WEBVTT - Daybreak Weekend: US PCE, CBI Conference, BOK Preview 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.520 --> 0:00:13.000 This is Bloomberg Daybreak Weekend, our global look at the 0:00:13.000 --> 0:00:15.440 top stories in the coming week from our Daybreak anchors 0:00:15.440 --> 0:00:17.840 all around the world. Straight ahead, on the program, we 0:00:17.920 --> 0:00:20.720 discuss some key economic data in the US and how 0:00:20.760 --> 0:00:24.239 it might impact FED policy moving forward, Plus a look 0:00:24.239 --> 0:00:27.160 at corporate earnings from the nation's largest department store chain. 0:00:27.480 --> 0:00:29.040 I'm Tom Busby in New York. 0:00:29.240 --> 0:00:31.840 I'm callin Hedger in London, where we're looking ahead to 0:00:32.000 --> 0:00:34.879 a key gathering of the biggest names in British business. 0:00:35.240 --> 0:00:38.280 I'm dek Krisner, looking ahead to next week's policy decision 0:00:38.320 --> 0:00:40.760 from the Bank of Korea, as well as the state 0:00:40.800 --> 0:00:42.960 of global trade. 0:00:43.320 --> 0:00:46.879 That's all it's truly had on Bloomberg Daybreak Weekend on 0:00:47.000 --> 0:00:51.480 Bloomberg eleven, TRIEO, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:51.880 --> 0:00:55.960 Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:56.360 --> 0:00:59.360 Sirius XM one twenty one, and around the world on 0:00:59.400 --> 0:01:08.000 Bloomberg Radio, dot Com and The Bloomberg Business. A good 0:01:08.040 --> 0:01:10.080 day to you. I'm Tom Busby, and we begin today's 0:01:10.080 --> 0:01:13.120 program with some key data coming out in the US. 0:01:13.480 --> 0:01:15.800 In this holiday shortened week ahead, we get a second 0:01:15.800 --> 0:01:18.760 read on US third quarter GDP and a read on 0:01:18.800 --> 0:01:22.840 what Americans are earning and spending with October's Personal consumption 0:01:22.920 --> 0:01:24.280 Expenditures Price Index. 0:01:24.360 --> 0:01:25.120 That's a mouthful. 0:01:25.520 --> 0:01:28.880 How might this impact FED policy moving forward? For more, 0:01:29.040 --> 0:01:33.360 we're joined by Stuart Paul, us economist with Bloomberg Economics. Stuart, 0:01:33.360 --> 0:01:35.679 thank you for joining us. Now let's start with what 0:01:35.720 --> 0:01:39.039 you expect to see this Wednesday, the second estimate as 0:01:39.040 --> 0:01:41.040 far as Q three economic growth. 0:01:41.319 --> 0:01:44.040 So, as we saw in the first estimate, GDP growth 0:01:44.200 --> 0:01:46.760 ran at an annualized pace of two point eight percent, 0:01:46.880 --> 0:01:50.000 pretty robust in the third quarter. We still think that 0:01:50.040 --> 0:01:52.400 two point eight percent is about right, but there is 0:01:52.600 --> 0:01:55.120 room for an upward revision. When we look at the 0:01:55.240 --> 0:01:57.600 spending data that we saw over the past few months, 0:01:57.600 --> 0:02:00.919 there have been some upward revisions, especially at August and September, 0:02:01.320 --> 0:02:04.640 and so we can see the already exceptional pace of 0:02:05.120 --> 0:02:08.400 personal spending growth get revised up further to almost an 0:02:08.440 --> 0:02:12.400 annualized pace of four percent, beyond the actual number itself. 0:02:12.639 --> 0:02:14.799 What I think matter is most to the FED is 0:02:14.880 --> 0:02:18.480 where that spending is and some of the categories that 0:02:18.520 --> 0:02:22.960 were revised up were things like spending out at bars 0:02:23.000 --> 0:02:26.000 and restaurants, some of the more discretionary categories that show 0:02:26.040 --> 0:02:28.480 that people aren't raining in their spending habits as much 0:02:28.520 --> 0:02:31.880 as maybe the FED had expected given where rates were. 0:02:32.600 --> 0:02:34.680 And so when the FED is starting to think about 0:02:34.680 --> 0:02:38.359 where policy should go, and it takes into consideration what 0:02:38.440 --> 0:02:41.120 it is likely to see with these revisions, a potential 0:02:41.200 --> 0:02:43.720 upward revision to growth, the back of an upward revision 0:02:43.760 --> 0:02:48.320 to household spending, it's indicative that the FED should be 0:02:48.360 --> 0:02:51.400 maybe moving a little bit slower in its rate cut 0:02:51.480 --> 0:02:53.760 trajectory than it had previously planned. 0:02:54.040 --> 0:02:56.880 Well, let's go back to spending. So you think bars, restaurants, 0:02:56.919 --> 0:03:00.560 I imagine, back to school spending. I imagine also travel. 0:03:00.840 --> 0:03:03.160 Were there laggards and as it always come back to 0:03:03.200 --> 0:03:04.640 housing when it comes to laggards. 0:03:05.160 --> 0:03:08.000 Well, so what we're really looking at in next week's 0:03:08.040 --> 0:03:12.880 data is the revision two Q three data, and fortunately 0:03:12.960 --> 0:03:15.280 we have some monthly data that give us a little 0:03:15.280 --> 0:03:17.360 bit of an insight into what we can expect for 0:03:17.400 --> 0:03:20.320 the revision to the quarterly print. And when we look 0:03:20.320 --> 0:03:24.320 at those monthly figures, households really just were not as 0:03:24.720 --> 0:03:28.440 frugal in some of those discretionary categories as we had 0:03:28.520 --> 0:03:32.360 previously believed. And so the FED, when it started on 0:03:32.440 --> 0:03:36.560 its rate cut trajectory, now has fresher data in hand 0:03:36.600 --> 0:03:39.320 that shows well, at the time that you started making 0:03:39.400 --> 0:03:43.360 those cuts, we previously believed that households were starting to 0:03:43.360 --> 0:03:45.560 get a little bit more frugal, they were starting to 0:03:45.560 --> 0:03:48.040 get a little bit worried, so we started cutting rates. Well, 0:03:48.040 --> 0:03:49.920 now it turns out, based on some of the revisions 0:03:49.920 --> 0:03:52.480 that we've seen to the monthly data, maybe they haven't 0:03:52.480 --> 0:03:54.840 been as frugal as we thought. When we look at 0:03:54.840 --> 0:03:57.880 the quarterly data, there's room for that upward revision, and 0:03:57.920 --> 0:04:00.200 so the FED can sort of slow its pace of 0:04:00.280 --> 0:04:01.480 cuts going forward. 0:04:01.800 --> 0:04:05.080 Okay, got it. So people were emboldened by that do 0:04:05.120 --> 0:04:08.240 a little more spending with that first half a percent 0:04:08.320 --> 0:04:12.320 rate cut, exactly. All right, let's move on. Then. Also Wednesday, 0:04:12.360 --> 0:04:14.360 we get something I know you look at very closely, 0:04:14.440 --> 0:04:18.760 October's Personal Income and Outlayser Report PCE spending and personal income. 0:04:19.400 --> 0:04:21.240 What do you see? What are you looking at there 0:04:21.360 --> 0:04:23.640 and how is that related to that third quarter growth? 0:04:23.760 --> 0:04:25.960 So that third quarter growth, we're probably going to get 0:04:26.000 --> 0:04:28.920 a modest revision upward. And then on the same day, 0:04:29.040 --> 0:04:31.279 at the same time, we're going to get the October 0:04:31.320 --> 0:04:34.400 as you said, Personal Income and Outlayser Report, which really 0:04:34.440 --> 0:04:38.960 has three main components to it October personal spending, October 0:04:39.000 --> 0:04:44.480 personal income, and PCE inflation, the Fed's preferred gauge of prices. 0:04:44.600 --> 0:04:47.360 So taking those in order, we have some income data 0:04:47.360 --> 0:04:50.280 that again might make the FED want to slow its 0:04:50.400 --> 0:04:53.880 role just a little bit. Personal income growth likely increased 0:04:53.920 --> 0:04:56.760 at a monthly pace in October of zero point four 0:04:56.839 --> 0:04:59.440 percent per month. That's up from a pace of zero 0:04:59.440 --> 0:05:02.000 point three per in September. Now you might be thinking 0:05:02.000 --> 0:05:06.520 to yourself, we had such a dismal jobs report in October, 0:05:06.560 --> 0:05:08.960 how could it be that personal income is growing, but 0:05:09.320 --> 0:05:13.719 wages increase during the month, headcount increase just very slightly 0:05:13.920 --> 0:05:17.440 enough to boost labor income, and we also saw transfer 0:05:17.480 --> 0:05:22.280 payments from unemployment insurance claims and interest income likely increasing 0:05:22.440 --> 0:05:25.400 about one percent during the month. And that's enough to 0:05:25.480 --> 0:05:28.360 keep personal income growing at a pace that's a bit 0:05:28.520 --> 0:05:32.200 too hot for comfort for the FED to cut in 0:05:32.279 --> 0:05:34.680 these big chunks or even to cut maybe even twenty 0:05:34.680 --> 0:05:37.800 five basis points in October. And then the next major 0:05:37.880 --> 0:05:42.279 line item within that personal income and outlaser report spending October. 0:05:42.320 --> 0:05:48.360 Personal spending really supported by spending on autos. And then 0:05:48.400 --> 0:05:51.520 when we think about inflation, it's really auto price. Is 0:05:51.640 --> 0:05:56.240 vehicle prices that put the brakes on the disinflation process. 0:05:56.560 --> 0:05:59.960 We're expecting core PCEE inflation, the annual pace of core 0:06:00.120 --> 0:06:04.000 PC inflation to register two point eight percent in October. 0:06:04.240 --> 0:06:07.640 That's up from two point seven percent, where that figure 0:06:07.720 --> 0:06:10.800 had been lingering for about three months. So all these 0:06:10.880 --> 0:06:13.479 numbers sort of point to the Fed maybe needing to 0:06:13.560 --> 0:06:16.479 slow down just a little bit. It caught up to 0:06:16.520 --> 0:06:19.680 the curve with that fifty bases point cut early. We 0:06:19.760 --> 0:06:22.880 got another twenty five basis points off just during the month, 0:06:23.320 --> 0:06:26.000 and now when we're thinking about December and twenty twenty five, 0:06:26.120 --> 0:06:28.560 the Fed can move just a little bit slower as 0:06:28.600 --> 0:06:29.240 it cuts rates. 0:06:29.400 --> 0:06:31.760 FED Chair Jerome Palce said the bank is in no rush, 0:06:32.120 --> 0:06:34.440 no rush to lower that benchmark rate, and of course, 0:06:34.600 --> 0:06:37.719 as always, it's all data dependent, so he's put the 0:06:37.720 --> 0:06:40.080 signals out there. Don't get too excited, that's right. 0:06:40.160 --> 0:06:42.560 The keyword from all the Fed speak that we've heard 0:06:42.560 --> 0:06:46.080 over the past week has been cautious, cautious, cautious. 0:06:46.800 --> 0:06:49.200 Well, we got a lot of data dump this short 0:06:49.279 --> 0:06:52.279 this holiday shortened week ahead our thanks to Stuart Pohl, 0:06:52.400 --> 0:06:56.120 us economist with Bloomberg Economics. We move next to third 0:06:56.160 --> 0:06:58.599 quarter earning season, which may be winding down, but this 0:06:58.680 --> 0:07:02.200 Tuesday we hear from retail giant Macy's. How will those 0:07:02.200 --> 0:07:05.040 results position the chain ahead of the all important holiday 0:07:05.040 --> 0:07:08.480 shopping season. For more, we're joined by Mary Ross Gilbert 0:07:08.520 --> 0:07:13.640 Bloomberg Intelligence, senior equity analyst covering retail. Mary, thank you 0:07:13.680 --> 0:07:16.679 so much for joining us. Well, we know Americans continue 0:07:16.720 --> 0:07:18.960 to spend a lot of money. Have they been spending 0:07:18.960 --> 0:07:21.200 their money at Macy's, That's the question. 0:07:21.680 --> 0:07:24.760 Tom. They have been spending their money at Macy's, but 0:07:24.960 --> 0:07:28.400 not as much as they're spending money elsewhere. So with 0:07:28.480 --> 0:07:32.000 their third quarter numbers due out on Tuesday, we're expecting 0:07:32.040 --> 0:07:35.480 them to miss the top line estimates, and we think 0:07:35.480 --> 0:07:37.920 they'll probably beat on the profit line. They've done a 0:07:37.920 --> 0:07:42.080 really good job managing costs, managing inventories, and they've beat 0:07:42.120 --> 0:07:45.480 their earnings for the past eight quarters, so we think 0:07:45.520 --> 0:07:47.560 they beat again on the bottom line, but we think 0:07:47.600 --> 0:07:49.880 they miss on the top line. So we're showing they 0:07:49.920 --> 0:07:54.880 could miss consensus estimates for sales to decline about one 0:07:54.920 --> 0:07:57.840 and a half percent. We think it could decline more 0:07:57.960 --> 0:08:00.720 like maybe three to five percent, So we'll see when 0:08:00.760 --> 0:08:04.160 they go to report, But the big focus really will 0:08:04.160 --> 0:08:07.160 be once they come out with the results, what comparable 0:08:07.240 --> 0:08:11.160 sales look like. And while we think generally they'll be down, 0:08:11.720 --> 0:08:15.640 we're really looking for the first fifty stores that they've 0:08:15.680 --> 0:08:20.200 completely transformed. That means they've added personnel to the shoot 0:08:20.240 --> 0:08:23.440 apartment so they have more service, and also in women's 0:08:23.440 --> 0:08:27.720 apparel and men's apparel. So we think that with all 0:08:27.760 --> 0:08:30.320 the improvements that they made to the first fifty stores 0:08:30.760 --> 0:08:33.319 in the first two quarters of the year, they were 0:08:33.360 --> 0:08:36.040 able to show positive comps. So we're looking to see 0:08:36.080 --> 0:08:39.720 if they can still continue that trend in the third quarter, 0:08:40.080 --> 0:08:43.120 and that could show some encouraging signs as they seek 0:08:43.200 --> 0:08:44.960 to transform the business. 0:08:45.200 --> 0:08:49.160 So refreshed stores, more salespeople on the floor, designer brands, 0:08:49.360 --> 0:08:51.480 all of that adding up in the last couple of 0:08:51.520 --> 0:08:54.600 quarters to a little bump in sales. But we think 0:08:55.520 --> 0:08:58.720 is it the consumer, Is it Macy's what may have 0:08:59.040 --> 0:09:01.280 held back sale in the third quarter. 0:09:01.679 --> 0:09:05.679 Clearly department stores has been seeing a weakness there's been 0:09:05.679 --> 0:09:08.760 a trend away from department stores going toward more off 0:09:08.840 --> 0:09:11.160 price and also in the mass channel. So if you 0:09:11.200 --> 0:09:16.360 look at Walmart's numbers out, they reported robust results, exceeded 0:09:16.480 --> 0:09:20.080 estimates on the top line, and they indicated that two 0:09:20.160 --> 0:09:24.320 thirds of their beat was related to consumers who have 0:09:24.559 --> 0:09:28.040 come from households that earn over one hundred thousand. Now 0:09:28.080 --> 0:09:32.200 Macy's their core customer earns under one hundred thousand, so 0:09:32.320 --> 0:09:36.880 the largest contingent that shops Macy's. But they're shutting down 0:09:36.920 --> 0:09:39.240 about one hundred and fifty stores, so they sort of 0:09:39.240 --> 0:09:42.440 have two classifications. One would be the go forward stores. 0:09:42.760 --> 0:09:45.560 We really think that's the most important metric to look at, 0:09:45.840 --> 0:09:49.200 but we will also look at the fifty refresh store 0:09:49.880 --> 0:09:52.920 performance too as a sign of what could come in 0:09:53.000 --> 0:09:56.400 terms of improving performance. But generally the department store space 0:09:56.480 --> 0:10:00.480 has seen a decline, and looking at our transaction data 0:10:01.080 --> 0:10:04.800 early we only have fifteen days in their fourth quarter, 0:10:05.280 --> 0:10:08.080 but we haven't seen an improvement. One of the things 0:10:08.160 --> 0:10:10.240 that we've noticed in looking at this data is that 0:10:10.320 --> 0:10:12.920 October was pretty weak across the board, and we think 0:10:12.960 --> 0:10:16.840 it was because of unusual warm weather around the country 0:10:17.160 --> 0:10:20.600 and now that the weather has turned colder, that should 0:10:20.679 --> 0:10:24.840 improve outerwear sales, which are higher margin. But a change 0:10:24.880 --> 0:10:29.640 in weather is the number one reason why consumers will 0:10:29.640 --> 0:10:32.320 buy something new, according to a survey that we just 0:10:32.440 --> 0:10:34.120 conducted this week and published. 0:10:34.440 --> 0:10:37.680 Wow. And speaking of weather, how do you think Macy's 0:10:37.760 --> 0:10:40.839 was impacted by a series of devastating storms? I mean 0:10:40.840 --> 0:10:43.280 one affecting about a quarter of the country. 0:10:43.840 --> 0:10:48.319 That's exactly right, Florida, in North Carolina, but mainly Florida. 0:10:48.400 --> 0:10:50.959 So yes, they will be impacted by that. We saw 0:10:51.000 --> 0:10:54.760 that with tj X, which reported their results and again 0:10:54.960 --> 0:10:58.880 they beat, and they their guidance was sort of light, 0:10:58.960 --> 0:11:02.240 but they typically beat, so we think generally the news 0:11:02.280 --> 0:11:05.480 coming out of TJX was very positive. But they did 0:11:05.559 --> 0:11:09.280 say that they were impacted by the hurricanes and then 0:11:09.480 --> 0:11:15.160 also impacted by unseasonably warm weather in October. So we 0:11:15.200 --> 0:11:17.640 think we'll hear something similar to that when we get 0:11:17.679 --> 0:11:19.040 results out of Macy's. 0:11:19.400 --> 0:11:23.760 And now you talked about the discount stores Walmart. How 0:11:23.840 --> 0:11:27.120 is Macy's faring in online sales? And of course you 0:11:27.160 --> 0:11:29.160 know the big bugaboo there is Amazon. 0:11:29.840 --> 0:11:32.800 Yes, absolutely, well it's not just Amazon. If you look 0:11:32.840 --> 0:11:37.280 at Walmart, and Target. They both reported double digit increases 0:11:37.320 --> 0:11:41.160 in online sales, so they're actually doing really well on 0:11:41.200 --> 0:11:46.560 the e comm part. Now for Macy's, Macy's online sales 0:11:46.559 --> 0:11:48.720 are about, you know, sort of a little. It's over 0:11:48.800 --> 0:11:51.640 thirty percent, somewhere around that thirty three thirty four percent 0:11:51.679 --> 0:11:56.720 of sales is online, and that business has been doing okay. 0:11:57.240 --> 0:12:00.480 But again they're really more of an omni channel, Taylor. 0:12:00.880 --> 0:12:04.559 So you might have a consumer originated transaction and then 0:12:04.600 --> 0:12:06.800 pick it up in store. So I think it's going 0:12:06.880 --> 0:12:10.200 to follow the trend that the overall business is seeing 0:12:10.280 --> 0:12:12.040 generally in terms of increases. 0:12:12.480 --> 0:12:14.800 Wow, A lot to look forward to. Macy's Q three 0:12:14.840 --> 0:12:18.120 earnings out this Tuesday. Our thanks to Mary Ross Gilbert, 0:12:18.120 --> 0:12:22.440 Bloomberg Intelligence senior echoity analyst covering retail. Coming up on 0:12:22.440 --> 0:12:24.520 Bloomberg day Break weekend, we look ahead to a key 0:12:24.559 --> 0:12:28.240 gathering in the biggest names in British business. I'm Tom 0:12:28.280 --> 0:12:42.840 Busby and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:42.840 --> 0:12:45.280 our global look ahead at the top stories for investors 0:12:45.360 --> 0:12:47.760 in the coming week. I'm Tom Busby in New York. 0:12:48.000 --> 0:12:50.120 Up later in the program, we look ahead to a 0:12:50.160 --> 0:12:53.120 meeting from the Bank of Korea. But first, it's been 0:12:53.120 --> 0:12:55.520 an eventful year for British business, the first change in 0:12:55.559 --> 0:12:59.240 government in fourteen years, a pivotal autumn budget announcement, an 0:12:59.400 --> 0:13:03.680 uncertain g' your political environment. This week, entrepreneurs, finance leaders, 0:13:03.720 --> 0:13:07.840 politicians all convene at the Confederation for British Industry's annual 0:13:07.840 --> 0:13:11.360 conference to discuss what's ahead in twenty twenty five and 0:13:11.400 --> 0:13:13.520 for more, let's go to London and bring in Bloomberg 0:13:13.600 --> 0:13:16.559 day break, euro banker Caroline hepgar Tom. 0:13:16.720 --> 0:13:19.880 The UK's business leaders and politicians may be at odds 0:13:19.920 --> 0:13:23.440 on some matters, but both groups agree on one thing, 0:13:23.840 --> 0:13:28.080 the need for sustainable economic growth in Britain. It is 0:13:28.120 --> 0:13:31.880 something that has proven elusive in twenty twenty four, but 0:13:32.040 --> 0:13:34.880 with a new Labour government to out the country's helm, 0:13:35.160 --> 0:13:40.120 many are still hoping that next year will bring more prosperity. 0:13:40.240 --> 0:13:44.079 The Confederation for British Industry says that the problem is evident. 0:13:44.160 --> 0:13:47.839 The economy is faltering and firms are struggling to solve 0:13:47.960 --> 0:13:52.240 challenges without support. The group has also bemoaned the cost 0:13:52.280 --> 0:13:55.800 of doing business in the UK against the backdrop of 0:13:56.040 --> 0:14:00.440 unreliable supply chains and a declining stock market in London. 0:14:00.960 --> 0:14:04.520 In response, the Chancellor Rachel Reeves is doing her best 0:14:04.600 --> 0:14:08.440 to rev up the engine of industry. The Chancellor used 0:14:08.440 --> 0:14:13.079 her landmark mansion House address to announce a swathe of measures, 0:14:13.120 --> 0:14:18.000 including bringing bonus payments forwards for financial professionals and a 0:14:18.040 --> 0:14:23.480 reassessment of Posts two thousand and eight crisis regulation. But 0:14:23.520 --> 0:14:26.480 will her efforts be enough to spur growth given the 0:14:26.560 --> 0:14:29.880 uncertain backdrop? The threat of headwinds is something I've been 0:14:29.880 --> 0:14:33.080 discussing with the director of research at the think tank 0:14:33.120 --> 0:14:37.040 the Resolution Foundation, James Smith. I started off by asking 0:14:37.120 --> 0:14:41.160 him where the recent hard than expected UK inflation numbers 0:14:41.440 --> 0:14:43.560 are an indicator of worse to come. 0:14:44.280 --> 0:14:47.440 It's a pretty disappointing inflation release all round. As you say, 0:14:47.800 --> 0:14:50.720 inflation is up. We expected that. 0:14:50.720 --> 0:14:53.239 Because energy bills were going. 0:14:53.040 --> 0:14:55.560 Up some falls in the past, we dropping out of 0:14:55.640 --> 0:15:01.400 the twelvemonth calculation. But what we've seen is inflation tacking 0:15:01.480 --> 0:15:04.840 up a little bit. We've seen services inflation up from 0:15:04.840 --> 0:15:08.640 four point nine percent in September to five percent in October, 0:15:09.000 --> 0:15:12.600 and those underlying measures of inflation what really the Bank 0:15:12.640 --> 0:15:13.800 of England is watching. 0:15:14.000 --> 0:15:16.240 So those rises there. 0:15:16.040 --> 0:15:19.000 They're not big, but and they have been a little 0:15:19.000 --> 0:15:22.640 bit erratic in recent months, but still there's a disappointing 0:15:23.080 --> 0:15:27.160 release and doesn't really encourage us to think there's very 0:15:27.280 --> 0:15:29.160 rapid cuts and interest rates coming. 0:15:29.200 --> 0:15:30.840 Inflation still looks quite sticky. 0:15:31.640 --> 0:15:34.400 Okay, Yeah, in terms of the work that you have 0:15:34.520 --> 0:15:37.880 done then on the pressures that there might be for 0:15:38.000 --> 0:15:41.480 higher inflation, and also on the data, it's quite fascinating. 0:15:41.520 --> 0:15:44.720 We've known for two years that the official Labor for 0:15:45.000 --> 0:15:48.720 survey that's produced by the RNs has had significant problems. 0:15:49.280 --> 0:15:51.520 What do you think that the official data has missed 0:15:51.600 --> 0:15:53.560 because you know it's close to a million people. 0:15:53.600 --> 0:15:54.080 Maybe. 0:15:54.960 --> 0:15:55.200 Yeah. 0:15:56.320 --> 0:15:58.280 We've known for as you say, for quite some time 0:15:58.320 --> 0:16:02.640 that the Labor four Survey, the key measure of employment 0:16:02.720 --> 0:16:06.480 lad market quantities in the UK, has had problems of 0:16:06.560 --> 0:16:10.280 declining response rates. So what we've been doing is trying 0:16:10.320 --> 0:16:13.480 to figure out what the lad market might look like 0:16:13.520 --> 0:16:17.960 if you just use ADMIN data, so the HMRC Real 0:16:18.000 --> 0:16:23.800 Time Indicators measure of employment and HRC data on self 0:16:23.880 --> 0:16:26.360 employment to try and give you an overall sense of employment. 0:16:26.400 --> 0:16:29.320 And if you do that calculation, it suggests that as 0:16:29.360 --> 0:16:32.960 you say, something like a million more people might be 0:16:33.840 --> 0:16:34.640 in employment. 0:16:34.720 --> 0:16:35.480 So the laborforce. 0:16:35.480 --> 0:16:41.440 Ser they could be really seriously underestimating the amount of 0:16:41.720 --> 0:16:44.400 the extent of which people are in employment in the UK, 0:16:44.560 --> 0:16:47.600 and we really think, you know, that could be quite 0:16:47.600 --> 0:16:49.560 a big difference. We're not at all certain about what 0:16:49.600 --> 0:16:52.400 that level looks like. This is giving you a sense 0:16:52.440 --> 0:16:55.480 of where employment might be. But the key thing here 0:16:55.560 --> 0:16:57.920 is in terms of future inflation is if you look 0:16:58.360 --> 0:17:03.000 at measures of un employment, particularly unemployment relative to the 0:17:03.040 --> 0:17:05.879 amount of vacancies in the economy, the so called tightness 0:17:05.960 --> 0:17:09.639 of the labor market, this doesn't radically change your view there. 0:17:09.760 --> 0:17:15.080 So the counterpart to higher employment is lower inactivity. So 0:17:15.119 --> 0:17:18.600 the thing we've been talking about is lots of people 0:17:18.640 --> 0:17:20.960 falling out the labor market. If more people are in 0:17:21.040 --> 0:17:25.240 employment that we expect, then the obvious counterpart that would 0:17:25.320 --> 0:17:28.639 be the less of a problem on the inactivity side. 0:17:28.800 --> 0:17:31.119 I'm interested to hear more from you on that front, 0:17:31.200 --> 0:17:34.520 because this is a narrative that we've had in the 0:17:34.640 --> 0:17:37.760 UK since the pandemic, that so many more people were 0:17:37.800 --> 0:17:42.560 inactive in the workforce. Would looking at the calculations that 0:17:42.600 --> 0:17:44.840 you've done, I mean, how differently should we be thinking 0:17:44.880 --> 0:17:46.000 about that problem. 0:17:46.080 --> 0:17:49.480 Well, it's still clear that we have got a problem 0:17:49.800 --> 0:17:55.320 of higher levels of poor health, so more people say 0:17:55.400 --> 0:17:59.600 that they have stability. We certainly are paying more for 0:17:59.640 --> 0:18:02.680 this little benefit, so that that's not quite the same 0:18:02.720 --> 0:18:04.160 thing as a sort of survey. 0:18:03.880 --> 0:18:05.560 Measures of ill health. 0:18:05.560 --> 0:18:09.000 So there's still the types of problems we've been talking about. 0:18:09.080 --> 0:18:13.320 Those are still there, but the overall effect on in 0:18:13.400 --> 0:18:17.160 activity through higher employment might be quite a lot smaller. 0:18:17.200 --> 0:18:20.639 So there could be other things going on pushing down 0:18:21.200 --> 0:18:25.600 in activity. So more people in work or older people 0:18:25.880 --> 0:18:29.840 you know, without health problems, and more women participating in 0:18:29.840 --> 0:18:32.560 the labor market for example, could be the ways in 0:18:32.640 --> 0:18:35.360 which you reconcile those two estimates. 0:18:35.800 --> 0:18:38.359 How much does it mean that government policy has to shift? 0:18:38.400 --> 0:18:40.920 I mean only last month Kirs Starmer told the Labor 0:18:40.920 --> 0:18:44.360 Party conference that the long term sick needed to get 0:18:44.359 --> 0:18:48.560 back to work where they could, saying quote that he 0:18:48.680 --> 0:18:51.199 was talking to his Labour party. Obviously we have to 0:18:51.240 --> 0:18:55.000 do everything we can to tackle worklessness. Liz Kendall, who's 0:18:55.040 --> 0:18:57.280 the Working Pension Secretary, is meant to be launching big 0:18:57.280 --> 0:19:00.800 reforms of job centers later this then you know, the 0:19:00.840 --> 0:19:03.920 way that people get back into work sort of extraordinary. 0:19:03.920 --> 0:19:06.560 But it does mean that government policy that has flowed 0:19:06.560 --> 0:19:08.760 from this data probably has to change. 0:19:09.080 --> 0:19:11.000 I think the key thing here is that the government 0:19:11.119 --> 0:19:14.560 have said that they want to get the employment rate 0:19:14.680 --> 0:19:15.680 up to eighty percent. 0:19:15.800 --> 0:19:18.200 So that's a very ambitious target. 0:19:18.280 --> 0:19:20.320 You know, we were in the early seventies in terms 0:19:20.359 --> 0:19:24.640 of employment rate at the moment, but if the ADMIN 0:19:24.760 --> 0:19:27.040 measure of employment is to be believed, we're a lot 0:19:27.080 --> 0:19:30.679 closer to that target than we work previously. So we still, 0:19:30.720 --> 0:19:32.760 as I say, we still have a challenge in terms 0:19:32.840 --> 0:19:37.440 of the overall welfare bill for those receiving benefits related 0:19:37.480 --> 0:19:41.320 to health. So the set of policy issues that are there, 0:19:41.400 --> 0:19:43.399 and we be hearing about that in the budget with 0:19:43.520 --> 0:19:47.400 the chance of saying that she would continue to try 0:19:47.440 --> 0:19:50.480 and make cuts to disability benefits put. 0:19:50.280 --> 0:19:52.640 In place by her predecessor, Jeremy Hunt. 0:19:52.760 --> 0:19:56.639 So there are definitely, you know, still problems there that 0:19:56.680 --> 0:19:57.960 the government need to be addressed. 0:19:57.960 --> 0:20:00.800 But it's good news potentially for their if. 0:20:00.680 --> 0:20:04.240 More people are in work, more people are paying tax, 0:20:04.320 --> 0:20:07.639 and you know that's the kind of key counterpart to 0:20:07.680 --> 0:20:07.960 all this. 0:20:08.440 --> 0:20:11.560 That was the director of research at the Resolution Foundation, 0:20:11.760 --> 0:20:15.560 James Smith, speaking to me and Stephen Caroll on Bloomberg Radio. 0:20:16.000 --> 0:20:18.199 So growth is the name of the game. How to 0:20:18.359 --> 0:20:20.800 get there though, no doubt that will be the question 0:20:20.960 --> 0:20:25.040 on the lips of different sector leaders and influential voices 0:20:25.320 --> 0:20:30.240 at the upcoming CBI Industry Conference. I've been discussing what's 0:20:30.240 --> 0:20:33.640 ahead with Bloomberg's UK Business editor Julian Harris. 0:20:34.080 --> 0:20:36.800 I mean, it never ends for British businesses really. I 0:20:36.840 --> 0:20:38.680 guess you could say that in a lot of countries 0:20:38.720 --> 0:20:42.120 as well. Just as they think the coast is clear, 0:20:42.240 --> 0:20:45.560 something comes up. The latest thing, of course, was the budget. 0:20:45.680 --> 0:20:48.080 It was expected to be quite severe, but it probably 0:20:48.119 --> 0:20:51.879 went further than many expected, and the hit from tax 0:20:52.400 --> 0:20:56.280 is huge. It does depend what kind of business you are, though, 0:20:56.400 --> 0:20:59.720 and sometimes the CBI has been accused in the past 0:20:59.720 --> 0:21:04.560 of of just representing the biggest businesses in the UK 0:21:06.080 --> 0:21:08.520 and not focusing as much on the smaller ones. And 0:21:08.520 --> 0:21:12.719 then a hit from NI really depends on how the 0:21:12.760 --> 0:21:15.600 form of your business, how many staff you employed, how 0:21:15.600 --> 0:21:18.280 many of them are part time. So businesses are real 0:21:18.320 --> 0:21:21.320 link to a certain extent, but that there's certainly a 0:21:21.320 --> 0:21:22.480 big hit from costs. 0:21:22.760 --> 0:21:24.919 What do you think is the biggest concern for British 0:21:25.000 --> 0:21:28.439 businesses currently? Is it the new incoming US president. Is 0:21:28.480 --> 0:21:32.560 it the regulatory changes for example that Rachel Reeves announced 0:21:32.560 --> 0:21:35.359 that Manchin hows or is it that budget that is 0:21:35.480 --> 0:21:37.160 the big issue, perhaps something else. 0:21:37.840 --> 0:21:39.800 I think there are the things that they know about 0:21:39.880 --> 0:21:42.040 and that they can plan for, and then the things 0:21:42.040 --> 0:21:44.800 that they can't. So from most businesses that we speak 0:21:44.840 --> 0:21:46.879 to at the moment, when you talk about Trump and 0:21:47.600 --> 0:21:50.320 the thread of trade war and tariffs, they just kind 0:21:50.359 --> 0:21:53.720 of shrugged their shoulders and well, we don't know what's 0:21:53.760 --> 0:21:57.400 going to happen there. There's so many different factors in play. Obviously, 0:21:57.440 --> 0:22:00.679 if Trump did introduce all his tariffs that the effect 0:22:00.760 --> 0:22:04.199 would be huge. In the UK is so exposed to 0:22:04.280 --> 0:22:07.680 what happens internationally that it can't be neglected. And that's 0:22:07.760 --> 0:22:11.040