WEBVTT - Surveillance: Labor Force Growth Is Slowing, Joseph Cohen Says 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.880 Bloomberg dot Com, and of course on the Bloomberg Let's 0:00:27.880 --> 0:00:30.400 talk about the strategy forward Bunama Haitian with us with 0:00:30.480 --> 0:00:34.720 Alian's global investors strategy in the US. But everybody, mona, 0:00:35.040 --> 0:00:40.000 everybody yesterday was an EU strategists, weren't we ha That's right, 0:00:40.000 --> 0:00:43.440 Tom uh Yeah, you know, the dragging press conference was 0:00:43.560 --> 0:00:45.600 a little bit on the depressing side. You know, he 0:00:45.640 --> 0:00:49.080 talked about weakness in China, he talked about possible weakness 0:00:49.120 --> 0:00:50.839 in the US, but then really brought it back to 0:00:50.880 --> 0:00:54.800 the Euro Area itself, noting German autos in particular, Italy 0:00:55.120 --> 0:00:58.360 weakening overall. So um, you know, I think in a 0:00:58.440 --> 0:01:01.200 week where we are void of you know, news flow, 0:01:01.600 --> 0:01:04.360 that really kind of took center stage. Why is the 0:01:04.360 --> 0:01:07.160 ECB always the last of the party. You should never 0:01:07.240 --> 0:01:10.679 have to cut your forecasts as aggressively as they had 0:01:10.720 --> 0:01:13.240 to yesterday. And the only reason they had to cut 0:01:13.280 --> 0:01:16.959 their forecast that aggressively is because they've been dragged, kicking 0:01:17.000 --> 0:01:20.640 and screaming into delivering the mere cult that we got yesterday. 0:01:20.680 --> 0:01:23.600 Why are they always the last the party? Mona? Yeah, 0:01:23.680 --> 0:01:26.479 you know, that's an interesting question. And we talk about how, 0:01:27.000 --> 0:01:30.200 you know, the US and Asia really have had a 0:01:30.319 --> 0:01:33.480 key source of growth u driving their economy over the 0:01:33.520 --> 0:01:36.240 last ten years, and that was in part technology and innovation. 0:01:36.800 --> 0:01:38.640 In the US, it was the thanks stocks in the 0:01:38.880 --> 0:01:41.440 in China and Asia the bad stocks. We looked to 0:01:41.480 --> 0:01:44.759 Europe and we don't see that same sort of innovation 0:01:44.880 --> 0:01:47.280 productivity coming out of that region. Of course, they also 0:01:47.400 --> 0:01:51.320 mired in political uncertainty and difficulty around being an explot 0:01:51.360 --> 0:01:56.960 oriented economy, so in some ways they just haven't perhaps 0:01:57.040 --> 0:01:59.560 picked up on one of the key drivers of growth 0:01:59.560 --> 0:02:02.240 probably going forward. I mean, I know, Mona, it was 0:02:02.280 --> 0:02:06.720 a quiet December and then a quiet January and quiet February. 0:02:06.920 --> 0:02:10.360 John and I aged you didn't. But now, what after 0:02:10.520 --> 0:02:14.960 drug do you make a strategy adjustment off the market 0:02:15.040 --> 0:02:19.720 reaction to drugs? Bombshell Y. You know, I think our 0:02:19.840 --> 0:02:22.919 strategy even going into this year, had been a bit 0:02:22.919 --> 0:02:25.639 of a Barbell approach um, and we talked about how 0:02:25.639 --> 0:02:27.560 in one hand of that Barbell, we still prefer the 0:02:27.680 --> 0:02:31.280 US as best in the block from a developed market perspective. 0:02:31.560 --> 0:02:33.760 The other hand of that Barbell was really China and 0:02:33.840 --> 0:02:37.000 selective em which were you know, poised to do well 0:02:37.040 --> 0:02:40.240 with not only potential trade deal but the selective stimulus 0:02:40.280 --> 0:02:44.120 measures they're facing, and valuations that had really catered our 0:02:44.160 --> 0:02:46.919 crater last year or so, you know, some attractiveness there 0:02:46.960 --> 0:02:49.160 In the middle of that Barbell and no man's land 0:02:49.320 --> 0:02:52.160 was Europe still and I think, um, you know, not 0:02:52.240 --> 0:02:54.400 only Brexit, but some of the economic uncert until we 0:02:54.440 --> 0:02:57.400 talked about was what was driving that decision. You know, 0:02:57.400 --> 0:03:02.200 at some point Europe may become interesting from a dividend perspective, 0:03:02.240 --> 0:03:04.160 So I think, you know, with the euro stocks at 0:03:04.160 --> 0:03:08.440 a three percent yield and foots the flues, uh, you know, 0:03:08.480 --> 0:03:11.000 we may get some interest from a value or dividend 0:03:11.000 --> 0:03:13.560 oriented investor, but you know, we're not there yet in 0:03:13.680 --> 0:03:15.720 terms of really kind of pounding the table. I don't 0:03:15.720 --> 0:03:18.080 think you're alone moment, that is for sure. I stugged 0:03:18.160 --> 0:03:21.239 to find a single European equity market ball for the 0:03:21.320 --> 0:03:23.680 last few months. We've had a market rally that I 0:03:23.720 --> 0:03:26.040 think and many others would also agree that has been 0:03:26.040 --> 0:03:28.720 built on the faith in policymakers and their ability to 0:03:28.880 --> 0:03:32.480 stabilize the situation. At some point this year we were 0:03:32.520 --> 0:03:35.240 inevitably going to go through a period where that faith 0:03:35.280 --> 0:03:39.400 would be tested. Was the ECB news conference the beginning 0:03:39.400 --> 0:03:41.320 of that. Just the period that we have to go 0:03:41.400 --> 0:03:44.400 through where the faith in the policymaker's ability to stabilize 0:03:44.400 --> 0:03:47.880 the global economy is tested somewhat. And what is your 0:03:47.920 --> 0:03:51.400 advice to investors listening to this that may experience that 0:03:51.480 --> 0:03:55.000 in the coming weeks. Yeah, you know, we went through 0:03:55.160 --> 0:03:57.920 a dramatic fall in December. We fell Pete trough probably 0:03:57.920 --> 0:04:01.640 around on the SMP, and then we went through dramatic reversal. 0:04:01.760 --> 0:04:06.560 So now we're up about from the December flows. It's 0:04:06.760 --> 0:04:10.560 natural after that kind of one way directional upboard movement 0:04:10.800 --> 0:04:13.760 to get a period of consolidation of profit taking. I 0:04:13.760 --> 0:04:16.960 think it's actually healthy. Um. What we have to wait 0:04:17.000 --> 0:04:20.320 for now is the next set of catalysts to emerge 0:04:20.360 --> 0:04:23.760 to drive us to perhaps either our next leg upward 0:04:24.160 --> 0:04:28.080 or maybe some sideways movement. But what we're watching closely is, uh, 0:04:28.120 --> 0:04:31.000 those two economies that we mentioned earlier, the US and China, 0:04:31.080 --> 0:04:33.040 to really pull US out of this. So we'll get 0:04:33.040 --> 0:04:35.919 the jobs number this morning, which may be somewhat telling. 0:04:35.960 --> 0:04:38.000 If the US is you know, we'll be able to 0:04:38.080 --> 0:04:40.839 decouple further. But what we're really looking for is we 0:04:40.960 --> 0:04:42.839 entered the second half of this year, is whether the 0:04:42.920 --> 0:04:46.520 Chinese stimulus will be able to be effective and US 0:04:46.640 --> 0:04:50.040 earnings growth story is effective as well. Nicely framed in 0:04:50.839 --> 0:04:54.880 mystery here in March mortomaazed, thank you, thank you with Alians. 0:04:58.040 --> 0:05:01.919 What a perfect time to speak to Kathy Jones of 0:05:02.000 --> 0:05:04.360 schwab as we look at fixed income and so much 0:05:04.360 --> 0:05:10.000 of this UH, Cathy is draggy adjust It's got nothing 0:05:10.040 --> 0:05:13.760 to do with America. But in the butt in your world, 0:05:14.320 --> 0:05:17.719 is the terminal value of where the yield is heading? 0:05:18.360 --> 0:05:22.800 Doesn't it migrate a little bit lower? Yeah, Tom, I 0:05:22.839 --> 0:05:26.640 would definitely agree. Um, we had been looking at a 0:05:26.760 --> 0:05:30.160 trading range maybe you know, the in the ten year 0:05:30.200 --> 0:05:32.840 treasury around two and a half to three percent this year, 0:05:32.839 --> 0:05:36.000 but I think UH it could break below two and 0:05:36.040 --> 0:05:38.440 a half based on some of the weakness we've seen 0:05:38.480 --> 0:05:43.240 in global UH economic activity, particularly those horrible numbers out 0:05:43.240 --> 0:05:47.200 of China overnight. So um, yeah, we think that it 0:05:47.200 --> 0:05:49.360 it drifts lower from here, and that the FETE has 0:05:49.360 --> 0:05:52.880 done raising rates to seventy five just seems to be 0:05:53.080 --> 0:05:55.279 the line in the sin Now the upper end of 0:05:55.279 --> 0:05:57.919 a really narrow trading range. Are you saying we're going 0:05:58.000 --> 0:06:02.280 to be back into trading rights, Cathy? But it shifts Ilowa. Yeah. Um. 0:06:02.360 --> 0:06:04.600 We had our call had been that we had peaked 0:06:04.640 --> 0:06:06.719 last year at three and a quarter for the cycle, 0:06:06.800 --> 0:06:09.320 and the probably holding about a two and a half 0:06:09.320 --> 0:06:11.880 to three percent range. But now I'm I'm looking at 0:06:11.920 --> 0:06:14.440 maybe two in a quarter to two and three quarters 0:06:14.520 --> 0:06:18.200 has more likely range. Um, A lot's going to depend, 0:06:18.240 --> 0:06:21.200 of course on whether we bounce back um some of 0:06:21.200 --> 0:06:24.159 this weakness, but it is looking more more on the 0:06:24.200 --> 0:06:27.640 downside than the upside. Kith. We talked to equity types 0:06:27.680 --> 0:06:30.880 like Liziane Saunders about the single digit world, and of 0:06:30.880 --> 0:06:34.080 course we've had many years of bowl market migrating to 0:06:34.279 --> 0:06:38.320 high single digit and some would psychologically frame double digit 0:06:38.480 --> 0:06:41.880 in your world, that's not the case. Tell me that 0:06:42.000 --> 0:06:44.640 savers are going to get used to a nominal return 0:06:45.279 --> 0:06:49.560 of three or four percent? Is that true? Oh? Yeah, 0:06:49.640 --> 0:06:52.640 I think so. Um, it's would be very difficult to 0:06:52.680 --> 0:06:58.320 get a lot above that, given the aging of the population, 0:06:58.640 --> 0:07:01.960 the level of growth at we're expecting. It wouldn't make 0:07:02.000 --> 0:07:05.320 a lot of sense to get to expect much. Okay, 0:07:05.880 --> 0:07:09.880 so is dividend growth my new yield, Well that has 0:07:09.920 --> 0:07:12.200 been for quite some time. But I would say now 0:07:12.240 --> 0:07:14.840 there's real competition. I mean, you can get two and 0:07:14.840 --> 0:07:17.320 a half percent in a very short term risk free 0:07:17.840 --> 0:07:21.960 piece of paper, So that is stiff competition for the 0:07:22.040 --> 0:07:25.600 volatility the equities john to be a good property for you. 0:07:25.720 --> 0:07:27.960 The real dividend growth. Oh thanks, I think it's just 0:07:28.160 --> 0:07:31.760 that's just an extra show. It's a show. It's got 0:07:31.760 --> 0:07:34.960 a tone to it. Six basis points. German tenure, Kathy, 0:07:35.440 --> 0:07:38.720 just phenomenal. It's this security that everybody wants to be 0:07:38.760 --> 0:07:40.640 able to show up but just gets the face ripped 0:07:40.640 --> 0:07:43.000 off every tron they try and do it. Kathy, what 0:07:43.160 --> 0:07:46.720 is going on in Germany? Well, I think what we're seeing, 0:07:46.760 --> 0:07:50.040 as DROGGI pointed out, is just the real impact of 0:07:50.080 --> 0:07:52.480 all this trade conflict that we've had. So we have 0:07:52.600 --> 0:07:56.440 the slowdown in growth. It's coming out of both China 0:07:57.240 --> 0:08:00.400 and now out of Europe as a result of all 0:08:00.400 --> 0:08:05.160 these trade business that's going on. And I think that 0:08:05.160 --> 0:08:08.040 that is the issue for the FED. Now you know, 0:08:08.120 --> 0:08:13.000 we can't be isolationist in the sense that we were 0:08:13.080 --> 0:08:16.240 open enough to global trade to feel its impact as well. 0:08:16.280 --> 0:08:19.440 But I think, yeah, Germany is so dependent on on trade, 0:08:19.800 --> 0:08:23.640 and particularly trade with China, that that's really what's affecting 0:08:24.000 --> 0:08:26.440 UM the boone market. So, Cathy, I was watching your 0:08:26.600 --> 0:08:29.960 dollar yesterday break down, then breakdown again, then keep breaking 0:08:29.960 --> 0:08:32.920 down into the end of yesterday's session, and I was 0:08:32.960 --> 0:08:35.079 asking myself a couple of questions. How much of this 0:08:35.160 --> 0:08:38.440 move as a percentage was about the policy that the 0:08:38.440 --> 0:08:41.199 ECB had introduced, and how much of it as a 0:08:41.240 --> 0:08:43.400 percentage was just a total lack of belief that the 0:08:43.400 --> 0:08:46.520 policy will actually work. What he's driving about right now? 0:08:46.520 --> 0:08:48.960 The former of the letter, Yeah, I would say it's 0:08:48.960 --> 0:08:54.320 probably the latter, because although um drawing, you introduced some 0:08:54.440 --> 0:08:57.679 easier policy that should you know, is designed to help 0:08:58.080 --> 0:09:00.199 the banking system, designed to help me A to me, 0:09:00.280 --> 0:09:01.880 I don't think there's a lot of faith that there's 0:09:02.000 --> 0:09:05.960 enough firepower there to really do it. I look, I 0:09:06.000 --> 0:09:10.320 think it where we are after draggy and it's clearly 0:09:10.320 --> 0:09:13.959 a reaffirmation of lower rates as well. Give me a 0:09:14.080 --> 0:09:18.400 schwab prediction on inflation and that what that does to 0:09:18.480 --> 0:09:22.520 my lovely total return. Well, we're actually saying a little 0:09:22.520 --> 0:09:25.160 bit of an optick in inflation this year, but we 0:09:25.240 --> 0:09:28.000 think some of that is driven by energy that not 0:09:28.120 --> 0:09:30.439 only flows through the top line, but we'll flow through 0:09:30.480 --> 0:09:34.520 a little bit to the underlying core rate. But we're 0:09:34.520 --> 0:09:37.320 still saying it pretty tame. I mean, I don't think 0:09:37.320 --> 0:09:40.640 that we're looking for anything above two percent in core inflation. 0:09:41.400 --> 0:09:44.319 What do you recommend for somebody desperate for you, gentlemen 0:09:44.400 --> 0:09:48.440 the yesterday on loans and he's you know, he's spouting 0:09:48.520 --> 0:09:51.960 seven and eight percent coupons, I mean above high yield. 0:09:52.080 --> 0:09:55.720 I mean, what do you recommend for someone who says, Cathy, 0:09:55.800 --> 0:09:58.200 this is all great, but I can't get it done 0:09:58.200 --> 0:10:02.199 at four percent? Yeah, the the only way you can 0:10:02.240 --> 0:10:04.920 get above four percent is to take a certain amount 0:10:04.960 --> 0:10:06.960 of risk, And so we just try to be realistic 0:10:07.040 --> 0:10:09.360 with people and say, sure, you can get seven percent, 0:10:09.440 --> 0:10:10.920 but you're going to have to be in very low 0:10:10.960 --> 0:10:14.880 credit quality towards the end of the business cycle. You know, 0:10:15.120 --> 0:10:18.320 you probably don't want to have your whole portfolio in 0:10:18.440 --> 0:10:20.360 high yield our loans at this stage of the mind. 0:10:20.400 --> 0:10:22.280 And we don't we don't talk enough about this, John, 0:10:23.040 --> 0:10:26.360 right now, are are you comfortable, Cathy saying that we've 0:10:26.360 --> 0:10:29.440 seen the tights in high yield after the rally over 0:10:29.480 --> 0:10:32.600 the last couple of months at about four basis points over? 0:10:33.160 --> 0:10:36.640 Is that it? Yeah? I still think so. I mean, 0:10:36.679 --> 0:10:39.360 I've been really surprised by the magnitude of the rally 0:10:39.440 --> 0:10:43.440 since you know, Christmas Eve, uh in high yield and 0:10:43.440 --> 0:10:47.440 and generally speaking in all the spreads, But I'm pretty 0:10:47.440 --> 0:10:50.760 comfortable that we've probably seen the tights. You see, Okay, 0:10:51.120 --> 0:10:54.640 Cathy's if you say tights, It's okay. Farrell gets like 0:10:54.720 --> 0:10:57.400 this on Fridays because he's preparing for the real yield. 0:10:58.000 --> 0:11:01.480 John wise, guy, I'm not gonna was Jones to explain this, 0:11:01.880 --> 0:11:05.440 Would you explain what the leotard is? So typically in 0:11:05.480 --> 0:11:08.360 any given market, Europe, the United States, and let's talk 0:11:08.400 --> 0:11:10.520 about the United States for that matter, you'll have a benchmark, 0:11:10.679 --> 0:11:13.080 so you'll be four hundred basis points over the benchmark 0:11:13.080 --> 0:11:15.560 of a similar maturity. So basically, when you say that 0:11:15.600 --> 0:11:18.880 we're really tight, you're looking at high yield over treasuries 0:11:18.920 --> 0:11:22.000 at about four hundred basis points um. For the other 0:11:22.080 --> 0:11:27.240 all different four hundred basis points. Can you go to 0:11:27.360 --> 0:11:32.079 percentage points for percentage points, which which is pretty tight, Tom, 0:11:32.120 --> 0:11:35.560 given to how wide things have got through December. Big 0:11:35.640 --> 0:11:38.959 V shaped recovery, Cathy in High Yield, Big V shaped 0:11:39.000 --> 0:11:42.840 recovery inequities. Do you see this being a story that 0:11:42.880 --> 0:11:45.760 goes beyond credit, that we've had the V shaped recovery 0:11:46.000 --> 0:11:49.080 and that we've exhausted the federal reserve fueled rally of 0:11:49.120 --> 0:11:51.920 the last couple of months. Well, I think at leads 0:11:52.000 --> 0:11:55.400 for the time being. UM. I think total return year 0:11:55.520 --> 0:11:58.280 to date and high yield is something like seven seven 0:11:58.280 --> 0:12:00.840 and a a half percent. I mean, it's a whole year 0:12:01.160 --> 0:12:04.280 worth of performance right there. So I think we have 0:12:04.440 --> 0:12:07.199 to back and fill to some extent. I certainly don't 0:12:07.240 --> 0:12:11.080 see the impetus from moving a lot further from here 0:12:11.559 --> 0:12:14.319 unless you really really think that the you know, a 0:12:14.520 --> 0:12:17.240 that the economy is going to turn around and go 0:12:17.480 --> 0:12:20.120 sharply higher, but the Fed's going to sit back and 0:12:20.160 --> 0:12:22.880 allow it to do that. Very good Cathy Jones, thank 0:12:22.920 --> 0:12:25.760 you so much for an important update for US investors 0:12:25.800 --> 0:12:31.800 on all the drama we saw yesterday in your Let 0:12:31.880 --> 0:12:34.760 us begin and let's really focus here on the fabric 0:12:34.800 --> 0:12:36.760 of the American labor economy. We can do that with 0:12:36.840 --> 0:12:39.880 Juliet Cornado. And the reason that Dr Cornados with this 0:12:40.040 --> 0:12:44.079 John is she was loving the nickelback and the choice 0:12:44.520 --> 0:12:47.240 of picking out the one with zz tops Billy Gibbons 0:12:47.280 --> 0:12:50.160 in it. As Juliet, Dr Cornado, are you a large 0:12:50.240 --> 0:12:54.120 nickelback fan? I am not a nickelback fan. I'm sorry 0:12:54.120 --> 0:12:57.920 to disappoint you, Tom, I'm I'm I am astonished that 0:12:58.040 --> 0:13:00.640 it is being debated on the floor of it was. 0:13:00.679 --> 0:13:04.080 I think I'm well astonished it made an appearance on 0:13:04.120 --> 0:13:10.960 this program. Julia equally astonishing. Julia is too young for this. 0:13:11.080 --> 0:13:14.200 But we played Kansas and Sticks earlier in the weeks. 0:13:14.720 --> 0:13:19.600 We finished Strong Memories of that the bar Is Show. 0:13:19.679 --> 0:13:22.040 This week, I'm sure you do. Let us go out 0:13:22.080 --> 0:13:25.600 to the broad midwest of Kansas. Carry on my wayward son. 0:13:26.240 --> 0:13:29.839 Forget about the East coast, the west coast, Julia, what's 0:13:29.840 --> 0:13:34.160 the employment fabric of the great middle west of this nation. 0:13:35.520 --> 0:13:38.920 The employment fabric is the service sector. And we're going 0:13:38.960 --> 0:13:42.480 to be relying on that turvice sector as we moved 0:13:42.480 --> 0:13:44.560 through the year, because I think we're going to see 0:13:44.559 --> 0:13:50.000 a fading in the manufacturing and energy sector hiring that 0:13:50.080 --> 0:13:52.560 has been a powerhouse in the last couple of years. 0:13:52.880 --> 0:13:56.400 That's got to fade. With the global slowdown. We're we're 0:13:56.440 --> 0:14:00.199 starting to see the cracks there, and that's where we 0:14:00.240 --> 0:14:03.680 should feel the pain. The service sector is what's likely 0:14:03.720 --> 0:14:06.199 to carry us through. It was resilient in the last 0:14:06.240 --> 0:14:11.840 global slowdown during twenty sixteen, and it's largely domestically oriented. 0:14:12.240 --> 0:14:14.960 As long as consumers keep the phase, that can be 0:14:15.000 --> 0:14:18.800 a virtuous cycle with consumers spending supporting the service sector 0:14:18.920 --> 0:14:21.520 and the service sector continuing to add jobs. John This 0:14:21.640 --> 0:14:25.040 is so important. If we're in a virtuous cycle, that's 0:14:25.040 --> 0:14:28.000 how you get to where the optimus are. This is 0:14:28.360 --> 0:14:30.120 a big, big issue right now, not just for the 0:14:30.160 --> 0:14:32.400 United States, but for Europe. To even in Europe, the 0:14:32.440 --> 0:14:37.880 service sector is pretty resilient. Got these two economies. Global 0:14:37.880 --> 0:14:40.440 manufacturing Abadankie is largely in a recession at the moment. 0:14:40.440 --> 0:14:42.720 It is not looking good at all, especially in China 0:14:42.760 --> 0:14:45.400 and Europe and hitting the United States. It is two 0:14:45.400 --> 0:14:48.040 economies as well, Julius. So essentially you're saying that the 0:14:48.080 --> 0:14:50.400 service sector can pull up the arrest of the economy 0:14:50.600 --> 0:14:52.840 and won't be brought down by what is happening with 0:14:52.880 --> 0:14:57.120 manufacturing worldwide. Well, I think we will be brought down. 0:14:57.160 --> 0:14:59.880 We will see growth moderate. I think there's no doubt 0:15:00.000 --> 0:15:04.040 about the fact that is likely to be much lower 0:15:04.040 --> 0:15:09.240 than But the service sector dynamics can be resilient to 0:15:09.320 --> 0:15:12.840 that slowdown. Uh. And we've seen that before and and 0:15:12.920 --> 0:15:15.160 that will be you know that that's that's going to 0:15:15.240 --> 0:15:17.880 be our saving grades. It's not going to necessarily accelerate 0:15:17.880 --> 0:15:21.120 to offset the slowing manufacturing, but it will be a 0:15:21.160 --> 0:15:24.160 buffer to that slowdown. Julia, on the global basis and 0:15:24.200 --> 0:15:27.120 the cliche the Chairman Powell is a central banker to 0:15:27.160 --> 0:15:31.120 the world. Maybe Chairman Draggy is central banker to the world. 0:15:31.240 --> 0:15:34.440 I M. Currencies have had a real tough go of 0:15:34.440 --> 0:15:38.920 it the last ten twelve training sessions with even Argentinean 0:15:39.000 --> 0:15:42.600 pays so knocking out to new weakness yesterday. I mean 0:15:43.160 --> 0:15:50.040 the drag effect or the Powell effect. They're global, aren't they? Oh? Absolutely, 0:15:50.160 --> 0:15:53.200 Central banking is a global game now and uh. I 0:15:53.240 --> 0:15:57.200 think the FED certainly is has gotten on board with 0:15:57.240 --> 0:15:59.600 that in the last few years. They're talking and keeping 0:15:59.640 --> 0:16:03.480 their eye very closely on global development. But yes, primarily 0:16:04.120 --> 0:16:06.240 the E c D and the FED really set the 0:16:06.240 --> 0:16:08.760 tone for global market. What is your observation on the 0:16:08.840 --> 0:16:13.440 jobs report? What will you look for? Well, we've seen 0:16:13.520 --> 0:16:15.840 kind of a disconnect between a lot of the high 0:16:15.920 --> 0:16:20.920 frequency job market indicators and other indicators of demands in 0:16:20.960 --> 0:16:24.920 the economy and payrolls. Payrolls have been accelerating in the 0:16:25.000 --> 0:16:28.080 last few months and everything else has been moderating. So 0:16:28.160 --> 0:16:31.160 I expect a number I'm a little bit below consensus. 0:16:31.160 --> 0:16:34.360 I'm looking for one fifty k. It looks like we're 0:16:34.440 --> 0:16:38.960 due for some correction down again. One, you know, a 0:16:39.040 --> 0:16:42.040 healthy number, it's nothing to worry about, but we should 0:16:42.080 --> 0:16:46.480 see some either a combination of downward revisions and slower 0:16:46.560 --> 0:16:48.920 higher and John, this shows a variance. It's out there 0:16:48.920 --> 0:16:52.680 because we've got many others two fifty or two as well. 0:16:52.680 --> 0:16:55.360 There's a there's a real variance, folks going into this 0:16:55.480 --> 0:16:58.560 number in eighteen minutes. I've gotta get you thought some 0:16:58.560 --> 0:17:00.920 white scot to j D of a Whatmently, I think 0:17:00.920 --> 0:17:03.160 the consensus for you now is even with white growth 0:17:03.160 --> 0:17:06.720 getting towards decade highs of three something per cent, that 0:17:06.720 --> 0:17:10.040 that's not going to bleed into headline price pressures. That 0:17:10.080 --> 0:17:11.960 we won't see a big pick up inflation off the 0:17:12.000 --> 0:17:14.720 back of that. Do you agree with that? Julia, Yeah, 0:17:14.800 --> 0:17:17.359 I'm I'm I'm in that camp. We just really haven't 0:17:17.400 --> 0:17:19.880 seen much passed through. It's not to say we're not 0:17:20.000 --> 0:17:23.960 seeing cyclical pressures in inflation. We are seeing, for example, 0:17:24.040 --> 0:17:27.640 goods prices pick up, goods inflation pick up, but there's 0:17:27.680 --> 0:17:33.520 a lot of other structural factors from from housing, from technology, UH, 0:17:33.640 --> 0:17:37.440 from healthcare that are offsetting that in weighing inflation down. 0:17:37.520 --> 0:17:40.000 So it's going to be really hard to see a 0:17:40.119 --> 0:17:43.080 notable acceleration. How do you and Julia Cornado with his 0:17:43.160 --> 0:17:46.680 folks macro policy perspectives as we moved to jobs today, 0:17:46.760 --> 0:17:48.560 Jim Glassman with us in a bit, and then every 0:17:48.640 --> 0:17:52.400 Joseph Cohen as well. Dr Coronado, how do you study 0:17:52.960 --> 0:17:57.080 retail America? Do you like partition bricks and mortar and 0:17:57.240 --> 0:18:01.840 Amazon ors or a different Coronado method. There's been such 0:18:01.880 --> 0:18:04.600 a disruption and retail in the last couple of years, 0:18:04.600 --> 0:18:08.359 an accelerated disruption, and that actually I think it adds 0:18:08.400 --> 0:18:10.480 to the noise in the data. For example, what we 0:18:10.520 --> 0:18:14.960 saw on retail sales UH in December was overstated because 0:18:15.200 --> 0:18:18.040 we just can't do the things like we like to do, 0:18:18.119 --> 0:18:21.960 like seasonally adjusted data, because all the patterns have been disrupted. 0:18:22.000 --> 0:18:25.040 So taking the temperature of the retail sector is a 0:18:25.040 --> 0:18:27.520 lot harder than it used to be. And you need 0:18:27.560 --> 0:18:29.840 to be more patients, and you need to sort of 0:18:29.880 --> 0:18:32.520 smooth through some of the noise and the data because 0:18:33.400 --> 0:18:35.880 it's just all over the map now. And that's true 0:18:35.920 --> 0:18:39.800 both for measures of inflation and measures of sales. Julia, 0:18:39.880 --> 0:18:42.600 if we get another take higher in the participation, right, 0:18:42.760 --> 0:18:44.760 do we have some people on the FOMC that start 0:18:44.840 --> 0:18:46.680 looking back at the policies over the last couple of 0:18:46.760 --> 0:18:49.200 years and say, you know what, maybe we got this wrong. 0:18:51.280 --> 0:18:54.959 You know, it's second guessing is hard to do. Uh. 0:18:55.119 --> 0:18:57.119 You know. I think say they were making the decisions 0:18:57.160 --> 0:19:00.560 coming off the zero lower bound. Uh, you know, with 0:19:00.640 --> 0:19:03.720 a healthy labor market and a falling unemployment rate, it 0:19:03.760 --> 0:19:07.840 didn't make sense to stay at zero. Uh. You know. 0:19:07.960 --> 0:19:10.480 And I think right now the debate is more around Okay, 0:19:10.480 --> 0:19:12.800 now that we are closer to something that looks like 0:19:12.800 --> 0:19:17.120 a neutral interest rate, now we can let this run 0:19:17.200 --> 0:19:19.359 a little bit and see how far we can go 0:19:19.480 --> 0:19:22.720 with it. But I think, you know, second guessing getting 0:19:22.720 --> 0:19:26.280 off the zero lower bound when the economy was doing well. 0:19:26.320 --> 0:19:28.080 You know, I don't think many people are going to 0:19:28.200 --> 0:19:32.120 regret that decision, per se. Julia Karnata, thank you so much. 0:19:32.200 --> 0:19:35.000 Macro policy perspectives of the look at the job economy, 0:19:35.040 --> 0:19:42.720 and we'll continue with discussion this discussion. This is a 0:19:42.800 --> 0:19:46.680 joy and extensive conversation this morning with Abbey Joseph Cohen. 0:19:47.359 --> 0:19:49.880 She's been a wonderful friend of Bloomberg on the economy 0:19:49.880 --> 0:19:53.000 and Bloomberg surveillance, and she joins US futures at negative 0:19:53.000 --> 0:19:56.679 eighteen down futures negative one seventy three. Abby, wonderful to 0:19:56.760 --> 0:19:59.879 have you with us this morning. Is Jim Blastman was 0:20:00.000 --> 0:20:03.720 alluding to within the synthesis of your work as a 0:20:03.840 --> 0:20:09.400 senior investment strategists and advisory director at Goldman Sachs, can 0:20:09.440 --> 0:20:13.960 you say that America stands alone, separate from draggy and 0:20:14.080 --> 0:20:19.280 separate from the challenges of e M and China. Clearly, Tom, 0:20:19.440 --> 0:20:23.119 the United States has many advantages, and one of the 0:20:23.160 --> 0:20:26.919 things I am concerned about is that these disparities that 0:20:26.960 --> 0:20:29.800 we have benefited from in the US are beginning to 0:20:29.880 --> 0:20:32.800 ease up a little bit. So for example, he talked 0:20:32.840 --> 0:20:37.080 about the importance of immigration to the United States. Let's 0:20:37.160 --> 0:20:39.520 keep in mind that while we always focus on the 0:20:39.600 --> 0:20:43.520 quarterly GDP numbers, I think long term economists look at 0:20:43.560 --> 0:20:47.119 potential growth rate of GDP and that has come down 0:20:47.200 --> 0:20:50.320 in the United States. There are two key reasons. One 0:20:50.520 --> 0:20:53.480 is that productivity of our workers has come down. Maybe 0:20:53.520 --> 0:20:57.040 we've not been infesting enough in terms of capex. But 0:20:57.160 --> 0:20:59.760 the other thing that's happened is that labor force growth 0:21:00.160 --> 0:21:03.479 is now slowing UM. And one key component of that 0:21:03.600 --> 0:21:07.120 growth and labor force had been immigration. If we look 0:21:07.160 --> 0:21:10.800 at at some early indicators, they're not looking good. So, 0:21:10.880 --> 0:21:15.440 for example, if we look at approved student visas, this 0:21:15.520 --> 0:21:18.600 is for foreign students coming to the United States, either 0:21:18.680 --> 0:21:22.760 for university studies or graduate level, that has declined double 0:21:22.840 --> 0:21:26.000 digit UM. And in addition, there has been a sharp 0:21:26.080 --> 0:21:29.679 decline in the number of those special visas that we 0:21:29.760 --> 0:21:33.440 grant workers who have special skills and categories. And this 0:21:33.520 --> 0:21:36.479 is something I hope it's not the canary in the 0:21:36.480 --> 0:21:39.440 coal mine, but we need to watch it carefully. I 0:21:39.440 --> 0:21:42.000 want to I want I want to say broader here 0:21:42.440 --> 0:21:44.879 and and then go more micro later, but on a 0:21:44.920 --> 0:21:48.280 broader theme, from what we heard from Mr Draggy yesterday 0:21:48.359 --> 0:21:51.440 and his illusion late in the press conference to protectionism, 0:21:51.840 --> 0:21:55.400 are you working at this point at Goldman Sachs around 0:21:55.560 --> 0:21:59.840 wrapped around a mercantilistic America, and we see the effect 0:21:59.840 --> 0:22:02.560 on the labor economy, we see the effect from Mr 0:22:02.640 --> 0:22:06.720 Dragging indeed a mercantilistic America. We see the effect for 0:22:06.760 --> 0:22:11.760 an ascendant Asia. You've raised so many different interesting points 0:22:11.800 --> 0:22:14.520 in that question. Let me try to respond briefly. I 0:22:14.840 --> 0:22:18.080 can First of all, the United States, in many ways 0:22:18.119 --> 0:22:21.760 does stand alone UM. We have the most productive workers 0:22:21.760 --> 0:22:26.360 on the planet. My concern is that productivity impetus is slowing. 0:22:26.880 --> 0:22:30.720 Number one, number two UM. From a standpoint of our 0:22:30.880 --> 0:22:34.200 exposure to foreign trade, the United States is not as 0:22:34.240 --> 0:22:38.120 exposed many of these other countries Germany, Japan, and so on. 0:22:38.440 --> 0:22:42.119 More than of their GDP is related to foreign trade. 0:22:42.400 --> 0:22:46.080 For the United States it's roughly fifteen percent. So those 0:22:46.160 --> 0:22:51.400 are different factors as well. But nevertheless, over the last decade, 0:22:51.560 --> 0:22:55.160