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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Phil Orlando joins US

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Speaker 1: chief Equity Market Strategies, also head of Client Portfolio Management

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Speaker 1: that federated Hermi's Phil, what's your take on this job's miss?

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Speaker 1: It was a huge miss. Uh, you know at uh

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Speaker 1: two thirty five thousand versus the seven thirty three consensus.

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Speaker 1: But I gotta tell you our number at Federated, we

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Speaker 1: were forecasting four hundred and ninety thousand, so the number

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Speaker 1: we thought was going to be a huge miss. Okay.

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Speaker 1: Your follow up question is, well, how do we need

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Speaker 1: got to be closest? Without going over Phil, that's the rule.

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Speaker 1: There are there are three key model inputs in our

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Speaker 1: labor model. Two of them are weak. The ADP report

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Speaker 1: for August missed by two hundred and fifty thousand jobs.

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Speaker 1: The Philly said was very soft. It missed by four points.

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Speaker 1: The third model input is the claims dad and frankly

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Speaker 1: that's been pretty good. But when you when you and

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Speaker 1: there was also a seasonal adjustment that was negative by

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Speaker 1: seventy seven thousand in this report. So when you work

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Speaker 1: back the seasonal adjustment plus the upside revisions in June

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Speaker 1: and July, that comes to UH and UH sort of

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Speaker 1: a clean number, if you will, A four hundred and

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Speaker 1: forty six thousand. We're forecasting four nine, So basically we

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Speaker 1: were there. UM. I think that the myths that we

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Speaker 1: saw today will be reversed in September. That number is

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Speaker 1: going to be reported on Friday, October eight, and and

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Speaker 1: the key factor there is the roll off of the

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Speaker 1: three federal unemployment bonus. Folks are going to be coming

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Speaker 1: back to work in our view, uh, and particularly in

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Speaker 1: that leisure and hospitality category that showed bagel in the

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Speaker 1: month of August, which was very surprising that well. And

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Speaker 1: we know, of course that those benefits, that extra three

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Speaker 1: hundred dollar week expire September six. I believe that that

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Speaker 1: is Monday, Phil. What this means for the markets, though,

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Speaker 1: I'm wondering, is this September taper by the federal reserve

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Speaker 1: off the table. Well, in our view, it was always

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Speaker 1: off the table because we were expecting this number to miss.

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Speaker 1: We think the September number to be reported in early

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Speaker 1: October will be very strong, north of a million jobs.

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Speaker 1: So we expect the Fed to announce that taper at

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Speaker 1: their f O m C meeting on November three. That's

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Speaker 1: been our forecast. We're we're holding to that right now.

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Speaker 1: What when we see text docs sort of holding us

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Speaker 1: back from bigger losses and a sell off in bonds,

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Speaker 1: what does that say to you? Well, is probably strong

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Speaker 1: word bonds in our view tells us that the market

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Speaker 1: is reading through the hiccup on this number and that

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Speaker 1: we're going to get the labor market back on pace

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Speaker 1: later in the year. The Fed will announced the taper

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Speaker 1: later in the year, we think in November, not in September,

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Speaker 1: and so the bond market I think is looking ahead

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Speaker 1: and sort of pricing that end. But clearly you've you've

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Speaker 1: had to slow down in in growth here, uh in

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Speaker 1: the fact that technology stocks are doing well tells us

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Speaker 1: that the market is saying, Okay, I've got to look

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Speaker 1: for a place where I'm going to get growth, regardless

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Speaker 1: of how good or how bad the underlying economy is,

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Speaker 1: and and and tech has been a place where that's

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Speaker 1: been reliable over the last eighteen months. Phil or is

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Speaker 1: it rates are going to be somewhat anchored because they're

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Speaker 1: the Fed has made a point in a distinction between

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Speaker 1: a taper and a rate hike. Correct is out what

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Speaker 1: you also see moving tech. We we absolutely see that,

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Speaker 1: but we we eventually the FED. If if we're right

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Speaker 1: that the FED starts the paper before the end of

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Speaker 1: this year, let's say they started in November. We think

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Speaker 1: it's gonna be a relatively short taper that by the

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Speaker 1: middle of calendar two, the hundred and forty billion dollars

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Speaker 1: QUEI will have been tapered down to zero. That sets

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Speaker 1: the FED up to begin to increase interest rates. In

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Speaker 1: calendar three. We're looking for two quarter point rate hikes

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Speaker 1: take the funds right up by fifty basis points. So

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Speaker 1: you've got to be able to sort of read the cycle.

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Speaker 1: That's the way we think this is playing out. And

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Speaker 1: I think the technology sector is saying, Okay, if for

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Speaker 1: whatever reason, delta variant economic policy, FED policy, whatever, the

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Speaker 1: economy takes a tick down here, um, we're still going

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Speaker 1: to get some good growth out of the technology names.

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Speaker 1: How far can we get off the ground? I mean,

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Speaker 1: what do you see as a terminal rate film in

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Speaker 1: terms of interest rates? How I mean to two hikes

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Speaker 1: bringing us to fifty basis points. That's still basically you know,

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Speaker 1: zerp right, So when when can we see real rises? Well,

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Speaker 1: so our our forecast on on benchmark Ken's we think

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Speaker 1: we get maybe back to one seventy five this year,

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Speaker 1: two percent next year, maybe two and a half percent

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Speaker 1: in calendar three. You know, that seems like a big number,

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Speaker 1: knowing we're at fifty basis points a year ago, But

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Speaker 1: in the overall scheme of life, two and a half

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Speaker 1: percent on benchmark ten year treasury yields two years from

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Speaker 1: now is not death. That ought to continue to support

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Speaker 1: a strong equity market, And in fact, our s and

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Speaker 1: P five hundred forecast by the end of next year

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Speaker 1: is still up at the fifty three hundred level, and

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Speaker 1: we're sitting here at you know, let's call it. So

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Speaker 1: you've still got some good growth in stocks, not the

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Speaker 1: hundred and seven percent we've seen over the last eighteen months,

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Speaker 1: but the equity market to continue to do well, certainly

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Speaker 1: outpacing the bond market. Phil You've talked about cycles a

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Speaker 1: little bit, and I want to hit on this point.

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Speaker 1: I'm trying to nail down some of our market participants

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Speaker 1: on where we are in the cycle. If it's early phase,

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Speaker 1: are you thinking that there's more room to run in

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Speaker 1: the smaller caps? When is the transition to mid too late?

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Speaker 1: And are we there yet? So so small caps, value

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Speaker 1: stocks and international stocks are still the three areas that

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Speaker 1: we're focused on here because we think there's still some

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Speaker 1: outsize games coming. But when you when you take a

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Speaker 1: step back and look at the bigger cycle, the economic

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Speaker 1: growth that we're going to enjoy this year, we think

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Speaker 1: will slow into calendar twenty two, and we'll slow again

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Speaker 1: into calendar twenty three, not to recessionary levels, but we

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Speaker 1: think more to sort of more trend line levels. Our

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Speaker 1: early guests on calendar twenty three is GDP growth, you

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Speaker 1: know in that sort of two to three percent neighborhood

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Speaker 1: now all under twenty four and beyond is going to

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Speaker 1: be a function of how draconian it's fed policy over

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Speaker 1: the next year or two. Fiscal policy with with Congress

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Speaker 1: and the Biden administration, and might know those are question

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Speaker 1: marks we don't know what's going to happen there um,

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Speaker 1: but based upon what we think we know right now,

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Speaker 1: the economy does decelerate back to trend line over the

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Speaker 1: next couple of years, but not into recession. So that's

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Speaker 1: not so bad. Let me take this in a slightly

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Speaker 1: different direction. We had an op ed by Joe Mansion.

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Speaker 1: Was it just last night? It feels like days ago,

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Speaker 1: but just yesterday, I think, um saying, you know, twenty

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Speaker 1: eight trillion dollars is too much and we can't be

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Speaker 1: adding to that deficit. He's concerned about all kinds of issues,

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Speaker 1: are you We're we're we're absolutely on board with Senator

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Speaker 1: Mansion that that if I could fill in some of

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Speaker 1: the blanks, we now know definitively, based upon the n

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Speaker 1: b e R the National Bureau of Economic Research, that

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Speaker 1: the law the shortest and deep this recession in history

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Speaker 1: ended April a year ago. We had this powerful v

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Speaker 1: bottom economic recovery that started last summer. We we know

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Speaker 1: definitively that we have closed the output gap in g

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Speaker 1: d P with the second quarter g P report this year,

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Speaker 1: So we don't need another five and a half trillion

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Speaker 1: dollars of stimulus to sort of prop up the economy.

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Speaker 1: We're back to where we need to be. Now, what

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Speaker 1: I think Senator Mansion said is the question here is

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Speaker 1: not propping up the economy. It's it's sort of reordering

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Speaker 1: the social contract between the federal government and the American people.

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Speaker 1: That's a completely different argument, and it's one that I

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Speaker 1: guess the Biden administration Congress is going to have to

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Speaker 1: make that argument to the American people. But but from

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Speaker 1: an economic standpoint, we don't need five and a half

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Speaker 1: trillion dollars of additional debt, higher taxes, et cetera to

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Speaker 1: resuscitate the economy because the economy is doing five. Are

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Speaker 1: your clients asking you though about higher taxes and the

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Speaker 1: impact on the markets? Yes? Absolutely. I just did two

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Speaker 1: client meetings question Connecticut earlier this week, and that was

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Speaker 1: that was those are the questions, higher debt levels, higher taxes,

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Speaker 1: higher servicing of the debt, What does that mean to

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Speaker 1: us as investors? And what should we be doing to

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Speaker 1: protect ourselves buying bitcoin, water and building and building yourself

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Speaker 1: a fallout shelter. That was not my answer, but one

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Speaker 1: client did jump out and talked about, you know, ammunition

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Speaker 1: and can goods in the basement. You know, I'm not

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Speaker 1: going there either, but but I almost went there, but

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Speaker 1: I didn't say it out loud. It is it is

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Speaker 1: an uncertain time for for clients and investors who are

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Speaker 1: out there trying to figure out what all of this means. Yeah,

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Speaker 1: especially since you can't be in the basement if you

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Speaker 1: live in the northeast, right, it's completely flooded too soon,

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Speaker 1: mad And you also missed n f T s in there.

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Speaker 1: N f T s are also this new thing after

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Speaker 1: f n f T s are a little crazy. I'm

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Speaker 1: I'm just talking about what you need in case armageddon comes.

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Speaker 1: You could throw gold in there for bitcoin, but you

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Speaker 1: you have to have more and more people. Even though

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Speaker 1: we don't see it Phil getting bearished, right at least

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Speaker 1: at least hedging hedging bearish. Do you have a lot

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Speaker 1: of people hedging well, I'll put myself in that category

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Speaker 1: that that yes, we've got a forty eight hundred target

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Speaker 1: on the SMP five this year at the end of

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Speaker 1: this year, but we're also acknowledging the fact that that

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Speaker 1: we're sitting here at record highs now. I think we

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Speaker 1: hit our fifty four record high the other day and

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Speaker 1: We've got all of these fiscal and monetary policy head

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Speaker 1: winds ahead of us, the depth ceiling, questions about the

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Speaker 1: jobs report, economic growth, the delta area, et cetera. Could

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Speaker 1: we see a five or ten percent air pocket over

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Speaker 1: the next couple of months, you know, back to let's

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Speaker 1: call it a two hundred day moving average. I mean,

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Speaker 1: that's very possible. Now, we would look at that as

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Speaker 1: a as a potential buying opportunity if we can get

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Speaker 1: some of these issues resolved. But but I'm not going

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Speaker 1: to suggest that the market is going to go straight up,

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Speaker 1: you know, to fifty next year without any consolidation in

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Speaker 1: between now and that. How do you compete with a

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Speaker 1: wall of cash that's flooding anytime you get a little

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Speaker 1: bit of a dip, And we could fold this over

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Speaker 1: into high yield spreads. The minute it goes above three

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Speaker 1: hundred basis points of where treasuries a wall of cash

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Speaker 1: comes in. You wake up, you have a million emails

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Speaker 1: from Japan. They can't wait to buy bonds that aren't

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Speaker 1: negative interest rates. How do you compete with that? Well,

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Speaker 1: it's very hard to compete with and and that's not

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Speaker 1: to suggest that we're on the precipe of a bear market.

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Speaker 1: We're not. But when I talk about an air pocket,

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Speaker 1: these things are relatively short lived. And and maybe it's because,

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Speaker 1: for example, the debt ceiling issue becomes a near term

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Speaker 1: hot potato or uh, suddenly it seems that this five

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Speaker 1: and a half trillion dollar package in Congress is going

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Speaker 1: to get the votes and we're gonna double capital gains

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Speaker 1: tax rates something like that. Um. So when you're talking

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Speaker 1: about an air pocket, you're talking about the market moving

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Speaker 1: lower for you know, a couple of days, a couple

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Speaker 1: of weeks. But I think by the time we get

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Speaker 1: back into the end of October beginning of November sort

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Speaker 1: of work through. You know, the Fed is going to

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Speaker 1: make that announcement. We think on November three, Uh, Speaker

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Speaker 1: Pelosi has established a September seven vote date for a

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Speaker 1: couple of these pieces of legislation. By the time we

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Speaker 1: get into early November, we're hoping that we'll have some

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Speaker 1: answers to some of these questions. Remember when TARP seemed

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Speaker 1: like an insanely large amount of money, like just unbelievable

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Speaker 1: that they could spend eight hundred billion dollars, And now

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Speaker 1: he said drop in the bucket. I want to ask

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Speaker 1: you about a point that Crety Goopta made earlier, said

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Speaker 1: she doesn't talk to a lot of investors who are

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Speaker 1: really long term putting money down long term, you know, uh,

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Speaker 1: for more like five to ten years or ten to

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Speaker 1: twenty years. It's more of a near term to medium

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Speaker 1: term UM investment horizon. Do you see that as well? No,

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Speaker 1: I don't. I there are certainly investors who are nervous

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Speaker 1: about navigating the near term uh, you know, challenges. But

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Speaker 1: I think if you're going to invest in the market

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Speaker 1: for for college savings, retirement savings, whatever, you've got to

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Speaker 1: be thinking longer term. And and the reality is that

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Speaker 1: that America is the greatest nation in the world and

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Speaker 1: the greatest financial markets in the world. We're investing throughout

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Speaker 1: the entire world. Companies produce positive earning. Stock prices follow

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Speaker 1: those earnings. Eventually we're gonna stabilize with with better fiscal

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Speaker 1: and monetary policies that will be able to project out

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Speaker 1: into the future. And and as you're looking out, you know,

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Speaker 1: over the decades um, you know, at eight to twelve

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Speaker 1: normalize positive return out of stocks on a total return

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Speaker 1: basis is a reasonable assumption, UM, and and so again

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Speaker 1: as you're thinking retirement, college savings, those sort of good

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Speaker 1: longer term goals. Um. The equity market is the place

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Speaker 1: where you need to be alright, great to get some

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Speaker 1: insight with you, Phil. Always love hearing from you, Phil Orlando,

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Speaker 1: Chief equity market strategists and head of Client portfolio Management

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Speaker 1: that Federated Hermes. They've got a total of I think

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Speaker 1: about six d fifty billion under management, but hundred and

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Speaker 1: a hundred billion and change in equities alone. So great

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Speaker 1: to hear from Federate Hermes and Phil Orlando. Let's get

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Speaker 1: over right now to talk about the aftermath of I

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Speaker 1: saw described as ex Hurricane Ida. You know, hurricane or

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Speaker 1: storm um, doesn't really matter because it did so much

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Speaker 1: damage traveling up from New Orleans and hitting the New York,

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Speaker 1: New Jersey connectic, the tri state area really hard. Um.

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Speaker 1: What what are we seeing in terms of damage? What

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Speaker 1: are we seeing in terms of the aftermath here? For that,

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Speaker 1: I want to bring in a Bloomberg reporter on this

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Speaker 1: to give us late to Skylar Woodhouse joins us Um

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Speaker 1: and Skylar. I heard a factoid today, not sure if

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Speaker 1: it's true. I heard that more rain was dropped in

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Speaker 1: an hour than ever had been recorded in that area before.

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Speaker 1: Is that the case, Yeah, No, that is the case, definitely.

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Speaker 1: I mean, you know, I was in my apartment and

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Speaker 1: I could hear the rain outside, and I'm thinking to myself,

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Speaker 1: my goodness, it's really coming down. But no, the rain

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Speaker 1: it came through and it really ran back the city,

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Speaker 1: and it left a lot of people confused and just

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Speaker 1: an utter shock really to what has happened and really

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Speaker 1: such a short amount of time, and it was something

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Speaker 1: that you know, no one could have expected to really

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Speaker 1: cause such such great damage and to see the but

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Speaker 1: what the storm did to the city, it just left

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Speaker 1: so many people in complete shock and confusion as well.

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Speaker 1: People are just really confused as to what just happened. Skyler.

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Speaker 1: That is of hints it my next question. This isn't

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Speaker 1: our first rodeo with aftermaths of hurricanes. Why were we

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Speaker 1: so caught off guard? Yeah, you know, I think after

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Speaker 1: you know, I think the city did a lot of

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Speaker 1: repairs after Hurricane Sandy years ago. But I think you know,

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Speaker 1: time is moving, thinks they're quickly changing. You know, climate

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Speaker 1: change is presenting a whole set of new challenges, and

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Speaker 1: I think this this range just came completely out of

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Speaker 1: nowhere and just left everyone just so at loss as

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Speaker 1: to why weren't we prepared and you know, what could

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Speaker 1: have been done different to prevent such a catastrophe that

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Speaker 1: we really saw. And it just raised a lot of

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Speaker 1: questions as to what will the city and Albany do

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Speaker 1: to prevent something like this from happening again. Now, the

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Speaker 1: Tri State area is not exactly a red Tri State area,

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Speaker 1: so I don't know if it swings any voters, but um,

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Speaker 1: how do you think people feel about the the Infrastructure

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Speaker 1: Bill now considering what we just saw happen. I mean,

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Speaker 1: I think people's eyes have I think people have definitely

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Speaker 1: you know, maybe perked up a bit and or you know,

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Speaker 1: maybe paying a little bit more attention now after what

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Speaker 1: we saw in the Tri State area. I mean you

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Speaker 1: could say up here, you know it's it definitely leans,

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Speaker 1: you know, it's definitely more blue. But you know, so

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Speaker 1: I think it's leaving people that just definitely pay way

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Speaker 1: more attention to um, you know, climate change in how

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Speaker 1: the Infrastructure Bill could possibly um improve some of the

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Speaker 1: downfalls that we saw were impacted from the hurricane through

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Speaker 1: this bill and It's definitely made people realize that this

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Speaker 1: is something that needs to be taken seriously. All Right, Skyler,

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Speaker 1: thanks so much for joining us. Skylar Woodhouse, Bloomberg News

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Speaker 1: reporter on the aftermath of Hurricane Ida and New York

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Speaker 1: City is worsening weather patterns. Let's uh, let's get back

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Speaker 1: to the corporate world right now. We've got a great

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Speaker 1: guest for you, Tom Bone, as the president CEO of

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Speaker 1: the Association for Corporate Growth. They have a huge network

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Speaker 1: d mid market corporate executives all um running companies that

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Speaker 1: are between ten million in market cap and a billion

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Speaker 1: or ten million and I guess revenue per year and

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Speaker 1: and a billion in revenue uh per year. And it's

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Speaker 1: just a great place to get a picture of what's

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Speaker 1: happening in the return to work. They have about thirty

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Speaker 1: million jobs that they control, Tom, what do you think

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Speaker 1: here as we as we round out what are we

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Speaker 1: now nineteen months, twenty months through the pandemic? Um? Are

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Speaker 1: we getting back to work or is there going to

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Speaker 1: be something new ahead of us? A great to talk

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Speaker 1: to you both, Thanks for having me. We get a

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Speaker 1: survey of about a middle market companies on what they

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Speaker 1: thought the future would look like. And what's interesting about

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Speaker 1: this survey is it happened it coincided just before we

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Speaker 1: started to get to the peak of what delta was

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Speaker 1: looking like. So probably I think that if there was

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Speaker 1: all to happened a little bit later, they'd even be

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Speaker 1: more significant. But what we heard back loud and clear

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Speaker 1: was that seventy percent of the respondent said that they

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Speaker 1: were going to come back to a work environment that

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Speaker 1: was very different, and they said it would probably be hybrid.

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Speaker 1: Which hybrid model looks at, you know, coming into the

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Speaker 1: office two or three days a week and then having

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Speaker 1: much more flexible opportunities to work from home or god

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Speaker 1: knows where where people are working from today. But it

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Speaker 1: was interesting though because this was prior to the to

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Speaker 1: the very insurgeon, we had at least, you know, two

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Speaker 1: thirds things it's going to be different. We're not going

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Speaker 1: back to the way things used to be. Interesting, if

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Speaker 1: you go back, at least in some portion to the office,

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Speaker 1: what does that look like. Are you hearing that more

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Speaker 1: of these companies are either doing testing or asking for

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Speaker 1: vaccination status. Well, it's a great question. And what we're

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Speaker 1: finding in our data is that they're the vaccine mandates

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Speaker 1: are actually very much aligned with kind of the political

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Speaker 1: geography of the country. So in the southeast we're not

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Speaker 1: seeing very many political mandates. In the northeast and out

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Speaker 1: towards parts of the Midwest, and certainly on the on

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Speaker 1: the far west coast, we're seeing a much more willingness

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Speaker 1: and likelihood to have vaccine mandates in place. And barring that,

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Speaker 1: UM the flexibility comes in and they have to be tested,

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Speaker 1: you know, a minimum of one, sometimes multiple times a week,

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Speaker 1: which can become very very onerous. But it's definitely different

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Speaker 1: than it was prior to all this happening. Beyond UM

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Speaker 1: the virus, beyond the pandemic, what are your member executives

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Speaker 1: most concerned about? What are the biggest challenges that they're facing.

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Speaker 1: Number One right now is labor. Labor lay. We're getting

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Speaker 1: the right employees and getting them on time, you know,

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Speaker 1: to to build the positions that they need. I keep

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Speaker 1: hearing from everyone they just simply cannot hire. We just

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Speaker 1: saw the jobs report come out today and I think

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Speaker 1: it was two thousand new jobs when they were expecting

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Speaker 1: seven hundreds something thousand. In the delta. UH they're talking

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Speaker 1: about is simply the lack of people entering or re

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Speaker 1: entering the labor force, and you know, we're seeing it,

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Speaker 1: certainly from our organization. Our members are saying over and

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Speaker 1: over is that trying to get quality people in every

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Speaker 1: type of position right now is incredibly difficult. And but

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Speaker 1: the hope is, and I think you know, if you

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Speaker 1: look at the survey that we put out there, is

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Speaker 1: that employees want the flexibility to work from home. They're

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Speaker 1: saying loud and clear, we cannot go back to the

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Speaker 1: way things used to be, right, that is their strong hope.

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Speaker 1: So the hope is that with some of this cultural

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Speaker 1: change now, with this hybrid and the selectible environment, that

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Speaker 1: they're able to attract more employees. Well, I look at

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Speaker 1: a CG. We have our completely distributed organization over fifty

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Speaker 1: six employees. But what's amazing is that we are all

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Speaker 1: over the US, so we can hire in any community

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Speaker 1: across the country, and that's given us a significant advantage.

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Speaker 1: Just about thirty seconds here, is there a skills mismatch?

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Speaker 1: I you know, I don't know that it's much of

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Speaker 1: a as a skill mitch mismatches. It is a simply

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Speaker 1: a lack of willing and able bodies to jump into

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Speaker 1: the to the fray. I mean, it's it's a lot

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Speaker 1: of the jobs before we used to have a problem

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Speaker 1: hiring when the tech sector or technical type skills either

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Speaker 1: generally across the board, middle management and other types of

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Speaker 1: managerial jobs that people simply marketing jobs, social media jobs

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Speaker 1: having a really tough time finding uh, finding the folks

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Speaker 1: to take those positions. All right. Interesting. I wish we

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Speaker 1: had more time with you, Tom. I hope we can

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Speaker 1: get you back on the program because your network. I

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Speaker 1: just love to tap you for more insight. Uh, there's

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Speaker 1: so much we can learn. And we didn't even get

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Speaker 1: to talk about cybersecurity, which which is something that we

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Speaker 1: think about a lot as well. Tom Bone there is

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Speaker 1: the CEO and president of the Association for Corporate Growth.

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Speaker 1: All right, and it is kind of a special episode,

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Speaker 1: a little bit of a special day because of the

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Speaker 1: big non farm payroll jobs miss we had again. UM

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Speaker 1: just got I think two hundred and thirty five is it?

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Speaker 1: Two hundred thirty five thousand is what we added. Um,

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Speaker 1: I gotta pull up my eco US screen again. Yeah,

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Speaker 1: we added two hundred thirty five thousand jobs. We were

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Speaker 1: looking for seven thirty three thousands, So Um, a huge miss,

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Speaker 1: and compared to the previous month. You know, the original

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Speaker 1: number we got was nine forty three thousand, that was

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Speaker 1: revived revised up to more than a million, one spot

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Speaker 1: zero five three. So UM really apparent that the delta

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Speaker 1: variant UM really crept into the economy since the last report.

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Speaker 1: Let's bring in Tom Gimle is the founder and CEO

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Speaker 1: of the Sound Network in Chicago to we're the leading

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Speaker 1: staffing and recruiting firms in the country. And Tom, was

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Speaker 1: this a surprise to you? I thought it was gonna

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Speaker 1: be a little bit higher. I didn't think it was

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Speaker 1: gonna be seven thousand. I thought it would be about

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Speaker 1: four fifty or five. You know, I think we have

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Speaker 1: to look at this. We have the delta variant, we

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Speaker 1: have the situation with school districts fighting with state governments UM,

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Speaker 1: and we have the dispute over booster shots and and

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Speaker 1: initial vaccines, and we still added almost a quarter of

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Speaker 1: a million jobs. This is it's not it might not

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Speaker 1: be a grand slam, but it's sure as heck isn't

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Speaker 1: a strikeout. I think one thing that really hit people

432
00:24:42,800 --> 00:24:47,360
Speaker 1: is that the leisure and hospitality sector didn't add any jobs.

433
00:24:48,320 --> 00:24:52,320
Speaker 1: How are you thinking about a sector by sector who's

434
00:24:52,359 --> 00:24:56,600
Speaker 1: asking for staffing and who was saying they're asking for it,

435
00:24:56,640 --> 00:25:00,240
Speaker 1: but the supply is the real issue. Well, I think

436
00:25:00,240 --> 00:25:03,720
Speaker 1: the supplies the real issue around every industry. What we're

437
00:25:03,760 --> 00:25:06,040
Speaker 1: seeing right now is that, and I know you guys

438
00:25:06,080 --> 00:25:07,800
Speaker 1: talk about it all the time, is that the number

439
00:25:07,800 --> 00:25:09,919
Speaker 1: of jobs versus a number of available workers for the

440
00:25:09,920 --> 00:25:12,800
Speaker 1: first time ever outpacing one another. So I think you

441
00:25:12,920 --> 00:25:15,680
Speaker 1: have that issue you have in the restaurant space. I

442
00:25:15,760 --> 00:25:18,119
Speaker 1: was having uh lunch the other day with the CEO

443
00:25:18,160 --> 00:25:20,720
Speaker 1: of a major restaurant group in Chicago, and he was

444
00:25:20,760 --> 00:25:22,960
Speaker 1: saying he could hire three hundred people if he could

445
00:25:22,960 --> 00:25:25,720
Speaker 1: find them. So what you've got is this transition. And

446
00:25:25,960 --> 00:25:28,720
Speaker 1: we still haven't had the the influx of people who

447
00:25:28,720 --> 00:25:31,480
Speaker 1: are on federal unemployment, and we should see that in

448
00:25:31,520 --> 00:25:34,160
Speaker 1: the September job in the October report on the September

449
00:25:34,240 --> 00:25:37,520
Speaker 1: jobs numbers. So I just think I really believe that

450
00:25:37,560 --> 00:25:40,399
Speaker 1: the jobs numbers in the economy overall is more like

451
00:25:40,440 --> 00:25:43,399
Speaker 1: a race track. You have the straightaways where you're getting

452
00:25:43,440 --> 00:25:45,280
Speaker 1: really fast, and then you have you go slow down

453
00:25:45,280 --> 00:25:48,840
Speaker 1: around the corners. And we've got changes seasons, the delta variant.

454
00:25:49,040 --> 00:25:51,280
Speaker 1: We added a quarter of a million jobs. This isn't

455
00:25:51,320 --> 00:25:54,800
Speaker 1: a bad thing because you can't go, you know, two

456
00:25:54,920 --> 00:25:58,600
Speaker 1: hundred miles an hour all the time, and we're getting

457
00:25:58,720 --> 00:26:01,960
Speaker 1: used to new things. We saw the education sector drop

458
00:26:02,040 --> 00:26:06,360
Speaker 1: and not adding jobs, and the seasonal aspect is real. Yeah,

459
00:26:06,359 --> 00:26:08,720
Speaker 1: and it's a flag to flag race also with this

460
00:26:08,920 --> 00:26:13,840
Speaker 1: um virus invariants forcing us to pitt and drop the slicks,

461
00:26:13,920 --> 00:26:17,879
Speaker 1: add some rain tires. What what uh? When do we

462
00:26:18,040 --> 00:26:19,960
Speaker 1: when do we get back up to speed again on

463
00:26:20,040 --> 00:26:25,040
Speaker 1: dry tarmac? Well, my my guess is is that we're

464
00:26:25,040 --> 00:26:26,800
Speaker 1: going to get through the end of the year and

465
00:26:26,800 --> 00:26:29,720
Speaker 1: we're going to see the delta variant level off. Is

466
00:26:29,720 --> 00:26:32,480
Speaker 1: when I'm talking to two people like you guys, aren't

467
00:26:32,480 --> 00:26:36,560
Speaker 1: everybody else's And what it seems like is we've got

468
00:26:36,880 --> 00:26:40,960
Speaker 1: a rehash of of the most vulnerable are the ones

469
00:26:40,960 --> 00:26:44,640
Speaker 1: getting hospitalized, and that might be people who aren't vaccinated

470
00:26:45,160 --> 00:26:48,720
Speaker 1: and people who are older and or have chronic illnesses

471
00:26:49,080 --> 00:26:52,720
Speaker 1: or obesity. And that's not overall and overall arching, but

472
00:26:52,840 --> 00:26:55,320
Speaker 1: that seems to be where the numbers are going. And

473
00:26:55,320 --> 00:26:57,520
Speaker 1: then it's gonna level off. What I haven't seen it all.

474
00:26:57,640 --> 00:27:00,440
Speaker 1: I'm talking to CEOs and heads of HR every single

475
00:27:00,520 --> 00:27:05,080
Speaker 1: day is that companies are still hiring in mass they

476
00:27:05,200 --> 00:27:08,480
Speaker 1: can't find people for certain areas. And I think what

477
00:27:08,520 --> 00:27:11,080
Speaker 1: we're also starting to see is, and not that other

478
00:27:11,119 --> 00:27:13,240
Speaker 1: countries aren't having are having problems with it, but you're

479
00:27:13,240 --> 00:27:15,320
Speaker 1: seeing a lot a lot of companies go to offshore

480
00:27:15,520 --> 00:27:17,480
Speaker 1: because if they can't find the workers here, they're going

481
00:27:17,520 --> 00:27:19,679
Speaker 1: to find them someplace else, and that doesn't get reported

482
00:27:19,680 --> 00:27:21,880
Speaker 1: in the statistics. I gotta tell you that we have

483
00:27:22,320 --> 00:27:27,480
Speaker 1: so the state of Saxony has so few workers that

484
00:27:27,640 --> 00:27:32,719
Speaker 1: not only are they writing letters to Polish immigrants that

485
00:27:32,760 --> 00:27:36,160
Speaker 1: couldn't stay in the UK after Brexit to please move

486
00:27:36,280 --> 00:27:42,080
Speaker 1: to Saxony, but they are preparing refugee programs that will

487
00:27:42,119 --> 00:27:46,560
Speaker 1: get refugees straight into trainee positions for like electro mechanical jobs.

488
00:27:47,320 --> 00:27:51,480
Speaker 1: They need desperately to have new workers in these sort

489
00:27:51,480 --> 00:27:55,560
Speaker 1: of engineering, electrical mechanic and then anything anything like plumbing,

490
00:27:55,680 --> 00:28:00,359
Speaker 1: you know, or any trades. They need people beyond belief.

491
00:28:00,400 --> 00:28:02,400
Speaker 1: And the other thing you have to realize is we're

492
00:28:02,440 --> 00:28:05,800
Speaker 1: also hitting maybe hopefully a climax, but but of where

493
00:28:06,240 --> 00:28:09,560
Speaker 1: immigration is south of the border. For the past five years,

494
00:28:09,600 --> 00:28:12,520
Speaker 1: four and a half years, it's been stopped. The influx

495
00:28:12,560 --> 00:28:15,800
Speaker 1: of immigrants from the border, and whether illegal or legal,

496
00:28:15,880 --> 00:28:18,680
Speaker 1: slow it down, and and and so guess what happens

497
00:28:18,760 --> 00:28:20,479
Speaker 1: all of a sudden you don't have people to do

498
00:28:20,560 --> 00:28:23,320
Speaker 1: the work that a lot of people would would normally

499
00:28:23,440 --> 00:28:26,760
Speaker 1: do who were coming in. So you've got the pandemic,

500
00:28:27,200 --> 00:28:31,320
Speaker 1: and you've got seasonality, and you've got immigration issues, and

501
00:28:31,400 --> 00:28:34,760
Speaker 1: you've got federal unemployment at the highest has ever been right,

502
00:28:34,800 --> 00:28:37,880
Speaker 1: So all of those things at the same time with

503
00:28:37,960 --> 00:28:40,520
Speaker 1: the delta variant, and we've just got a little bit

504
00:28:40,520 --> 00:28:43,560
Speaker 1: of people saying, hold on, I'm not sure where I

505
00:28:43,560 --> 00:28:44,840
Speaker 1: want to work or what I could do. And I

506
00:28:44,880 --> 00:28:47,560
Speaker 1: also think the other thing is that six months ago,

507
00:28:47,640 --> 00:28:50,760
Speaker 1: eight months ago, employees thought I'm gonna be able to

508
00:28:50,800 --> 00:28:53,040
Speaker 1: work from home and work remote and work from the

509
00:28:53,080 --> 00:28:56,480
Speaker 1: beach for the rest of my life. And with UH,

510
00:28:56,520 --> 00:29:00,320
Speaker 1: with the vaccine becoming readily available, corporations are saying, hold

511
00:29:00,440 --> 00:29:04,120
Speaker 1: on here, we're not gonna go a pent back, but

512
00:29:04,200 --> 00:29:05,960
Speaker 1: we are going to be hybrid and we're gonna want

513
00:29:05,960 --> 00:29:08,000
Speaker 1: people to be close to the office. So you just

514
00:29:08,120 --> 00:29:10,120
Speaker 1: had a lot of people figuring out what the new

515
00:29:10,160 --> 00:29:13,400
Speaker 1: normal is gonna be. Can you quickly talk to us

516
00:29:13,480 --> 00:29:17,160
Speaker 1: about what you're hearing about wages. What are companies telling you.

517
00:29:17,280 --> 00:29:19,440
Speaker 1: I was going to ask the exact same thing, and

518
00:29:19,440 --> 00:29:21,880
Speaker 1: we saw, well, no, because I'm looking at the ECO

519
00:29:21,920 --> 00:29:24,840
Speaker 1: page here, looking at the numbers. Average hourly earnings were

520
00:29:24,880 --> 00:29:26,880
Speaker 1: up four point three percent. That's more than the street

521
00:29:26,920 --> 00:29:29,240
Speaker 1: was looking for. And that's year over year, the month

522
00:29:29,280 --> 00:29:31,240
Speaker 1: over month zero point six percent. That's double what the

523
00:29:31,280 --> 00:29:34,239
Speaker 1: street was looking for. Tom. Yeah, So so on the

524
00:29:34,320 --> 00:29:37,240
Speaker 1: hourly side, it's a big bump. Of what we're seeing

525
00:29:37,360 --> 00:29:42,200
Speaker 1: is uh number one municipality Chicago being one, San Francisco

526
00:29:42,240 --> 00:29:45,000
Speaker 1: being another, that are now up to fifteen dollars an hour,

527
00:29:45,360 --> 00:29:48,720
Speaker 1: and the surrounding counties around those cities had to up

528
00:29:48,760 --> 00:29:51,360
Speaker 1: it as well to make sure that they could match

529
00:29:51,400 --> 00:29:53,320
Speaker 1: what the cities are doing. So you're finally getting a

530
00:29:53,400 --> 00:29:56,920
Speaker 1: catch up right there. Number one. Number two, when you

531
00:29:57,000 --> 00:29:59,680
Speaker 1: have the summer open up, you have more people going

532
00:29:59,720 --> 00:30:02,280
Speaker 1: into the service industries, even though the numbers don't show

533
00:30:02,280 --> 00:30:04,680
Speaker 1: an ad there, but you do have more people doing

534
00:30:04,760 --> 00:30:08,080
Speaker 1: hourly work at an increased minimum wage. And then you

535
00:30:08,160 --> 00:30:10,680
Speaker 1: have the search for for people in a in a

536
00:30:10,800 --> 00:30:14,000
Speaker 1: very desolate market right now, So companies are paying more

537
00:30:14,120 --> 00:30:16,560
Speaker 1: that can afford it, and they're paying instead of fifteen

538
00:30:16,600 --> 00:30:20,239
Speaker 1: seventeen nineteen dollars. So that's on the hourly side, on

539
00:30:20,280 --> 00:30:23,640
Speaker 1: the salary side, on the white collar aspect, you're seeing

540
00:30:23,640 --> 00:30:27,240
Speaker 1: companies that need to get people and and technology is

541
00:30:27,320 --> 00:30:30,560
Speaker 1: driving it. So when you see technology and even accounting

542
00:30:30,560 --> 00:30:33,920
Speaker 1: and finance which now has a technology element, marketing which

543
00:30:34,000 --> 00:30:37,959
Speaker 1: now has a technology element with Google Analytics and different

544
00:30:37,960 --> 00:30:42,000
Speaker 1: software packages, even sales positions, they expect you to have

545
00:30:42,320 --> 00:30:46,200
Speaker 1: a software knowledge and an analytical brain more than ever

546
00:30:46,240 --> 00:30:49,280
Speaker 1: before to do that. So we're seeing companies start to

547
00:30:49,320 --> 00:30:52,240
Speaker 1: pay more. However, I don't think that will increase at

548
00:30:52,280 --> 00:30:54,160
Speaker 1: a rapid rate and at all level off towards the

549
00:30:54,240 --> 00:30:56,160
Speaker 1: end of the year, because when there's a supply and

550
00:30:56,240 --> 00:30:59,840
Speaker 1: demand issue, what you have is companies reverting to hiring

551
00:31:00,080 --> 00:31:02,760
Speaker 1: three level people, and when you do that, salaries don't

552
00:31:02,800 --> 00:31:06,880
Speaker 1: increase in well, while we have more and more UH

553
00:31:07,000 --> 00:31:10,760
Speaker 1: companies that are offering higher wages. In fact, I saw

554
00:31:11,080 --> 00:31:14,200
Speaker 1: we have a newsletter, the Daybreak newsletter that I read

555
00:31:14,280 --> 00:31:17,560
Speaker 1: usually first thing in the morning, and there's a chart

556
00:31:17,640 --> 00:31:22,000
Speaker 1: in there from the n f I B today. UM,

557
00:31:22,040 --> 00:31:24,360
Speaker 1: I actually have the chart I had the chart produced

558
00:31:24,360 --> 00:31:26,120
Speaker 1: on the Bloomberg terminal. So if you have a terminal,

559
00:31:26,440 --> 00:31:30,720
Speaker 1: you can type type g hashtag b t V space

560
00:31:30,960 --> 00:31:35,440
Speaker 1: four three to one. You got that tailor. I actually

561
00:31:35,440 --> 00:31:37,720
Speaker 1: like the number because it's a countdown G hashtag b

562
00:31:37,840 --> 00:31:41,880
Speaker 1: TV four three to one. And what this chart shows

563
00:31:41,880 --> 00:31:45,120
Speaker 1: you as two panels, um, the top one shows you

564
00:31:45,240 --> 00:31:49,000
Speaker 1: that there are more job openings. Well, more firms have

565
00:31:49,160 --> 00:31:52,080
Speaker 1: job openings than ever before. The chart goes back to

566
00:31:52,120 --> 00:31:58,800
Speaker 1: the seventies, so small businesses need workers and um, more

567
00:31:59,000 --> 00:32:02,200
Speaker 1: firms are offering pay raises to get people through the

568
00:32:02,240 --> 00:32:05,720
Speaker 1: door than ever before, at least since the seventies or

569
00:32:05,760 --> 00:32:07,840
Speaker 1: eighties when the charts started. So tom it looks like

570
00:32:08,080 --> 00:32:11,200
Speaker 1: not only do a lot more firms need people, but

571
00:32:11,320 --> 00:32:13,400
Speaker 1: a lot more firms are willing to pay more at

572
00:32:13,400 --> 00:32:16,480
Speaker 1: this point now to bring him through the door. Well,

573
00:32:16,520 --> 00:32:18,640
Speaker 1: they're also paying more to their existing staff and that

574
00:32:18,800 --> 00:32:21,600
Speaker 1: also doesn't get projected in the data. And this has

575
00:32:21,640 --> 00:32:24,280
Speaker 1: been a problem that iPad with the BLS statistics for

576
00:32:24,280 --> 00:32:28,520
Speaker 1: forever is that it only tracked new hires and salary wages.

577
00:32:28,560 --> 00:32:31,680
Speaker 1: Where we have employees that get promotions internally, they may

578
00:32:31,680 --> 00:32:33,800
Speaker 1: not go into effect for a quarter, they may not

579
00:32:33,840 --> 00:32:37,320
Speaker 1: go into effect. It maybe bonus driven and incentified that way.

580
00:32:37,560 --> 00:32:41,120
Speaker 1: So salaries are increasing, and we're focusing with more and

581
00:32:41,160 --> 00:32:44,080
Speaker 1: more of our clients to say, you've got to start

582
00:32:44,120 --> 00:32:46,760
Speaker 1: re recruiting your existing staff so they don't leave and

583
00:32:46,800 --> 00:32:51,040
Speaker 1: paying those people more, and that also affects the market. Matt,

584
00:32:51,040 --> 00:32:53,520
Speaker 1: it's interesting we await Um. Of course, we know that

585
00:32:53,520 --> 00:32:59,640
Speaker 1: we're waiting the President to come speak about this job's report. Tom,

586
00:32:59,680 --> 00:33:04,000
Speaker 1: I am curious if you you know, could hear one thing?

587
00:33:04,800 --> 00:33:08,760
Speaker 1: What would it be? Uh, Matt, Although I think the

588
00:33:08,840 --> 00:33:12,360
Speaker 1: President is walking out now. Well, then we're gonna have

589
00:33:12,400 --> 00:33:15,920
Speaker 1: to thank Tom. Really great talking to you, Tom. Always

590
00:33:16,000 --> 00:33:19,000
Speaker 1: always good to get your take. Tom Gimble, founder and

591
00:33:19,040 --> 00:33:21,240
Speaker 1: CEO of Last Down Network, Thanks for listening to the

592
00:33:21,240 --> 00:33:25,160
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews

593
00:33:25,160 --> 00:33:29,480
Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm

594
00:33:29,520 --> 00:33:33,960
Speaker 1: Matt Miller. I'm on Twitter at Matt Miller. Put on

595
00:33:34,080 --> 00:33:37,160
Speaker 1: Ball Sweeney. I'm on Twitter at pt Sweeney. Before the podcast.

596
00:33:37,200 --> 00:33:39,680
Speaker 1: You can always catch us worldwide at Bloomberg Radio