Brought you by Bank of America Mary Lynch. Investing in local communities, economies and a sustainable future. That's the power of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated Member s I p C. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with David Gura. Daily we bring you insight from the best of economics, finance, investment, and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
and of course on the Bloomberg. Joining us now in Paris is Jean flu Crich. He doesn't really need much of an introduction. Former ECP President and honorary chairman of the Group of Thirty. Also with us in New York is Villain Bout, Chief Economist of City, Mr Triche, Well, come to the program. Thank you so much for coming on. Let's assume that the polls are right. Let's assume that so we get something like six for President mccron on Sunday.
What happened next? What kind of message does the President mccorn give to France and Europe. I think, first of all, we have to wait for the election. As Mr mccorn said himself. Of course it's never done in advance. It's not a dumb deal. The polls are very positive and I think really that Macon will have probably a very powerful mandate to reform the country because it was his own, you know view, since he started to engage in politics.
But fancy that it's a man who was not known by the French only two years and a half ago and is perhaps the next future president and perhaps we'll have a majority according to certain survey and poles that we have on the parliamentary election. It is absolutely clear that if he has this togument date, he will have a majority in the parliament in my view, and then of course all kinds of reforms that are overdue in France could start. So we'll talk about deficits and budget
fiscal rules in a second. But why do the French not recognize themselves anymore in the old parties in the classic right versus left, or they have they become too centrists. Well again, the damage that a large deal of public spendings on top of the average of the G seven countries, on top of the average of the European countries, is something which is not considered by a lot of of political parties as absolutely negative for friends and for job creation.
So the debate which we had but between mc and marian lpen showed very clearly that Macron was attached to sound policies, was attached to finance everything that would be spent, and was certainly with the intention of respecting the rules. And I trust that it is something which is very important. Mr Uche, good morning from New York. As we look at this sea change and the culture, the generational change in France, can we get a France that's a little
more fiscally responsible? You and Mr Deutsenberg and ECB had to worry about a France that would spend too much money, where the government was too big, too big for all of France. Can they get more responsible with the President mccron, I think so. Frankly speaking, it's a pleasure, of course to it to talk to you, I really think so. I think that the message that Macon gave was that we have to respect the rules. Of course, he's Cody Molso for reform, and I think he's right. It's link
for a Ministo of finance of the AU area. I myself and in full agreement with that is coding for new reforms as regards also the budget of the euro Area that would be created. But respecting the rule, we have the stability and both back and it is important of course that France applies in his own interests. It is not a question of you know, pleasing partners. It's a question of being sure that we do all what
we can to create jobs and and grow. And I think that we can be reasonably confident that there has been a change in the overall position of public opinion in France. But we will see, and nothing is done yet. What can we do about a better trade policy for France, not only trade with the rest of the continent, but trade with the rest of the world, and even I may suggest trade with the United in Kingdom. What can
be a new trade policy for France? Well, as you know, the trade policy is influenced by each particular government, of course, but is done at the level of the Single Market and of the Area and of course the European Union as a whole. So from that standpoint, I expect France to be open, of course, as was said very very clearly, to global trade, and of course you open trade that being said, of course, with the appropriate influence for the deals to be fair. And it is clearly what what
has been said. It seems to me very very openly and frankly in particular in the debate but also in the various declaration of the candidate paper. Right, the reforms
are strong. But what has changed since alone promised the same fiscal rule changes back in is you're really ready to sit down at the table and say, you know, let's start from scratch and think exactly what we want to do on fiscal Well again, we will see exactly what is the policy of the new president and of the new government, because we will leve also a government,
so a lot of things have to be done. What is clear is that there is a very very powerful will on the side of the new possible French government and president, and on the side of the German partners also and the other partners in Europe to discuss and not to discuss our need to settle the present, but also to have a view of the future and of the reform that are at stake and of the new
course of action for Europe as a whole. So from that standpoint, I think that we are in circumstances that are probably the best since quite a long period of time, because you remember at the very beginning of the Alarmed Mandate there was not not such a close relationship potentially close relationship beween Germany and France and the other partners. Well, let me bring in our partner from the Netherlands with
us Jan Clauche today, Folks is Villain Pouder. He is professor of the London School of Economics and the course head of all economics at City Group. Professor. Question from Mr Trichet, Please yes, Tricia, France still spends well over fifty GDP in the public sector. With all the talk about pension former Raby market reform, that number has to get much closer to for France to become a dynamic economy.
Do you see any chance that there will be a coalition in France that will not be frustrated by the losers of such a drastic reduction desized the public sector. Is there any hope that the France will not look like Scandinavia and the public spending but more like the Euro Area average. Well, we again, I think that you're absolutely right. This is one of the dimension of reform
which is very important. Diminished the public spendings and the proportion of GDP, which are much higher than the average. And second we have also these structural reforms and the liberal market appropriate reform, and we also have the cost
competitiveness of the country, of course, of the economy. But on the first point, I think that this idea that it is of course a progressive march in the direction of diminishing public spendings and the proportion of GDP, as Sweden, for instance, did a number of countries proved that it
was possible. Of course, it cannot be done overnight. But the winners in such an orientation are the unemployed, because it's absolutely clear that the weight of this uh public spendings is much too high and hamper the appropriate competitiveness of the economy. So the winners will be the unemployed, young people and also all the unemployed in France. Thank you so much for now the former recently Prince angel and Bowker, Bloomberg, Surveillance, David Gerr and Tom Keene. Of course,
much to talk about here. Jim Glassman and Bill gross will join us, and always Alan Krueger joins us from Princeton University, and Alan, we must take a moment on the passing UH in the last day. The death of William Bauma of Princeton University absolutely definitive, the giant of what I would call entrepreneurial economics. His book, his textbook with Alan Blinder, is truly classic. Uh. What did he
mean for the students of Princeton University. I was mesmerized at how gentle and yet how distinct in assertive his lecturing was well. Obama was a giant in the field of economics, and he was truly a renaissance man. He was five years old. He moved at the end of his career from Princeton to n y U. So it's more a loss for the Yuan. That's true for n y U. But he is forever associated with your in. He was Uh. He was at Princeton forty two years.
I interviewed him tom in two thousand one UM in the Journal of Economic Perspectives, which I tweeted out yesterday in case people wanted to read. He was truly a remarkable man, remarkable career, made lasting contributions to economics. I was inspired by his words. A humility was wonderful. He was a master student at LSC and Lionel Robbins. I believe I may be wrong in this, but I believe the story is Robbins, the giant of Elisi, personally intervened to make him a PhD candidate. He was so good
at speaking well. In this interview he told that story where he first applied and they had never heard of City College. So he was turned down, and he applied a second time and Ladle Robbins intervened. He said, this man really wants to come here, and the end of three weeks they had him joined the faculty. Yeah. I mean that was the giant sense of it. His spirit to me, and there's so many things, but almost cost disease and the rest of it, and works Tobin and others.
To me, it was his fearlessness about don't forget the entrepreneur, which dovetails into your work on labor economics. How did he describe where the entrepreneur fits in to price and firm? Well, his contributions and industrial organization, I think we're quite significant.
The work he did on contestable markets where you have a natural monopoly, yet you still want government regulation so that you have the degree of competition that's optimal um and that enabled I think many many firms to develop new technology because often the technology was the barrier to entry. He worked on ways for firms to collaborate on R and D without colluding, uh to um monopolize the market. UM. So, I think every American is benefiting from the work that
he did. The work he did on cost disease, which you mentioned is relevant today for healthcare reform. You know he was involved in in the mid nineties and the Clinton health care effort, and he explained that the reason why healthcare costs are growing so quickly is that there's
been faster productivity growth outside of healthcare. UH. And when impact of his model or implication of his model is that the government services that are provided, which tend to have slower productivity growth, are going to become more costly over time. William Bauma did, of course speak soon to Alan Blinder of Princeton, who was so associated with a professor Obama's effort and education Alan Krueger very quickly here Obamacare trump Care. Does it matter to our listeners? Well,
I think it matters to all Americans. Certainly matters to the twenty four million Americans who would lose their health insurance under the bill that passed the House yesterday. But it matters, uh to everyone else, because it will affect our costs um And you know, the estimates are for a large number of Americans the net cost of health insurance would be situately higher under this bill. Do you presume on first blush that the CBO scoring will be
remarkably like the previous CBO scoring. I don't see how it could be all that different, and what I understand that the bill they're quite similar. Yeah, let's come back Alan Krueger with us. Thank you so much for those comments on Professor Bama. That's one of those special things about surveillance, folks, is our guest quality is so good that when someone dies within the realm of economics, financial investment, it's amazing the perspective we hope to deliver to you
when we hear uh this news. If you have kids, this is the most important conversation of the day. Alan Krueger is at Princeton University and he has been eclectic writing on terrorism, has acclaim with David Carter on the minimum wage, and Professor Krueger. Here's a single sentence. I take it from Jeff go over to the Washington Poe Professor Krueger finds of male prime age labor force dropouts say they took pain medication the day prior. Your work
on opioid is not a lot of political broather. It is careful and accurate analysis of the drugs and dropouts in America. What's the policy prescription to get us away from heroin and the opioids that are destroying so much, particularly of the Midwest. First of all, I think I might use that as a title for a paper that I'm writing, Dropouts. We'll take the surveillance royalty from that place. Brookings will hand that right over to you. Um. You know,
there's not an easy answer. There are I think many components the answer. The first is to prevent the problem in the first place. And if we could keep people in the labor force, that we can keep them engaged.
If we can keep the unemployed searching for a job, If we can help those who are on the margins of the labor market to even volunteer so that they are learning new skills and staying engaged than networking, I think that's one important step to prevent the problem from growing where the problem exists, especially for those who are on disability insurance and receiving medicare. Something like forty of them receive opioid prescriptions during the course of the year.
I think we need to use rehabilitation, we need to use treatment, We need physical therapy. But the jobs do you have in your history going to Lynden, Lyndon, Maines, Johnson, frank and Dolor, Roosevelt and others. Is there a incentive prescription to create investment for lower education goods producing jobs in America. They're not going to go to Princeton. They're not gonna work for pick your accounting firm or legal firm. They're not going to do radio here in New York.
Where does that policy prescription come to help people in West Virginia, Ohio, Kentucky and westward. This is why it's a tragedy. We weren't able to invest more in infrastructure in America. We need to rebuild our roads and our highways bridges. President Obama tried for eight years to ramp up in and I wish him luck and succeeding in that because I think that will help our country and I think it will improve our competitiveness in the future.
And just as importantly, help this demographic that you're discussing. When you when you look at the field of economics and the field of policy today, make a Venn diagram of politics and policy, how much crossover is there? Having gone through this fight recently here over healthcare reform, you talked to doctors, you talk to people in health insurance, talk to people at health companies, healthcare companies. There's a
sense that policy isn't driving it. How do you get back to a point where the conversation in Washington is less focused on the politics and more on the policy. Well today, the overlap in the Venn diagrams is an old set. And I once went back and I went through all of the issues I worked on when I worked for President Obama, and I reviewed what evidence did we look at, what type of evidence was it relevant? And it was quite an impressive list. The current administration
seems to be intimidated by experts. Experts aren't always right, but I think we do have something to add. I think it's unfortunate the way that President Trump has criticized federal statistics. The impartial civil servants who toil away earned too little. In my view, they're overworked. In my view, they do the best job they can. Yet attacking the unemployment rate, um other economic measures I think is very counterproductive and I think it's uh symbolic of the disdain
for using evidence and policy development. Thomas a very important question about young people and drug addiction. How about just stepping back from that more broadly, Uh, you teach you to college, you you interact with a lot of young people. How does the labor market look for the young men and women who will be graduating school here over these next few weeks. I think the job market has clearly picked up over the last seven years, and I think
we're seeing many manifestations of that. One is that more students are going directly to work instead of on too graduate school. Uh. First. For older workers, however, I think they're still struggling. And where we're seeing I think, uh tremendous difficulty are workers in their fifties early sixties who lose a job and they're finding a lot of difficulty
getting a W two traditional job. And many of them are hanging up their own shingle, which can have some benefits, but they're not necessarily prepared for being their own boss. In hindsight, when you look at tax revenue as a percentage GDP. And let's not get carried away. It's the chart is clear, folks, it's elevated, but not that much. We're taxes raised too much within the era of Obama.
Could they tweak it a little bit lower? Well, you know, I think taxes should be as low as possible, but high enough to pay for the services that the public demands. And the public demands a lot of services. But trend. If I'm a Republican sitting here like the two congressmen I interviewed in Washington, the fact of the matter is, Professor, we're off trend. We're We're right, we're elevan needed were We're certainly not in an outlier position to create to
our history. And Tom, the proof of the pudding is in the economic recovery. You know, people said that the tax increases, that Obamacare would destroy jobs. Well what about those fifteen and a half million jobs that were created over the last taxes to create more jobs? Saying I get get Mike, can you get Mike red Hat please bring it in here, you know. But by the way, Tom, I fought for years for corporate tax reform. I think our corporate tax system is very uh inefficient. So can
we say that Krueger and Trump are on common ground here? Well, I think we're in common around and that we say that we should have corporate tax reform. Now, the nature of the reform is a bit different, and I think we can reform our system and remain revenue neutral. What did you make of the one pager, as it's called, the White House handed out after a hundred days in office,
the plan the principles for tax reform. Uh. You know, you say there's this commonality of you and the administration being in favor of corporate taxes from did you see anything in the detail? I'm not gonna say it with granular detail in the detail that sheet where you think that the administration has head in the right direction? Look, that was rushed out, and I felt sorry for the professional career employees at the Treasury Department. Um, it's not
the type of work product they're accustomed to producing. UM. I think, Uh, the idea of lowering the corporate tax rate and getting rid of some of the preferences that we have to pay for that, I think that makes a lot of sense. Tax rate for past through companies I think would be extremely abused. So I had a lot of concerns. Um, there were no budget numbers that came along with the proposal, which is which is kind
of remarkable. Um, how is one supposed to consider a proposal which would probably, you know, add trillions and trillions of dollars to the deficit without having the administration do that type of analysis. I don't know how they could in good faith say that this is their proposal, that they haven't done that type of analysis. And if they did that type of an elsis, why wouldn't they share it with the American people so we could evaluate it. Let me get back here to job stay in the
last couple of minutes we have with you. I spoke with the Secretary of Commerce Earliver this week, and he was very proud to talk about the efforts the administration is working on when it comes to training. Going back to that meeting with Chancellor Lamerko when she was at the White House, the trip that Devanka Trump, daughter and advisor to the President, took to Germany to meet with German executives to see how they train workers and keep workers at those companies. Is that a step in the
right direction? Do you think what's been the biggest hurdle to getting training programs built into our corporate structures here in the U s. As they are in Germany. I think it is a step in the right direction, But Germany also mandates that companies spend a certain share of their budget on training, and I don't see the current administration interested in that type of an idea. Also, in the president's budget outline wasn't really a budget proposal. He
cuts job training. So I think there are many things we can do. I would like to see a much better school to work training program where students who are not at the time college bound they might be college bound later on, can apprentice with companies, can learn skills while they're going to school. I think that strengthens both their school work and their ability to navigate the job market.
Alan Krueger, thank you so much, particularly for those kind comments on his colleague at Princeton, William BAUMO now at New York University. Uh uh. This day brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch Pierce Federan Smith Incorporated Member s I p C. There's something new
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Bloomberg's news and data. Download or io s app or search for the Bloomberg extension at the Chrome Store to try lens out. Learn more at Bloomberg dot com, slash lens, Chip Lastsman of Northwestern and JP Morgan with us today. We're just speaking with Alan Krueger about the death of William Boma of Princeton University in New York University and his professor. Krueger. Of course, Riley mentioned his work is front and center in your work and Frankie, the work
of every politician in Washington on healthcare. It's called bombs, cost disease, and it's where you you raise wages because you've got to raise wages, but there's no productivity gain and bad things happen. Is there where we are right now? I don't think so. I think that's where we were in the nineteen seventies and early nineteen eighties. But I think people we live in a more competitive world, so companies aren't as quick to grant wage increases that they
can't be matched by productivity improvement. So I don't really think that's our problem today, but it is a problem for the worker because it is productivity that really lifts our living standards. And I talked to Ben Bernanke, and let me ask you the same question. Which part of productivity are we most challenged by? Is a capital dynamics, labor dynamics, or is it something unknowable like all this
technology we're dealing with each and every day. I think it's unknowable because here here we have a massive amount of innovation going on in the technology sector, and in fact, we all think that they're not really measuring that properly. But then on the other hand, we're not seeing the productivity gains that you expect from innovation. I have a feeling it's just really volatile and random and it takes time for us to sort of milk the benefits of
all this innovation, and there's so much going on. Maybe that's that's part of the issue. But um, I wouldn't be writing oh bits yet for productivity because I think looking around it just feels like we're living at a time of rapid innovation and it just know whether that show you know, how long does that take to show up?
I don't know. It could be a decade. Chris Rupie writing yesterday that the productivity read was a big ouch for the economic right, big ouch for the economy plainly sputtering in the first quarters we we start the year. Uh yeah, but that's all because of the bizarre not to be believed GDP estimate that the things slow down
practical Transtorp, I don't even think it's transitory. Frankly, I think it's fake slowdown, because the truth is, if there's a seasonal distortion, as the b e A and everybody things, including the FED, then it's not really transitory. It's mismeasurement of the quarterly GDP figures. And I think that's what's so useful about the labor market data. You sort of
have two different perspectives on the economy. And interestingly, the labor market data suggested that things accelerated at least through February. We had a soft March paywall figure. But the employment picture looks quite good. The GDP figure figure is not and this is, by the way, probably going to be corrected. When you look at the second quarter or third quarter GDP, we'll see everything kind of line up again in the in the panoply of economic data, giving you some indication
of growth in this economy. How much does GDP matter to you? Given that, uh, it can beast to volo. It doesn't matter at all to me. Quarterly figures I don't really pay attention to. The one thing I pay most attention to is jobless claims because they are the most accurate indicator we have of the pulse of the economy. It only tells you what's going on with the businesses that are operating and what we've seen so far in
the first quarter. Uh, the trends. You know, it's a steady economy and in fact, if anything, it feels like the economy is still growing a little faster than trend, thank god, because we still have some populations of people out there who dropped out, there were discouraged, and they're coming back in. We need we need a little bit more above trend growth to get everybody back to work.
What you're talking with the professor Kruger just a moment ago about job opportunity for new graduates of colleges and universities, a lot of them facing that crude reality. And just a couple of weeks here, let me go beyond the headline numbers just a little bit here as well. You look at employment among African Americans, say, it's still you know what, upwards of eight percent. Why have we not been able to target smaller sectors or parts of the economy,
different demographic groups. Now that this recovery has continued for as long as it has been, where where is that deficit come from? Well, it always happens, right if you look at unemployment by level of education or um ethnic background, what you always see that pattern. And I think that that's why the best thing that we can do, I mean, the only thing that we can really do is make sure that the macro economy continue is to recover and I think a lot of those problems start to get fixed.
But but the truth is looking deeper, it's really about education and lack of education, lack of skills UM and a lot of those jobs are not in the urban areas where people need the jobs. Is the problem. It's tough to it's tough to commute to the jobs. So I think this is a chronic problem and a problem that we always have uh in every cycle wait for uce. This goes back to Laurence Summer's idea of secular stagnation, which is a secular view versus a cyclical view. Are
we conflating the two ideas too much? Probably because the yeah, because the demographics. You know, the problem is the very negative view that everybody had about the economy comes from this slow growth. We're doing getting well. The slow growth didn't prevent us from getting back on our feet, and it hasn't prevented the US living standard from rising. We're
now a record levels. The problem is, um, the slow growth is not really it's about demographics a lot of it, and so it's very easy to can use the cycle strains with all the other stuff that's going on, the disruption from innovation the globalization, the demographic shift, and I think that's the problem that we were still thinking, well, this is about the cycle. Truth is, we're pretty much recovered.
We're not fully recovered, but we're pretty much there. Most people have a job for a half percent unemployment is not bad. There's still our pockets of unemployed. But the truth is the cycle is behind us, and now we're The stresses that we're feeling are more related to these things I've been going on long before the downturn in
two thousand eight. Let's ask about the economic promise here after the election, and we're talking with them about at the top of the show about trumponomics and what we can read into trumponomics from what we saw on Capitol Hill this week the vote on another iteration of of healthcare reform. Uh. You note in a recent recent note that equity investors have been patient. Why do you think they've been so patient here? And how long do you
do you do you expect they will be? Yeah? You know, if that's interesting because I I think what we're learning in the markets is that the this is not so easy coming up with all these grand ideas tax reform and infrastructure spending, healthcare reform. We could barely get it out of the House. I think what's going on the empty market, though, is it's not that they're counting so much on something specific to the legislided process. It's more of that they feel that the mindset in Washington is
turning more pro growth. I imagine that must be what's going on, and so if that's the case, I think their patients it's probably longer than we think. I don't know, you know, I think after a year or so, if you don't see any more progress, maybe that's an issue. What are you gonna look for today? I mean, we're supposed to do this in the next section. We've got so many distractions going What do you look for? Yeah, somewhere between a hundred seenty five and two hundred thousand.
The last month was weird, and particularly in contrast to a dB I don't get I don't really I don't really know what's going on. People think it's whether I don't know, is it? Because and we're back to forty five dollars a barrel, the oil hunk of the American economy gets in the way of all the smoothness, the vectors, the gradients, that you want to deal with. You know, it could down the road. It's only very recently that oils pulled back, and that's sort of leaving a cloud
over the market. But the truth is the oil sectors still has been picking up quite a bit and until very recently. I think if oil prices don't sort of get back to like that fifty dollar range, maybe this is gonna be a drag. The odd thing about oil, though, is we all tend to react to it like this is a bad thing for the US economy. When oil prices go down, it's a bad thing for the energy sector, it's a good thing for Americans, and in fact, we as a country still used twice as much oil as
we produce. So the problem is it's hard to see what consumers are doing, how they're spending their windfall. And I think that's why equity investors, when they see oil prices go down, they think negative because they can't quite see where the beef offsetting benefits are. Jim Lastman was this year on Jobs Day. We're just a few minutes away from getting that data from the Labor Department, and always value the perspective of Professor Krueger. Jim Glassman. Bill
Gross will join us in just a little while. Are really lucky here? What very lucky? I come off the TV set this morning to the top of the shows, the usual suspects, but we are very honored to have each and every one of them here with us. I come off the TV. So just to give you a vignette, folks, it's uh, you know, they take me down and they give me my walker to get you over the radio. There's Philip but he's standing with Edward Morris, and I go,
how good is this? We get to talk to the smart people from JP Morgan as we get to talk to John Tucker. I mean, you know, there's no there's no he's bringing the for the he's the downer with the traffic flow. Yeah, well he's we're working on it. Uh. This morning, we're joined by James Glassman here in our studios at head Economists for Commercial Banking at JP Morgan Chase. We talked a lot about uncertainty and the degree to which that's weighing on investors, how it's weighing on the
economy generally. How about the labor market. Are there are there people reluctant to hire because they don't know what's going to happen with regulation or with taxes, said, I don't think so, you know, uh, I frankly, we're always doing anything with uncertainty. I don't know a time that we weren't dealing with uncertainty. And I think what's happening is when work, when employers see what's going on in
the job market. Everybody has noticed we're getting job growth a pretty decent up sixteen million in the last several years, the last eight years. So what that's doing is this making people realize they need to get ahead of their staff needs. And so I think regardless of the uncertainty, they realize that it's getting gonna get harder and harder to find people, and so it makes people want to look harder for folks. So I think that's really been
a real change in attitude about hiring. And maybe and maybe we're that maybe that's one reason why we're getting a little more hiring than you might expect. What the kind of growth we get. What can you tell from looking at layoffs? Average number of layoffs? What does that figure tell you about the economy. They're just about as low as I've ever seen them, and relative to the size of the labor force. UH nothing going on the jobless claims trend. UH is telling you that there's nothing
bad going on in the economy. Then, in fact, if anything, we're still probably growing fastive in our trend. If there was a problem somewhere, you would see layoffs picking up a little bit. And you know, we're we're it's a it's a really spectacular view of a very flattering view of the economy. What you see from the from the layoff story. When you look at this labor market as a whole, what are the pockets are the corners of it that are still lagging? Be that demographic, be that
in terms of educational timent, what still needs improvement? Well, there's two things. Really, There still are just a few folks who are working, a few folks more of a normal who are working part time involuntarily. That problem is rapidly disappearing, though. I think that's a story about family owned businesses. And then and then the young people from five year old people in their prime working years. A lot of folks got discouraged during the recession. About three
million dropped out. That number has now come down to about one and a half million. So people are coming back in. But I would say we still have a year's worth of good job growth. We need to get all those people back in. About a million and a half young people still to come back and living with family against still in school. Maybe yeah, but they claimed James Glassman power point which is treasured and captain Mr. My favorite notes is the invisible unemployment. What do you
mean by invisible unemployment? The folks who just gave up, dropped out and did something else. The smart ones went back to school for special job skills. They don't show up as unemployed because if I give up looking for a job, I'm not gonna show up. So if a Trump and Goose of nominal GDP of fifty basis points half a percentage point, does that mean anything that you're invisible helps to pull them back? You think? So? Yeah. They wake up in the morning and I go, jeez,
I feel better. I just well, I got a tweet. Their friends are telling him, hey, there's a job here, um, And I think that's how it happens. The kids find out that there's opportunities. And you're starting to see that happen. The participation of young people now because coming back in the farthest west tenth Avenue. You actually traveled, do you see a lot of you see a lot of help want? They do? Actually? Uh? And in places that I always wondering, how do you how would you find somebody here? Uh?
That there? You know, And the fact that you're posting help wanted means it must be you must be desperate, because there's many ways of finding job. Is desperation translating to higher wages? In other words, of this an employees market in technology In some markets that there there are stories, but overall not yet, not on tenth Avenue, not in the bodeg on tenth Avenue. You've been to tenth Avenue
till twice. Let me ask you how manufacturing. There is this clarion from this administration about bringing manufacturing jobs back. How does the manufacturing sector look in this country at this point in terms of it's it's relative health. Well, it's been hit by the all that was going on the energy sector. When energy prices came down, all the activity related to energy kind of died and CAPEX slowed down industrial production. That began to change late last year
as activity picked up again. So we'll see, you know, But but the big, but the big wind hitting manufacturing is all about innovation and technology. And all you gotta do is go to an autopoint in Electington, Kentucky, UH just to see what's going on. You don't see too many human beings. It's a huge issue and sustains through this generational shift. We have a generation constancy on Jobs Day. The perspective of James Glassman of JP Morgan, we do
that now. He will stay with us through the statistics will see in five and a half minutes, and then perspective from Jana's Capital and Bill Gross. He has been most generous to talk to us about the Central Bank of this nation and of course the impact on fixed income Jobs Day. Let's get straight to the numbers here. The April numbers from the Labor Department, starting with the change in non farm payrolls survey was a d and
the actual read two hundred eleven thousand. But catching my I here is the revision for the March numbers, revised down from what was a disappointing number thousand revised down to seventy nine thousand. Looking at the unemployment rate here four point six percent. The survey was four point rather sorry, survey was four point six percent. The actual four point four percent. Uh, what do you make of that March revision? Down of a churn here yields moving a little bit.
I don't see that much of a market movement. I mean, still focused on oil. But wage growth isn't all that good. I mean, let's start with the unemployment rate. Jim Glassmow with JP Morgan with US four point six per was to survey a lovely four point four percent. But you know that's not for good reasons, right, yeah, not with not people are disappearing, um, but still we're kind of in that zone of um, what the fat things of
its full employment? So I think they'll be encouraged by the report it you know, it tells you we're not quite there yet, but I think it keeps them on board with the idea of getting their funds right back up. That revision negative six is certainly not what you want to see, almost like a second derivative of pop up and in wage growth. Uh, you know, it's it's just a mixed store here. Every year hourly earnings two point five with a bad revision is the average hourly earnings number?
Jim Glassman, is it a blue collar statistic, or does it capture all of America? Well, it doesn't capture all of America and it doesn't capture all of pay. So there's a lot of benefits and healthcare insurance premiums and things like that that are not in there. But remember this thing was stuck at two sent forever, so it's come up a little bit. Look at the labor force change, which goes right into that unemployment rate next to nothing three thousand than a hundred and forty five thousand. Those
are buoyant numbers in a terrible twelve. Yeah, so we had you know, these numbers are very volatile on the monthly basis, had a surge of labor force earlier in the year, so it's hard to tell. Sometimes you need about six months behind you to see what's really going on with these numbers. They get very volatile. How do you link this into the productivity reports that we saw the other way quickly here? Please? Well, you know slop
aarctivity means that's what's the restraint on pay. So if parctivity were booming, we would be seeing stronger gains and average oly earn. He's probably okay, Jim Glassman with this JP Morgan, and we say thank you for that. And now joining us Bill Gross, he is with Janice Capital. We welcome all on Bloomberg Television into our cozy aboard our radio studios here David Gura and Tom Keane to speak to Mr Gross. Bill. Wonderful to speak to you again, and we really value your being with us each and
every job's day. I'm going to suggest, even though there's not much market action, when you look at last month's multi report, this is certainly not the bang up report the job optimists would have wanted to see. Well, that's certainly not in terms of wages, in terms of the potential for the FED to be a little stronger and a little more hawkish. Uh. You know, the job's number,
I think is a good number. And the U six, the underployment number came down from eight six to from eight nine eight six, which is a pretty substantial change. So there's something in there for everybody. To me. It's simply suggests that the FED continues on its course of gradual increases, and that, of course is the the primary question. What does gradual mean to the market. Gradual means like forty basis points for the year and to the FED in terms of the dots, that means fifty to seventy five.
And there's the conundrum, as you know, cher Yelling does focus on this labor report. Does she need to focus on in her usual months to month and quarter to quarter away or does she really need to focus away from the jobs report on at a lot of other themes within our American economy. Well, I think she needs to focus away. There's been a number of reports, supportive reports that suggests that low and negative interest rates do strange things as they approach or punched through the zero bound.
I've been talking about that for several years, and I don't think the FIT or other central banks really focus on enough the fact that low low interest rates keep zombie corporations alive. And that feeds into your question for productivity, the fact that low interest rates destroy you know, very productive business models like insurance companies and pension funds and savings in general. And so the FED, to my way of thinking, is a model driven type of institution, and
their models are outdated. So they need to get into the future as opposed to come back from the past. Bill, We've got to go to the market dynamics right now from this important jobs report, and I want to go right to the research chase that's going on in the
last forty eight hours. Would you presume commodity dynamics that we've seen and the worries about China, which are always their link to commodities fold right back to a central bank discussion of the United States of America, Or maybe it's not a taper tantrum, but it's an oil tantrum. Is that what we're seeing if we presume a more restrictive fed Well, you mentioned China, and China is a tough one. Uh, certainly in terms of their policies and
their credit creation. Uh. You know, China, to my way thinking, a year ago, UH jumped up credit to a type of annual rate and created global growth more than expected. Now they tend to be tightening the reins, so to speak. But no one really knows about the shadow banking system in China, little on the shadow banking system in the
United States. I have a sense though, that that credit is being restricted, that their short term rate has moved up by two to three basis points, and the ultimately that makes a difference on a global basis and that's why you're seeing oil prices and that's why you're seeing other commodity prices come down by five ten in in some cases of simply because China, as the growth creator
and the credit creator, is simply slowing down. So we were talking with Villain Batter a little earlier today from City Group, and he said he does not think that Trump and omics, as it's come to be called his run its course. When when you look at that still nascent brand of economics, where do you think we are? Well, I think it, uh, it's still running its course in terms of mark gets and and that's where you have to, uh, that's where you have to discriminate between markets and the
real economy. Obviously, the real economy is only three or four months old in terms of Trump and the administration, and the policies haven't had a chance to work yet, let alone to be put into law. But I think the potential of course for lower corporate tax rates whatever that is, the potential for reregulate deregulation in terms of
significant industries, the potential for um uh you know globalization. Uh, you know, there's there's lots there that have affected markets and affected currencies as you and Tom follow but the real economy is yet to punch in. I think I'm a skeptic. I think that the real economy in the US and in globally, but the US economy is a two percent number going forward, and that it's a function of productivity, and the productivity you really can't be affected
by corporate tax rates. Just look at it this way. Let me finish the thought, and I'll let to ask another question. Um, you know, productivity is a function of investment and and corporations have had lots of money they can borrow money at the cheapest rate possible in in decades, but yet they failed to do that. And so cutting corporate taxes, giving them cash flow, letting them repatriate money from outside the United States, will that do a lot of good in terms of investment? I don't think so.
I don't think I'll make much of a difference. And so two percent real growth, I think is where we're heading. Yeah, I think that the saying goes if if if ands and butts were candies and nuts, every day would be would be Christmas. I'm increasingly interested in in patients, how long someone like you is willing to give Washington willing to give this administration to do something like tax reform
or healthcare reform or regulatory reform. Well, I think it gets down to David to the to the number, to the real growth number. If it's three percent, if they can really recreate three percent type of economy, then investors can be patient and they need to see that as we move along. We didn't see that in the first quarter. We're seeing a potential four percent second quarters, so still
up in the air. But three percent is the number that risk markets, that equities, that pe ratios, that HI yield spreads in terms of their compression are all based on. And so I think there's some disappointment ahead of it's two and there's some optimistic uh movement in terms of prices if it's three. Bill girls very quickly her How
correlated are the markets right now? Is over at New Burger Birming yesterday talking with their good folks, and there was a real statement of the new genus of the markets, the lack of correlation. How would lock step are the different asset classes right now? Well, I think they're in
pretty lockstep. I mean, you can talk about the last three months in terms of the correlation, but to my way of thinking, I always go back to the most asset prices, and almost all asset prices are correlated to the neutral FED funds rate, to the existing Fed funds rate, the forward Fed funds rate, and from there, uh, we derived the you know, the Gordon discount model, the dividend discound model, and others. And so I think the correlation
is really in terms of interest rates. And as long as we stay stable and relatively low, then markets can stay stable and relatively low. But there's risk there, and perhaps we can talk about that, and let's do that. We'll talk to you. It's like Uncle Wiggily. He's telling us what's gonna happen in the next chapter as well, Bill Gross with us the janis at Capital and Bloomberg
Television and Bloomberg Radio worldwide built. We're talking about the correlations within the market, and you were linking them to the anchor of central bank action. And yet the commodities are in free fall. How do you how do you use commodity dynamics within your work? Are they an opportunity when they plunge like this to make alpha down the road? Do you go long and oil? Do you go along Canada. Do you go along Looney rather, how do you play
a commodity plunge? Yeah? Uh? In two ways. Tom first, in terms of car and says, you look for a very undervalued currency. I like the Mexican pay so so. I recognize their obvious problems in terms of Trumpian policies going forward, but I think it's a very attractive situation and very volatile, which which makes it possible to you know, to basically to sell puts on the Mexican pay so so.
In terms of commodities, what I look for, and I'm a volatility seller at relatively high volatilities, I look for those commodities that have been most recently volatile. Let's take gold for the last two or three days. You know, a pretty dramatic decline in terms of gold following on a pretty dramatic decline in real interest rates. UM are arising in real interest rates which produced that, and so UM gold, to my way thinking, has a relatively high volatility.
UM oil is creeping up there with US downdraft in the past few days, and so i'd rather than look for price distortions to go long or short, I look for higher volatility to sell on the wings and to take advantage of uh, you know, of the premiums as opposed to the potential price drop or price increase. Tom touched upon this a few minutes ago briefly, But when you look at oil right now, what do you think
is is driving the price lower? We were talking with Steven Short yesterday and he suggested that this had nothing to do with with OPEC. It was a different story than that. What's your sense of what's motivating this downturn that we're seeing. Well, you looked at oil both in terms of supply and demands. Sometimes that the supply is a mystery, especially with the shale in the United States
and the marginal price for production. But you also looked at demand, and to my way of thinking, global demand for oil is a reflection of global growth and a reflection of potential Chinese growth. And we've talked about this ten minutes ago. But I think the Chinese economy is in the process of slowing raising credit, and that in turn reflects in terms of a lower oil price down the road. So um, both of those things. I don't
think oil has a lot further to go. Um, you know, it's a close to forty five can go down to forty I suppose, But I think we're in a zone here where where oil can be sold in terms of its volatility, both at levels of fifty plus and at levels of forty minus. It's it's a it's a pleasure
to privilege to talk with you on jobs Day. And I wonder, aside from that being a good peg, how you how you rate the importance of data on the labor economy when you look at the health of the U S economy overall, in other words, when you're looking at all of this data, this panoply of data, how important is that is the labor market at this point? Well, I think it is uh. And ultimately to my way of thinking, David, I I moved from jobs to retail sales.
That there's definitely a connection, right, not a direct connection, but to my way of thinking, that an economy is a reflection of demand, consumer demand. That's why we have economies to provide consumer products. And so you know, I look straight from job creation to its effect on retail sales, and of course we've seen some pretty disappointing numbers. That's a lot of it. Of course, because of the transition to UM you know to the internet as opposed to
to to hardline stores. But in any case, retail sales have been very slow, and so you would have to wonder how you know job creation has affected that and why it hasn't affected it more positively. But you know, to my way thinking, the weak economy in the first quarter is a reflection of sales even in the face of higher UH employment numbers that we experienced. No, there's been no one more than you that is spoken of
this nation's financial repression. A few visits ago, you made very clear to us you look at financial repression in seven eight years, and I believe your language was even a decade. I spoke to Sherman Bernanke earlier this week. I believe I mentioned you about his Dylan South Carolina. In the crushing weight on savers and investors? What do they do? Let's revisit this again. What do our listeners actually do about the dearth of yield in their investments? Well,
there are number of ways to do it. I don't think you do it by taking more risk. Obviously, that's one way. By taking high yield bonds as supposed to treasuries at the extreme example, um that would not be my recommendation simply because of the compression of spreads and the inherent risk at these price levels. What do investors do? What the savers do? Um? Do they sit it out? Um? Yeah, to a certain extent, I think they do, and they
wait for a central bank, hopefully the Fed. They're on the move upwards, although very gradually, they wait for a central bank to to renormalize. To some extent, I don't think that's ever going to happen relative to ten or twenty years ago. We're not going back to a two percent real rate of interest simply because there's too much leverage. But savers have to be careful as as we move higher in terms of interest rates. Uh, simply because there's
a price declines ahead. If they invest in junk bonds and even long treasuries. What a savers doing a long term? Uh? They save more? What do they do? They work longer? Um? What do they do? They lower their standard of living? And those are the repercussions basically of a low interest rate that is a reflection of central bank policies that
have kept interest rates down. That rest interest rates like you talked about for the last six or seven years, is this generational and that we migrate back to what you and I saw our grandparents doing in the twenties and the thirties. Do we need to get the use to a three percent coupon being a big deal? Yeah, I think we do for a long time. I think tonk to a certain extent. It's a function of demographics, and a demographic wave is something that's hard to resist.
We know about the boomers and the retirement of the boomers, and the fact that all older people spend less and therefore the real interest rate should be uh, you nconcomminally lower. We know that globally it's the same situation with Japan.
Is are Petra edition so uh? With demographics alone and the high level of debt relative to GDP in most countries, you know, it's a situation where you have to get used to lower interest rates, if only because if central banks raised them too much like they did in two thousand and five and six to five and a quarter percent, you can break the bank. Milkings to Global conference just wrapped up in the Secretary of the Treasury was there in conversation with our editor in chief at John Michel.
Mr Gross was pool side at the Milk conference of course, of course, but one of the things they discussed with the prospect of their being long bonds of Secretary monution issuing bonds of fifty years or longer in duration. And he says, there's a working group at Treasury looking into that. Right now, what should they be think about, how should they be approaching whether or not the Treasury Department shouldn't
fact issue bonds of longer duration. Well, simply, I mean, Warren Buffett would simply say if he was asked, I don't know if he's been asked, but he would simply say, you should issue debt when interest rates are exceedingly low. And from the Treasury standpoint, and you know, they're not a profit making institution, but they certainly look towards, you know, the attractiveness of either issuing debt at high interest rates or low interustrates. It's better to issue with them when
they're low. And and and yes, it's being opposed by the street, by the investment banking world, and to some extent by the uh you know, investment institutions like Janice, I Guess and Pimpco. But the fact is that the Treasure should be loading up on fifty year dead and maybe even a hundred you're dead simply because at three and a half percent, it's about as attractive as it's ever going. Again, if you if you take out a mortgage, you want to take it out at three percent as
opposed to five percent. And so come on, okay, Bill, this is really important. Everything we've talked about before is absolutely useless. I want you to explain the geniosity that the San Francisco forty Niners gave up Mitchell Trobinsky of David Gura's North Carolina to the Chicago Bears and yet took a motherload of draft excellence. Are your forty Niners super Bowl bound? Because he said no to Trabinsky of Chapel Hill, Well, certainly there's one or tim more wins
ahead because of that. That's up ever heard of. You know, if I were a Chicago Bear fan, I'd be hanging my head and uh in shame because they moved up from three to two. They got the same person that they were going to get anyway, and they gave away draft choice about there you go. We we thank ESPN for their wisdom because I had no idea what I was talking about. Their nick wagon or over to ESPN helping me out there with Bill Gross on how the
Bears failed on this mission. Mr Gross, thank you so much. With Janice Cappel and of course uh an affection for what they do they want if they want one or two more games, David, they double right double their own this year. David Mitchell Trobinski, He's like the real deal. Yeah, well, I mean highly touted. Who do you follow it? I follow Manchester United? I can't. I mean there's too much is everybody knows listening. There's just too much to watch right now. I will say I don't follow the NBA,
and I love watching the busted Celtics. It's just they're just they're just fun. I have no idea what I'm looking at, but they're fun. I like it a lot. 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 David Gura. Is that David Gura? Before the podcast? You can always
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