Transcripts For CNBC Squawk On The Street 20240714

Number overall, 130,000 jobs added, that was 20,000 or 30,000 less than expected, at least, given who you were listening to. Private secretator read added 90 job. Participation rate up. 3 , thats the high since 2013 hours worked rose. 1 . That was somewhat expected it is at 34. 4. So overall your reaction overall remains market wary, if you want a job, you can get a job. Thats an amazing economy. 3. 7 we got to get used to that what im shocked at is that i hear people talking about what the tariffs would do, even previous show. Look, when smoot holly came in, we did real big tariffs before president roosevelt, really tanked the economy, or was participant in tanking the economy, bank failures, this is not bad given the fact that the president drew a line in the sand versus the chinese. I wouldnt expect it to be this strong you can say, listen, mining lost jobs well, no kidding the country has gone away from mining but what i dont like to see frankly is a big spike in healthcare that has been a tax on the system but it is a good enough number for powell to take action. It is a good enough number to be able to say were not going into recession. But lets not go into recession, lets not make this the trend line the trend line is not as good as last year. Right, to put it in perspective, we like to give you the monthly averages and what we have been hitting this year. The last sixmonth average, 150,000 jobs added last 12 months, 173,000. Now, that does compare to 2018, stronger, 223,000 jobs were added on average each month from the year 2018. You have workers being hired for the census, i believe, as well and the current numbers. Bond market reacts by having prices go higher right look, i think that when i look at this, here are the things i think about. What do i cover . I cover the decline and fall of the mall but thats not showing in the numbers. I cover tariffs and manufacturing. Well, look, manufacturing is certainly not as strong. Thats a big loss. But it shouldnt be. Were basically saying, lice li chinese, we dont want your stuff, be free and say you dont want our stuff this is an economy driven by the sales force. Com those are companies that call the labor force to decline because they are labor saving and yet people are still finding jobs and not finding jobs at a much lower price i think we have to go back i know i want to depoliticize it for a second. When did we have numbers last . With president johnson president johnson which numbers are you referring to we have significant fairly significant job growth 3. 7. Youre talking about the unemployment rate. President johnson, it was both inflationary and recessionary, the last time we had this. Yes. We had way too much inflation and we had a recession a year later. To me, the worry is, we are worried about inflation and recession. Im not worried about inflation, workers are making a little money. I know everyone is worried about recession. Im not if the fed cuts. Right you think they will. We get 25 basis points and two weeks, right the Auto Industry would save billions of dollars on rate cut. The banks would make billions of dollars in rate cuts the secondary loans are based on the banks have not been performing well in part because of the decline in Interest Rates. The short rates are too high versus the long. And a lot of the short rates, thats what laws are priced off of i dont think people realize auto loans are priced off of that i had carvana on last night. Thats a big employer. If you take this and youre president johnson, youre saying, wow, i like it, im going to throw more fuel on the fire he was guns and butter we dont have a guns and butter situation unless you want to say, wait a second, our deficit is ballooning, chinese deficit ballooning, but im less worried about that than continued job growth i think jay powell has a lot to answer for. Yeah. He took rates up way too high and it was a mistake which you said many times. Yeah. The last one to be fair, you were saying while it was happening you were saying it, can you imagine almost ayer year ago si we had this conversation where does the time go i know jay. Hes a good guy. Jerome. President doesnt seem to actually say he really knows him. Refers to him, where did i get this guy jerome . You liked him because you liked his gray hair apparently speaking of johnson, when he took over lbj yeah. First budget in 64, do you know how big the United States budget was in 1964, what the battle was to keep it below 100 billion, 99 billion, can you imagine . Can you imagine . Johnson is worth studying right now worth studying we are at the same everyone keeps comparing when we were at these levels, when we were at these levels that was a bad time in the country at these levels. This is, i think, a better time, because were actually playing with one hand tied behind our back the chinese versus powell. All right take it back to the stock market for me in terms of what your expectations are, with this number, with the moves in the bond market, we have seen we were starting to see the tenyear creep up in yields until this mornings number. Everybody most expect were going to get 25 basis points from your friend jay so what does that mean for the stock market at this point. I think this is a great question because yesterday the highest growth tack, which does well when the economy is slowing, were the worst performers in the entire market. The best performers were the retailers and they do well when you get macys started rallying so i thinkthis number is as my friend larry kudlow would say, goldilocks all right so it is good for the market. Yeah, it is. Stock market. Right ive got certain stocks that i follow as being emblematic of what does well crowd strike, okta, z scale, palo alto. Probably one president ial tweet on trade not particularly positive away from a decline, arent we . Well, i think not that were going to see it because it feels like there is momentum between the potential or expected talks in october right the Chinese Commerce Ministry Said there is going to be some substantive talks in the next couple of weeks. So if you go against that tweet right now or say, listen, the tariffs are going up no matter what, i think people say, okay, i have to go back to my model again. Last night, lululemon really emblematic of what is going on 6 exposure to tariffs in this country. But thats down substantially. Why . Because they knew that the president meant business against the chinese. Other retailers and suppliers have not done that if you havent done it and the president tweets something harsh about china, take your numbers down again, every time you take the numbers down, you get a selloff lets move on to other stories involving technology this morning states are planning to launch separate antitrust investigations into facebook and google starting as early as next week the wall street journal reported in Texas Attorney general will lead the effort examining the impact of google and Digital Advertising markets. A tweet this morning, im launching an investigation into facebook to determine whether their actions endangered consumer data, reduced the quality of Consumer Choices or increased the price of advertising. The largest social media platform in the world must follow the law one of the things that has happened is advertising has i mean, you what do you mean . It is much cheaper to advertise. If you run a website, you dont make a lot of money on advertising unless you have something really inventive like instagram or search function. Seemingly been the case since Digital Advertising came on to the scene. How often have we talked about exchanging analog dollars for digital dimes or nickels or penny pennies. They talked about put all his money on instagram, alphabet, why . Because he reaches people. Look, the millennials, david, are so busy cutting the cord we had a good Football Game on last night, and you saw, for instance, i saw i was watching this, this is emblematic of our time, that movie i got to see this movie, has my guy from dunder mifflin and the guy from the wire and it is an amazon movie. Advertise on nbc. That is right i quoted you, steve burt from the last Conference Call, the incremental advertising revenues were largely as a result of companies that are Digital Companies advertising on television. Right get used to it cbs loses the nfl contract nobody is advertising for movies anymore who goes to the movies people you have dinner now at movies. Yeah. I guess. Somebody behind me spilled a drink on me, an alcohol drink i dont need a beer spilled on me, frankly. I almost threw a tequila at the guy but it is too precious there is a belief that the ch p cheapest form of entertainment at home, video games thats what people are doing i would rather own grand theft auto than i would own half shows i see advertised all that said, do you think there will be an impact from the ever increasing number of investigations, in the eu, of these enormous platforms, mainly google, facebook, sometimes amazon thrown in there. I think it peaked you think it peaked yes, heres why instagram, shopify, these are companies that have created a huge number of jobs. If you have 5,000 followers on instagram, you have a business i think it is time for the people who actually are making their small, medium size remember, who is the backbone of this economy come on, give me the cliche. Consumer. Small business. If youre a Small Business, you are able to create a business, etsy, shopify, instaygram, alphabet, google what is we got 50 state attorney generals can i suggest they have budget short falls . I dont see the merit of these cases. I think instagram, all those investigations, they peaked. They peaked. They peaked. Well, i think the ones that you still have to a close eye out for are the fcc and the doj. Ftc is going rogue. They have gone rogue . Gone rogue. What does that mean theyre, like, i mean, obama could have wouldnt have the ftc be as powerful and as obstructionist ferc, by the way, ferc is so equally obstructionist the president has to bear down on these agencies. These agencies are very antiregular pro regulation. The administration continues to roll back regulations and from the very businesses in some cases theyre trying to not just auto. Mercury emissions. Also the lightbulbs. Big energy decline in this country use is the lightbulbs. I speak to every oil guy, why . Because i like the oil and gas industry. Even the methane rollback. They dont like the methane. Yeah. They feel that if the democrat comes in, theyre going to have to change everything the coal guy also because of esg. You know what else . They like to breathe they dont want to be in the black lung, no rainbow coalition. All right up next, you got a mad dash. Were going to count you down to the opening bell, of course. A strong week for stocks right here at the New York Stock Exchange and elsewhere. And, of course, were speaking with larry kudlow, on the heels of that august jobs report lets give you one more look at futures. We get started with trading here on a friday. In 16 minutes. A lot more coming your way through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. All right, lets head to the bond pits, check in with Rick Santelli who joins us from chicago. Good friday morning, rick. Yes, happy friday, david. You know, lets start out with the jobs report. I was only about 90,000 off to the upside i thought jobs were on the light side, but that doesnt mean thats the entire report one bright spot, 63. 2, Labor Force Participation. Lets show a chart we had several 63. 2s but they are the highest going all the way back to the fall of 2013 as you see on that chart. Intraday of twoyear, everything got hit right as the data came out. Were close to 157 you can see we back tracked. We sit now at 152, which means were down 1 on the day, were up one on the week 30 year bonds might be the best place to Pay Attention to if youre looking for more upside than just a correction of the wild month of august look at twoday chart. Flirting with right below and right above 209 on those high yields well, 209 was very significant it was for years the all time low closing yield of 30s if we cant get above that, this is the last couple of days, this bounce in yields may be temporary, want to pay close attention to that level. One week of 10s sums up the week 146, the cycle low close and you can see how we built from there even with some of the givebacks today, unchanged on the day, with respect to tenyears, they are still up 6 on the week were up 10 from our lowest close on the cycle dollar index really was hit as well on the number as you can clearly see on the chart but redeeming factor there, take it back to may of 2017 basically were toying with levels recently that are the best levels since then so 27 1 2 months, 28 months. Here we are, down a tenth of a cent on the week, as you see on the chart, still up at the crown of this very strong move but 98 handle is key we start to trade below there. Look at recent activity to come in selling dollars that are currently long david, jim, back to you. Time for us to get to a mad dash, of course. Ahead of the opening bell. Lululemon is going to be a feature today. Always good to talk a little stocks it is up about 5 here in the early going. It is up more than 60 this year let me just explain this is what i call a clinic for people who want to be in retail, for people understand why a stock goes up this is one of the best Conference Calls, well orchestrated by calvin mcdonald. This is about how you change the face of retail you have to make it exciting lincoln park, illinois, building, which is basically a place it is a temple to wellness and these people are positioning themselves as the wellness Clothing Company if you do that, youre able to charge a lot of money. Yeah. I think this say remarkable company, china, they cited particular growth, very strong 6 as i mentioned exposure on tariffs to the United States they have, david, what i regard as the clearest, longest growth path of any retailer, meaning it is not done. Are you living the sweat life yourself. I spent a fortune on presents at lululemon everybody i ever bought it for is most appreciative incredible great story. They talk about sweat, they talk about stink. Theyre right in your face about what people have to worry about when they work out, and they are mindful and they do have mindfulness rooms, not unlike marc benioff at sales force. This has zeitgeist you want to be experiential . Lulu is experiential. Well be keeping a close eye on shares of lulu. They are going to be up. Were going to get an opening bell about ten minutes from now as well. And the market itself has been looking up larry kudlow, hell be joining us as well soon after the open to talk about the jobs number and a number of other things a lot more squawk on the street coming your way. I mean, if you havent thought about switching to geico, frankly, youre missing out. Uh. The mobile app makes it easy to manage your policy, even way out here. Your marshmallows. Get digital id cards, emergency roadside service, even file a. Whoa. Whoa. Whoa. Whoa. Whoa. Whoa oops, that cheeky little thing got away from me. My bad. Geico. Its easy to manage your policy whenever, wherever. Can i trouble you for another marshmallow . But were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. All right, looks like were going to have a higher open for stocks broadly speaking when we get that opening bell, about seven or so minutes from now, well be talking a lot of stocks as well in a minute it was sophies big day. By the way, shes the next mozart. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Well have an opening bell for you, 3 1 2 minutes from now, which does give me enough time to talk with my colleague here and ask that question i like to ask sometimes at moments like this, which is what is the key to this market it is a reference to a conversation you and i had got, almost 20 years ago, on squawk box. It is easy to say apple andy. Zoom video this is one of the the recent ipo. Yes, other than beyond meat one of the great performers. Yep. Zoom reported a quarter that was instantly the stock was down 4 bucks. Go through the Conference Call they are winning, winning, winning this business. Now, cisco is their opponent amy chang who was unbelievably good is now tasked with taking back they already said the biggest share, of video conferencing, but they start with the talk about hsbc, a client they won. What could be more far flung 3500 offices they are winning and when i was at nvidia, they used zoom. They asked jensen young i asked him about it, said, look, theyre the best in show zoom had a great quarter very interesting stock down initially, and now going higher which is right because it was a true blowout. Interesting though we watched slack yesterday do a similar move. Down 4. Then it didnt finish down much another recent ipo, that was the direct listing speaking of ip os, yesterday, a lot of reporting on wework even if they do follow their current plan, theyre not going to hit the market for a while. You got a number of holidays in late september, midoctober. Well see when they get there, jim. Some encouraged by the resistance of investors to even consider the valuation they originally were going with saying thats a good sign for the market. Ive used them. Theyre not the lowest price there are many me too companies in there i think people own this, it is a monopo monopoly there are other players. You can pair them off against these guys these guys have a fragile mind take i happen to like the space but dont love them. Yeah. They got a very charismatic ceo. Dont count him out. Adam newman. They have other people there is a bench there they have a very good bench. But the problem is, david, the it has got a travis kalyn interesting piece i just think that i dont want to count them out i sure dont want to if i were an individual investor, i would want to buy something lower than where it was. It is going to be perhaps well below half of its last round of significant financing and then there is that softbank question we raised yes, of course, will they come in again or are they at the point where theyre, like, no, guys, you cant go that low. What an important question. We have to mark down our investment so significantly. You hear the applause building here we get an opening bell in 20 seconds. Here at the big board, you can see the real time exchange, of course, back at our headquarters as well. It is ethan alan, yeah, opening the nasdaq, wisdom tree investments, big advertiser, had been, etf. Never noticed that. Important. Im watching say again. Dont watch the ebbs. Dont watch the ads i love the ads we have amazing ads. That guy with the tape hell tape anything. Anything im going to go buy it because it is phil swift. And that think you stick up your nose. Everything is clear. Back to stocks one word. Jellyfish. Jellyfish is that two words yeah. Good question. David, lets talk about costco. Lets do that. So bizarre, you get flee pieces out of nowhere saying costco is the best retailer, classic growth, after the stock had a big run, what it says to me is people run out of ideas. It does. Where is the zoomies, they had a good quarter i am aghast that they just keep coming back. Did you see the piece yesterday, they break it up maybe a states attorney general will break up amazon. Some of the parts is not worth doing unless there is a vague possibility of it occurring and one would not think thats the case at walmart. If alphabet broke up now, i dont know, i like pieces of yeah, thats another point on the whole antitrust concern if you really came to the end of it and it went badly, so to speak, they would separate out a number of the businesses that would get higher multiples on their own and or the ones investing would be treated differently fast to gram. Come on. If it is valuable, instagram is valuable how long do you how much time do you spend looking at your feed before you go to bed . Im not on instagram. Are you a known communist im not on facebook no, im not a communist. I like look at the doggist before you go to i dont know what that means. A bunch of dogs . Great pictures of dogs. I pet my dog. I like saying hello to him, spending time with my dog, i dont need to look at pictures of other dogs. Lets look at apple. Katy huberty strikes again. She didnt change her rating or anything like that. But she is an influential analyst. Shes an influencer. And growth accelerated to 25. 8 year over year from july does it matter sure. There is a lot of Gross Margins there insane you got it. I have it come on. I have a lot of research the Gross Margins are insane we forgot to mention the best times for apple are behind them and tim cook never invented anything as i look at my watch, my daughter texting now from vienna very nice. So i look at this piece, i say, geez, this is a great bridge to 5g we have been looking for bridges to 5g. People are fretting about china. Apple just keeps going up and up so i think this is good grist for those wondering why it is going up and up. Katie been very, very right for a very long time tremendous exhibit one, this is like perry mason, about app store net Revenue Growth accelerating people should get this the stock will go higher you believe it will yes, i do yes, i do. Trade concerns be dammed. Well, no, i think that until i read about a boycott, which i have not seen doesnt appear the chinese have wanted to go to the nationalist sort of boycott level. No, it doesnt. Remember when they were against kfc. Remember, the state run media as opposed to, what, the free run media, the totalitarian country. But state run media was you look at the cannabis stocks the cannabis stocks i keep an eye on them. Not in the last day. Value what are you kidding me im not kidding you national tv here. Tell me international, i think. Where is the value kronos. Kronos owned by altria, in a deal to potentially merge, in a merger of equals where pmi is not paying a premium for it. I would rather be in kronos than cubic zirconia, known as juul but i think that we have got a moment here when you look at tilray, when you look at canopy, david, these stocks are now trading as if it is not going to be the wave of the future. I think it is. You think it is you spent a lot of time, so many guests on mad money. Irwin simon making money. I dont know i just dont want to write off that industry, just as when people are really loving it. It is so hated now i did want to it is funny, you bring that up, it does remind me of the continued talks between altria and Philip Morris international. It is not imminent but designed to get a deal done between the two. There is a lot of pushback from shareholders particularly on both sides. But we got a negative spread, so at this point, there is a belief that the pmi has to raise the bid to get altria shareholders to vote in favor what im hearing at least from those behind sort of the talks to some extent is well maybe our Shareholder Base doesnt understand how bad things are. And how much this market is changing and how quick the decline is or how much it is accelerating, which is why we need to do this. Hard case to make when youre really not saying much as youre trying to get a deal done and deal with all the social issues and everything else, merger of equals, it is more pmi buying them, buying them for no premium. People feel it is cold. It is cold they feel oil and gas is cold. These are declining industries millennials dont want to own the stocks juul is their savior they have no control at juul. They have a significant economic ownership stake at altria. You can have the biggest merger of the year and no one is focused on it. People are not yeah, people are not talking about it a great deal i want to. It is by far the largest, one of the largest of all time. And it has not gotten a good reception. Theyre in a tough place here. It leaked because they decided to cancel some conferences come on, guys. Like the oldest one in the book. Maybe they shouldnt have. Perhaps we wouldnt have found out about it, they would have had more time, they could have sprung it on us, have the communication message out of the box. Why is that Howard Willard is a good ceo and not saying that hes got the big stake in kronos i love he did that kronos is such a well run fund lord jones, paid a lot of money for that, smart. Goransteen is a business person. Hes a business person and young fellow, got the backing of altria and i think the one to buy, frankly. Speaking of 11 bucks. Cannabis land again speaking of things arent being bought now, the banks are the worst performer, have to check in with bob or mike santoli to tell me that jpm, bank of america down over 1 this morning. Morgan stanley, everything is down there it is. Yeah they have a fortress balance. I heard that. I think that jamie dimon right in there on the whole we work thing. Hes, like, hes going to get them to market nothing can stop jamie. Jamie is lets say hes got the longevity going for him. He does by the way good salesman too. What are you hearing about what solomon is doing at goldman . We talked about it yesterday glossed over it i did more digging tell me give me more insight you dont want to hear it. Yes, i do. The apple card with the apple card, you and that apple card. Have you looked at National Card tell me it is it is the easiest sell in the world. We dont know if it will be used but i got mine yesterday many people are getting them if it is used, it is just money in the bank, if the algorithms are right. I think that the idea that goldman expense structure will get better now that the people are leaving im just saying, goldman is the stock to buy in the group. Okay. All right. There i said it. All right you know what, david lets get back to. Back to todays jobs report joining us now with the first reaction from the white house, it is nationaleconomic Council Director larry kudlow. Before we talk the number, how you been whats going on . Im doing great, jimmy. Thank you very much. My brandnew titanium hip replacement, which is three months old, has kicked in beautifully. Im walking, im pirouetting, and im playing tennis again and life is grand. Thank you. I am so glad. Thats Allegheny Technologies if you want to play that. A stock on kudlows hip lets get allegheny, a heck of a lot going on. Larry, a number to me that says things are good, but that if rates were lower, things, amazingly, considering the fight were having with the chinese, got fight, could be even better. What do you think . Well, i reckon thats correct. Money markets and bond markets are expecting Monetary Policy to lower the target rate. Certainly in september probably october too but, jimmy, i want to go back to these numbers because i watch the coverage this morning, among my dear friends and former colleagues look, 130,000 is the very solid number but august is always a quirky month usually the print comes in too low for seasonal reasons, and then it is revised up. But heres a story, i want to break this with you, and david, here is a story. The Household Survey, the Household Survey from which unemployment is derived and tends to be dominated by Small Businesses, the Household Survey was up by 590,000. Okay 590,000. This is the Third Straight blowout month the average is 373,000 for those two months and one more, please, the civilian labor force increased by 571,000 this is also the Third Straight month the average is 425,000 these are people, jimmy, that last number, civilian labor force, theyre coming out of the wood work and theyre coming back to work so Household Survey up 590,000, unbelievable blowout number. Civilian labor force picks up by 571,000. All i want to say is america is working. America is working and final point here, at the intro, American Workers are getting paid now, average Hourly Earnings, 12 month change, 3. 2 but in the last three months, average Hourly Earnings have picked up to 4 , 4. 2 at an annual rate. And, by the way, thats what the productivity numbers are showing. So, look, this actually was a blowout number and i want people to appreciate the magnitude here because you and i have been doing this a long time, i have seldom seen these kinds of numbers almost 600,000 people in the Household Survey and new entrants into the labor force. It is really quite remarkable. Lets go over, larry, you know i know companies, no one knows topdown better than you. I look at the companies i follow and theyre not really hiring. Im wondering if there is a new economy, i hope that fed chair jay powell is listening, a new economy being created by the internet of people who are creating their own jobs, creating their own businesses, letting their dreams come true sorry to be so i dont mean to be ethereal or dramatic you know that it is not the it is the real Small Business that creates these jobs, and the Small Businesses have never been easier to create with the internet how come no one is focused on technology as a job creator . Well, they should youre absolutely right. Your analysis is right and, jimmy, thats why look, this nonfarm payroll survey, establishment survey, will not pick that up and thats why here this morning i want to emphasize the Household Survey, which picks up the smaller and brandnew businesses at a much greater degree than socalled, you know, nonfarm payrolls i think i think youre spot on and, bit way, spey the way, spef technology, were seeing a pickup in productivity the last two years, eight quarters, eight quarters of productivity, 1. 8 , that is a huge increase because if you went back into the earlier parts of this cycle, it was zero, productivity was zero. The growth of employment, the growth of employment is about 1. 3 so the economys potential is now moving above 3 for the first time in probably 20 years plus and at the heart of that is the Technology Story look, it is also the services story. You had a blowout ism Services Number and i want to add to this too. President trump is working hard to defend the American Economy and to defend American Workers the race to Technology Advance where the United States has a very big lead is part and parcel of our discussions with china. We must not let the chinese steal our technology unfortunately there is some evidence down through the years that they dont value ip and they have forced technology transfers. So this is all of the piece. Now, i hope we talk about the negotiations coming up because i think thats very important, very positive. But im just saying, what does america do best . What does america do best . We create, we invent, we innovate, and we produce the heart of this is technological advance, in every nook and cranny of the economy, whether it is autos, farming, manufacturing, internet, 5g, we do this better than any other country. We have to maintain that lead and we have to make sure everybody plays fair in the World Trading system and if they dont play fair, we have to take actions to defend it so you see what im saying one leads to the other to the other. I would add, you know, as you know, i like to report, the chinese are moving very quickly when it comes to 5g. Im sure you know that im sure you get reports on it theyre being very aggressive. Lets talk a bit about your expectations for the negotiations. One parenthetical, i have met we had very important Oval Office Meetings with the big telcos, with all of the chipmakers, the ciscos, the qualcomms, you name it. I know. We have right now in the United States a terrific lead in 5g we are deploying at 100 cities there is a narrative were losing to china. It is not true i want to emphasize that. I know were deploy, but they have the ability through their command economy to just go right at it and i think theyre being very aggressive too. Larry, let me get to your well see about how command economies work, versus how free economies work well see about that you and i are on the same page on that one where are you in terms of your expectations for the upcoming negotiations do you have a timeline are they going to be in october . Are the two sides getting their agendas together with the hopes that there will be Real Progress made these are important questions. Look, what i can tell you is this, the phone call, night before last, between secretary mnuchin and ambassador lighthizer and the vice premier liu he went very well. They have decided the deputies level will continue in washington later this month. And from that deputies level meeting will come an agenda. And an outline, so that the principles will meet in early october. I think this is terribly important. I know we had additional tariffs. President trump is a very tough negotiator, as i think we all know but, the phone lines have been open during this period, and the negotiations are proceeding. I said many times, we still expected them to come over here in late september. The principles will meet in early october. The deputies will meet in a couple of weeks. So, i cant predict an outcome, not here to do that, all im saying is the talks are continuing you might say theyre now going to heat up when the chinese team comes here thats very positive development. Okay. Always difficult to figure out what will happen after that. Nobody is expecting youre going to reach some sort of agreement in the near term, larry. You know, i dont want to predict. I just i learned in this game, i participated in many meetings and, of course, were all part of the principles trade team that meets with the president every week i dont want to predict anything im just saying it is good thing that theyre coming here, and tempers are calmer now were engaged in a very very important discussion across the board, whether its agriculture or ip or tech transfer for cloud or cyberhacking or trade barriers, you know well see what happens i mean, on this one, this is the first facetoface meeting now in several months. We would leaove to go back to where we were in may where we were getting kind of close to an agreement, maybe 90 of the way. But i dont want to predict. Im just saying i think its very positive that we negotiate. And it may well be, it may well be that something positive comes out of that. Maybe not, but maybe so. President trump himself continues to say we will make a deal as long as its a good deal for the United States work force and the economy, and the president himself believes china wants to make a deal because they are not doing well. They are not doing well right now. And i think they are going to need some help, and trade might improve their economy. But, but, but we will see. No forecast from me. Understood. The kudlow axiom, better to talk than not to talk. Without a doubt larry, this is subject you and i can probably discuss in future interviews, but i wanted to get it out there because its in the news a lot it involves the relationship between your administration and business, which i know you are at the forefront of, talking to ceos and the like. The administration has been aggressive in rolling back environmental regulations, like 84 of them by peoples count in certain areas, particularly when it comes to the methane role roll back, the roll back of mileage standards in air pollution from automobiles and even the roll back in terms of mercury emissions from power plants you have gotten push back from the very businesses that you are trying to conceivably help many auto manufacturers saying we are happy to go with californias standards a number of the Power Plant Companies saying, you know what . We have already spent the money on mercury were okay with it even methane, bp, shell saying we are okay in terms of dealing with the current rules why dont you back off when you hear that from business . No, look, this is a very important point. Im glad you raised it the cafe fuel standards, which rules will be released shortly, probably in the next few weeks, we have done what the carmakers originally asked us to do, which is to lower the miles per gallon standards. That leads to safer cars, safer cars, and cheaper cars maybe 2,500 to 3,000 cheaper cars because, in our judgment, the prior administrations rulemaking here was excessive, was erroneous, and was not built on proper cost benefit analysis. Now, we will have our discussions with the state of california we want one standard for the whole country. Most carmakers agree with us by the way, federal statutes override state statutes. Understood. Did you meet with mary berra yesterday . We did. She expressed it tto the presidt her support for our reforms on cafe fuel standards. Mary is doing her best to open up plants am i think its possible the president will go with her to a meeting and a discussion in ohio she did not sign that letter, General Motors a lot of big car companies, General Motors for one, daimlerbenz for another, did not sign that letter only a few did look, the industry asked us to lower the regulatory barriers to safe and cheaper cars. Let me make one more point you mentioned methane and so forth. The United States has the cleanest air and water of all the Major Industrial countries we want to look at problems for clean air and water . Have a look at our friends in china. Thats the issue there. Nobody wants to go there. We have, we have reopened our energy industry. There is an executive order that the nec and others participated in so we will make permitting faster we will open the doors to pipelines, to various installations for lng, so forth. So look where we are and this goes right to the economy. Look where we are here. Larry, we are getting the hard wrap from your people, im afraid. Plentiful and cheap energy to power america forward. I think thats zbl. Larry, we have to wrap there. Great to see you, my friend. Thank you. Thank you so much for coming on squawk on the street. My pleasure. Thanks, layer. Reporter all right. Jim, kind of wrap things up for us we talked a bit about the jobs number itself. He puts it in, wants to talk about the Household Survey. Larry is always he was my partner for many years i took down notes on all of this the Household Survey and the job creation, poverty 71,000 number. These are important and overlooked larry, again, was someone i know that people are like, hold it, he got this one wrong. He is an economist and he has gotten a lot right and that is an important thing that is overlooked. Markets kind of given up a little bit of its gains here not speaking too much. A mixed bag for the most part. A strong week. Yeah, look, i think that fed chief speaks today i think people are worried about that there will be people who say, wait a second, the z scalers of the world have run too fast. The rotation out of the highest growth, a lot of that is today because of crowdstrike there is always one that triggers this. And i stick by the allegheny technology, if you want to play the titanium hip play. Thats good to know you name a body part and jim will give you a stock for it. I can give you that striker, striker. Yeah. What do you got on mad tonight . At home, lets find out i do, by the way, have been happening see what this at home has to say. Its been a great week, and glad you made it back found your way back to the show. Had to spend more time with my family. You need time to relax. Yes. All right have a good rest of the day and great weekend. Congratulations to everybody. A lot of people have a story. It was pathetic. Congrats on your president ial tweet. All right. Squawk on the street is back after this thank you so much for coming in. Is something going around . Yeah, uh, welcome to cold season. [ sneeze ] you know at cdw we get that sometimes its smart to work outside the office. Thats why we would suggest the powerful, portable Lenovo Thinkpad t480. To let your people stay productive from anywhere. Wow, i feel really great about this. [ sneeze ] its probably nothing. Or something, really bad. You need it orchestration by cdw and lenovo. Featuring the intel 8th generation core processor. Thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Good morning happy friday and welcome back to squawk on the street. Im sara eisen here with david faber and Mike Santelli live from post 9 at the New York Stock Exchange Carl Quintanilla is on assignment look at the markets. Soothing talk on trade from larry kudlow just now on our air, saying talks are going well heading towards october meetings okay jobs report its making for a flat markets the s p 500 is up a point. The dow is up 39 the nasdaq is negative we are still heading for our second week in a row of gains for stocks our roadmap starts with the jobs report, coming in weaker than expected what that means for the overall economy. Big tech antitrust concerns states are planning to launch new investigations of facebook and google what should investors expect and lululemon surging we will take a look at the state of the consumer next. First up, jobs. Coming in headline numbers weaker than expected lets get to Steve Liesman for more on what was underneath the headlines. Tfirst it came in below expectations second, in the mix of good and bad data, it didnt provide the definitive judgment on whats going on with the economy that some hoped lets go through the numbers nonfarm payrolls 130 we revised out 20,000 jobs from june and july combined but average hurley earnings on the positive side. And more people came into the work force 63. 2 . So lets go through the good and bad. On the good side we have the rising rages we have the growing labor participation. Temp help on the upside. A strong Household Survey that larry kudlow just spent a lot of time talking about really modest private sector job growth 96,000. Thats like we have all this difference in opinion and it comes to really reading this number jefferies writes the headline increase in payrolls is disappointing. All the peripheral data is good. Lombard said when they soften like this the economy is slowing, period, full stop the government added a lot, a big chunk was added for the census, plus 34,000 on government Education Health Services Plus 32,000 but temp help came in up 15. Construction 14. Hospitality 12 manufacturing weak or three or 4,000. So some strange movements this morning in the outlook for what the Federal Reserve will do an Interest Rates as a result of this number. There is now a modest bet in the futures market its on hold, small, still a 98 chance of a cut, but a slight chance of a hold, a slight chance of a 50 basis cut earlier in the day twothirds ever a rate cut in october, about what it was now a 33 chance that we dont get that next cut. Little confused by this, sara, because otherwise since the number came out rates and yields have come down, but there has been in interesting shift where the market not quite so aggressively pricing in the fed this morning i think that october question is going to be key, especially as we wait for powell this afternoon. I would add another one. I dont know if you hit the average weekly hours worked. Yeah. And also, you know, a sign like people were very worried in july when that that would come down. That they were starting to cut hours. It looked like that rebounded. That was overall a good sign its not a recessionary number. No, its not. Its not you know, you said it pretty good in the intro. Like it was a pretty good number i mean, you could go either way with this thing in how you characterize it. 130. I will say two things quickly. One is we have to get used to lower numbers for two reasons. One is that we have been overperforming in general on the jobs market. And remember you had that downward revision of five thun thousand for the year ending march 2019 that suggested the run warate o job growth was 41,000 a month lower than we previously believed this is a normal number. This 130 to 150 range is the new range i think and it used to be sort of a 175 to 200 range Steve Liesman, thank you. Pleasure. Larry kudlow joining the team earlier on squawk on the street on those jobs numbers. Heres what he had to say. 130,000 is a very solid number, but august is always a quirky month Household Survey up 590,000. Its an unbelievable blowout number civilian labor force picks up by 571,000. All i want to say is america is working. Joining us now, Jp Morgan Funds strategist david kelly and rbc capital strategist lori calvisina. Lori, was this good enough for a market craving fed cuts . I dont think so. Bad enough, i should say. If you were bullish, you are still bullish. If you were bearish, you are still bearish. We have defensives doing well and industrials. Thats odd we have some of the areas that have been the hoot exist ttest e market like tech, riske in software i dont think its clear what the markets is telling you it thinks of this. David, whats your take well, i think this is weaker than it looks. Steve actually made a lot of great points there first of all, you have to take out the 25,000 temporary census workers. These jobs wont be around in the long run now you are at 105,000 and then also that benchmark adjustment the Labor Department has been overestimating job growth from new companies all along. This reflects an underlying trend of less than 100,000 jobs being added. And we have a lot of pentup jobs there may be some of that where companies are filling job openings even though they are feeling more glum right now. This is an okay report, but i think the shows the labor market softening and its shifting down to 2 growth like what we saw in 2018. Lori, 2 growth seemed to be the premise for the last couple of months. It confirms what you thought about the economy going in at the same time the stock market is about where it was in early august late july, but bond yields are so much lower Investment Sentiment i would say got more defensive what does that leave the outlook for stocks tactically right now . I would say in the short terterm i dont think you have the trigger today. We are actually not too far away from the alltime highs. We got expense valuations. Sentiment is bearish sentiment is euphoric. Thats unwinding i think it would have been good forthe market long run if we got something to let that euphoric unwind continue we need to get positions out of the way to make sense of the future. What specifically are you looking at that tells you positions had been euphoric. The cftc data among Asset Managers things linike pension funds, insurance companies. Hedge funds, but it includes other big institutions and that money, we actually saw that level of euphoria, that positioning got back to january 2018 highs, september of 2018 highs this last july starting to unwind we are just not there yet. David, talk to me about bond yields they moved up yesterday. A tenyear above onesix what are your expectations there . Well, they could come a little bit lower a lot of people have been talking about the idea that some stage we will see negative yields in the u. S. But we are really in the Twilight Zone when it comes to the bond market. These yields dont make any sense for a rational longterm investor so some day we will pay a price for this meantime though, these low bond yields are what supported the stock market its hards for money to leave the stock market in droves when you are not getting paid in cash i think the federal will cut in september, probably one more time this year you are not getting paid in cash, certainly not in the bond markets. Yields will stay low, but otherwise really wouldnt deserve this level of love. Right what does that mean someday we will pay a price for it . Obviously we will go through at some stage we will have a Business Cycle. There will come a time when weve got so much in terms of Financial Assets relative to gdp that you will have inflation from this. I think at some stage go to the left thats going to finally lead to the inflation that we have avoided all the way through the last few decades i mean, thats down the road these are just not good longterm investments at these yields. And yet, lori, itdoesnt look like investors are wore paid about a bond bubble or anything like that we continue to see the flows in the billions bank of america putting out numbers into Investment Grade bonds, almost 8 billion last week 3. 5 billion into government bonds. Small outflows from high yield that does that tell you . It tells us that we think part of the market is health enough we are not seeing any smoking gun there either what we are seeing on the equity side is that the thirst for yield is insatiable. Utilities and reits, overvalued, still going up and up. There is a thirst to move there. And you should stay in those sectors . For now we look at reitz, its expensive. Thats the only problem with it. Utilities are below peak valuations they dont have china risk they dont have 2020 risk. You know, i will add one thing on this jobs reports if i could give you a bearish thing i saw people are talking about how strong the wage data is. That is good for consumers thats not great for corporate Profit Margins when companies are complaining about margins, they are complaining about labor. You have that risk raised a little bit in my mind. 3. 2 from last year up in august david and lori, thank you. Thanks. When we come back, big techs antitrust concerns planning to launch separate investigations into facebook and google we will ask a former new york antitrust che antitrust chief awwhat to expec thtopeorngtos e p rfmi sckon the dow. Squawk on the street is right back tautomatically goes into a Money Market Fund when you open a new account. And fidelitys rate is higher than etrades, td ameritrades, even 10 times more than schwabs. Plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. Just another reminder of the value youll only find at fidelity. Open an account today. New antitrust scrutiny for big tech numerous states plan to launch probes in facebook and google next week. The journal reports Texas Attorney general will lead a multistate investigation new yorks attorney general runs point on facebook review, confirming in a tweet this morning. Im launching an investigation into facebook to determine whether their actions endanger consumer data, reduce the quality of consumers choices. The largest media platform in the world must follow the law. Joining us the former head of the new york ag bureau he is now down in moffett kerman he has been recently obtained tovito advise google. Premise in usa versus microsoft the company had a dominant position in a important Product Market that they leveraged to force consumers to buy bundled products that they didnt want or need. Does that apply to either google or facebook . I dont think so. These are very different issues. Each Company Faces different issues so no similarity, i dont think. They all have large market shares. Right whats the distinction between googles overwhelming market share in search that is different from what microsoft had in operating systems so microsoft had a very large 90 plus market share, which is much larger, i believe, than google has in search had it for over a decade so the numbers at the time were much different and what microsoft basically did, you had a very good summary, they used their market power to insulate themselves from the competition in particular, the browser, which was a new product, to maintain their market share, and did a number of illegal things they abused their market dominance. Thats really the issue. These companies, have they abused whatever power they have. So do these states attorneys general not have a case . Is there nothing to scrutinize with these companies i think, as i said, the companies have larger market shares we are in the political season you know, Big Tech Companies have been the focus of some people running for office. So i think thats part of it the Texas Attorney general, who is doing the google probe, is plang about what he perceives as anticonservative bias, which i actually find pretty troubling as citizen, as a former Law Enforcement officer, and as a believer in the first amendment. I think thats potentially a misuse of the antitrust laws if thats the motivation here so i think there is sort of a taint to this at the beginning, at least in that respect. I would point out google does have, according to the latest numbers, 92. 3 of the search market. Yes, they have a large market. Its as large as microsofts was. Right but i dont think its yeah, they have had it for as long a period. Does that matter . Does the time you held it matter it does. Why because, as you know, given what you do, markets shift all the time they can turn rapidly, particularly in the tech sector. New product comes along. You know, google, when it had its search product, there were other Search Engines that were much more popular. Google was perceived by consumers to be better why is why it has a large market share. Thats something that should be rewarded if a company has a better product and people like it, thats not a problem. No. Lounge, given you are working with google. How long do these things tend to take in terms of the investigation . A long time. I would say the microsoft investigation was a couple of years and then there was a trial, an appeal it went for a long period of time so i think its a long way down the road th these are very early days. I dont think investigations are terribly focused at this point yet. There will be document subpoenas. In the email era, there is hundreds of thousands of emails that have to be scrutinized. Probably millions. Yeah. Its a lot of work. On that point, what resources and personnel do the state attorney generals have and whats the significance from a bipartisan basis while the department of justice and other agencies of the federal government are already looking into it . Well, as a former state enforcement official, i defend the right of the states to enforce the laws they have coequalsovereigns i this area with the federal government i always thought is it a good use of our scarce resources . The states have scarcer antitrust resources than the federal government so one of the considerations i always thought about when i was the chief of the bureau in new york is the doj and ftc going to do something how many people do i have to throw at this . And you think about lost opportunity costs. A lot of these offers are small, they have one or two antitrust ags. Are they relationshplicatings going on its not clear what the ftc are you saying its a waste of their time and resource sns. No. I think they have a legitimate interest if they want to do it i think they have a be careful because these are enormously intensive resource consiiri so. Even in new york, which has 15 antitrust ags, if you tie up four or five on a probe like this, like this microsoft, it might mean you cant do other things you have to think about that. And just to get back to what might be motivating some of this scrutiny, you mentioned that, yes, there is some people who think that there are sort of partisan search results in google that has been out there. But there are Small Businesses that complained about advertising policies at Google Google does privilege some of its own internal sites in search results perhaps as opposed to third parties. Are there not things like that to consider . Well, yeah. They will look into all that stuff. Its very early days the ftc, as you recall, a number of years ago had a very extensive investigation with regard to search and didnt find a problem. Thats one of the questions that come to mind, if search is the focus. What has changed since the ftc that was a unanimous decision by the ftc. Three democrats and two republicans all gave them a clean bill of heat you ha health you have to ask whats different now. Thanks very much. Lets hit lululemon. Shares higher on the heels of a strong earnings beat another one. Revenue also ahead of forecast the Athletic Apparel making hiking the fullyear outlook the key sales for mens business, climbing 35 , outperforming growth of womens apparel. Revenue in north america was up 21 . The stock had already been up more than 50 into this result up more than 60 so far in 2019 right now. Getting a big boost, guys. To go through some of the other highlights the mens comps up 27 and they are still seeing doubledigit growth in womens as well, which is a more mature business. The other big surprise, the store comps were 11 people were expecting five there. We knew ecommerce and digital would be a big driver. Clear will i lululemon continues to stand out in what has been a bumpy retail earnings season they are true to their brand they are keeping the innovation coming and keeping the execution going as well. The big knock against it now is valuation, right yeah. And if you look at some of the analysts notes, a lot taking victory laps because they are bullish on this stock saying the stock is not cheap but it stands above the rest in retail in a period of uncertainty, according to citi. It deserves that valuation susquehanna saying no science of devaluation. The tariff issue, found out that 6 of what they make is manufactured in china and imported to the u. S. They have been taking measures to mitigate that thats going to be a hit to eps. It was embedded in earnings forecasts and they came if better. We go to a mindfulness room, they have them in the stores they do they are opening new experiential stores. They opened one in chicago and lincoln park that was a big driver they will do more. They have had early success with the selfcaroline. Remember they are getting into shampoos and deowed rents and expanding. The only other point id make is lulu is in a very different place than a nike. Its a much smaller company. They have expanded a lot. You are seeing Growth Numbers off a smaller base still its impressive giving the lumpiness of retail and the fickle consumers. It has not paid to be a contrarian in retail the winners keep winning the stuff that looks cheap stays cheap. Especially lulu. Without a doubt. As we go to break a check on the markets. Slight gains in the major indexes. You see about 0. 15 , just above the flat line for the s p. The nasdaq pulling back slightly squawk on the street will be right back tell him were flexible. Dont worry. My dutch is ok. Just ok . in dutch tell him we need this merger. in dutch its happening. just ok is not ok. Especially when it comes to your network. At t is americas best Wireless Network according to americas biggest test. Now with 5g evolution. The first step to 5g. More for your thing. Thats our thing. The u. S. Is going to need doctors. And a lot of them over the next decade our population is aging but is healthier and living longer. As a result, physician shortages are being felt across the United States indicate rogers has more on the story. Kate. Thats right the association of medical american colleges projects there could be a shortage of up to 122,000 physicians by the year 2032 in primary and Specialty Care we are here in arizona the state is short about 600 primary care physicians. A number of that will triple in the next decade. The state is 44th in the nation for ratio of primary care physicians to population, and that matters because the population here is growing very quickly. One way to fix this issue is by adding more residency opportunities for doctors like christopher lou, a first year recession at Abrazo Health we have got a significant will i large elderly population, so with that come a lot of chronic diseases such as cardiovascular disease, diabetes, high blood pressure, those type of things and managing those diseases and the complications that can arise from those. The hope is that the more residents who come to states like arizona to train will wind up staying here once their Program Training is cleat aompln do this important work and hopefully fill that doctor shortage gap. I have a question on why this is happening and how much you are hearing about the economics of being a doctor and how they dont get paid as much and its much more challenging. I mean, doctors always complain that times are very different and the cost benefit ratio isnt what it used to be certainly, sara so student debt obviously is a huge factor. The cost and time and the way that the job is done now that technology is much more involved has also changed the daytoday duties also the aging population. More americans are living longer because they are living seemingly healthier lives. They need more care as they age. A lot of doctors are hitting retirement age they are leaving the work force. That aging population is slicing the industry in several ways one more thing the aamc says more residency programs and slots need to be added. So they support congressional efforts to increase the amount of medicare funding that goes into the Training Programs the hospitals bear a lot of the costs to train these physicians as they go through their careers. Talk about a Skills Mismatch in parts of the labor market thats a big one at this point thank you. Kate rogers. Time for etf spotlight. Taking a look at a few of the most popular recent trades this week, at least temp rarely have backed off look at that huge surge this year that we have seen just to the right of the screen, we pulled back the last couple of days, up again today. Its unclear if this is an Inflection Point we have seen this week. Yields going up. Huge week also for Corporate Bond issuance. Look at the gield miners etf as well of course, gold had a little bit of a pull back from a very aggressive increase. You still are looking at strong up trends. These are backing off and kind of testing those right now and then in terms of style of stock investing, the low volatility trade, defensive stocks, yield oriented, splv is a poster child for that. That has not missed much of a beat yields remain low. Up half a percent today. Some people are chattering about the twotens is steepening they made a big deal about the yield curve inversion, are we heading into recession better Economic Data yes i think there is a lot less intense buying at the longer end of the curve people are saying that heavy Corporate Bond issuance tends to drag the tenyear yield up a little bit today, of course, yields arent doing much, but they are reis steepening. Lets send it over to sue herera for a cnbc news update. Good morning, everyone. Hurricane dorian making landfall at Cape Hatteras in North Carolina this morning as a category 1 storm you are looking at images shot from the International Space station. K nbc meteorologist david big ar has more. Here is what the current track is showing the storm has moved back to the atlantic thats the good news we are waiting for a track update from the Hurricane Center around 11 00 for today its going to be move off into the atlantic and then it should stay off the coastline until it gets to canada. For the next couple of hours and next few days the major impact storm surge along parts of the east coast high surf and some tropical stormforce winds around parts of cape cod because the storm will be getting wider as it gets weaker. Thank you so much in other news, chinese president xi meeting with german chancellor merkel in beijing he reportedly told her china and the European Union have the same interests in protecting the rules of the multilateral trading system and china will further open up its markets. And robert mugabe, the longtime leader of zimbabwe, who was forced to resign in 2017 after a military takeover, has died he took power after the end of white minority rule in 1980 and presided over a country whose early promise was eroded by economic turmoil and human rights violations. He was 95 years old. You are up to date thats the news update this hour david, back downtown to you. Thank you, sue. When can he am come back, is President Trumps tariff strategy working we will speak with pulitzer prizewinning columnist jim stewart. Larry kudlow saying earlier they are back on track for talks in october. Squawk on the street will be right back for farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice lettuce. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Top white house Economic Advisor confirming last hour the u. S. And china will hold trade talks next month but larry kudlow told me he is not going to predict the outcome. President trump himself continues to say we will make a deal as long as its a good deal for the United States work force and the economy, and the president himself believes china wants to make a deal because they are not doing well. They are not doing well right now, and i think they are going to need some help, and trade might improve their economy. But, but, but we will see. No forecast from me. For more on President Trumps trade strategy we are joined at post 9 by pulitzer prizewinning columnist jim stewart. We also had a conversation about 5g the chinese are moving rapidly on 5g employment in trade, what are your thoughts the hong kong situation got my attention this week when china agreed to withdraw that extradition provision they were trying to impose on hong kong after million antly take they would never give way as i said before, china takes the long view. They very specifically in doing that said this doesnt change our goal fully integrating hong kong into chinese society, but we will wait its been 70 years since hong kong was reunified with china, and 70 years to china is virtually nothing. The parallel to the trade negotiations is china may have some flexibility they will make strategic concessions that advance their longterm goals. And if you assume their longterm goal is to be, if not the dominant World Economy, certainly on a par with the United States, there may be a path through these negotiations where they can give way something and, you know, accept that they dont lose that much faith, face, and still have it be consistent with their longterm goal now, exactly what thats going to be, i dont know. But i think it reminded me they are adults, they are mature. They dont respond to any immediate political pressure they take a very long view i think if the United States recognizes that, we can come up with a plan that is going to look like a win for us that also is acceptable to them. We have this live picture of hong kong. I mean, jim, the surprise this week was actually that the u. S. Economic data came in better than expected on services, on consumer parts of our economy. The jobs data was kind of an okay mix, but not recessionary and that continues to be the president s edge and leverage when he decides to ramp up the tariffs and negotiate harder on china. So how do you match that with your view that china plays the long game and has leverage in that sense well, you know, i think when i was listening to larry kudlow just now he said china is hurting, the economy isnt that good a, i dont know how much we really know about that or how much it is hurting, but b, i dont think it matters that much to the chinese they can take a lot more pain than we can. It is true, the numbers are looking good i have been skeptical of a recession for some time. We have got really strong unemployment going here. Just because the yield curve inverted does not mean that we have to go into a recession. So, yes, at this moment the Strong Economy helps but, look, what happens when the stock market every time, there is the merest hint that there could be a settlement of the trade wars i mean, went up 400 points one day this week on news that they are going to talk again. However good the u. S. Economy is, it would be better if this uncertainty cloud wasnt hanging over the global economy. And if i was the president of the United States i would want to harness that and take advantage of that. The stock market hasnt gone anywhere for a year. If i was heading into an election i would like to see a nice rally the next few months. Are you in the camp sorry, mike that believes at some point he will say, okay, heres a deal given enough time that will send the market up . Not to mention he will have gotten lower rates from powell because of concern about trade slowing down the economy absolutely. I have been saying that all along. He is going to get a deal. And he is going to call it a win and he is going to campaign on it and get the farmers excited why wouldnt he . Thats what he is good at. And so i have always thought it will be some kind of a deal that he will call a victory in the trade war. What i think is, though, so far have never seen any real understanding of the chinese coming from the white house. And i dont know what the state department is telling them, which i assume they are ignoring it to keep bludgeoning them, saying we are going to hammer you, humiliate you, beat you, that to me is not a path to a solution overnight china did a monetary easing move. But also the interesting thing about the timing of the initiation of the trade war by this administration was that chinas longterm priorities were already lets become less export reliant lets really foster more domestic consumption and get the middle class busy here as opposed to this model that they pursue so this kind of fits into their longterm goals in a way i guess the question is what is the cost of global disengagement, right you had this globalization premium build into the World Economy for 25, 30 years. I dont think we have seen the costs showing up yet, which is one reason the u. S. Economy hasnt responded much yet. Companies are trying to do work around t around people think that this status quo isnt going to last, that there is going to be a strong trading relationship with china. And so they are looking for kind of temporary outs. I dont see any wholesale move, to move manufacturing to vietnam or Something Like that and that is crazy. That would hurt the global economy. So i think there is very much a wait and see attitude on the part of u. S. Businesses but with a fundamental optimism that this will get resolved because its so much in the United States and chi chinas interests. We are getting breaking news on the automakers. Phil lebeau has that for us. The dodger has launched an investigation looking at ford, honda, bmw, volkswagen, four automakers who have reached an agreement within the last couple of weeks with the state of california recording vehicle emissions. The reason that the doj has launched this investing is to look into why they have reached this agreement with california, did they violate any antitrust laws in reaching that agreement, but at the end of the day this is all about the Trump Administration, we heard from larry kudlow last hour, and its belief if should set one National Standard when it comes to fuel economy. California should not have the right to set a separate standard, and the automakers, the four that i mentioned, ford, honda, bmw and volkswagen, they have already agreed with california in terms of the standards that california is going to be setting going through to 25. So thats at the heart of this not only this investigation, but also this dispute that is going to be flaring up the next couple weeks between the Trump Administration and the state of california when it comes to fuel economy standards. You know, phil, as you said, i asked kudlow, before we knew about this news, about in general about the administrations push back against businesses incertain areas where businesses were okay whether its mercury emissions from power plants. I heard that. The cafe standards that you covered so closely or whether its a number of other areas as well methane, for example, where some of the industries are saying we are okay with things lets listen to what kudlow had to say why they are pushing forward in terms of the lower standards that they want versus what california is looking for. We have done what the carmakers originally asked us to do, which is to lower the miles per gallon standards that leads to safer cars, safer cars, and cheaper cars maybe 2,500 to 3,000 cheaper cars because, in our judgment, the prior administrations rulemaking here was excessive, was erroneous, and was not built on proper cost benefit analysis. Phil, id love to get your take given you are close to so many of the automakers in terms of their thoughts on a Statement Like that. A couple of things. First of all, before i comment on those statements, david, i should tell you that we have reached out to all the automakers we expect we will likely hear something about this doj investigation from the automakers within the next hour or two with regard to what larry kudlow said, almost everybody in the Auto Industry would agree. Sure, if you do not have the vehicles getting 54 miles an hour per gallon for a Fleet Average by 2026, which was the standard originally set when they reached this agreement with the obama administration, if you do not have the vehicles striving to hit that standard, the vehicles will be cheaper nobody disputes that the question about safety, i am not sure where larry kudlow is getting that from. I am not sure anybody has said a vehicle that gets 38 miles per gallon or the fleetwide average at 38 miles per gallon means safer vehicles as opposed to 54 miles per gallon in terms of will the vehicles are cheaper . Sure you wont have to put as Much Technology it does cost more over time as you make these vehicles much more fuel efficient. There is no disputing that this gets back to the main question does california have the right to set standards on its own . Its had this waiver from the epa going back to early 70s and the Trump Administration has said almost from the getgo, almost from the day that President Trump took office, no, no, no, we dont think they have that right there should be one National Standard with regard to your question about the automakers and why they are pushing back, they are pushing back because they want one National Standard, but their feeling is the train has already left the station when it comes to increasing fuel economy make it continue moving in that direction because the rest of the world is going in that direction. They dont want to be pulled back as far as perhaps the Trump Administration is indicating, especially if there is going to be a dispute with california they want to go to the highest standard if thats californias or the national one, whatever it might be right and the 13 states along with california we should point out they are trying to repeal that californias right to actually its a waiver. Excuse me. They want to get rid of that waiver. Right jim, some have said the doj is being used in this battle as a weaponization of antitrust law. Thats what it looks like to me thats whats interesting and troubling about this to use the antitrust laws in a novel way. The antitrust laws outlaw the restraint of trade, monday opization. Is this wian agreement that california is complying with state regulatory requirements, a restrain on trade . If somebody didnt go along with california, would that somehow increase competition i find that a really hard argument to make and quite a stretch for the usual use of the antitrust laws i mean, the real fight here is between federal standards and the state of california. I feel bad for the automakers. They are caught in the middle here they are trying to find a path in which they can keep selling cars in california while also complying with National Standards. Suddenly they are hit with an antitrust investigation . Of course, it will be a field day for lawyers, you know, billable hours going up into the thousands, especially because it is a novel use of the antitrust laws but i think its really counterproductive. I am trying to figure out, so what the Trump Administration is angry about, that they cut a deal potentially with california it just adds an extra layer of complexity in his fight going on for a while with the automakers for moving factories. Yeah. If you kind of act as one with your competitors to try and, you know, get some standards set. I dont know. Thats true. All Companies Must act as one if they are complying with the regulatory requirements. There are all kinds of industry standards. Thi they may be safety standards, in this case environmental standards. There are a zillion things they do in can cert because they are required to by regulatory agencies i think what trump is mad about is california, because its so big and there are so many cars there, has de facto set the National Standard. And as we pointed out earlier as well, i mean, it is an interesting situation where you have oh, phil is been all right. We lost phil jim, glad we had you here to weigh in on this very interesting. I mean, the use of the antitrust whether you are talking about aol time warner, time wanner at t, there is this cloud of politicization hanging over a very apolitical economicallydriven agency that is a big shift the way the white house has treated the justice department. Thank you for being here. The automakers are also trader the u. S. Auto makers that is not too spooked. Getting a check on the major averages averages as we head to break. Higher now, 77 points up on the dow. S p up a quarter a percent under 2 from record highs on the s p 500 right now. Well be right back. Johnson johnson is a baby company. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. The bond market is doing something it has never done before and it could mean a change in the air. Find out more upon tradingnation. Cnbc z tradingnation. Cnbc. Com more squawk on the street is coming up. Certainly raising some eyebrows this morning. This doj investigation of some automakers ford motor, though, confirming it has received a letter from the department of justice on this california admissions agreement and whether in some fashion it was colluding lets get over to the cme group and join Rick Santelli with the santelli exchange. Thank you, david. I would like to welcome the former chairman of the council ed lazear. Ed, thanks for joining me im going to get right into it inthought the jobs number was jobs lite. The revision of 20k over two months wasnt good but wages on a month over month topped 0. 4, the second time this year you have to go back to september of 2017 to find a higher number. Theres been several of those. But the big news, epop, employment to population, best since december of 08 at 60. 9. And Labor Force Participation moves up to levels at 63. 2, weve had several, but thats really the best since 2013 your thoughts on the report . Right i would say growing, but slowing. It was almost an ideal report to my mind for this part of the Business Cycle as you mentioned, the epop is up the employment to population ratio. Thats the number of people who have jobs over the number of people who could have jobs its kind of a surprise, actually, to still be growing. It was pretty stable and it ticked up a little bit hopefully that will hold, well see where it goes next month as you mentioned, wages are good wage growth at 3. 2 is just about right on where we want to be at this point of the cycle, again. So that looks good the other thing that was good was the hours, average weekly hours went up by a tenth of an hour a tenth of an hour is the equivalent of 400,000 jobs so thats good news, as well so most of this stuff is really quite good wibld s, i would say. The other thing you should point out, look at the threemonth moving average of jobs rather than the singlemonth job number and the threemonth moving average is 156,000. Its still recovery pace, because we only need about half of that to keep up with population growth. It is lower than what we had last year. Its about twothirds of what we had last year. So again, it looks like were peaking, but really, just quite a solid report so i have no complaints. All right listen, ed, we only have one minute left. Real quickly, i want to hit on a big discussion we had this morning, which is the run rate of the u. S. Economy. If you look at gdp in 2017 and 2018 and the two quarters we have for 2019, it certainly seems like 2. 5 is very, very realistic, but the assumption is we have a 2 run rate. Weigh in on that as an economist in the 30 seconds that we have 2. 5 is realistic heres why if you think about the 30year average before the recession, it was about 3 were going to lose about half a percentage point because of demographics so that would put us down to about 2. 5 now, that doesnt mean that its going to happen, but we certainly dont have to suffer delusions of grandeur to get there. All you need isabout 2 productivity growth and youre at 2. 5 . And we could have more than 2. 5 or 2 productivity growth. Its feasible. Excellent even if its not most likely, it is certainly feasible excellent ed, thank you for your time today. Hope you have a great weekend. Sarah, back to you my pleasure rick, thank you lets get a check on the winning sector for the week, which is retail dom chu has that for us back at headquarters if you take a look at this overall picture, retail was the biggest winner with Consumer Discretionary the bestperforming sector on a oneweek basis, up close to around 3 , almost a full percentage point better than the broader s p 500 thanks in part to strong oneweek performances from the likes of a lot of stocks, tapestry, pvh, gap, other apparel and accessories companies. The sector will continue to be a focus for investor as more attention turns towards the health of the American Consumer and whether that strength can keep the economic expansion going. Now ill send it back downtown to you guys at the exchange. Sarah . Squawk alley is coming up next dow is up 72 point were sort of building on our gains here, adding some momentum into the day, though f. A. A. N. G. All lower. 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