WEBVTT - Could SVB Be a Contagion for Regional Banks? 0:00:01.280 --> 0:00:05.640 This is Bloomberg Business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. 0:00:19.720 --> 0:00:23.600 You know the story SPB Silicon Valley Bank collapsing into 0:00:23.640 --> 0:00:26.520 FDIC receivership earlier today, We were just talking about it 0:00:26.520 --> 0:00:31.000 with our TV colleagues. We also had an earlier in 0:00:31.040 --> 0:00:36.360 the week a crypto connected bank also coming undone, So 0:00:36.680 --> 0:00:38.680 let's get to it. We're talking about Silvergate earlier in 0:00:38.720 --> 0:00:41.000 the bank earlier in the week with US. Right now 0:00:41.120 --> 0:00:43.760 is Anton Schutz, who's president and chief investment officer at 0:00:43.800 --> 0:00:47.040 mendon Kapital Advisors. He joins us via zoom in Florida, 0:00:47.080 --> 0:00:50.760 who I should remind everybody is investing largely in that 0:00:50.840 --> 0:00:53.519 regional bank sector also with US as Herman Chan, he's 0:00:53.560 --> 0:00:57.200 senior ALICE for US regional banks with our Bloomberg Intelligence team. 0:00:57.320 --> 0:01:00.280 He is here in our Bloomberg Interactive Broker's studios. Listening 0:01:00.320 --> 0:01:02.080 to him this morning, I'm like, we gotta have them on. 0:01:02.120 --> 0:01:04.640 We gotta have them on. So glad to have both 0:01:04.720 --> 0:01:07.160 of you here, So Herman, let's start with you, though, 0:01:07.600 --> 0:01:11.520 what is of note right now in terms of where 0:01:11.560 --> 0:01:13.679 we are and what we know about Silicon Valley and 0:01:13.760 --> 0:01:16.679 potentially impact on the rest of the banking sector or 0:01:16.720 --> 0:01:18.920 not impact on the rest of the banking sector. Sure, 0:01:20.120 --> 0:01:22.360 So when I think about what happened with SBB, it 0:01:22.400 --> 0:01:26.640 really is a classic bank run wrapped inside a technology 0:01:26.640 --> 0:01:30.880 bubble that we have seen start to pop with rates 0:01:30.880 --> 0:01:35.120 where they are today. So it's a very unique bank 0:01:35.440 --> 0:01:42.440 that catered specifically to a client demographic startup in Silicon 0:01:42.560 --> 0:01:47.160 Valley and across the US and internationally, and their venture 0:01:47.520 --> 0:01:53.480 capital partners, and with what's going on with the startups 0:01:53.520 --> 0:01:57.480 today with burning cash and not raising additional funds via 0:01:57.600 --> 0:02:02.360 vcs or i pos, you've seen that those deposits really outflow, 0:02:02.480 --> 0:02:07.400 and that's really was the chief concern with SBB, followed 0:02:07.440 --> 0:02:10.760 by the fact that SBB invested a lot of securities 0:02:10.840 --> 0:02:14.720 during the prior zero rate environment and with rates worthy 0:02:14.720 --> 0:02:18.040 are today, those securities were underwater, so they were sitting 0:02:18.080 --> 0:02:20.960 on on a lot of paper losses, which was a 0:02:21.000 --> 0:02:24.040 big red flag for the investment community. So it's just 0:02:24.080 --> 0:02:26.000 a matter of time before they started to happen as 0:02:26.040 --> 0:02:28.160 long as we stayed in this rate environment. As long 0:02:28.200 --> 0:02:31.359 as we stayed in this rate environment. And frankly, the 0:02:31.480 --> 0:02:36.880 management surprised the street with the equity offering and also 0:02:37.040 --> 0:02:40.480 the sale of their investment, the available for sale investment 0:02:40.480 --> 0:02:45.600 securities portfolio. That surprised the streets and it brought on 0:02:45.760 --> 0:02:48.000 board a lot of questions of the viability of the 0:02:48.000 --> 0:02:50.720 big Can you walk us through actually the last couple 0:02:50.760 --> 0:02:53.800 of days and really how this is transpired and just 0:02:53.840 --> 0:02:59.960 spiraled out of control. Yeah, it's really kind of crazy 0:03:00.120 --> 0:03:03.000 how it all happened. It really is the fact that 0:03:03.440 --> 0:03:07.040 they came out with this news about selling their securities 0:03:07.080 --> 0:03:11.120 and issuing equity. The market was surprised. You have the 0:03:11.160 --> 0:03:15.040 fact that silver Gate closed down the same day, and 0:03:15.120 --> 0:03:18.800 the market was very taken aback by the issue. You 0:03:18.840 --> 0:03:22.359 saw the stock trading down sixty percent yesterday, and it 0:03:22.360 --> 0:03:26.240 brought on board questions of the viability of the bank, 0:03:26.320 --> 0:03:31.160 with VC folks telling their their startup companies to pull 0:03:31.240 --> 0:03:34.200 money out of the bank. So it was a classic 0:03:34.200 --> 0:03:36.240 bank run that just happened in the blink of an eye. Yeah, 0:03:36.240 --> 0:03:38.120 everybody started getting nervous and just wanted to run for 0:03:38.120 --> 0:03:39.920 the Hills. All right, let's bring in the investor and 0:03:39.960 --> 0:03:42.160 the investors side of this story. Anton's so good to 0:03:42.160 --> 0:03:44.840 have you back with us. How do you see what's 0:03:44.840 --> 0:03:48.240 happening and how we got here? Well, first of all, 0:03:48.520 --> 0:03:51.840 I'm really angry because there's a law in the books 0:03:51.840 --> 0:03:55.000 in this country about creating a bank run. So you know, 0:03:55.040 --> 0:03:59.000 all the social media out there, all the big institutions 0:03:59.040 --> 0:04:01.720 that publicly went out and told everybody pull your money 0:04:01.720 --> 0:04:03.960 out of there, because at the end of the day, 0:04:04.360 --> 0:04:06.520 it was a liquidity situation. It was a bank run, right, 0:04:06.520 --> 0:04:09.720 It was poorly run bond portfolio, was a botched offering, 0:04:09.720 --> 0:04:12.600 and they should have wall crossed everybody. But creating a 0:04:12.600 --> 0:04:15.040 bank run really getting on you know, social media and 0:04:15.040 --> 0:04:17.719 telling everybody get out of the bank, I mean, that 0:04:17.880 --> 0:04:20.000 is actually illegal. So unless they want to change the law, 0:04:20.279 --> 0:04:22.640 they should think about potentially going after people to create 0:04:22.680 --> 0:04:25.080 a run. You know, this is a liquidity situation. There 0:04:25.120 --> 0:04:28.200 was a badly run portfolio of bonds, right, they took 0:04:28.200 --> 0:04:30.520 a lot of risk. That's you know, that's where the 0:04:30.600 --> 0:04:33.280 risk is, right, It's not credit silver gate, same thing, right, 0:04:33.320 --> 0:04:35.240 they had a run on the bank. They had a 0:04:35.320 --> 0:04:38.880 securities portfolios too long in duration, they couldn't liquidated. And 0:04:39.200 --> 0:04:40.360 by the way, at the end of the day, the 0:04:40.640 --> 0:04:43.760 FED was going to break something raising rates. And they've 0:04:43.760 --> 0:04:45.719 broken a couple of banks here. And the banks are 0:04:45.760 --> 0:04:47.960 culpable too because they didn't run their balance sheet well. 0:04:48.240 --> 0:04:50.520 But creating runs on banks is still legal in this 0:04:50.600 --> 0:04:53.080 country and is wrong. And by the way, from a 0:04:53.080 --> 0:04:57.320 contagion perspective, this bank was really unique. I mean the 0:04:57.440 --> 0:05:01.039 risks they took where their portfolio was unique. The deposits 0:05:01.080 --> 0:05:04.520 they had. We're really relying on venture capital, right, really big, big, 0:05:04.600 --> 0:05:08.720 chunky deposits, so a very small part of the deposits 0:05:08.720 --> 0:05:11.400 are under that two hundred and fifty thousand amounts. So 0:05:11.400 --> 0:05:13.160 when when people started to take money out, it became 0:05:13.240 --> 0:05:15.880 so serious that the regulars had to step in. And 0:05:16.040 --> 0:05:18.360 it's really sad because if they had, you know, wall 0:05:18.440 --> 0:05:21.280 crossed a bunch of big institutions raised the money, come 0:05:21.279 --> 0:05:23.159 out and said, hey, we're really strong, we have lots 0:05:23.200 --> 0:05:26.040 of lots of capital, rather than you know, publicly go 0:05:26.080 --> 0:05:27.839 out and oh, yeah we're gonna a capitalizing. We have 0:05:27.880 --> 0:05:29.839 bad news for you. Right, they could have wall crossed 0:05:29.839 --> 0:05:34.320 a bunch of big institutions Anton. But because of this news, 0:05:34.640 --> 0:05:36.200 what are you doing in your own fun and looking 0:05:36.240 --> 0:05:38.960 at some of the fun the names that you do, right, 0:05:39.000 --> 0:05:41.520 you're into the regional banks. What are you doing to 0:05:41.560 --> 0:05:44.359 kind of check out the exposure that might be similar, 0:05:44.440 --> 0:05:48.080 maybe on a different scale to SVB. Yeah, there is 0:05:48.279 --> 0:05:51.320 There is nothing like SVB. There's a couple of other 0:05:51.360 --> 0:05:53.280 banks out there that that that do a fair bit 0:05:53.279 --> 0:05:56.320 of venture lending. We don't have exposure to them. I'm 0:05:56.360 --> 0:05:58.080 actually not going to name them because I don't want 0:05:58.080 --> 0:05:59.760 to be part of creating a run on these companies. 0:05:59.800 --> 0:06:03.440 But nobody has that type of exposure right to that 0:06:03.560 --> 0:06:06.560 extent um. You know. I do expect that some of 0:06:06.560 --> 0:06:08.840 those other companies may seek partners, They may get smart 0:06:08.880 --> 0:06:11.320 about it, or raise capital over the weekend and do 0:06:11.360 --> 0:06:13.080 exactly what I said, which is to a wall cross 0:06:13.120 --> 0:06:15.280 and go okay, let's shore up the balance sheet in 0:06:15.320 --> 0:06:17.640 case the money does want to run out or is nervous. 0:06:18.000 --> 0:06:20.520 But but this is a This is not regional banks, right, 0:06:20.520 --> 0:06:24.040 These are These are institutions that are very focused on 0:06:24.080 --> 0:06:26.400 this niche and there's not many of them. You know. 0:06:26.600 --> 0:06:30.039 My my core investment are are companies that are based 0:06:30.080 --> 0:06:33.559 in smaller geographies that have great core deposits that lend money. 0:06:34.120 --> 0:06:37.039 You know that that really have very sticky deposits, and 0:06:37.120 --> 0:06:39.480 that's important. It's not chunky either, right. You know, First 0:06:39.480 --> 0:06:41.560 Republic came out today and made a statement, I don't 0:06:41.560 --> 0:06:43.880 own First Republic, so it would be very clear. But 0:06:44.200 --> 0:06:47.800 you know, they talked about the granularity of their depositors 0:06:48.000 --> 0:06:50.480 and it's very granular. Yes, they have some venture but 0:06:50.800 --> 0:06:54.320 again very very small percentage relative you know to what 0:06:54.360 --> 0:06:57.680 Silicon Valley did. So again, I think this is localized. 0:06:58.640 --> 0:07:00.520 There are very small banks in this country that have 0:07:00.640 --> 0:07:05.440 huge deposits that you know, went out in bought bond portfolios. 0:07:05.480 --> 0:07:08.919 Those will eventually become owned by by slightly bigger banks. Herman, 0:07:08.960 --> 0:07:11.160 come on in and feel free to ask Anton a question. 0:07:11.200 --> 0:07:14.840 Do you agree that it's localized? Yeah, s MEB is 0:07:14.840 --> 0:07:18.760 a very unique animal where their entire business model was 0:07:18.840 --> 0:07:22.520 focused on the startup and venture capital community. There's no 0:07:22.600 --> 0:07:25.560 other bank that that's public today that really does that 0:07:25.880 --> 0:07:29.200 of SBB size. SBB was the top twenty bank in 0:07:29.240 --> 0:07:32.760 the US, even though most folks listening today probably never 0:07:32.800 --> 0:07:34.440 heard of a BIT a week ago, but it was 0:07:34.480 --> 0:07:37.080 a it's a very big deal, and it's a unique 0:07:37.080 --> 0:07:41.160 bank that all of the venture capital and start community trusted. 0:07:41.240 --> 0:07:44.280 Until yesterday, I have to say that I didn't know 0:07:44.320 --> 0:07:46.080 who this bank was and then did a milk in 0:07:46.160 --> 0:07:48.440 event a year ago that was all about kind of 0:07:48.480 --> 0:07:51.880 innovation and disruption. I believe it was in wellness and 0:07:52.000 --> 0:07:55.320 they because of their investments that they make and you know, 0:07:55.360 --> 0:07:57.720 talked with the head of the company. So it was 0:07:57.760 --> 0:07:59.480 certainly and I've been doing this a long time too, 0:07:59.520 --> 0:08:02.160 it was not on my radar. Yeah, I mean, what 0:08:02.480 --> 0:08:05.840 exactly lies ahead now in the midst of all of this, 0:08:06.080 --> 0:08:08.440 because this is a big, kind of dramatic week just 0:08:08.520 --> 0:08:11.040 in general in the market's heading into next week with 0:08:11.080 --> 0:08:15.160 that critical CPI reading. So how does this really lead 0:08:15.320 --> 0:08:17.760 for the banking sector moving forward when you're looking more 0:08:17.800 --> 0:08:21.040 toward these regional banks. Yeah, So the focus is on 0:08:21.120 --> 0:08:25.400 deposits and how stable deposits will be for the banking industry. 0:08:25.520 --> 0:08:28.960 And second, it's going to be focused on how much 0:08:29.000 --> 0:08:31.160 losses that the banks have in their securities port follow 0:08:31.480 --> 0:08:35.319 Those were the two crux critical issues for SBB that 0:08:36.080 --> 0:08:40.320 didn't pass muster, and I agree with Anton saying that 0:08:41.760 --> 0:08:44.560 some of these banks that are feelings a bit of 0:08:44.559 --> 0:08:47.760 this contagion risk maybe need to bite the bullet and 0:08:48.400 --> 0:08:51.480 raise some capital over the weekend with some big name 0:08:51.520 --> 0:08:54.640 investors to really assuage some of the fears that's in 0:08:54.679 --> 0:08:57.839 the marketplace today. So Anton are you. I'm looking at 0:08:57.840 --> 0:08:59.800 your first bank shares that's a top holding by you. 0:09:00.000 --> 0:09:02.200 It's down four percent. Do you buy on some of 0:09:02.200 --> 0:09:05.840 these dives that we're seeing in some of the names. Well, I, 0:09:06.000 --> 0:09:07.800 you know, as a mutual fund manager, I can't tell 0:09:07.840 --> 0:09:10.360 you exactly what I'm gonna do, but I will tell 0:09:10.360 --> 0:09:13.520 you that that I'm very confident in these companies. I'm 0:09:13.559 --> 0:09:17.040 confident in their business models, their deposits, their lending structure, 0:09:18.520 --> 0:09:21.040 and their capital. Right. I think that you also had 0:09:21.080 --> 0:09:24.120 a really big anomaly. Right, you had a very violent 0:09:24.200 --> 0:09:26.839 move up in rates over the last week, and by 0:09:26.880 --> 0:09:29.600 the way, violent moved down in rates today. So could 0:09:29.640 --> 0:09:32.559 Silicon Valley have been saved where they even tried to 0:09:32.679 --> 0:09:36.559 raise capital had they been at today's rates versus yesterday's Right, 0:09:36.679 --> 0:09:39.600 it's a really big mark on the portfolio, given given 0:09:39.640 --> 0:09:43.360 how many securities they had, so a really really big change. 0:09:43.480 --> 0:09:45.199 You know, I think the Fed, you know, is getting 0:09:45.200 --> 0:09:47.960 a signal here, right, they've broken something, and you know, 0:09:48.000 --> 0:09:51.440 perhaps they should stop shrinking their balance sheet and allow 0:09:51.520 --> 0:09:53.760 liquidity be out there, and perhaps they ought to wait 0:09:53.800 --> 0:09:55.920 and see. We all have to remember we're coming off 0:09:55.960 --> 0:09:58.640 a lot of money slashing around for a long time, 0:09:58.679 --> 0:10:01.840 and even more so post pandem A Kermanja fifteen seconds. 0:10:02.000 --> 0:10:03.520 What would make you a little bit more nervous? What 0:10:03.600 --> 0:10:06.880 has to happen quickly? Yeah, What really makes me nervous 0:10:06.960 --> 0:10:10.880 is if we see more deposited outflow as system in 0:10:10.960 --> 0:10:14.520 general or general. So that's something that we're going to 0:10:14.559 --> 0:10:16.720 have to keep an eye on. Bank runs. Who would 0:10:16.760 --> 0:10:20.560 have thought? Thank you both, Anton Schutz, President and Chief 0:10:20.600 --> 0:10:23.920 Investment Officer, Men and Kapital Advisors via zoom from Florida. 0:10:24.040 --> 0:10:26.640 Herman Chan. He's our senior Alice for US regional banks 0:10:26.760 --> 0:10:29.400 at Bloomberg Intelligence. Joining us here at her Bloomberg Interactive 0:10:29.400 --> 0:10:33.560 Broker's studio. You're listening to the Bloomberg Business Week podcast. 0:10:33.800 --> 0:10:36.600 Catch us live weekdays from two to five pm Easter 0:10:36.840 --> 0:10:40.160 on Bloomberg Radio, The Bloomberg Business a Band You two. 0:10:40.440 --> 0:10:43.600 You can also listen live to our flagship New York station, 0:10:43.960 --> 0:10:50.720 Just say Alexa play Bloomberg elve and Dirty. All right, folks, 0:10:50.760 --> 0:10:52.800 you know you have a big headline today. US pay 0:10:52.880 --> 0:10:55.559 rolls up in February by more than expected, while a 0:10:55.559 --> 0:10:58.679 broad measure of monthly wheat growth slowed, offering a mixed 0:10:58.679 --> 0:11:01.040 picture as the Fed consider whether to step up the 0:11:01.040 --> 0:11:03.800 pace of interest rate hike. So many questions. All right, 0:11:03.840 --> 0:11:06.199 with what she is seeing, Let's bring in Amy Hunter Glazer, 0:11:06.320 --> 0:11:09.120 senior vice president at the Global Staffing, an HR services 0:11:09.120 --> 0:11:12.440 company at Deco. She's with us via zoom in Florida. 0:11:12.600 --> 0:11:15.120 And then here for our jobs round table, Bloomberg News 0:11:15.320 --> 0:11:18.599 Economics editor Molly Smith. She's here in our Bloomberg Interactive 0:11:18.600 --> 0:11:21.680 Broker studio. All right, So Molly lay it out for us. 0:11:21.800 --> 0:11:24.840 It was a mixed batch of data right from the 0:11:24.880 --> 0:11:28.480 government totally, which is why I hesitate to take a 0:11:28.559 --> 0:11:30.440 side here. So I'm going to lay out the good 0:11:30.440 --> 0:11:32.600 and the bad. So on the good side, we have 0:11:32.679 --> 0:11:35.600 this headline number of payrolls growing by more than three 0:11:35.720 --> 0:11:39.320 hundred thousand last month. That's succeeding almost every estimate in 0:11:39.360 --> 0:11:43.000 the Bloomberg survey and continuing this streak that economists have 0:11:43.040 --> 0:11:46.400 now gotten it wrong for eleven straight months. To the downside, 0:11:46.480 --> 0:11:49.760 so we are still growing far more than what most 0:11:49.880 --> 0:11:53.840 forecasters would expect. You may have seen the unemployment rate 0:11:54.000 --> 0:11:57.160 rosebook actually for a quote good reason. It's because more 0:11:57.160 --> 0:12:01.560 people actually came into the workforce, so the participation rate rows, 0:12:01.679 --> 0:12:04.760 and also the share of those people who are employed 0:12:05.080 --> 0:12:07.560 also ros so it's not just that they are looking 0:12:07.600 --> 0:12:10.120 for work, they actually have jobs. So those are all 0:12:10.440 --> 0:12:14.120 good things. Another thing where there maybe needs to be 0:12:14.160 --> 0:12:16.640 a little caveat is that we're hearing that a measure 0:12:16.640 --> 0:12:20.080 of wage growth slowed, which it did for average hourly 0:12:20.120 --> 0:12:22.960 earnings for all employees. But if we look at a 0:12:23.000 --> 0:12:26.880 smaller subset that is just looking at what's called non 0:12:26.880 --> 0:12:30.079 supervisory workers, as in the majority of us who are 0:12:30.120 --> 0:12:33.880 not in management positions, right, those wages actually rose a lot. 0:12:34.080 --> 0:12:36.800 So that let's just lay it leave it there for 0:12:36.880 --> 0:12:39.760 this is the start of the mixed picture. Amy, I 0:12:39.760 --> 0:12:42.600 wanted to bring you in the conversation and chat about 0:12:42.640 --> 0:12:45.200 what you're seeing when it comes to US staffing demand 0:12:45.240 --> 0:12:48.760 and those data points right now. Yeah, so, frankly, it 0:12:48.840 --> 0:12:51.720 wasn't a surprise. On the ground. We're still seeing almost 0:12:51.760 --> 0:12:56.280 two openings for every single employee out there seeking employment. 0:12:56.360 --> 0:12:59.120 So the market's still hot. Jobs are still out there, 0:12:59.160 --> 0:13:03.360 Employers are still fighting for top talent. Well, it's interesting 0:13:03.440 --> 0:13:05.480 you heard, you know, Molly lay it all out, so 0:13:05.640 --> 0:13:09.280 you it sounds like tight labor market still. But I 0:13:09.320 --> 0:13:11.439 am also curious about as we dig a little bit deeper, 0:13:11.480 --> 0:13:14.760 what about the wages that are being offered our companies 0:13:14.800 --> 0:13:16.480 able to dial that back a little bit and not 0:13:16.559 --> 0:13:18.640 have to compete so much when it comes to wages. 0:13:19.880 --> 0:13:22.400 I still think we're seeing the most success and employers 0:13:22.400 --> 0:13:25.680 who are paying up in that seventy fifth percentile range, 0:13:26.440 --> 0:13:28.480 especially as it relates to the kind of that non 0:13:28.559 --> 0:13:31.400 desk workforce. What we are seeing a little bit of 0:13:31.400 --> 0:13:35.880 a slow What does that mean is that like the hospitality, leisure, yea, 0:13:36.240 --> 0:13:39.839 our warehouse transportation those folks, what we are seeing is 0:13:39.840 --> 0:13:43.320 a slowdown on workers that are transitioning from one job 0:13:43.360 --> 0:13:46.599 to another getting those great wage gains that they have 0:13:46.760 --> 0:13:50.160 seen for the past twelve months. So signing bonuses starting 0:13:50.200 --> 0:13:53.679 to stall, just a little bit, retention bonuses we're kind 0:13:53.720 --> 0:13:55.680 of going by the wayside. So we're seeing some of 0:13:55.720 --> 0:14:00.319 those other financial incentives really shift, But that base wage 0:14:00.360 --> 0:14:04.520 hourly rate, we're still seeing the candidates are taking advantage 0:14:04.600 --> 0:14:07.559 up Molly. I was curious about what kind of impact 0:14:07.679 --> 0:14:11.000 this report will have on FED policy because we didn't 0:14:11.000 --> 0:14:15.000 see a big revision downward for those January numbers. And 0:14:15.160 --> 0:14:17.440 still even though we saw a bit of cooling, I mean, 0:14:17.480 --> 0:14:21.360 this wasn't seem like I'm still pretty strong, solid report, right, Yeah. 0:14:21.360 --> 0:14:23.320 And I'm laughing here because I wish I could give 0:14:23.360 --> 0:14:26.120 you the answer, and I think that's what we all 0:14:26.160 --> 0:14:27.920 want to know, and you know, I don't want to 0:14:27.920 --> 0:14:30.960 see a Carol's thunder here. But she had alluded to 0:14:31.000 --> 0:14:32.920 a survey that she did on Twitter and what this 0:14:33.120 --> 0:14:35.720 means we're in the FED? Oh yeah, it is? It 0:14:35.880 --> 0:14:39.200 being twenty five fifty year depends on CPI, I said, 0:14:39.240 --> 0:14:42.400 Fed's next move twenty fifty Most people said fifty bases 0:14:42.440 --> 0:14:46.200 points really over sixty twenty three percent to twenty five 0:14:46.200 --> 0:14:49.200 bases points and then I set up to CPI fifteen percent. Okay, well, 0:14:49.200 --> 0:14:50.920 I'm gonna go with the last one to give myself 0:14:50.960 --> 0:14:52.840 the most weagle room here. I think that's the most 0:14:52.880 --> 0:14:55.840 prety thing to do. And just given like what I 0:14:55.880 --> 0:14:59.360 was saying before all of these caveats that it's really 0:14:59.400 --> 0:15:02.480 just tough to take this at the face value because 0:15:02.760 --> 0:15:04.800 on the one hand, the Fed's going to see these 0:15:05.000 --> 0:15:07.480 two as you mentioned, Jess, back to back months of 0:15:07.600 --> 0:15:12.120 really strong job gains excuse me. But then on the 0:15:12.160 --> 0:15:16.200 other hand, they see moderating wage growth, which is great, 0:15:16.360 --> 0:15:19.880 but there's the subset of the population where they're still 0:15:19.920 --> 0:15:22.800 experiencing really strong wage gains, and it's in the service 0:15:22.840 --> 0:15:26.120 sector where the FEED is most concerned about wage pressures. 0:15:26.160 --> 0:15:28.440 All right, that's but Mike made the point too, and 0:15:29.080 --> 0:15:31.040 this speaks to something you know, I feel like Amy 0:15:31.040 --> 0:15:33.680 that you were talking about. Mike McKee earlier said that 0:15:34.320 --> 0:15:38.320 where the growth was was hospitality, right, I think food services, 0:15:38.320 --> 0:15:41.600 things like that, and that tends to be lower wages 0:15:41.720 --> 0:15:44.600 versus manufacturing, which saw some declines, which tend to be 0:15:44.680 --> 0:15:47.920 higher wages that actually, you know provides That's actually a 0:15:47.920 --> 0:15:50.200 good point, Kyle, because we did break out and some 0:15:50.360 --> 0:15:52.680 of like where this was a mixed bag the good 0:15:52.720 --> 0:15:55.640 and the bad. That what we look at, and what's 0:15:55.640 --> 0:15:58.320 called the diffusion index. It tracks like the breadth of 0:15:58.400 --> 0:16:01.680 jobs gains and how wides read the employment growth is 0:16:01.720 --> 0:16:05.760 across industries. It's actually pretty narrow right now. It fell 0:16:06.000 --> 0:16:08.400 the last month to the lowest level since the onset 0:16:08.440 --> 0:16:11.040 of the pandemic. So that shows you that the job 0:16:11.080 --> 0:16:14.080 grains were really just concentrated in a few industries like 0:16:14.280 --> 0:16:17.200 leisure as well as retail and healthcare. Amy, I was 0:16:17.240 --> 0:16:19.680 curious about what are you seeing when it comes to 0:16:19.840 --> 0:16:22.960 the type of benefits that talent is trying to seek 0:16:22.960 --> 0:16:25.440 in these new type of roles. When we are debating 0:16:25.440 --> 0:16:28.600 a lot about what the picture looks like when it 0:16:28.600 --> 0:16:30.200 comes to the FED and what that means for them, 0:16:31.200 --> 0:16:34.640 it's all about flexibility. So they're looking for employers that 0:16:34.720 --> 0:16:37.920 really allow them that opportunity to focus not only on 0:16:37.960 --> 0:16:41.000 their financial wellbeing, but their mental wellbeing and health wellbeing 0:16:41.080 --> 0:16:45.440 as well. So we're seeing flexible schedules, paid time off, 0:16:45.480 --> 0:16:49.960 any additional perks having to do with physical activity, yoga classes, 0:16:50.040 --> 0:16:53.880 things of that nature. So wage continues to be number one, 0:16:54.280 --> 0:16:56.560 but a solid number two behind that is how that 0:16:56.720 --> 0:17:00.800 financial peace gets balanced truly with your helped them well being. 0:17:00.960 --> 0:17:03.480 I mean that sounds like that's so it's challenging, right, 0:17:04.240 --> 0:17:08.280 That's still be challenging for them. It's dynamic. I want 0:17:08.280 --> 0:17:09.880 to bring up one more question for you as well. 0:17:09.880 --> 0:17:12.240 If that's Okay, there was one thing that we saw 0:17:12.320 --> 0:17:16.200 that the average work week was shorter in February and 0:17:16.800 --> 0:17:19.560 not a ton But normally this is what we can 0:17:19.600 --> 0:17:23.040 see is a potentially worrisome sign because employers tend to 0:17:23.040 --> 0:17:26.080 cut hours before they cut staff when demand wayne. So 0:17:26.080 --> 0:17:28.200 I just want to know in your work if that's 0:17:28.200 --> 0:17:30.439 seeing you're seeing any of the impacts of that come up. 0:17:31.440 --> 0:17:33.920 We're really not seeing that much of an impact as 0:17:33.920 --> 0:17:37.800 it relates to hours worked. Maybe a slight reduction in overtime, 0:17:37.800 --> 0:17:40.879 but I actually attribute that to we've seen some relief 0:17:40.880 --> 0:17:43.560 in a couple of different areas on supply chain issues, 0:17:43.880 --> 0:17:45.800 so I think it's more of a rebalance where we've 0:17:45.840 --> 0:17:48.560 just had for the past this heightened sense of we've 0:17:48.600 --> 0:17:50.359 got to get product out the door, and we've had 0:17:50.359 --> 0:17:53.080 a lot of overtime that we're just balancing back to 0:17:53.760 --> 0:17:57.359 a new normal. Hey, I do wonder Amy, I didn't 0:17:57.400 --> 0:17:59.160 tell me if this is right. Guys, FED swaps were 0:17:59.680 --> 0:18:03.520 price in a FED cut now again later this year, 0:18:03.600 --> 0:18:06.520 all right, so they are still Amy, so are the 0:18:06.600 --> 0:18:09.840 companies that you're working with or hearing from anybody though 0:18:09.880 --> 0:18:13.479 talking about the potential for a recession that could be 0:18:13.480 --> 0:18:18.639 problematic or slowdown next year. Yeah, what I'm hearing from 0:18:18.680 --> 0:18:22.320 most employers is they're cautiously optimistic that, you know, this 0:18:22.520 --> 0:18:25.880 may be a tiny slowdown, but that it will rebound 0:18:26.000 --> 0:18:28.560 very quickly. So I really am seeing a lot of 0:18:28.560 --> 0:18:31.720 companies hold on to their labor and an effort to 0:18:31.800 --> 0:18:35.280 avoid even if there's, you know, a little bit of disruption. 0:18:35.400 --> 0:18:38.360 They don't want to be faced with a talent shortage 0:18:38.359 --> 0:18:40.879 in the future. So I think lessons learn from the 0:18:40.920 --> 0:18:43.240 pandemic or at play again today is they're kind of 0:18:43.280 --> 0:18:47.800 stockpiling their workforce on the back end, all right, so 0:18:47.840 --> 0:18:51.560 we need to look forward. CPI, that's our next stop. Molly, 0:18:51.640 --> 0:18:54.320 let me get your thoughts first. Yeah, CPI the next 0:18:54.320 --> 0:18:57.159 big one. Next week. We also have PPI, which is 0:18:57.240 --> 0:19:01.840 Producer price Index of wholesale inflation as well as retail sales. 0:19:01.920 --> 0:19:04.640 So yeah, these are really the next big data points, 0:19:04.680 --> 0:19:06.680 the last ones that the FED will have before they're 0:19:06.760 --> 0:19:11.720 meeting the following week. I think, taken together, all of 0:19:11.760 --> 0:19:14.200 this probably and of course, in the context of SBB, 0:19:14.400 --> 0:19:17.320 really can't ignore that at this point is probably still 0:19:17.359 --> 0:19:20.800 tilting in favor of the twenty five basis point hike. 0:19:20.840 --> 0:19:23.680 As opposed to fifty. So it almost in a way 0:19:23.720 --> 0:19:25.920 seems like what Pal was talking about earlier this week, 0:19:26.160 --> 0:19:29.879 opening the door to fifty is somewhat okay, it's very 0:19:29.920 --> 0:19:32.000 much old news at this point. I mean, I don't know. 0:19:32.080 --> 0:19:35.440 To me, that just seems like that would just really 0:19:35.600 --> 0:19:39.119 cause more problems than do good. Amy saved to fifteen 0:19:39.160 --> 0:19:41.560 twenty seconds. Any thoughts in terms of wage inflation and 0:19:41.600 --> 0:19:44.480 what we might get. I think we'll wait and see. 0:19:44.520 --> 0:19:47.359 I think we'll continue to see just some modest growth 0:19:47.400 --> 0:19:50.040 over the next couple of months, but I don't anticipate 0:19:50.119 --> 0:19:52.760 any huge surprises. All right, Gonna leave it on that note. 0:19:53.040 --> 0:19:55.280 Our thanks to both of you. Amy Glazer, Senior VP 0:19:55.359 --> 0:19:57.879 of a Deca via Zoom out there in Florida, and 0:19:57.880 --> 0:20:00.480 Molly Smith right here in our Bloomberg Interactive broke her studio. 0:20:00.520 --> 0:20:04.280 She's economics editor at Bloomberg News. I also asked the 0:20:04.320 --> 0:20:07.280 Twitter world, what would you lead with today? I said, cooling, 0:20:07.320 --> 0:20:11.000 wage inflation, bank contagion or other. Overwhelmingly, they said bank 0:20:11.040 --> 0:20:16.240 contaction at seventy seven almost seventy eight percent. This is 0:20:16.400 --> 0:20:20.439 Bloomberg Business Week inside from the reporters and editors who 0:20:20.520 --> 0:20:24.520 bring you America's most trusted business magazine, plus global business 0:20:24.600 --> 0:20:28.800 finance and tech news. The Bloomberg Business Week Podcast with 0:20:28.880 --> 0:20:34.800 Carol Messer and Tim Stenebec from Bloomberg Radio. Want talk 0:20:34.840 --> 0:20:38.160 a little about the crypto space if we made because bitcoin, 0:20:38.600 --> 0:20:42.240 I believe it's had its worst week since November due 0:20:42.280 --> 0:20:44.280 to the equity sell off, fear of a higher rates, 0:20:44.280 --> 0:20:48.400 and really an escalating US regulatory crackdown on crypto combining 0:20:48.400 --> 0:20:51.560 to hurt investors sentiment again. So we kind of continue 0:20:51.560 --> 0:20:53.320 to see this planet out. I'm just playing up Bitcoin 0:20:53.400 --> 0:20:55.480 for the week. It looks like it was down I 0:20:55.520 --> 0:20:58.240 think about four and a half percent here, right, Carol, 0:20:58.320 --> 0:21:00.760 really getting under pressure, and especially when you're looking at 0:21:00.800 --> 0:21:03.920 just more broadly with this overall selloff in the equity 0:21:04.000 --> 0:21:07.440 market and really as far as I mean cryptocurrencies, especially 0:21:07.480 --> 0:21:10.159 in recent months, I mean, it's been really hard, and 0:21:10.200 --> 0:21:12.320