Larry A. Kudlow Talks August Jobs Report And China Trade [Full CNBC Interview]

First On CNBC: CNBC Transcript: National Economic Council Director Larry A. Kudlow Speaks with CNBC‘s “Squawk on the Street” Today

Larry A. Kudlow

Image source: CNBC Video Screenshot

WHEN: Today, Friday, September 6, 2019

WHERE: CNBC’s “Squawk on the Street

The following is the unofficial transcript of a FIRST ON CNBC interview with National Economic Council Director Larry A. Kudlow on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM) today, Friday, September 6th. The following is a link to video of the interview on CNBC.com:

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Watch CNBC's full interview with Larry A. Kudlow on August jobs report and trade

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JIM CRAMER: Back to today’s jobs report, which I liked, of course. Joining us now with the first reaction from the White House, it is National Economic Council Director Larry A. Kudlow. First, Larry, before we talk the number, how have you been? What’s going on?

LARRY A. KUDLOW: I’m doing great, Jimmy. Thank you very much. My brand-new titanium hip replacement, which is three months old, has kicked in beautifully. I’m walking, I’m pirouetting, and I’m playing tennis again. And life is grand. Thank you.

JIM CRAMER: I am so glad. That’s Allegheny Technologies, if you want to play that, David.

DAVID FABER: We’ve got a stock play on Kudlow’s hip.

JIM CRAMER: -- Larry -- let’s get -- Allegheny, they’ve got a heck of a lot going on. Alright, Larry, a number to me that says things are good, but that if rates were lower, things, amazingly, considering the fight we’re having with the Chinese, the good fight, could be even better. What do you think?

LARRY A. KUDLOW: Well, I reckon that’s correct. Money markets and bond markets are expecting monetary policy to lower the target rate, certainly in September, probably October, too. But, Jimmy, I want to go back to these numbers because I watched the coverage this morning, among my dear friends and former colleagues. Look, 130,000 is the very solid number. But August is always a quirky month. Usually the print comes in too low for seasonal reasons, and then it is revised up. But here’s a story, I want to break this with you and David. Here is a story. The household survey – the household survey from which unemployment is derived and tends to be dominated by small businesses, the household survey was up by 590,000. Okay. 590,000. This is the third straight blowout month. The average is 373,000 for those two months. And one more, please, the civilian labor force increased by 571,000. This is also the third straight month the average is 425,000. These are people, Jimmy, that last number, civilian labor force, they’re coming out of the wood work and they’re coming back to work. So, household survey up 590,000. It’s an unbelievable blowout number. Civilian labor force picks up by 571,000. All I want to say is America is working. America is working. And final point here, at the intro, American workers are getting paid. Now, average hourly earnings, 12-month change is 3.2%. But in the last three months, average hourly earnings have picked up to 4%, 4.2% at an annual rate. And, by the way, that’s what the productivity numbers are showing. So, look, this actually was a blowout number. And I want people to appreciate the magnitudes here. Because, you and I have been doing this a long time, I have seldom seen these kinds of numbers. Almost 600,000 people in the household survey and new entrants into the labor force. It is really quite remarkable.

JIM CRAMER: Let’s go over, Larry, because you know I know companies, there’s no one that knows top down better than you. I look at the companies I follow and they’re not really hiring. I’m wondering if there is a new economy, I hope that Fed Chair Jay Powell is listening, a new economy being created by the internet, of people who are creating their own jobs, creating their own businesses, letting their dreams come true. I’m sorry to be so -- I don’t mean to be ethereal or dramatic. But, Larry, you know that it is not the -- it is the real small business that creates these jobs. And the small businesses have never been easier to create with the internet. How come no one is focused on technology as a job creator?

LARRY A. KUDLOW: Well, they should. Because you’re absolutely right. Your analysis is right. And, Jimmy, that’s why -- look, this nonfarm payroll survey, this so-called establishment survey, will not pick that up. And that’s why, here this morning, I want to emphasize the household survey, which picks up the smaller and brand-new businesses at a much greater degree than so-called, you know, nonfarm payrolls. I think -- I think you’re spot on. And, by way the way, speaking of technology, what we’re seeing a pickup in productivity. The last two years, eight quarters, eight quarters of productivity gains. Okay. 1.8%, that is a huge increase because if you went back into the earlier parts of this cycle, it was zero. Productivity was zero. So, 1.8%. The growth of employment, the growth of employment is about 1.3%. So, the economy’s potential is now moving above 3% for the first time in probably 20 years plus. And at the heart of that is the technology story. Look, it is also the services story. You had a blowout – a blow out ISM services number. And I want to add to this too. You know, President Trump is working hard to defend the American economy and to defend American workers. The race to technology advance, where the United States has a very big lead, is part and parcel of our discussions with China. We must not let the Chinese steal our technology. Unfortunately, there is some evidence down through the years that they don’t value IP and they have forced technology transfers. So, this is all of the piece. Now, I hope we talk about the negotiations coming up because I think that’s very important and very positive. But I’m just saying, what does America do best? What does America do best? We create, we invent, we innovate, and we produce. The heart of this is technological advance. In every nook and cranny of the economy, whether it is autos, farming, manufacturing, internet, 5G, we do this better than any other country. We have to maintain that lead and we have to make sure everybody plays fair in the world trading system. And if they don’t play fair, we have to take actions to defend it. So, you see what I’m saying one leads to the other to the other.

DAVID FABER: Alright, yeah. Understood, Larry. No, we do. And I would add, you know, as you know, I like to report, I mean, the Chinese are moving very quickly when it comes to 5G. I’m sure you know that. I’m sure you get reports on it. They’re being very aggressive. Let’s talk a bit about your expectations for the negotiations.

LARRY A. KUDLOW: David, David, let me just – David, one parenthetical here, I have got to tell you. I have met -- we had very important oval office meetings with the big Telcos, with all of the chipmakers, the Ciscos, the Qualcomms, you name it.

DAVID FABER: I know. Yep.

LARRY A. KUDLOW: We have, right now, in the United States, a terrific lead in 5G. We are deploying at 100 cities. There is a narrative out there we’re losing to China. It is simply not true. I want to emphasize that. Simply not true.

DAVID FABER: I know we are deploying aggressively, but they -- they have the ability through their sort of command economy to just go right at it. And I think they’re being very aggressive too. Larry, let me get to your –

LARRY A. KUDLOW: Well, we’ll see about –

DAVID FABER: Yeah, we will.

LARRY A. KUDLOW: -- We’ll see about how command economies work, versus how free economies work. We’ll see about that.

DAVID FABER: You and I are on the same page on that one. Where are you in terms of your expectations for the upcoming negotiations? Do you have a timeline? Are they going to be in October? Are the two sides getting their agendas together with the hopes that there will be real progress made?

LARRY A. KUDLOW: Alright, well, these are important questions. Look, what I can tell you is this, the phone call, night before last, between Secretary Mnuchin and Ambassador Lighthizer and the Vice Premier Liu He went very well. That’s important. They have decided now the deputy’s level -- the deputies level will continue in Washington later this month. And from that deputy’s level meeting will come an agenda and an outline, so that the principles will meet in early October. I think this is terribly important. I know we’ve had additional tariffs. President Trump is a very tough negotiator, as I think we all know. But, the phone lines have been open during this period, and the negotiations are proceeding. I’ve said many times, we still expected them to come over here in late September. The principals will meet in early October. The deputies will meet in a couple of weeks. So, I can’t predict an outcome. I’m not here to do that. All i’m saying is the talks are continuing. You might say they’re now going to heat up when the Chinese team comes here. That’s a very positive development.

DAVID FABER: Okay. Always difficult to figure out what will happen after that. Nobody is expecting you’re going to reach some sort of agreement in the near term, Larry.

LARRY A. KUDLOW: You know, David, I don’t want to predict. I just – I’ve learned in this game, I’ve participated in many meetings. And, of course, we’re all part of the principals trade team that meets with the President every week. I don’t want to predict anything. I’m just saying it is good thing that they’re coming here, and tempers are calmer now. We’re engaged in very important discussions across the board, whether it’s agriculture or IP or tech transfer or cloud or cyber-hacking or trade barriers. You know, we’ll see what happens. I mean, on this one, this is the first face-to-face meeting now in several months. We would love to go back to where we were in May where we were getting kind of close to an agreement, maybe 90% of the way. But I don’t want to predict. I’m just saying I think it’s very positive that we negotiate. And it may well be -- it may well be that something positive comes out of that. Maybe not, but maybe so. President Trump himself continues to say: we will make a deal, as long as it’s a good deal for the United States work force and the economy, and the President himself believes China wants to make a deal because they are not doing well. They are not doing well right now. And I think they are going to need some help, and trade might improve their economy. But, but, but we will see. No forecast from me.

DAVID FABER: Understood.

LARRY A. KUDLOW: The Kudlow Axiom, better to talk than not to talk.

DAVID FABER: Without a doubt. Larry, and this is subject you and I can probably discuss as well in future interviews, but I wanted to get it out there because it’s in the news a lot today. It involves the relationship between your administration and business, which I know you are at the forefront of, talking to CEOs and the like. The administration has been aggressive in rolling back environmental regulations. I think 84 of them by people’s count. But, in certain areas, particularly when it comes to the methane role roll back, the roll back of mileage standards in air pollution from automobiles and even the roll back in terms of mercury emissions from power plants. You have actually gotten push back from the very businesses that you are trying to conceivably help. Many auto manufacturers saying we are happy to go with California’s standards. A number of the power plant companies saying, you know what? We have already spent the money on mercury. We’re okay with it. And even methane, BP, Shell, saying we are okay in terms of dealing with the current rules. Why don’t you back off when you hear that from business?

LARRY A. KUDLOW: No, look, this is a very important point. I’m glad you raised it. The cafe fuel standards, which rules will be released shortly, probably in the next few weeks, we have done what the carmakers originally asked us to do, which is to lower the miles per gallon standards. That leads to safer cars, safer cars, and cheaper cars. Maybe 2,500 to $3,000 cheaper cars. Because, in our judgment, the prior administration’s rulemaking here was excessive, was erroneous, and was not built on proper cost benefit analysis. Now, we will have our discussions with the state of California. We want one standard for the whole country. Most carmakers agree with us. By the way, federal statutes override state statutes.

DAVID FABER: Understood. What do Mary Barra say? Did you meet with Mary Barra yesterday? What did she have to say?

LARRY A. KUDLOW: We did meet with Mary Barra. Mary Barra expressed to the President her support for our reforms on cafe fuel standards. Mary Barra is doing her best to open up plants. I think it’s possible the President will go with her to a meeting and a discussion in Ohio. She did not sign that letter, General Motors. A lot of big car companies, General Motors for one, Daimler-Benz for another, did not sign that letter. Only a few did. Look, the industry asked us to lower the regulatory barriers to safe and cheaper cars. Let me make one more point. You mentioned methane and so forth. Look, the United States has the cleanest air and water of all the major industrial countries. We want to look at problems for clean air and water? Have a look at our friends in China. That’s the issue there.

DAVID FABER: Nobody wants to go there.

LARRY A. KUDLOW: We – we have – we have reopened our energy industry. There’s an executive order that the NEC and others participated in, so that we will make permitting faster, we will open the doors to pipelines, to various instillations for LNG and so forth. So, look where we are. And this goes right to the economy. Look where we are here. We have plentiful –

DAVID FABER: Okay. Larry. We’re getting the hard wrap from your people, I’m afraid.

LARRY A. KUDLOW: But – plentiful, plentiful and cheap energy to power America forward. I think that’s a big part.

JIM CRAMER: Very true. We’re a natural resources powerhouse. But, Larry, we’re going to have to wrap there. It’s always great to see you, my friend.

LARRY A. KUDLOW: Thank you.

JIM CRAMER: And thank you so much for coming on “Squawk on the Street.”

LARRY A. KUDLOW: My pleasure.



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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver