WEBVTT - US Stocks Rally After Jobless Claim Data 0:00:02.960 --> 0:00:10.840 Bloomberg Audio Studios, Podcasts, radio News. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.759 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.800 --> 0:00:22.000 Listen on demand wherever you get your podcasts, or watch 0:00:22.079 --> 0:00:24.040 us live on YouTube. 0:00:25.079 --> 0:00:28.240 Alex Ci alongside Paul Sweeny, Welcome to Bloomberg Intelligence Radio. 0:00:28.280 --> 0:00:30.960 We are broadcasting to you live from Interactive Brokers Studio 0:00:31.080 --> 0:00:34.120 right here in Midtown Manhattan. Also check us out on 0:00:34.159 --> 0:00:36.680 YouTube as well. What do you do in the market? 0:00:36.960 --> 0:00:38.960 I mean the Nastak one hundred is up by two percent. 0:00:39.080 --> 0:00:42.519 It has been an extremely difficult week in the market 0:00:42.600 --> 0:00:44.880 if you count last Friday, just in terms of understanding 0:00:44.880 --> 0:00:47.720 where we are, where positioning is and is the market complacent? 0:00:47.720 --> 0:00:50.479 I mentioned the Vicks at twenty five. Joining us now 0:00:50.560 --> 0:00:52.920 is Brian Whale and chief investment officer and a generalist 0:00:53.000 --> 0:00:56.520 portfolio manager over at TCW joins US now. Hey, Brian, 0:00:57.480 --> 0:00:59.840 are we complacent here at this point or is this 0:00:59.880 --> 0:01:00.880 a buying opportunity? 0:01:03.440 --> 0:01:05.600 I think it's a buying opportunity in the bond market. 0:01:05.640 --> 0:01:07.120 We've had a little bit of a backup. I think 0:01:07.160 --> 0:01:10.000 everything we saw you know, earlier this week Sunday night 0:01:10.040 --> 0:01:12.319 into Monday was it was a bit of panic. You know, 0:01:12.360 --> 0:01:15.120 we've been in the very barished camp with regards to 0:01:15.160 --> 0:01:18.559 the economy. But even we would were dismissing the notion 0:01:18.640 --> 0:01:22.000 of some intermeding cut. We thought that was that was 0:01:22.520 --> 0:01:24.800 a foolish way to think about the world. So I 0:01:24.800 --> 0:01:26.800 think this is this is kind of calm, This is 0:01:26.800 --> 0:01:29.280 the market kind of settling in here a little bit. 0:01:29.680 --> 0:01:31.720 You know, even though we've backed off in bond yields 0:01:32.319 --> 0:01:34.440 since the lows on Monday morning, if if you just 0:01:34.440 --> 0:01:36.760 take a step back for a second, you know, the 0:01:36.880 --> 0:01:39.080 five year as just kind of an indicator of yields 0:01:39.120 --> 0:01:42.039 has come down fifty basis points since we started the quarter, 0:01:42.080 --> 0:01:44.360 so since you know, since July one, and that's a 0:01:44.360 --> 0:01:47.120 big move. And I think that's very much in line 0:01:47.200 --> 0:01:50.280 with you know, the the notions and everyone in the 0:01:50.280 --> 0:01:53.560 fairytale camp of no landing kind of being shaken a 0:01:53.560 --> 0:01:55.400 little bit. We've seen a couple of months of of 0:01:55.520 --> 0:01:59.760 slowing economic data and the one economic kind of data 0:01:59.800 --> 0:02:01.760 point that had been holding up that no landing camp, 0:02:01.800 --> 0:02:04.280 which was the headline payrolls number, you know, that got 0:02:04.320 --> 0:02:06.640 knocked off a little bit on Friday, and so if 0:02:06.640 --> 0:02:08.639 you kind of forget the noise early in the week, 0:02:08.680 --> 0:02:10.600 this looks like a kind of the right place to 0:02:10.639 --> 0:02:12.200 settle in Brian. 0:02:12.560 --> 0:02:14.679 When you walked out onto the TCW trading floor on 0:02:14.720 --> 0:02:17.280 Monday morning, what were your traders telling you? 0:02:20.360 --> 0:02:24.760 It was, you know that metrics didn't make sense. Things 0:02:24.800 --> 0:02:27.800 were moving all over the place. Liquidity was very poor. 0:02:28.360 --> 0:02:29.760 You know, you saw the vicks. You know, I think 0:02:29.800 --> 0:02:31.359 at one point it was that you know, in toyday 0:02:31.440 --> 0:02:35.400 was well over fifty, which looked it was in a sixties. Yeah, 0:02:35.400 --> 0:02:36.800 it looked more like an apple. It looked like it 0:02:36.800 --> 0:02:38.760 looked like an It looked like a like a stock 0:02:38.800 --> 0:02:40.160 market crash. 0:02:40.160 --> 0:02:40.560 It didn't. 0:02:40.600 --> 0:02:43.960 It did not look like a market where a headline employee. 0:02:44.000 --> 0:02:46.120 You know, the rate should have been one hundred and 0:02:46.120 --> 0:02:48.880 seventy five thousand growth on the payrolls number, and it 0:02:48.880 --> 0:02:52.040 came in one hundred and fourteen thousand, and the unemployment 0:02:52.120 --> 0:02:53.720 rate went from you know, four point one to four 0:02:53.760 --> 0:02:57.680 point three. I mean, that's that's that's indi indicative of 0:02:57.680 --> 0:03:00.360 a slowing economy and a slower labor for worse than 0:03:00.360 --> 0:03:02.480 maybe one that's weaker than the market was expecting, and 0:03:02.520 --> 0:03:04.639 it probably will cause the FED to have to cut 0:03:04.639 --> 0:03:07.639 more aggressively than the market was pricing beforehand. But sure, 0:03:07.720 --> 0:03:08.680 it sure wasn't panic. 0:03:09.160 --> 0:03:12.000 Well what did you make of the ten year auction yesterday? 0:03:12.000 --> 0:03:12.680 It wasn't good. 0:03:12.840 --> 0:03:15.120 It just was pretty bad again, thirty year coming today? 0:03:15.120 --> 0:03:18.280 The three year was fine. You know, our jersey tells 0:03:18.280 --> 0:03:19.359 me I should care about these things. 0:03:19.360 --> 0:03:20.000 I know, yeah, I know. 0:03:20.400 --> 0:03:21.320 What did you make that? 0:03:22.720 --> 0:03:24.480 You know, it's it's it's it's the same thing I 0:03:24.480 --> 0:03:26.480 make of what I this morning. You know, it's it's 0:03:26.520 --> 0:03:28.960 gappy price action. It's it's it's a nervous market. I mean, 0:03:29.000 --> 0:03:31.560 you saw, you know, a little bit of supply. You know, 0:03:31.639 --> 0:03:33.680 the street pushes it around. You got a higher yield 0:03:33.680 --> 0:03:36.560 this morning. You know, initial jobless games come in just 0:03:36.560 --> 0:03:39.640 a hair under expectations. Although the four week moving average 0:03:39.720 --> 0:03:43.720 keeps moving up, continue it continued claims continues to stay hi. 0:03:44.000 --> 0:03:46.280 So the fact that we're off ten basis points in 0:03:46.320 --> 0:03:48.880 the market is just it's a market trying to find 0:03:48.920 --> 0:03:51.600 its footing, almost trying to you know, almost trying to 0:03:51.760 --> 0:03:53.240 catch its breath a little bit, which is which is 0:03:53.240 --> 0:03:55.320 a healthy thing. I think what we would contend is, 0:03:55.880 --> 0:03:58.040 you know, this is maybe not the breath you take 0:03:58.560 --> 0:04:00.360 because everything is going to be all right, more like 0:04:00.360 --> 0:04:02.400 the breath you take before you take the punch. And 0:04:02.480 --> 0:04:04.080 so you know, over the next few over the next 0:04:04.120 --> 0:04:06.360 few months, what we're probably going to see, at least 0:04:06.360 --> 0:04:08.560 we expect is is more of the same, which is 0:04:08.560 --> 0:04:11.480 the economic data continuing to slow and the FED is 0:04:11.480 --> 0:04:12.520 going to have to react to that. 0:04:13.600 --> 0:04:17.120 Brian, where do you see opportunities in the fixing can 0:04:17.200 --> 0:04:19.080 market here? Given some of the volatility we've seen over 0:04:19.080 --> 0:04:20.200 the last several days. 0:04:21.520 --> 0:04:25.000 It's a boring answer. I'd say the opportunities maybe agency 0:04:25.040 --> 0:04:27.159 mortgages aside, but at a high level of the opportunities 0:04:27.560 --> 0:04:30.160 is in duration and in liquidity, like keep keep your 0:04:30.200 --> 0:04:33.520 powder dry, because you know, I'm not saying we're going 0:04:33.560 --> 0:04:35.359 to have vixed days of you know, of north of 0:04:35.440 --> 0:04:39.600 sixty again. But if we enter the fall and the 0:04:39.680 --> 0:04:42.400 narrative and you start reading more about a recession and 0:04:42.880 --> 0:04:46.080 the job market turns from one of where companies are 0:04:46.200 --> 0:04:49.440 just not hiring but actually starts to fire, what you're 0:04:49.480 --> 0:04:52.159 going to see then is concerned about earnings growth and 0:04:52.200 --> 0:04:54.400 the ability of companies to service their debt, and then 0:04:54.440 --> 0:04:58.400 there's going to be conversation around downgrades and what happens 0:04:58.400 --> 0:05:01.119 then in terms of pricing and like our trading floor 0:05:01.120 --> 0:05:03.920 and the opportunities we're looking for. Corporate bonds are going 0:05:03.920 --> 0:05:07.400 to get cheaper relative to treasuries, highyield bonds, emerging market bonds, 0:05:07.400 --> 0:05:09.880 they're all going to get cheaper. And that's the that's 0:05:09.920 --> 0:05:12.360 a really nice buying opportunity because in the bond world now, 0:05:12.400 --> 0:05:15.640 not only can you kind of buy cheap credit and 0:05:15.680 --> 0:05:19.000 get the benefits of spread duration and that's another conversation, 0:05:19.040 --> 0:05:20.960 but you can also get carry and you can also 0:05:21.000 --> 0:05:24.120 get the advantage of like diversification into portfolio because you know, 0:05:24.120 --> 0:05:26.320 with yields across the curve right now at four percent, 0:05:26.760 --> 0:05:28.560 you know, bonds can be bonds again, so they can 0:05:28.600 --> 0:05:31.760 act as that hedge of that offset into an environment 0:05:31.760 --> 0:05:33.760 where we get volatility and equities to cline. 0:05:33.839 --> 0:05:34.960 So two things with corporates. 0:05:35.040 --> 0:05:37.440 One, we saw a record amount of issuance yesterday in 0:05:37.480 --> 0:05:40.760 the investment grade market all year. And then also the 0:05:40.800 --> 0:05:43.200 spreads have not blown out at all like in the 0:05:43.240 --> 0:05:45.200 last few days. Yeah, they moved up, but we haven't 0:05:45.200 --> 0:05:47.320 blown out. And I'm just wondering if there's more priced 0:05:47.360 --> 0:05:48.679 appreciation here to come. 0:05:49.880 --> 0:05:52.800 Definitely, it's a trillion dollars a little over a trillion 0:05:52.839 --> 0:05:55.680 dollars of issuance year to date, which is very high. 0:05:55.720 --> 0:05:57.880 But yeah, look like just to put things in kind 0:05:57.880 --> 0:06:01.200 of context for everybody here and watch this stuff day 0:06:01.200 --> 0:06:03.960 to day. I mean, you know, investment, great corporate bonds 0:06:04.120 --> 0:06:07.000 kind of on the tight end, meaning like the amount 0:06:07.000 --> 0:06:09.440 of yield you get over treasuries doesn't get much tighter 0:06:09.440 --> 0:06:11.839 than about point eight percent, you know, eighty basis points. 0:06:11.839 --> 0:06:15.040 We're sitting at about one hundred basis points. Historical averages 0:06:15.240 --> 0:06:18.920 just even excluding like big moves like the Great Financial Crisis, 0:06:19.160 --> 0:06:21.560 historical averages are about one hundred and twenty one hundred 0:06:21.560 --> 0:06:23.480 and twenty five basis points. So you know that was 0:06:23.560 --> 0:06:25.280 kind of us too on Monday when it's like, look 0:06:25.480 --> 0:06:27.680 the market, everybody's got to calm down a little bit. Like, 0:06:28.360 --> 0:06:30.920 you know, at one hundred basis points over, corporate bonds 0:06:30.960 --> 0:06:35.520 still look expensive. So be patient. You know, this this 0:06:35.720 --> 0:06:37.880 may not be a recession that we kind of jump 0:06:37.920 --> 0:06:40.080 into in and overnight. This just may be an old 0:06:40.080 --> 0:06:42.599 fashioned recession where we're just going to have to walk 0:06:42.640 --> 0:06:44.680 our way into it. So as an investor, you've got 0:06:44.680 --> 0:06:47.000 to keep that kind of long term perspective in mind 0:06:47.760 --> 0:06:50.640 and preserve that capital. You know, if you've got that cash, 0:06:50.920 --> 0:06:53.200 that's worth a lot because you'll be able to spend 0:06:53.240 --> 0:06:56.160 it in very wise ways, probably throughout the remainder of 0:06:56.200 --> 0:06:57.520 the year and into early next year. 0:06:58.120 --> 0:07:00.880 So, Brian, when the phone calls do from Wall Street 0:07:01.000 --> 0:07:04.000 with these new issues, what kind of calls do you take? 0:07:04.279 --> 0:07:05.200 Do you take everything? 0:07:05.320 --> 0:07:08.520 I mean, because you've got capital deploy are you focusing 0:07:08.600 --> 0:07:11.200 just on the highest quality stuff? What kind of phone 0:07:11.240 --> 0:07:12.880 calls do you take from Wall Street these days? 0:07:13.560 --> 0:07:16.320 I think the way I've described is like, don't call 0:07:16.400 --> 0:07:18.560 us when you think we need you, call us when 0:07:18.600 --> 0:07:21.480 you need us. You know that that's that is That 0:07:21.640 --> 0:07:24.680 is like a good way to describe what we call 0:07:24.760 --> 0:07:26.920 like the liquidity premium, which is and I was talking 0:07:26.920 --> 0:07:29.440 about cash before, like you know, if you want the 0:07:29.480 --> 0:07:31.680 opportunities when people are calling you on the phone and 0:07:31.680 --> 0:07:34.280 saying we've got a problem or somebody needs to sell 0:07:34.360 --> 0:07:36.640 and et cetera, and it's like, Okay, what you hear 0:07:37.120 --> 0:07:38.840 seems like going on to like a dealer's like a 0:07:38.920 --> 0:07:40.760 car lot, you know, somebody's like, look, I got to 0:07:40.800 --> 0:07:43.080 get rid of this thing, you know, blah blah. Same thing. Like, 0:07:43.280 --> 0:07:45.560 as an investor, you want to wait for the opportunities 0:07:45.560 --> 0:07:48.680 where Wall Street calls you and says, look, here's an opportunity. 0:07:49.200 --> 0:07:51.960 Here's the price. I know, you know where regular market 0:07:51.960 --> 0:07:54.520 pricing is, and you know, what do you think? And 0:07:54.800 --> 0:07:58.080 that's that's what you wait for. It It happens kind 0:07:58.080 --> 0:08:00.640 of infrequently, but that's where you can make the big money. 0:08:01.240 --> 0:08:04.520 Where do you think we're going to see the most volatility? 0:08:05.600 --> 0:08:08.960 That's a good question, you know. In the short term, 0:08:09.080 --> 0:08:11.480 you know, we'll see it uh in uh and obviously 0:08:11.480 --> 0:08:14.160 in interest rates. I think the next thing that would 0:08:14.160 --> 0:08:15.960 probably be a your what we call these high data 0:08:16.040 --> 0:08:19.360 parts of fixed income, like like high yield and emerging markets. 0:08:19.440 --> 0:08:22.520 I think down the line, you know, so so the 0:08:22.560 --> 0:08:26.040 public liquid markets will react first, and that's where you 0:08:26.080 --> 0:08:28.119 will see the vall also throw you know, they'll probably 0:08:28.120 --> 0:08:31.560 see some some currency volatility in there too. But down 0:08:31.600 --> 0:08:34.040 the line, if we do get a true recession, there'll 0:08:34.040 --> 0:08:36.720 be a shake up, you know, in in everybody's favorite 0:08:36.760 --> 0:08:39.480 market today, which is private credit, and there's there's some 0:08:39.559 --> 0:08:41.880 you know, private credits here to stay and and you know, 0:08:41.880 --> 0:08:44.760 there's some some great things about it. However, it's been 0:08:44.800 --> 0:08:47.040 too easy for too long uh and there's going to 0:08:47.080 --> 0:08:49.120 have to be a shakeout uh And and that's a 0:08:49.120 --> 0:08:51.160 healthy thing for the market in the long term. And 0:08:51.200 --> 0:08:53.000 so in the short term, focus on those kind of 0:08:53.040 --> 0:08:56.520 liquid markets like like like high yield bonds for instance, 0:08:56.960 --> 0:09:01.440 UH currencies, and then in the longer term that'll probably 0:09:01.520 --> 0:09:03.480 roll into less liquid parts of the market. 0:09:04.000 --> 0:09:05.640 All Right, Brian, thanks so much for joining us. Really 0:09:05.640 --> 0:09:08.760 appreciate Brian Whalen. He's a chief investment officer. That means 0:09:08.760 --> 0:09:11.600 he's a big dude and a generalist portfolio manager TCW. 0:09:11.840 --> 0:09:14.040 I tell you I've worked at TCW when I was 0:09:14.040 --> 0:09:15.920 on a cell side twenty some odd years. 0:09:16.280 --> 0:09:18.520 I knew I had like four or five relationships good 0:09:18.520 --> 0:09:19.440 relationships there. 0:09:19.679 --> 0:09:21.920 Oh, really smart, super smart. 0:09:22.000 --> 0:09:23.720 Yeah, I mean like across. 0:09:23.320 --> 0:09:26.160 The board, like I avoided the fixicing floor, like the plague. 0:09:26.320 --> 0:09:28.280 I went to the equity floor because that's they were. 0:09:28.679 --> 0:09:28.880 You know. 0:09:29.120 --> 0:09:32.480 That's so I think people are really smart when they 0:09:32.520 --> 0:09:34.920 can break things down in language that I understand. Like 0:09:34.920 --> 0:09:36.720 that's the pure sign, Like you're so smart you can 0:09:36.800 --> 0:09:37.839 dumb it down right, And. 0:09:37.760 --> 0:09:40.600 That's how Brian Wentlest principle was where can I make 0:09:40.600 --> 0:09:41.160 the most money? 0:09:41.200 --> 0:09:42.199 Where can I make the most. 0:09:42.000 --> 0:09:44.000 Money as he should? Exactly as he should. 0:09:44.200 --> 0:09:46.400 I tell you go to Los Angeles. There's two meetings. 0:09:46.400 --> 0:09:50.120 You have to get TCW and Capitol Group. Everything else 0:09:50.200 --> 0:09:50.840 is just gravy. 0:09:50.880 --> 0:09:52.160 If you get that, that's like. 0:09:52.200 --> 0:09:54.360 Eighty percent of the votes, eighty percent of the commission 0:09:54.360 --> 0:09:55.720 dollars out of those two shops. 0:09:55.800 --> 0:09:58.559 Yeah, duh, Tucker, he didn't know that, Geese. 0:10:00.600 --> 0:10:04.480 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:04.559 --> 0:10:08.080 weekdays at ten am Eastern on applecard Play and Android 0:10:08.120 --> 0:10:10.880 Auto with the Bloomberg Business App. You can also listen 0:10:11.000 --> 0:10:14.120 live on Amazon Alexa from our flagship New York station, 0:10:14.480 --> 0:10:18.240 Just say Alexa play Bloomberg eleven thirty. 0:10:19.000 --> 0:10:21.160 All right, let's check in with our good friend Claudia Sam. 0:10:21.240 --> 0:10:24.439 She's a chief economist, that New Century Advisor's former Federal 0:10:24.440 --> 0:10:28.480 Reserve economist, and a Bloomberg opinion columnist. And she's got 0:10:28.480 --> 0:10:30.839 this thing called the Sam Rule. Now, I'm not an economist. 0:10:30.840 --> 0:10:34.440 I think marginal revenue, marginal cost. That's my extensive knowledge 0:10:34.600 --> 0:10:35.360 of economics. 0:10:35.760 --> 0:10:37.319 Claudia, thanks so much, for joining us here. 0:10:37.440 --> 0:10:40.040 Can you just summarize for our listeners our viewers what 0:10:40.080 --> 0:10:44.280 the sum rule says and was it triggered on Friday 0:10:44.360 --> 0:10:45.680 with the job support. 0:10:46.559 --> 0:10:49.640 So it's a recession indicator. So it uses changes in 0:10:49.679 --> 0:10:53.720 the unemployment rate over a year to it has a 0:10:53.760 --> 0:10:58.840 threshold and compares that to historical episodes of recessions. And 0:10:59.120 --> 0:11:01.520 you know that's when it turns on. It has turned 0:11:01.559 --> 0:11:04.640 on historically inside in the early months of not a forecast, 0:11:04.640 --> 0:11:07.800 in the early months of a recession. And with the 0:11:08.120 --> 0:11:11.480 employment report on July it the som rull crossed the 0:11:11.679 --> 0:11:16.840 half a percentage point threshold, and so it's indicating a recession. 0:11:17.200 --> 0:11:21.080 Are we in a recession my expert opinion looking broadly 0:11:21.120 --> 0:11:25.000 as no, we are not, but that increasing unemployment rate 0:11:25.000 --> 0:11:27.520 that we have seen over a year plus is very 0:11:27.559 --> 0:11:30.240 disconcerting and we're not pointed in the right direction in 0:11:30.320 --> 0:11:32.040 terms of where we're trending. 0:11:32.440 --> 0:11:35.040 This is why I really loved your Bloomberg opinion piece yesterday, 0:11:35.040 --> 0:11:36.840 because it feels like a lot of people are coming 0:11:36.880 --> 0:11:39.599 on talking about your rule and how that is de 0:11:39.720 --> 0:11:42.120 facto then we're in a recession. As reason for the 0:11:42.160 --> 0:11:45.760 FED to do something, maybe bigger or an emergency way, 0:11:45.880 --> 0:11:47.640 and you come out with an article that says US 0:11:47.679 --> 0:11:50.480 isn't in a recession despite the indicator, my recession rule 0:11:50.559 --> 0:11:51.560 was meant to be broken. 0:11:51.840 --> 0:11:52.760 What does that mean. 0:11:55.000 --> 0:11:59.440 When we think about this cycle from the pandemic on 0:11:59.480 --> 0:12:01.920 the last four and a half years, the disruptions to 0:12:01.960 --> 0:12:06.000 the US economy have been in many ways unprecedented, and 0:12:06.360 --> 0:12:10.319 in particular, we've had some really big disruptions to supply, 0:12:11.040 --> 0:12:14.640 which are typical boom and bust indicators recession, high inflation, 0:12:14.720 --> 0:12:18.319 low inflation. Those are about demand and so the some 0:12:18.559 --> 0:12:23.360 rule I, in my opinion, is getting overstated by some 0:12:23.400 --> 0:12:26.079 of the really abrupt shifts and labor supply in the 0:12:26.200 --> 0:12:31.040 last several years. And that's just some of the unployment 0:12:31.080 --> 0:12:33.720 rate increase is the good kind. It's people who come 0:12:33.760 --> 0:12:36.960 in want to work, they will get jobs. It'll be growth. 0:12:37.320 --> 0:12:40.720 But in the interim that looks like the unemployment rate 0:12:40.800 --> 0:12:44.439 rising in the recession, there's some of the bad unemployment 0:12:44.480 --> 0:12:46.319 in there too. So that's where it gets really hard, 0:12:46.360 --> 0:12:49.000 and you know, it's difficult to hear. I'm happy to 0:12:49.040 --> 0:12:52.640 have sparked a robust conversation. This is really really important 0:12:53.120 --> 0:12:57.280 to know if we're in or headed towards a recession 0:12:57.320 --> 0:13:00.720 because our policy actions that can be taken, and so 0:13:00.840 --> 0:13:04.800 you know, it's it's I'm using the tool and other 0:13:04.920 --> 0:13:06.600 data just like anybody else. 0:13:07.440 --> 0:13:09.880 So, Claudia, what do you make of an unemployment rate 0:13:09.920 --> 0:13:11.120 of four point three percent? 0:13:11.600 --> 0:13:14.679 To me, in my experience, that's still low. 0:13:14.800 --> 0:13:17.400 I guess if you want to get concerned about the trend, 0:13:17.520 --> 0:13:17.800 I e. 0:13:17.880 --> 0:13:19.600 It's moving higher, that's a concern. 0:13:19.679 --> 0:13:22.840 But in and of itself four point three percent, how 0:13:22.880 --> 0:13:24.400 does that kind of stack up for you? 0:13:25.559 --> 0:13:25.719 Right? 0:13:25.760 --> 0:13:29.800 So, if if our concern is about the direction we're 0:13:29.840 --> 0:13:32.400 pointed in, are we headed towards the recession? Are we 0:13:32.520 --> 0:13:36.360 enter recession? The relevant metric is the change and the 0:13:36.440 --> 0:13:40.720 unemployment rate. The level is important. Sometimes it's unsustainably low, 0:13:40.760 --> 0:13:43.320 like earlier when we had the labor shortages, the unemployment 0:13:43.360 --> 0:13:44.640 rate in the United States, when I got down to 0:13:44.679 --> 0:13:47.360 three point four percent, that was because we were missing 0:13:47.360 --> 0:13:49.960 some workers too, right, Like that wasn't going to stick. 0:13:50.040 --> 0:13:52.920 So sometimes, like you know, within bounds, sometimes the level 0:13:52.920 --> 0:13:55.640 does tell us something. But at four point three percent, 0:13:55.720 --> 0:13:59.959 this is very much consistent with the demographics of our 0:14:00.559 --> 0:14:04.440 We have an older, more experienced workforce four percent unemployment 0:14:04.520 --> 0:14:08.640 that that's much more like you would expect or predict, 0:14:08.960 --> 0:14:10.960 So that we're not four point three is not like, 0:14:11.000 --> 0:14:14.040 oh wow, this is really low. It's not sustainable. And 0:14:14.080 --> 0:14:17.520 we've gone into recessions in the past with lower unemployment 0:14:17.559 --> 0:14:20.240 than now and also higher so the level itself is 0:14:20.360 --> 0:14:23.080 not a protection against a recession. 0:14:23.440 --> 0:14:26.280 Paul pointing to himself when he said older workforce seasoned, 0:14:26.320 --> 0:14:31.520 we think season experience, Claudia to that point, how do 0:14:31.600 --> 0:14:33.840 I understand the fact that you had a huge move 0:14:33.880 --> 0:14:37.120 in the bond market when initial jobless claims came out. 0:14:37.200 --> 0:14:41.480 They're volatile, their seasonality, they change, and yet we're still 0:14:41.680 --> 0:14:44.240 having such market sensitivity to that. 0:14:44.360 --> 0:14:46.280 Where does that kind of tell you about where we are? 0:14:47.360 --> 0:14:50.920 Right? Well, this is very much this question about the 0:14:51.040 --> 0:14:56.440 dynamics the recession, right, It's not this isn't about this 0:14:56.520 --> 0:14:58.000 hole rule, but it captures it. 0:14:58.080 --> 0:14:58.200 Right. 0:14:58.240 --> 0:15:00.960 This is why this almost worked historic is you get 0:15:01.000 --> 0:15:05.240 periods where the unemployment rate starts coming up gradually, and 0:15:05.280 --> 0:15:07.640 then it picks up steam, and then it goes up 0:15:07.680 --> 0:15:10.400 a lot. And we had some signals that were in 0:15:10.400 --> 0:15:12.840 this stage. It's been going up slowly and gradually, and 0:15:12.880 --> 0:15:15.360 with the July employment report, things look like they were 0:15:15.360 --> 0:15:19.120 picking up steam in the wrong way, and so that's 0:15:19.160 --> 0:15:21.680 the concern. And then then what we're looking for and 0:15:21.800 --> 0:15:26.680 claims data is is that momentum there or was it 0:15:26.800 --> 0:15:28.800 just the weather or this that you know? And so 0:15:28.840 --> 0:15:31.880 I think that's this reaction because we're kind of on this. 0:15:33.520 --> 0:15:35.400 It's not like we're on the knife's edge, but the 0:15:35.520 --> 0:15:39.480 dynamics are like it makes a big difference at this 0:15:39.560 --> 0:15:42.640 point if the increase in the unemployment rates speed up 0:15:42.680 --> 0:15:44.800 or not, because once they get going, they tend to 0:15:45.080 --> 0:15:48.280 you have these negative feedback loops and then you're not 0:15:48.280 --> 0:15:50.200 talking about a half a percentage point increase and then 0:15:50.240 --> 0:15:52.280 employment you're talking about a three percentage point increase. 0:15:52.920 --> 0:15:56.920 Claudia talked to us about the migration component to the 0:15:57.040 --> 0:16:00.560 labor market. How has that impacted the number because again 0:16:00.560 --> 0:16:03.200 we've had a surge in migration on the southern border. 0:16:02.920 --> 0:16:05.080 For the last several years. How's that impacted the numbers? 0:16:05.080 --> 0:16:05.520 Do you think? 0:16:06.680 --> 0:16:06.800 Right? 0:16:06.840 --> 0:16:11.200 Well, first thing, having the immigration and we've had other 0:16:11.840 --> 0:16:14.040 prime age labor force participation that is higher in the 0:16:14.160 --> 0:16:16.560 US right now than it's been in general. So it's 0:16:16.600 --> 0:16:19.840 not just about immigrants. But we it was very important 0:16:19.880 --> 0:16:23.600 to have more labor supply address these labor shortages that 0:16:23.640 --> 0:16:26.360 we'd had, and this has taken prior pressure off of 0:16:26.400 --> 0:16:30.680 wages and inflation and so like that's very good. And 0:16:30.760 --> 0:16:35.160 then we have more supply of workers and that and 0:16:35.280 --> 0:16:38.640 hiring has moderated, right like, the pace has slow down some. 0:16:38.760 --> 0:16:40.680 So now we're in the opposite direction of the jobs 0:16:40.680 --> 0:16:43.200 need to catch up to the workers. So if you 0:16:43.240 --> 0:16:47.360 think about that, this is all in adjustment right like 0:16:47.360 --> 0:16:49.720 where it's it's more of a timing issue. And when 0:16:49.960 --> 0:16:53.800 the reason that the labor supply causing increasing unployment rates 0:16:53.800 --> 0:16:56.080 a good thing is when they when those new workers 0:16:56.120 --> 0:16:59.720 do get jobs, they help us expand the economy, which 0:16:59.760 --> 0:17:03.120 is the exact opposite of this kind of recession watch contracting. 0:17:04.240 --> 0:17:08.440 But I will say, you know, employers have different margins 0:17:08.480 --> 0:17:12.800 to adjust labor demand writ large, and we have seen 0:17:13.400 --> 0:17:18.520 the hiring rates at employers come down to levels that are, 0:17:19.440 --> 0:17:23.119 you know, line up with much higher unemployment rates than 0:17:23.119 --> 0:17:25.359 in the past. So it could be just employers are 0:17:25.400 --> 0:17:27.080 not wanting to lay off as much because they got 0:17:27.119 --> 0:17:31.879 burned in this crisis, and so we're seeing you know, 0:17:31.920 --> 0:17:34.720 it's harder if you're coming in labor force to get jobs. 0:17:34.720 --> 0:17:37.399 So this is really tricky labor market treat and that 0:17:37.440 --> 0:17:39.280 means every single scrap of data we get on the 0:17:39.320 --> 0:17:41.400 labor market is a big deal. 0:17:41.600 --> 0:17:43.320 So Claudia, before I let you go in, but a 0:17:43.359 --> 0:17:46.480 minute left. I'm looking at WERP WRP on the terminal. 0:17:46.720 --> 0:17:48.680 It's looking at twenty five basis points of cuts in 0:17:48.720 --> 0:17:49.720 the next three meetings. 0:17:49.800 --> 0:17:51.080 Is that fair pricing? Right now? 0:17:52.359 --> 0:17:55.440 That is my baseline. I think that's fair fair pricing 0:17:55.600 --> 0:17:59.359 the FED. There is more slowing in the labor market 0:17:59.440 --> 0:18:02.440 than I think is comfortable. We don't need to get 0:18:02.480 --> 0:18:04.600 into a recession for the FED to start acting, So 0:18:04.640 --> 0:18:07.200 I think a little picking up the pace some in 0:18:07.280 --> 0:18:10.399 like three consecutive cuts makes sense. But they're going to 0:18:10.480 --> 0:18:13.920 be very attuned to you know, we've got more information 0:18:13.960 --> 0:18:16.000 on labor market between now in September. 0:18:16.960 --> 0:18:19.080 All right, Claudia, thank you so much for joining us. 0:18:19.240 --> 0:18:21.520 Really appreciate getting some of your time. Claudia sam she 0:18:21.640 --> 0:18:24.760 is the chief economist at New Century Advisors, former Federal 0:18:24.800 --> 0:18:29.719 Reserve economist, and a Bloomberg Opinion opinion writers. We appreciate 0:18:29.720 --> 0:18:31.359 getting some of her time. She's a creator of the 0:18:31.400 --> 0:18:35.919 Psalm rule, a recession indicator, which says, maybe it's not 0:18:36.080 --> 0:18:39.600 tripped today, but it's certainly suggesting that the risks of 0:18:39.640 --> 0:18:41.200 a recession or higher certainly. 0:18:40.920 --> 0:18:41.400 In your term. 0:18:41.480 --> 0:18:43.359 But I love her candor of like, look, I think 0:18:43.440 --> 0:18:45.240 some people are taking this and running with us like 0:18:45.240 --> 0:18:47.600 a little bit too far. There's some more nuances. I 0:18:47.640 --> 0:18:51.160