Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
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Speaker 1: podcastle Scaleup Talk. Dan Eyes he knows all this stuff
Speaker 1: because he's a tech analyst. He does that stuff for
Speaker 1: web Bush Securities. He joins his via Zoom sporting his
Speaker 1: Penn State regalia there, which we appreciate as always. Hey Dan,
Speaker 1: thanks so much for joining us. I got to start
Speaker 1: with Tesla. I mean, Elon changes prices on his cars
Speaker 1: like most people change socks. I thought this was a
Speaker 1: little bit more to the downside, a little bit more scientific,
Speaker 1: because I want to go to the issue which I
Speaker 1: asked Matt. I'd love to get your thoughts, Dan, how
Speaker 1: do you model out like real demand for electric vehicles?
Speaker 3: Look, I mean if you look at the price cards,
Speaker 3: no doubt this one. I think surprise the street. I
Speaker 3: mean it surprises us a bit right in terms of
Speaker 3: we believe about ninety five percent of the price cards
Speaker 3: in the rearview mirror. Now, from an elasticity perspective, growth
Speaker 3: is sort of steady state. What I really view in
Speaker 3: that sort of thirty to forty percent ban so in
Speaker 3: terms of year of year of growth. But when you
Speaker 3: look at some of these cuts, look, it's from an
Speaker 3: inventory perspective in the US they need to right now
Speaker 3: focus on volumes over just holding the line on prices.
Speaker 3: And that's really what we're seeing in terms of this
Speaker 3: Yin Yang play out.
Speaker 2: So they're basically trying to take or hold as much
Speaker 2: market share as they can, imagine as these UAW strikes
Speaker 2: kind of free customers out. Yesterday, I was talking to
Speaker 2: a dealer who said, and he owns Ford GM as
Speaker 2: well as Delantis stores, and he said, even if they
Speaker 2: had inventory of say you're looking for a Ford Ranger
Speaker 2: and they have one, customers are already worried about the
Speaker 2: strike affecting parts, about the strike affecting build quality, and
Speaker 2: they're already looking, you know, let's go look at a
Speaker 2: Nissan Frontier or a Toyota Tacoma instead. So do you
Speaker 2: do you see the strike already having effects on Tesla
Speaker 2: competitors definitely.
Speaker 3: I mean we've seen it even as of the last
Speaker 3: even two weeks ago. I mean because the worry here
Speaker 3: and look that's always say it's such a debacle in
Speaker 3: Detroit in terms of this UAW strike because it was
Speaker 3: doing for consumers looking at alternatives. And when I believe
Speaker 3: if this lasts another two three weeks, this starts to
Speaker 3: have a pretty massive ripple effect even twenty twenty four
Speaker 3: from the EV lineup. And who benefits there. It's Tessa,
Speaker 3: it's Ridian, it's far and auto makers, and I think
Speaker 3: that's the frustration right now for a bar and Farling.
Speaker 4: Yep.
Speaker 1: Interesting. I mean I just bought the bmw X three
Speaker 1: met and I just went to look and see what
Speaker 1: the the EV offerings are.
Speaker 4: There.
Speaker 1: Huge premiums they wanted over and I'm like, I'm not
Speaker 1: paying a premium just to say.
Speaker 2: Massive premiums to make a purchase now. And then on
Speaker 2: the other on the other side of that, you do
Speaker 2: get a seventy five dollars yeah, tax credit credit, and
Speaker 2: and then you'll get another one for probably two grand
Speaker 2: from New Jersey, so all in about ten grand back.
Speaker 1: That's the math doesn't work right now, all right? Hey,
Speaker 1: So let's step back, Dan, you cover you know, a
Speaker 1: big swath of the tech space here. We got interest
Speaker 1: rates to my friend, continuing to go higher. That's got
Speaker 1: to be tough on the valuation call. How do you
Speaker 1: put some of your your tech bullishness in the context
Speaker 1: of these rising these rising rates rates we haven't seen
Speaker 1: since two thousand and seven.
Speaker 3: Yeah, I mean, look, no doubt it's caused white knuckles,
Speaker 3: and we've seen it with tax stocks on the pressure
Speaker 3: I mean, Paul Matt, I just kind of view it
Speaker 3: all all of our checks. Fundamentally speaking, I think we
Speaker 3: go into a three cure earning the season. That's going
Speaker 3: to be pretty significant surprise at the upside across cloud, software,
Speaker 3: digital advertising, I think on the chip side as well.
Speaker 3: So you'll you'll see this and maybe a bit overshadow
Speaker 3: on the near term. But I believe we go into
Speaker 3: the next three to six months and this is more
Speaker 3: of a golden opportunity to buy tech rather than time
Speaker 3: to fear it on sort of macro worries, I mean
Speaker 3: that that continues to be We're handholding clients through this.
Speaker 2: I will say that tech so uh, I've just charted
Speaker 2: out the Nasdaq YEP, and if you put that up
Speaker 2: against the US tenure, you'll see that as rates rise,
Speaker 2: even though the Nasdaq wants to rally, still it's pulling down.
Speaker 1: Those tech stocks.
Speaker 2: So you know, if rates continue to climb, that's no
Speaker 2: bueno for for stocks. And if inflation comes down. You
Speaker 2: know when it was on its way up and that
Speaker 2: was fattening margins. When inflation comes down, do margins get
Speaker 2: under pressure?
Speaker 3: Look, I mean theory from a high level, you could
Speaker 3: say that, but if what's actually happening is, you know,
Speaker 3: supply chains normalizing. You look at AI and we talked
Speaker 3: as the biggest transformation from a tech perspective in the
Speaker 3: last thirty is it's a huge talent and you're actually
Speaker 3: now starting to see just more and more efficiencies throughout
Speaker 3: these software companies and supply chains. So I actually think
Speaker 3: this is a talent. And look in a lot of
Speaker 3: these companies, they have more cash than some countries right
Speaker 3: in terms of they don't need to rely on the
Speaker 3: debt markets. I think M and A is going to
Speaker 3: continue to accelerate. And I just view this as sort
Speaker 3: of the time where I think tech gets stronger despite
Speaker 3: maybe macro clouding it, as many of the Bears, right,
Speaker 3: I mean they've they've called ten of the last two
Speaker 3: downturns the last twenty years.
Speaker 1: Hey, Dan, let's let's switch gears to another name. I
Speaker 1: know you do a lot of work on Apple. What
Speaker 1: can you tell us about this early rollout of the
Speaker 1: Apple iPhone fifteen? How's it going as a meeting expectations?
Speaker 1: What are your thoughts?
Speaker 3: I mean I can tell you even as of checks
Speaker 3: this week in Asia, right now ahead of plan it's
Speaker 3: about ten to ten eleven twelve percent above iPhone fourteen.
Speaker 3: China has actually been strong if you could sell through,
Speaker 3: is there? And despite what'll call it the too hot
Speaker 3: to handle those situations terms the iPhone and fifteen the
Speaker 3: software rollout, which will which will fix that? Look, it
Speaker 3: comes down to just if you get the promotions and carriers,
Speaker 3: it's a no brain. I mean a lot of customers
Speaker 3: right now they're essentially trading in again iPhone fifteens for free.
Speaker 1: What are you telling? What are you telling clients here?
Speaker 1: This is kind of the best trade here in tech?
Speaker 1: From your list, I.
Speaker 3: Think the best trade is probably Microsoft into earnings.
Speaker 5: You know that.
Speaker 3: I think software? If I look at Microsoft, Google, an Amazon,
Speaker 3: those three because of what's happened on cloud and these
Speaker 3: hyperscale buildouts. I think that continues to really be the
Speaker 3: trade here. And even though look, I mean the New
Speaker 3: York City cab drivers barish on tech and earning. So
Speaker 3: I think that sets up for what I view is
Speaker 3: just a very strong rally into year end, despite opposite
Speaker 3: Macro ten year Jitters All right, Dan.
Speaker 1: Well, actually real quick, I'm just looking at the background
Speaker 1: of his little zoom set up there. I see a
Speaker 1: lot in your sports paraphernalia. With the Giants. I got
Speaker 1: asked a question, do the Giants have a quarterback?
Speaker 4: Look?
Speaker 3: I mean that's they have a running back, right, and
Speaker 3: I think the Achilles heel. It's just I just don't
Speaker 3: know if Jones is that quarterback that's gonna get us there.
Speaker 3: And also you have an offensive line that is like
Speaker 3: Swiss Jeeves.
Speaker 1: But we've got a quarterback. We've got to get him
Speaker 1: back on the field. That is, of course Aaron Rodgers.
Speaker 1: Oh excuse him, Dan, excuse me? So that's the Jets. Yeah,
Speaker 1: that's the Jets. That's sorry, Well, nobody in.
Speaker 2: New York has a quarterback then, right.
Speaker 1: You're exactly, well, we don't know about it doesn't matter.
Speaker 1: Let's let that go. He's got a job to do.
Speaker 1: Dan i'ves web Bush Security Senior analys He covers all
Speaker 1: the tech. We appreciate getting a few minutes of this time.
Speaker 1: Big Penn State fan.
Speaker 5: You're listening to the team Ken's are live program Bloomberg
Speaker 5: Markets weekdays at ten am eastering on Bloomberg dot com,
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Speaker 1: You know, we had a big revision to last month's
Speaker 1: jobs number. Yeah, and you put the revising a bigger
Speaker 1: beat and then a huge beat today. So that's five.
Speaker 1: I'm doing a math. Five hundred and sixty three thousand
Speaker 1: jobs added to the US pay roll over the last
Speaker 1: couple of months. Who are these people and who's hiring
Speaker 1: all them? So let's talk to somebody who does this
Speaker 1: stuff for real. Julia Pollock, chief economists at ZIP Recruiter. Boy,
Speaker 1: they're going to know what's happening. Julia, thanks so much
Speaker 1: for joining us. Number one. Who's hiring all these people? Well?
Speaker 6: This report shows job growth pretty much across the board. Leisure, hospitality,
Speaker 6: healthcare remains very strong. Vasional business services were strong. There's
Speaker 6: almost no area where there's weakness except the information sector.
Speaker 6: That sector has lost two point five percent of its
Speaker 6: employees over the past year. It's the glaring exception.
Speaker 2: Wait, what's the information Are we in the information sector?
Speaker 6: We are all the information sector. Yes, it's tech broadcasters,
Speaker 6: et cetera.
Speaker 1: Boy, John Tucker, you're looking at me for so, Julia,
Speaker 1: you know one hundred and fifty I guess one hundred
Speaker 1: and seventy thousand was the or one hundred and sixty
Speaker 1: one hundred thousand was the estimate. Why were the economists
Speaker 1: so wrong? What are the economists getting wrong?
Speaker 6: Well, you know, there's something called the surprise index, and
Speaker 6: it has been showing that we've been wrong for over
Speaker 6: a year. The economy keeps surprising to the upside. And
Speaker 6: that's because our traditional understanding of gravity of you know,
Speaker 6: forces in the economy is that when the FED raises
Speaker 6: interest rates, that's going to slow economic activity down. And
Speaker 6: I mean, what doesn't need to explain it. Any ordinary
Speaker 6: American can understand this. When rates go up, you think
Speaker 6: twice about borrowing to open a business or build a
Speaker 6: home or whatever.
Speaker 4: It is.
Speaker 6: The issue here is that well, activity has cooled in
Speaker 6: some areas, but there have been offsetting sources of strength
Speaker 6: that have caused the overall picture to remain very very rosy.
Speaker 2: So does this mean that the Fed has to raise
Speaker 2: rates again? Julia?
Speaker 1: I mean, you know, you're an economist.
Speaker 2: That seems to be their goal raised race, slow down businesses,
Speaker 2: slow down hiring, slow down spending.
Speaker 1: Is that is that going to happen?
Speaker 6: So for the last three months, those PCE inflation reports
Speaker 6: have been very encouraging, and they precore PC inflation at
Speaker 6: just two percent over the past three months. And so
Speaker 6: if we are really within kind of you know, Stone's
Speaker 6: throw of the Fed's inflation target, looking at the numbers
Speaker 6: that it cares about most, perhaps they won't need to
Speaker 6: raise rates again. You know, it's not their goal here.
Speaker 6: Isn't to reduce employment. It isn't to raise unemployment. It's
Speaker 6: to cool inflation. And if that can happen without pain
Speaker 6: in the live market, so much the better.
Speaker 1: So, Julia, what are the employers that you guys talked
Speaker 1: to a ZIP recruiter? What are they telling you about
Speaker 1: their ability to hire people? Are they finding the people
Speaker 1: they want? Do they have to pay up to get them.
Speaker 1: What are the key drivers for the employers?
Speaker 6: So we are about to release an employer survey, our
Speaker 6: new annual Employer Survey, and our pain is a very
Speaker 6: very clear picture that employers are still struggling. It is
Speaker 6: not easy out there to recruit and retain talent. Their
Speaker 6: biggest difficulty is not not being able to find qualified candidates,
Speaker 6: but over forty percent say they can't find candidates at all.
Speaker 6: And then once they do find candidates, they're having a
Speaker 6: really tough time making connections with those candidates. You know,
Speaker 6: it was thirty seven percent of the time candidates are
Speaker 6: ghosting their interviews.
Speaker 1: Wow, So what are the kids today? Are just the
Speaker 1: people that are looking for jobs today? How important is
Speaker 1: that whole hybrid model where I'm going to wear to
Speaker 1: work from home? How important is that today?
Speaker 6: Well, the five day in office work week is effectively dead.
Speaker 1: Only sixty nobody told us.
Speaker 6: Well in our survey, employers say that only sixteen percent
Speaker 6: of their office jobs are being done in office all
Speaker 6: the time five days a week. So most employers are
Speaker 6: providing some form of flexibility at least one two three
Speaker 6: days when workers can work from home. Hybrid is the
Speaker 6: new normal.
Speaker 2: Everyone has told us by Yes, every day someone.
Speaker 1: Tells us that, So don't worry.
Speaker 2: Paul's just pushing back against it. I look at while
Speaker 2: in the terminal we have E can Go, which is
Speaker 2: a pretty cool function, and you can choose non farm
Speaker 2: payrolls from the drop down menu. Highly recommend it and
Speaker 2: look at the breakdown. So it's as you said, Julia,
Speaker 2: leisure and hospitality a huge driver of this last report.
Speaker 2: And then also government is a big driver in terms
Speaker 2: of adding jobs. Where do you see this going. Construction
Speaker 2: kind of shrank a little bit. Where do you see
Speaker 2: this going as we head into the holiday season.
Speaker 6: Well, you know, that's a good news story, not a
Speaker 6: bad news story. I think some people are interpreting that
Speaker 6: as the economy only creating low paying jobs and leasion hospitality.
Speaker 6: That's not true. With today's report, every major sector has
Speaker 6: now recovered to pre pandemic levels except leisure hospitality, which
Speaker 6: thank goodness, is at least catching up and moving in
Speaker 6: the right direction.
Speaker 7: You know, the.
Speaker 6: Government, local government school rules have been short staffed. They
Speaker 6: started the last school year with lots of vacancies. They
Speaker 6: had to do the same thing again this year, so
Speaker 6: it's good to see them finally making some headway, and
Speaker 6: the private sector still posted the lion's dare of the jobs.
Speaker 1: So we had average hourly earnings grow four point two
Speaker 1: percent year every year. You can make the argument that
Speaker 1: number should actually be higher if there's so many, if
Speaker 1: it's so hard to find, people want to just pay more.
Speaker 6: Yes, So on average wages have grown eighteen percent now
Speaker 6: since the pandemic. Prices have also grown eighteen percent since
Speaker 6: the pandemic. So from the perspective of most workers, it's
Speaker 6: been a wash. They're just treading water and they got
Speaker 6: used to real wage growths between twenty thirteen and twenty nineteen,
Speaker 6: when they actually saw their wages grow about one point
Speaker 6: four percent faster than inflation each year. So they're wondering
Speaker 6: why they're not managing to get a little bit more
Speaker 6: each year. I think that wages could still do some
Speaker 6: catching up over the coming years, given how tight the
Speaker 6: slave market is.
Speaker 1: All right, Julia, thanks so much. We appreciate that as always,
Speaker 1: Julia Pollock from Zip Recruiter.
Speaker 5: You're listening to the tape cans Are Live program Bloomberg
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Speaker 1: Let's break down this job's number because it deserves some
Speaker 1: more attention. Here. Tom Gimble, he is with us. He
Speaker 1: knows a thing or two about this market. He's the
Speaker 1: CEO of LaSalle Network, and Tom, I'm just going to say,
Speaker 1: you know, here's my analysis.
Speaker 4: Wow, I would agree. And just before we get rolling
Speaker 4: on this, for the record, I went to University of
Speaker 4: Colorado and coach Prime. I'm just so we're going to
Speaker 4: talk football. Let's just talk about who's really on the upside.
Speaker 1: That's right.
Speaker 4: No, this number is fantastic. I think a lot of
Speaker 4: it's propped up by the government quite frankly, which gives
Speaker 4: me a little cause for concern of when that's bigot
Speaker 4: finally gets turned off. But it's definitely a good sign
Speaker 4: that we're not ready to land this economy just yet.
Speaker 2: So where's all the impetus coming from? We were talking
Speaker 2: yesterday about the Inflation Reduction Act, and of course we
Speaker 2: had the Chips Act. Is that money flowing? Is that
Speaker 2: money hiring people.
Speaker 4: I think it's the initial infrastructure package. I was talking
Speaker 4: to group down in Texas, that construction company, and that
Speaker 4: a couple of years ago, seventy percent of their business
Speaker 4: was I had followed up on a story that I
Speaker 4: had read and talked to them that seventy percent of
Speaker 4: their business used to be private and now seventy percent
Speaker 4: is public sector and working for the government. And so
Speaker 4: I think that the infrastructure is really bearing this thing down.
Speaker 4: It's getting a little crazy.
Speaker 1: Can you explain what I guess labor hoarding is. I think
Speaker 1: it's really a what is it? Indeed, do you think
Speaker 1: it's a thing.
Speaker 4: Well, I think the concept of hiring people and not
Speaker 4: necessarily needing to use them because the talent may come
Speaker 4: and play at a later date. If that's what you're
Speaker 4: referring to. And I think that the situation with what
Speaker 4: big Tech used to do in that capacity of hiring
Speaker 4: people and not yet needing them, I don't think that
Speaker 4: it was in wide abundance. I think it's happened from
Speaker 4: time to time. The real challenge that we have if
Speaker 4: you look at the Jold's report and if you look
Speaker 4: at the openings versus the number of people in the
Speaker 4: market and looking and that discrepancy. What it really says is,
Speaker 4: and we've talked about this before on Jobs Friday, is
Speaker 4: the skills gap and where we're missing it, and we're
Speaker 4: missing it in two areas, technology and blue collar labor,
Speaker 4: and we've got it's all coming at a time that
Speaker 4: people are picking political fights instead of doing what's necessary
Speaker 4: for the economy, and that's immigration, both on legal and
Speaker 4: illegal immigration south of the border, which affects the blue
Speaker 4: collar and European immigration, which really affects the technological gap
Speaker 4: that we have. And we need both of those areas
Speaker 4: if we want to continue our dominance as a political
Speaker 4: and capitalistic leader.
Speaker 2: So wait, you're not saying you're not railing against immigration
Speaker 2: complaining that our jobs get stolen, but saying we need
Speaker 2: that immigration to fuel our growth.
Speaker 4: One hundred percent. I mean, look at everyone wants to
Speaker 4: compare what we have going on with infrastructure to the
Speaker 4: New Deal. And when we had the New Deal, who
Speaker 4: did that? Immigrants? And so you know, when you have
Speaker 4: that and the people willing to throw a hammer and
Speaker 4: do the blue collar work, and we don't have those
Speaker 4: people now. Do I think that immigration south of the
Speaker 4: border and letting you illegal. No, I'm not propoting. I'm
Speaker 4: not a proponent of that. What I do think we
Speaker 4: need to do is come to a conclusive agreement on
Speaker 4: what's the best way to get people in to keep
Speaker 4: the economy fueled, which goes to payroll taxes, which goes
Speaker 4: to companies being able to accomplish things, which leads to
Speaker 4: trickle down economics where you have more suppliers to what's
Speaker 4: going on. We've just got this intersection that everybody thinks
Speaker 4: that the economy is going to keep going forever. We've
Speaker 4: got the UAW talking about thirty two hours of work
Speaker 4: for forty hours of pay. You know that's entitlement talk.
Speaker 4: That's not capitalistic talk.
Speaker 8: You know.
Speaker 2: Well, I just wanted to pull up he can he
Speaker 2: Can Go, which is a function that I've been playing
Speaker 2: with on the Bloomberg terminal. It's a very cool way
Speaker 2: to chart job games, and Eca n go is the
Speaker 2: way you can pull it up if can look at
Speaker 2: a number of data points with it. But I can
Speaker 2: see tom that we added a lot more jobs in
Speaker 2: leisure and hospitality in the last month than we have
Speaker 2: in previous months. We added more jobs well, government workers.
Speaker 2: We added more government workers than we did last month.
Speaker 2: We had more trade, transportation and utilities workers than we
Speaker 2: did last month. What do you think about the trends
Speaker 2: about the sectors that you've seen move and how do
Speaker 2: you see it going forward into the holiday shopping season.
Speaker 4: Well, I think that the consumer spending, I think is
Speaker 4: going to be decent, and I think when and I
Speaker 4: know that there's talk about where the individual credit problems
Speaker 4: are and what we're looking at, but what we've got is,
Speaker 4: you know, what's the expression that he who knows, he
Speaker 4: who knows only his own generation remains always a child.
Speaker 4: And I think that we're looking at people that don't
Speaker 4: want to study history and don't want to look back,
Speaker 4: and we've got a couple of generations of people that
Speaker 4: think that if if we overspend, are what we have,
Speaker 4: the government's going to take care of us. And I
Speaker 4: think we're going to see that through the holiday season.
Speaker 4: And I haven't seen any information to tell me otherwise.
Speaker 4: I see the travel and hospitality, like you said, continues
Speaker 4: to hire. There's a shortage, and I'm in Chicago. I
Speaker 4: was in Denver last week and Charlotte and I saw
Speaker 4: signs in every restaurant that they're looking for people and hiring,
Speaker 4: and and you have situations where people companies still want
Speaker 4: to you know, look at California, they want to raise
Speaker 4: the hourly rate for ret They are raising the hourly
Speaker 4: rate for restaurant workers and simultaneously complaining about inflation and
Speaker 4: what we can do about it. It's like the left
Speaker 4: hand doesn't know what the right hand is doing.
Speaker 2: Look at the fiscal stimulus that we get and the
Speaker 2: FED trying to raise rates. So you know, as the
Speaker 2: as the federal government is stimulating economic growth, the FED
Speaker 2: is trying to slow it down.
Speaker 4: Yep, Hey Tom, Yeah, Well I think that that's because
Speaker 4: the Fed, the FED isn't worrying about votes.
Speaker 1: That's probably true, right, Tom. Talk to us about, you know,
Speaker 1: kind of some of the trades out there where you
Speaker 1: see a lot of reporting that employers can't find people,
Speaker 1: you know, whether it's electricians or plumbers or things like that.
Speaker 1: And you know a lot of folks probably are weighing
Speaker 1: whether to get a college education and all that student
Speaker 1: debt versus maybe going to a trade school. Talk to
Speaker 1: us about kind of the supplying demand of trade men
Speaker 1: and women out there in the economy.
Speaker 4: Oh, there's a huge there's a huge shortage of the
Speaker 4: blue collar trades. And what ends up happening is you
Speaker 4: see it during during housing bubbles and and when new
Speaker 4: construction numbers are going up and they can't find enough
Speaker 4: people to do that. And we're seeing it with infrastructure too,
Speaker 4: but just on a local level of somebody to come
Speaker 4: and fix your plumbing or your lawn sprinklers or cut
Speaker 4: the grass and doing that is that there's a there's
Speaker 4: a shortage of labor, which comes from twofold number one,
Speaker 4: the immigration problem that we talked about a few moments ago.
Speaker 4: And then secondarily, you've got people that are going to
Speaker 4: college for one year, two year, three years because they
Speaker 4: think that's what they're supposed to do. Societies leading them
Speaker 4: down that path. They're incurring the debt, although I think
Speaker 4: the President just eliminated about nine billion dollars of it.
Speaker 4: And then what do they do And what we moved
Speaker 4: into is people working at the Verizon store to sell
Speaker 4: phones and they're not happy and the service level isn't great,
Speaker 4: or going in and learning a trade, and which is
Speaker 4: really you know, the true middle class. If we're going
Speaker 4: to look back over the past seventy years, all.
Speaker 1: Right, Tom, thanks as always for chiming in on this
Speaker 1: Job's Friday. Tom Gimble, CEO at LaSalle Network.
Speaker 5: You're listening to the Team Ken's Are Live program Bloomberg
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 5: on demand wherever you get your podcasts.
Speaker 1: Let's go to somebody who actually knows where they're talking about.
Speaker 1: I they get paid to know what they're talking about,
Speaker 1: as opposed to the three of us. Ellis Pfeiffer. He's
Speaker 1: a managing director in fixed income research at Raymond James
Speaker 1: Raymond James. By the way, if people don't know, it
Speaker 1: is a very very good regional investment bank prograch firm
Speaker 1: ray j as we let to call it in the biz.
Speaker 1: I competed against them a lot. They have a lot
Speaker 1: of good ana. There's a lot of good bankers down there,
Speaker 1: and what they do they do well. Ellis, thanks so
Speaker 1: much for joining us here. Explain to us why you
Speaker 1: know we got this print on the employment and then
Speaker 1: people said, oh, you know, this gives more ammunition to
Speaker 1: the Fed to maybe hike rates. And but now the
Speaker 1: stock market's up and yields are coming back in. What
Speaker 1: do you make of today's print maybe how it might
Speaker 1: impact the Fed?
Speaker 8: Well, I think, you know, it's not going to slow
Speaker 8: down the Fed as far as you know their rhetoric,
Speaker 8: and it's not going to make them change course by
Speaker 8: any stretch because the job market is obviously continued to
Speaker 8: be relatively strong. Now the issue becomes, you know, when
Speaker 8: you look at the underlying data, there was some some
Speaker 8: not discrepancies, I guess, but some differences between the non
Speaker 8: farm peril data that came out this morning, some of
Speaker 8: the data earlier in the week, and then the household
Speaker 8: employment numbers is you know, household survey this morning that's
Speaker 8: responsible for the unemployment rate. So you know, the earlier
Speaker 8: in the week we learned that, you know, Joelt's data
Speaker 8: told us there were a lot of professional jobs, high
Speaker 8: paying jobs, and we're opening yet today's survey on the
Speaker 8: household survey tells us that, well, you know, most of
Speaker 8: the jobs came in lower paying jobs, such as you know,
Speaker 8: the services industry, and that the part time work has
Speaker 8: actually increased, whereas full time workers actually decreased. So those
Speaker 8: things kind of coldbined to help the abrgality earning stops.
Speaker 8: I think that's where the market's kind of looking at
Speaker 8: this going well, you know, the the survey the households
Speaker 8: are there is really more closely tied to the ADP
Speaker 8: jobs number, so maybe not quite as strong, you know,
Speaker 8: the headline data versus the true underlying data. And I
Speaker 8: think that's why the market turned around to that.
Speaker 2: So what do you think is driving this, uh, this
Speaker 2: this labor market. At the same time as indust rates
Speaker 2: have risen to you know, levels we haven't seen since
Speaker 2: two thousand and seven, companies continue to hirelight crazy.
Speaker 8: Why, Well, I think a lot of you know, a
Speaker 8: lot of the hiring has come in, you know, the
Speaker 8: the services industry, and you know, when when things are tough,
Speaker 8: we were hoping we'd see this big rotation into the
Speaker 8: services industry away from the goods industry and that, and
Speaker 8: we've been getting it of late. We've had you know,
Speaker 8: had a lot of savings still tent up from from
Speaker 8: pandemic stimulus. Uh that that has been drawn down a lot,
Speaker 8: but a lot of that spending went moved away from
Speaker 8: the goods day the goods type of purchases into the
Speaker 8: services type purchases and that's you know, frankly, while the
Speaker 8: FED has been so focused on you know, services inflation
Speaker 8: less housing because in our house it's very sticky, So
Speaker 8: they've been they've been focused there. That's where the growth
Speaker 8: has been. It's been it's really in the services, uh industry.
Speaker 2: So what do you take from the rates picture then, ellis?
Speaker 2: I mean, you know, we had for a long time
Speaker 2: and inverted a very inverted yield curve wherever you looked,
Speaker 2: and typically you know that has signaled a recession. Now
Speaker 2: we have have a bear steepening, which is I suppose
Speaker 2: rarer than a bowl steepening, and correct me if I'm
Speaker 2: wrong with these terms, but basically it doesn't happen as often,
Speaker 2: but that always leads into a recession. So how does
Speaker 2: the future look to you considering what the curve is
Speaker 2: telling us?
Speaker 8: Yeah? Absolutely, and you're absolutely right, it's a little bit
Speaker 8: different this time. You know, back in two thousand and
Speaker 8: seven we saw a little bit of a bear steepening
Speaker 8: ahead of the recession, but so it is fairly rare
Speaker 8: for that to happen as far as the recession, and
Speaker 8: a resteepening of the U curve is definitely a better
Speaker 8: predictor than an inversion, and at least a more timely predicted.
Speaker 8: So but you know, I think the resteepening has occurred
Speaker 8: from two factors. One has been that rise in oil prices,
Speaker 8: which has since come off quite a bit, and so
Speaker 8: that that hasn't barely been reflecting the bomb market. I
Speaker 8: think we're kind of nervous about today. And then the
Speaker 8: other is the higher for longer kind of makes you know,
Speaker 8: the bond market tend to reprice, you know, that term
Speaker 8: premium that that tends to you know, keep rates a
Speaker 8: little bit more elevated for the time. So I think
Speaker 8: it's going to have to obviously similar more data prints,
Speaker 8: but I think that's kind of why we're sitting at
Speaker 8: these highs. And and frankly, there's a there's a lot
Speaker 8: of speculative interest on the short side or bond market.
Speaker 8: So the sentiment from you know, the speculative market is
Speaker 8: quite dramatic at this point. And they are a very
Speaker 8: good sentiment indicator, they're not a very good timing indicator.
Speaker 8: Similar instances were you know, twenty eighteen, uh and then
Speaker 8: once you know, the common began to show some weakness
Speaker 8: and some some other issues, you know bond market actually started.
Speaker 1: Rallying them els thirty seconds left. What's the what's the
Speaker 1: typical conversation you're having these days with your clients?
Speaker 8: It is, why would I invest further out of the
Speaker 8: curve when I can get more in the shorter term?
Speaker 8: And you know, we've gone through the numbers and we're
Speaker 8: told clients, you know, if you if you just simply,
Speaker 8: for instance, by a two year at this level and
Speaker 8: give up X number of basis points over the two
Speaker 8: year cycle which you expect things to change in the
Speaker 8: market and Bonsta Valley, you would you would become you
Speaker 8: do well way better off by standing out of the
Speaker 8: eel kurt today, capturing some of that longer term yield
Speaker 8: and then instead of trying to trying to keep up
Speaker 8: with money market rates, email rights things like that.
Speaker 1: All right, Alis, I really appreciate you taking the time.
Speaker 1: Ellis Pfeiffer, he is at Raymond James. He's a managing
Speaker 1: your director in fixing, come Research.
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Speaker 1: One challenge is in one headwood headwinds is commercial real
Speaker 1: estate and that could be a big, big issue. It
Speaker 1: already is for a lot of investors, for a lot
Speaker 1: of owners of real estate. But we wanted to dig
Speaker 1: into it a little bit on the back of this
Speaker 1: labor data and talk about commercial real estate. John Fish
Speaker 1: is the CEO of Suffolk Construction and he's chair of
Speaker 1: the Real Estate Roundtable. And John, thanks so much for
Speaker 1: joining us here, and you're kind enough to provide some
Speaker 1: notes here, and you break it down between bad news
Speaker 1: as it relates to the state of the commercial real
Speaker 1: estate business and good news, And boy, you list a
Speaker 1: lot more bad news type of issues than good news.
Speaker 1: How concerned should we be about the commercial real estate
Speaker 1: business from a perspective that not everybody's going back to
Speaker 1: work yet, there are big loans tied to these things,
Speaker 1: there's a lot of vacant office space around. Help us
Speaker 1: frame the state of the commercial real estate business today
Speaker 1: in America.
Speaker 7: First, Paul and Matt, thank you the privilege to be
Speaker 7: with you this afternoon. I would say that the commercial
Speaker 7: real estate business in a very very tough situation this
Speaker 7: particular point in time, and some multitude of reasons that
Speaker 7: you've been reporting on over the last few months on it.
Speaker 7: You know, first, you get vacancy rates running anywhere from
Speaker 7: twenty to forty percent in the You get the hollowing
Speaker 7: out of our urban areas of our communities with the Chicago, Boston,
Speaker 7: San Francisco. You get also one hundred one point five
Speaker 7: trillion dollars or commercial loans coming to in the next
Speaker 7: couple of years, which is a significant amount of money
Speaker 7: coup with the fact that there is no capital available
Speaker 7: right now. Banks are not lending, especially the commercial banks
Speaker 7: this particular point in time, and when they do lend,
Speaker 7: the cost of this capital is significantly high than it
Speaker 7: was before in the past. And I think one of
Speaker 7: the biggest issues that I think this revolves around commercial
Speaker 7: real estate today is price discovery. People don't understand what
Speaker 7: value is today. We don't understand what building's are worth.
Speaker 7: And therefore, because there's no history over the last few months,
Speaker 7: a few quarters about how things have traded, people cannot
Speaker 7: understand valuation. And once you get in that type of
Speaker 7: doom loop situation, it really really doesn't speak well for
Speaker 7: the future of real estates, especially commercial estate over the
Speaker 7: next I would say four or five quarters my senses,
Speaker 7: at the end of the day, things will settle down,
Speaker 7: we will end up with a high degree of price discovery,
Speaker 7: and we will have more of a consistency and prictability
Speaker 7: going forward. But at the end of the day, it's
Speaker 7: a challenging time, and I think what we need to
Speaker 7: be focusing on, how do we just take this one
Speaker 7: day to time and realize what the fed's actions that
Speaker 7: are on a going four basis have a very very
Speaker 7: deleterious impact on the solution to real estate's problems today.
Speaker 2: So it does look like the FED could lean towards
Speaker 2: another hike here after we got such a strong jobs
Speaker 2: number this morning, as Paul has been saying, does that
Speaker 2: concern you? I mean, we're looking at you know, yields
Speaker 2: climbing across the curve and that's just got to be
Speaker 2: even more bad news for commercial real estate and probably
Speaker 2: building in general.
Speaker 7: Yeah, no doubt. I mean the ten year today is
Speaker 7: sort of a harbring dull where we're going. There's no
Speaker 7: doubt in my mind about that, and I think the
Speaker 7: FED raising the interest rates in November by twenty five
Speaker 7: basis points is not really material. It's psychological. It's more
Speaker 7: or less, you know, charming out the fact that we're
Speaker 7: going to continue to raise interest rates, we continue to
Speaker 7: put stress on capital across the board, We're going to
Speaker 7: continue to create create a sense of instability in the
Speaker 7: financial markets. When you ever have instability and lack of predictability,
Speaker 7: you get problems at the end of the day. And
Speaker 7: I think what we need to do, We just need
Speaker 7: to take a deep breath, slow down, and give the
Speaker 7: real estate developers and the lenders out there time to
Speaker 7: solve these problems, because if they don't, these issues will
Speaker 7: become the taxpayers problems, not the real estate developers problems.
Speaker 7: And today that the real estate developers problems, the private
Speaker 7: equities problems, the shadow banking problems, but they're not the
Speaker 7: taxpayers and if we move too quickly, they will become
Speaker 7: the taxpayers problems. In addition, just to comment on what
Speaker 7: Joe Biden spoke about the three hundred thirty six thousand jobs,
Speaker 7: I think that was a very very powerful strong estimate.
Speaker 7: I mean, you know it blew past expectations of maybe
Speaker 7: one seventy out there. But at the end of the day,
Speaker 7: I think it's good news. But also there's I think
Speaker 7: concerning news behind all that. Okay, going forward, we've got
Speaker 7: a serious immigration problem in this country. I think everybody
Speaker 7: acknowledge it. My industry, real estate construction, we're in zero
Speaker 7: one on a point right now. We're not a three
Speaker 7: point six or three point seven percent. So if we
Speaker 7: don't solve for the immigration issue, okay, we don't bring
Speaker 7: more people into this country, it's going to be very
Speaker 7: difficult to grow our economy. And so to me, I
Speaker 7: stand firm and the fact that we need to focus
Speaker 7: on today how to put forth a solid immigration policy
Speaker 7: to prevent continuing escalation of wages which were seen across
Speaker 7: the board right now. And I think this wage escalation issue,
Speaker 7: unfortunately is not going to subside. And when you take
Speaker 7: a UAW, you take over the pilots, you take good healthcare.
Speaker 7: Right now at the Kaiser, this is systemic in our
Speaker 7: society today. In this health in this labor issue is
Speaker 7: going to continue to drive inflation higher over the next
Speaker 7: I think four or five quarters.
Speaker 1: How bad is that going to be? Commercial real estate loans.
Speaker 7: I think it's gonna be very, very challenging. As I
Speaker 7: talked about this idea of price discovery, people don't know
Speaker 7: what assets are worth it at this particular point in time.
Speaker 7: I just think is a point out we need time
Speaker 7: to allow people to get accustomed to the current economic
Speaker 7: and financial environment and give these banks and lenders and
Speaker 7: it borrows more time to work these things out. If
Speaker 7: we don't, I think at the end of the day,
Speaker 7: it could be very very material to overall economy on
Speaker 7: a going for a basis.
Speaker 1: All right, John, thanks so much for if you mention.
Speaker 1: Really appreciate getting your perspective there. John Fish, he's the
Speaker 1: CEO of Suffolk Construction. He's also the chair of the
Speaker 1: Real Estate round Table talking about commercial real estate. It's
Speaker 1: going to be some challenging. As John said, next four
Speaker 1: to five quarters, price discovery is going to be a
Speaker 1: big thing. What is that building that's for sale on
Speaker 1: forty six Street and third app We know what it
Speaker 1: sold for, you know ten years ago, what's it going
Speaker 1: to sell for today? And what that means? Who knows?
Speaker 1: And what's the mean for the lenders and the equity
Speaker 1: holders there? That's a big issue.
Speaker 5: You're listening to the tape cans are live program Bloomberg
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Speaker 1: Eleven thirty jobs number came in today, three hundred and
Speaker 1: thirty six thousand new jobs. You're heard from President Biden.
Speaker 1: One of the questions is who's getting these jobs? What
Speaker 1: types of industries? Is it evenly distributed across this economy.
Speaker 1: Let's check in with our next guest, Javier Paulo Mades.
Speaker 1: He is the president and CEO of US Hispanic Business Council,
Speaker 1: and we appreciate Jabier spending a couple of minutes with us.
Speaker 1: Talk to us about the Hispanic community out there. Javier,
Speaker 1: how are they participating in what is in a remarkably
Speaker 1: strong labor market.
Speaker 9: Yeah, it's been great, you know, you know, what a
Speaker 9: pleasant surprise, nearly three hundred and forty thousand jobs. You know,
Speaker 9: in August we saw what I thought were kind of
Speaker 9: pre pandemic growth rates at it, you know, but it
Speaker 9: proved this month proved that, you know, certainly we're still
Speaker 9: adding jobs and there's some real bright spots as you mentioned,
Speaker 9: not only for the American small business community, but specifically
Speaker 9: for the Hispanic community and the Hispanic small business community.
Speaker 9: The growth, as you mentioned, in the private sector was
Speaker 9: led by leisure and hospitality, healthcare, professional services. I think
Speaker 9: leisure and hospitality added some ninety six thousand jobs. Hispanics
Speaker 9: are about twenty five percent of that workforce. Professional services
Speaker 9: added about thirty thousand jobs, Hispanics for about twenty percent
Speaker 9: of that workforce, and then healthcare added about forty thousand jobs,
Speaker 9: and Hispanics are about fifty percent of that workforce. So
Speaker 9: for the American small business community, great for the Hispanic
Speaker 9: business community, Suffice it to say, you know, Hispanics had
Speaker 9: had a role to play, and you know, I'm delighted
Speaker 9: at the news.
Speaker 2: So according to the Small Business Association, five million, there
Speaker 2: are five million or near that Hispanic owned businesses in
Speaker 2: the US, and according to Stanford, Hispanics have created eighty
Speaker 2: percent of all the net new businesses in basically the
Speaker 2: last decade.
Speaker 1: Actually it was twenty eleven to twenty twenty one.
Speaker 9: So there's some four point five million Hispanic owned firms
Speaker 9: in the country that collectively contribute just north of eight
Speaker 9: hundred billion dollars to the American economy. They run the gamut,
Speaker 9: you know, from every industry in size and business model.
Speaker 9: You can imagine. And yeah, about eighty percent of the
Speaker 9: net new businesses that were created were created by a
Speaker 9: Latino in this country over the last decade. So you know,
Speaker 9: we're creating new businesses at a rate of three to
Speaker 9: one when compared to the general market. And you know,
Speaker 9: I I think we're at the beginning of this thing.
Speaker 9: It's only getting better, it's only getting stronger. According to
Speaker 9: the Department of Labor between the years twenty twenty and
Speaker 9: twenty thirty, So we're in it now. According to Labor,
Speaker 9: between twenty twenty and twenty thirty, some seventy eight percent
Speaker 9: of new entrants, net new entrance into the workforce will
Speaker 9: be Hispanic. Imagine that seventy eight percent of the net
Speaker 9: new entrance into the American workforce will be Hispanic.
Speaker 2: Well, and we were talking earlier with Tom Gimble, who
Speaker 2: runs the LaSalle Staffing Network out of Chicago, and he
Speaker 2: was saying, one of the biggest problems in the labor
Speaker 2: market these days is that we don't have enough immigration,
Speaker 2: that we need more immigration, you know, from.
Speaker 1: All of our borders. How do you stop that.
Speaker 2: Issue from being conflated with the illegal immigration that we
Speaker 2: see rugs coming in, people dying in the desert, like
Speaker 2: that whole negative story. How do you separate out, you know,
Speaker 2: the positive from the negative.
Speaker 9: You know, certainly you know it is a contentious issue,
Speaker 9: no no, no question, Administration after administration, Republican Democrat has
Speaker 9: kick this can down the road, which is why we
Speaker 9: find are some of the situation we're in now. Clearly
Speaker 9: there is a crisis on the border. We need to
Speaker 9: deal with that, We need to keep the bad actors out.
Speaker 9: But to pretend that America doesn't need immigrant labor is
Speaker 9: disingenuous at best. I think our elected officials have a
Speaker 9: responsibility to parse this thing out and look at it
Speaker 9: from an economic perspective. At the United States Hispanic Business Council,
Speaker 9: and we're the leading advocate for America's small Hispanic small
Speaker 9: business community, and we have always believed that immigration reform
Speaker 9: is an economic imperative. I mean, if you look at
Speaker 9: the agricultural sector alone, the last time I was on BLUEMBERG.
Speaker 9: I think it was I mentioned that that sector is
Speaker 9: seventy three percent immigrant labor. And in that sector alone
Speaker 9: last year we basically destroyed ten million tons, not ten
Speaker 9: million pounds, ten million tons of fruits and vegetables and
Speaker 9: unharvested fields because we simply didn't have the immigrant labor
Speaker 9: to work the industry. So it is an important issue,
Speaker 9: important enough for the continued well being of the American
Speaker 9: economy that we should deal with it honestly.
Speaker 1: So let me ask you, Javier, as the CEO of
Speaker 1: the US Hispanic Business Council, what do you believe is
Speaker 1: proper immigation policy? And you've got it full thirty seconds.
Speaker 9: You know, we need to start with worker visas right
Speaker 9: off the bat. We need to increase the worker visas
Speaker 9: both from the you know, the high tech sector all
Speaker 9: the way down to skilled labor. The Dignity Act is
Speaker 9: a very good start. We should look at that as
Speaker 9: a starter, and we need to frankly come to together
Speaker 9: both both parties, both sides of the aisle, to find
Speaker 9: a workable solution for the American people, the American economy.
Speaker 1: All right, Javier, thank you so much. We appreciate it certainly,
Speaker 1: certainly a very contentious issue as we speak right now
Speaker 1: in Washington and on the borders. But again, you put
Speaker 1: that in the context of a very well and I
Speaker 1: think they're two separate issues, right.
Speaker 2: I mean, you have the illegal immigration story, and then
Speaker 2: you've got the legal immigration. We need to bring in
Speaker 2: more legal immigrants to do work in this country, and
Speaker 2: a lot of them obviously are Hispanic, a lot of
Speaker 2: them are going to be German, a lot of them
Speaker 2: are going to be French. Maybe not French, but a
Speaker 2: lot of different countries, you know.
Speaker 1: Yep, absolutely a big issue. Javier Palomeris, he is a
Speaker 1: president and CEO of the US Hispanic Business Council, join
Speaker 1: us to give us his unique perspective.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast plans form you prefer. I'm Matt Miller. I'm on
Speaker 2: Twitter at Matt Miller nineteen seventy three.
Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.