Kevin Allen Hassett, chair of the president's Council of Economic Advisers, joins reporters for the White House briefing:
SANDERS: I've invited the chairman of the President's Council of Economic Advisers, Kevin Hassett, to join us today, and offer more details about the growing economy, and take your questions on this topic. After that, I'll be happy to come up and take questions on news of the day. Thanks.
KEVIN HASSETT: Thank you. Thank you, Sarah, and you know, I -- I watch these things a lot, and -- and I was noticing that not everybody's always in the best mood. And so I told Sarah, what you guys need are some charts, right? And -- and so we've got some charts for you today.
HASSETT: Yeah, I know. Yeah, I can see. There are a lot of nodding people.
OK, so -- so I think that -- that Sarah said it best: that we're in, as the president has tweeted, one of the best economies I've seen in my career, and that there are a number of facts that have developed over the last few months that are, I think, confirming some of the stuff we talked about last fall, when we talked about -- gosh, it was maybe in November -- the tax bill, and the economic impact that the tax bill might have on the economy. In addition, the president has pursued a trade agenda and deregulation, and we're beginning to see the effects of all of this in the data.
And the first slide, if we can get it, is one of my favorite ways to just look at a summary of how the economy's doing, is to look at the GDP growth over the previous year. And you might recall, when President Trump ran for office, and when he came in, and when I first started at CEA almost a year ago, that we were looking ahead to three percent growth, and everybody said, "No, no, no, we've got a new normal," those blue lines which you see during the Obama years, where we've got growth in the ones, maybe up to two, if we're lucky. But we could never get three percent growth again.
Well, in the latest data that we have, we've got growth year-over-year that's just a smidgen less than three percent. And the Atlanta Fed GDP now number right now is that second quarter GDP will be high enough to make the year-over-year growth about 3.1 or 3.2.
And so if you look at this chart, you can see that there's been a clear trend break, and that we've gone from a new normal of low growth to just normal, which is the three percent growth that Americans used to expect.
Could I have the next slide, please?
In this chart, I want to show something that -- that we again talked about in the fall, which is that one of the reasons why we had such low growth in the previous administration is it was so anti-business, and it was basically discouraging capital formation in the U.S. with inappropriate tax policy and high regulation. And you can see that in the data, if you look at, for example, the blue dot from Q1 in 2015 to Q4, 2015. Business capital spending barely increased at all, and even in pre-election 2016, it stayed at about the same level.
But subsequently, and after the election, already, we started to see a big increase in business sentiment, and capital spending started to go up. And now that we've passed the tax bill, then you can see capital spending skyrocketing, just as we said it would last fall. And that higher capital spending is exactly, you know, one of the key factors driving growth at this time.
I can remember way, way back in the fall saying that if we passed the tax bill, we'd expect to see capital spending this year higher by about 10 percent. If you look at the last bar in the first quarter of GDP this year, capital spending was up 9.2 percent.
Next slide, please.
There are a number of other things that we can look at, and -- and believe me, we could go on all day, but I promised Sarah I'd stop at about 10 minutes. This is one of the ones that I find most striking, because it has such a big impact on our outlook for small business. And so right now, small businesses are as optimistic as we've ever seen since we've began surveying them. And I think it's also interesting to see, like you could say, "Well -- " and -- and sometimes people, the Obama administration will say, "Well, we just set this economy up for the president." But you see a clear break in this chart when -- at the election.
And so President Trump promised that he would cut taxes, that he'd reduce taxes on small business, and that he would reduce the heavy regulatory costs that were imposed on them by the previous administration. And you can see even before he began to act, the sentiment turned -- turned around.
And that next slide, please. HASSETT: And that's helped lead to something. This is really one of the more remarkable labor markets that we've ever seen. The job market right now is about as strong as I've ever seen, and -- and there are a lot of ways to put it in perspective, but for me, the -- the easiest fact is just that it's only seven times back to 1970 that we've had an unemployment rate below 4 percent. And two of those months were the last two months. And we expect that will continue.
As remarkable as that chart is, I think the next one is one of the ones that, I think, moves me even more. The next chart shows the gap between the unemployment rate of white workers and black workers.
And you can see that the gap between the unemployment rate for black workers and white workers has gone to an all-time low, and it's maybe about a third what it was, on average, during the Obama administration.
And, of course, we want that gap to get all the way down to zero, but we've made a tremendous amount of progress because President Trump's still (ph) working to heat up the economy.
The next chart, for a person who loves economic data, is really my favorite because you rarely ever see anything that is the best since the Second World War in economic data.
And this chart shows that the initial claims for unemployment insurance, which is those people who have the really bad news that they lost their job, and then show up at the unemployment office to collect their unemployment insurance.
That as a share of the workforce, they're the lowest they've been since the Second World War. And so, you know, one of the worst, most disruptive things that can happen to a person's life is to lose their job. Right now, there's never been a better economy for this since the Second World War.
I've got one more chart, and then we'll open it up for questions. And the last chart is something that the president tweeted about. And this is just a chart of what's happened to Americans' wealth since the president was elected.
This is how much money they've got in their checking accounts, their saving accounts, what the value of their house is and, of course, the value of equity markets.
And you can see that since the president was elected, the -- American'’ wealth has increased by $7 trillion and I would guess that when we see the data over the next coming quarters, that we're going to cross the $100 trillion mark for Americans' wealth.
And so it's very clear that the president's economic policies are working. But I think that the most important thing is that they're working for America's workers.
That America's workers are being laid off at the lowest pace that we've ever seen. And wage growth, which we didn't include in the chart, is also taking off as well.
With that, I'll open up for a few questions. I promised Sarah that I would keep it at three or four or something like that.
And I'll start with Roberts (ph), and then I'll work back.
QUESTION: Great. Kevin, good afternoon and thank you...
HASSETT: Good afternoon.
QUESTION: ... for being with us today. The unemployment rate, 3.8 percent last month. But the labor participation rate still lags four points behind where it was the last time unemployment was below 4 percent, down in -- in this range.
What -- what can this White House do to increase the labor participation rate?
HASSETT: Right. Well, this White House has, going all the way back to the campaign, when the president was speaking to the forgotten people, the people who had exited the labor force because they were so discouraged that they had just sort of given up.
And we said that we don't believe the story that was being pushed by the previous administration, that there's no hope for you. We think that you should get back into the labor force as of -- I did this calculation as of the last jobs report. I haven't updated it for this jobs report.
But as of the last jobs report, 900,000 people -- 900,000 Americans who were out of the labor force have been -- have gotten a job since President Trump took office.
So I'll go back to you, ma'am. And -- yeah.
QUESTION: Yes. Thank you. Two questions. Does this administration put into account that the Obama administration had been dealing with a recession? They were coming out of a recession. Do you take that into account when you talk about the numbers, comparing apples to oranges when you're dealing with economic (inaudible)?
And then going into black unemployment. The numbers have come down. But historically, the numbers have always been one and a half to two times or even great than that, of white America.
Will this administration -- since you love to tout those numbers -- effectively target in to bring that down to nothing?
HASSETT: Thank you for that -- that (inaudible) you said. So, first, the Great Recession. That was -- the targeting point is something we've been working on.
But, first, the Great Recession absolutely slowed growth in the early years of the Obama administration. But normally what we should have seen in the economic recovery is, that at the end of the administration, that the capital spending and everything else would be getting back to normal. And that wasn't happening. And that was clearly in the data.
As -- as for the targeting, I think that one of the things that we've spoken in this room about, before, that the president talks a lot about, is -- is increasing jobs in goods-producing industries. That's manufacturing and construction.
Those goods-producing industries are creating jobs right now at a pace that's just a little bit under 50,000 a month, and that pace is about double what it was under the previous administration.
It's precisely the thing that the president's been targeting. And if you look at the -- the racial disparities across different professions, that it's the good-producing industries that are, in part, responsible for the big reduction in the black unemployment rate.
QUESTION: (inaudible) follow up on that (ph)?
HASSETT: I will let you have one (ph) follow-up, I'm sorry. Because I think -- yes. Go ahead.
QUESTION: I -- I'm sorry. Thank you for that.
QUESTION: So -- but when it comes to construction, it's known more so as a boost for Hispanic workers. What specifically are you going to do to target for African-Americans, since you are talking -- I mean, you guys tout this...
HASSETT: The -- the president's policies are clearly working. The gap is the lowest in history, and his policy is to target goods-producing industries and he's been very successful at that.
Could I move back here, yellow -- yellow tie? Yes. Thank you.
QUESTION: Let's turn to -- to trade for a second. The United States, has its stance right now on possible tariffs. China has its stance on possible tariffs. Have you guys at all modeled, at all, if there is a trade war between the U.S. and China, how that would impact the U.S. economy?
And as well, you’ve had Republicans, over the last couple months, who have said the one thing that can stall tax reform, the impact on the economy as they see it, is the president's trade policy. Are they on to something there?
HASSETT: Look, the economic report of the president that we put out a few months ago documented something the president has talked about, I think, very emotionally at times, going all the way back to the campaign.
Which is that our trade deals are very asymmetric, that our markets are really open to the imports from other countries, but a lot of other countries have asymmetric treatment of us.
And so for example, in Europe, they have a 10 percent tariff on cars and we have a 2.5 percent tariff. The president's objective is to get fully reciprocal trade deals. And if you model a future where everybody else reduces their trade barriers to ours, then that's massively good for the global economy and massively good for the U.S. economy.
Now, the president wrote the book, "The Art of The Deal." We're engaged in discussions and negotiations, and we're hopeful that we reach that positive long-run equilibrium.
Let me move on to another one. Right -- right here. Thanks.
QUESTION: Thank you, Kevin. I wanted to ask you about the benefits of the tax cut legislation that the president signed into law in December.
A Morgan Stanley survey found that 43 percent of the tax cut savings are going to stock buybacks and dividends. Thirteen percent are going to employee raises and bonuses, employee benefits, something like that.
Are you disappointed that you're seeing that impact, that effect from the tax cut? That so much more...
QUESTION: ... seems to be going to Wall Street than to Main Street?
HASSETT: No, not -- not at all. In -- in fact -- in fact, wage growth right now is the highest, if you look at the -- over the last quarter, at the employment cost index, it's the highest it's been, going all the way back, at least, to 2006. But that's where they changed the way they do data.
That we've got more than 6 million people that have been announced to have a pay raise because of the tax bill. The average pay raise for them is a little north of $1,200.
And the president's said, again and again, and CEA's said, again and again, that there'd be a $4,000 increase in pay for people if we passed the tax bill.
And people said that that number was completely implausible, but let's look at the numbers now. Walmart, for example, has increased the minimum wage for their workers, the lowest-paid workers at Walmart, by $2 an hour. If you run that forward, that's just a little bit less than $4,000 this year. HASSETT: And so if the lowest-paid people at Walmart are getting the $4,000 the president has promised, then of course we're not disappointed in the wage data.
HASSETT: Could I have a question over here?
QUESTION: Just to follow up on...
QUESTION: It's going to Wall Street than to Main Street (inaudible)?
QUESTION: Just to follow up on the question that was asked earlier. Tariffs -- do you predict -- right, and it was the trade question, I guess, that Blake (ph) was asking, following up on.
There's always a prediction that increased tariffs will depress the economy. What the president is engaged in, do you foresee any problems with the tariffs that he's implemented and what would be your reaction to it?
HASSETT: I think that the president is pushing our trading partners hard to make their deals fair for America's workers. And that that's his objective, and there are ongoing discussions right now. And I know (ph) a lot of other presidents -- I was over here at one point as an outsider coming to talk to President Obama's team about this. A lot of other presidents had wanted to make better deals Or and failed. And this president is not going to fail at that. He's going to make better deals.
QUESTION: Would that depress the economy, higher tariffs? Do you admit that that could problems with the economy.
HASSETT: We expect that this is going to work out well, that we're going to get fair trades deals. Could I have, back there, the fellow -- yes.
QUESTION: Just following up on that a little bit -- I thought you said here and what the president said also is that, talking about tariffs would be more of a negating tactic, as much as anything. How far though can this be as a negotiating tactic would mean -- so far (inaudible) the (inaudible), and (inaudible) other countries don't (inaudible).
HASSETT: No, I reject the view that it's a negotiating tactic. Purely for example, the steel tariffs were put in place as a national security concern. The president is the commander in chief. He's supposed to make those judgments. At a time of war, we need to produce steel. I think that there are a lot of things going on in the 301 space, to use the inside baseball term. We're trying to get China to stop stealing more than $100 billion worth with of our intellectual property every year and open their markets to our products. So there are a lot of things going on right now.
I think last question, Sarah? OK.
QUESTION: Indication of where we in terms of the NAFTA negotiations? Right now, there's this idea out there that the United States might want to break up the NAFTA negotiations and do a direct deal with Canada, a direct deal with Mexico. Is that the right approach and what do you think is coming?
HASSETT: I think that the president's approach is to negotiate with Mexico and to negotiate with Canada and to make better deals. And I think that you know, you'll have to talk Ambassador Lighthizer to get an update on the current state of the negotiations.
QUESTION: Thank you very much. Thank you all for having me.
SANDERS: Thanks, Kevin.