Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com
Speaker 1: and of course on the Bloomberg terminal. Secondly, well, some
Speaker 1: police to say joined us right now. Seculd be great
Speaker 1: to catch up with your sir. Really decent payroll support
Speaker 1: in the view of so many people your perspective, police, sir.
Speaker 1: First of all, no, it was a good report. I
Speaker 1: think the couple of things that that I'm very happy
Speaker 1: to see. In the private sector. We're seeing UH employment
Speaker 1: back to pre pandemic levels in the manufacturing sector. The
Speaker 1: same thing in the childcare sector for the first time.
Speaker 1: Quite honest, in a little bit we've seen some gains,
Speaker 1: which means that our childcare facilities are getting a little
Speaker 1: bit back to I wouldn't call them back to what
Speaker 1: they were pandemic, but we're seeing some growth there. Warehousing
Speaker 1: and obviously manufacturing we've seen some great growth there as well.
Speaker 1: So we're seeing our job economy moving float forward. The
Speaker 1: wage growth we're seeing the biggest well some of the
Speaker 1: biggest gain and the lowest income earners, which is good. Obviously,
Speaker 1: we're still dealing with inflation and and the wage growth
Speaker 1: isn't quite keeping up inflation. But I think what we
Speaker 1: want to do is actually bring inflation down. Uh So
Speaker 1: we have to continue to move forward. But this is
Speaker 1: this shows that where the country is quite with President
Speaker 1: Biden laying out the plans when he took office, is
Speaker 1: still moving forward on the job side. But as you
Speaker 1: just mentioned, there's still a lot of unanswered questions about
Speaker 1: the economy. It's still the kind of in a very
Speaker 1: you know, interesting place. Secondly, well, Chelf for light on
Speaker 1: you over the last few months to give me updates
Speaker 1: on what's happening on the West Coast. I understand the
Speaker 1: contract with the West Coast Port Union expired and talks
Speaker 1: around going. You've said a few times on this program
Speaker 1: that you're not concerned. You concern Now, No, I'm not
Speaker 1: gonnacern because both sides, both parties put a statement out
Speaker 1: to Wite two statements now letting people know that they're
Speaker 1: going to continue negotiations when the contract expired July. First,
Speaker 1: I've spoken I didn't speak to them this week. I
Speaker 1: spoke to both sides last week. They both said it's
Speaker 1: moving in the right direction. Both sides, I should say,
Speaker 1: the unions and the companies. Uh. And obviously we haven't
Speaker 1: had that issue yet that might pop up that will
Speaker 1: cause little indigestion for for both sides. But I like
Speaker 1: that where it's going. You know, the interesting thing about
Speaker 1: this negotiation, it doesn't start until six weeks prior to
Speaker 1: the expiration of contract. And that's one of the things
Speaker 1: that you know, a little different than most contracts. Some
Speaker 1: contracts you can start negotiation at six months prior to expiring.
Speaker 1: But but I feel good with were going. I know
Speaker 1: there's a lot at steak. Clearly we don't want to
Speaker 1: have any issues like we did last holiday season and
Speaker 1: last fall with with with boats out in the with
Speaker 1: with ships out in the harbor and not getting supplies,
Speaker 1: and so I do feel good where we are. Today's
Speaker 1: during today the second well shod You know, this is
Speaker 1: a really important topic. And I can take your word
Speaker 1: for the youth feel good, but other members of the
Speaker 1: audience might not. Can you help them understand what's at
Speaker 1: stake here and the details of the nego seations. What's
Speaker 1: stopping this one from closing, what's the gap, how bigs
Speaker 1: the gap, and what's it over? Yeah, and so just
Speaker 1: so everyone understands, when you when they do the negotiations
Speaker 1: on the port UH, they generally go on for a
Speaker 1: long periods of time. And historically, UH under the two
Speaker 1: thousand and fourteen UH it went on for a long time.
Speaker 1: There was no strikes or slowdowns or lockouts. But what
Speaker 1: we want to do right now in the time that
Speaker 1: we're living and making sure that people's pressures, they feel
Speaker 1: the pressure price pressures at home, they're paying for goods
Speaker 1: and services where they're seeing inflation obviously impacting their families.
Speaker 1: We want to make I want to make sure the
Speaker 1: President Fine wants to make sure that we don't have
Speaker 1: a breakdown negotiation at the point to add additionally to inflation,
Speaker 1: additionally to cost. And that's that's what's at stay, quite honestly.
Speaker 1: And what the contract that they negotiating is everything from wages,
Speaker 1: to working conditions to everything that you can imagine. So
Speaker 1: it's a massive contract. There are tens of thousands of workers.
Speaker 1: There are nine shipping companies involved in this in this negotiation,
Speaker 1: so it is. It's a very long negotiation. Let's just
Speaker 1: say long. It's a very very challenging negotiation at the table.
Speaker 1: But when when I hear from both sides the same
Speaker 1: exact thing that it's moving along, I'm pleased with that.
Speaker 1: I'm not concerned about the contract expiring last on the
Speaker 1: first of this month. Certainly next month I come on
Speaker 1: this show. If we don't have a contract, and we're
Speaker 1: not close to a contract, then you and I might
Speaker 1: be having a very different conversation. But right now I
Speaker 1: feel good. Well, let's talk about that. As you know,
Speaker 1: you can't take their word for it either. Are you
Speaker 1: preparing for the possibility of a strike? Can you continue
Speaker 1: talk to me about what those preparations look like. Yeah,
Speaker 1: I'm really honestly, I'm really not concerned about strike. The
Speaker 1: last time there was a strike of the ports of
Speaker 1: l A and Long Beach it was in nineteen seventy two,
Speaker 1: I believe, so we haven't had a strike there in
Speaker 1: quite some time. And the way I look at this,
Speaker 1: these workers and these shipping companies and these suppliers and
Speaker 1: everyone work at the point, particularly the workers, they've lived
Speaker 1: through and work through a pandemic like a lot of
Speaker 1: us have. They want to work every day, they were
Speaker 1: still unloading ships. The supply chain issues or the shortages
Speaker 1: at the at the ports weren't necessarily because they weren't
Speaker 1: unloading the ships. It was because the manufacturing stopped in China.
Speaker 1: They shut down manufacturing, just like they did earlier this year.
Speaker 1: So workers want to go to work. If workers don't work,
Speaker 1: they don't get paid. They're not a salary bunch of people.
Speaker 1: If they don't work the hours, they don't get paid
Speaker 1: the hourly workers. And that's why for them, there's an
Speaker 1: interest for the for the people that work on the
Speaker 1: ports to make sure this contract gets resolved and they
Speaker 1: continue to work. A secondly was just quickly and briefly,
Speaker 1: and I respect your time, and I just want to squeeze,
Speaker 1: they say, And you mentioned China. The President, we understand,
Speaker 1: will be meeting with advices today to consider removing tariffs
Speaker 1: on China. We've been told many times over the last
Speaker 1: few years from the previous administration on this one that
Speaker 1: a lot of this is about fairness and also protecting
Speaker 1: American jobs. Do you have a seat at the table
Speaker 1: in that conversation. No, I'm not necessary at the table.
Speaker 1: I've been involved in some conversations and I think that,
Speaker 1: you know, I'm not sure exactly what's gonna happen today
Speaker 1: at the White what's your view want it? What if
Speaker 1: you sent back to them? I mean, I think I
Speaker 1: think you know, it's it's about my paid grade as
Speaker 1: far as where I am right now. But I think that,
Speaker 1: you know, I think having this conversation is really important
Speaker 1: because we're thinking about the pressures of of of inflation,
Speaker 1: but we're also going to keep an eye on the
Speaker 1: jobs that are here in the United States. And the
Speaker 1: President has certainly laid out in the beginning of his
Speaker 1: presidency a big opportunity to create more opportunities in manufacturing
Speaker 1: United States of America. One thing that's indirectly related the
Speaker 1: Bipartisan Innovation Act that's in front of Congress right now.
Speaker 1: That's an important piece of legislation to pass because that
Speaker 1: would allow us the opportunity to build more in America
Speaker 1: and have more products built America. Somewhat we're seeing right
Speaker 1: now in America is the computer chips that are in
Speaker 1: all of our phones and our doorbells, and and we're
Speaker 1: doing it right now on tv UM. We should be
Speaker 1: making those United States of America. That's an opportunity for
Speaker 1: us to help leave long term inflationary pressures down the road.
Speaker 1: Next time we're in Washington day, say Tom Kate and
Speaker 1: I would love to catch up with these secretaries. Great
Speaker 1: to catch up with you now, Secondary Wolfs there from
Speaker 1: outside the White House, we moved to the government's former
Speaker 1: governor of the Federal Reserve and Boost School, Randall Crossing,
Speaker 1: for brief comments. You're as well, Randy. We had gradualism
Speaker 1: and a measure moment with green Span. Is that history
Speaker 1: now with this art economy, that's history that is long
Speaker 1: long behind us. You can see that the FIT now
Speaker 1: is trying to move expeditiously exactly as she said. This
Speaker 1: is completely consistent with their their desire to move fast,
Speaker 1: and I think they are very likely to go seventy
Speaker 1: five basis points at the next meeting. Obviously we'll get
Speaker 1: some inflation data between now and then. They're also going
Speaker 1: to get a GDP report because they'll know the numbers
Speaker 1: before we know them when they make their decision on Wednesday.
Speaker 1: Will find out on Thursday and at the end of
Speaker 1: the month. But I think they're gonna go seventy five
Speaker 1: and I think there's nothing in this report that would
Speaker 1: slow them down from that. Randy, that's just a question
Speaker 1: I have. I don't want to make too much of
Speaker 1: a big Databa. It's just something that keeps jumping out
Speaker 1: to me. We keep churning out really robust jobs growth,
Speaker 1: payrolls three seventy two, unemployment's really stabilized at three point
Speaker 1: six percent. I'd love your thoughts on what you make
Speaker 1: of that. Well, I mean, this is exactly as Mike said.
Speaker 1: You've got two different surveys, uh, and different ways of
Speaker 1: gathering the data, so they're not always exactly the same.
Speaker 1: And uh, we don't always know months a month why
Speaker 1: one is going one direction one's going in another direction.
Speaker 1: But I think both of them point to pretty robust,
Speaker 1: robust job job market right now. But I do see
Speaker 1: that weakening by the fall. And what do you make
Speaker 1: of a lower participation rate sixty two percent? Randy, Well,
Speaker 1: it's sort of been bouncing around sixty two point two,
Speaker 1: sixty two point three. I think you know that's it's
Speaker 1: small enough to and and it's only months a month
Speaker 1: movements to that. It's too difficult to make too much
Speaker 1: of that. But I think what it says, is that
Speaker 1: there's a large number of people who I think are
Speaker 1: just not going to come back into the labor market.
Speaker 1: I think especially older workers that had come in really,
Speaker 1: really robustly before the before the pandemic struck. I've just
Speaker 1: said this is just too risky. There's really no need
Speaker 1: for me to be in the in the job market
Speaker 1: and being exposed. I want to be spending time with
Speaker 1: my kids, I want to be spending time traveling with
Speaker 1: my my loved ones, and and I think we're just
Speaker 1: not going to see the labor force participation rate move
Speaker 1: up to where it was pre pandemic. Randy, great to
Speaker 1: have you with us run across that of the investitis.
Speaker 1: You kind of both skill responding to that upside supprime.
Speaker 1: Jeffrey Rosenberg now leads us forward. Here's with black Rock.
Speaker 1: He's co lead portfolio manager of the Systematic multi Strategy
Speaker 1: fun Jeff, that's a mouthful. Let's cut to the chase.
Speaker 1: How do devolve this odd economy and the new volatility
Speaker 1: you're living in the bond market down to a systematic strategy. Well, Tom,
Speaker 1: it's an odd economy as you as you point out,
Speaker 1: but it's it's a it's a payroll report, as Jonathan
Speaker 1: nailed right at the beginning, that solidifies seventy five basis points.
Speaker 1: You know, going into this, the market is expecting a
Speaker 1: slowdown in in payrolls. You heard, uh, Randy talked about
Speaker 1: that into the fall. That's still the case, but it's
Speaker 1: it's not slowing fast enough, and so you know that
Speaker 1: the Fed is going to have to do more. And
Speaker 1: when you see the lack of labor force participation, and
Speaker 1: I agree with Randy, we don't want to over interpret
Speaker 1: you know point one, yes, yes here there, but you
Speaker 1: haven't really seen that, uh, and that's a real problem
Speaker 1: on the wage inflation front. So you know, the the
Speaker 1: lack of payroll slowing here and the lack of an
Speaker 1: increase in participation is just again highlighting the pressures on
Speaker 1: the FED here that you have an overheating economy and
Speaker 1: they need to really push on the demand side. And
Speaker 1: so you're seeing the reaction in the front end. Uh.
Speaker 1: You know, reflective of that, Jeff, I want to go
Speaker 1: to the wheelhouse of what you do, which is Lincoln
Speaker 1: full faith and credit into trying to not lose money here.
Speaker 1: Pria misera over TV securities talks about a very serious inversion,
Speaker 1: perhaps even a greater inversion than we saw within two
Speaker 1: thousand folks. This is where the two year yield is
Speaker 1: substantially higher than the ten year yield. What does each
Speaker 1: basis point mean of larger inversion going forward? What does
Speaker 1: that mean the real world of not trying to lose
Speaker 1: money and fixed income? Yeah, well, the first part of
Speaker 1: that of what it means, and you're seeing a bit
Speaker 1: of that movement in reaction to today's print, where bigger
Speaker 1: increases in the short end, lower increases in the long end,
Speaker 1: and the flattening of the curve. Is really the market
Speaker 1: expecting the Fed to tighten into a recession. And this
Speaker 1: isn't a new expectation, but it's certainly the reaction again
Speaker 1: to today's data, where you know, as I just said,
Speaker 1: the economy is labor markets are very hot. The Fed
Speaker 1: has to do more. And if you look at kind
Speaker 1: of what's priced into the market in a forward basis,
Speaker 1: it has the one year or the FED funds rate
Speaker 1: two years out from now lower than where it's expected
Speaker 1: in one year. So what is that saying. It's saying
Speaker 1: that the market is expecting the Fed to push us
Speaker 1: into a recession. And that's the same message that you
Speaker 1: see when you talk about an inverted yield curve, that
Speaker 1: front end interest rates are going to reflect FED policy,
Speaker 1: the longer end interest rates are going to reflect that
Speaker 1: future expectation of recession. And and you've heard Powell, you know,
Speaker 1: basically admit and and and really in the minutes that
Speaker 1: they're willing to take that risk because the bigger risk
Speaker 1: is letting inflation become entrenched. And I think that's right, Kayley.
Speaker 1: It's so important here and I'll have the chart for Monday.
Speaker 1: Folks will do it in the five am hour if
Speaker 1: they let me in the building. Kayley. I look at
Speaker 1: curve inversion, and we forget how rare this is. I've
Speaker 1: really got to go back thirty years to get out
Speaker 1: to a half a percentage point inversion the curve. That's
Speaker 1: how rare what some of these strategists are talking about. Yeah,
Speaker 1: we're talking nineteen eighties, the last time we saw yield
Speaker 1: curve inverted by fifty basis points. And yet that is
Speaker 1: what we heard from Priamiser earlier. She basically echoed the
Speaker 1: sentiment that the FED is going to be focused on inflation.
Speaker 1: They're going to continue to be aggressive even if we
Speaker 1: do see that softening in the economy. Therefore, you continue
Speaker 1: to see the short end a lot higher than than
Speaker 1: the long end. So, Jeff, do you agree with that
Speaker 1: that we could ultimately end up at half a percentage
Speaker 1: point inverted with the Fed tolerate that? Well, you know,
Speaker 1: it's really about the broader question of how will as
Speaker 1: we get into the fall and you start to see
Speaker 1: the impact of a slowing economy, how will the Fed balance?
Speaker 1: It's two objectives between inflation fighting, which is front and center.
Speaker 1: What they're saying is the number one objected. Kind of
Speaker 1: easy to do that when the labor markets are red hot,
Speaker 1: and the Secretary Walsh, as you're gonna have later on
Speaker 1: the program, takes a victory lap, it's gonna be a
Speaker 1: lot harder for the Fed, and therefore for the market
Speaker 1: to still talk about inflation is the only objective when
Speaker 1: we're looking at an environment when inflation the year of
Speaker 1: a year basis is coming down, but unemployment UH is
Speaker 1: potentially going up, or at least these payroll figures are
Speaker 1: going down. So you know, pre as call on the
Speaker 1: inversion is really a statement that they're gonna maintain into
Speaker 1: a slowing economy, this very aggressive stance on FED tightening.
Speaker 1: They may or may not do that. I think it's
Speaker 1: an open question as we get into data that is
Speaker 1: a little bit more mixed in terms of the growth
Speaker 1: inflation trade off. But clearly, if they maintain this degree
Speaker 1: of inflation fighting focus into an environment that is clearly slowing,
Speaker 1: than yes, you could see that degree of inversion in
Speaker 1: the curve. Okay, So the operative word there being if
Speaker 1: the question of whether or not that the Fed is
Speaker 1: going to blink It used to be a conversation of
Speaker 1: September that clearly has shifted with some people still looking
Speaker 1: for fifty basis points in September. How long, Jeff, do
Speaker 1: you think it will take the data to deteriorate enough
Speaker 1: that there is a potential that the Fed thinks twice? Yeah,
Speaker 1: you know, I think we're looking at a slowdown in
Speaker 1: the jobs market into the fall. I think that sets
Speaker 1: up September, October, November periods where we see need that
Speaker 1: kind of tradeoff really starting to show up, and these
Speaker 1: reports become a lot more important. Um, the FED meetings
Speaker 1: are going to get a lot more interesting when you
Speaker 1: have that tension and they're starting to think about and
Speaker 1: and talk about slowing the pace. A lot of that's
Speaker 1: going to depend on the pace of slowdown in the
Speaker 1: inflation side, and there's an expectation that you get that
Speaker 1: slow down. And so that's this kind of movement in
Speaker 1: two sides here. Falling inflation and rising unemployment is going
Speaker 1: to make a very difficult period for the FED. It's
Speaker 1: not where they are today. So I think later this
Speaker 1: month it's gonna be seventy five basis points and and
Speaker 1: you know, a more clear path. But I think as
Speaker 1: we get into the fall and the impact of the
Speaker 1: tightening and financial conditions shows up in the labor markets,
Speaker 1: then we're gonna see this tradeoff manifest in the Fed's
Speaker 1: decisions on radio and television. If it's joining us Jeffrey Rosenberg,
Speaker 1: where US is black rock after a buoyant jobs report,
Speaker 1: two year react sharply where they higher two year yield
Speaker 1: out eleven basis points three point one two, with some
Speaker 1: substantial negative four basis points curve and version as well.
Speaker 1: Equities on the chin ever so slightly not done. A
Speaker 1: lot of futures down twenty six down, futures down one
Speaker 1: or three. The vix comes up point three six points
Speaker 1: twenty six point four four. Jeff, you're living a Bloomberg
Speaker 1: total return all in index of a negative twelve percent.
Speaker 1: I'm going to chart it out from two thousand twenty
Speaker 1: is negative six percent an annualized in bonds. How do
Speaker 1: you hide? Do you hide by going short duration? Well,
Speaker 1: on the on the rates side, you know so much
Speaker 1: of that is the combination of two extraordinary things. Tom. First,
Speaker 1: we came into this bond market with very low inflation expectations.
Speaker 1: You know, this transitory was priced into the bond market,
Speaker 1: and so when you have low coupon and you have
Speaker 1: a reset in inflation expectations, uh, that that's the impact.
Speaker 1: So bond markets do a really bad job of placing
Speaker 1: unexpected inflation, and that's what we got. The good news,
Speaker 1: if there is some going forward, is we've priced a
Speaker 1: lot more inflation here into into bonds, and so you've
Speaker 1: seen increases across the curve in yields, a lot of
Speaker 1: increases in the short end. And yes, shortening duration here
Speaker 1: makes a lot of sense because duration has been a
Speaker 1: tough environment and an absolute return environment, and so the
Speaker 1: yields are getting to a better place. Now. We need
Speaker 1: to see the inflation forecast validated for that to manifest,
Speaker 1: there's still, you know, a risk there, but certainly we've
Speaker 1: priced in a better inflation expectation trajectory. If we start
Speaker 1: to realize these forecasts and inflation coming down, some of
Speaker 1: that yield increase is going to be a little bit
Speaker 1: more protective in the front end of Kelly, what I'm
Speaker 1: hearing here from Mr Rosenberg is the immense amount of
Speaker 1: uncertainty going forward, and let's already sell it here up
Speaker 1: to the inflation report of next week. Yeah, an inflation
Speaker 1: report that could hear a nine handle on cp I
Speaker 1: tom on Wednesday. So that's going to be something that
Speaker 1: this bond market is watching carefully. And talking of the
Speaker 1: uncertainty that's out there, the amount of volatility we have
Speaker 1: seen and continue to see, we've almost gotten used to
Speaker 1: the idea that we see double digit basis point moves
Speaker 1: on yields, the two year yield right now doing the
Speaker 1: exact same thing today up whopping eleven basis points on
Speaker 1: the back of this data. It is remarkable the extent
Speaker 1: to which we see the bond market moving and the
Speaker 1: uncertainty that is out there. Jeff, I'm wondering when you
Speaker 1: think we will get a clear enough read that the
Speaker 1: bond market can make a decision either way. Yeah, you know,
Speaker 1: look at the consensus forecasts. Uh, you can find them
Speaker 1: on Bloomberg ecst. Uh. Sorry for the product plug there
Speaker 1: for you guys, but the consensus forecasts have inflation on
Speaker 1: the year of the year basis, you know, coming down.
Speaker 1: So we need to see that. And as you point out,
Speaker 1: you know, the CPI reports are as important now than
Speaker 1: these payroll reports, arguably even more important as inflation is
Speaker 1: really the central issue for the outlook for financial markets.
Speaker 1: So that's what we need to see. That's what the
Speaker 1: bond market needs to see in these monthly figures. Uh,
Speaker 1: you know, coming down into the forecast range uh and
Speaker 1: seeing the broadening of inflation story start to start to
Speaker 1: to to pull back. It's been a bad set to
Speaker 1: sce in a row where it's been the opposite, and
Speaker 1: that's why we've gotten this this change from the Fed.
Speaker 1: As Jonathan pointed out, expecting fifty and getting seventy, that's
Speaker 1: because you've had inflation really show up on the surprise
Speaker 1: to the upside. So we will be able to have
Speaker 1: a little more confidence that we're not getting these persistent
Speaker 1: UH inflation surprises when you see it in those CPI reports.
Speaker 1: Jeff Frozenberg, thank you so much. I mean political moment, folks.
Speaker 1: It is important at Bloomberg Savella's to speak truly to
Speaker 1: those steep in experience. I think of Robert Feldman at
Speaker 1: Morgan Stanley or David pilling X of the f T
Speaker 1: with his wonderful blending adversity, bending adversity. But also on
Speaker 1: that list is Tobias Harris. To say, he's senior Fellow
Speaker 1: for Asia at the Center for American Progress, barely describes
Speaker 1: the study from Brandeis to Cambridge to his book The Econoclast.
Speaker 1: Mr Abe, We're thrilled that Tobias could join us UH
Speaker 1: this morning. Tobias, this is someone who took what Kazumi did,
Speaker 1: which was drag rural Japan into a modern urban history.
Speaker 1: That's what Kazuomi did, a modern immediacy of the urban landscape.
Speaker 1: And then Abe said we have to go further, we
Speaker 1: have to go beyond the legacy of World War Two.
Speaker 1: Was he successful? I think in a very broad sense.
Speaker 1: I think there's certainly no going back to what Japan
Speaker 1: was like before Abe returned to the premiership in and
Speaker 1: so in that sense, I think you very much a success.
Speaker 1: And you know that that Abe was very fond of
Speaker 1: of Mrs Thatcher's line there is no alternative when he
Speaker 1: talked about his own policies, and I think that is
Speaker 1: what Japan has now. You have uh An economic policy,
Speaker 1: in foreign policy. He laid a blueprint for his successors,
Speaker 1: and no one really has thought of anything better. You
Speaker 1: wrote in Foreign Affairs magazine of the arch moment of Japan,
Speaker 1: which is malaise. Their voter turnout is appallingly low compared
Speaker 1: to recent history. How did he and how does anybody
Speaker 1: new in Japan bring a new spirit to political Japan?
Speaker 1: It seems to be gone. I think there's gonna be
Speaker 1: a lot of questions about Japanese democracy after today's events,
Speaker 1: and and um, you know, it's it's shocking. I think
Speaker 1: everyone is is think trying to think through what it means.
Speaker 1: Um And in some ways obvious assassination is a reflection
Speaker 1: of one of the one of the best things about
Speaker 1: Japanese democracy, which is how accessible it's elected officials are
Speaker 1: to the public. You know, Japanese election campaign, yes, they
Speaker 1: you know, they use the internet more than they used
Speaker 1: to uh their tv ads, but they're still based largely
Speaker 1: on politicians getting out there on their feet and interacting
Speaker 1: with voters directly. And you know, I think there's some
Speaker 1: concern does this mean the end of that? Is there
Speaker 1: going to be you know, security court on this, you know,
Speaker 1: are you not going to have that accessibility? And I
Speaker 1: certainly hope not. I think it was a strength of
Speaker 1: Japanese democracy that voters had as much access to their
Speaker 1: representative to this day. He was an arched conservative and
Speaker 1: also there was great liberality on social policy. I'm going
Speaker 1: to suggest he tried to drag his LDP to the center.
Speaker 1: Is there a political center in Japan in two thousand
Speaker 1: twenty three. I don't know if it's so much the
Speaker 1: center as it was. You know, you know, fundamentally, he
Speaker 1: was someone who wanted his country to be strong, and
Speaker 1: basically he would do what it what it would take,
Speaker 1: whatever it would take to do that. And if that
Speaker 1: meant globalizing Japan, if it meant opening Japan to the world,
Speaker 1: if it meant welcoming investment and tourism, and you know,
Speaker 1: opening Japan to trade through something like a tv P,
Speaker 1: he was going to do that even if you know instinctively,
Speaker 1: you know, you look at traditional conservatives and you talked
Speaker 1: about uh former Prime Minister Koizumi's war with oral japan Um.
Speaker 1: You know, even if it meant taking on those core
Speaker 1: LDP interest to bring uh, you know, to open Japan
Speaker 1: to the world, Abe was willing to do that. I
Speaker 1: don't think he was a reformer quite the way that
Speaker 1: that Koizumi was, but he did recognize that that Japan
Speaker 1: had to open to foreign influences more than it had
Speaker 1: been in the past. Tobias, please explain to us how
Speaker 1: the response will be from the emperor and his family.
Speaker 1: It is such a unique, original relationship. How will Emperor
Speaker 1: Aruhito respond to this assassination? What a what a fascinating question, because,
Speaker 1: of course, I mean, there were plenty of moments with
Speaker 1: uh the current emperor's father, some moments of tension between
Speaker 1: Uh miss Rabe and the former Emperor Um. But you
Speaker 1: know what it comes down to it in moments like
Speaker 1: this that are you're just genuinely shocking, tragic moment for
Speaker 1: the entire nation. The imperial household has generally stepped up
Speaker 1: and served as basically given voice to those feelings of
Speaker 1: the entire nation, and I would expect as much from
Speaker 1: from emperor. And I don't think this is gonna be
Speaker 1: a moment of political tension. I think this will be
Speaker 1: a moment, uh, you know where where uh the Emperor
Speaker 1: speaks on behalf of public sorrow. Just quickly to Bias,
Speaker 1: we only have about a minute left. But you were
Speaker 1: talking about how Abe looked globally, and I've heard from
Speaker 1: many people this morning that he was a unique figure
Speaker 1: in Japanese politics in that he did have that global recognition.
Speaker 1: I mean, people knew who Shinzo Abe was. Where does
Speaker 1: Japan stand in terms of global politics in his absence, Well, certainly,
Speaker 1: you know, he was probably the most powerful figure in
Speaker 1: Japanese politics right up until the moment he died. I mean,
Speaker 1: even more powerful in somebodys than then Prime Minister Kishida.
Speaker 1: And he was pushing, uh, you know, for more defense spending,
Speaker 1: pushing for a more sort of defense posture. And it's
Speaker 1: hard to see who's gonna fill his shoes in terms
Speaker 1: of making that case. And so I think it introduces
Speaker 1: maybe just a little uncertainty what we're gonna get out
Speaker 1: of the policy making process. I think there's gonna be
Speaker 1: a lot of pressure on Kishida to maybe continue his
Speaker 1: agenda UH and to fulfill Abbe's mission. But there's still
Speaker 1: work to do, and Kishida is going to really have
Speaker 1: to step up in the moment UH and continue to
Speaker 1: live up to the blueprint that Abbe outlined when he
Speaker 1: was Prime Minister. Thank you for bam of this this morning,
Speaker 1: Savice House that the sense of for American progress. We're
Speaker 1: Helene Becker owns the high Ground and Counting Company and
Speaker 1: joins us UH this morning. Helena. I want to look
Speaker 1: forward into earnings as well. With all this chaos and
Speaker 1: with the airlines full, are they actually bringing anything down
Speaker 1: the income statement to make what we call airline profit? Yes, yes,
Speaker 1: Actually we think that most of the airlines will be profitable.
Speaker 1: A couple will report losses in the quarter um but
Speaker 1: in our earnings preview which we published yesterday, we think
Speaker 1: there are some positive surprises ahead even with the flight
Speaker 1: cancelations and delays that they experienced a Memorial Day weekend
Speaker 1: and over Father's Day weekend. And I will just point
Speaker 1: out that the delays last weekend we're smaller than the
Speaker 1: number of delays we saw those two weekends. So the
Speaker 1: airlines are cutting capacity, which obviously has the effect given
Speaker 1: that demand is still very very strong. UM, it has
Speaker 1: the effect of raising ticket prices, and we think that
Speaker 1: they're recovering between sev and a d pent of the
Speaker 1: rise and the cost of fuel UM. As we go
Speaker 1: through the year, we're getting a little more concerned with
Speaker 1: wage inflation UM. The contract that United Pilots may vote
Speaker 1: on later this month UM provided for and almost fifteen
Speaker 1: percent increase. American offered their pilots seventeen percent increase. So
Speaker 1: we're definitely seeing significant wage inflation UM. And and that
Speaker 1: won't that won't be UM, not not for the foreseeable future,
Speaker 1: and and so UM with demand still strong, although we're
Speaker 1: a little worried what happens after after somes What I
Speaker 1: want to talk about, Helene, as you know, the price
Speaker 1: tolerance in this industry right now for the consumer just
Speaker 1: seems to be unlimited. It's immense. I'm just wondering whether
Speaker 1: it's there in the back half of this year. How
Speaker 1: do you gauge that? Yeah, I don't think it will
Speaker 1: be Frankly, UM, we're worried about that because consumers you
Speaker 1: guys talk about it on the show all the time.
Speaker 1: Consumers have a lot of financial pressure right now. They've
Speaker 1: got higher UM prices when they fill up their car
Speaker 1: when they went to get to work, and then they
Speaker 1: have UM cooling their home is going up. Eventually heating
Speaker 1: their homeless is going to go up. And I think
Speaker 1: there are a lot of people who really wanted to
Speaker 1: travel this summer. They haven't traveled for a couple of years, um,
Speaker 1: and they just wanted to get out and about. And
Speaker 1: as you go through the year, I think that after
Speaker 1: after people start returning to the office again. I noticed
Speaker 1: when I'm in the city it's so much more crowded
Speaker 1: than it was just you know, three months ago, two
Speaker 1: months ago, um. And And so I think we're gonna
Speaker 1: we're gonna see pressure on on on traffic growth as
Speaker 1: as we head into the holiday season. So how does
Speaker 1: an airline make longer term decisions? Then? Because I think
Speaker 1: about the retailers which struggled for so long to get
Speaker 1: adequate supply and now they're left with too much inventory.
Speaker 1: Is demand is waning? Are we're going to see a
Speaker 1: situation where airlines try to get more pilots, they try
Speaker 1: to get more flight attendants, just labor in general, and
Speaker 1: as soon as they get all of that, the demand's
Speaker 1: gone and they're overstaffed. Yeah, that's of course we worry
Speaker 1: about that too. I think the pilot issue is is
Speaker 1: going to be with us for at least another two years,
Speaker 1: So I'm not so worried about them, UM, and I'm
Speaker 1: not really that worried about the flight attendants. To your point, though,
Speaker 1: I think focus on the capacity and the number of
Speaker 1: aircraft in the air. During the pandemic, the industry retired
Speaker 1: about eight hundred plants at the u S system and
Speaker 1: those are never coming back. And then there are still
Speaker 1: delivery delays from Airbus and Boeing on the especially the
Speaker 1: narrow body aircraft. I was reading an article earlier this
Speaker 1: morning that the manufacturers can't get enough engines. The engine
Speaker 1: manufacturers are having trouble keeping up with the supply, so
Speaker 1: you're not delivering as many aircraft and UM as you reported.
Speaker 1: Uh last week you saw that the airlines cut capacity
Speaker 1: UM for the summer months and that will probably continue,
Speaker 1: and that's that's their big weapon, right, It's just keeping
Speaker 1: a lid on how much capacity can go up. UM.
Speaker 1: And then we also published yesterday the number of employees
Speaker 1: as of April. We're back to two nineteen levels. It's
Speaker 1: just they're in the wrong places there there right, everybody went, um,
Speaker 1: I mean think about pre pandemic. Everybody was going to Chicago,
Speaker 1: New York, San Francisco, Boston business centers. And now everybody's
Speaker 1: going to leisure destination's Miami, California, Southern California, Sona. And
Speaker 1: so you're you're seeing that chip. So people are people
Speaker 1: are just misplaced, Elaine Thomas. So jealousy hasn't on a
Speaker 1: vacation yet. Your own decision the fetish front. Remember you
Speaker 1: went to Paris Etiam in the year Yeah, back to
Speaker 1: that of Cowen. This is the Bloomberg Surveillance Podcast. Thanks
Speaker 1: for listening. Join us live weekdays from seven to ten
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each
Speaker 1: day from six to nine am for insight from the
Speaker 1: best in economics, finance, investment, and international relations. And subscribe
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,
Speaker 1: and of course on the terminal. I'm Tom Keene and
Speaker 1: this is Bloomberg e