1 00:00:02,600 --> 00:00:13,040 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:29,440 Speaker 1: Bloomberg dot com, and of course on the Bloomberg Donald 5 00:00:29,440 --> 00:00:31,240 Speaker 1: Trump was in Ohio. He said, let it go, let 6 00:00:31,280 --> 00:00:35,520 Speaker 1: it go, and played it. We played the video a lot. 7 00:00:35,600 --> 00:00:39,080 Speaker 1: He says, this is a tax on China? Is it thou? 8 00:00:39,400 --> 00:00:43,320 Speaker 1: No economist I know agrees with that statement. That's what's 9 00:00:43,360 --> 00:00:46,360 Speaker 1: so interesting about this round of tariffs. If and I say, 10 00:00:46,479 --> 00:00:49,360 Speaker 1: if it is implemented on September one, these are the 11 00:00:49,360 --> 00:00:52,440 Speaker 1: consumer items that were spared from the first few rounds 12 00:00:52,440 --> 00:00:54,640 Speaker 1: of tariffs. It could be an incremental hit to growth 13 00:00:54,640 --> 00:00:56,480 Speaker 1: if it's implemented. But this could be the thing that 14 00:00:56,560 --> 00:01:00,000 Speaker 1: consumers feel if the price you fist stopped, smartphone starts 15 00:01:00,000 --> 00:01:02,000 Speaker 1: to go a little bit higher. Went in on all 16 00:01:02,040 --> 00:01:03,720 Speaker 1: of this. I'm pleased to say that dropping by the 17 00:01:03,760 --> 00:01:06,720 Speaker 1: studio is Michelle Mayer be of a Merrill Lynch, Head 18 00:01:06,760 --> 00:01:10,720 Speaker 1: of US Economics. Good morning to Michelle. Typically first Friday 19 00:01:10,720 --> 00:01:12,480 Speaker 1: of the month, we'd be living with payrolls well in 20 00:01:12,520 --> 00:01:14,840 Speaker 1: with trade this morning. What does that say about payrolls 21 00:01:15,120 --> 00:01:17,480 Speaker 1: a little bit later? You know, I think it's the 22 00:01:17,520 --> 00:01:20,920 Speaker 1: fact that you have these external factors that are overwhelming 23 00:01:21,280 --> 00:01:26,360 Speaker 1: um the incoming data. So the what happens around trade 24 00:01:26,560 --> 00:01:29,920 Speaker 1: is by far the most important risk factor out there, 25 00:01:30,160 --> 00:01:32,520 Speaker 1: and it's going to be more of a forward looking 26 00:01:32,560 --> 00:01:35,840 Speaker 1: story as well. Right, So what happens to jobs today 27 00:01:35,920 --> 00:01:38,120 Speaker 1: is not necessarily going to be a function or a 28 00:01:38,160 --> 00:01:40,520 Speaker 1: factor for how you think about growth in the future 29 00:01:40,880 --> 00:01:43,759 Speaker 1: if these terraffs go into place. This is the view 30 00:01:43,760 --> 00:01:46,840 Speaker 1: from Deutsche Bank going into the number. We're wait payrolls, 31 00:01:46,880 --> 00:01:49,480 Speaker 1: but this data has been rendered largely irrelevant. If it 32 00:01:49,560 --> 00:01:52,960 Speaker 1: is strong but reinforced latest bond, bold signals and negative risk. 33 00:01:53,080 --> 00:01:56,240 Speaker 1: If the data is weak, how do you frame it 34 00:01:56,280 --> 00:01:58,760 Speaker 1: for clients this morning, whether this data matters or not? 35 00:01:58,840 --> 00:02:01,160 Speaker 1: What it means a bit strong? What it today? It's weak? Yeah, 36 00:02:01,200 --> 00:02:03,440 Speaker 1: I mean I hate to say that jobs don't matter, 37 00:02:03,640 --> 00:02:05,720 Speaker 1: you know, I hate to see any economic data doesn't matter, 38 00:02:05,760 --> 00:02:08,679 Speaker 1: because you know, we do take all incoming information into 39 00:02:08,720 --> 00:02:12,120 Speaker 1: our forecasts and think carefully about it. In jobs are important. 40 00:02:12,160 --> 00:02:14,760 Speaker 1: They're important. They're telling us about you know, how many 41 00:02:15,040 --> 00:02:17,320 Speaker 1: people are getting hired and how they're getting paid, etcetera. 42 00:02:17,440 --> 00:02:21,520 Speaker 1: So it matters. Um, if we have a strong report, 43 00:02:21,560 --> 00:02:23,200 Speaker 1: I think it tells us that there's a bit more 44 00:02:23,200 --> 00:02:26,400 Speaker 1: resiliency of the U. S economy to some of these risks, 45 00:02:26,440 --> 00:02:28,799 Speaker 1: and that companies, while they may be starting to cut 46 00:02:28,800 --> 00:02:31,440 Speaker 1: back on their investment in capital, they're still investing in labor, 47 00:02:31,520 --> 00:02:34,040 Speaker 1: and people still have jobs, and there's some ability for 48 00:02:34,080 --> 00:02:38,880 Speaker 1: the consumer to withstand some of these tariffs. That said, 49 00:02:39,040 --> 00:02:41,920 Speaker 1: of course, the big risk factor out there is what 50 00:02:42,000 --> 00:02:44,880 Speaker 1: happens on trade, and that's where people and markets are 51 00:02:44,880 --> 00:02:47,960 Speaker 1: most focused. Let's reset twelve months forward. What's your GDP call? 52 00:02:48,240 --> 00:02:50,520 Speaker 1: GDP call for the United States? So we think we 53 00:02:50,560 --> 00:02:53,280 Speaker 1: have growth essentially returning to trend one point eight percent 54 00:02:53,360 --> 00:02:56,720 Speaker 1: on US sub two percent where you are now? And 55 00:02:56,760 --> 00:02:59,919 Speaker 1: if if we put in a text on China, is 56 00:03:00,000 --> 00:03:04,080 Speaker 1: the President puts it, you gotta mark that down right? Yeah, 57 00:03:04,160 --> 00:03:08,280 Speaker 1: So that's the challenges. Actually, So are you modeling a grocerycession? Um? 58 00:03:08,560 --> 00:03:11,800 Speaker 1: Well not yet? Um, So we think can I make 59 00:03:11,880 --> 00:03:13,639 Speaker 1: some news here to come on? We think we're gonna 60 00:03:13,680 --> 00:03:17,600 Speaker 1: be leveling off right around trend maybe one to two 61 00:03:17,639 --> 00:03:20,960 Speaker 1: quarter basis you fast slightly below trend, but the the 62 00:03:21,000 --> 00:03:24,720 Speaker 1: overall Tratractordia stuff. But but yes, I mean, I think 63 00:03:24,800 --> 00:03:27,160 Speaker 1: it's partly gonna be a function of how central Bank's 64 00:03:27,200 --> 00:03:29,760 Speaker 1: offset this shock from But what's important your Johan as 65 00:03:29,800 --> 00:03:34,600 Speaker 1: an American politics one eight percent Michelle Meyer, trend doesn't 66 00:03:34,639 --> 00:03:37,880 Speaker 1: get you reelected. That's what this is really about. Yeah, 67 00:03:37,960 --> 00:03:41,040 Speaker 1: going into and the prospect of perhaps not getting a 68 00:03:41,120 --> 00:03:44,240 Speaker 1: trade deal either, which seems to have been injecting submergency 69 00:03:44,240 --> 00:03:46,800 Speaker 1: into the White House maybe over the last couple of days, Michelle, 70 00:03:46,880 --> 00:03:50,080 Speaker 1: just on the payrolls reporting on global manufacturing. Manufacturing is 71 00:03:50,120 --> 00:03:52,480 Speaker 1: in a recession worldwide at the moment. I think we 72 00:03:52,520 --> 00:03:54,400 Speaker 1: can all agree on that. The risk is that it 73 00:03:54,440 --> 00:03:57,280 Speaker 1: bleeds into services. Do you see that happening? Do you 74 00:03:57,320 --> 00:03:59,480 Speaker 1: see it taking hold of the service sector in any 75 00:03:59,520 --> 00:04:02,720 Speaker 1: way shape perform here in the United States at the moment. 76 00:04:02,920 --> 00:04:05,400 Speaker 1: So it's really interesting is on manufacturing. Yes, it's a 77 00:04:05,480 --> 00:04:09,880 Speaker 1: global manufacturing downturn um, but in the U s the 78 00:04:09,920 --> 00:04:12,760 Speaker 1: manufacturing data has been marginally better. The I s M 79 00:04:12,800 --> 00:04:16,040 Speaker 1: survey is still above fifty. It hasn't fallen into contraction. 80 00:04:16,160 --> 00:04:19,960 Speaker 1: Territory manufacturing jobs based off last few reports and a 81 00:04:20,080 --> 00:04:24,160 Speaker 1: DP this week are actually still increasing very modestly, but 82 00:04:24,279 --> 00:04:26,600 Speaker 1: there is some growth. So I think would be really 83 00:04:26,920 --> 00:04:29,360 Speaker 1: um interesting with today's report is whether or not the 84 00:04:29,440 --> 00:04:32,480 Speaker 1: manufacturing sectors continue to have jobs. And then you know, 85 00:04:32,600 --> 00:04:34,560 Speaker 1: what do you see on the services on the service side. 86 00:04:34,640 --> 00:04:38,240 Speaker 1: So far, there's been little evidence of a spillover from 87 00:04:38,279 --> 00:04:42,800 Speaker 1: these global um challenges into the service side economy, but 88 00:04:43,360 --> 00:04:45,320 Speaker 1: obviously something we have to keep a very close eye on, 89 00:04:45,360 --> 00:04:48,160 Speaker 1: and that's something that fed Chair Power is very concerned about. 90 00:04:48,480 --> 00:04:50,760 Speaker 1: So far, so good for the U S consumers, so fast, 91 00:04:50,800 --> 00:04:52,640 Speaker 1: so good for the labor market. You bring up fed 92 00:04:52,720 --> 00:04:56,080 Speaker 1: Chair j Pown, So let's talk about it going into yesterday, 93 00:04:56,120 --> 00:04:59,360 Speaker 1: the chances of a September right cut with fifty there 94 00:04:59,400 --> 00:05:03,320 Speaker 1: and there about then after the trade news crossed the Bloomberg, 95 00:05:03,360 --> 00:05:06,560 Speaker 1: guess what we approach almost percent for September right cut 96 00:05:06,839 --> 00:05:10,160 Speaker 1: once more, that into play between White House trade policy 97 00:05:10,600 --> 00:05:14,200 Speaker 1: and federal reserve easing. How important is that at the moment, Michelle, 98 00:05:15,160 --> 00:05:17,480 Speaker 1: I think that is the key story, This idea of 99 00:05:17,520 --> 00:05:22,359 Speaker 1: an adverse feedback loop where President Trump puts more pressure 100 00:05:22,400 --> 00:05:26,320 Speaker 1: in terms of greater tariffs and that weekends economic growth. 101 00:05:26,360 --> 00:05:29,600 Speaker 1: It creates some greater risk factors out there, and then 102 00:05:29,720 --> 00:05:33,000 Speaker 1: you have the power put that becomes ever more powerful 103 00:05:33,640 --> 00:05:36,760 Speaker 1: um and you see a central bank response. So for 104 00:05:36,839 --> 00:05:39,400 Speaker 1: the markets to say, Okay, the terroors might happen, but 105 00:05:39,800 --> 00:05:42,520 Speaker 1: we have a backstop that chair power is just going 106 00:05:42,600 --> 00:05:44,480 Speaker 1: to cut. Do we have a backstop? I think we've 107 00:05:44,480 --> 00:05:47,239 Speaker 1: got to talk about that. This belief that the chairman 108 00:05:47,279 --> 00:05:50,880 Speaker 1: can underwrite trade policy from the White House, can it 109 00:05:50,960 --> 00:05:54,280 Speaker 1: actually offset the global In fact, I would make the case, 110 00:05:54,400 --> 00:05:56,320 Speaker 1: and I think Powell tried to make this cases that 111 00:05:56,400 --> 00:05:58,600 Speaker 1: he doesn't want to be underwriting trade policy. He's got 112 00:05:58,640 --> 00:06:01,919 Speaker 1: no choice, has it. And that's really where the friction 113 00:06:02,040 --> 00:06:04,360 Speaker 1: I think comes from. It's not the intention to give 114 00:06:04,720 --> 00:06:06,600 Speaker 1: President Trump a green light to go ahead and be 115 00:06:06,680 --> 00:06:09,520 Speaker 1: tough on trade. But if you consider what his mandate is. 116 00:06:09,560 --> 00:06:13,720 Speaker 1: Mandate is to support economic growth, insure maximum employment. And 117 00:06:13,920 --> 00:06:16,400 Speaker 1: if you have a big shock, which they are taking 118 00:06:16,480 --> 00:06:19,159 Speaker 1: as external, they assume this is a pure exhaugen of shock. 119 00:06:19,200 --> 00:06:21,240 Speaker 1: They're not being political about it. They're saying, Okay, we 120 00:06:21,320 --> 00:06:22,839 Speaker 1: have a big shock, we need to offset in la 121 00:06:22,960 --> 00:06:25,000 Speaker 1: terre policy. If I look at the yields on my 122 00:06:25,080 --> 00:06:28,520 Speaker 1: Bloomberg screen in the United States, one seventy two year 123 00:06:29,720 --> 00:06:34,760 Speaker 1: year stunning to thirty year bond? Are those quote unquote 124 00:06:35,040 --> 00:06:38,960 Speaker 1: good for America? So? You know, it sure looks like 125 00:06:39,279 --> 00:06:43,280 Speaker 1: what two I'm thinking? You know, is that good for 126 00:06:43,440 --> 00:06:45,239 Speaker 1: I mean, I know it's good for real estate guys 127 00:06:45,560 --> 00:06:47,400 Speaker 1: like the guy who lives above the Gucci store on 128 00:06:47,440 --> 00:06:50,600 Speaker 1: Fifth Avenue. But is it good for America? You know? 129 00:06:50,760 --> 00:06:53,320 Speaker 1: So what it's I think the idea? Is that what 130 00:06:53,440 --> 00:06:56,520 Speaker 1: it's signaling about where we are as an economy. No, 131 00:06:56,760 --> 00:06:58,360 Speaker 1: it's not good, you know it would it be a 132 00:06:58,480 --> 00:07:00,719 Speaker 1: much better signal if we had a love three percent 133 00:07:00,839 --> 00:07:02,840 Speaker 1: on the tenure or even four percent a ten year, 134 00:07:02,880 --> 00:07:05,440 Speaker 1: that would be a signal of an economy that's growing. 135 00:07:06,120 --> 00:07:09,560 Speaker 1: GDP growth is trending three percent, inflation is running two percent. 136 00:07:09,800 --> 00:07:12,360 Speaker 1: You know, that would obviously be a better story. Um 137 00:07:12,480 --> 00:07:15,280 Speaker 1: so the fact that interest rates are so low it 138 00:07:15,480 --> 00:07:18,360 Speaker 1: is indicative of an economy that trend growth is lower 139 00:07:18,480 --> 00:07:21,000 Speaker 1: and inflation is more stubbornly low. Can we pretend it's 140 00:07:21,000 --> 00:07:23,560 Speaker 1: a normal Friday? What's your non farm payrolls? Oh good, 141 00:07:23,600 --> 00:07:27,080 Speaker 1: I've been waiting for that. I never asked today I 142 00:07:27,120 --> 00:07:30,200 Speaker 1: will because nobody cares what it's we're looking for a 143 00:07:30,320 --> 00:07:33,400 Speaker 1: hundred and seventy thousand, now, okay, one seventy car record? 144 00:07:33,440 --> 00:07:36,960 Speaker 1: Dost want any five? Michelle Meyer? Thankanks, Michelle. I apologize 145 00:07:36,960 --> 00:07:39,960 Speaker 1: we didn't do anything in the housing. I'm sorry. Next 146 00:07:40,000 --> 00:07:57,520 Speaker 1: time we'll do that. Let's right now, fold this economics 147 00:07:57,600 --> 00:08:00,240 Speaker 1: and the Trump uh is? He said in all Io 148 00:08:00,720 --> 00:08:04,040 Speaker 1: tax on China shock into what it means for Washington. 149 00:08:04,120 --> 00:08:07,480 Speaker 1: Henrietta trades joins us love having a run from Beta Partners. 150 00:08:07,760 --> 00:08:10,760 Speaker 1: I mean, Henrietta, you're gonna tell me the House and 151 00:08:10,840 --> 00:08:17,440 Speaker 1: the Senate support the President Trump's tax on China. Hey, 152 00:08:17,560 --> 00:08:19,960 Speaker 1: tom Um, you know I was thinking. One of the 153 00:08:20,000 --> 00:08:22,280 Speaker 1: best anecdotes I've got is when I was in a 154 00:08:22,360 --> 00:08:26,320 Speaker 1: meeting with the Senate Majority whip at the time, John Corner, 155 00:08:26,400 --> 00:08:28,880 Speaker 1: and speaking with his chief of staff and he and 156 00:08:28,920 --> 00:08:30,640 Speaker 1: I asked him, you know, on a scale from one attend, 157 00:08:30,720 --> 00:08:32,600 Speaker 1: how big a deal is this trade war? How big 158 00:08:32,640 --> 00:08:35,240 Speaker 1: a deal are these China tariffs? And point blank the 159 00:08:35,280 --> 00:08:38,680 Speaker 1: answer was three. It's the three. I would say, now, 160 00:08:39,240 --> 00:08:41,400 Speaker 1: maybe it's at like a five or six based on 161 00:08:41,480 --> 00:08:44,520 Speaker 1: my conversations with Senior Council in the last twenty four hours, 162 00:08:45,000 --> 00:08:47,520 Speaker 1: but they're not inclined to stop them. The one the 163 00:08:47,600 --> 00:08:51,120 Speaker 1: one tariff that really does spook them is the potential 164 00:08:51,200 --> 00:08:55,200 Speaker 1: for tariffs on automobiles against the EU. But they'll only 165 00:08:55,320 --> 00:08:58,920 Speaker 1: act on that after those. So, I mean, they don't 166 00:08:58,960 --> 00:09:02,000 Speaker 1: care about the fiscal policy, one point x trillion dollar 167 00:09:02,080 --> 00:09:05,600 Speaker 1: debt coming down the pike, what we're doing to our grandchildren, etcetera. 168 00:09:06,000 --> 00:09:09,560 Speaker 1: You're telling me they're not going to matter about cell 169 00:09:09,600 --> 00:09:13,680 Speaker 1: phone tariff and consumer product tariffs across all of America. 170 00:09:14,720 --> 00:09:18,080 Speaker 1: I sincerely believe that. And they are looking at polling 171 00:09:18,200 --> 00:09:22,280 Speaker 1: data from their constituents and amongst the Republican Party, you've 172 00:09:22,280 --> 00:09:27,839 Speaker 1: got roughly approval for Republicans. I don't disagree. Yeah, and so, 173 00:09:28,040 --> 00:09:30,160 Speaker 1: and that's what they're that's what's driving them. Um. I 174 00:09:30,240 --> 00:09:32,640 Speaker 1: had one client who very astutely said, you know, if 175 00:09:32,679 --> 00:09:34,440 Speaker 1: I was the president, I put this on in August 176 00:09:34,480 --> 00:09:37,040 Speaker 1: when everybody's thought, nobody's going to pay attention, and that's 177 00:09:37,120 --> 00:09:38,920 Speaker 1: low and behold, August first comes around, and that's what 178 00:09:39,000 --> 00:09:42,160 Speaker 1: we got and it goes into effect September one. I 179 00:09:42,280 --> 00:09:45,400 Speaker 1: just wonder what the minimum condition for progresses to back 180 00:09:45,480 --> 00:09:50,120 Speaker 1: away from that any ideation. You know, I appreciate the question, 181 00:09:50,200 --> 00:09:51,800 Speaker 1: but I would just push back a little bit because 182 00:09:51,800 --> 00:09:55,040 Speaker 1: I get this from investors on the minute. The reality 183 00:09:55,120 --> 00:09:58,400 Speaker 1: is it's USCR policy to provide a grandfather clause for 184 00:09:58,600 --> 00:10:01,439 Speaker 1: inventories that have been ordered by the business community to 185 00:10:01,600 --> 00:10:05,160 Speaker 1: travel from across the Pacific to get to their port 186 00:10:05,240 --> 00:10:07,560 Speaker 1: in the United States. That is something we have seen 187 00:10:07,679 --> 00:10:10,800 Speaker 1: five consecutive times in a row with the first, second, third, 188 00:10:10,840 --> 00:10:15,000 Speaker 1: and fourth chranches and then uh the escalation to they 189 00:10:15,080 --> 00:10:19,160 Speaker 1: provide three to five weeks of leeway for cargo to 190 00:10:19,480 --> 00:10:21,480 Speaker 1: come across the ocean if they're on a ship, or 191 00:10:21,480 --> 00:10:23,199 Speaker 1: if they're in the air, or what have you. And 192 00:10:23,280 --> 00:10:25,439 Speaker 1: they even granted in an extra fifteen days in the 193 00:10:25,520 --> 00:10:29,000 Speaker 1: last May escalation. This is not an indicator that they're 194 00:10:29,040 --> 00:10:32,880 Speaker 1: not serious. There are there's no scenario above five percent 195 00:10:32,920 --> 00:10:35,800 Speaker 1: odds that they don't put these tarasson September one. This 196 00:10:35,960 --> 00:10:38,679 Speaker 1: four week grace period is literally the least they could 197 00:10:38,720 --> 00:10:42,120 Speaker 1: do to prevent disruption to existing inventories. So let's talk 198 00:10:42,120 --> 00:10:44,840 Speaker 1: about counter measures, then, Henriette the Chinese out this morning. 199 00:10:44,880 --> 00:10:47,240 Speaker 1: If the US is going to implement the additional tariffs, 200 00:10:47,320 --> 00:10:50,720 Speaker 1: China will have to take necessary counter measures. What did 201 00:10:50,760 --> 00:10:54,839 Speaker 1: those counter measures look like? Well after the second round 202 00:10:54,880 --> 00:10:57,080 Speaker 1: of tariffs, they switched from doing a dollar per dollar 203 00:10:57,160 --> 00:11:00,600 Speaker 1: retaliation into a percentage based retaliation. So right now both 204 00:11:00,600 --> 00:11:03,400 Speaker 1: sides the tariff roughly sixty percent of each other's inventories. 205 00:11:03,760 --> 00:11:07,280 Speaker 1: This billion escalation from the U s side represents about 206 00:11:08,320 --> 00:11:12,560 Speaker 1: UM maybe given the President decided that it was going 207 00:11:12,600 --> 00:11:14,520 Speaker 1: to be a little bit more than that, UM, So 208 00:11:14,600 --> 00:11:17,160 Speaker 1: I would expect China to retaliate by putting tariffs on 209 00:11:17,280 --> 00:11:20,600 Speaker 1: maybe eight billion, which would be as a percentage basis 210 00:11:21,040 --> 00:11:23,280 Speaker 1: tip for tat. And then we saw yesterday that they 211 00:11:23,320 --> 00:11:27,679 Speaker 1: canceled from significant pork purchases. UM. There are anecdotal reports 212 00:11:27,760 --> 00:11:31,200 Speaker 1: from the business community of increased red tape and all 213 00:11:31,240 --> 00:11:33,400 Speaker 1: that that will continue. I'm glad you bring this up 214 00:11:33,440 --> 00:11:35,920 Speaker 1: because it's eluded in the last twelve hours off this 215 00:11:36,040 --> 00:11:40,319 Speaker 1: bombshell from the President that they have not purchased the 216 00:11:40,520 --> 00:11:46,200 Speaker 1: agricultural products. Do you have evidence of that, Henrietta? Um? Well, 217 00:11:46,240 --> 00:11:49,120 Speaker 1: I thought in your reporting from yesterday morning, UH that 218 00:11:49,280 --> 00:11:52,880 Speaker 1: they canceled the port purchase, so I assume that that's valid. UM. 219 00:11:52,960 --> 00:11:55,200 Speaker 1: And what we're looking for is not just a couple 220 00:11:55,240 --> 00:11:59,199 Speaker 1: of million UM purchases from Swabians. So we need we 221 00:11:59,320 --> 00:12:01,760 Speaker 1: need some were in the range of two hundred to 222 00:12:01,920 --> 00:12:05,600 Speaker 1: three hundred billion dollar commitments from China in the next 223 00:12:05,679 --> 00:12:07,880 Speaker 1: two years in order for President Trump to feel like 224 00:12:07,920 --> 00:12:10,599 Speaker 1: he's delivered. Where will that come from? Where does that? 225 00:12:10,720 --> 00:12:12,800 Speaker 1: I mean, does that corn or wheat or you know, 226 00:12:13,800 --> 00:12:15,839 Speaker 1: it's got to be everything. So that's gotta be everything 227 00:12:15,880 --> 00:12:21,560 Speaker 1: from soybeans to sorghum, corn wheat. Idiots? Why would they agree? Look, 228 00:12:21,600 --> 00:12:24,920 Speaker 1: you're great at the non rudeness the Grace of Washington. 229 00:12:25,280 --> 00:12:28,800 Speaker 1: John Farroll was extremely rude and I'm less extremely rude, 230 00:12:28,840 --> 00:12:32,880 Speaker 1: but still rude. You're not the president made this announcement. 231 00:12:32,960 --> 00:12:36,280 Speaker 1: I believe Secretary Monution was upset because he didn't brief 232 00:12:36,400 --> 00:12:39,559 Speaker 1: the Chinese before the announcement. Why are they at the 233 00:12:39,640 --> 00:12:44,679 Speaker 1: margin going to buy more agricultural products on this Friday morning. Oh, 234 00:12:45,040 --> 00:12:48,240 Speaker 1: I wouldn't expect that they would, and they have basically 235 00:12:48,360 --> 00:12:51,120 Speaker 1: said since um I want to I want to say, really, 236 00:12:51,200 --> 00:12:58,040 Speaker 1: since December second, Argentina they committed to making substantial agriculture 237 00:12:58,040 --> 00:13:00,280 Speaker 1: purchoses and that was what like seven months ago. They 238 00:13:00,320 --> 00:13:03,920 Speaker 1: still have not. Okay, we gotta leave it there. Thanks 239 00:13:03,960 --> 00:13:23,360 Speaker 1: for the great briefing. Henry. The Trades of Veta ellen'sner joint. 240 00:13:23,480 --> 00:13:26,640 Speaker 1: She runs US Economics at Morgan Stanley. She's won every 241 00:13:26,679 --> 00:13:29,480 Speaker 1: trophy out there and right now has a trophy call 242 00:13:29,600 --> 00:13:33,240 Speaker 1: from the greater Morgan Stanley. A real cautious caution, I 243 00:13:33,320 --> 00:13:36,319 Speaker 1: should say on the market, Ellen, are you gonna have 244 00:13:36,400 --> 00:13:40,120 Speaker 1: to adjust your economic call, your Excel spreadsheet because of 245 00:13:40,200 --> 00:13:44,160 Speaker 1: what the President announced yesterday? Yeah? So it's a it's 246 00:13:44,200 --> 00:13:47,280 Speaker 1: a good question. I mean, you know, economists loathe making 247 00:13:47,559 --> 00:13:51,679 Speaker 1: uh changes on the fly, but I think the at 248 00:13:51,720 --> 00:13:56,200 Speaker 1: the very least, um subjectively, you know, you'll see recession 249 00:13:56,280 --> 00:13:59,440 Speaker 1: probabilities go up. The models may not pick up these 250 00:13:59,520 --> 00:14:03,360 Speaker 1: kinds of things yet, right, but subjectively, um, you you 251 00:14:03,559 --> 00:14:08,080 Speaker 1: have to assume more risk and more recession risk specifically 252 00:14:08,640 --> 00:14:11,080 Speaker 1: on the back of this kind of renounce What what's 253 00:14:11,080 --> 00:14:14,920 Speaker 1: your run rate now twelve months forward? So twelve months forward, 254 00:14:15,040 --> 00:14:19,760 Speaker 1: we've still got probability, um, but you can easily see 255 00:14:19,840 --> 00:14:24,880 Speaker 1: that going higher. Uh, you know at at one in three. 256 00:14:25,080 --> 00:14:27,640 Speaker 1: I would not be surprised right now, right because it's 257 00:14:27,680 --> 00:14:30,440 Speaker 1: just the amount of uncertainty is incredible. Now, what's been 258 00:14:30,520 --> 00:14:34,520 Speaker 1: keeping recession probabilities low in terms of just models, the 259 00:14:34,600 --> 00:14:39,360 Speaker 1: real data, And one reason why the Fed resisted. UH. 260 00:14:39,560 --> 00:14:43,280 Speaker 1: Many of the policymakers ended up resisting, delivering fifty basis points, 261 00:14:44,040 --> 00:14:47,040 Speaker 1: which was, as you know, against our advice. UM. But 262 00:14:47,760 --> 00:14:50,600 Speaker 1: UH failed to do that because they just traditional monetary 263 00:14:50,640 --> 00:14:52,280 Speaker 1: policy making is I want to see it in the 264 00:14:52,400 --> 00:14:54,680 Speaker 1: data first. I really don't like being pre emptive. I 265 00:14:54,720 --> 00:14:56,560 Speaker 1: think chair pal had made a push to try to 266 00:14:56,640 --> 00:15:02,240 Speaker 1: be preemptive, UM, but traditional monetary policy making one on 267 00:15:02,400 --> 00:15:05,280 Speaker 1: Wednesday and they decided just to cut twenty five basis 268 00:15:05,320 --> 00:15:08,040 Speaker 1: points because they couldn't see it in the real data. 269 00:15:08,120 --> 00:15:11,080 Speaker 1: But at what point do you need to assume that 270 00:15:11,280 --> 00:15:15,000 Speaker 1: that's coming? UH? And you know, the consumer is really 271 00:15:15,080 --> 00:15:18,400 Speaker 1: the last holdout for the economy, you know in all 272 00:15:18,480 --> 00:15:21,720 Speaker 1: your leading sectors, and the GDP benchmark revision showed this 273 00:15:22,320 --> 00:15:28,480 Speaker 1: inventories down and falling, UH, investment down and falling profits 274 00:15:28,560 --> 00:15:32,080 Speaker 1: and specifically undistributed profits. What do I have left over 275 00:15:32,120 --> 00:15:33,520 Speaker 1: at the end of the day as a company to 276 00:15:33,720 --> 00:15:36,800 Speaker 1: hire and to invest? All of that is down. So 277 00:15:36,920 --> 00:15:38,920 Speaker 1: how long can you assume that the rest of the 278 00:15:39,000 --> 00:15:42,720 Speaker 1: economy holds up? Ellen? We gotta let John Farrow in 279 00:15:42,800 --> 00:15:44,800 Speaker 1: here because he's going to speak with free trader Lawrence 280 00:15:44,840 --> 00:15:47,240 Speaker 1: car Ellen what do you want to know from the 281 00:15:47,280 --> 00:15:49,960 Speaker 1: administration this morning? What do you think the main question 282 00:15:50,080 --> 00:15:52,840 Speaker 1: is for so many people on Wall Street, I think 283 00:15:52,920 --> 00:15:56,440 Speaker 1: we're always trying to gauge what the pin point is. Uh, 284 00:15:56,680 --> 00:16:01,000 Speaker 1: you know, how can they assure American household old uh 285 00:16:01,240 --> 00:16:04,600 Speaker 1: that uh, we're gonna be able to fight this fight 286 00:16:05,320 --> 00:16:08,560 Speaker 1: without you losing your job? You know. And I think 287 00:16:08,600 --> 00:16:11,040 Speaker 1: at the end of the day, that's what everyone wants 288 00:16:11,080 --> 00:16:13,960 Speaker 1: to know. You know, at what cost are you willing 289 00:16:14,080 --> 00:16:17,520 Speaker 1: to continue to play this game and keep uncertainty on 290 00:16:17,640 --> 00:16:19,680 Speaker 1: such a high level. And then it just sounds felt 291 00:16:19,720 --> 00:16:22,760 Speaker 1: like yesterday, And then in the little gaggle of reporters 292 00:16:22,840 --> 00:16:25,440 Speaker 1: that the President spote too that he didn't seem too 293 00:16:25,480 --> 00:16:29,320 Speaker 1: concerned about the market impact of his decision yesterday, that 294 00:16:29,400 --> 00:16:31,480 Speaker 1: he wasn't too concerned. He said something along the lines 295 00:16:31,520 --> 00:16:34,720 Speaker 1: of the market and market participants having fully understood what 296 00:16:34,840 --> 00:16:36,760 Speaker 1: had happened. I'm not sure what that actually means, Ellen, 297 00:16:36,800 --> 00:16:38,280 Speaker 1: but it's not a change, a little bit of a 298 00:16:38,320 --> 00:16:41,840 Speaker 1: shift at this White House. Well, yeah, I think you know, 299 00:16:41,920 --> 00:16:44,920 Speaker 1: early on it was always okay. The you know, President 300 00:16:44,960 --> 00:16:47,200 Speaker 1: Trump's pain point is the stock market. And as long 301 00:16:47,240 --> 00:16:50,080 Speaker 1: as the stock market is holding up. That's his queue 302 00:16:50,160 --> 00:16:52,840 Speaker 1: that you can push this further. And if it's not 303 00:16:53,000 --> 00:16:56,080 Speaker 1: holding up, then that would be uh you know, his 304 00:16:56,520 --> 00:17:01,120 Speaker 1: uh uh circuit breaker, if you will, so, uh you know, 305 00:17:01,160 --> 00:17:05,159 Speaker 1: apparently the FED is his circuit breaker, and that you know, uh, 306 00:17:05,560 --> 00:17:08,600 Speaker 1: you know, he can get one basis points out of 307 00:17:09,240 --> 00:17:11,959 Speaker 1: the f O m C in terms of interest rate 308 00:17:12,040 --> 00:17:15,240 Speaker 1: cuts one way or another and one way that he's 309 00:17:15,320 --> 00:17:19,000 Speaker 1: learned how to do that. Then is okay, you only 310 00:17:19,080 --> 00:17:23,040 Speaker 1: delivered a basis point cut. You said that it's all 311 00:17:23,080 --> 00:17:25,960 Speaker 1: about trade, I'll know to go further and get more cuts. 312 00:17:26,080 --> 00:17:29,760 Speaker 1: How is he going to deliver a recession? Well, that's 313 00:17:29,840 --> 00:17:33,520 Speaker 1: the So that's the risk, right, I mean, is are 314 00:17:33,560 --> 00:17:37,600 Speaker 1: you really going to thread that needle so finely that 315 00:17:37,960 --> 00:17:40,639 Speaker 1: you know that you can push it hard enough that 316 00:17:40,760 --> 00:17:43,480 Speaker 1: the Fed's got your back so to speak, and will 317 00:17:43,560 --> 00:17:45,720 Speaker 1: cut in order to keep the economy a flow because 318 00:17:45,720 --> 00:17:47,760 Speaker 1: the FED can't play that game, right, They're not going 319 00:17:47,800 --> 00:17:50,600 Speaker 1: to play a game of chicken with the president on 320 00:17:50,720 --> 00:17:53,440 Speaker 1: the economy. Uh. And so but if you know the 321 00:17:53,560 --> 00:17:56,720 Speaker 1: FED has uh your back, and then it gives you 322 00:17:56,800 --> 00:17:59,760 Speaker 1: more cover to push trade further. But the risk is 323 00:17:59,840 --> 00:18:03,200 Speaker 1: a course, as you note, recession risk or rising. The 324 00:18:03,320 --> 00:18:05,960 Speaker 1: risk is that you push the economy into recession. And 325 00:18:06,119 --> 00:18:09,360 Speaker 1: as you know, we don't elect the incumbent party. Um 326 00:18:09,560 --> 00:18:12,720 Speaker 1: if we have recession in an election year. Uh, And 327 00:18:12,840 --> 00:18:15,760 Speaker 1: so that is the risk, uh that that apparently the 328 00:18:15,800 --> 00:18:17,920 Speaker 1: president is willing to take. So and then Chapman Pou 329 00:18:18,040 --> 00:18:20,760 Speaker 1: tried his best not to get drawn into criticizing trade 330 00:18:20,800 --> 00:18:23,240 Speaker 1: policy in the news conference. I'm sure he's trying his 331 00:18:23,400 --> 00:18:26,200 Speaker 1: best not to be the guy that has to underwrite 332 00:18:26,440 --> 00:18:28,720 Speaker 1: trade policy, but it just feels like that's who he 333 00:18:28,880 --> 00:18:31,440 Speaker 1: is now. So it's September while and truly in play. 334 00:18:31,480 --> 00:18:35,399 Speaker 1: Are you looking for a right cut? So after the so, 335 00:18:35,520 --> 00:18:37,760 Speaker 1: as you know, we expected dipty basis points to be 336 00:18:37,840 --> 00:18:40,320 Speaker 1: delivered on One of their argument was that the message 337 00:18:40,359 --> 00:18:42,159 Speaker 1: that you send to markets is that you will be 338 00:18:42,280 --> 00:18:46,000 Speaker 1: aggressive upfront and do whatever it takes. Having failed to 339 00:18:46,080 --> 00:18:49,480 Speaker 1: do that, the market now has no confidence that the 340 00:18:49,560 --> 00:18:52,560 Speaker 1: said will do whatever it takes. So that's one problem 341 00:18:52,600 --> 00:18:55,680 Speaker 1: with not having started off aggressive. The risk there is 342 00:18:55,760 --> 00:18:58,640 Speaker 1: that you're forced to do more as a follow up 343 00:18:59,119 --> 00:19:03,200 Speaker 1: and deliver that at basis point cut. Anyway, UM, right 344 00:19:03,280 --> 00:19:05,600 Speaker 1: now we have them, And this was an expectation we 345 00:19:05,680 --> 00:19:09,399 Speaker 1: said on Wednesday that we have the next cut coming 346 00:19:09,440 --> 00:19:13,040 Speaker 1: in October because you know, when when we look at 347 00:19:13,080 --> 00:19:15,600 Speaker 1: the data pattern, inflation is going to be rising. Here 348 00:19:15,640 --> 00:19:18,959 Speaker 1: going into the September meeting, we didn't see that jobs. 349 00:19:19,160 --> 00:19:21,280 Speaker 1: You know, we don't see in our models that jobs 350 00:19:21,280 --> 00:19:22,959 Speaker 1: are going to fall off or the consumer is going 351 00:19:23,000 --> 00:19:26,520 Speaker 1: to fall off. But you know yesterday was a different day. Well, 352 00:19:26,640 --> 00:19:28,639 Speaker 1: yesterday was a different day. If you were on the 353 00:19:28,680 --> 00:19:31,879 Speaker 1: partial differentials on an X on the back of the equation, 354 00:19:32,200 --> 00:19:35,840 Speaker 1: how much do you take down g d P with 355 00:19:35,960 --> 00:19:41,480 Speaker 1: a ten percent terrifying everything remaining. So the modeling that 356 00:19:41,600 --> 00:19:45,560 Speaker 1: we've done on ten percent on everything remain everything remaining 357 00:19:46,200 --> 00:19:49,760 Speaker 1: ten percent if you just model it straight right, ten 358 00:19:49,880 --> 00:19:52,679 Speaker 1: percent even though you're hitting a lot of consumer goods, 359 00:19:53,280 --> 00:19:56,240 Speaker 1: UH does not make a material difference on GDP. And 360 00:19:56,359 --> 00:19:59,800 Speaker 1: where we all weathered up about this, well, because here's 361 00:19:59,840 --> 00:20:02,639 Speaker 1: the ladder, Tom, I'm getting ready to ladder you up. 362 00:20:03,240 --> 00:20:09,800 Speaker 1: The ladder is in how it affects business confidence, consumer confidence, 363 00:20:10,119 --> 00:20:15,600 Speaker 1: CAPEX jobs. It's in the non linearity of financialations and confidence. 364 00:20:15,760 --> 00:20:19,800 Speaker 1: It's less so on just the direct mechanical impact to GDP, 365 00:20:19,880 --> 00:20:23,080 Speaker 1: and of course those other factors or that's the fuzzy 366 00:20:23,160 --> 00:20:25,760 Speaker 1: side of economics. There's a lot of judgment that goes 367 00:20:25,840 --> 00:20:30,520 Speaker 1: into that because certainly today when margins are already running 368 00:20:30,680 --> 00:20:34,480 Speaker 1: so stin, there's not a lot more room that have 369 00:20:34,720 --> 00:20:38,000 Speaker 1: to absorb this kind of increase in Let's take the 370 00:20:38,040 --> 00:20:41,160 Speaker 1: partition of the economy. Joelivarnio over into Texas was brilliant 371 00:20:41,200 --> 00:20:45,600 Speaker 1: and emphasizing manufacturing off a cliff fine. The goods producing 372 00:20:45,720 --> 00:20:48,680 Speaker 1: c p I is in the you know, deflation dis inflation. 373 00:20:49,040 --> 00:20:52,240 Speaker 1: Are you predicting its service sector c p I given 374 00:20:52,560 --> 00:20:55,760 Speaker 1: the Trump strategy will come down and begin to dampen 375 00:20:56,200 --> 00:20:59,040 Speaker 1: general inflation like Dallas trimmed and all that. Does that 376 00:20:59,240 --> 00:21:02,760 Speaker 1: roll over and come down or not? Well, not on 377 00:21:03,080 --> 00:21:07,440 Speaker 1: any kind of timeline that markets certainly want to look at. 378 00:21:07,520 --> 00:21:10,200 Speaker 1: So from teariffs, the mediate effect of course is again 379 00:21:10,320 --> 00:21:12,960 Speaker 1: just going back to the mechanics of it. Uh is 380 00:21:13,280 --> 00:21:16,639 Speaker 1: you know, import prices rise, then pp I prices, so 381 00:21:16,800 --> 00:21:19,919 Speaker 1: you get at the wholesale level and then consumer prices. 382 00:21:19,960 --> 00:21:22,960 Speaker 1: So teariff going in on September one, you could see 383 00:21:23,000 --> 00:21:25,800 Speaker 1: it starts to show up in cp I numbers by 384 00:21:25,840 --> 00:21:30,320 Speaker 1: say November December, uh and that and so yeah, you 385 00:21:30,440 --> 00:21:33,360 Speaker 1: get that impact where it lifts inflation, but of course 386 00:21:33,440 --> 00:21:36,080 Speaker 1: the FED looks through that. Uh, you know, it starts 387 00:21:36,160 --> 00:21:40,159 Speaker 1: to affect impact consumer spending because they're not gonna unless 388 00:21:40,200 --> 00:21:43,280 Speaker 1: income is out pacing that delta, you're not going to 389 00:21:43,359 --> 00:21:45,200 Speaker 1: be able to overcome that. And you start to damp 390 00:21:45,240 --> 00:21:49,160 Speaker 1: in consumer demand. And so after hitting aggregate demand, then 391 00:21:49,200 --> 00:21:52,520 Speaker 1: it starts to have a gravitation on inflation. But you're 392 00:21:52,560 --> 00:21:56,080 Speaker 1: talking it well into next year, where then it starts 393 00:21:56,119 --> 00:21:58,360 Speaker 1: to turn inflation in the other direction. I got bad news. 394 00:21:58,440 --> 00:22:01,080 Speaker 1: Jim Gorman just emailed in James Gorman, and he says, 395 00:22:01,080 --> 00:22:03,600 Speaker 1: are you going to talk about jobs with Ellen? What 396 00:22:06,600 --> 00:22:09,080 Speaker 1: do you think of Job's day? Please? So I think 397 00:22:09,160 --> 00:22:11,320 Speaker 1: job's day is going to be perfectly fine. But I 398 00:22:11,400 --> 00:22:14,760 Speaker 1: think markets are going to take this as backward looking, uh, 399 00:22:14,960 --> 00:22:17,600 Speaker 1: you know, jobless claims. So there are two things that 400 00:22:17,600 --> 00:22:20,200 Speaker 1: you got to look at. Right Where businesses laying off, well, 401 00:22:20,240 --> 00:22:22,520 Speaker 1: we know they weren't. And we're really good at predicting 402 00:22:22,600 --> 00:22:26,600 Speaker 1: that because we've got weekly initial jobs still remaining extremely low. 403 00:22:26,960 --> 00:22:29,680 Speaker 1: What we're not as good at. Uh. And this is 404 00:22:29,720 --> 00:22:31,159 Speaker 1: not a knock to me and my team is just 405 00:22:31,280 --> 00:22:33,879 Speaker 1: economists in general. We're not as good at picking up 406 00:22:33,920 --> 00:22:37,840 Speaker 1: in real time, didn't hiring change? Was there some slowdown 407 00:22:37,880 --> 00:22:41,160 Speaker 1: and hiring? It doesn't feel like that occurred in July. 408 00:22:41,320 --> 00:22:42,680 Speaker 1: It feels like this is going to be a pretty 409 00:22:42,760 --> 00:22:45,480 Speaker 1: nice number. So we've got close to a hundred ninety 410 00:22:45,560 --> 00:22:49,280 Speaker 1: thousand in July. UM, and so I don't think to 411 00:22:49,359 --> 00:22:53,280 Speaker 1: be a message today D eight six to get oh please, 412 00:22:53,520 --> 00:22:58,800 Speaker 1: thank you? Can you go? Hundred six? Great? Alexander love Evan, 413 00:22:59,080 --> 00:23:15,520 Speaker 1: thank you so much? With Morgan Stanley Place decide that 414 00:23:15,560 --> 00:23:19,000 Speaker 1: Kathy Jones joined us Nashalp Center, the financial research chief 415 00:23:19,080 --> 00:23:23,640 Speaker 1: Fixed Incomes Strategies. Good morning to Kathy. Your initial take please, Yeah, 416 00:23:23,640 --> 00:23:25,639 Speaker 1: I would agree with Jim. This is a this is 417 00:23:25,680 --> 00:23:28,520 Speaker 1: a pretty good report all the way around. UM. I'm 418 00:23:28,680 --> 00:23:31,840 Speaker 1: encouraged to see the labor force participation rate picking up. 419 00:23:31,960 --> 00:23:36,320 Speaker 1: That's that's certainly a good sign, and the underemployment rate 420 00:23:36,400 --> 00:23:39,679 Speaker 1: coming down. It's around seven. That's ah, it's not at 421 00:23:39,760 --> 00:23:42,359 Speaker 1: the historic law, but it's getting pretty close to it. 422 00:23:42,560 --> 00:23:46,920 Speaker 1: Probably the only weaknesses those downward revisions taking away about 423 00:23:47,000 --> 00:23:50,200 Speaker 1: forty jobs from the prior couple of months, but not 424 00:23:51,160 --> 00:23:54,480 Speaker 1: not enough to really change the small picture. It's pretty 425 00:23:54,480 --> 00:23:58,080 Speaker 1: good Kasey link in what you're seeing with an earnings reports, 426 00:23:58,160 --> 00:24:02,280 Speaker 1: revenue reports at Schwab really coast to coast at the margin, 427 00:24:02,400 --> 00:24:08,240 Speaker 1: Will we see a corporate labor cost cutting? You know, 428 00:24:08,400 --> 00:24:10,840 Speaker 1: I think in some industries that's probably going to be 429 00:24:11,400 --> 00:24:15,920 Speaker 1: the case. UM, But I think overall, the big swing 430 00:24:16,040 --> 00:24:18,720 Speaker 1: factor here we all know is trade. Right, That's the 431 00:24:18,800 --> 00:24:21,960 Speaker 1: thing that's driving business investment or lack thereof. That's the 432 00:24:22,040 --> 00:24:25,640 Speaker 1: thing that's driving optimism or lack thereof. So UM, once 433 00:24:25,720 --> 00:24:27,280 Speaker 1: we get a resolution on that, If we get a 434 00:24:27,359 --> 00:24:29,639 Speaker 1: resolution on that, then I think that that could be 435 00:24:29,680 --> 00:24:32,679 Speaker 1: an important component of of what happens with the labor market. 436 00:24:33,800 --> 00:24:36,159 Speaker 1: Within the labor market, then is a wage frame for 437 00:24:36,280 --> 00:24:39,920 Speaker 1: us at wage dynamic. You see right now we're seeing 438 00:24:40,000 --> 00:24:43,919 Speaker 1: the gradual rise in overall average hourly earnings UM. If 439 00:24:44,000 --> 00:24:47,320 Speaker 1: you look a little deeper into the wage growth, you 440 00:24:47,680 --> 00:24:51,560 Speaker 1: are seeing some acceleration in certain industries, but the average 441 00:24:51,600 --> 00:24:53,520 Speaker 1: is being held down by the fact that we add 442 00:24:53,560 --> 00:24:55,920 Speaker 1: a lot of jobs in the lower wage sectors of 443 00:24:56,000 --> 00:24:58,440 Speaker 1: the autonomy, which you know you'd expect at this point 444 00:24:58,480 --> 00:25:00,480 Speaker 1: in the cycle. That's a good thing this point in 445 00:25:00,520 --> 00:25:02,800 Speaker 1: the cycle. We're bringing people in and many of those 446 00:25:02,840 --> 00:25:06,360 Speaker 1: are in lower wage areas, but that holds down the average. 447 00:25:06,440 --> 00:25:09,639 Speaker 1: But within that starting to see some pretty good wage 448 00:25:09,680 --> 00:25:12,360 Speaker 1: increases in other areas. Keith, you were talking to Jim 449 00:25:12,400 --> 00:25:14,359 Speaker 1: Glassman about this before, and to me, this is the 450 00:25:14,440 --> 00:25:16,840 Speaker 1: heart of the matter, and it's the number one male 451 00:25:17,640 --> 00:25:21,480 Speaker 1: I get from our listeners coast to coast is they 452 00:25:21,520 --> 00:25:24,359 Speaker 1: don't look at it is a good economy because they 453 00:25:24,440 --> 00:25:28,840 Speaker 1: see it as an unwaited barbell or unbalanced barbell. I 454 00:25:28,880 --> 00:25:32,840 Speaker 1: should say, with a lot of low wage jobs being created, 455 00:25:32,880 --> 00:25:35,440 Speaker 1: I mean, I get it, it's unit job growth, but 456 00:25:35,560 --> 00:25:40,120 Speaker 1: are they quality jobs? Well, you know, clearly it would 457 00:25:40,160 --> 00:25:43,280 Speaker 1: be nice if at this point, with unemployment that three 458 00:25:43,359 --> 00:25:48,200 Speaker 1: point seven, if we were seeing uh, stronger average wage growth. 459 00:25:48,680 --> 00:25:51,840 Speaker 1: So no, a lot of these are healthcare services and 460 00:25:52,320 --> 00:25:54,719 Speaker 1: many of these are lower wage jobs. But again, if 461 00:25:54,720 --> 00:25:58,120 Speaker 1: you're pulling in people who have been sidelined, typically that's 462 00:25:58,119 --> 00:26:00,280 Speaker 1: where you're going to see the jobs being create aided. 463 00:26:00,400 --> 00:26:03,840 Speaker 1: So all jobs are good jobs in that sense. But yeah, 464 00:26:04,280 --> 00:26:06,880 Speaker 1: it doesn't have a feel good factor that it might 465 00:26:07,040 --> 00:26:10,120 Speaker 1: have in previous cycles. Well, well then then let's move 466 00:26:10,160 --> 00:26:12,240 Speaker 1: it to the fixed income area as well. Now you've 467 00:26:12,280 --> 00:26:16,240 Speaker 1: had a huge shock of what the President said yesterday afternoon. 468 00:26:16,680 --> 00:26:20,639 Speaker 1: How do you adjust your fixed income strategy when you 469 00:26:20,800 --> 00:26:24,879 Speaker 1: barbell an okay, labor economy with the trade war that 470 00:26:25,600 --> 00:26:30,359 Speaker 1: was accentuated yesterday afternoon. Yeah, this is really tough, and 471 00:26:30,560 --> 00:26:33,560 Speaker 1: barbell is kind of a key word there. What do 472 00:26:33,600 --> 00:26:35,119 Speaker 1: you do with a barbell? I mean, I mean, what 473 00:26:35,200 --> 00:26:39,320 Speaker 1: do I do if I've got gains and bonds right now? Well, 474 00:26:39,600 --> 00:26:41,080 Speaker 1: you know, I think you need to hold on to 475 00:26:41,160 --> 00:26:44,640 Speaker 1: some intermediate or long term bonds because the overall trajectory 476 00:26:44,720 --> 00:26:47,239 Speaker 1: of global rates is still down. I mean, look at 477 00:26:47,240 --> 00:26:49,800 Speaker 1: all the negative yielding bonds we have in Europe right now, 478 00:26:50,400 --> 00:26:53,159 Speaker 1: and if the trade war continues, those fields are going 479 00:26:53,200 --> 00:26:55,760 Speaker 1: to continue to fall. So you need something with duration. 480 00:26:55,920 --> 00:26:58,440 Speaker 1: But we, like the Barbell idea, have some short term 481 00:26:58,480 --> 00:27:01,080 Speaker 1: and have some long term. Kind of missed that middle 482 00:27:01,200 --> 00:27:03,360 Speaker 1: dip in the yield curtain, I mean, to a data check. 483 00:27:03,480 --> 00:27:06,600 Speaker 1: Right now, we have a deterioration here. All in all, 484 00:27:06,680 --> 00:27:10,920 Speaker 1: we are negative twelve than we advanced higher a better 485 00:27:11,080 --> 00:27:15,320 Speaker 1: tape and right now negative fifteen down futures, negative ninety 486 00:27:15,720 --> 00:27:18,120 Speaker 1: yields I'm gonna say, are churning. All in all, maybe 487 00:27:18,119 --> 00:27:21,359 Speaker 1: a little higher yields off of where we were before 488 00:27:21,440 --> 00:27:24,160 Speaker 1: the jobs report, the ten ye yield one point eight 489 00:27:24,240 --> 00:27:28,000 Speaker 1: seven percent. Gold was up twenty dollars now up eighteen 490 00:27:28,440 --> 00:27:32,399 Speaker 1: dollars fourteen forty nine years. Currencies really don't play today. 491 00:27:32,520 --> 00:27:35,880 Speaker 1: All in all, Sterling, I should say one twenty three 492 00:27:36,000 --> 00:27:40,200 Speaker 1: Cathy Jones with us a schwab right now, Cathy, So 493 00:27:40,320 --> 00:27:43,560 Speaker 1: I got a Barbell approach in bonds, but I want 494 00:27:43,600 --> 00:27:46,000 Speaker 1: to go outside full faith and credit to try to 495 00:27:46,160 --> 00:27:51,280 Speaker 1: capture a higher yield. Where do I do that? Yeah, 496 00:27:51,440 --> 00:27:55,200 Speaker 1: it's getting tough to find great valuation. So saying the 497 00:27:55,320 --> 00:27:59,920 Speaker 1: corporate market UM high yield spread versus treasuries are pretty tie. 498 00:28:00,640 --> 00:28:03,680 Speaker 1: And if we do UM get a slow down, further 499 00:28:03,760 --> 00:28:06,400 Speaker 1: slow down in the global economy and further slow down 500 00:28:06,520 --> 00:28:09,680 Speaker 1: here because of trade UM that doesn't offer you a 501 00:28:09,760 --> 00:28:11,800 Speaker 1: lot of value. So if you're going to go out, 502 00:28:12,160 --> 00:28:15,920 Speaker 1: we're suggesting just higher credit quality and corporates or you know, 503 00:28:16,119 --> 00:28:18,440 Speaker 1: if you if you were in a high tax state 504 00:28:18,600 --> 00:28:22,080 Speaker 1: like New York, you might look at the muni market. Well, 505 00:28:22,160 --> 00:28:23,760 Speaker 1: come on, you want me to look at the muni 506 00:28:23,840 --> 00:28:27,200 Speaker 1: market where that's priced up pride, the feeding frenzy of 507 00:28:27,320 --> 00:28:30,240 Speaker 1: acquisition there of price up and you're done. You have 508 00:28:30,480 --> 00:28:33,879 Speaker 1: value in Muni's You know, you have to pick your 509 00:28:33,920 --> 00:28:36,560 Speaker 1: spots really carefully on the Muni curve right now, it's 510 00:28:36,760 --> 00:28:39,360 Speaker 1: very overvalued. At at the short end of the curve. 511 00:28:39,480 --> 00:28:41,040 Speaker 1: You can find a little bit of value if you 512 00:28:41,120 --> 00:28:44,360 Speaker 1: go intermediate term. Okay, well we call that the value 513 00:28:44,360 --> 00:28:48,320 Speaker 1: of the curve. I guess um as well when I 514 00:28:48,440 --> 00:28:51,320 Speaker 1: when I look at the fixed income market and it 515 00:28:51,440 --> 00:28:53,160 Speaker 1: has to come over to equity. I mean, I know 516 00:28:53,240 --> 00:28:56,120 Speaker 1: you and Lizenne Sanders are barely in speaking terms, but 517 00:28:56,400 --> 00:29:00,920 Speaker 1: if I have a Kathy Jones bond economy, that leads 518 00:29:01,000 --> 00:29:07,320 Speaker 1: to a higher reward pe multiple, right where I've got 519 00:29:07,440 --> 00:29:13,320 Speaker 1: to reset my equity valuation off of your world, right Yeah. 520 00:29:13,400 --> 00:29:18,160 Speaker 1: I mean, obviously the discount rate matters for valuations and equities, 521 00:29:18,240 --> 00:29:21,120 Speaker 1: and that's been a probably a pretty big component of 522 00:29:21,160 --> 00:29:24,040 Speaker 1: what's driven the equity market. But Luzanne would tell you 523 00:29:24,160 --> 00:29:27,240 Speaker 1: to watch the part as well. So some of those 524 00:29:27,320 --> 00:29:30,640 Speaker 1: downward revisions to corporate profits that we've seen in the 525 00:29:30,760 --> 00:29:33,719 Speaker 1: GDP revision have her a little bit concerned. What are 526 00:29:33,720 --> 00:29:35,880 Speaker 1: you seeing on the demand side right now? In terms 527 00:29:35,920 --> 00:29:38,800 Speaker 1: of that insatiable desire for papers? There are a lot 528 00:29:38,840 --> 00:29:43,760 Speaker 1: of issues right now to take up the demand. Yeah, yeah, absolutely. 529 00:29:43,840 --> 00:29:46,080 Speaker 1: I mean if you were in a position to be 530 00:29:46,200 --> 00:29:49,280 Speaker 1: a borrower right now, you would certainly want to issue 531 00:29:49,320 --> 00:29:54,040 Speaker 1: bond at these yields. Kathy Jones, thank you so much, greatly, 532 00:29:54,080 --> 00:30:10,160 Speaker 1: greatly appreciate it. With Schwab's morning for the President and 533 00:30:10,320 --> 00:30:12,880 Speaker 1: for the Trump administration's views on the jobs report, I'm 534 00:30:12,920 --> 00:30:15,200 Speaker 1: pleased to say that we joined on Bloomberg Television and 535 00:30:15,320 --> 00:30:19,120 Speaker 1: on radio by Larry Cardlo, National Economic Council Director. Good 536 00:30:19,160 --> 00:30:22,560 Speaker 1: morning to Larry Ryan Jackson. Thank you great to have 537 00:30:22,640 --> 00:30:24,720 Speaker 1: you with us. I can't think of a Payrolls Friday 538 00:30:24,840 --> 00:30:27,600 Speaker 1: where we've barely talked about payrolls Friday because everyone wants 539 00:30:27,640 --> 00:30:29,840 Speaker 1: to talk to me about trade. So where do you 540 00:30:29,880 --> 00:30:31,560 Speaker 1: want to start? I think we should just start with 541 00:30:31,680 --> 00:30:34,840 Speaker 1: the headline. It's the trade story. So many people, Larry, 542 00:30:34,880 --> 00:30:38,360 Speaker 1: are trying to figure out the minimum condition of success 543 00:30:38,440 --> 00:30:42,360 Speaker 1: for the following month to avoid this September one tariff increase. 544 00:30:42,400 --> 00:30:45,440 Speaker 1: If we've got any idea what that is, Larry, well, 545 00:30:45,480 --> 00:30:49,080 Speaker 1: I don't want to speculate on that. Look and in 546 00:30:49,200 --> 00:30:53,160 Speaker 1: some sense the story is very straightforward. Our team returned 547 00:30:53,240 --> 00:30:58,280 Speaker 1: from Shanghai Bassador, Lighthouse Secretary Manuchin, we met with we 548 00:30:58,360 --> 00:31:01,560 Speaker 1: all met with the President yesterday, talked about it. President 549 00:31:01,680 --> 00:31:06,200 Speaker 1: himself is not satisfied with the progress of the talks 550 00:31:07,080 --> 00:31:11,400 Speaker 1: with respect to agriculture, with respect to structural items. Even 551 00:31:11,480 --> 00:31:15,160 Speaker 1: he's still concerned about the sale outlawing the sale of 552 00:31:15,200 --> 00:31:19,520 Speaker 1: Feton mall in China. So he did tweet uh and 553 00:31:20,160 --> 00:31:23,160 Speaker 1: and put on tariffs at ten percent that will come 554 00:31:23,240 --> 00:31:28,000 Speaker 1: on the three billion remaining balance September one. But look, Jonathan, 555 00:31:28,480 --> 00:31:31,160 Speaker 1: it was a very respectful tweet. It was a very 556 00:31:31,240 --> 00:31:34,640 Speaker 1: matter of fact tweet, and he clarified some of that 557 00:31:34,840 --> 00:31:38,360 Speaker 1: or added to some of that yesterday when he had 558 00:31:38,440 --> 00:31:43,840 Speaker 1: his press haggel gaggle and said, really the issue of 559 00:31:43,960 --> 00:31:48,640 Speaker 1: tariffs and the relationship depends on the progress or the 560 00:31:48,760 --> 00:31:51,960 Speaker 1: lack of progress for a trade deal between the two 561 00:31:52,040 --> 00:31:55,520 Speaker 1: great countries. Was a respectful letter and it's a constructive letter. 562 00:31:55,920 --> 00:31:58,680 Speaker 1: And you know, we believe the President expects and our 563 00:31:58,760 --> 00:32:01,920 Speaker 1: team expects to be meeting with the China team inter 564 00:32:01,960 --> 00:32:04,520 Speaker 1: early September. Can we assume though, that if the Chinese 565 00:32:04,600 --> 00:32:07,680 Speaker 1: begin buying agricultural products between now in September, we can 566 00:32:07,760 --> 00:32:11,640 Speaker 1: avoid that tariff increase. Would that be sufficient? I wouldn't. 567 00:32:11,720 --> 00:32:14,200 Speaker 1: I wouldn't want to speculate, you know, can't avoid and 568 00:32:14,280 --> 00:32:19,240 Speaker 1: so forth. I would say from our talks internally that 569 00:32:19,400 --> 00:32:21,560 Speaker 1: that would be a plus. That would be a very 570 00:32:21,640 --> 00:32:25,040 Speaker 1: good plus. If they start buying agricultural products in size, 571 00:32:25,360 --> 00:32:28,400 Speaker 1: it would certainly help the story at the moment. The 572 00:32:28,440 --> 00:32:31,840 Speaker 1: President followed that tweet up with some more aggressive language. Larry, 573 00:32:31,840 --> 00:32:33,920 Speaker 1: I think you'd say, until such time that there is 574 00:32:33,960 --> 00:32:38,120 Speaker 1: a deal, we will be taxing the hell out of China. Larry, 575 00:32:38,280 --> 00:32:42,600 Speaker 1: how do you expect the Chinese to respond to that language? Well, 576 00:32:42,680 --> 00:32:45,400 Speaker 1: we will see. I don't want to speculate on that. 577 00:32:46,320 --> 00:32:49,400 Speaker 1: There's some things coming out of Beijing today, and we 578 00:32:49,560 --> 00:32:52,880 Speaker 1: will be evaluating these statements. I don't want to get 579 00:32:52,920 --> 00:32:56,239 Speaker 1: ahead of the story at all. We'll see a day 580 00:32:56,280 --> 00:32:59,640 Speaker 1: at a time. But again, there's certainly a month here 581 00:33:00,320 --> 00:33:03,720 Speaker 1: before the tariffs go into place. A lot of things 582 00:33:03,840 --> 00:33:06,160 Speaker 1: can happen in a month, A lot of good things 583 00:33:06,280 --> 00:33:09,320 Speaker 1: can happen in a month. So let's just see what happens. 584 00:33:09,360 --> 00:33:11,680 Speaker 1: I don't I don't like to predict or speculate on 585 00:33:11,800 --> 00:33:13,720 Speaker 1: any of this. Well, Letty, I appreciate that but just 586 00:33:13,800 --> 00:33:15,760 Speaker 1: to understand the premise of that statement, we will be 587 00:33:15,880 --> 00:33:20,040 Speaker 1: taxing the hell out of China if these tweets become 588 00:33:20,120 --> 00:33:23,320 Speaker 1: policy on September one, taxes will be coming up on 589 00:33:23,440 --> 00:33:28,240 Speaker 1: US consumers as well. One night. Well, look at the 590 00:33:28,360 --> 00:33:31,360 Speaker 1: consumer issue. You know, we've been down this road discussing 591 00:33:31,440 --> 00:33:34,440 Speaker 1: it with respect to prior tariffs. You know, our view 592 00:33:34,800 --> 00:33:39,000 Speaker 1: is any impact on US consumers is diminimous and minuscule, 593 00:33:39,680 --> 00:33:42,680 Speaker 1: and we have models to show that. You know, look, 594 00:33:43,320 --> 00:33:47,960 Speaker 1: probably the strongest aspect of the American economy today, including 595 00:33:48,080 --> 00:33:53,120 Speaker 1: this Job's report, is precisely consumer spending and consumer income, 596 00:33:53,840 --> 00:33:56,800 Speaker 1: and that includes real income because there's no inflation. We 597 00:33:57,000 --> 00:34:01,520 Speaker 1: think the economic burden of these arabs has fallen most 598 00:34:01,600 --> 00:34:05,280 Speaker 1: heavily on China. They've had to slash prices in order 599 00:34:05,360 --> 00:34:09,360 Speaker 1: to offset tariffs. That's damaged their profitability in their growth. 600 00:34:09,760 --> 00:34:13,200 Speaker 1: There's a lot of movement of production and related supply 601 00:34:13,440 --> 00:34:18,320 Speaker 1: chains out of China and going elsewhere. And so I 602 00:34:18,800 --> 00:34:21,880 Speaker 1: really think that in terms of the American story, our 603 00:34:21,920 --> 00:34:26,360 Speaker 1: economy is quite strong. Unfortunately, in terms of the China story, 604 00:34:26,440 --> 00:34:29,160 Speaker 1: I think their economy is quite weak. So Larry, relatively speaking, 605 00:34:29,200 --> 00:34:30,839 Speaker 1: I think most people agree with that. But let's talk 606 00:34:30,840 --> 00:34:33,560 Speaker 1: about some of those models you've modeled this impact of 607 00:34:33,560 --> 00:34:36,440 Speaker 1: an extra ten percent on this three hundred billion that's 608 00:34:36,480 --> 00:34:38,960 Speaker 1: been modeled internally. Can you share with us some of 609 00:34:39,040 --> 00:34:42,680 Speaker 1: those findings that you've actually found. I'm going to talk 610 00:34:42,760 --> 00:34:44,399 Speaker 1: to our team and see if we want to put 611 00:34:44,440 --> 00:34:46,960 Speaker 1: any of that out. We have not yet. We may. 612 00:34:47,480 --> 00:34:49,480 Speaker 1: I'll get back to you on that. Okay, Well, I'd 613 00:34:49,520 --> 00:34:50,799 Speaker 1: love to talk to you about it, because a lot 614 00:34:50,800 --> 00:34:53,239 Speaker 1: of people are confused by it. Most people assume that 615 00:34:53,320 --> 00:34:54,960 Speaker 1: if you put that tariff up to ten per cent 616 00:34:55,040 --> 00:34:57,759 Speaker 1: on September one, there's gonna be some real pass through 617 00:34:58,000 --> 00:35:00,160 Speaker 1: to the consumer because these are the retail I him 618 00:35:00,239 --> 00:35:03,000 Speaker 1: that haven't been touched so far. So you're saying that 619 00:35:03,080 --> 00:35:06,240 Speaker 1: won't happen come September, Prices won't go up on everyday 620 00:35:06,320 --> 00:35:09,800 Speaker 1: items for consumers because of this tariff. Well, I'm speaking 621 00:35:09,880 --> 00:35:14,279 Speaker 1: in the aggregate, Jonathan. But again, our experience and our 622 00:35:14,360 --> 00:35:18,800 Speaker 1: modeling suggests that any consumer impact be very very small, 623 00:35:19,280 --> 00:35:23,880 Speaker 1: and that the biggest burden in economic terms is falling 624 00:35:23,920 --> 00:35:26,280 Speaker 1: on China. And you know, I think the Chinese economy 625 00:35:26,360 --> 00:35:30,960 Speaker 1: is in rather poor shape. I don't want the Chinese 626 00:35:31,040 --> 00:35:33,279 Speaker 1: economy to be in bad shape. I'm just saying that's 627 00:35:33,360 --> 00:35:37,600 Speaker 1: what's happened. Our economy is very strong. Their economy is 628 00:35:37,760 --> 00:35:41,480 Speaker 1: very weak. They're losing market share, they're losing production. Uh, 629 00:35:41,560 --> 00:35:43,640 Speaker 1: and they're probably not going to get that back. People 630 00:35:43,680 --> 00:35:46,160 Speaker 1: are going elsewhere. Some people are coming back home to 631 00:35:46,239 --> 00:35:49,359 Speaker 1: the United States. We welcome that with our very low 632 00:35:49,480 --> 00:35:53,880 Speaker 1: corporate tax rates and our deregulation program and our easy 633 00:35:53,960 --> 00:35:56,920 Speaker 1: access to energy and so forth. So I think it's 634 00:35:56,960 --> 00:36:01,480 Speaker 1: a plus. But look, with our forecast thing. We expect 635 00:36:01,560 --> 00:36:05,799 Speaker 1: to meet with the Chinese in September, and some good 636 00:36:05,840 --> 00:36:08,480 Speaker 1: things may well come from that meeting. That is possible. 637 00:36:08,680 --> 00:36:11,600 Speaker 1: At the moment, though, Larry, that manufacturing story abroad is 638 00:36:11,640 --> 00:36:13,520 Speaker 1: starting to come into the United States. You see it 639 00:36:13,520 --> 00:36:15,400 Speaker 1: in the I S M. S. I'm not saying recontraction 640 00:36:15,520 --> 00:36:17,480 Speaker 1: territory here in the United States, we're starting to see 641 00:36:17,520 --> 00:36:20,160 Speaker 1: them roll over. You're not worried about that that the 642 00:36:20,360 --> 00:36:24,239 Speaker 1: weakness that's been triggered abroad from this trade story is 643 00:36:24,239 --> 00:36:26,480 Speaker 1: starting to bleed into the U. S. Economy. There's real 644 00:36:26,520 --> 00:36:30,120 Speaker 1: signs of it, Larry, I don't deny that. I mean, 645 00:36:30,360 --> 00:36:33,640 Speaker 1: the United States is not immune from the world economy. Um, 646 00:36:34,320 --> 00:36:37,440 Speaker 1: maybe we can talk some about problems and policy mistakes 647 00:36:37,520 --> 00:36:42,080 Speaker 1: and overseas. I am, however, heartened by the way new 648 00:36:42,200 --> 00:36:44,600 Speaker 1: orders in that is M were up nicely, So that's 649 00:36:44,600 --> 00:36:48,800 Speaker 1: a good sign manufacturing itself. In the industrial production report, 650 00:36:48,800 --> 00:36:52,480 Speaker 1: as you may know, as up nicely in May and June. 651 00:36:53,080 --> 00:36:58,080 Speaker 1: And durable goods, particularly so called core capex durable goods 652 00:36:58,360 --> 00:37:01,560 Speaker 1: had a big increase in June after a decent increase 653 00:37:01,600 --> 00:37:04,440 Speaker 1: in May. So we're looking for a comeback there. I 654 00:37:04,480 --> 00:37:07,919 Speaker 1: mean a lot of these issues, and I don't deny 655 00:37:08,040 --> 00:37:11,040 Speaker 1: the hard good sector has been slower. It's the consumer 656 00:37:11,160 --> 00:37:15,440 Speaker 1: sector that's really dominating. But you know, we have unfortunately 657 00:37:15,560 --> 00:37:21,239 Speaker 1: faced two years of severe monetary restraint. Now hopefully that 658 00:37:21,480 --> 00:37:25,080 Speaker 1: period of monetary restraint is coming to an end. And 659 00:37:25,200 --> 00:37:28,120 Speaker 1: I note that the money and bond markets are predicting 660 00:37:28,200 --> 00:37:32,040 Speaker 1: several more rate cuts from our central bank, so that's 661 00:37:32,080 --> 00:37:34,760 Speaker 1: going to help the story. But we still have strong 662 00:37:34,840 --> 00:37:38,719 Speaker 1: incentives in place to produce and work and investment. I 663 00:37:38,800 --> 00:37:40,600 Speaker 1: think that our economy is going to have a very 664 00:37:40,680 --> 00:37:42,880 Speaker 1: strong second half. But Larry, let's be clear here. The 665 00:37:42,920 --> 00:37:45,200 Speaker 1: reason that fed fund future start to really price in 666 00:37:45,280 --> 00:37:48,319 Speaker 1: a right cut in September was after that suite. It's 667 00:37:48,360 --> 00:37:50,400 Speaker 1: the belief that this trade story is gonna do some 668 00:37:50,520 --> 00:37:52,719 Speaker 1: real damage to the U. S economy. And that's what 669 00:37:52,760 --> 00:37:55,920 Speaker 1: I'm struggling to get my head around going We've got 670 00:37:56,040 --> 00:37:58,279 Speaker 1: its campaign season now, I'd love to know what the 671 00:37:58,320 --> 00:38:01,160 Speaker 1: message is from the party, so the US consumer and 672 00:38:01,200 --> 00:38:04,120 Speaker 1: anyone working in manufacturing that we're gonna push this, We're 673 00:38:04,120 --> 00:38:07,080 Speaker 1: gonna tax the how so to say, out of China 674 00:38:07,360 --> 00:38:09,400 Speaker 1: until they break and give us a deal. How far 675 00:38:09,400 --> 00:38:12,239 Speaker 1: are you willing to go with this? Well, Jennathan, I 676 00:38:12,400 --> 00:38:16,120 Speaker 1: just want to note in today's jobs report, not only 677 00:38:16,239 --> 00:38:20,680 Speaker 1: hundred sixty four thousand, which is a solid number households, 678 00:38:20,719 --> 00:38:23,799 Speaker 1: which is the small business number. Household employment was up 679 00:38:23,840 --> 00:38:27,560 Speaker 1: two hundred and eighty three thousand. Here's one very important number. 680 00:38:28,160 --> 00:38:33,080 Speaker 1: Civilian labor force up three hundred and seventy thousand. Last 681 00:38:33,160 --> 00:38:36,280 Speaker 1: month was up three hundred and thirty five thousand. People 682 00:38:36,360 --> 00:38:39,440 Speaker 1: are coming out of the woodwork to come back to 683 00:38:39,560 --> 00:38:44,520 Speaker 1: work because of better job opportunities, better job training opportunities, 684 00:38:44,800 --> 00:38:47,839 Speaker 1: and higher wages. That's so important and we just got 685 00:38:47,920 --> 00:38:50,320 Speaker 1: and this is so important to the story of the 686 00:38:50,400 --> 00:38:54,920 Speaker 1: strength of the US. The wage and salary numbers revised 687 00:38:55,000 --> 00:38:58,560 Speaker 1: up across the board the last twelve months, wages and 688 00:38:58,680 --> 00:39:02,160 Speaker 1: salaries rising at five point one percent, with no I 689 00:39:02,280 --> 00:39:05,640 Speaker 1: beg your pardon, five point five with an above a 690 00:39:05,880 --> 00:39:10,080 Speaker 1: percent saving rate, which is absolutely phenomenal. And the biggest 691 00:39:10,160 --> 00:39:13,080 Speaker 1: gainers in all of this are the low end, the 692 00:39:13,200 --> 00:39:16,200 Speaker 1: middle and low end people, the blue collar workers and 693 00:39:16,320 --> 00:39:18,759 Speaker 1: so forth. In fact, the bottom ten percent is the 694 00:39:18,840 --> 00:39:21,640 Speaker 1: biggest gainer. Uh, some of our critics on the other 695 00:39:21,760 --> 00:39:24,719 Speaker 1: side might want to check those facts to improve their 696 00:39:24,800 --> 00:39:28,120 Speaker 1: own analysis. So I think we're in very, very good 697 00:39:28,200 --> 00:39:30,359 Speaker 1: shape here at home, Larry. Looking at the equity market, 698 00:39:30,400 --> 00:39:32,400 Speaker 1: it's not in good shape over the last couple of days. Granted, 699 00:39:32,440 --> 00:39:34,759 Speaker 1: it's been a fantastic year for US equities, but it's 700 00:39:34,800 --> 00:39:36,759 Speaker 1: some real weaknesses that it has emerged in the last 701 00:39:36,800 --> 00:39:40,080 Speaker 1: twenty four hours. The President said to reporters yesterday he 702 00:39:40,280 --> 00:39:43,200 Speaker 1: wasn't concerned at all about the negative reaction from markets. 703 00:39:43,480 --> 00:39:46,120 Speaker 1: I expected that a little bit because people don't understand 704 00:39:46,480 --> 00:39:49,480 Speaker 1: quite yet what's happened. Is this a change of stance 705 00:39:49,560 --> 00:39:50,960 Speaker 1: from the White House. There used to be a real 706 00:39:51,000 --> 00:39:55,840 Speaker 1: concern about equity markets if we pivoted. Well, no, Jonathan 707 00:39:55,880 --> 00:39:59,279 Speaker 1: I'll go back to what you said two sentences ago. 708 00:39:59,800 --> 00:40:02,360 Speaker 1: We you've had a heck of a year. The indexes 709 00:40:02,400 --> 00:40:06,160 Speaker 1: are up more or less, and I think that is, 710 00:40:06,360 --> 00:40:10,800 Speaker 1: by the way, foreshadowing a very strong economic mic growth 711 00:40:10,920 --> 00:40:15,040 Speaker 1: period for the rest of and on into It's been 712 00:40:15,080 --> 00:40:18,960 Speaker 1: a fabulous stock market and by the bye, encouragingly to me, 713 00:40:19,080 --> 00:40:21,440 Speaker 1: at least in terms of the key sectors in the 714 00:40:21,560 --> 00:40:26,560 Speaker 1: stock market, the hardwoods sectors, the industrial sector, transports have 715 00:40:26,719 --> 00:40:30,319 Speaker 1: had a terrific comeback. I noticed chips and semiconductors too. 716 00:40:31,120 --> 00:40:36,000 Speaker 1: That tells me that any pause in the economy and 717 00:40:36,120 --> 00:40:40,440 Speaker 1: hardwoods last year undoubtedly related to the monetary tightening from 718 00:40:40,480 --> 00:40:43,120 Speaker 1: the fit. That pause maybe coming to an end. And 719 00:40:43,239 --> 00:40:45,680 Speaker 1: that's why I'm pretty darn optimistic. When I look at 720 00:40:45,719 --> 00:40:49,120 Speaker 1: today's job numbers and I see all these literally hundreds 721 00:40:49,160 --> 00:40:52,040 Speaker 1: of thousands of people returning to the labor force, I say, 722 00:40:52,160 --> 00:40:54,400 Speaker 1: something very good is cooking out there. Well, let me 723 00:40:54,480 --> 00:40:56,440 Speaker 1: let's just follow up on that question. Though I asked you, 724 00:40:56,520 --> 00:40:58,880 Speaker 1: the President said that he's no concerned about the negative 725 00:40:58,960 --> 00:41:02,320 Speaker 1: reaction from markets. Is that a change instance from the 726 00:41:02,360 --> 00:41:05,400 Speaker 1: White House? Now he as as I understood that, he 727 00:41:05,520 --> 00:41:10,080 Speaker 1: was just referring to the overnight mediate response. A day 728 00:41:10,160 --> 00:41:12,200 Speaker 1: or two in the stock market doesn't make a trend, 729 00:41:12,239 --> 00:41:14,080 Speaker 1: for heaven's sake. Well, let's have a final question on 730 00:41:14,120 --> 00:41:16,719 Speaker 1: the phone exchange market, shall we. Last week was really 731 00:41:16,760 --> 00:41:19,400 Speaker 1: confusing for me, confusing for many others as well. You 732 00:41:19,560 --> 00:41:22,480 Speaker 1: ruled out any effects intervention. Then the President said, I 733 00:41:22,520 --> 00:41:24,719 Speaker 1: didn't say I'm not going to do something, just what 734 00:41:24,920 --> 00:41:29,120 Speaker 1: is the policy right now? Look in brief, I mean 735 00:41:29,200 --> 00:41:32,759 Speaker 1: I have the president's quotes here. Uh, he did say 736 00:41:32,800 --> 00:41:34,680 Speaker 1: I wouldn't say I'm not going to do something now, 737 00:41:34,800 --> 00:41:37,680 Speaker 1: but he said, look, having a strong dollar, there's a 738 00:41:37,760 --> 00:41:40,600 Speaker 1: reason it's so good having a strong dollar is having 739 00:41:40,680 --> 00:41:43,640 Speaker 1: a strong dollar, having a strong currency shows what an 740 00:41:43,640 --> 00:41:47,600 Speaker 1: amazing country. I stand by those remarks. I thank him 741 00:41:47,640 --> 00:41:51,680 Speaker 1: for making them. We have ruled out any currency intervention. 742 00:41:51,920 --> 00:41:55,919 Speaker 1: I mean. The problem here, and this president has said 743 00:41:56,000 --> 00:41:59,440 Speaker 1: many times, it's not that our dollar is strong and 744 00:41:59,520 --> 00:42:02,440 Speaker 1: rely independent, but we love that money is coming in 745 00:42:02,600 --> 00:42:06,040 Speaker 1: here from all over the world. We are the hottest economy, 746 00:42:06,360 --> 00:42:09,400 Speaker 1: were the only real major country with solid growth and 747 00:42:09,520 --> 00:42:12,960 Speaker 1: investment returns. The problem here is that President is concerned 748 00:42:13,360 --> 00:42:19,680 Speaker 1: correctly in my view, that other countries maybe manipulating their currencies, 749 00:42:20,280 --> 00:42:24,000 Speaker 1: perhaps to get some short term trade advantage. We don't 750 00:42:24,080 --> 00:42:26,920 Speaker 1: like that. We want a level playing field, and the 751 00:42:27,000 --> 00:42:31,080 Speaker 1: G twenty arrangements have always called for currency stability. As 752 00:42:31,120 --> 00:42:35,000 Speaker 1: Secretary Minution would attest, that's the issue. We worry more 753 00:42:35,040 --> 00:42:38,600 Speaker 1: about what the others are doing. We're perfectly happy to 754 00:42:38,760 --> 00:42:42,719 Speaker 1: have the US dollar as the center of the world's economy. 755 00:42:43,040 --> 00:42:46,440 Speaker 1: We are the world's reserve currency, and we aim to 756 00:42:46,560 --> 00:42:48,640 Speaker 1: keep it that way. With that in mind, Larry, when 757 00:42:48,680 --> 00:42:51,560 Speaker 1: can we expect you to assign these countries as currency manipulates? 758 00:42:51,600 --> 00:42:54,000 Speaker 1: As the Treasury Secretary has a watch list? Where's the 759 00:42:54,080 --> 00:42:57,879 Speaker 1: final list of currency manipulates? As when do we get it? Well? 760 00:42:57,920 --> 00:43:00,759 Speaker 1: Secretary Minition has expanded as well, Solist, that is a 761 00:43:00,840 --> 00:43:03,640 Speaker 1: Treasury function. I'm going to leave it to him. He's 762 00:43:03,880 --> 00:43:07,560 Speaker 1: covering it very well. He's a very smart guy and 763 00:43:07,640 --> 00:43:10,240 Speaker 1: a great leader over at Treasury. So we will follow 764 00:43:10,320 --> 00:43:13,520 Speaker 1: that story as it unfolds. Great to catch up with you. 765 00:43:13,560 --> 00:43:15,399 Speaker 1: Appreciate all the time you've given us this morning. I've 766 00:43:15,400 --> 00:43:17,960 Speaker 1: been pulled in morning as well. The National Economic Council 767 00:43:18,160 --> 00:43:22,240 Speaker 1: Director joining us from the White House. Thanks for listening 768 00:43:22,360 --> 00:43:26,880 Speaker 1: to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews 769 00:43:26,920 --> 00:43:32,160 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 770 00:43:32,719 --> 00:43:36,000 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 771 00:43:36,080 --> 00:43:39,480 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio