Surveillance: Household Survey Was Up, Kudlow Notes

Larry great to catch up with you. A bit of confusion around the desk on the payrolls report. So let's start with your interpretation. Big freight number on the top line. Then wage growth is pretty solid. What do you see? I agree with you. I think that top line number of twenty thousand is an absolute fluke and there are a million reasons for that. Winter seasonals. The government shutdown the scoring of it, the um you know, classification of

people working a non working I think it's crazy. More interesting was the household survey, which tends to pick up smaller businesses and from which unemployment is derived. So the household survey was up two hundred and fifty five thousand. That's a very big number. Hence, unemployment fell nicely from four to three point eight percent. And as you know to John, the wage rates average hourly earnings twelve month changes now up to three point four percent. That's a

terrific number, biggest in quite some time. And I want to add one point to those people who incorrectly believe that higher wages and more people working cause inflation, that's wrong in my judgment. But if you buy that, just think of this. Earlier this week we had a number on productivity output per hour, really the heart of the growth of the market economy. One point eight percent increase for the four quarters in eighteen. John, that's a big number.

We haven't seen that, right, It's been flirting with zero for years. So let's say your wages arising at three point four percent, I would argue the workforce is earning its pay increase with more productive than efficient activity. So if you take your three point four minus one point eight, you're one point six. There. It's not inflationary. That's actually below the FEDS targets if you follow that logic. So I'm quite happy with that, and I think it shows

a very healthy economy. So Larry, I think the Federals at this point, but actually agree with a lot of what you've said, specifically on the wage growth number not meaning much for headline price pressures. At the moment. We just get this concern back on the table about global growth. Are you confident that the US is pretty well insulated to the slowdown with sing abroad? Yes, I am, I am. I'm not saying that we we live in a complete island.

But look, we're the hottest economy in the world because we've made some important pro growth reforms. You and I have talked about lower tax rates, deregulation, opening up energy, and so forth. Good attitudes. You know, we're not there's no war against business here. That's good. The other trouble is Europe, the one I'm interested in. We'll probably get to China in the moment. But John, you know Mr Dragon is a very smart man. I'm not here to

take his inventory. I'm just saying another round of that version of quei right concessionaire, cheap loans to banks. I believe this is the fourth round that that's not the answer, John. The answer is they've got to make labor and fiscal reforms throughout Europe, and most of those countries haven't really done it, so their growth rates are uncomfortably close to zero. I don't think Europe is in an outright recession, but the growth rates are so low. We are buying their goods.

If it weren't for the US. You know, our consumers are buying their goods. Our businesses are by and their capital goods, right industrial goods. We're the only demand they have, so it's kind of working the other way. It's not that they're damaging us. We're trying to help them, but at some point they've got to take measures. Help comes to those who help themselves. So the European situation is the European situation. I wish him luck. We had trade talks this week. Well you know what, I'm going to

use the term constructive uh Massador Lightheisers, our leader. I participated with the Secretary General the EU, Martin Selmayer. We're moving towards what some of us call an early harvest on things like l n G and soybeans and single standards on pharmaceuticals and so forth. There are a lot of issues here. We're moving in the right direction to show that the United States and the EU can in

fact have a much better trade relationship. By the way the EU is helping us with China, the EU is going been China a very difficult time and exactly the same structural issues that we are discussing with the Chinese. So I'll just say the europe the European trade story looks better to me. So, Larry, let's talk about the Chinese story. There is a feeling from a lot of

people I've been speaking to on Wall Street. I wonder whether you've been speaking to the same people that the President wants a quick deal, and he wants a quick deal because he's worried about the markets. Is that true? Does the President want a quick deal here? Larry, No, I've never understood that story. How many times the President have to say it has to be a good deal

for the United States across the board. You know, I p theft, force, transfer of technology, cyber hacking, ownership enforcement, you know the issues as well as I do. He has said this time and again. Now, I think there's a lot of optimism from the President, and I share his optimism. The deal is not done yet. We're still working away this communications all this week. By the way, between the US team and the and the China team.

But a quick deal. Heck no, he wants a good deal for the US workers, right, farmers, ranchers, small businesses, technology companies. He wants a good deal. Remember he walked out of the North Korean talks and it wasn't his liking. Is he prepared to walk away from these talks? Well, I'm not. I don't want to speculate. I'm just saying

that he's making a point. If these things are not in the America's interests, whatever, whether it's a security deal or a trade deal, if they're not in America's interests, he will not accept it. That's the only point I'm making. Now, don't read me bearish. I'm not bearish. Now there's a president. But again, this idea of a quick deal just to get a pop in the stock market, I just wanted to strenuously disagree with would right now Larry Off to

handle it? He said, sometimes he us have to walk away. There's a belief amongst a lot of people, and you can tell me and put that right. There's a belief among a lot of people that on this particular issue, he won't be willing to walk away because he's worried about the price action in the market. Are you saying that's just not true. The market action, the price action isn't a factor in these negotiations. That is just not true.

That is just not true. He has to do what's best for American technology, for American workers, American manufacturers, American farmers, and it has to be enforceable, John, Yeah, it has to be enforceable. Ambassador Leheiser has put together very detailed and innovative enforcement procedure. Okay, the Chinese signed onto it when they were here two weeks ago. We are waiting to see if President she and the Politburo invasion will continue to stay signed on. Those are the factors we

have to tech the United States. We have to act our own interests, our own technology, our own security. So no, no, a few points one way or another on the down is not driving his thinking. Never has been. Actually, I didn't know where that came from. I'm not saying. By the way again, let me underscore at this point the president is cautiously optimistic. So am I souls are you know,

trade policy group, my colleagues. So I don't want to say that we're about to leave but if it's not the right deal for this country and this country's long term future, John, we won't take it, and the Potus has made that very clear. Let's talk about the the enforcement mechanism, Larry. A lot of people confused as to how you come up with a mechanism to enforce the Chinese to make sure they don't do anything funny with the currency. What's the thinking here, Larry, Just lift a

little the negotiations. What is the enforcement mechanism there, aside from just a written agreement from the Chinese and a pledge not to do it. Well, look, um, I'm the currency point. We've asked for currency stability number one, no manipulation, and number two, we've asked for greater transparency, John. Where transparency in this case means we would like to know as quickly as possible any currency interventions undertaken by China.

We'd like to know that that's part of the deal that was agreed to in the talks here in Washington. We'll see if we get a sign off from the top leaders in Beijing. Story. As you know, the trade deficit in the United States just came in at the widest level in a decade. The economy is strong, importing

more here in the United States, that was inevitable. The President, though, wants to close that trading gap, and I'm just wondering how much of that is within your control and how much of that will actually be down to what happens

in the FX market. Well, look at that point, I think the increase in the trade gap is largely a function of American growth, where the fastest growing economy of all the major countries, and that are uh supply side policies on low tax rates and deregulation and trade reform. By the way, we have a very good U. S m c. A trade deal cooking with Congress. Nobody ever wants to talk about that. I think it's really important

and I think it's pro growth. So our growth right now is in fact generating a faster or a wider trade gap. You're quite right, but you know that's that's a good reason. I'd like to see these other countries grow faster. That would help us. But with regard to China or any other trading space, John, the key point for US is to break down barriers, so we have reciprocal tariffs and non tariff deals and allow American businesses right to export, give us the market openings to export.

We are the most competitive economy in the world today. A and if you open the door, we will sell you tons and tons and tons of goods and that will shrink the trade deficit. That's a pro growth solution to trade. And I'm hoping and again I am guardedly optimistic as presidents with regard to China, I believe we are moving in that direction. Market openings for USA export sales, industrial commodities, agricultural mollities, and also again fair, fair, and

legal uh technology discussions and laws. That's what we're aiming for. And by the way, don't I'm not there, believe me. I'm just saying to your point, there's no Willie Nelly fast deal here to get thirty points on the dab. This is a long term, historic, historic opportunity for the future of the United States. Do we have a date for meeting with President Jay? Larry, I beg your pardon. Do we have a date for meeting with President? Nothing in cement John, I can't report anything in cement um.

The news reports of late March are uh, in a loose sense, accurate, but nothing in cement It could go into April. No strict here again, let me fall back. We want to get it right. So we made a lot of agreements here in Washington two weeks ago, very very fruitful, positive talks with Vice Premier leu Hey and his group. Now it has to go back and clear the top level. President she and the polup. You're in Beijing.

But we want to get it right. John, You know what, that's the key, not the timing, not even the place. We have to get it right. So it's in America's interest. Hey, Larry, always great to get the inside from you and the administration. Thank you for always dropping by off the payrolls and recut like that. Joining us from Washington, d C. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple podcast, SoundCloud, or whichever podcast platform

you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.