Gary Cohn on the Shutdown & AI’s Impact on the Labor Market 10/29/25

0:00Bring in show music, please. This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, a conversation with Gary Cohn, National Economic Council Director in President Trump's first administration, Cohn weighs in on the state of our economy. Overall corporate earnings, they continue to be very strong. But when you look at how corporates are getting there, it's also interesting. We've seen probably more layoffs in this round of corporate earnings than we've seen in a long period of time. Indeed, layoffs, layoffs, layoffs this tech earnings season. Christina Partsinevelis reports on AI's role in tech's labor market.

0:43Top CEOs were telling us something completely different about what's driving these cuts. And the mayoral election that's captured national attention, from billionaires even. Robert Frank reports on the money flowing for, and more commonly against, New York mayoral candidate Zoran Mamdani. New York is doing better right now than I've ever seen it, and that's what they're trying to protect. Those conversations plus$5 trillion with a T in NVIDIA's Sightline. It feels like so recently we were trying to figure out who would be the first company to go above$1 trillion. It's Wednesday, October 29th, and Squawk Pod begins right now.

1:25Stand Becky by in three, two, one, cue it please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. Andrew, welcome back. Thank you. It's nice to see you. I feel like I've been seeing you every day, but in different boxes. You were never really gone. Not long enough for you, but yes. If you want to wear that stupid jacket, you can wear it. Just do it here if you want to. If you want to, I'm... Is this your gift? That's my gift. That's my gift. I'm too old to worry about these trivial things.

2:03When you're sitting at the table, it feels natural. But you would like to wear it. You would like to wear it. I always like the... I like a blazer. I like a suit because it... It has been 14 years he's been yelling at you not to wear a jacket. 35 total. It's like armor. That's what it is. For me, it's like armor. For me, it's like... You think it's constricting. Constricting. And I turn into a different person. Unfortunately, people like that person more than... So maybe... I don't... I don't know. Seriously, if you... And you've got the pocket square. Well, you can do some more... You've got those beautiful suits.

2:34You've got those... You can do more fashion-oriented things, too. Peak lapels. And you can do different colored shirts. Peak lapels, different colored shirts. You know, there's a lot of options. You should take it and run with it. I may. Oh, my goodness. I don't know if I'm in a position... Because last time you wanted to do that, the guy running the place said you couldn't do it. Remember? He wanted to have the... Wasn't that under your goading? Yeah, I think that was under your goading. Wow. Is this me? You know how things actually work around here. Yeah. Let's take a look at how the U.S. equity...

2:59I like what you're... That's... Hey now. Hey now. Check this out. NVIDIA's market cap actually crossing the$5 trillion mark in early trading this morning. We're going to have more on that in just a moment. but the key number to watch on this is$205.76 a share. If it stays above that level, it will open above$5 trillion. And you're right, Joe, it was just, it feels like so recently we were trying to figure out who would be the first company to go above$1 trillion. Above a trillion. And it was Apple, I think. How many years ago was this? I don't know. They all merged together. Two, three years ago, is it feeling like?

3:36Well, you know, that where's the beef ad was 40 years ago. So I don't know anymore. I don't try to figure out when things. I remember having these conversations very recently with a lot of people. We did. And the law of large numbers. You said, oh, what, are we going to have a trillion-dollar company? Yeah, we are. We're going to have a$5 trillion. Someone's going to be worth a trillion dollars. That could never happen. Apple was above$4 trillion yesterday. It ended up not closing above that. But in the pre-market this morning, it's back above$4 trillion. So you've got three companies, two above$4 trillion, one above$5 trillion.

4:04And wow, here we are. And we could have a guy in his 50s that's worth a trillion dollars, theoretically. Yeah. It's getting close. Elon Musk. And once it happens to one, it happens to the rest. Yeah. Well, no, no, but it could happen again. I know, but it could happen again. Seven or ten companies. It doesn't usually happen in a vacuum. But yeah, it depends. Of course, the civil war will probably prevent more trillionaires from happening. Probably. We're hearing about that more and more. I think Dahlia is spouting that that that that prophecy. The civil war is coming. Just the class struggle because of not between the north and south or the rest.

4:40Oh, no. No, between the heads. Yeah, exactly. Like, let them eat cake, guillotine. Gotham type stuff. Mondani. Look, it's true, and at a point where you've got the government shut down, and that is really... No food stamps for you, but a trillion dollars. In the markets. I just saw a video of Mondani on from I don't know what year. It seems a horrible video. Where he literally says that he wants the government to seize the... Means of production. Means of production. like actually says it Marxism like actually says it communism yeah it's interesting because I talk to people in New York and even people who are supportive of him say oh Andrew he's not really a socialist he's a democratic socialist and then when you see him say it he says I'm a socialist you go oh okay it's actually Marxism if you go yesterday a couple years ago he said he's been watching the New York City police and their IDF yeah I saw that too I mean he's you know He's young.

5:38Maybe he's better now, a couple of years. It's coming. We might as well face it. Well, I don't know if you saw, by the way, Bill Ackman, you know, made this argument yesterday that he thinks the poly market and all of these prediction markets. China can be manipulated. He's basically trying. He's trying to he's trying to make the argument to people to go out and vote because he's saying, look, it's not a done deal because these these market things are not effective. It is when billionaires look like they are trying to change the election. Well, that's the other part that makes this super complicated.

6:11There's a flurry of news from NVIDIA over the last 24 hours. During a keynote presentation at the company's AI conference, CEO Jensen Wong said the company expects$500 billion in GPU sales through the end of 2026. Also said the company is now producing some of its Blackwell AI chips in Arizona. They were previously manufactured in Taiwan. and NVIDIA announced it's working with the U.S. Department of Energy to build seven new supercomputers. It's also working with Uber to build a fleet of self-driving cars. And it's partnering with Eli Lilly to build a supercomputer and AI factory to help accelerate drug development and drug discovery.

6:53Separately, it announced it's taking a$1 billion stake in networking company Nokia plans to use that money to fund its AI ventures and other general corporate purposes. OK, we need to add that. The two companies plan to work together to develop next generation 6G cellular technology, the stock sword of Nokia. It is pulling back a little bit this morning. NVIDIA is also partnering with Cisco and T-Mobile on 6G development, and it announced high-ups with Palantir and Oracle. And what I was going to say was, every time they announce they're going to spend money with someone in an investment, you can just, Andrew, you add the money, and Becky's already looking at me, because that's why I'm referencing you, because you're looking at suit jackets to wear on set now.

7:44No, but every time they spend money somewhere, you can just add that to their market cap, Which is the crazy part. Right. Just they're spending, okay, it's going to be billions or even trillions on this stuff, so just add it to our market cap. We're spending it. Why does their market cap go up when they're spending it? They're partnering with everybody and building themselves into the infrastructure of everything that matters. That deal with Nokia is a pretty big one because it's going to get them into the cell to the airwaves to go through some of these things. And once you put your equipment into these things, it's really hard to get it out.

8:15I mean, how long was that reader that I just said? because to summarize everything NVIDIA's doing, it takes that long. It's not the only reason the stock's that high. We're going to talk about it more with what we heard from President Trump, but the potential deal with China and the mention he made of Blackwell chips yesterday. Who knows if that actually happens? NVIDIA, Jensen Wang's been saying for a while that NVIDIA is looking at China as basically zeroed out that business. If it turns out that the China business is not only not zeroed out, but they can ship more than the H20 chips, but also potentially Blackwell chips, that's huge news for the markets.

8:45I don't know what Congress is going to think about that. what some of the China hawks are going to say about it, but it is part of what is pushing NVIDIA shares higher this morning. Well, the deal, the framework of the deal is start buying soybeans again and do something with fentanyl. And give us rare earths. And give us rare earths. But you do those three things and we take the tariffs off. But we take the tariffs off and, by the way, you can have chips. So it's not just the trade deals that are happening here. Oh, and give us TikTok. Yeah, national security. Okay, part of the deal, you acknowledge that it's, It's working here or is it taco?

9:20Let's see what the deal is. I've been trying to figure that out. By default. And I don't like saying taco, but it's a shorthand. By default, he moved the window. So you could say he's been. But is there a method to the madness? Is it brilliant? Look at the market. It depends if you believe in tariffs ultimately. So that's like a long-term question, right? There aren't any. They're just, they're de minimis. In the short term. The question is, has he moved the window? It was the threat of those targets that got all these deals done. and they never really happen. You think these deals never happened?

9:50No, the tariffs never really happened. The worst case scenario... The worst case scenario never happened. But there are... There are. This goes back to the$200 billion that's going to come in. So they are real. Right. And there's really hasn't been inflationary yet. Well, and that's... There are... Look, you saw, you know, meat, furniture. There are things, clothing. There are real things that are impacting people that are going to cost more. Toys, if you look at any of the impact, people are buying fewer toys. I know, but it hasn't, you know, it's been outliers. Not that we've tamed inflation, but even with inflation at 3%, it's hard to say that that is all from tariffs.

10:28There's a lot of it's coming from other places. Now that I've been on the road, I want to tell you, Starbucks just introduced a iced coffee drink with protein. This is where, yeah. Where you can get 29 grams of protein in your, and I've been drinking them everywhere I go, and they're great. I have no affiliate code. I'm not an influencer. I'm just telling you, it's, I would, I was part of it. And there were people in line just to get the protein coffee. And you're not gagging it down? No, it was really tasty. I did the sugar-free, the sugar-free version, because if you do the one with sugar, it's.

11:05So what is it? 200, 200 calories. 200. I thought it was pretty good. And we talked about this before, and I know it goes all the way back to the eating. Protein diets are high now. Seinfeld, remember the fat-free yogurt? Everybody kept eating it and they all got fat and then they had it tested and it was loaded with fat. It was not true. 29 grams, you... That's what they say, I think so. We need to test it. I haven't tested it, but what do you want me to tell you? We need Costanza to go to a lab. And find out. You think it tastes too good to really be 200 calories? I don't know, maybe there's...

11:36It's like the holy grail to find something. Look, everybody's trying to find protein. High-protein diets are all the rage right now. There are some questions about protein powder, so if that's the right way to get at it. This, I think, is through a sort of almost like a Fairlife kind of milk situation. Yeah. What is that? The milk across the board is... Fairlife is a milk company that's owned by Coca-Cola that has sort of super high levels of protein. Is it a lactating product of some animal? Yes. Yes, it's real milk. It's real milk. Somehow they strain it or do something that I don't understand.

12:09Because oat milk is not frickin' milk. No, no, it's not like that. Well, it's not milk. Right. It didn't come from a lactate. Call it something else. NVIDIA shares are... It doesn't sound as good if you call it sludge. It's a little less appetizing. Oat sludge. I was going to say this yesterday. Pea-based meat, P-E-A. Pea-based meat is not meat. Call it something else. It's made from peas, right? Yeah, it's beyond meat because it's not meat. And the stock got what it deserved, I think. But I'm not commenting on valuation. It can go back up. I don't care. Doesn't matter to me. Cheese will be next.

12:52Next on Squawk Pod, once the National Economic Council director under President Trump, Gary Cohn is watching today's economy closely. The cost of labor is not going down. and the price that they can charge the ultimate consumer is not going up. The only way to make your quarterly numbers work is to squeeze some cost out. And it feels like the cost that people are squeezing out right now is labor cost.

13:20This is Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross-Sorkin. Here's Joe. Join us now, IBM Vice Chair Gary Cohn. He served as director of the National Economic Council in President Trump's first term. Good to have you on. Great to be here with Joe. I don't know where to start on this, Gary. And Becky and Andrew, it's great to be with you. Great to see you. It's great to be with all of you. I was just complimenting Andrew on his book. I told him he needed to live more publicity. We didn't really know what was out there yet. Wait a minute. Thanks. Your book is out? Not yet. No, I'm joking.

13:54You were in the first Trump administration. And I guess it was widely talked about that if you agree with 70 percent of something, you don't want to sacrifice the perfect for the good. You had some issues, I think. And maybe in the second administration, you're not part of it, but you're not necessarily a tariff guy or some of the things. But are you a little bit surprised that as well as things are going, how divided everybody is? I'm shocked. I mean, the borders closed. The market's at new highs. We're getting these trade deals. GDP looks good. Unemployment's still low. Inflation is, you know, I don't know.

14:33Benefits are about to end. Government workers aren't getting paid. Soybean farmers are up in arms. That's not Trump. None of that. I can just let the two of you talk. This is perfect. None of that is Trump. It's the side, in fact, that's resisting Trump. The buck stops here. No, no. The buck stops here. Look, I understand that I hate what the Democrats are doing here, but ultimately the government's been closed for a month and somebody's got to figure this out and open it. somebody's got to step in and be a lawyer on this. That is a manifestation of what I'm saying about their whole resist mentality.

15:04That's why the government's shut down, because he's doing too well as we are. I think you look at this in many ways as things are going well. But we're in this, many people call it this, K-shaped economy, right? We've got one leg going up and one leg going down. When has that not been true, that there's the high-end consumer and the low-end consumer? It's always been true. Is it worse? I just think it's bigger and more divided today than it has been in a very long time. Between people that are doing well and have enormous amount of disposable income and are willing to spend money no matter what's going on in the economy.

15:41And then there's those, as Becky and you were just talking about, those that literally work for the government today who are probably standing in line potentially at food banks to be able to put food on their tables. The economy between the two of those is as wide as it has ever been. The government going back to work will help some of that. And there's a very interesting but strange phenomena. When you're a government that shuts down for four weeks and you don't pay your workers, the workers tend to cut back and they tend to make due over those four weeks. Then they get the four weeks of payback and then they go out and spend it.

16:15So in a funny but true way, it ends up being stimulant for the economy. So when those workers get their four weeks of back pay, they'll put it into the economy. And it will feel good during those periods of times. As you point out, if you look at overall corporate earnings, they continue to be very strong. But when you look at how corporates are getting there, it's also interesting. We've seen probably more layoffs in this round of corporate earnings than we've seen in a long period of time. Over the last week and a half, two weeks, you've seen well over$160 ,000. Why is that? Well, I think it's a combination.

16:48But the 160 ,000, if you put it in relationship to the conversation you were having with Steve Leisman yesterday morning, where you were talking about the private payroll data looks like about 15 ,000 jobs a week. Well, 160 ,000 is 15 ,000. That's at least 10 weeks. We've laid out 10 weeks of people in the last few weeks. Wow. You go down the list, UPS is top of the list at close to 50 ,000. That's purely a function of less foreign imports and less freight. So they're telling you this is less for this has to do a trade. You're looking at Nestle. Nestle is in here at 16 ,000. Price of chocolate is really high.

17:25Consumers are buying less chocolate. So, you know, the overall thought here, and we talked about this last time this year, input prices are going up for U.S. companies. The cost of labor is not going down and the price that they can charge the ultimate consumer is not going up. The only way to make your quarterly numbers work is to squeeze some cost out. And it feels like the cost that people are squeezing out right now is labor cost. And I said it to you guys about a month ago, and I think it's proving true in these numbers. We've seen 160, 170 ,000 layoffs in the quarter. Policy question for you.

18:00Either you're Jay Powell or you're President Trump. What do you do to fix that problem? this is like this is a tough problem but i do think they're working towards fixing it slowly and surely you know getting a deal done with china getting a deal done with japan getting a deal done with canada those are all very helpful you know once you you figure out where the final cost of goods is or the final input costs and these rare earths and a bunch of these commodity inputs, which is, you know, Japan, China, Canada, once you settle the price of those input costs down, I think manufacturers have a much better idea of what they can charge and what labor they can have.

18:45And right now, you know, we're pushing labor out of the equation. And look, there's a bit of an AI reality in there, and there's a huge AI excuse. You know how many times stocks have gone up when companies announced rationalization of operations or layoffs or whatever you want to call it. It used to happen all the time. You said, how do we fix this? Is this something that corporations have needed to do in pairing unproductive parts of their business? Can they actually, is this actually a net positive long term that this tariff cover is giving them reason to lay off people? It's a bad thing, but they're going to be leaner and meaner.

19:28It's the natural cycle. It's the natural cycle. Not for the people that are losing their jobs. Exactly right. If you're one of those people that's in the cycle, it doesn't feel very natural. It doesn't feel very fair. But if you think of the cycle we've had and sort of starts with the COVID cycle, the COVID cycle, we had the exact opposite. Every company was hoarding workers. You know, everyone who came in and said, look, I can't hire good people. I can't get good people. Anyone I get, I'm retaining, I'm attracting. We came out of COVID with workers at an all-time record high in companies. Companies were hoarding workers.

20:02And they weren't going to let them go at any cost because, heaven forbid, they should need that incremental person. They couldn't get them back. We've gone from hoarding workers at the end of COVID. And now, you know, three or four years later, we're to the point where we're going in the corporate world. We're going from hoarding workers to we're going to let's see how efficiently we can run. Let's have one less marginal worker than we need with the understanding that the environment is that I can hire back a marginal worker tomorrow if I really need them. It's not AI yet. There's a little bit of AI.

20:34Look, I'm not going to say AI is not part of this equation. It's a little bit of AI, but a lot of this is traditional workers. So, you know, 50 ,000 workers at United Parcel Service, that's not AI. That's volume going through UPS. In terms of the AI piece, so when do you think that there's a tipping point for that? I don't think there's a tipping point. I think there's an evolution. I think you're going to see companies continue to embrace AI, continually figure out how to create a company-wide enterprise solution that creates real synergistic cost savings outcomes. And as that happens, you will start to see companies.

21:09I don't know if they will necessarily get smaller, but they will definitely move people out of certain tasks that people hate to do. How fast is the evolution and how painful is it? Are we talking like watching the Wolfman when the moon comes out? We're in it now. We're in the beginnings of the evolution now. But is it painful? In the world of writing code, the skill and uniqueness of writing code is going to become an obsolete skill in our near-term future here. You know, the code assist programs are so good at writing code that instead of hiring thousands of the best engineers, you're going to hire hundreds of the best engineers and give them AI tools to help them build it.

21:48In the world of HR, the HR tools today and AI are so good that no one's ever building these huge AI departments and say, well, for every 10 or 12 or 15 employees we have to hire another HR person. You don't. The HR bot's going to be able to take care of 95 % of what that person needs. So there's going to be huge opportunity there. We're seeing that. We're seeing it. And those are what I would consider sort of operations, enterprises. They're making companies more efficient. We haven't gotten AI to sort of being the revenue producer. We've got it to be the cost center savings. I think AI, as we move down this field and we're heading really quickly into the quantum space, when we get into the quantum space, AI will go from the cost saver to the revenue creator.

22:37Because what? What happens then? The machine actually can think. The machine actually goes from doing something that you've taught it to do, because it's looked at the way you've done it, and the machine says, oh, I know what to do here, because I see the way you've done it 100 times. But that's AGI. Yeah. And then we go to quantum, and quantum says, no, it's not what you did in the past, it's what you did in the past, but you actually should have done this. We're going to add this on top. So maybe you did a net present value model, You did some of the pieces. Oh, you didn't do it in the machine.

23:10And today, AI would do those two because you would tell it that's the money you want. If you had quantum in there, they might go, oh, wait, I'm not sure those are the best answers. Let's do a discounted free cash flow without you telling it because it would know it's one of the tools. Then we hit the singularity. And then we live forever. And I'm going to keep going to church in the meantime. You do that. I think that's a good place for you, Joe. I think it's important. Do you have an idea? What would you tell people to do about this? How do you think it ends, this shutdown? Some kind of backroom?

23:44That's what Schumer wants, a backroom deal. Look, these shutdowns usually end. I think we're going to talk about this in a minute. Usually end when government workers force it to end. You saw the biggest federal union told the Democrats to vote for the CO. I got it. But you know what? That union's still showing up to work. If the air traffic controllers and TSA decides not to show up to work one weekend, the pressure on Republicans and Democrats will be very high to get this. Ted Cruz has a bill to pay the air traffic controllers, keep Americans flying, pay TSA. Is it a good thing to pass that bill or a bad thing because it means that there is not a pressure point to reopen the entire government?