1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,240 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you

3
00:00:13,280 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,960 --> 00:00:23,840
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

5
00:00:23,920 --> 00:00:30,200
Speaker 1: and of course on the Bloomberg Terminal. We will come

6
00:00:30,280 --> 00:00:33,839
Speaker 1: all of you on Bloomberg Television and Bloomberg Radio across

7
00:00:33,880 --> 00:00:37,600
Speaker 1: this nation. A conversation with twenty nine Secretary of Labor

8
00:00:37,680 --> 00:00:40,640
Speaker 1: of the United States, Marty Walsh. I have never had.

9
00:00:40,800 --> 00:00:44,440
Speaker 1: It's a certain moment, this kind of conversation with the

10
00:00:44,479 --> 00:00:48,000
Speaker 1: Secretary of Labor. I consider it to be for all Americans,

11
00:00:48,120 --> 00:00:51,239
Speaker 1: especially Key. I want to start at the top of

12
00:00:51,280 --> 00:00:55,760
Speaker 1: your Twitter feed where you say, very simply investing in

13
00:00:55,800 --> 00:01:00,120
Speaker 1: our workforce is investing in our infrastructure. I want you

14
00:01:00,160 --> 00:01:05,160
Speaker 1: to identify right now why that infrastructure legislation is so

15
00:01:05,240 --> 00:01:09,679
Speaker 1: important for creating jobs in America. Now, first of all, Tom,

16
00:01:09,720 --> 00:01:12,440
Speaker 1: thank you for having me today. It's important because it's

17
00:01:12,440 --> 00:01:15,040
Speaker 1: about the future of America. It's about keeping us competitive,

18
00:01:15,120 --> 00:01:17,520
Speaker 1: keeping us number one in the world. Uh, it's about

19
00:01:17,600 --> 00:01:21,000
Speaker 1: long term investment. That infrastructure plan that President Biden has

20
00:01:21,040 --> 00:01:24,279
Speaker 1: been talking about. Is about the kas economy. It's about

21
00:01:24,360 --> 00:01:28,360
Speaker 1: electric grid, it's about broadband, it's about rose and bridges.

22
00:01:28,440 --> 00:01:31,520
Speaker 1: It's about schools, it's about clean drinking water. It really

23
00:01:31,600 --> 00:01:34,120
Speaker 1: is about laying down the foundation for the next decade

24
00:01:34,120 --> 00:01:36,640
Speaker 1: in America to continue to move us forward. Uh. This

25
00:01:36,760 --> 00:01:39,360
Speaker 1: last year has been difficult. With a pandemic, We've seeing

26
00:01:39,640 --> 00:01:42,720
Speaker 1: a lot of inequities in our in our economy. We've

27
00:01:42,720 --> 00:01:45,640
Speaker 1: seen unemployment rates in community, a coll of the Black

28
00:01:45,680 --> 00:01:50,200
Speaker 1: community and Latino community a lot lower. Uh. That's been historic. Uh.

29
00:01:50,320 --> 00:01:52,920
Speaker 1: This plan is about building back better. It's about creating

30
00:01:52,960 --> 00:01:56,680
Speaker 1: pathways into the middle class. Your economic prosit labor have

31
00:01:56,800 --> 00:02:01,320
Speaker 1: made real clear. One month a disappointment. Now this month, okay,

32
00:02:01,360 --> 00:02:05,000
Speaker 1: maybe less of a disappointment, but nevertheless, back to back

33
00:02:05,160 --> 00:02:08,519
Speaker 1: months where we can celebrate lots of restaurant, leisure and

34
00:02:08,680 --> 00:02:11,800
Speaker 1: hospitality coming back to work. But maybe with the rest

35
00:02:11,800 --> 00:02:15,960
Speaker 1: of America, including manufacturing jobs, it was a little soggy.

36
00:02:16,400 --> 00:02:19,320
Speaker 1: Why was it from where you sit, Well, I think

37
00:02:19,320 --> 00:02:21,720
Speaker 1: because we're still recovering from a pandemic, and I think

38
00:02:21,880 --> 00:02:24,720
Speaker 1: we saw some we saw a good gain, or decent gain,

39
00:02:24,760 --> 00:02:27,359
Speaker 1: I should say, in the manufacturing sector this month. We

40
00:02:27,400 --> 00:02:30,120
Speaker 1: saw a gain in the education government sector this month.

41
00:02:30,400 --> 00:02:32,799
Speaker 1: We saw a gain obviously in the leisure hospitality this month.

42
00:02:33,040 --> 00:02:35,040
Speaker 1: So we've seen gains in different places. But we still

43
00:02:35,080 --> 00:02:38,000
Speaker 1: got to have to remember that, you know, the economic

44
00:02:38,080 --> 00:02:42,760
Speaker 1: hit to the economy two jobs back last March, March, April,

45
00:02:42,760 --> 00:02:45,079
Speaker 1: and May. We're devastating in a lot of ways, and

46
00:02:45,680 --> 00:02:48,200
Speaker 1: we can't just slip a switch. But we uh, this

47
00:02:48,280 --> 00:02:51,239
Speaker 1: is a this is a positive, positive report. Certainly, I

48
00:02:51,280 --> 00:02:52,679
Speaker 1: would love to be able to stand here and say

49
00:02:52,720 --> 00:02:55,520
Speaker 1: seven million jobs came back, but unfortunately that's that's not

50
00:02:55,560 --> 00:02:58,720
Speaker 1: how the economy works, and that's not how the system works.

51
00:02:58,800 --> 00:03:00,480
Speaker 1: Right when you learn this a is my of bust

52
00:03:00,560 --> 00:03:01,960
Speaker 1: and the idea that you've got to be a little

53
00:03:01,960 --> 00:03:04,480
Speaker 1: bit patient, and policy as well. I'm not going to

54
00:03:04,560 --> 00:03:06,400
Speaker 1: get into what the president is going to talk about

55
00:03:06,400 --> 00:03:07,760
Speaker 1: and here in a bit and you'll hear that on

56
00:03:07,840 --> 00:03:11,360
Speaker 1: Bloomberg Radio and television. Folks, the idea of what we're

57
00:03:11,400 --> 00:03:14,480
Speaker 1: gonna do between Republicans and Democrats, I want you to

58
00:03:14,520 --> 00:03:18,440
Speaker 1: talk about your responsibility, which is a better wage. So

59
00:03:18,560 --> 00:03:23,040
Speaker 1: many Americans before the pandemic, in the pandemic haven't seen

60
00:03:23,080 --> 00:03:26,280
Speaker 1: that better wage Can you say you see wage growth now.

61
00:03:27,080 --> 00:03:28,920
Speaker 1: We saw a little bit of wage growth this month,

62
00:03:29,160 --> 00:03:31,520
Speaker 1: and that's encouraging. Uh, you know, and I think that

63
00:03:31,560 --> 00:03:33,560
Speaker 1: we need to continue to see hopefully wage growth as

64
00:03:33,560 --> 00:03:36,160
Speaker 1: we move forward. That's also part of the American Jaws Plan.

65
00:03:36,280 --> 00:03:39,360
Speaker 1: That's part of the President's economic plan to create opportunities

66
00:03:39,360 --> 00:03:41,520
Speaker 1: for people to get into the middle class. And that's

67
00:03:41,520 --> 00:03:43,840
Speaker 1: a good thing. I mean, we saw it with the

68
00:03:43,840 --> 00:03:46,840
Speaker 1: pandemic unemployment. Lots of people talking about the unemployment rate,

69
00:03:46,880 --> 00:03:48,920
Speaker 1: people not going back to work. I don't necessarily agree

70
00:03:48,920 --> 00:03:50,760
Speaker 1: with that, but what we want to see is is

71
00:03:50,760 --> 00:03:53,160
Speaker 1: people get off unemployment. As people get back to work,

72
00:03:53,200 --> 00:03:55,960
Speaker 1: they have opportunities that earn more money. Marty Wallace, long

73
00:03:56,000 --> 00:03:57,920
Speaker 1: ago and far away, it was a matter of ten

74
00:03:58,040 --> 00:04:01,240
Speaker 1: or twenty years ago, you were lay Rows Union Local

75
00:04:01,320 --> 00:04:05,160
Speaker 1: two two three in Boston. You live the union model.

76
00:04:05,480 --> 00:04:08,040
Speaker 1: There's a lot of people out there, Republicans and even

77
00:04:08,080 --> 00:04:12,240
Speaker 1: some Democrats, they're afraid of the union model. They're afraid

78
00:04:12,240 --> 00:04:15,920
Speaker 1: of what President Biden speaks about about the atomization of

79
00:04:15,960 --> 00:04:19,320
Speaker 1: the American labor economy and a need to get back

80
00:04:19,400 --> 00:04:23,400
Speaker 1: to something that you actually lived as a young adult.

81
00:04:23,680 --> 00:04:25,760
Speaker 1: How close are we to getting back to what you

82
00:04:25,880 --> 00:04:29,080
Speaker 1: lived a better union America? Well, I think we have

83
00:04:29,120 --> 00:04:31,039
Speaker 1: a ways to go about, but we're working towards it.

84
00:04:31,080 --> 00:04:33,800
Speaker 1: The labor moment certainly is more popular when you pull it.

85
00:04:34,320 --> 00:04:38,280
Speaker 1: Labor movement stands for for for supporting workers and advocating

86
00:04:38,320 --> 00:04:41,080
Speaker 1: for good wages and benefits and moving forward. And people

87
00:04:41,080 --> 00:04:43,239
Speaker 1: shouldn't be afraid of the labor movement, the labor moment.

88
00:04:43,320 --> 00:04:45,200
Speaker 1: We need to make sure that the laby moment works

89
00:04:45,200 --> 00:04:47,479
Speaker 1: with businesses. As mayor of the City of Boston, as

90
00:04:47,520 --> 00:04:49,800
Speaker 1: the head of the building trades in Boston, as a worker,

91
00:04:49,800 --> 00:04:52,800
Speaker 1: as a state representative, I always felt collaboration was important,

92
00:04:52,920 --> 00:04:55,679
Speaker 1: and I think having these conversations we before, we shouldn't.

93
00:04:55,760 --> 00:04:58,200
Speaker 1: We shouldn't be looking business shouldn't be identified as bad,

94
00:04:58,440 --> 00:05:00,800
Speaker 1: Labor shouldn't be identified as bad, should be talking about

95
00:05:00,839 --> 00:05:03,159
Speaker 1: how do we move our economy forward together? But Marty

96
00:05:03,400 --> 00:05:07,080
Speaker 1: entrepreneurial Americans. Someone suggests it's more geop based. I don't

97
00:05:07,080 --> 00:05:09,720
Speaker 1: know if that's true or not, but I would respectfully

98
00:05:09,760 --> 00:05:15,000
Speaker 1: suggest that entrepreneurial America is scared stiff of the rising

99
00:05:15,000 --> 00:05:18,280
Speaker 1: wages they see right now. How do you respond to

100
00:05:18,400 --> 00:05:22,080
Speaker 1: self starting small business in America. I mean, I think

101
00:05:22,080 --> 00:05:24,800
Speaker 1: we have to tell people, the entrepreneurs in America, we

102
00:05:24,839 --> 00:05:26,680
Speaker 1: need to you need to help share the wealth. You

103
00:05:26,720 --> 00:05:28,800
Speaker 1: need to make sure that your employees that work for

104
00:05:28,839 --> 00:05:31,600
Speaker 1: you are treated faily and paid respectfully, because the other

105
00:05:31,640 --> 00:05:33,520
Speaker 1: ones that are making sure of the product or whatever

106
00:05:33,560 --> 00:05:36,640
Speaker 1: you're doing, uh carrying a forward. And it is nothing

107
00:05:36,640 --> 00:05:39,640
Speaker 1: wrong with making sure that American workers paid a good

108
00:05:39,640 --> 00:05:42,000
Speaker 1: wage for a good day's pay, good good day's work.

109
00:05:42,040 --> 00:05:44,760
Speaker 1: I should say that's that's that's what we should be doing.

110
00:05:44,920 --> 00:05:47,200
Speaker 1: Let's go to the economics of those two schools on

111
00:05:47,240 --> 00:05:50,880
Speaker 1: the Charles River. Then it's real simple that fair share

112
00:05:51,240 --> 00:05:54,520
Speaker 1: has got to come out of higher prices revenue coming

113
00:05:54,520 --> 00:05:58,200
Speaker 1: in from the consumer pricing power in that or it

114
00:05:58,279 --> 00:06:01,200
Speaker 1: comes out of a margin compress and in a loss

115
00:06:01,200 --> 00:06:04,719
Speaker 1: of profits. What is the department labor of labor of

116
00:06:04,760 --> 00:06:08,200
Speaker 1: President Biden advocate? Are we going to see higher prices

117
00:06:08,480 --> 00:06:11,440
Speaker 1: or are we gonna see margin compression? I think I

118
00:06:11,440 --> 00:06:13,400
Speaker 1: think when the President is talking about is making sure

119
00:06:13,480 --> 00:06:16,080
Speaker 1: that we create fit, fair opportunities for everybody. And I

120
00:06:16,120 --> 00:06:18,240
Speaker 1: think that those conversations is still to be had. I

121
00:06:18,279 --> 00:06:19,840
Speaker 1: don't think it has to be one or the other.

122
00:06:20,160 --> 00:06:23,240
Speaker 1: Fair tell me about labored policy here. You've been there

123
00:06:23,279 --> 00:06:25,919
Speaker 1: for long enough to get the curtains done. I believe

124
00:06:25,920 --> 00:06:28,719
Speaker 1: you've got a Boston Red Sox motif on your curtains

125
00:06:28,720 --> 00:06:31,400
Speaker 1: at labor. That's fine, But I want to know what

126
00:06:31,440 --> 00:06:35,920
Speaker 1: the wash plan is at Department of Labor. We're still

127
00:06:35,920 --> 00:06:38,000
Speaker 1: working through it, still moving forward. You know, I've been

128
00:06:38,000 --> 00:06:39,839
Speaker 1: here now. This is my third jobs report and I

129
00:06:39,839 --> 00:06:42,760
Speaker 1: think my tenth week. Uh So we're working on how

130
00:06:42,800 --> 00:06:45,760
Speaker 1: do we continue to support American workers in different types

131
00:06:45,800 --> 00:06:47,960
Speaker 1: of policies and how do we support American workers. I

132
00:06:48,080 --> 00:06:50,640
Speaker 1: spent a lot of time going around this country talking

133
00:06:50,680 --> 00:06:54,120
Speaker 1: to business, talking to workers, talking to people, and we'll

134
00:06:54,120 --> 00:06:57,359
Speaker 1: continue moving forward in those different conversations. They don't have

135
00:06:57,400 --> 00:06:59,080
Speaker 1: a plan tell out to you here today on TV,

136
00:06:59,240 --> 00:07:01,719
Speaker 1: but certainly we're working forward to make sure that that

137
00:07:01,800 --> 00:07:04,120
Speaker 1: everyone treat is treated failing. I want you to do.

138
00:07:04,360 --> 00:07:07,320
Speaker 1: This is to a Democratic congressman of Oregon who's seen

139
00:07:07,880 --> 00:07:10,640
Speaker 1: uh you know, his easy wins of years ago become

140
00:07:10,720 --> 00:07:13,720
Speaker 1: much closer Races and Oregon. When you go into a

141
00:07:13,760 --> 00:07:16,920
Speaker 1: district that's close, where it's Democrats and Republicans right on

142
00:07:17,040 --> 00:07:19,840
Speaker 1: top of each other. When you go into a district

143
00:07:19,920 --> 00:07:22,440
Speaker 1: like that, how do you speak to small business and

144
00:07:22,480 --> 00:07:26,320
Speaker 1: how do you speak to entrepreneurs trying to get business

145
00:07:26,360 --> 00:07:30,120
Speaker 1: going even with these rising wages. Well, quite honestly, I've

146
00:07:30,120 --> 00:07:32,520
Speaker 1: been talking about the American Jaws Plan and the impact

147
00:07:32,520 --> 00:07:35,160
Speaker 1: of the American Jows planning. The American Jows Plan is

148
00:07:35,160 --> 00:07:36,960
Speaker 1: is not a plan just for workers. It's a plan

149
00:07:37,000 --> 00:07:39,760
Speaker 1: for America. And there are benefits in this plan for everyone,

150
00:07:39,840 --> 00:07:46,360
Speaker 1: this plan for entrepreneurs, for small businesses, large businesses, main streets, backstreets, workers. Uh,

151
00:07:46,560 --> 00:07:49,480
Speaker 1: it really is a plan about about keeping America very

152
00:07:49,520 --> 00:07:52,280
Speaker 1: at the forefront of competition in the world. And that's

153
00:07:52,320 --> 00:07:53,880
Speaker 1: what I talked to people, and when when you get

154
00:07:53,880 --> 00:07:55,520
Speaker 1: a chance to talk to them about it and the

155
00:07:55,600 --> 00:07:58,560
Speaker 1: different aspects of the plan. Everyone loves something in the plan,

156
00:07:58,600 --> 00:08:02,360
Speaker 1: whether it's broadband access, energy, clean drinking, wat of new schools.

157
00:08:02,680 --> 00:08:05,360
Speaker 1: Everybody loves something in the plans. So it really is

158
00:08:05,360 --> 00:08:08,160
Speaker 1: talking about you know, this plan, the American Jobs Plan

159
00:08:08,360 --> 00:08:10,760
Speaker 1: is not a Democratic plan, it's not a Republican plan.

160
00:08:10,960 --> 00:08:13,080
Speaker 1: It's a plan for America. And hopefully we can get

161
00:08:13,080 --> 00:08:15,320
Speaker 1: back to having those conversations in this country. I want

162
00:08:15,360 --> 00:08:17,400
Speaker 1: you to speak for Janet yellow in this morning. The

163
00:08:17,440 --> 00:08:20,400
Speaker 1: President went big yesterday and moved the corporate text down

164
00:08:20,440 --> 00:08:24,880
Speaker 1: to what do you, Secretary Yelling and the President need

165
00:08:25,000 --> 00:08:29,160
Speaker 1: to see from the Republicans now in this infrastructure debate.

166
00:08:30,160 --> 00:08:33,200
Speaker 1: Hopefully we can. I mean, we're definitely seeing conversations happening.

167
00:08:33,360 --> 00:08:36,439
Speaker 1: We're definitely seeing negotiations happening here. The President made it

168
00:08:36,520 --> 00:08:38,440
Speaker 1: very clear from the very beginning that he wanted this

169
00:08:38,480 --> 00:08:40,559
Speaker 1: bill to be worked on by all sides, and and

170
00:08:41,000 --> 00:08:43,079
Speaker 1: he intended to have people sitting at the table with him.

171
00:08:43,200 --> 00:08:45,400
Speaker 1: He has done an amazing job with that. I am

172
00:08:45,440 --> 00:08:48,320
Speaker 1: talking to all sides as well. I'm talking to Democrats

173
00:08:48,360 --> 00:08:50,880
Speaker 1: Republicans about the spell and I think that we're seeing

174
00:08:51,000 --> 00:08:52,880
Speaker 1: I don't want to say progress yet, but we're definitely

175
00:08:52,920 --> 00:08:55,440
Speaker 1: seeing movements in the right direction as far as this

176
00:08:55,720 --> 00:08:59,840
Speaker 1: major piece of legislation, infrastructural legislation for our country. Secretary,

177
00:09:00,440 --> 00:09:03,400
Speaker 1: thank you so much for joining Bloomberg worldwide on radio

178
00:09:03,440 --> 00:09:14,920
Speaker 1: and television. This is Bloomberg with a restatement almost in

179
00:09:14,920 --> 00:09:18,240
Speaker 1: this pandemic, all the different dynamics that we see within

180
00:09:18,280 --> 00:09:21,600
Speaker 1: our financial system and our economics. That is a perfect

181
00:09:21,880 --> 00:09:25,280
Speaker 1: siguy into the former governor the Fellow Reserve System. Randall

182
00:09:25,280 --> 00:09:28,520
Speaker 1: Crassner joins us now the boot School Chicago, ascost I

183
00:09:28,559 --> 00:09:32,280
Speaker 1: believe in London, where he's been for many months. Professor,

184
00:09:32,320 --> 00:09:34,959
Speaker 1: thank you so much for starting, Uh, letting us start

185
00:09:35,000 --> 00:09:38,680
Speaker 1: strong on this job's day. As you see this labor

186
00:09:38,760 --> 00:09:42,880
Speaker 1: economy and the battle of our politics as well, how

187
00:09:42,920 --> 00:09:48,920
Speaker 1: close are we to fully employed? So we're not there yet. Um.

188
00:09:48,960 --> 00:09:51,559
Speaker 1: We clearly have a very strong labor market. Even though

189
00:09:51,559 --> 00:09:54,520
Speaker 1: the print last month was for a low number of jobs,

190
00:09:54,840 --> 00:09:57,880
Speaker 1: it's clear that we have lots of reports of labor shortages,

191
00:09:57,920 --> 00:09:59,800
Speaker 1: and we see that in that the Fed Beige Book,

192
00:10:00,080 --> 00:10:04,120
Speaker 1: we see that in just talking to to business people. Uh,

193
00:10:04,320 --> 00:10:07,280
Speaker 1: it's a strong labor market. We're recovering very quickly. But

194
00:10:07,400 --> 00:10:10,640
Speaker 1: a lot of people aren't coming back into the jobs market. UM.

195
00:10:10,800 --> 00:10:13,559
Speaker 1: Part of that is because they've just decided it's too volatile,

196
00:10:13,600 --> 00:10:15,800
Speaker 1: it's too risky, I'm going to stay out. And part

197
00:10:15,840 --> 00:10:17,679
Speaker 1: of it is they're getting some very good benefits that

198
00:10:17,760 --> 00:10:20,600
Speaker 1: eventually will will fall off. So it's I think it's

199
00:10:20,600 --> 00:10:22,760
Speaker 1: pretty tight, and I think the thing to focus on

200
00:10:22,800 --> 00:10:26,720
Speaker 1: will be what's happening with with wages. Exactly as you

201
00:10:26,720 --> 00:10:30,560
Speaker 1: guys were discussing the numbers could bounce all over the place,

202
00:10:30,600 --> 00:10:33,199
Speaker 1: and it could be lower because like it spins, it

203
00:10:33,200 --> 00:10:35,679
Speaker 1: could be higher because of my demand. But I think

204
00:10:35,679 --> 00:10:37,520
Speaker 1: we have to look through that and sort of see

205
00:10:37,800 --> 00:10:40,320
Speaker 1: what is it, what is the wage pressure that's coming in.

206
00:10:40,360 --> 00:10:42,040
Speaker 1: I think that's really going to be the key. You know,

207
00:10:42,160 --> 00:10:45,520
Speaker 1: Governor cross are a very careful and scary course at

208
00:10:45,520 --> 00:10:49,480
Speaker 1: the University of Chicago is Economics for Liberal Arts Majors.

209
00:10:49,520 --> 00:10:52,520
Speaker 1: It's just, you know, just it's a frightening event to see.

210
00:10:52,559 --> 00:10:55,000
Speaker 1: And I'm sure what you're doing in Economics for Liberal

211
00:10:55,120 --> 00:11:00,520
Speaker 1: Arts Majors is underscoring the complexity of our labor system.

212
00:11:00,640 --> 00:11:06,040
Speaker 1: Meal Dutta Renaissance Macro absolutely nails the key distinction right

213
00:11:06,080 --> 00:11:10,280
Speaker 1: now is are we seeing a longer work week or

214
00:11:10,520 --> 00:11:14,000
Speaker 1: are we seeing more jobs? At some point that flips

215
00:11:14,040 --> 00:11:18,400
Speaker 1: two more jobs, doesn't it. Yeah, I think uh. And clearly,

216
00:11:18,400 --> 00:11:20,319
Speaker 1: if you look at the number of job openings that

217
00:11:20,360 --> 00:11:23,800
Speaker 1: are out there, it's enormous. There's been enormous increase in that.

218
00:11:23,960 --> 00:11:27,080
Speaker 1: And we're also seeing that people are willing to quit

219
00:11:27,120 --> 00:11:29,800
Speaker 1: their jobs. They only quit their jobs a lot when

220
00:11:29,840 --> 00:11:32,320
Speaker 1: they feel pretty confident that then get another one, and

221
00:11:32,400 --> 00:11:35,280
Speaker 1: so so I think the there are lots of job

222
00:11:35,320 --> 00:11:38,319
Speaker 1: openings out there, There will be lots of opportunities for people.

223
00:11:38,559 --> 00:11:40,520
Speaker 1: It's just are there enough in sentence for people to

224
00:11:40,600 --> 00:11:45,040
Speaker 1: come back into the labor market. What UM do you

225
00:11:45,080 --> 00:11:49,199
Speaker 1: think of this paradigm change that we're watching Randall Krosner

226
00:11:49,480 --> 00:11:53,599
Speaker 1: in terms of the shift from monetary policy over the

227
00:11:53,679 --> 00:11:56,520
Speaker 1: last forty years from the Reagan Vulker era to this

228
00:11:56,640 --> 00:12:01,120
Speaker 1: new era of basically mmt um, it seems that the

229
00:12:01,160 --> 00:12:05,600
Speaker 1: freshwater economists have all been drowned in salt water here. Um,

230
00:12:05,600 --> 00:12:09,000
Speaker 1: there's no more trust in free markets, there's no more

231
00:12:09,679 --> 00:12:14,480
Speaker 1: real business cycle, there's no more monetarism. Um. What's the

232
00:12:14,520 --> 00:12:19,880
Speaker 1: point then, of the Chicago Booth UH school. I'm not

233
00:12:20,040 --> 00:12:23,200
Speaker 1: quite sure that we we've been we've been drown quite

234
00:12:23,320 --> 00:12:25,560
Speaker 1: quite yet. I think there's still a lot of belief

235
00:12:25,640 --> 00:12:28,400
Speaker 1: in UH, in the power of markets and the value

236
00:12:28,440 --> 00:12:31,960
Speaker 1: of of market economy. I mean, that's a lot of

237
00:12:32,000 --> 00:12:35,120
Speaker 1: what's driving the recovery. Think about what happened during the pandemic.

238
00:12:35,440 --> 00:12:38,560
Speaker 1: It was the innovative sectors that we're allowing people to

239
00:12:38,600 --> 00:12:42,880
Speaker 1: get food, to get the things that they needed. So

240
00:12:43,280 --> 00:12:46,800
Speaker 1: I think that's still super important driving force. Think about

241
00:12:46,840 --> 00:12:50,560
Speaker 1: the creation of the vaccines, that was, uh, you know,

242
00:12:50,720 --> 00:12:55,400
Speaker 1: very much a market driven, market driven phenomena. So but Professor,

243
00:12:55,440 --> 00:12:57,920
Speaker 1: we're going to run up debts of a hundred twenty

244
00:12:58,280 --> 00:13:02,280
Speaker 1: dt of g d P. Is that concerning to economists

245
00:13:02,280 --> 00:13:05,640
Speaker 1: in America? Oh, for sure, that's a separate issue. And

246
00:13:05,679 --> 00:13:08,480
Speaker 1: so I think that's a very important one. It seems

247
00:13:08,520 --> 00:13:11,120
Speaker 1: that there's, uh, there's a desire on some people in

248
00:13:11,160 --> 00:13:15,040
Speaker 1: Washington kind of supplant the private sector investment with government

249
00:13:15,040 --> 00:13:20,439
Speaker 1: sector investment, with private activity, with more government sponsored activity.

250
00:13:20,559 --> 00:13:22,600
Speaker 1: That is a real challenge, and I think there are

251
00:13:22,600 --> 00:13:25,840
Speaker 1: many economists, not just in Chicago, but throughout the country

252
00:13:25,880 --> 00:13:28,640
Speaker 1: who are very concerned about that, concerned about the bunk

253
00:13:28,679 --> 00:13:31,400
Speaker 1: burden that we're putting on future generations. Somebody's got to

254
00:13:31,440 --> 00:13:34,000
Speaker 1: repay this debt, and that's going to be the future generations.

255
00:13:34,080 --> 00:13:37,360
Speaker 1: And Professor, we've have increasingly heard that there's no amount

256
00:13:37,360 --> 00:13:39,720
Speaker 1: of tax increases that can cover that, and so you

257
00:13:39,800 --> 00:13:42,439
Speaker 1: do have to bring in the private sector to help

258
00:13:42,480 --> 00:13:44,880
Speaker 1: fund some of the public investments. Do you see that

259
00:13:44,920 --> 00:13:48,840
Speaker 1: as a realistic possibility. I think that's extremely important, and

260
00:13:48,880 --> 00:13:51,400
Speaker 1: I think that's extremely valuable, and so we can have

261
00:13:51,480 --> 00:13:55,000
Speaker 1: good public private partnerships like the one with a so

262
00:13:55,200 --> 00:13:58,360
Speaker 1: called Operation Warp Speed, which helped to U to allow

263
00:13:58,559 --> 00:14:02,360
Speaker 1: Maderna wh would never produced a vaccine before now to

264
00:14:02,400 --> 00:14:06,000
Speaker 1: be producing perhaps a billiona vaccines that this year. So

265
00:14:06,040 --> 00:14:08,560
Speaker 1: there can be valuable public private partnerships. There can be

266
00:14:08,640 --> 00:14:11,440
Speaker 1: valuable aspects of government spending. But you've got to be

267
00:14:11,520 --> 00:14:14,360
Speaker 1: careful to make sure that it has payoff, because if

268
00:14:14,360 --> 00:14:17,040
Speaker 1: it doesn't have payoff and helping to grow preductivity and

269
00:14:17,080 --> 00:14:20,120
Speaker 1: helping it grow the economy, it's gonna put an unbearable

270
00:14:20,120 --> 00:14:22,680
Speaker 1: burden on future generations governing to Cross. I want to

271
00:14:22,720 --> 00:14:25,160
Speaker 1: go to Chicago on you, and that is over the

272
00:14:25,160 --> 00:14:27,960
Speaker 1: financial integrity of the system. You're one of our great

273
00:14:28,040 --> 00:14:31,240
Speaker 1: voices on this. I know you're on your laptop. It's

274
00:14:31,240 --> 00:14:35,360
Speaker 1: some she cafe in London day trading a mc R game.

275
00:14:35,480 --> 00:14:39,000
Speaker 1: Stop Randy, What in God's name does this mean for

276
00:14:39,040 --> 00:14:41,480
Speaker 1: the system? I mean, you and I are making jokes

277
00:14:41,480 --> 00:14:43,960
Speaker 1: about this, but you know a lot of money is

278
00:14:43,960 --> 00:14:45,800
Speaker 1: gonna be made, a lot is going to be lost.

279
00:14:46,040 --> 00:14:49,400
Speaker 1: Regulators are clearly doing next to nothing on this. What's

280
00:14:49,440 --> 00:14:52,240
Speaker 1: the impact of this on the trust in the bid

281
00:14:52,480 --> 00:14:55,920
Speaker 1: and the trust in the ask. That's a super important

282
00:14:55,960 --> 00:14:59,360
Speaker 1: question because the integrity of the markets is crucial and

283
00:14:59,360 --> 00:15:02,360
Speaker 1: and we've seen a lot of newcomers into markets, and

284
00:15:02,360 --> 00:15:04,880
Speaker 1: we think a lot of coordination of those newcomers in

285
00:15:05,040 --> 00:15:08,320
Speaker 1: markets in ways that we hadn't seen before, people using technology.

286
00:15:08,640 --> 00:15:10,760
Speaker 1: So regulators need to be aware of that, and market

287
00:15:10,760 --> 00:15:14,280
Speaker 1: participants need to be aware of that greater volatility. And

288
00:15:14,440 --> 00:15:16,640
Speaker 1: we want to make sure that march markets function well.

289
00:15:16,720 --> 00:15:20,800
Speaker 1: We don't want sudden stops of of trading that where

290
00:15:20,840 --> 00:15:24,000
Speaker 1: people feel that they are not being treated fairly and

291
00:15:24,000 --> 00:15:25,880
Speaker 1: other people can get in and out and they can't.

292
00:15:26,200 --> 00:15:28,440
Speaker 1: And so I think that does need That means that

293
00:15:28,560 --> 00:15:31,600
Speaker 1: regulatory rethink for the new era where there are a

294
00:15:31,640 --> 00:15:36,480
Speaker 1: lot more people coming in and people coordinate in ways

295
00:15:36,800 --> 00:15:39,800
Speaker 1: that they couldn't before. So the little guys all working

296
00:15:39,840 --> 00:15:42,280
Speaker 1: together could be much better and bigger than and more

297
00:15:42,320 --> 00:15:46,000
Speaker 1: important than the traditional big guys. Professor kros well, we'll

298
00:15:46,040 --> 00:15:47,920
Speaker 1: have to leave it there, Professor Krausser, thank you so

299
00:15:48,000 --> 00:15:50,440
Speaker 1: much for joining us today with the Booth School at

300
00:15:50,480 --> 00:15:53,000
Speaker 1: the University of Chicago. In the force of course is

301
00:15:53,040 --> 00:15:56,880
Speaker 1: public service. As a governor of the Federal Reserve assist him.

302
00:16:02,960 --> 00:16:05,160
Speaker 1: David Jones with us to begin this hour, this job

303
00:16:05,240 --> 00:16:08,280
Speaker 1: say our with Bank of America Securities and their global

304
00:16:08,320 --> 00:16:12,040
Speaker 1: investment strategists, but much more, David, I want to talk

305
00:16:12,080 --> 00:16:14,560
Speaker 1: about your tour of duty at the FED and then

306
00:16:14,640 --> 00:16:18,920
Speaker 1: at the International Monetary Fund. You wrote many things on

307
00:16:19,120 --> 00:16:24,720
Speaker 1: tapered tantrums. Is the tantrum to come anything like what

308
00:16:24,840 --> 00:16:29,320
Speaker 1: you wrote about years ago at the i m F. Well,

309
00:16:29,360 --> 00:16:31,680
Speaker 1: the thing about tantrums, of course, is that they are

310
00:16:31,760 --> 00:16:35,400
Speaker 1: unexpected by their very nature. You know, our belief is

311
00:16:35,640 --> 00:16:37,360
Speaker 1: UH and the work that we did at the i

312
00:16:37,480 --> 00:16:40,200
Speaker 1: m F and UH. You know, even as even at

313
00:16:40,200 --> 00:16:42,280
Speaker 1: the FED, of course, we were obviously very concerned with

314
00:16:42,320 --> 00:16:45,320
Speaker 1: these issues. When you start to see the FED move

315
00:16:45,640 --> 00:16:47,880
Speaker 1: towards tightening, when you start to see the FED reduce

316
00:16:47,960 --> 00:16:52,080
Speaker 1: its monetary accommodation, UH, that allows volatility to pick up again.

317
00:16:52,560 --> 00:16:55,120
Speaker 1: And in ways there are there are mechanisms in which

318
00:16:55,120 --> 00:16:58,320
Speaker 1: these things become self augmenting, and then you can have

319
00:16:58,360 --> 00:17:02,280
Speaker 1: a sudden surge of volatility. When that happens, where that happens,

320
00:17:02,520 --> 00:17:06,160
Speaker 1: you can never completely predict them. The inertial forces here,

321
00:17:06,440 --> 00:17:09,800
Speaker 1: David Jones, are critical and you have a subhead in

322
00:17:09,840 --> 00:17:14,320
Speaker 1: your Michael Hardner report where you say the Fed is dithering.

323
00:17:14,880 --> 00:17:20,520
Speaker 1: How does the fed ditthering play into this morning's jobs report? Well,

324
00:17:20,560 --> 00:17:22,480
Speaker 1: this is the policy of the FED at the moment.

325
00:17:22,520 --> 00:17:25,159
Speaker 1: The FED wants to see you know, the whites of

326
00:17:25,200 --> 00:17:29,040
Speaker 1: the eyes of inflation before they actually before they actually

327
00:17:29,080 --> 00:17:32,200
Speaker 1: make their move um, and so they have to see

328
00:17:32,240 --> 00:17:37,280
Speaker 1: these numbers pick up. Um. What we're expecting today is uh,

329
00:17:37,320 --> 00:17:39,640
Speaker 1: you know, you know, if you are a bull, for instance,

330
00:17:39,680 --> 00:17:42,160
Speaker 1: what you want to see is a very high jobs number,

331
00:17:42,320 --> 00:17:45,159
Speaker 1: and you want to see average hourly earnings at a

332
00:17:45,280 --> 00:17:48,560
Speaker 1: very low perhaps euro point two percent or lower. Uh.

333
00:17:48,720 --> 00:17:51,000
Speaker 1: That's really what you're going to need as a bull

334
00:17:51,240 --> 00:17:54,040
Speaker 1: to continue with that attitude. David, What if we get

335
00:17:54,080 --> 00:17:57,160
Speaker 1: to a stage here where the inflationary pressures do prove

336
00:17:57,400 --> 00:17:59,480
Speaker 1: not only to be transitory, but we actually start to

337
00:17:59,520 --> 00:18:01,639
Speaker 1: see a pull back and at the same time we

338
00:18:01,640 --> 00:18:05,480
Speaker 1: start to realize some of the growth estimates economic growth

339
00:18:05,600 --> 00:18:08,640
Speaker 1: estimates in the future. Here. What does that do here

340
00:18:08,720 --> 00:18:13,480
Speaker 1: for how the FED is going to calculate its next move. Well,

341
00:18:13,520 --> 00:18:15,679
Speaker 1: that is, you know, that is actually not our expectation,

342
00:18:15,720 --> 00:18:18,680
Speaker 1: to be honest. Our expectation is that inflation is going

343
00:18:18,760 --> 00:18:23,120
Speaker 1: to be less transitory than people think and more permanently.

344
00:18:23,720 --> 00:18:26,840
Speaker 1: We also think that growth is speaking here uh, and

345
00:18:26,880 --> 00:18:28,840
Speaker 1: that in the second half we're actually going to see

346
00:18:28,880 --> 00:18:31,640
Speaker 1: some slower economic growth and we're going to move more

347
00:18:31,720 --> 00:18:36,240
Speaker 1: towards more towards the stagflationary outcome. That is, that is

348
00:18:36,280 --> 00:18:39,560
Speaker 1: our belief and and our market recommendations are based on

349
00:18:39,640 --> 00:18:43,239
Speaker 1: that framework. Um. If you do see something along with

350
00:18:43,280 --> 00:18:47,320
Speaker 1: the Fed uh, what what you've just outlined, very high

351
00:18:47,359 --> 00:18:50,240
Speaker 1: growth uh and very low inflation, You're probably going to

352
00:18:50,280 --> 00:18:52,800
Speaker 1: have to see the mint that the FED move up

353
00:18:53,320 --> 00:18:55,560
Speaker 1: and start to indicate that it's going to move faster.

354
00:18:56,040 --> 00:18:58,600
Speaker 1: It's going to start to wind down Huey, perhaps at

355
00:18:58,640 --> 00:19:01,280
Speaker 1: a at the earlier dates and at a quicker rate,

356
00:19:01,440 --> 00:19:02,680
Speaker 1: and then you're going to see the back of the

357
00:19:02,760 --> 00:19:06,400
Speaker 1: yield kerve pick up quite dramatically. David. What I love

358
00:19:06,520 --> 00:19:08,959
Speaker 1: is Romayne and I have a raging debate in the afternoons.

359
00:19:09,000 --> 00:19:11,760
Speaker 1: He thinks inflations transitory. I think I'm more in your camp.

360
00:19:11,800 --> 00:19:15,800
Speaker 1: We see it's stickier than some other people think. Given

361
00:19:15,960 --> 00:19:19,560
Speaker 1: that backdrop that you described in the stagflation risk in

362
00:19:19,600 --> 00:19:22,520
Speaker 1: the second half, how does full faith in credit tenure

363
00:19:22,560 --> 00:19:27,720
Speaker 1: bonds react well, I mean, you know, I guess what

364
00:19:27,760 --> 00:19:29,480
Speaker 1: you can say is that the you know, the first

365
00:19:29,480 --> 00:19:32,560
Speaker 1: half of this year you could describe basically as an

366
00:19:32,560 --> 00:19:36,000
Speaker 1: inflationary groom. Um. And you saw the thirty year running

367
00:19:36,200 --> 00:19:38,639
Speaker 1: and the you know, the as an annualized loss of

368
00:19:38,680 --> 00:19:42,760
Speaker 1: post and annualized loss of which is really just a

369
00:19:42,840 --> 00:19:45,840
Speaker 1: staggering number. It's the largest loss for the third year

370
00:19:45,880 --> 00:19:48,520
Speaker 1: treasury in the hundred years. And you see similar numbers

371
00:19:48,520 --> 00:19:50,840
Speaker 1: on the on the ten year as well. UM. So

372
00:19:51,000 --> 00:19:52,959
Speaker 1: you know, as far as equities went, you know, this

373
00:19:53,040 --> 00:19:56,040
Speaker 1: was very positive for typlicals, but it did temper some

374
00:19:56,040 --> 00:20:00,000
Speaker 1: of the upside for technology and for corporate bonds as well. UM.

375
00:20:00,000 --> 00:20:02,919
Speaker 1: In the in the second half, we think, as we

376
00:20:03,000 --> 00:20:06,520
Speaker 1: move towards a slower growth outcome and we continue to

377
00:20:06,560 --> 00:20:09,399
Speaker 1: see inflation to the ground, we think that's been argues

378
00:20:09,480 --> 00:20:12,040
Speaker 1: for a sort of later cyclicals in the equity market,

379
00:20:12,440 --> 00:20:14,840
Speaker 1: and we think you should also start thinking about some

380
00:20:14,960 --> 00:20:20,320
Speaker 1: of the quality defensive, particularly stables and utilities. You say

381
00:20:20,320 --> 00:20:22,919
Speaker 1: a game of two halves, and the two halves, well,

382
00:20:22,960 --> 00:20:25,240
Speaker 1: you know, you can take the two halves of two thousands,

383
00:20:26,480 --> 00:20:28,600
Speaker 1: but David, I'm gonna take the two halves back a

384
00:20:28,680 --> 00:20:33,160
Speaker 1: decade and they overlay here. This changes technology. How does

385
00:20:33,240 --> 00:20:37,240
Speaker 1: technology play into your Bank of America work as we

386
00:20:37,320 --> 00:20:41,400
Speaker 1: come out of this horrific pandemic as technology advanced equity

387
00:20:41,480 --> 00:20:47,320
Speaker 1: prices or not. Well, technology really benefited from very low

388
00:20:47,359 --> 00:20:50,680
Speaker 1: interest rates. If you think of technology, uh, it's it's

389
00:20:50,800 --> 00:20:54,119
Speaker 1: very you know, it's correlated with with duration in that

390
00:20:54,440 --> 00:20:57,960
Speaker 1: you know when when inflatients, when when interest rates come down,

391
00:20:58,119 --> 00:21:00,880
Speaker 1: technology off the forms we if we're now in an

392
00:21:00,920 --> 00:21:04,160
Speaker 1: environment where interest rates are going to rise, and that

393
00:21:04,240 --> 00:21:07,600
Speaker 1: necessitates a switch in your ethid allocation framework, and that

394
00:21:07,760 --> 00:21:12,119
Speaker 1: means perhaps fading technology a bit, particularly at these valuations.

395
00:21:12,440 --> 00:21:14,800
Speaker 1: David Jones, Thank you, don't be a stranger, David Jones.

396
00:21:14,840 --> 00:21:18,119
Speaker 1: With this global investment strategist, the Bank of America Securities,

397
00:21:25,040 --> 00:21:28,000
Speaker 1: the tenure yield has barely moved one point six to

398
00:21:28,200 --> 00:21:32,080
Speaker 1: six seven. That's a good ciguity into Jeffrey Rosenberger, Black

399
00:21:32,160 --> 00:21:38,080
Speaker 1: Rock portfolio manager of their Systematic Multi Strategy fund. Jeffrey Rosenberg,

400
00:21:38,160 --> 00:21:40,320
Speaker 1: when I see here in the calculus of your carding

401
00:21:40,400 --> 00:21:43,360
Speaker 1: email and is forget about the y axes is which

402
00:21:43,440 --> 00:21:46,720
Speaker 1: is where the financial media is what really changes with

403
00:21:46,840 --> 00:21:50,840
Speaker 1: these back to back labor reports. Is our guestimates along

404
00:21:50,880 --> 00:21:55,080
Speaker 1: the X axis. How does your X axis change as

405
00:21:55,119 --> 00:21:57,840
Speaker 1: you look out into two thousand twenty one and into

406
00:21:57,960 --> 00:22:02,480
Speaker 1: next year. You know, Tom, it's a it's a really

407
00:22:02,520 --> 00:22:06,320
Speaker 1: difficult headline number two forecast right there was very wide

408
00:22:06,400 --> 00:22:09,760
Speaker 1: range estimates. And I think the news here on this

409
00:22:09,840 --> 00:22:13,760
Speaker 1: payroll report is that you're seeing signs of the supply

410
00:22:13,960 --> 00:22:17,720
Speaker 1: side constraints to the labor market, and you're seeing so

411
00:22:17,720 --> 00:22:19,560
Speaker 1: you're seeing that in some of the headline numbers, you're

412
00:22:19,560 --> 00:22:22,119
Speaker 1: seeing that in some of the industry numbers. And importantly,

413
00:22:22,119 --> 00:22:24,080
Speaker 1: go back to the conversation you had a minute ago

414
00:22:24,359 --> 00:22:29,239
Speaker 1: on average hourly earnings, despite a likely mixed shift that

415
00:22:29,240 --> 00:22:35,040
Speaker 1: should have otherwise pushed average our hourly earnings downward, we're

416
00:22:35,080 --> 00:22:38,399
Speaker 1: seeing that increase and it is a similar story to

417
00:22:38,480 --> 00:22:42,040
Speaker 1: what we saw in April in that average hourly earnings

418
00:22:42,080 --> 00:22:45,040
Speaker 1: figure before. So for a long time we've ignored these

419
00:22:45,119 --> 00:22:48,960
Speaker 1: figures because they've been very distorted by the mixed shift.

420
00:22:49,040 --> 00:22:52,800
Speaker 1: The fact that you're seeing the increases in spite of

421
00:22:52,840 --> 00:22:55,760
Speaker 1: the mixed shift is really going to feed into this

422
00:22:56,000 --> 00:23:01,800
Speaker 1: narrative of supply side constraints pushing up wages. The push

423
00:23:01,840 --> 00:23:04,960
Speaker 1: up in wages will fuel and continue the debate on

424
00:23:05,359 --> 00:23:12,680
Speaker 1: whether transitory becomes more permanent because it flows into wage expectations.

425
00:23:12,760 --> 00:23:14,960
Speaker 1: That's to be seen, but I think that's the really

426
00:23:15,000 --> 00:23:17,760
Speaker 1: important news out of this report. To Jeah, that's exactly

427
00:23:17,760 --> 00:23:20,640
Speaker 1: where I want to go. Wages aren't transitory, they're stickier.

428
00:23:20,760 --> 00:23:22,719
Speaker 1: Once you raise a wage, it's harder to cut it

429
00:23:22,880 --> 00:23:24,680
Speaker 1: than it is to raise it, so you're going to

430
00:23:24,840 --> 00:23:27,520
Speaker 1: keep it there if you're an employer, I believe, how

431
00:23:27,560 --> 00:23:29,720
Speaker 1: does this then fold into some of the break evens

432
00:23:29,800 --> 00:23:33,280
Speaker 1: those inflationary expectations, and we fold over into a two

433
00:23:33,320 --> 00:23:37,640
Speaker 1: year yield that is punch on the day. Yeah, looks

434
00:23:37,680 --> 00:23:41,800
Speaker 1: the short term reactions are parsing the headline slightly disappointing

435
00:23:41,880 --> 00:23:45,560
Speaker 1: number versus some of the wage numbers. But the longer

436
00:23:45,680 --> 00:23:49,760
Speaker 1: term dynamic is, you know, not only are wage increases sticky,

437
00:23:50,040 --> 00:23:53,560
Speaker 1: but wage increases is what helps to maintain your real

438
00:23:53,640 --> 00:23:57,960
Speaker 1: purchasing power, right, and maintaining real purchasing power is how

439
00:23:58,080 --> 00:24:01,840
Speaker 1: companies can afford to get passed through. So for the

440
00:24:01,920 --> 00:24:05,199
Speaker 1: decades in which we heard about the inability to pass

441
00:24:05,320 --> 00:24:09,640
Speaker 1: through price increases to the final end consumer now you're

442
00:24:09,680 --> 00:24:12,840
Speaker 1: seeing possibly and this will be the debate, you know,

443
00:24:12,920 --> 00:24:18,639
Speaker 1: possibly uh loosening in that dynamic that will feed into

444
00:24:18,680 --> 00:24:23,120
Speaker 1: this debate around transitory versus permanent. But it's an important

445
00:24:23,480 --> 00:24:27,520
Speaker 1: contribution to that debate from today's report. So for those

446
00:24:27,520 --> 00:24:29,040
Speaker 1: folks in the market that are trying to sort of

447
00:24:29,040 --> 00:24:30,960
Speaker 1: price this out going forward here, Jeff, I mean, we

448
00:24:31,000 --> 00:24:33,280
Speaker 1: saw earlier in the year there seemed to be pretty

449
00:24:33,280 --> 00:24:37,199
Speaker 1: broad conviction here about the pace of monetary policy, the

450
00:24:37,200 --> 00:24:40,240
Speaker 1: renormalization of it. Will You saw that durn premium really

451
00:24:40,240 --> 00:24:42,120
Speaker 1: shoot up in the first few months of the year.

452
00:24:42,280 --> 00:24:44,320
Speaker 1: It's kind of flattened out over the last couple of months,

453
00:24:44,320 --> 00:24:47,000
Speaker 1: and I'm wondering if today's report and the couple other

454
00:24:47,000 --> 00:24:49,080
Speaker 1: economic data points that we've had over the last couple

455
00:24:49,119 --> 00:24:53,000
Speaker 1: of weeks is going to change anyone's mind. I don't

456
00:24:53,040 --> 00:24:55,520
Speaker 1: think so. And I think what we've had, as you

457
00:24:55,600 --> 00:24:59,720
Speaker 1: pointed out right, it was a rapid reestimation of the

458
00:25:00,000 --> 00:25:03,800
Speaker 1: economic outlook, the FED outlook, uh, that flowed through the

459
00:25:03,840 --> 00:25:07,120
Speaker 1: report through the market, and now we're seeing a much

460
00:25:07,480 --> 00:25:12,520
Speaker 1: stronger consolidation. The next phase is really the movement towards

461
00:25:12,560 --> 00:25:15,239
Speaker 1: the impact on tapering. I think if you look at

462
00:25:15,240 --> 00:25:18,160
Speaker 1: the totality of today's report, I don't think it really

463
00:25:18,240 --> 00:25:21,560
Speaker 1: changes the market expectations on the trajectory of that. We'll

464
00:25:21,600 --> 00:25:24,600
Speaker 1: see some signaling of that to June. You know, mostly

465
00:25:24,680 --> 00:25:27,200
Speaker 1: it's the end of year into two twenty two kind

466
00:25:27,200 --> 00:25:30,520
Speaker 1: of expectation around tapering, and nothing today's in today's report

467
00:25:30,560 --> 00:25:33,280
Speaker 1: really changes that. Timing. Jeff Rosenberger, I've got to go

468
00:25:33,560 --> 00:25:36,119
Speaker 1: to the obvious at pros are looking at, which is

469
00:25:36,160 --> 00:25:38,800
Speaker 1: the ocean of cash that is out there, And it's

470
00:25:38,800 --> 00:25:41,080
Speaker 1: real simple. It can be overnight reserves, it can be

471
00:25:41,160 --> 00:25:44,239
Speaker 1: some fancy way you at black Rock account for it.

472
00:25:44,520 --> 00:25:46,359
Speaker 1: What do we do into the weekend? What do we

473
00:25:46,400 --> 00:25:49,400
Speaker 1: do into June and the summer when we observe this

474
00:25:49,480 --> 00:25:56,359
Speaker 1: wall of cash doing nothing? Well, the excess liquidity in

475
00:25:56,359 --> 00:26:00,280
Speaker 1: the market has been, you know, the dominant feature of

476
00:26:00,280 --> 00:26:03,720
Speaker 1: of everything we're seeing going on, you know, from financial markets,

477
00:26:03,760 --> 00:26:07,040
Speaker 1: to the to the to the meme stock craze. And

478
00:26:07,840 --> 00:26:10,960
Speaker 1: it's not going away anytime soon. Now the FED is

479
00:26:11,040 --> 00:26:15,159
Speaker 1: talking about starting to talk about talking about UH tapering

480
00:26:15,400 --> 00:26:19,399
Speaker 1: and maybe turning down the pace of increase, but for

481
00:26:19,480 --> 00:26:23,480
Speaker 1: the short run, we are still awash with excess liquidity.

482
00:26:23,520 --> 00:26:26,680
Speaker 1: And that helps to support a lot of valuations which

483
00:26:26,720 --> 00:26:29,919
Speaker 1: you see in the fixed income market across the sectors,

484
00:26:30,400 --> 00:26:34,240
Speaker 1: very tight levels of spread, very low levels of risk premium.

485
00:26:34,480 --> 00:26:37,760
Speaker 1: It's a reflection of this excess liquidity. Nothing in today's

486
00:26:37,760 --> 00:26:40,440
Speaker 1: reports going to change that, and that access liquidity is

487
00:26:40,440 --> 00:26:43,720
Speaker 1: is very much staying with us for for for a while. Jeff,

488
00:26:43,760 --> 00:26:47,200
Speaker 1: you mentioned valuations. Gina Martin Adams of our Bloomberg Equity

489
00:26:47,240 --> 00:26:50,919
Speaker 1: Strategist writes in and says that these higher wage inflationary

490
00:26:50,960 --> 00:26:54,159
Speaker 1: pressures are the next thing to hit margins when it

491
00:26:54,200 --> 00:26:57,800
Speaker 1: comes to some of these companies. Is that evaluation concerned

492
00:26:57,800 --> 00:27:00,960
Speaker 1: as well, the squeeze that we might see now on margins,

493
00:27:02,720 --> 00:27:04,880
Speaker 1: You know it is. And in the equity market, it's

494
00:27:04,960 --> 00:27:09,520
Speaker 1: it's a huge theme, right because it's about inflation protection, right,

495
00:27:09,600 --> 00:27:12,080
Speaker 1: so much what we talk about in the fixed income market,

496
00:27:12,480 --> 00:27:16,439
Speaker 1: tips levels, yield curve, yield curve, steepeners. How do you

497
00:27:16,480 --> 00:27:19,919
Speaker 1: find inflation protection for your portfolio? Well, the equity market,

498
00:27:20,280 --> 00:27:24,720
Speaker 1: it's about margins and identifying which companies have the pricing

499
00:27:24,840 --> 00:27:29,280
Speaker 1: power to pass through and not absorb that increase in wages,

500
00:27:29,359 --> 00:27:34,000
Speaker 1: increase in commodity prices, increase in in in prices across

501
00:27:34,040 --> 00:27:37,400
Speaker 1: the board, uh, and not affect their margins. So that's

502
00:27:37,400 --> 00:27:39,600
Speaker 1: where you're seeing the winners and losers. You're seeing the

503
00:27:39,600 --> 00:27:44,520
Speaker 1: inflation baskets really focus on these companies where there is

504
00:27:44,600 --> 00:27:48,960
Speaker 1: pricing power and pass through as an effective place to

505
00:27:49,160 --> 00:27:53,879
Speaker 1: put investments for this inflationary fear and for inflationary hedges.

506
00:27:53,920 --> 00:27:57,040
Speaker 1: So it is about margins, and it's about identifying where

507
00:27:57,040 --> 00:27:58,960
Speaker 1: do you have margin compression and where do you have

508
00:27:59,240 --> 00:28:01,399
Speaker 1: margins to build an expansion. Jeff, when you look at

509
00:28:01,400 --> 00:28:03,720
Speaker 1: the economic recovery here and the pace that it's on

510
00:28:03,840 --> 00:28:06,199
Speaker 1: here in the US here and overlay it with what

511
00:28:06,240 --> 00:28:10,199
Speaker 1: we're seeing in other countries, developed countries primarily here, do

512
00:28:10,320 --> 00:28:13,439
Speaker 1: you actually see a little bit more resynchronization here of

513
00:28:13,480 --> 00:28:18,280
Speaker 1: that recovery story. Um, you know, it's an interesting story.

514
00:28:18,440 --> 00:28:22,360
Speaker 1: It's it's less about resynchronization and a little bit more

515
00:28:22,400 --> 00:28:25,920
Speaker 1: about kind of sequencing. Uh. You know, the the US

516
00:28:26,000 --> 00:28:28,480
Speaker 1: has been out ahead. A lot of this is obviously

517
00:28:28,520 --> 00:28:32,560
Speaker 1: linked to reopening and the success with vaccinations. Europe is

518
00:28:32,600 --> 00:28:36,560
Speaker 1: expected to catch up asn't there quite yet, But that's

519
00:28:36,640 --> 00:28:40,440
Speaker 1: not so much recynchronization as it is sequencing the US

520
00:28:40,440 --> 00:28:45,160
Speaker 1: success in vaccination opening first Europe following and then though

521
00:28:45,280 --> 00:28:47,600
Speaker 1: not often you know, thought of as a as a

522
00:28:47,680 --> 00:28:52,000
Speaker 1: developed economy with respect to how you prefer the question,

523
00:28:52,360 --> 00:28:55,880
Speaker 1: you have a very different dynamic going on in China,

524
00:28:56,240 --> 00:28:59,880
Speaker 1: partly a story of sequencing as well, much earlier in

525
00:29:00,040 --> 00:29:02,840
Speaker 1: to the into the COVID crisis, much earlier in terms

526
00:29:02,880 --> 00:29:05,560
Speaker 1: of the reopening, and now at a at a different

527
00:29:05,600 --> 00:29:08,840
Speaker 1: phase in terms of its monetary, fiscal and credit policy,

528
00:29:09,040 --> 00:29:11,200
Speaker 1: you know, looking to to to be more on the

529
00:29:11,240 --> 00:29:15,200
Speaker 1: tighter side. And and so that's not really about uh,

530
00:29:15,200 --> 00:29:18,720
Speaker 1: you know, synchronous recovery and reopening as much as it

531
00:29:18,800 --> 00:29:21,840
Speaker 1: is about the sequencing of it. Jeff Rozenberg, thank you

532
00:29:21,880 --> 00:29:24,120
Speaker 1: so much to the black Rock this morning. This is

533
00:29:24,120 --> 00:29:28,120
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live

534
00:29:28,280 --> 00:29:32,040
Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio

535
00:29:32,280 --> 00:29:35,920
Speaker 1: and on Bloomberg Television each day from six to nine

536
00:29:35,960 --> 00:29:40,360
Speaker 1: am for insight from the best in economics, finance, investment,

537
00:29:40,520 --> 00:29:45,520
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

538
00:29:45,600 --> 00:29:49,440
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

539
00:29:49,560 --> 00:30:00,200
Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg. You