Coming up on the kudlow report. Beginning right now. Follow me on this number. Only 113,000 new nonfarm payrolls. That was disappointing for january. But the Small Business oriented Household Survey generated a huge gain of 638,000 jobs. And parttime workers fell 520,000. Both wages and hours worked went up. Now, follow this, over the past year, the number of unemployed has dropped by 2. 1 million while employment has risen by 1. 8 million. This is from the households survey. But its just like the Payroll Survey as well. Now, because of this, the jobless rate has fallen from 7. 9 a year ago to 6. 6 in todays report. Thats more than just people dropping out of the workforce. And on top of it, the socalled u6 marginally employed impairment rate fell to 12 from 13. 1 just last month. Another healthy sign. All that said and all im saying is the economy is growing at about 2. 5 , thats in line with the average for this whole subpar recovery. Theres no growth burst coming in 2014. Best as i can tell. But theres no collapse either. The world is not coming to an end. Lets talk. Dissect it. Here now we bring in joe lavorgna and we welcome back john macon. And theres robert rice, author of aftershock. His movie is available on dvd and itunes now. Gentlemen, thank you very much on a friday evening. John, i havent seen you in ages. Whats your take . Am i close to the truth . Am i too optimistic . How do you see the world . How did you see the jobs report . This is a very interesting jobs report. Its a great test of where we are here. To summarize, for the last two month, weve created about 90,000 jobs a month. Thats half the rate of the last two years. So i would take it as a little bit more of a danger sign than you. Although there were some bright spots, perhaps the brightest was the increase in employment of people who are longterm unemployed. Probably what they did, they were rational, they heard, longterm befnefits are ending, so lets go to work. So that was a good thing. One of the important things to remember is whats the fed going to do here . I think the market rallied today because the markets counting on bad news being a little bit of good news. Oh that is, the fed is going to get nervous here. Theyre not going to do anything. Theyre not going to change their story next week. But i think what were seeing is the situation where janet yellen does not want to create the yellen put. She does not want to be seen as boosting the market. I wrote about that. You did . Im thinking along the same lines. Robert rice, the fed has the threshold of 6. 5 unemployment, beyond which or below which they said at one time when bernanke was running it not so long ago that that would mean a hike in the target rate, the socalled fed funds rate. Here at 6. 6 in unemployment, 6. 5 could come next month. Do you think the fed will keep its credibility and raise the target rate or throw it out the window . I dont think theyre going to throw it out the window entirely and explicitly. But i agree with john. I think the jobs report today quite bad and i think investors are responding positively because they think the fed is going to slow the tapering. In fact, the fed may stop tapering altogether, at least for the next several months until the job numbers look much better. No way, no way. Joe lavorgna, set them straight. I agree with you, larry. Thats the least they may break their Forward Guidance on the 6. 5 Unemployment Rate. But theyre going to continue to taper. Joe, there were some good numbers in here. Im not saying this was the greatest thing. But the Household Survey is very important. People overlook it it was important. Over the last two months, household employments been almost 400,000. The payroll numbers the last two months were horrible, no question. But if you look at leading indicators of the labor market, jobless claims lower in january versus december, the nfib hiring plans are relatively high. Manpower survey within the data this morning, all the weakness was in services, which runs completely counter to the multiyear high we saw in the employment component of the nonmanufacturing ism. Im actually more upbeat than you are for 14. I think growth is a point higher at 3. 5 . Whoa john, this is where you and i probably do agree. People got very euphoric in the second half of last year. You had big quarterly gdps. People were talking about a big burst of growth in 2014. But still a lot of problems in this economy. Obamacare, one of the problems. But there are a lot of other problems. This has been about a 2. 4 socalled recovery during the whole period. Thats about half of the norm of postwar recovery rate. I cant find a growth burst. Yeah. I dont see it either. I think this is a recovery where the underlying growth rate is about 2 . And we oscillate between saying, its going to be 3 , its going to be 1 . And the fed tries to react to that. Ill make a challenge here. On tuesday when janet yellen goes up to the hill and talks to the House Committee with her Humphrey Hawkins testimony, shes basically going to say, i think things are all right and were not going to do anything. I think then the stock markets going to go down. You think she thinks were not going to do any taper . Oh, no. Im sorry, i misspoke. Were not going to do anything to make it better. Were not going to stop tapering. Were going to keep tapering. Were going to watch the Unemployment Rate. But shes not going to give any hint that theyre there to health. Forward guidance and credibility is going to be damaged im going to disagree a little bit. I think janet yellen especially, unlike bernanke, certainly unlike any predecessor, she has explicitly talked about the twin goals of the fed, that is, not just price stability but also full employment or moving toward full employment. Shes very clear on the record that she is worried about jobs. And i wouldnt be surprised if she went up there and said, were going to at least slow down the tapering. But, bob, wait a second larry, i want to weigh in on this. First of all, shes yet to run a meeting as the chair. So for her to go up there and speak herself for her own views and not reflect those of the committee, which by the way are much more hawkish, in part because of the president s who are there, in addition the fact there are a lot of vacancies, would be extraordinary. I just dont see that happening. John is more right in the sense, if she doesnt sound dovish like investors might think, stock market might go down. But if im right about growth, the market will go up. The Thing Holding back the economy, all those factors, Balance Sheet repair, all those things theyre better. Weve come through this cycle still growing. Why wouldnt we accelerate . Monetary policy is very easy. Ill tell you why. Purchasing power. American consumers still dont have the purchasing power bob, thats a bunch of malarkey. Income is one of the most understated series in the history of the macro data. We had 8 trillion wealth created last year. Surely some of that is going to be spent. Consumption was over 3 last quarter. I want to raise a factual point. In todays numbers i think this is important. Its often overlooked. Average Hourly Earnings went up by. 2 . But average hours worked also went up. And if you look at the yearonyear changes here, youre looking at 4 Income Growth minimal with only about a 1 inflation rate. Those numbers dont measure commission or bonuses or any of that variable just as a bare minimum from this report, theres a lot of income in here. Let me jump in here. You are not talking about you guys are not talking about where the income is going. And the median Household Earnings are still going nowhere. By many measures, the adjustments for inflation are going down. We measuring a rat incoe ina. Most of the money is spent by the higher earners. The fact is that the employment number was weak and everybodys going to be looking to the fed to be nice and the feds not going to be nice. Then the markets will be back to worrying as they were. We came into this year, everybody was totally convinced wed have 3 growth. Joe still thinks we might. We might but i dont see it. And now theres some doubts out there people are trying to decide whether bad news is good news. And today they decided bad news was good news because they think janet yellen is going to give them a put and shes not. I think the stock market read this jobs report the way i did. Rob rice, i want to give you the last word. With Employment Benefits not being extended, i would argue that thousands of people are going back into the labor force and they are taking jobs they might not otherwise take. Therefore, i argue, not extending for the 11th time the unEmployment Benefits is a good thing for job creation. I give you the last word. You know, ordinarily, if this were an ordinary jobs picture, i would agree with you. But its not ordinary. We have still three people looking for jobs for every job thats available and we have a historically, almost unprecedented number of people that have dropped out of the job force environment and are not looking. Not to extend unEmployment Benefits for these people and not put money in their pockets is bad for the economy in terms of the purchasing power that they dont have. I see it the other way. I have to leave it there. Joe, robert, thank you very much. John will stick around. Were going to tackle one of the major questions for the economy which is obamacare. I believe it remains a wet blanket. It has job locks and disincentives everywhere. Were going to debate that next up. I think its clogging up the whole economy. Later on on kudlow, we had that impressive stock market rally today. We finished higher for the week. Is this winter correction finally coming to an end . Free market capitalism is the best path to prosperity. You know else we need . Abolish the corporate tax, launch some free trade and have some appropriate immigration reform. Those are progrowth measures that would get us to 4 . I know, im dreaming. Im kudlow. Well be right back. Theres a saying around here, you stand behind what you say. Around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Some Brokerage Firms are but way too many arent. Why . Because selling their funds makes them more money. Which makes you wonder. Isnt that a conflict . Search proprietary mutual funds. Yikes then go to e trade. Weve got over 8,000 mutual funds and not one of them has our name on it. Were in the business of finding the right investments for you. E trade. Less for us, more for you. The funds prospectus contains its investment objectives, risks, charges, expenses and other Important Information and should be read and considered carefully before investing. For a current prospectus visit www. Etrade. Com mutualfunds. Welcome back to the kudlow report. Even the white house now admits that the socalled economic recovery is still subpar. But they dont seem to understand the negatives associated with obamacare. Here now is democratic strategist Stephen Mcmahon and we bring back economist john makin, a former consultant to the u. S. Treasury, the cbo and the imf. Steve, a lots been printed about the cbo estimate, 2. 5 million jobs lost, the socalled job lock. Theres disincentives for workers, the socalled poverty trap. Businesses are not going to hire because they dont want to pay for all this. I dont see this economy really bursting out until we make some major changes in obamacare, as in repeal it. Well, larry, thats not going to happen. I think theres no question and the president s even said if there are problems with obamacare and the republicans have constructive solutions, hes open to discussing them. Im glad johns here tonight because he was at cbo and im sure he read the whole report. Yes, yes. And the whole report said a number of things that werent quite so damning, which you didnt mention, and havent really been covered in the press. They include the fact that the cbo says over the next ten years on balance, the aca is going to increase the demand for goods and services which is going to create jobs. The insurance premiums on the exchange are 15 lower than what people were projecting, which the cbo also noted. So there were a lot of things like this jobs report, there were a lot of things underneath the headline that were much more encouraging. Remember, the aca wasnt the the Affordable Care act wasnt a jobs bill. It was designed to give insurance for people losing it. Nancy pelosi and some others sold it as a jobs bill. I dont want to let that go by. That was one of the sells and the president himself used that kind of rhetoric. Let me go to john on this. John, if you have a job and you work hard and climb the ladder of opportunity, youre either going to lose your subsidy and or youre going to pay higher tax rates. So that is a disincentive to work. Thats a disincentive to work hard. And i think that hurts the growth of the overall economy. Yeah, well, there are three things the economy is struggling with. One of them is the uncertainty that surrounds obamacare and its implementation. Both were employers and employees. I think thats still there. This hasnt been a smooth rollout at all. People dont know really what theyre going to be spending for health care. And we dont have full information on where its going. But a lot of people that i know are finding that they have to spend more. Secondly, of course, the regulation of financial markets, the dodd frank legislation is still a big problem because banks have gone out of the lending business. And finally we have a lot of disincentives to grow in the world at large. Emerging markets are struggling and so on. Im seeing 2 growth. Im seeing obamacare not helping. And one of the reasons a lot of people said at the start of the year, when we start this year, theres no more fiscal drag, theres no impact of the tax increases and spending cuts that we saw last year. That may be true to some extent. But we still have drags coming from all these regulations i think obamacare is a big drag. I think a lot of these businesses not only because its a disincentive to work, which is tragic, in my opinion, but a lot of these businesses will not make longterm investment because theyre just not sure what the rules of the game is going to be and what the penalty is going to be. But, steve, i want to come back to you on this. Two places where you and i might agree. Number one, in the president s state of the union address, he had a paragraph that called for free trade. Unfortunately, democratic leader harry reid ended all that in the senate. I believe free trade would really help grow the economy. And second i dont know in specifics what obama wants. But sensible immigration reform, like bringing brainiac visas to two or three times the size, letting foreign students remain here, would also be progrowth. The wall street journal editorial page chided republicans for not pushing this. I want to chide everybody. Your guy reid doesnt want to do this, nobody wants to do this this is the stuff of which better growth comes from. I agree with you, larry. I think the president would agree with you. And those are two things that can contribute to Economic Growth. You said something a moment ago that i want to actually agree with as well. If theres a disincentive to work, thats tragic. I think thats tragic but only if its true. So far, i dont think the people who youre talking about, the folks who would be included and covered under the aca have any disincentive to work because they need to work to make ends meet. Thats what the cbo report said. It was very clear. They acknowledged supplyside disincentives with respect to labor. The cbo report also talked about declining participation in the workforce generally which has been going on for some time as a result of baby boomers leaving the workforce. So the question becomes, who is it thats declining in participation . Im not leaving. Is it the lower wage im a baby boomer. Im not leaving. We all want you to stay around forever, larry. Johns got to be a baby boomer. Steve, you may not be a baby boomer. You may be younger. I am. Were all here kicking, working away. Let me add something. Last word, john. The trade issue is very important. Trade, lets face it, i think we all agree on this, i want to emphasize, trade is a president ial issue. The president has to offer strong leadership. The president has to slap down harry reid and say, were going to move ahead here. And i dont see that happening. Theres always resistance. The president has to be aggressive and i think most president s do. And i hope president obama will simply abandon reid on this. Hes got to. Global trade, we have atlantic trade initiative, we have pacific trade initiative. If that stuff rolls forward thats so progrowth, proinvestment, probusiness, projob creation, whatever you do on trade, on exports and the like, youre going to increase the home office. So steve, please tell the president when you see him tonight for drinks or whenever you see him that kudlow it was in the state of the union, he put it there for a reason. But hes got to knock down harry reid. Ive got to get out of here. Thank you very much. The sochi games are under way. So are more security concerns. Next up, the latest on an apparent airline hijacking attempt and much more. Turn around every now and then i get a little bit hungry and theres nothing good around turn around, barry i finally found the right snack [ female announcer ] fiber one. There was a boy who traveled to a faraway place where villages floated on water and castles were houses dragons lurked, giants stood tall, and the good queen showed the boy it could all be real. Avo whatever you can imagine, all in one place. 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