this morning following its first quarterly report as a public company. it's friday, june 7th. jane welles is -- did you see that she's still here i know we're doing some potty report today. >> until you see this. she's in the bathroom. >> the bathroom is right next to our food. >> a foot away from our food >> it is but it's number one only >> yeah. joe's rules. >> kyle. "squawk box" begins right now. ♪ live from new york where business never sleeps, this is quarterback. >> i'm looking at you, kyle. >> like i said, we all know way too much about each other. but good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. andrew is off today. he underwent surgery but he's

feeling okay he's dealing with some pain from that but he's okay he's recovering. let's look at the u.s. equity futures at this hour the dow futures are indicated up about 86 points. this comes after the dow just ended its fourth winning day in a row. that's the first time you've seen the dow up for four days in a row for three months s&p and nasdaq up for the third straight session you'll see green arrows from them at least right now. nasdaq up by 28 but of course everything is riding on the jobs number and we'll talk more about that in just a moment treasury yields this morning, you'll see that the 10-year is yielding 2.124% the 2-year at 1.874% and mike, i was reading something today about the inversion. if you watch that for a month, that has been a very correct indicator of a recession it's predicted seven out of the last eleven. >> that's from way back that said what exactly about the

yield curve is predictive. it is about a four-week span if it stays inverted that long even after that, there's still a long lead time, typically before you had the start of a recession in prior cycles. it's not as if that's the moment the recession starts but that's when the signal takes a relevance. >> hard to pull out of the nose dive at that point >> that's the way it seems but i point out if you look beyond that -- right after three years the yield curve is quite steep now so it's suggesting that the treasury market is kind of clenching up for a potential rate cut in the near term but that it'll work. in other words, it could perhaps just be a short easing cycle and then the economy does not fall into deflation and recession >> last week rwas rough for the equity markets then we went into monday scared. because of tariffs and sort of defense. and it was the sixth straight down week, wasn't it >> yeah.

>> then somehow we managed -- do you remember -- because we were talking tuesday morning because you're here almost every day the market managed not to go down after being down a lot of monday it was up four points. and i asked you tuesday morning, is this drying up? is the selling seem like it's exhausted? if we do 100 points a day, we'll be up a thousand for the week. so funny the way the market confounds as many people as it can. but obviously armageddon somehow was at least pushed back a couple of weeks. >> yeah. >> and we could be up -- where are we we're not far from new highs again. >> like 3% >> even though we've got tariffs on everything. >> you've gotten back into the s&p half of what you lost in may in three days basically. >> yeah. okay so i look at all the different stupid financial websites. ours included which is not stupid but it was another one this morning. and it said we've got to stop lying about tariffs. stop lying about tariffs

now, what do you think i thought? i thought it was what we'd normally see is trump's got to stop saying other countries pay it and it's a tax. but that wasn't the line it was a fairly decent piece by some guy this was on market watch that said, look, we haven't seen any cost increases passed to consumers yet. we haven't seen hyperinflation yet. we haven't seen all these worst case scenarios stop painting such a bleak picture which is what we really have seen. we'll see today whether we get some type of a deal. maybe that's why the market's up if they go into effect on monday, maybe we do go right back down. but it's been hyped. we don't know yet on whether it's going to be armageddon for the economy from tariffs >> the market over anticipates things periodically. right? we're sort of drawing the line out to if we get full tariffs and they stay on forever and we get no resolution, what does it mean for hiring capitals

and it didn't matter because profits were growing 20% this year it matters because we already knew we were stepping down in terms of the growth rate and all the rest of it yes, i agree we came into the week, investor sentiment was very, very depressed. you had all kinds of bearishness -- >> you said tuesday it was drying up. you said that. i asked you leading you to that conclusion >> no, i wrote a piece on it it would take incremental bad news to get the market down from there. and yesterday we got the report -- >> wednesday too how about that wednesday we closed up after the -- after a dropoff -- after a 90% drop in jobs in one month. >> sure. when markets are really over in a short period of time, they always bound >> you are sending signals today with that green dress, are you not? that is the greenest green i think i've ever seen >> it is the greenest. somebody said yesterday when i wear red the market goes up. >> either way, huh >> i don't know if green -- i

did wear green earlier this week when we were up 500. >> you wore green to hide from me >> from the green screen >> no. bill murray. you know does he watch ever >> yeah. >> i think he made that up too >> he's in new york this month so he was watching earlier this week >> he was? then he goes on to say some horrible things which we don't need to get into i'm playing golf today and i thought immediately, wow i'm feeling the pull do i have to stay until -- >> yes, you do we have a lot coming up today including stan druckenmiller who will be with us for an hour. and today's top market story, the jobs report. the may employment numbers are going to be released at 8:30 eastern time probably added about 180,000 jobs last month. the unemployment rate is expected to hold steady at 3.6%. but quickly on this, what's the market want? we don't want a 27 up like we got from the adp >> i don't think you do.

i don't think you want a real bad number that shows that job growth fell off a cliff in may i think the market is now craving confirmation that it's going to be realized but they don't want -- >> that's the story on the journal though >> but in a span of two weeks the market is saying it's a 30% chance, usually it's overwhelmingly 70% or more within that span that would mean the fed just decided to have a little bit of a shock and awe like this is going to happen. why waste time thinking about it i don't think that's the likelie likeliest. so if you get a 250 thourkss job number today, that muddles the story a little bit because i think you probably -- the fed says we have time to be on hold, watch how this plays out. >> i'll give you my chances if you give me 250. give it to me. i'll deal with it. won't you deal with it if it's

250? >> sure. except there is something -- >> it's always good. >> is the government hiring or is it private? you could see a census hiring boosting up and covering that up you got to look at are private payrolls increasing. >> all that stuff. >> it could be under a hundred i can't imagine that would be really bad or good >> then the fed to come out and say we're going to cut anyway. >> they want their cake and eat it too >> sure. that would be nice i think that's the best. >> the turn of the sentiment from wednesday >> i think you want bond yields to go up from here at least a little bit. >> on the topic of jobs, ibm is handing out pink slips company telling cnbc it's going to lay off 1700 workers. to acquire red hat

lin continuing to hire aggressive tli in what it calls critical new areas. and shares of ibm so far this year kind of flat, you would think. we've been flat for years and years, in fact buffett got any left >> i think >> that was one of his -- that was like a miscue, i think he got some dividends. in corporate news, hot ipo beyond meat serving up shares. net loss widened but revenue bet forecasts. beyond meat said it could break even this year see sales more than doubling you see there was some fast food outlet somewhere, i think burger king, one location >> it was in williamsburg, i think. >> yeah. these are impossible burgers people were like, wow. >> because they were real burgers. >> for me it would be these are just as crappy burger king

burgers. but they were real meat. >> and they were selling it as impossible burgers >> it doesn't include deals with restaurants and other companies that haven't been signed yet but i don't know mike, is this where the froth is now? it's not in uber, it's in this stupid -- >> $7 billion market cap >> you know what i like -- >> for next year supposed to be 350. 20 times next year sales >> what i really like is these millennial clowns that -- i don't eat any processed food i don't want anything. i want my food totally -- so you love burgers that are totally made from scratch with chemicals. they're not the slightest thing natural about these things, but globally you're going to act locally and globally and the planet and cow farts and all this crap. >> it's the livestock piece. >> but i go to whole foods and now i'm eating something that was manufactured in, like, a

lab. with, like, test tubes not exactly. but it's the most processed of all foods. >> i know. i can't argue with you on this >> go kill a cow and just eat it raw. >> i feel bad. i don't like killing cows. but i can eat the morning star grillers easily. i don't mind veggie burgers. >> did they think about that this is the most processed you can get. >> people opt for them for various different reasons. i mean, one of which is that meat production is not the most efficient use of resources in many ways. >> although jane pointed out yesterday that this production, the guys who make beyond burger -- beyond whatever it is, they have said it's a more efficient thing than the cow is. >> when it comes to the stock, though, it feels like all the enthusiasm for plant based meat and food is running through this one stock, right because you can't -- there aren't that many other options

tyson doesn't give you a play on this even though they're working on something >> 30 times next year's. >> 20. >> well, if you come over tonight, since i haven't invited you yet. but if you do, you're going to be filled with the sensory delight of real meat and real steaks and real burgers. maybe even some knockwurst kosher but i'm serving no processed beyond meat or impossible -- can i count on you >> sure. you don't think knockwurst is processed though >> maybe not hebrew national. not as bad as -- i'll take my chances. >> sounds good coming up, jobs in america we're going to talk about what the market wants to see. then in the next hour, our news maker of the morning stanley druckenmiller. never had a down year in 30

years. and then -- >> i can't believe that. that's amazing >> then got to a point saying it's just too hard then he talked to us in the past he doesn't take the big swings anymore. he said tepper did i don't know what's with these pittsburgh guys. first as we head to break, here's a look at the biggest premarket winners and losers in the dow. we'll be back. this is the couple who wanted to get away who used expedia to book the vacation rental which led to the discovery that sometimes a little down time can lift you right up. expedia. everything you need to go.

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[ slurps ] gwho's a good boy? it's me. me, me, me. hey guys! you're gonna want to get in on this. i know how to those guys in here. let's pause the internet on their devices. wohhh? huhhhh? [ grumbling ] all: sausages! mmm, mmmm.

bon appetite. make time for what matters. pause your wifi with xfinity xfi and see the secret life of pets 2 in theaters. we are counting down to the may employment report due out at 8:30 a.m. eastern time joining us now, michelle gerard and matt ryan. i really do love the first friday of the month. i get excited. >> people like us who live around the first friday of the month, every time somebody says a date, i'm like it's payroll friday >> has there ever been a number that doesn't matter at all it's always back wards looking but -- >> it is backward looking. but if it's strong, to some extent the markets may say, oh, but that was before we really had a chance to see the impact on everything that's unfolded. so in a way, it feels a little

asymmetric to me, where if it's weak the markets will jump on it but if it's strong, they'll say wait until next month. >> if it's weak, we're hearing because it's just you can't find the right people for the job the market's so strong and the unemployment is so low that the available candidates aren't out there. even if it is weak, why is it weak >> that's been the question we've been asking ourselves. or certainly the risk we've been putting out there. that even if you get weak numbers, it very well could be the lack of supply unfortunately now it feels like the risk would be because of the uncertainty that's rising and a hesitancy on businesses, this time it would be i think a little bit more of a question about maybe there is some weakening in dmnd. >> with adp, if it goes from 270 to 27, i don't even need a calculator is that 90%? that's down 90%, right >> close to it in the midst of the mexican

announcement and china, doesn't that -- wouldn't that immediately send up a red flag that, wow -- >> right >> and all the recession fears have been rekindled. >> this is a report where the details really matter. and to your point about a weak number, what the adp number suggested was a 32,000 decline in construction hiring which that speaks to a weather issue. that was the largest month on month decline since december of 2010 so we could get an issue with the midwest flooding that has occurred that could really impact labor market. >> the other weakness was manufacturing. >> correct >> because mark zandi was saying that could be some issue because of tariffs or something along those lines. >> that could also be the case as well. the tariffs -- manufacturing and hiring has been soft over the past several months. that wouldn't surprise me as much and remember, the last month's payroll number was boosted by a down tick in hours worked. for every 1/10 an hour is

worked, it's equivalent to 250,000 jobs i'm watching the hours number as much as i'm watching the headline number. >> we're actually going to have stan druckenmiller on for a little while he points out wages really are growing. he says it hasn't been this strong since almost reagan so in the midst of allthe inequality talk and the bernie sanders and minimum wage, it's front and center but it's actually as positive as it's been or there's signs of it being -- starting to work organically. >> so the wage growth has been rising it's been rising since 2014. it just hasn't been rising as quickly as you would expect. >> but quicker now >> and more importantly is the breadth of the improvement unlike what we had seen prior to t 2018, the big story last year was the wage growth at those at the lower end of the earnings spectrum showed some of the best increases. so everywhere -- you know, the

important thing now is employment is strong whether it's race, whether it's gender and the same thing is true of people saying wage gains it isn't just the high income earnings everybody now is seeing the benefits of a strong economy >> given that now the markets are going to cut, it's a matter of what month before september, perhaps, that it happens have we just severed that link between wage growth and being concerned about inflation? i mean, after the fed's meeting this week and rethinking the inflation picks. >> the whole relationship has been called into question, right? this whole cycle we haven't seen that connection. the other thing, though is inflation itself has disappointed this year we've moved further away we've dropped from 2% at the end of the year in april the underlying wage numbers the fed looks -- not wage numbers. core inflation numbers were down at 1.6%. so that's the thing. from the fed standpoint, inflation is also sort of arguing that maybe you should be

doing more in terms of cutting rates to get inflation up. now you've introduced downside economic risk. it's those two things coming together that makes the rate cuts seem like that cheap insurance we talked about. >> unless the inflation dip is transitory >> so if we get higher inflation, the fed would be -- it almost would be a welcomed development at this point. that's what i think the risk management approach this is. >> you know how many countries would kill to -- you know, if you said to have inflation is disappointing and you meant too low. >> that's a good point >> and for me it's hard to get to that point. i remember volcker >> but we had inflation. >> so you have to get -- that's a whole -- >> but you don't want japan either >> we had 20 years to learn that that shows you how far we've come >> that's 100% right >> i wish we could get up to 400% >> but that's one of the things that's come out of the fed's

conference maybe the benefits of running a labor market hot are, you know, offset some of the risks of unanchored inflation >> tariffs if there's ever a time to -- you know, you got to -- they're a cudg cudgel you shouldn't use trade for immigration, but if there's a time you're going to do it >> the problem with tariffs especially with mexico is you're hurting your own company, especially the autos >> it's always like that >> you know, we'll see if these things go into effect. and it also raises uncertainty and i think one of the things when we think about the possibility of a fed rate cut this year, what are the sort of signs in the past the fed's done that well, in '95 the chicago pmi

started off around 64 and ended it and by the time the fed cut in july, it was 45. and manufacturing ism started off the year around 58 got down to 45 as well we're off about two points from the beginning of the year, but if you do these things or escalate the trade war, pretty sure the manufacturing ism and the chicago pmi are going to take the next leg low per. >> the other risk, too, joe, is when you talk about tariffs and inflation, the assumption is it will be fed through to the consumer and you'll get inflation as a result. the more damaging risk is of course that companies can't pass it through and it's not an inflation problem but corporate profits and capex type of pullback as a result problem >> all right thank you. speaking of passing things through, we got a big bathroom segment coming up. which is -- i don't know how we're going to do this tactfully. you guys run hard, run fast. get the hell out of here

before -- and use the bathroom upstairs before you leave. when we come back, we've got the big business of fooling drug tests. nobody can tell this the way jane welles is going to tell it. let's head into the bathroom and check in with jane who is, yes, in the bathroom. >> hi, jane. >> you caught me in an awkward moment but coming next, we thought for a jobs day, we thought we should talk about another growing industry synthetic urine to fool the employee drug test when "squawk" returns. johnson & johnson is a baby company.

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workers have been taking pre-employment drug tests for years. for many companies, it's a standard part of the hiring process. but the new numbers show that more americans are now failing that brings jane wells to our next story, the big business of fooling with fake pee. so you brought some fake pee right next to my water and you're like, oh, it's fake pee >> don't drink it! >> no. i'm not. >> if it passes as pee, it probably has the same -- it might as well be pee and you brought it here. >> it doesn't have the -- it's clean. >> most pee is sterile >> you know what people drink their pee in the desert >> it is sterile >> yeah. >> okay. go with your -- let's hear it. >> okay. companies need workers -- >> i thought it was apple juice. i almost did >> and that has put the

traditional drug testing model in a bind. the positive workforce is growing. it's still under 5% but highest level since 2004 the main reason is cannabis. quest says marijuana positives are up 17% from 2014 when legalization began hr consultant david lewis says companies are looking the other way because they need workers. >> we have companies that have been working with us for years whou always had a pretty strict drug testing policy. they've dropped that policy now or they've dropped pieces of it so their testing is for less and focusing on their main concerns which is some level of abuse and thing that are going to put employees in danger. >> also up, cheating on this test like the one i bought from test clear. some are more anatomically correct for men. come in different shades i did not buy one of those because i want to keep my job. but synthetic urine is a thing >> if there's a way to cheat something, there's a business

for it i mean, that's the way of capitalism >> i think this is pretty crazy. and it doesn't make a fair for it >> all my urine samples say i'm pregnant >> i asked how often follow-up testing were done these days pip took one when i joined this company and never again. companies don't usually do retests because if you're a productive employee, why find something? >> how much did that test cost >> $43. >> that's it >> yeah. i bought two and you pour regular water in it and you put a foot warmer on it. it's like at 98 degrees right now. so it even feels. >> if you hand a sample and it's room temperature, they're going to know. >> cannabis lasts, like, a long time how long, do you know? >> i don't know. i think it depends i've heard as much as a week

>> now you say depends on this segment. thanks >> by the way, opioid positives are down >> how long does that last you have to have it the previous day? if it's last week, i don't think it shows up. what about coke? >> i think pot -- >> pot stays in. >> but opioid positives are down i don't know if it's because people are waiting or those people just aren't getting hired. >> i came from fnn remember >> in l.a. >> and didn't take one there and never took one here. >> i took one here >> i took one here did you? >> it's the only test i've ever taken. >> you had to go to 30 rock and go in the bathroom and somebody watched. >> nobody watched. >> at the door >> if you're a guy and get an anatomically correct ones. they have strap-ons and you put

it in your pant. but a woman, it's a little harder to -- if they're watching >> unless you have a dress on. >> mack, how did you i mean, they never gave me one how did you get by here, mack? >> mack is super straight. he drives, like five hours a day. he does not do any drugs >> for five hours with whab are you going for five hours i wouldn't blame you >> you bring up a good point what companies do need to know if you have cannabis in your system >> we talked about this before my uncle works at a trucking company. it's a huge deal for them. they have a hard time finding people that pass it. you don't want people on the road in 18 wheelers who can't pass a drug test. >> law enforcement >> there are some crazy things some people do have those things that -- >> you missed it she poured the pee in his water.

>> drink it. >> i'm not going to drink it i'm not going to smell it, drink it, or touch it. >> do it do it. do it. >> chug chug chug chug all right, jane. thanks >> i'll be back in like a year. >> can you come back tomorrow? >> well, it is saturday. >> come back next week through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from using feedback to innovate... to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.

welcome back you're watching "squawk box" live from the nasdaq market site in times square. in technology news, microsoft and amazon took a look at looker before google's $2.6 billion purchase of the data analytics company. cnbc.com has a new piece laying out exactly what happened. google's cloud chief approached looker about a deal earlier this year looker then called frank

quatrone microsoft and amazon were among the companies he found google put together its offer quickly and it became their third largest in their history check out shares up by about 0.7% >> suggests maybe it's a seller's market for cloud assets at this point to the big guys. the valuation of this company before this deal was 1.6 at last report so the suggestion here being the big guys like google scale up. it's a good time to be a seller of those businesses right now. coming up, more on jobs in america. we're looking at the hottest areas right now for hiring then at the top of the hour, stanley druckenmiller. why he sold a lot of the stocks in may and moved into treasuries but we'll get a more detailed look at actually what haenpped "squawk box" will be right back. help me meet a client's need. is the fund built to sell

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joining us to talk about the state of hires right now, founder and ceo of la salle network. good to see you. >> good to see you, mike >> obviously the markets are bracing for potential for some kind of a slowdown the job front's been something you can plug in good numbers every month. what are you feeling out there what are clients suggesting to you about the pace of hiring >> the heads of hr, the cfos are saying they're hiring. they're going to continue to hire and the interesting thing is it used to be tied more to the stock market and we the constant volatility that exists now due to the administration and what comes off on twitter, job hiring hasn't been tired to that as much companies are going to hire no matter what. >> is that because of the mind-set of labor scarcity that has set in essentially they've had to during this cycle, you know, focus a lot more on keeping the people they have >> there's 100% supply and demand however, with the -- we're still in this phase of globalization and whether it's the trade

tariffs are china, the existing relationship we've had with india and outsourcing companies. it's going to be more competitive to hire people in america. and with the tariffs, you're seeing more of that and companies are bullish. >> well, we have seen on the manufacturing side a little softness in terms of the official numbers does that bear itself out in what you're seeing >> manufacturing is better than -- it hasn't been great in this country in a long time. that can't be where we set our hopes on i think people looking far reason to say we're going to get bad, this is still fantastic >> where do you see the most upside potential >> across potential services service and hospitality will increase due to the travel we're seeing college graduates come out we'll see a lot of entry level hiring and back office positions still robust hiring. if you have operation supply chain still going high on the back end, that means companies

will continue to hire. >> the capital expenditures were down, is that because the companies weren't investing in plants people but not plants? >> ibm laid off some people. you're going to see that on the bigger company's scale that they're not going to spend as much in capital. but simultaneously, where do we always say that new job growth comes from small and medium sized companies. as that happens on the big companies, it gives more opportunity for start-ups and medium sized companies to make inroads. >> you got an official estimate for today? >> i tell you, it would probably be 120,000 they're going to reset it next month and we'll see where we are july and august are going to be really good numbers. i'm confident of that. >> all right talk to you then >> thanks. when we come back, walmart's plan for every last inch delivery bringing groceries right to your refrigerator "squawk box" wl rhtac i'm working to keep the fire going for another 150 years. ♪ to inspire confidence through style.

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walmart holding its annual shareholder meeting in arkansas today. that's where we find courtney reagan they've recovered from the bernie invasion yet down there, courtney >> i think so. it's been a couple days and there's been a lot of action in the in between we have this celebratory event it happens every year on this friday in june that's going to happen behind me in a couple of hours but before that, walmart decided it was going to announce a new in-home delivery program this means that walmart employees are going to be able to deliver groceries ordered online directly into your fridge or your garage starting this fall in three cities st. louis, pittsburgh, and vero beach, florida marc lore tells me the retailer will install a smart lock with a uniqyo unique four-digit lock

walmart companies that have been with the company for at least a year will be able to come into your home and make the delive deliveri deliveries but that delivery can only happen if a camera on the employee's vest is activated with a live stream so you the homeowner can actually watch the employee come into your home, make the delivery, put it into your fridge and then leave by locking the door i asked marc lore about other possibilities that could be an add-on for this possibility. here's what he said. >> first of all, delivering general merchandise into the home without packaging, that's another paying point for customers. customers being able to leave products on their kitchen table to be returned leave with the product those are two examples but lots more things we can do even outside of, you know, commerce in general. but when you think about health and wellness and other areas like that. >> so you might remember that walmart talked about testing

something like this initially in silicon valley it was working with august home and deliv. so it was deliv drivers doing it later a test with walmart employees and that's much closer to what they're offering right now. remember amazon does offer a similar program. amazon key with a lock system. their employees also have the cameras on the vest that you can watch that delivery happen as well back over to you >> are they crazy, courtney? i can't imagine saying, here, have free reign in my house. >> it's funny you say that of course that was a big question and everybody's been talking about the security of it that's why they didthese tests they started with these deliv drivers and decided the trust factor was going to be better with a walmart employee that was vetted, that was a w-2 employee, that was specially vetted with the cameras. they have a decent sized testing

group and they made sure to include skeptics and repeat customers. they recorded a lot of the information. marc lore had a really interesting analogy. he said think about it like airbnb there are going to be some early adopters and others who think no way i'm letting a stranger say,m lit letting a stranger in my house. then over time, it becomes more normal. >> still no way! there should be a show called "prime suspect" and the killer is the prime delivery guy. no way what is wrong with people? >> reporter: you wouldn't do it? but think about the airbnb -- >> leave it on my doorstep i get groceries delivered all the time you can leave them on my doorstep i don't need to give you access to my house. >> reporter: you can that's true. you can do that, too. >> what's wrong with -- >> nothing you want strangers running around your house? not to mention is the place clean. >> that's, too. >> anyway, courtney, thank you great to see you and we'll see you back here again soon the walmart annual meeting -- what >> if somebody comes in my

house, i'll be sued for -- they're not leaving alive, probably so, it's just scary. scary. your insurance rates go up. >> yeah, yeah. all right, the walmart annual meeting was also an opportunity for senator bernie sanders to take aim at the retail giant over wages. >> it's not a radical idea i'm asking walmart -- the employees are asking walmart -- pay the workers there a living wage you don't get rich on 15 bucks an hour. that's for sure. but at the very least, you can live with some security. >> the push to hike the minimum wage, to talk more about that, let's welcome genevieve wood, heritage foundation's spokesperson, and chris lu, who served as deputy labor secretary in the obama administration, a senior fellow at the university of virginia's miller center. welcome to both of you >> good morning. >> genevieve, let's start off with a little bit of the research you've done when it comes to minimum wage. what have you found, some of the inn tended consequences? >> sure. in 2016, we did an analysis of this, and it looked at if we had

doubled the minimum wage to $15, which is what senator sanders is calling for, across the country, you would see about 7 million lower-wage jobs actually go away so, while some people might get a raise, a lot of people would actually lose their jobs and look, when you look at companies like walmart, maybe compare that to amazon, large companies can take on those kind of higher costs much better than smaller companies. so, amazon, which they did it, what, not even a year ago, raised their minimum wage. good for them. if walmart wants to do that, good for them, but the government shouldn't be stepping in and making everyone do it and again, smaller businesses, which employ about 70% of the folks in this country, they can't take on those costs the way larger companies with larger capital can, and you're going to see jobs actually go away, and that's going to be very bad for workers. >> you know, walmart actually raised its minimum wage, too it's up 50% over the last four years and is now at $11 versus the federal minimum wage of $7.25. chris, what do you think

federal minimum wage is well below what most employees are actually paying right now. >> well, and let's remember this, next sunday, june 16th, will mark an unfortunate milestone. it will be the longest period of time between federal minimum wages in u.s. history, since we created a minimum wage in 1938 it was last increased in july of 2009 so, there's millions of american workers that have gone nine years without -- actually, ten years -- without a pay increase. and let's think about what that means. if you're earning $7.25 an hour, which is what the minimum wage is, for a family of two, you are living in poverty. it's one of the reasons why the fed survey recently found that 40% of americans can't come up with $400 for an emergency expense. and when you have companies like amazon and mcdonald's and walmart now supporting an increase in the federal minimum wage, the only question is why congress has not taken action on this the minimum wage has been raised 28 times in its history under republicans and under democrats, and this idea that it's going to

cause job loss is just contradicted by not only economic studies but by real-world examples around the country. >> chris, you'd be happy if you -- let's say we get a 40% increase in the minimum wage, you can just go home, gosh, because then everything's just fine all of a sudden, people are getting $10 instead of $7, they're still in poverty these are entry-level jobs most of the time. >> that's right. >> you're not going to fix our income inequality problem by going from $7 to $10 -- >> that's right. >> or even $7 to $15 and the worst minimum wage is zero, which is what the 7 million people that lose their jobs -- a lot of them, you know, high school or college kids that want to first get a foot in the door at a place like mcdonald's or whatever, or walmart. i mean -- >> this is not hypothetical. i mean, we've seen this done seattle has tried it right here, right outside of washington, d.c., maryland suburb did it, and what happened well, the mcdonald's, for example, they put in four kiosks, which eliminated four

jobs, people that would have been taking orders look, this is not something that, again, we don't know what happens -- we do and to point of like we haven't had a raise in seven years -- nobody should be in a minimum-wage job for seven years! it is an entry-level job people who don't have skills, it's their opportunity to get their foot in the door and as you rightly pointed out, this is a lot more about suburban teenagers than it is a single mom most minimum-wage workers after one year on the job get a raise. after one year some less than that. but the idea that people are making $10 to $15 an hour for ten years in a row, they're in the wrong business that's not the way it works. >> look, these are the same arguments that have been made over the last eight years. every time the minimum wage is talked about increasing, we always talk about job losses and go back and look in the studies in places around the country. there has not been job loss. a modest increase in the minimum wage, according to the vast majority of economists, does not lead to job loss and let's consider that 8 million working mothers will get

an increase -- would get a pay raise with an increase in the federal minimum wage 4 million of those are single mothers. the average age of people earning minimum wage is over 30 years old. this disproportion helps, latinos, african-americans sure, we need to do something about income inequality, but we can't sit at $7.25 for another year. >> very few americans are at $7.25. the economy is doing great and most businesses in this case is already paying more. but the idea that you're going to come in and tell the vast majority of businesses -- i'm not talking about amazon, but smaller businesses, as i said, that employ over 70% of americans in this country -- you're going to cut their bottom line they're unfortunately going to cut jobs. >> genevieve, chris, we have to leave it there thank you for your time. >> thank you. coming up, stanley druckenmiller, the famed economist, joins us on set for the next hour. stay tuned "squawk box" on cnbc comes right back direct messages have evolved. so should the way you bank. virtual wallet from pnc bank.

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this is a special hour of "squawk box. investor and founder of duquesne capital, stanley druckenmiller, joins us for an hour to discuss his big market call, the trade war, the capital gains tax, and the minimum wage debate. druckenmiller goes on the record, as the second hour of "squawk box" begins right now. ♪ it's friday i'm in love ♪ monday you can fall apart

>> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ [ sigh ] good morning and welcome back to "squawk box" here on cnbc the cure welcomes you back i'm joe kernen along with becky quick and mike santoli andrew is out today. in studio, legendary investor stanley druckenmiller, chairman and ceo of duquesne family office, called now we have a lot to cover in just a second, so let's get to the futures real quickly and show you where they are we're now up more than 100 points this morning on the dow the s&p up 12, the nasdaq indicated up 39. let's get right to our special guest, and that is stanley druckenmiller, duquesne family office ceo he's the founder of duquesne capital, and you manage that as well as a lot of soros money, all at at same -- i don't know how you do so much at the same time if you don't know this man's record -- and i'm not even

talking about being the biggest philanthropist in the world -- and when was that, 2009, stan? $800 million but -- >> i can't remember -- >> okay, but anyway, 30 years without a down market. >> 39. >> yeah, 39. average 30% -- >> 30 years competing. we don't really talk afterward, but yeah, it is 30-plus. >> and i think after 30 years of not having a down year or getting 30% a year, you couldn't do it any -- i don't see how you can do it. you'd get up every morning worrying, i think, wouldn't you? and that's too much for anyone trying to beat -- >> there was a lot of luck in there. i had a lot of big drawdowns inner year it was just the way the calendar came out, so there was a lot of luck involved with that. >> i've talked to you in recent days, and you had an interview that got a lot of play at the economics club and so, we'll start by saying, so, 1,000 points today -- or i'm sorry, 100 points a day would bring us up almost 1,000 for the week so, we've had a snapback

and i asked you -- you sold everything you said, you know, these headlines don't really necessarily cover the nuances of what you've done in the last couple of weeks, right i mean, they said you've sold everything and got in treasurys. that's not exactly what you did, is it? >> no. but i did do a lot so, i was over 90% invested. >> right. >> fat and happy fed looked like they were going in the right direction and the sunday of the trump tweet, came in monday and the market was only down 0.5% or 1% and decided to go to net flat. >> and that was the first -- that was the china, not the mexico. >> china tweet i just kind of wanted to take a deep breath and process it net flat doesn't mean i sold everything i kept all my long investments and used other vehicles to get in that flat the other thing was i bought a

bunch of treasurys just because i want -- by the way, it took me three days i wish i had done it all in first day, but didn't have the courage or the gumption or whatever and yeah, that's what i did. and pretty much stayed there until the fed repivot, acceleration, whatever you want to call it, tuesday morning, and nowhere back to where i was, but i've gotten a little more exposed during the week. >> but you also point out, and you say a lot of it's luck so, i mean, it looked like you said, wow, i'm going to play -- i'm going to ride these treasurys as they go up and the yields fall below -- but that's not what it was. you needed to go somewhere with treasurys and all of a sudden there was a serendipity and the treasury market took off after this -- >> soros used to have a one-way bet. what's a one-way bet that's when you very -- you have a lot of conviction that something might not move, but if it moves, it will only move in one direction. so, i bought the treasurys

thinking, for example, the two-year -- i think it was like 2.30% or something if i'm wrong, it goes to 2.40%, and you can envision a scenario where you could make 150 or 200 basis points so, i didn't necessarily think i was going to make money, but it was a great risk-reward. and you're right, now that it's down to 1.85 or wherever it is this morning, it's no longer a one-way bet. you could lose 60, 70, still could probably make 150, so it's not like it's a bad bet. it's just, it's nowhere near what it was that particular day. >> so, you definitely sat up and took notice of what these tariffs might do to what you were pretty happy about, and that is, deregulation, tax reform, animal spirits for the markets, all these things that happened in the first couple of years of the trump presidency. you think this is enough of a

headwind to really reverse some of all those positive things to where you're -- could we go into a recession? could the market have a much bigger pullback than we've seen so far is that on the horizon you still don't know >> joe, the answer is i don't know but i'm managing my own money and i don't need to play every day. i'm not competing. and you said it perfectly. i think i called in right after my knee replacement, the day after the election. >> you did. >> and you guys were great we had a discussion about how none of us understood what cutting taxes and deregulation, why the market would go down because trump had been elected and i think we talked about animal spirits in that interview at the time and maybe the economy could grow at 3% under this guy and i wish i had followed my own advice more in action, but that's kind of what happened

and animal spirits is something you can't measure, but confidence matters and you do wonder -- and the "journal" had a great piece on this tuesday morning -- you do wonder whether this is enough to kill animal spirits. and what do you mean by animal spirits? well, for example, if you're a company and you're thinking about building a plant or doing capital spending, i mean, really i mean, aren't you going to wait now, see how this thing is resolved, what's going on? but i don't know if you calculate the tariffs, at least the one we've had, just in and of themselves, it doesn't look like it's that damaging but at the same time, ben bernanke, who's a great, great mind -- got a lot of iq points on me -- he thought subprime was contained. because if you just do the math, same thing the tariff thing doesn't look that damaging. but if you take all of the other effects and confidence

and we've had a few more things down the road since then we had huawei and 5g was going to be one of the great engines of not only in the u.s. but global growth. that's challenged now. we've interrupted that supply chain. supply chains all over the world have been sort of twisted around people are wondering then we've got mexico. that one came out of nowhere so, there's a lot of uncertainty, and i'd love to sit here and tell you i have a crystal ball, but i just, i don't know i don't know >> you and kevin warsh have been watching the fed and commenting on the fed for a long time. >> probably too much, yeah >> i mean, i have so many questions about this, and i'm thinking, we only have an hour that's what just ran through my head, listening back -- >> oh, no, get through everything, right. >> that's what i thought but is the fed still -- isn't there the law of diminishing returns for what they're able to do have we hit that yet

looks like we haven't, because we got a pause, which bounced us in december, and then we got something more recently, where there might be a cut-in. it worked again. is it going it always work just because it makes stocks more valuable >> no. one day it won't work. we proved in 2008, at some point you start pushing on a string. i'll say this -- i don't understand the fed's monetary framework at all i grew up in an era with voelker and greenspan, where monetary policy was primarily used for countercyclical. and when the market -- excuse me, when the economy started running too hot after a period, they would lean against it and when it looked like things were softening and rolling over, they would lean against that now we have decimal-point

inflation targets like it's armageddon if it's 1.432% instead of 1.65% we're worried about inflation expectations five or ten years down the road. we have a 2%, 2.0%, excuse me, inflation target, that if we don't meet it, it's armageddon and i have trouble with that whole -- the preciseness of it and the attention to it. as you know, joe, we're in -- well, you may not agree with me, but i think we're in one of the biggest productivity inflection booms since the late 1800s i am very confident that it's not being measured in real gdp i'm also very confident i couldn't measure it. but i know that we have all these free products out there that don't measure in gdp.

just a couple of examples -- somebody at m.i.t. did a study and said the average american would pay $18,000 a year to use the google search engine i know i'd pay more, by the way. but here's just one little anecdote so, in 2010, americans took -- or globally, took 300 billion pictures okay, this year we took 2.5 trillion pictures, okay? and the pictures this year on the phone in your pocket are better than the pictures you were taking with a kodak camera eight years ago. and if you look at gdp accounting, all right, there is no accountingin value for thos pictures it has done nothing for gdp. in fact, you could argue, since we used to go in and pay 50 cents per picture when we went

to have them developed, that added to gdp, and that's no longer in there, so it now literally subtracts from gdp and i could give you a million other examples google maps, whatever. >> i agree 100% with you >> i'm putting all my clients in photomat shares as a broker. so stupid! >> probably, i did ooi don't remember, but higher than they say it is. >> if real growth is higher, you had these powerful, long-term trends that are working in favor of that -- how is the fed at 2.25% to 2.5% short-term interest rates restraining that? in other words, you mentioned that the fed has sort of repivoted because it seems to want to move toward where the market is at this point. what's the difference, if the fed were at 2% or 1.5% or 2.25% or 2.5% as it is right now >> well, because the gig economy is important, but it's not the only economy and economics works on the -- the economy works on the margin and on confidence, and there's a lot of whole other areas --

autos, o-line retail, global trade, big, that are deteriorating. and i actually think the fed is right to be worried. i think we could be in an inflection point, and i think they'd be crazy not to think so. i have no problem with what chairman powell's done i think he inherited a very tough job. my biggest problem is what yellin did we had a booming economy fairly early cycle. i know i talk too much about the fed, but at the time, i said they should sneak one in every time they can until they get to some normal rate. >> i remember. >> i deeply, deeply believe in a capitalist system you need a hurdle rate for investment and if that rate is not up there somewhere around 3% or 4%, people are going to get crazy.

investors are going to get crazy. corporations are going to get crazy. zombies are going to stay in business and we had the opportunity to get there, but that doesn't mean -- >> well, she did sneak one in december 2015. the markets kind of continued falling apart, and then they were on hold for a year. >> yeah, but we had that whole period in 2016 where, in my opinion, they could have gotten to 3.5% or 4%. we'll never know, but they could have at least tried, okay? but once confidence turns down, you know, you've got to deal with the hand you're dealt and chairman powell has now got a tough situation on his hands. >> you've evolved -- >> he was at 4%, i'd say we should really be cutting and it would be great, but we're not at 4%. >> does that mean you think there are bubbles that have built up in the equity markets, in other markets around, if there are still zombie companies that are out there, have we not shaken things out? because we haven't been at 3% or 4% in a very long time. >> yeah, we have $10 trillion in

corporate debt we had $6 trillion -- i think you and i did an interview, delivering alpha, and it was like $7.5 trillion at the time so, ironically, by trying to achieve escape velocity, we are in worse shape for a recession now than if things had slowed down when the period you're talking about, mike, because there's been a lot of nonsense that's gone on since then. now we have the global trade situation. so, you just think -- i don't know. >> from what i'm hearing, your views have evolved on the fed at this point, and i like what you're saying because it's a much more, i think, positive place that it puts us, if it's productivity and innovation and technology that has us stuck in this low interest rate environment. and i agree with you -- said i don't know if i agree with you -- you know what i would pay for google maps? >> nothing. >> when will i get somewhere whendo i have to leave i know when i have to leave. because it says -- oh, there's

traffic on that route. if i had that in l.a., i would have gone off the freeways i would have saved seven years of my life with google maps. >> by the way, this affects inflation, too. >> yeah? >> quality adjustment -- >> that's why rates are so low. >> we are probably -- if this was measured properly, we are probably already in deflation. by the way, that's a good thing. we have good deflations and bad deflations that's my objection to the 2% inflation target for all seasons. in the late 1800s, in the industrial revolution, we had 3% deflation and we were growing at 8% real. so, i don't know where we are. i don't know whether we're at zero, whether we're at 1%, whether we're at 2%, but i wish we'd stop worrying about it, because we're in a productivity shock, and this thing can't be measured so, to sit there and count decimal points until at least, a, the economic statistics catch up with what's happened, the

preciseness i just think is -- >> this didn't exist 15 years ago. how much is this thing worth and what this is capable of? i have the encyclopedia britannica everywhere i go i don't even know what andy does with this. >> i'm glad you mentioned encyclopedia britannica, because you used to pay for that, and that added to gdp. so, relative to now, that's a negative. >> music i listen to music that i don't pay for. >> by the way, i know some of this shows up in advertising, but a lot of that is coming out of tv, and the whole value -- there's no way -- >> well, your larger point is that we're not correct, or the fed is not correct to fear the japan scenario in this instance. >> no, not at all. >> it explains why treasury yields are where they are, probably. >> yeah, and this whole obsession with the zero bound? you know why we're at the zero bound, because they put rates at the zero bound we have never had deflation that i can find that started because we were near the zero bound. we have deflation in every instant because there was an

asset bubble so, if i was trying to create deflation, like i'm this evil darth vader -- oh, let's create deflation -- i would have done exactly what the fed did from 2012 until a couple years ago. >> i'm completely confused do you feel good about things right now or bad >> i'm worried about the long term because -- you know, and i don't like the victory laps about how great things are because we've used monetary policy to create a lot of build-ups. by the way, i haven't even gone into what the government's done. >> well, not just federal government, state governments, too. >> the trillions of dollars deficit, and full employment, and no one would have minded if the fed hadn't been running policy to enable these guys. and then you have president trump running around saying, well, we need to keep interest rates low because the debt is high well, geez, why do you think the debt is high and if you want the debt to explode more, just keep interest

rates low. i'm concerned about the long term as a practitioner, i don't -- my central case is we're not going into a recession i'm worried about it and with the new view of the fed, you know, i'm a liquidity guy. i'm not worried -- i'm not that worried about markets right now. >> if we had to have a -- >> but i'm also not that bullish. i'm not nearly as invested as i was. >> you're bullish on productivity and innovation and capitalism, though if we have to choose a billionaire -- at least we're not talking about how capitalism's broken. i mean, there's some good things happening in terms of what innovation and what -- you know, you let the free markets work and it gets pretty exciting. your problem's with entitlements, and it's, you know -- a lot of people think the answer is more government, not less government, so -- >> i couldn't agree more and joe, one of the things you and i disagree on deeply is climate change. >> we do. >> okay. what we probably don't disagree

on -- and the green new deal is so over the top, i'm not even there, okay? but if you're going to -- if you're going to finance this stuff they want to do, all right, this is seared in my brain because i went around the college campuses for two or three years. but you know, 40 years ago, government investment used to be 30 cents of government spend now it's 15. entitlements used to be 28 cents of government spend. now it's over 70 >> 70. >> if you want to do this new stuff, all right, the answer isn't to raise everybody's taxes, because in my opinion, that's going to cause damage you go where jesse james went. you go where the money is. and the money is entitlements. there's nothing productive about transfer payments, and they've got to be dealt with and i wish the young people out there would understand that there's no free lunch, and if you want all this stuff, the

answer isn't to raise taxes, because you're going to kill the economy, and then there's going to be nothing for anybody. the answer is to take some of it from the old people like me that are going to get -- believe i'm getting a ss payme"street sign y payment? that's ridiculous. it was set up as a safety net. >> you don't mean taking it away from billionaires, but on a means testing, taking it from anybody who makes that kind of money. >> on social security? yeah, and by the way, if you need to do a payroll tax that addresses that, that's okay, too. i want it addressed so the next generation doesn't get zero. it's funny, the one thing hillary and donald trump agreed on was we're not going to touch entitlements, which is amazing to me. >> all right, well, we're going to -- we're going to offer you a cnbc contributor position, so -- >> i have to say, i'm going to decline it, but thank you. >> so we can have you on, like, every quarter, at least, or so

i mean, there's some money involved here with the cnbc contributor stand. anyway, coming up, much more from today's special guest -- declined already you declined in advance. stanley druckenmiller. and we are counting down it's jobs friday on top of all this numbers and market reaction is straight ahead on "squawk box. coming right back. >> announcer: time now for today's aflac trivia question. virat kohli is the only cricketer to be featured in the forbes highest paid athletes list how much did he make last year the answer when cnbc's "squawk box" continues but not when to use it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover.

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>> announcer: now the answer to today's aflac trivia question. virat kohli is the only cricketer to be featured in the forbes highest paid athletes list how much did he make last year the answer -- $24 million. in the house, i hope they would do it, but with republicans controlling the

senate, there's no guarantee we will succeed what we need is walmart, the largest private-sector employer in this country, to take a bold step forward and say that all of their employees should live with dignity. >> that's bernie sanders confronting walmart over minimum wage, advocating that the retail giant should pay its workers at least $15 an hour. let's talk minimum wage and much more with our special guest today, stanley druckenmiller, who is the ceo of duquesne family office. stan, you saw what bernie had to say. you were watching this week as it was coming out. and you sent us an email because it got you a little fired up what do you think about it. >> well, first of all, on the minimum wage, we just had a discussion about innovation. we didn't even go into the cloud. and to me, the choice -- it's not minimum wage versus a wage, it's minimum wage versus no wage and if you want to hurt workers with what's going on with the alternatives, with technology,

jack the minimum wage up enough and you'll have job losses as a result so, it doesn't make a lot of sense to me. but the thing that really enraged me that comrade sanders said was his comment about charter schools. i've spent the better part of my life -- one of the great joys of my life was meeting jeff canada. it's funny -- i was talking to fiona last night -- to have met jeff canada and ken langone and have them both in my life for over 30 years, i mean, what a privilege and what luck. but getting back on topic -- when he says he's against charter schools, i know the man just doesn't care about inequali inequality all he cares about is power, because that is disruptive to the african-american community, who prefers this and the only way you get out of inequality is with education at the early level and giving

everybody on this -- in this country a shot and believe me, this myth about pulling up your bootstraps and, you know, i'm going to make it -- that's fine for 90%-95% of the population, but there are communities out there where these kids have no shot because the public schools are just so terrible they're never going to be able to compete in our economy. and for sanders, i assume he's in the pocket of the teachers' unions i don't know why he said it. but how in the world can you be against charter schools if you're serious about the inequality issue >> and we should tell people about the work you've done in harlem how long have you been there >> well, i've been there -- i met jeff in 1993, but it's jeff's work. it's not mine. but we're serving 13,000 kids and 25,000 families in 100 blocks of central harlem we've moved the needle on every single metric.

and becky, if you even just drive up there -- and i showed you pictures of 25 years ago -- you won't even believe what's happened in the community. our biggest problem is gentrification, which is a high-class problem relative to what we're looking at. and what's really cool is the harlem children's own model, which by the way, jeff invented, not me, is being replicated in communities all over the country. obama's promise neighborhood started. so we're not just affecting like 13,000 kids up there now it's becoming a nationwide thing. and i think it's one of the answers -- one -- to the whole inequality issue so, it's very exciting >> when you see hundreds of millions of dollars poured into a system like the newark school system, without really decent results to show for any of that, what do you think? >> it broke my heart

but you know, i hate to say it, because i know you're going to have viewers who passionately disagree, but i'm just not a believer in government being the most effective actor and this whole tax debate is interesting, because i understand i really do understand why people want higher taxes, and they think that's the solution to inequality. but you also need to understand, i'd much, much rather have a jeff canada implementing programs and use his talents through private-sector donors and donors that hold his organization accountable, rather than letting the government deal with it. >> just to be clear, you think that's a solution for the 5% of communities where you're not getting decent public schools, correct? you don't think that this is something -- i mean, i'm a product of the public schools for most of my life. my mom was a public school

teach teacher. my kids are in the public schools. >> oh, we are in the public schools in harlem. we're not -- one of the misperceptions about harlem children zone is that we're a charter school network a, that's a small piece of what we do up there we have baby college we have pre-k. we have employment in technology centers. you know, basically from cradle to college, we're all over these kids and all over the process, but we deeply, deeply believe in public schools so, that's not what i'm talking about here i'm just saying that there are kids that need a shot, and it cannot be done just through charter schools. and by the way, if there are charter schools that are not performing, they should be shut down. >> what do you think of bernie sanders and other candidates who are now on the campaign trail basically saying you need free college, you need universal basic income, you need universal health care? how do we deal with those issues and what happens in an environment where things are so

charged? >> well, i just don't believe in any of that. one of the problems with college is it's been subsidized now through student loan programs, and what's happened? it hasn't helped the students. colleges just keep raising their prices and these students come out and they're in debt. look, all this sounds wonderful, becky -- universal health care, free colleges -- but you've got to pay for something and you know, i started my career in the '70s there are a lot of people that thought the soviet union was the answer, okay i've watched socialism in various forms my whole life. the latest example is venezuela. and the people that would like socialism and think this is the way to get, they should go down to venezuela -- actually, they shouldn't -- they'd probably be shot ken langone was with me last night, and he pointed out a statistic i had not heard. the average venezuelan lost 34

pounds last year i mean, that's what you're dealing with and look, i know capitalism isn't perfect. i know there are issues. but the alternative is absolutely -- i've seen this movie before, and i don't want to go down that route. >> although the alternative that is being presented is not centrally planned dictatorship like in venezuela. it is a bigger safety net or widening out entitlements and having it paid for through higher taxes i mean -- >> it's through government, though, mike. >> of course. >> it's through government i mean, the health care system, to me, very simply, they want medicare for all medicare's going to go bust, okay so, let's make it even worse and let's do medicare for all. why is medicare going to go bust because the way the thing works right now, don't know what we pay for our health care. and until you have consumers have choice and understand when they go to a doctor what the cost is and there's some kind of

choice, this thing's just -- it's not going to get better so, yeah, i understand what you're saying, but i've seen government in so many forms. i mean, i'll give you just one, small, little anecdote so, when we started the pre-k program in harlem children's zone, we had our little thing called harlem gems and i'm very proud to say that in 12 years, and, like, 15% to 20% of the kids are homeless, got a lot of special-needs kids. one child -- one out of 12 years of kids has not been school-ready at kindergarten so, it's a great program so, we start this thing. it takes us about three to six months to get it started up. off we go. and across the street we get head start money and believe me, i love the head start money, and i think it's a great program. it didn't take us three to six months to start it up. it took us six years, and we fill out a questionnaire every

quarter, 1,700 questions from the government -- are we complying with -- not one of which is about student outcomes. now, is the head start better than not having anything at all? yes. and those kids are having the same outcomes as the kids across the street but i'm just talking about -- >> the delivery. >> my whole life, everything where you get government versus the private sector involved, the answer has always been the same. >> we're going to try to stay private. quick commercial here. thanks to stan druckenmiller. coming up, we are going to have much more with legendary investor stan druckenmiller. "squawk box" coming right back ♪ pnc bank has technology to help make banking easier,

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[ slurps ] gwho's a good boy? it's me. me, me, me. hey guys! you're gonna want to get in on this. i know how to those guys in here. let's pause the internet on their devices. wohhh? huhhhh? [ grumbling ] all: sausages! mmm, mmmm. bon appetite. make time for what matters. pause your wifi with xfinity xfi and see the secret life of pets 2 in theaters. ♪ presidential candidates floating plans to raise taxes on the rich, but joe biden has been fairly silent on taxes, until now. robert frank joins us now with more

oh, good >> your favorite segment, right? >> my favorite guy >> well, you've got elizabeth warren proposing a wealth tax, bernie sanders wants to increase the estate tax, and kamala harris wants to repeal the gop tax cuts, but front-runner joe biden has been fairly quiet about taxes, except for one, the capital gains tax. >> capital gains tax, which i believe is much too low. it's much too low now in my view now it's down to 20% it's too low. >> now, the biden campaign hasn't released any numbers on what they would like to see, but given his history with the capital gains tax, it's clear he thinks it's unfair, it favors the wealthy, and should be higher now, in 2003, he voted against cutting the rate to 15% from 20%. now, after it did go to 15%, he and president obama, of course, pushed it back to 20%, and then they added that additional surcharge of 3.8% for top earners. now, democrats point out that the capital gains used to be much higher, back at 35% in the 1970s.

the top 1% received more than two-thirds of the $580 billion in long-term gains in 2018 and because the cap gains rate is lower than the 37% top income tax rates, some of the richest americans pay a lower rate than wage-earne wage-earners but conservative analysts say that even if it was increased to 25%, it would raise less than $25 billion a year, since the wealthy would simply choose not to sell their assets or, probably like stan here, they would just sell before the tax hike, which we've seen before. >> all right, let's pick up that topic of taxes and taxing the wealth with our guest host, stanley druckenmiller. stanley, what do you think of what robert just said? >> i'm going to shock you. i kind of agree with biden i don't -- i don't really think capital gains promote investment as much as advertised out there, and it's hard for me to believe

larry page and mark zuckerberg and jeff bezos would have said, oh, my god, the capital gains tax is going to be 35%, i'm not going to try and found amazon or google so, i don't have a problem with it >> but you probably want to -- you wouldn't want to expand entitlements you'd probably want to fix entitlements and debt with the money -- >> yes, joe, i'm still a conservative don't worry. i don't want to give you a heart attack over there. >> but -- >> i would also not be giving, like, tax breaks for buying used corporate jets i get the new jets, okay somebody has to make them, you get employment, you get all that, but used jets. so, there's all kinds of stuff in the tax system. the problem with the capital gains hike -- and i don't really know the answer -- is it might not raise that much revenue. >> right. >> and i'm not -- i'm not into something just because it's

fair but frankly, i think -- i kind of agree with biden. but i did want to say this you know how we could solve inequality very easily of welt, just do something disastrous to the economy, the stock market would go down 40% and inequality would drop substantially. >> it fell in 2008 that's exactly what happened, we had the biggest decrease in inequality since 1970. >> and that's the biggest problem with the argument today. a little-known fact because the media doesn't want to put it out there, is real wages have gone up under trump it's the first time it's happened, i think in 40 years. and we all know african-american employment is up because president trump tells us every ten minutes. we all know other minorities -- and so, the bottom is doing better the problem is, the top, the differential is getting even bigger and even though it's one of the seven deadly sins, one of the most powerful human emotions is

envy so, the narrative about inequality is correct, but one piece of the story is left out, is that everybody's doing better >> right. >> unfortunately, the people that are really accelerating -- so, i don't believe the way to solve this is let's just ruin everything and then everybody will be worse off but we'll be more equal. >> right, but the inverse of that, conservatives say growth will solve everything. in fact, during high growth periods, inequality increases, so it doesn't solve inequality i am shocked, though, that you're saying you would support a higher capital gains rate. you're a guy that, i would guess, makes a large share of your income from capital gains, right? >> i wish. i'm too short-term but i have had substantial capital gains, but it's -- >> so, has that changed for you? was there a time when you wouldn't have, but now you -- >> i've never been big on -- >> what should the rate be what do you think is a fair rate should it be taxed the same as

income, 37%? there was a time when they were the same. >> i wouldn't have a problem with that, but then don't tell me you're going to raise the 37% to 50% and it's going up on both of them. >> right. >> okay? as far as i'm concerned, they didn't do tax reform, okay we did some tax reform in '86. this wasn't tax reform the thing became even more complicated. >> yeah. >> but i would have no problem with normalizing capital gains i hope i'm not wrong, because i could be to me, you don't want to raise any taxes unless you're going to raise revenue. i don't want to raise capital gains taxes because i want to hurt somebody. >> do you think the marginal rate is at the right level right now? >> i don't know. i'm a laffer curve guy i don't know where we are -- we know it's between 0 and 100. i don't know which it is. >> but do we need to -- you mentioned 70 cents of every dollar i mean, that's a problem, is it not? >> what's 70 -- oh,

entitlements >> entitlements. if we do anything with increased revenue -- i mean, spending should still probably be cut and we need to address entitlements, do we not? >> we don't even need to cut entitlement spending we just need to slow them down or make them grow at zero and all our problems go away. >> -- not of the leading 22 -- >> they all went up over 5% or 6% last year with nominal gdp growth less than that. they're still gaining. and by the way, we haven't even gotten into the really demographic -- the gray boom spot i talked about 12 years ago, if you'll remember. i'm sure you don't i thought the real consequences won't show up until 2025-2030. i said this in 2012. well, it's not 2025 yet, but we're getting there. >> right >> robert, thanks for coming in. >> thank you, guys >> thanks, robert. >> thank you >> we have more to come. all right, coming up, stanley druckenmiller will stay here

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we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. and we've talked about it quite a bit, especially with -- as i just said -- if you look at the basic thrust of the 22 clown car -- i shouldn't say clown -- but the 22 democrats who are running right now -- it is entitlement expansion. that's the whole thing

but the big debate in this country right now, because of a lot of this, is on whether socialism is effective we've interviewed -- versus capitalism we've interviewed a number of people, and some billionaires on this program to get their issue, take on the issue. jpmorgan chase ceo jamie dimon defended capitalism, same as our guest host, in april, writing "i am not an advocate for unregulated, unvarnished socialism, but we shouldn't forget that freedom and free enterprise, capitalism, are at some point inexorably linked." a few days after dimon published that letter, billionaire ray dalio spoke out about this very same issue >> i didn't say broken i said that it needs to be reformed i'm a capitalist i'm a professional capitalist. the system has worked for me i didn't have anything and then i got something through the

capitalist system. and capitalism means the ability to save and invest in capital markets and private enterprise and all of that, and i'm supportive of that >> i'm not really sure -- we tried to pin him down on exactly what he wanted to do with it, but i mean, any comments on -- don't know if you saw the whole interview with dalio or -- >> i didn't see it let me just say, again, look, capitalism isn't perfect but it's lifted hundreds -- it's lifting billions of people out of poverty and to me, it's proven to be the best system we've had. my problem with today's narrative is we're not doing capitalism right now as i see it we've been moving further away from it. we're moving further away through free trade we're moving further away through manipulation with crazy monetary policy.

we have all this crony capitalism with lobbyists in washington so, for the last 30 years, i think we've been moving further and further away from what i would call capitalism. but that's not the debate. the debate out there is capitalism versus socialism. and we've seen that movie and we know how it ends, so i just -- i don't get it. >> you talked about google, and we need to bring up what also has been happening lately, and that is the big, i guess pushback against how great these companies are, how well they do, how big they are, how much of their lives they're involved with but capitalism produced some of these great innovations. has it -- are these guys too big, too powerful now? do we need to take a look? >> look, they're big, but first of all, let's go to -- they've now got enemies on both sides. let's take president trump

first. i don't happen to be a nationalist, and i don't know what i think about -- yeah, i'm what you hate -- i'm a globalist, okay? >> okay. >> and i don't know what i think about economic wars. but if i was going to have an economic war from china, with china, and i was a nationalist, okay, the last thing i would be doing would be attacking our best companies for the next 30 years who are going to be in that fight, which are the ai leaders. google, facebook, amazon you'll notice, joe, about a year ago, they had kind of gotten quite tough with the private sector, the chinese had. and then the minute the trade stuff happened, they pivoted okay, they got rid of jack ma, but then they got friendly with

alibaba, started putting restrictions on stuff ten cent does, we all know what they do with huawei. so, they're oiling the companies that are going to compete with us in the next 30 or 40 years, because, let's not be naive, this is all going to be about ai and technology and what are we doing? we are attacking our companies that are the leaders in this stuff, but man, it's great we're putting -- we're supporting our steel industry, our coal industry, our aluminum industry way to think about the future, president trump. just genius. now, let me take the other side. so, we have the democrats out there -- and president trump, we all know his motivation, as these are all left-wing liberals out there that run these things -- his words, not mine. so, now the democrats hate them because they're convinced that facebook's platform got president trump elected. that's complete nonsense

i mean, whether you like it or not, president trump won the election because more people voted in the right states for him than voted for her, and the facebook ads are just dwarfed by anything else. so, i just do not understand the emotion over this issue. then you've got the whole privacy argument and very simple to me. if you don't like what google's doing with their privacy, don't use google okay don't go on it don't go on facebook and good luck to you, by the way, if you want to go to another search engine. the woman from denmark who keeps going on -- you could put google on the fourth page, and they'd still use it compared to the other search engines competitive, because i'm old enough and stupid enough, i hit the wrong button and i get trapped in one of those search engines. and like, i go crazy how bad they are, and also that i'm too stupid to know how to get out of it. >> but you're pointing out how powerful they really are and consumers have benefited

have start-ups been hurt by monopoly power of these companies? is competition being hurt, around the edges we could make changes that could make it fair? >> yes, i think -- >> possible. >> look, i'm a capitalist, and you can have monopoly power that becomes punishing for capitalists. and we've never had to deal with the networking effect, which the internet has created and absolutely, when you see acquisitions made to eliminate competition, that's to be seriously thought about. but the narrative that google is gouging on prices -- well, first of all, their products are free, so how are you gouging on prices and they're anti-innovation? i mean, this is one of the most innovative companies in the world. if there's a reason not to own it as a stock holder, it's they're spending so much money on crazy stuff trying to advance science in the world so i don't like -- i don't like that narrative either. but i do agree, yes, if they're

buying companies to eliminate competition, there's stuff we can do there. >> you make a persuasive case that we shouldn't be targeting these companies as an investor as a trader, though, what do you foresee in terms of whether it's going to affect them in terms of restraining their valuations i mean, if you had to say, do i fade this trend and think it's going to blow over or do i think it's going to be with us for a while >> hawell, mike, i don't think they're going to break up google, but if they do, it would be worth more. i mean, the sum of the parts would be worth more. facebook would be worth less, because obviously, messenger and the platform, that's all integrated amazon you could argue would be worth more you have aws sitting over here, probably worth what, $500 billion itself and this going on. so, i think it's debatable it does make, obviously, investing in all of them more challenging. it's over the head but we'd have to change the law, as i understand it, literally change the law, which is going to take years, to win a monopoly

case against somebody whose products are free. >> well, they're free and you don't give them anything you don't give them exclusive right to put wires in your house. >> no. >> i don't want to run out of time so, if trump had not -- you're now worried that he's going -- i don't know if you're worried, but you think he's going to lose because of screwing up all the good things he did with tariffs and the trade war. you're worried -- >> that's not why i think he's going to lose. i think he's going to lose because i've analyzed the data in pennsylvania, michigan -- >> in swing states. >> -- and wisconsin, and i think he's in bad shape. i think he will win if he runs against comrade sanders or elizabeth warren, but i think it's very, very difficult for him to beat any centrist candidate when i look at -- >> because of the tariffs or because of something else, because the tariffs are hurting the auto industry or other places >> i'd say a lot of it, becky, is because of his behavior soccer moms, he doesn't need to lose -- don't forget, he won these states by less than 0.5% >> right.

>> my old stomping grounds, pittsburgh, has gone blue because high-tech's moved in there and it's booming pennsylvania is tough, and he doesn't win without pennsylvania. >> do you think -- and you're -- >> but yes, becky -- one more thing -- >> okay. >> he and pence keep talking about the booming economy and the booming this or the booming that if you don't think we're going to be booming in 18 months -- and that's clearly a risk -- i don't see how he wins, because i don't know what the narrative's going to be. >> if you think it more likely, i guess a biden or a moderate is the candidate, but you're -- >> no, i don't know who the candidate is. >> but if one of the crazy ones did win and did win the election -- he calls them the crazy ones he calls them crazy. i know you want your entitlements and you want your safety net expanded, but -- >> no, i think being crazy was a liability -- >> but if they do, you think that would be bad for the stock market, if bernie or -- >> if bernie sanders became president, i think stock prices should be 30% to 40% lower than they are now the good news is, we'd all be

much more equal because everybody would be poorer, but the rich would have lost a lot more wealth than the poor would have. >> and you have no idea whether they run someone like that, or whether that person could win. i don't think bernie sanders could win the general election, but i could be wrong. >> i don't either, but you know, stranger things have happened. the young people love him. the young people, by the way, who -- how can you be under 30 years old and vote for bernie sanders, who wants to give more money through more entitlements to old people? i just don't get it. >> right old people that could be living to 100. >> me! >> yeah, they could be living much longer and they're going to have to support -- >> hopefully we're going to live to 100 and bankrupt the whole system. >> yeah, bankrupt the entire system >> stan, thank you >> do you think -- i think we're going to go a little further. >> are we? okay sorry, my bad. >> all i want to get to here is back to the market outlook and what's most likely and it's always just percentages. and do you think that, somehow, trump is able to successfully

deal with both china and mexico in a way that the stock market can take advantage of these lower interest rates and head higher >> i feel very strongly that the secular growth companies -- cloud, payments -- have enough runway that they can grow just as fast in a 1% economy as a 3% economy, and those companies are unequivocally worth more with rates at 2.15% than they are with the ten-year at 3%. i also feel very strongly that there's a risk that the economy slows down a lot we'll see. and if it does, there are a lot of cyclical companies that are worth less if interest rates are 2.15% than 3% because they have negative earnings leverage affecting them. >> very quickly, you said you were 90% invested until early may tweet about china tariffs, at which point you bought a lot of treasurys, closed out some

positions. you came back in earlier this week -- >> only a little bit, unfortunately. i wish i had bought more. >> but you came back into the equity markets earlier this week what percentage, if you were at 90% before >> i'm at 15%, and it's -- you're a very smart lady, but it's not a great question because i could be very different on monday and your viewers should take nothing i say on friday with seriousness about where i might be on monday or tuesday >> well, if you came back on the show, we'd -- >> get a daily update -- >> you could update us on what you're doing anyway -- >> jobs number's important today. >> i think they're very important. there's a technical thing when you have five weeks in may that could bias the number upward, the seasonal adjustment. they're important only because they affect the fed. i don't use the job numbers to predict the economy. it's just unbelievable the

obsession with the lagging indicator. i use them for entry and exit points to fade but i think if the job number is weak, given everything else they're saying, the fed will be on a clear easing path by july >> stan druckenmiller, thank you for spending so much time with us you know, long time coming, a lot of begging, a lot of whining, a lot of couajoling, bt thank you. >> and thank you for the opportunity to talk to your viewers. it's been a lot of fun. >> we've really appreciated having you here. >> thank you. >> it is a lot of fun. >> it is. >> i hope it was a great experience for you. >> it was wonderful, joe. >> we have to wait a long time for -- anyway. thank you for spending the hour. what's coming up is there a jobs number yeah, we're still going to do it. >> we are. we are counting down the jobs number is set to be released in 28 minutes, 28 1/2 minutes. our panel of market experts and economists are standing by with predictions, and we'll have reaction to the data the number that stan druckenmiller just told us is very important because what it signals the fed will do next more on this when we come back

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welcome back, everybody! this is "squawk box" on cnbc, and we are less than 30 minutes away from the number of the morning, the may jobs report let's get right to steve liesman. he's got a look at what we should be watching for this morning. and steve, there's a lot. >> there is a lot. wall street forecasting a relatively strong jobs report, despite challenges from concerns about a weakening economy. here are the numbers we're looking for. 180. that's unchanged, by the way, since that weak adp report on the bottom of 27,000 unemployment estimated unchanged at 3.6%. average hourly wages, pretty good, we'll take 0.3%. coming into the report, jobless claims and the ism service report suggested hiring strength, but adp and the manufacturing ism pointed to a weaker report. the trouble for the market, forecasting an economy already expected to weaken with new concerns about tariffs we just don't know how much of the concerns over trade directly or indirectly could impact these numbers, and of course, future numbers. well, the market is convinced, or at least the fed funds futures market's convinced they

will eventually. here's the number. now, i think, from my sense, 20% probability of a cut less than two weeks before the meeting i think that's pretty high >> it's pretty high, but it's well below what you would need two weeks in advance. >> to get there, true. but on a meeting when everybody was convinced it wasn't going to happen -- >> that's right. >> it'd be like 10% or 5%. but it's been as high as 30% there's the july number, 65% probability, heading up towards 99.99%, 95% for october. and by the way, two rate cuts are built into the structure of this market here yesterday, new york fed president john williams telling me that he hears it and he sees what the market is forecasting about fed policy and the economy, but he did not endorse it he has a relatively upbeat view on the economy he said, oh, i see it, i hear it but john, what are you going to do about it? well, i hear it and i see it we kept going in a circle, back

and forth. >> joining us for our jobs panel, club for growth president and former congressman dave mcintosh, and lindsey piegza with stifel. and harvard school professor jason furman is with us. with that adp number, i'm just wondering, lindsey, what are you thinking can it be off by 150,000 jobs? >> i know the market is looking for a relatively strong number, but i do think that we're going to see the risk of a downside. i think we see a number closer to 125 and as you mentioned, that adp number was pretty ugly, so we could see a payrolls number less than 100,000 again, our official forecast is 125,000, but i do think that the risk to the market is we see a weaker-than-expected number, well below the trend pace of 170,000 as we have going into this morning's report. >> joe, we're still -- actually, mark's much more optimistic than i were, the 200,000 number but the reason is, i think

you're seeing the continued strong gdp growth and the tariff problem isn't yet impacting the employment number. it's more affecting supply chain questions for the large corporations i think the adp probably overestimated in april, underestimated in may. if you average them out, it's not that inconsistent with what the real numbers are going to be >> hey, jason, is it possible a bad number is not necessarily a slowing economy but just the difficulty finding qualified people and just the shrinking availability of candidates is that part of your equation? >> yeah. you know, we're averaging about 200,000 jobs a month this year we had a lot more than that last month, obviously if we have less than that this month, that will be absolutely fine at some point, and it keeps being after i think it's going to be, you know, we're going to have to slow down because you're going to have a hard time

finding people what i'm more worried about right now is that wage growth, nominal wage growth, seems to have stalled out and if that's the case, i think that would be the more worrying for the sake of the economy, probably not for the sake of the markets, though. >> have your recession sensors gone off more recently in the last couple weeks, jason are you in that camp have you been surprised by how quickly we're ready to -- i mean, we go from goldilocks and nirvana to, you know, to 1929. i mean, we can do it in the blink of an eye these days >> there's nothing in the data that would make you worried. but if you're talking about recession, you want to look forward. and there were some big policy changes announced in the last couple weeks, and they should lead us to revise our forecast and revise it down even if we did mexico, that shouldn't be enough to put us into a recession, but it certainly raises the odds. >> what do you think, lindsey? >> i think there's plenty in the data to make us concerned,

particularly looking at the consumer we see traditional discretionary purchases trending negative in three of the last five months with the latest april report down 0.2%. if the consumer is not happy and healthy out in the marketplace, that's a pretty big red flag that the economy is beginning to lose momentum. also when we look at business investment, we also see that corporations are starting to pull back. now, it's still trending positive, but it's that second derivative or a loss of momentum, businesses signaling that they're less confident that the recovery will be perpetuated through the end of the year. this is exactly what we saw in first-quarter gdp report -- top-line number very impressive, but consumption down to a four-quarter low, business investment down to a two-quarter low. and if when we strip out government spending, inventories, and trade, we see that real-file domestic sales was at a six-year low, and that's a very good indicator of the underlying, organic momentum in the economy it's at a six-year low. >> okay, see, we just heard from stan druckenmiller that this number is extremely important, not because he thinks it's a

good economic indicator, but because he thinks it will signal what the fed will do next. >> i think that's possible i still maintain two things, and i've been pretty strong on both of these june is too soon and the market is overall too aggressive in baking in -- >> i'm not talking about june. i'm talking about july. >> i think july is possible for a turnaround, if you get a weak number and other confirmation. remember, the fed doesn't believe that job growth -- and i say this, "believe" -- the fed's estimate is that job growth should be no more than 80,000 or 100,000, and that is to take care of the entrants to the workforce. the idea that it's been higher and stronger is a measure to them of coming eventual tightness in the labor market, which we keep waiting for a bit like gado and it never happens we keep finding workers, although the unemployment rate has been down, so that's a sign that indeed we're getting to a point -- whether or not that leads to inflation, i think the fed is a little less concerned about that now than it ever was. so, i think july is certainly a

possibility. i think what would happen was, if you get a weak report and other signals of weakness, the fed would signal a change in policy in june and deliver it in july. >> do you think the fed -- i mean, who knows what preferences are -- but you mentioned john williams, right? there's this instinct they really would prefer, if they could, to be on hold -- >> yes. >> -- and wait and see if there's a strong number today, give them that clearance -- i guess it depends -- >> to be on hold yeah, i think it does. and i think that's where they want to be i think there are some people who even want to be a little bit tighter. but they deal with the reality of inflation not being at their target i think there are some on the fed on the other side who actually want to cut rates simply because of the inflation issue. and then you layer in this tariff issue and clarida was very clear with me on tuesday -- i said, "how do you think about this?" he goes, "one-time rise in the price level, i address the weakness." and i think that's more or less

fed consensus. >> i think the fed's been reacting to the market in a way that it is unusual what they're doing is signaling to people, this volatility, we're watching it, and you're going to be okay in the end, i think steve's right, it will be the inflation number that drives what the real policy choice is that they make on this. >> had a great discussion with druckenmiller about inflation. because earlier, i mean, it was -- i referenced it because we said, you know, we've had some really disappointing numbers on inflation and it's like, i hear that and i can't help from my past life think you mean high inflation is the disappointing part. >> right. >> but we mean low inflation -- >> right. >> when did that happen? it happened -- >> all i know is when it came to the idea that inflation may be much lower, stan went like this and i went like that >> you said it differently but agree? >> i've been coming on this show for like 20 years talking about -- >> but for me, what it meant -- >> productivity being

understated, technology being a bigger factor -- >> but it wasn't central bankers health setting us up for the end of the world by being too easy isn't why rates are currently low. it's that we've done all these things and it's not measured the same there's been so much productivity and google and all these great things. >> google, right. >> that it explains why -- on the flip side, what we didn't talk was the t.a.r.p. people -- if you used to have $1 million and you could go in an 8% yield, you could live on $80,000. what do retired people do now to try to have enough money to save or to live i don't know anyway, this is you, mike. yep, coming up, down to the wire with those impossible, new tariffs on mexico. more negotiations are set to take place in washington right now, though, all parties are staring at a changed battlefield kml monday morning next, we'll talk to a former ambassador to mexico who spoke out this week, saying that if the u.s. wants to fix illegal immigration, tariffs are the wronway g to do it stay tuned you're watching "squawk box.

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but moving your internet and tv? that's easy. easy?! easy? easy. because now xfinity lets you transfer your service online in just about a minute with a few simple steps. really? really. that was easy. yup. plus, with two-hour appointment windows, it's all on your schedule. awesome. now all you have to do is move...that thing. [ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. negotiators from the united states and mexico are expected to talk more about immigration today, trying to find an answer before monday's tariff deadline. so, what are the chances for a deal before the weekend is up and what might that deal actually look like joining us now is carlos pasquale he is former u.s. ambassador to mexico from 2009 to 2011 he is one of seven former

ambassadors who wrote a cnbc.com editorial on wednesday, warning that the tariffs on mexico would hamper its ability to deal with migration. sir, thank you for being here, mr. ambassador what do you think the chances are that we'll see these tariffs actually get out on monday >> thanks very much for having me the encouraging thing is that they're still in discussions and negotiations there's a proposal that is on the table. we don't know all of the details of it. part of it is a pledge by the mexican government to put 6,000 troops on its southern border, but then a complicated proposal for what is called the safe third-party agreement. and in that agreement, it would involve that migrants from el salvador and honduras would have to seek refuge and asylum in guatemala. migrants out of guatemala would have to seek refuge in mexico. and those who then come to the united states would have to be returned to the safe third country, the country where they're designated to seek asylum it would require an agreement

among all of those countries to be able to participate this is in discussion right now. we haven't seen the details of it, but it's a combination of that package which is really going to become a defining factor on whether these tariffs go into effect and have a devastating impact on consumers in the united states, on integrated supply chain, on mexico's economic growth, and we have to see how it proceeds over the course of the day. >> guatemala -- i'd seen headlines earlier this week that sounded like they were coming along in some of these negotiations and agreeing to some of these points you just mentioned. >> there have been discussions with guatemala one of the factors is that all of these countries -- el salvad salvador, honduras, guatemala, mexico, and the united states -- are going to have to negotiate that into an agreement, how it's going to function and work but it's an extraordinary step it wou and it would place a burden on mexico the intent on the migrants might actually be to go to mexico instead of the united states the deportation from the united states would essentially be to

the appropriate third party, so it would go -- those migrants would be going back to guatemala or honduras or el salvador and i think the other point that few people actually recognize is that the net migration out of mexico to the united states is either zero or negative because of the economic growth that mexico's experienced over the past two decades, over the period of nafta. more mexicans have actually returned back to mexico from the united states than are going from mexico to the united states. >> but you are talking about -- >> so the migration issue is really -- >> i mean, the migration issue is a huge one who you look at countries from el salvador, honduras, guatemala right now. what created that problem and how do we fix it >> there are a couple of things that created that problem. one is fundamentally what's happening in those countries the violence, the cartels, the drugs, the gangs that have been faced there and the threats that have been presented to people's lives. so, people are fleeing for their lives, and they're trying to seek some form of safe and secure life into the future.

and so, one has to recognize that eventually there are investments that are going to have to be made into central america, not just on economic growth, but on the rule of law, because people want to live safely the other piece of it is that there's going to have to be an investment on mexico's side on increased migration enforcement. they've indicated that they're willing to add 6,000 additional troops there are measures that they've been taking in the past few months to increase the number of migrants that they're deporting, but that's going to have to become a major factor as well. and then in the end, the united states and mexico and all of these countries are going to have to look at this as a partnership, because it isn't going to just be resolved by one country alone. and the issue of drug demand in the united states is going to have to play into the overall equation and how that affects the incentives for people to migrate and organize the impact of organized crime in the region >> ambassador, thank you for your time today. >> thank you

>> wow druckenmiller made people really mad on both sides here pretty funny. >> he says whatever he thinks. he's beholden to nobody. >> i mean, the ones on the right are mad about the taxes and the trump comments and then i got from a real lefty hater here about how a. sorkin [ laughter ] that's -- no, it can't be. >> no, it's not. >> okay, you win. >> it's not! i'm on pain medication right now, it's not him. >> but it was just -- i mean, really just venting. anyway, the jobs report. it's the number wall street is waiting for, both for its read on the economy and what it could mean for the fed's next move and then later, market guru ken fisher tries to make sense of the volatile yield curve and talks about the movement in stocks stay tuned to "squawk box" on cnbc it. do i use aflac when the kids get slime in the plumbing?

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still to come, the big number of the morning, the may jobs report. final predictions are next, followed by the data and the instant market reaction. we are watching it all closely so is the rest of wall street. we'll bring you the news as soon as it hits quk x"ilbeiggoo "sawbo wl rht back. ♪ the final countdown this is my headquarters.

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♪ welcome back to "squawk box," everybody. this is cnbc we are live from the nasdaq market site in times square, and we are just a couple minutes away from the government's may jobs report, so let's get final predictions from our panel david mcintosh, we'll start with you. >> great our prediction is 200,000. i know that's bullish, but we still think the fundamentals are very strong. >> unemployment rate >> staying steady at 3.6%. >> lindsey, how about you? >> i'm going to go on the weaker side i think we've seen enough weakness in the data that this could be a disappointing number, closer to 125,000, but i don't expect much change in the unemployment rate. i would agree with that. >> okay. and steve liesman, what do you

think? >> 173,000 on the private sector and a real pick 'em on the government, because i don't know if there's some census hiring in there or not, and whether or not there's something from the shutdown at all. maybe 183,000 on the full, but i can only forecast the private sector, which is actually the only thing anybody can do, at best. >> same thing with unemployment, still looking at 3.6%? >> i don't have an unemployment forecast >> that's fair. >> no model. >> rick, how about you >> 188,000, and i'm including everybody. >> i'm sorry, what was that last thing you said >> oh, i'm including everybody i'm not separating out government, nongovernment, i don't know unemployment rate, i don't put a lot of stock in it i look at that big pile we don't count and i think they're coming back in. >> you think they're coming back in for all of this do we have jason here, too jason? >> yep, i'm here i would go with 150,000, 3.7% on the unemployment rate. but if wage growth is 0.2% or less, i think that's more

important than either of those numbers. >> all right, folks. after a long week where the markets have pushed pretty sharply higher, 3.6% gains that we've seen for the dow, the dow is implied to open up by about 75 points here futures are up by nine points for the s&p and by 26 points for the nasdaq. >> and don't start with some mortgage stuff give us the numbers, diana >> reporter: 75,000 nonfarm payrolls, increased by 75,000 jobs in may. the unemployment rate is 3.6%. that's unchanged from april. average hourly earnings increased 6 cents to $27.83. that's 0.2% month-to-month over the year, earnings are up 3.1% now, we have some pretty sizable revisions here march numbers -- 189,000, revised down to 153,000. april numbers -- 263,000, revised down to 224,000. add it all up, that's down 75,000 jobs. after revisions, job gains have averaged 151,000 over the past

three months let's look at some sectors now professional services were the big gainers, up 33,000 construction pretty flat but up 4,000. you know i had to mention that one. health care up 16,000. retail was the biggest loser it lost 7,000 jobs now, unemployment by race -- black unemployment rate was 6.2% that was the lowest since last november labor force participation rate, 62.8%. the u-6, or real unemployment rate, 7.1% that's down from 7.3% in april now, monthly gains are now averaging 164,000 this year, and that's down from the average of 223,000 in 2018. back to you guys discuss. >> all right, diana, thank you very much. lindsey, want to go to you very quickly, because you were expecting the lowest number, 125,000. it was still quite a bit above the number that we got. >> i think the market should actually look at this as a pretty positive report, because it's going to be another data point that's going to make it very difficult for the fed to

ignore the weakness bubbling underneath the surface, which means that the fed is likely going to have to act by the end of the year and give us the cycle's first rate cut and we've seen this ongoing disconnect between the markets' plea for a rate cut or rate cuts in the near term and the fed consistently digging in their heels that they're opposed to any change in appropriate policy i do think this is another data point that forces the fed's hand. >> i want to take a look we're just looking at the ten-year for those of you at home, listening in the car or radio, you can't see that, but the ten-year is yielding 2.081%. it was above 2.1% this morning so, steve, real quick reaction here, the markets on this. what are you digging into the numbers that we haven't talked about? >> not much to dig into it what i'm digging into are the revisions and the current one, which tells you that there has been -- honestly, zandi has been coming on singing this same song for a while, and he's been wrong until now, he's right, which is a downshift in the jobs market i think that you look at the three-month average being

151,000, and had those other numbers been input into the models that are out there, they all would have been for a lower estimate, had we known that it was a little bit weaker before so, the net is what tells you that there's this downshift. we don't know if any of it's trade-related. what i said at the top, you've got these two forces going on. you know the economy is weakening, slowing with the expectation that it's not going to be slow data that it was going to be somewhere in the 2% range or a little bit above was where we thought we were going to and then you layer in the trade thing, and maybe now you're a little bit weaker, too, as well. >> what was private-sector growth versus government >> it was 90 somehow, government found a way to lose -- >> net 15,000. >> net 15,000 down i'm just looking at the data right now. i'll get back to you on that, becky. >> hey, rick, let's just talk about the market's reaction to this dow futures came down a little bit. we had been up about 75 points above fair value now we're up by about 50 points above fair value, but the yield and the ten-year really is something worth watching

what else are you seeing in the treasury market? >> treasurys are yawning through it i think there's two big tells here, actually one of them is fed fund futures. they are rallying, and the farther back you go, because it's the logjam process in the contract, of course -- some of these months now, like november, they're up over five ticks, which is rather substantial. but i caution viewers -- think about it just like a bunch of logs going over the cliff. the current log is the next meeting, maybe 20% maybe gone up a little bit all of the other logs behind it are showing, obviously, much more easing. the problem with the contract is the accuracy we all talk about is really only for the next log. and all the logs down the line, as they start to come forward and contracts expire, many times you get a much sharper image of reality. so, i do caution but it is still a tell you can see what investors are

thinking the other big tell is that the dollar index lost about a quarter of a cent quick. it was virtually unchanged it's now down a third of a cent. i find that a very large tell with respect to we have hindsight now of other central banks that have eased. we have mario draghi, you know, praying to the gods that we can maybe get a little more inflation but not even thinking about raising rates until mid-2020 so, i think the dollar index is a very good gauge, and it's obviously pricing in kind of the story lindsey's been talking about, at least for the moment >> not only that, but if we do see big moves in the dollar, if it weakens a little bit, jason, i guess the question is what does that mean in the brotherer context when you start talking about the potential for tariffs coming on next week? we have kind of said it's not going to matter because the peso had weakened so much against the dollar dollar has a lot of implications through a lot of different things that could be happening here jason? >> yeah, i think it certainly does you know, it's what insolates you from some of the dumb decisions you might otherwise

make on things like tariffs. but if this doesn't change the supply chains and the uncertainty of those products that are moving back and forth across the mexican border. why would you want to make cars in america when you could make cars in, you know, japan and germany and have much more reliable supply chains you know, this jobs number itself, by the way, i don't think there's anything to worry about there, but anyone who's worried about inflation right now, in a world where nominal wage growth is actually slowing -- there's only 3.1% over the last 12 months. just a few months ago, it was at a 3.4% pace. there is no reason at all to be worried about inflation being too high there's reasons to worry about inflation being too low, so i think this gives, you know, not a necessity of the fed acting, but a lot of permission for them to act without worry >> david >> so, over on the policy side, i think this is a big signal to the white house and the administration they've got to find some new tools for economic stimulus, and

that the tariffs are now higher risk, essentially, because they're starting to have an impact, potentially, on growth and the numbers there. so, i think you'll see more push to get the deregulatory measures out, and hopefully, some cautioning on imposing these new tariffs. >> two-year note yield down below 1.8%, also very sensitive to fed exec tags so it's not too far below the rate i was saying before, when we got the number, it was surprising how treasury yields went into the number at recent lows and it shows the bond market sniffed out it was going to be a little bit of a light number, but it doesn't change the story dramatically in part of the fed intentions maybe it solidifies. >> becky, more detail here -- the construction and manufacturing being down may be some of the weather with flooding and stuff like that with construction. but the manufacturing lindsey was asking for it's been fairly, you know, tepid, 3,000, 5,000. retail has been on this torrid

decline -- minus 7, minus 13, minus 14, and that could be this secular thing that's going on with the bricks-and-mortar shops. >> but those were the same areas we saw weakness with adp earlier this -- >> adp did a wonderful job of leading into this weakness, as much as it is otherwise maligned. >> one question i have with retail is, look, americans are still spending that retail number is not necessarily a reflection of consumer spending coming down -- >> absolutely. >> and we're spending our money in different ways, getting things in different ways, and i'm not sure that the jobs number's going to pick up additions at an amazon wear mouse or at least not put it in the same context. >> there's been an ongoing discussion between the industry and data people about what counts as retail hiring. >> right. >> and we have been looking for some of that retail hiring in the transportation and the warehouse segment, that an amazon worker is a retail worker at a warehouse, rather than a clerk at a bricks-and-mortar store. you've had some additional strength in there, but not this early this month

and mike, on the fly, did the math right, minus 15 on government. >> all right. >> well, you know, what you said coming into this, steve, is that the fed looks at anything from 80 to 100,000 hiring and says, that's strong, that's just picking up any slack that's there. so, this isn't a really weak number from their perspective. >> it's enough to keep the unemployment rate unchanged, more or less we have had this extraordinary run where you had a regular recovery in the jobs market, and then you had this additional recovery that brought in enormous numbers of people i can tell you from the fed conference that i was at in chicago this past week, there is a lot of sympathy for the let-it-run idea, about both the economy and the job market there's a lot of talk about the good that it does to have people just hired, rather than on the sidelines and that there's a long-term good to this and there's a lot of talk about letting it go. and i think that's more and more the conventional wisdom on the board right now. >> jason, what else would you

take out of this >> you know, you look at the household side of this survey, and you saw u-6 down again this month, the unemployment rate flat, the participation rate flat and remember, every time you see the participation rate flat, that's good news, because an aging population should be bringing that down you know, that gauge of the economy is very healthy right now. but if we're expecting consumer spending to propel us over the rest of this year, you know, the slow wage growth, the higher prices we're going to get from tariffs aren't good news for that, you know, 70% of our economy going forward. >> can i just get to rick? rick, i'm having -- i'm not trusting my computer here, so i just want to throw it you. i've got a 22% chance of a june hike -- june cut, sorry -- and that's mostly unchanged in the wake of this number. and what's shot up now is this july hike, the certainty about a 76% --

>> yeah, july's up you know, june is up one tick, basically. >> right. >> july's up three august is up five. september's up five. november -- >> rick, i've got to cut you off -- >> -- is up 6 1/2. >> it just changed as soon as i asked the question, june shot up to 34%. >> yeah, one tick is worth a lot when you're this close to the meeting. >> right, right. it's this close to the meeting, and it's usually not this volatile this close to the meeting, so -- >> oh, yeah, it is, yeah, because it's based on days until the meeting, so it gets very volatile, yeah. >> but i mean, usually they make up their mind and it's pretty much set lindsey, do you think that june is in play >> i don't think june is in play for a policy change, but i do think this means that they're going to have to have a much more meaningful conversation about a potential change in policy in the second half of the year and just opening the door is going to be a significant change for the fed digging in their heels, saying, no, we're at appropriate and we're going to remain on the sideline, remain at this patient approach. >> but the market has more than

opened the door. the market's got both garage doors open here. >> we do have this different situation this year with every meeting now being perceived as live >> right, because we've got the press conference. >> you have the press conference at each one. so, i wonder if june starts to get a little bit higher than it otherwise would in terms of probabilities. because people say, hey, look, if we're going to do this in five or six weeks anyway -- >> mike, as you speak -- and obviously, as rick has pointed out, in this is a sympathetic reaction to what's happened in the fixed income market. we went from 33 to 35 when mike says it goes up, so -- >> i'll shut up now. >> it could -- i mean, i want to see it hit 50% that would be a big move if that's where the market was priced in. i will point out, between powell's speech, my interview with clarida and with williams and evans, nobody pushed back against the market pricing nobody said, "i think the market's out of its mind here to be in this place." they had multiple opportunities to do so, and they didn't do it. rick >> well, to be fair, evans did say that he do.

>> well, it all depends what your definition of out of your mind is! >> say it again, rick? >> it all depends on what your definition of out of your mind they didn't sense that the end of the fed fund futures curve is accurate with 2 1/2 or 3 eases they basically acknowledged the reality of the here and now. the problem they always have is when they ignore present conditions and lay out a course, or they get really stringent in areas like greenspan, where he's going to do a quarter point every meeting, no matter what. i don't know that they could have said anything else. i think we read too much into it >> i worry about -- >> the fact that they pushed back doesn't mean as much as we're thinking it does. >> right i will tell you what i think, which is that i think that the fed ought to somewhat manage these expectations because if they don't deliver, then the market has to readjust and you get a volatility or you get a down draft in the market -- >> aw, isn't that horrible, taking risk in the markets unheard of

no, it's not that. >> you now have two -- >> you know -- shouldn't lead investors by the nose with a hook sorry, it's not a good idea. they paint themselves in with these words. >> agreed. and so, if the words are misinterpreted by the market, i always think they ought to -- >> right. >> -- say a word or two -- >> no words, no misinterpretation. maybe let people figure it out for a couple of meetings. >> so, you now have two volatility factors you've got what's the fed going to do and you've got the trade uncertainty. so, i think for the next two, three months, the most reliable prediction is we're going to see more volatility. >> can we ask jason what he suggests the fed ought to do >> they're inversely correlated. first of all, those two forms of volatility are inversely correlated, which is good news i think -- i wouldn't cut rates in june. i'd want to see more data about a weakening in the economy, but i'd be very prepared to cut them over the summer. >> all right we want to thank our panel today. thank you, everybody

have a great weekend and we'll see you all again soon. all right, coming up, an expert view on the market from ken fisher the dow looking at potentially its best week of the year. we were going to do 1,000 points now we've given back we need to be up about 100 today. >> are they still happy after this meeting >> will wall street cooperate after today's jobs report? we're going to talk jobs, markets, and what the trade war is doing to the u.s. economy, even though it's still kind of early. "squawk box" is coming right back

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welcome back to "squawk box. the government's may jobs report showing 75,000 new positions to nonfarm payrolls last month, the unemployment rate at 3.6%, unchanged. that total for jobs was well below expectations futures right now lower indicated gains than we saw before, but still a net positive opening s&p due to open up almost 0.25% ten-year yields have been on the decline since the jobs number, had been near their lows, now 2.055%, a new low for this recent move. and the dollar has also softened up it had been in a bit of a putback. the dollar index now below 97, although it picked up in the last couple minutes. last hour we were joined -- was that just last hour? >> yep time flies. >> joined on set by legendary investor stanley druckenmiller for his views on the markets and the economy. one of the things he mentioned, he doesn't like victory laps showcasing how great things are

and noted that monetary policy has also created some problems >> i'm concerned about the long term as a practitioner, i don't -- my central case is we're not going into a recession i'm worried about it and with the new view of the fed, you know, i'm a liquidity guy, i'm not worried -- i'm not that worried about markets right now. >> all right, here for his reaction as well as to discuss the broader markets is ken fisher, executive chairman and co-chief investment officer for fisher investments like so many things, it'd be so great if there were no consequences or reasons for really low interest rates. it'd be so great, but is it indicating that we're slowing down and that could be a problem for equity markets what do you think? >> we know people are afraid of that, but i always like it when people don't like it that's kind of my life

you know, you had that stanley druckenmiller guy on, and he's a bright, young fella. he's self-made richer than i am, younger than i am, better looking than i am, higher iqing than i am and bett than i am. in fact, you had that kevin o'leary guy the other day. he made a fashion statement about neckties with you, he used to go to get some fancy ties >> i don't want to go there. to the point, i never thought that the fed is as important as it is.

druckmul druckenmulle knows america better than i do he does not talk about global. there is nothing said about global and i have always been a top down global viewer of the world and when you look at the world outside of america right now. people think it is much worst than it is >> you mean i guess i would t p extrapolate from that. >> concerns about europe, cross that and concerns of all this tariff stuff do something to china. now actually, euro zone as a whole is growing at a low rate stocks are not really -- d really -- drukenmiller said this as long as --

>> relatively. >> exactly >> i want people to think about goals. we are close to goldilocks right now. relatively slow growth the fact is people don't appreciate it. >> you said you like it when people don't like what's going on a lot of people did not like the market >> really? >> or concerned about things how far can that take us >> we had a decent come back in u.s. markets this week >> look at today's come back we are up 20 points. >> is that the headline or people think we are the fed? >> yeah, so let me speak to a different point as you guys are talking earlier about jobs and my lifetime, you are going to hate this. i never paid attention to a

job's number i just don't go there. but, if you take the time from the jobs number and look at european stock prices. a couple of them blinked a hair or a whisker i believe in markets more than other stuff. markets are pretty cool. >> okay. >> thank you >> you got a lot of money under management surprising >> the world is tiny 108. >> let them get technical. thank you. >> come back soon. >> oh, let's get down to the new york stock exchange, jim cramer is joining us right now. we were looking at the futures and the reaction to the jobs report, what do you think? >> well, look i think that economy is not that hot.

this is a good environment i don't want to see inflation. i think your point, becky, and the rest of the world, what do they give you? there is so much that's nice here it is not bad or great it is nice i respect ken on the federal reserve but i recognize a lot of participants do care and they may cut and give you some commentary on it this is okay on environment, if you got the earnings, you will make money a lot of companies will make more than others it is pretty good. it is not great, it is not bad >> if the fed does cut rates in july, what does it mean for the market >> depending on what's going on in china, we as the president by that point, we have 25% tariffs and a lot of this is game over otherwise, what's happening is they cut and people still buy it

they buy the 2.5 yielder they like dividends. it is terrific it is a benign environment we have to hear what the president is going to do with mexico i am not a fan of putting in big tariffs. it is not about the gmilitary issues it is about getting a wall built. that's not good for the economy. >> we are watching to see what happens on monday. >> you loif those tariffs 5% gon monday, what does it mean? is that an impact at all >> jim, we can always roll them back they have not been rolled back a lot. mexico is a different animal from china i think the president is erratic and capricious about this. mexico is a good friend of our

country. they may not do everything we like, they sure done most of what we like it was our fault, nafta was bad but it was our fault >> our business in this country favors nafta the president should recognize that nafta was something we wanted immigration because it kept work and jobs growth. that's our fault we want to split the $5 an hour. the president should recognize we are in this fix of american business and stop beating up the mexicans >> jim, thk u, wll sanyoe'ee you in a couple of minutes, okay >> thank you >> "squawk box" will be right back

final check on the markets 20 on the dow. we are up 120. a pretty volatile premarket trading here now up 71. our jobs number, the nasdaq is indicated up of about 31 the s&p indicated above 9. 10-year fail again at 206.

i had someone put urine in my water cup. jane welsh >> thank you, jane, you are welcome balcony time >> it is quite a friday. make sure you join us on monday. "squawk on the street" is next >> good friday morning, welcome to "squawk on the street." i am carl quintanilla with david faber and jim cramer dow ward revisions, the futureses afutures are recovering we'll give china more time to report tariffs many in vvestors believe