WEBVTT - Bloomberg Surveillance TV: April 30, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.400 Terminal and the Bloomberg Business apps. 0:00:36.440 --> 0:00:37.640 Out to run Temple send this. 0:00:38.000 --> 0:00:40.120 I still see you upside for USA Cares, but we'll 0:00:40.159 --> 0:00:42.800 have to be driven by earning's growth from here. So far, 0:00:42.880 --> 0:00:44.600 the upside in the S and P has been narrow, 0:00:44.680 --> 0:00:47.080 but I expect the earnings growth to broaden out as 0:00:47.120 --> 0:00:50.400 we move through twenty twenty four with better participation from 0:00:50.440 --> 0:00:53.519 other sectors beyond the tech and communications services and the 0:00:53.600 --> 0:00:55.400 FAB five runs with us around the table. 0:00:55.480 --> 0:00:56.640 Morning Run, Good morning. 0:00:56.640 --> 0:00:58.880 We're not talking about MAX seven, We're talking about Fab five. 0:00:59.720 --> 0:01:00.480 We draw well. 0:01:00.520 --> 0:01:02.160 If you look at the year today, basically Apple and 0:01:02.200 --> 0:01:05.520 Tesla have been a drag, even including yesterday's gains from Tesla. 0:01:05.319 --> 0:01:06.720 So really it's the five stocks. 0:01:06.880 --> 0:01:09.080 If I look at the earnings results so far this quarter, 0:01:09.520 --> 0:01:11.840 all of the earnings growth this five stocks again, so 0:01:11.880 --> 0:01:13.800 we're back in that story that we've had for the 0:01:13.880 --> 0:01:16.320 last two and a quarter years where the rest of 0:01:16.360 --> 0:01:18.160 the S and P five hundred is really not giving 0:01:18.200 --> 0:01:19.520 us much to get excited about. 0:01:19.760 --> 0:01:21.560 But I think that's going to change as we move 0:01:21.560 --> 0:01:22.039 through the year. 0:01:22.160 --> 0:01:24.279 What sounds you is going to change, well, part. 0:01:24.160 --> 0:01:25.800 Of it is I look at and say, the only 0:01:25.880 --> 0:01:28.880 way this demand for AI and technology investment can be 0:01:28.920 --> 0:01:31.600 sustained is if the customers get a return on investment. 0:01:32.040 --> 0:01:34.280 Companies aren't going to keep pouring money into these products 0:01:34.319 --> 0:01:37.480 and services unless they see some benefits. The key question 0:01:37.520 --> 0:01:39.720 to me is how quickly do we see those benefits? 0:01:40.000 --> 0:01:41.920 Do they show up in the twenty twenty four pn L. 0:01:41.959 --> 0:01:44.759 I'm a little skeptical. I'm hopeful on that front. But 0:01:44.800 --> 0:01:46.880 more importantly, I think as we start looking at the 0:01:46.920 --> 0:01:50.960 prospect of rate cuts, not just rate increases, interest expense 0:01:51.000 --> 0:01:53.720 will shift income statements in the market. And I think 0:01:53.720 --> 0:01:57.680 we're basically seeing an ongoing demand that shifted from goods 0:01:57.720 --> 0:02:00.680 towards services, and that should also brought learning growth. 0:02:00.880 --> 0:02:02.840 This was a story about six months ago too, and 0:02:02.920 --> 0:02:04.800 a lot of people are talking about eventually we'd start 0:02:04.840 --> 0:02:07.480 to see things broadening out with rate cuts, and then 0:02:07.480 --> 0:02:10.720 I got pushed out three months, then another three months. Basically, 0:02:10.880 --> 0:02:13.440 are we in purgatory until we get the sense that 0:02:13.440 --> 0:02:14.960 the Fed is actually going to cut rates and if 0:02:15.000 --> 0:02:16.960 they don't, you're not going to get a broadening out 0:02:16.960 --> 0:02:18.840 from the FAB five for the foreseeable future. 0:02:19.639 --> 0:02:22.360 Well, I guess this is where a key underlying assumption 0:02:22.400 --> 0:02:24.960 for me is I'm still optimistic on the inflation front. 0:02:25.320 --> 0:02:28.000 I fully recognized the first quarter was an ugly surprise. 0:02:28.160 --> 0:02:30.040 Right January, I thought, okay, we can look at this 0:02:30.080 --> 0:02:32.600 and maybe it's a January anomaly. We got February and 0:02:32.600 --> 0:02:35.040 February was much better, but then March was kind of 0:02:35.080 --> 0:02:38.160 crushing in terms of that optimism. We had service inflation 0:02:38.280 --> 0:02:40.440 X shelter go from five point one percent annualized in 0:02:40.480 --> 0:02:42.760 the fourth quarter to eight point seven in the first quarter. 0:02:43.160 --> 0:02:45.560 Core PCE went from one point six to four point four. 0:02:46.240 --> 0:02:48.120 I still think as we moved through the year, you're 0:02:48.160 --> 0:02:50.480 going to see the labor markets showing us an easing 0:02:50.480 --> 0:02:52.880 of tightness. And I think we're going to see that 0:02:52.880 --> 0:02:55.680 pricing pressure in the service sector start to ease. One 0:02:55.720 --> 0:02:58.519 of my favorite anecdotes, by the way, auto insurance has 0:02:58.560 --> 0:03:01.440 been basically eighty basis points of the three point eight 0:03:01.440 --> 0:03:04.560 percent of core CPI over the last year. It's three 0:03:04.600 --> 0:03:07.160 and a half percent of the index. Now, auto insurance 0:03:07.200 --> 0:03:08.520 rates are still going to go up for the next 0:03:08.560 --> 0:03:10.000 six months, probably, but. 0:03:10.040 --> 0:03:11.560 Not at twenty two percent annualized. 0:03:11.639 --> 0:03:13.480 Steeper shoot of though, of Massujo would say, you can 0:03:13.560 --> 0:03:15.480 cherry pick what you want, you still will have you 0:03:15.600 --> 0:03:16.760 you can get to two percent. 0:03:16.520 --> 0:03:19.120 Any which way. What would you have to see and 0:03:19.160 --> 0:03:19.360 some of. 0:03:19.320 --> 0:03:22.239 The numbers that are coming out starting with ECI, going 0:03:22.240 --> 0:03:24.680 to adults that we get tomorrow, going to the payrolls 0:03:24.720 --> 0:03:27.519 report on Friday as well as ISM data, what would 0:03:27.520 --> 0:03:30.120 you have to see the change of view, Well. 0:03:29.960 --> 0:03:32.040 I guess what I would want to see back to 0:03:32.080 --> 0:03:34.400 the data this week. I think the ECI is probably 0:03:34.400 --> 0:03:36.720 one of the best metrics for wage growth. It's fully 0:03:36.720 --> 0:03:40.200 comprehensive wages and benefits. It also works better in terms 0:03:40.200 --> 0:03:42.320 of adjusting for mixshift. If you look at average hourly 0:03:42.360 --> 0:03:44.760 earnings that we're going to get on Friday, that can 0:03:44.760 --> 0:03:46.680 be skewed. If you get more low paying jobs, it 0:03:46.680 --> 0:03:48.920 makes wage growth look lower, so that one is probably 0:03:49.000 --> 0:03:52.240 less valuable. So on ECI want to see basically anywhere 0:03:52.240 --> 0:03:54.640 from a ninety zero hundred basis point reading. It'd be 0:03:54.680 --> 0:03:57.200 great if we saw something below that. I don't know 0:03:57.200 --> 0:03:58.760 if we see a one point two one point three 0:03:58.800 --> 0:04:01.280 that's going to spook the markets. I think if we 0:04:01.320 --> 0:04:04.920 look at the Jolt stata questionable in terms of reliability. 0:04:04.920 --> 0:04:07.000 If you look at the response rate to the Jolt survey, 0:04:07.040 --> 0:04:09.760 it's gone from sixty five to seventy percent pre pandemic 0:04:09.960 --> 0:04:12.400 to thirty or thirty five percent, So some people do 0:04:12.520 --> 0:04:15.000 question if the data is there's reliable. I like to 0:04:15.040 --> 0:04:17.640 watch the quits rate within the Jolt stata. That tells 0:04:17.680 --> 0:04:20.159 you are people finding better jobs where they're getting higher 0:04:20.200 --> 0:04:21.000 wages and they're moving. 0:04:21.040 --> 0:04:22.360 So it's another anecdote. 0:04:22.720 --> 0:04:24.719 And then on Friday we'll wait and see the market 0:04:24.800 --> 0:04:27.320 is saying around two hundred and forty thousand new nonfarm payrolls. 0:04:27.640 --> 0:04:29.359 We need about one hundred and thirty to one hundred 0:04:29.360 --> 0:04:31.640 and forty thousand in a typical environment to keep pace 0:04:31.720 --> 0:04:34.560 with population growth. If we get a big upside surprise 0:04:34.560 --> 0:04:37.120 and more positive revisions. You know, that's going to make 0:04:37.160 --> 0:04:39.719 me a little more nervous that maybe this economy is reaccelerating. 0:04:39.720 --> 0:04:41.280 And by the way, if I take this alongside the 0:04:41.360 --> 0:04:45.040 data out of Europe this morning, upside surprises across the Eurozone, 0:04:45.440 --> 0:04:48.919 positive albeit marginal commentary coming out of the Pollitt Burou 0:04:48.960 --> 0:04:51.280 in China, you know, there is a risk that there's 0:04:51.279 --> 0:04:53.640 a reacceleration here and that would basically undermine some of 0:04:53.680 --> 0:04:54.719 my optimism on inflation. 0:04:54.880 --> 0:04:56.800 To John's point earlier, so do you think Europe and 0:04:56.880 --> 0:04:59.799 China are catching up to the US exceptionalism that maybe 0:04:59.880 --> 0:05:01.239 is petering out? 0:05:01.400 --> 0:05:02.839 That might be a little too optimistic. 0:05:02.880 --> 0:05:04.760 I guess I look at Europe and saying going from 0:05:04.839 --> 0:05:08.160 zero to something positive is really great. But you know, 0:05:08.640 --> 0:05:10.880 I do think there will be improvement this year. And 0:05:10.920 --> 0:05:12.800 I would also note, you know, I think the case 0:05:12.800 --> 0:05:15.400 for the ECB cutting rates is a lot stronger. I mean, 0:05:15.680 --> 0:05:18.640 you basically don't have debating and we're not debating whether 0:05:18.680 --> 0:05:21.760 Europe is reaccelerating. We're basically, you know, there's it's clear 0:05:21.800 --> 0:05:24.000 that Europe's going from zero to something very low on 0:05:24.080 --> 0:05:27.479 growth and inflation has been smoothly decelerating in Europe. So 0:05:27.640 --> 0:05:29.400 I think you're going to get one hundred basis points 0:05:29.400 --> 0:05:32.560 of rate cuts from the ECB this year. And very importantly, 0:05:33.040 --> 0:05:36.000 monetary policy decisions in Europe have a more immediate and 0:05:36.080 --> 0:05:39.000 magnified impact on the economy than the UMS because a 0:05:39.000 --> 0:05:41.240 lot more of the corporate rate is floating rate and 0:05:41.320 --> 0:05:43.599 a lot more of the household debt is floating rate. 0:05:43.839 --> 0:05:46.240 So right now you're saying that your base case is 0:05:46.279 --> 0:05:48.360 you're going to get inflation coming in lower and you're 0:05:48.360 --> 0:05:48.599 going to. 0:05:48.600 --> 0:05:49.480 Get some rate cuts. 0:05:50.040 --> 0:05:53.600 What's the playbook if you do see that reacceleration inflation 0:05:53.920 --> 0:05:55.960 and that case comes to play. 0:05:56.560 --> 0:05:58.479 Yeah, if you get a reacceleration, then I think the 0:05:58.480 --> 0:06:00.360 FED ends up keeping rates where they are. I don't 0:06:00.360 --> 0:06:02.360 think you're going to see the Fed raising rates from here. 0:06:02.400 --> 0:06:04.839 I don't buy into that hawkish thesis at all. I 0:06:04.839 --> 0:06:06.240 think five and a quarter to five and a half 0:06:06.240 --> 0:06:08.680 on FED funds is plenty tight in real terms. 0:06:09.279 --> 0:06:13.320 And again I appreciate the question. 0:06:13.080 --> 0:06:15.279 But when I look at the data, there's one part 0:06:15.279 --> 0:06:18.000 where there's a lot of uncertainty, and that's really the 0:06:18.080 --> 0:06:19.120 service ex shelter. 0:06:19.640 --> 0:06:21.200 If we look at the shelter inflation. 0:06:21.320 --> 0:06:24.240 We know from the ZILO observed rent index, then inflation 0:06:24.279 --> 0:06:26.640 there has basically declined sharply. It still hasn't shown up 0:06:26.640 --> 0:06:29.320 in the CPI, but historically there's a one year lag 0:06:29.400 --> 0:06:31.200 between ZILO and CPI PCE. 0:06:31.920 --> 0:06:32.880 Based on ZILO, we know. 0:06:32.920 --> 0:06:35.200 Inflation from rent has gone from sixteen percent two years 0:06:35.200 --> 0:06:37.599 ago to less than three point six percent for the 0:06:37.640 --> 0:06:40.720 last nine consecutive months. CPI is still printing six so 0:06:40.760 --> 0:06:42.760 we know that part of inflation is coming down. We 0:06:42.800 --> 0:06:44.680 know core goods prices are still going to be soft 0:06:44.680 --> 0:06:46.880 because we can watch the Manheim Used car price Index. 0:06:47.200 --> 0:06:50.400 So when I piece it together for basically sixty nine 0:06:50.440 --> 0:06:53.520 percent of core CPI, I know inflation is staying lower, 0:06:53.560 --> 0:06:55.880 going lower. So I guess I have a hard time 0:06:55.920 --> 0:06:59.520 with the thesis that overall inflation is accelerating. I don't 0:06:59.520 --> 0:07:01.880 see that as likely, and I think we'd be better 0:07:01.920 --> 0:07:04.080 off focusing on what is the base case. We've gone 0:07:04.080 --> 0:07:06.920 from nine percent inflation to close to three. There's been 0:07:06.920 --> 0:07:09.360 a lot of progress, Real interest rates are up a lot, 0:07:09.720 --> 0:07:11.240 and I think it's time for the FED to basically 0:07:11.240 --> 0:07:13.360 start focusing on the other leg of the dual mandate. 0:07:13.400 --> 0:07:15.400 Which luckily they don't have to worry about because the 0:07:15.440 --> 0:07:17.640 job market is strong. But if we can have a 0:07:17.640 --> 0:07:19.560 three and a half percent unemployment rate and still get 0:07:19.560 --> 0:07:21.360 to the inflation target, that's how we should be thinking 0:07:21.360 --> 0:07:22.120 about later this year. 0:07:22.160 --> 0:07:22.640 Two phraces. 0:07:22.680 --> 0:07:25.600 I want to one pack with you plenty tight, plenty progress, 0:07:26.040 --> 0:07:28.480 plenty tye. What evidence is there that with plenty tie 0:07:28.680 --> 0:07:31.000 and on the plenty progress, how much evidence is there 0:07:31.040 --> 0:07:33.240 that that's just a supply side story, not a demand 0:07:33.280 --> 0:07:35.840 one driven by the FED, which you say is plenty tight. 0:07:36.000 --> 0:07:37.560 I'm really glad you went there because I think one 0:07:37.600 --> 0:07:39.440 of the other things that's happened is we look at 0:07:39.840 --> 0:07:42.840 growth expectations in the US. The consensus for twenty twenty four, 0:07:43.160 --> 0:07:45.280 sorry ECFC on your Bloomberg termine a new way you 0:07:45.280 --> 0:07:46.040 would got is two. 0:07:45.960 --> 0:07:46.679 Point four percent. 0:07:46.880 --> 0:07:48.760 You want to make sure I'm fresh two point four 0:07:48.800 --> 0:07:50.480 percent for this year. If you go back to October, 0:07:50.520 --> 0:07:52.760 it was fifty basis points. So there's a lot of 0:07:52.760 --> 0:07:55.280 optimism around economic growth in the US, but there are 0:07:55.320 --> 0:07:58.200 signs of cracks. If you look in the consumer mortgage 0:07:58.240 --> 0:08:00.920 and credit card delinquencies are up forty You're on year 0:08:01.000 --> 0:08:05.160 now again from a very low base autodelinquencies up twenty percent. 0:08:05.800 --> 0:08:07.800 In the Wall Street Journal this morning, there's another article 0:08:07.840 --> 0:08:10.120 about how many commercial real estate loans are coming to 0:08:10.160 --> 0:08:13.120 The Mortgage Banker Association is saying nine hundred and twenty 0:08:13.160 --> 0:08:15.400 nine billion dollars of maturities this year, two hundred and 0:08:15.400 --> 0:08:17.680 six billion of what's your office. You're going to see 0:08:17.800 --> 0:08:21.320 defaults on commercial property. We saw another bank failure in 0:08:21.320 --> 0:08:23.360 the last week. You're going to see more bank failures. 0:08:23.600 --> 0:08:26.119 There are going to be news stories that come through 0:08:26.440 --> 0:08:28.480 that start to chip away at some of this optimism. 0:08:28.480 --> 0:08:30.680 And so I think it's a little easy to get 0:08:30.720 --> 0:08:33.559 caught up in the excitement of current data and to say, 0:08:33.880 --> 0:08:37.000 you know what tightness. But the reality is monetary policy 0:08:37.040 --> 0:08:39.760 acts with long and variable lags, and I think we're 0:08:39.760 --> 0:08:41.560 going to see some of those lags come into play 0:08:41.600 --> 0:08:44.480 this year, as the consumers depleted their excess savings, has 0:08:44.480 --> 0:08:48.400 trouble paying their debts, and as corporates actually find carrying 0:08:48.400 --> 0:08:51.680 these much higher interest expenses gets pretty difficult over time. 0:08:51.800 --> 0:08:54.400 The show answer is Way Run Temple of Last Run, 0:08:54.480 --> 0:08:58.480 Thank You, Sir, Love, a real time conversation supported by Blomberg. 0:08:58.320 --> 0:09:10.800 At its terminal we love that. Thanks for around of time. 0:09:10.800 --> 0:09:13.120 But a city's rough, cell kids cities rough, selk can 0:09:13.200 --> 0:09:15.680 joins us. Now looking ahead to the federal self tomorrow 0:09:15.720 --> 0:09:17.959 and the data on Friday, let's talk about the data 0:09:18.240 --> 0:09:18.960 that we just got. 0:09:19.200 --> 0:09:20.720 How much does that change things tomorrow? 0:09:21.440 --> 0:09:24.520 You know, this is a challenging print for the Fed. 0:09:24.720 --> 0:09:28.160 It's not quite a nightmare, but it's something akin maybe 0:09:28.160 --> 0:09:29.800 to a really bad dream. 0:09:30.200 --> 0:09:31.600 You know, coming in a one. 0:09:31.559 --> 0:09:35.760 To two is just evidence that the inflation data, the 0:09:35.800 --> 0:09:38.400 wage growth data, is moving in the wrong direction to 0:09:38.400 --> 0:09:41.920 be consistent with their target. And you already got a 0:09:41.960 --> 0:09:44.959 lot of hints of that with the Q one inflation data. 0:09:45.400 --> 0:09:48.400 And you know, a saving grace may have been if 0:09:48.480 --> 0:09:52.400 wage growth showed continue signs of cooling on a quarterly basis. 0:09:52.440 --> 0:09:55.480 But I think putting all that data together, it's going 0:09:55.559 --> 0:09:58.200 to be very hard for Powell not to lean a 0:09:58.200 --> 0:10:01.080 bit more hawkish into these figures and really see they're 0:10:01.200 --> 0:10:05.000 say they're not seeing the progress on inflation that they 0:10:05.080 --> 0:10:07.319 need to be confident to start to ease policy. 0:10:07.559 --> 0:10:10.120 This one point two percent increase in the employment cost 0:10:10.200 --> 0:10:12.560 index for the quarter was the biggest advance of a year. 0:10:12.920 --> 0:10:15.640 We're looking at a reacceleration at a time or even 0:10:15.679 --> 0:10:17.760 city group. You believe that there is going to be 0:10:17.840 --> 0:10:20.640 a rapid deceleration and still a significant number of rate 0:10:20.679 --> 0:10:23.280 cuts later this year. Does this make the rethink that. 0:10:23.720 --> 0:10:26.559 I think it's very challenging, because you know, our base 0:10:26.640 --> 0:10:29.400 case has been based on a market slowing in the 0:10:29.440 --> 0:10:32.720 economy as you get later in the year, and that 0:10:32.840 --> 0:10:34.840 on its own would give the Fed more confidence than 0:10:34.880 --> 0:10:36.360 inflation would continue to cool. 0:10:36.760 --> 0:10:39.240 But you've seen the start of this year. 0:10:39.679 --> 0:10:42.400 You know, GDP growth came in a bit softer than expected, 0:10:42.400 --> 0:10:44.559 but domestic demand was running near three percent, So I 0:10:44.559 --> 0:10:48.439 would call that a pretty strong economy. Labor market indicators 0:10:48.440 --> 0:10:52.240 are cooling but still at pretty solid levels, and as 0:10:52.280 --> 0:10:55.360 I mentioned, the wage growth data just not cooling enough 0:10:55.400 --> 0:10:58.920 for them that they can have confidence that the inflation 0:10:59.040 --> 0:11:01.560 moved back to target. I think really the data, both 0:11:01.600 --> 0:11:04.400 on the activity side and the inflation side are kind 0:11:04.400 --> 0:11:05.319 of moving against that. 0:11:05.679 --> 0:11:09.000 There's also a challenge in this the thesis that some 0:11:09.080 --> 0:11:11.120 of the employment numbers that have been really robust have 0:11:11.160 --> 0:11:14.559 been entirely driven by immigration, which has been disinflationary. You know, 0:11:14.640 --> 0:11:17.559 we've gotten full employment without inflation. Do you think that 0:11:17.600 --> 0:11:21.200 these data that actually strip out some of the wage 0:11:21.200 --> 0:11:23.920 adjustments that we're seeing in some of the overarching payrolls 0:11:24.000 --> 0:11:27.720 numbers really presents a significant problem for that thesis. 0:11:28.040 --> 0:11:30.120 Yeah, you know, then this is really key. 0:11:30.240 --> 0:11:32.240 You know, we get a lot of data throughout the 0:11:32.320 --> 0:11:36.760 quarter on the labor market, on wages, it's really when 0:11:36.800 --> 0:11:39.280 you get to the employment cost index that that's sort 0:11:39.320 --> 0:11:41.440 of supposed to be the be all, end all for 0:11:41.559 --> 0:11:44.280 wage growth. That is by far the best measure and 0:11:44.360 --> 0:11:47.640 indicator of wage pressures in the economy because, as you said, 0:11:47.640 --> 0:11:50.120 it controls for composition, a variety of other factors. 0:11:50.240 --> 0:11:51.120 Now, it's not perfect. 0:11:51.200 --> 0:11:55.240 Maybe we are seeing some distortions in the first quarter 0:11:55.640 --> 0:11:59.040 due to bigger price gains and wage gains that are 0:11:59.040 --> 0:12:00.080 hard to seasonally edge. 0:12:00.200 --> 0:12:01.079 Just or control for. 0:12:01.520 --> 0:12:03.720 But this is supposed to be the one that the 0:12:03.720 --> 0:12:06.600 Fed hangs has had on to tell really where wages 0:12:06.840 --> 0:12:09.079 are going. So I do think this is this is 0:12:09.080 --> 0:12:10.400 pretty difficult news for them. 0:12:10.480 --> 0:12:12.400 If wages are too high and companies are keeping up 0:12:12.400 --> 0:12:15.599 with these higher costs, could this spell then maybe layoffs? 0:12:16.400 --> 0:12:20.400 Well, you know, right now, what we're seeing is labor 0:12:20.440 --> 0:12:23.600 market has been fairly strong terms of hiring wage growth 0:12:23.600 --> 0:12:26.880 has been somewhat elevated, inflation's falling, so real rages have 0:12:26.920 --> 0:12:30.319 been pretty have been pretty good, and that's fueling ongoing 0:12:30.360 --> 0:12:34.120 strength and consumer spending, which in turn is fueling more 0:12:34.160 --> 0:12:36.319 strength in the labor market. 0:12:36.880 --> 0:12:38.120 And so and right now we're. 0:12:38.000 --> 0:12:41.040 Really not seeing much appetite for layoffs. So I think 0:12:41.080 --> 0:12:43.400 more likely is you could get an environment where the 0:12:43.440 --> 0:12:48.040 economy stays resilient, but inflation just stays much stickier than 0:12:48.280 --> 0:12:49.240 expect Mamma kay. 0:12:49.240 --> 0:12:50.960 We wanted to bring it back into the conversation on 0:12:51.000 --> 0:12:52.480 the lip of market. Can we talk about some of 0:12:52.520 --> 0:12:54.160 the numbers we're expecting to get out in the next 0:12:54.160 --> 0:12:59.000 few days tomorrow, IDP and Jolts Thursday claims Friday Pairos, 0:12:59.120 --> 0:13:00.800 what are even the same fun is done? 0:13:00.960 --> 0:13:01.080 Well? 0:13:01.120 --> 0:13:04.439 I think the Fed and therefore me are most focused 0:13:04.480 --> 0:13:09.160 on Friday's excuse me, payrolls, because that'll tell us something 0:13:09.200 --> 0:13:12.320 about how tight the labor market is and whether this 0:13:12.400 --> 0:13:15.600 wage pressure will continue. If we continue to get the 0:13:15.640 --> 0:13:19.200 same kind of job creation, it doesn't suggest any relief 0:13:19.240 --> 0:13:21.960 on the wage side unless there's a big addition to 0:13:22.640 --> 0:13:25.120 the labor force. So it is something the FED is 0:13:25.160 --> 0:13:29.439 going to be watching Jolts was important less important now 0:13:29.520 --> 0:13:31.880 it's been coming down. As long as it continues to 0:13:31.880 --> 0:13:34.560 come down, vacant number of vacancies continue to come down, 0:13:34.679 --> 0:13:37.720 the Fed will be less concerned about that. So I 0:13:37.720 --> 0:13:41.760 think it's really the payrolls creation number and perhaps wages 0:13:41.800 --> 0:13:45.160 and salaries within that that are going to attract the 0:13:45.200 --> 0:13:50.520 most attention from policymakers. Unfortunately, after their decision this time. 0:13:50.440 --> 0:13:51.240 Mike, I get a drink. 0:13:51.240 --> 0:13:53.400 It's going to catch up with the key there breaking 0:13:53.440 --> 0:13:56.160 down the economics day to get into the Federal Reserve tomorrow. 0:13:56.360 --> 0:13:59.120 Payrolls in our survey, the estimate two hundred and forty thousand, 0:14:00.240 --> 0:14:03.520 you've got no tid two hudred ky on Friday. We's 0:14:03.520 --> 0:14:05.559 that coming from? And why do you expect downside risk 0:14:05.600 --> 0:14:07.520 from here? What's guiding that view? I know it's a 0:14:07.559 --> 0:14:10.720 house few of a city, Andrew tannisis every time it 0:14:10.760 --> 0:14:12.760 comes on, where's that house few coming from? 0:14:13.040 --> 0:14:13.240 Yeah? 0:14:13.280 --> 0:14:15.920 Absolutely, And we are expecting the labor market to still 0:14:15.920 --> 0:14:18.640 hold up well, as you said in this report, and 0:14:18.679 --> 0:14:21.720 the idea of the economy slowing is that we are 0:14:21.760 --> 0:14:25.240 starting to see in some areas a few cracks. In particular, 0:14:25.320 --> 0:14:28.120 if I was highlight on the labor market side. If 0:14:28.120 --> 0:14:30.440 you look at some of the small business indicators that 0:14:30.480 --> 0:14:33.720 we track, those are looking kind of worrying, especially in 0:14:33.880 --> 0:14:37.320 the survey data within the NFIB that would argue that 0:14:37.440 --> 0:14:40.680 slow that hiring is likely to slow A fair amount. 0:14:41.520 --> 0:14:42.800 That being said has noted. 0:14:42.920 --> 0:14:45.080 You know, the data have been kind of going against 0:14:45.120 --> 0:14:47.880 it in the first quarter, and we've seen upside surprises 0:14:47.920 --> 0:14:50.880 and payrolls throughout the first quarter and over two hundred 0:14:50.920 --> 0:14:54.600 thousand in aprils a fairly in a is fairly strong number, 0:14:54.680 --> 0:14:55.400 So you. 0:14:55.360 --> 0:14:58.160 Know, that's kind of the basis for it. But right 0:14:58.200 --> 0:15:00.760 now I think the labor markets holding up fairly well. 0:15:00.920 --> 0:15:03.160 There's been an ongoing debate through the show this morning 0:15:03.280 --> 0:15:05.800 about whether or not FED chair of J. Powell is 0:15:05.800 --> 0:15:07.680 going to be interesting at all, but also whether he's 0:15:07.680 --> 0:15:09.640 going to answer the question about whether a rate hike 0:15:09.800 --> 0:15:12.000 could potentially be on the table for any reason. 0:15:12.400 --> 0:15:13.280 You don't think it would be. 0:15:13.600 --> 0:15:16.360 You think that we're sufficiently restrictive, but do you think 0:15:16.400 --> 0:15:18.600 that this is a federal reserve that has to indicate 0:15:19.040 --> 0:15:22.680 some level of sort of I don't know, retracement from 0:15:22.720 --> 0:15:25.880 the pivot last year, just simply because you need an 0:15:25.880 --> 0:15:30.320 economy to run cooler with a market that really. 0:15:30.360 --> 0:15:33.440 Does sell off. And this is a key point. 0:15:33.520 --> 0:15:36.400 And I think for the FED, and you've heard Pal 0:15:36.560 --> 0:15:39.320 say something along these lines, they do feel they're restrictive. 0:15:39.600 --> 0:15:42.400 They would rather just hang out at these levels for 0:15:42.520 --> 0:15:45.680 longer than have to raise rates. Again, I don't think 0:15:45.720 --> 0:15:48.840 it's completely off the table. I think it would take 0:15:48.960 --> 0:15:52.320 something like an acceleration in inflation from where we are 0:15:53.120 --> 0:15:56.560 and a continued acceleration through the year to really get 0:15:56.600 --> 0:15:58.680 that conversation on the table of raising race. 0:15:58.800 --> 0:16:00.000 So I don't think you'll lean into it. 0:16:00.040 --> 0:16:02.119 I think you'll still say that they feel they're restrictive, 0:16:02.760 --> 0:16:04.560 but that they could hang out here for longer if 0:16:04.560 --> 0:16:05.080 they need to. 0:16:05.320 --> 0:16:06.840 Do you think he's going to be boring or do 0:16:06.840 --> 0:16:08.240 you think he's going to come out and try to 0:16:08.240 --> 0:16:09.800 make people feel a little bit more bearish. 0:16:10.080 --> 0:16:11.480 I think he's going to be a little bit a 0:16:11.520 --> 0:16:12.440 little bit boring. 0:16:12.720 --> 0:16:16.000 I would expect him to come in and say that, 0:16:17.560 --> 0:16:19.360 you know, not to say the fetcher is ever boring, 0:16:19.400 --> 0:16:23.400 but uh, they'll come back colistically and basically say that 0:16:23.920 --> 0:16:25.960 exactly we're seeing that they're not. They don't have enough 0:16:26.000 --> 0:16:29.840 confidence yet. They had that the economy remains resilient. They 0:16:29.840 --> 0:16:31.920 do think inflation will move back down to target, but 0:16:31.960 --> 0:16:33.320 the data are kind of moving against them. 0:16:33.320 --> 0:16:35.040 Would you like us to do a shout tomorrow when 0:16:35.040 --> 0:16:37.200 we don't have to you know, we don't. 0:16:37.000 --> 0:16:39.480 Have to turn up a him were you loving? 0:16:39.840 --> 0:16:41.480 Just you know, for the people who make the promos, 0:16:42.200 --> 0:16:43.760 who are in the news room, if you want to 0:16:43.760 --> 0:16:44.640 put that promo on. 0:16:44.880 --> 0:16:45.920 Yeattle bit later. 0:16:46.520 --> 0:16:48.960 Just tight the three guests we've had this morning, that 0:16:49.080 --> 0:16:52.240 just site's going to be boring and suggesting Sham and 0:16:52.280 --> 0:16:55.400 Poushi and Aim spake. Robisk assists. Rob's going to say it. 0:16:55.440 --> 0:16:56.040 Thank you, sir. 0:17:05.480 --> 0:17:09.040 A gross amandalinam right in this policy normalization in response 0:17:09.080 --> 0:17:12.600 to improved inflation is a supportive backdrop for credit, and 0:17:12.680 --> 0:17:15.400 extended delay beyond twenty twenty four for rate cuts because 0:17:15.440 --> 0:17:18.600 of economic strength would likely be more easily digested by 0:17:18.640 --> 0:17:21.520 credit versus a postponement of rate cuts because of a 0:17:21.640 --> 0:17:26.080 sustained reacceleration of inflation. Mana joins us, now for more, Amanda, 0:17:26.119 --> 0:17:29.240 this is brilliant. Not all rate cuts are created equally, 0:17:29.320 --> 0:17:30.960 not all delays are either. 0:17:31.480 --> 0:17:32.600 Is this a healthy delay? 0:17:33.119 --> 0:17:35.320