Labor Market Is Strong, Kevin Hassett Says

play roads Friday. Let's go with the trade story. Just to begin with, we've talked about markets with Mixer, Let's talk about the economy in the United States. What's the methodology for calculating what this trade story right now means for the US economy. Well, I actually think the bigger difficulty is is not the standard methodologies where we're looking yet shares the economy and elasticities and all of that.

I think the bigger question is is the supply chain and the impact on the supply chain and how that sort of feeds its way through the economy, and that could be a lot more problematic for me. The big question is what is the president's objective here? Does he want to address some of the intellectual property issues with American companies in China or does he just want to get the deficit get to a smaller deficit with China.

If that is the objective, then I think we have a problem because, Um, if it's a smaller deficit with China, then it's going to be larger deficits elsewhere. And then do the targets then change other countries? Um, So the presence objectives I think have to be clearer and then

we can have an idea where it's going. I would be shocked if, having seen China respond to this first round of tariffs, if we now don't see an upsizing and U S tariffs two d billion, I think that that's coming um and so then UM, that's just not the way the president responds to back down. What is the two billion number? Besides the amount of minutes nemars laying on the field, what is two under billion the amount of traders that the actual tariff No, No, that's that.

I think that's the amount of Chinese products that will that the tariff will be will be placed on. UM. And so once we get that second round, which I think is coming. Since China did respond, um. You know, we did have the dollar for dollar response in the first round of tariffs. UM, then the response from China to that is going to be interesting because we, as your prior guests said, the China doesn't have the ability to put tariffs on that amount of US imports because

China doesn't import that that much from the US. You're gonna have to forgive me for this, but it's kind of like a high level schoolyard fight where you go to the teacher at the end and you say, he hit me first. Because a lot of people will write up this story today and they'll say that China retaliates it. China retaliates it. But in the administration's mind and in some people's minds, quite justifiably so, it is the United

States reciprocating. And until we sort this out who is reciprocating and who is retaliating, this is going to go on and on, isn't it. I think that's a very good point, and I think you're absolutely correct. It is it is the US that's responding, um to what it perceives. And I think that there's some validity to that that that the way the trade is, the US policies towards US trade are are are unfair, and they're looking to

level the playing field. Um, now you know the the I think that the differences if we look, for example, that the W two does an estimate of trade weighted aggregate tariffs, and the differences between the tariffs that the US products face and the rest of the world is not that great. And I think that that's probably the reason why most economists don't think that this is going to become a full blown trade war, because you don't blow up the world economy because of small differences in

in aggregate tariffs. About four weeks ago, John Ferrell, justin Wolfers in Michigan put this out and it's shocking how tight and how set low the tariffs are after forty years of negotiations. I mean, the President completely miss is that within his discourse, we do have low single to mid single digit tariffs in the United States and elsewhere in Europe as well. But this goes beyond tariff barriers. It's non tariff barriers to entry. And you strike a

really important point on the intellectual property rights. This is something that comments Secretary Wilbur Ross has really been pushing quite aggressively. Can anything be done that, Conrad? I think so, because that's I mean that that's China just changing, changing its policies. And actually I actually think that that's how this plays out, and that that's where China has the ability to give a bit and and where it's likely

to will see some give from China. Men, if China wants to be this move from the developing economy into a more developed economy, those are the kind of change of structural changes that they have to make. Kntcros with this with final thoughts on this jofter, he's already que economics. One of the things we know, Kinrad, is when unemployment improvement rate improves, we go from ten percent to five percent to four percent whatever. It's usually linear, and it

happens a lot faster than things. It gets better faster than we usually perceive. You told us an hour ago we could drive under three percent. You're suggested to me that seven or eight point two percent of America would be employed. Yes, and that if we are not looking at and I don't know whether it is the case, but if we are not looking at a recession in then I think we are are probably going to see an unemployment rate that that moves below below three percent.

And the reason is so we're sitting here at three three and a three percent right now. Um, if we look at the pace of job growth, which has been stronger than I thought it would be this year, and it would been averaging close to two labor force growth has also been stronger. But on the labor force side, we have the influence of demographics and those are going to continue to drive lower rates of labor force participation UM.

And with the kind of job creation that we're seeing, I think that leads to an uneplumber rate that hits three and a half percent by the end of this year, three percent by the end of next year. And if the economy continues to grow, UM, we're we'll probably see a beat breach three once we get into mean, the thing to watch on the unemployment rate is when it moves in the other direction. And so you know if I'm wrong in the unemployment rate does not continue to decline.

Once we see about a half a percentage point rise in the unemployment rate, that has been a true and tested signal that the economy has gone into recession. When you when you hear me talk about vector change, That's precisely what it means when Kind describes a vector flipping. So let me ask you a big question for this administration,

who have been tremendous with the federal reserve. Then a crack a pit last week when Larry Kind, of the Economic Advisor to the President, suggested that the Federal Reserve should be perhaps conscious that good payrolls growth and a strong economy doesn't necessarily mean that inflation is going to run away. What do you think that message was all about. Well, I mean, I think on the on the comment, I think we just need to remember that this administration just

does things differently. And um, you know, we when we look at that, that's not a message that the FED is not getting from elsewhere also, right, So, I mean it's on both sides of the aisle. I think there there's there is a level of concern that the Fed um is is tightening or might eventually tighten too much.

I'm not concerned about that at all. And that, um, if we look at and it was very interesting common in the minutes yesterday that when they were talking about the yield curve, that they need to look at broader measures of financial conditions. And if we look at broader measures of financial conditions, and the one that I focused on is the one that the Chicago Fed puts together

because I think that's what the FED looks at most closely. Um, that's not showing any tightening and financial conditions when we include um, not just the yield curve, but um levels of yield survey data on through the year. Yeah, that's an example of that. I mean, I think that's a that's a pretty strong signal that the Fed is is not materially tightening monetary policy. I would I would imagine that if monetary policy was getting tighter, financial conditions would

also get tighter. And that's not happening. So I'm not concerned about the FED overdoing it here. The tightening we asking though, is maybe not the United States, it's in global financial conditions. Is that something they need to think about a little bit more. And the potential feedback loop that comes into the United States, well, and that's I think a function of primarily of what's happening with the dollar.

And and you know, the FED is it kind of has its hands tied here because there I think they are going to be focused on feedback loops, feedback loops, I think that the right now, the feeling is that those feed feedback loops are not particularly large and are not going to change the track that the economy is on. But the FED needs to focus on its primary and congressionally mandated goals, which is the labor market and inflation, and those are arguing for continued moves higher in the

FED funds. Right, are you going to watch the World Cup today? You ask him, absolutely, I'll watch. I'll watch the rock up today? Is how many times will flop? I mean, you know, it's a big source of study. I mean John Andrew beating over at the Wall Street journals. I mean Brazil winning, he flopped twenty four minutes, ten seconds, Brazil tied. It goes out to thirty four minutes with no falls, no falls. I mean, come on, this is

tied into what brazils. It's not that he's hurt. It has to do with delaying or he has found a law. He's found a law. A lot of people kick name out all the time. I mean, I don't. I don't think the rolling around is justified. Colin rapid, he's also he's also a little guy. He's five foot, takes a hundred and forty pounds, and you know you get hit by a big mustard going to go down because I've seen they go right after him, big time, big time.

They really do. Please, you're gonna watch it though it's France. Have any predictions, Mr Quadras, I that's not my as sophisticated as I know. I mean, if you look, if you look at my pool on Bloomberg and you see how badly I'm doing, that's why. Oh no, no, I have the trophy. I've done. I've done really well. The last two days they haven't played with us down. You know, John's got a zillion questions for Alan Krueger about the

state of our labor labor economy. Professor Krueger is at Princeton University of former chairman of the President's Council of Economic Advisors, is public service to President Obama in the nation, but far more than that, one of our most interesting and acute labor economists. The number one feedback now I get Alan Krueger is not on Brazil, Belgium, not in the Red Sox. It's on guys are saying on this show, men and women that were fully employed, and not one

single listener agrees. Are we fully employed by the traditional measure that economists would use. I would say we're at full employment, but as I've said on your show before, Tom, full employment does not mean perfection, and we are far away from perfection when it comes to the labor market. John Farrell that I don't know what it's like in the United Kingdom. It's visceral here. People get really upset

when the year suits and tice a full employment. Of course they do, and that's the kind of campaign the President brand a couple of years back. Alan. It's also hard to reconcile with the payrolls growth that we're seeing. We're looking for another rest similar a hundred ninety thousand today. How is that possible if we're at full employment. Well, the unemployment rate has been heading down. You know, we

haven't seen any recovery in labor force participation. In fact, the labor force participation rate has continued to decline since President Trump took office. He hasn't talked about that very much. Um So, the growth has been coming in employment from a decline and unemployment. People are staying in the labor force longer but they haven't been coming back, and we started to see that the labor market slank. The paper

once thought was structural, it's actually perhaps cyclical. Uh. You know, I think we really are confronting structural problems now we we have uh and and and the business cycle, the deep recession made the structural problems worse that the laid our response to them. So the tremendous rise and inequality that we've seen since the nineteen eighties, the polarization that we have in terms of employer demand, the very heterogeneous

quality of education of the skills of the workforce. I think those are all structural problems, and the business cycle has made them worse. So a lot of people will be asking where is the white growth if we're a full employment where is it allan Well, some of the wage growth is in bonuses, and we're seeing bonuses now that might not stick um after we we hit the

peak of this recovery. Uh. And the wage growth has been more sluggish than one would predict from the historical relationship between how tight the labor market is in wage growth. And that's been a trend, to be honest. If you look at the nineties and the first decade of the two thousand's, the love all of unemployment that's consistent with real weage growth has been moving down, meaning that it takes an even tighter labor market to generate more real

wage growth. A lot of people have argued over the last couple of years that the cost of employing someone has gone up by quite a lot. You have to pay for the healthcare and other adulans as well. Do you think that some of the story is just not being captured by base salary, that the cost to hire is actually incrementally a lot more expensive than it was

ten years ago. Well, a couple of things that are first, employment costs index picks up, the full cost of hiring someone picks up, not only the health insurance costs but also vacation time. And the employment cost index is up but not three percent yet, still just below three percent. So that's part of the story. But we're also seeing a slowdown in the growth and healthcare costs has begun to pick up over the last year. But part of the story was we should have seen even stronger wage

growth because health insurance costs were growing more slowly. I just put on Twitter with your Alan Krueger uh, monikers. Well, maybe it's not the article of the year, but it's the reporting of the year and the gig economy where you've done a lot of work. Elena Samuel's Alona Samuel Samuels rather at the Atlantic magazine and she actually went out and got a job with Amazon Flex and the article is devastating about the new American gig economy that

basically it's a fraud. It's people working at near minimum wage, at minimum wage, net net net clean below minimum wage. What is your research? Does it agree with the reporting of of Alana Samuels. I think what we see in the gig economy by and large is very elastic supply, meaning this is a place where people can find work. She describes that they float into that sector and initially wages may have been higher than someone could earn as

a taxi driver or other parts of the economy. But because of the elastic supply, I think we're seeing an equilibrium where the wages pushed pretty low, the wages pushed pretty low. Within the microeconomics, is an income in a substitute effect? Or is it the new atomization of unions. We started out with the guilds in Europe a million years ago. John Fair, I don't know if you know this. Alan Kruger does like a ten week trip every year doing research on the guilds of cafes in Venice. Spent

a lot of time Italy. But whether it's your researching the guilds of Italy or it's the death of unions in America, my key question today is is the gig economy the new death of unions? Well, I think unions were already on their deathbed, and I think the recent Supreme Court decision in the Jana's case is going to make it even harder. For the one area where unions had some strength. We're gonna see a lot more free riding where workers get the benefits of what's left of

unions and they're not paying for those services. I've supported for a long time new structures of unions which will enable gig workers to organize, to negotiate, to try to improve their terms and conditions. Forget about Detroit unions where you made a hundred and twenty eight thousand. You never thought you'd make that before. The fact is we've gone

from sixty thousand a year union. You know, I'm just using old numbers down to twenty eight thousand non union, and now we're going to gig economy, which is somewhere below that twenty eight thousand. Is it is Mr Bezos and others taking advantage of this new wave of atomization of your American labor economy. Yeah. I think worker bargaining power has been declining for lots of reasons. Part of it's the decline in unions. Part of it is practices

companies use. Amazon has non compete classes where you can't go work for another warehouse in some cases. UH fast food restaurants have no poaching agreements where they won't hire workers away from other restaurants in their chain. I think all of these practices have weakened reduced competition for work. I think it's a good too. I don't mean to interrupt, John, but I know you're over there calculating how much Namer has been on the field rolling around. No. I was

looking at Juventus over the last five days. What are they doing with the stock? The stock is up. Is there any news not not at the moment, but they've added two and eighty something million euros to the market. We had to medicate Pharaoh yesterday. I don't know if you know this, Ellen, but he's a c Melanish act. But that we had to medicate John about eleven am. And it's got something to say about your tennis too.

I think Allen's going to give you some lessons. Come on, I mean, you can't get a hotel room in London. I think Wimbledon needs its fair share of time on this show. Frances Teo follows into the third round, first time in a major. There you go, keep going on, stop, please keep going. Is Federer getting too old? It doesn't look like it on the court. You seriously, there's such

a beautiful game. Okay. Now the new game at Wimbledon, where it's grass in the old days, is the grass today the same as you old grass where the ball slid like eight ft uh it stays awfully low. I don't know if it's the same, but it still stays. Does Nadal do it Wimbledon? Nadal is a clay guy who loves ruling garrows in France. Can he play at Wimbledon and win? Or is it just such a different game it's a harder game for him. I certainly wouldn't

rule it out. I'll tell you one thing that amazes me about Nadal at the French Open and at the US Open. His speed is extraordinary, Billy to get around the court, that the way the birst he takes, it's unbelievable. This is a created credit important. This goes like the neighbor for amateurs and tennis. Read me, shade to our forehead? Which side? Did those guys shade to? Their back hands are so good they almost shade to go to the

back end, don't they. Well, Nadal's backhand is really a two handed forehand, but you'll see you'll see them run around their back end. You know, they'll hit it inside out forehand by running around their back hand. And also look how fast they are to run around their back end. That's the best tennis player you ever saw. It has to be Federer, right. So Rosie Cassal's warm up at Forest Till she was a giant, like four ft ten inches. She would practice her leap and she would get she

was like an NBA player. She would get literally a foot half off the ground. That was amazing. But yeah, that's one thing I like about tennis. You could be any size there. There there are female players on tour five ft two ft three. I mean, this is great, John. I had no idea how it's waking up to redux my tennis life. I didn't realize you have a played. Oh I'd love to know how many I would love to see. Do you know how many women's Davis records

I snapped? Can we give a charity tennis match if you want to write in on Twitter at Pharaoh TV, we can raise some money to get to play tennis. It is now a great pleasure to bring two year from the University of Michigan, Betsy Stevenson, who does some exceptionally creative research on the American labor economy. Bessie, I'm gonna ask you the question. It has been a theme today, which is a lot of fancy people in fancy suits and try ties and dresses tell us that America is

fully employed and aggressively our listening audience doesn't agree. Which is it? Yeah, Um, well that's a great question, and I think is that what happens is we take a look at the data and we see that unemployment rates are really low. So the issue about getting more Americans employed really isn't about bringing the unemployment right down lower.

It's about bringing more people into the labor markets. But I think the thing that you hear from your listeners, that the average person hears or believes is that they don't have the job they necessarily want, or they don't have the hours they want, or they're not able to use their skills appropriately. So economists or us looking at how many people are out there looking for work that don't have any But of course you're not unemployed if you have uh, if you have a full time job.

But it's not that in the career you were hoping to have the career you trained for, um, if there's ability to move up, um, or even if you're part time. Right, And we've we've paid a lot of attention to those part time numbers. Now that's not going on. We've still we've seen the number of people employed part time has come way down as well. Um, we do have a

pretty tight labor market. The question is when our employer is going to start reacting to that by providing people more training, by giving them upward mobility, and by the big thing everybody wants, which is higher wages. But see I here for a couple of years now that we've got a tight labor market, but then we carry on printing scood jobs every single month in a payrolls report,

and the participation rates tick tire again today. And I'm just wondering how much hit and unemployment there actually is and how many people that are available to come back into the work for um. You know that that's a really hard question because the people who are you know, a lot of people are choosing not to work whatever they're outside option is. Maybe it's staying home with their kids. Um, maybe it's you know, taking care of elderly relatives. Maybe

it's living off of their savings. Whatever their options are, they've got to have something, a job that looks good enough that they want to give that up. And that's a really hard thing for us to measure. How many people out there are right on the cusp of thinking, if the right job comes along, I would change what

I'm doing. You know, if you look at at the history of the United States labor market, I mean, our labor force participation searched in the eighties and nineties, but that's because women decided to give up staying home and come into the labor market. We've had a lot of men over the last fifty years decide that they have better things to do besides working, and we've had a lot of economists trying to figure out what going to do to turn that around. And that is a fifty

year trends that we haven't seen turned around. I mean, if you just joined us, Betsy Stevenson with us with a Ford School, University of Michigan and exceptionally good at core economics, but linking it into policy, what should be the optimal policy? Professor Stevenson of the man's session? If there is a man's session, and yeah, it's better than it used to be, but a lot of people listening this is you correctly state, would say they're under employed.

What's the policy to jump start this? Well, I would not call it a man session because again, a lot of this is um men who are who have other alternatives, who have people who are supporting them, parents or girlfriends or wives. And what we have to do, though, is make work appealing to them. We have to find ways in which they feel valued at work. And the problem is we've shifted from an economy where we make stuff to an economy where we do stuff for other people.

And you know, that's what we're seeing in policy right now is trying to say, well, if we put up trade barriers, if we um, you know, do a bunch

of things, we can start making stuff. But I feel very strongly that getting people jobs that pay them very little assembling things, um, you know, the kind of jobs that are currently being done in China is not going to bring these guys back into the labor market because for for them to have dignity in their jobs, it's not just about building something, it's about being paid a respectable wage. So what we've got to do is find a way is to make the new economy appealing to

men who have very traditional notions of masculinity. I mean, Professor Stevenson. If I look at the Atlantic magazine article by Alona Samuels, which maybe is my reporting article of the year, I delivered packages for Amazon and it was a nightmare. In a lot of goes into excruciating granularity on the gig economy. Have we gone from the unions

of your Detroit urine arbor, you're dearborn. Have we gone from the unions to the atomization of it down to the non union meal you We've been in for twenty years and now we're just something new with the gig economy that seems even sub below what we were doing years ago. Are we in a new round of atomizing over the labor economy. Well, one thing we know is it's taken us a long time to really firmly established the research. But unions reduced inequality and unions boost wages.

And that's coming on the heels of the latest Supreme Court decision that has undermined unions. That unions are in massive decline in the United States. In fact, it's almost impossible to find a private sector unionized job nowadays. And you know, that means that we're removing a force that has traditionally served to give workers access to better jobs. So that's definitely happening the gig economy. It is not most people's primary job. So the BLS just had a

data saw that. But what they did that that I think missed what people are seeing is that they were looking at primary jobs. What people are doing is scrambling to make a buck on the side, and that's because their primary job isn't delivering for them anymore, and so they're picking up something on the side. Maybe it's driving

for Uber, maybe it's delivering packages. Um. You know, they're they're finding some sort of side hustle that you have to get a lot of fancy degrees, John Tucker, So you can side hustle is PhD, you know, side hustle, Betsy. This has been great, Thank you so much, greatly appreciated, Bessie Stevenson, and I do want to get her on more to to. I love that phrase. Side also exactly

characterizes what Alona Samuel's captures. Here is our John Ferrell with Dr Hessett, the opportunity now for welcome our listeners on Bloomberg Radio and for our viewers on Bloomberg TV. I'm really placed to say that we can cross over to the White House now for the Trump administration's views on the payrolls report. We're joined by Kevin Hassett, the Council of Economic Advisors Chairman. Hey, Kevin, it's always great

to catch up with you. Solid payrolls growth. Thanks for giving your time to Bloomberg TV and Bloomberg Radio this morning. I'm just wondering how you stop the President from tweeting again this morning. Hey, Like always, I briefed the President on the jobs report way ahead of time, and and you know, like before he did not reveal the numbers or anything. Hey, Kevin, let's not go there. Let's talk about how solid the payrolls growth looks and how unemployment

starts to be taken a little bit higher. Do you think it's some evidence here that this is a labor market that needs to absorb some slacks still? Oh yeah, there's definitely still a lot of room for the labor market to absorb the slack. And again, this is a great jobs report. We through the year averaging about two hundred and fifteen thousand jobs per month, and we're pretty

much right on that. I think that you had mentioned that the markets were moving a lot, and I think it's because this is a jobs report that was pretty much about what's been happening for the rest of the year. The one thing that was different is that the unemployment rate inched up. But the reason it did a is because there was almost, I guess we could almost call it a stampede of people back into the labor force.

And that's something that President Trump is emphasized as a key objective of his policy is going all the way back to the campaign, and so it was really hardening to see it. I know, it looks like it's bad news and the unemployment rate goes up. But if it goes up because people are quitting their jobs more and heading back into the labor force, which is really what we saw on the data, then that means that it's a really, really strong market. Kevin. We say it quite

cleaning that I see you sit in a participation. Right. There is one worry that's taken play, Iu swhere this economy. The headline numbers look rock solid. There is some nervousness from some of the officials in the Republican Party as well, and it's around the tarriffs story that could possibly negate the positive effect of the fiscal stimulus that your administration is introduced. You concerned about that, Kevin, Well, Look, make no mistake about it. The President has the right objective

that he wants to make trade deals fair. He wants to make them better than they are right now. There's a heck of a lot of problems non teriff farriers. You mentioned them in the previous story out China. Bight raised non terif farriers in response to this, Well, they've already got them left and right. They're doing forced technology transfer and so on, and so the objective is to make trade deals better and that should be good for the economy. And I think, you know, the President wrote

the Art of the Deal. I think that we're going to start to see those deals. And as an economist, I also look at the data. I guess that's why I'm here right And and one of the things that we've been watching for is negative impact in the data from the anxiety over over trade. And if you look at this jobs report, then one of the key places where you would see that would be in the metal using industries because the steel and aluminum tariffs are in place.

And we actually saw an employment increase in the downstream industries in this jobs reported. So there isn't clear evidence in the data the anxiety over trade is being harmful to the industries that we would most watch for harm and and I think that that's probably because these people all understand that the President's driving the world towards a

better equilibrium. Well, Kevin, I'm not sure businesses understand that, because the Federal Reserve in their minutes were pretty clear yesterday the following quote, contacts in some districts indicated the plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy. What do you make of that, Kevin, Well, that was an anecdote, And the question is what's of the data. And in the latest capital spending data we have capital spending is booming.

And if we look at the industries that could be most negatively affected in theory from the trade dispute, they're actually booming as well and hiring more workers. And so if they were really concerned about it, we would have expected to see layoffs. Well, the administration is certainly hoping there's going to be the stimulus that drives a supply side response increased business investment. As you know, Kevin confident leads CAFEX decisions, and when the President came into the

White House, confidence went through the roof. I haven't met a CEO that's too confident about this trade story as it evolves. Do you foresee any complications of it a common months? Why? Yeah, I think that the confidence is gonna skyrocket once the President starts to deliver deals, and I think in the coming months you're gonna start to see those deals. So in the coming months we're gonna see some deals, and it raises the question what is

the minimum condition for success? Because I've spoke to many people around this table over the last few months that still quite can't can't get a handle on what the minimum condition for success is with this ambition to get better deals. What is the minimum condition for success? Kevin Well? I think the President has been pretty clear that he wants deals that are reciprocal. He wants other countries to

reduce their barriers to the level that we have. And I think that, you know, minimum conditions, so the things that the negotiators work out. And I'm just the you know, the economic adviser. I'm not the negotiator, but I think that we want to move pretty much towards reciprocal deals. See the President at the G seven meetings said let's take everybody take our tariffs to zero. And it seems like some of our trading partners got pretty anxious about

that offer. But it shows that the president's serious that he's going to make the deals better. It's to a real chance that we could take Harris down to zero. Let's talk about the autos. There's a report coming down to Germany recently that we could get auto tarrifs down to zero. Kevin do you actually see that being a real chance, And away from the hysteria on the front page of the newspaper, how much talks are happening behind

the scenes, high level talks between trade negotiators on either side. Well, you'd have to interview the trade negotiators about what their talks look like. But the briefing that I've been getting is that things are moving forward, that there's a good chance that we're going to start to make deals. And it's very heartening to see that. As you mentioned that, say, the European automakers are saying, yeah, let's take the President

at his word and let's move things towards zero. Now they might have to you know, they might be offering that while not wanting to reduce their non teriff barriers, and so we have to see, right like, how it all works out. But in the end, we have fully

reciprocal deals and the President's approach will have proven correct. Kevin, I know it's not your turf, so I want to get away from it just for a moment to talk about the Federal Reserve, which, to be honest with you, is in your grounds and it's something that you watch and you carefully proceed with caution to talk about I'm

sure it was really interesting recently for many people. This administration has been so careful about the federal reserve, nominated some great candidates to the FED, really not interfered with federal reserve policy. And then a crack emerged last week when Larry Cudlow, I'm sure a friend of yours, the economic advisor to the President, stepped in with a not too subtle message for the FED not to go too quickly. Is this administration concerned about the FED going too quickly?

You know, we absolutely, on Larry and I and the President, we respect the independence of the FED. We've appointed great people to the FED. Some of them still have to be confirmed, and they they should hopefully be confirmed quickly. But we d respect the indepense to the FED. Larry always did, he did last week. I thought that story was miscovered. He was speculating about something that that you know,

I guess I what's speculated about now. But the fact is that Larry a hund percent respects the indefense of the FED. We would never ever try to pressure them to do anything other than what they think is right, and we meet with them, you know, I have lunch with the J. Powell and the other governors once a month and we meet and we talked about how the economy is doing. But even at those private lunches, I'd never say, hey, come on and cut me some slack

on interest rates. It would be totally inappropriate. Maybe not privately, but this took place quite publicly in an interview with the following quote, faster economic growth does not cause inflation. My hope is that they understand that they will have to move very slowly. That's pretty clear, isn't it. Larry was responding to a question, and without you know, giving the fat advice. Let me just say that as an economist, if you look at a cycle, let's even step outside

of this one. So we're talking theoretically, if you have a capital spending boom, then that can put downward pressure on prices and allow late in a cycle for GDP growth to be high without creating a lot of inflation. And so if we see a capital spending boom, then economic theorists would tell you then that might be that there's less risk in prices. But I would never advise the FED about it, and they're more adept at looking

at inflation than I am. They've got hundreds of economists and doing it for their whole careers, and we respect their independence. I know you respect their independence, and the econome with ay surely does make sense. But when you say the following words, my hope is that they understand that they will move very slowly. That's not subtle at all, Kevin, I want to reiterate that point. Come on, he's not lobbying them. But but but you can bring bring Larry

on and ask him. But that I can say that what Larry is thinking in his head, which is what I'm thinking, is that we've got a capital spending boom going on and that that should hopefully make it in But we're gonna in the end, it's going to be the proof will be in the pudding. The proof will be in the data, just like we talked about, like do we see the trade the down the potential downside risks showing up in the job stata and they didn't.

So ultimately it will be in the data. And I think what Larry is saying is he's hoping the data turn out to prove our theory is correct. Okay, Kevin has said, always great to get your thoughts. Pay Rolls looking solid, the economy looking good. Much more on the trade story, I'm sure from the White House in the

coming months. Kevin Hassett there, the Economic Advisor to the President, and joining us the Chairman of the National Economic Council of Advisors, Muhammad Larry Joan Faro Joam ferroor with a spirited conversation there. 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 Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.