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Speaker 2: So let's get to it, and let's get to the
Speaker 2: labor market and that report we got this morning at
Speaker 2: eight thirty am Eastern.
Speaker 3: Here's just kind of some of the details.
Speaker 2: US employers unexpectedly cut jobs in the month of July,
Speaker 2: and hiring the prior to months was revised lower, suggesting
Speaker 2: that the labor market here in the US is weaker
Speaker 2: than previously thought after surprising strength tim earlier this year.
Speaker 4: The decline in jobs, driven by cuts and government leisure
Speaker 4: and hospitality, also retail. Private sector payrolls rose by thirty
Speaker 4: thousand dollars for a second month, was led by healthcare
Speaker 4: and social assistants. Manufacturing and construction perils those continue to climb.
Speaker 3: And then there was the participation rate.
Speaker 2: The share of the population working or looking for work
Speaker 2: fell to sixty one point four percent, which excluding the pandemic,
Speaker 2: was the lowest since the nineteen seventies. Among those between
Speaker 2: the ages of twenty five and fifty four, known as
Speaker 2: prime age workers, participation edged higher, but remained near the
Speaker 2: lowest levels of the fast of the last few years.
Speaker 2: White House, Director of the National Economic Council. We're talking
Speaker 2: about Kevin Hasse and Hassett. He spoke earlier on Bloomberg
Speaker 2: TV and Radio on Open Interest with Danny Berger and
Speaker 2: Michael McKee, and.
Speaker 5: Labor force participation is kind of on a downward trajectory,
Speaker 5: which means that the break even jobs number, that is
Speaker 5: that the job's number you need so the unemployment rate
Speaker 5: doesn't go up, has gone from maybe one hundred twenty hundred,
Speaker 5: thirty thousand a few years ago to maybe about.
Speaker 6: Forty thousand now.
Speaker 5: And so what it means is that what the market
Speaker 5: is used to looking at, oh, it's like a normal
Speaker 5: tread the water kind of jobs number, if it's around
Speaker 5: one hundred, is no longer.
Speaker 2: True, all right, That, of course is white House, Director
Speaker 2: of the National Economic Council, Kevin Hassett earlier on Bloomberg
Speaker 2: joining us with more is there on Michael McKee, who
Speaker 2: was talking to mister Hassett earlier on Bloomberg. He is,
Speaker 2: of course Bloomberg TV and Radio International Economics and Policy course,
Speaker 2: joining us here in studio along with and back with
Speaker 2: us Matt Lazetti, he's chief economist at Deutsche Bank.
Speaker 3: Guys, thank you so much.
Speaker 2: I do want to kick it off with you, though, Mike,
Speaker 2: we've had a few hours for the dusk to settle.
Speaker 2: Is this a report that was weaker? Like, what's the
Speaker 2: assessment here?
Speaker 7: I think the bottom line, to just skip to the
Speaker 7: end of the book, is that the labor market is
Speaker 7: weaker than it had appeared, but it's not weak. It's
Speaker 7: not a problem for the FED to have to deal with.
Speaker 7: And there were, as you mentioned, some quirks in the
Speaker 7: data this time, and everything Kevin said was true about
Speaker 7: with the labor force declining, you need fewer jobs to
Speaker 7: employ people, so the unemployment rate can go down, and
Speaker 7: that is something the Fed's going to have to think
Speaker 7: about in terms of what is the level of interest
Speaker 7: rates that keeps the unemployment rates steady.
Speaker 4: We'll dig into all of this and more in just
Speaker 4: a min at. First, I want to bring in Matt Lazetti,
Speaker 4: chief economist over at Deutsche Bank. Do you agree with
Speaker 4: Mike's assessment here that, Yeah, on the surface, it looks weaker,
Speaker 4: but it's not as bad as sort of the headline number.
Speaker 8: Yeah, I think absolutely you got a downside surprise on
Speaker 8: payrolls you had the one hundred thousand of download divisions
Speaker 8: to prior months. But I think what it does is
Speaker 8: it confirms that that breaking number is just lower. So
Speaker 8: there's various FED estimates out there suggesting that the breaking
Speaker 8: even number could be as low.
Speaker 6: As zero per month.
Speaker 8: Over the past three or six months, we're running at
Speaker 8: twenty to forty five thousand on headline payroll numbers. With
Speaker 8: that backdrop, we've seen the auntoplane rate decline to the
Speaker 8: lowest level in eighteen months. We've seen other measures of
Speaker 8: labor Marcus slack actually tighten on the margins as well,
Speaker 8: and so I think it actually fits more with a
Speaker 8: story where the breaking number is quite low. We see
Speaker 8: payroll gains trending kind of around those levels, maybe a
Speaker 8: little bit above labor market slack tightening at the margins,
Speaker 8: But it takes away some of the upside risks of
Speaker 8: the labor market that the fed might have been contemplating.
Speaker 2: All right, So when it comes to we've got to
Speaker 2: actually a question I want to bring in from a
Speaker 2: viewer and listener. It's Mark in Toronto, and he says,
Speaker 2: what impact do boomers retiring have on the labor participation
Speaker 2: rate in unemployment make and if we.
Speaker 3: Could address that.
Speaker 2: I have to say, I have some rumors in my
Speaker 2: family who've retired recently and or in the last few years,
Speaker 2: and they have at least three or four of them
Speaker 2: that have left the labor market. Matt, is that something
Speaker 2: that is certainly at play here?
Speaker 6: Absolutely?
Speaker 8: So if you look at the labor force participation of
Speaker 8: recent months in June, there's a big decline in prime age,
Speaker 8: which I think you alluded to, and specifically the twenty
Speaker 8: five to thirty four age.
Speaker 6: Group that partially reversed.
Speaker 8: I think the bigger structural trend is labor force participation
Speaker 8: for fifty five plus continues to collapse.
Speaker 6: There's a question about whether or not that's worrying or not.
Speaker 8: I would actually argue that it's really in line with
Speaker 8: what you would expect from demographics. So if you look
Speaker 8: at different age groups with fifty five plus, their participation
Speaker 8: rates are actually not moving around all that much. So
Speaker 8: what's happening is people are just aging into buckets where
Speaker 8: they work a lot less, where their participation rates are
Speaker 8: much lower, and we're in fact much closer to what
Speaker 8: I would expect from a demographics implied trend from the
Speaker 8: labor market.
Speaker 4: Mike, what about the other end of the demographic spectrum,
Speaker 4: and that would traditionally be new entrance to this country,
Speaker 4: entering the labor force and younger immigrants. We've seen that
Speaker 4: dry up significantly over the past few months, and it's
Speaker 4: certainly by design with this administration. You address that with
Speaker 4: Kevin Hasset a little bit in one of the questions
Speaker 4: that he answered, does that work in our economy when
Speaker 4: we're not having enough kids?
Speaker 7: It isn't good news for the overall economy. As we
Speaker 7: were talking about with Kevin Acid, the size of the
Speaker 7: labor force is one input into what potential growth is.
Speaker 7: And if the labor force isn't growing, you've got to
Speaker 7: get more out of productivity. Kevin in worsh thinks you
Speaker 7: will eventually, not yet, so it is it is a
Speaker 7: problem for the economy overall, and you could see that
Speaker 7: in the overall participation numbers as well, although prime age
Speaker 7: has ticked up a little bit. Things have loosened up
Speaker 7: a little bit compared to where they were. But the
Speaker 7: demographics at the other end, as Matt was saying, that's
Speaker 7: been going on for quite a while, as baby boomers
Speaker 7: from nineteen forty six started retiring, and now we're past
Speaker 7: the peak of baby boomers being sixty five, so that'll
Speaker 7: be less and less of an issue going forward, But
Speaker 7: it still takes a lot of people out of the
Speaker 7: labor force.
Speaker 3: Is it too soon?
Speaker 2: Well, I feel like there's a million things I want
Speaker 2: to talk about because demographics things. I know we've talked
Speaker 2: with you about it, But I do think about longer term,
Speaker 2: if we don't allow immigration into the country and we
Speaker 2: have an older workforce, you know how much the economy
Speaker 2: here in the US is at risk in terms of growth, Matt.
Speaker 3: Is that something you guys are thinking about a lot
Speaker 3: or studying.
Speaker 6: Sure?
Speaker 8: I mean, I think if you look at projections for
Speaker 8: population growth in the size of the US population, as
Speaker 8: you look out five or ten years, without positive net
Speaker 8: ration flows, you have a declining labor force.
Speaker 6: You have a declining population.
Speaker 8: The US is not the only economy global economy that
Speaker 8: is dealing with We've seen this movie, right, We see
Speaker 8: these issues in various parts of Asia, Europe. Many of
Speaker 8: these economies are actually worse place than the US is
Speaker 8: from that perspective, but no doubt, we rely on positive
Speaker 8: net immigration flows as we look ahead, I think, as
Speaker 8: Mike mentioned, you know, the hope is that productivity growth
Speaker 8: can pick up. It has been pretty robust over these
Speaker 8: past two to three years, and that that can be
Speaker 8: the supporting mechanism for overall growth so far as it's
Speaker 8: working out. Okay, Yeah, that's a bigger question as you look.
Speaker 6: At Okay, I promise we oh, go ahead, Mike. I
Speaker 6: was just going to add on to this.
Speaker 7: There is one aspect of this that the productivity can't
Speaker 7: really solve, and that is the fewer people that are working,
Speaker 7: the lower the dependency ratio is. And so social Security
Speaker 7: gets less funding, Medicare gets less funding, and that is
Speaker 7: an ongoing issue and nobody has any idea and Congress
Speaker 7: is going to address this.
Speaker 2: I keep saying, if you know, robots are going to
Speaker 2: replace us, or AI makes us more productive, but you know,
Speaker 2: robots don't buy lunch, or robots don't need their shoes
Speaker 2: shined or robots don't need to go shopping for shoes,
Speaker 2: you know, like I just just.
Speaker 4: They need to be oiled. Though it depends sometimes it depends.
Speaker 2: It depends, Mike, I want to get to the conversation
Speaker 2: with Hassett. Kevin Hassett this money at one point talking
Speaker 2: about early earnings, and he then brought up weekly earnings.
Speaker 3: She said something like, I don't know if.
Speaker 2: The president's watching the Oval office saying you got your
Speaker 2: point though, and Kevin, good job, good job. And Kevin said,
Speaker 2: I don't know if he's watching, but I'll find out.
Speaker 2: And I want to get both of your perspectives. But
Speaker 2: let's Mike speaks to the president who watches a lot
Speaker 2: of TV. We know that, and respond, is that typical.
Speaker 3: Of a president?
Speaker 2: Is it shows his involvement in what the messages that's
Speaker 2: getting out.
Speaker 7: I think it's just unique to this president that he
Speaker 7: likes to do that, and he likes to hear people
Speaker 7: talking about him, and he spends a lot from all
Speaker 7: the reports we get from the White House, he spends
Speaker 7: a lot of time watching television, the various news programs.
Speaker 7: I don't know that he was watching Kevin Hasset today putting.
Speaker 3: Pressure on then his members of his team when they're
Speaker 3: on air.
Speaker 7: Well, yes, but every White House does that in a
Speaker 7: sense that you're sending out a spokesman for the White House,
Speaker 7: so that person is not going to say, yeah, we
Speaker 7: blew it, this was a bad policy or something like that.
Speaker 7: They're always going to try to present the best numbers.
Speaker 7: And I was thinking when Kevin and I were having
Speaker 7: that conversation, you know the old saying about you can
Speaker 7: torture the statistics any way you want to get the
Speaker 7: numbers that you want.
Speaker 6: The bottom line for.
Speaker 7: The White House, though, is that we are average hourly
Speaker 7: earnings are falling behind inflation. And whether you use one
Speaker 7: measure or another doesn't really matter because the public thinks
Speaker 7: that's happening, and that's their political problem.
Speaker 4: Well, speaking of communications, you and Danny Berger asked Kevin
Speaker 4: Hassett about the communications between the President and Kevin Worsh.
Speaker 6: Let's listen to what he had to say.
Speaker 5: There have been some new stories that the President's talking
Speaker 5: to Kevin Worsh, and of course he is, you know,
Speaker 5: and he talked to Jay Powell too. But the other
Speaker 5: thing is that that Kevin Worsh and the President have
Speaker 5: a very close, long term relationship from New York City,
Speaker 5: from Florida, and they talk about the economy all the time.
Speaker 5: It's very very natural for the President to do something
Speaker 5: like say, hey, you know, Chairman worsh what do you
Speaker 5: think about today's job number. That's a very normal thing
Speaker 5: for him to do. But I think that's the way
Speaker 5: you should think about the balance of the conversations.
Speaker 4: Earlier on Bloomberg TV with Danny Berger and Mike McKee, Matt,
Speaker 4: I want to toss this over to you because Kevin ass
Speaker 4: had also said that the President respects the independence of
Speaker 4: the Federal Reserve. And I'm curious, based on the reporting
Speaker 4: that we've seen around the conversations happening between the FED
Speaker 4: Chair and the President and what the President said publicly
Speaker 4: and on social media throughout this term in his previous term,
Speaker 4: is the view now is the market viewing that the
Speaker 4: president respects the independence of the FED?
Speaker 8: Look, I think we don't really know that the context
Speaker 8: of the conversations that are happening. It seems like it
Speaker 8: might be more frequent than what has the interactions between
Speaker 8: the President and the FED Chair than in the past.
Speaker 8: If you look at market measures, I think what we
Speaker 8: like to look at our inflation expectations showing anything that
Speaker 8: is worrying. Are they suggesting that the Fed's credibility is
Speaker 8: at risk? I think last week you did see a
Speaker 8: notable rise in inflation expectations. I don't know that there
Speaker 8: was anything kind of tied to the President or but
Speaker 8: if I think it was tied to Chairwash's specific comments
Speaker 8: around willingness to potentially raise rates, unwillingness to say that
Speaker 8: they were targeting two percent PCE price inflation, and just
Speaker 8: the overall conversation I think and the language that he use,
Speaker 8: I think raise some risks from a market perspective about
Speaker 8: whether or not the FED would do what's necessary to
Speaker 8: keep inflation in check.
Speaker 2: President Trump did an interview with punch Bowl today and
Speaker 2: he reiterated his preference for lower interest rates, but acknowledge
Speaker 2: it is not the central bank chief's decision alone. So
Speaker 2: kind of making our taking a little bit of a
Speaker 2: softer tone in some of the criticisms. I mean, when
Speaker 2: it comes down to it, I know we are already thinking, Okay,
Speaker 2: what does the FED do next? We've got inflation prints
Speaker 2: to get through, right, Mike, We've got more economic data
Speaker 2: who knows where the FED will be and Kevin Walsh
Speaker 2: and everybody on the FOMC at the next meeting.
Speaker 7: So clearly, you don't trade FED fund's futures. You're right,
Speaker 7: we don't know. But the people who do trade these
Speaker 7: things have to decide on a minute to minute basis
Speaker 7: what they're going to do. And they have backed off
Speaker 7: the idea of a September rate hike. But the important
Speaker 7: thing is we're going to have two more inflation reports,
Speaker 7: two more, well one more after this jobs report, and
Speaker 7: so there will be a lot of data for them
Speaker 7: to hang a decision on. We don't know what that
Speaker 7: data is going to say, and so at this point
Speaker 7: it's too early to speculate. I mean, it's been going
Speaker 7: into this, everybody was saying, well, if we get a
Speaker 7: bad number, then the FED might have to back off.
Speaker 7: And we got a bad number, so they're saying the
Speaker 7: Fed's going to back off. Now we're all onto, Well,
Speaker 7: let's see what we get on Wednesday with CPI and
Speaker 7: we'll make a decision.
Speaker 4: It's a favorite part of well, Matt, what is what
Speaker 4: should you know? It's the FED is a duel mandate.
Speaker 4: But and I for a lot of people last few
Speaker 4: months have said, Okay, the labor market is strong, so
Speaker 4: the focus should be on getting inflation down. After today's
Speaker 4: print is does that view change? Should the Fed still
Speaker 4: be squarely focused on on that part of the dual matter?
Speaker 6: I think it changes.
Speaker 8: You know, clearly you had a downside surprise and payrolls,
Speaker 8: but if you think the break even numbers close to zero,
Speaker 8: you're actually running at or near those levels. The underplanning
Speaker 8: rates at four point one percent, it is below well
Speaker 8: below what the Fed thought it was going to be
Speaker 8: at the end of this year. It remains our best
Speaker 8: measure of labor market slack. I think you have a
Speaker 8: shift of risk distribution around the labor market. Now there's
Speaker 8: not as much upside risk. But September will be about
Speaker 8: the inflation data that we get over the next two months,
Speaker 8: especially we get a bounce back in payrolls next month.
Speaker 3: Reinflation is still a problem.
Speaker 6: Right, so in our view it is.
Speaker 8: I mean, if you look at PC inflation, which is
Speaker 8: what the FED targets, it is the highest that it's
Speaker 8: been since nineteen ninety two, if you strip out COVID
Speaker 8: and we agree with an evolving FED assessment from many
Speaker 8: officials that it is more broad based, is more demand
Speaker 8: driven AI related an investment as a source of inflationary pressures.
Speaker 8: Underlying inflation is stuck closer to three percent. None of
Speaker 8: that changed today. We'll get an update on that next
Speaker 8: week from the CPI.
Speaker 4: Okay, I want to just throw this last one at you,
Speaker 4: even though we don't have enough time, Mike Lisa Cooke,
Speaker 4: because in the conversation right independse of the Fed, since
Speaker 4: we heard from Kevin Hassett this morning, our Bloomberg News
Speaker 4: team reporting that President jump has revived this threat to
Speaker 4: file fire Federal Reserve Governor Lisa Cook over those unproven allegations.
Speaker 6: Update us here on.
Speaker 7: This, Well, they apparently sent Lisa Cook a letter that
Speaker 7: said the President is considering firing you because of the
Speaker 7: allegations of mortgage fraud, and you have three weeks to
Speaker 7: respond to this letter. Remember, the Supreme Court said that
Speaker 7: the President couldn't fire her, but because she didn't get
Speaker 7: due process, they didn't decide the legality of her particular case.
Speaker 6: And so now the White.
Speaker 7: House is coming back and trying to follow the dictate
Speaker 7: of the court and give her the opportunity to respond.
Speaker 7: And we don't know how this will low play out,
Speaker 7: because even if she's found not guilty, the president could
Speaker 7: come back and say, well, yeah, but she was implicated
Speaker 7: or something. So this is just it's Friday. Put it
Speaker 7: that way, and this is the kind of thing you
Speaker 7: get on Friday.
Speaker 3: Hey for the lawyers, that's all I'm going to say.
Speaker 2: Matt Lezetti, chief US economist at Deutche Bank, thank you
Speaker 2: so much. And of course, our own Mike McKee, Bloomberg
Speaker 2: TV and Radio International Economics and Policy correspondent, do more
Speaker 2: on a labor market.
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Speaker 2: We have been reporting US employers unexpectedly unexpectedly cut jobs
Speaker 2: in the month of July, and hiring the prior two
Speaker 2: months was revised lower, suggesting the labor market is weaver
Speaker 2: weaker than previously thought.
Speaker 3: Man, do I need a weekend?
Speaker 2: This is after some surprising strength earlier this year. We're
Speaker 2: going to stay on the labor market. We've been trying
Speaker 2: to look at this from different vantage points, and that's
Speaker 2: where our next guest comes in.
Speaker 4: We've got Laura Ulrich with US Director of Economic Research
Speaker 4: in North America at Indeed Hiring Lab. She's also a
Speaker 4: former senior Regional economist and senior manager at the Federaliserve
Speaker 4: Bank of Richmond, primarily focused on research related to higher
Speaker 4: education and workforce dynamics, which, by the way, we got
Speaker 4: some great questions from our audience coming in just about this.
Speaker 4: She was also an economics professor and associate dean for
Speaker 4: undergraduate programs at Winthrop University. She joins US from North Carolina. Welcome, Welcome, Welcome.
Speaker 4: How would you describe today's payrolls report and how it
Speaker 4: changes your view of the labor market if at all?
Speaker 9: I wouldn't say it necessarily changes my view of the
Speaker 9: labor market. We at the Hiring Lab and Indeed have
Speaker 9: been kind of describing the market as a market that
Speaker 9: is cooled, not necessarily that is cooling, and we're kind
Speaker 9: of bouncing along the bottom. And I see that as
Speaker 9: the same today as I really did yesterday.
Speaker 10: However, I do think it is.
Speaker 9: Important to acknowledge that the payroll employment report came in
Speaker 9: about one hundred thousand jobs below consensus today and so
Speaker 9: that's notable, right, It was much softer than what people
Speaker 9: were expecting.
Speaker 2: So I am curious too, and tell us a little
Speaker 2: bit more if you would, Laura, about the activity you
Speaker 2: are seeing on the platform. What are the job listings,
Speaker 2: what are the jobs people are looking for? Give us
Speaker 2: an idea and how it gives us some context about
Speaker 2: data today versus maybe six months ago or just trends,
Speaker 2: because you guys see a lot we do.
Speaker 6: We do.
Speaker 9: We have access to a lot of data both on
Speaker 9: labor supply and labor demand.
Speaker 10: I would tell you that we've been in kind of.
Speaker 9: A I wouldn't call it a steady state, because there
Speaker 9: has been a bit of turbulence, right, We've been balancing
Speaker 9: a bit. But we've been at about a job posting
Speaker 9: index of one hundred and two ish, between about one
Speaker 9: hundred and one and one hundred and two since about
Speaker 9: September of last year. So that's kind of what leads
Speaker 9: partially to our viewpoint in that this is kind of
Speaker 9: a cool market that's bumping on on the bottom.
Speaker 10: One interesting point, though, and you did see.
Speaker 9: This reflected potentially in today's job payroll employment report. We
Speaker 9: have seen some strength in some sectors where we were
Speaker 9: seeing considerable weakness before.
Speaker 10: So software development.
Speaker 9: Jobs, for example, are up fifteen percent since early twenty
Speaker 9: twenty five, and we had seen considerable cooling in tech
Speaker 9: jobs and in the payroll employment report, jobs in both
Speaker 9: information and professional business services were up today. So we
Speaker 9: are starting to see some of those I would say
Speaker 9: sectors that maybe are more AI exposed that we had
Speaker 9: seen a lot of softness to turn the corner a.
Speaker 4: Bit, okay, you know, Brendan down in Maryland sent us
Speaker 4: a question during our last segment that would be great
Speaker 4: for you to weigh in on. It's about sort of
Speaker 4: these different areas of the economy and what you're seeing
Speaker 4: in terms of different sectors. He writes that it seems
Speaker 4: many jobs were lost in education. To what extent do
Speaker 4: you think these are permanent job locked is as many
Speaker 4: municipal school districts have exhausted and no longer can use
Speaker 4: the massive federal funding they received during the pandemic era.
Speaker 10: Here's a great question. I did take note of that
Speaker 10: data point this morning.
Speaker 9: I think that the loss of those local education government
Speaker 9: jobs that could be a bit of an anomaly with
Speaker 9: some issues with the seasonal adjustments. I think it'll be
Speaker 9: interesting to see what the number looks like next month.
Speaker 10: I will say though, much.
Speaker 9: Of my background is an education as you mentioned, and
Speaker 9: there is considerable pressure both on higher end but also
Speaker 9: K through twelve, partially because of the federal funding cuts,
Speaker 9: but also because there are have just been fewer and
Speaker 9: fewer and fewer students enrolled in public schools, and so
Speaker 9: if you look at enrollment for many of those districts,
Speaker 9: it's been declining, and so there's less need for staff
Speaker 9: and teachers at some of those districts as well.
Speaker 2: Hey, I want to get too, because one of the
Speaker 2: things we talk about, Laura, when it comes to the
Speaker 2: labor market is the impact of AI.
Speaker 3: Right, we're still trying to figure all.
Speaker 2: Of that out, and we thought, both Tim and I
Speaker 2: when you talked about strength and software development jobs, we
Speaker 2: kind of were surprised.
Speaker 4: At that Thoughtcus, we're going to do it.
Speaker 3: Yeah, So that was that was interesting to us.
Speaker 2: You have done a new survey, the Indeed Hiring Lab
Speaker 2: Labor Market Outlook Survey. You talked to more than one
Speaker 2: hundred US economists and labor market experts. Tell us about
Speaker 2: the findings and what you heard.
Speaker 9: Absolutely, So we're really excited. This is a brand new
Speaker 9: product for us. We released it earlier this week. So
Speaker 9: we'll be doing this on a quarterly basis where we
Speaker 9: ask over one hundred very well respected labor economists to
Speaker 9: predict what they think is going to happen both to
Speaker 9: unemployment rates but also our own job postings that indeed,
Speaker 9: and along with that, we're going to be asking.
Speaker 10: Them some special questions. This time, we had a lot
Speaker 10: of questions on AI.
Speaker 9: It was really interesting for us to see the results
Speaker 9: because from a macro point of view, there wasn't a
Speaker 9: lot of disagreement amongst economists. Many of them did see
Speaker 9: that there would be a slight decline in job postings
Speaker 9: and unemployment and a slight increase in unemployment rates over
Speaker 9: the next.
Speaker 10: Here, but not a lot of movement.
Speaker 9: But the AI question got a much broader array of answers.
Speaker 9: I will say a little over fifty percent of the
Speaker 9: economists that we're surveying, I think it's fifty seven percent
Speaker 9: believed that AI would lead to.
Speaker 10: Job losses on net.
Speaker 9: About in the thirty percent thought it would lead to
Speaker 9: job gains on net.
Speaker 10: And then some are unsure, and I think that wide.
Speaker 9: Array of responses from like I said, this group of
Speaker 9: very well respected labor economists, really shows how much uncertainty
Speaker 9: there is in what path this might go in. But
Speaker 9: I will say, and indeed we're starting to see I
Speaker 9: mentioned that growth in software development. Those jobs where we
Speaker 9: are seeing growth do tend to be what we're calling
Speaker 9: AI touch jobs. These are jobs they either have AI
Speaker 9: at the titles, so think like AI engineer or machine learning.
Speaker 10: Specialists, something like that.
Speaker 9: Data center technicians another one that's growing a lot, or
Speaker 9: they mention AI as being a skill or or a
Speaker 9: characteristic of the job in the job description. So those
Speaker 9: jobs are on the rise on our platform for sure.
Speaker 9: They're also on the rise in terms of what people
Speaker 9: are seeking. And so really from our vantage point right now,
Speaker 9: I would say today, from my perspective, it's much easier
Speaker 9: for me to point to some growth that we're seeing
Speaker 9: from AI in the labor market to actual destruction from
Speaker 9: AI doing people's jobs.
Speaker 2: But as you pointed out in the press release, you
Speaker 2: guys said, when a group like this converges on something
Speaker 2: like AI, as they did, right in terms of the impact,
Speaker 2: it's worth paying attention when it splits that tells us
Speaker 2: something too.
Speaker 3: In this quarter, it did both. Is that fair in
Speaker 3: terms of how I'm reading it?
Speaker 10: It did.
Speaker 9: We asked one really interesting thing was we asked the
Speaker 9: economists exactly what sectors do you think there'll be the
Speaker 9: largest decline in jobs and what sector do you think
Speaker 9: they'll be.
Speaker 10: The largest increase. And there were two occupational sectors from
Speaker 10: our data that ended up on both lists. That was
Speaker 10: selfware development and data and analytics.
Speaker 9: So some of the economists thought, this is where we're
Speaker 9: actually going to see the most laws and others thought,
Speaker 9: this is where we're going to see.
Speaker 10: The most gain. That was a surprise to me.
Speaker 9: I didn't expect to see the same sectors end up
Speaker 9: on both lists.
Speaker 2: It's just it's a reminder that we're figuring our way.
Speaker 2: People say we're early in on this right and understanding
Speaker 2: really the impact. I mean, we're trying to figure this
Speaker 2: out and we don't really know right longer term exactly
Speaker 2: how it plays out.
Speaker 10: I totally agree.
Speaker 9: I think one thing that we do know, and we
Speaker 9: did another survey internally and indeed where we asked employers
Speaker 9: if they were seeking what we defined as AI native
Speaker 9: or AI fluent talent AI native talent has nothing to.
Speaker 10: Do with age.
Speaker 9: You can be a gen xer like me and BAI native,
Speaker 9: but it basically means that you default to AI technology
Speaker 9: to help you across multiple workflows.
Speaker 10: AI fluent is you still feel.
Speaker 9: Comfortable across workflows, but you don't necessarily default to it.
Speaker 9: And forty five percent of employers said they were actively
Speaker 9: recruiting AI native talent, but only fourteen percent of workers
Speaker 9: in the survey considered themselves AI natives. I think one
Speaker 9: thing we do know right now is people who do
Speaker 9: have AI related skills and talent are being hotly demanded
Speaker 9: in the labor market.
Speaker 4: Well, let's make this a little personal because our team
Speaker 4: told us that you have a couple of kids. I
Speaker 4: guess they're not kids anymore, but they're young men entering
Speaker 4: the labor market right now. And this is, I think,
Speaker 4: I think it's fair to say, a really interesting time
Speaker 4: to enter the labor market. You're talking about this AI
Speaker 4: fluency and being AI native. What do you tell them
Speaker 4: about the skills that they need to succeed in this market.
Speaker 10: It's a great question. And yes, I have three sons, sixteen,
Speaker 10: nineteen and twenty two one.
Speaker 4: I'm sorry for the third one that I did not
Speaker 4: mention it.
Speaker 10: If you don't know who you are, you won't mind.
Speaker 9: But the oldest just finished graduate school in data science,
Speaker 9: which in R and D data has been one of
Speaker 9: our softest areas.
Speaker 10: So you can.
Speaker 9: Imagine for me and the work that I do, doing
Speaker 9: the research that I do, but also living life as
Speaker 9: a mom, trying to.
Speaker 10: Help this young adult.
Speaker 9: He has landed his first full time job, which is
Speaker 9: excellent news for our household, but it was very tough,
Speaker 9: and what I kept stressing to him was that, in
Speaker 9: my opinion, it's really important for young job seekers to
Speaker 9: prove to companies that they are better off.
Speaker 10: The company is better off.
Speaker 9: With AI plus them than AI without them, and that's
Speaker 9: a tough road to navigate right now, but I do
Speaker 9: think it's extremely important.
Speaker 10: So I think being an AI native is very important.
Speaker 10: I have stressed that to my.
Speaker 9: Sons and have stressed to myself too, as someone who
Speaker 9: is older. Only eleven percent of Gen xers in our
Speaker 9: survey even define themselves as AI fluent, and I've had
Speaker 9: to work hard as an older worker myself to become
Speaker 9: an AI and native and to really dig into it.
Speaker 9: So I think it's something that in my view, is
Speaker 9: extraordinarily important as we do go into this period that
Speaker 9: is going to be so uncertain, because I've believe that
Speaker 9: for my children's generation, one of the most important skills
Speaker 9: they can have is adaptability.
Speaker 2: I got to ask you about one more data point
Speaker 2: from your survey finding. We've only got about a minute
Speaker 2: or so left, but it's you guys found a larger
Speaker 2: majority fifty seven percent of panelist, so they expect downward
Speaker 2: pressure on the wages of college educated workers over the
Speaker 2: next year versus thirty four percent who said the same
Speaker 2: for workers without a degree.
Speaker 3: Forgive me, but just about forty seconds. Why do you
Speaker 3: think that is?
Speaker 10: Yeah, I think that.
Speaker 9: The sectors that are most likely to be impacted, especially
Speaker 9: in the short run, are many white collar sectors that
Speaker 9: college educated people flow into. I'll say too, We've done
Speaker 9: some work in indeed, looking at how that collides with
Speaker 9: the demographic shifts that you guys were talking about before,
Speaker 9: and what we've kind of predicted through this is that
Speaker 9: we might have an excess of workers moving into the
Speaker 9: white collar roles with the combination of demographic shifts and
Speaker 9: AI and so if that happens and supply exceeds demand.
Speaker 9: Seeing downward pressure on wages would be be pretty pretty
Speaker 9: rational to expect.
Speaker 3: All right, great stuff. Please please come back and join
Speaker 3: us again. We would love to have you. Have a
Speaker 3: good weekend.
Speaker 2: Laura Ulrich's director of economic research in North America at
Speaker 2: Indeed Hiring Lab.
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 4: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five e's during
Speaker 1: this Listen on Apple Karplay and Android Auto with the
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Speaker 3: This story definitely caught our attention. Tim set it up
Speaker 3: so well.
Speaker 2: It's about one sports fan and what he's paying to
Speaker 2: watch all of the streaming channels and sports that he
Speaker 2: loves on streaming channels, and it turns out to be
Speaker 2: more than two thousand dollars a year.
Speaker 3: He's got to share some passwords like.
Speaker 11: What is he doing?
Speaker 3: We know what goes on at the stent of bic ausehole?
Speaker 6: Okay?
Speaker 4: Why so much? As our team reports out, the rise
Speaker 4: of streaming services has made it difficult for US sports
Speaker 4: fans to follow their favorite teams without special subscriptions with
Speaker 4: pro league signing deals with multiple services and creating a
Speaker 4: bewildering schedule and some steep costs. We've got Randall Williams,
Speaker 4: bloomberg new senior reporter and the co host of the
Speaker 4: Bloomberg Business of Sports podcasts. That podcast is available at
Speaker 4: Bloomberg dot com, Apple, Spotify or wherever you get your podcasts.
Speaker 2: Also means it's the weekend because it's dropped.
Speaker 3: Hey, good to have you here. Lots of talking. Well,
Speaker 3: it's great to have you. We're going to get into
Speaker 3: the streaming cost. I feel like we have to go
Speaker 3: to FIFA though, you start there, because last.
Speaker 2: Week we talked about and it looked like they were
Speaker 2: trying to get outside investors and all this stuff.
Speaker 3: That's done right, it's dead.
Speaker 6: The sign after we talked to you shortly.
Speaker 12: Shortly after it died, and I think I was reporting
Speaker 12: on it like maybe three hours after, which is nuts.
Speaker 12: The thing that is going to that remains to be
Speaker 12: seen is if Giohnny Infantino, the FIFA president, is going
Speaker 12: to win his reelection next year. He was I would say,
Speaker 12: reaffirmed as president this week in Morocco, where I believe
Speaker 12: he said the final is probably going to be played there,
Speaker 12: but UEFA has not. They have not said anything different.
Speaker 12: They still are not supporting him.
Speaker 4: I maybe many people who are just sort of joining
Speaker 4: the conversation right now about FIFA and post World Cup
Speaker 4: sure might not understand. I certainly don't detention paint a
Speaker 4: picture the tension between UEFA and FIFA was Was this
Speaker 4: just the you know, straw that broke the camel's back
Speaker 4: or have there been tensions for a while.
Speaker 12: Well, there have been tensions for a while. I think
Speaker 12: that when Gianni and Fantino of course is looking at
Speaker 12: FIFA as a business, as most executives do, but there's
Speaker 12: also a pure, a purest mentality in all sports, in
Speaker 12: golf and tennis and football and basketball and everything else.
Speaker 12: And so you think about the innovations that Jihanna and
Speaker 12: Fantino that's what he would call it, and say like
Speaker 12: such as hydration breaks, commercial breaks that are used to
Speaker 12: sell ads, that's not typical in football. UEFA is very
Speaker 12: strongly opposed to that, and it's even said in the
Speaker 12: Euros that they won't be doing it. But that is
Speaker 12: something that if UEFA was trying to maximize TV dollars,
Speaker 12: that they could sell, but they're talking about the purity
Speaker 12: of the game of soccer and they're saying no, absolutely not.
Speaker 12: So then you you, you know, relay that into what's
Speaker 12: happened recently. FIFA may fifteen billion dollars from the World
Speaker 12: Cup and then after that they're going to be like,
Speaker 12: you know, we're going to sell stakes, We're going to
Speaker 12: do this with Thrive Capitals Joshua Krishner, and UEFA is like, listen, no,
Speaker 12: we've had enough of you and we're going to be
Speaker 12: trying to probably get rid of you come next year.
Speaker 3: Yeah.
Speaker 4: Do they have the power to do that?
Speaker 12: I think it's going to take some rallying, and they
Speaker 12: need they need. There has to be another potential candidate.
Speaker 12: I have not seen any reports that someone has been
Speaker 12: trying to rally against them. It's just that they do
Speaker 12: not support him. I also don't anticipate that Johnny Infantino
Speaker 12: in four months is going to be able to change
Speaker 12: UEFA's mind. So who can UEFA find to really go
Speaker 12: up against Jihanny Infantino? And the reality is Infantino, as
Speaker 12: much as he has done with the Trump administration and
Speaker 12: for the World Cup, it's hard to argue that he
Speaker 12: hasn't done a good job.
Speaker 6: Fifteen billion dollars the most.
Speaker 12: Ever, it's going to be hard to get rid of
Speaker 12: anybody who's just made record setting profits.
Speaker 2: And won't there always be that tension between FIFA and
Speaker 2: kind of the regionals, of.
Speaker 12: Course, because FIFA owns the World Cup, which is the
Speaker 12: you know, it's over the entire world. Whereas you know,
Speaker 12: you have your CONCA, CAF, you have your your soccer
Speaker 12: federation in South America, you have UEFA, and each of
Speaker 12: them have their own tournaments. You have the Euro, you
Speaker 12: have Copa America. But the World Cup is when everybody competes.
Speaker 12: So there's always going to be some tension there.
Speaker 3: We gotta be a little jealous of this one, so well,
Speaker 3: just a little bit.
Speaker 2: So listen, there was a story on the Bloomberg too,
Speaker 2: the next World Cup and the money deals Randall FIFA
Speaker 2: exploring selling US media rights for the next two World
Speaker 2: Cups together, which will keep the hydration breaks that.
Speaker 3: We didn't right. Yes, they're not going away, are they?
Speaker 6: I don't think so.
Speaker 12: I mean once once you get a chase of advertiser
Speaker 12: money in thirty seconds and all, and you got to
Speaker 12: think about this is exclusivity. At the Super Bowl and
Speaker 12: at other events, those thirty second ads sell for eight
Speaker 12: million dollars a piece, but they never really rerun. When
Speaker 12: you're watching the World Cup, you see the same ads
Speaker 12: over and over and over and over again.
Speaker 4: Well, yeah, my son's like talking to me about Bank
Speaker 4: of America home depot and like he's seven years old
Speaker 4: and never watches other commercials and he knows. And by
Speaker 4: the way, David Beckham's in all of these, of course,
Speaker 4: So this is great news for David Beckham.
Speaker 12: I guess it's great news for all of FIFA's partners
Speaker 12: is because it really is one of the most exclusive,
Speaker 12: you know, advertisements that you can possibly have, because it's
Speaker 12: going to run in every single match across various continents
Speaker 12: and in regions. So they are going to take this
Speaker 12: to market. They're probably going to shop around to whoever's
Speaker 12: willing to pay the most. But of course you want
Speaker 12: to reach angle of this.
Speaker 4: There's not one inch of that screen that is not
Speaker 4: taken up by an ad, even when the game.
Speaker 12: Is going absolutely not everything is an ad in there.
Speaker 12: It's so much, so so much so that even the
Speaker 12: stadiums think about the stadiums, we're not calling MetLife Stadium MetLife.
Speaker 12: We're calling a New York New Jersey stadium.
Speaker 3: Pum blew my mind. How the heck did they get
Speaker 3: that done.
Speaker 12: I mean, they obviously have an insurance partner, and you
Speaker 12: know they SOFI Stadium became Sandelo State and so on
Speaker 12: and so forth. I just could not believe that they're
Speaker 12: willing to go that far to protect sponsors. But as
Speaker 12: sponsors are paying a premium, and that's what.
Speaker 6: They're asking, So that's why they did it. I think
Speaker 6: it's part of it because.
Speaker 4: Those those but the naming rights that you know, you
Speaker 4: naming rights for a stadium, you expect that that those
Speaker 4: that name to be used when the stadium is mentioned.
Speaker 6: It's it's twofold.
Speaker 12: The stadiums and their owners were willing. They wanted the
Speaker 12: World Cup and they wanted those matches in that revenue
Speaker 12: that came from FIFA, and so they were willing to
Speaker 12: cover up the names. At the same time, FIFA is like,
Speaker 12: we don't want anybody profiting off the World Cup except
Speaker 12: for US and our partners. And so even if it's
Speaker 12: Mercedes Benz Stadium in Atlanta, you know, Hard Rock Stadium
Speaker 12: in Miami, there were banners that were hung up that
Speaker 12: said New York New Jersey Stadium, and it's it's hard
Speaker 12: for me to say New York New Jersey Stadium when
Speaker 12: the stadium is in New Jersey.
Speaker 3: We we saw it. It came down to the fact
Speaker 3: in our backyard.
Speaker 12: The the host committee is called New York New Jersey
Speaker 12: Host Committee, and so that's why the stadium was named that.
Speaker 12: But nonetheless it is a bit far fetched. I'm like,
Speaker 12: that's too far But anyways.
Speaker 2: We mentioned streaming costs coming into this. METEA rights what
Speaker 2: were they for the past World Cup? What might they
Speaker 2: be for the future World Cup?
Speaker 12: Believe the media rights are around four hundred eighty five
Speaker 12: million around that half a million dollars half a billion
Speaker 12: dollar mark. I believe they will probably go for double that.
Speaker 12: I mean this is this was probably one of the
Speaker 12: most successful World Cups.
Speaker 3: So they sell them for two you're talking about a
Speaker 3: two billion dollar deal.
Speaker 12: I'm saying at minimum a billion. I could see two
Speaker 12: billion dollars, but it depends on who shows.
Speaker 4: Up for who shows up and once that's US meteorites. Yes,
Speaker 4: but the challenge with that is going to be the
Speaker 4: time zone for the.
Speaker 12: Next time zone it's yeah, it's five hours, six hours ahead.
Speaker 12: I believe in Spain, Portugal and.
Speaker 3: Morocco that I think it's doable.
Speaker 12: They have to figure out the schedule and when the
Speaker 12: players are going to be playing.
Speaker 6: We're not going to see it.
Speaker 12: I would be shocked unless the US somehow ends up
Speaker 12: in the final in twenty thirty. I would be shocked
Speaker 12: that if the number surpasses what it was this year,
Speaker 12: which was I believe sixty four million viewers, which is
Speaker 12: probably the most watch soccer ever here in the US.
Speaker 4: I think you're going to go.
Speaker 10: I probably will.
Speaker 12: Yeah, Bloomberg grants make permission.
Speaker 4: Four years to make.
Speaker 3: Are you listening to anybody?
Speaker 2: Branda Williams, Bloomberg News Senior reporter, co host of the
Speaker 2: Bloomberg Business of Sports podcast.
Speaker 3: Check it out, Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch
Speaker 1: us live weekday afternoons from two to five eastering. Listen
Speaker 1: on Apple Karplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 4: We are trying to figure out what's going on with AIDBT.
Speaker 4: So far, they see your Amazon, Alphabet in video, Meta,
Speaker 4: Oracle and SpaceX. Check this out and I know it's together.
Speaker 4: They raised more than two hundred billion dollars from dollar
Speaker 4: bond sales that dwarfs thirteen billion from high grade tech
Speaker 4: companies in the same period last year.
Speaker 2: Think about the Alphabet offering yesterday, ten tranches over so
Speaker 2: much investor interest and they're not done. That's at least
Speaker 2: all the analysis that we've been seeing. But there's a
Speaker 2: little bit of a chill.
Speaker 6: I don't get it.
Speaker 3: I don't know.
Speaker 2: It's a chill in golfing AI linked debt. As tech
Speaker 2: borrowing surges, buyers have grown weary that nassave AI spending
Speaker 2: will not pay off.
Speaker 4: We've got a dabby day. Barbousha with us Bloomberg News
Speaker 4: Corporate finance reporter. He joins us here in the Bloomberg
Speaker 4: Interactive Brokers studio. Can you just settle for us the
Speaker 4: distinction between what Carol mentioned that Thursday offering from Alphabet
Speaker 4: attracting rough one hundred and fifteen billion dollars of peak demand.
Speaker 4: That's according to people with knowledge.
Speaker 3: Of it, and they raised only.
Speaker 4: Yes, Love, you were on this byline, by the way,
Speaker 4: so you know about this. Then today you have this
Speaker 4: story out that talks about the chill that's in golfing.
Speaker 4: As we talked about this on our editorial call this morning. Yeah,
Speaker 4: each of these companies is different and has different offerings.
Speaker 11: What did you So it's kind of interesting so that
Speaker 11: the Google deal comes after a string of well, there
Speaker 11: were three deals between June and July essentially, where we
Speaker 11: had space X, we had Nvidia, we had Amazon raising
Speaker 11: twenty five billion each. And these deals did not do
Speaker 11: particularly well in the secondary market, which you know, traders
Speaker 11: and investors care very much about, because if if a
Speaker 11: bond doesn't do well and secondary market, then it becomes
Speaker 11: sort of difficult to pull sales of going forward.
Speaker 2: We'll explain that, right, It's an important to see like
Speaker 2: kind of the movement, right these investments, no, explain that,
Speaker 2: That's what I'm saying.
Speaker 11: Yeah, Well, essentially, if when a bond is issued, there
Speaker 11: is a primary market where it gets absorbed and there
Speaker 11: are books or orders for that for that bond sale,
Speaker 11: and then the bond just starts changing against in the
Speaker 11: secondary market, and if it loses value, then the narrative
Speaker 11: around the asset in question, you know, becomes problematic.
Speaker 2: Right, and harder for that entity right to come back
Speaker 2: and do another issue.
Speaker 4: Exactly exactly, Okay, So enter the banks and sort of
Speaker 4: the narrative or like the narrative that's emerging around the
Speaker 4: attempt to sort of rekindle demand for at least part
Speaker 4: of this debt.
Speaker 6: So raupen.
Speaker 11: After these three deals, there was a different deal by
Speaker 11: black Croc. It was for a data center, so it
Speaker 11: was by Black Rock, but not just a corporate deal.
Speaker 11: It was still AI essentially. And with this deal, which
Speaker 11: was smaller in size about half of those a half billion,
Speaker 11: the well, the banks on the deal essentially kept the
Speaker 11: orders limited to so called buy and hold investors. So
Speaker 11: institutional investors that are let's say, strategically invested in these
Speaker 11: assets or like these assets, don't plan to essentially make
Speaker 11: a quick profit by selling these assets. The moment that
Speaker 11: they start trading was.
Speaker 3: It like relying on the secondary market, right.
Speaker 11: Well, the idea of this was essentially to make sure
Speaker 11: that it wouldn't be like an offloading in the secondary
Speaker 11: market immediately. And so what happens is that they created
Speaker 11: what in a sort of banker linguis called scarcity value.
Speaker 11: So the bonds were not easily available and that made
Speaker 11: them more valuable.
Speaker 2: As somebody who watches this market, are they creating an
Speaker 2: environment and so it's not reflecting the real trade and
Speaker 2: demand that's out there, Like it's kind of I don't
Speaker 2: want to say covering it up right, You're allowed to
Speaker 2: do this. There's nothing illegal, but I mean it speaks
Speaker 2: to the difficulty with some of these issues.
Speaker 6: Definitely.
Speaker 11: It definitely does the fact that I mean everyone knows
Speaker 11: that there's going to be there has been already a
Speaker 11: ton of that issue ones to finance the I built out.
Speaker 11: There's going to be even more. So there's no doubt
Speaker 11: that the market is aware of that. There are still
Speaker 11: questions as to the pace and the cadence, like the
Speaker 11: frequency of these bonds. And so those three deals one
Speaker 11: after the other said between the end of June and
Speaker 11: July kind of spook the market a little bit, and
Speaker 11: so there wasn't there wasn't needing a market for a
Speaker 11: deal that did well essentially, and so the Blackroad deal
Speaker 11: upened and then after that we saw the Google deal yesterday,
Speaker 11: which is particularly.
Speaker 4: Well, where do I mean, do we think about this
Speaker 4: from a yields perspective too? On what these investors are
Speaker 4: being paid for taking on this risk, Like how does
Speaker 4: it vary from one company to another?
Speaker 6: Well, that's the thing.
Speaker 11: So yes, there was an order book or you know,
Speaker 11: the let's say, the quality of investors participated in the
Speaker 11: Black Coat deal was, as I said, more buy and hold.
Speaker 11: Let's not forget that. You know, what these bonds were
Speaker 11: offering in terms of yields was particularly high. So we're
Speaker 11: looking at like in the case of Black Road, it
Speaker 11: was like seven and a half percent, which right, yeah,
Speaker 11: which makes it closer to a high held credit rather
Speaker 11: than an investment grade, you know, blue chip type of credits.
Speaker 3: What did Alphabet offer.
Speaker 11: I don't remember, but it was like something like, if
Speaker 11: I'm not mist taking fifteen basis points above their existing curve,
Speaker 11: so that that is a premium that makes the new
Speaker 11: bonds essentially attractive.
Speaker 2: Is it important to like what Blackrock did? This was
Speaker 2: a data center deal, so was this real estate? Was
Speaker 2: this like what versus what we're getting from Alphabet or
Speaker 2: you know, or what SpaceX or Amazon was doing. I mean, like,
Speaker 2: where do we think about Okay, these buckets are similar
Speaker 2: versus this. I'm trying to figure out too what this
Speaker 2: means in terms of the AI spend and trade and
Speaker 2: how investors are getting much more discriminatory.
Speaker 11: Yeah, it's I mean data center that, particularly in the
Speaker 11: investment grade market is a new thing. Essentially it started
Speaker 11: the I think DCA actually, and it's essentially project bonds,
Speaker 11: So it's bonds to finance the actual project, as opposed to,
Speaker 11: for instance, a corporate straightforward corporate deal, senior and secured
Speaker 11: bonds issued by a company where the use of proceeds
Speaker 11: can include, for instance, AI investment, but it can also
Speaker 11: be refinancing of debt or any other thing. In this case,
Speaker 11: it's especially project bonds, where in the case for Black Crop,
Speaker 11: for instance, it was black Rock Funds taking an ownership
Speaker 11: stake in the project company that is going to develop
Speaker 11: this data center, META at the other part of the ownership,
Speaker 11: and then the black Rock Funds raised the financing to
Speaker 11: essentially back their stake in the project.
Speaker 4: We're speaking with David Barbousha, Bloomberg News Corporate Finance Reporter
Speaker 4: joints us here in the Bloomberg Interactive Broker studio. Here
Speaker 4: we are, Oh, you wanted to say something, I just
Speaker 4: do you.
Speaker 2: Think it's interesting that META was part of this because
Speaker 2: people are questioning the meta strategy.
Speaker 11: Well, this is let's just this is not the first
Speaker 11: data center of meta. They actually sort of inaugurated the
Speaker 11: data center trend with a very large transaction late last year.
Speaker 11: It was like the Hyperiod data Center Louisiana. Okay, Yeah,
Speaker 11: a blue Hour which was much larger than this one.
Speaker 11: So you know the first time that is okay.
Speaker 4: So I was going to say, here we are going
Speaker 4: into We're done seven months of the year. So we
Speaker 4: a little over halfway down with this year, and so
Speaker 4: far already we've seen what two hundred billion, more than
Speaker 4: two hundred billion dollars in pond sales. What do your
Speaker 4: sources tell you about what the rest of the year
Speaker 4: is going to look like?
Speaker 11: So like, as I said, everyone knows there's going to
Speaker 11: be a ton of that coming up. Forecasts keep changing, like.
Speaker 4: Two hundred billion more, one hundred and fifty billion more.
Speaker 11: There is a Bucklass estimate which with total hyperscaler that
Speaker 11: so large tech companies at two hundred and eighty billion
Speaker 11: for the total of this year. So we're looking potentially
Speaker 11: at a hundred eight hundred eighty billion dollars. But if
Speaker 11: you look at the whole space, Like, so including data centers,
Speaker 11: including the you know, the broader tech sector. There are
Speaker 11: estimates I think fresh GP organized says that put it
Speaker 11: at about five hundred billion dollars.
Speaker 2: So what do you watch in terms of you know,
Speaker 2: the big question that's out here? David A Like, we're
Speaker 2: just trying to figure out again going back to you know,
Speaker 2: for here we are three years in right getting ready
Speaker 2: to i think enter our fourth year when it comes
Speaker 2: to the AI spend and build and just trying to
Speaker 2: figure out when is it overdone? And I'm just curious
Speaker 2: the things that you watch or what you hear when
Speaker 2: you are reporting this stuff out. What are you hearing
Speaker 2: from folks in the industry.
Speaker 11: I mean, there is a there is a concern obviously
Speaker 11: around that It's mainly driven by the pace of issuance
Speaker 11: and the pace of the financing. There is a concern
Speaker 11: of you know, capacity overbuild. There is a concern that
Speaker 11: the technology may become obsolete, obsolete relatively soon.
Speaker 6: Yeah, so that's another Yeah.
Speaker 4: What are we going to do. Let's say that it
Speaker 4: is not to be answered right now, but let's say
Speaker 4: that happens. What do we do with all these data centers?
Speaker 6: And I turn them off.
Speaker 2: I mean there, well, this is why you know, you
Speaker 2: think about just other rushes, the energy market or two,
Speaker 2: and they overbuild and to drill, drill, drill. You know,
Speaker 2: they have seen their cycles where rooms and bus if
Speaker 2: rooms and busts in a big way, and anybody in
Speaker 2: the industry is just very cautious.
Speaker 3: And I feel like, is there are people being cautious?
Speaker 11: Well, I mean it does. It does have feelings like
Speaker 11: it does remind people of previous you know, technology driven
Speaker 11: boomen bus cycles. But we'll see, like we've seen the
Speaker 11: tech earnings recently was relatively well, we're positive and so
Speaker 11: they were positive also for this Google bond for instance.
Speaker 4: So okay, this just got me thinking. And Carol, we've
Speaker 4: talked about this before. But you know, if we think
Speaker 4: about this from the perspective of the l elms that
Speaker 4: people use just to chat, the chatbots. You know, I
Speaker 4: woke up yesterday morning and asked Claude a question, but
Speaker 4: it was like, you need to upgrade in order to
Speaker 4: ask this question. So I just went to open AI
Speaker 4: and chat GPT and asked the same question there. And
Speaker 4: when I run out of space there, I just used
Speaker 4: you know, the Google one.
Speaker 3: You have no loyalty to anything, no loyalty I know.
Speaker 2: And this is where like like this is what we're
Speaker 2: trying to figure out or where we think about companies
Speaker 2: and to spend are saying, wait, you don't really need
Speaker 2: to use this expensive tool to do what you are doing.
Speaker 2: Like there's going to be a point where people are
Speaker 2: not maybe necessarily offering it to everybody, right, employees, Like
Speaker 2: we're trying to figure this out.
Speaker 11: Yeah, we'll see. Sorry we're doing this to you, but
Speaker 11: I understand. But like the scale of the finances suggest
Speaker 11: that there's a lot of demands.
Speaker 4: Yes, that's that's what.
Speaker 2: They wouldn't do it unless they thought, which is what
Speaker 2: we talk about with Mandeep Sing from Bloomberg Intelligence.
Speaker 3: There's the demand, there's the backlog.
Speaker 4: The customers.
Speaker 2: The customers, right, so there's the sales on the revenue.
Speaker 2: You just wonder can it all come to a quick
Speaker 2: start stop at some point?
Speaker 3: I don't know, that's the big question.
Speaker 4: Dobby Day, this is a great story. Thank you for
Speaker 4: stopping by the Bloomberg INTERACTI Brokers Studio. Dabby Day Barb Busha.
Speaker 4: He's corporate finance reporter for Bloomberg and US You can
Speaker 4: check out his reporting and the entire team's reporting on
Speaker 4: the Bloomberg Terminal and at Bloomberg dot com.
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