00:00In May, the U.S. economy added 172,000 jobs, far exceeding all estimates.
00:07Let's bring in White House National Economic Council Director Kevin Hassett.
00:11And, I mean, frankly, congratulations are in order, Kevin.
00:15This is an unambiguously good jobs number, an upward revision in the last month.
00:21Does it foreshadow the risk of broadening inflation?
00:27No, absolutely not.
00:28And, in fact, it's a great question, Matt.
00:31The bottom line is that what's going on is because the president has recruited from companies around the world $18
00:38trillion of new investment.
00:39And we're seeing, if you looked at the advanced herbals numbers, equipment investment through the roof, up 3% in
00:47March,
00:48one of the biggest months we've ever seen, that people are building factories, creating jobs, creating the golden age, the
00:55boom,
00:56that is a logical supply-side response to the big, beautiful bill, the no tax on tips, the no tax
01:01on overtime, and the rest.
01:02And so we're seeing the benefit of that.
01:04And you might recall that when we were talking about this a year ago, there were a lot of naysayers
01:09who said,
01:09well, we can't possibly even have positive jobs numbers because of our immigration policy.
01:15But the fact is that we're getting positive jobs numbers because we've got high wage growth and native-born Americans
01:22are rushing into the labor market in droves.
01:24And so that negative story is gone.
01:26And finally, I've got to say, we really love going through the Bloomberg data,
01:29and we have this thing that I like to look at, which is the probability distribution of all the forecasts
01:34for the jobs number before it comes out.
01:36And when I looked at it after I got these numbers, I saw that the very, very top person was
01:42low by about 40,000 jobs,
01:44which shows that the Trump economy is surprising Wall Street analysts over and over again,
01:49and they need to maybe think about getting the supply side of their model fixed.
01:52It does surprise people to the upside for sure.
01:55I hear a lot of – I have heard since it passed a lot of positivity about the big, beautiful
02:02bill and the economic growth that it would create.
02:04We see 172,000 jobs.
02:06We see unemployment at 4.3 percent.
02:09But we see inflation at 3.8 percent on the PCE.
02:12So it looks kind of like too late Powell was right on time.
02:16And now the market is pricing in a hike.
02:19Is that wrong?
02:22Yeah, I think that's terribly wrong.
02:24The bottom line is that what you need to do is look at the impact of oil price shocks on
02:29core inflation.
02:30And the history of it is that they're temporary.
02:32They don't lead to lasting inflation.
02:34The people see through it and don't adjust upward their inflation expectations.
02:38And so my advice to the Fed, and I certainly respect their independence and I'm really thrilled to have a
02:44talented person like Kevin Wurst there, is watch the numbers.
02:47Because what you're going to see is that with a big supply side boom that you could have high growth
02:52without having runaway inflation.
02:54It's not a Phillips curve event at all.
02:55And the last time this happened was the 90s when Alan Greenspan saw through that and gave us some of
03:00the best years we ever had.
03:02And I think that we have that opportunity right now if the Fed pays close attention to the data and
03:07thinks about why it keeps surprising on the upside, them especially, and surprising on the downside on inflation.
03:13I mean, absent the Gulf issue, you know, the inflation basically would be completely under control right now.
03:20How soon do you expect that to be wrapped up?
03:23Because that's almost completely within our power, right?
03:26We went in there maybe at the behest of Israel, but it was our decision to do that.
03:31Well, the president will make the call on that.
03:33I mean, negotiations are ongoing, and I'm not a forecaster for when it's all going to end.
03:38But the bottom line is that the global market should understand that risk premia are going to be much, much
03:43lower going forward once we successfully take away the option for Iran to build a nuclear weapon.
03:49And, you know, if you look at the sort of crazy actions that they're taking in the Straits, you know,
03:54even attacking Chinese boats, for goodness sakes,
03:57then you can see how terrible it would be for the world if they had ballistic missiles and nuclear weapons.
04:02And President Trump thinks that's unacceptable.
04:04And, you know, of course, there's a short-term disruption in oil prices, but we expect it to be over
04:08soon.
04:09Let's get back to the jobs picture because you mentioned the investment in equipment, which makes sense following on the
04:15legislation that you passed.
04:16Are we going to see manufacturing jobs come back to the U.S. economy?
04:21Because we don't really see job creation in the goods-producing sector yet.
04:26You know, it's inching up, but what is going way up is construction.
04:30And remember in the big, beautiful bill that President Trump did something that was really quite clever,
04:35where he said for four years we're going to allow people to expense factories.
04:39And so what's happening right now is that people are racing to build the factories.
04:44And then once those buildings are up, then they'll put the machines in and create the jobs and so on.
04:48And so construction employment is way, way up.
04:51And we think that that's like the leading indicator for what's going to happen to manufacturing work over the next
04:56year or so.
04:57We have seen an uptick in government jobs, which I thought was surprising.
05:02I figured we were going to go the other way, but we added $54,000 there and an uptick in
05:08hiring in a lot of health care services, food and accommodations.
05:15Those are lower paid areas.
05:17Are you worried about the lower half of the K?
05:21Well, what we're seeing is that wages across the board, real wages, are going up on average about $3,000
05:26since President Trump took office.
05:29And so, you know, right now the jobs, the government jobs that you talked about, were really state and local
05:35jobs.
05:36And there tend to be kind of seasonal patterns in those things that aren't completely captured by seasonal adjustment.
05:42And so we have a lot of teachers that took off for the summer and maybe took a job at
05:46the boardwalk and so on.
05:47That kind of thing is, and then it gets offset in September is probably what's going on because it's all
05:53state and local.
05:54We, in the federal government, have cut federal government employment by more than 300,000 workers.
05:58And that's like tax savings that is going to accrue to the benefit of the American people for a long,
06:03long time.
06:03We did. I was just looking at the wage growth, 3.4 percent, and PCE was 3.8 percent.
06:11So how do you factor higher real wages?
06:15You're looking at the latest number, and I can send you an email.
06:19But we've aggregated it through since when Trump took office, and the number was $3,000 as of a speech
06:24that we wrote for him a day or two ago.
06:26All right. Well, that certainly is good news for the workers in this country.
06:30Kevin, great to get some time with you. Really appreciate you joining us.
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