1
00:00:02,600 --> 00:00:12,960
Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

2
00:00:13,480 --> 00:00:17,560
Speaker 1: Jay Lee. 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 --> 00:00:38,080
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Jim

5
00:00:38,120 --> 00:00:40,760
Speaker 1: Glassman dropping by the studio here in New York. JP

6
00:00:40,880 --> 00:00:44,199
Speaker 1: Morgan Chase, Commercial Banking head Economists, Good morning, teach him,

7
00:00:44,240 --> 00:00:46,879
Speaker 1: Good morning. What are you expecting in about nineteen minutes time?

8
00:00:47,280 --> 00:00:51,280
Speaker 1: Pretty decent job report and m This is interesting because

9
00:00:51,320 --> 00:00:55,200
Speaker 1: we're still seeing above trend hiring, which is odd. When

10
00:00:55,240 --> 00:00:56,920
Speaker 1: the underplom rate is this low, you tend to think

11
00:00:56,920 --> 00:00:59,160
Speaker 1: you're gonna see things slow down. The number of people

12
00:00:59,200 --> 00:01:02,240
Speaker 1: who are sixteen to seventy, the working age population, has

13
00:01:02,280 --> 00:01:05,480
Speaker 1: slowed down dramatically. It's running about seventy thousand a month.

14
00:01:05,760 --> 00:01:09,200
Speaker 1: So that tells you anything above that is an economy

15
00:01:09,280 --> 00:01:10,880
Speaker 1: that's growing faster and it's training. And that's why the

16
00:01:10,920 --> 00:01:12,759
Speaker 1: uneplumber rate has come down about a half a point

17
00:01:13,000 --> 00:01:15,360
Speaker 1: this last year. When this print comes out, though, I

18
00:01:15,400 --> 00:01:18,160
Speaker 1: just wonder if payrolls growth slows, are we gonna blame

19
00:01:18,200 --> 00:01:20,600
Speaker 1: demand or lack of supply. What do you think the

20
00:01:20,640 --> 00:01:23,360
Speaker 1: reaction function of the investor is right now, because I

21
00:01:23,240 --> 00:01:25,800
Speaker 1: imagine they're going to blame demand. I think most people

22
00:01:25,840 --> 00:01:28,319
Speaker 1: should be it will be thinking about supply because that's

23
00:01:28,319 --> 00:01:30,000
Speaker 1: where the constraint is. And that's what all of our

24
00:01:30,040 --> 00:01:32,240
Speaker 1: business clients are telling us. They having a hard time

25
00:01:32,280 --> 00:01:35,639
Speaker 1: finding people. We've got a survey of folks business leaders

26
00:01:35,640 --> 00:01:38,440
Speaker 1: that is pointing out this that folks are just that's

27
00:01:38,480 --> 00:01:41,880
Speaker 1: the big challenge for for businesses. So one day you

28
00:01:41,920 --> 00:01:45,080
Speaker 1: figure you're gonna start to see slower growth and hiring,

29
00:01:45,600 --> 00:01:47,800
Speaker 1: and it's got to be because of the supply constraint.

30
00:01:47,880 --> 00:01:49,920
Speaker 1: You think so. But I think given the perception of

31
00:01:49,920 --> 00:01:52,280
Speaker 1: investors right now, looking at the dates around sweat, there

32
00:01:52,360 --> 00:01:54,400
Speaker 1: is a real concern about demand him. You know, I

33
00:01:54,440 --> 00:01:56,920
Speaker 1: think the issue in the market is really more about

34
00:01:56,960 --> 00:01:59,880
Speaker 1: the possibility of recession in the next couple of years.

35
00:02:00,040 --> 00:02:02,680
Speaker 1: Has been that idea has been percolating for most of

36
00:02:02,680 --> 00:02:05,360
Speaker 1: the last year. So that's why people worry about the

37
00:02:05,400 --> 00:02:06,920
Speaker 1: yell curve and what the FED is doing. And you

38
00:02:07,000 --> 00:02:09,440
Speaker 1: might wonder why are people worried about the FED when

39
00:02:09,480 --> 00:02:12,000
Speaker 1: the real FED funds rator is only zero and it's

40
00:02:12,040 --> 00:02:14,640
Speaker 1: because the market has been thinking. As you look at

41
00:02:14,680 --> 00:02:17,000
Speaker 1: our history, what people observe is that every time we

42
00:02:17,040 --> 00:02:19,600
Speaker 1: get to full employment or low levels of unemployment, within

43
00:02:19,639 --> 00:02:22,200
Speaker 1: a year or two, we trip up in a new recession.

44
00:02:22,240 --> 00:02:24,440
Speaker 1: And I think, I think this what's going on the

45
00:02:24,440 --> 00:02:28,040
Speaker 1: equity market. It's more about the possibility of a recession

46
00:02:28,360 --> 00:02:31,240
Speaker 1: than it is about the economy itself today. Well, listen,

47
00:02:31,320 --> 00:02:33,240
Speaker 1: look at the ice it has come out in the lasts.

48
00:02:33,280 --> 00:02:35,120
Speaker 1: This is a market that ignored a really hot I

49
00:02:35,200 --> 00:02:37,840
Speaker 1: d P print and was lately to focus on what

50
00:02:37,880 --> 00:02:39,480
Speaker 1: happened with the I s M. I think there's a

51
00:02:39,520 --> 00:02:42,600
Speaker 1: view amongst most investors and most market participants right now

52
00:02:42,800 --> 00:02:45,480
Speaker 1: that the labor markets that lacking indicates on what is

53
00:02:45,520 --> 00:02:47,960
Speaker 1: happening gaps whereas the reality it is. But you know,

54
00:02:48,040 --> 00:02:50,120
Speaker 1: things like the I s M are more sentiment driven

55
00:02:50,120 --> 00:02:52,040
Speaker 1: to and they've been out of line with some of

56
00:02:52,040 --> 00:02:54,520
Speaker 1: the other measures. So I think, yes, of course the

57
00:02:54,600 --> 00:02:57,720
Speaker 1: labor market is lagging, and it responds to how business

58
00:02:57,720 --> 00:03:00,839
Speaker 1: to see things. But but the truth is, I think, uh,

59
00:03:00,880 --> 00:03:03,640
Speaker 1: we we are still riding a wave of fiscal stimulus

60
00:03:03,639 --> 00:03:06,079
Speaker 1: from last year, and I think the I really think

61
00:03:06,120 --> 00:03:08,920
Speaker 1: that the big idea that's brewing in the market is

62
00:03:09,000 --> 00:03:12,040
Speaker 1: more a worry about a new recession and could the

63
00:03:12,080 --> 00:03:16,160
Speaker 1: FED be the cause of that by overtightening. What is

64
00:03:16,480 --> 00:03:19,320
Speaker 1: your view on the American economy? I mean, I'm JP

65
00:03:19,320 --> 00:03:22,160
Speaker 1: Morgan is a huge platform as a chasman, you know,

66
00:03:22,280 --> 00:03:25,680
Speaker 1: economic operation. You're in commercial banking, which is a whole

67
00:03:26,320 --> 00:03:29,280
Speaker 1: a different wing. But is it a view of two

68
00:03:29,320 --> 00:03:33,120
Speaker 1: point whatever? Is CLARENI says a solid economy or is

69
00:03:33,160 --> 00:03:36,600
Speaker 1: itself of that? You know in macro terms? I think

70
00:03:36,680 --> 00:03:39,440
Speaker 1: it is a spectacular economy. We we've come out of

71
00:03:39,440 --> 00:03:42,480
Speaker 1: an awful recession. We're back to levels of unemployment that

72
00:03:42,520 --> 00:03:44,080
Speaker 1: I haven't seen since I was in college, and that

73
00:03:44,120 --> 00:03:47,280
Speaker 1: wasn't yesterday. Um And but the big issue in the

74
00:03:47,360 --> 00:03:50,640
Speaker 1: in the U. S. Economy is all the disruption caused

75
00:03:50,640 --> 00:03:53,840
Speaker 1: by innovation. So you look at the labor market, it

76
00:03:53,880 --> 00:03:56,960
Speaker 1: looks great. Unemployment is low, people are getting jobs, helping

77
00:03:56,960 --> 00:04:00,320
Speaker 1: it signs all over the place. Our business leaders can't

78
00:04:00,400 --> 00:04:02,200
Speaker 1: know they were having to work hard to have fired

79
00:04:02,240 --> 00:04:05,000
Speaker 1: pep hired people. And yet when you look at the

80
00:04:05,080 --> 00:04:07,840
Speaker 1: income distribution of the U. S. Economy, that kind of

81
00:04:07,880 --> 00:04:09,880
Speaker 1: tells you why it is that there's so much age.

82
00:04:10,160 --> 00:04:12,680
Speaker 1: I mean, do you agree with a guilded age? You

83
00:04:12,720 --> 00:04:15,360
Speaker 1: mean Robert Gordon, your great mentor a Northwestern wrote about

84
00:04:15,360 --> 00:04:17,960
Speaker 1: this a few years ago. Are we in a guilded

85
00:04:18,120 --> 00:04:22,880
Speaker 1: age of Eisenhower unemployment rate? I think so. I think

86
00:04:22,920 --> 00:04:25,479
Speaker 1: I think so, And come on, guys, is the same

87
00:04:25,520 --> 00:04:27,400
Speaker 1: way not here to poopoo on the economy. I think

88
00:04:27,440 --> 00:04:29,680
Speaker 1: the economy compared to the rest of the world is solid.

89
00:04:29,920 --> 00:04:33,120
Speaker 1: I agree with that relatively speaking. What I struggle to

90
00:04:33,120 --> 00:04:36,120
Speaker 1: agree with is, how do you reconcile the idea that

91
00:04:36,200 --> 00:04:38,800
Speaker 1: the real Fed funds rate is at zero and could

92
00:04:38,800 --> 00:04:42,120
Speaker 1: well be a neutral and yet the economy is spectacular?

93
00:04:42,440 --> 00:04:44,679
Speaker 1: How do you reconcile those two things? Just the idea

94
00:04:44,720 --> 00:04:48,600
Speaker 1: that a real Fed funds rate of zero is also neutral?

95
00:04:48,960 --> 00:04:52,760
Speaker 1: Could economist? Some economists think maybe we've gone through neutral,

96
00:04:52,800 --> 00:04:54,440
Speaker 1: though I don't think it is neutral. I don't think

97
00:04:54,480 --> 00:04:56,600
Speaker 1: the Fed thinks it's neutral. If you look at the FEDE,

98
00:04:56,880 --> 00:04:59,640
Speaker 1: someone at the Fed thinks it's neutral. Well, some do,

99
00:04:59,800 --> 00:05:01,479
Speaker 1: but I have thought that for a while, and they've

100
00:05:01,520 --> 00:05:03,320
Speaker 1: changed your mind a while ago. If you look at

101
00:05:03,320 --> 00:05:05,680
Speaker 1: the bulk of the folks there, they tend to think

102
00:05:05,680 --> 00:05:08,400
Speaker 1: that neutral is a real fit a fun straight about

103
00:05:08,400 --> 00:05:11,080
Speaker 1: a percentage point over inflation. So I I don't I

104
00:05:11,080 --> 00:05:13,480
Speaker 1: don't think if if Chairman Power we're here and not

105
00:05:13,560 --> 00:05:15,320
Speaker 1: on air, I think he would. We tried to get him.

106
00:05:15,360 --> 00:05:18,000
Speaker 1: He was unavailable today from Atlanta. He's busy with the

107
00:05:18,080 --> 00:05:21,520
Speaker 1: chairman Banankee and you were shot out to Michael McKee's

108
00:05:21,600 --> 00:05:27,520
Speaker 1: killing with Robert Kaplan in this power thing? Am I right? John,

109
00:05:27,600 --> 00:05:32,680
Speaker 1: it's a panel to form a chairman chatwoman. We're gonna

110
00:05:32,720 --> 00:05:35,440
Speaker 1: hear all of them to government, all of them together understands. Yeah,

111
00:05:35,440 --> 00:05:38,080
Speaker 1: but security scenario. It's very very cool. But I just

112
00:05:38,160 --> 00:05:41,040
Speaker 1: wonder whether this is the appropriate forum for the chairman

113
00:05:41,080 --> 00:05:43,480
Speaker 1: to communicate a change all single a little bit of

114
00:05:43,520 --> 00:05:45,400
Speaker 1: a change in communication. Jim, do you think it is?

115
00:05:45,880 --> 00:05:48,920
Speaker 1: I don't think so, And I think I mean, Congress

116
00:05:49,000 --> 00:05:50,600
Speaker 1: is the best place to do it, and in their

117
00:05:50,600 --> 00:05:53,120
Speaker 1: official documents. But I think he's sort of he's I

118
00:05:53,160 --> 00:05:56,000
Speaker 1: think he has changed the message. I think the messages

119
00:05:56,160 --> 00:06:00,640
Speaker 1: we're we're closer to neutral than we were, and we're

120
00:06:00,640 --> 00:06:02,720
Speaker 1: gonna be more cautious and we're gonna be given to

121
00:06:02,760 --> 00:06:05,480
Speaker 1: guided by the data. It's not no longer automatic pilot.

122
00:06:05,600 --> 00:06:08,200
Speaker 1: We have n f I B Survey, the Small Business Survey,

123
00:06:08,240 --> 00:06:10,440
Speaker 1: and small business folks are a lot more employees, and

124
00:06:10,520 --> 00:06:13,120
Speaker 1: you think, like, it's not like a hundred employees or twenty,

125
00:06:13,160 --> 00:06:16,320
Speaker 1: it's like a thousand employees. But where's investment? When you're

126
00:06:16,320 --> 00:06:18,360
Speaker 1: traveling all over the country. I get the idea that

127
00:06:18,400 --> 00:06:20,840
Speaker 1: there's help. Why don't we can't get jobs? But is

128
00:06:20,880 --> 00:06:24,200
Speaker 1: there really an appetite to invest in the two thousand

129
00:06:24,520 --> 00:06:26,839
Speaker 1: to be more cautious, particularly in this environment, because what

130
00:06:26,880 --> 00:06:29,200
Speaker 1: they what they think is going on, is that the

131
00:06:29,240 --> 00:06:31,520
Speaker 1: markets are telling them you've got to be prepared for

132
00:06:31,560 --> 00:06:34,800
Speaker 1: some possible recession in the future, so that automatically makes

133
00:06:34,800 --> 00:06:36,720
Speaker 1: you more cautious. But at the end of the day,

134
00:06:37,040 --> 00:06:39,080
Speaker 1: your investment decisions are going to be based on what

135
00:06:39,160 --> 00:06:42,040
Speaker 1: you think the market opportunities are, and they're going to

136
00:06:42,080 --> 00:06:43,680
Speaker 1: be guided by what they see on the ground, not

137
00:06:43,720 --> 00:06:45,160
Speaker 1: what they hear in the airwaves. Do you have a

138
00:06:45,200 --> 00:06:49,400
Speaker 1: train to catch? Right? Do go get a train? Thank

139
00:06:49,440 --> 00:06:51,360
Speaker 1: you so much that we were thrilled they could join

140
00:06:51,480 --> 00:07:09,080
Speaker 1: us here on job. Culling the reserve requirement ratio so

141
00:07:09,120 --> 00:07:11,840
Speaker 1: effectively culling the amount of cash lenders must hold as

142
00:07:11,880 --> 00:07:14,480
Speaker 1: reserves by one percentage point now will happen in two

143
00:07:14,480 --> 00:07:17,240
Speaker 1: stages over the next month. Miranda Car joining us from

144
00:07:17,280 --> 00:07:21,360
Speaker 1: High Tank International China macro Strategists. There, Miranda, great to

145
00:07:21,360 --> 00:07:23,320
Speaker 1: have you with us on the program. Let's talk about this.

146
00:07:23,360 --> 00:07:26,760
Speaker 1: Do I view this as easing or something seasonal? What

147
00:07:26,960 --> 00:07:31,400
Speaker 1: is this? Well, there's two You always get a squeeze

148
00:07:31,480 --> 00:07:34,480
Speaker 1: in China's markets ahead of the spring festivals. People take

149
00:07:34,520 --> 00:07:37,640
Speaker 1: money out of the out of the banking system. But

150
00:07:37,760 --> 00:07:42,120
Speaker 1: the fact that you've had UM such one percent across

151
00:07:42,160 --> 00:07:45,560
Speaker 1: the board for all the banks, it's it's more than

152
00:07:45,600 --> 00:07:48,840
Speaker 1: offsetting the both the liquidity squeeze and the thing about

153
00:07:48,840 --> 00:07:51,280
Speaker 1: in our cart it's permanent. If they just wanted to

154
00:07:51,320 --> 00:07:54,080
Speaker 1: provide short term liquidity, they could do to that through

155
00:07:54,080 --> 00:07:57,800
Speaker 1: open market operations. So this is UM an economic boost,

156
00:07:57,880 --> 00:08:00,960
Speaker 1: not just a liquidity injection. As a good point, and

157
00:08:01,000 --> 00:08:02,880
Speaker 1: I do wonder whether what we've seen so far, because

158
00:08:02,880 --> 00:08:05,000
Speaker 1: we have had a series of triple our cuts over

159
00:08:05,080 --> 00:08:08,440
Speaker 1: the last couple of months, whether that's enough to support

160
00:08:08,520 --> 00:08:12,960
Speaker 1: this economy, to support a turn in this economy, is it? Miranda, Well,

161
00:08:13,120 --> 00:08:15,600
Speaker 1: they need to push more money into the students, to

162
00:08:15,640 --> 00:08:18,600
Speaker 1: the banking system and support some of the infrastructure investment,

163
00:08:18,840 --> 00:08:21,160
Speaker 1: which is one of the key things to offset the

164
00:08:22,800 --> 00:08:25,400
Speaker 1: projected slow down going to this trade and sort of

165
00:08:25,440 --> 00:08:28,240
Speaker 1: lower lower exports. I mean, because you're already seeing the

166
00:08:28,280 --> 00:08:31,080
Speaker 1: slowdown coming through in the commodity prices which have been

167
00:08:31,200 --> 00:08:34,000
Speaker 1: incredibly weak um as we come into as we come

168
00:08:34,000 --> 00:08:37,079
Speaker 1: into January, UM, so there needs to be more shovel

169
00:08:37,120 --> 00:08:40,160
Speaker 1: money shoveled out. This is also just to offset the

170
00:08:40,160 --> 00:08:43,280
Speaker 1: shadow banking slow down. This is a really important nuanswer

171
00:08:43,320 --> 00:08:46,760
Speaker 1: to mail. This is not about commodities, it's not about food,

172
00:08:47,360 --> 00:08:51,600
Speaker 1: it's not about the people of China small business data,

173
00:08:51,640 --> 00:08:56,640
Speaker 1: da dada. This is about the debt in the banking system,

174
00:08:56,800 --> 00:09:01,679
Speaker 1: isn't it. Yeah. And the thing is they've tried to

175
00:09:01,800 --> 00:09:05,559
Speaker 1: they're trying to drag the monetary system away from the

176
00:09:05,720 --> 00:09:07,800
Speaker 1: you know, things like the trust lending and the shadow

177
00:09:07,840 --> 00:09:10,680
Speaker 1: banking and the online financing and drag it back into

178
00:09:10,679 --> 00:09:12,920
Speaker 1: the banking system, but also put into the cabin Don't

179
00:09:12,960 --> 00:09:15,960
Speaker 1: they have to legislate that and not do it through

180
00:09:15,960 --> 00:09:22,120
Speaker 1: a monetary intrusion, So they they I mean, they don't

181
00:09:22,160 --> 00:09:24,679
Speaker 1: need to legislate that. I mean, a lot of the

182
00:09:25,000 --> 00:09:26,880
Speaker 1: so a lot of the slowdown last year was all

183
00:09:26,920 --> 00:09:30,120
Speaker 1: about regulation. Um, it wasn't you know in terms of

184
00:09:30,160 --> 00:09:35,080
Speaker 1: it wasn't a monetary policy tightening. They they they regulated

185
00:09:35,480 --> 00:09:38,319
Speaker 1: and so they're sort of the regulation really squeezed the

186
00:09:38,920 --> 00:09:41,520
Speaker 1: sort of off the shadow banking system. Now, the fact

187
00:09:41,600 --> 00:09:43,680
Speaker 1: that they've eased that, that's not going to give a

188
00:09:43,760 --> 00:09:46,920
Speaker 1: huge amount of boost into that sector, but it is

189
00:09:46,960 --> 00:09:50,120
Speaker 1: going to give more more system wide liquidity. You are

190
00:09:50,400 --> 00:09:53,959
Speaker 1: experts on how they clear their systems. Is this really

191
00:09:54,000 --> 00:09:56,680
Speaker 1: what it's about, is they won't let banks fail and

192
00:09:56,720 --> 00:09:59,760
Speaker 1: that they just haven't cleared out the debris over side

193
00:09:59,800 --> 00:10:02,240
Speaker 1: to in twenty years. And this is a price they

194
00:10:02,280 --> 00:10:05,160
Speaker 1: pay right now, is they've got too much garbage businesses

195
00:10:05,200 --> 00:10:09,439
Speaker 1: out there. Well, you the thing is they've cleaned out

196
00:10:09,480 --> 00:10:12,160
Speaker 1: a lot Like a lot of the garbage was which

197
00:10:12,280 --> 00:10:15,080
Speaker 1: everyone was focused on from the two thousand nine stimulus

198
00:10:15,080 --> 00:10:18,360
Speaker 1: package was from the local government financing platforms. Now that's

199
00:10:18,400 --> 00:10:21,720
Speaker 1: been that's been hived off into fiscal bed so therefore

200
00:10:21,800 --> 00:10:24,640
Speaker 1: it's been dealt with. It's basically been um, you know,

201
00:10:24,760 --> 00:10:27,680
Speaker 1: put on the government balance sheet. So that's that's that's

202
00:10:27,720 --> 00:10:30,800
Speaker 1: been in effect cleared up. What we're getting now is

203
00:10:30,800 --> 00:10:33,400
Speaker 1: the first wave of private sector defaults and it's a

204
00:10:33,480 --> 00:10:36,760
Speaker 1: small and medium sized private companies which are really struggling

205
00:10:36,800 --> 00:10:38,800
Speaker 1: at the moment. And now they've had when they had

206
00:10:38,800 --> 00:10:42,679
Speaker 1: the shadow banking UM taps turned off last year, they

207
00:10:42,720 --> 00:10:45,040
Speaker 1: were the ones that you saw the rising bankruptcies, really

208
00:10:45,080 --> 00:10:48,680
Speaker 1: struggling and where the slowdown was. Now the question for

209
00:10:48,760 --> 00:10:51,640
Speaker 1: China is how they get money into back into that

210
00:10:51,720 --> 00:10:54,959
Speaker 1: sector so you don't see a huge wave of bankruptcy

211
00:10:55,040 --> 00:10:57,800
Speaker 1: is coming through and much more pressure. And that's to

212
00:10:57,880 --> 00:11:00,760
Speaker 1: be honest, the big big issue for UM. You know,

213
00:11:00,800 --> 00:11:04,520
Speaker 1: did the domestic economy this year because they're trying to

214
00:11:04,559 --> 00:11:07,240
Speaker 1: get money into that sector, but some of the it's

215
00:11:07,280 --> 00:11:09,760
Speaker 1: a really difficulty, don't have the mechanisms to do it.

216
00:11:09,840 --> 00:11:12,240
Speaker 1: Some miranda just to be clear, to summarize and conclude

217
00:11:12,640 --> 00:11:18,280
Speaker 1: the deleveraging effort, and the Chinese authorities slightly capitulated on that. Yeah,

218
00:11:18,320 --> 00:11:22,040
Speaker 1: I mean basically deleveraging is not seen as a it's

219
00:11:22,080 --> 00:11:24,280
Speaker 1: it's the saying that we're not going to go into

220
00:11:24,320 --> 00:11:28,199
Speaker 1: a big monetary boost. But obviously the deleveraging and the

221
00:11:28,320 --> 00:11:31,439
Speaker 1: really squeeze that we had last year, it's it's basically

222
00:11:31,520 --> 00:11:34,200
Speaker 1: that's come to an end and we're now into much

223
00:11:34,240 --> 00:11:37,880
Speaker 1: more accommodative phase. Now, this has been brilliant round the car,

224
00:11:37,960 --> 00:11:53,240
Speaker 1: Thank you so much. At the high time. Why don't

225
00:11:53,240 --> 00:11:56,640
Speaker 1: you bring in professor Krueger years he looks at a

226
00:11:56,679 --> 00:12:01,440
Speaker 1: make America Great Again employment report and what are your thoughts? Well,

227
00:12:01,480 --> 00:12:03,199
Speaker 1: my thoughts are a little bit cloudy because at the

228
00:12:03,240 --> 00:12:08,079
Speaker 1: BLS web page, I guess went to a said we're sorry, unavailable.

229
00:12:08,440 --> 00:12:11,120
Speaker 1: But from the top line numbers, this is an excellent report,

230
00:12:11,200 --> 00:12:13,839
Speaker 1: and I think it shows that the Fed has been

231
00:12:13,840 --> 00:12:16,960
Speaker 1: pursuing a very prudent course. No, it shows that the

232
00:12:17,040 --> 00:12:21,840
Speaker 1: BED have felt that the labor market continues to be strong,

233
00:12:22,000 --> 00:12:26,600
Speaker 1: the real economy is moving along. Uh, we had stimulus

234
00:12:26,600 --> 00:12:30,840
Speaker 1: at the wrong time. Um. But UM looks to me

235
00:12:31,000 --> 00:12:35,280
Speaker 1: like this is a big win for the course has

236
00:12:35,280 --> 00:12:38,840
Speaker 1: been on three seventy thousand, three twelve plus fifty eight.

237
00:12:38,920 --> 00:12:42,720
Speaker 1: Even I can do the math three seventy thousand left.

238
00:12:42,800 --> 00:12:47,560
Speaker 1: I mean this this really limits Chairman Powell's conversation this

239
00:12:47,600 --> 00:12:51,560
Speaker 1: morning about stability or a rate cut. You just don't

240
00:12:51,600 --> 00:12:56,720
Speaker 1: do that into a three seventy statistic, do you. Well,

241
00:12:56,760 --> 00:12:58,640
Speaker 1: I think the Fed is going to be more data dependent.

242
00:12:58,800 --> 00:13:01,559
Speaker 1: I think they're not on a pre set course, and

243
00:13:01,600 --> 00:13:06,080
Speaker 1: we'll probably see a fewer rate increases. And the headwinds

244
00:13:06,160 --> 00:13:09,000
Speaker 1: that we have been developing late in December earlier this

245
00:13:09,120 --> 00:13:11,839
Speaker 1: year aren't reflected in this report. But it shows that

246
00:13:11,920 --> 00:13:13,720
Speaker 1: the actions that the BED was taking through the end

247
00:13:13,760 --> 00:13:16,200
Speaker 1: of last year, it seemed to me to be pretty

248
00:13:16,240 --> 00:13:32,120
Speaker 1: well justified. Alan Krueger, Princeton, Thank you now joining us

249
00:13:32,200 --> 00:13:34,880
Speaker 1: Michael Darta. As we spoke to David Rosenberg earlier. Mr

250
00:13:34,960 --> 00:13:39,240
Speaker 1: Darta at m CAM Partners is decisive in writing economics

251
00:13:39,280 --> 00:13:42,640
Speaker 1: and linking it in to market performance. Michael Darty, if

252
00:13:42,679 --> 00:13:45,000
Speaker 1: you see a bang up jobs report, I saw one

253
00:13:45,080 --> 00:13:47,720
Speaker 1: headline that called it a blowout, that's great. Can you

254
00:13:47,800 --> 00:13:52,839
Speaker 1: link it over into equity market performance? I can sure try, Tom,

255
00:13:52,880 --> 00:13:55,120
Speaker 1: Thanks for having me on. So we have a bit

256
00:13:55,120 --> 00:13:58,240
Speaker 1: of a strange situation here. I mean, these numbers are

257
00:13:58,240 --> 00:14:02,800
Speaker 1: white hot, very very very strong. Yet financial markets for

258
00:14:02,880 --> 00:14:06,320
Speaker 1: some time have been basically telling us that growth is

259
00:14:06,360 --> 00:14:09,720
Speaker 1: going to slow. You simply don't see it in these numbers,

260
00:14:09,760 --> 00:14:11,560
Speaker 1: and that really puts the FED in a bit of

261
00:14:11,559 --> 00:14:15,280
Speaker 1: a pickle. Um. They say they're data dependent, and that

262
00:14:15,400 --> 00:14:18,000
Speaker 1: means if they are going to shift course, they need

263
00:14:18,000 --> 00:14:21,640
Speaker 1: the data to tell them to do so. Unfortunately, data

264
00:14:21,720 --> 00:14:25,760
Speaker 1: lags financial market indicators, and so you know, we basically

265
00:14:25,800 --> 00:14:28,080
Speaker 1: have the situation where the FED is going to be

266
00:14:28,160 --> 00:14:33,280
Speaker 1: incredibly reluctant to really shift policy in a dovish direction,

267
00:14:33,400 --> 00:14:35,880
Speaker 1: despite the fact that you know, we've got parts of

268
00:14:35,880 --> 00:14:40,040
Speaker 1: the yield curve that are inverted, significant stress and credit markets,

269
00:14:40,320 --> 00:14:43,640
Speaker 1: slow down, in liquidity growth, all those things tell us

270
00:14:43,640 --> 00:14:45,840
Speaker 1: the economy is going to soppen this year. You and

271
00:14:45,840 --> 00:14:48,040
Speaker 1: I are looking at the same quick data we'll see

272
00:14:48,160 --> 00:14:51,400
Speaker 1: much more earlier. I'm looking at leisure and hospitality up

273
00:14:51,400 --> 00:14:55,760
Speaker 1: in very few negative numbers on the screen. But if

274
00:14:55,760 --> 00:14:58,240
Speaker 1: you look at now and over the last number of months,

275
00:14:58,800 --> 00:15:02,040
Speaker 1: what portion of the big job numbers that we're seeing

276
00:15:02,160 --> 00:15:06,240
Speaker 1: our quality jobs or are they all people saying, you know,

277
00:15:06,480 --> 00:15:10,480
Speaker 1: what would you like for dessert? Well, you know, we

278
00:15:10,480 --> 00:15:12,560
Speaker 1: we you know, we do have some low end jobs.

279
00:15:12,640 --> 00:15:16,160
Speaker 1: We also have higher quality jobs. The labor markets tight

280
00:15:16,280 --> 00:15:20,160
Speaker 1: enough now to raise wages um so we are seeing

281
00:15:20,160 --> 00:15:23,560
Speaker 1: workers wages move up just over three percent year over year.

282
00:15:24,200 --> 00:15:27,440
Speaker 1: So you know, this is outside of the recovery range.

283
00:15:27,520 --> 00:15:29,960
Speaker 1: For most of the expansion has been close to two

284
00:15:30,160 --> 00:15:32,480
Speaker 1: So we are moving up now, and that's what matters.

285
00:15:33,440 --> 00:15:36,360
Speaker 1: We also had a situation where nominal GDP growth last

286
00:15:36,400 --> 00:15:40,720
Speaker 1: year was above five, very strong, basically the strongest of

287
00:15:40,720 --> 00:15:44,360
Speaker 1: the recovery. The question is this year in a slowing

288
00:15:44,440 --> 00:15:48,560
Speaker 1: nominal growth environment, um, how does the FED handle that?

289
00:15:48,760 --> 00:15:50,760
Speaker 1: And how do you look forward? Because if it's just

290
00:15:50,800 --> 00:15:54,360
Speaker 1: a matter of celebrating stale data or end up with

291
00:15:54,360 --> 00:15:56,720
Speaker 1: a policy are if you're just joining us, Michael Darta,

292
00:15:56,880 --> 00:16:00,000
Speaker 1: mcamp partners with us on this job to a future.

293
00:16:00,000 --> 00:16:02,640
Speaker 1: As were oh, up thirty is up twenty seven right now,

294
00:16:02,640 --> 00:16:04,800
Speaker 1: you don't see any equity markets with the bond market.

295
00:16:05,160 --> 00:16:07,960
Speaker 1: Off the headline, we had a huge move tenure yield

296
00:16:08,320 --> 00:16:10,560
Speaker 1: up seven even eight basis points. That get back a

297
00:16:10,560 --> 00:16:15,160
Speaker 1: little bit right now. But two point on the tenure yield,

298
00:16:15,200 --> 00:16:20,600
Speaker 1: real gyrations yen one six yen is a little bit weaker.

299
00:16:20,680 --> 00:16:23,560
Speaker 1: Off the jobs report, I'll call that a fractional move

300
00:16:23,680 --> 00:16:25,760
Speaker 1: as well, Michael Dart. And when I look at the numbers,

301
00:16:25,800 --> 00:16:28,240
Speaker 1: and I'm just doing a quick eyeball here, folks, I

302
00:16:28,360 --> 00:16:31,680
Speaker 1: see the Barbell economy. I see media and duration not

303
00:16:31,840 --> 00:16:36,600
Speaker 1: doing much. I see you know, the marginally attached unemployment

304
00:16:36,760 --> 00:16:39,760
Speaker 1: U five. I see the all in U six data

305
00:16:40,200 --> 00:16:44,120
Speaker 1: really not improving all that much? Is it a tale

306
00:16:44,240 --> 00:16:49,000
Speaker 1: of two America's Well, Tom, I I think it's just

307
00:16:49,440 --> 00:16:53,360
Speaker 1: a matter of some of the standard employment metrics not

308
00:16:53,520 --> 00:16:57,520
Speaker 1: really capturing the depth of depth of the of the

309
00:16:57,560 --> 00:17:01,600
Speaker 1: downturn and the slowness of most of the economic expansion.

310
00:17:01,720 --> 00:17:05,600
Speaker 1: My favorite metric is the employment the population ratio for

311
00:17:05,800 --> 00:17:10,800
Speaker 1: prime age individual to fifty four. And you know, we're

312
00:17:11,200 --> 00:17:14,640
Speaker 1: just now starting to get back to you know, to

313
00:17:14,240 --> 00:17:17,439
Speaker 1: to more normal levels on that one, but it's taken

314
00:17:17,560 --> 00:17:21,159
Speaker 1: quite a long time exactly by no means that you know,

315
00:17:21,240 --> 00:17:25,920
Speaker 1: are we at levels consistent with record employment? You read

316
00:17:25,920 --> 00:17:28,879
Speaker 1: my mind? Yeah, Michael, you read my mind on that.

317
00:17:29,000 --> 00:17:31,080
Speaker 1: I did not that that's sharp, but something just like

318
00:17:31,119 --> 00:17:35,040
Speaker 1: it of five to fifty four prime employment in America.

319
00:17:35,119 --> 00:17:38,159
Speaker 1: This morning, I took it back to President Truman. And

320
00:17:38,200 --> 00:17:40,960
Speaker 1: the answer is is all our listeners know, the vector

321
00:17:41,000 --> 00:17:43,760
Speaker 1: has always gone up. That's the American way. We always

322
00:17:43,800 --> 00:17:47,560
Speaker 1: create more jobs. And there's been a leveling from two

323
00:17:47,600 --> 00:17:52,560
Speaker 1: thousand and employed twenty five to fifty four in this nation,

324
00:17:52,640 --> 00:17:54,919
Speaker 1: even a decline at one point, but let's call it

325
00:17:54,960 --> 00:17:58,720
Speaker 1: a leveling. For radio. Fine, there's been a leveling. Let's

326
00:17:58,760 --> 00:18:02,560
Speaker 1: go back. Why did we level out in employed prime

327
00:18:02,600 --> 00:18:07,919
Speaker 1: Americans beginning about two thousand. Well, I mean, so the

328
00:18:07,960 --> 00:18:12,320
Speaker 1: starting point there literally was the tightest labor market since

329
00:18:12,400 --> 00:18:17,200
Speaker 1: the since the nineteen sixties, and well it was just

330
00:18:17,280 --> 00:18:19,480
Speaker 1: to some degree, you know, and then we had a

331
00:18:19,640 --> 00:18:22,879
Speaker 1: you know, a very deep, very very long downturn in

332
00:18:22,920 --> 00:18:27,440
Speaker 1: a quite slow recovery in that prime major ratio. Because

333
00:18:27,480 --> 00:18:30,199
Speaker 1: you're looking at how many people are employed relative to

334
00:18:30,240 --> 00:18:35,520
Speaker 1: their population, it's not distorted by dropouts into and less

335
00:18:35,520 --> 00:18:38,879
Speaker 1: distorted by demographics. And so you know, to the extent

336
00:18:38,960 --> 00:18:41,240
Speaker 1: that we have people that are on the sidelines due

337
00:18:41,280 --> 00:18:44,159
Speaker 1: to opioid addiction or lots of skills. You know, your

338
00:18:44,200 --> 00:18:46,920
Speaker 1: previous guest, Alan Krueger has done a lot of work

339
00:18:46,960 --> 00:18:49,320
Speaker 1: on that. You know, it's really captured in that ratio.

340
00:18:49,440 --> 00:18:52,119
Speaker 1: So we are recovering. You know, we've recently hit a

341
00:18:52,200 --> 00:18:55,000
Speaker 1: cycle high on that ratio. I don't have the updated

342
00:18:55,080 --> 00:18:58,119
Speaker 1: data on my Bloomberg screen at the moment, but recently

343
00:18:58,560 --> 00:19:01,560
Speaker 1: we finally got back to the pre crisis media we're

344
00:19:01,600 --> 00:19:04,879
Speaker 1: not at We're not at levels um that you would

345
00:19:04,880 --> 00:19:08,960
Speaker 1: expect to see with the unemployment rates of FO We

346
00:19:09,080 --> 00:19:10,960
Speaker 1: got so much to talk about very quickly, your Michael

347
00:19:11,040 --> 00:19:16,240
Speaker 1: Darta Howard Chairman Powell fold this wonderful employment report, this

348
00:19:16,280 --> 00:19:19,240
Speaker 1: blowout number into his comments this morning with Bernanke and

349
00:19:19,320 --> 00:19:23,159
Speaker 1: yelling you know, I think you know, he's sort of

350
00:19:23,200 --> 00:19:25,639
Speaker 1: walking a tight rope here. I think he's you know,

351
00:19:25,720 --> 00:19:28,679
Speaker 1: certainly not going to want a jostle markets anymore. That

352
00:19:28,800 --> 00:19:32,520
Speaker 1: reacted very poorly to his press conference after the last

353
00:19:32,520 --> 00:19:35,720
Speaker 1: bad decision, So I think he's going to try to

354
00:19:35,800 --> 00:19:38,320
Speaker 1: tippo to a bit. He's probably not going to weigh

355
00:19:38,320 --> 00:19:40,480
Speaker 1: in directly on this number, and he'll try not to

356
00:19:40,520 --> 00:19:43,959
Speaker 1: weigh in directly on, you know, on on recent market dynamics.

357
00:19:43,960 --> 00:19:46,320
Speaker 1: But you know, he may be lad there, so we'll

358
00:19:46,359 --> 00:19:48,640
Speaker 1: see how it unfolds. Michael Darter, thank you so much

359
00:19:48,680 --> 00:19:52,280
Speaker 1: for your analysis away from your clients here on the job,

360
00:19:52,359 --> 00:20:09,960
Speaker 1: say Michael Darted with m CAM Partners is well, here

361
00:20:10,160 --> 00:20:13,960
Speaker 1: is administration. Now. I'm really pleased to say we joined

362
00:20:14,000 --> 00:20:16,320
Speaker 1: now on Bloomberg Television and for our listeners across the

363
00:20:16,359 --> 00:20:19,680
Speaker 1: world of Bloomberg Radio by Larry Cudlow, the National Economic

364
00:20:19,720 --> 00:20:22,679
Speaker 1: Council Director, and he joins us now. Good day to Larry,

365
00:20:24,400 --> 00:20:26,600
Speaker 1: Good day, Thank you, for having me. Always great to

366
00:20:26,600 --> 00:20:28,240
Speaker 1: have your Larry. Let's just start with that blow out

367
00:20:28,280 --> 00:20:32,520
Speaker 1: payrolls report. The consumer in the United States looks really

368
00:20:32,520 --> 00:20:35,760
Speaker 1: strong right now. Do you see that still a sustainable Larry?

369
00:20:38,119 --> 00:20:41,080
Speaker 1: Oh sure? I mean look at first of all, if

370
00:20:41,080 --> 00:20:43,720
Speaker 1: you if you break out some of the key pieces

371
00:20:43,760 --> 00:20:46,920
Speaker 1: in this report, as you know, now, do we get

372
00:20:46,960 --> 00:20:50,439
Speaker 1: the three and twelve thousand jobs the prior two months

373
00:20:50,480 --> 00:20:54,000
Speaker 1: were revised higher, so that put another fifty eight thousand

374
00:20:54,119 --> 00:20:59,280
Speaker 1: jobs in. People are streaming into the workforce. So with

375
00:20:59,720 --> 00:21:03,160
Speaker 1: where ages, you know, year on year average hourly earnings,

376
00:21:03,240 --> 00:21:07,200
Speaker 1: what three point two percent hours worked are very significant

377
00:21:07,240 --> 00:21:11,119
Speaker 1: two percent you put that together the income or a

378
00:21:11,160 --> 00:21:13,920
Speaker 1: proxy for wage income as I've called it down through

379
00:21:13,960 --> 00:21:18,240
Speaker 1: the years, that's five point two percent nominal and the

380
00:21:18,280 --> 00:21:21,480
Speaker 1: inflation rate is only about I don't know, a bucket

381
00:21:21,480 --> 00:21:24,640
Speaker 1: a quarter, maybe one point four percent. That's a lot

382
00:21:24,680 --> 00:21:28,800
Speaker 1: of consumer firepower. I think you saw that during the

383
00:21:28,840 --> 00:21:32,919
Speaker 1: holidays selling season. I think it's going to continue. I

384
00:21:32,960 --> 00:21:36,200
Speaker 1: just want to say, you know, I appreciate your characterization

385
00:21:36,320 --> 00:21:38,960
Speaker 1: a blowout. It was a blowout, but but look, I

386
00:21:39,040 --> 00:21:41,919
Speaker 1: just want to editorialize. I know this has been a

387
00:21:41,920 --> 00:21:45,919
Speaker 1: gloomy period. I know people are concerned about the stock market. Okay,

388
00:21:46,200 --> 00:21:49,720
Speaker 1: corrections come and go, nobody particularly likes them. But there

389
00:21:49,800 --> 00:21:53,200
Speaker 1: you have it. There's no recession in sight. If I may,

390
00:21:53,560 --> 00:21:57,160
Speaker 1: this is so loose talk about recession with a lot

391
00:21:57,200 --> 00:22:01,520
Speaker 1: of very I don't know, not hard day as surely

392
00:22:01,880 --> 00:22:06,880
Speaker 1: there's just no recession. The American economy is growing three solid,

393
00:22:07,119 --> 00:22:11,560
Speaker 1: job games are huge, and businesses are investing big time.

394
00:22:12,040 --> 00:22:16,760
Speaker 1: So it's a much better, more optimistic picture than what

395
00:22:16,840 --> 00:22:19,520
Speaker 1: we've been getting in the last month or two. So

396
00:22:19,880 --> 00:22:21,960
Speaker 1: let's talk about that. Because you said back in July

397
00:22:22,000 --> 00:22:24,879
Speaker 1: of last year that the boom would be sustainable for

398
00:22:24,920 --> 00:22:27,440
Speaker 1: as far as the eye can see. Now we're often

399
00:22:27,480 --> 00:22:29,360
Speaker 1: overtaken by events. And I just wonder whether we're being

400
00:22:29,400 --> 00:22:31,640
Speaker 1: overtaken by events now, do you still see the boom

401
00:22:31,640 --> 00:22:34,000
Speaker 1: is sustainable as far as the eye can see, or

402
00:22:34,040 --> 00:22:38,520
Speaker 1: do we need to temper expectations a little bit? Well?

403
00:22:38,600 --> 00:22:41,840
Speaker 1: I hold to that. Um. You know, if I if

404
00:22:41,840 --> 00:22:44,520
Speaker 1: I get a cutload forecast right for a few months,

405
00:22:44,600 --> 00:22:46,880
Speaker 1: I'm going to write it as long as I possibly can.

406
00:22:47,080 --> 00:22:49,720
Speaker 1: They're not always right, as I think, you know, but

407
00:22:50,040 --> 00:22:53,359
Speaker 1: I think look, we have a set of economic policies

408
00:22:53,400 --> 00:22:57,040
Speaker 1: that are pro growth. I mean, this is President Trump's revolution.

409
00:22:57,119 --> 00:23:02,360
Speaker 1: If you will lower business tax rates, roll back all

410
00:23:02,520 --> 00:23:07,680
Speaker 1: manner of regulations. Uh, small business taxes coming down, individual

411
00:23:07,760 --> 00:23:12,159
Speaker 1: taxes coming down. As I say, the regulatory rollback is huge,

412
00:23:13,320 --> 00:23:17,000
Speaker 1: unlocking the energy sector. Now, I'm not gonna spend twenty

413
00:23:17,000 --> 00:23:19,440
Speaker 1: minutes on this, but let me just say these are

414
00:23:19,480 --> 00:23:23,280
Speaker 1: pro growth policies. And for those skeptics who say, well,

415
00:23:23,280 --> 00:23:26,639
Speaker 1: it's a sugar high, it's not a sugar high. These

416
00:23:26,640 --> 00:23:32,880
Speaker 1: policies are going to remain in place for years, for years. Okay.

417
00:23:32,960 --> 00:23:36,119
Speaker 1: The business tax cuts I guess have to be extended

418
00:23:36,160 --> 00:23:41,800
Speaker 1: in this is We've got a long ways to go.

419
00:23:41,920 --> 00:23:44,120
Speaker 1: I mean, hopefully they'll be made permanent. But you see

420
00:23:44,160 --> 00:23:49,080
Speaker 1: my point. The policies are intact. The president is you know,

421
00:23:49,160 --> 00:23:53,040
Speaker 1: in no way would he tolerate efforts by the new

422
00:23:53,080 --> 00:23:56,480
Speaker 1: Congress to raise taxes or raise regulations and so forth.

423
00:23:56,880 --> 00:24:01,320
Speaker 1: So why can't I ask you, why can't the incentive

424
00:24:01,480 --> 00:24:07,040
Speaker 1: effects they have given us the supply side boom without installation?

425
00:24:07,280 --> 00:24:09,840
Speaker 1: Why can't that continue for as far as the eye

426
00:24:09,880 --> 00:24:11,720
Speaker 1: can see? Well, this is the pushback, Larry, This will

427
00:24:11,720 --> 00:24:14,520
Speaker 1: be the pushback. The downside surprises we've had elsewhere in

428
00:24:14,560 --> 00:24:17,919
Speaker 1: the economy, housing and real estate, the industrial sector, retail

429
00:24:17,960 --> 00:24:21,199
Speaker 1: and wholesale sector, services, and business cycle indicators. What is

430
00:24:21,200 --> 00:24:23,080
Speaker 1: happening with the yield curve, the inversion we see at

431
00:24:23,119 --> 00:24:25,520
Speaker 1: the front end, the slow down in China, the rollover

432
00:24:25,560 --> 00:24:27,840
Speaker 1: and crewed which, as we know, is no longer the

433
00:24:27,880 --> 00:24:29,679
Speaker 1: net net positive for the U. S. Economy that it

434
00:24:29,760 --> 00:24:32,640
Speaker 1: used to be. All of those things A big head

435
00:24:32,680 --> 00:24:34,639
Speaker 1: wins into the U. S economy at the moment. And

436
00:24:34,680 --> 00:24:37,399
Speaker 1: I think the real debate happening with economists, quite honestly

437
00:24:37,440 --> 00:24:40,040
Speaker 1: and genuinely and stripping out all of the politics, is

438
00:24:40,040 --> 00:24:42,240
Speaker 1: about whether the U. S. Economy can decouple from the

439
00:24:42,280 --> 00:24:44,320
Speaker 1: rest of the world. The rest of the world is

440
00:24:44,359 --> 00:24:46,399
Speaker 1: not looking great, and the answer for many people is

441
00:24:46,480 --> 00:24:50,919
Speaker 1: know why is the answer? Yes, Larry, Well, look, I

442
00:24:51,000 --> 00:24:52,679
Speaker 1: agree with you. The rest of the world is not

443
00:24:52,760 --> 00:24:56,440
Speaker 1: looking great. Maybe we'll talk about China and trade in

444
00:24:57,000 --> 00:24:59,359
Speaker 1: a few moments. I agree with that, But look, my

445
00:24:59,480 --> 00:25:04,720
Speaker 1: basic model has always been that the US leads. It's

446
00:25:04,760 --> 00:25:08,080
Speaker 1: not that I want everybody else to do poorly. I don't.

447
00:25:08,400 --> 00:25:13,840
Speaker 1: I want booming growth and prosperity worldwide. But unfortunately there's

448
00:25:13,800 --> 00:25:17,040
Speaker 1: a lot of policies out there that aren't working all right.

449
00:25:17,600 --> 00:25:22,439
Speaker 1: Second point, the United States, we are the locomotive. We

450
00:25:22,520 --> 00:25:25,760
Speaker 1: are the ancient that leads when we get it right.

451
00:25:26,280 --> 00:25:29,159
Speaker 1: I learned this from Reagan many years ago. When we

452
00:25:29,240 --> 00:25:32,440
Speaker 1: get the story right, when we go free market, when

453
00:25:32,440 --> 00:25:37,000
Speaker 1: we go incentives, when it pays more to invest or

454
00:25:37,080 --> 00:25:41,359
Speaker 1: work the extra hour. You saw phenomenal wage increases today

455
00:25:41,680 --> 00:25:45,160
Speaker 1: and along with the labor number. When these things go right,

456
00:25:45,359 --> 00:25:50,479
Speaker 1: we will go right and then and then hopefully the

457
00:25:50,520 --> 00:25:53,800
Speaker 1: rest of the world will follow if they don't take

458
00:25:53,840 --> 00:25:57,800
Speaker 1: anti growth policies. So I agree with you globally, but

459
00:25:57,960 --> 00:26:01,120
Speaker 1: I gotta say that the United States can go it alone.

460
00:26:01,320 --> 00:26:04,880
Speaker 1: We can shoulder the burden of the world economy if

461
00:26:04,880 --> 00:26:07,920
Speaker 1: we must. Yep, I'd rather these countries, you know, followers.

462
00:26:08,200 --> 00:26:10,960
Speaker 1: So you see the point I'm making. If we are

463
00:26:11,080 --> 00:26:14,800
Speaker 1: on the incentive track, if we're on the growth track,

464
00:26:15,080 --> 00:26:19,520
Speaker 1: if we're on the prosperity track, will be just fine, okay,

465
00:26:19,600 --> 00:26:24,600
Speaker 1: and hopefully our success will even help their success. There's

466
00:26:24,640 --> 00:26:28,600
Speaker 1: too much gloom. There's too much gloom and doom. I

467
00:26:28,720 --> 00:26:33,160
Speaker 1: prefer boom. I think everyone watched the watching this program.

468
00:26:33,200 --> 00:26:35,200
Speaker 1: Larry with the exception of people with big shorts would

469
00:26:35,200 --> 00:26:37,760
Speaker 1: love the boom and not the gloom at the moment, though,

470
00:26:37,800 --> 00:26:40,359
Speaker 1: when you look at what's happening with Apple, Apple coming

471
00:26:40,359 --> 00:26:42,200
Speaker 1: down and saying there's a big slow down in China,

472
00:26:42,240 --> 00:26:45,640
Speaker 1: bigger than they anticipated. Also pointing towards the trade situation,

473
00:26:45,960 --> 00:26:48,720
Speaker 1: and your own colleague, Kevin Hassett saying the following yesterday

474
00:26:48,720 --> 00:26:50,639
Speaker 1: to CNN, there are a heck of a lot of

475
00:26:50,720 --> 00:26:52,960
Speaker 1: US companies that have sales in China that are gonna

476
00:26:53,000 --> 00:26:55,960
Speaker 1: be watching their earnings being downgrading next year until we

477
00:26:56,000 --> 00:26:59,679
Speaker 1: get a deal with the Chinese. To me, that's tacit.

478
00:26:59,720 --> 00:27:02,879
Speaker 1: Admit that the trade debate, the skirmish with China is

479
00:27:02,920 --> 00:27:05,920
Speaker 1: impacting big US companies and it's feeding back into the

480
00:27:06,000 --> 00:27:10,840
Speaker 1: U s economy. Larry, Well, look, let me just back out.

481
00:27:10,920 --> 00:27:14,280
Speaker 1: You've got two issues here, both good questions. First of all,

482
00:27:14,960 --> 00:27:17,359
Speaker 1: Kevin has it, my dear friend in colleague, We went

483
00:27:17,440 --> 00:27:21,280
Speaker 1: back yesterday and took a look at the profit numbers

484
00:27:21,920 --> 00:27:29,159
Speaker 1: on a worldwide basis. So if American companies operating in

485
00:27:29,320 --> 00:27:36,560
Speaker 1: China had zero profits zero, that would only affect one

486
00:27:36,680 --> 00:27:41,840
Speaker 1: point seven percent of total US profits, a very small

487
00:27:41,920 --> 00:27:45,240
Speaker 1: fraction you follow me. Now, It's not gonna be zero,

488
00:27:45,359 --> 00:27:48,120
Speaker 1: It's gonna be better than zero. So I think it's

489
00:27:48,160 --> 00:27:52,240
Speaker 1: a little easy and inaccurate to just say all these

490
00:27:52,280 --> 00:27:56,720
Speaker 1: American companies are gonna crash because China's economy is very weak.

491
00:27:56,760 --> 00:27:59,520
Speaker 1: I grant you that, but I don't think that profits.

492
00:27:59,840 --> 00:28:02,480
Speaker 1: I think Mr Tim Cook, who was a friend of mine,

493
00:28:02,520 --> 00:28:06,159
Speaker 1: he's a brilliant businessman. I think Apple may have been overextended.

494
00:28:06,480 --> 00:28:09,720
Speaker 1: I'm not here to get a second guess his business

495
00:28:09,720 --> 00:28:13,600
Speaker 1: plan and so forth. I'm just saying Apple is not apocryphal.

496
00:28:14,160 --> 00:28:17,959
Speaker 1: And the slowdown in China, which is quite significant, Uh,

497
00:28:18,040 --> 00:28:21,560
Speaker 1: you know, they've lost their They're not doing market based

498
00:28:21,560 --> 00:28:24,960
Speaker 1: reforms anymore. If they would listen to US and negotiate

499
00:28:25,040 --> 00:28:29,440
Speaker 1: with us on trade, we would help them enormously with technology.

500
00:28:29,560 --> 00:28:33,280
Speaker 1: I p tech transfers as well as free market approaches.

501
00:28:33,320 --> 00:28:36,639
Speaker 1: They've gone off the track. That's the Chinese problem. And

502
00:28:36,680 --> 00:28:39,040
Speaker 1: by the way, I just want to add, not only

503
00:28:39,080 --> 00:28:42,880
Speaker 1: am I not worried about American profits and China's I

504
00:28:43,000 --> 00:28:49,280
Speaker 1: note that President Trump has been rather optimistic with respect

505
00:28:49,320 --> 00:28:53,719
Speaker 1: to the China trade talks. We are set sending a delegation,

506
00:28:53,760 --> 00:28:57,680
Speaker 1: as you may know of deputy level people to China

507
00:28:58,000 --> 00:29:01,880
Speaker 1: this weekend and next, and then the Chinese will reciprocate

508
00:29:02,000 --> 00:29:04,800
Speaker 1: when they come here. President just talked to Sheet. So

509
00:29:05,480 --> 00:29:07,560
Speaker 1: I don't want to get ahead of the curved, right,

510
00:29:07,680 --> 00:29:11,720
Speaker 1: all these good ideas on no tariffs, no non tariff barriers,

511
00:29:12,360 --> 00:29:15,080
Speaker 1: let's stop the technology stealing. I don't want to get

512
00:29:15,080 --> 00:29:19,760
Speaker 1: ahead of that curve. Their enforcement issues, timing issues, et cetera.

513
00:29:19,960 --> 00:29:23,720
Speaker 1: But but, but, but I think that President Trump is

514
00:29:23,760 --> 00:29:28,720
Speaker 1: more optimistic, and I think China needs the kind of

515
00:29:28,840 --> 00:29:34,160
Speaker 1: pro growth trade reforms that President Trump is suggesting. Their

516
00:29:34,200 --> 00:29:37,760
Speaker 1: economy has been slumping for years. Take a look at

517
00:29:37,800 --> 00:29:41,640
Speaker 1: the charts on investment in sales. What car sales fell

518
00:29:41,960 --> 00:29:45,800
Speaker 1: absolutely twenty They have gotten off track. So we could

519
00:29:45,800 --> 00:29:48,640
Speaker 1: help them if they let us. And I don't think

520
00:29:48,680 --> 00:29:52,000
Speaker 1: there's a catastrophe in the making if they do let us.

521
00:29:52,280 --> 00:29:54,520
Speaker 1: But I'm not going to get ahead of the curve.

522
00:29:54,640 --> 00:29:57,040
Speaker 1: Let's see how it works. Well, you know what encourage

523
00:29:57,040 --> 00:29:58,480
Speaker 1: you to get ahead of the cub Oh, he wants

524
00:29:58,480 --> 00:30:00,600
Speaker 1: some insigns. And what we're looking to achieve next week.

525
00:30:00,640 --> 00:30:02,680
Speaker 1: What is the minimum condition of success for the lower

526
00:30:02,720 --> 00:30:05,360
Speaker 1: level talks to generate some high level talks in the

527
00:30:05,360 --> 00:30:09,640
Speaker 1: coming months. Well, that's a good question, and it's a

528
00:30:09,640 --> 00:30:15,760
Speaker 1: hard question. Um, you've got different buckets of issues. You've

529
00:30:15,800 --> 00:30:24,000
Speaker 1: got your commodity buckets, agriculture, industrial supplies, capital goods. We

530
00:30:24,080 --> 00:30:29,280
Speaker 1: are asking China to significantly reduce their tariff barriers and

531
00:30:29,400 --> 00:30:33,440
Speaker 1: their non tariff barriers very very important. We'd like them

532
00:30:33,440 --> 00:30:37,000
Speaker 1: to reduce their subsidies so they don't flood the market

533
00:30:37,240 --> 00:30:41,800
Speaker 1: with excess goods and services. That's one very important area.

534
00:30:42,160 --> 00:30:45,840
Speaker 1: Another important area that will be discussed and vetted in

535
00:30:45,920 --> 00:30:51,080
Speaker 1: this Deputy's meeting, the whole issue of I P theft um.

536
00:30:51,280 --> 00:30:54,480
Speaker 1: By the way, that may be part of the Apple issue. Uh.

537
00:30:55,120 --> 00:30:57,800
Speaker 1: I don't want to surmise too much here, but Apple

538
00:30:57,840 --> 00:31:01,320
Speaker 1: technology may have been picked up by China and now

539
00:31:01,440 --> 00:31:04,520
Speaker 1: China is becoming very competitive with Apple. You've got to

540
00:31:04,560 --> 00:31:07,640
Speaker 1: have a rule law. There's some indications from China that

541
00:31:07,680 --> 00:31:09,720
Speaker 1: they're looking at that, but we don't know that yet.

542
00:31:09,840 --> 00:31:14,120
Speaker 1: There's no enforcement, there's nothing concrete. Finally, among other things,

543
00:31:14,480 --> 00:31:17,480
Speaker 1: the cyber hacking has got to stop, and and let's

544
00:31:17,600 --> 00:31:20,800
Speaker 1: force face it, ownership has got to change. We are

545
00:31:20,920 --> 00:31:25,280
Speaker 1: asking them to let American companies own their companies, so

546
00:31:25,320 --> 00:31:32,320
Speaker 1: there's no forced transfer of sensitive technology that is hugely important.

547
00:31:32,600 --> 00:31:38,200
Speaker 1: Now preliminary talks have been I would say a little

548
00:31:38,240 --> 00:31:43,480
Speaker 1: more optimistic than usual, but there is nothing definitive. I

549
00:31:43,480 --> 00:31:46,480
Speaker 1: think Ambassador Lighthouser would tell you that there's nothing definitive,

550
00:31:47,000 --> 00:31:51,080
Speaker 1: and again, trust but verify. I learned that under Reagan,

551
00:31:51,280 --> 00:31:53,600
Speaker 1: and we're gonna have to have it here with Chinese

552
00:31:53,680 --> 00:31:57,680
Speaker 1: trade talks, so we can help their economy if they

553
00:31:57,760 --> 00:32:02,240
Speaker 1: let us. But we don't know this yet. There are

554
00:32:02,280 --> 00:32:06,600
Speaker 1: some big claims and some big goals for next week alone.

555
00:32:06,840 --> 00:32:09,280
Speaker 1: Let's get to another potential meeting and not between the

556
00:32:09,320 --> 00:32:11,840
Speaker 1: President of the United States and President She between the

557
00:32:11,840 --> 00:32:14,200
Speaker 1: President of the United States and the Federal Reserve chairman.

558
00:32:14,600 --> 00:32:16,800
Speaker 1: Are you working on making that meeting happen? Larry? Could

559
00:32:16,800 --> 00:32:21,680
Speaker 1: that be happening anytime soon? I don't want to get

560
00:32:21,720 --> 00:32:26,360
Speaker 1: too specific and too details on that um the details

561
00:32:26,400 --> 00:32:31,040
Speaker 1: haven't been quite fixed yet, but I think both sides

562
00:32:32,000 --> 00:32:36,160
Speaker 1: would like to have a meeting, and I personally think

563
00:32:36,200 --> 00:32:39,360
Speaker 1: a meeting would be useful. It's just my personal opinion.

564
00:32:40,360 --> 00:32:43,719
Speaker 1: I prefer to talk rather than than not to talk,

565
00:32:44,280 --> 00:32:47,360
Speaker 1: so I'd like to see a meeting. I can't be

566
00:32:47,400 --> 00:32:50,720
Speaker 1: more specific than that. I'm sorry, it's just that, Um,

567
00:32:50,800 --> 00:32:54,560
Speaker 1: the details have not been worked through yet. Well, final question, Larry,

568
00:32:54,600 --> 00:32:59,080
Speaker 1: what would that be beneficial to the Federal Reserve? I

569
00:32:59,160 --> 00:33:01,480
Speaker 1: beg your part? Why would that meeting be beneficial for

570
00:33:01,520 --> 00:33:08,960
Speaker 1: the Federal Reserve? Well? Look, um, in in diplomatic terms,

571
00:33:09,040 --> 00:33:14,000
Speaker 1: what's the phrase of frank and candid exchange of views?

572
00:33:15,160 --> 00:33:17,480
Speaker 1: I think it would be nice to have a frank

573
00:33:17,560 --> 00:33:22,120
Speaker 1: and candid exchange of views? Shall we say up close

574
00:33:22,240 --> 00:33:27,719
Speaker 1: and personal? Um? I think President Trump would benefit. I

575
00:33:27,760 --> 00:33:30,960
Speaker 1: think j Pal would benefit. Can I just say one thing?

576
00:33:31,000 --> 00:33:35,400
Speaker 1: I'm all right, you know, I don't want to predict

577
00:33:35,480 --> 00:33:38,520
Speaker 1: anything here in a sense, I can't really predict a meeting,

578
00:33:38,560 --> 00:33:41,360
Speaker 1: although I think what will happen. I just want to

579
00:33:41,360 --> 00:33:45,040
Speaker 1: note that, you know we're in a boom. You had

580
00:33:45,040 --> 00:33:52,040
Speaker 1: this blockbuster jobs number today. There is no inflation. There

581
00:33:52,160 --> 00:33:57,360
Speaker 1: is no inflation. More growth, more people working does not

582
00:33:57,880 --> 00:34:03,440
Speaker 1: cause inflation. These old Federal Reserve models are outdated and

583
00:34:03,480 --> 00:34:07,080
Speaker 1: have proven to be incorrect. Right now, the inflation rate

584
00:34:07,160 --> 00:34:10,120
Speaker 1: is probably less than one and a half percent, even

585
00:34:10,160 --> 00:34:14,319
Speaker 1: while unemployment is low and jobs are staring and we're

586
00:34:14,320 --> 00:34:17,680
Speaker 1: growing at three pc. Why do I say that because

587
00:34:18,239 --> 00:34:22,080
Speaker 1: that is a point of view which the President holds,

588
00:34:23,040 --> 00:34:26,680
Speaker 1: and I think the President is exactly right. Uh, this

589
00:34:26,760 --> 00:34:30,920
Speaker 1: is supply side revolution. We're creating more goods and services.

590
00:34:31,239 --> 00:34:35,040
Speaker 1: We're increasing the capital stock and business investment, and that's

591
00:34:35,080 --> 00:34:39,120
Speaker 1: what creates incomes and jobs. Uh. I'm sure you remember

592
00:34:39,200 --> 00:34:42,879
Speaker 1: Jean Baptiste say he wrote it in the early part

593
00:34:42,880 --> 00:34:46,520
Speaker 1: of the nineteenth century. He was a French economic philosopher.

594
00:34:47,160 --> 00:34:50,640
Speaker 1: I met him a while back. You perhaps did, also,

595
00:34:51,160 --> 00:34:56,600
Speaker 1: says Law. Supply creates its own demand. This is not

596
00:34:57,440 --> 00:35:01,640
Speaker 1: government spending from the demand side. This is lower tax

597
00:35:01,800 --> 00:35:05,920
Speaker 1: rates from the supply side, and it is businesses that

598
00:35:06,160 --> 00:35:12,120
Speaker 1: ultimately drive the economy. I would like j. Powell to

599
00:35:12,360 --> 00:35:18,200
Speaker 1: hear that argument from President Trump, who knows the argument

600
00:35:18,360 --> 00:35:21,360
Speaker 1: very well. Now, Jay, I think does too. He's a

601
00:35:21,440 --> 00:35:24,920
Speaker 1: very smart guy. Okay, So I'm just saying they can

602
00:35:25,000 --> 00:35:29,680
Speaker 1: benefit from an exchange of views. Let's understand that more

603
00:35:29,719 --> 00:35:34,319
Speaker 1: people working and solid three percent growth is not is

604
00:35:34,480 --> 00:35:40,040
Speaker 1: not causing higher inflation, and therefore FED policy should take

605
00:35:40,080 --> 00:35:43,600
Speaker 1: that into account, says Law. We may have to go

606
00:35:43,680 --> 00:35:46,799
Speaker 1: and commune with him to fully understand it. Hey, Larry,

607
00:35:46,880 --> 00:35:48,480
Speaker 1: you and I could go on forever, but we both

608
00:35:48,480 --> 00:35:50,840
Speaker 1: get in trouble, me with my producer and you with

609
00:35:51,040 --> 00:35:53,120
Speaker 1: your pr Thank you very much for joining us. A

610
00:35:53,160 --> 00:35:55,080
Speaker 1: happy New Year to you said, and thank you very

611
00:35:55,120 --> 00:35:56,560
Speaker 1: much for giving us your time, as you always do.

612
00:35:56,800 --> 00:36:05,840
Speaker 1: After every payrolls Friday m Thanks for listening to the

613
00:36:05,840 --> 00:36:12,359
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

614
00:36:12,719 --> 00:36:16,920
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

615
00:36:17,000 --> 00:36:21,239
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

616
00:36:21,680 --> 00:36:22,800
Speaker 1: I'm Bloomberg Radio