WEBVTT - Surveillance: U.S. Jobs Recovery With Kudlow 0:00:05.080 --> 0:00:12.640 Yeah, Welcome to the Bloomberg Surveillance Podcast and I'm Tom 0:00:12.720 --> 0:00:15.680 Keene Jay Leye. We bring you insight from the best 0:00:15.800 --> 0:00:21.240 in economics, finance, investment, and international relations. Find Bloomberg Surveillance 0:00:21.280 --> 0:00:25.720 on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 0:00:26.040 --> 0:00:28.840 on the Bloomberg jointing us on Bloomberg TV and m 0:00:28.880 --> 0:00:31.280 Bloomberg Radio. Larry Cardlog joining us from outside of the 0:00:31.280 --> 0:00:33.239 White House. Larry, great to catch up with you, sir, 0:00:33.600 --> 0:00:36.960 after a really solid payrolls report with an unemployment rate 0:00:37.120 --> 0:00:40.199 nicely in the single digits, south of nine percent, and 0:00:40.200 --> 0:00:42.920 the number one question everyone's asking right now, Larry, what 0:00:43.000 --> 0:00:44.919 does it mean for the fiscal effort in Washington? Can 0:00:44.960 --> 0:00:48.760 you draw the line for us just join those dots? Uh? No, 0:00:48.960 --> 0:00:52.400 I really can't. I mean the conversations are going on 0:00:53.360 --> 0:00:57.400 daily and we'll continue to go on. We still have 0:00:57.520 --> 0:00:59.680 the view. First of all, today's number eight point four 0:00:59.680 --> 0:01:02.760 percent unemployment. I just want to note I think that 0:01:02.920 --> 0:01:07.840 shows that President Trump's idea of a generous unemployment assistance 0:01:07.880 --> 0:01:10.679 plan that he's put as the executive order, but not 0:01:10.720 --> 0:01:13.800 necessarily an extravagant one. I think he's been born out 0:01:13.840 --> 0:01:16.959 to be exactly right. Eight point four percent unemployment is 0:01:17.000 --> 0:01:21.480 really the headline story of this massive jobs improvement report. Now, 0:01:21.680 --> 0:01:24.679 regarding the discussions on the Hill, you've got a continuing 0:01:24.720 --> 0:01:28.800 resolution discussion, you've got a cares to Act or whatever 0:01:28.840 --> 0:01:32.400 you call it discussion. There are areas of agreement. There 0:01:32.480 --> 0:01:35.720 wide areas of disagreement. However, on the size and scope. 0:01:36.400 --> 0:01:39.759 We have the view that a smart package, a well 0:01:39.880 --> 0:01:44.480 targeted package, for example, helping small businesses with PPP extensions, 0:01:45.000 --> 0:01:49.160 opening schools, COVID health, uh, you know, kids and jobs 0:01:49.240 --> 0:01:52.240 or our watchwords. Why don't we just pass a more 0:01:52.360 --> 0:01:56.160 modest package instead of a package that goes into multi 0:01:56.200 --> 0:01:58.760 trillion dollars that we don't need, and then the long 0:01:58.920 --> 0:02:01.320 term would be counter for tips. So we'll see, Johnathan, 0:02:01.400 --> 0:02:03.240 I don't want to forecast. I don't want to get 0:02:03.240 --> 0:02:05.720 in the way of the talks. The talks are continuing. 0:02:05.920 --> 0:02:07.760 But that's our basic point of view. If you agree 0:02:07.800 --> 0:02:10.359 on four or five things, let's go for it. Okay, 0:02:10.440 --> 0:02:13.040 let's stop dilly dowling around. Let's go for it. But 0:02:13.160 --> 0:02:16.400 not the entire uh left wing agenda from the other 0:02:16.440 --> 0:02:19.560 side of the aisle. That's not acceptable. Larry You've never 0:02:19.600 --> 0:02:21.400 been afraid of making a forecast, So I'm sure you 0:02:21.400 --> 0:02:23.280 can make a forecast on the economy with us right 0:02:23.280 --> 0:02:25.520 now and tronic gates from you. Where you think the 0:02:25.520 --> 0:02:27.800 economy is going and what that means for your policy stance. 0:02:27.880 --> 0:02:30.320 Do you think this is a self sustaining recovery now, 0:02:30.680 --> 0:02:35.560 independent of the need of further stimulus. Yeah. Look again, 0:02:36.000 --> 0:02:38.360 extending small business loans would be a good thing, and 0:02:38.360 --> 0:02:41.320 there's some other important facetts, but I do think it's 0:02:41.320 --> 0:02:44.440 self sustaining. I've said this before. What you have here 0:02:45.080 --> 0:02:49.040 is a housing boom. You have a retail sales boom, 0:02:49.080 --> 0:02:53.519 you have an automobile boom, strong consumer spending, and we're 0:02:53.520 --> 0:02:55.959 getting you know, we've recovered over half of the jobs 0:02:56.000 --> 0:03:00.640 we lost last winter. UM. Inventories have laps in the 0:03:00.639 --> 0:03:04.280 second quarter. I think there were down three UM. So 0:03:04.480 --> 0:03:07.000 the way I see it, Jonathan, is to meet these 0:03:07.040 --> 0:03:12.120 demands housing, construction, automobiles, consumers, retailers, and so forth, we're 0:03:12.160 --> 0:03:15.280 gonna need to rebuild inventories, and that is going to 0:03:15.400 --> 0:03:18.520 add impetus to the second half growth, which will be 0:03:18.520 --> 0:03:22.400 at least and perhaps much more. I think the Atlanta 0:03:22.440 --> 0:03:27.840 Fed has said the third quarter. But anyway, uh self sustaining. Yes, 0:03:28.480 --> 0:03:30.679 we're gonna go on for quite some time. Next year 0:03:30.760 --> 0:03:32.680 is going to be a banner year for the economy 0:03:32.720 --> 0:03:36.600 and for jobs, assuming the policy regime is pro growth 0:03:36.640 --> 0:03:40.480 with incentives. So I'm relatively optimistic. Now, I will say 0:03:40.720 --> 0:03:44.160 we have much more work to do. We're not out 0:03:44.200 --> 0:03:46.720 of the woods. We have too many people unemployed. Even 0:03:46.720 --> 0:03:49.720 though the numbers have improved radically and way ahead of 0:03:50.040 --> 0:03:52.960 expectations on Wall Street, we have more work to do. 0:03:53.200 --> 0:03:56.440 There's still way too many unemployed and much too much hardship. 0:03:56.480 --> 0:03:59.720 I get that, but I think one has an optimistic 0:03:59.760 --> 0:04:03.000 read bound in mind. And I think, incidentally the virus 0:04:03.080 --> 0:04:05.960 numbers are helping quite a bit as they flatten that 0:04:06.280 --> 0:04:10.080 and hook lore Larry. We talked about that hardship. We 0:04:10.160 --> 0:04:12.680 talked about the disparity beneath the appricate numbers. If you 0:04:12.720 --> 0:04:14.480 and I have talked about a million times after the 0:04:14.520 --> 0:04:16.400 last several months, still a lot of pain out there. 0:04:16.600 --> 0:04:18.000 I'm just trying to gate from you there is we 0:04:18.040 --> 0:04:20.960 have this discussion about this recovery. How comfortable you would 0:04:20.960 --> 0:04:23.039 be going into the back end of the year without 0:04:23.080 --> 0:04:27.160 an agreement with the other side. Of the aisle. Look, 0:04:27.240 --> 0:04:30.839 we can live with it. We can absolutely live with it. Um. 0:04:30.880 --> 0:04:33.679 It depends on the package. You know, a bad package 0:04:33.720 --> 0:04:37.400 would not be helpful. A smart, good package, well targeted, 0:04:37.520 --> 0:04:42.039 would be helpful. Okay. Congress wants to legislate longer run 0:04:42.160 --> 0:04:46.040 unemployment assistance. If Congress wants to put in let's say, 0:04:46.080 --> 0:04:51.080 benefits for bonuses for re employment, uh fine. If Congress 0:04:51.080 --> 0:04:53.800 wants to help out with funding a bit on the 0:04:53.920 --> 0:04:57.560 school openings, fine, that sort of thing would be extremely 0:04:57.640 --> 0:05:01.799 positive in my judgment. Lengthening p PP for small business, sure, 0:05:02.400 --> 0:05:04.320 do we absolutely need it. No, I'm not going to 0:05:04.440 --> 0:05:08.160 precondition anything here. What's good is good independently. What's not 0:05:08.240 --> 0:05:11.240 good is not good independently. Right now, the economy is 0:05:11.279 --> 0:05:14.240 on a self sustaining recovery path in my judgment, and 0:05:14.279 --> 0:05:17.440 we'll continue along those lines, and we'll continue to surprise 0:05:17.520 --> 0:05:20.120 on the upside. And I don't want anything to get 0:05:20.120 --> 0:05:22.320 in the way. I mean, look, one of the issues here, 0:05:22.400 --> 0:05:24.120 let's put it right on the table. It's like the 0:05:24.160 --> 0:05:27.280 elephant in the living room is the other side of 0:05:27.279 --> 0:05:30.480 the aisle. The Biden team wants a four trillion dollar 0:05:30.560 --> 0:05:33.440 tax hike. Now to me, coming off a deep and 0:05:33.480 --> 0:05:37.240 painful pandemic contraction. That is a terrible idea. I don't 0:05:37.240 --> 0:05:40.240 care whether you're Knesian or a supply sider or what. 0:05:40.600 --> 0:05:45.960 You wouldn't be picking taxpayer wallets and purses. Stop pickpocketing 0:05:45.960 --> 0:05:48.440 their money. They need more money, not less money. I'd 0:05:48.520 --> 0:05:51.520 rather they had more money through tax cuts, tax cuts 0:05:51.680 --> 0:05:56.000 which President Trump emphasizes, UH, rather than spending measures. But 0:05:56.080 --> 0:05:58.599 let people keep their own money. But the idea, and 0:05:58.600 --> 0:06:01.919 this is the uncertainty factor with the election looming, and 0:06:01.960 --> 0:06:04.240 it looks like a toss up right now, President Trump 0:06:04.320 --> 0:06:07.880 is gained about six or eight points after the convention. UH. 0:06:08.000 --> 0:06:12.200 The idea of a gigantic tax hike on individuals, payrolls, 0:06:12.560 --> 0:06:17.120 companies large and small, that is a hurdle for this 0:06:17.200 --> 0:06:20.000 self sustaining recovery. So I think it's important to just 0:06:20.080 --> 0:06:22.680 put that right on the table. I don't understand it. 0:06:22.760 --> 0:06:26.280 I don't care left right Kangent supplies hire, who would 0:06:26.279 --> 0:06:29.200 show white mine would be jacking up taxes by four trillion. 0:06:29.440 --> 0:06:32.040 And this idea that it's just rich people. First of all, 0:06:32.160 --> 0:06:34.719 rich people help investment a lot, and we like to 0:06:34.800 --> 0:06:37.679 reward success in the Trump years. But The second point 0:06:37.760 --> 0:06:40.360 is middle class people will bear the brunt of any 0:06:40.400 --> 0:06:43.800 tax hike that always happens. When politicians say won't, it 0:06:43.920 --> 0:06:50.440 always happens, and they'll go deep into everybody's pockets. Wrong policy, Larry. 0:06:50.440 --> 0:06:52.520 I'm not here to advocate for anybody, and I'm not 0:06:52.520 --> 0:06:54.360 here to talk about electoral politics with you as well. 0:06:54.440 --> 0:06:56.640 Last time I checked, the form of vice president hasn't 0:06:56.680 --> 0:06:59.560 been elected to public hethice. Right now, you guys are 0:06:59.600 --> 0:07:01.520 running the government. You have to work with the other 0:07:01.560 --> 0:07:03.360 site to some degree. I guess I want to talk 0:07:03.400 --> 0:07:06.640 about language with you. There's some language around aid for states. 0:07:06.720 --> 0:07:08.720 I keep hearing this language that we don't want to 0:07:08.839 --> 0:07:12.200 use money for bailouts of states, and I'm trying to understand. 0:07:12.320 --> 0:07:16.040 Is there a distinction between state aid and state bailouts 0:07:16.040 --> 0:07:19.200 and how do you draw that distinction. Well, I think 0:07:19.200 --> 0:07:21.679 the President had said it well a number of times. 0:07:22.280 --> 0:07:26.280 He doesn't want to bail out in efficient government operations 0:07:26.600 --> 0:07:30.720 at the state and local level. We have the administration 0:07:30.760 --> 0:07:36.000 has been very generous uh in nick prior packages and 0:07:36.120 --> 0:07:41.120 other means of providing aid to states, principally for COVID 0:07:41.200 --> 0:07:44.520 related reasons, but also many other reasons, including by the way, 0:07:44.960 --> 0:07:48.400 equipment for COVID reasons, and testing for COVID reasons and 0:07:48.440 --> 0:07:51.760 so forth. We've been very generous. Hundreds and hundreds of 0:07:51.800 --> 0:07:55.200 billions of dollars have been injected into state and local governments. 0:07:55.320 --> 0:07:58.320 That's fine, we needed that. We were in a pandemic emergency, 0:07:58.360 --> 0:08:01.440 no question about it. On the other hand, end one area, 0:08:01.480 --> 0:08:05.880 for example, the President is singled out badly unfunded pensions 0:08:06.200 --> 0:08:09.320 at the state local level. We don't believe a COVID 0:08:09.360 --> 0:08:13.200 package is the right method or the right vehicle for that. 0:08:13.480 --> 0:08:17.680 There's a number of other spending issues in the other 0:08:18.160 --> 0:08:21.000 other team's proposals that have nothing to do with COVID. 0:08:21.160 --> 0:08:24.640 By our calculations, over third of their proposals are non 0:08:24.720 --> 0:08:28.200 COVID related proposals that should be scrapped. So what President 0:08:28.200 --> 0:08:33.360 Trump would say is, if it's necessary and it's properly targeted, Jonathan, 0:08:33.720 --> 0:08:36.239 then we would probably see our way to a compromise. 0:08:36.559 --> 0:08:38.560 But at the moment, we're not there. And again I 0:08:38.600 --> 0:08:41.600 repeat what the Chief Meadows has said, what Secretary Venition 0:08:41.600 --> 0:08:44.720 has said. We agree on some areas, and if we 0:08:44.760 --> 0:08:47.240 could find four or five areas key areas, and I 0:08:47.240 --> 0:08:51.559 will once again say reopening schools and extending small business assistance. 0:08:51.760 --> 0:08:54.160 If we agree on that, let's just pass it. Let's 0:08:54.200 --> 0:09:00.320 just have a smart, well targeted, smaller package. So what 0:09:00.320 --> 0:09:03.360 would you do, Larry, if the state level austerity begins 0:09:03.960 --> 0:09:06.079 in the federal government? What will be the response when 0:09:06.120 --> 0:09:08.760 you start to see that play out? States across America 0:09:09.080 --> 0:09:12.520 who are up against budget constraints can't use the bondmarket 0:09:12.559 --> 0:09:15.640 in the same way the federal government can. What's the response, 0:09:15.679 --> 0:09:18.960 what's the plan, what's the strategy? Well, actually, I will 0:09:19.000 --> 0:09:22.720 just say this. The federal reserves lending facilities include a 0:09:22.840 --> 0:09:27.920 very generous tax free municipal bond lending, so states can 0:09:27.960 --> 0:09:30.960 tap into that, and so can localities. The feed has 0:09:31.000 --> 0:09:36.520 been very generous about backstopping UH tax exempt municipal type bonds, 0:09:37.080 --> 0:09:38.960 so they should make use of that. I think that's 0:09:38.960 --> 0:09:41.199 a plus, particularly if you need two or three year 0:09:41.760 --> 0:09:44.480 type paper. Now, the other point I make is it's 0:09:44.559 --> 0:09:48.600 quite true that the damage economic damage as a result 0:09:48.640 --> 0:09:52.040 of the pandemic has damaged budgets at the federal, state 0:09:52.080 --> 0:09:55.280 and local level, no question about it. It is also true, however, 0:09:55.400 --> 0:09:58.640 revenues are coming in much stronger now, as the economy 0:09:58.679 --> 0:10:02.599 picks up steam. I think there's a lot of underestimating 0:10:02.640 --> 0:10:06.280 going on and the extent to which this recovery is 0:10:06.360 --> 0:10:10.640 helping all finances at all levels. Revenues at the federal 0:10:10.720 --> 0:10:13.880 level have improved enormously, and they are showing great improvement 0:10:13.880 --> 0:10:16.800 at the state local level. So I think people should 0:10:17.080 --> 0:10:19.720 put that on the table, put that on the scoreboard. 0:10:19.840 --> 0:10:22.319 You know, let's not just rush into stuff. That's been 0:10:22.360 --> 0:10:25.760 one of the issues here. Let's look at things carefully 0:10:25.760 --> 0:10:29.560 and analytically and assess them and their need. What is essential, 0:10:30.240 --> 0:10:33.280 what is smart, that's fine, but what is not essential? 0:10:33.559 --> 0:10:37.680 And just throwing money at places to fund more poor 0:10:37.760 --> 0:10:40.480 management or pension funds, that's not what we want. That's 0:10:40.480 --> 0:10:44.440 a different conversation, and it's a different moment on legislative time. 0:10:44.520 --> 0:10:47.079 That's all I'm saying. It might be worthwhile let's look 0:10:47.120 --> 0:10:49.880 at pensions, but not now, not the COVID. Let's have 0:10:49.920 --> 0:10:53.079 a separate item for that. Well, let's talk about a 0:10:53.120 --> 0:10:55.839 targeted effort then. And the airline specifically, the President of 0:10:55.840 --> 0:10:58.200 the United States said recently, will be helping the airlines. 0:10:58.240 --> 0:11:01.600 You have to help the airlines. Arguably the most free 0:11:01.600 --> 0:11:04.040 market approach to helping the airlines is not throwing aid 0:11:04.040 --> 0:11:07.120 at them. It's having a proper testing regime at airports 0:11:07.120 --> 0:11:10.319 across America and getting that New York to London corridor, 0:11:10.400 --> 0:11:12.000 of which I've got skin of the game right now, 0:11:12.080 --> 0:11:14.320 Larry on the other side at the moment, trying to 0:11:14.360 --> 0:11:16.959 work out how to get back, how we get that reopen, 0:11:17.040 --> 0:11:18.960 and how we get these airlines back to work. I 0:11:19.000 --> 0:11:21.520 think that's the key for these companies. It's not about 0:11:21.520 --> 0:11:25.240 throwing money at them. It's how we establish safe testing regimes. 0:11:25.280 --> 0:11:27.520 And I'm just wondering why we haven't seen a big 0:11:27.559 --> 0:11:30.800 effort publicly to make that happen, Larry. Why not, Well, 0:11:30.880 --> 0:11:33.920 because there's been a huge effort privately, and we will 0:11:34.000 --> 0:11:38.959 be um unveiling the positives of that private effort. We 0:11:39.040 --> 0:11:43.600 are in constant communications with the air air carriers. We 0:11:43.640 --> 0:11:47.480 agree with what you're suggesting with respect to testing and 0:11:47.520 --> 0:11:51.200 taking temperature and a host of other measures. We also 0:11:51.240 --> 0:11:55.000 are working with the airlines regarding contact tracing and the 0:11:55.040 --> 0:11:59.480 feasibility of that UH without incurring too much additional expense. 0:11:59.720 --> 0:12:03.079 We're looking at telephone apps for that. We're looking at 0:12:03.120 --> 0:12:05.599 testing before you get on the plane and after you 0:12:05.640 --> 0:12:08.120 get on the plane, I mean when you land on 0:12:08.240 --> 0:12:10.600 both sides of the pond, so you won't have to 0:12:10.600 --> 0:12:13.839 have a fourteen day quarantine. We're looking very intensely at that. 0:12:14.360 --> 0:12:17.160 All that said, I will at however, the President has 0:12:17.200 --> 0:12:20.560 said a number of times airlines are crucial. It's one 0:12:20.600 --> 0:12:24.320 of the key arteries are of economy, transportation and so forth. Um, 0:12:24.360 --> 0:12:27.720 if they need additional assistance, we stand ready to work 0:12:27.760 --> 0:12:31.319 with them to hammer out additional packages. Secretary Manution is 0:12:31.400 --> 0:12:36.719 leading that charge. So we've got information testing additional assistance 0:12:36.840 --> 0:12:40.640 on the table for the airline business. When we hear 0:12:40.640 --> 0:12:43.080 about it, Larry, you've talked about it privately. When we 0:12:43.080 --> 0:12:45.320 start hearing about this publicly, when it is the big 0:12:45.400 --> 0:12:49.439 unveiled so to speak. UM, without a specific timetable, I 0:12:49.640 --> 0:12:55.560 would say it will be a matter of weeks, not percent, Larry, 0:12:55.720 --> 0:12:58.280 as you not having this conversation not just about big tech. 0:12:58.600 --> 0:13:01.520 Imagine there's some nervousness of about the read across from 0:13:01.520 --> 0:13:03.760 a labor market that's still doing okay and what it 0:13:03.800 --> 0:13:06.280 means for the policy effort down in Washington. Raised this 0:13:06.320 --> 0:13:09.840 issue with you before. There is some cynical people among 0:13:09.920 --> 0:13:11.800 us and I'm sure you'll appreciate that, Larry. He believe 0:13:11.840 --> 0:13:14.840 that unless the market gaps a LOWA, there won't be 0:13:14.840 --> 0:13:18.360 any urgency down in Washington to cut a deal. Now. 0:13:18.600 --> 0:13:21.440 Is the piscal approach independent of the price action in 0:13:21.520 --> 0:13:26.480 financial markets, Larry, Well, the physical approach is not independent 0:13:26.520 --> 0:13:30.040 of the economy. But I don't see there's there's no 0:13:30.200 --> 0:13:34.520 magic special formula between the stock market, UH and a 0:13:34.600 --> 0:13:38.240 possible additional assistance plan. There's there's no direct length, there's 0:13:38.240 --> 0:13:42.320 no formula. I wouldn't want to go there, frankly, for 0:13:42.400 --> 0:13:45.280 what it's worth, Johathan, I think you know in markets, 0:13:45.280 --> 0:13:47.160 nothing goes up in the straight line. We've had a 0:13:47.160 --> 0:13:50.640 phenomenal rally in the stock market, which itself, by the way, 0:13:50.960 --> 0:13:54.840 represents confidence in the economy later this year and next year. 0:13:55.120 --> 0:13:58.760 But the tech sector is undergoing a correction right now, 0:13:59.000 --> 0:14:01.200 and as you well know from your coverage down through 0:14:01.200 --> 0:14:04.559 the years, that's a fairly normal item. I don't think 0:14:04.559 --> 0:14:10.720 anybody should panick. The economy is definitely definitely improving, Larry. 0:14:10.760 --> 0:14:12.360 Before we let you go, I wanted to talk about 0:14:12.400 --> 0:14:14.640 something personal with you. You and I have tried some 0:14:14.679 --> 0:14:17.120 punches over the years with me sitting care and you 0:14:17.200 --> 0:14:20.120 in that position as well. Earlier this week, you talked 0:14:20.120 --> 0:14:23.480 about recovery and been twenty five years sober, and I 0:14:23.520 --> 0:14:26.240 just wanted to say personally to you, congratulations Larry, and 0:14:26.280 --> 0:14:29.720 thank you for sharing that story earlier this week. That's 0:14:29.800 --> 0:14:34.360 very kind of you, Jonathan. It's um. It's perhaps the 0:14:34.360 --> 0:14:39.360 greatest achievement of my life. And I'm most grateful to 0:14:39.520 --> 0:14:43.080 my friends and family, my saintly wife. I came back 0:14:43.120 --> 0:14:47.680 to faith in recovery and twelve Step meetings. I'm in 0:14:47.720 --> 0:14:51.000 touch with my friends all the time. The First Lady 0:14:51.200 --> 0:14:54.360 did a fabulous job yesterday. My hat's off tour. It's 0:14:54.400 --> 0:14:58.560 a delicate subject. She brought in people in recovery, people 0:14:58.560 --> 0:15:03.160 who are employers and laryees in a wonderful roundtable. Again, 0:15:03.200 --> 0:15:06.480 it's a phenomenal thing that the First Lady did. I 0:15:06.520 --> 0:15:09.920 was honored to participate. I would just say, Jonathan again, 0:15:09.960 --> 0:15:14.000 thank you for noticing. Look Um. As I mentioned yesterday, 0:15:14.000 --> 0:15:17.960 there's no question I would not be where I am 0:15:18.000 --> 0:15:21.000 in this position, in this job, which is the pinnacle 0:15:21.120 --> 0:15:24.200 of my professional career and a great honor bestowed on 0:15:24.280 --> 0:15:26.440 me by the President and the First Lady. I would 0:15:26.440 --> 0:15:29.200 not be here if I weren't sober all of yours. 0:15:29.960 --> 0:15:33.480 Thank you, sir, and thanks for being here and allowing 0:15:33.520 --> 0:15:36.440 me to interrogate you every single month as always, Larry 0:15:36.440 --> 0:15:39.560 Fancasa to catch up Larry Cardlock, the National Economic Council 0:15:39.640 --> 0:15:45.440 Director outside the White House. One of the great strengths 0:15:45.440 --> 0:15:47.760 of Bloomberg surveillance is you as we welcome you on 0:15:47.880 --> 0:15:51.680 radio and television. Is an eclectic view of economists. We 0:15:51.720 --> 0:15:54.600 now turned the former governor of the Fellow Reserve System, 0:15:54.760 --> 0:15:59.520 Randall crossn Are truly one of our experts in financial economics, 0:15:59.560 --> 0:16:03.000 sent our partying that into the labor system as well, 0:16:03.240 --> 0:16:07.000 Randy Krasser, and you're wonderful reading of the literature. How 0:16:07.120 --> 0:16:10.160 is our labor share doing? This is something we'll speak 0:16:10.160 --> 0:16:14.720 to Blanche Flour later, but this is something that's so important, 0:16:14.920 --> 0:16:19.880 labor getting its fair share of any economic growth presumed forward. 0:16:20.080 --> 0:16:24.080 How is our labor share? And so we certainly have 0:16:24.160 --> 0:16:30.600 seen the labor share decline over over time. Some of 0:16:30.640 --> 0:16:34.880 that is due to the way labor is U is 0:16:35.040 --> 0:16:38.840 characterized in the in the data. Because of course, if 0:16:38.880 --> 0:16:42.760 you can make your labor income into capital gains income, 0:16:43.200 --> 0:16:45.400 your tax at a much lower rate, and so it's 0:16:45.440 --> 0:16:48.640 been a very strong incentive to try to move things 0:16:48.720 --> 0:16:50.760 into what would have in the old days been called 0:16:50.840 --> 0:16:53.920 labor income and move into categories of being called capital income. 0:16:54.080 --> 0:16:57.840 So that accounts for part of the transition. So, just 0:16:57.920 --> 0:17:00.600 looking right now at where we are in the labor market, 0:17:00.640 --> 0:17:03.320 given this better than expected print, do you feel like 0:17:03.400 --> 0:17:07.119 there is momentum perhaps that economists have not accounted for, 0:17:07.240 --> 0:17:09.600 that they have failed to account for given the number 0:17:09.600 --> 0:17:12.919 of positive surprises in a row. Well, I think it's 0:17:12.960 --> 0:17:15.600 great that we've gotten some positive surprises. I mean, these 0:17:15.640 --> 0:17:19.240 numbers are of such large magnitudes that, um, it's no 0:17:19.320 --> 0:17:22.280 surprise that we and we've never had something exactly like 0:17:22.359 --> 0:17:26.080 this before, that we're gonna have more misses. And so 0:17:26.520 --> 0:17:29.359 I think we're broadly in the same range of where 0:17:29.400 --> 0:17:32.240 people thought we would be. That the unemployment rate was 0:17:32.240 --> 0:17:35.159 going to spike up very significantly initially, then as the 0:17:35.240 --> 0:17:38.719 unlock occurs, you're going to have a very uh major 0:17:39.000 --> 0:17:42.919 move down that will gradually slow down. And also, as 0:17:42.960 --> 0:17:45.920 you're mentioning before, there's an additional bump because of the 0:17:46.560 --> 0:17:51.119 census workers that will make the unemployment rate look lower 0:17:51.240 --> 0:17:54.679 this month than than otherwise. But um, we're gonna make 0:17:54.680 --> 0:17:57.800 a mistake. I'm glad. I'm glad things are better. Yeah, 0:17:57.880 --> 0:18:00.479 I mean, look, we we we all are. This has 0:18:00.560 --> 0:18:02.920 been a brutal market and it's been moving from temporary 0:18:03.000 --> 0:18:05.359 layoffs and permanent ones. We've been talking about Coca Cola 0:18:05.400 --> 0:18:08.240 and the airlines and everybody else announcing layoffs, even the 0:18:08.280 --> 0:18:10.560 companies that are doing well. I want to go to 0:18:10.600 --> 0:18:13.680 the numbers. The confusion that Michael McKee, who is brilliant 0:18:13.680 --> 0:18:15.840 and who has been doing this for years, was displaying 0:18:16.160 --> 0:18:19.520 came from a very confusing set of data. Yesterday we 0:18:19.560 --> 0:18:23.040 had a changed method of accounting for jobless claims. Today 0:18:23.080 --> 0:18:25.720 there are separate surveys that are coming out. Do you 0:18:25.800 --> 0:18:28.920 feel like the data itself is more confusing than it's 0:18:28.960 --> 0:18:33.800 ever been before. Well, I think that the fundamentals of 0:18:33.800 --> 0:18:37.000 the data are are the same, but it's just the 0:18:37.080 --> 0:18:40.040 movements in the data in these short amounts of time 0:18:40.040 --> 0:18:42.880 are so much larger than we're used to that of 0:18:42.920 --> 0:18:47.720 course they're going to be possibilities for um misinterpretation or 0:18:48.320 --> 0:18:51.720 miss uh miscategorization. So I think we have to take 0:18:51.880 --> 0:18:53.720 these numbers with a little bit of a grain of salt, 0:18:54.000 --> 0:18:56.520 not because there there's something wrong with numbers, but just 0:18:57.080 --> 0:18:59.879 the movements are so large that what used to be, 0:19:00.800 --> 0:19:03.359 you know, a hundred thousand was a big movement. Now 0:19:03.440 --> 0:19:06.119 it's a million, and so it's just a very different, 0:19:06.640 --> 0:19:10.479 different kindle of fish, Professor Cross. There there's a raging debate, 0:19:10.520 --> 0:19:14.160 and this goes more to your wheelhouse of financial economics, 0:19:14.240 --> 0:19:17.640 and over the years, the debate is on the growth 0:19:17.760 --> 0:19:22.359 rate needed given the interest rates within our fiscal policy. 0:19:22.480 --> 0:19:25.920 This is the this is the crying worry right now 0:19:26.320 --> 0:19:29.320 of those looking at our deficit build up. Give us 0:19:29.320 --> 0:19:33.240 your sense right now of the growth rate we need 0:19:34.000 --> 0:19:38.159 given the potential interest rates higher that we may experience. 0:19:38.560 --> 0:19:41.159 Are we near a point of worry or do we 0:19:41.200 --> 0:19:45.639 need to worry outside of two thousand twenty five. I 0:19:45.640 --> 0:19:48.080 think the longer run, there's a challenge. I mean, right now, 0:19:48.320 --> 0:19:50.879 it seems that the markets are very, very willing to 0:19:51.080 --> 0:19:57.840 definance countries that have astonishingly high deficits, whether it's the US, Japan, 0:19:58.000 --> 0:20:01.160 and a number of other countries. Least of major countries. 0:20:01.400 --> 0:20:05.320 Emerging market countries are facing enormous challenges, but there are 0:20:05.640 --> 0:20:08.160 some of the large countries like the US, are very 0:20:08.200 --> 0:20:10.840 fortunate at the moment to be seen as relatively safe, 0:20:10.840 --> 0:20:13.320 and there's a lot of money looking for those relatively 0:20:13.359 --> 0:20:17.000 safe assets. The challenges that at some point the chickens 0:20:17.040 --> 0:20:19.000 will come home to roost, that someone will say, well, 0:20:19.000 --> 0:20:21.639 can they really pay all this off? We don't know 0:20:21.720 --> 0:20:24.359 exactly what we'll trigger that, but but I think we 0:20:24.400 --> 0:20:28.600 should be worrying about that in the UH in the intermediate, 0:20:28.680 --> 0:20:31.960 longer run and Professor the Center and Budget and Policy Priorities, 0:20:32.000 --> 0:20:35.640 they go back too and say, we have a confidence 0:20:36.160 --> 0:20:39.920 that the American system has always developed a growth rate 0:20:40.480 --> 0:20:43.680 over that interest rate glide path what Peter orzag would 0:20:43.680 --> 0:20:46.520 call the glide pass out there. There's a little bit 0:20:46.520 --> 0:20:49.080 of angst right now that that may end. How do 0:20:49.119 --> 0:20:53.160 you feel about that? But it's UH, that's a concern now. 0:20:53.200 --> 0:20:57.040 And at least the short intermediate run interest rates are 0:20:57.040 --> 0:21:00.560 are around zero, even the tenure rate being less than 0:21:00.560 --> 0:21:04.120 one percent. I mean, that's really unprecedented UM and in 0:21:04.160 --> 0:21:07.560 many other countries we're seeing long term rates be be 0:21:07.640 --> 0:21:11.800 negative and so obviously that makes a lot of UH 0:21:12.000 --> 0:21:15.800 fiscal physical spending much more much more feasible when you 0:21:15.840 --> 0:21:18.560 have zero or negative rates. But if and when those 0:21:18.680 --> 0:21:21.719 rates go go up, that's when the challenge will come in. 0:21:21.880 --> 0:21:23.240 I think that's going to be at least a few 0:21:23.320 --> 0:21:26.480 years off. But we shouldn't be complacent now and say, oh, well, 0:21:26.680 --> 0:21:29.159 we can just borrow forever at zero and it's no 0:21:29.240 --> 0:21:31.840 problem with that kind of attitude. You won't be borrowing 0:21:31.880 --> 0:21:34.280 for very long at zero, and that come home to 0:21:34.359 --> 0:21:37.040 Ruth sooner. People have been saying that we haven't seen it, 0:21:37.080 --> 0:21:40.719 but people keep saying that, I do wonder, Professor, going forward, 0:21:40.800 --> 0:21:42.960 if the FED is out of tools to improve the 0:21:43.040 --> 0:21:46.640 labor market from here, well, I think you can't rely 0:21:46.760 --> 0:21:48.360 just on the FED for everything. People try to try 0:21:48.359 --> 0:21:50.639 to rely on the FED to to cure all ills. 0:21:51.000 --> 0:21:53.919 There's some things that the FED can can provide support for. 0:21:54.040 --> 0:21:56.000 It inn front, a lot of liquidity to markets, so 0:21:56.280 --> 0:21:59.600 when things when there is market dysfunction in February March, 0:22:00.000 --> 0:22:03.000 we're very helpful and in that Right now, I think 0:22:03.119 --> 0:22:07.320 it's much more the transition. Uh, the shock of of 0:22:07.440 --> 0:22:10.159 COVID is really a fundamental shock to the structure of 0:22:10.200 --> 0:22:12.280 the economy. I think it's much more fundamental than what 0:22:12.320 --> 0:22:14.719 happened with the global financial crisis or with nine eleven 0:22:15.040 --> 0:22:17.000 some parts of the economy are simply not going to 0:22:17.080 --> 0:22:19.560 be coming back, and we have to acknowledge that there's 0:22:19.560 --> 0:22:21.040 going to be a transition there and that's going to 0:22:21.160 --> 0:22:25.920 take time. The FED can't directly address address. Professor Crossner, 0:22:26.000 --> 0:22:28.040 thank you so much with the Booth Schools Chicago. We're 0:22:28.080 --> 0:22:32.960 thrilled that you can join us today on this job's day, 0:22:33.840 --> 0:22:36.240