WEBVTT - Surveillance: US Jobs Report with Walsh 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.200 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring 0:00:13.119 --> 0:00:17.119 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:23.320 international relations. Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.240 dot Com and of course on the Bloomberg Terminal. Now 0:00:29.600 --> 0:00:32.120 with the Secretary of Labor here on a job stay 0:00:32.159 --> 0:00:35.080 in the shock of good employment are John Farrell bun 0:00:35.159 --> 0:00:37.279 Jonathan Farrell. I'm pleased to say that joining us now 0:00:37.360 --> 0:00:40.120 from Washington is the US Labor Secretary Mary World Secondary 0:00:40.120 --> 0:00:43.720 worldsh fantasticy. Catch up with you, sir. Another strong jobs report. 0:00:43.920 --> 0:00:46.320 As you know, this has been a very very strong 0:00:46.400 --> 0:00:49.199 labor market in America and labor is meant to have 0:00:49.320 --> 0:00:51.440 the leverage in this world. And secondly, Welsh, we've got 0:00:51.440 --> 0:00:54.480 to go to the union question. Should unions have the 0:00:54.600 --> 0:00:58.360 right to strike? That's all, you have the right to strike. 0:00:58.400 --> 0:01:00.639 I think that unions have the right to strike UH 0:01:00.640 --> 0:01:04.039 in almost every collector bagging agreement. UH, in this particular caation. 0:01:04.120 --> 0:01:05.880 Next question will probably about the rail so I want 0:01:05.880 --> 0:01:09.039 to anticipate it. UH. The National Railway Act has a 0:01:09.080 --> 0:01:11.760 provision in it that allows the president to get involved 0:01:11.760 --> 0:01:14.440 in the negotiation when asked and the unions asked him 0:01:14.480 --> 0:01:16.520 to get involved in this, he put together a Presidential 0:01:16.520 --> 0:01:19.640 Emergency Board. They came back with some recommendations. I had 0:01:19.680 --> 0:01:22.319 that twenty hour negotiation of my office. We added some 0:01:22.319 --> 0:01:24.880 more benefits to the contract. It went in front of 0:01:24.880 --> 0:01:27.200 the members. Uh, state of the union's voted for it. 0:01:27.319 --> 0:01:29.840 For the unions vote against it. I tried to get 0:01:29.840 --> 0:01:32.920 both sides to stay at the table and negotiate over 0:01:33.040 --> 0:01:36.000 sick time, and there's some work condition rules as well. Uh. 0:01:36.000 --> 0:01:37.600 They weren't able to get to an agreement. And the 0:01:37.640 --> 0:01:40.520 next step in the Railway Act is is Congress to 0:01:40.560 --> 0:01:42.360 take action, and that's what they did yesterday. Well in 0:01:42.400 --> 0:01:44.520 place you anticipate today because you said, well, at once 0:01:44.560 --> 0:01:45.880 for us, on the one hand, you think they should 0:01:45.920 --> 0:01:47.720 have the right to strike, and on the other hand, 0:01:48.160 --> 0:01:49.800 you take away the right to strike. Can you make 0:01:49.840 --> 0:01:52.280 sense of that for us? Yeah? Well, I mean it's 0:01:52.360 --> 0:01:54.440 it's the way that the law is, the Railway Act is. 0:01:54.600 --> 0:01:56.400 And you know, when I look at this contract, we 0:01:56.440 --> 0:01:57.920 spent a lot of time. I spent a lot of 0:01:57.920 --> 0:02:00.160 time myself. But the unions in particular, it's been a 0:02:00.200 --> 0:02:02.360 lot of time at the negotiating table and and and 0:02:02.400 --> 0:02:04.880 there's some very good provisions in the contract. It wasn't 0:02:04.880 --> 0:02:10.280 like it was a bad contract. Increase split on healthcare, 0:02:10.320 --> 0:02:12.959 which they preserved. They were able to get some work 0:02:13.040 --> 0:02:16.200 rules changes, they were able to get three unpaid days off. 0:02:16.680 --> 0:02:19.880 The issue of sick time needs to be content. The 0:02:19.919 --> 0:02:22.000 companies need to sit down with the unions now and 0:02:22.040 --> 0:02:25.080 have a serious conversation about two issues. One is sick days, 0:02:25.080 --> 0:02:28.160 paid sick days, and the second issue is manpower and 0:02:28.320 --> 0:02:30.480 and power on on the work on on the rails. 0:02:30.480 --> 0:02:33.440 They were down about over the last several years. And 0:02:33.520 --> 0:02:35.600 that's a big issue when it comes to the safety 0:02:35.600 --> 0:02:37.760 and health of the workers on the job. So I'm 0:02:37.800 --> 0:02:39.920 going to encourage both sides now to to get right 0:02:39.919 --> 0:02:43.160 back at it uh and and have those conversations now 0:02:43.200 --> 0:02:45.680 and and move forward in a positive ways. Wolves there 0:02:45.720 --> 0:02:48.720 is a key distinction, an important distinction to nightcare, and 0:02:48.720 --> 0:02:51.519 it's the way the law can work. It's not necessarily 0:02:51.520 --> 0:02:54.680 the way the law has to work. You've chosen to 0:02:54.800 --> 0:02:58.280 make this decision. Happened to you, this was a choice. Well, 0:02:58.320 --> 0:02:59.799 I know, I don't necessarily. I think there was a 0:02:59.840 --> 0:03:02.000 lot the factors there too. You're talking about the economy 0:03:02.240 --> 0:03:05.280 and you're talking about supply chain, and we've had challenges 0:03:05.280 --> 0:03:08.800 in our country with with shortage of baby formula, formula. 0:03:08.840 --> 0:03:11.240 We've gone through a pandemic where we had shortage supplies 0:03:11.280 --> 0:03:13.400 coming in. And what this would have done to the 0:03:13.440 --> 0:03:16.359 American people, Uh, never mind the American economy. It would 0:03:16.360 --> 0:03:18.480 have crippled a lot of people because we wouldn't have food. 0:03:18.600 --> 0:03:21.360 It would have shortened food on the shelves. UH, supplies 0:03:21.400 --> 0:03:23.720 coming in. Uh. This is also as much of making 0:03:23.760 --> 0:03:26.760 sure that our economy and the American people move forward 0:03:26.960 --> 0:03:30.079 than anything else too. So again, I'm very sympathetic to 0:03:30.080 --> 0:03:32.160 to the to the workers out there, and that's why 0:03:32.200 --> 0:03:34.760 the President, when he, at their request, put the Presidential 0:03:34.760 --> 0:03:38.160 Emergency Board together, came back with a very good recommendations 0:03:38.160 --> 0:03:41.600 on behalf not everything. But in negotiations, I'm negotiated contracts 0:03:41.640 --> 0:03:44.840 where I've gotten good, good contracts. I've negotiated contracts where 0:03:44.840 --> 0:03:47.640 i haven't gotten everything I've wanted either height, sickly, it's 0:03:47.680 --> 0:03:50.640 something you have, is something that I have? How can 0:03:50.720 --> 0:03:54.920 those rail work way work has ever secure the benefits 0:03:54.920 --> 0:03:58.880 that you claim to support without the credible threat to strike. 0:04:00.080 --> 0:04:02.720 I hope you have the companies on this show and 0:04:02.760 --> 0:04:05.080 ask them that same question and not ask me today 0:04:05.360 --> 0:04:07.560 after the Congress took actually yesday, because I think that's 0:04:07.560 --> 0:04:09.720 a very important question. You need to ask the companies 0:04:10.160 --> 0:04:13.640 why why that's not offered to their employees across the board. 0:04:13.680 --> 0:04:16.400 But in saying that, I intend on sitting down with 0:04:16.440 --> 0:04:18.719 the companies and talking to them about a couple of 0:04:18.760 --> 0:04:21.400 things that during the negotiations that that I heard from 0:04:21.480 --> 0:04:23.560 the unions about the concerns that they had about their 0:04:23.560 --> 0:04:26.000 workers have uh, And I intend on bringing that up 0:04:26.000 --> 0:04:28.480 and talking to them about it. And in the next contract, 0:04:28.839 --> 0:04:32.920 this contract expires, so we've already they're already working three 0:04:32.960 --> 0:04:35.040 years without a contract. So as they head into the 0:04:35.080 --> 0:04:37.720 next negotiation, this should be the top priority. And you 0:04:37.760 --> 0:04:39.920 don't have the way for a negotiation. The companies can 0:04:39.920 --> 0:04:42.160 offer up paid sick time anytime they want. You've just 0:04:42.200 --> 0:04:44.560 made it even easier in the next negotiations stuff, haven't you, 0:04:44.720 --> 0:04:46.640 Because we know the endgame here if you're on the 0:04:46.640 --> 0:04:49.080 other side of that deal that negotiations secretly wolves one 0:04:49.080 --> 0:04:51.480 Earth with a company sign up to any of that stuff. Well, 0:04:51.520 --> 0:04:54.040 we know what's going to happen here. Ultimately they can 0:04:54.080 --> 0:04:56.120 just say no, and then it comes to the president. 0:04:56.200 --> 0:04:59.760 The President says, okay, we'll impost this deal on you. Now, 0:04:59.800 --> 0:05:01.800 you how negotiations work. That's not how it works. I 0:05:01.800 --> 0:05:03.960 mean they just played out so in the last couple 0:05:04.000 --> 0:05:05.320 of months. What do you mean, That's not how it works. 0:05:05.320 --> 0:05:07.400 That's how it's played out. That's that's how it works. 0:05:07.400 --> 0:05:10.840 That the Congress has interacted over eighteen times where the 0:05:10.920 --> 0:05:16.200 PEB recommendation recommended the PEB, Congress enforced a PB that 0:05:16.240 --> 0:05:19.080 was not pro worker at all. It didn't have wage increases, 0:05:19.120 --> 0:05:23.400 didn't have preservation of healthcare premiums, it didn't have work conditions, 0:05:23.400 --> 0:05:25.719 that didn't have unpaid days off, it didn't have any 0:05:25.720 --> 0:05:28.320 of that. And Congress came in and again, this stuff 0:05:28.360 --> 0:05:30.479 hasn't happened at the bargaining table. And that's why the 0:05:30.480 --> 0:05:32.600 companies need to come to the bargaining table out earlier. 0:05:32.640 --> 0:05:34.520 In this particular case, they didn't come to the table 0:05:34.600 --> 0:05:37.719 till till I think eighteen months after the contract expired, 0:05:37.800 --> 0:05:41.200 and they would have had now that they're gonna have to. 0:05:41.240 --> 0:05:43.280 I think that they they You know, a lot of 0:05:43.320 --> 0:05:45.640 the CEOs have made comments already about the need to 0:05:46.200 --> 0:05:48.920 better relations with their workers in the in the unions 0:05:48.920 --> 0:05:50.560 on their jobs. It's likely, well, she wan, I can 0:05:50.600 --> 0:05:52.400 go back and forth on this a lot. The President 0:05:52.440 --> 0:05:54.000 of being not his States, intended to be quite what 0:05:54.040 --> 0:05:56.520 he said his words, the most pro union president leading 0:05:56.560 --> 0:06:00.240 to the most pro union administration in American history. Right. 0:06:00.720 --> 0:06:02.359 The fact of the matter is what it came down to. 0:06:02.440 --> 0:06:05.000 It your forced union members to take a contract they 0:06:05.040 --> 0:06:07.920 didn't vote for. How do you explain this in any 0:06:07.960 --> 0:06:11.560 other wide, shapeful form. I just understand it. The President 0:06:11.560 --> 0:06:13.719 of the United States America is very pro union, There's 0:06:13.720 --> 0:06:15.960 no question about it. He talks about it very publicly, 0:06:15.960 --> 0:06:18.200 and he's very proud of that. He's also the president 0:06:18.279 --> 0:06:19.839 United States of America. And when you look at what 0:06:19.960 --> 0:06:23.600 with the devastation a national rail strike would cause America, uh, 0:06:23.640 --> 0:06:26.719 that far outweighs that the cost of moving forward. The 0:06:26.720 --> 0:06:29.000 President put together a p EB. There's a lot of 0:06:29.000 --> 0:06:32.240 benefits in that PEB. Good good provisions in that PEB 0:06:32.520 --> 0:06:34.839 that are going to benefit these union workers out there. 0:06:34.920 --> 0:06:37.440 And there's no question about that. I'm a union worker, 0:06:37.600 --> 0:06:40.160 union member myself. I understand that, and at the end 0:06:40.160 --> 0:06:42.680 of the day, the President got a very good deal 0:06:42.800 --> 0:06:45.279 on the table for the workers. However, the workers wanted 0:06:45.320 --> 0:06:47.560 one more in that deal, and I could understand and 0:06:47.720 --> 0:06:49.920 sympathize with the workers. But what we'll do is we're 0:06:49.920 --> 0:06:51.760 going to continue to work now as an administration to 0:06:51.800 --> 0:06:54.880 make sure that we helped them achieve their ultimate goal. 0:06:55.160 --> 0:06:57.560 What message do you think this sends to the ongoing 0:06:57.640 --> 0:07:02.320 light the contract talks with West coastalk Workers Secondary Welsh, 0:07:02.560 --> 0:07:05.360 I mean the West Coast Dark Workers. They're in current negotiation, 0:07:05.440 --> 0:07:08.920 and that they have their own bargaining issues that they're 0:07:08.920 --> 0:07:11.320 working on and then moving forward on that issue, having 0:07:11.360 --> 0:07:14.800 those conversations, those dialogues, the differences the companies in the 0:07:14.880 --> 0:07:17.800 Dark Workers came to the table the beginning of the negotiation, 0:07:18.000 --> 0:07:20.920 not halfway through it. You've been quite constructive on how 0:07:20.960 --> 0:07:23.480 these talks will go on the West Coast. What are 0:07:23.480 --> 0:07:25.760 the lessons to learn Secondary World from the last couple 0:07:25.760 --> 0:07:28.600 of months with the railroad workers, where you were also 0:07:28.680 --> 0:07:31.400 equally constructive on how this would turn out. What are 0:07:31.440 --> 0:07:33.880 the lessons learned for you personally over the last several months. 0:07:34.520 --> 0:07:38.280 Unfortunately for the rail unions. I didn't really get involved 0:07:38.320 --> 0:07:43.960 until pretty much they were through negotiations, meaning they were 0:07:43.960 --> 0:07:46.160 not able to get deals done. I got involved a 0:07:46.160 --> 0:07:48.720 little bit there. Then the unions came and asked asked 0:07:48.720 --> 0:07:50.400 the President to put the PTB on the board, and 0:07:50.400 --> 0:07:52.600 they were able to negotiate stuff and on. On the 0:07:52.720 --> 0:07:56.040 port negotiation, I've been in it from the beginning, meaning 0:07:56.040 --> 0:07:58.880 I've had conversations with the companies. I'm in regular contact 0:07:58.880 --> 0:08:01.480 with the companies on the on the West Coast. I'm 0:08:01.520 --> 0:08:03.800 in regular contact with the unions on the West Coast, 0:08:03.960 --> 0:08:05.880 just to make sure that they're moving forward. And I 0:08:05.920 --> 0:08:08.240 think that the relationships are a little different than than 0:08:08.320 --> 0:08:12.040 between the rail the rail construction, the rail companies and 0:08:12.040 --> 0:08:14.480 the rail workers unions. Secondly, Welsh, and now you have 0:08:14.480 --> 0:08:15.960 to go out, said, because there's a bill to sign 0:08:15.960 --> 0:08:18.520 with the President of the United States, attend fifteen bastant 0:08:18.560 --> 0:08:20.400 time you've got to run. We always appreciate your time. 0:08:20.400 --> 0:08:23.640 Thanks for the AMUS. This Friday morning, Labor Secondary Mary Welsh, 0:08:23.920 --> 0:08:28.200 following what was a tremendous jobs report, John Ferrell with 0:08:28.280 --> 0:08:43.160 the Secretary of Labor Randa Crossing with his professor Crosser 0:08:43.200 --> 0:08:46.480 in the booth School Chicago as well. Ready you and 0:08:46.480 --> 0:08:49.640 I can talk about the algebra standard there forget about it. 0:08:49.720 --> 0:08:52.559 Do we have any understanding of the veracity of our 0:08:52.600 --> 0:08:57.040 statistics given the new America, the new technology out there. 0:08:57.040 --> 0:08:59.240 Are we making this up as we go or can 0:08:59.280 --> 0:09:03.720 we really get estimate forward? Was some good faith? I 0:09:03.720 --> 0:09:08.640 think we have reasonable, um uh reasonable insight into that. 0:09:08.840 --> 0:09:10.200 But of course, as you said, there are a lot 0:09:10.200 --> 0:09:13.640 of changes things are now. We're bouncing out of a 0:09:13.720 --> 0:09:18.200 very unusual period with COVID shutdowns. Of course there's uncertainty 0:09:18.320 --> 0:09:20.480 that that's there. But I think as we were talking 0:09:20.480 --> 0:09:23.160 about before, and as I had said before, the FED 0:09:23.280 --> 0:09:25.520 is going to keep at it until the labor market cracks. 0:09:25.600 --> 0:09:28.440 The labor market has not cracked. Wages are still going 0:09:28.520 --> 0:09:32.240 up at a very rapid clip, and the FED can't 0:09:32.320 --> 0:09:36.480 stop until the labor market starts to slow down because otherwise, um, 0:09:36.679 --> 0:09:39.599 you're gonna see wage inflation continues strong, You're going to 0:09:39.720 --> 0:09:43.760 see services um services prices continue to go up. And 0:09:43.800 --> 0:09:45.480 so they're going to keep at it. And as I said, 0:09:45.480 --> 0:09:47.199 I think they're gonna keep at it until they get 0:09:47.200 --> 0:09:50.320 at least into the mid mid fives in UM in 0:09:50.360 --> 0:09:54.320 the next year, and Jay is hoping and he talked 0:09:54.320 --> 0:09:58.440 about this what I call it an immaculate disinflation, that is, 0:09:58.559 --> 0:10:01.959 could we bring the inflation can rate down without having 0:10:01.960 --> 0:10:05.120 a significant rise the unemployment rate. The only way they 0:10:05.120 --> 0:10:07.520 can do that is if wages start to come down, 0:10:07.640 --> 0:10:10.040 if more people come into the labor market, if demand 0:10:10.040 --> 0:10:12.240 starts to come down. We haven't seen that yet, so 0:10:12.320 --> 0:10:15.240 it doesn't look like an immaculate disinflation. Interests are gonna 0:10:15.240 --> 0:10:17.439 have to continue to rise. Fetch your j Powell pointing 0:10:17.520 --> 0:10:21.120 to accelerated or brought forward retirements is a big driver 0:10:21.320 --> 0:10:23.520 of why we are not seeing the participation rate go 0:10:23.559 --> 0:10:26.000 back while people are not coming back into the labor market. 0:10:26.240 --> 0:10:28.160 What did you make of his comments around that that 0:10:28.240 --> 0:10:31.480 this week. Well, I think you know that was his 0:10:31.600 --> 0:10:34.439 hope that maybe if if there's more supply coming into 0:10:34.480 --> 0:10:36.360 the labor market, that will help to take some of 0:10:36.360 --> 0:10:38.720 the heat out of out of wages. Well, we're not 0:10:38.720 --> 0:10:40.720 seeing a lot of evidence of that now, and he 0:10:40.800 --> 0:10:42.959 was sort of hinting at I was hoping for that, 0:10:43.200 --> 0:10:45.480 don't really seem to see it. So the only way 0:10:45.520 --> 0:10:47.840 that we can do this is to have slow down 0:10:47.840 --> 0:10:50.840 in demand that will slow down the demand for workers 0:10:50.880 --> 0:10:53.840 and slow down those those wage increases. He's still hoping, 0:10:54.400 --> 0:10:57.079 but we've never had an immaculate disinflation before. I don't 0:10:57.080 --> 0:11:00.080 want to say it's impossible, but but it's uh. I 0:11:00.120 --> 0:11:02.440 think it's not very likely. Randy Crossing, whether it's the 0:11:02.480 --> 0:11:04.760 course of the Boos School of Chicago and moments Jeffrey 0:11:04.800 --> 0:11:07.120 Rosenberg will join us as well from Black Rock. We 0:11:07.120 --> 0:11:09.800 welcome all of you on radio and television of the 0:11:09.840 --> 0:11:12.400 shock of this job to day futures. The negative sixty 0:11:12.400 --> 0:11:16.400 one is John Farrell mentions two year yield exploding out 0:11:16.480 --> 0:11:18.960 John and a cup of coffee, a sip of tang. 0:11:19.240 --> 0:11:22.160 We've gone from fourteen basis points out to seventeen basis 0:11:22.160 --> 0:11:25.120 points higher two year years a full faulty still bellow 0:11:25.160 --> 0:11:26.960 the highs of the week, but back to full faulty 0:11:27.000 --> 0:11:28.160 and with the old up at the front end. So 0:11:28.160 --> 0:11:30.960 how much you can imagine Equity's down features by one 0:11:30.960 --> 0:11:32.719 point five percent on the SMP and that doll a 0:11:32.760 --> 0:11:35.000 stronger by about seven tenths of one percent on the 0:11:35.200 --> 0:11:37.480 x Y. To see this, folks, we're all wired in, 0:11:37.600 --> 0:11:39.920 but none of us is wired in. Like Michael McKee 0:11:39.920 --> 0:11:42.760 he's looking there at the BLS data I'm looking over 0:11:43.000 --> 0:11:45.959 just because I got a test. I'm going like, what 0:11:46.000 --> 0:11:47.959 I'm looking at? What do you what is the single day? 0:11:47.960 --> 0:11:50.839 Do you see in the pages that you go through? Well, 0:11:50.880 --> 0:11:53.240 I'm just trying to do the math here. The interesting 0:11:53.280 --> 0:11:56.240 thing about the hiring here is you might not be 0:11:56.280 --> 0:12:00.440 surprised that there were twenty construction jobs added. Uh, We've 0:12:00.520 --> 0:12:02.640 got a lot of rebuilding to do down in Florida. 0:12:03.120 --> 0:12:07.959 But what month is it? It's November and we lost 0:12:08.160 --> 0:12:11.840 jobs in retailing. Thirty thousand jobs lost in retailing. That 0:12:11.960 --> 0:12:15.840 just seems very odd to me that we don't have 0:12:15.880 --> 0:12:20.440 as many people doing the retail work at at Hollis Amazon. 0:12:22.960 --> 0:12:25.280 It could be I can go back and look here. 0:12:25.360 --> 0:12:26.840 One of the things you want to look at is 0:12:26.880 --> 0:12:32.360 the uh UM under transportation warehousing and UH and and 0:12:32.520 --> 0:12:39.120 couriers and that couriers and warehousing. We're down uh twelve 0:12:39.840 --> 0:12:44.240 point four thousand. So at this point it's kind of 0:12:44.240 --> 0:12:46.000 hard to see. My son made a lot of highs 0:12:46.000 --> 0:12:48.480 in that world. But the last couple of years, yeah, 0:12:48.720 --> 0:12:51.240 I mean, but they don't seem to have added a 0:12:51.320 --> 0:12:53.719 lot of people. And that's kind of kind of a 0:12:53.720 --> 0:12:55.720 little strange. You have to dig into that a little 0:12:55.720 --> 0:12:57.880 bit further. We'll do that in about twenty minutes time. 0:12:58.000 --> 0:12:59.560 Becase is going to break down the jobs numbers for 0:12:59.640 --> 0:13:01.560 us as we out towards the up and about. Then 0:13:01.559 --> 0:13:03.920 we're gonna hear from this line up, fantastic lineup going 0:13:03.920 --> 0:13:06.520 into the open, Muhammad Erin of Bloomberg Opinion and a 0:13:06.520 --> 0:13:08.800 whole lot more and Rick Raider black Rock. Then we're 0:13:08.800 --> 0:13:11.280 here from Anna Stagia Amarosa of my Capital, Mike Collinto, 0:13:11.320 --> 0:13:14.760 Phim and you hear from Secondary Welsh. Tom responded, these 0:13:14.880 --> 0:13:19.120 numbers at about eastern time, maybe our most important conversation 0:13:19.240 --> 0:13:23.160 with the Secretary of Labor given the railroad, theatrics of America, 0:13:23.240 --> 0:13:28.480 harkening back to eighteen seventies seven. Thank you so much 0:13:28.600 --> 0:13:35.280 Randa Crossing for being with. We bring in really at 0:13:35.280 --> 0:13:39.439 a telling point given bond market movement. Jeffrey Rosenberg joins 0:13:39.520 --> 0:13:42.440 us now from black Rock. Jeff Rosenberg, I look at 0:13:42.440 --> 0:13:44.440 the volatility and I don't want to quite it over 0:13:44.480 --> 0:13:47.600 to the news on Bridgewater and they're challenging fourth quarter. 0:13:48.080 --> 0:13:50.679 How do you run fixed income money right now? I 0:13:50.720 --> 0:13:54.599 don't have a clue. Well, you know, one of the 0:13:54.640 --> 0:13:57.000 biggest challenges is what we're seeing in the in the 0:13:57.120 --> 0:14:02.319 reaction to this surprise the upside, and particularly as you 0:14:02.360 --> 0:14:05.160 guys have highlighted, it's the wage data that that's driving it. 0:14:05.240 --> 0:14:07.680 But what you see is stocks are down and bond 0:14:07.800 --> 0:14:11.920 yields are up, and and that's the kind of uh correlation, 0:14:12.880 --> 0:14:18.000 a positive correlation UH in in terms of both going 0:14:18.080 --> 0:14:20.040 down at the same time. That is that is so 0:14:20.240 --> 0:14:23.080 challenging for investors, and I think it's a reminder. You know, 0:14:23.160 --> 0:14:26.520 what we learned from Chair Powell in the speech earlier 0:14:26.640 --> 0:14:29.760 this week is that the most important determinant for inflation 0:14:29.880 --> 0:14:33.400 going forward is going to be the services component. And 0:14:33.520 --> 0:14:37.720 what drives that services component is wages. And so what 0:14:37.840 --> 0:14:40.600 we might be starting to to get a hint of here, 0:14:40.640 --> 0:14:43.560 and it was in a little bit of the earlier conversation. Yeah, yeah, 0:14:43.800 --> 0:14:47.720 wages are not wages. Sorry. Inflation is coming down because 0:14:47.800 --> 0:14:51.480 of all those underlying components, the supply side, the goods picture, 0:14:51.840 --> 0:14:55.200 the discussion around the lagged impact of housing. None of 0:14:55.280 --> 0:14:59.520 that matters. What matters is a wage price spiral and 0:14:59.640 --> 0:15:05.640 so upside here you bring that out today, Jeff. What 0:15:05.840 --> 0:15:09.520 matters is is this is this wage price, uh, and 0:15:09.680 --> 0:15:11.400 what we're seeing in the wages, and so I think 0:15:11.440 --> 0:15:13.680 that's the most important takeaway. And the challenge to get 0:15:13.720 --> 0:15:18.040 back to your questions is that inflation really undermines the 0:15:19.320 --> 0:15:23.080 relationship between stock bond correlation. But can't get back to 0:15:23.160 --> 0:15:26.120 that until we settle it busted. Jeff Rosenberg chops, this 0:15:26.240 --> 0:15:28.360 is what happens when you study with Meltzer and good 0:15:28.400 --> 0:15:32.400 friend at Carnegie Mellon you start talking about it. He 0:15:32.520 --> 0:15:34.400 has a point, though, Tom, let me jump in here 0:15:34.480 --> 0:15:37.120 quickly and tell you I did the calculations. Private service 0:15:37.200 --> 0:15:40.480 industry jobs. Wages were up eight tenths of a percent. 0:15:40.600 --> 0:15:43.840 Will goods producing jobs were up four tenths. So what 0:15:44.280 --> 0:15:47.880 j Pal said about service industry jobs driving wages higher 0:15:47.880 --> 0:15:52.160 because they can't find employees is definitely showing up in 0:15:52.480 --> 0:15:55.120 the wage data, it appears. Which composition really raises a 0:15:55.240 --> 0:15:57.280 question as well, And Randy Krasner, I'd love you weighing 0:15:57.320 --> 0:16:00.280 in on that. Whether there's a compositional aspect where people 0:16:00.320 --> 0:16:02.840 on the higher ends are getting hired and there's a shortage, 0:16:02.920 --> 0:16:05.640 especially with the retirees, and on the lower ends, perhaps 0:16:05.760 --> 0:16:08.360 it's a different picture. What's your sense of how much 0:16:08.440 --> 0:16:12.880 that's contributing to the unexpectedly high rise in wage inflation. 0:16:15.080 --> 0:16:18.480 Jeff Rosenberg, what's your sense of that? Excuse me, sorry, 0:16:18.600 --> 0:16:20.920 I thought Randy might have been might have been off, 0:16:20.960 --> 0:16:23.480 But I'll take that. Yeah, you always have to look 0:16:23.560 --> 0:16:28.280 at the compositional effects here, and certainly, uh, there may 0:16:28.360 --> 0:16:31.240 be some of that as as Mike highlighted with the 0:16:31.360 --> 0:16:33.760 with the retail numbers down and the warehouse numbers down 0:16:33.840 --> 0:16:35.800 and and like, some of that can be seasonals. So 0:16:35.960 --> 0:16:38.200 that's something we'll have to look in. So there is 0:16:38.280 --> 0:16:40.880 definitely when you look at the high frequency data on 0:16:40.960 --> 0:16:43.320 a month a month basis, you can get a mixed 0:16:43.360 --> 0:16:45.480 shift and that may be pushing up this number, this 0:16:45.520 --> 0:16:49.000 point by five number. Nevertheless, you know, the bigger takeaway 0:16:49.080 --> 0:16:53.040 if you abstract, if you smooth out from the monthly variations, 0:16:53.160 --> 0:16:56.000 is that the twelve month run weight a run rate 0:16:56.480 --> 0:17:00.200 of wage inflation is still above five percent. And so 0:17:00.360 --> 0:17:02.600 this is really the challenge. And so we're gonna get 0:17:02.640 --> 0:17:05.680 away at some point from this debate about fifty or 0:17:05.720 --> 0:17:08.320 seventy five or really the pace and the issue is, 0:17:09.080 --> 0:17:13.199 is the level of rates restrictive enough that's really going 0:17:13.240 --> 0:17:15.359 to be the debate because right now in the bond curve, 0:17:15.960 --> 0:17:18.359 the market is expecting rates to be cut by the 0:17:18.440 --> 0:17:21.480 second half of two thousand twenty three. So there's a 0:17:21.560 --> 0:17:25.159 real disconnect between an expectation that we can see the 0:17:25.240 --> 0:17:28.879 Fed have success on inflation so much so that they 0:17:28.920 --> 0:17:31.880 can turn and start cutting rates, versus what we're seeing 0:17:31.920 --> 0:17:34.520 in the data today, which is none of the impact. 0:17:34.600 --> 0:17:37.040 Now there's long and variable lax here, so that's gonna 0:17:37.080 --> 0:17:39.639 make it challenging. But the reality is, and that's what 0:17:39.680 --> 0:17:41.320 you're seeing in the reaction the front end of the 0:17:41.400 --> 0:17:45.800 curve is that we still have a significant inflation problem 0:17:46.000 --> 0:17:49.679 in the most important driver of inflation, which is in wages. 0:17:49.760 --> 0:17:52.359 And Jeff, I got a ways to go here and 0:17:52.400 --> 0:17:56.040 I'm gonna do this and particularly with your heritage at 0:17:56.119 --> 0:17:59.560 Tuppern and Karnie Melon. And the bottom line is we've 0:17:59.640 --> 0:18:02.680 been year before. There's a belief out there by a 0:18:02.760 --> 0:18:06.000 lot of people that are financial world and maybe even 0:18:06.080 --> 0:18:09.760 our social world is going to fall apart with higher 0:18:09.920 --> 0:18:14.840 real rates, higher nominal rates, etcetera. That we've lived this before, 0:18:15.000 --> 0:18:17.720 we've been here before. What do you presume will we 0:18:18.000 --> 0:18:24.880 will we look like financially with a five percent federate. Well, 0:18:24.920 --> 0:18:27.560 we're seeing that right now in terms of some of 0:18:27.640 --> 0:18:32.000 the implications of a withdrawal of liquidity, which you've seen 0:18:32.040 --> 0:18:35.399 in the tech sector, what you're seeing in terms of 0:18:35.600 --> 0:18:38.480 some of the early stage venture and the impacts that 0:18:38.560 --> 0:18:41.159 has had and seen from a withdrawal of liquidity, and 0:18:41.280 --> 0:18:44.480 certainly in my markets in the bond markets, the repricing 0:18:44.680 --> 0:18:48.560 from zero to a positive real interest rate or certainly 0:18:48.600 --> 0:18:52.120 a positive nominal interest rate with inflation staying sticky, it's 0:18:52.119 --> 0:18:54.240 hard to see the positive real interest rate, you know, 0:18:54.359 --> 0:18:57.520 is significant negative returns and fixed income. Now, the good 0:18:57.600 --> 0:19:00.879 news going forward is that a just and from zero 0:19:01.440 --> 0:19:04.680 to the four basis point increases that we've seen this 0:19:04.880 --> 0:19:08.359 year is a one time effect, and so the negative 0:19:08.680 --> 0:19:12.080 returns and fixed income are hard to repeat a second 0:19:12.160 --> 0:19:14.879 year going because you start with a lot a lot 0:19:15.119 --> 0:19:19.080 higher incomes. So one of the positive aspects here away 0:19:19.160 --> 0:19:22.680 from the significant challenges everywhere else in financial markets, is 0:19:22.800 --> 0:19:26.080 that cash has a yield associated with it. Whether that's 0:19:26.240 --> 0:19:29.520 a real heeld after inflation depends on the outlook for inflation, 0:19:29.760 --> 0:19:32.879 but certainly there's a much better opportunity set in cash 0:19:32.920 --> 0:19:34.600 in the front end of the yield curve and then 0:19:34.640 --> 0:19:36.320 helps to give a little bit of a place to 0:19:36.440 --> 0:19:39.080 hide while we see a lot of the implications of 0:19:39.400 --> 0:19:42.880 your question, a much higher nominal interest rate across financial 0:19:42.960 --> 0:19:46.520 markets play out as they as it continues to play out, Jeff, 0:19:46.560 --> 0:19:48.359 I'm just looking at the market movements here and just 0:19:48.440 --> 0:19:50.840 a whip saw that we've seen in the benchmark instruments 0:19:50.920 --> 0:19:53.600 like rates like two year yields up now fourteen basis points. 0:19:53.640 --> 0:19:56.840 Now suddenly people gaming back out that five peak fed 0:19:56.920 --> 0:20:00.640 funds rate. If we haven't seen a liquidity issis yet, 0:20:00.800 --> 0:20:04.199 if we haven't seen a financial system accident, what's going 0:20:04.240 --> 0:20:06.760 to trigger it? Given that we have seen such incredible 0:20:06.840 --> 0:20:10.760 volatility on the backs of some of these numbers. Yeah, 0:20:10.880 --> 0:20:15.000 you know, we we've seen sort of a rolling sequencing 0:20:15.400 --> 0:20:18.280 of kind of smaller fires. Uh. It's sort of like 0:20:18.400 --> 0:20:23.480 the analogy small fires, small fires, small forest fires prevent 0:20:23.640 --> 0:20:26.040