1
00:00:09,880 --> 00:00:13,800
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

2
00:00:13,960 --> 00:00:17,560
Speaker 1: We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,520
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:27,840
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. So

5
00:00:27,920 --> 00:00:30,200
Speaker 1: it is pay Rolls Friday. Your estimates look like this

6
00:00:30,240 --> 00:00:33,000
Speaker 1: in a Bloomberg survey the mediate estimate one hundred and

7
00:00:33,040 --> 00:00:36,159
Speaker 1: forty five thousand from a previous read in the previous

8
00:00:36,159 --> 00:00:39,159
Speaker 1: month of one hundred and thirty thousand. Pleased to say that.

9
00:00:39,240 --> 00:00:41,200
Speaker 1: Joining us on the phone to kick our coverage off,

10
00:00:41,360 --> 00:00:45,120
Speaker 1: Tom Porcelli, obviously Capital Markets chief US Economists. Good morning

11
00:00:45,159 --> 00:00:47,519
Speaker 1: to Tom. Good morning, how are you go doing very

12
00:00:47,640 --> 00:00:49,760
Speaker 1: very well? Let's start with what you're looking for in

13
00:00:49,800 --> 00:00:52,800
Speaker 1: the payrolls report in a round about ninety minutes time. Yeah,

14
00:00:52,840 --> 00:00:55,360
Speaker 1: so we're looking for a hundred and fifty thousand private jobs,

15
00:00:55,960 --> 00:00:59,280
Speaker 1: which you know, it's funny people keep on sort of wondering, Hey,

16
00:00:59,320 --> 00:01:01,880
Speaker 1: you know, isn't job growth slowing down? Yeah, job growth

17
00:01:01,920 --> 00:01:04,760
Speaker 1: are slowing down, but that's not news, right. I think

18
00:01:04,959 --> 00:01:07,720
Speaker 1: most people that were looking for, uh, the forecast, this

19
00:01:07,760 --> 00:01:10,240
Speaker 1: stuff we're looking for job growth to slow down this year,

20
00:01:10,319 --> 00:01:11,920
Speaker 1: so so so we're getting it right. I mean we

21
00:01:11,959 --> 00:01:15,399
Speaker 1: averaged what close to two d and fifty thousand jobs

22
00:01:15,480 --> 00:01:19,039
Speaker 1: ch DRED jobs last year or averaging about a hundred

23
00:01:19,040 --> 00:01:22,319
Speaker 1: and fifty eight thousand jobs this year, So um, you

24
00:01:22,360 --> 00:01:25,440
Speaker 1: know the slowdown has started. But but again, I think

25
00:01:25,480 --> 00:01:29,520
Speaker 1: people love people love simple, right, People love to sort

26
00:01:29,560 --> 00:01:32,320
Speaker 1: of look at one number or one report, and and

27
00:01:32,319 --> 00:01:35,400
Speaker 1: and based on one single number, trying to derive whether

28
00:01:35,480 --> 00:01:37,399
Speaker 1: or not this report was good or bad. And to

29
00:01:37,480 --> 00:01:39,800
Speaker 1: be honest, the payroll report it's not the thing you

30
00:01:39,800 --> 00:01:41,720
Speaker 1: should be doing that with. I mean, there's too many

31
00:01:41,760 --> 00:01:43,600
Speaker 1: moving parts. So if people are going to be glued

32
00:01:43,600 --> 00:01:46,399
Speaker 1: to their eco screens today on their Bloomberg terminals and

33
00:01:46,560 --> 00:01:49,000
Speaker 1: only looking at the change in jobs, you're never going

34
00:01:49,040 --> 00:01:50,440
Speaker 1: to get a good sense for whether this was a

35
00:01:50,440 --> 00:01:52,880
Speaker 1: good or bad report. There's way too too many other

36
00:01:52,920 --> 00:01:55,480
Speaker 1: moving parts to to sort of decipher this report based

37
00:01:55,520 --> 00:01:57,840
Speaker 1: on one single number. Well, let's stick into it. Let's

38
00:01:57,840 --> 00:01:59,720
Speaker 1: talk with a little bit more dese outsome You've made

39
00:01:59,720 --> 00:02:02,040
Speaker 1: the the average Alley earnings is the thing to watch

40
00:02:02,080 --> 00:02:04,680
Speaker 1: here and it really helps explain this tug of war

41
00:02:04,760 --> 00:02:07,080
Speaker 1: between what's happening with the head count, But what is

42
00:02:07,080 --> 00:02:09,600
Speaker 1: actually happening with the average Aalley earnings really explains what

43
00:02:09,720 --> 00:02:11,280
Speaker 1: is happening with the head count. Just walk me through

44
00:02:11,360 --> 00:02:15,160
Speaker 1: that dynamic. Yeah, so so so, Jonathan, this is this

45
00:02:15,240 --> 00:02:17,560
Speaker 1: is exactly right. I think, you know, if we take

46
00:02:17,600 --> 00:02:19,680
Speaker 1: a step back and just sort of keep this basic

47
00:02:19,720 --> 00:02:23,359
Speaker 1: for a second, why do we care about the payroll report? Um,

48
00:02:23,360 --> 00:02:24,919
Speaker 1: it's not because we actually want to know how many

49
00:02:25,000 --> 00:02:27,080
Speaker 1: jobs were gained. I mean, that's obviously helpful information, but

50
00:02:27,120 --> 00:02:29,240
Speaker 1: that's that's that's not the sort of the essence of

51
00:02:29,280 --> 00:02:31,399
Speaker 1: what we while we look at this thing. The reason

52
00:02:31,480 --> 00:02:32,639
Speaker 1: we look at this thing is because we want to

53
00:02:32,680 --> 00:02:34,480
Speaker 1: know if if the consumer has the ability to spend.

54
00:02:34,880 --> 00:02:37,400
Speaker 1: I mean, you know, that's what it effectively comes down to.

55
00:02:37,880 --> 00:02:40,240
Speaker 1: And and so when when when you look at this

56
00:02:40,320 --> 00:02:43,200
Speaker 1: report that your key takeaway is supposed to be, well,

57
00:02:43,200 --> 00:02:45,640
Speaker 1: what are aggregate wages? Do it? And so when you

58
00:02:45,639 --> 00:02:48,320
Speaker 1: think about aggregate wages, aggregate wages are made up of

59
00:02:48,360 --> 00:02:50,480
Speaker 1: a few things. It's basically the it's a combination of

60
00:02:50,520 --> 00:02:52,760
Speaker 1: head count, is a combination of hours, and it's a

61
00:02:52,760 --> 00:02:57,000
Speaker 1: combination of hourly wages. So when you disaggregate the payroll

62
00:02:57,040 --> 00:02:58,799
Speaker 1: report in this way, which, by the way, to my

63
00:02:59,000 --> 00:03:01,440
Speaker 1: earlier point on, you can and look at a single number. Um,

64
00:03:01,440 --> 00:03:02,880
Speaker 1: I've just given you three that you need to pay

65
00:03:02,919 --> 00:03:05,239
Speaker 1: attention to. So when when you pay when when you

66
00:03:05,280 --> 00:03:09,000
Speaker 1: break it down what you see over recent um months

67
00:03:09,000 --> 00:03:11,359
Speaker 1: and in fact over the last a couple of years

68
00:03:11,360 --> 00:03:14,680
Speaker 1: in particular, guess what the key drive of those three components.

69
00:03:14,680 --> 00:03:17,040
Speaker 1: Guess what the key driver has been of aggregate wages.

70
00:03:17,480 --> 00:03:21,680
Speaker 1: It's hourly wages, right, and then followed up by hours,

71
00:03:21,720 --> 00:03:24,919
Speaker 1: and then followed in a distant third by head count.

72
00:03:25,440 --> 00:03:27,440
Speaker 1: So if you really want to get a sentence for

73
00:03:27,520 --> 00:03:31,280
Speaker 1: what the consumer's ability is continue to drive consumption, this

74
00:03:31,360 --> 00:03:33,000
Speaker 1: is the right way of thinking about the sport. And

75
00:03:33,080 --> 00:03:35,240
Speaker 1: let let me be clear this is always true. I

76
00:03:35,240 --> 00:03:36,960
Speaker 1: don't care where you are in the cycle. I don't

77
00:03:36,960 --> 00:03:39,000
Speaker 1: say it doesn't mean anything that job growth is slowing down, right,

78
00:03:39,000 --> 00:03:41,520
Speaker 1: And when job growth is killing it, you're still supposed

79
00:03:41,520 --> 00:03:46,000
Speaker 1: to be looking at the decomposition in this way. If

80
00:03:46,040 --> 00:03:49,200
Speaker 1: we get a gloomy number, and if we get yields

81
00:03:49,200 --> 00:03:51,960
Speaker 1: through the thirty year bonds through two point zero zero,

82
00:03:52,080 --> 00:03:55,560
Speaker 1: the ten year test, the September lows of a lower yield.

83
00:03:55,960 --> 00:03:58,880
Speaker 1: Do we all sudden shift to a feed analysis of

84
00:03:58,960 --> 00:04:03,320
Speaker 1: December eleven? Yeah? So, I think, you know it. I

85
00:04:03,400 --> 00:04:08,520
Speaker 1: thought it was very interesting that um, Charlie Evans basically said,

86
00:04:08,720 --> 00:04:12,080
Speaker 1: you know, I I think we're basically done with with cuts, right.

87
00:04:12,440 --> 00:04:14,000
Speaker 1: You know he said this, what was it last week?

88
00:04:14,040 --> 00:04:16,320
Speaker 1: That you know he does not have any additional cuts?

89
00:04:16,480 --> 00:04:18,920
Speaker 1: Uh baked in Now. I thought that was interesting in

90
00:04:19,720 --> 00:04:21,320
Speaker 1: and of itself. I mean, if for no other reason,

91
00:04:21,320 --> 00:04:23,160
Speaker 1: then he's you know, we have him sort of plastered

92
00:04:23,160 --> 00:04:26,280
Speaker 1: on the extreme debth side of of the equation. So

93
00:04:26,320 --> 00:04:28,279
Speaker 1: I think it actually goes to sort of really drive

94
00:04:28,360 --> 00:04:31,960
Speaker 1: home the hurdle is, I think, growing incrementally higher to

95
00:04:32,040 --> 00:04:34,400
Speaker 1: see further cuts. Now, Make no mistake, we expect that

96
00:04:34,400 --> 00:04:35,919
Speaker 1: the FED is going to cut at the end of

97
00:04:35,960 --> 00:04:39,480
Speaker 1: this month, and even and Evans is a voter, um,

98
00:04:39,520 --> 00:04:41,600
Speaker 1: but they'll they'll have plenty of votes to basically get

99
00:04:41,600 --> 00:04:45,040
Speaker 1: another cut through. The question is what happens in December. Um,

100
00:04:45,160 --> 00:04:48,400
Speaker 1: Right now, we do not expect any additional cuts. We

101
00:04:48,400 --> 00:04:50,400
Speaker 1: we don't know if if if the votes will appear.

102
00:04:50,720 --> 00:04:53,680
Speaker 1: But if you continue to get soft you know, sort

103
00:04:53,680 --> 00:04:56,120
Speaker 1: of sentiment and data which you know clearly people are

104
00:04:56,200 --> 00:04:59,640
Speaker 1: hyper sensitive to UM as as as we should be. UM.

105
00:04:59,680 --> 00:05:01,520
Speaker 1: Then I think that all of a sudden will put

106
00:05:01,640 --> 00:05:04,760
Speaker 1: December back into play, that the market for for the ft,

107
00:05:04,800 --> 00:05:06,760
Speaker 1: I mean making a mistake. The market all re expects

108
00:05:06,800 --> 00:05:09,280
Speaker 1: December is going to happen, but it's not a foregone

109
00:05:09,279 --> 00:05:11,720
Speaker 1: conclusion for the FED. So I think, and look, I know,

110
00:05:11,800 --> 00:05:14,760
Speaker 1: I hate putting any emphasis on on one single number.

111
00:05:15,279 --> 00:05:18,320
Speaker 1: We like when you do, but I do think that

112
00:05:18,360 --> 00:05:20,640
Speaker 1: this report UM will will sort of go a long

113
00:05:20,680 --> 00:05:23,520
Speaker 1: way to either in bolding those folks that think we

114
00:05:23,560 --> 00:05:26,400
Speaker 1: need further cuts or or not. Tom, everything you thought

115
00:05:26,440 --> 00:05:28,800
Speaker 1: would happen is happening. You told us that payrolls growth

116
00:05:28,800 --> 00:05:31,760
Speaker 1: would need to decelerate, it has it is. You said

117
00:05:31,800 --> 00:05:34,920
Speaker 1: that GDP would have to return to trend growth. Arguably

118
00:05:35,160 --> 00:05:37,719
Speaker 1: it has it is. Then we've all been punched in

119
00:05:37,720 --> 00:05:39,760
Speaker 1: the face by a growth scare, and many people have

120
00:05:39,800 --> 00:05:42,320
Speaker 1: been gripped by these end of cycle anxiety fears that

121
00:05:42,360 --> 00:05:45,640
Speaker 1: it's all over, that it's different this time. It's not twelve,

122
00:05:45,720 --> 00:05:50,120
Speaker 1: it's not fifteen sixteen. Tom, make that very sensible forecast

123
00:05:50,200 --> 00:05:53,400
Speaker 1: underpinned by some really reasonable analysis, that that's all this

124
00:05:53,560 --> 00:05:56,960
Speaker 1: is a return to trend growth and payrolls growth decelerating

125
00:05:57,040 --> 00:05:59,800
Speaker 1: just in the way that you expected. Yeah, so in

126
00:06:00,040 --> 00:06:02,520
Speaker 1: and and it's it's funny. So I'm gonna answer a

127
00:06:02,600 --> 00:06:04,680
Speaker 1: question and maybe a slightly different way than than you

128
00:06:04,680 --> 00:06:06,280
Speaker 1: want me to. But but I think this is maybe

129
00:06:06,320 --> 00:06:09,440
Speaker 1: more compelling. I find I find this one, I'm about

130
00:06:09,440 --> 00:06:12,640
Speaker 1: to say, sort of sort of interesting. Um Uh. I

131
00:06:12,680 --> 00:06:15,600
Speaker 1: feel like in a lot of ways we've we've been um,

132
00:06:15,640 --> 00:06:18,120
Speaker 1: you know, we've we've been pretty steadfasted in our view

133
00:06:18,520 --> 00:06:21,720
Speaker 1: and and we remained steadfast in our view of exactly

134
00:06:21,760 --> 00:06:23,599
Speaker 1: as you just summarize it that you know, this is

135
00:06:23,640 --> 00:06:25,680
Speaker 1: not some you know, slowing into a recession, although of

136
00:06:25,720 --> 00:06:28,520
Speaker 1: course the recession is going to happen at some point obviously. Um,

137
00:06:28,520 --> 00:06:29,720
Speaker 1: but you know, this is just a sort of a

138
00:06:31,000 --> 00:06:34,120
Speaker 1: slowing from a higher rate of growth, and we'll stabilize

139
00:06:34,160 --> 00:06:37,440
Speaker 1: sort of, you know, roughly around here. But here's the thing, Um,

140
00:06:37,520 --> 00:06:40,599
Speaker 1: this is a very hard sell for people. Um people.

141
00:06:41,120 --> 00:06:43,840
Speaker 1: People don't want to hear this sort of um chatter

142
00:06:44,240 --> 00:06:46,640
Speaker 1: old the old people. It seems as funny I wrote,

143
00:06:46,640 --> 00:06:48,640
Speaker 1: I wrote this yesterday. It's you know, there was this

144
00:06:48,720 --> 00:06:51,400
Speaker 1: there was this phrase that you know, sort of bad

145
00:06:51,520 --> 00:06:53,600
Speaker 1: is good, right, And they were talking about this with

146
00:06:53,600 --> 00:06:56,880
Speaker 1: regard to data, and and their point was, well, look,

147
00:06:56,960 --> 00:06:59,440
Speaker 1: even if we get bad data, it's good because it

148
00:06:59,440 --> 00:07:01,719
Speaker 1: means the FED is going to cut um, which is

149
00:07:01,760 --> 00:07:03,800
Speaker 1: perverse in every way by the way, I mean, but whatever,

150
00:07:03,880 --> 00:07:05,559
Speaker 1: this is what the market had been sort of saying.

151
00:07:05,839 --> 00:07:07,920
Speaker 1: I think that now we've sort of shifted. I think

152
00:07:07,960 --> 00:07:11,320
Speaker 1: now then I think what the idiom now is good

153
00:07:11,400 --> 00:07:13,760
Speaker 1: is bad. And what I mean by that is, you know,

154
00:07:13,840 --> 00:07:16,840
Speaker 1: the other day we had auto sales, and auto sales

155
00:07:16,880 --> 00:07:20,080
Speaker 1: by basically any measure, killed it with seventeen point two

156
00:07:20,120 --> 00:07:23,120
Speaker 1: million units. Uh, it was consensus with seventeen and the

157
00:07:23,120 --> 00:07:25,160
Speaker 1: previous month with sixteen points. I did not know that

158
00:07:26,480 --> 00:07:29,920
Speaker 1: millions of autos. Yeah, but I had no idea. But look,

159
00:07:29,920 --> 00:07:31,400
Speaker 1: in fairness, if you were to read one of your

160
00:07:31,400 --> 00:07:33,960
Speaker 1: Bloomberg articles, you know ald you heard was that auto

161
00:07:33,960 --> 00:07:36,800
Speaker 1: sales collapsed. And I was like, I've reached out to

162
00:07:36,840 --> 00:07:38,680
Speaker 1: the to the authors, and I was like, what do

163
00:07:38,720 --> 00:07:40,880
Speaker 1: you guys do? What are you seeing? Well? I think

164
00:07:40,880 --> 00:07:43,320
Speaker 1: they were pointing to some very specific sounds from Japanese

165
00:07:43,360 --> 00:07:46,480
Speaker 1: automakers tom before we got the full pitch they were,

166
00:07:47,800 --> 00:07:52,240
Speaker 1: but they Honda basically fell pretty dramatically. But nevertheless, and

167
00:07:52,280 --> 00:07:54,480
Speaker 1: maybe they followed up and they changed the headline, which

168
00:07:54,480 --> 00:07:55,960
Speaker 1: I sincerely hope they did, But when I saw the

169
00:07:55,960 --> 00:07:59,400
Speaker 1: headline at three pm UM on auto sales day, it

170
00:07:59,440 --> 00:08:03,000
Speaker 1: was still that really egregiously wrong headline. And so anyway,

171
00:08:03,040 --> 00:08:04,560
Speaker 1: and I'm not picking on them, I mean, you know,

172
00:08:04,720 --> 00:08:06,800
Speaker 1: I think I spoke to them, and that's exactly what

173
00:08:06,800 --> 00:08:09,760
Speaker 1: they told me. It was about this Honda thing. Nevertheless,

174
00:08:10,160 --> 00:08:13,040
Speaker 1: the narrative the next day was all about how all

175
00:08:13,080 --> 00:08:15,280
Speaker 1: those sales collapsed. And it wasn't just a bloom brick name.

176
00:08:15,280 --> 00:08:16,720
Speaker 1: It was all over the place. And I was like, well,

177
00:08:16,760 --> 00:08:18,680
Speaker 1: I don't I just don't understand what people are talking about.

178
00:08:18,680 --> 00:08:21,040
Speaker 1: So I started to dig into it a little bit. Then. Basically,

179
00:08:21,040 --> 00:08:23,080
Speaker 1: what people were doing is that they were looking at

180
00:08:23,080 --> 00:08:25,720
Speaker 1: these sort of the disaggregated numbers um and the problem

181
00:08:25,720 --> 00:08:27,520
Speaker 1: is looking at the disaggregated numbers, which, by the way,

182
00:08:27,560 --> 00:08:30,200
Speaker 1: no one but if you're trying to sell a weak story,

183
00:08:30,240 --> 00:08:31,960
Speaker 1: I guess that's a good way of going about it.

184
00:08:32,040 --> 00:08:34,280
Speaker 1: But there's so many problems with looking at disaggregated doesn't

185
00:08:34,280 --> 00:08:36,640
Speaker 1: take into accounts selling day differences for months to months.

186
00:08:36,760 --> 00:08:38,560
Speaker 1: It doesn't take into account, you know, short of ships

187
00:08:38,559 --> 00:08:41,160
Speaker 1: and holidays. And it's like, my point in saying all

188
00:08:41,200 --> 00:08:43,959
Speaker 1: of this is, I think people are people. People want

189
00:08:44,000 --> 00:08:45,840
Speaker 1: to hear a bad story. I mean, that's the sentence

190
00:08:45,880 --> 00:08:48,080
Speaker 1: that I get right now. And so I'm happy to

191
00:08:48,080 --> 00:08:49,679
Speaker 1: tell you guys how things look really good. And I'm

192
00:08:49,679 --> 00:08:55,400
Speaker 1: sure we've ran at a time in that regard. Nevertheless,

193
00:08:55,440 --> 00:08:57,120
Speaker 1: I feel like it's really fired up. It's hard to

194
00:08:57,160 --> 00:09:17,680
Speaker 1: sell that. You Jolis and now joining us Ellen Zentner,

195
00:09:17,720 --> 00:09:21,560
Speaker 1: their chief US economist. Ellen, you cut your teeth on

196
00:09:21,720 --> 00:09:27,320
Speaker 1: consumption analysis long ago in far away what is the

197
00:09:27,480 --> 00:09:32,520
Speaker 1: state of the American consumer into this job's report. So

198
00:09:32,760 --> 00:09:35,800
Speaker 1: you know, if we look in the aggregate, right, things

199
00:09:35,840 --> 00:09:39,520
Speaker 1: look fine for the households. Balance sheets are good, credit

200
00:09:39,600 --> 00:09:44,160
Speaker 1: is flowing, we're creating jobs, incomes arising. Confidence is off

201
00:09:44,200 --> 00:09:47,200
Speaker 1: of its highs, but it's still high. Um. But you know,

202
00:09:47,240 --> 00:09:49,520
Speaker 1: since the financial crisis, we don't look at anything in

203
00:09:49,520 --> 00:09:52,280
Speaker 1: the aggregate anymore. It just doesn't make sense. In the aggregate.

204
00:09:52,400 --> 00:09:56,240
Speaker 1: The household experience is so different across income levels that

205
00:09:56,360 --> 00:09:58,760
Speaker 1: you look at the lowest income households and of course

206
00:09:58,760 --> 00:10:01,560
Speaker 1: they're still struggling with rents and healthcare being a high

207
00:10:01,600 --> 00:10:05,080
Speaker 1: share of uh their income. Uh. They did get some

208
00:10:05,120 --> 00:10:07,280
Speaker 1: support last year from the tax cuts, but we don't

209
00:10:07,320 --> 00:10:10,600
Speaker 1: cut taxes again this year, so now we're comping to that.

210
00:10:11,360 --> 00:10:13,520
Speaker 1: Uh So it's just it's a it's a mixed bag

211
00:10:13,600 --> 00:10:17,040
Speaker 1: for households at the upper end. Uh. You know, upper

212
00:10:17,040 --> 00:10:21,199
Speaker 1: income folks got hit by the tax cuts last year

213
00:10:21,360 --> 00:10:23,280
Speaker 1: in terms of not getting as much back. And I'm

214
00:10:23,280 --> 00:10:26,400
Speaker 1: not playing violin here for anyone, but it's a fact

215
00:10:26,400 --> 00:10:28,880
Speaker 1: of the matter. We've got tourism that's down, that goes

216
00:10:28,920 --> 00:10:31,840
Speaker 1: into luxury spending. A lot of pent up demand has

217
00:10:31,880 --> 00:10:34,640
Speaker 1: been met there. How many personal aircraft can you buy? Tom,

218
00:10:35,400 --> 00:10:38,840
Speaker 1: I'm asking you. I'm like, how you're not asking me,

219
00:10:38,920 --> 00:10:41,120
Speaker 1: because this is a true story. How how many are

220
00:10:41,160 --> 00:10:43,840
Speaker 1: you buying? No, we've got one. We decided not to

221
00:10:43,960 --> 00:10:46,559
Speaker 1: upgrade on the least back thing. We decided that we

222
00:10:46,600 --> 00:10:49,319
Speaker 1: would stay with the three decently import of things out

223
00:10:49,320 --> 00:10:52,920
Speaker 1: and counry on. Yeah. So so the bottom line, right,

224
00:10:52,920 --> 00:10:56,280
Speaker 1: we're we've seen consumption slowing. I mean, there's this idea

225
00:10:56,320 --> 00:10:58,320
Speaker 1: out there that the consumer has just unstoppable. If you

226
00:10:58,320 --> 00:11:00,120
Speaker 1: look on a year over year basis, can some and

227
00:11:00,280 --> 00:11:03,640
Speaker 1: is slowing because job growth is slowing, income is growing

228
00:11:03,679 --> 00:11:06,559
Speaker 1: at a slower pace um. And so the question is

229
00:11:06,640 --> 00:11:08,679
Speaker 1: on a lot of these metrics, whether it's consumer or

230
00:11:08,800 --> 00:11:12,960
Speaker 1: job related, is this acceptable slowdown or is this something

231
00:11:13,000 --> 00:11:17,400
Speaker 1: that slowdown continues and moves through worrisome levels towards recession.

232
00:11:17,559 --> 00:11:20,120
Speaker 1: That's what people are trying to grapple with right now.

233
00:11:20,200 --> 00:11:22,400
Speaker 1: The consumer looks like it's slowing back toward more of

234
00:11:22,440 --> 00:11:25,559
Speaker 1: a trend rate. There's nothing yet that tells us that

235
00:11:25,600 --> 00:11:27,440
Speaker 1: should be falling off the cliff. And a lot of

236
00:11:27,440 --> 00:11:30,560
Speaker 1: that is because layoffs has been so low, and unless

237
00:11:30,559 --> 00:11:32,880
Speaker 1: we're laying off people, it's kind of hard to put

238
00:11:32,880 --> 00:11:35,720
Speaker 1: the consumer down all together. So and let's talk about

239
00:11:35,760 --> 00:11:37,920
Speaker 1: that with a little bit more detailed to get your baseline.

240
00:11:37,960 --> 00:11:40,960
Speaker 1: Tempus of RBC was on the show around about fifty

241
00:11:41,000 --> 00:11:43,080
Speaker 1: minutes ago telling a similar story about the return to

242
00:11:43,120 --> 00:11:45,440
Speaker 1: trend growth, that it didn't have to be something we feared.

243
00:11:45,720 --> 00:11:48,679
Speaker 1: Do you see it being anything worse than that? Ellen, Well,

244
00:11:48,920 --> 00:11:51,440
Speaker 1: certainly there's the risk. And look, we built in the

245
00:11:51,480 --> 00:11:54,880
Speaker 1: downsides in the I S m UH numbers. This week

246
00:11:54,920 --> 00:11:57,679
Speaker 1: it did raise our recession probability model. Now it raised

247
00:11:57,679 --> 00:12:00,480
Speaker 1: it up to about that. People would say one in

248
00:12:00,520 --> 00:12:03,360
Speaker 1: five is still pretty good chances. I mean, a pretty

249
00:12:03,559 --> 00:12:07,160
Speaker 1: low chance this late in the cycle. Um, But it

250
00:12:07,280 --> 00:12:10,400
Speaker 1: is too early to judge that these data are slowing

251
00:12:10,520 --> 00:12:13,640
Speaker 1: towards something more sinister. You know, I think Janet Yellen

252
00:12:13,679 --> 00:12:17,320
Speaker 1: a couple of weeks ago. Uh, if I paraphrase her,

253
00:12:17,480 --> 00:12:20,480
Speaker 1: she captured it very well. We should be seeing a

254
00:12:20,520 --> 00:12:23,440
Speaker 1: slowdown in jobs now. The tighter the labor market gets,

255
00:12:23,480 --> 00:12:25,880
Speaker 1: the slower job creation is, and it allows the FED

256
00:12:25,960 --> 00:12:29,360
Speaker 1: to be even more accommodative if you're putting less and

257
00:12:29,440 --> 00:12:32,360
Speaker 1: less downward pressure on the unemployment. You know that, dairy Tom.

258
00:12:32,400 --> 00:12:35,160
Speaker 1: It's just we're trying to gauge whether we're headed there

259
00:12:35,240 --> 00:12:37,320
Speaker 1: or not. I get the idea we've got a crystal

260
00:12:37,360 --> 00:12:40,560
Speaker 1: ball out unlike the President United States, who wants action now.

261
00:12:40,640 --> 00:12:43,480
Speaker 1: But is the real tip point of this job's report?

262
00:12:43,880 --> 00:12:47,000
Speaker 1: We begin to migrate to an analysis of December eleven?

263
00:12:47,120 --> 00:12:50,480
Speaker 1: For you, is that your end meeting a dead meeting

264
00:12:50,920 --> 00:12:54,800
Speaker 1: or we'll have some character intention to it. Yeah, it's well,

265
00:12:54,800 --> 00:12:56,640
Speaker 1: it's definitely not going to be a dead meeting. I mean,

266
00:12:56,880 --> 00:13:00,320
Speaker 1: now that you know the December meeting actually ends up

267
00:13:00,360 --> 00:13:03,000
Speaker 1: being one of the most closely watched because what message

268
00:13:03,040 --> 00:13:05,880
Speaker 1: is the FED going to send in their dot plot?

269
00:13:06,240 --> 00:13:09,679
Speaker 1: Because they set expectations for the year ahead in their

270
00:13:09,720 --> 00:13:13,720
Speaker 1: dot plot, and since markets are uncertain and we don't

271
00:13:13,720 --> 00:13:16,920
Speaker 1: know whether we're headed towards just UH slowing back to

272
00:13:17,000 --> 00:13:21,040
Speaker 1: trend or something below. Mind, the thing is that that

273
00:13:21,160 --> 00:13:22,880
Speaker 1: the feed is going to show. They're not going to

274
00:13:23,040 --> 00:13:26,320
Speaker 1: show a whole lot of cuts in UH in that

275
00:13:26,400 --> 00:13:28,880
Speaker 1: December dot plot. They just don't tom. They don't pre

276
00:13:29,120 --> 00:13:34,600
Speaker 1: judge failure plots at Texas. No, the dot plot is

277
00:13:34,640 --> 00:13:37,520
Speaker 1: something very new, and believe me, a lot of us

278
00:13:37,520 --> 00:13:40,160
Speaker 1: are you know, not too happy with the dot plot.

279
00:13:40,160 --> 00:13:43,080
Speaker 1: It can be confusing at times and confused markets at times,

280
00:13:43,120 --> 00:13:45,240
Speaker 1: but it's it's here to stay. I mean, the set

281
00:13:45,320 --> 00:13:47,320
Speaker 1: is a very slow moving beast, and when it when

282
00:13:47,320 --> 00:13:51,040
Speaker 1: it introduces something, it's it's nearly impossible to take it away.

283
00:13:51,440 --> 00:13:53,680
Speaker 1: Yellen tried during her time to change it to something

284
00:13:53,720 --> 00:13:56,120
Speaker 1: like a fan chart, so it basically made it useless,

285
00:13:56,160 --> 00:13:57,959
Speaker 1: but you still put it out there. I think we

286
00:13:58,000 --> 00:14:00,680
Speaker 1: could still move in that direction. But at times it

287
00:14:00,720 --> 00:14:03,200
Speaker 1: proves very useful and at other times it proved to

288
00:14:03,320 --> 00:14:06,400
Speaker 1: be very detrimental. Um the market is going to look

289
00:14:06,480 --> 00:14:10,160
Speaker 1: for the FED to indicate that it would be providing

290
00:14:10,200 --> 00:14:14,800
Speaker 1: further cuts in UH, and it's unlikely that the dot

291
00:14:14,840 --> 00:14:17,680
Speaker 1: plot would show that unless you've got enough of them

292
00:14:17,679 --> 00:14:20,920
Speaker 1: pre judging that they're still not at the right level

293
00:14:20,960 --> 00:14:23,760
Speaker 1: for policy. And an outside the dot plot within the

294
00:14:23,840 --> 00:14:26,440
Speaker 1: Summary of Economic projections, the forecast for growth from the

295
00:14:26,440 --> 00:14:30,160
Speaker 1: FED at the moment is two GDP growth. Do you

296
00:14:30,160 --> 00:14:33,560
Speaker 1: think that's a little bit too optimistic? No, But this

297
00:14:33,600 --> 00:14:36,800
Speaker 1: is a this is a an arithmetic exercise, John. So

298
00:14:37,040 --> 00:14:38,920
Speaker 1: the first half of the year came in so strong

299
00:14:38,960 --> 00:14:42,600
Speaker 1: for GDP and we're tracking roughly around one and a

300
00:14:42,600 --> 00:14:45,120
Speaker 1: half percent for the third quarter. In order to get

301
00:14:45,160 --> 00:14:48,040
Speaker 1: growth much down below two percent, and this is on

302
00:14:48,080 --> 00:14:50,120
Speaker 1: a Q four over Q four basis, you have to

303
00:14:50,120 --> 00:14:57,360
Speaker 1: put some really nasty numbers in for the fourth quarter. Sorry, yeah, no,

304
00:14:57,440 --> 00:15:00,920
Speaker 1: I could see downside to that, absolutely. Uh. You know

305
00:15:01,000 --> 00:15:03,720
Speaker 1: the the but what the base effects that we're looking

306
00:15:03,720 --> 00:15:06,360
Speaker 1: at going into that December meeting will will matter when

307
00:15:06,360 --> 00:15:10,240
Speaker 1: they update those forecasts. But the downside risks are tremendous here,

308
00:15:10,240 --> 00:15:12,080
Speaker 1: and I think that that will put downward pressure on

309
00:15:12,080 --> 00:15:15,560
Speaker 1: those forecasts going forward. Ellen, how Barbell is the American

310
00:15:15,680 --> 00:15:18,320
Speaker 1: labor economy. I mean, you know, we spout about three

311
00:15:18,800 --> 00:15:21,800
Speaker 1: or two point or four percent wage growth, but how

312
00:15:21,880 --> 00:15:24,040
Speaker 1: much is that going to the halves and how much

313
00:15:24,080 --> 00:15:27,400
Speaker 1: of that is not going to the have nuts. So

314
00:15:27,640 --> 00:15:30,960
Speaker 1: the the actual wage pressures and the pace of wage

315
00:15:30,960 --> 00:15:33,680
Speaker 1: gains is actually stronger at the lower end than the

316
00:15:33,720 --> 00:15:37,200
Speaker 1: top end. But you're talking about affecting those with the

317
00:15:37,240 --> 00:15:40,080
Speaker 1: lowest wage bill and so this is why when we

318
00:15:40,160 --> 00:15:42,640
Speaker 1: raise minimum wage growth, it doesn't show up that much

319
00:15:42,640 --> 00:15:45,600
Speaker 1: in the aggregate, because you're you're marginally raising the most

320
00:15:45,640 --> 00:15:52,080
Speaker 1: marginally paid workers pay. And so that's where restaurants, leisure, hospitality,

321
00:15:52,280 --> 00:15:54,160
Speaker 1: that's where a lot of the jobs have been created

322
00:15:54,160 --> 00:15:57,840
Speaker 1: in this expansion. So that's where the pressures are. Restaurants

323
00:15:57,840 --> 00:16:01,520
Speaker 1: have been complaining about having enough workers because one, when

324
00:16:01,720 --> 00:16:05,400
Speaker 1: conditions get better, they go somewhere else to get paid more.

325
00:16:06,120 --> 00:16:08,560
Speaker 1: So that's where the tighter labor markets are at that

326
00:16:08,720 --> 00:16:10,960
Speaker 1: low end of the pay scale. So when we talk

327
00:16:11,000 --> 00:16:14,640
Speaker 1: about wage pressures there, that doesn't it's wage pressures for

328
00:16:14,800 --> 00:16:18,320
Speaker 1: the very lowest paid. And so I think that's important

329
00:16:18,400 --> 00:16:21,240
Speaker 1: that at the top end, you know, any wage pressures,

330
00:16:21,280 --> 00:16:25,120
Speaker 1: they are coming from a lack of skilled labor. Uh.

331
00:16:25,120 --> 00:16:28,520
Speaker 1: And that's just that's structural problems. And now, folks, surveillance

332
00:16:28,560 --> 00:16:31,240
Speaker 1: throwback to the late great Ken Cruit and we have

333
00:16:31,280 --> 00:16:33,320
Speaker 1: to do this in honor of Ken and ask Ellen

334
00:16:33,440 --> 00:16:38,600
Speaker 1: Zentner are fly fisher? Have you fished Argentina? So it's

335
00:16:38,640 --> 00:16:40,640
Speaker 1: it's funny you ask. So my husband tells me that

336
00:16:40,680 --> 00:16:43,280
Speaker 1: I'm a really odd person because I've been looking forward

337
00:16:43,280 --> 00:16:47,920
Speaker 1: to my fiftieth birthday for years. We are in two

338
00:16:48,040 --> 00:16:51,840
Speaker 1: years tom so so Uh, we are going to Argentina

339
00:16:51,880 --> 00:16:55,880
Speaker 1: and Chile to fish patagony on both sides. Uh. And

340
00:16:56,000 --> 00:16:58,320
Speaker 1: that is and Ken Ken would have loved it. I

341
00:16:58,640 --> 00:17:01,880
Speaker 1: got back from fly fishing on Sunday. We fly fish

342
00:17:01,920 --> 00:17:04,080
Speaker 1: to Montana and you know, we just we used to

343
00:17:04,080 --> 00:17:06,520
Speaker 1: love to drive you crazy by talking about fly fishing.

344
00:17:06,560 --> 00:17:08,639
Speaker 1: It was just I'd be sitting there looking at the ceiling,

345
00:17:08,680 --> 00:17:13,080
Speaker 1: Johnny Ken pro trout the size of your leg? Are

346
00:17:13,119 --> 00:17:19,080
Speaker 1: you going to Argentine trip? Yeah? I really? You know, frankly, folks,

347
00:17:19,080 --> 00:17:21,280
Speaker 1: and this is in support of what Ellen has done,

348
00:17:21,760 --> 00:17:25,280
Speaker 1: uh for the fishing industry. I can't say enough about

349
00:17:25,280 --> 00:17:29,320
Speaker 1: the images of Argentina. It is just it must be

350
00:17:29,400 --> 00:17:32,720
Speaker 1: just surreal to go down there. Ellen, we'll leave it

351
00:17:32,720 --> 00:17:36,159
Speaker 1: at that. Thanks so much for the discussion of of

352
00:17:36,920 --> 00:17:42,840
Speaker 1: Argentine and I don't think she does, but she's lying.

353
00:17:42,920 --> 00:17:45,960
Speaker 1: She's it's like she's like thirty nine and holding her

354
00:17:46,640 --> 00:17:48,800
Speaker 1: something like that. Her calls have been great. We we

355
00:17:48,880 --> 00:17:53,480
Speaker 1: bust her traps. But uh Zentner has been extraordinary on

356
00:17:53,640 --> 00:17:57,480
Speaker 1: modeling from three pent Trump and g d P on

357
00:17:57,640 --> 00:18:00,440
Speaker 1: down and on what the Fed would do. It has

358
00:18:00,480 --> 00:18:18,200
Speaker 1: been an extraordinary streak for Morgan Stanley. John, why don't

359
00:18:18,200 --> 00:18:20,119
Speaker 1: you bring in our next guest here on the linkage

360
00:18:20,600 --> 00:18:25,600
Speaker 1: of this employment report in the revisions up into a

361
00:18:25,720 --> 00:18:28,040
Speaker 1: better feeling for the market versus the gloom of the

362
00:18:28,160 --> 00:18:30,119
Speaker 1: last three days and look at the unemployment right as

363
00:18:30,160 --> 00:18:32,760
Speaker 1: well three point five percent. Let's bring in Jeff Rosenberg,

364
00:18:32,800 --> 00:18:37,000
Speaker 1: shall we? Black Rock Systematic Fixed Income Team Senior portfolio manager, Jeff.

365
00:18:37,040 --> 00:18:38,480
Speaker 1: Great to have you with us on the program. Your

366
00:18:38,520 --> 00:18:41,080
Speaker 1: first take please, well, you know, it's great to be

367
00:18:41,200 --> 00:18:44,080
Speaker 1: on an audio program because we can do something on

368
00:18:44,320 --> 00:18:47,280
Speaker 1: radio that you can't do on television, and that is

369
00:18:47,359 --> 00:18:51,040
Speaker 1: we can listen to something very carefully, and what do

370
00:18:51,080 --> 00:18:55,560
Speaker 1: we hear That is the sound of relief. That's what's

371
00:18:55,600 --> 00:18:57,920
Speaker 1: going on in the market reaction. There was a lot

372
00:18:57,960 --> 00:19:01,520
Speaker 1: of fear that we were going to at another data point,

373
00:19:01,760 --> 00:19:04,480
Speaker 1: I've had a lot of recessionary signals over the last

374
00:19:04,520 --> 00:19:07,600
Speaker 1: two weeks. This is a sign of relief. A sigh

375
00:19:07,640 --> 00:19:10,920
Speaker 1: of relief doesn't mean that the recession risk is pasted us,

376
00:19:11,000 --> 00:19:15,920
Speaker 1: but it doesn't accelerate that narrative that all the signs

377
00:19:15,920 --> 00:19:18,240
Speaker 1: were pointing to recession. This is a sign that you

378
00:19:18,400 --> 00:19:21,679
Speaker 1: still have strength in the labor market. The consumer is

379
00:19:22,760 --> 00:19:26,520
Speaker 1: offsetting force to the global slowdown, to the trade uncertainty.

380
00:19:27,040 --> 00:19:29,199
Speaker 1: We'll see how long it lasts for. But you know

381
00:19:29,240 --> 00:19:31,920
Speaker 1: the revisions. I mean, I wouldn't read too much into

382
00:19:31,960 --> 00:19:34,200
Speaker 1: the headline being a little bit less. This is an

383
00:19:34,200 --> 00:19:38,879
Speaker 1: okay report. It's good enough. It wasn't a big disappointment,

384
00:19:39,119 --> 00:19:41,320
Speaker 1: and the earnings are a little bit of a disappointment.

385
00:19:41,320 --> 00:19:43,320
Speaker 1: But you've got some noise in those reports. Should we

386
00:19:43,359 --> 00:19:44,920
Speaker 1: do a shout out the car Ricord down and j

387
00:19:45,680 --> 00:19:47,080
Speaker 1: we have to do it. I mean, car Rick down

388
00:19:47,119 --> 00:19:50,679
Speaker 1: and nailed this. Why don't you continue with Jeff? What

389
00:19:50,720 --> 00:19:52,440
Speaker 1: we are seeing that was a spread between the soft

390
00:19:52,520 --> 00:19:55,480
Speaker 1: data and the heart data. Guess a bit wider. The

391
00:19:55,840 --> 00:19:57,600
Speaker 1: m S through the week. Not pretty the dates w

392
00:19:57,680 --> 00:20:00,240
Speaker 1: I see on the screen right now? Okay, how do

393
00:20:00,280 --> 00:20:02,439
Speaker 1: you explain away that story at the moment? How do

394
00:20:02,440 --> 00:20:06,040
Speaker 1: you expect it to develop in the coming months. Yeah,

395
00:20:06,119 --> 00:20:08,960
Speaker 1: it's it's a little bit of a difference in what

396
00:20:09,080 --> 00:20:12,040
Speaker 1: we're reflecting. I mean, that's the soft data. The survey

397
00:20:12,119 --> 00:20:15,720
Speaker 1: data is very much influenced by what's going on on

398
00:20:15,760 --> 00:20:18,239
Speaker 1: the industrial side. Yes, it was non manufacturing as well,

399
00:20:18,280 --> 00:20:21,400
Speaker 1: so you're seeing that this week, you're seeing that spill over,

400
00:20:21,480 --> 00:20:26,480
Speaker 1: but that's much more influenced by sentiment, and sentiment on

401
00:20:26,520 --> 00:20:31,439
Speaker 1: the industrial side. On the manufacturing side is weak, and

402
00:20:31,480 --> 00:20:35,240
Speaker 1: it's weak because we've seen a collapse in exports and

403
00:20:35,560 --> 00:20:40,320
Speaker 1: that's very much the consequence of trade and trade uncertainty.

404
00:20:40,600 --> 00:20:43,520
Speaker 1: That's not new, it's been building for a long time.

405
00:20:43,600 --> 00:20:47,359
Speaker 1: You can see it in even even earlier measures of

406
00:20:47,920 --> 00:20:51,800
Speaker 1: survey and sentiment soft data when you looked at CEO

407
00:20:52,000 --> 00:20:55,160
Speaker 1: and business leader confidence that that had been dropping off

408
00:20:55,320 --> 00:20:58,679
Speaker 1: what you see today and the hard data of payroll

409
00:20:59,080 --> 00:21:01,640
Speaker 1: and wages as what's been holding up the consumer side,

410
00:21:01,640 --> 00:21:05,320
Speaker 1: and you still see fairly strong consumer confidence. And that

411
00:21:05,440 --> 00:21:08,040
Speaker 1: story is gonna gonna be with us. That dichotomy between

412
00:21:08,040 --> 00:21:10,280
Speaker 1: the two sides of the economy parts the death stiles,

413
00:21:10,320 --> 00:21:12,639
Speaker 1: because when I look at this, there's one big number there.

414
00:21:12,680 --> 00:21:14,560
Speaker 1: And I don't mean to be a gloom crew here, folks,

415
00:21:14,560 --> 00:21:16,760
Speaker 1: but the fact is, I'm looking at a line of

416
00:21:16,840 --> 00:21:20,720
Speaker 1: average Arlie arnies flat zero point zero percent, and it

417
00:21:20,840 --> 00:21:24,000
Speaker 1: says to me that the blended macro view and Jeff,

418
00:21:24,040 --> 00:21:27,400
Speaker 1: you're great at this. You gotta parse this to quintiles

419
00:21:27,480 --> 00:21:30,320
Speaker 1: or death stiles, and it tells me that, yeah, this

420
00:21:30,400 --> 00:21:33,200
Speaker 1: is great data. Yes the markets are better, but there's

421
00:21:33,240 --> 00:21:36,560
Speaker 1: still a large part of America not seeing a wage raise.

422
00:21:38,000 --> 00:21:42,080
Speaker 1: So so the details of the distribution is a really

423
00:21:42,119 --> 00:21:47,840
Speaker 1: important point. But beyond the this month's weekly earnings monthly

424
00:21:47,840 --> 00:21:52,720
Speaker 1: earnings change, there's been a bigger story that the strength

425
00:21:52,880 --> 00:21:56,720
Speaker 1: and the persistence of the labor market. In different segments

426
00:21:56,800 --> 00:22:00,960
Speaker 1: of the labor market, you're seeing greater benefits. It's accruing

427
00:22:01,440 --> 00:22:04,159
Speaker 1: to the lower end of the labor force. So we

428
00:22:04,200 --> 00:22:06,920
Speaker 1: see this by parsing out not so much the wages,

429
00:22:07,000 --> 00:22:10,320
Speaker 1: but parsing out where have the biggest declines in the

430
00:22:10,400 --> 00:22:13,480
Speaker 1: unemployment rate come from? Where they went from. They've come

431
00:22:13,520 --> 00:22:16,639
Speaker 1: from the lower end of the distribution of workers. I

432
00:22:16,680 --> 00:22:18,800
Speaker 1: want to say lower end when we can parse the

433
00:22:18,880 --> 00:22:23,359
Speaker 1: data by education for example. Uh. And so that's where

434
00:22:23,400 --> 00:22:27,600
Speaker 1: you're seeing the strength and the broadening of the consumer

435
00:22:27,640 --> 00:22:31,399
Speaker 1: confidence because those areas are much more focused on the

436
00:22:31,520 --> 00:22:35,919
Speaker 1: changes in real wage income, which is a function of

437
00:22:36,240 --> 00:22:39,239
Speaker 1: waged rates and do I have a job, what are

438
00:22:39,280 --> 00:22:42,440
Speaker 1: my hours work? To the combination of all that has

439
00:22:42,480 --> 00:22:45,000
Speaker 1: been lifting that income and that's been a big support

440
00:22:45,080 --> 00:22:48,480
Speaker 1: to the consumption side. I want to the interest rate

441
00:22:48,520 --> 00:22:50,680
Speaker 1: market as well. We've seen this dash and yelds a

442
00:22:50,720 --> 00:22:53,440
Speaker 1: thirty year bond, folks really not moving all that much.

443
00:22:53,440 --> 00:22:55,399
Speaker 1: It was a two oh two and now two oh three.

444
00:22:55,880 --> 00:23:00,760
Speaker 1: But give us the Jeff Rosenberg view forward of what

445
00:23:01,040 --> 00:23:06,560
Speaker 1: yields tell us, given this better Job's report, Well, you know,

446
00:23:07,240 --> 00:23:10,479
Speaker 1: just on the moment, just today, what are the yields

447
00:23:10,520 --> 00:23:13,560
Speaker 1: telling us. It's the it was my premise at the beginning.

448
00:23:13,560 --> 00:23:15,439
Speaker 1: It's a little bit of a sigh of relief. So

449
00:23:15,520 --> 00:23:17,720
Speaker 1: the front end of the curve is selling off, but

450
00:23:17,720 --> 00:23:20,280
Speaker 1: if we back off from that. The bond market has

451
00:23:20,320 --> 00:23:25,119
Speaker 1: been worried about recession and pricing in fed action to

452
00:23:25,880 --> 00:23:29,600
Speaker 1: forestall that recession for a long time, and it's still

453
00:23:29,640 --> 00:23:33,480
Speaker 1: doing that. So away from the noise of today's UH payroll,

454
00:23:33,560 --> 00:23:36,160
Speaker 1: they're still looking for a negative GDP number. But what's

455
00:23:36,160 --> 00:23:39,439
Speaker 1: the black Rock call on the run rate of g

456
00:23:39,560 --> 00:23:42,080
Speaker 1: d P in the interest rates? Are you are you

457
00:23:42,160 --> 00:23:44,800
Speaker 1: modeling a two percent America? Or do you have to

458
00:23:44,880 --> 00:23:48,719
Speaker 1: finally model below that? Well, what you're what we're in

459
00:23:48,720 --> 00:23:52,560
Speaker 1: in terms of the model and the regime is the

460
00:23:52,720 --> 00:23:57,440
Speaker 1: risk of recession, because that's clearly what Sam's survey data.

461
00:23:57,840 --> 00:24:01,040
Speaker 1: The extension of the labor market. I mean, there's a

462
00:24:01,040 --> 00:24:05,840
Speaker 1: perversity to three point five percent unemployment rate. That very

463
00:24:05,920 --> 00:24:10,399
Speaker 1: low unemployment rates are are actually a future signal of

464
00:24:10,800 --> 00:24:15,119
Speaker 1: recession because you are getting to in a typical historical

465
00:24:15,160 --> 00:24:18,800
Speaker 1: context and overheating kind of environment for the labor market

466
00:24:18,920 --> 00:24:21,920
Speaker 1: that typically doesn't doesn't last. So you're in that late

467
00:24:22,000 --> 00:24:26,080
Speaker 1: cycle indicators which are warning of recession. But we're not

468
00:24:26,160 --> 00:24:30,560
Speaker 1: yet osion to your to your good analysis, Jeff Rosenberg,

469
00:24:30,640 --> 00:24:35,239
Speaker 1: are we in a normal cycle? I would suggest the

470
00:24:35,320 --> 00:24:37,800
Speaker 1: vast majority of my listeners don't agree with that. Is

471
00:24:37,880 --> 00:24:42,920
Speaker 1: there's something going on. I'm not saying this is every

472
00:24:42,960 --> 00:24:47,320
Speaker 1: cycle is unique. Uh So this one is is certainly unique,

473
00:24:47,359 --> 00:24:51,160
Speaker 1: buffeted by an extension of the cycle, zero and negative

474
00:24:51,200 --> 00:24:54,359
Speaker 1: interest rates. But where we are today is the third

475
00:24:55,440 --> 00:24:59,080
Speaker 1: quote quote unquote mid cycle slowdown. What's the difference between

476
00:24:59,080 --> 00:25:02,320
Speaker 1: a mid cycle slow down in a prerecession the outcome.

477
00:25:02,680 --> 00:25:07,399
Speaker 1: So if the outcome of the current slowdown is recession,

478
00:25:07,560 --> 00:25:10,520
Speaker 1: then this will end the cycle if it's the way

479
00:25:10,560 --> 00:25:14,040
Speaker 1: the last two and where most mid cycle slowdowns end

480
00:25:14,119 --> 00:25:16,520
Speaker 1: up three out of four mid cycle slowdowns don't end

481
00:25:16,720 --> 00:25:20,479
Speaker 1: in recession. Is the third one of this extended cycle.

482
00:25:20,840 --> 00:25:23,919
Speaker 1: So we don't really know which way that's going to go.

483
00:25:24,160 --> 00:25:26,480
Speaker 1: A little sigh of relief here because of the strength

484
00:25:26,520 --> 00:25:29,920
Speaker 1: of the consumer and the and the debate is policy response,

485
00:25:29,960 --> 00:25:34,200
Speaker 1: global policy response against continuation of trade and political erta.

486
00:25:34,600 --> 00:25:37,000
Speaker 1: This has been wonderful. Jeffrey Rosenberg, thank you so much.

487
00:25:37,040 --> 00:25:39,760
Speaker 1: You're always important. Love to have Jeff Rosenbergan on fed

488
00:25:39,880 --> 00:25:42,119
Speaker 1: Day that was scarlet food as well, and we do

489
00:25:42,240 --> 00:25:57,840
Speaker 1: this with a better tone to the market. Tiffany Wilding

490
00:25:58,000 --> 00:26:00,720
Speaker 1: is aged today at Pimco. Now she has to blow

491
00:26:00,800 --> 00:26:03,439
Speaker 1: up or report because of a good job's reports, she

492
00:26:03,480 --> 00:26:06,200
Speaker 1: will I'm kidding, she welcome, We welcome her right now.

493
00:26:06,720 --> 00:26:09,520
Speaker 1: Tiffany Wilding Andrew Balls was on earlier, and there's a

494
00:26:09,560 --> 00:26:13,600
Speaker 1: Pimco call of sub two g d P. Does this

495
00:26:13,800 --> 00:26:17,560
Speaker 1: better than good unemployment report give you pause to a

496
00:26:17,680 --> 00:26:21,439
Speaker 1: sub two pc GDP call? Um, Well, well, thanks for

497
00:26:21,480 --> 00:26:23,280
Speaker 1: having me. First of all, you know, so I would

498
00:26:23,320 --> 00:26:26,960
Speaker 1: say about today's report that it was better than um,

499
00:26:27,040 --> 00:26:31,680
Speaker 1: better than feared, given the uh is M or I

500
00:26:31,960 --> 00:26:35,160
Speaker 1: s M manufacturing and non manufacturing reports. But I would

501
00:26:35,160 --> 00:26:38,840
Speaker 1: say overall, today's report is still consistent with the slowing

502
00:26:39,080 --> 00:26:41,840
Speaker 1: US economy. UM. If you look at private payroll growth

503
00:26:41,920 --> 00:26:45,399
Speaker 1: six month moving average basis, it's around just above a

504
00:26:45,520 --> 00:26:48,040
Speaker 1: hundred thousand jobs per month, and that's down from two

505
00:26:48,080 --> 00:26:51,920
Speaker 1: hundred last year, you know, So, so we are certainly slowing. Now.

506
00:26:51,960 --> 00:26:54,159
Speaker 1: I think you know, today's report should probably you know,

507
00:26:54,200 --> 00:26:56,240
Speaker 1: a suese some of the fears that the U. S

508
00:26:56,280 --> 00:26:58,600
Speaker 1: economy is collapsing. It's certainly not, but but it is

509
00:26:58,600 --> 00:27:01,159
Speaker 1: certainly slowing, you know. And I think the key question

510
00:27:01,240 --> 00:27:04,320
Speaker 1: here is is whether you know we should be slowing

511
00:27:04,600 --> 00:27:07,760
Speaker 1: as we get um, you know, as the the economy

512
00:27:07,800 --> 00:27:11,080
Speaker 1: becomes late cycle, just because you have fewer people uh

513
00:27:11,119 --> 00:27:13,720
Speaker 1: too in the labor force to to to draw on

514
00:27:13,840 --> 00:27:16,280
Speaker 1: for jobs, you know, and that's certainly happening, but I

515
00:27:16,280 --> 00:27:18,199
Speaker 1: think more is happening here. I think there's also some

516
00:27:18,240 --> 00:27:20,399
Speaker 1: cyclical weakness in the economy, and it's not just the

517
00:27:20,440 --> 00:27:24,480
Speaker 1: manufacturing sector. Is this Dwight David Eisenhower's three point five

518
00:27:24,560 --> 00:27:28,840
Speaker 1: percent unemployment rate. I mean, we've talked to a number

519
00:27:28,880 --> 00:27:31,000
Speaker 1: of people this morning, and I get the idea. It's

520
00:27:31,040 --> 00:27:38,240
Speaker 1: a stunning statistic, but so many of our listeners are going, uh, really, yeah.

521
00:27:38,240 --> 00:27:40,040
Speaker 1: I mean, I think you have to be careful about that.

522
00:27:40,119 --> 00:27:42,119
Speaker 1: That three point five unemployment rate. Now it is, it

523
00:27:42,200 --> 00:27:45,040
Speaker 1: is very low historically, and that's great UM, and it's

524
00:27:45,080 --> 00:27:47,760
Speaker 1: consistent with the you know, still a solid labor market.

525
00:27:48,160 --> 00:27:50,240
Speaker 1: But but you have to you know, it's in terms

526
00:27:50,320 --> 00:27:53,320
Speaker 1: of the direction of travel more broadly, and I think

527
00:27:53,320 --> 00:27:56,000
Speaker 1: in the context of slowing UM, what you could be

528
00:27:56,040 --> 00:27:58,679
Speaker 1: seeing with the unemployment rate is that you have fewer

529
00:27:58,720 --> 00:28:01,960
Speaker 1: people that are being drawn into the labor market UM,

530
00:28:02,000 --> 00:28:04,760
Speaker 1: and so then the participation rate UM instead of the

531
00:28:04,880 --> 00:28:07,640
Speaker 1: steady gains that we've seen over the last six months,

532
00:28:07,720 --> 00:28:10,040
Speaker 1: it starts to level out or maybe even fall a

533
00:28:10,040 --> 00:28:11,919
Speaker 1: little bit. So what that can mean for the unemployment

534
00:28:12,000 --> 00:28:15,520
Speaker 1: rate is it actually takes you another leg down before

535
00:28:15,560 --> 00:28:18,160
Speaker 1: it starts moving up. You know, as as you mentioned before,

536
00:28:18,160 --> 00:28:20,600
Speaker 1: our forecasts are for for one percent growth, that's well

537
00:28:20,600 --> 00:28:23,240
Speaker 1: below trend. And so in that environment, you should see

538
00:28:23,280 --> 00:28:25,159
Speaker 1: the unemployment rate taking up, and we expect that in

539
00:28:25,160 --> 00:28:28,000
Speaker 1: the next several quarters. Michael besch Lass emails and I'm kidding.

540
00:28:28,520 --> 00:28:32,399
Speaker 1: We adore Michael Beschlass's work. I apologize. I have to

541
00:28:32,400 --> 00:28:36,480
Speaker 1: go back to December of nineteen nine. This is Richard Nixon,

542
00:28:37,080 --> 00:28:42,360
Speaker 1: spirot Agnews unemployment exactly, not Dwight David Eisenhower. So, Tiffany,

543
00:28:42,400 --> 00:28:44,240
Speaker 1: I think one of the economic calls out there, certainly

544
00:28:44,240 --> 00:28:47,520
Speaker 1: for the bulls, is yes, we know manufacturing is kind

545
00:28:47,520 --> 00:28:49,480
Speaker 1: of rolling over. We had a you know that real

546
00:28:49,520 --> 00:28:53,560
Speaker 1: negative manufacturing p m i UM. But the consumer is

547
00:28:53,560 --> 00:28:56,200
Speaker 1: still strong and the consumer will carry this economy to

548
00:28:56,240 --> 00:29:01,200
Speaker 1: two plus. At what point does UM that not really

549
00:29:01,200 --> 00:29:03,040
Speaker 1: hold water anymore? So what at what point does the

550
00:29:03,080 --> 00:29:08,200
Speaker 1: employment picture suggests that there's downside to that scenario. Well, yeah, well,

551
00:29:08,200 --> 00:29:10,840
Speaker 1: certainly if you start to see negative uh you know,

552
00:29:10,880 --> 00:29:14,680
Speaker 1: negative reports, negative private payroll changes per month, that's going

553
00:29:14,720 --> 00:29:17,200
Speaker 1: to impact the consumer, you know. But but just taking

554
00:29:17,200 --> 00:29:20,880
Speaker 1: a step back when you have slowing um business output

555
00:29:20,960 --> 00:29:24,800
Speaker 1: slowing revenue growth, slowing profitability than than what you do

556
00:29:24,840 --> 00:29:27,240
Speaker 1: as a as a corporation is you have to adjust

557
00:29:27,360 --> 00:29:31,239
Speaker 1: both your capex numbers and your your labor costs um and.

558
00:29:31,280 --> 00:29:34,000
Speaker 1: So that that's what we're seeing now. I think you

559
00:29:34,320 --> 00:29:36,440
Speaker 1: have firms that are that are moving back and not

560
00:29:36,600 --> 00:29:39,640
Speaker 1: hiring um at such a brisk pace. We've even seen

561
00:29:39,720 --> 00:29:43,560
Speaker 1: some decline and aggregate hours in certain sectors um and

562
00:29:43,560 --> 00:29:46,640
Speaker 1: and and so that that will impact aggregate income growth

563
00:29:46,680 --> 00:29:49,200
Speaker 1: and ultimately that feeds through to real consumption. And and

564
00:29:49,360 --> 00:29:51,400
Speaker 1: just one other point on this is that you know,

565
00:29:51,760 --> 00:29:56,000
Speaker 1: consumer sentiment has remained relatively elevated um and and that's

566
00:29:56,040 --> 00:29:58,720
Speaker 1: despite you know, some of the trade tensions and other

567
00:29:58,760 --> 00:30:01,000
Speaker 1: market volatility that we've scene. You know, that's something that

568
00:30:01,040 --> 00:30:04,160
Speaker 1: we're watching very closely. Consumer sentiment started deteriorate a little

569
00:30:04,200 --> 00:30:07,520
Speaker 1: bit in August, you know, and that was also coinciding

570
00:30:07,600 --> 00:30:10,160
Speaker 1: with some more weak with some weakness and real consumption

571
00:30:10,200 --> 00:30:12,000
Speaker 1: and a tick higher in the savings rate. You know.

572
00:30:12,040 --> 00:30:14,440
Speaker 1: So that is I think that consumer sentiment numbers what

573
00:30:14,440 --> 00:30:16,760
Speaker 1: we're really watching. You know, it's it's sort of uncertain

574
00:30:16,800 --> 00:30:19,479
Speaker 1: on when when that should start to deteriorate. But The

575
00:30:19,560 --> 00:30:21,360
Speaker 1: last point that I would just make is late cycle

576
00:30:21,400 --> 00:30:25,040
Speaker 1: consumers always tend to be relatively um uh, you know,

577
00:30:25,440 --> 00:30:28,280
Speaker 1: the outlook is relatively good until it's not, and then

578
00:30:28,320 --> 00:30:31,880
Speaker 1: you start to see consumer sentiment drop. So, Tiffany, I

579
00:30:31,920 --> 00:30:34,400
Speaker 1: continue to be, you know, a little concerned about the

580
00:30:35,120 --> 00:30:37,120
Speaker 1: wage growth even if it's and it was sub three

581
00:30:37,200 --> 00:30:40,040
Speaker 1: percent here, but uh this month, but just even three

582
00:30:40,040 --> 00:30:42,760
Speaker 1: percent low three percent? Is that consistent with what we

583
00:30:42,760 --> 00:30:46,080
Speaker 1: should be expecting with an economy that is at or

584
00:30:46,120 --> 00:30:48,800
Speaker 1: near full employment. It just seems a little on the

585
00:30:48,840 --> 00:30:51,840
Speaker 1: weak side. Yeah, I mean, I agree, and I think

586
00:30:51,880 --> 00:30:56,400
Speaker 1: that's that's the result of just secular trends towards lower productivity,

587
00:30:56,600 --> 00:31:00,080
Speaker 1: secular trends towards um you know, a reduced ability of

588
00:31:00,080 --> 00:31:02,320
Speaker 1: of of labor to bargain. Although we're seeing a little

589
00:31:02,320 --> 00:31:04,800
Speaker 1: bit more of that. You know, labor share is the

590
00:31:04,840 --> 00:31:07,240
Speaker 1: thing that economists love to look at, its labor share

591
00:31:07,280 --> 00:31:10,400
Speaker 1: of aggregate income UM economy wide income, you know, and

592
00:31:10,400 --> 00:31:12,200
Speaker 1: when that's starting to go up, that suggests we are

593
00:31:12,280 --> 00:31:15,840
Speaker 1: late cycle and that labor can bargain for higher wage

594
00:31:16,440 --> 00:31:18,600
Speaker 1: We're not really we're not really seeing that. Um. It's

595
00:31:18,600 --> 00:31:20,640
Speaker 1: gone up maybe a little bit but but not that much.

596
00:31:20,760 --> 00:31:23,160
Speaker 1: So you know, I think these secular trends in the

597
00:31:23,240 --> 00:31:26,200
Speaker 1: labor market will continue to to sort of dampen auverage

598
00:31:26,240 --> 00:31:28,760
Speaker 1: hourly earnings. And you know, the three percent today is

599
00:31:29,000 --> 00:31:31,720
Speaker 1: equivalent adjusting for all of that to four percent in

600
00:31:31,720 --> 00:31:35,040
Speaker 1: the previous cycle. That's absolutely brilliant, Tifferty Wild and thank

601
00:31:35,080 --> 00:31:38,840
Speaker 1: you so much, greatly, greatly appreciated. With Pimco this morning,

602
00:31:54,720 --> 00:31:57,600
Speaker 1: it is a once a month conversation our John Farrell

603
00:31:58,120 --> 00:32:01,120
Speaker 1: with Lawrence Cudlow of the White House US. Let us

604
00:32:01,440 --> 00:32:03,560
Speaker 1: listen from the White House now we can get the

605
00:32:03,560 --> 00:32:05,920
Speaker 1: reaction from the administration. I want to welcome our listeners

606
00:32:05,920 --> 00:32:09,280
Speaker 1: from Bloomberg Radio and for Bloomberg TV. Larry Cudlow joined

607
00:32:09,320 --> 00:32:14,200
Speaker 1: us now the National Economic Council Director. Good Mornitu, Larry Mina, Jonathan,

608
00:32:14,280 --> 00:32:16,800
Speaker 1: thank you always, great to see you. The week. The

609
00:32:16,920 --> 00:32:19,800
Speaker 1: data that was the soft data has been really choppy, Larry,

610
00:32:19,840 --> 00:32:22,480
Speaker 1: it's been really soft. Then the hard data this morning,

611
00:32:22,480 --> 00:32:25,400
Speaker 1: the Job's report was Okay, what are your thoughts your

612
00:32:25,440 --> 00:32:28,000
Speaker 1: assessment on that distinction between the soft data which is

613
00:32:28,000 --> 00:32:29,800
Speaker 1: looking a little bit weak at the moment, and the

614
00:32:29,840 --> 00:32:33,560
Speaker 1: hard data, which is still pretty resilient. Well, there's a

615
00:32:33,640 --> 00:32:36,720
Speaker 1: lot of good data out there, and there's some soft data,

616
00:32:36,760 --> 00:32:38,640
Speaker 1: but I just want to know what I mean. Look

617
00:32:39,200 --> 00:32:43,520
Speaker 1: for Americans across the country. The headline number here is

618
00:32:43,520 --> 00:32:47,080
Speaker 1: the three point five percent unemployment rate. It is a

619
00:32:47,120 --> 00:32:51,240
Speaker 1: fifty year low. I think that's a tremendous achievement, and

620
00:32:51,320 --> 00:32:57,160
Speaker 1: it's well distributed. Jonathan, African Americans, Hispanics, Asians, even people

621
00:32:57,800 --> 00:33:01,240
Speaker 1: below high school diplumbers. It's a for cominal achievement and

622
00:33:01,400 --> 00:33:06,320
Speaker 1: all Americans should be proud of this. And regarding the

623
00:33:06,360 --> 00:33:10,840
Speaker 1: payroll numbers, look at you got a hundred thirty six thousand,

624
00:33:11,160 --> 00:33:14,520
Speaker 1: but as you know, I'm sure you're reported already the

625
00:33:14,680 --> 00:33:21,680
Speaker 1: upward revisions for July and especially August for thousand. So

626
00:33:21,840 --> 00:33:26,000
Speaker 1: really today's number on payrolls is a hundred and eighty

627
00:33:26,000 --> 00:33:30,480
Speaker 1: one thousand. And then finally, I want to kind of

628
00:33:30,560 --> 00:33:33,920
Speaker 1: replete what we talked about a month ago. If you

629
00:33:34,120 --> 00:33:39,959
Speaker 1: look under the hood, one of the most important indicators

630
00:33:40,000 --> 00:33:45,360
Speaker 1: of employment is the household survey, where they question individuals

631
00:33:45,760 --> 00:33:51,080
Speaker 1: who many cases own or work in a small business.

632
00:33:51,520 --> 00:33:57,960
Speaker 1: The household survey was up three hundred ninety one thousand.

633
00:33:58,280 --> 00:34:02,480
Speaker 1: It's another staggering number. Last month was five ninety, the

634
00:34:02,560 --> 00:34:06,400
Speaker 1: prior two months around two fifty. The average Jonathan there

635
00:34:06,680 --> 00:34:10,600
Speaker 1: for the household survey. I remember it is the household

636
00:34:10,719 --> 00:34:16,880
Speaker 1: survey that produces the unemployment rate, which also dovetails into

637
00:34:16,920 --> 00:34:20,759
Speaker 1: the labor force participation rate and the employment ratios, all

638
00:34:20,800 --> 00:34:24,480
Speaker 1: of which went up. You're looking at this tremendous move

639
00:34:24,960 --> 00:34:28,200
Speaker 1: in the household survey, the four month change. I hate

640
00:34:28,239 --> 00:34:30,919
Speaker 1: to look at my cards, but I'm not smart enough

641
00:34:30,960 --> 00:34:34,120
Speaker 1: to remember all these statistics. But that thing is up

642
00:34:34,360 --> 00:34:38,920
Speaker 1: three hundred seventy eight thousand in the last four months.

643
00:34:38,960 --> 00:34:41,840
Speaker 1: Now A couple of points here. Again, this tends to

644
00:34:41,840 --> 00:34:47,120
Speaker 1: be small business and entrepreneurial. Many economists, many good business economists,

645
00:34:47,160 --> 00:34:50,760
Speaker 1: will tell you the household survey looking under the hood,

646
00:34:51,120 --> 00:34:55,280
Speaker 1: is a leading indicator of the payroll survey, which measures

647
00:34:55,360 --> 00:34:59,799
Speaker 1: the larger corporations. I think this is a fabulous development,

648
00:35:00,120 --> 00:35:02,960
Speaker 1: and it suggests to me as I've been thinking all along.

649
00:35:03,400 --> 00:35:07,520
Speaker 1: With market interest rates coming down a hundred basis points

650
00:35:07,520 --> 00:35:10,200
Speaker 1: in the last few months, I think the economy is

651
00:35:10,239 --> 00:35:13,479
Speaker 1: now in a turning zone. And I think we've had

652
00:35:13,480 --> 00:35:16,040
Speaker 1: a soft two quarters, but I think now we're going

653
00:35:16,080 --> 00:35:19,760
Speaker 1: to be moving into a much stronger economic story. Larry.

654
00:35:19,800 --> 00:35:22,120
Speaker 1: That's hopeful, but the data else where paints a different picture.

655
00:35:22,320 --> 00:35:24,440
Speaker 1: You know, here on Wall Street, the leading indicators of

656
00:35:24,520 --> 00:35:26,719
Speaker 1: the I M S. I remember last week there was

657
00:35:26,760 --> 00:35:28,799
Speaker 1: a news conference with the President Donald Trump, and he

658
00:35:28,800 --> 00:35:30,279
Speaker 1: asked you to stand up and talk about the p

659
00:35:30,400 --> 00:35:31,920
Speaker 1: M I S. So let's talk about the p M

660
00:35:31,920 --> 00:35:33,480
Speaker 1: I is the I M S. The I S M

661
00:35:33,520 --> 00:35:36,319
Speaker 1: this week was really not good, Larry. The export new

662
00:35:36,360 --> 00:35:40,120
Speaker 1: export order's number came in in the low faulties. It

663
00:35:40,200 --> 00:35:44,399
Speaker 1: looks like that trade disruption globally is starting to come

664
00:35:44,440 --> 00:35:46,239
Speaker 1: through here in the United States. Do you not see

665
00:35:46,239 --> 00:35:48,959
Speaker 1: that in the data, Larry, Well, I didn't know. Let's

666
00:35:49,120 --> 00:35:52,120
Speaker 1: let's just spend a moment on that. You're quite right

667
00:35:52,160 --> 00:35:55,000
Speaker 1: about the I S M manufacturing, by the way, the

668
00:35:55,040 --> 00:35:57,640
Speaker 1: I S M services, I know it's slipped a bit,

669
00:35:57,680 --> 00:36:03,680
Speaker 1: but it's still in powerful territory. The market UH manufacturing,

670
00:36:03,719 --> 00:36:07,439
Speaker 1: the market's p M I was actually quite strong. That's

671
00:36:07,440 --> 00:36:10,719
Speaker 1: what the President spoke about at the u N. I

672
00:36:10,760 --> 00:36:13,560
Speaker 1: want to make a point though I know it is

673
00:36:13,680 --> 00:36:19,480
Speaker 1: commonplace to say the manufacturing slowdown is a function of

674
00:36:19,520 --> 00:36:24,719
Speaker 1: the China trade discussion, but can I give you just

675
00:36:24,760 --> 00:36:29,160
Speaker 1: a little counterview here. Uh, we've seen our exports to China,

676
00:36:29,280 --> 00:36:33,880
Speaker 1: are manufacturing exports to China come down. Okay, that is correct.

677
00:36:34,200 --> 00:36:38,359
Speaker 1: But you know what, by far the biggest problem we

678
00:36:38,440 --> 00:36:46,360
Speaker 1: have regarding manufacturing and manufacturing exports is Europe and especially Japan.

679
00:36:46,760 --> 00:36:48,879
Speaker 1: You want to hear some numbers just real quick, because

680
00:36:48,880 --> 00:36:54,560
Speaker 1: I racked these up last night. China exports of manufacturing

681
00:36:54,960 --> 00:36:59,880
Speaker 1: is down about fifty billion dollars. Okay, Canada in Mexico,

682
00:37:00,400 --> 00:37:04,919
Speaker 1: which are bigger trading partners, Uh, manufacturing exports to those

683
00:37:04,920 --> 00:37:08,840
Speaker 1: two countries hundred billion dollars down. This is in the

684
00:37:08,920 --> 00:37:14,160
Speaker 1: last three or four months. Germany alone, which is in recession,

685
00:37:14,680 --> 00:37:19,720
Speaker 1: we have lost a hundred and fifty billion in manufacturing

686
00:37:19,840 --> 00:37:28,200
Speaker 1: exports to Germany. The numbers we can do the Eurozone

687
00:37:28,239 --> 00:37:31,080
Speaker 1: if I go Eurozone, y, Jonathan, that you know. The

688
00:37:31,120 --> 00:37:34,800
Speaker 1: trouble with the story here is not in my judgment

689
00:37:35,280 --> 00:37:38,920
Speaker 1: that President Trump is trying to drive a good and

690
00:37:39,080 --> 00:37:44,440
Speaker 1: hard bargain to protect the American economy from Chinese unfair

691
00:37:44,480 --> 00:37:48,080
Speaker 1: and non lawful trading practices. I mean, that's ongoing, and

692
00:37:48,120 --> 00:37:50,480
Speaker 1: that's a high priority. And I'm sure you and I'll

693
00:37:50,480 --> 00:37:54,000
Speaker 1: get to that in a minute. The real trouble factually

694
00:37:55,080 --> 00:38:00,000
Speaker 1: is the collapse of the European economy, most particularly in Germany.

695
00:38:00,080 --> 00:38:06,400
Speaker 1: So America's great manufacturing companies have lost a huge export market. Again,

696
00:38:06,480 --> 00:38:12,440
Speaker 1: let me repeat this. Germany alone. Germany alone cost US

697
00:38:12,480 --> 00:38:17,160
Speaker 1: a hundred and fifty billion dollars in manufacturing exports. That's

698
00:38:17,200 --> 00:38:21,640
Speaker 1: not a tariff question. That's because they're not growing, they're

699
00:38:21,680 --> 00:38:25,120
Speaker 1: not cutting taxes and deregulating. So I just want to

700
00:38:25,120 --> 00:38:28,279
Speaker 1: make that point. China really isn't the problem right now.

701
00:38:28,800 --> 00:38:31,759
Speaker 1: They're bearing the brunt I think of our tariffs. It's

702
00:38:31,800 --> 00:38:34,719
Speaker 1: the German story and the European story that needs to

703
00:38:34,760 --> 00:38:37,000
Speaker 1: be improved. Larry, we're gonna get screamed out because we're

704
00:38:37,000 --> 00:38:38,800
Speaker 1: not moving quick enough. So let me move through somebody

705
00:38:38,800 --> 00:38:41,120
Speaker 1: stories a little bit faster. I'll go fast. But I

706
00:38:41,160 --> 00:38:43,520
Speaker 1: worked so hard to prepare these I know you didn't.

707
00:38:43,520 --> 00:38:45,440
Speaker 1: You've got them across quite clearly. There will be people

708
00:38:45,480 --> 00:38:47,840
Speaker 1: screaming at the TV though, saying the reason Europe is

709
00:38:47,880 --> 00:38:50,680
Speaker 1: weak is because of trade. This isn't from me. This

710
00:38:50,719 --> 00:38:52,880
Speaker 1: is from the chair of the Institute for Supply Management.

711
00:38:52,880 --> 00:38:56,480
Speaker 1: Global trade remains the most significant issue, as demonstrated by

712
00:38:56,520 --> 00:38:58,799
Speaker 1: the contraction and new export orders that began in July.

713
00:39:00,040 --> 00:39:02,680
Speaker 1: Let's just get to the trade talks next week October ten.

714
00:39:03,280 --> 00:39:05,240
Speaker 1: Most people are trying to work out to what degree

715
00:39:05,280 --> 00:39:08,560
Speaker 1: the slowdown in the economic dates constrains the administration's ability

716
00:39:08,640 --> 00:39:12,040
Speaker 1: to carry on pushing China. Are you saying, despite the

717
00:39:12,080 --> 00:39:15,560
Speaker 1: weakness that we're seeing in the economy worldwide and in

718
00:39:15,600 --> 00:39:18,759
Speaker 1: the United States very slowly creeping through, that doesn't change

719
00:39:18,760 --> 00:39:23,040
Speaker 1: the approach from the United States going into next week. No. Look,

720
00:39:23,080 --> 00:39:26,919
Speaker 1: I mean, if you aggregate all the numbers, Jonathan, we're

721
00:39:26,960 --> 00:39:29,200
Speaker 1: about two and a half percent growth in the first

722
00:39:29,239 --> 00:39:32,120
Speaker 1: half of this year, and I think we'll get at

723
00:39:32,160 --> 00:39:34,840
Speaker 1: least that much in the second half of this year.

724
00:39:35,320 --> 00:39:38,239
Speaker 1: So we're in a pretty strong position. China, on the

725
00:39:38,280 --> 00:39:41,920
Speaker 1: other hand, which is really bearing the brunt of these tariffs,

726
00:39:42,280 --> 00:39:46,200
Speaker 1: either through their valued currency or price cuts or profit

727
00:39:46,320 --> 00:39:49,760
Speaker 1: losses or supply chain movement, they're in much worse shape.

728
00:39:50,239 --> 00:39:52,239
Speaker 1: By the way. Those Chinese numbers, I don't know, if

729
00:39:52,239 --> 00:39:54,759
Speaker 1: you saw the Harvard study. You've got to take the

730
00:39:54,840 --> 00:39:58,440
Speaker 1: Chinese GDP and subtractive about two percentage points, all right,

731
00:39:58,640 --> 00:40:02,560
Speaker 1: So it's much lower than people thought. Now I want

732
00:40:02,600 --> 00:40:07,120
Speaker 1: to have the negotiations. Our team is going in open minded.

733
00:40:07,719 --> 00:40:12,279
Speaker 1: So this coming week, uh, Monday and Tuesday, if I

734
00:40:12,320 --> 00:40:18,480
Speaker 1: have this right, there will be new additional conferences negotiations

735
00:40:18,719 --> 00:40:22,600
Speaker 1: at the deputies level, and then Thursday and Friday of

736
00:40:22,800 --> 00:40:27,480
Speaker 1: next next week at the principles level. Everything's on the table.

737
00:40:27,880 --> 00:40:30,479
Speaker 1: We'd love to go back to where we were in May,

738
00:40:30,840 --> 00:40:33,560
Speaker 1: where we were a lot closer, and you know, all

739
00:40:33,640 --> 00:40:38,880
Speaker 1: the issues, the commodities, the tariffs, the ownership, the forced

740
00:40:39,120 --> 00:40:43,799
Speaker 1: transfer of technology, the IP theft, the cyber hacking, all

741
00:40:43,880 --> 00:40:47,200
Speaker 1: that will be on the table. And China has been

742
00:40:47,200 --> 00:40:52,759
Speaker 1: buying some commodities. That's a goodwill gesture, so let's keep

743
00:40:52,800 --> 00:40:55,239
Speaker 1: it open mind. I don't want to forecast. I'm just

744
00:40:55,280 --> 00:41:00,240
Speaker 1: saying this is a good thing. We're going into these negotiations.

745
00:40:59,560 --> 00:41:01,759
Speaker 1: The taris to set to go up. What do you

746
00:41:01,800 --> 00:41:03,960
Speaker 1: need to see from the Chinese at those talks next week.

747
00:41:04,120 --> 00:41:07,600
Speaker 1: Let's prevent that from happening. I wouldn't want to make

748
00:41:07,640 --> 00:41:10,560
Speaker 1: a judgment. These are calls that would be made by

749
00:41:10,600 --> 00:41:14,480
Speaker 1: the president. We have a very strong negotiating teams. You know,

750
00:41:14,760 --> 00:41:19,719
Speaker 1: a bestalord, Bob Lightheuzer Uh Secretary step Manuchin uh no predictions.

751
00:41:19,760 --> 00:41:23,080
Speaker 1: I never do that. All I'm saying is the Caudlow

752
00:41:23,160 --> 00:41:27,000
Speaker 1: actually and Jonathan better to talk than not to talk.

753
00:41:27,640 --> 00:41:31,560
Speaker 1: Coming into this, China has been buy in some commodities,

754
00:41:32,000 --> 00:41:35,800
Speaker 1: the small amount, but perhaps a good sign. We postponed

755
00:41:36,239 --> 00:41:40,120
Speaker 1: our next stage tarip dates as a good will measure.

756
00:41:40,560 --> 00:41:44,920
Speaker 1: So let's see. You never know, you know, there could

757
00:41:44,920 --> 00:41:51,440
Speaker 1: be some positive surprises coming out of these talks. Okay,

758
00:41:51,600 --> 00:41:56,480
Speaker 1: I'm not predicting. I'm just saying, don't rule that that out.

759
00:41:56,600 --> 00:42:00,200
Speaker 1: There could be some positive surprise. Well, Larry, a lot

760
00:42:00,200 --> 00:42:01,839
Speaker 1: of people will be watching this just thinking you're trying

761
00:42:01,880 --> 00:42:03,919
Speaker 1: to get the market up by improving the mood music

762
00:42:03,960 --> 00:42:06,759
Speaker 1: around the trade story. Let's talk specifics. What are the

763
00:42:06,800 --> 00:42:10,840
Speaker 1: things you want to see next week. I can't move markets,

764
00:42:11,160 --> 00:42:14,840
Speaker 1: neither you nor I can. I certainly can't marry Jonathan.

765
00:42:14,880 --> 00:42:17,319
Speaker 1: You're a much more influential guy than I am. I

766
00:42:17,360 --> 00:42:21,000
Speaker 1: don't think you what you say as much more. Iry.

767
00:42:21,040 --> 00:42:23,279
Speaker 1: Let's talk about the store and just take place in

768
00:42:23,360 --> 00:42:26,799
Speaker 1: DC and political store in DC. I agree with you.

769
00:42:26,920 --> 00:42:29,160
Speaker 1: Let's talk about the political storm in d C. I

770
00:42:29,160 --> 00:42:32,200
Speaker 1: don't want to talk about the specifics. It's not your round,

771
00:42:32,200 --> 00:42:33,360
Speaker 1: and it would be unfair to you. But I do

772
00:42:33,400 --> 00:42:36,200
Speaker 1: want to ask you the following question, whether the impeachment

773
00:42:36,200 --> 00:42:40,160
Speaker 1: inquiry of the Democrats at the moment complicates your ability

774
00:42:40,200 --> 00:42:42,560
Speaker 1: to go into these trade talks and get concessions from

775
00:42:42,560 --> 00:42:47,440
Speaker 1: the Chinese in the trade discussions. Well, Jonathan, I do

776
00:42:47,520 --> 00:42:50,400
Speaker 1: not think so, all right, I do not think so.

777
00:42:50,640 --> 00:42:55,480
Speaker 1: I think the impeachment story where we've been completely transparent

778
00:42:55,600 --> 00:43:00,000
Speaker 1: on phone transcripts and whistleblower releases and all the rest,

779
00:43:00,040 --> 00:43:03,439
Speaker 1: so that I don't think that's an impact right now.

780
00:43:04,080 --> 00:43:08,439
Speaker 1: I think it has only the tiniest, tiniest effect maybe

781
00:43:08,520 --> 00:43:12,120
Speaker 1: occasionally on stock market psychology. I don't buy it. Here

782
00:43:12,160 --> 00:43:17,279
Speaker 1: here's the point. Just consider this remote speaker. Pelosi has

783
00:43:17,320 --> 00:43:20,920
Speaker 1: been very difficult impeachment. Okay, but but but but she

784
00:43:21,040 --> 00:43:26,080
Speaker 1: has been very accommodative and cooperative on us m C

785
00:43:26,320 --> 00:43:31,120
Speaker 1: A very important now, I think, and I think Ambassador

786
00:43:31,200 --> 00:43:35,520
Speaker 1: Lighthouser shares this view. A lot of the moderate Democrats

787
00:43:35,560 --> 00:43:41,040
Speaker 1: who were elected from Republican and Trump districts our leery

788
00:43:41,080 --> 00:43:44,160
Speaker 1: of impeachment. They may go along, I don't know, we'll see,

789
00:43:44,800 --> 00:43:49,280
Speaker 1: but they wished to tell their constituents they got something done.

790
00:43:49,960 --> 00:43:55,279
Speaker 1: And U S m c A is huge for farmers, manufacturers,

791
00:43:55,360 --> 00:44:03,040
Speaker 1: auto workers, intellectual property, technology, investment, digital services, financial services.

792
00:44:03,520 --> 00:44:07,279
Speaker 1: It's worth a half percent of GDP increase over a

793
00:44:07,320 --> 00:44:10,040
Speaker 1: period of time, a couple hundred thousand jobs. So what

794
00:44:10,080 --> 00:44:13,200
Speaker 1: I'm saying is, Okay, you've got impeachment. I understand that. Yeah,

795
00:44:13,520 --> 00:44:16,399
Speaker 1: But at the same time, at the same time, many

796
00:44:17,120 --> 00:44:20,319
Speaker 1: Democrats may wish to show that they can work with

797
00:44:20,400 --> 00:44:25,160
Speaker 1: Republicans to produce a pro growth package that benefits every

798
00:44:25,200 --> 00:44:30,279
Speaker 1: single economic sector. So I remain optimistic about that point.

799
00:44:30,600 --> 00:44:34,520
Speaker 1: And I believe Speaker Pelosi as I say, she's being

800
00:44:34,600 --> 00:44:37,279
Speaker 1: tough on impeachment, but she's been very open and a

801
00:44:37,360 --> 00:44:42,280
Speaker 1: commendative on trade. Color me optimistic. I'm taking the over

802
00:44:42,640 --> 00:44:45,120
Speaker 1: on the U S m c A trade. Larry, I've

803
00:44:45,160 --> 00:44:47,040
Speaker 1: got one final question for you. The President in the

804
00:44:47,080 --> 00:44:49,920
Speaker 1: lost twenty four hours said China should start an investigation

805
00:44:49,960 --> 00:44:52,560
Speaker 1: into the bidens. If you go into trade talks next

806
00:44:52,600 --> 00:44:54,839
Speaker 1: week and the Chinese asked you about that comment, how

807
00:44:54,840 --> 00:44:58,239
Speaker 1: do you explain it. I had not spoken to the

808
00:44:58,280 --> 00:45:02,080
Speaker 1: President on matt It doesn't really sound like that's gonna

809
00:45:02,120 --> 00:45:05,680
Speaker 1: have much of an impact, if anything, on the China

810
00:45:05,760 --> 00:45:10,240
Speaker 1: trade talks. I do know that we continue to monitor

811
00:45:10,360 --> 00:45:15,480
Speaker 1: the Hong Kong freedom and democracy movement, which the US

812
00:45:15,560 --> 00:45:20,480
Speaker 1: supports very strongly, that could impinge on those talks. I

813
00:45:20,920 --> 00:45:24,840
Speaker 1: can't say you have to ask the President about the

814
00:45:24,880 --> 00:45:28,040
Speaker 1: issue of China looking at other corruption matters. I can't

815
00:45:28,040 --> 00:45:29,719
Speaker 1: speak to that, but you can assure us a lowry

816
00:45:29,760 --> 00:45:34,080
Speaker 1: that won't be part of the discussions next week. Well,

817
00:45:34,160 --> 00:45:37,400
Speaker 1: Jonathan some sense I can't assure you of anything, but

818
00:45:37,520 --> 00:45:41,080
Speaker 1: I would say my own expectation is that's not going

819
00:45:41,120 --> 00:45:45,719
Speaker 1: to be front and center when Lightheuser Ammunition speak with

820
00:45:45,880 --> 00:45:49,959
Speaker 1: Vice Premier Leu Hey, I think, look, let's go back

821
00:45:50,000 --> 00:45:53,120
Speaker 1: to this, let's close on this. I think in the

822
00:45:53,239 --> 00:45:58,240
Speaker 1: last month there has been a softening in the psychology

823
00:45:58,280 --> 00:46:02,560
Speaker 1: of the trade talks on both sides. I think China

824
00:46:02,640 --> 00:46:05,920
Speaker 1: needs a deal. President Trump has said he will make

825
00:46:05,960 --> 00:46:10,000
Speaker 1: a deal provided it's a good deal that will defend

826
00:46:10,120 --> 00:46:13,880
Speaker 1: American interests. And again, I want to go back. You

827
00:46:13,960 --> 00:46:16,720
Speaker 1: don't think these are these numbers are coming out good.

828
00:46:17,120 --> 00:46:20,400
Speaker 1: Take a look under the hood. We're running almost four

829
00:46:20,840 --> 00:46:25,720
Speaker 1: hundred thousand household jobs per month. That is a leading

830
00:46:25,760 --> 00:46:29,600
Speaker 1: indicator of a stronger and by the way, last point,

831
00:46:31,440 --> 00:46:34,759
Speaker 1: the housing sector. Look at the housing sector. It's a

832
00:46:34,840 --> 00:46:39,439
Speaker 1: leading indicator of the economy with interest rates way down right,

833
00:46:40,480 --> 00:46:46,840
Speaker 1: starts permits existing and new homesale and pending home sales

834
00:46:46,880 --> 00:46:49,279
Speaker 1: are all up. You know this interview is closing, and

835
00:46:49,320 --> 00:46:51,319
Speaker 1: you know that the people around us are shouting us

836
00:46:51,360 --> 00:46:53,080
Speaker 1: to close out the interview. But you also know the

837
00:46:53,120 --> 00:46:55,600
Speaker 1: household survey is not a leading indicator for anyone on

838
00:46:55,640 --> 00:46:58,360
Speaker 1: Wall Street for the U. S economy either. Larry, you

839
00:46:58,400 --> 00:47:00,040
Speaker 1: do know that, I know you know that because you

840
00:47:00,040 --> 00:47:02,680
Speaker 1: would never put it. You would on a piece of

841
00:47:02,680 --> 00:47:06,200
Speaker 1: Southside research that set that. I beg your pardon. You know,

842
00:47:06,280 --> 00:47:08,239
Speaker 1: when I was doing this for a living on Wall

843
00:47:08,280 --> 00:47:10,920
Speaker 1: Street a long time ago, we have to look at households.

844
00:47:10,920 --> 00:47:14,200
Speaker 1: And when I was reporting on CNBC in one of

845
00:47:14,239 --> 00:47:17,160
Speaker 1: the great historic television shows, we used to look at

846
00:47:17,160 --> 00:47:20,359
Speaker 1: the household employment all the time. You gotta look under

847
00:47:20,400 --> 00:47:23,440
Speaker 1: the hood. Look from the households come the unemployment and

848
00:47:23,480 --> 00:47:27,400
Speaker 1: the participation. Rage. All I'm saying, Look, maybe I'm wrong, Okay,

849
00:47:27,600 --> 00:47:29,680
Speaker 1: you can chastise me in a couple of minds if

850
00:47:29,719 --> 00:47:32,680
Speaker 1: I'm wrong. I just really like what I see. Four

851
00:47:32,760 --> 00:47:36,439
Speaker 1: hundred thousand new jobs and households per month. I think

852
00:47:36,480 --> 00:47:40,120
Speaker 1: that shows you a turning zone up for the economy. Larry,

853
00:47:40,160 --> 00:47:41,560
Speaker 1: we're both gonna get in trouble. I know you've gotta

854
00:47:41,560 --> 00:47:43,680
Speaker 1: be ou swhere, Larry cut like that. Always appreciate you're

855
00:47:43,680 --> 00:47:45,520
Speaker 1: on the state and for catching up with you as

856
00:47:45,520 --> 00:47:48,360
Speaker 1: well from outside of the White House, Larry Cutlod thanks

857
00:47:48,400 --> 00:47:52,640
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

858
00:47:52,880 --> 00:47:58,239
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

859
00:47:58,320 --> 00:48:01,920
Speaker 1: you prefer. I'm on Twitter her at Tom Keene before

860
00:48:01,960 --> 00:48:06,160
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.