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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Claudia Some her leadership at New Century Advisors, her importance

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Speaker 2: in academics, and certainly pushing back against recession gloom over

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Speaker 2: the last year and a half is noted as well.

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Speaker 2: Claudia Some, I have the greatest problem with our analysis.

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Speaker 2: I just did the average unemployment rate back fifty years

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Speaker 2: at six percent. We're at four point x percent? Is

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Speaker 2: this a fully employed America? Even admit our gloom?

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Speaker 3: So the unemployment at four point two percent, but that's

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Speaker 3: basically what we think of as maximum employment. Now, remember

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Speaker 3: that unemployment rate over time, that demographics like what's a

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Speaker 3: good number for unemployment can change, you know, So comparing

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Speaker 3: back sixty years probably isn't the way to go. But

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Speaker 3: the other thing about unemployment recently has been for almost

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Speaker 3: a year now, it's been in a relatively stable range

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Speaker 3: at a low level. So we really are in a

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Speaker 3: good place now. The expectations are that we're not staying

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Speaker 3: in this good place. But the starting point is important.

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Speaker 4: So Claudia, how do you think the Federal Reserve looks

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Speaker 4: at the labor market here? Is there a number where

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Speaker 4: they say, hmm, we need to maybe think about our

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Speaker 4: policy because we need to try to I don't know

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Speaker 4: impact this labor market someway.

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Speaker 3: Right, So I think it's important. J. Powell has been

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Speaker 3: very open about the fact that the FMC is in

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Speaker 3: learning mode.

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Speaker 2: Right.

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Speaker 3: They are going to pour through the details of this

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Speaker 3: data and all the data that they're going to get

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Speaker 3: this month on unemployment, on inflation, and the thing is

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Speaker 3: it's for them. There's a couple pieces. One, like I said,

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Speaker 3: their expectation is that the labor market is going to

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Speaker 3: weaken given all the policies that are in place. What

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Speaker 3: they're wanting to see is is it weakening gradually as

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Speaker 3: they had been thinking it would, or is it really

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Speaker 3: moving quickly? And that like that speed of Weeken and

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Speaker 3: could tell them, hey, we can we can ease off

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Speaker 3: a bit because you know, there's enough demand destruction to

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Speaker 3: kind of work against the inflation. So that'll be important.

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Speaker 3: And the other big thing for them will be to

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Speaker 3: try and figure out are we seeing shifts in labor demand,

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Speaker 3: which is something they could you know, kind of help

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Speaker 3: with by lowering rates, or is it something about shifts

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Speaker 3: in labor supply, say from a restricted immigration, and that

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Speaker 3: piece they can't do as much with, Claudia.

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Speaker 2: Before we get to the numbers in two minutes, the

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Speaker 2: real wage. What is a trend right now in the

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Speaker 2: inflation adjusted wage that you see across America?

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Speaker 3: Again, we're as we're going into this period of transition

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Speaker 3: where we expect inflation to move up, we expect the

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Speaker 3: labor market to soften some, and you know that that

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Speaker 3: should be of putting us in a direction of less

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Speaker 3: real wage growth.

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Speaker 5: But we have had.

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Speaker 3: Numbers that have been relatively strong in recent times. So

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Speaker 3: I don't think that that's a particular cause of alarm,

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Speaker 3: but it's it is likely probably to soften some.

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Speaker 2: In your term, Claudia, some where there's a new century advisor.

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Speaker 2: She'll continue with us as we look to the data.

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Speaker 2: A number of other good guests coming up commercial free

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Speaker 2: across the nation here for this important jobs report, to

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Speaker 2: look at the markets here, Paul Wes see green in

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Speaker 2: the screen all day. It's tepid, it's pre holiday, but

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Speaker 2: nevertheless it's a lift to the market.

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Speaker 4: It's a lift of the market. Tom got the S

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Speaker 4: and pup five points, the Dow of forty five points

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Speaker 4: in NASTAC up fifteen, OX under seventeen, VIX under seventeen. Now,

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Speaker 4: let's call that quiescent, as someone would say. And looking

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Speaker 4: at the yield market, also pretty quiet out there. Tom

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Speaker 4: got the ten year treasury coming in by about two

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Speaker 4: basis points four and a quarter percent for your ten

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Speaker 4: year treasury in two years at three seventy five, three

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Speaker 4: seventy six.

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Speaker 2: So I guess that's what i'd watch here report.

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Speaker 4: Yep, he's kind of what we're looking at right now.

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Speaker 2: The two year Let me do that to four digits.

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Speaker 2: That's the way we roll at surveillance. It's three point

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Speaker 2: seven six eight two, three point seven six eighty two

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Speaker 2: for those taking notes on your commute this morning. Again,

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Speaker 2: Claudia signed with us, and we will continue with her

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Speaker 2: wonderful perspective in a moment. Features up six a wide

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Speaker 2: set of eight thirty data this morning. Much more than

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Speaker 2: just jobs report. We'll see claims as well, and of

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Speaker 2: all things, a trade balance for May from New York

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Speaker 2: City America's jobs report.

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Speaker 6: And I'm John Tucker in the news room with the

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Speaker 6: breaking news change in non farm playrolls, signs of resilience

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Speaker 6: of the US labor market coming in much better than expected.

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Speaker 6: One hundred forty seven thousand non farm payrolls created for

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Speaker 6: the month of June. The expectation was for one hundred

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Speaker 6: and six thousand. Right to the unemployment rate, that actually

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Speaker 6: is lower down to four point one percent. The expectation

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Speaker 6: was for four point three percent in the unemployment rate.

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Speaker 6: So a bit of a surprise in these numbers. Again,

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Speaker 6: resilience in the US labor market just coming across the

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Speaker 6: bloomberg from the Labor Department, Paul and Tom.

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Speaker 2: John Tucker, thanks so much. A lift of the market's

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Speaker 2: futures up six now up fifteen down, futures up at

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Speaker 2: one vic sixteen point four to five. We don't see

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Speaker 2: that number yet. While statistics in the bond market, where

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Speaker 2: we go away from rate cut talk, a two year

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Speaker 2: yield eleven basis points, that's the edge of jinormous is

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Speaker 2: a move three point ninety six three point nine zero

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Speaker 2: percent seven beeps and the ten year higher yield, even

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Speaker 2: the thirty year buy and out to four point eighty four.

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Speaker 2: Gets my attention, Paul, What do you see in the tape?

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Speaker 4: Just a as you mentioned Tom on the short end

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Speaker 4: of the curve, A big move there, and again we're

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Speaker 4: seeing a lift of the equities at S and P

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Speaker 4: now thirteen and the NASTAC up fifty four. So I

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Speaker 4: guess resilient as the work.

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Speaker 2: TOOMEE underemployment rate comes in seven point eight to seven

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Speaker 2: point seven. I'm extending here, folks, so doctor Sam can

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Speaker 2: look at the data here. The revision is a constructive

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Speaker 2: five thousand up one thirty nine to one for the

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Speaker 2: three month average. Scott landman, thank you so much for

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Speaker 2: putting the non farm payrolls three month average in the

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Speaker 2: e CEO go critically, folks. It goes from one hundred

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Speaker 2: and thirty five thousand, that's an old number, and then

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Speaker 2: the next month up to one five zero. Check that,

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Speaker 2: from one hundred and forty one thousand up to a

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Speaker 2: three month moving average of one hundred and fifty thousand.

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Speaker 2: We go to Claudia Sam here thrilled that she's with us,

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Speaker 2: before we get perspective from Sarah Wolf at Morgan Stanley.

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Speaker 2: Doctor Som is this impossible to predict for pros like

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Speaker 2: you because of the change in immigration.

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Speaker 3: In America, because we have so many policy changes moving

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Speaker 3: once in immigration, which can affect labor supply definitely is

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Speaker 3: in the mix.

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Speaker 5: Now. You know, it's going to.

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Speaker 3: Take some time to unpack these numbers because it's not

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Speaker 3: as easy to tell the story here, right, because the

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Speaker 3: immigration stories we've had, you know, inflows in the country

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Speaker 3: like really shut down, so you would think you'd start

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Speaker 3: seeing slower job gains. It could put some down a

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Speaker 3: pressure on the unemployment right, But here we've got you know,

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Speaker 3: solid job gains and then employment rate moving down. So

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Speaker 3: like it, there's a lot going on under the hood,

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Speaker 3: and I think that's where you can get some pretty

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Speaker 3: mixed signals. I will say, you know, if you look

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Speaker 3: like this is one day to release, it is very important.

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Speaker 3: But if we look broadly across many other you know,

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Speaker 3: sources that we have, there is a direction of slowing

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Speaker 3: in the labor market that we are likely to see.

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Speaker 5: We didn't see it today.

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Speaker 3: That's great, but we're gonna, you know, have to figure

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Speaker 3: out what's what's going on the under the hood on a

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Speaker 3: directional basis.

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Speaker 2: Paul, can we have a moment of silence for Annawan Shore.

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Speaker 2: I mean, I mean, she's just killing it. I don't know.

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Speaker 2: Her vector was a higher number than survey yeap, I

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Speaker 2: mean she didn't nail one. Forty seven was one.

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Speaker 4: I mean love consensus. I mean, what's Chicago thing?

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Speaker 5: Tom they're smart?

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Speaker 2: Is well, not like Michigan. But you know, come on, Claudia, exactly,

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Speaker 2: Claudia exactly, Claudia.

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Speaker 4: I mean, when you look at the labor market here,

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Speaker 4: it seems, you know, we've heard a term over the

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Speaker 4: last four or five years, labor hoarding. Is that an

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Speaker 4: economic concept?

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Speaker 2: He learned uh in school?

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Speaker 3: So I think, you know, this was a concept that

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Speaker 3: came out of after the pandemic when it was so

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Speaker 3: difficult to rehire workers and we had the labor shortages.

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Speaker 3: And we still see the imprints of that. You know,

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Speaker 3: we got the jold State of Fermain. It showed that

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Speaker 3: we are in this low firing but low hiring environment,

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Speaker 3: which kind of fits that idea of you know, once

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Speaker 3: you get the worker, you keep them on, but maybe

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Speaker 3: you don't expand the workforce. So that and that has

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Speaker 3: been a feature of the labor market now for several months,

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Speaker 3: we haven't seen an event that really like spikes up

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Speaker 3: the layoffs, so you know, things have kept moving along.

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Speaker 3: But that that is I think of something you can

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Speaker 3: describe in the data.

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Speaker 2: Doctor some what final question? We got a four point

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Speaker 2: one percent statistics. Sarah Wolf takes it out to eight

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Speaker 2: decimal points forget about that. But the fact is I've

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Speaker 2: got Chairman Powell a July meeting, a four point one

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Speaker 2: percent statistic, and a basic nominal GDP. Mystery, which is

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Speaker 2: sort of kind of like pretty good animal spirit. How

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Speaker 2: do you do a rate cut with a four point

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Speaker 2: one percent number?

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Speaker 3: Well, I think the other thing to add in this,

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Speaker 3: you've got an inflation rate that's been above two percent

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Speaker 3: for four years right like it's you. You don't see

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Speaker 3: the deterioration in the labor market right now, and so

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Speaker 3: the problem still remains that inflation is too high. Okay,

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Speaker 3: So I think this makes it difficult for the FED

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Speaker 3: to say we're going to start cutting.

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Speaker 2: We're polling today. We're going to special crab cake report

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Speaker 2: here at age fifty five. Doctor Sam lopsk cold worm

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Speaker 2: lobster lobster cold or warm lobster cold. Thank you, you

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Speaker 2: can come back. Claudia seb thank you so much. I

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Speaker 2: can see me and Claudia Jackson hole. You think there's

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Speaker 2: a lobster roll at the million choler cowboy By, I

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Speaker 2: don't think so, Doctor sim We adore that you come

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Speaker 2: on each and every Jobstay.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 2: We have the wisdom of Patrick McHenry of the Carolinas.

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Speaker 2: I can't say enough about his public service to the GOP.

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Speaker 2: There's a photo on Wikipedia. He's like twelve years old

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Speaker 2: with Bush the younger? Was he slid into politics? Patrick mckenry,

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Speaker 2: When did you get interested in politics very young?

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Speaker 7: I was in middle school and high school. That's when

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Speaker 7: I started covering politics. But look, look look at me now? Now,

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Speaker 7: I mean, this is this is the cruel, trull thing

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Speaker 7: of of a of a long public careers. You have

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Speaker 7: all these pictures of uh uh, you know, I'm short,

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Speaker 7: but there are moments where I went wide, then the

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Speaker 7: hero went white and then losing it.

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Speaker 2: So I noticed your bow type free today for those

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Speaker 2: of you on radio, it's a crushing view of Patrick

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Speaker 2: and met Henry. We like the tail bow type today.

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Speaker 2: What is it like when you are up the food

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Speaker 2: chain of the GOP and President Trump calls you to jawbone?

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Speaker 2: Let's say what's today Thursday, Wednesday night at seven pm?

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Speaker 2: What's it actually like when a president calls you up? Oh?

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Speaker 7: It's serious. Look, I mean, the challenge of being a

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Speaker 7: Republican congressional leader these days is you have to suffer

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Speaker 7: your indignities in public. And in previous generations of politics

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Speaker 7: you had you got to here in dignities in private.

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Speaker 7: And there's there's value in that, huge value in that.

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Speaker 7: But this president knows his power and the power that

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Speaker 7: he has over the Republican Party and among Republican legislators.

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Speaker 7: And that's what we saw evolve over the last week

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Speaker 7: in the United States Senate, enabled by adept Senate leadership

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Speaker 7: obviously putting deals together together to get the bill through,

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Speaker 7: the reconciliation built through the Senate, but we saw that

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Speaker 7: in really in really major form in the US House,

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Speaker 7: where there there were no there were no offers of

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Speaker 7: changes to the policy, but brute force and brute force

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Speaker 7: moved it through the House of Representatives, or is moving

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Speaker 7: it through the House for Representatives at this hour.

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Speaker 4: So, Patrick, what do you make of this bill? What's

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Speaker 4: your view of this bill as it stands now?

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Speaker 7: So, it's it's a the way I've always thought of

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Speaker 7: this reconciling package is the extension of twenty seventeen tax

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Speaker 7: cuts with fewest changes necessary to unlock the bill. So

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Speaker 7: a clean extension the tax code with a few minor

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Speaker 7: changes that are important to the president and delivering on

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Speaker 7: his campaign message. That's number one. Number two, there are

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Speaker 7: offsetting entitlement changes that aren't major in dollar amount, but

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Speaker 7: significant in political peril by touching medicaid. And medicaid used

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Speaker 7: to be an area of healthcare policy for the indigen

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Speaker 7: and poor where Republicans had a winning message. Let's put

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Speaker 7: work requirements here, Let's make sure able bodied folks are

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Speaker 7: not receiving a governmental benefit. Let's make sure that this

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Speaker 7: is a social safety net. That is no longer the

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Speaker 7: case with the expansion of Obamacare and Republican states. This

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Speaker 7: now is a very very mixed populist Republican party when

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Speaker 7: it comes to medicaid spending, government safety net, expansion of

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Speaker 7: government safety net spending. It is not the old Conservative

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Speaker 7: party of cutting spending. And the third thing is there's

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Speaker 7: a massive set of policies that are unlocked here and

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Speaker 7: significant spending connected with this bill, about three hundred billion

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Speaker 7: dollars of new spending. That is the president's significant agenda

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Speaker 7: for defense policy, defense tech, American dynamism when it brings

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Speaker 7: when it comes to manufacturing renaissance in the United States.

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Speaker 7: There's going to be significant action the President's going to

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Speaker 7: be able to take by unlocking this policy through this bill.

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Speaker 7: So those are the three components that I think of

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Speaker 7: right now. And the deficit piece of this is really

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Speaker 7: driven by the clean extension the tax code, which was

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Speaker 7: going to happen with Republican leadership.

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Speaker 4: Patrick the reduction in some of benefits, whether it's Medicaid

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Speaker 4: or other parts of benefits package, is that a political

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Speaker 4: risk for the Republican Party in the midterm elections coming up.

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Speaker 7: Yes, because this is a different Republican electorate. President Trump

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Speaker 7: has changed the Republican electorate over his three election cycles

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Speaker 7: as a Republican nominee for president. This is a middle

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Speaker 7: and lower class Americans are receiving medicaid benefits through Obamacare.

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Speaker 7: So let's rewind in twenty seventeen, one of the signature

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Speaker 7: first bills of that Trump administration was repealing Obamacare. This

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Speaker 7: bill was just passed by Republican full Republican control of

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Speaker 7: the House, in the Senate, in trinees Obamacare for another generation.

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Speaker 7: And that's the clear piece.

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Speaker 2: And Patrick mckenree with this contributor to Bloomberg, we're thrilling

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Speaker 2: could be with us with his public service to the nation.

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Speaker 2: From the Carolina's Patrick, there have been a couple wonderful

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Speaker 2: studies spanning from two thousand and nine to the present day,

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Speaker 2: of the arch shift of the Democrats now representing elite,

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Speaker 2: privileged East and West Coast constituencies and the Republicans much

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Speaker 2: more the poor. What does medicaid cuts do to the

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Speaker 2: people of your district in the Carolinas.

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Speaker 7: Well, the truth is it will not do much. It

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Speaker 7: will not do much at all. There's been this political

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Speaker 7: talking point that this is going to devastate the medicaid population.

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Speaker 7: It will not. Why well, because work requirements are just

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Speaker 7: a basic element of proof of eligibility. And what you'll do,

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Speaker 7: what we'll have with work requirements is are some population,

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Speaker 7: so some significant piece of the population there's receiving Medicaid

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Speaker 7: benefits and not working will go get jobs, and so

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Speaker 7: the idea that this is going to devastate the population

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Speaker 7: is not true. Number one. Number two, it will shift

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Speaker 7: to the action of the state legislatures where they're going

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Speaker 7: to have to come up with paying forest for themselves

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Speaker 7: rather than drawing down gaming federal dollars. For example, the

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Speaker 7: provider tax. States have figured out how to rig a

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Speaker 7: system by which they tax hospitals and then give them

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Speaker 7: more money than the tax than the taxes they impose

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Speaker 7: by drawing down federal taxpayer dollars. So it is a

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Speaker 7: scheme and is a tax scheme that the Republican legislatures

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Speaker 7: and Democratic legislatures in particularly using. So this will shift down.

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Speaker 7: I don't think there's going to be much harm to

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Speaker 7: this population, but it will be a huge political talking

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Speaker 7: point in the midterm election.

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Speaker 2: I would love your opinion on this, and you know

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Speaker 2: we're getting a GOP line for you, but that's fine.

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Speaker 2: Patrick McHenry, just to give pause, have you been surprised

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Speaker 2: by Paul, which I'm going to addit realizes an anemic

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Speaker 2: Democratic party response. Patrick, where are the Democrats.

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Speaker 7: They're searching. They're searching for a message.

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Speaker 2: Yeah, but I don't mean to cut you off, but

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Speaker 2: I clearly remember Richard Nixon getting run over in California,

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Speaker 2: and Nixon picked himself up. Whatever you think about Richard Nixon, folks,

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Speaker 2: and he went dinner to dinner, Robert Chicken to Rubbert

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Speaker 2: Chicken lunch to rebuild the Republican Party in the sixties.

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Speaker 2: Where are the Democrats doing a Nixon reducts.

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Speaker 7: They're raising money online rather than actually going and working

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Speaker 7: the base and developing a new message for their party

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Speaker 7: and understanding. They just got hammered in the presidential election

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Speaker 7: with no message. It was all vibes but no substance.

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Speaker 7: So they've got to do some soul searching. And they

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Speaker 7: can't just say no Kings. I don't even know what

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Speaker 7: that means, by the way, and the average voter knows

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Speaker 7: less about what the heck that mess means. They need

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Speaker 7: something other than we're not Trump. They need substance here

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Speaker 7: about what they're going to do for America, and they're

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Speaker 7: yet to do that. I think, Hakeem Jeffries, I think

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Speaker 7: you see leaders in the US House that are much

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Speaker 7: more keen to do that than what we've seen out

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Speaker 7: of the Senate Democratic leadership that's been around for a

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Speaker 7: decade and a half with the same.

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Speaker 4: Message, Patrick, President Trump is on a tremendous winning streak.

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Speaker 4: You know, many parts of his administration, his platform. What's

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Speaker 4: next for President Trump and his administration, do you think?

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Speaker 7: Well, next up legislatively is a crypto bill, and that'll

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Speaker 7: be the stable Coin Bill the Senate passed a month ago,

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Speaker 7: and there's a public pledge that they'll work that through

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Speaker 7: the House and pass it to the President's desk in

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Speaker 7: the month of July, and then they'll turn their work

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Speaker 7: to the Market Structure Bill for digital assets. And think

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Speaker 7: of the Market Structure Bill as like a thirty three

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Speaker 7: and thirty f act for securities and brings huge clarity

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Speaker 7: to the crypto market through a market structure bill. But

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Speaker 7: those that first bill, the stable Coin Bill, will be

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Speaker 7: to the President's esk in July and implementation will follow there,

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Speaker 7: and then the larger piece for crypto will come in

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Speaker 7: the early fall. Those are the next legislative items. I

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Speaker 7: think what we're going to see the President to assign

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Speaker 7: this bill and then start rolling out pieces of policy

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Speaker 7: that come from this bill. Defense build up is one.

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Speaker 7: I think you'll see the President take significant action on

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Speaker 7: artificial intelligence in our competition with China. Those things will

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Speaker 7: come to the four in major ways.

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Speaker 2: Pat, we're gonna have We're out of time, We're gonna

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Speaker 2: have to leave it there. But Patrick Mayhonry thank you

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Speaker 2: so much. The former House Speaker Protein for current advisory

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Speaker 2: board member for b g R.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Androidtio with

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Speaker 1: the Bloomberg Business Up. You can also listen live on

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Speaker 1: Amazon Alexa from our flagship New York station Just Say

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Speaker 1: Alexa played Bloomberg eleven thirty.

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Speaker 2: Wendy Shower joins US professor Civics Brown University. Of course,

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Speaker 2: with all our work with their Tauban at Center, Wendy's

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Speaker 2: is just another big piece of legislation or is there

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Speaker 2: a new new is Mister Jeffrey speaks in Washington.

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Speaker 8: Well, I mean I think nobody should be surprised that

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Speaker 8: the House and Senate GOP passed the tax cut. I mean, yes,

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Speaker 8: Trump will claim victory for this bill. He did get active,

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Speaker 8: He put himself on the line. He went up to

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Speaker 8: the hill, he lobbied, he threatened. But Republican administrations, Republicans

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Speaker 8: cut taxes. We've seen this all the way going back

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Speaker 8: to Ronald Reagan, and they've also increased deficits, and even

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Speaker 8: though that can sometimes cost them politically, it has not

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Speaker 8: traditionally cost them politically. So it's not surprising. And you know,

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Speaker 8: Americans think ahead to next week. In fact, most of

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Speaker 8: America's thinking ahead to tomorrow. What is the holiday going

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Speaker 8: to be, what's the weather going to be. Nobody's thinking

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Speaker 8: ten years from now the deficit.

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Speaker 9: Will be an additional three trillion dollars.

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Speaker 2: Is Trump threatened the same as LBJ threaten from another

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Speaker 2: time and place. You know.

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Speaker 8: The real difference, I think is that the Republican Party,

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Speaker 8: on the face of it, pargically in the House, seems

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Speaker 8: immune or not as interested in local projects, local district

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Speaker 8: flow of money.

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Speaker 9: The federal government, as we've seen with.

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Speaker 8: Those no jos, these cuts, it is enormously embedded, and

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Speaker 8: even under Johnson it had a lot of resources to deliver,

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Speaker 8: and every congress person was interested in those resources. These

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Speaker 8: Republicans don't seem to be worried about going back to

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Speaker 8: their districts, in fact the opposite and saying we're not

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Speaker 8: taking money from the federal government.

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Speaker 9: We're not going to try to.

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Speaker 8: Make a deal just to increase the flow of money

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Speaker 8: to our district on a cut spending. So this party

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Speaker 8: is quite different from either the Republican or the Democratic

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Speaker 8: Conservative Party that Johnson dealt with.

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Speaker 9: Their political incentives don't seem to be the same.

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Speaker 4: We are looking at Kim Jeffries right now speaking in

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Speaker 4: the Capitol here. But it kind of goes back to

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Speaker 4: a question Tom asked earlier this morning, where are the Democrats?

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Speaker 4: Where is the message? Where is the pushback on just

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Speaker 4: a day to day basis that doesn't seem to be

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Speaker 4: any check on this president.

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Speaker 9: Well, it is.

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Speaker 8: It's an odd thing for the Democrats to be saying

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Speaker 8: we're worried about the deficit. It's not usually what the

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Speaker 8: Democratic Party says. It says we need to spend government

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Speaker 8: money to help people who need a little assistance or

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Speaker 8: a lot of assistants. And the Medicaid cuts are sticking

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Speaker 8: in public approval ratings right So this bill is underwater

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Speaker 8: with the public at the moment.

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Speaker 9: But the original Trump tax cut bill was also.

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Speaker 8: Underwater with the public. The Democrats did well in twenty eighteen,

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Speaker 8: and COVID interrupted the twenty twenty election, so we don't

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Speaker 8: know what the political impact of that bill was.

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Speaker 9: But it was also underwater when it passed.

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Speaker 8: So you know, the Democrats, you know, to say we

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Speaker 8: have to get worried about cuts that will happen literally

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Speaker 8: two and a half years from now, that's a hard sell.

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Speaker 9: So the Democrat Republicans know that.

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Speaker 8: And they also scheduled the worst Medicaid cuts if you're

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Speaker 8: thinking about people who might not be any eligible any longer,

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Speaker 8: for after the twenty six midterms.

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Speaker 9: So it is going to be difficult for the Democrats

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Speaker 9: to make this case, no matter how magical communicator you're

438
00:24:33,480 --> 00:24:35,240
Speaker 9: looking for in the Democrat party.

439
00:24:35,359 --> 00:24:39,680
Speaker 2: Well, Patrick mccannrey was just a Republican from the Carolinas

440
00:24:39,800 --> 00:24:43,520
Speaker 2: contributor to Bloomberg, and I asked him about the Medicaid

441
00:24:43,520 --> 00:24:46,560
Speaker 2: cuts and he said, the incentive of getting people to

442
00:24:46,720 --> 00:24:52,239
Speaker 2: work will make the draconian cuts less draconian. Is that

443
00:24:52,359 --> 00:24:56,600
Speaker 2: just Republican happy talk or does it actually work that

444
00:24:56,720 --> 00:24:59,000
Speaker 2: you say you're not getting your Medicaid unless you find

445
00:24:59,040 --> 00:25:00,000
Speaker 2: a job. Does that work?

446
00:25:01,400 --> 00:25:01,640
Speaker 1: Well?

447
00:25:02,119 --> 00:25:04,840
Speaker 9: So to be clear, you have to look for a job.

448
00:25:05,600 --> 00:25:08,400
Speaker 8: I think that's the language I have to double check

449
00:25:08,480 --> 00:25:11,320
Speaker 8: because you know, nobody can guarantee getting a job, but

450
00:25:11,359 --> 00:25:13,320
Speaker 8: you have to at least actively be seeking work.

451
00:25:14,080 --> 00:25:16,480
Speaker 9: And that's important, I think.

452
00:25:16,320 --> 00:25:19,720
Speaker 8: For the constituency that is now shifted to the Republican Party.

453
00:25:19,960 --> 00:25:22,560
Speaker 9: Remember you know FDRs, You well know Tom.

454
00:25:22,640 --> 00:25:24,800
Speaker 8: You could give me the litany of programs that FDR

455
00:25:24,880 --> 00:25:28,080
Speaker 8: created in the New Deal. All of them required something

456
00:25:28,200 --> 00:25:32,280
Speaker 8: of the recipient. And Bill Clinton reformed welfare. Let's not

457
00:25:32,280 --> 00:25:35,720
Speaker 8: forget the Democrats took AFDC and they made it ten

458
00:25:35,800 --> 00:25:38,720
Speaker 8: IF and that limited the amount of time you could

459
00:25:38,800 --> 00:25:41,080
Speaker 8: be on welfare. That's what the Democrats did in the

460
00:25:41,160 --> 00:25:45,960
Speaker 8: nineties and it ended up not being as destructive as

461
00:25:46,000 --> 00:25:48,600
Speaker 8: people thought it could be. So this is what the

462
00:25:48,640 --> 00:25:52,520
Speaker 8: Republicans are counting on that in fact, this won't cut

463
00:25:52,600 --> 00:25:55,600
Speaker 8: seven million people off the rolls, that in fact, you

464
00:25:55,640 --> 00:25:57,399
Speaker 8: have to go to school, you have to prove that

465
00:25:57,440 --> 00:25:59,240
Speaker 8: you're a caretaker, or you have to look for work.

466
00:25:59,400 --> 00:26:02,400
Speaker 8: And the majority already of Americans, when they absorb that,

467
00:26:03,160 --> 00:26:05,680
Speaker 8: we'll say, well, I work, So why shouldn't they?

468
00:26:06,560 --> 00:26:06,919
Speaker 2: Wendy.

469
00:26:07,320 --> 00:26:12,120
Speaker 4: Typically, the midterm elections are a challenge for the incumbent administration,

470
00:26:12,240 --> 00:26:16,080
Speaker 4: maybe the opposition party gets some traction here. Is that

471
00:26:16,200 --> 00:26:20,720
Speaker 4: the expectation for this midterm because it seemed like this president,

472
00:26:20,760 --> 00:26:24,640
Speaker 4: this administration has almost unparalleled momentum here.

473
00:26:26,400 --> 00:26:29,719
Speaker 8: Yeah, Well, you know, presidents in their second term, they

474
00:26:29,720 --> 00:26:32,520
Speaker 8: don't always worry about the fate of their party in

475
00:26:32,600 --> 00:26:33,960
Speaker 8: that second midterm.

476
00:26:34,240 --> 00:26:35,760
Speaker 9: It's not really on their mind.

477
00:26:36,040 --> 00:26:38,040
Speaker 8: And as far as we know at the moment, the

478
00:26:38,080 --> 00:26:41,520
Speaker 8: Constitution is holding and President Trump cannot seek and is

479
00:26:41,560 --> 00:26:44,119
Speaker 8: not seeking to be elected to a third term. So

480
00:26:44,359 --> 00:26:46,399
Speaker 8: there isn't much in it for Trump to cooperate with

481
00:26:46,440 --> 00:26:49,520
Speaker 8: Congress at all. And this, to me is the lesson

482
00:26:49,560 --> 00:26:52,400
Speaker 8: of what's going on this week is that whatever leverage

483
00:26:52,440 --> 00:26:56,200
Speaker 8: Congress had with Trump is gone evaporated.

484
00:26:55,680 --> 00:26:57,679
Speaker 9: Which means that the institution, even though it.

485
00:26:57,640 --> 00:26:59,880
Speaker 8: Hasn't really been a check on the president as of yet,

486
00:27:00,240 --> 00:27:03,320
Speaker 8: will have no power to check the executive branch.

487
00:27:03,880 --> 00:27:07,280
Speaker 9: And the courts have been i think split in terms

488
00:27:07,320 --> 00:27:08,760
Speaker 9: of supporting Trump and opposing Trump.

489
00:27:09,000 --> 00:27:11,560
Speaker 8: So that is that the concern is that where's the

490
00:27:11,680 --> 00:27:14,239
Speaker 8: leverage for Congress, Not just where the Democrats are, but

491
00:27:14,600 --> 00:27:16,600
Speaker 8: where's the LeVert for Congress in this system?

492
00:27:17,160 --> 00:27:18,919
Speaker 9: And what you have to worry about. I think if

493
00:27:18,960 --> 00:27:21,400
Speaker 9: you're the Republicans, is the future of the party.

494
00:27:21,640 --> 00:27:23,880
Speaker 8: There are many We can have a long conversation about

495
00:27:23,920 --> 00:27:25,720
Speaker 8: how many Republicans are going to line up to run

496
00:27:25,760 --> 00:27:28,399
Speaker 8: for president in twenty eight or much less governor or

497
00:27:28,440 --> 00:27:32,399
Speaker 8: senator in twenty six, and if they suffer because of

498
00:27:32,440 --> 00:27:36,680
Speaker 8: this bill, that weakens the Republican Party going into twenty eight.

499
00:27:37,040 --> 00:27:38,080
Speaker 9: And that's what I think.

500
00:27:38,119 --> 00:27:40,600
Speaker 8: People have to figure out how to manage under a

501
00:27:40,640 --> 00:27:42,879
Speaker 8: president who's probably not going to be concerned about that.

502
00:27:43,000 --> 00:27:48,520
Speaker 2: Professor Shulder, thank you so much. Wenday show around University There.

503
00:27:50,800 --> 00:27:54,720
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

504
00:27:54,720 --> 00:27:57,719
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

505
00:27:57,760 --> 00:28:01,280
Speaker 1: Otto with the Bloomberg Business app. Also watch us live

506
00:28:01,359 --> 00:28:04,920
Speaker 1: every weekday on YouTube and always on the Bloomberg terminal.

507
00:28:05,520 --> 00:28:08,800
Speaker 2: Joining us now, thank you so much for coming in.

508
00:28:08,840 --> 00:28:12,000
Speaker 2: We're gonna get her in here before, I mean today, Tom,

509
00:28:12,080 --> 00:28:17,160
Speaker 2: this is at that's unbelievable. And Rebecca Pattison to join

510
00:28:17,240 --> 00:28:19,840
Speaker 2: us for the work at Bridgewater with Bessemer Trust years ago.

511
00:28:19,920 --> 00:28:23,879
Speaker 2: And JP Morgan joining us right now with a Council

512
00:28:24,040 --> 00:28:27,480
Speaker 2: on Foreign Relations and It's sort of cool that you're

513
00:28:27,520 --> 00:28:32,160
Speaker 2: with CFR because I've never seen a time where economics, finance, investment,

514
00:28:32,280 --> 00:28:37,840
Speaker 2: international relations are all into one gelled ball. What what's

515
00:28:37,880 --> 00:28:40,520
Speaker 2: the way you think forward to clarity?

516
00:28:40,920 --> 00:28:45,760
Speaker 10: Yeah, well, good to see you. Happy faux Friday. You

517
00:28:45,760 --> 00:28:48,560
Speaker 10: know it is. It is so complicated right now. There

518
00:28:48,560 --> 00:28:52,920
Speaker 10: are so many cross currents with geopolitics, domestic policy, the

519
00:28:52,960 --> 00:28:56,600
Speaker 10: feedback loop between financial markets, economics and all these things,

520
00:28:56,600 --> 00:29:00,280
Speaker 10: so getting clarity is not easy. At the same time time,

521
00:29:00,480 --> 00:29:03,320
Speaker 10: I think there are some lessons we've learned. Even just

522
00:29:03,360 --> 00:29:06,120
Speaker 10: looking back over the last ninety days from early April,

523
00:29:06,600 --> 00:29:09,240
Speaker 10: I think we've learned that the US exceptionalism is something

524
00:29:09,280 --> 00:29:10,520
Speaker 10: we shouldn't take for granted.

525
00:29:10,720 --> 00:29:11,560
Speaker 5: We saw that in the.

526
00:29:11,520 --> 00:29:15,640
Speaker 10: Reaction in early April. I think we've seen that opportunities

527
00:29:15,680 --> 00:29:20,040
Speaker 10: to invest our dynamic, and they're relative. So think about Germany. Right,

528
00:29:20,080 --> 00:29:22,920
Speaker 10: the German stock market is up over thirty percent year

529
00:29:22,960 --> 00:29:25,440
Speaker 10: to day versus the S and P what five and

530
00:29:26,000 --> 00:29:28,760
Speaker 10: growth in Germany is slower. Right, the economy is not

531
00:29:28,800 --> 00:29:31,520
Speaker 10: as robust, and yet the market's doing better because of

532
00:29:31,600 --> 00:29:36,280
Speaker 10: valuations and relative sentiment changes. So keeping that relativity in mind,

533
00:29:36,320 --> 00:29:40,000
Speaker 10: I think is really important. There's a lot of lessons

534
00:29:40,040 --> 00:29:42,120
Speaker 10: you can take away, and I think Tom that helps

535
00:29:42,120 --> 00:29:45,560
Speaker 10: you as you go forward saying what are my truths?

536
00:29:45,560 --> 00:29:47,720
Speaker 10: What do I know for sure? One thing I know

537
00:29:47,880 --> 00:29:51,440
Speaker 10: for sure is that we're not done with tariffs. So this,

538
00:29:52,040 --> 00:29:54,200
Speaker 10: oh we have clarity on tariffs now, I think that's

539
00:29:54,280 --> 00:29:55,000
Speaker 10: kind of silly.

540
00:29:56,080 --> 00:29:58,360
Speaker 2: I want to point out that mister Jeffries of the

541
00:29:58,400 --> 00:30:02,400
Speaker 2: Democratic Persuasion speaking since four fifty three AO, and.

542
00:30:02,680 --> 00:30:04,680
Speaker 5: What did he says? Taking a sweet time right.

543
00:30:04,800 --> 00:30:07,000
Speaker 2: Still speaking in the House. We're trying to await a

544
00:30:07,080 --> 00:30:10,080
Speaker 2: vote there. And also, Clia, thank you so much for

545
00:30:10,240 --> 00:30:13,120
Speaker 2: this Off of our desk. There are bomb threats and

546
00:30:13,200 --> 00:30:17,880
Speaker 2: grounded flights in Ottawa and Montreal, Canada that according to

547
00:30:17,920 --> 00:30:22,600
Speaker 2: the FAA. We're monitoring that story right now and we'll

548
00:30:22,680 --> 00:30:26,120
Speaker 2: leave it at that. Paul with Rebecca Pattison Commercial Free. Absolutely.

549
00:30:26,200 --> 00:30:28,760
Speaker 4: Rebecca talked to us about your view of the US dollar.

550
00:30:28,800 --> 00:30:30,880
Speaker 4: We've seen a lot of risk assets it bounce back,

551
00:30:31,040 --> 00:30:33,880
Speaker 4: most notably US equities. Yes, but we haven't seen the

552
00:30:33,920 --> 00:30:34,640
Speaker 4: dollar come back.

553
00:30:34,680 --> 00:30:35,240
Speaker 2: It's not down.

554
00:30:35,280 --> 00:30:37,600
Speaker 4: The Bloomberg dollar in nex is down roughly ten percent

555
00:30:37,640 --> 00:30:39,480
Speaker 4: off of its highs earlier in the year. What do

556
00:30:39,520 --> 00:30:39,920
Speaker 4: you make of that?

557
00:30:40,080 --> 00:30:42,560
Speaker 10: Yeah, I think there's two things going on. One is

558
00:30:42,680 --> 00:30:46,880
Speaker 10: relative changes in US yields. And even though the data today,

559
00:30:46,880 --> 00:30:49,560
Speaker 10: the peril data today was better than expected and we

560
00:30:49,600 --> 00:30:51,960
Speaker 10: saw little bounce and yields of bouncing the dollar, the

561
00:30:51,960 --> 00:30:55,400
Speaker 10: bigger story is when you compare January to now, wherever

562
00:30:55,440 --> 00:30:58,360
Speaker 10: you're looking on the curve or even FED funds expectations,

563
00:30:58,360 --> 00:30:58,959
Speaker 10: it's lower.

564
00:30:59,040 --> 00:31:01,160
Speaker 5: So that's a piece of it. But the more.

565
00:31:01,000 --> 00:31:03,600
Speaker 10: Important structural piece of it, which I think has legs

566
00:31:03,640 --> 00:31:08,479
Speaker 10: going through this year, is investors globally thinking about how

567
00:31:08,560 --> 00:31:11,400
Speaker 10: much risk premium should be in US assets, and so

568
00:31:11,440 --> 00:31:14,280
Speaker 10: they're doing one of two things. They're either reducing US

569
00:31:14,320 --> 00:31:18,920
Speaker 10: assets in favor of other countries or commodities, or they're

570
00:31:18,960 --> 00:31:21,840
Speaker 10: hedging their dollar risk. So maybe I want to keep

571
00:31:21,880 --> 00:31:24,680
Speaker 10: my US tech exposure for structural reasons, but I don't

572
00:31:24,680 --> 00:31:25,320
Speaker 10: want to have that.

573
00:31:25,240 --> 00:31:27,600
Speaker 5: Dollar risk, so I hedge it out. Both of those

574
00:31:27,640 --> 00:31:29,360
Speaker 5: things are contributing to the weaker dollar.

575
00:31:29,600 --> 00:31:31,560
Speaker 2: Is that something I don't know?

576
00:31:31,840 --> 00:31:34,680
Speaker 4: Can we call it a bearish market for the US

577
00:31:34,760 --> 00:31:36,840
Speaker 4: dollar or is this kind of a trading thing?

578
00:31:37,240 --> 00:31:40,200
Speaker 10: Well, the FED part of it is a trading thing,

579
00:31:40,440 --> 00:31:44,960
Speaker 10: to use your language. The reallocation is a slow bleed.

580
00:31:45,160 --> 00:31:47,360
Speaker 10: It's something that's going to take time. If I am

581
00:31:47,400 --> 00:31:50,760
Speaker 10: a major sovereign wealth fund or pension fund, I do analysis,

582
00:31:50,800 --> 00:31:53,960
Speaker 10: then I go to my quarterly board meeting and get approval,

583
00:31:54,000 --> 00:31:56,000
Speaker 10: and then I roll out my new plan over the

584
00:31:56,080 --> 00:31:59,840
Speaker 10: next few months. So this dollar unwind, if you will,

585
00:32:00,400 --> 00:32:02,960
Speaker 10: is not something that's finished or quick.

586
00:32:03,200 --> 00:32:04,720
Speaker 5: It's going to take months or quarters.

587
00:32:04,880 --> 00:32:07,920
Speaker 2: But what is a stronger euro? Just as one example,

588
00:32:07,920 --> 00:32:10,160
Speaker 2: what does it do to Christine Leguard's lunch? I mean

589
00:32:10,800 --> 00:32:12,520
Speaker 2: is if you get out over a one to twenty

590
00:32:12,560 --> 00:32:16,040
Speaker 2: one year I'm sorry, that begins doing pinge Mercedes.

591
00:32:15,440 --> 00:32:18,520
Speaker 10: Sales, right, yeah, And they said that earlier this week

592
00:32:18,560 --> 00:32:21,240
Speaker 10: at the Central Bank conference in Portugal.

593
00:32:21,280 --> 00:32:22,120
Speaker 5: They have every year.

594
00:32:22,160 --> 00:32:22,960
Speaker 2: So were you there?

595
00:32:23,200 --> 00:32:26,400
Speaker 10: Sadly no everyone was there, but I know, I know

596
00:32:26,640 --> 00:32:28,240
Speaker 10: I wasn't Italy last week.

597
00:32:28,280 --> 00:32:29,960
Speaker 5: But we're not going to go there right now.

598
00:32:30,640 --> 00:32:35,240
Speaker 2: I wrote Francinea, note she killed, hurting five of those people.

599
00:32:35,400 --> 00:32:35,920
Speaker 5: That's awesome.

600
00:32:35,960 --> 00:32:37,680
Speaker 2: Francine was rude for the first time.

601
00:32:38,680 --> 00:32:43,080
Speaker 10: Anyway, they're drawing a very light pencil lined in the

602
00:32:43,160 --> 00:32:46,360
Speaker 10: sand on one twenty for euro dollar exchange rate. I

603
00:32:46,360 --> 00:32:48,760
Speaker 10: think it'll depend how quickly it gets there, what the

604
00:32:48,800 --> 00:32:51,800
Speaker 10: economic backdrop is when it gets there. But they do

605
00:32:51,880 --> 00:32:54,400
Speaker 10: have some limited tolerance and we're seeing that everywhere right

606
00:32:54,480 --> 00:32:57,600
Speaker 10: Switzerland taking interest rates to zero to try to limit

607
00:32:57,680 --> 00:33:01,720
Speaker 10: Swiss Frank's strength, Taiwan, Hong Kong, lots of intervention. I

608
00:33:01,720 --> 00:33:04,479
Speaker 10: don't think we're looking at a currency crisis around the corner,

609
00:33:04,520 --> 00:33:06,560
Speaker 10: but I do think we have to keep our eyes

610
00:33:06,640 --> 00:33:09,280
Speaker 10: open that this could turn into something.

611
00:33:09,600 --> 00:33:11,200
Speaker 2: Well, because I knew you were showing up, I did

612
00:33:11,320 --> 00:33:14,080
Speaker 2: trade weight at Sis Frank and it's up seventy eight percent,

613
00:33:14,760 --> 00:33:20,040
Speaker 2: Swiss francs seventy eight percent, and I think it's twenty years.

614
00:33:19,840 --> 00:33:23,600
Speaker 2: It's just it's a log linear moon shot as well.

615
00:33:24,040 --> 00:33:29,000
Speaker 2: Is there a leverage destabilization behind these moves in currency?

616
00:33:29,360 --> 00:33:32,880
Speaker 10: So there's one story that I think would be good

617
00:33:32,880 --> 00:33:35,320
Speaker 10: for people to read with their lobster role this weekend.

618
00:33:35,840 --> 00:33:39,000
Speaker 10: My colleague at CFUR Brad sets Are, published a piece

619
00:33:39,120 --> 00:33:42,600
Speaker 10: yesterday on balands of payments, looking at the Asian currencies

620
00:33:43,000 --> 00:33:46,320
Speaker 10: and what he calls a reverse Asian financial crisis risk.

621
00:33:46,760 --> 00:33:49,600
Speaker 10: I have not had the chance yet to read this piece.

622
00:33:49,640 --> 00:33:52,240
Speaker 10: I just read the top of it. But the idea

623
00:33:52,440 --> 00:33:55,440
Speaker 10: is that a lot of these currents have become very undervalued,

624
00:33:56,000 --> 00:33:59,520
Speaker 10: and if they have to revalue and everything that comes

625
00:33:59,560 --> 00:34:02,920
Speaker 10: with that, the owning of US treasuries by Taiwan Life insurers,

626
00:34:02,960 --> 00:34:06,880
Speaker 10: et cetera, you could have global ripple effects across asset classes.

627
00:34:07,280 --> 00:34:09,640
Speaker 10: So I think that would be useful reading for anyone

628
00:34:09,640 --> 00:34:11,080
Speaker 10: who's thinking about contagion.

629
00:34:11,280 --> 00:34:13,480
Speaker 2: I'll put this out on LinkedIn and Twitter. Setser's at

630
00:34:13,480 --> 00:34:17,560
Speaker 2: giant but Rebecca with that to walk through it, you

631
00:34:17,719 --> 00:34:22,920
Speaker 2: get reverse contagion in the Taiwan dollars strengthens, but Taiwan's

632
00:34:23,000 --> 00:34:26,600
Speaker 2: Life insurer is on a boatload of American paper, which

633
00:34:26,640 --> 00:34:29,400
Speaker 2: am I right, goes priced down, yield up, and they

634
00:34:29,400 --> 00:34:30,480
Speaker 2: have balance sheet risk.

635
00:34:30,560 --> 00:34:33,880
Speaker 5: That's exactly right. OK, that was perfect.

636
00:34:34,000 --> 00:34:36,760
Speaker 10: And the whole point there is whatever the bond yield

637
00:34:36,840 --> 00:34:40,040
Speaker 10: is doing this week or today, that's not the story.

638
00:34:40,080 --> 00:34:42,799
Speaker 10: The story is over the next year as we get

639
00:34:42,800 --> 00:34:45,000
Speaker 10: this slow shift in reallocation, and we're not going to

640
00:34:45,080 --> 00:34:47,719
Speaker 10: get the supply with the big beautiful bill coming through

641
00:34:47,840 --> 00:34:50,560
Speaker 10: probably till Q one next year, but we are going

642
00:34:50,640 --> 00:34:53,359
Speaker 10: to have challenges to get demand to meet that new

643
00:34:53,400 --> 00:34:56,480
Speaker 10: bond supply, and if we don't meet the supply, yields

644
00:34:56,480 --> 00:34:59,240
Speaker 10: are going to be biased higher gold.

645
00:34:59,400 --> 00:35:04,080
Speaker 4: It's been such god bless what I mean, A what

646
00:35:04,080 --> 00:35:05,440
Speaker 4: do you make of it? And B what do you

647
00:35:05,480 --> 00:35:05,960
Speaker 4: do from here?

648
00:35:06,040 --> 00:35:09,000
Speaker 10: I guess I'm staying long gold. I have been for

649
00:35:09,000 --> 00:35:13,680
Speaker 10: two years, and I've been there because of central bank diversification,

650
00:35:13,760 --> 00:35:16,040
Speaker 10: which also is one of those things that plays out

651
00:35:16,160 --> 00:35:20,239
Speaker 10: very slowly. Central bankers don't move fast, so this is

652
00:35:20,280 --> 00:35:22,799
Speaker 10: something that I think will have legs as they diversify

653
00:35:23,040 --> 00:35:27,400
Speaker 10: their allocations and then looking for the retail consumer also

654
00:35:27,440 --> 00:35:30,080
Speaker 10: maybe a little more nervous about bonds having the same

655
00:35:30,160 --> 00:35:33,960
Speaker 10: degree of diversification benefit they've had in the past. Okay,

656
00:35:34,120 --> 00:35:36,560
Speaker 10: I have very little gold. Maybe I'll have a two

657
00:35:36,680 --> 00:35:40,080
Speaker 10: percent allocation or a three percent allocation. You get enough

658
00:35:40,120 --> 00:35:43,479
Speaker 10: retail investors doing that, you've got another five hundred bucks

659
00:35:43,520 --> 00:35:44,760
Speaker 10: at least on the gold price.

660
00:35:46,440 --> 00:35:49,200
Speaker 2: We're coming up on Steve Myron out of Boston University

661
00:35:49,200 --> 00:35:53,719
Speaker 2: in Harvard, very controversial as a CEA head for President Trump.

662
00:35:53,760 --> 00:35:57,799
Speaker 2: Matt Miller will be doing this interview, Rebecca Patterson, with

663
00:35:57,840 --> 00:36:04,200
Speaker 2: immense respect for your career. He's controversial. Explain why Steve

664
00:36:04,239 --> 00:36:05,760
Speaker 2: Myron is controversial.

665
00:36:06,000 --> 00:36:09,200
Speaker 10: Well, he produced a paper last November before he became

666
00:36:09,280 --> 00:36:12,120
Speaker 10: head of the Council of Economic Advisors that people now

667
00:36:12,239 --> 00:36:16,319
Speaker 10: refer to as the mar Laga mar Largo Accord, And

668
00:36:16,400 --> 00:36:20,840
Speaker 10: basically a lot of the discussion in that paper is happening.

669
00:36:21,440 --> 00:36:25,080
Speaker 10: So they wanted a weeker dollar check, they wanted tariffs check,

670
00:36:25,600 --> 00:36:29,440
Speaker 10: They want to get countries to pay for the protection

671
00:36:29,560 --> 00:36:32,440
Speaker 10: of US military. I think to a degree we're seeing

672
00:36:32,480 --> 00:36:35,760
Speaker 10: that NATO increasing how much they're paying, etc. People buying

673
00:36:35,760 --> 00:36:39,359
Speaker 10: more US weapons. The piece of it that's controversial is

674
00:36:39,719 --> 00:36:42,400
Speaker 10: that I don't think will happen is trying to get

675
00:36:42,400 --> 00:36:46,960
Speaker 10: central banks overseas to continue owning US bonds but switch

676
00:36:47,000 --> 00:36:49,240
Speaker 10: out what they hold today, which is very short term

677
00:36:49,640 --> 00:36:53,160
Speaker 10: into duration We're talking about one hundred year bonds and

678
00:36:53,200 --> 00:36:55,080
Speaker 10: then hold it because that would lower the cost of

679
00:36:55,160 --> 00:36:58,080
Speaker 10: US servicing our debt, so we would us would benefit.

680
00:36:58,440 --> 00:37:00,960
Speaker 10: I don't think that that's going to happen. If it

681
00:37:01,000 --> 00:37:03,759
Speaker 10: doesn't happen, the fallback in the paper is to look

682
00:37:03,800 --> 00:37:07,479
Speaker 10: at capital taxes, which was in the Big Beautiful Bill

683
00:37:07,719 --> 00:37:09,600
Speaker 10: until Thatcescent had it.

684
00:37:09,560 --> 00:37:11,680
Speaker 2: Removed at the G seven meeting.

685
00:37:11,760 --> 00:37:14,600
Speaker 10: But the possibility of a capital tax to try to

686
00:37:14,640 --> 00:37:18,719
Speaker 10: get foreigners to play ball with the United States on

687
00:37:18,840 --> 00:37:21,759
Speaker 10: various policy goals. I think is still a possibility. We

688
00:37:21,800 --> 00:37:23,120
Speaker 10: need to keep our eyes open for.

689
00:37:23,440 --> 00:37:27,359
Speaker 2: So your call the summarize here, your call on week dollar, the.

690
00:37:27,320 --> 00:37:30,319
Speaker 10: Trends in place, Yes, I believe so not it's not

691
00:37:30,360 --> 00:37:31,840
Speaker 10: going to be every day, but I think are the

692
00:37:31,880 --> 00:37:35,520
Speaker 10: next year, A year from now, we're going to be

693
00:37:35,560 --> 00:37:37,279
Speaker 10: talking and we're going to have a weeker dollar and

694
00:37:37,360 --> 00:37:40,240
Speaker 10: higher gold prices from here, and unless we have a recession,

695
00:37:40,280 --> 00:37:41,800
Speaker 10: I think we'll also have higher yields.

696
00:37:41,920 --> 00:37:44,239
Speaker 2: We're doing to a countdown to Stephen Meyern here off

697
00:37:44,280 --> 00:37:46,920
Speaker 2: of this jobs report, with futures up six now up

698
00:37:46,960 --> 00:37:49,719
Speaker 2: twelve and the yield space a higher yield. It was

699
00:37:49,760 --> 00:37:54,160
Speaker 2: a solid report versus some of the gloom it was noted.

700
00:37:54,160 --> 00:37:56,279
Speaker 2: We also note that it's fourth of July weekend, and

701
00:37:56,560 --> 00:37:59,960
Speaker 2: keep pulling your team. Surveillance is cold or warm life

702
00:38:00,000 --> 00:38:01,480
Speaker 2: obstle Miss Patterson.

703
00:38:01,560 --> 00:38:04,040
Speaker 10: Please all lobster roll is good as long as there's

704
00:38:04,320 --> 00:38:07,600
Speaker 10: good butter and lemon for me. Okay, And I'm a

705
00:38:07,640 --> 00:38:09,399
Speaker 10: white Bordeaux with my lobster role.

706
00:38:09,640 --> 00:38:14,040
Speaker 4: Oh, solid, solid pairing. There nothing to argue about there.

707
00:38:15,280 --> 00:38:18,080
Speaker 2: What in the control are you having white Bordeaux right now?

708
00:38:18,960 --> 00:38:20,560
Speaker 2: I don't know what white bordeaux he is.

709
00:38:20,800 --> 00:38:22,960
Speaker 5: It's really young, that's all you need to know.

710
00:38:23,000 --> 00:38:27,239
Speaker 2: It's good white bordeaux. We'll try that this week. Rebecca Patterson,

711
00:38:27,719 --> 00:38:29,839
Speaker 2: thank you so much for coming in. Thanks for having

712
00:38:30,000 --> 00:38:32,160
Speaker 2: to our studios here on Jobs Day.

713
00:38:32,400 --> 00:38:36,320
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

714
00:38:36,360 --> 00:38:39,400
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

715
00:38:39,400 --> 00:38:42,440
Speaker 1: Auto with the Bloomberg Business app. You can also listen

716
00:38:42,520 --> 00:38:45,759
Speaker 1: live on Amazon Alexa from our flagship New York station,

717
00:38:46,320 --> 00:38:49,000
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

718
00:38:50,680 --> 00:38:53,759
Speaker 2: Can't split your trip to the Jersey Shore with the

719
00:38:53,840 --> 00:38:57,879
Speaker 2: conference Sport and their economists off of our labor economy.

720
00:38:58,280 --> 00:39:01,680
Speaker 2: A lot of emails in Lane from good people helping

721
00:39:01,800 --> 00:39:06,279
Speaker 2: saying this jobs report is not as sprightly as it appears.

722
00:39:06,360 --> 00:39:07,200
Speaker 2: Do you agree?

723
00:39:07,960 --> 00:39:12,520
Speaker 11: I totally agree. Well, in Long Island, actually Tom and

724
00:39:12,880 --> 00:39:16,120
Speaker 11: not far from Jones Beach, so maybe after we'll finished that,

725
00:39:16,280 --> 00:39:20,319
Speaker 11: we'll just go there. I think it's a goldilocks kind

726
00:39:20,320 --> 00:39:24,719
Speaker 11: of report which may allow the FIT to cut rates

727
00:39:24,760 --> 00:39:27,240
Speaker 11: in the second half of the year, but not because

728
00:39:27,280 --> 00:39:32,880
Speaker 11: the label market is deteriorating, but because inflation may prove

729
00:39:33,000 --> 00:39:36,920
Speaker 11: to be lower than we all expected after you know,

730
00:39:37,080 --> 00:39:40,160
Speaker 11: tariffs and all of that, So it's it would be

731
00:39:40,200 --> 00:39:43,440
Speaker 11: a rate cut for a good reason, not for a

732
00:39:43,480 --> 00:39:49,480
Speaker 11: bad reason requiring an emergency. So the unemployment rate declining

733
00:39:49,560 --> 00:39:54,280
Speaker 11: actually removed the July rate cut off the table for sure,

734
00:39:54,680 --> 00:39:57,000
Speaker 11: and we were not expecting one, by the way. But

735
00:39:58,000 --> 00:40:03,479
Speaker 11: I think that the acceleration, continued deceleration in every jail

736
00:40:03,600 --> 00:40:08,759
Speaker 11: earnings is a good signal that services inflation will continue

737
00:40:08,760 --> 00:40:13,400
Speaker 11: to decline and will at least partially of set expected

738
00:40:13,520 --> 00:40:15,480
Speaker 11: increases in inflation.

739
00:40:16,440 --> 00:40:18,960
Speaker 2: And two points. The President will speak to mister Putin

740
00:40:19,320 --> 00:40:21,399
Speaker 2: now scheduled at ten a m. Paul.

741
00:40:21,640 --> 00:40:23,160
Speaker 5: Very good, Elena.

742
00:40:23,239 --> 00:40:26,880
Speaker 4: So when you think underneath the layers here is the

743
00:40:27,000 --> 00:40:29,600
Speaker 4: labor market, I don't know it is a fair to

744
00:40:29,600 --> 00:40:30,800
Speaker 4: say it's still solid.

745
00:40:31,080 --> 00:40:32,600
Speaker 5: Is that a fair characterization?

746
00:40:32,760 --> 00:40:35,080
Speaker 4: Or are there some wor worse some trends?

747
00:40:35,239 --> 00:40:41,080
Speaker 11: Tallid goldilocks, fred, jail equilibrium. These are all the terms

748
00:40:41,120 --> 00:40:44,719
Speaker 11: that we've been using, and I think that each one

749
00:40:44,760 --> 00:40:49,560
Speaker 11: of them is relatively fair to use. The labor market

750
00:40:49,719 --> 00:40:53,480
Speaker 11: remains in equilibric right, the layoffs remain low. We saw

751
00:40:53,560 --> 00:40:57,399
Speaker 11: the U two unemployment rate declined this morning. So these

752
00:40:57,400 --> 00:41:03,000
Speaker 11: are the unemployments employment rate that relates to new layoffs.

753
00:41:03,200 --> 00:41:07,640
Speaker 11: So we see initial jobless claims not moving much, but

754
00:41:08,080 --> 00:41:12,160
Speaker 11: at the same time, underneath the hood, it's getting harder

755
00:41:12,200 --> 00:41:15,080
Speaker 11: for people to find the job if they lose one.

756
00:41:15,600 --> 00:41:18,560
Speaker 11: And this report, you know, shows a little bit of

757
00:41:18,600 --> 00:41:22,880
Speaker 11: a pickup in those, you know, in recent months, in

758
00:41:22,960 --> 00:41:28,759
Speaker 11: those people who were employed but now moving into the

759
00:41:28,800 --> 00:41:32,400
Speaker 11: unemployment status. So if you look at the flows data,

760
00:41:32,800 --> 00:41:37,360
Speaker 11: it's very subtle, but there is that kind of feeling

761
00:41:37,520 --> 00:41:41,520
Speaker 11: that things are worsening a little bit under the hood.

762
00:41:42,200 --> 00:41:44,680
Speaker 4: If I look at the average hourly earnings on a

763
00:41:44,719 --> 00:41:47,640
Speaker 4: year on your basis, came into three point seven percent,

764
00:41:48,120 --> 00:41:51,120
Speaker 4: a little bit lower than consensus, but still pretty darn solid.

765
00:41:51,160 --> 00:41:54,480
Speaker 4: So it seems like wage growth is still solid, but

766
00:41:54,560 --> 00:41:56,960
Speaker 4: it I don't think it's inflationary. What do you think.

767
00:41:58,239 --> 00:42:01,960
Speaker 11: That's what touch Chip has been telling us. The labor

768
00:42:02,000 --> 00:42:06,520
Speaker 11: market is not a source of inflationary pressures, and I

769
00:42:06,560 --> 00:42:10,880
Speaker 11: think this report shows exactly that, and that's why I

770
00:42:10,920 --> 00:42:15,880
Speaker 11: think that will allow them to continue normalizing rates once

771
00:42:15,960 --> 00:42:21,800
Speaker 11: they see those three employment reports and three inflation reports

772
00:42:21,800 --> 00:42:25,440
Speaker 11: over the summer. While starting with this one today.

773
00:42:26,280 --> 00:42:28,200
Speaker 2: Lena, thank you so much, you learn to show table

774
00:42:28,280 --> 00:42:30,560
Speaker 2: with us. Here my first look I Drew Shall published

775
00:42:30,560 --> 00:42:33,520
Speaker 2: with the Conference Board through the longer weekend.

776
00:42:33,800 --> 00:42:38,640
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

777
00:42:38,719 --> 00:42:43,040
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

778
00:42:43,160 --> 00:42:46,680
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

779
00:42:46,719 --> 00:42:50,759
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

780
00:42:50,760 --> 00:42:54,160
Speaker 1: can also watch us live every weekday on YouTube and

781
00:42:54,320 --> 00:42:56,000
Speaker 1: always on the Bloomberg terminal

782
00:43:00,960 --> 00:43:01,720
Speaker 3: Has carried