Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, sun Cloud, Bloomberg dot com,
Speaker 1: and of course on the Bloomberg terminal. Let's get right
Speaker 1: to it. Uh this morning here with an important conversation
Speaker 1: with the White House. And what's so important here, John
Speaker 1: and Lisa is we all know they're people that finessed
Speaker 1: their way into sixteen under Pennsylvania Avenue, and there's others
Speaker 1: that lean over the desk and just grind out work.
Speaker 1: That's been the path of Brian Deese, director of National
Speaker 1: Economic Council and most importantly of Middlebury and Yale. And
Speaker 1: then he went to work John and actually went from
Speaker 1: task to task to task as he went up a
Speaker 1: Democratic Party food chain. It's very place to say that.
Speaker 1: Brant Days of the National Economic Council joins us right now. Brian,
Speaker 1: you've seen the polls. You know where the focus is.
Speaker 1: The CPS poll in the last week say the administration
Speaker 1: is not focused enough on inflation. Brian so let's start there.
Speaker 1: The degree to which you think you can do anything
Speaker 1: about it, well, I think we've got a pretty straightforward
Speaker 1: and clear I plan to do so. It starts with
Speaker 1: the context, as you were just noting historic economic growth
Speaker 1: strongest in forty years, historic job growth more than six
Speaker 1: million jobs last year, and the unemployment rate the biggest
Speaker 1: dropping unemployment on record in this country, down to three
Speaker 1: point So we have a lot of strength in the
Speaker 1: economic recovery and the uniquely strong economic recovery that positions
Speaker 1: us to go at the issue of price increases. And
Speaker 1: you heard the Present yesterday with a pretty straightforward plan.
Speaker 1: Number one, the FED needs to operate with the independence
Speaker 1: that it has. He's nominated five very quality individuals to
Speaker 1: the FED. They need to be confirmed without delay. And
Speaker 1: from his pers active his approaches about expanding the productive
Speaker 1: capacity the economy, making it easier for us to make
Speaker 1: more goods, provide more services. That's about unsticking supply chains.
Speaker 1: It's about make a boosting competition, making our economy more competitive,
Speaker 1: and it's about lowering kitchen table costs, going right at
Speaker 1: those costs that most directly impact families. So he's got
Speaker 1: a straightforward plan here, it's the right plan for the
Speaker 1: country and we're gonna stick at it. Brian just standing
Speaker 1: with the Federal Reserve. So let's go there briefly. Muhammad
Speaker 1: al Arian of bloom Bug Opinion and of course the
Speaker 1: president of Queen's College, Cambridge said in the last few
Speaker 1: weeks on our network, this was one of the worst
Speaker 1: FED calls in the history of the Federal Reserve. Yet
Speaker 1: Chairman pal got a second term. And you were part
Speaker 1: of that interview process. What did you hear in that
Speaker 1: interview process that convinced you that this is the right
Speaker 1: person to lead this FED through this current environment. President
Speaker 1: was pretty clear about his criteria for nominees to the
Speaker 1: Federals or Board of Governors expertise, judgment and independence, and
Speaker 1: he saw in Chairman Powell, but also Layo Brainerd incredible
Speaker 1: expertise and judgment as well as experience, and he thinks
Speaker 1: these are the right people to lead are the Fed's
Speaker 1: effort and has now added on with three additional nominees.
Speaker 1: If you look at this group of five, you see
Speaker 1: ideological diversity, You see differences in academic style and temperament,
Speaker 1: but overall you see extraordinary breadth of experience, across the board.
Speaker 1: This is a very solid group of five people to
Speaker 1: get get to work on this effort. So we're confident
Speaker 1: that these are the right individuals, and importantly, what you
Speaker 1: heard from the President yesterday, we're confident in putting our
Speaker 1: faith in the institution. Unlike our predecessor, the President is
Speaker 1: trying to reinforce that having the independence of the Federal
Speaker 1: Reserve to make difficult decisions in this environment is incredibly important.
Speaker 1: It's important for the economy, it's important for our democracy.
Speaker 1: You got to make some difficult decisions now to break
Speaker 1: up build my bat to the President implied that that
Speaker 1: was the direction of travel. Now, the things that you
Speaker 1: can do after we fold into the trap of just
Speaker 1: talking about numbers, let's talk about substance. What are the
Speaker 1: pieces of that that you think you can pass and
Speaker 1: can alleviate some of the price pressure in the medium term.
Speaker 1: We'll start with the biggest costs that a typical family
Speaker 1: faces on a monthly basis, healthcare, prescription drugs, childcare. Those
Speaker 1: are the biggest costs, and this bill has elements that
Speaker 1: would go directly at it and provide relief in very
Speaker 1: practical ways, meaning no American family middle class family pays
Speaker 1: more than seven percent of their income and childcare that
Speaker 1: prides economic security. It also will help get more people
Speaker 1: back to work because parents, particularly women, will have more
Speaker 1: support healthcare. We have seen five million more Americans this
Speaker 1: year get healthcare because we made it cheaper and easier
Speaker 1: for them to get access. Continuing that support, extending that
Speaker 1: support common sense lowers costs for families. Same with prescription
Speaker 1: drugs as well. Those are the kinds of things that
Speaker 1: I think speak to the economic challenges that family as
Speaker 1: they're facing, and are also practical and have broad support,
Speaker 1: broad support among economists but also the American people. But Brian,
Speaker 1: last night, President Biden conceded that some of those exact
Speaker 1: programs are going to be very hard to pass, in
Speaker 1: particular the child tax credit. So given the fact that
Speaker 1: renewable energy is basically one of the most important areas,
Speaker 1: that seems like there is bipartisan support for what are
Speaker 1: some of the provisions that are passible right now that
Speaker 1: could lower prices? Well, I just be very clear, the
Speaker 1: clean energy provisions in this bill will not only make
Speaker 1: it easier and cheaper to deploy cheen clean energy and
Speaker 1: address the climate crisis, it will reduce energy costs. The
Speaker 1: child care provisions in this package will not only reduce
Speaker 1: child care costs for families, but help people get to work.
Speaker 1: The healthcare provisions will make improve health for our families
Speaker 1: but also lower costs. Those are all things that I
Speaker 1: think are practical, would address costs and are doable in
Speaker 1: this content. Brian earlier in the inflation are out look,
Speaker 1: we saw a lot of outsized gains for the lowest
Speaker 1: income earners that they actually were seeing some of the
Speaker 1: biggest wage gains. We've seen that shift recently, and the
Speaker 1: latest bank earning show a increase for bank or pay
Speaker 1: over the past year. The expectation is it will continue
Speaker 1: to increase from here. At what point do you start
Speaker 1: to get concerned about a wage price spiral. One of
Speaker 1: the things that's remarkable about is the fact that the
Speaker 1: wage increases were skewed to the bottom end of the distribution,
Speaker 1: so the bottom of earners, and in fact earners in
Speaker 1: we in sectors like leisure and hospitality saw historic record
Speaker 1: wage gains. That's the kind of progress that we want
Speaker 1: to see. And also not only because those are people
Speaker 1: that need wage increases the most, but also it is
Speaker 1: that it creates the least concern about wages and prices
Speaker 1: interacting with each other. I think that what you heard
Speaker 1: from Joe Biden yesterday is people seeing their wages go up.
Speaker 1: That's a good thing. That's part of an economy that
Speaker 1: is progressing and growing in a different way than it
Speaker 1: has in the past. And so what we want to
Speaker 1: do is we want to keep that economic momentum going
Speaker 1: while taking steps to have prices normalized. That's what most
Speaker 1: projections suggest will happen. But we need to stay on target.
Speaker 1: And that's why the President is being very clear about
Speaker 1: the plan that he's got moving forward, and also clear
Speaker 1: about where he needs Congress to confirm uh qualified nominees
Speaker 1: for the Federals or to work on practical elements of
Speaker 1: build back better that would speak to the cost of families.
Speaker 1: And this is where the hope is right now, and
Speaker 1: I think we all agree. We all hope you'll be successful.
Speaker 1: We will want the best for this country. At the moment,
Speaker 1: though people don't feel this. You say way it's growth.
Speaker 1: People say seven percent inflation. You say things are getting better.
Speaker 1: They say things are getting more expensive at the pump.
Speaker 1: The President yesterday said you could see what we did
Speaker 1: when we came out and worked with other countries to
Speaker 1: do something about crude supplies. We saw what happened. Crude
Speaker 1: came down and straight back cup. Right now it's eight
Speaker 1: six just sath of eighty seven dollars of Battle Brian.
Speaker 1: Within the address yesterday, the President said we can do
Speaker 1: more to increase oil supplies brand specifically, specifically, what can
Speaker 1: he do to increase crude supplies? Well, we can. We
Speaker 1: can work to accelerate the release of strategic reserves that
Speaker 1: is currently underway in the United States, and we can
Speaker 1: working with other oil consuming nations accelerate supplies onto the market.
Speaker 1: We can work with oil producing countries around the world
Speaker 1: so that the OPEC plus countries are actually meeting the
Speaker 1: targets that they have set for themselves. Some of the
Speaker 1: tightness and oil markets right now is a function of
Speaker 1: the fact that those target those supply targets have not
Speaker 1: been hit because there's been events in certain countries. We
Speaker 1: can work and engage with those countries and look to
Speaker 1: your broader point these This is work not yet finished,
Speaker 1: and the American people are frustrated, understandably, so this has
Speaker 1: been a tough couple of years. COVID and the uncertainty
Speaker 1: that it creates, and prices create uncertainty. But that's why
Speaker 1: it's important that we have a clear plan and action
Speaker 1: that we can communicate in practical ways too. That will
Speaker 1: impact people's lives. And there's a big publement. What you
Speaker 1: just said, let me to jump in. It's the plus
Speaker 1: in OPEC plus if you don't one hundred opaque right
Speaker 1: now you're dialing Russia. This is where I need some
Speaker 1: input from you. The foreign policy goes of the administration
Speaker 1: now at odds with your economic objectives. Well, we are
Speaker 1: meeting the UH the Russian government and making clear to
Speaker 1: President Putin the stakes and the costs associated with his action.
Speaker 1: That is about that is about making clear to him
Speaker 1: the stakes for him to make the decision. Those are
Speaker 1: decisions that ultimately he has to make. That's not on
Speaker 1: the United States. But we have been very clear that
Speaker 1: we will be prepared for any contingency, not only in
Speaker 1: terms of imposing signalifigate economic costs on the Russians, but
Speaker 1: also working with our partners to mitigate the impact, including
Speaker 1: in energy markets. That's not easy. It requires steady, consistent
Speaker 1: diplomacy with our allies, with other oil producing countries, and
Speaker 1: it is work yet to be completed. But that's the
Speaker 1: focus of this administration in trying to make sure that
Speaker 1: whatever international and geopolitical events we have to manage through,
Speaker 1: we are keeping front and center what we can do
Speaker 1: to help protect and support American consumers and middle class
Speaker 1: families here. And that sounds great, So let's go there.
Speaker 1: Let's get some real detail on this. The President said
Speaker 1: that maybe we can look into alleviating some of the
Speaker 1: precious some of the dependence of Europeans on Russian energy, Brian,
Speaker 1: when you try and work to get crude output up higher.
Speaker 1: As you know, a conflict right now is what's happening
Speaker 1: with Russia. Europe's in the middle of that, Germany's in
Speaker 1: the middle of that. United States to some degrees in
Speaker 1: the middle of that right now, to Brian, so what
Speaker 1: on earth can you do? Can you just run me
Speaker 1: through the very specific part of the policy effort that
Speaker 1: you could do to alleviate some of the dependence of
Speaker 1: the Europeans on Russian gas. Well, in the very immediate term,
Speaker 1: the focus is on how we can make sure that
Speaker 1: European countries have sufficient access to natural gas to get
Speaker 1: through the winter months, but also to alleviate pressures in
Speaker 1: the spring. And very specifically, what that means is working
Speaker 1: with our allies and partners, particularly gas producing countries, to
Speaker 1: understand what additional capacity exists and how we could move
Speaker 1: and extend their capacity into the region. That is country
Speaker 1: by country. It's very specific and technical, but we're working
Speaker 1: those plans that we have them in place for any contingents.
Speaker 1: Do we have capacity here at home in the U s.
Speaker 1: Bryan to do more these of course a private companies,
Speaker 1: it's not like the Saudis who can just dial it
Speaker 1: in and increase output. Do we have capacity here and
Speaker 1: what could the administration do to advise them, to encourage them,
Speaker 1: incentivize them to increase that capacity. Well, with respect to
Speaker 1: natural gas, our export capacity is we are at at
Speaker 1: close to maximum export capacity. So what we can principally
Speaker 1: do is work with allies and try to identify and
Speaker 1: arrange ways to move more product in other ways. But
Speaker 1: bigger picture, oil trades as a global commodity on a
Speaker 1: global market, and it is a function of supply and demand,
Speaker 1: and ultimately the most powerful issue right now is working
Speaker 1: to get the stated supply commitments to actually be delivered
Speaker 1: on and that's going to be the most impactful, as
Speaker 1: well as working with allies to put reserves on the table.
Speaker 1: Those are the steps that we're focused on. Bran, I
Speaker 1: know you've got to run. I just wanted to squeeze
Speaker 1: one important question in the president for a lot of
Speaker 1: people yesterday in that news conference really took one for
Speaker 1: the team. He stuck up for all of you when
Speaker 1: people question the leadership around him, specifically on the economy,
Speaker 1: he talked about he underestimated, overestimated. He talked about what
Speaker 1: he needs to do better personally. Brian, I said on
Speaker 1: air last week that we haven't heard enough from you,
Speaker 1: and I want to hear more from you, and it's
Speaker 1: great we're hearing from you today. What do you personally
Speaker 1: need to do more of well? I think that the
Speaker 1: President was very clear eyed, as he always is, about
Speaker 1: both the progress we've made and the challenges that we've faced.
Speaker 1: I think that one of the perennial challenges in these
Speaker 1: jobs is making sure that we are hearing from all corners,
Speaker 1: getting outside of Washington in terms of the perspective and
Speaker 1: the input, and trying to hear from everyone we can
Speaker 1: in terms including constructive criticism. That's gonna be a goal
Speaker 1: for all of us in this White House, starting with
Speaker 1: the President for two and I think that that that helps.
Speaker 1: It's a you know, working here in this environment is
Speaker 1: seven it's NonStop. That can be difficult to do, but
Speaker 1: we are resolved to make sure that we are hearing
Speaker 1: from everybody. We're listening to everyone and also getting out
Speaker 1: outside of Washington and trying to explain the ways in
Speaker 1: which the steps we are taking are actually impacting people
Speaker 1: and meeting them where they are. Yeah, that's gonna be
Speaker 1: That's gonna be work that we'll try to do more of,
Speaker 1: even as we continue to manage the day to day
Speaker 1: and all the issues we've just discussed. Brian, can I
Speaker 1: say thank you on behalf of the team. Is great
Speaker 1: to catch up and we all hope that we can
Speaker 1: have more exchanges like this one in the nefew Chip
Speaker 1: Bryant taste that the director of the nextional economic cancel
Speaker 1: right now and this is really well time. Peter Cheer
Speaker 1: joins us, head of macro Strategy and Academy UH Securities
Speaker 1: and what's important here is the acuity of his note
Speaker 1: and what's great about Peter Cheer Folks is the immediacy
Speaker 1: of his note. He writes about the zeitgeist. Peter, I love, love,
Speaker 1: love how you're talking about the bet of inflation stasis
Speaker 1: or inflation even rolling over, and how the federal shift
Speaker 1: its rhetoric. How close as Chairman Powell to shock king
Speaker 1: the markets with a dovish tone. I think we're probably
Speaker 1: a few weeks away from that. I think we need
Speaker 1: to see a little bit more bad data or a
Speaker 1: week data. We're starting to see inventory builds. I think
Speaker 1: some of the supply chain issues are going away. We're
Speaker 1: seeing slower retail sales. I think we're gonna get this
Speaker 1: realization that the economy isn't quite as good as we thought.
Speaker 1: And unfortunately, I think the first part of that, if that,
Speaker 1: is going to continue to talk hockey. And that's why
Speaker 1: I see a little bit more downside to this market.
Speaker 1: Let's not do the econo babble, Peter cheer. Let's stay
Speaker 1: within the fixed income market and maybe look at the
Speaker 1: fan distribution of yield. What will yield do if Powell
Speaker 1: yields to a slowing economy and moves from the forest
Speaker 1: parlor game to three rate hikes or even dare I say,
Speaker 1: two rate hikes, how does your world change. I actually
Speaker 1: think we're gonna see lower yields, So I'm actually very
Speaker 1: bullish right now on treasuries seems slightly awkward, and I
Speaker 1: think what we're going to see as a big risk
Speaker 1: off movie. Saw a little bit of it yesterday, Right,
Speaker 1: that was one of the first times in a while
Speaker 1: we've seen yields go lower and stocks down. So give
Speaker 1: us a sense of what the trajectory has to be
Speaker 1: in the data to lead to this sort of devish
Speaker 1: surprise and the idea that perhaps if that is just
Speaker 1: job owning, I think it's gonna be a little bit gradual. Right,
Speaker 1: We're gonna see little signs at the supply chains opening up.
Speaker 1: We're gonna see signs that inventories, buildings, signs that retails
Speaker 1: spending is slowing. So it's going to take a few weeks,
Speaker 1: maybe a month. And part of the issue is going
Speaker 1: to be the politicians keep putting this pressure on. We
Speaker 1: need the politicians to take a step back, look at jobs,
Speaker 1: look at those things. I think we're gonna run to
Speaker 1: a much bigger problem at the end of the year
Speaker 1: where we're headed, and it's not gonna be inflation. That's
Speaker 1: going to be about jobs. And if the administration thinks
Speaker 1: people care about inflation, wait till they see how much
Speaker 1: they care if we don't have jobs because they cut
Speaker 1: growth too quick. Okay, So you think that we're actually
Speaker 1: closer to a looser labor market than a tighter one
Speaker 1: that we're seeing in the wage increases. Is that correct? Yes,
Speaker 1: I think we're gonna start seeing some pressure from all
Speaker 1: this hiking that we're gonna see the economy slow down
Speaker 1: a little bit and the job growth slow down. Okay,
Speaker 1: so going forward, I'm curious if you're going into big
Speaker 1: tech right now. No, I'm still shedding that one thing.
Speaker 1: So I've been very nervous about big tech. I think
Speaker 1: when we start our year outlooks we are very nervous
Speaker 1: about big tech. That's worked out very well. I'm starting
Speaker 1: to get a little bit nervous that we're seeing this creep.
Speaker 1: It went from the archetype stocks to the Nazac one
Speaker 1: hundred to the Nazac composite, and I think if we
Speaker 1: get another lake lower, it's actually gonna be led by
Speaker 1: the SEP five d is. People start selling the socks
Speaker 1: that haven't gone down as much so That's where I
Speaker 1: think the next lake comes down, is this further shift
Speaker 1: to the SEP. I'm not quite ready to buy yet,
Speaker 1: but I am starting to look at that and I
Speaker 1: probably will start buying with some of the most needed upsectors. First,
Speaker 1: good to catch up set as always paid a chief
Speaker 1: of Academy Securities. We are thrilled now to bringing Nila Richardson.
Speaker 1: She is a different chief economist. She is at the
Speaker 1: automatic data processing Company a d P. Yes, they do
Speaker 1: unemployment report of some note, but far more they have
Speaker 1: massive granularity on the American labor economy. Nila, You've got
Speaker 1: a quote on jobs of fifty employees or under and
Speaker 1: it's exploded out from a hundred thirty two thousand out
Speaker 1: to two hundred something thousand. Is well, I want you
Speaker 1: to discuss what your shop knows about the competition of Amazon,
Speaker 1: Target and those warehouses with small business America. Well, first
Speaker 1: of all, small businesses are holding their own UH. They
Speaker 1: were the first to recover from the pandemic UH and
Speaker 1: to start adding headcount even though they were the hardest
Speaker 1: hit by those widespread closures in early But they've had
Speaker 1: some challenges in competition with these larger firms, they're not
Speaker 1: able to recruit in the same way. They can't pay
Speaker 1: and retain in their compensation packages in the same way
Speaker 1: as the bigger companies. So we've seen them continue to
Speaker 1: power head but the competition has gotten stronger and more
Speaker 1: active at the same time, and when you talk about granularity,
Speaker 1: it's really showing up in the wage games. And we
Speaker 1: can talk about at but we're seeing some wage pressures
Speaker 1: at the end of the year. Uh, they're stronger than
Speaker 1: they were in earlier parts of NEILA. Let's build on that,
Speaker 1: especially in light of the software than expected jobless claims.
Speaker 1: Some people might say, as John was indicating earlier, this
Speaker 1: is an indication of a softening and perhaps a less
Speaker 1: tight labor market than many people have thought based on
Speaker 1: the granularity that you've just been talking about. Is that
Speaker 1: consistent with your observations? Now? You know, when we ask
Speaker 1: our our clients at a DP, what is the biggest
Speaker 1: challenge that you're facing, and especially for small firms, it's
Speaker 1: finding people. It's the number one challenge from businesses from
Speaker 1: one employee to five hundred, it's the number one challenge
Speaker 1: and that has been consistent through It is consistent as
Speaker 1: we turn the page on a new year, but we
Speaker 1: are seeing that show up in wage pressures. We're seeing
Speaker 1: that uh industries that had a talent shortage before the
Speaker 1: pandemic or where we're seeing the job gains. It's not
Speaker 1: the industries that have been hardest hit, like leisure and hospitality.
Speaker 1: It's professional business services, finance, information tech. That's where you're
Speaker 1: seeing some double digit wage gains from a year ago
Speaker 1: as of December. And what's also notable, we're we're also
Speaker 1: seeing wage pressure is not for older workers, but for
Speaker 1: younger Gen V We're seeing them those who have kept
Speaker 1: their jobs for a year or more are seeing the
Speaker 1: strongest gains of anybody. So this is a lop sided
Speaker 1: market with some industries outperforming and some sectors out performing.
Speaker 1: And that's all creating a lot of noise in terms
Speaker 1: of wages. And we've seen the shift also where initially
Speaker 1: it was the lowest income earners who are seeing the
Speaker 1: biggest wage pop and now we're seeing it shift to
Speaker 1: a broader number of sectors. Can you gauge out, can
Speaker 1: you game out based on your experience how sticky some
Speaker 1: of these gains are? I mean, is is a one
Speaker 1: time kind of payment or are we going to see
Speaker 1: commensurate types of increases next year the year after, You're
Speaker 1: not going to see ages be the push to inflation
Speaker 1: if it continues. Uh. If you look at some of
Speaker 1: these firms, especially those in the service sector, the margins
Speaker 1: are thin. And I know you all talk about corporate
Speaker 1: profits and margins all the time. There is only so
Speaker 1: much wiggle room on wages. So yes, you might see
Speaker 1: an increase or a pop to get workers in into
Speaker 1: the door for these service sector firms, especially in leisure,
Speaker 1: in hospitality and restaurants and bars. But the continuation of
Speaker 1: year over year wage bins at the case that we're
Speaker 1: seeing them is not likely and not likely to drive inflation.
Speaker 1: We've got a dispersion here, we always have that. That's
Speaker 1: not news. Nebraska under two percent unemployment rate, Ohio four statistic,
Speaker 1: even Texas four or five is statistic as well. When
Speaker 1: you calibrate a fully employed America, what's the unemployment rate
Speaker 1: you have in your head? Obviously below four percent, but
Speaker 1: dare I say, can we be fully employed? It's three
Speaker 1: point two percent, three percent or even a stunning two
Speaker 1: point nine unemployment rate by a traditional definition, yes, but
Speaker 1: by a definition that recognizes that the workforce is smaller
Speaker 1: now than it was two years ago. No, there are
Speaker 1: three point six million jobs that we had in the
Speaker 1: economy two years ago we don't have now. We haven't
Speaker 1: created jobs on top of that. Twenty nineteen a number.
Speaker 1: And so yes, if you look at just a rate,
Speaker 1: a rate that includes a denominator which shows a smaller
Speaker 1: level of a workforce, and you can get you can
Speaker 1: get there. You can give the math. The math works,
Speaker 1: and if you really look at all those jobs on
Speaker 1: the sideline, I don't think you remind us any guests
Speaker 1: that mentions numerator denominator. We don't talk to Nila. Okay,
Speaker 1: that's enough math. I want to talk Nila about the
Speaker 1: idea of a fully employed America and the granularita that
Speaker 1: a d PC's who leads the way. Large corporations, mids
Speaker 1: size or mom and pop. Right now, large companies are
Speaker 1: leading away. They're the ones that are showing that they
Speaker 1: can hire and hire strongly in this market. This is
Speaker 1: a market where everybody's trying to add head count at
Speaker 1: the same time. It's not a traditional market. Um and
Speaker 1: so when everybody's running the race at the same time,
Speaker 1: the bigger and the stronger you are, the faster you
Speaker 1: can go. And that's what we're seeing with large companies.
Speaker 1: They're really outpacing in terms of gains. Will that continue?
Speaker 1: I don't think so, because if history is any guide,
Speaker 1: it's really smaller firms that contribute the most to worker gains.
Speaker 1: In fact, in the previous expansion, small companies produced two
Speaker 1: thirds of the net job gains. So yes, in this
Speaker 1: time of transition, bigger companies are leading and winning. That
Speaker 1: wasn't true through the whole recovery. It's true now, But
Speaker 1: I suspect that small firms gain brown once the economy
Speaker 1: completely normalizes. NATA, thank you a really good point finish
Speaker 1: on NATO Richards in that of the I d P,
Speaker 1: I d P Chief Economist, as we talked to Craig
Speaker 1: Moffatt about five G of Moffatt Nathanson and his expertise
Speaker 1: on our worries and fears of five G. It's the
Speaker 1: surveillance pop process. We look at experts. We try to
Speaker 1: go to experts to give you perspective. On radio, on television,
Speaker 1: Lisa brand Wintson, Time Key Now with Daniel Tannembob Dan
Speaker 1: Tannembomb partner in ahead of America's in a financial crime
Speaker 1: at Oliver Wyman and actually knowledgeable more than politicians on sanctions,
Speaker 1: Dancer the Tannembomb prism. What did you hear yesterday in
Speaker 1: the press conference that will change the behavior of Mr Putin? Well,
Speaker 1: thanks for the intro tongue. I didn't hear anything in
Speaker 1: the press conference yesterday that it is likely to change
Speaker 1: the behavior um of Mr Putin. I think you've heard
Speaker 1: since December this White House UM and al eyes talk
Speaker 1: about the threat of sanctions should Russia move its forces
Speaker 1: across the border as a reminder again, uh into Ukraine. UM.
Speaker 1: I think hearing that emphasized again, I mean it did
Speaker 1: sound actually a little trumpy at some points talking about
Speaker 1: kind of you know, these are are kind of the
Speaker 1: mother of all sanctions, so to speak. UM. I think
Speaker 1: continuing to hold the line on what will happen UM
Speaker 1: was pretty consistent from what we've heard out of the
Speaker 1: administration over the last month or so. Okay, the last
Speaker 1: month or so. But you know, let's try to get
Speaker 1: over let's try to do the Oliver Wyman thing and
Speaker 1: actually look in advance. So for Apple computer, Apple iPhones,
Speaker 1: what does sanctions mean do they pull out of Russia?
Speaker 1: So I mean this. The threats of sanctions have taken
Speaker 1: on a variety of form, everything from sanctions on North
Speaker 1: Stream to impacting energy, cutting off Russia from global payments networks,
Speaker 1: sanctioning large Russian banks, and potentially restricting the importation of
Speaker 1: you US origin goods. When I talk to clients, I'm
Speaker 1: already hearing institutions, not necessarily in the consumer product space,
Speaker 1: but in the financial services industry begin to work on
Speaker 1: asset repatriation plans to begin to look at everything up
Speaker 1: to a potential market exit of Russia, and that could
Speaker 1: happen in advance of any further incursion into Ukraine. I
Speaker 1: think the market concerns are really sparking a lot of
Speaker 1: noise and jitters where some businesses are calculating that the
Speaker 1: risk might not be worth the reward in the market
Speaker 1: going forward. Just to give you some sense, Anthony Blinkin,
Speaker 1: who's over in Europe meeting with Germany's old Off Schultz,
Speaker 1: speaking right now, and he's talking about the negotiations with
Speaker 1: Russia and the alliance with Europe, saying that the Allies
Speaker 1: aim is to seek diplomatic resolution with Russia. This really
Speaker 1: speaks to this feeling that we increasingly get that perhaps
Speaker 1: their hands are tied. You point out that sanctions have
Speaker 1: not worked in the past. Can you give us some
Speaker 1: details about how clients are preparing for the escalation that
Speaker 1: feels increasingly inevitable. I think, as we've seen from going forward,
Speaker 1: sanctions between the US, EU and Russia certainly had a
Speaker 1: material impact on the Russian economy. You've certainly seen what
Speaker 1: was a growing economy in kind of the global scale
Speaker 1: in Russia shrink and look more insular as it became
Speaker 1: fortress Russia trying to insulate itself from sanctions. I'm not
Speaker 1: seeing anyone do this yet, but I'm certainly seeing more
Speaker 1: and more clients in the financial services sector really begin
Speaker 1: to weigh is this a market that we want to
Speaker 1: be in anymore? Given the uncertainty and all of the
Speaker 1: risk that exists to our business. I think it's a
Speaker 1: lot of planning. I'm not necessarily seeing anyone sell off
Speaker 1: or pull the trigger quite yet, but there's a lot
Speaker 1: of watching and waiting, and I think there's a lot
Speaker 1: of companies that are really beginning to be concerned that
Speaker 1: this might not be worth it being in the market anymore. So,
Speaker 1: where will we see this when you look at a
Speaker 1: market impact is simply because as we were talking about,
Speaker 1: the announcement about bitcoin restrictions in Russia is having an
Speaker 1: effect as Toomas talking about earlier on the price of bitcoin.
Speaker 1: Are there certain asset classes that are going to have
Speaker 1: disproportionate and correlated blowouts one way or another in response
Speaker 1: to some sort of action by the US on Russia.
Speaker 1: I think, looking across a variety of sectors, I'm seeing
Speaker 1: potential impact not necessarily isolated to one. I think when
Speaker 1: I look at correspondent banking businesses that have operated in
Speaker 1: Russia for some time, those seem like trime ones that
Speaker 1: might be looking to cut themselves out of the market
Speaker 1: pretty quickly. But I can't necessarily isolate it to one
Speaker 1: specific segment. The institutions I'm talking to really cut across
Speaker 1: a variety of different sectors, so this could be broader
Speaker 1: than just a specific element of the market. Jan I
Speaker 1: want to go back here to Apple, but then I
Speaker 1: want to take it to a different company that's maybe
Speaker 1: more appropriate to the negotiations and your expertise and sanctions.
Speaker 1: You have CRIMEA two thousand fourteen maybe of Ukraine two
Speaker 1: thousand twenty two. You've got Mr Putin, He's going nowhere.
Speaker 1: And then you have the law against Apple, which has
Speaker 1: to do with what Apple has to do to get
Speaker 1: business done in Russia. What's the law against Caterpillar? I mean,
Speaker 1: Caterpillar is machinery that's our number one export to Russia.
Speaker 1: Do we have to assume that with any form of
Speaker 1: moving into Ukraine that Russia is not going to be
Speaker 1: able to buy Caterpillar products. So I think it's to
Speaker 1: be made very clear. And President Biden tried to articulate
Speaker 1: this yesterday and kind of walk back elements of this.
Speaker 1: This sanctions and the responsive sanctions will be kind of
Speaker 1: proportional to the actions that Russia takes. There's a variety
Speaker 1: of different levels that the US has begun to package
Speaker 1: with its EU allies in terms of what sanctions could
Speaker 1: look like. That include things like import bands of American
Speaker 1: origin agricultural products. Um, that's not to say that is
Speaker 1: the lever they'll pull. I think you have to keep
Speaker 1: some powder drying the situation. So I'd be surprised if
Speaker 1: sanctions are levied all at once. Uh, there's certainly a
Speaker 1: lot of concern around whether sanctions are levied preemptively which
Speaker 1: could give Russia just a occation to further move into Ukraine,
Speaker 1: or they're levied after they move into Ukraine, which didn't
Speaker 1: really help the last time, and they haven't given up
Speaker 1: crime need Mr Tanneb'm thank you so much for joining
Speaker 1: us today, Daniel tanneb Oliver Wyman. They're expert on sanctions.
Speaker 1: I learned a lot there that was great. We speak
Speaker 1: the best and brightest, and that would be Craig Mafat,
Speaker 1: founding partner, Senior research analyst at MafA. Nathanson and Craig.
Speaker 1: I don't want to turn this into a consumer interview
Speaker 1: about like am I going to be safe on my
Speaker 1: playing with my five G phone? Forget about that. What
Speaker 1: I want to talk about here is how the people
Speaker 1: you are experts on how they adjust to what is
Speaker 1: clearly a dysfunctional US government transportation and that what a
Speaker 1: Verizon and the rest of them do with the US
Speaker 1: government hit over the head by Emirates Air. Yeah, I
Speaker 1: tell you Tom that first. Well, thank you for having
Speaker 1: me on and good to see you again. Good to
Speaker 1: see Jonathan and Lisa. I've got to say you hit
Speaker 1: the nail on the head. This is a highly dysfunctional government.
Speaker 1: Uh and and it really goes back quite a few years.
Speaker 1: I saw in the tea I heard in the teaser
Speaker 1: you were you know, there was the comment snuck up
Speaker 1: on everybody. It's hard for a calendar year to sneak
Speaker 1: up on people if you can kind of find it
Speaker 1: in your in your calendar if you look. And yet,
Speaker 1: and by the way, this is not a story. We
Speaker 1: started talking about this spectrum band being used for five
Speaker 1: g back in so the f a A has had
Speaker 1: five years to prepare, and the auction for these for
Speaker 1: this spectrum band happened in the end of closed in
Speaker 1: early one and a year later, the FCC suddenly says,
Speaker 1: oh my goodness, wait a second, it is unbelievable to
Speaker 1: me that that it took five years before the FCC
Speaker 1: before or the f a A seriously engaged on this issue.
Speaker 1: So correct, you nailed Brown physics. I mean I heard
Speaker 1: you were Suma Comelaoudy in Brown physics long ago. Let's
Speaker 1: bring up the formula here that matters, which is the
Speaker 1: area definition of an antenna Alpha New Jersey gave me this,
Speaker 1: thanks sale for that. A equals landed squared, divide divide
Speaker 1: four pie g. The MafA translation is, folks, is this
Speaker 1: is going to get solved by rotating the antennas at
Speaker 1: JFK so they don't approach the runways. Is it that's
Speaker 1: simple a fix? Dr? Moffatt, Well, it's actually a little
Speaker 1: simpler than that. Even so, look the radial propagation. So
Speaker 1: think of a circle I R squared of the the
Speaker 1: area covered right now, they're talking about turning down power
Speaker 1: levels for two miles around an airport. Two miles around
Speaker 1: an airport in some some airports are far enough outside
Speaker 1: of downtown areas that doesn't matter. Some like LaGuardia or
Speaker 1: Hobby or love or or or Reagan, it actually matters
Speaker 1: quite a bit. Um. My suspicion is the solution will
Speaker 1: be remember that that sector that antennas are sectorized, that is,
Speaker 1: they serve in an arc of about twenty degrees um.
Speaker 1: You won't turn down power on the entire antenna. You'll
Speaker 1: turn down power on single sectors that face runways. And
Speaker 1: remember what's that what's that issue here is the altimeter
Speaker 1: that is measuring the height of the airplane only when
Speaker 1: you're quite close to the runway. So you will turn
Speaker 1: down the power level on antenna's that face runways for
Speaker 1: that sector. It's not a terribly hard problem to think
Speaker 1: of how you get to the solution. And by the way,
Speaker 1: the ultimate solution is actually fixed the damn altimeters um
Speaker 1: that that are subject to interference outside of the band
Speaker 1: they're supposed to be operating in. So, Craig, if it's
Speaker 1: a simple if it's a relatively simple face X And frankly,
Speaker 1: this whole episode has exposed, as you said, the profound
Speaker 1: dysfunctionality of the government on a broader level. How do
Speaker 1: you then factor in some of the infrastructure spending that
Speaker 1: you were pointing to that could actually help the telecom sector,
Speaker 1: that could help some of these five G rollouts at
Speaker 1: a time when the government doesn't seem to be that
Speaker 1: on top of things. Yeah. Look, I think the infrastructure
Speaker 1: that goes down a completely different path the the infrastructure
Speaker 1: built for the broadband, for example, pushes the responsibility for
Speaker 1: broadband construction out to the states. So you're going to
Speaker 1: have fifty individual states coming up with their own proposals
Speaker 1: for how they think about uh cost justifying individual projects
Speaker 1: where they want to target um. That's that's its tone
Speaker 1: level of dysfunctional, I think, and the reason that Congress
Speaker 1: chose that path was that they were frustrated with the
Speaker 1: f c C in part because of the fccs handling
Speaker 1: of UH the so called art off auctions were other
Speaker 1: rural broadband UM. I actually think the FEC did a
Speaker 1: pretty good job in that case, but there was frustration
Speaker 1: over that, and so they chose an alternative that I
Speaker 1: think is also likely to be dysfunctional. I think in
Speaker 1: this case, though, to go back to the the the
Speaker 1: issue of of the f A A and the f CC,
Speaker 1: I don't think there's any ambiguity this time who's at fault.
Speaker 1: This is a problem of the f A A, not
Speaker 1: the FCC. The FEC was very clear, had a very
Speaker 1: measured process throughout this entire episode, and it was the
Speaker 1: f A A that simply refused to engage. So I
Speaker 1: think this time you have to point the finger at
Speaker 1: the FAA and you can understand why Verizon and A,
Speaker 1: T and T are so incredibly frustrated. UM that at
Speaker 1: the not even the eleven hour, it's it's well passed midnight,
Speaker 1: and suddenly to raise these concerns about yesterday's news is
Speaker 1: incredibly frustrating for the carriers. The Y S N coupon us,
Speaker 1: didn't it some twenty two? Feel still feel like I'm
Speaker 1: into a twenty So chill this morning. Craig on his sofa,
Speaker 1: Craig Moffett, that of Moffett Nathanson. Thank you, Craig. Send
Speaker 1: up West to Michael Sagred. This is the Bloomberg Surveillance Podcast.
Speaker 1: Thanks for listening. Join us live weekdays from seven to
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Speaker 1: Keene and this is Bloomberg