Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: let's get back to the news of the day. We're
Speaker 1: going to talk about again Presidents Vladimir's Lensky's visit to
Speaker 1: the White House. We're going to do that now with
Speaker 1: Angela Stent. She is senior fellow at the Brookings Institute.
Speaker 1: Joining us now and Angela, it's great to have you
Speaker 1: with us. As we've walked through a few different times,
Speaker 1: this is President Zelinski's first trip outside of Ukraine in
Speaker 1: three hundred days since the invasion. Walk us through, I
Speaker 1: guess sort of the signal they put it into context
Speaker 1: how important this trip is. Well, this is indeed a
Speaker 1: historic trip. He hasn't left the country. He didn't go
Speaker 1: to the G twenty. He's gone to know how he's
Speaker 1: done everything by zoom. But I think he realizes it
Speaker 1: is very important to come to the United States. This
Speaker 1: is a crucial period in this ongoing war. The Russians
Speaker 1: aren't doing well on the battlefield that Ukrainians are doing
Speaker 1: much better, but they're also being pummeled every day by
Speaker 1: Russian attacks and losing your electricity and border and heat
Speaker 1: and things like that. So he's coming to the United
Speaker 1: States to thank the United States for everything that's done.
Speaker 1: Without our weapons and our financial support, Ukraine probably wouldn't
Speaker 1: be where it is now. UM too, I think make
Speaker 1: sure when he talks to the Congress certainly that um
Speaker 1: they understand that Ukraine still needs their help because there
Speaker 1: is doubt about what's going to happen when the Republicans
Speaker 1: take over the House. And I'm sure he also wants
Speaker 1: to talk to the President. President Biden wants to talk
Speaker 1: to him about how does this go from here? What
Speaker 1: what does he envisage, UM is going to happen in
Speaker 1: this war? UM, so a lot to talk about and
Speaker 1: symbolically very important, you know, and I'm thinking about Vladimir
Speaker 1: Putin in Moscow where wherever he is right now watching
Speaker 1: this meeting on TV. Obviously I would have to assume
Speaker 1: this doesn't play well in Moscow. Does this risk sort
Speaker 1: of a more aggressive retaliation type of thing from from
Speaker 1: Vladimir Putin to to watch this meeting take place? Well, certainly.
Speaker 1: His press secretary this morning said, you know, the more
Speaker 1: assistance of the US gives, you know, the more the
Speaker 1: risk of escalation there is. You know, we've been so
Speaker 1: worried about escalation, and what we've seen the Russians do
Speaker 1: clearly is with this indiscriminate bombing of civilian targets, but
Speaker 1: short of using a tactical nuclear weapon, which I think
Speaker 1: the likelihood of that is not very great. Um, the
Speaker 1: Russians want us to believe that they're going to escalate.
Speaker 1: They want to intimidate the Ukrainians and the West into
Speaker 1: not doing more. But I'm not sure that this really
Speaker 1: does risk very much more because as I said, the
Speaker 1: Russians are not doing well on the battlefield. That yes,
Speaker 1: they can continue to bomb these civilian targets, but they've
Speaker 1: been doing that for the past few weeks. Anyway, Well, Ahula,
Speaker 1: talk to us about that a little bit more. Sort
Speaker 1: of the Russian perspective, specifically, the Putin expects expectation when
Speaker 1: he started this invasion three hundred days ago. Did he
Speaker 1: have any idea or I don't know. Did he Do
Speaker 1: you think that he thought we would be talking about
Speaker 1: this three hundred days later? Certainly not. He thought that
Speaker 1: right that they be able to take key of in
Speaker 1: three days and conquer the whole country. So I'm sure
Speaker 1: he had, in his wildest dreams, didn't think that the
Speaker 1: war would be going on. Because they totally underestimated the
Speaker 1: Ukrainians ability and will to fight back, and they have
Speaker 1: underestimated Western solidarity. They didn't think the US, we're back
Speaker 1: and it's European. Our eyes were back Ukraine the way
Speaker 1: it has so I think from their perspective, um this
Speaker 1: this was unexpected. The Russians now portrayed this war as
Speaker 1: a proxy war between Russia and the West. They see
Speaker 1: this as a war between them and primarily the United States.
Speaker 1: That's not how we see it. It's a war between
Speaker 1: Russia and Ukraine, and we're helping support the Ukrainians. But
Speaker 1: this is really feeding in through the narrative that Foodin
Speaker 1: is telling the Russian public that this is really the
Speaker 1: USS is guilty here, you know, Angela, I know, uh,
Speaker 1: President Zelinski is in DC's mainly to get more weapons
Speaker 1: in the fight against Russia. But boy, as I think
Speaker 1: of that cold winter approaching and really already here in Ukraine,
Speaker 1: we talk to us a little bit about what that
Speaker 1: winter is going to look like for Ukraine this year
Speaker 1: and is there anything uh, the US can do to
Speaker 1: to help them on out front. Well, I mean, it's
Speaker 1: going to be a very cold, dark winter, whatever the
Speaker 1: temperatures are. I mean, they're people who have already been
Speaker 1: existing without heat, without electricity, and without running water in
Speaker 1: cities and in rural areas too. But all the more
Speaker 1: that the Russians bomb them, the more that that strengthens
Speaker 1: the will of the Ukrainian people to resist Russia. But
Speaker 1: it's obviously very, very difficult to live under those circumstances.
Speaker 1: So what the US can do is I think we've
Speaker 1: given them some assistance in trying to repair their electricity
Speaker 1: grid and things like that, but by providing them with weapons,
Speaker 1: and we now have announced that we will give them
Speaker 1: the Patriot missile. This is a defensive system to shoot
Speaker 1: back the Russian missiles. The more that we can provide
Speaker 1: them with the weapon we to deflect Russian attacks, then
Speaker 1: the less they will in fact lose their electricity uh,
Speaker 1: and the less their infrastructure will be damaged by the Russians.
Speaker 1: So it takes a few weeks to train people to
Speaker 1: use these systems, but hopefully in a few weeks time
Speaker 1: that will help. Well, that's you hit on what I've
Speaker 1: been wondering. So we're we're providing support in the form
Speaker 1: of weapons, but as you mentioned, that requires training as well.
Speaker 1: I mean, is the US providing that training? Yes, it is,
Speaker 1: will be training the Ukrainians I think probably at our
Speaker 1: airport base in Germany, um and uh, and that's where
Speaker 1: they'll receive the training. Edgella. How do you see this
Speaker 1: all ending? I mean, is there any world in which
Speaker 1: Vladimir Putin just concedes defeat and walks out of Ukraine?
Speaker 1: I assume not. But how does this resolve itself? Well,
Speaker 1: it's really unclear. This is a war that could go
Speaker 1: on for a long time. The Russians are digging their
Speaker 1: heels and Putin's view is the longer uh, this war
Speaker 1: goes on, the more likely it is that either the
Speaker 1: Ukrainian people will say, we've had enough of this weekend,
Speaker 1: live like this anymore, let's sit down at the table
Speaker 1: and make concessions UM. And the same with the Europeans
Speaker 1: who are also suffering from high gasoline prices and and
Speaker 1: and problems also with the supply of electricity and things
Speaker 1: like that, UM as a result of the sanctions by
Speaker 1: the way that we've imposted on Russia. And so they're
Speaker 1: hoping that he's hoping that the Europeans will say, maybe
Speaker 1: we have to rethink what we're doing, and the same
Speaker 1: in the United States. That's why President Zelinski is going
Speaker 1: to the Congress. You know, you have a lot of
Speaker 1: skeptics among the Republican Party who are questioning why the
Speaker 1: U should continue supporting Ukraine like that, So that that
Speaker 1: part of Prutin's game plan is to wait for the
Speaker 1: Western resolved to collapse UM and then force the Ukrainians
Speaker 1: to make these concessions. It doesn't look likely at the
Speaker 1: moment that the Ukrainians are going to do this. Blutin
Speaker 1: will never accept defeat, but in theory he could certainly
Speaker 1: um UH present this as some kind of a game
Speaker 1: for Russia if Russia's taking taken the little bit more territory,
Speaker 1: but he doesn't prepared to do that at the moment.
Speaker 1: And Angela, you hit on an important point this this
Speaker 1: Republican opposition when you're you're looking at, uh, what's happening
Speaker 1: on on US shores. And of course President Zelinski is
Speaker 1: set to address Congress later today, and we've been having
Speaker 1: this conversation. You think about Matt Gates, you think about
Speaker 1: Marjorie Taylor Green, their their opposition to the fact that
Speaker 1: the US is providing any aid at all to Ukraine.
Speaker 1: Is there anything in your view that that the President
Speaker 1: of Ukraine could say tonight in front of Congress that
Speaker 1: would shift sentiment. Well, I'm sure that he's not going
Speaker 1: to be able to change the mind of people like
Speaker 1: Marjorie Kayla Green. UM. But I think apparently he is
Speaker 1: going to meet them after the speech separately with Republican
Speaker 1: and Democratic leadership. UM. And I think what he's trying
Speaker 1: to do probably is to shore up people like uh,
Speaker 1: Mitch mcconnells and image will common people like that, who
Speaker 1: in fact is still very much in favor of supporting Ukraine.
Speaker 1: We shouldn't forget that until now, Ukraine has been one
Speaker 1: of the few issues on which there's been bipars In
Speaker 1: agreement UM in Congress to support it. So I think
Speaker 1: those people will be his targets. Um. I I read
Speaker 1: somewhere that he might be meeting with some of the
Speaker 1: Round Paul. Now, Round Paul is an extreme skeptic on this,
Speaker 1: so I have no idea whether that would change his mind. Actela,
Speaker 1: Just so our listeners have a sense of of why
Speaker 1: you know so much about this top topic, talk to
Speaker 1: us about your book about Vladimir Putin for a little bit, right, So,
Speaker 1: I've published a book called Putin's World, um. And in
Speaker 1: that book I look at Russia's relations both and the
Speaker 1: subtitles Russia against the West and with the Rest um.
Speaker 1: And in that book, I certainly look at why Russia's
Speaker 1: relations with the West have deteriorated so much, um in
Speaker 1: the last few years under Putin. But why the rest
Speaker 1: of the world, much of the US of the World, China, India,
Speaker 1: the other Bricks countries, much as the Middle East, Africa
Speaker 1: and Latin America. All of those countries right have not
Speaker 1: condemned Russia for its invasion of Ukraine, have not imposed
Speaker 1: sanctions on it because Putin is very carefully cultivated relations
Speaker 1: with these non Western countries, um and that's really paying
Speaker 1: off for him. And that's why, you know, when we
Speaker 1: look at this, President Biden said at the beginning of
Speaker 1: the wars will be a Pooria. It's a Polia in
Speaker 1: the West, but it's not a prior in the rest
Speaker 1: of the world. Angela really appreciate your time. That is
Speaker 1: Angela stant She is senior fellow at the Brookings Institution,
Speaker 1: and as she said, she's the author of Putin's World,
Speaker 1: Russia's Russia against the West end with the rest. Really
Speaker 1: appreciate your time. As we watch President Vladimir Zelinsky's trip
Speaker 1: to the US, this is Bloomberg Business Week. These sees
Speaker 1: Bloomberg Business Week with Carol Masser and Tim stinebec on
Speaker 1: Bloomberg Radio. We were just talking about President Biden's meeting
Speaker 1: with President Zelinski. Later today, Attorney General Merrick Garland will
Speaker 1: join a meeting with the two. According to Bloomberg reporting,
Speaker 1: that's because the d J has played a key role
Speaker 1: in enforcing some of the sanctions against Russia, which leads
Speaker 1: nicely to one of the stories on the terminal today
Speaker 1: it's in the business Week magazine, the headline of which
Speaker 1: is Russia and Iran are building a trade route that
Speaker 1: defies those sanctions. Let's talk about it with Bloomberg business
Speaker 1: Week editor Joel Weber and business Week Global Economics editor
Speaker 1: Christina Lynde Blad. They joined us both now, and Joel,
Speaker 1: it's a big important story again as we watch what's
Speaker 1: happening in Washington, d C. With the Ukrainian president here
Speaker 1: on us. Doyle, Yeah, it seems like a pretty well
Speaker 1: time story and very much adjacent to sort of the
Speaker 1: bigger geopolitical tensions and and what this story um digs
Speaker 1: into was honestly like just it's a you gotta read
Speaker 1: this thing either on your phone or or in the
Speaker 1: magazine or online so that you can see what this
Speaker 1: this this trade corridor is starting to look like. And
Speaker 1: really what Russia and Iran are trying to do here
Speaker 1: is find a synergistic um relationship that can actually be
Speaker 1: behind the lines, UH so that things like ports that
Speaker 1: and that rely on other other UH partners can't be
Speaker 1: affected by sanctions. And so they've really come up with, UH,
Speaker 1: there's an existing infrastructure, but then they have very ambitious
Speaker 1: plans to expand. What that looks like, Christina, how ambitious
Speaker 1: and what do they need to accomplish? Well, they are
Speaker 1: planning to invest about twenty five billion dollars and that
Speaker 1: is in widening and upgrading some part, like you said,
Speaker 1: some parts of existing infrastructure, like the Sea of Azov,
Speaker 1: which is the distinction of being the shallowest in the
Speaker 1: world that needs to be dredged in parts. Uh, there's
Speaker 1: a canal linking the Don and the Volga rivers um
Speaker 1: also very narrow in parts and has sort of traffic
Speaker 1: jams there. We're seeing Iranian ships um beginning to move
Speaker 1: through these waterways. So what they're creating basically is this
Speaker 1: internal I'm inland corridor rather which UM where it's more
Speaker 1: difficult to scrutinize what kind of cargo is going through
Speaker 1: and where where does the trade currently begin and where's
Speaker 1: the ideal endpoint currently And then also in their in
Speaker 1: their plans right so right now this the CEO as
Speaker 1: of which is right north of the Black Sea. Most
Speaker 1: people don't even I think you know, probably didn't do
Speaker 1: it in geography and high school. UM. And then the
Speaker 1: terminus would be on the Indian Ocean because India is
Speaker 1: a key part of also what while not making huge
Speaker 1: investments compared to other partners, it is that it is
Speaker 1: part of this um of this corridor because already we're
Speaker 1: seeing UM. For example, Russia was a shipment of Russian
Speaker 1: grain that transited through Iran on its way to India
Speaker 1: this year, and how busy is it currently. UM. We
Speaker 1: analyzed I'm sorry about the noise. We analyzed UM some
Speaker 1: data on ship movements and we saw we were able
Speaker 1: to track a couple of dozen ships from Iran and
Speaker 1: and Russia that are already using the waterway. Some of
Speaker 1: those vessels are sanctioned, but there is in complete data.
Speaker 1: So but that's what we were able to establish. You know, Christina,
Speaker 1: when I think of both Iran and Russia and their
Speaker 1: trade with the rest of the world, all I can
Speaker 1: think about is is oil and energy. So I'm curious,
Speaker 1: what will these two nations be trading back and forth.
Speaker 1: I assume it's not a big oil relationship. What are
Speaker 1: some of the items that will be going pores? Well,
Speaker 1: you're right, great on oil products was the foundation of
Speaker 1: the existing trade. But they've signed a bunch of deals
Speaker 1: this year and they're trying to expand you know two
Speaker 1: into like polymers, medical supply, auto parts. So we saw
Speaker 1: for example already that trade in the first eight months
Speaker 1: of the year doubled between Russia and Iran, and there
Speaker 1: are forecasts from Russian sources saying it could go to
Speaker 1: as high as forty billion dollars a year if the
Speaker 1: two countries wrap up a free trade agreement. And so Christina,
Speaker 1: if the aim here is or one of the aims
Speaker 1: is to build sort of a sanctioned proof trade route,
Speaker 1: what has the response been from around the world. What
Speaker 1: is the US, for example, how to say about this. Well,
Speaker 1: the US UM envoys, um U s officials rather are
Speaker 1: already very concerned that some of the trade going through
Speaker 1: right now is arms from Iran traveling to Russia, and
Speaker 1: they're basically putting the world on notice that you know
Speaker 1: that um they want to crack down on that kind
Speaker 1: of commerce, and also that other countries that that sort
Speaker 1: of aid in this effort, in this larger effort, you know,
Speaker 1: will also be sanctioned. So that could be a concern
Speaker 1: for countries like India if they want to participate in
Speaker 1: this corridor. Okay, So that that speaks to you know,
Speaker 1: how the US and and uh its allies could actually
Speaker 1: try and pinch this. What what options do they have
Speaker 1: to exert influence and try and uh you know, dial
Speaker 1: down what's possible here to exert influence with the other
Speaker 1: with others, like with allies, to make sure that the
Speaker 1: corridor is you know, trafficked, not as much as the
Speaker 1: Uranians and Russians would like. Well, I mean, like I said,
Speaker 1: if they I mean, if they could they could say,
Speaker 1: if they would say action for example Indian buyers of
Speaker 1: Russian wheat that was going through the corridor, that's I mean,
Speaker 1: they haven't spoken exactly with that kind of detail, but
Speaker 1: they basically said, you know, you know, if we find
Speaker 1: that countries are trading with these nations, we will they
Speaker 1: will be targets of sanctions to I mean. The difficulty
Speaker 1: is that it's much harder to track, um, you know,
Speaker 1: cargoes going through this inland corridor than it would be
Speaker 1: in the open sea. Um. For one thing, the vessels
Speaker 1: are generally smaller because you know, these waters aren't as deep,
Speaker 1: so there's going to be more, you know, more traffic
Speaker 1: to get the same amount of goods across. I mean,
Speaker 1: I'm gonna ask that about Christina about the ships involved
Speaker 1: in this um you know, presumably these are just Iranian
Speaker 1: and Russian ships there are they sort of cutting out
Speaker 1: the global shipping industry more or less. That's I mean,
Speaker 1: from what we've been able to gather. Yet that's mostly
Speaker 1: what they are because you know, ships need. For example,
Speaker 1: Russia has been working uh and you know, to give
Speaker 1: Iranian ships, you know, right of passage through its rivers
Speaker 1: and canals. So so you know, Russia control some of
Speaker 1: these waterways, so not any country can go through and
Speaker 1: talk about India role here. Sorry to cut you off, Shoal,
Speaker 1: but when we think about this route that's being built
Speaker 1: between Russia and Iran, how does India factor in? Well,
Speaker 1: India has made an investment in an Iranian port um,
Speaker 1: but it pre dates it's been you know, the work
Speaker 1: there has been lagging for many years, so um, it
Speaker 1: wasn't done. I don't think with any kind of larger
Speaker 1: vision of what was going to happen in terms of
Speaker 1: how these two countries were going to try to you know,
Speaker 1: turn so much towards you know, rushing around towards each
Speaker 1: other and try to accelerate plans for building this route.
Speaker 1: But generally there has been an effort underway for at
Speaker 1: least a decade to sort of together countries in Eurasia
Speaker 1: closer together, and so India was going to be part
Speaker 1: of that in some form. I wonder actually the evolution
Speaker 1: of the brick relationships to write like if you if
Speaker 1: you can reach uh Asia a little bit here, maybe
Speaker 1: even South Africa through this these terminus, you start to
Speaker 1: actually see that this could be I mean this this
Speaker 1: is kind of the US nightmare. I think actually, like
Speaker 1: if they can actually stitch together a trade corridor that's
Speaker 1: sort of behind the namy lines, like you really you
Speaker 1: might not be able to touch it that effectively, right,
Speaker 1: That's right, that's right. I mean it also shows I mean,
Speaker 1: I think one of the things we've been tracking all years,
Speaker 1: it's just to to look at how supply lines, you know,
Speaker 1: I mean, rather supply chains are changing as a result
Speaker 1: of geopolitics. You know. So we've seen a bit through
Speaker 1: you know, near shoring and so called French shoring. But this,
Speaker 1: this to me actually was a story that I hadn't
Speaker 1: heard that much about, so I was very did all right,
Speaker 1: it's a great story from Bloomberg Business Week, that is
Speaker 1: Russia and Iran are building a trade route that defies sanctions.
Speaker 1: Those nations investing upwards of twenty billion dollars to ease
Speaker 1: the passage of goods along those waterways and those railways.
Speaker 1: A very timely conversation again as our Ukrainian President Vlodomir
Speaker 1: Zelinsky visits US soil for the first time, first trip
Speaker 1: outside the country since that war started over three hundred
Speaker 1: days ago. Thank you to Bloomberg business Week editor Joel
Speaker 1: Weber and Business Week Global Economics Editor Christina Lynn Blad.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messier and
Speaker 1: Tim Stenebeck on Bloomberg Radio. Well. One of the defining
Speaker 1: features of the economy in two, other than super hot inflation,
Speaker 1: it's been a super strong labor market. The unemployment rate
Speaker 1: came in at three point seven percent in November. Let's
Speaker 1: talk about what the next year holds with Julia Poll
Speaker 1: Actually is cheap economist over at ZIP recruiter. She joins
Speaker 1: us now on zoom from Los Angeles. Julia, It's great
Speaker 1: to get some time with you as we wrap up two.
Speaker 1: Let's talk about the labor market. In three. Do we
Speaker 1: get above four percent inflation or are we gonna stay
Speaker 1: resilient here. Unemployment, I mean unemployment. It's been a long year.
Speaker 1: The FED is predicting four points six unemployment in four
Speaker 1: but it's somewhat hard to see how that will happen
Speaker 1: given the strength of the US consumer right now. We're
Speaker 1: still seeing consumers with with plenty of runway left, with
Speaker 1: very low debt service payments as a share of disposal income,
Speaker 1: and with very low delinquencies. And here's the most important
Speaker 1: thing that's going to happen in the next year. Workers
Speaker 1: are going to see a real wage increase, and that's
Speaker 1: because inflation is coming down more quickly than wage growth,
Speaker 1: and so actually their purchasing power could expand, and I
Speaker 1: think that will fuel strong, UH sustained, robust employment growth
Speaker 1: despite some of the predictions. Well, Julia, clearly I have
Speaker 1: inflation on my mind. So let's talk about that a
Speaker 1: little bit. Sort of the link between inflation and what
Speaker 1: we're seeing in the labor market wrapped those two together,
Speaker 1: are there is what does that relationship look like in
Speaker 1: this moment? Does one depend on the other. So the
Speaker 1: imbalances in the labor market are a key contributing factor
Speaker 1: to inflation, and they are a reason that we have
Speaker 1: seen UH inflation spread across the goods in the CPI basket,
Speaker 1: UH move out of energy and and food and areas
Speaker 1: like that where supply chain issues were to blame initially
Speaker 1: UH and into core services now. But what we know
Speaker 1: is that that the FEDS actions are taking effect. We
Speaker 1: can see inflation coming down now UH and UM real
Speaker 1: time sort of market rents, for example, real time private
Speaker 1: sector data suggests that there's more cooling ahead. We also
Speaker 1: know that when inflation comes down, it doesn't mean that
Speaker 1: wage growth comes down right away either. They have actually
Speaker 1: been pretty long periods in history of real wage growth
Speaker 1: because wages are much stickier than than than prices of
Speaker 1: goods and services. And so what we could see this
Speaker 1: year is that after seeing their purchasing power erode in two,
Speaker 1: workers could now actually finally get a real wage increase
Speaker 1: as they have been doing over the past five months. Actually,
Speaker 1: I'm wondering how you think we got to this situation
Speaker 1: we're in now, with the imbalances you're you're talking about.
Speaker 1: You know, the Jolts Job Survey job opening survey still
Speaker 1: shows something like ten million job openings in the US,
Speaker 1: you know, way off the charts compared to pre COVID.
Speaker 1: Why is the job market still so hot in your opinion, Well,
Speaker 1: initially it was because employers rushed back into the market
Speaker 1: and demand returned much more quickly than labor supply. Many
Speaker 1: of the people who left the labor market initially, who
Speaker 1: were displaced to our older workers, just felt it wasn't
Speaker 1: worth the effort to reskill and and come back. And
Speaker 1: so we we've seen many more people retire than would
Speaker 1: have been the case without the pandemic. Um. We also
Speaker 1: are kind of returning to the pre pandemic downward, trimmed
Speaker 1: in labor force participation that that's driven by an aging
Speaker 1: population and retiring a set of boomers now um. And
Speaker 1: then finally, you know, immigration fell off a cliff. UH.
Speaker 1: Embassies and consulates were closed around the world and UH,
Speaker 1: and immigration had been falling even before the pandemic due
Speaker 1: to the Trump administration's policies. And so the shortfall is
Speaker 1: anywhere between at one point five and two million immigrants
Speaker 1: who would otherwise have been we're working in the United
Speaker 1: States now. UM. So the long term prospects of the
Speaker 1: US lab market UH and its size are not that
Speaker 1: great right now unless we start making more babies or
Speaker 1: or alloting more immigrants and those boomers back to work.
Speaker 1: It's always the boomer's fault. Katie ever noticed that it's
Speaker 1: a nice change from just blaming the millennial. Yeah, I
Speaker 1: don't know, let's go back to flaving the millennials. I'm
Speaker 1: closer to the boomer and than the millennial and making
Speaker 1: me uncomfortable with all those even even among working age people,
Speaker 1: even among the millennials, we have this this very worrying
Speaker 1: trend of working age men leaving the labor force, the
Speaker 1: decline in labor force precipation among prime age men. I
Speaker 1: think it is perhaps even more concerning, and that's tied
Speaker 1: to things like this, you know, dramatic increase in in
Speaker 1: drug use and drug overdoses and and opioids and fentonmyl
Speaker 1: and these very very dangerous things. So hopefully this is
Speaker 1: a year of where policymakers study the reasons underlying relatively
Speaker 1: sluggish low participation in the labor force and come up
Speaker 1: with and serious solutions. Yeah. No, that's definitely been one
Speaker 1: of the mysteries just tracking that participation rate. But sort
Speaker 1: of to Mike's previous question, why has the labor market
Speaker 1: been so resilient. That question becomes even more pressing when
Speaker 1: you think about some of the headlines that we've been
Speaker 1: getting over the past couple of months. When you watch
Speaker 1: what's happening in the crypto industry, which it's told idiosyncratic story,
Speaker 1: but you've seen a lot of jobs lost there. Then
Speaker 1: you think about the tech sector and some of these
Speaker 1: big tech giants either freezing hiring or laying people off.
Speaker 1: You haven't seen it work its way into the data.
Speaker 1: And is that because there's certain sectors of the economy,
Speaker 1: of the jobs market that are still hiring and then
Speaker 1: some or how does that sort of wash out? So
Speaker 1: when we talk about tech layoffs, we're talking about tens
Speaker 1: of thousands of workers. But in a normal month, two
Speaker 1: million workers in the US economy are laid off or
Speaker 1: fired typically, and since the pandemic, that has been way
Speaker 1: down to about one point three one point four million.
Speaker 1: Uh and so we have far fewer layoffs and terminations
Speaker 1: happening in the economy right now overall in the aggregate,
Speaker 1: and that's why those tech layoffs are hardly even showing up. Also,
Speaker 1: when tech workers are laid off, their reemployment prospects are
Speaker 1: are pretty strong. I mean, this is the cream of
Speaker 1: the crop. These are the most in demand workers in
Speaker 1: the economy, and so many of them are finding reemployment
Speaker 1: remarkably quickly. Uh They're getting calls from recruiters before they
Speaker 1: even you know, sign that severance stackage. So that's why
Speaker 1: we're just not seeing unemployment take up that much as
Speaker 1: a result of these layoffs. I was going to ask you, actually,
Speaker 1: like what is the matchup between the job openings and
Speaker 1: these layoffs in the tech sector. You know, it's it's
Speaker 1: I would worry that you'd get laid off, as say
Speaker 1: a programmer at Twitter and have to you know, your
Speaker 1: your best option is to go work as a barista
Speaker 1: at Starbucks or something. But I guess it's not. It's
Speaker 1: not that dire right now that there is still a
Speaker 1: lot of openings in the tech sector for these layoffs
Speaker 1: that we're hearing about. Anecdotally, about three and four laid
Speaker 1: off tech workers appear to be getting new jobs in
Speaker 1: tech based on our surveys. So, um, you know, there
Speaker 1: there are still tech opportunities. There are companies that are
Speaker 1: profitable who are seeing their share prices rise. I mean
Speaker 1: it's you know, it's a small set of tech companies,
Speaker 1: but there are solid, healthy tech companies with with strong
Speaker 1: growth prospects um. And then even within tech companies, you know,
Speaker 1: many of them are laying off workers in their least
Speaker 1: profitable UH teams or functions or sections, but still hiring
Speaker 1: pretty rapidly in other parts of the business that are
Speaker 1: very profitable and strong UH. And so you know, sometimes
Speaker 1: we needs to look at these layoffs as a share
Speaker 1: of employment in the entire company, and often they're they're
Speaker 1: not really changing head count very much overall. And then
Speaker 1: in the broader economy, there's still huge demand for tech workers,
Speaker 1: both within tech and beyond tech every other industry. Every
Speaker 1: company is becoming a tech company in America, within a website,
Speaker 1: an app, and increasing amounts of data that they collect
Speaker 1: an analyze. So what does it all mean for wage growth, Julia?
Speaker 1: You know, is are we going to see sort of
Speaker 1: that wage price spiral that people talk about where company
Speaker 1: you know, workers are demanding higher pay and so companies
Speaker 1: raise their prices to to pay for that. Is that
Speaker 1: a risk do you think going in So? I don't
Speaker 1: think so. I don't think we're seeing a wage price
Speaker 1: spiral because we are actually seeing prices come down. We're
Speaker 1: seeing goods prices come down and uh, and we're seeing uh,
Speaker 1: you know, wage growth appear to sort of slow or
Speaker 1: or level off. UM. So I don't think that is
Speaker 1: too much of a concern. I think we've now given
Speaker 1: time for supply chains to sort of repair and improve,
Speaker 1: and so as workers now start receiving real wage increases again, uh,
Speaker 1: that will uh you know, sustain demand for goods and services, um,
Speaker 1: but without putting too much pressure on their prices. So
Speaker 1: I think the you know, there's a there's something called
Speaker 1: the beverage curve and labor economics, which is a curve
Speaker 1: showing job openings versus the unemployment rate, and what the
Speaker 1: Fed really wants to do reduce job openings, reduce that
Speaker 1: gap between the number of people seeking jobs in the
Speaker 1: number of jobs available without pushing unemployment up too much.
Speaker 1: So far, they're actually managing to move down that beverage curve,
Speaker 1: pushing job openings down ever so gradually without really increasing unemployment.
Speaker 1: It would be a sort of a miracle if they
Speaker 1: if they managed to do that. That's not usually the
Speaker 1: direction that this curve is, but it seems to be
Speaker 1: working all right. Julie We've got to leave it there.
Speaker 1: That is Julia poll actually is chief economist over as
Speaker 1: ZIP recruiter. N all yeah, but you let me drive?
Speaker 1: No no, no no, all right, please, I'll do the right gravels.
Speaker 1: I want to drive. It's a good question. Drive is
Speaker 1: the drive to the globe? Tim Well down on Bloomberg Radio,
Speaker 1: All right, we are about eighteen minutes away from the
Speaker 1: close of trading on December twenty one. Let's get some
Speaker 1: insight from Lisa Ericson. She is head of the Public
Speaker 1: Markets group over at US Bank Wealth Management. She joins
Speaker 1: US now on Zoom from Minneapolis. Lisa, we're looking at
Speaker 1: a big broad rally today, but when you look across
Speaker 1: the Wall Street forecasts for there is a lot of
Speaker 1: doom and gloom when it comes to the stock market.
Speaker 1: Where do you fall when you look at the balance
Speaker 1: of risks. We're really more cautious on the US equity
Speaker 1: market going into the new year. And the reason why
Speaker 1: is that, as you pointed out, when you look both
Speaker 1: at the macro outlook and the micro look, we continue
Speaker 1: to have some headwinds. Chief among them is the fact
Speaker 1: that we still have inflation while declining at relative relatively
Speaker 1: elevated levels, and as long as that remains the case,
Speaker 1: we're going to have the FED continue to be more
Speaker 1: restrictive in their policy, again maybe at a slower pace,
Speaker 1: but nonetheless really trying to tighten. So you can bind
Speaker 1: those two factors with the fact that consumers and companies
Speaker 1: now have been having to deal with this tougher environment
Speaker 1: for some time, and it becomes a question again of
Speaker 1: how long the consumer can continue to hold out and
Speaker 1: those corporate profit margins continue to hold out in terms
Speaker 1: of maintaining relatively resilient levels, but not with without some
Speaker 1: slowing slely. So what does it look like in practice
Speaker 1: to be cautious on the equity market at this point?
Speaker 1: Do you avoid it completely, just go all in the
Speaker 1: fixed income or do you try to find those stocks
Speaker 1: that that actually do benefit from higher rates and pricing power.
Speaker 1: How do you sort of put cautiousness into practice in
Speaker 1: the market. We're advising our clients to be underweight US
Speaker 1: equities relative to their long term strategic allocations, so we
Speaker 1: think again caution is warranted and how they're positioning themselves
Speaker 1: across asset classes because of those factors that we just
Speaker 1: talked about, where we would put that money in term
Speaker 1: is relatively more sort to our fixed income, higher quality
Speaker 1: fixed income as well as global infrastructure listed stocks, which
Speaker 1: would contain sectors such as utilities UH, it would contain
Speaker 1: midstream energy, UH, transports, all of those kinds of infrastructure
Speaker 1: items that again tend to offer like high quality fixed income,
Speaker 1: higher levels of interest or dividends, and so that higher
Speaker 1: level of incoming cash flow helps to buffer the portfolio
Speaker 1: in more difficult environments, and so high quality fixed income
Speaker 1: that makes me think of treasuries, and treasuries are interesting.
Speaker 1: When you think about the news that we got from
Speaker 1: the Bank of Japan yesterday that they're lifting the cap
Speaker 1: on yield curve control. That spurred some fears that maybe
Speaker 1: if you think about Japanese bond buyers, there's such a
Speaker 1: consistent force in US government bond markets that maybe they'll
Speaker 1: stay home if fields are a little bit higher over there.
Speaker 1: When you're looking long term at the fixed income market,
Speaker 1: do you factor that in or do you think those
Speaker 1: fears are overblown? To your point, there are forces that
Speaker 1: continue to pull up yields across the globe. Obviously, here
Speaker 1: in the US, the FED itself is tightening, and we
Speaker 1: have central banks globally, the most recent of which being
Speaker 1: the Bank of Japan, really having to raise their targets
Speaker 1: or their bands. Nonetheless, we still think that having that
Speaker 1: higher income cushion that can come from higher quality fixed
Speaker 1: income makes sense. And right now, all other things being equal,
Speaker 1: we would also lean slightly shorter immaturity, keeping closer to
Speaker 1: the benchmark because of those actors, but we do want
Speaker 1: to continue to keep an outlook. We do see that
Speaker 1: yields overall are are quite attractive, so at some point
Speaker 1: in the future we might actually look at potentially extending
Speaker 1: out that maturity profile of a fixing portfolio, But right
Speaker 1: now we're still on the relatively short side again because
Speaker 1: of the factors that you mentioned. At least I know
Speaker 1: at US Bank Wealth Management you have a proprietary health
Speaker 1: check you call it of macro indicators. Can you talk
Speaker 1: to us a little bit about what some of the
Speaker 1: inputs are and what is that health check showing for
Speaker 1: the US and some other parts of the world. We
Speaker 1: do have a global proprietary health check that looks across
Speaker 1: the countries, whether in the developed markets or emerging markets,
Speaker 1: at how activity is going on in general sectors of
Speaker 1: the economy, whether it's consumer housing, and for each of
Speaker 1: those sectors, what it does is it bottom up puts
Speaker 1: together a number of key indicators in each area. What
Speaker 1: we've really and seeing here over the course of the
Speaker 1: last year, whether it's in the US, whether it's in
Speaker 1: developed international markets or emerging markets, is we definitely have
Speaker 1: seen slowing in the trend of where those indicators are pushing.
Speaker 1: In addition to that, the absolute level of the indicators
Speaker 1: have come down quite a bit. So all of those
Speaker 1: are really just pointing to the fact that the macro
Speaker 1: environment has been impacted by again, uh, the tougher market
Speaker 1: monetary environment, in addition to just some of the natural
Speaker 1: deceleration that comes from the fact that one was a
Speaker 1: big reopening year and it's just hard to keep growth
Speaker 1: at that same level. And so these a you're cautious
Speaker 1: on the equity market, do you see any opportunities to
Speaker 1: go on offense when you look at equities or you
Speaker 1: mostly playing defense here? One of the areas within equities
Speaker 1: that we do think again is interesting right now are
Speaker 1: more dividend oriented equities. So in line with the theme
Speaker 1: that we had on the fixed in comic global infrastructure
Speaker 1: side of again pulling some of that cash flow upfront
Speaker 1: in what could be again a more volatile market. We
Speaker 1: see within equities again some of those dividend paying stocks,
Speaker 1: particularly those with good ongoing dividend growth, really makes sense,
Speaker 1: you know, at least I've heard. I've talked to a
Speaker 1: few people fund managers and strategists who have said, well,
Speaker 1: is going to start out rough. It's basically going to
Speaker 1: be a lot like two was volatility, Inflation still too high,
Speaker 1: rates still elevilate, elevated. But then they expect sort of
Speaker 1: an inflection point in the year where it's clear that
Speaker 1: inflation has come under control and the Fed might actually
Speaker 1: start signaling that they'll they're gonna ease eventually. How do
Speaker 1: you think about the year coming up? Is it possible
Speaker 1: to sort of break it into sort of a good
Speaker 1: bad first half and a and a better second half.
Speaker 1: Is that a possibility? Do you think? Well, it certainly
Speaker 1: is a possibility that hopefully over three things improve, and
Speaker 1: of course, for all of us, we do hope that's
Speaker 1: the case. When we look at the year overall, however,
Speaker 1: we just see a lot of uncertainty. We haven't been
Speaker 1: in a period like this where again the level of
Speaker 1: forecast and certainty is high, and I think that stems
Speaker 1: from a couple of things. So one is just the
Speaker 1: fact that we've never been through a period like we've
Speaker 1: had where we had a sudden event like a global pandemic,
Speaker 1: you know, shut down the economy. Then we've had extraordinary
Speaker 1: monetary and fiscal stimulus leading to reopening and then unfortunately
Speaker 1: elevated inflation because not only of demand, but because of
Speaker 1: the supply chain constraints. So again, how that exactly works
Speaker 1: out and the pace at which again supply comes back online,
Speaker 1: including in the labor force, just really remains to be seen.
Speaker 1: So with all of that, there is high uncertainty I
Speaker 1: think about the trajectory, so we again believe the best
Speaker 1: place to start is a more cautious uh stance. But
Speaker 1: we'll look at it as it continues to move forward, allright.
Speaker 1: Lisa Erickson, she is head of the Public Markets group
Speaker 1: over at US Bank Wealth Management. Joining us on zoom
Speaker 1: from Minneapolis. Thanks for listening to Bloomberg Business Week. Download
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