WEBVTT - Surveillance: US Jobs Report with Walsh 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.039 with Jonathan Farrell and Lisa Abramowitz Jay Ley, we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:23.320 international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.040 dot Com, and of course, on the Bloomberg terminal. We 0:00:29.160 --> 0:00:32.680 do this each in every job's day A spirited conversation 0:00:32.760 --> 0:00:36.680 with the Secretary of Labor. Here is John Farrell u S. 0:00:36.760 --> 0:00:38.919 Labor Secretary Monty wolf Seconredy wolf St right to catch 0:00:39.000 --> 0:00:41.040 up with you, sir? Does this make your job a 0:00:41.080 --> 0:00:44.200 little bit easier going into the long weekend? It's certainly 0:00:44.479 --> 0:00:48.680 going to Labor Day weekend having fifteen thousand jobs, add 0:00:48.680 --> 0:00:51.760 the economy and the labor participation for what's number going 0:00:51.840 --> 0:00:53.760 up as well, So that's that's a good way to 0:00:53.880 --> 0:00:55.880 enter the Labor Day weekend. I been planning to ask 0:00:55.880 --> 0:00:58.080 you this question since I went to Jackson Holle and 0:00:58.120 --> 0:01:01.000 caught up with feedeficials last week. Love your reaction to this. 0:01:01.600 --> 0:01:03.360 Do you think how our unemployment is a price worth 0:01:03.400 --> 0:01:07.000 paying to get inflation lower? Say again, sorry, say it 0:01:07.040 --> 0:01:09.360 one mo time. Do you think higher unemployment is a 0:01:09.440 --> 0:01:14.520 price worth paying to get inflation lower. Uh No, I 0:01:14.760 --> 0:01:16.280 don't think so, And I don't think that with the 0:01:16.319 --> 0:01:18.880 case here. I think that. And again I don't want 0:01:18.920 --> 0:01:21.320 to contradict what what the folks in the fet are saying. 0:01:21.600 --> 0:01:24.400 But when you look at the job openings in America 0:01:24.520 --> 0:01:26.360 right now, I think we're going to be consistently strong 0:01:26.400 --> 0:01:28.440 as we move forward here. I think when to continue 0:01:28.480 --> 0:01:30.960 to people be going back to work, having the unemployment, 0:01:31.040 --> 0:01:34.920 having the labor participation rate getting bigger, I think that's important. 0:01:34.920 --> 0:01:37.360 I think what's going to reduce the inflation is obviously 0:01:37.840 --> 0:01:40.039 the inflation Reduction Acts will help us on that. The 0:01:40.080 --> 0:01:42.280 gas prices continue to come down will help us on that. 0:01:42.600 --> 0:01:44.280 And and then you know, I think the biggest unknown 0:01:44.400 --> 0:01:46.520 is going to be what's happening with Russia and Ukraine. 0:01:46.720 --> 0:01:48.880 This is what Chairman Pal said last week. He said 0:01:48.960 --> 0:01:52.160 higher interest rates, slower growth, and a softer labor market 0:01:52.160 --> 0:01:55.320 condition will bring down inflation. They will also bring some 0:01:55.400 --> 0:01:57.840 pain to households and businesses. He said this a failure 0:01:57.880 --> 0:02:02.080 to restore price stability would make far greater pain. You 0:02:02.080 --> 0:02:04.600 say you disagree with that. Secondly, Wolf, so you know 0:02:04.640 --> 0:02:06.880 I think I think that the Chairman certainly has has 0:02:06.960 --> 0:02:09.320 has has a lot more knowledge on this than I do. 0:02:10.000 --> 0:02:12.160 But what I my concern is, what I don't want 0:02:12.160 --> 0:02:14.480 to see is is people being laid off. I want 0:02:14.480 --> 0:02:16.919 to see continuou, seeing people go back to work, people 0:02:17.080 --> 0:02:20.720 being able to earn good wages. I think that you know, overall, 0:02:21.120 --> 0:02:23.080 and again, we're at a very interesting time when it 0:02:23.080 --> 0:02:25.720 comes to our economy. Nothing that's been predicted or no 0:02:25.880 --> 0:02:28.200 indicators that we've talked about in the last two years 0:02:28.480 --> 0:02:30.360 is like any other time in the history of our country. 0:02:30.600 --> 0:02:32.200 So I think that you know, as we think about 0:02:32.240 --> 0:02:34.840 inflation coming down, there's lots of reasons for why inflation 0:02:34.880 --> 0:02:37.079 went up, and it's not the same old pressures of 0:02:37.120 --> 0:02:39.200 the past. Well, this is what sentence Warren had to 0:02:39.240 --> 0:02:41.200 site to see an end over the weekend. Of response 0:02:41.240 --> 0:02:42.919 to some of this, she said, you know what's worse 0:02:42.919 --> 0:02:45.560 than high prices and a strong economy, it's high prices 0:02:45.560 --> 0:02:47.720 and millions of people out of work. I'm very worried 0:02:47.720 --> 0:02:50.720 that the FED is going to tip the economy into recession. 0:02:50.880 --> 0:02:53.079 Do you worry about the same thing. No, I think 0:02:53.080 --> 0:02:54.560 the Feds are going to be very careful and what 0:02:54.600 --> 0:02:57.360 they're doing. I think they're taking a very uh consistent, 0:02:57.480 --> 0:02:59.799 unique approach to what's happening here. And I think that, 0:03:00.080 --> 0:03:02.079 you know, again, as we were already seeing some of 0:03:02.120 --> 0:03:04.840 the inflationary pressures not come down enough, but we're starting 0:03:04.880 --> 0:03:07.640 to see those numbers go down in the right direction. Clearly, 0:03:07.639 --> 0:03:09.520 we have we have a ways to go before before 0:03:09.560 --> 0:03:10.960 we get to where we want to be in our 0:03:11.000 --> 0:03:14.080 economy when it comes to inflation and prices. But again, 0:03:14.160 --> 0:03:16.880 all of this wasn't all of those clouds for different reasons. 0:03:16.919 --> 0:03:18.480 And I think that, you know, we just need to 0:03:18.480 --> 0:03:20.800 continue to work on supply chain. We need to continue 0:03:20.800 --> 0:03:23.160 to get goods and service into our country and lawn term, 0:03:23.200 --> 0:03:24.679 we need to produce more here in the United States 0:03:24.720 --> 0:03:26.840 of America. Just for Americans looking down to DAYC at 0:03:26.840 --> 0:03:29.079 the moment Secredy Walsh, I think they're hearing the Chairman 0:03:29.080 --> 0:03:31.400 of the FEDS say one thing, and they're hearing another 0:03:31.440 --> 0:03:33.200 thing from the White House. The Chairman of the Fed 0:03:33.320 --> 0:03:36.200 is preparing the American people for pain, pain that we 0:03:36.280 --> 0:03:39.480 have to go through to get inflation lower. And I 0:03:39.560 --> 0:03:41.120 know other people out there think we can get a 0:03:41.160 --> 0:03:43.720 soft landing, but I'm not hearing that same concern about 0:03:43.760 --> 0:03:46.320 the future from from you, sir. Secondly, wish why are 0:03:46.320 --> 0:03:48.640 you a little bit more optimistic than say this Federal Reserve, 0:03:49.720 --> 0:03:52.360 because we have a star economy and the President is 0:03:52.400 --> 0:03:55.280 laid down some really good foundation here for the future 0:03:55.440 --> 0:03:57.880 of what we're doing here in America. The infrastructure billity, 0:03:58.080 --> 0:04:00.520 I take a different approach to this as as a former, 0:04:00.680 --> 0:04:02.760 as a former mayor of the city. I think about 0:04:02.920 --> 0:04:05.560 how do I grow my city. It's by investing an infrastructure. 0:04:05.760 --> 0:04:08.560 It's about creating more housing. The housing obviously is a 0:04:08.560 --> 0:04:10.520 little slow right now in the United States being built, 0:04:10.520 --> 0:04:12.520 but I think there's different reasons for that. Uh and 0:04:12.640 --> 0:04:15.160 and companies are still looking for people we have. You know, 0:04:15.200 --> 0:04:16.520 we had a meeting a couple of weeks ago at 0:04:16.520 --> 0:04:18.720 the White House that people were looking at for seven 0:04:18.760 --> 0:04:21.680 hundred thousand people working in SAP security. We have an 0:04:21.680 --> 0:04:24.279 ability to hire more nurses, We need more teachers. We 0:04:24.360 --> 0:04:26.440 have lots of jobs in our country that we need 0:04:26.480 --> 0:04:28.559 for the future of our country to stay open. So 0:04:28.560 --> 0:04:30.440 so I think that when we think about bringing down 0:04:30.440 --> 0:04:32.720 inflationary pressures, I think it's going to be looked very 0:04:32.760 --> 0:04:34.880 different than it has in the past. I think a 0:04:34.920 --> 0:04:37.080 lot of people that you're right, and some other people 0:04:37.080 --> 0:04:39.320 are round on that front. Secondly, Welsh, thank you sir. 0:04:39.480 --> 0:04:41.840 As always, we appreciate your time, especially ahead of a 0:04:41.880 --> 0:04:44.800 long weekend. Thank you very much. John Farrell was the 0:04:44.839 --> 0:04:47.600 Secretary of Labor there talking about it better than good 0:04:47.640 --> 0:04:54.760 Jobs report Randall Crossner. He's a former governor of the 0:04:54.760 --> 0:04:59.200 Federal Reserve System math from Brown and at Booth School, 0:04:59.360 --> 0:05:03.760 economics professor at the University of Chicago. Randy, I want 0:05:03.800 --> 0:05:08.760 to talk here about America's labor economy is being a 0:05:08.760 --> 0:05:11.560 homogeneous where we talk about an all in say three 0:05:11.600 --> 0:05:16.880 point unemployment rate, or is it about the halves doing 0:05:16.960 --> 0:05:20.120 well and a good part of America flat on their back. 0:05:22.240 --> 0:05:25.640 There is a lot of diversity in the and the 0:05:25.760 --> 0:05:28.160 labor market outcomes. I think you're exactly right, So this 0:05:28.240 --> 0:05:30.880 is not something that's even but as you were describing, 0:05:31.360 --> 0:05:34.039 this is really what the FIT is hoping for. More 0:05:34.080 --> 0:05:37.560 people are coming back into the labor market. That helps 0:05:37.640 --> 0:05:41.559 to reduce the tightness of that market. And you saw 0:05:41.640 --> 0:05:46.080 that manifest in slightly lower wage growth, which is exactly 0:05:46.120 --> 0:05:48.520 what the FIT is hoping for. That more people will 0:05:48.560 --> 0:05:51.920 come in leave some of the pressures in the market 0:05:52.160 --> 0:05:54.120 and take some of the pressure off some of the 0:05:54.120 --> 0:05:56.640 wage increases, so that will make it easier for the 0:05:56.720 --> 0:05:59.560 head to to try to bring inflation down to its 0:05:59.560 --> 0:06:04.680 two percent goal without pushing the economy too far too 0:06:04.680 --> 0:06:09.039 far down. Brandy, we've got at the participation rate to 0:06:09.080 --> 0:06:11.960 that point at sixty two point four percent, then how 0:06:12.080 --> 0:06:14.880 high can the Fed hope and wish and will that 0:06:15.000 --> 0:06:18.640 number to get? Well, they'd like to get a lot higher. 0:06:18.800 --> 0:06:20.360 Maybe we'll get a little bit higher. I think it's 0:06:20.640 --> 0:06:24.119 it's surprising how much it hopped up. My guess is that, um, 0:06:24.120 --> 0:06:26.800 it may not stay that high, or it might come 0:06:26.839 --> 0:06:29.200 down a little bit, but it's going in the right direction, 0:06:29.400 --> 0:06:32.159 which is exactly what we what we want to see 0:06:32.360 --> 0:06:35.480 see happening to reduce some of the labor shortages, to 0:06:35.520 --> 0:06:38.279 reduce some of the pressures of the labor market. Because 0:06:38.279 --> 0:06:40.640 it's been a bit surprising, given how strong the labor 0:06:40.680 --> 0:06:42.960 market is, that a lot of people haven't been bothering 0:06:42.960 --> 0:06:46.720 to even look Randy Crowsner, based on some of the takeaways, 0:06:47.160 --> 0:06:48.880 I think you're going to hear that word goldilocks a 0:06:48.920 --> 0:06:52.839 lot this morning. Would you push back against that characterization 0:06:53.200 --> 0:06:55.280 of this report given what you're expecting in the months 0:06:55.279 --> 0:06:59.600 to come. Well, it's just one number, so we wouldn't 0:06:59.600 --> 0:07:01.760 want to go go too far. But I think it's 0:07:01.839 --> 0:07:04.000 it's consistent with with with the FED wants to go. 0:07:04.520 --> 0:07:07.239 I think it has made the market says somewhat happy 0:07:07.279 --> 0:07:09.440 that because I think they were worried that there could 0:07:09.440 --> 0:07:13.440 have been a blowout report here. And unfortunately, good news 0:07:13.440 --> 0:07:15.480 in the labor market can be bad news because the 0:07:15.520 --> 0:07:18.360 FED will have to respond more. And so I think 0:07:18.360 --> 0:07:20.880 it's it's on a good path, but the FED is 0:07:20.920 --> 0:07:23.640 still going to be debating fifty or seventy five basis points, 0:07:23.840 --> 0:07:25.560 and I think it would end up but you know, 0:07:25.800 --> 0:07:27.480 very close to four by the end of the year, 0:07:27.480 --> 0:07:29.800 if not at four, and then be you know, hold 0:07:30.200 --> 0:07:33.720 with a four handle through much of Randy, Thank you, 0:07:33.800 --> 0:07:48.880 Randy Chryston there at the University Chicago, whether gloom or optimism. 0:07:48.960 --> 0:07:52.240 We speak with Jeffrey Rosenberg and black Rock portfolio manager 0:07:52.320 --> 0:07:55.280 for their systematic multi strategy fund thrilled he can join 0:07:55.400 --> 0:07:59.320 us each job day. Jeff, we need to recalibrate in 0:07:59.360 --> 0:08:01.840 the next year, or as John Farrell mentions, we need 0:08:01.880 --> 0:08:05.320 more data. But this seems to be one side relief 0:08:05.480 --> 0:08:09.080 equities up. How does the bond market have a sigh 0:08:09.080 --> 0:08:14.600 of relief, Well, it's a sigh of relief, Tom, because 0:08:14.720 --> 0:08:18.000 you had a lot of expectations really following the Jackson 0:08:18.080 --> 0:08:23.040 Hole presentations, speeches both by Powell and Schnabel that were 0:08:23.280 --> 0:08:28.560 very hawkish with regards to central banks, definitively stating that 0:08:28.640 --> 0:08:32.200 they were focused on inflation. And so the setup going 0:08:32.240 --> 0:08:35.960 into today was a little bit skewed to the downside 0:08:36.040 --> 0:08:38.640 that if it was a stronger report, that would have 0:08:38.760 --> 0:08:43.520 only solidified expectations for the seventy basis points in September, 0:08:43.559 --> 0:08:47.160 And if it was a significantly weak report, then the 0:08:47.240 --> 0:08:49.520 market might have looked through that as opposed to what 0:08:49.559 --> 0:08:52.760 we've seen, you know, in the last couple of payroll reports, 0:08:52.800 --> 0:08:56.080 particularly over this summer rally. Uh, it had been a 0:08:56.160 --> 0:08:58.880 market that, hey, if we got bad news, bad news 0:08:58.960 --> 0:09:01.240 is good news, and it may no longer be the 0:09:01.280 --> 0:09:04.480 case that bad economic news and slowdown is really going 0:09:04.559 --> 0:09:07.400 to push the Fed off of its tightening cycle, because 0:09:07.440 --> 0:09:11.200 they've been so clear to tell us it's really about inflation. 0:09:11.600 --> 0:09:13.960 So I think the look through for today, Tom, is 0:09:14.080 --> 0:09:18.800 really about what does the report signal about any kind 0:09:18.840 --> 0:09:20.840 of inflation look through, and I think the labor force 0:09:20.880 --> 0:09:24.480 participation rate number is really the key, uh takeaway? That 0:09:24.600 --> 0:09:27.320 is the most interesting pieces as you discussed a minute 0:09:27.320 --> 0:09:29.480 ago and Randy, which is you know, a little bit 0:09:29.480 --> 0:09:31.959 better than expected news. They're a little bit weaker than 0:09:32.040 --> 0:09:35.280 expected on the wage front, you know, modestly that's good 0:09:35.280 --> 0:09:37.800 news from the bond market perspective of not having to 0:09:37.840 --> 0:09:41.000 see the FED really react to inflation maybe as a 0:09:41.160 --> 0:09:44.760 strong again one data point, we're not going to overread that. 0:09:44.880 --> 0:09:47.120 But that's the one takeaway I would have from this 0:09:47.200 --> 0:09:49.720 report that I think is important is the look through 0:09:49.760 --> 0:09:53.360 to inflation. Okay, so I'll be in danger of over 0:09:53.400 --> 0:09:57.160 interpting one day to point then, Jeff, with that participation right, 0:09:57.200 --> 0:09:59.880 we've seen FED sports showing a pairing of bets on 0:10:00.080 --> 0:10:03.840 rate increases. Does it make sense then to expect less 0:10:03.920 --> 0:10:06.680 hiking from the Fed? And in what in what sense? 0:10:07.280 --> 0:10:11.520 Less hiking in the natum or less hiking overall, less 0:10:11.640 --> 0:10:16.440 less hiking next year? What do we think? Yeah, it's 0:10:16.480 --> 0:10:19.360 it's definitely about the near term trajectory. I think what 0:10:19.400 --> 0:10:22.000 you're seeing in the markets today is is about you know, 0:10:22.040 --> 0:10:25.720 the seventy five versus fifty debate. Today's number, you know, 0:10:25.760 --> 0:10:28.200 maybe pushes back a bit, and that's why you're seeing 0:10:29.120 --> 0:10:31.120 the rally in the front end of interest rates. But 0:10:31.160 --> 0:10:34.880 that's not over interpret again one data point, Um, this 0:10:34.960 --> 0:10:39.839 isn't really going to significantly change the trajectory of the FED, 0:10:39.960 --> 0:10:44.359 and the terminal rate debate is still very much unsettled, 0:10:44.440 --> 0:10:48.440 and today's labor market report isn't really going to settle 0:10:48.559 --> 0:10:51.160 that debate. We're going to focus a lot more on 0:10:51.200 --> 0:10:53.920 the inflation and the inflation trajectory. You know, a minute 0:10:53.920 --> 0:10:55.880 ago Mike McKee mentioned the you know, some of the 0:10:55.920 --> 0:10:58.280 housing numbers. Um, you know, this is one of the 0:10:58.280 --> 0:11:02.559 big challenges here that we're seeing is a huge transition 0:11:02.679 --> 0:11:06.760 from homeownership to home renting, and and you know that 0:11:06.960 --> 0:11:12.480 rental prices is a huge component of that inflation outlook. 0:11:12.520 --> 0:11:14.880 So those things are not really being addressed here on 0:11:14.960 --> 0:11:18.120 this labor market report, and that still faces the market 0:11:18.160 --> 0:11:21.439 still faces, John Farrell, what's so important here, and you 0:11:21.520 --> 0:11:23.880 brought this up before, it's a key insight is what 0:11:23.920 --> 0:11:26.440 do we really learn about where the terminal rate is 0:11:26.480 --> 0:11:28.959 for the Fed? The answers this doesn't help us well, look, 0:11:28.960 --> 0:11:30.160 at the end of the day, I think if it's 0:11:30.160 --> 0:11:32.760 been pretty clear they want time to financial conditions and 0:11:32.840 --> 0:11:35.120 to some degree that's going to cap the upside over 0:11:35.160 --> 0:11:37.160 the next few months. Tim if they're not satisfied, and 0:11:37.400 --> 0:11:39.160 ultimately the FEDS in control. And we've said it a 0:11:39.200 --> 0:11:40.960 million times over the last week, we've gone from a 0:11:40.960 --> 0:11:43.480 FED put to a FED call the good news. I 0:11:43.480 --> 0:11:45.200 think for a lot of people, just for now, if 0:11:45.240 --> 0:11:47.960 you publish the secondary market, this is a relief. When 0:11:48.000 --> 0:11:50.439 it's sticked. By the end of the day, we'll sit 0:11:50.640 --> 0:11:52.800 features robbing overage just a little bit positive, behalf of 0:11:52.840 --> 0:11:56.120 one percent. I'll continue this conversation with Jeff's colleague Rick 0:11:56.160 --> 0:11:57.840 Reader will do that at the top of the looking 0:11:57.840 --> 0:12:00.439 forward to that conversation. Also catching up with Victoria Finanti's 0:12:00.440 --> 0:12:03.200 a cross mark, Michael Capin of Bank America, Jim Bianco, 0:12:03.280 --> 0:12:06.360 Pianco Research too, and Secondary Welsh at the White House, 0:12:06.360 --> 0:12:10.439 Tom All coming up Secondary Welsh about Eastern time. Very good. 0:12:10.480 --> 0:12:12.839 John Ferrell with the Secretary of Labor. We will look 0:12:12.880 --> 0:12:17.599 for that on radio and television. Joining us now excuse me, 0:12:17.640 --> 0:12:20.040 Jeff Rosenberg still with us as well. We've got a 0:12:20.080 --> 0:12:22.040 great team lined up here to get you out over 0:12:22.080 --> 0:12:25.280 the next seventeen minutes of this jobs report. Jeff, what 0:12:25.320 --> 0:12:28.040 are you seeing in flows? What's the fear level out there? 0:12:28.280 --> 0:12:31.240 I don't want to know inside black Rock baseball, But 0:12:31.440 --> 0:12:39.920 are are people selling bonds as money flowing out of debt? Yeah? Tom, 0:12:39.920 --> 0:12:42.240 as you can imagine. You know, the flows are highly 0:12:42.280 --> 0:12:46.199 reactive to the returns. And this has been a historic 0:12:46.679 --> 0:12:51.480 UH negative return year for all categories that fixed income 0:12:51.520 --> 0:12:53.719 and and we've seen that in the past week as 0:12:53.760 --> 0:12:58.040 well in terms of acceleration in terms of rates, higher, spreads, wider. 0:12:58.520 --> 0:13:01.320 This is a very challenging and ironment for fixed income 0:13:01.400 --> 0:13:06.079 because we've come we came into this year really pricing 0:13:06.120 --> 0:13:10.839 the old inflationary regime, and obviously the inflationary regime has 0:13:10.840 --> 0:13:14.520 surprised the Fed, it's surprised the bond market, uh and 0:13:14.520 --> 0:13:17.560 and we continue to see those surprises. And so until 0:13:17.600 --> 0:13:21.600 we get a sufficient inflation risk premium priced into the 0:13:21.640 --> 0:13:25.160 bond market, returns are are going to be challenged. Now, 0:13:25.160 --> 0:13:28.280 the good news is you're starting to get more of 0:13:28.320 --> 0:13:30.920 that priced in, more of it priced into the front 0:13:31.000 --> 0:13:33.319 end of the curve. You talked a minute ago about 0:13:33.320 --> 0:13:35.600 the terminal rate. It's the back end of the curve 0:13:35.679 --> 0:13:39.480 where you still see a lot of confidence in the 0:13:39.520 --> 0:13:43.040 bond market that inflation will fall back through the two 0:13:44.200 --> 0:13:46.800 UH target. And so this is this is a bond 0:13:46.840 --> 0:13:50.000 market that gives the Fed an incredible amount of credibility 0:13:50.400 --> 0:13:53.040 uh that remains uh you know, to be seen, and 0:13:53.080 --> 0:13:57.960 that's a vulnerability to future fixed income returns. Jeff Rosenberg, 0:13:58.000 --> 0:14:00.520 thank you so much, Really appreciate the O your time 0:14:00.559 --> 0:14:09.040 here on jobs day before a holiday weekend. Michael Purvis 0:14:09.080 --> 0:14:12.400 joins us from Todd Back and Capital, always writing really 0:14:12.440 --> 0:14:15.600 intelligent notes. Michael, let me cut to the chase. What 0:14:15.800 --> 0:14:18.640 is the why and the how we get the standard 0:14:18.679 --> 0:14:24.760 of pores. Well, Tom, you know one thing that's been um, 0:14:24.840 --> 0:14:27.320 kind of working in the market's favorite broadly, you know, 0:14:27.360 --> 0:14:31.520 putting aside positioning and relief rallies and and so forth, 0:14:31.640 --> 0:14:34.000 is that, you know, the corporate earnings machine has been 0:14:34.040 --> 0:14:37.120 really performing here. UM. Now, obviously there's a lot of 0:14:37.200 --> 0:14:41.480 questions about how whether that trajectory can be maintained into 0:14:41.520 --> 0:14:43.560 the end of the year, and in particular to teth 0:14:43.640 --> 0:14:46.920 has in twenty three UM. But look, you know, nominal 0:14:47.000 --> 0:14:51.160 GDP is very high it's the components of nominal GDP 0:14:51.200 --> 0:14:54.840 in terms of the waitings of inflation versus real growth 0:14:55.000 --> 0:14:58.440 are not what we want them to be. But we're 0:14:58.440 --> 0:15:02.280 still seeing seeing you know, nominal high nominal GDP drive 0:15:02.440 --> 0:15:06.080 drives nominal earnings right there, and so we were we 0:15:06.160 --> 0:15:08.480 are seeing you know, continued strength. If you look at 0:15:08.560 --> 0:15:11.760 Q two s reports they came in the surprise levels 0:15:11.760 --> 0:15:14.440 were better than they were in a Q on there um. 0:15:14.520 --> 0:15:16.520 And on the other side, on the valuation side, look, 0:15:16.520 --> 0:15:19.440 you know we have had, you know, you go through 0:15:19.480 --> 0:15:22.600 this massive FED pivot over the last twelve months. It's 0:15:22.600 --> 0:15:25.080 been pretty remarkable, but it's also really well priced, and 0:15:25.760 --> 0:15:29.760 PE multiples are and the equity risk premium by by 0:15:29.880 --> 0:15:34.440 my measures, have really calibrated appropriately here. So look, if 0:15:34.480 --> 0:15:36.400 we wake up and you know, next week the ten 0:15:36.480 --> 0:15:38.640 years had four percent, which which is which I won't 0:15:38.640 --> 0:15:41.120 be but but you know, if A were to do that, 0:15:41.160 --> 0:15:44.040 then obviously we're probably going to see some further the 0:15:44.320 --> 0:15:47.240 contraction and so forth there. But I think right now 0:15:47.400 --> 0:15:50.280 the markets are going along and so I think, you know, 0:15:51.240 --> 0:15:55.160 we need to get through this uh September FED meeting. 0:15:55.200 --> 0:15:58.840 We need to get through some uh you know, look, 0:15:59.040 --> 0:16:03.560 economic data is good. UM. Unemployment data, UM, you know 0:16:03.640 --> 0:16:05.600 it's still really Rebut the I s M. We just 0:16:05.640 --> 0:16:08.040 got maybe and maybe, Michael. What we're seeing here is 0:16:08.080 --> 0:16:10.760 markets responding or coming around to that view because US 0:16:10.840 --> 0:16:13.800 ten year yields, thirty year yields resume their rise. Ten 0:16:13.840 --> 0:16:18.200 year yields up to three points to seven percent. Right now. 0:16:18.440 --> 0:16:21.200 You talk quite positively about stalks and about the earnings story, 0:16:21.400 --> 0:16:24.600 but others say that the earnings need to catch up 0:16:24.600 --> 0:16:27.560 with reality, and that means that we need to see 0:16:27.680 --> 0:16:30.680 cuts to expectations around corporate profits. Why do you not 0:16:30.760 --> 0:16:34.200 see that? Well, look, I think part of this is 0:16:34.280 --> 0:16:38.560 simply comes back to nominal GDP being being high this 0:16:38.680 --> 0:16:41.480 year and probably pretty high next year as well. My 0:16:41.560 --> 0:16:44.920 biggest risk to earnings next year. I mean, of course, 0:16:44.920 --> 0:16:46.920 if we get a big recession, yes that's gonna there's 0:16:46.960 --> 0:16:50.080 no question that will be a big hit to earnings here. 0:16:50.160 --> 0:16:54.880 But you know what are the other real risk for 0:16:54.920 --> 0:16:57.720 earnings next year? Simply inflation coming down a lot. If 0:16:57.720 --> 0:17:01.000 that were to happen, a lot of the earnings will 0:17:01.040 --> 0:17:03.800 come in and some companies will certainly see some some 0:17:03.880 --> 0:17:07.280 margin depression there. I want to give you a victory 0:17:07.320 --> 0:17:09.840 lab Michael Purvis. We had pre amsra on earlier with 0:17:09.960 --> 0:17:12.800 the call of the summer on curve inversion, and every 0:17:12.800 --> 0:17:16.720 once in a while Purvis absolutely nails it, folks. A 0:17:16.800 --> 0:17:20.600 few years ago, Michael, you nailed a d X Y 0:17:20.760 --> 0:17:25.360 the blended Pacific RIM currency regime X Japan. We now 0:17:25.440 --> 0:17:28.520 have a yen through a new level moments ago one 0:17:28.640 --> 0:17:33.480 forty point eight zero on Japanese yen. Many talking one 0:17:33.760 --> 0:17:37.280 weaker yen. Michael Purvis right now on what it means 0:17:37.359 --> 0:17:41.479 to see such currency weakness and strong dollar on the 0:17:41.480 --> 0:17:46.280 Pacific RIM, well, I think it's it's very significant. I mean, 0:17:46.320 --> 0:17:48.680 the fact is is that the United States dollar relative 0:17:48.720 --> 0:17:51.600 to so many currencies to Europe, but particularly the yen 0:17:51.720 --> 0:17:55.879 and and many e M currencies, is sort of effectively 0:17:55.920 --> 0:17:59.640 a pectrocurrency um certainly on a relative basis here. So 0:18:00.240 --> 0:18:02.240 you know, if you're talking about the end, you have 0:18:02.320 --> 0:18:06.880 to consider high threw carbon vulnerabilities, and they're as as 0:18:06.880 --> 0:18:10.680 painful as oil prices are here, it's a lot less 0:18:10.720 --> 0:18:14.400 so than it is in places like Japan and the Eurozone. 0:18:14.440 --> 0:18:17.199 So I think I think there's there's that you know, 0:18:17.320 --> 0:18:18.800 if you tell me Tom that oil is going to 0:18:18.880 --> 0:18:21.399 one fifty. I'll you know, I I can't imagine how 0:18:21.440 --> 0:18:24.200 the end wouldn't get a lot cheaper or the euro 0:18:24.680 --> 0:18:27.679 get substantially ship re religive to the dollar here. So 0:18:28.080 --> 0:18:30.440 I think that's one of the weird dynamics. It's that 0:18:30.560 --> 0:18:35.120 oil is leading, is a key thing that's driving, that's 0:18:35.200 --> 0:18:38.639 leading currencies around by the notes, Does that lead to 0:18:38.640 --> 0:18:41.280 a change in bo J policy? Michael, Is that where 0:18:41.320 --> 0:18:43.720 they well, well, I guess we've all been waiting for 0:18:43.880 --> 0:18:46.240 that for some time. I think there's a you know, 0:18:46.280 --> 0:18:48.960 there's certainly an interesting um sort of game of chicken 0:18:49.000 --> 0:18:51.560 the b o J has been playing here. We'll see 0:18:52.119 --> 0:18:55.639 at what level of sensitivity they have. But I think there, 0:18:56.320 --> 0:18:59.120 you know, after like you know, three decades of very 0:18:59.280 --> 0:19:03.840 very considered deflation disinflation in Japan, you know, maybe that 0:19:04.000 --> 0:19:06.240 they feel this is what it's sort of needed, kind 0:19:06.240 --> 0:19:10.800 of wake up um the economy there. But it is 0:19:10.840 --> 0:19:13.040 a dangerous game I think they're playing at some point. 0:19:13.880 --> 0:19:16.480 Michael Purvis, thank you so much greatly a previous We're 0:19:16.520 --> 0:19:32.080 appreciative there right now, Tiffany Wild with this uh PIMCO 0:19:32.160 --> 0:19:35.520 chief yours economists understanding that Paul Sweeney and I are 0:19:35.560 --> 0:19:39.879 not prime age, but Tiffany Wilding is prime age good 0:19:39.920 --> 0:19:43.640 prime ate statistics. Tiffany Wilding and that we're getting back 0:19:43.640 --> 0:19:48.879 to pre pandemic levels. Describe what prime ages please, morning, 0:19:48.920 --> 0:19:53.840 Tom and Paul. Yeah, so prime age is and it 0:19:54.320 --> 0:19:57.840 is exactly what it suggests that, Um, you know, this 0:19:58.000 --> 0:20:02.120 is the prime working years as defined by I guess 0:20:02.160 --> 0:20:04.480 the Bureau of Labor Statistics. Now, now keep in mind, 0:20:04.480 --> 0:20:07.560 though that prior to the pandemic, you're actually seeing people 0:20:07.560 --> 0:20:11.159 participate in the labor market longer. Um, so you actually 0:20:11.160 --> 0:20:13.440 did see participation rates for that kind of fifty five 0:20:13.480 --> 0:20:16.720 to sixty five or even because you have an older increase, 0:20:16.800 --> 0:20:18.919 but that all changed after the pandemic. We have a 0:20:19.000 --> 0:20:21.960 large wave of retirement. So now, um, you know, kind 0:20:22.000 --> 0:20:24.400 of the prime age participation rate is a really key 0:20:24.440 --> 0:20:29.639 focus here for um, you know, for broader participation rate trends. Well, okay, 0:20:29.640 --> 0:20:33.280 it's a key focus. Is the prime age. Is the 0:20:33.400 --> 0:20:36.400 rest of the economy getting back pre pandemic? I mean 0:20:36.400 --> 0:20:39.399 the compendium of statistics you look at, is that a 0:20:39.480 --> 0:20:42.320 unique idea or are we really getting back to what 0:20:42.480 --> 0:20:47.560 Paul January two thousand twenty that level. Well, so I 0:20:47.840 --> 0:20:50.240 think what's interesting and this came out I think in 0:20:50.359 --> 0:20:58.119 the various papers that were presented at Jackson Hole. UM. 0:20:58.160 --> 0:21:00.240 You know that a lot of the statistic it's been 0:21:00.280 --> 0:21:03.960 a lot of the underlying structural trends in the US economy, uh, 0:21:04.040 --> 0:21:07.639 you know, like participation rates or um, other you know, 0:21:07.720 --> 0:21:12.080 labor market trends or or like the productivity reports and 0:21:12.119 --> 0:21:15.240 things like that. They all actually are kind of behaving 0:21:15.240 --> 0:21:16.840 in a way that you would expect. So they're getting 0:21:16.880 --> 0:21:19.360 back to where they were prior to the pandemics. They're 0:21:19.400 --> 0:21:22.560 kind of normalizing, if you will. What looks to be 0:21:22.720 --> 0:21:27.840 a more structural change, UM is of course the inflation data. UM. 0:21:27.840 --> 0:21:30.240 And it's not just you know, the prices data obviously, 0:21:30.240 --> 0:21:32.280 but the wages data. All the wages came in maybe 0:21:32.320 --> 0:21:36.159