WEBVTT - Bloomberg Surveillance TV: December 9, 2024 0:00:02.440 --> 0:00:08.600 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business App. 0:00:36.479 --> 0:00:40.960 Unemployment ticking up slightly to four point two percent, Andrew 0:00:40.960 --> 0:00:44.360 Hollenhorst of City saying the unemployment rate is the better 0:00:44.479 --> 0:00:47.720 signal to watch. The report was now quite soft enough 0:00:47.720 --> 0:00:49.760 for the Fed to cut fifty basis points that we 0:00:49.800 --> 0:00:53.640 had projected for December, but a twenty five basis point 0:00:53.680 --> 0:00:57.160 cut appears very likely, followed by cuts in January and 0:00:57.240 --> 0:01:00.520 subsequent meetings. Andrew joins us now, and Andrew, I am 0:01:00.560 --> 0:01:02.240 so glad we get a chance to speak with you, 0:01:02.560 --> 0:01:05.479 because you have a contrarian view, and you have persisted 0:01:05.560 --> 0:01:08.120 in this contrarian view that this labor market has a 0:01:08.120 --> 0:01:11.480 great deal of weakness that people are not seeing what 0:01:11.640 --> 0:01:14.280 gives you that conviction. Now, even though it has been 0:01:14.319 --> 0:01:18.040 a while since we've seen really some of the confirmation 0:01:18.480 --> 0:01:20.119 in the headline numbers, it's. 0:01:20.000 --> 0:01:22.600 Been really noisy data, and so I think that's part 0:01:22.600 --> 0:01:25.360 of the issue with analyzing the labor market here. You 0:01:25.440 --> 0:01:28.120 have to make some decisions. You have to take a 0:01:28.160 --> 0:01:31.600 stand on which data are giving you the correct signal 0:01:31.600 --> 0:01:33.440 about where the labor market is going. To give you 0:01:33.480 --> 0:01:34.880 a sense of the contrast, if you look at the 0:01:34.920 --> 0:01:37.960 payroll survey, the Establishment survey of businesses, that's telling you 0:01:38.000 --> 0:01:40.440 we've added two point two million jobs over the last year. 0:01:40.480 --> 0:01:42.720 It sounds like a great number. On the other hand, 0:01:42.720 --> 0:01:44.520 if you look at the household survey, you call people 0:01:44.520 --> 0:01:46.880 at home and ask them if they're working, We're down 0:01:46.959 --> 0:01:49.559 seven hundred and twenty five thousand jobs in that survey. 0:01:49.560 --> 0:01:51.840 That's typically what you would see going into a recession. 0:01:52.200 --> 0:01:54.920 So which is the true signal? Of course, we don't know, 0:01:54.960 --> 0:01:56.560 and you have to put some weight on each You 0:01:56.640 --> 0:01:59.720 have to have humility in terms of analyzing this data. 0:02:00.200 --> 0:02:02.840 But if you look at that payroll's number, we know 0:02:03.000 --> 0:02:07.640 from the revisions that the business survey Establishment survey, payrolls 0:02:07.640 --> 0:02:10.440 are being overstated. So every month and we get that number, 0:02:10.800 --> 0:02:13.799 we should be subtracting something like seventy thousand jobs per 0:02:13.840 --> 0:02:16.919 month from that number. So that is the overstated number. 0:02:17.080 --> 0:02:18.920 The household survey, which we think is giving us a 0:02:18.919 --> 0:02:21.720 better indication where the labor market is running, is telling 0:02:21.800 --> 0:02:24.440 us that we may actually be losing jobs here. So 0:02:24.760 --> 0:02:27.160 we continue to have this softening trend in the labor market, 0:02:27.160 --> 0:02:29.560 the unemployment rate that's rising, and I think that's the 0:02:29.560 --> 0:02:30.560 trend we should be watching. 0:02:30.680 --> 0:02:33.880 If that is the case, how much can you discount 0:02:33.880 --> 0:02:36.560 the idea that the number of hours worked has actually 0:02:36.639 --> 0:02:39.400 inflected upwards, and that when you pair that with some 0:02:39.440 --> 0:02:41.840 of the wage gains that we've seen, that's when some 0:02:41.919 --> 0:02:44.200 of the inflation concerns start coming back in. 0:02:44.560 --> 0:02:49.000 Yeah, I'm not too concerned about inflation cyclically because of 0:02:49.040 --> 0:02:51.360 the softening that we have in the labor market. Now, 0:02:51.760 --> 0:02:54.280 what you're saying is correct that we have a strange 0:02:54.360 --> 0:02:57.880 labor market where businesses are hoarding labor right now. So 0:02:57.919 --> 0:03:00.280 we're seeing a hiring rate that's very low, but we 0:03:00.280 --> 0:03:02.840 don't have a layoff rate that's rising. Right, We don't 0:03:02.840 --> 0:03:05.480 have hours work that's plunging. It's come down, but it's 0:03:05.480 --> 0:03:08.720 not falling further. Wage growth which is slowed, but it's 0:03:08.760 --> 0:03:11.080 been a little bit stickier at a higher level. So 0:03:11.320 --> 0:03:13.240 this is a different labor market than what we've ever 0:03:13.240 --> 0:03:15.800 seen before. I think these things can be happening together 0:03:15.840 --> 0:03:18.520 where you have firms that are reluctant to higher firms 0:03:18.560 --> 0:03:21.359 that want to hold on to their current employees if 0:03:21.360 --> 0:03:23.880 they can, but when they lose those employees, they're not 0:03:23.919 --> 0:03:26.679 backfilling them. And what that means is you don't necessarily 0:03:26.720 --> 0:03:29.120 have a higher probability of losing your job right now, 0:03:29.440 --> 0:03:31.600 but if you do lose your job, you have a 0:03:31.680 --> 0:03:34.240 higher probability of not finding one again, and that's going 0:03:34.280 --> 0:03:36.920 to affect consumer behavior, that's going to affect the broader economy. 0:03:37.000 --> 0:03:40.040 Does that mean that there isn't really a number? I 0:03:40.080 --> 0:03:42.200 mean outside of what would be normal that we could 0:03:42.240 --> 0:03:44.760 get on Wednesday, That would mean that the Fed shouldn't 0:03:44.760 --> 0:03:47.040 be cutting. Should the Fed really be cutting regardless of 0:03:47.080 --> 0:03:48.720 the CPI figure we get on Wednesday? 0:03:48.960 --> 0:03:50.880 Yeah, I think we have to go back to an 0:03:50.960 --> 0:03:55.840 environment where the Fed central banks are balancing risk to 0:03:55.880 --> 0:03:59.200 inflation and risks to the labor market. So it was 0:03:59.280 --> 0:04:02.760 easy to say a year ago that, well, inflation's running 0:04:02.840 --> 0:04:05.360 very high. That should be the complete focus. And I 0:04:05.360 --> 0:04:08.880 think we're still fighting the last battle a little bit here. So, yes, 0:04:08.960 --> 0:04:12.200 inflation has been sticky. Inflation hasn't come down as nicely 0:04:12.240 --> 0:04:14.640 as some people thought that it would. But you also 0:04:14.680 --> 0:04:16.479 have to look to the labor market. So we have 0:04:16.560 --> 0:04:18.840 inflation that looks to be running maybe closer to three 0:04:18.880 --> 0:04:21.719 percent than two percent. I think it's going to continue 0:04:21.760 --> 0:04:23.880 to slow based on what I'm seeing in the labor market. 0:04:23.880 --> 0:04:26.239 But that's a projection, that's a forecast at this point. 0:04:26.440 --> 0:04:28.120 But you have to trade that off with looking at 0:04:28.160 --> 0:04:30.280 the household service Seven hundred and twenty five thousand people 0:04:30.320 --> 0:04:30.880 are not working. 0:04:30.880 --> 0:04:33.479 Now do you think the Fed has that message? It's 0:04:33.520 --> 0:04:36.520 this whole what they should do versus what they will do. 0:04:36.520 --> 0:04:38.039 Do you think that there is a number that for 0:04:38.120 --> 0:04:40.760 them would cause them to stop the cuts in December? 0:04:40.880 --> 0:04:43.520 I think December they're probably going to cut even if 0:04:43.520 --> 0:04:45.679 we get a strong CPI inflation reading. 0:04:45.720 --> 0:04:46.800 I think this would. 0:04:46.600 --> 0:04:49.200 Be more about what are they going to signal for January? 0:04:49.400 --> 0:04:52.039 Right now, I think we'll get a softer report on Wednesday. 0:04:52.040 --> 0:04:54.560 First course, CPI inflation. I think that's going to make 0:04:54.600 --> 0:04:56.680 the decision very easy. But if we don't, if we 0:04:56.720 --> 0:04:58.760 get a stronger reading, then what you would see them 0:04:58.839 --> 0:05:00.800 do I think is still cut in December, but say, 0:05:00.920 --> 0:05:02.280 you know, we might be at that point where we 0:05:02.320 --> 0:05:04.279 would slow the pace of cuts. They've been using this 0:05:04.400 --> 0:05:07.400 really open rhetoric of saying we're going to be cautious, 0:05:07.400 --> 0:05:09.360 We're going to be careful. Of course, every central bank 0:05:09.400 --> 0:05:10.960 is going to be cautious and care You can cautiously 0:05:10.960 --> 0:05:13.159 cut fifty basis points, right, It doesn't really mean anything. 0:05:13.200 --> 0:05:14.599 So we'll see what they say in December. 0:05:14.839 --> 0:05:15.119 Okay. 0:05:15.120 --> 0:05:17.520 Speaking of January, we're going to get a brand new 0:05:17.560 --> 0:05:20.760 Trump administration coming in a sweet Republican sweep, and Trump 0:05:20.839 --> 0:05:24.680 yesterday on Meet the Press was talking about immigration in 0:05:24.720 --> 0:05:26.479 the first one hundred days. You're talking about the fact 0:05:26.520 --> 0:05:29.480 that what's going on in the labor market. How tight 0:05:29.520 --> 0:05:31.360 could a labor market get if we do see things 0:05:31.440 --> 0:05:32.640 like mass deportations. 0:05:32.720 --> 0:05:32.920 Yeah. 0:05:32.920 --> 0:05:34.640 One of the things you talked about in that interview 0:05:34.800 --> 0:05:38.720 was that this is going to start with those immigrants 0:05:38.760 --> 0:05:41.359 that have a criminal history, and that that's going to 0:05:41.360 --> 0:05:43.800 be the focus, at least initially, So Lisa was talking 0:05:43.839 --> 0:05:46.880 about this idea of sequencing. What's the policy sequencing? So 0:05:47.000 --> 0:05:49.680 if that really is the focus, that's not something that's 0:05:49.680 --> 0:05:52.720 going to have a big effect on the domestic labor market. Now, 0:05:52.760 --> 0:05:54.640 we know that a large percentage of workers in this 0:05:54.720 --> 0:05:57.599 country are working without authorization, So if you had a 0:05:57.640 --> 0:06:01.440 large deportation program, then you could have issues where worker 0:06:01.600 --> 0:06:04.760 firms are trying to hold on to their native workers. 0:06:05.320 --> 0:06:07.520 That could tighten the labor market. So you do have 0:06:07.520 --> 0:06:09.240 that risk. I think we have to watch how that 0:06:09.279 --> 0:06:12.240 policy plays out, But based on what I heard over 0:06:12.279 --> 0:06:14.320 the weekend, that's not making me more concerned about an 0:06:14.360 --> 0:06:15.440 inflationary impetus from that. 0:06:15.560 --> 0:06:18.359 The other risk, of course is tariffs, and potentially the 0:06:18.400 --> 0:06:20.880 Fed might have to think about what that means for 0:06:20.880 --> 0:06:23.680 inflation next year. How are you thinking about tariffs? Are 0:06:23.680 --> 0:06:25.520 they negotiating tool? Are they blanket? 0:06:26.240 --> 0:06:28.040 I think they're on two tracks, and I think we've 0:06:28.120 --> 0:06:31.680 already seen tariffs as a negotiating tool. We saw tariffs 0:06:31.680 --> 0:06:34.479 floated from Mexico for Canada. Those tariffs are probably not 0:06:34.520 --> 0:06:36.760 going to come into effect. They're meant to be a 0:06:36.839 --> 0:06:41.320 start to negotiating things related to immigration and ventional right 0:06:41.360 --> 0:06:46.440 non economic issues across the board. Tariff is on a 0:06:46.480 --> 0:06:48.560 separate track. I think I think we will see some 0:06:48.880 --> 0:06:52.720 form of that. That would if you're increasing the cost 0:06:52.760 --> 0:06:55.800 of foreign goods, then some of those costs could pass 0:06:55.839 --> 0:06:58.599 through into consumer prices. But we've heard from FED officials 0:06:58.720 --> 0:07:02.400 is that they're going to be quite slow in terms 0:07:02.440 --> 0:07:04.720 of taking their time and watching how this plays through 0:07:04.760 --> 0:07:07.800 in the economy. And remember, from a central bank perspective, 0:07:08.080 --> 0:07:10.920 if you put that tearf in place, the first instinct 0:07:10.960 --> 0:07:13.400 of central bankers is to say, that's a one time 0:07:13.480 --> 0:07:15.480 rise in the price level. And we don't respond to 0:07:15.480 --> 0:07:16.960 a one time rise in the price level. So I 0:07:16.960 --> 0:07:18.520 don't think this is something that's going to make the 0:07:18.560 --> 0:07:20.560 central bank, make the FED a lot more hawkish. 0:07:21.000 --> 0:07:23.120 I guess one thing that amahs to try to get at, 0:07:23.160 --> 0:07:24.680 and I think it's the right thing to get at, 0:07:25.000 --> 0:07:28.720 is what would make you rethink the thesis if we 0:07:28.800 --> 0:07:32.880 do se say, an increase in inflation from policies, or 0:07:33.240 --> 0:07:35.880 just if CPI comes in hot earth and expected, what 0:07:36.200 --> 0:07:38.880 is it that would force you to look at a 0:07:38.880 --> 0:07:42.280 different set of considerations in your employment template. 0:07:42.400 --> 0:07:45.640 Yeah, if I see growth that's accelerating, if I see 0:07:45.720 --> 0:07:48.600 job growth that's accelerating, the unemployment rate that's coming down 0:07:48.640 --> 0:07:51.680 instead of coming up. We have wage growth that's picking up, 0:07:51.800 --> 0:07:53.880 and we're starting to hear firms say we have a 0:07:53.880 --> 0:07:56.080 lot of pricing power in this market. We can raise prices, 0:07:56.120 --> 0:07:57.920 And that's all the opposite of what we're hearing right now. 0:07:58.000 --> 0:07:59.960 Right we're hearing firms say, even when we cut price, 0:08:00.520 --> 0:08:02.640 we're not getting the kind of sales that we were expecting. 0:08:02.680 --> 0:08:05.600 So that's why I think we're in a down trend 0:08:05.720 --> 0:08:08.080 in terms of inflation. If those things inflected, then you 0:08:08.080 --> 0:08:09.440 would get worried about higher inflation. 0:08:09.520 --> 0:08:12.160 You still see a very big risk of recession. 0:08:13.240 --> 0:08:16.360 I think recession risk is elevated. It's certainly elevated, and 0:08:16.400 --> 0:08:19.640 so I would disagree with FED officials that it's not elevated. 0:08:19.720 --> 0:08:21.680 When you have the unemployment rate that's up by almost 0:08:21.680 --> 0:08:24.000 a percentage point and you have very low hiring rates. 0:08:24.160 --> 0:08:26.080 What you worry about is is this going to move 0:08:26.120 --> 0:08:29.920 over into layoffs. We haven't seen that yet, and that's 0:08:29.960 --> 0:08:32.120 a very good thing, and it looks like maybe this 0:08:32.160 --> 0:08:35.720 could continue sometime without getting that pickup in layoffs. But 0:08:36.240 --> 0:08:38.440 is that risk elevated? I think you have to say 0:08:38.480 --> 0:08:41.319 it's elevated, and I would also say very high valuations 0:08:41.320 --> 0:08:44.040 in equity markets. It doesn't mean that we have to 0:08:44.080 --> 0:08:46.040 have a sell off, right, but does that make the 0:08:46.160 --> 0:08:48.920 risk more elevated that we would get a correction in 0:08:49.000 --> 0:08:51.800 risk assets and that could drive somewhat of a slowing 0:08:51.800 --> 0:08:54.240 in the economy. I would worry about that also, Andrew. 0:08:53.960 --> 0:08:56.120 Andrew hollin Horst, always wonderful to speak with you. Thank 0:08:56.120 --> 0:09:08.360 you for being with us. Tim Adams at the Institute 0:09:08.360 --> 0:09:12.240 of International Finance saying this, we'll likely see burgeoning Emina 0:09:12.320 --> 0:09:16.920 activity with an improved deal making landscape, personnelist policy. Amory 0:09:16.960 --> 0:09:19.040 says that all the time. So we'll see who comes 0:09:19.080 --> 0:09:21.960 in at the regulatory agencies to learn more about the 0:09:22.000 --> 0:09:25.200 future of regulations. Tim joins us now, Tim, thank you 0:09:25.240 --> 0:09:27.720 so much for being here here. So do you see 0:09:27.760 --> 0:09:29.960 right now the banking sector is really driving a lot 0:09:30.000 --> 0:09:33.240 of the optimism in the financial space going forward. 0:09:33.320 --> 0:09:35.520 Sure, and they're hearing from their clients. Animal spirits are 0:09:35.520 --> 0:09:37.120 back in the US. The outlook is for the near 0:09:37.200 --> 0:09:38.960 term at least it's pretty bright. There's a sense of 0:09:39.000 --> 0:09:41.800 deregulation across Europe. In the US. We'll see how much 0:09:41.840 --> 0:09:44.160 of that actually happens. But you know, there's a sense 0:09:44.200 --> 0:09:45.679 of optimism that we haven't seen. 0:09:45.520 --> 0:09:46.000 In a while. 0:09:46.320 --> 0:09:49.000 Does that optimism is it mostly centered or should it 0:09:49.000 --> 0:09:51.920 be mostly centered on the largest American banks or the 0:09:51.960 --> 0:09:52.560 smaller ones? 0:09:52.640 --> 0:09:54.319 Well, I think it's across the board. I think Main 0:09:54.360 --> 0:09:56.120 Street Wall Street are going to do well over the 0:09:56.160 --> 0:09:59.760 near term, but Wall Street looks at the near term 0:09:59.760 --> 0:10:02.000 with great optimism. I think deal flow is going to 0:10:02.000 --> 0:10:03.520 pick up. We're going to see IPOs, We're going to 0:10:03.520 --> 0:10:05.840 see M and A activity, and that's good for our institutions. 0:10:06.120 --> 0:10:08.320 I know you're concerned though about the deficit, so you 0:10:08.440 --> 0:10:11.160 took kindly to the fact there's some deficit hawks when 0:10:11.160 --> 0:10:13.600 it comes to personnel's policy. But over the weekend, Trump 0:10:13.640 --> 0:10:16.720 said that he's not going to cut Social Security entitlements, 0:10:16.800 --> 0:10:18.839 not going to raise the retirement age. How are you 0:10:18.840 --> 0:10:19.960 supposed to get the deficit down? 0:10:20.160 --> 0:10:22.600 Yes, it's very hard because most of what you just described, 0:10:22.640 --> 0:10:25.720 you look at a social insurance and defense and net interest. 0:10:25.760 --> 0:10:27.200 Some of the debt is about ninety percent of what 0:10:27.240 --> 0:10:29.120 we spend. The rest is kind of a rounding error. 0:10:29.559 --> 0:10:31.520 We can grow and I think Scott Bessen to who's 0:10:31.559 --> 0:10:33.680 going to be the next Treasury Secretary is focused on growth. 0:10:33.760 --> 0:10:35.319 That's good, but we're going to have to find ways 0:10:35.360 --> 0:10:38.840 to find savings. Deficit hawks are gone in Washington. They 0:10:38.840 --> 0:10:41.320 don't exist anymore, and maybe you need the Marcus to 0:10:41.360 --> 0:10:44.120 send as a signal it's time to become more sober 0:10:44.160 --> 0:10:45.520 in our fiscal outlook. 0:10:45.760 --> 0:10:47.640 Tim, you've spent a lot of time focused on the 0:10:47.679 --> 0:10:49.800 structure of the financial system in the United States, and 0:10:49.800 --> 0:10:53.480 by all accounts, it's really strong and it's diversified. There's 0:10:53.480 --> 0:10:56.840 been a lot of discussion around mergers amongst smaller banks 0:10:56.880 --> 0:10:58.520 and how much we could see if there is an 0:10:58.559 --> 0:11:01.440 administration that is amenable to that kind of tie up, 0:11:02.000 --> 0:11:03.080 how much could we see. 0:11:03.120 --> 0:11:04.679 I think you'll see a lot. I think you ended 0:11:04.720 --> 0:11:07.800 up seeing a barbelling. The largest institutions get larger and 0:11:08.000 --> 0:11:11.000 the mid size become larger. It's a scale business. Look 0:11:11.040 --> 0:11:15.800 at JP Morgan spend seventeen billion dollars a year on technology. 0:11:16.000 --> 0:11:19.040 Jamie probably would spend trillion. But think about the tech 0:11:19.080 --> 0:11:21.280 spin that these institutions put in place and who they're 0:11:21.280 --> 0:11:24.360 competing with, and then you'll see smaller local institutions than 0:11:24.400 --> 0:11:25.240 know the local markets. 0:11:25.280 --> 0:11:26.440 So it's a bifurcation. 0:11:26.760 --> 0:11:28.480 The mid sized guys are going to get bigger. 0:11:28.559 --> 0:11:31.360 Well, you raise this question, who aren't the big competitors? 0:11:31.640 --> 0:11:34.240 Is it Apple, is it absolutely or is this an 0:11:34.240 --> 0:11:37.120 issue of say, the Apollos of the world. And this 0:11:37.160 --> 0:11:40.280 has been sort of the two sided barbell at a 0:11:40.280 --> 0:11:43.880 time where potentially fewer regulations for the largest banks could 0:11:43.880 --> 0:11:45.240 make them more competitive against both. 0:11:45.360 --> 0:11:48.000 Yeah, I probably mean two hundred CEOs a year. In 0:11:48.040 --> 0:11:50.160 the financial sector. We hear a lot about private credit 0:11:50.160 --> 0:11:52.560 and private equity. We hear a lot about Apple, Google 0:11:52.600 --> 0:11:55.000 and the tech platforms. And if you're Jamie, you're trying 0:11:55.040 --> 0:11:57.679 to compete with the tech platforms, right. And then if 0:11:57.760 --> 0:11:59.960 you're then then you maybe you can acquire or part 0:12:00.040 --> 0:12:01.840 and you're with private equity and private credit. 0:12:02.200 --> 0:12:04.640 I'm really curious what happens to Europe and all of 0:12:04.679 --> 0:12:07.840 this if you have this growing American banking system, if 0:12:07.880 --> 0:12:10.000 the biggest get bigger and they're not just eating the 0:12:10.040 --> 0:12:12.440 smaller bank's launch, they're taking it from Europe too, which 0:12:12.440 --> 0:12:15.760 has been really struggling and has tried UniCredit Commerce trying 0:12:15.760 --> 0:12:18.120 to get some sort of merger through. Do something need 0:12:18.200 --> 0:12:19.840 to change? But it finally start. 0:12:19.600 --> 0:12:20.800 To absolutely core. 0:12:20.840 --> 0:12:23.520 Europe is on this back politically and economically. German economy 0:12:23.600 --> 0:12:26.920 is really struggling. Periphery's doing much better, Spain, Greece, Poland. 0:12:27.400 --> 0:12:31.240 But euro needs banking, consolidation, the need capital markets, union, banking, 0:12:31.240 --> 0:12:33.240 and there's so much that this new Commission and this 0:12:33.280 --> 0:12:36.000 new Parliament needs to take on. They're saying the right things, 0:12:36.160 --> 0:12:38.240 but we'll see it's time for action across Europe. 0:12:38.320 --> 0:12:40.199 We saw uned Credit try to do that with Commerce 0:12:40.240 --> 0:12:43.040 Bank and the Germans really did not want that to happen. 0:12:43.360 --> 0:12:46.600 What could give the boost to these countries to say, okay, 0:12:46.640 --> 0:12:47.800 we should start consolidating. 0:12:47.840 --> 0:12:50.719 Well, you're hearing it from Christine Loard the ECB, she's 0:12:50.760 --> 0:12:53.480 signaling a unique consolidation. You need Brussels to say it's 0:12:53.520 --> 0:12:55.760 time to act as time to consolidate. I think this 0:12:55.840 --> 0:12:57.280 deal is going to go through over time, and I 0:12:57.320 --> 0:12:59.120 think we'll see more over time as well. 0:12:59.200 --> 0:13:01.439 Hold on a second, you think that the Germans are 0:13:01.480 --> 0:13:04.560 going to be okay with an Italian bank taking over 0:13:04.640 --> 0:13:05.880 one of their national champions. 0:13:05.960 --> 0:13:09.240 Let's underscore they already have The Italians have already taken over. 0:13:09.360 --> 0:13:12.400 They have no choice, right, These are great institutions I 0:13:12.520 --> 0:13:15.280 like Comerance Bank. The CEO Betina is wonderful. I think 0:13:15.320 --> 0:13:18.000 they all realize that to compete domestically and the nationally 0:13:18.120 --> 0:13:20.960 compete with US firms on the continent, they've got to consolidate. 0:13:21.120 --> 0:13:23.040 Tim You talk with a lot of regulators, you talk 0:13:23.080 --> 0:13:25.640 with a lot of elected politicians, and I'm curious about 0:13:25.640 --> 0:13:28.480 whether you've really heard a change in tone over in 0:13:28.520 --> 0:13:32.280 Europe that recognizes how different this moment is that they're in. 0:13:32.679 --> 0:13:34.920 I think the Trump shock has gotten their attention. I 0:13:34.920 --> 0:13:35.600 think they know. 0:13:35.640 --> 0:13:36.439 They have to do more. 0:13:36.480 --> 0:13:40.439 But Brussel's a challenging place. You know, it's a bureaucratic machine. 0:13:40.640 --> 0:13:42.960 So you need political leadership right now. That's missing in 0:13:43.000 --> 0:13:45.920 France and Germany. Hopefully in six months we'll have greater stability. 0:13:46.240 --> 0:13:49.120 Brussels needs to act, Frankfort needs to act. We need 0:13:49.160 --> 0:13:50.480 to see political leadership. 0:13:50.559 --> 0:13:53.079 Where is the political leadership right now? And you're at 0:13:53.080 --> 0:13:55.640 the G seven it felt like it was Georgia Maloney 0:13:55.720 --> 0:13:59.280 that was almost this central figure of Europe because everyone 0:13:59.320 --> 0:14:01.640 that showed up was either a lame duck or on 0:14:01.679 --> 0:14:02.240 their way out. 0:14:02.600 --> 0:14:05.680 Well, the polls have the rotating presidency the EU, they're 0:14:05.840 --> 0:14:07.640 very pro growth, and I like what they've done with 0:14:07.679 --> 0:14:09.920 their economy. I like where they want to go. Spain 0:14:10.000 --> 0:14:12.000 is saying, look at us, we're growing fast. In Greece, 0:14:12.240 --> 0:14:15.000 which was always sort of the stepchild of the EU 0:14:15.080 --> 0:14:17.720 for so many years, is now really putting in great performance. 0:14:17.960 --> 0:14:20.240 I think what you'll see over time core you're figuring 0:14:20.240 --> 0:14:22.680 out they need to lead and do more in Germany 0:14:22.760 --> 0:14:25.080 is the secret and the key to the future of 0:14:25.120 --> 0:14:25.880 European growth. 0:14:25.960 --> 0:14:28.640 So you've done on this whirlwind tour of the whole world. 0:14:28.760 --> 0:14:30.600 You're coming to an end. I'm sure you're very happy 0:14:30.680 --> 0:14:33.440 to be going home. What's your big tic takeaway, Tim, 0:14:33.480 --> 0:14:36.320 after meeting with international leaders of finance around the world. 0:14:36.520 --> 0:14:39.280 Yeah, there's an enormous optimism about the US, but there's concerns. 0:14:39.280 --> 0:14:41.440 There's just so much we don't know about what this 0:14:41.480 --> 0:14:44.200 new administration is going to do. The economic leaders that 0:14:44.200 --> 0:14:47.200 have been put in place, that personnel's policy have really 0:14:47.240 --> 0:14:51.440 boyd that outlook. But ultimately, how will these different policies 0:14:51.440 --> 0:14:52.080 be put in place? 0:14:52.120 --> 0:14:52.960 Will we see tariffs? 0:14:53.040 --> 0:14:56.960 Is it selective, incremental or is it much broader? We 0:14:57.040 --> 0:14:57.520 just don't know. 0:14:57.800 --> 0:15:00.480 Tim Adams of the IIF thank you so much with 0:15:00.560 --> 0:15:12.120 us a key question of how tied the hands are 0:15:12.160 --> 0:15:15.400 of the FED to the fact that inflation might be 0:15:15.520 --> 0:15:18.040 the surprise card here heading into the end of twenty 0:15:18.080 --> 0:15:18.560 twenty four. 0:15:19.120 --> 0:15:21.720 Right, So, when you look at last week's jobs report, 0:15:21.800 --> 0:15:24.280 you get a bit of a riddle for twenty twenty five. 0:15:24.640 --> 0:15:29.000 You get very strong job growth, a uptick in the 0:15:29.080 --> 0:15:33.880 unemployment rate, and importantly for the FED, really robust wage growth. 0:15:33.920 --> 0:15:37.840 Where does that lead to sticky inflation? So the riddle 0:15:37.960 --> 0:15:40.200 is an H for hiring or an H for hiking. 0:15:40.320 --> 0:15:43.160 We don't know in twenty twenty five, but the wage 0:15:43.160 --> 0:15:46.280 growth is putting pressure on inflation, and that's something the 0:15:46.320 --> 0:15:48.800 FED has to keep in, you know, in the rear 0:15:48.880 --> 0:15:51.960 rear mirror as they're trying to support the labor market pause. 0:15:52.320 --> 0:15:55.760 You've said recently that it seems like this job's market 0:15:55.800 --> 0:15:57.680 is on a knife edge. It could go one way 0:15:57.760 --> 0:15:59.960 or another. Are you saying that we're at that tip 0:16:00.160 --> 0:16:02.520 point where we could see whether the solidity of the 0:16:02.600 --> 0:16:05.920 labor market is actually contributing to an increasing likelihood of 0:16:05.920 --> 0:16:07.160 stickiness and even a rate hike. 0:16:07.480 --> 0:16:11.000 Yeah, we're in the stasis period, this really quiet period 0:16:11.040 --> 0:16:13.960 in the labor market where there's very low layoffs and 0:16:14.200 --> 0:16:17.520 now pretty you know, average hiring. If you take the 0:16:17.600 --> 0:16:20.920 last three months of the BLS data, you get something 0:16:20.960 --> 0:16:22.920 a little bit less than one hundred and forty thousand 0:16:23.000 --> 0:16:27.640 jobs created every month on average. So that's solid. But 0:16:27.680 --> 0:16:30.280 I don't think we stay in this equilibrium. I think 0:16:30.320 --> 0:16:32.720 there is a tipping point that is coming, and I'm 0:16:32.760 --> 0:16:35.480 not quite sure whether it's a tipping point lower or 0:16:35.560 --> 0:16:38.680 tipping point higher. So I'm watching wages and what wage 0:16:38.680 --> 0:16:41.880 growth suggests. Both in the BLS data and in the 0:16:41.920 --> 0:16:46.240 ADP payroll data. It suggests that wages are still robust, 0:16:46.240 --> 0:16:48.760 they're still growing. That suggests there's still a bit of 0:16:48.840 --> 0:16:51.200 tightness in the labor market, and I think that's tied 0:16:51.240 --> 0:16:53.560 to longer term trends, not something that the FED can 0:16:53.600 --> 0:16:54.320 fix right away. 0:16:54.440 --> 0:16:57.280 Is there a possibility that when that equilibrium shifts, if 0:16:57.320 --> 0:17:00.119 it does shift towards sticky inflation, that it's not just sticky, 0:17:00.320 --> 0:17:03.560 but wage growth also translates into reacceleration of inflation. 0:17:03.720 --> 0:17:07.080 And that's the problem for the FED. It depends on 0:17:07.119 --> 0:17:10.840 what they do right now. It seems like they're on 0:17:11.000 --> 0:17:14.480 track for a cut in December that could be followed 0:17:14.480 --> 0:17:17.960 by a pause early next year. We're all hoping that 0:17:18.000 --> 0:17:21.040 it's not a hike, because that would imply an acceleration 0:17:21.160 --> 0:17:24.879 of inflation much higher than the Fed's projections right now. 0:17:25.200 --> 0:17:28.960 But given how robust wage growth is, remember before the 0:17:29.000 --> 0:17:32.159 pandemic that ten years of expansion, waste growth was between 0:17:32.160 --> 0:17:35.200 two and three percent. We're now at four percent, So 0:17:35.280 --> 0:17:38.760 there's no consistency of a four percent average hourly wage 0:17:38.760 --> 0:17:41.240 growth with two percent target inflation. 0:17:41.440 --> 0:17:42.960 Is there a risk though, that if the FED is 0:17:43.000 --> 0:17:46.000 cutting in December and they continued with some cuts at 0:17:46.040 --> 0:17:48.119 least in the first half of twenty twenty five, that 0:17:48.160 --> 0:17:51.159 they allow that reacceleration to happen, that they create the 0:17:51.240 --> 0:17:54.119 environment where the animal spirits can continue, hiring can continue 0:17:54.119 --> 0:17:57.200 with a hopium of what a president Donald Trump presidency means, 0:17:57.400 --> 0:17:58.520 and that's what creates it. 0:17:58.680 --> 0:18:02.000 Well, decades of FED policy teach us one thing that 0:18:02.080 --> 0:18:05.800