WEBVTT - Surveillance: U.S. Economic Growth With Hooper

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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<v Speaker 1>with Jonathan Ferroll and Lisa Brownwitz Jaily, we bring you

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<v Speaker 1>insight from the best and economics, finance, investment, and international relations.

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<v Speaker 1>Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

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<v Speaker 1>and of course on the Bloomberg terminal. Right now, our

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<v Speaker 1>conversation of the day, John and Lisa on economics. Peter

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<v Speaker 1>Hooper joins us, of course with Deutsche Bank. His deck

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<v Speaker 1>on economics hugely anticipated on Wall Street. Peter, I want

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<v Speaker 1>to go to the heart and soul of your must read,

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<v Speaker 1>and that is simply you look for upside risk to

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<v Speaker 1>g d P and an unemployment rate that drives us

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<v Speaker 1>down to a fully employed America. Balance that forest right now?

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<v Speaker 1>Will that occur within market stability and national stability? Tom?

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<v Speaker 1>That's uh, that could be a tall order. But look,

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<v Speaker 1>there's an awful lot driving growth at this parent point.

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<v Speaker 1>We have the course, the normalization of demand coming out

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<v Speaker 1>of COVID as people are being vaccinated. We have we

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<v Speaker 1>have a tremendous fiscal support both behind us and ahead

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<v Speaker 1>of us. Here. Uh. We we think that we're probably

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<v Speaker 1>at least a half percentage point out of GDP on GDP,

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<v Speaker 1>out of what's still to come. But but the the

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<v Speaker 1>household income support that we've gotten so far, building up

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<v Speaker 1>a war chest of household saving that's going to get

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<v Speaker 1>to something like ten percent of g d P waiting

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<v Speaker 1>in the wings to be spent um. There's there's no

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<v Speaker 1>way we're going to see less than six seven percent

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<v Speaker 1>growth this year. Our own forecast is above the census

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<v Speaker 1>at seven and a half percent, so that that that's

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<v Speaker 1>certainly enough to get the labor market by that can

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<v Speaker 1>happen next year back down to the three and a

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<v Speaker 1>half percent unemployment rate that we saw pre crisis. In

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<v Speaker 1>the dynamics that Matthew Lozetti work through for you. You

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<v Speaker 1>took your coin of phrase and you talk about the

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<v Speaker 1>amazon Ization. I hope I got that right, the Amazonization

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<v Speaker 1>of the American economy. Do we underestimate the cardboard boxes

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<v Speaker 1>and the cloud that's out there from Mr Bezos? Well,

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<v Speaker 1>I mean the good thing. Amazonization has a number of facets,

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<v Speaker 1>but one very important for the FED is despite this

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<v Speaker 1>very rapid growth and a tightening of the labor market,

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<v Speaker 1>unlikely what we've seen for quite some time Amazonization is

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<v Speaker 1>a factor that we think is going to keep inflation

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<v Speaker 1>from getting out of control. Uh. Certainly, the vast increase

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<v Speaker 1>improvement in information flow about about supply and demand of

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<v Speaker 1>all kinds of commodities and services price information now globally

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<v Speaker 1>is going to keep we think after some some initial

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<v Speaker 1>disruptions as as bottlenecks appeared during this normalization process, amazonization

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<v Speaker 1>working in the background is certainly going to be there. Uh, Peter, great,

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<v Speaker 1>to catch up, he said, Let's just run things out

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<v Speaker 1>with a couple of thoughts on this for the Federal

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<v Speaker 1>Reserve at the moment, the difference between transitory and persistent.

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<v Speaker 1>You know, we talk and Joe call morning about this

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<v Speaker 1>and Tom has a drink because the drinking game we play,

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<v Speaker 1>and I think vice check cloud had joined in recently too.

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<v Speaker 1>What is the difference for you? What defines that as

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<v Speaker 1>the year goes on? Okay, Well, one thing the feeds

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<v Speaker 1>been wanting to see is a string of good information

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<v Speaker 1>on the labor market. I think that's four or five

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<v Speaker 1>months of something approaching a million on on payrolls before

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<v Speaker 1>before they give us any indication they're going to be

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<v Speaker 1>uh giving us a hint about apring to come. Uh,

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<v Speaker 1>there's another another issue here is transitory versus persistent on inflation. Yes,

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<v Speaker 1>we're gonna get some We are going to get a

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<v Speaker 1>bulge in in price increases the middle of this year

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<v Speaker 1>as growth normalizes, as the economy normalizes. But another thing

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<v Speaker 1>to keep in mind here, going back to this amazonization

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<v Speaker 1>is we've been above well above trend in consumption of goods.

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<v Speaker 1>Uh COVID meant people who dropped back sharply on their

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<v Speaker 1>demands or services. I think as things normalize, you're gonna

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<v Speaker 1>see a shift back towards services, and that means taking

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<v Speaker 1>some of the pressure off the good sector. So, yes,

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<v Speaker 1>we're seeing a lot of shortages. Yes, we're gonna see

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<v Speaker 1>some some real disruptions as these demand patterns shift and

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<v Speaker 1>things normalized. But we've been encouraged by the extent to

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<v Speaker 1>which labor supply in in the hospitality sector for example,

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<v Speaker 1>has picked up. Hiring is picked up, there's a lot

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<v Speaker 1>of there's an awful lot of unemployed people that need

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<v Speaker 1>to get jobs. Still, so um, there'll be some disruption,

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<v Speaker 1>we will see some transitory price increases, but our expectation

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<v Speaker 1>is on inflation, which could get to two and a

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<v Speaker 1>half percent in the middle of this year, maybe a

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<v Speaker 1>little higher. We'll be back to or below two percent

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<v Speaker 1>by next year. That's not a persistent problem, Peter, what's

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<v Speaker 1>the economic effect of higher taxes? Economics? So, I mean,

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<v Speaker 1>looking looking ahead at what we're what we we might get.

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<v Speaker 1>Obviously from listening to semi earlier discussion, a lot of

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<v Speaker 1>uncertainty about just what's going to go through Congress here.

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<v Speaker 1>But if Biden gets the program, if we get if

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<v Speaker 1>we get this UH to and a quarter trillion UH

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<v Speaker 1>jobs plan with the corporate texts um UH package to

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<v Speaker 1>go with it, UH, that's worth about one percent. I mean,

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<v Speaker 1>assuming roughly ten percent is the SPA then comes in

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<v Speaker 1>the first year, and that the tax program goes through

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<v Speaker 1>as planned, we're seeing about a percentage point of GDP

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<v Speaker 1>growth out of the spending side, and roughly a half

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<v Speaker 1>a percentage point offset from tax increases. The total tax

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<v Speaker 1>increase over the next year something on the order of

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<v Speaker 1>by next year or something on or of nine billion dollars,

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<v Speaker 1>a little little lesson half a percentage GDP. So yes,

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<v Speaker 1>it's I mean, there are all kinds of questions about

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<v Speaker 1>what impacts the particular form at tax has across different

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<v Speaker 1>parts of the of the corporate sectors as well as households.

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<v Speaker 1>But but the broad the broad view macro view is

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<v Speaker 1>we're looking at something like overall half percentage point stimulus

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<v Speaker 1>to growth would be more if it weren't for this

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<v Speaker 1>half point dragged from from the from the tax side.

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<v Speaker 1>You know, Tom, it just strikes me the degree of

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<v Speaker 1>policy uncertainty right now for economists to factor in. You

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<v Speaker 1>got that two point three trillion dollar stimulus plan that

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<v Speaker 1>may or may not see the light of day, followed

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<v Speaker 1>by a one and a half trillion dollar plan expected

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<v Speaker 1>to be announced this week, followed by potentially tax hikes

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<v Speaker 1>that could have a negative impact. How do you game

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<v Speaker 1>this all out? I think you game it out with

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<v Speaker 1>five seats in the House come November of two thousand

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<v Speaker 1>and twenty two, I would suggest, Lisa, the politics is

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<v Speaker 1>going to take it over. Peter Hooper, You've got a

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<v Speaker 1>fifty five page deck, and there is one page which

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<v Speaker 1>describes the foolishness of this all. It is stunning how

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<v Speaker 1>the savings of this fiscal strategy has gone to the wealthy.

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<v Speaker 1>It's absolutely a breathtaking chart. Folks, We protect the copyright.

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<v Speaker 1>Go to Deutsche Bank to get the chart, Peter, how

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<v Speaker 1>how far apart are the two America's right now? Uh? Tom,

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<v Speaker 1>They've obviously grown ever further apart, certainly over the last

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<v Speaker 1>decade and accelerating over the last four years with tax

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<v Speaker 1>cuts with with into the last year with the asset

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<v Speaker 1>very asset gains and stock and housing markets. So um,

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<v Speaker 1>no question. Uh. Politically, something's got to be done about this.

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<v Speaker 1>It's going to be painful when it comes, but that

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<v Speaker 1>is certainly one reason to be considering taxes more heavily

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<v Speaker 1>at the at the upper income levels at this point

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<v Speaker 1>going forward, Peter, We've got to leave it there, have

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<v Speaker 1>Peter Hope of that Doute Bank globe ahead of economic

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<v Speaker 1>research and chief economist. You want to bring in, James

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<v Speaker 1>pev CL investment officer, James, you like the minus right

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<v Speaker 1>now in Europe? Sure, I absolutely do. I think there

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<v Speaker 1>are some great quality opportunities. And what I was interesting

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<v Speaker 1>me is the ratio between the copper price and the

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<v Speaker 1>gold price suggests to me that ten U s treasury

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<v Speaker 1>yield should now be it around two and a half cent.

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<v Speaker 1>Now we know it's not that principally because Japanese investors

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<v Speaker 1>have been buying fantasy almost r yields within their own market.

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<v Speaker 1>But I would have a side bet with you that

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<v Speaker 1>we will see the tenure yield at two by the

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<v Speaker 1>end of the calendar year. And that's a reglisively big move,

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<v Speaker 1>given that we only got through one on the first

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<v Speaker 1>trading day of the current calendar year. Is that a

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<v Speaker 1>move that looks like the movie saw in Q one?

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<v Speaker 1>A move that's accompanied by better banks, better bank stock performance,

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<v Speaker 1>better cyclical performance, better small camp performance. To the cygnicals

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<v Speaker 1>perform in line with that move higher on two on

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<v Speaker 1>tens to too during I don't think they do. I

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<v Speaker 1>think interesting and have a very difficult time. I would

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<v Speaker 1>observe that the banks are now awash with overnight deposits.

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<v Speaker 1>That's extremely bad news. The banks seeking to lend on

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<v Speaker 1>what they want our time deposits. They want long term deposits.

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<v Speaker 1>They don't want all the money, and I think therefore

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<v Speaker 1>that the banks have had their day in the side.

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<v Speaker 1>I would only in the case of the States, wants

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<v Speaker 1>to be invested in JPMorgan and Bank America, both of

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<v Speaker 1>which I think have excellent opportunity cut off support long

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<v Speaker 1>term returns. The middle bank ranking banks However, again a

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<v Speaker 1>really struggle, and that I would say is going to

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<v Speaker 1>be one of the challenges for fixnicals writ large, they

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<v Speaker 1>discount a lot of bad news. When I'm looking at

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<v Speaker 1>circles today, I'm looking at the better quality, defensive circles

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<v Speaker 1>to some of the telecommunication companies, some of the drinks

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<v Speaker 1>companies like the Age, which I still think looks too cheap.

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<v Speaker 1>James Bevan, I want you to rationalize thirty five times earnings.

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<v Speaker 1>My one estimate of Microsoft is the twelve months forward

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<v Speaker 1>view is thirty five times earnings. Justify owning Microsoft right now.

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<v Speaker 1>Let's let me rationalize it by talking about the earning

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<v Speaker 1>zeald rather than the price earnings multiple, because of course,

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<v Speaker 1>the earning zeal is the price ownings multiple reversed, and

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<v Speaker 1>an earning zeal of three percent needs to be considered

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<v Speaker 1>in the context of where cash rates currently are exter

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<v Speaker 1>risk premier payment for taking everty risk relative to to

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<v Speaker 1>cash as the three race of return does remain relatively elevated,

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<v Speaker 1>and that puts all of the focus on whether or

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<v Speaker 1>not we are going to get real growth. And I

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<v Speaker 1>am in the camp that says we will get a

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<v Speaker 1>short term acceleration and inflation that seems for me absolutely

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<v Speaker 1>baked in the cake. Nothing we can do that. But

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<v Speaker 1>I do also believe that inflation is going to come

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<v Speaker 1>down again, and I would say that that is driven

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<v Speaker 1>by the demographic changes, disruptive technologies, high levels of embedded indebtedness,

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<v Speaker 1>and the continuing globalization and notwithstanding the trade tensions does

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<v Speaker 1>mean that there is a lid put on the capacity

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<v Speaker 1>for domestic businesses to raise costs and prices generally. And

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<v Speaker 1>that allows me to believe that a three and earning

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<v Speaker 1>zeal coupled with long term growth still leaves a company

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<v Speaker 1>like Microsoft offering premium returns to corporate and also very

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<v Speaker 1>much to government. That if you're listening to markets, though, James,

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<v Speaker 1>I'm looking right now at earnings that have beaten expectations

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<v Speaker 1>by twenty six percent, even if you strip out financials

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<v Speaker 1>versus the average of five percent during earning seasons. This

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<v Speaker 1>from UBS is Mark Hathlet. How do you explain the

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<v Speaker 1>fact that you have not seen a cheer from equity traders.

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<v Speaker 1>You haven't seen this excitement about this growth that's beating

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<v Speaker 1>expectations in what is expected to be a low rate

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<v Speaker 1>world for a long time because of what you just said, Lisa.

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<v Speaker 1>I think that one of the problems we have with

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<v Speaker 1>earnings numbers is year on your comparisons are flattered by

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<v Speaker 1>the extraordinary down draft that we saw in March and

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<v Speaker 1>April last year, and what investors are looking at is

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<v Speaker 1>the trend growth rather than the one off growth for

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<v Speaker 1>the period. And looking forward, I think that we are

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<v Speaker 1>going to see well over a hundred and eighty dollars

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<v Speaker 1>of earnings for the SMP five hundreds. That allows me

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<v Speaker 1>to project and in X will stoundints by the end

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<v Speaker 1>of this year. And my greater concern is we get

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<v Speaker 1>to that level earlier on the back of this extraordinary

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<v Speaker 1>liquiditcy environment engineered by the Federal Reserve and Treasury, and

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<v Speaker 1>that would be the moment to take money off the table.

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<v Speaker 1>But now I think that index earnings on trend our

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<v Speaker 1>game well, I think the year on your comparisons, so

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<v Speaker 1>that will get to be ignored. James, it's gonna see

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<v Speaker 1>You're gonna catch up as always, Thank you, mate, James.

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<v Speaker 1>Bob and c C l A Chief Investment Officer. Right

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<v Speaker 1>now on the President's speech on infrastructure, John Lieber joins

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<v Speaker 1>us with your RAISIA group and his important experience with

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<v Speaker 1>Senator McConnell in Kentucky. John, I want to go down

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<v Speaker 1>to the reality which I'm sure you faced years ago

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<v Speaker 1>a Senator McConnell, which is a bridge over the Ohio River.

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<v Speaker 1>It is the Brent Spence Bridge, and it says all

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<v Speaker 1>about how we can't fix our infrastructure in America. How

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<v Speaker 1>do we fix the Brent Spence the Brent Spence Bridge

0:14:06.320 --> 0:14:10.520
<v Speaker 1>given the President's initiative. Yeah, that's a great example of

0:14:11.000 --> 0:14:15.720
<v Speaker 1>really important piece of interstate of infrastructure that carries quite

0:14:15.760 --> 0:14:19.160
<v Speaker 1>a bit of interstate commerce and should be oppressing national

0:14:19.200 --> 0:14:21.960
<v Speaker 1>issue that Congress wants to try to fix that's really

0:14:21.960 --> 0:14:24.400
<v Speaker 1>non neglected for far too long. So, you know, I

0:14:24.440 --> 0:14:27.360
<v Speaker 1>think the reality is Biden's guts the party in the alignment,

0:14:27.400 --> 0:14:31.960
<v Speaker 1>he needs to pass a very large infrastructure bill. UM.

0:14:32.400 --> 0:14:35.200
<v Speaker 1>One of the biggest challenging challenges of the last ten

0:14:35.280 --> 0:14:38.080
<v Speaker 1>years has been the declining revenues in the Highway Trust Fund.

0:14:38.440 --> 0:14:41.560
<v Speaker 1>That's made paying for these types of repairs extremely difficult.

0:14:41.920 --> 0:14:44.480
<v Speaker 1>But right now we're in an environment where the Democrats

0:14:44.480 --> 0:14:48.040
<v Speaker 1>are basically united and around increasing taxes on corporations and

0:14:48.120 --> 0:14:51.200
<v Speaker 1>wealthy Americans to get this stuff done. And probably by

0:14:51.200 --> 0:14:52.800
<v Speaker 1>the end of the year, you know they're going to

0:14:52.880 --> 0:14:54.760
<v Speaker 1>have the authority to start the money flowing over the

0:14:54.800 --> 0:14:57.120
<v Speaker 1>next five to ten years to fix these kind of things.

0:14:57.280 --> 0:15:00.600
<v Speaker 1>Do you look for a compromise of focuses on projects

0:15:00.640 --> 0:15:03.280
<v Speaker 1>like the Brent Spence Bridge or are we going to

0:15:03.400 --> 0:15:07.360
<v Speaker 1>look for a more omnibus bill. I'd be surprised to

0:15:07.400 --> 0:15:11.080
<v Speaker 1>see Republicans even being really relevant in this process. Frankly,

0:15:11.160 --> 0:15:13.440
<v Speaker 1>I think that they have. You know, the Democrats have

0:15:13.480 --> 0:15:17.120
<v Speaker 1>the votes probably to do most of the infrastructure projects.

0:15:17.120 --> 0:15:21.000
<v Speaker 1>They've got big ambitions beyond physical infrastructure with this human

0:15:21.040 --> 0:15:25.520
<v Speaker 1>infrastructure side, focused on childcare and subsidies for education and healthcare.

0:15:26.160 --> 0:15:28.040
<v Speaker 1>And you know, Republicans just aren't going to play ball

0:15:28.120 --> 0:15:30.240
<v Speaker 1>for that. And most importantly, they don't want to raise

0:15:30.280 --> 0:15:31.800
<v Speaker 1>taxes to pay for it, and that's going to be

0:15:31.840 --> 0:15:34.280
<v Speaker 1>the biggest stumbling block. I think that makes this a

0:15:35.000 --> 0:15:37.240
<v Speaker 1>basically a partisan exercise, and I want to go a

0:15:37.280 --> 0:15:39.320
<v Speaker 1>little bit deeper into that. Given your work with Senate

0:15:39.360 --> 0:15:42.760
<v Speaker 1>Majority Leader Mitch McConnell or a former Senate Majority leader,

0:15:42.960 --> 0:15:45.240
<v Speaker 1>there is a question of whether they would be open

0:15:45.320 --> 0:15:48.320
<v Speaker 1>the Republicans to any tax hikes. When you were working

0:15:48.400 --> 0:15:50.920
<v Speaker 1>for him. Did he talk about the necessity for paying

0:15:50.960 --> 0:15:53.800
<v Speaker 1>for different projects or did he believe that things would

0:15:53.800 --> 0:15:57.720
<v Speaker 1>pay for themselves if you had the right projects. I

0:15:58.320 --> 0:16:00.400
<v Speaker 1>think I'd say that the kind of your your average

0:16:00.400 --> 0:16:04.080
<v Speaker 1>Republican manager member believes in the in the user pay

0:16:04.280 --> 0:16:06.960
<v Speaker 1>no shan when it comes to infrastructure. So for a

0:16:07.000 --> 0:16:11.600
<v Speaker 1>long time, that user pay idea was embodied in the

0:16:11.680 --> 0:16:14.640
<v Speaker 1>Highway Trust Fund, where gas tax fueled the Highway Trust

0:16:14.640 --> 0:16:16.400
<v Speaker 1>Fund and then the highly trust pumps used to pay

0:16:16.400 --> 0:16:19.920
<v Speaker 1>for service transportation projects. And now you've got people driving

0:16:20.000 --> 0:16:22.680
<v Speaker 1>less cars and coming more fuel efficient, and the gas

0:16:22.680 --> 0:16:26.800
<v Speaker 1>bax hasn't gone up in in generation, so those revenues

0:16:26.840 --> 0:16:29.800
<v Speaker 1>are declining. But if you ask, you know, your average

0:16:29.800 --> 0:16:32.920
<v Speaker 1>Republican if they want to raise taxes on incorporations there

0:16:33.040 --> 0:16:35.560
<v Speaker 1>or a small business owner to pay for infrastructure, the

0:16:35.560 --> 0:16:38.400
<v Speaker 1>answer is going to be no um. And this dynamic

0:16:38.480 --> 0:16:40.560
<v Speaker 1>is just making it really difficult to get even done.

0:16:41.040 --> 0:16:44.080
<v Speaker 1>Given your experience in Washington, d C does a nine

0:16:44.120 --> 0:16:47.360
<v Speaker 1>hundred billion dollar skinny infrastructure bill, and it is funny

0:16:47.360 --> 0:16:49.760
<v Speaker 1>that we're calling a nine hundred billion dollar plan skinny.

0:16:49.960 --> 0:16:52.480
<v Speaker 1>Does it seem feasible and likely to be the outcome

0:16:52.520 --> 0:16:55.920
<v Speaker 1>of some of these negotiations. Yeah, you raised a good point.

0:16:55.960 --> 0:17:00.040
<v Speaker 1>I mean it's absolutely while. Um, two years ago, the

0:17:00.080 --> 0:17:02.800
<v Speaker 1>Senate Committee the Deals with Infrastructure put together a bipartis

0:17:02.920 --> 0:17:05.520
<v Speaker 1>bill that was around four a billion dollars and it

0:17:05.600 --> 0:17:09.320
<v Speaker 1>was considered historic achievement. And now many of the Democrats

0:17:09.359 --> 0:17:11.960
<v Speaker 1>that were involved in that process basically rolled their eyes

0:17:12.000 --> 0:17:14.480
<v Speaker 1>at the Republicans six d billion dollar proposal. And it

0:17:14.560 --> 0:17:17.280
<v Speaker 1>just shows you how how far the goalposts have moved. Um.

0:17:17.359 --> 0:17:19.160
<v Speaker 1>But no, I think the challenge you're at the House

0:17:19.560 --> 0:17:21.679
<v Speaker 1>and that even if there were a Senate compromise that

0:17:21.760 --> 0:17:24.159
<v Speaker 1>ended up around nine under billion dollars, which I'm extremely

0:17:24.200 --> 0:17:27.159
<v Speaker 1>skeptical because of that. You know, the House sensers an

0:17:27.160 --> 0:17:30.280
<v Speaker 1>opportunity here and Joe Biden sensers an opportunity here to

0:17:30.359 --> 0:17:32.680
<v Speaker 1>go much much bigger in a in a way that's

0:17:32.720 --> 0:17:35.960
<v Speaker 1>going to be really transformative for American's anti poverty programs

0:17:36.280 --> 0:17:38.280
<v Speaker 1>and really change the game when it comes to green

0:17:38.359 --> 0:17:40.679
<v Speaker 1>energy and sentence. And that's really what this is about.

0:17:40.720 --> 0:17:44.000
<v Speaker 1>This isn't about repairing potholes, fixing the Branch Spence Bridge

0:17:44.200 --> 0:17:46.680
<v Speaker 1>and doing a couple of projects on infrastructure. This is

0:17:46.720 --> 0:17:49.840
<v Speaker 1>about doing big things to accomplish the Biden agenda. It's

0:17:49.840 --> 0:17:52.400
<v Speaker 1>why he ran, that's why he was. They think that's

0:17:52.440 --> 0:17:55.760
<v Speaker 1>why he wants and that's their goal. How does the

0:17:55.960 --> 0:18:00.359
<v Speaker 1>big thing's tone sold into the beginning of the run

0:18:00.400 --> 0:18:06.040
<v Speaker 1>to November of two thousand twenty two. Well, remember two

0:18:06.080 --> 0:18:08.760
<v Speaker 1>is an interesting year. I mean, the president, the president,

0:18:08.800 --> 0:18:11.919
<v Speaker 1>the party in power almost always loses seats, really always.

0:18:11.920 --> 0:18:14.159
<v Speaker 1>I mean there's very few exceptions as this rule that

0:18:14.240 --> 0:18:16.840
<v Speaker 1>the party in power loses seats in the mid terms.

0:18:17.320 --> 0:18:20.119
<v Speaker 1>It's possible this cycle is a little different because the

0:18:20.119 --> 0:18:22.840
<v Speaker 1>fact that Biden didn't have any cotails. So this isn't

0:18:22.880 --> 0:18:26.320
<v Speaker 1>like the Democrats have an extra members in the House

0:18:26.640 --> 0:18:30.359
<v Speaker 1>as some majorities do. But you know, the odds are

0:18:30.440 --> 0:18:32.879
<v Speaker 1>and the historical trend would be that the Democrats lose

0:18:33.040 --> 0:18:35.680
<v Speaker 1>probably the House and potentially the Senate as well, which

0:18:35.680 --> 0:18:38.639
<v Speaker 1>means that Biden, like Obama and Trump, is going to

0:18:38.760 --> 0:18:41.880
<v Speaker 1>lose his ability to do any legislation after his first

0:18:41.880 --> 0:18:44.879
<v Speaker 1>two years. So if you think that your elect came

0:18:44.920 --> 0:18:47.320
<v Speaker 1>to Washington to get things done, this is your window

0:18:47.400 --> 0:18:49.400
<v Speaker 1>to do it as a Democrat, and I think ultimately

0:18:49.440 --> 0:18:52.720
<v Speaker 1>that drives them to a partisan deal by the end

0:18:52.760 --> 0:18:54.760
<v Speaker 1>of the year, John, it's gonna say you're gonna hear

0:18:54.800 --> 0:19:02.919
<v Speaker 1>from you John Labor there. So let's bring in Jennifer Lea.

0:19:02.960 --> 0:19:05.840
<v Speaker 1>Shall we beat my capital market sen economists? Jen, can

0:19:05.920 --> 0:19:08.399
<v Speaker 1>we start right there just on how you're reading some

0:19:08.480 --> 0:19:14.159
<v Speaker 1>of the corporate guidance around cost pressures around the labor market. Well,

0:19:14.200 --> 0:19:17.320
<v Speaker 1>good morning everyone. So this is where as they're all saying,

0:19:17.359 --> 0:19:20.680
<v Speaker 1>the the incertainty is lying how much inflation is really

0:19:20.720 --> 0:19:22.800
<v Speaker 1>building built up through the system. Like if we were

0:19:22.800 --> 0:19:25.320
<v Speaker 1>talking about this like say nine months ago, you know

0:19:25.359 --> 0:19:27.320
<v Speaker 1>a lot of people were saying that inflation is going

0:19:27.320 --> 0:19:29.280
<v Speaker 1>to be very slow to come back, but we all

0:19:29.280 --> 0:19:31.679
<v Speaker 1>know that at some point when things open up, and

0:19:31.720 --> 0:19:34.680
<v Speaker 1>they are opening up clearly, Um, it's difficult as some

0:19:34.680 --> 0:19:37.400
<v Speaker 1>some companies are having it, but they are opening up.

0:19:37.720 --> 0:19:39.680
<v Speaker 1>Price pressures are turning to rise. And this is why

0:19:39.680 --> 0:19:41.720
<v Speaker 1>I'm always interested in watching things like the I s

0:19:41.840 --> 0:19:45.800
<v Speaker 1>M surveys. Data are obviously clearly important, but what people

0:19:45.840 --> 0:19:47.720
<v Speaker 1>are saying, what companies are saying out of the ground

0:19:47.720 --> 0:19:50.720
<v Speaker 1>are is very key. Um. So again, one of the

0:19:50.760 --> 0:19:53.159
<v Speaker 1>I SEN surveys, like the manufacturing ones that have always

0:19:53.200 --> 0:19:55.880
<v Speaker 1>been talking about what the respondents have always been referring

0:19:55.920 --> 0:19:59.560
<v Speaker 1>to higher price pressures and finding how labor is difficult

0:19:59.600 --> 0:20:01.480
<v Speaker 1>to come by these days, and they're paying more for

0:20:01.560 --> 0:20:04.840
<v Speaker 1>wages and all that. So those sorts of UM commented

0:20:04.960 --> 0:20:08.000
<v Speaker 1>those sorts of comments, Um, what companies are saying. I

0:20:08.000 --> 0:20:11.000
<v Speaker 1>think it's very critical to our the inflation outlook, and

0:20:11.000 --> 0:20:14.399
<v Speaker 1>we do see inflation inflation perking higher in the months ahead.

0:20:14.600 --> 0:20:18.480
<v Speaker 1>Do you model in wage inflation is part of that

0:20:18.640 --> 0:20:23.160
<v Speaker 1>new inflation we do? I mean, wage inflation is obviously

0:20:23.480 --> 0:20:26.560
<v Speaker 1>part of the entire inflation picture, not just goods and

0:20:26.600 --> 0:20:29.680
<v Speaker 1>services which are also on the rise, but with labor

0:20:29.720 --> 0:20:34.760
<v Speaker 1>shortages and people or companies struggling to meet this newfound demand,

0:20:34.800 --> 0:20:37.359
<v Speaker 1>they need people to create these you know, to create

0:20:37.400 --> 0:20:39.600
<v Speaker 1>these witches, to be on the factory floor for example,

0:20:39.840 --> 0:20:41.640
<v Speaker 1>to be at the restaurant floor. And so in order

0:20:41.680 --> 0:20:45.680
<v Speaker 1>to get more people, obviously they're gonna have to start hiking, um,

0:20:46.040 --> 0:20:49.280
<v Speaker 1>hiking wages and bringing in and introducing more benefits to

0:20:49.440 --> 0:20:51.520
<v Speaker 1>lure people back into the labor force. Does it still

0:20:51.520 --> 0:20:56.160
<v Speaker 1>feel transitory, Jennifer Um A little bit, yes, because they're

0:20:56.160 --> 0:20:59.560
<v Speaker 1>not always there yet. UM. You know, this pandemic is

0:20:59.600 --> 0:21:02.679
<v Speaker 1>still you know, front and foremost on everyone's minds and

0:21:02.720 --> 0:21:05.359
<v Speaker 1>everywhere in the world. So things are moving forward, but

0:21:05.440 --> 0:21:07.719
<v Speaker 1>you know, obviously it's doing depend on what you know,

0:21:08.000 --> 0:21:10.080
<v Speaker 1>which area, which country we're talking about. In the in

0:21:10.119 --> 0:21:13.080
<v Speaker 1>the US has been you know, at the at the

0:21:13.119 --> 0:21:15.960
<v Speaker 1>forefront and has been moving for very quickly thanks to

0:21:16.000 --> 0:21:18.960
<v Speaker 1>the fast piece of vaccinations you know, the UK as well,

0:21:19.000 --> 0:21:21.560
<v Speaker 1>So things are opening up. So it's it's looking better.

0:21:21.600 --> 0:21:24.520
<v Speaker 1>It's it's definitely looking a lot better, uh, this year

0:21:24.600 --> 0:21:27.040
<v Speaker 1>than you have other countries who are not who are

0:21:27.040 --> 0:21:29.639
<v Speaker 1>still struggling on vaccinages, like in Europe and an India

0:21:29.680 --> 0:21:32.080
<v Speaker 1>of course, and that's where things are still you know,

0:21:32.600 --> 0:21:35.159
<v Speaker 1>although thin were transitory yet we're still at the beginning stages.

0:21:35.320 --> 0:21:36.880
<v Speaker 1>It's got to be the word of the year already.

0:21:36.960 --> 0:21:40.000
<v Speaker 1>Jennifer A. Thank you be mal Capital Market Senior economists.

0:21:40.160 --> 0:21:43.880
<v Speaker 1>This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

0:21:44.000 --> 0:21:47.320
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0:21:47.440 --> 0:21:51.679
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0:21:51.760 --> 0:21:56.639
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