Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week. Us CPI Nemers reinforcing concerns
Speaker 1: about inflation. The financial stories that chief are worth a
Speaker 1: really different reaction to Mark. It's more indications of just
Speaker 1: how hot the U. S. Economy really is. Through the
Speaker 1: eyes of the most influential voices Larry Summers, the former
Speaker 1: Treachery Secretary, Katherine Keating, CEO of v n Y, mom
Speaker 1: Sam's l Sharon and founder of Equatic Group Investment in
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: So much for the dog days of summer, to landmark
Speaker 1: pieces of legislation, a major river runs dry, inflation takes
Speaker 1: a holiday, and the FBI searches former President trump'st mar
Speaker 1: Alago residents. Welcome to August. This is Bloomberg Wall Street Week.
Speaker 1: I'm David Weston. This week's special contributor Larry Summers on
Speaker 1: not counting our chickens too soon, on inflation We've Sarah
Speaker 1: seen this movie before. And Melissa Carney of the University
Speaker 1: of Maryland on the risk of running out of workers.
Speaker 1: Our population is going to age and it's not going
Speaker 1: to grow. Eventually, we're going to have a shrinking working
Speaker 1: age population. Things are supposed to be quiet in August,
Speaker 1: but the news God's haven't gone that message. The week
Speaker 1: started off dramatically as dozens of FBI agents executed a
Speaker 1: warrant to search former President Trump's mar Alago residents. Trump
Speaker 1: allies were quick to comment, it's unpresidented that you would
Speaker 1: go into a former president. Why wouldn't they just ask
Speaker 1: the president if they have something there that they want.
Speaker 1: But Attorney General Merrick Garland waited until the end of
Speaker 1: the week before weighing in. I personally approved the decision
Speaker 1: to seek a search warrant in this matter. Second, the
Speaker 1: department does not take such a decision lightly. And then
Speaker 1: on Friday we got to see the warrant and what
Speaker 1: was taken. The FBI has again sees classified records, some
Speaker 1: that were marked as top secret from former President Donald
Speaker 1: Trump's marro Logo home. And this was a copy of
Speaker 1: the search warrant that was seen by Bloomberg. Congress moved
Speaker 1: forward on not one but two pieces of major legislation,
Speaker 1: that Chips Act that's been pending forever. The United States
Speaker 1: must lead the world in the production of these advanced hips.
Speaker 1: This law will do exactly that. And a piece or
Speaker 1: two of the bill back better proposal that had been
Speaker 1: left for dead but came back like Lazarus at the
Speaker 1: eleventh hour and the fifty ninth minute, and the bill
Speaker 1: as amended is past. And those summer in the northern
Speaker 1: Hemisphere is supposed to be hot, not so hot that
Speaker 1: europe Rhine River drives up, posing yet another problem for
Speaker 1: strained supply chains. It's also just getting extremely expensive. The
Speaker 1: same ball general I was speaking to you before, he
Speaker 1: said that he literally fell off his chat when he
Speaker 1: saw the coast they're shipping on the Rhine. But as
Speaker 1: hot as things were everywhere else. Inflation chose this week
Speaker 1: to cool down a bit, with headline CPI numbers flat
Speaker 1: month over month and core up less than expected. Though
Speaker 1: to be fair, we still are facing more inflation than
Speaker 1: anyone would like. It is good news, so though I
Speaker 1: do think we have to be cautious as fixed that
Speaker 1: all along, there's no silver bullet here, and after the
Speaker 1: Producer price Index numbers reinforced the idea of the inflation
Speaker 1: just might be softening a bit. The markets responded warmly,
Speaker 1: with the SMP posting its fourth weekly climb in a row,
Speaker 1: up three to six and the NASDAC back in bull
Speaker 1: territory up over three percent, while bonds were relatively calm,
Speaker 1: with the yield on the tenure ending the week not
Speaker 1: far from where it started at two point eight three percent.
Speaker 1: Here to help us sort it all out, or Joann Feeny,
Speaker 1: portfolio manager at Advisor's Capital Management, and Christina Hooper, chief
Speaker 1: Global market strategist at Investco. So welcome to both of you. Christina,
Speaker 1: let me start with you on the reaction of the
Speaker 1: markets to this. As CPI and pp I numbers some encouragement,
Speaker 1: does it sort of suggest maybe we're heading in a
Speaker 1: better direction. David, We're definitely heading in a better direction. Um.
Speaker 1: It looks like we're past peak for inflation, but the
Speaker 1: problem is inflation is still very very high. If we
Speaker 1: think about the FEDS inflation target of two, we're way
Speaker 1: far away from that and it's going to take us
Speaker 1: a significant amount of time to get there. Um. But
Speaker 1: this is the first step in that direction, and so
Speaker 1: it's progress. Joy. I think the market start of thought,
Speaker 1: maybe we can back off a little bit. Well, the market,
Speaker 1: I think might be a little bit too optimistic. About
Speaker 1: how much work the FEDS still has to do. Yes,
Speaker 1: the numbers have been good. In fact, a core pc
Speaker 1: inflation looks like a peaked back in March, and we
Speaker 1: got that information and that's a positive. And we're starting
Speaker 1: to see some of those items that were really short
Speaker 1: supply now start to become more available and that's helping
Speaker 1: to take the price pressure off. So christ take us
Speaker 1: over the next month a half or so, because we
Speaker 1: got Jackson hole first, right, well, he or from FED
Speaker 1: speakers including j Pow, and then there's phare amount of data.
Speaker 1: I think we get another CPI reading or two, we
Speaker 1: get jobs numbers reading things like that. Where do you
Speaker 1: think the FED will be come September. Well, I'm actually
Speaker 1: going to go out on a limb, David and say
Speaker 1: we're probably going to be in a place where the
Speaker 1: FED feels it should air on the side of a
Speaker 1: little more caution. Right, We've gone at a pretty breakneck
Speaker 1: speed in terms of back to back seventy five basis
Speaker 1: point hikes, and the FED is, as Joanne said, very
Speaker 1: data dependent, So it's going to be looking at data
Speaker 1: and seeing that longer term inflation expectations are better anchored
Speaker 1: than they were um and they are going to see
Speaker 1: inflation moving in the right direction. Uh. Inflation growth is
Speaker 1: obviously still an issue, so they're going to be hiking rates,
Speaker 1: but they don't have to be as aggressive. So perhaps
Speaker 1: they signal it in a Jackson Hoole speech. That might
Speaker 1: be too premature, but I think by the time we
Speaker 1: get to September October, we should see a FED that
Speaker 1: pivots to a less hawkish tightening stance. You know, I
Speaker 1: think the critical data, in addition to what you just
Speaker 1: mentioned Christina, is going to be the employee cost index
Speaker 1: that e c I. But we know the labor market
Speaker 1: is very tight, and we're concerned right that wages are
Speaker 1: going to continue to rise and that's going to put
Speaker 1: a floor early under price inflation as those bleed through
Speaker 1: into prices from firms. We're seeing that a lot. We're
Speaker 1: seeing firms actually be pretty successful at raising prices in
Speaker 1: the face of those higher costs. So, you know, if
Speaker 1: if job openings drop and some of the heat comes
Speaker 1: out of the labor market and we don't get as
Speaker 1: large increases in wages and overall employee costs, then I
Speaker 1: could see the FED, you know, becoming a little bit
Speaker 1: more at ease. Christina Hooper of Inbsco and joe Anfoni
Speaker 1: Advisor's Capital Mets. We'll be staying with us as we
Speaker 1: turn from the markets generally to what investors can do
Speaker 1: about them. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Housing start reversed to four months decline and
Speaker 1: the overall economy grew in the spring at a modest
Speaker 1: two point three percent annual rate, but amid signs that
Speaker 1: inflation was again easing. That wasn't good news for everyone.
Speaker 1: This week the oil market stepped into a poodle, with
Speaker 1: the price taking its biggest one day hit in almost
Speaker 1: a year, and every currency in sight took a bite
Speaker 1: out of the dollar. That was Lewis ruck I just
Speaker 1: take on the economy on Wall Street Week back now
Speaker 1: thirty five years later, we're still focused on housing and
Speaker 1: energy and growth, but from a very different vantage point
Speaker 1: to Anfini of Capital Management and Christina Hooper of Investor
Speaker 1: are still with So Joanne, let me start with you
Speaker 1: if I could. Let's know what housing, because a lot
Speaker 1: of talking about housing right now, whether we in fact
Speaker 1: are in a bubble. Obviously, housing prices have gone up
Speaker 1: a lot, rent costs are really in record levels places.
Speaker 1: At the same time, the fits trying to come off
Speaker 1: with that sugar hunt. Yeah, it's clearly a reset going
Speaker 1: on in the housing market. Um, you know that those
Speaker 1: low interest rates clearly created a lot of demand, a
Speaker 1: lot of activity in the housing market. But people shouldn't
Speaker 1: forget that there's still an awful lot of younger folks
Speaker 1: out there who have delayed getting into their first, first home,
Speaker 1: and and that latent demand is still out there. And
Speaker 1: I think what we're seeing now is a reevaluation of
Speaker 1: how much house can I afford, And so we have
Speaker 1: seen people walk away from contracts. We've seen the builders
Speaker 1: slow down a little bit. But given how high mortgage
Speaker 1: rates are, the existing homeowners don't want to get out
Speaker 1: of their old cheap mortgages. So that's going to push
Speaker 1: demand to the new builds. So we're still pretty enthusiastic
Speaker 1: about some of the plays in the new uh you know,
Speaker 1: in in new building for housing like say Alinar for example,
Speaker 1: which tends to serve that lower end, the first home
Speaker 1: buyer or the one step up home buyer. So there
Speaker 1: are places to be in housing. You just have to
Speaker 1: be a little bit patient here as this reset place
Speaker 1: through and folks renegotiate contracts and then find slightly cheaper
Speaker 1: houses to buy. So Christian, you heard about Lenard there
Speaker 1: maybe lower end of housing. About what are you seeing?
Speaker 1: There's a lot of volatility in the marketplace. Where does
Speaker 1: it create opportunities for investors at this point? Well, it
Speaker 1: creates opportunities really at times when we see um sell offs.
Speaker 1: Of course we haven't seen much of a sell off
Speaker 1: in in recent weeks, but but when we do get those,
Speaker 1: that's an opportunity for investors to reshuffle portfolios right and
Speaker 1: and sometimes it's about exchanging lower quality um, less defensive
Speaker 1: for higher quality, more defensive, getting a little more yield
Speaker 1: in there. So I think the areas that I would
Speaker 1: focus on right now or are opportunities and healthcare like pharma,
Speaker 1: as well as as technology. The secular growth place there
Speaker 1: joan one of the things that have been driving the
Speaker 1: US a country. Sometimes our consumers. Consumers had a pretty
Speaker 1: good time of it, They've had really good balance sheets,
Speaker 1: they've got a very fair amount of income coming in.
Speaker 1: At the same time, there's more pressure there Now, what
Speaker 1: does that say in terms of investing in stocks if
Speaker 1: in fact there's more pressure on the consumer. Yeah, you know,
Speaker 1: it's become a very challenging time to invest in the
Speaker 1: consumer space, because what we have going on now is
Speaker 1: really a tale of two consumers. We have folks at
Speaker 1: the lower to middle end of the income distribution really
Speaker 1: being hurt by these high prices, this high inflation. For them,
Speaker 1: it's making their budgets a lot tighter. And so we're
Speaker 1: seeing that in the results of say a Walmart and
Speaker 1: a Target, where they're finding their shoppers aren't spending less,
Speaker 1: but they're switching away from discretionary products towards the necessities
Speaker 1: which have lower margins, so it's hurting their profits. But
Speaker 1: then you look at the higher end of the income distribution,
Speaker 1: you see companies like Apple selling expensive iPhones, they're not
Speaker 1: seeing a drop in demand. Or say Williams Sonoma, right,
Speaker 1: they sell higher end uh you know, kitchen gear and
Speaker 1: furnishing type stuff and they're not really seeing a drop.
Speaker 1: So it really depends what kind of a consumer products
Speaker 1: company you are and how much you can raise prices
Speaker 1: because you have a resilient uh supply of shoppers or
Speaker 1: how much you're having to really trim them back to
Speaker 1: keep the shoppers walking in the door. And so it
Speaker 1: does make it a selection question, and to Christina's point,
Speaker 1: finding the higher quality companies that have the more resilient
Speaker 1: shoppers is really going to help your portfolio. David, I
Speaker 1: would just argue that in this environment, having seen gas
Speaker 1: prices come down significantly, UM will incomes aren't as pressured
Speaker 1: now that they were just a little while ago. So
Speaker 1: I think that that chasm between those two sets of
Speaker 1: consumers might not be as wide. Um, there's a little
Speaker 1: alleviation of the pressure on lower and middle income American
Speaker 1: households right now, just because energy prices have come down.
Speaker 1: So it's certainly not a much better situation, but it
Speaker 1: is materially better, and we saw that born out in
Speaker 1: the most recent consumer sentiment numbers. Talk about earnings, if
Speaker 1: you would, Christina from while we're just getting through the
Speaker 1: earning season here, if we're seeing a tale of two consumers,
Speaker 1: as we just heard from joining, are we seeing a
Speaker 1: tale of two sets of companies as well, but high
Speaker 1: quality versus less high quality? Well, certainly there are some
Speaker 1: companies that are far better able to pass on their
Speaker 1: costs than others. Um, there are those that are really
Speaker 1: experiencing reduction in traffic. For example, if we're looking at
Speaker 1: some of the retailers, UM and and others that have
Speaker 1: have held up fairly well. So I think, you know,
Speaker 1: going forward, what we're going to have to make an
Speaker 1: assessment on is is which are those higher quality companies
Speaker 1: that can defend their margins, that can pass on crisis,
Speaker 1: that can weather this storm better, because let's face it,
Speaker 1: it's going to be you know, um there are gonna
Speaker 1: be some significant headwinds in the next two quarters. I
Speaker 1: would argue Joanne as a portfolio manager, how are you
Speaker 1: feeling about tech these days? I know text covers an
Speaker 1: awful lot of sins, there are a lot of different
Speaker 1: things called tech. But how are you feeling other opportunities
Speaker 1: right now in tech? Oh? Yeah, I think there definitely are.
Speaker 1: You know, it could take some patients really for investors
Speaker 1: to to reap the rewards of tech. But when we
Speaker 1: look at technology, what we look for our companies that
Speaker 1: are in the middle of a change in the way
Speaker 1: things are done. Demand coming from the market, whether it's
Speaker 1: demographics or taste. But you know, the cloud area companies
Speaker 1: shifting their active these away from internal service state of
Speaker 1: the cloud. This is still happening, and more traffic on
Speaker 1: the Internet is pushing data centers to have to expand
Speaker 1: and build in faster, wider pipes. So if you look
Speaker 1: for the companies that supply the parts to enable that,
Speaker 1: you know they're going to be able to sell well
Speaker 1: no matter what happens in terms of the cyclical side
Speaker 1: of the economy. And generally if you if you pick
Speaker 1: and choose carefully, you can find ones that have deep
Speaker 1: moats around them that don't have a lot of competition.
Speaker 1: You're not buying into companies that are selling commodities, so
Speaker 1: you know, whether it's a broad Calm or an Amazon
Speaker 1: which really enables the cloud out, or Microsoft which enables
Speaker 1: the software to make all this work, these are companies
Speaker 1: that are going to power through. It's gonna be a
Speaker 1: little bit cyclical, but they're going to hold up better
Speaker 1: than others will. Christina. Finally, let's go Overseas if we could,
Speaker 1: because we've talked about the FED. However faster they're going
Speaker 1: to tighten their tightening, no question about it. Europe looks
Speaker 1: like they're tightening. There are some places like Japan and
Speaker 1: China that maybe going the other direction, Does that create
Speaker 1: an opportunity for investors? I think so, David. It's not
Speaker 1: just prints in terms of monetary policy. So we both
Speaker 1: we have China easing and we have Japan remaining very easy. Um.
Speaker 1: But it's also fiscal stimulus. We're seeing fiscal stimulus in
Speaker 1: both those countries, whereas in the US and other Western
Speaker 1: developed countries they're pulling back on stimulus. And so that
Speaker 1: sets up an environment in which there are built in
Speaker 1: tail winds that we're just not seeing here. I think
Speaker 1: there's potential there now when we look specifically at China equities.
Speaker 1: There's a lot of pessimism right now around China, especially
Speaker 1: given headlines around the property sector. But if you ring
Speaker 1: fence the property sector and look at the broader market,
Speaker 1: especially technology, there are a lot of opportunities in China
Speaker 1: equities and I think there's the potential for positive surprise.
Speaker 1: Thank you so much to Christina Hooper of Investco and
Speaker 1: joe Anfini of Advisors Capital Management. Coming up, we ask
Speaker 1: our special contributor Larry Summers whether those CPI members have
Speaker 1: him feeling any better about inflation. This is Wall Street
Speaker 1: week on Bloomberg. Okay, this is Wall Street Week. I'm
Speaker 1: David Weston to take us through the high points of
Speaker 1: this week. We welcome back our very special continue to
Speaker 1: Larry Summers of Harvard. So, Larry, thank you so much
Speaker 1: for joining us from Aspen. Actually this week we'll talk
Speaker 1: a little later about what you're doing out there. But first,
Speaker 1: we got CPI numbers this week on Wednesday. They came
Speaker 1: in significantly better than a lot of people thought they would.
Speaker 1: So do you find some relief from this? Are we
Speaker 1: over the worst of it when it comes to inflation?
Speaker 1: I don't think these were encouraging numbers. We we knew
Speaker 1: that the headline number was going to be coming substantially
Speaker 1: down because we could see what had happened with gasoline prices.
Speaker 1: The core number was better than most people, uh expected. Uh,
Speaker 1: that's certainly better than the alternative to that. On the
Speaker 1: other hand, it was heavily driven by volatile sectors like
Speaker 1: used cars, like hotels, like air airs. We've Sarah seen
Speaker 1: this movie before. We had a terrific core number in March,
Speaker 1: but it was from those volatile sectors, and then it
Speaker 1: bounced back up in April, May and June so we'll
Speaker 1: have to see, uh what happens going forward. But this
Speaker 1: is certainly a better number than most people expected, and
Speaker 1: it will come as a bit of relief to the FED.
Speaker 1: But I certainly think it's nothing like we are out
Speaker 1: of the woods. It's nothing like a fundamental change in
Speaker 1: uh the orientation. It's nothing that means that we can
Speaker 1: pivot away from the overwhelming paradigm being in need for
Speaker 1: restrictive policy to contain inflation. Well, that's what I want
Speaker 1: to ask you about some relief for the FED. You said,
Speaker 1: is there a risk in that? And you've warned before
Speaker 1: about backing off too quickly in the cooling of the economy.
Speaker 1: There a risk the FED past too much attention to
Speaker 1: numbers like these. We'll have to we'll have to see
Speaker 1: what they do. If the FED regards this as a
Speaker 1: major game changer, they will be making another major mistake.
Speaker 1: I would be surprised if they regarded it that way,
Speaker 1: because I think when you look within it, you'll see
Speaker 1: that seasonally adjusted airfares coming out of two JULYES when
Speaker 1: air fares were highly distorted by COVID. How could you
Speaker 1: take that seriously as a huge harbinger of new UH trends,
Speaker 1: So I don't think they will make UH that kind
Speaker 1: of mistake. They certainly shouldn't make that kind of mistake.
Speaker 1: But you know, you get out of woods and even
Speaker 1: deep woods, you get out of them one step at
Speaker 1: a time. So I don't wanna deny that this is
Speaker 1: that there's some encouragement UH in this number, but overreacting
Speaker 1: to that would be a grave mistake. I think your show, before, David,
Speaker 1: I've talked about how prudent people finish their regiment of
Speaker 1: antibiotics even as they're gratified four days in that they
Speaker 1: feel better, and I still think that's the right metaphor
Speaker 1: for thinking about this situation. You and I have talked
Speaker 1: a lot about race. What about the balance sheet? Because
Speaker 1: I muna say, just about every week after we get
Speaker 1: done on this program, somebody emails me and says, what
Speaker 1: about the balance sheet? How effective is the balance sheet
Speaker 1: and helping to slow down the economy get our arms
Speaker 1: around inflation? And are they doing it the right way?
Speaker 1: Should they be coming off the balance sheet even faster
Speaker 1: than they are? I wonder if they should come off
Speaker 1: faster than they are. I think the clearest statement about
Speaker 1: the balance sheet is that they should have stopped buying
Speaker 1: six or nine months earlier than they did. I think
Speaker 1: it's clear that we had something that history will look
Speaker 1: back on as a bit of a housing bubble, and
Speaker 1: I think they contributed to that by buying mortgage backed securities.
Speaker 1: Now I certainly think they're going in the right direction
Speaker 1: with QT rather than QUE. Could they do it faster?
Speaker 1: Perhaps they could. Would it make a major difference, I'm
Speaker 1: not sure that it would. Would it add to financial risk,
Speaker 1: It might in terms of some kind of accident in
Speaker 1: markets in general, David, I think that yields are driven
Speaker 1: more by the fundamentals of what's happening in the economy
Speaker 1: and less by central bank policies like uh QT and
Speaker 1: QE that I think many in the markets thank know.
Speaker 1: I could be right about that, or I could be
Speaker 1: uh or I could be wrong. But I think people
Speaker 1: often ascribe to the direct impact of these policies. What
Speaker 1: is in fact a signaling with respect to future monetary policies.
Speaker 1: And I don't think that now the this is an
Speaker 1: area of stability to FED has set an expectation, that
Speaker 1: expectation is underway. I wouldn't be recommending a major change
Speaker 1: in balance sheet policies at at this point, Okay, Larry Summers,
Speaker 1: I'm delted to say, everybody staying with us, because we're
Speaker 1: gonna be joined by Melissa Carney. She's professor of economics
Speaker 1: in Maryland, and she has convened that Larry and some
Speaker 1: other esteemed economist and askment to address the very important
Speaker 1: question of after we come through whatever downturn we're going through,
Speaker 1: where will the growth come from. That's gonna have next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. This is
Speaker 1: Wall Street Week. I'm David Weston, our special man Truitton.
Speaker 1: Larry Summers has stayed with us and we are joined now.
Speaker 1: But Melissa Carney, she's professor of economics at the University
Speaker 1: of Maryland, also director of the Aspen Economic Strategy Group,
Speaker 1: which she has convened and asked me this week with
Speaker 1: Larry and other esteemed economists to address a critical question
Speaker 1: really of where the United States could be facing seculation.
Speaker 1: So Melissa, welcome to Wall Street Week. Great to have
Speaker 1: you here. Let's start with the question of where growth
Speaker 1: will come on the other side of whatever it is
Speaker 1: we're going through, because that's ultimately going to be the
Speaker 1: question here. I understand from economists like you it comes
Speaker 1: from one of two sources, either more workers or more productivity.
Speaker 1: Are we going to get more workers? We're looking at
Speaker 1: both fewer workers and lower productivity, as you know, So
Speaker 1: let me focus on the fewer workers aspect for a moment.
Speaker 1: The real issue demographic issue facing the US is we
Speaker 1: have a plummeting birth rate, and so total fertility in
Speaker 1: the US is now below the level required to keep
Speaker 1: population growth constant. And so the issue here is that
Speaker 1: on average now a woman in the US is expected
Speaker 1: to have one point six five children over her lifetime.
Speaker 1: So women used to have three kids, then it fell
Speaker 1: to two. Women were having comfortably above two kids for
Speaker 1: many decades. With a with a fertility rate below too,
Speaker 1: that means our population is going to age and it's
Speaker 1: not going to grow, and so eventually we're going to
Speaker 1: have a shrinking working age population unless Melissa, we have immigration.
Speaker 1: And that's why immigration, I think many of us at
Speaker 1: this conference feel, is so very very important. What's your
Speaker 1: sense of what economists would say the politics apart um
Speaker 1: about the immigration policy. Economists love immigration. We think immigration
Speaker 1: is a is a potential answer to our demographic challenges
Speaker 1: as well as our activity innovation challenges. Since immigrants come in,
Speaker 1: they work, they're more likely than native born Americans to
Speaker 1: be entrepreneurs and innovators. Of course, as you know, Larry,
Speaker 1: immigration rates our way down. So we used to bring
Speaker 1: in as you know, we hit as many as a
Speaker 1: million new people coming into the country every year. That
Speaker 1: number is now below two d and fifty thousand, and
Speaker 1: so the combination of a declining native born population and
Speaker 1: a decline in immigration per tens even worse demographic challenges
Speaker 1: than if we were just facing one versus the other.
Speaker 1: Let me see if I can do a little arithmetic
Speaker 1: based on what you said from one mate in two
Speaker 1: So that's about seven fifty thousand people a year. So
Speaker 1: that's about half a percent of our workforce, maybe a
Speaker 1: little less, so half a percent slower labor force. Uh
Speaker 1: growth over time can accumulate to something uh that is
Speaker 1: very that is very large. And and if we go
Speaker 1: back to the birth rates, we have about five fewer
Speaker 1: babies being born a year than in the not distant past. Melissa,
Speaker 1: if you um, what would you say about about this um.
Speaker 1: Most people are scared that immigrants come and they take
Speaker 1: jobs for Americans and that if they're more immigrants, then
Speaker 1: there aren't gonna be as many jobs for Americans, or
Speaker 1: if there are jobs, because there's more competition, uh, they're
Speaker 1: going to be paid less. And that's true whether the
Speaker 1: job people think is working at McDonald's or is UH
Speaker 1: working doing computer programming at Microsoft. What how do you
Speaker 1: How should people feel? Shouldn't they have shouldn't they have
Speaker 1: this worry that they're gonna be poorer if we take
Speaker 1: all the immigrants, just like they get hurt if we
Speaker 1: take a lot of local a lot of trade from
Speaker 1: other countries where they have much lower wage. So so
Speaker 1: the reason economists are so bullish on immigration is because
Speaker 1: we have so much evidence that immigrants are good for
Speaker 1: the economy. They are good for most workers. But it
Speaker 1: is true that there are some groups in some places
Speaker 1: that will feel wage pressures. And I think the way
Speaker 1: we the way we solve this issue is to make
Speaker 1: sure that we recognize the disparate impacts of certain groups.
Speaker 1: We recognize that low wage workers in certain sectors might
Speaker 1: not experience the benefits the overall benefits that immigrants bring
Speaker 1: to the economy and we take steps to help them.
Speaker 1: I mean, it's not it's not dissimilar to what we
Speaker 1: have to do with trade to you know, more imports
Speaker 1: is good for most people, but some people are harmed
Speaker 1: by it. We're going to see this too with the
Speaker 1: shift to green a greener economy. Some people are going
Speaker 1: to lose their jobs even though it's better for everyone.
Speaker 1: And so I mean, I think acknowledging that some people
Speaker 1: feel and are harmed by this, but that's a small
Speaker 1: concentrated group, and taking steps to address that allows us
Speaker 1: to do things that make the economy grow and be
Speaker 1: more productive. I wanted to come back to fertility. Larry's
Speaker 1: pointed out a way in which economics, whether misperceived or not,
Speaker 1: may affect our willingness to have immigration. What about fertility?
Speaker 1: Are there economic causes for the reduction and fertility? So
Speaker 1: the decline in US fertility and it's really being driven
Speaker 1: by a plummeting of birth rates since two thousand seven.
Speaker 1: Births fell after the Great Recession. They haven't recovered. Um,
Speaker 1: you can't point to any any policy or economic factor
Speaker 1: that's changed since two thousand seven. So sometimes people will
Speaker 1: say things like childcare has become more expensive, and if
Speaker 1: we just made childcare less expensive, people would return to
Speaker 1: having more than two kids. I do not that is
Speaker 1: just not the case, right, There's nothing, uh, there's nothing
Speaker 1: that easy that we could point to. And in fact,
Speaker 1: us women now are just having births in the same
Speaker 1: way that women and other high income try countries have
Speaker 1: reduced their birthrates long before, in the eighties and nineties.
Speaker 1: So I don't think this is going to be easy
Speaker 1: to turn around. Lots of other countries have taken direct
Speaker 1: steps to try and incentivize people to have more kids.
Speaker 1: There's a lot of countries that have experimented with baby
Speaker 1: bonuses a few thousand dollars. Birthrates go up a little
Speaker 1: bit in the following year, but nothing like the increase
Speaker 1: in infertility we would need to get back to replacement level. Also,
Speaker 1: having an expert like you here, I can't resist stepping
Speaker 1: out of our mutual lane as economists to ask a
Speaker 1: question I suspect is on many people's minds. Do you
Speaker 1: think that the recent Supreme Court decision and the steps
Speaker 1: that are going to be taken in a number of states,
Speaker 1: do you think that's going to materially affect the number
Speaker 1: of births in the United States. The we do have
Speaker 1: estimates on this based based on you know, lots of
Speaker 1: data we have about how abortion restrictions, you know, lead
Speaker 1: to more birthrates. I expect there will be about or
Speaker 1: thousand more births a year. UM. So uh, yes, not
Speaker 1: this is this is not going to bring fertility rates
Speaker 1: back to where they were. This is going to mean
Speaker 1: that some women who wouldn't want to have a child
Speaker 1: now are going to UM. Since you raise the issue,
Speaker 1: I will say that this makes the imperative of doing
Speaker 1: more to support kids and low income women in this
Speaker 1: country that much stronger. Which is, you know that that
Speaker 1: was something that Congress was talking about for a brief
Speaker 1: moment in the initial build back Better That stuff got
Speaker 1: jettisoned in the post Dogs decision paradigm. We are going
Speaker 1: to have some more births disproportionately born to low income women,
Speaker 1: and we need to talk about how we're going to
Speaker 1: make sure that those children are well taken care of. So, Larry,
Speaker 1: can we make up the loss of population and workers
Speaker 1: with productivity. We have the Chips and Science Act, now
Speaker 1: we have the Inflation Production Act, both of which I
Speaker 1: understand our meant to increase productivity. Can we make it
Speaker 1: up and increase productivity? You know, Melissa organized a terrific
Speaker 1: session here on R and D and science leadership issues.
Speaker 1: I think there's a lot we can do, but it's
Speaker 1: both about spending money and it's about spending it well.
Speaker 1: Thank you so much. Has been a great discussion. I
Speaker 1: wish I were out there and ask with you. I
Speaker 1: could learn a lot more. But thank you so much
Speaker 1: for our very special trader Larry Summers of Harvard and
Speaker 1: Lissa Carney, Professor of economics at the University of Maryland. Finally,
Speaker 1: one more thought. Heavy is the head that wears the crown,
Speaker 1: at least according to Shakespeare's Henry the Fourth. And it's
Speaker 1: not only heavy, it's hard to pass that crown under
Speaker 1: the next head, at least judging by how often it
Speaker 1: doesn't seem to work. We don't have to go all
Speaker 1: the way back to Lear to find leaders bungling their
Speaker 1: succession plans. And they have dividance in three our kingdom,
Speaker 1: it's a houst intense to shake well cares in business
Speaker 1: from my age concerning them on the youngest we all
Speaker 1: know how that worked out for King Leir. And there
Speaker 1: are plenty of more recent examples, though, particularly in the
Speaker 1: world of business, like Jack Welch annointing Jeff M. L
Speaker 1: to carry on his legend at GE, something that didn't
Speaker 1: work out so well, although Jeff seemed to be the
Speaker 1: last to know when he spoke to our John Nichols
Speaker 1: Wade in two seventeen, not long before he had his
Speaker 1: crown removed. We always have a group of successors, and
Speaker 1: I always think you've got to earn it every day.
Speaker 1: So you've been doing it in a while, I feel great,
Speaker 1: and we'll see where it goes. Or Kevin Johnson, who
Speaker 1: had the bad fortune to be the second CEO to
Speaker 1: replace Starbucks chief Howard Schultz, only to be succeeded by
Speaker 1: you guessed it, Howard Schultz. Though when I spoke with
Speaker 1: Kevin and two nine, he admitted that it was tricky
Speaker 1: in a transition from founder lead to founder inspired. Those
Speaker 1: transitions oftentimes are the most difficult and the most critical
Speaker 1: transition that any company will go through. And this week
Speaker 1: we got yet another example when the founders of the
Speaker 1: Carlisle Group announced that their handpicked air Tucson Lee would
Speaker 1: be leaving abruptly to re replaced at least temporarily by
Speaker 1: Bill Conway, one of those founders who picked him, says,
Speaker 1: definite that we've shaken the investment universe. Let's not be
Speaker 1: coy about it. Ten pm Eastern on a Sunday night.
Speaker 1: And remember, like I said, he's stepping down before the
Speaker 1: contract is even up. But it wasn't only q Lee
Speaker 1: who stepped down this week. We also saw a legend
Speaker 1: prepared to move on when Serena Williams, arguably the greatest
Speaker 1: of all time in women's tennis, announced that she would
Speaker 1: be retiring after the U S opened this year, something
Speaker 1: she had just joked about earlier. Every tennis player thinks
Speaker 1: about the R word as soon as they hit five years.
Speaker 1: And when it comes to Serena, I'm not sure that
Speaker 1: we're going to see any successor anytime soon. So given
Speaker 1: how much drama there is around the subject, it shouldn't
Speaker 1: be surprising that there is a hit TV drama series
Speaker 1: given over to the matter of succession. Because it's one
Speaker 1: thing to know the boss has to go, it's quite
Speaker 1: another to figure out who should be the new boss.
Speaker 1: A special if you're warring with family members, he's erratic,
Speaker 1: he's making bad decisions. If he's not careful, he's going
Speaker 1: to destroy the company. And what you're going to do something?
Speaker 1: I think I'm the best option, all right, because you
Speaker 1: like playing boss. That does it. For this episode of
Speaker 1: Wall Street Week, I'm David Weston. This is Bloomberg. See
Speaker 1: you next week.