National Economic Council Director Larry Kudlow On Weak Jobs Data

Updated on

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

WHEN: Today, Friday, March 8, 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 Kudlow on CNBC’s “Squawk on the Street” today, Friday, March 8th. The following is a link to video of the interview on

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 hedge fund letters, conference, scoops etc

Watch CNBC's Full Interview With Larry Kudlow Following Weak Jobs Data

CARL QUINTANILLA: Back to today’s other big story, of course, job creation really grinded to a halt in February. Labor Department says nonfarm payrolls is up just 20k. That’s the worst month since September of 2017, even as the unemployment rates drops to 3.8. Joining us with the reaction from the White House today, National Economic Council Director Larry Kudlow. Larry, great to have you back. Good morning.

LARRY KUDLOW: Good morning, Carl. You know, I was there in the Roman Empire. It wasn’t all that great. We should really put -- have some perspective on it.

CARL QUINTANILLA: You in the robes—I’ve got to see. Pics or it didn’t happen. Larry, help us understand 20,000. How did this happen?

LARRY KUDLOW: I think it is a very flukey number. It is interesting that 20,000 there, the household employment number from which unemployment comes was up 255, which is a great number. The unemployment rate fell right .2 from 4 to 3.8. Wages were up, actually a big wage number year on year, 3.4%. Look, I think you have timing issues with respect to the government shutdown. Winter, seasonal issues. Very flukey. I wouldn’t pay attention to it to be honest with you.

JIM CRAMER: Well, Larry, it is Jim. I want to -- I totally share your view. I want to be able to defend the number as a way to be able to say: there was weather and this time you really got to take weather seriously. But I wonder, Larry, at what point are some of these woes from overseas are we importing? I know we’re going to import a lot from that deficit number but are we importing Brexit, are we importing worries in Germany, are we importing the issues that are hurting China? Because I don’t want those to impact us. Because they don’t necessarily reflect anything other than United States being a little more ascendant than they are.

LARRY KUDLOW: Look, well, that last point is an important point. We’re the fastest growing economy in the world from the major economies. And you mentioned Europe, the United States is buying goods. We are really the only source of stimulus. I mean, let’s take Europe, it’s a big trading partner, so, we’re buying -- we’re importing their consumer goods, importing their capital goods. We’re importing their manufacturing goods, and that’s, you know, they need that demand. If it weren’t for us, they would be in worse shape. Probably negative across the board. They can keep throwing money at it, as Mr. Draghi is. Now more easy money lending to the banks. That’s not going to do it. They have been doing this for years. They need changes in their labor regulations, they need lower marginal tax rates, et cetera, et cetera. We are the source of stimulus. We are the hottest economy in the world. And we are expensing, despite the silly, flukey number, we are on a roll and I’m going to say that the outlook for the American economy is still 3% growth plus.

DAVID FABER: Really? That’s – that was my question, Larry. You called a silly flukey number, so you don’t believe it is reflective of all of a slowdown in growth?

LARRY KUDLOW: No. I don’t think it is reflective of anything, except you have timing issues and scoring issues and eligibility issues and lousy winter seasonal issues. Again, this is all going to be revised up. You can use a three-month moving average. I think jobs are about 190,000 plus. Look at the house hold survey. That’s where the unemployment rates come from. That thing was up, if i have it right, 255,000. So, your unemployment rate comes down from 4 to 3.8 and your wage numbers are up, I believe, .4%, 3.4% year on year. Those are really, really big numbers. And, again, you may not see it in this month, monthly data is monthly data, there’s a lot of noise, but the trend lines are so important, the biggest factor in the growth of jobs in the past year is, guess what, women. Women have come back into the labor force. I don’t know what the number is, 50 something percent, 57% or 58% of the new entrants in the labor force from women. That’s a big turnaround from the last 15 or 16 years. And then of course, as we’ve discussed on this show, blue collar. Blue collar employment, manufacturing, autos and so forth. Fastest gains since the ’80s. And the Blue Collar wages are rising faster than the White Collar wages. I’m not saying higher, I’m just saying faster. These are great things and, by the way, one last number, I just want to put this in, the best number I’ve seen all week: productivity, output per hour. That is the ultimate growth driver in our economy at least. Productivity is up 1.8% for the last four quarters in 2018. That’s a big number. Because that thing had been flat, zero or near zero for many years. That tells you a number of things, okay. I think that lower tax rates and deregulation is working. But it shows you that money is being invested, businesses are investing, new equipment, new campuses, new everything, new robots, you were talking about AI before, that’s a big number. 1.8% productivity growth changes the whole potential of the economy to grow. It is a terrific number. Much more important than today’s payroll number.

JIM CRAMER: Alright. So, Larry, I like that, I likethe women, that’s important for the International Women’s Day. Of course, the participation is terrific. But at what point, Larry, can we say, ‘Things are good here, things have slowed down in China, down 20% in that -- for heaven’s sake. And a remarkable number.’ at what point do you go to the President and say, ‘Listen, you know, we got plenty of time, don’t have to hurry this, we’re winning, they’re losing.’

LARRY KUDLOW: Well, look, we have come a long way in those talks. I’m not sure I have any new news to add particularly. We are still negotiating by phone and teleconference. The documents from two weeks ago advanced enormously. That’s why the President is optimistic about the potential for a deal. We’re still looking at the structural issues. We’re looking at the enforcement issues. We’re looking at the commodity issues. I don’t want to hang a timetable on this. Ambassador Lighthizer is doing the best he can. There may be a meeting down in Florida, in Mar-A-Lago, between the two leaders, maybe late this month or early next month. Nothing in cement. But there’s a lot of talk about a meeting. They’re moving along very nicely. They’re moving along very nicely and they’re covering more ground than ever before. And, look, Jimmy, you’re right, China’s economy, there’s two things going on here: one is the business cycle is lousy. The recent data is lousy the stock market has come back this year, but it had been performing very badly. But there is a long-term problem here. China had been departing from its market based reforms that helped them grow in the ’80s and ’90s and early 2000s. They’ve been moving in the wrong direction, they’ve been moving away to a more authoritarian economy and political story. That’s hurt them. Direct investment has slowed down enormously and they’ve had to fight to keep the Yuan Renminbi steady. Now, we have hurt them, I think. President Trump’s negotiating strategy, tough, aggressive, tariffs are part of his strategy, so they have come to the negotiating table to talk about more things, more seriously than ever before. So, you’re right, we have them over a barrel. On the other hand, we would like a good deal, both countries should benefit, but I must say, as the President has said, and he’s very serious, if we don’t get a good deal for the United States and its workforce and its Blue Collar people, and its ranchers, and its technology, you know, they got stop stealing our technology -- if we don’t get a good deal, then we won’t get a good deal. And you saw him walk away from North Korea – I’m just saying that’s a directive moment, it could apply to trade, I’m not forecasting. I’m just saying, it has got to be a good deal for the USA.

CARL QUINTANILLA: And if it is not, Larry, if you do walk, then what are we left with? I mean, tariffs go to 25.  trade deficit continues to grow. Our Budget deficit continues to rise 70% year on year. Then what?

LARRY KUDLOW: Well, I don’t want to do what ifs because I’m not predicting that we’ll walk away. I’m just saying, the President made it clear how tough a negotiator he can be. The tariffs were one illustration of that and the North Korean -- I call it a directive moment, is another. I’m not suggesting that’s going to happen. I’m not here to announce that. I don’t want anyone to misinterpret. We are actually all, in the senior government, we are all relatively optimistic. But, again our conditions have to be met. And there have to be big changes in the IP theft, you know this issue as well as we do, in the force transfer of technology, in the ownership provisions, and in the enforcement provisions. But having said that, Carl, we have a lot of really good stuff on the table. The documents are very good. I’m not here to reveal the details. But I’m just saying we have come further than any time before and it is pretty good stuff. So, I don’t want to sound like a bear. I’m actually rather a bull on it. But I’m saying, if it doesn’t measure up, and it goes to Jim’s point, if it doesn’t measure up, the United States will stick to its guns, believe me on that.

DAVID FABER: Larry, Carl mentioned the budget deficit. You were on this with us last Friday, I didn’t mention it, I like to get to it every other Kudlow appearance. 310 billion for first four months of the year, you know, running close to that trillion dollar number in an economy that is strong, to your point, which makes people wonder: what is going to happen if the economy weakens in terms of our ability to deal with that kind of a deficit if we’re generating that much now?

LARRY KUDLOW: Alright, David, did you say in an economy that is soft?

DAVID FABER: No, I said strong.

LARRY KUDLOW Oh. Thank you. No, no, thank you. I appreciate that. Little ear trouble. Look ay, the budget is coming out next week, I believe, OMB will publish its budget. What you’ll see is a study glide path towards lower deficits as a share of GDP and the very tough spending outline, 5% spend and reduction, domestic spending across the board, it’s just what the doctor ordered. We don’t want government spending to interfere with economic growth. So, you’ll see a pretty steady downward glide path. On this point, whatever your villain is in the deficits, let me say even the CBO, with which we generally disagree, I’m not breaking news here on my part, but they just published their new numbers. You know, from the point of pretax cut to now, we have had about $7 trillion unexpected increase. $7 trillion over 10 years in terms of GDP. And that kind of calculates to roughly 1.2, 1.3 trillion in additional revenue. That’s the CBO numbers. These are all ten-year estimates, I apologize for that, but that’s the convention. So, what am I saying here? The tax cut was about 1.5 trillion scored. We have virtually paid for it, I guess 8 0% paid for it. And that’s by the CBO’s own numbers. So, our growth estimates as you can expect will be faster, they’re closer to 2, we’re sticking with 3. I think what we did was, we borrowed in the short run to make a great investment in the economy through tax cuts. That investment is paying off. Growth, productivity, higher wages. And now we will recoup that investment and the books are going to gradually look better and better as the share of GDP. That’s the way this thing should work. And I think that’s the way it is already working.

CARL QUINTANILLA: Larry, Chinese Foreign Minister appeared to applaud Huawei for filing their suit, should investors see Huawei as a wild card in trade talks?

LARRY KUDLOW: I don’t want to get into any details on that one for sure. The Huawei issue is a complicated issue. It is really not a trade issue. I mean, if you listen to Ambassador Lighthizer, we regard that more as a legal issue, at least at the moment. I know it is part of the overall landscape, Carl, but I don’t want to really comment on that. There is a legal process that is going on. It may enter into trade. I don’t want to make any predictions. Let me just set Huawei aside for the moment.

CARL QUINTANILLA: Okay. Larry, appreciate the time as always.

LARRY KUDLOW: Thank you.

Leave a Comment