WEBVTT - Jobs Report Reaction & Tech in Wind Turbines 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You, 0:00:05.360 --> 0:00:07.640 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.960 at Bloomberg dot com. Right now, looking at the equity 0:00:21.000 --> 0:00:24.600 market here smph up slightly, dow up about sixty points. Uh. 0:00:24.680 --> 0:00:27.360 Not much movement in here after this job's report, but 0:00:27.400 --> 0:00:30.440 let's see where the action might be. We've welcome our 0:00:30.520 --> 0:00:34.160 good friend Vince Signarella. Vince is the global market macro 0:00:34.320 --> 0:00:37.280 strategist for Bloomberg. Vince, thanks so much for joining us 0:00:37.280 --> 0:00:39.159 here in a Bloomberg in act the broker studio. What 0:00:39.280 --> 0:00:40.960 did you take out of the jobs data this morning? 0:00:41.080 --> 0:00:43.240 We'll tell you. Larry's right and he's stealing my thunder 0:00:43.240 --> 0:00:45.080 the rat. I wrote about this about seven years ago 0:00:45.120 --> 0:00:48.000 when I was with Wall Street Journal. August is a 0:00:48.200 --> 0:00:53.200 seasonally adjusted month um It often is revised higher. Last year, 0:00:53.240 --> 0:00:55.320 in two thousand eighteen, the number was a blowout like 0:00:55.360 --> 0:00:58.800 two eighties something, and then September was revised lower. So 0:00:59.480 --> 0:01:01.320 you kind of look at the August jobs data and 0:01:01.400 --> 0:01:03.240 you treat it like figure skating. You throw out the 0:01:03.280 --> 0:01:05.600 high and the low, and you get somewhere of an 0:01:05.600 --> 0:01:09.360 average over the summer. Let's just get your big picture 0:01:09.400 --> 0:01:11.840 takeaway from the jobs report. When I looked at it, 0:01:12.080 --> 0:01:14.039 my impulse was, this is a choose your own adventure 0:01:14.120 --> 0:01:16.399 jobs report. There's good, there's bad, pick the narrative you 0:01:16.440 --> 0:01:18.800 want go with it. The Fed certainly will the cut 0:01:18.880 --> 0:01:21.720 rates come September eight. The question is what they're going 0:01:21.760 --> 0:01:23.560 to do with it going forward, probably going to be, 0:01:23.760 --> 0:01:25.679 you know, watching the data, as they've been saying for 0:01:25.720 --> 0:01:29.840 a long time. Does this maturely shift markets in any 0:01:29.840 --> 0:01:31.960 way over the next few weeks Ahead of that f 0:01:32.000 --> 0:01:34.080 o MC getting its shut And I mean, I think 0:01:34.240 --> 0:01:36.160 you were exactly correct. If you look at the private 0:01:36.200 --> 0:01:38.880 payrolls numbers, they were disappointing. So if you if you 0:01:38.920 --> 0:01:40.640 wanted to look at a week job's report, you could 0:01:40.640 --> 0:01:43.199 look at that. You could look at the wage growth, 0:01:43.240 --> 0:01:46.400 which was substantially higher than estimates, and that would give 0:01:46.440 --> 0:01:49.080 you the positive narrative to the story. So there's it's 0:01:49.120 --> 0:01:51.320 definitely a mixed job report. And as I said, August 0:01:51.480 --> 0:01:53.240 is a month I kind of throw out, and I 0:01:53.280 --> 0:01:55.480 think the FED and everybody else in the long run 0:01:55.560 --> 0:02:00.000 will do the same. I think you also correct about September. Um. 0:02:00.800 --> 0:02:03.160 My take for the FED for September is that they 0:02:03.160 --> 0:02:07.080 will do They'll utter the draggy narrative, we don't want 0:02:07.120 --> 0:02:09.280 to stand in the way of economic growth. This will 0:02:09.320 --> 0:02:13.440 be an additional insurance cut, perhaps to keep things smoothing along. 0:02:13.960 --> 0:02:15.839 They've They've shown us they could turn on a dime 0:02:15.880 --> 0:02:19.400 if they need to have data changes, so there's no harm, 0:02:19.400 --> 0:02:21.960 no foul by cutting basis points. And I wonder what 0:02:22.000 --> 0:02:23.839 their messaging will be tho Vince. You know, I think 0:02:23.840 --> 0:02:26.280 the you know, an insurance cut. I don't think it's 0:02:26.280 --> 0:02:28.040 something that the market wants to hear. The market wants 0:02:28.080 --> 0:02:30.920 to hear that we're into an easing cycle. Do you 0:02:30.919 --> 0:02:33.120 think the FED will go that far? I doubt it. 0:02:33.240 --> 0:02:35.720 I don't think they'll change the narrative from the last 0:02:35.760 --> 0:02:39.560 statement that drastically, because the economy and the data don't 0:02:39.600 --> 0:02:41.640 call for an easy cycle right now. They call for 0:02:41.800 --> 0:02:43.880 the potential that they may have, you know, and you 0:02:43.919 --> 0:02:46.320 won't hear this realistically from the Fed, either that they've 0:02:46.400 --> 0:02:49.000 hiked a little bit too aggressively. If you if you 0:02:49.040 --> 0:02:51.400 look at the natural rate of interest, which Williams has 0:02:51.400 --> 0:02:53.920 put out a paper on the Feds Williams a couple 0:02:53.960 --> 0:02:56.720 of years ago, the natural rate of interest right now 0:02:56.800 --> 0:02:59.880 is some forty basis points below the FED funds. Right 0:03:00.639 --> 0:03:03.080 you can easily see a fifty basis points cut in 0:03:03.120 --> 0:03:04.960 the Fed fund rate just to bring us back to 0:03:05.400 --> 0:03:08.160 sort of neutral ground. And they have the room to do, 0:03:08.440 --> 0:03:10.440 all right. So before we dig too much into the 0:03:10.520 --> 0:03:12.600 Job's report, we're gonna be getting more on that coming 0:03:12.680 --> 0:03:14.880 up in the show. But I want to dig into 0:03:15.000 --> 0:03:18.519 the China news overnight. Uh, the fact that they are 0:03:18.560 --> 0:03:20.919 in fact engaging in more stimulus. And you said out 0:03:20.919 --> 0:03:23.360 a note this morning that I thought was really important, 0:03:23.440 --> 0:03:26.360 which is China wouldn't be engaging in additional rounds of 0:03:26.360 --> 0:03:29.000 stimulus if they thought that we were anywhere close to 0:03:29.000 --> 0:03:31.280 a trade deal. Yeah, and I think that that is 0:03:31.320 --> 0:03:34.720 definitely the case. But I will the caveat to that, honestly, 0:03:34.920 --> 0:03:37.440 is my sources from China last tw weeks have gone dark, 0:03:38.040 --> 0:03:41.680 uh no news. So that sort of coincides with that 0:03:41.800 --> 0:03:44.400 if you will, that I'm not hearing anything, which means 0:03:45.240 --> 0:03:48.119 there really isn't any positive news that I can take from, 0:03:48.120 --> 0:03:51.880 which which then raises a question, right, can additional Chinese 0:03:51.880 --> 0:03:55.880 stimulus offset what we have seen in terms of a slowdown, 0:03:55.960 --> 0:03:59.640 and that could actually ameliorate markets or calm them even 0:03:59.680 --> 0:04:01.880 with how a trade A greatment, not not really a 0:04:02.240 --> 0:04:05.200 China stimulus is for their own domestic economy. It's to 0:04:05.280 --> 0:04:09.640 support their businesses. The hope is that the reserve requirement 0:04:09.680 --> 0:04:12.520 cut will add liquidity, which Chinese banks will then lend 0:04:12.840 --> 0:04:16.279 to businesses. And it's a it's a tax season coming 0:04:16.320 --> 0:04:18.520 up at the end of September, so if business demand 0:04:18.720 --> 0:04:22.360 requires capital. China wants to keep the domestic engine going 0:04:22.400 --> 0:04:25.760 because they know the international engine is not there with 0:04:25.839 --> 0:04:28.240 the tariffs, so they need to prop up the domestic 0:04:28.240 --> 0:04:30.920 economy and I think that reserve re cirement cut is 0:04:30.960 --> 0:04:33.760 to do that and that alone, and that to me 0:04:33.839 --> 0:04:37.320 sends a signal that they're not anticipating the international economy 0:04:37.360 --> 0:04:40.440 to lift them anytime soon. Let's bring a good friend, 0:04:40.480 --> 0:04:45.440 Carl Ricka Donna Bloomberg Economics chief US economist. So Carl, welcome, 0:04:45.480 --> 0:04:47.600 You're in our Bloomberg Interreactor Broker Studio. We'll love having 0:04:47.640 --> 0:04:49.800 you here. I want to get your thoughts on the 0:04:49.880 --> 0:04:51.840 job's number again, as we've kind of discussed, you're kind 0:04:51.839 --> 0:04:54.360 of a goldilocks type of report. What was your take. 0:04:54.839 --> 0:04:57.760 I'm gonna go on the side of whichever bear said 0:04:57.920 --> 0:05:00.760 things were a little bit that too cold, So I'm 0:05:00.800 --> 0:05:03.080 not gonna say goldilock scept for this report, although I 0:05:03.080 --> 0:05:05.159 know some analysts are saying that, uh. And certainly if 0:05:05.160 --> 0:05:07.240 we look at the reaction in the treasury market, it 0:05:07.279 --> 0:05:09.919 also seems to have that sentiment that things were a 0:05:09.960 --> 0:05:13.440 little on the chili side here. So what's impressive is 0:05:13.440 --> 0:05:15.600 that the economy is holding up as well as it is. 0:05:15.640 --> 0:05:18.520 So even the manufacturing sector, which is really front and 0:05:18.560 --> 0:05:22.200 center in this trade skirmish and economic uncertainty and strong dollar, 0:05:22.560 --> 0:05:25.800 still managed to eke out positive job games. Now, mind you, 0:05:25.920 --> 0:05:29.000 the I s M earlier this week fell into minor 0:05:29.040 --> 0:05:31.560 contractionary territory. I think it's going to stay there for 0:05:31.600 --> 0:05:35.360 a couple more months. So the economy is weathering the storm, 0:05:35.440 --> 0:05:38.039 but it certainly is not immune to what's happening. And 0:05:38.080 --> 0:05:40.839 we can see that in this slowing pace of job creation. 0:05:40.920 --> 0:05:44.560 So while that headline number one thirty, uh, not very impressive, 0:05:45.040 --> 0:05:49.039 we have to factor out twenty five thousand census workers 0:05:49.040 --> 0:05:51.960 that were hired for is to get an even better 0:05:52.000 --> 0:05:55.320 sense of underlying momentum in the economy. But when we 0:05:55.360 --> 0:05:58.960 do that and instead look at private sector hiring nine thousand, 0:05:59.240 --> 0:06:02.279 that that goldilocks Paul. But I want to push back 0:06:02.320 --> 0:06:05.560 because honestly, you did see better than expected wage growth, 0:06:05.720 --> 0:06:08.440 which indicates that perhaps the labor market is tight and 0:06:08.440 --> 0:06:10.760 that we're not adding as many jobs since simply because 0:06:10.760 --> 0:06:12.960 there aren't that many people looking for work. Sure we 0:06:13.000 --> 0:06:16.000 should be getting some wage pressure as the unemployment rate 0:06:16.120 --> 0:06:19.599 is plunging below four percent. I think the unemployment rate 0:06:19.640 --> 0:06:22.000 could actually hit three point four percent or three point 0:06:22.000 --> 0:06:24.440 five percent by the end of this year. So things 0:06:24.520 --> 0:06:28.640 absolutely are tightening. But remember one thing, Lisa, inflation is 0:06:28.680 --> 0:06:32.680 a lagging economic indicator, and wage inflation is also a 0:06:32.760 --> 0:06:36.279 lagging economic indicator. So what's more important is the activity 0:06:36.279 --> 0:06:39.200 based metrics, things like the pace of hiring, in the 0:06:39.279 --> 0:06:43.120 hours worked, and the aggregate income growth, and those were 0:06:43.200 --> 0:06:46.320 on cooler trajectories in this report. How do you think 0:06:46.480 --> 0:06:50.160 the FED should interpret this data? Well, the Fed has 0:06:50.200 --> 0:06:52.440 to look at this data and say, yes, the economy 0:06:52.800 --> 0:06:57.440 is losing some momentum. We're not at recession risk territory here, 0:06:57.600 --> 0:07:00.560 but we're definitely looking at sub two percent growth in 0:07:00.600 --> 0:07:02.960 the back half of the year. In that environment, the 0:07:03.000 --> 0:07:05.080 Feds should be trying to take some of the steam 0:07:05.120 --> 0:07:07.200 out of the trade weighted dollar, which is at record 0:07:07.279 --> 0:07:10.160 high levels. Uh and therefore they should be cutting twenty 0:07:10.640 --> 0:07:14.280 in September, October, December. In December, they should look at 0:07:14.280 --> 0:07:17.680 their Bloomberg screens. If the yield curve is still inverted, 0:07:17.720 --> 0:07:20.200 then keep those twenty five basis point cuts coming right 0:07:20.240 --> 0:07:22.720 into the new year. Vince, is that what the market 0:07:22.760 --> 0:07:25.160 is looking for? Just cut to zero basically on a 0:07:25.200 --> 0:07:27.960 monthly trajectory. I didn't say zero, but the ten year 0:07:28.000 --> 0:07:30.160 treasury yields at zero, they be They Fed better go 0:07:30.200 --> 0:07:32.680 to zero as well. I think the market would like 0:07:32.760 --> 0:07:35.080 them to do that. I personally would like to see 0:07:35.080 --> 0:07:39.000 them get the ioe R closer to where the tenure is, 0:07:39.040 --> 0:07:41.280 to keep that yield curve a little flatter and not 0:07:41.320 --> 0:07:44.760 so inverted. Um. It makes absolutely no sense to have 0:07:44.880 --> 0:07:48.720 FED funds right seventy five basis points above the tenure yield. 0:07:48.840 --> 0:07:52.080 So the market is definitely asking exactly what Carl said, 0:07:52.400 --> 0:07:54.840 give me that seventy five basis points. Give it to 0:07:54.880 --> 0:07:56.360 me in a little bit out of time. We can't 0:07:56.360 --> 0:07:58.320 really handle it all at once because that'll scare the 0:07:58.320 --> 0:08:01.000 heck out of us. Um whether or not they'll get that, 0:08:01.000 --> 0:08:03.880 that's a good question. I think they'll be a little 0:08:03.880 --> 0:08:06.320 bit more reluctant to go that quickly. All right, Well, 0:08:06.400 --> 0:08:09.600 we'll continue the conversation. Car Down and Bloomberg Economics Chief 0:08:09.640 --> 0:08:12.800 US Economist, Thank you so much. Vince Ignarella, global macro 0:08:12.880 --> 0:08:15.200 strategist for Bloomberg, both of you in our Bloomberg Interactive 0:08:15.200 --> 0:08:32.480 Progra Studios. Thank you so much for being with us. Well, 0:08:32.520 --> 0:08:35.439 it is Jobs Friday, and I think the mixed report 0:08:35.520 --> 0:08:39.320 that we got from the Department would suggest that the 0:08:39.320 --> 0:08:41.840 Fed probably has a little bit more ammunition should they 0:08:41.880 --> 0:08:45.000 decide to cut rates at their next meeting. They get 0:08:45.000 --> 0:08:46.480 a sense of kind of how this may play out. 0:08:46.480 --> 0:08:48.559 We welcome our next guest, Chris Louse. He's a senior 0:08:48.600 --> 0:08:51.520 fellow at the University of Virginia Miller Center. He was 0:08:51.600 --> 0:08:54.520 former Deputy Secretary of Labor under President Obama. He joins 0:08:54.559 --> 0:08:57.719 US from Virginia on the phone, Chris, thanks so much 0:08:57.720 --> 0:09:00.240 for joining us. What was your take of the jobs 0:09:00.320 --> 0:09:04.000 numbers that we saw this morning. You know, it's basically 0:09:04.040 --> 0:09:07.680 what you'd expect in UH, an economy that clearly is 0:09:07.679 --> 0:09:11.559 slowing down. How much is the unclear issue at this point. 0:09:11.600 --> 0:09:14.600 And when you combine this with the consumer confidence numbers 0:09:14.600 --> 0:09:17.200 from last week, the manufacturing numbers from earlier this week, 0:09:17.400 --> 0:09:19.360 this is about what you'd expect. And you when you 0:09:19.360 --> 0:09:23.640 look at the trend not only but particularly compared to 0:09:23.720 --> 0:09:27.880 twenty eighteen, UH, this is a slowing economy and so 0:09:28.080 --> 0:09:32.520 it will leave policymakers not only in Washington in Congress, 0:09:32.520 --> 0:09:34.200 but also in the said trying to figure out, you know, 0:09:34.200 --> 0:09:37.319 what the next step is. So the headline number missed, 0:09:37.520 --> 0:09:40.920 but the wage increase beat. And I think this is 0:09:40.960 --> 0:09:42.959 actually really important because a lot of people have said 0:09:43.000 --> 0:09:46.080 it's been interesting, UH that the headline numbers of job 0:09:46.160 --> 0:09:48.800 creations have been as high as they have, given where 0:09:48.800 --> 0:09:51.439 we are in the credit cycle and the economic cycle, 0:09:51.480 --> 0:09:53.440 and given how many jobs have already come back to 0:09:53.440 --> 0:09:57.200 the market. You know, I'm wondering whether the lower than 0:09:57.240 --> 0:10:00.720 expected number paired with better than expected wage it indicates 0:10:00.960 --> 0:10:04.200 a tight labor market, getting that sort of sweet spotmentum 0:10:04.200 --> 0:10:06.800 that people have been waiting for. Right. You know, the 0:10:06.840 --> 0:10:09.680 wage growth I think with three which is pretty good, 0:10:09.720 --> 0:10:12.920 but again, given the fact that we've been at below 0:10:12.960 --> 0:10:15.559 four percent unemployment for you know, most of this year, 0:10:15.600 --> 0:10:18.240 if not longer than that, you would expect higher wage 0:10:18.240 --> 0:10:21.320 growth in that And I think what confounds us is 0:10:21.440 --> 0:10:25.200 why that hasn't happened, and it may simply reflect a 0:10:25.360 --> 0:10:28.800 changing economy at this point, is that a lot of 0:10:28.800 --> 0:10:30.880 these low wage shops are going to stay low wage jobs, 0:10:30.920 --> 0:10:33.760 in particular with a federal minimum wage that hasn't gone 0:10:33.800 --> 0:10:36.440 up in ten years, and that the economically, the economy 0:10:36.559 --> 0:10:39.360 is just fundamentally different than what we have seen during 0:10:39.440 --> 0:10:43.840 previous economic expansions. It's interesting, Chris, I was just commenting 0:10:44.160 --> 0:10:47.920 recently that you know, you walk down Main Street, USA anywhere, 0:10:48.040 --> 0:10:51.240 and it's almost every single store, every establishment has a 0:10:51.320 --> 0:10:54.400 help wanted sign out there. Um. It just again it 0:10:54.440 --> 0:10:57.960 kind of goes to that wage story. What do you think, 0:10:58.000 --> 0:11:00.280 given where we are in terms of three points seven 0:11:00.360 --> 0:11:03.920 percent unemployment, would you expect to see wages even higher 0:11:04.280 --> 0:11:07.560 in terms of growth than here. Well, I would normally 0:11:07.559 --> 0:11:10.080 expect to see that given everything we've always learned about markets. 0:11:10.120 --> 0:11:11.959 And the other thing that's sort of interesting is that 0:11:12.320 --> 0:11:14.960 labor force participation, while it picked up a little bit 0:11:15.240 --> 0:11:17.600 UH this month, UM, it's essentially kind of been in 0:11:17.640 --> 0:11:20.520 the same band over the last four or five years. 0:11:20.640 --> 0:11:23.600 And so people really are not coming off the sidelines 0:11:23.679 --> 0:11:25.439 right now to get jobs. And in part it's because 0:11:25.720 --> 0:11:29.880 the demographics of this country have changed. People are retiring earlier, UM, 0:11:30.000 --> 0:11:33.200 people are staying in school longer, UM. But a lot 0:11:33.240 --> 0:11:35.960 of the traditional ideas of what it means when you 0:11:36.000 --> 0:11:39.560 have low unemployment, higher wages people coming off the sidelines 0:11:39.679 --> 0:11:43.040 just haven't happened so far. Chris, I want to shift 0:11:43.080 --> 0:11:45.400 gears a little bit because it seems like the job's 0:11:45.440 --> 0:11:49.240 report didn't necessarily shift market expectations that much. And and 0:11:49.280 --> 0:11:53.560 speak to a Bill Dudley column of Federal Reserve, former 0:11:53.600 --> 0:11:56.720 New York Fed President for Bloomberg Opinion where he was 0:11:56.760 --> 0:11:59.840 talking about how right now, given where we are in 0:11:59.880 --> 0:12:02.679 the economy, the Fed shouldn't really be cutting rates all 0:12:02.760 --> 0:12:07.160 that much because it could potentially incentivize President Trump to 0:12:07.760 --> 0:12:12.600 ramp up his trade war and basically hurt the economy 0:12:12.679 --> 0:12:16.200 more in the long run, And I'm wondering whether you'd 0:12:16.200 --> 0:12:20.680 weigh in on that, especially because the Chief Economic Council Director, 0:12:20.760 --> 0:12:23.120 Larry Cudlow is just uh sort of railing against it 0:12:23.160 --> 0:12:27.280 on Bloomberg Television moments ago. So what's your what's your take? Well, 0:12:27.320 --> 0:12:30.199 I think, look, I mean, the what the President has 0:12:30.200 --> 0:12:32.520 been able to do over the last couple of years 0:12:32.559 --> 0:12:34.360 is he knows that the US economy is strong, and 0:12:34.360 --> 0:12:37.280 that it's a it's certainly the strongest of any country 0:12:37.280 --> 0:12:39.600 in the world that's resilient at this point. It's given 0:12:39.679 --> 0:12:42.559 him a fair amount of latitude in waging this trade war, 0:12:42.600 --> 0:12:44.880 not with just with China, but with Europe and our 0:12:45.280 --> 0:12:48.120 friends in North America. It may turn out that he 0:12:48.160 --> 0:12:50.959 has much a much shorter leash now in doing that, 0:12:51.480 --> 0:12:54.000 and it may cause them to rethink this kind of 0:12:54.440 --> 0:12:57.520 uh score short strategy that they're doing and maybe try 0:12:57.559 --> 0:13:00.200 to cut a deal sooner rather than later. Be is 0:13:00.360 --> 0:13:02.800 whether it's will interest rates or frankly, whether it's the 0:13:02.840 --> 0:13:06.080 trillion dollar budget deficits that we're running right now. There's 0:13:06.160 --> 0:13:08.440 not a lot of you know, the traditional levels that 0:13:08.480 --> 0:13:11.440 we would use if this economy really starts to go 0:13:11.520 --> 0:13:14.600 south this point and so um, I you know, I'm 0:13:14.640 --> 0:13:16.839 not sure I can comment one way or another and 0:13:16.920 --> 0:13:19.640 on Bill Dudley's column, other than to say that, Um, 0:13:19.679 --> 0:13:24.360 if the President thinks the economy can withstand these headwinds, um, 0:13:24.400 --> 0:13:27.480 he may be mistaken. Let's sort of shift the question 0:13:27.480 --> 0:13:30.280 on its head, then, which is if the Federals were 0:13:30.320 --> 0:13:33.800 too cut rates to zero, would that materially improve the 0:13:33.880 --> 0:13:38.120 labor market at this point in the economic cycle. Look, 0:13:38.280 --> 0:13:40.120 it certainly would help a little bit. I think the 0:13:40.200 --> 0:13:42.320 challenge we also have to recognize is that we are now, 0:13:42.840 --> 0:13:45.959 you know, nine plus years into this economic expansion. When 0:13:45.960 --> 0:13:49.120 you look historically, Um, that's a long period of time. 0:13:49.520 --> 0:13:51.880 And it's not just what's happening here in the United States, 0:13:51.920 --> 0:13:55.560 but it's a slowing Chinese economy, it's Germany possibly going 0:13:55.600 --> 0:13:59.080 into recession. It's the uncertainty around Brexit. So the U 0:13:59.160 --> 0:14:00.760 s can certainly do a and the FITS can do 0:14:00.800 --> 0:14:03.440 a lot um, But in this global economy, you know, 0:14:03.720 --> 0:14:06.440 if other countries start to move south, it's hard for 0:14:06.480 --> 0:14:08.920 the US to resist that as well. So Chris, do 0:14:08.960 --> 0:14:12.200 you and your kind of outlook, are you discounting a 0:14:12.240 --> 0:14:14.520 recession in the next six to twelve months? Or do 0:14:14.559 --> 0:14:18.160 you think that the consumer can continue to support growing 0:14:18.280 --> 0:14:21.640 US economy. Well, and that's really what has propped up, UM, 0:14:21.720 --> 0:14:24.400 the US economy. I mean, we've seen business investment not 0:14:24.600 --> 0:14:26.880 certainly be what we expected after the tax got in, 0:14:27.160 --> 0:14:30.200 with the consumer confidence numbers from last Friday suggesting that 0:14:30.680 --> 0:14:35.320 people might be pulling back on their own spending. Um. Look, 0:14:35.400 --> 0:14:39.040 I don't think we're heading into recession before the next election, 0:14:39.120 --> 0:14:42.280 but I certainly think you'll see economic growth that's well 0:14:42.320 --> 0:14:46.320 below two percent. And I think, um, the President will 0:14:46.320 --> 0:14:50.480 be running for re election essentially in a similar economic 0:14:50.560 --> 0:14:53.360 time that he criticized Barack Obama for when he ran 0:14:53.400 --> 0:14:56.400 for office in twenty sixteen, So I think that will Um, 0:14:56.400 --> 0:14:58.160 I don't think we're heading into recession, but I think 0:14:58.240 --> 0:15:02.000 for the President's purposes that challenges his re election bid. 0:15:02.960 --> 0:15:05.440 Is consumer spending a leading or lagging indicator from your 0:15:05.560 --> 0:15:09.600 bantage point? You know, that's actually an interesting question. I mean, 0:15:09.680 --> 0:15:13.040 you know, UM, you've what you see now is consumer 0:15:13.080 --> 0:15:16.120 debt at levels we haven't seen since, um, since before 0:15:16.240 --> 0:15:19.000 the recession. So I think sometimes consumers are it's a 0:15:19.040 --> 0:15:21.360 little bit lagging. They're they're kind of spending money, they're 0:15:21.400 --> 0:15:23.840 taking out loans until they realize, wow, you know, maybe 0:15:23.880 --> 0:15:26.480 the plant place I'm working at is not expanding as fast, 0:15:26.600 --> 0:15:28.840 or you know, I was expecting in this pay raise, 0:15:29.120 --> 0:15:32.560 so I'll say it's probably lagging. Um. But you know 0:15:32.600 --> 0:15:34.600 what I'm also troubled by is the fact that, again, 0:15:34.600 --> 0:15:36.880 as they said, not only consumer debt, but you see 0:15:36.880 --> 0:15:40.360 these statistics about Americans not being able to come up 0:15:40.400 --> 0:15:43.680 with four hundred dollars for an emergency expense, and what 0:15:43.720 --> 0:15:47.200 you realize is that even a period of low unemployment, 0:15:47.560 --> 0:15:49.800 a lot of people really are living paycheck to paycheck, 0:15:49.840 --> 0:15:52.080 and it wouldn't take much of a downturn in the 0:15:52.080 --> 0:15:55.920 economy to affect millions of people. Chris Lou thank you 0:15:56.040 --> 0:15:58.000 so much, as always for spending time with us. Your 0:15:58.000 --> 0:16:01.800 insights are very welcome. Chris slew is former Deputy Secretary 0:16:01.800 --> 0:16:04.680 of Labor and senior Fellow at the University of Virginia 0:16:04.720 --> 0:16:23.200 Miller Center. He worked under former President Obama. It took 0:16:23.240 --> 0:16:25.360 a couple of hours, but bond investors have taken a 0:16:25.360 --> 0:16:27.880 look at the job's data and said, no, not so great. 0:16:27.920 --> 0:16:30.120 The economy ain't so hard. We're gonna keep buying right now, 0:16:30.200 --> 0:16:33.120 Let's get a view from one such bond investor, Tad Ravel, 0:16:33.240 --> 0:16:36.560 chief investment officer for fixed income at TCW, joining US 0:16:36.600 --> 0:16:39.240 from Los Angeles. Tad thank you so much for spending 0:16:39.240 --> 0:16:41.520 the time. First, I'd love to get your read on 0:16:41.560 --> 0:16:44.240 the jobs report. Does that sort of confirm your bullish 0:16:44.280 --> 0:16:49.040 stance currently on duration on US treasuries? I thought it 0:16:49.120 --> 0:16:52.760 was a week report. Actually, I think that um when 0:16:52.760 --> 0:16:56.240 you look at the year over year change in the 0:16:56.600 --> 0:16:59.600 actual non farm payroll numbers a number of people at work, 0:17:00.040 --> 0:17:02.760 it's at the lowest growth rate since I think maybe 0:17:02.800 --> 0:17:06.200 two thousand and eleven. It was rising something like one 0:17:05.720 --> 0:17:09.120 point three on a year over year basis very disappointing. 0:17:09.720 --> 0:17:12.040 It's possible, of course, that it could get revised, but 0:17:12.200 --> 0:17:15.640 notwithstanding that, I think it's actually pretty clear that the 0:17:15.760 --> 0:17:19.760 jobs market has slowed down quite a bit. The uh 0:17:19.800 --> 0:17:24.359 the rise in hourly earnings is superficially a could be 0:17:24.440 --> 0:17:26.520 viewed as a as a positive sign, but in point 0:17:26.560 --> 0:17:29.720 of fact, when companies start to pull back on their 0:17:29.760 --> 0:17:33.119 hiring or start to let people go, it's oftentimes felt 0:17:33.240 --> 0:17:37.960 by the lower wage cohort of those companies first, and 0:17:38.000 --> 0:17:40.920 so consequently, when you look at numbers like the hourly 0:17:40.960 --> 0:17:44.399 wages and even the average work week, those are not 0:17:44.480 --> 0:17:48.159 necessarily indicative of actually the underlying health of the of 0:17:48.200 --> 0:17:51.120 the labor market. But this shouldn't be surprising to anybody. 0:17:51.119 --> 0:17:53.200 In our view, we do view ourselves in a pretty 0:17:53.280 --> 0:17:56.680 late cycle type of type of environment. And um, well, 0:17:56.800 --> 0:18:00.320 employment is something of a lagging indicator. It's the slee 0:18:00.720 --> 0:18:04.159 uh follows on the heels of very weak manufacturing data. 0:18:04.400 --> 0:18:07.399 And we have a manufacturing sector that both the US 0:18:07.480 --> 0:18:10.359 and globally is either in recession or on the verge 0:18:10.359 --> 0:18:13.520 of it. So it's it was a weak number, and um, 0:18:13.560 --> 0:18:16.439 not a big surprise, I think. So, Ted, how do 0:18:16.480 --> 0:18:19.720 you expect our friends at the Federal Reserve to interpret 0:18:19.800 --> 0:18:24.560 this data? Oh? I don't actually think that they I 0:18:24.560 --> 0:18:27.880 don't actually think that we should take their their rhetoric 0:18:28.040 --> 0:18:30.960 at at face value. I don't really believe that they're 0:18:31.000 --> 0:18:33.199 that they're data driven or when they say things like 0:18:33.280 --> 0:18:35.359 they are data driven, as they have maintained for a 0:18:35.400 --> 0:18:38.080 long period of time, they never say exactly what kind 0:18:38.119 --> 0:18:40.520 of data that they're looking at. They're gonna ease. Um, 0:18:40.560 --> 0:18:42.480 they've committed to that course of action. We're going to 0:18:42.520 --> 0:18:45.720 get another twenty five fifty basis points of rate reduction. 0:18:45.760 --> 0:18:48.000 I think that that's all baked into the cake. But 0:18:48.800 --> 0:18:52.400 there is a there's almost an absurd disconnect, I think, 0:18:52.560 --> 0:18:56.080 between the both the rhetoric and the actions of the 0:18:56.119 --> 0:19:00.399 Federal Reserve on the one hand, and um the the 0:19:00.960 --> 0:19:05.359 longer term understanding of what monetary policy is supposed to 0:19:05.440 --> 0:19:08.280 be about, and for the idea that the central bank 0:19:08.359 --> 0:19:11.000 is supposed to be independent taking a long term view 0:19:11.480 --> 0:19:15.359 of the UH prosperity of the country as opposed to 0:19:15.400 --> 0:19:19.639 responding to near term blips in the employment data or 0:19:19.680 --> 0:19:21.960 whatever it is that they want to latch onto. But 0:19:22.119 --> 0:19:25.359 the bias from the FED and from central banks around 0:19:25.400 --> 0:19:30.879 the world, complete ridiculous nonsense of how do you really feel? 0:19:33.920 --> 0:19:37.199 Since you ask, well, so look, look, I guess that 0:19:37.280 --> 0:19:38.600 you know. We we can debate what the Fed is 0:19:38.640 --> 0:19:41.600 going to do and how much they should cut, etcetera, um, 0:19:41.720 --> 0:19:45.160 for for for days, and we will. But I'm curious 0:19:45.240 --> 0:19:47.520 how much it matters. I mean, right now, it's not 0:19:47.560 --> 0:19:50.240 as if monetary conditions are particularly tight. I mean, we're 0:19:50.240 --> 0:19:52.520 watching this bond bonanza right now with any company that 0:19:52.560 --> 0:19:54.679 wants to sell bonds can sell bonds, and they can 0:19:54.760 --> 0:19:56.840 borrow at record low rates. So I'm looking at this 0:19:56.880 --> 0:19:59.440 and wondering, let's say the FED cuts to zero, will 0:19:59.480 --> 0:20:03.040 it matter. It's not going to matter in the long run, right, 0:20:03.040 --> 0:20:05.639 Just as you said, seventy five billion dollars worth of 0:20:05.920 --> 0:20:09.280 US corporate debt came to market this week. This idea 0:20:09.600 --> 0:20:14.080 that if you simply lower the cost of borrow the 0:20:14.119 --> 0:20:18.480 cost of credit, that you can maintain prosperity forever. That's 0:20:18.560 --> 0:20:21.080 I think what I was getting on my soapbox about 0:20:21.119 --> 0:20:23.639 a few moments ago. That's kind of the absurdity that 0:20:23.840 --> 0:20:28.320 essentially economic growth is a function of very deep fundamental 0:20:28.400 --> 0:20:32.680 factors that basically relate to having labor and capital work 0:20:32.760 --> 0:20:36.440 together on a ongoing basis to find ways to be 0:20:36.720 --> 0:20:39.200 more efficient and more productive over the course of time. 0:20:39.440 --> 0:20:43.040 Simply lowering the input costs of financing and doing it 0:20:43.119 --> 0:20:46.560 in an artificial way doesn't lead to higher efficiency. In fact, 0:20:46.560 --> 0:20:50.440 it probably does the opposite, because it ends up maintaining 0:20:50.960 --> 0:20:55.760