WEBVTT - Surveillance: U.S. Jobs Report With Kudlow 0:00:09.880 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.440 Bloomberg dot Com, and of course, on the Bloomberg from 0:00:27.440 --> 0:00:30.000 New York City. Good morning to you Wall on the 0:00:30.040 --> 0:00:32.760 Bloomberg Radio and on Bloomberg TV. I'm really happy to 0:00:32.760 --> 0:00:36.280 say that the National Economic Councils Director Larry Cutlow joins 0:00:36.360 --> 0:00:38.760 us now in reaction to the payrolls report. Larry always 0:00:38.760 --> 0:00:42.080 great to get your thoughts on payrolls Thursday this time around, 0:00:42.120 --> 0:00:44.159 and I think everyone just wants the initial reaction to 0:00:44.159 --> 0:00:46.240 the job's report and what it means for the next 0:00:46.320 --> 0:00:49.960 fiscal package. How did these numbers shape the fiscal effort 0:00:49.960 --> 0:00:53.840 in Washington over the next several weeks. Well, look, first 0:00:53.880 --> 0:00:57.160 of all, it's as spectacular number and it helps the 0:00:57.200 --> 0:01:01.840 overall situation enormously, So you know, that's really the key point. 0:01:02.080 --> 0:01:04.280 We've created a lot of jobs in the last couple 0:01:04.319 --> 0:01:07.720 of months, and the trends continue. I want to say 0:01:07.760 --> 0:01:11.480 one thing I was listening to that earlier conversation. I 0:01:11.520 --> 0:01:16.039 don't think people understand that relationship. The rescue package that 0:01:16.200 --> 0:01:20.280 the President led with bipartisan support and Congress, and the 0:01:20.360 --> 0:01:24.680 p p P that Secretary manution Uh fostered and implemented. 0:01:25.280 --> 0:01:29.399 It's the temporary layoffs, John, it's the furloughs that are 0:01:29.440 --> 0:01:34.600 coming down. We kept people connected to their employers. Okay, 0:01:34.760 --> 0:01:38.319 they did receive assistance, but we kept them connected so 0:01:38.400 --> 0:01:42.479 that as the economy reopened and the businesses reopened, roughly 0:01:43.360 --> 0:01:46.160 of small business reopened. So we saw it again today. 0:01:46.400 --> 0:01:49.680 I mean, sixty three and a half percent of unemployed 0:01:50.120 --> 0:01:54.320 now are temporary workers. That number was seventy and was 0:01:54.440 --> 0:01:58.160 seven point seven million. I don't see why that trend 0:01:58.280 --> 0:02:01.480 can continue. That's the point making I don't. I'm not sure. 0:02:01.480 --> 0:02:05.280 It's like an intellectual disconnect why that trend can continue. 0:02:05.440 --> 0:02:08.200 A lot of temporary layer us will go back to work. 0:02:08.520 --> 0:02:10.079 I think a lot of people believe you can't extra 0:02:10.200 --> 0:02:12.360 polay this out too far because we've had to slow 0:02:12.360 --> 0:02:15.639 down or reverse the reopenings elsewhere, Larry, and for that reason, 0:02:15.680 --> 0:02:18.000 many people think more help is needed. This is what 0:02:18.040 --> 0:02:19.760 the President had to say in the last twenty four 0:02:19.760 --> 0:02:22.919 hours when he was asked about more direct payments for individuals. 0:02:22.960 --> 0:02:25.160 He said, I support it, but it has to be 0:02:25.200 --> 0:02:28.799 done properly, and I support actually larger numbers than the Democrats. 0:02:28.960 --> 0:02:31.640 So that doesn't sound like a consideration anymore. It sounds 0:02:31.680 --> 0:02:35.000 like the President's made a decision. It's not a fair characterization. 0:02:35.080 --> 0:02:38.520 Larry Well, No, I don't think final decision has been 0:02:38.520 --> 0:02:42.600 made at all. Uh. President has always favored that, but 0:02:42.760 --> 0:02:45.040 he wants it to be done in a very smart way, 0:02:45.040 --> 0:02:47.880 in in a targeted way. So I think the shape 0:02:47.880 --> 0:02:50.200 of any kind of package is still very much up 0:02:50.240 --> 0:02:53.400 in the air. Look, he has emphasized a number of 0:02:53.440 --> 0:02:58.360 programs now again, negotiations won't formally begin until after the 0:02:58.400 --> 0:03:01.880 recess to life worth recess. He's talked about payroll tax cut. 0:03:02.520 --> 0:03:07.720 He's talked about reemployment benefits and bonuses because we don't 0:03:07.760 --> 0:03:10.799 like the six hundred dollars plus up on unemployment. It's 0:03:10.800 --> 0:03:15.040 a disincentive to work. He's talked about helping the restaurant industry, 0:03:15.360 --> 0:03:20.160 the tourism ministry, the entertainment industry with better business write offs. 0:03:20.360 --> 0:03:24.040 He's talked about capital gains, He's talked about investment rite offs. 0:03:24.160 --> 0:03:26.800 There's still a very large package here, and you know, 0:03:26.840 --> 0:03:29.720 we won't know until we go into these negotiations. So 0:03:30.080 --> 0:03:33.520 he's right, Uh, everything's on the table. Where many things 0:03:33.520 --> 0:03:35.840 are on the table. It's just a question of shaping 0:03:35.840 --> 0:03:38.880 it and do it smart. I thought the original rescue 0:03:38.880 --> 0:03:41.920 package was very smart. I don't know if everything has 0:03:41.960 --> 0:03:45.360 to apply all over again, we'll see. We assess the economy, 0:03:45.480 --> 0:03:48.080 that's the key point. Well, let's assess the dates up. 0:03:48.240 --> 0:03:51.080 What's the evidence of the enhanced unemployment benefits of being 0:03:51.120 --> 0:03:55.600 a disincentive through sense of work? Well, right now, I 0:03:55.640 --> 0:03:59.480 can only give you anecdotal evidence. I hear this a 0:03:59.520 --> 0:04:02.680 lot of his Here this secretary minution, here's this um 0:04:02.840 --> 0:04:07.640 Jane Scalia at labor. So many business people have said 0:04:07.680 --> 0:04:11.760 to us, particularly the smaller business, particularly some sense the 0:04:11.800 --> 0:04:15.880 most vulnerable to the pandemic, the restaurants, the small stores 0:04:15.880 --> 0:04:20.560 and shops. They can't hire people back because the unemployment 0:04:20.560 --> 0:04:24.440 benefits are very generous. Now, I happen to think the 0:04:24.520 --> 0:04:29.479 generous unemployment package was probably a good thing at the 0:04:29.520 --> 0:04:33.159 beginning of this pandemic when we put it, when we 0:04:33.200 --> 0:04:36.480 put it on the table in mid March and late March. Okay, 0:04:36.640 --> 0:04:39.280 working with the p p P program pay or protection. 0:04:39.520 --> 0:04:42.880 I think the unemployment compensation could be a good thing. 0:04:43.120 --> 0:04:46.040 But now that moment has passed, we're moving into the 0:04:46.080 --> 0:04:50.239 reopening and as these numbers shows spectacular job numbers, people 0:04:50.279 --> 0:04:52.799 are starting to move back. They want to go to work. 0:04:53.040 --> 0:04:54.560 So I think we have to look at this a 0:04:54.560 --> 0:04:59.320 little differently now, and I think reemployment benefits probably will 0:04:59.400 --> 0:05:01.919 help fill the bill, and those two have to be 0:05:02.000 --> 0:05:06.200 targeted to the right people who maybe we're having trouble 0:05:06.240 --> 0:05:09.200 getting a job or competing with the unemployment at six 0:05:09.760 --> 0:05:12.039 It will be a better story for the small businesses. 0:05:12.240 --> 0:05:14.839 It will be more manageable. They'll be able to afford people. 0:05:15.120 --> 0:05:18.200 That's the key point, Larry. Unfortunately, you were the team 0:05:18.240 --> 0:05:20.520 have only given me another sixty seconds for this interview, 0:05:20.520 --> 0:05:22.479 which is unfortunate because I have so much to cover 0:05:22.560 --> 0:05:24.599 with you. So let me get to China. A caught 0:05:24.640 --> 0:05:27.080 up with Ambassador Bolton in the last twenty four hours 0:05:27.080 --> 0:05:28.960 in the Wall Street Journal. In the last couple of weeks, 0:05:28.960 --> 0:05:32.039 he referred to Secretary Manuchin as a panda hugger. You 0:05:32.120 --> 0:05:34.839 came off lightly. You were called a free trader, but 0:05:34.880 --> 0:05:37.560 he said there is an intellectually fractured approach to fit 0:05:37.600 --> 0:05:40.800 all things China. He said that the president was leaning 0:05:40.880 --> 0:05:44.400 on President g to get the best possible outcome, to 0:05:44.560 --> 0:05:47.800 lean on States and by soybeans, etcetera, to help him 0:05:47.839 --> 0:05:50.440 win an election. They were his words that the president 0:05:50.440 --> 0:05:52.559 of the United States was leaning on a foreign leader 0:05:52.600 --> 0:05:56.039 to help win the election. Now, Larry, my question is, 0:05:56.120 --> 0:05:58.400 at the moment with Hong Kongan, the news and the 0:05:58.480 --> 0:06:00.760 likes of Secretary Pompeio, go and get that, I'm making 0:06:00.760 --> 0:06:02.359 a lot of noise about how hot you will be 0:06:02.360 --> 0:06:05.320 on China. How can we take that seriously? When a 0:06:05.320 --> 0:06:08.880 former employee of this administration is gona around saying the 0:06:08.880 --> 0:06:11.680 older president wants is the president she to help him 0:06:11.680 --> 0:06:15.080 win the next election, Well, I'll just say I haven't 0:06:15.120 --> 0:06:18.640 read Mrs Bolton's book. Uh. Many people who were at 0:06:18.680 --> 0:06:23.360 that dinner in Japan completely disagree and say that that 0:06:23.440 --> 0:06:27.080 was an unfactual remark. Okay, that's what I know. Uh, 0:06:27.160 --> 0:06:30.279 China is a huge problem. We are engaging with them 0:06:30.279 --> 0:06:33.320 on trade, but what they are doing in Hong Kong 0:06:33.800 --> 0:06:37.360 as well as other problems, becomes a larger and larger 0:06:37.560 --> 0:06:42.920 difficulty in our relations. As Secretary Pompeio and National Security 0:06:42.960 --> 0:06:46.640 Advisor O'Brien have said time and time again, I want 0:06:46.640 --> 0:06:50.120 to pivot to a much better story. July one, the 0:06:50.240 --> 0:06:53.120 U s m c A trade deal went into place. 0:06:53.480 --> 0:06:58.080 That is a hugely important, pro growth, job creating trade 0:06:58.080 --> 0:07:02.160 deal which will help agg worker and farmers and manufacturers 0:07:02.360 --> 0:07:05.320 and the blue collar boom can re arise. We've got 0:07:05.320 --> 0:07:10.600 currency stability, We've got intellectual property protections. It's a tremendous deal. 0:07:10.680 --> 0:07:13.280 I don't know why it doesn't get more coverage. The 0:07:13.360 --> 0:07:15.880 leaders are probably gonna come here next week to celebrate 0:07:15.880 --> 0:07:18.480 it with President Trump. U s m c A is 0:07:18.520 --> 0:07:21.640 a solid winner and it will be pro growth and 0:07:21.760 --> 0:07:25.200 by the bye it will add to growth next year after. 0:07:25.320 --> 0:07:27.680 I think we have a strong second half and that's 0:07:27.720 --> 0:07:30.720 looking forward and I don't see anything reasons block that. 0:07:31.040 --> 0:07:34.280 As long as people know, and I'll end with this, John, 0:07:34.920 --> 0:07:40.360 people know they must exercise best practices. Don't forget the guidelines. Okay, 0:07:40.440 --> 0:07:46.400 the masks, the distancing, the testing, and the personal hygiene 0:07:46.640 --> 0:07:52.000 are important to mitigate this higher flashpoint in the Southwest. 0:07:52.040 --> 0:07:55.160 It's not necessarily nationwide. It's a few states in the Southwest. 0:07:55.600 --> 0:07:59.880 Use those mitigation best practices and we will get out 0:07:59.880 --> 0:08:02.600 of that more as and we will grow this economy 0:08:02.640 --> 0:08:05.760 and spectacular fashion. Larry, I'm not sure how we got 0:08:05.760 --> 0:08:07.680 from leaning on foreign leaders to wearing a mask, but 0:08:07.680 --> 0:08:10.239 I'm pleased that is the administration's approach at the moment 0:08:10.280 --> 0:08:12.800 to where a mask. Larry. I would talk about U S. 0:08:12.920 --> 0:08:15.120 M c A, but unfortunately, because of your team, I've 0:08:15.120 --> 0:08:16.800 got to cut this interview short and hopefully we can 0:08:16.840 --> 0:08:19.040 pick up where we end this another time in the 0:08:19.040 --> 0:08:21.840 next couple of weeks. Larry, count love that National Economic 0:08:21.880 --> 0:08:30.560 Council Director. Right now, we have to look systemically at 0:08:30.600 --> 0:08:34.880 the systematic, multi strategy approach of black rock, and we 0:08:34.920 --> 0:08:37.800 can do that with Jeffrey Rosenberg. He joins us now 0:08:38.080 --> 0:08:41.960 hugely prodigious on the dynamics of the market and how 0:08:42.000 --> 0:08:46.120 it folds back into fixed income. Jeff, let me get 0:08:46.120 --> 0:08:49.480 out front of your next July note. What is the 0:08:49.559 --> 0:08:54.000 distinction right now in bond dynamics that has your attention 0:08:54.280 --> 0:08:56.880 well on the on the bond dynamic side, away from 0:08:56.920 --> 0:09:00.840 the payroll report. You know, it's it's really about yesterday's news, 0:09:00.840 --> 0:09:05.160 and it's about the discussion around yield curve control or 0:09:05.200 --> 0:09:07.840 what the FED wants to call it. Yield curve targeting 0:09:07.880 --> 0:09:10.840 because the front end of the yield curve is pinned 0:09:10.840 --> 0:09:13.560 at zero. There's no doubt about that. The uncertainty in 0:09:13.559 --> 0:09:16.080 the bond market is about the shape of the yield 0:09:16.160 --> 0:09:20.079 curve as you move further out in the maturity. That's 0:09:20.120 --> 0:09:24.160 really where monetary policy and the uncertainty is centered, because 0:09:24.240 --> 0:09:28.920 you have these two great unprecedented pressures on that curve. 0:09:28.960 --> 0:09:32.360 On the one side, the fiscal policy that Jonathan just 0:09:32.400 --> 0:09:37.000 talked about, UH support for the economy, for financial markets 0:09:37.040 --> 0:09:40.040 is being funded in the treasury market, and it is 0:09:40.080 --> 0:09:44.120 an historic expansion in the amount of supply of debt. 0:09:44.160 --> 0:09:46.440 On the other side is the FED that it's set 0:09:46.480 --> 0:09:51.680 up till now for markets functioning. They're going to expand 0:09:51.679 --> 0:09:55.080 the balance sheet to maintain that market functioning. So we're 0:09:55.080 --> 0:09:57.800 going to start to pivot away from that market functioning 0:09:57.840 --> 0:10:03.120 conversation to a conversation around chewy, around l steps, around 0:10:03.440 --> 0:10:06.720 further accommodation, and so in the bond market, that's where 0:10:06.720 --> 0:10:09.480 all the uncertainty lies. It's about the ship in the curve, 0:10:09.640 --> 0:10:12.440 about yield curve targeting. When the market moves, you do 0:10:12.480 --> 0:10:15.040 more data checks for your futures. Up thirty seven Dow 0:10:15.200 --> 0:10:17.360 futures up. It's a round number, so I'll mention it 0:10:17.800 --> 0:10:21.240 four zero zero up, four hundred points right up, buttressed 0:10:21.240 --> 0:10:23.880 on twenty six thousand on the DALLA. The VIX comes 0:10:23.880 --> 0:10:27.360 in a big stick one point six six points twenty 0:10:27.400 --> 0:10:31.160 six point nine six on the VIX. Jeff Rosenberg's bond 0:10:31.160 --> 0:10:34.720 markets asleep UH to year yield point one six percent. 0:10:35.000 --> 0:10:37.560 Jeff doesn't care about the ten year or the thirty year. 0:10:37.640 --> 0:10:41.040 I look, Jeff Rosenberg at the bond dynamics here and 0:10:41.080 --> 0:10:45.960 come on, equity market up looking out to two thousand 0:10:46.080 --> 0:10:49.000 twenty one. Is there a risk here that the bond 0:10:49.040 --> 0:10:52.160 market looks out to two thousand twenty one and all 0:10:52.200 --> 0:10:56.680 of a sudden it's yield up, price lower. Possibly. You know, 0:10:56.760 --> 0:10:59.480 we're talking about the back end of the curve, and 0:10:59.480 --> 0:11:01.720 that's what you know where you're just highlighting there's no 0:11:01.840 --> 0:11:03.920 movement in the front end of the curve because that's 0:11:03.920 --> 0:11:06.640 all pinned. You know, it is really going to be 0:11:06.760 --> 0:11:11.600 about whether or not we've had success on the virus 0:11:12.200 --> 0:11:16.440 and the combination of fiscal and monetary policy getting success 0:11:16.440 --> 0:11:20.240 around inflation expectations. Very hard to see that today at 0:11:20.360 --> 0:11:24.199 historical levels of inflation and inflation expectations. But if you're 0:11:24.200 --> 0:11:27.080 going to have a scenario where you could have the 0:11:27.120 --> 0:11:30.400 bond market up and the equity market up, getting back 0:11:30.440 --> 0:11:33.400 to a little bit of inflation could be a positive. 0:11:33.480 --> 0:11:37.480 It's a tricky conversation because there could be a slippery 0:11:37.480 --> 0:11:40.480 slope from a little bit of inflation being good to 0:11:40.960 --> 0:11:44.520 a little bit of inflation being uh, not good. And 0:11:44.600 --> 0:11:48.640 so that's going to be that further out one dynamic, 0:11:49.080 --> 0:11:51.760 certainly not the dynamic today in terms of inflation and 0:11:51.800 --> 0:11:56.160 inflation fears. But remember this is the goal fighting inflation 0:11:56.400 --> 0:11:59.600 from below, meaning we have too little inflation. So if 0:11:59.640 --> 0:12:02.240 there's good to be higher interest rates, it might be 0:12:02.320 --> 0:12:05.559 welcomed by the Fed in a little bit steeper of 0:12:05.920 --> 0:12:09.960 a curve pricing in a little bit higher inflation expectation. Jeff, 0:12:09.960 --> 0:12:11.840 In a day like today, we're getting all this data 0:12:12.080 --> 0:12:14.640 with respect to the US labor market, would you trade 0:12:14.679 --> 0:12:16.920 on any of it? You know? I think that Mike 0:12:17.000 --> 0:12:20.880 McKee had the framing of the data exactly right, that 0:12:21.200 --> 0:12:24.640 this is old news. It's good news, but it's news 0:12:24.679 --> 0:12:27.640 that it was already reflected in prices and we've moved 0:12:27.679 --> 0:12:31.760 beyond the kind of early June market to in a 0:12:31.880 --> 0:12:35.760 high frequency basis really having the debate in market prices 0:12:35.880 --> 0:12:38.240 about the next payroll reports, which is, if you look 0:12:38.280 --> 0:12:41.440 at this one, you know the biggest category of improvement 0:12:41.720 --> 0:12:45.120 is leisure and hospitality. It was down over seven million 0:12:45.520 --> 0:12:48.079 in in in April, it was up in May, it's 0:12:48.240 --> 0:12:51.560 up today over two million. That's going to go down 0:12:52.000 --> 0:12:55.520 in July if these shutdowns, if the spread of the 0:12:55.600 --> 0:13:00.520 virus remains uncontained, and that's what the markets focused on 0:13:00.640 --> 0:13:02.719 in the high frequency data. So I think this is 0:13:02.760 --> 0:13:05.360 a little bit of good news, but not news to 0:13:05.440 --> 0:13:08.160 move the market. So, Jeff, this is what surprises me. 0:13:08.240 --> 0:13:10.280 You're saying it was priced in and people are looking 0:13:10.280 --> 0:13:13.800 to the potential bad news going forward. The higher frequency 0:13:13.880 --> 0:13:16.920 data that we got the eight thirty release was the 0:13:16.960 --> 0:13:19.600 initial jobless claims data, which was worse than expected with 0:13:19.600 --> 0:13:22.160 more than one point four million jobless claims coming in 0:13:22.480 --> 0:13:26.360 and with the ongoing UH the ongoing claims also coming 0:13:26.400 --> 0:13:29.760 in higher than expected. Why is the market focusing more 0:13:29.880 --> 0:13:32.760 on the upside surprise in the June jobs report when 0:13:32.800 --> 0:13:36.840 that is farther backward looking than the initial jobless claims, 0:13:36.880 --> 0:13:40.360 which point towards an acceleration of reclosure. Well, you know, 0:13:40.480 --> 0:13:42.360 it's a it's a it's a great question. I think 0:13:42.400 --> 0:13:47.079 it's really important to remember just the scope of flows 0:13:47.200 --> 0:13:51.120 that we're talking about here. So these are unprecedented leads, 0:13:51.520 --> 0:13:55.120 large flows into the labor market and out of the 0:13:55.160 --> 0:13:57.240 labor market. So when you're looking at that four point 0:13:57.280 --> 0:14:01.680 eight million number, that's a net number her of maybe 0:14:01.760 --> 0:14:07.040 fifteen million uh leaving uh and and and or ten 0:14:07.080 --> 0:14:10.800 million leaving and fifteen million entering. And so these are 0:14:10.960 --> 0:14:15.000 really really large gross flows. And inside of that, the 0:14:15.080 --> 0:14:18.960 scope of uncertainty is just you know, we are we 0:14:19.080 --> 0:14:22.040 really don't know what to expect. Remember the range in 0:14:22.080 --> 0:14:26.080 the Bloomberg survey was was was minus five thousand plus 0:14:26.200 --> 0:14:29.520 nine million. I mean, no one really knows how to 0:14:29.600 --> 0:14:33.440 forecast these flows in employment. So to one point four 0:14:33.520 --> 0:14:37.960 to seven on initial jobless claims versus you know that survey, 0:14:38.000 --> 0:14:40.560 it's within the margin of error. And that's why you're 0:14:40.560 --> 0:14:43.280 not really seeing a market reacting to that higher initial 0:14:43.400 --> 0:14:47.280 jobless claims. It's more the story of this report, which 0:14:47.360 --> 0:14:52.000 is the story of June economy, reopening flows back into 0:14:52.160 --> 0:14:56.080 into the economy, big increases in retail, leisure and hospitality. 0:14:56.360 --> 0:15:00.560 The change, as Jonathan highlighted, the decline in hourly earnings 0:15:00.640 --> 0:15:04.280 is a reflection of the labor force starting to redistribute 0:15:04.320 --> 0:15:08.320 back to the lower wage workers that were most harm 0:15:08.440 --> 0:15:11.040 So all of that is consistent with what I think 0:15:11.080 --> 0:15:14.040 we were pricing in back in early June. Jeff rozen 0:15:14.120 --> 0:15:16.360 very one final question, and I'll keep it sort of 0:15:16.360 --> 0:15:21.520 philosophic here on a sleepy summer Thursday. The Powell put 0:15:22.040 --> 0:15:25.120 has never been more putty than the put is right now. 0:15:25.880 --> 0:15:28.880 Is this a normal bond market? I mean, it's almost 0:15:28.920 --> 0:15:32.320 like the systems rigged by central bank action. Are you 0:15:32.440 --> 0:15:37.400 working systematically within a normal bond market? No, it's a 0:15:37.440 --> 0:15:40.960 really good question, Tom, And you know you read the 0:15:41.000 --> 0:15:44.960 Minute and they talk a lot about the historical precedence. 0:15:45.200 --> 0:15:48.920 So it's it's not normal in any sense of what 0:15:49.000 --> 0:15:52.240 we thought of as normal functioning of the bond markets. 0:15:52.280 --> 0:15:56.880 We have had experiences with yield curve control, with financial 0:15:56.880 --> 0:15:59.680 repression in the United States. It was the aftermath of 0:15:59.720 --> 0:16:02.680 World War Two up until the fifty one Treasury Set accord. 0:16:03.520 --> 0:16:06.760 That is the period that is more like where we 0:16:06.840 --> 0:16:09.360 are today. So when you think about the treasury market 0:16:09.400 --> 0:16:13.200 and you think about the functioning of risk free rates 0:16:13.240 --> 0:16:16.960 in our financial markets as a base for understanding financial 0:16:17.000 --> 0:16:21.520 market pricing, you really have to reassess your assumptions from 0:16:21.520 --> 0:16:23.840 a systematic point of view. We have to re look 0:16:23.960 --> 0:16:28.240 at what's in the data, what's underlying the data that 0:16:28.280 --> 0:16:32.680 we see, and how that changes. When the fundamental underpinnings 0:16:32.680 --> 0:16:36.040 of the structure of the Treasury rates are now really 0:16:36.160 --> 0:16:39.440 pinned that zero the zero lower bound, and we're going 0:16:39.480 --> 0:16:41.840 to debate over the next couple of months how far 0:16:41.960 --> 0:16:45.320 out that control or that targeting moves out. The correpect 0:16:45.360 --> 0:16:49.040 to answer your questions, is absolutely a very different environment 0:16:49.120 --> 0:16:52.520 than anything in the in the post different one environment. 0:16:52.720 --> 0:16:59.720 Jeff Rosenberg of black Rock, thank you so much. Today 0:17:00.080 --> 0:17:02.760 it's all about the jobs data coming in much better 0:17:02.920 --> 0:17:05.840 than expected. Let's dig a little bit deeper with Jay 0:17:05.920 --> 0:17:09.919 Bryson Wells Fargo Chief Economists. I'll speak slowly, Ja for you, 0:17:09.960 --> 0:17:13.320 because I know you're a graduate and a PhD graduate 0:17:13.440 --> 0:17:15.880 of the University of North Carolina at Chapel Hill as 0:17:15.920 --> 0:17:18.800 a Dukie here as a Dukey alumni, I'll speak a 0:17:18.800 --> 0:17:21.600 little bit slowly, okay for you, doctor, So Jay, thanks 0:17:21.640 --> 0:17:25.159 so much for we really appreciate it. What do you 0:17:25.280 --> 0:17:27.680 make of this job's data here? Is this just kind 0:17:27.680 --> 0:17:30.520 of catching up as we kind of reopened here or 0:17:30.560 --> 0:17:33.960 do you see anything a little bit deeper in there? Well? 0:17:34.000 --> 0:17:37.560 So yes, there is uh some catching up that to 0:17:38.040 --> 0:17:42.240 be done here. Um. Recall that we lost between you know, 0:17:42.359 --> 0:17:45.720 February and April, we lost twenty two million jobs. Um. 0:17:45.760 --> 0:17:49.760 Now we have gotten about seven million backs. So you know, 0:17:49.960 --> 0:17:53.200 as the economy reopened in you know, in May and 0:17:53.240 --> 0:17:56.000 in June, this is what you're kind of seeing, you 0:17:56.040 --> 0:17:59.000 know here. Um. I think it's gonna be interesting when 0:17:59.000 --> 0:18:01.600 we get to the July report because you know, if 0:18:01.600 --> 0:18:05.159 there's any bad news here at this morning, and I 0:18:05.160 --> 0:18:07.720 don't want to stress that, but you know, initial jobless 0:18:07.720 --> 0:18:11.560 claims remain high, continuing jobless claims remain high, and we 0:18:11.640 --> 0:18:14.720 all know that some states have started to go into 0:18:14.760 --> 0:18:19.520 reverse um recently in terms of reopening, and so these 0:18:19.680 --> 0:18:24.440 big employment games are probably behind us at this point. 0:18:25.040 --> 0:18:27.240 Jab Ryson with us, and wonderful to have you with us, 0:18:27.320 --> 0:18:30.840 Jay today. Futures up forty Futures continue to advance up 0:18:30.880 --> 0:18:35.160 four thousand, sixteen in the Dow, almost in two big 0:18:35.200 --> 0:18:38.600 figures in the vix point six A Jay when I 0:18:38.600 --> 0:18:41.040 saw the numbers, and I get the idea that this 0:18:41.119 --> 0:18:42.760 is as good a get as it gets. And now 0:18:43.160 --> 0:18:46.200 we really learned the cost of this pandemic. Great will 0:18:46.240 --> 0:18:51.200 economists over the weekend, particularly Wells Fargo. Will they readjust 0:18:51.440 --> 0:18:55.040 the level the percentage of unemployment rate we're gonna see 0:18:55.080 --> 0:18:57.919 at the end of the year, or will they just 0:18:57.960 --> 0:19:02.080 simply bring it in closer? These are better numbers. Is 0:19:02.119 --> 0:19:07.360 the recovery of December now the recovery of October? Well, yeah, 0:19:07.520 --> 0:19:10.200 I think Tom that there is something to be said 0:19:10.240 --> 0:19:11.720 of that. I mean, it's interesting when you look at 0:19:11.760 --> 0:19:17.520 the technical details here. What what the uh BLS has 0:19:17.600 --> 0:19:21.000 been saying is that there's been people who have been 0:19:21.000 --> 0:19:26.480 misclassified up until this point. That is, when the BLS 0:19:26.600 --> 0:19:30.680 calls these people and ask them questions, these people were saying, yes, 0:19:30.680 --> 0:19:33.920 I'm on, I didn't work, Um, I didn't work this 0:19:33.960 --> 0:19:37.160 week because of quote other reasons. And you know it's 0:19:37.160 --> 0:19:39.719 because of the pandemic. They were they were furlowed from 0:19:39.760 --> 0:19:43.880 their jobs. And and so when you calculate the unemployment rate, 0:19:44.000 --> 0:19:49.360 these people were considered to be employed, um, but they 0:19:49.440 --> 0:19:53.120 really weren't. They were really furloughed um, and so there 0:19:53.160 --> 0:19:55.720 was some sense that that was that was bringing down 0:19:55.720 --> 0:19:59.080 the unemployment rate by too much. And what we we've 0:19:59.200 --> 0:20:03.480 learned with this June report is that misclassification error is 0:20:03.520 --> 0:20:08.240 a lot lower. So this eleven point one percent unemployment 0:20:08.359 --> 0:20:11.320 rate seems to be closer to you know, the quote 0:20:11.320 --> 0:20:15.399 true unemployment rate at this point, and so we're probably 0:20:15.400 --> 0:20:17.840 not going to get a bounce back up. And so yeah, 0:20:17.920 --> 0:20:21.680 I would think that we we are already pretty low 0:20:21.720 --> 0:20:23.399 in terms of our unemployment rate at the end of 0:20:23.440 --> 0:20:24.879 the year. So I don't know if we're going to 0:20:24.960 --> 0:20:26.800 be making a lot of adjustments than that, but I 0:20:26.840 --> 0:20:30.600 could see other shops bringing their unemployment rate numbers down. 0:20:31.000 --> 0:20:34.240 Those sirens, you hear, folks, we welcome all of you worldwide. 0:20:34.280 --> 0:20:37.960 That is the North Carolina State Police running to the 0:20:38.000 --> 0:20:40.879 rescue of how we have someone from Duke and North Carolina. 0:20:41.160 --> 0:20:45.720 And at the same time, those sirens are that's right, 0:20:45.800 --> 0:20:48.280 just a little you know, trying to prevent a little 0:20:48.280 --> 0:20:51.480 bit of a issue here. Jay. You know, it's interesting here, 0:20:52.200 --> 0:20:56.040 what is your sense of kind of the underlying health 0:20:56.240 --> 0:20:59.359 of the labor market here. I mean, again, we kind 0:20:59.359 --> 0:21:02.000 of had a couple months here where we came back 0:21:02.040 --> 0:21:04.840 better than expected. But as we shake out to the 0:21:04.840 --> 0:21:06.280 other side of this thing, but it looks like we're 0:21:06.280 --> 0:21:09.520 having some significant resurgence and some key markets, I think 0:21:09.520 --> 0:21:13.639 about California, Texas, Florida, those are key labor markets. Do 0:21:13.680 --> 0:21:17.160 you expect to see kind of some less than good 0:21:17.160 --> 0:21:19.920 news over the next month or two. Yeah, so, I 0:21:19.960 --> 0:21:21.720 far I was given a letter of grade. You know, 0:21:21.720 --> 0:21:24.680 the unemployment or the tough of the economy, the labor 0:21:24.720 --> 0:21:27.520 market back in February would have been in a where 0:21:27.520 --> 0:21:29.440 are we now, We're you know, kind of at a 0:21:29.560 --> 0:21:32.280 sea And I understand that because he is a really 0:21:32.320 --> 0:21:35.399 good grade there, but you know, for most of us, 0:21:35.440 --> 0:21:39.560 kind of bediocre. And you know, so, um, we have, 0:21:39.840 --> 0:21:43.000 as we said earlier, we have gotten the bounce uh 0:21:43.040 --> 0:21:48.040 from furlough workers coming back, but there are probably millions 0:21:48.080 --> 0:21:51.840 of businesses that aren't coming back. They've closed for good, 0:21:52.520 --> 0:21:55.560 and those key people aren't going to go back to 0:21:55.600 --> 0:21:58.919 a job anytime soon. And so you know, by the 0:21:59.040 --> 0:22:01.359 end of next year, you know, we're still thinking the 0:22:01.400 --> 0:22:04.840 unemployment rate's going to be at six percent um and 0:22:04.840 --> 0:22:07.600 in February was three point five percent. I mean, we're 0:22:07.600 --> 0:22:10.560 not going back to that anytime soon. And so yeah, 0:22:10.640 --> 0:22:12.439 you know, we're moving in the right traction. Things are 0:22:12.440 --> 0:22:16.439 getting are better, but there's still gonna be millions of 0:22:16.480 --> 0:22:18.680 Americans who are going to be unemployed, and they're probably 0:22:18.680 --> 0:22:20.920 going to be unemployed for a long period of time. 0:22:21.240 --> 0:22:23.040 It's too short a time, Ja Brison, we gotta do 0:22:23.080 --> 0:22:26.720 this again soon, Jay Brison, Wills Fargo, Thank you so much. 0:22:30.680 --> 0:22:32.639 This is a year you could pack it in. But 0:22:32.720 --> 0:22:36.320 that was never the spirit of Arthur Fiedler. And I'm 0:22:36.320 --> 0:22:39.520 gonna go back, folks to my childhood. Keith Lockhart doesn't 0:22:39.560 --> 0:22:42.720 know this, but I was weaned, absolutely weaned on the 0:22:42.840 --> 0:22:46.920 Boston Pops. I would sit in Swellesley Hills. My grandparents 0:22:46.920 --> 0:22:50.720 had that eighteen twelve Tchaikovsky overture from the I think 0:22:50.760 --> 0:22:53.200 it was a Minnesota Orchestra, and I was ordered a 0:22:53.240 --> 0:22:56.920 gunpoint to listen to it six times a day around July. 0:22:57.880 --> 0:23:03.800 And then something happened. Arthur learned from institution he had 0:23:03.840 --> 0:23:08.640 the audacity to get old Paul. This was like Williams 0:23:08.640 --> 0:23:12.359 to his dream Ski. It was that bad. I have 0:23:12.440 --> 0:23:17.640 the clearest memory of Keith, who he came in under 0:23:17.680 --> 0:23:22.160 the greatest pressure of anybody. I'm sure of anybody maybe 0:23:22.160 --> 0:23:25.560