Surveillance: J&J Pause Impact Unclear, Bernstein Says

member of the White House Council on Economic Advisors. Dr Bernstein, what is so charming about your work out of Hunter College in Colombia, as you've always gone for the societal effect of America. How does the Biden administration sustain the confidence of society given the shock of these these false steps in our in our clearing from the pandemic. Yeah,

it's a it's an important question. And I do want to make clear that while you appropriately called me Dr Bernstein, and I'm not a medical doctor, and uh, we have a deep staff of medical authorities and public health officials who are just pouring over this information. Uh. On your question, which again it's it's always a joy to talk to someone who kind of knows the history of what we're

talking about here. Um, if you look at the polling on the infrastructure proposal, north of seventy of Americans are supportive, and more than fifty of Republicans are. And the reason is is when it comes to the fact that there are four hundred thousand schools and child care centers where lead leeches into the water. There's thirty million people who don't have access to to fast broadband. Uh, there are

essential workers facing poverty. Uh. These are issues that are well understood by so many people outside of the Beltway in terms of their necessity. I'm not just talking about voters. I'm also talking about governors and mayors who understand the cost of disinvestment in infrastructure. Jared, what does a change in the transition of a hundred days or whatever the number of days is from the Trump administrations take on

science from where you sit versus a Biden administration. This morning, there's going to be a press conference, I believe at ten am. Tell us the science that you observe. It's six Pennsylvania Avenue. Yeah. From the moment that President Biden took office. UH, you know, facts were very much uh back in the mix, and science is a huge part of that. UM. Obviously Dr Faucci has continued to play a key role. But this has always been a fact in science driven area of inquiry for for our administration.

And that's precisely what's occurring right now as we speak. On not going to lean into it because you know, I want to stay in my economics lane, but that's the fact of the case. That's the responsible thing to do, and we'd expect nothing less from you, sir. But we do have to talk about the economy and the reopening effort as it bears to the context around the vaccination

effort as well. So John, let's go there. Does this jeopardize the vaccination timeline of the administration of potentially reopening this economy in any way, shape or form. It is a totally fair question to which I don't know the answer, and I don't think anyone else does either. I think before we can make the kinds of timing determinations that you're asking about, we have to understand how disruptive this is, and we just don't know yet. It is the case,

as you well know. Again, I think the rescue plan, I don't think we know the rescue plan UH played a key role in producing and distributing vaccines in helping us really accelerate the curve of getting shots and arms. A hundred and fifty million shots and arms a hundred fifty million checks out the door. So that that's the

rescue plan and action. But it's a fair question to which we don't have an answer yet, and it wouldn't be prudent for me to speculate given the information I just say, the lack of information I have at this point. It would also did something Counse didn't it. It It feeled

a big debate about inflation. And we'll get that data in about thirty three minutes, sir, So let's talk about that, because I imagine that was really the impetus to hear from the White House today around the inflation data in America. I've been asking this question continually, we all have on this program. The base case the consensus from you, Jared is transitory from the Federal Reserve transit tree. How would you know if you're wrong? Yeah, so that's a great question.

And if you look at the document that myself and my colleague Journey Todeski wrote yesterday, it's on the white House Blog. We had a section that's gotten a little bit less attention than the base effects and the pent up supply issues, the transitory issues. We talked about inflationary expectations for long term inflationary uh for for understanding of a long term of inflations trajectory. You really it's really

an an expectations game. And one of the things we put in there people may not have had their coffee yet, so I apologize if I'm waxing too statistical. Is a something called the Common Index of Inflation Expectations. This is a kind of a blending of over twenty different indicators of inflation expectations. We borrowed the technology from the Federal Reserve, and it does show that expectations have been rising, but

from historically low levels to more normal ones. So I think that kind of an index, which incorporates so many different household survey measures, market measures, is the right way to think about future pressures, whether whether whether the anchor maintains or is nudged. What would you say, though, Jared, to people who pushed back on your idea of transitory and say we're doing something different. This is an experiment of helicopter money, dropping cash into people's bank accounts while

keeping rates very low. What's your response, Well, in fact, we've done this sort of thing before, and in fact, not only did we see unemployment full to fifty year lows with a fiscal stimulus that was highly procyclical in the last expansion, but inflation continued to miss its target from the downside. So I think it's really not necessarily mystery or magic, and you simply have to look at

the indicators. We are, as we tried to express in that blog yesterday, you know, pretty obsessively monitoring, engaging UH the indicators to try to understand the dynamics between heat which we expect, whether it's the rescue plan or the job's plan, Helping families and businesses get the relief that they need, Helping states and localities get the resources they need safely reopening schools. All of that is going to contribute to economic growth, and it's going to have some

impact on prices as we're seeing. But the key point is distinguishing between heat and overheat, and the overheat story, which we argue is something that we're going to completely watch carefully, but is a lower risk probability than uh. The importance of the other measures I've talked about that has to be gauged as well, and I talked about how I believe it should be done. There's a question about confidence to about the confidence to go out and

spend at one point eight trillion dollar cash pile. How concerned are you about the issues around vaccines affecting that confidence and slowing growth more materially? What is going to be the measure for you on that front. We're gonna have to continue to look as we do at not just the monthly and the quarterly UH data on consumer spending, on travel, on seating at restaurants. UM, We're gonna have to look at the daily and the weekly implications of this.

And I think that's been actually a real advance in in economic UH study in this in this period, which is the availability of very high frequency data that we now have enough to link it up to the more UH traditional indicators, and so we can know that the credit card data gives us information about consumer spending and what it was showing was increased confidence, increased re engaging

with commerce. UH and UH you know the kinds of price effects that we've been discussing so far UH so so far, UH, we we like what we're seeing in in that regard, John, ifor one as a journalist, appreciate the increased transparency. We've caught up many times together. Now over the last several months, you put out that blog

closed on inflation as well. I do you wonder, and this is a delicate question, whether you're worried about losing control of the narrative around inflation over the next comple of months. I don't know. I mean, I I don't think it's really a narrative. I guess I don't really think about it in sort of control of the narratives story, And maybe I should. I think about it much more

in terms of the substance of the pressures on prices. Uh, and just speaking, you know, honestly and transparently and truthfully about what we judge to be the case. Um. The inflation dynamics are something I have studied for many decades, and you know, I would argue that, you know, I was one, not not the only, not the only one.

I was one of the folks who argued that the natural rate of unemployment, you know, it was really many percentage points lower than was previously thought, and that helped us get to a place where we were having a much more equitable and much more racially rewarding job market. When we got to truly full employment, and as we predicted, inflation pressures were quiescent. So I think we've learned a lot about this area of macro policy substantively, and I

think we just have to continue investigating it. Jared, there's a lot of fancy talk here and inflation, and we can partition and have a bow tie analysis. You know what it's about a bag of groceries. I've had more comments and viewers and listeners in the last forty eight hours on food inflation then I've had in the last three years. Is it here to stay? Yeah? This is one of the ways economists can really piss off normal You got that right, and you're leaving the charge so shape.

But tell us about food inflation. You know, when I talked to my wife about core inflation, I explained that that leaves out food and gas prices. She just shakes her head and looks at me, like, what the heck are you talking about? But in fact, that is the gauge that economists and the Federal Reserve used to try to get at the underlying signal because food and energy are much more volatile energy particularly, but food as well

is very much a global market. So if we want to understand domestic price pressures, we really do have to look at the core look in terms of food inflation. Uh, this is some of the sectual dynamics that again we wrote about yesterday, and we do expect to see pressures in some face to face services, say restaurants, food away from home. But I don't mean to interrupt, but we're gonna run out of time. How is the Biden administration and for that matter, how are the elites of Washington

going to react to four percent plus food inflation? Lisa A. Bramowitz is crushed by four percent plus food and got that right. Yeah, Well, first of all, you know, we're not gonna I'm not gonna lean into the federal reserves lane because it's uh, it's their job to think about, you know, these sectoral impacts on prices. I think where we're coming from. We have to look at the American

people's nutritional needs and make sure they're meeting them. And both in the Rescue Plan and in forthcoming ideas that you're gonna hear about in the Family's Plan. Um, we are taking very seriously, UH the ability of people to meet their nutritional needs. It's something that we think about

a lot. We follow the Pulse survey, which shows how many people even now as UH we as the economy very clearly recovers from the pandemic induced for session, we have too many people facing nutritional shortfalls, and we have a really effective program UH SNAP are formerly called food Stamps, which meets those needs. And and we've we've extended that program and the rescue plan and some of the prior fiscal packages, and we will continue to make sure that

SNAP meets people's nutritional needs. Jared always appreciate kailed that Jared Fernstein, White House Council of Economic Advice as men. But joining us from the White House and important conversation right now a joy. On very short notice. Peter Hotez joins this Dean of National School of Tropical Medicine, Baylor College of Medicine. Dr Hotez has just been such a

support to us on clear thinking through this pandemic. Peter Hotez, somewhere buried in your distinguished and extinguished CV is hematology. It is ignored by so many in virology and bacteriology. And as the effect of all this upon our blood, give us a quick synopsis of the hematology of blood clots to these vaccines. Well, Tom, we don't know the full story yet, but there is an emerging story and it's coming out in papers like the New England Journal

of Medicine last week and others. And it has to do with the fact that the two major AD no virus based vaccines, and that's astra Zeneca and J and

J and not the mr Anda vaccines, not the other technologies. Um, the two, the two major AD no virus vaccines by the pharma companies, seem to be inducing an immune response and in some mechanism that we don't fully understand, that's activating an antibody response to platelets which are associated with blood clotting, and this is causing platelet activation and then these thrombotic events which unfortunately are happening in the in

the veins draining the brain. That's causing cerebral thrombosis, which is a very severe and life threatening conditions. So to be clear here, this is the idea of a vaccine coming over into a cardiac event. As you say, the venus system coming out of the brain being blocked. The number six out of six point eight million. Does that

give you pause or is this just a risk at hand? Well, those are the numbers coming out of the US for the J and J vaccine, for the astra zeneca adona virus vaccine, it's about one and a hundred thousand to maybe one and two hundred thousand, So they are rare events um and and what countries are going to do about this will depend on the availability of other vaccines. You know, the US, we've got a pretty big portfolio. We've got two m R and A vaccines from from

a Visor and Maderana. We have a novavax vaccine coming along. They may make a different decision than a country that's entirely dependent on ad no virus vaccines. It's it's going to be risk versus benefit. But you know, it's the problem. The other problem, of course, is this is not happening in a vacuum. It's happening in the background of a very aggressive anti vaccine lobby that's piling on now globally, and so that could easily derail a lot of efforts.

I'm particularly concerned about African and Latin American countries which backed themselves into a corner and um in the sense that they became totally dependent on these add no virus vectored vaccines. In some cases this is also true the GAMA lay a Russian vaccine which is also an adnavirus vaccine, but we don't have any information about that. So so the impact, especially on the world's low and middle income countries, could be really devastating, and I'm really upset about what's

going on. Dr Hotez, this is where I wanted to go, the communication of some of the details as we learn about potential side effects. Do you think that the FDA, that the CDC UH, that the European health officials should have waited before disclosing some of this information, or do you think that it's important to shore up the feeling of full transparency. You know, it's it's you could argue

it either way. I think they made the right call because you know, one of the things that's really important is to reassure the public, both in Europe and the United States and globally that the regulatory bodies have the pharmaco vigilance, the monitoring in hand and basically I mean some pay in some ways the American people in Europe and should be reassured that are there are regulatory systems, are global governance of vaccines is intact and can pick

up rare events that wouldn't necessarily show up in the Phase three trials. So you know, it's a glass half full, half empty. I think they made the right call and and now it's a matter of how you navigate the next few weeks because we don't have a lot of alternatives, especially from many countries. Dr Hotel is going back to your other point about the developing world that potentially relies

on these non mRNA vaccines. How much do you think that these types of communications, these news flashes end up deterring that effort to vaccinate the developing world. Yeah, I think it's a big deal. You know, I've been up against, going up against the anti vaccine lobby for for years and years because I have a daughter with autism and I wrote a book called Vaccines Did Not Cause Rachel's Autism,

which made me public enemy number one. So I know what they're capable of, and for years I've been saying, look, don't think this is going to stay walled off to North America and Europe. This thing is going to go lobal and it has. We're starting to see now those same anti vaccine messages that's coming out of the us UH and now we're finding it in Africa and Latin America.

And remember what the other reason we're seeing this is the Putin government has this has been reported by US and British intelligence has been piling on with this whole systematic program of what's been called weaponized health communications, trying to destabilize democracies with anti vaccine, anti science messages and targeting scientists. So this is this is another big issue. Peter, give us an update on India, because the numbers there are,

the mathematics is not good right now. Maybe not as bad as Brazil, but it's there. You mentioned Gamma lay or the spot Nick vaccine as well. Would you take the spot Nick vaccine? Well, not if I had other alternatives. And the reason is because that vaccine has not gone through stringent regulatory a stringent regulatory authorities but defined by the w h OH. It's not gone through w h O pre qualification, so there are a lot of unknowns about it now in India. What we're doing is are

we're accelerating our vaccine with biological ian Hyderabad. They're preparing one point two billion doses. This is an older school technology or combin and protein vaccine that so far as looking really good and hopefully that might fill some of the gaps in Africa and Latin America and globally. Short notice Peter Hotel this morning after this news on Johnson and Johnson. He is dean of the National School Tropical Medicine, Baylor College. I'm pose and joy this now paying US

an institute President, Adam. Let's just start that set the stage for US for its inflation print in about two as in thirty minutes. What are you looking for set? Thanks for having me, Johnson. I think I'm looking for a lot of US signifying nothing, because this inflation print is really about technical things like base effects. Just when you bounce back from the kind of shutdown we had, you were just going to end up with readings of inflation.

You're also going to have these short term bottlenecks. As you LESA, we're joking about the word transitory. The transitory issue is really going to come in two. That's where the real FED debate is. That's where the focus should be and Frankly, that's where Jared Bernstein, representing the White House should be talking. The fact that there's going to be some inflation for the next few months showing up in non core which which our headline, which Tom points out,

is not going to worry. You're right that the Fed is acting like they're worried. They're trying to get ahead of this, but people shouldn't worry. The inflation study that we have is partitioned and impose it into services and goods inflation. Is that a correct study. It's a correct

first cut, but it's not a sufficient cut. Tom. As you know, Jim Stock from Harvard and various people in the Federal Reserve System have been looking at breakdowns inflation into bigger components, um, excuse me, smaller components that still significant ones. I think that the two key components we look at are, as Jonathan mentioned, wages, because that's ultimately what we care about, both in the sense of its own terms and in the sense that that's the one

thing that does lead to future headline inflation. And the other one, which I've been emphasizing for the last couple of weeks publicly, is healthcare inflation. That healthcare is the economy. It's one of the services, whether it is genuinely pent up demand people who put off procedures they considered elective amidst the pandemic, and which there will be a shortage of available supply, so either they'll get rationed by people

waiting a lot longer or crisis will rise. So to me, it's wages and healthcare of the subcomponents you really want to focus on. When do we know whether the wage inflation that we're starting to hear about with some labor shortages, whether it's transitory as well, or whether that has longer lasting legs. It's a really good question, Lisa, and there's no simple answer because wages, as we know, have been

getting compressed for decades. Now. I don't mean there's been no growth, but the share of GDP growth going to wages has been way down versus preceding decades. So there's some way you could have wages growth without it necessarily turning into inflation if basically workers get to take back some of the money the capital has been holding onto um.

And that's hard for the FED to discern the difference, both because you don't get the data until later and because it looks very political, so there's no easy call on that. I'm afraid Dr Posy. We like to get out in front of the zeit guy. Sometimes we succeed, sometimes we fail. Right now I'm going to succeed and anticipate your essay and Foreign Affairs Magazine folks, this will be out pretty much any day here for the May issue. And you speak of the nostalgia. All of us have.

John Farrell's incredibly nostalgic. Lisa Bramos just based in nostalgia, and we're all doing it about trying to find in America, trying to find an Atlantic policy from another time and place. What does it mean for our viewers and our listeners as we wax nostalgic? Thank you for citing my forthcoming

article Tom and Foreign Affairs. What I mean when I talk about the price of nostalgia is this fixation that American politicians have on heavy metal, on men bashing machines, running running tough fisheries, all these sorts of visuals that you see on the Bruce Springsteen jeep commercials about what is the important good way to have a good middle class job. And it's nostalgia because it's misplaced because those

kinds of jobs, there's only so many of those. Even in the best of times, you're only gonna be able to add a couple percent to the workforce doing that, and it's not going to help the rest of the economy. And it just further ignores frankly, women and people of color, who are predominantly in slow wage services jobs among the and whereas the old manufacturing sector part of the nostalgias, it's overwhelmingly white man. And so this just further reinforces

the sense of frustration and privilege. And the other point just to make is that it's not gonna work. I mean, there are people who think you do this, you you fixate on manufacturing because you'll buy off the fascist But it's not going to buy them off, because all it's gonna do is reinforce their sense of special status. So I'm urging the Biden administration and people to get past the nostalgia and worry about bringing up jobs for everybody. And I pulled anice adem. We appreciate your time so

as always and pay us in. Institute President Simona Macuda was State Street their senior economist with a really really smart no doubt unlinking fiscal and monetary into our inflation worry, Simona, which is more important for this fear of runaway inflation the fiscal story of the monetary story. Well, first of all, I think none of them are particularly impactful in the very near term. Everything that we are seeing today has to do with what we're talking about just now, reopening

base effect all of that. I think where the policy framework and the combination and monetary and fiscal shift in the way we we set policy talks more about inflation over the medium term. And it's hard to tell really which one is more important than the other because there

are many facets to the fiscal side. But I think we come back to monetary and monetary policy almost has this role of guiding, you know, to what extent fiscal spending or fiscal expansion is allowed to help the economy run hot before monetary sort of putting the brakes to it. I think at the moment you have a combination where on both sides the intent is to really allow for more frequent and more prolonged episodes of the economy running hot. On both sides of policy. Let's go, oh yeah, let me,

let's let's talk. Let's talk from macro to the grocery store, because there's a question of what prices were looking at a sort of the red herring to signal that perhaps there is a longer lasting inflationary push. Are their particular goods, particular services that you view as harbingers perhaps greater inflation to come. So I look at visible prices what I consider, you know, things that the average person would pay attention to.

And there are two in particular, energy prices gasoline and food prices that I think are more visible to the average person. And why are they important? They are important because they speak to how you form inflation expectations. Right, So we as economies, we understand the different between core inflation and headline inflation. But you know, really, what are you experiencing your real life? You do not experience core inflation, right You You experience the life as a whole and

inflation as a whole. For policy making purposes, core inflation is very important for the average person. It's headline that helps that inflation expectation. So I think it's it's it's we should not dismiss put the inflation as as an element in shaping inflation expectations. But again one point that would make from a policy standpoint, and you're looking not just at the peaks, right, You're looking at the sustainability

of this trend. Remember, we were at two and a half percent inflation in you know, just a couple of years ago. We were close to three percent, uh four percent even in two thousand eleven. It didn't last. So really the question that we all are watching for, and that's why I say the one inflation is important. I

think for market is two inflation. That's more important. Still because if we'll talk about the sustainabilly, something the vice chairman of the Fellows Average Climate had talked about recently as well. Simonta, great to catch up, Thank you very much. Samonti will cut to that, the State Street Senior economist.

This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene, and this is Bloomberg