NEC Director Kevin Hassett Talks Jobs Data & Inflation

**Kevin Hassett** (0:02)
Bloomberg Audio Studios. Podcasts, radio, news.

**Matt Miller** (0:07)
In May, the US economy added 172,000 jobs, far exceeding all estimates. Let's bring in White House National Economic Council Director, Kevin Hassett. And I mean, frankly, congratulations are in order, Kevin. This is an unambiguously good jobs number and upward revision in the last month.
Does it foreshadow the risk of broadening inflation?

**Kevin Hassett** (0:34)
No, absolutely not. And in fact, it's something that's a great question, Matt. The bottom line is that what's going on is because the president has recruited from companies around the world $18 trillion of new investment. And we're seeing, if you looked at the advanced urban numbers, you know, equipment investment through the roof up 3 percent. You know, in March, in one of the biggest months we've ever seen, that people are building factories, creating jobs, creating the golden age, the boom, that is a logical supply side response to the big beautiful bill, the no tax on tips, the no tax on overtime and the rest. And so we're seeing the benefit of that. And you might recall that when we were talking about this a year ago, there are a lot of naysayers who said, well, we can't possibly even have positive jobs numbers because of our immigration policy.
But the fact is that we're getting positive jobs numbers because we've got high wage growth and native-born Americans are rushing into the labor market in droves. And so that negative story is gone. And finally, I gotta say, we really love going through the Bloomberg data and we have this thing that I like to look at, which is the probability distribution of all the forecasts for the jobs number before it comes out. And when I looked at it after I got these numbers, I saw that the very, very top person was low by about 40,000 jobs, which shows that the Trump economy is surprising Wall Street analysts over and over again. And they need to maybe think about getting the supply side of their model fixed.

**Matt Miller** (1:59)
It does surprise people to the upside for sure.
I hear a lot of, I have heard since it passed, a lot of positivity about the big, beautiful bill and the economic growth that it would create. We see 172,000 jobs, we see unemployment at 4.3%, but we see inflation at 3.8% on the PCE. So it looks kind of like too late Powell was right on time. And now the market is pricing in a hike. Is that wrong?

**Kevin Hassett** (2:29)
Yeah, I think that's terribly wrong. The bottom line is that what you need to do is look at the impact of oil price shocks on core inflation. And the history of it is that they're temporary, they don't lead to lasting inflation, that people see through it and don't adjust upward their inflation expectations. And so my advice to the Fed, and I certainly respect their independence, and I'm really thrilled to have a talented person like Kevin Warsh there, is watch the numbers. Because what you're going to see is that with a big supply side boom, that you could have high growth without having runaway inflation. It's not a Phillips curve event at all. And the last time this happened was the 90s, when Alan Greenspan saw through that and gave us some of the best years we ever had. And I think that we have that opportunity right now, if the Fed pays close attention to the data and thinks about why it keeps surprising on the upside, them especially.
And surprising on the downside on inflation. I mean, absent the Gulf issue, the inflation basically would be completely under control right now.

**Matt Miller** (3:28)
How soon do you expect that to be wrapped up? Because that's almost completely within our power, right? We went in there maybe at the behest of Israel, but it was our decision to do that.

**Kevin Hassett** (3:38)
Well, the president will make the call on that. I mean, negotiations are ongoing, and I'm not a forecaster for when it's all gonna end, but the bottom line is that global markets understand that risk premia are gonna be much, much lower going forward once we successfully take away the option for Iran to build a nuclear weapon. And if you look at the sort of crazy actions that they're taking in the Straits, even attacking Chinese boats, for goodness sakes, then you can see how terrible it would be for the world if they had ballistic missiles and nuclear weapons. And President Trump thinks that's unacceptable. And of course, there's a short-term disruption in oil prices, but we expect it to be over soon.