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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. I

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Speaker 1: want to speak with Jeffrey A. Komodo. He is the

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Speaker 1: American Representative to the International Monetary Fund, the first Deputy

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Speaker 1: Managing Director, the seat of John Lipsky, of David Lipton

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Speaker 1: and others over the recent years. And we're thrilled and

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Speaker 1: Mr Rokamoto could join us this morning. Jeffrey, there is

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Speaker 1: a change at the i m F, and that will

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Speaker 1: be the language of your regional economic outlook for the

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Speaker 1: Asia Pacific region the next time it's published. I think

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Speaker 1: of the fancy title for Hong Kong, the Resident Representative

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Speaker 1: for People's Republic of China, Hong Kong Special Administrative Region.

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Speaker 1: The politics and indeed the reality has changed in Hong Kong.

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Speaker 1: How will the i m F adapt to a new

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Speaker 1: Hong Kong. Thanks Tom, and it's great to be with

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Speaker 1: you here this morning. We're still assessing kind of the

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Speaker 1: the broader geopolitical issues that surround the future of Hong

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Speaker 1: Kong and UH and the U S. China relationship. But

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Speaker 1: suffice to say that Hong Kong's business model is being

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Speaker 1: challenged by actions that have been taken on both sides here.

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Speaker 1: And I think one thing that's important to remember is

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Speaker 1: that Hong Kong is an important place for the world

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Speaker 1: to to transact. It's an important financial gateway for China,

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Speaker 1: and it's an important financial gateway for the rest of

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Speaker 1: the world. And at some point people have to balance

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Speaker 1: or figure out how they weigh these two things in

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Speaker 1: their mind as they go forward. The study of leakages

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Speaker 1: and interdependencies of GETA, GOP and FF is different than

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Speaker 1: you I think of your term at KPMG is well,

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Speaker 1: how will the Pacific rim adapt and adjust to an

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Speaker 1: assertive communist party? You know Hong Kong. Does the I

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Speaker 1: m F suggest the simplistic idea that Singapore will pick

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Speaker 1: up business or can there be economic gain for other nations?

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Speaker 1: This is, you know, this is a chance for firms

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Speaker 1: to decide where they want to do business in light

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Speaker 1: of what's going on. UM, there's UH. You know, Asia

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Speaker 1: is a big place and there are many many places

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Speaker 1: where there are also quite a bit of financial activity.

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Speaker 1: The question is going to be which place sets the

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Speaker 1: conditions right for the capital to flow through that jurisdiction.

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Speaker 1: Hong Kong has has proven itself over time is having

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Speaker 1: a very stable and predictable monetary policy, well governed financial sector. Uh.

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Speaker 1: These kinds of things are are important for for fostering

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Speaker 1: this kind of activity in your area. And we'll see

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Speaker 1: if other other regions decided to compete. I think, you know,

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Speaker 1: we we want a system of competition because that leads

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Speaker 1: over time to best results. Obviously, Jeffrey, we're talking about

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Speaker 1: this and bit a backdrop of slowing growth in general.

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Speaker 1: Uh mals a concern about an acceleration of some of

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Speaker 1: the weakness. And you expect the IMF expects that medium

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Speaker 1: and small business bankruptcies could triple to about from four

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Speaker 1: percent currently by the end of this year. What do

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Speaker 1: you hope that policymakers do to save this off? Right now,

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Speaker 1: we're at a critical stage in the in the crisis,

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Speaker 1: which is we're trying to protect the productive capacity of

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Speaker 1: the economy. Right, that comes down to two things. One

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Speaker 1: is protecting literally human capital, so protecting people's lives and

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Speaker 1: protecting their health so they can work productively. UH. And

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Speaker 1: on the other side of this, and the other is

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Speaker 1: protecting firms that would have otherwise been viable businesses. UM.

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Speaker 1: The challenges understanding which ones are viable and which ones

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Speaker 1: aren't at this stage in the in the crisis, and

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Speaker 1: so they're The type of firm level support that is

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Speaker 1: being provided, whether it's by the U S or European

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Speaker 1: governments or others, is absolutely critical UH and is needed

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Speaker 1: to kind of make sure that businesses that do can

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Speaker 1: see the other side of this don't have to go

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Speaker 1: through a restructuring that is unduly complex and costly. Mr Komoto,

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Speaker 1: the first time I heard the word macro prudential was

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Speaker 1: from the August John Lipsky standing in the room of

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Speaker 1: the consul and Foreign Relations and people to be blunt.

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Speaker 1: Folks were scared stiff. It was after the financial crisis.

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Speaker 1: Do we have enough humility right now, sir, of where

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Speaker 1: we are? Your managing director has made it real clear

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Speaker 1: in bulgarian bluntness, the situation we're in. Do we understand

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Speaker 1: the crisis we're in and the risk to our international system? Well,

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Speaker 1: you know, the managing director is good with Bulgarian bluntness.

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Speaker 1: I don't know what that that gives me. But on

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Speaker 1: on the on the issue of whether we understand what's

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Speaker 1: what's what's happening as this has gone on longer than

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Speaker 1: people expect or initially expected, I think the reality is

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Speaker 1: said in that your policies have to be calibrated for

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Speaker 1: for the longer haul. Uh. And that means a different

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Speaker 1: type of approach attend actually than what you were taking

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Speaker 1: in March or April. Um. You know, we're seeing economies

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Speaker 1: having to grapple, for example, with reopening. That's that's a

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Speaker 1: difficult process. A partial reopening still puts economic and financial

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Speaker 1: strain on the system. Uh. And that you know is

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Speaker 1: gonna need a lot of thought in terms of how

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Speaker 1: how we get through this. At the I m F,

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Speaker 1: you know, this is a question that we're studying quite intensively.

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Speaker 1: We're trying to be responsive to members that are at

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Speaker 1: various stages of reopening and helping them set their policies,

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Speaker 1: you know, in other words, winding down the ones that

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Speaker 1: are no longer needed in starting up the new ones

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Speaker 1: that are needed for this juncture. Jeffrey, how should policy

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Speaker 1: makers decide which companies to save and which to let

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Speaker 1: go to bankrupt. That's a that's a million dollar question

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Speaker 1: on on a on what to how to sit these

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Speaker 1: sit through these companies, some businesses we're struggling at the

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Speaker 1: beginning of this and uh, you know, for all and

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Speaker 1: for all, for all realities, they're not going to make it,

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Speaker 1: or that they were never intended to make it but

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Speaker 1: did benefit from firm support. But what we need to

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Speaker 1: think about is what has structurally changed in the in

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Speaker 1: the context of a pandemic. Certain sectors are simply not

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Speaker 1: going to be uh as economically viable given how their

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Speaker 1: business follow works. That these are places where a lot

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Speaker 1: of people are gathering. If this requires a lot of

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Speaker 1: you know, human to human contact, if the business model

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Speaker 1: can adapt to one that is socially distant and contact

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Speaker 1: lists or for virtual uh, that's not a business model

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Speaker 1: that that is likely to survive uh, you know through

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Speaker 1: this without a substantial amount of support. The the the

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Speaker 1: question is is how do you bridge them along the

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Speaker 1: way and the most efficient way possible. There are a

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Speaker 1: variety of ways that we're seeing countries do this. Each

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Speaker 1: country is going to have to take its own approach.

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Speaker 1: On one hand, you have this concerned about emerging markets

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Speaker 1: and this call for writing down at chunk of the

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Speaker 1: debt so that a lot of corporations and sovereign sovereignties

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Speaker 1: can can hinue. And on the other hand, you have

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Speaker 1: this call to add on debt to companies that are

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Speaker 1: struggling in order to keep them going and bridge them

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Speaker 1: to the other side. At what point are you talking

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Speaker 1: about zombie companies, about the zombification of corporations around the world,

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Speaker 1: and the concern about growth on that in the longer term.

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Speaker 1: Good question. The the uh one thing I think we

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Speaker 1: have to analytically analyze, and this is something that you

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Speaker 1: know authorities in governments. A lot of this will depend

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Speaker 1: on the insolvency regime that's in place in each jurisdiction.

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Speaker 1: But a lot of what you have to think about

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Speaker 1: is if you're a business and you weren't able to

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Speaker 1: produce or as much revenue as you as you were

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Speaker 1: anticipating in January of this year, and now you've had

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Speaker 1: to borrow to bridge your way through this, you now

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Speaker 1: have effective balance sheet, you you have you have a

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Speaker 1: load on your balance sheet you're gonna have to repay

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Speaker 1: at some point, even if that in the interest rate

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Speaker 1: on that debt is is zero percent. Um. That's that's

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Speaker 1: cost to you and your business going forward has a

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Speaker 1: higher cost structure. So if you're thinking about a higher

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Speaker 1: cost structure in a lower revenue base, um, you know

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Speaker 1: it's you're gonna have to take a critical lie to

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Speaker 1: say who who can't tolerate that? Even though loans may

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Speaker 1: be available today, you have to take a close look

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Speaker 1: at which firms won't won't survive under under that kind

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Speaker 1: of strength, Jeffrey. Just to wrap things up, just finally,

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Speaker 1: let's finish with Europe. We all watch the economic tragedy unfold.

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Speaker 1: After the last economic crisis, we spent ten years watching

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Speaker 1: the continent compromise their way to mediocrity and suboptimal outcomes

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Speaker 1: again and again and again. Going into a massive weekend

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Speaker 1: this Friday with European leaders, what's the I m f

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Speaker 1: S message. What's your message Jeffrey for the Europeans this weekend,

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Speaker 1: I would say, keep the eye on the prize. There's

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Speaker 1: there's uh, obviously a very consequential ECB decision that's forthcoming,

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Speaker 1: and just in just a couple of minutes here, it's

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Speaker 1: a big weekend to try and sort through. And you know,

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Speaker 1: more important than just the policy issues surrounding m navirus

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Speaker 1: and assistance is how Europe is going to sort through

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Speaker 1: questions that affect that affect the member countries and chart

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Speaker 1: a path truly to growth and prosperity. Growth isn't gonna

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Speaker 1: come in a one shot, uh, you know, assistance package

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Speaker 1: from from the European authorities. It's going to require a

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Speaker 1: commitment to you know, longstanding things that we've all understood, right,

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Speaker 1: which is increasing productivity, improving competitiveness. Uh and uh and

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Speaker 1: we'll see me wish the Europeans well as they try

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Speaker 1: to sort through these difficult issues. I think we all do. Jeffrey,

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Speaker 1: fantastic to hear from you, sir, Jeffrey, alcome OUTO there.

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Speaker 1: I am at first deputy managing to director. A huge

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Speaker 1: weekend coming up, A real shoppy couple of weeks for

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Speaker 1: this equity market. Is the rotation back on. Let's start

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Speaker 1: the conversation this morning with Julian Emmanuel bt i G

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Speaker 1: Chief Equity and Derivatives Strategist, Judy and great to catch

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Speaker 1: up with you, buddy. Going back to Friday, the equal

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Speaker 1: way SMP out performing a market cap at S ANDP.

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Speaker 1: Is this the rotation again or another head fight. No,

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Speaker 1: it's the rotation again, with a slight difference here. Okay,

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Speaker 1: The problem that we have over the last several months

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Speaker 1: is that that the large names in the SMPS have

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Speaker 1: become such an overwhelming percentage of the index that even

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Speaker 1: though on balance the rotation into cyclicals, um, you know,

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Speaker 1: and real laggard is likely going to be positive long term,

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Speaker 1: it's definitely a headwind in the nearer term because you

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Speaker 1: you're in the middle of unwinding a great deal of

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Speaker 1: momentum that's accumulated. Julian, what are you doing right now?

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Speaker 1: I mean, I'm sort of jumping ahead of the conversation here,

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Speaker 1: but what is your action plan for equity investment in

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Speaker 1: trading right now? Right? So? So broadly, in our view,

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Speaker 1: we think that, you know, if you look at the SMP,

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Speaker 1: you've been in a trading range for really around two

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Speaker 1: months at this point. We actually ink that that range

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Speaker 1: continues um. But again, we think that the momentum names

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Speaker 1: are gonna unwind. So we want to hedge the NAT

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Speaker 1: deck exposure hedging q q Q, and we want to

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Speaker 1: take some chips off the table and some of the

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Speaker 1: very highest flying names which we think come earning season reports,

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Speaker 1: it's really going to be difficult for them to get

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Speaker 1: any forward price accident because the expectations are very high

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Speaker 1: as opposed to some of the more typical names financials

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Speaker 1: for example, Obviously the reports have been shoppy, um but

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Speaker 1: you've seen better revenue from from the trading side, but

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Speaker 1: they're expect expected earnings are down over fifty quarter on quarters,

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Speaker 1: so it's really hard to see downside to those numbers.

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Speaker 1: And you know, consequently, we think those stock prices stabilized

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Speaker 1: season moves on Julian, the high flyers you expect to unwind.

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Speaker 1: Does that mean that they are going to decline in

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Speaker 1: a major way? The facebooks of the world, the netflix

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Speaker 1: is of the world, perhaps the twitters of the world.

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Speaker 1: Of seeing down of US ex percent ahead of the

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Speaker 1: market open today, or does that mean they're just going

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Speaker 1: to underperform some of the cyclicals. Well, we think you

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Speaker 1: could see that that come off around ten percent. I mean,

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Speaker 1: if you think about it coming off of ten coming

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Speaker 1: off ten percent, it's really not that much considering that

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Speaker 1: you know, we've we've moved about twelve thirteen percent higher

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Speaker 1: in the last month alone and off the low we're up,

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Speaker 1: you know, well over fifty. It's really in a lot

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Speaker 1: of ways sort of going to blow the froth off

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Speaker 1: the off the market and likely in the long term

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Speaker 1: would be a healthy development. Well, Judian, relative to the

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Speaker 1: move off the bottom yet, ten percent might not be

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Speaker 1: a lot. But I just wonder if you got a

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Speaker 1: ten percent move lower on the NASTAG, can you get

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Speaker 1: a move higher on the s and P five hundred,

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Speaker 1: Just real simple maths, Judy and I struggle to see

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Speaker 1: how that can happen. No, it's not likely going to happen,

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Speaker 1: which is why we think, you know, basically the trading

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Speaker 1: range that's broadly defined uh on on the bottom in

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Speaker 1: the SMP and and the recent highs this week around

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Speaker 1: thirty two, thirty five, thirty forty, we think that's going

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Speaker 1: to prevail. And depending on the severity of the NAZAC pullback,

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Speaker 1: you know, you could probe the bottom end of the

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Speaker 1: range in the esthment. What I'm hearing from you, Judy,

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Speaker 1: and is some kind of asymmetric risk towards the cyclical

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Speaker 1: is doing better because the bar is so low? Is

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Speaker 1: that affair character characterization of things? Absolutely? John talking to

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Speaker 1: me about a Vicks curve as well going out into November,

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Speaker 1: because a lot of people think we're gonna see some

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Speaker 1: real chomping us coming out of the summer. Well, there's

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Speaker 1: no question about it. But positively, when thinking about the election,

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Speaker 1: you know, the hedging over the election term has already

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Speaker 1: caused the VIX curve to bulge as well as skew

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Speaker 1: in options. You know, the price of downside puts versus

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Speaker 1: upside called the heads the election is historically expended. Generally,

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Speaker 1: when that happens, it sort of means that the worst

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Speaker 1: is priced in and you're likely to get a positive

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Speaker 1: reaction regardless of of how the election sorts itself out.

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Speaker 1: It's just you know, the lessoning of uncertainty, presumingly that

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Speaker 1: we're going to have a winner on the morning of

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Speaker 1: November four, um. But for us, the risk again is

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Speaker 1: really more in the near term, looking out towards the

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Speaker 1: end of the summer and Labor Day, because of the

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Speaker 1: accumulating pressure in the NAZAC and because you had this

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Speaker 1: incredible volatility sling shot where the nasdacs um VIX, the

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Speaker 1: x N it was trading at a discount to the

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Speaker 1: SMP five back in April, which was part of our

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Speaker 1: bullish call in April, and now it's at a massive premium.

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Speaker 1: That kind of sling shot coupled with Monday. Monday was

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Speaker 1: a very key day. You traded over two percent above

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Speaker 1: the prior days high in the nattack and closed below

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Speaker 1: the low. That's only happened three times in the history

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Speaker 1: of the NAZAC. Lower prices were in store on all

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Speaker 1: three occasions. Julian Emmanuel, with the folks, future is a

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Speaker 1: negative twenty, a little bit better tape than we saw

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Speaker 1: an hour ago. Julian, I'm gonna ask you a really

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Speaker 1: dumb question. We do this because I know a young

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Speaker 1: hipster like you only buys E T F S. I

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Speaker 1: remember US steel and Anacona copper is a cyclical? What's

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Speaker 1: a cyclical? It's probably, for the most part something that

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Speaker 1: is has depressed valuations and is reflecting the continuation of

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Speaker 1: an economic recession which we don't share. But broadly, you know,

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Speaker 1: it's really the swap of financials, industrials, materials and energy.

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Speaker 1: Really broadly speaking, we're speaking with Julian Emmanuel of bt

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Speaker 1: I G. I'm still struck on this idea of the

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Speaker 1: unwind within the big tech names and the fact that

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Speaker 1: this is going to come on the heels of earnings.

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Speaker 1: Yet there's been so much disparity between some of the

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Speaker 1: big tech names, and I think this is important to

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Speaker 1: point out. You've got the likes of Netflix and Amazon

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Speaker 1: gaining more than six Facebook up only seventeen percent. Are

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Speaker 1: the loss is going to be concentrated in specific names

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Speaker 1: or will this be a broad based technical unwind that

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Speaker 1: will be h something of a correction more broadly, Uh,

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Speaker 1: It's probably going to be elements of both, but we

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Speaker 1: would expect the highest flyers to probably correct the deepest,

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Speaker 1: you know. And again, if you think about it, part

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Speaker 1: of of what's been unusual about the last couple of

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Speaker 1: months is public participation in the market. It's literally at

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Speaker 1: record however you measure it, particularly an options activity, um,

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Speaker 1: you know. And again, some of the highest flyers really

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Speaker 1: or where the public is concentrated, and we think not

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Speaker 1: dissimilar to what you sort of saw in February of

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Speaker 1: the market first started coming off, those names are most modering.

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Speaker 1: This is really important and it goes back to what

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Speaker 1: Lisa said earlier, Julian, are you looking at the so

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Speaker 1: called high flyers to to go down on an absolute

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Speaker 1: basis or a relative basis. Now at this point it's

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Speaker 1: likely going to be absolute. You know, part of our

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Speaker 1: view that no that can correct ten percent from here mhm,

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Speaker 1: Julian gretta cash judy in the manuel there of BT

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Speaker 1: I g how better fantastic to cash? I would you, sir,

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Speaker 1: our better gallo with algebra investments, Alberto, Just to get

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Speaker 1: our hands around the guidance, just to refined to some

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Speaker 1: words I used a little bit earlier. Today. Que will

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Speaker 1: carry on shortly after QUI ends. They may raise interest rates.

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Speaker 1: Long after they've raised interest rates, they'll be reinvesting these

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Speaker 1: maturing assets on the balance sheet. But QUEI is not

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Speaker 1: gonna win for a long long time, is it. Alberto?

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Speaker 1: Good morning and John and Tom. We're looking at central

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Speaker 1: banks getting stuck into quantity debating into US and purchases

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Speaker 1: for a very very long period of time. The idea

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Speaker 1: of modern monitoring theory or prolonged purchases for central from

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Speaker 1: central banks. It's not a new idea. We had periods

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Speaker 1: in history looking back, um, not ten years ago, but

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Speaker 1: much longer when interest rates were low and governments were

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Speaker 1: trying to use their currencies to fund large deficits. In history,

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Speaker 1: we had many recurring episodes where governments essentially debased their currencies,

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Speaker 1: and we are probably about to witness this type of

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Speaker 1: turning point. There is something around U hundred trillion dollars

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Speaker 1: in global fixing up sovereign bonds and investment great debt

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Speaker 1: that are yielding very close to one percent or zero

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Speaker 1: or below zero. Now for the first time, we're seeing

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Speaker 1: montreal steamus, unprecedented and phisical schemus combined. So a lot

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Speaker 1: of these savings are essentially a sitting dock in the

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Speaker 1: potential picture of a small rise. Given a small rise

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Speaker 1: in inflation, what central banks will do is to keep

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Speaker 1: buying because they cannot afford government bond deals and financing

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Speaker 1: costs to rise because there's too much debt. Brittle. This

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Speaker 1: is so important what you're saying in folks, We've really

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Speaker 1: got to focus on this right now. Going back to

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Speaker 1: the researcher Paul Deguar and Charles White plots at the

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Speaker 1: beginning of the financial crisis, Come on, Alberto, it is

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Speaker 1: one big exercise in kicking the can down the road.

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Speaker 1: What is the price to the system of Europe perpetuating

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Speaker 1: that process? This is this is why all investors are

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Speaker 1: a bit uneasy. We have stock markets and a lot

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Speaker 1: of financial instruments hitting record highs. But I have to

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Speaker 1: say there's a theory mood among market participants, and there's

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Speaker 1: the feeling that someone will have to pay the price.

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Speaker 1: So that's that's the question you're asking, what is the price?

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Speaker 1: The price for an unprecedented monitor and fiscal steamers, the

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Speaker 1: price for que infinity could be at some point to

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Speaker 1: have a higher level of inflation. And here I'm gonna

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Speaker 1: go and quote Carmen Reinhardt uh who said that the

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Speaker 1: lesson of history that even if institutions and and and

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Speaker 1: policy makers improve, they're always tempted to stretch the limits.

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Speaker 1: Some governments, maybe because of elections, maybe because they want

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Speaker 1: to keep unemployments low, they may be tempted to stretch

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Speaker 1: the limits to push interest rates lower, to increase qeing

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Speaker 1: even more, to do yield cer control, to goingto more

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Speaker 1: negative territory. And even a small rise in inflation means

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Speaker 1: that you're gonna get negative returns on your savings if

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Speaker 1: you're invested in tresories, if you're invested in guilts in

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Speaker 1: the UK or Euro sovereign debt. So I'm not so

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Speaker 1: worried about, you know, the euro breakup risk, but I

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Speaker 1: am worried if I'm holding BTPs the one percent, or

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Speaker 1: if I'm holding treasuries the one percent, worried about inflation

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Speaker 1: going to two or three. Alberto, given the fact that

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Speaker 1: central bankers have been pushing the limit, how much are

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Speaker 1: you expecting the ECB to start buying higher debt the

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Speaker 1: way that the Federal Reserve has and in order to

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Speaker 1: do to sort of profit from that, buying highled credit

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Speaker 1: in Europe ahead of that. So this is a race

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Speaker 1: to the bottom with every central bank and every government

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Speaker 1: trying to essentially do more stimulus to safeguard industrial infrastructure

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Speaker 1: UH in each respective economy. So the US and the

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Speaker 1: UK have already moved pretty aggressively. DCB has an internal

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Speaker 1: conflict because some countries want to do more and some

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Speaker 1: don't want to do more. What they can do, in addition,

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Speaker 1: as you said, is they could buy double B rated

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Speaker 1: bonds fallen angels in the high space, or they could

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Speaker 1: increase the envelope of the t lp R O or

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Speaker 1: enlarge the tiering the difference between the rates the negative

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Speaker 1: rates that banks are receiving versus the deposit rate of

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Speaker 1: the TLPR or essentially giving more money to banks. I

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Speaker 1: think these two are not a base case for today,

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Speaker 1: but they are a put option. They are a possibility

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Speaker 1: if things get worse in the second half. Bet so

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Speaker 1: fantasy to catch up with this always great have you

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Speaker 1: want to day like today? I bet so? Kind of

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Speaker 1: the a algebraus investments. Julia Cornados with mecro policy perspectives.

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Speaker 1: Her acclaim out of University of Texas Austin was the economy.

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Speaker 1: She was at Barkley's and BMP perry BA where she

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Speaker 1: absolutely nailed the slowness of GDP that was to come

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Speaker 1: with mecro policy perspective, she joins us this morning, Dr Cornado,

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Speaker 1: let's go back to that moment where you nailed the

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Speaker 1: GDP growth that didn't happen. Are we falling into that

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Speaker 1: trap again? We're certainly at danger of it. I mean,

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Speaker 1: the FED has done a pretty good job disconnecting markets

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Speaker 1: from the economic distress we're experiencing, which prevents the sort

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Speaker 1: of debt deleveraging that we were starting to see in March.

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Speaker 1: And it was that balance sheet drag that really was

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Speaker 1: the constraint on the recovery last time around. Now we

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Speaker 1: don't have over leveraged consumers. That's definitely a benefit. We

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Speaker 1: also don't have banks that are in uh distress, we're

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Speaker 1: having solvency questions, and that's also a huge benefit. But

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Speaker 1: we do have a deeper fundamental whole in the economy

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Speaker 1: and just a tremendous amount of uncertainty. So there is

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Speaker 1: still lots of need for support to get the economy

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Speaker 1: through this and to minimize the structural damage and the

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Speaker 1: frictions that can result if this just drags on and

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Speaker 1: on and we don't get some clarity on the virus.

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Speaker 1: Dr Coronado tell us about the rates of change, the

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Speaker 1: dynamics value of something like jobless claims right now? Is

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Speaker 1: that statistic that we see here, and I believe it's

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Speaker 1: ten minutes that statistic. Is it a vailue to you? Oh,

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Speaker 1: tremendous value. I mean, the fact that jobless claims are

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Speaker 1: still so historically elevated tells us that there's just incredible

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Speaker 1: churn in the labor market. We have not settled down,

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Speaker 1: We have not gotten back to normal. Yes, we've had

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Speaker 1: a couple of surprisingly good job reports, but this is

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Speaker 1: mostly about people reconnecting to their employers as some reopenings happened.

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Speaker 1: But we see now that those reopenings were too early.

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Speaker 1: It's very fragile. Uh, and the outlook for the economy

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Speaker 1: could take a turn for the worse again, given that

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Speaker 1: we're seeing increased restrictions in the states where the virus

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Speaker 1: has really taken off. So the go ahead, Sorry, no, no, Julia.

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Speaker 1: Yesterday American Air said that they might lay off are

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Speaker 1: likely going to lay off twenty five thousand employees when

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Speaker 1: the fiscal support runs out. This raises a question was

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Speaker 1: the fiscal support worth it? Did it just prolong the

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Speaker 1: inevitable by keeping people on the payroll in theory but

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Speaker 1: not in actuality. To Tom's point of what is the

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Speaker 1: meaning of furlough, what's your view on that? Well, I

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Speaker 1: think that the design was good. The idea was that

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Speaker 1: this was a temporary stop that we needed to put

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Speaker 1: on the economy as we put the structure in place

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Speaker 1: to manage the virus, as we dampened the spread head

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Speaker 1: and then put the structures in place to manage it

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Speaker 1: going forward. We have squandered that opportunity as a nation.

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Speaker 1: Some states have done better than others. But UM, the

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Speaker 1: design and the intention was I think well thought out. Uh.

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Speaker 1: The actuality is that as one week again we reopened

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Speaker 1: way too soon, We're not going back to normal. We

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Speaker 1: haven't gotten the virus under control. So these companies are

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Speaker 1: now starting to hunker down for a longer, more protracted recovery,

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Speaker 1: and so they have to right size their businesses. So

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Speaker 1: it wasn't the fault of the stimulus. It was the

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Speaker 1: fault of the public health response and the impatience amongst

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Speaker 1: a lot of very large states. UH that has led

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Speaker 1: to UH this situation where we're now seeing more permanent,

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Speaker 1: lasting separations and reductions and force. This is so important.

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Speaker 1: And as we wait for these claims out of the

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Speaker 1: initial jobless claims that we're going to be getting soon,

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Speaker 1: what are you looking for to indicate the scope the

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Speaker 1: depth of that second wave of layoffs that already has begun.

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Speaker 1: So M one, we look at the initial claims, both

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Speaker 1: the regular and the pandemic program for gig economy workers,

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Speaker 1: just how many new filings are there, and then we

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Speaker 1: look at continuing claims, which gives us a better sense

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Speaker 1: of on net how many people are leaving the roles

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Speaker 1: of unemployment and returning to work. Uh, and that gives

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Speaker 1: us a sense of of what might be happening on

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Speaker 1: the hiring side of the ledger. UM, so we haven't

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Speaker 1: seen as much. There's been a little bit of a

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Speaker 1: disconnect between claims and payrolls. Payrolls show a bit more

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Speaker 1: reconnection than claims show. Uh, there's a lot of noise

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Speaker 1: in the data. There's uh, you know, on both sides,

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Speaker 1: both for payrolls and for claims, you know, triangulating the

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Speaker 1: whole picture. Though we still do have a very elevated

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Speaker 1: level of unemployment and that rich turn that we were

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Speaker 1: starting to see a very nice dynamic is at risk

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Speaker 1: and claims is we're you know, it's timely. We get

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Speaker 1: it every week, so that gives us a real time

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Speaker 1: read on how this resurgence and the virus is impacting

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Speaker 1: the labor market. Jenia, brilliant to see you, Jendia coloring

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Speaker 1: out of that macroid policy perspective. Thanks for listening to

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Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

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Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

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Speaker 1: on Twitter at Tom Keane. Before the podcast, you can

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Speaker 1: always catch us worldwide. I'm Bloomberg Radio