WEBVTT - Surveillance: No Recession In Sight, Kudlow Says 0:00:02.600 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:38.080 Bloomberg dot Com, and of course, on the Bloomberg Jim 0:00:38.120 --> 0:00:40.760 Glassman dropping by the studio here in New York. JP 0:00:40.880 --> 0:00:44.199 Morgan Chase, Commercial Banking head Economists, Good morning, teach him, 0:00:44.240 --> 0:00:46.879 Good morning. What are you expecting in about nineteen minutes time? 0:00:47.280 --> 0:00:51.280 Pretty decent job report and m This is interesting because 0:00:51.320 --> 0:00:55.200 we're still seeing above trend hiring, which is odd. When 0:00:55.240 --> 0:00:56.920 the underplom rate is this low, you tend to think 0:00:56.920 --> 0:00:59.160 you're gonna see things slow down. The number of people 0:00:59.200 --> 0:01:02.240 who are sixteen to seventy, the working age population, has 0:01:02.280 --> 0:01:05.480 slowed down dramatically. It's running about seventy thousand a month. 0:01:05.760 --> 0:01:09.200 So that tells you anything above that is an economy 0:01:09.280 --> 0:01:10.880 that's growing faster and it's training. And that's why the 0:01:10.920 --> 0:01:12.759 uneplumber rate has come down about a half a point 0:01:13.000 --> 0:01:15.360 this last year. When this print comes out, though, I 0:01:15.400 --> 0:01:18.160 just wonder if payrolls growth slows, are we gonna blame 0:01:18.200 --> 0:01:20.600 demand or lack of supply. What do you think the 0:01:20.640 --> 0:01:23.360 reaction function of the investor is right now, because I 0:01:23.240 --> 0:01:25.800 imagine they're going to blame demand. I think most people 0:01:25.840 --> 0:01:28.319 should be it will be thinking about supply because that's 0:01:28.319 --> 0:01:30.000 where the constraint is. And that's what all of our 0:01:30.040 --> 0:01:32.240 business clients are telling us. They having a hard time 0:01:32.280 --> 0:01:35.639 finding people. We've got a survey of folks business leaders 0:01:35.640 --> 0:01:38.440 that is pointing out this that folks are just that's 0:01:38.480 --> 0:01:41.880 the big challenge for for businesses. So one day you 0:01:41.920 --> 0:01:45.080 figure you're gonna start to see slower growth and hiring, 0:01:45.600 --> 0:01:47.800 and it's got to be because of the supply constraint. 0:01:47.880 --> 0:01:49.920 You think so. But I think given the perception of 0:01:49.920 --> 0:01:52.280 investors right now, looking at the dates around sweat, there 0:01:52.360 --> 0:01:54.400 is a real concern about demand him. You know, I 0:01:54.440 --> 0:01:56.920 think the issue in the market is really more about 0:01:56.960 --> 0:01:59.880 the possibility of recession in the next couple of years. 0:02:00.040 --> 0:02:02.680 Has been that idea has been percolating for most of 0:02:02.680 --> 0:02:05.360 the last year. So that's why people worry about the 0:02:05.400 --> 0:02:06.920 yell curve and what the FED is doing. And you 0:02:07.000 --> 0:02:09.440 might wonder why are people worried about the FED when 0:02:09.480 --> 0:02:12.000 the real FED funds rator is only zero and it's 0:02:12.040 --> 0:02:14.640 because the market has been thinking. As you look at 0:02:14.680 --> 0:02:17.000 our history, what people observe is that every time we 0:02:17.040 --> 0:02:19.600 get to full employment or low levels of unemployment, within 0:02:19.639 --> 0:02:22.200 a year or two, we trip up in a new recession. 0:02:22.240 --> 0:02:24.440 And I think, I think this what's going on the 0:02:24.440 --> 0:02:28.040 equity market. It's more about the possibility of a recession 0:02:28.360 --> 0:02:31.240 than it is about the economy itself today. Well, listen, 0:02:31.320 --> 0:02:33.240 look at the ice it has come out in the lasts. 0:02:33.280 --> 0:02:35.120 This is a market that ignored a really hot I 0:02:35.200 --> 0:02:37.840 d P print and was lately to focus on what 0:02:37.880 --> 0:02:39.480 happened with the I s M. I think there's a 0:02:39.520 --> 0:02:42.600 view amongst most investors and most market participants right now 0:02:42.800 --> 0:02:45.480 that the labor markets that lacking indicates on what is 0:02:45.520 --> 0:02:47.960 happening gaps whereas the reality it is. But you know, 0:02:48.040 --> 0:02:50.120 things like the I s M are more sentiment driven 0:02:50.120 --> 0:02:52.040 to and they've been out of line with some of 0:02:52.040 --> 0:02:54.520 the other measures. So I think, yes, of course the 0:02:54.600 --> 0:02:57.720 labor market is lagging, and it responds to how business 0:02:57.720 --> 0:03:00.839 to see things. But but the truth is, I think, uh, 0:03:00.880 --> 0:03:03.640 we we are still riding a wave of fiscal stimulus 0:03:03.639 --> 0:03:06.079 from last year, and I think the I really think 0:03:06.120 --> 0:03:08.920 that the big idea that's brewing in the market is 0:03:09.000 --> 0:03:12.040 more a worry about a new recession and could the 0:03:12.080 --> 0:03:16.160 FED be the cause of that by overtightening. What is 0:03:16.480 --> 0:03:19.320 your view on the American economy? I mean, I'm JP 0:03:19.320 --> 0:03:22.160 Morgan is a huge platform as a chasman, you know, 0:03:22.280 --> 0:03:25.680 economic operation. You're in commercial banking, which is a whole 0:03:26.320 --> 0:03:29.280 a different wing. But is it a view of two 0:03:29.320 --> 0:03:33.120 point whatever? Is CLARENI says a solid economy or is 0:03:33.160 --> 0:03:36.600 itself of that? You know in macro terms? I think 0:03:36.680 --> 0:03:39.440 it is a spectacular economy. We we've come out of 0:03:39.440 --> 0:03:42.480 an awful recession. We're back to levels of unemployment that 0:03:42.520 --> 0:03:44.080 I haven't seen since I was in college, and that 0:03:44.120 --> 0:03:47.280 wasn't yesterday. Um And but the big issue in the 0:03:47.360 --> 0:03:50.640 in the U. S. Economy is all the disruption caused 0:03:50.640 --> 0:03:53.840 by innovation. So you look at the labor market, it 0:03:53.880 --> 0:03:56.960 looks great. Unemployment is low, people are getting jobs, helping 0:03:56.960 --> 0:04:00.320 it signs all over the place. Our business leaders can't 0:04:00.400 --> 0:04:02.200 know they were having to work hard to have fired 0:04:02.240 --> 0:04:05.000 pep hired people. And yet when you look at the 0:04:05.080 --> 0:04:07.840 income distribution of the U. S. Economy, that kind of 0:04:07.880 --> 0:04:09.880 tells you why it is that there's so much age. 0:04:10.160 --> 0:04:12.680 I mean, do you agree with a guilded age? You 0:04:12.720 --> 0:04:15.360 mean Robert Gordon, your great mentor a Northwestern wrote about 0:04:15.360 --> 0:04:17.960 this a few years ago. Are we in a guilded 0:04:18.120 --> 0:04:22.880 age of Eisenhower unemployment rate? I think so. I think 0:04:22.920 --> 0:04:25.479 I think so, And come on, guys, is the same 0:04:25.520 --> 0:04:27.400 way not here to poopoo on the economy. I think 0:04:27.440 --> 0:04:29.680 the economy compared to the rest of the world is solid. 0:04:29.920 --> 0:04:33.120 I agree with that relatively speaking. What I struggle to 0:04:33.120 --> 0:04:36.120 agree with is, how do you reconcile the idea that 0:04:36.200 --> 0:04:38.800 the real Fed funds rate is at zero and could 0:04:38.800 --> 0:04:42.120 well be a neutral and yet the economy is spectacular? 0:04:42.440 --> 0:04:44.679 How do you reconcile those two things? Just the idea 0:04:44.720 --> 0:04:48.600 that a real Fed funds rate of zero is also neutral? 0:04:48.960 --> 0:04:52.760 Could economist? Some economists think maybe we've gone through neutral, 0:04:52.800 --> 0:04:54.440 though I don't think it is neutral. I don't think 0:04:54.480 --> 0:04:56.600 the Fed thinks it's neutral. If you look at the FEDE, 0:04:56.880 --> 0:04:59.640 someone at the Fed thinks it's neutral. Well, some do, 0:04:59.800 --> 0:05:01.479 but I have thought that for a while, and they've 0:05:01.520 --> 0:05:03.320 changed your mind a while ago. If you look at 0:05:03.320 --> 0:05:05.680 the bulk of the folks there, they tend to think 0:05:05.680 --> 0:05:08.400 that neutral is a real fit a fun straight about 0:05:08.400 --> 0:05:11.080 a percentage point over inflation. So I I don't I 0:05:11.080 --> 0:05:13.480 don't think if if Chairman Power we're here and not 0:05:13.560 --> 0:05:15.320 on air, I think he would. We tried to get him. 0:05:15.360 --> 0:05:18.000 He was unavailable today from Atlanta. He's busy with the 0:05:18.080 --> 0:05:21.520 chairman Banankee and you were shot out to Michael McKee's 0:05:21.600 --> 0:05:27.520 killing with Robert Kaplan in this power thing? Am I right? John, 0:05:27.600 --> 0:05:32.680 it's a panel to form a chairman chatwoman. We're gonna 0:05:32.720 --> 0:05:35.440 hear all of them to government, all of them together understands. Yeah, 0:05:35.440 --> 0:05:38.080 but security scenario. It's very very cool. But I just 0:05:38.160 --> 0:05:41.040 wonder whether this is the appropriate forum for the chairman 0:05:41.080 --> 0:05:43.480 to communicate a change all single a little bit of 0:05:43.520 --> 0:05:45.400 a change in communication. Jim, do you think it is? 0:05:45.880 --> 0:05:48.920 I don't think so, And I think I mean, Congress 0:05:49.000 --> 0:05:50.600 is the best place to do it, and in their 0:05:50.600 --> 0:05:53.120 official documents. But I think he's sort of he's I 0:05:53.160 --> 0:05:56.000 think he has changed the message. I think the messages 0:05:56.160 --> 0:06:00.640 we're we're closer to neutral than we were, and we're 0:06:00.640 --> 0:06:02.720 gonna be more cautious and we're gonna be given to 0:06:02.760 --> 0:06:05.480 guided by the data. It's not no longer automatic pilot. 0:06:05.600 --> 0:06:08.200 We have n f I B Survey, the Small Business Survey, 0:06:08.240 --> 0:06:10.440 and small business folks are a lot more employees, and 0:06:10.520 --> 0:06:13.120 you think, like, it's not like a hundred employees or twenty, 0:06:13.160 --> 0:06:16.320 it's like a thousand employees. But where's investment? When you're 0:06:16.320 --> 0:06:18.360 traveling all over the country. I get the idea that 0:06:18.400 --> 0:06:20.840 there's help. Why don't we can't get jobs? But is 0:06:20.880 --> 0:06:24.200 there really an appetite to invest in the two thousand 0:06:24.520 --> 0:06:26.839 to be more cautious, particularly in this environment, because what 0:06:26.880 --> 0:06:29.200 they what they think is going on, is that the 0:06:29.240 --> 0:06:31.520 markets are telling them you've got to be prepared for 0:06:31.560 --> 0:06:34.800 some possible recession in the future, so that automatically makes 0:06:34.800 --> 0:06:36.720 you more cautious. But at the end of the day, 0:06:37.040 --> 0:06:39.080 your investment decisions are going to be based on what 0:06:39.160 --> 0:06:42.040 you think the market opportunities are, and they're going to 0:06:42.080 --> 0:06:43.680 be guided by what they see on the ground, not 0:06:43.720 --> 0:06:45.160 what they hear in the airwaves. Do you have a 0:06:45.200 --> 0:06:49.400 train to catch? Right? Do go get a train? Thank 0:06:49.440 --> 0:06:51.360 you so much that we were thrilled they could join 0:06:51.480 --> 0:07:09.080 us here on job. Culling the reserve requirement ratio so 0:07:09.120 --> 0:07:11.840 effectively culling the amount of cash lenders must hold as 0:07:11.880 --> 0:07:14.480 reserves by one percentage point now will happen in two 0:07:14.480 --> 0:07:17.240 stages over the next month. Miranda Car joining us from 0:07:17.280 --> 0:07:21.360 High Tank International China macro Strategists. There, Miranda, great to 0:07:21.360 --> 0:07:23.320 have you with us on the program. Let's talk about this. 0:07:23.360 --> 0:07:26.760 Do I view this as easing or something seasonal? What 0:07:26.960 --> 0:07:31.400 is this? Well, there's two You always get a squeeze 0:07:31.480 --> 0:07:34.480 in China's markets ahead of the spring festivals. People take 0:07:34.520 --> 0:07:37.640 money out of the out of the banking system. But 0:07:37.760 --> 0:07:42.120 the fact that you've had UM such one percent across 0:07:42.160 --> 0:07:45.560 the board for all the banks, it's it's more than 0:07:45.600 --> 0:07:48.840 offsetting the both the liquidity squeeze and the thing about 0:07:48.840 --> 0:07:51.280 in our cart it's permanent. If they just wanted to 0:07:51.320 --> 0:07:54.080 provide short term liquidity, they could do to that through 0:07:54.080 --> 0:07:57.800 open market operations. So this is UM an economic boost, 0:07:57.880 --> 0:08:00.960 not just a liquidity injection. As a good point, and 0:08:01.000 --> 0:08:02.880 I do wonder whether what we've seen so far, because 0:08:02.880 --> 0:08:05.000 we have had a series of triple our cuts over 0:08:05.080 --> 0:08:08.440 the last couple of months, whether that's enough to support 0:08:08.520 --> 0:08:12.960 this economy, to support a turn in this economy, is it? Miranda, Well, 0:08:13.120 --> 0:08:15.600 they need to push more money into the students, to 0:08:15.640 --> 0:08:18.600 the banking system and support some of the infrastructure investment, 0:08:18.840 --> 0:08:21.160 which is one of the key things to offset the 0:08:22.800 --> 0:08:25.400 projected slow down going to this trade and sort of 0:08:25.440 --> 0:08:28.240 lower lower exports. I mean, because you're already seeing the 0:08:28.280 --> 0:08:31.080 slowdown coming through in the commodity prices which have been 0:08:31.200 --> 0:08:34.000 incredibly weak um as we come into as we come 0:08:34.000 --> 0:08:37.079 into January, UM, so there needs to be more shovel 0:08:37.120 --> 0:08:40.160 money shoveled out. This is also just to offset the 0:08:40.160 --> 0:08:43.280 shadow banking slow down. This is a really important nuanswer 0:08:43.320 --> 0:08:46.760 to mail. This is not about commodities, it's not about food, 0:08:47.360 --> 0:08:51.600 it's not about the people of China small business data, 0:08:51.640 --> 0:08:56.640 da dada. This is about the debt in the banking system, 0:08:56.800 --> 0:09:01.679 isn't it. Yeah. And the thing is they've tried to 0:09:01.800 --> 0:09:05.559 they're trying to drag the monetary system away from the 0:09:05.720 --> 0:09:07.800 you know, things like the trust lending and the shadow 0:09:07.840 --> 0:09:10.680 banking and the online financing and drag it back into 0:09:10.679 --> 0:09:12.920 the banking system, but also put into the cabin Don't 0:09:12.960 --> 0:09:15.960 they have to legislate that and not do it through 0:09:15.960 --> 0:09:22.120 a monetary intrusion, So they they I mean, they don't 0:09:22.160 --> 0:09:24.679 need to legislate that. I mean, a lot of the 0:09:25.000 --> 0:09:26.880 so a lot of the slowdown last year was all 0:09:26.920 --> 0:09:30.120 about regulation. Um, it wasn't you know in terms of 0:09:30.160 --> 0:09:35.080 it wasn't a monetary policy tightening. They they they regulated 0:09:35.480 --> 0:09:38.319 and so they're sort of the regulation really squeezed the 0:09:38.920 --> 0:09:41.520 sort of off the shadow banking system. Now, the fact 0:09:41.600 --> 0:09:43.680 that they've eased that, that's not going to give a 0:09:43.760 --> 0:09:46.920 huge amount of boost into that sector, but it is 0:09:46.960 --> 0:09:50.120 going to give more more system wide liquidity. You are 0:09:50.400 --> 0:09:53.959 experts on how they clear their systems. Is this really 0:09:54.000 --> 0:09:56.680 what it's about, is they won't let banks fail and 0:09:56.720 --> 0:09:59.760 that they just haven't cleared out the debris over side 0:09:59.800 --> 0:10:02.240 to in twenty years. And this is a price they 0:10:02.280 --> 0:10:05.160 pay right now, is they've got too much garbage businesses 0:10:05.200 --> 0:10:09.439 out there. Well, you the thing is they've cleaned out 0:10:09.480 --> 0:10:12.160 a lot Like a lot of the garbage was which 0:10:12.280 --> 0:10:15.080 everyone was focused on from the two thousand nine stimulus 0:10:15.080 --> 0:10:18.360 package was from the local government financing platforms. Now that's 0:10:18.400 --> 0:10:21.720 been that's been hived off into fiscal bed so therefore 0:10:21.800 --> 0:10:24.640 it's been dealt with. It's basically been um, you know, 0:10:24.760 --> 0:10:27.680 put on the government balance sheet. So that's that's that's 0:10:27.720 --> 0:10:30.800 been in effect cleared up. What we're getting now is 0:10:30.800 --> 0:10:33.400 the first wave of private sector defaults and it's a 0:10:33.480 --> 0:10:36.760 small and medium sized private companies which are really struggling 0:10:36.800 --> 0:10:38.800 at the moment. And now they've had when they had 0:10:38.800 --> 0:10:42.679 the shadow banking UM taps turned off last year, they 0:10:42.720 --> 0:10:45.040 were the ones that you saw the rising bankruptcies, really 0:10:45.080 --> 0:10:48.680 struggling and where the slowdown was. Now the question for 0:10:48.760 --> 0:10:51.640 China is how they get money into back into that 0:10:51.720 --> 0:10:54.959 sector so you don't see a huge wave of bankruptcy 0:10:55.040 --> 0:10:57.800 is coming through and much more pressure. And that's to 0:10:57.880 --> 0:11:00.760 be honest, the big big issue for UM. You know, 0:11:00.800 --> 0:11:04.520 did the domestic economy this year because they're trying to 0:11:04.559 --> 0:11:07.240 get money into that sector, but some of the it's 0:11:07.280 --> 0:11:09.760 a really difficulty, don't have the mechanisms to do it. 0:11:09.840 --> 0:11:12.240 Some miranda just to be clear, to summarize and conclude 0:11:12.640 --> 0:11:18.280 the deleveraging effort, and the Chinese authorities slightly capitulated on that. Yeah, 0:11:18.320 --> 0:11:22.040 I mean basically deleveraging is not seen as a it's 0:11:22.080 --> 0:11:24.280 it's the saying that we're not going to go into 0:11:24.320 --> 0:11:28.199 a big monetary boost. But obviously the deleveraging and the 0:11:28.320 --> 0:11:31.439 really squeeze that we had last year, it's it's basically 0:11:31.520 --> 0:11:34.200 that's come to an end and we're now into much 0:11:34.240 --> 0:11:37.880 more accommodative phase. Now, this has been brilliant round the car, 0:11:37.960 --> 0:11:53.240 Thank you so much. At the high time. Why don't 0:11:53.240 --> 0:11:56.640 you bring in professor Krueger years he looks at a 0:11:56.679 --> 0:12:01.440 make America Great Again employment report and what are your thoughts? Well, 0:12:01.480 --> 0:12:03.199 my thoughts are a little bit cloudy because at the 0:12:03.240 --> 0:12:08.079 BLS web page, I guess went to a said we're sorry, unavailable. 0:12:08.440 --> 0:12:11.120 But from the top line numbers, this is an excellent report, 0:12:11.200 --> 0:12:13.839 and I think it shows that the Fed has been 0:12:13.840 --> 0:12:16.960 pursuing a very prudent course. No, it shows that the 0:12:17.040 --> 0:12:21.840 BED have felt that the labor market continues to be strong, 0:12:22.000 --> 0:12:26.600 the real economy is moving along. Uh, we had stimulus 0:12:26.600 --> 0:12:30.840 at the wrong time. Um. But UM looks to me 0:12:31.000 --> 0:12:35.280 like this is a big win for the course has 0:12:35.280 --> 0:12:38.840 been on three seventy thousand, three twelve plus fifty eight. 0:12:38.920 --> 0:12:42.720 Even I can do the math three seventy thousand left. 0:12:42.800 --> 0:12:47.560 I mean this this really limits Chairman Powell's conversation this 0:12:47.600 --> 0:12:51.560 morning about stability or a rate cut. You just don't 0:12:51.600 --> 0:12:56.720 do that into a three seventy statistic, do you. Well, 0:12:56.760 --> 0:12:58.640 I think the Fed is going to be more data dependent. 0:12:58.800 --> 0:13:01.559 I think they're not on a pre set course, and 0:13:01.600 --> 0:13:06.080 we'll probably see a fewer rate increases. And the headwinds 0:13:06.160 --> 0:13:09.000 that we have been developing late in December earlier this 0:13:09.120 --> 0:13:11.839 year aren't reflected in this report. But it shows that 0:13:11.920 --> 0:13:13.720 the actions that the BED was taking through the end 0:13:13.760 --> 0:13:16.200 of last year, it seemed to me to be pretty 0:13:16.240 --> 0:13:32.120 well justified. Alan Krueger, Princeton, Thank you now joining us 0:13:32.200 --> 0:13:34.880 Michael Darta. As we spoke to David Rosenberg earlier. Mr 0:13:34.960 --> 0:13:39.240 Darta at m CAM Partners is decisive in writing economics 0:13:39.280 --> 0:13:42.640 and linking it in to market performance. Michael Darty, if 0:13:42.679 --> 0:13:45.000 you see a bang up jobs report, I saw one 0:13:45.080 --> 0:13:47.720 headline that called it a blowout, that's great. Can you 0:13:47.800 --> 0:13:52.839 link it over into equity market performance? I can sure try, Tom, 0:13:52.880 --> 0:13:55.120 Thanks for having me on. So we have a bit 0:13:55.120 --> 0:13:58.240 of a strange situation here. I mean, these numbers are 0:13:58.240 --> 0:14:02.800 white hot, very very very strong. Yet financial markets for 0:14:02.880 --> 0:14:06.320 some time have been basically telling us that growth is 0:14:06.360 --> 0:14:09.720 going to slow. You simply don't see it in these numbers, 0:14:09.760 --> 0:14:11.560 and that really puts the FED in a bit of 0:14:11.559 --> 0:14:15.280 a pickle. Um. They say they're data dependent, and that 0:14:15.400 --> 0:14:18.000 means if they are going to shift course, they need 0:14:18.000 --> 0:14:21.640 the data to tell them to do so. Unfortunately, data 0:14:21.720 --> 0:14:25.760 lags financial market indicators, and so you know, we basically 0:14:25.800 --> 0:14:28.080 have the situation where the FED is going to be 0:14:28.160 --> 0:14:33.280 incredibly reluctant to really shift policy in a dovish direction, 0:14:33.400 --> 0:14:35.880 despite the fact that you know, we've got parts of 0:14:35.880 --> 0:14:40.040 the yield curve that are inverted, significant stress and credit markets, 0:14:40.320 --> 0:14:43.640 slow down, in liquidity growth, all those things tell us 0:14:43.640 --> 0:14:45.840 the economy is going to soppen this year. You and 0:14:45.840 --> 0:14:48.040 I are looking at the same quick data we'll see 0:14:48.160 --> 0:14:51.400 much more earlier. I'm looking at leisure and hospitality up 0:14:51.400 --> 0:14:55.760 in very few negative numbers on the screen. But if 0:14:55.760 --> 0:14:58.240 you look at now and over the last number of months, 0:14:58.800 --> 0:15:02.040 what portion of the big job numbers that we're seeing 0:15:02.160 --> 0:15:06.240 our quality jobs or are they all people saying, you know, 0:15:06.480 --> 0:15:10.480 what would you like for dessert? Well, you know, we 0:15:10.480 --> 0:15:12.560 we you know, we do have some low end jobs. 0:15:12.640 --> 0:15:16.160 We also have higher quality jobs. The labor markets tight 0:15:16.280 --> 0:15:20.160 enough now to raise wages um so we are seeing 0:15:20.160 --> 0:15:23.560 workers wages move up just over three percent year over year. 0:15:24.200 --> 0:15:27.440 So you know, this is outside of the recovery range. 0:15:27.520 --> 0:15:29.960 For most of the expansion has been close to two 0:15:30.160 --> 0:15:32.480 So we are moving up now, and that's what matters. 0:15:33.440 --> 0:15:36.360 We also had a situation where nominal GDP growth last 0:15:36.400 --> 0:15:40.720 year was above five, very strong, basically the strongest of 0:15:40.720 --> 0:15:44.360 the recovery. The question is this year in a slowing 0:15:44.440 --> 0:15:48.560 nominal growth environment, um, how does the FED handle that? 0:15:48.760 --> 0:15:50.760 And how do you look forward? Because if it's just 0:15:50.800 --> 0:15:54.360 a matter of celebrating stale data or end up with 0:15:54.360 --> 0:15:56.720 a policy are if you're just joining us, Michael Darta, 0:15:56.880 --> 0:16:00.000 mcamp partners with us on this job to a future. 0:16:00.000 --> 0:16:02.640 As were oh, up thirty is up twenty seven right now, 0:16:02.640 --> 0:16:04.800 you don't see any equity markets with the bond market. 0:16:05.160 --> 0:16:07.960 Off the headline, we had a huge move tenure yield 0:16:08.320 --> 0:16:10.560 up seven even eight basis points. That get back a 0:16:10.560 --> 0:16:15.160 little bit right now. But two point on the tenure yield, 0:16:15.200 --> 0:16:20.600 real gyrations yen one six yen is a little bit weaker. 0:16:20.680 --> 0:16:23.560 Off the jobs report, I'll call that a fractional move 0:16:23.680 --> 0:16:25.760 as well, Michael Dart. And when I look at the numbers, 0:16:25.800 --> 0:16:28.240 and I'm just doing a quick eyeball here, folks, I 0:16:28.360 --> 0:16:31.680 see the Barbell economy. I see media and duration not 0:16:31.840 --> 0:16:36.600 doing much. I see you know, the marginally attached unemployment 0:16:36.760 --> 0:16:39.760 U five. I see the all in U six data 0:16:40.200 --> 0:16:44.120 really not improving all that much? Is it a tale 0:16:44.240 --> 0:16:49.000 of two America's Well, Tom, I I think it's just 0:16:49.440 --> 0:16:53.360 a matter of some of the standard employment metrics not 0:16:53.520 --> 0:16:57.520 really capturing the depth of depth of the of the 0:16:57.560 --> 0:17:01.600 downturn and the slowness of most of the economic expansion. 0:17:01.720 --> 0:17:05.600 My favorite metric is the employment the population ratio for 0:17:05.800 --> 0:17:10.800 prime age individual to fifty four. And you know, we're 0:17:11.200 --> 0:17:14.640 just now starting to get back to you know, to 0:17:14.240 --> 0:17:17.439 to more normal levels on that one, but it's taken 0:17:17.560 --> 0:17:21.159 quite a long time exactly by no means that you know, 0:17:21.240 --> 0:17:25.920 are we at levels consistent with record employment? You read 0:17:25.920 --> 0:17:28.879 my mind? Yeah, Michael, you read my mind on that. 0:17:29.000 --> 0:17:31.080 I did not that that's sharp, but something just like 0:17:31.119 --> 0:17:35.040 it of five to fifty four prime employment in America. 0:17:35.119 --> 0:17:38.159 This morning, I took it back to President Truman. And 0:17:38.200 --> 0:17:40.960 the answer is is all our listeners know, the vector 0:17:41.000 --> 0:17:43.760 has always gone up. That's the American way. We always 0:17:43.800 --> 0:17:47.560 create more jobs. And there's been a leveling from two 0:17:47.600 --> 0:17:52.560 thousand and employed twenty five to fifty four in this nation, 0:17:52.640 --> 0:17:54.919 even a decline at one point, but let's call it 0:17:54.960 --> 0:17:58.720 a leveling. For radio. Fine, there's been a leveling. Let's 0:17:58.760 --> 0:18:02.560 go back. Why did we level out in employed prime 0:18:02.600 --> 0:18:07.919 Americans beginning about two thousand. Well, I mean, so the 0:18:07.960 --> 0:18:12.320 starting point there literally was the tightest labor market since 0:18:12.400 --> 0:18:17.200 the since the nineteen sixties, and well it was just 0:18:17.280 --> 0:18:19.480 to some degree, you know, and then we had a 0:18:19.640 --> 0:18:22.879 you know, a very deep, very very long downturn in 0:18:22.920 --> 0:18:27.440 a quite slow recovery in that prime major ratio. Because 0:18:27.480 --> 0:18:30.199 you're looking at how many people are employed relative to 0:18:30.240 --> 0:18:35.520 their population, it's not distorted by dropouts into and less 0:18:35.520 --> 0:18:38.879 distorted by demographics. And so you know, to the extent 0:18:38.960 --> 0:18:41.240 that we have people that are on the sidelines due 0:18:41.280 --> 0:18:44.159 to opioid addiction or lots of skills. You know, your 0:18:44.200 --> 0:18:46.920 previous guest, Alan Krueger has done a lot of work 0:18:46.960 --> 0:18:49.320 on that. You know, it's really captured in that ratio. 0:18:49.440 --> 0:18:52.119 So we are recovering. You know, we've recently hit a 0:18:52.200 --> 0:18:55.000 cycle high on that ratio. I don't have the updated 0:18:55.080 --> 0:18:58.119 data on my Bloomberg screen at the moment, but recently 0:18:58.560 --> 0:19:01.560 we finally got back to the pre crisis media we're 0:19:01.600 --> 0:19:04.879 not at We're not at levels um that you would 0:19:04.880 --> 0:19:08.960 expect to see with the unemployment rates of FO We 0:19:09.080 --> 0:19:10.960 got so much to talk about very quickly, your Michael 0:19:11.040 --> 0:19:16.240 Darta Howard Chairman Powell fold this wonderful employment report, this 0:19:16.280 --> 0:19:19.240 blowout number into his comments this morning with Bernanke and 0:19:19.320 --> 0:19:23.159 yelling you know, I think you know, he's sort of 0:19:23.200 --> 0:19:25.639 walking a tight rope here. I think he's you know, 0:19:25.720 --> 0:19:28.679 certainly not going to want a jostle markets anymore. That 0:19:28.800 --> 0:19:32.520 reacted very poorly to his press conference after the last 0:19:32.520 --> 0:19:35.720 bad decision, So I think he's going to try to 0:19:35.800 --> 0:19:38.320 tippo to a bit. He's probably not going to weigh 0:19:38.320 --> 0:19:40.480 in directly on this number, and he'll try not to 0:19:40.520 --> 0:19:43.959 weigh in directly on, you know, on on recent market dynamics. 0:19:43.960 --> 0:19:46.320 But you know, he may be lad there, so we'll 0:19:46.359 --> 0:19:48.640 see how it unfolds. Michael Darter, thank you so much 0:19:48.680 --> 0:19:52.280 for your analysis away from your clients here on the job, 0:19:52.359 --> 0:20:09.960 say Michael Darted with m CAM Partners is well, here 0:20:10.160 --> 0:20:13.960 is administration. Now. I'm really pleased to say we joined 0:20:14.000 --> 0:20:16.320 now on Bloomberg Television and for our listeners across the 0:20:16.359 --> 0:20:19.680 world of Bloomberg Radio by Larry Cudlow, the National Economic 0:20:19.720 --> 0:20:22.679 Council Director, and he joins us now. Good day to Larry, 0:20:24.400 --> 0:20:26.600 Good day, Thank you, for having me. Always great to 0:20:26.600 --> 0:20:28.240 have your Larry. Let's just start with that blow out 0:20:28.280 --> 0:20:32.520 payrolls report. The consumer in the United States looks really 0:20:32.520 --> 0:20:35.760 strong right now. Do you see that still a sustainable Larry? 0:20:38.119 --> 0:20:41.080 Oh sure? I mean look at first of all, if 0:20:41.080 --> 0:20:43.720 you if you break out some of the key pieces 0:20:43.760 --> 0:20:46.920 in this report, as you know, now, do we get 0:20:46.960 --> 0:20:50.439 the three and twelve thousand jobs the prior two months 0:20:50.480 --> 0:20:54.000 were revised higher, so that put another fifty eight thousand 0:20:54.119 --> 0:20:59.280 jobs in. People are streaming into the workforce. So with 0:20:59.720 --> 0:21:03.160 where ages, you know, year on year average hourly earnings, 0:21:03.240 --> 0:21:07.200 what three point two percent hours worked are very significant 0:21:07.240 --> 0:21:11.119 two percent you put that together the income or a 0:21:11.160 --> 0:21:13.920 proxy for wage income as I've called it down through 0:21:13.960 --> 0:21:18.240 the years, that's five point two percent nominal and the 0:21:18.280 --> 0:21:21.480 inflation rate is only about I don't know, a bucket 0:21:21.480 --> 0:21:24.640 a quarter, maybe one point four percent. That's a lot 0:21:24.680 --> 0:21:28.800 of consumer firepower. I think you saw that during the 0:21:28.840 --> 0:21:32.919 holidays selling season. I think it's going to continue. I 0:21:32.960 --> 0:21:36.200 just want to say, you know, I appreciate your characterization 0:21:36.320 --> 0:21:38.960 a blowout. It was a blowout, but but look, I 0:21:39.040 --> 0:21:41.919 just want to editorialize. I know this has been a 0:21:41.920 --> 0:21:45.919 gloomy period. I know people are concerned about the stock market. Okay, 0:21:46.200 --> 0:21:49.720 corrections come and go, nobody particularly likes them. But there 0:21:49.800 --> 0:21:53.200 you have it. There's no recession in sight. If I may, 0:21:53.560 --> 0:21:57.160 this is so loose talk about recession with a lot 0:21:57.200 --> 0:22:01.520 of very I don't know, not hard day as surely 0:22:01.880 --> 0:22:06.880 there's just no recession. The American economy is growing three solid, 0:22:07.119 --> 0:22:11.560 job games are huge, and businesses are investing big time. 0:22:12.040 --> 0:22:16.760 So it's a much better, more optimistic picture than what 0:22:16.840 --> 0:22:19.520 we've been getting in the last month or two. So 0:22:19.880 --> 0:22:21.960 let's talk about that. Because you said back in July 0:22:22.000 --> 0:22:24.879 of last year that the boom would be sustainable for 0:22:24.920 --> 0:22:27.440 as far as the eye can see. Now we're often 0:22:27.480 --> 0:22:29.360 overtaken by events. And I just wonder whether we're being 0:22:29.400 --> 0:22:31.640 overtaken by events now, do you still see the boom 0:22:31.640 --> 0:22:34.000