Kevin Hassett reacts to Trump calling him "potential Fed chair"

Key Concepts

• ADP Report: A monthly report on private sector employment.
• Federal Reserve (The Fed): The central bank of the United States, responsible for monetary policy.
• National Economic Council (NEC): An executive branch agency that advises the President on domestic and international economic policy.
• Gross Domestic Product (GDP): A monetary measure of the market value of all final goods and services produced in a period of time.
• Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
• Productivity: The efficiency of labor or a factor of production.
• Artificial Intelligence (AI): The simulation of human intelligence processes by machines, especially computer systems.
• Bureau of Labor Statistics (BLS): A U.S. government agency that measures labor market activity, working conditions, and price changes.
• Household Survey and Payroll Survey: Two different methods used by the BLS to collect employment data.
• Purchasing Managers' Index (PMI): An indicator of the economic health of the manufacturing sector.
• Industrial Production: A measure of the output of the industrial sector of the economy.
• M3 Survey: A survey conducted by the Bureau of the Census regarding capital goods orders and shipments.
• Sentiment Surveys: Surveys that gauge consumer or business confidence and expectations.
• Government Shutdown: A situation where non-essential government operations cease due to a lapse in appropriations.

Labor Market Slowdown and ADP Data

The labor market experienced an intensified slowdown in November, as indicated by the ADP report. Private companies reportedly cut 32,000 workers. A significant portion of these job losses came from small businesses, which shed 120,000 jobs last month. This marks four out of the last six months with net negative employment in the small business sector. In contrast, larger businesses (companies with 50 or more employees) showed positive growth, adding 90,000 jobs. The ADP report is the final data set presented to the Federal Reserve before its upcoming meeting.

Potential Federal Reserve Chair and Economic Outlook

Kevin Hassett, Director of the National Economic Council, addressed the potential appointment of a new chair for the Federal Reserve. While not confirming any specific candidate, Hassett stated that the President is considering a "great group of people" and will make a decision by the end of the month. He expressed his personal satisfaction with his current role at the NEC, calling it a "dream job."

Treasury Secretary Scott Besson projected a positive economic outlook for the upcoming year, anticipating a return to 4% GDP growth. He suggested that the recent government shutdown may have temporarily reduced fourth-quarter growth to around 2%, but expects a rebound effect in January and February as delayed activities resume.

Key factors contributing to this optimistic forecast include:

• Tax Refunds: Individuals who benefited from no tax on tips and overtime, and who haven't changed their withholding, are expected to receive substantial tax refunds, injecting extra cash into the economy.
• Capital Spending: Significant capital spending is underway, with over 20 groundbreakings for new factories in the US over the last two months. This increased investment is expected to boost supply.

Analysis of Labor Market Data and Productivity

Hassett contextualized the ADP data by emphasizing the need to examine the upcoming Bureau of Labor Statistics (BLS) reports, which will provide a more comprehensive view of the labor market. He noted that strong GDP growth (around 4% in the third quarter) coupled with slower employment growth suggests a significant increase in productivity.

Hassett attributed this productivity boom to the increasing integration of Artificial Intelligence (AI) into business operations. He explained that firms are becoming more efficient, producing more output per hour worked. The current labor market data might reflect a temporary pause as companies adjust to the enhanced productivity of their existing workforce, particularly those hired in the previous year. He stressed the importance of reviewing both the household and payroll surveys from the BLS for a clearer understanding.

Manufacturing Sector Trends and Data Discrepancies

The discussion touched upon trends reshaping US manufacturing in 2025, citing a journal that reported output leveling off with limited catalysts for growth. This report indicated that manufacturers increased output by only 0.8% year-to-date, and the Purchasing Managers' Index (PMI) fell to 48 in July, marking five consecutive months of contraction. Projections for 2026 included a mild contraction in the first half, followed by flat performance, persistent inflation, high inventories, and sluggish freight volumes.

Hassett expressed a different perspective based on his review of "hard numbers," including industrial production data from the Fed and capital goods orders and shipments from the M3 Survey. He described these numbers as "very solid," supporting the possibility of 4% GDP growth. He suggested that the manufacturing sector experienced a significant negative shock during the previous administration but has recovered considerably this year. He highlighted that sentiment surveys can become less reliable during government shutdowns, as they tend to collapse temporarily. He emphasized the need to compare the more authoritative government data with other indicators once all data becomes available.

Conclusion

The conversation highlighted a mixed picture of the US economy. While the ADP report indicated a slowdown in private sector job growth, particularly in small businesses, larger companies continued to expand. The administration expressed optimism about future GDP growth, driven by tax refunds and increased capital spending, and attributed rising productivity to AI adoption. However, there were differing interpretations of manufacturing sector data, with some reports suggesting a contraction while official industrial production figures appeared stronger. The upcoming BLS reports are anticipated to provide a clearer picture of the labor market's trajectory.