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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: It's also privileged. Speak to Tiffany Wilding. She's at pimco.

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Speaker 2: Toughest job on the economics beat. She has to go

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Speaker 2: into a bunch of animals that manage fixed income paper

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Speaker 2: and tell them what to do. Tiffany, what will be

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Speaker 2: your message off this jobs report to the fixed income

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Speaker 2: horde at Pimco.

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Speaker 3: Yeah, Well, so, obviously the unemployment rate tick up is

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Speaker 3: the focus of markets as long as well as the

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Speaker 3: fact that wages wage inflation cooled a little bit, you know,

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Speaker 3: But I guess what I would say is that the

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Speaker 3: household survey, which was the basis of that unemployment rate increase,

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Speaker 3: you know, it was weaker than the establishment survey, which

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Speaker 3: is the headline payroll figure. You know, from a headline

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Speaker 3: payroll figure, we're still getting a solid pace of payroll games.

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Speaker 3: And if you look at the details of that, I think,

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Speaker 3: I think you guys were talking about this earlier, but healthcare, education,

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Speaker 3: government sectors have been really strong. But even outside of that,

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Speaker 3: if you look at everything else, it almost looks like

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Speaker 3: it's going to it's re accelerating in terms of payroll growth.

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Speaker 3: So you know, I would still say this. You know,

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Speaker 3: every report can be noisy. Smoothing through the noise, US

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Speaker 3: economists still looking pretty good here, growth looking pretty good.

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Speaker 1: So as somebody who does not do this for a living, Tiffany,

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Speaker 1: do I focus on the fact that the change in

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Speaker 1: nonfarm payrolls came in better than expected at two hundred

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Speaker 1: and seventy five thousand versus consensus or that negative revision.

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Speaker 1: It's kind of a I'm not sure which way to

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Speaker 1: go there.

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Speaker 3: Yeah, No, I think that's incredibly fair. The January report,

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Speaker 3: you know, I think was upwardly biased as a result

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Speaker 3: of the seasonal factors. It's been incredibly difficult to seasonally

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Speaker 3: adjust data after the pandemic, just as a result of

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Speaker 3: changing behaviors. You know, usually at the beginning of the year,

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Speaker 3: you get companies that are sort of calling workers. They're

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Speaker 3: you know, they're reducing their headcount after the holiday rush,

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Speaker 3: et cetera. You're just getting less of that now because

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Speaker 3: of you know, labor hoarding trends and just wanting to

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Speaker 3: keep employed employ employee ease. So the seasonal factors are

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Speaker 3: kind of messed up as a result. You know, But again,

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Speaker 3: we like to look at we like to smooth through data.

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Speaker 3: We like to look at three month moving averages, and

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Speaker 3: on that perspective, you know, things still look pretty good.

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Speaker 1: How about on the wage front, Tiffany again zero point

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Speaker 1: one percent on a month a month basis gain. The

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Speaker 1: consensus was for plus zero point two so a little

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Speaker 1: bit weaker there and certainly sharply down from last month.

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Speaker 1: But again, who knows what happened in last month with

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Speaker 1: with with the data, talk to us about kind of

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Speaker 1: your view about wages.

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Speaker 3: Yeah. Here again, you know, you have to smooth through

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Speaker 3: the noise. The data can be noisy, and when we

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Speaker 3: do that, what I would say is just that, uh,

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Speaker 3: wage indicators, and it's not only the average hourly earnings data,

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Speaker 3: but it also looks like you know, if you look

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Speaker 3: at the Atlanta Fed measure and other another data, they're

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Speaker 3: just decelerating more slowly than the price level than the

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Speaker 3: disinflation that we've seen with the price data. So you

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Speaker 3: know what that suggests. You know, obviously wages are less

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Speaker 3: flexible than prices. It's not shocking that that's happening, you know,

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Speaker 3: But we would argue the process is slow. You need

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Speaker 3: more cooling in the labor market. You need the unemployment

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Speaker 3: rate to start to go up a little bit, you know,

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Speaker 3: in order to get some more cooling in wage inflation

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Speaker 3: and overall, you know, at least right now, wage inflation

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Speaker 3: still looks like it's running at a level that is

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Speaker 3: above where you would think levels would be consistent with

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Speaker 3: the FEDCE target. So we still have some work to do,

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Speaker 3: is what I would say.

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Speaker 2: Based off your economics and not off you know, a portfolio,

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Speaker 2: you know, management and all that, but off your economics,

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Speaker 2: where's the ten year inflation adjusted yield a year from now?

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Speaker 2: We're at two percent? When we're effervescent two point zero

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Speaker 2: five percent. We've had a challenging week. We've brought the

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Speaker 2: ten year really into one point eight zero percent. Where's

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Speaker 2: that a year from not tiffany?

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Speaker 3: Well, you know, so as you know, we don't forecasts.

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Speaker 2: Nobody watching on YouTube.

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Speaker 3: Come So so what I what I would say is this,

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Speaker 3: when we look at longer term real interest rates, we

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Speaker 3: like to look at the five year five year, for example,

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Speaker 3: and when we look at those levels, we like to

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Speaker 3: compare them to what we think is a reasonable level

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Speaker 3: for the underlying neutral interest rate in the US economy.

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Speaker 3: And we think that is kind of still in a

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Speaker 3: range of zero to one percent. Longer term, real neutral

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Speaker 3: interest rates are above that. In other words, we think

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Speaker 3: policy is restrictive, and that's exactly what the economy needs

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Speaker 3: right now in order to cool things off in order

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Speaker 3: to bring inflation back down. But the economy will not

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Speaker 3: need restrictive policy forever. Right once inflation is backed, you know,

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Speaker 3: in a comfortable level for the Fed, they will start

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Speaker 3: to ease. They will start to bring that restrictive policy

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Speaker 3: back more into alignment. So all of that is to say,

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Speaker 3: is that real rates are elevated. We think it's an

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Speaker 3: incredible opportunity for bond investors. Yeah, because because they need

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Speaker 3: to be elevated in order to help the economy, was

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Speaker 3: kind of a gift in terms of yields for bond

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Speaker 3: investors at this point.

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Speaker 2: Can you can you model that the gift goes away

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Speaker 2: and we go back to some form of low rate

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Speaker 2: regime or is that just ancient history?

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Speaker 3: Well, you know, I guess what we would say there is,

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Speaker 3: you know, we're elevated, you know, relative to where we

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Speaker 3: think neutral is. We think they probably you know, rates

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Speaker 3: will come down now, whether we go back down to

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Speaker 3: zero or even negative if you're looking at real rates

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Speaker 3: or you know, zero kind of nominal in the policy rate.

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Speaker 3: You know, whether they go back down there is going

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Speaker 3: to be contingent on whether the US economy goes into recession.

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Speaker 3: And you know, on that point, I would say that,

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Speaker 3: you know, the soft landing looks much more achievable now

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Speaker 3: than it did a year ago. Of course, there are

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Speaker 3: risks that still remain. There are hot spots in the

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Speaker 3: US economy that we're watching very closely. You know, regional

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Speaker 3: banks and the cre market. You know clearly there's a

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Speaker 3: recession going on within you know, the office space of SIRI.

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Speaker 3: Regional banks have a lot of exposure on their balance sheet.

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Speaker 3: A result of that, we think some of the smaller

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Speaker 3: regional banks will you know, they're probably under reserved for

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Speaker 3: that exposure. So all of that is to say is

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Speaker 3: there's hot spots in the economy. But nevertheless, you know,

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Speaker 3: we think rates on average will be higher than they were,

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Speaker 3: you know for the decade pre pandemic.

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Speaker 2: Tiffany asking for a friend, can you get us tickets

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Speaker 2: to Pepperdine to the March Madness West Regional? Do you

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Speaker 2: got pullet on.

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Speaker 3: That I'm not the right person to ask if PIMS

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Speaker 3: go for that unfortunately.

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Speaker 2: Well we'll ask you. Good morning Dan,