WEBVTT - US Payrolls Rise Below Forecast 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.240 --> 0:00:29.360 We are honored at this moment of a view of 0:00:29.360 --> 0:00:32.120 the American labor economy. You've speak to Claudia Sam with 0:00:32.159 --> 0:00:35.880 all of our affiliations with Michigan, whether the definitive de 0:00:35.960 --> 0:00:38.279 Sam rule, We're thrilled she could join us today. From 0:00:38.320 --> 0:00:41.760 New Century Advisors, I'm looking at this report. First of all, 0:00:41.800 --> 0:00:44.479 mister Myron looks pretty good here on his path to 0:00:44.560 --> 0:00:49.520 six rate cuts. Very simply, the revision is a negative 0:00:49.680 --> 0:00:54.520 seventy six thousand. That is a negative twenty six thousand 0:00:54.680 --> 0:00:59.840 combined statistic the three months moving average. Thank you Scott 0:01:00.040 --> 0:01:02.840 and in our team Vince gollin Off for this the 0:01:02.960 --> 0:01:07.119 three months moving average change. Paul, look at that negative 0:01:07.200 --> 0:01:09.679 twenty two thousand exactly. 0:01:10.000 --> 0:01:13.280 Claudia saw, I'm here joining us still chief economist and 0:01:13.319 --> 0:01:14.280 New Century Advisors. 0:01:14.600 --> 0:01:16.480 Quick read from you, Claudia on some of. 0:01:16.480 --> 0:01:18.479 These numbers, I mean, I don't know the unemployment rate 0:01:18.520 --> 0:01:20.000 tick down to four point four percent. 0:01:21.560 --> 0:01:23.560 Yeah, no, that is very encouraging. 0:01:23.640 --> 0:01:26.080 I mean, we've seen the unemployment rate moving up since 0:01:26.080 --> 0:01:28.319 the middle of the year. There were some reasons to 0:01:28.360 --> 0:01:31.000 think that maybe the November number, the four point six percent, 0:01:31.120 --> 0:01:34.440 was somewhat elevated with the government shutdown ending, and so 0:01:34.520 --> 0:01:37.200 it is reassuring to see some of that come back off. 0:01:37.240 --> 0:01:39.480 But it has risen over the course of the year. 0:01:39.560 --> 0:01:41.040 That is problematic. 0:01:41.160 --> 0:01:43.480 And then you know, you do point to these payroll 0:01:43.560 --> 0:01:47.400 numbers are really weak, and next month we're going to 0:01:47.480 --> 0:01:49.680 get the annual revisions in which we know is going 0:01:49.760 --> 0:01:53.160 to take a good chunk out of over the last year. 0:01:53.200 --> 0:01:58.200 So we do have this very slow job creation unemployment 0:01:58.240 --> 0:02:02.440 rates rising. It's not it is very reassuring to see 0:02:02.480 --> 0:02:05.400 this steady march and the unemployment rate kind of take 0:02:05.440 --> 0:02:07.800 a little bit of edge off. But you know, we're 0:02:07.800 --> 0:02:10.000 not all clear here. This is not this is a 0:02:10.120 --> 0:02:13.680 very confusing and risky, potentially risky picture. 0:02:13.800 --> 0:02:16.200 Doctor. Someone just right where I wanted to go. We're 0:02:16.200 --> 0:02:17.120 at Jackson Hole. 0:02:17.280 --> 0:02:19.040 She and I are looking out over, you know, through 0:02:19.040 --> 0:02:22.080 the big window in the mountains in the backcheon and 0:02:22.120 --> 0:02:25.400 she's so delicate. She says, hey, stupid, it's about the 0:02:25.440 --> 0:02:29.320 revision report in February, Claudia Simon, I mean, with futures 0:02:29.360 --> 0:02:31.760 of fifteen year folks, a nice lift to the market. 0:02:31.720 --> 0:02:33.520 Claudia Sam this revision coming up. 0:02:33.600 --> 0:02:37.480 You and Anna Wong have really really emphasized what do 0:02:37.520 --> 0:02:41.480 you glean from the new BLS about what that big 0:02:41.520 --> 0:02:43.680 revision in thirty days is going to tell us? 0:02:45.840 --> 0:02:48.160 Right? Well, I think you know we've I mean, there's 0:02:48.200 --> 0:02:50.680 going to be a large downward revision in the prior year. 0:02:50.760 --> 0:02:54.200 So we've had, you know, we just haven't had a 0:02:54.280 --> 0:02:57.680 lot of job creation. Now the again, the unemployed rate 0:02:57.720 --> 0:03:01.639 has been rising, not dramatically, so there has been in 0:03:01.680 --> 0:03:04.760 the payrolls. There has been kind of a slowing supply 0:03:05.280 --> 0:03:08.440 of labor and a slowing demand of labor. The slowing 0:03:08.440 --> 0:03:10.639 demand is winning out. The unemployer rate is coming up. 0:03:10.960 --> 0:03:13.679 But the big sure looks much more ominous. 0:03:13.160 --> 0:03:15.840 If you only look at payrolls, And maybe it doesn't 0:03:15.840 --> 0:03:18.040 look ominous enough if we only look at the unplayer rate. 0:03:18.080 --> 0:03:20.040 Like you got to kind of put all the pieces together, 0:03:20.960 --> 0:03:24.600 but it's it's certainly a concern and a risk, and 0:03:24.639 --> 0:03:27.720 this is exactly what the FED was responding to. I mean, 0:03:27.760 --> 0:03:30.560 they cut rate seventy five basis points last year with 0:03:30.600 --> 0:03:34.040 inflation outivated on concerns about where So this is also 0:03:34.200 --> 0:03:36.560 validating I think FED as a hole, like they are 0:03:36.720 --> 0:03:39.040 moving on concerns about the labor market and it's we 0:03:39.080 --> 0:03:40.120 are seeing it in the data. 0:03:40.160 --> 0:03:42.760 Okay, but Governor Sam see how I'm like, I'm running 0:03:42.760 --> 0:03:45.560 the next job for governor some If you look at 0:03:45.600 --> 0:03:48.960 the three rate cuts in all, it's a nonlinear function. 0:03:49.960 --> 0:03:52.960 I mean, when does a twenty five beat rate cut 0:03:53.120 --> 0:03:58.280 kick in to advance that demand for jobs to get 0:03:58.360 --> 0:03:59.880 job formation going again? 0:04:01.160 --> 0:04:01.280 Right? 0:04:01.320 --> 0:04:03.440 Well, I think this is where the FED really took 0:04:03.440 --> 0:04:06.640 the view of front loading these cuts on concerns about 0:04:06.640 --> 0:04:09.400 where the labor market might go that do that really 0:04:09.480 --> 0:04:11.960 raises the bar for them to do more cuts in January. 0:04:11.960 --> 0:04:14.440 It's kind of like they took an effort there and 0:04:14.560 --> 0:04:16.560 takes time for that to work its way through the economy. 0:04:16.640 --> 0:04:19.160 They're looking out at seeing some fiscal policy. 0:04:18.760 --> 0:04:21.839 That should come online that should be somewhat supportive early 0:04:21.880 --> 0:04:24.839 in this year, Like we have the ingredients here to 0:04:24.880 --> 0:04:28.359 stabilize labor market, get hiring, you know, back on track. 0:04:28.480 --> 0:04:31.279 But we don't really have many signs of that happening yet, 0:04:31.320 --> 0:04:33.159 but the Fed has kind of done their work, and 0:04:33.200 --> 0:04:34.679 I think they're going to want to see. 0:04:34.520 --> 0:04:37.000 How this plays out, you know, keeping a care fly 0:04:37.120 --> 0:04:37.320 on it. 0:04:37.360 --> 0:04:39.200 But the fact that we saw the unemployment rate take 0:04:39.320 --> 0:04:41.480 down that gives them some breathing room. 0:04:41.760 --> 0:04:45.720 We continue with Claudia's futures advance up fourteen fifteen, now 0:04:45.800 --> 0:04:48.440 up twenty one, a bid into the market and down 0:04:48.480 --> 0:04:50.400 features up one point thirty. Oh and I don't have 0:04:50.440 --> 0:04:53.080 a fifty thousand on futures print right now in now, 0:04:53.200 --> 0:04:56.760 but it's remarkable where they're The vix comes in constructively 0:04:57.160 --> 0:04:58.400 fifteen point twenty three. 0:04:58.400 --> 0:05:00.920 The Sweeny yield was shock the unched here. 0:05:01.000 --> 0:05:03.520 I wonder if that's a typo on the Bloomberg but 0:05:03.560 --> 0:05:07.440 a little bit higher yield structure. I noticed dollar strength 0:05:07.880 --> 0:05:11.480 as well. Oil on Venezuela really not doing much today. 0:05:11.920 --> 0:05:15.200 Gold you're kidding me, Paul, up thirty six dollars and 0:05:15.200 --> 0:05:19.440 you're forty five hundred ounce Sweeney with car with Claudia. 0:05:19.120 --> 0:05:21.320 Sam Claudia. Let's look at the wage side here. 0:05:22.000 --> 0:05:24.880 Average hourly earnings on a year on year basis up 0:05:24.920 --> 0:05:29.160 three point eight percent. That's consensus. That's pretty solid. Consensus 0:05:29.200 --> 0:05:32.039 was three point six. The revised last period was up 0:05:32.080 --> 0:05:33.800 a little bit to three point six. So three point 0:05:33.839 --> 0:05:36.719 eight percent earnings growth? What do you make of that? 0:05:38.400 --> 0:05:40.839 So, I mean that is a I mean that's a 0:05:40.839 --> 0:05:43.799 bump up on Yes, that's above expectations. I think it'll 0:05:43.839 --> 0:05:46.360 be you know, always kind of concerned about one month 0:05:46.360 --> 0:05:50.680 and looking at composition, but you know that we've seen 0:05:51.400 --> 0:05:54.520 big picture, We've seen moderation and wage growth, but it 0:05:54.520 --> 0:05:57.920 has been very gradual right over time. So that does 0:05:58.080 --> 0:06:00.800 you know, fit within the you know, wage grows still 0:06:01.080 --> 0:06:03.440 and this is still elevated, which does fit with I 0:06:03.440 --> 0:06:06.640 mean productivity is higher too, So I don't think this 0:06:06.800 --> 0:06:10.440 is a number that would necessarily cause concern about you know, 0:06:10.520 --> 0:06:12.960 spillovers to inflation, but it is, you know, something to 0:06:13.040 --> 0:06:13.640 keep an eye on. 0:06:14.000 --> 0:06:17.000 So what I mean, you've alluded to this, But to you, 0:06:17.160 --> 0:06:19.839 is the January meeting now a big We got CPI, 0:06:19.920 --> 0:06:23.200 but it's January meeting now a bigger deal? Or is 0:06:23.200 --> 0:06:25.320 Claudia sam out to March and beyond? 0:06:27.640 --> 0:06:30.560 Well, every every meeting is a live meeting. 0:06:30.720 --> 0:06:34.920 But I to me this they really put effort into 0:06:34.960 --> 0:06:38.360 getting the rate cuts done last year, putting together even 0:06:38.400 --> 0:06:39.679 though there were questions, abou. 0:06:39.480 --> 0:06:42.040 Should we way for more data? Is it really necessary? 0:06:42.440 --> 0:06:44.520 I think this front loading, which is a smart thing 0:06:44.600 --> 0:06:47.560 because the policy takes a while to take effect, so 0:06:48.200 --> 0:06:50.719 I think to get that done, there's probably going to 0:06:50.760 --> 0:06:54.240 be a we want to, you know, really assess the situation. 0:06:54.360 --> 0:06:56.600 So I don't I don't see them having their urgency 0:06:56.600 --> 0:06:58.279 with January, particularly with this report. 0:06:58.320 --> 0:06:58.640 Today. 0:06:58.880 --> 0:07:01.640 Claudia sam with us and we continue commercial free in 0:07:01.720 --> 0:07:05.040 this hour. Michael McGee coming up. Christina CAMMANI comes in 0:07:05.080 --> 0:07:08.839 the studio and drops everything. She dropped Lisa's breakfast. I 0:07:08.880 --> 0:07:10.840 mean we'll get to her in a moment. 0:07:10.880 --> 0:07:13.040 With Invesco as well. We're going to continue with doctor 0:07:13.120 --> 0:07:16.240 some Paul. We continue with the bid moving up, futures 0:07:16.320 --> 0:07:17.080 up twenty. 0:07:16.840 --> 0:07:18.120 Four, absolutely laudy. 0:07:18.160 --> 0:07:20.760 We're gonna get some inflation data coming up soon here 0:07:21.280 --> 0:07:23.960 just on the other mandate for this FED kind of 0:07:24.040 --> 0:07:25.000 what are you looking for there? 0:07:27.400 --> 0:07:29.960 Yeah, we had the last inflation reading we have with 0:07:30.040 --> 0:07:34.000 the CPI was very distorted by all the disruptions from 0:07:34.880 --> 0:07:38.360 missing a month of data basically with inflation. So I 0:07:38.440 --> 0:07:40.840 think next week is just seeing how much of those 0:07:40.880 --> 0:07:43.800 distortions shake their way out and to get a little 0:07:43.800 --> 0:07:45.280 bit cleaner read on inflation. 0:07:45.960 --> 0:07:47.480 I think today with employment, we. 0:07:47.440 --> 0:07:49.760 Probably shook out a lot of any of the distortions 0:07:49.800 --> 0:07:52.320 from the government shutdown on the employment data. I don't 0:07:52.360 --> 0:07:54.600 think we're going to get fully back to normal in 0:07:54.680 --> 0:07:58.640 terms of CPI with next week's report, but I think 0:07:58.680 --> 0:08:02.600 that's just getting something back to a more normal reading, 0:08:03.000 --> 0:08:06.680 which you know is inflation is still elevated, and then 0:08:06.720 --> 0:08:09.760 trying to peace out. Are there any signs, like real signs, 0:08:09.840 --> 0:08:13.760 not some measurement quirk, but real signs of inflation turning 0:08:13.760 --> 0:08:16.440 the corner and really making you know, pointing towards two percent. 0:08:16.520 --> 0:08:17.960 I think, you know, we're not going to get any 0:08:18.080 --> 0:08:20.560 like super clarity on Monday, but hopefully we'll clear out 0:08:20.600 --> 0:08:21.640 some of the distortions. 0:08:21.880 --> 0:08:24.080 Oh, I just moved it ahead. The tweets are coming out. 0:08:24.120 --> 0:08:26.960 I mean, everybody's working on Twitter and LinkedIn now to 0:08:27.000 --> 0:08:30.000 get an immediate message in vesco does that is well? 0:08:30.000 --> 0:08:33.520 CLAUDIUSA just you know, is the analysis comes out here, 0:08:33.559 --> 0:08:36.840 What is the efficacy of taking a three month moving 0:08:36.880 --> 0:08:39.760 average or taking three months of shut down and non 0:08:39.800 --> 0:08:42.440 shut down data and annualizing that. 0:08:42.600 --> 0:08:45.280 Is that a good University of Michigan experiment. 0:08:47.000 --> 0:08:48.520 Yeah, well, I have to say, I mean, you know, 0:08:48.559 --> 0:08:51.440 with my recession indicator, I need a three month average 0:08:51.440 --> 0:08:53.560 at the unemployment rate. I can't even take the app 0:08:53.640 --> 0:08:57.200 like October doesn't exist, right, So I mean we're in 0:08:57.240 --> 0:08:59.839 a moment and we've had more distortions in the data. 0:09:00.040 --> 0:09:01.359 So just and it's a moment. 0:09:01.120 --> 0:09:03.959 Where you take these averages because you're trying to smooth 0:09:03.960 --> 0:09:05.960 out just some of the noise that comes from trying 0:09:06.000 --> 0:09:09.280 to measure a thirty trillion dollar economy. And you know, 0:09:09.320 --> 0:09:12.800 we're just it's been hard to even do that exercise. 0:09:12.840 --> 0:09:15.080 So I continue to you know, that is the way 0:09:15.120 --> 0:09:17.000 to think about this, Like you want to smooth out 0:09:17.040 --> 0:09:18.880 and you also want to step back and look at 0:09:18.880 --> 0:09:21.880 trends not just over three months. Like to me, the 0:09:21.920 --> 0:09:24.880 fact that we've had an unemployment rate rising gradually over 0:09:24.920 --> 0:09:27.040 two and a half years by a percentage point, I mean, 0:09:27.040 --> 0:09:29.160 like you got to like look at the big picture too. 0:09:30.320 --> 0:09:34.040 Claudia, thank you so much, just really really really valuable. 0:09:34.320 --> 0:09:39.760 Her labor share of the economy is jaw dropping. I 0:09:39.800 --> 0:09:42.320 can't say enough about it. I'll effort that chart out 0:09:42.320 --> 0:09:46.120 on Twitter and LinkedIn stealing it from doctor Some. She's 0:09:46.240 --> 0:09:48.760 chief economist New Century Advisors. 0:09:49.320 --> 0:09:50.040 Stay with us. 0:09:50.280 --> 0:09:53.520 More from Bloomberg Surveillance coming up after this. 0:10:00.720 --> 0:10:04.320 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:10:04.400 --> 0:10:07.560 weekday afternoons from seven to ten am Eastern Listen on 0:10:07.640 --> 0:10:11.320 Applecarplay and Android Atto with the Bloomberg Business app, or 0:10:11.440 --> 0:10:12.920 watch us live on YouTube. 0:10:13.360 --> 0:10:16.680 Christina camp Many Joints is here, Senior portfolio Manager, Global 0:10:16.720 --> 0:10:19.880 Debt at Invesco. Here, Christina, you see a labor number 0:10:19.880 --> 0:10:22.240 here today that if you just look at the you know, 0:10:22.280 --> 0:10:25.360 the headline unemployment rate, it seems like the labor market's okay. 0:10:25.440 --> 0:10:27.719 Does that lend you to believe that the FED may 0:10:27.800 --> 0:10:30.000 wait a little bit, give them some confidence to wait 0:10:30.040 --> 0:10:30.480 a little bit? 0:10:30.679 --> 0:10:32.960 I think, morning, and thank you again for having me. 0:10:33.120 --> 0:10:35.240 And I dropped all my thanks because I was so 0:10:35.320 --> 0:10:36.960 excited to log into the terminal. 0:10:36.679 --> 0:10:37.600 And see what the data was. 0:10:38.280 --> 0:10:41.720 You could come back, but I think I think we 0:10:41.760 --> 0:10:44.080 may be back to a FED sitting on their hands 0:10:44.080 --> 0:10:48.280 mode and trying to decipher through the data. And again 0:10:48.320 --> 0:10:50.760 we're still like, these are all noisy numbers. You're like, oh, 0:10:50.800 --> 0:10:54.280 great headlines fifty. Well, revisions is minus seventy six, but 0:10:54.520 --> 0:10:57.199 the unemployment rates better, and I think the FED will 0:10:57.240 --> 0:11:01.040 probably be most focused and comforted by the unemployment rate. 0:11:01.679 --> 0:11:04.040 And the market's not really pricing much for the FED 0:11:04.720 --> 0:11:08.520 really until we get the new chair in June, so 0:11:08.559 --> 0:11:10.559 I think that that kind of remains our base case 0:11:10.600 --> 0:11:10.960 for the FED. 0:11:11.080 --> 0:11:11.280 Here. 0:11:11.840 --> 0:11:15.760 So twenty twenty five for the bond investors a really 0:11:15.760 --> 0:11:18.640 good year. The AD was up seven percent something along 0:11:18.679 --> 0:11:23.160 those lines. In twenty twenty six, Am I just clip 0:11:23.200 --> 0:11:25.960 clipping coupons? Is that how I should think about fixed income? 0:11:26.480 --> 0:11:30.200 Look, I think that there's still absolutely an opportunity in 0:11:30.240 --> 0:11:32.720 fixed income. I think the same pounding the table that 0:11:32.720 --> 0:11:34.960 we've had for the last year, that there is, especially 0:11:34.960 --> 0:11:37.679 in this environment, and opportunity for global fixed income when 0:11:37.720 --> 0:11:40.160 you take a step back, and that doesn't mean not 0:11:40.320 --> 0:11:42.760 the US, it means including the rest of the world, 0:11:42.840 --> 0:11:47.000 which I think investors typically do not do. But I 0:11:47.000 --> 0:11:49.880 think it's about I think curves should probably still steep in, 0:11:49.960 --> 0:11:52.640 but there's still some that gives you roll down opportunity, 0:11:52.640 --> 0:11:54.400 and there's value in the front end, and I think 0:11:55.080 --> 0:11:57.080 thinking about the long end of the market, we have 0:11:57.160 --> 0:11:59.120 to think about all these things back to the questions 0:11:59.160 --> 0:12:00.800 that we had at the beginning last year, what are 0:12:00.840 --> 0:12:06.000 the policy at the administration's policy objectives going into midterms? 0:12:06.000 --> 0:12:08.440 Like what are they trying to accomplish? And then what 0:12:08.559 --> 0:12:11.360 is the impacts on fundamentals? And I think there are 0:12:11.400 --> 0:12:14.720 so many moving pieces, but it's still about security and 0:12:14.760 --> 0:12:18.360 what's going on with like Trump seems to want cheaper 0:12:18.360 --> 0:12:21.880 oil and cheaper mortgage rates and those focuses, and then 0:12:21.880 --> 0:12:22.839 what do they mean to the market? 0:12:22.920 --> 0:12:24.960 Future's up twenty six right now, there's a bid to 0:12:25.000 --> 0:12:29.680 the market, Christina out passed. Where your own power controls things, 0:12:29.840 --> 0:12:32.000 or maybe mister Myron controls things. 0:12:32.360 --> 0:12:34.840 What does the spread. 0:12:34.360 --> 0:12:37.640 You find most efficacious? Don't give me the vanilla two 0:12:37.880 --> 0:12:40.360 ten when you walk in the morning and tune into 0:12:40.400 --> 0:12:43.440 one of your three Bloomberg terminals, which is the spread 0:12:43.679 --> 0:12:44.560 that matters to you? 0:12:45.080 --> 0:12:47.199 So lately we've been looking at two thirties and we 0:12:47.320 --> 0:12:49.800 laugh that in a lot of places, meaning across a 0:12:49.800 --> 0:12:52.440 lot of different markets, different regions, it's like the whole 0:12:52.520 --> 0:12:57.120 curve because we're in this dynamic that the front end 0:12:57.400 --> 0:13:01.920 offers value right in twos and the FED has done 0:13:01.960 --> 0:13:04.480 some work and seems to be kind of patient for now, 0:13:04.679 --> 0:13:09.199 but it feels like the bar or whatever forward FED 0:13:09.200 --> 0:13:11.600 that we have to hike is very very high, and 0:13:11.720 --> 0:13:15.480 depending on who we get with the next FED chair, 0:13:16.480 --> 0:13:19.240 the bar could be differing in terms of how quick 0:13:19.240 --> 0:13:21.600 we are to ease. So that's the front end, and 0:13:21.640 --> 0:13:24.320 then I think because of all of these fiscal dynamics 0:13:24.320 --> 0:13:27.640 we're talking about increasing the defense budget, spending and all 0:13:27.679 --> 0:13:30.480 of these things, the long end matters even more so, 0:13:30.559 --> 0:13:32.600 like we really are zoomed out and looking at the 0:13:32.720 --> 0:13:35.400 entire curve and looking at two thirty sometimes and again 0:13:35.440 --> 0:13:38.319 it'll shift depending on what's going on and what we've priced. 0:13:38.440 --> 0:13:40.720 But how do you think about in twenty twenty six 0:13:40.840 --> 0:13:43.600 is as you look ahead here US versus rest of 0:13:43.600 --> 0:13:45.840 the world, because boy, if you look at the stock 0:13:45.880 --> 0:13:48.360 market in twenty twenty five, as well as the US did, 0:13:49.240 --> 0:13:51.880 international markets did even better. 0:13:52.000 --> 0:13:53.200 Yeah, how do you think about it? In the fixtion 0:13:53.280 --> 0:13:53.720 come world. 0:13:54.040 --> 0:13:55.839 So again, we run global funds. 0:13:55.880 --> 0:13:57.920 So twenty twenty five is an exciting year for US 0:13:57.960 --> 0:14:00.760 that there's finally some ability to step back. And again 0:14:00.800 --> 0:14:03.600 it doesn't mean that the US is not investable in 0:14:03.640 --> 0:14:05.760 a great place to invest, but look at all these 0:14:05.800 --> 0:14:08.760 opportunities elsewhere, and I think that still is the story 0:14:08.760 --> 0:14:13.160 in the underlying thesis, right, Like there is growth in 0:14:13.240 --> 0:14:15.679 the US and there are positive dynamics here, but a 0:14:15.760 --> 0:14:18.040 strong US is good for the rest of the world too. 0:14:18.520 --> 0:14:22.800 And I think that there are opportunities in foreign exchange 0:14:22.840 --> 0:14:26.880 markets as a standalone. There are certainly across fixed income markets, 0:14:26.880 --> 0:14:29.680 and I think inequities again, like we're not equity managers 0:14:29.760 --> 0:14:33.680 our team, but I think that that global story is 0:14:33.680 --> 0:14:36.320 here to stay. And again, when you zoom out and 0:14:36.360 --> 0:14:38.720 you talk about dollar cycles or all these cycles, they're 0:14:38.720 --> 0:14:42.120 normally multi year, if not ten year cycles. 0:14:42.240 --> 0:14:46.080 Off the radar is continental Europe. Goldman Sachs publishes today's 0:14:46.080 --> 0:14:50.320 Spend Your Spend and their EU team that Germany's just 0:14:50.360 --> 0:14:53.200 simply better than people expect. We've heard that from German 0:14:53.280 --> 0:14:58.240 banks as well. Is there a hidden value in larger 0:14:58.400 --> 0:15:02.280 developed EU that I haven't talked about in what, Paul 0:15:02.360 --> 0:15:03.200 three years. 0:15:03.720 --> 0:15:05.480 So I'm not sure. 0:15:05.640 --> 0:15:10.280 Again, it's hard to get super excited about, just like 0:15:10.960 --> 0:15:14.400 European Union across the board different countries because of how 0:15:14.400 --> 0:15:16.640 tight things are. But I think your first point is 0:15:16.720 --> 0:15:19.440 right that people you had a lot of excitement in 0:15:19.520 --> 0:15:22.320 Q one on the German defense spending and all of that. 0:15:22.440 --> 0:15:26.440 But whether you talk to people, certainly in continental Europe 0:15:26.560 --> 0:15:28.880 but here too, I think there's a lot of negativity 0:15:28.880 --> 0:15:31.040 and people just don't believe that Europe can ever get 0:15:31.040 --> 0:15:33.000 out of its own way. And I think that there 0:15:33.080 --> 0:15:36.280 is more positive things happening there than is price or 0:15:36.280 --> 0:15:40.240 that people give credit to. I think so, I think so. 0:15:40.360 --> 0:15:42.320 I think we are at a point that you need 0:15:42.320 --> 0:15:44.400 to see some proof in the pudding. I think maybe 0:15:44.440 --> 0:15:47.720 equities has it more. I think the euro itself has 0:15:47.760 --> 0:15:50.480 different like there are different dynamics there and it's funding 0:15:50.520 --> 0:15:52.440 and it depends what goes on with central banks. But 0:15:52.520 --> 0:15:54.960 I think there is still opportunities there for sure. 0:15:55.920 --> 0:15:58.080 You know, I think in twenty twenty five I heard 0:15:58.120 --> 0:16:02.000 more discussion about emerging markets and happened many years for sure. 0:16:02.920 --> 0:16:06.160 Why is that and how do you guys think about it? Yeah, so. 0:16:07.640 --> 0:16:12.200 We have a team that has a deep, long history 0:16:12.240 --> 0:16:16.480 of investing in emerging markets, but again last year was 0:16:16.520 --> 0:16:19.600 certainly a time that it got broad interest. I think 0:16:19.720 --> 0:16:22.880 for us we think about em that it's you have 0:16:22.960 --> 0:16:24.160 to think of it, that it can't just be a 0:16:24.200 --> 0:16:28.760 consistent allocation blindly because it is super volatile, but there 0:16:28.800 --> 0:16:31.640 are opportunities there. I think the places that stand out 0:16:31.680 --> 0:16:36.280 in particular are Brazil, Mexico, South Africa, Aruba. 0:16:37.400 --> 0:16:39.000 I don't know about Aruba, but you know. 0:16:40.920 --> 0:16:41.320 I heard. 0:16:41.360 --> 0:16:43.200 I heard we were supposed to go to Aruba hot 0:16:43.280 --> 0:16:45.160 for our first baby moon. I got canceled back on 0:16:45.200 --> 0:16:49.080 twenty sixteenth, so I've never looked, but I think those 0:16:49.200 --> 0:16:53.040 markets you have Steve curves high real yields, there are 0:16:53.120 --> 0:16:57.480 opportunities both in rates and in FX, and we are 0:16:57.520 --> 0:16:59.400 we are involved in those Christians and you. 0:16:59.320 --> 0:16:59.920 Thank you so much. 0:17:00.000 --> 0:17:03.600 I really really appreciate Senior portfolio manager and Vesco stay 0:17:03.640 --> 0:17:14.560 with us. More from Bloomberg Surveillance coming up after this. 0:17:14.560 --> 0:17:18.480 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:17:18.520 --> 0:17:21.919 starting at seven am Eastern on Applecarplay and Android Auto 0:17:21.960 --> 0:17:24.920 with the Bloomberg Business app. You can also listen live 0:17:25.000 --> 0:17:28.560 on Amazon Alexa from our flagship New York station. Just 0:17:28.600 --> 0:17:31.159 say Alexa play Bloomberg eleven thirty. 0:17:31.520 --> 0:17:32.680 He is Magnificent. 0:17:32.800 --> 0:17:36.359 The essay at High Frequency Economics is a yield based 0:17:36.840 --> 0:17:40.959 analysis of the economy. It is what Karl Weinberg did 0:17:40.960 --> 0:17:44.240 at Lehman Brothers for decades, and it was just thrilled 0:17:44.280 --> 0:17:45.720 that he could join us here this morning. 0:17:45.960 --> 0:17:46.160 Karl. 0:17:46.280 --> 0:17:48.440 I love your research note and that you say the 0:17:48.520 --> 0:17:52.720 labor market's going to hover, but GDP may be light. 0:17:53.040 --> 0:17:56.679 Link the two together into the first part of twenty 0:17:56.760 --> 0:17:57.400 twenty six. 0:17:58.440 --> 0:18:00.399 Hi, Tom, good morning. Thanks for having me back on 0:18:00.440 --> 0:18:01.480 the show. It's been a while. 0:18:02.320 --> 0:18:02.520 You know. 0:18:02.600 --> 0:18:03.679 We're at full employment. 0:18:03.840 --> 0:18:06.800 That's my assessment anyhow, others might not agree with that. 0:18:07.280 --> 0:18:09.960 But even at a four and a half percent unemployment rate, 0:18:10.080 --> 0:18:11.720 which I think, by the way, is going to go 0:18:11.840 --> 0:18:14.720 down in this morning's report, and we'll get a revision 0:18:15.000 --> 0:18:17.680 downward to the figure that we saw for in November. 0:18:18.040 --> 0:18:21.760 But when we're at full employment like this, all right, 0:18:21.800 --> 0:18:24.560 the economy has trouble growing. The only way it can 0:18:24.640 --> 0:18:28.200 grow is either by immigration or getting more people in 0:18:28.240 --> 0:18:32.080 the labor force, or by increasing productivity. So productivity was 0:18:32.119 --> 0:18:35.159 really strong in the third quarter. The economy grew well, 0:18:35.320 --> 0:18:37.879 but there's no promise that those productivity gains are going 0:18:37.920 --> 0:18:41.240 to continue into the fourth quarter. So GDP growth may 0:18:41.280 --> 0:18:44.119 be capped, if you will, by the economy being at 0:18:44.119 --> 0:18:45.200 full employment right now. 0:18:45.440 --> 0:18:48.560 I really I'm more focused folks on the SAGI GDP 0:18:48.680 --> 0:18:52.800 outlook of selected economists. Mister Myron wants six rate cuts 0:18:52.840 --> 0:18:55.080 one and a half percent, down, down down. 0:18:55.280 --> 0:18:56.760 Is that a Carl Weinberg theme. 0:18:57.680 --> 0:19:00.760 Absolutely not. I think Myron is wrong. I think he's 0:19:00.840 --> 0:19:04.720 abusing and misinterpreting the tailor rule and the estimates and 0:19:04.760 --> 0:19:09.120 the importance of our star within the tailor rule. Our 0:19:09.200 --> 0:19:13.639 star certainly has come down, but potential GDP has also 0:19:13.720 --> 0:19:16.399 come down, potential GDP growth. So when you put the 0:19:16.440 --> 0:19:20.040 two together, there's no recommendation from the tailor rule or 0:19:20.080 --> 0:19:22.760 anything that I know about economics for the Fed to 0:19:22.840 --> 0:19:26.320 continue to cut rates with the economy at full employment. 0:19:26.640 --> 0:19:29.760 This is Kerl Weinberg and Michael Faroli at JP Morgan 0:19:30.080 --> 0:19:34.080 this phrase potential GDP. None of these people within the 0:19:34.119 --> 0:19:37.480 Trump administration talk about. It's like they're blanked Carl. 0:19:37.480 --> 0:19:39.639 The focus obviously today will be on the labor market. 0:19:39.680 --> 0:19:42.800 But the other side of the Fed mandate is inflation. 0:19:43.920 --> 0:19:46.400 What's your inflation view. Are you concerned that we may 0:19:46.480 --> 0:19:49.200 see stick your inflation, that maybe the market's discounting. 0:19:50.240 --> 0:19:55.080 I'm concerned about more inflation as twenty twenty six progresses, 0:19:55.480 --> 0:19:59.200