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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg King.

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Speaker 1: Jim Glassman now JP Morgan Chase Commercial Banking head economist

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Speaker 1: traditions to catch out with each Jim ahead of the

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Speaker 1: payrolls reports, So your base case please for the numbers

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Speaker 1: that drop in eleven minutes time. I was thinking back

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Speaker 1: from the slim pickings in February unemployment study, and you

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Speaker 1: know what, Actually, I think we're sort of in the

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Speaker 1: middle of a transition. To your most people who want

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Speaker 1: a job already working, so we're gonna be seeing hiring

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Speaker 1: slowing down. And that's why I think the most useful

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Speaker 1: information is going to be from the weekly jobless claims

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Speaker 1: that tells you something about layoffs and the trend in

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Speaker 1: the unemployment rate. I think we're at cruising altitude and

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Speaker 1: I think we're going to see job growth slow down,

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Speaker 1: but everything sort of hold up pretty well. I'm really

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Speaker 1: intrigued by the trend and jobless claims because we've had

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Speaker 1: a lot of noises winter layoffs did pick up a

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Speaker 1: little bit earlier this year, and now they're right back

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Speaker 1: down to extremely low levels in every single state. So, Jim,

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Speaker 1: the story you tell, the story you tell makes a

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Speaker 1: lot of sense, made a lot of sense last year

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Speaker 1: the year before as well. Why is it different this time?

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Speaker 1: Why will payrolls finally start to de sounded right a

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Speaker 1: little bit? Well, I'll tell you what. You know? What

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Speaker 1: what what we look at the numbers for the last

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Speaker 1: couple of years. What you know is that there still

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Speaker 1: are these pockets of hidden unemployment. But what was really

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Speaker 1: intriguing last month, even though we were all sort of

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Speaker 1: taken aback by the payroll numbers, the household surveys telling

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Speaker 1: you that the number of people who are having to

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Speaker 1: work part time involuntarily has backed down to normal and

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Speaker 1: the number of young adults who sort of dropped out,

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Speaker 1: the participation of folks is getting is really moving back

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Speaker 1: to where we were in two thousand seven. So this idea,

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Speaker 1: I think, what we it's it's hard to know how

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Speaker 1: long it's going to take to pull out people who

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Speaker 1: were in these hidden pockets of unemployment. But I think

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Speaker 1: now you could say we're much closer to where we

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Speaker 1: need to be than we've been in the last couple

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Speaker 1: of years. So I don't know when this is going

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Speaker 1: to happen, but I would I would be shocked if

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Speaker 1: we don't see payroll is slowing down at least by summer. So, Jim,

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Speaker 1: there seems to be a d emphasis this time around

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Speaker 1: on the wage growth, with the idea that the FED

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Speaker 1: will be more tolerant of wages accelerating without having to

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Speaker 1: raise rates. Do you think that that's true? Yeah, I

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Speaker 1: think it's bigger stories than that. Actually, I mean, I

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Speaker 1: think I think they're learning that just because wages are

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Speaker 1: doing better doesn't mean that translates into inflation. Uh, businesses

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Speaker 1: are very profitable, so there's no real pressure on businesses

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Speaker 1: to be ramping a prices. In effect, the inflation news

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Speaker 1: have been very tame. I think what's making the FED

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Speaker 1: more patients is they believe that inflation is very cyclical.

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Speaker 1: They know that it tends to go on the high

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Speaker 1: side when the economy strong, and then fall off in recession.

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Speaker 1: I think they're trying to take a longer view about

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Speaker 1: inflation and try to target the average level of inflation

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Speaker 1: rather than at any moment in time. So I think

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Speaker 1: that's a that's a new idea to me, that's a

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Speaker 1: really innovative idea. That we'll hear more about the summer

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Speaker 1: in their conference, and I think it just makes them

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Speaker 1: more patient. That must be one of the reasons why

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Speaker 1: they're willing to sort of sit back and watch how

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Speaker 1: things play out. That said, for corporate profits, certainly higher

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Speaker 1: wages means lower margins and that could potentially weigh on

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Speaker 1: equity valuations. Do you expect us to start to see

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Speaker 1: a greater degree of wage inflation in this report and

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Speaker 1: going forward? You know, we're already seeing a pickup. I

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Speaker 1: think it's just returned to normal three and a half

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Speaker 1: percent three or three and a half percent wage growth.

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Speaker 1: In my book, there is normal diff inflation is running

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Speaker 1: two percent um. I don't think there's no sign yet

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Speaker 1: that this is putting pressure on wages, and I think

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Speaker 1: we're living in a different era. Frankly, I don't think

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Speaker 1: business is are going to be forced to raise wages

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Speaker 1: to the point where they become less competitive. I think

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Speaker 1: they're constrained also by the competitive markets they're living in.

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Speaker 1: So I think it's going to work a little differently

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Speaker 1: than what we all grew up with, that that it's

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Speaker 1: not wages aren't going to be driving inflation. It's going

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Speaker 1: to be more of the strength of global demand and

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Speaker 1: technology and things like that that are going on that

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Speaker 1: are constraining inflation. We still haven't really got our hands

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Speaker 1: around why inflation has become so muted when the economy

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Speaker 1: is doing so well. Jim, it's really hot to reconcile,

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Speaker 1: really hot to reconcile the conversation we're having right now

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Speaker 1: about the strength of the labor market with some of

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Speaker 1: the forecasts for a recession, as some of those recession

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Speaker 1: calls are quite near term as well, reconcile those two

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Speaker 1: things for me if you can, Jim, can you at home? Yeah? No,

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Speaker 1: I don't think you can reconcile them. I think I

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Speaker 1: think what you're hearing um when you have when you

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Speaker 1: listen to people talk about recession, they can't tell you

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Speaker 1: what's going on right now that might be a red

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Speaker 1: makes them think this. What they really refer two is

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Speaker 1: that you should look at our history books. What people

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Speaker 1: have noticed is that when we get back to full employment,

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Speaker 1: we just never stayed there more than a year or two. Jimmy,

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Speaker 1: that's the sole reason why this conversation is coming up.

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Speaker 1: And frankly, I mean, you've got to respect history. But frankly,

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Speaker 1: I don't think there's anything that any of us economists

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Speaker 1: see on the inflation side or on the financial balances

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Speaker 1: that should make us be talking about recession. It's really

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Speaker 1: just based on this history that somehow, for some reason,

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Speaker 1: we just never seem to stay at full employment. I

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Speaker 1: think that's a pretty weak argument myself, and I look

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Speaker 1: around the economy. I think we're all struggling to understand

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Speaker 1: tame inflation, and the financial system seems very balanced, the

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Speaker 1: banking system is very strong. Um, I don't think there's

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Speaker 1: anything that you can really point to that tells you

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Speaker 1: this is really kind of unprecedent. This has the potential

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Speaker 1: to cause a recession. So I think we're I think

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Speaker 1: people are slowly beginning to ignore this conversation. Jim Glassman,

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Speaker 1: JP Morgan Shase, Commercial Banking Head Economists. We can catch

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Speaker 1: up with Mike Zanta now mkmpan as chief economist and

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Speaker 1: macro strategist. You've had a couple of minutes, Mike to

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Speaker 1: have a look at the data. Your first rate place. Yes, absolutely, John,

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Speaker 1: So you know it's a decent number, but as Jim said,

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Speaker 1: bounce back from the prior month, which was a big disappointment.

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Speaker 1: What I like to do here is to take a

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Speaker 1: three month moving average because as you know, the standard

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Speaker 1: deviation in these monthly figures is too big to dry

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Speaker 1: sweeping conclusions from. And if we do that, we still

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Speaker 1: see about a hundred and eighty thousands. So that's good.

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Speaker 1: You know, that does suggest some cooling, but that's what

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Speaker 1: the Fed intended, right. They didn't raise rates and reduce

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Speaker 1: the balance sheet for most of the last two years

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Speaker 1: to boost the economy. They're trying to restrain it. If

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Speaker 1: they have the restraint they want, then you know, no

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Speaker 1: more FED rate hikes and and we can debate you know,

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Speaker 1: potential easing. But you know, I think this is this

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Speaker 1: is right in line with an economy moving to trend. So, Mike,

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Speaker 1: every analyst that we spoke to ahead of this number,

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Speaker 1: so that it's all about the participation rate, it's all

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Speaker 1: about the headline jobless number. I would argue that the

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Speaker 1: market reaction shows that's not the case. That actually still

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Speaker 1: it's about the wage growth, which was disappointing. The headline

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Speaker 1: number beat the actual wage growth disappointed, and you've got

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Speaker 1: a bid for bonds. Right, So yeah, that's a good point. Um.

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Speaker 1: You know, the wage growth number coming in a little

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Speaker 1: cool with a with a pretty strong headline figure tells you,

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Speaker 1: I mean, that's about as good as it gets for

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Speaker 1: the market, right, because job growth is strong, so we're

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Speaker 1: still going to have income generation. Yet you know, you

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Speaker 1: don't have this light flashing red on the inflationary pressure. Right.

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Speaker 1: If the wages are still modest or you know, still

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Speaker 1: in line with the underlying productivity growth rate and the

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Speaker 1: FEDS inflation target, then it doesn't look like there's any

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Speaker 1: really any evidence of overheating. And so this is what

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Speaker 1: the market on solid job growth but you know, no

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Speaker 1: evidence of an inflationary problem. So this is a goldilocks report.

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Speaker 1: Now it's a goldilocks report. Do we have any sense

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Speaker 1: of the participation rate and who is coming back into

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Speaker 1: the market at this point because we were speaking earlier

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Speaker 1: with Jim Glassman and he was saying most of the

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Speaker 1: people who wanted a job and who are employable already

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Speaker 1: are employed. So this is on the peripectly, this is

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Speaker 1: sort of raises some questions about who's left and what

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Speaker 1: it's taking to bring them back in what's your sense, right, Well,

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Speaker 1: what's interesting to me is that the prime age participation

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Speaker 1: rate people twenty five to fifty four has been moving up.

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Speaker 1: So if we just look at the overall level of unemployment,

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Speaker 1: it's essentially been flat for a year really right around

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Speaker 1: you know, we were right at these levels three eight

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Speaker 1: percent last May, and so job growth is stronger than

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Speaker 1: what you'd get from working age population growth. Then that's

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Speaker 1: been fulfilled by a rising prime age participation and rate,

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Speaker 1: which is really good news. And these are folks that

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Speaker 1: were not counted because they had not been in the

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Speaker 1: you know, count it as in the labor force. So

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Speaker 1: in the feeling has been that either through disability or

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Speaker 1: opioid addiction, um, you know, that they weren't going to

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Speaker 1: be able to come back. But they're coming back, and

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Speaker 1: that's that's a good story. One big question that I've

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Speaker 1: bandied around with a number of people is how does

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Speaker 1: this job's number account for people working multiple jobs? Well,

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Speaker 1: you know there are some statistics on that. Um, you know,

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Speaker 1: I think I did it write up a while ago.

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Speaker 1: I can send you guys but you know, there's been

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Speaker 1: this focus on the so called gig economy, that's where

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Speaker 1: it was going to work. But yeah, it's not. It's

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Speaker 1: interesting because it's something that you know, we see every

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Speaker 1: day when we use uber and so on and so forth,

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Speaker 1: but it's not really in the statistics. You know, at

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Speaker 1: least people working part time for economic reasons. That number

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Speaker 1: has been essentially plunging ever since the labor market recovery started.

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Speaker 1: So could be one of those situations where what seems obvious,

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Speaker 1: you know, maybe within the context of a you know,

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Speaker 1: the quite large labor market really just isn't as significant

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Speaker 1: as it seems. So I want to go back to

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Speaker 1: wages for a second and sort of what it says

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Speaker 1: that we're not seeing inflation accelerate even to the degree

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Speaker 1: that many people were expecting, which still wasn't that much,

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Speaker 1: Philip Scarf dead, is that basically the big takeaway again

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Speaker 1: and again that we're beating over the head with every

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Speaker 1: single job support since the financial crisis. Yeah, it's really

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Speaker 1: for the Fed, you know, that's sort of their base

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Speaker 1: model of inflation, and it's certainly been a moving target,

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Speaker 1: right they seem to just adjust there, you know, their

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Speaker 1: estimate for the sustainable unemployment rate down this based on

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Speaker 1: what's been happening with you know, very little inflation pressure.

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Speaker 1: So it's a it's a problematic model, um, you know.

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Speaker 1: And we also have this issue. We just were talking

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Speaker 1: about prime age participation moving up, and so you know,

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Speaker 1: if you're looking at it just too narrow of measure

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Speaker 1: of labor market slack, then you can, you know, you

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Speaker 1: can also come to the wrong conclusion about spare capacity,

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Speaker 1: even within the context of the Phillips curve model. So

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Speaker 1: for example, the prime age employment to population ratio is

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Speaker 1: just finally just finally getting back to the you know,

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Speaker 1: the two decade pre crisis median level. But we're still

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Speaker 1: you know, unless i'm you know, I haven't been able

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Speaker 1: to appraise all the numbers so far today. But you know,

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Speaker 1: at least recently, we were not back to the high

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Speaker 1: scene um during the last cycle, are certainly the cycle

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Speaker 1: before it. So if there's a bit more slack out

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Speaker 1: there than what most people believe just looking at the

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Speaker 1: unemployment rate, then that could be one reason that the

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Speaker 1: so called Phillips curve isn't isn't working. Another reason is

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Speaker 1: that it just might not be a very good model

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Speaker 1: of the inflation process. So so yeah, we don't have

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Speaker 1: we don't have much inflationary pressure to to write home about.

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Speaker 1: It's one of the reasons the FED paused right the

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Speaker 1: last press FED press conference, Paul Powell was talking about

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Speaker 1: the idea that you don't want a situation where inflation

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Speaker 1: and expectations permanently ratch lower. And so there's just this

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Speaker 1: ongoing expectation that the FED you know, continues to undershoot

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Speaker 1: or fail on its inflation goal. Yeah, just want'll take

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Speaker 1: a look at markets. The TAO in particular, is extending

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Speaker 1: gains following this report. Green across the screen on the

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Speaker 1: equity side, on the bond side, also a bit of

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Speaker 1: a bid. Just real quick up, Mike Darta of mk

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Speaker 1: M Partners. Is bad news good news? Or is tupid

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Speaker 1: news good news? Again? You know, I think it's a

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Speaker 1: situation where, you know, the Goldilock scenario is good news, right.

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Speaker 1: I mean, I don't think risk markets are going to

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Speaker 1: like the idea of a potential recession and the business cycle.

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Speaker 1: We saw that obviously play out late last year. At

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Speaker 1: the same time, you know, the data is so strong

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Speaker 1: that it's going to be pushing the fed into continual tightening,

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Speaker 1: and then we have to worry about the FED over

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Speaker 1: doing it. That may not be so good for risk

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Speaker 1: markets either. This is about perfect right, and the yield,

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Speaker 1: the yield curve is sort of disinverted on its own

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Speaker 1: and defends just sitting there watching the data, and you know,

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Speaker 1: the data is in line with the modest growth economy

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Speaker 1: with not a lot of inflationary pressure. It's about as

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Speaker 1: good as it gets for equity markets, about as good

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Speaker 1: as it gets. Michael darda chief economist, who market strategist

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Speaker 1: and partner at m k M Partners, for the Trump

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Speaker 1: Administration's views on the job report now in very place

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Speaker 1: to say. We joined on Bloomberg CV and on radio

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Speaker 1: by Larry Cudlow, National Economic Council Director. Larry always great

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Speaker 1: to catch up with your body. Let's just talk about

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Speaker 1: the payrolls report to begin with. It looks solid, it

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Speaker 1: looks like a bounce back. You first read, yeah, it's

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Speaker 1: a good number. It's a very good number. One plus

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Speaker 1: when you put the revisions and you get up to

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Speaker 1: two hundred eleven. I like that number a lot. I

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Speaker 1: think the wages are still well above three hours worked,

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Speaker 1: are rising and you know. Even away from that, I

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Speaker 1: just want to note it's been a tough you know,

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Speaker 1: between government shutdowns and lousy winter seasonal adjustments. But it

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Speaker 1: looks like the economy is really coming back now and

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Speaker 1: we'll be better than two P and Q one at

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Speaker 1: least that's our hope, and then I think you'll get

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Speaker 1: back towards three percent for the rest of the year.

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Speaker 1: What's interesting here, last point on these numbers. This is

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Speaker 1: very similar to what happened last year. You had a

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Speaker 1: week first quarter. We've had week first quarters. I don't know,

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Speaker 1: bad seasons three years, but then the economy snap back.

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Speaker 1: We've got three percent growth. It's a repeat and I

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Speaker 1: like it very much. And I think President's Trump's rebuilding

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Speaker 1: of the economy from the supply side with tax cuts

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Speaker 1: and deregulation and trade reform. I think we're still very

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Speaker 1: much in place. Labor market looks solid, lottery. That's your view,

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Speaker 1: you expect to see three percent GDP growth. Some people

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Speaker 1: do share that very optimistic view. This is what I

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Speaker 1: struggle with. How do you reconcile that very very constructive

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Speaker 1: assessment of the US economy with coals for the FETE

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Speaker 1: to cut rates Larry, how do those two things work well?

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Speaker 1: I think the issue on that is a precautionary issue.

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Speaker 1: A couple of points here quickly. Number one, we are

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Speaker 1: facing a worldwide slowdown, you know, recession. Arguably, I don't

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Speaker 1: want to make that call, but Europe is not doing well.

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Speaker 1: Germany itself may be in recession. That troubles us. Okay,

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Speaker 1: that's point number one. Point number two, There is no inflation.

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Speaker 1: There is no inflation. I mean we're talking about maybe

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Speaker 1: one and a half percent max. And productivity rising at

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Speaker 1: one point eight percent last year. So wages are rising

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Speaker 1: at whatever three point two percent that's being covered by

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Speaker 1: productivity without inflation. Why raise interest rates? And look, we

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Speaker 1: just don't want any threats to this rebuilding, reviving, growing

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Speaker 1: economy and um looking at the yield curve and other

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Speaker 1: market based measures. I think on their time, the fet

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Speaker 1: is independent. Not emphasize that if that is independent, but

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Speaker 1: the President has said and I concur that I think

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Speaker 1: that we could do at some point with some reductions

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Speaker 1: in the FEDS target rate letry. The Federal Reserve is

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Speaker 1: operationally independent. That's a matter of fact. You're allowed, by

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Speaker 1: a matter of process to nominate who you like to

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Speaker 1: the Federal Reserve. Your administration will do it. Previous administrations

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Speaker 1: have done it as well. No issue with that whatsoever.

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Speaker 1: But when you call for rate cuts, can you see

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Speaker 1: how that puts the Federal Reserve between a rock and

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Speaker 1: hard place. Well, I don't know. You know, it's a

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Speaker 1: free country. President has a lot of well informed opinions.

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Speaker 1: As a successful businessman and investor, I've been covering this

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Speaker 1: bid for a long time. We're not pressuring, We're not

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Speaker 1: going after their independence. We have our point of view.

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Speaker 1: I think a lot of people, by the way, the

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Speaker 1: markets have a point of view. The markets, as you

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Speaker 1: probably know better than I do, have actually been starting

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Speaker 1: to price in a federal funds rate reduction. So that's

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Speaker 1: all it is. We're all entitled to our opinions nowadays.

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Speaker 1: It's a great country. The larry where your opinion becomes original,

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Speaker 1: and it is original, is because the rate market is

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Speaker 1: predicting a forecasting price in a rate cut, because it's

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Speaker 1: simultaneously forecasting the rapid deceleration in US growths. Most of

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Speaker 1: the people that I find that agree with you that

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Speaker 1: the Federal Reserve is gonna cut twice in the next year,

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Speaker 1: they're also forecasting much much like a GDP growth in

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Speaker 1: your three percent. That's where it becomes original. And I

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Speaker 1: think the optics really really matter here. When I ask

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Speaker 1: guests from the street whether they think the perception, not

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Speaker 1: your intent, the perception the optics of federal reserve independence,

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Speaker 1: whether that is being compromised, the answer I keep getting

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Speaker 1: is yes, Larry, we're treading to fine line here. Well, look,

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Speaker 1: I respect people may disagree with this, but let me

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Speaker 1: make this point. Let's go to a broader measure, not

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Speaker 1: real GDP, but nominal GDP, which is related to monetary policy.

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Speaker 1: So nominal GDP is real output plus inflation. I think

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Speaker 1: overall nominal will slow, but the slowing is not gonna

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Speaker 1: be in real It's not gonna be output. It's not

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Speaker 1: gonna be business investment or jobs. The slowing in that

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Speaker 1: measure is from lower inflation. And I think that's a

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Speaker 1: big surprise, and I think that's something everybody has to consider.

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Speaker 1: So I as I look at the Eel curve and

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Speaker 1: I look at other measures of the dollar and Golden

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Speaker 1: commodity index, is what I'm seeing, you know, take the

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Speaker 1: tip spreads. I'm seeing a reduction in the expected rate

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Speaker 1: of inflation, and I'm seeing a reduction in the actual

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Speaker 1: rate of inflation. It's disinflation, if you will. And therefore,

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Speaker 1: I think in that sense, we have room to lower

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Speaker 1: the FED target rate at their you know, on their speed,

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Speaker 1: on their dime. I'm not pressuring and going up against

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Speaker 1: the independence. I just think, you know, let's go back.

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Speaker 1: I'm not exactly going to break news here, but a

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Speaker 1: long held Cuddlow view. More people working and prospering is

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Speaker 1: not inflationary. And in this particular business cycle which we

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Speaker 1: have started as president rebuilds the economy, this is supply

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Speaker 1: side expansion. These are lower tax rates and regulations right,

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Speaker 1: better after tax returns for investment and hence productivity and

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Speaker 1: hence labor force growth. So you see what I'm saying.

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Speaker 1: We're pushing the supply curve out that actually lowers inflation,

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Speaker 1: and I think the authorities have to keep that in

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Speaker 1: mind as they go about their business to set interest

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Speaker 1: rates and the balance sheet. I want to raise that point.

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Speaker 1: Uh be great. I think to freeze the balance sheet

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Speaker 1: and then stop the reduction of the balance sheet. What's

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Speaker 1: the appropriate science of the balance sheet, Larry H. I

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Speaker 1: don't know, and you know, that's a very difficult question.

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Speaker 1: I don't know what I suspect though, is we don't

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Speaker 1: want measures that will restrain the economy or financial market conditions. Okay,

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Speaker 1: we don't want that, so I would tread very cautiously.

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Speaker 1: And I think in this new environment, with the supply

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Speaker 1: side growth take off and rebuilding an economy, I think

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Speaker 1: some people have to rethink some of their assumptions. And

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Speaker 1: by the way, by the way, I'm not sure the

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Speaker 1: FED really has much of a disagreement with the sorts

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Speaker 1: of things I'm talking about. I think we're reaching common

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Speaker 1: ground here, Larry. I agree with you. I mean, I've

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Speaker 1: got rid of a blank rock next to me who

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Speaker 1: also thinks that wage growth won't lead to consumer price pressures.

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Speaker 1: I don't think what you're saying is outlandish, but I

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Speaker 1: think your assessment of Federals serve policy is a little

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Speaker 1: bit difficult. The FED funds rate on a real basis

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Speaker 1: is barely positive. Most people will conclude that this isn't

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Speaker 1: time monetary policy at the moment, and people are trying

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Speaker 1: to figure out the message that you're trying to send

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Speaker 1: to the f O m C. If you nominate people

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Speaker 1: like Steve and more and Herman Kaine, what is the

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Speaker 1: message you're sending to the FED if you follow through

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Speaker 1: on those nominations. Well, look, these are very capable of people,

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Speaker 1: and I think what you have here is a philosophy

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Speaker 1: that strong growth is not inflationary, especially when it comes

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Speaker 1: from the supply side of the economy, which is where

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Speaker 1: it's coming from, you know, as you look at the

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Speaker 1: jobs and the hours work and the business investment. So

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Speaker 1: these are people that would like a steady dollar and

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Speaker 1: they don't believe that growth causes inflation, and therefore they

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Speaker 1: will reflect those views to balance perhaps some of the

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Speaker 1: other views on the Federal Reserved. Again, I want to

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Speaker 1: indicate that I don't think the FED right now today

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Speaker 1: is very far away from these points of you. Yeah.

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Speaker 1: I mean, I've watched the chairman speak, I've watched the

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Speaker 1: vice chairman, Richard Claren to speak. Uh, I'm not sure

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Speaker 1: we have a big disagreement here. Maybe one of timing.

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Speaker 1: I don't know. I don't want to get into that

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Speaker 1: because the FAT is independent. But for heaven's sakes, strong

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Speaker 1: growth is not inflationary. More people working can't be inflationary.

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Speaker 1: And that's a point of view that I've held for

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Speaker 1: three or four decades, as you probably know, and watch

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Speaker 1: the market indicators, and I think that's what those two

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Speaker 1: candidates that haven't been vetted yet, but those two candidates

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Speaker 1: believe that, and I think that's a good balance to

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Speaker 1: the fete. So Larry, you and I can have a

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Speaker 1: back and forth on this in the future. Now, you

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Speaker 1: want a little bit of time to talk about the

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Speaker 1: trade story, and I want to provide that for you.

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Speaker 1: It's felt like the end game for a while. Now

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Speaker 1: we have this March first self and post deadline, it's

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Speaker 1: come and gone. Just exactly what have the Chinese done

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Speaker 1: to secure the extra time from the United States. What

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Speaker 1: are the concessions that you've secured? You know? Uh, point

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Speaker 1: of fact, we never had a deadline. Just want to

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Speaker 1: make that point, We never had a deadline. What we

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Speaker 1: need This came out yesterday in the Oval Office and

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Speaker 1: it's been well reported. We need a great trade deal

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Speaker 1: for the United States, one which hopefully works for China.

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Speaker 1: We need a great trade deal. And then when we

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Speaker 1: get that deal, and we've come a long way, as

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Speaker 1: President characterized yesterday, the talks this week which are still

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Speaker 1: going on, they're still talking this morning. By the way,

428
00:23:20,840 --> 00:23:23,879
Speaker 1: these are productive talks. These are talks that are you know,

429
00:23:24,000 --> 00:23:26,520
Speaker 1: moving the ball in the right direction. We're making hay

430
00:23:26,600 --> 00:23:32,400
Speaker 1: on this. President also indicated correctly that we have been

431
00:23:32,480 --> 00:23:36,760
Speaker 1: satisfied on a number of issues. We've come further than

432
00:23:36,840 --> 00:23:39,840
Speaker 1: we thought we would get and um I salute my

433
00:23:40,200 --> 00:23:45,439
Speaker 1: Chinese counterparts as well for doing this. So we're moving

434
00:23:45,480 --> 00:23:47,960
Speaker 1: towards it. We're not done yet. We have some issues

435
00:23:48,040 --> 00:23:50,760
Speaker 1: to get through. It's not so much timing, it's making

436
00:23:50,800 --> 00:23:53,199
Speaker 1: a good deal. That's the key point. Well, let's talk

437
00:23:53,200 --> 00:23:55,760
Speaker 1: about the sticking points, the fight of the existing tariffs

438
00:23:55,760 --> 00:23:58,680
Speaker 1: and the enforcement mechanism. You said we might progress have

439
00:23:58,800 --> 00:24:01,840
Speaker 1: we might progress on those. Choose and define how, Larry,

440
00:24:01,840 --> 00:24:05,919
Speaker 1: if you can. I don't want to get into specifics.

441
00:24:05,920 --> 00:24:09,240
Speaker 1: It's not my role right now, particularly because the negotiations

442
00:24:09,240 --> 00:24:12,639
Speaker 1: are ongoing, but I will just say this is the

443
00:24:12,680 --> 00:24:18,760
Speaker 1: broadest deepest discussions in US Chinese trade relations history. Uh.

444
00:24:18,840 --> 00:24:21,320
Speaker 1: Somebody said in the meeting yesterday is it's a forty

445
00:24:21,400 --> 00:24:23,800
Speaker 1: year history. We have never come this far, We've never

446
00:24:23,840 --> 00:24:27,199
Speaker 1: done that much. We've never had these conversations before. That

447
00:24:27,359 --> 00:24:30,880
Speaker 1: is a very good thing. Now we are making headway

448
00:24:30,920 --> 00:24:33,840
Speaker 1: in a lot of areas, and you know that includes

449
00:24:33,960 --> 00:24:41,720
Speaker 1: enforcement that includes I P theft, that includes force, technology, transfers, ownership, cyberspace, commodities,

450
00:24:41,760 --> 00:24:43,800
Speaker 1: and all the rest of it. I'm not here to

451
00:24:43,880 --> 00:24:46,920
Speaker 1: provide details. Uh, those are of course in the middle

452
00:24:46,960 --> 00:24:50,480
Speaker 1: of the negotiations that are ongoing. But we've come further

453
00:24:50,560 --> 00:24:53,320
Speaker 1: and farther than ever before. It's the point the President made.

454
00:24:53,359 --> 00:24:55,920
Speaker 1: I think it's a very important point. The talks around coming, Larry,

455
00:24:55,960 --> 00:24:59,399
Speaker 1: are they coming through the weekend? I don't think so.

456
00:24:59,480 --> 00:25:01,399
Speaker 1: I've not heard that. Just let me say I have

457
00:25:01,520 --> 00:25:04,760
Speaker 1: not heard that. But in any case, I mean I

458
00:25:04,840 --> 00:25:08,560
Speaker 1: think Mr Vice premierly you Hey has to get back

459
00:25:08,560 --> 00:25:11,879
Speaker 1: to Beijing. Uh, you can expect is the next step

460
00:25:12,000 --> 00:25:15,800
Speaker 1: after today's talks are completed, and you know, it's quite

461
00:25:15,840 --> 00:25:20,000
Speaker 1: possible we'll make even additional headway today. As regarding next

462
00:25:20,040 --> 00:25:23,840
Speaker 1: week the principles, the top level on both teams will

463
00:25:23,880 --> 00:25:28,440
Speaker 1: be in touch through teleconferencing and the professional staff will

464
00:25:28,480 --> 00:25:31,200
Speaker 1: be hard at it. There's no let up here. This

465
00:25:31,240 --> 00:25:34,080
Speaker 1: is an ongoing process. So letty just as a final question,

466
00:25:34,080 --> 00:25:36,440
Speaker 1: there will be some people confused watching this because they

467
00:25:36,440 --> 00:25:39,240
Speaker 1: thought there was a March first deadline that was somewhat

468
00:25:39,280 --> 00:25:44,359
Speaker 1: self imposed. Then was what pushed aside looking forward expectations

469
00:25:44,440 --> 00:25:47,359
Speaker 1: for me? When is it realistic that these talks conclude

470
00:25:47,600 --> 00:25:50,600
Speaker 1: that the two leaders President Trump, President She sit around

471
00:25:50,600 --> 00:25:55,480
Speaker 1: the table together and sign a deal. I've tried to

472
00:25:55,560 --> 00:25:59,320
Speaker 1: tell your folks that everybody else. We never had a deadline.

473
00:26:01,160 --> 00:26:05,960
Speaker 1: You can't cancel a meeting that wasn't scheduled. But look um,

474
00:26:06,040 --> 00:26:09,479
Speaker 1: the prospects for deal are good, and President said that

475
00:26:09,560 --> 00:26:13,240
Speaker 1: yesterdays Premierly o Hey said the same thing. That's terribly

476
00:26:13,359 --> 00:26:17,240
Speaker 1: terry employing. The trick here is to get a good

477
00:26:17,640 --> 00:26:22,760
Speaker 1: US China trade deal that covers the key areas and

478
00:26:22,800 --> 00:26:26,719
Speaker 1: that is enforceable. That is a trick once we get

479
00:26:27,240 --> 00:26:30,240
Speaker 1: If we get I should say, if we get a

480
00:26:30,280 --> 00:26:35,439
Speaker 1: good President characterizes as a great trade deal, then the

481
00:26:35,640 --> 00:26:39,119
Speaker 1: two leaders will hold some kind of summit and to

482
00:26:39,200 --> 00:26:43,000
Speaker 1: sign it. But the key point is the substance, and

483
00:26:43,040 --> 00:26:46,440
Speaker 1: we're working on the substance and we're getting closer. We're

484
00:26:46,480 --> 00:26:49,760
Speaker 1: making headway. It's very productive. I don't know have many

485
00:26:49,760 --> 00:26:53,480
Speaker 1: ways to say that. It's never been timetable driven. And

486
00:26:53,520 --> 00:26:54,919
Speaker 1: we wish you the best of a lot, Larry. We

487
00:26:54,920 --> 00:27:09,440
Speaker 1: will take you thank you very much joining us now

488
00:27:09,720 --> 00:27:11,800
Speaker 1: to talk a little bit about the jobs numbers as

489
00:27:11,800 --> 00:27:14,200
Speaker 1: well as what we just heard from the White House's

490
00:27:14,240 --> 00:27:18,720
Speaker 1: Chief Economic council is Tiffany Wilding of PIMCO. Tiffany Wilding,

491
00:27:19,240 --> 00:27:23,479
Speaker 1: chief US economist. What was your take if you were

492
00:27:23,480 --> 00:27:26,520
Speaker 1: listening in on the Cudlow interview from what he said,

493
00:27:26,640 --> 00:27:30,280
Speaker 1: was there anything that really stood out to you? Yeah? Well,

494
00:27:30,280 --> 00:27:32,240
Speaker 1: thanks for having me. You know, so, I think that

495
00:27:32,440 --> 00:27:35,119
Speaker 1: I think it's a policy debate right now. Is with

496
00:27:35,160 --> 00:27:37,720
Speaker 1: respect of monetary policy as well as fiscal is really

497
00:27:37,800 --> 00:27:40,639
Speaker 1: the extent to which you know, running the economy a

498
00:27:40,640 --> 00:27:43,080
Speaker 1: little bit hot can engender some of the sort of

499
00:27:43,119 --> 00:27:46,959
Speaker 1: supply side repair and improvement after we saw you know,

500
00:27:47,280 --> 00:27:50,360
Speaker 1: you know, incredible damage after the two tho eight financial crisis.

501
00:27:50,720 --> 00:27:51,800
Speaker 1: You know, when I think if you kind of look

502
00:27:51,840 --> 00:27:54,320
Speaker 1: at the economy and kind of survey the different areas

503
00:27:54,440 --> 00:27:57,919
Speaker 1: where we've seen the most uh, sort of supply improvement

504
00:27:58,160 --> 00:27:59,920
Speaker 1: from from running things a little bit hot, as on

505
00:28:00,000 --> 00:28:03,800
Speaker 1: a labor market side. Um so, we've seen continued improvements

506
00:28:03,800 --> 00:28:07,560
Speaker 1: in participation rates, in particular for prime age people, prime

507
00:28:07,600 --> 00:28:11,280
Speaker 1: age women. Participation rates have increased, you know, quite notably

508
00:28:11,320 --> 00:28:13,600
Speaker 1: and I think there's been even you know, an encouraging

509
00:28:14,000 --> 00:28:17,359
Speaker 1: you know, uplift in in prime age mail participation, and

510
00:28:17,400 --> 00:28:20,439
Speaker 1: that's after some what look to be secular declines, you know.

511
00:28:20,480 --> 00:28:22,280
Speaker 1: So I think that that you know, that's that's obviously

512
00:28:22,400 --> 00:28:25,359
Speaker 1: very encouraging for the you know, the longer run growth prospects.

513
00:28:25,400 --> 00:28:27,280
Speaker 1: But if you look at you know, the other sectors

514
00:28:27,280 --> 00:28:30,280
Speaker 1: of the economy, productivity and productive capacity, I think maybe

515
00:28:30,280 --> 00:28:32,440
Speaker 1: there's a little bit of less evidence. You know. Now

516
00:28:32,480 --> 00:28:34,359
Speaker 1: it's kind of the I think early stages, and we

517
00:28:34,359 --> 00:28:37,200
Speaker 1: need to continue to watch this. It will happen over time. Um.

518
00:28:37,200 --> 00:28:40,200
Speaker 1: But one thing to watch I think is UM is

519
00:28:40,520 --> 00:28:43,160
Speaker 1: the I t UH in tech related investment R and

520
00:28:43,240 --> 00:28:46,200
Speaker 1: D in the past that's tended to lead gains in

521
00:28:46,320 --> 00:28:49,920
Speaker 1: productivity sort of increases in trend productivity. So that's something

522
00:28:49,920 --> 00:28:51,640
Speaker 1: that certainly will be watching. And then the one last

523
00:28:51,640 --> 00:28:53,160
Speaker 1: point that I would just want to make is, you know,

524
00:28:53,200 --> 00:28:55,640
Speaker 1: the FED. You know, I think I agree that inflation

525
00:28:55,680 --> 00:28:59,640
Speaker 1: pressures are our our modest um and that allows the

526
00:28:59,680 --> 00:29:02,440
Speaker 1: FED to be patient and sort of potentially allow these

527
00:29:02,560 --> 00:29:05,120
Speaker 1: um improvements to run, you know, but you also the

528
00:29:05,120 --> 00:29:08,200
Speaker 1: FED also have to weigh this against financial stability risks, um.

529
00:29:08,240 --> 00:29:10,200
Speaker 1: And you know, while we would also say that financial

530
00:29:10,200 --> 00:29:12,080
Speaker 1: stability risks are low, you know, this is something that

531
00:29:12,160 --> 00:29:14,480
Speaker 1: you know, we also have to monitor in the context

532
00:29:14,480 --> 00:29:18,120
Speaker 1: of lower rates and easier financial conditions. So, Tiffany, the

533
00:29:18,160 --> 00:29:20,880
Speaker 1: FED affears to be quite comfortable sitting on the sidelines.

534
00:29:20,920 --> 00:29:22,680
Speaker 1: And I think what we just heard from Larry Cutlow

535
00:29:22,800 --> 00:29:26,360
Speaker 1: speaking with John Farrow is that the administration is comfortable

536
00:29:26,360 --> 00:29:28,160
Speaker 1: with the FED on the sidelines, if not maybe even

537
00:29:28,200 --> 00:29:31,840
Speaker 1: cutting rates. Um. Was there anything the jobs report today

538
00:29:32,000 --> 00:29:36,760
Speaker 1: that is likely to change that outlook in your opinion? Um? No,

539
00:29:36,960 --> 00:29:38,840
Speaker 1: I I didn't think so. I mean, I thought the

540
00:29:39,120 --> 00:29:41,880
Speaker 1: report overall was was, you know, relatively in line with

541
00:29:41,960 --> 00:29:44,680
Speaker 1: kind of our expectations least underlying details and the sense

542
00:29:44,720 --> 00:29:48,240
Speaker 1: that you know, we are looking for some deceleration in

543
00:29:48,360 --> 00:29:51,560
Speaker 1: growth over the next year. You know, our forecast is

544
00:29:51,560 --> 00:29:53,680
Speaker 1: is two percent in an end of twenty nineteen. So

545
00:29:53,720 --> 00:29:57,000
Speaker 1: that's a deceleration and that's really being led to some

546
00:29:57,120 --> 00:30:00,320
Speaker 1: extent by by the good sector of the US economy

547
00:30:00,360 --> 00:30:03,920
Speaker 1: and manufacturing, which is you know, has important links to

548
00:30:03,960 --> 00:30:06,720
Speaker 1: the global economy, which is slowing. So there's some spillover

549
00:30:06,800 --> 00:30:09,560
Speaker 1: effects that will have an impact there. And similarly, we're

550
00:30:09,560 --> 00:30:12,600
Speaker 1: seeing some slowing in the jobs in the jobs data

551
00:30:12,680 --> 00:30:15,560
Speaker 1: on the manufacturing and good side. Um, you know, so

552
00:30:15,720 --> 00:30:18,120
Speaker 1: that that sort of slowing was in line with our expectations.

553
00:30:18,240 --> 00:30:20,320
Speaker 1: But you know, on the other hand, you know, obviously

554
00:30:20,320 --> 00:30:23,280
Speaker 1: we've seen you know, wage we've seen some wage acceleration,

555
00:30:23,480 --> 00:30:27,240
Speaker 1: but it's largely following productivity gains. So we don't think

556
00:30:27,280 --> 00:30:29,840
Speaker 1: that that passes through to a large extent to really

557
00:30:29,880 --> 00:30:32,840
Speaker 1: accelerate consumer price inflation. You know, So this idea that

558
00:30:32,880 --> 00:30:34,920
Speaker 1: the Fed can remain on hold for a prolonged period

559
00:30:34,920 --> 00:30:36,600
Speaker 1: of time, you know, I don't I don't think really

560
00:30:36,720 --> 00:30:40,320
Speaker 1: changed given today's report. One thing that I'm really struck by,

561
00:30:40,360 --> 00:30:43,920
Speaker 1: and I feel like, perhaps is the unspoken headline of

562
00:30:43,960 --> 00:30:46,280
Speaker 1: this whole thing, is that this report comes out better

563
00:30:46,320 --> 00:30:50,200
Speaker 1: than expected. Headline number. Sure, wage growth is tepid. The

564
00:30:50,280 --> 00:30:53,440
Speaker 1: chance being priced into the market of a rate cut

565
00:30:53,520 --> 00:30:55,760
Speaker 1: starting at the beginning of next year by the Federal

566
00:30:55,760 --> 00:30:59,080
Speaker 1: Reserve has increased since this report, even though people are

567
00:30:59,080 --> 00:31:02,040
Speaker 1: saying that it indicates it's uh pretty good strength in

568
00:31:02,080 --> 00:31:05,520
Speaker 1: the US labor market. Economists are saying that bond traders

569
00:31:05,560 --> 00:31:08,080
Speaker 1: are too pessimistic, but bond traders have gotten it right

570
00:31:08,120 --> 00:31:11,239
Speaker 1: and economists have gotten it wrong more frequently. So what

571
00:31:11,520 --> 00:31:14,160
Speaker 1: is it that analysts are seeing right now that gives

572
00:31:14,200 --> 00:31:16,200
Speaker 1: them confidence that we're not going to see a downturn

573
00:31:16,240 --> 00:31:22,200
Speaker 1: and that it's premature to price in a FED rate cut? Um? Well,

574
00:31:22,240 --> 00:31:25,280
Speaker 1: so I think that what's in terms of premature to

575
00:31:25,400 --> 00:31:27,560
Speaker 1: price a rate cut? Um? You know. I think I

576
00:31:27,600 --> 00:31:29,840
Speaker 1: think one of the things is that traditionally when we

577
00:31:29,920 --> 00:31:32,400
Speaker 1: see rate cuts is it's usually because you see a

578
00:31:33,320 --> 00:31:36,680
Speaker 1: more pronounced downturn in the US economy, you know. And

579
00:31:36,680 --> 00:31:39,239
Speaker 1: although we think growth will decelerate next year, you know,

580
00:31:39,280 --> 00:31:41,800
Speaker 1: we we don't think that the probability of recession at

581
00:31:41,880 --> 00:31:44,560
Speaker 1: least over the next year or so, um, you know,

582
00:31:44,720 --> 00:31:47,280
Speaker 1: is materially high enough to build it into our kind

583
00:31:47,280 --> 00:31:50,480
Speaker 1: of basic case outlook. Of course, it's always a risk, um.

584
00:31:50,560 --> 00:31:51,960
Speaker 1: But but so I think that, you know, and the

585
00:31:52,000 --> 00:31:54,680
Speaker 1: reason why we don't think that recession is is you know,

586
00:31:55,200 --> 00:31:57,680
Speaker 1: appropriate for the base case outlook, is because you still have,

587
00:31:57,800 --> 00:32:01,040
Speaker 1: as others have said, the um the household sector is

588
00:32:01,040 --> 00:32:04,000
Speaker 1: is still pretty strong. You never really saw the leveraging

589
00:32:04,120 --> 00:32:07,160
Speaker 1: up in the household sector after the financial crisis, you know,

590
00:32:07,200 --> 00:32:09,800
Speaker 1: which can cause those deleveraging effects to really weigh on

591
00:32:09,840 --> 00:32:12,280
Speaker 1: growth and push the economy into a recession, you know.

592
00:32:12,280 --> 00:32:13,720
Speaker 1: On the other on the other side of that as well,

593
00:32:13,760 --> 00:32:16,360
Speaker 1: the banking sectors is much more more robust. So if

594
00:32:16,400 --> 00:32:19,640
Speaker 1: we do get you know, some additional slowing in global

595
00:32:19,720 --> 00:32:22,040
Speaker 1: growth that does spill over into the US market, we

596
00:32:22,040 --> 00:32:24,840
Speaker 1: think that would be relatively contained because the banks just

597
00:32:24,880 --> 00:32:28,160
Speaker 1: aren't going to be the type of contagion agent um

598
00:32:29,040 --> 00:32:31,800
Speaker 1: that that they were, you know, in the last financial crisis.

599
00:32:31,880 --> 00:32:33,560
Speaker 1: So those things make us pretty you know, still make

600
00:32:33,640 --> 00:32:36,560
Speaker 1: us pretty confident on the growth outlook for the US.

601
00:32:36,560 --> 00:32:39,000
Speaker 1: So just following up on that a little bit, Tiffany,

602
00:32:39,080 --> 00:32:42,280
Speaker 1: how concerned are you that the weak growth coming out

603
00:32:42,280 --> 00:32:45,520
Speaker 1: of the European Union and a slowing Chinese economy albeit

604
00:32:45,600 --> 00:32:48,920
Speaker 1: still growing, you know, mid single digits admittedly, how much

605
00:32:49,600 --> 00:32:51,959
Speaker 1: are you concerned that could weigh on the US economy

606
00:32:52,000 --> 00:32:55,240
Speaker 1: maybe in the back half of this year into next year. Yeah,

607
00:32:55,280 --> 00:32:57,280
Speaker 1: I mean, so we think that's ultimately going to be

608
00:32:57,320 --> 00:32:59,360
Speaker 1: a headwind for for the U S economy. I think

609
00:32:59,360 --> 00:33:02,520
Speaker 1: it's starting to be so, you know, in an export

610
00:33:02,600 --> 00:33:06,320
Speaker 1: growth to the to China, uh and and to to Europe,

611
00:33:06,560 --> 00:33:10,360
Speaker 1: we started to see that decelerate. In addition, there tends

612
00:33:10,400 --> 00:33:14,280
Speaker 1: to be UM, you know, a relationship between ups and

613
00:33:14,360 --> 00:33:17,800
Speaker 1: downs in US investment activity with the sort of ups

614
00:33:17,840 --> 00:33:21,120
Speaker 1: and downs in Chinese growth UM, and that relationship, you know,

615
00:33:21,160 --> 00:33:23,000
Speaker 1: that kind of happens with the lags. So you see

616
00:33:23,000 --> 00:33:27,400
Speaker 1: those spillover effects of deceleration in China in particular. UM.

617
00:33:27,720 --> 00:33:30,280
Speaker 1: You see that I think starting to happen now with

618
00:33:30,360 --> 00:33:33,800
Speaker 1: some deceleration and equipment investment, heavy equipment investment and things

619
00:33:33,840 --> 00:33:35,880
Speaker 1: like that in the US. And I think that continues

620
00:33:36,600 --> 00:33:38,440
Speaker 1: throughout the better part of this year, you know. And

621
00:33:38,520 --> 00:33:41,440
Speaker 1: I think the questions we've seen more recent stabilization or

622
00:33:41,520 --> 00:33:44,960
Speaker 1: policies from from the Chinese government to stabilize their own

623
00:33:44,960 --> 00:33:48,640
Speaker 1: economy fiscal as well as some credit easing policies, UM.

624
00:33:48,680 --> 00:33:50,320
Speaker 1: You know, and I think the question of you know,

625
00:33:50,360 --> 00:33:52,320
Speaker 1: does that take hold kind of in the latter part

626
00:33:52,320 --> 00:33:54,520
Speaker 1: of that this year, you know, and does that sort

627
00:33:54,520 --> 00:33:57,320
Speaker 1: of help support the global economy? You know, No, we don't.

628
00:33:57,360 --> 00:33:59,920
Speaker 1: We don't think that you get another synchronized recovery like

629
00:34:00,000 --> 00:34:02,160
Speaker 1: you do Inen. But you know, by the end of

630
00:34:02,200 --> 00:34:04,960
Speaker 1: this year, you know, those sort of headwinds we think

631
00:34:04,960 --> 00:34:07,960
Speaker 1: will fade. Tiffany Wilding, thank you so much for spending

632
00:34:08,000 --> 00:34:10,880
Speaker 1: the time with us on this Job's Day Friday. Tiffany

633
00:34:10,880 --> 00:34:15,839
Speaker 1: Wilding is US economist for PIMCO, joining us from California,

634
00:34:16,000 --> 00:34:19,279
Speaker 1: and it really interesting to me to see just how

635
00:34:19,400 --> 00:34:23,040
Speaker 1: much of this report is being digested as goldilocks. As

636
00:34:23,080 --> 00:34:30,000
Speaker 1: many people have said, Thanks for listening to the Bloomberg

637
00:34:30,000 --> 00:34:35,960
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

638
00:34:36,360 --> 00:34:40,560
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

639
00:34:40,600 --> 00:34:44,879
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

640
00:34:45,320 --> 00:34:46,400
Speaker 1: I'm Bloomberg Radio