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Speaker 1: Broadcasting live to New York, Gloomberg eleventh Yo to Washington,

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Speaker 1: d C, Bloomberg to Boston, Bloomberg twelve hundreds to San Francisco,

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Speaker 1: Bloomberg to the Country Series Exam Channel one ninety and

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Speaker 1: around the globe. The Bloomberg Radio Plus happened Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. Hey Dirty on Wall Street. I'm

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Speaker 1: Michael McKee along with Tom Keen. Our economic indicators brought

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Speaker 1: to you by Commonwealth Financial Network. When it's time to

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Speaker 1: change the conversation, talk with a broker dealer, R I

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Speaker 1: A that's ready to listen? Call six or six two

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Speaker 1: three six three eight or is it Commonwealth dot com

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Speaker 1: to learn more? There are no numbers today, then why

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Speaker 1: are we Why are we doing economic and because we

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Speaker 1: have some indicators and we have the President of the

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Speaker 1: Federal Reserve Bank of New York, Bill Dudley, at Eastern

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Speaker 1: time this morning give me a speech on community development.

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Speaker 1: But people are looking. Maybe he'll go beyond that. There

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Speaker 1: is Q and A this afternoon. Uh. Robert Kaplan from

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Speaker 1: the Dallas Fed is speaking tomorrow. Patrick Harker from Philadelphia,

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Speaker 1: Williams from San Francisco, and Jeff Lacker from Richmond are

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Speaker 1: all speaking. A lot of Feds speak this week, and

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Speaker 1: of course the numbers and the Fed speak all go

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Speaker 1: together in people's mind as people want to know what's

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Speaker 1: next from our central bank, and the basic idea is

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Speaker 1: retail sales has a lot to do with it. Could

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Speaker 1: we get a nail sales wedn Mike, could we get

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Speaker 1: a negative Atlantic GDP now statistic off of multi retail

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Speaker 1: sales if we get well, you know we could. Um,

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Speaker 1: I don't know who we would talk to to day. Well,

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Speaker 1: we're gonna ask Michael Farauli because he's with JP Morgan JV.

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Speaker 1: He's the chief US economists. UH there and Michael, we

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Speaker 1: had the Fed minutes as you write, they don't suggest

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Speaker 1: any hurry to raise rates, but they do suggest there

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Speaker 1: is a very uh divergent view of how uh strong

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Speaker 1: the economy is and inflation threat is, and whether or

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Speaker 1: not rates will need to rise more than the markets

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Speaker 1: are forecasting. Tomorrow's group, certainly, Harker, Williams and Lacquer are

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Speaker 1: all on one side. Dudley seems to be with the

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Speaker 1: chair uh in in being patient, but it does seem

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Speaker 1: very unsettled at this point. Well, I mean there's always

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Speaker 1: the vergences of views on the committee, so I don't

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Speaker 1: think that's anything unusual. Um, but it was the case

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Speaker 1: that in March about half the committee do you grew

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Speaker 1: at risk of the downside, About half of you then

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Speaker 1: is balanced, and you had even more people view inflation

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Speaker 1: risks to the downside. Now, Uh, one thing I would

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Speaker 1: say is the earlier you said there's no data out today,

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Speaker 1: I think I actually at eleven, we're gonna get the

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Speaker 1: New York FEDS Survey of consumer Inflation Expectations, and I

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Speaker 1: think that's kind of important in terms of some of

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Speaker 1: these inflation risks. I think you look at the reasons

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Speaker 1: they saw inflation risks downside, and one of them was

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Speaker 1: because of dollar strength and import prices and tomorrow will

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Speaker 1: get import prices. And another one was that there may

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Speaker 1: be a risk that inflation expectations could be could be

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Speaker 1: moving lower. So I did think it will probably be

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Speaker 1: interesting to watch that number later this morning. Now we

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Speaker 1: have seen that number stabilize, and I think the last

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Speaker 1: couple of times it was out. Yeah, so last month

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Speaker 1: it did actually pick up after falling to an all

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Speaker 1: time low. Now all time is only it's only this,

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Speaker 1: this particular series is only three years old, but it

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Speaker 1: has and it's three years Uh, kind of mirrored the

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Speaker 1: longer history of the Michigan Survey of Inflation Expectations. Michael,

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Speaker 1: I want to give you a major shout out for

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Speaker 1: just terrific fundamental research, well written, well fought out research

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Speaker 1: on the new terminal value. You and select fewer way

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Speaker 1: out front on this. The number one question I'm getting

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Speaker 1: now in the streets. People stop me and they say, Okay,

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Speaker 1: lousy first quarter. There's a bull leaf, it gets better.

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Speaker 1: There's a lot of doubt out there. How do we

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Speaker 1: just presume second, third, and fourth quarter g d P

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Speaker 1: makeup for a MOULDI first quarter. That's a good question.

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Speaker 1: As you mentioned at the outset um the Atlantic side

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Speaker 1: of the the zero point one, we're at zero point two

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Speaker 1: for Q one. Uh. This would, if we get it,

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Speaker 1: be the third consecutive quarter below one and probably will

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Speaker 1: start to raise some questions once again about if there's

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Speaker 1: something special about first quarters in terms of the seasonal

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Speaker 1: adjustment or other issues. UM. I think it's hard to know.

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Speaker 1: We're we're mostly writing this up to just the confluences

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Speaker 1: of bad factors. Now as we look out the Q two,

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Speaker 1: which is your question, Um, I do think it's it's

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Speaker 1: it's not just hopeful, you know, wishful thinking to believe

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Speaker 1: that things improve. Some of the the drags in Q

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Speaker 1: one are are clearly transitory. Inventories were bloated their back

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Speaker 1: into probably a better situation now with the dollar now

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Speaker 1: down for five or six percent from its the peak. Uh,

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Speaker 1: you may get start to get a little bit of

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Speaker 1: relief on the trade side. Um. And also I would

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Speaker 1: say that the energy capex now has basically been shaved

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Speaker 1: to the bone, so there there isn't much left to

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Speaker 1: cut their UM. So I do you think as we

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Speaker 1: look out to the second corner and beyond, things look

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Speaker 1: a little brighter than than Q one. And you know,

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Speaker 1: one thing I would would add just finally on that is,

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Speaker 1: as I mentioned, we keep getting these bad Q ones.

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Speaker 1: One thing we've kind of said is, you know, focus

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Speaker 1: on the labor market data and if it gives the

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Speaker 1: conflicting signal relative to the GDP, you know, stick with

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Speaker 1: the labor data and that suggests that growth and hours worked,

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Speaker 1: the momentum there is solid and so we're feeling that

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Speaker 1: things do you get better as we get past the

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Speaker 1: first quarter, Well, we'll come back with Michael Firley, because

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Speaker 1: the question I want to ask you is is we

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Speaker 1: wouldn't have enough time to finish it up here before

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Speaker 1: we have taken break. Come because I want to know

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Speaker 1: why we're seeing this disparage between growth and employment. A

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Speaker 1: lot of people have commented on that the GDP numbers

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Speaker 1: don't support the kind of labor market growth that we've

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Speaker 1: been getting, and one of those numbers a lot of

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Speaker 1: economists say has got to be wrong. Yeah, Plus Michael Faroli,

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Speaker 1: isn't he making tea today for Cherry Allen and the President?

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Speaker 1: Wouldn't you like that? Wouldn't you like to be like

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Speaker 1: in a Bond Like in a Bond movie, Faroleo going

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Speaker 1: black tie and put the tea down, madam Cherry, would

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Speaker 1: you like some sugar? It could be that the President

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Speaker 1: and the Fed chair are sitting there going, Abby Joseph

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Speaker 1: Cohen has the capitals? Who do we have in the playoffs?

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Speaker 1: And we know Abbe Joseph Cohen as the capitals. They've

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Speaker 1: been slacking off a little bit, but I'm going with

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Speaker 1: the capital. Since the Bruins didn't make it, I gotta

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Speaker 1: go with the caps so saying that you know, O

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Speaker 1: Vegkan is just amazing to watch the Canadians Um didn't

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Speaker 1: make it either. Full disclosure. With Tobias left, your city

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Speaker 1: group is in medication off of the Canadians collapse, the

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Speaker 1: biggest collapse in the history of sport. Tobias. Good morning.

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Speaker 1: If you're listening, shoot yours up a. We're Michael Faroli

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Speaker 1: of JP Morgan This hour of Savellance Barty by mont

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Speaker 1: Kisco Volvo. Visit Monkisco Volvo dot com. Here's Michael bar

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Speaker 1: with news headlines. Mike Tom, thank you very much. Fifteen

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Speaker 1: former presidents of the American Bar Association are joining the

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Speaker 1: push to urge Republicans to consider President Obama Supreme Court nominee.

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Speaker 1: In a letter to Senate leaders, the former Bar Association

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Speaker 1: presidents argue that Republicans refusing to hold a vote is

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Speaker 1: injecting politics into the courts that materially hampers the effectiveness

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Speaker 1: and the operation of the judiciaries. Part of it. The

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Speaker 1: group also calls that Judge Mary Garland as one of

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Speaker 1: the most outstanding judges in the country. The top Democrat

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Speaker 1: on the House elect Committee on Benghazi is endorsing Hillary

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Speaker 1: Clinton for resident. Maryland Representative Elijah Cumings spoke at a

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Speaker 1: support rally yesterday in Baltimore. Cummings thank about Senator Bernie

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Speaker 1: Sanders for his service. But Bernie, I know Hillary Clinton.

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Speaker 1: I knew her as first lady went seeing her husband.

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Speaker 1: President Clinton let out nation to peace and prosperity. Republican

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Speaker 1: presidential candidate Donald Trump is blasting the way the country

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Speaker 1: chooses presidential party nominees. In Rochester, New York. Trump called

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Speaker 1: the method corrupt and crooked. Global News twenty four hours

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Speaker 1: a day, powered by our hundred journalists more than a

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Speaker 1: hundred fifty news bureaus from around the world. I'm Michael Barr,

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Speaker 1: Mike Tom, thank you, Michael time now for the Woomberg

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Speaker 1: NBC Sports Report and John stash are Now we know

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Speaker 1: the answer the question who is Daniel Willis? Yeah. He

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Speaker 1: was kind of the secondary story. The big story over

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Speaker 1: the one we remembered most from the Masters might the

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Speaker 1: collapse of Jordan Spieth, who had never shown any sign

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Speaker 1: and that could be possible speep seemingly on his way

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Speaker 1: to a second consecutive wire to wire victory, five shot lead,

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Speaker 1: then two bogies and a quadruple bogie on the twelve fold.

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Speaker 1: Two shots in the water, another end of the sand.

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Speaker 1: He went from up five to down three four birds

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Speaker 1: in a row in the front nine. I knew that,

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Speaker 1: I knew that even Parr was good at least by

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Speaker 1: a shot. And sometimes that makes it hard. Um you

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Speaker 1: go away from the game plan that I was using

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Speaker 1: on the front nine and you just play a little

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Speaker 1: conservative and um, yeah, I just put a little bit

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Speaker 1: of weak swings on it. Three holes in a row,

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Speaker 1: all of a sudden, I'm not I'm not leading anymore.

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Speaker 1: Will It was the last player to register. His wife

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Speaker 1: was due to give birth yesterday, but his son was

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Speaker 1: in born in March twenty nine, so he got to

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Speaker 1: Augusta just in time to Monday's only the second from

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Speaker 1: England to win the Masters, joining Nick Foul, though first

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Speaker 1: tournament he has ever won in US Soil Stay alive

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Speaker 1: for seventy three wins, the best regular season ever. Golden

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Speaker 1: State had to win at San Antonio, where no visiting

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Speaker 1: team had won all year, where the Warriors hadn't won

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Speaker 1: since seven. Stay prevailed eighties six Deth Curry thirty seven

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Speaker 1: points win Wednesday over Memphis and move over Bowles. The

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Speaker 1: Warriors break the record long seasons almost over for the

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Speaker 1: next and Nets both lost. The Islanders lost, which means

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Speaker 1: they'll play Florida in the playoffs. The Rangers will take

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Speaker 1: on Pittsburgh Mets Bats. Quiet all weekend by the Phillies

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Speaker 1: five to two. Yankees rained out in Eat Detroit with

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Speaker 1: the Bloomberg NBC Sports Update. I'm John Stash John, thanks

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Speaker 1: so much. A major shout out to all of you

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Speaker 1: that have assisted this morning and helping Francine la Croix

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Speaker 1: in London understand the beverage of my choice in college,

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Speaker 1: Michael Boone's farm. Francine put out a nice clip art

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Speaker 1: image of it EJ. Gallo brand. It's a brand of

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Speaker 1: apple wine and told not that we needed Boone's farm.

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Speaker 1: Remember from a few years ago. Francy was like, really fancy,

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Speaker 1: No they do. I don't think they do, you know,

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Speaker 1: I think it's illegally in Europe. Maybe not should be

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Speaker 1: Bloomberg's Surveillance with Michael Faroli of JP Morgan. Bloomberg Surveillance

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Speaker 1: five years. Learn more at a dr dot org. Canadian

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Speaker 1: Pacific Railway ending efforts to buy Norfolk Southern after the

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Speaker 1: US carrier rejected several proposals and opposition mounted to the

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Speaker 1: merger plan backed by investor Bill Ackman. European equities are

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Speaker 1: are mostly higher as Italian bakes climb before a meeting

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Speaker 1: to discuss cleaning up the financial system. Emerging markets advanced

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Speaker 1: after signs of a pickup in Chinese industrial demand. Went

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Speaker 1: assists for Swiss Frank weekends with government bonds, who checked

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Speaker 1: the markets every fifteen minutes throughout the trading day. On

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Speaker 1: Bloomberg US DOT Index futures are higher. SNP eveny futures

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Speaker 1: up eight points, now EVENI futures up sixty three NASDAC

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Speaker 1: eveny futures up twenty The acts in Germany's up nine

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Speaker 1: tenths per cent. Ten year treasury down five thirty seconds.

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Speaker 1: The yeld one point seven three percent yield on a

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Speaker 1: two year points seven zero percent ni Max screwed oil

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Speaker 1: up seven tenths percent or twenty seven cents at thirty

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Speaker 1: nine ninety nine. A barrel coll makes gold up nine

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Speaker 1: tenths percent or ten dollars seventy cents at twelve fifty

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Speaker 1: four fifty announced. The euro and dollar fourteen sixteen, the

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Speaker 1: N one oh eight point oh seven. That's a Bloomberg

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Speaker 1: business flash, Tom and Mike Karen, thanks so much. It

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Speaker 1: is on a Monday on Wall Street. The following is

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Speaker 1: from Bloomberg View opinions in commentary from Bloomberg columnists. I'm

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Speaker 1: Paula Dwyer, an editor with Bloomberg View. Almost lost in

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Speaker 1: the tragic comic presidential election is the growing disdain toward

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Speaker 1: big business. It comes through in the candidates rhetoric, voter behavior,

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Speaker 1: and the campaign issues. Businesses Washington agenda, a corporate tax cut,

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Speaker 1: trade deals, regulatory relief, and immigration reform is shot. That's

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Speaker 1: not unusual for an election year, Yet the anti corporate

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Speaker 1: mindset seems fiercer than in the past and likely to

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Speaker 1: continue under a new president. The obvious example of this

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Speaker 1: vibe is Donald Trump, who often demonizes companies for hiring

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Speaker 1: immigrants and moving production overseas, both of which he has done.

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Speaker 1: By the way, Bernie Sanders won seven of the last

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Speaker 1: eight Democratic contests by calling for bank breakups, higher corporate taxes,

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Speaker 1: and repeal of free trade deals. Even the normally business

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Speaker 1: friendly Hillary Clinton tries to out Bernie Bernie with tough

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Speaker 1: new measures to regulate Wall Street. Business has gone through

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Speaker 1: similar waves of unpopularity, but this time it's more of

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Speaker 1: an existential nature, with critics questioning the benefits that companies

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Speaker 1: derive from global activities. All of this means business leaders

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Speaker 1: must rethink their approach to politics and prepare for Battle

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Speaker 1: Royal if pressure continues for redistributive taxes that would harm

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Speaker 1: corporate profits. I'm Paula Dwyer, an editor with Bloomberg View.

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Speaker 1: For more Bloomberg commentary, please go to Bloomberg View dot com.

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Speaker 1: Or view go on the terminal. This has been Bloomberg

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Speaker 1: View and Bloomberg View commentaries can be heard hourly weekdays

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Speaker 1: on Bloomberg Radio and Economics, Finance, Investment, on International Relations,

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Speaker 1: Bloomberg Surveillance, Michael, And we're talking on economics now with

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Speaker 1: Michael Faroli, chfus economist at JP Morgan Chase. And want

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Speaker 1: to get to the question that I wanted to pose

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Speaker 1: before the break, didn't have enough time because I really

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Speaker 1: want to look at this, Michael. Uh, you mentioned the

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Speaker 1: idea for economists of uh, choosing between GDP when it's

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Speaker 1: extraordinarily low and payrolls when they're really good as they

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Speaker 1: have been. One of them has probably got to be wrong.

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Speaker 1: How do you how do we know which one is which? Well? Uh,

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Speaker 1: you know, I think you kind of arithmetically the difference

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Speaker 1: between GDP growth and growth and hours work is going

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Speaker 1: to be productivity, and productivity will probably be negative this quarter,

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Speaker 1: also a negative last quarter on a trend basis, so

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Speaker 1: which I think, you know, these numbers are very volatible

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Speaker 1: quarter to quarter kind of smooth it out, and productivity

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Speaker 1: is running sub one and has been for several years now,

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Speaker 1: and so I think That's probably the more important message here,

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Speaker 1: is that we just aren't seeing the type of productivity

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Speaker 1: growth that we would like to and that's why the

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Speaker 1: jobs numbers look relatively decent, but the GDP number doesn't.

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Speaker 1: You know, some people would argue that we're just mismeasuring

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Speaker 1: GDP UH, which is true. But we've always been mismeasuring

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Speaker 1: GDP and undercounting GDP UH. And I think the question

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Speaker 1: is are we is it getting worse? I don't. I

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Speaker 1: haven't really seen any compelling evidence that it is uh.

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Speaker 1: And so I think, you know, we have to take

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Speaker 1: on board the fact that I believe productivity growth has

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Speaker 1: has shike it down over the last ten years. Well,

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Speaker 1: what's the explanation for the first quarter blues for the

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Speaker 1: last couple of years? It was all the weather was

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Speaker 1: so terrible? Wow, wasn't terrible dis quarter? No, it's actually

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Speaker 1: quite quite mild. So there are some lingering concerns that

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Speaker 1: some of the seasonal adjustment maybe faultier and inadequate. I

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Speaker 1: think there's a little bit of that. Um, you know,

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Speaker 1: our best guess though, is it it's just a matter

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Speaker 1: of bad luck that we happen to have several negative

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Speaker 1: factors all kind of hitting us in Q one, at

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Speaker 1: least when it comes to the GDP adding up. So

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Speaker 1: we are inclined to, uh, just to write this quarter

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Speaker 1: off and say, well, you know, sometimes you just you

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Speaker 1: just get a bad one. And it so happens that

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Speaker 1: we've had them as happened in Q ones over the

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Speaker 1: last couple of years. And there may be as I

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Speaker 1: had a little bit of seasonality, but I don't think

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Speaker 1: that's seasonal adjustment issues. But I don't think that's the

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Speaker 1: main story. The magic of the Friday publication of your

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Speaker 1: weekend and Monday report on economics, the Melman Faroly magic

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Speaker 1: is there's always some chart buried on page seven that

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Speaker 1: nobody else has. You did that a number of months ago,

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Speaker 1: was service sector inflation upwards and goods producing inflation downward.

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Speaker 1: Do you still see that occurring on those vectors moving

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Speaker 1: in those opposite directions. Well, I think so that has

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Speaker 1: been the trend. Uh. And then if as you look

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Speaker 1: at the last two inflation reports for January and February,

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Speaker 1: the CPI the core CPI surprise the upside three tents

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Speaker 1: in each case and generally and actually in both of

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Speaker 1: those it was due to goods, uh goods pricing, and

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Speaker 1: that was surprising, particularly since you know, you had had

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Speaker 1: you've had this long period of dollar strength and commodity

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Speaker 1: price weakness, and so you would have expected core goods

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Speaker 1: to be off those last months. Instead they bounced. Now

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Speaker 1: we do get another CPI reading on Thursday, we would

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Speaker 1: expect uh, some normalization back down in good prices, but uh,

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Speaker 1: you know, I think as you look at over the

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Speaker 1: course of it was definitely the case that services were

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Speaker 1: moving up, which makes sense given what the dollar was doing. Uh,

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Speaker 1: Janet said, we're a little bit of a surprise. We

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Speaker 1: expect that to be partly offset in this week's report.

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Speaker 1: So your forecast as we're going to see inflation back off, Yeah,

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Speaker 1: I mean just just for this one month. I mean,

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Speaker 1: I think you want to distinguish kind of the month

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Speaker 1: to month readings of you know, the intricate details of

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Speaker 1: apparel prices and so forth, versus the longer term trends.

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Speaker 1: So we think that March you do see a little

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Speaker 1: bit of easing uh in the CPI, But then as

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Speaker 1: we look out, you know, four quarters ahead, we do

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Speaker 1: think that inflation trends are tilted upwards. But in a

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Speaker 1: in a pretty gradual ascent. Yeah. I mean just that

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Speaker 1: that's the central debate at the FED. It's how fast

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Speaker 1: is inflation is going to go up? Yeah? Yeah, I

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Speaker 1: mean the models, the models which suggests is going to

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Speaker 1: be gradual. History suggests that, you know, these things tend

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Speaker 1: to be stable until they aren't. Um. So I think

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Speaker 1: we're kind of torn between Michael. In the time that

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Speaker 1: we've got left, I want you to rejusify and tell

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Speaker 1: us your single point understanding. There's a distribution around it

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Speaker 1: where the terminal value of the American economy is going.

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Speaker 1: You and a select few really got out front of

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Speaker 1: advising the nation in Wall Street and investors that GDP

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Speaker 1: is going to be at a new normal lower. Where

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Speaker 1: is that new normal lower? Enough recalibrate what you did

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Speaker 1: eighteen months two years ago. Yeah, So currently we are

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Speaker 1: at our view on potential GDP grow at this one. Um.

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Speaker 1: What some of that reflects long run demographic patterns that

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Speaker 1: that people have been expecting for a while, But some

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Speaker 1: of that also reflects the fact that productivity has been

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Speaker 1: exceptionally weak and we expected to continue to be weak,

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Speaker 1: uh going forward. Now we do expect it to pick

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Speaker 1: up from over the last few years has been exceptionally weak,

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Speaker 1: and even we aren't that pessimistic to to kind of

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Speaker 1: extrapolate the Transford. If you look at what's happened over

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Speaker 1: the past five years in terms of productivity and labor supply,

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Speaker 1: you'd probably think that trend GDP growth was more like

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Speaker 1: zero point seven or zero point eight percent. Now, what

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Speaker 1: we're saying is, we do think relative to those the

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Speaker 1: last five years, we should see a little bit of

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Speaker 1: a pickup in productivity. But even you know, with that pickup,

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Speaker 1: we can't get much above one and a half in

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Speaker 1: our our projections. How that is, how far do you

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Speaker 1: do you see this going? Well, so, yeah, our projections

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Speaker 1: are basically on a um through the business cycle. So uh,

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Speaker 1: we don't know when an extra sessionbviously is gonna happen,

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Speaker 1: but call it three to four years. So you know,

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Speaker 1: we're not trying to be too specultive here and saying

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Speaker 1: what we think, uh, ten or twenty year ahead g

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Speaker 1: d P growth could possibly be. I think it's it's

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Speaker 1: um a bit extreme to think that anyone could have

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Speaker 1: insight into kind of technological trends at that far horizon.

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Speaker 1: Michael Faroli, thanks so much. He's with JP Morgan thrilled

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Speaker 1: to have him on, of course, and Mike affiliated with

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Speaker 1: the Booth School and their wonderful conference. Yeah, but I

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Speaker 1: thought maybe he was going to be the fifth guest

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Speaker 1: like Pete Best in the Beatles, you know, Voker, Greenspan,

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Speaker 1: Ringo and Faroli. Yeah, but or you know, um, George Martin. Yes,

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Speaker 1: he could be. Yeah, that's good, he could be George Martin.

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Speaker 1: I like that. It's very good, very good. Michael Faroli

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Speaker 1: on the new terminal value and that one point four

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Speaker 1: percent one point five percent statistic is game changing for

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Speaker 1: our American politics. Maybe that's some of what we see

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Speaker 1: and the political dermy, Mike, there's a primary tomorrow New York. Am,

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Speaker 1: I right on, it's a week. It's a week, a

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Speaker 1: week than political commercials that the rest of America has

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Speaker 1: been seen. Is the debate on Thursday? Than is it?

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Speaker 1: Is it at n y U? Is it the Navy Yard? Okay,

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Speaker 1: candidates in New York they take the subway. It's Bloomberg

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Speaker 1: surveillance