speaker 1: think that it's not going to be as positive as
Speaker 1: it typically has. If you go back over forty years,
Speaker 1: the labor story adds about like one or one and
Speaker 1: a half percent every.
Speaker 3: Year to GDP.
Speaker 1: I think now it's likely to be about.
Speaker 3: A half of that or a third of that.
Speaker 1: Essentially that by the way, you mentioned the hourly earnings.
Speaker 1: If you look at the weekly earnings actually up relative
Speaker 1: to inflation quite a bit, about one thousand dollars overall
Speaker 1: for all Americans, about three thousand dollars for manufacturing workers,
Speaker 1: four thousand dollars for construction workers. And so there is
Speaker 1: something going on too where people are something at hours
Speaker 1: that's going on that's offsetting the participation.
Speaker 4: President watching in the Oval office is just saying, you
Speaker 4: got your point in Kevin, good job about that.
Speaker 1: I don't know if he's watching, but I'll find out.
Speaker 3: I can tell you.
Speaker 4: People we've talked to so far today are basically saying
Speaker 4: this is a non event, even with the negative number
Speaker 4: for the FED, because it shows the labor market is
Speaker 4: stable if nothing else, and they can focus on inflation.
Speaker 4: I'm wondering, though, why the President is saying things like
Speaker 4: Kevin has to can do what he needs to do.
Speaker 4: The labor market was stable under j Powell, and the
Speaker 4: President was really mad at him all the time.
Speaker 3: Why is he giving.
Speaker 4: Kevin or so much more runway even though conditions haven't
Speaker 4: changed all that much.
Speaker 1: Right, Well, I could say that the president, you know,
Speaker 1: there have been some news stories that the president's talking
Speaker 1: to Kevin Warreshould. Of course he is, you know, and
Speaker 1: he talked to Jay Powell too. But the other thing
Speaker 1: is that that Kevin warreshold the President have a very
Speaker 1: close long term relationship from New York City, from Florida,
Speaker 1: and they talk about the economy all the time. And
Speaker 1: I talked to Kevin as well as does Scott Besson,
Speaker 1: and so that's like not really news. And the fact
Speaker 1: is that there's somebody at the FED now that the
Speaker 1: President is one hundred percent sure is going to do
Speaker 1: what's right based on the numbers and not play partisan games.
Speaker 1: And you know heard me mention some of the partisan
Speaker 1: games that I could think.
Speaker 2: I just wanted apologies for jumping, I just wanted to
Speaker 2: pick up all this one of the conversations because you
Speaker 2: mentioned about the economy. Are they talking about monetary policy
Speaker 2: as well as are just like broad economic advice.
Speaker 1: I've not been listening to the conversations, but I'm sure
Speaker 1: that the President doesn't say, hey, you got to do
Speaker 1: this or that to interest rates.
Speaker 3: He respects you well.
Speaker 2: Given that line of communication is open, I wonder if
Speaker 2: we could do a little bit of scenario analysis. Let's
Speaker 2: say that this FED does hike. There was an e
Speaker 2: f T report saying that perhaps the chair worsh might
Speaker 2: hike if the data continues as it is for September.
Speaker 2: What do you think the president's conversation would be like
Speaker 2: with FED share warh should that happen.
Speaker 1: The President is going to respect the independence of the FED.
Speaker 1: I'm highly confident, and when it's very very natural for
Speaker 1: the President to do something like say, hey, you know,
Speaker 1: Chairman worsh, what do you think about today's job number?
Speaker 1: And that's a very normal thing for him to do.
Speaker 1: But I think that's the way you should think about
Speaker 1: the balance of the conversations.
Speaker 4: Forgive me for asking this, but I've been dying to
Speaker 4: ask you this question since you brought this up last Friday.
Speaker 4: You said that the biggest danger to the economy is
Speaker 4: that socialist communist Democrats actually have a big victory in November.
Speaker 4: What is socialism in your mind?
Speaker 1: Well, well, you know Mike that I, as cechair, wrote
Speaker 1: a chapter about it in the Economic Report of the President.
Speaker 1: Was widely criticized because people said, oh, there's no way
Speaker 1: the Democrats are socialists. I didn't say democrat anywhere in
Speaker 1: the report, said here's the risk of socialism. But then
Speaker 1: I wrote a book, The Drift Stopping America Slide to Socialism,
Speaker 1: because I believe socialism. We are sliding towards socialism through
Speaker 1: that party. And so socialism is when the government owns
Speaker 1: the capital and then hands it out to people.
Speaker 3: Is a very simple definition.
Speaker 1: And so let's just say, hypothetically, the government decides to
Speaker 1: have grocery stores where it sets the prices and tells
Speaker 1: people like when they can get in and get the
Speaker 1: cheap stuff. The history of this is that the grocery
Speaker 1: stores end up being empty. Prices don't matter because there's
Speaker 1: nothing to buy, and over time, socialism leads to public disorder,
Speaker 1: and you see it in Venezuela, you see it in
Speaker 1: Cuba and so on, and so it's a terrible path
Speaker 1: to go. But I think that what people underappreciate is
Speaker 1: that the policies they've been advocated by Democrats since President
Speaker 1: Trump took office, where hey, you could have wealth taxes,
Speaker 1: you could have really high taxes on income.
Speaker 3: You could really high taxes on capital.
Speaker 1: Game, they've been basically sliding forwards socialism for a long time.
Speaker 1: And so while the new people are a lot more
Speaker 1: charismatic than the people of the Senate, I think the
Speaker 1: policies that they're advocating better care for all, you know, like,
Speaker 1: come on, Hillary Clinton's self care policy was.
Speaker 3: About that, right, and so that I think that that's the.
Speaker 1: Uncomfortable thing that Democrats have to come to terms with,
Speaker 1: is that these socialists are actually advocating things that Democrats
Speaker 1: have advocated for a long time.
Speaker 4: Well, if government ownership of means of production is part
Speaker 4: of the definition there, then the Trump administration has taken
Speaker 4: shares in Intel, MP Materials, Trilogy Metals, Lithium Americas, and
Speaker 4: they've got the golden share in US steel. Why is
Speaker 4: that not socialism?
Speaker 1: Yeah, because it's not control. So, for example, the Norwegians
Speaker 1: have a sovereign wealth fund. They own maybe about three
Speaker 1: or four percent of US equities. That's not socialism. They're
Speaker 1: not going in and telling the management to do and
Speaker 1: so on. And so I think that one of the
Speaker 1: things that President Trump and Howard not to give noticed
Speaker 1: is that in the end, the US would be way
Speaker 1: better off if we have something like a soferg wealth fund.
Speaker 1: Then we're certainly putting up firewalls to make sure that.
Speaker 3: Zabi can't come in and micro manage less firms. We
Speaker 3: just heard from Rick Reader of Black Rock, you know, well.
Speaker 4: We need to see something on the fiscal side to
Speaker 4: try to get the economy moving in companies spending. Again,
Speaker 4: does the President have any plans to propose something like
Speaker 4: that or are we kind of stuck until after the
Speaker 4: midterms and or if the Democrats take control of one
Speaker 4: of the houses, we're stuck for two years.
Speaker 1: You know, I think that Rick's call for, you know,
Speaker 1: some kind of stimulus package, I guess I haven't seen
Speaker 1: what he said. Feels completely inconsistent with all the data
Speaker 1: I'm seeing right now, and so I'd have to see
Speaker 1: what Rick was saying. But right now there are You know,
Speaker 1: obviously we're watching closely the welfare of the American people,
Speaker 1: but we haven't had meetings where we talk about a stimulus.
Speaker 2: Film director Hassett. You know, it's often that great leaders
Speaker 2: need to be ones who surround themselves with people who
Speaker 2: can deliver them hard truths. And it's a strange time
Speaker 2: in this economy. Many things are changing, be it AI
Speaker 2: or impact of higher oil prices. I wonder what those
Speaker 2: conversations are, like. How often are you coming to the
Speaker 2: president and delivering him advice that's maybe hard to take
Speaker 2: that parts of this economy maybe need various efforts. How
Speaker 2: often are you having those difficult conversations?
Speaker 1: You know, I obviously can't talk about specific conversations with
Speaker 1: the President.
Speaker 3: I was in the Oval with them last night.
Speaker 1: We talked about a wide range of issues, and he
Speaker 1: doesn't really have much.
Speaker 3: Patience for yes men, and so.
Speaker 1: When you go into a meeting of the Oval, what
Speaker 1: the guy can say is that you cover a wide
Speaker 1: range of topics and a wide range of opinions.
Speaker 4: Always all right, what do we think is going to
Speaker 4: happen now with Iran? And the reason I asked that
Speaker 4: is because everybody also that we have talked to says that, boy,
Speaker 4: it would sure do a lot if we got that
Speaker 4: war over with and prices came down for energy.
Speaker 1: Well, again, I'm not involved in the negotiations with the Iranians.
Speaker 1: I don't have any insight. That's not you know, it's
Speaker 1: stronger than yours on.
Speaker 3: The specifics of the negotiations.
Speaker 1: I could say that we've done an enormously good job
Speaker 1: stabilizing global energy markets despite this disruption, by doing things
Speaker 1: like increasing production through pipelines, getting the Jones actwave so
Speaker 1: that American energy can move to the coast. And that's
Speaker 1: one reason why while energy prices are higher than we
Speaker 1: would like, they didn't go nearly as high as a
Speaker 1: lot of the people on your shows were saying. Right,
Speaker 1: people were saying we're going to be stuck at one
Speaker 1: hundred and fifty dollars oil just a few months ago.
Speaker 1: And so I think what that means is that all
Speaker 1: of these steps that we've taken increasing energy production, especially
Speaker 1: in the US, means that when this is resolved, then
Speaker 1: prices are going to drop a lot. And I think
Speaker 1: that that is something that's being priced into futures markets,
Speaker 1: and it's actually affecting this today because if you know
Speaker 1: bioil today somewhere, then it usually takes about two months
Speaker 1: to be shipped, and so the you know, it really
Speaker 1: puts a downward pressure on prices today.
Speaker 4: Now I got to put you on this spot again
Speaker 4: one more time here in an area that you do follow,
Speaker 4: and that is the budget for the United States. The
Speaker 4: President's budget would add a lot more to the debt.
Speaker 4: That means more bonds have to be sold. And we
Speaker 4: were just talking with a lot of people this morning
Speaker 4: about how much private debt is coming to the markets,
Speaker 4: especially from the AI sector. How much do you worry
Speaker 4: about interest rates going up and the country having to
Speaker 4: pay a lot more because there's a lot of demand
Speaker 4: for bonds right now, a lot of demands I sell
Speaker 4: them rather well.
Speaker 1: I mean, the point is that what the President's done
Speaker 1: is he's put out of budget that gets the deficit
Speaker 1: to GDP down to almost nothing over a ten year window.
Speaker 1: We've taken significant steps to achieve those by for example,
Speaker 1: reducing federal employment by more than three.
Speaker 3: Hundred thousand workers.
Speaker 1: And I just got a briefing on the Vice President's
Speaker 1: fraud Task Force yesterday. The way do you see, there's
Speaker 1: going to be tens and tens of billions of dollars
Speaker 1: just in a year. So multiply that by ten to
Speaker 1: get the deficit effect of a fraud that we've stopped
Speaker 1: that the Vice Presiden's team is stopping. And so we're
Speaker 1: one hundred percent focused on the deficit of the log RUD.
Speaker 3: But we also at.
Speaker 1: Times when we spend less money on international organizations, we
Speaker 1: can spend more money on the defense things that keep
Speaker 1: us safe. And so we're changing things you know, within
Speaker 1: the bundle. But we're definitely shooting for lower deficit over time.
Speaker 2: Just combining these two ideas, Director Hasset, of taking action
Speaker 2: and what you were mentioning before with higher oil prices.
Speaker 2: This is a president who has signaled out big oil,
Speaker 2: both Excellon and Chevron specifically amid this ongoing crisis. What
Speaker 2: steps is this White House going to do in order
Speaker 2: to act on the idea that big oil is contributing
Speaker 2: to the inflation we're seeing in higher prices?
Speaker 1: Well, I think that, you know, big oil is heavily
Speaker 1: concentrated in the US.
Speaker 3: It's something to keep an eye on.
Speaker 1: But the bottom line is the global energy price story
Speaker 1: is a positive one compared to what people thought, and
Speaker 1: I think that the things that made it positive are
Speaker 1: going to make prices drop very very quickly once they stem.
Speaker 2: Sir Director has when you say too concentrated, they're just
Speaker 2: too big. Is it kind of an anti trust issue
Speaker 2: you think?
Speaker 1: You know, as an economist, you could look at something
Speaker 1: like the herfindal in decks and just think about, like,
Speaker 1: what share of the market.
Speaker 3: Does any business have?
Speaker 1: And that's something that you know is a source of
Speaker 1: investigation for people at the FDC and the Justice Department.
Speaker 1: That's not something that's within the purview of the DC.
Speaker 2: Understood, Kevin, thank you very much for your time this morning.
Speaker 2: That's the White House National Economic Council Director Kevin Hasset