1 00:00:05,120 --> 00:00:08,440 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,480 --> 00:00:12,320 Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day 3 00:00:12,360 --> 00:00:16,840 Speaker 1: for insight from the best and economics, geopolitics, financial investment. 4 00:00:17,239 --> 00:00:22,079 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,239 --> 00:00:26,479 Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com, 6 00:00:26,600 --> 00:00:30,400 Speaker 1: the Bloomberg Terminal and the Bloomberg Business app. I placed 7 00:00:30,400 --> 00:00:32,479 Speaker 1: to site the US labor secondary Mally Waltz Joint just 8 00:00:32,560 --> 00:00:35,000 Speaker 1: now from Washington. Now, Marty, did you have to edit 9 00:00:35,040 --> 00:00:37,600 Speaker 1: your notes once you saw that job's number in the 10 00:00:37,680 --> 00:00:41,120 Speaker 1: last twenty four US Well, I looked at my economists 11 00:00:41,120 --> 00:00:43,879 Speaker 1: and I said, you were way off to that. You know. 12 00:00:44,400 --> 00:00:46,680 Speaker 1: It was you know, and I was on a call 13 00:00:46,760 --> 00:00:49,440 Speaker 1: with some folks from the White House earlier and they said, 14 00:00:49,440 --> 00:00:50,800 Speaker 1: what do you think about the jaws of points? It 15 00:00:50,800 --> 00:00:53,440 Speaker 1: was good, straight jaws are pointed. And Jack Berncy made 16 00:00:53,479 --> 00:00:56,320 Speaker 1: a joke, he said, you never change your tone. You know. 17 00:00:56,360 --> 00:00:57,920 Speaker 1: It was a great report. I mean when you look 18 00:00:57,960 --> 00:01:01,440 Speaker 1: at areas of that, I think a really important business grew, 19 00:01:01,840 --> 00:01:05,720 Speaker 1: healthcare grew, education grew, and we saw in strong steady 20 00:01:05,720 --> 00:01:08,520 Speaker 1: growth and construction. I mean, so those are areas that 21 00:01:08,560 --> 00:01:10,840 Speaker 1: obviously you you would know better than I would as 22 00:01:10,840 --> 00:01:13,760 Speaker 1: far as signs for the economy and concerns about economy. 23 00:01:13,880 --> 00:01:16,880 Speaker 1: But right now, certainly I'll take this jobs report for 24 00:01:17,080 --> 00:01:18,880 Speaker 1: any day of the week. Well, Secondly, Wesh, I said 25 00:01:18,880 --> 00:01:20,760 Speaker 1: it to you now two months running. I mean you've 26 00:01:20,760 --> 00:01:23,040 Speaker 1: been right. I've tried to push back, but ultimately we're 27 00:01:23,040 --> 00:01:26,040 Speaker 1: seeing this job's growth without that inflation re impulse, with 28 00:01:26,120 --> 00:01:30,240 Speaker 1: that wage is picking up, We're seeing participation start to climb. Secondly, Welsh, 29 00:01:30,480 --> 00:01:33,319 Speaker 1: what are the dynamics underpending that do you think? Why 30 00:01:33,319 --> 00:01:35,880 Speaker 1: do you think that can continue? I mean, I think 31 00:01:35,920 --> 00:01:38,800 Speaker 1: we're still going to be assessing that and evaluating that 32 00:01:38,880 --> 00:01:40,600 Speaker 1: for years to come. I think what's happening at this 33 00:01:40,640 --> 00:01:43,880 Speaker 1: moment in time is something that economists and folks like 34 00:01:43,920 --> 00:01:45,680 Speaker 1: you and me and all of us will be talking 35 00:01:45,680 --> 00:01:47,640 Speaker 1: about down the road. I don't think there's really an 36 00:01:47,680 --> 00:01:50,160 Speaker 1: answer other than you know, the President did lay out 37 00:01:50,200 --> 00:01:54,000 Speaker 1: an agenda to get people back to work, and then 38 00:01:55,000 --> 00:01:57,600 Speaker 1: he laid out an agenda to tackle inflation. Obviously the 39 00:01:57,600 --> 00:01:59,800 Speaker 1: FED is doing the thing as well, and I just 40 00:02:00,040 --> 00:02:01,920 Speaker 1: I think we're living in a very different time right now, 41 00:02:01,960 --> 00:02:04,920 Speaker 1: economic times, and you know most economists or people who 42 00:02:04,920 --> 00:02:07,120 Speaker 1: are business people won't really kind of might not agree 43 00:02:07,160 --> 00:02:09,079 Speaker 1: with what I'm about to say, But I just think 44 00:02:09,080 --> 00:02:11,440 Speaker 1: that this these are times we've never really experienced in 45 00:02:11,440 --> 00:02:13,760 Speaker 1: this country, and we just literally have to take this 46 00:02:13,840 --> 00:02:15,640 Speaker 1: month a month to see as long as we can 47 00:02:15,680 --> 00:02:18,480 Speaker 1: move forward and and avoid a recession and avoid a 48 00:02:18,560 --> 00:02:21,279 Speaker 1: downtourn the economy and try and create as many opportunities 49 00:02:21,320 --> 00:02:23,800 Speaker 1: both for employers and employees in this country. Well, the 50 00:02:23,800 --> 00:02:26,000 Speaker 1: sitist speaking to that right now, and the President has 51 00:02:26,040 --> 00:02:27,600 Speaker 1: some fresh numbers to put into that side of the 52 00:02:27,680 --> 00:02:30,280 Speaker 1: union address next week. Secly. Well, so now you've got 53 00:02:30,280 --> 00:02:31,560 Speaker 1: to run. So I want to work through a couple 54 00:02:31,560 --> 00:02:33,920 Speaker 1: of issues with you. Here's one. You usually give us 55 00:02:33,919 --> 00:02:36,079 Speaker 1: an update on what's happening on the West coast with 56 00:02:36,120 --> 00:02:38,440 Speaker 1: the dot workers contract. Where are we now? Have they 57 00:02:38,480 --> 00:02:41,400 Speaker 1: asked for your involvement? So? No, I mean I've been 58 00:02:41,480 --> 00:02:43,280 Speaker 1: I've been in city contact this week. I talked to 59 00:02:43,680 --> 00:02:46,679 Speaker 1: all sides. Uh. They were able to to work through 60 00:02:46,720 --> 00:02:49,600 Speaker 1: some some of the more tricky issues out there. Uh, 61 00:02:49,639 --> 00:02:51,240 Speaker 1: they have not asked, per se for me to come 62 00:02:51,240 --> 00:02:54,120 Speaker 1: out and talk to them. I did go out January second, 63 00:02:54,520 --> 00:02:57,240 Speaker 1: h to sit down and talk to the companies and 64 00:02:57,240 --> 00:02:59,520 Speaker 1: some of the union guys out there, union people out there, 65 00:03:00,040 --> 00:03:02,080 Speaker 1: they're moving along certainly. As I said to you a 66 00:03:02,080 --> 00:03:04,880 Speaker 1: long time ago, I wish this negotiation was done, but 67 00:03:05,200 --> 00:03:06,840 Speaker 1: there's a lot of a lot of issues out there 68 00:03:06,840 --> 00:03:09,440 Speaker 1: that they want to go through. But so far, hopefully 69 00:03:09,440 --> 00:03:12,079 Speaker 1: we don't have anything that will will hold this contract up. 70 00:03:12,200 --> 00:03:14,080 Speaker 1: But certainly it's something i'd like to get done sooner, 71 00:03:14,120 --> 00:03:15,840 Speaker 1: Ran and later. You've been pretty calm about it, and 72 00:03:15,919 --> 00:03:18,000 Speaker 1: often ask you when does the red lights start to flash? 73 00:03:18,160 --> 00:03:20,680 Speaker 1: Are we getting closer to that point for you? No, 74 00:03:21,200 --> 00:03:22,720 Speaker 1: it will flash to me if there's an issue that 75 00:03:22,760 --> 00:03:24,080 Speaker 1: I think is going to be one of those make 76 00:03:24,160 --> 00:03:26,240 Speaker 1: up break issues, you know, like in the railroads when 77 00:03:26,400 --> 00:03:29,160 Speaker 1: we talked about right right, you know, the negotiations weren't 78 00:03:29,160 --> 00:03:31,760 Speaker 1: really going on as they're moving forward. When sick time 79 00:03:31,840 --> 00:03:33,359 Speaker 1: came up, paid sick time came up. I kind of 80 00:03:33,440 --> 00:03:35,680 Speaker 1: knew that that was one of those red flashing problems. 81 00:03:35,880 --> 00:03:38,640 Speaker 1: I haven't seen that yet in the ports negotiations, and 82 00:03:38,680 --> 00:03:40,280 Speaker 1: I think that you know, the way they work is 83 00:03:40,320 --> 00:03:43,480 Speaker 1: a lot of these the unions work uh and negotiate 84 00:03:43,560 --> 00:03:45,880 Speaker 1: with individual ports, but there is a master contract. I 85 00:03:45,880 --> 00:03:47,560 Speaker 1: don't know if that's the technical name for it, but 86 00:03:47,680 --> 00:03:50,520 Speaker 1: right now I'm not concerned about that yet. I mean, listen, 87 00:03:50,880 --> 00:03:52,880 Speaker 1: you could change on the dime, obviously, but right now 88 00:03:52,920 --> 00:03:55,080 Speaker 1: I feel good. It's likely West. Usually, Tom Kine and 89 00:03:55,120 --> 00:03:57,320 Speaker 1: I like to talk about football, real football, the stuff 90 00:03:57,320 --> 00:04:00,240 Speaker 1: that happens outside at the United States. I'm tell you're 91 00:04:00,240 --> 00:04:04,080 Speaker 1: a massive Bruins fan, is that true? I like the Bruins, 92 00:04:04,120 --> 00:04:07,040 Speaker 1: I like the Patriots, I like the Celtics, and I 93 00:04:07,120 --> 00:04:09,440 Speaker 1: also like me and United. Oh you do as well. 94 00:04:09,720 --> 00:04:11,560 Speaker 1: The reason I bring up the Bruins is because there's 95 00:04:11,560 --> 00:04:14,080 Speaker 1: some interest in perhaps maybe you go into the NHL 96 00:04:14,200 --> 00:04:17,400 Speaker 1: Players Association. Any truth to that. Secondly, Walsh, there was 97 00:04:17,360 --> 00:04:20,440 Speaker 1: a report from Politico this week. I don't have any 98 00:04:20,480 --> 00:04:23,400 Speaker 1: personal news to make today today and focused on a 99 00:04:23,560 --> 00:04:25,880 Speaker 1: job report that that is shown since the present BUYD 100 00:04:25,920 --> 00:04:28,120 Speaker 1: has taken off, as twelve point one million people have 101 00:04:28,240 --> 00:04:29,880 Speaker 1: either gone back to work or job has been at 102 00:04:29,880 --> 00:04:32,800 Speaker 1: the economy. And you know, certainly this is such an 103 00:04:32,800 --> 00:04:35,400 Speaker 1: honor being Labor secretary and being on a daily today. 104 00:04:35,440 --> 00:04:36,960 Speaker 1: I feel even better about it being able to be 105 00:04:37,000 --> 00:04:38,760 Speaker 1: on TV. That sounds like, you've got some news to 106 00:04:38,800 --> 00:04:42,720 Speaker 1: make tomorrow. I live my life a day to time, 107 00:04:42,760 --> 00:04:45,240 Speaker 1: so figure see what happens. Secondly, Marty Welsh, I think 108 00:04:45,240 --> 00:04:47,080 Speaker 1: we can read between the lines there. It's gonna catch up, 109 00:04:47,120 --> 00:04:54,480 Speaker 1: sir as always the Labor Secretary there money Welsh, that 110 00:04:54,640 --> 00:04:58,159 Speaker 1: is a monster upside surprise five D seventeen thousand. The 111 00:04:58,200 --> 00:05:00,719 Speaker 1: only big economist on Wall Street that him anywhere near 112 00:05:01,080 --> 00:05:03,200 Speaker 1: with City and Andrew Holland Horst a little north of 113 00:05:03,240 --> 00:05:05,760 Speaker 1: three hundred k neil data looked for an upside surprise, 114 00:05:05,800 --> 00:05:08,040 Speaker 1: Well here it is. This is what City said earlier 115 00:05:08,040 --> 00:05:11,479 Speaker 1: this week. Pal's hopefulness must now confront the data. The 116 00:05:11,520 --> 00:05:15,280 Speaker 1: devish market reaction to Chairman Pal's relatively neutral comments implicitly 117 00:05:15,279 --> 00:05:18,920 Speaker 1: assumes inflation will continue to call faster than the Fed expects, 118 00:05:18,960 --> 00:05:22,279 Speaker 1: even absent a further tightening of financial conditions. Tom here's 119 00:05:22,279 --> 00:05:24,920 Speaker 1: a question for you. If Chairman Pal had this report 120 00:05:24,960 --> 00:05:28,320 Speaker 1: in hand on Wednesday in the news conference with the 121 00:05:28,320 --> 00:05:31,560 Speaker 1: press conference had been any different, would have been different? Yeah? 122 00:05:31,640 --> 00:05:34,719 Speaker 1: I think so. I think that what what? What what 123 00:05:34,800 --> 00:05:36,839 Speaker 1: I see here? John? It's so important with the men's 124 00:05:36,920 --> 00:05:40,920 Speaker 1: respect all. Mike McKee owns this story is you wonder 125 00:05:41,200 --> 00:05:43,359 Speaker 1: does the rest of the world begin to trust the 126 00:05:43,480 --> 00:05:46,760 Speaker 1: data of so many people are getting this wrong? Have 127 00:05:46,880 --> 00:05:51,160 Speaker 1: we got the person to Jack Welch and his criticisms 128 00:05:51,200 --> 00:05:54,920 Speaker 1: of Washington economic data the late Greek Jack Welch, And 129 00:05:55,640 --> 00:05:58,280 Speaker 1: you just wonder do you trust the data? Why don't 130 00:05:58,320 --> 00:06:00,760 Speaker 1: you bring in the optimist nil to the head of 131 00:06:00,880 --> 00:06:03,960 Speaker 1: US economic research, every nice Lince Macro And now you 132 00:06:04,040 --> 00:06:07,280 Speaker 1: seats it or you're running around the room. I just 133 00:06:07,320 --> 00:06:09,760 Speaker 1: got back to my seat. You look, time, I trust 134 00:06:11,080 --> 00:06:13,240 Speaker 1: a lot a lot of you know, just going to 135 00:06:13,240 --> 00:06:16,000 Speaker 1: Tom's point, you know, I think for for your audience, 136 00:06:16,200 --> 00:06:18,680 Speaker 1: it's not about trusting the data, it's about trusting the 137 00:06:18,680 --> 00:06:21,960 Speaker 1: people interpreting the data, just in the same way political polls, right, 138 00:06:21,960 --> 00:06:23,760 Speaker 1: I mean all the polls are off. No, the polls 139 00:06:23,800 --> 00:06:26,960 Speaker 1: aren't really off. What's off is the people's interpretation of 140 00:06:27,000 --> 00:06:30,200 Speaker 1: those polls. Um, And that's what's going on here. I mean, 141 00:06:30,279 --> 00:06:35,760 Speaker 1: keep an eye on part time employment. Uh, you know, 142 00:06:35,800 --> 00:06:40,520 Speaker 1: on part time employed for economic reasons. Everyone who talks 143 00:06:40,560 --> 00:06:43,760 Speaker 1: about that, it's a it's a t because it went up, Neil, 144 00:06:43,839 --> 00:06:45,120 Speaker 1: just because the time I want to go in this, 145 00:06:45,279 --> 00:06:48,359 Speaker 1: I think it's absolutely historic here I'm gonna I'm gonna fold. 146 00:06:48,400 --> 00:06:51,600 Speaker 1: And there's other names as well, folks. Neil Data along 147 00:06:51,640 --> 00:06:54,200 Speaker 1: with the great Jim Glassman at JP Morgan with his 148 00:06:54,440 --> 00:06:57,880 Speaker 1: decades of decades of study how the labor economy, he 149 00:06:58,040 --> 00:07:01,520 Speaker 1: owned the study of teenage employment years ago. And John 150 00:07:01,560 --> 00:07:04,880 Speaker 1: just mentions Neil Holland Horst overt City Group who came 151 00:07:04,920 --> 00:07:08,880 Speaker 1: within the vicinity here. What are we getting wrong about 152 00:07:08,920 --> 00:07:13,760 Speaker 1: the fabric of American labor when it's staring us in 153 00:07:13,840 --> 00:07:17,320 Speaker 1: the face, with large parts of America with two and 154 00:07:17,680 --> 00:07:21,440 Speaker 1: three point zero percent unemployment? Why are we getting us 155 00:07:21,520 --> 00:07:26,680 Speaker 1: so wrong? Well, I think it starts with, you know, 156 00:07:26,720 --> 00:07:30,080 Speaker 1: the underlying economic momentum in the country, which is picking up. 157 00:07:30,120 --> 00:07:32,680 Speaker 1: I mean it could well be that, you know, conditions 158 00:07:32,680 --> 00:07:37,400 Speaker 1: are picking up. Employers had positioned for an alternative outcome 159 00:07:37,480 --> 00:07:39,720 Speaker 1: for things to be slowing down. Now they find themselves 160 00:07:39,720 --> 00:07:42,080 Speaker 1: having to play catch up to that stronger economic growth. 161 00:07:42,080 --> 00:07:44,480 Speaker 1: I mean, look, the underlying rate of employment is not 162 00:07:44,560 --> 00:07:49,200 Speaker 1: five I mean that is true, but it's probably higher 163 00:07:49,200 --> 00:07:53,800 Speaker 1: than where where where the consensus believes. UM. And you know, 164 00:07:53,880 --> 00:07:57,360 Speaker 1: given what we know about their trajectory going forward, UM, 165 00:07:57,400 --> 00:08:00,040 Speaker 1: you know there's risk that employment will remain strong. And 166 00:08:00,120 --> 00:08:03,400 Speaker 1: if you're talking about two thousand, let's say it's half 167 00:08:03,440 --> 00:08:05,320 Speaker 1: the rate. Let's say that's the real number, half the 168 00:08:05,400 --> 00:08:09,280 Speaker 1: rate of what we got today. So it's two. That's 169 00:08:09,440 --> 00:08:12,800 Speaker 1: more than enough to continue pushing the unemployment rate down 170 00:08:12,840 --> 00:08:16,680 Speaker 1: over time. UM. And so you know, look, I mean, 171 00:08:17,120 --> 00:08:22,160 Speaker 1: I I've said this, the onus is on the economic bears. Um. Frankly, 172 00:08:22,200 --> 00:08:25,240 Speaker 1: I don't I don't think the this is going to 173 00:08:25,360 --> 00:08:29,840 Speaker 1: really change the FEDS calculus. I mean, guys, it's not 174 00:08:29,880 --> 00:08:31,760 Speaker 1: like they're gonna come out and say, oh, we gotta 175 00:08:31,800 --> 00:08:34,320 Speaker 1: go back to fifty. You know. All they can do 176 00:08:34,400 --> 00:08:38,160 Speaker 1: at this point is just sort of extend out. Um. 177 00:08:38,679 --> 00:08:40,880 Speaker 1: But Neil, how much were we looking at people who 178 00:08:40,920 --> 00:08:44,079 Speaker 1: are getting multiple jobs because they're trying to deal with inflation. 179 00:08:44,160 --> 00:08:46,719 Speaker 1: How are we looking at one person accounting for three 180 00:08:46,800 --> 00:08:49,800 Speaker 1: of these jobs that have been created? I mean, I 181 00:08:49,800 --> 00:08:51,599 Speaker 1: have to look at the multiple job holders as a 182 00:08:51,640 --> 00:08:54,080 Speaker 1: share of employment that's in the household data. I haven't 183 00:08:54,080 --> 00:08:56,320 Speaker 1: looked at that yet. Um. But it doesn't look to 184 00:08:56,360 --> 00:09:00,800 Speaker 1: be abnormal. UM. And Look, I mean, if you don't 185 00:09:00,800 --> 00:09:04,239 Speaker 1: believe the BLS, what about consumers? Look at what consumers 186 00:09:04,240 --> 00:09:07,040 Speaker 1: are telling you about the jobs market. Okay, the labor 187 00:09:07,080 --> 00:09:10,200 Speaker 1: differential from the concert sport also a January data point 188 00:09:10,320 --> 00:09:13,040 Speaker 1: that was out earlier this week, I believe it rose 189 00:09:13,080 --> 00:09:15,719 Speaker 1: to a three month high. And it's at a very 190 00:09:15,800 --> 00:09:18,400 Speaker 1: very strong level, certainly, you know, more or less word 191 00:09:18,559 --> 00:09:22,800 Speaker 1: was before the pandemic, if not a little higher again. Uh, 192 00:09:22,880 --> 00:09:25,439 Speaker 1: consumers are telling you that things are okay in the 193 00:09:25,520 --> 00:09:28,520 Speaker 1: labor market. And consumers uh, and this is drawing on 194 00:09:28,559 --> 00:09:31,000 Speaker 1: research from the New York FED. Consumers have a habit 195 00:09:31,040 --> 00:09:33,719 Speaker 1: of spotting changes in their own local economies before the 196 00:09:33,800 --> 00:09:36,200 Speaker 1: data because they know the places that are, you know, 197 00:09:36,240 --> 00:09:38,719 Speaker 1: putting up help wanted signs, They know the places that 198 00:09:38,760 --> 00:09:42,120 Speaker 1: are handing out pink slips, and they see it before. Uh. 199 00:09:42,360 --> 00:09:44,920 Speaker 1: You know, the survey collectors of the BLS do and 200 00:09:45,000 --> 00:09:47,559 Speaker 1: so um. You know, consumers are telling you that the 201 00:09:47,600 --> 00:09:51,520 Speaker 1: labor markets are fine, um and that, and that unemployment 202 00:09:51,600 --> 00:09:53,640 Speaker 1: is low. So if you don't want to take the 203 00:09:53,640 --> 00:09:56,920 Speaker 1: BLSS word for it, maybe we can just take the 204 00:09:56,920 --> 00:09:59,280 Speaker 1: American consumers word for it and get on the phone 205 00:09:59,360 --> 00:10:01,520 Speaker 1: and tell some pay Plata side no doubt to that. 206 00:10:01,640 --> 00:10:14,600 Speaker 1: Every Nissons Macro Fantastic to catch up with Neil Jeffrey 207 00:10:14,640 --> 00:10:18,240 Speaker 1: Rosenberg joins us right now. He's portfolio manager Systematic Multi 208 00:10:18,280 --> 00:10:22,120 Speaker 1: Strategy at black Rock. Jeff Rozenberg does this adjust a 209 00:10:22,240 --> 00:10:28,200 Speaker 1: fixed in CONFUW of black Rock. Yeah, that you have 210 00:10:28,280 --> 00:10:31,600 Speaker 1: to understand this is a big pushback to the to 211 00:10:31,720 --> 00:10:35,160 Speaker 1: the slowing and it's a reminder of what Powell tried 212 00:10:35,240 --> 00:10:37,559 Speaker 1: to say to the market, though the market wasn't listening 213 00:10:37,600 --> 00:10:42,880 Speaker 1: that their main concern is they're not yet seeing, uh, 214 00:10:42,920 --> 00:10:47,160 Speaker 1: the impact of their tightening in the labor markets. And 215 00:10:47,240 --> 00:10:49,559 Speaker 1: so this is a very clear message and and a 216 00:10:50,160 --> 00:10:54,839 Speaker 1: really kind of important warning that perhaps the interest rate 217 00:10:54,920 --> 00:10:58,760 Speaker 1: sensitivity put housing to the side, put the interest rate 218 00:10:58,800 --> 00:11:02,679 Speaker 1: sensitivity of the economy to the FEDS tightening. To date, 219 00:11:03,080 --> 00:11:05,760 Speaker 1: yes there are long and variable lags, but we haven't 220 00:11:05,840 --> 00:11:08,600 Speaker 1: really seen that degree of tightening. And when you take 221 00:11:08,640 --> 00:11:13,360 Speaker 1: the financial conditions easing, the combined is perhaps what we're 222 00:11:13,360 --> 00:11:16,000 Speaker 1: seeing here is the inability of the Fed to really 223 00:11:16,280 --> 00:11:18,800 Speaker 1: get to its goal, which is to rain in the 224 00:11:18,800 --> 00:11:23,040 Speaker 1: inflation pressures from a market palace. Set it again on Wednesday, 225 00:11:23,080 --> 00:11:25,480 Speaker 1: it's still a labor market that is too hot, given 226 00:11:25,480 --> 00:11:28,160 Speaker 1: that we're not seeing wages Jeff increased to the degree 227 00:11:28,160 --> 00:11:30,960 Speaker 1: that some people might expect. It's such a headline blowout number. 228 00:11:31,559 --> 00:11:34,160 Speaker 1: Do you take comfort from that or do you disregard 229 00:11:34,240 --> 00:11:36,959 Speaker 1: that as a compositional effect of what jobs are getting 230 00:11:36,960 --> 00:11:41,400 Speaker 1: created right now? Yeah, it's you know, the a h 231 00:11:41,480 --> 00:11:45,120 Speaker 1: G number in terms of giving us a read on 232 00:11:45,720 --> 00:11:49,640 Speaker 1: wage inflation, is probably the most distorted because of the 233 00:11:49,720 --> 00:11:52,600 Speaker 1: mixed shift earlier this week. We've got e c I, 234 00:11:53,200 --> 00:11:56,280 Speaker 1: you've got a DP, and you've got probably the best 235 00:11:56,280 --> 00:11:59,080 Speaker 1: measure of the Atlanta Fed wage tracker. At least those 236 00:11:59,160 --> 00:12:03,680 Speaker 1: latter two are still pointing to an elevated level of 237 00:12:03,800 --> 00:12:07,200 Speaker 1: wages and sorry, wage inflation that I think is still 238 00:12:07,320 --> 00:12:10,319 Speaker 1: very concerning to the Fed. Again, Powell was explicit when 239 00:12:10,320 --> 00:12:12,959 Speaker 1: he said that earlier this week the market wasn't listening. 240 00:12:13,240 --> 00:12:17,200 Speaker 1: This report is a reminder that the hot, tight labor 241 00:12:17,280 --> 00:12:19,320 Speaker 1: market is still going to be an issue for the 242 00:12:19,360 --> 00:12:21,480 Speaker 1: inflation outlook and for the FED outlook. How would you 243 00:12:21,480 --> 00:12:23,480 Speaker 1: play this then, Jeff, if you really trust the headline 244 00:12:23,520 --> 00:12:26,680 Speaker 1: number more than you trust the wage number, why would 245 00:12:26,720 --> 00:12:28,840 Speaker 1: you buy ten year treasuries where they are if you 246 00:12:28,880 --> 00:12:31,080 Speaker 1: believe that this Fed could be that far behind the 247 00:12:31,120 --> 00:12:36,080 Speaker 1: curve maybe later in the year before it's apparent. Well, 248 00:12:36,160 --> 00:12:38,200 Speaker 1: you're you're it's a good question, Lisa, and you asked 249 00:12:38,240 --> 00:12:40,800 Speaker 1: about ten year treasuries, and I think you have to 250 00:12:40,800 --> 00:12:43,320 Speaker 1: be a bit cautious here on the degree to which 251 00:12:43,360 --> 00:12:47,480 Speaker 1: we've seen the rally in back end yields uh and 252 00:12:47,480 --> 00:12:49,880 Speaker 1: and and you know you don't have to buy those 253 00:12:49,960 --> 00:12:53,080 Speaker 1: yields here. You can buy the shorter end of the market. 254 00:12:53,360 --> 00:12:56,439 Speaker 1: The curve is at a historic level of inversion. Uh 255 00:12:56,480 --> 00:12:58,960 Speaker 1: And I think there's more vulnerability as a result of 256 00:12:59,000 --> 00:13:02,480 Speaker 1: that and today's report and what we're seeing not just 257 00:13:02,600 --> 00:13:05,199 Speaker 1: from today but for a long time in the data. 258 00:13:05,480 --> 00:13:07,720 Speaker 1: The degree of tightness in the labor market may really 259 00:13:07,840 --> 00:13:10,960 Speaker 1: challenge the ability that fed to to deliver that pivot 260 00:13:11,040 --> 00:13:14,360 Speaker 1: at the bond markets pricing into the second half of year. Jeff, 261 00:13:14,400 --> 00:13:16,320 Speaker 1: it's a little bit off your remap, but I'm gonna 262 00:13:16,360 --> 00:13:18,840 Speaker 1: go there because I know Ellen Meltzer and Marvin Goodfriend 263 00:13:18,920 --> 00:13:21,680 Speaker 1: beat it into you at Carnegie Mellon. And that is 264 00:13:22,000 --> 00:13:24,560 Speaker 1: I wanted you to link in here the shock of 265 00:13:24,640 --> 00:13:27,800 Speaker 1: five seventeen thousand and the forty eight other numbers that 266 00:13:27,880 --> 00:13:31,680 Speaker 1: indicate this job boom that some few have called for, 267 00:13:32,440 --> 00:13:37,559 Speaker 1: and the Biden stimulus, it just seems are we underestimating 268 00:13:37,640 --> 00:13:40,360 Speaker 1: Jeff trunche I. Maybe this is for Glenn Hubbard's coming 269 00:13:40,440 --> 00:13:44,120 Speaker 1: up as well. Are we underestimating Jeff Rosenberg? Trunch one, 270 00:13:44,200 --> 00:13:47,480 Speaker 1: Trunch two, and Trunch three, Which can be summed up, 271 00:13:47,480 --> 00:13:50,839 Speaker 1: as Blanchard says of the Biden stimulus, is that what 272 00:13:50,840 --> 00:13:56,839 Speaker 1: we're getting wrong. Well, what we're getting wrong and where 273 00:13:57,000 --> 00:14:00,800 Speaker 1: the confusion is at is a tremendous dish portion in 274 00:14:00,840 --> 00:14:05,240 Speaker 1: the economy from COVID, both the COVID impact and the 275 00:14:05,280 --> 00:14:08,199 Speaker 1: COVID stimulus. And so we're seeing the backside of that. 276 00:14:08,280 --> 00:14:10,760 Speaker 1: And really what you take out of today's report is 277 00:14:10,760 --> 00:14:13,320 Speaker 1: really the strength and services and this is the handoff 278 00:14:13,360 --> 00:14:16,400 Speaker 1: from the goods economy to the services economy. But we're 279 00:14:16,440 --> 00:14:20,840 Speaker 1: also seeing those distortions in our read of inflation. The 280 00:14:20,960 --> 00:14:24,040 Speaker 1: deflation that we're seeing from the good side is pushing 281 00:14:24,120 --> 00:14:28,240 Speaker 1: down the headline and the core measures of inflation. It's 282 00:14:28,440 --> 00:14:31,720 Speaker 1: making it look like we've made a lot better progress. Again. 283 00:14:31,800 --> 00:14:34,240 Speaker 1: Pell talked about this on Wednesday when he pushed back 284 00:14:34,640 --> 00:14:38,680 Speaker 1: against the market inflation forecast to highlight that we shouldn't 285 00:14:38,680 --> 00:14:42,520 Speaker 1: expect that goods deflation to persist, and you're gonna start 286 00:14:42,560 --> 00:14:45,760 Speaker 1: to see some of that come out. So this confusion 287 00:14:46,200 --> 00:14:49,240 Speaker 1: from COVID and the fiscal stimulus is part of that. 288 00:14:49,560 --> 00:14:51,760 Speaker 1: Is also what we're seeing in the makeup. The surprise 289 00:14:51,880 --> 00:14:55,360 Speaker 1: numbers that Mike McKee highlighted is all from the services 290 00:14:55,400 --> 00:14:58,600 Speaker 1: side of the economy, highlighting the transition and the strength 291 00:14:58,600 --> 00:15:01,320 Speaker 1: that we'll continue to see their Jeff Frozenberg, thank you 292 00:15:01,400 --> 00:15:08,960 Speaker 1: so much. Particularly thank you through this Historically Glenn Hubbard, 293 00:15:09,000 --> 00:15:13,720 Speaker 1: director of Columbia's Chasen Institute for Global Business, and steeped 294 00:15:14,040 --> 00:15:20,080 Speaker 1: in the underestimation that we have of the American economic experiment. Hubbard, 295 00:15:20,120 --> 00:15:25,000 Speaker 1: I want you to speak of the micro cosm, the initiative, 296 00:15:25,600 --> 00:15:29,000 Speaker 1: the way we go out on a micro basis and 297 00:15:29,160 --> 00:15:35,680 Speaker 1: find growth in America that pushes against traditional caution, traditional gloom. 298 00:15:35,720 --> 00:15:38,320 Speaker 1: You've owned the high ground on that for decades. Are 299 00:15:38,360 --> 00:15:43,840 Speaker 1: we underestimating the American business spirit spirit? Well, I think 300 00:15:43,840 --> 00:15:47,200 Speaker 1: we are to. And importantly, as we said before, we're 301 00:15:47,320 --> 00:15:50,760 Speaker 1: underestimating how hard it is to forecast in the recovery 302 00:15:50,800 --> 00:15:53,400 Speaker 1: from COVID as we change in the mix of consuming 303 00:15:53,440 --> 00:15:57,760 Speaker 1: goods and services, how firms suggests, how industries. Sudjust I 304 00:15:57,760 --> 00:16:00,560 Speaker 1: thought we would see an upside surprise and nothing like this, 305 00:16:00,840 --> 00:16:03,840 Speaker 1: I confess, but it tells me the jobs market is 306 00:16:04,040 --> 00:16:07,880 Speaker 1: much more robust than markets had bought uh and certainly 307 00:16:07,920 --> 00:16:10,640 Speaker 1: a worry for the federal Reserve. I look, Glenna, at 308 00:16:10,640 --> 00:16:12,920 Speaker 1: the fiscal stimulus of this, and let's go to your 309 00:16:12,920 --> 00:16:16,200 Speaker 1: public service for the nation. Typically with those of the 310 00:16:16,240 --> 00:16:20,640 Speaker 1: Republican persuasion Olivia Blanchard, who you and I agree, knows 311 00:16:20,720 --> 00:16:25,160 Speaker 1: the math. Olivia Blanchard calls this the Biden stimulus. Are 312 00:16:25,200 --> 00:16:30,280 Speaker 1: we still witnessing stimulus effect that leads to these shock numbers? 313 00:16:31,240 --> 00:16:34,320 Speaker 1: I think we're witnessing two things. One is the hangover 314 00:16:34,440 --> 00:16:37,400 Speaker 1: from excessive aggregate demands stimulus, so I agree with that. 315 00:16:37,760 --> 00:16:40,360 Speaker 1: But we're also seeing a lot of adjustment as the 316 00:16:40,400 --> 00:16:43,880 Speaker 1: economy comes out of the COVID pandemic, the goods boom, 317 00:16:43,960 --> 00:16:47,240 Speaker 1: and now our recovery and services which are very labor intensive. 318 00:16:47,560 --> 00:16:49,880 Speaker 1: So I think when people forecast jobs, they have to 319 00:16:49,920 --> 00:16:52,400 Speaker 1: do so at a more micro level given both of 320 00:16:52,400 --> 00:16:55,000 Speaker 1: those factors, and I think the job market is likely 321 00:16:55,040 --> 00:16:57,800 Speaker 1: to remain hot, posing a real challenge for the beet. 322 00:16:57,920 --> 00:16:59,920 Speaker 1: Remember the j Old stata we're pointing in the same day. 323 00:17:00,680 --> 00:17:03,120 Speaker 1: I'm just keep thinking about what Alan Ruskin Over at 324 00:17:03,120 --> 00:17:05,680 Speaker 1: Deutsche Bank said in response to this Job's number, saying, 325 00:17:06,280 --> 00:17:08,520 Speaker 1: more broadly, one has to think in terms of higher 326 00:17:08,560 --> 00:17:12,240 Speaker 1: equilibrium rates in this cycle, given very unique labor market 327 00:17:12,280 --> 00:17:16,560 Speaker 1: resilience and therefore less expenditure sensitivity to rates. Glenn, how 328 00:17:16,680 --> 00:17:20,000 Speaker 1: high do neutral rates have to go if this labor 329 00:17:20,040 --> 00:17:23,320 Speaker 1: market is as strong as it seems. Well, keep in mind, 330 00:17:23,320 --> 00:17:26,879 Speaker 1: while the FED has adjusted, one could hardly describe monetary 331 00:17:26,920 --> 00:17:30,879 Speaker 1: policy as overly restrictive given where inflation is. So I 332 00:17:30,880 --> 00:17:32,879 Speaker 1: think there are two challenges for the FED. One is 333 00:17:32,920 --> 00:17:35,800 Speaker 1: figuring out how high. And I agree that FED is 334 00:17:35,880 --> 00:17:38,919 Speaker 1: not likely to revert to very large rating increases, so 335 00:17:39,040 --> 00:17:43,000 Speaker 1: more gradual rating creatures, but probably into the fives. But 336 00:17:43,160 --> 00:17:45,240 Speaker 1: they may have to hold it for longer than market 337 00:17:45,280 --> 00:17:48,320 Speaker 1: participants think. The fan, of course, has been signaling that, 338 00:17:48,400 --> 00:17:50,760 Speaker 1: but the market doesn't believe it. Do you think that 339 00:17:50,840 --> 00:17:53,960 Speaker 1: this kind of strong data makes the the idea of 340 00:17:53,960 --> 00:17:57,320 Speaker 1: a soft landing more likely or less likely because of 341 00:17:57,400 --> 00:18:00,000 Speaker 1: how long the FED will have to hold rates high. 342 00:18:00,320 --> 00:18:03,800 Speaker 1: I'm gonna give you the classic economist answer both. Uh, 343 00:18:03,960 --> 00:18:06,600 Speaker 1: it could make it more likely in the sense that 344 00:18:06,640 --> 00:18:10,520 Speaker 1: we obviously have a very robust underlying economy, giving the 345 00:18:10,560 --> 00:18:13,359 Speaker 1: FED some room to move. On the other hand, the 346 00:18:13,440 --> 00:18:16,840 Speaker 1: possibility of a policy error here is quite significant, So 347 00:18:16,880 --> 00:18:19,440 Speaker 1: I think this is a tough going moment for the FED. 348 00:18:19,520 --> 00:18:22,960 Speaker 1: It's not easy for the FED, and markets by occasionally 349 00:18:23,000 --> 00:18:27,920 Speaker 1: loosening financial conditions make it even more challenging. F Good, Glenn. 350 00:18:27,960 --> 00:18:30,720 Speaker 1: I look at the path forward here and I think 351 00:18:30,760 --> 00:18:34,280 Speaker 1: one of the surprises underreported in the three tumultuous days 352 00:18:34,320 --> 00:18:40,679 Speaker 1: we've had is productivity lifted unit labor costs came down. 353 00:18:41,280 --> 00:18:44,679 Speaker 1: Are you an optimist that out of this horrific pandemic, 354 00:18:45,200 --> 00:18:47,720 Speaker 1: all the shocks, all the once in a lifetime events 355 00:18:47,760 --> 00:18:52,440 Speaker 1: we've add, that we can find a new productivity Well, 356 00:18:52,520 --> 00:18:55,680 Speaker 1: let let me start longer terms. That's always safer for economists. 357 00:18:55,680 --> 00:18:59,200 Speaker 1: I am an optimist about productivity growth future in the US, 358 00:18:59,320 --> 00:19:02,960 Speaker 1: given techno logical advance and now it's penetrating through. I'm 359 00:19:03,000 --> 00:19:06,320 Speaker 1: also optimistic that the recovery from COVID is leading to 360 00:19:06,359 --> 00:19:09,920 Speaker 1: some reallocations that may raise productivity. That's said, of course, 361 00:19:09,960 --> 00:19:13,200 Speaker 1: we've seen a lot of productivity fluctuations positive and negative 362 00:19:13,200 --> 00:19:16,160 Speaker 1: in recent years, and one swallow does in a spring 363 00:19:16,240 --> 00:19:19,760 Speaker 1: make Glenn, We're talking a lot about trying to understand 364 00:19:19,800 --> 00:19:22,760 Speaker 1: a very uncertain economic moment as the world recovers from 365 00:19:22,760 --> 00:19:25,600 Speaker 1: a pandemic. There's a larger question that the FED has 366 00:19:25,640 --> 00:19:27,560 Speaker 1: to deal with as well, which is what is the 367 00:19:27,560 --> 00:19:31,399 Speaker 1: implication of looser financial conditions and getting them further away 368 00:19:31,400 --> 00:19:34,520 Speaker 1: from their goal of an ongoing disinflation. We've heard from 369 00:19:34,520 --> 00:19:37,440 Speaker 1: a number of wonderful economists this morning saying it doesn't 370 00:19:37,440 --> 00:19:39,439 Speaker 1: really matter at this point because of all the tightening 371 00:19:39,480 --> 00:19:43,840 Speaker 1: from last year. Do you agree, well, again, I'm gonna 372 00:19:43,840 --> 00:19:47,120 Speaker 1: have to prodgate and standard econ way Milton Friedman taught 373 00:19:47,160 --> 00:19:50,640 Speaker 1: us years ago about long and variable lags of monetary policy. 374 00:19:50,760 --> 00:19:53,720 Speaker 1: So there is reason to be cautious. Is that you suggest? 375 00:19:54,320 --> 00:19:56,680 Speaker 1: That's said, there's a lot of momentum in the economy, 376 00:19:56,720 --> 00:19:59,399 Speaker 1: and the way to tighten financial conditions is to tighten 377 00:19:59,480 --> 00:20:02,600 Speaker 1: financial conditions, And so I think the FEDS still has 378 00:20:02,680 --> 00:20:04,600 Speaker 1: more work to do than the markets. Thing. Do you 379 00:20:04,600 --> 00:20:07,480 Speaker 1: still think that this federal reserve should go above five? 380 00:20:07,960 --> 00:20:11,959 Speaker 1: And decidedly so? I do so, I do think so? Uh, 381 00:20:12,040 --> 00:20:16,080 Speaker 1: And thoughts before this report on one final question are 382 00:20:16,080 --> 00:20:19,159 Speaker 1: We've got just a stream of news this morning, and 383 00:20:19,160 --> 00:20:21,960 Speaker 1: and I just wanted you to talk to me about 384 00:20:22,000 --> 00:20:23,919 Speaker 1: the return of the risk free rate. You've got the 385 00:20:23,920 --> 00:20:27,159 Speaker 1: truck on your hand, like Professor Joseph Cohen up at 386 00:20:27,160 --> 00:20:30,159 Speaker 1: Columbia Business School, and you gotta like a lot of 387 00:20:30,160 --> 00:20:35,119 Speaker 1: bright young people that have never known actual cost of money. 388 00:20:35,680 --> 00:20:38,640 Speaker 1: What do you tell them about this new world that's 389 00:20:38,680 --> 00:20:41,080 Speaker 1: the old world us, you and I and Abby used 390 00:20:41,080 --> 00:20:44,520 Speaker 1: to know. Well, I think it's a matter of reminding 391 00:20:44,600 --> 00:20:48,359 Speaker 1: people of basic discounted cash flow math. It's whip sawing 392 00:20:48,480 --> 00:20:53,439 Speaker 1: technology prices, stock prices, whip sawing prices of other goods 393 00:20:53,440 --> 00:20:57,720 Speaker 1: producing sectors as well, and then also that higher returns 394 00:20:57,760 --> 00:21:00,320 Speaker 1: for savers can be a good thing. Uh on the 395 00:21:00,359 --> 00:21:03,240 Speaker 1: other side. So I think we're learning the risk free 396 00:21:03,320 --> 00:21:07,360 Speaker 1: rates and equilibrium an zero in an economy that's rowed. 397 00:21:08,119 --> 00:21:10,600 Speaker 1: Very good, Glenn Hubert, thank you so much, Glen Hubbard 398 00:21:10,640 --> 00:21:23,719 Speaker 1: with Columbia right now. Pre Miser, Global head of Race 399 00:21:23,760 --> 00:21:26,720 Speaker 1: Strategy at TV Securities Prayer, You've had three calls and 400 00:21:26,760 --> 00:21:28,880 Speaker 1: thanks for being with us. And the three calls went 401 00:21:28,920 --> 00:21:33,480 Speaker 1: as follows. It was raised, three yield curve inverted all year, 402 00:21:34,040 --> 00:21:36,119 Speaker 1: and recession in the back half of the year. And 403 00:21:36,200 --> 00:21:39,479 Speaker 1: those three calls still the three calls. We still have 404 00:21:39,480 --> 00:21:42,120 Speaker 1: that call. Yes, Um, you know, I think the FED 405 00:21:42,240 --> 00:21:43,960 Speaker 1: is telling that. I think the reaction function of the 406 00:21:44,000 --> 00:21:47,080 Speaker 1: FED has actually changed a little bit. The urgency to hike, 407 00:21:47,200 --> 00:21:49,880 Speaker 1: the urgency to take rates more restrictive. I think that's 408 00:21:49,920 --> 00:21:52,680 Speaker 1: a lot less. They are more convinced for soft landing. 409 00:21:52,680 --> 00:21:56,199 Speaker 1: We're actually not. You know, the data strong h the 410 00:21:56,280 --> 00:21:58,560 Speaker 1: labor market data is always lagged. I think it's going 411 00:21:58,600 --> 00:22:01,280 Speaker 1: to be more lagged right now. You know, the service 412 00:22:01,320 --> 00:22:03,359 Speaker 1: sector is slowing, but in our view is going to 413 00:22:03,400 --> 00:22:05,840 Speaker 1: slow a lot more in the second half of the year. 414 00:22:05,880 --> 00:22:08,359 Speaker 1: So you know, we're still looking for a recession. I 415 00:22:08,400 --> 00:22:11,520 Speaker 1: think the FED right now is is saying, we don't know. 416 00:22:11,680 --> 00:22:14,040 Speaker 1: We don't know if this immaculate disinflation, which is what 417 00:22:14,119 --> 00:22:16,600 Speaker 1: we're calling it, will continue. You know, there has been 418 00:22:16,680 --> 00:22:19,800 Speaker 1: some disinflation clearly in our view, for that to get 419 00:22:19,800 --> 00:22:22,040 Speaker 1: for inflation to get to two percent, you're going to 420 00:22:22,119 --> 00:22:24,440 Speaker 1: need that pain in the labor market. And I think 421 00:22:24,440 --> 00:22:26,119 Speaker 1: that's what the FED is saying, we don't know. You know, 422 00:22:26,119 --> 00:22:28,359 Speaker 1: they're gonna hike twenty five We think they're going to 423 00:22:28,440 --> 00:22:31,359 Speaker 1: literally live meeting by meeting. We're looking for another twenty 424 00:22:31,359 --> 00:22:33,800 Speaker 1: five in March, then another one in May. I would 425 00:22:33,840 --> 00:22:36,080 Speaker 1: say there's risk of another one in June. If inflation 426 00:22:36,119 --> 00:22:39,720 Speaker 1: doesn't continue to decline at the same pace, there's risk 427 00:22:39,800 --> 00:22:42,240 Speaker 1: of them going up to five and a quarter and 428 00:22:42,240 --> 00:22:44,480 Speaker 1: then staying there all year, because they really need that 429 00:22:44,520 --> 00:22:47,399 Speaker 1: inflation to get back to two percent. The really you know, 430 00:22:47,560 --> 00:22:50,800 Speaker 1: UH don't want to let inflation expectations get unanchored and 431 00:22:50,800 --> 00:22:52,760 Speaker 1: the economy is going to slow down. So you know, 432 00:22:52,800 --> 00:22:55,439 Speaker 1: we're looking for that recession still. But I have to 433 00:22:55,440 --> 00:22:59,119 Speaker 1: say the the case of a soft landing is high today, 434 00:22:59,119 --> 00:23:01,320 Speaker 1: and I think the FED is sort of banking on that. 435 00:23:01,960 --> 00:23:04,360 Speaker 1: And the vanilla two tents spread the difference in year 436 00:23:04,440 --> 00:23:06,359 Speaker 1: between the two year and the ten years, the ten years, 437 00:23:06,359 --> 00:23:08,920 Speaker 1: the benchmarkts, what the media watches, What is your two 438 00:23:09,000 --> 00:23:12,879 Speaker 1: years study? What will be the dynamic of the important 439 00:23:12,960 --> 00:23:16,679 Speaker 1: two year yield? I think the two years largely about 440 00:23:16,800 --> 00:23:20,000 Speaker 1: that terminal rate, and then what happens afterwards. It's all 441 00:23:20,040 --> 00:23:21,879 Speaker 1: going to come down to inflation. You know, I have 442 00:23:21,960 --> 00:23:23,919 Speaker 1: clients saying, why would the fact that this year, well, 443 00:23:23,960 --> 00:23:27,399 Speaker 1: if inflation continues to decline, if inflation is at two percent, 444 00:23:27,720 --> 00:23:29,879 Speaker 1: the FED is likely to cut this year. Now Our 445 00:23:30,000 --> 00:23:32,200 Speaker 1: view is no, inflation is going to get really sticky. 446 00:23:32,280 --> 00:23:35,000 Speaker 1: I mean, it's easy to get that first couple of 447 00:23:35,040 --> 00:23:38,119 Speaker 1: percentage point decline. You really for inflation to get to 448 00:23:38,160 --> 00:23:41,240 Speaker 1: two percent, we need pages around three percent. So if 449 00:23:41,280 --> 00:23:43,760 Speaker 1: if inflation is going to be sticky, I think the 450 00:23:43,800 --> 00:23:45,840 Speaker 1: FED is really going to struggle to cut trade so 451 00:23:45,880 --> 00:23:48,119 Speaker 1: that two years has not only the end point of 452 00:23:48,160 --> 00:23:50,560 Speaker 1: the hiking cycle, but all the cuts that are priced, 453 00:23:50,560 --> 00:23:53,119 Speaker 1: and we're pricing in two D basis points of cuts 454 00:23:53,160 --> 00:23:55,960 Speaker 1: between the middle of this year and and you know, 455 00:23:56,200 --> 00:23:59,080 Speaker 1: essentially two years out there's that. What happens to that, 456 00:23:59,480 --> 00:24:02,320 Speaker 1: I think it's to be a function of inflation. Our views, 457 00:24:02,359 --> 00:24:04,520 Speaker 1: the FED is going to hold still. You know, they're 458 00:24:04,560 --> 00:24:07,800 Speaker 1: not going to cut rates until they see wages close 459 00:24:07,880 --> 00:24:10,919 Speaker 1: to three percent, until they see PCE close to two percent. 460 00:24:11,440 --> 00:24:14,720 Speaker 1: You know, the exhaustion everybody's voice today after this week 461 00:24:14,960 --> 00:24:17,680 Speaker 1: is notable, it's palpable. And you said that this is 462 00:24:17,720 --> 00:24:20,800 Speaker 1: the most confused FED end markets that possibly you have 463 00:24:20,920 --> 00:24:24,360 Speaker 1: ever seen. Where do you get conviction in any trade 464 00:24:24,440 --> 00:24:27,520 Speaker 1: at a moment like this, It's hard. I think you 465 00:24:27,600 --> 00:24:31,000 Speaker 1: have to keep you know, risk positions light. Um. You know, 466 00:24:31,119 --> 00:24:33,720 Speaker 1: I think the FED has stepped down clearly, so volatility 467 00:24:33,720 --> 00:24:36,320 Speaker 1: will be a little bit lower. But where is that endpoint? 468 00:24:36,359 --> 00:24:39,240 Speaker 1: What do they do after that? All that is is 469 00:24:39,320 --> 00:24:40,919 Speaker 1: up in the air. I think we're going to have 470 00:24:40,960 --> 00:24:42,960 Speaker 1: to go back to models, and a lot of people 471 00:24:43,040 --> 00:24:46,040 Speaker 1: have less including the FED, I think, have less faith 472 00:24:46,320 --> 00:24:48,679 Speaker 1: in models. You know, the Phillips curve? Does it exist? 473 00:24:48,960 --> 00:24:52,560 Speaker 1: Why has inflation declined? So I think we're actually looking 474 00:24:52,600 --> 00:24:54,800 Speaker 1: more at our models. We're looking at how do you 475 00:24:54,840 --> 00:24:58,560 Speaker 1: get service inflation down with wages staying high? How do 476 00:24:58,600 --> 00:25:00,840 Speaker 1: you get wages to come down? Can they does the 477 00:25:00,880 --> 00:25:03,439 Speaker 1: unemployment rates stay here? So we're actually going back to 478 00:25:03,800 --> 00:25:06,080 Speaker 1: chon one on one. But I can see for the 479 00:25:06,119 --> 00:25:08,680 Speaker 1: market that's been used to forward guidance from the FED 480 00:25:08,880 --> 00:25:11,879 Speaker 1: and the ECB, we're getting no forward guidance. So they 481 00:25:11,960 --> 00:25:14,119 Speaker 1: think the market is going to be whippy. You have 482 00:25:14,200 --> 00:25:17,600 Speaker 1: to have these strategic trades, perhaps like being long duration 483 00:25:17,600 --> 00:25:20,000 Speaker 1: for example, but have to be you know, have to 484 00:25:20,040 --> 00:25:22,080 Speaker 1: be nimble around it. I think interest rates in the 485 00:25:22,160 --> 00:25:24,680 Speaker 1: near term can rise because you talked about I s 486 00:25:24,800 --> 00:25:28,520 Speaker 1: M services that goes above fifty. The consumer is still strong, 487 00:25:29,240 --> 00:25:32,440 Speaker 1: you know, consumption of services is still strong. Then interest 488 00:25:32,520 --> 00:25:34,520 Speaker 1: rates look too low, So I think you know, we're 489 00:25:34,560 --> 00:25:37,200 Speaker 1: trading it more tactically in the near term and having 490 00:25:37,240 --> 00:25:41,200 Speaker 1: an eye on that strategic recession. Does the FED cut rates, 491 00:25:41,280 --> 00:25:43,080 Speaker 1: I think you sort of have to plate it. You 492 00:25:43,400 --> 00:25:45,520 Speaker 1: have to be nimble because the FED is number I 493 00:25:45,560 --> 00:25:47,720 Speaker 1: prayer wanderful to get your fear. As always, prayer mused 494 00:25:47,720 --> 00:25:50,680 Speaker 1: for that. That's a d. Subscribe to the Bloomberg Surveillance 495 00:25:50,680 --> 00:25:55,119 Speaker 1: podcasts on Apple, Spotify, and anywhere else you get your podcasts. 496 00:25:55,480 --> 00:25:59,960 Speaker 1: Listen live every weekday starting at seven am Easter bloomber 497 00:26:00,119 --> 00:26:03,440 Speaker 1: dot Com, the I Heart Radio app tune In, and 498 00:26:03,520 --> 00:26:07,119 Speaker 1: the Bloomberg Business app. You can watch as live. I'm 499 00:26:07,119 --> 00:26:11,880 Speaker 1: Bloomberg Television and always on the Bloomberg Terminal. Thanks for listening. 500 00:26:12,359 --> 00:26:15,200 Speaker 1: I'm Tom Keene, and this is Bloomberg