WEBVTT - Surveillance: Expect Growth in 2nd Half, Kudlow Says 0:00:09.880 --> 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 --> 0:00:27.240 Bloomberg dot Com, and of course, on the Bloomberg I'm 0:00:27.280 --> 0:00:29.000 pleased to say that we joined by one of the 0:00:29.000 --> 0:00:32.360 sharpest minds in global economics now, Catherine Mann be City 0:00:32.360 --> 0:00:35.159 Global Chief Economists. Catherine, fantastic to have you with us 0:00:35.159 --> 0:00:37.080 on a day like this morning. Let's just start with 0:00:37.080 --> 0:00:39.320 the basic question, what are you looking for from this 0:00:39.360 --> 0:00:43.440 payrolls report? In not evenutes time? Well, I tell you 0:00:43.440 --> 0:00:45.559 you know, this is a case where everybody's looking for 0:00:45.600 --> 0:00:48.559 the report, But I'm looking beyond the report because I 0:00:48.560 --> 0:00:50.800 think at this point for the markets, it's pretty much 0:00:50.840 --> 0:00:53.760 all priced in and it's all about, um where we're 0:00:53.760 --> 0:00:56.600 going to go from here. I think the elements going 0:00:56.640 --> 0:00:59.240 forward in an inner term that are most relevant are 0:00:59.520 --> 0:01:02.680 how long to the furloughs last, how long do they 0:01:02.720 --> 0:01:04.720 turn in? At what point did they might be turned 0:01:04.760 --> 0:01:08.880 into firing? There any strange quirks in this particular report, Catherine, 0:01:08.880 --> 0:01:11.399 like wages that we should ignore pay less attention to 0:01:12.760 --> 0:01:14.400 I think that actually there are a lot of things 0:01:14.400 --> 0:01:16.080 in this report that are not really going to be 0:01:16.120 --> 0:01:19.960 representative of the challenge going forward of restarting the economy. So, 0:01:20.040 --> 0:01:23.160 I mean, you know, it's it's new, it's news that 0:01:23.200 --> 0:01:25.920 hasn't happened yet because it hasn't been announced. But at 0:01:25.920 --> 0:01:27.840 this point it's old news, and we've got to move 0:01:27.880 --> 0:01:29.960 on to thinking about what we're gonna do. What are 0:01:29.959 --> 0:01:31.319 the number is going to look like? What are the 0:01:31.319 --> 0:01:34.120 trajectory is going to look like about getting the economy 0:01:34.160 --> 0:01:36.800 back on track. When you talk about getting the economy 0:01:36.840 --> 0:01:39.839 back on track, US markets seem to have already moved 0:01:39.920 --> 0:01:43.319 past the catastrophic report. And you were quoted in a 0:01:43.400 --> 0:01:47.880 story today talking about this massive divide, this disconnect between 0:01:48.320 --> 0:01:50.520 stock markets that continue to rally then as that now 0:01:50.600 --> 0:01:55.080 positive on the year, and the bleakest economic reports in history. 0:01:55.160 --> 0:01:58.280 You don't think it can last? Why not? H No? 0:01:58.440 --> 0:02:00.800 I don't. I mean at some point there's the market 0:02:01.120 --> 0:02:04.640 either the fundamentals catch up to the markets, or the markets, 0:02:04.760 --> 0:02:07.720 uh come down to the fundamentals. And and of course 0:02:07.760 --> 0:02:10.519 the reason why they're so disconnected is because there has 0:02:10.600 --> 0:02:14.400 been a tremendous amount of policy support put forward to 0:02:14.680 --> 0:02:18.840 underpin the financial markets in particular. That's where the FEDS 0:02:19.320 --> 0:02:22.600 broad set of programs. They actually haven't done much yet. 0:02:22.680 --> 0:02:25.320 I mean they just sort of given forward guidance of 0:02:25.360 --> 0:02:29.320 the market for writing market guidance, um. But and there's 0:02:29.360 --> 0:02:31.760 also a lot of funding, you know, on the fiscal 0:02:31.800 --> 0:02:34.080 side as well. So the markets are sort of saying, 0:02:34.560 --> 0:02:37.040 we know all that it's gonna it's gonna work out. 0:02:37.400 --> 0:02:42.959 So we're looking to Yeah, I think that's when they're 0:02:42.960 --> 0:02:44.840 gonna be you know, they were going to be surprised 0:02:44.880 --> 0:02:47.480 in later on in the year. Good morning. I look 0:02:47.520 --> 0:02:49.520 out of my abode here and I can look over 0:02:49.600 --> 0:02:53.840 and wave to Columbia University and the wonderful Laureate Edmund Phelps. 0:02:54.440 --> 0:02:58.520 And there can be phrases like nehru output gap and 0:02:58.560 --> 0:03:02.000 all these other stuff, And it devolves down to John 0:03:02.000 --> 0:03:05.880 Williams Modern Kent, which is our start as we go 0:03:05.960 --> 0:03:08.680 into this report and as we come out of it, 0:03:09.280 --> 0:03:13.720 do we have a clue where our start is? Well, 0:03:13.760 --> 0:03:17.079 you know, I'm interested. You say the neighbor they output gap, 0:03:17.120 --> 0:03:19.760 our star. I put them all into the category of 0:03:20.240 --> 0:03:24.480 we don't observe them. They are all estimates and they 0:03:24.520 --> 0:03:28.200 move over time, and so sort of thinking that any 0:03:28.280 --> 0:03:31.200 of them are your north star is really a bad 0:03:31.240 --> 0:03:33.240 way of thinking about things because they are not a 0:03:33.280 --> 0:03:36.400 north star. They don't uh you know, they're they're not changeless. 0:03:36.640 --> 0:03:39.360 We should not be guided by them because they are 0:03:39.440 --> 0:03:43.960 so uh in this moment in particular, so affected by 0:03:44.640 --> 0:03:47.839 underlying data that we really have to go and look 0:03:47.840 --> 0:03:52.200 at a much more microeconomic analysis, micro data, higher frequency data. 0:03:53.160 --> 0:03:57.320 What does the micro data say about wage dynamics here 0:03:57.880 --> 0:04:00.000 or will it take you a month or two or 0:04:00.000 --> 0:04:04.240 a three to really get an understanding of a disinflationary 0:04:04.360 --> 0:04:09.360 tendency expected? So there's a lot of uh you know, 0:04:09.360 --> 0:04:12.520 there's a lot of challenges here because uh sure, there's 0:04:12.560 --> 0:04:15.920 a tremendous amount of of unemployment going to be coming 0:04:15.920 --> 0:04:19.240 out of this report. Um, it is broad based, although 0:04:19.240 --> 0:04:22.479 there's there's higher intensity in some sectors than others. But 0:04:22.600 --> 0:04:26.960 going forward, the question to me is when the economy 0:04:27.080 --> 0:04:30.160 starts to reopen and people start to go back out 0:04:30.600 --> 0:04:33.040 to we call us going back out to play. Of course, 0:04:33.080 --> 0:04:35.120 people work at restaurants, but there are a lot of 0:04:35.120 --> 0:04:37.520 people who play, and by going out to restaurants, as 0:04:37.560 --> 0:04:40.479 hit the theater and sporting events and travel and tourism 0:04:40.480 --> 0:04:43.400 and so forth. When people do that, what are the 0:04:43.480 --> 0:04:48.080 rules of engagement by companies? Um? Do they only have 0:04:48.120 --> 0:04:51.320 half as many tables, no middle seat, half as many 0:04:51.320 --> 0:04:55.000 tickets in the theater? Under those situations, you you have 0:04:55.160 --> 0:04:57.920 a very interesting dynamic because you don't need as many 0:04:58.000 --> 0:05:01.440 people UM, and you still have to you know, make 0:05:01.480 --> 0:05:04.000 a profit otherwise you're going to go out of business. 0:05:04.200 --> 0:05:07.719 So how does that translate into prices that people have 0:05:07.839 --> 0:05:11.520 to pay? So the disconnect between wages and prices could 0:05:11.520 --> 0:05:14.400 actually get bigger, Catherine, I'd like to talk about what's 0:05:14.440 --> 0:05:16.120 about to happen with interest rates as well, and the 0:05:16.160 --> 0:05:19.160 difference between now and what we saw after the last crisis. 0:05:19.200 --> 0:05:21.159 After the last crisis, it took a long time for 0:05:21.200 --> 0:05:23.920 people to figure out rates weren't going up anytime soon. 0:05:24.160 --> 0:05:26.679 I don't think two year rates actually bottomed out until 0:05:27.640 --> 0:05:29.520 as you look at things right now, is this a 0:05:29.600 --> 0:05:32.320 market that's accepted that reality The rates are going to 0:05:32.360 --> 0:05:36.919 remain low for a whole lot longer from here. So 0:05:37.640 --> 0:05:39.800 I think that the market definitely thinks that rates are 0:05:39.839 --> 0:05:43.080 going to stay extremely low UM, And in some sense 0:05:43.160 --> 0:05:47.479 they know this now for sure because of the range 0:05:47.480 --> 0:05:50.080 of FED programs that have been put into place. But 0:05:50.200 --> 0:05:53.120 they even knew that, um when the FED pivoted last 0:05:53.200 --> 0:05:58.120 year after the December debacle. So you know, the markets 0:05:58.600 --> 0:06:02.000 know for sure that the FED is so far away 0:06:02.000 --> 0:06:05.240 from monetary policy normalization that they know that there's a 0:06:05.320 --> 0:06:10.520 put on ptic practically every single asset in the portfolio. Well, 0:06:10.520 --> 0:06:13.760 a put is a different thing than necessarily going negative. 0:06:13.800 --> 0:06:16.719 And right now we're seeing traders uh that that the 0:06:16.760 --> 0:06:19.400 Federal Reserve will take rates negative despite the fact that 0:06:19.440 --> 0:06:21.800 the forms he has said repeatedly that it will not do. 0:06:21.920 --> 0:06:24.279 So do you think that this is a disconnect, that 0:06:24.320 --> 0:06:26.479 the market is in for a rude awakening and that 0:06:26.520 --> 0:06:29.599 FED officials have come out and reiterate their stance against 0:06:29.600 --> 0:06:31.560 negative rates, or do you think that the Fed is 0:06:31.560 --> 0:06:33.960 going to have its hand forced yet again by the market. 0:06:35.440 --> 0:06:38.680 So I think so perhaps the market is taking a 0:06:38.760 --> 0:06:42.719 queue from negative w t I Right, nobody thought the 0:06:42.760 --> 0:06:45.640 roil prices could go negative either. Um, So there are 0:06:45.880 --> 0:06:49.400 policy rates that could go negative, and and the f 0:06:49.480 --> 0:06:51.159 O m C has said, no, we're not going to 0:06:51.240 --> 0:06:53.880 do that. That's not the same thing as the market 0:06:54.000 --> 0:06:58.359 taking market determined rate negative. Right, there's a distinction between 0:06:58.400 --> 0:07:01.839 the two. Okay, there's a distinction, but there was a 0:07:01.839 --> 0:07:06.280 headline today. UBS is getting a lot of uh response 0:07:06.320 --> 0:07:08.640 from their their customers. They're not going to play in 0:07:08.640 --> 0:07:11.080 the negative rate space. You know, They're just not gonna 0:07:11.240 --> 0:07:14.320 participate in this. Ken Rogoff in the late Marvin good 0:07:14.360 --> 0:07:17.320 Friend would suggest we need to see a greater magnitude, 0:07:17.360 --> 0:07:21.560 a greater courage, doctor Man of affecting negative rates. Do 0:07:21.680 --> 0:07:25.560 we need a more bold negative rate policy or is 0:07:25.600 --> 0:07:30.760 it a failed policy to be negative? Negative rates is 0:07:31.240 --> 0:07:34.840 not Uh, it's not appropriate. I mean, this is not 0:07:35.080 --> 0:07:38.000 a situation where we need negative rates. There's plenty of 0:07:38.040 --> 0:07:41.920 credit available. Um, it's going into the financial markets. The 0:07:42.000 --> 0:07:46.040 challenges is not going from financial markets to the real economy. 0:07:46.600 --> 0:07:51.000 That's the disconnect, and negative interest rates won't help that. Cancine, 0:07:51.000 --> 0:07:53.280 appreciate you time this morning, history making day on this 0:07:53.280 --> 0:08:00.160 payrolls Friday, Catherine Man that City Global Chief Economists to 0:08:00.200 --> 0:08:03.320 Bloomberg survey changes day to day depending on the mix 0:08:03.320 --> 0:08:05.840 of opinions we get, and we've sort of migrated it 0:08:05.920 --> 0:08:10.160 casually from twenty to one two million with an update. 0:08:10.280 --> 0:08:13.920 Ellen Setner of Morgan Stanley. Ellen, I know that John 0:08:13.960 --> 0:08:16.400 and Lisa have all sorts of current questions about a 0:08:16.560 --> 0:08:20.559 thirty What have you learned in May, the short days 0:08:20.600 --> 0:08:23.720 of May that we've had about what we will see 0:08:23.760 --> 0:08:27.480 in the June, the July or the August report. Can 0:08:27.520 --> 0:08:30.320 you take this out further as we have taken out 0:08:30.480 --> 0:08:34.960 weekly claims. Yeah, it's a good question, tom Um. So 0:08:35.040 --> 0:08:37.520 we should be looking ahead. I mean, any of these 0:08:37.600 --> 0:08:41.640 numbers that are just absolutely shocking should not surprise me one. 0:08:41.720 --> 0:08:44.240 And as we continue to get April data, it's it's 0:08:44.360 --> 0:08:48.800 largely backward looking because they are starting to open up. 0:08:49.360 --> 0:08:53.400 They're opening up the limited capacity, but they're opening up, 0:08:53.440 --> 0:08:55.880 and so you're going to be pulling some people back 0:08:55.880 --> 0:08:59.000 into the labor market very slowly here as we're in May. 0:08:59.040 --> 0:09:01.000 And I'll tell you some of the best highest uh, 0:09:01.320 --> 0:09:04.120 the best high frequency data at least that we have 0:09:04.160 --> 0:09:07.960 at Morgan Stanley are these weekly alpha wise surveys of 0:09:08.040 --> 0:09:11.200 roughly two thousand households where we could already see in 0:09:11.280 --> 0:09:14.280 April that they were starting to look forward to a 0:09:14.320 --> 0:09:19.360 better day, to opening financial expectations had stopped declining and 0:09:19.400 --> 0:09:22.560 started rising uh, and so people are looking forward to 0:09:22.600 --> 0:09:24.680 a better day. Just what is that better day gonna 0:09:24.720 --> 0:09:26.560 look like? But we do know that the worst of 0:09:26.559 --> 0:09:29.640 the data is past us, even though we're getting confirmation 0:09:29.679 --> 0:09:31.960 of just how bad it was. Now, how will the 0:09:32.240 --> 0:09:38.080 urgency of our politics change off of the stark numbers 0:09:38.240 --> 0:09:42.000 at eight thirty? So I think it's certainly going to 0:09:42.160 --> 0:09:49.280 make the argument for continued expanded fiscal support greater um, 0:09:49.400 --> 0:09:53.120 even though some policymakers will assume that this is already 0:09:53.520 --> 0:09:56.040 um at this this kind of bad data was already 0:09:56.040 --> 0:09:59.520 accounted for in the fiscal support that's been past. But 0:10:00.160 --> 0:10:02.400 you know, if we are going to look ahead, you know, 0:10:02.640 --> 0:10:05.560 to the day when say the six hundred dollar weekly 0:10:05.600 --> 0:10:09.280 supplemental checks start to uh fade, So those that were 0:10:09.280 --> 0:10:11.559 the first to claim that would start happening in July. 0:10:12.120 --> 0:10:16.400 In July, unemployment rate is still going to be extraordinarily high. Um. 0:10:16.440 --> 0:10:18.559 There will be some states in July that that may 0:10:18.600 --> 0:10:22.320 not have a fully fully reopen and so you can 0:10:22.360 --> 0:10:24.840 imagine cries from households and how can you pull this 0:10:24.960 --> 0:10:27.560 support out from under me when the unemployment rate is 0:10:27.559 --> 0:10:30.160 still very high and I don't even have the opportunity 0:10:30.280 --> 0:10:33.480 to look for a job, And so our public policy strategy. 0:10:33.520 --> 0:10:36.800 Just don't think we're done. Which fiscal support that means 0:10:36.800 --> 0:10:40.280 a roughly three trillion dollars in support we've passed already 0:10:40.559 --> 0:10:42.760 will continue to rise, and it will have to rise 0:10:42.840 --> 0:10:45.160 until we climb out of this hole. And then how 0:10:45.200 --> 0:10:48.199 does that policy support adapt evolve as you go from 0:10:48.240 --> 0:10:50.960 a closed economy to an open one or one that 0:10:51.040 --> 0:10:55.240 is slowly reopening. How do you recalibrate the policy effort um, 0:10:55.320 --> 0:10:57.840 So it's a good question, John, I think that um, 0:10:58.600 --> 0:11:00.920 some of the support, especially of households, is going to 0:11:00.960 --> 0:11:04.440 be have to be stepped down. Uh. And so you know, 0:11:04.520 --> 0:11:07.960 can you design the six hundred dollar weekly supplemental check 0:11:08.360 --> 0:11:10.360 to step down and stayed in the same way we 0:11:10.440 --> 0:11:14.920 do unemployment benefits as the unemployment rate improved, because you 0:11:14.960 --> 0:11:17.160 do have to step that down at some point over time. 0:11:17.640 --> 0:11:20.600 How much will small businesses have to pay people in 0:11:20.720 --> 0:11:24.800 order to attract them off of unemployment benefits? Because in 0:11:24.880 --> 0:11:27.560 thirty four states, as we've estimated, people are getting as 0:11:27.640 --> 0:11:31.000 much as not more than when they did work. Uh, 0:11:31.040 --> 0:11:32.960 And so you're gonna have to up pay them in 0:11:33.080 --> 0:11:35.040 order to get them back in. So that's something that 0:11:35.360 --> 0:11:38.400 policymakers will have to take into account on the small 0:11:38.440 --> 0:11:41.520 business side. You know, the demand for those loans will 0:11:41.520 --> 0:11:44.520 wane over time. We've still got some room here. Um, 0:11:44.880 --> 0:11:47.559 We've still got about a hundred billion or so left 0:11:47.600 --> 0:11:50.640 in the coffers for those loans and demand has flowed. 0:11:50.880 --> 0:11:53.600 And then the credit facilities from the said those haven't 0:11:53.600 --> 0:11:58.200 even been in use yet because they've because they've not 0:11:58.280 --> 0:12:02.000 been defined and really open yet. Um, but those have 0:12:02.120 --> 0:12:06.240 unlimited capacity, and just those things improve, you would see 0:12:06.320 --> 0:12:09.319 usage of those facilities naturally way and so a lot 0:12:09.360 --> 0:12:11.280 of this is just natural wind downs. I think on 0:12:11.320 --> 0:12:13.199 the unemployment benefits, there's going to have to be a 0:12:13.320 --> 0:12:17.640 design to that six dollar weekly supplemental. We all want 0:12:17.679 --> 0:12:20.520 to see things improve and improve quickly today when we 0:12:20.559 --> 0:12:23.440 get these numbers, and I think we're pretty familiar with 0:12:23.480 --> 0:12:25.800 the size. As tragic as it is, these are gonna 0:12:25.800 --> 0:12:28.200 be huge job losses when this number comes out. What 0:12:28.320 --> 0:12:31.160 we don't know a lot about right now, escope the 0:12:31.200 --> 0:12:33.640 breadth of the job losses. What are you looking for 0:12:33.800 --> 0:12:38.400 just in terms of breadth underneath the headline number. So 0:12:38.679 --> 0:12:41.079 we've seen in the weekly jobs claims that started out 0:12:41.120 --> 0:12:44.000 that most of the job loss um we're in the 0:12:44.000 --> 0:12:49.200 the usual suspects, um, you know, services industries, in this case, 0:12:49.400 --> 0:12:52.280 very tourism related industries as well, and it was very 0:12:52.320 --> 0:12:56.640 concentrated restaurants, tourism, leisure, and hospitality. UM. But as a 0:12:56.720 --> 0:12:59.800 job's claims progressed, we saw it start to broaden our 0:13:00.000 --> 0:13:02.400 cross the labor market. So I would I would want 0:13:02.400 --> 0:13:04.960 to look at the diffusion index to see how broad 0:13:05.040 --> 0:13:07.400 spread the clients are, because I think we're going to 0:13:07.480 --> 0:13:12.160 see it hit across just about every uh, every industry. 0:13:12.520 --> 0:13:16.440 Those still the bulk of it concentrated in those uh 0:13:16.679 --> 0:13:24.200 discretionary services related areas. Ellen. Initially, when the shock first started, 0:13:24.240 --> 0:13:26.760 people were saying that the job losses we're going to 0:13:26.800 --> 0:13:29.120 be temporary, that it's something different than in the past, 0:13:29.160 --> 0:13:32.760 because this was a manufactured shutdown. As time has gone on, 0:13:32.840 --> 0:13:35.160 people are revising that and saying it's going to take 0:13:35.160 --> 0:13:37.640 a long time for these jobs to be brought back 0:13:37.720 --> 0:13:40.360 into the economy. Where do you stand on that? How 0:13:40.360 --> 0:13:43.760 many of these job losses have gone from temporary to permanent? 0:13:45.640 --> 0:13:48.680 So I think by the so, um, good morning, Lisa, 0:13:48.880 --> 0:13:53.319 it's uh, the you know, it's it's a bit upsetting 0:13:53.360 --> 0:13:55.559 to talk about these kinds of jobs numbers, because there 0:13:55.559 --> 0:13:57.400 are a lot of people that will have permanent job 0:13:57.440 --> 0:13:59.800 loss from this, and you know, we've had more of 0:13:59.800 --> 0:14:03.600 the thirty million jobless claims filed. Um, we think it's 0:14:03.640 --> 0:14:06.000 reasonable to the expect that ten to twelve million of 0:14:06.040 --> 0:14:08.520 them could come back by the end of the year. Um. 0:14:08.760 --> 0:14:10.880 You know that's not enough. We'd like to get them 0:14:10.880 --> 0:14:13.400 back to work more quickly. Now, how do we get 0:14:13.400 --> 0:14:16.120 people back to work at all? Because states will be 0:14:16.240 --> 0:14:19.160 reopening and there will be in need for some of 0:14:19.200 --> 0:14:22.520 those jobs to come back. Um. A lot of those 0:14:22.520 --> 0:14:25.600 have been furloughed and so they're more they're more connected 0:14:25.680 --> 0:14:29.400 to the employer, and as those employers open back up, 0:14:29.440 --> 0:14:32.480 you're gonna need labor quickly. That means the folks that 0:14:32.520 --> 0:14:34.720 you've already trained that can easily walk in the door 0:14:35.120 --> 0:14:37.840 and start working right away. But there will be an 0:14:37.840 --> 0:14:41.160 element of either permanent job loss here. It just takes 0:14:41.200 --> 0:14:43.120 people longer to get back into the labor first than 0:14:43.160 --> 0:14:46.280 we previley previously thought. Some of that is because the 0:14:46.360 --> 0:14:50.840 phase reopening will be very gradual. Um. But also our 0:14:50.880 --> 0:14:54.680 biotechnology UH analysts are now pointing out that you know, 0:14:54.760 --> 0:14:58.880 the the US, unlike other countries states have been reopening 0:14:59.320 --> 0:15:02.760 when cases are still rising um and so unlike most 0:15:02.800 --> 0:15:06.080 countries that have had strict lockdowns, the US has plateaued 0:15:06.240 --> 0:15:09.560 at its peak and daily new cases without any sustained decline. 0:15:10.080 --> 0:15:15.120 And so if that dynamic continues, then the reopening will 0:15:15.160 --> 0:15:20.960 be even uh phased in an even weaker pace, if 0:15:20.960 --> 0:15:24.160 you will, a weaker capacity than we then we had thoughts. 0:15:24.160 --> 0:15:26.160 So these are all things are going to constantly adjust 0:15:26.200 --> 0:15:29.880 these expectations around the labor market. I think in the 0:15:30.080 --> 0:15:31.600 if I could said just say, I think in the 0:15:31.680 --> 0:15:34.640 short term here we can get some really upward surprising 0:15:34.680 --> 0:15:37.000 bounces in the data, just because you're going from very 0:15:37.040 --> 0:15:40.440 little activity to some activity, and that can look explosive 0:15:40.520 --> 0:15:42.880 on a month over month change, but it's really the 0:15:42.920 --> 0:15:46.080 path after that it's going to be fairly shallow. Ellen, 0:15:46.160 --> 0:15:48.520 just real quick here, which industries do you expect the 0:15:48.600 --> 0:15:53.040 job losses to be most permanent? Well, I think that 0:15:53.040 --> 0:15:59.680 that certainly, UM tourism, um energy, you know, the restaurants, 0:16:00.200 --> 0:16:02.720 you know, those are areas where the jobs losses will 0:16:02.840 --> 0:16:07.280 uh you may as well consider them um permanent. And 0:16:07.320 --> 0:16:10.640 when you think about recovery across the nation state by state. 0:16:10.960 --> 0:16:15.520 Look for states with more diverse industries to recover more quickly. Uh, 0:16:15.560 --> 0:16:17.880 you need that. You can't be a state that's easily 0:16:18.520 --> 0:16:22.640 concentrated it with jobs and tourism or jobs and energy. Um, 0:16:22.800 --> 0:16:26.800 it's going to weigh on date GDP for longer. Now. 0:16:26.880 --> 0:16:29.320 The history of that's watching new. Jersey Ellen sentner with 0:16:29.440 --> 0:16:35.640 us with Morgan Stanley, thank you so much. Right now, 0:16:35.640 --> 0:16:38.000 as we look at this job's report, try to synthesize 0:16:38.000 --> 0:16:41.280 it into the markets where we see yields sustain ever 0:16:41.400 --> 0:16:44.560 lower as we saw yesterday. Jeffrey Rosenberg joins. He is 0:16:44.600 --> 0:16:48.280 with black Rock. Jeff, I want to take the mix 0:16:48.360 --> 0:16:51.280 of this shocking report. I guess it's better than the 0:16:51.280 --> 0:16:53.920 gloom that was expected, but I really don't want to 0:16:53.920 --> 0:16:56.240 sell that to you right now, Jeff. We have to 0:16:56.280 --> 0:17:00.200 bring it over to yields. Why did yields come in yesterday? Say? 0:17:00.640 --> 0:17:03.480 And is it just the gaming of a crushingly difficult 0:17:04.080 --> 0:17:09.000 labor market? Thanks Tom, Um. Yeah, I think it's hard 0:17:09.040 --> 0:17:13.199 to turcret a lot of those moves, uh, you know, 0:17:13.280 --> 0:17:17.560 under their normal I'm a reaction function because you have 0:17:17.680 --> 0:17:22.280 so much of the fed and supply interacting as as 0:17:22.400 --> 0:17:25.200 kind of the major drivers. You know, we're we're about 0:17:25.240 --> 0:17:30.520 to embark on a historic expansion of debt issuance, UH, 0:17:30.560 --> 0:17:34.640 and a historic expansion of the FED effectively taking down 0:17:34.640 --> 0:17:37.280 that debt issuance to make sure that the financing rates 0:17:37.480 --> 0:17:41.919 are are not disruptive. So you know, it's you know, 0:17:42.000 --> 0:17:44.400 your question is, you know, what's the what's the rate 0:17:44.520 --> 0:17:47.640 moves telling us UH, it's really hard to parcel out 0:17:48.240 --> 0:17:52.800 this kind of very unique technicals from say, some of 0:17:52.840 --> 0:17:55.239 the numbers that we that we normally would look at. 0:17:55.840 --> 0:17:59.200 All right, let's let's talk more about this job to 0:17:59.240 --> 0:18:02.200 report the worst of a port in American history. Digging 0:18:02.200 --> 0:18:04.560 a little bit more into it, it does appear that, 0:18:04.680 --> 0:18:11.680 as feared, the job losses were widespread the leisure and hospitality, retail, healthcare, professional, manufacturing, 0:18:11.760 --> 0:18:15.520 construction information these millions of job losses, and then also 0:18:15.600 --> 0:18:20.160 we saw the wage gains, pointing to a disproportionate amount 0:18:20.240 --> 0:18:23.760 of job cuts at the lower end of the income spectrum. 0:18:23.760 --> 0:18:28.800 I'm wondering, from your perspective, given this dynamic of the layoffs, 0:18:28.840 --> 0:18:33.840 what does that say about the path of the recovery ahead. Well, 0:18:34.720 --> 0:18:38.920 it confirms what we expected in terms of the distributional 0:18:39.000 --> 0:18:45.600 impacts of the Corona virus crisis, and um, you know, 0:18:45.680 --> 0:18:49.919 the big issue going to go forward basis is re 0:18:50.160 --> 0:18:55.639 engagement versus reallocation. And I don't have all the data 0:18:55.680 --> 0:18:58.280 in front of me yet. There's there's some things we 0:18:58.320 --> 0:19:00.360 can tease out from this report that will that will 0:19:00.359 --> 0:19:05.040 help to uh answer that. But but that's really going 0:19:05.080 --> 0:19:08.840 to inform the path of the recovery because if you 0:19:08.880 --> 0:19:11.639 can re engage your workers, you know, one of the 0:19:11.840 --> 0:19:14.000 one of the things that's that's sort of anomalous about 0:19:14.040 --> 0:19:16.560 this report is the unemployment rate. There's a note from 0:19:16.560 --> 0:19:21.240 the BLS saying, you know, there's there's a misclassification going 0:19:21.320 --> 0:19:25.680 on and if you if you classified yourself um as 0:19:25.720 --> 0:19:28.680 employed but not at work because of the Corona crisis, 0:19:28.880 --> 0:19:32.280 you know, that's understating the unemployment rate by about five 0:19:32.320 --> 0:19:35.920 percentage points. That's kind of a technical issue, but that 0:19:35.920 --> 0:19:38.000 that's a that's a kind of a good thing, right, 0:19:38.040 --> 0:19:40.679 that's what we want to feel. We're we're still employed, 0:19:41.320 --> 0:19:43.520 but we just can't work because of the coronavirus. And 0:19:43.520 --> 0:19:45.560 it really gets to the heart of this notion of 0:19:45.880 --> 0:19:49.119 you know, is this a temporary dislocation or is it 0:19:49.240 --> 0:19:52.640 or is it permanent? So re engagement is about temporary 0:19:52.680 --> 0:19:57.120 that's a faster recovery. Reallocation is you know, my job 0:19:57.240 --> 0:19:59.280 is gone and it's not coming back. I have to 0:19:59.400 --> 0:20:03.359 realy keep somewhere else in the economy. That's a much 0:20:03.680 --> 0:20:08.840 more longer term process, filled with lots of frictions, and 0:20:08.840 --> 0:20:12.800 and it slows the process down. Um, that's what we're 0:20:12.800 --> 0:20:15.399 going to debate. And I think the impact on the 0:20:15.440 --> 0:20:18.680 lower end is really going to be focused on did 0:20:18.680 --> 0:20:21.479 those jobs come back? Jeff. The market seems to be 0:20:21.520 --> 0:20:25.160 pricing in increasingly a bottoming out of the economic data, 0:20:25.280 --> 0:20:27.879 people saying this was the worst that we're going to see, 0:20:28.200 --> 0:20:32.159 probably in our lifetimes, possibly in history. But there's a 0:20:32.240 --> 0:20:34.840 question about a second wave of layoffs. And I've heard 0:20:34.880 --> 0:20:39.000 a growing number of economists and market participants talk about this, 0:20:39.000 --> 0:20:42.760 this idea that the longer that you remove a big 0:20:42.840 --> 0:20:46.800 cohort of of the labor market from their jobs, they 0:20:46.800 --> 0:20:50.280 don't have the discretionary spending and that will eventually bleed 0:20:50.320 --> 0:20:53.680 into the higher income jobs, which is starting already. Are 0:20:53.680 --> 0:20:57.200 you seeing any signs of that, Well, I think it's 0:20:57.240 --> 0:21:00.280 I think it's early to say that we're seeing signs 0:21:00.280 --> 0:21:03.520 of that, But I think the sentiment is correct that 0:21:04.040 --> 0:21:07.760 there is there. There is kind of the initial shock, 0:21:07.920 --> 0:21:10.879 there's an initial recovery, and then there's the what are 0:21:10.880 --> 0:21:13.920 the longer term implications. That part of the thing, of course, 0:21:13.960 --> 0:21:17.000 that's challenging the longer term implications is we don't know 0:21:17.040 --> 0:21:19.320 what the path of the virus itself look like. But 0:21:19.400 --> 0:21:21.560 even beyond the path of the virus itself, there's the 0:21:21.640 --> 0:21:24.959 question of, well, what is the more kind of permanent 0:21:25.040 --> 0:21:29.560 reaction of the economic structure to the crisis. What is 0:21:29.600 --> 0:21:33.920 the reaction to consumption, what is the reaction to savings rates, 0:21:33.920 --> 0:21:37.840 what is the reaction to behaviors. So at the macro level, 0:21:37.880 --> 0:21:41.080 a very kind of puberly simplistic perspective is, you know, 0:21:41.119 --> 0:21:44.399 there's a higher savings rate, there's there's more precautionary savings, 0:21:44.400 --> 0:21:48.000 there's less consumption, and that just overall changes kind of 0:21:48.080 --> 0:21:51.840 aggregate demand, aggregate activity. But beyond that, there is a 0:21:51.960 --> 0:21:55.520 much more distributional impact as to how does expect various sectors. 0:21:55.760 --> 0:21:57.719 Let me ask some money question, Jeff, I'm sure you're 0:21:57.720 --> 0:21:59.840 gonna get it today, You're gonna get it into the week, 0:22:00.000 --> 0:22:03.000 and certainly when you roll out your reports from Monday. 0:22:03.080 --> 0:22:05.520 Can we get the debt genie back in the bottle? 0:22:05.920 --> 0:22:08.720 I mean, I get the rationalization of all this debt 0:22:08.760 --> 0:22:12.840 build up given THEE it's a virus, it's a pandemic. Great, 0:22:13.160 --> 0:22:15.399 are you optimistic we can you get the debt genie 0:22:15.480 --> 0:22:20.159 back in the bottle? No, I I think that. I 0:22:20.200 --> 0:22:23.120 don't think that's actually a debate right now. I mean 0:22:23.160 --> 0:22:25.880 there's a little bit of a pushback and there's a question. Now. 0:22:27.359 --> 0:22:29.879 You saw some comments from from from the House and 0:22:31.200 --> 0:22:34.359 some of the congressional leaders about the next wave, and 0:22:34.359 --> 0:22:37.000 there's a bit of a debate about that because there 0:22:37.080 --> 0:22:41.800 is some concerns about the debt, but there's the there's 0:22:40.720 --> 0:22:45.680 the direct fiscal policy, and then there's the expansion of 0:22:46.000 --> 0:22:49.600 the FED support. Um we we are really kind of 0:22:49.960 --> 0:22:54.080