WEBVTT - Surveillance: Americans Should Be Depressed, Rattner Says 0:00:00.040 --> 0:00:02.640 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.000 their trust and independent registered investment advisors to the two 0:00:07.040 --> 0:00:10.680 and four trillion dollars Why Learn more at find your 0:00:10.760 --> 0:00:26.320 Independent Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.720 --> 0:00:30.440 I'm Tom Keene with David Gura. Daily we bring you 0:00:30.480 --> 0:00:35.520 insight from the best in economics, finance, investment, and international relations. 0:00:35.920 --> 0:00:40.519 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.600 --> 0:00:48.640 of course on the Bloomberg. Joining us now is Peter Hooper. 0:00:48.640 --> 0:00:52.400 He's the chief economist at which Man Morty. Peter, I 0:00:52.440 --> 0:00:54.400 won't ask you the question should he stay or should 0:00:54.400 --> 0:00:56.200 he go? But to maybe we can talk about the 0:00:56.640 --> 0:01:00.120 ramifications of this decision, the Governor Carney's waging right now. 0:01:00.440 --> 0:01:03.480 What are there? Well, this is a this is certainly 0:01:03.520 --> 0:01:08.039 a difficult critical time for the UK economy. UH were 0:01:08.240 --> 0:01:12.640 as as breakfit unfolds learning how this is going to 0:01:12.720 --> 0:01:18.440 affect the economy there and and more globally, um the 0:01:18.440 --> 0:01:22.360 the economy right now facing the effects of substantial weakening 0:01:22.440 --> 0:01:27.560 of sterling. UH inflation expectations up sharply at a time 0:01:27.560 --> 0:01:30.479 when growth has not yet picked up a pace so 0:01:31.280 --> 0:01:35.319 difficult decisions, difficult decisions ahead. I think this is an 0:01:35.400 --> 0:01:39.040 uncertainty about Mr Carney's future that needs to be resolved 0:01:39.080 --> 0:01:42.800 this week, and global investors are hoping that he stays on. 0:01:43.040 --> 0:01:48.280 He's he's a known commodity and someone who is generally trusted, 0:01:49.200 --> 0:01:52.520 but obviously personal reasons of his own for wanting to 0:01:52.560 --> 0:01:55.680 go on. I would look through the politics here. Some 0:01:55.760 --> 0:01:58.000 new statistics at this morning from the Euro Area about 0:01:58.040 --> 0:02:01.000 growth in in the wake of the Brexit vone gross 0:02:01.040 --> 0:02:03.040 domestic product for his point three percent in the three 0:02:03.040 --> 0:02:05.560 months to September, inflation rate picking up to point five 0:02:05.600 --> 0:02:07.640 percent in October, both of those things in line with 0:02:07.640 --> 0:02:09.760 with expectations here. What do they tell you about the 0:02:10.080 --> 0:02:13.760 health of the the euro economy here after that referendum vone, Well, 0:02:13.800 --> 0:02:18.720 the the the economy is h so far, not taking 0:02:18.919 --> 0:02:22.160 any kind of a significant hit. We weren't expecting a 0:02:22.200 --> 0:02:26.000 major negative for the euro economy, but more in an 0:02:26.000 --> 0:02:30.720 issue for the UK um UH at this point, it's 0:02:30.760 --> 0:02:34.200 how how does the how do the negotiations move going forward? 0:02:34.600 --> 0:02:37.799 The UK obviously more sensitive to this than the Euro Area. 0:02:38.280 --> 0:02:41.520 ECPs goal here are right close to just below two percent. 0:02:41.639 --> 0:02:43.800 That with the likelihood we get to that anytime soon. 0:02:45.280 --> 0:02:50.600 We're a ways off. Uh. And our expectation is ECB 0:02:50.880 --> 0:02:55.760 is going to expand its QUI at the December meeting. Um. 0:02:55.800 --> 0:03:00.480 But certainly globally things beginning to move in a direction 0:03:00.520 --> 0:03:03.760 that that that could be helpful. I mean, you're you're 0:03:03.800 --> 0:03:08.240 seeing inflation slowly pick up in the US. News out 0:03:08.280 --> 0:03:11.919 of China has been Uh. Inflation is that admit more 0:03:11.919 --> 0:03:16.560 of the watchword these days, um so um labor markets. 0:03:16.680 --> 0:03:19.239 Labor markets are tightening. Uh. And it's going to be 0:03:19.280 --> 0:03:21.640 a slow process. But I'm gonna take a while, Peter, 0:03:21.720 --> 0:03:25.119 let's do let's do a granular thing. We have two 0:03:25.120 --> 0:03:29.080 point nine percent and we're assuming it's inventories and exports. 0:03:29.440 --> 0:03:33.960 Helped me here with if I want to delete inventories 0:03:34.120 --> 0:03:37.560 from my analysis of g d P, translate that jargon 0:03:37.720 --> 0:03:41.839 forest okay. Uh. The inventory sales ratio has been has 0:03:41.880 --> 0:03:46.720 been relatively high. Uh. It plunged. Inventory investment plunged in 0:03:46.720 --> 0:03:50.000 the second quarter, a big negative on growth. Third quarter 0:03:50.480 --> 0:03:53.920 looks like it's subtracted something on the order of a 0:03:53.920 --> 0:03:56.880 half percentage point from from GDP growth going I mean, 0:03:56.920 --> 0:03:59.960 added something like half a percent as inventory investment went 0:04:00.000 --> 0:04:04.600 from a substantial negative to a moderate plus. Uh. That 0:04:04.920 --> 0:04:09.000 is you know what it does going forward, is it 0:04:09.000 --> 0:04:10.839 takes a little bit out of the fourth quarter we've 0:04:10.880 --> 0:04:14.240 we've we were expecting to see more correction in inventories 0:04:14.480 --> 0:04:19.000 UM over the near tournaments. Our Deutsche Bank view, UM, 0:04:19.360 --> 0:04:23.479 we we now expect to see inventories subtract a few 0:04:23.480 --> 0:04:27.160 tents in Q four UM. So it was a moderate 0:04:27.160 --> 0:04:29.440 plus to us, a little bit of surprise, but more 0:04:29.480 --> 0:04:33.680 in line with consensus expectations. UM. We still have some 0:04:33.680 --> 0:04:36.279 correction to go going forward. Does it get you to 0:04:36.600 --> 0:04:40.159 a sustained better g d P or as you told 0:04:40.240 --> 0:04:42.760 us an hour ago, that it gets you to sub 0:04:42.839 --> 0:04:46.440 two GDP. You can't have both. Okay, you have two 0:04:46.480 --> 0:04:51.760 point nine Half of that was exports and inventories. Uh. 0:04:52.160 --> 0:04:56.360 The underlying feeling growth trend is something in the one 0:04:56.440 --> 0:04:59.760 and a half to two percent range. That's uh what 0:05:00.040 --> 0:05:05.600 we're consumer and business investment. Consumer just over two. Business 0:05:05.640 --> 0:05:08.560 investment has been very week has been a modest negative. 0:05:09.240 --> 0:05:11.520 That's where we need to really pick up going forward. 0:05:12.040 --> 0:05:14.600 But let me say that even if we're at just 0:05:14.760 --> 0:05:18.760 one and a half percent GDP growth, that's enough to 0:05:18.880 --> 0:05:23.520 give us ongoing improvement in the US labor market. Because 0:05:24.160 --> 0:05:28.600 productivity output per hour has not grown over the last 0:05:28.600 --> 0:05:33.719 five years. For overall GDP, labor productivity pretty flat. So 0:05:34.080 --> 0:05:36.359 one and a half percent GDP growth means one and 0:05:36.320 --> 0:05:39.000 a half percent labor demand growth, which gives you pretty 0:05:39.000 --> 0:05:46.640 good growth in in employment. Uh. That's a tightening labor market. Um. 0:05:46.880 --> 0:05:51.640 Problem here productivity is growing that slowly. Uh. Not just 0:05:53.600 --> 0:05:57.520 it means very slow potential growth. It means uh lag 0:05:57.720 --> 0:06:01.719 lagging improvement in the US underd of living. Uh. And 0:06:01.839 --> 0:06:04.719 it means pressure on unit labor cards. Yeah. And David, 0:06:05.000 --> 0:06:07.400 not that I want editor lies here, but it touches 0:06:07.440 --> 0:06:10.479 a little bit on Mr Trump's comments in different debates 0:06:10.480 --> 0:06:13.799 on a quote unquote one percent economy and not particularly 0:06:13.880 --> 0:06:17.680 one point zero percent. But Dr Hooper's view is Trumpian 0:06:18.360 --> 0:06:22.800 in the GDP sense. Squinting a correct word, I think 0:06:22.839 --> 0:06:25.040 it is my sudden Matt Winkler's piece this work. We 0:06:25.040 --> 0:06:28.000 can ask him about, yes, whether or not that's vaded 0:06:28.040 --> 0:06:31.160 to the dictionary. Uh. Squinting through that headline number. Peter 0:06:31.240 --> 0:06:34.159 looking looking at household spending, looking at the state of 0:06:34.200 --> 0:06:36.040 the consumer, How does he or she look in light 0:06:36.040 --> 0:06:39.000 of that two point nine percent figure, I think overall 0:06:39.080 --> 0:06:43.760 consumer is doing okay, alright, household balance sheets of recovered 0:06:44.040 --> 0:06:48.400 uh average households net worth income ratio back to previous 0:06:48.760 --> 0:06:53.720 near previous highs, labor market doing well, hiring going okay, 0:06:53.800 --> 0:06:56.440 and wage inflation beginning to rise. You you had a 0:06:56.440 --> 0:07:01.480 four percent increase nominal income, uh two a little of 0:07:01.600 --> 0:07:05.359 two percent real income. Uh. That's enough to sport a 0:07:05.920 --> 0:07:10.360 you know, a moderate growth in consumer spending going forward, 0:07:10.760 --> 0:07:13.560 and that's that's more than two thirds of the economy, 0:07:13.640 --> 0:07:17.280 so that that's what's giving you this uh, this underlying 0:07:17.480 --> 0:07:20.600 growth and domestic demand somewhere in the at least one 0:07:20.640 --> 0:07:23.000 and a half two percent range in the face of 0:07:23.000 --> 0:07:26.040 some drag on the part of business spending. As I mentioned, 0:07:26.040 --> 0:07:28.360 we get personal income and personal spending figures this morning. 0:07:28.360 --> 0:07:32.120 What are you looking for there? I think my expectation 0:07:32.200 --> 0:07:33.680 is we're going to be somewhere in the four percent 0:07:33.800 --> 0:07:36.160 range nominal. Yeah, but this is important because you get 0:07:36.280 --> 0:07:38.720 spending an income. I get it, and then you take 0:07:38.760 --> 0:07:41.600 it down and you guys calculate. Did the government calculate 0:07:41.680 --> 0:07:44.480 or do you back out what the personal savings rate is? 0:07:44.720 --> 0:07:46.320 They give it to us, they give it you. It's 0:07:46.320 --> 0:07:48.320 all part of it. You don't have to like do incense, 0:07:48.600 --> 0:07:51.840 you know, do a Harry Potter hell of kind of thing. 0:07:52.120 --> 0:07:57.160 And the saving saving rate has gone from low of 0:07:57.360 --> 0:08:01.520 three to five six. Okay, but but Peter, this is 0:08:01.560 --> 0:08:06.040 really important here. The paradox of savings, the paradox is 0:08:06.120 --> 0:08:08.840 upon us with with this great distortion of the fixed 0:08:08.840 --> 0:08:12.320 income market, isn't it. Well? We we've saying, we've been 0:08:12.360 --> 0:08:15.040 saying that the baby boom generation has not been saving 0:08:15.160 --> 0:08:19.080 enough for retirement. Savings has picked up, but it picked 0:08:19.160 --> 0:08:22.120 up primarily because of all the uncertainty around the Great 0:08:22.120 --> 0:08:26.120 Financial Crisis. People. People were shocked by the by the 0:08:26.200 --> 0:08:29.080 drop in home prices, people were shocked by the huge 0:08:29.160 --> 0:08:33.600 drop in in asset values. Uh. All this uncertainty says 0:08:33.640 --> 0:08:36.960 we need to save more. Of course, that is that 0:08:37.200 --> 0:08:40.200 is one of the drags on consumer spending. More you say, 0:08:40.240 --> 0:08:42.880 the less you spend. Uh, that was a drag. That 0:08:43.000 --> 0:08:45.200 was a drag coming out of the out of the 0:08:45.880 --> 0:08:50.439 out of the recession. Uh. Saving has been wiggling around, 0:08:50.440 --> 0:08:52.120 but it's been a little more stable. I would say, 0:08:52.160 --> 0:08:54.280 what are you doing us for Halloween? What am I 0:08:54.320 --> 0:08:56.480 worry for Halloween? Are you going this? John Maynard? Keys 0:08:59.120 --> 0:09:01.600 those jewel man, I've got a mask on the front, 0:09:01.600 --> 0:09:03.960 a mask on the back. On the front, I'm going 0:09:04.000 --> 0:09:06.719 as Irving Fisher and my mask in the back is 0:09:06.760 --> 0:09:10.080 the vice chairman, Stanley Fisher. So I'm going as Fisher 0:09:10.120 --> 0:09:13.400 Fisher for Hello. We think anybody will get it on 0:09:13.440 --> 0:09:16.120 the upper east side? What do you think, David? Come 0:09:16.160 --> 0:09:18.800 on if they get it in Brooklyn? Right? Yeah, you're 0:09:18.800 --> 0:09:21.319 going as a kil farmer, right of course, of course 0:09:21.720 --> 0:09:25.080 I'll have my my backpack laden with I'm afraid to 0:09:25.120 --> 0:09:28.559 ask what the girl offspring? How you're going to embarrass them? 0:09:28.800 --> 0:09:32.079 Halloween be safe today. Let's let's I just want to 0:09:32.160 --> 0:09:35.600 rip up the script on Job's Day. This job's day 0:09:35.640 --> 0:09:38.920 is a big deal. December's job days a bigger deal, 0:09:39.080 --> 0:09:43.480 right absolutely? I mean this, This Job's Day is not 0:09:43.520 --> 0:09:47.280 going to affect what the Fed? Uh, what what the 0:09:47.280 --> 0:09:52.800 Fed's up to? It will raise raise the issue of 0:09:52.800 --> 0:09:57.679 December if if there's an unusually weak number um and 0:09:57.720 --> 0:10:02.760 followed up by another one h uh in early December. 0:10:03.080 --> 0:10:10.200 But at this point that you know, it's uh. I 0:10:10.240 --> 0:10:15.000 think we're looking for something in the range on payrolls. 0:10:15.360 --> 0:10:18.199 We're looking for maybe a little bit further updrift and 0:10:18.280 --> 0:10:21.400 average early earnings and this is right on track for 0:10:21.400 --> 0:10:26.280 for FED moving ahead. David Girl, December two, December two ish. Yes, 0:10:29.200 --> 0:10:30.800 we've got an ECB meeting on the heels of down 0:10:30.800 --> 0:10:33.439 of the eighth I believe. But yep, Peter, in a 0:10:33.480 --> 0:10:35.079 recent note, you said here we see a good chance 0:10:35.120 --> 0:10:38.400 of substantial further step down in the unemployment rate. What 0:10:38.400 --> 0:10:40.760 what leads you to think that could be the case. Well, 0:10:41.040 --> 0:10:44.160 the unemployee rate has leveled off over the last year 0:10:44.720 --> 0:10:50.000 because labor force participation has picked up pretty significantly. Uh. 0:10:50.200 --> 0:10:54.120 The there's a secular downtrend and labor force participation because 0:10:54.160 --> 0:10:57.560 of demographics, largely the retirement of the Baby Boom generation 0:10:58.040 --> 0:11:01.720 taking about a quarter percentage point per year, and that 0:11:02.920 --> 0:11:06.320 adds has a substantial impact on on the unemployer right 0:11:06.360 --> 0:11:08.280 if it if it backs up, and it has, it's 0:11:08.400 --> 0:11:11.720 enough to level of things out. Uh. If if it 0:11:11.800 --> 0:11:16.199 resumes its downtrend, um the unemploint rate with with something 0:11:16.200 --> 0:11:19.240 anything in the neighborhood of one fifty on payrolls, unemployment 0:11:19.280 --> 0:11:23.000 rate is going to fall somewhere between three quarters of 0:11:23.040 --> 0:11:26.120 a percentage point and one percent over the next year. 0:11:26.240 --> 0:11:31.160 That's how powerful that downtrend is. UM. So we think 0:11:31.320 --> 0:11:35.199 that the labor force particiation participation rate picked up over 0:11:35.240 --> 0:11:37.599 the last year, not so much because a lot of 0:11:37.640 --> 0:11:41.080 people are coming back in, but because the rate of 0:11:41.559 --> 0:11:44.920 people who are unemployed long term unemployed actually leaving the 0:11:45.000 --> 0:11:49.400 labor force has dropped off. UH. That says that sometime 0:11:49.440 --> 0:11:51.719 in the next six months you could see a resumption 0:11:51.760 --> 0:11:55.120 move toward a bit of a downtrend and labor force participation. 0:11:55.840 --> 0:12:00.559 That says that unemployment UM begins to trend down. Word again, 0:12:00.920 --> 0:12:03.320 you and your colleagues did a masterful job. You're going 0:12:03.320 --> 0:12:06.440 through what was discussed at the Boston FEDS Economic Conference 0:12:06.440 --> 0:12:09.680 on Octilly the fourteenth, that, of course we're fed share 0:12:09.760 --> 0:12:13.040 Yellen suggested it might be wise to or there might 0:12:13.080 --> 0:12:15.440 be a rationale for running the economy in a more 0:12:15.520 --> 0:12:18.160 high pressure state. To what degree you think that's going 0:12:18.200 --> 0:12:21.600 to be discussed tomorrow and Wednesday around that giant conference 0:12:21.600 --> 0:12:25.120 table in the Equals Building in Washington, And and do 0:12:25.160 --> 0:12:28.120 you think there's much agreement there among policy makers that 0:12:28.120 --> 0:12:29.719 it's something that they you know, that they could be 0:12:29.760 --> 0:12:33.560 heading towards Um, you know, I think when when Jane 0:12:33.679 --> 0:12:36.280 Yellen raised the Center speech, she was sort of asking 0:12:36.320 --> 0:12:40.720 the question, and her speech was more to raise issues 0:12:40.760 --> 0:12:46.880 that warrant further research by macroeconomists in the years to come. Um, 0:12:46.920 --> 0:12:51.120 I'm not expecting a theme to the central theme of 0:12:51.120 --> 0:12:54.480 the discussion be it's time to run the economy at 0:12:54.480 --> 0:12:59.000 a hotter level. Uh, in a serious way until until 0:12:59.559 --> 0:13:02.600 you know, next year. If indeed the unemployed rate stage 0:13:02.600 --> 0:13:06.719 starts declining significantly, this becomes an issue for FED discussion. 0:13:06.960 --> 0:13:10.560 So far, however, we're not there. Dr Banky Dean Mackie 0:13:10.840 --> 0:13:13.079 Barklay is now at point seven two with Steve Cohen 0:13:13.760 --> 0:13:17.440 has said for quarters the migration here is to four 0:13:17.520 --> 0:13:21.920 point zero percent unemployment. Can I make some news this morning? 0:13:22.240 --> 0:13:26.200 Is a major house like Peter Hooper, agree with Dr Mackie. Okay, 0:13:26.400 --> 0:13:30.080 our house call is for unemployment getting down into the 0:13:30.120 --> 0:13:34.760 mid fours over the next year. But okay, alright, okay, 0:13:34.880 --> 0:13:37.400 it's Halloween. You want to risk Uh, they're not my 0:13:37.480 --> 0:13:40.920 fishure fisher there. Certainly I will tell you it's pure 0:13:40.960 --> 0:13:44.640 arithmetic that if okay, if pure arithmetic that if a 0:13:44.720 --> 0:13:50.359 labor force participation rate resumes its downtrend, secular downtrend. Okay, 0:13:50.640 --> 0:13:53.440 if the economy continues to grow two percent and productivity 0:13:53.440 --> 0:13:57.000 hasn't picked up, will be below four percent by the 0:13:57.080 --> 0:14:00.160 end of next year. Let's leave it there, Peter, Thank 0:14:00.160 --> 0:14:02.360 you news. This one that's shocking, folks, you heard it. 0:14:02.880 --> 0:14:05.199 I believe folks that David Gurry. I think that's the 0:14:05.280 --> 0:14:09.000 first I would suggest, yes for what we've heard. I 0:14:09.000 --> 0:14:11.120 want to I wanna. I want to suggest that DARTR. 0:14:11.200 --> 0:14:14.120 Hooper did not make a point forecast there or estimate 0:14:14.679 --> 0:14:17.960 he are or both. He suggested those would be the 0:14:18.000 --> 0:14:21.600 trends given this, that and the other thing. That's not 0:14:21.640 --> 0:14:26.200 the same because an official, Mr Cry, And don't let's 0:14:26.200 --> 0:14:28.560 be sure is badge still works? Mr Cry. That's all 0:14:28.600 --> 0:14:41.560 we ask Peter Hooper, thank you so much. I want 0:14:41.560 --> 0:14:43.360 to bring in Steve Whiting now. He is the chief 0:14:43.400 --> 0:14:46.800 global strategist at City Private Bank. A real pleasure to 0:14:46.840 --> 0:14:48.960 have him here. And I want to start with with 0:14:49.000 --> 0:14:52.440 the bond market. Steve. I look at the FED minutes, 0:14:52.480 --> 0:14:54.560 I look at the Fed statements. I listened to Mario 0:14:54.640 --> 0:14:57.520 Draggy a week and a half ago, and I wonder 0:14:57.600 --> 0:14:59.680 hear how much uncertainty remains when it comes to to 0:14:59.720 --> 0:15:01.760 monta terry policy in light of what we have looking 0:15:01.760 --> 0:15:03.240 at w I R P here, the probability of a 0:15:03.280 --> 0:15:06.000 hike at you know, the heels of this FED meeting seventeen, 0:15:06.880 --> 0:15:10.760 how much uncertainty remains when it comes to central banks. Well, 0:15:10.800 --> 0:15:14.440 I think they're coming into a path that sort of 0:15:14.640 --> 0:15:19.000 makes sense now for two thousand and seventeen. When you 0:15:19.000 --> 0:15:21.960 think about the period when interest rate hikes really became 0:15:22.080 --> 0:15:25.480 credible in two thousand and fourteen, the markets and the 0:15:25.520 --> 0:15:28.800 said were very far apart the idea that they'll do 0:15:29.000 --> 0:15:31.440 one step now before the end of the year and 0:15:31.480 --> 0:15:35.000 two quarter point tightenings next year. And as Janet Yellen 0:15:35.120 --> 0:15:38.560 said at Jackson Hole, that was the course if there 0:15:38.600 --> 0:15:42.320 is a shop free outlook, Um, that is now sort 0:15:42.320 --> 0:15:44.560 of a reasonable course that we could be on, particularly 0:15:44.600 --> 0:15:48.040 with that qualification that, um, if there are no outside shocks, 0:15:48.200 --> 0:15:50.280 you know, history is stilled with them, and there have 0:15:50.400 --> 0:15:53.880 been FED tightenings through those periods and they couldn't control everything. 0:15:53.920 --> 0:15:56.160 But now I think that this is a path that 0:15:56.200 --> 0:15:58.680 we're sort of the hawks and the doves can both 0:15:58.680 --> 0:16:00.800 take that road together and see if you're not you're 0:16:00.840 --> 0:16:04.280 not writing off November rate rise completely, are you you know, 0:16:04.360 --> 0:16:07.800 in my gut, I just can't completely do that. Um. 0:16:07.840 --> 0:16:11.800 The fact that they didn't even mention the weakness in 0:16:11.840 --> 0:16:14.640 the pervasive weakness and economic data in the month of August, 0:16:15.520 --> 0:16:18.160 when you know they followed up in September with a 0:16:18.240 --> 0:16:21.560 pause in three decents. You know first said that is 0:16:21.640 --> 0:16:25.320 not political, just the absence of mentioning any of the 0:16:25.360 --> 0:16:28.160 weak economic news, perhaps so that it doesn't fall into 0:16:28.200 --> 0:16:32.080 a political context. It just strikes me that with um 0:16:32.160 --> 0:16:36.440 so much information arguing for a tightening, that just deciding 0:16:36.480 --> 0:16:38.720 to wait to December, it's just hard to say that 0:16:38.720 --> 0:16:42.320 that it's entirely off the table. December obviously seems more likely, 0:16:42.360 --> 0:16:45.040 and the historical proclivity is to the said not the 0:16:45.120 --> 0:16:48.280 tighten right ahead of political events. But um, I just 0:16:48.320 --> 0:16:50.280 note that one play this play is after me a 0:16:50.320 --> 0:16:52.160 little bit here, because we've heard time and time again 0:16:52.240 --> 0:16:56.240 they won't raise rates because of the election. How could 0:16:56.240 --> 0:16:58.440 you see those two events interacting with with one another. 0:16:58.480 --> 0:17:00.640 In other words, if they were to raise it's in November, 0:17:00.640 --> 0:17:02.880 what what measurable effect would that have on the campaign? 0:17:02.920 --> 0:17:05.120 On the election? As you see in Well the Strongest 0:17:05.200 --> 0:17:08.080 argument is maybe not political, it's the sac The Federal 0:17:08.119 --> 0:17:11.640 Reserve is not, you know, trying to impose a harsh tightening, 0:17:12.080 --> 0:17:15.280 and markets are unprepared, have not priced in this event, 0:17:15.680 --> 0:17:19.800 so they politely uh in. They would likely desire not 0:17:19.880 --> 0:17:22.320 to have that outcome in the market, whereas in December, 0:17:22.400 --> 0:17:25.359 where's entirely priced in, they're going to have less impact 0:17:25.359 --> 0:17:27.560 in many ways that it has tried to tighten without 0:17:27.640 --> 0:17:30.440 impact over you know, the last two years and said 0:17:30.480 --> 0:17:31.960 only one chance and then take a look at what 0:17:32.040 --> 0:17:34.760 happened in last December. In fact, historically the Federal Reserve 0:17:34.840 --> 0:17:37.720 has tried to avoid. December is the period of liquidity 0:17:37.880 --> 0:17:40.040 year and uncertainty. So they're just a little bit they 0:17:40.080 --> 0:17:43.080 can't win situation here, but they have managed, you know, 0:17:43.160 --> 0:17:46.159 to take down expectations so much for the course of 0:17:46.200 --> 0:17:49.240 future tightening that they're they're okay here one way or 0:17:49.280 --> 0:17:54.679 the other. Does inflation say next year, Steve writing, I 0:17:54.720 --> 0:17:58.240 think inflation comes back just simply on the oil price rise. 0:17:59.080 --> 0:18:01.440 And you know, the depending on how the American economy 0:18:01.480 --> 0:18:04.040 forms and how willing the fit of Reserve is to 0:18:04.200 --> 0:18:07.320 go in a different direction from other central banks and 0:18:07.480 --> 0:18:10.399 will dictate the path of the exchange rate and you know, 0:18:10.600 --> 0:18:13.680 a meaningful dampening effect from goods prices. You know we 0:18:13.760 --> 0:18:16.639 were on earlier. I don't think that you're going to 0:18:16.720 --> 0:18:19.200 see the kind of inflation with a life of its 0:18:19.200 --> 0:18:22.879 own where demands that year after year year it's going 0:18:22.920 --> 0:18:26.120 to be a bounce. Yeah, And I like that framework. 0:18:26.160 --> 0:18:28.480 Stephen Winding with his folks, and Stephen Winding is an 0:18:28.560 --> 0:18:33.919 economist and a strategist, links in earnings, revenues and the 0:18:34.000 --> 0:18:39.719 dynamics of profitability of corporations into our greatest greater economy, Stephen, 0:18:39.720 --> 0:18:42.680 and it will be a changed world if we get 0:18:42.680 --> 0:18:46.640 a villain bowder economy and others that have frankly been 0:18:46.680 --> 0:18:51.120 more optimistic than city group migrating towards the city group 0:18:51.280 --> 0:18:54.280 level of g d P somewhere in the vicinity of 0:18:54.320 --> 0:18:59.399 two point zero percent some south, some north. Isn't that 0:18:59.640 --> 0:19:03.760 unex acceptable to the animal spirit of the country. Isn't 0:19:03.760 --> 0:19:08.480 that unacceptable to develop corporate confidence? Look, I think one 0:19:08.520 --> 0:19:12.399 of the hard questions has to be when we have 0:19:12.920 --> 0:19:16.560 nearly two hundred thousand jobs created on average per month 0:19:16.640 --> 0:19:20.040 for seven years, you know what in terms of headcount 0:19:20.640 --> 0:19:25.040 looks like a you know, very significant tightening of labor markets. 0:19:25.040 --> 0:19:28.040 But output growth is slow and so much is out 0:19:28.040 --> 0:19:30.880 of control of policy makers. You know, we can do 0:19:30.960 --> 0:19:35.439 things ideally to incentivize labor force participation, to get people 0:19:35.480 --> 0:19:38.359 looking at the incentives to work and go back, um 0:19:38.520 --> 0:19:41.280 when it comes to productivity growth. You know the technology 0:19:41.359 --> 0:19:44.560 surprises uh that we have seen, you know, for one, 0:19:44.600 --> 0:19:47.320 in the facting sector in oil where we had a 0:19:47.359 --> 0:19:51.160 couple of years back a dramatic windfall and output uh, 0:19:51.200 --> 0:19:54.600 you know, a decade earlier in I T You know, 0:19:54.720 --> 0:19:58.080 these sorts of technology surprises are not something that I 0:19:58.119 --> 0:20:00.800 think policymakers can plan for. But wheak you think about this, 0:20:00.920 --> 0:20:02.560 and I think it's actually a really good argument in 0:20:02.600 --> 0:20:05.600 favor of potential optimism. Is that when you're down, you know, 0:20:05.680 --> 0:20:09.359 near early nineteen eighties lows on this, and you see 0:20:09.480 --> 0:20:12.680 enough things going around in the technology front, we might 0:20:12.720 --> 0:20:15.200 actually one of these days we're not going to get 0:20:15.240 --> 0:20:18.000 just downside surprises and growths. To cut to the chase 0:20:18.600 --> 0:20:21.280 and what's what's interesting to me and help me here, 0:20:21.280 --> 0:20:23.679 Stephen Whiting and David Gura jump in here as someone 0:20:23.680 --> 0:20:26.840 of wisdom as well. I saw an Apple commercial this 0:20:26.880 --> 0:20:29.560 weekend which is a bunch of you know, millennials. You 0:20:29.600 --> 0:20:32.120 want to punch there, you know the whole Apple techie 0:20:32.480 --> 0:20:35.320 gorgeous thing. You want to punch all of them. But 0:20:35.400 --> 0:20:39.320 the basic idea is that technology of Apple using your 0:20:39.359 --> 0:20:44.639 iPhone to do qt C pie selfies. That's productivity, robotics, 0:20:44.920 --> 0:20:48.520 e commerce. Um. You know the fact that the e 0:20:48.600 --> 0:20:52.400 commerce sector is sort of displacing you know, standard commerce 0:20:52.480 --> 0:20:56.119 with a lot less labor input, and people are a 0:20:56.200 --> 0:20:59.520 little bit happy not having you know, massive amounts of 0:20:59.560 --> 0:21:02.840 speculum at inventory across you know, millions of square miles 0:21:02.920 --> 0:21:04.960 across the United States. You know where somebody might just 0:21:05.040 --> 0:21:07.199 walk in and happen to buy it. There is a 0:21:07.240 --> 0:21:11.440 technology like that which is in fact disruptive. Uh. You 0:21:11.560 --> 0:21:14.240 know these sorts of things where you have some resources 0:21:15.000 --> 0:21:18.280 again on the sidelines that you can redeploy. That's how 0:21:19.119 --> 0:21:22.639 you know, real income rogers per person. That reminded me 0:21:22.840 --> 0:21:24.959 of a very vivid moment from stand fisher speech at 0:21:25.000 --> 0:21:27.200 the Economic Club of New York in which he's urged 0:21:27.240 --> 0:21:29.120 by a colleague to take a subway ride to see 0:21:29.119 --> 0:21:32.280 everybody using you sing there iPods. I thought that was 0:21:32.560 --> 0:21:34.680 I thought that was just great. We were talking with 0:21:34.920 --> 0:21:37.680 Peter Peter a few moments ago about his take on 0:21:37.760 --> 0:21:40.520 Janet Yellen speech at the FED conference in Boston a 0:21:40.520 --> 0:21:42.840 little while back, and so much of that conference had 0:21:42.880 --> 0:21:46.200 to do with productivity. Alan Krueger spoke there as well. 0:21:46.760 --> 0:21:48.840 When you look at demographics, how much do you just 0:21:49.680 --> 0:21:51.760 raise up your hands in defeat here? How much can 0:21:51.800 --> 0:21:53.440 the FED do? How much can anyone do about the 0:21:53.520 --> 0:21:57.400 demographic picture we're seeing in this country right now? Well, um, 0:21:57.720 --> 0:22:00.560 aging is not something we're going to do anything about. 0:22:00.600 --> 0:22:04.199 It's it's the course of history and where it will go. 0:22:04.800 --> 0:22:10.560 I think raising labor force participation for older workers is ideal. Um. 0:22:10.640 --> 0:22:13.080 What striking is in the list seven years, with the 0:22:13.119 --> 0:22:16.439 exception the last twelve months. Um, you know, we were 0:22:16.440 --> 0:22:20.600 seeing labor force participation undershoot anything that demographics could explain. 0:22:20.960 --> 0:22:24.639 People between five and fifty five were not in the 0:22:24.720 --> 0:22:28.040 labor force US as they were predicted to be. It's 0:22:28.040 --> 0:22:30.520 been remarkably weak on that front. And you know, for 0:22:30.600 --> 0:22:33.080 us to see in the last twelve months three million 0:22:33.359 --> 0:22:37.280 people come back and search for jobs is pretty striking. 0:22:37.320 --> 0:22:40.720 That's another big forecast miss. Both the short fall and 0:22:40.760 --> 0:22:44.080 now the improvement are other size that the forecasting is 0:22:44.119 --> 0:22:46.280 getting better that we've We've talked a ton on this 0:22:46.320 --> 0:22:53.280 program just about the deficits of of FED forecasting. Uh sure, 0:22:53.640 --> 0:22:55.800 the FED and others, but you know, how do we 0:22:55.840 --> 0:23:03.800 forecast better? Uh information, being able to take real time 0:23:04.720 --> 0:23:09.119 digital information on sales production in the economy, These sorts 0:23:09.119 --> 0:23:12.480 of things that we probably don't fund very well. Improving 0:23:12.480 --> 0:23:14.919 these sorts of things can help. Um. You know, if 0:23:14.920 --> 0:23:17.000 people are looking for the answers to like how to 0:23:17.040 --> 0:23:20.480 make you know financial markets les volatil, that's a different story. 0:23:20.560 --> 0:23:22.960 You know, we can people will always try harder to 0:23:23.119 --> 0:23:27.200 get uh some better forecast, and you know, it becomes 0:23:27.600 --> 0:23:29.480 a little bit like high frequency trade. Think it's a 0:23:29.680 --> 0:23:32.359 it's a race for speed, but it won't necessarily improve everything. 0:23:32.520 --> 0:23:37.160 That's an important point. What is your confidence in your 0:23:37.240 --> 0:23:40.960 guestiments of C plus I plus G plus n x, 0:23:41.080 --> 0:23:44.679 particularly after the first look we saw third quarter? Do 0:23:44.680 --> 0:23:49.359