WEBVTT - Lots More on the Big Problem With the Monthly Jobs Report 0:00:00.240 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.200 --> 0:00:11.560 Joe, I have an embarrassing confession. Go on, you know 0:00:11.600 --> 0:00:12.960 the birth death adjustment. 0:00:13.560 --> 0:00:14.880 I have the same confession. 0:00:15.360 --> 0:00:17.200 I used to think it was something about like the 0:00:17.239 --> 0:00:20.480 population of people and the labor supply, but it's not. 0:00:20.560 --> 0:00:21.960 It's about business formation. 0:00:22.239 --> 0:00:23.040 Yes, that's right. 0:00:23.160 --> 0:00:23.560 Oh my. 0:00:23.880 --> 0:00:26.440 My confession is even more embarrassing, which is that I 0:00:26.480 --> 0:00:31.360 literally always forget what it is. I did a deadlist. 0:00:31.440 --> 0:00:34.960 I'm both the most popular trader and most successful trader 0:00:35.159 --> 0:00:36.360 at Citadel. 0:00:36.040 --> 0:00:37.080 That is going viral. 0:00:37.320 --> 0:00:38.200 Uh barges. 0:00:38.280 --> 0:00:40.320 This is an after school special, except. 0:00:40.080 --> 0:00:42.600 I've decided I'm going to base my entire personality going 0:00:42.640 --> 0:00:45.880 forward on campaigning for a strategic pork reserve in the US. 0:00:46.080 --> 0:00:46.839 Black goals. 0:00:46.920 --> 0:00:49.880 These are the important questions that robots taking over the world. 0:00:50.000 --> 0:00:52.839 No, I think that like in a couple of years, 0:00:53.040 --> 0:00:55.320 the AI will do a really good job of making 0:00:55.320 --> 0:00:58.320 the odd Launch podcast. One day that person will have 0:00:58.360 --> 0:00:59.400 the mandate of Heaven. 0:00:59.560 --> 0:01:01.760 How do I get more popular and successful? 0:01:02.120 --> 0:01:03.000 We do have. 0:01:05.319 --> 0:01:07.640 You're listening to lots more where we catch up with 0:01:07.680 --> 0:01:10.400 friends about what's going on right now, Because. 0:01:10.200 --> 0:01:13.199 Even when the Odd Lots is over, there's always lots more. 0:01:13.480 --> 0:01:15.680 And we really do have the perfect guest. 0:01:19.480 --> 0:01:21.160 When people are listening to this, it is jobs Day. 0:01:21.200 --> 0:01:24.080 We're recording the September fourth, Jobs Day, September fifth. The 0:01:24.120 --> 0:01:26.720 important thing to note right now is that, to some extent, 0:01:26.760 --> 0:01:29.640 that monthly non farm payrolls report that everyone depends on 0:01:29.720 --> 0:01:33.160 and relies on has never felt to me like more 0:01:33.200 --> 0:01:35.280 of a moving target in terms of what I'm supposed 0:01:35.280 --> 0:01:37.440 to be looking at. For many years. It's like, Okay, 0:01:37.440 --> 0:01:39.319 how many jobs are created this month? Yeah, it's going 0:01:39.360 --> 0:01:41.240 to get revised a little bit, but that tells you something. 0:01:41.600 --> 0:01:48.120 Now between seasonality, post COVID sort of normalization that's still processing, 0:01:48.360 --> 0:01:51.680 and then of course this sort of changes in immigration policy, 0:01:51.680 --> 0:01:55.360 which have swung dramatically in the year. These numbers, it's 0:01:55.440 --> 0:01:57.960 not clear that you actually have to put it in 0:01:58.040 --> 0:01:59.680 some work to understand these, no totally. 0:01:59.720 --> 0:02:03.280 And also, I mean the BLS itself seems to have 0:02:03.400 --> 0:02:06.760 some difficulty with the numbers, because the trend that we've 0:02:06.800 --> 0:02:09.480 seen is they put out a non farm payroll like 0:02:09.520 --> 0:02:13.240 an initial estimate on a Friday, and then a few 0:02:13.280 --> 0:02:16.320 weeks later you got the revisions, and the revisions always 0:02:16.320 --> 0:02:18.160 seem to be downwards lately. 0:02:17.919 --> 0:02:20.840 Lately they've been mostly downwards. And then there's annual revisions 0:02:20.880 --> 0:02:23.880 and those are coming up, I believe next week. And 0:02:24.000 --> 0:02:26.200 you know, we were at a time when setting aside 0:02:26.280 --> 0:02:28.399 the collection and of course setting it aside the fact 0:02:28.400 --> 0:02:31.240 that the BLS chief has been fired and there's going 0:02:31.280 --> 0:02:33.000 to be a new one at some point. Sitting outside 0:02:33.040 --> 0:02:35.480 all of these things, we're also at a time when 0:02:35.480 --> 0:02:38.360 there are significant questions about just the macro state of 0:02:38.400 --> 0:02:41.520 the economy and whether the sort of low hiring, low 0:02:41.600 --> 0:02:44.840 firing mode which is characterized for a while now is 0:02:44.880 --> 0:02:48.200 at risk of deteriorating further. I don't know, it's a 0:02:48.240 --> 0:02:48.679 tough read. 0:02:49.040 --> 0:02:51.400 You know who we should ask Steve Englander. 0:02:51.639 --> 0:02:55.360 Okay, but let me start with a broader question. Actually 0:02:55.400 --> 0:02:57.240 may be excellent. And the thing is that the question 0:02:57.280 --> 0:03:00.360 has changed. Like in the past, we used to say, okay, 0:03:00.480 --> 0:03:04.320 last month or you know, last twelve months, NFP growth 0:03:04.400 --> 0:03:07.359 was two hundred thousand, looks like one hundred thousand. Now 0:03:07.400 --> 0:03:09.080 things have slowed down. That's all we had to know 0:03:09.960 --> 0:03:14.280 this time around. Because supply is so important, everyone is 0:03:14.320 --> 0:03:17.680 making an estimate and kind of saying, well, native born workers, 0:03:17.720 --> 0:03:20.560 you know, maybe seventy thousand. If you're pessimistic, if you 0:03:20.560 --> 0:03:23.960 think we have net immigration from foreign born workers, you 0:03:24.040 --> 0:03:25.960 have a view of fifty. And if you think that 0:03:26.000 --> 0:03:29.000 there's still some legal immigration coming in, maybe you're at 0:03:29.000 --> 0:03:32.720 one hundred. And that means that getting the level right 0:03:33.040 --> 0:03:37.600 is really important. And the problem with the NFP numbers 0:03:37.640 --> 0:03:40.280 that actually has two components, one of which is the 0:03:40.280 --> 0:03:42.760 one that we all think about. They survey about one 0:03:42.840 --> 0:03:47.320 hundred and sixty thousand businesses maybe six hundred thousand establishments, 0:03:47.520 --> 0:03:50.240 and basically say, okay, how many workers did you have 0:03:50.320 --> 0:03:52.360 last month? How many did you have this month, And 0:03:52.840 --> 0:03:56.520 through their statistical analysis they say, okay, this is a change. 0:03:56.600 --> 0:04:00.360 So that's for firms that are in continual operation, gives 0:04:00.400 --> 0:04:03.160 them that number. The problem is that they have no 0:04:03.280 --> 0:04:07.120 handle on firms that have just opened and very little 0:04:07.120 --> 0:04:10.160 handle on firms that have just closed. So they use 0:04:10.200 --> 0:04:15.000 something called the birth death adjustment to adjust for employment 0:04:15.080 --> 0:04:17.960 by those latter two categories of firms, you know, net 0:04:18.040 --> 0:04:22.719 job creation from new firms minus closing firms. And the 0:04:22.839 --> 0:04:26.560 problem is that they have a very simple model. And 0:04:27.160 --> 0:04:28.840 it was fine in the past when all you cared 0:04:28.839 --> 0:04:31.359 about was the direction, but now when you're saying it 0:04:31.440 --> 0:04:35.359 really matters if NFP gross is fifty. Having a bias 0:04:35.400 --> 0:04:39.800 in that number really affects things. And what you see 0:04:40.279 --> 0:04:44.799 is that that number has through thickened sin has stayed 0:04:44.960 --> 0:04:47.560 about one hundred thousand jobs. You know when you seasonally 0:04:47.560 --> 0:04:50.080 adjust it, because they publish a not seasonal adjustment, but 0:04:50.120 --> 0:04:52.320 you can do a rough and ready seasonal adjustment very 0:04:52.360 --> 0:04:55.960 stable at about every month. One hundred thousand jobs or 0:04:56.000 --> 0:04:58.120 almost one hundred thousand jobs are coming from that birth 0:04:58.160 --> 0:05:01.000 death adjustment. In terms of what we see on Bloomberg 0:05:01.120 --> 0:05:04.839 page Friday morning at eight thirty, we have another source 0:05:04.880 --> 0:05:08.279 of information on that which lags but which is far 0:05:08.320 --> 0:05:11.360 more accurate. This is something called the Business Employment Dynamics. 0:05:11.880 --> 0:05:14.120 It lags by about eight months, but it's based on 0:05:14.560 --> 0:05:17.960 the quarterly census of employment and wages. And what that 0:05:18.240 --> 0:05:22.120 shows is that in twenty twenty four, like Q four, 0:05:22.160 --> 0:05:25.360 twenty twenty four stay to four quarters, both the employment 0:05:25.400 --> 0:05:29.359 growth coming from continuing firms and continuing operation and the 0:05:29.360 --> 0:05:33.520 employment growth from newly open firms let's just closed firms 0:05:34.000 --> 0:05:38.880 they've tanked. So you're sort of looking at a reliable 0:05:38.920 --> 0:05:41.279 source because it's not even a sample. This is the 0:05:41.440 --> 0:05:45.040 entire population. They know what opened and what's closed, saying, hey, 0:05:45.480 --> 0:05:50.120 there just isn't any significant jobs creation from newly formed firms, 0:05:50.880 --> 0:05:53.560 and the and the p number keeps telling you that 0:05:53.920 --> 0:05:55.800 there's one hundred thousand jobs coming from that. 0:05:56.279 --> 0:05:58.880 This is already excellent. Next week we are getting yet 0:05:58.920 --> 0:06:02.239 another one of these QC quarterly. 0:06:03.600 --> 0:06:07.280 Q what do you call it? I call it what 0:06:07.880 --> 0:06:08.760 I call QCW. 0:06:09.000 --> 0:06:12.680 Okay, we get a new qce W. That's the ninth, 0:06:13.000 --> 0:06:15.320 September ninth, We get that, right, tell us what this is. 0:06:15.440 --> 0:06:18.440 Let's walk through this part again in terms of what 0:06:18.520 --> 0:06:21.560 is it that's high quality about this data, why we 0:06:21.640 --> 0:06:24.560 expect it to show further downward revisions, and why there 0:06:24.600 --> 0:06:27.600 continues to be the sort of downward bias in this 0:06:27.680 --> 0:06:30.240 initial snapshot vers letter better insight. 0:06:30.440 --> 0:06:33.480 Oh okay, First, NFP has a big sample, but it's 0:06:33.480 --> 0:06:36.400 a sample. They're sampling errors and people who don't report, 0:06:36.480 --> 0:06:38.640 and you don't know if there's a bias and who's 0:06:38.680 --> 0:06:42.200 reporting who's not reporting, so there's always some inherent error there. 0:06:43.000 --> 0:06:46.359 Qc W is basically the universe. It's not a sample. 0:06:47.120 --> 0:06:50.840 They get administrative data from the Labor Department saying how 0:06:50.839 --> 0:06:55.520 many people paid in the unemployment insurance and that's basically everybody, 0:06:55.560 --> 0:06:59.279 because everybody does everybody who's working does pay unemployment insurance. 0:06:59.800 --> 0:07:02.040 And and so when they come up with a number, 0:07:02.120 --> 0:07:04.880 there's a bit of revision because there's sometimes some firms 0:07:04.920 --> 0:07:07.080 don't report in time, but there's not much and that 0:07:07.240 --> 0:07:11.440 it's very authoritative. And so if you sort of say, oh, 0:07:11.560 --> 0:07:16.000 QCW and the Business Employment Dynamics tell us that in 0:07:16.160 --> 0:07:19.680 twenty twenty four there was almost no job creation from 0:07:19.760 --> 0:07:23.120 newly opened let's just close firms, you believe it because 0:07:23.160 --> 0:07:25.120 there's you're not going to get a better source. There's 0:07:25.160 --> 0:07:27.680 no other source to that, and so that's why it's 0:07:27.760 --> 0:07:30.600 used for the benchmark. It probably should be used to 0:07:30.760 --> 0:07:34.360 re benchmark employment more frequently in the year because they 0:07:34.400 --> 0:07:37.440 do publish it quarterly. But you know, when it comes out, 0:07:37.480 --> 0:07:39.840 it's a big deal. And we think it's likely to 0:07:39.960 --> 0:07:43.480 tell us that somewhere between seven hundred and fifty and 0:07:43.600 --> 0:07:47.880 maybe one point one million jobs that's the overstatement between 0:07:48.560 --> 0:07:52.040 Q one twenty twenty four and Q one twenty twenty five, 0:07:52.760 --> 0:07:55.520 and that will knock off a lot in terms of 0:07:55.560 --> 0:07:58.400 headline employment growth. The key point is that there's no 0:07:58.480 --> 0:08:00.720 reason to believe that the bias is really shifted. 0:08:01.720 --> 0:08:04.280 One of the other unusual things that's going on at 0:08:04.280 --> 0:08:07.240 the moment is we have this new head of the 0:08:07.280 --> 0:08:11.720 BLS installed by the Trump administration, and that new head 0:08:12.040 --> 0:08:16.200 suggested initially that the BLS could just stop publishing jobs 0:08:16.280 --> 0:08:20.040 numbers altogether, or maybe they could publish them less frequently, 0:08:20.080 --> 0:08:24.080 like on a quarterly basis or something. Is the quarterly idea. 0:08:24.680 --> 0:08:30.280 Maybe that's reasonable given the lag with the QCW data. 0:08:31.120 --> 0:08:32.920 I think that they can do things that are far 0:08:33.000 --> 0:08:35.800 less dramatic to improve the quality of the monthly numbers 0:08:36.120 --> 0:08:39.320 because we do have some information that's relevant for jobs 0:08:39.320 --> 0:08:43.280 creation by newly opened firms. Going back to business employment dynamics, 0:08:43.280 --> 0:08:46.640 if you look at how job creation from existing firms, 0:08:46.640 --> 0:08:50.480 continuing firms, and job creation from new firms move, they 0:08:50.520 --> 0:08:53.160 tend to move together. The amplitude is different, but the 0:08:53.400 --> 0:08:56.320 direction is very much the same. They can use the 0:08:56.360 --> 0:08:58.800 sample data that they get from the one hundred and 0:08:58.840 --> 0:09:02.760 sixty thousand firms six hundred thousand plus establishments that they 0:09:02.800 --> 0:09:06.640 sample and say, look, if continuing firms are telling us 0:09:06.640 --> 0:09:12.160 the job creation is twenty thousand a month, it's very 0:09:12.240 --> 0:09:15.120 unlikely that job creation from new firms is going to 0:09:15.120 --> 0:09:17.360 be one hundred. We can use a variety of statistical 0:09:17.400 --> 0:09:20.880 methods to sort of make a guesstimth. It won't be perfect, 0:09:20.880 --> 0:09:21.840 they will be a luck better. 0:09:35.520 --> 0:09:39.480 Speaking of the new BLS person, Joe, I saw the 0:09:39.520 --> 0:09:42.760 most worrying sentence in an analyst note. 0:09:42.880 --> 0:09:43.600 Yesay, so. 0:09:43.679 --> 0:09:45.920 The sentence was, I have it on my screen. The 0:09:45.960 --> 0:09:50.320 sentence is because Trump has his own BLS person. Now 0:09:50.440 --> 0:09:53.079 I don't necessarily see a bad number on Friday. 0:09:54.280 --> 0:09:57.880 I don't know that pessimistic. I think, I don't know, 0:09:58.000 --> 0:09:59.280 but I don't know. I don't have a view of 0:09:59.360 --> 0:10:02.319 I don't have a view on this. But who said this? 0:10:02.640 --> 0:10:04.160 I don't want to say, because I'm not sure it's 0:10:04.200 --> 0:10:04.880 public or not. 0:10:05.240 --> 0:10:07.120 But this is a notable person. 0:10:07.679 --> 0:10:08.960 Yes, it's someone you know? 0:10:09.120 --> 0:10:12.200 Actually okay? Fine? And not me okay, and not Steve, 0:10:12.360 --> 0:10:15.720 not Stephen, let's talk about the conversation has focused on 0:10:15.800 --> 0:10:18.080 these levels and pace of job creation and so forth. 0:10:18.120 --> 0:10:21.160 We recently did an episode with Austin Goilsby, the Chicago 0:10:21.200 --> 0:10:24.120 Fed President, and he was like, so much as a flux, 0:10:24.160 --> 0:10:26.040 I'm not really looking at levels, And he called what 0:10:26.120 --> 0:10:28.719 he's like he use this term very dramatic, the four 0:10:28.800 --> 0:10:31.679 horseman of truth. He's interested in rates. He's interested in 0:10:31.720 --> 0:10:34.080 the unemployment rate, which is still at four point two percent. 0:10:34.240 --> 0:10:36.800 He's interested at the hiring rate, which we had the 0:10:36.880 --> 0:10:38.920 Jolt support come out this week, it's at three point 0:10:38.920 --> 0:10:41.520 three percent. He's interested in the firing rate, which I 0:10:41.520 --> 0:10:44.520 think has still been fairly low. Maybe he's looking at 0:10:44.559 --> 0:10:46.160 like the rate of wage growth. I don't remember what 0:10:46.200 --> 0:10:49.920 the fourth horseman was in a time of volatility. What 0:10:49.920 --> 0:10:52.280 do you think about this idea, like, let's just forget 0:10:52.320 --> 0:10:55.640 about levels and just focus on rates because they don't 0:10:55.640 --> 0:10:57.760 get revised as much. You go out and you ask 0:10:58.040 --> 0:11:01.240 thousands of people are you employed or onmployed right now? 0:11:01.559 --> 0:11:04.079 And if four point two percent say they're unemployed, that 0:11:04.400 --> 0:11:07.280 is probably a reasonable proxy for whether people are employed 0:11:07.360 --> 0:11:07.520 or not. 0:11:07.920 --> 0:11:10.200 Right But Joe, if you turned out to be the 0:11:10.240 --> 0:11:14.240 next person named to the flumc to board and you 0:11:14.280 --> 0:11:17.120 see payroll number, it comes out at seventy five thousand, 0:11:17.160 --> 0:11:19.719 like tomorrow's consensus. Is that a strong number or a 0:11:19.760 --> 0:11:20.400 week number? 0:11:20.960 --> 0:11:22.640 Well, there's some siting. I just look at the I 0:11:22.640 --> 0:11:24.720 don't know, I mean, I don't know let's say so 0:11:24.840 --> 0:11:27.160 right now, just for what it's worth, the unemployment rate 0:11:27.240 --> 0:11:30.199 is at four point two percent. Economists expected to tick 0:11:30.320 --> 0:11:33.160 up to four point three percent. Let's say it comes 0:11:33.160 --> 0:11:35.400 in four point two percent. Let's say we have a 0:11:35.400 --> 0:11:38.120 week NFP number, but the unemployment rate stays at four 0:11:38.160 --> 0:11:40.880 point two percent. Why don't I say, okay, things are 0:11:40.880 --> 0:11:41.760 still more or less fine? 0:11:42.120 --> 0:11:44.640 Well, let me say this. I like grates, but I 0:11:44.720 --> 0:11:47.440 like the employment the population ratio. Okay, because we know 0:11:47.520 --> 0:11:51.280 that participation rate is cyclical, and if you look to 0:11:51.320 --> 0:11:56.280 the employment the population ratio, all these comments that unemployment 0:11:56.360 --> 0:11:59.040 rate is stable and it looks in balance nothing's changed, 0:11:59.480 --> 0:12:04.040 they don't hold up very well. We've had pretty consistent drop, 0:12:04.440 --> 0:12:06.520 not a two thousand and eight type of drop, but 0:12:06.760 --> 0:12:09.440 you know, it's like over sixty a year ago, now 0:12:09.440 --> 0:12:12.880 it's fifty nine point six. It's telling us that there's 0:12:13.000 --> 0:12:17.640 kind of increased softening. I think you can't be choosy 0:12:17.679 --> 0:12:19.720 about which rates you look at, but I think in 0:12:19.800 --> 0:12:23.840 cyclical periods, probably employment to population is telling you more. 0:12:23.840 --> 0:12:26.280 In this time, it is more on Waller's side than 0:12:26.320 --> 0:12:27.480 it is on Powell side. 0:12:27.960 --> 0:12:31.480 I know we've been talking about weaknesses in the NFP estimates, 0:12:31.559 --> 0:12:35.199 But what's your expectation for the official number? 0:12:35.960 --> 0:12:38.360 Well, I wrote, we're a little bit split brained on 0:12:38.400 --> 0:12:40.480 this left brain, right brain, because we live in a 0:12:40.520 --> 0:12:43.360 world where we have to get the market reaction right. 0:12:43.400 --> 0:12:47.079 So our forecast is seventy five thousands, very close to consensus. 0:12:47.280 --> 0:12:50.679 You know, nothing dramatic. I'd just say this that you've 0:12:50.679 --> 0:12:53.199 got to realize there's so much randomness in the number. 0:12:53.240 --> 0:12:55.199 It could be one hundred and twenty five thousand and 0:12:55.280 --> 0:12:57.480 not be meaningful. But it's just the way it goes. 0:12:58.480 --> 0:13:00.560 You know what. We've argued. If you get the range 0:13:00.559 --> 0:13:04.680 of forecasts, almost everybody is between like forty thousand and 0:13:04.880 --> 0:13:07.560 one hundred thousand, one hundred and five thousand. So you 0:13:07.600 --> 0:13:10.240 get a number like thirty, I think that will be 0:13:10.280 --> 0:13:11.600 a very dramatic number in. 0:13:11.559 --> 0:13:13.400 Terms of outside the range of expectation. 0:13:13.520 --> 0:13:15.920 Yeah, I mean, because this range is really tight in 0:13:16.200 --> 0:13:18.920 terms of market expectation. And I think it would put 0:13:18.920 --> 0:13:21.360 fifty on the table for the FED, because I think 0:13:21.679 --> 0:13:24.800 the argument would be that if you get a number 0:13:24.880 --> 0:13:27.600 that's so low, you probably should have cut in June 0:13:28.400 --> 0:13:30.240 or July, and so you're not saying, oh my god, 0:13:30.240 --> 0:13:32.280 the world's coming to an end. Everything's falling apart. But 0:13:32.360 --> 0:13:34.520 you're saying, yeah, well, we kind of missed it. The 0:13:34.640 --> 0:13:37.880 data weren't there at the time. In retrospect, had we 0:13:37.920 --> 0:13:39.760 had those data, we probably would have cutt in June 0:13:39.840 --> 0:13:42.440 or July. So we're just doing catch up now. Now. 0:13:42.720 --> 0:13:45.280 For us, the real issue is how to interpret like 0:13:45.280 --> 0:13:48.480 one hundred thousand, because we would say, okay, one hundred 0:13:48.480 --> 0:13:51.360 thousand less, our bias of seventy thousand means real job 0:13:51.400 --> 0:13:54.559 creation of thirty thousand, so you should be talking about fifty. 0:13:55.080 --> 0:13:57.120 I don't think we've convinced the market yet that that's 0:13:57.160 --> 0:13:58.640 the way you should look at it. 0:13:59.000 --> 0:14:01.720 By the way, just before going on so on the 0:14:01.760 --> 0:14:05.440 ECO page consensus is seventy five K. Consensus is for 0:14:05.440 --> 0:14:08.040 the unemployment rate to tick up to four point three percent. 0:14:08.840 --> 0:14:12.120 Also average our early earnings of point three percent month 0:14:12.160 --> 0:14:13.800 of a month growth, so that's sort of like what 0:14:13.880 --> 0:14:16.160 we're looking at this week. We've had some sort of 0:14:16.200 --> 0:14:18.280 soft data. We had initial claims today come in at 0:14:18.320 --> 0:14:20.920 to thirty seven k. That was ahead of the estimate 0:14:20.960 --> 0:14:25.000 of to thirty k. ADP employment take it or leave 0:14:25.040 --> 0:14:27.400 it fifty four k versus estimates of sixty eight k, 0:14:27.560 --> 0:14:29.920 down significantly from the one hundred and six k revised 0:14:30.000 --> 0:14:32.720 last month. I had some services employment forty six point 0:14:32.760 --> 0:14:36.800 five that was a little bit shy of expectations, so soft, 0:14:36.840 --> 0:14:39.000 and there's this risk of softening. I just think it's 0:14:39.040 --> 0:14:42.920 really interesting the range of possibilities for September, because you know, 0:14:42.960 --> 0:14:46.520 we were just in Jackson Hole and you're talking about, oh, 0:14:46.560 --> 0:14:48.960 maybe there's a case for fifty. But there's also still 0:14:48.960 --> 0:14:51.840 a lot of residual concern about inflation, and the inflation 0:14:52.040 --> 0:14:53.760 dragon has yet to fully be slayd. 0:14:54.120 --> 0:14:56.560 The reason I would focus on the labor market is 0:14:56.600 --> 0:14:58.680 because if it's as weak as we think it is, 0:14:59.080 --> 0:15:01.640 in correctly measure the slack in the labor market what 0:15:01.720 --> 0:15:05.240 they care of inflation. Okay, that the again I'm serve 0:15:05.320 --> 0:15:07.080 more on Waller's side, that you're not going to have 0:15:07.120 --> 0:15:09.760 any kind of power on the labor side. If I 0:15:09.760 --> 0:15:11.960 can make one comment, I mean, some people get their 0:15:11.960 --> 0:15:14.480 pleasure from banging their head against the wall. The walle 0:15:14.520 --> 0:15:16.920 I bang my head against once or twice a year 0:15:17.640 --> 0:15:20.960 is taking all of these incoming data on labor market 0:15:21.040 --> 0:15:24.240 indicators and trying to predict nonfarm payrolls. 0:15:23.760 --> 0:15:24.720 You've got to have a hobby. 0:15:25.480 --> 0:15:27.800 You got to have a hobby, and this one might 0:15:27.840 --> 0:15:30.320 be the definition of insanity. And none, none of them 0:15:30.600 --> 0:15:31.880 work a bucket of spit. 0:15:32.040 --> 0:15:35.440 I'm looking at the band daid on your forehead. When 0:15:35.440 --> 0:15:38.440 you talk about head against the wall for pleasure, you're 0:15:38.440 --> 0:15:39.400 actually talking literally. 0:15:39.440 --> 0:15:41.120 It would appear, well, you should see the wall. 0:15:41.280 --> 0:15:47.000 Okay, okay. We would be remiss if when we have 0:15:47.120 --> 0:15:49.480 you in the studio, if we did not ask about 0:15:49.520 --> 0:15:51.880 what's going on with bonds. So one of the things 0:15:51.920 --> 0:15:55.280 that's happening today is because of that softening jobs data 0:15:55.320 --> 0:15:58.040 that Joe just laid out, we are seeing a little 0:15:58.080 --> 0:16:02.440 bit of a recovery in bond because there's more expectation 0:16:02.560 --> 0:16:05.360 that the Fed might cut. But the big story in 0:16:05.440 --> 0:16:08.720 recent days has been this huge sell off in bonds, 0:16:08.800 --> 0:16:13.000 particularly at the long end. And it doesn't particularly in Europe, 0:16:13.240 --> 0:16:16.600 particularly in Europe, but also in the US. It does 0:16:16.640 --> 0:16:19.880 seem kind of weird that we're talking about the economy 0:16:19.960 --> 0:16:23.520 is slowing and meanwhile the long end of the curve 0:16:24.280 --> 0:16:25.800 just keeps going up. What's going on. 0:16:27.120 --> 0:16:30.400 Market's attention span is maybe not as long as you 0:16:30.400 --> 0:16:32.960 give it credit for. And I think the problem is 0:16:33.000 --> 0:16:36.280 this that you look at fiscal situations that are deteriorating 0:16:36.880 --> 0:16:41.160 globally and likely to deteriorate in the US, especially if 0:16:41.200 --> 0:16:44.920 anything happens with the tariffs to pull them back, and 0:16:45.040 --> 0:16:46.720 markets are kind of saying, look, in the long term, 0:16:46.760 --> 0:16:48.560 this doesn't look good. It looks like there's a lot 0:16:48.560 --> 0:16:52.360 of borrowing out there. But the long term in market terms, 0:16:52.360 --> 0:16:54.040 can be six weeks and it can be six years. 0:16:54.080 --> 0:16:56.440 You don't know when those forces are going to matter, 0:16:57.000 --> 0:16:59.680 so absent anything else, the market pays attention to it. 0:17:00.240 --> 0:17:02.520 Then you sort of come in this week and every 0:17:02.640 --> 0:17:05.040 number seems to be soft. You say, oh my god, 0:17:05.080 --> 0:17:07.600 if Fed's going to cut, and all of a sudden, 0:17:07.600 --> 0:17:10.520 this sort of selling of bonds, especially because the market 0:17:10.520 --> 0:17:14.600 probably got reasonably short worrying itself about the fiscal situation, 0:17:14.960 --> 0:17:16.960 they say, oh my god, maybe not so short, and 0:17:16.960 --> 0:17:18.840 people are buying back the bonds that they've sold, and 0:17:18.880 --> 0:17:21.760 you get the kind of dramatic movement we've seen this week. 0:17:22.080 --> 0:17:25.080 We've argued in the short term, both facts and bonds 0:17:25.080 --> 0:17:28.320 are going to be driven by the FED and the 0:17:28.400 --> 0:17:30.720 US economy, and by short term I mean the next month. 0:17:30.960 --> 0:17:33.680 They're six weeks I think once you get past that, 0:17:34.080 --> 0:17:37.040 we don't think inflation is going to disappear. And even 0:17:37.160 --> 0:17:42.000 outside of the tariff induced inflation, there's non tariff goods 0:17:42.040 --> 0:17:45.640 and services seem to be at best stays steady and 0:17:46.000 --> 0:17:48.439 maybe even edging up a bit. There's a bit of 0:17:48.480 --> 0:17:53.439 fysical stimulus in Trump's fiscal package. Tickets possible that the 0:17:53.480 --> 0:17:56.480 economy is not as bad as it might look based 0:17:56.520 --> 0:18:00.440 on the employment numbers that we're getting, especially if there 0:18:00.520 --> 0:18:05.879 is a productivity pickup in the data that's not really recognized. 0:18:06.480 --> 0:18:09.280 So we see a possibility, or we actually see more 0:18:09.320 --> 0:18:11.760 than a possibility. We expect dollar weakness in the next 0:18:11.760 --> 0:18:13.800 couple of weeks, but by the time we get to 0:18:13.880 --> 0:18:15.920 the end of the year, we could see the dollar strengthening. 0:18:16.080 --> 0:18:18.879 Positioning is kind of short dollars in our view, and 0:18:18.920 --> 0:18:21.320 same with the bond market. You know, while the market 0:18:21.400 --> 0:18:24.040 served saying, oh my god, last week was debating zero 0:18:24.040 --> 0:18:26.280 on twenty five, this week, I suspect they'll be debating 0:18:26.320 --> 0:18:29.080 twenty five and fifty. While the market's debating that bond 0:18:29.119 --> 0:18:31.679 yields are going to come down. Once that's kind of 0:18:31.720 --> 0:18:35.080 settled in terms of market expectations, I think they'll look 0:18:35.080 --> 0:18:37.800 at the fiscal picture and kind of say, you know, 0:18:38.080 --> 0:18:39.159 low four is maybe not. 0:18:40.280 --> 0:18:42.880 It's interesting it occurs to me when you say, how 0:18:43.000 --> 0:18:45.320 when we talk about how bad the economy is, that 0:18:45.359 --> 0:18:48.920 there's actually two different ways of what bad could mean. 0:18:49.040 --> 0:18:51.119 So one is bad could just mean a sort of 0:18:51.280 --> 0:18:54.520 where you are on the cycle. We're in a deceleration cycle. 0:18:55.040 --> 0:18:57.919 We're not creating as many jobs. Therefore we have to 0:18:57.960 --> 0:19:00.520 have a lower rate of interest to get the going again. 0:19:01.119 --> 0:19:04.560 But then bad could also mean more sort of qualitatively, 0:19:04.640 --> 0:19:08.919 where what's really bad is slackening growth and also a 0:19:09.000 --> 0:19:13.560 firm inflation picture, such that traditional measures of policy stimulus 0:19:13.680 --> 0:19:16.440 or de stimulus don't work as well they'd like because 0:19:16.440 --> 0:19:18.760 there is some sort of deeper rot. And it sounds 0:19:18.800 --> 0:19:20.680 like what you're saying, if I can put all of 0:19:20.720 --> 0:19:24.919 this together, is that cyclically there's a slowdown. There may 0:19:24.920 --> 0:19:28.240 be a case for fifty basis point cut very soon, 0:19:28.680 --> 0:19:31.399 a case for lower rates, but not so bad in 0:19:31.440 --> 0:19:34.680 the case of the US economy is broken and therefore 0:19:34.760 --> 0:19:37.560 policy measures won't work to get it revived again. 0:19:37.960 --> 0:19:39.960 Yeah, I think that's right. We actually don't think they'll 0:19:40.000 --> 0:19:42.600 do much more than fifty. They'll say, okay, we've caught 0:19:42.680 --> 0:19:45.680 up pint to weight and see and our baseline because 0:19:45.680 --> 0:19:48.160 we're not yet sure about what the employment number is 0:19:48.160 --> 0:19:50.440 is twenty five and stop. But you know we've been 0:19:50.840 --> 0:19:53.520 talking about the choice being between twenty five and. 0:19:53.440 --> 0:19:56.240 Fifty, just adding around one more. It really is just 0:19:56.320 --> 0:19:58.720 on the Europe situation. We mostly talk about the US. 0:19:58.800 --> 0:20:01.120 Like France has also so their ten year year old 0:20:01.119 --> 0:20:02.960 has been shooting higher. 0:20:03.119 --> 0:20:05.000 Yeah, this is the crazy thing. I think if we 0:20:05.080 --> 0:20:07.160 didn't have everything that was going on in the US 0:20:07.200 --> 0:20:10.480 at the moment, the France story would be huge in 0:20:10.520 --> 0:20:10.920