will reduce inflationary pressures on the economy. this bill will reduce the inflationary pressure on the economy. it strengthens our economy over the long run as well. it has the support of climate leaders like former president al gore that says the bill is long overdue and a necessary step to ensure the united states takes decisive action on the climate crisis and helps our economy provide leadership for the world by example. this bill is fighting inflation. this bill is fighting inflation. progressive leaders like senator elizabeth warren said that this bill is a bill about fighting inflation, bringing down the cost of families, and putting

our country on a sounder economic footing. the bill finally delivers on the promise that washington has made for decades to the american people. we are giving medicare the power to negotiate prescription drug prices, which means seniors and consumers will pay less for their prescription drug. medicare will save about $290 billion. in addition, it changes the circumstance for people on medicare by putting a cap of a maximum $2000 a year. they will have two not pay more than $2000 a year no matter how many prescriptions they have for all of their prescription drugs. which is important for people with cancer and long-term diseases. it's a godsend. literally a godsend for many 50 -- families. it locks in lower health care premiums for the next three years for millions of families

that get coverage under the affordable care act. they will need an average savings of $800 a year with 13 million people. third it will invest $369 billion to secure our energy future and address the climate crisis, bringing down family energy bills by hundreds of dollars by providing working families tax credits. it gives folks rebates to buy new and efficient appliances, to weatherize their homes, and tax credits for heat pumps and rooftop solar. it also gives consumers a tax credit to buy any electric vehicle. new or used. and a tax credit for 7500 dollars if those vehicles remain in america. this investment in environmental

justice is real. it also provides tax credits to create thousands of good paying jobs, manufacturing jobs and clean energy construction projects. clean hydrogen projects, carbon capture projects, and more by giving tax credits for those that build these projects here in america. this bill would be the most significant legislation in history to tackle the climate crisis and improve our energy security right away. it will give us the tool to meet climate goals that we have agreed to by cutting emissions and accelerating clean energy. a huge step forward. this bill requires the largest corporations to begin to pay their fair share of taxes. by putting in place a 15% corporate minimum tax. i know you have never heard me say this before and it might come as a shock to you.

55 of the fortune 500 companies paid no federal income tax in 2020. you've only heard me say that about 10,000 times. the fact is, they paid no taxes on a collected income of over $40 billion. this bill ends that. they will have to pay a minimum of 15% tax on that $40 billion or whatever the number turns out to be. this package will reduce the federal deficit by $300 billion. already on my watch, the deficit comes down my first year by $350 billion and a record $1.7 trillion at the end of this fiscal year. this bill is going to keep that progress going. i will say it again. this legislation will bring down the deficit, bring down the deficit.

this bill will not raise taxes on anyone making less than $400,000 a year. a promise i made during the campaign and one that i have kept. i know it might seem like something -- like nothing gets done in washington. work of the government can be slow and frustrating and sometimes even infuriating. the hard work of ours into dates and months for people that refuse to give up pays off. history is made. lives are changed. this legislation, we are facing up to some of our biggest problems and taking a giant step forward as a nation. that did not just happen on this inflation reduction bill. it also happened yesterday when the senate made the bipartisan decision as a nation to invest in america's manufacturing technology of semiconductors and additional funding for basic research and development.

and the cutting edge industries of the 21st century. i want to thank speaker pelosi. it has added to the benefit -- it has the added benefit of creating tens of thousands of good paying additional jobs. lowering inflation. the ability to not only compete with china for the future, but to lead the world. you heard me say a thousand times we have to invest in research, development, and growth. my plea is to put politics aside and get it done. we can lower the cost of automobiles, consumer electronics, and so much more. most things are powered by the semiconductors and the tiny computer chips.

i know the compromise on the inflation bill doesn't include everything i have been pushing for. bringing down the cost of things for families that matter by providing accessible things like affordable childcare. preschool. keeping students and -- in college and closing the health care coverage gap. expanding medicaid and states that refuse to do it. look. this bill is far from perfect. my message to congress is this.

this is the strongest bill you can pass to lower inflation, cut the deficit, reduce health-care costs, and tackle the climate crisis to promote energy security. all while reducing the burdens of working-class and middle-class families. more on this later. i want to thank senator manchin for the extraordinary effort that it took to reach this result. gdp and whether or not we are in a recession. both chairman powell and many of the significant personnel and economists say we are not in a recession. let me just give you what the facts are in terms of the state

of the economy. we have a record job market, record unemployment of 3.6%. we created 9 million new jobs so far. they have had record rates. one hundred billion dollars in semiconductor investments already announced by texas instruments. hyundai, tesla, and more. and just last week, a corporation announced $22 billion in new investment in semiconductor batteries, chargers, and medical devices to create another 16,000 jobs here

in america. this is probably the strongest rebound in american manufacturing in over three decades, creating 613,000 manufacturing jobs. passing the chips bill will put another $72 billion of incentives and tax credits to advance semiconductor production. and the inflation reduction act will add another $370 billion in clean energy tax credits and reconciliation, including incentives for domestic production, solar panels, and wind turbines. it doesn't sound like a recession to me. thank you very much. >> you were just listening to president biden speaking about the inflation reduction act of

2022. a quick recap of what the bill is. a 15% corporate minimum tax on a lot of these companies he says has not been paying the peder -- federal income tax on around $40 billion. it also allows medicare to negotiate price cuts. a $2000 cap on prescription drugs and lower health care premiums for the next three years. they also talked about boosting tax enforcement by increasing the irs budget and when it comes to clean energy, incentives for electric vehicles and the like. it's bring in annmarie hordern. how effective do you think these policies will really be? >> he has to make sure he can get it through congress, right? we have to hear from senator cinema to see if she will greenlight this. remember, when the president was talking about a lot of these provisions, there is another bill called build back better

and it had a number of items the progressive wing really wanted to see like a child tax credit. that is not included in this bill. this bill is something that moderates and progressives can likely get behind. it is a win for the president. if i think the real takeaway of the speeches that he had to pivot and address the elephant in the room which is, of course, negative growth in gdp, second quarter and a row. and these other questions the white house is really being asked. kriti: a lot of the deal was crafted around things that she would support. she has been vocal about not supporting the carried interest tax break. how much of a struggle is that vote really? annmarie: what she said is she will have to see the taxes and then she will let us know. she is very much so for provisions when it comes to climate change and fighting

climate change. the one issue that she had with build back better is a lot of the corporate taxes. this one is the 15% minimum corporate tax for those that are getting those deductibles in place, that can no longer be the status of it. the majority of the trump era tax cuts from 2017 still going to live. we have a congress that is democratic and a white house that is democratic. and probably senator cinema would be able to give her nod to it. every single senator has to vote yes and you have to get the house progressives that wanted to see so much more out of this bill all to sign on. kriti: annmarie hordern, we thank you for the analysis. he also made comments about the gdp numbers we got that says we are not a nejra session.

coming up, earnings from apple and what to expect. that conversation next. this is bloomberg. ♪

kriti: this is bloomberg markets

and we just heard from president biden on what he's doing to help americans deal with rising prices. weaker consumer spending is at play here. we're seeing how shoppers are doing after the bell. if you look at amazon waiting, it was 6%. now it is at 3%. the achilles' heel of amazon, what is it? shipping? consumer exposure? >> it's the impact of inflation. it when amazon spoke, they talk about $6 billion in added costs that are hurting profit with $4 billion of them continuing into the second order. inflation is really hurting them. as well as access capacity. -- excess capacity. it will take two or more years

for them to be able to get there. we report today after the bell. kriti: and the success of the aws, going to rescue her some of the pain. poonam: the u.s. has been growing north of 35% and as high as 40%. they are 35% and could go to 40% over time in the long run. a very healthy business and a very lucrative business. one that has plenty of growth ahead in our view. kriti: bloomberg intelligence senior analyst kuna him go oil. -- poonam goyle.

apple shares are up 15% this july, the biggest monthly gain in roughly two years. here is a senior equity analyst. angela, thank you for joining us. we were talking about margins when it came to amazon, but this inventory buildup -- how much of a problem is that going to be after we hear the earnings after the bell? >> i think what will be the most important is what it looks like for the high-end consumer. the lower end of the market is in a bind right now. we see a number of indications and smartphones and across other areas of tech where they are in the low end of the market and it remains very challenged. our view is that the market remains very resilient in nature and you have kind of wireless customers. the wireless industry is continuing to offer very

attractive offerings. at the end of the day, some of the numbers that they have provided in late april will prove to be somewhat conservative in nature. we have the quarter outlook. kriti: apple is not the market, and i would argue that it is. it's one of the fastest growing companies in s&p 500. angelo: there is a market share in terms of smartphone units.

it kind of tells you how important they are and how leveraged they are. it is very critical here that we can hear those things that they can continue to post results not only in smartphones, but of course the services side of things where we think any type of pickup. it is extreme the up from a year ago. it's what we have seen in the last three years. we have seen a potential mess on the services side of things before accelerating later this year. i think it is extremely important for this community because they need to say what they need to say in a positive manner for the sake of the market share. kriti: so to hop into the stock,

how much of the appeal of apple shares right now is the amount of cash on the balance sheet? angelo: that is so important in terms of not only how much cash is on the balance, but this is a company that we think will continue to generate 100 billion plus with free cash flow annually. and able to buy back 3% plus. apple is at the top of the list. the rebound that we see here out of apple, this continues to hold up because this is really a safe haven for many investors. and not to mention the assets because the service business is 20% of revenue and 40% of their profits. it is so important to the story here and it continues to grow at

a double-digit pace. kriti: talk about apple tv. how much of that will help the bottom line? angelo: not much. apple tv is a small part of the services side of things. i think it's more along the lines of what they have to say in terms of momentum and whether or not they are building upon that. as far as the actual results are concerned, the apple tv is a small portion of the service business in general. kriti: apple shares up about .2%, underperforming. the senior equity analyst, we thank you as always. this is bloomberg. ♪

angelo: this is bloomberg markets -- kriti: this is bloomberg markets. we see green on the screen when it comes to the s&p 500.

not only are you seeing a rebound in the stock market, you see it off of the session lows with elevated volume. volume is up 20% higher than the 20 day average. that screams conviction buy-in, but it's important to know it's not led by tech. it's led by utilities, real estate. in the 10 year yield down about 10 basis points and inversion becomes a little bit less. it comes down to whether or not we are in a recession. we are there, to negative quarters of gdp and a contraction that michael mckee points out we never had outside of a recession. does that mean this will be declared a recession? it means that what has been priced here today is actually true and they can go on and look forward to price in the full case. we are awaiting comments from janet yellen. she is scheduled to speak in washington on the state of the economy and we will bring that

to you live from the treasury department. stick with us. this is bloomberg. ♪

>> welcome to "bloomberg markets ." >> we are awaiting comments from janet yellen, he is speaking in the treasury department on a day that the united states is in a technical recession. two negative quarters of gdp is significant. let's get a check on the markets. the s&p 500 is higher by 1%. this is crucial as we talk about the bull case for that remark appeared you have a massive pricing of this recession.

the market can move forward. what is notable is the nasdaq is underperforming, it is up 0.6%. the s&p 500 is up 0.9%. the bond market is going to be crucial. that inversion which is supposed to be that signal for recession, it is becoming less inverted, only inverted by 21 basis points. jon: right now, we are getting so many earnings stories that are informing us of what companies think about the road ahead and we are seeing next performance from some of those takeaways. comcast under pressure as that housing market reality is weighing on broadband business. we have seen that advertising impact on meta platforms ahead of apple and amazon. a more encouraging story from honeywell and ford. as you reference the treasury secretary, this is a story that has taken over in washington.

we have heard from the president, pushing back on the worries about whether we are technically in a recession or headed towards a recession, talking about the country being on the right path. we know, with the midterms approaching, this will continue to be a big story not just on wall street, but in d.c. kriti: i cost of the get a lecture from michael mckee, who is joining the onset, talking about whether or not how significant this technical recession is pure oculus about what else we need to see for the economists to get on board. michael: you can call it whatever you want but it is not really a recession under the mbr calls at one. what we saw today was a problem with inventories which will probably correct itself. good news on trade, which is a good thing considering the strength of the dollar. the consumer and business spending parts were

disappointing. business spending went down a lot on structures. kriti: let's dive into the treacherous artery -- the treasury secretary. sec. yellen: we are in an important moment for our economy and it presents an opportunity for us all to take stock. the united states experienced his start economic recovery, a rebound unmatched in our nation's modern history in its speed and scale. right now, even in the face of global headwinds including a war in europe and variants of the pandemic, our economy remains resilient. our unemployment rate stands at a 6.3%, household finances are strong, and industrial output continues to grow. this outcome was not preordained.

in january 2020 one when president biden and this administration took office, the unemployment rate was 6.4%. 834,000 new jobless claims were being filed each week on average. 20 million americans were receiving unemployment benefits. only 1% of americans who had been fully vaccinated against covid-19. over 3000 people were dying from the virus each day. in many respects, by the time president biden took office, our economy had been brought to a standstill. at its core, remarkable progress since then has been driven by this administration's policies, particularly through timely and targeted fiscal support in the rescue plan combined with the vaccination effort that allowed businesses to reopen and americans to get back to work.

over the course of the administration, our economy has created over 9 million jobs and the labor market is now at full employment. in 2021, we saw the biggest single year decline in unemployment on record in the biggest year of economic growth in almost four decades. this investment has recovered a pre-pandemic trend in just two years. by comparison, in the last two recessions, this never happened. during this time, we also reduced the deficit by $1.5 trillion. these statistics are not abstractions, it represents american workers back at work, families with more financial security, and businesses small and large that have been able to hire and grow. as president biden has said, we have entered a new phase in our recovery, focused on achieving steady, stable growth without

sacrificing the gains of the last 18 months. we know there are challenges ahead of us. growth is slowing globally, inflation remains unacceptable he hi, and it is this administration's top priority to bring it down. we know how difficult higher prices can be for families. how they can squeeze a household budget and how challenging the past two years of disruption caused by covid-19 have been. that is what this -- that is why this administration mounted a historic vaccination campaign to get the pandemic under control and why we are focused on bringing down prices. the same factors that have driven inflation to record levels internationally in peers like canada, the united kingdom, and the euro zone, those factors

are hurting americans as well. these challenges also include valerie putin's shameful war in ukraine -- vladimir putin's shameful war in ukraine. more than half the inflation experienced in 2022 reflects rising food and energy costs, global fallout from russia's invasion. it also reflects the impacts of the pandemic, particularly in china where repeated lockdowns have brought their economy to a halt. the federal reserve has a primary role in bringing down inflation. the president and i are committed to taking action to drive down costs and protect americans from the global pressures we face. that includes the president's historic release of one million barrels a day from the strategic petroleum reserve which helped reduce the price of gas between

17 and $.42 per gallon according to a treasury analysis this week. americans have seen additional relief on this front and in the last few weeks, prices have declined by over $.60 a gallon in total. our efforts also include the work we have done on the price of russian oil, a way to ensure a steady flow of oil into the global market. while denying putin revenue for his military. at a time of global anxiety over high prices, a place cap on russian oil is one of the most powerful tools we have to address inflation by preventing future spikes in energy costs. the reconciliation package announced yesterday will also help ease inflationary pressures by lowering some of the biggest costs families face including

energy, health care, and prescription drugs all while making historic investments in fighting climate change and reducing the deficit. this bill will also make sure we finally have the resources we need to ensure that wealthy americans are not able to avoid paying the taxes they owe. these efforts are long overdue and congress should pass it immediately. this context, including the successes of last year and the global challenges we face, it is critical in understanding today's gdp data. both economists and americans have a similar definition of recession. substantial job losses and mass layoffs. businesses shutting down. activity slowing considerably.

family budgets under immense strain. a broad-based weakening of our economy. that is not what we are seeing right now when you look at the economy. job creation is continuing. household finances remain strong. consumers are spending and businesses are growing. one example, in the last three months, our economy has created 1.1 million jobs. in the three months beginning each modern recession outside of the pandemic, our economy lost 240,000 jobs on average. spending by businesses and consumers, the core of our economic activity, rose by 3% in the first quarter of this year and continues to expand -- continued to expand in the second. the measure of our

manufacturing, mining, and agility sectors has shown strong average growth over the first half of the year compared to average declines during pastor sessions. -- past recessions. it is important to look beyond the headline number to understand what is happening. the contraction in gdp was driven primarily by the change in private inventories, a volatile component of gdp which attracted two percentage points -- which retracted two percentage points. today's report shows continues -- continued consumer spending and in services in particular in addition to notable strength in net exports. overall, with the slowdown in project demand, this report indicates an economy that is transitioning to more study,

sustainable growth. this path is consistent with the one that eases inflationary pressures while maintaining a labor market progress of the past 18 months. while economy has been resilient in the face of numerous shocks, i should also stress that there are numerous risks on the horizon. many of them global. yet we remain highly attuned to. they infer the outcome of the war in ukraine, covid lockdowns in china, and pandemic related supply chain snarls. these factors make predicting the future difficult and we must be clear eyed and vigilant about the threats they pose. but we cannot lose sight of the remarkable progress we have made from the depths of the pandemic and the resilience our economy has shown thanks to the hard

work and perseverance of american workers, families, and businesses as well as effective policy. this progress gives us a solid foundation to confront the challenges ahead of us and i believe that in the months to come, it is possible to maintain that strength, particularly in the labor market, while easing the tightness that has driven inflation. with that, i would be happy to take your questions. >> thank you, secretary. regardless of whether or not we are in a recession, and he seemed to be indicating not -- you seem to be indicating not, some americans are feeling pain right now and the last time we have to tame inflation at this level was the early 1980's and it took two years to do that. did you anticipate that this

fight against inflation will be a long and grinding one or will it be faster and do we need to see some job losses in order to bring that inflation rate down? sec. yellen: so, with respect to how americans are feeling about the economy, they are experiencing great stress from high inflation. we have not seen anything like this since the 1970's and seeing what is happening to food prices and energy prices and rent and other prices in the economy is making families very concerned about their household budgets. they want to see it and and -- it end and it is the president's

top priority to bring inflation down would -- down. i think the key job here is the federal reserve's. they are moving to address that and have indicated their commitment to bringing it down. this is an unusual situation in that, coming out of the pandemic , we had a set of supply chain challenges that continued to effect -- to affect the economy. it is hard to know what the timeframe is for those supply chain pressures to resolve and ease. there are some positive signs we are seeing that suggest that inflation is likely to come down

in the days ahead. but the proof will be in the meeting. the fed is taking the right measures. the administration and congress are taking important supplementary measures. as i mentioned, the releases from the strategic petroleum reserve have been one factor working to bring down gas prices and the legislation that will make an enormous difference to prescription drug prices. there are investments in energy to address climate change will, over time, improve greatly our sense of security about energy and make us less vulnerable to global shocks and we are working with our allies on a price cap to avoid further upward pressure

on oil and gas prices. >> you very much. -- thank you very much. i would like to ask you specifically, do you think it will be necessary for unemployment to rise above 5% in order for inflation to reach the fed's target of 2%? sec. yellen: i believe, as i have said, that there is a path to bring down inflation while maintaining a strong labor market. most estimates of the national rate of unemployment -- natural rate of unemployment are less than 5%. it is not a certainty this action be done, but i believe

there is a path to accomplishing that and as chair powell said repeatedly, that would be his objective to try to accomplish that and i would consider that a good outcome as well. clearly, we are seeing a slowing in the economy and in demand that is appropriate and necessary to transition from rapid growth and recovery from a serious job shortfallwe need ton growth, we are seeing that. i believe there is a path by which we maintain a strong labor market like that. >> could you say more about how you believe that inflation reduction act would impact inflation?

how much do you believe that will tackle inflation and over -- and over what time frame? sec. yellen: i do not have numerical estimates, but i see that it is making an important contribution to lowering the cost of prescription drugs, which is, for many households, a severe burden on their household budgets. this is something that policymakers and members of congress have sought to accomplish for many years and it is a great achievement if it can become law and will certainly help. with respect to health care premiums, the funding that is provided is going to be important in holding down health insurance costs for many americans.

these are two important contributions that we should see come into play as soon the legislation is passed and put into effect. beyond that, there's deficit reduction in the bill and, over time, i see deficit reduction as an appropriate accompaniment to the policy changes the fed is putting into effect. >> in today's gdp report, we saw very high nominal gdp growth. how does that high level of growth jive with the idea that the economy is slowing and how does it suggest -- and does it suggest the economy is going to have to slow at a more aggressive pace to get back to 2% inflation? sec. yellen: we had high nominal

gdp growth because inflation is high and that shows up in the gdp. real growth was reported in this advanced report as a negative number, and that is a better metric to look at in assessing the overall performance of the economy. i see the last several quarters as exhibiting a significant slowdown in the pace of spending and the economy and when you look at the details in terms of spending components, we are in a period where there is significant fiscal drag, government spending made a negative contribution to gdp. we saw negative contribution this quarter, huge from inventories.

importantly, consumer spending remains positive. but the real data to my mind show that there is a slowdown in progress. the labor market right now is extremely tight and may be the source of some of the inflationary pressures, certainly not all of it by any means, food and energy are an important contributor, supply chain problems relating to the pandemic and what is happening in china, those are important. but we've got two job vacancies for every unemployed person which is a level of tightness in the labor market that i don't think we have ever seen historically and the slowdown in the economy coupled hopefully with a restoration of higher levels, a rebound in labor force

participation, we are not sure if that will occur, but beginning to take some of the tightness out of the labor market while maintaining overall a strong labor market, that is a plan to bring down inflation. >> thank you. is there such a thing as a mild or partial recession and if so, what would that look like? are you committed to staying in this role until growth and inflation stabilize? sec. yellen: i will stay in this role as long as president biden finds my contributions to be useful. i serve at his pleasure. what was the first part of the question? bother session -- recessions are different -- mild recession.

recessions are different. we had a different recession following the global financial crisis when unemployment rose to 10%. it took a decade for the economy to get back to full employment. we have had milder recessions than that. there has been a significant increase in the unemployment rate, but they do differ. this is an unusual situation where we have to slow down the labor market. we could see some mild easing of pressures in the labor market, yet continue to feel we've got a strong labor market that is operating in full employment. >> their spin a run up in the

dollar in the last few months -- there has been a one up in the dollar in the last few months. do you believe that degree of dollar appreciation is appropriate and do we worry about negative effects on the global economy? sec. yellen: there certainly has been a significant depreciation of the dollar. part of it is driven by interest rate differentials between the united states and other countries as we have moved to tighten monetary policy more quickly. it has attracted capital inflows into the united states that have pushed up the dollar and that is typically something that occurs in cycles of monetary policy tightening. i think we have also seen some risk off safe haven type flows into the dollar that exacerbated

that. i am worried about the global outlook, the imf and world bank have on several occasions downgraded the outlook. a strong dollar creates, for some of those countries, pressures on their economies, especially when there is dollar-denominated debt, it becomes harder to pay off. so rising interest rate, strong dollar environment can create pressures in other parts of the world, especially at a time when all of us are suffering from the impacts of putin's war driving up energy and food prices in creating burdens on both countries around the world, particularly the lowest income

countries. we are seeing more countries that are likely to experience debt distress. this is a stressful environment for many countries. some countries are benefiting from higher commodity prices, so it is an offset and it differs. you asked about self reinforcing cycles. i don't see that occurring at this point. i do not see that kind of distress developing anywhere that i'm aware of. >> thank you. the polling shows most americans feel like we are in a recession. why have this drawn out symmetric battle -- semantic battle, especially when so many

americans feel like they were misled last year, especially given the chance that things could change and we could have recession by the definition you are outlining? why has this become this battle? sec. yellen: i agree with you and i think we should avoid a semantic battle. i tried to do that in my remarks today. when you say that americans are concerned about the economy, i think their biggest concern is with inflation and high prices, that they feel they cannot afford to put gas in their gas tank, and people are worried about their retirement savings and whether or not they will have enough to retire. sometimes people reduce -- people use the word recession to refer to that. that is really about inflation. i think the discomfort that households feel, it is not because of the job market.

jobs are readily available and most americans feel good about their employment prospects. layoffs have been low. some may worry that the labor market will begin, but i think the biggest burden that is weighing negatively on household sentiment is inflation and that is why that is our top priority in terms of addressing that. when you look at the economy, the official arbiter of what is a recession is going to be the national bureau of economic research. they will decide at some time in the future. i think what we can constructively do is talk about what is the state of the economy. the labor market remains exceptionally strong. that is not what we see in past

episodes that has been labeled recession. on the other hand, we see slowdown in growth. that is to be expected given how rapidly the economy grew when it was recovering from the pandemic and all of those job losses and policy was designed to do that. we should expect to see a slowdown. this economy is at full employment. so we have a slowing economy, we have a variety of risks to the outlook that i have tried to enumerate, but we have strengths in the economy. a strong labor market being one strength. consumer household balance sheets remain generally strong. credit quality is strong. you do not see some significant