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Speaker 2: I want to get right to the economic data of
Speaker 2: the day. It is Jobs Day and the change of
Speaker 2: non farm payroll came in one hundred and seventy seven thousand.
Speaker 2: Consensus was one thirty eight, so a beat there. The
Speaker 2: prior period was revised down sharply from two hundred and
Speaker 2: twenty eight thousand to one and eighty five, so some
Speaker 2: cross currents there. Let's break it down. Tom Gimball, Vice
Speaker 2: chairman American Staffing Association and founder of LaSalle Networks. Hey, Tom,
Speaker 2: what do you take away from today's non farm payroll data?
Speaker 3: I think it shows that the US economy is resilient.
Speaker 4: I think that the tariff hubbabaloo for lack of a
Speaker 4: better word, hasn't hit yet.
Speaker 3: Companies didn't know.
Speaker 4: What to do following the announcement the first week in April,
Speaker 4: so we have some time to show up on that.
Speaker 4: And I think the real message is small and medium
Speaker 4: sized businesses always drive the jobs numbers more than anything else,
Speaker 4: and so if big companies do layoffs, small companies can
Speaker 4: now afford to hire some talent they couldn't before, and
Speaker 4: that's where you see a lot.
Speaker 3: Of the hiring.
Speaker 5: So since you run one of the leading staffing and
Speaker 5: recruiting firms in the country, who's staffing and recruiting.
Speaker 3: Well, I think that that.
Speaker 4: The companies that are hiring are small and medium sized companies.
Speaker 3: You're not.
Speaker 4: You know, when you see the announcements that a company
Speaker 4: like Starbucks is doing layoffs or what have you, is
Speaker 4: that you see that big companies have to cut overhead.
Speaker 4: But when you have small companies, you know, the two
Speaker 4: sectors that I see a lot continue to be our
Speaker 4: healthcare and you're going to have techn service firms, and
Speaker 4: service firms are going to continue to be doing consulting work.
Speaker 4: There's technology bases, things along those lines that aren't as
Speaker 4: directly affected by lack of inventory and trade tariffs of
Speaker 4: importing products from other countries.
Speaker 2: Tom some economists are concerned that tariffs and just economic
Speaker 2: uncertainty resulting from tariff discussions could hit small and midsized
Speaker 2: businesses harder because maybe they don't have the same profit
Speaker 2: margins and resources as some of the bigger companies. What
Speaker 2: are your respondents in your surveys telling you.
Speaker 4: I think there's no doubt about that that I'm talking
Speaker 4: to leader CEOs of businesses every week, and there's obviously
Speaker 4: a concern due to the uncertainty of what's going on
Speaker 4: geopolitically and the tariffs. However, at the same time is
Speaker 4: that labor for the most part, can be scaled up
Speaker 4: and scaled down and companies right now have to focus
Speaker 4: on where the opportunities lie. And so what we see
Speaker 4: right now is there is a fear, there is an uncertainty. However,
Speaker 4: there's also companies, small and medium sized companies. Again, I
Speaker 4: want to repeat, if you're a small manufacturing company, you've
Speaker 4: got real challenges. If you're a small distribution company, you've
Speaker 4: got real challenges. But if you're a consulting firm, if
Speaker 4: you're a services business, if you're a technology app development company,
Speaker 4: there's still opportunity because companies have to figure out workarounds
Speaker 4: to the situation, and those are usually going to be
Speaker 4: technologically based solutions.
Speaker 5: To the other side of it, those small, medium sized
Speaker 5: businesses that are geared towards the consumer is selling stuff
Speaker 5: and products and manufacturing, et cetera. Are they laying off
Speaker 5: people or are they just not hiring?
Speaker 4: No, I think you're seeing both. Listen, companies are laying
Speaker 4: off in good economies, companies lay people off. What you
Speaker 4: have is in a situation like this, companies have to
Speaker 4: look at their infrastructure. It's the same thing with unloading
Speaker 4: real estate during the COVID situation. They might not have
Speaker 4: needed it all along, but it gives them an excuse
Speaker 4: to do that. And so, you know, for lack of
Speaker 4: a better phrase, are companies pruning some talent right now?
Speaker 3: They absolutely are.
Speaker 4: And at the same same time, you see that if
Speaker 4: you go and look and search any job board, you're
Speaker 4: going to see that companies are also hiring weeks after
Speaker 4: they do layoffs because they're different skill sets, different positions,
Speaker 4: and so you know, the word hiring freeze is usually
Speaker 4: for new positions, but ones that are deemed to be
Speaker 4: necessary to the business, Companies are always going to be
Speaker 4: hiring in those spots.
Speaker 2: Labor hoarding, that's a term I learned during a pandemic.
Speaker 2: I've never heard that before. Is that still a thing?
Speaker 3: Tom, No, I don't think so.
Speaker 4: You know, during the pandemic, when people were afraid that
Speaker 4: there was going to be a boom coming out and
Speaker 4: there ended up being one at the end of twenty
Speaker 4: and all of twenty one and summ of twenty.
Speaker 3: Two, that made sense.
Speaker 4: But right now companies are more sitting here saying what
Speaker 4: puts us in the strongest position to compete no matter
Speaker 4: what the economic climate. And if you're a big company,
Speaker 4: you do have excess labor, and so it's easy to
Speaker 4: cut that back.
Speaker 3: If you're a small company, you.
Speaker 4: Couldn't always compete against big companies because you can't pay
Speaker 4: the same wage. Well, when those big companies prune and
Speaker 4: late p people off, now you can get some of
Speaker 4: that talent for a little bit lower price. And at
Speaker 4: the same time those people are a little bit burned
Speaker 4: feel burned by the big companies. So you get a
Speaker 4: more engaged employee who really appreciates the quality of life
Speaker 4: at a smaller, medium sized company.
Speaker 6: All right, we.
Speaker 5: Appreciate it, Tom, Always good to get your perspective. Thank
Speaker 5: you so very much. Tom Gimbal, Vice chairman American Staffing
Speaker 5: Association and founder of LASAL Network, really helping understand the
Speaker 5: difference of the big large companies and the smaller medium
Speaker 5: sized businesses. I never thought that, like, if you get
Speaker 5: fired in a large firm that the small medium sized
Speaker 5: firm benefits.
Speaker 6: That actually makes sense.
Speaker 2: Good, Yeah, I guess in certain industries, yeah, certain areas.
Speaker 2: So I'll have to see.
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Speaker 5: Kelex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
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Speaker 6: We also have an amazing bench of reporters as.
Speaker 5: Well as bureau chiefs that we like to tap as well.
Speaker 5: We're going to go to one of them now, brook Sutherland.
Speaker 5: She is the Boston bureau chief, one of my favorite people,
Speaker 5: one of the smartest people that I've ever met. So
Speaker 5: the headline for Boston is that President Trump is announced
Speaker 5: that Harvard University would lose its tax exempt status and
Speaker 5: that threatens to revoke the school's financial benefits. Brook, what's
Speaker 5: the vibe in Boston right now.
Speaker 7: I mean, I think the vibe is not great. I
Speaker 7: think there's a lot of concern about not just what
Speaker 7: happens with Harvard, but what happens with some of the
Speaker 7: other funding cuts, specifically around the NIH. I mean, this
Speaker 7: is an economy that really thrives off of its higher
Speaker 7: education institutions, its top tier hospitals, and its research facilities.
Speaker 7: And these organizations support a much broader ecosystem that is
Speaker 7: very linked to Massachusetts employment and the other overall health
Speaker 7: of the state economy. And so this is an issue
Speaker 7: that state politicians have really, you know, rallied around Harvard
Speaker 7: for you know, in terms of just really pushing back
Speaker 7: on this and trying to protect those interests that are
Speaker 7: key to their economy. We've even seen, you know, the
Speaker 7: Republican candidate for governor coming out and advocating for the
Speaker 7: funding that goes to some of these institutions in the
Speaker 7: important role that they play in the Massachusetts economy.
Speaker 2: What's the feeling a Brook as to the legality of
Speaker 2: such a move. Does the President have the legal authority
Speaker 2: to do so.
Speaker 7: It's still not clear at this point whether or not
Speaker 7: his comments this morning about revoking Harvard's tax exempt status
Speaker 7: actually came in conjunction with the directive from the I R.
Speaker 7: S or from him in particular. It's it's not clear
Speaker 7: exactly sort of what steps are being taken or where
Speaker 7: we might be in any kind of process.
Speaker 8: Now.
Speaker 7: Typically the IRS standards prevent the President from interfering with
Speaker 7: federal tax agency decisions, and so this is undoubtedly something
Speaker 7: that if you know, the administration were to proceed with
Speaker 7: revoking targets Harvard's tax exempt status, that you would likely
Speaker 7: see the university challenge that, and it's a process that
Speaker 7: would take years to play out between appeals and you know,
Speaker 7: negotiations over what might happen here.
Speaker 5: So the dum dums like me are going to be like,
Speaker 5: what's the big deal. They have a big endowment, they
Speaker 5: charge a lot to tuition, Like why do they need
Speaker 5: the status and what's the actual argument.
Speaker 7: So the endowment is helpful, but you can't really use
Speaker 7: it like an ATM or you know, a piggy bank.
Speaker 7: The funds that are in there are mostly earmarked for
Speaker 7: certain programs, you know, scholarships, certain schools, and so they
Speaker 7: can't just use that money as they wish to plug
Speaker 7: whatever gaps that they might have. And you know, Harvard
Speaker 7: is certainly in a better position to weather this storm
Speaker 7: than a lot of institutions. It's one of the oldest
Speaker 7: in the country and also the richest. But you know,
Speaker 7: I still think the financial toll of this can be
Speaker 7: really significant, and it can affect how the university dolls
Speaker 7: out financial aid. If they're not tax exept, they would
Speaker 7: also have to pay property taxes. They have a lot
Speaker 7: of real estate, not just in Cambridge, but also in
Speaker 7: Boston proper, and that bill alone would be extremely substantial.
Speaker 2: And stripping Harvard's taxes and status would deal a significant
Speaker 2: financial blow to the university. This is in Bloomberg reporting,
Speaker 2: which receives an estimated foreigner and sixty five million dollars
Speaker 2: in tax benefits annually. And it's not just Harvard again, Brooke,
Speaker 2: looking at your report here, some seventeen hundred private colleges
Speaker 2: operate as nonprofits. Given their contributions to society, they receive
Speaker 2: that benefit part of a section of the Internal Revenue
Speaker 2: Service tax Code, which specifically mentions education as being a
Speaker 2: purpose that can receive the exemption. So I'm guessing pretty
Speaker 2: much every private college and the university around the country
Speaker 2: brook is looking to this Harvard case.
Speaker 7: I think they definitely are. I mean, I think there's
Speaker 7: a question of whether, you know, the administration is particularly
Speaker 7: targeting Harvard because it is so well known and so
Speaker 7: prestigious in terms of trying to effectuate some of the
Speaker 7: change that it wants to see on college campuses. You know,
Speaker 7: it's sort of making a model out of Harvard versus
Speaker 7: some of the other universities in the country. But certainly,
Speaker 7: I think they are watching this very carefully. And if
Speaker 7: they're not, you know, directly connected to this particular fighter
Speaker 7: going to see their own tax exempt status called into question,
Speaker 7: they're likely feeling the pressure of the funding cuts because
Speaker 7: NIH funding does not just go to the Harvards and
Speaker 7: the Mits of the world. It also goes to a
Speaker 7: number of other universities spread out all across the country
Speaker 7: that are doing, you know, very important work to advance
Speaker 7: US competitiveness and things that we've decided our national priorities,
Speaker 7: you know, things around national security, around medical advancements, semiconductor research,
Speaker 7: I mean, this all takes money, and historically that's a
Speaker 7: role that the government has played in supporting that research
Speaker 7: and innovation.
Speaker 5: Uh Brook, before we let you go, also touted your
Speaker 5: expertise in the industrial industry. You've covered the industrial industry
Speaker 5: for a very long time. You have a weekly newsletter
Speaker 5: that sort of picks up on all the little details
Speaker 5: happening within that very important space. And in your piece
Speaker 5: today you talked about toothpaste versus which is like basically
Speaker 5: factory orders. Can you give me the takeaway from that?
Speaker 5: I thought it was quite interesting, is how we're looking
Speaker 5: at the economy.
Speaker 7: Sure, I mean, I think there was a lot of
Speaker 7: concern heading into this earning season about what we might
Speaker 7: see from the manufacturing economy, the thinking being that that
Speaker 7: was sort of the front lines of where tariffs would hit.
Speaker 7: And these companies are certainly, you know, expecting an impact,
Speaker 7: but by and large, they're mostly doing okay. I mean,
Speaker 7: the demand in the first quarter was very strong, and
Speaker 7: so far companies really aren't flagging any kind of material
Speaker 7: step back or you know, some sort of serious pause
Speaker 7: in projects. It's a very different story on the consumer
Speaker 7: side of the economy though. I mean, you've seen airlines
Speaker 7: pull their guidance because of a pullback and travel demand,
Speaker 7: the concerns about consumer confidence. You've seen companies like Colgate
Speaker 7: palm Olive, which makes toothpaste, with sales dropped about three
Speaker 7: percent and the first quarter in part because customers are
Speaker 7: trading down from premium toothpaste options to sort of middle
Speaker 7: tier options, and that trade down effect is manifesting, you know,
Speaker 7: in a number of different places across the consumer economy,
Speaker 7: and I think, you know, it's just interesting. There was
Speaker 7: an argument a few years ago about could you see
Speaker 7: sort of a decoupling of the manufacturing sector from the
Speaker 7: rest of the economy because there are sort of secular
Speaker 7: reasons driving construction of new factories, whether it's reshoring or
Speaker 7: you know, some of the energy initiatives that we've had,
Speaker 7: all of the government stimulus around infrastructure and semiconductors that
Speaker 7: didn't happen, And I think it would be extremely difficult
Speaker 7: for that to happen again in an environment if we
Speaker 7: do see tariffs really damp and consumer confidence and really
Speaker 7: cause that consumer to pull back on spending. It's hard
Speaker 7: to keep industrial equipment orders going along at a role
Speaker 7: place when people can't afford sort of basic needs.
Speaker 6: All right, Brooke, we really appreciate it. Thank you so
Speaker 6: very much.
Speaker 5: Brooks Sutherland, Boston Bureau Chief in Industrials expert.
Speaker 6: Right here at.
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Speaker 6: For a recap.
Speaker 5: Chevron made a bid Dubai, Hess has accepted, and then
Speaker 5: Exon came in and said, no, we have rite a
Speaker 5: first refusal to Hess's project in Guyana, which is a
Speaker 5: prolific oil region, and they've been an arbitration for quite
Speaker 5: a long time on that. We may get final result
Speaker 5: later on in this year. Vince Piazza heads up all
Speaker 5: our oil and industry coverage for Bloomberg Intelligence and joins me, Now, Vincent,
Speaker 5: what do you think of the answer that Nope, they
Speaker 5: got complete confidence.
Speaker 6: If Chevron doesn't get Hess.
Speaker 8: What happens, well, look is, if Sevron doesn't get Hess,
Speaker 8: someone of size would need to make a move on Hess, right,
Speaker 8: and you.
Speaker 9: Know Exon suggests that it has these preemptive rights, and
Speaker 9: so if the arbitration goes in its favor, there would
Speaker 9: be a decision that needs to be made about that
Speaker 9: value and what that value is. And I would suggest
Speaker 9: to you that because of Hesse's size, the number of
Speaker 9: suitors for hes whether it's the asset or the entire entity,
Speaker 9: is quite limited, and you need someone that has the heft,
Speaker 9: the balance sheet, the flexibility, the financial flexibility of an
Speaker 9: Exon mobile and so I think both entities have a
Speaker 9: solid case to be made. I've never heard of an
Speaker 9: acquisition being held up because of a shared asset, but
Speaker 9: you know, a lot of strange things that happened in
Speaker 9: the world in the last year or so, so we'll
Speaker 9: see what happens. But I think if you take a
Speaker 9: look at just the earnings from today, guys, I think
Speaker 9: it's obvious that Exon is pulling away both operationally and financially.
Speaker 9: And I think that if you were to take a
Speaker 9: look at this a year from now, you would see
Speaker 9: the ongoing strength of the Exon operations and Exon's financial health.
Speaker 9: Financial health.
Speaker 2: Right, So, hey, Vince, you've been covering these big oil
Speaker 2: companies integrated oil companies for years. Here what are they
Speaker 2: telling you with about life at blows sixty dollars a
Speaker 2: borrower around sixty dollars a borrower for WTI crud.
Speaker 9: You know, life is sustainable when you have solid balance
Speaker 9: sheet and you have the financial strength. And in this
Speaker 9: case you have Exon Mobile, which paid back roughly five
Speaker 9: billion of debt. Balance sheet leverage is very, very manageable.
Speaker 9: They have the financial flexibility to push forward financially. They
Speaker 9: threw off about nine billion of free castulow eight point
Speaker 9: eight to be exact. The cadence of buybacks remains the same,
Speaker 9: the dividend pace remains the same. So there is strength
Speaker 9: there in their confidence in their decision to maintain those levels.
Speaker 9: Contrast that with what you heard from Stevron. And when
Speaker 9: you're throwing off roughly a billion dollars of free castlow
Speaker 9: and you're trying to pay out dividends of three and
Speaker 9: do buybacks of another four, the math doesn't compute right,
Speaker 9: and so that pretends the decision to scale back the
Speaker 9: buy backs closer to what two and a half or
Speaker 9: three billion four to twenty twenty five. Hey, look, you know, operationally,
Speaker 9: Exon's in a strong position, especially in Guiana, especially in
Speaker 9: the Permian. You have a yellow tail likely coming on
Speaker 9: sooner than expected, most likely in three Q. That's two
Speaker 9: hundred and fifty thousand barrels a day of growth capacity
Speaker 9: on a resource that has potential of well in excess
Speaker 9: of six billion dollars. So you could understand the attraction
Speaker 9: for both Exon and for Devron, and you know Exon's
Speaker 9: and a driver feet there. You have also for Exon
Speaker 9: the pioneer acquisition the Permium basin, which remains a strong,
Speaker 9: low cost avenue for growth. So I'm not really concerned
Speaker 9: here if this dips below the sixty six dollars Bollol range,
Speaker 9: especially when you have the balance sheet strength to push
Speaker 9: through that. Now, fifteen twenty years ago, the economics were different,
Speaker 9: right leverage was a bigger thwart and also a bigger
Speaker 9: thwart of pain for these organizations as well. But for
Speaker 9: the most part, a lot of these names have gotten
Speaker 9: their balance beats, and the right size and the right
Speaker 9: gape maturities are quite manageable in twenty five and twenty six,
Speaker 9: so I don't see the pain coming from any type
Speaker 9: of balance sheet event. And for the most part, what
Speaker 9: we're telling the operators is, let's manage that production. We
Speaker 9: want to see the free cashulow being thrown off. We
Speaker 9: don't want this excessive accelerated growth that we saw during
Speaker 9: a one point zero. We're in a different situation here.
Speaker 9: It's a mature industry. What we do want to see
Speaker 9: is much more capital discipline. It's fine if you want
Speaker 9: to go out there and pay for an asset using
Speaker 9: your currency, using you for equity, because your equity is
Speaker 9: valued higher than what a private equity sponsored company may be,
Speaker 9: and you can consolidate, integrate and actually increase recash flow
Speaker 9: going forward as well.
Speaker 6: All Right, Ben, thanks a lot. We really appreciate it.
Speaker 5: Vincent Piazza, he covers Boom, all the oil companies E
Speaker 5: ANDPS as well as the big guys for Bloomberg Intelligence.
Speaker 6: We appreciate all of that insight. Shameless Plug.
Speaker 5: You can check out my full cheve On interview on
Speaker 5: the Bloomberg podcast page on YouTube. It's also available on
Speaker 5: Bloomberg dot com, and you can also check it out
Speaker 5: on the terminal as well.
Speaker 6: Shameless plug, I did it.
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