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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Here

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Speaker 1: in New York. Joining us is Steve England. That standard

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Speaker 1: shout at Bank Global head of Effects, Steve. Great to

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Speaker 1: have you with us. We'll get to the Federal Reserve

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Speaker 1: in just a moment. A comment on the Bank of England.

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Speaker 1: The vote is nine zero to keep rates unchanged, but

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Speaker 1: it's about the projection and the signal that more than

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Speaker 1: one hike would be needed to keep inflation and check

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Speaker 1: does that make sense to you? Well, you know, the

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Speaker 1: inflation numbers are actually pretty good. You know, wages are

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Speaker 1: turning up, but kind of on the very shallow level.

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Speaker 1: I think that most analysts would would argue that the

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Speaker 1: UK could raise rates a little bit. But this is

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Speaker 1: so conditional on how the Brexit story plays out that

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Speaker 1: it's not really operational on any relevant time horizon. Raising

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Speaker 1: The growth forecast for one sees excess demand in three

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Speaker 1: years rising more than previously sees a small margin of

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Speaker 1: excess supply in the economy. Now Sterling was positive off

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Speaker 1: the back of all of this, it's just turned negative

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Speaker 1: once again. So if you're trying to keep up to speed,

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Speaker 1: I'm struggling to cable one thirty forty three and now

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Speaker 1: just a little bit softer on the session. The Bank

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Speaker 1: of England news conference will begin at about thirteen minutes time.

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Speaker 1: We'll try and bring you some highlights of that when

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Speaker 1: it begins with Governor Carney. At the bottom of this hour, Steve,

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Speaker 1: we've got to talk about the Federal Reserve. Soft inflation

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Speaker 1: is transit Tree? Was that a policy mistake? It may not, well,

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Speaker 1: it may not be a correct statement. I mean, I

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Speaker 1: think he tries to do policy as best he can. Uh,

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Speaker 1: the inflation defense and inflation forecasting record isn't brilliant. And

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Speaker 1: when you look at you know, even when you analyze

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Speaker 1: the you know the shocks are coming to core inflation.

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Speaker 1: They all seemed to be concentrated on the downside. So

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Speaker 1: even if they're transitory, if they're all transitory downwards, we

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Speaker 1: end up with weaker inflation for an extended period. The

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Speaker 1: market didn't buy it. The inflation expectations actually went down.

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Speaker 1: They didn't buy the transitory story, and inflation expectations actually

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Speaker 1: went down during the f O m C and have

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Speaker 1: stayed down. This is what I didn't understand about the

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Speaker 1: statement from the Federal Serve Chairman yesterday. If that was

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Speaker 1: the view of the committee, why wasn't it formalized in

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Speaker 1: the statement. They may have thought that the in the

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Speaker 1: second paragraph, the repetition of their confidence that the economy

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Speaker 1: was fine and that they would eventually get to two

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Speaker 1: would be enough, But I think that they would have

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Speaker 1: saved a lot of unnecessary volatility had they inserted, uh,

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Speaker 1: you know, a couple of words like you know, low

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Speaker 1: inflation possibly transitory um in in the statement. I think

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Speaker 1: the combination of the reduction of the IOE er and

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Speaker 1: the flat out statement was what pushed the market to

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Speaker 1: take the devilish interpretation. Initially to talk to the two

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Speaker 1: of you, Stephen Engeler and Jerome Schneider of Pimcoe with

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Speaker 1: us here in a bit as well as a real joy.

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Speaker 1: And what I love about you guys is you're on

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Speaker 1: the X axis. Now we all know. Yesterday Chairman Powell

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Speaker 1: begged the markets to extend their view to get out

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Speaker 1: from September and December and try to get out to

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Speaker 1: December and even in the two thousand twenty, How do

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Speaker 1: you with standard charter adjust your vision, your guesses, your gambles,

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Speaker 1: your speculations. If you've got a FED that's extending out

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Speaker 1: the timeline, Well, the first question you ask is do

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Speaker 1: you have any new information on on inflation? The answers

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Speaker 1: between you know, one PM and five PM there was

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Speaker 1: no new information except the power forecast, and again the

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Speaker 1: FEDS forecasts of inflation you know, about as good as

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Speaker 1: the markets. Then then you ask the question, does that

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Speaker 1: mean that the reaction function is changing? And it seems

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Speaker 1: to me that there's been enough comments and concern Earns

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Speaker 1: that says, let look, if if the forecast turns out

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Speaker 1: to be wrong, and that we end up with one

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Speaker 1: six one seven core inflation six months from now, plus

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Speaker 1: the commitment that seems to be coming to make up

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Speaker 1: for undershoots, there will be a lot of pressure for

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Speaker 1: rates to go down. I mean, our forecast is flat

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Speaker 1: rates as far as the eye can see. But I

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Speaker 1: think that the combination of you know, low inflation and

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Speaker 1: low core inflation, and the shift in the in the

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Speaker 1: targeting methodology could lead to a slow set of you

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Speaker 1: and I've talked about this a million times, and that

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Speaker 1: the culture of bankers is they all live in fear

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Speaker 1: of doing the Japanese which is over a decade ago

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Speaker 1: japan guests wrong on the dynamic. Is what we observed

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Speaker 1: yesterday just about they're petrified of getting the call wrong. Well,

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Speaker 1: there's still I think a lot of people out the

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Speaker 1: Feds still see the Phillips curved and and part of

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Speaker 1: it is is that they're uncertain about what the trend

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Speaker 1: in the economy is. If if we end up in

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Speaker 1: six months with the unemployment rate that say three and

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Speaker 1: a quarter, uh, you know, they're they're probably not going

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Speaker 1: to cut because they're gonna say, look, you know even

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Speaker 1: if uh, Philip's curve is flat, were sliding down, if

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Speaker 1: inflations won seven in the unemployment rates three eight, they

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Speaker 1: might say, you know, there's a case for us stave.

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Speaker 1: We talked about this yesterday. The problem with the Fed

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Speaker 1: right now it's not whether they're data dependent, it's how

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Speaker 1: they're dependent on the data. And I still don't get it.

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Speaker 1: If you had all the secrets, if we had all

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Speaker 1: the secrets, and this is what we said yesterday, if

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Speaker 1: you knew what every single data point would be for

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Speaker 1: the US economy, for the global economy through the rest

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Speaker 1: of this year, you still wouldn't know with any accuracy

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Speaker 1: what this Federal Reserve Chairman's gonna do. We don't understand

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Speaker 1: the reaction function. Isn't that problem? Well, I think the

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Speaker 1: problem is that the reaction function that the FED thought

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Speaker 1: it would have doesn't seem to be valid. The the

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Speaker 1: old styled Taylor rule, Philips curve. You put them together,

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Speaker 1: you know exactly what the Fed's gonna do. I think

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Speaker 1: the Petal's credit. He's questioned this you star our star

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Speaker 1: method bology that the fan that was adhering to and saying,

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Speaker 1: look the numbers are aren't suggesting that that's right. And

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Speaker 1: so I think, you know, he may have the committee

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Speaker 1: may not be there. There's still hawks there, but I

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Speaker 1: think that the they're moving away from that yelling style

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Speaker 1: of what he just said about John Williams and our

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Speaker 1: star is exactly what the President the United States is saying.

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Speaker 1: The President, wait a minute, this is not what we're seeing.

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Speaker 1: That's what President Trump. So we've seen this time and

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Speaker 1: time again. The chairman comes out says something. Everyone walks

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Speaker 1: away a little bit confused, and then Rich Clamada, the

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Speaker 1: vice chairman, comes out the following day and tries to

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Speaker 1: clean some of this up. He speaks tomorrow. A load

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Speaker 1: of FETE speakers come up tomorrow. What are you looking

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Speaker 1: to hear from them? Steve? You know, Appel at the

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Speaker 1: press conferences speaking for the committee should be and so

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Speaker 1: he has to bound supposed to hawkish and and the

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Speaker 1: dovish wings. When Rich Claren is speaking tomorrow, he's speaking

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Speaker 1: for himself. He's very influential, and he he may be

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Speaker 1: sort of giving guidance as to how the Committee is

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Speaker 1: shifting and may end up being more dubbish. He'll be

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Speaker 1: solid because his key word has been solid well as

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Speaker 1: a solid economy. But it has been a solid economy.

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Speaker 1: But we've spent the last three months listening to FED

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Speaker 1: speakers carefully curate this message about target inflation, a symmetrical

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Speaker 1: inflation target, perhaps allowing for an overshoot. And then you

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Speaker 1: have the Federal Reserve chairman come out in a news conference.

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Speaker 1: Perhaps he wanted to wind in rate cut beats. If

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Speaker 1: he did, okay, that's fine, I get all of that,

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Speaker 1: But to be so definitive about inflation and soft inflation

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Speaker 1: being transitory, that for me doesn't add up when I

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Speaker 1: think about the communication effort of the last three months.

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Speaker 1: I think his fear is that the market will start

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Speaker 1: praising in rate cuts next month, two months from now,

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Speaker 1: and that you know, even if if inflation is soft

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Speaker 1: on trend, will take us another six months, nine months

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Speaker 1: to figure that out. And you think he does want

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Speaker 1: to push that discussion out further. Stephen, We all have

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Speaker 1: some sympathy with that, Steve, Thank you, love. I use

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Speaker 1: one of my hated words. I hate the word cure eight. Okay,

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Speaker 1: there's forty seven emails. And why haven't I talked about

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Speaker 1: Barcelona Liverpool? Folks will get to it in a minute.

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Speaker 1: Pharaoh's a genius. Okay, let's move on. The reason we

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Speaker 1: haven't gotten to Barcelona Liverpool yet is because we had

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Speaker 1: Steven england are In, who was worshiped on Wall Street

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Speaker 1: for cross rate analysis, and then we double barrel it

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Speaker 1: with Jerome Schneider Pimco, who owned short term paper and

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Speaker 1: listen very carefully to the X axis yesterday and Sherman Paul,

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Speaker 1: the little Messi of short term portfolio management, isn't he

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Speaker 1: I think? I think so. Did you see how that

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Speaker 1: ball curved? It was amazing? Why don't they do that

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Speaker 1: more often? Because it's so difficult to stop? Look at

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Speaker 1: the NHL, you come down the ice should shoot the pucket,

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Speaker 1: you know, if it gets a goal, great, they should

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Speaker 1: shoot more in football talk joining us now we'll talk

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Speaker 1: about that a little bit light to Jerome Fed right

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Speaker 1: cut bets. How much of a bating did they take

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Speaker 1: in the last twenty four hours? Yeah? I mean, ultimately

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Speaker 1: you have to look at where the starting point is.

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Speaker 1: And I think you know, when you wake up this morning,

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Speaker 1: it's obviously a little bit different than yesterday morning. Um,

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Speaker 1: from the perspective of we're still focused on potential for

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Speaker 1: rate cuts, we're still biased towards a very devilish reaction

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Speaker 1: functions from the FED, although less reactive or less less

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Speaker 1: dublished than we once were. So to call it hawkish

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Speaker 1: isn't necessarily the right context. I just think you have

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Speaker 1: to look at the starting point to do that, and

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Speaker 1: that for me is really the bias. We still a

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Speaker 1: Pimcoe believe that the likelihood of of the healing process

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Speaker 1: of growth trajectories financial conditions being easy, and the response

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Speaker 1: function the FED will lead toward growth patterns and inflation

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Speaker 1: potentially edging higher later this year and early next year.

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Speaker 1: But that response function from the FED is going to

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Speaker 1: be relatively deliberate and slow. Um. Ultimately, what that means is,

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Speaker 1: you know, we probably believe more likely than not if

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Speaker 1: you're betting that the next move is high or rather

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Speaker 1: than lower in terms of a rate trajectory from the dead.

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Speaker 1: And you heard that yesterday, UM justified by his use

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Speaker 1: of the Dallas trimmed mean probably the three biggest words

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Speaker 1: that no one had ever heard before, at least in

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Speaker 1: in in much of the academic an economic world. But ultimately,

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Speaker 1: when when you look at it, he gave one one

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Speaker 1: pronounced statement how that is. And they said basically that

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Speaker 1: there would be considerable advanced notice to ensure that there

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Speaker 1: was a smooth process in place before they made any

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Speaker 1: changes to the downside trajectory and to the upside trajectory.

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Speaker 1: And to me, that means that they're not going to

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Speaker 1: be that concerned if inflation remains over a quarter or

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Speaker 1: so at one point five or one point six um,

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Speaker 1: They'll it will be on their radar, clearly, but it's

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Speaker 1: not going to be eliciting a reaction function of a

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Speaker 1: rate cut. And so what we've basically seen is the

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Speaker 1: market react to that pretty pretty pronounced dissertation. At that point,

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Speaker 1: they debate around the Federal Reserve's next move is probably

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Speaker 1: the most polarized it has been for a long long time.

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Speaker 1: Up or down? High core card? Is that health feature rhyme? Yeah,

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Speaker 1: I mean, ultimately you have to put in the context

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Speaker 1: of why you're having the debate, and you have to

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Speaker 1: be comfortable in the sense that growth in the US

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Speaker 1: continues to be the bright light around the world in

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Speaker 1: terms of where things are headed. Um, is a two

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Speaker 1: percent growth rate astounding? Definitely not, but it is a

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Speaker 1: two percent growth rate nice in a relative context. Yes,

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Speaker 1: And so the US, the dollar the other you know,

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Speaker 1: the dollar. The equity markets will benefit from that, especially

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Speaker 1: with the with the posture that fed being patient over

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Speaker 1: the foreseeable future. So the debate is healthy. I think

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Speaker 1: what is unhealthy though, is two things. One the sense

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Speaker 1: of volatility, low volatility that we've created in the marketplace,

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Speaker 1: and as whenever you see volatility, you want to do

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Speaker 1: two things. Either a you want to have protection because

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Speaker 1: there's high volatility, or Two, if there's relatively low volatility,

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Speaker 1: you want to basically buy by protection when it's cheap,

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Speaker 1: and for that right now is really think about the

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Speaker 1: world as an opportunistic place where you really have to

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Speaker 1: justify taking risk at this point in time. So being

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Speaker 1: prudently about the risk you take is is an portant. Well,

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Speaker 1: Mr Paul was prudent yesterday and we see that with

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Speaker 1: markets that didn't go tantrum like is. John Farrell mentions

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Speaker 1: this is all the Hoover Institute. I've been out to

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Speaker 1: their conference many many times, Michael McKee out there. We

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Speaker 1: got Evans in Stockholm, and then Clara Williams, Bowman, Bullard, Daily,

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Speaker 1: Kaplan Mester all lining up in Stanford to talk to

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Speaker 1: John Taylor's sware at the Hoover Institute. How close are

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Speaker 1: we to a tantrum? One of these people is going

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Speaker 1: to step up and say we're not cutting rates, We're

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Speaker 1: going to higher what will be the bond in equity

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Speaker 1: market reactions? UM. I would put this in the context

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Speaker 1: of we central bankers, specifically Palace learned his lesson about

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Speaker 1: being too communicative about the others and and the more

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Speaker 1: important thing is Clarenda since he joins his device. Truman

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Speaker 1: has done very much important of basically creating a more

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Speaker 1: concise message about what they're looking at. So the cacophony

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Speaker 1: of other communicators is actually that it's been a chorus

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Speaker 1: more or less of focusing on inflation. So the discussion

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Speaker 1: is what is the inflation reaction function? We are less

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Speaker 1: likely to have a tantrum and the ammunication model. I

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Speaker 1: think that my take is that there's less likely to

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Speaker 1: have a tantrum from the communication model um and he

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Speaker 1: used it, frankly used his pot podium yesterday to to

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Speaker 1: do to do just that is to try to communicate,

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Speaker 1: which is the purpose of going to eight eight press

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Speaker 1: conferences a year during the FED. But I think it's

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Speaker 1: actually probably going to come from some type of event,

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Speaker 1: whether it's a credit event, extranees event, brexited at least

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Speaker 1: something like that which which ends up upsetting the markets.

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Speaker 1: It's quite possible that people take the mantra of you know,

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Speaker 1: you know, selling may and go away and you could

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Speaker 1: be it could be a long summer. They do that

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Speaker 1: in the bottom mark. We definitely do not do that. Bobo.

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Speaker 1: My my alarm clock still goes off at three m

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Speaker 1: every morning, sir. So there's no there's no change in that,

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Speaker 1: but I would say that being prudent along these roads

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Speaker 1: is important. Thank you all used to say that Johning

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Speaker 1: us On the founder is someone that used to sit

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Speaker 1: on the MPC. Dartmouth's Danny Blanche won in the conversation Danny,

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Speaker 1: good morning to you. To make it really really simple,

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Speaker 1: Danny just doesn't think we're a full employment so let's

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Speaker 1: bring Danny in. That's essentially of view, isn't it, Danny right?

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Speaker 1: And it's been my view for quite a long time. UM,

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Speaker 1: And I think that's the major era central banks have

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Speaker 1: made is to think that we're anywhere close to full employment.

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Speaker 1: If we were, we'd be seeing wage growth as we

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Speaker 1: did in the past in the four to five percent range,

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Speaker 1: and we're not. Um, And what's happened is central banks

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Speaker 1: have had to kind of get their acts together, and

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Speaker 1: all the time they keep lowering the expectation of how

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Speaker 1: low unemployment can go without a big set of wage increases.

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Speaker 1: So I think still both of them, the UK and

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Speaker 1: the US, are still in a position where they're still

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Speaker 1: quite a long way from full employment. And if you

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Speaker 1: look at the MPCs in Placia report today, they lowered

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Speaker 1: the prospect of what unemployment can be. So there's the

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Speaker 1: big era. That's why there's no inflation, and actually we

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Speaker 1: should have this interesting sort of disconnect, and Tom just

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Speaker 1: talked about the disconnect, which is the inflation in the

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Speaker 1: UK and in the US basically below target, wage growth

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Speaker 1: picking up, absolutely no sign of inflation picking up. And

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Speaker 1: I've been on these program with you guys for probably

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Speaker 1: ten years, and I've been hearing every time inflation is

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Speaker 1: going to rise, and Blanche Farrell always says, no, it isn't.

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Speaker 1: Labor market slack is huge than they are, is much

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Speaker 1: lower than you think, and a lot of the slack

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Speaker 1: comes within firms. So I think the disconnect and the discussion,

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Speaker 1: I mean, the the idea that suddenly the Fed is

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Speaker 1: going to, excuse me, have to raise rates because inflation

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Speaker 1: is going to pick up. With good luck with that one.

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Speaker 1: Whenever I heard that let's take your days month in

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Speaker 1: the lap ten years, let's take for the whites of

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Speaker 1: the eye and put you on the fl if we

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Speaker 1: can and talk about the United States specifically, when the

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Speaker 1: Chairman of the Federal reserved around and says that the

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Speaker 1: current self period of inflation is transit Tree, what would

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Speaker 1: you see to say back to him in those committee meetings, Well,

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Speaker 1: you've made this forecast the same thing for the last

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Speaker 1: ten years, saying that it's transitory and it's coming. Um.

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Speaker 1: So you're the market actually doesn't sort of seem to

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Speaker 1: believe you, and I don't believe you. Um. And you

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Speaker 1: raise rates in two thousand, seventeen and eighteen based upon

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Speaker 1: not no real world data whatsoever, entirely based on your

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Speaker 1: forecast of coming inflation, excuse me. And so that era

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Speaker 1: meant eventually you had to go on hold. So the

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Speaker 1: market doesn't really believe pal saying that they look back

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Speaker 1: and see how poor the forecasts have been and then

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Speaker 1: we'll see what's coming. But I think that the market

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Speaker 1: doesn't believe that because they've they've heard the same thing

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Speaker 1: over and over and over again, and still there's no inflation. David.

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Speaker 1: If you go back to your classic the wage curve

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Speaker 1: technology overlay, at that time, it was totally for them.

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Speaker 1: Now you've been one who has been incredibly courageous about saying,

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Speaker 1: here's the data, but here's the society we're living in.

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Speaker 1: Do all the gurus to all the pundits to all

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Speaker 1: the frankly well meaning public servants, do they just simply

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Speaker 1: misjudge the societal and cultural effects on our incomes and

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Speaker 1: on our wages. Well, there's a couple of a couple

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Speaker 1: of shots and going on. Obviously there's a technological shock,

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Speaker 1: and everywhere we go we think about the potential that

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Speaker 1: robots are coming to replace workers. But essentially what we

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Speaker 1: saw was this giant shock on top of rising global forces.

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Speaker 1: And so what that meant is the world changed. I mean,

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Speaker 1: I think if you go back to about comments, in

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Speaker 1: a sense, the f O, MC and others haven't realized

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Speaker 1: the world changed in two thousand and eight. The economy

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Speaker 1: is not going to bounce back to pre recession levels

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Speaker 1: as it did because globalization continues. Um. Technological change is

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Speaker 1: coming and coming fast. And what happens within organizations, firms

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Speaker 1: don't have to pay as much as they did in

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Speaker 1: the past. Workers bargaining tower is weakened, and inflation isn't

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Speaker 1: going to come bounding back because the global thing. John

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Speaker 1: the Skorski was down today. I had to take an uber.

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Speaker 1: I'm sorry you talked to the guys driving the cars

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Speaker 1: in this secclaimed gig economy. Guess what, John, it ain't happening.

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Speaker 1: That's the message from them. Can we get back to

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Speaker 1: the car ricodonical, which essentially cars. Carl's view is that

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Speaker 1: wages are picking up and that that will feed into

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Speaker 1: cost south swhere because the biggest input cost that a

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Speaker 1: company has is its labor force, and therefore what you're

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Speaker 1: going to see is a rise in general prices. Danny,

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Speaker 1: what do you say back to that argument, Well, at

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Speaker 1: some point that will be true. But actually, at some

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Speaker 1: point that will be true. At some point the economy

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Speaker 1: will get sentry to the narrow and we'll see some

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Speaker 1: of that pick up, but we ain't seen it yet.

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Speaker 1: One of the other things we saw in big message

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Speaker 1: at that Compress conference today was we're seeing substitution within firms.

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Speaker 1: They're taking on workers, they're not investing, which we are

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Speaker 1: seeing a change in the balance of labor and capital,

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Speaker 1: and not least because in a way now it's it's

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Speaker 1: a temporary thing, even shed labor if you need to work.

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Speaker 1: As Bartening path still remains weak. It will get much

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Speaker 1: stronger as we move closer to full employment. But we're

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Speaker 1: not there yet, so I don't buy it. I don't

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Speaker 1: buy the claim that suddenly this is all going to

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Speaker 1: start feeding through. At some point it will. But think

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Speaker 1: about for the last five years, every single time that

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Speaker 1: central banks have said it, they've been wrong and had

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Speaker 1: to lower their estimates. So they were on the same path,

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Speaker 1: and I think the NIA is probably somewhere under three

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Speaker 1: percent um. The FED had it at four and a half,

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Speaker 1: and every every time we see a forecast they've had

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Speaker 1: to lower it. Yet used to have allies on the

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Speaker 1: FED like them around your coach a Lakota. Do you

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Speaker 1: have allies that think the same way you do on

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Speaker 1: the F ONMC right now? Well, because car Is to

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Speaker 1: some extent has been right. But I think the story

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Speaker 1: why your question is a really good one. If you

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Speaker 1: go back to look at say that December two thousand,

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Speaker 1: an eighteen FED rate rise, it was clearly wrong, it

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Speaker 1: was clearly an error and it was and it was unanimous.

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Speaker 1: And the same thing with the Bank of English last

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Speaker 1: rate rise. So you know, I think the answer is

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Speaker 1: that we're now back in group things again. Um, it

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Speaker 1: doesn't appear that people actually see, you know, what's going

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Speaker 1: on in the US economy, David. They focused on forecast,

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Speaker 1: which has been terrible. We've got to let you go,

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Speaker 1: but I've got to ask, and I don't want you

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Speaker 1: to get out your Crystal ball right now. I want

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Speaker 1: you to get out your Crystal Palace. I mean, Cardiff

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Speaker 1: faces relegation. Bobby Reid is not MESSI of Barcelona. Would

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Speaker 1: you explain to our global audience the importance of this

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Speaker 1: Crystal Palace Cardiff game, so you don't go down to

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Speaker 1: the league below? Well, Cardiff is I'm afraid and lost

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Speaker 1: the weekend to Fulham. We have a couple of games

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Speaker 1: to go, but they think in the end it will

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Speaker 1: come down to my team will go down unless they

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Speaker 1: can beat Manchester United, and I think the chances of

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Speaker 1: that are about are even lower than the chance that

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Speaker 1: inflation is going to take off. There we go, let's

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Speaker 1: fold it right into that. That's a headlineable they need

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Speaker 1: they need Brighton to drop some points. Really yeah, but

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Speaker 1: every fact we need Brighton to lose everything, and we've

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Speaker 1: got to beat Crystal Palace and then at least draw

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Speaker 1: against They need Brighton to lose to Arsenal. I can see,

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Speaker 1: I can see the Bloomberg red headline. The acclaimed famous

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Speaker 1: Bloomberg headline Blanche Flowers is car different. Maybe bright and

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Speaker 1: bright and beats arsenal, and you know Danny gets it done.

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Speaker 1: But I think it's very unlikely the bright and beats

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Speaker 1: arsenal this weekend. You've really got a better goal average

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Speaker 1: that we've got to do better than you open this.

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Speaker 1: I mean, like day and I could have talked off

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Speaker 1: line about this. There's nothing off flying with Blanche Flower,

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Speaker 1: a long time ago professor, Thank you so much, kiss

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Speaker 1: thanks to enough about his recent academic research on from

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Speaker 1: the classic and the wage could really asking whether you

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Speaker 1: agree or disagree with Professor Blanche Flower. It is thought

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Speaker 1: provoking research on the state of the American labor economy.

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Speaker 1: In our analysis of all fed not front and center,

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Speaker 1: but tangential was a pickup in the productivity the efficiency

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Speaker 1: of the United States of America's economy. Sarah House with

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Speaker 1: us with Wells Fargo, who looks at these things, Sarah,

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Speaker 1: productivity is an amazingly squishy thing of the dynamics of capital,

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Speaker 1: the dynamics of this strange labor market, and there's a

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Speaker 1: jumble of everything else as well. I'm looking at the

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Speaker 1: moving averages here and I got to admit, off the

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Speaker 1: mat in the end of two thousand and seventeen, there's

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Speaker 1: a little life in productivity. Do you agree. Yeah, I'd

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Speaker 1: say we have seen a rebound over the past year

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Speaker 1: or so. I think you don't want to put too

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Speaker 1: much emphasis on on any singular quarter. I think it's

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00:23:15,760 --> 00:23:18,720
Speaker 1: a little bit of an agape identity too. But you know,

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Speaker 1: as you indicate, smooving through some of those quarterly fluctuations,

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Speaker 1: we have seen a pickup in in productivity and that's

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Speaker 1: been an important outlet for some of the wage pressures

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Speaker 1: that that we've seen in terms of labor compensation rising

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00:23:31,840 --> 00:23:34,080
Speaker 1: with the tight labor market, and why we're still not

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Speaker 1: seeing much inflation with productivity and folks, this is truly

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00:23:38,840 --> 00:23:43,240
Speaker 1: an economics the horse and the cart question. Does the

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00:23:43,359 --> 00:23:48,879
Speaker 1: economy get better and productivity goes up, or does productivity

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00:23:49,000 --> 00:23:51,960
Speaker 1: go up and the economy get better? Which is it?

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00:23:53,320 --> 00:23:56,560
Speaker 1: I think it's it's uh, it's it can be. It

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00:23:56,600 --> 00:23:59,879
Speaker 1: can be either. Um, we see productivity and improve I

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00:24:00,000 --> 00:24:02,840
Speaker 1: think that certainly helps in terms of real wages, and

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00:24:02,960 --> 00:24:06,640
Speaker 1: that helps in terms of your spending power and your

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00:24:06,800 --> 00:24:10,040
Speaker 1: overall potential rate of growth. UM. But I think in

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00:24:10,400 --> 00:24:14,200
Speaker 1: many ways, this the productivity story is an underlying driver,

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00:24:14,640 --> 00:24:16,639
Speaker 1: and it's it's been on the back burner more recently.

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00:24:16,920 --> 00:24:19,159
Speaker 1: Sever looking ahead to pay rolls coming up tomorrow, what

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00:24:19,240 --> 00:24:20,960
Speaker 1: are you guys are looking for over at once Franco,

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00:24:21,600 --> 00:24:24,119
Speaker 1: So we're looking for about two hundred thousand games, a

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00:24:24,200 --> 00:24:27,159
Speaker 1: little bit stronger than consensus. I think we've seen some

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00:24:27,280 --> 00:24:30,040
Speaker 1: of the p m I s, particularly the regional Fed

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00:24:30,160 --> 00:24:33,840
Speaker 1: Services p m i's indicata pickup in hiring. We've also

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Speaker 1: seen that with jobless claims having trended lower UM over April,

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Speaker 1: though we did see another bounce bounce are you are you?

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Speaker 1: Come on, come on, are you? I gotta make some news?

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00:24:43,600 --> 00:24:47,159
Speaker 1: Here are you saying? Three hundred thousand, two D two

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00:24:47,200 --> 00:24:50,600
Speaker 1: hundred thousand? Oh, I missed, I missed my ears, Phil,

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00:24:52,200 --> 00:24:54,520
Speaker 1: not quite the not quite the news. But I think

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Speaker 1: UM that pick up in in April probably won't be

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Speaker 1: sustained and we'll still probably see some slowing on trend

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Speaker 1: given some of the softer readings we've seen and things

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Speaker 1: like temporary hiring UM as well as some some moderation

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Speaker 1: in terms of the job openings and hiring plans. So

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00:25:10,760 --> 00:25:13,240
Speaker 1: it's still looking like the labor markets very strong, but

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Speaker 1: the pace of improvement. I think we are beginning to

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Speaker 1: see slow so right cut bets took a bit of

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00:25:17,840 --> 00:25:21,120
Speaker 1: a bay tink from Cham and pal crushed. If payrolls

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Speaker 1: comes out the way you anticipate, Sarah, do you expect

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Speaker 1: that to continue that move? I think the payrolls have

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Speaker 1: really been taking a backburn or to some of the

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Speaker 1: inflation data. So from that respect, I think average early

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Speaker 1: earnings will in many ways garner even more attention. We're

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00:25:35,280 --> 00:25:37,879
Speaker 1: looking for only zero point two percent tomorrow. That's some

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Speaker 1: partment the calendar quis. I think the trend is is

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00:25:40,640 --> 00:25:43,639
Speaker 1: still upward, but bottom line this comes due well, how

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Speaker 1: does that end up feeding through to inflation? And again,

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00:25:46,400 --> 00:25:49,080
Speaker 1: given those strong productivity refers, we're just not seeing those

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Speaker 1: those wage pressures really translating into inflation. That insight is

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Speaker 1: so important, folks. Sometimes it's all about the jobs reports.

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Speaker 1: Sometimes inflation it shifts, you know, not on a weekly

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Speaker 1: monthly basis us, but over time you can shift. Sarah

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Speaker 1: House with us with Wells Fargo. Thanks for listening to

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00:26:07,119 --> 00:26:11,600
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

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00:26:11,680 --> 00:26:17,520
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer I'm

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00:26:17,600 --> 00:26:20,840
Speaker 1: on Twitter at Tom Keane before the podcast. You can

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00:26:20,920 --> 00:26:24,080
Speaker 1: always catch us worldwide. I'm Bloomberg Radio