Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. So here's the latest
Speaker 2: this morning. Friday's payrolls report postponed as the government shut
Speaker 2: down trags on Steve Englander, whose standard showdered right in
Speaker 2: the US data quality has become quote more Fall's gold
Speaker 2: than the gold standard. We expect the uncertain quality of
Speaker 2: the data to become the bigger issue than statistical agencies
Speaker 2: and the FED have so far acknowledged. Steve joins us
Speaker 2: now for more. Steve, good morning, Good moran, tell us
Speaker 2: what you ready to think? What's going on here?
Speaker 3: Look, you know it's become so common to say that
Speaker 3: the US data are the gold standard, and they may
Speaker 3: be compared to everything else. But there's so many holes
Speaker 3: in the data that haven't been addressed, and I'd say
Speaker 3: that you know, bls. You know, it's not political in
Speaker 3: the sense that Trump accused them of being, but they've
Speaker 3: been kind of intellectually lazy over.
Speaker 2: The last decades too, making them intellectually lazy. You're suggesting
Speaker 2: it's not just response rates, what is it?
Speaker 3: Well, you look at the birth death adjustment, which is
Speaker 3: basically more than half the employment growth we've been getting,
Speaker 3: and it doesn't reflect anything that's happening in real time.
Speaker 3: It's basically an auto regressive model that says what's going
Speaker 3: to happen January of this year is what happened January
Speaker 3: of last year. Now they're going to try and fix it.
Speaker 3: As a consequence, there will be not just the usual
Speaker 3: benchmark revisions, but big revisions from April through January or
Speaker 3: April through December, as well as a big down you know,
Speaker 3: weak number we think in January.
Speaker 2: So I stay've put the data through in England a filter,
Speaker 2: what do you look at? What would you point to?
Speaker 1: This?
Speaker 2: Says you know, well, I can rely on that. That
Speaker 2: makes sense. That's where the economy.
Speaker 3: Is, you know, I've used the image of being in
Speaker 3: Plato's cave. You sort of see a lot of images
Speaker 3: in the wall, and you try and sort of put
Speaker 3: them together to make, you know, make a coherent story.
Speaker 3: But even the unemployment rate, which everybody lives and dies by,
Speaker 3: if the labor force is constant, it also takes this
Speaker 3: seventy or eighty people reporting that they're unemployed more than
Speaker 3: last month to push it up by a tenth of
Speaker 3: a percent. You know, given how much stress we put
Speaker 3: on that, that's not a big number.
Speaker 4: Okay, So I'll take your Plato's cave analogy, and it
Speaker 4: seems like we've been living there for about six years now.
Speaker 4: At the data being called into question, and frankly a
Speaker 4: lot of fluctuations since the pandemic. I just raise a
Speaker 4: question of what's your sense then, and taking a look
Speaker 4: at all the images on the wall, do you see
Speaker 4: a labor market that's stronger than people think or weaker?
Speaker 3: I see labor market that's pretty mediocre. It's not a disaster.
Speaker 3: There's no sign that's falling apart quickly. On the other hand,
Speaker 3: it really is the case that you're you know, if
Speaker 3: you don't have a job, it's you know, good luck
Speaker 3: and God bless. I mean, it's just not you know,
Speaker 3: the odds that you're going to find the job are
Speaker 3: relatively low. On top of that, you know, the AI
Speaker 3: think the productivity thing, we think could matter in the
Speaker 3: short term, although we're very optimistic in the longer term
Speaker 3: that jobs will be created. I mean, cavemen, the unemployment
Speaker 3: rate is no higher now than it was in the
Speaker 3: day of the caveman.
Speaker 4: We're really going back to caves and hieroglyphics. I'm just
Speaker 4: curious going forward about what you're watching to understand whether
Speaker 4: we're heating up and whether there is a degree of
Speaker 4: undermining the significance of this data on a permanent level
Speaker 4: as a result of the government shutdowns that make some
Speaker 4: of this data optional depending on the week.
Speaker 3: I mean, it can't be optional because the Bond Lessons
Speaker 3: the only organization that has like a real sam that
Speaker 3: they sit down and they try and sample the entire country.
Speaker 3: If everybody else has samples of opportunity, who's posting on LinkedIn,
Speaker 3: whose payroll checks are you processing? And so on and
Speaker 3: so forth, you know, they could combine all of this.
Speaker 3: I mean, there's so much more information out there than
Speaker 3: what the BLS is using and information that's available in
Speaker 3: a real time, they can do a much better job
Speaker 3: than they've been doing.
Speaker 5: Trump has appointed someone new. On Friday reported about it.
Speaker 5: He confirmed it on truth Is is someone that people call
Speaker 5: a data nerd. I got messages from Biden error people
Speaker 5: and Trump people saying this is a great pick for
Speaker 5: the BLS. Do you think a new commissioner could come
Speaker 5: in and maybe take some of this on board.
Speaker 3: I think so, But I mean the question is whether
Speaker 3: he breaks out of the BLS mindset that you know,
Speaker 3: all you do is use inside BLS and you tweak
Speaker 3: this and you tweak that, and everything is fine. You know.
Speaker 3: Look an NFP, I mean, we don't use ride shares,
Speaker 3: we don't use gig workers. They're just as much employe.
Speaker 3: They're not entrepreneurs, they're just as much employees as we are.
Speaker 5: When it comes to report, we're not going to get it.
Speaker 5: But you have a very downbeat suggestion for how many
Speaker 5: jobs are created actually negative.
Speaker 3: Yeah, I mean, I think we're the lowest in the
Speaker 3: street so at least as of yesterday. But look the
Speaker 3: problem is that we've estimated that the bias and the
Speaker 3: birth death adjustment you know, we estimated seventy thousand, power
Speaker 3: estimated sixty thousand. If they come up with a model
Speaker 3: that really takes current conditions into account and it's consistent
Speaker 3: with other data sources we have that are better but lagged.
Speaker 3: You know, all the numbers we've had for the last
Speaker 3: eighteen months. You know, just the birth desk stuff will
Speaker 3: go down by sixty or seventy thousand.
Speaker 2: Stay you're a foreign exchange guy, Yeah, uh huh, what
Speaker 2: do you advocate for the moment? Given everything you've just
Speaker 2: said over the last five minutes.
Speaker 3: Well, you know, I, like I said, labor market is
Speaker 3: soft and software. In fact, you know, what it tells
Speaker 3: you is that productivity growth when we get the numbers
Speaker 3: that are based on the revised data, are likely to
Speaker 3: be even stronger than what's been reported. We believe the
Speaker 3: productivity numbers, you know, we're serving in the wash camp
Speaker 3: where it's sort of you know, we think that there's
Speaker 3: something happening in productivity. Productivity normally does not pick up
Speaker 3: four years into the recovery five years into the recovery,
Speaker 3: and that's usually a signal it's something structural. That's what
Speaker 3: we saw in the late nineties that is what we
Speaker 3: saw in the mid sixties. So we think that's the
Speaker 3: most by far, the most important thing that's happening in
Speaker 3: the economy right now. And you know, arguing about about
Speaker 3: twenty five basis points here or there, it's kind of
Speaker 3: a waste of time.
Speaker 2: What do you think we should be arguing about.
Speaker 3: Oh, we should be trying to estimate productivity growth better
Speaker 3: and understand the dynamics that's going to happen. For example,
Speaker 3: we're dollar bulls because we think the US has the
Speaker 3: labor market flexibility. You don't need a Bloomberg journalist. You
Speaker 3: let them go, but you find some place. Yeah, no, sorry,
Speaker 3: I didn't need that. You don't need a foreign change
Speaker 3: economists to let them go. But you find somebody who's
Speaker 3: going to you find something. You know, but you're making
Speaker 3: money somewhere else, and you look at the profits numbers
Speaker 3: that we're getting. Historically, US firms hire when when they're
Speaker 3: making money, they might not hire the same people they
Speaker 3: hired two years ago, but they'll say, Okay, where are
Speaker 3: we making money. Let's pick up some people and see
Speaker 3: if it works elsewhere in the world. In France, you
Speaker 3: buy a truck, you don't like the truck. You know,
Speaker 3: for business, you sell it in six months, you hire
Speaker 3: a worker. Seven months later, you decide you don't like
Speaker 3: the worker. You know, he's more fixed capital than the truck.
Speaker 2: And this has been a sacred source of the American
Speaker 2: economy for a long time. Deep capital markets, bankruptcy and
Speaker 2: flexible lane markets. Are we losing any dynamism?
Speaker 3: I mean there's a risk that we are. Look, you
Speaker 3: know there's also stuff that you know, Trump is trying
Speaker 3: to do, or is people are trying to do. I
Speaker 3: think that's positive for the economy in terms of deregulation,
Speaker 3: but you know, the sert of willingness to sort of say, yeah,
Speaker 3: I see a problem, I'm going to fix it, you know,
Speaker 3: like some of the things they've talked about the housing market.
Speaker 3: You know, to fix the housing market you have to
Speaker 3: increase housing supply, not housing demand. You'll just get higher
Speaker 3: housing prices, but the same number of price. I think
Speaker 3: they have to be careful about their willingness to interface.
Speaker 2: That's my concern too, that we're not embracing the dynamism
Speaker 2: that traditionally has laid the foundation for the American success story.
Speaker 2: Anything we're questioning you in the last twelve in fact,
Speaker 2: never mind the last twelve months, the last five years,
Speaker 2: and maybe you can go further back than there. Stay
Speaker 2: with us. More Bloomberg surveillance coming up after this. Terry
Speaker 2: Haynes of PAN Geopolicy writing, it's a strong signal that
Speaker 2: Trump is walking and chewing gum at the same time,
Speaker 2: not letting geopolitics distract from US economic attention. Terry joined
Speaker 2: us now for more, Terry, that raises the question, then
Speaker 2: who's next.
Speaker 6: That's a very good question, John, And you know, I'd
Speaker 6: look for, among other things, a strengthening of the US
Speaker 6: EU deal, you know, which has been kind of on
Speaker 6: off on for Davos related reasons. And you know, beyond that,
Speaker 6: I would look for probably we should go out and
Speaker 6: look at Asia a little bit more, where the trade
Speaker 6: deals can be strengthened even further.
Speaker 5: Terry Tyler mentioned it, but Prime Minister Modi was one
Speaker 5: of the first officials to come to the White House.
Speaker 5: It was almost a year ago, February thirteenth of last year.
Speaker 5: Yet basically a year later we were getting a deal.
Speaker 5: Was damage done in pushing India towards say China or
Speaker 5: Russia because this deal took so long.
Speaker 6: There's been a lot of you know, the mode he's
Speaker 6: got his own politics, of course, but the you know,
Speaker 6: there's been a lot of back and forth and a
Speaker 6: lot of kind of raw elbows between the United States
Speaker 6: and India and all kinds of things, ranging from the
Speaker 6: geopolitical scrapes with between India and Pakistan and you know,
Speaker 6: frankly Trump's desire to take credit for the lessening of
Speaker 6: hostilities there, to the Russian oil, all kinds of other things,
Speaker 6: many of which Tyler mentioned, And you know that has
Speaker 6: made things more difficult than they appeared to be last
Speaker 6: year when Mody was talking about Mega plus Mega equals
Speaker 6: mega or mega whatever it was, and the you know,
Speaker 6: but they have had a desire to do a deal
Speaker 6: for quite a while. It's been obvious that things have
Speaker 6: been thawing, and you know, I think there's there's still
Speaker 6: some prickliness there, but you know, there's a desire to
Speaker 6: do a deal. The other thing I'd say is that,
Speaker 6: you know, there's a lot of handwringing in markets always
Speaker 6: for the for the lack of detail of these things,
Speaker 6: and that's entirely fair, but you look at the other
Speaker 6: way that this this has been done in prior years
Speaker 6: where deals have been negotiated, negotiated, negotiated, they're never finalized.
Speaker 6: Finally they're finalized, like the EU with Mercosur, which took
Speaker 6: twenty five years and they're still not done. And so
Speaker 6: markets prefer progress. So that's positive for markets.
Speaker 5: Well, when you talk about the prickliness of this deal,
Speaker 5: the President made it clear they're not going to buy
Speaker 5: any more Russian oil. We didn't hear that from Mody.
Speaker 6: Well, exactly, that's and you know, I made clear when
Speaker 6: I wrote that the details of this met many details
Speaker 6: of this were not final And I imagine, and I
Speaker 6: am this is instinct on my part. I imagine that
Speaker 6: the timing of winding down Russian oil purchases is the
Speaker 6: major reason why Mody isn't talking about that. And I
Speaker 6: also imagine that there are a variety of other details
Speaker 6: that the United States and the India want also relating
Speaker 6: to timing purchases of what, when and how, all those
Speaker 6: sorts of things. And that's about I think that's the
Speaker 6: reason why we have kind of a sliding deal here.
Speaker 4: Is there a telling, miss Harry that perhaps the US
Speaker 4: is taking a harder approach with Russia as a result
Speaker 4: of some of the ongoing negotiations with European allies about
Speaker 4: the war with Ukraine and Russia, and asked this, because
Speaker 4: that's a key component of this deal, Russia, excuse me,
Speaker 4: India agreeing not to buy Russian crude.
Speaker 6: Yeah, I think so. I think it's a I think
Speaker 6: it's a major signal from this deal. You know, the
Speaker 6: you know, Trump, Trump likes to do what he can
Speaker 6: do to butter up major adversaries, and that that gets
Speaker 6: off putting for domestic audiences sometimes. But I think there's
Speaker 6: no doubt that what the United States is doing right
Speaker 6: now is trying to push Russia and squeeze the life
Speaker 6: blood of its war machine. Then European allies are helping.
Speaker 6: You know, a lot of the ghost fleet activity coming
Speaker 6: back into European waters has been harassed and more. And
Speaker 6: you know, so what you're seeing is a kind of
Speaker 6: a ramped up effort based on what not only then,
Speaker 6: but more importantly, the Europeans are willing to do. They
Speaker 6: were not willing to, for example, take frozen Russian assets
Speaker 6: and convert those for Ukrainian use, but they are willing
Speaker 6: to do that. So the policy is shifting to that,
Speaker 6: and that will have the usual effect on Russia's economy,
Speaker 6: but it also makes China's support and pumping up of
Speaker 6: the Russian client state even more obvious. Senators today stay
Speaker 6: with us.
Speaker 2: More Bloomberg surveillance coming up after this, We've got some
Speaker 2: data from Yulanta should say for the conference boards. She
Speaker 2: writes this about consumer confidence. Confidence collapsed in January, hitting
Speaker 2: at the lowest level since May twenty fourteen. Concerns worse
Speaker 2: than across all age groups, income levels, and political affiliations.
Speaker 2: This wasn't a one month fluke Ulana joins us now
Speaker 2: for more. J Lema, good morning, come morning. This one
Speaker 2: is really hard to internalize, the idea that consumer confidence
Speaker 2: is worse now than it wasn't the pandemic. Can you
Speaker 2: make sense to some of this for us?
Speaker 1: And what makes it even worse is that it's a trend.
Speaker 1: It's just not one month's thing, right. We have seen
Speaker 1: it declining for quite some time now, and that what
Speaker 1: makes it very legitimate. Actually, so confidence right now is
Speaker 1: at the worst level since two ten years ago, but
Speaker 1: it was worth before if you go back to the
Speaker 1: Great Recession. Coming out of the Great Recession, that's how
Speaker 1: consumers feel felt at that time, So think about it
Speaker 1: this way. Now, consumers are feeling actually that as bad
Speaker 1: as they were coming out of the Great Recession. So
Speaker 1: that tells you something. So what does it tell.
Speaker 4: You, Because a lot of people come on the show,
Speaker 4: they say ignore it because frankly it has not been
Speaker 4: instructive to how the economy has done. And frankly, how
Speaker 4: you've seen companies and even workers demonstrate their spending capacities.
Speaker 1: Well, every bird likes its own nest, and kind of like,
Speaker 1: I do believe in the data, just again, because it's
Speaker 1: a trend. It's not just a one month thing, So
Speaker 1: I think there's something to it. Consumers are worried about jobs,
Speaker 1: consumers are worried about affordability, and consumers are worried about
Speaker 1: the income levels. So this is very important because that
Speaker 1: actually coincides with what the actual data telling us. If
Speaker 1: everybody was talking about how great GDP numbers were in
Speaker 1: Q three, but I looked at income data in the
Speaker 1: same exact VIA report, and that data is telling me
Speaker 1: that disposable personal income in real terms, which is income
Speaker 1: essentially adjusted for inflation and taxes, that has been flat
Speaker 1: since Q three of this year. So that is weakening
Speaker 1: and that is the fuel for consumers to spend going forward.
Speaker 4: Is this an economic issue or is this a political issue.
Speaker 1: In terms of consumer confidence?
Speaker 4: And I asked this because ultimately, if you look at
Speaker 4: the averages, they're pretty good. But if you look at
Speaker 4: the politics, it's the affordability crisis that you're talking about,
Speaker 4: and certainly a lot of people are feeling every single day.
Speaker 4: So does this get represented in the overall economic data
Speaker 4: or in terms of what policies are going to come
Speaker 4: out of Washington, DC to respond some of these issues.
Speaker 1: I think it's both. It's really about how unaffordable things are,
Speaker 1: and it's all about the economy stupid right, At the
Speaker 1: end of the day, it's about prices, it's about jobs.
Speaker 1: Consumers are not feeling confident about finding a job, so
Speaker 1: it is about the economy. I do think that political
Speaker 1: things and other disruptions are playing a role as well.
Speaker 1: Consumers do hear the news and oftentimes you know, confidence
Speaker 1: and sentiment indicators reflect what is happening in the news.
Speaker 1: And there's like even some special indexes like news heard
Speaker 1: in the Michigan survey, right, so that that is something
Speaker 1: to take into accounty.
Speaker 5: And a lot of guests will come on and they're
Speaker 5: talking about the excitement the tax rebate. Where do you
Speaker 5: see that money going?
Speaker 1: I think, you know, I'm very cautious about that because
Speaker 1: I think that people spend a lot of money during
Speaker 1: the holiday season and they may have to return this money.
Speaker 1: It's spent, it's already spent. You do see a significant
Speaker 1: pickup in credit card balances over the last several months,
Speaker 1: and that is the data coming from the New York Fed.
Speaker 1: And I think that given you know, the constraints in
Speaker 1: terms of income roles, in terms of the labor market,
Speaker 1: people will be cautious and we'll try to get to
Speaker 1: pay back some depth.
Speaker 2: This is the Bloomberg Survandons podcast, bringing you the best
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