Bloomberg播客：非农疲软与能源冲击下的美联储政策困境

It's nice to have you, especially on a job's day. So let's just begin with your reaction to a softer than expected 29,000. What does it mean? You know, I think we're sort of seeing a very stable jobs situation. Um, in some ways, I think expectations were raised by last month's print, which came in well above expectations, but was downwardly revised. It was downwardly revised. And actually, even at the time, many analysts were saying this does not seem consistent with what we're seeing in other markers of the labor market.

And so, you know, we saw the unemployment rate tick up ever so slightly. Um, we're still kind of trucking along. Labor force participation is down below where it was 18 months ago. Um, the thing that I think is causing the biggest problem for families, because, you know, 4.2% unemployment rate is, is pretty good, but we're seeing real wages continue to decline. So, you know, year over year, we saw wages go up by 3%. But that has been significantly less than the inflation that people are facing, um, at the pump and at the grocery store.

And so I think that's really squeezing families. We're also seeing, uh, consumer confidence is down. Um, now consumer spending has continued, though. We're seeing rising debt, rising household debt. Um, rising, uh, delinquencies on some of that consumer credit. So families are still being squeezed. Workers paychecks aren't keeping up with inflation. Um, it's a story we've been seeing for a while now. We heard from Kevin Hassett before you walked in the room, and it was remarkable to hear him frame all of this.

This morning on Bloomberg, he pointed specifically to construction workers up 12,000 this month, he says, which means 112,000 since the president took office. As bullish a sign as I have seen for the economy since I've been watching it. Is that how you would describe this? I am surprised to hear, uh, Mr. Hassett, his career has been going on for a few years, for quite some time, in fact. Isn't he right? Dow 36,000, in the early aughts.

So, um, he saw some pretty bullish signs for the economy back then. Um, you know, obviously the white House is going to spend the jobs numbers as the greatest thing since sliced bread. Course, that's his job. Um, you know, I'll say it's been interesting to observe the degree to which, um, market reactions and even the way that we talk about the jobs numbers have really shifted to this world of primarily thinking about jobs.

Being a little soft but not too soft is great because it means that the fed won't keep hiking rates. Um, and so, you know, I think we saw that reaction, um, throughout the market this morning. Um, but I think it also points to the degree to which the stock market has become a little bit decoupled from consumer expenditures from the real economy and workers. And, you know, the construction worker piece is part of that, right?

GDP has been really, really driven recently by the I build out. Yes. Um, that has delivered some jobs. Um, it's not delivering housing and other things that construction workers could be building. It's also driving interest rates higher because there's just a ton of demand. Aren't they also temporary jobs once the data centers built we've talked about this scale. It takes like 50 people to run this massive plant. There's also that's exactly right.

And there's also a lot of, um, you know, there's a lot of upward pressure on debt finance from that. Right. Um, and there's a lot of concern about the kind of nesting game that we saw in the housing market before the financial crisis of, um, different companies loaning each other money, banks loaning each other money. Based on this, I build out that right now feels like a boon to GDP, at least. Whether that's actually helping workers or not is to be seen.

But also the debt really relies on these astronomical revenue projections into the future. And if those don't come true, we might have some significant financial problems. So let's talk more about the fed, which she raised the market interpreting a softer print as evidence that the fed is maybe less likely to tighten policy next month. But if I'm the fed looking at not the headline payrolls figure, but at the wage figure you were talking about, where there clearly is an upward pressure in wages to the same extent that there is in an overall inflation.

Is that not a sign that maybe you don't need to tighten policy right now because there is no wage price spiral in the works right now? I mean, it's an interesting you know, we have been talking about inflation for years now. And the question of the degree to which the wage price spiral was apparent at all during the pandemic, supply shocks. Um, you know, I think there are really big questions about how the fed should be thinking about monetary policy.

That said, they're in a really tough position right now because of the kind of chaotic tariffs and the war in Iran which are driving up. You know, as we just heard, diesel prices which filter through the rest of the economy. Um, and, you know, when you couple that with supply shocks, don't just drive up prices, they also create the opportunity for price gouging for corporations to increase their profit margin, because it sort of creates like a tiny little monopoly for everything where there's a supply disruption.

And so, you know, we saw that during the pandemic, supply disruptions. And I think that we're going to keep seeing this inflation driven by all of this chaos. And that is a difficult thing for the fed to grapple with. You know, the administration would argue and Peter Navarro has said it on this program, you never hike interest rates in the face of an energy shock. As long as we have $100 a barrel oil, 650 diesel and so on, 450 at the gas pump.

Is there some truth to that? No one is going to get relief from the energy prices, and now consumers are paying more for everything else with a higher interest rate on top of it. Yeah, I mean, I probably wouldn't expect the fed to hike given the jobs numbers we're seeing and the inflation numbers we're seeing. But, you know, the fed has had to step away in some ways from the 2% target. And I know that they're not doing that through forward guidance.

But and unfortunately I think that the administration's attacks on fed independence also put the fed in a uncomfortable position where markets are looking for reassurance that they are going to continue to take inflation seriously, um, and not be motivated by politics by the upcoming election, etc.. And so they're having to try to signal that firmly while also be careful about their dual mandate. And, you know, as you said, debt is also it's squeezing workers and families.

Um, you know, mortgage rates hitting 7%. That is really tough. Um, and it's also causing problems in the housing market. Mhm. Well so many of these things are interconnected obviously. And to Joe's point on not hiking into an energy shock. It also could end up not being energy in isolation. That is the shock if it's diesel prices that remain at these elevated levels. And that means everything that's loaded onto a truck or needs to be harvested this harvest season, the cost of that could go up by how much?

What would you expect here? So that's very difficult to predict. And it's also difficult to predict the short term effects of um, some of these measures that are being taken. So, you know, it seems as if the Trump administration was essentially trying to bully Europe into increasing their diesel releases through the threat of an export ban. And, you know, all of these things honestly create more chaos and uncertainty.

Um, it's possible that we'll see diesel prices moderate somewhat. Um, but you know, those diesel prices. As you said, they feed through the rest of the economy. And another thing that I'm really concerned about is heating oil prices. Um, and, you know, in Europe, they were really concerned about the export ban because they are already suffe