WEBVTT - Bloomberg Surveillance TV: October 3, 2024 0:00:02.440 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.120 Terminal and the Bloomberg Business app. Job was flaends this 0:00:37.159 --> 0:00:39.640 morning two twenty five. The estimate two twenty one the 0:00:39.680 --> 0:00:43.680 previous week are revised to nineteen into tomorrow. Payrolls the 0:00:43.800 --> 0:00:46.400 estimate in our survey one fifty the previous month one 0:00:46.520 --> 0:00:48.599 forty two. Mike be Keith, thank you, sir. With us 0:00:48.600 --> 0:00:51.240 now as Lindsay Piegs O Stephel. Lindsay, Let's talk about 0:00:51.240 --> 0:00:53.960 the numbers that just came out. Anything to fear, anything 0:00:54.000 --> 0:00:56.360 to worry about. Looking at the labor market data through 0:00:56.400 --> 0:00:57.120 this week. 0:00:57.600 --> 0:01:00.200 And really not yet. The job was claim see to 0:01:00.200 --> 0:01:02.000 be pretty steady. We have seen a little bit of 0:01:02.000 --> 0:01:06.960 weekly volatility, but nothing to indicate a sizeable directional trend. 0:01:07.560 --> 0:01:10.039 Right now, we continue to see that the labor market 0:01:10.120 --> 0:01:14.920 remains tight ish with some indications of cooling momentum. But 0:01:15.000 --> 0:01:19.240 again that cooling suggests the data is simply moving more 0:01:19.280 --> 0:01:22.920 towards a neutral state as opposed to an indication of 0:01:23.080 --> 0:01:25.680 mounting weakness. As we look further to the end of 0:01:25.720 --> 0:01:28.360 the year and turn that page into twenty twenty five. 0:01:28.280 --> 0:01:30.240 Where do you get any degree of confidence that we'd 0:01:30.280 --> 0:01:32.919 stabilize in this state at this level. 0:01:33.800 --> 0:01:35.720 Well, I don't think we're going to get much confidence 0:01:35.760 --> 0:01:38.880 from jobless claims per se, at least not the weekly 0:01:39.400 --> 0:01:43.000 data that we've stabilized. Big confidence is going to come 0:01:43.040 --> 0:01:47.000 from more improvement or more stabilization in the not farm 0:01:47.040 --> 0:01:49.520 payrolls report. So Friday is going to be a very 0:01:49.600 --> 0:01:53.840 key driver, not only for confidence for investors, but for 0:01:53.880 --> 0:01:57.000 the Fed officials looking to make that determination of what's 0:01:57.040 --> 0:02:01.280 the appropriate next move for November and December. If we 0:02:01.360 --> 0:02:05.440 see more indications of cooling momentum, I think that's going 0:02:05.480 --> 0:02:08.400 to bolster the case for a larger, more aggressive second 0:02:08.520 --> 0:02:12.120 round fifty basis point cut. But if we see more 0:02:12.240 --> 0:02:16.280 steady conditions, if we see more stabilization. That's going to 0:02:16.280 --> 0:02:19.880 make it pretty difficult, coupled with earlier on even inflation 0:02:20.000 --> 0:02:23.640 data from the PCE to justify anything beyond a twenty 0:02:23.639 --> 0:02:26.720 five basis point cut. And should we see the numbers 0:02:26.720 --> 0:02:29.160 come into the upside, I think the FED may be 0:02:29.160 --> 0:02:31.160 willing to sit on the sideline and take a pause 0:02:31.200 --> 0:02:31.799 in November. 0:02:32.080 --> 0:02:35.080 Forgive me, because I've been conditioned my experience, lindsay, But 0:02:35.160 --> 0:02:38.000 every time we're heading into a non farm payrolls everyone 0:02:38.000 --> 0:02:39.600 says this is going to be decisive. It's going to 0:02:39.639 --> 0:02:42.080 tell us where we are in current terms of on 0:02:42.160 --> 0:02:44.840 the brink of some sort of deterioration or some you know, 0:02:45.080 --> 0:02:47.240 steady as he goes type of state. And then it 0:02:47.280 --> 0:02:50.120 comes out and people find fifteen different narratives to justify 0:02:50.400 --> 0:02:53.320 within that same data. Lindsay, why should this be any different? 0:02:54.280 --> 0:02:56.959 Well, I think again, it's not the end all, it's 0:02:56.960 --> 0:02:59.800 not the deciding factor for November, but it is one 0:02:59.800 --> 0:03:03.120 of the key pieces. We have a handful of key 0:03:03.240 --> 0:03:05.919 data points between now and November, and the Fed is 0:03:05.960 --> 0:03:08.720 going to look at them in their entirety. So coupled 0:03:08.760 --> 0:03:10.919 with the idea that the PCE, yes, it's a key 0:03:11.000 --> 0:03:14.200 driver but it was mixed. It was uneven, the headline retreated, 0:03:14.240 --> 0:03:18.200 the core showed further upward momentum. Now we're going to 0:03:18.200 --> 0:03:20.560 turn our focus to the labor market. If the labor 0:03:20.600 --> 0:03:23.960 market comes in very clear to the upside or the downside, 0:03:24.200 --> 0:03:26.760 that's going to be a very key driving factor to 0:03:26.800 --> 0:03:29.120 that decision. But again, if it comes in mixed, the 0:03:29.160 --> 0:03:31.559 FED is likely to say, well, we need more indications. 0:03:31.760 --> 0:03:33.560 We're going to wait for a next round of inflation, 0:03:33.600 --> 0:03:35.400 We're going to wait for the next round of the 0:03:35.480 --> 0:03:38.480 employment data. So it's not that one data point is 0:03:38.480 --> 0:03:41.000 going to make the decision, but each of these data 0:03:41.040 --> 0:03:45.000 points becomes increasingly more important as the picture is not 0:03:45.120 --> 0:03:47.480 yet clear as to what the FED should be doing 0:03:47.800 --> 0:03:50.640 and the size and the momentum of these policy adjustments 0:03:50.640 --> 0:03:51.920 that the market is anticipating. 0:03:52.080 --> 0:03:54.320 Lindsay, how much salt though needs to be thrown on 0:03:54.640 --> 0:03:58.000 the next data point of the non Frompezer report on 0:03:58.040 --> 0:04:00.000 November first. 0:04:00.120 --> 0:04:03.880 Well, there is going to be some adjustments that have 0:04:03.960 --> 0:04:06.760 to be taken into account. Of course, the port strike, 0:04:06.840 --> 0:04:10.240 of course the hurricane. All of these events are going 0:04:10.280 --> 0:04:13.920 to provide additional volatility, but it's likely that we do 0:04:13.960 --> 0:04:17.360 see most of that volatility not necessarily hit the November report, 0:04:17.600 --> 0:04:19.839 It may take an additional month to come through. 0:04:20.200 --> 0:04:20.279 That. 0:04:20.400 --> 0:04:23.479 Being said, if we did see that type of distraction 0:04:23.640 --> 0:04:27.240 or volatility, the FED can also look through that. So yes, 0:04:27.279 --> 0:04:29.320 there is some amount of we need to look at 0:04:29.360 --> 0:04:31.760 the data point with a grain of salt given the 0:04:31.880 --> 0:04:35.160 underlying factors, these one off effects, But the FED is 0:04:35.200 --> 0:04:37.160 smart enough to look through that. They're going to see 0:04:37.160 --> 0:04:40.560 the underlying directional momentum, and again that's going to help 0:04:41.040 --> 0:04:44.560 decide where the FED policy needs to go from here. 0:04:44.680 --> 0:04:46.360 What's your best guess fit tomorrow? 0:04:47.560 --> 0:04:49.960 I think we are going to see something similar along 0:04:50.000 --> 0:04:51.880 what we saw last month. I think one hundred and 0:04:51.960 --> 0:04:54.960 forty one hundred and fifty thousand is very reasonable, keeping 0:04:55.040 --> 0:04:58.320 us on par with again the pace of job creation, 0:04:58.920 --> 0:05:01.159 raising the three month out very closer to around one 0:05:01.240 --> 0:05:04.480 hundred and thirty thousand, But the unemployment rates still study 0:05:04.480 --> 0:05:07.720 around four point two percent, well below what the FED 0:05:07.800 --> 0:05:11.520 is designated as that full employment range or the sustainable 0:05:11.600 --> 0:05:14.599 level of joblessness. So I think we get a somewhat 0:05:14.640 --> 0:05:20.200 favorable report, still indicating tight ish conditions and still indicating 0:05:20.640 --> 0:05:24.719 the need for a very patient, tempered, controlled reduction of 0:05:24.839 --> 0:05:30.680 rates as again inflation. Their job of reinstating price stability 0:05:30.960 --> 0:05:32.120 has not yet been met. 0:05:32.320 --> 0:05:44.680 Lindsay Pick of Stayful, Lindsay, thank you, Adam Poison of 0:05:44.680 --> 0:05:47.480 the Peterson Institute. With this to say, I stand by 0:05:47.560 --> 0:05:50.040 my col The Fed will stop cunning rates by March 0:05:50.080 --> 0:05:52.719 of twenty five and will be hiking by June of 0:05:52.760 --> 0:05:56.000 twenty five, seeing a forty percent chance if Harris is 0:05:56.040 --> 0:06:00.480 elected eighty five percent plus if Trump is elected. Adam 0:06:00.760 --> 0:06:03.000 joined us now, Adam, welcome back to the program, sir. 0:06:03.040 --> 0:06:05.000 We've got lots of work through here. Let's just start 0:06:05.120 --> 0:06:07.560 at the top. Why is the outlook for you in 0:06:07.600 --> 0:06:09.839 twenty twenty five so election dependent? 0:06:11.120 --> 0:06:13.400 Thanks for having me back, John. I think it's election 0:06:13.520 --> 0:06:17.200 dependent in two reasons. The first is whether it's Harris 0:06:17.279 --> 0:06:21.800 or Trump. I think the commentariat and a lot of 0:06:21.839 --> 0:06:26.640 the market people are overestimating the likelihood that a divided 0:06:26.720 --> 0:06:30.640 Congress will prevent fiscal expansion. You will get some fiscal 0:06:30.720 --> 0:06:33.479 expansion if it's Harris, and you will get outrageous fiscal 0:06:33.560 --> 0:06:36.640 expansion if it's Trump. And Emery and I have talked 0:06:36.640 --> 0:06:40.240 about this on our previous appearance. I think Congress is 0:06:40.279 --> 0:06:43.279 not going to block it either way. The second reason 0:06:43.400 --> 0:06:46.160 is specifically to do with Trump. In a recent analysis 0:06:46.200 --> 0:06:50.039 to Peterson's to put out last week, we go through 0:06:50.200 --> 0:06:54.359 very carefully what his plans for general across the board tariffs, 0:06:55.560 --> 0:07:01.920 particularly migration deportation policy and interference with FED independence would mean. 0:07:01.960 --> 0:07:04.120 And that puts you at an inflation rate of well 0:07:04.160 --> 0:07:05.840 above four percent easily. 0:07:06.400 --> 0:07:07.960 And I mean you've made the argument O said that 0:07:08.000 --> 0:07:10.400 you think the fence should be preparing for two way 0:07:10.480 --> 0:07:13.679 risk and should be preparing market participants and the general 0:07:13.720 --> 0:07:16.160 public for two way risk as well. That reminded me, 0:07:16.320 --> 0:07:18.480 like it reminded you of the situation that Governor Countie 0:07:18.560 --> 0:07:21.080 was in back in twenty sixteen. Why do you believe 0:07:21.120 --> 0:07:23.640 that's the right idea? 0:07:23.720 --> 0:07:26.800 I think, John, thanks for having me back to talk 0:07:26.800 --> 0:07:29.360 about this. And you're right about the parallel with the 0:07:29.360 --> 0:07:32.160 Bank of England facing the Brexit call something very political 0:07:32.200 --> 0:07:34.440 where they don't want to come down politically. But it's 0:07:34.520 --> 0:07:37.920 disingenuous to just sit there and say, well, what will happen? 0:07:38.240 --> 0:07:38.840 What will happen? 0:07:39.200 --> 0:07:41.840 I mean in the end that is what will happen 0:07:41.880 --> 0:07:45.440 if it doesn't affect the politics or are the outcomes. 0:07:45.960 --> 0:07:49.320 But if you're choosing to just every meeting just tack 0:07:49.480 --> 0:07:53.960 back and forth and update people's expectations, you leave a 0:07:54.000 --> 0:07:57.480 lot of room for volatility, and arguably you're going to 0:07:57.520 --> 0:08:00.320 cause more harm to the economy. Sometimes you have to 0:08:00.320 --> 0:08:03.480 be honest and just say, look, we are not going 0:08:03.520 --> 0:08:06.720 to pretend we the FED have a view on Trump 0:08:06.800 --> 0:08:08.960 versus Harris, but we think there's a high risk of 0:08:09.000 --> 0:08:12.080 fiscal expansion and a high risk of additional tariffs, and 0:08:12.080 --> 0:08:15.360 a high risk of disruption the labor markets either way, 0:08:16.040 --> 0:08:20.040 and all of that is inflationary or stagflationary. So therefore 0:08:20.080 --> 0:08:23.600 we should not be encouraging the idea that there's either 0:08:24.960 --> 0:08:27.840 a further path of rate cuts in twenty twenty five 0:08:28.160 --> 0:08:30.880 or encouraging the idea that all the risks are to 0:08:30.920 --> 0:08:33.599 the downside. This is different than the clip you just 0:08:33.640 --> 0:08:37.040 showed a Beyonco. My concerns are about the policy changes, 0:08:37.440 --> 0:08:39.960 and also, as I've written about and we've talked about, 0:08:40.320 --> 0:08:43.480 that the FED is not as tight now as they 0:08:43.480 --> 0:08:46.320 think they are. It's not about that there's this persistent 0:08:46.400 --> 0:08:49.440 inflation no landing. It's that new shocks are coming and 0:08:49.840 --> 0:08:51.520 policy is not as tight as they think. 0:08:51.760 --> 0:08:53.800 There're two things here, Adam. One is they're not as 0:08:53.800 --> 0:08:55.880 tight as they think they are, a question around neutral, 0:08:55.920 --> 0:08:57.319 which is something that a lot of people. 0:08:57.160 --> 0:08:58.000 In markets debate. 0:08:58.320 --> 0:09:01.120 Another thing is how much FED try to get ahead 0:09:01.120 --> 0:09:04.240 of possible policy changes that could expand the deficit. How 0:09:04.320 --> 0:09:06.800 much would the FED be exposing it to itself to 0:09:07.040 --> 0:09:09.240 incredible political risk if it weighed in, I mean, if 0:09:09.240 --> 0:09:12.199 it didn't pingpong around what the data is actually showing 0:09:12.280 --> 0:09:14.480 right now and try to make a statement on whose 0:09:14.559 --> 0:09:18.280 programs would potentially be more inflationary at a time where 0:09:18.520 --> 0:09:22.120 the arguments on both sides contradict some of what you've 0:09:22.120 --> 0:09:22.920 been talking about. 0:09:23.800 --> 0:09:27.560 Well, the arguments claimed Lisa may contradict, but the facts don't, 0:09:27.640 --> 0:09:29.439 and the Fed's job is to follow the facts and 0:09:29.480 --> 0:09:33.040 the basic economics. I think it is a risk either way. 0:09:33.280 --> 0:09:36.520 And obviously Chair Pale and the leadership of the FED 0:09:36.840 --> 0:09:39.120 has decided the way they're going to manage the risk 0:09:39.200 --> 0:09:41.160 is they're only going to talk about the next three 0:09:41.160 --> 0:09:44.240 months and they're just going to focus on that. And 0:09:44.360 --> 0:09:46.400 that was very clear from the Chair. 0:09:46.280 --> 0:09:47.480 Speech at Jackson Hall. 0:09:47.880 --> 0:09:50.760 And so my push has bit at a minimum, admit 0:09:50.880 --> 0:09:54.600 that that's all you're doing, and don't let people get 0:09:54.679 --> 0:09:58.160 notions about twenty twenty five and beyond. But the second 0:09:58.200 --> 0:10:02.400 point is we're seeing major erosion of politics and norms 0:10:02.440 --> 0:10:05.600 and stability in the US. And if you look around 0:10:05.640 --> 0:10:08.280 the world where there are countries where you have that, 0:10:08.800 --> 0:10:12.400 generally the central bank ends up having to be more outspoken, 0:10:12.880 --> 0:10:17.320 more principled, and more courageous. This is like in South Africa, 0:10:17.520 --> 0:10:20.600 this is like in India, This is like it used 0:10:20.640 --> 0:10:23.680 to be in Italy before the Euro that the central 0:10:23.720 --> 0:10:26.760 bank has to stand up. And the FED situation isn't 0:10:26.840 --> 0:10:31.040 quite as delicate, Lisa as I think they think it is. 0:10:31.080 --> 0:10:34.439 And you just said it could be portrayed because both 0:10:34.480 --> 0:10:37.079 Harris and Trump are going to lead to expansions of 0:10:37.120 --> 0:10:40.360 fiscal policy. Both Harris and Trump are not going to 0:10:40.480 --> 0:10:42.960 roll back to Harris and are going to increase them somewhat. 0:10:43.320 --> 0:10:45.679 The FED doesn't have to say what we in a 0:10:45.800 --> 0:10:48.280 non partisan place can say. They don't have to say 0:10:48.320 --> 0:10:51.360 Trump is worse than Harris. They can just say the 0:10:51.480 --> 0:10:55.040 risks to inflationary policy are higher from both. 0:10:55.679 --> 0:10:58.199 Adam, what would you say about the fact that even 0:10:58.240 --> 0:11:00.679 though people keep talking about the jaffas, the bond market 0:11:00.679 --> 0:11:02.480 hasn't woken up to it, and a lot of people 0:11:02.520 --> 0:11:04.760 think it's never going to simply because it has it 0:11:04.840 --> 0:11:05.840 in the past. 0:11:07.440 --> 0:11:09.960 It's a fair concern. I mean, I don't have anything 0:11:10.000 --> 0:11:12.880 great to say about that, because this is the dynamic 0:11:12.960 --> 0:11:16.600 you get. The US is the global reserve currency. China 0:11:16.679 --> 0:11:18.840 is a mess, Europe is a partial mess. 0:11:19.200 --> 0:11:19.800 The world is. 0:11:19.760 --> 0:11:24.240 Unsecured in geoeconomic terms. So in relative terms, people are 0:11:24.240 --> 0:11:28.040 going to keep investing in the US. You were saying 0:11:28.200 --> 0:11:31.960 a little bit ago on the program about the increased 0:11:32.000 --> 0:11:35.200 interest in gold and Costco selling platinum to go with 0:11:35.280 --> 0:11:39.760 its meal kits. You know this is bitcoin. All these 0:11:39.800 --> 0:11:44.560 things are signs of people having trying to seek alternatives 0:11:44.600 --> 0:11:48.480 to the dollar when there's no good state level, no 0:11:48.559 --> 0:11:52.280 good alternative currency. And I think all these investments will 0:11:52.360 --> 0:11:55.840 ultimately end in tiers. But the fact is that temporarily 0:11:55.880 --> 0:11:59.280 gives the US board room to run its fiscal policy, 0:11:59.360 --> 0:12:02.000 run its de and that's part of why my forecast 0:12:02.160 --> 0:12:04.160 is that the deficits are only going to increase. It's 0:12:04.200 --> 0:12:06.480 not because I think that's good, it's not because I 0:12:06.480 --> 0:12:09.640 think it does no harm, but it is likely for 0:12:09.720 --> 0:12:10.280 the next. 0:12:10.040 --> 0:12:12.920 Few years, given all that you think about the direction 0:12:13.040 --> 0:12:15.679 of the FED and what they're doing now. Yesterday, Mark 0:12:15.760 --> 0:12:18.640 Rowan told Jonathan of Apollo that this was the most 0:12:18.679 --> 0:12:22.360 expensive insurance cut that we've seen from the FED in history. 0:12:22.400 --> 0:12:23.920 Would you agree with him? 0:12:24.920 --> 0:12:25.400 I guess so. 0:12:26.400 --> 0:12:28.840 I wouldn't put it as negative a spin on it. 0:12:28.960 --> 0:12:32.440 I guess I'm Marie as that sounds because insurance cuts 0:12:32.440 --> 0:12:35.800 are been rare in history, and I think insurance is good. 0:12:35.880 --> 0:12:37.880 You just have to be prepared once you've paid the 0:12:37.920 --> 0:12:40.440 insurance premium to write it off as a sunk costs. 0:12:41.040 --> 0:12:42.120 And that's all I've been saying. 0:12:42.120 --> 0:12:44.320 I mean, I bound the record saying the FED should 0:12:44.320 --> 0:12:46.400 have been cutting maybe not fifty, but should have been 0:12:46.440 --> 0:12:49.480 cutting this fall because given where the short term inflation 0:12:49.559 --> 0:12:55.200 outlooked is, which is down, and the risks of a 0:12:55.200 --> 0:12:57.680 potential recession, it's fine for them to take on a chart. 0:12:57.760 --> 0:13:00.760 So as I view that as good, but again, insurance 0:13:00.880 --> 0:13:03.520 is a some costs. My only point is warn people 0:13:03.880 --> 0:13:06.880 just because you're taking out insurance doesn't mean that you're 0:13:06.880 --> 0:13:09.560 going to keep going in that direction. In fact, just 0:13:09.559 --> 0:13:11.720 because you're hitting own insurance, you may make it less 0:13:11.880 --> 0:13:13.720 likely that you're going to keep cutting. 0:13:14.000 --> 0:13:14.920 Adam ahead of the election. 0:13:15.080 --> 0:13:17.280 You also have some thoughts on inflation, how it's central 0:13:17.320 --> 0:13:19.440 to voters, given the fact that we've had low inflation 0:13:19.760 --> 0:13:23.360 before this latest bout for forty years. Who's messaging that 0:13:23.520 --> 0:13:27.040 the best? Are voters basically blaming Kamala Harris because of 0:13:27.280 --> 0:13:30.160 Bidenomics and they put the blame on Biden Or is 0:13:30.200 --> 0:13:33.560 she doing a good job and explaining that terroriffs may 0:13:33.600 --> 0:13:34.440 be inflationary. 0:13:35.600 --> 0:13:37.400 I think it's more of the latter than the farmer 0:13:37.440 --> 0:13:39.880 hen Mary, thank you for engaging with Adam. I'm not 0:13:39.920 --> 0:13:43.600 a polster, but I can see that basic fact that 0:13:43.800 --> 0:13:47.240 inflation has become a dominant topic going into this election. 0:13:47.320 --> 0:13:51.120 All the polling data makes that very clear. People do 0:13:51.240 --> 0:13:54.600 feel in As we look through the data as best 0:13:54.640 --> 0:13:58.600 we can, they're noticed price level shifts, right, So eggs 0:13:58.640 --> 0:14:00.760 went up a lot in prices, it's not that they're 0:14:00.800 --> 0:14:01.680 continuing to rise. 0:14:01.720 --> 0:14:03.320 In fact, some of it is they're falling. 0:14:03.760 --> 0:14:07.200 But people still feel the relative price shift they've already seen, 0:14:07.400 --> 0:14:09.960 and we know that they always feel even if wages 0:14:10.040 --> 0:14:13.680 are going up, that stuff they deserve, and if prices 0:14:13.760 --> 0:14:16.720 go up, that's stuff that's unfair. So they don't see 0:14:16.720 --> 0:14:20.080 the balance very clearly they're allowed to see whatever they want, 0:14:20.120 --> 0:14:22.720 but that's how people see it in this context. I 0:14:22.720 --> 0:14:25.640 think the Harris campaign is doing a good job building 0:14:25.640 --> 0:14:28.880 on some things that the Biden administration finally said in 0:14:28.960 --> 0:14:31.320 the last six months or a year, which is that 0:14:31.560 --> 0:14:35.080 terrorifts are attacks, and there are particularly attacks on working 0:14:35.120 --> 0:14:38.720 people because the stuff people buy, their food, their choice, 0:14:38.720 --> 0:14:44.080 they're closed, they're inexpensive, furniture, they're electronics are infinitely cheaper 0:14:44.160 --> 0:14:48.400 because we allow inputs and we allow competition and we 0:14:48.480 --> 0:14:52.680 allow choice. And so I think that message from Harris 0:14:52.680 --> 0:14:56.200 campaign that they would not put on a general across 0:14:56.200 --> 0:14:58.400 the board tariff the way the Trump people and the 0:14:58.440 --> 0:15:02.440 president form. President Trump keeps saying he will is getting home. 0:15:02.880 --> 0:15:06.040 There's still a legacy that, you know, when you're president, 0:15:06.240 --> 0:15:09.080 you get the blame, just like the Fed, whatever happens 0:15:09.080 --> 0:15:09.640 on your watch. 0:15:09.680 --> 0:15:11.360 So there's still a legacy. 0:15:11.600 --> 0:15:14.520 Of Biden that inflation occurred on his watch. On whether 0:15:14.600 --> 0:15:18.040 or not it was his all that that doesn't matter. 0:15:18.080 --> 0:15:18.840 That's still a track. 0:15:19.360 --> 0:15:32.440 Adam poson Adam appreciate elsewhere on the Federal Reserve. The 0:15:32.440 --> 0:15:35.080 former New York Fed President Bill Dudley, in a new 0:15:35.160 --> 0:15:39.240 Bloomberg opinion column. Writing this, I've been too pessimistic about 0:15:39.240 --> 0:15:41.000 the risk of a so called hard landing for the 0:15:41.080 --> 0:15:44.040 US economy over the past few years. Although most of 0:15:44.080 --> 0:15:46.680 my conclusions that led to that view were correct, such 0:15:46.680 --> 0:15:50.080 an outcome remains very much in doubt. Bill joins us 0:15:50.120 --> 0:15:52.600 now for more. Bill, Welcome back to the program, sir. 0:15:52.600 --> 0:15:55.600 It's been quite a journey for you, an intellectual journey 0:15:55.600 --> 0:15:57.280 over the year so far. I want to go through 0:15:57.280 --> 0:15:59.680 a couple of headlines and you help me understand why 0:15:59.680 --> 0:16:01.880 you've as you think in somewhat. It was only back 0:16:01.920 --> 0:16:04.040 earlier this summer where you said I changed my mind 0:16:04.240 --> 0:16:06.800 the FED needs to cut rights now. Before the Federal 0:16:06.800 --> 0:16:08.920 Reserve meeting last time around, you said they need to 0:16:08.960 --> 0:16:12.480 go big. Now I think they will. They did this morning. 0:16:12.920 --> 0:16:15.720 My hard landing forecast turned out to be wrong. They'll 0:16:15.760 --> 0:16:17.720 just walk us through how you're thinking about things currently 0:16:18.000 --> 0:16:19.880 and what kind of policy this backdrop needs. 0:16:21.360 --> 0:16:24.040 Well, my original view was that FED would be late 0:16:24.080 --> 0:16:28.280 to tighten maitre policy. Check as a consequence, inflation go 0:16:28.360 --> 0:16:31.000 up and the labor market would get very tight check. 0:16:32.040 --> 0:16:34.320 Then the Federal Reserve would have to tighten maitre policy 0:16:34.360 --> 0:16:36.800 a lot check and the unplayer would have to go 0:16:36.880 --> 0:16:39.120 up at least they have a percentage point trigger the 0:16:39.120 --> 0:16:42.360 sam rule check, but the sham roll trigger. That doesn't 0:16:42.400 --> 0:16:44.520 seem like it's leading to recession. If you look at 0:16:44.560 --> 0:16:48.000 what that the GDP numbers, they've have been very firmly lately. 0:16:48.680 --> 0:16:51.560 Second quarter three percent, third quarters tracking two and a 0:16:51.600 --> 0:16:54.440 half percent. So even though I had the story right, 0:16:54.760 --> 0:16:57.840 it doesn't look like the conclusion is going to pan out. Yeah, 0:16:57.840 --> 0:17:00.040 it's just starting to say for sure. That's why the 0:17:00.240 --> 0:17:03.520 market has so much attention focused on it. And I 0:17:03.520 --> 0:17:05.919 thought I was interesting the summary of economic projections at 0:17:05.960 --> 0:17:09.879 the last FMC meeting. They actually in their summary of 0:17:09.880 --> 0:17:12.760 economic projections, they actually think that the downside risks to 0:17:12.840 --> 0:17:15.359 the labor market are actually greater now than the upside 0:17:15.440 --> 0:17:17.879 risk of the inflation. So they're worried about the exact 0:17:17.920 --> 0:17:20.760 same thing. And that's why tomorrow's labor market report is 0:17:20.760 --> 0:17:23.919 so important. If the labor market really starts to deteriorate, 0:17:24.680 --> 0:17:27.840 then I think the soft landing story will start to 0:17:27.840 --> 0:17:30.200 come into question. And that's why thefect cut fifty basis 0:17:30.200 --> 0:17:32.120 points a couple of weeks ago. 0:17:32.280 --> 0:17:34.679 I think a lot of people bill share your journey 0:17:34.800 --> 0:17:38.680 in terms of changing views and not understanding which models 0:17:38.680 --> 0:17:42.960 are actually accurate this time around. What in your analysis 0:17:43.400 --> 0:17:45.520 makes you think that this time is different and that 0:17:45.600 --> 0:17:49.120 some of the classic indicators that traditionally have foretold recession 0:17:49.800 --> 0:17:50.600 no longer work. 0:17:51.760 --> 0:17:52.919 I think two things are different. 0:17:53.000 --> 0:17:55.560 Number one, you had all these fiscal transfers during the 0:17:55.680 --> 0:17:59.160 pandemic to businesses and households, So business and household boundce 0:17:59.160 --> 0:18:01.920 sheets are in better shape than they typically are late 0:18:02.000 --> 0:18:04.719 in the business cycle. You know, for example, look at 0:18:04.720 --> 0:18:06.880 debt service calls for the household sector is still pretty 0:18:06.920 --> 0:18:10.000 low because people locked in very low mortgage rates during 0:18:10.040 --> 0:18:13.200 the servant during the pandemic. The second thing I think 0:18:13.280 --> 0:18:15.640 is different is that financial conditions have eased a lot, 0:18:15.720 --> 0:18:17.200 even before the federies. 0:18:16.800 --> 0:18:17.600 A cut rates. 0:18:17.960 --> 0:18:20.600 So financial conditions are We're at the most tightest about 0:18:20.920 --> 0:18:23.440 about a year ago, and since then it beads a lot, 0:18:23.480 --> 0:18:26.840 stock market up, bodils down, credit spreads tighter, and so 0:18:26.960 --> 0:18:29.240 even though manentrey policy is tighten, when you look at 0:18:29.280 --> 0:18:32.160 the level of short term rates, financial conditions have eased 0:18:32.160 --> 0:18:34.000 a lot, and that's supporting economic activity. 0:18:34.280 --> 0:18:35.640 What's to say we're landing at all? 0:18:35.640 --> 0:18:38.159 Bill Well that's a good question. 0:18:38.240 --> 0:18:40.800 I mean, I think you know the fact would like 0:18:40.880 --> 0:18:42.800 to economy to grow. You know, two to two and 0:18:42.840 --> 0:18:45.840 a half percent keeps the unemploying rate right where it is, 0:18:46.920 --> 0:18:49.359 and the third quarter looks like it's shaping up that way. 0:18:49.800 --> 0:18:51.680 But keeping on that very you know, that. 0:18:51.720 --> 0:18:54.920 Nice edge growth not strong enough to cause the researchers 0:18:54.920 --> 0:18:57.560 of inflation, not weak enough to lead to the kind 0:18:57.560 --> 0:19:00.000 of deterioration and labor market that would lead to recession. 0:19:00.200 --> 0:19:01.560 That's gonna be tough to keep on. 0:19:01.520 --> 0:19:04.000 That nice edge, Bill, What are you expecting for tomorrow? 0:19:05.119 --> 0:19:07.639 I think it'll be a decent payroll employer report. I mean, 0:19:07.680 --> 0:19:09.600 I think the estimates are around one hundred and forty thousand. 0:19:10.440 --> 0:19:11.800 That seems like a reagionable estiment. 0:19:12.000 --> 0:19:14.840 We have to remember, though, the payroll employment has a 0:19:14.880 --> 0:19:17.520 big standard era around those estimates, So you could get 0:19:17.520 --> 0:19:19.520 something like eighty thousand, or you get something like two 0:19:19.600 --> 0:19:21.919 hundred thousand, and it really wouldn't to tell you for 0:19:21.960 --> 0:19:25.320 sure that the economy has actually changed momentum, Bill. 0:19:25.160 --> 0:19:27.680 How difficult is that in the November seventh meeting going 0:19:27.720 --> 0:19:30.920 to be considering how messy the data might be, considering 0:19:30.960 --> 0:19:32.959 we might not have an outcome from the election. Can 0:19:33.000 --> 0:19:34.640 you think of a time like this one that they're 0:19:34.680 --> 0:19:36.200 going into in the next month. 0:19:36.840 --> 0:19:39.720 Well, the particular awkwardness is that there will be another 0:19:39.760 --> 0:19:43.200 payroll employer report during the blackout period right before. 0:19:43.000 --> 0:19:46.440 The fo C meeting. Look, I think that most. 0:19:46.200 --> 0:19:49.880 Of the momentum is for twenty five basis points at 0:19:49.880 --> 0:19:53.119 this point. Powell basically for shared that in a speech, 0:19:53.720 --> 0:19:55.399 the fact that you had all these people in the 0:19:55.680 --> 0:19:58.080 summer that projections that only had one more rate cut 0:19:58.119 --> 0:20:00.679 in their forecast after the last meeting also tells you 0:20:00.720 --> 0:20:02.280 that it's probably not going to be fifty. So I 0:20:03.080 --> 0:20:07.040 think the basic stories still intact, risks to the labor 0:20:07.119 --> 0:20:10.200