Net 245 thousand people went back to work in november. That is significantly slower than we have seen every month since we started gaining again. Private payrolls, only 344,000. Last month in october, that was 877,000. The unlimit rate does fall to 6. 7 , but that is in large part because fewer people were in the labor force looking for jobs. Heres the thing that i think is really going to be important as we look at how the pandemic reshaped the economy. You look at what happened with retail hiring. 35,000 jobs lost in retail in a month when they are usually hiring for holiday sales. Createdad 118,000 jobs in the warehousing and courier sectors, which are the people who work for the online sales departments. It is a real change. Finally, the total labor force is still 9. 8 million below where it was in february. So no matter how well we have come back, no matter what that initial v looks like, it is starting to flatten out now, and you still have almost 10 Million People who had jobs in february who dont have jobs now. Guy this is where the real problem lies. Basically all of jobs we are seeing at the moment are people going back to work, but the scarring is starting to be really clear in these numbers. Labor force participation rate, 64. 5 . The scarring is there. I am wondering what happens when we get through the process of dealing with what is happening where the nextis administration is going to have to deal with. So on that note, let me hand things over to my good friend and colleague jon ferro. Nathan coming off this payroll report, a downside surprise, as you guys have been coming over. The previous number revised lowers. The read across for this market is really quite clear. An equity market at or near alltime highs and a bond market breaking down, and yields breaking out. Why . They believe washington, d. C. Is about to agree to a fiscal deal, and that makes this deal hot or likely. For our audience worldwide, we can get the white house reaction. I am very pleased to say that joining us now is larry kudlow, National EconomicCouncil Director. Lets start right there. Downside surprise on the payrolls report. People we speak to in the last hour, the last 90 minutes, all say this mix it more likely to get a deal down in d. C. Does it make a difference to you, larry . Mr. Kudlow i just want to say, i dont think this is such a bad jobs report, ok . It may have come in a wee bit under expectations, but i dont know what that means. 6. 7 Unemployment Rate is big news. The cbo and others didnt expect Single Digits until early 2021, so we got Single Digits the last couple of months. Incidentally, important to everybody, you look under the hood, the biggest drops in unemployment were in the minority groups. Africanamericans, hispanics, asians, and let me add, not a minority group, but other drop in unemployment came from women. That is not just people leaving the labor force. I beg to differ. We also scored in the Household Survey private jobs were up nearly 500,000. That is a strong number. And it is true, we have 10 million unemployed area i understand that. Theres still a lot of hardship left area however, lets keep in mind that the peak of that number was 23 million, and when we look at the other statistics, and im sure you will want to talk about that, other statistics on retail sales and housing in capex are very strong. The atlanta fed gdp now is looking for 11 q4. It is near that is their number, not ours. I think the economy is very much in a vshaped recovery. The pmis were strong. The isms were strong he is a lets put this in some perspective area the jobs numbers are not the only stat, and 6. 7 unemployment is an awful good number. Jonathan you and i could debate the state of the economy. I think what matters is how you read the economy, how the administration sees the economy, and what it means for how you put together a policy package you talk to me about it. Where are you when stimulus talks right now . Mr. Kudlow i think what weve got, senator mcconnell is talking to how speaker pelosi. Our team is in touch, particularly with senator mcconnell and Republican House leader kevin mccarthy. People are glad to see that the other team has come down in its numbers. On the other hand, there are still policy differences that remain. I think Mitch Mcconnell sounds to me, ive known him quite some time, a little more optimistic, but i cant say one way or the other with the outcome is going to be. I dont want to predict that. I will add this point. From our standpoint, and i think senator mcconnell agrees with this, we have for many months, you and i have talked about it, argued for targeted assistance. Targeted assistance in a few key areas. One is the Small Businesses, to resurrect ppp. Two is an employment assistance because we are going to continue , as you noted. We will still have a lot of unemployment. School, covid related spending is good. Maybe Certain Industries have to be help out. And i will add to that, in terms of the figures flowing around, youve got roughly 450 billion available from unspent treasury 100 25 billion and 100. 5 billion dollars available numbers. Ent ppp it would be good to use that money which is already been to redeploy itce and reappropriate it and in a sense, the bookkeeping is ok. Youre not really adding above what the legislators suggested last winter and a little bit this summer. Theres a good way to do that around 600 billion. Im not going to get into the numbers game. Jonathan well, you are getting into the numbers game right now. You are bringing up the numbers. Mr. Kudlow i am just saying there are key targeted areas that could be done by redeployed appropriations. 160 billion. That is the state aid in the bipartisan plan. That has been the redline for senate republicans. Have we moved the dial on that story . Mr. Kudlow i dont know. Senator mcconnell has indicated he is not happy with that part of the Bipartisan Group or speaker pelosi. Hes not happy with it. Im going to leave that to his decision. Hes never been happy with a big nail out of states and localities. A lot of these blue states are poorly managed. Pension funds and so forth. Funding is very popular. Thats different than a broadbased omnibus appropriation for states and localities. I believe that to senator mcconnell, but i am just saying thats always been a difficult hurdle to get for. Jonathan your rep presented bmo straighten this morning. Would the president signed a bill that has 160 billion of state aid . Michael i wouldnt be able mr. Kudlow i wouldnt be able to say that. You would have to ask him. I was with him last evening talking about the jobs numbers and related matters. The president is in favor of a new assistance package. He is in favor of that. Targetingtails, the that i discussed earlier, is absolutely crucial, and as you know, the president has always opposed a largescale appropriation for state and local governments that he believes have end is managed for many years. Is that what this all comes down to come i political debate about what you guys perceive as mismanagement of state finances i did time when we are in a pandemic, we are seeing more restrictions in california, new york, and in republican states as well . Is this what it is going to come down to . Mr. Kudlow i dont know that. I dont want to declare that area i want to go back to targeted assistance, particularly Small Businesses, unemployment assistance. These are temporary measures. Dealann and no jonathan and no deal. That doesnt sound like a compromise. Mr. Kudlow jonathan, i am not going to make a deal with you. Jonathan i dont expect you to, sir. I dont expect you to negotiate with me either. Mr. Kudlow mr. Kudlow talk for just a moment jonathan 160 billion of dollars of state aid. Mr. Kudlow mr. Kudlow larry, lets finish on a good note jonathan larry, lets finish on a good note. Just answer the question. Weve got two plans, and 908 billion dollar proposal and a 500 and billion dollar proposal. In the bipartisan proposal is 160 billion state aid. Is that what it is going to come down to . We either make a deal in the middle or we cant. It doesnt sound like we can. Can you convince the audience otherwise . [laughter] mr. Kudlow i can only give you the facts. As i have laid them out. And as ive said, the president s view, the majority leaders view, my view, Steve Mnuchins view over at treasury as we have targeted areas of assistance that we think would strengthen the economy, and those include most particularly ppp for Small Businesses which are in need, dealing with covid spikes that we expect even more in the Christmas Holiday season, and some unemployment assistance, which also we would like to have again to get us through the covid spikes, and the recovery elsewhere is pretty strong. Let me add this point. Help is on the way. The vaccines will be distributed in a week or two. I was at Vice President pences covid task force. A week or two. They are expecting, these are the experts, at least 20 million by the end of december and at least another 20 million by january, on their way to 100 million in march. That becomes awfully important not only for the health and safety of americans, but also, it will help keep businesses open, which is our view. We do not want as this is closed. It will help keep schools open, which is our view and as President Trumps view. We do not want schools closed. So that is going to be an enormous boost, and we have to lean through this period of the spike in covid. We get that. That is what our experts are telling us. But help is on the way. ,e have this massive Program Operation warp speed, which is panning out, and it is going to be a great and for america, a great tune for the economy. Coming back to the stimulus package, i am going to say again we see important targeted areas, most particularly, i will narrow it down to a couple, Small Businesses, the ppp program which probably saved 50 million jobs in fact, the temporary 3 of themow, roughly 2 have gone back to work. Secondly, some on and limit assistance because, and isaac because, as ive acknowledged, despite betterthanexpected jobs numbers, there are still hardships. I would say those are the two assistanceid related. We want to keep the schools open, keep the business is open. Weve got a strong economy, retail sales and housing and capital goods and durable goods sales. One of my favorite, best indicators i have seen, ed hyman, one of the Top Economists has a christmas survey. Hes a brilliant guy. He has this Christmas Tree survey. It is up 29 yearoveryear. That is a good holiday spirit number that tells me we are in fact in the vshaped recovery. Jonathan larry, i gave you three or four minutes then so you and i can finish on good terms. One final question. We have gone back and forth together for three or four years, sometimes with a little bit of roughandtumble. Weve always got our points across. Let me give you the opportunity to do one final thing. For your successor, what is your advice for them . Mr. Kudlow ive never met him. Im not going to get policy advice because i fear we have some significant disagreements, but we are in a honeymoon period of sorts. It is a fabulous job. It is a great honor for me to have had that area it is a great honor for me to serve our country, as well as this president. A very powerful council. It gets involved in nearly every aspect of economic life, of trade life, of National Security matters, it sits on the National Security council. It is involved across the board at almost every conceivable thing, the nec. I wish them luck. He better be ready to work hard hours, but im sure he knows that. He has served in government before. It is a terrific job, and i am blessed to have held that job for nearly three years. As i say, it is the high point of my professional career, and ive always thanked President Trump on that. I think everybody else for the opportunity to do this. I just love the job. Jonathan and we thank you for your contribution to this program. Larry kudlow, thank you, sir. Have a good christmas. There kudlow, National EconomicCouncil Director. Back to you larry kudlow, national i, Council DirectorNational EconomicCouncil Director. Back to you. Alix thank you. Joining us now for the Market Reaction is nick maroutsos, Janus Henderson head of global bonds. The markets very clear. Yields up over six basis points here. The market expect the more stimulus. How much higher can yields go on this . Is thinthink that there liquidity as we head into year end. Theres this notion of fiscal stimulus heading down the chute, but i dont get at is as much as people thi. I think we will get a stimulus package before year end door into the new administration. I think the less action was the only physical front, the more inevitable we see the fed take action. To me, that is a more important piece of the puzzle. The fed is really the only game in town. It is something we have been saying for quite some time. The fiscal package matters, but whatever that is is really going to dictate what the fed does going forward. Qe3, whenk to peak bernanke was running the show, he was buying anywhere between 85 lien dollars and 90 billion every month of treasuries. Even after 3 trillion a Balance Sheet expansion and 2. 5 trillion of fiscal spending, we are seeing powell buy about one or billion dollars. Our expectation is that even though yields may rise marginally, there will be a limit put on Interest Rates. You could see more easing in the form of yield curve control, but it is really critical to watch the fed, not the discussions of what is happening in d. C. Guy can you break it formula bit more clearly . Say we get 1 trillion out of d. C. What does that mean for the fed . Nick i dont think it really changes the feds game. When i look at the markets, i sort of separate things between the market function. Coming at the headlines across, the first when i saw was the mortgage industry roars to best year ever, courtesy of the fed. We could say the same thing. Corporate bonds have their best year courtesy of the fed. Equities hitting alltime highs courtesy of the fed. The fed is the one driving this forth because they are backing equities, backing Corporate Bonds, providing that support that is needed. I think the key for the next few months is how much deterioration follows from these renewed lockdowns. That is going to dictate how much the fed puts it in terms of monetary stimulus, and certainly what they do in terms of introducing an even more expanded program. Alix do you think theyre going to increase the average weight of maturity to keep a lid on the long end . Nick i think they have to, and it is not necessarily to stop yields from rising too aggressively. , and ourt of inflation view, is really misguided in some respects. Coming, but it is very slowly. The likelihood of seeing sustained inflation is going to be very low. Ultimately, bonds are there to provide that protection, and as yields increase, the become a lot more attractive for investors. If you look around the world, the u. S. Yield stick out as pretty attractive on a relative basis. On a historical basis they dont look that attractive, but when u. S. Rates are trading around 1 , i think you will still see some natural buyers. I dont think you will ceepo will issue you will see people sq you will see people eschew the bond market entirely. Guy the thing that stands up to me as we are starting to see clear evidence of scarring within the economy. Longterm and employment moving higher. People are leaving the labor force, particularly women. That is the factor that i think the fed is going to be paying a great deal of attention to. We are starting to see that evidence away of the longterm effects covid is going to have. What do you think the feds read on this is going to be, and how does that calibrate the longterm trajectory . Nick that is a great point. I heard kudlow speak, and with all due respect, it is very hard to find a Silver Lining in the jobs number. The permanent and limit is rising which really highlights the lasting damage the permanent unemployment is rising , which really highlights the lasting damage on the economy. You have huge structural problems and play. Theres huge negative feedback loop. More debt, lower private sector investment, lower growth, lower inflation, lower rates. Ultimately, i think when we look at the economic function, we have a long road ahead of us to get back to precovid levels. It is not like Business Travel is going to resume any time soon because there is a vaccine. Prices may come back to some extent as a result of the vaccine being disseminated, and Consumer Spending happening again, but again, the bond market i thing is the only market that realizes the economy is unlikely to grow given that it is saddled with so much debt. Alix how do we know what for employment is going to be out of this . Nick we dont. That is why we tend to disregard some of these numbers right now because they are so volatile, so choppy. It is hard to get a clear picture as to what the economy really looks like, which puts our focus firmly on the fed. I will even take it a step further. We have a scenario where we have janet yellen becoming treasury secretary. The onetwo punch of powell and yellen is really the only two voices you need to listen to. I think it further cements further accommodation, and they will probably go down as one of the best dynamic duos around. Batman and robin, sonny and cher, i would put powell and yellen right up there with them. [laughter] alix that is an image for you. Guy yeah. I can certainly see it happening. Nick, lets talk about what this means for the rest of the wor