U.S. markets closed
  • S&P 500

    3,825.33
    +39.95 (+1.06%)
     
  • Dow 30

    31,097.26
    +321.83 (+1.05%)
     
  • Nasdaq

    11,127.84
    +99.11 (+0.90%)
     
  • Russell 2000

    1,727.76
    +19.77 (+1.16%)
     
  • Crude Oil

    108.46
    +2.70 (+2.55%)
     
  • Gold

    1,812.90
    +5.60 (+0.31%)
     
  • Silver

    19.85
    -0.50 (-2.44%)
     
  • EUR/USD

    1.0426
    -0.0057 (-0.54%)
     
  • 10-Yr Bond

    2.8890
    -0.0830 (-2.79%)
     
  • GBP/USD

    1.2103
    -0.0072 (-0.59%)
     
  • USD/JPY

    135.1750
    -0.5530 (-0.41%)
     
  • BTC-USD

    19,177.43
    -1,073.53 (-5.30%)
     
  • CMC Crypto 200

    420.84
    +0.70 (+0.17%)
     
  • FTSE 100

    7,168.65
    -0.63 (-0.01%)
     
  • Nikkei 225

    25,935.62
    -457.42 (-1.73%)
     

Biden is ‘doing what he can’ on inflation, CEA chair Cecilia Rouse says

Chair of the Council of Economic Advisers Cecilia Rouse joins Yahoo Finance Live to discuss the state of the labor market, inflation, economical growth, and the outlook for inflation.

Video Transcript

AKIKO FUJITA: Let's turn our attention now to the labor market. Private sector employment decelerated in May, adding just 128,000 jobs last month. That marks the slowest pace of job growth in the pandemic recovery. And it comes as investors brace for that all-important non-farm payrolls number.

Let's bring in Cecilia Rouse. She is chair of the Council of Economic Advisors. Cecilia, it's great to talk to you today. When we talk about the deceleration that we saw, at least in private payrolls, that kind of points to what we heard from the president earlier this week in that op-ed. He said specifically that the average monthly job creation could shift in the next year from current levels of 500,000 to 150,000. That would be in line with the next phase of the recovery. So what should Americans be expecting right now in terms of a slowdown?

CECILIA ROUSE: Well, look, as you highlighted, we've had a historic recovery in the past year from the pandemic, where we've had some of the fastest job growth ever in the first year of a presidency. Unemployment has come down faster than it has at any other time since data were recorded. Labor force participation is nearly back to where it was pre-pandemic. Just today, we got unemployment insurance claims. They're the lowest that they've been since the 1970s.

So we know that we've got a very strong labor market. But we also know that that is not what is consistent with a strong, stable, steady, steadily growing economy. That when an economy has reached-- basically, reached full employment and is growing steadily, that we expect to see job growth more in the 150, 200-- you know, in that range. So we know that our labor market is very strong.

When the Federal Reserve considers its dual mandate of stable prices and full employment, Chair Powell has said he believes the labor market is too hot, so one he would like to see the job growth slow down a little bit. But even beyond that, once-- even once inflation is under control, we would expect to see job growth to moderate. And that would be more consistent with the kind of economy that President Biden really envisions in the United States.

BRIAN CHEUNG: Cecilia, it's Brian Cheung here. Are you already seeing a moderation within some subsectors of the labor market when you consider that the ADP report today, which, again, different than the BLS report that we'll get tomorrow, detailed, actually, a contraction in non-farm private employment among smaller businesses, specifically those with only one to 19 employees. We saw a contraction not just in May, but in previous months as well. Is the story for small businesses very different than those for large businesses?

CECILIA ROUSE: Well, we are going to have to wait to see. ADP does not track one for one with the data that we get from the Bureau of Labor Statistics. We know from the JOLTS data that we saw yesterday that job vacancies remain very solid. People are still quitting jobs, which suggests that they're quitting jobs, taking better jobs. Employers are still filling jobs at a very rapid clip. So there's always been some-- there's always heterogeneity. There's always some difference across the labor market. We will know more tomorrow when we see the data from the Bureau of Labor Statistics.

AKIKO FUJITA: Cecilia, it does feel like there's been a bit of a shift in tone coming from the White House. We heard the president say, on inflation specifically, he respects the Fed's independence. We know that's always been the case coming from the White House. But he's also said that it's up to Congress as well. And I wonder if this messaging is essentially the White House saying, look, there's not a whole lot that we can do at this point to make an immediate impact in driving inflation down.

CECILIA ROUSE: What the president is trying to articulate is, one, not every president has respected the independence of the Federal Reserve Board. So this president is saying he understands that the Federal Reserve has got a difficult job ahead. And he respects their independence and he respects what they need to do and what they seek to do. So that's one.

Two, the president is very focused on inflation, and he is doing what he can with the tools that he has available. But part of that, in addition to what he can do administratively, whether it's releases from the Strategic Petroleum Reserve, but importantly, his economic agenda really is about increasing economic capacity, which is how we lower these kinds of price pressures going forward. And that is what underlies his legislative agenda for which he needs the participation of Congress.

That is where he's focused on lowering prices for the items that households spend 80% of their budgets on, whether it's healthcare, childcare, energy costs. We know we need to transition to a clean energy system. We know that we need to be refilling the coffers of the federal government. So the president is talking about his economic agenda really has been about the long-term capacity of our economy so that we can generate the kind of growth that supports good-paying jobs for average Americans, where they are seeing increases, which they haven't seen for the last several decades, increasing economic capacity so that we've got a very healthy economy going forward.

BRIAN CHEUNG: You mentioned energy, but I guess I'm wondering if there are other levers that the administration can pull, like, let's say, for example, tariffs. So if there is, for example, inflationary pressures coming from the tariffs that were imposed by the previous administration on Chinese goods, is that something that you would be advocating to take down to lower prices here in the United States?

CECILIA ROUSE: The president is looking at a range of options, including strategically rolling back some of the tariffs on Chinese goods. But he wants to do so in a way that makes sense for the US economy, for the US consumer, for the US worker, and that is also consistent with working with our allies abroad, and, you know, so it's in a strategic fashion. But absolutely the president is considering all levers that are at his disposal in a way that makes a lot of sense for the US economy.

AKIKO FUJITA: Cecilia, real quick, why hasn't it taken this long to make a decision on tariffs? I mean, this is, some would argue, the single lever that the administration can pull. And you've said your own analysis pointed to the fact that it could drive inflation down in some manner.

CECILIA ROUSE: So the president has been a very busy man. We've been managing a pandemic. And now we have this war, Russia's war on Ukraine, which is a very complicated situation and which is really responsible for the latest increases in our energy prices. And so, the president wants to take a considered look at these tariffs and do so in a way that is consistent with our global position in an economic framework that is consistent with our geopolitical strategies and that makes a lot of sense for the US economy.