DEMAND IN CHINA.
BUT AS FRIDAY'S JOBS MEMBERS
REMIND US THERE'S A BIG
DISCONNECT BETWEEN FINANCIAL
MARKETS, FORTUNES OF INDIVIDUAL
COMPANIES EVEN BIG ONES IN THE
US ECONOMY AS A WHOLE.
IT'S WAY TOO SOON TO WRITE OFF
THIS YEAR.
MARKETS ARE PROTECTORS OF WHAT
HAPPENS TO THE ECONOMY AS A
WHOLE.
IS A GENIUS WHEN SAID STOCK
MARKET IS CORRECTLY PROTECTED
NINE OF THE LAST FIVE RECESSIONS
AND IN FACT IN THE LAST 50 YEARS
WE HAD 29 MARKET CORRECTIONS.
PERIODS WITH EQUITIES WERE DOWN
BY MORE THAN 10% FROM THEIR
RECENT HIGHS AS WE HAVE NOW.
IN THAT TIME WE'VE HAD ONLY
SEVEN RECESSIONS.
US ECONOMY HAD ITS BEST YEAR IN
A DECADE AND 2018 AND DESPITE
THE CONCERNS IN SOME QUARTERS
THAT ALL GOOD THINGS MUST COME
TO AN END THERE'S NOTHING YET TO
SUGGEST THE MENTAL WILL CONTINUE
INTO 2019.
THE FACT JOB REPORTS ON FRIDAY
-UNDERSCORE JUST HOW STRONG THE
LABOR MARKET IS THAT IT IS SO
STRONG MEN AND WOMEN WITH YEARS
HAVE BEEN DISCOURAGED FROM
LOOKING FOR WORK OR COMING BACK
INTO THE LABOR FORCE IN HUNDREDS
AND THOUSANDS.
A FEW SIGNS OF THE KIND OF
STRESSES THAT USUALLY DERAIL AN
EXPANSION.
INFLATION FINANCIAL SUCCESSES
NEGATIVE SHOCK FROM OVERSEAS OR
AT HOME.
IT WILL REQUIRE DEFT MANAGEMENT
BY THE POLICYMAKERS IN
WASHINGTON TO KEEP THE ECONOMY
MOVING AND PERHAPS WE MIGHT LOSE
SLEEP OVER.
FOR NOW, THERE REMAINS PLENTY TO
STAY AWAKE FOR IN 2019.
TO DISCUSS ALL THESE ISSUES AND
TO LOOK AHEAD TO WHAT WILL BE A
VERY BUSY YEAR I'M JOINED BY
DOUG DIRECTOR OF THE
CONGRESSIONAL BUDGET OFFICE
DURING THE GEORGIA LEADERSHIP
INITIATION AND CURRENTLY
PRESIDENT OF THE AMERICAN ACTION
FORUM, ECONOMIC THINK TANK.
DOUG, THANK YOU FOR JOINING US.
HAPPY NEW YEAR.
>> THANK YOU.
HAPPY NEW YEAR.
GERRY: AS WE STARTED A YEAR THAT
WAS ANTICIPATED IN A TREMENDOUS
GLOOM AND FINANCIAL UNCERTAINTY
AND WORRIES AND START WITH JOB
REPORT THAT LOOKS LIKE ONE OF
THE BEST, IF NOT SINGLE BEST JOB
REPORTS OF THIS ENTIRE TENURE
EXPANSION.
EXPLAIN THE DISCONNECT, WHAT IS
GOING ON?
>> TWO THINGS GOING ON.
STOCK MARKET HAS HAD TO ADJUST
TO THE FACT THE FED IS NO LONGER
BUYING UP TONS AND TONS OF
TREASURIES AND MORTGAGE-BACKED
SECURITIES AND PUMPING CASH INTO
THEIR THAT WILL CHASE STOCKS.
THE REVERSE IS HAPPENING.
THEY NORMALIZING INTEREST RATES
SO MONEY IS MORE EXTENSIVE AND
DOWNSIZING THE PORTFOLIO AND
VOLATILITY HAS RETURNED TO THE
MARKET.
IT'S TAKEN ADJUSTMENT.
WE'VE SAW EQUITIES HAVE BEEN A
BIT OVERVALUED BECAUSE OF YOU TO
CASH IN THAT WAY.
UNDERLYING PROCESS AND NOT A BAD
THING AND HARD TO LIVE THROUGH,
I ADMIT BUT NOT A BAD THING FOR
THE ECONOMY AS A WHOLE.
SECOND PIECE IS A HARDER PIECE
WHICH IS THERE IS TURBULENCE IN
THE POLICY WORLD.
IF YOU THINK ABOUT THE
MEDICATIONS APPROACH A TRADE AND
IT SHIFTS SEEMINGLY WITH THE
PRESIDENT'S TACTICS TO CATCH
THEM UNAWARE AND WALK OUT OF THE
G20 SUMMIT AND THEY CAN'T AGREE
ON WHAT THEY AGREED UPON.
THE MARKET SITS AND TRIES TO
FIGURE OUT THE FUTURE AND WILL
BE THE INTERNATIONAL ENVIRONMENT
AND GLOBAL GROWTH IN THE FACE OF
THAT, IT IS HARD.
I GETS MAGNIFIED BY THE FACT THE
FED TRYING TO FIGURE OUT IN THE
MARKETS TRYING TO FIGURE OUT
WHAT THE FEDS - UNCERTAINTY IS
BOILING IN THE MARKETS.
GERRY: LET'S BREAK IT DOWN TO
START WITH.
JOB SUPPORT ON FRIDAY WAS
MARKEDLY GOOD PASSWORD AND JOBS
UP AND ON UP LIMIT UP BUT THAT'S
BECAUSE PEOPLE CAME INTO THE
MARKET FORCE AND WAGES ARE
STRONG.
THAT POINT TO A STRONG ECONOMY
AND YET SOME PEOPLE SAY IT'S A
BACKWARD LOOKING REPORT AND
CONCERNS AND SIGNS THAT THE
ECONOMY IS SLOWING.
YOU SEE 2019 UNFOLDING?
OF THAT MOMENTUM CONTINUE?
>> I THINK THE PESSIMISM ABOUT
HER SESSION IS COMPLETELY
MISPLACED.
HE CANNOT GET A RECESSION IN THE
UNITED STATES WITHOUT HAVING
ALSO SECTOR GO SOUTH.
THERE IS NO REASON FOR A VERY
STRONG HUSTLE SECTOR TO PULL
BACK THAT SHARPLY.
OVER THE FINAL THREE MONTHS OF
2018 PAYROLL EXPANDED AT A RATE
OF 7% AND THAT THE GREAT ANNUAL
GROWTH RATE.
A STRONG FOUNDATION FOR INCOME
AND WE SHOULD SEE CONTINUED
MOMENTUM INTO 2019.
NO QUESTION.
WILL THE ECONOMY SLOW?
YES.
INEVITABLY IT WILL SLOW AND THE
QUESTION IS TOWARD WHAT?
2% OR 2.5%?
THAT'S THE REAL ISSUE.
IS NOT A RECESSION BUT WHAT WILL
THE SLOWDOWN LOOK LIKE.
GERRY: WHAT COULD GO WRONG?
FROM THE FALL WE SAW A FEW
MONTHS AGO PEOPLE'S CONFIDENCE
IS HEADED FOR A ONE OH CAVE GET
HIT, HOUSING MARKET IS WEAK AND
COULD THAT REALLY HIT THE
HOUSEHOLD SECTOR?
>> YOU CAN TELL STORIES ABOUT IT
ALL GOING ON.
NO QUESTION ABOUT IT.
WE ARE WEAK POINTS IN THE US
ECONOMY AND HOUSING SECTOR IS
WEAK.
NO QUESTION.
IT'S BEEN A CONCERN FOR QUITE
SOME TIME.
IF YOU LOOK AT CEO AND CFO
CONFIDENCE IT'S COME DOWN
SHARPLY AND TALKING ABOUT
SCALING BACK INVESTMENT.
LAYER ON TOP OF THAT GLOBAL
GROWTH AND WHAT WE LEARNED BUT
THE CHINESE ECONOMY YOU CAN TELL
A STORY WHERE THERE'S A
SIGNALIZED GLOBAL DOWNSHIFT AND
LOSS OF CONSUMER CONFIDENCE THAT
WILL CAUSE PEOPLE TO PULL BACK.
I DON'T THINK THAT THE MOST
WEEKLY SALE BUT YOU CAN'T LET
OUT.
GERRY: ONE CONCERN IS THE FED
AND THEY TALK TO THE MOST
NOTABLY THE FED IS OVERDOING IT
AND RAISING INTEREST RATES LAST
FOR YEARS SEEMS TO BE ON THE
PATH TO RAISE INTEREST RATES AND
SOMEONE ONCE SAID RECESSIONS
[INAUDIBLE] THERE KILLED BY THE
BOROUGHS OR SO IS THE FED IN
DANGER OF OVERDOING IT?
>> THEY ARE NOT OVERDONE IF IT
LETS TALK WILL BE NO SO FAR.
WE ARE IN AN ECONOMY GROWING THE
PERCENT PLUS OR MINUS IN THE
REAL FEDERAL IS ZERO AND THERE'S
A WAY THAT IS OVERDOING IT.
NOTHING THE FED HAS DONE SO FAR
OR HAPPEN SO FAR SHOULD BE IN
QUESTION.
THE ISSUE BECOMES WHAT THE
NUMBER AND PACE OF THE HIKES IN
2019 AND ABOVE AND THAT'S A FAIR
REASON FOR MARKETS TO BE
UNCERTAIN AND TO TRY TO FIGURE
THAT OUT BUT I'M SURPRISED BY
THE LACK OF CONFIDENCE IN THE
FED'S ABILITY TO DO THAT BUT
THEY'VE DONE A MINUTE STOP.
RAPID GROWTH, LOW INFLATION.
GERRY: THEY SEEM TO BACK OFF
THEIR STEADY STATE OF INCREASING
INTEREST RATES AND MARKET THE
THINKING FAR FEWER RATES.
WHAT YOU EXPECT THE FED TO DO
THIS YEAR?
>> I BELIEVE THE FED HAS SAID
CLEARLY STILL BE DATED DEPENDENT
BUT HAVE NOT SAID WHAT THAT IS.
THAT'S A SOURCE OF SOME
UNCERTAINTY AND I THINK WHAT
WERE GOING TO SEE THE FED DO IS
MOVE TWICE OR THREE TIMES AND IT
COULD DEPEND MORE ON WHAT THE
JOB SUPPORT LOOKS LIKE IN
GENERATE, FABRIC AND MARCH THE
WHAT THE STOCK MARKET LOOKS LIKE
IN THOSE MONTHS.
THEIR CONSCIENCE OF CONDITIONS
THE MORE CONSCIOUS OF WHAT'S
GOING ON IN MAJOR ECONOMY AND
MONITORING IT CLOSELY.
GERRY: OUTSIDE THE FEDERAL
RESERVE WITH CONCERNS AS I SAID
IT'S NOT THE SPIRIT OF
BIPARTISANSHIP AND THE
GOVERNMENT SHUTDOWN'S WHAT TO
EXPECT OUT OF WASHINGTON?
HOW MUCH WILL THAT IMPACT THE
ECONOMY?
>> GOVERNMENT SHUTDOWN WITH
SCENES OF OUR IS A PARTIAL
SHUTDOWN AND DURATION EVEN GOES
PER MONTH IT WILL NOT HAVE A BIG
IMPACT ON THE ECONOMY AND
STEPPING BACK TO THE LARGER
PICTURE ON POLICY THERE WAS NOT
A LOT THE PRESIDENT HAD ON THE
AGENDA.
HE DID NOT HAVE A RICH
LEGISLATIVE AGENDA THAT SAID WE
HAVE TO GET THIS ON.
ESSENTIALLY NOTHING.
I EXPECT GRIDLOCK AND A LOT OF
NON- POLICY INVESTIGATIONS AND
EFFORTS AND TESTING IN THE