Surveillance: Labor Market Story Strong, Says Kudlow

here on the American labor economy. You can do that with Ellen Sentner, and you can particularly do that John, because within our research notes there's always that one chart. I remember when Ellen years ago owned the tarot part of consumers spending. It was the same thing. You have a killer chart, Ellen, on the labor differential jobs out there, plentiful jobs, jobs are hard to get. This is the most perfect American labor enemy since time began, isn't it. Yeah,

it's it's pretty strong. I mean, which it came with a stronger wage growth as well, but markets pretty strong. Why why can't we dovetail this and do I happy America with wage growth? Tom? Because I'm an economist, I'm supposed to be the disnal scientist, so I have to

find something bad and everything. My husband will tell you I'm really good at that, but you know the look the consumer households obviously think the labor market was great in August based on the results from the Conference Boards survey. And you know, we trust households, um you know, if if layoffs were rising, uh, if they weren't able to find a job when they jump into the labor market, they usually let us know. And so I think that

has helped lift effectations for today's number. And this goes to your hours work analysis and just what's in the paycheck after inflation. A lot of people are really focused on that number today, on and hours worked. If you're going to see science of weakness, you want to see it immediately in lay else you'll see it in ours work.

Just how important is that data point for you today, Allen? Yeah, so I think it's extremely important actually, and and uh, you know, consensus is looking for it to tick back up after having ticked down last month, and and so there is going to be a lot of focus there because uh, it's it's uh, it leads other jobs data. It's coincidence with h GDP growth in the economy. Uh. And we can see hours worked are always sort of the pipeline is slowing that you look for in the

labor market. You know, investment is down hours worked or down because companies will cut the hours of existing workforce. First we know that the pace of hiring has slowed, uh, and the final thing is laying off, and we just haven't seen that. So hours worked I look at it is just uh, you know, the precursor, one of the several precursors we see to finally getting to layoffs. And

so everyone will be watching it. And then we were watching ice MS earlier this week manufacturing ice M sub fifty non manufacturing, I M pretty decent to America's ellen almost and two globe economies at the moment. One's manufacturing, the other is services, and one seemingly more important than the other at this point, try and reconcile the differences that we're seeing in the dates at the moment. Just how do you get a read on the U. S economy?

So I think clearly the manufacturing survey being under more pressure is reflecting the fact that it's more beholden to what's going on with global growth. Uh, it's picking up the trade risks and how companies have had to change behavior around trade tensions and the uncertainty there. The fact that the service side of the economy is holding up much better is encouraging because it is the lion's share of the economy and the lions share of the labor market.

So one can say, well, why do we care about manufacturing at all? Then we care because the leading parts of the economy sit in the manufacturing sector. Uh. And so it's only a matter of time, uh that manufacturing is weak before whatever is causing that weakness starts to bleed over into the rest of the economy. So really that service side, service sector jobs, consumers spend, you know, that's the shoe to drop, and for that you need layoffs and we just have not begun to see that yet.

What are we doing for the overtime? I mean one of the backstories your folks, and it's almost anecdotal. And we talked about minimum wage increase. It means less overtime because people are paying for a new higher minimum wage. But what's the overtime or almost the worker exhaustion that we're seeing in America? Well, I think that uh, well, we had been having a big increase in overtime hours as we've seen hiring slow and so we're trying to

get more existing the workforce. But but that is the worrisome trend that we've seen now start to reverse, right, is that we're actually cutting overtime hours, we're cutting temporary exactly. And so again talking about the precursors, you know, those are some of the precursors that we look for that tell us further weakness or or real weakness is coming.

I mean, and Ellen, I don't want to get all David Blanche Flower and you we say good morning to Dr blanch for no doubt listening up in the handover bubble. But but Allen helped me with the under employed in America, and that starts with a dearth of full time jobs. What's the vector right now on full time jobs versus part time jobs? So I think, uh, you know, part time jobs. We we like to see, Uh, if people are going to work part time, we want them to

work part time because they choose to work part time. Uh. And in this post financial crisis world, those being forced to work part time because full time is just not available had surge. Now since that time, their overall numbers are higher, but the the incidents of those working part time forced part time has come down, and it's actually back to more normal levels. I mean, this is really the point in the labor market where the unemployment rate

has stopped coming down. UH. It's pretty much leveling off. And and ironically, what does that tell us? It tells us the labor market is probably about as tight as it was able to get UH in this expansion UH and can either hold in here or it can start to weaken from here. But that's what the various UH

unemployment rate measures tell me. And when I look at metrics like you're talking about the part time for economic reasons, you know, it's telling me that there's not a whole lot more excess we can squeeze out of this labor market. And oftentimes that's when things turn, is when they can't get any better. The jobs are ports thirty six minutes away.

Several hours after that twelve thirty Eastern time over in Zurich, the fete Cham and J. Powell having the final word ahead of the fetes, blank out, what do you think the objective is for Cham and Power today on I think his objective is going to be too It is a really good question, I think, just given the evidence from the data, the balance of risks that still remain. I think there's enough there for him to maintain the easing bias that he clearly Jackson hole. Well, Ellen, we're

going friends. Nobody's listening, Ellen, they're all taking their childrenbody listens when I'm on your show. They excuse me when I'm comes on. But Tom, I'm trying to be realistic here right, there are those on the FED that are still pushing hard against the need to cut any further. This is a very divided FED, and the reason why it's divided. You should be happy that it's divided. When it's divided, they don't see a emergency to respond to, and so it's going to be easier probably to pull

more on board with a cut. But we're not talking about fifty. Is he going to bring up Mr Dudley? Is he going to bring up No, I don't care about fifty. He's got to respond to the two essays and Bloomberg opinion by William Dudley. Doesn't he know why not? He's got to put a sentence sitting there. No, you don't go there. That's the FED has to fly above that, right, take the high road. Okay, No, he will absolutely not. That was going to be the name of our show.

By the way, before surveillance of your show should be two men dangerously unsupervised. Oh I like that, and I should come and trying to fill the saint next time. I think so the next day I take off. I love that. Would you fill in for Tom next time? Seriously, that would be very cool. I come over to Bloomberg for the free food, great coffee, and I'll get you some free food. You know even you know, not the day old stuff. We have to We should do this, We should do this. I agree, we should do this.

Next payrolls Friday, I get Ellen to come with you. She may have a day coundar. It's a little do the morning with us. Just ahead of the number. I'll call James Gorman and see what he says. Ellen Sner, thank you so much. With Morgan Stanley, what we love about our Bloomberg abilities is to find people that have cross national experience. That would be James Omeger. He is in Beijing, our deputy bureau chief there, but with really exquisite experience linking Japan to China is well. James, let

me start with an outball question. How enthused is Japan this morning that China has moved to a more accommodative banking strategy. I think that the Japanese economy is pretty dependent on on China's economy. I mean a lot of their I think about a third of their exports go to China. So anything the Chinese government or the central banking too stimulate command in the economy is obviously gonna

be good for Japanese companies. I mean, I think, you know, this is what what the PBUC has done today was pretty pretty expected. So Matthew in Fox are stimulus. But if this does provide support to Chinese companies, you know that's going to obviously see more demands for Japanese industrial products, Japanese exports, and and also you know, demand for things

like Japanese cars sold in China as well. So it's good for what's good for China is probably going to be a pretty good It's going to be good for Japan down the line as well. James talked to us about the significance of the reserve of climate ratio versus say, the one year lending rate or the one year deposit rate.

We haven't seen those main rates being cut. I don't think since can you walk US through while they're choosing to use the reserve requirement ratio over some of the other benchmark rates of the PBOC, I mean, the central banks and the government's here's main fear is is sort of stoking another housing bubble on a stock bubble. And so the thinking is that by cutting the amount of money that banks have to hold in reserve, they'll lend more money to companies to know, to provide to you know,

stimulate company investment. Is there evidence of that? There is? There is, I mean previous cuts that happened in January and May did lead to more lending temporarily through through the company. So there was a big boom in lending in the first quarter after the cut that happened in January, but since then those effects are sort of taped it off and credit demand credit supply has been sort of

tapering off. And one of the problems is obviously there's one of the problems is with less demand from the US because of the trade war, there's less demand for credit from Chinese companies. They're just not wanting to borrow as much. So one problem in the government and the central bank is having is even if you push down rates Further, if people don't want to borrow money, they're not going to borrow money, no matter how cheap it is in Europe. Put that in the United States too.

So James talked to me about whether this is a change of approach or not. Because we've seen incrementally, this gradual approach towards stimulus from the Chinese and policymakers and officials over there for more than twelve months now, we're trying to get our hands around whether we're about to make a shift into another gear. James, what do you see happening. I don't think it's gonna be I don't think there's a huge step up in their stimulus. I

mean it's going to have an effect. But one of the things I'm talking about their statement today was this is going to help us September's tax season when companies have to pay their quarterly taxes. So those are the kind of that's the level of that that the Central Bank is not thinking about. It's not a massive increase in the economy. It's like helping companies get through the next quarter, making sure they have enough money to pay their taxes. So it's not really, you know, a game changer.

In what they're trying to do. How is the tradeward treated in the domestic newspapers of Beijing that you and your team look at every day, I mean feelingly in Hong Kong's been abulous about the pulse of Chinese writing in Hong Kong. How is the trade war written about domestically? Yeah, it's it's interesting to look at what gets reported and what doesn't get reported. Obviously, you know there is reporting about the trade war, is it's it's a premial topic

of discussion in the media here. But you know when when, for example, when President Trump tweeted a couple of weeks ago, whether the biggest enemy of the US is your own power or hijim ping, that just wasn't reported at all in any media in China. So there was there was it was reported that, you know, he had said some stuff about China and reported that there had been comments,

but there's no detail provided. And then when it is reporting, obviously it's gonna it holds to the Chinese line that China is making real efforts to try and come to an accommodation and the US is being unreasonable. So you know obviously that you can't ignore that subject. But I mean the reporting that does go out, at least in the domestic media is is often skewed or just certain things just don't don't appear at all, it seems. Thank you so much, thanks in your Friday and you really

appreciate it. Mr Meger's and aging with Bloomberg News with us sound Jeffrey Rosenberg he is with black Rock with a synthesis here of the markets into our economy, Jeff, are we going to have an ugly ninety days days in our bond ownership? Is it going to be yield up, price down? You know, you know, Tom, it's hard to say. I mean, I agree. You look at this payroll report

and you know it's it's a mixed report. As you guys were just saying, you got a little bit weaker in terms of market expectations, not not horribly disappointing, but you had stronger payrolls. You know, you're getting kind of a muted reaction in the market and that gets us, you know, more online with the FED cutting interest rates and the expectations for the Fed cutting interest rates, that

doesn't really alter that environment. Hard to see how you have significant bond losses in an environment where the FED is basically saying they're leaning towards cutting interest rates rather than doing nothing, or a different kind of environment altogether where they're raising interest Right. I mean, we can look at this any number of ways. How short employment changes one survey, nonfarm employment, another survey, and I'm looking all

in all, it's three solid months of job development. I mean, I get the idea we're all gaming out of vector that's going to go south. But doesn't the FED have to look at the three months moving average of whatever labor survey they want to look at. Yeah, well that the backstory here is that you have weakness in areas of the global economy that have been so far outside

of the labor market. Right. So this morning's headline and the focus of the data is on the strongest part of the economy, and the concern is is the strongest part of the economy going to start to see some of the impact of the weaker parts. The weaker parts, of course, are global growth slowing and the trade uncertainties. And you know, while someone might say a one thirty headline that's showing some weakness, I think I think it's

it's not as weak as feared. Where you might have had a downside surprise of a much much weaker report. That's really the story, and the story is maintained out of this payroll report where the consumer side, particularly with this wage growth number, the consumer side, the job market side that's still strong and holding up. And that's where you get this dissonance between depending on which Fed official you're you're reading a quote from, why are they cutting?

What is the recession risk? Because you have cross currents in the economy. Some parts which are basically global trade manufacturing parts of the economy are showing clear slow down, clear weakness, clear follow through from the trade uncertainty, the consumer, the household, the jobs market that remains okay. So this

is a FED that is has its divisions. Does any central bank the chairman will speak today and is he just simply going to say we need more data to get the September eighteen Well, I think that what he has been doing is is clearly leaving the window, leaving the degree to to not pushing back on market expectations. Market expectations are pricing for in September. The Powell had they had the payroll report ahead of putting together his speech. Uh he's not going to do anything to change those

market expectations. He's going to try to reinforce those market expectations. The Fed doesn't want to surprise the market. If that doesn't want a guy the market differently than I think they're happy to deliver. There's a big debate back do they do fifty? Do they do? They? So they're going to do another twenty five in September. That's what the market expects and Powell to want to say anything one

way to disrupt that. Fishres up eleven, death features up UNTI right now, I'm gonna call it a buoyant day. And then we pulled back before the report churned a little bit negative tone off the report, but we're bringing that back right now with the futures up eleven, Town futures up ninety seven, a lift to the market, the VIX fifteen point seven three. We're advantaged by Jeffrey Rosenberg

of black Rock. Jeffrey, I want to come back, but just one time for one more uh question, if if, if we can, how do you link all this into the equity markets on a cross asset basis? Just Powell, the Powell put in place to support equities you know, it's a it's a really interesting development what's going on. Most of the time we're focused on the overall level of the equity market, but you get the bigger change.

You know, equities had almost a five percentage reversal yesterday. Now, what am I talking about talking about the sectoral contributions of what has been driving this market, and what has been driving this market has been a defensive equity market rotation. Equity managers have been moving into the most defensive areas of the stock market, and a lot of that is

related to trade uncertainty. So when you had the rally and the overall index up, you know, one little over one percent on the easing of the trade concerns, which you really see is a much much bigger, not a one percent, but a five percent move in relative valuations between what had been the defensive part where people have been hanging out UH and the less defensive, more trade exposed sectors, and you saw a much bigger rotation away

from that. So it's really these intrasector performance that is really driving the equity market much more than the overall level. Obviously, overall level matters, UH, and that's where people focus. But a lot of performance is going in in this Jeffrey Rosenberg with a black rock. Tiffany wild Enjoys down from Pimco looking at the economy and advising fixed income on the American economy with green on the screen to deal up forty four points. Tiffany, what do you say to

fixed income animals after the mixed report we just saw. Yeah, I think there was a little bit of something for everyone in this report. Um, you know. And I guess what I would say is is that every report, you know, can be a bit noisy, you know, So we try to look at kind of the broader trends and not anyone anyone given report. And I think those broader trends were confirmed in this report, and that is that labor markets are slowing, um, you know, again trying to kind

of smooth through some of the noise. Um. The the average kind of moving average of payroll growth has declined down to a hundred forty k UM for private payrolls, for example, versus over two hundred last year. Yeah. And I think one important thing to remember there is too,

is that you know, this data does get revised. Um. The Bureau of Labor Statistics actually just recently released its preliminary what it calls benchmark revisions, and those benchmark revisions actually suggested that total payrolls in the economy are actually

five hundred less uh than they were previously believing. So that data doesn't get incorporated and until early next year, but that would suggest that the you know, that six month moving average of forty that I just suggested is maybe you know, even less than that, closer to one twenty. So I mean, we are decelerating here. So Tiffany, how do you think this Job's report and just the trend

that you've been just discussing will play within the federal reserve? Um? Yeah, I mean I certainly think that, you know, it confirms I think that you do need more accommodative monetary policy, and there is downside risk to the forecast, you know. So something that we've been very focused on is is the manufacturing sector which is in uh in recession in the US, um in a mini recession. You know, I think the key question is the extent to that to

which that spills over into the broader economy. You know, I think we are seeing early indications of that. Uh. There have been other service sectors, for example, that are tied to global trade, which has also been very weak and decelerating. Those service sectors are are starting to are starting to contract as well, you know. And then and then you have some idiosyncratic issues, you know, like retail, the retail trade industry which continues to you know, shed

jobs at brick and mortar. There's issues with with malls and things like that that it's impacting structures, you know, So that that's gonna be the thing that we watch, you know. I guess the other important thing to note here is just you know, as the economy decelerates, you're gonna get slower corporate revenues, You're gonna get slower profits.

So really, again, the question is what do corporations do in order to kind of readjust their inputs, you know, do they focus on cutting back labor or investment or both? And how much? So, Tiffany, it's just a sense of you know what I think the market obviously is discounting multiple uh FED cuts. Is that something that you think

is a fair discount by the market? Um? Yeah, I do. Um. And the reason is is if you just sort of maybe benchmark the recent slowing to kind of what we saw in sixteen, just kind of as a broad benchmark, US GDP growth slowed to one percent UM on a trailing year over your basis at that time. You know, if you look at that kind of growth shock to the U S economy using the Fed's own model, they provide market participants with their own model, fancy name called

farb us. If you use that model to to kind of look at what that means for the FED funds rate, and you know, it actually suggests that the FED funds rate should be seventy five basis points or maybe even a little bit more lower to kind of offset that shock. You know. So I think the markets are are certainly pricing in um, you know, some some more of a dubbish turn from the FED and more easing, and I think that's certainly appropriate. It's appropriate. But it comes down

to business investment as well. I mean I looked through the job survey and I can see a little bit of trade analysis there. What is your synthesis of what business investment is actually doing in America? Well, yeah, I mean I think I think business investment could I mean, it's been it's certainly been slowing since last year, UM, and it's been actually pretty weak but still positive the

first couple of quarters this year. We actually think that it will contract, you know, outright in the third quarter and will continue to be weak in the in the back half of the year. And so you know, what we've seen is that businesses are are slowing their investment and things like heavy equipment. Now this is this can be tied to the you know, the industrial manufacturing sector, so heavy equipment and machines and things like that. The ones. The one bright spot I think on the investment side

has been intellectual property investment, technology type of investments. We saw that a lot last year. We're seeing that kind of slow as well, but I think that's one bright spot. Oh and the president tweeting a Larry Cudlow and Varney and Company now for further questions. John Farrell will be with Mr Cudlow here in a bed in a bit as well. The present is very active today. I don't think a schedule schedules open. Yeah, it's executive time. Executive time.

There's a lot of executive time. I'm counting the tweets and uh one, two, three, four, five, six, seven, eight, nine, I think nine, but maybe ten. The days are early days. The day is young. So Tiffany, you know, one of the concerns out there, and you know, I kind of ebbs and flows is the kind of the R word. Um, where does the recession UH fit into your outlook if at all? Yeah, Yeah, I mean I think I think

it's reasonable. I mean, so we would say the recession risks, you know, are elevated now if you just look historically, you know, any given year kind of has a probability of recession of around fifteen percent just if you look

at the historical instances of a recession. So we would say that it's elevated relative to that historical average now and and and the reasons are is because you know, like I said before, the U. S economy, it is decelerating, and we have you know, weakness and global growth that is spilling over. They're starting to be questions around if that will spill over into into consumption. You know, So that just sets up for you know, a very weakend

kind of fragile state. And and that means that any sort of other you know, negative shock, you know, it can can push the economy over UH into recession potentially. So you know, that's why we would think it's elevated, you know, and I guess again that's why it calls for more more phanezing. I think to buffer them. Tiffany, Thank you so much, Tiffanty welding with us with PIMCO on the labor economy, and it's folding in to what we see. For here is John Ferrell with Lawrence Cudlow

Rump Administration's views on the job for report. I'm pleased to say, well now joined on Bloomberg Television and on Bloomberg Radio by Larry Cudlow, National Economic Council Director. Larry. Always great to have you with us. Let's just put the labor market together with that trade dispute. How do you frame the transmission mechanism for the trade friction right now into the labor market into the U. S. Economy. Well, look,

today's labor market story was very strong. Um, the payroll job is a hundred thirty thousand, but you know, August is a quirky month. Usually the number comes in low and then it's revised upwards. But Jonathan, I want to raise a point that I don't think anyone's really discussed.

Yeah on the air. Actually, the big story here is the blowout number in the household employment survey, from which unemployment derives, that was up five hundred and ninety thousand, five hundred and ninety thousand, and that's the third straight months of outsized numbers. The average is three hundred and seventy three thousands. So hundred thirty thousand non farm payrolls is fine, it's fine, probably be revised up. But the household survey at five ninety Now you know why is

that important? Well, first of all, that's where the unemployment rate comes from. The unemployment rate remains low, and UH in some of these subcategories African Americans, African American women, UH, their rock bottom historical lows. I want to make one other point, Jonathan, in this number that I haven't seen discussed, the civilian labor force increase. I gotta look at my sheet to get this number right. By five hundred and seventy one thousand. Now, that's like think of it, people

coming out of the woodwork and rejoined the labor force. UH. That number has been rising steadily for the last three months. The average is four hundred twenty five thousand. And finally, UH, labor force wages average hourly earnings three two percent for the twelve months, Jonathan, but um for the last three months, the wage rate is above four. So let me just recalibrate this. We are seeing blowout numbers and household survey that's your small business a leading indicator by the way

of payrolls point number one. We are seeing blowout numbers of people returning to work and they are getting paid well, Jonathan. If I may, America is working and America is get being paid and the economy is very strong, probably much stronger than all this rumor mill media narrative would suggest.

These are very very strong numbers today. So, Larry, I know you watched this program religiously, but you were probably busy about an hour ago and Muhammadalarian came up on this program and he said that actually, the participation rate looks pretty good, average as worked looks pretty good, wages looks pretty solid. We just can't get away from this anxiety around the trade story, Larry, and I think people found it encouraging this week that talks are going to happen.

Can you just walk me through the timeline for these talks. And I'm trying to understand whether these talks are contingent on tariffs not going up again in October. Have the Chinese asked for that? Uh No, not at the moment. Look, all's that's happened, and and it's very positive developments. Um. Sar Jerry Manusia and Bassador Lightheizer on the phone with Vice premierly or Hey. They decided that they Chinese team would in fact come to the US. That will be

preceded Jonathan A Deputy's meeting. Chinese deputies team will come to the US. I guess in a week or two in September to meet with our deputies. They will hammer out an agenda with key discussion points, and then I guess in early October. The precise date has yet to be said. Our principal negotiators against sectary munition, Bestler Lightheiser will sit down with Vice Premier leu Hey and his

others h At to talk about the deal. Look, Um, I have maintained, or I have tried to maintain through a kind of long summer here that while President Trump continues his defense of the American worker in the American economy, President Trump is a very tough negotiator. I hope people appreciate that. Now the other part of the story is that we're talking, and Cudlow axiom it's always better to talk than not to talk. President Trump is indicated he would he would take a deal as long as it's

a good deal for this country. President also believes that China wants a deal. You know, coming back to the job numbers, you you made that linkage, and it's an important linkage. Our economy is humming, the Chinese economy is not, and we believe that they want to make a deal. And so let us see how these negotiations turn out. I don't want to forecast, I don't want to predict. All I can say is sitting down and talking is always a good thing. And the phone calls were very constructive.

So so let's see, let's keep an open mind, let's even try to be optimistic. So, Larry, I just want to get a bit more clarity on the process the ministerial level talks that will happen in the coming weeks here in the United States. Do you need to see anything come from them to get to the next level to get to the talks in October? Or do the talks in October happened regardless of what happens at the ministerial level in the coming weeks. Well, no, there are

no conditions. There are no conditions. We're they're coming to talk and we welcome them with open arms to talk. Look a bit of context here, Jonathan. We I thought we were close last May. You may recall you and I have talked about this in the interim. We thought

we were close. Maybe there. Uh. The key issues remain on the table right the so called structural issues I P theft, force, transfer of technology, cloud technology, cyber interference, and of course the trade, the tariff and non tariff barriers regarding commodities, UH, energy, agriculture, UH and so forth. We we we thought we were close. Then the talks broke off. China pulled back for whatever reason. I'm not here to second guess it. I don't even want to

go into motives. We would like. I can say this, our team would like to go back and pick up where we left off in the May UH talks. Whether that will be possible remains to be seen. I don't want to predict it. All I know is we've got a new round of talks, and I think that's a very hopeful developed. Let me just to jump in because I know we're pushed for time. Do you think there's any chance of the October tariff increase could be delayed, could be pushed back. I don't want to speculate at

all on that. That, of course, is the President's decision. Is that part of the conversation. It may be part of the conversation. There'll be a lot of things as part of that conversation. I'm sure Taras will enter into it, along with the other issues that I just mentioned a few moments ago. The reason arsillary is because there would be ministerial talks before the high level talks happen in October, and of course we would have to make that decision

in the next couple of weeks. Is that on the table for the ministerial level talks in the coming weeks. I will simply respond by saying President Trump is, as I think we know now, a very tough and crafty negotiator. He has shown his willingness to use tariffs as part of this whole negotiating process. The best I can do is to paraphrase what he has been saying. We want to see results. We would like to see results in the near term. When we don't see results, we take

additional actions. On the other hand, if we do see results from these upcoming meetings, then progress will be made, as best I can tell you. And look, I said a few moments ago, from these jobs numbers. Today, America is working, America is producing, Our economy is quite strong. Things like productivity is rising as well as wages and so forth. We need to protect that. We are the world's leader in technology, invention, innovation, application, and new business starts.

We're the world's leader. And Larry, already important topics and I know you're going to address them in the talk. Technology is our family jewels and we must protect America on that. This is a president's point of view. This is a take from China, Larry, that I want you to weigh in on. The editor of China's Global Times, viewed by many as being a mouthpiece for the Communist Party, tweeted this earlier this week, and I'd love your input on it. Personally, I think the US is worn out

by the trade war. It may no longer hope for crushing trushing China's will. There's more possibility of a breakthrough between the two sides. Just how wrong is that statement, Larry? Yeah, Well, my response to that is never underestimated, Never underestimate the strength of this country or the strength of this president. President Trump is doing what presidents have not done in the last five years. He sees the unfair trading practices.

He wants to protect our country, our workforce, our technology, are farmers whatever. He is not going to relent. And by the way, in sheer political terms, I think the President has enormous support with respect to a rebalance and a big change in our relationship with China. Jonathan, this is an economic issue, This is a technology issue, This is a fair trade issue, This is a national security issue.

This is also a human rights issue. So those people in China or any place else who underestimate the strength and determination of the United States, they are making a very very big mistake. Couple, ID love a final word from you on the Federal Reserve, if you may. The former New York Fed President Built Dudley White in an opinion in the last couple of weeks and was quite controversial about the fetes role enabling the President to go harder on trade. Larry, I've been wanted to defend the

federal reserves independence. I came down quite hard on that piece and was very critical of it. The President then again tweeted once more about where did I find this Jerome guy? Just to be balanced here, Larry, I have to say, it's incredibly unhelpful to go after the Fed in this way. Larry, Just how complex is it right now? And the conversations you're having personally? Is this something you're pushing back on in the White House? No, Look, the

President has made his views clear. He's very outspoken, he's very well informed. Our view has always been that the monetary policy seven rate hikes in the last two years, nine rate hikes, way too tight. We've had severe monetary headwinds. You know, it's a wonder we're growing at two and a half to three percent with these monetary headwinds. Okay, that's one key point with respect to Bill Dudley, whom I have known for many years. Bill Dudley went over

the cliff. What Bill dudley statements suggested is that the Federal Reserve should adopt a monetary policy geared towards defeating President Trump in now. That is the most politicized statement I have ever heard, and the current Federal Reserve Board disavowted walked away from it, which is a good thing. Mr Dudley stepped over the cliff. He's been criticized heavily by Democrats, like my friend Larry Summers, for example. I

will weigh in on that criticism. The idea that you conduct monetary policy towards somehow influencing an election outcome is just utter nonsense. The FED is an independent agency. We've always said that, but then again, we have our opinions about the state of monetary policy. Market is telling us the Fed is going to lower rate in September and October. I think that's a good thing. We shouldn't have an

inverted yield curve. We should normalize that, and I think if we get to a normal position, it will actually help the economy get back above three. Dudley, who then wrote a second article on Bloomberg, which did not recant the first article, is trying to politicize this election and lead some sort of anti Trump, you know, the revolution or whatever the heck is called. That is nonsense. He is so far off the charts, he is over the cliff.

He has no support, I hope. But in any event, in any event, the fattest professional they are independent, they're gonna do what I think they need to do, and that's going to help the economy. And again I go back to today's job numbers. America is working in America and workers are coming back into the labor force. They're getting paid, they're spending, they're saving, they're producing. We're in

pretty darn good shape if you ask me. Larry, final question for you, because Bill Dudley did clarify that piece, as you mentioned, he trying to walk it back somewhat. That criticism remains, But I'm trying to understand the difference between what Larry Cudlo is pushing back on and what Larry Cutler in the White House is doing right now with regards to respecting the political independence from the Federal Reserve. There's not a big gap between that piece and what

you guys are pushing for. Oh I, I just couldn't disagree more with respect, Jonathan. I'm sorry, there's no moral equivalence between the two. We have never suggested that FED policy should be geared towards elections. What we have suggested is that FED policy should be geared towards maximum economic prosperity. And we have noted many times there is no inflation.

I mean the inflation break even as you yourself, no, as well as anybody is down around one one a quarter percent, which is what Rich Clarena Vice chairs said and what the chairman has said. That's a different issue. We want maximum prosperity, job creation and stay with the law. Inflation. We're not out there talking about a campaign, No, Larry, I agree with that. You're not talking about specifically Dudley LinkedIn specifically to the election. That is a new law.

I agree, And he's a former senior FED official. And look, the Federal Reserve Board disvowed properly so and I can tell you internally from my conversations they were horrified. Larry, you get zero pushback from me on that point. But where I do see a link because the President himself as a linked to Federal Reserve policy to the Democratic Party that came before him and suggested that the Fed kept policy easy for the Democrats. That's making the political link,

is it not? No, Look, the President has been very consistent and I with my whole hearted support. I mean I talked to him almost every day on this and other matters. Um, we want to remove obstacles to economic growth. We want to remove obstacles to economic growth. An inverted Deo curve and a premature hiking of interest rates last year and maybe the year before generated an obstacle to economic growth. Let's remove that obstacle and you'll see this

economy with low taxes, low regulations, free trade reforms. Look U, S M c A, Japan, Europe. We're making tremendous gains on trade while we protect America with respect to China. Those are the factors that will lead to three to four percent economic growth and keep this job story as strong as possible. Those are the issues. This is year to help this country. Is not just about an election. It never is about election. There's a vision here, Jonathan,

There's a vision here. The President's vision has always been, liberate the economy from unnecessary regulations and taxes. Give us a level plan field, give us cheap and plentiful energy, let us use our economic resources, let us use our God given talents. Let us reward success, not punish it. That is an a vision just for a year or two. That's a vision that would keep this country on a high trajectory for the next twenty years, the next forty years,

the next several generations. This is a transformational president, and I think the early returns are pretty darn good. Not everyone agrees with me. I respect that, but that's his reality. This other chapter, Dudley, he's playing like a party hack on precincts politics for the next election. That is nonsense. That is utter nonsense. Never look, my first job at the New York Fed in open market operations with nineteen seventy three. So I've been watching this story for I

know whoever, it is almost fifty years. I've never seen anything like the Dudley statement. There is no excuse or defense for it. Hi, Larry, We've got to leave it there. Apparently, I've had two calls from d C, and I've got to let you go. Larry Cudlo. Always appreciate and respect your efforts to articulate the views from the White House every first Friday of the month following the payrolls report.

Larry Cudlo there the National Economic Council Director, joining us from Washington, d C. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.