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Speaker 2: We are advantaged with us.
Speaker 3: Claudia Som We're thrilled that she could join us here
Speaker 3: on each and every jobs a chief economist at News
Speaker 3: Century Advisors, Claudia, I guess a question to let you discuss.
Speaker 3: Maybe it's not an Nber recession, but if I've got
Speaker 3: a ginormous negative revision in an under one hundred thousand
Speaker 3: this month jobs report.
Speaker 2: What portion of America is now in recession? So we
Speaker 2: need we need to.
Speaker 4: Be really careful with these payroll numbers in that you know,
Speaker 4: it's telling us something about labor demand is slowing, right,
Speaker 4: and that that piece that contraction, that what it's a
Speaker 4: recession that's about demand falling short. We also are in
Speaker 4: a period it's very hard to measure, but we are
Speaker 4: in a period where it is likely that the labor.
Speaker 2: Supply is also slowing.
Speaker 4: You know, we've had dramatic retroductions in immigration. We also
Speaker 4: have an aging workforce, right, so we so those two
Speaker 4: things can come together and get you lower numbers in
Speaker 4: terms of payrolls. The bad piece, the thing that like
Speaker 4: the FED might want to react to, would be the
Speaker 4: weaker labor demand, that structural piece, that supply piece. That
Speaker 4: is not something the FED reacts to. So while these
Speaker 4: payroll numbers are pretty eye popping, you know, you know
Speaker 4: some attention, these are weaker than we thought in the revisions.
Speaker 4: Look at that unemployment rate, right, it ticked up, but
Speaker 4: that is still a good that looks like balance still
Speaker 4: to your.
Speaker 3: Yield was a negative ten basis points, it's now a
Speaker 3: negative fourteen basis point. To translate, folks, yields our lower
Speaker 3: bond prices higher the thirty year bond even as higher.
Speaker 3: Here modeling out that September meeting, Claudia sum, if I
Speaker 3: look at the data, my amateur answer is I want
Speaker 3: to smooth out to a three months unemployment rate. That
Speaker 3: statistic is thirty five thousand. I mean the President's going
Speaker 3: to go to Jerome Powell and say we're well under
Speaker 3: one hundred thousand on a ninety day jobs report. Can
Speaker 3: you say, okay, it's time to adjust.
Speaker 2: Could we have.
Speaker 3: An intermediate inter meeting rate cut.
Speaker 4: I mean I think that is highly unlikely. Again, the
Speaker 4: unemployment rate is four point two percent. Fair the Fed,
Speaker 4: there's there's movements, Like the FED can't change the labor supply.
Speaker 4: They can't think if they're structural changes, that's not their remit,
Speaker 4: that's not their tools, right, and so they're going to
Speaker 4: be watching very carefully the unemployment. It did move up,
Speaker 4: if it continues to move up, if it picks up
Speaker 4: pace as it moves up, Like these are real science,
Speaker 4: you know, the payrolls they're telling us something. And there
Speaker 4: certainly is a risk that there's more labor demand. But
Speaker 4: this is not this is not I mean, no one
Speaker 4: data release would tend to, you know, bring the FED
Speaker 4: into intermeding action. But this is not you know, just
Speaker 4: the broadbrush the top line numbers. This doesn't look like that.
Speaker 3: Paul in August in Michigan and Ann Arbor. Yeah, there's
Speaker 3: a junior, Claudia Sam's in graduate school who's going to
Speaker 3: look at the immigration overlay on.
Speaker 5: Yes, I know that's really what I like to see
Speaker 5: that Claudia, Tom and I try to, you know, kind
Speaker 5: of look at things on a rolling basis here, not
Speaker 5: get too caught up in one month here, one month there.
Speaker 5: The non farm payroll three month average change that's also
Speaker 5: notable here. It was one hundred and fifty thousand, kind
Speaker 5: of poking along, one hundred and fifty thousand last month,
Speaker 5: that gets revised down to sixty four thousand, and then
Speaker 5: this month comes in an even lower thirty five thousand.
Speaker 6: I don't know that.
Speaker 5: That seems like something's going on out there. How do
Speaker 5: we think about that?
Speaker 2: Right there?
Speaker 4: Yes, like in smoothing through the numbers, but again that
Speaker 4: these payrolls to put to piece apart, what is you know,
Speaker 4: supply and demand, and it's very hard. Like the immigration
Speaker 4: was we don't have good numbers in real time, but
Speaker 4: we see border crossings have basically stopped for unauthorized immigration,
Speaker 4: and the immigration you know whatever, you know, you think
Speaker 4: about the policies like it wasn't an important driver of
Speaker 4: labor force growth and these job gains that we needed
Speaker 4: to be making, you know, in years past to get
Speaker 4: that unemployment rate low. Well it's reversed, and it's it's
Speaker 4: done so very suddenly. So I don't want to write
Speaker 4: this all often. And the defense certainly wouldn't write this off.
Speaker 4: There is a sign that we've got some weakening of demand.
Speaker 4: We see that also in you know, in the GDP numbers,
Speaker 4: the consumer spending, we've seen some softening. So like it's
Speaker 4: this question of how do you pull the two pieces apart?
Speaker 4: And I mean one rough way to kind of see
Speaker 4: where you stand is to look at how unemployment rate
Speaker 4: is balancing out the people looking for work or are
Speaker 4: they still at about the same rate finding.
Speaker 3: That work clute, So yeah, it's going to be I
Speaker 3: can't wait to see what you're published there. Thank you
Speaker 3: so much, Claudia. Some new century advisors here on this
Speaker 3: job report. Really just the market's moving of the two
Speaker 3: year yield hasn't found about him here we're in fifteen
Speaker 3: basis points.
Speaker 2: That's a huge, a huge move joining.
Speaker 3: Us now, and I can't think of a better time
Speaker 3: to speak to Michael Darta, thrilled that he could join
Speaker 3: us here after doctor some Michael Darte is with Roth
Speaker 3: Capital as well. Michael Darta, I want you to synthesize
Speaker 3: this back to classic data, which is the animal spirit
Speaker 3: of the country. Can we have enough inflation to keep
Speaker 3: nominal GDP okay or all of a sudden is our
Speaker 3: stagflation going to become stag staggy?
Speaker 7: Thanks for having me on, Tom. Look, I think if
Speaker 7: you look at the first half, because we're obviously getting
Speaker 7: some distortions and volatility in the GDP statistics, but if
Speaker 7: you average the first and second quarter nominal GDP ran
Speaker 7: at about four percent, just to touch above four, you know,
Speaker 7: that's perfect. That's basically a non inflation area setting. Once
Speaker 7: these supply side shocks dissipate, we are seeing weakness and
Speaker 7: real growth. You know, if you look at real final
Speaker 7: sales to the private sector, just above one percent in
Speaker 7: Q two, barely two percent in Q one, and then
Speaker 7: we had a long streak of pretty close to three
Speaker 7: percent growth, you know, in the two years before that,
Speaker 7: and so we're definitely slowing here, but most of it
Speaker 7: looks like it's on the real side, and that's exactly
Speaker 7: what you'd expect from an adverse supply shock. So the
Speaker 7: challenge for the FED is just to you know, keep
Speaker 7: policy neutral, and that's the debate that's going on right
Speaker 7: now on the FOMC. But Claudia made the point that
Speaker 7: the unemployment rate is not lifting off. So those revisions
Speaker 7: minus two point fifty eight K for the last two
Speaker 7: months for payrolls or the prior two months. That looks
Speaker 7: very scary and recessionary, But the reality is you will
Speaker 7: not find one nb R recession in history without the
Speaker 7: unemployment rate shooting up meaningfully, meaning at least several hundred
Speaker 7: basis points from the cyclical trough. We're basically flat from
Speaker 7: year ago level, same with U six And so this
Speaker 7: is an economy where the supply side has taken a
Speaker 7: hit from tariffs and the demand side has moderated. But
Speaker 7: you know appropriately so.
Speaker 5: So, Michael, is it again. There's a lot of numbers
Speaker 5: to parts through here from today, a lot of negative revisions.
Speaker 5: But as you mentioned, as Claudia mentioned, that unemployment rate
Speaker 5: is staying right at four point two percent, and that's
Speaker 5: is that where you think the FED will keep its
Speaker 5: focus that number?
Speaker 2: I think so.
Speaker 7: I mean, that's essentially what poll FED chair Powell discussed
Speaker 7: this week in terms of the economy being in balance,
Speaker 7: supply and demand being in balance. I mean, look at
Speaker 7: the margin. I think these numbers definitely lead the FED
Speaker 7: to lower policy rates. The question is what is the
Speaker 7: timing and the magnitude futures markets are priced for about
Speaker 7: ninety basis points of cuts over the next twelve months.
Speaker 7: You know, but markets have anticipated sooner in deeper cuts
Speaker 7: than what the FED has been willing to deliver over
Speaker 7: the course of the last few years, So that's not new.
Speaker 7: I mean, the question here is do things really fall
Speaker 7: off from here unless the Fed gets moving and you
Speaker 7: risk markets, despite today's action, are pretty optimistic that we'll
Speaker 7: hang in there.
Speaker 2: Michael Darta.
Speaker 3: When you look at those jobs and if we're under
Speaker 3: one hundred thousand as a glide path, we get the
Speaker 3: emotion of a negative statistic. We don't well, we don't
Speaker 3: have that. What will the nominal tenuere you'll do?
Speaker 7: Well, you know, we're right in a range show here,
Speaker 7: tom right. I mean, you know, we came into the
Speaker 7: year pushing four point eight percent, and we obviously slumped
Speaker 7: below four for like a day when we had the
Speaker 7: risk off event when Trump first announced the reciprocal tariffs,
Speaker 7: and now we're kind of, you know, right in that range.
Speaker 7: I mean, it's interesting because reflectively, people start talking about
Speaker 7: fiscal deficits every time rates move up, but then when
Speaker 7: they come down, no one attributes that to an improving
Speaker 7: fiscal outlook. So perhaps something else is driving the rate
Speaker 7: structure here, and I think what's driving it is simply
Speaker 7: risk on and risk off. You know the contours of
Speaker 7: the business cycle in FED policy, rate expectations moving around,
Speaker 7: which is obviously hitched to both of those. And so
Speaker 7: you know the tenure yield here to me, I mean,
Speaker 7: you know, we're kind of neutral on box here for
Speaker 7: four ther to five percent, bullish you know, sub four percent,
Speaker 7: then I think you want to be more cautious.
Speaker 5: So, Michael, I'm starting to see in my inbox in
Speaker 5: social kind of a narrative that history may be repeating itself.
Speaker 5: Last year, the FED aired by not cutting in July,
Speaker 5: so they did catch up cut at their next meeting.
Speaker 5: Is that something that might be brewing again this year?
Speaker 7: I mean, Paul, it's possible, but I think you'd need
Speaker 7: ongoing data deterioration and perhaps some kind of a risk
Speaker 7: off event. You know, the FED did get going with
Speaker 7: a fifty basis point cut, you know last year, second
Speaker 7: half of the year they cut basis points, but then
Speaker 7: what happened They stopped the labor market stabilized, So I
Speaker 7: kind of think all in, you know, they're they're going
Speaker 7: to start restart in a more gradual manner September. Very
Speaker 7: well is still in play here. If you look at
Speaker 7: the labor market diffusion index. I just brought it up
Speaker 7: on my Bloomberg screen, Yes you go. We're at forty
Speaker 7: six point eight as of this July. So that's actually
Speaker 7: a little bit below where we were last summer, you know, which,
Speaker 7: along with the rising unemployment rate which we don't have
Speaker 7: this time, really kicked off alarm bells that the Fed
Speaker 7: was falling behind the curve. You also had lower bond
Speaker 7: market inflation expectations going into the early fall last year
Speaker 7: and what we have today, and that could be a
Speaker 7: consequence of this hectoring from the White House, which is
Speaker 7: backfiring in my opinion.
Speaker 2: So let's talk about that, Michael.
Speaker 3: And this is the history of Michael Dart and all
Speaker 3: that he has Wisconsin to me and and what a
Speaker 3: privilege yesterday Michael Darta to talk to Richard Clare to
Speaker 3: allow brainer.
Speaker 2: Back to back about the modern trend that if we
Speaker 2: cut rates or raise rates, we're establishing a new vector.
Speaker 3: Why can't the chairman come out and say, you know,
Speaker 3: back to Vulcar, back to Burns, we're going to do
Speaker 3: a one off twenty five be cut and reassess.
Speaker 2: To me, that's common sense.
Speaker 3: But it pushes against all of a modern academic theory,
Speaker 3: doesn't it.
Speaker 7: Yeah, I mean, I think tomic comes down to, you know,
Speaker 7: what are the markets priced in here? So the markets
Speaker 7: have priced in ninety one basis points over the next
Speaker 7: twelve months. So does the FMC guide markets for more
Speaker 7: than that or less than that?
Speaker 8: You know?
Speaker 7: Right now? I mean, I think you've got quite a
Speaker 7: bit of division on the committee. We did get two descents.
Speaker 7: That's the first time too. Fed Governor's descent. It looks
Speaker 7: like geniuses this morning since nineteen ninety three, right, But
Speaker 7: I think the focus has to be on price stability.
Speaker 7: I mean, obviously the FED wants to preserve the business site,
Speaker 7: but inflation is still above target. And if the FED
Speaker 7: is going to be harangued and cajoled into cutting rates
Speaker 7: when it's perhaps inappropriately inappropriate to do so, if inflation
Speaker 7: expectations go up, then long term interest rates go up,
Speaker 7: not down. So if the president's concerned about debt financing costs,
Speaker 7: let the FED do its job, you know, let's return
Speaker 7: inflation two target and price stability is the number one
Speaker 7: way that you're going to have moderate market interest rates.
Speaker 7: The other way is get the fiscal House and Order
Speaker 7: in Washington. D C has good luck for that face
Speaker 7: planted in that regard.
Speaker 3: Michael, Thank you so much, Michael darn Roth Capital, and
Speaker 3: they're really looking forward to his research, you know, published
Speaker 3: into the weekend.
Speaker 2: Christina Catmeny waiting for her first gray hair. She may
Speaker 2: get it.
Speaker 3: By the way, the two year yields are moving today
Speaker 3: with Invesco Christina cat Many here before.
Speaker 2: I believe Steph Ross gonna join us.
Speaker 3: What does it mean for adults in the bond business
Speaker 3: when you see this is CFA level four, you see
Speaker 3: a ginormous two year yield move.
Speaker 9: Look, I mean we're getting a big steepening of the
Speaker 9: curve today, and I think the market has vacillated this
Speaker 9: year between is the Fed more concerned with growth?
Speaker 10: Are they more concerned with inflation? Which is it? And
Speaker 10: a lot of the.
Speaker 9: Economic weakness we've seen all year has really been soft data,
Speaker 9: and today is really the first signs that you're seeing
Speaker 9: some real hard data that's weakening. And it's not the
Speaker 9: seventy three number, it's that negative revision number, which is meaningful.
Speaker 2: We nailed that. Yeah, we nailed fucker nailed.
Speaker 5: So Christina, do you how do you think the Fed's
Speaker 5: going to view this data? It's almost like, boy, if
Speaker 5: they had known this data yesterday, would they have done
Speaker 5: something different? How do you think they are going to
Speaker 5: view this data? Here is a lip or is this
Speaker 5: something different?
Speaker 2: Was that right? Would they have done something different?
Speaker 10: I don't know that they would have done something different.
Speaker 9: And I think we've said really even coming into the
Speaker 9: summer that they they have the calendar on their side
Speaker 9: in terms of the gap to the September meeting, with
Speaker 9: two payroll reports, two CPI reports, you're really supposed to
Speaker 9: see a lot of these inflationary numbers come through from
Speaker 9: the terrorist shocks, which has all been delayed, and a
Speaker 9: lot of participants in the market have said, well, they
Speaker 9: haven't come through yet, So we just don't have to
Speaker 9: be worried about inflation.
Speaker 10: That's not our camp. I think that there are still risks.
Speaker 9: The Fed and Powell statements in the presser I think
Speaker 9: very clearly tells you he's concerned about not even just
Speaker 9: first order effects that haven't shown up, but second order.
Speaker 9: So there's a lot of time it certainly gives nods
Speaker 9: to the descents that we had this week that are
Speaker 9: talking for preemptive cuts or Tom what you were talking
Speaker 9: about earlier, of like, why don't we just ease because
Speaker 9: we know we're restrictive and give ourselves some wiggle room.
Speaker 9: But that hasn't been where the Fed's been anchored, even
Speaker 9: though a lot of us think maybe that's what they
Speaker 9: should be doing.
Speaker 3: Paul, continue the conversation. We've got a beautiful three months
Speaker 3: moving average chart. In October of twenty.
Speaker 2: Twenty three, when the market lifted, it was a two
Speaker 2: hundred thousand every month three months moving average. We're down
Speaker 2: to thirty five thousand.
Speaker 3: In defense of the President and Secretary Besson, that's a.
Speaker 2: Vector, Yeah, it is.
Speaker 5: It's certainly something to pay attention to. And again we're
Speaker 5: seeing in the short end of the curve the two
Speaker 5: year yield is now off seventeen basis points. We have
Speaker 5: a fifty fifty basis point steepening in the yield curve.
Speaker 5: What does that tell you?
Speaker 10: Look, in a lot of ways, the curve we think
Speaker 10: should be steeper. Still, even with this.
Speaker 9: Move today and coming into this week, really in the
Speaker 9: last month, you've seen kind of this retest of what
Speaker 9: has been the thesis this year, you've seen a big
Speaker 9: flattening in the last week. You've seen a big correction
Speaker 9: in foreign exchange with the dollars stronger, and now we're
Speaker 9: kind of turning these back on our heels. But with
Speaker 9: where we are in a cycle, the curve shouldn't be flat,
Speaker 9: and we've gotten in cash space almost down to back
Speaker 9: two tents close to a flat level, so we need
Speaker 9: to re steepen that out. And it tells you that
Speaker 9: even if the FED is not easy to yesterday or
Speaker 9: tomorrow in the pipeline that's in the trajectory and the
Speaker 9: long end should still be at where it is anchored
Speaker 9: or at higher levels because the inflationary risks remain out there.
Speaker 2: Have you ever been called a bond vigilante?
Speaker 8: No?
Speaker 3: No, are the bond vigilantes out today tell said what
Speaker 3: to do.
Speaker 10: I don't know if they are.
Speaker 9: I don't know if the bond vigilantes of old kind
Speaker 9: of remain in the same sense we're not.
Speaker 10: We don't have these.
Speaker 9: I think there's a lot of fear of like the
Speaker 9: Liz Trust moments, in these like dramatic selloups.
Speaker 10: Really today's move is a front end correction.
Speaker 9: And I think on that, But is that a narrative
Speaker 9: in the market about what are fiscal pressures? What are
Speaker 9: we doing big picture of like controlling inflation and supply
Speaker 9: and all be shot, We're bringing.
Speaker 3: Three hundred billion tariff revenue to pay for a big
Speaker 3: bill for a tax cut. I'll be political and say
Speaker 3: it's spread out across the death siles, and some people
Speaker 3: would say it's skewed for the fancy people like Paul Sweeney. Okay, fine,
Speaker 3: I'm looking at the screen and I got a ninety
Speaker 3: day moving average of non farm payrolls that Paul not
Speaker 3: that long ago, would have been.
Speaker 2: Is the economist Bart Simpson would say, a total cow.
Speaker 2: That's the bottom line.
Speaker 9: This is what people have been waiting for for really
Speaker 9: at least the last we're nine months, if not two years,
Speaker 9: right since twenty two when we were looking for this
Speaker 9: rolling recession is imminem.
Speaker 5: So credit, what do you do with credit here? I
Speaker 5: mean it sounds like maybe I'm not I don't want
Speaker 5: to take too much credit risk here.
Speaker 9: Yeah, So we have been a little bit more cautious
Speaker 9: on credit, and that's been a kind of a harder
Speaker 9: call because credit remains exceptionally tight, keeps grinding. You're in
Speaker 9: a slow supply period over the summer, so we kind
Speaker 9: of have bits and pieces of credit, but where we're
Speaker 9: probably most comfortable owning credit is higher quality front end paper.
Speaker 9: And then there are some things kind of globally that
Speaker 9: look interesting too, in Europe some credit.
Speaker 2: It's Friday, we're at the beach. Does a five year
Speaker 2: CD look good right now?
Speaker 10: I still think it looks looks pretty decent.
Speaker 5: Yeah, yeah, to your to your treasuries now that I mean,
Speaker 5: that's a big song in the two year?
Speaker 2: Okay, what are you going to do? What are you
Speaker 2: going to do when you get back to the office.
Speaker 2: I mean, are you gonna buy or you're selling? You know,
Speaker 2: but you get price up, yeled down in the two year?
Speaker 10: Yeah?
Speaker 2: Do you lighten up on that? Is it like a stock?
Speaker 2: Were you?
Speaker 9: So we've kind of shifted into more steepeners with this
Speaker 9: and kind of say like what are the tactical So
Speaker 9: it's it's again, what what's your big picture of thesis?
Speaker 9: I don't think that those have changed, right, Like we
Speaker 9: believe in a week or dollar, we believe that the
Speaker 9: curves should be steeper, but we keep vacillating of what
Speaker 9: the FEDS pricing, and I think coming into this the
Speaker 9: front end looks like it was stretched.
Speaker 2: Christina.
Speaker 3: Thank if someone's Christina Catmanni are in a huge day
Speaker 3: for Invesco in her bonds as well.
Speaker 1: You're listening to the Bloomberg Surveillance po podcast. Catch us
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Speaker 2: Curious what you need to focus on?
Speaker 3: Clarida and BRAINERD they don't listen to us. They listened
Speaker 3: to Ernie Tedesky.
Speaker 2: Joining us now from the the Budget Lab at Yale.
Speaker 3: I should say Ernie Tedesky, who drives a lot of
Speaker 3: their mathematics. Ernie, I don't want to give away the
Speaker 3: publication of your report, but you're kind enough to say
Speaker 3: you've done an all night or trying to get out
Speaker 3: in front of a new tariff calculation from the President.
Speaker 3: Can you state that you're eighteen percent maybe adjusted for
Speaker 3: consumption substitution, seventeen percent tariff is going to go up.
Speaker 6: So actually, when you look at the list that came
Speaker 6: out last night, some of the tariffs went up, some
Speaker 6: of them went down from what was threatened before, So
Speaker 6: like Bangladesh, for example, went from thirty five percent to
Speaker 6: twenty percent, Thailand went from thirty six percent to nineteen percent.
Speaker 6: So it was kind of a mix when you add
Speaker 6: everything together. We had been at eighteen point two percent.
Speaker 6: Now we're at eighteen point three percent for the average
Speaker 6: effective terrafory. And the other big one is that Mexico
Speaker 6: got a ninety day stay. Yeah, they were supposed to
Speaker 6: go up to thirty percent there now at twenty That's
Speaker 6: another big factor in this too. So really, like versus
Speaker 6: forty eight hours ago, this list didn't make a giant difference.
Speaker 3: It's folks, I can't say enough about the importance of
Speaker 3: what they're doing in terms of the graphical representation.
Speaker 2: Ernie. I'll get to Mexico in a moment. Paul's got
Speaker 2: a bunch of questions too.
Speaker 3: You have an I take great offense to our analysis
Speaker 3: that we're back to Smoot Hawley thirty three and thirty four.
Speaker 3: If you look at the Tadesky horizontal line, we're back
Speaker 3: to nineteen eighteen, we're back to eighteen six two. Indeed,
Speaker 3: we are back to seventeen ninety eighty nine. What does
Speaker 3: that history mean for twenty twenty six in America.
Speaker 6: I mean, look like those were very different times back then.
Speaker 6: I think Number one, it means, you know, I agree
Speaker 6: with the administration, we're going to raise a substantial amount
Speaker 6: of revenue from these terracts and.
Speaker 2: Brainers said that yesterday. Lyle was all over that yesterday.
Speaker 6: Look, and one should not understate how important that is.
Speaker 6: We have an unsustainable fiscal trajectory. Well, you know, we
Speaker 6: project three trillion dollars over the next ten years. But look,
Speaker 6: we're also seeing evidence of this already in consumer pass
Speaker 6: through durble PCE that was part of the PCE report
Speaker 6: that came out yesterday accelerated the most over six months
Speaker 6: that it has since nineteen eighty seven, other than the
Speaker 6: depths of the pandemic. So, you know, the idea that
Speaker 6: we're going to somehow dodge a bullet and get through
Speaker 6: the Scott free I think is already empirically real.
Speaker 5: So, Ernie, that's a key point that the three trillion
Speaker 5: dollars over ten years that the US government's going to raise,
Speaker 5: that's not being paid by China, by Mexico, by the EU,
Speaker 5: that's being paid by the American economy, and I don't
Speaker 5: know where it comes from, the consumer, the importer of
Speaker 5: the retailer. Talk to us about it on a household basis,
Speaker 5: How much do you think consumers are going to pay
Speaker 5: on per household base?
Speaker 6: Yeah, no, this is a very very important question. So
Speaker 6: first of all, on your first point, you know, if
Speaker 6: foreigners were paying this tariff, we would expect import prices
Speaker 6: to decline. Import prices have not declined. If anything, they've
Speaker 6: picked up a little, so they're probably so on average,
Speaker 6: they're probably not shouldering much of all of this. You know,
Speaker 6: we think that right now consumers are paying about seventy
Speaker 6: percent of the tariff, you know, so that's the pass
Speaker 6: through right now, and we think that that's sticking up
Speaker 6: over time. It's still early ultimately these you know, so
Speaker 6: if these tariffs today stayed in effect and perpetuity, that
Speaker 6: would be twenty four hundred dollars per household per year
Speaker 6: after you know, say two years of days and pitching
Speaker 6: families at the bottom much more than that, And that's after.
Speaker 2: Text, right, that's after that, right, So you're talking yet.
Speaker 3: You know, somebody popping sixty seventy thousand a year, figure
Speaker 3: out the rent. Forget about the idiocy of New York City.
Speaker 3: I mean Ernie's living large up in New Haven. But
Speaker 3: the answer is twenty four hundred dollars after text that
Speaker 3: hammers the bottom of three deaths house, Folks, I can
Speaker 3: say this again, Ernie Tedesky with us before we go
Speaker 3: to trade minister a career here with John Farrell.
Speaker 2: The Budget labbit Yell. It's free, you go out, It's
Speaker 2: a website.
Speaker 3: It's spectacular, whatever your politics, and with all sorts of charts.
Speaker 2: Ernie Tedesky.
Speaker 3: Mexico Avocados, tomatoes, broccoli, The Budget labb at Yell. Food
Speaker 3: prices rice three point four percent in stay two point
Speaker 3: nine percent higher.
Speaker 2: Forever. Fresh produce from.
Speaker 3: Mexico I'm at living is initially seven percent up and
Speaker 3: then stabilizes it three point six percent higher. Is that
Speaker 3: why we delayed from Mexico? Is they explain to President
Speaker 3: Trump the price of tomatoes.
Speaker 6: So here's the good news about these tariffs is that
Speaker 6: they exempt products that are US MCA complying from Canada
Speaker 6: and Mexico. It's complicated, but like basically you can think
Speaker 6: of it that if your product is actually made substantially
Speaker 6: in Mexico and Canada, then it is exempt from the tariffs.
Speaker 6: Fresh produce is you know, eighty percent of the fresh
Speaker 6: produce that we get ninety percent of the fresh produce
Speaker 6: from Mexico right now, is US MCA complying. So it's
Speaker 6: not Mexican imports that are driving the food price increases
Speaker 6: from these tariffs. It's the non Canada and Mexico countries,
Speaker 6: so from Brazil, you know, bananas from Central America, that's
Speaker 6: what's getting hit by these interests right now.
Speaker 5: Are you surprised, Ernie that how it's played out, with
Speaker 5: Canada being such a big trading partner of the US
Speaker 5: that the boy the discussions with Canada Mexico seem to
Speaker 5: be quite different.
Speaker 6: It does surprise me. On the other hand, the their
Speaker 6: reactions have been quite different. You see no retaliation from
Speaker 6: Mexico to our tariffs so far, whereas Canada is the
Speaker 6: only country other than China that has levy counter tariffs
Speaker 6: and to their detriment, I might, I mean, the politics
Speaker 6: of doing that are completely understandable, but that just heightens
Speaker 6: the economic damage to Canada and to the United States
Speaker 6: from these tariffs. So it doesn't surprise me that our
Speaker 6: you know, counter counter reaction is different.
Speaker 3: So mister Greer is going to be on are at
Speaker 3: a moment If you were sitting in a room this
Speaker 3: morning with mister Greer and the Secretary of Commerce the
Speaker 3: Secretary Treasury, they pop in to see doctor Tedesky, what
Speaker 3: what's a single thing you would say to the Secretary
Speaker 3: of Treasury now is he tries to advise a president
Speaker 3: who didn't take micro One on one.
Speaker 6: I would say, I would say two things. One is
Speaker 6: a question, one is a comment. The question would be
Speaker 6: what is the strategic goal here? You know, why are
Speaker 6: we tariffing things like nas and coffee?
Speaker 3: Again?
Speaker 2: Do you agree with Vice Chair Brainerd that the strategic
Speaker 2: goal is to raise revenue to pay for the other
Speaker 2: piece of budget lab analysis, that big big bill.
Speaker 6: I think that's a secondary goal. I think that this
Speaker 6: administration is true believers in tariffs. They think manufacturing and
Speaker 6: jobs will come back. But I would say two things. One,
Speaker 6: why then are we tariffing things that will never come
Speaker 6: back like bananas and coffee? And then the second thing
Speaker 6: I would say is is there a you know, can
Speaker 6: we work together to find a better way to raise
Speaker 6: the same amount of revenue that doesn't hit either lower
Speaker 6: income households or investment as much as tariffs do.
Speaker 5: So typically, Ernie, how should tariffs be used? How have
Speaker 5: they been used in the past successfully? And is that
Speaker 5: policy being you know, followed today.
Speaker 6: Look, there are this is another area where I agree
Speaker 6: with the administration. There are unfair trade practices out there
Speaker 6: against the United States, and tariffs are ammunition in resolving
Speaker 6: those disputes. That has absolutely been the case in the past.
Speaker 6: They have not since at least the nineteen thirties, been
Speaker 6: used for substantial revenue. And similar to that, we haven't
Speaker 6: you know, levied them broadly. If we've used them, it's
Speaker 6: been on very specific items, not because we you know,
Speaker 6: not because we don't like those items or those countries,
Speaker 6: but literally to try to get those countries to the
Speaker 6: table to resolve trade disputes. So this is very different
Speaker 6: than the way we've used tariffs in the past.
Speaker 3: Number fifth, nineteen oh one. I know you read this
Speaker 3: in Doug Erwin's Against the Tides September.
Speaker 2: Five, nineteen oh one.
Speaker 3: McKinley does a recant of his trade certitude. He does
Speaker 3: this the day before his assassination. Do you frame out
Speaker 3: here that if the president is whatever your politics was,
Speaker 3: I don't care if you frame out he's overcome by
Speaker 3: events like inflation. Could we have a Trump recant where
Speaker 3: he gets us back to Uruguay, where he gets us
Speaker 3: back to get.
Speaker 6: It's really hard for me to see that, you know,
Speaker 6: Number one, they are true believers. Number Two, now we're
Speaker 6: stuck with this three trillion dollars in revenue, which again
Speaker 6: I would emphasize like that part of it is a
Speaker 6: good thing and helpful. I think that that's going to
Speaker 6: hinder any future administration, Republican or Democratic, whether you know,
Speaker 6: if they don't like the tariffs, it's going to be
Speaker 6: hard for them to replace them, right because you're going
Speaker 6: to have status quo biased And you know, we can
Speaker 6: I consider a spreadsheeting, come up with all sorts of
Speaker 6: great theoretical alternatives all day long, but most of those
Speaker 6: alternatives require Congress to take a vote, which is which
Speaker 6: is going to make it hard to replace the revenue
Speaker 6: that's already in place very quickly.
Speaker 3: Or Ernie, we have judiciary action over the last two
Speaker 3: days in an Appleit court listening to the legality of
Speaker 3: the president's action. Could that be a bombshell where they
Speaker 3: say to President Trump, you can't do this.
Speaker 6: I would emercize I am not nearly as useful as
Speaker 6: a lawyer. We know that if we did, yeah, but
Speaker 6: if we did get a decision like that, yeah, I
Speaker 6: think it would. I think it would be a bombshell.
Speaker 6: It would not be the end, though. There are other
Speaker 6: legal authorities that, at least temporarily they could use to
Speaker 6: re raise tariffs.
Speaker 3: The website of the year for Bloomberg Surveillance, without question,
Speaker 3: the Budget Lab at Yale with the leadership of Earning Tedesk,
Speaker 3: has just been absolutely spectacular.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seventy eight on Apple Coarclay, and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station. Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 3: Anna rog Rana joins us senior technology analyst for Bloomberg Intelligence.
Speaker 2: Let me go to where Mark German is this morning,
Speaker 2: Anna rag There.
Speaker 3: Seems to be a haste to just do something in
Speaker 3: artificial intelligence after what we saw from Apple yesterday.
Speaker 2: Is em and a part of mister Cook's future.
Speaker 11: I mean, he talked about it last night on the call,
Speaker 11: and frankly speaking, he said, you know, they will look
Speaker 11: at deals, but I'm, to be honest, not so keen
Speaker 11: on them buying a very large company for a very
Speaker 11: large amount, because I would rather than partner with multiple
Speaker 11: vendors to use different models, because we are still in
Speaker 11: very early stages of figuring out which models will eventually
Speaker 11: be used for what functions. So I'm more in the
Speaker 11: partnership camp rather than buying camp.
Speaker 3: So would you see them doing partnerships with Google and
Speaker 3: Gemini and I perplexity.
Speaker 11: Yeah, I Tom, I really hope so, because there's a
Speaker 11: lot of money involved in that search deal. So if
Speaker 11: they were to do a revised deal including Gemini models
Speaker 11: and some kind of search agreement and then get paid
Speaker 11: for it, I think that's in the best interest of Apple,
Speaker 11: you know, both shareholders and employees.
Speaker 5: Honurk I saw China. They called out China as a
Speaker 5: source of growth there. That's been a big, big headwind
Speaker 5: or big question mark. I think for a lot of
Speaker 5: investors how Apple would perform in China given all the
Speaker 5: crosswinds there. What did you learn last night? About Apple
Speaker 5: in China.
Speaker 11: So two things happened in China, and that's something we
Speaker 11: discussed yesterday morning. One is the pull forward of demand
Speaker 11: across the world because of tariff related you know, you
Speaker 11: could see people are feared that the prices are going
Speaker 11: to go up, so they bought it. The second thing
Speaker 11: that happened specifically in China is some of Apple products,
Speaker 11: some of their phones were eligible for discus through the carriers.
Speaker 11: This is something that doesn't happen, you know, just hasn't
Speaker 11: happened before. So those were the two factors that helped
Speaker 11: them at least, you know, get over the positive territory
Speaker 11: after some time.
Speaker 5: Anrak probably the I would say on the average investor,
Speaker 5: I guess my biggest question about Apple is to what
Speaker 5: extent will they play and how will they play in
Speaker 5: the world of AI. Did we learn anything more last night?
Speaker 5: Did Tim Cook have anything else to really share?
Speaker 11: I think he repeated a lot what he repeated back
Speaker 11: in June in the Worldwide Developer Conference about Apple intelligence
Speaker 11: and embedding more throughout the ecosystem and the operating system.
Speaker 11: But you know, at the end of the day, series
Speaker 11: most important because that's the that's the voice command where
Speaker 11: you ask for things and they are a bit behind
Speaker 11: on that. And you know that's where the partnerships may
Speaker 11: come in and help them accelerate with that particular you know,
Speaker 11: function and then get it improved quite a bit.
Speaker 3: Andrak, you published an energy your ride this morning. He
Speaker 3: thinks I doesn't read I don't read his research read it.
Speaker 2: I do.
Speaker 3: Rag. After I was done looking at the Chicago Cubs
Speaker 3: non trading deadline, I looked at your piece on Jenai
Speaker 3: to lift Microsoft over twenty twenty six consensus.
Speaker 2: We talked about this yesterday.
Speaker 3: But now that we've got Microsoft, Meta, Amazon, Apple in AWE.
Speaker 2: Do you have a better clarity.
Speaker 3: About late twenty six into twenty twenty seven.
Speaker 2: Yeah.
Speaker 11: I think from a growth rate point of view, Microsoft
Speaker 11: will still do better than all the others, largely because
Speaker 11: of their relationship with open Aiye. So remember one thing.
Speaker 11: Every time you and I spend more time on CHACKGPT,
Speaker 11: a lot of that processing is done by Microsoft. That's
Speaker 11: really their biggest advantage right now. And that's where you know,
Speaker 11: Amazon shareholders are unhappy about it because they didn't see
Speaker 11: that lift in revenue growth as what Microsoft saw or
Speaker 11: what Google saw.
Speaker 2: So how do the upstart stay in the game.
Speaker 3: I'm going to pick on Perplexity just because Joe Wisenhal
Speaker 3: told me to. But how does someone like Perplexity con
Speaker 3: heat with these giants?
Speaker 11: See see Perplexity is fine in that case because it's
Speaker 11: competing directly with Mode, with OpenAI and other applications that
Speaker 11: are AI based applications. So it is trying to basically tell,
Speaker 11: you know, users like myself that don't go to chat GPT,
Speaker 11: start using my application.
Speaker 2: It's better.
Speaker 11: It's really in that realm they fight, you know, whether
Speaker 11: it comes to somebody like an Amazon or Microsoft or Google,
Speaker 11: the question is who is hosting that app on their
Speaker 11: cloud platform, and you know whichever. If you let's say,
Speaker 11: for the sake of discussion, if Perplexity is hosted on
Speaker 11: one of these platforms and their user count goes up,
Speaker 11: they make more money on the back end, not so
Speaker 11: much on the front end.
Speaker 5: Amazon also reported last night on a rag after the close.
Speaker 5: It looks like they're the stocks trading down about seven
Speaker 5: eight percent here, weaker than expected operating income and maybe
Speaker 5: trailing the sales growth ahead of its cloud rivals. Here
Speaker 5: help us think about Amazon right here?
Speaker 11: Yeah again, this is there are two factors of it.
Speaker 11: They do not have a chat gptal like app that
Speaker 11: runs on their platform, which is why they don't get
Speaker 11: that you know, consumer lift that Microsoft is getting. The
Speaker 11: second thing is their round rate is very high. According
Speaker 11: to last night's number, they're running at somewhere aroun one
Speaker 11: hundred and twenty billion dollars in revenue compared to Microsoft's
Speaker 11: seventy five and Google's fifty. So there is a difference
Speaker 11: in growth rates. I mean, it's just pretty logical. But
Speaker 11: you know that's what I said. If you were to
Speaker 11: strip out Microsoft's AI contribution, you know, they would be
Speaker 11: running in their twenties also, so I think the most
Speaker 11: people do not, you know, I think the bigger disappointment
Speaker 11: is both the other cloud vendors beat by a big
Speaker 11: amount and these guys just met and that the reason
Speaker 11: for that is the lack of a consumer app. Now,
Speaker 11: I think over time Amazon will come back and showcase
Speaker 11: that they will also get AI workloads, but they will
Speaker 11: come more from the enterprise side, not so much from
Speaker 11: the consumer.
Speaker 3: So very quickly, and I think this could really help
Speaker 3: the dummies, like a rag. How are each of their
Speaker 3: audiences or potential audiences.
Speaker 2: Of AI different.
Speaker 3: Who's Amazon going after, Who's Microsoft going after, Who's Google
Speaker 3: and others going after?
Speaker 11: Yeah, all of them are pretty much going after the
Speaker 11: same kind of customer. But Amazon is pretty much dedicated
Speaker 11: to large enterprises. So let's say if JP Morgan is
Speaker 11: experimenting right now to creating an app internally or a
Speaker 11: chat about internally that has AI, over time, the usage
Speaker 11: of that will grow and that would help AWS. As
Speaker 11: I said, the case with Microsoft is because of their
Speaker 11: relationship with open Ai. You know, chat GPD has gone
Speaker 11: from you know, arguably somewhere around you know, seven hundred
Speaker 11: million users daily and the number of time, the amount
Speaker 11: of time you're using on the app is quite big
Speaker 11: every day. So Microsoft is making more money off of it.
Speaker 11: It's more a timing issue than so much that one
Speaker 11: is better than the other.
Speaker 3: ANDROK, thank you so much, Inerragrano, which is real expertise
Speaker 3: there with Bloomber Intelligence.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.
Speaker 3: Sebastian Page joins us some tiro Price his book on
Speaker 3: leadership out. I'll get that out on Twitter and I'm
Speaker 3: LinkedIn here and it's Sebastian, thanks for joining us today.
Speaker 2: The heritage of tiro Price, back to my ute is
Speaker 2: you guys were out front on technology and growth.
Speaker 3: Tiro Price on the reaffirmation of this technology juggernaut in
Speaker 3: MEG seven.
Speaker 12: We absolutely love to research technology, understand technology, capture the trends.
Speaker 2: Tom.
Speaker 12: I hear the same words from different analysts and portfolio
Speaker 12: managers on our platform these days about AI, same expression.
Speaker 12: They're all saying, it's real. And if you look at
Speaker 12: the projections for spending on AI for the next twelve months,
Speaker 12: it's not decelerating, it's accelerating. It's expected to go up
Speaker 12: by eighty percent globally. So here we are it's not
Speaker 12: just about spending, it's also about productivity games.
Speaker 5: So Sebastian, does that say we continue to just focus
Speaker 5: on the MAG seven or just some of the big
Speaker 5: tech names, or are you trying to find value outside
Speaker 5: of that group that's worked so well.
Speaker 12: That's such an important question because everything I just said
Speaker 12: is basically the consensus. Stocks are up thirty percent in
Speaker 12: three and a half months, the price earnings ratios at
Speaker 12: twenty two, and the market is more concentrated than pretty
Speaker 12: much any time and history, so you're going into earning season.
Speaker 12: It's interesting listening to Bloomberg Surveillance. Everybody was saying, we're
Speaker 12: going to get positive surprises, We're going to get positive surprises.
Speaker 12: And I get a little bit philosophical here and I ask,
Speaker 12: is it still surprise if everybody expects a surprise? Yep,
Speaker 12: probably not, and you're seeing that now. So long way
Speaker 12: of saying, we're long diversification in our portfolios, you should
Speaker 12: own the growth stocks, but from an asset allocation top
Speaker 12: down perspective, we're long diversification, and we're getting most of
Speaker 12: it right now from international value, small and midcaps.
Speaker 2: Really.
Speaker 5: So we saw earlier in the year when there was
Speaker 5: some of this volatility around Liberation Day and the shock
Speaker 5: of tariffs, investors were taking money out of the US,
Speaker 5: out of the dollar, out of US stocks, out of bonds,
Speaker 5: and putting in elsewhere the rest of the world, including
Speaker 5: European equities in a big way, who've been out performing.
Speaker 5: Is that still the call there or is that just
Speaker 5: a short term trade.
Speaker 12: You know, from a macro perspective, it's counterintuitive. But some
Speaker 12: of this is jolting Europe in particular into spending fiscal infrastructure.
Speaker 12: We expect the debt to GDP in Germany to go
Speaker 12: up by twenty percent over the next ten years.
Speaker 5: So that could be.
Speaker 12: I still believe long in the exceptionalism and the dynamicism
Speaker 12: of the US economy, but right now you have macro
Speaker 12: momentum semester Patrid.
Speaker 3: There's suppose a VIX blows out to nineteen point one
Speaker 3: zero over two big figures out with the tensions of
Speaker 3: the morning. Okay, I get Windsor Ontario and the stereotype
Speaker 3: of an auto industry in Canada flat on its back.
Speaker 2: You've lived, I mean, did you see Jean Bellavoue at
Speaker 2: the forum? I did not?
Speaker 3: Yeah, I mean you know you lived Quebec. Fine, What
Speaker 3: do does tariffs mean for the rest of Canada? Not Windsor,
Speaker 3: but for resource Canada? What christiph Friedland used to talk
Speaker 3: about plywood and sexy things like that.
Speaker 2: What's it mean?
Speaker 12: It matters a lot. It probably matters more than counterrentatively,
Speaker 12: Again for the US. In the US, goods subject to
Speaker 12: tariffs represent only nine percent of GDP. So I gotta say, Tom,
Speaker 12: I'm both a Canadian citizen and a US citizen, so
Speaker 12: I have a view that's I would say neutral here,
Speaker 12: But generally speaking, it looks like Canada just wants to
Speaker 12: get a better deal and that's why they're holding out.
Speaker 3: Should others hold out? I mean, is that what TiAl
Speaker 3: Price would say is it is a new terriff for
Speaker 3: as your budget lab says, we're back.
Speaker 2: To nineteen thirty three. Should that all the country's push?
Speaker 12: Look, you know, on days like today, it sounds like
Speaker 12: it feels like tariffs are driving the entire US economy. Again,
Speaker 12: goods subject to tariffs represent nine percent of GDP. There
Speaker 12: are knock on and implied to facts, but you have
Speaker 12: many other factors that in my mind matter more fiscal spending,
Speaker 12: the strength of the consumer, the corporate earnings. These all
Speaker 12: look pretty good.
Speaker 2: Well, one more question your book. Beyond diversification, it's absolutely phenomenal.
Speaker 2: Let's go there right now.
Speaker 3: How should our listeners and viewers diversify given the global
Speaker 3: trauma that we're in right now?
Speaker 12: Yeah, you know, Tom, I don't know if you'd noticed.
Speaker 12: When I go to the dentist, my dentist always wants
Speaker 12: investment advice. I think I guess they have a little
Speaker 12: bit of money on the dentists are well paid, and oh,
Speaker 12: you're in the investment business. What should you do? But
Speaker 12: you have two seconds to say something. I always say
Speaker 12: the most trite thing to say, which is stay invested,
Speaker 12: stay diversified. And I have in my notes for you
Speaker 12: all today the headline is be boring. We actually have
Speaker 12: a lot of our tactical positions, not all that are neutral.
Speaker 12: We are long diversification. Sometimes it's painful when markets become
Speaker 12: more and more concentrated, but I think that's the right
Speaker 12: thing to do, right.
Speaker 3: Sebastian Page, thank you so much for getting its started
Speaker 3: this morning.
Speaker 2: He's a t ro price.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 3: We finished strong, Strong, Strong with Anna Wong who saw
Speaker 3: this coming, Doctor Wong. Before we get the market open,
Speaker 3: Kayleie Cox over at Ridtholtz identifies that the labor force
Speaker 3: has declined for the third straight month. It's the first
Speaker 3: time that's happened since twenty eleven. You nailed this with
Speaker 3: your historic discussion on birth death models in that is
Speaker 3: the vector in place to get to a negative non
Speaker 3: farm payrolls.
Speaker 8: I think I think today's very weak payrolls report and
Speaker 8: the massive Doward revision suggests that the negative payroll is
Speaker 8: probably with us right now. So with today's reading and
Speaker 8: our read that the overstatement per month is roughly between
Speaker 8: eighty thousand to one hundred thousand, that means today's print
Speaker 8: means slightly negative payrolls. So I think today's print will
Speaker 8: bring back the recession narrative because it is very very weak.
Speaker 2: Claudia Sum didn't want to go there, you know. No,
Speaker 2: that's so that's where she wus.
Speaker 5: And how do you think that the FED is going
Speaker 5: to view this data point? Again, it's just one data point.
Speaker 5: We heard that from President Hammock of the Cleveland FED.
Speaker 5: How do you guys think the FED will view this?
Speaker 13: Yeah, so President's Beth Hammock is basically the most hawkish
Speaker 13: individual in THEMC committee.
Speaker 8: According to our spectrometer yes, and in terms of this peril, however,
Speaker 8: it really vindicated Chris Waller's position, and in fact, Chris
Speaker 8: Waller issued at dissent note today and it basically confirmed
Speaker 8: his read of the labor market. As you have to
Speaker 8: read beneath the headlines and go into details and think
Speaker 8: about the revisions, because even today's revisions are larger than
Speaker 8: what I would have expected, and I'm more ready on
Speaker 8: the high side in the market. So it so I
Speaker 8: think Chris Waller will gain a lot of plout within
Speaker 8: the FOLC and will be we will likely.
Speaker 13: Be seeing an earlier rate cut this year.
Speaker 2: Doctor one. I understand people like you.
Speaker 3: You were at Chicago and you're trained to be measured,
Speaker 3: get on a trend. We don't want to cut rates
Speaker 3: until we really have a trend in place. Isn't it
Speaker 3: a perfect time to just do a twenty five beep
Speaker 3: cut and reassess.
Speaker 8: I think the policy role would say say, yes, they
Speaker 8: should be cutting now.
Speaker 13: But at the same time, I think I think.
Speaker 8: Today's very weak payrolls report and the massive downward revision
Speaker 8: suggests that the negative payroll is probably with us right now.
Speaker 8: So with today's reading and our read that the overstatement
Speaker 8: per month is roughly between eighty thousand to one hundred thousand.
Speaker 8: That means today's print means slightly negative payrolls. So I
Speaker 8: think today's print will bring back the recession narrative because
Speaker 8: it is very, very weak.
Speaker 3: Claudia sum didn't want to go there, you know, No,
Speaker 3: that's so, it's whatso rules do you think that the
Speaker 3: FED is going to view this data point?
Speaker 5: Again, it's just one data point. We heard that from
Speaker 5: President Hammock of the Cleveland Fed. How do you guys
Speaker 5: think the FED will view this?
Speaker 8: Yeah, so President's Beth Hammick is basically the most hawkish
Speaker 8: individual in THEMC committee according to our spectrometer. Yes, and
Speaker 8: in terms of this peril however, it really vindicated Chris
Speaker 8: Waller's position, and in fact, Chris Waller issued at dissent
Speaker 8: note today and it basically confirmed his read of the
Speaker 8: labor market as you have to read beneath the headlines
Speaker 8: and go into details and think about the revisions, because
Speaker 8: even today's revisions are larger than what I would have expected,
Speaker 8: and I'm already on the high side in the market.
Speaker 8: So it so I think Chris Waller will gain a
Speaker 8: lot of plout within the FOOC and will be we
Speaker 8: will likely be seeing an earlier rate cut this year and.
Speaker 3: A stay with this, please please please stay with us,
Speaker 3: with us Bloomberg Economics.
Speaker 2: We're going to get the markets opening. Come back to
Speaker 2: doctor Wong what you need.
Speaker 3: To know futures deteriity that came back actually off the report.
Speaker 3: They're now negative sixty four on SPX, vix out two
Speaker 3: point two zero points for Global Wall Street, and we
Speaker 3: welcome you worldwide. Good morning in the Friday Pacific evening.
Speaker 3: It's real simple. You have a two year US yield
Speaker 3: now a full twenty basis points yield down, price up
Speaker 3: on the two year yield as you get the markets open,
Speaker 3: are John Tucker all right?
Speaker 14: And the opening bill report being brought to you by Oppenheimer.
Speaker 14: Oppenheimer focuses the power of their thinking on you, creating
Speaker 14: customized plans to help achieve your goals. Put the power
Speaker 14: of Oppenheimer thinking into your investing, wealth management, capital markets,
Speaker 14: investment banking.
Speaker 2: Right out of the.
Speaker 14: Gate, we are lower has and P five hundred down
Speaker 14: one percent, sixty two points lower sixty two seventy eight
Speaker 14: on the index. The down Jones and Lavage down three
Speaker 14: hundred seventy eight points. The NASDK one hundred right now
Speaker 14: two hundred and seventy five points lower, That is down
Speaker 14: one point two percent. Shares of Amazon helping lead the
Speaker 14: declines right now seven percent lower, and shares of Apple
Speaker 14: up in the early going. They are up right now
Speaker 14: one and a half percent. That is your opening bell report,
Speaker 14: poland Tom.
Speaker 2: Thanks so much, John, so much. Good we're coming out.
Speaker 3: Ernie Tdesky, thank you so much for joining us from
Speaker 3: the budget lab at Yale in the last two hours.
Speaker 3: Here's Tedesky reporting in as we go to anamwog here again,
Speaker 3: down in negative four hundred on a market opening. Tedesky,
Speaker 3: The two hundred and fifty three thousand negative two month
Speaker 3: downward revision is the largest since at least nineteen seventy nine,
Speaker 3: other than the COVID noise. Doctor Wang, I understand people
Speaker 3: like you. You were at Chicago and you train to
Speaker 3: be measured, get on a trend. We don't want to
Speaker 3: cut rates until we really have a trend in place.
Speaker 3: Isn't it a perfect time to just do a twenty
Speaker 3: five beep cut and reassess.
Speaker 8: I think the policy rule would say say yes, they
Speaker 8: should be cutting now, But at the same time, I
Speaker 8: think what the FED is thinking about is that inflation
Speaker 8: might be surging in the next couple of months. And
Speaker 8: so in my team, we are scraping online prices to
Speaker 8: get a real time look at what how prices are doing.
Speaker 13: And what we're seeing is actually a mixture.
Speaker 8: We see some goods that has raised prices a lot
Speaker 8: in the past three months, already feeling like maybe they
Speaker 8: could not pass through all the taraf to the consumer
Speaker 8: because they're seeing a drop in demand. So those things
Speaker 8: are things like sporting equipments because you know, we really
Speaker 8: have seen an audio equipment because those two categories have
Speaker 8: seen well, the firms in those sectors thought they would
Speaker 8: raise the price by over ten percent and consumers would
Speaker 8: just take it, but turns out people are just not
Speaker 8: as happy about that. But on the other hand, we're
Speaker 8: starting to see toys prices going up, men's furnishings, apparels
Speaker 8: and suits, sewing suits going up.
Speaker 2: It's bow ties and they're killing it's killing the bow ties,
Speaker 2: I think, and.
Speaker 6: Let me do this.
Speaker 2: I want to get this. Yeah, this is Neil Dutta here.
Speaker 3: The prime age employment age prime age employment rate has
Speaker 3: declined point.
Speaker 2: Five percent over the last year.
Speaker 3: This is not good and it's a reminder that unemployment
Speaker 3: being low is not necessarily a fair representation of what's
Speaker 3: going on in the job market. Dutta really pushing against it.
Speaker 3: He's looking at non farm payrolls. Others are looking at
Speaker 3: the comfort of four point two.
Speaker 5: Percent, and along Calie Cox red Holts Wealth Management is
Speaker 5: out on social saying the labor force declined for the
Speaker 5: third straight month, the first time that's happened since twenty eleven.
Speaker 5: What's going on there with the workforce?
Speaker 8: Yeah, so the decline in the last two months, and
Speaker 8: I think we haven't looked at the details for this month,
Speaker 8: but I think the trend in the last three months
Speaker 8: is that it's the youth, the people who are graduating
Speaker 8: out of college, the people who are in their early
Speaker 8: twenties that are driving this decline and labor force. And
Speaker 8: I think, you know, I know, the narrative of there
Speaker 8: is that it's immigration, it's undocumented, but actually I think
Speaker 8: the dominant thing is the youth, and we need to
Speaker 8: figure out what's the story there. There's some signs that
Speaker 8: it's related to AI and that with firms trying to
Speaker 8: I mean, replacing a lot of entry jobs, white collar
Speaker 8: entry jobs with AI. There's just less need for you know,
Speaker 8: interns or younger. It's just harder out there for people
Speaker 8: graduating out of college.
Speaker 3: We're calling interns this year junior analysts. I don't know why,
Speaker 3: but that's what HR told me.
Speaker 2: Anamong thank you, thank you, thank you. Really leading the
Speaker 2: nation on.
Speaker 3: Careful analysis of her labor economy. She's the Bloomberg Economics.
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