WEBVTT - Payrolls at US Companies Fall by Most Since 2023, ADP Says 0:00:02.520 --> 0:00:10.520 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.520 --> 0:00:14.400 Week Daily reporting from the magazine that helps global leaders 0:00:14.440 --> 0:00:18.360 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy, plus global business, finance and tech 0:00:23.440 --> 0:00:27.320 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:31.720 with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.080 --> 0:00:34.280 For more with us on how the US economy is doing, 0:00:34.320 --> 0:00:37.200 We've got Bloomberg Economics US and Canada economist Stort Paul. 0:00:37.240 --> 0:00:39.400 He joins us here in the Bloomberg Business Week Studio. 0:00:39.600 --> 0:00:41.440 So start, we are one week out from the last 0:00:41.520 --> 0:00:45.080 FMC decision by the FED this year. The data that 0:00:45.120 --> 0:00:46.879 we're getting now, the data that we get between now 0:00:46.880 --> 0:00:48.960 and then, will it do anything to change the thinking 0:00:49.200 --> 0:00:51.560 about an expected twenty five basis point great cut. 0:00:51.600 --> 0:00:53.800 I don't think that it'll do anything to change whether 0:00:53.920 --> 0:00:55.600 or not we will get a cut. I think that 0:00:55.640 --> 0:00:58.000 the only thing that it can change is what the 0:00:58.040 --> 0:01:01.240 coalition of voters looks like. Basically, all of the data 0:01:01.280 --> 0:01:04.600 that we got today was pretty bad. We had layoffs 0:01:04.720 --> 0:01:07.720 as reported by ADP in the month of November. We 0:01:07.800 --> 0:01:11.280 saw ism services yes, it's surprise to the upside, but 0:01:11.319 --> 0:01:14.760 it's surprised because of slowing supply chains, like a very 0:01:14.800 --> 0:01:18.720 peculiar reason for ISM to surprise to the upside. We 0:01:18.760 --> 0:01:22.600 saw new orders that were weakening, employment that continued to decline. 0:01:22.600 --> 0:01:25.920 In the ISM Services report, we saw import prices that 0:01:25.959 --> 0:01:28.480 were flat basically, so that gives a little bit of 0:01:28.520 --> 0:01:31.400 room for the FED to consider cut because tariff passed 0:01:31.400 --> 0:01:34.160 through is slow. And the final thing that we saw 0:01:34.280 --> 0:01:39.760 was September's industrial production numbers with manufacturing output basically flat, 0:01:39.959 --> 0:01:42.160 and so all of it just sort of points to 0:01:42.959 --> 0:01:46.479 this final FED decision for the year looking like it's 0:01:46.520 --> 0:01:49.680 going to be made by a pretty robust coalition. In 0:01:49.720 --> 0:01:52.480 my view, when we get the summary of Economic projections 0:01:52.520 --> 0:01:54.960 in December, that's where I expect to see a lot 0:01:55.000 --> 0:01:58.120 of dissent and a lot of division among the committee. 0:01:58.200 --> 0:02:01.040 You know, we've been talking to Matthew on Balance of 0:02:01.080 --> 0:02:06.080 Power about USMCA, the trade deal that replaced NAFTA. You 0:02:06.200 --> 0:02:08.840 obviously follow the Canadian economy. I mean, in the past 0:02:09.120 --> 0:02:11.239 this has been an important economy for the US, US 0:02:11.280 --> 0:02:15.160 has been important economy for the for Canada. Excuse me, so, 0:02:15.200 --> 0:02:18.440 how are you thinking also too about where trade is 0:02:18.560 --> 0:02:22.480 kind of settling between what has been really important trading 0:02:22.520 --> 0:02:23.800 partners for the United States. 0:02:24.400 --> 0:02:26.680 Well, I think that the thing that most important remember 0:02:26.880 --> 0:02:30.680 from the Canadians perspective in the context of USMCA, is 0:02:30.720 --> 0:02:34.840 that Canadian negotiators are basically going to be waiting for 0:02:35.000 --> 0:02:38.919 the US and Mexico to sort out trade and border disputes, 0:02:39.800 --> 0:02:44.640 trade and border deals. For example, how much security Mexico 0:02:44.680 --> 0:02:49.160 should be deploying to the US southern border before Canada 0:02:49.200 --> 0:02:52.239 actually gets to come to the table to discuss its 0:02:52.280 --> 0:02:55.320 own trade relationship. Right now, the average effective TARIF rate 0:02:55.400 --> 0:02:58.000 on Canadian exports to the US is in the low 0:02:58.080 --> 0:03:01.000 single digits, you know, three to four. Yeah, because of 0:03:01.040 --> 0:03:04.280 how many carve outs there are, and because of you know, 0:03:04.560 --> 0:03:07.000 the importance of the US as an energy export market 0:03:07.040 --> 0:03:09.640 for Canada. All the energy just flows through the United States. 0:03:10.040 --> 0:03:11.040 Canada is right. 0:03:10.880 --> 0:03:15.240 Now relatively content just to wait. The bigger issue for 0:03:15.360 --> 0:03:20.640 Canada right now is dealing with pretty lackluster domestic output 0:03:20.720 --> 0:03:24.359 and domestic demand. The labor market has softened materially over 0:03:24.360 --> 0:03:26.239 the summer. It looks like there's a little bit of 0:03:26.240 --> 0:03:29.079 a glimber of hope there right now, it seems as though, 0:03:29.919 --> 0:03:34.840 excuse me, trade is sort of normalizing. Of course, you know, 0:03:35.240 --> 0:03:37.720 the second quarter was really really rough. Yeah, and so 0:03:37.760 --> 0:03:40.120 we saw an outperformance in the third quarter. But trade 0:03:40.440 --> 0:03:44.640 balances are starting to normalize, and any sort of negotiation 0:03:44.720 --> 0:03:46.160 is just gonna be on hold until the US and 0:03:46.240 --> 0:03:47.760 Mexico can sort out their differences. 0:03:47.800 --> 0:03:51.040 Okay, So just a realistic timeline for what that could be. 0:03:52.120 --> 0:03:54.640 I think that in earnest we're going to start seeing 0:03:54.760 --> 0:03:57.840 some important talking points rolled out in the second quarter 0:03:57.880 --> 0:04:00.760 of twenty twenty six. Of course, there are if any 0:04:00.800 --> 0:04:04.880 sort of negotiation can be sped up by let's say, 0:04:04.960 --> 0:04:08.040 Carney Prime Minister Karney visiting the White House. He's already 0:04:08.040 --> 0:04:10.119 been to the US now I think twice so far 0:04:10.640 --> 0:04:14.760 since he took the leadership role. But right now I'm 0:04:14.800 --> 0:04:20.280 expecting to see some more definitive deal points getting rolled 0:04:20.279 --> 0:04:21.000 out in the second. 0:04:20.839 --> 0:04:21.560 Quarter next year. 0:04:21.640 --> 0:04:23.120 It's just kind of wild. I thought we were kind 0:04:23.160 --> 0:04:24.800 of we're not done with trade. I know we're not 0:04:24.800 --> 0:04:28.400 done with trade, but it just keeps creeping back. One 0:04:28.440 --> 0:04:29.760 of the other things that we've been talking a lot 0:04:29.760 --> 0:04:32.400 about are retail earnings this week and over the last 0:04:32.440 --> 0:04:35.400 couple of weeks. Nations retail companies continuing to report out 0:04:35.440 --> 0:04:37.960 earnings amid the holiday shopping season now under ray too. 0:04:37.960 --> 0:04:39.880 It's going to stay with us. Want to get to 0:04:40.200 --> 0:04:41.719 tim some of the earnings we got today. 0:04:42.000 --> 0:04:44.440 Yeah, let's bring in Emily Cone. She's Bloomberg News Consumer 0:04:44.480 --> 0:04:47.080 team leader. She joins us here in a studio. So 0:04:47.080 --> 0:04:49.080 I'm a little confused about what's going on with Macy's 0:04:49.120 --> 0:04:52.920 because shares initially fell after the company reported earnings forecasts 0:04:52.960 --> 0:04:55.960 that disappointed investors. But now we're seeing them up two percent. 0:04:55.960 --> 0:04:57.360 What's going on with Macy's. What do we learn? 0:04:57.680 --> 0:05:01.000 I mean, macy has basically had a good report, solid 0:05:01.080 --> 0:05:04.320 lead up to the holiday season. I think the shares 0:05:04.320 --> 0:05:07.120 are volatile. I think the thing that brought shares down 0:05:07.120 --> 0:05:12.280 initially this morning was a disappointing profit forecast, and I 0:05:12.320 --> 0:05:16.160 think that that speaks to we had the CEO tell 0:05:16.240 --> 0:05:21.159 us this morning a cautious consumer, so they're being, you know, 0:05:21.600 --> 0:05:24.120 a little bit conservative with their forecast. I think that 0:05:24.240 --> 0:05:27.200 initially disappointed investors, but all in all, it is a 0:05:27.200 --> 0:05:31.960 pretty good report for the company. I think they're also 0:05:32.160 --> 0:05:34.640 they're stocks up thirty four percent this year, so I 0:05:34.680 --> 0:05:37.080 think anything a little bit disappointing, might. 0:05:36.960 --> 0:05:39.760 Be two percent swaying from high to low. It's a lot, 0:05:39.920 --> 0:05:40.400 it's a lot. 0:05:40.520 --> 0:05:40.960 It's like a. 0:05:40.960 --> 0:05:43.719 Confusing investor or a confused investor. 0:05:43.480 --> 0:05:47.480 Right, yeah, a little bit, yeah, yeah, But I do 0:05:47.560 --> 0:05:50.520 think it comes on the backdrop of really strong performance 0:05:50.720 --> 0:05:51.159 this year. 0:05:51.400 --> 0:05:54.680 Just throw Dollartry. They reported better than expected profit. They 0:05:54.720 --> 0:05:57.159 also raised their full year earnings outlook, and we saw 0:05:57.240 --> 0:05:59.960 that stock ralling in today's session. So a good report. 0:06:00.120 --> 0:06:02.560 And what does it say about what type of consumer? 0:06:03.200 --> 0:06:03.520 Yeah? 0:06:03.520 --> 0:06:05.320 For sure, I mean this is the kind of store 0:06:05.360 --> 0:06:07.560 that does well in this kind of economy. Right. They 0:06:07.560 --> 0:06:09.680 said on their earnings call they're seeing middle to high 0:06:09.680 --> 0:06:12.719 income shoppers trading down to Dollar Tree. That's good news 0:06:12.720 --> 0:06:14.960 for a store like this, And it continues to paint 0:06:14.960 --> 0:06:17.000 this picture that we saw last week in the week before, 0:06:17.040 --> 0:06:21.240 which is this split screen picture of how the consumer 0:06:21.320 --> 0:06:24.640 is doing. Consumers are still spending, but they're looking for 0:06:24.760 --> 0:06:27.120 value and they're looking for places where the price is 0:06:27.200 --> 0:06:31.200 right and Dollar Tree definitely fits in that better category. 0:06:31.560 --> 0:06:33.160 So Stuart, come on back in here and just give 0:06:33.240 --> 0:06:35.320 us your take on how the US consumer is doing 0:06:35.320 --> 0:06:37.800 and the context of the retail earnings that we continue 0:06:37.839 --> 0:06:42.160 to hear about. To Emily's point, consumers trading down higher 0:06:42.160 --> 0:06:44.680 and consumers trading down, that's good news in an environment 0:06:44.960 --> 0:06:48.080 such as this for a company like dollar Tree. We 0:06:48.160 --> 0:06:51.800 had Dana Telsa in earlier this week and she basically said, listen, 0:06:51.880 --> 0:06:54.800 if you're offering something unique to the consumer, like if 0:06:54.800 --> 0:06:57.320 you're a Levi's for example, if you have a marketing 0:06:57.360 --> 0:07:00.599 campaign that is unique, you're still able to bring in consumers. 0:07:00.640 --> 0:07:02.040 How do you characterize the environment. 0:07:02.279 --> 0:07:04.760 It's interesting when I read so. Of course, I think 0:07:04.760 --> 0:07:07.480 about the economy mostly from the top down, and I 0:07:07.600 --> 0:07:10.000 enjoy when I get to participate in a round table 0:07:10.000 --> 0:07:12.760 with somebody like Emily who provides some insight about the 0:07:12.760 --> 0:07:15.560 broader economy from the bottom up. And what's interesting is 0:07:15.560 --> 0:07:20.320 when I see rotation to a lower end retailer like 0:07:20.400 --> 0:07:23.920 dollar Tree, it speaks of the price sensitivity of consumers. 0:07:24.240 --> 0:07:25.840 And then when we look at some of the more 0:07:26.000 --> 0:07:29.600 macroeconomic data, we see that firms are struggling to pass 0:07:29.640 --> 0:07:31.880 through some of the costs of tariffs. A lot of 0:07:32.440 --> 0:07:37.400 firms are reporting that they're getting squeezed in terms of profitability. Again, 0:07:37.480 --> 0:07:39.760 this is when I zoom out to the macroeconomic level, 0:07:40.040 --> 0:07:43.920 we're seeing squeezed profits in the aggregate data because a 0:07:43.960 --> 0:07:46.440 lot of the cost of tariffs are sitting with those producers. 0:07:46.680 --> 0:07:49.960 When you have consumers that are especially price sensitive, it's 0:07:50.040 --> 0:07:52.440 just sort of a tenuous balance that you're walking in 0:07:52.480 --> 0:07:53.160 the economy. 0:07:53.440 --> 0:07:55.480 Now. It's no wonder why. 0:07:55.320 --> 0:07:57.760 Policymakers are going to be pushing for a rate cut, 0:07:58.040 --> 0:08:01.440 because you're hoping that looser credit conditions will help to 0:08:01.560 --> 0:08:04.400 alleviate some of the pressure that consumers are feeling so 0:08:04.440 --> 0:08:07.280 that you can continue to have that expansion. But right now, 0:08:07.360 --> 0:08:09.640 it's just characteristic of a sort of tenuous balance in 0:08:09.680 --> 0:08:11.160 the broader macroeconomy. 0:08:11.240 --> 0:08:11.440 Yeah. 0:08:11.440 --> 0:08:13.880 I also feel like characteristic and Emily come on back 0:08:13.880 --> 0:08:16.240 in here, is that we are constantly hearing, even from 0:08:16.280 --> 0:08:19.160 retailers that do well, right, I think even Walmart, that 0:08:19.240 --> 0:08:22.800 there's like a cautious consumer out there, I mean cautious consumers. 0:08:22.840 --> 0:08:26.680 So they're spending, but they're being careful, they're being cautious, 0:08:26.680 --> 0:08:29.480 they're making choices, they're trading down. Is that a fair 0:08:29.640 --> 0:08:30.600 narrative takeaway? 0:08:30.680 --> 0:08:32.560 I think that's exactly right, and I think that's what 0:08:32.600 --> 0:08:35.240 we heard from Tony Spring this morning where you know, 0:08:36.120 --> 0:08:39.440 Macy's generally it's a middle to high income shopper, but 0:08:39.559 --> 0:08:42.800 around the holidays they have more aspirational shoppers come in. 0:08:43.040 --> 0:08:45.320 Those are the people who they're seeing pull back be 0:08:45.520 --> 0:08:48.000 extra cautious, and I think that's right. 0:08:48.280 --> 0:08:51.320 So, you know, before we wrap up, just kind of 0:08:51.320 --> 0:08:54.000 on the specifics, Emily, just real quickly, who else are 0:08:54.000 --> 0:08:56.120 we done from the retailers, And didn't we just have 0:08:56.280 --> 0:08:59.600 like a pretty impressive Black Friday and Cyber Monday? 0:09:00.760 --> 0:09:01.160 We did? 0:09:01.320 --> 0:09:04.680 We had, we had an interesting Black Friday Cyber Monday. 0:09:05.720 --> 0:09:08.679 We don't really know the full results yet, and I 0:09:08.720 --> 0:09:12.240 think we'll see that. We have some more retailers reporting 0:09:12.440 --> 0:09:15.319 the rest of the week. We have Kroger tomorrow. Five 0:09:15.360 --> 0:09:20.400 below are right too, I think exactly PVH. Yeah, so 0:09:20.440 --> 0:09:23.680 we're still the retail earning season really never steps. 0:09:23.880 --> 0:09:26.640 Yeah, all right, and then we'll get into the holiday results. Emily, 0:09:26.679 --> 0:09:28.880 thank you so much, really appreciate it. Bloomberg News Consumer 0:09:28.920 --> 0:09:32.000 team leader Emily Cone with the latest don retailers. Stuart 0:09:32.000 --> 0:09:35.480 Paul still with us talking about economics. I mean, there's 0:09:35.480 --> 0:09:37.120 a lot going on, and I guess we are just 0:09:37.160 --> 0:09:41.440 so focused about the FED meeting next week. Is it 0:09:41.480 --> 0:09:43.720 all but done? Another quarter point cut? And is it 0:09:43.760 --> 0:09:46.320 all then about what kind of color we get on 0:09:46.400 --> 0:09:49.840 twenty twenty six? And does it really matter because Fetcher J. Powell, 0:09:49.840 --> 0:09:51.880 we assume will be on his way out. 0:09:52.120 --> 0:09:54.240 Yeah, I think that the twenty five basis point cut 0:09:54.280 --> 0:09:56.760 in December is a done deal. When I think back 0:09:56.800 --> 0:09:59.760 to October, we only had one descent in favor of 0:09:59.760 --> 0:10:02.320 hole rates steady and that was from Kansas City FED 0:10:02.360 --> 0:10:05.559 President Jeffrey Schmid. So when, of course the Beige book 0:10:05.600 --> 0:10:08.960 came out, I was particularly interested to know what's going 0:10:09.000 --> 0:10:11.640 on in Kansas City. Is it possible that he would 0:10:11.720 --> 0:10:15.400 join the coalition of voters come December who would favor 0:10:15.520 --> 0:10:18.520 a twenty five basis point cut? And Kansas City conditions 0:10:18.559 --> 0:10:21.280 looked quite a bit worse in the last Fed Beige Book, 0:10:21.480 --> 0:10:24.880 So I expect that there is this broader coalition forming 0:10:24.960 --> 0:10:28.200 for December cut. You know that Governor Myron is going 0:10:28.280 --> 0:10:31.760 to vote in favor of more than twenty five basis 0:10:31.760 --> 0:10:34.679 points in December. What's going to be a little bit peculiar, 0:10:34.679 --> 0:10:37.599 And we've seen this. We saw this last year. In particular, 0:10:38.040 --> 0:10:41.360 is that when the Summary of Economic projections comes out 0:10:41.559 --> 0:10:44.720 with the dot plot, I would not be surprised to 0:10:44.840 --> 0:10:49.760 see other FOMC participants keeping their dots a quarter point 0:10:49.840 --> 0:10:52.600 higher than where we end the year. That's to say, 0:10:52.600 --> 0:10:56.560 there are sort of shadowed descents among FOMC participants who 0:10:56.559 --> 0:10:59.600 are not voting, who would have preferred rates to not 0:10:59.679 --> 0:11:02.440 be a low in December, even though the actual voters 0:11:02.559 --> 0:11:05.280 decide to lower by twenty five. Explain why, because we 0:11:05.400 --> 0:11:08.559 have other FOMC participants who are not voters, and among 0:11:08.640 --> 0:11:12.720 those people are Cleveland FED President Beth Hammock, Dallas FED 0:11:12.800 --> 0:11:16.960 President Lori Logan, Folks like that who are going to 0:11:16.960 --> 0:11:20.040 be voters next year, who were more hawkish in all 0:11:20.040 --> 0:11:23.160 of their public comments. They don't get a vote this time, 0:11:23.480 --> 0:11:26.199 but we expect that they would try to send a 0:11:26.240 --> 0:11:29.040 signal to the rest of the world, Hey, we're not 0:11:29.120 --> 0:11:31.040 going to be moving at the same pace next year. 0:11:31.240 --> 0:11:33.760 And so when we see dots for twenty twenty six, 0:11:34.080 --> 0:11:37.319 I expect there is going to be a pretty wide distribution. 0:11:37.640 --> 0:11:42.160 I expect that the incoming cohort of FMC voters from 0:11:42.200 --> 0:11:44.319 the regional banks are actually going to be quite a 0:11:44.320 --> 0:11:46.760 bit more hawkish in twenty twenty six than they have 0:11:46.880 --> 0:11:47.520 been this year. 0:11:47.880 --> 0:11:51.240 Are we nuts to be thinking? Are for traders and 0:11:51.320 --> 0:11:54.160 investors to be assuming that Kevin Hassett is the next 0:11:54.200 --> 0:11:57.040 FED share because it does seem like all roads are leading, 0:11:57.080 --> 0:11:58.439 all FED roads are leading to him. 0:11:58.440 --> 0:12:00.800 At this point, it looks like that's going to be 0:12:00.840 --> 0:12:02.720 the case. It looks like it's going to be a 0:12:02.800 --> 0:12:07.959 Hasset nomination. President Trump was alluding to Kevin Hassett being 0:12:08.000 --> 0:12:10.240 the nominee when he had a press conference. I guess 0:12:10.320 --> 0:12:13.960 just yesterday, there was a story from the Financial Times 0:12:13.960 --> 0:12:18.640 today that apparently in one on one conversations between bond 0:12:18.640 --> 0:12:22.679 market investors and the White House, some folks expressed concern. 0:12:22.960 --> 0:12:24.720 But then you look at the price action when the 0:12:24.760 --> 0:12:27.400 trial balloon has floated last week with Kevin Hassetts name, 0:12:27.440 --> 0:12:31.200 and he passed the financial markets test with flying colors. 0:12:31.640 --> 0:12:35.000 And so I'm less concerned about what folks are saying 0:12:35.040 --> 0:12:37.080 to the White House than what the market is saying 0:12:37.080 --> 0:12:38.880 to the White House. And the market is giving a 0:12:38.880 --> 0:12:39.520 clear go ahead. 0:12:39.679 --> 0:12:41.160 I don't want to put the cart before the horse, 0:12:41.200 --> 0:12:42.800 but if you're saying the market is giving the clear 0:12:42.840 --> 0:12:45.600 go ahead, then what does the Senate confirmation process look like. 0:12:46.280 --> 0:12:50.600 I think that what's different between let's say the Senate 0:12:50.600 --> 0:12:55.240 confirmation process for Trump's nominees this time versus in his 0:12:55.400 --> 0:12:58.800 first term is that I guess you could say the 0:12:58.840 --> 0:13:02.240 MAGA movement has last. Then there is a broader coalition 0:13:02.640 --> 0:13:05.880 that is in support of President Trump's agenda, and so 0:13:06.440 --> 0:13:10.280 the division between the Senate Republicans, for example, and the 0:13:10.320 --> 0:13:13.520 White House is pretty narrow. There is not a lot 0:13:13.600 --> 0:13:16.480 of a descent among Centerate Republicans in the White House. 0:13:16.720 --> 0:13:18.720 Every now and then you see somebody pop up like 0:13:18.800 --> 0:13:21.560 Mitch McConnell who has their own voice. But I expect 0:13:21.559 --> 0:13:23.760 that somebody like Kevin Hassett should make it through the 0:13:23.760 --> 0:13:27.640 confirmation process and the Senate Banking Committee pretty easily, and 0:13:27.679 --> 0:13:31.560 then it'll be mostly a party lion's vote when it 0:13:31.559 --> 0:13:33.800 actually gets to the Senate itself, to the Senate floor. 0:13:34.200 --> 0:13:37.320 So I don't think that it's going to be an 0:13:37.360 --> 0:13:39.840 easy process. I think that it's going to be one 0:13:39.960 --> 0:13:44.080 where you're gonna have some pretty dramatic headlines when he 0:13:44.160 --> 0:13:48.760 gets questions from let's say Senator Warren from Massachusetts. It's 0:13:48.760 --> 0:13:51.800 going to be a pretty ugly back and forth. But 0:13:51.880 --> 0:13:54.000 when it comes time to actually counting the votes. I 0:13:54.080 --> 0:13:56.920 think you just get party lines votes and gets he 0:13:56.960 --> 0:13:59.679 gets his shot if that's what the White House ultimately 0:13:59.720 --> 0:14:00.360 decide to do. 0:14:00.559 --> 0:14:03.240 And speaking of Spoke, she wants lower rates. 0:14:03.320 --> 0:14:04.280 Yeah, that's right. 0:14:04.320 --> 0:14:05.760 This is what's tricky is. 0:14:05.720 --> 0:14:09.280 That sometimes sometimes. 0:14:09.120 --> 0:14:12.360 Political partisans find a way to make sort of funny bedfellows. 0:14:12.400 --> 0:14:15.120 And yes, she does want lower rates, but does it 0:14:15.120 --> 0:14:19.480 come at a cost of politicizing the FED as an institution. 0:14:19.840 --> 0:14:21.680 I think she's going to try to make it more 0:14:21.720 --> 0:14:25.080 difficult for him, even though they both might want the 0:14:25.080 --> 0:14:25.440 same thing. 0:14:25.440 --> 0:14:27.720 When it comes to policy, it's just the Fed, all 0:14:27.720 --> 0:14:29.200 of it around the FED. I mean, you had Treasury 0:14:29.240 --> 0:14:31.680 Secretary Scott best And today saying he's going to push 0:14:31.680 --> 0:14:35.080 for this new rule that regional FED presidents must have 0:14:35.120 --> 0:14:37.200 lived in that district for the last three years. For 0:14:37.240 --> 0:14:38.920 the last three years, I just feel like there's just 0:14:39.040 --> 0:14:41.320 so many things going on. You're going to come back. 0:14:41.400 --> 0:14:43.720 We will continue the Fed conversation, but keep in mind, 0:14:43.760 --> 0:14:46.800 one week from today we will have the last decision 0:14:46.880 --> 0:14:49.920 of twenty twenty five. Stuart Paul Bloomberg Economics, US and 0:14:49.960 --> 0:14:51.880 Canada economists. 0:14:52.000 --> 0:14:54.800 Stay with us. More from Bloomberg Business Week Daily coming 0:14:54.840 --> 0:14:56.000 up after. 0:14:55.680 --> 0:15:03.600 This listening to the Bloomberg Business Week Daily Podcast. Catch 0:15:03.640 --> 0:15:06.320 US live weekday afternoons from two to five eas during 0:15:06.560 --> 0:15:10.440 Listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:15:10.640 --> 0:15:12.960 or watch US Live on YouTube. 0:15:13.560 --> 0:15:15.920 We promised you that we were going to continue on 0:15:16.040 --> 0:15:19.200 the US economy and really the US consumer, the online 0:15:19.240 --> 0:15:22.840 lending marketplace and platform for loans, credit cards, deposit accounts, insurance, 0:15:22.840 --> 0:15:25.120 and where we're talking about Lending Club. They announced one 0:15:25.200 --> 0:15:27.600 hundred million dollars share buy back just about one month ago. 0:15:28.120 --> 0:15:31.240 It was about fifty not fifty, nearly five percent of 0:15:31.240 --> 0:15:33.640 the company's market value on the day of the announcement. 0:15:33.680 --> 0:15:36.080 Now Atlas have been raising their price targets on the 0:15:36.080 --> 0:15:39.200 stock this year, most recently again raising them since the 0:15:39.200 --> 0:15:42.560 company reported earnings late October. The company posted third quarter 0:15:42.600 --> 0:15:45.560 results that be estimates. They provided a guidance range for 0:15:45.640 --> 0:15:49.640 new fourth quarter originations with a midpoint above estimates. And 0:15:49.680 --> 0:15:51.360 the stock it's actually up this year. 0:15:51.600 --> 0:15:53.800 Yeah, it is. Shares of the two point one billion 0:15:53.840 --> 0:15:56.120 dollar market cap company about fourteen percent of more than 0:15:56.160 --> 0:15:59.200 twelve percent since reporting those earnings back on October twenty second, 0:15:59.440 --> 0:16:02.480 delighted to have with us. Scott Sanborn, CEO of Lending Club, 0:16:02.640 --> 0:16:05.560 also CEO for close to a decade at Lending Club 0:16:05.600 --> 0:16:07.800 for fifteen years now, also with us here in the 0:16:07.840 --> 0:16:11.320 Bloomberg BusinessWeek studio Herman Chant Bloomberg Intelligence senior analysts for 0:16:11.400 --> 0:16:14.720 US regional banks. He helped bring all of this together. Scott, 0:16:14.760 --> 0:16:16.800 I want to start with you and just give us 0:16:16.800 --> 0:16:19.720 some size and scope of the business, the consumers that 0:16:19.760 --> 0:16:22.200 you're working with, who's interacting with the platform. 0:16:22.560 --> 0:16:25.360 Yeah, So we serve a customer base we call the 0:16:25.400 --> 0:16:28.920 middle majority. They are if you think about credit, which 0:16:28.920 --> 0:16:31.760 we are a credit centric bank. If you've got a 0:16:31.800 --> 0:16:33.480 lot of money, you don't need a lot of access 0:16:33.480 --> 0:16:35.640 to credit, You pay cash for car, you save up 0:16:35.680 --> 0:16:38.200 to send your kids to college. If you're on the 0:16:38.200 --> 0:16:40.960 other end of the spectrum, you can't really access credits. 0:16:41.280 --> 0:16:45.640 So there's this middle group that are high income, heavy 0:16:45.720 --> 0:16:46.480 users of credit. 0:16:46.520 --> 0:16:48.840 So they can afford a car, they can afford to 0:16:48.840 --> 0:16:50.360 send their kids to school, but they need to use 0:16:50.360 --> 0:16:52.680 credit to do it. That's who we serve. 0:16:53.120 --> 0:16:55.800 It's a really big customer base that represents about a 0:16:55.840 --> 0:16:58.440 third of the US population, but it's close. 0:16:58.200 --> 0:16:59.880 To half of the credit wallets. 0:17:00.160 --> 0:17:02.480 They are more likely than average to have every form 0:17:02.480 --> 0:17:05.720 of credit, and that credit is with the exception mortgages 0:17:05.800 --> 0:17:07.080 also larger than average. 0:17:07.080 --> 0:17:07.720 That's what we starve. 0:17:07.840 --> 0:17:10.760 How much do these people usually make our average? 0:17:10.800 --> 0:17:13.280 And you know, obviously misleading averages can be misleading, but 0:17:13.320 --> 0:17:15.359 average is about one hundred and twenty five thousand dollars. 0:17:15.720 --> 0:17:17.840 But you can think of it of ranging between call 0:17:17.880 --> 0:17:18.560 it eighty. 0:17:18.320 --> 0:17:21.719 Thousand dollars in individual income to about two hundred thousand 0:17:21.800 --> 0:17:23.920 is where we really over index. 0:17:25.000 --> 0:17:25.280 Great. 0:17:25.800 --> 0:17:29.000 One of the real highlights of your recent investor day 0:17:29.080 --> 0:17:34.400 last week last month was the panel discussion with Marketplace Investors, 0:17:34.400 --> 0:17:37.520 and we talked about this earlier before your appearance here 0:17:37.520 --> 0:17:42.040 on radio. One of the panelists talked about being aligning 0:17:42.080 --> 0:17:45.399 performance expectations partnering with better operators. Are you seeing that 0:17:45.640 --> 0:17:49.200 with the private private credit space, Yeah, we do so. 0:17:49.400 --> 0:17:52.280 You know, we were born as a marketplace. Initially, everything 0:17:52.320 --> 0:17:56.159 we originated we sold. When we acquired the bank in 0:17:56.240 --> 0:17:58.920 twenty one, we started to hold a portion of our 0:17:58.920 --> 0:18:00.240 loans on our balance sheet. 0:18:00.520 --> 0:18:04.680 That both gives us a stronger and more resilient earnings. 0:18:04.320 --> 0:18:08.680 Profile also allows us to do other things innovate using 0:18:08.680 --> 0:18:11.800 our balance sheet, and what we found is just by 0:18:11.840 --> 0:18:15.719 aligning our interest with our loan buyers, we're the largest 0:18:15.720 --> 0:18:17.680 eater of our own cooking. We're the largest holder of 0:18:17.760 --> 0:18:20.920 lending club loans. We care very deeply about the performance 0:18:20.920 --> 0:18:25.639 of the credit, and credit is always evolving. It's very dynamic. 0:18:26.520 --> 0:18:28.719 Because we have a balance sheet, what we can do 0:18:28.840 --> 0:18:31.160 is when we want to test something new, we test 0:18:31.200 --> 0:18:34.359 it on our balance sheet. Let's try longer duration, let's 0:18:34.400 --> 0:18:37.159 try a larger loan size, let's try a new marketing channel. 0:18:37.440 --> 0:18:40.080 We hold that first, we see it, we own it, 0:18:40.240 --> 0:18:42.359 we make sure it performs the way we expect, and 0:18:42.400 --> 0:18:45.040 then we release that to the marketplace. If you don't 0:18:45.040 --> 0:18:47.639 have a balance sheet, you can't really do that. And 0:18:47.720 --> 0:18:52.520 so that's visible in our results across every aspect of underwriting. 0:18:52.600 --> 0:18:56.520 So lower delinquencies than the rest of the industry, thirty 0:18:56.600 --> 0:19:01.920 or forty percent below, lower roll rates, covery rates, lower prepayments, 0:19:01.960 --> 0:19:05.960 lower fraud, literally every aspect that you can measure of credit. 0:19:06.040 --> 0:19:07.080 We're out performing on. 0:19:07.400 --> 0:19:11.359 Has that remained consistent this year, in recent months, in 0:19:11.400 --> 0:19:13.359 recent weeks, like you have a great real time view 0:19:13.840 --> 0:19:16.000 of the consumer in the form of how well they 0:19:16.000 --> 0:19:19.280 are doing in terms of paying back their loans. That's right, 0:19:19.359 --> 0:19:20.120 still looking good. 0:19:20.280 --> 0:19:23.199 Yeah, so that's been consistent for you know, we release 0:19:23.280 --> 0:19:25.359 four years of data we put out there and so 0:19:25.400 --> 0:19:29.120 it's remained consistent. But you know it's not it's kind 0:19:29.119 --> 0:19:31.320 of like a duck on a pond. It's remained consistent 0:19:31.320 --> 0:19:33.440 because we're doing a lot of work underneath the cover. 0:19:33.600 --> 0:19:36.560 So you know, something that we shared an investor Day 0:19:36.600 --> 0:19:39.160 is at any given time we have more than two 0:19:39.240 --> 0:19:43.679 hundred tests in the market where we're evaluating price points, 0:19:43.760 --> 0:19:47.760 changes to the credit. So we're constantly adjusting to reflect 0:19:47.840 --> 0:19:51.800