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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each

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Speaker 2: day for insight from the best in markets, economics, and

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Speaker 2: geopolitics from our global headquarters in New York City. We

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Speaker 2: are live on Bloomberg Television weekday mornings from six to

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Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,

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Speaker 2: or anywhere else you listen, and as always on the

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Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Joining us now

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Speaker 2: for a long discussion. Jim's out to the president of

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Speaker 2: Apollo Global Management. Jim, good morning, Good morning driving, and

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Speaker 2: happy birthday. Sarah's good time very much.

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Speaker 3: I appreciate it.

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Speaker 2: We spend too much time on the Federal Reserve. But

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Speaker 2: I do want your reaction to this journal piece overnight.

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Speaker 3: Well, I think I think that the President's already won.

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Speaker 3: It's a great distraction of headlines. I personally don't think

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Speaker 3: he's going to name anybody too early because right now

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Speaker 3: he's in the catbird seat of blaming without accountability, which

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Speaker 3: is classic Trump playbook. So I think the fact that

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Speaker 3: we're talking about. It is interesting. It's a great diversion

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Speaker 3: from the reality I think he does. There's no doubt

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Speaker 3: he wants rates lower. That's what's part of his plan

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Speaker 3: for many, many years, and that's how he doesn't like

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Speaker 3: to pay debt and he likes to pay low coupons

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Speaker 3: on it. But the fact that you know, I just

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Speaker 3: don't think that if you're Trump right now and you

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Speaker 3: take his playbook, he'll make this a conversation. But I

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Speaker 3: don't suspect he's going to do anything premature because he's

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Speaker 3: able to put blame on the current resident of the Fed,

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Speaker 3: and he likes to be in that position.

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Speaker 2: Your word's blaming with accountability without accountability. Is this something

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Speaker 2: you think he should be accountable for.

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Speaker 3: Well, certainly, I think if you think about what's going

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Speaker 3: on in the last three or four months, the issues

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Speaker 3: of tariffs, it feels like that's a little bit on

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Speaker 3: the sidelines right now. I know we haven't resolved, but

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Speaker 3: the marketplace has absorbed the idea of a ten percent

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Speaker 3: plus or minus tariff, maybe a little bit higher, but

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Speaker 3: to Trump's benefit, in the administration's benefit, the market has

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Speaker 3: absorbed that, moved on the issues about the Middle East

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Speaker 3: and all the challenges of foreign policy. There was a

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Speaker 3: lot of action last ten days ago and a week

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Speaker 3: and a half ago, and now that has been sort

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Speaker 3: of absorbed in the marketplace. The big elephant in the

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Speaker 3: room is still our deficit issue. You guys have talked

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Speaker 3: about it quite a bit. It's obviously the topic of

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Speaker 3: appropriate conversation, and so I think that is an important

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Speaker 3: topic that still remains. But we talked earlier in this

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Speaker 3: year about the decline of US exceptionalism. I think Mark

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Speaker 3: Twain was right that the PREMI that my death is

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Speaker 3: a bit premature, and certainly the market has moved on.

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Speaker 3: So I think the tariffs are a little bit off

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Speaker 3: on the side, the foreign policy issues are a little

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Speaker 3: bit off the side. Right now. The deficit issue is

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Speaker 3: a real issue. We can talk a little bit about

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Speaker 3: what's going on with the dollar. I personally think what's

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Speaker 3: going on with the dollar. I think there was a

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Speaker 3: lot of investors around the globe that invested in US

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Speaker 3: assets and they made money both ways on the currency

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Speaker 3: and on the underlying assets for almost ten years. And

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Speaker 3: they turned around and they found themselves really unhedged. And

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Speaker 3: I think you're going to see some pretty good numbers

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Speaker 3: out of the big banks this quarter because investors around

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Speaker 3: the globe have been rushing to hedge their dollar exposure.

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Speaker 3: But I think it's a ten year catchup that people

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Speaker 3: just didn't hedge their portfolios in massive scale. So I

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Speaker 3: don't look at this dollar decline is I look at

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Speaker 3: it as more of a technical factor than a long

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Speaker 3: long run impact on the health of the US economy.

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Speaker 1: There's a lot to impact there, including the breakout of

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Speaker 1: the hedging profits at some of the big banks, which

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Speaker 1: we'll all be now looking for. To build on what

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Speaker 1: John is asking about is the FED on the brink.

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Speaker 1: I don't want to say I have a policy error,

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Speaker 1: but it being too late kind of to build on

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Speaker 1: what President Trump is accusing him, because you are seeing

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Speaker 1: the weakening and the dollar accompanied by the biggest negativity,

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Speaker 1: the biggest in in downside economic surprises that we've seen

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Speaker 1: in a year.

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Speaker 3: If you look at the Bloomberg page on rates of

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Speaker 3: the G seven economies other than the UK, where the

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Speaker 3: outlier in terms of where our ten year yields are

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Speaker 3: and our yield curve is. You know, I sit in

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Speaker 3: my seat and I see a variety of inputs that.

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Speaker 3: Some tell me the economy is slowing down a little

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Speaker 3: bit with consumers. Some tell me inflation is still a

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Speaker 3: little bit more represented in the economy. I see, we

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Speaker 3: see inflation around three percent, three three and a half percent.

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Speaker 3: And I don't think it's obvious that the FED should

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Speaker 3: be cutting right now. I think it is a very

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Speaker 3: legitimate question to be asking what's the trajectory of the

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Speaker 3: FED activity? And so I don't think it's a slam

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Speaker 3: dunk decision. I know the market that the futures would

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Speaker 3: tell you three cuts in the next the rest of

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Speaker 3: the year, three three and f cuts, you know, Tors

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Speaker 3: and I are a bit skeptical on that. We see

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Speaker 3: what's going on, and I think there's maybe one cut.

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Speaker 3: Your basic question, is the FED conversation a really important

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Speaker 3: one right now? It is. I have a view that

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Speaker 3: rates are going to be a little bit stickier and

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Speaker 3: higher in the US than people think. We've had that

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Speaker 3: view for quite some time. But so it is a

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Speaker 3: good question for the administration to have right now. But

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Speaker 3: I'm not sure that's the primary question for the market.

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Speaker 1: One of the reasons why people keep asking this question

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Speaker 1: is would the FED be considering cutting for.

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Speaker 4: The right reasons for the wrong reasons.

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Speaker 1: The right reasons being disinflation, which you reject, but the

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Speaker 1: wrong reasons being because we are seeing a weakening in

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Speaker 1: the labor market as we see as an increase in

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Speaker 1: jobless claims. What's your sense of that based on what

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Speaker 1: you've seen with portfolio companies, what you've seen with your investments,

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Speaker 1: is that valid?

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Speaker 3: Yes, I think long term you can't argue with the

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Speaker 3: long term deflationary impact of technology and AI that is

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Speaker 3: out there now, whether that's six twelve, eighteen, twenty four months,

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Speaker 3: there's a massive deflationary impact from that activity. I just

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Speaker 3: don't think it's on the center of the plate right

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Speaker 3: now in the markets. It's out there, and I think

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Speaker 3: that you're fighting with short term still supply interruptions, hiring interruptions,

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Speaker 3: and some short term challenges that are inflationary versus a

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Speaker 3: long term backdrop of deflationary trends because of AI around

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Speaker 3: the globe. I think that's sort of the center converge.

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Speaker 3: When I'm back here in twenty twenty six and twenty

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Speaker 3: twenty seven, I think rates will probably be a bit

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Speaker 3: lower because of the technology impact. But I think in

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Speaker 3: the next six to nine months. I don't think rates

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Speaker 3: are going to be dramatically lower.

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Speaker 2: If you'd taken six months OFLF and came back to

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Speaker 2: work and look where the market was, I don't think

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Speaker 2: you'd have a clue when I think it happened here.

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Speaker 2: Equity's close to all time highs, credit spreads are very tight.

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Speaker 2: It's not a market is screaming count for rate cuts.

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Speaker 2: From your standpoint at Apollo, when you look at valuation, underwriting,

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Speaker 2: any red flags getting your attention, that's all at the moment.

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Speaker 3: You know, the me is amazingly resilient in the US.

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Speaker 3: When I was here three or four months ago, there

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Speaker 3: was concern, handeringing about the trajectory of the economy. There

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Speaker 3: was handeringing about non US investors, global investors investing in

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Speaker 3: the US. I've been all around the world the last

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Speaker 3: twelve weeks. American exceptionalism is front and center. Back you

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Speaker 3: talk about where valuations are and levels of equities and raids,

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Speaker 3: they're back. Global investors want to invest in the US.

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Speaker 3: They made a lot of noise. They thought they were

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Speaker 3: going to diversify themselves away, and they realized that breadth

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Speaker 3: and depth and the strength of the US economy and

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Speaker 3: the scale of what they need to invest, and the

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Speaker 3: US is the primary place to invest. It still is,

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Speaker 3: so you know, it's sharing as I was in Europe

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Speaker 3: a few weeks ago as well, your folks, I want

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Speaker 3: to talk about that. Amazingly is going on in Germany

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Speaker 3: right now. The reality is public markets are the narrative,

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Speaker 3: but private capital drives the economy and we're seeing it.

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Speaker 3: We've been amazingly active. Edm F last week a louto

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Speaker 3: matica what's going on in a variety of financing. So

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Speaker 3: it's been a very very busy time, but I'm not

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Speaker 3: seeing any red flags going off, and I really I

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Speaker 3: want to make sure we talk today about this concern

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Speaker 3: about the private capital private credit bubble versus just an

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Speaker 3: economic cycle. We're due for a credit cycle, but that

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Speaker 3: does not mean it's a bubble and private capital is

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Speaker 3: playing a bigger and bigger role. Look what we did

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Speaker 3: last week for ED and F in the UK and

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Speaker 3: Germany four and a f billion dollars strowing private capital

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Speaker 3: financing long duration debt to finish out their nuclear power

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Speaker 3: plant build. Really really important that we're playing that role.

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Speaker 2: Well, sit in Europe, let's just stay there. Off the

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Speaker 2: back of your travel. So you mentioned AD and F

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Speaker 2: big staling transaction. Also big target from you and the

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Speaker 2: team to invest was it one hundred billion in Germany

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Speaker 2: over the next ch title set.

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Speaker 3: If you're a leadership of journey right now, your goal

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Speaker 3: is to get a four trillion economy to a six

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Speaker 3: trillion economy, and you are I was with the administration.

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Speaker 3: You can talk to Murz. You know, they really are

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Speaker 3: the role of private capital along with government spending over

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Speaker 3: the next five or ten years.

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Speaker 2: They've been so dependent on the banking system in Europe

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Speaker 2: for such a long time. Can they get away from that?

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Speaker 2: Because I feel like I've been talking about this for

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Speaker 2: more than a decade.

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Speaker 3: Well, I think the evidence is hereto if you look

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Speaker 3: at the last twenty four months and what's going on

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Speaker 3: with the leading Italian banks. Look what's going on with HSBC,

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Speaker 3: what's going on with Barkley's and Deutsche Bank. They're operating

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Speaker 3: in a much different capital regime, with a focus on

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Speaker 3: shareholder value, with a focus on roe and they're really,

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Speaker 3: you know, not taking all the policy lending on their

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Speaker 3: balance sheet like they had in the past. So they're

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Speaker 3: actually operating the right way. What you didn't really see before.

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Speaker 3: Is the government really embracing in Germany, in France, in

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Speaker 3: the UK they want private capital to be part of

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Speaker 3: the solution because they know the government balance sheets cannot

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Speaker 3: do all that's needed in terms of the massive cappex

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Speaker 3: of transmission, line of transportation, of AI, of data centers.

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Speaker 3: They know they're behind. So if anything, this administration in

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Speaker 3: the US, the memo they sent out about what's going

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Speaker 3: on in the US and Europe stepping forward, European leadership

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Speaker 3: has taken notice. Let there be no doubt. I go

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Speaker 3: to Europe three four times a year. I've never been

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Speaker 3: so embraced as we were three weeks ago in Germany

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Speaker 3: and France about the role of private capital in this

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Speaker 3: build out.

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Speaker 4: How much is that driven by this US administration?

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Speaker 3: A lot? I mean, it's clear that they know that.

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Speaker 3: The European leadership has even if you look this morning

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Speaker 3: about how they're stepping up on defense spending with NATO.

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Speaker 3: So I think, you know, when I think about the

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Speaker 3: globe right now, again, taros are a little bit off

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Speaker 3: on the sidelines. They're part of the conversation. It's a

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Speaker 3: question of how much, not if or when. And I

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Speaker 3: do think they feel like there's a responsibility that they

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Speaker 3: have for their citizens, because when you look at the

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Speaker 3: last fifteen years and where the US has grown versus

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Speaker 3: europe growth, it's startling. You know, when I got out

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Speaker 3: a college a few decades ago, it was all about Japan.

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Speaker 3: Japan was going to take over the world. It was

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Speaker 3: all about Germany industrial taking over the world. That did

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Speaker 3: not come to play. And I know they have a

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Speaker 3: lot of catching up to do, and I just think

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Speaker 3: it's a very very power now. You know, if you watch,

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Speaker 3: if you listen, if you read the Draggy letter and

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Speaker 3: what he put forth eighteen months ago, Now if they

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Speaker 3: followed that all one hundred and fifty six pages in

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Speaker 3: great detail, it would be a watershed economic opportunity. And

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Speaker 3: I think parts of that will to come forth. But

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Speaker 3: they're already making moves on securitization other activities. And to

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Speaker 3: Jonathan's point, the European banks are a bit behind the

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Speaker 3: US in terms of the fundamental focus on roe and

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Speaker 3: shareholder return and capital efficiency, but I think they're I

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Speaker 3: don't want to say they're catching up, but they're getting

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Speaker 3: in line. Clearly.

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Speaker 2: You've talked about macro paralysis in the past. I don't

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Speaker 2: see any sign of paralysis when I urt site high

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Speaker 2: yield issuance, when I look at activity, do you see

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Speaker 2: paralysis at all?

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Speaker 3: I don't. And back to this last topic. I mean,

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Speaker 3: as you point out, at least a pointing out, the

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Speaker 3: two big topics that they need to really deal with

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Speaker 3: right now is the tariff on July ninth and the

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Speaker 3: big beautiful bill. But we're not talking about that this point.

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Speaker 3: We're talking about a FED chairman in nine months. And

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Speaker 3: I look at everything through. What this president has been

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Speaker 3: in the past is a real estate developer. It's all

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Speaker 3: about location, location, location. The FED pick will be about loyalty, loyalty, loyalty.

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Speaker 3: Let's not get confused. There isn't paralysis in the market.

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Speaker 3: As I mentioned before, you know the public markets in

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Speaker 3: the narrative, the private capital is really the driver of

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Speaker 3: the economy. A lot of activity going on in the

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Speaker 3: US on refinancing, in Europe, on the global industrial renaissance.

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Speaker 3: So we are on pace to have our busiest quarter

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Speaker 3: in origination we've had in a number of years, a

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Speaker 3: tremendous amount of activity across our equity platform, our infrastructure platform,

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Speaker 3: our credit platform. So I do think there was a

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Speaker 3: lot of handeringing, as I said six six or three

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Speaker 3: four months ago, and I think that's now on the sidelines,

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Speaker 3: maybe not on the narrative, but certainly on activity.

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Speaker 1: Is that activity in lieu of some of the deals

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Speaker 1: activity that we were expecting. Was it sort of expected

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Speaker 1: to be the deals and the IPOs and the big

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Speaker 1: boom for the banks, and instead it's a Powell coming

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Speaker 1: in and doing a lot of financing deals in the.

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Speaker 3: Back Well, I think too. I think the beginning of

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Speaker 3: the year, people projected that the busiest folks on Wall

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Speaker 3: Street would have been the ECM equity capital markets teams

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Speaker 3: and the M and A teams, And while they've both

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Speaker 3: been busy, the busiest folks have been their rate hedging

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Speaker 3: and derivative teams because of what's going on in the

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Speaker 3: dollar and concern about tariffs and such. But it's an

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Speaker 3: interesting back up. Even listening to your program this morning,

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Speaker 3: the fundamental economy is doing fine. It's doing well, maybe

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Speaker 3: not to the growth expectations that people had earlier this year,

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Speaker 3: and will come out somewhere around a two percent growth

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Speaker 3: with about three percent inflation. But whether it was Nvidia,

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Speaker 3: whether it was Micron. You know, a lot of cappec

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Speaker 3: still going, a lot of companies in the AI space

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Speaker 3: raising tremendous amounts of capital at high valuations with long

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Speaker 3: list of investors coming in, and the activity. As I

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Speaker 3: said earlier, what's going on in Europe right now about

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Speaker 3: that industrial renaissance. It's still going on. So again, I

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Speaker 3: think there's the headlines and then there's the reality of

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Speaker 3: the underlying economy and the role of private capital, which

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Speaker 3: is a much much bigger, longer term story.

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Speaker 5: How do you think you're going to decipher the reality

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Speaker 5: versus the headlines? When it comes to New York City.

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Speaker 5: You have a huge company here in New York and

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Speaker 5: a lot of people are concerned about a democratic socialist

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Speaker 5: becoming the mayor of the city.

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Speaker 3: You know, it's probably one of the most complicated jobs

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Speaker 3: in the world on the political stage in terms of

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Speaker 3: bringing a variety of the five boroughs together, the business,

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Speaker 3: the community, the unions, all the folks that make New

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Speaker 3: York the special place it is. As I've mentioned before,

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Speaker 3: three out of every hundred college graduates a year come

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Speaker 3: to New York. In the US, it's still the magnet

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Speaker 3: of talent and ambition. Uh So when you see somebody

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Speaker 3: that on the surface does not appear to have a

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Speaker 3: long resume of leadership and making tough decisions, really concerning.

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Speaker 3: And I think that we'll see now just winning the primary.

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Speaker 3: While in the past it might have been the litmus

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Speaker 3: test for being the mayor, I think there's still a

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Speaker 3: long time coming until November.

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Speaker 6: Build down the office in Florida. You're hearing.

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Speaker 4: There was a diplomatic response.

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Speaker 3: We are resid we we are, we are, we are

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Speaker 3: a New York company, got we we are. We are

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Speaker 3: determined to be here. I'm determined to be here. Our

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Speaker 3: leadership is determined to be here. We have people in

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Speaker 3: the office five days a week, is running. You know.

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Speaker 6: It's uh, Jim, It's good to see you. Happy birthday,

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Speaker 6: Jim Jelpless.

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Speaker 2: Claims initial claims lower that expected, continuing claims higher than expected,

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Speaker 2: and creeping higher over the past few months. From your

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Speaker 2: advantage point, President Dadi, how much weight would you put

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Speaker 2: on one versus the other and what's the labor market

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Speaker 2: picture look like in your point of view your opinion, Well.

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Speaker 7: The labor market shaping up to be solid, and the

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Speaker 7: data today confirmed that now continuing claims are going up

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Speaker 7: because it takes a little longer to find a job.

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Speaker 7: That's consistent with the hiring numbers just being slower as

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Speaker 7: the economy comes to a more sustainable pace. But when

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Speaker 7: I look at the labor market, there are really no

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Speaker 7: warning signs that it's weakening.

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Speaker 6: Will continue to.

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Speaker 7: Watch that, but right now it's progressing solidly, although more

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Speaker 7: slowly than before.

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Speaker 1: President Daily A lot of people have said that it

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Speaker 1: is a data dependent federal reserve, and yet we haven't

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Speaker 1: seen enough data to really understand or whether inflation is

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Speaker 1: the primary objective or whether it really is some of

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Speaker 1: the weakening that we've seen the labor market, albeit from

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Speaker 1: a strong place. When will you have enough data to

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Speaker 1: really make that determination.

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Speaker 7: Well, one of the challenges of central banking that you

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Speaker 7: just have to accept is that we never have perfect data,

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Speaker 7: So you're always making judgments, and you want sufficient data

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Speaker 7: to make a judgment that is really going to be

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Speaker 7: best for the American people. So right now we have

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Speaker 7: incoming information on the labor market which does not signal

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Speaker 7: real weakness, It just signals slowing.

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Speaker 4: So we'll continue to watch that, and.

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Speaker 7: Then on inflation, the data have been good so far

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Speaker 7: coming in If we were only backward looking, we would say, oh,

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Speaker 7: it's time to adjust the interest rate. But we have

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Speaker 7: to be forward looking, and then you have to make

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Speaker 7: judgments about how you think inflation will shape up going forward.

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Speaker 7: And they always really see three scenarios, and I'm leaning

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Speaker 7: towards one, and I'll tell you more and more. But

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Speaker 7: the one scenario, of course, is that it's just delayed.

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Speaker 7: The tariffs are going to have some impact on inflation.

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Speaker 7: It is after all, increasing costs, and that will be

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Speaker 7: a more persistent effect. The second opportunity or possibility is

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Speaker 7: that it's delayed but it will be a one off.

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Speaker 7: And a third, of course, which I think is increasingly possible.

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Speaker 7: It's not my modal, but it's increasingly possible, is that

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Speaker 7: this just doesn't amount to as much as the models

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Speaker 7: in history would tell us, because businesses find ways to

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Speaker 7: absorb the costs and they split it down the production

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Speaker 7: chain and ultimately consumers pay less of that. So I

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Speaker 7: think those last two scenarios, it's delayed, but it's a

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Speaker 7: one off, or it doesn't materialize to the extent that

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Speaker 7: the models would suggest. Those are where you know, I'm

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Speaker 7: putting increasing probabilities it will just have to collect some

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Speaker 7: more information to make a decision. But you know, ultimately

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Speaker 7: we can't wait for perfect information or we'll be behind

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Speaker 7: and we can't do that to the American people.

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Speaker 1: It sounds like President Dailier leaning toward a sooner rate

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Speaker 1: cut if it is confirmed that this tariff impulse isn't

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Speaker 1: as inflationary as people expected.

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Speaker 4: Is that correct?

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Speaker 6: Well, sooner than what?

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Speaker 7: I mean, my modal outlook has been for some time

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Speaker 7: that we would you begin to be able to adjust

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Speaker 7: the rates in the fall, and I haven't really changed

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Speaker 7: that view. It does seem like that. Of course, if

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Speaker 7: the tariffs are one off, you can look through them,

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Speaker 7: and if they're just not going to materialize, and you

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Speaker 7: have to watch both sides of the mandate. And I

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Speaker 7: think that's really important. It's not one or the other.

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Speaker 7: It's both sides of our mandate that have really come

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Speaker 7: into frame since we brought inflation down from the really

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Speaker 7: high levels to something that's closer to our target. Ultimately,

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Speaker 7: we have to watch both sides, and that's what I'm doing.

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Speaker 7: And then the fall looks promising for a rate cut,

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Speaker 7: I don't know for sure. I mean, we have to

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Speaker 7: be open about what we don't know. Humble is I

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Speaker 7: think the word that comes out of the inflation run

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Speaker 7: up and so, but we will. You know, there's a

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Speaker 7: lot of differences of views on the committee. I see

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Speaker 7: that as real positive right now because people bring their

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Speaker 7: perspectives and the data will guide us to what is

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Speaker 7: the one that ultimately looks like reality.

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Speaker 1: President Daily John was talking about the Palace intrigue, and

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Speaker 1: I do wonder about how the increasingly political overlay to

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Speaker 1: the FED has complicated your messaging, given that there is

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Speaker 1: this debate about the dual mandate, etc.

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Speaker 4: How much has it affected the way that you communicate?

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Speaker 6: You know, not really.

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Speaker 7: One of the things that I recognize on a regular

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Speaker 7: basis is if I go out and talk to the

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Speaker 7: people who live in the twelve Federal Reserve District, so

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Speaker 7: that's nine states, very diverse states in the West, they

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Speaker 7: don't actually bring this up at all. What they bring

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Speaker 7: up is what do you think is going to happen

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Speaker 7: to inflation? Will you be able to restore inflation to

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Speaker 7: two percent? Will you be able to restore price stability?

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Speaker 7: Do you think the labor market is going to be

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Speaker 7: preserved during it? Because ultimately, I really want both jobs

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Speaker 7: and lower inflation. I want to be able to get ahead,

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Speaker 7: and so far, the people in my district are cautiously

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Speaker 7: optimistic overall, thinking that the economy is weathering some of

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Speaker 7: the worst concerns and the uncertainties, but continuing to move along.

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Speaker 7: So cautiously optimistic is where where they are, and I

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Speaker 7: think that reflects what's top of their mind, less about

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Speaker 7: what's happening in Washington, and more about what's happening in

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Speaker 7: their lived experience in their communities.

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Speaker 1: So, President Daily, would you dismissed some of the discussions

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Speaker 1: around shadow fed and all of that is simply palace

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Speaker 1: intrigue and not necessarily affecting what would happen on the

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Speaker 1: feder You're concerned about.

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Speaker 3: That, you know.

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Speaker 7: Ultimately, what I'm concerned about is the two mandates Congress

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Speaker 7: gave us full employment, price stability. There's work to do there.

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Speaker 7: That's where all of my focus is. And the Federal

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Speaker 7: Reserve is an institution, it weather's a variety of different

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Speaker 7: points in time. Ultimately, because we only think of one thing,

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Speaker 7: how our work and further the American people in their

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Speaker 7: lives and livelihoods, and how we do that through our

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Speaker 7: congressionally mandated goals, So that's what we think about. We've

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Speaker 7: had a durable history since nineteen thirteen, and I would

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Speaker 7: consider that to be continuing to do our job well.

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Speaker 6: President Addy.

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Speaker 2: One argument we've heard to reduce interest rates sooner than

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Speaker 2: maybe say the fall, as you indicated, is that basically

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Speaker 2: the labor market right now is no longer a source

437
00:21:47,080 --> 00:21:49,600
Speaker 2: for inflation, and with that in mind, there is space

438
00:21:49,600 --> 00:21:51,679
Speaker 2: to reduce interest rates because the Fed beliefs that the

439
00:21:51,680 --> 00:21:55,240
Speaker 2: policy rate is still restrictive. Does that not convince you

440
00:21:55,320 --> 00:21:56,000
Speaker 2: enough right now?

441
00:21:57,840 --> 00:22:01,240
Speaker 7: Not completely, because remember, inflation has been above our target

442
00:22:01,359 --> 00:22:05,200
Speaker 7: for some time, well above our target during periods of time,

443
00:22:05,600 --> 00:22:07,960
Speaker 7: and there's a sense where people really want us to

444
00:22:08,000 --> 00:22:11,000
Speaker 7: get that down. Inflation is a tax on people, and

445
00:22:11,080 --> 00:22:14,119
Speaker 7: every time we let people continue paying that tax, it

446
00:22:14,200 --> 00:22:17,080
Speaker 7: erodes their well being. So I'm very focused on getting

447
00:22:17,080 --> 00:22:20,120
Speaker 7: inflation down to two percent us. Being sure that we're

448
00:22:20,119 --> 00:22:22,680
Speaker 7: on that sustainable path as long as the labor market

449
00:22:22,760 --> 00:22:26,040
Speaker 7: doesn't show signs of weakening is really important. So you

450
00:22:26,160 --> 00:22:27,919
Speaker 7: have to make a view. You have to have a

451
00:22:28,000 --> 00:22:31,200
Speaker 7: view about what you think tariffs will do to inflation. Now,

452
00:22:31,240 --> 00:22:36,360
Speaker 7: my own view is that they will potentially raise inflation

453
00:22:37,160 --> 00:22:41,040
Speaker 7: that's my modal outlook, but they should dissipate over the period.

454
00:22:41,040 --> 00:22:44,200
Speaker 7: It's not going to be something that builds into inflation expectations,

455
00:22:44,280 --> 00:22:46,879
Speaker 7: and thus we really have to lean against it. But

456
00:22:46,920 --> 00:22:50,040
Speaker 7: we can't just be assuming we know just because that's

457
00:22:50,080 --> 00:22:52,720
Speaker 7: our modal outlook. We have to really collect the information

458
00:22:53,119 --> 00:22:57,120
Speaker 7: and understand. Remember, data dependence isn't a backward looking activity,

459
00:22:57,119 --> 00:23:00,400
Speaker 7: it's a forward looking activity. Right now, we're looking forward

460
00:23:00,480 --> 00:23:03,960
Speaker 7: by talking to our contacts, and they still feel uncertain

461
00:23:04,000 --> 00:23:06,040
Speaker 7: about what they will do. They're going to try to

462
00:23:06,040 --> 00:23:09,240
Speaker 7: pass some along, but they, as a number of people

463
00:23:09,280 --> 00:23:11,720
Speaker 7: you've had on your show have mentioned, firms don't have

464
00:23:11,800 --> 00:23:14,960
Speaker 7: all those abilities, whether they're managing their brand or just

465
00:23:15,040 --> 00:23:18,080
Speaker 7: they have exhausted consumers who can't take anymore. That's what

466
00:23:18,080 --> 00:23:21,960
Speaker 7: we're waiting to find out. But I don't think we're behind.

467
00:23:21,560 --> 00:23:22,200
Speaker 3: In our waiting.

468
00:23:22,760 --> 00:23:23,840
Speaker 4: Policy in a good place.

469
00:23:23,920 --> 00:23:26,159
Speaker 7: The economy is in a good place, and that's what

470
00:23:26,160 --> 00:23:28,200
Speaker 7: we'll continue to monitor President daily.

471
00:23:28,240 --> 00:23:30,000
Speaker 1: How much of a lesson was it last year when

472
00:23:30,000 --> 00:23:32,040
Speaker 1: the FED cut by one hundred basis points only to

473
00:23:32,040 --> 00:23:35,480
Speaker 1: see long term yields rise significantly in the face of

474
00:23:35,520 --> 00:23:38,960
Speaker 1: growth and inflation expectations. Is that something that you worry

475
00:23:39,000 --> 00:23:40,040
Speaker 1: about could happen now?

476
00:23:41,160 --> 00:23:43,760
Speaker 7: You know, really, financial markets are an input to our

477
00:23:43,880 --> 00:23:46,960
Speaker 7: to my decisions, not an output that I'm worrying about.

478
00:23:47,000 --> 00:23:50,040
Speaker 7: And ultimately, you know, we want to see financial conditions

479
00:23:50,480 --> 00:23:52,760
Speaker 7: align with what we're trying to do for the economy

480
00:23:52,800 --> 00:23:55,000
Speaker 7: and we'll adjust as need it. But you know, we

481
00:23:55,040 --> 00:23:58,240
Speaker 7: make policy. There's many things that affect yields. We make

482
00:23:58,280 --> 00:24:02,119
Speaker 7: policy that we believe will be with the lags of

483
00:24:02,160 --> 00:24:05,119
Speaker 7: monetary policy, supportive of both of our goals. And so

484
00:24:05,160 --> 00:24:07,200
Speaker 7: I haven't I don't spend a lot of time wondering

485
00:24:07,200 --> 00:24:09,800
Speaker 7: what the bond market will do, especially given there's so

486
00:24:09,920 --> 00:24:12,280
Speaker 7: many things going on in the bond market right now.

487
00:24:12,320 --> 00:24:13,480
Speaker 4: It's been quite volatile.

488
00:24:13,760 --> 00:24:16,840
Speaker 7: So really it's about what did financial conditions overall do

489
00:24:16,960 --> 00:24:20,160
Speaker 7: and what does that do to growth and activity and inflation?

490
00:24:20,240 --> 00:24:22,880
Speaker 7: Does it restrain it or or support it? And that's

491
00:24:23,040 --> 00:24:26,480
Speaker 7: that's where my focus is on input just present.

492
00:24:26,880 --> 00:24:28,920
Speaker 2: Just want to squeeze this in. What would life be

493
00:24:29,119 --> 00:24:31,760
Speaker 2: like with a permanent role in Washington, d C. Compared

494
00:24:31,760 --> 00:24:32,920
Speaker 2: to say, San Francisco?

495
00:24:33,320 --> 00:24:35,399
Speaker 6: How would that feel hotter?

496
00:24:37,880 --> 00:24:40,280
Speaker 7: But seriously, you know, one of the things that I've

497
00:24:41,040 --> 00:24:44,040
Speaker 7: my experience with the Federal Reserve is you have to

498
00:24:44,080 --> 00:24:47,200
Speaker 7: contribute from wherever you sit. And that's what we all

499
00:24:47,240 --> 00:24:50,080
Speaker 7: do when we get around that table. There's nineteen of us,

500
00:24:50,119 --> 00:24:52,640
Speaker 7: and we don't think about who is in what role.

501
00:24:52,720 --> 00:24:53,520
Speaker 3: It's really how do.

502
00:24:53,520 --> 00:24:57,600
Speaker 7: We debate, discuss, bring our best thinking and our best

503
00:24:57,640 --> 00:25:01,240
Speaker 7: disagreement to bear so we can make right decision at

504
00:25:01,280 --> 00:25:03,240
Speaker 7: the right moment for the people we serve.

505
00:25:03,320 --> 00:25:05,280
Speaker 6: President dealily, appreciate your time. Very diplomatic.

506
00:25:15,320 --> 00:25:17,840
Speaker 2: Let's turn to NATO member countries agreeing to a defense

507
00:25:17,880 --> 00:25:20,800
Speaker 2: spending target of five percent of GDP. Mike Schumacher of

508
00:25:20,840 --> 00:25:23,920
Speaker 2: Wells Fargo writing, just say no to thirty year bonds.

509
00:25:24,160 --> 00:25:27,840
Speaker 2: Rising defense spending means heavier issuance, meaning pressure on the

510
00:25:27,920 --> 00:25:28,480
Speaker 2: long end.

511
00:25:28,760 --> 00:25:30,720
Speaker 6: Mike joins us now for more might Welcome.

512
00:25:30,440 --> 00:25:32,359
Speaker 2: To the program Sir, provocative piece, and I think a

513
00:25:32,400 --> 00:25:34,560
Speaker 2: lot of people will agree with you and Mike. The

514
00:25:34,600 --> 00:25:36,639
Speaker 2: interesting thought that you and the team have god, is

515
00:25:36,720 --> 00:25:39,000
Speaker 2: this is not just the United States. This seems to

516
00:25:39,040 --> 00:25:41,240
Speaker 2: be a global story.

517
00:25:42,840 --> 00:25:44,320
Speaker 3: It is, joannal. We think it's got legs.

518
00:25:44,400 --> 00:25:47,000
Speaker 8: See you think about a secular shift in defense spending.

519
00:25:47,000 --> 00:25:50,240
Speaker 8: We're talking probably five ten years something like that. It's

520
00:25:50,240 --> 00:25:52,480
Speaker 8: going to have a long time to go, and I

521
00:25:52,480 --> 00:25:54,680
Speaker 8: get it. There's a lot of skepticism. People say, well,

522
00:25:54,760 --> 00:25:57,159
Speaker 8: NATO's target's been two percent for a long time, how

523
00:25:57,160 --> 00:26:00,359
Speaker 8: many countries have actually hit that? Not many would they

524
00:26:00,359 --> 00:26:02,560
Speaker 8: go to a three point five percent or five percent,

525
00:26:03,000 --> 00:26:05,040
Speaker 8: Maybe they don't get there, But really the point is

526
00:26:05,080 --> 00:26:07,560
Speaker 8: they go up in terms of spending, and I think

527
00:26:07,600 --> 00:26:10,040
Speaker 8: most countries probably ratchet. They're spending up in the next

528
00:26:10,080 --> 00:26:12,800
Speaker 8: couple of years. So if your runway is two or

529
00:26:12,800 --> 00:26:15,640
Speaker 8: three years, you say, well, if your average NATO country

530
00:26:15,640 --> 00:26:18,360
Speaker 8: boosts defense spending by zero point five percent of GDP

531
00:26:18,840 --> 00:26:20,560
Speaker 8: through the math, that's a lot of bonds. We think,

532
00:26:20,560 --> 00:26:22,119
Speaker 8: a lot of long term debt, and I doubt that

533
00:26:22,119 --> 00:26:22,919
Speaker 8: it's fully priced.

534
00:26:23,119 --> 00:26:24,800
Speaker 1: A lot of people have pushed back on the argument

535
00:26:24,840 --> 00:26:26,600
Speaker 1: that issuance matters, and I know that this is sort

536
00:26:26,640 --> 00:26:28,919
Speaker 1: of the popular idea, and yet in the US it

537
00:26:28,960 --> 00:26:32,200
Speaker 1: hasn't because we've increased our debt dramatically in periods where

538
00:26:32,200 --> 00:26:33,720
Speaker 1: we saw rates at near zero.

539
00:26:33,880 --> 00:26:35,520
Speaker 4: So I'm just wondering at what point, what.

540
00:26:35,600 --> 00:26:38,359
Speaker 1: Sort of the tipping point where people become bond vigilantes

541
00:26:38,359 --> 00:26:40,680
Speaker 1: and pay attention to issuance rather than just inflation.

542
00:26:43,480 --> 00:26:46,040
Speaker 8: Yeah, it's interesting. I think issuance does matter. So think

543
00:26:46,080 --> 00:26:48,960
Speaker 8: about not just nominal rates, but real rates. I agree

544
00:26:49,000 --> 00:26:51,280
Speaker 8: inflation is high, that's why you've got high break evans.

545
00:26:51,280 --> 00:26:54,520
Speaker 8: But think about your nominal interest rate. Decompose that break

546
00:26:54,520 --> 00:26:57,719
Speaker 8: even inflation real rate. I'll give you a couple numbers. So,

547
00:26:58,040 --> 00:27:00,720
Speaker 8: in the decade prior to COVID, the average real rate

548
00:27:00,760 --> 00:27:03,520
Speaker 8: on a ten year Treasury was forty basis points four zero.

549
00:27:04,000 --> 00:27:07,760
Speaker 8: Today it's about two percent. That's a massive premium. Issuance

550
00:27:07,800 --> 00:27:11,280
Speaker 8: does matter. So the market's saying, look, we've got the US,

551
00:27:11,320 --> 00:27:14,720
Speaker 8: which is profligate. It's got six percent something budget deficit,

552
00:27:15,080 --> 00:27:16,600
Speaker 8: a lot of bonds to come out, we have to

553
00:27:16,680 --> 00:27:19,000
Speaker 8: charge a relatively high penalty. So I think the market's

554
00:27:19,000 --> 00:27:20,160
Speaker 8: been opposing that for a while.

555
00:27:20,480 --> 00:27:24,200
Speaker 5: Germany is considering this fifty year bond. Mike, who's best

556
00:27:24,200 --> 00:27:26,639
Speaker 5: position to tap their debt markets when it comes to

557
00:27:26,640 --> 00:27:27,520
Speaker 5: this defense spending.

558
00:27:29,960 --> 00:27:31,160
Speaker 3: Ooh, fifty years tough.

559
00:27:31,240 --> 00:27:33,200
Speaker 8: I remember when the US talked about a fifty year

560
00:27:33,240 --> 00:27:37,080
Speaker 8: back in the first Trump administration. I personally hold probably

561
00:27:37,119 --> 00:27:39,639
Speaker 8: forty or fifty clients. How many buyers do we find?

562
00:27:39,800 --> 00:27:40,080
Speaker 3: Zero?

563
00:27:40,320 --> 00:27:42,919
Speaker 8: So perhaps the Germans have more luck today, But I

564
00:27:42,960 --> 00:27:45,119
Speaker 8: think when you look at really long term debt it's tough.

565
00:27:45,320 --> 00:27:47,560
Speaker 8: But I would say in general, whether it's a fifty

566
00:27:47,640 --> 00:27:50,040
Speaker 8: year or a thirty year, the countries that are best

567
00:27:50,040 --> 00:27:52,320
Speaker 8: positioned are the ones that are starting with a relatively

568
00:27:52,320 --> 00:27:55,320
Speaker 8: low budget deficit and low issues. Germany is the obvious example.

569
00:27:55,880 --> 00:27:58,760
Speaker 8: When you think about the outstanding volume of boons, it's

570
00:27:58,840 --> 00:28:01,080
Speaker 8: less than two trillion dollars. Just to put that in

571
00:28:01,600 --> 00:28:04,680
Speaker 8: contact treasuries, you've got twenty four trillion Germany as a

572
00:28:04,720 --> 00:28:08,120
Speaker 8: pristine credit rating. Germany will find buyers for long term

573
00:28:08,160 --> 00:28:11,119
Speaker 8: debt relative to other countries, but probably has to focus

574
00:28:11,160 --> 00:28:13,080
Speaker 8: more on twenty and thirty or less on fifty.

575
00:28:13,119 --> 00:28:15,720
Speaker 1: In my opinion, what is the idea of higher rates

576
00:28:15,760 --> 00:28:19,040
Speaker 1: for longer What does that do to valuations over a

577
00:28:19,040 --> 00:28:21,240
Speaker 1: longer time. We've already seen what that's done to the

578
00:28:21,280 --> 00:28:24,080
Speaker 1: housing market and sort of the stasis that sits there.

579
00:28:24,320 --> 00:28:27,720
Speaker 1: But do you expect equity returns globally to be substantially

580
00:28:27,800 --> 00:28:30,840
Speaker 1: lower over the next five years, ten years because of

581
00:28:30,920 --> 00:28:34,359
Speaker 1: rates that are permanently sort of pegged at a higher level.

582
00:28:37,520 --> 00:28:39,520
Speaker 8: It probably makes people think about that trade off a

583
00:28:39,520 --> 00:28:41,600
Speaker 8: bit more carefully and It's interesting. We used to do

584
00:28:41,680 --> 00:28:44,080
Speaker 8: a lot of comparisons between the equity risk premium and

585
00:28:44,080 --> 00:28:46,960
Speaker 8: bond yields. The problem is that model has shown the

586
00:28:47,000 --> 00:28:49,440
Speaker 8: equity market, whether it's the US or elsewhere, to be

587
00:28:49,520 --> 00:28:51,880
Speaker 8: rich for a long time. But I do think that

588
00:28:51,960 --> 00:28:54,840
Speaker 8: if bond yields are persistently high. So let's say that

589
00:28:54,880 --> 00:28:57,840
Speaker 8: the quote average rate on a US tenure for the

590
00:28:57,920 --> 00:28:59,880
Speaker 8: next five or ten years is three and a half

591
00:29:00,120 --> 00:29:02,920
Speaker 8: four percent instead of two something, does that impact the

592
00:29:02,920 --> 00:29:03,680
Speaker 8: equity market?

593
00:29:03,720 --> 00:29:04,200
Speaker 3: Probably?

594
00:29:04,520 --> 00:29:06,720
Speaker 8: Is it something people can trade today, I don't think so,

595
00:29:06,920 --> 00:29:09,960
Speaker 8: But when you consider longer term allocations, it probably does

596
00:29:10,000 --> 00:29:13,000
Speaker 8: play a role and probably eventually makes bonds more attractive.

597
00:29:13,280 --> 00:29:13,480
Speaker 7: Mike.

598
00:29:13,520 --> 00:29:15,680
Speaker 5: Some of the naysayers that NATO, though, we're saying that

599
00:29:16,000 --> 00:29:18,960
Speaker 5: this defense spending, this five percent target of GDP is

600
00:29:19,040 --> 00:29:21,959
Speaker 5: only because Trump is there, he has a four year term.

601
00:29:22,240 --> 00:29:25,240
Speaker 5: How much of this analysis you have on only because

602
00:29:25,280 --> 00:29:27,840
Speaker 5: Trump's president and then potentially in four years they're not

603
00:29:27,880 --> 00:29:29,480
Speaker 5: going to reach even close to that spending.

604
00:29:31,840 --> 00:29:33,840
Speaker 8: That's a great point. That's why we focus really just

605
00:29:33,920 --> 00:29:36,160
Speaker 8: on the next few years. So for US, we'd say, look,

606
00:29:36,200 --> 00:29:38,480
Speaker 8: Trump is going to harangue NATO members to spend more

607
00:29:38,480 --> 00:29:40,720
Speaker 8: on defense. That's pretty clear. He's done it already. He's

608
00:29:40,720 --> 00:29:43,400
Speaker 8: been successful. Look at Canada, it's going to spend two

609
00:29:43,400 --> 00:29:46,520
Speaker 8: percent of GDP on defense in the upcoming fiscal year

610
00:29:46,520 --> 00:29:48,960
Speaker 8: after being one three or one five something like that.

611
00:29:49,040 --> 00:29:51,960
Speaker 8: So he's already getting that done. So for US, it's

612
00:29:52,000 --> 00:29:54,360
Speaker 8: not so much about what happens in twenty thirty or

613
00:29:54,400 --> 00:29:57,240
Speaker 8: twenty thirty five when who knows as the US president.

614
00:29:57,320 --> 00:29:59,560
Speaker 8: But if you think about the path for the next

615
00:29:59,640 --> 00:30:02,080
Speaker 8: two to three years, when Trump will be very visible,

616
00:30:02,280 --> 00:30:05,000
Speaker 8: very loud, I think it's reasonable to say that most

617
00:30:05,000 --> 00:30:07,560
Speaker 8: countries in NATO will ratch up there spending quite a bit.

618
00:30:07,680 --> 00:30:09,760
Speaker 8: So for US, that's the big impact on the markets.

619
00:30:09,960 --> 00:30:11,960
Speaker 8: It's much less about what happens in the out years.

620
00:30:12,080 --> 00:30:14,360
Speaker 2: My quick final question a question I think we'll ask

621
00:30:14,400 --> 00:30:16,960
Speaker 2: a few times this morning. If the next FED share

622
00:30:17,040 --> 00:30:19,280
Speaker 2: is a White House puppet, do we have to introduce

623
00:30:19,320 --> 00:30:21,320
Speaker 2: some kind of em premium to the long.

624
00:30:21,240 --> 00:30:21,760
Speaker 6: End of the curve?

625
00:30:24,880 --> 00:30:28,720
Speaker 8: Yeah, I'm skeptical about that, John, And here's why. When

626
00:30:28,800 --> 00:30:31,720
Speaker 8: you think about the nominee, it's pretty clear if people

627
00:30:31,800 --> 00:30:33,640
Speaker 8: want to act a bit dubbish to try to get

628
00:30:33,680 --> 00:30:35,200
Speaker 8: that job, to get the interview to.

629
00:30:35,120 --> 00:30:35,840
Speaker 3: Get the nomination.

630
00:30:36,040 --> 00:30:39,360
Speaker 8: But once the FED share is in place, how much

631
00:30:39,360 --> 00:30:41,280
Speaker 8: control does the president actually have?

632
00:30:41,880 --> 00:30:42,360
Speaker 3: Not much?

633
00:30:42,880 --> 00:30:46,240
Speaker 8: It was a great point. Powell's a Trump nominee, trump appointee.

634
00:30:46,560 --> 00:30:49,200
Speaker 8: Can Trump really control what he does? No, So, if

635
00:30:49,240 --> 00:30:51,760
Speaker 8: it's Kevin Hassett or if it's Waller, who gets the job.

636
00:30:52,240 --> 00:30:55,640
Speaker 8: Once that person's in the seat, once that person's been confirmed,

637
00:30:55,920 --> 00:30:57,520
Speaker 8: I think he or she is going to take his

638
00:30:57,560 --> 00:31:00,200
Speaker 8: own direction. So I'm not super concerned about that right now,

639
00:31:00,280 --> 00:31:02,520
Speaker 8: but I think the markets might overreact between now and

640
00:31:02,920 --> 00:31:05,320
Speaker 8: September October, whenever that nomination comes out.

641
00:31:05,360 --> 00:31:09,240
Speaker 2: I appreciate the input. My thank you, Sir, Mike Sheen macroflasfanco.

642
00:31:18,600 --> 00:31:19,200
Speaker 6: Joining us NAS.

643
00:31:19,240 --> 00:31:22,520
Speaker 2: Nita Richardson of ADP NATI, Good morning, Ernie. You and

644
00:31:22,600 --> 00:31:24,920
Speaker 2: others have talked about this so called loachha and dynamic

645
00:31:24,960 --> 00:31:27,400
Speaker 2: in this labor market. Is it getting harder to get

646
00:31:27,400 --> 00:31:27,760
Speaker 2: a job?

647
00:31:28,120 --> 00:31:31,600
Speaker 9: It is, and it is especially for new graduates. We've

648
00:31:31,640 --> 00:31:35,480
Speaker 9: seen that be in a predominant story. So what companies

649
00:31:35,520 --> 00:31:39,920
Speaker 9: are doing is they're taking a pause on welcoming.

650
00:31:39,680 --> 00:31:41,440
Speaker 4: Younger workers into the workforce.

651
00:31:41,960 --> 00:31:45,400
Speaker 9: They're taking a pause on hiring, maybe even hiring senior roles.

652
00:31:45,440 --> 00:31:48,520
Speaker 9: They're still in that weight and see mode a slowdown

653
00:31:48,560 --> 00:31:50,720
Speaker 9: in the hiring the momentum that we saw at the

654
00:31:50,760 --> 00:31:51,480
Speaker 9: beginning of the year.

655
00:31:51,600 --> 00:31:52,440
Speaker 4: Can there be this.

656
00:31:52,480 --> 00:31:55,680
Speaker 1: Low turn type of dynamic for a really prolonged period

657
00:31:55,720 --> 00:32:00,120
Speaker 1: of time without there being some at least perceived weakness

658
00:32:00,160 --> 00:32:02,760
Speaker 1: in the labor market. That becomes reality.

659
00:32:02,840 --> 00:32:07,280
Speaker 9: You know what, it's interesting how concentrated hiring has become.

660
00:32:07,320 --> 00:32:10,640
Speaker 9: If you look at that last government report, what you

661
00:32:10,680 --> 00:32:13,560
Speaker 9: see is ninety six percent of the hiring has come

662
00:32:13,560 --> 00:32:16,040
Speaker 9: from healthcare and leisure and hospitality.

663
00:32:16,200 --> 00:32:17,680
Speaker 4: Two thirds came from healthcare.

664
00:32:17,960 --> 00:32:20,720
Speaker 9: There's a lot of company can do other than let

665
00:32:20,760 --> 00:32:22,760
Speaker 9: go of a worker. One thing they can do is

666
00:32:22,800 --> 00:32:26,720
Speaker 9: cut hours. Fifty five percent of workers in the United

667
00:32:26,720 --> 00:32:30,200
Speaker 9: States are hourly. So we may not be seeing the

668
00:32:30,240 --> 00:32:33,280
Speaker 9: slowdown in the initial job list claims numbers, but they

669
00:32:33,320 --> 00:32:36,440
Speaker 9: are showing up in hours worked and I think that's

670
00:32:36,480 --> 00:32:39,600
Speaker 9: a number to watch, continuing claims as a number to watch.

671
00:32:39,800 --> 00:32:44,120
Speaker 9: And then the concentration of the employment that's coming mostly

672
00:32:44,160 --> 00:32:48,240
Speaker 9: in a very non cyclical sector, a structural sector like healthcare,

673
00:32:48,560 --> 00:32:50,720
Speaker 9: that's an indication that everybody else.

674
00:32:50,720 --> 00:32:52,080
Speaker 1: Is in wait and see most You know, this is

675
00:32:52,120 --> 00:32:54,000
Speaker 1: such a difficult market to get a hand around, because

676
00:32:54,080 --> 00:32:56,520
Speaker 1: is it weakening or is it week? Is this normalizing

677
00:32:56,760 --> 00:33:00,560
Speaker 1: or is this really problematic? And does it highlight potential

678
00:33:00,680 --> 00:33:02,960
Speaker 1: crack to come. What's your take on that? What's the

679
00:33:03,000 --> 00:33:03,880
Speaker 1: sort of tell.

680
00:33:03,960 --> 00:33:08,120
Speaker 9: There's nothing normal about the economy that's not dynamic, especially

681
00:33:08,200 --> 00:33:09,200
Speaker 9: a US economy.

682
00:33:09,240 --> 00:33:10,480
Speaker 4: It feeds on dynamism.

683
00:33:10,760 --> 00:33:13,560
Speaker 9: So I would read the labor market is as in

684
00:33:13,640 --> 00:33:18,040
Speaker 9: a stasis. There's no movement, and that doesn't plan. You

685
00:33:18,080 --> 00:33:20,479
Speaker 9: asked me if how long does this happen until we

686
00:33:20,760 --> 00:33:21,920
Speaker 9: call it a weak market?

687
00:33:22,040 --> 00:33:23,680
Speaker 4: Well, it shows up in productivity.

688
00:33:23,920 --> 00:33:27,080
Speaker 9: If you have a labor market that's not dynamic, that

689
00:33:27,240 --> 00:33:30,120
Speaker 9: is not you know, ingesting new talent, it is not

690
00:33:30,240 --> 00:33:32,720
Speaker 9: moving and workers are going to higher paying jobs and

691
00:33:32,760 --> 00:33:36,600
Speaker 9: being promoted. That feeds into the productivity numbers. And we

692
00:33:36,640 --> 00:33:39,400
Speaker 9: saw that the last read on productivity was quite weak

693
00:33:39,760 --> 00:33:44,760
Speaker 9: one point four percent. The power of exceptionalism comes from

694
00:33:44,800 --> 00:33:48,080
Speaker 9: not just workers, but output per worker, and that's what's slowing.

695
00:33:48,280 --> 00:33:49,920
Speaker 4: That's where you're going to see the weakness.

696
00:33:49,960 --> 00:33:51,800
Speaker 5: First, Neil, you say it's harder to get a job,

697
00:33:51,800 --> 00:33:53,240
Speaker 5: but is it easier to get fired?

698
00:33:53,320 --> 00:33:55,760
Speaker 4: Right now? Are they the same?

699
00:33:57,320 --> 00:34:00,240
Speaker 9: You know it can be are quite easy to get

700
00:34:00,240 --> 00:34:01,480
Speaker 9: fired depending on what you do.

701
00:34:01,560 --> 00:34:04,680
Speaker 5: I might take out some of like personal issues. Are

702
00:34:04,720 --> 00:34:06,560
Speaker 5: people are companies laying people off?

703
00:34:06,720 --> 00:34:08,920
Speaker 9: It doesn't look like that. It looks like people are

704
00:34:08,960 --> 00:34:11,759
Speaker 9: holding on to their workers. And in fact we've seen

705
00:34:11,760 --> 00:34:14,520
Speaker 9: at ADP and the data and the payroll data, not

706
00:34:14,560 --> 00:34:17,880
Speaker 9: only are they holding on to existing workers, they're actually

707
00:34:18,080 --> 00:34:20,920
Speaker 9: re hiring workers that have left and come back. And

708
00:34:20,960 --> 00:34:24,839
Speaker 9: I think, I mean to your question, hiring has become

709
00:34:24,920 --> 00:34:29,640
Speaker 9: more cautious. They change the composition. Employers are less likely

710
00:34:29,680 --> 00:34:30,760
Speaker 9: to take a new bet.

711
00:34:30,560 --> 00:34:31,640
Speaker 4: On a worker they don't know.

712
00:34:31,840 --> 00:34:34,720
Speaker 9: They'd rather hire someone they do know who can onboard quickly,

713
00:34:34,920 --> 00:34:37,480
Speaker 9: who is very efficient, or not hire at all. That's

714
00:34:37,520 --> 00:34:40,200
Speaker 9: what we're seeing in the data, and that again feeds

715
00:34:40,239 --> 00:34:43,000
Speaker 9: back into the lack of dynamism that we might be experiencing.

716
00:34:43,040 --> 00:34:45,640
Speaker 5: I'm going to ask the question Jonathan always asks, if

717
00:34:45,680 --> 00:34:48,120
Speaker 5: you're hired right now you have a job, are you

718
00:34:48,200 --> 00:34:49,720
Speaker 5: going in and asking for pay rises?

719
00:34:50,760 --> 00:34:55,040
Speaker 9: You're probably going in and asking for a pay raise, yes,

720
00:34:55,480 --> 00:34:59,240
Speaker 9: and not getting it. So yeah, the ask is there,

721
00:34:59,560 --> 00:35:02,319
Speaker 9: but the action is not. And you can see that

722
00:35:02,560 --> 00:35:07,879
Speaker 9: in how our initial job switcher data is looking. Yes,

723
00:35:08,000 --> 00:35:10,880
Speaker 9: you get a bump from switching jobs, but it's not

724
00:35:10,960 --> 00:35:13,479
Speaker 9: the same bump that you would have gotten two years ago,

725
00:35:13,920 --> 00:35:17,120
Speaker 9: and it's not the premium of getting that bump versus

726
00:35:17,160 --> 00:35:18,959
Speaker 9: what your pay growth would have been if you stayed

727
00:35:18,960 --> 00:35:22,239
Speaker 9: at your previous employer isn't really there. So yeah, you

728
00:35:22,280 --> 00:35:24,200
Speaker 9: can ask, be careful how much you.

729
00:35:24,160 --> 00:35:27,160
Speaker 2: Asked for Kate Poskin, Kate Paskin. I always say that,

730
00:35:27,239 --> 00:35:30,600
Speaker 2: Kate Paskin. The companies don't want you to ask. Stay well,

731
00:35:30,760 --> 00:35:33,359
Speaker 2: and they want to have that leverage. Get comfortable, not

732
00:35:33,440 --> 00:35:33,960
Speaker 2: end enough.

733
00:35:34,160 --> 00:35:36,479
Speaker 1: Yeah, keep asking because the firing rate isn't that high,

734
00:35:36,520 --> 00:35:37,480
Speaker 1: So you know, go for it.

735
00:35:37,600 --> 00:35:38,200
Speaker 6: Keep pushing.

736
00:35:38,600 --> 00:35:40,560
Speaker 2: Mi McKay's going to keep pushing my mcas more tax

737
00:35:40,680 --> 00:35:43,160
Speaker 2: for us. Mike, you wanted to focus on the trite numbers, right.

738
00:35:43,400 --> 00:35:45,440
Speaker 10: Well, trade numbers and durable goods. There's a couple of

739
00:35:45,440 --> 00:35:49,319
Speaker 10: interesting things here. The exports for the United States fell

740
00:35:49,360 --> 00:35:53,160
Speaker 10: five point two percent. That is the most since the

741
00:35:53,280 --> 00:35:57,480
Speaker 10: largest drop, shall we say, since twenty twenty. It isn't

742
00:35:57,480 --> 00:36:01,000
Speaker 10: clear why that would be because for US goods have

743
00:36:01,080 --> 00:36:04,359
Speaker 10: been dropping as the dollar drops. So this is in

744
00:36:04,400 --> 00:36:08,000
Speaker 10: the trade business pretty much a story about exports not

745
00:36:08,120 --> 00:36:08,640
Speaker 10: living up.

746
00:36:09,080 --> 00:36:09,520
Speaker 5: Now on the.

747
00:36:09,560 --> 00:36:13,080
Speaker 10: Durable goods side, we saw a rise of sixteen percent,

748
00:36:13,760 --> 00:36:18,720
Speaker 10: which is the largest since two thy fourteen, an increase

749
00:36:18,840 --> 00:36:22,080
Speaker 10: of sixteen point four percent, But it's almost all Boeing

750
00:36:22,080 --> 00:36:25,600
Speaker 10: one hundred and fifty eight percent rise in Boeing non

751
00:36:25,640 --> 00:36:29,600
Speaker 10: defense aircraft sales or orders during the month, and some

752
00:36:29,719 --> 00:36:34,640
Speaker 10: mixed news underneath because factories, the stuff we normally think about,

753
00:36:34,680 --> 00:36:41,920
Speaker 10: like machines and primary metals, fabricated products those rows, but computers,

754
00:36:42,320 --> 00:36:46,880
Speaker 10: communications equipment, electrical equipment, and appliances all fell orders for

755
00:36:46,920 --> 00:36:49,239
Speaker 10: those during the month, so it isn't clear exactly how

756
00:36:49,280 --> 00:36:53,000
Speaker 10: strong durables are even though the headline number is pretty strong.

757
00:36:53,120 --> 00:36:55,680
Speaker 6: My McKay appreciate the update. My thank you. Nada still

758
00:36:55,680 --> 00:36:55,920
Speaker 6: with us.

759
00:36:55,960 --> 00:36:58,240
Speaker 2: NATA wanted to tenci on the feder itself, just briefly,

760
00:36:58,560 --> 00:37:00,960
Speaker 2: not as any of Deutsche Bank set. This is no uncertainty,

761
00:37:01,239 --> 00:37:03,120
Speaker 2: he says. You can see in the forecast a lot

762
00:37:03,239 --> 00:37:06,480
Speaker 2: of division. Do you hear and see a lot of division?

763
00:37:07,320 --> 00:37:11,040
Speaker 9: Yeah, I think that's to be expected. When things are

764
00:37:11,080 --> 00:37:13,560
Speaker 9: really bad are really good, you should see a lot

765
00:37:13,560 --> 00:37:16,920
Speaker 9: of consensus. The gray areas or where it's hard to

766
00:37:17,000 --> 00:37:19,560
Speaker 9: drive that consensus, and it really depends on whether you

767
00:37:19,680 --> 00:37:22,759
Speaker 9: want as a policy maker to make a preentive move

768
00:37:23,120 --> 00:37:25,920
Speaker 9: because you may think that the economy is weakening and

769
00:37:26,040 --> 00:37:28,520
Speaker 9: rates are too restrictive, or you're still in wait and

770
00:37:28,560 --> 00:37:32,000
Speaker 9: see mode and you can see that various actors are

771
00:37:32,080 --> 00:37:35,279
Speaker 9: playing or responding to different parts of the economy. It's

772
00:37:35,320 --> 00:37:38,320
Speaker 9: like we all are looking at a puzzle with missing pieces,

773
00:37:38,719 --> 00:37:40,600
Speaker 9: and you're trying to figure out what's in the center

774
00:37:40,640 --> 00:37:42,759
Speaker 9: of that puzzle, and you don't have the pieces at

775
00:37:42,760 --> 00:37:46,080
Speaker 9: the ready, and those pieces probably won't materialize for months

776
00:37:46,160 --> 00:37:46,520
Speaker 9: and in.

777
00:37:46,400 --> 00:37:47,239
Speaker 4: Some cases years.

778
00:37:47,239 --> 00:37:51,000
Speaker 9: If you're talking about long term capital investments, so you're guessing,

779
00:37:51,200 --> 00:37:53,879
Speaker 9: you're guessing what the center of the economy is. You're

780
00:37:53,880 --> 00:37:57,160
Speaker 9: guessing about policy over the next six months, over the

781
00:37:57,200 --> 00:38:01,240
Speaker 9: next even six years. Because many companies that are manufacturers

782
00:38:01,239 --> 00:38:04,160
Speaker 9: are making tenure investments, not three month investments.

783
00:38:04,320 --> 00:38:07,120
Speaker 2: Do they have sufficient information to sit there and say,

784
00:38:07,520 --> 00:38:09,399
Speaker 2: we're forced to make a guess right now, and we've

785
00:38:09,400 --> 00:38:10,160
Speaker 2: got to make a call.

786
00:38:10,719 --> 00:38:11,640
Speaker 6: Is that as soon as July?

787
00:38:11,800 --> 00:38:13,719
Speaker 2: Or can they keep on waiting because the chairman keeps

788
00:38:13,719 --> 00:38:17,160
Speaker 2: saying we can wait the economy solid? Is the economy solid?

789
00:38:17,840 --> 00:38:20,360
Speaker 9: If you're looking at the unemployment rate, you can go

790
00:38:20,440 --> 00:38:23,000
Speaker 9: with a solid message. It has not budged in a

791
00:38:23,040 --> 00:38:25,799
Speaker 9: couple of months and it's still quite low if you

792
00:38:25,840 --> 00:38:28,440
Speaker 9: look at it historically. So there is a reason to wait.

793
00:38:29,080 --> 00:38:31,560
Speaker 9: If you're looking at an economy where if you look

794
00:38:31,560 --> 00:38:34,920
Speaker 9: at all the typical median projections, they are expecting slower growth,

795
00:38:35,080 --> 00:38:39,319
Speaker 9: higher inflation, higher unemployment. If that is your forecast, you

796
00:38:39,400 --> 00:38:42,640
Speaker 9: may want to make a preemptive move, and that's what

797
00:38:42,680 --> 00:38:44,440
Speaker 9: some of the committee is doing.

798
00:38:44,640 --> 00:38:46,680
Speaker 4: But overall the consensus looks.

799
00:38:46,480 --> 00:38:48,640
Speaker 9: Like to wait and see, and they have the data

800
00:38:48,640 --> 00:38:49,480
Speaker 9: support to do so.

801
00:38:49,760 --> 00:38:51,719
Speaker 2: Nita, it's going to see. As always, Thank you nither

802
00:38:51,760 --> 00:38:55,640
Speaker 2: Rich of them, there of ADP. This is the Bloomberg

803
00:38:55,680 --> 00:39:00,000
Speaker 2: Sevenans podcast, bringing you the best in markets, economics, angiopology.

804
00:39:00,640 --> 00:39:03,120
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805
00:39:03,120 --> 00:39:06,360
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806
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Speaker 2: the podcast on Apple, Spotify or anywhere else you listen,

807
00:39:09,880 --> 00:39:12,520
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808
00:39:12,520 --> 00:39:13,120
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