US Council of Economic Advisors Chairman Stephan Miran Talks Jobs Data
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Joining us now is Stephen Myron, the chairman of the Council of Economic Advisers. Stephen, welcome back to the program, sir. Thanks for making some time for us this morning. Let's just take a little assessment of where things are right now. So through the week, GDP first contraction since 2022, consumer confidence the weakest since May 2020, manufacturing shrinking on the ISM report. And then we just had this very solid payrolls report. What's your assessment, Stephen, of where things are at the moment?

Good morning. Thanks for having me. And let me just say that I know that surveillance usually ends at nine. So I look forward to you guys benefiting from the president's forthcoming no tax and overtime. So thanks for staying a few extra minutes. But no, look, I think there's been an ongoing disconnect between the hard data and the soft data. And the hard data continued to perform very well. 177,000 jobs last month, a beat of 40,000 jobs. That's the president's second jobs they beat in a row. And on top of that, you've got 11,000 construction jobs,

expanding and expanding construction sector in spite of the president's crackdown on the border, disproving critics again. And the hard data continue to be okay. And I think it's worth emphasizing that these data represent the period after the president's historic actions with tariffs on April 2nd. - So Stephen, we need to get into that because there are some people that we've spoken to that worry about the next report. They think that this could show up in the main report. And I've heard the words downside risks repeatedly. Are you confident that some of that's avoidable?

So, you know, look, you know, given given the historic scope and speed with which the president acted to put American workers and firms first for the first time in decades, you know, it shouldn't be surprising if there's if there's some accompanying volatility and that extends to financial markets that we've seen. And it could extend to economic data also as companies sort of substitute activity from one month to another.

But you know that that remains to be seen but so far in the hard data We're not seeing any real evidence of that to be the case and as you pointed out, you know There are various soft data sentiment indices that look not as good but those tend to be influenced by financial markets and there's been enormous volatility there lately as you guys are aware and they tend to be influenced a lot by a lot by politics and

But historically, the correlation between those and activity has been weaker in the last few years than it would have been, say, 10 years ago. We are seeing it show up in some hard data, and that's trade volumes. We just caught up with the Port of LA director, Gene Sirocco. Stephen, I wonder if you've been in touch with them and how you see this playing out. They're telling us now the trade volumes are about to fall, that what they're about to see through their port could drop by something like a third.

30%. And then from there, this could ripple through the US economy. What's the sequencing of things from your standpoint?

Thanks. So as I mentioned a moment ago, there can be some volatility in the economic data. And I think it's worth emphasizing that there are some firms that want to see the outcome of trade negotiations, which will be coming soon. And they want to see the tax bill passed, which again, will be coming soon. And as a result, they may substitute activity from one month to another, from one quarter to another, but it all gets averaged out over time. These are not the types of activities for which activity would get canceled permanently. And as you mentioned at the start,

The GDP report contained a five-point drag from import activity. So we're just coming off of a quarter with an enormous amount of imports that, by the way, there was a data anomaly in the GDP data that I'm sure most of your audience is aware of by now.

But after such a huge import drag on the economy in the first quarter, it wouldn't be surprising if there were a little bit less imports subsequently. I mean, but this stuff all averages out over time. And that's why it's important to look at measures of underlying GDP growth, underlying economic activity. And those were quite strong. As you know, the market is very focused on trade talks right now. And that's why we've seen equities recover to the extent they have over the past week. Stephen, the U.S. says China wants to talk.

China's going around saying the US wants to talk. I don't think the market really cares about that. The market just wants to see talks. What's the timeline for actual talks?

So the president has repeatedly said in recent weeks, and he's been very clear that he thinks that we will do a deal with China. I think the president is right. And as I keep pointing out, the president has one of the best track records on making deals in the entire history of the country. He is able to pull deals out of a hat that nobody thinks are possible. He pulled the phase one deal with China out of a hat in 2018, 2019, in spite of all the doubters. Many people didn't think that was possible, but he achieved it.

And so I think the president is right that we will have a deal with China. I can tell you that I have good reason for that optimism. I think that it's in the interest of both economies to lower the temperature, to create breathing space, to continue talking, to figure out how we can get to a new stable equilibrium on trade. And I think that a little bit of de-escalation will be quite helpful. So I would be surprised if tariff rates are where they are now within a few weeks from now.

A few weeks. So you're saying within a few weeks, the 145% tariff rate on China is bound to come down. And to where, Stephen?

Well, I can't get ahead of negotiations. I can't make commitments. I'm not part of the trade negotiating team. I'm not a trade negotiator. But what I can tell you is the president has been very clear that he thinks that there will be a deal with China. And I think the president is right. And I think it's in the interest of both sides to come to a de-escalation that lowers the temperature and creates breathing space. Well, China this morning put out a statement, the Commerce Ministry, so this is official, saying China is currently evaluating this.

Do you have a sense when the president is going to get on the phone with Xi Jinping?

I don't. I don't. And again, you know, I'm not a trade negotiator. I'm an economic advisor. That's the scope of my role. What I'm giving you is my is my expectations. You know, I can't get ahead of the negotiations. I can't commit anyone. Stephen, I wonder if you could give us some insight, though, just to the approach, the approach we're taking at the moment. The Treasury secretary mentioned just yesterday that maybe we could revisit the purchase agreements that we struck with China back in 2020. Is that something we'd look to do with other nations as well?

- You know, look, I mean, I think that there's a wide variety of terms that can be included in the different negotiations and each country is different, each trading partner is different, and I suspect that each trading agreement that is reached will end up being different too. But things like that should definitely be on the table. And I think it's up to other countries to show America that they mean to make trade more fair, they mean to make trade more reciprocal, and they mean to create better markets for U.S. exports the way that we accept their exports into our markets.

And purchases like the type you're describing, you know, could work towards that ends. Well, the Europeans are looking at increasing the purchases of U.S. goods to 50 billion euros to address what they say is the problem in the trade relationship. Is that enough to get a deal done between Washington and Brussels?

- Again, I can't, you know, I'm not a trade negotiator. I'm not making deals with people. I'm just an economic advisor. And, you know, I can't say, you know, I can't prejudge the outcomes of those deals. However, what I will say is that talking is better than not talking.

And I do believe in the ability of the president to create deals that nobody expects. And once you start on that process, I think that there will be fertile ground for countries to see eye to eye to make trade fairer, more symmetric, more durable, more resilient, and create a more long-lasting, stable global trading system. Well, the Japanese are talking, and I think this is something that you can offer some insight on, an assessment on what this could mean for financial markets and the economy. And we'd love to know the kind of advice you'd give

In the Oval to the President of the United States, the Japanese finance minister was asked if Japan's holding of treasuries could be a negotiation tool. And the response was this, here's the quote, "It does exist as a card. Whether or not we use that card is a different decision." Stephen, what's your reaction to that? - My reaction is that I'm not the treasury secretary and you should ask my neighbor a couple blocks down. - Do you have an assessment on what that would mean for markets and the economy though?

I don't. But, you know, for markets in the economy, I think that, you know, capital flows will ultimately in the long run follow economic growth and economic opportunity. And that's why the president is focused on creating the most dynamic, strongest, healthiest economy in U.S. history. And we're talking a lot about trade, but there's two other elements to the package also. And those are tax relief for Americans, no tax on tips, no tax on overtime, no tax on Social Security, incentives for corporate investment, lower corporate rates on domestic manufacturing, you know, expensing, things like that.

And also deregulation, getting regulations out of the way so that American firms can produce in America without layers and layers of red tape that make financing difficult, that delay projects and just make it unattractive to invest in the United States. And as we succeed in creating the economy we want by passing the tax bill, the big, beautiful tax bill, by...

proceeding with the deregulatory effort and getting government out of the way and putting American workers on fair ground via trade renegotiation and tariffs, then we're going to create the economy that will attract capital flows. So all of this stuff in the short run, you know, it's a little bit noise. But in the long run, capital will follow economic opportunity. And this administration is focused single-mindedly on creating economic opportunity for American firms and workers. So, Steve, let's quickly talk about the big, beautiful bill. What kind of revenue do you expect from the tariffs to offset

the tax cuts the president wants to get across the line. So when you talk about things like offsets, that's ultimately, usually people talk about that as part of the reconciliation process, which is basically, as your audience knows, a legal artifact of how the sausage gets made in Washington and how bills come together and get signed into law. The tariff revenue is sort of a different bucket.

And, you know, I'm not at a liberty to share our internal number, but what I would say is I would be surprised if we had tariff revenue, you know, that was less than hundreds of billions of dollars a year. And that's very substantial. You know, so when you think about the revenue that you can raise from tariffs ultimately paid for by foreigners, use that revenue to help finance preservation of the president's historic 2017 tax cuts, use that revenue to help finance additional tax relief for American firms and workers, I think that's a winning combination.

Steve, right now the market is basically just only pricing in the fact that there's going to be an extension of current policy. How confident are you that you get some of those sweeteners like you just mentioned, no tax on tips, actually done in this package given how slim the Republican majority is in the Senate and the House?

Oh, I'm very confident that we will get this package over the line. I'm extremely confident we'll get this package over the line. The entire Republican Party is unified and committed to using tax incentives to create a vibrant, robust, healthy and dynamic economy. And that was what created the first Trump economic boom. And it's what will help create the second Trump economic boom as well.

Stephen, just a final word on the Federal Reserve, which we may. The president's been outspoken, as you know. He said we should reduce interest rates. The Treasury Secretary, Scott Besson, made the argument that look at where the front end of the yield curve is right now. The two-year trading below Fed funds, that's evidence that this market thinks we're too tight and the Fed should cut rates. I just wonder from your perspective how you'd weigh in. Do you think this complicates the optics for the Federal Reserve? Does it make it harder for them to ease over the next several months?

Sure. So, you know, I think everyone's entitled to an opinion on interest rates and where they should be. And the president actually has a pretty good track record of his opinions. He was right in 2018, 2019, that inflation wasn't an issue and that interest rates were too high. And eventually consensus came around to his view. And again, he was right in 2021 that interest rates were too low and inflation was coming back big time. And again, he's right in

consensus came around to his view. So everyone's entitled to an opinion on these matters. I think the president has a great track record on them, as does Secretary Besson, who is a fabulous track record as an investor on these subjects. And everyone's entitled to their view. As to whether it interferes with the things you're talking about, I don't think so. I think the track record of the Federal Reserve speaks for itself. Stephen, can I just say, I really wanted to catch up with you. I did this for free.

No overtime, okay? But I'll take the tax break. I will take the tax break. Stephen, thank you, sir. The tax break is coming. Thank you, sir. The chairman of the Council of Economic Advisors. Switch to Verizon Business and get more from your internet without paying more for your internet. Get LTE Business Internet starting at $39 a month when paired with select business mobile plans. That's unlimited data.

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