NEC Director Kevin Hassett on May jobs report: This is a job market that's hitting on all cylinders

[00:00:00] Speaker 1: Let's get back to the jobs number, as Jim says. We're joined this morning with the first reaction from the White House with National Economic Council Director Kevin Hassett. Kevin, happy Friday. Good to have you back. Yeah, great to be back. Thanks. I'll tell you what impressed a lot of people were the revisions because prior 15 prints, 12 have been revised down. We got an up [00:00:20] Kevin Hassett: one on this. What do you think that means? You know, I think that basically what we're seeing is an enormous amount of positive momentum in hiring. Obviously, you're right that a couple of hundred and seventies in a row, that's a great couple of months, but then having upper divisions of around 100,000 means that this is a job market that's hitting on all cylinders. And it's our belief that this is happening because of all the supply side policies that the president has put in place. We've got the big, beautiful bill with the, you know, expensing for new factories. We've got, you know, no tax on tips, no tax on overtime. So people are out there working harder. We've got quit rates down to about as low as we've ever seen. We've got layoffs about as low as we've ever seen. This is about the strongest market of my lifetime and of your lifetime. And again, I don't think it's a classic Phillips curve. Here goes inflation. It's going to take off kind of jobs market. It's a supply side driven job market boom, which I think means that the Fed could watch the inflation numbers and wait a while before it does anything about it. [00:01:19] Speaker 1: Right. Government was a surprise. 52 is the best government print in almost two years. Does that take some of the shine off of it? [00:01:29] Kevin Hassett: Not really, because if you noticed, it was all local governments. And so we've cut a federal government employment by more than 300,000 workers. And that's a permanent reduction in taxes that Americans are going to have to pay for people who are at times, you know, not very much productive at all. But, you know, the state and local governments, they got a lot of stuff to do, trash removal and everything else. There's also things that happen in the summer around the end of the school year. So it's a pretty typical thing to see the, you know, a big swing in local employment around the beginning of the summer and the end of the summer. [00:02:02] Speaker 3: You know, Kevin, I'm a little surprised at you. You sound like you're part of that group which says we have to have rate hikes. And that's disappointing. And I say it's disappointing because if you're listening to the dollar general call, you listen to the below, the five below call, if you listen to the Dollar Tree call, if you listen to the Ollie's bargain call, if you listen to the Burlington call, you're going to hear things that are quite different from what you say, which there's a group of people in this country. If you listen to the people who make homes and try to sell them, a group of people in this country are very disenfranchised. I would have thought that you would have realized the need for a rate cut to be able to help the people at the lower part of the K instead of joining the group of people who think we ought to have a quarter point rate cut by the end of the year. It's surprising to me. [00:02:41] Kevin Hassett: Oh, I think you misunderstood what I was saying. What I'm saying is that this is not a Phillips curve jobs number. This is a supply side jobs number, which means you could have growth and low inflation. And so this is a kind of story that suggests that the Fed shouldn't hike rakes. It shouldn't at all. And it'll have room as it watches the numbers to cut rakes. [00:02:59] Speaker 3: But your term, yours will be used against you. You see, because what you're saying is that everybody's doing well. There's a considerable part of the people who are not doing well in this country. And they need the help of the Fed. And I am surprised that you're not addressing those people, the people who make less than $40,000 in this country, who need help, who've seen snap benefits decline, who have the higher gasoline prices because of a war in Iran. What about them? [00:03:23] Kevin Hassett: Well, obviously, we care about everybody that's in this job support and everybody who's not in the job support because they might be looking for a job. The bottom line, though, is that in the end, we're talking right here in this hit about the aggregate number. And the aggregate number is through the roof. Good. When you get growth, when you get growth like this, GDP now of around 4 percent jobs, 170,000 unemployment rate not going up. Then that's great news for ordinary workers, because just let's remember, Jim, that when the unemployment rate goes up, it's it's the guy at the bottom who loses his job first. Right. And so these numbers are good across the board. [00:03:58] Speaker 3: They're good for a lot of people. It doesn't mean what people they're good for a lot of people. But how about the people? How about the people who can't afford a home? We have to worry about them. How about the people who are having to have policies? You know, we've got all sorts of policies to try to lower lower costs for these people. These are people I'd love to see a rate cut for. Maybe we get this so they have a home equity loan that if they if they want to be able to stretch it a little bit so they can pay their bills. Don't those people deserve a rate cut or are you in this campus? I'm with you in the Fed. I'm with you in the president. [00:04:28] Kevin Hassett: No, no, I'm with you in the president. I think that the Fed has been behind the curve. I think that there's been plenty of room for a rate cut lately. And now we've got a new guy in town at the Fed who hopefully is going to be able to get things to be seen that way. But but the key point is that he's going to have to use economic argument and economic analysis to convince his peers that it's time for a rate cut. And the way you do that is you make the point that I just made right at the beginning of the hit that this is a big boom. It's a it's an incredibly hot job market, but it's happening because the supply side factors. And so it's not a classic Phillips curve moment where you need to hike rates. [00:05:02] Speaker 3: All right, good, because I heard you and I would say, you know what, we got another guy who says it's going to be a quarter point hike. I'm glad to hear you distinguish that. Thank you. [00:05:10] Speaker 4: But, Kevin, you know, when it comes to the other side of things in terms of inflation and at least some of the commentary that we've heard from oil executives and the like, if things continue in Iran at the where they are and the strait continues to be largely closed, there does seem to be a lot of concern about inventories and the fact that we could see far higher oil prices. [00:05:28] Kevin Hassett: How are you figuring that? Oh, you know, for sure, like eventually you run into a problem with inventories. There's very ample inventories right now. We follow them every day. You know, there's both government inventories and private inventories of the billions of barrels. They have been running down. I'd say we're about a billion barrels short from where we should have been. If the straits have been open the whole time. But that's something that can be refilled if we can get the straits open at a reasonable amount of time. [00:05:54] Speaker 1: If that doesn't happen, though, do we do we end up in this tank bottom scenario if we get through June with no relief? [00:06:01] Kevin Hassett: Well, I wouldn't say that the inventory problem starts to be a problem in June. I think it's quite a bit farther down the road than that. But but absolutely, you know, at some point oil prices, you know, if they stay high forever and ever, then there's inflation and then higher prices. But that's not what our expectation is. So that and indeed, even if the straits stay closed, what will happen will be they'll start building pipelines to get into the Red Sea and so on. And so markets adjust to these things. [00:06:30] Speaker 4: Kevin, given how many questions I'm sure you get on this, not to mention from us over the last number of months, the impact of AI on jobs, you know, how closely are you monitoring that at this point? What are you hearing from enterprises, from corporate America in terms of hiring plans and or the impact? It is still early. But nonetheless, we haven't. You know, I'm curious as to what you're seeing sort of on a more granular level. [00:06:54] Kevin Hassett: Yeah. Oh, for sure. We're looking at everything every day. We understand that this is a primary concern for many Americans. They're worried about, well, is AI going to take my job away from me? The thing I can say is that one of the signs that maybe there was something going on about six months ago was that we were seeing disappointing hiring of new college grads. But that is actually really picked up. So it looks like that story, like maybe the new college grads are not being hired because of AI. I think that story has gone away. And what we're seeing right now, the Council of Economic Advisors has been working on a report for us. And what we're seeing right now is that the companies that use AI are really, really booming, even small companies. The companies that haven't done that yet are, you know, staying pretty stagnant. And so that the AI job picture is a little bit different than what you might think in the sense that the AI is increasing employment for the companies that use it. And that the companies that aren't using it are kind of falling a little bit behind right now. And so so if you're really if you're focused on AI jobs right now, that the key is that we've got to diffuse AI faster.