WEBVTT - Surveillance: US Payrolls Surprise 0:00:05.120 --> 0:00:08.440 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.480 --> 0:00:12.320 with Jonathan Farrell and Lisa Abramowitz. Join us each day 0:00:12.360 --> 0:00:16.840 for insight from the best and economics, geopolitics, financial investment. 0:00:17.239 --> 0:00:22.079 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.239 --> 0:00:26.479 anywhere you get your podcasts, and always I'm Bloomberg dot Com, 0:00:26.600 --> 0:00:30.400 the Bloomberg Terminal and the Bloomberg Business app. I placed 0:00:30.400 --> 0:00:32.479 to site the US labor secondary Mally Waltz Joint just 0:00:32.560 --> 0:00:35.000 now from Washington. Now, Marty, did you have to edit 0:00:35.040 --> 0:00:37.600 your notes once you saw that job's number in the 0:00:37.680 --> 0:00:41.120 last twenty four US Well, I looked at my economists 0:00:41.120 --> 0:00:43.879 and I said, you were way off to that. You know. 0:00:44.400 --> 0:00:46.680 It was you know, and I was on a call 0:00:46.760 --> 0:00:49.440 with some folks from the White House earlier and they said, 0:00:49.440 --> 0:00:50.800 what do you think about the jaws of points? It 0:00:50.800 --> 0:00:53.440 was good, straight jaws are pointed. And Jack Berncy made 0:00:53.479 --> 0:00:56.320 a joke, he said, you never change your tone. You know. 0:00:56.360 --> 0:00:57.920 It was a great report. I mean when you look 0:00:57.960 --> 0:01:01.440 at areas of that, I think a really important business grew, 0:01:01.840 --> 0:01:05.720 healthcare grew, education grew, and we saw in strong steady 0:01:05.720 --> 0:01:08.520 growth and construction. I mean, so those are areas that 0:01:08.560 --> 0:01:10.840 obviously you you would know better than I would as 0:01:10.840 --> 0:01:13.760 far as signs for the economy and concerns about economy. 0:01:13.880 --> 0:01:16.880 But right now, certainly I'll take this jobs report for 0:01:17.080 --> 0:01:18.880 any day of the week. Well, Secondly, Wesh, I said 0:01:18.880 --> 0:01:20.760 it to you now two months running. I mean you've 0:01:20.760 --> 0:01:23.040 been right. I've tried to push back, but ultimately we're 0:01:23.040 --> 0:01:26.040 seeing this job's growth without that inflation re impulse, with 0:01:26.120 --> 0:01:30.240 that wage is picking up, We're seeing participation start to climb. Secondly, Welsh, 0:01:30.480 --> 0:01:33.319 what are the dynamics underpending that do you think? Why 0:01:33.319 --> 0:01:35.880 do you think that can continue? I mean, I think 0:01:35.920 --> 0:01:38.800 we're still going to be assessing that and evaluating that 0:01:38.880 --> 0:01:40.600 for years to come. I think what's happening at this 0:01:40.640 --> 0:01:43.880 moment in time is something that economists and folks like 0:01:43.920 --> 0:01:45.680 you and me and all of us will be talking 0:01:45.680 --> 0:01:47.640 about down the road. I don't think there's really an 0:01:47.680 --> 0:01:50.160 answer other than you know, the President did lay out 0:01:50.200 --> 0:01:54.000 an agenda to get people back to work, and then 0:01:55.000 --> 0:01:57.600 he laid out an agenda to tackle inflation. Obviously the 0:01:57.600 --> 0:01:59.800 FED is doing the thing as well, and I just 0:02:00.040 --> 0:02:01.920 I think we're living in a very different time right now, 0:02:01.960 --> 0:02:04.920 economic times, and you know most economists or people who 0:02:04.920 --> 0:02:07.120 are business people won't really kind of might not agree 0:02:07.160 --> 0:02:09.079 with what I'm about to say, But I just think 0:02:09.080 --> 0:02:11.440 that this these are times we've never really experienced in 0:02:11.440 --> 0:02:13.760 this country, and we just literally have to take this 0:02:13.840 --> 0:02:15.640 month a month to see as long as we can 0:02:15.680 --> 0:02:18.480 move forward and and avoid a recession and avoid a 0:02:18.560 --> 0:02:21.279 downtourn the economy and try and create as many opportunities 0:02:21.320 --> 0:02:23.800 both for employers and employees in this country. Well, the 0:02:23.800 --> 0:02:26.000 sitist speaking to that right now, and the President has 0:02:26.040 --> 0:02:27.600 some fresh numbers to put into that side of the 0:02:27.680 --> 0:02:30.280 union address next week. Secly. Well, so now you've got 0:02:30.280 --> 0:02:31.560 to run. So I want to work through a couple 0:02:31.560 --> 0:02:33.920 of issues with you. Here's one. You usually give us 0:02:33.919 --> 0:02:36.079 an update on what's happening on the West coast with 0:02:36.120 --> 0:02:38.440 the dot workers contract. Where are we now? Have they 0:02:38.480 --> 0:02:41.400 asked for your involvement? So? No, I mean I've been 0:02:41.480 --> 0:02:43.280 I've been in city contact this week. I talked to 0:02:43.680 --> 0:02:46.679 all sides. Uh. They were able to to work through 0:02:46.720 --> 0:02:49.600 some some of the more tricky issues out there. Uh, 0:02:49.639 --> 0:02:51.240 they have not asked, per se for me to come 0:02:51.240 --> 0:02:54.120 out and talk to them. I did go out January second, 0:02:54.520 --> 0:02:57.240 h to sit down and talk to the companies and 0:02:57.240 --> 0:02:59.520 some of the union guys out there, union people out there, 0:03:00.040 --> 0:03:02.080 they're moving along certainly. As I said to you a 0:03:02.080 --> 0:03:04.880 long time ago, I wish this negotiation was done, but 0:03:05.200 --> 0:03:06.840 there's a lot of a lot of issues out there 0:03:06.840 --> 0:03:09.440 that they want to go through. But so far, hopefully 0:03:09.440 --> 0:03:12.079 we don't have anything that will will hold this contract up. 0:03:12.200 --> 0:03:14.080 But certainly it's something i'd like to get done sooner, 0:03:14.120 --> 0:03:15.840 Ran and later. You've been pretty calm about it, and 0:03:15.919 --> 0:03:18.000 often ask you when does the red lights start to flash? 0:03:18.160 --> 0:03:20.680 Are we getting closer to that point for you? No, 0:03:21.200 --> 0:03:22.720 it will flash to me if there's an issue that 0:03:22.760 --> 0:03:24.080 I think is going to be one of those make 0:03:24.160 --> 0:03:26.240 up break issues, you know, like in the railroads when 0:03:26.400 --> 0:03:29.160 we talked about right right, you know, the negotiations weren't 0:03:29.160 --> 0:03:31.760 really going on as they're moving forward. When sick time 0:03:31.840 --> 0:03:33.359 came up, paid sick time came up. I kind of 0:03:33.440 --> 0:03:35.680 knew that that was one of those red flashing problems. 0:03:35.880 --> 0:03:38.640 I haven't seen that yet in the ports negotiations, and 0:03:38.680 --> 0:03:40.280 I think that you know, the way they work is 0:03:40.320 --> 0:03:43.480 a lot of these the unions work uh and negotiate 0:03:43.560 --> 0:03:45.880 with individual ports, but there is a master contract. I 0:03:45.880 --> 0:03:47.560 don't know if that's the technical name for it, but 0:03:47.680 --> 0:03:50.520 right now I'm not concerned about that yet. I mean, listen, 0:03:50.880 --> 0:03:52.880 you could change on the dime, obviously, but right now 0:03:52.920 --> 0:03:55.080 I feel good. It's likely West. Usually, Tom Kine and 0:03:55.120 --> 0:03:57.320 I like to talk about football, real football, the stuff 0:03:57.320 --> 0:04:00.240 that happens outside at the United States. I'm tell you're 0:04:00.240 --> 0:04:04.080 a massive Bruins fan, is that true? I like the Bruins, 0:04:04.120 --> 0:04:07.040 I like the Patriots, I like the Celtics, and I 0:04:07.120 --> 0:04:09.440 also like me and United. Oh you do as well. 0:04:09.720 --> 0:04:11.560 The reason I bring up the Bruins is because there's 0:04:11.560 --> 0:04:14.080 some interest in perhaps maybe you go into the NHL 0:04:14.200 --> 0:04:17.400 Players Association. Any truth to that. Secondly, Walsh, there was 0:04:17.360 --> 0:04:20.440 a report from Politico this week. I don't have any 0:04:20.480 --> 0:04:23.400 personal news to make today today and focused on a 0:04:23.560 --> 0:04:25.880 job report that that is shown since the present BUYD 0:04:25.920 --> 0:04:28.120 has taken off, as twelve point one million people have 0:04:28.240 --> 0:04:29.880 either gone back to work or job has been at 0:04:29.880 --> 0:04:32.800 the economy. And you know, certainly this is such an 0:04:32.800 --> 0:04:35.400 honor being Labor secretary and being on a daily today. 0:04:35.440 --> 0:04:36.960 I feel even better about it being able to be 0:04:37.000 --> 0:04:38.760 on TV. That sounds like, you've got some news to 0:04:38.800 --> 0:04:42.720 make tomorrow. I live my life a day to time, 0:04:42.760 --> 0:04:45.240 so figure see what happens. Secondly, Marty Welsh, I think 0:04:45.240 --> 0:04:47.080 we can read between the lines there. It's gonna catch up, 0:04:47.120 --> 0:04:54.480 sir as always the Labor Secretary there money Welsh, that 0:04:54.640 --> 0:04:58.159 is a monster upside surprise five D seventeen thousand. The 0:04:58.200 --> 0:05:00.719 only big economist on Wall Street that him anywhere near 0:05:01.080 --> 0:05:03.200 with City and Andrew Holland Horst a little north of 0:05:03.240 --> 0:05:05.760 three hundred k neil data looked for an upside surprise, 0:05:05.800 --> 0:05:08.040 Well here it is. This is what City said earlier 0:05:08.040 --> 0:05:11.479 this week. Pal's hopefulness must now confront the data. The 0:05:11.520 --> 0:05:15.280 devish market reaction to Chairman Pal's relatively neutral comments implicitly 0:05:15.279 --> 0:05:18.920 assumes inflation will continue to call faster than the Fed expects, 0:05:18.960 --> 0:05:22.279 even absent a further tightening of financial conditions. Tom here's 0:05:22.279 --> 0:05:24.920 a question for you. If Chairman Pal had this report 0:05:24.960 --> 0:05:28.320 in hand on Wednesday in the news conference with the 0:05:28.320 --> 0:05:31.560 press conference had been any different, would have been different? Yeah? 0:05:31.640 --> 0:05:34.719 I think so. I think that what what? What what 0:05:34.800 --> 0:05:36.839 I see here? John? It's so important with the men's 0:05:36.920 --> 0:05:40.920 respect all. Mike McKee owns this story is you wonder 0:05:41.200 --> 0:05:43.359 does the rest of the world begin to trust the 0:05:43.480 --> 0:05:46.760 data of so many people are getting this wrong? Have 0:05:46.880 --> 0:05:51.160 we got the person to Jack Welch and his criticisms 0:05:51.200 --> 0:05:54.920 of Washington economic data the late Greek Jack Welch, And 0:05:55.640 --> 0:05:58.280 you just wonder do you trust the data? Why don't 0:05:58.320 --> 0:06:00.760 you bring in the optimist nil to the head of 0:06:00.880 --> 0:06:03.960 US economic research, every nice Lince Macro And now you 0:06:04.040 --> 0:06:07.280 seats it or you're running around the room. I just 0:06:07.320 --> 0:06:09.760 got back to my seat. You look, time, I trust 0:06:11.080 --> 0:06:13.240 a lot a lot of you know, just going to 0:06:13.240 --> 0:06:16.000 Tom's point, you know, I think for for your audience, 0:06:16.200 --> 0:06:18.680 it's not about trusting the data, it's about trusting the 0:06:18.680 --> 0:06:21.960 people interpreting the data, just in the same way political polls, right, 0:06:21.960 --> 0:06:23.760 I mean all the polls are off. No, the polls 0:06:23.800 --> 0:06:26.960 aren't really off. What's off is the people's interpretation of 0:06:27.000 --> 0:06:30.200 those polls. Um, And that's what's going on here. I mean, 0:06:30.279 --> 0:06:35.760 keep an eye on part time employment. Uh, you know, 0:06:35.800 --> 0:06:40.520 on part time employed for economic reasons. Everyone who talks 0:06:40.560 --> 0:06:43.760 about that, it's a it's a t because it went up, Neil, 0:06:43.839 --> 0:06:45.120 just because the time I want to go in this, 0:06:45.279 --> 0:06:48.359 I think it's absolutely historic here I'm gonna I'm gonna fold. 0:06:48.400 --> 0:06:51.600 And there's other names as well, folks. Neil Data along 0:06:51.640 --> 0:06:54.200 with the great Jim Glassman at JP Morgan with his 0:06:54.440 --> 0:06:57.880 decades of decades of study how the labor economy, he 0:06:58.040 --> 0:07:01.520 owned the study of teenage employment years ago. And John 0:07:01.560 --> 0:07:04.880 just mentions Neil Holland Horst overt City Group who came 0:07:04.920 --> 0:07:08.880 within the vicinity here. What are we getting wrong about 0:07:08.920 --> 0:07:13.760 the fabric of American labor when it's staring us in 0:07:13.840 --> 0:07:17.320 the face, with large parts of America with two and 0:07:17.680 --> 0:07:21.440 three point zero percent unemployment? Why are we getting us 0:07:21.520 --> 0:07:26.680 so wrong? Well, I think it starts with, you know, 0:07:26.720 --> 0:07:30.080 the underlying economic momentum in the country, which is picking up. 0:07:30.120 --> 0:07:32.680 I mean it could well be that, you know, conditions 0:07:32.680 --> 0:07:37.400 are picking up. Employers had positioned for an alternative outcome 0:07:37.480 --> 0:07:39.720 for things to be slowing down. Now they find themselves 0:07:39.720 --> 0:07:42.080 having to play catch up to that stronger economic growth. 0:07:42.080 --> 0:07:44.480 I mean, look, the underlying rate of employment is not 0:07:44.560 --> 0:07:49.200 five I mean that is true, but it's probably higher 0:07:49.200 --> 0:07:53.800 than where where where the consensus believes. UM. And you know, 0:07:53.880 --> 0:07:57.360 given what we know about their trajectory going forward, UM, 0:07:57.400 --> 0:08:00.040 you know there's risk that employment will remain strong. And 0:08:00.120 --> 0:08:03.400 if you're talking about two thousand, let's say it's half 0:08:03.440 --> 0:08:05.320 the rate. Let's say that's the real number, half the 0:08:05.400 --> 0:08:09.280 rate of what we got today. So it's two. That's 0:08:09.440 --> 0:08:12.800 more than enough to continue pushing the unemployment rate down 0:08:12.840 --> 0:08:16.680 over time. UM. And so you know, look, I mean, 0:08:17.120 --> 0:08:22.160 I I've said this, the onus is on the economic bears. Um. Frankly, 0:08:22.200 --> 0:08:25.240 I don't I don't think the this is going to 0:08:25.360 --> 0:08:29.840 really change the FEDS calculus. I mean, guys, it's not 0:08:29.880 --> 0:08:31.760 like they're gonna come out and say, oh, we gotta 0:08:31.800 --> 0:08:34.320 go back to fifty. You know. All they can do 0:08:34.400 --> 0:08:38.160 at this point is just sort of extend out. Um. 0:08:38.679 --> 0:08:40.880 But Neil, how much were we looking at people who 0:08:40.920 --> 0:08:44.079 are getting multiple jobs because they're trying to deal with inflation. 0:08:44.160 --> 0:08:46.719 How are we looking at one person accounting for three 0:08:46.800 --> 0:08:49.800 of these jobs that have been created? I mean, I 0:08:49.800 --> 0:08:51.599 have to look at the multiple job holders as a 0:08:51.640 --> 0:08:54.080 share of employment that's in the household data. I haven't 0:08:54.080 --> 0:08:56.320 looked at that yet. Um. But it doesn't look to 0:08:56.360 --> 0:09:00.800 be abnormal. UM. And Look, I mean, if you don't 0:09:00.800 --> 0:09:04.239 believe the BLS, what about consumers? Look at what consumers 0:09:04.240 --> 0:09:07.040 are telling you about the jobs market. Okay, the labor 0:09:07.080 --> 0:09:10.200 differential from the concert sport also a January data point 0:09:10.320 --> 0:09:13.040 that was out earlier this week, I believe it rose 0:09:13.080 --> 0:09:15.719 to a three month high. And it's at a very 0:09:15.800 --> 0:09:18.400 very strong level, certainly, you know, more or less word 0:09:18.559 --> 0:09:22.800 was before the pandemic, if not a little higher again. Uh, 0:09:22.880 --> 0:09:25.439 consumers are telling you that things are okay in the 0:09:25.520 --> 0:09:28.520 labor market. And consumers uh, and this is drawing on 0:09:28.559 --> 0:09:31.000 research from the New York FED. Consumers have a habit 0:09:31.040 --> 0:09:33.719 of spotting changes in their own local economies before the 0:09:33.800 --> 0:09:36.200 data because they know the places that are, you know, 0:09:36.240 --> 0:09:38.719 putting up help wanted signs, They know the places that 0:09:38.760 --> 0:09:42.120 are handing out pink slips, and they see it before. Uh. 0:09:42.360 --> 0:09:44.920 You know, the survey collectors of the BLS do and 0:09:45.000 --> 0:09:47.559 so um. You know, consumers are telling you that the 0:09:47.600 --> 0:09:51.520 labor markets are fine, um and that, and that unemployment 0:09:51.600 --> 0:09:53.640 is low. So if you don't want to take the 0:09:53.640 --> 0:09:56.920 BLSS word for it, maybe we can just take the 0:09:56.920 --> 0:09:59.280 American consumers word for it and get on the phone 0:09:59.360 --> 0:10:01.520 and tell some pay Plata side no doubt to that. 0:10:01.640 --> 0:10:14.600 Every Nissons Macro Fantastic to catch up with Neil Jeffrey 0:10:14.640 --> 0:10:18.240 Rosenberg joins us right now. He's portfolio manager Systematic Multi 0:10:18.280 --> 0:10:22.120 Strategy at black Rock. Jeff Rozenberg does this adjust a 0:10:22.240 --> 0:10:28.200 fixed in CONFUW of black Rock. Yeah, that you have 0:10:28.280 --> 0:10:31.600 to understand this is a big pushback to the to 0:10:31.720 --> 0:10:35.160 the slowing and it's a reminder of what Powell tried 0:10:35.240 --> 0:10:37.559 to say to the market, though the market wasn't listening 0:10:37.600 --> 0:10:42.880 that their main concern is they're not yet seeing, uh, 0:10:42.920 --> 0:10:47.160 the impact of their tightening in the labor markets. And 0:10:47.240 --> 0:10:49.559 so this is a very clear message and and a 0:10:50.160 --> 0:10:54.839 really kind of important warning that perhaps the interest rate 0:10:54.920 --> 0:10:58.760 sensitivity put housing to the side, put the interest rate 0:10:58.800 --> 0:11:02.679 sensitivity of the economy to the FEDS tightening. To date, 0:11:03.080 --> 0:11:05.760 yes there are long and variable lags, but we haven't 0:11:05.840 --> 0:11:08.600 really seen that degree of tightening. And when you take 0:11:08.640 --> 0:11:13.360 the financial conditions easing, the combined is perhaps what we're 0:11:13.360 --> 0:11:16.000 seeing here is the inability of the Fed to really 0:11:16.280 --> 0:11:18.800 get to its goal, which is to rain in the 0:11:18.800 --> 0:11:23.040 inflation pressures from a market palace. Set it again on Wednesday, 0:11:23.080 --> 0:11:25.480 it's still a labor market that is too hot, given 0:11:25.480 --> 0:11:28.160 that we're not seeing wages Jeff increased to the degree 0:11:28.160 --> 0:11:30.960 that some people might expect. It's such a headline blowout number. 0:11:31.559 --> 0:11:34.160 Do you take comfort from that or do you disregard 0:11:34.240 --> 0:11:36.959 that as a compositional effect of what jobs are getting 0:11:36.960 --> 0:11:41.400 created right now? Yeah, it's you know, the a h 0:11:41.480 --> 0:11:45.120 G number in terms of giving us a read on 0:11:45.720 --> 0:11:49.640 wage inflation, is probably the most distorted because of the 0:11:49.720 --> 0:11:52.600 mixed shift earlier this week. We've got e c I, 0:11:53.200 --> 0:11:56.280 you've got a DP, and you've got probably the best 0:11:56.280 --> 0:11:59.080 measure of the Atlanta Fed wage tracker. At least those 0:11:59.160 --> 0:12:03.680 latter two are still pointing to an elevated level of 0:12:03.800 --> 0:12:07.200 wages and sorry, wage inflation that I think is still 0:12:07.320 --> 0:12:10.319 very concerning to the Fed. Again, Powell was explicit when 0:12:10.320 --> 0:12:12.959 he said that earlier this week the market wasn't listening. 0:12:13.240 --> 0:12:17.200 This report is a reminder that the hot, tight labor 0:12:17.280 --> 0:12:19.320 market is still going to be an issue for the 0:12:19.360 --> 0:12:21.480 inflation outlook and for the FED outlook. How would you 0:12:21.480 --> 0:12:23.480 play this then, Jeff, if you really trust the headline 0:12:23.520 --> 0:12:26.680 number more than you trust the wage number, why would 0:12:26.720 --> 0:12:28.840 you buy ten year treasuries where they are if you 0:12:28.880 --> 0:12:31.080 believe that this Fed could be that far behind the 0:12:31.120 --> 0:12:36.080 curve maybe later in the year before it's apparent. Well, 0:12:36.160 --> 0:12:38.200 you're you're it's a good question, Lisa, and you asked 0:12:38.240 --> 0:12:40.800 about ten year treasuries, and I think you have to 0:12:40.800 --> 0:12:43.320 be a bit cautious here on the degree to which 0:12:43.360 --> 0:12:47.480 we've seen the rally in back end yields uh and 0:12:47.480 --> 0:12:49.880 and and you know you don't have to buy those 0:12:49.960 --> 0:12:53.080 yields here. You can buy the shorter end of the market. 0:12:53.360 --> 0:12:56.439 The curve is at a historic level of inversion. Uh 0:12:56.480 --> 0:12:58.960 And I think there's more vulnerability as a result of 0:12:59.000 --> 0:13:02.480 that and today's report and what we're seeing not just 0:13:02.600 --> 0:13:05.199 from today but for a long time in the data. 0:13:05.480 --> 0:13:07.720 The degree of tightness in the labor market may really 0:13:07.840 --> 0:13:10.960 challenge the ability that fed to to deliver that pivot 0:13:11.040 --> 0:13:14.360 at the bond markets pricing into the second half of year. Jeff, 0:13:14.400 --> 0:13:16.320 it's a little bit off your remap, but I'm gonna 0:13:16.360 --> 0:13:18.840 go there because I know Ellen Meltzer and Marvin Goodfriend 0:13:18.920 --> 0:13:21.680 beat it into you at Carnegie Mellon. And that is 0:13:22.000 --> 0:13:24.560 I wanted you to link in here the shock of 0:13:24.640 --> 0:13:27.800 five seventeen thousand and the forty eight other numbers that 0:13:27.880 --> 0:13:31.680 indicate this job boom that some few have called for, 0:13:32.440 --> 0:13:37.559 and the Biden stimulus, it just seems are we underestimating 0:13:37.640 --> 0:13:40.360 Jeff trunche I. Maybe this is for Glenn Hubbard's coming 0:13:40.440 --> 0:13:44.120 up as well. Are we underestimating Jeff Rosenberg? Trunch one, 0:13:44.200 --> 0:13:47.480 Trunch two, and Trunch three, Which can be summed up, 0:13:47.480 --> 0:13:50.839 as Blanchard says of the Biden stimulus, is that what 0:13:50.840 --> 0:13:56.839 we're getting wrong. Well, what we're getting wrong and where 0:13:57.000 --> 0:14:00.800 the confusion is at is a tremendous dish portion in 0:14:00.840 --> 0:14:05.240 the economy from COVID, both the COVID impact and the 0:14:05.280 --> 0:14:08.199 COVID stimulus. And so we're seeing the backside of that. 0:14:08.280 --> 0:14:10.760 And really what you take out of today's report is 0:14:10.760 --> 0:14:13.320 really the strength and services and this is the handoff 0:14:13.360 --> 0:14:16.400 from the goods economy to the services economy. But we're 0:14:16.440 --> 0:14:20.840 also seeing those distortions in our read of inflation. The 0:14:20.960 --> 0:14:24.040 deflation that we're seeing from the good side is pushing 0:14:24.120 --> 0:14:28.240 down the headline and the core measures of inflation. It's 0:14:28.440 --> 0:14:31.720 making it look like we've made a lot better progress. Again. 0:14:31.800 --> 0:14:34.240 Pell talked about this on Wednesday when he pushed back 0:14:34.640 --> 0:14:38.680 against the market inflation forecast to highlight that we shouldn't 0:14:38.680 --> 0:14:42.520 expect that goods deflation to persist, and you're gonna start 0:14:42.560 --> 0:14:45.760 to see some of that come out. So this confusion 0:14:46.200 --> 0:14:49.240 from COVID and the fiscal stimulus is part of that. 0:14:49.560 --> 0:14:51.760 Is also what we're seeing in the makeup. The surprise 0:14:51.880 --> 0:14:55.360 numbers that Mike McKee highlighted is all from the services 0:14:55.400 --> 0:14:58.600 side of the economy, highlighting the transition and the strength 0:14:58.600 --> 0:15:01.320 that we'll continue to see their Jeff Frozenberg, thank you 0:15:01.400 --> 0:15:08.960 so much. Particularly thank you through this Historically Glenn Hubbard, 0:15:09.000 --> 0:15:13.720 director of Columbia's Chasen Institute for Global Business, and steeped 0:15:14.040 --> 0:15:20.080 in the underestimation that we have of the American economic experiment. Hubbard, 0:15:20.120 --> 0:15:25.000 I want you to speak of the micro cosm, the initiative, 0:15:25.600 --> 0:15:29.000 the way we go out on a micro basis and 0:15:29.160 --> 0:15:35.680 find growth in America that pushes against traditional caution, traditional gloom. 0:15:35.720 --> 0:15:38.320 You've owned the high ground on that for decades. Are 0:15:38.360 --> 0:15:43.840 we underestimating the American business spirit spirit? Well, I think 0:15:43.840 --> 0:15:47.200 we are to. And importantly, as we said before, we're 0:15:47.320 --> 0:15:50.760 underestimating how hard it is to forecast in the recovery 0:15:50.800 --> 0:15:53.400 from COVID as we change in the mix of consuming 0:15:53.440 --> 0:15:57.760 goods and services, how firms suggests, how industries. Sudjust I 0:15:57.760 --> 0:16:00.560 thought we would see an upside surprise and nothing like this, 0:16:00.840 --> 0:16:03.840 I confess, but it tells me the jobs market is 0:16:04.040 --> 0:16:07.880 much more robust than markets had bought uh and certainly 0:16:07.920 --> 0:16:10.640 a worry for the federal Reserve. I look, Glenna, at 0:16:10.640 --> 0:16:12.920 the fiscal stimulus of this, and let's go to your 0:16:12.920 --> 0:16:16.200 public service for the nation. Typically with those of the 0:16:16.240 --> 0:16:20.640 Republican persuasion Olivia Blanchard, who you and I agree, knows 0:16:20.720 --> 0:16:25.160 the math. Olivia Blanchard calls this the Biden stimulus. Are 0:16:25.200 --> 0:16:30.280 we still witnessing stimulus effect that leads to these shock numbers? 0:16:31.240 --> 0:16:34.320 I think we're witnessing two things. One is the hangover 0:16:34.440 --> 0:16:37.400 from excessive aggregate demands stimulus, so I agree with that. 0:16:37.760 --> 0:16:40.360 But we're also seeing a lot of adjustment as the 0:16:40.400 --> 0:16:43.880 economy comes out of the COVID pandemic, the goods boom, 0:16:43.960 --> 0:16:47.240 and now our recovery and services which are very labor intensive. 0:16:47.560 --> 0:16:49.880 So I think when people forecast jobs, they have to 0:16:49.920 --> 0:16:52.400 do so at a more micro level given both of 0:16:52.400 --> 0:16:55.000 those factors, and I think the job market is likely 0:16:55.040 --> 0:16:57.800 to remain hot, posing a real challenge for the beet. 0:16:57.920 --> 0:16:59.920 Remember the j Old stata we're pointing in the same day. 0:17:00.680 --> 0:17:03.120 I'm just keep thinking about what Alan Ruskin Over at 0:17:03.120 --> 0:17:05.680 Deutsche Bank said in response to this Job's number, saying, 0:17:06.280 --> 0:17:08.520 more broadly, one has to think in terms of higher 0:17:08.560 --> 0:17:12.240 equilibrium rates in this cycle, given very unique labor market 0:17:12.280 --> 0:17:16.560 resilience and therefore less expenditure sensitivity to rates. Glenn, how 0:17:16.680 --> 0:17:20.000 high do neutral rates have to go if this labor 0:17:20.040 --> 0:17:23.320 market is as strong as it seems. Well, keep in mind, 0:17:23.320 --> 0:17:26.879 while the FED has adjusted, one could hardly describe monetary 0:17:26.920 --> 0:17:30.879 policy as overly restrictive given where inflation is. So I 0:17:30.880 --> 0:17:32.879 think there are two challenges for the FED. One is 0:17:32.920 --> 0:17:35.800 figuring out how high. And I agree that FED is 0:17:35.880 --> 0:17:38.919 not likely to revert to very large rating increases, so 0:17:39.040 --> 0:17:43.000 more gradual rating creatures, but probably into the fives. But 0:17:43.160 --> 0:17:45.240 they may have to hold it for longer than market 0:17:45.280 --> 0:17:48.320 participants think. The fan, of course, has been signaling that, 0:17:48.400 --> 0:17:50.760 but the market doesn't believe it. Do you think that 0:17:50.840 --> 0:17:53.960 this kind of strong data makes the the idea of 0:17:53.960 --> 0:17:57.320 a soft landing more likely or less likely because of 0:17:57.400 --> 0:18:00.000 how long the FED will have to hold rates high. 0:18:00.320 --> 0:18:03.800 I'm gonna give you the classic economist answer both. Uh, 0:18:03.960 --> 0:18:06.600 it could make it more likely in the sense that 0:18:06.640 --> 0:18:10.520 we obviously have a very robust underlying economy, giving the 0:18:10.560 --> 0:18:13.359 FED some room to move. On the other hand, the 0:18:13.440 --> 0:18:16.840 possibility of a policy error here is quite significant, So 0:18:16.880 --> 0:18:19.440 I think this is a tough going moment for the FED. 0:18:19.520 --> 0:18:22.960 It's not easy for the FED, and markets by occasionally 0:18:23.000 --> 0:18:27.920 loosening financial conditions make it even more challenging. F Good, Glenn. 0:18:27.960 --> 0:18:30.720 I look at the path forward here and I think 0:18:30.760 --> 0:18:34.280 one of the surprises underreported in the three tumultuous days 0:18:34.320 --> 0:18:40.679 we've had is productivity lifted unit labor costs came down. 0:18:41.280 --> 0:18:44.679 Are you an optimist that out of this horrific pandemic, 0:18:45.200 --> 0:18:47.720 all the shocks, all the once in a lifetime events 0:18:47.760 --> 0:18:52.440 we've add, that we can find a new productivity Well, 0:18:52.520 --> 0:18:55.680 let let me start longer terms. That's always safer for economists. 0:18:55.680 --> 0:18:59.200 I am an optimist about productivity growth future in the US, 0:18:59.320 --> 0:19:02.960 given techno logical advance and now it's penetrating through. I'm 0:19:03.000 --> 0:19:06.320 also optimistic that the recovery from COVID is leading to 0:19:06.359 --> 0:19:09.920 some reallocations that may raise productivity. That's said, of course, 0:19:09.960 --> 0:19:13.200 we've seen a lot of productivity fluctuations positive and negative 0:19:13.200 --> 0:19:16.160 in recent years, and one swallow does in a spring 0:19:16.240 --> 0:19:19.760 make Glenn, We're talking a lot about trying to understand 0:19:19.800 --> 0:19:22.760 a very uncertain economic moment as the world recovers from 0:19:22.760 --> 0:19:25.600 a pandemic. There's a larger question that the FED has 0:19:25.640 --> 0:19:27.560 to deal with as well, which is what is the 0:19:27.560 --> 0:19:31.399 implication of looser financial conditions and getting them further away 0:19:31.400 --> 0:19:34.520 from their goal of an ongoing disinflation. We've heard from 0:19:34.520 --> 0:19:37.440 a number of wonderful economists this morning saying it doesn't 0:19:37.440 --> 0:19:39.439 really matter at this point because of all the tightening 0:19:39.480 --> 0:19:43.840 from last year. Do you agree, well, again, I'm gonna 0:19:43.840 --> 0:19:47.120 have to prodgate and standard econ way Milton Friedman taught 0:19:47.160 --> 0:19:50.640 us years ago about long and variable lags of monetary policy. 0:19:50.760 --> 0:19:53.720 So there is reason to be cautious. Is that you suggest? 0:19:54.320 --> 0:19:56.680 That's said, there's a lot of momentum in the economy, 0:19:56.720 --> 0:19:59.399 and the way to tighten financial conditions is to tighten 0:19:59.480 --> 0:20:02.600 financial conditions, And so I think the FEDS still has 0:20:02.680 --> 0:20:04.600 more work to do than the markets. Thing. Do you 0:20:04.600 --> 0:20:07.480 still think that this federal reserve should go above five? 0:20:07.960 --> 0:20:11.959 And decidedly so? I do so, I do think so? Uh, 0:20:12.040 --> 0:20:16.080 And thoughts before this report on one final question are 0:20:16.080 --> 0:20:19.159 We've got just a stream of news this morning, and 0:20:19.160 --> 0:20:21.960 and I just wanted you to talk to me about 0:20:22.000 --> 0:20:23.919 the return of the risk free rate. You've got the 0:20:23.920 --> 0:20:27.159 truck on your hand, like Professor Joseph Cohen up at 0:20:27.160 --> 0:20:30.159 Columbia Business School, and you gotta like a lot of 0:20:30.160 --> 0:20:35.119 bright young people that have never known actual cost of money. 0:20:35.680 --> 0:20:38.640 What do you tell them about this new world that's 0:20:38.680 --> 0:20:41.080 the old world us, you and I and Abby used 0:20:41.080 --> 0:20:44.520 to know. Well, I think it's a matter of reminding 0:20:44.600 --> 0:20:48.359 people of basic discounted cash flow math. It's whip sawing 0:20:48.480 --> 0:20:53.439 technology prices, stock prices, whip sawing prices of other goods 0:20:53.440 --> 0:20:57.720 producing sectors as well, and then also that higher returns 0:20:57.760 --> 0:21:00.320 for savers can be a good thing. Uh on the 0:21:00.359 --> 0:21:03.240 other side. So I think we're learning the risk free 0:21:03.320 --> 0:21:07.360 rates and equilibrium an zero in an economy that's rowed. 0:21:08.119 --> 0:21:10.600 Very good, Glenn Hubert, thank you so much, Glen Hubbard 0:21:10.640 --> 0:21:23.719 with Columbia right now. Pre Miser, Global head of Race 0:21:23.760 --> 0:21:26.720 Strategy at TV Securities Prayer, You've had three calls and 0:21:26.760 --> 0:21:28.880 thanks for being with us. And the three calls went 0:21:28.920 --> 0:21:33.480