Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Phil Orlando joins US
Speaker 1: chief Equity Market Strategies, also head of Client Portfolio Management
Speaker 1: that federated Hermi's Phil, what's your take on this job's miss?
Speaker 1: It was a huge miss. Uh, you know at uh
Speaker 1: two thirty five thousand versus the seven thirty three consensus.
Speaker 1: But I gotta tell you our number at Federated, we
Speaker 1: were forecasting four hundred and ninety thousand, so the number
Speaker 1: we thought was going to be a huge miss. Okay.
Speaker 1: Your follow up question is, well, how do we need
Speaker 1: got to be closest? Without going over Phil, that's the rule.
Speaker 1: There are there are three key model inputs in our
Speaker 1: labor model. Two of them are weak. The ADP report
Speaker 1: for August missed by two hundred and fifty thousand jobs.
Speaker 1: The Philly said was very soft. It missed by four points.
Speaker 1: The third model input is the claims dad and frankly
Speaker 1: that's been pretty good. But when you when you and
Speaker 1: there was also a seasonal adjustment that was negative by
Speaker 1: seventy seven thousand in this report. So when you work
Speaker 1: back the seasonal adjustment plus the upside revisions in June
Speaker 1: and July, that comes to UH and UH sort of
Speaker 1: a clean number, if you will, A four hundred and
Speaker 1: forty six thousand. We're forecasting four nine, So basically we
Speaker 1: were there. UM. I think that the myths that we
Speaker 1: saw today will be reversed in September. That number is
Speaker 1: going to be reported on Friday, October eight, and and
Speaker 1: the key factor there is the roll off of the
Speaker 1: three federal unemployment bonus. Folks are going to be coming
Speaker 1: back to work in our view, uh, and particularly in
Speaker 1: that leisure and hospitality category that showed bagel in the
Speaker 1: month of August, which was very surprising that well. And
Speaker 1: we know, of course that those benefits, that extra three
Speaker 1: hundred dollar week expire September six. I believe that that
Speaker 1: is Monday, Phil. What this means for the markets, though,
Speaker 1: I'm wondering, is this September taper by the federal reserve
Speaker 1: off the table. Well, in our view, it was always
Speaker 1: off the table because we were expecting this number to miss.
Speaker 1: We think the September number to be reported in early
Speaker 1: October will be very strong, north of a million jobs.
Speaker 1: So we expect the Fed to announce that taper at
Speaker 1: their f O m C meeting on November three. That's
Speaker 1: been our forecast. We're we're holding to that right now.
Speaker 1: What when we see text docs sort of holding us
Speaker 1: back from bigger losses and a sell off in bonds,
Speaker 1: what does that say to you? Well, is probably strong
Speaker 1: word bonds in our view tells us that the market
Speaker 1: is reading through the hiccup on this number and that
Speaker 1: we're going to get the labor market back on pace
Speaker 1: later in the year. The Fed will announced the taper
Speaker 1: later in the year, we think in November, not in September,
Speaker 1: and so the bond market I think is looking ahead
Speaker 1: and sort of pricing that end. But clearly you've you've
Speaker 1: had to slow down in in growth here, uh in
Speaker 1: the fact that technology stocks are doing well tells us
Speaker 1: that the market is saying, Okay, I've got to look
Speaker 1: for a place where I'm going to get growth, regardless
Speaker 1: of how good or how bad the underlying economy is,
Speaker 1: and and and tech has been a place where that's
Speaker 1: been reliable over the last eighteen months. Phil or is
Speaker 1: it rates are going to be somewhat anchored because they're
Speaker 1: the Fed has made a point in a distinction between
Speaker 1: a taper and a rate hike. Correct is out what
Speaker 1: you also see moving tech. We we absolutely see that,
Speaker 1: but we we eventually the FED. If if we're right
Speaker 1: that the FED starts the paper before the end of
Speaker 1: this year, let's say they started in November. We think
Speaker 1: it's gonna be a relatively short taper that by the
Speaker 1: middle of calendar two, the hundred and forty billion dollars
Speaker 1: QUEI will have been tapered down to zero. That sets
Speaker 1: the FED up to begin to increase interest rates. In
Speaker 1: calendar three. We're looking for two quarter point rate hikes
Speaker 1: take the funds right up by fifty basis points. So
Speaker 1: you've got to be able to sort of read the cycle.
Speaker 1: That's the way we think this is playing out. And
Speaker 1: I think the technology sector is saying, Okay, if for
Speaker 1: whatever reason, delta variant economic policy, FED policy, whatever, the
Speaker 1: economy takes a tick down here, um, we're still going
Speaker 1: to get some good growth out of the technology names.
Speaker 1: How far can we get off the ground? I mean,
Speaker 1: what do you see as a terminal rate film in
Speaker 1: terms of interest rates? How I mean to two hikes
Speaker 1: bringing us to fifty basis points. That's still basically you know,
Speaker 1: zerp right, So when when can we see real rises? Well,
Speaker 1: so our our forecast on on benchmark Ken's we think
Speaker 1: we get maybe back to one seventy five this year,
Speaker 1: two percent next year, maybe two and a half percent
Speaker 1: in calendar three. You know, that seems like a big number,
Speaker 1: knowing we're at fifty basis points a year ago, But
Speaker 1: in the overall scheme of life, two and a half
Speaker 1: percent on benchmark ten year treasury yields two years from
Speaker 1: now is not death. That ought to continue to support
Speaker 1: a strong equity market, And in fact, our s and
Speaker 1: P five hundred forecast by the end of next year
Speaker 1: is still up at the fifty three hundred level, and
Speaker 1: we're sitting here at you know, let's call it. So
Speaker 1: you've still got some good growth in stocks, not the
Speaker 1: hundred and seven percent we've seen over the last eighteen months,
Speaker 1: but the equity market to continue to do well, certainly
Speaker 1: outpacing the bond market. Phil You've talked about cycles a
Speaker 1: little bit, and I want to hit on this point.
Speaker 1: I'm trying to nail down some of our market participants
Speaker 1: on where we are in the cycle. If it's early phase,
Speaker 1: are you thinking that there's more room to run in
Speaker 1: the smaller caps? When is the transition to mid too late?
Speaker 1: And are we there yet? So so small caps, value
Speaker 1: stocks and international stocks are still the three areas that
Speaker 1: we're focused on here because we think there's still some
Speaker 1: outsize games coming. But when you when you take a
Speaker 1: step back and look at the bigger cycle, the economic
Speaker 1: growth that we're going to enjoy this year, we think
Speaker 1: will slow into calendar twenty two, and we'll slow again
Speaker 1: into calendar twenty three, not to recessionary levels, but we
Speaker 1: think more to sort of more trend line levels. Our
Speaker 1: early guests on calendar twenty three is GDP growth, you
Speaker 1: know in that sort of two to three percent neighborhood
Speaker 1: now all under twenty four and beyond is going to
Speaker 1: be a function of how draconian it's fed policy over
Speaker 1: the next year or two. Fiscal policy with with Congress
Speaker 1: and the Biden administration, and might know those are question
Speaker 1: marks we don't know what's going to happen there um,
Speaker 1: but based upon what we think we know right now,
Speaker 1: the economy does decelerate back to trend line over the
Speaker 1: next couple of years, but not into recession. So that's
Speaker 1: not so bad. Let me take this in a slightly
Speaker 1: different direction. We had an op ed by Joe Mansion.
Speaker 1: Was it just last night? It feels like days ago,
Speaker 1: but just yesterday, I think, um saying, you know, twenty
Speaker 1: eight trillion dollars is too much and we can't be
Speaker 1: adding to that deficit. He's concerned about all kinds of issues,
Speaker 1: are you We're we're we're absolutely on board with Senator
Speaker 1: Mansion that that if I could fill in some of
Speaker 1: the blanks, we now know definitively, based upon the n
Speaker 1: b e R the National Bureau of Economic Research, that
Speaker 1: the law the shortest and deep this recession in history
Speaker 1: ended April a year ago. We had this powerful v
Speaker 1: bottom economic recovery that started last summer. We we know
Speaker 1: definitively that we have closed the output gap in g
Speaker 1: d P with the second quarter g P report this year,
Speaker 1: So we don't need another five and a half trillion
Speaker 1: dollars of stimulus to sort of prop up the economy.
Speaker 1: We're back to where we need to be. Now, what
Speaker 1: I think Senator Mansion said is the question here is
Speaker 1: not propping up the economy. It's it's sort of reordering
Speaker 1: the social contract between the federal government and the American people.
Speaker 1: That's a completely different argument, and it's one that I
Speaker 1: guess the Biden administration Congress is going to have to
Speaker 1: make that argument to the American people. But but from
Speaker 1: an economic standpoint, we don't need five and a half
Speaker 1: trillion dollars of additional debt, higher taxes, et cetera to
Speaker 1: resuscitate the economy because the economy is doing five. Are
Speaker 1: your clients asking you though about higher taxes and the
Speaker 1: impact on the markets? Yes? Absolutely. I just did two
Speaker 1: client meetings question Connecticut earlier this week, and that was
Speaker 1: that was those are the questions, higher debt levels, higher taxes,
Speaker 1: higher servicing of the debt, What does that mean to
Speaker 1: us as investors? And what should we be doing to
Speaker 1: protect ourselves buying bitcoin, water and building and building yourself
Speaker 1: a fallout shelter. That was not my answer, but one
Speaker 1: client did jump out and talked about, you know, ammunition
Speaker 1: and can goods in the basement. You know, I'm not
Speaker 1: going there either, but but I almost went there, but
Speaker 1: I didn't say it out loud. It is it is
Speaker 1: an uncertain time for for clients and investors who are
Speaker 1: out there trying to figure out what all of this means. Yeah,
Speaker 1: especially since you can't be in the basement if you
Speaker 1: live in the northeast, right, it's completely flooded too soon,
Speaker 1: mad And you also missed n f T s in there.
Speaker 1: N f T s are also this new thing after
Speaker 1: f n f T s are a little crazy. I'm
Speaker 1: I'm just talking about what you need in case armageddon comes.
Speaker 1: You could throw gold in there for bitcoin, but you
Speaker 1: you have to have more and more people. Even though
Speaker 1: we don't see it Phil getting bearished, right at least
Speaker 1: at least hedging hedging bearish. Do you have a lot
Speaker 1: of people hedging well, I'll put myself in that category
Speaker 1: that that yes, we've got a forty eight hundred target
Speaker 1: on the SMP five this year at the end of
Speaker 1: this year, but we're also acknowledging the fact that that
Speaker 1: we're sitting here at record highs now. I think we
Speaker 1: hit our fifty four record high the other day and
Speaker 1: We've got all of these fiscal and monetary policy head
Speaker 1: winds ahead of us, the depth ceiling, questions about the
Speaker 1: jobs report, economic growth, the delta area, et cetera. Could
Speaker 1: we see a five or ten percent air pocket over
Speaker 1: the next couple of months, you know, back to let's
Speaker 1: call it a two hundred day moving average. I mean,
Speaker 1: that's very possible. Now, we would look at that as
Speaker 1: a as a potential buying opportunity if we can get
Speaker 1: some of these issues resolved. But but I'm not going
Speaker 1: to suggest that the market is going to go straight up,
Speaker 1: you know, to fifty next year without any consolidation in
Speaker 1: between now and that. How do you compete with a
Speaker 1: wall of cash that's flooding anytime you get a little
Speaker 1: bit of a dip, And we could fold this over
Speaker 1: into high yield spreads. The minute it goes above three
Speaker 1: hundred basis points of where treasuries a wall of cash
Speaker 1: comes in. You wake up, you have a million emails
Speaker 1: from Japan. They can't wait to buy bonds that aren't
Speaker 1: negative interest rates. How do you compete with that? Well,
Speaker 1: it's very hard to compete with and and that's not
Speaker 1: to suggest that we're on the precipe of a bear market.
Speaker 1: We're not. But when I talk about an air pocket,
Speaker 1: these things are relatively short lived. And and maybe it's because,
Speaker 1: for example, the debt ceiling issue becomes a near term
Speaker 1: hot potato or uh, suddenly it seems that this five
Speaker 1: and a half trillion dollar package in Congress is going
Speaker 1: to get the votes and we're gonna double capital gains
Speaker 1: tax rates something like that. Um. So when you're talking
Speaker 1: about an air pocket, you're talking about the market moving
Speaker 1: lower for you know, a couple of days, a couple
Speaker 1: of weeks. But I think by the time we get
Speaker 1: back into the end of October beginning of November sort
Speaker 1: of work through. You know, the Fed is going to
Speaker 1: make that announcement. We think on November three, Uh, Speaker
Speaker 1: Pelosi has established a September seven vote date for a
Speaker 1: couple of these pieces of legislation. By the time we
Speaker 1: get into early November, we're hoping that we'll have some
Speaker 1: answers to some of these questions. Remember when TARP seemed
Speaker 1: like an insanely large amount of money, like just unbelievable
Speaker 1: that they could spend eight hundred billion dollars, And now
Speaker 1: he said drop in the bucket. I want to ask
Speaker 1: you about a point that Crety Goopta made earlier, said
Speaker 1: she doesn't talk to a lot of investors who are
Speaker 1: really long term putting money down long term, you know, uh,
Speaker 1: for more like five to ten years or ten to
Speaker 1: twenty years. It's more of a near term to medium
Speaker 1: term UM investment horizon. Do you see that as well? No,
Speaker 1: I don't. I there are certainly investors who are nervous
Speaker 1: about navigating the near term uh, you know, challenges. But
Speaker 1: I think if you're going to invest in the market
Speaker 1: for for college savings, retirement savings, whatever, you've got to
Speaker 1: be thinking longer term. And and the reality is that
Speaker 1: that America is the greatest nation in the world and
Speaker 1: the greatest financial markets in the world. We're investing throughout
Speaker 1: the entire world. Companies produce positive earning. Stock prices follow
Speaker 1: those earnings. Eventually we're gonna stabilize with with better fiscal
Speaker 1: and monetary policies that will be able to project out
Speaker 1: into the future. And and as you're looking out, you know,
Speaker 1: over the decades um, you know, at eight to twelve
Speaker 1: normalize positive return out of stocks on a total return
Speaker 1: basis is a reasonable assumption, UM, and and so again
Speaker 1: as you're thinking retirement, college savings, those sort of good
Speaker 1: longer term goals. Um. The equity market is the place
Speaker 1: where you need to be alright, great to get some
Speaker 1: insight with you, Phil. Always love hearing from you, Phil Orlando,
Speaker 1: Chief equity market strategists and head of Client portfolio Management
Speaker 1: that Federated Hermes. They've got a total of I think
Speaker 1: about six d fifty billion under management, but hundred and
Speaker 1: a hundred billion and change in equities alone. So great
Speaker 1: to hear from Federate Hermes and Phil Orlando. Let's get
Speaker 1: over right now to talk about the aftermath of I
Speaker 1: saw described as ex Hurricane Ida. You know, hurricane or
Speaker 1: storm um, doesn't really matter because it did so much
Speaker 1: damage traveling up from New Orleans and hitting the New York,
Speaker 1: New Jersey connectic, the tri state area really hard. Um.
Speaker 1: What what are we seeing in terms of damage? What
Speaker 1: are we seeing in terms of the aftermath here? For that,
Speaker 1: I want to bring in a Bloomberg reporter on this
Speaker 1: to give us late to Skylar Woodhouse joins us Um
Speaker 1: and Skylar. I heard a factoid today, not sure if
Speaker 1: it's true. I heard that more rain was dropped in
Speaker 1: an hour than ever had been recorded in that area before.
Speaker 1: Is that the case, Yeah, No, that is the case, definitely.
Speaker 1: I mean, you know, I was in my apartment and
Speaker 1: I could hear the rain outside, and I'm thinking to myself,
Speaker 1: my goodness, it's really coming down. But no, the rain
Speaker 1: it came through and it really ran back the city,
Speaker 1: and it left a lot of people confused and just
Speaker 1: an utter shock really to what has happened and really
Speaker 1: such a short amount of time, and it was something
Speaker 1: that you know, no one could have expected to really
Speaker 1: cause such such great damage and to see the but
Speaker 1: what the storm did to the city, it just left
Speaker 1: so many people in complete shock and confusion as well.
Speaker 1: People are just really confused as to what just happened. Skyler.
Speaker 1: That is of hints it my next question. This isn't
Speaker 1: our first rodeo with aftermaths of hurricanes. Why were we
Speaker 1: so caught off guard? Yeah, you know, I think after
Speaker 1: you know, I think the city did a lot of
Speaker 1: repairs after Hurricane Sandy years ago. But I think you know,
Speaker 1: time is moving, thinks they're quickly changing. You know, climate
Speaker 1: change is presenting a whole set of new challenges, and
Speaker 1: I think this this range just came completely out of
Speaker 1: nowhere and just left everyone just so at loss as
Speaker 1: to why weren't we prepared and you know, what could
Speaker 1: have been done different to prevent such a catastrophe that
Speaker 1: we really saw. And it just raised a lot of
Speaker 1: questions as to what will the city and Albany do
Speaker 1: to prevent something like this from happening again. Now, the
Speaker 1: Tri State area is not exactly a red Tri State area,
Speaker 1: so I don't know if it swings any voters, but um,
Speaker 1: how do you think people feel about the the Infrastructure
Speaker 1: Bill now considering what we just saw happen. I mean,
Speaker 1: I think people's eyes have I think people have definitely
Speaker 1: you know, maybe perked up a bit and or you know,
Speaker 1: maybe paying a little bit more attention now after what
Speaker 1: we saw in the Tri State area. I mean you
Speaker 1: could say up here, you know it's it definitely leans,
Speaker 1: you know, it's definitely more blue. But you know, so
Speaker 1: I think it's leaving people that just definitely pay way
Speaker 1: more attention to um, you know, climate change in how
Speaker 1: the Infrastructure Bill could possibly um improve some of the
Speaker 1: downfalls that we saw were impacted from the hurricane through
Speaker 1: this bill and It's definitely made people realize that this
Speaker 1: is something that needs to be taken seriously. All Right, Skyler,
Speaker 1: thanks so much for joining us. Skylar Woodhouse, Bloomberg News
Speaker 1: reporter on the aftermath of Hurricane Ida and New York
Speaker 1: City is worsening weather patterns. Let's uh, let's get back
Speaker 1: to the corporate world right now. We've got a great
Speaker 1: guest for you, Tom Bone, as the president CEO of
Speaker 1: the Association for Corporate Growth. They have a huge network
Speaker 1: d mid market corporate executives all um running companies that
Speaker 1: are between ten million in market cap and a billion
Speaker 1: or ten million and I guess revenue per year and
Speaker 1: and a billion in revenue uh per year. And it's
Speaker 1: just a great place to get a picture of what's
Speaker 1: happening in the return to work. They have about thirty
Speaker 1: million jobs that they control, Tom, what do you think
Speaker 1: here as we as we round out what are we
Speaker 1: now nineteen months, twenty months through the pandemic? Um? Are
Speaker 1: we getting back to work or is there going to
Speaker 1: be something new ahead of us? A great to talk
Speaker 1: to you both, Thanks for having me. We get a
Speaker 1: survey of about a middle market companies on what they
Speaker 1: thought the future would look like. And what's interesting about
Speaker 1: this survey is it happened it coincided just before we
Speaker 1: started to get to the peak of what delta was
Speaker 1: looking like. So probably I think that if there was
Speaker 1: all to happened a little bit later, they'd even be
Speaker 1: more significant. But what we heard back loud and clear
Speaker 1: was that seventy percent of the respondent said that they
Speaker 1: were going to come back to a work environment that
Speaker 1: was very different, and they said it would probably be hybrid.
Speaker 1: Which hybrid model looks at, you know, coming into the
Speaker 1: office two or three days a week and then having
Speaker 1: much more flexible opportunities to work from home or god
Speaker 1: knows where where people are working from today. But it
Speaker 1: was interesting though because this was prior to the to
Speaker 1: the very insurgeon, we had at least, you know, two
Speaker 1: thirds things it's going to be different. We're not going
Speaker 1: back to the way things used to be. Interesting, if
Speaker 1: you go back, at least in some portion to the office,
Speaker 1: what does that look like. Are you hearing that more
Speaker 1: of these companies are either doing testing or asking for
Speaker 1: vaccination status. Well, it's a great question. And what we're
Speaker 1: finding in our data is that they're the vaccine mandates
Speaker 1: are actually very much aligned with kind of the political
Speaker 1: geography of the country. So in the southeast we're not
Speaker 1: seeing very many political mandates. In the northeast and out
Speaker 1: towards parts of the Midwest, and certainly on the on
Speaker 1: the far west coast, we're seeing a much more willingness
Speaker 1: and likelihood to have vaccine mandates in place. And barring that,
Speaker 1: UM the flexibility comes in and they have to be tested,
Speaker 1: you know, a minimum of one, sometimes multiple times a week,
Speaker 1: which can become very very onerous. But it's definitely different
Speaker 1: than it was prior to all this happening. Beyond UM
Speaker 1: the virus, beyond the pandemic, what are your member executives
Speaker 1: most concerned about? What are the biggest challenges that they're facing.
Speaker 1: Number One right now is labor. Labor lay. We're getting
Speaker 1: the right employees and getting them on time, you know,
Speaker 1: to to build the positions that they need. I keep
Speaker 1: hearing from everyone they just simply cannot hire. We just
Speaker 1: saw the jobs report come out today and I think
Speaker 1: it was two thousand new jobs when they were expecting
Speaker 1: seven hundreds something thousand. In the delta. UH they're talking
Speaker 1: about is simply the lack of people entering or re
Speaker 1: entering the labor force, and you know, we're seeing it,
Speaker 1: certainly from our organization. Our members are saying over and
Speaker 1: over is that trying to get quality people in every
Speaker 1: type of position right now is incredibly difficult. And but
Speaker 1: the hope is, and I think you know, if you
Speaker 1: look at the survey that we put out there, is
Speaker 1: that employees want the flexibility to work from home. They're
Speaker 1: saying loud and clear, we cannot go back to the
Speaker 1: way things used to be, right, that is their strong hope.
Speaker 1: So the hope is that with some of this cultural
Speaker 1: change now, with this hybrid and the selectible environment, that
Speaker 1: they're able to attract more employees. Well, I look at
Speaker 1: a CG. We have our completely distributed organization over fifty
Speaker 1: six employees. But what's amazing is that we are all
Speaker 1: over the US, so we can hire in any community
Speaker 1: across the country, and that's given us a significant advantage.
Speaker 1: Just about thirty seconds here, is there a skills mismatch?
Speaker 1: I you know, I don't know that it's much of
Speaker 1: a as a skill mitch mismatches. It is a simply
Speaker 1: a lack of willing and able bodies to jump into
Speaker 1: the to the fray. I mean, it's it's a lot
Speaker 1: of the jobs before we used to have a problem
Speaker 1: hiring when the tech sector or technical type skills either
Speaker 1: generally across the board, middle management and other types of
Speaker 1: managerial jobs that people simply marketing jobs, social media jobs
Speaker 1: having a really tough time finding uh, finding the folks
Speaker 1: to take those positions. All right. Interesting. I wish we
Speaker 1: had more time with you, Tom. I hope we can
Speaker 1: get you back on the program because your network. I
Speaker 1: just love to tap you for more insight. Uh, there's
Speaker 1: so much we can learn. And we didn't even get
Speaker 1: to talk about cybersecurity, which which is something that we
Speaker 1: think about a lot as well. Tom Bone there is
Speaker 1: the CEO and president of the Association for Corporate Growth.
Speaker 1: All right, and it is kind of a special episode,
Speaker 1: a little bit of a special day because of the
Speaker 1: big non farm payroll jobs miss we had again. UM
Speaker 1: just got I think two hundred and thirty five is it?
Speaker 1: Two hundred thirty five thousand is what we added. Um,
Speaker 1: I gotta pull up my eco US screen again. Yeah,
Speaker 1: we added two hundred thirty five thousand jobs. We were
Speaker 1: looking for seven thirty three thousands, So Um, a huge miss,
Speaker 1: and compared to the previous month. You know, the original
Speaker 1: number we got was nine forty three thousand, that was
Speaker 1: revived revised up to more than a million, one spot
Speaker 1: zero five three. So UM really apparent that the delta
Speaker 1: variant UM really crept into the economy since the last report.
Speaker 1: Let's bring in Tom Gimle is the founder and CEO
Speaker 1: of the Sound Network in Chicago to we're the leading
Speaker 1: staffing and recruiting firms in the country. And Tom, was
Speaker 1: this a surprise to you? I thought it was gonna
Speaker 1: be a little bit higher. I didn't think it was
Speaker 1: gonna be seven thousand. I thought it would be about
Speaker 1: four fifty or five. You know, I think we have
Speaker 1: to look at this. We have the delta variant, we
Speaker 1: have the situation with school districts fighting with state governments UM,
Speaker 1: and we have the dispute over booster shots and and
Speaker 1: initial vaccines, and we still added almost a quarter of
Speaker 1: a million jobs. This is it's not it might not
Speaker 1: be a grand slam, but it's sure as heck isn't
Speaker 1: a strikeout. I think one thing that really hit people
Speaker 1: is that the leisure and hospitality sector didn't add any jobs.
Speaker 1: How are you thinking about a sector by sector who's
Speaker 1: asking for staffing and who was saying they're asking for it,
Speaker 1: but the supply is the real issue. Well, I think
Speaker 1: the supplies the real issue around every industry. What we're
Speaker 1: seeing right now is that, and I know you guys
Speaker 1: talk about it all the time, is that the number
Speaker 1: of jobs versus a number of available workers for the
Speaker 1: first time ever outpacing one another. So I think you
Speaker 1: have that issue you have in the restaurant space. I
Speaker 1: was having uh lunch the other day with the CEO
Speaker 1: of a major restaurant group in Chicago, and he was
Speaker 1: saying he could hire three hundred people if he could
Speaker 1: find them. So what you've got is this transition. And
Speaker 1: we still haven't had the the influx of people who
Speaker 1: are on federal unemployment, and we should see that in
Speaker 1: the September job in the October report on the September
Speaker 1: jobs numbers. So I just think I really believe that
Speaker 1: the jobs numbers in the economy overall is more like
Speaker 1: a race track. You have the straightaways where you're getting
Speaker 1: really fast, and then you have you go slow down
Speaker 1: around the corners. And we've got changes seasons, the delta variant.
Speaker 1: We added a quarter of a million jobs. This isn't
Speaker 1: a bad thing because you can't go, you know, two
Speaker 1: hundred miles an hour all the time, and we're getting
Speaker 1: used to new things. We saw the education sector drop
Speaker 1: and not adding jobs, and the seasonal aspect is real. Yeah,
Speaker 1: and it's a flag to flag race also with this
Speaker 1: um virus invariants forcing us to pitt and drop the slicks,
Speaker 1: add some rain tires. What what uh? When do we
Speaker 1: when do we get back up to speed again on
Speaker 1: dry tarmac? Well, my my guess is is that we're
Speaker 1: going to get through the end of the year and
Speaker 1: we're going to see the delta variant level off. Is
Speaker 1: when I'm talking to two people like you guys, aren't
Speaker 1: everybody else's And what it seems like is we've got
Speaker 1: a rehash of of the most vulnerable are the ones
Speaker 1: getting hospitalized, and that might be people who aren't vaccinated
Speaker 1: and people who are older and or have chronic illnesses
Speaker 1: or obesity. And that's not overall and overall arching, but
Speaker 1: that seems to be where the numbers are going. And
Speaker 1: then it's gonna level off. What I haven't seen it all.
Speaker 1: I'm talking to CEOs and heads of HR every single
Speaker 1: day is that companies are still hiring in mass they
Speaker 1: can't find people for certain areas. And I think what
Speaker 1: we're also starting to see is, and not that other
Speaker 1: countries aren't having are having problems with it, but you're
Speaker 1: seeing a lot a lot of companies go to offshore
Speaker 1: because if they can't find the workers here, they're going
Speaker 1: to find them someplace else, and that doesn't get reported
Speaker 1: in the statistics. I gotta tell you that we have
Speaker 1: so the state of Saxony has so few workers that
Speaker 1: not only are they writing letters to Polish immigrants that
Speaker 1: couldn't stay in the UK after Brexit to please move
Speaker 1: to Saxony, but they are preparing refugee programs that will
Speaker 1: get refugees straight into trainee positions for like electro mechanical jobs.
Speaker 1: They need desperately to have new workers in these sort
Speaker 1: of engineering, electrical mechanic and then anything anything like plumbing,
Speaker 1: you know, or any trades. They need people beyond belief.
Speaker 1: And the other thing you have to realize is we're
Speaker 1: also hitting maybe hopefully a climax, but but of where
Speaker 1: immigration is south of the border. For the past five years,
Speaker 1: four and a half years, it's been stopped. The influx
Speaker 1: of immigrants from the border, and whether illegal or legal,
Speaker 1: slow it down, and and and so guess what happens
Speaker 1: all of a sudden you don't have people to do
Speaker 1: the work that a lot of people would would normally
Speaker 1: do who were coming in. So you've got the pandemic,
Speaker 1: and you've got seasonality, and you've got immigration issues, and
Speaker 1: you've got federal unemployment at the highest has ever been right,
Speaker 1: So all of those things at the same time with
Speaker 1: the delta variant, and we've just got a little bit
Speaker 1: of people saying, hold on, I'm not sure where I
Speaker 1: want to work or what I could do. And I
Speaker 1: also think the other thing is that six months ago,
Speaker 1: eight months ago, employees thought I'm gonna be able to
Speaker 1: work from home and work remote and work from the
Speaker 1: beach for the rest of my life. And with UH,
Speaker 1: with the vaccine becoming readily available, corporations are saying, hold
Speaker 1: on here, we're not gonna go a pent back, but
Speaker 1: we are going to be hybrid and we're gonna want
Speaker 1: people to be close to the office. So you just
Speaker 1: had a lot of people figuring out what the new
Speaker 1: normal is gonna be. Can you quickly talk to us
Speaker 1: about what you're hearing about wages. What are companies telling you.
Speaker 1: I was going to ask the exact same thing, and
Speaker 1: we saw, well, no, because I'm looking at the ECO
Speaker 1: page here, looking at the numbers. Average hourly earnings were
Speaker 1: up four point three percent. That's more than the street
Speaker 1: was looking for. And that's year over year, the month
Speaker 1: over month zero point six percent. That's double what the
Speaker 1: street was looking for. Tom. Yeah, So so on the
Speaker 1: hourly side, it's a big bump. Of what we're seeing
Speaker 1: is uh number one municipality Chicago being one, San Francisco
Speaker 1: being another, that are now up to fifteen dollars an hour,
Speaker 1: and the surrounding counties around those cities had to up
Speaker 1: it as well to make sure that they could match
Speaker 1: what the cities are doing. So you're finally getting a
Speaker 1: catch up right there. Number one. Number two, when you
Speaker 1: have the summer open up, you have more people going
Speaker 1: into the service industries, even though the numbers don't show
Speaker 1: an ad there, but you do have more people doing
Speaker 1: hourly work at an increased minimum wage. And then you
Speaker 1: have the search for for people in a in a
Speaker 1: very desolate market right now, So companies are paying more
Speaker 1: that can afford it, and they're paying instead of fifteen
Speaker 1: seventeen nineteen dollars. So that's on the hourly side, on
Speaker 1: the salary side, on the white collar aspect, you're seeing
Speaker 1: companies that need to get people and and technology is
Speaker 1: driving it. So when you see technology and even accounting
Speaker 1: and finance which now has a technology element, marketing which
Speaker 1: now has a technology element with Google Analytics and different
Speaker 1: software packages, even sales positions, they expect you to have
Speaker 1: a software knowledge and an analytical brain more than ever
Speaker 1: before to do that. So we're seeing companies start to
Speaker 1: pay more. However, I don't think that will increase at
Speaker 1: a rapid rate and at all level off towards the
Speaker 1: end of the year, because when there's a supply and
Speaker 1: demand issue, what you have is companies reverting to hiring
Speaker 1: three level people, and when you do that, salaries don't
Speaker 1: increase in well, while we have more and more UH
Speaker 1: companies that are offering higher wages. In fact, I saw
Speaker 1: we have a newsletter, the Daybreak newsletter that I read
Speaker 1: usually first thing in the morning, and there's a chart
Speaker 1: in there from the n f I B today. UM,
Speaker 1: I actually have the chart I had the chart produced
Speaker 1: on the Bloomberg terminal. So if you have a terminal,
Speaker 1: you can type type g hashtag b t V space
Speaker 1: four three to one. You got that tailor. I actually
Speaker 1: like the number because it's a countdown G hashtag b
Speaker 1: TV four three to one. And what this chart shows
Speaker 1: you as two panels, um, the top one shows you
Speaker 1: that there are more job openings. Well, more firms have
Speaker 1: job openings than ever before. The chart goes back to
Speaker 1: the seventies, so small businesses need workers and um, more
Speaker 1: firms are offering pay raises to get people through the
Speaker 1: door than ever before, at least since the seventies or
Speaker 1: eighties when the charts started. So tom it looks like
Speaker 1: not only do a lot more firms need people, but
Speaker 1: a lot more firms are willing to pay more at
Speaker 1: this point now to bring him through the door. Well,
Speaker 1: they're also paying more to their existing staff and that
Speaker 1: also doesn't get projected in the data. And this has
Speaker 1: been a problem that iPad with the BLS statistics for
Speaker 1: forever is that it only tracked new hires and salary wages.
Speaker 1: Where we have employees that get promotions internally, they may
Speaker 1: not go into effect for a quarter, they may not
Speaker 1: go into effect. It maybe bonus driven and incentified that way.
Speaker 1: So salaries are increasing, and we're focusing with more and
Speaker 1: more of our clients to say, you've got to start
Speaker 1: re recruiting your existing staff so they don't leave and
Speaker 1: paying those people more, and that also affects the market. Matt,
Speaker 1: it's interesting we await Um. Of course, we know that
Speaker 1: we're waiting the President to come speak about this job's report. Tom,
Speaker 1: I am curious if you you know, could hear one thing?
Speaker 1: What would it be? Uh, Matt, Although I think the
Speaker 1: President is walking out now. Well, then we're gonna have
Speaker 1: to thank Tom. Really great talking to you, Tom. Always
Speaker 1: always good to get your take. Tom Gimble, founder and
Speaker 1: CEO of Last Down Network, Thanks for listening to the
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm
Speaker 1: Matt Miller. I'm on Twitter at Matt Miller. Put on
Speaker 1: Ball Sweeney. I'm on Twitter at pt Sweeney. Before the podcast.
Speaker 1: You can always catch us worldwide at Bloomberg Radio