What are those jobs numbers tell about where we are on the economy in particular managing inflation.
Look the economy is pretty strong right. Right now the question is inflation is way above any concept of target. My view has
been that inflation's not going to come down to target levels or close to target levels without introducing some real slack into
the economy which means a period of very high turbulence. Whether that slacks going to come because the Fed's going to
have to push interest rates very high or whether that slacks going to come because of internal forces in the economy
inflation eroding people's incomes and so forth that's less clear to me. But I don't think there's a path to a low inflation
economy without a material period of economic slack. It could happen but it's not the dominant probability. What we saw today
was a lot of strength and that suggests more need for interest rate hikes and that's what was discounted into the market. So
Steve you're a smart investor so speak for the smart investors. Should smart investors be actually rooting for weaker jobs
numbers than we saw this week. Well just to follow on Larry's point I think that I think his
point is completely correct. But I think if you take the probability of higher interest rates being required given
today's job numbers and obviously that was the market reaction I think the market is way underpricing the likelihood of future
interest rate hikes. Looking at something like seven more hikes and that's probably some fraction of what would be required in
order to get inflation down by using higher interest rates. So I don't know what Jamie. Which which whether Jamie Diamond was
referring more to the real economy or more to the markets. But if but I would be very worried about the markets and somewhat
worried about there about the real economy. The reasons Larry said.
Are we seeing any indications yet of a slowdown in the economy. That obviously the Fed has to want. If they're going to get
their arms around inflation. We're seeing a little bit of
indications that some firms are no longer reporting the kind of huge labor shortages that they were
before. We're seeing some indications of inventory build ups. But I think overall the picture is still a very stretched
economy. You know the statistic I like to focus on goes to the labor market and it's the ratio of vacancies to unemployment
typically for every 10 unemployed people. We have six or seven vacancies. Right now we have 20. The highest we've ever had
before was 15. So even if there is some easing up we've got very very tight labor markets. And I don't think there's likely to be
substantial disinflation while we have very tight labor markets. Steve you'll remember that Chair Powell earlier when we weren't
seeing the inflation yet said if it comes we've got the tools to deal with it. I wonder when we do we talk to Larry Fink this
week actually and he has his own doubts. This is part of what Larry had to say. I don't believe the Federal Reserve has the
policy or the tools to do much with it right now. And I'm personally not blaming the Federal Reserve for where they where
we are right now. But I believe most of the problems we're living with today are more policy generated and supply
generated. Steve what he's talking about there and certain policy generated
are things like some of our trade policies sorry policies on immigration. We're not getting as many workers. Indeed. Energy
policy. You saying that's bigger than just a single fiscal stimulus package. And so that's not something the Fed can deal
with. Are we concerned they don't have the tools they need to get the job done.
I would be a little concerned but for slightly different reasons. I think some of those policy issues are certainly
legitimate but I don't think the question for example of immigration is really what's driving our inflationary situation
at the moment or really would make that much of a material difference in any medium near or medium term scenario. I think
in fairness to those on the who are on time transitory there are some supply shocks going on in the world. If you look for
example the price of chicken and egg I just happen to see this. They both are up by more than double digits this year. I don't
think people are eating a lot more chicken and eggs or eggs. So I think you have to look for other reasons for some of this
stuff. And obviously energy was tight. We can talk more about energy. But Ukraine certainly has exacerbated that. But on the
other side of the ledger I just want to make one comment in relation to what I said. You know for those people who basically
look at people like Larry and me and say you guys keep talking about recession. What recession. There is still more than two
trillion dollars of excess savings or cash on the sidelines. So Jason Furman has done these numbers and by his math. Even with
the lower savings rate that we've seen in the last couple of months it maybe has brought that two and a half trillion down by
one hundred million or something like that. So there's still a huge amount of excess cash. If you saw a first quarter bank
earnings reports that CEOs and CFO were all talking about how much cash people still have in their bank accounts. So so yes I
do see trouble down the road but I don't think it's right in front of us at this moment. And then one very last point I'd
make is that as we talk to companies we are there is the transmission mechanism from the Fed through the capital markets
to companies going on where it is where companies especially growth companies are bracing themselves for it to be harder to
raise capital. And you're starting to see them cut back on expansion plans on hiring plans on things like that. I don't
think you can find that in the numbers yet but it's some anecdotal evidence that we've started to see. Laura what about
that point specifically. I've had some people from Wall Street say when it comes to really quantitative tightening which we're
seeing for the first time this week this week that actually really depends on where that money is coming out of. It's not
clear whether that will slow the economy down or not. I don't know that I think that we are seeing some beginnings of
the evidence of monetary policy working. I don't really understand Larry Fink's views. It seems to me pretty clear that
a substantial part of the inflation we have is related to the fact that we have driven demand to extremely high levels. In
2021 GDP in dollars grew at overall 11 percent. That's a reflection of what was happening with fiscal and monetary
policy. We have growth at eleven percent in total spending. You're going to have high and rising inflation and that's what
we got. So it is substantially related to what at least with the benefit of hindsight were policy errors in 20 21. I think it's
also important to understand that if your bathtub overflows there's going to be more flooding some places than there are
going to be other places. That doesn't mean that the fundamental cause of the problem isn't an overflow. And we had a fundamental
overflow and it manifested itself more in some parts of the economy in some sectors than in others. And we call those
bottlenecks sectors. But in many of the bottleneck sectors we were producing more at the end of 2021 than we were at the
beginning of 2021 which is what shows you that it was kind of a demand shock. I don't think we have the tools to bring this down
smoothly. The experience is as I've said on this show before that when unemployment's below 4 and inflation's above 4
recession comes within the next two years. And my best guess would be that's what we will see
this time round. Yes we have had supply shocks. There's also this idea that if it's a supply shock we're not supposed to
adjust policy. Well I would disagree with that. If the economy is going to be kept in balance and there's going to be inflation
then if the capacity of the economy to produce has been reduced we've got to reduce the level of demand. And this is why I
always go back to the labor market because the labor market isn't one specific sector. It's everything from child
psychiatrists to workers at McDonald's where we've allowed demand to exceed supply creating the wage inflation which is the
basis for much of the inflation that we are us that we're seeing. So I think that we're in a quite difficult situation. I
don't think we had to be in this situation. And I think the Fed's going to do its very
best to navigate a path. But there may not be any path of monetary policy that enables inflation to come down to the 2 3
percent range and also keeps the economy growing rapidly. We can agree that that's what we all want but that doesn't make it
something that's feasible.