America’s Blue Collar Boom & Manufacturing Renaissance

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A surge in business investment is reshaping the U.S.

economic landscape.

The latest data from the Federal Reserve shows a stunning uptick in capital expenditures, one that rivals the heights of the late 90s tech boom.

In this episode, we speak to Joe Lavornia, counselor to the Treasury Secretary, to help us unpack what this investment means for the economy.

I'm Georgia Howe with Daily Wire executive editor John Bickley.

It's Sunday, July 27th, and this is Morningwire.

The following is an interview interview between Joe Lavorna, counselor to the Treasury Secretary and senior editor Kebot Phillips.

Hey, Joe, thanks again for coming on.

Always a pleasure to have you.

Yeah, sure.

Thanks for having me.

So I want to talk to you about some new numbers coming from the Federal Reserve showing a significant increase in the U.S.

production of business equipment.

Now, give us some context on why that is a good sign for the economy and what this means for average Americans.

The Federal Reserve provides industrial production figures every month.

And one of the details is often overlooked in the market, and that is production of business equipment.

That series is an excellent proxy for what economists call capex or capital spending, which essentially measures all the things that firms invest in to help produce more of the goods and services that people want.

It could be computers, software, things of that sort.

And what we observed in the first quarter is that the equipment production rose at a 23% rate.

Not surprisingly, when we got the GDP data, we saw a 24% increase.

Really, really strong, really exciting news.

We think that is a result of the one big beautiful bill, which had retroactive expensing to inauguration day.

So companies getting very excited about the pro-growth policies that President Trump was putting forward took that initiative in the first quarter, increased production of business equipment.

We saw that in the GDP accounts.

Importantly, though, In Q2, we saw another large gain in business equipment production, up almost 11%.

That is a really strong increase following a boom in the first quarter.

What that means is before the one big beautiful bill became legislation, we had an almost 17% annualized increase over those two quarters of business equipment production.

That is remarkable.

Excluding the pandemic, that is the fastest two-quarter gain since the last two quarters of 1997 during the heart of the internet boom.

So what we're seeing now businesses react in anticipation of the bill.

The bill now is passed, which means that we're going to see a much higher glide path, much more growth in capital spending, which means it's going to reinforce this blue-collar boom we've been seeing.

This is all very consistent with what President Trump has wanted and what Secretary Besson has helped push through.

So, as you mentioned, this trend actually started back in quarter one.

That was before the Big Beautiful bill had passed, when we weren't even sure if it was going to pass.

So, what are some other reasons that we could be seeing this trend taking place beyond just this bill?

Well, we certainly, I mean, it's possible that we could have seen, you know, maybe an 11%

2Q gain is fantastic.

Maybe it would have been even stronger if people took President Trump at his word and realized he was going to get the bill done on July 4th.

The bill contains a lot of other positive pro-growth policies, such as faster permitting as it relates to energy production, the ability of energy producers to tap federal waterways and land for drilling, which is something they couldn't couldn't do under the previous administration, essentially making it much easier to conduct business with low and stable tax rates that are now permanent.

It's encouraging people to spend.

And this bill also includes 100% expensing if you build a new plant.

That wasn't the case in the first bill.

So it's even better.

So if you want to build things, you want foreign capital to come in, which is what's happening in large part because the tariffs have incentivized countries to come in and companies to come into the U.S.

Well, they're going to have cheap and abundant energy.

They're going to have a much friendlier regulatory backdrop.

And if you're a U.S.

producer, you're going to be able to expense that factory you wouldn't have been able to do before.

So really, it's a reindustrialization.

It's a manufacturing renaissance.

It's what President Trump accurately describes as a golden era.

I believe we're upon that happening, and this CapEx comeback is consistent with it.

So if you go through the Fed data, one thing that caught my eye was the lack of increase in tariff-sensitive goods.

Economists have been saying that those products in particular would see a large price increase over the last few months.

That clearly is not happening.

So give our listeners some context on what tariff-sensitive goods are and in your view, why those prices are not increasing.

So there are some products that might have a tariff effect.

It's very hard to figure out.

what the tariff effect is, in large part because the economists for five months in a row have been saying there's going to be inflation in the data.

And we had four months in a row where the data on the CPI surprised to the the downside.

The fifth month was in line, but then we had very good PPI and import price data.

If you look hard enough, you could find almost anything.

What we know is, broadly speaking, in the latest PPI data and in the import price data that followed, there was virtually no inflation at all coming from China, which, as you know, is our largest.

We were in the largest deficit with China.

And without question, we know that the pricing platform, generally speaking, has been much lower than expected.

So

I would argue that going forward, the likelihood we see an acceleration in inflation to what people think is extraordinarily low.

And if at some point there is an adjustment, it is a one-off price level adjustment.

This is not something that will self-perpetuate.

Inflation is a monetary phenomenon.

We're seeing inflation expectations come down.

We know interest rates are historically high for reasons that have nothing to do with trade,

but we do expect the backdrop to improve.

We've talked quite a a bit on the show about all of the positive signs regarding the U.S.

economy, but there are some concerning trends as well.

For example, we saw this week that manufacturing in the mid-Atlantic region here at home has decreased dramatically.

So what is causing that trend in particular?

I would say the broad data look really good.

There's always going to be these pockets of softness, and some of these more qualitative metrics

have been weaker, depending on which one you're looking at.

But that's not really the hard data.

The hard data is very strong.

The bill now is done.

So the forward to us is very positive.

And especially, we've already seen this big CapEx improvement.

So I would focus on the big picture and this harder data, which clearly shows a V-shaped recovery in CapEx.

President Trump campaigned on a promise to bring investments from around the world here to the U.S.

to benefit the American workers and our economy.

And that has happened.

We've seen trillions of dollars worth of investments pouring in onshoring of jobs and manufacturing.

We saw AstraZeneca just this week announce a half trillion dollar investment.

Why is that happening?

What is driving that?

You just mentioned one company, and there have been many others.

I don't know if it's $2 trillion, $3 trillion, $4 trillion.

They're capital commitments that will occur over time.

This is why, though, we needed the bill to be passed because it made permanence to tax changes.

So there's some clarity on what tax policy would be.

It's hard to make a spending decision if you know what your tax rate is going to be.

So that's part of it.

Again, that includes deregulation.

energy encouragement, you know, energy encouraged production.

Those are all incentives to come in.

And of course, it's overlaid with the tariff and also President Trump's negotiating skill.

It all fits together.

Different companies are going to move at a different pace.

Trade deals are still being negotiated.

We expect much more good news to come in the months ahead.

And you're going to see a much fairer,

much more America-first trade situation.

At the same time, you're getting manufacturing reindustrialization in a way that's going to benefit the middle and lower income worker, which was a hallmark of President Trump's first set of policies.

And it's coming back in even a bigger way this time around.

We've definitely seen investors take a more rosy outlook on the economy.

If you look at the numbers, the SP 500 hitting record highs, Dow gaining ground, global markets in Asia and Europe also picking up steam.

So they're clearly optimistic.

But if you look at polling data, it seems like Americans are more skeptical about President Trump's handling of the economy.

He's double digits underwater right now on that issue, lower than at any point in his first term.

So what's your message to Americans who might not be all that confident right now in President Trump's economic strategy?

You know, looking at the polling, I'd always be careful because I think some polls can be very inaccurate.

What we've been highlighting are a couple of things.

Of course, the fact that in the first six months of President Trump's term, blue-collar wages, which are technically what are known as non-supervisory production workers, you know, the backbone of the labor market, we've seen a 1.2% increase in the first six months of President Trump's term.

That's the second fastest all time, only behind the first six months of President Trump's first term, 1.3% gain.

Now with the one big, beautiful bill in place, the capex comeback that we're seeing, that will only continue to foster and galvanize further gains in wages, that was going to show up in people's take-home pay, bigger paychecks.

better jobs.

And that ultimately is going to lead to what President Trump rightly calls a golden era.

And you're going to see it reflected in all sorts of numbers.

So switching gears a bit, President Trump has made no secret that he's not a fan of Federal Reserve Chair Jerome Powell.

He is calling for an investigation into the Fed's renovation project, which has gone well over budget.

And now your boss, Treasury Secretary Scott Besson, is conducting a thorough review of the Federal Reserve that goes beyond just that renovation project.

What exactly is he looking for?

We'll have to wait and see.

I mean, clearly there is a focus on this administration of uh eliminating waste, abuse, and fraud.

And whatever projects there are that the government's government's involved in, if it looks like there's cost overruns that can't be justified, they need to look at it.

So I think it's a very prudent, thorough approach.

We'll see what the results bring.

Final question.

There's a lot to talk about in the economy, but give us something that you think is being underdiscussed, underreported, that gives you reason for optimism.

Yeah, sure.

I think they know about it, but I would say, and this is what President Trump has talked about, interest rates.

Interest rates are high, and the housing market is

certainly soft.

First-time affordability is historically low.

President Trump's policies, we know from what he's done on the wage side, benefit all Americans and, in particular, are centric or focused on middle and lower-income people.

And they need lower interest rates to be able to afford a home.

And you mentioned some qualitative manufacturing surveys.

To the extent that interest rates are high, that's also at the margin going to dampen manufacturing.

So, if you want to look at areas of the economy that could do better if rates were lower, manufacturing and housing would be the two most obvious places to look.

All right, we will leave it there.

Joe, thank you so much for coming on.

Thank you.

That was Daily Wire senior editor Cabot Phillips speaking with Joe Lavornia.

And this has been a weekend edition of Morningwire.

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