WEBVTT - Surveillance: Labor Market Outlook With Dudley 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.800 and of course on the Bloomberg terminal. Joining us now 0:00:29.840 --> 0:00:33.000 William Dudley. He is of Berkeley, he is of Goldman 0:00:33.040 --> 0:00:36.080 sax and of course the former president of the New 0:00:36.159 --> 0:00:38.599 York Federal Reserve. And we're thrilled he could join us, 0:00:38.640 --> 0:00:41.800 and he writes presciently on labor this morning. Bill, I 0:00:42.159 --> 0:00:44.680 don't want to go into the details of President biden 0:00:44.840 --> 0:00:48.760 seventy two points on the power of corporations and the 0:00:48.800 --> 0:00:53.519 consolidation of corporations and the weakness of labor. You do 0:00:53.600 --> 0:00:56.120 address it this morning in your note, But I want 0:00:56.120 --> 0:00:59.000 to go back to an important article you wrote six 0:00:59.080 --> 0:01:03.920 years ago. What kind of jobs have been created? Bill Dudley? 0:01:04.120 --> 0:01:09.960 How did we get here with declining labor share? It's 0:01:10.000 --> 0:01:14.160 not really clear exactly why the labor sharer has declined 0:01:14.200 --> 0:01:18.480 so much over the last uh a couple of decades. Presently, 0:01:18.520 --> 0:01:22.520 it's because corporations have more power. Uh, you know, any 0:01:22.520 --> 0:01:26.520 trust policy has been less aggressive, uh in dealing with 0:01:26.560 --> 0:01:29.240 any competitive practices. And I think labor is power from 0:01:29.240 --> 0:01:33.800 a unionization perspective is also lesson. But you know, it's 0:01:33.800 --> 0:01:35.919 also a question of how tight is the labor markets 0:01:36.000 --> 0:01:39.319 through much of the last economic expansion during an excess 0:01:39.319 --> 0:01:41.840 supply of labor. We only got too close to full 0:01:41.840 --> 0:01:44.800 employment at the very end of the last economic expansion, 0:01:44.840 --> 0:01:47.160 then the pandemic it. So I think the key is 0:01:47.160 --> 0:01:49.360 going to be can the FED drive the economy to 0:01:49.400 --> 0:01:52.000 full employment? And if the economy is at full employment, 0:01:52.000 --> 0:01:53.680 then I would expect labor to do better and pick 0:01:53.760 --> 0:01:58.280 up a bigger share of income. The primal scream of 0:01:58.320 --> 0:02:01.720 this document and the politic little energy that supports it 0:02:01.920 --> 0:02:05.680 so that supports President Biden, seems to be about in 0:02:06.080 --> 0:02:11.800 a blanket of technology over this generation. Do we underestimate 0:02:11.880 --> 0:02:17.560 the technological effects on our labor economy, on our American economy. 0:02:19.040 --> 0:02:21.680 I think there's no question that the digitalization of the 0:02:21.760 --> 0:02:25.079 US economy has had pretty powerful effects on the return 0:02:25.120 --> 0:02:28.680 on capital and in the return on labor. Uh. You know, 0:02:28.680 --> 0:02:30.880 I think the ability that people to search now through 0:02:30.919 --> 0:02:33.960 the labor market and find people to employ is vastly 0:02:33.960 --> 0:02:36.119 different than it was. You know when you people used 0:02:36.120 --> 0:02:40.119 to help wanted advertising to attract the workers to employ them. 0:02:40.440 --> 0:02:43.320 Build us a belief that maybe labor has started to 0:02:43.360 --> 0:02:45.399 get a little bit more power as we work through 0:02:45.440 --> 0:02:48.679 this reopening. You've written today in your column, is the 0:02:48.760 --> 0:02:51.000 labor market too loose or is it tight? Is it 0:02:51.080 --> 0:02:54.120 loose or tight? And but your answer is both. Can 0:02:54.160 --> 0:02:56.360 you bolt me through the thinking bill and your license pace. 0:02:57.280 --> 0:02:59.520 So it's it's loose in the sense if you look 0:02:59.560 --> 0:03:01.160 at the point of rate, the one point of rates 0:03:01.160 --> 0:03:03.400 still elevated to compared to where we were in February 0:03:03.440 --> 0:03:05.959 two thousand twenty, when the unemploy rate was three and 0:03:06.000 --> 0:03:08.079 a half percent. Right now it's five point nine percent. 0:03:08.600 --> 0:03:10.200 It's a loose when you look at the number of 0:03:10.200 --> 0:03:12.760 people who are actually employed. Were seven million jobs short 0:03:12.760 --> 0:03:15.560 of where we were in February. If you look at 0:03:15.600 --> 0:03:17.520 it in terms of how many how many job openings 0:03:17.560 --> 0:03:19.840 there are a number of job openings is an all 0:03:19.960 --> 0:03:22.959 time record. We're all we have nine million time point 0:03:23.000 --> 0:03:26.040 two million of open jobs. Businesses have a lot of jobs. 0:03:26.080 --> 0:03:28.639 To feel they can't find workers, you actually see here 0:03:28.720 --> 0:03:31.800 here about that anecdotically in the FED Reserves Bagebook report 0:03:31.800 --> 0:03:35.400 where they talk about how businesses literally can't find workers 0:03:35.520 --> 0:03:39.000 to hire to do they're working and some businesses actually 0:03:39.000 --> 0:03:41.360 are cutting back their hours of operation because they can't 0:03:41.360 --> 0:03:45.280 find enough workers to keep their output up. So, Bill, 0:03:45.320 --> 0:03:47.880 when we talk about though, the power of workers here, 0:03:47.880 --> 0:03:51.000 when you go back decades prior, there was an argument 0:03:51.000 --> 0:03:53.320 to be made to here that it was a mobility 0:03:53.360 --> 0:03:55.400 of workers that also gave them a lot of power, 0:03:55.680 --> 0:03:59.480 and that with the consolidation of industries, with the decline 0:03:59.480 --> 0:04:02.600 of labor unions, UH, that sort of leverage is just 0:04:02.760 --> 0:04:04.800 not there the way it used to be. Is it 0:04:04.840 --> 0:04:07.560 possible to bring that back? Is it possible for that 0:04:07.640 --> 0:04:12.080 to be done at the behest of government policy? I 0:04:12.120 --> 0:04:15.680 think it'll be difficult because mobility has declined. Willingness of 0:04:15.680 --> 0:04:18.240 people to move from one, you know, geographic location in 0:04:18.240 --> 0:04:21.080 the US to another is much lower today than it 0:04:21.200 --> 0:04:23.800 was twenty thirty years ago. And part of that's the 0:04:23.839 --> 0:04:26.279 aging of the population. Is people you know, are are older, 0:04:26.279 --> 0:04:30.080 they're they're more attached to where they've lived historically. So 0:04:30.160 --> 0:04:31.840 I think I think it's really about the FED. It's 0:04:31.839 --> 0:04:33.960 really about the FED getting the economy to full employment. 0:04:33.960 --> 0:04:36.200 Is the FED can get the economy full employment, make 0:04:36.240 --> 0:04:39.040 the labor market truly tight, then workers will have to 0:04:39.440 --> 0:04:41.440 Businesses will have to pay up for workers, and workers 0:04:41.480 --> 0:04:44.120 will get up bigger share of the pie. But let's 0:04:44.120 --> 0:04:46.440 talk about the FED just briefly. You've talked a lot 0:04:46.440 --> 0:04:49.039 about the risk the balance of risks around the Federal 0:04:49.080 --> 0:04:52.000 Reserve that once they do lift off, that trajectory won't 0:04:52.000 --> 0:04:54.400 be a shallow as the trajectory we saw in the 0:04:54.400 --> 0:04:56.760 previous Psycho I said that you were a pot of 0:04:56.880 --> 0:05:00.000 Do you still feel that way, yeah, because they basically 0:05:00.000 --> 0:05:02.000 he said that we're not gonna even begin to raise 0:05:02.040 --> 0:05:04.920 short term race until three conditions are met. The economy 0:05:05.000 --> 0:05:06.880 has to be at their view of full employment, we 0:05:06.920 --> 0:05:09.159 have to they hit two percent inflation, and they have 0:05:09.200 --> 0:05:11.280 to be confidence that inflation is can go above to 0:05:11.400 --> 0:05:14.479 percent in the future. That's very very late to actually 0:05:14.520 --> 0:05:17.120 begin the tightening process in terms of lifting off in 0:05:17.200 --> 0:05:19.800 terms of short term interest rates. Before they used to 0:05:19.800 --> 0:05:22.760 try to hit you know, they lifted off early with 0:05:22.800 --> 0:05:25.880 the idea of hitting two percent inflation, full employment, and 0:05:25.920 --> 0:05:27.920 a neutral federal fund rate all at the same time. 0:05:27.960 --> 0:05:31.080 We're not gonna do that this time. Important final point 0:05:31.120 --> 0:05:33.279 and Bill get to hear from you as always. That 0:05:33.360 --> 0:05:35.440 paces out on the Bloomberg terminal this morning and on 0:05:35.440 --> 0:05:37.920 Bloomberg dot com. Is the labor market loose or tight? 0:05:38.440 --> 0:05:41.480 The answer it's both by Bill Dudly, the former Federal's 0:05:41.480 --> 0:05:47.720 serve Bank of New York president self. David Riley of 0:05:47.760 --> 0:05:50.880 Blue Bay Asset Management agrees. He says Grin and Barrett, 0:05:50.960 --> 0:05:54.360 it is a growth economy. David, what does the slowdown 0:05:54.520 --> 0:05:59.400 gloom crew get wrong? Well, I think they get wrong 0:05:59.600 --> 0:06:03.200 the extend off momentum that we have in the US, 0:06:03.279 --> 0:06:06.360 and I think also the global economy right now. And 0:06:06.560 --> 0:06:11.279 you know, we still do have continuing substantial fiscal support, 0:06:11.360 --> 0:06:13.479 and I think that we're going to get more going 0:06:13.520 --> 0:06:16.039 forward as well coming out of Washington, and you know, 0:06:16.080 --> 0:06:18.240 we're getting things like the recovery funds will start to 0:06:18.240 --> 0:06:20.520 be dispersed towards the end of this year and into 0:06:21.080 --> 0:06:25.400 two within Europe, and of course with the vaccine rollout 0:06:25.880 --> 0:06:30.240 um as as as well supporting reopening. So I'm pretty 0:06:30.360 --> 0:06:32.919 confident I've got a high conviction, even though the market 0:06:32.960 --> 0:06:35.320 is kind of challenging that conviction. In terms of how 0:06:35.320 --> 0:06:38.000 the bomb market is performing that you know, we do 0:06:38.120 --> 0:06:40.679 have strong growth for this year, we'll have above trend 0:06:40.880 --> 0:06:43.320 for growth for next year. I think where the market 0:06:43.560 --> 0:06:47.320 can reasonably um or you know, those country views can 0:06:47.360 --> 0:06:49.600 can reasonably challenge to sort of yeah, but once we 0:06:49.680 --> 0:06:52.520 get past that, then we're going back into a sort 0:06:52.520 --> 0:06:56.839 of Steckler stagnation of you know, excess savings, low growth, 0:06:56.880 --> 0:06:58.880 low inflation, and the FED will never be able to 0:06:58.880 --> 0:07:02.440 get UH rates higher. It's going to end up getting 0:07:02.480 --> 0:07:04.880 trapped in a way that I think the ECB has done. 0:07:05.240 --> 0:07:08.680 I'm not as pessimistic as as as that so um 0:07:08.720 --> 0:07:11.760 and I think right now the market is underprising um 0:07:12.280 --> 0:07:15.560 the Fed. So you know, I still think that bond 0:07:15.600 --> 0:07:18.280 shields are going to end meaningfully higher by the end 0:07:18.320 --> 0:07:20.680 of this year. But you know, yeah, I'm taking some 0:07:20.720 --> 0:07:24.200 pain and I'm having to gwyn and bear that right now. David, 0:07:24.200 --> 0:07:26.000 earlier on we caught it with Beamo, talked about the 0:07:26.040 --> 0:07:28.360 reaction function of this market, how a market response to 0:07:28.400 --> 0:07:30.880 incoming economic data. It made the point it's not what 0:07:30.920 --> 0:07:33.320 you expect. Might be a little bit more counterintuitive in 0:07:33.320 --> 0:07:36.480 the future, the upside surprises on CPI will actually lead 0:07:36.520 --> 0:07:39.120 to lower yields of the long when tens thirties, and 0:07:39.160 --> 0:07:43.120 you're pushing back against that. Well, I think in the 0:07:43.160 --> 0:07:48.280 new term that is because the market has interpreted the 0:07:48.400 --> 0:07:50.680 last meeting of the FED as as this you know, 0:07:50.760 --> 0:07:54.679 hawkish pivot and basically decided that the FED is blinked 0:07:54.720 --> 0:07:58.160 in terms of his average inflation targeting of regime. So 0:07:58.200 --> 0:08:00.760 if you get higher inflation in the near term, that 0:08:00.880 --> 0:08:03.480 is makes the FED more likely to to to to 0:08:03.600 --> 0:08:06.000 hire Gregs. But as I was saying before, people are 0:08:06.040 --> 0:08:09.800 sort of now debating this kind of secklist stagnation over 0:08:09.840 --> 0:08:12.400 the medium term, but I think they're wrong on that both. 0:08:12.560 --> 0:08:15.080 I think that, you know, as the data comes through, 0:08:15.120 --> 0:08:18.320 we will see higher and stickier um inflation as well 0:08:18.360 --> 0:08:21.320 as stronger growth. But also actually that I don't think 0:08:21.360 --> 0:08:25.480 the FED has become meaningfully more hawkish, and so at 0:08:25.520 --> 0:08:29.800 some point I do actually expect the curve to steep 0:08:29.840 --> 0:08:31.760 and back again and to get back onto that more 0:08:31.840 --> 0:08:35.160 kind of reflationary um trade. Tom and I hate that 0:08:35.200 --> 0:08:37.400 when questions when will that happen? But David, I do 0:08:37.440 --> 0:08:40.440 think it's important when you think we'll have sufficient information 0:08:40.480 --> 0:08:43.120 to challenge the current consensus when do you think that 0:08:43.160 --> 0:08:47.240 will happen. I think we're going to be looking at 0:08:47.280 --> 0:08:51.160 sort of September October time. I mean, you know, what's 0:08:51.200 --> 0:08:54.800 important is, in addition to the inflation numbers, is also, 0:08:54.880 --> 0:08:58.040 of course what's happening in terms of, um, the labor market. 0:08:58.040 --> 0:09:00.920 And although we had a pretty strong pay rolls headline number, 0:09:01.000 --> 0:09:04.280 the actual unemployment rate UM, you know, somewhat surprisingly ticked up. 0:09:04.520 --> 0:09:06.679 Now our own forecast suggests that unemployment is going to 0:09:06.760 --> 0:09:09.480 be approaching four percent by the end of this year. 0:09:10.080 --> 0:09:12.200 Uh So, I think, you know, when we get to 0:09:12.320 --> 0:09:17.200 sort of October, we've had a number of payroll reports, 0:09:17.240 --> 0:09:21.800 including you know, the September payrolls, which will start to 0:09:21.880 --> 0:09:24.960 reflect some of the runoff in terms of the extent 0:09:25.040 --> 0:09:28.679 of unemployment insurance. UM. You know, kids returning to school, 0:09:29.040 --> 0:09:31.959 you know, Mom's getting more access to the labor market 0:09:31.960 --> 0:09:33.920 as well, so some of those sort of labor supply 0:09:34.040 --> 0:09:36.880 constraints may start to dissiplate as well. So, David, so 0:09:37.120 --> 0:09:39.360 as we sort of try to assess this growth story, 0:09:39.480 --> 0:09:42.079 this growth scare, whatever we want to sort of call 0:09:42.160 --> 0:09:44.960 it here, can you maybe walk us through the diversions 0:09:45.000 --> 0:09:47.960 that we've seen lately between what's been going on with 0:09:48.000 --> 0:09:50.160 regards to sovereign debt and what's been going on with 0:09:50.200 --> 0:09:53.640 regards of corporate credit, because they seem to now be 0:09:53.840 --> 0:09:57.400 uncoppling maybe just a little bit. Yeah, I think it's 0:09:57.400 --> 0:10:00.880 a good point that. I mean, one aspect of you know, 0:10:00.920 --> 0:10:03.960 what we've been seeing of late is that, well, you know, 0:10:04.000 --> 0:10:06.720 we've seen the volatility in the raids market. We've seen 0:10:06.760 --> 0:10:11.080 the equity markets starting to respond to that, and thinking, 0:10:11.360 --> 0:10:14.000 you know, the ball market is telling us that growth 0:10:14.080 --> 0:10:17.440 is slowing and potentially meaningful credit is actually held up 0:10:17.440 --> 0:10:20.880 pretty well now. In part credit doesn't need sort of 0:10:20.960 --> 0:10:25.640 really strong growth and corporate earnings growth in order to 0:10:25.679 --> 0:10:28.480 be still a relatively attractive from a from a from 0:10:28.480 --> 0:10:32.000 a carry perspective. Um. But I do think we say 0:10:32.040 --> 0:10:33.960 the credit market right now it's sort of saying, well, 0:10:34.320 --> 0:10:38.040 you know, yeah, okay, maybe growth is you may maybe moderating, 0:10:38.120 --> 0:10:40.360 but that's you know, it's it's not waiving any kind 0:10:40.400 --> 0:10:43.400 of red or even amber flags. In my opinion, David, 0:10:43.440 --> 0:10:45.760 my observation is you're not focused. I mean, that's all 0:10:45.800 --> 0:10:48.320 I can see now, John. This is just simple. Riley 0:10:48.400 --> 0:10:50.959 is focused and one thing and that's what England is 0:10:51.000 --> 0:10:53.480 going to do against Italy. Let's get to it. How 0:10:53.520 --> 0:10:56.360 do they do this? John Pharaoh and David Riley. Does 0:10:56.440 --> 0:10:59.360 England have to come out strong? It's the one question. 0:11:00.120 --> 0:11:02.760 Now when does England do it? Do they come out 0:11:02.800 --> 0:11:05.560 strong in the first half, John, or do they have 0:11:05.600 --> 0:11:08.640 to be patient and come out strong in the second. 0:11:08.720 --> 0:11:10.120 I think a lot of it comes down to one 0:11:10.120 --> 0:11:12.520 player for England. David. I'm sure you agree. Raheem Sterling 0:11:12.559 --> 0:11:15.600 has just been a standout performer, player of the tournament 0:11:15.679 --> 0:11:17.360 for England. If he turns out there could be a 0:11:17.400 --> 0:11:21.680 bit of trouble for Italy. It's just been absolutely fantastic. Yeah, 0:11:21.720 --> 0:11:25.200 I actually think I actually think it's the overall the 0:11:25.320 --> 0:11:28.960 actual better team. But England do have home advantage, so 0:11:29.640 --> 0:11:31.960 I am hopeful that that will be enough to kind 0:11:31.960 --> 0:11:34.480 of get us over the line. But yeah, I mean 0:11:34.640 --> 0:11:40.120 Racine Sterling running uh the Italian center backs I think 0:11:40.280 --> 0:11:43.040 could cause them some problems, particularly if they touch him. 0:11:43.080 --> 0:11:45.520 And of just which Italy turns up the one against Bounty, 0:11:45.679 --> 0:11:49.160 the one against Austria. I'm more interested in the thirty 0:11:49.200 --> 0:11:54.200 three unbeaten thirty plus games the City of London tom 0:11:54.280 --> 0:11:56.760 Monday morning. How does that work? David? What have you 0:11:56.800 --> 0:11:58.960 said to your team? Are you turning around to them 0:11:58.960 --> 0:12:01.280 and saying, look, I don't speech to be in early 0:12:01.320 --> 0:12:03.560 on Monday morning after the big game. What are the 0:12:03.600 --> 0:12:08.600 expectations from the staff in the city. Uh, well, I've 0:12:08.640 --> 0:12:11.040 told them I won't don't expect me to be You 0:12:11.200 --> 0:12:14.800 told them that. What about them, David, They've got to 0:12:14.840 --> 0:12:20.079 be banging there. I don't forget. I'm a lot older, 0:12:20.160 --> 0:12:23.679 so I've got to sleep great time. I do need 0:12:23.720 --> 0:12:26.839 my I don't need my sleep, so um yeah, I 0:12:26.880 --> 0:12:31.280 mean hopefully, um, you know we went there'll be a 0:12:31.320 --> 0:12:35.280 little bit of positivity and euphoria, maybe a sort of 0:12:35.360 --> 0:12:38.200 cheeky long sterling which should we should send the camera 0:12:38.640 --> 0:12:41.720 out to bank station just outside of bank Station tom 0:12:42.280 --> 0:12:46.280 on Monday morning. I'm tanning you tumballweeds all the way 0:12:46.280 --> 0:12:50.880 through to lunchtime. It's called bunk, right, bunk. Yeah. What 0:12:51.000 --> 0:12:53.360 I noticed here is David Riley just you know, he 0:12:53.480 --> 0:12:55.600 was not focused until we brought this up, John, and 0:12:55.640 --> 0:12:59.280 he's just full on right now. I would agree David 0:12:59.440 --> 0:13:04.719 in his own David Riley, thank you, Chief Investment Strategist 0:13:05.080 --> 0:13:12.520 t K Monday morning, it's going to be dead. David 0:13:12.559 --> 0:13:17.840 blanche Flower a few decades ago definitely restructured our labor 0:13:17.920 --> 0:13:21.040 thinking with his book The Wage Curve, and what we 0:13:21.200 --> 0:13:24.880 all know is our wage curve as a society has 0:13:24.920 --> 0:13:28.440 been shattered in the recent decades. He is at Dartmouth College. 0:13:28.559 --> 0:13:32.720 David David blanche Flower joins us UH this morning. Danny, 0:13:32.760 --> 0:13:35.120 I look at where we are in the first name 0:13:35.480 --> 0:13:37.760 that I came up with, and what I want to 0:13:37.800 --> 0:13:41.679 talk about more than anything is the primal scream nature 0:13:42.280 --> 0:13:47.199 of the seventy two point Executives Order. Who is screaming 0:13:47.720 --> 0:13:54.199 about consolidation in America? Well, I guess the way you 0:13:54.240 --> 0:13:58.000 would think of it now is that workers have been hurting, um. 0:13:58.120 --> 0:14:01.160 Non workers have been hurting. They've been hit a serious 0:14:01.280 --> 0:14:05.760 pandemic um and it's had a big impact on the world. 0:14:05.880 --> 0:14:10.640 But this sits on the end of many decades of 0:14:10.840 --> 0:14:14.720 poor wage growth, and the balance of power between workers 0:14:14.800 --> 0:14:18.720 and firms has shifted quite considerably compared to where it was. 0:14:19.080 --> 0:14:21.000 So this is a sort of I read it, and 0:14:21.040 --> 0:14:23.120 I've read it very quickly in the last twenty minutes. 0:14:23.440 --> 0:14:26.640 This is the kind of primal scream to try and 0:14:26.680 --> 0:14:31.200 redress the balance of power between workers and firms. Now, 0:14:31.240 --> 0:14:33.640 I think the country we just had its important market 0:14:33.680 --> 0:14:36.720 responses very little because the question is does it have 0:14:36.760 --> 0:14:41.440 any teeth? Is it merely wishful thinking? So when I 0:14:41.480 --> 0:14:44.560 read it that this is trying to think about UM 0:14:44.600 --> 0:14:47.640 some of the stories about big firms, about Google, about 0:14:47.680 --> 0:14:50.520 about on Facebook and song, but this is this is 0:14:50.560 --> 0:14:53.680 a scream and it start to think about that balance 0:14:53.760 --> 0:14:56.480 being being being changed. Whether it can do that, it 0:14:56.560 --> 0:14:59.080 is unclear. What's so important to me, Professor, is the 0:14:59.160 --> 0:15:02.680 idea from you or liberals like Paul Krugman, or conservatives 0:15:02.840 --> 0:15:06.200 as well the late at lazer out at Stanford is 0:15:06.240 --> 0:15:10.760 the overwhelming theme of that document is technology is here, 0:15:11.160 --> 0:15:15.160 and we are using and adapting to technology every every day. 0:15:15.280 --> 0:15:19.760 Within the economics of monopsony, can we take the deadweight 0:15:19.920 --> 0:15:23.880 loss of technology and can basically can we put the 0:15:23.920 --> 0:15:28.520 genie back in the bottle? Well, we'll probably not. UM. 0:15:28.640 --> 0:15:31.640 I mean, the teeth is the big story, but but 0:15:31.720 --> 0:15:34.160 I do think that in some sense that I'd like 0:15:34.240 --> 0:15:37.440 to think of it this way. UM firms have the 0:15:37.480 --> 0:15:42.840 ability to pay higher wages, they've seen no real need 0:15:42.960 --> 0:15:46.920 to do that, and they haven't shared. They haven't shared 0:15:47.000 --> 0:15:50.520 those wages and those in a sense, the profits that 0:15:50.560 --> 0:15:52.720 they've made. So this is a screen to try and 0:15:52.760 --> 0:15:55.320 do something about that. I mean, look at real wages. 0:15:55.360 --> 0:15:58.160 I mean, I've written about it for thirty years. Still, 0:15:58.280 --> 0:16:01.480 even with the growth that we've seen, real wages today 0:16:01.520 --> 0:16:04.440 are still below what they were in the nineties seventies. 0:16:04.760 --> 0:16:08.120 So this is about trying to think about that coming 0:16:08.120 --> 0:16:10.600 out of the White House, coming out of cc rouse, 0:16:10.640 --> 0:16:13.600 who cares about these kinds of questions. The issue is 0:16:13.680 --> 0:16:16.320 can you can you change this part? There appeared to 0:16:16.320 --> 0:16:19.280 be sensible things there in terms of let's think about 0:16:19.280 --> 0:16:22.480 this occupation or licensing, let's think about ways in which 0:16:22.520 --> 0:16:25.600 we can get prices down. But that in a in 0:16:25.640 --> 0:16:30.160 a sense an o'domini can just continues. And in a 0:16:30.240 --> 0:16:32.880 sense I read it is we would like for these 0:16:32.880 --> 0:16:35.320 things to happen. We would like to try and sort 0:16:35.320 --> 0:16:38.160 of stop the world from rolling. But there's little or 0:16:38.200 --> 0:16:39.400 nothing in it. I mean, there is going to be 0:16:39.440 --> 0:16:43.440 a White House competition, council um and and but that's true. 0:16:43.480 --> 0:16:45.560 But let's talk about that word and forgive me for 0:16:45.720 --> 0:16:48.360 up because I think that word is so important. The 0:16:48.400 --> 0:16:51.400 knee jerk reaction from conservatives this morning, I think would 0:16:51.440 --> 0:16:53.560 be to say I'm from the government and I'm here 0:16:53.600 --> 0:16:56.240 to help. This is a problem. The government wants to 0:16:56.240 --> 0:16:58.320 set prices all those kind of things. But I hear 0:16:58.360 --> 0:17:01.920 competition and the lack of air off and Tom I 0:17:01.960 --> 0:17:04.240 think rightly mentioned the late great and and Cruder and 0:17:04.320 --> 0:17:06.720 some of the work he did on non compete clauses 0:17:07.160 --> 0:17:09.520 and the labor market. And this is about trying to 0:17:09.600 --> 0:17:13.680 reintroduce competition where there hasn't been enough competition. Can you 0:17:13.720 --> 0:17:16.720 just sit there, that's your world, the labor something like 0:17:16.840 --> 0:17:20.119 non competes and the problem then that is caused. Well, 0:17:20.840 --> 0:17:25.040 this is about the balance of power. When the balance 0:17:25.040 --> 0:17:29.399 of power sits with firms. Firms can put put in 0:17:29.440 --> 0:17:33.399 occupational licenses and they differ by a state um and 0:17:33.440 --> 0:17:35.560 in the UK they can do these things called zero 0:17:35.640 --> 0:17:40.520 our contracts. That's what happens when the bargaining power shifts 0:17:40.520 --> 0:17:44.760 strongly towards towards firms. If you can somehow or other 0:17:44.840 --> 0:17:48.879 redress that take the occupational licenses the way that increases 0:17:48.920 --> 0:17:52.560 the powers of workers, that's what this document is about. 0:17:53.320 --> 0:17:56.040 But it but the first thing you read it, John, 0:17:56.080 --> 0:17:58.480 is it doesn't have any teeth it doesn't have. How 0:17:58.480 --> 0:18:01.160 are we going to do this? Yeah, you can say, 0:18:01.280 --> 0:18:03.400 you know, it will be good idea to lower drug prices. 0:18:03.520 --> 0:18:06.560 It would be good idea to let people have have refunds. 0:18:06.920 --> 0:18:09.320 And in some sense what we'll see and that's something 0:18:09.320 --> 0:18:13.000 I'd argue about a lot workers ability to bargain these 0:18:13.040 --> 0:18:17.399 things becomes greater as the economy moves towards full employment, 0:18:17.760 --> 0:18:20.640 and so we're seeing these adjustments going on. And then 0:18:20.680 --> 0:18:23.280 the last six or seven months we've see increasing power 0:18:23.359 --> 0:18:26.639 of workers trying to get trying trying to deal with 0:18:26.680 --> 0:18:28.960 the bottlenecks that we see. So I think this is 0:18:29.160 --> 0:18:32.880 sort of an opening salvo. Al Kruger's work is really 0:18:32.920 --> 0:18:36.600 important in that in that area, firms can impose rules 0:18:37.520 --> 0:18:40.960 when when they're bargaining position is strong. We will see 0:18:41.000 --> 0:18:46.199 what happens. But I just think, you know, the this 0:18:46.280 --> 0:18:48.200 is an opening salvo, it seems to me. But the 0:18:49.600 --> 0:18:51.800 professor when we talk about some of the market forces 0:18:51.840 --> 0:18:54.960 that have sort of pushed a little bit more, given 0:18:55.000 --> 0:18:57.000 the workers a little bit more bargaining power. Here the 0:18:57.080 --> 0:18:59.760 idea here that the administration now wants to nudge that 0:19:00.160 --> 0:19:02.720 further not necessarily a surprise but the idea when you 0:19:02.720 --> 0:19:04.960 start talking about some of these right to work issues 0:19:05.000 --> 0:19:07.600 and some of these licensing issues here, this is now 0:19:08.200 --> 0:19:10.359 a major shift. If he's able to get it through 0:19:10.720 --> 0:19:12.520 and able to sort of enforce these things, this would 0:19:12.560 --> 0:19:15.119 be a major shift in how in the US economy, 0:19:15.160 --> 0:19:18.560 in the US labor market. I think it would be. 0:19:18.600 --> 0:19:21.399 And there are signs around the world that these that 0:19:21.520 --> 0:19:25.160 this shift is underway. Um. Two examples in the UK 0:19:25.320 --> 0:19:29.320 we've seen rising unionization rates and actually in the United 0:19:29.400 --> 0:19:32.280 States and the last data that we have union rates, 0:19:32.680 --> 0:19:35.560 union density rights, that's the proportion of workers union has 0:19:35.600 --> 0:19:38.679 actually risen. Why is that. It's because actually in the 0:19:38.800 --> 0:19:43.480 last years or so, non union jobs have actually declined. 0:19:43.920 --> 0:19:46.080 So I think there is some evidence in the last 0:19:46.080 --> 0:19:49.959 couple of years that there is a move away. I mean, 0:19:50.000 --> 0:19:52.960 the right to work laws are our laws that can 0:19:53.000 --> 0:19:55.879 be imposed when there's plenty of workers around. So I 0:19:55.880 --> 0:19:59.320 think you're right, Um, the balance between workers and firm 0:19:59.400 --> 0:20:01.240 seems to be changing a bit. I mean, this is 0:20:01.400 --> 0:20:04.679 this is a really important and interesting document. It suggests 0:20:04.720 --> 0:20:06.520 that you know, we're going to see a push on 0:20:06.520 --> 0:20:10.359 the front of let's increase the power of workers. But 0:20:10.680 --> 0:20:13.920 whether you can impose that is another thing. Problem is, Danny, 0:20:13.920 --> 0:20:16.880 that's the left wing interpretation of this. And I mentioned 0:20:16.880 --> 0:20:20.080 a little bit earlier the conservative criticism would be, we're 0:20:20.080 --> 0:20:23.360 trying to we're trying to reduce the friction of corporations 0:20:23.640 --> 0:20:25.720 at the same time, I don't want to introduce more 0:20:25.760 --> 0:20:28.399 friction on the labor side with unions. And you know 0:20:28.440 --> 0:20:31.040 that's a political point, of course. I know that's a 0:20:31.080 --> 0:20:34.880 political point. Um that that that that that's true. I'm 0:20:34.880 --> 0:20:37.479 just suggesting that there are there are trends that are 0:20:37.520 --> 0:20:40.760 moving partly because that's what's happening out there in the world. 0:20:41.240 --> 0:20:43.480 I mean seeing those things happening. But yeah, John, I 0:20:43.560 --> 0:20:45.520 mean I don't think it's the it's the left wing view. 0:20:45.560 --> 0:20:48.199 I think it's that the reality is, the reality is 0:20:48.200 --> 0:20:50.920 where we are. How that's going to change will really 0:20:50.960 --> 0:20:53.679 depend upon how tight the labor market is. And we 0:20:53.680 --> 0:20:56.200 can both agree we need more competition. Danny, you and 0:20:56.240 --> 0:20:57.720 I could talk forever. I'll give you a call later. 0:20:57.960 --> 0:20:59.800 We'll carry this on and a little bit more. Danny 0:21:00.080 --> 0:21:07.800 Flat of Doltma College Andrew Peckross resists of Johns Hopkins 0:21:08.040 --> 0:21:11.199 were thoroughly could join us this morning. The mystery for 0:21:11.240 --> 0:21:15.560 me is someone vaccinated. Professor, is the idea that if 0:21:15.600 --> 0:21:21.920 I choose to be unvaccinated, how sick is sick when 0:21:21.920 --> 0:21:26.200 I get the delta variant? What's the level of sick 0:21:26.440 --> 0:21:31.160 we should expect. Well, the data is really rolling in 0:21:31.200 --> 0:21:36.600 now that um, the delta variant is causing disease primarily 0:21:36.680 --> 0:21:41.840 and unvaccinated populations, and the disease that it's showing seems 0:21:41.880 --> 0:21:44.119 to be a bit more severe than the disease we 0:21:44.200 --> 0:21:47.399 saw in similar age groups at the beginning of the pandemic. 0:21:48.119 --> 0:21:51.720