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Speaker 1: We'll begin this.
Speaker 3: Hour with stocks looking to bounce back after a week
Speaker 3: payrolls report, fueled rate cut expectations and your d any
Speaker 3: of your Danny research writing. Traders might be starting to
Speaker 3: take profits before going on their August vacations. They may
Speaker 3: also be betting that September could be a week month
Speaker 3: for stocks.
Speaker 1: Ed joins us now, and let's start.
Speaker 3: With the growth picture and just your reaction to Friday's
Speaker 3: labor market data, especially those massive downwards revisions. For you
Speaker 3: right now, is it a cause of concern?
Speaker 4: Not?
Speaker 5: Really? Not the way the market took a dive, and
Speaker 5: I'm happy to see that the market may very well
Speaker 5: rebound today. The reality is we did have a lot
Speaker 5: of uncertainty during May and June when we had these
Speaker 5: big downward revisions. Honestly, it seems to me the downward
Speaker 5: revisions actually make more sense given that if I was
Speaker 5: an employer during May and June, I wouldn't have fired anybody.
Speaker 5: But I wouldn't have hired anybody given all the uncertaintly
Speaker 5: unleashed by what I call Trump's tariff turmoil. And so yeah,
Speaker 5: all in all, those numbers didn't surprise me all that much,
Speaker 5: with the benefit of hindsight obviously. And then of course
Speaker 5: we did see that the labor supply, the labor force
Speaker 5: has been kind of flatted down since the beginning of
Speaker 5: the year. So this is a combination of weakness in
Speaker 5: May related that may be temporarily related to the turmoil
Speaker 5: on tariffs that should I think be abait over the
Speaker 5: next few months. And at the same time we may
Speaker 5: actually have a shortage of workers.
Speaker 3: Well, the President didn't like the jobs number on Friday,
Speaker 3: and he fired the head of the Bureau of Labor Statistics.
Speaker 3: Do you think that undercuts market confidence?
Speaker 5: Well, this is a very bad situation. The President in
Speaker 5: my opinion, shouldn't have done that. I agree with what
Speaker 5: your collie Danny just said, and that is he should
Speaker 5: be throwing more money at the Bureau of Labor Statistics
Speaker 5: that he can do a better job settling workers and
Speaker 5: the unemployed to see what's really going on here. Firing
Speaker 5: the commissioner it does raise some questions of the confidence
Speaker 5: that people are going to have in the data, especially
Speaker 5: if he puts in a loyalist as a statistician, which
Speaker 5: he's likely to do.
Speaker 6: So what do you do then, ed, if you get
Speaker 6: a loyalist put in as a top statistician there, do
Speaker 6: we still trade on the data? Do you take it
Speaker 6: more skeptically? Do you use private measures more? How will
Speaker 6: it change how you interpret labor market data?
Speaker 5: Well? Yeah, I think right now there's a lot of
Speaker 5: skepticism about the labor market data, the employment data, I
Speaker 5: should say, because of what you mentioned before the fact
Speaker 5: that response rates have gone down, and look, the economy
Speaker 5: moves a lot faster these days, and I'm not sure
Speaker 5: the statistical techniques that the BLS has move is rapidly.
Speaker 5: So I would throw more money at him rather than
Speaker 5: become partisan partisan about it. So all I'm saying is
Speaker 5: that data was already suspect for other reasons. And we've all,
Speaker 5: all of us economist types have looked at all the
Speaker 5: employment data, both private and public. So I think nothing
Speaker 5: dramatically changes in terms of the way the markets look
Speaker 5: at data.
Speaker 6: Even so ed nothing dramatically changes. But Friday did demonstrate
Speaker 6: a vulnerability in the market with that huge move in
Speaker 6: the front end. You could even see what happened with
Speaker 6: copper prices demonstrated a vulnerability.
Speaker 1: Given that we've had.
Speaker 6: This slow melt up to the summer, you're still bullish ed,
Speaker 6: But are you concerned about some of these short term
Speaker 6: blips that traders aren't properly hedged for.
Speaker 5: Well, you quoted me saying that a lot of traders,
Speaker 5: a lot of investors are going on vacation. They certainly
Speaker 5: don't want to be exposed to the volatility of the market,
Speaker 5: at least not from a trading perspective. So I think
Speaker 5: we're going to see a lot of that kind of
Speaker 5: activity slow down. I think it already has slowed down.
Speaker 5: Maybe it started that on Fridays. Some people said, you
Speaker 5: know what I'm going to take. I'll be taking vacation
Speaker 5: for the next week, two weeks. Let me just close
Speaker 5: my books here. And then, of course there is a
Speaker 5: seasonality issue. Septembers have a tendency to be a week months,
Speaker 5: so I would miss prize if this market just kind
Speaker 5: of chops around here in August and September, and maybe
Speaker 5: we make some sort of low or bottom in October
Speaker 5: for a year end rally.
Speaker 3: Good luck to anyone who's trying to take a vacation
Speaker 3: with all these headlines coming out, and also this week
Speaker 3: we have this new deadline when it comes to the
Speaker 3: tariff rates on Thursday. Do you think the market is
Speaker 3: ready to basically put the trade war behind them?
Speaker 5: I think the markets would love to put the trade
Speaker 5: war behind them, and I really thought that by now
Speaker 5: the President would really be sort of in the same camp,
Speaker 5: because he's going to start focusing on the midterm elections
Speaker 5: next year. He does love to talk at these large conventions,
Speaker 5: these large rallies in sports stadiums, and he's going to
Speaker 5: need to do that in order to shore up his
Speaker 5: Republican Party during the midterm elections. And he's going to
Speaker 5: really start to focus on just saying what has been
Speaker 5: accomplished and avoid doing things that might backfire on the midterms.
Speaker 5: So yeah, I think the other issue, of course, is
Speaker 5: the courts are probably about to rule it. He doesn't
Speaker 5: really have the legal authority to do what he's been doing.
Speaker 5: I don't know if it's going to go all the
Speaker 5: way up to the Supreme Court. The Appeals Court has
Speaker 5: a love in judges, and if all I loved of
Speaker 5: him rule that way, which is possible, the Supreme Court
Speaker 5: may not take it up. So we may be entering
Speaker 5: even a more volatile period with regards to what's going
Speaker 5: on here on the tariff side.
Speaker 3: But you don't expect the terrors to go away, do you,
Speaker 3: Because there are other tools they can use to enact them.
Speaker 5: There are other tools, but they're not as quick or
Speaker 5: efficient as the Emergency Act that he called upon. That
Speaker 5: the courts may rule he just doesn't have the power
Speaker 5: to declare an emergency when there doesn't seem to be
Speaker 5: an emergency. But again, I think he and the administration
Speaker 5: may conclude that it's time to downplay the whole thing
Speaker 5: and move on.
Speaker 6: What does that mean for corporate America ed Some of
Speaker 6: these companies are just starting to wrap their heads around
Speaker 6: what it needs for them, or you have the legend
Speaker 6: of Amazon last week, who said, we just don't know
Speaker 6: what's going to happen moving forward. Is there enough clarity
Speaker 6: after Friday for corporations to move forward with things like
Speaker 6: spending and hiring plans.
Speaker 5: I think we have to see what the courts rule
Speaker 5: and how the administration responds to that. The reality is,
Speaker 5: if we just take it at face value that the
Speaker 5: President wants to basically achieve a fifteen percent tariff across
Speaker 5: the board on everybody and raise something like four or
Speaker 5: five hundred billion dollars, well, the corporate income tax raises
Speaker 5: about six hundred billion dollars. In effect, the tariffs are
Speaker 5: attack and there are direct tax on importers businesses, and
Speaker 5: so it is a negative for corporate profitability. And again
Speaker 5: we've heard some bad news out of GM and Ford
Speaker 5: anticipate this, but other companies said, we just don't know
Speaker 5: enough to really figure out what this is going to
Speaker 5: cost us. So that's still a known unknown.
Speaker 3: But still a little bit more clarity in terms of
Speaker 3: the bottom line rate for tariffs. We do have a
Speaker 3: weakening jobs report on Friday. Do you think the Fed
Speaker 3: is in position to cut in September?
Speaker 5: Well, the market certainly thought so on Friday, maybe today
Speaker 5: there'll be a change of opinion. I think on Friday
Speaker 5: we got the probability of a rate cut according to
Speaker 5: the CME Fedwatch tracking tool, going up to a ninety
Speaker 5: percent probability. Then over the weekend that you know, that
Speaker 5: actually simmer down by the end of Friday down to
Speaker 5: eighty percent. I wouldn't be surprised if there is no
Speaker 5: rate cut on September because we still have a batch
Speaker 5: of data up ahead here, particularly on the inflation front.
Speaker 5: We are seeing that the tariffs are having an impact
Speaker 5: on inflation. A lot of people saying, well, it's not there,
Speaker 5: but the reality is, if you look at durable goods inflation,
Speaker 5: durable goods prices typically fall. That's what they did before
Speaker 5: the pandemic. Then they had that inflation spike, but then
Speaker 5: they came right back and started falling again, and now
Speaker 5: they're rising again, mostly because of the tariffs.
Speaker 3: ED thanks so much for your time this morning, to
Speaker 3: great point at your Denny of your Denny research. IPOs
Speaker 3: are making a comeback this summer, with the latest FIGMA
Speaker 3: share surging more than two hundred and fifty percent in
Speaker 3: its debut last week.
Speaker 1: So excited for this conversation.
Speaker 3: Joining us now is Nicey President Lynn Martin lind Good morning,
Speaker 3: thanks for joining.
Speaker 7: Us, Thanks for having me.
Speaker 8: So.
Speaker 1: You told John.
Speaker 3: Leson myself in May that you saw quote unprecedented levels
Speaker 3: of volume following the April second Liberation Day, but for
Speaker 3: the IPO landscape, you were optimistic, but the timeline was
Speaker 3: shifted out. Where are we now in that timeline in
Speaker 3: that pipeline?
Speaker 7: Well, I think as a result of the successful deals
Speaker 7: we've been able to bring to market, really starting in
Speaker 7: that end of May timeframe, but most manifestly over the
Speaker 7: last two weeks when we had seven IPOs, I think
Speaker 7: it's fair to say that the markets are open for IPOs.
Speaker 6: Our markets open for all IPOs, though, d do we
Speaker 6: still need to be selective among those that are being
Speaker 6: brought in and they need to be tech companies for example,
Speaker 6: or can we start to see some of the smaller
Speaker 6: midcaps come back too.
Speaker 7: Yeah, we've seen a variety of sizes and companies across
Speaker 7: different sectors come to market in the last few months.
Speaker 7: UH Tech in particular, has, as you point out, had
Speaker 7: a great reception in the market. You know, in the
Speaker 7: last two weeks we saw Nils and IQ. We saw
Speaker 7: McGrath Hill, we saw Figma as you just had the
Speaker 7: screen up, and then a couple months ago we saw
Speaker 7: a Circle come to market, also Hinge Health and Mountain,
Speaker 7: so some really tech led companies, but mostly pretty much
Speaker 7: all sectors.
Speaker 6: The market rate a bit of a split screen though,
Speaker 6: in because you start to have some IPOs coming back,
Speaker 6: and at the same time you have these private equity
Speaker 6: players coming up with liquidity solutions that just allows companies
Speaker 6: to be private for longer, be it secondary funds, be
Speaker 6: it perpetual capital. And their argument is companies just don't
Speaker 6: want to be public and we're giving the option not
Speaker 6: to be longer term. Does that hinder IPOs?
Speaker 7: Well, I think what it means is that the companies
Speaker 7: that come to market are better companies. You look at
Speaker 7: the companies that have come to market, it's not the
Speaker 7: first time that they've been in the news about an
Speaker 7: IPO bo Look at Circle for example, they were talking
Speaker 7: about going public back in twenty twenty one when they
Speaker 7: came to market. Though they're a better company. They have
Speaker 7: a more refined strategy, a more refined P and L,
Speaker 7: a story for the investors that generates a tremendous amount
Speaker 7: of excitement. And I think what you're seeing with the
Speaker 7: reception of the companies that have come to market is
Speaker 7: that pent up demand in the public markets, that pent
Speaker 7: up excitement in the public markets for new issues to
Speaker 7: come to market. It's something that I talk with long
Speaker 7: only investors, something I talk with retail about how they
Speaker 7: really want to see these new names, these growth companies
Speaker 7: come to market to add to their portfolio.
Speaker 3: That pent up demand. Was it being held back because
Speaker 3: of regulation in Washington?
Speaker 7: It was really being held back because of volatility and
Speaker 7: uncertainty in markets. There've been a variety of events that
Speaker 7: have occurred over the last three three and a half years, wars,
Speaker 7: geopolitical uncertainty that have fueled that volatility. Now that there
Speaker 7: is more certainty, more certainty around the geopolitical landscape, more
Speaker 7: certainty around the market and the trajectory of the market,
Speaker 7: that's why you're seeing these companies finally come to market.
Speaker 3: How has the change in regulatory leadership though the SEC
Speaker 3: regulates the nicey, how has that potentially changed your business
Speaker 3: going forward?
Speaker 7: We're very optimistic. We had a great relationship with the
Speaker 7: past administration and the past SEC, but We're very excited.
Speaker 3: About blackinso's very different than Garrigance.
Speaker 7: He is he is, and we've had a long relationship
Speaker 7: with Paul Atkins. This isn't Paul Akins' first time in
Speaker 7: the SEC, and we had a very productive working relationship
Speaker 7: with him. We've already had a very productive working relationship
Speaker 7: in the short time that he's been chair, and a
Speaker 7: lot of the modifications that he's looking to make I
Speaker 7: think are going to benefit the public markets.
Speaker 6: So we have a moment where public market volatility has
Speaker 6: started to edd But even so, you have the rebirth
Speaker 6: of memestocks, and you have these weird things happening where
Speaker 6: you have open Door, for example, on one day, can
Speaker 6: account for ten percent of all equity trading volume. What
Speaker 6: do you make of just the health of these markets
Speaker 6: at this moment as some of that starts to bubble up.
Speaker 7: I think the markets are incredibly healthy. I mean, our
Speaker 7: markets are the envy of the world. The breath, the depth,
Speaker 7: the liquidity, the trade certainty. Any one day, though there
Speaker 7: could be excitement about a different name. I think what
Speaker 7: you're seeing is a lot of the pent up demand
Speaker 7: looking for the new issues and new things to treat.
Speaker 6: It's very different though than twenty twenty one, where those
Speaker 6: retail investors have had all the money to go.
Speaker 1: So when you look at that, you're like, Okay, this
Speaker 1: is just.
Speaker 6: A temporary phenomenon, or do we just need to get
Speaker 6: used to single names getting this wind sweep of various
Speaker 6: excitement built up online and that's just the new normal
Speaker 6: we live in.
Speaker 7: No, I really can't speak to what's driving a stock
Speaker 7: any on any given day. Certainly the social media and
Speaker 7: the conversation around stocks overall, I think is actually a
Speaker 7: good thing. It means that people aren't interested in investing,
Speaker 7: they're interested in adding to their portfolio. They're also interested
Speaker 7: in diversifying their portfolio.
Speaker 1: Speaking of diversification.
Speaker 3: On Thursday, at and T says they're going to have
Speaker 3: this dual listing and the icy in Texas.
Speaker 1: What's the business like in Texas.
Speaker 7: Yeah, Well, we're very supportive of all of the changes
Speaker 7: that Governor Abbit has rolled out in the state of
Speaker 7: Texas to really foster that pro growth environment. Since we
Speaker 7: announced NYC Texas and launched the exchange, which was the
Speaker 7: end of March this year, we've added twenty new listings
Speaker 7: to the exchange. So we're very optimistic and grateful for
Speaker 7: a governor abbit for really leading the way on pro
Speaker 7: business atmosphere.
Speaker 1: Do you see more money leaving New York though?
Speaker 7: You know, I don't really, I don't know. I don't
Speaker 7: think so. I think New York's always going to be
Speaker 7: an important at the center for markets. But I think
Speaker 7: it's interesting the pro business moves and then ultimately what
Speaker 7: the pro business moves in Texas will lead to.
Speaker 1: On the federal level. More than anything, Lynn, thanks so
Speaker 1: much for time.
Speaker 3: Thanks for having great insight, and I see President Lynn Martin.
Speaker 3: Michelle Meyer of MasterCard Economics Institute writing, consumers are the
Speaker 3: heartbeat of the economy and they are resilient.
Speaker 1: Michelle joins us.
Speaker 3: Now, so you say they're resilient, what kind of cracks Michelle,
Speaker 3: and good morning, thanks for joining us. Do you think
Speaker 3: the economy is seeing right now when it comes to
Speaker 3: the consumer?
Speaker 1: Well, I think it goes back to.
Speaker 9: What we learned over the last few days on Friday
Speaker 9: with the jobs report that clearly there has been an
Speaker 9: certainty impact in the economy that has mattered for companies
Speaker 9: when they think about the labor demand numbers. So the
Speaker 9: slow down in job creation within the May, and the
Speaker 9: Junie report looking distinctly different than we thought it was
Speaker 9: in real time, shows that's something that uncertainty mattered, that
Speaker 9: there probably was some pausing in terms of the pace
Speaker 9: of job creation. But importantly, there's very little evidence of
Speaker 9: firing happening, whether you look at the jobless claims now
Speaker 9: or you look at the JOLT survey. And I think
Speaker 9: for consumers, what that results in is a labor market
Speaker 9: that is still supportive right, an unemployment rate of four
Speaker 9: point two percent, wage growth that is still running above
Speaker 9: underlying inflation, even with some of the tariff inflation impulses starting.
Speaker 1: To move in.
Speaker 9: So consumers are managing this, I think quite remarkably.
Speaker 6: And things like sales and the earnings we've seen look
Speaker 6: really strong. But Andrew lapthorn Over at Softgen noted that
Speaker 6: two thirds of the companies in the S and P
Speaker 6: reported declining profit margins. In other words, for now, the
Speaker 6: companies are eating the higher costs. If they turn around
Speaker 6: and start to rise and raise costs, will the consumer
Speaker 6: still be resilient.
Speaker 1: Well, I think it's.
Speaker 9: Happening, and it's happening slowly, And this is important to
Speaker 9: keep in mind, which is that I think relative to
Speaker 9: the initial expectations and the fear of terrists was that
Speaker 9: it was going to impact the economy immediately and all
Speaker 9: of a sudden, consumers won't be able to get items
Speaker 9: or they won't be able to afford certain goods. And
Speaker 9: the reality is that it's happening slowly. It's moving into
Speaker 9: the economy. It's starting more on the supplier side than
Speaker 9: the companies and into consumers. And if you look at
Speaker 9: the last inflation report, it's starting to show in certain
Speaker 9: categories a lot of the durable goods, discretionary goods, whether
Speaker 9: you're looking at appliances or auto tires or even into apparel,
Speaker 9: it's starting to show up. So I would argue that
Speaker 9: consumers are ready starting to face some of those higher prices.
Speaker 9: It's happening gradually, and it's happening uneven, which means that
Speaker 9: consumers still have some choices in terms of how to
Speaker 9: navigate this and move around some of these price shocks.
Speaker 6: In terms of the unevenness, it's also interesting to look
Speaker 6: and see what the hottest parts of this economy are,
Speaker 6: and it's hard to argue it's anything but tech and AI,
Speaker 6: but these are the very companies that are firing on
Speaker 6: a headline level and only hiring at the top echelons
Speaker 6: where you get the most pay. When you look at
Speaker 6: that trend, do you see what you're talking about, the uneveness.
Speaker 6: Does it start to get exacerbated by some of these
Speaker 6: tech moves.
Speaker 9: Well, I think the fact that you're seeing all this
Speaker 9: investment focus on technology is actually really positive secular trend
Speaker 9: that hopefully can help get us through some of this
Speaker 9: sick legal adjustment that's happening as a result of tariffs.
Speaker 9: But yes, to your point, what it also does is
Speaker 9: it creates a lot of wealth in the economy. So
Speaker 9: if you look at the equity market, we'll see what
Speaker 9: results today. But the trend has clearly been very positive,
Speaker 9: notwithstanding Friday, and therefore that's positive wealth gains, and those
Speaker 9: positive wealth gains will filter into consumer spending amongst the
Speaker 9: cohort that can realize those gains, that can invest and
Speaker 9: can see that wealth creation.
Speaker 1: That's the upper achalance of society.
Speaker 3: Do you feel like we're going into a K shape
Speaker 3: economy or we're just already in one?
Speaker 9: You know, that's been a conversation that's been on and
Speaker 9: off for the past several years. And I think the
Speaker 9: reality is that it's there's always an unevenness about any
Speaker 9: business cycle, and I think when you consider the start
Speaker 9: of this cycle coming out of the pandemic, it was
Speaker 9: certainly one that was much more driven by lower income
Speaker 9: consumers than we have seen in recent history because of
Speaker 9: the amount of stimulus that pumped in, because of the
Speaker 9: movement of labor market, red hot labor mark, very strong
Speaker 9: wage growth, and that has shifted over the last two
Speaker 9: years or so where lower income consumers aren't saying that
Speaker 9: same wave of stimulus clearly, and wage growth has slowed
Speaker 9: a bit more for that population than for others, and
Speaker 9: the balance sheet is just frankly not going to be
Speaker 9: a supportive We have a.
Speaker 3: Viewer writing in Loving to get your thoughts on real
Speaker 3: PC turning negative in the first six months of twenty
Speaker 3: twenty five. They say it's the first time we've seen
Speaker 3: that since twenty ten, excluding of course the pandemic.
Speaker 9: Well, real PC turning negative I think we can debate,
Speaker 9: but certainly there's been a slow down in measures of
Speaker 9: real PC if you look at the GDP reports in
Speaker 9: Q one and Q two, and that reflects what we
Speaker 9: were just talking about in terms of higher prices. Right
Speaker 9: the consumer has already started to see some of those
Speaker 9: price increases.
Speaker 1: And what that does.
Speaker 9: It means that real spending starts to slow. We saw
Speaker 9: it during the pandemic inflationary burst. The nominal economy was
Speaker 9: running at extraordinarily high levels and the real economy was
Speaker 9: much much slower because consumers and companies have to absorb
Speaker 9: those higher prices. So when you have a price shock
Speaker 9: today is a lot more muted than it was during
Speaker 9: the post pandemic period, But the real economy has to
Speaker 9: moderate in order to absorb some of those inflation camps.
Speaker 6: Michelle, you look at a lot of alternative data sources,
Speaker 6: and right now we're in a moment where we're starting
Speaker 6: to question the official data we're getting, not least of
Speaker 6: which if we do get an appointment at the BOS,
Speaker 6: which is blatantly political, if that does happen, would you
Speaker 6: be prepared to lean in to those alternative data sources.
Speaker 6: Does it change the inputs that you use to see
Speaker 6: where we go from here?
Speaker 9: Well, I am a big, big advocate of many different
Speaker 9: data sources. At the massacret Economics Institute, we're sitting on
Speaker 9: one of the most amazing ones which is understanding the
Speaker 9: consumer in real time by looking at consumer payments. So yes,
Speaker 9: I think it's extremely important to rely on many, many
Speaker 9: different sources and forms of data. The great thing about
Speaker 9: as being an economist here in the US is that
Speaker 9: we have a very long time series of data coming
Speaker 9: out of the government, which has been an extraordinary support
Speaker 9: for us in terms of how we think about modeling
Speaker 9: the economy. But the economy is dynamic, the economy is shifting,
Speaker 9: and therefore I think you have to be really mindful
Speaker 9: of using a variety of different data sources. So trying
Speaker 9: to see really that pulse of the consumer in particular
Speaker 9: and how consumers are evolving their spending trends has been
Speaker 9: a critical impet for US, and I think a real
Speaker 9: distinguishing factor.
Speaker 3: With the president though firing the head of the BLS,
Speaker 3: do you still put credibility in the job support going forward?
Speaker 1: I think you do.
Speaker 9: I mean, look, I think there's a huge staff of
Speaker 9: economists at the BLS that are doing their.
Speaker 1: Josh doesn't really even touch the data until the very end.
Speaker 9: And they've been doing their job for decades and I
Speaker 9: think that's hard to shift overnight. But they're contending with
Speaker 9: the fact that the response rate has been declining for
Speaker 9: surveys across all different types of government.
Speaker 1: Data, and that's a challenge.
Speaker 9: So I think continuing to adapt, continuing to find new methodologies,
Speaker 9: new innovative ways to gather data, it will be really important.
Speaker 3: Michelle Meyer, thank you so much for your time this morning.
Speaker 3: Of course, Michelle Meyer of the Massacard Economics Institute. Former
Speaker 3: New York Fed President Bill Dudley, writing this morning, quote,
Speaker 3: don't be fooled by the drama in terms of how
Speaker 3: the Fed manages the economy. It's mostly a tempest in
Speaker 3: a teapot. Bill joins us.
Speaker 1: Now, all right, Bill, I won't be distracted by all
Speaker 1: the drama.
Speaker 3: But there's a lot of noise right now coming out
Speaker 3: of Washington, DC when it comes to who potentially take
Speaker 3: this role. Do you think this administration wants to put
Speaker 3: in a shadow FED chair.
Speaker 4: I don't know if that's their intention or not.
Speaker 8: But obviously the next governor appointment that seemed to be
Speaker 8: on a faster timeline than we thought will be important
Speaker 8: because that person could end up being the next FED chair,
Speaker 8: and so people pay a particular attention to who that
Speaker 8: person is and what their views are.
Speaker 6: So in that case, And I know as you write,
Speaker 6: Bill that you did see boers desire to succeed Powell
Speaker 6: and Bowman's thank you to Trump for appointing her as
Speaker 6: part of the reason behind their descents.
Speaker 1: Bill, if I can just push.
Speaker 6: You on that, because many people have looked at this
Speaker 6: economy and said there are reasons for a cut, and
Speaker 6: Friday vindicated that with weaker labor market data. Is there
Speaker 6: an issue where we look at all these descents and
Speaker 6: say they are just political or is there real evidence
Speaker 6: that perhaps the Fed should be leaning towards a cut.
Speaker 4: Well, the FED is leaning towards a cut.
Speaker 8: If you go back and look at the June Summary
Speaker 8: of Economic projections, everybody sees the path of race is
Speaker 8: going downward.
Speaker 4: It's just a question of magnitude and timing.
Speaker 8: So the degree of disagreement with in the FED is actually,
Speaker 8: I think dramatically overstated, because everybody thinks.
Speaker 4: The next direction of moves is down.
Speaker 8: Just a question of when to do it and how
Speaker 8: to manage the inflation risk caused by the higher terrorists.
Speaker 6: So Bill, the direction of descent or the amount of
Speaker 6: descent is overstated. So too is the ability for this
Speaker 6: FMC to be swayed. What happens though, if the data
Speaker 6: becomes less reliable if a more political figurehead is put
Speaker 6: in at the BLS bill. You've been in the room
Speaker 6: evaluating this data with colleagues. How does that change and
Speaker 6: the FEDS evaluation of said data if changes are made
Speaker 6: at the Bureau of Labor Statistics.
Speaker 8: Well, it depends on whether the change is made at
Speaker 8: the Bureau Labor Sittays actually result in poor quality data
Speaker 8: or not. Obviously, if the data is rigged, then the
Speaker 8: Federal Reserve is going to have to go to other
Speaker 8: sources of data. There's a lot more data available now
Speaker 8: than there was in the past. You know, there's a
Speaker 8: lot of data that you can scrape off the Internet,
Speaker 8: for example.
Speaker 4: So I think that obviously we want.
Speaker 8: The BLS data to be excellent quality and trusted, and
Speaker 8: that's very important, and.
Speaker 4: So we have to keep an eye on that.
Speaker 8: But the idea that the Fed would be sort of
Speaker 8: unable to conduct mantrat policy because the BLS data was corrupt,
Speaker 8: I don't think that's the case.
Speaker 3: Well, going to the BLS data on Friday now, the
Speaker 3: average three month payroll gain went from one hundred and
Speaker 3: fifty thousand before Friday is released to now just thirty
Speaker 3: five thousand. Going back to those two dissenters, doesn't governor
Speaker 3: Waller have a point the crack has already emerged.
Speaker 1: Is the FED going to be behind the curve?
Speaker 8: Well? I think the FED probably will be behind the
Speaker 8: curve because the terroriffs creates so much uncertainty about what's
Speaker 8: going to dominate the risk of inflation or the risk
Speaker 8: of growth. Everyone said the terrorists are going to push
Speaker 8: up prices and push down economic activity, and the questions
Speaker 8: which is going to predominate. So the fact that the
Speaker 8: FED might be late is because the arraft policies created
Speaker 8: this tremendous uncertainty about which force is going to be dominant.
Speaker 3: J Powell really honed in on the unemployment rate last week,
Speaker 3: talking about the fact that's the main number is going.
Speaker 1: To look at. We did see a tick up to
Speaker 1: four point two percent.
Speaker 3: What do you think the line is for him where
Speaker 3: the unemployment rate ticking to what would get him really uncomfortable?
Speaker 8: I think, you know, a couple more in tents would
Speaker 8: definitely get him uncomfortable, because then you start to think
Speaker 8: that the whole labor market was starting to give way,
Speaker 8: and when that happens, it can be a self fulfilling
Speaker 8: prophecy because it scares people. They pull back on their
Speaker 8: own their spending, and that makes the labor market still weaker.
Speaker 4: The important part points that Paul.
Speaker 8: Made, though, is it's not about the payroll employment changes,
Speaker 8: it's basically how that actually reflects in the unemploying rate.
Speaker 8: Because what's basically happening this year is the growth rate
Speaker 8: of labor demand has fallen, but the growth rate of
Speaker 8: labor supply has also fallen dramatically because of deportations and
Speaker 8: the crackdown and immigration. So both sides of the labor
Speaker 8: market are less robust than there were before.
Speaker 6: And the jobs that were added Bill about seventy five
Speaker 6: of them came from healthcare, the cyclical parts of the economy.
Speaker 6: Really we're not adding jobs. The lack of breath in
Speaker 6: Friday's data. Does that concern you at all?
Speaker 5: Well?
Speaker 4: I think.
Speaker 8: I mean, I'm worried that we're going to be in
Speaker 8: a sort of stagflationary environment where we're going to have
Speaker 8: at both higher prices and a weaker economy. And the
Speaker 8: question is which one do you put more weight on.
Speaker 8: I think the direction of rates is down. I think
Speaker 8: the question is just, you know, what meeting does the
Speaker 8: FED finally to see enough evidence to warrant a cut.
Speaker 8: As I said in the piece that I published in
Speaker 8: Biolberg Opinion, you know, there's not that much disagreement about
Speaker 8: the FED.
Speaker 4: It's all about timing and magnitudes, not about direction.
Speaker 6: Well, what happens if Bill we have Adrinic Googler stepping down,
Speaker 6: so that's certainly a Trump appointment, and then you get
Speaker 6: Shairpowell who decides not to stay on as a governor
Speaker 6: through twenty twenty eight. In total, you add to that
Speaker 6: both Bowman and Waller. That means for Trump appointees on
Speaker 6: the FLMC, does that an aggregate just mean at the
Speaker 6: very margin a more doves shift to this FED?
Speaker 4: Oh? Absolutely?
Speaker 8: I mean I think you know, when it's a close
Speaker 8: call in that kind of situation, the ties.
Speaker 4: Are going to go to the doves.
Speaker 8: But at the end of the day, the economy is
Speaker 8: going to drive the story. You know, I think, you know,
Speaker 8: the chairman can't take the FED wherever he or she wants.
Speaker 8: It depends on how the economy is motivating. What's the
Speaker 8: right thing to do in terms of monetary policy. The
Speaker 8: chair has to convince the rest of the FOMC to
Speaker 8: go along. Now, obviously, if you have four governors all
Speaker 8: lined up on one side, that that gives the chair
Speaker 8: quite a bit of momentum to get his or her way.
Speaker 8: But you know, I think the feder Reserve presidents are
Speaker 8: going to continue to vote their conscience in terms of
Speaker 8: what's right for the for the macro economy.
Speaker 3: The markets this morning are rebounding off of the lows
Speaker 3: on Friday, following the fact that everyone's starting to bake
Speaker 3: in this idea of a September rate cup. But Bill,
Speaker 3: what if we get a hot CPI print, what's going
Speaker 3: to happen?
Speaker 7: Then?
Speaker 8: Well, I think it's too soon to say that we're
Speaker 8: going to get a September rateco. I mean, we just
Speaker 8: saw how the market for September has moved dramatically just
Speaker 8: in the last week. When Paul made his remarks that
Speaker 8: the press conference, people said, oh, they're not going to
Speaker 8: cut in September, and then we got the week in
Speaker 8: payroll and plumber report on Friday and everyone says, oh,
Speaker 8: they are going to cut in September. So it's a
Speaker 8: long time between now and September. You know, I think
Speaker 8: the prospects are pretty good that the FED is going
Speaker 8: to cut rates later this year. Whether it turns out
Speaker 8: to be September or not really is going to turn
Speaker 8: out to depend on the data bill.
Speaker 6: To what degree, could this just be a post Liberation
Speaker 6: Day fallout the jobs data we've had over the past
Speaker 6: three months and something that might rebound in August given
Speaker 6: more certainty on which tariff levels are being set.
Speaker 8: I think you're making a good point that the terriffs
Speaker 8: have caused people to sort of stand back in terms
Speaker 8: of business hiring and business investment because they don't really
Speaker 8: know what the landscape is. And as we get past
Speaker 8: August first and get more clarity on what the tariff
Speaker 8: packages are going to be country by country, that presumably
Speaker 8: will make businesses more willing to move forward in terms
Speaker 8: of their investment and hiring plans. So it certainly could
Speaker 8: go that way, or it could go that the higher
Speaker 8: terraffts are raising prices, that's crimping real income, and that's
Speaker 8: affecting consumer spending, and that's leading to weakness and employment
Speaker 8: that it's going to motivate the FED to cut rates.
Speaker 4: We still don't know which way, which direction is going
Speaker 4: to predominate.
Speaker 1: What we do know, though, is we know most of
Speaker 1: the rates.
Speaker 3: As a handful of countries potentially could get better deals
Speaker 3: and better rates, but for the most part, we do
Speaker 3: know the rates going forward and they're going to take
Speaker 3: effect this Thursday. How much time do you think the
Speaker 3: FED needs to see this work through the economy?
Speaker 8: Well, I think the FED would like to see, you know,
Speaker 8: a lot of time, a lot more than six weeks
Speaker 8: to the next FOMC meeting.
Speaker 4: I think they think it's probably going.
Speaker 8: To take six months to get to see the full
Speaker 8: effects of the teriffs because it takes quite a bit
Speaker 8: of time between the good landing on US shores and
Speaker 8: it actually ending up being sold in a department store
Speaker 8: and other retail establishment. So I think the FED thinks
Speaker 8: it's going to be a slow process, And Paul basically
Speaker 8: said that at his press conference last week.
Speaker 3: Former New York Fed President Bill Dudley, thank you so
Speaker 3: much for your time this morning.
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