1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,240 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Should 5 00:00:27,240 --> 00:00:30,760 Speaker 1: we bring it? John Stelfas, Openheimer Asset Management Chief investment strategist, 6 00:00:30,760 --> 00:00:32,560 Speaker 1: that you want us here in New York and mornit John, 7 00:00:32,720 --> 00:00:34,680 Speaker 1: Good morning, Good to be here. Do you tell your 8 00:00:34,720 --> 00:00:37,440 Speaker 1: clients a nice, beautiful story of optimism and hope about 9 00:00:37,440 --> 00:00:39,879 Speaker 1: a V shaped recovery in the global economy this year? Well, 10 00:00:39,920 --> 00:00:42,239 Speaker 1: you know, I actually am. I am expecting a V 11 00:00:42,360 --> 00:00:46,000 Speaker 1: shaped recovery. We've had a V shaped recovery uh in 12 00:00:46,000 --> 00:00:49,720 Speaker 1: in uh in oh nine, we had a V shaped 13 00:00:49,760 --> 00:00:54,280 Speaker 1: recovery most recently out of that fourth quarter. At There's 14 00:00:54,280 --> 00:00:58,360 Speaker 1: a remarkable resilience that is built into the global economy 15 00:00:58,360 --> 00:01:03,280 Speaker 1: as a result of low interest rates, highly sensitive monetary 16 00:01:03,360 --> 00:01:06,560 Speaker 1: policy not only by the US uh FED but by 17 00:01:06,640 --> 00:01:11,160 Speaker 1: central banks around the world, combined with counter inflationary trends 18 00:01:11,240 --> 00:01:15,479 Speaker 1: in globalization and technology that are very much intact and 19 00:01:15,560 --> 00:01:20,360 Speaker 1: make it make make the landscape much more resilient. Let's 20 00:01:20,360 --> 00:01:22,559 Speaker 1: store a distinction between a V shaped recovery and market, 21 00:01:22,600 --> 00:01:25,760 Speaker 1: shall we and a V shaped recovery in the economy. 22 00:01:25,800 --> 00:01:27,560 Speaker 1: I don't see much of a V shaped recovery in 23 00:01:27,600 --> 00:01:30,440 Speaker 1: the economy in places like Europe. We've seen some very 24 00:01:30,560 --> 00:01:34,360 Speaker 1: very premature signs of stabilization, maybe in China as well, 25 00:01:34,680 --> 00:01:37,080 Speaker 1: but nothing lack of V shaped recovery. Chump. I do 26 00:01:37,200 --> 00:01:39,160 Speaker 1: stand corrected on that. It must be that it's so 27 00:01:39,240 --> 00:01:41,160 Speaker 1: early in the morning. I think the markets do a 28 00:01:41,240 --> 00:01:44,240 Speaker 1: V shaped recovery here, but but I do think that 29 00:01:44,319 --> 00:01:48,400 Speaker 1: the the economic impact will actually be much less because 30 00:01:48,400 --> 00:01:49,800 Speaker 1: I think the rest of the world is going to 31 00:01:49,840 --> 00:01:52,960 Speaker 1: begin to get the what's been set by both the 32 00:01:53,040 --> 00:01:56,960 Speaker 1: US and China, which is called fiscal stimulus. Okay, if 33 00:01:57,040 --> 00:01:59,520 Speaker 1: there is a V shape recovery and markets, the vas 34 00:01:59,560 --> 00:02:01,640 Speaker 1: the small to be I've ever seen in my entire life. 35 00:02:01,720 --> 00:02:03,800 Speaker 1: And this does raise a question for be it never 36 00:02:03,800 --> 00:02:06,720 Speaker 1: really vied downward, it's just being upward, and it seems 37 00:02:06,760 --> 00:02:09,200 Speaker 1: like people are pricing in that there will be no effect. 38 00:02:09,560 --> 00:02:13,040 Speaker 1: How big is the potential downside if the economic bleed 39 00:02:13,080 --> 00:02:16,160 Speaker 1: through to John's point two Q three Q is actually 40 00:02:16,160 --> 00:02:18,800 Speaker 1: more than people had expected. Yeah, well, I think that 41 00:02:19,320 --> 00:02:21,520 Speaker 1: we'll have to wait and see. But you know it 42 00:02:21,520 --> 00:02:24,000 Speaker 1: could be and it would be a double digit UH 43 00:02:24,360 --> 00:02:27,720 Speaker 1: decline that we could see, but that that exists essentially 44 00:02:27,800 --> 00:02:31,680 Speaker 1: from any catalysts that can occur that is systemic in nature. 45 00:02:32,240 --> 00:02:35,040 Speaker 1: So but we just don't see that. I remember traveling 46 00:02:35,040 --> 00:02:37,359 Speaker 1: to China. My first trip to China was a high 47 00:02:37,440 --> 00:02:40,240 Speaker 1: level trip in oh in O four. It was March 48 00:02:40,320 --> 00:02:43,480 Speaker 1: of O four. I just left one big bank in 49 00:02:43,480 --> 00:02:46,480 Speaker 1: in UH in the US for another big bank in 50 00:02:46,960 --> 00:02:50,919 Speaker 1: the US, and and I left in September of two 51 00:02:50,919 --> 00:02:56,359 Speaker 1: thousand and three. Well, it's it's a lights off. Is 52 00:02:56,400 --> 00:02:59,960 Speaker 1: this about the Mandarin bar in Hong Kong's gonna tell 53 00:03:00,040 --> 00:03:05,720 Speaker 1: about his how contract? I'll never forget they get. As 54 00:03:05,800 --> 00:03:07,760 Speaker 1: soon as I arrived at the new bank, they said 55 00:03:07,800 --> 00:03:09,480 Speaker 1: to me, look, we want you to go to China. 56 00:03:09,880 --> 00:03:12,919 Speaker 1: And I kept postponing it by weeks because I was 57 00:03:13,000 --> 00:03:14,880 Speaker 1: looking at stars and I thought, my gosh, I've just 58 00:03:15,040 --> 00:03:17,519 Speaker 1: left one good job for another, and they're gonna kill me. 59 00:03:18,400 --> 00:03:20,320 Speaker 1: But I'm so glad that I went in March and 60 00:03:20,400 --> 00:03:23,400 Speaker 1: mode four. It changed my vision of the world once 61 00:03:23,480 --> 00:03:27,000 Speaker 1: I saw what was happening in China and on visits 62 00:03:27,040 --> 00:03:29,799 Speaker 1: there afterward it continues. It's it's a jog or not. 63 00:03:30,720 --> 00:03:32,960 Speaker 1: The Gloom Crew loves ratios. And one of the charts 64 00:03:33,000 --> 00:03:36,440 Speaker 1: that struck me this weekend was energy as compared to Technology. 65 00:03:36,640 --> 00:03:43,240 Speaker 1: O MG, it's John stofs is it. I don't think so. 66 00:03:43,440 --> 00:03:46,480 Speaker 1: I don't think it's nineteen. I think this. I think 67 00:03:46,560 --> 00:03:51,160 Speaker 1: since uh two thousand and nine, we have we've seen 68 00:03:51,400 --> 00:03:55,160 Speaker 1: different forces in effect in the global economy and within 69 00:03:55,320 --> 00:03:57,640 Speaker 1: the within the global market. So you see this time 70 00:03:57,760 --> 00:04:00,280 Speaker 1: is different. What is different about Amazon, Apple and the 71 00:04:00,360 --> 00:04:03,240 Speaker 1: other forty seven stocks that have captured all the bid 72 00:04:03,640 --> 00:04:06,400 Speaker 1: all the wall of money coming in. What's different this time? 73 00:04:06,560 --> 00:04:11,960 Speaker 1: I'd say one of them is profitability, cash flow management, 74 00:04:12,120 --> 00:04:18,479 Speaker 1: business premise, ability to execute, and the market uh, recognition, 75 00:04:18,640 --> 00:04:21,520 Speaker 1: both both within the business community and then the consume 76 00:04:21,560 --> 00:04:23,720 Speaker 1: you belong them? I mean, can you belong all these 77 00:04:23,760 --> 00:04:26,760 Speaker 1: glory names, Microsoft and the rest of them? We would 78 00:04:26,839 --> 00:04:29,880 Speaker 1: we would say so, and we are along some of 79 00:04:30,080 --> 00:04:32,600 Speaker 1: not all of them, but but a good number of 80 00:04:32,640 --> 00:04:35,200 Speaker 1: those glory names. As you so well put it, Apple 81 00:04:35,320 --> 00:04:36,880 Speaker 1: is the post a Chiel for the moment, isn't it. 82 00:04:36,920 --> 00:04:38,760 Speaker 1: We've talked about it on this program so much over 83 00:04:38,800 --> 00:04:41,320 Speaker 1: the last week with regards to what is happening in China. 84 00:04:41,720 --> 00:04:44,600 Speaker 1: It is heavily exposed to the demand side story, softening 85 00:04:44,680 --> 00:04:47,200 Speaker 1: Chinese growth. The risk around that it's heavily exposed to 86 00:04:47,240 --> 00:04:50,840 Speaker 1: the supply side story, the threat of disruptions to supply chains. 87 00:04:50,880 --> 00:04:53,200 Speaker 1: And yet still it's a couple of dollars from all 88 00:04:53,279 --> 00:04:55,560 Speaker 1: time highest, John, And this is what I've been grappling 89 00:04:55,640 --> 00:04:58,240 Speaker 1: with for weeks now. Quite clearly, the risks around the 90 00:04:58,320 --> 00:05:01,799 Speaker 1: outlook of shifted tilted to the downside. You can debate 91 00:05:01,880 --> 00:05:03,880 Speaker 1: the degree to which that has happened, but that's happened. 92 00:05:04,000 --> 00:05:08,240 Speaker 1: That's just the fact the priceless story hasn't changed. Why not, Well, 93 00:05:08,760 --> 00:05:11,640 Speaker 1: I think it's it's the what what the market is 94 00:05:11,720 --> 00:05:14,360 Speaker 1: seeing over the last course of the last few years 95 00:05:14,480 --> 00:05:18,160 Speaker 1: is every time Apple's future looks dark, it's surprises to 96 00:05:18,279 --> 00:05:21,480 Speaker 1: the upside and shows resilience. I mean, just with the 97 00:05:21,720 --> 00:05:25,760 Speaker 1: with the the the Apple iPhone eleven. Uh when when 98 00:05:25,800 --> 00:05:29,080 Speaker 1: the numbers look better than than anybody had originally expected 99 00:05:29,120 --> 00:05:32,480 Speaker 1: about a year later, right, Uh, we'd have to think that. 100 00:05:32,720 --> 00:05:34,520 Speaker 1: I think the other side of it is, you know, 101 00:05:34,920 --> 00:05:37,480 Speaker 1: when it comes to Apple is just if we I 102 00:05:37,600 --> 00:05:40,200 Speaker 1: bet you, if we all bring our Apple, are are 103 00:05:40,320 --> 00:05:43,400 Speaker 1: smartphones out of our pockets? I'm willing to bet you 104 00:05:43,520 --> 00:05:45,720 Speaker 1: that you want to know what's on my smartphone out 105 00:05:45,800 --> 00:05:48,000 Speaker 1: of my pocket? Is that an Apple approve? You don't 106 00:05:48,000 --> 00:05:50,760 Speaker 1: want to know? It's absolutely not. I will say, well, 107 00:05:50,800 --> 00:05:52,640 Speaker 1: you're pulling it up. While you're pulling up whatever you're 108 00:05:52,640 --> 00:05:55,200 Speaker 1: gonna pull up. That will become some sort of interesting 109 00:05:55,600 --> 00:05:57,920 Speaker 1: UH conversation later. I do think that there is a 110 00:05:58,040 --> 00:06:01,599 Speaker 1: question to the point of demand UH with respect to Apple, 111 00:06:01,680 --> 00:06:05,240 Speaker 1: and how much a slowdown in a Chinese economy bleeds 112 00:06:05,360 --> 00:06:08,960 Speaker 1: into global companies in a way that's not getting priced in. 113 00:06:09,040 --> 00:06:11,800 Speaker 1: And I think about this at a time when we 114 00:06:12,000 --> 00:06:15,360 Speaker 1: are looking at the potential for increasing bad loans on 115 00:06:15,520 --> 00:06:20,599 Speaker 1: Chinese banks, books that will potentially quadruple or can tuple 116 00:06:20,880 --> 00:06:23,240 Speaker 1: depending on how slow the economy goes, and this sort 117 00:06:23,279 --> 00:06:25,520 Speaker 1: of diverts some of the energy away from the PBOC 118 00:06:25,680 --> 00:06:28,680 Speaker 1: in terms of ability to stimulate the economy. How significantly 119 00:06:28,720 --> 00:06:31,880 Speaker 1: will it hit the consumer in China. I think that 120 00:06:32,160 --> 00:06:34,920 Speaker 1: that is the real question, but it should be of 121 00:06:35,040 --> 00:06:37,840 Speaker 1: some significance without a doubt. But in terms of the 122 00:06:37,920 --> 00:06:41,360 Speaker 1: buyer of the iPhone, which is a relative luxury product 123 00:06:41,480 --> 00:06:44,360 Speaker 1: in China based on per capita income. I think it 124 00:06:44,480 --> 00:06:47,080 Speaker 1: might have a greater negative effect on Huawei than it 125 00:06:47,120 --> 00:06:50,120 Speaker 1: would on Apple, for example, you know, in terms of 126 00:06:50,240 --> 00:06:56,280 Speaker 1: smartphone sales as a consumer product, because the Apple iPhone 127 00:06:56,960 --> 00:07:01,080 Speaker 1: is uh, it's a it's a luxury item in China. 128 00:07:01,200 --> 00:07:03,560 Speaker 1: If you can say it's a status symbol. It is 129 00:07:03,600 --> 00:07:08,080 Speaker 1: a global pick. John, thank you for this with optimism. 130 00:07:08,160 --> 00:07:23,800 Speaker 1: He's he's very v shaped. Yeah. We would normally do 131 00:07:23,920 --> 00:07:27,480 Speaker 1: an interview with one of our best labor economists in America, 132 00:07:27,600 --> 00:07:30,920 Speaker 1: someone that Republicans and Democrats are forced to read. He's 133 00:07:31,000 --> 00:07:33,920 Speaker 1: Jared Bernstein, senior fellow the Center and Budget and Policy 134 00:07:34,760 --> 00:07:38,840 Speaker 1: Priorities and as well the former chief economist and adviser 135 00:07:38,960 --> 00:07:42,360 Speaker 1: to Mr Biden. But Jared, this time, I've got to 136 00:07:42,440 --> 00:07:45,840 Speaker 1: rip it up and talk about Joe biden struggle he's having. 137 00:07:46,400 --> 00:07:50,640 Speaker 1: Can you explain, Jared Bernstein, why Vice President Biden cannot 138 00:07:50,880 --> 00:07:55,280 Speaker 1: get traction with the electorate on what I'll call moderate 139 00:07:55,640 --> 00:08:01,560 Speaker 1: Democratic party economics. Well, it's a tough question. Uh, there's 140 00:08:01,560 --> 00:08:05,280 Speaker 1: a lot of competition out there, including the young people 141 00:08:05,480 --> 00:08:09,480 Speaker 1: to Edge and Amy Kloba shar But in fact, I 142 00:08:09,600 --> 00:08:13,360 Speaker 1: think part of what's happening is just the nature, and 143 00:08:13,440 --> 00:08:16,320 Speaker 1: I would argue the very unfortunate nature of the primary 144 00:08:17,040 --> 00:08:22,360 Speaker 1: system for Democrats, which starting some very unrepresentative places. The 145 00:08:22,960 --> 00:08:27,720 Speaker 1: Vice President has South Carolina to come and Super Tuesday, 146 00:08:27,840 --> 00:08:30,560 Speaker 1: and he's uh, as he himself would tell you, he's 147 00:08:30,600 --> 00:08:33,040 Speaker 1: a fighter who's the maybe down but far from out. 148 00:08:33,720 --> 00:08:36,360 Speaker 1: It's if it's about wage growth, do you get a 149 00:08:36,480 --> 00:08:40,480 Speaker 1: sense that a large swath of Republican and Democrat America 150 00:08:41,280 --> 00:08:44,960 Speaker 1: is just fed up with lousy wage growth? And there's 151 00:08:45,040 --> 00:08:47,599 Speaker 1: a and I'm using this from Gordon Wood at Brown University, 152 00:08:48,000 --> 00:08:51,360 Speaker 1: there's a new radicalism out there. It doesn't allow for 153 00:08:51,480 --> 00:08:55,240 Speaker 1: people like Vice President Biden to place. You know, I 154 00:08:55,320 --> 00:08:58,240 Speaker 1: actually have a somewhat different view, starting with the economics, 155 00:08:58,360 --> 00:09:02,720 Speaker 1: which is that wage growth has actually been okay on average, 156 00:09:02,720 --> 00:09:05,040 Speaker 1: a little better than okay. I mean, we have productivity 157 00:09:05,040 --> 00:09:08,480 Speaker 1: growth that's not exactly gangbusters, so your your wage growth 158 00:09:08,559 --> 00:09:10,840 Speaker 1: isn't going to be maybe what it was, but in fact, 159 00:09:10,880 --> 00:09:12,720 Speaker 1: at the bottom end of the wage skill very low 160 00:09:12,760 --> 00:09:15,439 Speaker 1: on employment. It's helped put us put push up wage row. 161 00:09:15,800 --> 00:09:19,120 Speaker 1: What upsets people a lot makes them far less insecure 162 00:09:19,160 --> 00:09:22,559 Speaker 1: about the economy than those wage trends would suggest. Is 163 00:09:22,640 --> 00:09:24,760 Speaker 1: the difference between what they earn and what they need 164 00:09:24,880 --> 00:09:27,599 Speaker 1: to make ends meet. And here's where Biden and the 165 00:09:27,640 --> 00:09:30,439 Speaker 1: other Democrats come in, because they want to preserve and 166 00:09:30,559 --> 00:09:33,960 Speaker 1: expand the kind of safety net programs that helped close 167 00:09:34,040 --> 00:09:36,760 Speaker 1: the gap between what people earn and what they need, 168 00:09:37,120 --> 00:09:39,440 Speaker 1: whereas the Republicans and Trump really do want to tear 169 00:09:39,520 --> 00:09:40,880 Speaker 1: that away. By the way, you're gonna see a lot 170 00:09:40,920 --> 00:09:43,240 Speaker 1: of that today the President's budget which comes out later. 171 00:09:43,559 --> 00:09:46,079 Speaker 1: Gergy making some really good points here, and I'm listening 172 00:09:46,120 --> 00:09:47,760 Speaker 1: to you, and the story you're tuning is the difference 173 00:09:47,760 --> 00:09:50,520 Speaker 1: between the Democrats and the Republicans. And at the moment, 174 00:09:50,559 --> 00:09:52,000 Speaker 1: the battle of the last couple of weeks, it's just 175 00:09:52,080 --> 00:09:55,640 Speaker 1: a lot of Democrats trying to find small, maybe irrelevant 176 00:09:55,679 --> 00:09:59,600 Speaker 1: differences between themselves. How does the vice president get himself 177 00:09:59,679 --> 00:10:02,480 Speaker 1: back tracks? He's the man to take on the president 178 00:10:02,520 --> 00:10:06,440 Speaker 1: of the United States. Yeah, great question, but very simple answer. 179 00:10:06,520 --> 00:10:09,520 Speaker 1: If you're if you're uh, theory of the case is 180 00:10:09,559 --> 00:10:12,280 Speaker 1: that you're electable, you've got to start winning. So it's 181 00:10:12,320 --> 00:10:16,880 Speaker 1: just that simple. And yeah, it's that simple, and so uh, 182 00:10:17,800 --> 00:10:21,560 Speaker 1: the vice president has some stronger venues coming up for him, 183 00:10:21,720 --> 00:10:24,520 Speaker 1: and that's you know, that's gonna make or break Jared. 184 00:10:24,640 --> 00:10:26,520 Speaker 1: How important is it for Joe Biden to have an 185 00:10:26,520 --> 00:10:30,560 Speaker 1: actual message uh that comes out there, like a health 186 00:10:30,600 --> 00:10:33,360 Speaker 1: care for all or some of these other proposals that 187 00:10:33,400 --> 00:10:36,440 Speaker 1: are viewed as more radical, but are at least proposals 188 00:10:36,480 --> 00:10:38,240 Speaker 1: that you can sink your teeth into. I mean, so far, 189 00:10:38,800 --> 00:10:41,440 Speaker 1: what's Joe Biden's kind of claim to fame with respect 190 00:10:41,480 --> 00:10:45,120 Speaker 1: to proposals? Well, first of all, as I said, the 191 00:10:45,200 --> 00:10:48,800 Speaker 1: theory of the cases a return to normalcy, and I'm 192 00:10:48,840 --> 00:10:52,400 Speaker 1: the guy who can who can beat the the incumbent president, 193 00:10:52,480 --> 00:10:56,520 Speaker 1: which is obviously the most important argument for Democrats. Once 194 00:10:56,559 --> 00:10:58,800 Speaker 1: you get away from that, then and then I think 195 00:10:58,840 --> 00:11:02,920 Speaker 1: your initial point is uh correct and misunderstood, which is 196 00:11:03,000 --> 00:11:06,200 Speaker 1: that all Democrats are really pointing in the same direction. 197 00:11:06,240 --> 00:11:09,080 Speaker 1: It's a matter of how fast you're going to get there, Uh, 198 00:11:09,520 --> 00:11:12,680 Speaker 1: whether you're talking about Biden or Klobisher, Buddha judge, they're 199 00:11:12,760 --> 00:11:16,319 Speaker 1: all much more incremental in getting to universal coverage, for example, 200 00:11:16,360 --> 00:11:18,760 Speaker 1: than our Warren and Sanders. But that's more of a 201 00:11:18,840 --> 00:11:21,559 Speaker 1: diagnosis of just how ready you think the system is 202 00:11:21,640 --> 00:11:23,160 Speaker 1: to jump from where we are to where you want 203 00:11:23,200 --> 00:11:24,640 Speaker 1: to get or do you think you have to get 204 00:11:24,679 --> 00:11:26,920 Speaker 1: there more gradually? John? From the outside, looking again, it 205 00:11:26,960 --> 00:11:28,880 Speaker 1: looks like Matt Pete's doing a great job of positioning 206 00:11:28,960 --> 00:11:31,439 Speaker 1: South to take on the president and went over some 207 00:11:31,520 --> 00:11:34,360 Speaker 1: Republican voters just over the weekend. He's talking about the 208 00:11:34,400 --> 00:11:36,920 Speaker 1: budget deficit. I did not think i'd hear this from 209 00:11:36,960 --> 00:11:38,760 Speaker 1: this side of the art. He said, it's not fashionable 210 00:11:38,760 --> 00:11:40,800 Speaker 1: and progressive circles, but it's something that he thinks we 211 00:11:40,840 --> 00:11:43,559 Speaker 1: should be focusing on. What's the response to that from 212 00:11:43,640 --> 00:11:46,080 Speaker 1: the Biden same Jared, what's your response to a focus 213 00:11:46,200 --> 00:11:49,880 Speaker 1: on the budget deficit from Matt people to Judge? Yeah, well, 214 00:11:49,880 --> 00:11:51,800 Speaker 1: I'm not on the Biden team. Let me very clear 215 00:11:51,840 --> 00:11:54,920 Speaker 1: about that, and I don't know what they're response will be. Um, 216 00:11:55,200 --> 00:11:56,960 Speaker 1: you know the Buddha Judge is right when he says 217 00:11:57,000 --> 00:11:59,839 Speaker 1: that's not fashionable and progressive service, but it's also far 218 00:12:00,040 --> 00:12:03,480 Speaker 1: less fashionable in economic circles. I mean, it's widely recognized 219 00:12:03,520 --> 00:12:06,680 Speaker 1: that the old theory that budget devisit's crowd out private 220 00:12:06,760 --> 00:12:09,600 Speaker 1: following and push up interest rates. Is the month really 221 00:12:09,640 --> 00:12:12,600 Speaker 1: long because we have large budget evisits very low interest rates, 222 00:12:12,760 --> 00:12:15,400 Speaker 1: not just here but around the world. So I think 223 00:12:15,520 --> 00:12:18,000 Speaker 1: that perhaps budagent there is just trying to carve out 224 00:12:18,000 --> 00:12:21,080 Speaker 1: a different lane for himself and complain about our fiscal 225 00:12:21,120 --> 00:12:24,360 Speaker 1: and balances which are severe. Jared Bernstein with this with 226 00:12:24,440 --> 00:12:26,880 Speaker 1: the Center and Budget and Policy Administration, thrilled he could 227 00:12:26,920 --> 00:12:29,520 Speaker 1: join us this morning. Jared, let me channel your inner 228 00:12:29,720 --> 00:12:32,920 Speaker 1: L L B J, which is long agoing far away. 229 00:12:33,000 --> 00:12:36,640 Speaker 1: You took an activist what i'll call investment tax credit 230 00:12:36,720 --> 00:12:40,720 Speaker 1: approach to business investment. Can the Democrats out scoop Jackson 231 00:12:40,760 --> 00:12:44,920 Speaker 1: scoop Jackson and get on board some business initiatives to 232 00:12:45,000 --> 00:12:49,040 Speaker 1: seize the high ground there? You know, it's a good question, 233 00:12:49,160 --> 00:12:52,720 Speaker 1: and probably the way in for the Democrats is twofold 234 00:12:52,760 --> 00:12:57,080 Speaker 1: One is broadly on infrastructure, UM, American business really wants 235 00:12:57,160 --> 00:12:59,720 Speaker 1: there to be a deep investment in public infrastructure because 236 00:12:59,760 --> 00:13:01,839 Speaker 1: guess what, they're the ones up to drive over the 237 00:13:01,920 --> 00:13:06,400 Speaker 1: bridges and roads and airports. Uh. And secondly, on green investment, 238 00:13:06,800 --> 00:13:10,959 Speaker 1: I think there is a real opening for Democrats to 239 00:13:11,880 --> 00:13:19,320 Speaker 1: suggest that growth can be motivated by investment in UH. Intition, 240 00:13:19,440 --> 00:13:21,199 Speaker 1: you sound like you're in Davos. We're not, Are we 241 00:13:21,320 --> 00:13:23,920 Speaker 1: in Davos? John this morning. I mean, you know, I 242 00:13:24,040 --> 00:13:26,439 Speaker 1: wish do we have decent coffee? Yes we do. It 243 00:13:26,520 --> 00:13:29,719 Speaker 1: must not be davos um. But Jared, that's great, But 244 00:13:29,920 --> 00:13:32,880 Speaker 1: how do you affect that? In Washington? I asked at 245 00:13:32,920 --> 00:13:36,439 Speaker 1: a secretary chow, I had a transportation and you know, 246 00:13:36,559 --> 00:13:39,400 Speaker 1: I get the Republican line. Give me not the Democratic line, 247 00:13:39,440 --> 00:13:42,959 Speaker 1: give me the Bernstein line. How do you affect infrastructure 248 00:13:43,160 --> 00:13:49,160 Speaker 1: or green across both parties? You have to have I mean, 249 00:13:49,200 --> 00:13:51,079 Speaker 1: I hate to say to sound so political, and I 250 00:13:51,160 --> 00:13:53,880 Speaker 1: know it is political, but I think just my only answer, 251 00:13:54,360 --> 00:13:56,959 Speaker 1: you just have to have a very different administration. And 252 00:13:57,080 --> 00:13:58,280 Speaker 1: by the way, I'm not saying it has to be 253 00:13:58,360 --> 00:14:01,480 Speaker 1: a d or in R but the Trump administration just 254 00:14:01,720 --> 00:14:05,320 Speaker 1: never cared a whip about infrastructure investment. Their plans are 255 00:14:05,320 --> 00:14:08,840 Speaker 1: a couple sentences long, mostly asterisks, referring to a bunch 256 00:14:08,840 --> 00:14:12,280 Speaker 1: of fantastical plans that nobody's ever seen or written down. 257 00:14:12,720 --> 00:14:15,200 Speaker 1: So what you need is is it just a different 258 00:14:15,320 --> 00:14:18,280 Speaker 1: group of people who are not driven by a chaotic, 259 00:14:18,679 --> 00:14:22,160 Speaker 1: minitimated news cycle and are actually serious about public investment. 260 00:14:22,200 --> 00:14:24,440 Speaker 1: There are a lot of Republicans in that camp. I've 261 00:14:24,520 --> 00:14:27,920 Speaker 1: talked to them. They just don't have any power. Yeah, Jared, 262 00:14:28,320 --> 00:14:31,080 Speaker 1: we're sort of all circling at a similar kind of 263 00:14:31,240 --> 00:14:35,120 Speaker 1: question here, which is what's the Democratic message to counter 264 00:14:35,240 --> 00:14:38,160 Speaker 1: President Trump's, which is the economy is very strong. We 265 00:14:38,240 --> 00:14:40,720 Speaker 1: seem to be a chugging forward. He's come through with 266 00:14:40,840 --> 00:14:44,040 Speaker 1: trade negotiations. He's going to go forward with respect to 267 00:14:44,240 --> 00:14:47,600 Speaker 1: to infrastructure spending, he says, and the Democrats are caught 268 00:14:47,640 --> 00:14:49,880 Speaker 1: in a circular firing Scott Squad, I mean, what do 269 00:14:49,960 --> 00:14:52,480 Speaker 1: you say to that there's no real message that's emerging 270 00:14:52,560 --> 00:14:55,160 Speaker 1: other than hey, we'll go back to something that's going 271 00:14:55,240 --> 00:14:58,400 Speaker 1: to be less sensational when it comes to a news cycle. Well, 272 00:14:58,480 --> 00:15:02,520 Speaker 1: that's the huge challenge that posing. And in fact, there's 273 00:15:02,560 --> 00:15:04,280 Speaker 1: no question that the economy is going to be a 274 00:15:04,360 --> 00:15:07,200 Speaker 1: significant tailwind for Trump. I mean for a lot of 275 00:15:07,240 --> 00:15:10,400 Speaker 1: the Democrats when it comes to the economy and the electorate, 276 00:15:10,480 --> 00:15:13,040 Speaker 1: it's highlight the fact towards the extent to which it 277 00:15:13,160 --> 00:15:15,360 Speaker 1: just hasn't reached a lot of people in a lot 278 00:15:15,440 --> 00:15:18,320 Speaker 1: of places. I mentioned earlier that people are well more 279 00:15:18,480 --> 00:15:21,720 Speaker 1: insecure about their patrons and how far they go that 280 00:15:21,800 --> 00:15:24,080 Speaker 1: you'd expect given a three and a three point six 281 00:15:24,160 --> 00:15:27,320 Speaker 1: percent unemployment right, Jared, thank you so much. Just brilliance. 282 00:15:27,400 --> 00:15:30,120 Speaker 1: Jared Bernstein with us there with some careful questions on 283 00:15:30,240 --> 00:15:34,520 Speaker 1: the Democrats, and of course his former support vice president Buyden. 284 00:15:34,600 --> 00:15:38,000 Speaker 1: He is with the Center for Budget and Policy Priority 285 00:15:47,880 --> 00:15:53,360 Speaker 1: kit exissociation around Arsenal supporter also effects strategist, calling us 286 00:15:53,440 --> 00:15:55,240 Speaker 1: out of London. He joined us on the phone. Kick 287 00:15:55,280 --> 00:15:57,480 Speaker 1: great to catch up with your take this morning, and 288 00:15:57,520 --> 00:16:00,480 Speaker 1: then we'll turn to emerging markets. The US is still 289 00:16:00,600 --> 00:16:04,800 Speaker 1: slowing too slowly for effex to care. What did you 290 00:16:04,880 --> 00:16:09,360 Speaker 1: mean by that, Kit, Well, when if I had a campaign, 291 00:16:09,400 --> 00:16:11,800 Speaker 1: i'd sort of lead the people down. It's that if 292 00:16:12,120 --> 00:16:14,520 Speaker 1: if we look at the monthly changing on farm perils 293 00:16:14,560 --> 00:16:17,040 Speaker 1: and kind of stuff we're looking on Friday, they're okay, 294 00:16:17,280 --> 00:16:19,320 Speaker 1: you know that they were beats or they were decently, 295 00:16:19,360 --> 00:16:21,920 Speaker 1: they were solid. But the year of a year percentage 296 00:16:22,000 --> 00:16:25,320 Speaker 1: change has been on a deceleration trend. And perhaps more importantly, 297 00:16:25,840 --> 00:16:27,960 Speaker 1: the year of a year percentage change in avery that 298 00:16:28,120 --> 00:16:30,600 Speaker 1: hours worked is now you know, is under one percent. 299 00:16:30,760 --> 00:16:34,080 Speaker 1: So um. You know. The impression I get from that 300 00:16:34,240 --> 00:16:37,080 Speaker 1: and from plenty of other indegation, is that there's a 301 00:16:37,200 --> 00:16:41,240 Speaker 1: very gradual deceleration in US growth at this point in 302 00:16:41,280 --> 00:16:44,440 Speaker 1: the cycle, I have fears that with the FED having 303 00:16:44,520 --> 00:16:47,440 Speaker 1: less ammunition now and with fiscal policy pretty much on 304 00:16:47,560 --> 00:16:49,640 Speaker 1: hold till after the election, there's not much to kind of, 305 00:16:50,200 --> 00:16:53,000 Speaker 1: you know, prevent that slowing further. But the consensus on 306 00:16:53,160 --> 00:16:57,640 Speaker 1: US growth doesn't blink, doesn't budge, um, you know, two 307 00:16:57,720 --> 00:17:00,160 Speaker 1: percent ish for most people. You know, it's just going 308 00:17:00,200 --> 00:17:03,080 Speaker 1: to continue. That's kind of in the bag. So and 309 00:17:03,160 --> 00:17:06,520 Speaker 1: until they pay attention, until the slowdown in the US 310 00:17:06,600 --> 00:17:11,080 Speaker 1: economy show signs of picking up some momentum, it's just 311 00:17:11,240 --> 00:17:13,159 Speaker 1: a non factor in market, so that I might as 312 00:17:13,200 --> 00:17:15,399 Speaker 1: well stare at in the corner and talk to myself 313 00:17:15,440 --> 00:17:17,720 Speaker 1: about it. But in the meantime, though, what we say 314 00:17:17,800 --> 00:17:19,720 Speaker 1: is the dollar is stronger, with down three figures on 315 00:17:19,800 --> 00:17:22,000 Speaker 1: euro dollar since the start of the year, quite clearly 316 00:17:22,040 --> 00:17:27,080 Speaker 1: we're pushing something through this market. We're pushing continued growth. 317 00:17:27,080 --> 00:17:29,560 Speaker 1: Concerns about Europe, there are continued concerns about Germany, and 318 00:17:29,600 --> 00:17:31,639 Speaker 1: remember we're going to get some more German GDP numbers 319 00:17:31,960 --> 00:17:33,679 Speaker 1: at the end of the week. We've got Eurozone industrial 320 00:17:33,720 --> 00:17:37,960 Speaker 1: production numbers. All of those have looked very, very pretty bleak. Recently, 321 00:17:38,680 --> 00:17:43,920 Speaker 1: the ECB has effectively no ammunition. The Germans have really 322 00:17:44,000 --> 00:17:48,600 Speaker 1: no real enthusiasm for easing fiscal policy. And when I 323 00:17:48,680 --> 00:17:52,240 Speaker 1: talk to German corporate clients, they are long cash and 324 00:17:52,920 --> 00:17:56,320 Speaker 1: short on great investment plans to go out and spend it. 325 00:17:56,400 --> 00:17:59,879 Speaker 1: It's not it's not an encouraging story over in Asia. 326 00:18:00,119 --> 00:18:02,359 Speaker 1: What do you glean from what the Litmus paper for 327 00:18:02,520 --> 00:18:05,479 Speaker 1: in exchange says about this viral crisis. I'm looking at 328 00:18:05,560 --> 00:18:10,320 Speaker 1: Indonesia currency versus Chinese currency, and it's red zone green zone. 329 00:18:10,359 --> 00:18:12,600 Speaker 1: You know, it's back and forth and and all that. 330 00:18:12,800 --> 00:18:15,960 Speaker 1: Right now, it's weak Indonesia, stronger China. But what do 331 00:18:16,080 --> 00:18:20,240 Speaker 1: you make of what you observe in fex about this 332 00:18:20,480 --> 00:18:24,200 Speaker 1: viral crisis? Um, look, I think that that you have 333 00:18:24,480 --> 00:18:26,920 Speaker 1: that you have concerns, But the Chinese aren't going to 334 00:18:26,960 --> 00:18:29,720 Speaker 1: be letting the currency just for now play a partner. 335 00:18:29,760 --> 00:18:32,440 Speaker 1: I think that's pretty important. So, um, you know, we 336 00:18:32,640 --> 00:18:34,479 Speaker 1: we were, we were well into me. If you think 337 00:18:34,520 --> 00:18:36,879 Speaker 1: of the fourth quarter of the tai bat was one 338 00:18:36,960 --> 00:18:41,240 Speaker 1: of the strongest performing currencies, gaining safe haven status until 339 00:18:41,280 --> 00:18:43,919 Speaker 1: at the beginning of this year. People refocus that hang 340 00:18:43,960 --> 00:18:46,040 Speaker 1: on a second. They may have shifted to a big 341 00:18:46,080 --> 00:18:49,160 Speaker 1: current account surplus. They may have shifted to very inflation 342 00:18:49,240 --> 00:18:51,879 Speaker 1: fighting central bank and all the things that that make 343 00:18:52,080 --> 00:18:56,000 Speaker 1: a strong currency, but they're also still dependent on tourism 344 00:18:56,119 --> 00:18:58,000 Speaker 1: and they have a board of the China and you 345 00:18:58,080 --> 00:18:59,960 Speaker 1: know that that that maybe we should be concerned abo 346 00:19:00,080 --> 00:19:02,080 Speaker 1: that as well, and it's weakened quite a lot. So 347 00:19:02,480 --> 00:19:05,760 Speaker 1: I think, you know, the market does does worry about 348 00:19:05,840 --> 00:19:09,200 Speaker 1: about the impact on gross from the virus in individual 349 00:19:09,280 --> 00:19:13,560 Speaker 1: countries what? And I think it worries about growth globally 350 00:19:13,680 --> 00:19:16,920 Speaker 1: for emerging market currencies overall. And we wouldn't have the 351 00:19:16,960 --> 00:19:19,800 Speaker 1: Australian dollar all the way down here if it wasn't 352 00:19:19,800 --> 00:19:22,879 Speaker 1: for the virus. But but it has nothing to how 353 00:19:22,960 --> 00:19:25,800 Speaker 1: worried we would be if the Chinese let the let 354 00:19:25,920 --> 00:19:29,760 Speaker 1: their currency take the strain of of the weakness that 355 00:19:29,800 --> 00:19:33,919 Speaker 1: they have in their economy. That's that's the dollar U one. 356 00:19:34,280 --> 00:19:36,440 Speaker 1: I come in in the morning and it's seven plus 357 00:19:36,520 --> 00:19:39,120 Speaker 1: a minus and module on that every day. I'm trying 358 00:19:39,119 --> 00:19:42,040 Speaker 1: to understand the reaction of the dollar and the dollar 359 00:19:42,119 --> 00:19:45,200 Speaker 1: how much it will strengthen as this virus continues to 360 00:19:45,240 --> 00:19:48,160 Speaker 1: spread before it gets under control. And this plays into 361 00:19:48,200 --> 00:19:51,080 Speaker 1: the bond market. Call here and Jping working out this 362 00:19:51,200 --> 00:19:53,399 Speaker 1: morning saying that the bond market in the United States 363 00:19:53,760 --> 00:19:57,680 Speaker 1: is looking over bought, with treasuries treasury yields falling near 364 00:19:57,760 --> 00:20:01,399 Speaker 1: cycle lows, even in the context of coronavirus, given the 365 00:20:01,480 --> 00:20:04,920 Speaker 1: fact that the economy is improving, and I'm wondering, do 366 00:20:05,040 --> 00:20:09,920 Speaker 1: you agree, Um, yes, No, I think that that the 367 00:20:10,000 --> 00:20:13,080 Speaker 1: bond market is looking at a global economy where safe 368 00:20:13,080 --> 00:20:16,040 Speaker 1: the U s economy is slowing slowly without significant inflationary 369 00:20:16,080 --> 00:20:18,639 Speaker 1: pressure coming through. I don't think treasuries are going to 370 00:20:18,720 --> 00:20:22,960 Speaker 1: lose their bid. The FED is on hold until it eases. 371 00:20:23,040 --> 00:20:25,680 Speaker 1: It's not on hold until it tightens anytime. So get 372 00:20:25,760 --> 00:20:29,159 Speaker 1: given this pattern, the Chinese bond markets on a on 373 00:20:29,240 --> 00:20:31,959 Speaker 1: a tag this year, I'm playing catch up for being 374 00:20:32,119 --> 00:20:34,800 Speaker 1: ranged band last year, and European bond yield are just 375 00:20:34,880 --> 00:20:37,480 Speaker 1: anchored to the floor. So so I think bond investors 376 00:20:37,520 --> 00:20:40,320 Speaker 1: are still still out there looking said it's not it's 377 00:20:40,359 --> 00:20:42,119 Speaker 1: not the bond market that I think. I don't think 378 00:20:42,119 --> 00:20:43,800 Speaker 1: can damage it, but I do think that where that 379 00:20:43,920 --> 00:20:48,000 Speaker 1: feeds through is emerging markets have been holding up to 380 00:20:48,040 --> 00:20:53,360 Speaker 1: a degree because of low yields and low and two 381 00:20:53,440 --> 00:20:56,600 Speaker 1: things could hurt high yields or weaker growth because in 382 00:20:56,720 --> 00:21:00,240 Speaker 1: the end we could growth usually wins that fight. You've 383 00:21:00,280 --> 00:21:03,320 Speaker 1: seen this in the last hours of trading, Kitchu, thank 384 00:21:03,359 --> 00:21:16,680 Speaker 1: you so much. Suck in as well. I want to 385 00:21:16,720 --> 00:21:22,200 Speaker 1: make this clear to Global Bloomberg Surveillance, all of you listening. Lisa, 386 00:21:22,880 --> 00:21:28,520 Speaker 1: I just think I'm completely skewed on retail because of 387 00:21:28,720 --> 00:21:33,040 Speaker 1: all the empty stores when I walk or drive around 388 00:21:33,040 --> 00:21:37,560 Speaker 1: New York City. Yeah, there has been transformation with New 389 00:21:37,640 --> 00:21:39,920 Speaker 1: York City is its own microcostume right with the whole 390 00:21:40,080 --> 00:21:43,280 Speaker 1: leasing rates and the fact that a lot of owners 391 00:21:43,359 --> 00:21:45,440 Speaker 1: of buildings can actually write it off as a tax 392 00:21:45,520 --> 00:21:47,400 Speaker 1: loss if they don't end up having somebody in there, 393 00:21:47,480 --> 00:21:49,800 Speaker 1: rather than lower the rates. That said, there is a 394 00:21:49,920 --> 00:21:53,640 Speaker 1: shift from brick and mortar, and amid that shift, there's 395 00:21:53,680 --> 00:21:55,359 Speaker 1: so much noise that you're gonna have a lot of 396 00:21:55,400 --> 00:21:57,600 Speaker 1: people coming out and saying the retail numbers are noisy 397 00:21:57,680 --> 00:21:59,560 Speaker 1: if they're not really good. And that's sort of my 398 00:21:59,720 --> 00:22:02,240 Speaker 1: question is how reliable are some of these out points 399 00:22:02,280 --> 00:22:04,480 Speaker 1: can actually be? Why don't you ask at the house 400 00:22:04,640 --> 00:22:08,240 Speaker 1: Wells Fargo because she's informed on the emptiness of retail. 401 00:22:08,400 --> 00:22:11,840 Speaker 1: Sarah house Wells, Fargo, Security Senior Economist how much are 402 00:22:11,920 --> 00:22:15,240 Speaker 1: people watching how closely the retail number, given the fact 403 00:22:15,320 --> 00:22:17,800 Speaker 1: that the consumer has been the main driver of the U. 404 00:22:17,880 --> 00:22:20,359 Speaker 1: S economy, Sarah, I think it's going to be a 405 00:22:20,640 --> 00:22:22,639 Speaker 1: very key point to watch this week and in the 406 00:22:22,720 --> 00:22:25,800 Speaker 1: first quarter in general, just given that we did have 407 00:22:25,960 --> 00:22:30,960 Speaker 1: somewhat softer spending too and the fourth quarter, but we 408 00:22:31,080 --> 00:22:34,600 Speaker 1: look ahead to the current quarter there we are seeing 409 00:22:34,680 --> 00:22:36,560 Speaker 1: that consumer is going to again be probably one of 410 00:22:36,600 --> 00:22:39,000 Speaker 1: the stronger areas, just given some of the production issues 411 00:22:39,080 --> 00:22:41,399 Speaker 1: that we're seeing UM with things like Boeing and the 412 00:22:41,480 --> 00:22:45,240 Speaker 1: potential supply disruptions, and so I think, you know, the 413 00:22:45,560 --> 00:22:47,960 Speaker 1: focus on the consumer. We're certainly going to keep that 414 00:22:48,520 --> 00:22:51,600 Speaker 1: um here in Q one. So the consumer accounts for 415 00:22:51,720 --> 00:22:54,480 Speaker 1: I believe about seventy of the U. S economy. That's 416 00:22:54,520 --> 00:22:58,239 Speaker 1: up from decades ago, and a lot of people are 417 00:22:58,280 --> 00:23:00,359 Speaker 1: saying that this has been the stal war of the 418 00:23:00,440 --> 00:23:04,520 Speaker 1: economic cycle. How much longer can that overcome the weakness 419 00:23:04,600 --> 00:23:08,440 Speaker 1: that we're seeing in the industrials elsewhere, especially in light 420 00:23:08,480 --> 00:23:11,280 Speaker 1: of what we're seeing with the spread of the coronavirus. Well, 421 00:23:11,320 --> 00:23:13,320 Speaker 1: I think it can for for a good bit here, 422 00:23:13,359 --> 00:23:15,240 Speaker 1: in part because if you look at what's happening with 423 00:23:15,440 --> 00:23:19,600 Speaker 1: real income growth, so that's still growing north of two percent. 424 00:23:19,760 --> 00:23:21,920 Speaker 1: So even if we get somewhat of a downshift here, 425 00:23:21,960 --> 00:23:24,080 Speaker 1: I think given that you know, as you say about seventy, 426 00:23:24,480 --> 00:23:27,640 Speaker 1: the economy is you know, fundamentally still able to grow 427 00:23:27,720 --> 00:23:30,080 Speaker 1: at two percent. Never mind the fact that the saving 428 00:23:30,160 --> 00:23:32,119 Speaker 1: dree is about twice as high as as what we 429 00:23:32,200 --> 00:23:35,720 Speaker 1: saw in the last cycle, and households generally don't have 430 00:23:36,200 --> 00:23:38,359 Speaker 1: um nearly as much debt as they have and in 431 00:23:38,480 --> 00:23:41,399 Speaker 1: prior expansions. I mean, this can go on for for 432 00:23:41,520 --> 00:23:43,440 Speaker 1: a good bit. But of course, if we get a 433 00:23:43,560 --> 00:23:46,520 Speaker 1: much bigger hit to the manufacturing and industrial side of 434 00:23:46,560 --> 00:23:52,239 Speaker 1: the economy, as potentially these coronavirus issues UM compound, then UM, 435 00:23:52,400 --> 00:23:54,760 Speaker 1: then then the situation gets tougher and you're looking at 436 00:23:54,840 --> 00:23:58,119 Speaker 1: potentially a sub two percent GDP number this year. I mean, Sarah, 437 00:23:58,280 --> 00:24:00,639 Speaker 1: you lead your note with Michael McKees for favored survey, 438 00:24:00,720 --> 00:24:02,960 Speaker 1: which is the Jolts survey. I think a lot of 439 00:24:03,000 --> 00:24:05,720 Speaker 1: our listeners aren't familiar with that. Tell us about job 440 00:24:05,840 --> 00:24:10,240 Speaker 1: openings and labor turnover surveys. Why are they availue and 441 00:24:10,359 --> 00:24:14,080 Speaker 1: what do they say right now? Well, they're they're great 442 00:24:14,200 --> 00:24:17,520 Speaker 1: value in terms of looking at the early early signs 443 00:24:17,560 --> 00:24:20,919 Speaker 1: of how demand for labor is changing, and I think 444 00:24:20,960 --> 00:24:23,119 Speaker 1: the Jolt survey has in many ways been one of 445 00:24:23,200 --> 00:24:25,840 Speaker 1: the weaker data points for the labor market, where you 446 00:24:25,920 --> 00:24:29,760 Speaker 1: have openings down roughly a twenty month low, and so 447 00:24:30,080 --> 00:24:33,080 Speaker 1: we are seeing signs that as the economy has slowed 448 00:24:33,119 --> 00:24:36,479 Speaker 1: over the past year, demand for labor has downshifted. Now 449 00:24:36,560 --> 00:24:39,439 Speaker 1: you're still seeing companies hold onto those workers, evidence by 450 00:24:39,480 --> 00:24:42,920 Speaker 1: the fact that jobless claims are essentially moving sideways, but 451 00:24:43,080 --> 00:24:45,520 Speaker 1: it does point to a downshift in in hiring in 452 00:24:45,600 --> 00:24:49,040 Speaker 1: the coming months, which will likely translate into a downshift 453 00:24:49,119 --> 00:24:51,760 Speaker 1: in an income growth as well. Sarah, as we talk 454 00:24:51,920 --> 00:24:54,760 Speaker 1: about the economic data coming out, President Trump came out 455 00:24:54,800 --> 00:24:57,680 Speaker 1: with a four point eight chrillion dollar budget and one 456 00:24:58,000 --> 00:25:00,520 Speaker 1: sort of aspect of this among the huts that he 457 00:25:00,640 --> 00:25:03,800 Speaker 1: had in place was a deepening of the deficit. Well 458 00:25:03,920 --> 00:25:07,160 Speaker 1: that matter at all going forward for the economy, because 459 00:25:07,280 --> 00:25:10,000 Speaker 1: right now it seems like people have thrown the playbook 460 00:25:10,040 --> 00:25:12,440 Speaker 1: out the window, saying that deficits kind of don't matter 461 00:25:12,480 --> 00:25:15,280 Speaker 1: anymore in terms of jacking up taxes and jacking up 462 00:25:15,400 --> 00:25:19,840 Speaker 1: interest rates. Yeah, apparently they don't matter until the political 463 00:25:19,920 --> 00:25:22,399 Speaker 1: winds shift and they do again or or potentially the 464 00:25:22,480 --> 00:25:25,760 Speaker 1: financial market wins shift as as well. So I think 465 00:25:25,880 --> 00:25:28,879 Speaker 1: while it doesn't seem like there's been much concerned about 466 00:25:28,920 --> 00:25:32,360 Speaker 1: it from Washington lately or in many ways, and concerns 467 00:25:32,400 --> 00:25:34,679 Speaker 1: and financial markets where you know, if you look at 468 00:25:34,720 --> 00:25:38,480 Speaker 1: where US rates are, clearly no trouble financing that that 469 00:25:38,640 --> 00:25:41,639 Speaker 1: debt right now, but you know, things things can change, 470 00:25:41,720 --> 00:25:45,120 Speaker 1: so you could end up getting more sovereign neet issue 471 00:25:45,200 --> 00:25:48,920 Speaker 1: ins out of other parts of the world, and so um, 472 00:25:49,200 --> 00:25:52,720 Speaker 1: you know, is this you know, can we do this 473 00:25:53,000 --> 00:25:55,080 Speaker 1: as far as the eye can see? Probably not. And 474 00:25:55,160 --> 00:25:56,840 Speaker 1: of course there's going to be offsets in terms of 475 00:25:56,920 --> 00:25:59,320 Speaker 1: what we're spending, in terms of those those interest out 476 00:25:59,400 --> 00:26:02,000 Speaker 1: ways which are a limit perhaps how we can be 477 00:26:02,480 --> 00:26:04,920 Speaker 1: be spending some of that money towards towards more productive 478 00:26:05,000 --> 00:26:07,280 Speaker 1: uses and raising productivity where you can get a higher 479 00:26:07,359 --> 00:26:11,040 Speaker 1: run rate of GDP. Sarah, let's talk about the prospect 480 00:26:11,080 --> 00:26:13,760 Speaker 1: of higher run rate for GDP. The assumption is coming 481 00:26:13,760 --> 00:26:15,719 Speaker 1: from the White House at the moment and its annual 482 00:26:15,800 --> 00:26:20,080 Speaker 1: budget proposal, the White House proposal for fiscale looking for 483 00:26:20,160 --> 00:26:23,480 Speaker 1: GDP growth a three point one in the fourth quarter 484 00:26:23,520 --> 00:26:27,760 Speaker 1: of this year followed by three pc expansion in one 485 00:26:27,840 --> 00:26:30,600 Speaker 1: Can we really get back to that elusive three handle, Sarah? 486 00:26:31,680 --> 00:26:35,240 Speaker 1: I think it does remain fairly fairly elusive when you 487 00:26:35,320 --> 00:26:38,639 Speaker 1: just look at what are the under underlying fundamental so 488 00:26:39,160 --> 00:26:40,960 Speaker 1: UM productivity is of course a little bit of a 489 00:26:41,000 --> 00:26:43,119 Speaker 1: wild card. We do have a lot of great technology 490 00:26:43,280 --> 00:26:46,440 Speaker 1: coming on online. But in terms of UM, whether we 491 00:26:46,560 --> 00:26:49,800 Speaker 1: can get sort of that broad commercial commercialization of it 492 00:26:49,920 --> 00:26:52,760 Speaker 1: like we saw with you know, personal computers and in 493 00:26:52,840 --> 00:26:56,160 Speaker 1: the mid mid to late nineties finally coming on board 494 00:26:56,440 --> 00:26:58,680 Speaker 1: remains a big question mark. And but what we do 495 00:26:58,800 --> 00:27:01,080 Speaker 1: have a lot more clarity on is the labor supply. 496 00:27:01,680 --> 00:27:03,320 Speaker 1: And you know, if you look at what's happening in 497 00:27:03,520 --> 00:27:07,880 Speaker 1: terms of your your prime age workers, um, you're you're six, 498 00:27:08,240 --> 00:27:11,119 Speaker 1: basically they're they're growing about a quarter of a percent 499 00:27:11,480 --> 00:27:14,399 Speaker 1: a year coming up here, and so you know that 500 00:27:14,680 --> 00:27:19,080 Speaker 1: that says you need a massive rebound in in participation. Well, 501 00:27:19,119 --> 00:27:21,919 Speaker 1: we've already gotten a nice recovery there. How much how 502 00:27:22,000 --> 00:27:24,479 Speaker 1: much higher can this go? UM? I think that's that's 503 00:27:24,520 --> 00:27:27,119 Speaker 1: still a big question mark hanging over, hanging over the 504 00:27:27,200 --> 00:27:30,679 Speaker 1: labor supply and therefore potential growth. I'm afraid to ask 505 00:27:31,080 --> 00:27:35,720 Speaker 1: how what age is a prime age worker? Well, we'll 506 00:27:35,760 --> 00:27:40,200 Speaker 1: just use the BLSS definition and let's say fifty four, 507 00:27:40,400 --> 00:27:47,080 Speaker 1: so just at the upper end. John Sylvia would have 508 00:27:47,119 --> 00:27:50,240 Speaker 1: answered this, Uh, Sarah with Morgan, he said, Tom, you'd 509 00:27:50,320 --> 00:27:54,479 Speaker 1: be prime Love. I'm going to go to an official 510 00:27:54,560 --> 00:27:59,080 Speaker 1: definition according to the trying to stay attitude, silver points 511 00:27:59,160 --> 00:28:02,440 Speaker 1: this morning Santa right to catch every you we gotta 512 00:28:02,480 --> 00:28:05,240 Speaker 1: leave it at Santa House. Thank you, particularly on Joel's 513 00:28:05,359 --> 00:28:10,960 Speaker 1: Security Economist. Thanks for listening to the Bloomberg Surveillance podcast. 514 00:28:11,359 --> 00:28:16,280 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 515 00:28:16,440 --> 00:28:20,720 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 516 00:28:20,880 --> 00:28:24,679 Speaker 1: Keane before the podcast. You can always catch us worldwide. 517 00:28:25,200 --> 00:28:26,240 Speaker 1: I'm Bloomberg Radio.