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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm term Keene jay Leie.

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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 for

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Speaker 1: our audience worldwide. Life from London in New York. Joining

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Speaker 1: us now on Bloomberg Television and Radio. I'm pleased to

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Speaker 1: say is the Cleveland Fed President Lauretta Mester, and of

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Speaker 1: course my good colleague and friend, Bloomberg International Economics and

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Speaker 1: Policy correspondent Michael McKee. President Mster, fantastic to have you

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Speaker 1: with us again on this program. We've appreciating your time.

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Speaker 1: Through much of this economy, in this recovery has continued.

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Speaker 1: There is a real worry as we go deeper into

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Speaker 1: winter about what happens with the momentum that we've built

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Speaker 1: up through the summer. Let's just start there, President Mster,

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Speaker 1: what do you see and where do you see deceleration

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Speaker 1: that concerns you right now out Well, there's no doubt

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Speaker 1: about it that you said it. Well, there was a

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Speaker 1: lot of momentum. In fact, the economy had come back

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Speaker 1: stronger in the third quarter than many of us had

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Speaker 1: thought it would. The economy just proved to be more

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Speaker 1: resilient than than we had thought. UM. Despair across sectors. UM. Certainly, UM.

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Speaker 1: Some sectors that really need that face to face UM

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Speaker 1: kind of commerce are not doing well at all. Other

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Speaker 1: sectors are back to their pre pandemic levels or even beyond.

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Speaker 1: I'm thinking autos, I'm thinking housing. So that disparity is troubling.

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Speaker 1: We knew that things were going to slow down UM

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Speaker 1: after the bounce back in the third quarter, and you're

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Speaker 1: seeing that in the data. Now. UM, I am concerned

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Speaker 1: about the lack of fiscal policy. If you look back

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Speaker 1: and to the beige book that we had going into

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Speaker 1: the last fm C meeting, this is the compilation of

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Speaker 1: all the contexts that we all um for prior to

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Speaker 1: FLMC meetings. You'll see they had three concerns. One was

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Speaker 1: what was going to happen to the virus in the fall,

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Speaker 1: to what was gonna who was going to be the

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Speaker 1: next president of the United States? Election uncertainty, and three

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Speaker 1: what was going to happen with fiscal policy? Because they

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Speaker 1: were concerned without fiscal policy, things could get a lot worse.

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Speaker 1: So one of those uncertainty has been resolved. The election

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Speaker 1: uncertainty is resolved. But the virus case increase is very concerning,

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Speaker 1: and the fact that we don't have a fiscal package

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Speaker 1: is very concerning. So monetary policy, of course, has been

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Speaker 1: you know, we've said we're using our tools, We're gonna

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Speaker 1: leave things very accommodative. We have interest rates essentially zero,

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Speaker 1: we have UM asset purchases, and we have our thirteen

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Speaker 1: three facilities that are helping to get UM credit flowing

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Speaker 1: to households and businesses. But with the despaired impact of

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Speaker 1: this pandemic, that's where fiscal policy plays a role, because

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Speaker 1: fiscal policy can be really targeted two households and small

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Speaker 1: businesses that really need the aid, and the states and

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Speaker 1: local governments which have taken on a lot of the

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Speaker 1: burden here of helping. So I am concerned. Yesterday we

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Speaker 1: had our Community Advisory Council meeting and these are representatives

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Speaker 1: UM that are really on the ground in low and

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Speaker 1: moderate income neighborhoods and and there's a real need for housing,

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Speaker 1: affordable housing. Food security is an issue that's becoming more

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Speaker 1: a little more problematic as the fall has gone on

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Speaker 1: and the virus. You know, the case numbers are troubling.

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Speaker 1: So you see states um putting on restrictions, and even

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Speaker 1: without states doing it, you can see in the mobility

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Speaker 1: data that we look at that people themselves are being

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Speaker 1: more restricted. Well exact, there doesn't seem to be any

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Speaker 1: sign that Congress is going to do anything at least

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Speaker 1: in the short run here. So does that mean you

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Speaker 1: need to act, you need to do something at the

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Speaker 1: December sixte meeting, Well, I think we're in a good

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Speaker 1: place with our monetary policy because we are very accommodative.

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Speaker 1: That I think the need is going to be need

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Speaker 1: to be a fiscal response because they need to be

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Speaker 1: able to shore up the firms and the businesses that

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Speaker 1: are really being hurt by the pandemic. And as I said,

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Speaker 1: you can see some parts of the economy are doing

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Speaker 1: very well and yet there's a lot of people still

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Speaker 1: out of work. We have nine million people were not

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Speaker 1: even back to where we were in February, So you

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Speaker 1: know that disparity is really caused for a fiscal response.

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Speaker 1: And if you continue, if you look back at where

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Speaker 1: we were at the start of this, the idea was

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Speaker 1: to come in with strong fiscal policy which happened that

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Speaker 1: cares at response and with monetary policy working in tandem

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Speaker 1: right to try to get people through that period where

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Speaker 1: the economy really had to shut down because of the

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Speaker 1: surgeon the virus to make sure that we weren't overwhelming

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Speaker 1: our medical system. We're kind of back to those levels now.

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Speaker 1: I mean a lot of the medical systems in different

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Speaker 1: parts of the country now are really under a lot

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Speaker 1: of stress. And the idea that we're asking people to

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Speaker 1: make a sacrifice again and not having that aid in place,

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Speaker 1: I think it's going to be really burdensome on the

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Speaker 1: economy going forward and certainly burnens them on the families

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Speaker 1: um that that are bearing the brunt of the small

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Speaker 1: business owners we talked to that are really, you know,

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Speaker 1: having to live now through some restrictions that they don't

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Speaker 1: know whether they're going to come out at the end

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Speaker 1: or whether they're gonna have to shut down for good.

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Speaker 1: And I think these things are related in the sense

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Speaker 1: that if you were a small business owner or a

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Speaker 1: person with a job that has to go into work

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Speaker 1: and you don't have that income security, right, it's hard

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Speaker 1: to follow some of the restrictions. So you know, on.

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Speaker 1: You know, you may be taking a little more risk

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Speaker 1: because I don't have a job. If I don't go in,

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Speaker 1: so I might have been exposed, possibly to someone who

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Speaker 1: had the virus not showing symptoms. I may go into work. Similarly,

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Speaker 1: a small business rather than you know, you know, shutting down,

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Speaker 1: if there's a number of people who might have been exposed,

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Speaker 1: they're going to try to stay open because they don't

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Speaker 1: really have a choice of the sense that if they

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Speaker 1: don't stay open, they're going to go out of business.

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Speaker 1: So income support I think it's needed for both to

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Speaker 1: help them get through. But I also think it affects

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Speaker 1: how well we aren't following what the public health officials

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Speaker 1: say are the right things to do to fight the virus.

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Speaker 1: And I think that troubles me as well. Well, that's

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Speaker 1: all well and good, but Wall Street is looking at

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Speaker 1: this and saying, well, we're not going to get anything

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Speaker 1: out of Washington, so we need to get something out

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Speaker 1: of the Fed. Uh, the yield curve is steepened a

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Speaker 1: little bit. Maybe you need to turn out your holdings

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Speaker 1: on the balance sheet or maybe do a little more

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Speaker 1: QUEI do you think either of those things are called

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Speaker 1: for at the December meeting. Well, I mean, I'm not

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Speaker 1: going to pre judge the December meeting. We certainly at

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Speaker 1: every meeting we go in we talk about where are police,

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Speaker 1: he is calibrated, and what we need to do to

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Speaker 1: make sure that we're adding accommodation and supporting the recovery.

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Speaker 1: But again, you know, you have to look across different

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Speaker 1: sectors and sort of evaluate what tool can it help

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Speaker 1: the most um to bring up the sectors that are

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Speaker 1: you know, weakened in this and really affected by this.

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Speaker 1: And it's not clear to me that monetary policy necessarily

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Speaker 1: is the right tool to address those concerns. I grant

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Speaker 1: you that, you know, right now it looks like the

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Speaker 1: fiscal authorities are not going to come in with another package,

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Speaker 1: but you also have to think about what was the

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Speaker 1: right tool to address this. And you know, to my mind,

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Speaker 1: when you have a dispirit um, this such disparity across sectors,

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Speaker 1: it's the fiscal authorities and that fiscal policy that is

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Speaker 1: the right tool to use to address these things. And

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Speaker 1: so that's what's sort of the tension here is that

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Speaker 1: monetary policy is doing I think the right thing and

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Speaker 1: keeping things very accommodative and yet we don't have the

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Speaker 1: other side, and it's not an either or like one

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Speaker 1: can't substitute for for the other. Right, the reason it

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Speaker 1: worked well in the beginning of the pandemic is they

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Speaker 1: were working together. They weren't substitutes. They were reinforcing one another,

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Speaker 1: pres Messa. One thing you could do, obviously, and I

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Speaker 1: appreciate you're not here to pre judge the meeting, although

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Speaker 1: we would love you too. One question that has been

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Speaker 1: asked for people in fixed income markets at the moment

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Speaker 1: is whether you would expect the average maturity of your

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Speaker 1: bond buying. I don't expect you to give me a

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Speaker 1: decision on that, but could you tell me if you

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Speaker 1: see the benefits in doing something like that. Well, I mean,

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Speaker 1: as you know, from the the Great Financial Crisis and

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Speaker 1: the Great Recession, right, we went in and bought long

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Speaker 1: term assets to try to push down right the long

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Speaker 1: end of the yield curve in terms of the yields there,

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Speaker 1: and that's a tool monetary policy. When we started the

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Speaker 1: asset purchases in this environment, it was more about market

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Speaker 1: dysfunction that we were being and the treasury market um

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Speaker 1: and the mortgage backed security market. So the the actual

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Speaker 1: catalyst UM was about that dysfunctions we were buying across

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Speaker 1: the curve. UM. Of course those purchases also added accommodation,

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Speaker 1: so they had a two twofold effect. UM. But you're

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Speaker 1: right in the sense that there are things like, you know,

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Speaker 1: looking at UM, the maturities that we're buying UM. Clarifying

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Speaker 1: our forward guidance on asset purchases UM can be helpful.

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Speaker 1: You know, I'm a fan of you know, as clear

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Speaker 1: communications as we can make them UM, so that people

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Speaker 1: understand our reaction functions. So there are things like that,

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Speaker 1: UM that certainly would be under consideration UM. And that's

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Speaker 1: that's you know, going forward, we're going to have those

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Speaker 1: discussions that are needing just because with time for time

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Speaker 1: is that something would discuss the next mate because we

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Speaker 1: do understand the reaction function around interest rights very clearly.

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Speaker 1: Now we don't un asset purchases. Is that something needs

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Speaker 1: to clarify. Well, I certainly am always a fan of

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Speaker 1: clarifying our communications. And you know, at every meeting we

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Speaker 1: talk about our communications as part of them. It comes

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Speaker 1: out of the meeting that statement that you see. So

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Speaker 1: that's gonna be a fundamental part of any fom C meeting,

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Speaker 1: and I can't you know, say what will come out

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Speaker 1: of the meeting, but I do think that it is

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Speaker 1: an important part of how are we communicating our policy,

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Speaker 1: compete to the markets, and do that American public understand

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Speaker 1: why we're taking the actions we're taking um and including

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Speaker 1: all our tools. You're doing a financial stability conference today.

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Speaker 1: The last Senior Loan Officers survey showed that banks were

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Speaker 1: reporting weaker demand for business loans, and there were weaker

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Speaker 1: demand and tighter standards for commercial real estate. Do we

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Speaker 1: have a developing credit problem in this country? I don't

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Speaker 1: think so far, but I think that that's one of

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Speaker 1: the things when you're thinking about a resilient financial system,

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Speaker 1: it's two fold. It's obviously you don't want your banks

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Speaker 1: to fail. You want them to be robust through economic downturns.

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Speaker 1: But you also want the banks to be their lending

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Speaker 1: through the downturn And as you know, we took some

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Speaker 1: actions um early in the pandemic to try to ensure

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Speaker 1: that the banks were there um and able to lend

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Speaker 1: um to their to their customers and to households and businesses.

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Speaker 1: So those are those actions were taken to ensure that

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Speaker 1: credit could flow, and that the banking system was an

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Speaker 1: important way of getting that credit flowing. So you know

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Speaker 1: they're going to be looking, of course at credit risk,

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Speaker 1: and so far what's been. I think another strength of

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Speaker 1: this economy is that losses and credit losses have not

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Speaker 1: shown up at the banks um as much as they

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Speaker 1: might have. And so that's a positive in this economy,

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Speaker 1: is that we don't see the kinds of things that

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Speaker 1: we might have expected to see um given the shock

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Speaker 1: and the d shock of hand now it was, but

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Speaker 1: we want to make sure that the financial system stays

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Speaker 1: robust and resilience so that lending continued. President messed Up.

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Speaker 1: Always gracious with your time, and we appreciate it. Thank

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Speaker 1: you so much for jo want to guess hopefully we'll

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Speaker 1: catch up against soon before your end with us. Now

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Speaker 1: with immediate and essential labor perspective. Patrick Foy, MTA Chairman

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Speaker 1: and Chief executive officer, PET, I think you're lying to

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Speaker 1: me I'm gonna cut to the chase In no way.

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Speaker 1: Do I think you're only gonna cut nine thousand, three

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Speaker 1: hundred or nine thousand, four hundred employees. What's the real number?

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Speaker 1: About six months? If you don't get support from the

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Speaker 1: federal government. Well, tom UH is a number of operating

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Speaker 1: personnel that would be cut. We would obviously cut headquarters.

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Speaker 1: Headquarters staffing is down from there's more to cut their

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Speaker 1: Those people aren't involved in a delivery of services. But

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Speaker 1: we will be cutting we We've taken two point eight

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Speaker 1: billion dollars out of the m t a's cost structure

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Speaker 1: over the last couple of years. I would expect in

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Speaker 1: one apart from the service reductions, will take seven to

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Speaker 1: eight hundred billion dollars. Additionally, we're gonna be constantly cutting

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Speaker 1: UH and and reducing our costs because that's the that's

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Speaker 1: the right thing to do. When the service reductions are

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Speaker 1: on top of that, and the service reductions are staggering,

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Speaker 1: will affect every New Yorker, every one of our employees,

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Speaker 1: and the rooting center at n y U says it

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Speaker 1: will cost the region of four hundred and fifty thousand

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Speaker 1: jobs and destroy about six five billion of regional GDP.

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Speaker 1: And that what's so important here is the conflation of

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Speaker 1: variable and fixed costs. And you've got all sorts of

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Speaker 1: realities including complexity, including union relationships, etcetera. What do we

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Speaker 1: most get wrong about the fixedness of your variable costs.

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Speaker 1: Excellent questions on and I'll distinguished between subways and buses right, Uh.

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Speaker 1: Subways have extensive fixed capital cost that has to be

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Speaker 1: maintained at For instance, if you reduce service on a

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Speaker 1: subway line from a percent to eighty to sixty to forty,

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Speaker 1: you may be able to cut the number of train

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Speaker 1: operators and conductors. None of this is anything anybody at

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Speaker 1: the MTA wants to do. But the men and women

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Speaker 1: who maintain the tracks, maintain the trains, communications power, etcetera.

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Speaker 1: Will have to maintain that subway line regardless of whether

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Speaker 1: ridership and the number of trains is forty or fifty

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Speaker 1: percent or eight percent of normal. That is not the case, uh,

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Speaker 1: in in a bus in a bus system, because you

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Speaker 1: don't have that great fixed cost. And that is and

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Speaker 1: obviously the operating leverage also associated with increases and ridership

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Speaker 1: increases in declines in in ridership your spot on. So

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Speaker 1: a lot of people may be listening to this program

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Speaker 1: from des Moyne or Cleveland or El Paso, and they're

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Speaker 1: looking at a much problem transit authority that has forty

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Speaker 1: six billion dollars of debt, and they wonder why should

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Speaker 1: we be paying for the situation that currently is at hand,

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Speaker 1: Albeit this is an extraordinary situation, but why should it

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Speaker 1: fall on them? What would you say, so A Lisa,

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Speaker 1: I, I I say a bunch of things. France, As you

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Speaker 1: mentioned Cleveland, there's mass transit in Cleveland, there's mass transit

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Speaker 1: in Austin, Texas, in Atlanta and Washington, d C, in Chicago,

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Speaker 1: San Francisco, Los Angeles, across the New Orleans, across the

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Speaker 1: entire country, Blue States, Rent States. Mass transit is incredibly important.

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Speaker 1: It happens to be that the MTA carries about of

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Speaker 1: mass transit riders, so obviously we're a larger operation with

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Speaker 1: larger financial challenges. But every mass transit agency in the

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Speaker 1: country has been affected by the pandemic, not to the

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Speaker 1: same level of the m T A. Given our ridership

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Speaker 1: UH on a typical day pre pandemic, we've carried seven

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Speaker 1: point five seven point six million customers, largest in North America.

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Speaker 1: But every one of the transit agencies in the United

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Speaker 1: States is feeling the same pressure, and we'll have to

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Speaker 1: take steps not unlike those that we're talking about. No

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Speaker 1: one if the MTA wants to make these service cuts

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Speaker 1: because that's not what New York needs to feed the

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Speaker 1: economic recovery. And it's not it's not great service for

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Speaker 1: first responders, essential employees, and our other customers and pat

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Speaker 1: There's a question also about a spiral downward spiral for

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Speaker 1: public transportation that if you don't have fast enough, reliable

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Speaker 1: enough service that people stop using it and it just

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Speaker 1: sort of begets even less service and fewer people using it,

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Speaker 1: at what point does the m T a enter death

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Speaker 1: spiral that could have an even more profound effect on

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Speaker 1: the entire region. Look, I think it's an excellent question,

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Speaker 1: and the Rooting Centers analysis took that into account. But

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Speaker 1: you're right, Lisa, if we have to win rese for instance,

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Speaker 1: kateways the time between subways and buses on weekends to

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Speaker 1: say fifteen or twenty minutes, a lot of New Yorkers

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Speaker 1: are going to determine that to get to the to

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Speaker 1: the job, to school, to a medical appointment or whatever

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Speaker 1: they're doing, that it doesn't work for them any longer.

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Speaker 1: And it does. It does feed on it succel it's success.

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Speaker 1: Success in mass transit and growth in mass transit increases

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Speaker 1: ridership cutting it back also will cause some of our

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Speaker 1: customers to say, you know why, it's not worth it.

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Speaker 1: We won't get their revenue, we won't get their service.

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Speaker 1: And that's just a terrible place for any transit agency

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Speaker 1: to be. Pet Boy, I would assume in your esteem

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Speaker 1: career you seeing the death of New York City somewhere

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Speaker 1: between three and five times, you know, And folks, I

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Speaker 1: think a lot of people that know me know I

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Speaker 1: was screaming after nine eleven that New York City would

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Speaker 1: not die. I believe a mayor of New York had

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Speaker 1: a little bit to do with that thought. Pet four,

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Speaker 1: everybody's moving to the suburbs, what do you say to them? Well, look,

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Speaker 1: not everybody's moving to the summer tom but he here's

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Speaker 1: what I'd say. Cities like New York, in London and Bombay,

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Speaker 1: Mumbai and others have survived, have gone through pandemics in

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Speaker 1: the past. Obviously the nineteen eighteen nineteen nineteen flew in

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Speaker 1: the United States, which obviously had a significant impact on

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Speaker 1: New York City. The the movement to urbanization across the

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Speaker 1: entire globe is a global phenomenon. Uh the rise of

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Speaker 1: cities as centers of talent and intellectual capital. New York

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Speaker 1: City will be back. I'm bullish on New York City.

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Speaker 1: This is a particularly tough time, and twenty one or

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Speaker 1: going to be tough years. But obviously with the great

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Speaker 1: news from Fiser and Maderna and and the vaccines and

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Speaker 1: the offing that will be terrific news, New York City

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Speaker 1: will be back after getting through the dark days of

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Speaker 1: twenty and twenty one, no question in my mind, Mr Fourth,

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Speaker 1: thank you so much. Patrick Foyd with the m t A.

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Speaker 1: He's chairman and chief executive. Let's get right to it

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Speaker 1: here on the pandemic, and this is definitive. There's lots

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Speaker 1: of people managing the message right now. That is something

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Speaker 1: Dr Jonathan Quick has never done. He's with the Rockefeller

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Speaker 1: Foundation and is definitive in thinking about epidemics. This book,

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Speaker 1: The End of Epidemic, is truly the bible on these

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Speaker 1: modern processes. Dr Quick, thank you so much for joining us.

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Speaker 1: How does a pandemic end? You and I really haven't

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Speaker 1: lived on. I mean there was a collar in sixty seven,

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Speaker 1: I recall, but actually how does a pandemic end? So,

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Speaker 1: I mean it's basically like a forest fire, and it

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Speaker 1: either ends when it runs out of wood, which is

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Speaker 1: us humans. Or it ends when there is a a

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Speaker 1: response UM basically a dumping water all over it, which

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Speaker 1: is what a UH safe and effective vaccine would do.

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Speaker 1: And and those are the two ways that it that

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Speaker 1: it can end. And right now, the good news is

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Speaker 1: that we're we have seen um I think just remark

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Speaker 1: cobled news on the vaccine side. UM. But at the

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Speaker 1: same time, UH, we're letting that that forest fire run

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Speaker 1: uncontrolled in this country. And Dr Quick I say this

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Speaker 1: with great respect for all watching and listening that has

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Speaker 1: suffered this personally, particularly the essential workers and those that

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Speaker 1: have lost older loved ones. Is the reason it maybe

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Speaker 1: doesn't feel as angry is April or May, because we've

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Speaker 1: killed off so many old people. Is our pandemic demographic

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Speaker 1: now different than it was in spring, Well, it is

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Speaker 1: different than it was in the in the spring in

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Speaker 1: the sense that UM, overall, we're seeing a fewer desper

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Speaker 1: case because it is become a pandemic across all all generations,

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Speaker 1: and we're seeing more of the youth. But I mean

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Speaker 1: the reality is that we still have tens of millions

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Speaker 1: of people who are at risk. And UM, I think

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Speaker 1: we need to understand the consequences of basic the inaction,

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Speaker 1: because it's it's not just the fact that we're on

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Speaker 1: we're on a pathway to be to be um to

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Speaker 1: hit a death death of of nearly a half million

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Speaker 1: people by well over four hundred thou people by March

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Speaker 1: if we don't do something. That's one part of it.

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Speaker 1: The other is millions of people who who have had

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Speaker 1: COVID who are going to have the lingering consequences we

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Speaker 1: saw with the stars the first COVID, the one global

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Speaker 1: in two thousand and three, and we're seeing it again

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Speaker 1: today that perhaps a chord of the people have lingering disability.

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Speaker 1: Not to mention the fact that letting this go out

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Speaker 1: of control, um, it's people are not gonna feel safe

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Speaker 1: going aren't. They're not gonna feel safe in schools. So UM,

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Speaker 1: I think we have a real challenge by just letting

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Speaker 1: it run wild and and in the channel, and we

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Speaker 1: know what to do and it doesn't involve crashing the economy. Well,

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Speaker 1: hold on a second, because you say about the long

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Speaker 1: term effects, you talk about how it's not just the deaths,

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Speaker 1: it's that the prevalence could have Our ramifications far beyond

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Speaker 1: even our comprehension. Now we have a quarter of a

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Speaker 1: million deaths here in the United States. The real issue

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Speaker 1: is we don't even know where people are getting the

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Speaker 1: virus at this point. Has track and trace died at

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Speaker 1: this point given how pervasive COVID has become, Yeah, I

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Speaker 1: mean the track of trace at this point is gonna

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Speaker 1: be less important in the majority of places that that

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Speaker 1: are having it. That's not true though, in in more

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Speaker 1: focused settings like schools and workplaces, where we still have

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Speaker 1: some opportunity. But overall, track and it's the key thing

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Speaker 1: is a handful of of core actions. Everybody masks restrictive

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Speaker 1: suspend dangerous indoor places, limit gatherings over ten, stay home

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Speaker 1: of symptomatic. This is provide leave and government help support business.

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Speaker 1: I mean, it's not complicated, and we can't choose. It's

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Speaker 1: not like it's a menu you choose one or the other.

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Speaker 1: What we know clearly from nineteen eighteen and again now

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Speaker 1: is doing all of these things together until we have

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Speaker 1: bent the curve, and we could do it, and we

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Speaker 1: could do it without crashing the economy dr quick. This

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Speaker 1: is an essential point because some people will look around

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Speaker 1: and say the death rate is low even when we

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Speaker 1: have a pervasive virus. Why not let it go rampant?

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Speaker 1: Why shut down my social life? Why increase the incidence

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Speaker 1: is of of depression and the widening gap and inequality

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Speaker 1: and a whole host of other issues. What would you

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Speaker 1: say to those people about some of the restrictions that

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Speaker 1: have been coming out, basically saying these are harming us

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Speaker 1: more than helping us. So I think that the thing

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Speaker 1: is to be focused with our with our restrictions and

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Speaker 1: and recognize that yes, there is gonna be some some

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Speaker 1: short term individual little sacrifice, um, but it's gonna be

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Speaker 1: it's gonna pay off for the long term collective welfare

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Speaker 1: because we're only accelerated. I mean when you're when you're

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Speaker 1: getting up to um two death rates of of collect

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Speaker 1: humuli death rates of one a thousand. But it's the

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Speaker 1: total effect of that on society. So it's really um

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Speaker 1: taking a short term uh sacrifice for the collective long

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Speaker 1: term benefit. Any concerning numbers, doctor, We've got to leave

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Speaker 1: it that unfortunately, appreciate your time, said thank you that

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Speaker 1: of the Rockefeller Foundation. We appreciate your time and look

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Speaker 1: forward to getting you back soon. Here's the way it works, John,

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Speaker 1: And this is true of everything in economics when you

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Speaker 1: have long, smooth curves. We've had a huge recovery and

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Speaker 1: claims and down to a critical point where whatever moving

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Speaker 1: averages you're using butters up right against the data. That

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Speaker 1: thing is John, we are there right now. Is we

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Speaker 1: wait to see what claims do in December, in January.

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Speaker 1: That's a good precursor to bring in Nathan Sheets of PGM.

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Speaker 1: He is a fixed income chief economist writing definitive international

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Speaker 1: work for City Group a few years ago. And we're

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Speaker 1: thrilled to have Nathan Sheets with us from PJIMS this morning. Nathan,

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Speaker 1: you know those curves, those oiler functions. Michael Woodford owns

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Speaker 1: a high ground on this. We've got smooth curve showing

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Speaker 1: us getting to recovery. Do you believe it? I think

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Speaker 1: the the road recovery is likely to be quite rocky, unfortunately,

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Speaker 1: and I think this was highlighted by the claims data

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Speaker 1: this morning. The virus and the restrictions are being put

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Speaker 1: in place to fight the virus are likely to take

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Speaker 1: a bide out of economic activity over the next say,

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Speaker 1: three or four months. Now. I think the economy is

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Speaker 1: more flexible than it was in the spring, and we've

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Speaker 1: learned how to respond to restrictions uh more efficiently and smoothly,

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Speaker 1: but still I think saved for the United States Q

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Speaker 1: four in Q one growth are going to be struggling

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Speaker 1: to to stay positive. If we get a small positive number,

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Speaker 1: we should consider ourselves fortunate. So it is true that

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Speaker 1: in the long run, once we have this vaccine, we

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Speaker 1: hit that smooth curve that you describe. And I think

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Speaker 1: that the news on the vaccine is very encouraging, but

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Speaker 1: especially without fiscal stimulus, the next few months are going

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Speaker 1: to be challenging for the macro economy. Nathan, I gotta

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Speaker 1: say I'm sort of surprised at the market response to

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Speaker 1: these jobless claims that came in worse than expected. It

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Speaker 1: follows a trajectory including the retail sales we got earlier

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Speaker 1: this week that also came in weaker than expected. The

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Speaker 1: wave that we are seeing of this pandemic is hampering

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Speaker 1: economic activity more than economists are currently projecting. Do you

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Speaker 1: think the scarring the longer lasting effects of this uptick

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Speaker 1: in the virus counts? Do you think that it's going

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Speaker 1: to have a deeper effect on the economy than people

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Speaker 1: are currently giving credit to and beyond. The scarring question

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Speaker 1: is one that's absolutely critical to think about. What are

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Speaker 1: the longer term impacts of this episode on the labor

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Speaker 1: market and workers skills, on the small business sector and

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Speaker 1: the capacity of businesses to produce going forward, and importantly

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Speaker 1: on household and corporate balance sheets and the willingness of

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Speaker 1: folks to spend going forward. Now on balanced, my sense

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Speaker 1: is the what's likely to determine the scarring most most

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Speaker 1: importantly is how long it takes to get the vaccine.

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Speaker 1: And if we get that vaccine in the middle of

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Speaker 1: the year, then I think that the scarring there will

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Speaker 1: be some that will be more limited if if somehow

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Speaker 1: the vaccine disappoints. Particularly I don't think now the science

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Speaker 1: of it is going to disappoint. Those results seem really strong,

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Speaker 1: but there's still serious questions about distribution and about whether

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Speaker 1: people will actually get the vaccine. So if the vaccine

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Speaker 1: doesn't do what we expect, then I think the recovery

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Speaker 1: will be much slower and the scarring is likely to

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Speaker 1: be more intense and nic than. So many of us

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Speaker 1: were so wrong about how quickly the U. S economy

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Speaker 1: would bounce back and it's bounce back really quickly. How

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Speaker 1: do you model the second shock? Though? When an economy

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Speaker 1: goes through one shock like the one we got back

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Speaker 1: in March through eight prit into May, how do you

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Speaker 1: model the second shock when it begins to bubble away

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Speaker 1: again before our very own eyes, going difference of winds up.

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Speaker 1: One of the critical aspects of allowing the economy to

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Speaker 1: absorb the first shock as successfully as it has was

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Speaker 1: the powerful fiscal stimulus that Congress approved. And I think

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Speaker 1: going through this second shock, the second UH phase of

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Speaker 1: intense restrictions, what with what seems to be essentially no

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Speaker 1: physical stimulus. And as you were discussing some of the

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Speaker 1: other key safety NEP measures like the Renters moratorium rolling

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Speaker 1: off the end of the year, if that's where we are,

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Speaker 1: I think the economy is likely to be more exposed.

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Speaker 1: You know. On the other hand, as I said, I

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Speaker 1: think that that that we're learning how to deal with

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Speaker 1: this situation, and we're learning how to respond to lockdowns

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Speaker 1: more more efficiently than we were before. And so it's

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Speaker 1: a competing dynamic. But without stimulus and without Congress acting

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Speaker 1: on some of these safety NEP measures, it's going to

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Speaker 1: be a rough ride into the vaccine nthan how many

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Speaker 1: people are great with you? Let me tell you that.

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Speaker 1: Nathan shakes a page in Thanks for listening to the

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Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio