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Moody’s Senior Economist Ryan Sweet and former bank regulator William Black on the U.S. economy’s outlook and whether the manipulation of rates is...
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Closer -- the number of jobs created in June coming in short of expectations but does this data mean and economic downturn is straight ahead perfect.
Talk first street fight today -- Ryan -- he's the senior economist at Moody's and -- bearer is former bank regulator William.
Black Brian this number looks really what are we missing where -- the bullish side to this.
Well I would prefer to say it's word cautiously optimistic -- -- 80000 jobs is definitely disappointment.
Our forecast from -- point 5000 -- still do disappointment.
This is a very very tough job market but I think.
But 80000 jobs added in June is -- misleading because a lot of the weakness was it.
Focus in just a handful of industries primarily education health care which typically adds 30000 jobs during this recovery only added 2000.
That's not sustainable currency rebound there.
Retail was weak primarily department stores I still think there may be a little bit of some weather -- related payback.
But also leading indicators some of the key things that we're looking at -- help -- so I think we're likely gonna see a little bit.
Some better job numbers lying ahead.
All right William black who by the way it was one of the best bank regulators of all time according my friend Paul Muller who's written about the S and L crisis so he knows -- -- -- We're gonna ask you some questions about JPMorgan at the end but first let's talk about the economy.
You think that it's it not only is it not just muddling through but we may be headed for recession is that right.
Yeah I think that there are three serious risk.
Of the recession and Moody's by the way in December.
Of last year sad that we're going to have fiscal headwinds because the stimulus is run off so that's one problem.
The second problem is the lead in story just -- Europe is terrible and Europe -- finds no way to get out.
Of its problems so it is dragging down the United States and it goes from -- imminent crisis to imminent crisis.
And the third.
Is the fiscal cliff that were all facing in December of this year and that the markets are already beginning to anticipate.
This is austerity on ultra steroids.
And as with the Europe it would send the United States hurtling back.
Into a Great Recession.
Of -- scratch back here if you will or or use your your bullish loves to cut or at least is -- cautiously optimistic moves to it to -- What will keep us from fallen off the fiscal -- and and perhaps from a market standpoint Europe we cannot control its not our show.
Nonetheless Wall Street we know it's in the past climb the wall of worry what we see that again will be to see these markets kind of grind higher.
Well I think we're gonna continue to improve in fits and starts I agree Europe is a major headwind.
-- the fiscal cliff is.
Arguably the biggest concern that we have.
The closer we get towards the end of the year I think more -- -- he's gonna build about how we avoid falling off the fiscal cliff but.
Right now there's few signs of -- recession I think we're just muddling along I think it's a very sluggish recovery if you look since the beginning this year.
Average want -- job -- about a 150000 which is identical to what we saw last year so it is pretty much a -- Labor market you know until we get some of these uncertainties -- I think we're gonna continue to just grinds -- gradually higher and I think.
You know we're -- sluggish recovery but I don't think we're headed for another downturn.
All right what William I agree with the give -- the last thing we need right now as austerity what we need is growth I disagree with -- but the way would you get -- you think we need -- Government stimulus I would say we need more private sector.
Growth.
-- and perhaps even less government that we now have but make your case.
Two things are consistent right right now what we have is an eleven trillion.
Dollar loss.
Of household wealth.
And that means that demand has been.
It tremendously harmed.
And that means that business wasn't hiring.
And so much of the hiring that's occurred in the private sector.
Is because of government stimulus after all most of the money in the government stimulus goes to the private sector that's where we buy the supplies that -- -- etc.
-- that are called on a lot of that money was wasted as you know I mean whenever the Wall Street Journal went in and look at those so called stimulus jobs.
They found out that they weren't there the government was -- over reporting.
The the job creation effective -- stimulus.
And now look at the overall numbers of the recovery and look at it in comparison to Europe where we ran a real world test right they went through austerity.
We went through a mild stimulus package and the results are and in the United States economy and this is where we agree with Moody's.
Is an eight week.
But real recovery.
That lasted for about two years.
But that recovery is in severe danger of being completely -- -- by the three factors that I talked about.
And as I've listened.
I heard agreement with me not disagreement.
I've I've wanna get -- variety of one quick second but quickly I have to ask you about specifically William the the JPMorgan situation now being.
Part of the investigation of -- or not to mention all of the other banks where do you stand on banks' involvement in manipulating interest rates do you think it is more widespread.
Jeff -- who was fine already.
But we know it is in fact -- -- reported.
To the you know city of London authorities.
That it was widespread and allege that Barkley is -- one of the less dis honest.
And of these so yes this two has not been not calculated in net all this is bike two orders of magnitude.
The largest antitrust violation.
In the history of the world that we've ever learned about and the liability.
Is going to be extraordinary.
And it's good much of it's going to be been brought about through suits in the United States.
Either way let me just say is -- does not William failure for those who don't know you were you were key regulator with a whole personnel.
Crisis began but of one of the people who you know very well as Tim Geithner.
Because you you focused in on Tim Geithner when he was head the New York fed and that's when apparently in the year 2007 some of this.
Live or manipulation was going on will -- his actions be called into question.
Well Geithner we already know with an abject failure as a regulator and you're quite right.
But what -- cleese did intelligently was try to settle early with the banking authorities who are very weak in both countries.
But now it's gonna get into the serious fraud office in the United Kingdom has announced an investigation.
The state AG's who have been far more aggressive attorney generals in the United States are going to have claim on behalf of every state pension fund.
It's gonna be a victim of that's.
And as a result there's going to be given the much broader US discovery.
Then there is allowed in United Kingdom.
Far more of these embarrassing things comes out and you know.
That it's already a political scandal.
In the United Kingdom not about the role of the regulators.
Facilitating.
