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Speaker 3: Let's take a little deeper into that labor data we
Speaker 3: got today. We're joined by Joni Biley, chief workforce analyst
Speaker 3: at She's also the chair of the American Staffing Association,
Speaker 3: So we appreciate chatting with Jony every time we get
Speaker 3: these jobs numbers. Jenny, what do you make of this
Speaker 3: number that the print right across that the you know,
Speaker 3: the surface looks really solid.
Speaker 1: Yeah, well, hello Paul and Emily. Great to be with
Speaker 1: you today. Really interesting report this morning. You know, the
Speaker 1: headline number looks very strong, you know, over two hundred
Speaker 1: and fifty thousand, and it's interesting listening to Austin Gooles.
Speaker 1: We talk about, you know, the numbers and how this
Speaker 1: might relieve you know, a lot of pressure. But I
Speaker 1: have a little bit of a different take when you
Speaker 1: dig into these numbers. You know, most of the jobs
Speaker 1: that were actually created in the month of September were
Speaker 1: in the healthcare sector and then also in the leisure
Speaker 1: and hospitality sector. Those two sectors alone had about one
Speaker 1: hundred and sixty thousand jobs created. So then if you
Speaker 1: dig into the details here, we can see, you know,
Speaker 1: construction was good, twenty five thousand jobs created, the government
Speaker 1: added thirty one thousand jobs. But then we're not seeing
Speaker 1: robust growth in many of the other sectors. And so
Speaker 1: I think that headline number can be a bit misleading
Speaker 1: when you look at the actual data that is in
Speaker 1: the Establishment survey.
Speaker 4: So what then is it telling you about the current
Speaker 4: state of the US economy when you do seem to
Speaker 4: have noticed this kind of maybe distorted picture of the
Speaker 4: labor market at least just looking at the numbers and
Speaker 4: the data that we got this morning.
Speaker 1: Yes, I think there are some sectors that are doing well.
Speaker 1: I'd like to see growth come back, you know, in
Speaker 1: the manufacturing sector, stronger numbers in the professional and business
Speaker 1: service sector. We still saw a decline in September of
Speaker 1: almost fourteen thousand jobs in the temporary help staffing sector.
Speaker 1: And that's something that I always pay attention to because
Speaker 1: it's part of the industry that I'm in. So Emily
Speaker 1: I think what it's telling me is that we're still
Speaker 1: in a soft job market. Though some of these indicators
Speaker 1: look good, and I do believe, you know, Austin did
Speaker 1: mention it, there are other indicators that are showing we're
Speaker 1: still in that soft job market. Maybe we've gotten to
Speaker 1: a point where we do have that soft landing and
Speaker 1: things will start to improve over the next few months.
Speaker 1: And I certainly hope that that is the case, But
Speaker 1: I don't think that we are out of the woods
Speaker 1: just yet.
Speaker 3: So that's a more cautious take than we've heard throughout
Speaker 3: the morning here, Joony. Just in terms of this market,
Speaker 3: as you characterize the labor markets, maybe a little bit
Speaker 3: softer than it appears here. What are people missing do
Speaker 3: you think?
Speaker 1: Well, I think if you look at the report, you know,
Speaker 1: and seeing almost eighty thousand jobs come back in leisure
Speaker 1: and hospitality, those jobs are lower leveled skilled jobs and
Speaker 1: lower wage positions. So what we're not seeing come back
Speaker 1: yet are the higher skilled, more professional positions. Certainly in
Speaker 1: the healthcare sector that remains very strong, but we're not
Speaker 1: seeing jobs like in accounting and finance and and really
Speaker 1: that stem field, which there is a strong you know,
Speaker 1: demand in the future for you know, the skilled jobs
Speaker 1: in science and engineering, but we're not seeing a ton
Speaker 1: of job creation in those sectors right now. I also
Speaker 1: is very surprised that when you look at, you know,
Speaker 1: some of the numbers in like transportation and warehousing, those
Speaker 1: numbers were very soft, which tells me we're going into
Speaker 1: the retail season. We're not seeing you know, the companies
Speaker 1: really get ready for a strong, you know, retail holiday season.
Speaker 1: We're also seeing employers that normally hire this time you know,
Speaker 1: of the year and start to ramp up for the holidays.
Speaker 1: Their projections are a bit softer of the amount of
Speaker 1: people that they are going to need. So that's where
Speaker 1: I think I take a little bit more of a
Speaker 1: cautious approach. I'm not saying that we're going to fall
Speaker 1: off cliff by any means, but we still need you know,
Speaker 1: a few more months of job growth and really start
Speaker 1: to see some of that growth come from other sectors,
Speaker 1: you know, if you know, in addition to healthcare and
Speaker 1: leisure and hospitality.
Speaker 3: All right, Jenny, thank you so much for joining us.
Speaker 3: We really appreciate getting your perspective when we try to
Speaker 3: break down some of these jobs numbers here today Jonny Biley.
Speaker 3: She's a division president at employee Bridge and she's also
Speaker 3: the chair of the American Staffing Association. So a great
Speaker 3: voice to speak to speak with on these important job stays.
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Speaker 3: Thirty again on the labor front of the print here,
Speaker 3: as Lisa was just just reporting very strong jobs or
Speaker 3: print for the non farm payrolls today, much better than expected.
Speaker 3: Some good unemployment rate numbers as well. Let's check on
Speaker 3: Ben Emmons because we want to see what this means
Speaker 3: for the Federal Reserve. Ben Emmons is a founder and
Speaker 3: chief investment officer of Fed Watch Advisors, joining us from Washington, DC.
Speaker 3: So Ben, again, a strong labor number today non farm payrolls.
Speaker 3: How do you think this Federal Reserve is going to
Speaker 3: interpret this data?
Speaker 5: Hi? Paul Well listening to Austin Goolsby, You know he
Speaker 5: does continue to indicate that more cuts coming, right, I
Speaker 5: think they feel that although these could be sometimes outliers
Speaker 5: on a multi basis, it's interesting it still happens because
Speaker 5: of the pandemic effect with all this distortion in the
Speaker 5: household versus establishment survey. It's nonetheless a labor market does
Speaker 5: show the vation. Like if you look at the median
Speaker 5: duration of unemployment and there's now risen to twenty two weeks,
Speaker 5: that's the highest since I think twenty twenty two. If
Speaker 5: you take you know, the percentage of people you know
Speaker 5: of twenty seven weeks, so long we're out of work,
Speaker 5: there's no our twenty three percent of total employed. So
Speaker 5: there's some underlying deterioration. I think this feat is keen
Speaker 5: on bringing that back in and trying to control for
Speaker 5: the worst thing of the picture given the restrictive stance.
Speaker 5: So I think the fatal could either look at this
Speaker 5: saying we have room to cut. This is a good
Speaker 5: labor market, but we can cut rage because we just
Speaker 5: have very restrictive policy to keep the labor market in
Speaker 5: good ship.
Speaker 4: I'm wondering, if you know, a lot of people talk
Speaker 4: about how monetary policy happens and comes with a lag,
Speaker 4: and yet we're only about a month after the first
Speaker 4: rate cut. So Ben, would you say that the rate
Speaker 4: cut is already working or is something else also driving
Speaker 4: the strength in the labor market right now?
Speaker 5: So I think it's part of the signaling effect from raycuts.
Speaker 5: If you step back actually going to the June July
Speaker 5: period when all that softness start to come through and
Speaker 5: the fat speaker start also look at that and start
Speaker 5: to talk about raycuts, all that signaling happened. If you
Speaker 5: look at the ISM data that's coming through now, including
Speaker 5: regional data, you see all the forward looking indicators some
Speaker 5: sort of a turn upwards, right, and that's your new
Speaker 5: orders and inventories, and that's sort of like cyclical indicators.
Speaker 5: And again bring basically back each time to Bostic, who
Speaker 5: who are so outspoken on this, saying that they're in
Speaker 5: their surveys with local businesses. They got a lot of
Speaker 5: feedback like, okay, fed, if you're going to cut rates,
Speaker 5: we're going to see a lot more sales activity, a
Speaker 5: lot of things going happening. And I think that may
Speaker 5: be a reason. Right, So in surveys it shows up.
Speaker 5: Whereas this employment report itself. I was talking to your
Speaker 5: economists and A Wong about this. There's some alternative data
Speaker 5: out there that's that indicated that that may have been
Speaker 5: a really strong month, but it could be because of
Speaker 5: just a lot of shifts happening underneath. So I think
Speaker 5: the basis points of custo that we just had that
Speaker 5: is just hitting the economy as we speak, but that
Speaker 5: may take some time for truly works through. Why this
Speaker 5: fat I think is not that they're cutting rates from
Speaker 5: here despite this number, but the signaling of cuts is
Speaker 5: interesting that is coming through the fore looking indicators.
Speaker 3: Hey, Ben, we kind of came into this morning with
Speaker 3: a reasonable likelihood that fifty basis points was on the
Speaker 3: table for the next meeting. I'm looking at the work
Speaker 3: function here and that seems to be kind of off
Speaker 3: the table. Seems to be pricing in a twenty five
Speaker 3: bas point cut in the November meeting. How do you
Speaker 3: expect the Federal Reserve to proceed over the next you know,
Speaker 3: three four to five meetings as we get into next year.
Speaker 5: Yeah, these these probabilities are so fluctuating. In Paul, like,
Speaker 5: I looked at that too. It was thirty percent before
Speaker 5: the number now dropped to seven and a half percent
Speaker 5: for fifty base point cut. So it is definitely sensitive
Speaker 5: to anything that's stronger of data, very versus the weaker
Speaker 5: of data. I think that's the mechanics of the markets.
Speaker 5: So the Fed will ultimately come down to the back,
Speaker 5: but they didn't at this meeting at this minute sound
Speaker 5: in a couple of weeks, I think they just continue
Speaker 5: to look at like where the policy is in broader
Speaker 5: sense of how restrictive it really is. And it looks
Speaker 5: since the last two CPI reposts reports the real interest
Speaker 5: rate that the fat funds rate has only risen a
Speaker 5: little further from here, so it's gotten even more room
Speaker 5: to cut rates. We get CBI on Wednesday, I believe
Speaker 5: it's probably going to be not a sole of a
Speaker 5: CPI data either, so that that real FET funds rate
Speaker 5: remains quite high, drifting towards three percent. I think that
Speaker 5: is what they're looking at to say we can take
Speaker 5: some off, so we'll keep cutting rates until at some
Speaker 5: point that does information that shows some stabilization maybe turning higher,
Speaker 5: and you're seeing the economy accelerating, really accelerating growth, what
Speaker 5: does that.
Speaker 4: Mean for investing in bonds? I mean today I'm looking
Speaker 4: at you know, the two year up fifteen point eight
Speaker 4: basis points the ten year up ten basis points. I
Speaker 4: guess those expectations that maybe the Fed is not going
Speaker 4: to cut as much. Is that bad for people trying
Speaker 4: to make money in bonds here?
Speaker 5: It could be because you know that when we were
Speaker 5: at roughly the lows on the tenure was somewhere three
Speaker 5: sixty five or so a few weeks ago. I mean,
Speaker 5: I'll almost back to four percent, right, so call it
Speaker 5: thirty five basis points of change. You know, the industry
Speaker 5: sensitivity bounds is still really high, and noted from the
Speaker 5: index duration, it's a sensitivity of interest. Rates has climbed
Speaker 5: up again since we had this decline from interst rates
Speaker 5: from the spring from April all the way into the summer.
Speaker 5: And so it does show that if you're getting a
Speaker 5: little moving rates higher, you immediately get these accruing losses.
Speaker 5: So be mindful of this volatility that's that's basically caused
Speaker 5: by this interstrate sensitivity. The short end, the yucave alwys
Speaker 5: remain a bit more attractive because the yucreve has slowly normalized,
Speaker 5: but not as much. But there's still much more yield there.
Speaker 5: That's been said a lot, but I think I say
Speaker 5: on that that that's a view too, But bouncing itself
Speaker 5: will remain at the basically at the whim of this
Speaker 5: data movement. So there's volatility in bounds that's higher than
Speaker 5: we have pre pandemic, which makes it not always that
Speaker 5: easy to go all in bounce, and that says that
Speaker 5: would be more careful with long duration bounds here.
Speaker 3: All right, Ben, thanks so much for joining us. Always
Speaker 3: appreciate getting a few minutes of your time. Ben Emmon's
Speaker 3: chief investment officer and founder at fed Watch Advisors.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple car Playing and
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Speaker 2: wherever you get your podcasts, or watch us live on YouTube. Again.
Speaker 3: The story of the day, one of the economic stories
Speaker 3: of the day is certainly that job's number and he
Speaker 3: came in really strong and non farm payroll here. So
Speaker 3: let's break it down with somebody who does this stuff
Speaker 3: for a living, Tom Gimble. He's a founder and board
Speaker 3: member of LASALM Network. LASAL is founded in nineteen ninety
Speaker 3: eight and it is one of the leading staffing and
Speaker 3: recruiting firms in the country. So this is Tom's business.
Speaker 3: Hey Tom, you guys put up being the labor markets
Speaker 3: a pretty strong data point here today.
Speaker 6: What do you make of it?
Speaker 7: Well, I think number one, I went to the UVA
Speaker 7: of the Rocky at the University of Colorado. Oh yeah,
Speaker 7: we can get if we can get a go buff's
Speaker 7: real quick.
Speaker 3: I bet go buffs, go buffs.
Speaker 7: There we go. Now listen, this report is If you're
Speaker 7: anything but optimistic after this report, you're crazy. This is
Speaker 7: an unbelievable number with unemployment dropping and higher than expected
Speaker 7: jobs numbers, and it's a really good sign for the economy.
Speaker 3: So what do you make Tom? Where a is some
Speaker 3: of this demand coming from?
Speaker 6: There are a lot of.
Speaker 3: People that want to maybe poke a little bit of
Speaker 3: a throw some shade on this to say it's a
Speaker 3: it's coming from leisure, it's coming from healthcare, and not
Speaker 3: really the higher paying jobs. How do you make the
Speaker 3: how do you when you go underneath the service? What's
Speaker 3: the what's what's it look like?
Speaker 5: Yeah?
Speaker 7: I think I always find that interesting. Right, So they
Speaker 7: would rather not have people being hired in hospitality and
Speaker 7: leisure and construction. It's it's the fact that we have
Speaker 7: consumer spending that happens at hotels and restaurants and service
Speaker 7: industries means that consumers are making more money and they
Speaker 7: have more disposable income, which is a positive sign for
Speaker 7: the economy. So that hiring is really good, and what
Speaker 7: will end up happening is that continues to fuel it.
Speaker 7: That if people are spending more than the companies that
Speaker 7: make those retail products, we'll be hiring more people at
Speaker 7: those companies and so on and so forth. And without
Speaker 7: getting too reaganesque, but it's trickled down economics, and you're
Speaker 7: going to have a situation where it keeps fueling more
Speaker 7: better employment numbers, which is exactly what we want to
Speaker 7: have happen now. The one soft spot I continue to
Speaker 7: see is in recent college grads. I'm not seeing the
Speaker 7: volume of hiring at people coming right out of college
Speaker 7: a year out as I have during other bull markets,
Speaker 7: but I think that'll change post the election.
Speaker 4: From your neck of the woods, how much are people
Speaker 4: actually talking about the Federal Reserve and the impact of
Speaker 4: rate cuts on the labor market, Because obviously at Bloomberg,
Speaker 4: we are just obsessed with every piece of data that
Speaker 4: comes out and what it means for the FED. But
Speaker 4: how much do you actually talk about it at lasal network?
Speaker 5: Oh.
Speaker 7: I think that whether it's the Sound network or the
Speaker 7: CEOs and CFOs and heads of HR that I talked
Speaker 7: to on a regular basis, the FED rate is really
Speaker 7: important to people, and I would say more on mid
Speaker 7: and large cap companies because they're looking at the cash flow,
Speaker 7: the borrowing rate, how they're going to be able to
Speaker 7: hire people, how their wages affect their bottom line, and
Speaker 7: so I think it's a really important indicator that people look.
Speaker 7: Even if people don't understand exactly what the FED rate means,
Speaker 7: they do get that when rates were really low, there
Speaker 7: was nothing stopping hiring in the economy and what's going on.
Speaker 7: So when companies see that the fed's dropping rates by
Speaker 7: fifty basis points, people get excited. Now. The biggest difference,
Speaker 7: and I've been preaching this with you guys and elsewhere
Speaker 7: for a long time, is that we have more employers
Speaker 7: in this country now than ever before. And what I
Speaker 7: mean by that is if you would have gone back
Speaker 7: sixty seventy years ago, if somebody lost their job at
Speaker 7: Ford or General Motors, they were car people. They could
Speaker 7: only get jobs at the car industry, excuse me, rebounded
Speaker 7: Today skills are so transferable due to technology, and while
Speaker 7: I think it's not going to last forever, but remote
Speaker 7: work that you can lose your job in Detroit and
Speaker 7: be working for a company in Silicon Valley as well,
Speaker 7: And so we have that opportunity, and then the startup
Speaker 7: nature that companies and individuals can raise venture money and
Speaker 7: startups that I don't think we're ever going to have
Speaker 7: an employment lag like we had in the seventies really
Speaker 7: ever Again.
Speaker 3: Tom, I guess I haven't asked you this in a while,
Speaker 3: but where are we on that whole remote work? Have
Speaker 3: we settled into a new normal? And I guess that's
Speaker 3: company by company three days, four days, five days. Where
Speaker 3: do you think it is these days?
Speaker 2: Yeah?
Speaker 7: I think right now it's three days. I still see.
Speaker 7: It still amazes me, Paul, how many CEOs are afraid
Speaker 7: they'll they'll talk to me, they'll talk to each other,
Speaker 7: and they'll God, we got to get people in, but
Speaker 7: they won't lead, they won't say it, And that to
Speaker 7: me is really the disturbing part. I think the Amazon
Speaker 7: statement last week was really powerful, and you'll start to
Speaker 7: see some follow the leader type statements coming out. I
Speaker 7: think where we're going to get to is four days
Speaker 7: a week, and some companies going five and some going three,
Speaker 7: but the average will be four. And come twenty twenty five,
Speaker 7: we're not going to remote work and people wanting that
Speaker 7: isn't gonna happen. And you're going to see when companies
Speaker 7: start to downsize, and that will happen and other companies
Speaker 7: will hire them, so it won't affect the numbers. But
Speaker 7: when you see companies lay people off, it's going to
Speaker 7: be the remote workers that get hit first.
Speaker 4: Just going back to the print that we saw this morning,
Speaker 4: hourly earnings rose four percent from a year ago, the
Speaker 4: biggest advance in four months. I'm wondering what you make
Speaker 4: of this upside surprise in wages and you know what
Speaker 4: that tells you about the strength of the labor market.
Speaker 7: Well, I think it's interesting, and I have to dive
Speaker 7: a little bit deeper into the hourly wage increase and
Speaker 7: I saw that as well. But it really comes down
Speaker 7: to you have more people working more hours, and in
Speaker 7: the retail space, it's so hard. I mean, listen, I'm
Speaker 7: in Chicago, I was in New York a few weeks ago.
Speaker 7: I was in Nashville last week. It's really when you
Speaker 7: go to a restaurant, the service is lacking because there
Speaker 7: aren't enough people. And I talked to the managers when
Speaker 7: I'm there to find out on the ground what's happening,
Speaker 7: and I think what you're seeing when you see hourly
Speaker 7: rates increase, hourly wages increasing, it's because you can't find
Speaker 7: the people, and so you got to pay a little
Speaker 7: bit more to make sure that your people stay. And
Speaker 7: if you find somebody that you're getting the best that
Speaker 7: you can get.
Speaker 3: Tom you mentioned just about college graduates still having a
Speaker 3: tough time. Why do you think that is?
Speaker 7: I think company because usually what happens with kids out
Speaker 7: of college, and I'm not talking about accounting degrees or
Speaker 7: pre law or whatever, but more liberal arts education, the
Speaker 7: massive state colleges and people coming out is that companies
Speaker 7: hire in volume, whether it's sales or marketing, or they're
Speaker 7: going to do a training class and all of that
Speaker 7: type of thing. And when you hear the sky's falling
Speaker 7: every day from both sides of the political spectrum during
Speaker 7: an election year, companies put the brakes on massive hiring
Speaker 7: at individual companies. So we're seeing sporadic hiring in small
Speaker 7: medium sized business hiring, But we haven't seen the huge
Speaker 7: uptake of late stage venture companies, private equity companies that
Speaker 7: are really pouring money into hiring and mass and that's
Speaker 7: the biggest difference I see versus twenty oh one and
Speaker 7: twenty eighteen twenty nineteen when the market was really on fire.
Speaker 4: We only have about a minute left. But what's the
Speaker 4: outlook here for job growth for the rest of the year,
Speaker 4: particularly when you take into consideration the hurricanes in the
Speaker 4: Southern United States.
Speaker 7: Yeah, well, I think that's an interesting one, and I'm
Speaker 7: sure you'll have a lot of people talking about it.
Speaker 7: My take on it is you're actually going to see
Speaker 7: a lot of additional employment in the Southeast because we
Speaker 7: need people to do the work to clean it up,
Speaker 7: and the companies that do that, whether it's the government
Speaker 7: or private industry, don't have enough body. So you're going
Speaker 7: to see a lot of hiring going on down there,
Speaker 7: and the companies that employ the people who can't get
Speaker 7: to work, those people aren't going to be fired most
Speaker 7: likely and not being filing unemployment. So I think we'll
Speaker 7: actually maybe see a spike in the October jobs report
Speaker 7: coming out that first Friday in November due to the hurricane,
Speaker 7: that we'll have a mass of people going to work
Speaker 7: in the southeast to help that situation.
Speaker 3: All right, Tom, thanks so much for joining us, as
Speaker 3: I always love talking to you on Jobs Day. Tom Gimble,
Speaker 3: he's a founder and board member of LaSalle Network, giving
Speaker 3: us a breakdown there. Obviously, he's taking a very positive
Speaker 3: take on those strong jobs numbers. And again I'm glad
Speaker 3: you put it up, Emily, the wage number, because that's
Speaker 3: been strong and it's been higher than inflation for the
Speaker 3: last almost two years now. So the real income for
Speaker 3: most of Americans after the very difficult time coming of
Speaker 3: during the pandemic, has actually been quite positive real income.
Speaker 3: So that's visa the inflation, Yeah, purchasing power there, so
Speaker 3: that is good news.
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Speaker 3: Demily Grafeo is sitting in for Alex Steel on Paul
Speaker 3: Sweeneyer live here in our Bloomberg Interactive Brokers studio and
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Speaker 3: that's where you'll find the video portion of this program.
Speaker 3: I mean, again, as Charlie, just reporting a very strong
Speaker 3: print there on the payroll data stocks hire, although they're
Speaker 3: off their highs of the day, yields moving here, particularly
Speaker 3: on the short end of the curve where we've got
Speaker 3: to chew euro up nineteen basis points. How about that
Speaker 3: kid's three point eight nine the tenure run a four percent?
Speaker 3: Watch here three point nine six percent. Let's talk to
Speaker 3: somebody who actually gets paid to do this stuff. Brian Levitt,
Speaker 3: global market strategist for Investco doing the zoom thing from
Speaker 3: the home office. Good for him, Brian, what do you
Speaker 3: make of this print and how does it maybe change
Speaker 3: your alter or your view of kind of where your
Speaker 3: client should be putting money these days.
Speaker 6: It's a strong number. You know, these things will get revised,
Speaker 6: so we do take it with a little bit of
Speaker 6: a grain of salt. But it's a strong payroll number,
Speaker 6: and I do that as a good thing. It's you know,
Speaker 6: investors had been so focused on inflation. The shift really
Speaker 6: is now towards the sustainability, the resilience of growth, and
Speaker 6: so when you get a strong number like this, it's
Speaker 6: it's a positive.
Speaker 4: Now.
Speaker 6: The markets took it very favorably initially, As you mentioned,
Speaker 6: some of those gains have come back, that's cause interest
Speaker 6: rates have jumped up a lot. But I still view
Speaker 6: it as if you're in an environment where you have
Speaker 6: resilient growth and less rate cuts. So that's that's still
Speaker 6: better than weak growth and more rate cuts.
Speaker 4: So, Brian, is it fair to say then that the
Speaker 4: Fed has engineered a soft landing when you look at
Speaker 4: how the stock market is reacting and also just how
Speaker 4: strong the payroll print was today, Well, that's.
Speaker 6: The preponderance of evidence suggests a soft landing. Now, I
Speaker 6: don't think we can be absolutely certain yet, there's still
Speaker 6: some weakness too. If you notice in that report, in
Speaker 6: the payroll report, the manufacturing sector did lose jobs. We've
Speaker 6: seen some of the purchasing manager in the sas sitting
Speaker 6: below fifty for a bit here. But yeah, I mean,
Speaker 6: the preponderance of evidence still suggests a soft landing and
Speaker 6: a good backdrop for investors.
Speaker 3: So, Brian, if it is, you know, continue to be
Speaker 3: a risk on environment, how much risk stocks, bonds, credit, treasuries,
Speaker 3: how do you think about it?
Speaker 6: Yeah, if so, we've been in an environment now the
Speaker 6: leading indicators of the economy have actually been been pointing
Speaker 6: to below trend growth and we needed easing, and so
Speaker 6: easing comes along and the economy's actually been more resilient. Then, Yeah,
Speaker 6: you want to be in stocks, you want to be
Speaker 6: in riskier credit, you want to be in if you
Speaker 6: expect growth to pick up, you want to be in
Speaker 6: cyclicals and value. So it's a broadening picture. If you
Speaker 6: get the soft landing, as we suspect we will, you
Speaker 6: should see broader markets than we saw last year, and
Speaker 6: again a good backdrop for risk taking.
Speaker 4: What does broader mean? I'm thinking about an ETF house
Speaker 4: at your very own shop RSP that plays of course
Speaker 4: on the equal weight s and P five hundred. Is
Speaker 4: that where you kind of see the gains for the
Speaker 4: rest of the year or is it better to kind
Speaker 4: of stay in the market cap?
Speaker 6: Equal Weight's a great equal weight, it's a great point,
Speaker 6: and so marketcap can have long periods of outperformance. It
Speaker 6: tends to shift towards the end of a cycle, when
Speaker 6: you're going into a recession and coming out, that's when
Speaker 6: equal weight tends to do well. Now we've been in
Speaker 6: this long environment of market caap outperformance. Can we do
Speaker 6: it with a soft landing, you know, rather than see
Speaker 6: it a shift with you know, the market cap outperformance
Speaker 6: coming to the recession more along the lines of a
Speaker 6: soft landing and then a reacceleration in activity. That would
Speaker 6: be my view. We're starting to see it in some places.
Speaker 6: Small cap again having a very good day today on
Speaker 6: the expectation of this economy is in good shape. So yeah,
Speaker 6: a lot of the reason why the market cap outperformed
Speaker 6: last year is the market priced in a small cap
Speaker 6: rally or an eco boy rally in two months at
Speaker 6: the end of twenty three and then we had to
Speaker 6: back out all the rate cuts. I don't think that's
Speaker 6: the case this time. The FED is likely to continue
Speaker 6: to lower rates. So long as the economy remains resilient,
Speaker 6: then yeah, equal weight should outperform.
Speaker 3: Brian your global market strategist, So, how do you think
Speaker 3: about the US versus rest of the world.
Speaker 6: It's a little bit of a challenge here in the
Speaker 6: short term because the dollar strength and you know what
Speaker 6: you would want to see is US growth differentials moving
Speaker 6: back towards the rest of the world, US interest rate
Speaker 6: differentials moving back towards the rest of the world. Today's
Speaker 6: report throw a little bit of the challenge to that
Speaker 6: because US growth continues to look quite good, and interest
Speaker 6: rates may remain higher than many have thought, and the
Speaker 6: dollars moving up pretty significantly. So that's a little bit
Speaker 6: of a headwind to capital flowing around the world. Now
Speaker 6: you play this out over the next few years, the
Speaker 6: FED goes through it's easing cycle and rates starts to
Speaker 6: come down. Rates do come down, the dollars should weaken some.
Speaker 6: But in the short term here this is a report
Speaker 6: that's more favorable for US assets.
Speaker 4: Okay, so we did stocks, we did FX, we have
Speaker 4: to do bonds as well, Paul Brian, I mean, we're
Speaker 4: seeing a really large spike up in yields today in
Speaker 4: the US. How are people making money in bonds?
Speaker 6: Well, remember in twenty nineteen and investors were begging for
Speaker 6: four percent, and so it's back again today. In twenty nineteen,
Speaker 6: the answer to the question he do you get four percent?
Speaker 6: Was well, land money to the Russian government and a
Speaker 6: lot of people weren't willing to do that. So today
Speaker 6: you can lend money to US corporates, the US Treasury,
Speaker 6: to US municipalities and get these nice yields. Now, the
Speaker 6: total return story may be a little bit behind us,
Speaker 6: but the yields are there for the taking. And you know,
Speaker 6: if you're sitting in money markets, remember those fields will
Speaker 6: likely come down over time, so there is reinvestment risk.
Speaker 6: So it's still a very good opportunity for income investors
Speaker 6: to lock in the types of yields that they were
Speaker 6: begging for five years ago.
Speaker 3: Brian, your offices are they done in a world financial center?
Speaker 6: They are?
Speaker 3: So that begs a question.
Speaker 6: Is a Jersey guy.
Speaker 3: Fairy or path?
Speaker 6: It's the path.
Speaker 3: I spent. There's a cost conscious guy there because the
Speaker 3: ferries fair well.
Speaker 6: No, it is when you live in New Jersey, though,
Speaker 6: you get on the you park at the first station
Speaker 6: you can and for me that's Harrison. There's no way
Speaker 6: I'm driving all the way to the water.
Speaker 3: Very good, all right, Brian, we got that down. Brian Lettt,
Speaker 3: global market strategist at a Vesco. He is a path guy.
Speaker 3: Good to know you can talk to these Jersey guys
Speaker 3: and they work downtown. You got to figure out how
Speaker 3: they get across the river. I, on the other hand,
Speaker 3: was a fairy guy because it's because and then every
Speaker 3: night at home we took a cook car home.
Speaker 4: It's a lot of fun. I often take the ferry
Speaker 4: from it is marks men. If you go from Manhattan
Speaker 4: to Brooklyn. Yes, but I just like to romanticize my
Speaker 4: life load.
Speaker 3: I'll tell you the ferry now. They live down the
Speaker 3: Jersey Shore. The ferry down to the Highlands where John
Speaker 3: Tucker lists.
Speaker 2: That is a good voyage. There. You're listening to the
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Speaker 2: Bloomberg eleven thirty.
Speaker 3: All right, So we had a good news story on
Speaker 3: the labor front today. We also had some good news
Speaker 3: last evening, also on the labor market. We've got the
Speaker 3: US doc workers agreeing to go back to work as
Speaker 3: talks extended into January. So that's a good thing for
Speaker 3: those folks. It's a good thing for the US economy.
Speaker 3: Let's break it down and see what it really means. Hey,
Speaker 3: we could do that a leak clasical senior transport logistics
Speaker 3: and shipping analysts for Bloomberg Intelligence joining us from Princeton.
Speaker 3: So Lee, what did the the shippers and the dock workers,
Speaker 3: what did they actually agree to last night?
Speaker 8: Well, they agreed to go back to work and go
Speaker 8: back to the negotiating tables. So you know they're going
Speaker 8: to go back to work until an agreement is made.
Speaker 8: The new deadline now is mid January, so you know
Speaker 8: that's obviously on our radar, much like how this last
Speaker 8: deadline of September thirtieth was on our radar.
Speaker 9: And so what that means is that they're going back
Speaker 9: to work.
Speaker 8: You know, it's going to take some time to clean
Speaker 8: up the mess at the ports because there was a backup.
Speaker 8: Roughly speaking, it takes about a week to clear congestion
Speaker 8: created by one day of a strike. So call it
Speaker 8: three to four weeks until things quote unquote back get
Speaker 8: back to normal. And my guess is that the unions,
Speaker 8: when they do go back to work, they're not going
Speaker 8: to be going at full throttle.
Speaker 9: They might be kind of dragging their feet, if you will.
Speaker 8: So this apply chains are getting back to normal, and
Speaker 8: hopefully the two sides can come to an agreement where,
Speaker 8: you know, truly the efficiencies and the throughput is returned.
Speaker 9: To where it should be.
Speaker 4: What do we know so far about why the workers
Speaker 4: actually decided to end the strike?
Speaker 8: The why, that's a great question. I don't I'm not
Speaker 8: you know, in those meetings. But my guess is that
Speaker 8: both sides of being pressured significantly by the Biden administration.
Speaker 8: The Biden administration said that they did not want to
Speaker 8: enact the Taft Hartley Act, which pretty much tells the
Speaker 8: two parties that they got to go back to the
Speaker 8: negotiating table and cool off for eighty days. You know,
Speaker 8: they didn't want to do that because obviously the Biden
Speaker 8: administration wants to be considered a pro union president.
Speaker 9: And then you know, and then on the other side.
Speaker 8: Biden administration also doesn't want to see anything to hurt
Speaker 8: this fragile economy that we're currently in. You know, growth
Speaker 8: is expected one to two percent, tepid growth, but it's
Speaker 8: growth nonetheless, and obviously a prolonged strike could impact those
Speaker 8: growth numbers. But I don't think it's going to have
Speaker 8: much of an impact on overall GDP, maybe delaying some things,
Speaker 8: and on freight rates. You know, you're seeing some of
Speaker 8: the marine shipping names like Mares. They're down mid single
Speaker 8: digits and trading, and that's really being driven by the
Speaker 8: fact that if there was a prolonged strike, rates would
Speaker 8: have probably been bouncing higher. And what we see now
Speaker 8: is that maybe they're not going to get that bounce.
Speaker 8: They're still a lot higher than they were last year,
Speaker 8: but they're still not going to get that extra boost
Speaker 8: created by the congestion and issues from.
Speaker 9: A labor strike on the East and Gulf Coast ports.
Speaker 10: Lee.
Speaker 3: It sounds like, you know, there's a couple issues there
Speaker 3: between the two parties. One is just the wages, and
Speaker 3: presumably that is something that you can bridge the gap
Speaker 3: and get something done. The other one is productivity and
Speaker 3: mind modernization and you know, bringing technology or that would
Speaker 3: threaten jobs. That seems to be a lot harder to
Speaker 3: deal with any sense of how far away they are
Speaker 3: or how close they may be.
Speaker 8: On the money side, you know, from the last numbers
Speaker 8: that we saw, you know, the union has been very
Speaker 8: vocal and wanting seventy seven percent increase over six years,
Speaker 8: which is roughly a little.
Speaker 9: Under ten percent a year.
Speaker 8: And then you know the ports came back at around
Speaker 8: they opted it from forty percent to fifty percent. I'm
Speaker 8: assuming they're going to get closer to that seventy seven
Speaker 8: percent over time. The automation is probably a lot more sticky.
Speaker 8: The ports do want to have more automation, and automation
Speaker 8: isn't necessarily. You know, a robot comes in, it takes
Speaker 8: out a job, it just might be a different job.
Speaker 8: And there are sports where you know, workers are not
Speaker 8: necessarily there's one in New York one of the ports
Speaker 8: within the ports system in New York and New Jersey
Speaker 8: where they have some automation where there's people kind of
Speaker 8: operating joysticks, if you will, in an office and they
Speaker 8: kind of take control the last couple of minutes or
Speaker 8: the first couple of minutes of moving something to ensure
Speaker 8: it's safety. You know, it's not only your productivity standpoint,
Speaker 8: but also obviously the less people you have on the port,
Speaker 8: the safer it is. You know, accidents do happen, and
Speaker 8: so you know, I don't know where they're going to
Speaker 8: come out on this, but obviously the ports want to
Speaker 8: be more efficient, and the union wants to save jobs,
Speaker 8: and they just need to figure out, you know, some
Speaker 8: sort of middle ground, because at the end of the day,
Speaker 8: there's great technologies out there, whether it's you know, letting
Speaker 8: trucks in and out and report a lot quicker, and
Speaker 8: that's not only good for port throughput, but it's also
Speaker 8: good for you know, if you want to take an
Speaker 8: environmental standpoint, you know, you don't have.
Speaker 9: A queue of trucks a mile long waiting to cut
Speaker 9: into wait to get to the authority of New York.
Speaker 7: All right, I got you.
Speaker 3: Lead. Great stuff is always Lee Classical senior Transport Logistics
Speaker 3: and Chipping Antos for Bloomberg Intelligence, giving us the latest
Speaker 3: US stock worm go back to work as talks extended
Speaker 3: to January. That is good news.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Otto with the Bloomberg Business app. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: All right, let's talk about electric vehicles, and you talk
Speaker 3: about electric vehicles, I feel like you got to talk
Speaker 3: about tariffs, because it seems like everybodys slapping tariffs on
Speaker 3: everybody else's EV's, particularly the ones coming out of China.
Speaker 6: The EU.
Speaker 3: The latest he announces that they're imposed some tariffs of
Speaker 3: up to forty five percent on Chinese electric vehicles. How
Speaker 3: big of a deal is this for that market? David
Speaker 3: Weltz joins is Bloomberg Detroit Bureau chief. So if I'm
Speaker 3: a Chinese EV, I mean, am I welcome anywhere on
Speaker 3: this planet outside of China? What's going on there? David?
Speaker 10: So far, they've had growth in Brazil, not just TV's
Speaker 10: but Chinese car makers in general. In the Bazilian government
Speaker 10: hasn't he at them yet. But yeah, look, the Chinese
Speaker 10: benefited greatly from American, Japanese, Korean, European companies going to
Speaker 10: their market, and we split the profits with them, We
Speaker 10: gave them our technology, and you know, now there, you
Speaker 10: know a lot is happening that's squeezing out all those
Speaker 10: foreign interlopers. And they have tons of excess capacity in China.
Speaker 10: I mean we're talking tens of millions of vehicles and
Speaker 10: access capacity, and they don't want to lay Chinese workers
Speaker 10: off the governments. They are willing to absorb some losses,
Speaker 10: but they want to turn the country into a giant
Speaker 10: export base. That of course would be at the expense
Speaker 10: of everybody making and selling vehicles in the US, in Europe,
Speaker 10: Southeast Asia, where Toyota does a lot of business. So yeah,
Speaker 10: everybody feels threatened by this. The Chinese government subsidizes its
Speaker 10: companies in other ways like free land, paying for factories,
Speaker 10: funding R and D, and you know, the government's local
Speaker 10: and national owned some of these companies, and they're willing
Speaker 10: to absorbble losses while they all go for market ship.
Speaker 10: They're getting subsidies in every way possible. And you know,
Speaker 10: the foreign governments are saying, enough is enough here, and
Speaker 10: we're not going to just give our car market away
Speaker 10: to a Chinese export giant.
Speaker 4: So why is the EU voting to impose these tariffs now?
Speaker 4: Bring us up to speeding kind of the context here
Speaker 4: and the relationship between the EU and China.
Speaker 10: Yeah, the EU years ago decided diesel wasn't their thing
Speaker 10: for clean air, and they really pushed for adoption of
Speaker 10: VS and the Chinese seized on that and they've been
Speaker 10: growing a lot of market share in all the different
Speaker 10: European markets within the EU, and that does hurt the
Speaker 10: domestic companies. Interestingly, with this vote, Germany voted against it,
Speaker 10: which I thought was kind of fascinating in the sense
Speaker 10: that this sounds like a very tactical vote by the
Speaker 10: Germans because they probably knew that there'd be enough votes
Speaker 10: to implement the terriff. By voting against it, they signal
Speaker 10: to China that they're they're open for business and they
Speaker 10: need that because Volkswagen, Mercedes and BMW are big players
Speaker 10: in the Chinese market and they don't want to be
Speaker 10: penalized there for what the EU governments are doing.
Speaker 3: Interesting, So if I am a Western automaker, you know,
Speaker 3: whether it's Volkswagen or Afford David, what do I How
Speaker 3: do I think about the Chinese market? Is that an
Speaker 3: opportunity for me? Is that more of a risk here?
Speaker 10: Look, it's it's going away, and okay, I think it's
Speaker 10: a matter of time before the Western companies are mostly
Speaker 10: squeezed out. I mean, you know, you have two factors
Speaker 10: or played. One is the Chinese product. The domestic products
Speaker 10: a very good so it's tough to compete there. They
Speaker 10: have a cost advantage because of the subsidies, but also
Speaker 10: because labor is cheap. Arguably Western companies enjoy some of
Speaker 10: that which is cheap labor, but they don't necessarily benefit
Speaker 10: from all the government subsidies and money for factories, money
Speaker 10: for R and D and so forth. But the Chinese
Speaker 10: government is increasingly pressuring people by domestic and the product
Speaker 10: is that. So you're seeing market share losses from everybody.
Speaker 10: GM's market share is down by a third, Volkswagen that's
Speaker 10: taken hit. Hyundai's down like eighty percent because there was
Speaker 10: tension between the Korean soft marene government and China's government
Speaker 10: in the South China Sea a couple of years ago,
Speaker 10: and then suddenly nobody wanted to buy Hyundais and Kyas
Speaker 10: in China. So you see a lot of these domestic
Speaker 10: pressures in China against foreign name plates, and it's just
Speaker 10: tough and tougher for everyone to new business there.
Speaker 3: All right, David, thanks so much for joining us. I
Speaker 3: always appreciate getting your reporting and your perspective. David Wellchi's
Speaker 3: a Detroit bureau chief for Bloomberg News. Again, kind of
Speaker 3: some concerted effort on a part of some of these
Speaker 3: Western countries in a form of terraffs against the Chinese
Speaker 3: electric vehicles, a competitive market. To be short in developing
Speaker 3: story to be short.
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