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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is a joy.

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Speaker 3: This is something Paul's demanded that we get from macro

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Speaker 3: policy perspectives. Constant Hunter in here with Julia Cornado and

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Speaker 3: Taviam Paul in this day is just you know, I

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Speaker 3: just think that killer Julia does this shift Powell's discussion

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Speaker 3: of the character of our disinflation.

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Speaker 2: This stunning report.

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Speaker 4: I think it's an important report. I think Chair Powell

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Speaker 4: is likely to express some optimism that progress has resumed

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Speaker 4: after a disappointing first quarter and that the plan to

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Speaker 4: lower rates is on track. We think that they'll come

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Speaker 4: out with a two cut baseline. This report sort of

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Speaker 4: solidifies that we think that Chair Powell sort of has

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Speaker 4: that control over the median and the message, and that

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Speaker 4: he can sort of credibly express optimism, say that we

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Speaker 4: saw some broad based progress in today's report after a

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Speaker 4: d since April. So if we get a few more

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Speaker 4: prints like that, then they can begin a process. The

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Speaker 4: FED is now having to deal with the decision of

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Speaker 4: do we start early so that we can go slow,

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Speaker 4: or do we wait till weakness arrives, which is the

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Speaker 4: track record of central banks right wait till weakness arrives

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Speaker 4: and then cut quickly. This is a new approach or

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Speaker 4: a relatively untested left roach.

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Speaker 3: Because she knows I'm going to go mental, yes, put surveillance.

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Speaker 5: There's a lot of folks out there that says this

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Speaker 5: FED is already behind the curve, that they should be

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Speaker 5: cutting already. Do you, guys, how do you think about that?

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Speaker 1: I think that that is a valid perspective, But of

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Speaker 1: course they also have there's people who are saying that

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Speaker 1: there's going to be no landing, that the FED isn't

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Speaker 1: going to cut it all this year. So I think

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Speaker 1: I understand the perspective of the FED of deciding to wait,

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Speaker 1: given the prints that we had in the beginning of

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Speaker 1: the year, and given the fact that we're seeing anomalies

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Speaker 1: in the CPI data that we didn't see prior to

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Speaker 1: the pandemic. And so I think from their perspective, you know,

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Speaker 1: caution is the better part of valor. On the other hand,

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Speaker 1: as Julia said, historically they are late, and so I think.

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Speaker 6: That they do run that risk.

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Speaker 1: Fortunately, the jobs print last week was stronger than expected.

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Speaker 1: But our big concern if they're late is that labor

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Speaker 1: market starts to weaken and once you see that it's

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Speaker 1: too late because it is at best a coincident indicator.

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Speaker 5: Right, And Julie, I mean Joe Wisenthal from a Bloomberg

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Speaker 5: Onlins podcast just moments ago, said, you know, raising some

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Speaker 5: concerns about the labor market here that we you know,

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Speaker 5: four percent, You get paid attention to that kind of number.

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Speaker 5: So how do you feel about labor?

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Speaker 4: Yeah, no, I think that the the May employment report

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Speaker 4: was truly mixed, right. We the payroll number is strong,

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Speaker 4: it was broad based, but the household survey is showing

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Speaker 4: rising slack. You have to take that message at face value.

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Speaker 4: The fact that we have gone from a low of

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Speaker 4: three point four to four point zero. It's still a

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Speaker 4: low unemployment Rate's still a healthy job market, but you know,

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Speaker 4: it is not a more balanced than it was before.

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Speaker 4: There are risks on both sides now. And as Constance said,

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Speaker 4: if you keep restrictive policy in place for too long.

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Speaker 6: Then you're going to lose that resilience.

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Speaker 4: So even actually Governor Waller said this earlier this year.

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Speaker 4: He said, you know, the low hanging fruit of bringing

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Speaker 4: down job openings, you know, without a rise in unemployment

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Speaker 4: is probably behind us. To really see a decline in

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Speaker 4: labor demand from here, you're going to get that alongside

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Speaker 4: a rise in unemployment.

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Speaker 2: Yeah, we're going to come back.

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Speaker 3: But it's just a joy to have Constance Hunter and

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Speaker 3: Julia Cornetta with us.

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Speaker 2: But I got one fundamental question. Are we more than

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Speaker 2: ever John.

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Speaker 3: Edwards in Louisiana as you were studying in Texas? Are

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Speaker 3: we more than ever? Two Americas? And the idea idea

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Speaker 3: of aggregate analysis that the echos building is just quaint.

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Speaker 4: You know, I think there are always lots of Americas?

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Speaker 2: But is there more now? Is it more polarized now in.

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Speaker 4: Terms of politically, Absolutely, we're in a very ecomorize economically.

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Speaker 6: No, I would say, Tom, Actually the good news is.

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Speaker 4: That we're less polarized economically in a sense that the

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Speaker 4: lower wage workers have the best labor market they've seen

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Speaker 4: in generations this cycle, and it hasn't cracked yet. Really,

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Speaker 4: the weakness we see in the labor market is at

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Speaker 4: the top. It's the professional service sector jobs that are

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Speaker 4: experiencing the weakness. So no, I would say, actually, we've

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Speaker 4: seen a narrowing and wage inequality this cycle that we

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Speaker 4: haven't seen in thirty years.

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Speaker 3: It's just a bang up day here folks, if Jim

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Speaker 3: Bullard with us, the former president of Saint Louis, FED

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Speaker 3: and here for a half hour Julia cordontto with us

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Speaker 3: in Constance hunder a micro policy perspectives to get us

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Speaker 3: towards the FED meeting this after noon, most importantly at

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Speaker 3: ten o'clock, Paul Sweeney will drive forward with Alex Steele.

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Speaker 3: I mean you got you got something to talk about

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Speaker 3: it after this.

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Speaker 5: Inflation report, got got get a very interesting inflation report,

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Speaker 5: very something very important for the FED to take into

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Speaker 5: consideration here as we hear from the FED. And you're

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Speaker 5: gonna have full coverage this afternoon, right tom starting.

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Speaker 2: Can I go? Can I go? Odd?

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Speaker 3: Sure?

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Speaker 2: Mexican paeso weakness.

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Speaker 5: I don't know where to go.

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Speaker 3: There is just stunning. We have Juliet Cornado in the room.

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Speaker 3: You think we should go all Mexican pa.

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Speaker 5: I want to do that.

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Speaker 6: Yeah. And there it is politics for you, yes, exactly.

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Speaker 4: And the bond market action we saw in France yesterday,

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Speaker 4: you know, on just a rumor, there's a lot of uncertainty.

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Speaker 3: What a joy to have us here for a half

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Speaker 3: hour Julia Cornado and Constance hunder of micro policy perspectives Constant.

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Speaker 3: You know, I love Neil Daddy. He doesn't mince words.

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Speaker 3: May I quote Paul It does not take a rocket

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Speaker 3: scientist to figure out what needs.

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Speaker 2: To be done.

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Speaker 3: Yeah, and he's like, let's go. So FED needs to

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Speaker 3: get on with it. Constance, what are they waiting for?

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Speaker 3: I mean, I get at their ex post. You know,

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Speaker 3: with an act, we all know this. Can we really.

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Speaker 2: Hope for a new regime where they get on with it?

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Speaker 1: I mean, one thing that is going to hold them

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Speaker 1: back is that shelter print. Now that was isolated to

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Speaker 1: New York rents which went up and played an oversized part.

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Speaker 3: No, no, no, no, how much did two blocks in New Jersey

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Speaker 3: play point?

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Speaker 5: Yes?

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Speaker 3: Was are you telling me national inflation was Paul Sweeney's

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Speaker 3: housing fault?

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Speaker 1: I think it was Paul Sweeney's fault in particular.

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Speaker 6: Yeah, yeah, he used to blame.

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Speaker 1: You should get all the hate mail, you know, But seriously,

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Speaker 1: they're gonna need to see that shelter number come down

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Speaker 1: a bit. And you know, but I don't disagree. Look

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Speaker 1: that September has to be firmly on the table. The

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Speaker 1: markets believe it's firmly on the table, and even fed

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Speaker 1: that's a little bit behind, should be able to move

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Speaker 1: in September.

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Speaker 3: Jey, how do you.

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Speaker 5: Think about the US consumer here, Because we're getting inflation's

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Speaker 5: coming down, but it's still at that high reset level

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Speaker 5: of nineteen percent versus twenty nineteen. How's the US consumer

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Speaker 5: doing today?

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Speaker 4: Look, I'll reframe it this way. We should thank the

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Speaker 4: US consumer because one thing we keep hearing in earnings

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Speaker 4: reports and in the FEDS Beage book is that consumers

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Speaker 4: are priced sensitive. Again when we look at things like

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Speaker 4: goods prices broad based deflation, consumers want deals and they're

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Speaker 4: getting them on cars, on furniture, and on apparel this month,

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Speaker 4: so airfares on airfares, airfares plunged, So consumers are back

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Speaker 4: to that norm that they had before the pandemic of

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Speaker 4: to part with my money, you're going to have to

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Speaker 4: offer me value, and that is helping restore healthy inflation dynamics.

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Speaker 4: So they might still be grumpy from what we've all

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Speaker 4: been through, and we also, as Tom had alluded, to

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Speaker 4: see a lot of polarization in those sentiment numbers, but

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Speaker 4: you know the reality is that consumers have taken control

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Speaker 4: back that pricing power that companies enjoyed during the pandemic

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Speaker 4: has evaporated and now.

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Speaker 6: They need to deliver values. So some of those margins

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Speaker 6: are going to get pressed.

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Speaker 3: We had a GDP number first quarter. Where are we

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Speaker 3: one point three, one point four percent? Whatever Atlanta GDP

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Speaker 3: balloons out four percent?

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Speaker 2: I think, bring it back. Now we're running what's the

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Speaker 2: run rate? To both of you? What's do you? I mean,

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Speaker 2: do you guys argue about this? What's the run rate?

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Speaker 2: Unreal GDP? Are you that far apart the two of you?

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Speaker 4: I don't know.

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Speaker 6: I think so.

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Speaker 1: I think we're at both at about two point four

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Speaker 1: two point five. I mean, you have to look at

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Speaker 1: GDI when you look at this, and last last quarter

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Speaker 1: was really trade in inventories, right, and so the question

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Speaker 1: is how much are those inventories going to be rebuilt?

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Speaker 1: That's a very tricky thing to forecast. And then obviously

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Speaker 1: we have this strong dollar which is hurting trade in

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Speaker 1: some respects, but we also see tailwinds from the global

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Speaker 1: economy that we haven't seen for four years that could

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Speaker 1: slightly help our trade numbers.

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Speaker 3: I mean, it comes down to domestic final sales. What's

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Speaker 3: twelve months for mean, Julie, you were a BMP peribot

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Speaker 3: years ago, making headlines on this, what's domestic final sales

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Speaker 3: look like one year out? Don't give me this gloom stuff.

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Speaker 6: No, it's not gloomy.

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Speaker 4: I think we're both very constructive on a better productivity cycle,

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Speaker 4: not just because of AI. AI hasn't even begun to

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Speaker 4: enter the room yet. This is about a healthier labor market.

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Speaker 4: We've entered the stock market room, but not necessarily the

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Speaker 4: productivity numbers.

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Speaker 6: It is a bit.

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Speaker 4: We've had a strong investment cycle, We've had a good

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Speaker 4: labor market, good matching of employers and employees, and it's

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Speaker 4: we're not deleveraging. Last cycle was all about deleveraging and

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Speaker 4: global fragility and financial fragilities. And we have strong balance

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Speaker 4: sheets and a healthy, broad based economy. So I think

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Speaker 4: we are pretty constructive. That we've got a better productivity trend.

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Speaker 4: We've got immigration, at least for now. That's going to

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Speaker 4: be a big policy differentiator in.

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Speaker 6: Twenty twenty five. But for now, the.

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Speaker 4: US economy looks like it can run, you know, above

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Speaker 4: two percent UH and not generate inflation.

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Speaker 3: Apple's up nine since the gloom of the AI presence.

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Speaker 6: Actually that's true.

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Speaker 5: Nine This is just the a I bump that everybody

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Speaker 5: was looking for and they got.

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Speaker 6: I probably did too expensive.

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Speaker 5: But here we go up higher again.

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Speaker 2: So there you go.

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Speaker 6: Very good, very good file.

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Speaker 1: Actually good for now I need to start trimming that position.

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Speaker 5: Just loading and up by the momentum constance. What do

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Speaker 5: you what would you like to hear from the FED

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Speaker 5: chairman today versus maybe what do you think we will

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Speaker 5: hear from the FED chairman?

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Speaker 1: Yeah, that's that's a great question. I mean, I'd like

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Speaker 1: to hear him say that they as long as inflation

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Speaker 1: is making progress towards two percent, that it will be

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Speaker 1: appropriate for them to take away some policy tightness. And

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Speaker 1: let's remember where where is our star. Let's say it's higher,

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Speaker 1: Let's say it's three and a half, right and a half.

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Speaker 1: Let's say it's there. They can start cutting and still

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Speaker 1: be restrictive. And so I'd like that message of we

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Speaker 1: can start cutting and policy will still be restrictive.

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Speaker 3: Okay, So economic historian from the University of Texas, is

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Speaker 3: there any heritage that we do that besides a green

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Speaker 3: spanning and measured after after the fact, I don't observe.

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Speaker 3: I mean Richard Timberlake at Georgia or mcteera Dallas Fed

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Speaker 3: years ago.

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Speaker 6: No, there's no history. The history.

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Speaker 4: The history of what you you just noted is green

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Speaker 4: span is the mid nineties, mid and late nineties where

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Speaker 4: they kind of ebbed and flowed the FED funds right,

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Speaker 4: it went up, it went down, it went up, it

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Speaker 4: went down and without recession, and it was about fine

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Speaker 4: tuning and keeping the experience.

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Speaker 3: Does he have to address that today? Is the garden company?

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Speaker 3: He addressed it.

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Speaker 4: The Bloomberg reporters in the room and ask him that

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Speaker 4: bad question because they need to have a strategy.

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Speaker 6: That's the one they've been rich.

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Speaker 2: Take a memo corn out one to tell what was saying.

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Speaker 1: Well, and you brought up McTeer and he was the

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Speaker 1: one arguing for the productivity revolution. He was the one

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Speaker 1: arguing saying, we're going to be getting productivity and we

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Speaker 1: need to we need to make sure that we don't

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Speaker 1: raise rates into this stronger GDP because if you recall

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Speaker 1: in the second half of the nineties, GDP started to

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Speaker 1: gain momentum after those three rates while inflation fell.

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Speaker 5: The nineties late nineties were very good to me, they

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Speaker 5: weren't so Julia, you know, I'm trying to explain to

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Speaker 5: my kids are in the workforce now that this is

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Speaker 5: a more normalized rate environment. That's your stuff we live

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Speaker 5: through before. Is that kind of where we are now

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Speaker 5: we're back to normal? I guess I hope. So.

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Speaker 4: I mean, I think we've got or in a positive

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Speaker 4: real rate environment. It looks like the economy can handle that.

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Speaker 4: So I agree, our star is probably higher. That's where

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Speaker 4: we wanted to end up, right, That's what the whole

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Speaker 4: idea of the last strategy review at the FED was

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Speaker 4: about engineering a somewhat higher run rate on inflation and

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Speaker 4: gaining some policy space. And I think signs are that

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Speaker 4: we're that's exactly where we're heading. That will give them

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Speaker 4: better trade offs. I know, I know I'm going to

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Speaker 4: say this, and people's heads aren't going to explode. We've

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Speaker 4: got a better mix of fiscal and monetary policy.

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Speaker 2: Now.

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Speaker 6: Of course, six percent deficits are not sustainable forever, but

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Speaker 6: you know what we have had.

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Speaker 4: Is better state in local government, better fiscal participation. The

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Speaker 4: FED isn't carrying all the water for the economy.

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Speaker 3: You guys aren't allowed to travel together for safety, but

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Speaker 3: and you guys talked about how you adjust your FED

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Speaker 3: calls seriously to the end of the year. Did you

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Speaker 3: make a switch this morning when you publish for Macro

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Speaker 3: Policy Perspectives and you know switch this morning.

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Speaker 4: I think what we've been flagging for our clients is that,

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Speaker 4: you know, the outcome of today's meeting and the tone

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Speaker 4: and the tenor is going to depend on this morning's data.

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Speaker 4: It is an important data point and if we get

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Speaker 4: what we were below consensus on inflation, it came in

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Speaker 4: at our actually even a little bit below our forecast,

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Speaker 4: but that that would lean towards a more positive, constructive

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Speaker 4: message that we're going to start in September.

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Speaker 6: So I think that that's where we're at.

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Speaker 4: The data has ratified that orientation, and now it's up

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Speaker 4: to Share Powell to deliver the message.

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Speaker 3: And Ian Lingen is a third of a way to

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Speaker 3: a stunning call in the ten year yield YEP four

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Speaker 3: point two eight percent. I'm not saying it's going to

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Speaker 3: drive lower, but that's what Demo Capital Markets is saying

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Speaker 3: YEP exactly.

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Speaker 5: So where's constance? Where are you guys thinking about GDP

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Speaker 5: this year, next year? How is this economy going to

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Speaker 5: be growing?

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Speaker 1: Yeah, So we had originally been thinking we would have

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Speaker 1: a soft patch this year because higher rates would begin

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Speaker 1: to take a bite out of growth. And now we're

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Speaker 1: thinking that if the FED can act and that in time,

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Speaker 1: that that may be able to be avoided. And part

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Speaker 1: of the reason that's going to be avoided is this

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Speaker 1: productivity story that Julia was talking about earlier, right, and

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Speaker 1: all of the aspects of that that are.

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Speaker 6: Playing out in the ECONO.

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Speaker 1: So we're looking for a little softer than last year

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Speaker 1: and then a little bit of a pickup probably in

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Speaker 1: the second half of twenty twenty five as lower rates

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Speaker 1: continue and feed into growth.

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Speaker 3: Wa too optimistic constant Juliet cornerdo micro policy perspectives?

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Speaker 2: Can we do this again?

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Speaker 3: Is yeah?

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Speaker 2: Thank you, Thank you so much