Proft: Good morning, Dan and Amy. So I don't put a lot of stock in the Bureau of Labor statistics, the Unemployment rate, their measuring of it. It's certainly not the straight unemployment rate, more interested in the U6 rate, which includes those that are...
Jacobson: They call it the REAL Unemployment rate?
Proft: Yeah, those that are underemployed, right?
Jacobson: And those that have just stopped looking, too.
Proft: But at least you can do an apples-to-apples comparison. And the Left was quick to tout a declining unemployment rate during Obama's years, so you can't blame President Trump for doing the same. And particularly this number, we discussed this with Scott Shellady with the December Jobs report on Friday, but we didn't get to this number, as more breakdown was done by economists...this was our friend Mark Perry over at American Enterprise Institute, whose "Carpe Diem" section at AEI, his "Carpe Diem" blog is always excellent, that's a must read for me. And he notes that lowest black unemployment...the lowest...the gap between white unemployment and black unemployment, 3.1%...that is the lowest gap since the Bureau of Labor Statistics started tracking the black unemployment rate back in January of 1972. And so this is something that should be roundly celebrated, that that gap is declining and the overall rates are declining, right? That's good news. Also, and correspondingly, 196K manufacturing jobs created in 2017, and 16K fewer Federal government jobs. That's small, but still a little bit of shrinkage at the Federal level, and expansion of the manufacturing sector. It's the latter...
Jacobson: Too bad we can't do that in Illinois!
Proft: Well right!
Jacobson: Expand manufacturing and reduce government jobs.
Jacobson: Well see, that's the number one employer of Illinois, right?
Proft: Well...agribusiness, but it's certainly associated, yeah, with John Deere and Caterpillar, so...exactly right! I mean, imagine that...expanding the wealth-producing sector and constricting...contracting...the wealth redistribution sector! What a concept! In Illinois, by contrast...I made this mention before but I don't think I can say it enough...the greatest disparity between government jobs and manufacturing jobs anywhere in the Midwest. You want to know why Illinois' manufacturing renaissance isn't occurring as it is in our neighboring states? Illinois, 175K more government jobs, at every level, than manufacturing jobs. Alright? Federal government, Federal level, 186 new manufacturing jobs, 186K, 16K fewer Federal government jobs. Who’s going in the right direction? For more on these and other topics, we're pleased to be joined by our friend Jim Pethokoukis, CNBC contributor, columnist for the aforesaid American Enterprise Institute. Jim, thanks for joining us, appreciate it.
Pethokoukis: Hey, thanks for having me on, guys.
Proft: So what about this Jobs report on Friday, and kind of the numbers within the numbers that I just mentioned?
Pethokoukis: Well listen, we've had a very long economic recovery. It has not been particularly vigorous, but it has been steady, as month after month we've been sort of chopping down at the unemployment rate, other...you talk about those internal numbers like labor force participation, those have served...those have strengthened. So the prime age workers, 25-54, that's strengthened. That's enough that you have a very long recovery, again not very robust, though we're adding lots of jobs every month, so we're...listen, I have a little more...I think the unemployment rate is a meaningful number, I think it's a good number. And listen, some of these Wall Street banks, they're thinking we may have an unemployment rate closer to 3%, you know, over the next 18 months. And we haven't seen that since the 1950s. So right now, slow but steady.
Jacobson: So what is the reason behind the African-American unemployment rate dropping to record lows? Is it because more African-Americans have college degrees?
Pethokoukis: We've had a very long recovery, so ALL these unemployment rates are dropping. Why that GAP has narrowed specifically? Well, one thing I can tell you is that certainly we've seen better wage gains and strong job gains through the lower half of the term "job spectrum", and on the top, not so much in the middle, so that's going to affect different groups differently. But listen, in another year and a half, two years of this kind of job market, not only would I expect wages to go up faster, but I expect that gap to shrink further.
Proft: There's some suggestion that the tax cuts may push off the national business cycle, and the downturn that is coming, because as you said, we've had this long steady...not vigorous...but long and steady recovery from the depths of the Great Recession, and that if the tax cuts push off the downturn, the market correction, say past the 2018 election, then you've got a president whose going into his election, or re-election year potentially, in recession. Do you kind of see the same timeline in terms of market correction, natural business cycle, that at some point this recovery is going to stall and we're going to see two quarters of negative growth?
Pethokoukis: Listen, recoveries...expansions usually don't just end because they've gotten too old, okay? Usually it's something happens, that something is the Federal Reserve trying to tamp down inflation pressures, and ends up raising interest rates too fast, and we get a recession. This is probably a pretty (?) Federal reserve, they're probably going to take their time with this new sort of fiscal stimulus that we have from the tax cuts. So listen, I don't know the timing, nor would I say a low unemployment rate necessarily guarantees anybody's re-election...I think if I was running for President, and I was the incumbent, I'd rather, you know, have a very low unemployment rate than a very high unemployment rate! But you know, if you look at the 2000 election, we'd just had a boom period, but yet the Democrats did not win that election. So there's...it's no guarantee.
Proft: And, with respect to...just thinking about economic growth. So the next step you would take? There's discussion with what's on the Republicans...the Congressional Republicans agenda, and the President's agenda this year. Is it going to be something on the spend side, entitlement reform, which of course is Paul Ryan's bailiwick, or is it going to be a big infrastructure project that President Trump wants to do, some kind of public-private partnership, as politicians are wont to say, these big public works programs, or is it something else that they should be doing to forestall that recession that some are concerned about?
Pethokoukis: Yeah...I'm very skeptical about getting entitlement reform, because I think Paul Ryan is the only person in Washington now who cares deeply about that issue, I'm not sure anybody else does. I'm very skeptical about the infrastructure piece as well, I mean there really isn't even a plan put together yet, and now we're moving into 2018, a midterm year, I just don't think...nothing really big is going to happen. Listen, I think that at least for the moment, Washington should be in the "Let's not screw anything up" stage. I think there's a lot of stuff happening in the tech sector that will begin filtering into the rest of the economy, which should boost productivity. Now, I hope that happens, and I would hate to start screwing that up, either by doing something...another big spending plan that could enormously raise the deficit. Even as is, we're probably going back to trillion-dollar deficits, I remember when people used to care about that, apparently they don't care about that anymore. Right? We should take a breath and just think about what we need to do about some of these longer-term issues. Particularly education, which is an issue that excites NOBODY, but it's probably the most important one for our long-term growth.
Jacobson: Well I think on the top his agenda, President Trump, is you know, building the border wall, and tying that to DACA...but where are we going to get $18B dollars?
Pethokoukis: I dunno...the same place that we're getting $1.5T dollars. Charge it!
Proft: Hahaha, yeah, charge it. That's pocket change! Just run my AmEx on that. What about the Energy sector? Kind of an underappreciated event last week, because of all the furor of the Michael Wolff book, was the Trump administration given the green light to drilling rights off both Eastern and Western seaboards. And the energy sector was, you know, one of the most robust sectors that probably deserves a lot of credit for that expansion, however kind of slow and steady it was, and Trump seems to be doubling down on energy independence.
Pethokoukis: Well it's sort of...I think it's amazing that it's still kind of an under-reported story about what's happened. I mean, there's been two massive technological innovations in the 2000s; one has been the Internet, and the advent of smartphones, having a supercomputer in your pocket. And the other has kind of been the Shale Revolution. One...I certainly read a lot more about the one, on the front page of the business sections than the other, but both have been tremendously important, and will continue to drive growth going forward.
Proft: Alright, he is Jim Pethokoukis, CNBC contributor, columnist for the American Enterprise Institute, and a stable genius in his own right, he did...his is a Jeopardy champion as well.
Jacobson: Oh yeah! That's right.
Pethokoukis: Half of that description is true! Not saying which.
Proft: ...stable? It can't be stable.
Pethokoukis: No, listen...I report, you decide. Hey sports fans, stay warm!
Proft: *laughing* Thanks Jim, appreciate it.