Director of the National Economic Council Kevin Hassett Talks Oil Price Pressure, US Jobs Report
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I'm pleased to say that joining us now, following the jobs report, is the National Economic Council Director, Kevin Hassett. Kevin, you're a good man. Thanks for making time for us this morning. It's an obvious downside surprise on the jobs report. The three-month average has dropped to 6K. I think some people looking at this report at the headline level might be a bit nervous about what's inside it. Are there some one-offs here that make this look worse than maybe it is?
Yeah, there are a few. First of all, we had the crazy weather in February. The worst of it was actually outside of the survey week, but there was a lot of lingering junk, as you might recall, with the ice that was everywhere. We had some strikes on the West Coast that knocked off between 30 and 40,000 jobs. And so I think that on net, it's almost like a wash number. And the final thing is that there's a new procedure, birth death model at the BLS, which we believe is going to make the number more volatile. And so I think more and more we're going to have to average through the months. And remember, we had a really surprisingly positive number last month. And I think if you average the two, then it's about at the rate of job growth that's consistent with three or four percent GDP growth.
Kevin, it goes against the grain as well. ISM data earlier this week was really pretty decent. Claims were stable too. Next time we speak next month, do you expect to have a better story to tell?
Yeah. Yeah. I think that right now what's going to happen, right, is that the variability in the data will be apparent to folks. And so what's going to happen, I think, is that there'll be some anxiety that another number like this or two or three numbers like this is ahead for us. But we really don't believe that because, as you and I have discussed, like every other indicator is consistent with very strong GDP growth right now. And so this really is an outlier number.
What insights does Kevin Hassett share about the latest US Jobs Report?
Tax refunds are a big part of the bull case for the U.S. economy. I've got the Bloomberg lighting up in front of me right now with energy prices surging. How those refunds are going to be spent is key, Kevin, with energy bills still climbing. What's your assessment of the disruption we're seeing to supply in the Middle East?
Well, our expectation is that we've got our eyes on the horizon, that we know that sometime soon we're going to have a much more stable Venezuela with high stable energy output, a much more stable Iran with high and stable energy output, which is going to be very good not only for energy markets, but for risk premia around the world. Don't forget that this move against Iran is happening because they've promised to destroy us all. If that's not something that affects risk preview, I don't know what is. And so I think with an eye on horizon, then you can see that this is a huge positive for the global economy and global markets. The question is, when will the current near-term disruption end? And that's something that'll be decided by the military.
And there, of course, will be some uncertainty about when they decide to move, in part because the uncertainty protects the lives of American soldiers.
What factors contributed to the unexpected job loss in February?
But we expect that it'll be resolved quite soon.
As you see, we're starting to see a hit to production. Because we can't move the oil, we're breaching storage capacity in select producers right now. You saw some of that with Iraq earlier this week. The Journal reporting moments ago, we're seeing the same thing in Kuwait and UAE and Saudi Arabia.
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