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CNBC Transcript: Council of Economic Advisers Chairman Kevin Hassett Speaks with CNBC's "Squawk on the Street" Today

WHEN: Today, Friday, June 7, 2019

WHERE: CNBC's "Squawk on the Street "

The following is the unofficial transcript of a FIRST ON CNBC interview with Council of Economic Advisers Chairman Kevin Hassett on CNBC's "Squawk on the Street" (M-F 9AM – 11AM) today, Friday, June 7th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/06/07/full-interview-trump-economic-advisor-kevin-hassett-may-jobs-report.html.

All references must be sourced to CNBC.

CARL QUINTANILLA: We'll get to it in a moment. Let's get to the jobs number first and what could be an economic warning signal. Kevin Hassett joins us today. Chairman of the Council of Economic Advisors. Kevin, great to have you back. Good morning.

KEVIN HASSETT: Yeah, thanks. Good morning, guys.

CARL QUINTANILLA: Looking at the miss today, the revisions, the year to date average, it sure feels to some that the economy is slowing. Is it?

KEVIN HASSETT: Well, you know, I think that first quarter, let's go to GDP number first, was in the threes. So, the second quarter is looking in maybe two-ish. If you go back and look at the 2, 3% years that we had in 2017 and 2018, we tended to have, you know, one quarter north of three and then one in the low twos. And so, we're pretty much starting the year out like we started last year. The job number today was a little bit below our expectation and the market expectation. You know, one thing that I have not seen in discussion is that there really were pretty serious weather effects, you know, there's all of this flooding in the Midwest, i-29 was closed, a lot of the ports had to stop taking traffic. And my professional staff thinks that it took about 40,000 off the number. And so, if you added that back in, it is a little bit disappointing but it is not really cause to change our outlook for the year.

CARL QUINTANILLA: Some were thinking that census hiring could have added 90k. Do we know where it came in?

KEVIN HASSETT: Yeah, my briefing on the census hiring was that there was not anything in this number. It is going to be more apparent in the next few months, especially August.

JIM CRAMER: First, Kevin, it's Jim, and congratulations on a great run.

KEVIN HASSETT: Oh thanks. Yeah.

JIM CRAMER: And going into the private sector. Well, you know economics well. I think that what we did with China, you know I've been supporting you the whole way, I do worry that this and Mexico. There will be the U.S. citizens, there will be people who lose their jobs in Texas and other states. Will this be the tariff that you have to admit it will not be great for Americans? Even if – there is an imperative I know with the wall, an imperative to crime. But this could actually make it so Americans have to pay more and they could lose jobs.

KEVIN HASSETT: You know, I think that the real news on that though, which you guys covered before and I've been briefed on here, is that the talks with the Mexicans have proceeded very favorably, and that the President is going to get back to D.C. today from that European trip and look at a bunch of options and weigh all of the options over the weekend. And so, you know, I think the headline on the Mexican talks right now really is that there have been a lot of talks. There has been a lot of progress made. I think people feel like they're going to present the president when he gets back with some positive choices.

JIM CRAMER: Well, that would be great and could be a reason the markets rally. Kevin, what is great and what does the President want? And what can -- is there a way to create consensus? I know this is going to sound weird, but a consensus in Congress that this is really important, where the Democrats agree, too.

KEVIN HASSETT: Well, I think that, you know, we are still making progress with the USMCA. I think that Speaker Pelosi is open to letting that move forward. And so, I do think there still is a chance to work with Democrats. I know, when President Obama was in the White House, he was disappointed with his ability to work with Republicans, and we certainly feel it on the other side now. But I have, you know, also this week, been briefed on lots of positive progress on USMCA with Democrats from the house.

DAVID FABER: Well, if and when you were asked, sir, by the President, whether or not you favored tariffs on Mexico in an immigration dispute, what did you tell him?

KEVIN HASSETT: Well, you know, the President and I have talked about just about everything in that space. And I think that everything has costs and benefits. And right now, the President's top priority is to secure the border. And you've got to admit, there is a crisis down there that, you know, we could have fixed a long time ago if we would have gotten some political momentum on the Hill to do so. And so, the President is not going to take no for an answer. He is not going to let the crisis unaddressed. And he's decided to take this approach. And you've got to admit that this approach has been successful because the Mexicans are in town, they're working with us to try to come to a positive outcome.

DAVID FABER: Right, now there is some question as to what would be acceptable. Do you feel as though you or the President really have a line and understand what it is that would actually result in no tariffs going into place on Monday?

KEVIN HASSETT: Yeah, I think that that's going to be the President's call. But, you know, the President has spent hundreds of hours studying this with really top -- experts and you know, there's a lot of material asks on the table and I think that a lot of progress has been made with those and that the President will weigh to that and see if he thinks it's enough.

DAVID FABER: How much have we collected in tariffs so far from China? Do we know?

KEVIN HASSETT: You know, it's a knowable thing but you didn't ask me before I came on so I am not going to give you a number that gets fact checked. But yeah, I mean, we -- our tariff revenues this year are up quite a bit. They are up a bit.

DAVID FABER: What do we do with that money, by the way?

KEVIN HASSETT: It just goes into the general till. So, it reduces the debt.

CARL QUINTANILLA: I imagine some of it goes to farmers, right, Kevin?

KEVIN HASSETT: Yeah, well, not specifically. I mean, that's paid out of general revenues. But for sure, there has been a heck of a lot of relief for farmers who now are even hurting more because of the floods. You know, we see pictures of you know, some farms where they are basically completely under water right now. And so, yeah, there have been billions and billions spent on farm relief. But that's something that does not necessarily get directly tied to the tariffs. It comes out of general revenues.

CARL QUINTANILLA: What do we think the President's reaction will be if the Fed cuts rate in this is month or next month or September?

KEVIN HASSETT: Well, you know, my job is to respect the independence of the Fed and not to cheer them on one way or another. And you know, you can watch the President's response. I think the President's supporters will want to see what he thinks. And I think that's a good thing. And that does not mean we don't respect the independence of the Fed. But as CEA Chair, for sure, I should not be giving them advice or, you know, saying. 'Hey, if you do this or that, I'll dance a jig,' or something.

JIM CRAMER: Kevin, thank you. Thank you. How close do you think the Chinese are to rolling over? I mean, to me their economy has really been hurt by this. I think it has been working. It is very clear their tech stocks are down 20%. I know they talk a big game. We keep hearing about the 200-year plan. But isn't China very weak right now and could they be just having – have to make a deal in order to get their economy restarted?

KEVIN HASSETT: Well, for sure this has had a big -- much bigger impact on them than us. And that's partly by the design of the tariffs that we put in place. You know, I think we are hopeful that at G20 we can get back to where we were, which was very close to a deal. I think the thing to remember is that while the deal hit a roadblock, right before the roadblock, I think a lot of us at the White House thought we were very close to having a final deal. So getting from where we are now, which is not much talking, to close to a deal isn't as a big a trip as you might think because so much work has been put in to getting close to a deal.

DAVID FABER: Yeah, Kevin, I-- thanks for sticking with us with this very loud noise here with the big IPO at the Exchange today.

KEVIN HASSETT: I thought they're cheering me. Right?

DAVID FABER: Well, yeah, you can take it that way. Why not?

KEVIN HASSETT: Sure.

DAVID FABER: If I can get back to the U.S. Economy for a moment. I mean, you mention of course 3.2% Fourth Quarter GDP number. We had a very strong employment number out of that. But we average 150 over the last three months.

KEVIN HASSETT: That's correct, yeah.

DAVID FABER: Business investment, there is some concern about that. There is even some concern about consumer, you know, depending on who you talk to in the retail industry. Are you concerned that there is something going on here in terms of a slowdown in the U.S. economy, whether it starts with business investment or even kicks over to a more concerned consumer?

KEVIN HASSETT: Right, well, for sure there is a global slowdown going on and that's something that's been remarked upon by the IMF and the World Bank. But in the U.S., the thing that I've held onto is I've refused to revise my forecast throughout the year, you know, watching a month or two of bad data is that the income growth is still very strong. You know, we have wage growth north of three for ten months in a row -- first time since 2009. And when you get income growth like that, you tend to get lots of consumption growth. And that's kind of an insurance policy against bad GDP. So, I think that, you know, we had a really strong first quarter. The first quarter is usually weak. If you look at the income growth that tends to kind of move like the Queen Mary, it is something that should be a kind of insurance policy against getting down below 2 for the year. So, I think 3 is still a pretty good sweet spot given how strong the first quarter was and the fact that the first quarter is usually weaker.

CARL QUINTANILLA: Kevin, we're going to let you go.

KEVIN HASSETT: Thanks. Great to see you guys.

CARL QUINTANILLA: Are we going to see you again, before your last day?

KEVIN HASSETT: Oh, I will be here probably for about a month.

CARL QUINTANILLA: We always appreciate your time and your candor, Kevin.

KEVIN HASSETT: Thank you.

CARL QUINTANILLA: Hope to see you again.

KEVIN HASSETT: Yep.

CARL QUINTANILLA: Kevin Hassett.

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