1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast home toom Keene. Along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee, we bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance and Apple Podcast, SoundCloud, Bloomberg 5 00:00:23,360 --> 00:00:30,320 Speaker 1: dot Com, and of course on the Bloomberg Tournament Right 6 00:00:30,360 --> 00:00:32,760 Speaker 1: audience worldwide and pleased to say on Bloomberg TV and 7 00:00:32,760 --> 00:00:35,239 Speaker 1: on Bloomberg Radio. Joining us now is the U S 8 00:00:35,240 --> 00:00:38,479 Speaker 1: Secretary of Labor Money Walsh, Secretary wild always greater cash 9 00:00:38,600 --> 00:00:41,080 Speaker 1: up with you, sir, demanding this economy. Just had this 10 00:00:41,159 --> 00:00:43,920 Speaker 1: conversation on this program through the morning on Bloomberg TV 11 00:00:44,000 --> 00:00:46,720 Speaker 1: and radio. Demand seems to be pretty good. Still, it's 12 00:00:46,760 --> 00:00:50,000 Speaker 1: labor supply that's been out back by what Secretary Walsh, 13 00:00:50,240 --> 00:00:52,640 Speaker 1: in your mind and from the view of the administration 14 00:00:54,520 --> 00:00:56,880 Speaker 1: say that one. I'm sorry I missed that question. What's 15 00:00:56,880 --> 00:00:59,639 Speaker 1: something labor supply, Secretary Walsh? What it is holding back 16 00:00:59,720 --> 00:01:02,800 Speaker 1: labor apply? Well, I think what's happening here, and I 17 00:01:03,160 --> 00:01:05,839 Speaker 1: listened to you the previous panelists, and you know, I 18 00:01:05,920 --> 00:01:08,319 Speaker 1: pretty much agree with almost everything that was said. One 19 00:01:08,319 --> 00:01:10,200 Speaker 1: of the things that we're still dealing. What's particularly in 20 00:01:10,200 --> 00:01:12,840 Speaker 1: the month of August was the delta variant. Granted, we've 21 00:01:12,880 --> 00:01:15,440 Speaker 1: seen a level leveling off of the delta variant. UH, 22 00:01:15,480 --> 00:01:17,440 Speaker 1: this in the last couple of days here, the last 23 00:01:17,480 --> 00:01:19,399 Speaker 1: couple of weeks, But in the in the beginning of 24 00:01:19,760 --> 00:01:22,279 Speaker 1: at the end of July, early August, we saw increase 25 00:01:22,280 --> 00:01:24,280 Speaker 1: in delta variant. If you look at these job numbers 26 00:01:24,440 --> 00:01:26,520 Speaker 1: and you look at just look at take the hospitality number, 27 00:01:26,520 --> 00:01:29,320 Speaker 1: in the restaurant number, we had almost zero game this 28 00:01:29,360 --> 00:01:32,360 Speaker 1: month in that area. Meanwhile, the last three job report 29 00:01:32,520 --> 00:01:34,920 Speaker 1: that was leading the way. So I think that that's 30 00:01:34,959 --> 00:01:37,200 Speaker 1: part of what's going on here, and it is a 31 00:01:37,200 --> 00:01:39,120 Speaker 1: long game. We're looking at the long game here. You know, 32 00:01:39,120 --> 00:01:41,920 Speaker 1: we've added four point five million jobs since President Biden 33 00:01:41,959 --> 00:01:44,880 Speaker 1: has taken office. UH. This job report, the one thing 34 00:01:44,920 --> 00:01:47,320 Speaker 1: that I would highlight is we had strong growth in 35 00:01:47,360 --> 00:01:49,560 Speaker 1: the private sector, and I think we've seen growth in 36 00:01:49,600 --> 00:01:52,120 Speaker 1: the public sector and previous reports so and we've seen 37 00:01:52,120 --> 00:01:55,520 Speaker 1: some growth in manufacturing and auto related uses. So again, 38 00:01:55,560 --> 00:01:58,000 Speaker 1: this is a long game. There is some other tools 39 00:01:58,000 --> 00:01:59,640 Speaker 1: that we have to use here. We do have to 40 00:02:00,000 --> 00:02:01,880 Speaker 1: it is the legislation right now that we're moving through 41 00:02:02,320 --> 00:02:04,960 Speaker 1: infrastructure bills that we need to get through. But but 42 00:02:05,040 --> 00:02:06,840 Speaker 1: this is the long game right now, coming out of 43 00:02:06,880 --> 00:02:09,480 Speaker 1: a worldwide pandemic. Well, let's talk about those bills right now. 44 00:02:09,520 --> 00:02:12,000 Speaker 1: Secondary worlds. This from Senator Mansion and the Will Street 45 00:02:12,040 --> 00:02:15,480 Speaker 1: Journal yesterday placing a strategic pause on this budgetary proposal 46 00:02:15,800 --> 00:02:18,880 Speaker 1: by significantly reducing the size of any possible reconciliation bill 47 00:02:18,919 --> 00:02:21,600 Speaker 1: to only what America can afford and needs to spend 48 00:02:22,120 --> 00:02:24,960 Speaker 1: Seconty wh what's the response of the administration to that? 49 00:02:25,040 --> 00:02:28,720 Speaker 1: Our pad from Senator Mansion, I think America needs investment. 50 00:02:28,919 --> 00:02:32,160 Speaker 1: American people need investment. American people need the investment in 51 00:02:32,240 --> 00:02:35,040 Speaker 1: job training. Uh. The American people need the investment in 52 00:02:35,040 --> 00:02:38,679 Speaker 1: the care's economy. We saw again uh in nursing, home care, 53 00:02:38,720 --> 00:02:41,079 Speaker 1: and del care loss of jobs. Again this is a 54 00:02:41,120 --> 00:02:44,760 Speaker 1: second consecutive month. We need investment in childcare, we need 55 00:02:44,840 --> 00:02:48,680 Speaker 1: investment in schools. Uh. These are good investments moving forward. 56 00:02:48,800 --> 00:02:50,960 Speaker 1: And this will just continue to move our economy forward 57 00:02:51,160 --> 00:02:53,239 Speaker 1: and continue to prepare us for the future of America. 58 00:02:53,919 --> 00:02:55,880 Speaker 1: And I would ask you know, I would hope that 59 00:02:56,360 --> 00:02:57,920 Speaker 1: we'll be able to they'll be able to work their 60 00:02:57,919 --> 00:03:00,960 Speaker 1: differences out in Congress and move these two legislation A one. 61 00:03:01,280 --> 00:03:04,280 Speaker 1: Do we need taxes on excess CEO pay to pay 62 00:03:04,320 --> 00:03:06,880 Speaker 1: for that? Yeah, that's one of the one of the 63 00:03:06,919 --> 00:03:09,320 Speaker 1: plans that the President's been talking about, a plan to 64 00:03:09,320 --> 00:03:11,600 Speaker 1: pay for this. He's made it very clear that that 65 00:03:11,680 --> 00:03:14,680 Speaker 1: anyone who earns under for over founder under founder thousand 66 00:03:14,720 --> 00:03:17,440 Speaker 1: excuse me food dollars a year will not be paying 67 00:03:17,480 --> 00:03:20,560 Speaker 1: any additional taxes. And we're looking at adjusting some some 68 00:03:20,560 --> 00:03:22,520 Speaker 1: some of the tax policy in this country and then 69 00:03:22,600 --> 00:03:25,040 Speaker 1: using money and spent money from the American Rescue plans. 70 00:03:25,040 --> 00:03:27,120 Speaker 1: So that's that's what the President's plan. As far as 71 00:03:27,160 --> 00:03:31,320 Speaker 1: paying this with something but directed specifically a corporate executive 72 00:03:31,480 --> 00:03:33,440 Speaker 1: sexty wolves, that's a story we have out at the 73 00:03:33,440 --> 00:03:37,040 Speaker 1: moment that Democrats are discussing that. Have you been discussing that. No, 74 00:03:37,120 --> 00:03:39,440 Speaker 1: I mean, that's a conversation that that's that's above what 75 00:03:39,480 --> 00:03:41,480 Speaker 1: I'm doing right now. I know that this this conversation 76 00:03:41,520 --> 00:03:44,080 Speaker 1: is happening in the halls of Congress, It's happening with 77 00:03:44,120 --> 00:03:47,120 Speaker 1: the leadership, and that that's they will ultimately make decisions 78 00:03:47,280 --> 00:03:49,360 Speaker 1: on on how to pay for the spell. Marty, have 79 00:03:49,400 --> 00:03:52,400 Speaker 1: you spoken to Senator Mansion and talked about your thoughts 80 00:03:52,480 --> 00:03:55,040 Speaker 1: on this labor market and what this economy needs. Do 81 00:03:55,120 --> 00:03:58,240 Speaker 1: you pick up all those conversations with him? Yeah, it's 82 00:03:58,280 --> 00:04:00,320 Speaker 1: actually with the senator a couple of weeks ago and 83 00:04:00,680 --> 00:04:02,560 Speaker 1: we went to a coal mine in West Virginia and 84 00:04:02,680 --> 00:04:04,200 Speaker 1: we had a great day and a great chat, and 85 00:04:04,240 --> 00:04:06,480 Speaker 1: we talked a lot about a lot. You know, in 86 00:04:06,520 --> 00:04:09,200 Speaker 1: the offously center has his ideas and and and in 87 00:04:09,320 --> 00:04:11,480 Speaker 1: recommendations and opinions, and we just need to continue to 88 00:04:11,480 --> 00:04:13,680 Speaker 1: have dialogue. I think the beauty about all this is 89 00:04:13,720 --> 00:04:16,400 Speaker 1: that we continue to have these open conversations as long 90 00:04:16,440 --> 00:04:19,200 Speaker 1: as both do you have two sides willing to have conversations. 91 00:04:19,240 --> 00:04:21,080 Speaker 1: That's a good process and moving things along. Do you 92 00:04:21,080 --> 00:04:23,280 Speaker 1: see it's two sides though, considering you are part of 93 00:04:23,320 --> 00:04:25,240 Speaker 1: the same party, and the reason I asked you this, 94 00:04:25,320 --> 00:04:27,720 Speaker 1: Secretary Walsh, there is a narrative in the meter as 95 00:04:27,760 --> 00:04:31,320 Speaker 1: you know that the administration and your administrations that gender 96 00:04:31,360 --> 00:04:34,400 Speaker 1: has been held hostage by a single senator may be accountable. 97 00:04:34,440 --> 00:04:36,359 Speaker 1: To be kind, it is that how do you characterize 98 00:04:36,360 --> 00:04:39,880 Speaker 1: the situation? No, I mean, listen, I'm a former legislator 99 00:04:39,880 --> 00:04:43,080 Speaker 1: from Massachusetts and there's often times where I was debating 100 00:04:43,080 --> 00:04:45,840 Speaker 1: a bill in the in the Massachu's House representives with 101 00:04:46,120 --> 00:04:49,760 Speaker 1: the other side being my Democratic colleagues. And and you know, 102 00:04:49,800 --> 00:04:51,760 Speaker 1: as long as you have the dialogue, you can move forward. 103 00:04:51,800 --> 00:04:54,159 Speaker 1: I mean, listen, lots of people's have lots of concerns 104 00:04:54,320 --> 00:04:56,960 Speaker 1: and opinions on what we need to do moving forward. Uh. 105 00:04:57,120 --> 00:05:00,120 Speaker 1: And I'm supporting President Biden's plan and President biden as 106 00:05:00,200 --> 00:05:03,240 Speaker 1: American rescue plan. And what that resulted in was over 107 00:05:03,320 --> 00:05:06,440 Speaker 1: two hundred million vaccination shots. With that resulted in was 108 00:05:06,680 --> 00:05:10,440 Speaker 1: investment into childcare. With with that resulted in is moving 109 00:05:10,480 --> 00:05:12,919 Speaker 1: our economy forward four point family and jobs. You know, 110 00:05:12,960 --> 00:05:15,440 Speaker 1: the President has a plan. The plan is working. Uh, 111 00:05:15,520 --> 00:05:17,120 Speaker 1: and we're going to continue to move down down the 112 00:05:17,200 --> 00:05:20,160 Speaker 1: road on that plan. What did Senator Mansion say to you, Marty? 113 00:05:20,200 --> 00:05:22,360 Speaker 1: What was your take on Secondy Walsh, We didn't get 114 00:05:22,400 --> 00:05:24,600 Speaker 1: too much into the We didn't get too much into 115 00:05:24,640 --> 00:05:27,800 Speaker 1: the conversation about about the particulars of these bills. But again, 116 00:05:27,800 --> 00:05:29,440 Speaker 1: I know, I know, send the Mansion cares for his 117 00:05:29,520 --> 00:05:32,039 Speaker 1: constituents and cares for American people. And again, we just 118 00:05:32,080 --> 00:05:34,280 Speaker 1: need to continue to have dialogued to to move these 119 00:05:34,279 --> 00:05:36,280 Speaker 1: bills forward. So you think that that is not a 120 00:05:36,320 --> 00:05:39,440 Speaker 1: hard now a red line from Senator Mansion. Secondary Walsh 121 00:05:39,440 --> 00:05:41,720 Speaker 1: in your opinion, Well, I'm not going to speak for 122 00:05:41,800 --> 00:05:43,760 Speaker 1: sender Mansion. I mean, he certainly is his own person. 123 00:05:43,839 --> 00:05:45,680 Speaker 1: So we'll see as we move forward here over the 124 00:05:45,680 --> 00:05:47,760 Speaker 1: next couple of days, and imagine you devoid that question 125 00:05:47,760 --> 00:05:49,240 Speaker 1: as well. Secondly, well, so allow me to put it 126 00:05:49,240 --> 00:05:52,640 Speaker 1: in different words for you your interpretation of his stance. Currently, 127 00:05:52,920 --> 00:05:55,400 Speaker 1: for some people, they might interpret his words yesterday in 128 00:05:55,400 --> 00:05:57,600 Speaker 1: the Wall Street Journal as a red line hard no. 129 00:05:58,120 --> 00:06:01,560 Speaker 1: Was that your view? I know I wouldn't say it's 130 00:06:01,560 --> 00:06:03,400 Speaker 1: a hot no, But what I would say is that 131 00:06:03,440 --> 00:06:06,400 Speaker 1: we just have to continue to have conversation. Listen, lots 132 00:06:06,400 --> 00:06:08,960 Speaker 1: of people have different ideas on how we move forward 133 00:06:09,000 --> 00:06:12,159 Speaker 1: on these infrastructure bills. Some people think that these investments 134 00:06:12,320 --> 00:06:14,680 Speaker 1: are expenses and we shouldn't be paying this money. All 135 00:06:14,720 --> 00:06:16,720 Speaker 1: I know is that the investments that that in these 136 00:06:16,760 --> 00:06:19,880 Speaker 1: two infrastructure bills, particularly the Kids Economy Bill, are very 137 00:06:19,920 --> 00:06:23,120 Speaker 1: important about moving moving our economy forward. We've seen now 138 00:06:23,200 --> 00:06:25,240 Speaker 1: here in America we're talking about people that are not 139 00:06:25,279 --> 00:06:28,000 Speaker 1: returning to the workforce, and part of that is lack 140 00:06:28,040 --> 00:06:31,400 Speaker 1: of opportunity, lack of experience for different paying jobs. People 141 00:06:31,440 --> 00:06:33,640 Speaker 1: want to get good paying jobs. We need to assist 142 00:06:33,680 --> 00:06:35,839 Speaker 1: them by making the investment there. It's just like building 143 00:06:35,839 --> 00:06:38,240 Speaker 1: a brand new bridge in the city or town in America. 144 00:06:38,440 --> 00:06:40,520 Speaker 1: You build that bridge to get people connected to other 145 00:06:40,560 --> 00:06:42,960 Speaker 1: other locations. We need to continue to build that bridge 146 00:06:42,960 --> 00:06:46,279 Speaker 1: by investing in job training and other important cares. Economy 147 00:06:46,279 --> 00:06:49,200 Speaker 1: issues these secretary flame but Marti well, secretly, well, you 148 00:06:49,240 --> 00:06:51,400 Speaker 1: can't with your times. Thanks for joining us this morning, 149 00:06:57,760 --> 00:07:02,080 Speaker 1: right now victory lab in, folks, in the game of economics, 150 00:07:02,560 --> 00:07:06,320 Speaker 1: it's awfully tough to do this. We suggested surveillance at 151 00:07:06,360 --> 00:07:09,560 Speaker 1: three hundred sixty nine thousand to thirty five plus a 152 00:07:09,640 --> 00:07:14,679 Speaker 1: revision that is the new four hundred thousand. Mezra absolutely 153 00:07:14,800 --> 00:07:19,400 Speaker 1: nailed the call. Today it's seven and fifty jobs per 154 00:07:19,480 --> 00:07:23,240 Speaker 1: month over the last ninety days. How will that affect 155 00:07:23,360 --> 00:07:28,240 Speaker 1: the Powell calculus night, Tom, Thanks for having me back. 156 00:07:28,560 --> 00:07:30,800 Speaker 1: So yes, it's a weaker report, but if you look 157 00:07:30,840 --> 00:07:32,640 Speaker 1: at the three month moving average or look at the 158 00:07:32,680 --> 00:07:35,600 Speaker 1: other data, you know it's it's suggesting that the recovery 159 00:07:35,640 --> 00:07:37,680 Speaker 1: is continue. It's going to be in fits and starts. 160 00:07:37,760 --> 00:07:39,600 Speaker 1: The reopening we knew is not going to be in 161 00:07:39,600 --> 00:07:42,400 Speaker 1: a straight line. So we think tapering is still very 162 00:07:42,440 --> 00:07:45,160 Speaker 1: much on the table, but we're calling for a December taper, 163 00:07:45,280 --> 00:07:47,680 Speaker 1: not a September taper. I mean November as possible if 164 00:07:47,680 --> 00:07:50,280 Speaker 1: the next couple of reports are very strong, but later 165 00:07:50,360 --> 00:07:53,320 Speaker 1: this year they taper and then we see inflation next year. 166 00:07:53,560 --> 00:07:56,160 Speaker 1: We don't think they're hiking well until the end of 167 00:07:56,240 --> 00:07:59,120 Speaker 1: two thousand three, So that's why I think the curve 168 00:07:59,280 --> 00:08:02,360 Speaker 1: is stupid. Just to be clear, period, are you actually 169 00:08:02,360 --> 00:08:05,840 Speaker 1: pushing back your expectation for the startup taper to December 170 00:08:05,840 --> 00:08:09,320 Speaker 1: today based on this report? Now we've we've been calling 171 00:08:09,320 --> 00:08:12,320 Speaker 1: for December because we were looking for a week report today. 172 00:08:12,680 --> 00:08:14,880 Speaker 1: So just looking forward, Preyer, what are you going to 173 00:08:14,920 --> 00:08:17,200 Speaker 1: be looking for to get a sense of just how 174 00:08:17,280 --> 00:08:21,040 Speaker 1: quickly they could potentially readjust their expectations. I mean, we 175 00:08:21,080 --> 00:08:24,920 Speaker 1: know that wages are somewhat skewed by compositional issues, but 176 00:08:25,040 --> 00:08:27,920 Speaker 1: are there other aspects that have you concerned, like the 177 00:08:27,960 --> 00:08:31,960 Speaker 1: labor participation right exactly. So, I think labor participation is 178 00:08:32,000 --> 00:08:34,800 Speaker 1: a key one, particularly for the next couple of reports, 179 00:08:34,880 --> 00:08:38,040 Speaker 1: because we know the supplemental unemployment insurance is running out. 180 00:08:38,080 --> 00:08:40,880 Speaker 1: We know that schools are reopening. So we're really hopeful 181 00:08:40,920 --> 00:08:43,600 Speaker 1: that people re enter the labor force. And that's gonna 182 00:08:44,120 --> 00:08:46,640 Speaker 1: tell the FED, particularly the doves on the FED, I think, 183 00:08:46,679 --> 00:08:49,800 Speaker 1: will feel vindicated that there is a lot of slack 184 00:08:49,840 --> 00:08:53,480 Speaker 1: in the labor market. And until wage inflation properly picks up, 185 00:08:53,520 --> 00:08:55,600 Speaker 1: you know, not because of composition effects, which is what 186 00:08:55,640 --> 00:08:58,360 Speaker 1: we think held the number up, um, you know, or 187 00:08:58,520 --> 00:09:00,960 Speaker 1: or has been for the last few months. Um. You know, 188 00:09:01,000 --> 00:09:04,440 Speaker 1: When it's true underlying reage inflation picks up, that's when 189 00:09:04,440 --> 00:09:07,280 Speaker 1: I think some of that transitory narrative falls off. So 190 00:09:07,320 --> 00:09:09,280 Speaker 1: that's really going to be key the next few months. 191 00:09:10,360 --> 00:09:13,559 Speaker 1: We need to give a very careful shout out to 192 00:09:13,720 --> 00:09:17,040 Speaker 1: James O'Sullivan as well. Jim Sullivan, working with Priam, is 193 00:09:17,280 --> 00:09:20,559 Speaker 1: doing all the heavy lifting here. When you talk to 194 00:09:20,640 --> 00:09:25,200 Speaker 1: Jim O Sullivan about Q four, what do you argue about? 195 00:09:27,000 --> 00:09:29,720 Speaker 1: So we argue a lot about the pace of deceleration. 196 00:09:30,000 --> 00:09:32,240 Speaker 1: Jim's are a great call, great call on the number today. 197 00:09:32,760 --> 00:09:35,600 Speaker 1: You know, I'll be decelerating from a seven percent first 198 00:09:35,679 --> 00:09:38,960 Speaker 1: half GDP to a you know, three or four percent. 199 00:09:39,120 --> 00:09:41,080 Speaker 1: And what's the next step? Are we going down to 200 00:09:41,600 --> 00:09:44,240 Speaker 1: one percent or two percent? And you know Jim is 201 00:09:44,280 --> 00:09:47,440 Speaker 1: in the camp that things are decelerating. Reopening is feeding some, 202 00:09:47,640 --> 00:09:51,120 Speaker 1: the fiscal stimulus impact is feeding. But growth is still 203 00:09:51,160 --> 00:09:54,079 Speaker 1: solid and well well above potential, which will allow the 204 00:09:54,200 --> 00:09:57,520 Speaker 1: fact to exit. It's just the inflation question where Jim 205 00:09:57,559 --> 00:10:00,800 Speaker 1: has a slower or slow down in an inflation So 206 00:10:00,840 --> 00:10:04,439 Speaker 1: that's that's the keep out of extent of deceleration and 207 00:10:04,480 --> 00:10:08,600 Speaker 1: what's the longer term impact on inflation question. Link your 208 00:10:08,760 --> 00:10:12,560 Speaker 1: bond world, your full faith and credit world to the 209 00:10:12,720 --> 00:10:16,400 Speaker 1: equity markets. We don't do that. We do that clumsily. 210 00:10:16,440 --> 00:10:20,520 Speaker 1: I would say within the media. Does the yield mystery 211 00:10:20,559 --> 00:10:27,280 Speaker 1: now support equities or create greater uncertainty for equities? I 212 00:10:27,280 --> 00:10:29,400 Speaker 1: think so I do. I don't think there's such a 213 00:10:29,440 --> 00:10:31,720 Speaker 1: big disconnect between the two. I think the FED is 214 00:10:31,720 --> 00:10:35,360 Speaker 1: telling us they're tatering, but very slowly. The end point 215 00:10:35,400 --> 00:10:38,000 Speaker 1: of the hiking cycle, the market has taken down that 216 00:10:38,160 --> 00:10:41,200 Speaker 1: number significantly. If the fans only hiking to one and 217 00:10:41,200 --> 00:10:44,280 Speaker 1: a half percent, that's a very bullish environment for risk asses. 218 00:10:44,880 --> 00:10:47,360 Speaker 1: So I'm less concerned about the fat aspect. I'm more 219 00:10:47,400 --> 00:10:50,920 Speaker 1: concerned if global growth slows down, then that is something 220 00:10:50,960 --> 00:10:53,280 Speaker 1: that the bond market is somewhat priced for, but the 221 00:10:53,320 --> 00:10:56,320 Speaker 1: equity markets not. I seem more as a growth concerned 222 00:10:56,400 --> 00:10:59,600 Speaker 1: rather than a fat concern. One final question, tell me 223 00:10:59,600 --> 00:11:03,320 Speaker 1: about the X access duration here of all these moves 224 00:11:03,360 --> 00:11:04,920 Speaker 1: that we're going to see. I mean, I know we 225 00:11:04,960 --> 00:11:07,640 Speaker 1: go out to December on taper, but do you begin 226 00:11:07,679 --> 00:11:12,200 Speaker 1: to really extend out yield angst if I can to 227 00:11:12,280 --> 00:11:16,840 Speaker 1: the middle of two thousand twenty, if not later. In 228 00:11:16,960 --> 00:11:19,680 Speaker 1: terms of when we think rates will rise, yeah, when 229 00:11:19,720 --> 00:11:24,400 Speaker 1: price down rates up right? Um, So I think it 230 00:11:24,480 --> 00:11:27,040 Speaker 1: also depends on the fiscal site. Do we get a 231 00:11:27,120 --> 00:11:29,199 Speaker 1: three and a half or two trillion or if send 232 00:11:29,320 --> 00:11:32,440 Speaker 1: a mansion saying nothing without an offset, how much of 233 00:11:32,480 --> 00:11:33,959 Speaker 1: the offsets are we going to get? I think that's 234 00:11:34,000 --> 00:11:36,559 Speaker 1: a that's a key comportant as well. But if the 235 00:11:36,640 --> 00:11:38,959 Speaker 1: FED starts to taper, there's a lot of supply that 236 00:11:39,040 --> 00:11:41,000 Speaker 1: the market is to take down. So I think a 237 00:11:41,120 --> 00:11:44,080 Speaker 1: gradual rate right in, you know, starting at the end 238 00:11:44,080 --> 00:11:46,200 Speaker 1: of the year continuing next year. I can see that 239 00:11:46,280 --> 00:11:50,920 Speaker 1: consistent with tapering. To you and Jim O'Sullivan, congratulations on 240 00:11:51,080 --> 00:11:54,840 Speaker 1: just simply doing market economics. We greatly appreciate your return 241 00:11:55,440 --> 00:12:03,200 Speaker 1: this morning. Standing to see things change at the long 242 00:12:03,360 --> 00:12:04,880 Speaker 1: end of the curve though, tom So, let's have a 243 00:12:04,880 --> 00:12:07,120 Speaker 1: look at that and push through that two thirty five, 244 00:12:07,200 --> 00:12:09,400 Speaker 1: that big down side surprise on a payrolls report against 245 00:12:09,400 --> 00:12:12,440 Speaker 1: an estimate of seven thirty three yield tire on thirties 246 00:12:12,520 --> 00:12:16,360 Speaker 1: now by about three basis points on tens by two. However, 247 00:12:16,400 --> 00:12:18,079 Speaker 1: way you chop this up right now, there is a 248 00:12:18,120 --> 00:12:21,320 Speaker 1: view on the September twenty two meeting that that number 249 00:12:21,559 --> 00:12:24,320 Speaker 1: will just anchor the hawks a little bit and stop 250 00:12:24,400 --> 00:12:27,679 Speaker 1: them flying away and causing too much stock for chairman Power. 251 00:12:27,760 --> 00:12:30,280 Speaker 1: Let's bring in Jeff Rosenberg on that of black Rock 252 00:12:30,400 --> 00:12:33,839 Speaker 1: black Rocks portfolio manager. Jeff, I want to start straight there, 253 00:12:33,840 --> 00:12:36,160 Speaker 1: so with a down side surprise and your first interpretation, 254 00:12:36,240 --> 00:12:39,800 Speaker 1: your first read, Yeah, the first read is definitely this 255 00:12:39,880 --> 00:12:45,280 Speaker 1: has some delta variant on it. The mix shift here 256 00:12:45,559 --> 00:12:49,720 Speaker 1: is retails lower leisure and hospitality, which had been contributing 257 00:12:49,840 --> 00:12:53,320 Speaker 1: you know, four hundred five hundred thousand, doesn't show up 258 00:12:53,320 --> 00:12:56,440 Speaker 1: at all. The wage increase that you guys were talking about. 259 00:12:56,520 --> 00:12:58,640 Speaker 1: That really looks like a mixed shift here. And the 260 00:12:58,720 --> 00:13:02,520 Speaker 1: disappointment is in those two sectors, in particularly leisure and hospitality, 261 00:13:02,559 --> 00:13:06,480 Speaker 1: which speaks to you know, potentially this delta variant impact now, 262 00:13:06,559 --> 00:13:12,000 Speaker 1: because that's the fingerprints, that's a temporary impact. And John, 263 00:13:12,040 --> 00:13:14,360 Speaker 1: as you just highlighted, you know, the initial bond market 264 00:13:14,400 --> 00:13:16,960 Speaker 1: reaction was lower yields, but now you're starting to kind 265 00:13:16,960 --> 00:13:18,880 Speaker 1: of push higher in the back end. To me, that 266 00:13:19,040 --> 00:13:22,480 Speaker 1: says the market's looking through this and seeing, hey, this 267 00:13:22,559 --> 00:13:25,480 Speaker 1: is temporary. You know, we talked about transitory inflation. We're 268 00:13:25,480 --> 00:13:30,040 Speaker 1: gonna talk about transitory uh, delta variant impact here at 269 00:13:30,080 --> 00:13:33,680 Speaker 1: least with regards to the market reaction. Uh. And you 270 00:13:33,720 --> 00:13:36,320 Speaker 1: know a little bit of disappointment as well in terms 271 00:13:36,320 --> 00:13:40,080 Speaker 1: of the labor force participation rate not budging again. You know, 272 00:13:40,120 --> 00:13:43,480 Speaker 1: I think that's more of a temporary factor related to 273 00:13:43,520 --> 00:13:46,280 Speaker 1: the delta variant. So I think you know, you know, 274 00:13:46,280 --> 00:13:49,120 Speaker 1: the market was already you know, pushing back in terms 275 00:13:49,200 --> 00:13:53,280 Speaker 1: of expectations of when the tapering announcement would happen. This 276 00:13:53,360 --> 00:13:56,560 Speaker 1: solidifies that in terms of the folks who were expecting 277 00:13:56,600 --> 00:13:59,920 Speaker 1: something sooner or the hawk ish viewpoint, you know, we'll 278 00:14:00,000 --> 00:14:03,000 Speaker 1: at another month. Everyone will look for that, look for 279 00:14:03,160 --> 00:14:06,000 Speaker 1: the delta variant hopefully you know, to come out of 280 00:14:06,040 --> 00:14:10,600 Speaker 1: the September and even the October reports as we wait 281 00:14:10,679 --> 00:14:13,520 Speaker 1: into later this year. For the Governor Bryant has been 282 00:14:13,520 --> 00:14:15,720 Speaker 1: on the money here for many people waite for the 283 00:14:15,720 --> 00:14:18,440 Speaker 1: September night, to waite to see if the supply side 284 00:14:18,440 --> 00:14:20,160 Speaker 1: of this economy will hail. Do you think they have 285 00:14:20,200 --> 00:14:22,320 Speaker 1: the luxury of time on this side to waite for that. 286 00:14:24,080 --> 00:14:26,680 Speaker 1: You know they do in the sense that you know 287 00:14:26,840 --> 00:14:30,640 Speaker 1: they're really going to be focused on the longer term implications. 288 00:14:30,880 --> 00:14:34,200 Speaker 1: And you know they have talked over and over about 289 00:14:34,960 --> 00:14:39,200 Speaker 1: the necessity you know, particularly Powell speech last week, Uh, 290 00:14:39,240 --> 00:14:42,240 Speaker 1: you know, the need not to react and overreact to 291 00:14:42,280 --> 00:14:46,160 Speaker 1: short term developments. And so you know, from that vantage point, 292 00:14:46,280 --> 00:14:48,760 Speaker 1: they don't need to rush into it. And the most 293 00:14:48,800 --> 00:14:51,240 Speaker 1: important thing not to lose sight of here is the 294 00:14:51,320 --> 00:14:55,360 Speaker 1: emphasis that that tapering is not tightening. And and once 295 00:14:55,400 --> 00:14:58,040 Speaker 1: we get past this tapering announcement and they go on 296 00:14:58,280 --> 00:15:02,240 Speaker 1: kind of an autopilot of each monthly reduction, you know, 297 00:15:02,280 --> 00:15:04,240 Speaker 1: then we're going to shift this conversation and it's going 298 00:15:04,280 --> 00:15:06,440 Speaker 1: to be about, well, what is this due to the 299 00:15:06,480 --> 00:15:09,880 Speaker 1: path of future tightening. But that path of future tightening 300 00:15:09,920 --> 00:15:13,840 Speaker 1: doesn't begin until maybe late in two so they've got 301 00:15:13,840 --> 00:15:16,400 Speaker 1: a lot of time here before we get to that 302 00:15:16,520 --> 00:15:19,360 Speaker 1: how important is the revision upward for the prior month, 303 00:15:19,360 --> 00:15:23,720 Speaker 1: the idea that was revised from two more than a million, 304 00:15:23,760 --> 00:15:26,560 Speaker 1: the idea that there was momentum and that perhaps this 305 00:15:26,600 --> 00:15:30,240 Speaker 1: blip really is just a pause due to the delta variant. 306 00:15:31,040 --> 00:15:33,120 Speaker 1: It's a It's a good point, Lisa, And that's another 307 00:15:33,600 --> 00:15:38,560 Speaker 1: part of this report is it reinforces how strong the 308 00:15:38,640 --> 00:15:43,440 Speaker 1: labor market was going into this delta variant impact. And 309 00:15:44,000 --> 00:15:46,280 Speaker 1: I think you know that maybe what the market is 310 00:15:46,280 --> 00:15:50,120 Speaker 1: looking through you know that this is this is a 311 00:15:50,160 --> 00:15:53,640 Speaker 1: one off slow down and not the beginning of a 312 00:15:53,680 --> 00:15:56,120 Speaker 1: new trend, and that the strength in the in the 313 00:15:56,240 --> 00:16:00,280 Speaker 1: labor markets will re emerge as the reopening re ours 314 00:16:00,280 --> 00:16:02,640 Speaker 1: equity features. Just finding a little bit here. Someone changed 315 00:16:02,640 --> 00:16:05,480 Speaker 1: on the SMP five hundred, basically unchanged the negative on 316 00:16:05,520 --> 00:16:07,400 Speaker 1: the nastack. Now I'll be catching up with Rick read 317 00:16:07,400 --> 00:16:10,560 Speaker 1: at Jeff's colleague at the Tompany alongside Anastasia Amarosa and 318 00:16:10,600 --> 00:16:12,600 Speaker 1: Mike Collins. Will do that on the Open so in 319 00:16:12,640 --> 00:16:15,720 Speaker 1: about twenty minutes time. Sounds good. Lots to talk about 320 00:16:15,760 --> 00:16:17,680 Speaker 1: there as well. I just did the three months moving 321 00:16:17,760 --> 00:16:20,680 Speaker 1: average of where we are with the double revisions, and 322 00:16:20,720 --> 00:16:23,360 Speaker 1: I think away from the gloom of the moment, folks, 323 00:16:23,720 --> 00:16:27,920 Speaker 1: this is a pleasant survived. Jeff Rosenberg to five zero 324 00:16:28,080 --> 00:16:31,080 Speaker 1: jobs over ninety days and that comes out to seven 325 00:16:31,120 --> 00:16:35,360 Speaker 1: hundred and fifty thousand exactly per month. I'm sorry, Jeff Rosenberg. 326 00:16:35,600 --> 00:16:39,080 Speaker 1: That's not a bad number, not not bad at all. 327 00:16:39,120 --> 00:16:42,120 Speaker 1: And you're reinforcing the broader point, which is, if you 328 00:16:42,160 --> 00:16:45,520 Speaker 1: look through the noise, this is a very strong labor market, 329 00:16:45,600 --> 00:16:49,520 Speaker 1: good recovery. You know, is there more room to go? Sure, 330 00:16:50,000 --> 00:16:52,400 Speaker 1: you know, And that's what some of the points, uh, 331 00:16:52,800 --> 00:16:56,480 Speaker 1: many of the more devilish members have been highlighting. Uh. 332 00:16:56,520 --> 00:16:58,680 Speaker 1: And that's I think the broader takeaway is that the 333 00:16:58,720 --> 00:17:02,320 Speaker 1: reopening is happening, that the recovery in the economy, you know, 334 00:17:02,400 --> 00:17:04,760 Speaker 1: the thing that that this isn't talking about, and that 335 00:17:04,840 --> 00:17:07,280 Speaker 1: the Fed is is also going to be concerned about it. 336 00:17:07,280 --> 00:17:09,040 Speaker 1: And I think our focus will shift towards is the 337 00:17:09,040 --> 00:17:11,840 Speaker 1: impact of fiscal policy. You know, we're going to have 338 00:17:11,920 --> 00:17:14,520 Speaker 1: a fiscal tightening, even with a three and a half 339 00:17:14,560 --> 00:17:17,320 Speaker 1: trillion dollar stimulus plan. You know, that is not the 340 00:17:17,359 --> 00:17:20,600 Speaker 1: same kind of stimulus as the stimulus that is rolling off. 341 00:17:20,640 --> 00:17:23,960 Speaker 1: That's long term stimulus over ten year period and so 342 00:17:24,000 --> 00:17:26,560 Speaker 1: the FED is going to be concerned about the impact 343 00:17:27,520 --> 00:17:31,280 Speaker 1: on economic growth of that fiscal tightening. Are you managing 344 00:17:31,359 --> 00:17:36,040 Speaker 1: then twelve months forward, twenty four months forward to a 345 00:17:36,200 --> 00:17:40,119 Speaker 1: three percent American economy or something. You know, we're getting 346 00:17:40,160 --> 00:17:42,480 Speaker 1: back to where potential g d P is is that 347 00:17:42,840 --> 00:17:46,480 Speaker 1: is that your overlay here as you manage bond money. 348 00:17:46,880 --> 00:17:50,080 Speaker 1: That that is tom and and and it's it's in 349 00:17:50,280 --> 00:17:53,080 Speaker 1: most of the longer run forecast. You know, we've had 350 00:17:53,520 --> 00:17:58,720 Speaker 1: an an incredibly uh impactful impact on short term growth 351 00:17:58,760 --> 00:18:05,000 Speaker 1: from the combination of reopening and historic amounts of fiscal stimulus. 352 00:18:05,040 --> 00:18:07,720 Speaker 1: That's going to roll off. And so what is really 353 00:18:07,760 --> 00:18:11,159 Speaker 1: the underlying debate is is or the overriding debate is 354 00:18:11,200 --> 00:18:14,600 Speaker 1: what's the underlying capacity of the economy and the strength 355 00:18:14,600 --> 00:18:17,320 Speaker 1: of the economy and its ability to deliver. And most 356 00:18:17,359 --> 00:18:19,879 Speaker 1: of the consensus views have you going back to that level. 357 00:18:20,119 --> 00:18:24,480 Speaker 1: And the concerns on the downside is that you'll you'll 358 00:18:24,600 --> 00:18:28,760 Speaker 1: you'll press even lower. And that's the argument against moving 359 00:18:28,800 --> 00:18:33,880 Speaker 1: too quickly and overreacting to what might be transitory impacts 360 00:18:33,880 --> 00:18:35,560 Speaker 1: on inflation. Now, of course, the other side of the 361 00:18:35,640 --> 00:18:39,840 Speaker 1: argument is that we've done some serious structural damage to inflation, 362 00:18:39,920 --> 00:18:43,840 Speaker 1: inflation expectations the supply chain. The fet is admitted, you know, 363 00:18:43,840 --> 00:18:47,720 Speaker 1: they've underestimated the degree and length of how long the 364 00:18:47,840 --> 00:18:51,400 Speaker 1: restart economics would impact on the supply side and so 365 00:18:51,640 --> 00:18:55,120 Speaker 1: all that. You know, that's the growth side, but it's 366 00:18:55,160 --> 00:18:58,960 Speaker 1: also the inflation. Some interpretation, here's markets reverse nastac one 367 00:18:59,320 --> 00:19:01,919 Speaker 1: with a spike up earlier comes right back around to 368 00:19:02,040 --> 00:19:05,560 Speaker 1: a modestly negative statistic. The vix out to a sixteen 369 00:19:05,600 --> 00:19:09,160 Speaker 1: point five three lesa three the ten year yield excuse 370 00:19:09,200 --> 00:19:12,480 Speaker 1: me higher now one point three. Yeah, it seems like 371 00:19:12,480 --> 00:19:14,800 Speaker 1: people are looking past the huge headline mess and to 372 00:19:15,000 --> 00:19:17,800 Speaker 1: really reiterate what Jeff was saying, they're looking more at 373 00:19:17,800 --> 00:19:21,240 Speaker 1: the upward revisions. They're looking more at the momentum heading 374 00:19:21,280 --> 00:19:24,440 Speaker 1: into what was a delta poked month that really saw 375 00:19:24,720 --> 00:19:28,680 Speaker 1: zero net jobs in the travel, leisure and hospitality sectors, 376 00:19:28,720 --> 00:19:31,040 Speaker 1: which is really shocking given where we are in the reopening. 377 00:19:31,040 --> 00:19:33,439 Speaker 1: But Jeff, this really goes to the question is the 378 00:19:33,440 --> 00:19:36,159 Speaker 1: FED getting this right and does this data confirm that 379 00:19:36,280 --> 00:19:38,959 Speaker 1: that basically there is a lot of slack in the market, 380 00:19:39,320 --> 00:19:41,320 Speaker 1: or are we starting to get some concern with respect 381 00:19:41,359 --> 00:19:43,800 Speaker 1: the wage data. Albeit you have to pass through it. 382 00:19:45,359 --> 00:19:49,080 Speaker 1: You know, honestly, it's it's too early to know. Um. 383 00:19:49,240 --> 00:19:51,600 Speaker 1: You know, there's a lot of critique on both sides 384 00:19:51,680 --> 00:19:54,359 Speaker 1: of the debate as to whether the FED is is 385 00:19:54,440 --> 00:19:57,679 Speaker 1: making mistakes or not. You know what, what obvious concern is, 386 00:19:57,680 --> 00:20:01,160 Speaker 1: there is a tremendous amount of inflation, but it's not 387 00:20:01,359 --> 00:20:04,560 Speaker 1: in goods and services prices. It's in assets, and you 388 00:20:04,640 --> 00:20:07,000 Speaker 1: see it everywhere, and it's the acid inflation and the 389 00:20:07,040 --> 00:20:10,160 Speaker 1: financial stability concerns, it's in the minutes. There are folks 390 00:20:10,200 --> 00:20:12,800 Speaker 1: who are concerned about it. You know, if that ultimately 391 00:20:12,840 --> 00:20:15,040 Speaker 1: shows up in a negative way, then you know the 392 00:20:15,480 --> 00:20:18,520 Speaker 1: argument will be the FED ministic. But you know, given 393 00:20:18,560 --> 00:20:21,040 Speaker 1: what we know today, it's it's hard to argue that 394 00:20:21,960 --> 00:20:24,200 Speaker 1: is the case right now. And so the Fed's focused 395 00:20:24,200 --> 00:20:26,480 Speaker 1: on what's right in front of them, which is they 396 00:20:26,480 --> 00:20:31,000 Speaker 1: don't feel the need to move preemptively, and that's the 397 00:20:31,119 --> 00:20:34,480 Speaker 1: change in flexible average inflation targeting. So they're going to 398 00:20:34,520 --> 00:20:38,439 Speaker 1: be reactive and that's the kind of FED response function 399 00:20:38,480 --> 00:20:40,600 Speaker 1: that we now live with. Jeffrey Rosenberg, thank you so 400 00:20:40,680 --> 00:20:49,520 Speaker 1: much for black Rock. Market economics will interpret this and 401 00:20:49,560 --> 00:20:51,920 Speaker 1: they will make their tweaks. Of course, big news yesterday 402 00:20:51,920 --> 00:20:55,520 Speaker 1: with ellen zetn are bringing in Q three to two 403 00:20:55,560 --> 00:20:58,760 Speaker 1: point nine percent. Pretty prescient. There is well and then 404 00:20:58,760 --> 00:21:03,080 Speaker 1: there's a wide market economics disparity. If you're on the 405 00:21:03,200 --> 00:21:07,479 Speaker 1: by side managing money, you have economists to take a 406 00:21:07,480 --> 00:21:10,040 Speaker 1: different tack. That's a good thing always to speak to, 407 00:21:10,560 --> 00:21:12,960 Speaker 1: and that would be Tiffany Welding joining us from PIMCO 408 00:21:13,520 --> 00:21:18,000 Speaker 1: the bondom at least, this is the Pacific Investment Managing Company. 409 00:21:18,240 --> 00:21:20,280 Speaker 1: You looked off into the distance and I thought maybe 410 00:21:20,320 --> 00:21:22,600 Speaker 1: you could kind of see it's like a religious experience 411 00:21:22,680 --> 00:21:25,920 Speaker 1: to talk about PIMCO, what they've done over the decades 412 00:21:26,480 --> 00:21:31,480 Speaker 1: as well, Tiffany, if we're off a boom economy, what 413 00:21:31,720 --> 00:21:35,679 Speaker 1: kind of economy is it now? Well, I mean, we 414 00:21:35,720 --> 00:21:38,080 Speaker 1: look at this and we think this is more of 415 00:21:38,080 --> 00:21:41,600 Speaker 1: a soft patch instead of you know, the beginning where 416 00:21:41,640 --> 00:21:44,359 Speaker 1: there's a phrase from a long time ago. Are you 417 00:21:44,600 --> 00:21:49,720 Speaker 1: it's just the new transitory that well, I mean, so 418 00:21:50,080 --> 00:21:52,080 Speaker 1: I think on the on the you know, kind of 419 00:21:52,080 --> 00:21:54,280 Speaker 1: on the more worrying side, it does look like the 420 00:21:54,760 --> 00:21:58,320 Speaker 1: slowdown that we're seeing as a result of the increase 421 00:21:58,400 --> 00:22:02,359 Speaker 1: in cases the coronavirus as and and as a result 422 00:22:02,440 --> 00:22:05,600 Speaker 1: of some of these um supply chain bottlenecks, which appear 423 00:22:05,640 --> 00:22:07,680 Speaker 1: to have also intensified. It does look like the slowdown 424 00:22:07,680 --> 00:22:10,879 Speaker 1: that we're seeing an activity is a bit more pronounced. 425 00:22:11,080 --> 00:22:13,760 Speaker 1: Having said that, though, um, you know, it still looks 426 00:22:13,880 --> 00:22:16,040 Speaker 1: less than what we got, you know, at the end 427 00:22:16,080 --> 00:22:18,159 Speaker 1: of last year when we had uh, you know, the 428 00:22:18,200 --> 00:22:21,160 Speaker 1: kind of the rising new cases and of course, um, 429 00:22:21,200 --> 00:22:24,600 Speaker 1: you know, in March and April of of last year, 430 00:22:24,840 --> 00:22:26,600 Speaker 1: at the beginning of the pandemic. So it does look 431 00:22:26,640 --> 00:22:29,000 Speaker 1: like the economic um hit from this kind of thing 432 00:22:29,080 --> 00:22:31,960 Speaker 1: is is becoming less and and and we think that that, 433 00:22:32,320 --> 00:22:35,320 Speaker 1: you know, is going to create a slow patch instead 434 00:22:35,359 --> 00:22:37,760 Speaker 1: of the beginnings of a of a bigger downturn. When 435 00:22:37,800 --> 00:22:40,720 Speaker 1: is a soft patch or a slow patch become a 436 00:22:40,760 --> 00:22:43,879 Speaker 1: bigger and longer problem for an economy that faces a 437 00:22:43,960 --> 00:22:46,800 Speaker 1: number of pressures. Yeah, I mean, so I think that 438 00:22:47,000 --> 00:22:48,359 Speaker 1: on the on the at least on the on the 439 00:22:48,400 --> 00:22:50,800 Speaker 1: COVID side, I think, I do think what you have 440 00:22:51,000 --> 00:22:53,320 Speaker 1: to worry about a little bit is that you know, 441 00:22:53,440 --> 00:22:56,840 Speaker 1: you have the longer that you have this pandemic, that's 442 00:22:56,880 --> 00:23:00,000 Speaker 1: kind of at top of mind for people. The more 443 00:23:00,000 --> 00:23:03,920 Speaker 1: are solidified their new behaviors become um and that obviously 444 00:23:03,960 --> 00:23:07,920 Speaker 1: creates you know, economic reallocation that could create slower growth 445 00:23:07,960 --> 00:23:10,399 Speaker 1: as people want to just save more. You know, I 446 00:23:10,400 --> 00:23:12,760 Speaker 1: think there's a whole host of potential issues that we 447 00:23:12,800 --> 00:23:14,959 Speaker 1: have to we'll have to deal with if that, if 448 00:23:15,000 --> 00:23:17,840 Speaker 1: that happens. Um. You know, I think again, you know, 449 00:23:17,840 --> 00:23:20,840 Speaker 1: we're relatively optimistic still, um, you know, because you are 450 00:23:20,920 --> 00:23:24,480 Speaker 1: still seeing uh people getting vaccinated. You know, of course 451 00:23:24,480 --> 00:23:28,000 Speaker 1: we're gonna be talking about about boosters here relatively soon 452 00:23:28,040 --> 00:23:30,520 Speaker 1: in terms of people actually getting them. So you know, 453 00:23:30,560 --> 00:23:32,439 Speaker 1: all of that again makes us think that, you know, 454 00:23:32,920 --> 00:23:34,760 Speaker 1: this is something that we're we're still going to get over. 455 00:23:35,000 --> 00:23:36,879 Speaker 1: But of course we have to deal with that that 456 00:23:37,000 --> 00:23:39,080 Speaker 1: risk and and of course think about it. So we're 457 00:23:39,080 --> 00:23:41,800 Speaker 1: talking about Ellen Zentner. Morgan STANLEYO joined us earlier, and 458 00:23:41,880 --> 00:23:44,880 Speaker 1: another point that she made was that she expects two 459 00:23:44,880 --> 00:23:47,359 Speaker 1: thirds of all the jobs lost from the pandemic to 460 00:23:47,480 --> 00:23:51,200 Speaker 1: come back, and that means one third will not Where 461 00:23:51,240 --> 00:23:54,560 Speaker 1: are those jobs? Well, I think you have to be 462 00:23:54,640 --> 00:23:57,000 Speaker 1: a little bit careful about that because I think it's 463 00:23:57,080 --> 00:24:00,280 Speaker 1: very easy to kind of look at jobs and maybe 464 00:24:00,280 --> 00:24:02,119 Speaker 1: look at some of the technology and some of the 465 00:24:02,160 --> 00:24:05,720 Speaker 1: innovations that we've started to see, um folks implement and 466 00:24:05,760 --> 00:24:08,159 Speaker 1: you can say those jobs don't come back. But I 467 00:24:08,160 --> 00:24:10,320 Speaker 1: think what's more difficult is to sort of open your 468 00:24:10,320 --> 00:24:12,639 Speaker 1: mind and say these are the new jobs that that 469 00:24:12,720 --> 00:24:14,639 Speaker 1: all of this is going to create. And I think 470 00:24:14,760 --> 00:24:17,400 Speaker 1: that's much more difficult, um, you know, and I think 471 00:24:17,640 --> 00:24:20,080 Speaker 1: you know, we're very open minded, um you know, in 472 00:24:20,440 --> 00:24:22,359 Speaker 1: terms of of kind of the new jobs and the 473 00:24:22,359 --> 00:24:24,520 Speaker 1: new innovations that this is going to create. I think 474 00:24:24,560 --> 00:24:26,920 Speaker 1: where we get a little bit worried is about a 475 00:24:26,960 --> 00:24:30,000 Speaker 1: skills mismatch, you know, and how does the economy sort 476 00:24:30,040 --> 00:24:33,439 Speaker 1: of manage a transition um that were ultimately going to 477 00:24:33,600 --> 00:24:35,600 Speaker 1: you know, have to face and that we are currently facing, 478 00:24:36,240 --> 00:24:38,800 Speaker 1: um you know, and we hope that that transition is smooth. 479 00:24:38,960 --> 00:24:40,520 Speaker 1: But as we've seen in the past, you know what 480 00:24:40,560 --> 00:24:42,920 Speaker 1: economists called the you know, the China shock of course, 481 00:24:42,920 --> 00:24:45,520 Speaker 1: where US manufacturing came down. There's a whole coort of 482 00:24:45,560 --> 00:24:47,320 Speaker 1: people that were really left behind. And you know, of 483 00:24:47,320 --> 00:24:49,960 Speaker 1: course that's really what we we want to avoid. You know. 484 00:24:49,960 --> 00:24:52,119 Speaker 1: The FED uh you know, only has blunt tools to 485 00:24:52,160 --> 00:24:54,600 Speaker 1: do that. Um you know. Of course that you know 486 00:24:54,680 --> 00:24:57,040 Speaker 1: obviously is is fiscal policy that has to really step 487 00:24:57,080 --> 00:24:59,919 Speaker 1: in and try to uh to you know, uh may 488 00:25:00,000 --> 00:25:03,040 Speaker 1: image that transition and help it along. Tiffany, one of 489 00:25:03,080 --> 00:25:06,280 Speaker 1: the great things here is the partition of the labor 490 00:25:06,320 --> 00:25:09,199 Speaker 1: economy that we talk about each and every day. And 491 00:25:09,280 --> 00:25:12,960 Speaker 1: it does go back to John Edwards in two America's 492 00:25:13,880 --> 00:25:18,200 Speaker 1: can a central bank affect policy to help people that 493 00:25:18,400 --> 00:25:22,840 Speaker 1: aren't part of the modern labor economy? Or is this 494 00:25:23,040 --> 00:25:28,200 Speaker 1: all going to be about public policy and private investment? Well, 495 00:25:28,240 --> 00:25:31,280 Speaker 1: I mean, I think, you know, I'm pretty I'm so 496 00:25:31,440 --> 00:25:34,959 Speaker 1: optimistic that you know, this whole idea of you know, 497 00:25:35,200 --> 00:25:37,439 Speaker 1: running the economy hot to fed, being patient. You know, 498 00:25:37,480 --> 00:25:39,760 Speaker 1: a tailor rule right now would actually suggest that the 499 00:25:39,840 --> 00:25:42,720 Speaker 1: said funds rate should be over two percent. Obviously it's well, okay, 500 00:25:42,880 --> 00:25:44,879 Speaker 1: I looked at that the other day. You're dead on. 501 00:25:45,119 --> 00:25:47,919 Speaker 1: Thank you so much. Folks on the Bloomberg terminal. You 502 00:25:47,960 --> 00:25:50,840 Speaker 1: can go to t A. Y L To see Tiffany 503 00:25:50,880 --> 00:25:56,919 Speaker 1: Wilding's geniuses. Okay, discuss John Taylor Stanford's rule. Well, I mean, so, 504 00:25:57,000 --> 00:25:58,280 Speaker 1: I don't I don't want to get too much into 505 00:25:58,320 --> 00:26:00,480 Speaker 1: the tailor rule, but it does suggest that that should 506 00:26:00,480 --> 00:26:02,199 Speaker 1: be raising rates as a result of the inflation that 507 00:26:02,240 --> 00:26:04,560 Speaker 1: we're seeing, but they're not, you know, and they're again 508 00:26:04,600 --> 00:26:07,080 Speaker 1: the reason why that we're they're not is because they 509 00:26:07,119 --> 00:26:09,640 Speaker 1: do want to run the economy a little bit hot, 510 00:26:09,680 --> 00:26:11,760 Speaker 1: because they do think that there are there are gains 511 00:26:11,760 --> 00:26:14,360 Speaker 1: to that their benefits um, you know, and those benefits 512 00:26:14,400 --> 00:26:16,560 Speaker 1: can be people starting to come back to the labor market. Now, 513 00:26:16,600 --> 00:26:18,639 Speaker 1: your question was, even if people are coming back to 514 00:26:18,680 --> 00:26:21,840 Speaker 1: the labor market here your skills atrophied, are they ready 515 00:26:21,960 --> 00:26:24,760 Speaker 1: to come into the new jobs that the economy needs? 516 00:26:25,359 --> 00:26:27,640 Speaker 1: You know? And I think what you saw. The interesting 517 00:26:27,680 --> 00:26:30,760 Speaker 1: thing is is what you saw in sen and nineteen 518 00:26:30,800 --> 00:26:32,960 Speaker 1: when we're also running a hot labor market and a 519 00:26:33,000 --> 00:26:36,040 Speaker 1: hot economy. Well you saw us folks were recoming. We're 520 00:26:36,040 --> 00:26:38,040 Speaker 1: coming back to the labor market. Not only that, but 521 00:26:38,080 --> 00:26:41,840 Speaker 1: you're actually getting some of the employers retraining and reskilling them. 522 00:26:41,920 --> 00:26:44,480 Speaker 1: So they're hiring people that maybe skills of atrigat but 523 00:26:44,480 --> 00:26:46,480 Speaker 1: they're but they're making them better. So I do think 524 00:26:46,520 --> 00:26:50,600 Speaker 1: the private sector can do this, um you know, of course, uh, 525 00:26:50,640 --> 00:26:55,160 Speaker 1: you know, fund government educating government fund um investment in education, 526 00:26:55,280 --> 00:26:57,600 Speaker 1: care's economy issues type that you know, that can also help. 527 00:26:57,840 --> 00:27:01,240 Speaker 1: But to the tailor rule in a rule is based architecture. 528 00:27:01,280 --> 00:27:04,639 Speaker 1: Jeff Lacker joining us, the former president of the Richmond 529 00:27:04,680 --> 00:27:09,200 Speaker 1: FED a couple of days ago. If we haven't had inflation, 530 00:27:09,920 --> 00:27:14,560 Speaker 1: have we simply taken the price change architecture of a 531 00:27:14,680 --> 00:27:18,320 Speaker 1: higher tailor rule clearly evident and moved it over to 532 00:27:18,400 --> 00:27:24,760 Speaker 1: assets with the booming stocks and bond prices up. Yeah, 533 00:27:24,840 --> 00:27:28,960 Speaker 1: I mean so certainly, you know, lower interest rates UM 534 00:27:28,960 --> 00:27:32,639 Speaker 1: in a more accommodative FED certainly does impact a wide 535 00:27:32,720 --> 00:27:35,240 Speaker 1: range of asset prices, you know. And ultimately that's how 536 00:27:35,280 --> 00:27:38,879 Speaker 1: monetary policy works, um, you know. And and you know 537 00:27:38,920 --> 00:27:41,719 Speaker 1: on the in terms of the effects of that, um 538 00:27:41,840 --> 00:27:45,000 Speaker 1: you know. Of course, the FED has models you know 539 00:27:45,080 --> 00:27:47,600 Speaker 1: that that that that think about this and put it 540 00:27:47,640 --> 00:27:49,399 Speaker 1: into context. But you know, we do think that that 541 00:27:49,440 --> 00:27:54,400 Speaker 1: does translate into growth, you know, and inflation quite frankly, 542 00:27:54,480 --> 00:27:56,959 Speaker 1: and that's ultimately why the FED does these policies, right, 543 00:27:57,280 --> 00:27:59,720 Speaker 1: you know. I think there's another question here about you know, 544 00:27:59,760 --> 00:28:03,000 Speaker 1: because thus the Fed's tools are very blunt. How is 545 00:28:03,040 --> 00:28:06,640 Speaker 1: the sort of distribution of of of prosperity, if you will, 546 00:28:06,680 --> 00:28:09,800 Speaker 1: How how is that sort of distributed around the economy? Um, 547 00:28:09,840 --> 00:28:11,600 Speaker 1: you know, And I think that's where fifthfical policy can 548 00:28:11,600 --> 00:28:13,199 Speaker 1: come in and help the FED because it is such 549 00:28:13,240 --> 00:28:15,080 Speaker 1: a funt tool to make sure that it's sort of 550 00:28:15,080 --> 00:28:18,200 Speaker 1: directed at, you know, the areas in particular that needs 551 00:28:18,240 --> 00:28:23,000 Speaker 1: to help. Lisa Apples Trading, Old Graham, Dott and Coddle. 552 00:28:23,720 --> 00:28:27,479 Speaker 1: It's thirty nine times price to book, seven times priced 553 00:28:27,480 --> 00:28:31,520 Speaker 1: to sales, and it's slidely and rounded up to times 554 00:28:31,640 --> 00:28:33,639 Speaker 1: price to cash flow. Yeah, this is what we have 555 00:28:33,680 --> 00:28:36,760 Speaker 1: seen consistently, asked, prices go up regardless of the economy. 556 00:28:36,760 --> 00:28:39,520 Speaker 1: And John Gallup of Credit suitez this morning discussing how 557 00:28:39,640 --> 00:28:42,840 Speaker 1: there makes this you know, bifurcation between the economy and 558 00:28:42,840 --> 00:28:45,160 Speaker 1: the stock market. The stock market is not the economy. 559 00:28:45,480 --> 00:28:47,840 Speaker 1: This is blam meer surveillance. We are speaking with Tiffany Wilding, 560 00:28:47,960 --> 00:28:51,520 Speaker 1: PIMCO chief US economist, post this job's report. We are 561 00:28:51,520 --> 00:28:54,720 Speaker 1: seeing red on the screen. Tiffany, you talked about wages 562 00:28:54,840 --> 00:28:56,600 Speaker 1: and this to me is one of the biggest questions. 563 00:28:56,600 --> 00:28:59,080 Speaker 1: And I feel like I've been just hammering this again 564 00:28:59,120 --> 00:29:01,960 Speaker 1: and again, like it, you know, hammering a dead horse. 565 00:29:01,960 --> 00:29:06,480 Speaker 1: What's the expression, um and Friday, you don't care what 566 00:29:06,600 --> 00:29:09,960 Speaker 1: the expressions are. Good. I'm so glad, Tiffany. I'm wondering 567 00:29:10,160 --> 00:29:14,040 Speaker 1: how much bifurcation there is in the wage scale, how 568 00:29:14,080 --> 00:29:18,680 Speaker 1: the averages don't capture some of the differentials on for example, 569 00:29:18,800 --> 00:29:24,360 Speaker 1: the warehouse staffing picture and the retail workers that are 570 00:29:24,360 --> 00:29:29,040 Speaker 1: getting pretty big wage increases. Are they disproportionately large in 571 00:29:29,080 --> 00:29:32,800 Speaker 1: a good way for the economy on the lower end? Yeah, 572 00:29:33,080 --> 00:29:36,280 Speaker 1: I mean I think they are. So We've seen research, um, 573 00:29:36,320 --> 00:29:38,760 Speaker 1: you know, from economists from the Atlanta Fed. Of course, 574 00:29:38,760 --> 00:29:41,240 Speaker 1: they have their Atlanta Fed Wage Tracker as well, which 575 00:29:41,280 --> 00:29:43,440 Speaker 1: you know, tries to get out some of these compositional 576 00:29:43,440 --> 00:29:46,480 Speaker 1: effects that are impacting measures like average e really earnings. 577 00:29:46,480 --> 00:29:49,760 Speaker 1: But the research that they've done basically suggests that the 578 00:29:49,800 --> 00:29:53,360 Speaker 1: lower lower end of the wage spectrum, those jobs are 579 00:29:53,360 --> 00:29:57,680 Speaker 1: the jobs that are seeing the highest wage gains these days. UM. 580 00:29:57,680 --> 00:30:00,400 Speaker 1: And I agree that is ultimately a good thing. Um. 581 00:30:00,440 --> 00:30:04,040 Speaker 1: You know, we want to see measures broader measures um 582 00:30:04,080 --> 00:30:08,320 Speaker 1: within you know the economy, UM, labor share of profits. Um. 583 00:30:08,360 --> 00:30:10,240 Speaker 1: Of course, profits can be broken down into the kind 584 00:30:10,240 --> 00:30:12,200 Speaker 1: of capital share, the stockholder share in the labor share, 585 00:30:12,200 --> 00:30:14,560 Speaker 1: and ultimately you want to see that labor share UM, 586 00:30:14,600 --> 00:30:16,040 Speaker 1: you know, start to rise again. Of course, it's been 587 00:30:16,080 --> 00:30:19,240 Speaker 1: on a very secular decline. So you know, these these 588 00:30:19,360 --> 00:30:22,840 Speaker 1: kinds of um, you know, wage increases certainly are I 589 00:30:22,880 --> 00:30:25,920 Speaker 1: think a good thing. Um. You know, of course, Congress 590 00:30:25,960 --> 00:30:28,400 Speaker 1: has has sort of talked about raising the minimum wage, 591 00:30:28,800 --> 00:30:32,480 Speaker 1: which you know has been uh, you know, underperforming inflation 592 00:30:33,000 --> 00:30:35,200 Speaker 1: for quite some time. Um. You know, ultimately we don't 593 00:30:35,200 --> 00:30:38,000 Speaker 1: think that will happen, but you know, of course states 594 00:30:38,000 --> 00:30:39,719 Speaker 1: are are doing this. But I do think that that 595 00:30:39,720 --> 00:30:42,120 Speaker 1: would also be be a good thing. Um. You know, 596 00:30:42,200 --> 00:30:44,440 Speaker 1: so all of these policies are are quite good now. 597 00:30:44,480 --> 00:30:46,320 Speaker 1: But in terms of the FED and what this means 598 00:30:46,320 --> 00:30:48,640 Speaker 1: for the FED, you know, I think there it's really 599 00:30:48,680 --> 00:30:52,800 Speaker 1: a question of how broad based the wage inflationary pressures 600 00:30:52,840 --> 00:30:55,200 Speaker 1: are because what the FED doesn't want to happen is 601 00:30:55,200 --> 00:30:56,920 Speaker 1: for us to get in this sort of wage price 602 00:30:57,000 --> 00:30:59,800 Speaker 1: spiral where you have inflation that's sort of accelerating higher. 603 00:31:00,120 --> 00:31:02,080 Speaker 1: And we don't think that we're there yet because again 604 00:31:02,280 --> 00:31:05,120 Speaker 1: we're seeing it concentrated in the very lower end of 605 00:31:05,160 --> 00:31:07,360 Speaker 1: the wage spectrum, which is a good thing, but we 606 00:31:07,400 --> 00:31:10,080 Speaker 1: haven't seen it be more persistent across the wage spectrum yet, 607 00:31:10,160 --> 00:31:13,400 Speaker 1: which would suggest that inflation expectations are still relatively anchored. 608 00:31:13,480 --> 00:31:14,800 Speaker 1: You know, But of course this is something that we're 609 00:31:14,800 --> 00:31:17,160 Speaker 1: watching me and I think the FED is watching Sorr 610 00:31:17,200 --> 00:31:19,840 Speaker 1: Tiffany just real quick here, I'm wondering if you think 611 00:31:20,040 --> 00:31:22,840 Speaker 1: that the increases that we're seeing on the lower end 612 00:31:23,240 --> 00:31:26,160 Speaker 1: get it done, to quote Tom Keene from earlier this morning, 613 00:31:26,280 --> 00:31:28,800 Speaker 1: whether they're enough or whether there will be more persistent 614 00:31:28,880 --> 00:31:34,000 Speaker 1: increases as we try to bridge the gap and missing employees. Well, 615 00:31:34,040 --> 00:31:36,440 Speaker 1: I mean, you know that your question of is it 616 00:31:36,600 --> 00:31:39,280 Speaker 1: enough is a big one, right, So, I mean, for 617 00:31:39,320 --> 00:31:42,000 Speaker 1: the last you know, over thirty years, we've seen you know, 618 00:31:42,000 --> 00:31:44,479 Speaker 1: what it called labor share of of total economic profits 619 00:31:44,480 --> 00:31:48,120 Speaker 1: in this country decline, um. And and that's the result 620 00:31:48,200 --> 00:31:51,800 Speaker 1: of structural issues that have that won't change overnight. So 621 00:31:51,920 --> 00:31:55,520 Speaker 1: you know, of course we've had lower unionization transfward, lower 622 00:31:55,640 --> 00:31:58,240 Speaker 1: unionization as a result of right to work laws across 623 00:31:58,280 --> 00:32:01,800 Speaker 1: this country. So these are sort of solidified. Even this 624 00:32:01,920 --> 00:32:04,640 Speaker 1: lower labor bargaining power is solidified you know, in the 625 00:32:04,680 --> 00:32:07,360 Speaker 1: kind of law and in many states within the country. 626 00:32:07,440 --> 00:32:11,960 Speaker 1: So it's not going to be an overnight fix unfortunately. Um, 627 00:32:12,000 --> 00:32:14,280 Speaker 1: you know, to get you know, kind of these the 628 00:32:14,360 --> 00:32:17,720 Speaker 1: labor versus capital, you know, to get that more in balance. 629 00:32:18,280 --> 00:32:20,560 Speaker 1: So I don't think, you know, is it enough? You know? 630 00:32:20,560 --> 00:32:22,680 Speaker 1: I think we can always you know, do more, um, 631 00:32:22,720 --> 00:32:25,000 Speaker 1: you know, and ultimately I think that kind of prosperity 632 00:32:25,040 --> 00:32:28,680 Speaker 1: for everybody will be good for the broader economy. Tiffany, 633 00:32:28,720 --> 00:32:32,520 Speaker 1: thank you so much. Tiffany Welding with Pimco. This is 634 00:32:32,560 --> 00:32:36,560 Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live 635 00:32:36,680 --> 00:32:40,480 Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio 636 00:32:40,720 --> 00:32:44,280 Speaker 1: and on Bloomberg Television each day from six to nine 637 00:32:44,360 --> 00:32:48,760 Speaker 1: am for insight from the best in economics, finance, investment, 638 00:32:48,920 --> 00:32:53,920 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 639 00:32:54,040 --> 00:32:57,840 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 640 00:32:57,960 --> 00:33:02,000 Speaker 1: the terminal. I'm tom key than This is Bloomer