WEBVTT - Surveillance: Walsh Says US Still Moving Forward on Jobs 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.759 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com 0:00:23.920 --> 0:00:31.040 and of course on the Bloomberg terminal. Secondly, well, some 0:00:31.120 --> 0:00:33.800 police to say joined us right now. Seculd be great 0:00:33.800 --> 0:00:36.760 to catch up with your sir. Really decent payroll support 0:00:36.760 --> 0:00:39.199 in the view of so many people your perspective, police, sir. 0:00:39.479 --> 0:00:42.519 First of all, no, it was a good report. I 0:00:42.560 --> 0:00:44.560 think the couple of things that that I'm very happy 0:00:44.600 --> 0:00:47.559 to see. In the private sector. We're seeing UH employment 0:00:47.560 --> 0:00:50.400 back to pre pandemic levels in the manufacturing sector. The 0:00:50.400 --> 0:00:53.080 same thing in the childcare sector for the first time. 0:00:53.159 --> 0:00:54.960 Quite honest, in a little bit we've seen some gains, 0:00:55.120 --> 0:00:57.520 which means that our childcare facilities are getting a little 0:00:57.560 --> 0:00:59.400 bit back to I wouldn't call them back to what 0:00:59.520 --> 0:01:02.880 they were pandemic, but we're seeing some growth there. Warehousing 0:01:03.000 --> 0:01:06.080 and obviously manufacturing we've seen some great growth there as well. 0:01:06.360 --> 0:01:10.480 So we're seeing our job economy moving float forward. The 0:01:10.800 --> 0:01:13.360 wage growth we're seeing the biggest well some of the 0:01:13.360 --> 0:01:16.680 biggest gain and the lowest income earners, which is good. Obviously, 0:01:16.680 --> 0:01:19.760 we're still dealing with inflation and and the wage growth 0:01:19.840 --> 0:01:21.760 isn't quite keeping up inflation. But I think what we 0:01:21.760 --> 0:01:24.560 want to do is actually bring inflation down. Uh So 0:01:24.680 --> 0:01:27.280 we have to continue to move forward. But this is 0:01:27.520 --> 0:01:31.080 this shows that where the country is quite with President 0:01:31.120 --> 0:01:33.160 Biden laying out the plans when he took office, is 0:01:33.160 --> 0:01:35.399 still moving forward on the job side. But as you 0:01:35.600 --> 0:01:38.000 just mentioned, there's still a lot of unanswered questions about 0:01:38.040 --> 0:01:40.360 the economy. It's still the kind of in a very 0:01:40.440 --> 0:01:42.959 you know, interesting place. Secondly, well, Chelf for light on 0:01:42.959 --> 0:01:44.520 you over the last few months to give me updates 0:01:44.520 --> 0:01:47.080 on what's happening on the West Coast. I understand the 0:01:47.080 --> 0:01:49.520 contract with the West Coast Port Union expired and talks 0:01:49.560 --> 0:01:52.440 around going. You've said a few times on this program 0:01:52.520 --> 0:01:55.960 that you're not concerned. You concern Now, No, I'm not 0:01:56.000 --> 0:01:59.120 gonnacern because both sides, both parties put a statement out 0:01:59.120 --> 0:02:01.680 to Wite two statements now letting people know that they're 0:02:01.680 --> 0:02:04.800 going to continue negotiations when the contract expired July. First, 0:02:05.320 --> 0:02:07.040 I've spoken I didn't speak to them this week. I 0:02:07.040 --> 0:02:09.480 spoke to both sides last week. They both said it's 0:02:09.480 --> 0:02:12.320 moving in the right direction. Both sides, I should say, 0:02:12.400 --> 0:02:15.720 the unions and the companies. Uh. And obviously we haven't 0:02:15.720 --> 0:02:17.679 had that issue yet that might pop up that will 0:02:17.919 --> 0:02:21.280 cause little indigestion for for both sides. But I like 0:02:21.440 --> 0:02:23.359 that where it's going. You know, the interesting thing about 0:02:23.400 --> 0:02:26.600 this negotiation, it doesn't start until six weeks prior to 0:02:26.639 --> 0:02:29.000 the expiration of contract. And that's one of the things 0:02:29.000 --> 0:02:30.760 that you know, a little different than most contracts. Some 0:02:30.760 --> 0:02:34.360 contracts you can start negotiation at six months prior to expiring. 0:02:34.639 --> 0:02:36.240 But but I feel good with were going. I know 0:02:36.320 --> 0:02:38.520 there's a lot at steak. Clearly we don't want to 0:02:38.520 --> 0:02:41.120 have any issues like we did last holiday season and 0:02:41.200 --> 0:02:43.840 last fall with with with boats out in the with 0:02:43.840 --> 0:02:45.600 with ships out in the harbor and not getting supplies, 0:02:45.600 --> 0:02:48.040 and so I do feel good where we are. Today's 0:02:48.600 --> 0:02:50.240 during today the second well shod You know, this is 0:02:50.240 --> 0:02:52.760 a really important topic. And I can take your word 0:02:52.760 --> 0:02:54.280 for the youth feel good, but other members of the 0:02:54.280 --> 0:02:57.280 audience might not. Can you help them understand what's at 0:02:57.280 --> 0:03:00.839 stake here and the details of the nego seations. What's 0:03:00.840 --> 0:03:03.760 stopping this one from closing, what's the gap, how bigs 0:03:03.760 --> 0:03:06.480 the gap, and what's it over? Yeah, and so just 0:03:06.520 --> 0:03:08.880 so everyone understands, when you when they do the negotiations 0:03:08.880 --> 0:03:11.200 on the port UH, they generally go on for a 0:03:11.240 --> 0:03:15.040 long periods of time. And historically, UH under the two 0:03:15.080 --> 0:03:17.600 thousand and fourteen UH it went on for a long time. 0:03:17.760 --> 0:03:20.320 There was no strikes or slowdowns or lockouts. But what 0:03:20.360 --> 0:03:22.440 we want to do right now in the time that 0:03:22.440 --> 0:03:25.400 we're living and making sure that people's pressures, they feel 0:03:25.400 --> 0:03:27.919 the pressure price pressures at home, they're paying for goods 0:03:27.960 --> 0:03:31.519 and services where they're seeing inflation obviously impacting their families. 0:03:31.720 --> 0:03:33.160 We want to make I want to make sure the 0:03:33.160 --> 0:03:35.120 President Fine wants to make sure that we don't have 0:03:35.160 --> 0:03:38.760 a breakdown negotiation at the point to add additionally to inflation, 0:03:38.800 --> 0:03:42.360 additionally to cost. And that's that's what's at stay, quite honestly. 0:03:42.600 --> 0:03:46.119 And what the contract that they negotiating is everything from wages, 0:03:46.360 --> 0:03:49.240 to working conditions to everything that you can imagine. So 0:03:49.320 --> 0:03:53.040 it's a massive contract. There are tens of thousands of workers. 0:03:53.080 --> 0:03:56.440 There are nine shipping companies involved in this in this negotiation, 0:03:56.800 --> 0:03:59.440 so it is. It's a very long negotiation. Let's just 0:03:59.480 --> 0:04:03.080 say long. It's a very very challenging negotiation at the table. 0:04:03.400 --> 0:04:05.640 But when when I hear from both sides the same 0:04:05.680 --> 0:04:08.880 exact thing that it's moving along, I'm pleased with that. 0:04:09.440 --> 0:04:12.440 I'm not concerned about the contract expiring last on the 0:04:12.480 --> 0:04:15.400 first of this month. Certainly next month I come on 0:04:15.440 --> 0:04:17.480 this show. If we don't have a contract, and we're 0:04:17.480 --> 0:04:19.200 not close to a contract, then you and I might 0:04:19.240 --> 0:04:21.120 be having a very different conversation. But right now I 0:04:21.120 --> 0:04:23.440 feel good. Well, let's talk about that. As you know, 0:04:23.520 --> 0:04:25.479 you can't take their word for it either. Are you 0:04:25.560 --> 0:04:28.560 preparing for the possibility of a strike? Can you continue 0:04:28.600 --> 0:04:31.960 talk to me about what those preparations look like. Yeah, 0:04:32.000 --> 0:04:34.040 I'm really honestly, I'm really not concerned about strike. The 0:04:34.120 --> 0:04:35.600 last time there was a strike of the ports of 0:04:35.800 --> 0:04:38.120 l A and Long Beach it was in nineteen seventy two, 0:04:38.160 --> 0:04:40.280 I believe, so we haven't had a strike there in 0:04:40.360 --> 0:04:41.960 quite some time. And the way I look at this, 0:04:42.120 --> 0:04:45.039 these workers and these shipping companies and these suppliers and 0:04:45.080 --> 0:04:47.919 everyone work at the point, particularly the workers, they've lived 0:04:47.920 --> 0:04:49.680 through and work through a pandemic like a lot of 0:04:49.760 --> 0:04:51.719 us have. They want to work every day, they were 0:04:51.760 --> 0:04:55.200 still unloading ships. The supply chain issues or the shortages 0:04:55.240 --> 0:04:57.600 at the at the ports weren't necessarily because they weren't 0:04:57.640 --> 0:05:01.080 unloading the ships. It was because the manufacturing stopped in China. 0:05:01.120 --> 0:05:04.080 They shut down manufacturing, just like they did earlier this year. 0:05:04.320 --> 0:05:06.440 So workers want to go to work. If workers don't work, 0:05:06.440 --> 0:05:08.880 they don't get paid. They're not a salary bunch of people. 0:05:09.000 --> 0:05:10.760 If they don't work the hours, they don't get paid 0:05:10.760 --> 0:05:13.560 the hourly workers. And that's why for them, there's an 0:05:13.600 --> 0:05:15.480 interest for the for the people that work on the 0:05:15.520 --> 0:05:17.760 ports to make sure this contract gets resolved and they 0:05:17.800 --> 0:05:19.960 continue to work. A secondly was just quickly and briefly, 0:05:20.120 --> 0:05:21.800 and I respect your time, and I just want to squeeze, 0:05:21.800 --> 0:05:24.880 they say, And you mentioned China. The President, we understand, 0:05:25.040 --> 0:05:28.120 will be meeting with advices today to consider removing tariffs 0:05:28.120 --> 0:05:30.920 on China. We've been told many times over the last 0:05:30.960 --> 0:05:33.719 few years from the previous administration on this one that 0:05:33.800 --> 0:05:36.839 a lot of this is about fairness and also protecting 0:05:36.880 --> 0:05:38.880 American jobs. Do you have a seat at the table 0:05:39.240 --> 0:05:42.120 in that conversation. No, I'm not necessary at the table. 0:05:42.120 --> 0:05:44.240 I've been involved in some conversations and I think that, 0:05:44.320 --> 0:05:46.559 you know, I'm not sure exactly what's gonna happen today 0:05:46.680 --> 0:05:48.200 at the White what's your view want it? What if 0:05:48.240 --> 0:05:50.440 you sent back to them? I mean, I think I 0:05:50.480 --> 0:05:52.520 think you know, it's it's about my paid grade as 0:05:52.520 --> 0:05:54.200 far as where I am right now. But I think that, 0:05:54.360 --> 0:05:56.400 you know, I think having this conversation is really important 0:05:56.400 --> 0:05:59.919 because we're thinking about the pressures of of of inflation, 0:06:00.240 --> 0:06:02.359 but we're also going to keep an eye on the 0:06:02.440 --> 0:06:04.440 jobs that are here in the United States. And the 0:06:04.480 --> 0:06:06.640 President has certainly laid out in the beginning of his 0:06:06.720 --> 0:06:10.680 presidency a big opportunity to create more opportunities in manufacturing 0:06:10.720 --> 0:06:14.000 United States of America. One thing that's indirectly related the 0:06:14.360 --> 0:06:17.120 Bipartisan Innovation Act that's in front of Congress right now. 0:06:17.360 --> 0:06:19.839 That's an important piece of legislation to pass because that 0:06:19.839 --> 0:06:22.400 would allow us the opportunity to build more in America 0:06:22.440 --> 0:06:24.960 and have more products built America. Somewhat we're seeing right 0:06:25.000 --> 0:06:26.839 now in America is the computer chips that are in 0:06:26.880 --> 0:06:30.240 all of our phones and our doorbells, and and we're 0:06:30.279 --> 0:06:32.719 doing it right now on tv UM. We should be 0:06:32.760 --> 0:06:34.960 making those United States of America. That's an opportunity for 0:06:35.040 --> 0:06:38.160 us to help leave long term inflationary pressures down the road. 0:06:38.520 --> 0:06:40.600 Next time we're in Washington day, say Tom Kate and 0:06:40.680 --> 0:06:42.440 I would love to catch up with these secretaries. Great 0:06:42.480 --> 0:06:44.400 to catch up with you now, Secondary Wolfs there from 0:06:44.400 --> 0:06:52.560 outside the White House, we moved to the government's former 0:06:52.560 --> 0:06:55.160 governor of the Federal Reserve and Boost School, Randall Crossing, 0:06:55.279 --> 0:06:59.279 for brief comments. You're as well, Randy. We had gradualism 0:06:59.400 --> 0:07:02.520 and a measure moment with green Span. Is that history 0:07:02.600 --> 0:07:07.200 now with this art economy, that's history that is long 0:07:07.360 --> 0:07:09.320 long behind us. You can see that the FIT now 0:07:09.400 --> 0:07:12.160 is trying to move expeditiously exactly as she said. This 0:07:12.240 --> 0:07:17.400 is completely consistent with their their desire to move fast, 0:07:17.600 --> 0:07:19.800 and I think they are very likely to go seventy 0:07:19.800 --> 0:07:22.200 five basis points at the next meeting. Obviously we'll get 0:07:22.200 --> 0:07:24.320 some inflation data between now and then. They're also going 0:07:24.320 --> 0:07:27.119 to get a GDP report because they'll know the numbers 0:07:27.200 --> 0:07:30.400 before we know them when they make their decision on Wednesday. 0:07:30.440 --> 0:07:32.480 Will find out on Thursday and at the end of 0:07:32.480 --> 0:07:34.960 the month. But I think they're gonna go seventy five 0:07:35.080 --> 0:07:36.920 and I think there's nothing in this report that would 0:07:36.960 --> 0:07:38.880 slow them down from that. Randy, that's just a question 0:07:38.920 --> 0:07:40.000 I have. I don't want to make too much of 0:07:40.000 --> 0:07:41.960 a big Databa. It's just something that keeps jumping out 0:07:41.960 --> 0:07:44.440 to me. We keep churning out really robust jobs growth, 0:07:44.520 --> 0:07:48.680 payrolls three seventy two, unemployment's really stabilized at three point 0:07:48.760 --> 0:07:50.880 six percent. I'd love your thoughts on what you make 0:07:50.920 --> 0:07:55.720 of that. Well, I mean, this is exactly as Mike said. 0:07:55.800 --> 0:07:59.480 You've got two different surveys, uh, and different ways of 0:07:59.520 --> 0:08:02.000 gathering the data, so they're not always exactly the same. 0:08:02.200 --> 0:08:05.200 And uh, we don't always know months a month why 0:08:05.280 --> 0:08:07.520 one is going one direction one's going in another direction. 0:08:07.880 --> 0:08:10.920 But I think both of them point to pretty robust, 0:08:11.160 --> 0:08:14.560 robust job job market right now. But I do see 0:08:14.600 --> 0:08:17.640 that weakening by the fall. And what do you make 0:08:17.720 --> 0:08:22.440 of a lower participation rate sixty two percent? Randy, Well, 0:08:22.480 --> 0:08:24.680 it's sort of been bouncing around sixty two point two, 0:08:24.800 --> 0:08:27.320 sixty two point three. I think you know that's it's 0:08:27.360 --> 0:08:29.640 small enough to and and it's only months a month 0:08:30.360 --> 0:08:34.240 movements to that. It's too difficult to make too much 0:08:34.400 --> 0:08:36.880 of that. But I think what it says, is that 0:08:37.040 --> 0:08:38.679 there's a large number of people who I think are 0:08:38.720 --> 0:08:40.400 just not going to come back into the labor market. 0:08:40.679 --> 0:08:43.839 I think especially older workers that had come in really, 0:08:43.880 --> 0:08:48.360 really robustly before the before the pandemic struck. I've just 0:08:48.400 --> 0:08:51.400 said this is just too risky. There's really no need 0:08:51.440 --> 0:08:54.040 for me to be in the in the job market 0:08:54.040 --> 0:08:56.560 and being exposed. I want to be spending time with 0:08:56.559 --> 0:08:58.440 my kids, I want to be spending time traveling with 0:08:58.520 --> 0:09:01.080 my my loved ones, and and I think we're just 0:09:01.120 --> 0:09:03.960 not going to see the labor force participation rate move 0:09:04.040 --> 0:09:06.120 up to where it was pre pandemic. Randy, great to 0:09:06.120 --> 0:09:08.480 have you with us run across that of the investitis. 0:09:08.520 --> 0:09:10.960 You kind of both skill responding to that upside supprime. 0:09:15.880 --> 0:09:19.000 Jeffrey Rosenberg now leads us forward. Here's with black Rock. 0:09:19.600 --> 0:09:24.760 He's co lead portfolio manager of the Systematic multi Strategy 0:09:25.040 --> 0:09:28.280 fun Jeff, that's a mouthful. Let's cut to the chase. 0:09:28.440 --> 0:09:32.920 How do devolve this odd economy and the new volatility 0:09:32.960 --> 0:09:39.760 you're living in the bond market down to a systematic strategy. Well, Tom, 0:09:39.840 --> 0:09:42.400 it's an odd economy as you as you point out, 0:09:42.480 --> 0:09:45.920 but it's it's a it's a payroll report, as Jonathan 0:09:46.000 --> 0:09:50.120 nailed right at the beginning, that solidifies seventy five basis points. 0:09:50.400 --> 0:09:53.040 You know, going into this, the market is expecting a 0:09:53.160 --> 0:09:56.880 slowdown in in payrolls. You heard, uh, Randy talked about 0:09:56.920 --> 0:09:59.480 that into the fall. That's still the case, but it's 0:09:59.559 --> 0:10:02.760 it's not slowing fast enough, and so you know that 0:10:02.760 --> 0:10:05.760 the Fed is going to have to do more. And 0:10:06.440 --> 0:10:10.840 when you see the lack of labor force participation, and 0:10:10.880 --> 0:10:13.199 I agree with Randy, we don't want to over interpret 0:10:13.320 --> 0:10:16.480 you know point one, yes, yes here there, but you 0:10:16.559 --> 0:10:19.720 haven't really seen that, uh, and that's a real problem 0:10:19.760 --> 0:10:22.959 on the wage inflation front. So you know, the the 0:10:23.840 --> 0:10:29.040 lack of payroll slowing here and the lack of an 0:10:29.080 --> 0:10:33.000 increase in participation is just again highlighting the pressures on 0:10:33.040 --> 0:10:36.800 the FED here that you have an overheating economy and 0:10:36.840 --> 0:10:39.520 they need to really push on the demand side. And 0:10:39.559 --> 0:10:42.280 so you're seeing the reaction in the front end. Uh. 0:10:42.320 --> 0:10:45.679 You know, reflective of that, Jeff, I want to go 0:10:45.920 --> 0:10:48.360 to the wheelhouse of what you do, which is Lincoln 0:10:48.360 --> 0:10:51.320 full faith and credit into trying to not lose money here. 0:10:51.800 --> 0:10:56.720 Pria misera over TV securities talks about a very serious inversion, 0:10:56.920 --> 0:11:01.080 perhaps even a greater inversion than we saw within two 0:11:01.120 --> 0:11:03.600 thousand folks. This is where the two year yield is 0:11:03.640 --> 0:11:07.680 substantially higher than the ten year yield. What does each 0:11:07.840 --> 0:11:13.160 basis point mean of larger inversion going forward? What does 0:11:13.200 --> 0:11:16.040 that mean the real world of not trying to lose 0:11:16.080 --> 0:11:20.480 money and fixed income? Yeah, well, the first part of 0:11:20.480 --> 0:11:22.520 that of what it means, and you're seeing a bit 0:11:22.559 --> 0:11:27.000 of that movement in reaction to today's print, where bigger 0:11:27.040 --> 0:11:30.320 increases in the short end, lower increases in the long end, 0:11:30.320 --> 0:11:33.160 and the flattening of the curve. Is really the market 0:11:33.200 --> 0:11:38.199 expecting the Fed to tighten into a recession. And this 0:11:38.280 --> 0:11:41.000 isn't a new expectation, but it's certainly the reaction again 0:11:41.040 --> 0:11:43.560 to today's data, where you know, as I just said, 0:11:43.600 --> 0:11:46.320 the economy is labor markets are very hot. The Fed 0:11:46.360 --> 0:11:48.560 has to do more. And if you look at kind 0:11:48.559 --> 0:11:51.400 of what's priced into the market in a forward basis, 0:11:51.640 --> 0:11:54.280 it has the one year or the FED funds rate 0:11:54.360 --> 0:11:57.679 two years out from now lower than where it's expected 0:11:57.760 --> 0:11:59.760 in one year. So what is that saying. It's saying 0:11:59.760 --> 0:12:01.920 that the market is expecting the Fed to push us 0:12:01.920 --> 0:12:04.360 into a recession. And that's the same message that you 0:12:04.400 --> 0:12:07.400 see when you talk about an inverted yield curve, that 0:12:07.720 --> 0:12:10.360 front end interest rates are going to reflect FED policy, 0:12:10.440 --> 0:12:12.520 the longer end interest rates are going to reflect that 0:12:12.720 --> 0:12:17.080 future expectation of recession. And and you've heard Powell, you know, 0:12:17.200 --> 0:12:20.400 basically admit and and and really in the minutes that 0:12:20.600 --> 0:12:24.199 they're willing to take that risk because the bigger risk 0:12:24.559 --> 0:12:28.160 is letting inflation become entrenched. And I think that's right, Kayley. 0:12:28.200 --> 0:12:30.320 It's so important here and I'll have the chart for Monday. 0:12:30.320 --> 0:12:31.920 Folks will do it in the five am hour if 0:12:31.920 --> 0:12:34.480 they let me in the building. Kayley. I look at 0:12:34.600 --> 0:12:38.679 curve inversion, and we forget how rare this is. I've 0:12:38.679 --> 0:12:41.679 really got to go back thirty years to get out 0:12:41.720 --> 0:12:45.360 to a half a percentage point inversion the curve. That's 0:12:45.400 --> 0:12:48.280 how rare what some of these strategists are talking about. Yeah, 0:12:48.280 --> 0:12:50.720 we're talking nineteen eighties, the last time we saw yield 0:12:50.720 --> 0:12:52.920 curve inverted by fifty basis points. And yet that is 0:12:52.960 --> 0:12:55.760 what we heard from Priamiser earlier. She basically echoed the 0:12:55.760 --> 0:12:57.880 sentiment that the FED is going to be focused on inflation. 0:12:57.880 --> 0:13:00.240 They're going to continue to be aggressive even if we 0:13:00.320 --> 0:13:04.280 do see that softening in the economy. Therefore, you continue 0:13:04.280 --> 0:13:06.360 to see the short end a lot higher than than 0:13:06.400 --> 0:13:08.240 the long end. So, Jeff, do you agree with that 0:13:08.240 --> 0:13:11.119 that we could ultimately end up at half a percentage 0:13:11.120 --> 0:13:15.080 point inverted with the Fed tolerate that? Well, you know, 0:13:15.160 --> 0:13:18.800 it's really about the broader question of how will as 0:13:18.920 --> 0:13:21.280 we get into the fall and you start to see 0:13:21.480 --> 0:13:25.640 the impact of a slowing economy, how will the Fed balance? 0:13:25.880 --> 0:13:31.600 It's two objectives between inflation fighting, which is front and center. 0:13:31.760 --> 0:13:34.720 What they're saying is the number one objected. Kind of 0:13:34.760 --> 0:13:37.440 easy to do that when the labor markets are red hot, 0:13:37.480 --> 0:13:40.040 and the Secretary Walsh, as you're gonna have later on 0:13:40.080 --> 0:13:42.400 the program, takes a victory lap, it's gonna be a 0:13:42.400 --> 0:13:44.800 lot harder for the Fed, and therefore for the market 0:13:45.320 --> 0:13:48.680 to still talk about inflation is the only objective when 0:13:48.720 --> 0:13:51.880 we're looking at an environment when inflation the year of 0:13:51.920 --> 0:13:55.599 a year basis is coming down, but unemployment UH is 0:13:55.640 --> 0:13:57.960 potentially going up, or at least these payroll figures are 0:13:58.000 --> 0:14:00.840 going down. So you know, pre as call on the 0:14:00.880 --> 0:14:05.560 inversion is really a statement that they're gonna maintain into 0:14:05.600 --> 0:14:11.280 a slowing economy, this very aggressive stance on FED tightening. 0:14:11.480 --> 0:14:13.199 They may or may not do that. I think it's 0:14:13.200 --> 0:14:15.920 an open question as we get into data that is 0:14:15.960 --> 0:14:18.480 a little bit more mixed in terms of the growth 0:14:18.520 --> 0:14:22.240 inflation trade off. But clearly, if they maintain this degree 0:14:22.480 --> 0:14:26.720 of inflation fighting focus into an environment that is clearly slowing, 0:14:26.760 --> 0:14:29.120 than yes, you could see that degree of inversion in 0:14:29.120 --> 0:14:32.160 the curve. Okay, So the operative word there being if 0:14:32.400 --> 0:14:34.920 the question of whether or not that the Fed is 0:14:34.960 --> 0:14:36.960 going to blink It used to be a conversation of 0:14:36.960 --> 0:14:39.680 September that clearly has shifted with some people still looking 0:14:39.680 --> 0:14:42.560 for fifty basis points in September. How long, Jeff, do 0:14:42.600 --> 0:14:45.840 you think it will take the data to deteriorate enough 0:14:46.400 --> 0:14:50.200 that there is a potential that the Fed thinks twice? Yeah, 0:14:50.400 --> 0:14:52.880 you know, I think we're looking at a slowdown in 0:14:52.920 --> 0:14:55.720 the jobs market into the fall. I think that sets 0:14:55.800 --> 0:15:00.520 up September, October, November periods where we see need that 0:15:00.640 --> 0:15:04.040 kind of tradeoff really starting to show up, and these 0:15:04.760 --> 0:15:08.800 reports become a lot more important. Um, the FED meetings 0:15:08.960 --> 0:15:11.200 are going to get a lot more interesting when you 0:15:11.320 --> 0:15:14.800 have that tension and they're starting to think about and 0:15:14.800 --> 0:15:17.640 and talk about slowing the pace. A lot of that's 0:15:17.640 --> 0:15:21.120 going to depend on the pace of slowdown in the 0:15:21.160 --> 0:15:23.920 inflation side, and there's an expectation that you get that 0:15:24.040 --> 0:15:26.560 slow down. And so that's this kind of movement in 0:15:26.640 --> 0:15:30.000 two sides here. Falling inflation and rising unemployment is going 0:15:30.040 --> 0:15:32.840 to make a very difficult period for the FED. It's 0:15:32.880 --> 0:15:34.840 not where they are today. So I think later this 0:15:34.920 --> 0:15:38.240 month it's gonna be seventy five basis points and and 0:15:38.320 --> 0:15:41.320 you know, a more clear path. But I think as 0:15:41.360 --> 0:15:43.680 we get into the fall and the impact of the 0:15:43.720 --> 0:15:46.800 tightening and financial conditions shows up in the labor markets, 0:15:46.840 --> 0:15:50.160 then we're gonna see this tradeoff manifest in the Fed's 0:15:50.200 --> 0:15:53.520 decisions on radio and television. If it's joining us Jeffrey Rosenberg, 0:15:53.520 --> 0:15:56.000 where US is black rock after a buoyant jobs report, 0:15:56.040 --> 0:15:59.480 two year react sharply where they higher two year yield 0:15:59.520 --> 0:16:02.840 out eleven basis points three point one two, with some 0:16:03.240 --> 0:16:07.240 substantial negative four basis points curve and version as well. 0:16:07.280 --> 0:16:10.240 Equities on the chin ever so slightly not done. A 0:16:10.240 --> 0:16:13.080 lot of futures down twenty six down, futures down one 0:16:13.160 --> 0:16:15.760 or three. The vix comes up point three six points 0:16:15.840 --> 0:16:19.400 twenty six point four four. Jeff, you're living a Bloomberg 0:16:19.440 --> 0:16:22.600 total return all in index of a negative twelve percent. 0:16:22.680 --> 0:16:24.880 I'm going to chart it out from two thousand twenty 0:16:25.360 --> 0:16:30.600 is negative six percent an annualized in bonds. How do 0:16:30.640 --> 0:16:35.040 you hide? Do you hide by going short duration? Well, 0:16:35.040 --> 0:16:37.400 on the on the rates side, you know so much 0:16:37.400 --> 0:16:41.760 of that is the combination of two extraordinary things. Tom. First, 0:16:41.760 --> 0:16:46.880 we came into this bond market with very low inflation expectations. 0:16:46.920 --> 0:16:50.440 You know, this transitory was priced into the bond market, 0:16:50.480 --> 0:16:52.920 and so when you have low coupon and you have 0:16:53.000 --> 0:16:57.920 a reset in inflation expectations, uh, that that's the impact. 0:16:58.240 --> 0:17:01.760 So bond markets do a really bad job of placing 0:17:02.120 --> 0:17:05.679 unexpected inflation, and that's what we got. The good news, 0:17:05.840 --> 0:17:08.359 if there is some going forward, is we've priced a 0:17:08.400 --> 0:17:12.720 lot more inflation here into into bonds, and so you've 0:17:12.760 --> 0:17:16.480 seen increases across the curve in yields, a lot of 0:17:16.560 --> 0:17:19.880 increases in the short end. And yes, shortening duration here 0:17:19.920 --> 0:17:22.320 makes a lot of sense because duration has been a 0:17:22.320 --> 0:17:25.879 tough environment and an absolute return environment, and so the 0:17:25.960 --> 0:17:28.480 yields are getting to a better place. Now. We need 0:17:28.520 --> 0:17:32.960 to see the inflation forecast validated for that to manifest, 0:17:33.040 --> 0:17:37.119 there's still, you know, a risk there, but certainly we've 0:17:37.160 --> 0:17:40.960 priced in a better inflation expectation trajectory. If we start 0:17:41.040 --> 0:17:44.960 to realize these forecasts and inflation coming down, some of 0:17:45.000 --> 0:17:46.919 that yield increase is going to be a little bit 0:17:46.920 --> 0:17:49.239 more protective in the front end of Kelly, what I'm 0:17:49.320 --> 0:17:52.199 hearing here from Mr Rosenberg is the immense amount of 0:17:52.240 --> 0:17:55.199 uncertainty going forward, and let's already sell it here up 0:17:55.240 --> 0:17:58.000 to the inflation report of next week. Yeah, an inflation 0:17:58.040 --> 0:18:00.919 report that could hear a nine handle on cp I 0:18:01.000 --> 0:18:03.000 tom on Wednesday. So that's going to be something that 0:18:03.040 --> 0:18:05.680 this bond market is watching carefully. And talking of the 0:18:05.760 --> 0:18:08.439 uncertainty that's out there, the amount of volatility we have 0:18:08.520 --> 0:18:12.159 seen and continue to see, we've almost gotten used to 0:18:12.200 --> 0:18:14.840 the idea that we see double digit basis point moves 0:18:15.080 --> 0:18:17.399 on yields, the two year yield right now doing the 0:18:17.440 --> 0:18:20.600 exact same thing today up whopping eleven basis points on 0:18:20.640 --> 0:18:24.040 the back of this data. It is remarkable the extent 0:18:24.080 --> 0:18:27.359 to which we see the bond market moving and the 0:18:27.440 --> 0:18:30.560 uncertainty that is out there. Jeff, I'm wondering when you 0:18:30.600 --> 0:18:32.560 think we will get a clear enough read that the 0:18:32.600 --> 0:18:37.159 bond market can make a decision either way. Yeah, you know, 0:18:37.200 --> 0:18:40.920 look at the consensus forecasts. Uh, you can find them 0:18:40.920 --> 0:18:46.080 on Bloomberg ecst. Uh. Sorry for the product plug there 0:18:46.080 --> 0:18:49.760 for you guys, but the consensus forecasts have inflation on 0:18:49.800 --> 0:18:51.600 the year of the year basis, you know, coming down. 0:18:51.720 --> 0:18:54.680 So we need to see that. And as you point out, 0:18:54.720 --> 0:18:57.960 you know, the CPI reports are as important now than 0:18:57.960 --> 0:19:01.480 these payroll reports, arguably even more important as inflation is 0:19:01.520 --> 0:19:06.040 really the central issue for the outlook for financial markets. 0:19:06.040 --> 0:19:08.080 So that's what we need to see. That's what the 0:19:08.119 --> 0:19:11.560 bond market needs to see in these monthly figures. Uh, 0:19:11.600 --> 0:19:15.560 you know, coming down into the forecast range uh and 0:19:15.600 --> 0:19:20.600 seeing the broadening of inflation story start to start to 0:19:20.080 --> 0:19:23.040 to to pull back. It's been a bad set to 0:19:23.280 --> 0:19:26.199 sce in a row where it's been the opposite, and 0:19:26.240 --> 0:19:28.720 that's why we've gotten this this change from the Fed. 0:19:28.920 --> 0:19:33.120 As Jonathan pointed out, expecting fifty and getting seventy, that's 0:19:33.119 --> 0:19:36.160 because you've had inflation really show up on the surprise 0:19:36.200 --> 0:19:38.600 to the upside. So we will be able to have 0:19:38.640 --> 0:19:41.960 a little more confidence that we're not getting these persistent 0:19:42.600 --> 0:19:46.320 UH inflation surprises when you see it in those CPI reports. 0:19:46.480 --> 0:19:55.800 Jeff Frozenberg, thank you so much. I mean political moment, folks. 0:19:56.119 --> 0:19:59.119 It is important at Bloomberg Savella's to speak truly to 0:19:59.200 --> 0:20:02.479 those steep in experience. I think of Robert Feldman at 0:20:02.480 --> 0:20:05.480 Morgan Stanley or David pilling X of the f T 0:20:05.680 --> 0:20:10.280 with his wonderful blending adversity, bending adversity. But also on 0:20:10.280 --> 0:20:13.399 that list is Tobias Harris. To say, he's senior Fellow 0:20:13.440 --> 0:20:16.879 for Asia at the Center for American Progress, barely describes 0:20:16.920 --> 0:20:21.600 the study from Brandeis to Cambridge to his book The Econoclast. 0:20:21.960 --> 0:20:25.479 Mr Abe, We're thrilled that Tobias could join us UH 0:20:25.640 --> 0:20:30.120 this morning. Tobias, this is someone who took what Kazumi did, 0:20:30.560 --> 0:20:35.520 which was drag rural Japan into a modern urban history. 0:20:35.640 --> 0:20:39.800 That's what Kazuomi did, a modern immediacy of the urban landscape. 0:20:40.240 --> 0:20:43.000 And then Abe said we have to go further, we 0:20:43.080 --> 0:20:46.240 have to go beyond the legacy of World War Two. 0:20:46.640 --> 0:20:52.000 Was he successful? I think in a very broad sense. 0:20:52.160 --> 0:20:55.000