Jobs Report Is Weak, Gross Says

We'll go beneath the headline data. We are fond of doing that, and what we're really fond of is on a three day weekend, four day weekend, whatever it is, David Gurral, five day weekend, I'm labor day weekend. We're pleased to announce that William Gross and Jim Glassman are here.

They're here, are people talk to their people, and it's very We're really honored if Alan Krueger with us earlier, James Sweeney really doing well from Credit Sweee with some terrific perspective, and then to have Professor Krueger from Venice, Italy and to have uh Bill Gross join us in a bit from Janet Henderson is great. But we will begin with James Glassman of JP Morgan, Jim Glassman here,

and I want to frame August and wrap it around you. Travels, which is everybody's telling us as a job shortage, job openings are there, this is that the other wage growth. We'll get into all that. And yet there's twelve thousand people lined up to fill cardboard boxes at Amazon. And the good thing about Jim Glassman is you're on the road, not in the three zip codes that straddled James Diamond to me and David Gura, what have you witnessed on the road about a fully employed America? Are one lined

up to fill cardboard boxes at Amazon? Yeah? I mean there are pockets that are struggling, but they're also pockets out there that are just off the charts. Colorado, Nashville, Austin, West Coast, East Coast. We're doing fine. Actually, everybody is doing pretty well. There are a few areas that are slow. I think the problem for a lot of workers is there's just been so much change in the workplace. There's

a lot of automation, there's a lot of innovation. The jobs that used to exist ten years ago don't exist anymore. So you can find jobs, but the problem is they're not paying the same thing unless you can scale up. And that's really what our clients are telling us, is they that the kind of jobs they need don't have. They don't have people to write skills. Well. To me, that's music to my ears because that tells me that

something's changed over the last ten years. There are new opportunities opening up, and we just got to figure out how to get people steered there. I think a lot of community colleges are very focused on this. If you go to Miami Dade, all the very big community college systems, they've got a lot of programs for training people with specific skills. And I suspect that we will figure out and then in another few years we'll probably not here as much about this story because I think people are

figuring out that there are things out there. You just got to take the initiative to do something about it. We were having a conversation with James Swingeing from Credits was a little earlier just about what constitutes a skilled worker. How much agreement is there on that, what? What what

what we define as skilled worker as well? I don't know, You've got to ask, you know, you need people who know how to monitor computer systems and understand what what it is that all the stuff that's been mechanized, if they've got to understand the process there. So you'll get a different story depending on where you look. I think what people tell you is you need people who learn skills that we used to learn in shop class in

high school. You've got to have some math skills, you gotta know some programming, and honestly, you know, when I think of it, I think of when I turned my car into the local gas station to do routine maintenance. I took it in the other day, they say to me, can you come back in about three weeks because our mechanic is out of town. He's on vacation. So no

one no when there. You know, just maintaining a car has gotten much more complicated and you need to know how to read the diagon gnostics and understand the way the car is working to make sense of that. So, you know, my suspicion is that it's not It doesn't take an awful lot of training. The problem is it isn't really in anyone businesses interest to do. I mean, if if you spend the money to train somebody up, uh, then they become marketable and they jump, they go somewhere else.

So this is the role for the public sector and for the community colleges. It's a partnership that you needed to ask you about that because I think this administration has been keen to point out the parallel they'd like to see between the US training system and that in Germany or other parts of Europe, and there it seems like you get an apprenticeship company, finances that in part or at least in part, and then you stay with that company. How do you incentivize somebody who gets those

skills to stay? How do how do you make it so that that person doesn't have those marketable skills and wants to leave. Well, you know, when you look to South Carolina and North Carolina where the European auto industry has come in, you see a lot of that going on. And I think you know, to some extent, uh, you're not going to lose people if if the skills that

you're learning are specific to that company. But the way you do it is you offer benefits to you know, tie people in, and I think people, honestly, I think you just people appreciate the opportunities to develop, to know something about your company and to learn those skills. I don't think people are that quick to jump. A lot of folks, you know where they sort of we like to stay in our comfort zone. If you give me opportunities in my comfort zone, I'm happy to stay there.

So I don't think this problem is as big as you might think it is for the guy that learns the welding. Because if there's a hot paying job up in North Dakota and you teach me how to do welding down here, I'm gonna go. If I can get three times, this is really I was going to go another wrangler. Well, this is what you do folks with Jim Glass and frankly with Mr Gross as well, you've got something in your head to go to and they say something so damn smart, you gotta go the other way.

Let's go the other way. On welders. I read a paper at Iowa University of Iowa, Iowa State, I think the wrestling school Iowa State, and it was about it's not about welders, it's about really good welders, average welders, and welders that are a joke. Now, let's take that across the entire economy. The excellence and the demand for jobs is because employers only want the best flight attendants,

the best radio announcers, the best welders. Right, yeah, and you don't get that with the first guy you hire. This is something you learn on the job. Is it different now than it was when you were at Northwestern or Mr? Gore? I don't think so, because I didn't know anything when I started a job, and we know that. Yeah, yeah, and you know I don't you get hired. God knows. You have a great note out where you're looking at

our sense of worry about this this economy. I want to dig into that a little bit if if I could. There's a lot of apprehension here, just sort of about where we might be headed if we're on the precipice of a recession. Uh, the sense of doubt as well, that things at least with regard to the economy aren't as good or can't be as good for as long

as we think they will be. How do you process that, Jim? Well, you know, it's always the case when you're coming out of a really bad time, people are always worried over the overcautious. Then when finally we wake up and we realize here we are eight years. This is the eighth labor Day of recovery from the Great Recession. When you realize you've done a good job recovering, then you start to worry, oh my god, how can this last? And

I think, you know, it's legitimate. It's it's legitimate to think about this because our history books tell us that these recoveries last six and nine years, and and for some reason we we trip up and fall and fall back again. But if you look at why that happens, inflation problems, financial accesses, I don't think there's anything anything

to worry about. Frankly, myself, I think we've got a very good chance that this recovery, now that we've recovered the losses from the recession, we're gonna this The longevity of this cycle is probably gonna beat anything else we've seen. And so you know, it's natural to worry. Frankly, I'm happy when people worry because that makes me think expectations

are low. I'd like to hear people worry. We economists should worry when businesses stop worrying, and that makes that's what makes me nervous when you look at what might be leading to that worry. Is there an indicator that stands out to you is something that is reasonable. You look at the markets, say, and how how the stock market is is, for instance, is that something that gives one cause for concern. Stock market to me, is just a symptom of all this stuff. The thing that I

would worry about is if I started to see inflation problems. Well, I don't see that those are the things. That is the number one thing that always trips us up because that forces the FED to step on the brakes, and we tend to overdo it, and often that sets the stage for a new downturn. The other kind of thing that we've been seeing financial access is real estate go back ten years, real estate values above what we have ever seen before relative to income. There's nothing like that

out there. Only you know, maybe in the commercial real estate sector. You could argue that some assets are little pricing, but you know, that's that's something that can correct quickly. This is not like the real estate problems we saw last The employment employment employment to population ratio has been growing. Women's you know, jobs and all that. From the sixties up to sixty percent of Americans employed. Then we created down to fifty eight percent, dragging themselves back the late

nineties seventies. We've come back, but we're nowhere near where we were. Do you have a hope that we normalize it's six from the present, because you know, I don't think we'll ever get there, because right now, for the next ten years or so, we've got this massive wave of people who are approaching retirement. Why are you looking at me, I'm looking in the mirror. We've got twenty million people who have turned into gone into the fifties

or sixties. Those guys don't want to work and really not think, but they want to retire in And what you notice is when people get to about fifty years of age, they start scaling bad. Maybe you and I put up you know what I mean, had a massive Democrats, David, I really suggest to smooth this over with, one of our best guests is Dr Glassman should join us for a beverage of his choice on my grand Banks down in the East River. It's the forty eight foot Grand Banks, Jim,

it's over your thirty fourth Street. It's called Tuition. He'll be able to see it, you know. And I'm making a joke here, folks, because I know that Dr Glassman is familiar with that boat as well. We'll continue with Jim Glassman serious discussion on the state of the American labor economy, and then we link it together with Bill gross next Worldwide Coast to Coast Bloomberg Surveillance from our studios here on Lexington Avenue at fifty Street, right across

from Bloomingdale's in New York City. Davy girl, what's New York about? It's about a justice with her picture on the wall down at the Federal Justice Building downtown where people become new citizens. And last night in section one oh four Yankee Stadium there she was in taking in robe in row By might point out in the Judges pretty one errand Judge Yes on cinema or in the Bronx last night for that game against the Do you

watch last night? I watched. I watched enough to know I wanted to keep watching, but the three am beckoned or to thirty am or whatever it was that's running anyways, A major shout out to a Supreme Court justice who got out with the people in right. Very nice last night. Justice. We're with Jim Glassman, who knows about this, and to speak of the justice's heritage, which is Hispanic. We have a huge announcement today by the President on immigration. Potentially

I should say you have Toulouse or Na. Thank you so much for that perspective from the White House an hour ago. Jim Glassman, how does immigration fold into the job's report right now? Well, uh, you know, the demographics, the US demographics has the working age population slowing down a lot. We've had very little immigration in the last decade, and that's why we're getting all this recovery in the job market with slow growth. Immigration is an important part

of what makes the US economy strong. And if if the economy is doing better and we don't have the domestic workers to fill those jobs, we're going to see more immigration. So want to give an hundred and fifty thousand of non farm payroll ten or twenty years ago, if it was two d or two twenty was the delta immigration? Yeah, it seems it seems that might be

fifty or sixty or seventy. This is what's confusing everybody because we've never really when we talked about the broad economy, we've never really had to talk about immigration because are about demographics. Because whatever demographics was going on in the US immigration would tend to fill the gap. If we had the jobs and we didn't have the local workers, we would we would draw people in. This is not true in Italy or Japan. Uh demographics dominates and they're

they're used to this story. We're having to talk about demographics because when we've not been getting the immigration, and I think if if the economy does really start picking up speed, you gotta wonder, when you're getting two thousand jobs a month, where is this coming from. It might be that we're starting to see a little more immigration. You go to Arizona. I mean, one thing you don't know, folks, is he's not just a radio star and television star.

He lives in airports. When you go to Phoenix, what do you tell the audience of institutional and high net worth jpeoporgan people. Is immigration good for Senator Flank and for Senator McCain. Yeah, I mean I think everybody realizes, particularly in Texas, immigration is an important part of their economy. Arizona has a more negative view of this because of

the social problems that this brings. I don't really understand it, but I think we all deep down realize that we are a nation of immigrants, and this is what's made our economy strong. I think the issue is more about illegal and you know, we gotta we gotta solve this issue because immigration can solve a lot of issues. And it's not just the people coming in, it's the kids. I see this in my neighborhood, the families coming in from India and Asia. They're obsessed with education. They drive

their kids into education. It's the next generation that really brings the value to what you know, to the country. And we all know this story because our parents and our grandparents went through the same process. What can you tell us about the Republic of Texas. Our eyes are focused on that state right now in light of the devastating storm that hit it earlier this week. We're talking about immigration, obviously hugely important to that state as well.

What's the give us? Give us some context. You about the importance to the U. S economy of the Texas economy. Well, it's hugely important because of the energy sector, right, but it's also a really diverse economy. It's a real entrepreneur to place and a real dynamic economy. Honestly, they're gonna recover from this fashion And people think because it's just a really dynamic place. And uh, it's it's important for

the U s economy. It was the big it's the leading edge of the recovery because of the what's going on the energy sector. You look at employment growth in Texas, it's doing over the last ten years. It's done better than anybody except for code during North Dakota. But honestly, not many people want to go to North Dakota. So it's an important it's an important state. Healthcare is a gateway to the global to the to the global world. It's energy sector is pretty dynamic. It's pretty critical to

the US economy. Jim Glass, wind with US will continue. We'll go beneath the headline data here, David Gurr, we should say to our people because we're we're full disclosure. There are technical deficitions. This is this is interesting. We're

gonna pull back the curtain here just a little bit. Uh. You know, the data comes across the Bloomberg at eight thirty when those numbers are released, in part because some technicians, some people within Bloomberg and other outlets are able to get those numbers first in put them into the system. There apparently are some technical difficulties across the board at the Labor Department preventing that from happening today. So at eight thirty, we you, everybody will go to the web

to get those data from the Labor Department. And that's going to cause a bit of a delay here as we have to sort of pass through the numbers outside of the usual framework that we get them in. So it may be that we don't get the numbers right at eight thirty. My be a few seconds afterwards today. Could you turn around, David and turn on the studio lights. Yes, we'll be here worldwide on minutes. Yeah, yeah, I gotta get the orange going on the skin. You know, where's

Mr Bayner when I knew? Uh? Futures up, six down, futures up sixty five Jobs today with Jim Glass one in, Bill Gross, stay with us. Welcome morning, David Gurra and Tom Keene in New York, Bluebrick Surveillance on Bloomberg Radio. On Jobs Today, we go out door colleague Vine Delle Judas at the first Word desk for the latest jobs numbers against some quirkiness here this morning, Vinney, Yes, David,

job unemployment. Let's let me just start over payroll growth slowed in August one hundred and fifty six thousand the prior month, an increase of one hundred eighty nine thousand, the unemployment rate meantime creeping up to four point four percent, Private payrolls up by one hundred sixty five thousand, looking at average hourly earnings, a sore point up just point

one percent. Yes, there were some problems. The government had a little trouble getting the news out this morning, but that hit on time just the same at eight thirtiesome computer issues again. The Labor Department reporting non farm payrolls rose by one hundred fifty six thousand. That's slower than a prior month. That is below Wall Street forecasting. Unemployment rate up a notch four point four percent, and average

hourly earnings. I can't over emphasize this. This is a sore point up just point one percent in August, and I might add the July earnings increased revised down. I'm finite, s Bloomberg Radio. Let's go back to New York. These are extraordinary numbers. We think our team in Washington, particularly this morning, led by Brendan Murray, forgetting this out. There was some technical difficulties but we're acting normal with yields in.

You equity futures don't do much, David Guru, but yields in with curve flattening, it's just it's just a lighter tone to the data. With the unemployment rate again up four point for sind you know you look at moving averages, Jim Blaste, which I know you love, and again this pushes against the moving average vector that we want to go up a hundred and fifty six thousand. With negative forty one revision that gets you down to a hundred

and ten thousand. Yeah, I think the what you're going to hear from my community is don't trust the initial estimate of August because in the past seventeen years, with the exception of three years, you've seen this August number get revised up by an average of seventy five thousand by the time it's all in. So I think you've got to be a little leery of this kind of stuff. People were saying even when we saw the ADP number, they were telling you this, The information we're getting from

the labor market is frankly quite good. The jobless claims trend is gotten lower, ADP is finding an awful lot of employment. So I think with these monthly numbers, you have to be a little careful, particularly August, particularly August. Yeah, just to continue to process what we're seeing here. How big a deal is that headline? Miss said, do you think, Jim,

I don't think it's that big of deal. I've I've got people worth sort of in the one two D thousand range, and the people who thought one fifty were saying, there is this series. There's a significant bias that shows up in August. The things tend to get revised up, so don't be surprised if you see a two D number out of this. Jim Glass, thank you so much. It's JP Morgan as well. And now in Bloomberg Radio,

Bloomberg Television, Good morning, Alex. Still looking forward to the comments of Gary Cohen from the White House Law and I know, Alex, you'll do that here in a bit. Now we welcome William gross Off, Janet Snderson our coverage of this job's report, how it folds into markets, and particularly how it folds into a most interesting September in Washington. I guess Bill gross I look at this and I

see the revisions down in a little soggy report. It's once again putting a good month back together with another good month and another good month after that. We can't seem to get there. I think that's true. And I think August, you know, historically has has been different and been a little bit weak. But nonetheless, um, you know, the wage revisions I think strike me the most, and the point one in terms of the wage growth strikes me as well. You know it inflation tongue, not job

growth dominates central bank thinking these days. And uh, well, I think low unemployment percentages historically have led the higher wages and inflationary pressures, and the fabled Phillips curve which assumes this, Um, I think it appears to be broken. And and your are of your core inflation, which is what the film looks at, is increasing only at one point four percent, and it's down from the two point

one percent only six six months ago. So I think the fit is focused on wages and uh certainly inflation to the extent that wages are reflective in that. Let's try and and and this is a weak report, Let's synthesize Mr Gross's outlook their folks into what we see on the Bloomer I've seen a two point one one percent ten year bill in the angst of Korea. Five days ago, we got down to two point zero nine percent. Steve major Over at HSBC says we can go below

two percent. Do you agree that there's a set of news or a set of economic data that get will give Janet Yelling at one point nine nine percent and year yield. Well, geo political, perhaps, you know, North Korea is certainly important, and uh, you know, money moves to

quality in the safety when when global events threatened. Uh, you know, global bonds have rallied tended fift thirty basis points over the past few months due to in my opinion, not necessarily ding in North Korea, but unprecedented liquidity from the ECB and the b O G B o J. They've they've written one trillion dollars worth of free checks per month. It keeps investors happy and economies humming for now.

But uh, we see Japanese tenure race now at zero percent and buns at thirty five basis points, and that makes our tenure attractive at to ten and you know, perhaps it can go down to two percent because these other alternatives are extremely low and moving lower bill. We're making our annual pilgrimage to the edge of the fiscal cliff. It seems we're gonna be talking about the debt ceiling

here over these next few weeks. Is Congress endeavors to raise it, whether cleanly or with some other stuff attached to it. Of course, there's the issue of government funding as well. How much have you perfected your playbook with how to deal with this kind of disaster again? We faced it time and time again. Well, this one's extraordinary and the numbers still aren't certain in terms of how much it will cost. Is it a hundred billion? Isn't more? As a little bit less? Over what time period does

it occur? But certainly, uh, it extends the budget deficit, and it's something that has to be reckoned with. How do they do that politically? Hopefully Republicans this time sort of avoid it with a special type of measure and then you know, renore realize the budget in the next few weeks as as uh as we move along. But the uh, you know, Harvey is is very important, and it absorbs money and absorbs credit and put supply into

the treasuring market. So uh, no doubt that that's important, as is the tax cut situation, which presumably will be addressed in the next two or three months. But when when you look at the dead ceiling in particular there do do you have any level of anxiety that it's not going to be raised or raised on time? Oh? None at all. And you know I wrote yesterday, I tweeted yesterday that it was a sham. Um. You know,

it's just a political maneuver. Congress spends money and uh, you know, of course the the Treasury has to raise that type of money. It's a one to relationship. It's symbiotic. And uh, to the extent that the Congress wouldn't approve their own spending, to me is ridiculous. It's just a political maneuver to get something. And I think there's no doubt that the US out of this solvent will be for as long as I'm on this good earthing, we

shouldn't worry about it. And Bill Gross, you have been brilliant about the idea of financial repression, about you're gonna get a low yield and when you take out inflation, nothing's gonna be there. All sorts of people we talked to are talking about better wage growth. It didn't happen

this month. They're talking about vectors that move upward. Do you have any hope that America gets out of the financial repression you so well predicted, well, not typically at a financial repression tom to the extent that you might define it. By zero percent real short term interest rates versus two to three percent historically over the past ten twenty thirty years. That's a huge gap. And I don't

think that's gonna be narrowed. I don't think central banks, not only the FED, but the e c P and the b o J, they can't raise interest or it's back to normal simply because there's a lot of debt and increasing the amount of debt and the cost of cover that debt if increased by two to three percent, not just for the government, the government and the right checks, but with corporations, it's probably just never going to happen. And uh, go ahead, Well, no, I just don't. I

don't want to cut you off. But this is so critical, Bill Goes, because you live this, and you live this with a Monroe trader on your desk at a shop at Newport Beach a few years ago, and that is the deficit to g D P growing out. If we get back to what you and I recall the days of Monroe traders in early Bloomberg's a five or six percent deficit to g d P, I would suggest, respectfully, bad things happen. Are we going to revisit that in the next twenty four or thirty six months. Well, it

depends on the tax cut program. I don't think it's going to be that radical. I don't think you know, Democrats will will permit that type of increase. But you know, you make a good point. The US current account balance, which is reflective of the stuffs, not one for one, but close has been and deficit by three to four percent for the last forty years. It's an exorbitant privilege that the US has relative to the rest of the world. So I don't really see any pressure to reduce the deficit,

despite the Republican rhetoric. I see it increasing, perhaps not the four or five percent, but two or three percent annually. And the problem being, as I mentioned before Tom, the interest rate, and to the extent the interest rates to go up, I don't think they will. They can then the economy is threatened. We're gonna come back with Bill gross on radio. But very quickly here Bill Gross on TV. Do you believe in a three percent g d P

American economy? I do not. It depends on productivity. Productivity has been less than one percent, close to zero. Labor growth is less than a half a percent. Those two numbers to gether, you know, produce real GDP and it's a two percent at max real GDP. Bill. This again is about elasticities or responsiveness of market to economics, in

that Mario dragging has a plan and it's good. People in Farmford have a plan and we've had a massive move in euro trade weighted euro folks is well out over two standard deviations back nine years strong euro Bill? Is this about the market, the euro vigilantes telling Mario Draggy what to do. Oh, I don't think so, Tommy. You know, and you know I was well impressed by the bond vigilantes and the nineties, and I guess in the early part of the century. But now I think

central banks dominate. There's no doubt that they have conversations between the two, between the private market and the vigilantes and the central banks, and they take feedback from each other. But I think ultimately it's Druggy. Ultimately I think it's corrode I. Ultimately I think it's Janet Yellen. And so we'll see. And I agree with you this this news on December as a little startling because, Uh, while dr has always been a dove, uh, this is a continuation

of his devilishness. Do what we see from Carney, from Corota, from drag? Does it migrate over to the United States if they get a bill gross sub three g d P, if they get any sense of a job report like today and the tepid wage growth like today, Does yelling become like drag where we see articles from our Washington

team saying the federal delay. Well perhaps, although I think the Fed's fairly well committed because they've they've you know, put on the line such a small amount of treasuries in terms of you know, taking off the balance sheet. So I think there's safety there. But I do think that you know, you know, central banks, especially the ECB and the b o J are addicted que and balance sheet expand and low and negative yields. You know, Japan, as I've mentioned his cap their tenure JGB at ten

basis points it's now zero. Uh, and the e CBS balance sheet. Historically the world's most conservative central bank has expanded its balance sheet via que eat nearly five trillion dollars. It's larger than the FEDS. And uh so these are and I think there are legitimate questions as to how many bonds these central banks can buy before they effectively destroy the private market that capitalism requires. I don't want

to ask you about Mario drag communicator. There was this moment of miscommunication with the market in central Portugal just a couple of weeks ago. He spoke in Jackson Hole and we were talking with Dennis Gartman yesterday. He was saying that he couldn't quite figure out what it was Mario d was trying to lay out in that speech,

at least at least initially. I wonder if if if you're experiencing similar difficulty interpreting what he has to say, and if you think there was maybe a missed opportunity for him at it's an hold to talk more about the year at a job on the year a little bit, Well, I think so. And I think both the drug and yell And deferred in terms of monetary policy and simply shifted to regulation, which is fine and A and a

target and a legitimate target of central banks. They should have focused on that and the early part of the twenty one century. But nonetheless, drug he didn't tell us much. And perhaps today's statement is telling us something. I don't know where it's coming from, but you know, the drug is very deficient. And to not criticize, but to compliment. I suppose their economy is doing well, Inflation is contained,

although not as high as they want. And so you know, you'd have to give these central bankers at the moment in terms of cyclical results, uh, you know, somewhere in the B plus A category. But as I've mentioned in the past, over a long period of time, these uh, financial repressive types of strategies have negative consequences on savers, have negative consequences on insurance companies, pension funds, and ultimately

capitalism does not do well under these circumstances. The girls, I want to rip up the script of the time we've got left the number one talking point for me and David Garrow this morning. I don't know if you've seen it, Bill, but the essay in the Washington Post by a grievously ill uh John McCain of your U. S. Navy. Bill Gross served in the U. S. Navy a few tours of duty ago. Uh Senator McCain. Bill Gross begs for bipartisan solutions in Washington. He begs for a return

to the processes of another time and place. Can we get tax reform, can we get infrastructure build out? Can we get Washington to do constructively in the present milieu? Or do we have to get back to what we knew long ago? Well, I don't. I don't think it would get much change under the current administration, to be critical, and under the current Congress, so less addressed. Tax cuts, uh you know. The other day President Trump suggested that tax cuts would be good for the middle class because

when corporations have higher profits, they provide for higher wages, etcetera, etcetera. Well, has that really happened over the past five to ten years. Not really, It's a different geopolitical world. I think tax cuts, um, while not the highest in the world, is Trump claims, you know, are about average for the world at about when you include all of our uh you know, special situations. I think tax cuts will continue the fabled carried interest policy, which is, to my way of thinking, one of the

most ridiculous policies that ever existed. I think we're moving towards a twenty two or average corporate tax rate. Uh. I do think these policies will leave the middle class even more behind. And I do think ultimately that the universal income in the next ten or twenty years, perhaps two different administrations, is where we're headed, and not to lower and lower tax cuts and supply side economics. David does it sound like he's running for office Newport Beach?

That the council very very good, phil Growth. I want to ask you about trade. We're seeing the resumption of trade talks in Mexico City today. I believe between the US, Mexico and Canada, we've had a president use increasingly heated rhetoric about what might happen to NAFTA, talking openly about terminating that particular deal. What would the effect of that be to to say, how we're going to scrap this now long existing plan and uh, you know, I guess

he hopes to rebuild it or start from scratch. What would the effect of that be, as you see in well, it would be disastrous, you know, ten or fifteen years on in terms of NAFTA, and to reoriin it or to uh, you know, to to cancel it. Um. You know, obviously NAFTA has had some negative effects in terms of American wages that should have been expected. And to the extent that it's what Trump is trying to attack, you know, then find perhaps something else in terms of the UH

the agreement could could take place. But yes, you know, Trump is art of the deal. Out of the talk. UH to this point, out of the talk hasn't really gained as much anywhere in terms of legislation. But I think it would be disastrous and I think at all costs it should be avoided. A free trade agreement between Mexico and Canada and North America has perhaps one of the strongest and most productive free trade agreements in the world. Bill, What are you doing with your portfolio? What is the

gross strategy? September is the new year for business. Everybody's struggle struggling to find alpha in fixed income? What are you doing? What is the gross strategy with janis unconstrained? Well, janison constrained. UH, it's objective Thomas four to five percent. It's not a hedge fund. It isn't looking for double digit gains. How do you do that in this type of world with the treasury at two point one percent and stocks at a near historic pe ratio. It's very difficult.

What I've done over the past few months and a few quarters is to sell volatility, not to buy it, but to sell volatility to volatility, and to assume the interest rates take the tenure treasury stay between two percent and two point three percent, and if that happens, then, uh, you know, a fortified percent number it can be can be garnered based upon the premiums that options seller it

can provide. And so that in combination with you know, two percent yields on eighteen month corporate paper, produce a conservative but very low volatility type of portfolio with a fortified percent return. Bill Gross, thank you so much, greatly, greatly appreciate that. Today he is with Janis Anderson David what we learned there. I I'm still amazed that he

can't get above a three percent GDP. Yeah, no, it's uh, you know, I'm I can tell he said the draft jobs report was weak, and uh, you know, looking at these data, one has to sympathize with that assessment of it, I think, and it'll be interesting to hear what Garrit Cone has to say with the White House, to say how the President reacts to UH, to this job's report as well, in light of the numbers that we that

we got today. UH. And I was impressed also just by how confident he is that we're not going to see much differing when it comes to the dead ceiling, when it comes to funding the government here over these next few weeks. I know there are a lot of economists and strangers I've talked to have more anxiety this time around, saying that the terrain somehow different. I think anxiety perfectly captures UH, the path forward for the next thirty days. I we don't even got October, you know.

I am f meetings in October. That's what I can. You bought your ticket right now? Yeah, I think I'm slotted in. I don't know what we're doing. We'll figure out what to do. This is Gary Khen, National Economic Council Director, Gary Real, pleasure to have you with us. How do you interpret the number today? Are we sort of back to normal in the jobs market or is

this the beginning of a weaker cycle? Well, thanks for having me, And before I get started, look I just want to reach out to everyone in Louisiana and Texas, and you'll remind all of your viewers, you know, all the tragedy that they're still going through, and they remind everyone that we at the White House, you know, are not forgetting about them for a second, and we're laser focused on what's going on out there. Look on the on the economic data today. You know, it's part of

the natural growth that we're seeing in the economy. You know, if you look at the data we had this week, we had a GDP number of three percent. This week we had the jobs number that is still very good. If I would have told you at the beginning of the year, told you inauguration day that we'd be at three percent GDP and four point four percent unemployment, you would have said, hey, those are great numbers that that that would be an amazing accomplishment by Labor day what

we're there. So overall, we're very, very pleased with where we are in the economy, where we are in the cycle. We still know there's a lot of work to do in a lot more upside and the President is very focused on that. That's why we launched our tax agenda this week because we think we can really grow the economy much further from here before we get to taxes. You pointed the picture that jobs are consistently very very solid.

On the flip side, wages just aren't really going anywhere two and a half percent a year on year, and also inflation also really stagnant. What is the right monetary policy for something like that. So look, look, we we are concerned about the wages and that has a lot to do with our tax policy. If you listen to what the President outlined earlier this week, he talked about our corporate tax system or a business tax system, and how inefficient our business tax system is, and how we

really penalize businesses to being American. When you penalize businesses to being America, they don't hire American workers. We need to get our tax rates down to be competitive with the rest of the world. When they get our tax rates down, we then compete for labor. You compete for labor by driving wages and paying more wages to get people to work for you. So we are concerned about wage growth. We do want to get wage growth back

in the system. You're absolutely right. When I saw the numbers you know, the first thing I looked at was the wage number, and it's been flat at two and a half for a long period of time. We need to put more money back in US consumers pockets, and that's what we're trying to do, both by wage growth and by by by tax efficiency. So, yere, you kind of diverted my question there, So that seems that it's

a fiscal policy issue, not a monetary policy issue. Do you feel monetary policy then cannot help with the wage inflation debate? Look, I think wage inflation has to come through demand for more workers at higher price. And the way we create demand for workers is we create a better operating environment in the United States. You create a better operating environment in the United States by making the

United States more competitive. You create the competition by lowering the business tax rate and having businesses have to be here and want to be here in the United States. And that's exactly what the President laid out earlier this week. All right, So let's go to tax reform for a second. We've been hearing I feel a lot of mixed messages from the White House and lawmakers in terms of that

next step. For example, are you going to have to release additional tax details in a blueprint later this month. That's what we heard from Secretary Minution yesterday and some news outlets. So as I think you're all acutely aware, you know, Secretary Minutum, myself, the leadership of the Senate, leadership of the House, we've been working literally since November and December on a tax blueprint. We've met NonStop since then. The six of us have agreed on a outline of blueprint,

a skeleton. We agree on what we need to do for tax reform. We're now working with the House Ways and Means Committee and the Senate Finance Committee to really finalize what that blueprint will look like. I would say, take a skeleton and put the muscles on and put the skin on it. That's going to get released in the next in the next whatever weeks or months, as those committees get together and finalize all of the details, as the natural governing process happens, and that's going to

start literally next week. So Gary is the legislation in the hands of the Tax Writing Committee right now. The legislation is in all of our hands. We're working together, the group of six, the six of us will be in the White House with the President next week. We're going to continue to drive Gary, I get that. But in order to move it forward, it has to be with the Tax Writing Committee. So have you have you passed it off yet to them. There's a communal effort

going on here. We're trying to we we're not trying. We are working very collegially together to get tax reform done in a way that everyone buys in in every step of the way. And that's exactly what's going on here. Ultimately, tax reform has to be voted on in the House and the Senate. So yes, we're working with the House and the Senate to do that. Well, okay, fair enough, so you're talking more. We're all working together. But then you have Senator McCain coming out in the Washington Post

with a very very scathing review on President Trump. Um, he's saying, we need to compromise, even if we have to take something off the table, well that we didn't want, but saying that we have a president without any experience, he's poorly informed, he's impulsive. We don't answer to him. We answered to the American people. Doesn't stuff like that make the cooperation you're talking about impossible. It seems like we have a lot of cooperation, a lot of momentum

on tax reform. I think a lot of us understand the importance of getting taxes right, of simplifying the tax code, of returning more of people's heart earned income back to the American public, not sending it to the government to spend, allowing people to spend their own money, simplifying the tax code. The basic principles that the present laid out earlier this week appeal to everyone in this country. Why shouldn't we get out of the way and allow more Americans to

keep more of their hard EARA. I don't think there's a politician doesn't agree with that. I agree with you, I think as a person in the world who doesn't agree with that right. But then you have a Mitch McConnell, who's a Trump has said very disparaging things on Twitter about you, Speaker Paul Ryan, who is at odds with the President. Now you have Senator McCain coming out and do very scathing review. You might want it, but how you get their matters and doesn't. How you get there

doesn't work anymore. If we're like this in Congress, I'm confident that we're working well with comngregrants because I'm and I'm speaking to many of the people you just mentioned. We're speaking on a daily basis, and we've got great momentum on taxes right now. Okay, So tell me what you're gonna do in February. What job are you going to have. I'm gonna be right here doing what I'm doing right now. You're gonna be in front of the

White House, in front of a different building. I'm gonna be doing right exactly what I'm doing right now, being front the White House, with this beautiful new infrastructure being built out here. We'll be working on infrastructure in February. Okay, nice semm, Gary, But I asked the question because a lot of heat has been made about the fact that you weren't mentioned in that Missouri speech by President Trump on Wednesday in terms of those working towards tax reform.

So there's questions about whether you want to stick around to even be considered for FED chair. Now. I'm extremely happy doing what I'm doing. I have a once in a lifetime opportunity something that hasn't been done in over thirty years, to reform the U S tax code. I passionately believe it needs to be done, and I'm one of the luckiest people in the world. Do we have the opportun who to work on it. I'm really excited about what I'm doing, So you do not want to

be head of the FED. I'm really excited about doing what I'm doing. All right, let let's wind up on Harvey. You brought it up in terms of extending your condolences to those in Texas and Louisiana. Many say that Harvey could be the most expensive natural disaster in US history. How much harder does the tax and budget debate become now because you have deficit hawks in Congress in the Republican Party. Look, we have to deal with the Harvey situation.

It's it's it's it's not a debatable issue. What people in Texas and Louisa Zana are going through is unthinkable, unimaginable. I I've seen a lot of data. You've seen the data. We're analyzing it literally twenty four hours a day. Here. We have to help the people, We have to help Houston return. It's just not a debate. So we're gonna have to spend money, We're gonna have to pass some incremental relief bills, and we're just gonna have to do that.

It's not a choice. So it's just part of governing. Look, part of running the government is dealing with unforeseen issues. We're gonna deal with this and we're gonna move on. Um. Look, the part that it's gonna be more troubling is it's gonna it's gonna have impact on a lot of the economic data. You know, the economic data that we've just gotten. This unemployment data is probably the last that a clean

unemployment data we're gonna have for many, many months. As we go through the recovery process and people go in and out of unemployment, as they rebuild their houses and they rebuild their lives, we're gonna have a bunch of data that maybe won't make as much sense for the next three or four five months. So, you know, normalizing data for hurricanes and natural disasters is going to be more difficult for us to truly get a bigger picture of what's going on in the U. S. Economy. Gary Cohen,

real pleasure, Thank you so much for joining us. Gary Cohn, pointing to the infrastructure happening behind him on the White House Law and US National Economic Council Director Alex Steel on Bloomberg Television to radio worldwide with a lively interview. I would state that that's the single most Gary tone I've heard, Gary Cone. He's getting used to the job, is how I would put it. Yeah, I'm mixing it up,

I would say at Tessling a bit. She asked him several times if he wanted to be fed cheered directly, and he said repeatedly, he's happy doing what he's doing. Is there is with all of this, there is on

the job training. One of the things I always cite when I talked to college students about this is Greg Mankou, the acclaimed professor at Harvard, and he talked to everybody the first three or four months he was chairman of the president Council of Economic Advisors, like it was a lecture at ted lecture, and it took him a while to try to get towards the cadence it's expected, Yeah,

of executive officials. And of course, I think teaching that introductory economics course to thousands at Harvard probably prepares you well for the public speaking component. But you're right, you're right, there is a learning curve here. And uh, you know this is this is a regular thing that Gary Cone has to do now in this capacity. And I agree with you. I think he's seemingly more comfortable with the role.

He talked around the news of the day, which is the McCain essay and the Washington Post, but that he did circle back and and it really address the delicacies of the administration, David speaking to legislative leaders as compared to the president. That was an indirect illusion. Yeah, I'd said. We We've brought this piece up a couple of times today.

If you read anything today, read that piece in the Washington Post by the senior Senator from Arizona, John McCain, writing about, yes, the relationship between Congress and the White House, but also just about the institution he has served for so many decades now, A very important piece in the Washington Post today. Usually when we get the points guy in, we chit chat about banks and Miles and all that.

We will do that today because that's what you expect from Brian Kelly, but we must direct our attention to his real real abilities to synthesize all going on at George Bush Intercontinental and also hobbyist or Cobby Airport as well. Brian Kelly, tell us your perspective on the damaged airplane travel in and out of Houston. Yeah, Houston, it's going to take a long time to get back up and running. Today.

Actually yesterday I think they had United had twenty seven departures and they normally have about five hundred, so we are way way behind. You know, basically, avoid Houston at all costs. You know, most airlines actually every airline will let you reroute for free or change your flight. So basically, avoid Houston at all costs. But that being said, this weekend is still going to be a record weekend for

Labor Day travel. So even if you're not going to Houston or through it, the planes are going to be packed this weekend. How do how do airlines change or or or express some flexibility when we see a natural disaster like this one. I imagine there are a lot of people keen to get to the area to help out, to respond to the disaster. Do we see airlines accommodating interest in doing that. Yeah, well, in terms of giving away free flights for relief help, some airlines will do that.

I think on the opposite side, airlines you know, because it's a huge stress on their systems and their customer service, so they'll let people rebook for free, uh, to change their flights. Um. So they're called weather waivers, So anytime there's a storm coming most airlines it behooves them to to let consumers switch their flights for free. Um. Some airlines are more generous than others with you know, the

time frames in which you can change. Brian, let's get back to the business at hand, which is everybody's telling me airplane travels cheap. I look on the screens. You've gotta be kidding me. I've never seen fairs as expensive as they are. Which way is it right now? Well, it depends on which cabin you're looking at. You know. Coach fairs are actually ridiculous on the blog if you go to the points got a comp slash deals. We've seen yesterday with two nine four round trip to Argentina. Uh,

we've been seeing you want to put ian baggage. You know, Air Canada had a fair mistake last week and then also to to Israel. So um. But you know, even in the life lap business class we had South America sixty eight round trips, so you know, these deals, you gotta you gotta act fast when you see it on social media. You always booked the deal and then talk, you know, think about it later because the airlines usually give you twenty four hours to cancel, So don't try

to round up fifty five friends. You know, you just like book a flight and then you know, figure out taking off work or whatever in the twenty four hour safety period. But there are live fair one less flexible time. Who's driving the points guy bus right now? Are the banks driving the bus or the airlines driving the bus? I mean, everybody's addicted to your world. We get what you do, you save us some money, we hate you, etcetera. But who's driving the bus? In September of this year,

credit card companies are driving the bus. Actually, in September, Bank of America is popping into the rewards game. They're launching a new credit card. UM. The full details haven't been released, but they have confirmed UM they have this premium rewards credit card coming in September and it looks really you know, fifty point bonus. So we've seen you know, Chase really up to a year ago with the Sapphire Reserve.

AMX is up their platinum. I mean, the competitions at all time high, so the credit card companies are in the pilot seat of of the points industry, so to speak. Brian Kelly, thank you so much and congratulations for changing everybody's life. Go to folks. You don't even have to do the charge good thing. You can just go and be an absolute awe of what Brian Kelly and others have wrought with this, this symbiotic relationship. Thanks for listening

to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Key. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.