every one is trying to do something they can to nip it in the bud. >> thank you for joining me. that does it for the exchange. i'll join tyler and melissa for "power lunch". thanks wall street feeling the heat as tensions between the u.s. and china reach a fever pitch. will either side back down with the markets on edge, we're 30 minutes away from jerome powell delivering a speech that could determine the fate of this market. we'll bring you the details. general motors strike revving up as it's in the fourth week we'll talk to the head of one county that's feeling the pinch. power hundrlunch starts right nw hi, everybody. stocks are falling they are el with off the lows of

the day when the dow was down more than 300 points the russell 2000 fairing the worst. let's go to bob at the new york stock exchange >> remember all this optimism on friday the jobs report helped dispel some of the concerns about recession. dispel didn't get rid of them. the market started expecting some positive news on trade. we have an escalation of the trade war and that's pressure with the usual names the problem is the markets increasingly coming to believe that a trade deal even an 80% trade deal may be unlikely this year that's a big problem it means potentially lower growth in 2020

it means flat to lower interest rates. it means flat to lower oil and it continue emphasize on owning the defensive sectors. those utilities, those consumer staples that have been so much a stand out theis year and so expensive. they are the stand out sectors this year. this narrative means stocks are expensive right now. number one the fourth quarter guidance, if this uncertainty continues is not going to be positive that's why bulls want to reverse this whole narrative i just explained to you they don't know how to do that without a more positive trade story. back to you. >> thanks very much. the biggest drag on stocks today, fading optimism let's get the latest from washington on how that is developing >> tensions have been building

ahead of high level talks thursday white house officials mulling restricting chinese securities from federal pension portfolios. then you have three chinese tech companies in the world index being eyed in that decision that are now banned from doing business with u.s. suppliers without a license. it's us a suspicious timing. china saying it will retaliate on many fronts the halting of nba broadcast no coinden co coindence. alternating trade war and trade talks will be a normal thing between china and the u.s. going forward. yesterday president trump seemed to leave his options open. >> i think that we'll just have to see what happens. i would much prefer a big deal can something happen i guess, maybe

who knows. i think it's probably unlikely >> larry kudlow says he sees progress you have some mixed messaging from the hawks and the doves in the white house and in recent weeks you've had mixed messaging from the president himself but we'll see what the chinese put on table and how the u.s. ends up viewing it. >> thank you last hour on the exchange kelly asked the nba's decision from china was the right move. 84% said no. does this bode poorly for the chances of getting a trade deal done during this week's round of talks. the situation in the u.s. consumer follows the hearts with their wallet when it comes to american companies doing business in china. tony, great to have you with us. there's so in mixed messages coming out of the white house wp we have the backdrop of increasing tensions whether it

be the government pensions and whether or not they are allowed to invest in chie nanese stocksr the nba. what dwlo you think happens here >> it's adding a lot of complexity to the most complex trade agreements that you can try to negotiate and one of the that i thinks that happens with the nba issue is all of us on cnbc spend a will the of time on politics and economics culture trumps both of those in the minds of people and consumers. it does cross over into areas where consumers are going into retail shops start to think about this we haven't seen that kind of thing happen in the past we have seen that happen in china. it's real risk for american firms that are doing business over there >> i think the biggest question is whether or not there will be relief from tariffs and whether

or not the next traun ch of tariffs will go into effect. the u.s. will have little leverage to make sure that china complies with anything that is agreed upon unless there are things like tariffs in place >> that's true i think a comprehensive agreement is nearly impossible to do with all of these things that are being thrown into the bucket right now it's always going to be difficult. you throw in the national security issues and makes it hard to negotiate and then i also think you have the issue of president trump going through this impeachment process right now and him looking as a weak person -- a weak leader. the chinese questioning who are they negotiating with. are they negotiating with someone who will be there tomorrow that's an issue. i do think they want to get some kind of an agreement it will bring a lot of relief on both sides in the pacific and in

markets. it's not a slam dunk that will happen because of the issues that have cropped up over the last week. >> the chinese do not like to be lectured they do not like to be told what to codify in their laws with respect to the protections of intellectual property. i'm interested in hearing what you would tell american businesses about what they or their employees can fairly and safely say about chinese quote domestic politics while they continue to do business here it's not as if hong kong is the first sort of evidence of foul play on the part of the chinese government that we're aware of they have been persecuting the

muslims and they have lots of political prisoners and yet dozens of american companies do billions of dollars of business within that country every year >> yeah. i think it's unrealistic to tell global american businesses not to do business they are at the end of the day american companies i'll tell you what we tell our clients and we tell american company s to set your principles what are you principles and be open and public about them publish them tell the chinese and others what principles you have for what your expectations are for your managers and employees and just be very clear about it and go into those markets based on those principles

>> john deere, general motors. >> they sl global competition. my issue here with the nba is nba is essentially a monopoly. there's only one in world. there's not a clear number two the number two is a hundred steps down relative to the nba the nba has some power here. the problem with the nba is that they have -- they're uneven in what they expect from their people and their teams you can't criticize china but you can criticize turkey a general manager isn't allowed to say something but a player is allowed to say something they're not clear on what their principles are and what they are about. they have tried to come out with a couple of statements to clear that up. maybe they haven't quite done it they needed to go in as their

business model, as their business strategy knowing what those principles are >> we're all hopped up about this issue and you look on any cable news channel now, you'll see this debate taking place across the board let's be clear here, daryl mory was speaking as himself. he wasn't speaking on behalf of the houston rockets or the national basketball association. how long does this story play out before another shiny object comes along and we're all distracted and it goes away? >> it could happen soon. these things are happening every day and they're big. we as americans care about these kinds of issues. we don't say he shouldn't be allowed to say those things and

the nba has got so shut him up there's founl principles we believe in the firms need to go into these markets clear on those things. >> thanks as always. escalating trade tensions with chie that weighing heavily on the market. will earnings be the next shoe to drop? is the market waiting to see what happens at these trade talks on thursday, friday and into the weekend >> i think what tony said was really important he laid out this issue of how complex and how multi-facetted some of these trade issues are the notion we'll have some big deal, i think we have to dampen

our expectations on that markets are looking for is some senses of frame work put in place that will continue negotiations and we can begin the process of deescalation. i think that's what we'll look for out of the trade negotiations >> john, an awful lot of people believe this we're going to be in state of trade tension and geo political tension with china for the next years and maybe even decades that is just something we'll have to get used to. do you agree with that >> i don't i think it's very hard to tell what's going to happen three to six months out on something like this i think we're working up to a crescendo with both sides expressing their grievances to each other

more companies begin to diversify their supply chain away from china. >> lines in the sand with get washed away in the next tides. >> i think so. i think you can't count on that. if anything, it's a dynamic situation that based on the paying consumers in china and in the united states could feel from full second year of trade war, we think the effects of that are being reverberated in the halls of leadership of both countries and so we think we're just reaching a crescendo here we do agree with the thought this is a much longer process than many people thought from the beginning. wilbur ross gave us the signal on that, as i recall when he said the complexity of this thing about a year ago on cnbc, this will take some time

there's so many issues and fundamentally from an ideological perspective, there's a huge moat between both countries that's got to be worked out >> the longer this goes on, i'm thinking more like companies not wanting to spend we're already expecting capex to only go up 3%. what are you concerned about what are you looking for specifically on third quarter earnings calls the earnings conference calls in terms of commentary that will make you feel better or worse. what are some of the things that you'll be watching >> it was the first order effects from the trade conflict. we're not material enough to throw the global economy into recession. what does it do to business confidence, business spending?

this has been the slowest cycle in history. there's more of pause in the hiring plans as well >> thank you very much coming up, jay powell speaking at 2:30 p.m. eastern time we'll take the remarks from the fed chair live we're 23 day sbos into the gm se and showing no signs of ending soon we're going live to michigan for a look at the huge economic d an maybe political impact the strike is having stay with us

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we're in the fourth week of the gm strikes now the ripple effects have ravage gm share strikes which is down 10% at this time it's also ravage many communities relying on this company. we bring you to a county in michigan that's been hit hard where gm employs about 20,000

workers. joining is executive to mccomb county welcome. thanks for joining us. >> thanks for bringing me on the show >> i guess it depends on how long the strike lasts. what fall out are you seeing from it? >> there was some immediate impact that took place with some of the companies or facilities it was like day after they actually decided they will go on strike some of these facilities had to start laying folks off it's kind of a progression of layoffs that sl taken place. last friday was what we call national manufacturing day walking through it it was kind of sad >> you said you were number one. the number one county in the country with the highest manufacturing job growth

there's going to be a lot of layoffs, so to speak what can you tell us about that? what's the trickle down effect that we're seeing that's lasting month a month. >> you think about it as you just mentioned the number one job growth in the country. there's 31 other counties out there. what a huge asset that was some of these facilities will close up shop. how has that trickled down to the local community. i was in one that was called a cabob house.

normally that place is packed down the lunch hour. i walked in there and it was a quarter full normally you're seeing a lot of people starting to feel the impact it will take a bit of input to work with them to figure out how to solve this contract >> you also said you think it's surprising that president trump hasn't tried to stir this issue up what do you mean by that >> automatll the democratic cans have been in the county. knowing that it was something that swung the election toward donald trump during the last election cycle which may have swayed the state or the election it's surprising that he himself isn't here or even talking more about general motors settling strike on behalf of the workers. >> you think he should come out in support of it and maybe get this resolved? >> as a democrat i don't know if i would recommend him to do what he need to do to win mccomb

county anybody that wants to win over the county will have to win over the workers and a lot of them are from the manufacturing they want to know who they will trust to maintain jobs and some good wages moving forward. they will be voting. there's no question about it who they vote for will be dependent upon who they trust. >> pretty big ripple effect from your area to the whole country thanks very much for joining us. >> you bet thanks for having me we're about three hours away from next decision on the release from the next fed decision >> you can't wait. >> i got this countdown clock in my house this is a live shot of the wall of my living room. in just a few minutes we'll hear from jay powell in one of his last public speeches will he drop any hints about the fed next move. stay with us

not release the entire stript and give a context you can see

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welcome back let's check on the markets before we hear from jay powell the dow isdown nasdaq still the worst performer down almost 1% we have breaking news.

jay powell speaking today. it will be one of the last times we hear from him before the next fed meeting later this month >> h e is spe-- he is speaking. he will say the fed will continue to buy new reserves they said it was like to happen but powell saying it will happen says they are contemplating buying treasury bills. he says do not confuse what's going on with the fed balance sheet as quantitative easing it should not have a market efbt on monetary policy, per se he says the fed will act as appropriate.

he says the fed is data depende dependent. his policy is never on a pre-set course there are risks from weak global growth, from trade and from brexit as well recent job gains could be revised lower. even then it won't be a problem. >> you stay here >> never seen far from relevance drawing our attention after

recent events in the persian gulf technological advancements are rapidly changing our answer. with tera bytes competing with truckloads of goods, one of the best ways to measure output and productivity put more provocatively, might the slowdown be an artifact of measures this question is at the core of our work in august the bls announced that job gains were likely half million lower than previously reported i will discuss how we're using big data to improve our grasp of the job market in face of such

revisions. these three questions highlight the broad range of issues that come under the simple heading of data dependents. after exploring them i will comment briefly. our story of data dependents in the face of change began when the fed opened for business in 1914 world war i was breaking out in europe and over the next four years it fueled profound growth and transformation in the u.s. economy. you could not have seen this change the department of commerce did not public those until 1942. the census bureau had been running but that came out only every five years the fed began creating and publishing a series of industrial output reports that soon evolved into industrial production indices these initially compromised of

22 basic commodities because they covered the groups but also for the practical reason that data were available with less than a one month lag the feds efforts were among the earliest in creating timely measures of aggregate production and over the century of its existence or team has remained at the frontier of economic measurement using the most advance techniques to monitor u.s. industry and nimbly track changes and production figure one shows u.s. oil production since 1920. after rising fairly steadily through the 1970s, production began a long period of grads yul decli -- gradual decline. by 2005, production was at the same level that it had been 5 years earlier.

in 2018 the united states became the world's largest oil producer oil exports have surged. imports have fallen and the u.s. energy information administration projects that this month for the first time in many decades the united states will be a net exporter of oil. as policy makers, weclosely monitor developments in oil markets because discorruptionrun these market vs pls have played role we assess a sharp rise in the price of oil would have a strong negative effect and on the u.s. economy. today, higher oil price would cause dislocations and hardship for me but with exports and imports nearly balanced, the higher price paid by consumers is roughly offset by higher earnings of workers and firms in the u.s. oil industry.

setting aside the affects of geo political uncertainty that may accompany higher oil prices. we judge it would have offsetting effects on u.s. gdp it's fundamentally messier because it requires adding apples and oranges and a myriad of other goods and services. hard working statisticians regularly adapt the data sources and methods. the measured data provide accurate indicators.

periods of rapid change present particular challenges and it can take time for the measurement system to adapt to fully and accurately show the changes in the economy. the advance of technology has long presented measurement challenges in 1987, nobel prize winning e connist quipped you can see the computer age everywhere but in the productivity statistics. in the second half of the 1990 s, it was at the heart of policy making where others saw capacity constraint and incipient inexplaination, greenspan saw productivity boom. in light of the uncertainty it faced, it was judged the appropriate risk management approach called for refraining from interest rate increases

unless and until there were clearer signs of inflation later revisionist to gdp showed faster productivity growth this episode illustrates a key challenge in making data in realtime good decisions require good data but the data in hand are as seldom as good as we like. falling more than 3% a year from 1995 to 2003 to less than half that pace since then analysts are actively debating three alternative explaininatio

for this slow down it may be real and persist indefinitely. the slow down may be over stated because of measurement issues akin to those that work in the 1990s. wo we're carefully the implications of productivity gains. productivity growth seems to have moved up over the past year after a long period at very low levels we do not know whether that welcome trend will be sustained.

these technologies that were emerging 15 years ago are now ubiquitous we can receive near instantaneous updates on the lives of friends far and wide. adding to measurement challenge many of these services are free which is to say not exclusively priced we're the peace and tranquility afforded by those contentious arguments over the trivia of the moment for example, fed researchers have proposed a novel approach to measuring the value of services consumers derive from

cell phones based on the volume of data flowing over those connections. that would be very good news over the previous couple of decades would also have been about a quarter percent hire as well implying that measure m chan - measurement changes impart for the slow down in statistics. research in this area is an early stage but this example illustrates the depth of analysis supporting our data dependent decision making. let me now turn to the measurement issues raised from the measurement raised by the information age. answering this question is central to our out look for both of our dual mandate goals.

while this topic is always front and center, i'm raising it to how we're using big data to inform policy making until e cently the official data showed job gains of about 210,000 per month which is far higher than necessary to absorb new entrance into the labor force and thus hold the unemployment rate constant in august the bls publicly pro viewed the benchmark data revision coming in february 2020 and the news was job gains over the weird was more like 170,000 per month. a meaningfully lower number. the pace of job gains is hard to pin down in realtime largely because of the dynamism of our economy. definitive turn over arrive with a lag. initial data are sophisticated

guesses based on what is known as the birth death model of firms. several years ago we began a collaboration with payroll processing firm adp to construct a measure of payroll employment from their data set that covers about 20% of the nation's private work force and is available to us with roughly a one week delay while experience is still limited, we find promising evidence it can refine our realtime picture of job gains. for example, in the first eight months of 2008 as the recession was getting under way, the official monthly employment data showed job losses of about 750,000. later benchmark revision told a much bleaker story with declines of about 1.5 million

our new measure had it been available in to 2008 would have been much closer to the revised data alerting us that the job situation might have been worse than official data suggested we believer the new measure may help us better understand job market conditions in realtime. the preview leaves average job gains over the year through march above the pace required to accommodate growth in the work force over time. where we had seen a booming job market we now see more moderate growth some part of the benchmark likely will carry ford thus the current reported job gains of 157,000 per month on average of the past three months may well be revised lower.

of course the pace of job gains is only one of many job market issues that figure into our assessment of the economy and how it's performing relative to our maximum employment mandate as well as our assessment of any inflationary pressures arising in the job market. in summary, data dependence has been at the heart of policy making at the fed. before wrapping up i'll discuss recent developments in money markets. the federal reserve sets two overnight interest rates the interest rate paid on banks

reserve balances and the rate on our repurchase agreements. in mid-september, an important channel in the transmission process exhibited unexpectedly intense volatility payments the meet corporate tax obligations and purchase treasury secretaries created pressures in money markets we began conducting temporary open market operations these operations have kept the federal funds rate in the target range and have alleviated money market strains more generally. while a range of factors may

have contributed to these developments, it's clear without a sufficient quantity of reserves in the banking system even routine increases in funding pressures can lead to out sized movements in money market interest rates. this volatility can impede the effective implementation of money policy and we're addressing it. my colleagues will soon announce measures to add to is supply of reserves over time consistent with the decision we made in january, our goal is to supply ample reserves to ensure control of the federal funds rate and other short term rates is exercised primarily by setting our administered rates and not through frequent market operations of course, we will not hesitate to conduct temporary operations if needed to foster trading in the federal funds market at rates within the target range. reserve balances are one among several item on the liability side of the feds balance sheet

and demand for these liabilities notably currency and circulation grows over time. increasing the supply of reserves or maintaining a given level over time requires us to increase the size of our balance sheet. as we indicated in our march statement, at some point we'll begin increasing our security holdings to maintain an appropriate level of reserves. that time is now upon us neither of the recent technical issues nor the pressures of treasury bills we're contemplating to solve them should all the alter the stance monetary policy of which i turn. our goal in monetary policy is to have maximum and stable

prices at present the job in inflation pictures are favorable many indicators show a strong labor market with solid job gains, unemployment at a half century low and rising labor force participation. wages are rising for those with lower paying jobs. inflation is below our 2% objective but has been gradually firming over the past few months participants continue to see a sustained expansion, strong labor market conditions and inflation near our 2% objective as most likely many outside forecasters agree there are risks to this outlook from global developments growth around much of the world has weakened and uncertainties around trade, brexit and other issues pose risk to the outlooks as those factors have evolved my colleagues and i have shifted

our view about the appropriate monetary policy and have lowered its target range by 50 basis points we believe that our policy actions are providing support for the outlook. looking ahead, policies ahead, a pre-set course the next fmoc meeting is several weeks away and will be carefully monitoring incoming information. we will be data dependent, assessing the outlook and risks to the outlook on a meeting-by-meeting basis taking all of that into account, we will act as appropriate to support continued growth, a strong job market, and inflation moving back to our 2% objective. thank you and i look forward to questions. [ applause ] >> thank you, jay. and we do take cards as well as, so i would start just to

reiterate in terms of data dependency, the importance of the bea and the bls. and it's been a long-standing interest to support those agency s. i'm curious if you could lend your support to those agencies, as well? >> i would be delighted to our work depends really heavily on getting timely and accurate data and also on being able to anticipate changes in the structure of the economy an ever-evolving economy and it's not as simple as just counting the things that are happening. it really isan important challenge that enables policy makers to do a better job for the public i can hardly say too strongly how much we support that activity i would also like to support my colleagues in the industrial

production group who work behind the scenes for a century now, and also all of the other terrific economists at the fed i'm sure people in this room will appreciate that they work very hard to serve the public all the time and i would like to call that out. >> so in terms of being a pilot, way up in your jet plane, it's very nice to have good indicators about what, in fact, you're flying through. i'm going to ask a more general question i got the opportunity to go up to the rocky mountains national park this weekend and one of the things that the forestry world has learned is that if you go and fight every fire that starts in a forest, one day you get a fire that comes out of control and they've learned that pre-burns are actually a really powerful way of controlling big, systemic risk.

and i'm curious, we're more than a decade into an expansion the unemployment rate is at a low. do you think there's anymore fuel building up in the forest of the financial system? >> let me start by saying, it sounds like you had a more fun weekend than i did [ laughter ] let me take that question another way and i'll come back if you look through these long expansions, there have been periods where the economy slows and kind of gathers itself and moves forward again. that was '95 and '98, those two episodes, '15/'16, and a little bit a slowdown earlier in the mid-teens, in this expansion so that's clearly a natural -- that's part of these very long expansions that we've been having really for the last 40

years and it seems to be healthy thing. clearly, things are slowing a bit now. job growth is slowing as well. but it may just be gathering itself there's no reason why an expansion can't continue so but in terms of the dry tinder question, we monitor financial stability conditions very carefully now, all the time we have a division that's responsible for that and four briefings a year, regular quarterly briefings for the board and for the fmoc and ongoing monitoring we published our framework so everyone could see what we're looking at and hold us accountable. the pre-crisis situation was, call in the s.w.a.t. team and try to stop it this is a much more forward-looking thing. so we look at leverage in the banking system, asset prices, and the stability of funding, principally in the banking

system, but not exclusively. and if you look across all of those today, i would say that the vulnerabilities to the financial system are moderate overall, which is to say, not low and not high there are vulnerabilities in areas that we're carefully monitoring particularly, some asset prices have been high and also, corporate debt is an area. so in non-financial borrowing, you have households and businesses household is in good shape businesses are borrowing a lot and it's something we're monitoring carefully but the vulnerabilities are moderate overall >> great so when you first became share, you were spotted numerous times carrying paul volcker's book under your arm and i'm curious, what lessons did you learn from paul volcker and what lessons are you taking through your chairmanship? >> i've known paul volcker since i was an assistant secretary in the treasury in 1982 or '1

and at that time, he had relatively recently left the fed and i was frightened of even meeting him, so intimidated by this global figure and he couldn't have been nicer and more interested in, you know, help megaaing me and supp me and we kind of kept up so he was really -- it was a great person to know and i've read numerous accounts of his life, but this book, if you haven't read it, really sums it up well i don't think there has been a greater public servant in our broad area in our lifetime and he really just did exactly what he thought was the right thing all the time and let the chips fall where they may. he was famously booed at a washington bullets basketball game when he had rates very high, and they were then called the bullets. so he's a great man. i'm still in touch with him. so i actually thought, i should buy, you know, 500 copies of this book and just hand them out

at the fed i didn't do that, but it's a book i strongly recommend and we can all hope to live up to some part of what he is >> great one of the things that the fed has been doing over the past year is a strategic review of its policy framework just recently, we had a brookings conference discussing inflation and inflation targeting and a re-evaluation of perhaps the framework there. i'm curious how that research and review is evolving and your thoughts there >> so i think it's evolving very well this is something i really wanted to do as part oz my time as chair and a number of central banks around the world have done these external reviews in one form or another. and i thought it would be a good time and idea for us to do it. and when rich clairda arrived, there were only three of us on

the board at that time and we were having a hard time getting through the day. rich took this on at the very beginning and has been a great leader for this. we're looking at our framework, our tools, our communications. we began with a series of fed listens events at all 12 reserve banks. i think the last one i'm attending, the last one tomorrow in kansas citi, i think we've done 14 of those and they are -- they're very different, and lots of them are livestreamed and we're hearing from the people we serve, mainly so it's people who work and live in low and moderate-income communities. it's labor unions, it's small businesses and really, what a maximum employment and price stability and growth mean to them. and i have to say, if you listen to one of these things and sift through it, it's quite striking. it's -- it really does, i think it sheds a different kind of light than we might ordinarily get than just all the economics we study we take that onboard and now

we're going through a series of board meetings, where we're looking at things like makeup strategies for inflation and our tool kit and how we communicate and we're going through those things one by one. i think we're making great progress and i'm hopeful that we will -- i think the exercise itself is a big win. and a big gain for transparency and process. but also, i'm hopeful and i believe we'll be able to come out with some innovations, which will put us in a better place to serve the public and i'm also happy to see other central banks around the world are kind of picking up on the idea and doing it. >> great, great. so you mentioned the tool kit. and certainly the tool kit over the last decade has expanded quite considerably for not just the fed, but other central banks. and as you consider the prospect of, if we do see a full business cycle, what tools in that tool kit are you interested in using

again, and what tools do you not have in that tool kit that you hope to have >> as this audience knows well, the tools that we did use in this financial crisis were rates, the federal funds rate, which we cut close to zero, effectively to zero. and we also used fairly aggressively forward guidance, indicating to the market -- and this was at a time that the market was predicting liftoff and rate increases that were higher than the committee thought were appropriate sort of condemn semi-commitments to hold rates low for a long time so that worked and also, large-scale asset purchases of longer-term securities which our way of lowering long-term interest rates to support economic activity. so those -- i guess we need to stop calling them unconventional tools at some point, but those are the two new tools that we use during the financial crisis. i'm sure that we would use them again, as needed and as appropriate. we don't see that now. we looked carefully at negative