WEBVTT - Surveillance: 2022 Growth With Porcelli 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.560 To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot 0:00:23.560 --> 0:00:30.360 Com and of course on the Bloomberg terminal. We are 0:00:30.600 --> 0:00:33.440 thrilled to bring you someone with a lot of experience 0:00:33.720 --> 0:00:36.600 and looking at by the way yield moves and price moves. 0:00:36.880 --> 0:00:40.559 Gregory Staples joins us to stays with DWS barely described 0:00:40.600 --> 0:00:43.479 his career out of Columbia Economics with Mutual of New 0:00:43.560 --> 0:00:45.560 York and also with Deutsche Bank with a tenure of 0:00:45.640 --> 0:00:48.080 duty there as well. Greg honored to have you on 0:00:48.159 --> 0:00:51.560 with us today. Buried in your note is the shock 0:00:51.720 --> 0:00:55.400 of shocks. This is something John Farrell's provided leadership on 0:00:55.560 --> 0:00:59.440 within the media, and that is the German yield and 0:00:59.480 --> 0:01:02.400 the id yeah that we may finally get a positive 0:01:02.920 --> 0:01:05.959 ten year German yield back to the normality of early 0:01:06.000 --> 0:01:10.319 two thousand nineteen. What will that signal to Europe? What 0:01:10.440 --> 0:01:14.560 will that signal to the fixed income markets? You know, Tom, 0:01:14.560 --> 0:01:17.160 thanks for the comments. It's gonna be pretty tricky. What's 0:01:17.200 --> 0:01:19.360 interesting today, of course, is that the global sell off 0:01:19.400 --> 0:01:21.000 and rates that started in the U S seems to 0:01:21.040 --> 0:01:24.480 be spreading globally. And yes, indeed the tenure boot was 0:01:24.600 --> 0:01:27.160 last trading positive I think in April of two thousand 0:01:27.200 --> 0:01:30.000 and nineteen, more within a stone throw of that right now, 0:01:30.080 --> 0:01:32.280 and we think it truly gets there, you know, until 0:01:32.360 --> 0:01:34.919 the the u c B actually starts to move away 0:01:34.920 --> 0:01:37.319 from their p E p P program and their A 0:01:37.400 --> 0:01:40.520 p P program they're actively doing quantitative using. It's gonna 0:01:40.520 --> 0:01:44.000 be hard for European fixed income rates to go much 0:01:44.080 --> 0:01:45.759 higher than that. My money is going to flow into 0:01:45.760 --> 0:01:48.000 the higher yielding US. But I do think that there's 0:01:48.000 --> 0:01:50.880 a potential for a basis between US ten ures and 0:01:50.920 --> 0:01:53.080 tenure boots to go. Is why does two dred basis 0:01:53.080 --> 0:01:56.200 points you know right now where maybe at one and 0:01:56.320 --> 0:01:58.800 certainly they're much north of that. It's going to be 0:01:58.840 --> 0:02:01.080 hard because of the flows come out of Europe into 0:02:01.120 --> 0:02:06.440 the United States. This is so so so important, folks. 0:02:06.440 --> 0:02:10.320 It's not as simplistic the dynamics here, not the static analysis, 0:02:10.600 --> 0:02:14.960 the dynamic analysis. What is the behavior greg as we 0:02:15.040 --> 0:02:19.200 move to a higher yield regime describe those flows in 0:02:19.280 --> 0:02:22.760 the decision tree that people make when they step into 0:02:22.840 --> 0:02:26.920 the market given higher yield. Well from a global perspective, 0:02:26.960 --> 0:02:28.720 of course, there with the question is do they want 0:02:28.720 --> 0:02:31.679 to take currency risk? And the currency hedging component of 0:02:31.800 --> 0:02:34.280 is is very significant. You're not gonna go naked currency 0:02:34.320 --> 0:02:35.760 if you feel like you're going to give up on 0:02:35.800 --> 0:02:38.200 the currency trade, which you get on yield suffer has 0:02:38.200 --> 0:02:40.440 actually been pretty positive. You're able to still invest in 0:02:40.560 --> 0:02:43.120 US dollar and head your currency risk and come up 0:02:43.120 --> 0:02:45.720 with something that's considerably above what you're getting from global rates. 0:02:45.919 --> 0:02:47.600 So I think as long as that holds, it's going 0:02:47.639 --> 0:02:50.040 to suppress the U S rates from going too high 0:02:50.120 --> 0:02:52.639 too quickly. I think what's interesting over in Europe is 0:02:52.680 --> 0:02:55.240 they're not just facing higher inflation, but obviously underneath that 0:02:55.680 --> 0:02:58.680 support for the Italian government deficits. It's not as if 0:02:58.720 --> 0:03:01.960 the ECB can immediately step away from their programs because 0:03:02.000 --> 0:03:05.320 if they do, they potentially put Italian BTPs into some 0:03:05.400 --> 0:03:06.839 risk as to who it's going to take that debt 0:03:06.840 --> 0:03:09.280 down as well. So the flow is where do you 0:03:09.400 --> 0:03:12.280 get the highest deeld globally and our currency hedged basis 0:03:12.720 --> 0:03:15.079 right now, that's the United States, Greg, can you walk 0:03:15.120 --> 0:03:18.040 me through your expectations for the e CP, say against 0:03:18.080 --> 0:03:20.400 the Federal Reserve. This FEN looks like it's ready to 0:03:20.400 --> 0:03:23.360 go in March. Does that make it harder easier for 0:03:23.400 --> 0:03:26.480 the CCP to wait? I think it makes it very 0:03:26.520 --> 0:03:29.960 much harder. I mean, I think inflation is still rising 0:03:30.000 --> 0:03:32.679 over in in Germany. We saw some prints today that 0:03:32.720 --> 0:03:34.520 make you think the economy there is is coming out 0:03:34.520 --> 0:03:38.080 pretty pretty strongly. So the code for the the CP 0:03:38.160 --> 0:03:40.760 for so long has been continue to support the markets 0:03:40.760 --> 0:03:44.120 with open market purchases, continue to have a negative policy rate. 0:03:44.200 --> 0:03:46.760 They're going to be under some considerable pressure in two 0:03:47.120 --> 0:03:48.640 to lift the p E p P. I think that's 0:03:48.680 --> 0:03:50.680 going to happen in March. And then the question is 0:03:50.680 --> 0:03:52.880 to what degree did they taper down the open market 0:03:52.880 --> 0:03:55.880 purchases going forward under the APP program. I think they've 0:03:55.880 --> 0:03:57.960 got to consider accelerating and given what Defen has been 0:03:57.960 --> 0:04:00.800 doing full basis points away from that zero level on 0:04:00.840 --> 0:04:03.080 a German ten year As you know, Greg, just the 0:04:03.120 --> 0:04:05.160 experience of US all over the last ten years looking 0:04:05.160 --> 0:04:08.160 at European debt markets. It's what happens in Italy that 0:04:08.240 --> 0:04:11.200 counts here now in America we're talking about the prospect 0:04:11.200 --> 0:04:14.320 of time of financial conditions and the ability or inability 0:04:14.360 --> 0:04:17.400 of the Federal Reserve to step back. Does the ECB 0:04:17.920 --> 0:04:23.000 have any capacity to maintain easy financing conditions for places 0:04:23.040 --> 0:04:26.599 like Italy, and do they move away and ultimately does 0:04:26.640 --> 0:04:30.039 this European bond market trade like a sovereign or a 0:04:30.080 --> 0:04:33.640 credit greg which one within the Europe that's a very 0:04:33.720 --> 0:04:35.719 very good question. To what degree can they pull back 0:04:35.720 --> 0:04:38.560 and not destabilize the periphery Italy in particular, And it's 0:04:38.600 --> 0:04:41.760 going to be difficult, difficult, difficult to do. I think 0:04:41.800 --> 0:04:43.760 it's gonna be next to the two. Obviously, there's the 0:04:43.760 --> 0:04:46.200 sovereigns in the northern countries. It's the sovereigns as they 0:04:46.200 --> 0:04:48.160 try and nationalize the DAD and some of those programs 0:04:48.160 --> 0:04:51.839 that they instituted after the COVID spread through their last year. 0:04:52.240 --> 0:04:54.440 But they're still concerned about what Italy is going to 0:04:54.440 --> 0:04:57.280 be able to do if indeed the CCP pulls back 0:04:57.279 --> 0:04:59.839 from their purchases, that part of the market becomes a credit. 0:05:00.200 --> 0:05:02.080 Just want to watch for a close line. Greg gonna 0:05:02.120 --> 0:05:09.559 catch ups the grows staples there of DWS Group joining 0:05:09.600 --> 0:05:12.680 us now to discuss Sema Sha, chief vlobal market strategist 0:05:12.680 --> 0:05:16.000 of Principal Global Investors. Seema, it's one day. It's one 0:05:16.080 --> 0:05:18.480 day of a pretty violent move lower on the nav 0:05:18.520 --> 0:05:20.520 stack and in particular pocket to this market off the 0:05:20.520 --> 0:05:22.320 back of what we saw in the FED minutes. Is 0:05:22.360 --> 0:05:24.720 that one day a flavor of what we can expect 0:05:24.720 --> 0:05:29.159 in two. I think it gives us an insight into 0:05:29.240 --> 0:05:33.200 the kind of volatility that we should anticipate going into two. 0:05:33.560 --> 0:05:36.159 You know, we have, of course, we have inflation still 0:05:36.240 --> 0:05:38.720 very much elevated, so that's putting through some of the 0:05:38.760 --> 0:05:41.680 concerns that we had in one right into two. And 0:05:41.720 --> 0:05:44.039 then on top of that, of course we have all 0:05:44.080 --> 0:05:46.360 of the FED moves. You're getting tapering, you're getting rate 0:05:46.400 --> 0:05:50.200 high because potentially balancily runoff all in one year. So 0:05:50.360 --> 0:05:52.000 of course this is going to be a volatile year, 0:05:52.040 --> 0:05:54.279 and I think investors have to be really prepared for 0:05:54.360 --> 0:05:55.760 the kind of movies that we have to we might 0:05:55.800 --> 0:06:01.240 be soon, Sema, within your very thought, all note, there's 0:06:01.480 --> 0:06:04.440 not the idea of a surprise of two thousand and 0:06:04.480 --> 0:06:09.560 twenty two, which would be a more resilient higher inflation. 0:06:10.440 --> 0:06:13.800 Are we changing our probabilities right now? And do we 0:06:13.839 --> 0:06:16.760 need to game in with a nominal rate move a 0:06:16.920 --> 0:06:22.640 more resilient higher inflation. Yeah. It's interesting with the inflation story. 0:06:22.720 --> 0:06:25.280 You know, we do see inflation coming down from the 0:06:25.360 --> 0:06:27.520 levels that we've become accustomed to in the last two 0:06:27.600 --> 0:06:30.320 or three months. But at the same time, although it's 0:06:30.320 --> 0:06:33.840 coming down, we're still likely to see inflation settling at 0:06:33.880 --> 0:06:35.640 a level which is higher than what we've seen over 0:06:35.640 --> 0:06:37.520 the last ten years. Right. So this is a kind 0:06:37.520 --> 0:06:40.200 of the above the two percent target, and it's something 0:06:40.240 --> 0:06:43.720 that the Fed inevitably has got to respond to. Um. 0:06:43.720 --> 0:06:45.359 And when we think about inflation, I think from an 0:06:45.360 --> 0:06:47.919 investment perspective, the key story here is, as you were 0:06:47.920 --> 0:06:50.040 saying before, it's about real rates. You know, what has 0:06:50.040 --> 0:06:51.640 happened to that. One of the debates that we have 0:06:52.120 --> 0:06:55.200 on our team time and time again is will we ever, 0:06:55.320 --> 0:06:58.359 you know, will the Fed really permit real yields to 0:06:58.360 --> 0:07:01.120 get back into positive territory and how the markets respond 0:07:01.839 --> 0:07:04.440 We go through this time and time again. Um. And 0:07:04.520 --> 0:07:06.440 you know, of course recently with this jump up in 0:07:06.480 --> 0:07:08.679 real yields, is it's a question which is maybe getting 0:07:08.680 --> 0:07:12.480 a little bit closer. Okay, but let's take it to 0:07:12.520 --> 0:07:16.920 principal global in your institutional client, Tell if we get 0:07:17.120 --> 0:07:19.840 some form of final movement and real yields even to 0:07:19.920 --> 0:07:23.680 a lesser negative for even excuse me, the plague a 0:07:23.760 --> 0:07:28.240 positive statistic sema. If we get that move what does 0:07:28.240 --> 0:07:31.880 it mean for earnings in the animal spirits or corporations? 0:07:32.160 --> 0:07:36.320 Don't they do pretty well in a higher nominal yield environment? 0:07:37.280 --> 0:07:39.600 You know this, It's such I'm glad you said this point, 0:07:39.600 --> 0:07:41.800 because look, when we think about ectily is are going 0:07:41.840 --> 0:07:43.360 to think about rates, but we're also going to think 0:07:43.360 --> 0:07:46.880 about earnings. And the outlook that we have for two 0:07:46.920 --> 0:07:48.840 is still a very solid recovery. It's still a very 0:07:48.840 --> 0:07:52.160 strong economic environment. We can look at the labor market performance, 0:07:52.400 --> 0:07:54.559 we look at the demand, the continuous demold, and actually 0:07:54.600 --> 0:07:57.320 we do see supply constraints easing through the years of 0:07:57.400 --> 0:08:00.400 manufacturing should hopefully get a bit of a boost come 0:08:00.440 --> 0:08:02.800 into the second half of the year. So with all 0:08:02.840 --> 0:08:06.320 of that in mind, actually earnings growth stays positive. It's 0:08:06.320 --> 0:08:09.600 not as strong as one certainly, but it's still quite positive. 0:08:09.840 --> 0:08:13.360 And against that backdrop, you may not see exuties doing 0:08:13.400 --> 0:08:17.200 extremely well, but we do continue to see positive returns 0:08:17.200 --> 0:08:21.960 based of that still solid and its recovery CMA. This 0:08:22.000 --> 0:08:23.680 is the reason why so many people are hiding out 0:08:23.680 --> 0:08:26.680 in the reflationary stocks, in particular the banks and other 0:08:26.720 --> 0:08:30.760 some consumer discressionaries as well. When do you lean against 0:08:30.920 --> 0:08:33.319 the mood right now and catch the falling knife that 0:08:33.440 --> 0:08:36.640 is big tech, especially after hedge funds just had the 0:08:36.640 --> 0:08:39.400 most violent pout of selling for the past four sessions 0:08:39.679 --> 0:08:43.559 going back more than ten years in Golbyn Sack's data. Yeah, 0:08:43.679 --> 0:08:46.600 you know, so we have continued to hold um some 0:08:46.679 --> 0:08:48.880 of our overweight positions to big tech. We have been 0:08:49.559 --> 0:08:51.360 really in favor of making cut tech for a while. 0:08:51.360 --> 0:08:54.000 We continue to hold onto that even us conditions for 0:08:54.040 --> 0:08:57.240 tech become more challenging and we have to we have 0:08:57.280 --> 0:09:00.080 to recognize the look bond deals are biased higher. We 0:09:00.080 --> 0:09:02.320 don't think they're going to move significantly higher. And this 0:09:02.400 --> 0:09:05.520 is key because we do see inflation coming down through 0:09:05.600 --> 0:09:07.160 this year to a two and a half or several level. 0:09:07.160 --> 0:09:09.880 We're definitely not see it. They're kind of five continuing 0:09:09.920 --> 0:09:12.800 throughout this year. Um, So we we have that forecast. 0:09:13.200 --> 0:09:16.000 Now as we're thinking through big tech, we have to 0:09:16.120 --> 0:09:18.079 at the cyclical environment as well. You know that the 0:09:18.160 --> 0:09:20.840 work from home that kind of thing it's gone. So 0:09:21.000 --> 0:09:24.000 actually the cyclical environment is not in favor of big tech. 0:09:24.640 --> 0:09:26.640 But from an investment perspective, we also have to think 0:09:26.640 --> 0:09:28.640 about the long term and you want to be looking 0:09:28.640 --> 0:09:30.640 at companies which have got those big balan sheets and 0:09:30.679 --> 0:09:34.360 can continue to deliver earnings. So we actually still think 0:09:34.440 --> 0:09:36.480 it makes sense to have an allocation to big tech 0:09:36.640 --> 0:09:39.120 somethin not as big as we've had in recent years, 0:09:39.360 --> 0:09:41.720 but we still think it's an air of defense within 0:09:41.760 --> 0:09:44.640 the portfolio, which makes sense in a year which continues 0:09:44.679 --> 0:09:48.120 to be challenging. But at the same time, look mega cap, 0:09:48.320 --> 0:09:51.480 whether it's growth, whether it's value. I think that's what's 0:09:51.520 --> 0:09:54.240 key um and with rising heels and maybe that actually 0:09:54.280 --> 0:09:57.760 mega very large banks is probably the area that we 0:09:57.800 --> 0:10:01.200 could see some rotation towards this. Yeah, seem can we 0:10:01.200 --> 0:10:03.760 finish on a tricky one? What would you buy and 0:10:03.800 --> 0:10:06.480 hold through the rest of this year? The FOOTS one 0:10:06.720 --> 0:10:13.360 D or the SMP five hundred Sea of principal Global Investors? 0:10:13.400 --> 0:10:20.160 Thank you. Tom Pauselli joins us now the chief US 0:10:20.200 --> 0:10:23.160 economist at RBC Capital Markets. Tom, I just want you 0:10:23.200 --> 0:10:26.400 to spend a moment to describe how strange this moment 0:10:26.480 --> 0:10:30.560 is for this Federal Reserve a conversation about accelerating balance 0:10:30.559 --> 0:10:33.760 sheet reduction just as they're still building up the balance 0:10:33.840 --> 0:10:37.199 sheet and buying bonds through March. Tom makes sense of 0:10:37.240 --> 0:10:39.840 it all for us. Yeah, well, first of all, good morning, 0:10:39.840 --> 0:10:41.800 good to see you all. Um. You know, look, I 0:10:42.240 --> 0:10:45.520 would say that it is it strange. I mean, you know, 0:10:46.000 --> 0:10:47.319 I think I think we all need to keep in 0:10:47.360 --> 0:10:50.480 mind something we have a sample of one, right, I mean, 0:10:50.800 --> 0:10:52.719 we write, you know, the words, they did this one 0:10:52.760 --> 0:10:54.840 other time. It's not like we have a rich history 0:10:54.920 --> 0:10:56.800 of Hey, this is how it's happened in the past. 0:10:56.840 --> 0:10:59.360 I mean, they didn't one other time. And that one 0:10:59.400 --> 0:11:01.719 other time I think was wildly different in terms of 0:11:01.760 --> 0:11:04.480 the economic backdrop than than what we're enduring right now. 0:11:04.480 --> 0:11:07.040 And I think that's the that's the difference. So it 0:11:07.040 --> 0:11:10.400 may seem like stark contrast um their approach, but so 0:11:10.559 --> 0:11:13.480 is the economic backdrop. So I I don't I don't 0:11:13.520 --> 0:11:18.560 know that we should be so over overly surprised by this. Well, 0:11:18.600 --> 0:11:20.640 we should be looking at the data, that's what they say, 0:11:20.800 --> 0:11:23.480 although it's unclear what data they have been looking at 0:11:23.760 --> 0:11:27.280 for the past six months that suddenly liked their pivot recently, 0:11:27.800 --> 0:11:31.960 and as we march toward that job's figure tomorrow, I mean, 0:11:32.040 --> 0:11:34.320 as we marched toward the jobs figure tomorrow, I do 0:11:34.440 --> 0:11:36.679 wonder if there is a threshold at which, if the 0:11:36.720 --> 0:11:41.240 participation rate does not increase, or the job's number is 0:11:41.280 --> 0:11:43.680 a very big one, if that could actually force the 0:11:43.679 --> 0:11:46.760 Fed's hand earlier, or if it's not necessarily going to 0:11:46.840 --> 0:11:50.079 be that impactful. Yeah, I mean, look, I yeah, it's 0:11:50.080 --> 0:11:52.720 a it's a great question, and Lissa, I think, um, 0:11:52.760 --> 0:11:55.560 you know, the way you framed it, I think is perfect. Um, 0:11:55.960 --> 0:11:57.640 the way you set up this question is perfect. Look, 0:11:58.640 --> 0:12:00.760 you know the I think we all sort of appreciator, 0:12:00.800 --> 0:12:02.960 hopefully we will appreciate that the pair will report has 0:12:03.000 --> 0:12:06.800 been plagued by a seasonal adjustment issues or sampling issues, 0:12:07.080 --> 0:12:10.040 whatever the issue might be. I think we all recognize 0:12:10.080 --> 0:12:13.360 that there's some, um uh, you know, a bit of 0:12:13.400 --> 0:12:17.240 an additional quirkiness to what was already a pretty quirky report. 0:12:17.559 --> 0:12:20.160 What we do know is that a DP just printed 0:12:20.200 --> 0:12:23.679 eight hundred thousand jobs, right, Um, you know, the an 0:12:23.679 --> 0:12:27.080 assortment of different labor market metrics, including the claims data 0:12:27.120 --> 0:12:29.920 that just came out, continue to drive home. But the 0:12:30.000 --> 0:12:33.479 labor market is tight. I mean there's you know, there's 0:12:33.520 --> 0:12:35.760 really no way to get the sort of the meaningfully 0:12:35.840 --> 0:12:39.040 higher wage profile that we have in place than to 0:12:39.120 --> 0:12:42.240 have a really tight labor market. So with older respected 0:12:42.320 --> 0:12:45.240 tomorrow's report, I don't know that it really makes a 0:12:45.240 --> 0:12:47.800 difference in the world. UM. I think what we know 0:12:47.920 --> 0:12:50.320 is that the preponderance of data UM from the labor 0:12:50.360 --> 0:12:53.040 market perspective really drives home. Tight labor markets are here, 0:12:53.040 --> 0:12:55.440 wage pressures will continue, UM, And I think that's the 0:12:55.440 --> 0:12:58.959 thing that will keep the Fed engaged in part what 0:12:59.000 --> 0:13:01.920 you just said is important. Do you think that markets 0:13:01.920 --> 0:13:05.920 are under appreciating how much wages you think will rise 0:13:06.040 --> 0:13:08.840 later this year? Yeah? Look, you know one of the 0:13:08.840 --> 0:13:11.320 things that that that we've said, and we just wrote 0:13:11.320 --> 0:13:13.200 this in our Year Ahead, is you know what what 0:13:13.880 --> 0:13:16.000 some of the pressure that we're seeing from a wage 0:13:16.040 --> 0:13:18.760 perspective will actually ease. Now, I want to be clear 0:13:18.760 --> 0:13:21.440 on what that means, right, and a nuanced idea we're 0:13:21.480 --> 0:13:23.880 running right now. If you just there's countless measures of wages. 0:13:23.880 --> 0:13:25.880 One of them is averagarily learnings. I happen to hate 0:13:25.920 --> 0:13:27.600 that measure, but everyone seems to know it. So let's 0:13:27.600 --> 0:13:30.200 talk about that that right now is running around a 0:13:30.200 --> 0:13:33.480 six percent page. What we think happens as the year progresses, 0:13:33.800 --> 0:13:35.839 as you know, as sort of you know, look, it's 0:13:35.840 --> 0:13:38.320 gonna be a slower growth year. UM. It's still gonna 0:13:38.320 --> 0:13:39.960 be a really good year, but it's gonna be slower 0:13:40.000 --> 0:13:42.560 growth verst last year. UM. And so what we expect 0:13:42.600 --> 0:13:43.880 is going to happen is that some of the heat 0:13:43.920 --> 0:13:47.320 will come out of um a job opening space, which 0:13:47.320 --> 0:13:50.520 will take something heat out of wages. Wages will still 0:13:50.600 --> 0:13:52.440 remain elevated, and I want to be very very clear 0:13:52.440 --> 0:13:54.640 on that. But they're not gonna be running at a 0:13:54.720 --> 0:13:56.880 six percent page. We think that they'll probably be running 0:13:56.880 --> 0:13:59.800 closer to a four or five percent page. Again, I 0:14:00.000 --> 0:14:03.640 think that that's a very important nuanced idea that needs 0:14:03.640 --> 0:14:06.480 to be sort of understood. You're still looking at a 0:14:06.600 --> 0:14:10.040 really good labor backdrop, labor that's gonna tighten over the 0:14:10.080 --> 0:14:13.760 coming um a year relative to where we are now. 0:14:14.080 --> 0:14:16.720 But think about this pair overport right, This is again 0:14:16.800 --> 0:14:20.360 another great example we have been printing one on Assuming 0:14:20.400 --> 0:14:22.080 you know, the number comes in close to what we're 0:14:22.120 --> 0:14:26.160 predicting for tomorrow. We averaged what five and fifty thousand 0:14:26.280 --> 0:14:30.360 jobs per month in one, which is a staggering number. Obviously, 0:14:30.400 --> 0:14:32.640 given you know what has happened, it's not that surprising. 0:14:33.040 --> 0:14:35.160 But as we look at twenty two, you're not gonna 0:14:35.160 --> 0:14:37.840 average fifty jobs. You're probably gonna average half of that 0:14:38.360 --> 0:14:41.880 um per month over the over the years. So I 0:14:41.920 --> 0:14:44.920 think that's again another important way of thinking about where 0:14:44.920 --> 0:14:49.520 we are from the labor market perspective time. Your initial 0:14:49.600 --> 0:14:52.800 acclaim was on analysis of the wage growth in the 0:14:52.840 --> 0:14:57.000 many wage growth of America. What's the character of our 0:14:57.040 --> 0:14:59.920 wage growth this time around when you look at labor 0:15:00.120 --> 0:15:04.360 ability to negotiate a higher wage, the almost social aspects, 0:15:04.400 --> 0:15:07.800 so that what's the character of our two thousand twenty 0:15:07.840 --> 0:15:10.840 five wage growth? Yeah, so you know, one of the 0:15:10.880 --> 0:15:14.320 things that you know, as as I look at two 0:15:15.120 --> 0:15:16.840 is a little too far far from me in the forecast, 0:15:16.880 --> 0:15:18.600 but but in the current, in the in the sort 0:15:18.600 --> 0:15:21.040 of the current context and over the course of the year, 0:15:21.040 --> 0:15:22.640 and I think you've been into next year. I think 0:15:22.640 --> 0:15:24.680 it's very fair. You know. One of the things that's 0:15:24.680 --> 0:15:26.920 been very interesting is if you look at the sort 0:15:26.960 --> 0:15:30.080 of the wage pressures that are in different segments of 0:15:30.160 --> 0:15:32.760 the labor backdrop, and there's again, countless ways of capturing 0:15:32.800 --> 0:15:34.520 the essence of that. I think one way of looking 0:15:34.520 --> 0:15:36.880 at that is to look at job leavers first, job 0:15:36.960 --> 0:15:39.840 stairs UM, and I think this sort of doves tails 0:15:39.920 --> 0:15:42.440 dovetails with the conversation you all were having a little earlier. 0:15:42.720 --> 0:15:45.080 You know, it's been it's interesting to see, right, it's 0:15:45.160 --> 0:15:47.960 you know, do people have um the ability to sort 0:15:48.000 --> 0:15:51.240 of demand more from a wage perspective. I mean, on 0:15:51.280 --> 0:15:54.440 the face of it, they do, because if you look 0:15:54.480 --> 0:15:57.520 at what job leavers, people that leave a job to 0:15:57.520 --> 0:15:59.840 take another job, if you look at their their wage 0:16:00.080 --> 0:16:04.040 rate UM in percentage terms relative to job stayers. So 0:16:04.120 --> 0:16:08.240 people who stay um, the levers are are their wage 0:16:08.320 --> 0:16:10.840 rate is running a full percentage point more. UM. So 0:16:11.120 --> 0:16:14.080 I do. I do think that there's real scope for 0:16:14.360 --> 0:16:18.240 wage pressures to remain fairly elevated. In the context of 0:16:18.360 --> 0:16:21.040 again everything that we're talking about, you do, you are 0:16:21.080 --> 0:16:23.920 going to have a tight little type. It's not like 0:16:24.000 --> 0:16:26.720 we're waiting for tight labor market. It's it's already here. 0:16:26.720 --> 0:16:28.600 And I would argue it's been here. There's something we've 0:16:28.600 --> 0:16:30.320 been talking about for for for quite a number of 0:16:30.360 --> 0:16:32.040 months now. I mean, we we've put out quite a 0:16:32.120 --> 0:16:35.120 number of metrics that show some internal metrics that really 0:16:35.120 --> 0:16:37.200 show that labor market is tight, and we expect that 0:16:37.200 --> 0:16:39.200 that will remain that way over the balance of the year. 0:16:39.320 --> 0:16:42.280 So I think there's real scope for wage pressures to 0:16:42.360 --> 0:16:45.760 remain incredibly bulliant, even if some of the heat comes 0:16:45.760 --> 0:16:47.640 off a bit relative to where we are now. Tell 0:16:47.720 --> 0:16:49.720 me you produce some of our favorite research on the 0:16:49.720 --> 0:16:51.680 economy here in America. Thank you, SURF a band with 0:16:51.760 --> 0:16:54.640 US tempo selling of MBC capital markets coming into that 0:16:54.680 --> 0:17:02.880 Prince Tomorrow. We've been trying to find excellence in medical 0:17:02.960 --> 0:17:05.160 voices and we do that now with Christian Brier. He's 0:17:05.160 --> 0:17:09.760 with Johns Hopkins University, truly expert on Thailand and expert 0:17:09.800 --> 0:17:14.240 on the epidemiology of frontier economies. Dr Bryer, honor that 0:17:14.280 --> 0:17:17.359 you could attend with us today. There is a point, 0:17:17.440 --> 0:17:20.359 Dr Brier, where there is a divide, and I would 0:17:20.359 --> 0:17:23.040 say the divide was a textbook Morrison and Boyd in 0:17:23.200 --> 0:17:27.280 organic chemistry, and there was a modest book in biochemistry 0:17:27.359 --> 0:17:32.960 called Lenninger's bio chim. Rachel will Lynsky picked up Lenninger's 0:17:33.000 --> 0:17:37.320 bio chim at Washington University long ago and is at 0:17:37.359 --> 0:17:41.639 a sterling career in vaccination. Let me cut to the chase. 0:17:42.160 --> 0:17:44.879 Is the head of the CDC. Is her job in 0:17:44.960 --> 0:17:50.639 jeopardy this morning because of the communication that we've seen. Well, 0:17:50.680 --> 0:17:53.760 I can't really comment on her job in jeopardy with 0:17:53.800 --> 0:17:58.240 the administration. I do think that they really need to 0:17:58.400 --> 0:18:03.040 do more coordination and across the government, across the administration, 0:18:03.440 --> 0:18:06.840 and the CDC leader has important roles to play in that, 0:18:07.320 --> 0:18:11.359 but isn't and shouldn't be the chief voice of the 0:18:11.440 --> 0:18:15.320 policy decision. She needs really to be the scientific surveillance, 0:18:15.680 --> 0:18:19.479 data driven voice. Uh and uh. And I think that 0:18:19.480 --> 0:18:22.160 that as we all know, we've been living through an 0:18:22.240 --> 0:18:26.360 enormous surge with a very infectious virus. The guidance has changed, 0:18:26.480 --> 0:18:30.440 it needs to change. But the communications from the administration 0:18:30.480 --> 0:18:35.679 as a whole in challenging this is critical because the 0:18:35.760 --> 0:18:40.440 United Kingdom has provided leadership by Jettison as a general statement, PCR, 0:18:40.840 --> 0:18:43.639 are you suggesting in the coming hours or may I 0:18:43.680 --> 0:18:46.680 say days, that well, you'll see the US follow suit 0:18:46.800 --> 0:18:53.160 in Jettison PCR certitude. Well, uh that I I don't 0:18:53.200 --> 0:18:55.399 know for sure that that is going to happen. I 0:18:55.440 --> 0:18:58.879 think that there is some evidence that's emerging about some 0:18:59.000 --> 0:19:01.399 of the tests not picking up O macron, And we 0:19:01.440 --> 0:19:03.840 have to remember that the way that O macron was 0:19:03.880 --> 0:19:07.160 first really detected in South Africa was because of its 0:19:07.280 --> 0:19:11.560 variants on PCR testing there. It's just such a very 0:19:11.640 --> 0:19:15.560 variant virus um. The early studies that are suggesting the 0:19:15.680 --> 0:19:19.360 rapid tests may not pick it up as efficiently are 0:19:19.440 --> 0:19:22.360 not yet peer reviewed and they're relatively small, but that's 0:19:22.359 --> 0:19:24.800 something we're really paying close attention to because of course, 0:19:24.840 --> 0:19:27.960 people are relying on rapid testing at home to make 0:19:28.040 --> 0:19:32.240 all kinds of decisions. Dr Byro, how close are we 0:19:32.760 --> 0:19:35.680 from your estimations of getting more rapid tests and making 0:19:35.680 --> 0:19:37.800 them available since this does seem to be the key 0:19:37.880 --> 0:19:41.600 aspect kind of uh locking the hands of the CDC 0:19:41.840 --> 0:19:46.760 to recommend that everybody get these before they emerge from isolation. Yeah. Yeah, 0:19:46.840 --> 0:19:50.560 we were concerned a couple of weeks ago that the 0:19:50.640 --> 0:19:54.200 increase in testing and the availability and the administration's planned 0:19:54.240 --> 0:19:57.120 to make them free and more widely available was not 0:19:57.280 --> 0:20:00.159 going to happen in time to deal with the holiday 0:20:00.160 --> 0:20:03.320 is and the post holiday curves that we're seeing. And 0:20:03.400 --> 0:20:08.320 unfortunately that's exactly what's happened. So, uh, the estimate is 0:20:08.400 --> 0:20:11.040 roughly that by the third or fourth week of January 0:20:11.119 --> 0:20:14.080 we should be coming out of this testing shortage, but 0:20:14.200 --> 0:20:16.879 that again is not going to be in time to 0:20:17.040 --> 0:20:20.280 deal with the post holiday waves of infection that we're seeing. 0:20:20.960 --> 0:20:23.120 So we're going to have about two weeks where people 0:20:23.119 --> 0:20:26.680 are still going to be frustrated, we won't have enough tests, 0:20:26.720 --> 0:20:28.040 are going to be critical if you give me, if 0:20:28.040 --> 0:20:29.440 you jumping in, So because we have a couple of 0:20:29.440 --> 0:20:31.199 minutes left, you've touched on I think the heart of 0:20:31.200 --> 0:20:33.280 the problem for a lot of people when they listen 0:20:33.320 --> 0:20:35.760 to the CDC, am I listening to the science? Or 0:20:35.760 --> 0:20:38.520