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Speaker 1: This is the Bloomberg Surveillance podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Faroe and Lisa Abramowitz joined us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. I want

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Speaker 1: to pause here for the public service and Muhammad Larrian

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Speaker 1: and there's a photo out on his Twitter feed on radio.

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Speaker 1: It's real simple. It is the students of Queen's College,

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Speaker 1: Cambridge with the beast Bosa. This is the official dog

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Speaker 1: of the University of Cambridge. And Muhammad, I want to

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Speaker 1: just pause for a bit here, and this is on

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Speaker 1: Good Friday. Now. You studied with Erasmus Cambridge years ago.

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Speaker 1: And the problem is John Fisher had your job a

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Speaker 1: few years ago and he ran into an altercation with

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Speaker 1: Henry the Eighth. You got to be careful at Cambridge

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Speaker 1: when you're there. It's a it's an emotional place. What's

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Speaker 1: been your experience dealing with these students. What's been the

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Speaker 1: biggest surprise of your day job. Now, So for those

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Speaker 1: of you who don't know English history as well as

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Speaker 1: Tom does, John Fisher, who was the President of Queen's

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Speaker 1: got beheaded and you've got beheaded by Henry the Eighth. Look,

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Speaker 1: it's been an amazing experience with the students I can.

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Speaker 1: I'll tell you how exciting it is to see them

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Speaker 1: embrace the opportunity to giving and you're seeing transformation right

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Speaker 1: in front of your eyes. I experienced it, so I

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Speaker 1: see it repeat it over and over again, and it

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Speaker 1: happens especially to people who come from more difficult backgrounds

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Speaker 1: and who recognize that this is life's changing, not just

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Speaker 1: for them, but for subsequent generation. Tell me about the

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Speaker 1: elites that you're living with, and frankly, we are every day.

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Speaker 1: Maybe not at Cambridge, but we're in an elite world.

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Speaker 1: What is your optimism seeing this job report of an

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Speaker 1: America that's essentially flat on its back. Half of America

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Speaker 1: is struggling just to get by. So I do think

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Speaker 1: we have an inequality problem. I call it a trifecta income, wealth,

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Speaker 1: and in particular opportunity, and I think a lot has

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Speaker 1: to be done to try and level the playing field

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Speaker 1: on opportunity. Having said that this is not an economy

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Speaker 1: on its knees. This is an economy that's incredibly robust

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Speaker 1: and only gets down to its knees if there is

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Speaker 1: further policy mistakes. I'm actually quite encouraged by how well

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Speaker 1: the US economy has been doing, given what else has

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Speaker 1: been going on in the world. Well, I just want

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Speaker 1: to point out, because we're talking about inequality in the world,

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Speaker 1: this is a really, really good report for minorities. The

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Speaker 1: unemployment rate for blacks or African Americans drops from five

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Speaker 1: to seven to five percent, a seven tenths drop in

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Speaker 1: one month. Asian unemployment drops by six tenths to two

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Speaker 1: point eight percent, and Hispanic drops by seven intense to

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Speaker 1: four point six percent. This is only conjecture, but it

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Speaker 1: seems like when you have this kind of continuing improvement

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Speaker 1: in the labor market, it is getting to the people

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Speaker 1: who are less hired, to the people at the lower

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Speaker 1: end of the socioeconomic scale who didn't get the jobs

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Speaker 1: back right away, and it seems to be broadening. So

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Speaker 1: this is the question that people ask Mohammed. To Mike's point,

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Speaker 1: the labor market looks, so can this labor market report.

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Speaker 1: Some people might disagree based on other figures we've had

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Speaker 1: this week, But let's just go with this. Why does

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Speaker 1: the FED want to ruin it? That's the question you

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Speaker 1: often here asked. Why do they want to ruin this?

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Speaker 1: Why do they want to get unemployment higher? I think

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Speaker 1: a lot of people outside of Wall Street and the

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Speaker 1: federerserve the institution don't quite understand that. Can you make

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Speaker 1: sense of that for us? So the charitable interpretation is

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Speaker 1: because they're not getting enough help on the supply side,

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Speaker 1: and if we did more to enhance labor force participation,

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Speaker 1: they wouldn't have to do so much on the demand side.

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Speaker 1: That's the charitable side. The less charitable is they started

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Speaker 1: very late, and because they started for they are having

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Speaker 1: a lot of hikes in a very short amount of time,

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Speaker 1: which then creates more damage to the real economy than

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Speaker 1: you would have had otherwise had you started on time.

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Speaker 1: And I think there's general agreement that they started very late,

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Speaker 1: probably a year late. The Fed's argument, I'll take the

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Speaker 1: Randy Krausner's side for right now, is that they think

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Speaker 1: they can tighten the way they are tightening because there

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Speaker 1: were so many job openings left over after the pandemic

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Speaker 1: that people are filling those holes rather than unemployment rising.

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Speaker 1: We saw yesterday the jobless claims numbers, which when they

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Speaker 1: changed the seasonally adjusted factors, went up by about thirty thousand,

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Speaker 1: but they're still very low and not showing signs of

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Speaker 1: breaking out. There does seem to be also because it

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Speaker 1: was so hard to find workers, a labor hoarding thing

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Speaker 1: going on, where companies are reluctant to let people go.

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Speaker 1: So the FED is maybe gambling at this point that

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Speaker 1: they can get away with this, but it's paid off.

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Speaker 1: I'm going to take the Elizabeth Warren's side. We've created

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Speaker 1: a million jobs in ninety days. You just gave us

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Speaker 1: stunning diversity statistics of the minorities of America. Prospering, John,

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Speaker 1: is this maybe the best jobs report I've ever seen,

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Speaker 1: a million jobs in ninety days in different minority unemployment

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Speaker 1: that I never imagined, or you know what I'm going

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Speaker 1: to say back to that, So just wait, just wait,

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Speaker 1: just wait. Based on the titan we've had in twelve

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Speaker 1: months zero to five, potentially in the coming meeting on

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Speaker 1: May third, they go beyond five. I'm ahabit. On top

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Speaker 1: of that, the banking stress an extra layer of it.

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Speaker 1: I just think that's a big group of individuals right

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Speaker 1: now on Wolf Street market participants looking at the states

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Speaker 1: point this morning and saying, great, okay, wait it for

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Speaker 1: a couple of months, because it's going to get worse.

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Speaker 1: Is that your take? That's the fear. That is the fear,

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Speaker 1: and I worry about it every single day. My question

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Speaker 1: for you, if I add up all the numbers you've

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Speaker 1: given us, he's spanning down from five point three to

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Speaker 1: four point six, I'm black unemploying five point seven to

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Speaker 1: five age and three point four to two point eight.

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Speaker 1: That means white unemployment must have spiked higher in a

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Speaker 1: very big way. Well, I can check that out very

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Speaker 1: quickly here. White unemployment obviously has been very very low

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Speaker 1: at this point. White unemployment is unchanged, so that doesn't

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Speaker 1: add up. So if everything else goes down and white

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Speaker 1: is unchanged, so well, you can come with me tomorrow

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Speaker 1: to the Bureau of Labor Statistics and talk to them.

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Speaker 1: I run the table a moment. I want to celebrate

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Speaker 1: Mike mckey's work here talking with the Federalserve Bank of Boston,

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Speaker 1: talking to the Federiserve Bank of Cleveland, talking to the

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Speaker 1: feder Reserve Bank of Saint Louis, and I want to

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Speaker 1: go back to something. This is john so important because

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Speaker 1: it's what surveillance does. And McKee lives every day and folks,

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Speaker 1: you don't even know this, but Alarian on the side

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Speaker 1: is a songwriter. Here's Allarian off of one of his

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Speaker 1: key songs for Hamilton a number of years ago, and

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Speaker 1: the lyrics of this are just important and go really

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Speaker 1: right too, the idea of what the Fed will do.

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Speaker 1: Talk less, what smile more. Don't let them know what

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Speaker 1: you're against or what you're for. You can't be serious.

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Speaker 1: You want to get ahead. Fools who run their mouths

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Speaker 1: off wind up dead. You wrote about this, I didn't

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Speaker 1: quite write about that whole thing, but let me let me.

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Speaker 1: I just want to join you, because Mike, you are amazing.

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Speaker 1: I always listen to you. I end up having because

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Speaker 1: of you many more insights than I would otherwise. And

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Speaker 1: the way you interview federal officials and your questions at

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Speaker 1: the FEMC press conference or just terrific. So thank you.

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Speaker 1: Working too much? Oh absolutely, that're talking too much. I

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Speaker 1: think just talk to former federal officials see how they

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Speaker 1: feel about the amount of the follow under that that

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Speaker 1: they would give you is would you rather we go

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Speaker 1: back to the days when nobody spoke? And but that's

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Speaker 1: a false choice. Talk less doesn't mean don't talk. Well,

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Speaker 1: as as as a president of a college, when you

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Speaker 1: help a faculty meeting, can you tell members of the

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Speaker 1: faculty to shut up and not speak? That's kind of

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Speaker 1: the problem. They've got nineteen people eighteen at the moment

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Speaker 1: on the committee and they're all gonna want their chance

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Speaker 1: to say what they think. If knowing what we know today,

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Speaker 1: would you keep the dots? No? Well, you know, I

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Speaker 1: was just asked that by one of the people I interviewed,

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Speaker 1: and I said no, not because the dots couldn't be helpful,

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Speaker 1: but because they're not. Wall Street does not read them

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Speaker 1: as nineteen different dots based on the forecasts that those

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Speaker 1: people make. They read it is this is our this

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Speaker 1: is our plan. Okay, So Judge Keene, I rest my case. John.

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Speaker 1: Does the Bank of England need dots? Does the Bank

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Speaker 1: of England talk so much? Does the Bank of England

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Speaker 1: talked to Michael McKee like this and half my camera,

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Speaker 1: just my single, just for a moment, Mike McKay, you're

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Speaker 1: a masic. That's just my turn it's my turn, Mama.

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Speaker 1: Do you think the Bank of England dies this better

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Speaker 1: than the federal seff? Don't you just the communication? Why

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Speaker 1: what do they do differently? I think they are less political,

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Speaker 1: they're honest. They say things that may be unpleasant but

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Speaker 1: need to be said. You know, your governor came out

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Speaker 1: and said inflation will go up to thirteen percent if

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Speaker 1: we're not careful. He came out and warned against a

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Speaker 1: wage price spiral. The inflation report was the first to

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Speaker 1: acknowledge that they had made a mistake on transitory They

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Speaker 1: hiked first. I mean, if you look at what they do,

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Speaker 1: and then they publish fan charts and they're honest about

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Speaker 1: the answer. So does publish fan charts. No one looks

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Speaker 1: at them exactly because if you put something else out there,

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Speaker 1: they will look at that. So I do think that

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Speaker 1: there's a lot to learn from best practice central banking

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Speaker 1: around the world, and that we have to have an

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Speaker 1: open mind and we must not get stuck in this

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Speaker 1: lack of cognitive diversity, because it ends up hurting the

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Speaker 1: American people. It really does. If I could give you

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Speaker 1: one thing right now, would you take the CPR report

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Speaker 1: next week or the Bank arnings. What would you like

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Speaker 1: to number up front? If I'm worried about the economy,

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Speaker 1: I would take the bank earnings, but more details about deposits.

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Speaker 1: I think people don't understand what happens to a banking

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Speaker 1: system when money flows out, not just at the large banks,

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Speaker 1: but due to money market sector. It is significantly different

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Speaker 1: in terms of the propensity to lend and who gets hurt.

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Speaker 1: Small and medium term industries and they are major drop creators.

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Speaker 1: Would you like to stay for next hour? I mean

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Speaker 1: we can do this from those sixty minutes if you want.

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Speaker 1: All right, I think I managed the hour. Randa Krasner

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Speaker 1: where this as well, the former governor of the Federal Reserve.

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Speaker 1: Of course, the universe of Chicago Boost School, Professor Krauser.

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Speaker 1: When I look at this data and what doctor Larion

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Speaker 1: says about clearly optimistic data, I want you to speak

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Speaker 1: to the optimistic market economists that say there's more going

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Speaker 1: on than traditional economic analysis, that this is an America resilient.

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Speaker 1: How do you see that it boosts School. Oh, this

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Speaker 1: is something we've talked about before, and I've called this

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Speaker 1: so called immaculate disinflation that somehow because inflation is gradually

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Speaker 1: coming down that we can do this without the labor

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Speaker 1: market cracking, without really feeling much pain. I think that's

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Speaker 1: a little bit too positive. I think people would be

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Speaker 1: a little bit concerned to say, oh, well, we'll just

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Speaker 1: be able to make it all work work very easily.

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Speaker 1: One thing that was at least heartening in the in

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Speaker 1: the report is that the changes in wages seem to

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Speaker 1: be be roughly where the well exactly on where the

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Speaker 1: forecast was. Um. So that's down a bit from where

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Speaker 1: things had been. So we're seeing still recently robust labor market,

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Speaker 1: but not quite as much wage pressure. I very much

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Speaker 1: agree with with Muhammad. I think the FED has been well.

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Speaker 1: I would say the Fed has been very clear and

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Speaker 1: that makes it very easy to to say that unless

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Speaker 1: something wild happens in the next next few weeks, they're

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Speaker 1: going to go twenty five basis points and then it's

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Speaker 1: likely that they're they made pause. Obviously that'll relate to

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Speaker 1: how the the inflation report comes out, but they're getting

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Speaker 1: into the fives, and that's something that you know, we've

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Speaker 1: talked about for many months that I think that's where

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Speaker 1: the FED was going. I think they've made it fairly

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Speaker 1: clear that that's that's where they were going, and they're

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Speaker 1: probably gonna pause five and five and a half Governor Krasner,

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Speaker 1: I look at the one million jobs formed off revisions

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Speaker 1: of the last ninety days. The three months moving average

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Speaker 1: is three hundred and fifty five thousand. That is a

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Speaker 1: booming job economy under any theory. How distant is Jerome

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Speaker 1: Powell from his higher unemployment that he desires. Yeah, so,

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Speaker 1: as I said, you know, the FS, the Fed's not

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Speaker 1: going to quit until the labor market quits. And the

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Speaker 1: labor market has not yet quit, because I think the

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Speaker 1: view is still it's going to be very, very difficult

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Speaker 1: to bring inflation down in a consistent and permanent way

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Speaker 1: until you see some more weakness in the more weakness

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Speaker 1: in the job market. Fortunately, we don't see wages wage

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Speaker 1: growth accelerating, but it's not come down nearly as much

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Speaker 1: as as just extraordinary. I mean, are we back to

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Speaker 1: a bullard seven percent in the last four minutes. I'm

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Speaker 1: looking at three hundred and fifty five thousand jobs per month. Well,

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Speaker 1: here's the interesting thing that's happened, that happened in the

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Speaker 1: last month. When you look at that household survey the

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Speaker 1: labor force grew by four hundred and eighty thousand, which

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Speaker 1: the FETE has been expecting more people come into the

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Speaker 1: labor force and maybe that's bringing down the jolts jobs numbers.

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Speaker 1: And of those coming into the labor force, more people

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Speaker 1: got jobs five hundred and seventy seven thousand, while unemployment

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Speaker 1: fell by ninety seven thousand. There was a big dichotomy

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Speaker 1: between the establishment survey and the household survey for a

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Speaker 1: couple of months. It looks like household is now catching

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Speaker 1: up to thirty six. It's the number we haven't had

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Speaker 1: to downside the price on a piebrow support in twelve months.

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Speaker 1: Ronnie Crust and thank you at the University of Chicago

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Speaker 1: booth scold a business. Tiffany Wilding now with Pimco, thrilled

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Speaker 1: that she could join us this morning. Tiffany, what was

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Speaker 1: the distinctive feature for you of this job's report? Well,

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Speaker 1: I mean, I think, you know, obviously, the payroll number

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Speaker 1: on the surface was very strong, and as you mentioned,

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Speaker 1: the three month moving average is well above you know,

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Speaker 1: kind of what we need to sustain the level of

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Speaker 1: the unemployment rate. But but if you look at the

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Speaker 1: wage numbers, actually thought That was kind of interesting because

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Speaker 1: on a three month over three month basis, average hourly

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Speaker 1: earning is decelerating. We were at six and now we're

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Speaker 1: at three. That's much closer to the Fed's targets. You know,

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Speaker 1: I would say, actually, overall, you know, this payroll report,

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Speaker 1: even though we're talking about recession and things like that,

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Speaker 1: you know, at least this payroll report was very consistent

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Speaker 1: with a soft landing view that the FED has. Man

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Speaker 1: that's the soft landing view that they have of means,

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Speaker 1: I guess there's no fear of a twenty five deep lift.

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Speaker 1: If they lift twenty five more basis points, who is damaged? Well?

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Speaker 1: You know, I mean from an economist perspective, twenty five

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Speaker 1: basis points isn't really a lot, right, It's really all

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Speaker 1: about you know, the five percentage points that have increased,

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Speaker 1: you know, over the course of the last year. That

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Speaker 1: really matters, you know, and ultimately, the you know, we've

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Speaker 1: talked about a lot about long and variable lags. You know,

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Speaker 1: that in our view is impacting the economy. And I

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Speaker 1: think that the banking stress that you're seeing or that

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Speaker 1: we have seen, is kind of symptomatic of those long

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Speaker 1: and variable lags and the fact that monetary policy conditions

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Speaker 1: are tight. You know, so I I you know, I do.

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Speaker 1: I will say that as everyone knows, the labor market

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Speaker 1: does tend to lag. You do see growth decelerating first,

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Speaker 1: you know, and we think that that you know is

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Speaker 1: happening and will continue to happen, and then eventually labor

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Speaker 1: markets will also decelerate more as well. Tiffany, it's a

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Speaker 1: point on the Canada where you'd be comfortable saying that's

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Speaker 1: about the time I think we should realize recognize just

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Speaker 1: how much credits tightening we dispect off the bank of

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Speaker 1: the banking stress of the last month. When are we

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Speaker 1: going to find that out? Yeah? I mean so, I

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Speaker 1: mean we are starting to see it some of the

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Speaker 1: higher frequency data. You know that lending growth is slowing

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Speaker 1: and some of the regionals obviously the deposits are moving

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Speaker 1: out of some of the mid size and smaller banks,

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Speaker 1: and you know, I think overall the caustic capital for

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Speaker 1: those mid size and smaller banks, as for everyone else,

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Speaker 1: is going up, and so that's just going to make

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Speaker 1: loans less attractive for them to make. But overall, I

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Speaker 1: would just take a step back. We've done an analysis

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Speaker 1: just looking over fourteen developed markets over the past seventy

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Speaker 1: years around tightening cycles, and what that suggests is that

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Speaker 1: after a central bank starts hiking interest rates around four

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Speaker 1: to eight quarters after, you tend to see a more

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Speaker 1: material deceleration in the output gap and in growth. So

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Speaker 1: that's kind of lining up with what we're seeing, you know,

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Speaker 1: it's maybe suggestive that in the second half we actually

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Speaker 1: could see some more deterioration. Tiffany, this was wonderful to

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Speaker 1: get your few Tiffany Wilding Pimcock in on a holiday.

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Speaker 1: We appreciate that, Tiffany, thank you very much. And now

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Speaker 1: a conversation as we do with someone who works three

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Speaker 1: hundred and sixty five days of the year. She is

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Speaker 1: the US Commerce Secretary, but far more the former governor

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Speaker 1: of Rhode Island. And what is so important within the

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Speaker 1: stereotype of our politicians removed from the labor economy, that

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Speaker 1: is not Gina Ramando, the Commerce Secretary, joins us now

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Speaker 1: with the experience of the collapse of the Bulova watch

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Speaker 1: company in Rhode Island. Oh, Gina, I lived it with you.

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Speaker 1: You lived it in real time with your father. There's

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Speaker 1: an awful lot of America feeling they're living the Bulova

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Speaker 1: watch experience right now? How does the administration speak to

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Speaker 1: those that are not prospering? Good morning, good to see well.

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Speaker 1: First of all, the illustration is speaking directly to those

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Speaker 1: people because the President is obsessed with bringing more manufacturing

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Speaker 1: back to America. In fact, I was with the President

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Speaker 1: last week in Hickory, North Carolina, a town just like

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Speaker 1: what we're talking about, and I was there because of

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Speaker 1: expansions of two American companies making fiber optic cable, because

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Speaker 1: of our initiatives to provide every American broadband. So you know,

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Speaker 1: the President's calling on manufacturers to make more in America.

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Speaker 1: It is working, and it's reflected in these jobs numbers.

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Speaker 1: I mean, this is an excellent jobs report. You're seeing

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Speaker 1: record low black unemployment, You're seeing record low unemployment among

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Speaker 1: people who have been left behind. And the best news

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Speaker 1: for me is higher percentage of people working in the

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Speaker 1: workforce anytime in decades. So we're going to Middle America.

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Speaker 1: We're going to folks like my dad who were left

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Speaker 1: behind in the collapse of manufacturing, and we're getting them

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Speaker 1: back to work. That's the message to Middle America. Secondly,

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Speaker 1: Romando what's the message to the Europeans as you do

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Speaker 1: this work with us? You know, I'm headed to Europe

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Speaker 1: at the end of next month. We need to work together,

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Speaker 1: and you know, I think whether it's the IRA or

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Speaker 1: the Chips initiative, there's opportunities for European companies and opportunities

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Speaker 1: for us to work together to meet the moment with

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Speaker 1: climate change and our global competition with China. Perhaps I

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Speaker 1: should have been more precise. European companies will invest in

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Speaker 1: the United States. What's the message for European governments who

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Speaker 1: perhaps unhappy about what's happening at the moment, It's the

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Speaker 1: same message. You know. I understand that there was some

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Speaker 1: initial concern about the IRA in particular, but I'll tell

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Speaker 1: you we are in constant contact with our European colleagues,

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Speaker 1: including me. I've met with numbers of them and from

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Speaker 1: Germany from the EU in the past couple of months.

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Speaker 1: I think they're now understanding that there are opportunities for

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Speaker 1: them and by the way, we all need to do

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Speaker 1: more to come back climate change. So initial hurt feelings maybe,

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Speaker 1: but there's a lot of good work to do together.

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Speaker 1: Let's talk about's handy with supply chains. I know this

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Speaker 1: is very important to you. Adam Poston of the Piece

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Speaker 1: and Institute said, the idea that making everything domestically built

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Speaker 1: resiliency is quote the fallacy of self sufficiency and has

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Speaker 1: been disproven repeatedly. How would you respond to that? He's right?

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Speaker 1: I mean, nobody thinks we should be making everything that

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Speaker 1: we need in America. Nobody's saying we should be self sufficient.

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Speaker 1: It's a global economy. We want to continue to trade.

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Speaker 1: But in the case of semiconductors, for example, which are

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Speaker 1: essential to our national security, the fact that we buy

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Speaker 1: ninety plus percent of our leading edge chips from Taiwan

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Speaker 1: is also unsustainable and quite frankly, almost dangerous. So no

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Speaker 1: one would say we need to make enough chips in

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Speaker 1: America for all that we consume. That would be silly,

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Speaker 1: but we do need to have more resiliency, Madame Secretary,

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Speaker 1: I spoke to the managing director of the IMF yesterday

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Speaker 1: and it could have easily been one hundred and ten

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Speaker 1: percent conversation on China. You are gifted and that you

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Speaker 1: have Elizabeth Economy advising you, arguably our best young China

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Speaker 1: expert in America. What does doctor Economy advising you on

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Speaker 1: about improved China US relationships. Well, I am smiling because

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Speaker 1: doctor Economy is about to get on a plane and

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Speaker 1: head to China. And you know, what we are doing

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Speaker 1: is pursuing the policy of protecting and promoting. First and foremost,

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Speaker 1: we have to protect the United States of America and

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Speaker 1: our national security, and we're doing that with Gusto, with

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Speaker 1: our export controls and guarding our tech leading edge technology.

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Speaker 1: Having said that, where it makes sense, we need to promote,

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Speaker 1: We need to export, We need to help American businesses

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Speaker 1: and make sure that China provides for a level playing field.

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Speaker 1: So that's the administration strategy. You are correct that I

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Speaker 1: am extremely lucky to have Liz. She's extraordinary and she's

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Speaker 1: here in the Commerce Department. There is no level playing field.

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Speaker 1: There is a lack of reciprocity when it comes to

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Speaker 1: things like social media in tech, it's likely. Do you

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Speaker 1: think then that we need to stop banning more things

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Speaker 1: here in the United States? There is a law called

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Speaker 1: the Restrict Act weaving its way through Congress. The chief

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Speaker 1: architect is Senator Mark Warner or Virginia, which I think

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Speaker 1: is excellent and is very sensible, which is to say,

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Speaker 1: I do not think we should get into a witch

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Speaker 1: hunt sort of environment where we go after individual companies

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Speaker 1: by name, one at a time. I do think which

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Speaker 1: is what this law provides is more tools to the

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Speaker 1: Commerce Department for constant surveillance, ability to investigate and then

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Speaker 1: perhaps regulate company. This is a conversation We're going to

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Speaker 1: continue to have amount of secretary. This was fantastic. Thank you.

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Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and

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