WEBVTT - Bloomberg Wall Street Week - May 5th, 2023 0:00:00.040 --> 0:00:03.400 We turn our attention to the markets this week, USCPI endeavors, 0:00:03.600 --> 0:00:07.440 reinforcing concerns about inflation. The financial stories that sheep are 0:00:07.560 --> 0:00:10.560 worth a really different reaction to Mark. It's more indications 0:00:10.600 --> 0:00:13.240 of just how hot the US economy really. 0:00:13.039 --> 0:00:15.880 Is rude the eyes of the most influential voicing. 0:00:15.880 --> 0:00:18.759 Katherine Keating, CEO of b and Y Moan, Ryan Winningham, 0:00:18.880 --> 0:00:21.680 a Bank of America, Sam Zell Charman and founder of 0:00:21.680 --> 0:00:24.200 Equity Group Investment Bloomberg. 0:00:23.720 --> 0:00:27.320 Wall Street with David Weston from Bloomberg Radio. 0:00:27.480 --> 0:00:31.640 Testing the economy, more bank tremors, more FED rate hikes, 0:00:31.800 --> 0:00:35.479 and the unimaginable prospect of a US default. This is 0:00:35.560 --> 0:00:39.600 Bloomberg Wall Street Week. I'm David Weston. This week Stephen 0:00:39.720 --> 0:00:42.639 Ross of Related Companies on Wall Street moving to Miami. 0:00:43.280 --> 0:00:47.120 Miami is probably the most dynamic city in the country today, and. 0:00:47.120 --> 0:00:50.000 Melissa Karney of the University of Maryland on thousands of 0:00:50.080 --> 0:00:51.920 college students gone missing. 0:00:52.560 --> 0:01:07.200 The decline in the Rollman is not an encouraging trend. 0:01:09.319 --> 0:01:11.880 Global Wall Street had plenty to focus on this week. 0:01:11.920 --> 0:01:14.480 As we began the week breathing a sigh of relief 0:01:14.640 --> 0:01:18.600 over resolution of last week's banking crisis over First Republic. 0:01:19.200 --> 0:01:22.920 We are all very pleased to get the major source 0:01:22.959 --> 0:01:26.400 of uncertainty that was remaining from the recent bank term 0:01:26.440 --> 0:01:29.200 all addressed, and that that is a good thing. But 0:01:29.319 --> 0:01:31.759 then Treasury Sector A. Yellen told us that we may 0:01:31.800 --> 0:01:33.959 have less time than we thought to deal with that 0:01:34.080 --> 0:01:37.760 debt ceiling problem. Well, it would be absolutely disastrous for 0:01:37.840 --> 0:01:41.040 me to be completely blunted. And by Tuesday we were 0:01:41.080 --> 0:01:43.480 back to worrying about the banks again, as each day 0:01:43.600 --> 0:01:46.720 seemed to bring news of another regional bank seeking a 0:01:46.800 --> 0:01:47.360 new path. 0:01:48.240 --> 0:01:49.240 It's tumbling right now. 0:01:49.280 --> 0:01:52.680 By forty two, after seeing it's winging strategic options. 0:01:52.280 --> 0:01:56.040 A TD bank has agreed with First Horizon to terminate 0:01:56.080 --> 0:01:58.680 the previously announced merger, which had been agreed upon let's 0:01:58.680 --> 0:02:01.040 be honest before all this turmoil in the banks. 0:02:01.360 --> 0:02:04.000 But despite the problems with the banks and concerns over 0:02:04.000 --> 0:02:06.640 the dead ceiling, the Fed on Wednesday went ahead with 0:02:06.720 --> 0:02:09.680 the twenty five basis point rate hike. It had to telegraphs, 0:02:09.880 --> 0:02:12.400 which here Powell opening the door to a pause, but 0:02:12.600 --> 0:02:16.399 saying that inflation is still with us for now. Inflation 0:02:16.480 --> 0:02:19.640 remains well above our longer run goal of two percent. 0:02:20.240 --> 0:02:23.520 Then on Thursday, the European Central Bank followed suit, but 0:02:23.560 --> 0:02:25.880 said it does not plan to pause. 0:02:26.320 --> 0:02:30.480 In light of the ongoing high inflation pressures. The Governing 0:02:30.520 --> 0:02:34.880 Council today decided to raise the three key ECB interest 0:02:34.960 --> 0:02:40.799 rates by twenty five basis points. 0:02:39.280 --> 0:02:41.520 And if all that weren't enough. On Friday, the US 0:02:41.600 --> 0:02:45.359 jobs numbers came in much stronger than expected, adding another 0:02:45.400 --> 0:02:48.320 two hundred and fifty three thousand jobs last month, though 0:02:48.360 --> 0:02:51.240 they took away some from the month before, and as important, 0:02:51.320 --> 0:02:53.839 the unemployment rate went back down to their record three 0:02:53.880 --> 0:02:57.160 point four percent level and wages increased at a brisk 0:02:57.200 --> 0:03:00.600 pace of five ten percent month over months. Equity markets 0:03:00.639 --> 0:03:03.240 on Friday reversed all or most of all of their 0:03:03.280 --> 0:03:04.919 losses from the rest of the week, with the S 0:03:04.960 --> 0:03:06.839 and P five hundred ending the week off a mere 0:03:06.919 --> 0:03:09.919 eight tenths of a percent, while the NASDAG gained less 0:03:09.919 --> 0:03:12.040 than one tenth of a percent, and the yield in 0:03:12.120 --> 0:03:14.000 the ten year went all the way up to three 0:03:14.000 --> 0:03:16.400 point six percent and then all the way down to 0:03:16.480 --> 0:03:18.600 under three point three percent to end the week just 0:03:18.639 --> 0:03:21.480 about where it started at three point four to three percent. 0:03:21.800 --> 0:03:23.480 To take us through the week, in the markets and 0:03:23.520 --> 0:03:26.760 the economy, welcome back now, Ellen Lee, she's portfolio manager 0:03:26.800 --> 0:03:29.880 at Causeway Capital, and Savita Supermanian she's Bank of America 0:03:29.880 --> 0:03:32.880 ahead of US Equity and Quantitative Strategy. So welcome to 0:03:32.880 --> 0:03:34.359 both you. Great to have you here. Let me start 0:03:34.400 --> 0:03:36.360 with you, Ellen, if I could, Given what we saw 0:03:36.400 --> 0:03:38.760 from the FED, but then from the jobs numbers, what 0:03:38.760 --> 0:03:40.640 do we make of the economy right now and where's headed? 0:03:42.040 --> 0:03:42.440 Well? 0:03:42.440 --> 0:03:48.440 Clearly inflation is still high and FED still has concerns 0:03:48.480 --> 0:03:54.400 around that, and the latest job numbers still indicate that 0:03:54.440 --> 0:03:58.280 there is more slowing down to do. However, what's happening 0:03:58.320 --> 0:04:02.000 with the regional banking devices. I think that will help 0:04:02.040 --> 0:04:06.400 in this effort, but there's still more world to be done, 0:04:06.640 --> 0:04:11.200 as inflation is not quite there, and also the slowdown 0:04:11.400 --> 0:04:13.800 is not at a pace that we would want it 0:04:13.800 --> 0:04:15.120 to be in the current environment. 0:04:15.880 --> 0:04:18.159 So what about you, Savina. We heard about a possible 0:04:18.200 --> 0:04:21.280 pause maybe on Wednesday. Is that still viable after the 0:04:21.320 --> 0:04:22.600 jobs nurbs who saw on Friday? 0:04:22.960 --> 0:04:25.760 I mean, look, I think we're in a data dependent 0:04:25.960 --> 0:04:29.440 environment and the data so far is suggesting we're probably 0:04:29.440 --> 0:04:31.479 not going to see that rate cut that everybody is 0:04:31.520 --> 0:04:33.760 hoping for by the end of the you know, in 0:04:33.800 --> 0:04:36.360 the next couple of quarters. I mean, our view is 0:04:36.400 --> 0:04:40.640 that inflation might remain stickier and higher for the rest 0:04:40.640 --> 0:04:42.359 of the year. I mean, if you look at jobs, 0:04:42.640 --> 0:04:46.240 a big part of the tight labor market is just 0:04:46.320 --> 0:04:50.000 a great resignation during COVID and those folks haven't come 0:04:50.040 --> 0:04:52.320 back yet, so you know, I think it remains tight 0:04:52.360 --> 0:04:54.000 in certain parts of the economy. 0:04:54.160 --> 0:04:56.120 So, Savita, let's talk about the equity markets. You are 0:04:56.200 --> 0:04:58.280 one of our twenty four l's. I'm glad to say 0:04:58.320 --> 0:05:00.240 thank you for being here, and you're so live in 0:05:00.279 --> 0:05:01.880 the middle of the pack. Four hundred dollars on the 0:05:01.920 --> 0:05:07.320 EPs and and four thousand on the SB bus. Yes, 0:05:07.800 --> 0:05:09.800 are you inclined to change that at all? Given what 0:05:09.839 --> 0:05:10.480 we saw this. 0:05:10.400 --> 0:05:13.680 Week, I'm right in the middle of the consensus. 0:05:13.720 --> 0:05:13.920 Elf. 0:05:14.000 --> 0:05:17.040 I guess well, I think we're a little lower than 0:05:17.440 --> 0:05:20.560 consensus on earnings, and I think, if anything, I would 0:05:20.600 --> 0:05:24.440 be inclined to move that higher after what we've heard 0:05:24.480 --> 0:05:27.560 over the last few weeks. I mean, what really impresses 0:05:27.600 --> 0:05:31.200 me about earning season is that guidance has been very 0:05:31.240 --> 0:05:35.080 positive despite every reason that companies have to guide down 0:05:35.360 --> 0:05:38.000 on this year's earnings or next year's earnings, they're actually 0:05:38.000 --> 0:05:41.760 guiding above what consensus is expecting, so I was surprised 0:05:42.120 --> 0:05:46.200 by that optimism. We're also seeing beats across the board, 0:05:46.800 --> 0:05:49.680 not just in you know, technology stocks, but also in 0:05:49.720 --> 0:05:53.080 financials and healthcare. So it's been a very healthy earning 0:05:53.120 --> 0:05:56.760 season relative to what what folks were expecting coming into it. 0:05:57.800 --> 0:06:00.400 I think on the market itself, what I wore about 0:06:00.520 --> 0:06:03.599 is that it's still very tech top heavy, and that's 0:06:03.640 --> 0:06:07.120 the part of the market that I'm actually more concerned 0:06:07.160 --> 0:06:09.479 about from a rate risk perspective. 0:06:09.600 --> 0:06:11.520 Allan what about tech? Tech had been a leader for 0:06:11.520 --> 0:06:13.200 a long time, then it sort of gave up leadership. 0:06:13.240 --> 0:06:14.120 Who's going to lead down? 0:06:15.240 --> 0:06:18.160 I mean, we believe in the next cycle, with you know, 0:06:18.279 --> 0:06:25.520 themes like energy transition and more automation and energy infrastructure 0:06:25.560 --> 0:06:29.400 built and on shoring, we think industrials will be more 0:06:29.520 --> 0:06:32.960 at the head of market leadership, as we are hearing 0:06:33.120 --> 0:06:36.400 not only in the US but also in Europe of 0:06:36.520 --> 0:06:41.560 continuous capex plans because of the change that's needed to 0:06:41.640 --> 0:06:44.640 get us to the next era. And again with interest 0:06:44.720 --> 0:06:48.560 rates where they are, you know, if we believe the 0:06:48.680 --> 0:06:52.200 zero rate con interest rates are not bad, the biggest 0:06:52.279 --> 0:06:55.839 beneficiarias of that actually reside in the tech sector, and 0:06:55.920 --> 0:06:58.560 we don't think that we'll come back, and therefore we 0:06:58.640 --> 0:07:02.520 believe in which was like industrials and energy will lead 0:07:02.720 --> 0:07:03.440 the next valley. 0:07:03.720 --> 0:07:06.520 So what Savita. As you look at equities, are there 0:07:06.560 --> 0:07:09.400 some idiotocratic areas, particularly when it comes to credit, they're 0:07:09.440 --> 0:07:12.440 getting hit worse than others. I mean, everybody's interest rates 0:07:12.480 --> 0:07:14.600 are going up, but it may hit some companies differently 0:07:14.600 --> 0:07:15.080 from others. 0:07:15.240 --> 0:07:15.520 Yeah. 0:07:15.560 --> 0:07:18.560 Absolutely, So, you know, one of the big surprises to 0:07:18.640 --> 0:07:20.800 me is when you look at some of these so 0:07:20.880 --> 0:07:24.680 called defensive areas of the market, like healthcare or telecom, 0:07:25.200 --> 0:07:30.000 the credit risk is actually higher than you would expect, 0:07:30.200 --> 0:07:35.080 whereas energy, materials, commodities, which are typically you know, kind 0:07:35.080 --> 0:07:39.400 of at the epicenter of most credit downturns, are in 0:07:39.440 --> 0:07:42.760 a much better position. They've been deprived of capital for many, 0:07:42.760 --> 0:07:46.000 many years. They've become very disciplined about cash return and 0:07:46.040 --> 0:07:49.960 balance sheets and capital allocation, Whereas the companies that have 0:07:50.000 --> 0:07:53.400 gotten more easy money might not be in as great 0:07:53.400 --> 0:07:56.880 a position to handle this market increase in interest rates. So, 0:07:57.280 --> 0:08:00.640 you know, healthcare was I think it's the fourth highest 0:08:00.680 --> 0:08:04.400 industry in terms of floating rate risk sitting on balance sheets, 0:08:04.440 --> 0:08:07.520 which means they're going to face that move and that 0:08:08.360 --> 0:08:10.600 a lot faster than other sectoris did not. 0:08:10.680 --> 0:08:12.240 Know that quickly here at the n L. And you 0:08:12.440 --> 0:08:14.520 like Europe when it comes to securities. Why is that? 0:08:15.640 --> 0:08:19.200 Well, first of all, europe valuation is much more attractive 0:08:19.320 --> 0:08:24.600 versus us. Secondly in terms of a higher rate, higher 0:08:24.600 --> 0:08:28.720 interest rate environment, that should be advantageous. And thirdly, think 0:08:28.760 --> 0:08:32.800 about the energy crisis that Europe is going through right now, 0:08:33.240 --> 0:08:36.680 and they have to shift their energy infrastructure, which is 0:08:36.679 --> 0:08:39.920 a very strategic element of an economy, so that spending 0:08:40.040 --> 0:08:43.200 is going to continue, and not only that, they are 0:08:43.280 --> 0:08:47.480 leading the efforts on decarbonization, and again that will act 0:08:47.559 --> 0:08:50.679 as a fiscal stimulus for the growth of the economy. 0:08:50.960 --> 0:08:55.920 And again Europe has had very little spending and infrastructure 0:08:56.000 --> 0:08:59.360 the last thirty years. So we think this again will 0:08:59.400 --> 0:09:02.720 work in the favor of companies that are in energy 0:09:02.960 --> 0:09:06.720 and industrials to fuel economic growth in the next decade. 0:09:06.960 --> 0:09:09.079 It's fascinating and I did not know that actually a 0:09:09.200 --> 0:09:11.480 healthcare It's a fascinating voice. Savida, Thank you for bringing 0:09:11.520 --> 0:09:13.839 it to us. Thanks so much to Sevida Supermanian and 0:09:13.880 --> 0:09:17.200 Bank of America, and also Ellen Lee of Causeway Capital. 0:09:17.880 --> 0:09:20.120 It's time now for our weekly look at Wall Street 0:09:20.120 --> 0:09:22.480 Week past. Back in April of nineteen ninety one, the 0:09:22.559 --> 0:09:25.200 number one movie in the US was out for Justice, 0:09:25.320 --> 0:09:28.640 starring Steven Sagau. The number one song was You're in 0:09:28.800 --> 0:09:32.400 Love by Wilson Phillips. And as now, people were worried 0:09:32.440 --> 0:09:35.080 about the banks, with Lewis Rockgeiser to give us taking 0:09:35.120 --> 0:09:37.200 us through the problem as he saw it back then. 0:09:39.280 --> 0:09:41.920 Coming up, where have all the college students gone? We 0:09:42.000 --> 0:09:44.920 talked with Professor Melissa Carney of the University of Maryland 0:09:44.920 --> 0:09:47.080 about the drop off and high school students headed to 0:09:47.120 --> 0:09:49.079 college and what they are missing out. 0:09:49.640 --> 0:09:52.560 That wage premium that college graduates are getting an economy 0:09:52.880 --> 0:09:54.640 is still really high. 0:09:55.320 --> 0:09:57.720 That's next on Wall Street Glee on Bloomberg. 0:09:59.000 --> 0:10:03.160 This is Bloomberg Well Street Week with David Weston from 0:10:03.320 --> 0:10:11.640 Bloomberg Radio College. 0:10:11.720 --> 0:10:14.520 It's been the dream of American students and their parents 0:10:14.520 --> 0:10:18.040 for decades, the proven pathway to better jobs, higher pay, 0:10:18.200 --> 0:10:22.320 and social mobility, and not incidentally, a crucial source for 0:10:22.360 --> 0:10:25.160 the highly skilled workers we need for the next generation. 0:10:25.480 --> 0:10:27.080 And we're talking about what do we have to do 0:10:27.160 --> 0:10:29.319 in order to get our economy going, to make sure 0:10:29.320 --> 0:10:31.959 that we are a twenty first century education system that's 0:10:31.960 --> 0:10:34.520 preparing our children how not just to be employees, but 0:10:34.640 --> 0:10:35.679 how to be employers. 0:10:36.600 --> 0:10:39.400 But the risks and rewards of getting that college degree 0:10:39.440 --> 0:10:42.680 are coming under fresh scrutiny as the cost of getting 0:10:42.679 --> 0:10:46.160 the degree have been rising much faster than inflation for 0:10:46.240 --> 0:10:50.920 both public and private colleges and universities, and the burden 0:10:50.960 --> 0:10:53.640 of barring to pay those costs has been so crippling 0:10:53.840 --> 0:10:56.440 that the Biden administration is trying to forgive a fair 0:10:56.559 --> 0:10:57.120 amount of it. 0:10:57.600 --> 0:11:01.800 Entire generation is now sattled with unsustained death the exchange 0:11:01.880 --> 0:11:04.960 for an attempt at least to a college degree. 0:11:05.000 --> 0:11:07.840 Even a Speaker McCarthy's new budget proposal would cut back 0:11:07.880 --> 0:11:11.400 on pelgrants, which provide financial aid to the most needy. 0:11:12.080 --> 0:11:15.160 The Department of Education shared how the Speakers bill would 0:11:15.160 --> 0:11:19.360 remove up to sixty thousand teachers from classrooms. 0:11:18.800 --> 0:11:21.200 Eliminate student debt relief for more. 0:11:21.120 --> 0:11:26.199 Than forty million Americans, and make college more expensive by 0:11:26.240 --> 0:11:28.559 reducing pelgrants for millions. 0:11:29.040 --> 0:11:31.600 And if all that weren't enough, the COVID pandemic hit 0:11:31.640 --> 0:11:35.440 college students particularly hard, as far fewer high school students 0:11:35.520 --> 0:11:39.400 enroll in college today than before the pandemic, leaving us 0:11:39.400 --> 0:11:42.800 with a critical question whether college is still worth it 0:11:45.280 --> 0:11:47.520 and to take us through whether in fact a college 0:11:47.520 --> 0:11:49.440 degree is still worth it, we welcome now back to 0:11:49.600 --> 0:11:52.200 Wall Street Week Melissa Karney. She is professor of economics 0:11:52.200 --> 0:11:54.360 at Universe and Maryland as well as director of the 0:11:54.360 --> 0:11:57.680 Aspen Economic Strategy Group. So Melissa, great to have you 0:11:57.760 --> 0:12:00.480 back with us. First of all, start with the basic 0:12:00.640 --> 0:12:04.400 question about enrollment. Is enrollment down, If so, how much? 0:12:04.400 --> 0:12:06.240 And is it because of the pandemic or did it 0:12:06.280 --> 0:12:07.600 start before the pandemic? 0:12:09.000 --> 0:12:14.199 Yeah, recent numbers on enrollment rates suggest that enrollment is down. 0:12:14.280 --> 0:12:16.560 This is the sixth year that enrollment is down, so 0:12:16.600 --> 0:12:20.280 it was starting to decline before the pandemic took hold. 0:12:20.640 --> 0:12:24.800 But the pandemic knocked a lot of high schoolers and 0:12:25.040 --> 0:12:28.280 young adults off their college going plans. So we hear 0:12:28.320 --> 0:12:32.000 a lot, David about the learning loss in elementary schools 0:12:32.040 --> 0:12:34.840 and high schools. I think another thing we really have 0:12:34.920 --> 0:12:38.400 to be focused on is how many graduating seniors would 0:12:38.400 --> 0:12:41.520 have otherwise enrolled in college who haven't and they haven't 0:12:41.520 --> 0:12:44.520 come back yet. So this is concerning and how much 0:12:44.559 --> 0:12:44.959 it's the. 0:12:44.960 --> 0:12:46.960 Cost of the whole thing, Because you saw that Wall 0:12:46.960 --> 0:12:49.760 Street Journal poll that said something like fifty six percent 0:12:49.800 --> 0:12:52.680 of Americans don't believe a college degree is worth the price. 0:12:54.880 --> 0:12:59.560 Yeah, that I found those polling numbers really quite troubling. So, 0:12:59.679 --> 0:13:02.960 as you mentioned, a majority, a small majority, but a majority. 0:13:03.000 --> 0:13:05.040 None of the last of American adults now doubt that 0:13:05.120 --> 0:13:09.640 a college degree is worth it, and that is that's 0:13:09.760 --> 0:13:14.640 just emphatically not true. So in general, people who graduate 0:13:14.720 --> 0:13:18.440 with a four year college degree will make back the 0:13:18.480 --> 0:13:21.200 amount of money that, if they made good decisions, that 0:13:21.240 --> 0:13:23.160 they would have paid to get that degree. So a 0:13:23.200 --> 0:13:28.040 college degree is still an excellent investment in one's economic future. 0:13:28.480 --> 0:13:31.560 We know that college degree holders, four year college degree 0:13:31.600 --> 0:13:35.360 holders in particular, have an easier time finding work. They 0:13:35.360 --> 0:13:39.240 command much higher earnings when they do work, even in 0:13:39.440 --> 0:13:43.880 today's tight labor market. But as you mentioned, the price 0:13:44.080 --> 0:13:47.200 is really it's hard to figure out, and so a 0:13:47.200 --> 0:13:50.400 lot of people actually think getting a college degree would 0:13:50.440 --> 0:13:52.680 be more expensive than it would be for them. 0:13:52.880 --> 0:13:56.719 In particular, Melissa, you mentioned the relative lack of transparency 0:13:56.760 --> 0:13:58.840 and exactly knowing what the cost is. It's hard to 0:13:58.840 --> 0:14:00.560 do a cost benefit analysis. So if you want what 0:14:00.600 --> 0:14:03.600 the cost side is, whatever the benefit side is, why 0:14:03.760 --> 0:14:05.959 is it so opaque. 0:14:06.080 --> 0:14:09.120 They have their sticker price, their tuition prices, they're all 0:14:09.240 --> 0:14:12.800 in price. What they charge people who can pay full price. 0:14:13.280 --> 0:14:15.560 That's also what they charge the government for people who 0:14:15.600 --> 0:14:19.040 are paying on behalf of others. But that's not what 0:14:19.080 --> 0:14:23.200 an individual student pays. So about three quarters of students 0:14:23.600 --> 0:14:27.120 at for Your institutions are getting some form of aid, 0:14:27.640 --> 0:14:30.520 and so it's just really hard for students to figure 0:14:30.520 --> 0:14:34.280 out until they've gone through the whole process of applying 0:14:34.320 --> 0:14:37.640 for financial aid, filling out the FACA how much any 0:14:37.680 --> 0:14:40.160 individual school will take. There are a lot of efforts 0:14:40.240 --> 0:14:43.960 underway to make that pricing more transparent so students can 0:14:44.000 --> 0:14:47.000 figure out earlier in the process. But I think the 0:14:47.480 --> 0:14:50.800 real message that needs to get out is that students 0:14:50.800 --> 0:14:56.240 should not be discouraged from applying to flagship schools, selective 0:14:56.280 --> 0:14:59.040 for Your schools because they think they can't afford it. 0:14:59.080 --> 0:15:01.320 They should go through the process. Students who go to 0:15:01.400 --> 0:15:05.040 selective schools, who go to four year degrees seeking, you know, 0:15:05.120 --> 0:15:08.760 degree granting schools, they tend to have better outcomes. Those 0:15:08.800 --> 0:15:12.000 schools often have more resources and are better able to 0:15:12.120 --> 0:15:15.640 serve their students. So students should not be discouraged from applying, 0:15:16.040 --> 0:15:19.680 and they should take advantage of information that's out there 0:15:19.960 --> 0:15:24.200 net cross calculators, information on student on school websites to 0:15:24.240 --> 0:15:27.440 figure out what, on average is a typical student paying 0:15:27.560 --> 0:15:30.840 to attend this school. And by the way, people should 0:15:30.880 --> 0:15:34.560 make smart choices, like public schools charge a lot less 0:15:34.640 --> 0:15:37.280 than private schools. So getting back to why a lot 0:15:37.280 --> 0:15:39.560 of people don't think a school is worth it or 0:15:40.200 --> 0:15:43.520 pursuing a college degree is worth it, you know, you 0:15:43.520 --> 0:15:46.320 could get a lot of really good deals if you're 0:15:46.360 --> 0:15:49.920 looking at public four year institutions as opposed to private, 0:15:50.280 --> 0:15:54.400 especially if you're looking at in state tuition, those net 0:15:54.440 --> 0:15:57.720 prices are much lower for typical students, and people should 0:15:57.800 --> 0:16:00.640 take that into account when they decide where to go. 0:16:01.000 --> 0:16:03.000 So typically in economics, as I understand it, and you 0:16:03.120 --> 0:16:05.560 understand it much better than I do, and supply and demand, 0:16:05.600 --> 0:16:07.600 if the supply stars come down, it might put some 0:16:07.640 --> 0:16:09.920 pressure on the system if in fact we're getting the 0:16:10.000 --> 0:16:12.600 less enrollment. Do you see any indication some of these 0:16:12.760 --> 0:16:14.880 institutions of higher learning are saying, you know, we've got 0:16:14.880 --> 0:16:16.720 to get our act together. We got to be for example, 0:16:16.760 --> 0:16:19.600 more transparent, more direct, and by the way, even give 0:16:19.640 --> 0:16:21.520 a sense over the four years what's going to happen 0:16:21.520 --> 0:16:23.520 in the years, because one issue is how much you're 0:16:23.520 --> 0:16:24.840 going to raise it once I get. 0:16:24.720 --> 0:16:28.360 In unambiguously, the decline in the enrollment is not an 0:16:28.440 --> 0:16:32.440 encouraging trend. Whatever pressures it might put on some schools 0:16:32.440 --> 0:16:35.320 that are losing students, I think the decline in enrollment 0:16:35.360 --> 0:16:39.120 is really troubling because, as we said, a college degree 0:16:39.200 --> 0:16:42.880 really does grant an earnings premium to students who attend 0:16:43.040 --> 0:16:46.880 and complete a four year degree. So the earnings premium 0:16:47.000 --> 0:16:50.400 going to college workers was rising tremendously in the nineteen 0:16:50.440 --> 0:16:53.400 eighties and nineteen nineties when demand for college level skills 0:16:53.440 --> 0:16:56.200 really took off, and the supply of college educated workers 0:16:56.400 --> 0:17:02.000 didn't keep up. Since two thousand, that we premium has stalled, 0:17:02.440 --> 0:17:06.720 but importantly it is still tremendously high. So in a 0:17:06.760 --> 0:17:10.480 typical year, you know, let's just take twenty nineteen before 0:17:10.520 --> 0:17:14.600 the pandemic, you know, someone with a four year college degree, 0:17:14.880 --> 0:17:18.720 on average would make about eighty eight percent more a 0:17:18.840 --> 0:17:21.280 year than a full time, full year worker with just 0:17:21.359 --> 0:17:22.320 a high school degree. 0:17:22.359 --> 0:17:24.640 When you talk about the earnings premium, it surely must 0:17:24.640 --> 0:17:27.080 depend in part upon what you study and what the 0:17:27.119 --> 0:17:28.879 line of work you go into, right, I mean, I 0:17:28.880 --> 0:17:31.360 can just imagine, for example, what the demands are right 0:17:31.400 --> 0:17:35.520 now for technology, and some of the expertise and technology 0:17:35.960 --> 0:17:37.800 are very different from what they were thirty years ago. 0:17:39.840 --> 0:17:43.840 Absolutely, and this is a really important point. So in general, 0:17:44.040 --> 0:17:47.199 even though I'm really emphasizing that a college degree is 0:17:47.240 --> 0:17:50.280 a good investment in one's future, the fact of the 0:17:50.320 --> 0:17:54.640 matter is not all institutions and not all majors deliver 0:17:54.840 --> 0:17:58.200 large earnings premiums. And that again is something that students 0:17:58.280 --> 0:18:01.359 have to take into account and have to make good 0:18:01.400 --> 0:18:05.959 decisions about where they're studying and what they're studying. And 0:18:06.000 --> 0:18:10.120 that information too is now much more readily available than 0:18:10.119 --> 0:18:12.040 it used to be in the past. Students can look 0:18:12.119 --> 0:18:15.440 up what is the typical earning path for someone who 0:18:15.480 --> 0:18:20.400 pursues this major, who attends this institution, and again make 0:18:20.520 --> 0:18:21.440 smart choices. 0:18:21.920 --> 0:18:24.359 So well, as you look at the decline in enrollment, 0:18:24.440 --> 0:18:26.719 what about the demographics of it? Is it affecting some 0:18:26.760 --> 0:18:27.760 people more than others? 0:18:28.080 --> 0:18:31.119 Yeah, the decline enrollment has been much larger among men. 0:18:31.200 --> 0:18:35.120 Than women, which is, you know, women are doing better 0:18:35.200 --> 0:18:38.359 overall when it comes to young women getting college degrees, 0:18:38.400 --> 0:18:42.440 and so this is worrisome. And the pandemic related decline 0:18:42.520 --> 0:18:46.679 was especially pronounced among non white men. Again, this is 0:18:46.720 --> 0:18:49.120 another you know, this is another reason why these trends 0:18:49.119 --> 0:18:52.359 are particularly worrisome. We think a college degree is a 0:18:52.400 --> 0:18:56.480 great engine of upward mobility, and we worry if kids 0:18:56.520 --> 0:19:00.679 from lower income homes, from non white families in particular, 0:19:01.040 --> 0:19:03.760 are the ones who disproportionately had their college going plans 0:19:03.840 --> 0:19:04.600 knocked off track. 0:19:04.840 --> 0:19:06.760 Okay, Melissa, thank you so much for being back with 0:19:06.840 --> 0:19:08.720 us on Wall Streeve. That's Melissa Carney. She's professor of 0:19:08.760 --> 0:19:14.440 economics at the University of Maryland. Coming up, The FED 0:19:14.480 --> 0:19:16.680 told us this week it might just pause, but with 0:19:16.880 --> 0:19:19.679 the jobs numbers, let it pause, We asked Stephanie Flanders, 0:19:19.760 --> 0:19:23.240 she's senior executive editor for Economics and Government on Bloomberg. 0:19:23.600 --> 0:19:26.679 That does tell you something about the underlying strength of 0:19:26.720 --> 0:19:29.040 this economy, and certainly in the labor market, which has 0:19:29.040 --> 0:19:31.160 continued to confound the Fed. 0:19:32.840 --> 0:19:34.919 This is Wall Street Week on Bloomberg. 0:19:37.000 --> 0:19:41.200 This is Bloomberg Well Street Week with David Weston from 0:19:41.320 --> 0:19:42.280 Bloomberg Radio. 0:19:48.280 --> 0:19:50.119 This is Wall Streek. I'm David Weston. It was a 0:19:50.119 --> 0:19:52.960 week full of economic news as well as actions by 0:19:53.000 --> 0:19:54.920 central banks, and to take us through it all, we 0:19:55.000 --> 0:19:58.680 welcome now Stephanie Flanders. She is Bloomberg Senior Executive editor 0:19:58.680 --> 0:20:02.320 for Economics and Government and also the host of Stephanomic. 0:20:02.440 --> 0:20:04.920 So Stephanie, thank you so much for being here. Everything's 0:20:04.920 --> 0:20:06.479 connected to everything else as far as I can tell. 0:20:06.520 --> 0:20:09.320 But let's start with the Federal Reserve decision on Wednesday, 0:20:09.600 --> 0:20:12.960 raising twenty five basis points, not exactly saying what comes next, 0:20:12.960 --> 0:20:15.639 but at least opening the door to pausing. Is it 0:20:15.960 --> 0:20:18.639 justified the idea of a possible pause given where we 0:20:18.680 --> 0:20:21.960 are with the economy in the United States, Well, of course. 0:20:21.760 --> 0:20:25.199 We've ended the week with a really strong employment report. 0:20:25.280 --> 0:20:29.760 You know, we've had ten interest rate increases in a row, 0:20:30.080 --> 0:20:36.240 but now thirteen payrolls numbers that exceeded expectations. And you know, David, 0:20:36.280 --> 0:20:38.760 economists have we expect them to be wrong where they're 0:20:38.760 --> 0:20:41.679 not usually wrong in the same direction every month for 0:20:41.960 --> 0:20:44.680 over a year. So that does tell you something about 0:20:44.720 --> 0:20:47.600 the underlying strength of this economy and certainly of the 0:20:47.680 --> 0:20:51.240 labor market, which has continued to confound the FED and 0:20:51.440 --> 0:20:56.160 made it still quite difficult in trying to balance that tightening, 0:20:56.200 --> 0:20:59.600 that historic degree of tightening in the last year, against 0:20:59.640 --> 0:21:04.159 the sort of justified fears of creeping credit crunch problems 0:21:04.200 --> 0:21:08.679 for regional banks, and you know, still inflation above target. 0:21:09.119 --> 0:21:11.040 Well, let's talk about inflation just for a moment. The 0:21:11.080 --> 0:21:14.080 connection between the strong labor market and by the way, 0:21:14.280 --> 0:21:17.639 including those jobs numbers, were some pretty robust wage gains 0:21:17.720 --> 0:21:21.399 month over month. So as a practical matter, have we 0:21:21.440 --> 0:21:23.720 really got our arms around inflation? Do we have any 0:21:23.760 --> 0:21:26.000 reason to believe that the monetary politis thud a reserve 0:21:26.280 --> 0:21:29.040 thus far is having a material effect, It's having some effects, 0:21:29.080 --> 0:21:30.320 a material effect on inflation. 0:21:31.800 --> 0:21:34.119 Well, I think it is one of those things that 0:21:34.200 --> 0:21:36.679