Alan Krueger: Congress Should Invest In Infrastructure (Audio)

I A S, but space is limited. Register now at b n y melon dot com. Slash E t F Stocks higher, SMP five hundred index up seven on this Job's Friday to a game there of three tents of one percent. Nez Stack also climbing by three tents of one percent. The Dow also up by that amount. The SMP five hundred index, as we mentioned, up seven, nes Stack up fifteen to fifty two forty two. Now Industrial is up fifty to eighteen thousand, four hundred sixty nine.

The ten year down nine thirty seconds, yield one point six. Gold up ten eight, the ounce high by eight tens of one percent. West Texas Intermediate cruet four barrel right now, up two point seven percent. I'm Charlie Pellett and that's a Bloomberg Business flash. You're listening to Taking Stock with Kathleen Hayes and Pim Fox on Bloomberg Radio. I'm Kathleen Hayes, broadcasting live at the US Tennis Open here in Flushing Meadows, Corona Park, Queens. My co host Pim Fox is on vacation.

He'll be back in the office and on the show on Tuesday. Phillion for him today. Well, actually, he's a very special guest here at the Open every year on Bloomberg Radio. Alan Krueger. He's the been and Professor of Economics and Public Affairs at Princeton University's former head of the Council of Economic Advisers, and he's also an avid tennis fan. Alan is always great to have you here. You have the will this job? Tell me about it every year every year, my friend and watch a ton

of tennis. You know. There we're gonna talk about jobs and there are you know jobs created here at the Open for two weeks, right, because they do do a lot of hiring and to put on this event that is just so complicated has so many moving parts, but you know, come in and come out. It's a great sports event in some respects. I guess the US economy is going in that direction and that we have more and more workers who are working as contract workers and

freelancers doing short term jobs. Now, Ellen, that's a good question to look at, because we got the jobs report today a hundred fifty one. Um, you know, Lord Amester of President Cleveland, Cleveland Fed went out of our way, I think to point out, you only need seventy five to a hundred fifty jobs to keep the unemployment rate steady, if not moving lower. So so we get that. But this, this move from part time to uh, full time, is what a lot of people still aspire to, don't you think?

Or or are we really in such a gig economy now? Well, over the last decade we've had very fast growth in independent contract work, freelancers, workers being contracted out. And for some workers that's a better situation they have more control over their hours, more flexibility for companies that could be more efficient or productive. Uh. Yet for others they prefer to have its traditional job. So I think it's a

very heterogeneous sector. Um. We're also seeing over the last few years, very rapid growth in on demand work uber type jobs, task grabbit. They still only represent about half a percent of the workforce. We don't do a very good job capturing them in the statistics that came out this morning. Uh. Fortunately they're still small, so it's not really distorting our picture of how the economy is doing. But over time it's going to be a much bigger concern. Now,

what about the momentum in the economy. Yesterday we've got the Institute a Supply Management Manufacturing reported fell back below fifty. Uh. The consumer has been just about the only consistent driver of growth this year GDP year over year on a are just the last three quarters of something around one percent. Maybe it's going to bounce up to three percent when you look at the jobs numbers, when you look at all these different factoris how does it look to you?

Do look okay to me? I think we're going to grow about two percent this year. Having the consumer power of the recovery, I think that's actually very helpful. Consumers account for seventy of the US economy, so seeing households in a stronger position with higher income with lower gasoline prices, I think that should support the economy. I think there's still room for housing to expand. So this recovery is not going to be the strongest one on record, but

it could well be the longest. And I think that's what we should be rooting for. Okay, and I guess, but the question is the longest on record? Do you need to start raising interestates? You and I were both attendees at the Jackson Hole the Kansas City Fits im Poseum in Jackson Hole, Wyoming. In fact, just a week ago we were sitting listening to some very very big papers. We were listening to Janet Yellen say the case for great high has strengthened, which seems very broad. That doesn't

incline you to any direction. In two separate interviews, now what verst in Jackson Hall and then on Bloomberg Television this week, stand Fish of the vice chair seems to really be trying to push in the direction of hey, at least one interest rate increase this year. You get a sense that perhaps that the vice chair is trying to lead the chair towards the rate hike if he thinks it's so necessary. It is a committee, and members

of the committee can have different views. My own view is that the Fed should move slowly to raise rates. I think one rate hike later this year would be appropriate. Uh, you have to bear mind, even if rates can hop another twenty five basis points, we're still going to have very accommodative monetary policy. I think what the FED wants to do and should do is avoid a situation where

it has to ratchet up rates very quickly. So if they move up one rate hike this year, two next year, I think that's moving out a pace set slow enough that they're going. Uh. If the recovery continues as I as I expect it would, I think there'll be in a better position so that they don't have to yank up rates very quickly and pull the rug out of

the recovery. I'm speaking with Alan Krueger, Professor of Economics and Public Affairs at Princeton University, former head of the Council of Economic Advisors in the Obama administration, and we're live at the US Open in Queens and New York. Alan productivity. We also got numbers this week which showed the productivity is just lagging and sagging every which way it can businesses. That's a big question. Why are they so uncertain? Why won't they commit to longer term projects.

Some people blame very low interest rates as as part of that borrowing costs are low. Let people look out over the horizon and they're uncertain because they figured this situation has to change. What's hurting our productivity so much? That's an excellent question, and I don't think there's uh compelling answer. To be honest, I think there is a lot of uncertainty out there. I think some of it's

coming from the presidential election. I mean, we have a candidate who said he'd like to renegotiate the US debt, So it's possible Donald Trump wins, we're gonna have quite dramatic change in economic policy, in my view, not for the better. Also, there's a lot of uncertainty in the world economy. I think that's probably more important than Federough Reserve policy. And in fact, the low interest rates should

facilitate investment. So this you just said on one of the big themes from everybody who speaks from the Federal Reserve lately, and they seems to be people are trying to get the message across. If you're a central banker in almost any country that monetary policy only has so much power at this point when you're when you've been at zero rates or lower for so long, and now

governments have to step up. Legislators have to agree on steps because if we're going to move ahead, we need we need some sort of fiscal push, some kind of government spending. Do you agree with that? I think it's been that way for a while. I think the US Congress should have done much more a few years ago in terms of investing more infrastructure, helping a long term unemployee get back on their feet. Uh, there's only so

much that monetary policy can do. I think making investments in recent arch and development and an infrastructure who will raise our competitiveness and productivity in the future, especially given the low rates today, it makes a lot of sense. Well, Alan, you've done so much research in depth, from your your research,

from all the people you've worked with. When you think of the said invest in infrastructure, can you give us something specific, an idea maybe people have not looked out closely, or something that has been tried that you see as an example of something that can be productivity boosting, job boosting, well, just maintaining our existing infrastructure. Uh, Repairing our roads and

bridges and highways has a very high return. UH. So, I know people are worried about shovel already and so on, but we have all of this infrastructure out there that's in disrepair. Think about how many potholes you've run over the pothole tax. I know I've paid quite a bit this year to to have my car repaired because of uh roads that are dysfunctional. Um So that's an easy thing to do and also would put a lot of construction workers back to work. There's other things which are

also pretty easy. We had during the Recovery Acts something called Build America bonds. Build America bonds were taxable municipal bonds. They're much fairer, much more democratic form of investment because moderate income people, lower income people benefit from having Build America bonds and their portfolios. So we could bring back Build America bonds. Okay, So we are at the US Open and you come out here every year. So um jack sock an American having a pretty good match with

the Silk today. Who are you rooting for? Who are you betting on the on the men's side, Well, it's hard not to bet against marian and Djokovic. But it is nice to see Americans doing well. I was watching Ryan Harrison and I actually left during a tie break to come here to join you. So I'm glad you got the tennis, um, and it is nice to see so many young Americans doing well. How about on the women's side. On the women's side, of course, it's hard

to bet against against Serena UM. I watched matched earlier today, So that's Ova who had up at mugu Rosa, and it was very exciting. She lost the first three games and then came storming back. Uh. So be interesting for me to see how far she can go. Uh. In terms of tennis broadly, Uh, what could you tell people who have never been tennis fans that? What? What draws you to it? Why are you so addicted to tennis watching? Well, this is a great event. You see the best athletes

in the world playing tennis. You can watch them up close. During the first week in the outer courts, I sat right behind Sevetzolva's coach and two friends who went to high school with her. So Uh, it's an easy event to go to. There are plenty of seats, especially there are the early rounds and uh, just a great spirit out here. I agree, and it helps that people like you join us every year. I'm happy to come back. I know Alan Kruger faces and he's not working for

the U. S Tennis Association. By the way, those are sincere comments and I couldn't agree with you more. Alan Krueger, then then professor of Economics and Public Affairs at Princeton University, is also former head of the Council of Economic Advisors. Again, Alan, thanks so much for joining us. Coming up, we're gonna be taking a look at Dave Wilson, our stocks editor Chart of the day. I'm Kathleen Hayes, and this is Bloomberg