WEBVTT - Surveillance: Labor Market Story Strong, Says Kudlow 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.800 Bloomberg dot Com, and of course on the Bloomberg John 0:00:28.840 --> 0:00:31.080 fer and I now to dive into a real discussion 0:00:31.120 --> 0:00:35.000 here on the American labor economy. You can do that 0:00:35.040 --> 0:00:37.600 with Ellen Sentner, and you can particularly do that John, 0:00:37.640 --> 0:00:41.400 because within our research notes there's always that one chart. 0:00:41.520 --> 0:00:44.760 I remember when Ellen years ago owned the tarot part 0:00:44.800 --> 0:00:48.199 of consumers spending. It was the same thing. You have 0:00:48.320 --> 0:00:54.000 a killer chart, Ellen, on the labor differential jobs out there, 0:00:54.160 --> 0:00:58.040 plentiful jobs, jobs are hard to get. This is the 0:00:58.120 --> 0:01:03.120 most perfect American labor enemy since time began, isn't it. Yeah, 0:01:03.120 --> 0:01:05.640 it's it's pretty strong. I mean, which it came with 0:01:05.680 --> 0:01:08.920 a stronger wage growth as well, but markets pretty strong. 0:01:09.160 --> 0:01:11.800 Why why can't we dovetail this and do I happy 0:01:11.800 --> 0:01:16.000 America with wage growth? Tom? Because I'm an economist, I'm 0:01:16.040 --> 0:01:17.920 supposed to be the disnal scientist, so I have to 0:01:17.959 --> 0:01:21.360 find something bad and everything. My husband will tell you 0:01:21.400 --> 0:01:24.400 I'm really good at that, but you know the look 0:01:24.480 --> 0:01:30.000 the consumer households obviously think the labor market was great 0:01:30.600 --> 0:01:34.480 in August based on the results from the Conference Boards survey. 0:01:34.600 --> 0:01:38.040 And you know, we trust households, um you know, if 0:01:38.160 --> 0:01:41.160 if layoffs were rising, uh, if they weren't able to 0:01:41.240 --> 0:01:43.199 find a job when they jump into the labor market, 0:01:43.240 --> 0:01:45.320 they usually let us know. And so I think that 0:01:45.360 --> 0:01:49.640 has helped lift effectations for today's number. And this goes 0:01:49.680 --> 0:01:51.960 to your hours work analysis and just what's in the 0:01:52.000 --> 0:01:55.560 paycheck after inflation. A lot of people are really focused 0:01:55.560 --> 0:01:57.520 on that number today, on and hours worked. If you're 0:01:57.560 --> 0:01:59.120 going to see science of weakness, you want to see 0:01:59.120 --> 0:02:01.240 it immediately in lay else you'll see it in ours work. 0:02:01.320 --> 0:02:04.320 Just how important is that data point for you today, Allen? Yeah, 0:02:04.320 --> 0:02:07.200 so I think it's extremely important actually, and and uh, 0:02:07.240 --> 0:02:09.520 you know, consensus is looking for it to tick back 0:02:09.600 --> 0:02:12.560 up after having ticked down last month, and and so 0:02:12.600 --> 0:02:14.040 there is going to be a lot of focus there 0:02:14.040 --> 0:02:18.160 because uh, it's it's uh, it leads other jobs data. 0:02:18.240 --> 0:02:22.880 It's coincidence with h GDP growth in the economy. Uh. 0:02:22.919 --> 0:02:25.360 And we can see hours worked are always sort of 0:02:25.400 --> 0:02:27.680 the pipeline is slowing that you look for in the 0:02:27.760 --> 0:02:30.919 labor market. You know, investment is down hours worked or 0:02:30.960 --> 0:02:34.040 down because companies will cut the hours of existing workforce. 0:02:34.160 --> 0:02:38.440 First we know that the pace of hiring has slowed, uh, 0:02:38.480 --> 0:02:40.520 and the final thing is laying off, and we just 0:02:40.560 --> 0:02:42.919 haven't seen that. So hours worked I look at it 0:02:43.000 --> 0:02:45.440 is just uh, you know, the precursor, one of the 0:02:45.840 --> 0:02:49.640 several precursors we see to finally getting to layoffs. And 0:02:49.680 --> 0:02:51.640 so everyone will be watching it. And then we were 0:02:51.639 --> 0:02:54.560 watching ice MS earlier this week manufacturing ice M sub 0:02:54.600 --> 0:02:58.640 fifty non manufacturing, I M pretty decent to America's ellen 0:02:58.880 --> 0:03:02.040 almost and two globe economies at the moment. One's manufacturing, 0:03:02.480 --> 0:03:05.000 the other is services, and one seemingly more important than 0:03:05.040 --> 0:03:07.720 the other at this point, try and reconcile the differences 0:03:07.720 --> 0:03:09.480 that we're seeing in the dates at the moment. Just 0:03:09.520 --> 0:03:11.800 how do you get a read on the U. S economy? 0:03:12.280 --> 0:03:15.400 So I think clearly the manufacturing survey being under more 0:03:15.440 --> 0:03:18.679 pressure is reflecting the fact that it's more beholden to 0:03:18.760 --> 0:03:22.280 what's going on with global growth. Uh, it's picking up 0:03:22.360 --> 0:03:25.280 the trade risks and how companies have had to change 0:03:25.360 --> 0:03:29.959 behavior around trade tensions and the uncertainty there. The fact 0:03:30.040 --> 0:03:31.919 that the service side of the economy is holding up 0:03:32.080 --> 0:03:35.080 much better is encouraging because it is the lion's share 0:03:35.080 --> 0:03:37.200 of the economy and the lions share of the labor market. 0:03:37.600 --> 0:03:39.520 So one can say, well, why do we care about 0:03:39.520 --> 0:03:42.960 manufacturing at all? Then we care because the leading parts 0:03:43.000 --> 0:03:46.320 of the economy sit in the manufacturing sector. Uh. And 0:03:46.400 --> 0:03:49.920 so it's only a matter of time, uh that manufacturing 0:03:50.040 --> 0:03:53.560 is weak before whatever is causing that weakness starts to 0:03:53.560 --> 0:03:55.920 bleed over into the rest of the economy. So really 0:03:55.960 --> 0:04:00.720 that service side, service sector jobs, consumers spend, you know, 0:04:00.840 --> 0:04:03.200 that's the shoe to drop, and for that you need 0:04:03.280 --> 0:04:06.000 layoffs and we just have not begun to see that yet. 0:04:06.160 --> 0:04:07.960 What are we doing for the overtime? I mean one 0:04:08.000 --> 0:04:10.680 of the backstories your folks, and it's almost anecdotal. And 0:04:10.680 --> 0:04:13.920 we talked about minimum wage increase. It means less overtime 0:04:13.920 --> 0:04:16.680 because people are paying for a new higher minimum wage. 0:04:17.000 --> 0:04:20.680 But what's the overtime or almost the worker exhaustion that 0:04:20.720 --> 0:04:25.159 we're seeing in America? Well, I think that uh, well, 0:04:25.200 --> 0:04:29.320 we had been having a big increase in overtime hours 0:04:29.360 --> 0:04:32.839 as we've seen hiring slow and so we're trying to 0:04:32.839 --> 0:04:35.920 get more existing the workforce. But but that is the 0:04:36.200 --> 0:04:39.600 worrisome trend that we've seen now start to reverse, right, 0:04:39.720 --> 0:04:43.520 is that we're actually cutting overtime hours, we're cutting temporary exactly. 0:04:44.080 --> 0:04:47.640 And so again talking about the precursors, you know, those 0:04:47.680 --> 0:04:50.320 are some of the precursors that we look for that 0:04:50.440 --> 0:04:54.000 tell us further weakness or or real weakness is coming. 0:04:54.320 --> 0:04:55.760 I mean, and Ellen, I don't want to get all 0:04:55.800 --> 0:04:57.760 David Blanche Flower and you we say good morning to 0:04:57.880 --> 0:05:01.280 Dr blanch for no doubt listening up in the handover bubble. 0:05:01.839 --> 0:05:05.600 But but Allen helped me with the under employed in America, 0:05:05.720 --> 0:05:09.080 and that starts with a dearth of full time jobs. 0:05:09.440 --> 0:05:12.680 What's the vector right now on full time jobs versus 0:05:12.760 --> 0:05:16.480 part time jobs? So I think, uh, you know, part 0:05:16.520 --> 0:05:19.640 time jobs. We we like to see, Uh, if people 0:05:19.640 --> 0:05:21.240 are going to work part time, we want them to 0:05:21.279 --> 0:05:24.680 work part time because they choose to work part time. Uh. 0:05:24.760 --> 0:05:28.599 And in this post financial crisis world, those being forced 0:05:28.600 --> 0:05:30.359 to work part time because full time is just not 0:05:30.440 --> 0:05:34.480 available had surge. Now since that time, their overall numbers 0:05:34.520 --> 0:05:37.680 are higher, but the the incidents of those working part 0:05:37.720 --> 0:05:40.320 time forced part time has come down, and it's actually 0:05:40.800 --> 0:05:43.919 back to more normal levels. I mean, this is really 0:05:43.920 --> 0:05:46.159 the point in the labor market where the unemployment rate 0:05:47.080 --> 0:05:51.160 has stopped coming down. UH. It's pretty much leveling off. 0:05:51.440 --> 0:05:53.960 And and ironically, what does that tell us? It tells 0:05:54.000 --> 0:05:56.960 us the labor market is probably about as tight as 0:05:57.000 --> 0:06:00.520 it was able to get UH in this expansion UH 0:06:00.520 --> 0:06:02.599 and can either hold in here or it can start 0:06:02.640 --> 0:06:07.120 to weaken from here. But that's what the various UH 0:06:07.200 --> 0:06:10.040 unemployment rate measures tell me. And when I look at 0:06:10.120 --> 0:06:13.279 metrics like you're talking about the part time for economic reasons, 0:06:13.839 --> 0:06:15.440 you know, it's telling me that there's not a whole 0:06:15.480 --> 0:06:18.719 lot more excess we can squeeze out of this labor market. 0:06:18.720 --> 0:06:21.960 And oftentimes that's when things turn, is when they can't 0:06:21.960 --> 0:06:24.880 get any better. The jobs are ports thirty six minutes away. 0:06:24.960 --> 0:06:28.279 Several hours after that twelve thirty Eastern time over in Zurich, 0:06:28.320 --> 0:06:30.880 the fete Cham and J. Powell having the final word 0:06:30.880 --> 0:06:32.800 ahead of the fetes, blank out, what do you think 0:06:32.800 --> 0:06:35.880 the objective is for Cham and Power today on I 0:06:35.920 --> 0:06:38.159 think his objective is going to be too It is 0:06:38.160 --> 0:06:41.560 a really good question, I think, just given the evidence 0:06:41.600 --> 0:06:44.080 from the data, the balance of risks that still remain. 0:06:44.400 --> 0:06:46.839 I think there's enough there for him to maintain the 0:06:46.880 --> 0:06:51.440 easing bias that he clearly Jackson hole. Well, Ellen, we're 0:06:51.520 --> 0:06:56.760 going friends. Nobody's listening, Ellen, they're all taking their childrenbody 0:06:56.839 --> 0:06:59.720 listens when I'm on your show. They excuse me when 0:06:59.720 --> 0:07:06.200 I'm comes on. But Tom, I'm trying to be realistic 0:07:06.200 --> 0:07:08.440 here right, there are those on the FED that are 0:07:08.440 --> 0:07:11.200 still pushing hard against the need to cut any further. 0:07:11.360 --> 0:07:13.440 This is a very divided FED, and the reason why 0:07:13.480 --> 0:07:16.080 it's divided. You should be happy that it's divided. When 0:07:16.120 --> 0:07:19.640 it's divided, they don't see a emergency to respond to, 0:07:20.200 --> 0:07:22.640 and so it's going to be easier probably to pull 0:07:22.680 --> 0:07:25.200 more on board with a cut. But we're not talking 0:07:25.240 --> 0:07:29.840 about fifty. Is he going to bring up Mr Dudley? 0:07:29.920 --> 0:07:31.720 Is he going to bring up No, I don't care 0:07:31.760 --> 0:07:35.000 about fifty. He's got to respond to the two essays 0:07:35.280 --> 0:07:40.200 and Bloomberg opinion by William Dudley. Doesn't he know why not? 0:07:40.240 --> 0:07:42.640 He's got to put a sentence sitting there. No, you 0:07:42.640 --> 0:07:45.880 don't go there. That's the FED has to fly above that, right, 0:07:46.120 --> 0:07:49.920 take the high road. Okay, No, he will absolutely not. 0:07:50.680 --> 0:07:52.280 That was going to be the name of our show. 0:07:52.320 --> 0:07:57.000 By the way, before surveillance of your show should be 0:07:57.080 --> 0:08:01.480 two men dangerously unsupervised. Oh I like that, and I 0:08:01.520 --> 0:08:04.920 should come and trying to fill the saint next time. 0:08:05.000 --> 0:08:08.520 I think so the next day I take off. I 0:08:08.680 --> 0:08:12.239 love that. Would you fill in for Tom next time? Seriously, 0:08:13.000 --> 0:08:15.400 that would be very cool. I come over to Bloomberg 0:08:15.440 --> 0:08:18.320 for the free food, great coffee, and I'll get you 0:08:18.320 --> 0:08:20.560 some free food. You know even you know, not the 0:08:20.640 --> 0:08:22.520 day old stuff. We have to We should do this, 0:08:22.800 --> 0:08:25.360 We should do this. I agree, we should do this. 0:08:25.440 --> 0:08:27.640 Next payrolls Friday, I get Ellen to come with you. 0:08:27.760 --> 0:08:29.800 She may have a day coundar. It's a little do 0:08:29.880 --> 0:08:32.439 the morning with us. Just ahead of the number. I'll 0:08:32.440 --> 0:08:34.800 call James Gorman and see what he says. Ellen Sner, 0:08:34.880 --> 0:08:50.760 thank you so much. With Morgan Stanley, what we love 0:08:50.760 --> 0:08:53.440 about our Bloomberg abilities is to find people that have 0:08:53.520 --> 0:08:57.360 cross national experience. That would be James Omeger. He is 0:08:57.400 --> 0:09:00.640 in Beijing, our deputy bureau chief there, but with really 0:09:00.800 --> 0:09:06.720 exquisite experience linking Japan to China is well. James, let 0:09:06.720 --> 0:09:10.360 me start with an outball question. How enthused is Japan 0:09:10.480 --> 0:09:14.400 this morning that China has moved to a more accommodative 0:09:14.760 --> 0:09:20.560 banking strategy. I think that the Japanese economy is pretty 0:09:20.600 --> 0:09:22.480 dependent on on China's economy. I mean a lot of 0:09:22.480 --> 0:09:24.120 their I think about a third of their exports go 0:09:24.280 --> 0:09:26.360 to China. So anything the Chinese government or the central 0:09:26.400 --> 0:09:29.160 banking too stimulate command in the economy is obviously gonna 0:09:29.160 --> 0:09:31.880 be good for Japanese companies. I mean, I think, you know, 0:09:32.000 --> 0:09:34.480 this is what what the PBUC has done today was 0:09:34.520 --> 0:09:38.280 pretty pretty expected. So Matthew in Fox are stimulus. But 0:09:38.559 --> 0:09:41.640 if this does provide support to Chinese companies, you know 0:09:41.679 --> 0:09:44.360 that's going to obviously see more demands for Japanese industrial products, 0:09:44.440 --> 0:09:46.880 Japanese exports, and and also you know, demand for things 0:09:46.960 --> 0:09:49.199 like Japanese cars sold in China as well. So it's 0:09:49.200 --> 0:09:51.640 good for what's good for China is probably going to 0:09:51.720 --> 0:09:53.120 be a pretty good It's going to be good for 0:09:53.200 --> 0:09:55.000 Japan down the line as well. James talked to us 0:09:55.000 --> 0:09:58.200 about the significance of the reserve of climate ratio versus say, 0:09:58.480 --> 0:10:00.600 the one year lending rate or the one year deposit rate. 0:10:00.640 --> 0:10:03.080 We haven't seen those main rates being cut. I don't 0:10:03.120 --> 0:10:06.160 think since can you walk US through while they're choosing 0:10:06.200 --> 0:10:09.440 to use the reserve requirement ratio over some of the 0:10:09.440 --> 0:10:13.839 other benchmark rates of the PBOC, I mean, the central 0:10:13.840 --> 0:10:16.160 banks and the government's here's main fear is is sort 0:10:16.160 --> 0:10:18.800 of stoking another housing bubble on a stock bubble. And 0:10:18.840 --> 0:10:21.319 so the thinking is that by cutting the amount of 0:10:21.360 --> 0:10:23.719 money that banks have to hold in reserve, they'll lend 0:10:23.760 --> 0:10:27.720 more money to companies to know, to provide to you know, 0:10:27.920 --> 0:10:32.679 stimulate company investment. Is there evidence of that? There is? 0:10:32.720 --> 0:10:34.920 There is, I mean previous cuts that happened in January 0:10:34.920 --> 0:10:37.640 and May did lead to more lending temporarily through through 0:10:37.640 --> 0:10:39.319 the company. So there was a big boom in lending 0:10:39.320 --> 0:10:42.079 in the first quarter after the cut that happened in January, 0:10:42.440 --> 0:10:44.600 but since then those effects are sort of taped it 0:10:44.600 --> 0:10:47.400 off and credit demand credit supply has been sort of 0:10:47.400 --> 0:10:49.680 tapering off. And one of the problems is obviously there's 0:10:50.240 --> 0:10:52.360 one of the problems is with less demand from the 0:10:52.440 --> 0:10:54.720 US because of the trade war, there's less demand for 0:10:54.840 --> 0:10:56.960 credit from Chinese companies. They're just not wanting to borrow 0:10:57.000 --> 0:10:59.240 as much. So one problem in the government and the 0:10:59.360 --> 0:11:01.640 central bank is having is even if you push down 0:11:01.679 --> 0:11:03.560 rates Further, if people don't want to borrow money, they're 0:11:03.559 --> 0:11:05.080 not going to borrow money, no matter how cheap it 0:11:05.120 --> 0:11:08.360 is in Europe. Put that in the United States too. 0:11:08.400 --> 0:11:10.120 So James talked to me about whether this is a 0:11:10.200 --> 0:11:12.800 change of approach or not. Because we've seen incrementally, this 0:11:12.880 --> 0:11:16.360 gradual approach towards stimulus from the Chinese and policymakers and 0:11:16.440 --> 0:11:19.640 officials over there for more than twelve months now, we're 0:11:19.640 --> 0:11:21.560 trying to get our hands around whether we're about to 0:11:21.600 --> 0:11:23.959 make a shift into another gear. James, what do you 0:11:24.000 --> 0:11:26.320 see happening. I don't think it's gonna be I don't 0:11:26.320 --> 0:11:28.280 think there's a huge step up in their stimulus. I 0:11:28.280 --> 0:11:29.719 mean it's going to have an effect. But one of 0:11:29.760 --> 0:11:31.760 the things I'm talking about their statement today was this 0:11:31.800 --> 0:11:34.000 is going to help us September's tax season when companies 0:11:34.040 --> 0:11:36.560 have to pay their quarterly taxes. So those are the 0:11:36.640 --> 0:11:38.600 kind of that's the level of that that the Central 0:11:38.600 --> 0:11:40.920 Bank is not thinking about. It's not a massive increase 0:11:40.920 --> 0:11:43.200 in the economy. It's like helping companies get through the 0:11:43.200 --> 0:11:46.280 next quarter, making sure they have enough money to pay 0:11:46.280 --> 0:11:49.280 their taxes. So it's not really, you know, a game changer. 0:11:49.400 --> 0:11:51.680 In what they're trying to do. How is the tradeward 0:11:51.720 --> 0:11:55.600 treated in the domestic newspapers of Beijing that you and 0:11:55.679 --> 0:11:58.480 your team look at every day, I mean feelingly in 0:11:58.600 --> 0:12:02.600 Hong Kong's been abulous about the pulse of Chinese writing 0:12:02.960 --> 0:12:09.160 in Hong Kong. How is the trade war written about domestically? Yeah, 0:12:09.160 --> 0:12:11.160 it's it's interesting to look at what gets reported and 0:12:11.240 --> 0:12:13.480 what doesn't get reported. Obviously, you know there is reporting 0:12:13.480 --> 0:12:15.880 about the trade war, is it's it's a premial topic 0:12:15.880 --> 0:12:18.000 of discussion in the media here. But you know when when, 0:12:18.160 --> 0:12:20.840 for example, when President Trump tweeted a couple of weeks ago, 0:12:21.160 --> 0:12:23.160 whether the biggest enemy of the US is your own 0:12:23.200 --> 0:12:25.679 power or hijim ping, that just wasn't reported at all 0:12:25.720 --> 0:12:28.240 in any media in China. So there was there was 0:12:28.559 --> 0:12:30.160 it was reported that, you know, he had said some 0:12:30.200 --> 0:12:32.760 stuff about China and reported that there had been comments, 0:12:32.840 --> 0:12:35.720 but there's no detail provided. And then when it is reporting, 0:12:35.720 --> 0:12:38.760 obviously it's gonna it holds to the Chinese line that 0:12:39.040 --> 0:12:41.120 China is making real efforts to try and come to 0:12:41.160 --> 0:12:44.679 an accommodation and the US is being unreasonable. So you 0:12:44.760 --> 0:12:47.040 know obviously that you can't ignore that subject. But I 0:12:47.040 --> 0:12:49.199 mean the reporting that does go out, at least in 0:12:49.240 --> 0:12:53.920 the domestic media is is often skewed or just certain 0:12:53.920 --> 0:12:56.200 things just don't don't appear at all, it seems. Thank 0:12:56.240 --> 0:12:58.400 you so much, thanks in your Friday and you really 0:12:58.440 --> 0:13:18.000 appreciate it. Mr Meger's and aging with Bloomberg News with 0:13:18.160 --> 0:13:21.480 us sound Jeffrey Rosenberg he is with black Rock with 0:13:21.559 --> 0:13:25.920 a synthesis here of the markets into our economy, Jeff, 0:13:26.000 --> 0:13:29.480 are we going to have an ugly ninety days days 0:13:29.640 --> 0:13:33.400 in our bond ownership? Is it going to be yield up, 0:13:33.640 --> 0:13:37.960 price down? You know, you know, Tom, it's hard to say. 0:13:38.000 --> 0:13:42.160 I mean, I agree. You look at this payroll report 0:13:42.480 --> 0:13:44.600 and you know it's it's a mixed report. As you 0:13:44.600 --> 0:13:46.640 guys were just saying, you got a little bit weaker 0:13:46.679 --> 0:13:51.679 in terms of market expectations, not not horribly disappointing, but 0:13:51.760 --> 0:13:54.760 you had stronger payrolls. You know, you're getting kind of 0:13:54.800 --> 0:13:58.320 a muted reaction in the market and that gets us, 0:13:58.679 --> 0:14:04.040 you know, more online with the FED cutting interest rates 0:14:04.080 --> 0:14:06.360 and the expectations for the Fed cutting interest rates, that 0:14:06.440 --> 0:14:09.720 doesn't really alter that environment. Hard to see how you 0:14:09.840 --> 0:14:14.679 have significant bond losses in an environment where the FED 0:14:14.840 --> 0:14:19.160 is basically saying they're leaning towards cutting interest rates rather 0:14:19.240 --> 0:14:22.720 than doing nothing, or a different kind of environment altogether 0:14:22.720 --> 0:14:24.880 where they're raising interest Right. I mean, we can look 0:14:24.920 --> 0:14:27.800 at this any number of ways. How short employment changes 0:14:27.840 --> 0:14:33.280 one survey, nonfarm employment, another survey, and I'm looking all 0:14:33.280 --> 0:14:38.600 in all, it's three solid months of job development. I mean, 0:14:38.920 --> 0:14:41.120 I get the idea we're all gaming out of vector 0:14:41.160 --> 0:14:44.280 that's going to go south. But doesn't the FED have 0:14:44.360 --> 0:14:47.400 to look at the three months moving average of whatever 0:14:47.520 --> 0:14:50.360 labor survey they want to look at. Yeah, well that 0:14:50.520 --> 0:14:54.440 the backstory here is that you have weakness in areas 0:14:54.480 --> 0:14:58.479 of the global economy that have been so far outside 0:14:58.480 --> 0:15:01.000 of the labor market. Right. So this morning's headline and 0:15:01.040 --> 0:15:04.160 the focus of the data is on the strongest part 0:15:04.440 --> 0:15:07.880 of the economy, and the concern is is the strongest 0:15:07.880 --> 0:15:10.840 part of the economy going to start to see some 0:15:11.000 --> 0:15:13.920 of the impact of the weaker parts. The weaker parts, 0:15:13.920 --> 0:15:17.280 of course, are global growth slowing and the trade uncertainties. 0:15:17.480 --> 0:15:20.440 And you know, while someone might say a one thirty 0:15:20.520 --> 0:15:24.120 headline that's showing some weakness, I think I think it's 0:15:24.240 --> 0:15:27.600 it's not as weak as feared. Where you might have 0:15:27.640 --> 0:15:31.440 had a downside surprise of a much much weaker report. 0:15:31.800 --> 0:15:36.720 That's really the story, and the story is maintained out 0:15:36.760 --> 0:15:40.640 of this payroll report where the consumer side, particularly with 0:15:40.720 --> 0:15:44.040 this wage growth number, the consumer side, the job market 0:15:44.200 --> 0:15:48.200 side that's still strong and holding up. And that's where 0:15:48.240 --> 0:15:51.640 you get this dissonance between depending on which Fed official 0:15:51.760 --> 0:15:54.920 you're you're reading a quote from, why are they cutting? 0:15:55.000 --> 0:15:58.040 What is the recession risk? Because you have cross currents 0:15:58.040 --> 0:16:02.400 in the economy. Some parts which are basically global trade 0:16:02.680 --> 0:16:06.280 manufacturing parts of the economy are showing clear slow down, 0:16:06.520 --> 0:16:12.080 clear weakness, clear follow through from the trade uncertainty, the consumer, 0:16:12.480 --> 0:16:16.160 the household, the jobs market that remains okay. So this 0:16:16.240 --> 0:16:19.160 is a FED that is has its divisions. Does any 0:16:19.240 --> 0:16:23.360 central bank the chairman will speak today and is he 0:16:23.480 --> 0:16:26.040 just simply going to say we need more data to 0:16:26.120 --> 0:16:29.920 get the September eighteen Well, I think that what he 0:16:30.080 --> 0:16:34.520 has been doing is is clearly leaving the window, leaving 0:16:34.520 --> 0:16:40.480 the degree to to not pushing back on market expectations. 0:16:40.560 --> 0:16:45.400 Market expectations are pricing for in September. The Powell had 0:16:45.440 --> 0:16:49.200 they had the payroll report ahead of putting together his speech. 0:16:49.680 --> 0:16:52.760 Uh he's not going to do anything to change those 0:16:52.800 --> 0:16:56.560 market expectations. He's going to try to reinforce those market expectations. 0:16:56.680 --> 0:16:59.120 The Fed doesn't want to surprise the market. If that 0:16:59.240 --> 0:17:02.280 doesn't want a guy the market differently than I think 0:17:02.280 --> 0:17:06.399 they're happy to deliver. There's a big debate back do 0:17:06.520 --> 0:17:10.520 they do fifty? Do they do? They? So they're going 0:17:10.560 --> 0:17:13.879 to do another twenty five in September. That's what the 0:17:13.880 --> 0:17:16.879 market expects and Powell to want to say anything one 0:17:16.920 --> 0:17:21.119 way to disrupt that. Fishres up eleven, death features up 0:17:21.480 --> 0:17:25.640 UNTI right now, I'm gonna call it a buoyant day. 0:17:25.680 --> 0:17:28.280 And then we pulled back before the report churned a 0:17:28.320 --> 0:17:31.320 little bit negative tone off the report, but we're bringing 0:17:31.359 --> 0:17:34.040 that back right now with the futures up eleven, Town 0:17:34.040 --> 0:17:36.119 futures up ninety seven, a lift to the market, the 0:17:36.240 --> 0:17:39.960 VIX fifteen point seven three. We're advantaged by Jeffrey Rosenberg 0:17:40.280 --> 0:17:42.080 of black Rock. Jeffrey, I want to come back, but 0:17:42.160 --> 0:17:45.360 just one time for one more uh question, if if, 0:17:45.480 --> 0:17:48.280 if we can, how do you link all this into 0:17:48.320 --> 0:17:52.200 the equity markets on a cross asset basis? Just Powell, 0:17:52.440 --> 0:17:56.560 the Powell put in place to support equities you know, 0:17:56.640 --> 0:17:59.760 it's a it's a really interesting development what's going on. 0:18:00.280 --> 0:18:03.200 Most of the time we're focused on the overall level 0:18:03.280 --> 0:18:06.879 of the equity market, but you get the bigger change. 0:18:06.960 --> 0:18:13.520 You know, equities had almost a five percentage reversal yesterday. Now, 0:18:13.520 --> 0:18:17.520 what am I talking about talking about the sectoral contributions 0:18:17.720 --> 0:18:20.080 of what has been driving this market, and what has 0:18:20.119 --> 0:18:25.520 been driving this market has been a defensive equity market rotation. 0:18:25.960 --> 0:18:30.320 Equity managers have been moving into the most defensive areas 0:18:30.320 --> 0:18:32.359 of the stock market, and a lot of that is 0:18:32.400 --> 0:18:35.119 related to trade uncertainty. So when you had the rally 0:18:35.200 --> 0:18:38.080 and the overall index up, you know, one little over 0:18:38.119 --> 0:18:41.480 one percent on the easing of the trade concerns, which 0:18:41.480 --> 0:18:43.840 you really see is a much much bigger, not a 0:18:43.840 --> 0:18:47.920 one percent, but a five percent move in relative valuations 0:18:48.000 --> 0:18:52.159 between what had been the defensive part where people have 0:18:52.200 --> 0:18:56.440 been hanging out UH and the less defensive, more trade 0:18:56.520 --> 0:18:59.280 exposed sectors, and you saw a much bigger rotation away 0:18:59.320 --> 0:19:03.439 from that. So it's really these intrasector performance that is 0:19:03.520 --> 0:19:07.520 really driving the equity market much more than the overall level. Obviously, 0:19:07.600 --> 0:19:11.199 overall level matters, UH, and that's where people focus. But 0:19:11.320 --> 0:19:15.880 a lot of performance is going in in this Jeffrey 0:19:15.920 --> 0:19:31.440 Rosenberg with a black rock. Tiffany wild Enjoys down from 0:19:31.440 --> 0:19:35.960 Pimco looking at the economy and advising fixed income on 0:19:36.040 --> 0:19:38.800 the American economy with green on the screen to deal 0:19:38.880 --> 0:19:42.359 up forty four points. Tiffany, what do you say to 0:19:42.560 --> 0:19:49.680 fixed income animals after the mixed report we just saw. Yeah, 0:19:49.720 --> 0:19:51.439 I think there was a little bit of something for 0:19:51.560 --> 0:19:54.440 everyone in this report. Um, you know. And I guess 0:19:54.480 --> 0:19:56.960 what I would say is is that every report, you know, 0:19:57.000 --> 0:19:59.320 can be a bit noisy, you know, So we try 0:19:59.359 --> 0:20:01.480 to look at kind of the broader trends and not 0:20:01.640 --> 0:20:04.600 anyone anyone given report. And I think those broader trends 0:20:04.720 --> 0:20:07.520 were confirmed in this report, and that is that labor 0:20:07.560 --> 0:20:10.760 markets are slowing, um, you know, again trying to kind 0:20:10.760 --> 0:20:13.760 of smooth through some of the noise. Um. The the 0:20:14.720 --> 0:20:18.200 average kind of moving average of payroll growth has declined 0:20:18.240 --> 0:20:21.880 down to a hundred forty k UM for private payrolls, 0:20:21.880 --> 0:20:25.399 for example, versus over two hundred last year. Yeah. And 0:20:25.800 --> 0:20:27.520 I think one important thing to remember there is too, 0:20:27.560 --> 0:20:30.560 is that you know, this data does get revised. Um. 0:20:30.600 --> 0:20:33.720 The Bureau of Labor Statistics actually just recently released its 0:20:34.200 --> 0:20:38.200 preliminary what it calls benchmark revisions, and those benchmark revisions 0:20:38.200 --> 0:20:41.399 actually suggested that total payrolls in the economy are actually 0:20:41.400 --> 0:20:45.679 five hundred less uh than they were previously believing. So 0:20:45.720 --> 0:20:49.000 that data doesn't get incorporated and until early next year, 0:20:49.080 --> 0:20:51.160 but that would suggest that the you know, that six 0:20:51.200 --> 0:20:53.320 month moving average of forty that I just suggested is 0:20:53.359 --> 0:20:55.760 maybe you know, even less than that, closer to one twenty. 0:20:55.880 --> 0:20:58.439 So I mean, we are decelerating here. So Tiffany, how 0:20:58.440 --> 0:21:00.840 do you think this Job's report and just the trend 0:21:00.920 --> 0:21:06.560 that you've been just discussing will play within the federal reserve? Um? Yeah, 0:21:06.600 --> 0:21:10.399 I mean I certainly think that, you know, it confirms 0:21:10.480 --> 0:21:15.520 I think that you do need more accommodative monetary policy, 0:21:15.600 --> 0:21:18.119 and there is downside risk to the forecast, you know. 0:21:18.119 --> 0:21:20.399 So something that we've been very focused on is is 0:21:20.440 --> 0:21:24.679 the manufacturing sector which is in uh in recession in 0:21:24.720 --> 0:21:27.439 the US, um in a mini recession. You know, I 0:21:27.440 --> 0:21:29.560 think the key question is the extent to that to 0:21:29.600 --> 0:21:32.680 which that spills over into the broader economy. You know, 0:21:32.720 --> 0:21:35.600 I think we are seeing early indications of that. Uh. 0:21:35.720 --> 0:21:38.880 There have been other service sectors, for example, that are 0:21:38.880 --> 0:21:41.960 tied to global trade, which has also been very weak 0:21:41.960 --> 0:21:45.640 and decelerating. Those service sectors are are starting to are 0:21:45.680 --> 0:21:48.280 starting to contract as well, you know. And then and 0:21:48.320 --> 0:21:51.040 then you have some idiosyncratic issues, you know, like retail, 0:21:51.240 --> 0:21:54.400 the retail trade industry which continues to you know, shed 0:21:54.480 --> 0:21:57.159 jobs at brick and mortar. There's issues with with malls 0:21:57.160 --> 0:22:00.159 and things like that that it's impacting structures, you know, 0:22:00.200 --> 0:22:02.040 So that that's gonna be the thing that we watch, 0:22:02.160 --> 0:22:03.760 you know. I guess the other important thing to note 0:22:03.840 --> 0:22:06.320 here is just you know, as the economy decelerates, you're 0:22:06.320 --> 0:22:09.240 gonna get slower corporate revenues, You're gonna get slower profits. 0:22:09.240 --> 0:22:11.800 So really, again, the question is what do corporations do 0:22:12.280 --> 0:22:14.080 in order to kind of readjust their inputs, you know, 0:22:14.160 --> 0:22:16.920 do they focus on cutting back labor or investment or both? 0:22:16.960 --> 0:22:21.160 And how much? So, Tiffany, it's just a sense of 0:22:21.320 --> 0:22:25.040