Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg From
Speaker 1: Morgan Stanley joining us in New York. Jennifer's around. Jennifer,
Speaker 1: go through the numbers for me. What are we looking at? UM? Well,
Speaker 1: I think the first number everyone likes to look at
Speaker 1: his fixed income trading, and that was a little bit
Speaker 1: of a miss. They came in at eight eight million.
Speaker 1: Analysts were thinking it would be closer to one point
Speaker 1: two billion UM, and so you know, that's been the
Speaker 1: case across Wall Street. You know, yesterday Goldman also reported
Speaker 1: a miss UM. Now this has been like an ongoing competition.
Speaker 1: We'regan Stanley really gay eating some ground on Goldman UM
Speaker 1: and it seems like maybe they slipped a little bit
Speaker 1: this quarter. Uh, but they're up in early trading, and
Speaker 1: so I'm thinking that people have kind of shifted their
Speaker 1: focus a little bit UM and looked at their wealth
Speaker 1: management unit, which posted both record income and record revenues
Speaker 1: UM that you know, James Gorman made this huge back
Speaker 1: back in two thousand nine when he bought Smith Barney,
Speaker 1: and it seems like maybe that's starting to show the results.
Speaker 1: And Jennifer Morgan Stanley of course less dependent on Fick
Speaker 1: trading revenue than say a Goldman Sacks, much more dependent
Speaker 1: on the equity side of the bank, and equity sales
Speaker 1: and trading revenue coming in at one ninety two the
Speaker 1: estimate at one point eight nine billions, So looking solid
Speaker 1: there and looking solid out swhere. James Gorman is doing
Speaker 1: a terrific job here. And we spend a lot of
Speaker 1: time talking about Jamie Diamond at JP Morgan Lloyd Blank
Speaker 1: find at Gorman Sacks. But Gorman's like the quiet man
Speaker 1: on Wall Street delivering some pretty solid results for Morgan Stanley. Yeah,
Speaker 1: he has a strong bench, you know. He um he
Speaker 1: promoted Ted pick there Um he's now their global head
Speaker 1: of sales and trading after Ted pick Uh turned around
Speaker 1: the equities business. And it seems like he just knows
Speaker 1: who to surround himself with. Maybe and so uh that
Speaker 1: unit has actually um, like I said, gained ground on
Speaker 1: Goldman in the last couple of years. And Um is
Speaker 1: it's really starting to show the results that the bank
Speaker 1: had promised. Is it fair to say, Jennifer that Morgan
Speaker 1: Stanley is more of a UBS than it is a
Speaker 1: Goldman Sax? Are we not there yet? I don't think
Speaker 1: we're quite there yet. I mean, I still think, um,
Speaker 1: I think it's still a trading shop. I think, I mean,
Speaker 1: obviously wealth management has become increasingly important to the bank, UM,
Speaker 1: but I think that they are still um, still thought
Speaker 1: of as a trading shop, at least by investors. Bloom
Speaker 1: Bug's very young Jennifer surrounded by investors this morning some
Speaker 1: confidence after the numbers. The stock up by around about
Speaker 1: one four percentage point in the pre market. I'm Jonathan
Speaker 1: Farao in New York City for Bloomberg Surveillance over in
Speaker 1: the city of London all week. Bloomberg's Tom kink and
Speaker 1: morning Mr king A. You're morning, John Farrell. Interesting to
Speaker 1: see Morgan Stanley there off of Goldmen Sex yesterday. It'll
Speaker 1: be sliced and dice to the day. But really what
Speaker 1: this is about, whether you are part of global Wall Street,
Speaker 1: whether you're just an informed investor, or we think all
Speaker 1: of you listening across a bite body of age groups. Uh.
Speaker 1: And I've run into a lot of people John in
Speaker 1: London who you know, they're not really in the game,
Speaker 1: but they just love listening to us and we say
Speaker 1: good morning. And we do that with Bill Blaine of
Speaker 1: Mint Partners, and we can go right to the heart
Speaker 1: of the matter, Bill Blaine, which is whether it's Morgan
Speaker 1: Stanley or somebody listening on the street seventy miles north
Speaker 1: of London, it's about volatility. There's no volve there, there's
Speaker 1: no alpha, there's no dampening, there's no opportunity. The economists
Speaker 1: would say it comes down to lower potential g d P.
Speaker 1: Is this something we need to get used to? Well,
Speaker 1: that's fair. And you mentioned volatility because just the last
Speaker 1: few days, in the beginning of last week and into
Speaker 1: this week, we are actually beginning to see volatility slightly
Speaker 1: taking up and that's going to present all kinds of opportunities,
Speaker 1: but also leaves people with an awful lot of work
Speaker 1: to do to make sure them the right side of
Speaker 1: that volatility. If it's going to continue increasing, I think
Speaker 1: we're in to something of a new market. Well, we're
Speaker 1: you know, in something of a new market. And I
Speaker 1: guess there's a quiet tour. How does Global Wall Street?
Speaker 1: How does the city? How does New York? How does
Speaker 1: Hong Kong? How do they adapt to this? Do you
Speaker 1: say to Jim Gorman, James Gorman over at Morgan Stanley
Speaker 1: or Lloyd Blank find this is a one off, it's
Speaker 1: a cyclical thing. You keep the game going, or do
Speaker 1: you start to really make structural structural changes in institutional
Speaker 1: Wall Street, institutional Wall Street of courses or as you
Speaker 1: call it, we would call it the city of London.
Speaker 1: Of course. Um, it's always changing, it's always adapting. Here
Speaker 1: in Europe, we're coping with the effects of the imposition
Speaker 1: and new trading rules. Method to market makers and investment
Speaker 1: banks all around the world are going to have to
Speaker 1: change when it comes to dealing with European clients in
Speaker 1: terms of the way they structure of their own business. Though,
Speaker 1: they are going to be preparing for this usual cyclicality
Speaker 1: we see in in trading fixed income, in commodities. Um results,
Speaker 1: We're going to see banks re establish themselves in different
Speaker 1: areas to try and take advantage of where they perceive
Speaker 1: that market going at the moment. You're absolutely right. The
Speaker 1: numbers have been very poor right across the board, but
Speaker 1: they will improve. Bill, who's getting this right right now,
Speaker 1: whether they're in Europe or on Wall Street in the
Speaker 1: United States? Which bank, which CEO has got this right?
Speaker 1: Given the current regime we're working our way through. I
Speaker 1: don't think anyone really has it perfect yet. And it's
Speaker 1: very interesting to see that, John, because we are in
Speaker 1: this period that Tom's just described where zero ball has
Speaker 1: created this massive downturn and thick incomes. It's the person
Speaker 1: who can anticipate best and be positioned for the uptick
Speaker 1: when it comes. Now, when that up case tick comes
Speaker 1: is the absolute question. Is it going to be a
Speaker 1: result of the inflation we were talking about earlier? Is
Speaker 1: it going to be a result of the of a
Speaker 1: suddenly discovering that far from global aligned macro growth, we
Speaker 1: actually roll into some kind of recession which would trigger
Speaker 1: all kinds of market events. These are all vole creating events,
Speaker 1: and that's when the smarter trading desks are going to
Speaker 1: be able to contribute substantial profits to the right investment bank.
Speaker 1: And of course that has ever thus been the problem. Well,
Speaker 1: so arguably Bill that's Goldment Sex ready to go leverage
Speaker 1: to a pickup involved when that story comes around Goldment
Speaker 1: Sex just deliver. But many people are questioning the firm strategy. Bill,
Speaker 1: do you question the firm strategy or are you saying
Speaker 1: that Lloyd's doing this right quite patiently in the coming
Speaker 1: chord as things will change. Good good opera. Good call
Speaker 1: to try and get me to comment on any of
Speaker 1: the banks individually, But I don't think it would be
Speaker 1: fair for me to comment at any one bank in particular.
Speaker 1: But it is fair to say that the shall we say,
Speaker 1: the benches on all the investment banks have changed in
Speaker 1: recent years. I certainly pick up from the class bants
Speaker 1: we speak to in my company is a large brokerage,
Speaker 1: but from the client's way speak to, they are finding
Speaker 1: that the service that they're getting from the investment banks
Speaker 1: over the last few years has changed. And that's because
Speaker 1: the investment banks don't want the high costs of having older,
Speaker 1: very expensive managers in place. They want to have younger,
Speaker 1: cheaper graduates doing the calls. They also want to cut
Speaker 1: down on the risk that they are willing to cover
Speaker 1: or to carry, and that's also been reinforced by the
Speaker 1: trading rules that have been put on them by the
Speaker 1: central banks and regulatory authorities, and as a result, the
Speaker 1: banks are far less responsive to change and many of
Speaker 1: them look tired. As one of my clients said recently,
Speaker 1: that opens up loads of new opportunities for people to
Speaker 1: look at alternative ways of trading very quickly. Here and Sterling,
Speaker 1: do you ever call? We had a huge variation on
Speaker 1: the shows, Right and Sterling. One of the very interesting
Speaker 1: things is despite all the negativity in the UK out
Speaker 1: Brexit and the Karelian event this week, Starling is strong.
Speaker 1: Why is that? I think it's because people are looking
Speaker 1: past the immediate news and are looking forward to the
Speaker 1: UK reversing the current decline that's apparent and a stronger
Speaker 1: and more productive economy and marriaging despite Brexit. Fascinating, Bill Blane,
Speaker 1: thank you so much. We've been partners for the briefing
Speaker 1: this morning on Bloomberg Radio Bloomberg Television as well. How
Speaker 1: could it possibly be that one of the most acute, sharpest,
Speaker 1: at persistent critics of modern American politics is in England?
Speaker 1: John Farrell would understand that. Of course, I'm talking about
Speaker 1: John Farrell. I'm also talking about Brian Class. He's at
Speaker 1: the London School of Economics. He made a modest splash
Speaker 1: a number of years ago. The Despot's accomplice followed it
Speaker 1: up with Donald Trump's attack on democracy, uh aging eight
Speaker 1: weeks ago. It seems forever when you're publishing on the
Speaker 1: political milieu of the day, Doctor Class. It's just extraordinary
Speaker 1: how quickly it all blurs by. If you were to
Speaker 1: rewrite the Desperates Despot's Apprenticed right now, what would the
Speaker 1: next chapter be? Uh, probably about the politicization of rule
Speaker 1: of law and the recklessness with North Korea. UM. You know,
Speaker 1: I think it is truly remarkable this moment we're in
Speaker 1: where things seem like an an eternity ago. And you know,
Speaker 1: the tweet that Trump sent out about how his button
Speaker 1: was bigger than Kim Jongon's was like nine days ago,
Speaker 1: you know, I mean, it seems like ancient history, and
Speaker 1: yet these things are political moment is moving so quickly
Speaker 1: that people can't keep up. And and what's interesting here
Speaker 1: John Farrow's ambassador Gardner was with us, the former US
Speaker 1: ambassador to the EU, and he went right to where
Speaker 1: doctor Class went to. He went right to Korea. Is
Speaker 1: the issue of the moment and R Class, so think
Speaker 1: you bring up a really good point. Not only does
Speaker 1: nine days ago feel like a distant memory, I think
Speaker 1: we've become obsessed around very specific things that maybe aren't
Speaker 1: too significant. So we become obsessed by a book called
Speaker 1: called Far and Fury and the relationship between the President
Speaker 1: of the United States and Mr Bannon. In the meantime,
Speaker 1: things are happening behind the scenes that don't get attention.
Speaker 1: So my question to you, Brian, it's quite simple, what
Speaker 1: are we missing whilst we're distracted by things that might
Speaker 1: not mean too much. So I think what we're missing
Speaker 1: is the fact that there is a huge risk of
Speaker 1: an unpredictable crisis emerging. So every US president in modern
Speaker 1: history is dealt with one shortly after taking office. President H. W.
Speaker 1: Bush dealt with the fall of the Berlin Wall. Clinton
Speaker 1: dealt with the Rwanan genocide and the black Hawk Down
Speaker 1: incident in Somalia. Then you have George W. Bush with
Speaker 1: September eleven, and Obama had to deal with the financial meltdown.
Speaker 1: Trump has amazingly made it about a year without any
Speaker 1: major severe international crisis that just dropped in his lap.
Speaker 1: And I think, you know, the world is a tumultuous
Speaker 1: and dangerous play and that's where the stories like Fire
Speaker 1: and Fury actually come into play as relevant. Is they
Speaker 1: show that, Okay, what happens when this person who is
Speaker 1: clearly reckless, impulsive, and has serious questions about their fitness
Speaker 1: for office swirling around them even within their own party,
Speaker 1: has to deal with a major, serious, consequential international crisis.
Speaker 1: And that's where I think we are sort of just
Speaker 1: deluding ourselves to believe that there will be no consequences
Speaker 1: to this presidency. So, Brian, I was listening to Gillian
Speaker 1: Tett at the Financial Time Speak a couple of nights ago,
Speaker 1: and she compared the current situation to an Agaca Thristy novel,
Speaker 1: whereby there's a big noise in the kitchen and everyone
Speaker 1: rushes towards the kitchen, but the murder takes place in
Speaker 1: the library, and we're constantly distracted by what's handing in
Speaker 1: the kitchen, but ultimately what is handling in the library
Speaker 1: is much more significant. Does that resonate with you too, Brian?
Speaker 1: So yes, and no. I mean I think that absolutely
Speaker 1: we are distracted by small things, but I think that
Speaker 1: the small things captivate us because they speak to this
Speaker 1: larger truth, which is that the person in charge of
Speaker 1: the United States is both out of step with democratic
Speaker 1: values in the United States and is clearly unfit to
Speaker 1: be president. I mean, it's it's something where there's an
Speaker 1: it's an open secret in Washington, and I don't even
Speaker 1: think it's that shocking of a claim to say that. Privately,
Speaker 1: most Republicans would agree with that sentiment, and then they
Speaker 1: would publicly say something different. But it's a democracy, and
Speaker 1: you're really, you know, we're buying everybody says he Isn't
Speaker 1: he like forty years older than he is. I mean,
Speaker 1: you're the young turk of democratic analysis. To the supporters
Speaker 1: of the president, the guy won, he did, And I
Speaker 1: think it's important that the message he used resonated with people, right.
Speaker 1: I think there's absolutely legitimate grievances that Trump tapped into
Speaker 1: about the state of the economy and all of the
Speaker 1: aspects of his presidency that resonate with those people are important.
Speaker 1: But I think there's also a factor of democracy where
Speaker 1: you have to also, once you're in power, respect the
Speaker 1: norms of the system, which he does not do um
Speaker 1: And so I think, you know, over the long term,
Speaker 1: this recklessness, this abuse of democratic norms, basic checks and
Speaker 1: balances that he's engaging in are meaningful. When does the
Speaker 1: third book come out? Actually, I have another book coming
Speaker 1: out and that that I co wrote with Professor Nick
Speaker 1: Cheeseman in Birmingham called How To Rigging Election about election
Speaker 1: rigging around the world. So it's a it's it's excuse
Speaker 1: we saved the punchline. Did we rigged the election in
Speaker 1: the United States? Looking back? So there wasn't election rigging
Speaker 1: in the United States, but I think that there was.
Speaker 1: There's a chapter on international election medaling and hacking, which
Speaker 1: is going to become the new normal. I mean, I
Speaker 1: just saw jerry mandering folks in the southern part of
Speaker 1: the United States where the congressman put his summer home
Speaker 1: into the new district. He did a little that's positively British.
Speaker 1: So jerry mannering is a huge problem. And one of
Speaker 1: the things that I think is the hidden story about
Speaker 1: how polarization has taken root in American politics and going
Speaker 1: to have consequences related to it for a long time,
Speaker 1: is that the average margin of victory in two sen
Speaker 1: was mostly uncompetitive elections. We're so happy to have you
Speaker 1: into our London offices. Professor Class Brian Class look for him,
Speaker 1: particularly out on Twitter, with whether you agree or disagree
Speaker 1: with them doesn't matter, It's just an intelligent newsflow of
Speaker 1: debate and dialogue on these too much was times in China.
Speaker 1: The big story the economy ceiling its first full year
Speaker 1: acceleration since twenty ten. There's one man I always like
Speaker 1: to go to to talk China and his name is
Speaker 1: Don stress Sign. He was for twelve years the former
Speaker 1: Merrill Lynch Global Chief Economists. Then Mike milk and called
Speaker 1: and he became the president of the Milken Institute. He
Speaker 1: has now the ever core I s I Senior Managing
Speaker 1: Director for China. Specifically, don't great to have you with
Speaker 1: us on the program to get your insight into numbers
Speaker 1: that a lot of people are always confused by, or
Speaker 1: what do you make of Chinese GDP figures at the moment? Well,
Speaker 1: first thing I'd say, Jonathan is they've been roughly flat
Speaker 1: now for six years in a row. We go up
Speaker 1: and down in that tenth or two. This is implausible
Speaker 1: given all the things that have happened in China and
Speaker 1: happened around the world in markets that they serve. So
Speaker 1: we read these numbers quite frankly with a sense of
Speaker 1: obligation more than a sense of to learn that we're
Speaker 1: going to learn anything. It doesn't make sense just looking
Speaker 1: in from thirty five feet that you can have the
Speaker 1: prospect of a real heart landing and growth. So o,
Speaker 1: kate in real concerns about how they're going to sort
Speaker 1: out the debt pile and then growth. So Kate, what's
Speaker 1: happening Tom? What leave is they pulling that makes things okay? Well,
Speaker 1: it is a command and control economy. Chinese economy was
Speaker 1: terrible in two thousand and fifteen, much worse than they
Speaker 1: ever reported. Uh. They did a lot of stimulus in
Speaker 1: their own political interest anticipating the party congress and the
Speaker 1: handover in the end of seventeen, so that lifted the
Speaker 1: economy a lot. In Uheen. A lot of that was
Speaker 1: infrastructure spending. You can't build a subway in a year.
Speaker 1: There are five year projects. So there's still some of
Speaker 1: that going. But the longer term prospects are for China's
Speaker 1: growth rate to slow year after year after year. So
Speaker 1: don't we have these dead issues kind of bubbling underneath
Speaker 1: the economy. But at the same time, I was told
Speaker 1: that they would shift from the old economy dependent on
Speaker 1: exports to the world, to an economy the new economy,
Speaker 1: domestic consumption, et cetera. I still see a pronounced move
Speaker 1: in the old economy and export based growth through Is
Speaker 1: that what you see? Two exports contributed more in seventeen
Speaker 1: than they did in in China. That part is true.
Speaker 1: But they also are making big changes within the industrial sector.
Speaker 1: Coal is going to zero, not just in China, worldwide.
Speaker 1: That's important. The steel industry is going to migrate ninety
Speaker 1: percent out of China over the next two or three
Speaker 1: decades to lower wage countries India, Bangladesh, India all the
Speaker 1: way to Africa. So they're going to have issues with
Speaker 1: what are we gonna do with these people? The fifty
Speaker 1: five year old guy that's been working at Wuhan Steel
Speaker 1: for twenty years is not going to get hired by Okay,
Speaker 1: we've gotta rip up the script here. I mean what
Speaker 1: you always do with When do I ever talked to
Speaker 1: down strats Im, folks were having ripped up the script.
Speaker 1: But we're doing it right now. You just said China
Speaker 1: is gonna lose steel jobs. Professor Navarro out of Irvine,
Speaker 1: Secretary Ross down in Washington on his way to Dabas
Speaker 1: with the President all just set up as they listened
Speaker 1: to surveillance and said, yeah, because those jobs are coming
Speaker 1: back to the United States. But that's not what you
Speaker 1: said down strats. I'm critique the naivete of a bipartisan
Speaker 1: labor dynamic and manufacture ring between the United States and China,
Speaker 1: given all of the multilateral realities of global labor um
Speaker 1: I think what's going to happen, Tom, is you're going
Speaker 1: to see this big push in China to the high
Speaker 1: end uh high value added manufacturing. They call it made
Speaker 1: in China. So the irony of this is the US,
Speaker 1: Northern Europe, Japan to some extent Korea have made their
Speaker 1: money in the last forty years at the top end
Speaker 1: of manufacturing all the high tech stuff. Now China says, okay, look,
Speaker 1: these are the industries that we, China want to become
Speaker 1: globally dominant in and have an oligopoli staten enterprises that
Speaker 1: are globally efficient. I find that that difficult. But they're
Speaker 1: setting up this competition that's going to make the US
Speaker 1: and Japan and Northern Europe very angry. So okay, let
Speaker 1: me translate that into time. King talk. China wants to
Speaker 1: do a little Switzerland. Can you do that within a
Speaker 1: totalitarian regime? UM, the the the the the great question,
Speaker 1: do the obvious it's the only good one of the day.
Speaker 1: Jonathan doesn't say that anyway, it's the only um Uh.
Speaker 1: They will use a lot of subsidies, a lot of
Speaker 1: UM special favors to lift those companies that they want
Speaker 1: to become globally dominant UM as a replacement quite frankly
Speaker 1: for the innovation and the entrepreneurship UM that you would
Speaker 1: find in a modern market economy. And they have quite frankly,
Speaker 1: I think no interest. So don't we have a situation
Speaker 1: set up? And Thomas Rudi and pulled question, we have
Speaker 1: a situation where the United States wants their jobs back
Speaker 1: in the old world, the old manufacturing world, and the
Speaker 1: Chinese are sank Okay, well, we've got a problem with that,
Speaker 1: but maybe you can take them because actually we'd like
Speaker 1: your value added manufacturing jobs. Anyway. That to me just
Speaker 1: spoused tension for years and years to come. How is
Speaker 1: this going to play out? Because the big fit coming
Speaker 1: into was trade protection is m more specifically from the
Speaker 1: U S side. But does the US have a case
Speaker 1: here that it needs to protect itself from an overreach
Speaker 1: from China. That's sank. We're coming after your jobs, the
Speaker 1: big ones, the wow paid jobs. I don't think Washington
Speaker 1: realizes yet that it is the jobs that the us
Speaker 1: UH favors that China once and they're all upset. We're
Speaker 1: gonna bring callback, We're gonna ring back, go steal jobs
Speaker 1: in Erie, Pennsylvania wherever, um, China is gonna say on
Speaker 1: those baker and the jobs that we think are going
Speaker 1: to be favored that we want are the ones that
Speaker 1: China wants to. This is a This is going to
Speaker 1: be a big tension builder. Washington says, only America first.
Speaker 1: She's in pink, says party first. So we have this
Speaker 1: situation now in which nobody is really thinking market economy.
Speaker 1: She's been pink. Surely is not okay. Don't you hung
Speaker 1: on every word at Davos last year when President she
Speaker 1: spoke review for US. Now is a great Chinese authority?
Speaker 1: What did the president of China say that President Trump
Speaker 1: has to bounce off of this year? Um. What he
Speaker 1: said was we China are prepared and ready to take
Speaker 1: over the global economic leadership. That Washington seems to no
Speaker 1: longer want Now this was before as you know this,
Speaker 1: you go there before the inauguration and before the only
Speaker 1: America first UH speech. My my feeling is, uh, Washington
Speaker 1: doesn't want to be the global leader and China is
Speaker 1: incapable of it. You can't be a leader unless you
Speaker 1: have followers. And I know of few countries that matter
Speaker 1: that I think that economic leadership, uh, that's being the
Speaker 1: economic behavior in China is something that they want to emulate.
Speaker 1: This has been hugely valuable, Down Stress, I'm thank you
Speaker 1: so much. Um. It will really focus us some. I
Speaker 1: feel we'll be talking to Dr Stress sim more in
Speaker 1: the coming weeks as well. It is an important survey
Speaker 1: from a conference word Bart van arc Worth, that's right
Speaker 1: now on the mood of CEOs. It's something they routinely
Speaker 1: trot out, except this year. It goes to the heart
Speaker 1: of the great American debate. Bart van ark Is decades
Speaker 1: of experience, not only a parsing economics of America, but
Speaker 1: linking that into what the conference board does, which is
Speaker 1: the behavioral mood, if you will, of what's going on. Bart,
Speaker 1: let me get right to the chase. We all know
Speaker 1: labor is tight. Why don't they just raise the wages?
Speaker 1: Good morning told me. Yeah, I think that's that's one
Speaker 1: of the big questions. Why don't we do move faster
Speaker 1: in wage increases. Look, I think the issue was there
Speaker 1: were still enough people on the sidelines too to be
Speaker 1: able to continue without wage increases. But frankly this is
Speaker 1: going to change. What we see in this year survey
Speaker 1: on CEO and CC challenges is that shortage of talent
Speaker 1: in particular, so the higher end of the skill range
Speaker 1: is now the top concern for CEO. Why don't they
Speaker 1: raise pay Is Is it they addicted to the tenure,
Speaker 1: economic slowdown, labor supply access and they just can't change
Speaker 1: the habit. Is there something different this time? You know,
Speaker 1: we've come out of every other slowdown. Yeah, you know,
Speaker 1: I think there's still Another thing that we find in
Speaker 1: this survey is that there's an incredible hope that new
Speaker 1: technology and disruptive technology. It's the second important most concern
Speaker 1: that CEOs have that that is going to sort of
Speaker 1: manage some of this. So instead of you know, rapidly
Speaker 1: ramping up wages, there was a hope that actually technology
Speaker 1: might help to resolve part of these problems. But it's
Speaker 1: clearly not good enough. That's clear, and I think wages
Speaker 1: are going to go up. That's certainly in our projections
Speaker 1: at the conference. Wore too the tightness of the labor market.
Speaker 1: We suggest they should at some point, but that has
Speaker 1: been the case for a long long time now. But
Speaker 1: my question is related to the tax built on wages.
Speaker 1: A lot of companies are choosing to play bonuses instead
Speaker 1: of raising wayses. We saw this with Apple in the
Speaker 1: last twenty four hours, a bonus of I think two
Speaker 1: and a half thousand dollar. It's time to stock. We're
Speaker 1: saying it with other companies as well. A slight lift
Speaker 1: to the minimum wage maybe, but a big one thousand,
Speaker 1: two thousand, two thousand dollar bonus. Why are they choosing
Speaker 1: to pay a one off bonus instead of a wage increase,
Speaker 1: you know, John, I think it's partly reflective of also
Speaker 1: the changes in the composition of the labor market. One
Speaker 1: of the things that we find in this survey also
Speaker 1: when we look at sort of the challenges in human capital,
Speaker 1: is that there is a very sharp move towards making
Speaker 1: use of you know, the contingent workforce. So you know
Speaker 1: those are part timers, but also outsourced and managed surfaces,
Speaker 1: and you know, taking independence and self employed on board.
Speaker 1: So I think you know CEOs and c h R
Speaker 1: o s in particular, who we also survey it here
Speaker 1: are beginning to look at all sorts of alternative ways
Speaker 1: of making use of a combination of people and talent.
Speaker 1: To be clear, by offering the bonus, you get the
Speaker 1: corporate pr in the nation's capital, but it doesn't cost
Speaker 1: you because you're still going to use contingent labor. Is
Speaker 1: that what this is about. I think there's a part,
Speaker 1: there's a part of this, but look, you know we're
Speaker 1: also One other reason why I think companies are reluctant
Speaker 1: to rage wages very rapidly is that we're sort of
Speaker 1: in this very expended phase of the business cycle. The
Speaker 1: raging wages now it's not easily to let them fall
Speaker 1: again if the economy is going to slow some time
Speaker 1: down the road. So I think I think there's a
Speaker 1: much more broader thinking about how you can make use
Speaker 1: of good talents than just by raising wages. But again,
Speaker 1: as I said, I mean the conference, what we definitely
Speaker 1: believe that wages are going to increase, particularly the higher
Speaker 1: end of the talant scale. Well you can you can
Speaker 1: you give me a percentage? I mean, is it going
Speaker 1: to be one or two percent squeezing out wage gains
Speaker 1: or is it you know, back to the sixties and seventies,
Speaker 1: where you know, things got a little while, a little effervescence, exuberant,
Speaker 1: say at least you know, if you look at the
Speaker 1: last year or so, you know, depending on what wage
Speaker 1: indicator you're looking at. In the United States, but wage
Speaker 1: increases have been between two and three percent, which is
Speaker 1: not huge, but you know it's not it's not insignificant,
Speaker 1: aren't they spread out? Bart over people going up zero
Speaker 1: or negative one and other people earnering real tangible gains. Absolutely,
Speaker 1: tom totally, And that's why that's why you're seeing this
Speaker 1: much broader approach, that that companies are taking towards the
Speaker 1: labor market at a higher end that you have to
Speaker 1: pay skill premiums, and companies are going to do this.
Speaker 1: You can just solve this by not seeing your wage
Speaker 1: bill increasing. But I do think that there is so
Speaker 1: much broader thinking about how you can combine the needs
Speaker 1: for talent with what you have to pay as a
Speaker 1: company to bring that talent. In Part finner, thank you
Speaker 1: so much for the more important news survey really quite timely.
Speaker 1: Uh and and really Johnny should say timely as well
Speaker 1: into all the surveys that we see before the meetings
Speaker 1: of the World Economic Forum. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
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Speaker 1: Tom Mean before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.