Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
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Speaker 1: the immediacy that we're getting from hospital professionals, including the
Speaker 1: leadership at monts Snay in New York and today at
Speaker 1: Beth Israel Deaconess Lady up in Boston, we welcome all
Speaker 1: of you on radio and television. To people in the trenches,
Speaker 1: that would be the Lieutenant Governor of the Empire State,
Speaker 1: Kathy Hukel joins us this morning. Kathy, if you read
Speaker 1: the Buffalo News, it's writing your face. It's right in
Speaker 1: our face nationwide. What is the best practice now for
Speaker 1: politicians to contain the great hospitalization we're seeing? Well, we
Speaker 1: have a strategy, Tom, and thank you everyone for having
Speaker 1: back on this once again Western New York where I
Speaker 1: live Erie County, Buffalo. We now have a nine point
Speaker 1: four percent infection rate, and then from just two and
Speaker 1: a half three percent of a month ago. So I
Speaker 1: want to just point out first of all these numbers
Speaker 1: can viral out of controls very quickly, and what that does,
Speaker 1: it's an infection rate that leads to an increased number
Speaker 1: of hospitalizations. And that is our greatest fear. Governor Culma
Speaker 1: and I have said this from the beginning. Our fear
Speaker 1: is overwhelming the hospital system. So what we're doing is
Speaker 1: first of all calling back retired nurses and doctors, asking
Speaker 1: them to enlist again and help us in this battle,
Speaker 1: but also asking every single hospital to ensure that they
Speaker 1: have surge capacity. We had to do this in the spring.
Speaker 1: We know how it's done, and we can do this
Speaker 1: once again. Thirdly, we also want to make sure they
Speaker 1: have enough protective equipment. Remember how frightening it was back
Speaker 1: when March and April we were scouring the planet in
Speaker 1: search of something as simple as a mask. We couldn't
Speaker 1: get them from anywhere. So we're making sure they have
Speaker 1: those supplies. But what something we can't control, which is
Speaker 1: very frightening, the staffing. The staffing. Now, these are individuals
Speaker 1: who have been in this battle and the front minds
Speaker 1: of the terrific war for month. They're exhausted, many of
Speaker 1: them are sick themselves. May them don't want to expose
Speaker 1: their family members any longer, and that is where we're
Speaker 1: having a real crisis point. And early on we were
Speaker 1: able to enlist thirty thousand people from across the country
Speaker 1: who volunteered their time to come to the epicenter of
Speaker 1: the pandemic, New York City. Those people are now needed
Speaker 1: in their homes in North Dakota, doth Dakota, and Oklahoma,
Speaker 1: places where it's surging there as well. So that's what
Speaker 1: we're concerned about. We can create enough beds, we can
Speaker 1: put up field hospitals if we have to, but we
Speaker 1: have to make sure that they're properly staffed. That's the
Speaker 1: incredible stress on the health care system that we're seeing
Speaker 1: across the nation and increasingly yet again in New York.
Speaker 1: From the financial perspective, there is a question of how
Speaker 1: much money is needed, how soon. And I know you've
Speaker 1: come the show quite a bit and talked about the
Speaker 1: needs financially for New York State. Mitch McConnell currently putting
Speaker 1: out a bill, a skinny bill to get done before
Speaker 1: the end of the year that would not include funding
Speaker 1: for our for your government in New York State or
Speaker 1: other local governments. My question is how eminently do you
Speaker 1: need that money. If you do not get it before
Speaker 1: the end of the year, what gets cut first. We
Speaker 1: needed this money yesterday. And I don't still do not
Speaker 1: understand the life of me how Mitch McConnell and the
Speaker 1: Center Republicans can be so stinny. This is a once
Speaker 1: in a year event. It is global pandemic. And I
Speaker 1: don't even know how they think we're going to get
Speaker 1: the vaccination. About how they're going to get the vaccine
Speaker 1: is the stupid If they don't give us money, they're
Speaker 1: they're being The governor is governor Promo is head of
Speaker 1: the National Governor's Associations, a bipartisan group. Yesterday they sent
Speaker 1: a letter thing to the Settle government. We need money
Speaker 1: to be able to distribute. You're not going to do
Speaker 1: it nationwide. Okay, fine, you didn't help us with the testing.
Speaker 1: You left us on our own throughout this entire pandemic.
Speaker 1: You have to give us money to make up for
Speaker 1: the loss in revenues and the way we've been having
Speaker 1: extraordinary expenses. So, Lisa, I don't I'm not going to
Speaker 1: stay here. What has to be cut. All I know
Speaker 1: is it's not acceptable and everyone should be railing to
Speaker 1: convince the Republicans and bitch mcconnells do this for this country.
Speaker 1: If we don't get this crisis under control, our economy
Speaker 1: is going to implode. Conversely, if we can wrap our
Speaker 1: arms around this, get enough money to the states like
Speaker 1: New York so we can have mass vaccination as soon
Speaker 1: as it's humanly possible, we can super charge our economy
Speaker 1: once again, and that's what everyone wants. Lustening government. A
Speaker 1: couple of things to unpack here. One are you saying
Speaker 1: that without state aid from the federal level, you can't
Speaker 1: distribute this vaccine. No, I didn't say that. I'm just
Speaker 1: saying that we definitely need money to have a robust,
Speaker 1: aggressive plan. We will do it. This is New York,
Speaker 1: we'll figure it out. We are left on our own
Speaker 1: throughout this entire pandemic. Is unfortunate and it never should
Speaker 1: have been that way. We should have had a national
Speaker 1: response to this crisis, but we didn't. Failure of the
Speaker 1: battle government, failure of the Trump administration. So we're the
Speaker 1: governor and I've been working on this. We're ready for this.
Speaker 1: We can handle this, but it's going to be very
Speaker 1: expensive to get this vaccination out to student, to literally
Speaker 1: twenty million people, not once, but twice. And that's the
Speaker 1: challenge that we're facing. So the reality is, if you
Speaker 1: want to keep funding we want to keep paying for
Speaker 1: health care workers and people who do that, we need
Speaker 1: money from the Settle government. We need their help. I
Speaker 1: understand you waging lead the McConnell to come to the table.
Speaker 1: Have you urged speaking belows you to do the same thing,
Speaker 1: who for many people is perhaps aiming a little bit
Speaker 1: too high, particularly over the last couple of months going
Speaker 1: into the election. I don't know what is too high
Speaker 1: during a global pandemic. These are extraordinary costs. We're not
Speaker 1: asking them to help us balance our annual budget. We've
Speaker 1: had to incur costs that no one ever could have
Speaker 1: foreseen when they did their budgeting. And now it's not
Speaker 1: just the Blue states. Never Mitch McConnell said, why will
Speaker 1: we bail out the Blue states meaning New York, California, Connecticut,
Speaker 1: New Jersey. Now it is a national phenomenon and we
Speaker 1: need them to assist every state because this is going
Speaker 1: to hold back our economy. And one of the problems
Speaker 1: we have is that small businesses in particular, and I
Speaker 1: toured the southern tier west of New York yesterday to
Speaker 1: visit small businesses. They are barely clinging on for life,
Speaker 1: and the programs that helped them before, the unemployment program
Speaker 1: from the Settle government that assisted businesses as well business
Speaker 1: owners as well as for their employees. That's all going
Speaker 1: to expire in another within weeks. When that money's gone.
Speaker 1: Who do you think is going to be doing the
Speaker 1: consumer consumer purchasing. We need to keep our economy going.
Speaker 1: It's going to all dry up. Cathey, we always appreciate
Speaker 1: you dropping by. We appreciate it. Thank you time this morning, Cathee.
Speaker 1: How cool that New York's lieutenant governor We're not. Julie
Speaker 1: Norman joins us. She's a U cell in London, expert
Speaker 1: on all sorts of issues of distress in politics, and
Speaker 1: one of that is one of those, I should say,
Speaker 1: is their study of activism. Professor no Norman, thank you
Speaker 1: for joining us on the president elect. Liberals. I guess
Speaker 1: they're called progressives now, but I like the word liberals better.
Speaker 1: And then this idea of activism, what is the activism
Speaker 1: this president will face? We so m I think that's
Speaker 1: a really good question. I think that will see different
Speaker 1: kinds of pressures on Biden from both the left and
Speaker 1: the right. We know that there will be, um, you know,
Speaker 1: pressure on Biden to move forward on campaign promises that
Speaker 1: he made regarding racial justice and addressing entrenched inequalities. And
Speaker 1: I think a lot of that will take the form
Speaker 1: of more positive activism the sense of like political pressure.
Speaker 1: But we'll certainly get some other kinds of pressure from
Speaker 1: the left as well, which we've already seen in some
Speaker 1: comments in response to his nominees so far. But I
Speaker 1: do think he has a very pragmatic team and place.
Speaker 1: Um He's putting in a lot of people who resonate
Speaker 1: with UM an individual kind of across the spectrum. So
Speaker 1: we'll see what kind of mode that takes. There's a
Speaker 1: Washington word pragmatic in one way, Will moderate Democrats be
Speaker 1: pragmatic pragmatic with their more boisterous brethren. Yeah, Well, I
Speaker 1: think it's just going to be what actually what the
Speaker 1: Biden administration is actually able to do. We know that
Speaker 1: they will most likely be somewhat constrained to a more
Speaker 1: moderate agenda, as it is with with looking like a
Speaker 1: most most like Republican Congress. UM. If they are, however,
Speaker 1: able to give some nods to some issues on the
Speaker 1: progressive agenda. I think one area will they'll have the
Speaker 1: most ability to do that is with climate change. We've
Speaker 1: already saw the seen Biden a point John Terry is
Speaker 1: a new climates are um. He will most likely use
Speaker 1: executive action to unwind some of the regulations that Trump
Speaker 1: put a stop in regards to the environment. So I
Speaker 1: think so do it he can in some areas that
Speaker 1: really are important to the progressives in the party, but
Speaker 1: it's also clear that he probably won't move as far
Speaker 1: in other areas that someone the left would want, and
Speaker 1: perhaps that includes China, although this has been a pipe
Speaker 1: artisan issue. We saw the New York Times interview with
Speaker 1: Thomas Friedman with President elect Joe Biden talking about he
Speaker 1: does not plan to roll back the tariffs on China
Speaker 1: in short order. His first order of affairs will be
Speaker 1: to re establish the ties with allies. What would the
Speaker 1: United Front look like when it comes to tackling the
Speaker 1: China issue as they define it? Yeah, wells, I think
Speaker 1: this is the area where we won't see as much
Speaker 1: of their real substantive policy shift as much as just
Speaker 1: the shift in style. The Bien administration will most likely
Speaker 1: maintain a somewhat tough on China approach, especially in regards
Speaker 1: to issues like secure city and technology, but they will
Speaker 1: be some room open for engagement again on issues like
Speaker 1: climate change, again on issues like trade, and also doing
Speaker 1: so in a way that's much more cooperative with allies,
Speaker 1: especially European allies, rather than just an American first approach
Speaker 1: or a bullying or strong arm not strong arming of
Speaker 1: other countries. Professor, we're talking about policy in the future. Obviously,
Speaker 1: the President elect is putting together his candidate, putting together
Speaker 1: his cabinet, and I think we're all happy to see
Speaker 1: a smooth transition starting to form going into one. But
Speaker 1: when the president elect starts talking about policy in the
Speaker 1: here and now set by officials in the Lane duck session,
Speaker 1: do you think, Professor, that helps the formulation of policy
Speaker 1: or hinders it. Well, I think this is a challenge
Speaker 1: right now for Biden. He obviously wants to weigh in
Speaker 1: on the big crisis facing Americans right now, the economic
Speaker 1: crisis and the pandemic, of course, but he has to
Speaker 1: do so in a way that not only me non
Speaker 1: pinging too far in the current administration, but also on
Speaker 1: his own democratic colleagues in Congress. Um, you know we
Speaker 1: saw yesterday even the bipartisan framework that was put forward,
Speaker 1: there was some pushback to that from both Republicans and
Speaker 1: Democrats in other areas of leadership in Congress. But that
Speaker 1: was kind of stepping on toads negotiations. But I think
Speaker 1: the bottom line is that for Biden and for others
Speaker 1: who just want to see some real changes on these issues,
Speaker 1: they don't mind that pressure going forward, and they don't
Speaker 1: mind kind of having a stronger vote in that, even
Speaker 1: if it's a little bit um, even if it's seen
Speaker 1: as pressure by other on their own parties. Professor, appreciate
Speaker 1: your perspective, Jillie Norman that University of College London, professor.
Speaker 1: What's great about David Constant is not the Brown University acuity.
Speaker 1: What's great about him as he writes precise research notes
Speaker 1: that actually, as an adult used to do looks out
Speaker 1: one two in three years, you know you're is what
Speaker 1: you need to know. Blended in one to three years
Speaker 1: out is a constant twenty six percent lift to this market.
Speaker 1: He is a golden sex David, good morning. I love
Speaker 1: how you go out to two thousand, twenty two and
Speaker 1: you get us out. I think it's sp X forty.
Speaker 1: How do we get there? Well, I get there a
Speaker 1: couple of ways. You get there to around thirty seven
Speaker 1: hundred at the end of this year. Uh, you get
Speaker 1: there are forty three hundred at the end of twenty one,
Speaker 1: and then you get to forty six hundred at the
Speaker 1: end of two. So that's the path and sort of
Speaker 1: what are the building blocks behind it? Well, basically, you've
Speaker 1: got an economy that's getting better, you have earnings that
Speaker 1: are growing, and you have the rates that they are
Speaker 1: staying super low. I mean, those are the three building box.
Speaker 1: It's not so so brilliant. And it's also the tina trade.
Speaker 1: What is the alternative? What are the all what else
Speaker 1: is there that that that's out there? And equities becomes
Speaker 1: the defaults opportunity. So I want to think about the
Speaker 1: following way, Uh, Tom, break the market into two pieces.
Speaker 1: Let's take the five big stocks that are almost a
Speaker 1: quarter of the market, and let's take together sevent the market.
Speaker 1: Those big five stocks, their sales we're up eighteen percent
Speaker 1: this year, sales for everything else down five percent. So
Speaker 1: it explains why these stocks were up around fifty percent
Speaker 1: year today, So they had a great year. We understand
Speaker 1: that we're looking forward. What's the what's the path forward.
Speaker 1: These companies are expected to have revenue growth each of
Speaker 1: the next couple of years of around fifteen percent, So
Speaker 1: that's kind of part of your leg going forward, Tom.
Speaker 1: And the second part, if you think of the other
Speaker 1: four hundred and stocks, they're expected to have around six
Speaker 1: percent revenue growth top line sales growth of each of
Speaker 1: the next couple of years. So that's basically the story
Speaker 1: is about an economy that's getting better, coming off the
Speaker 1: pandemic of crisis low and generally getting better. The fed
Speaker 1: on hold that is our our general assumptions, the vaccination
Speaker 1: of half HERD immunity by May of next year. All
Speaker 1: that is to the positive, and I think the market
Speaker 1: is recognizing that and we'll continue to do so. It
Speaker 1: just sounds like a multiple story. But when I taught
Speaker 1: you and when I read your research, it's not just
Speaker 1: about the multiple story. It's about better earnings that you're
Speaker 1: looking for and above consensus earnings. To David, we walk
Speaker 1: me through why why you're a little bit more constructive
Speaker 1: than maybe the consensus is at the moment on earning specifically,
Speaker 1: So if we look at the earnings, uh, Jonathan, it's
Speaker 1: a good's a good question. So the consensus expectation it's
Speaker 1: around one hundred sixty five dollars of SMP five hundred
Speaker 1: earnings next year one, and we're at a hundred and
Speaker 1: seventy five dollars. You know what explains that, Well, part
Speaker 1: of it is a better economic backdrop. We've got GDP
Speaker 1: growth something around five the consensus expectations of forty nine
Speaker 1: economists and the Blueship forecast around three point eight percent,
Speaker 1: so that's a higher level of activity. There's not much
Speaker 1: inflation out there, inflation under control, so that's basically allowing
Speaker 1: companies to have that broader level of of earnings growth
Speaker 1: with not a lot of a lot of pressure on
Speaker 1: input costs. So that's your basic Your margins are basically
Speaker 1: part of that's recovery. And so those your two you
Speaker 1: your billion box as we see it in our models,
Speaker 1: and the Fed has made it very clear in our
Speaker 1: view that they're on hold for next three years at least,
Speaker 1: perhaps as long as five years based on the economics forecast,
Speaker 1: and so that's a pretty benign backdrop. It's a good
Speaker 1: backdrop for the equity market. And when you think about
Speaker 1: the asset allocators, the portfolio managers out there, around fifty
Speaker 1: percent of the assets are allocated to equities, about twenty little,
Speaker 1: little little less than twenty to bonds. So what's the
Speaker 1: alternative cash is offering zero and so that's a still
Speaker 1: an attractive place for for the equity market. Jompan, that's
Speaker 1: the index story beautifully, I doubt going out to let's
Speaker 1: talk about a second level story now the other whites
Speaker 1: and a mix for Goldman. Industrious Material has had a
Speaker 1: lot about that. The cyclical trade of the last month,
Speaker 1: that's played out wonderfully for so many people who had
Speaker 1: it on You stand avoid information technology, why divid Jonathan,
Speaker 1: I wanted you to think about it three ways. I
Speaker 1: want to think about growth, I want to think about value,
Speaker 1: and you want to think about cyclicals. The growth story
Speaker 1: is basically duration equity duration, those longer term cash flows
Speaker 1: at the zero lower bound. Those growth in mostly technology
Speaker 1: is prized, that's worth a lot and they're likely outperformed.
Speaker 1: You have value. The best value absolutely is in healthcare.
Speaker 1: They are the cheapest relative to the market in forty years.
Speaker 1: You got to go back to when when early uh
Speaker 1: Clinton administration, when they were trying to restructure part of healthcare,
Speaker 1: look at the Obamacare period of time and ten years ago.
Speaker 1: Those are the only times that were similar. And actually
Speaker 1: the valuation of healthcare is even more attractive than either
Speaker 1: of those two times. So that's your value trade and
Speaker 1: your value opportunity. And then the cyclical recovery, of course,
Speaker 1: is the pandemic relief coming from the vaccinations that we
Speaker 1: are assuming and some of the industrial companies likely to benefit.
Speaker 1: So I think that's your three pronged approach to kind
Speaker 1: of attacking the market. I think the other areas the
Speaker 1: market likely to do less well, financials, challenge of the
Speaker 1: flat yokur, energy still under a lot of pressure, consumer staples, utilities,
Speaker 1: some of those other areas will be challenge. But those
Speaker 1: are the ways that I would break that down. So
Speaker 1: what I'm hearing from you, David is potentially adding on
Speaker 1: to what Andrew Slimmon's and Morgan Stanley said earlier, which
Speaker 1: is perhaps the rally in some of the highest beta
Speaker 1: cyclical stocks, the travel sectors, the financials areas that have
Speaker 1: gotten beaten up disproportionately during the pandemic that that perhaps
Speaker 1: has gotten a little ahead of itself. Is that accurate?
Speaker 1: I would say certainly on the on the way you
Speaker 1: just I would I would sort of break apart your
Speaker 1: question there at leasta, And since the financials I think
Speaker 1: have a challenging headwinds in terms of the very flat
Speaker 1: YO curve, the fact that there's big reserves that need
Speaker 1: to be taken for the uncertainty on potential defaults from
Speaker 1: the consumer as well commercial side, the Federal Reserve has
Speaker 1: made regulations difficult to actually raise dividends. They're basically one
Speaker 1: of the most of the banks limited to prohibited from
Speaker 1: buying back stock at this juncture. So those are some
Speaker 1: of the key drivers historically that have been benefiting financials
Speaker 1: when the when those are in play, and they're not
Speaker 1: there right now. On the industrial side, UH, the idea
Speaker 1: of vaccination, you know, does offer some better opportunity for
Speaker 1: some of the travel sector and some of those industrial categories.
Speaker 1: I might point to some of the UH, some of
Speaker 1: the aerospace defense companies as well. I think the way
Speaker 1: to think about value opportunities is to look at the
Speaker 1: one and two level of profits and compare those with
Speaker 1: the pre pandemic level of profits in two thousand nineteen
Speaker 1: to kind of make that comparison, and for the overall
Speaker 1: market you'll be a little bit higher. Maybe you're about
Speaker 1: seven percent higher. That's our estimates, seven percent higher between
Speaker 1: two thousand nineteen and kind of go out to two
Speaker 1: thousand twenty one. But you've got other areas. Some areas
Speaker 1: we've got really depressed level of profits. Maybe they're fifty
Speaker 1: six as much as you had two years ago. I
Speaker 1: think that's the opportunity for a normalization. So that's where
Speaker 1: the value look at. We look at there and see
Speaker 1: some of the travel and the hospitality area, you know
Speaker 1: they would fall into that into that category. Last, I
Speaker 1: want to pick up on one thing you said earlier.
Speaker 1: You were mentioning about credit and kind of what's happening
Speaker 1: on the The equity market is telling a slightly uh
Speaker 1: different story from the credit market, because if you look
Speaker 1: at the strongest balance sheet companies, they're up twenty six
Speaker 1: percent year to date a portfolio of those, you compare
Speaker 1: that with a weak Balanti portfolio they're down one percent
Speaker 1: and that sector neutral. So that's not gonna e skew
Speaker 1: towards any one particular area. Yes, you're paying thirty five
Speaker 1: times for a strong boundary and you're paying thirteen times
Speaker 1: for a weaker balunty portfolio. But that's telling us that
Speaker 1: portfolio managers are not totally embracing the idea that the
Speaker 1: economy is solely recovering. And then we're sort of in
Speaker 1: the clear, and so you're seeing pockets of opportunity. And
Speaker 1: I would say, if you have a view that the
Speaker 1: you know, there's a path towards normalization, some of the
Speaker 1: weaker balancie companies would be attractive at this juncture. And
Speaker 1: they tend to be a cluster around some of the
Speaker 1: pandemic you know, companies that hurt most in the pandemic.
Speaker 1: And David, you always make it sounds so easy the past.
Speaker 1: It's great to catch up. So as always they have
Speaker 1: a custom that of government sacks, thank you right now
Speaker 1: on the domestic economy, and John mentions a DP today,
Speaker 1: claims tomorrow then on to job today and Friday will
Speaker 1: go beneath the headline numbers here on radio and television.
Speaker 1: At a thirty, Michael Faroli joins with JP Morgan, who
Speaker 1: was definitive a number of years ago, and calculating a
Speaker 1: shocking statistic for our potential g d P. Michael, before
Speaker 1: a job's discussion, do you have to reset your analysis
Speaker 1: of potential GDP after a pandemic? So, I think that's
Speaker 1: a difficult question. There are certainly aspects of the recent
Speaker 1: economic environment that would cause one to think that potential
Speaker 1: GDP growth may be slower. That said, we've seen a
Speaker 1: nice recovery in capital spending, so capital formation maybe holding
Speaker 1: in pretty well here. But I think in the long run,
Speaker 1: just given the demographic trends, potential is probably gonna be
Speaker 1: inching down in a little bit every couple of years,
Speaker 1: just given slower growth in the labor force. And that's
Speaker 1: just due to long run demographics, not necessarily short run
Speaker 1: up and downs that we've seen over the course of
Speaker 1: this year. So what's the run rate on non farm
Speaker 1: payrolls of Great shock? Pre pandemic was to see such
Speaker 1: good non farm payrolls over time? What's your new run
Speaker 1: rate on NFP? So, uh, when we get back to
Speaker 1: a normalized state of the world, which could be many
Speaker 1: years from now, we think it should be under one thousand,
Speaker 1: which is to say, the number of jobs created just
Speaker 1: to absorb new entrants into the labor force. So I
Speaker 1: think the days. Uh, you know when we grew up
Speaker 1: when it was two hundred plus that we considered to
Speaker 1: be a normal runway runway, our way are far behind us.
Speaker 1: So we are up against a fiscal cliff, and a
Speaker 1: number of people have come on and talked about this,
Speaker 1: this idea that some of the unemployment benefits are running
Speaker 1: out and will expire in the next couple of weeks.
Speaker 1: How big of a gap is there in your expectations
Speaker 1: for growth with an extension and without an extension of
Speaker 1: those benefits. So the fiscal cliff in terms of jobless
Speaker 1: benefits at the end of the year, we don't think
Speaker 1: will be anywhere nearest severe as the one we saw
Speaker 1: um in August when when the six dollar weekly federal
Speaker 1: pandemic unemployment compensation payments ran Now, so what's at stake
Speaker 1: here is two programs. Pandemic Unemployment Assistance which is for
Speaker 1: gig workers and other types of employees who don't don't
Speaker 1: normally qualify for benefits, and then this other program which
Speaker 1: is called peu CE. Most of the peu CE people
Speaker 1: will actually graduate into state extended benefit program. So it's
Speaker 1: really uh people on pe way and they were scheduled
Speaker 1: only at nine months of benefits anyway, So so there
Speaker 1: will be a hit here. I don't think it's going
Speaker 1: to be nearly a severe, as I said, as what
Speaker 1: we saw over the summer, but certainly something we believe
Speaker 1: will be a priority in any UH stimulus tours. Certainly
Speaker 1: we saw that in a bipartisan proposal yesterday, as as
Speaker 1: it should be, of course, and this is certainly extended
Speaker 1: benefits like PUC or something that the government has instituted
Speaker 1: in almost every recession in the post work period. Michael,
Speaker 1: just to turn to the I M that came out
Speaker 1: in the last twenty four hours, I think a lot
Speaker 1: of people walked away from that a bit confused. The
Speaker 1: number looked great, then the employment component was really really soft.
Speaker 1: And this quote came from them. Companies and supply continue
Speaker 1: to operate in reconfigured factories, but absentee is um. Short
Speaker 1: term shutdowns to sanitized facilities and difficulties in returning and
Speaker 1: hiring workers are causing strengths that will likely limit future
Speaker 1: manufacturing growth potential. What do you think about that quote
Speaker 1: that right there, Michael, is that's something that resonates with
Speaker 1: you about the prospects for the labor market in the net.
Speaker 1: So certainly there were some concerns when we had getting
Speaker 1: back to the other question, when we had those six
Speaker 1: hundred dollar weekly uh bonus payments, that that was hindering
Speaker 1: the return of the workforce. But with those behind us,
Speaker 1: we haven't been hearing as many anecdotes, so I agree
Speaker 1: that it was a little bit um confusing those uh
Speaker 1: the comments and that that reading and generally, uh, you know.
Speaker 1: One thing I would say is is it's been a
Speaker 1: little bit confusing how strong manufacturing employment has actually been
Speaker 1: over the past few years. And actually we've seen manufacturing
Speaker 1: productivity go down, which is pretty odd because this is
Speaker 1: a sector where generally we expect high productivity. So I
Speaker 1: think over time we should come to expect slower manufacturing
Speaker 1: employment growth. I wouldn't, though, expect it all to happen
Speaker 1: in one month. Like I sent my prahas suggest Well, Michael,
Speaker 1: do you think it makes it difficult to get a
Speaker 1: read on payrolls this Friday given what we heard yesterday? Well,
Speaker 1: I think it was difficult even before yesterday. We were getting,
Speaker 1: you know, differing signals from a number of things we
Speaker 1: normally look at, and I think the consensus the Bloomberg
Speaker 1: poll was somewhere between minus a hundred plus seven or
Speaker 1: eight hundreds. Quite a wide range there. Hopefully the ADP
Speaker 1: this morning is UM somewhat correct and saying that it's
Speaker 1: sort of in the middle of that range. But I
Speaker 1: think even before the I S M calling this Friday's
Speaker 1: number has been a little trickier, certainly than normally years.
Speaker 1: Michael John Herman of m U f G has a
Speaker 1: great grid this morning showing his relative optimism even though
Speaker 1: he's got a negative statistic on G d P, and
Speaker 1: then the street and the I, M F, O, E,
Speaker 1: C D and all the others as well. Is a
Speaker 1: general statement this December, are we too gloomy? I think
Speaker 1: it depends whether you're talking about the very near term
Speaker 1: or whether you're talking about the medium term. UH. Through
Speaker 1: the medium term, I say, I would say UM prospects
Speaker 1: are looking pretty good, certainly given all the news on
Speaker 1: the vaccines, which everyone, all the viewers are aware of. UH.
Speaker 1: If we get something like the bipartisan UH stimulus deal
Speaker 1: combined with the vaccines, I think we could be set
Speaker 1: up for a very strong one, particularly as we get
Speaker 1: into the spring months. But if you're talking about the
Speaker 1: very near term, I think we could be in for
Speaker 1: some pretty pretty rough months, particularly December January, given given
Speaker 1: the surgeon, the virus, the presumptive surge following the Thanksgiving holiday,
Speaker 1: and what that could mean for activity, particularly in consumer services.
Speaker 1: So if you just have a very short term view,
Speaker 1: I think there are certainly reasons for gloom. I think
Speaker 1: if you look beyond a few months, I'm quite optimistic
Speaker 1: on prospects through the US account. So Thomas just trolling
Speaker 1: me at this point saying are we too gloomy and
Speaker 1: then having you weigh in on it. Michael, I do
Speaker 1: wonder though, when you talk about how it's going to
Speaker 1: be very difficult in your term. We keep talking to
Speaker 1: people about the potential for scarring, and there's a question
Speaker 1: of how much people are adequately accounting for this in
Speaker 1: their models for the future beyond the next couple of months.
Speaker 1: Where are the pitfalls in terms of what people are
Speaker 1: pricing in? In other words, is their weakness that's going
Speaker 1: to be more persistent have longer lasting scars than perhaps
Speaker 1: people are accounting for. So I think this gets back
Speaker 1: to somewhat to Tom's question about potential GDP grood. So
Speaker 1: there certainly will be some scarring. I think the extent
Speaker 1: is so far the indicators are looking I would say
Speaker 1: relative to expectations, and in saying March or April. When
Speaker 1: it comes to things like permanent unemployment, are people who
Speaker 1: consider themselves permanently unemployed as a share of the overall
Speaker 1: pool of unemployed individuals that's actually not moved up as
Speaker 1: much as certainly I here, uh there, We're still a
Speaker 1: little depressed on labor force participation. I think if we
Speaker 1: have strong growth next year, we can hope to bring
Speaker 1: those people back into the labor market. H But I
Speaker 1: think there are reasons to to say the jury is
Speaker 1: still out. But what I would say is, yes, there
Speaker 1: will be scarring. The degree might be less than certainly
Speaker 1: than I have feared since or seven once ago. Michael
Speaker 1: grig to catch up as always Marca Ferrati, that of
Speaker 1: Jack P. Mrgan and looking ahead to payrolls Friday. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
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Speaker 1: you prefer. I'm on Twitter at Tom Keane Before the podcast,
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio