WEBVTT - Better-Than-Expected Job Data Resets Fed Bets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.320 --> 0:00:30.280 Claudia Sam on Fire with us a few days ago, 0:00:30.880 --> 0:00:34.000 and she has written up a storm of brilliance. We're 0:00:34.040 --> 0:00:36.880 thrilled that she could join us. Some new century advisors 0:00:37.000 --> 0:00:41.879 or definitive work at the FED and at Michigan as well. Claudia, 0:00:41.960 --> 0:00:45.199 of all your charts, to me, the most emotional one is, 0:00:45.320 --> 0:00:49.839 unlike past expansions, the unemployment rate is rising. Are we 0:00:49.920 --> 0:00:53.680 in an expansion? Are you on the acclaimed some recession? 0:00:53.760 --> 0:00:55.840 Watch now? 0:00:55.880 --> 0:00:57.480 I mean we are in an expansion. 0:00:57.600 --> 0:01:01.600 It is very unusual to have a jobless expansion at 0:01:01.600 --> 0:01:03.920 this point, you know, on a gradual rising. 0:01:03.920 --> 0:01:05.160 The unemployment rate is still a rising. 0:01:05.160 --> 0:01:07.720 The unemployment rate, it is a problem for some workers, 0:01:07.760 --> 0:01:11.080 but it doesn't the economy does not have right now 0:01:11.120 --> 0:01:14.480 that kind of recessionary dynamic, those rapid increases in the 0:01:15.360 --> 0:01:18.319 unemployment rate, and it's been a feature of the economy 0:01:18.360 --> 0:01:20.600 for two and a half years now that we've seen this, 0:01:20.720 --> 0:01:22.480 so it's very unusual. 0:01:22.800 --> 0:01:25.639 So cloudy. If we do have an economy that is growing, 0:01:25.800 --> 0:01:29.200 but a workforce that is not necessarily growing along with it, 0:01:29.240 --> 0:01:31.200 does that mean we're more productive? 0:01:33.600 --> 0:01:35.240 Not necessarily I mean the. 0:01:36.880 --> 0:01:40.160 Low higher or maybe we'll see today no higher economy 0:01:40.400 --> 0:01:43.000 that is really rough on people coming into the labor 0:01:43.040 --> 0:01:45.160 market for the first time or maybe coming back into 0:01:45.200 --> 0:01:47.920 the labor market like this is. They are really facing 0:01:47.960 --> 0:01:51.600 a tough labor market and that loses all kinds of potential, 0:01:51.680 --> 0:01:53.960 particularly for people at the beginning of their career, to 0:01:54.000 --> 0:01:56.760 get off on the wrong foot. We're seeing a lot 0:01:56.840 --> 0:01:59.440 less movement of people from jobs to jobs, So maybe 0:01:59.440 --> 0:02:01.880 that makes it productive because they've been on the job longer. 0:02:02.000 --> 0:02:04.920 But I wouldn't you know, maybe frame it quite that way. 0:02:05.080 --> 0:02:07.520 Doctor somillby with us after the report. Let me squeeze 0:02:07.520 --> 0:02:10.240 this in, Claudia if I could. You've got a brilliant 0:02:10.320 --> 0:02:12.960 three month moving average chart, which is the way I 0:02:13.120 --> 0:02:17.480 roll in the negative intigran This is calculus talk, Paul, 0:02:17.600 --> 0:02:21.040 Stay with me here. The negative into grand is late 0:02:21.400 --> 0:02:27.959 spring last year. We're basically on revision potentially into negative 0:02:28.000 --> 0:02:30.400 non farm payrolls back to when the Red Sox were 0:02:30.440 --> 0:02:34.000 gonna win last year. Is it that grim? We've really 0:02:34.040 --> 0:02:37.720 been that saggy since April of last year. 0:02:39.360 --> 0:02:41.760 Yeah, I mean, job creation really hit a wall. 0:02:41.960 --> 0:02:45.160 Now we can argue about whether it's grim in terms 0:02:45.160 --> 0:02:46.919 of how worried we should be about this, because again 0:02:47.000 --> 0:02:50.559 the unemployment rate has been rising only gradually, not dramatically. 0:02:51.480 --> 0:02:53.920 But yeah, no, I mean, and we could see the 0:02:54.240 --> 0:02:56.679 last year when all the dust settles with the revisions, 0:02:56.680 --> 0:02:58.960 that no jobs were on net created in the US, 0:02:59.080 --> 0:03:01.440 and that is very usual outside of a recession. 0:03:01.760 --> 0:03:03.760 So we're going to have that one time kind of 0:03:04.240 --> 0:03:05.959 I guess payrolls revision here. 0:03:06.200 --> 0:03:09.400 Explain to us what that means, right. 0:03:09.280 --> 0:03:11.919 Well, every month when we get the job's day numbers, 0:03:11.960 --> 0:03:14.760 these are based on a survey of a stab of businesses. 0:03:14.800 --> 0:03:17.160 I mean, it's a large survey, but it's not all 0:03:17.200 --> 0:03:19.800 the businesses in the country. So once you're at the 0:03:19.840 --> 0:03:25.320 benchmark revision, the buyer of labor statistics uses what's administrative 0:03:25.400 --> 0:03:29.000 data Unemployment Insurance System, which is basically a census of 0:03:29.040 --> 0:03:32.760 the eleven million establishments in the country, and so then 0:03:32.840 --> 0:03:35.920 we true up the level of employment because the survey 0:03:36.040 --> 0:03:38.160 just isn't you know it can miss things the first 0:03:38.160 --> 0:03:39.880 time around. I mean, there's a lot one can say 0:03:39.880 --> 0:03:43.400 about this, but really these revisions, they're probably going to 0:03:43.400 --> 0:03:45.360 be big today, but it's a sign of us getting 0:03:45.520 --> 0:03:48.320 better quality data so we can have this conversation about 0:03:48.320 --> 0:03:50.160 what is going on in this labor market. 0:03:50.280 --> 0:03:52.800 Claudia Sam stay with us again, commercial free for you 0:03:52.880 --> 0:03:56.880 across this nation. Diane Swack and Eric Winnigrad later Carl 0:03:56.920 --> 0:03:59.920 Weinberg in the nine o'clock hour. You're in timor of Fidelity. 0:04:00.480 --> 0:04:02.960 We'll join us in the nine o'clock cover is, well, 0:04:03.000 --> 0:04:05.320 where are we in the last five minutes? Futures lift 0:04:05.320 --> 0:04:08.040 a little bit? Up three, now up eleven. Don't want 0:04:08.040 --> 0:04:09.960 to make a big deal about it. Vix comes in 0:04:10.040 --> 0:04:15.040 nicety seventeen point eighty five. The yields for those keeping score, 0:04:15.160 --> 0:04:17.880 keep your hands on the wheel for those driving four 0:04:17.880 --> 0:04:20.680 point one two percent. Yields are in a solid two 0:04:20.760 --> 0:04:25.280 basis points price up, yield down. Into this jobs report 0:04:25.320 --> 0:04:28.880 and the dollar fractionally weaker, it is time to look 0:04:28.920 --> 0:04:30.280 at the labor economy. 0:04:31.080 --> 0:04:34.080 This is what we've been waiting for. January jobs figures 0:04:34.120 --> 0:04:37.880 and the change in non farm payrolls much stronger than expected. 0:04:38.320 --> 0:04:41.760 One hundred and thirty thousand jobs added to the economy 0:04:41.839 --> 0:04:45.000 last month. The whisper number was for thirty five thousand. 0:04:45.240 --> 0:04:48.320 We've got the unemployment rate ticking down to four point 0:04:48.320 --> 0:04:51.440 three percent. Four point four percent was expected. And the 0:04:51.440 --> 0:04:55.040 big one, the final benchmark payrolls revision. We're still waiting 0:04:55.080 --> 0:04:58.359 on that. There was an expectation for a loss of 0:04:58.400 --> 0:05:00.520 eight hundred and twenty five thousand jobs. Want to look 0:05:00.520 --> 0:05:03.920 at average hourly earnings month over month, up four tenths 0:05:03.920 --> 0:05:06.880 of a percent year over year, right in line with 0:05:07.040 --> 0:05:11.960 estimates three point seven percent. The market reaction not much. 0:05:12.160 --> 0:05:14.600 We've got S and p DAL and Nasdaq futures a 0:05:14.600 --> 0:05:18.479 little changed following this report. Again the economy adding many 0:05:18.520 --> 0:05:21.400 more jobs than expected last month, one hundred and thirty thousand. 0:05:21.640 --> 0:05:24.120 The expectation was for sixty five thousand. 0:05:24.160 --> 0:05:27.400 Guys, Thanks so much, Alex. I really appreciate that we 0:05:27.440 --> 0:05:30.400 were up eleven on futures now up twenty as well. 0:05:30.480 --> 0:05:33.080 A nice lift to the market. NASDAK up six tens 0:05:33.080 --> 0:05:35.680 of a percent. VIX comes in as you'd expect, Paul, 0:05:35.720 --> 0:05:37.839 the yield space, what do you see. 0:05:37.760 --> 0:05:41.520 I'm seeing a big movement in trash exactly right. Look 0:05:41.560 --> 0:05:43.240 at the short end of the curve of the two 0:05:43.279 --> 0:05:46.400 years up nine basis points three spot five to four percent, 0:05:46.480 --> 0:05:48.920 so a big, big move there. The ten year up 0:05:48.960 --> 0:05:50.800 about four and a half basis points four point one 0:05:50.920 --> 0:05:52.920 nine percent, So the short end of the curve tome 0:05:53.560 --> 0:05:57.040 really reflecting this better than expected nonfarm pay well. 0:05:56.960 --> 0:06:01.080 Higher yields and priced down across the entire spectrum of death. 0:06:01.160 --> 0:06:03.080 The ten year real yield was a one point eight 0:06:03.200 --> 0:06:06.000 zero now out at one point eight five. I wanted 0:06:06.080 --> 0:06:10.000 two part this discussion to go back to doctor major 0:06:10.040 --> 0:06:13.560 shoutout Andrew Hollendhorse City Group just just nailed this thing. 0:06:14.160 --> 0:06:17.440 We're going to try to get doctor Hollandhorst on the phone. 0:06:17.720 --> 0:06:21.440 You know, I look, Claudia a one thirty number, but 0:06:21.520 --> 0:06:24.719 with a negative revision. I don't want to oversell it. 0:06:24.800 --> 0:06:26.960 You need a three month moving average, as you say, 0:06:27.200 --> 0:06:31.240 non farm payrolls three month moving average seventy three thousand 0:06:31.320 --> 0:06:34.400 is our first quick look at Bloomberg. But then I 0:06:34.520 --> 0:06:40.799 got the actual final benchmark revisions rounded up almost negative 0:06:40.920 --> 0:06:45.839 nine hundred thousand translate a negative eight hundred and sixty 0:06:45.880 --> 0:06:47.960 two thousand revision. 0:06:49.279 --> 0:06:52.240 Well, and I'll say the benchmark revision that goes to 0:06:52.320 --> 0:06:56.200 last March was almost nine hundred thousand down There are 0:06:56.240 --> 0:06:59.159 other revisions from the birth death model that come in 0:06:59.200 --> 0:07:02.200 the months after that. By December of last year, the 0:07:02.240 --> 0:07:06.880 downward revision was over a million jobs. Yeah, so now 0:07:07.279 --> 0:07:09.840 we got the best possible outcome today. We knew these 0:07:09.880 --> 0:07:12.960 revisions were coming, and again we can talk about what's 0:07:12.960 --> 0:07:16.400 behind them. But to see the most recent readings, we've 0:07:16.440 --> 0:07:19.240 got some lift in the payrolls in January. It's just 0:07:19.240 --> 0:07:22.560 one month, but we got some lyft and the unemployment 0:07:22.600 --> 0:07:25.280 rate ticked down. So like we want to say a 0:07:25.360 --> 0:07:28.280 labor market that's stabilizing and coming out of this, but like, 0:07:28.520 --> 0:07:33.320 these are huge revisions. 0:07:32.360 --> 0:07:34.679 Doctors, Thom, I'm sitting in the back of the class 0:07:34.720 --> 0:07:38.360 at Michigan hiding you and the smart people are up front. Okay, 0:07:38.560 --> 0:07:41.880 my fancy math is one million jobs lost for whatever, 0:07:42.240 --> 0:07:47.200 Claudia Sam Diane Swank reason divided by twelve is eighty 0:07:47.240 --> 0:07:51.440 three thousand and three hundred and thirty three jobs evaporated 0:07:51.600 --> 0:07:56.080 every thirty days out of our belief our fabric of 0:07:56.120 --> 0:07:58.640 the American labor economy. Do I have that right? 0:08:00.000 --> 0:08:00.120 So? 0:08:00.320 --> 0:08:02.119 The revisions actually go back further. 0:08:02.360 --> 0:08:04.600 The first month that will be revised down because the 0:08:04.600 --> 0:08:08.800 benchmark was April of twenty twenty four, right, they take 0:08:08.840 --> 0:08:11.960 the annual benchmark revision is wedged in over the prior 0:08:12.040 --> 0:08:15.720 twelve months, so we're that million down. That's happening over 0:08:15.880 --> 0:08:18.440 a span of time. But if you look at the 0:08:18.480 --> 0:08:22.560 monthly changes last year the new estimates, there's a lot 0:08:22.560 --> 0:08:24.640 of red I mean, there's a lot of months where 0:08:24.640 --> 0:08:27.480 we were dipping, you know, into the not you know, 0:08:27.560 --> 0:08:28.280 destroying jobs. 0:08:28.360 --> 0:08:29.760 So these are big numbers. 0:08:29.800 --> 0:08:33.240 It is spread out over a period of time, but 0:08:34.240 --> 0:08:37.240 there's something here for us to understand about what exactly 0:08:37.320 --> 0:08:40.440 is happening with job creation and how comforted should we 0:08:40.480 --> 0:08:44.280 be by the latest numbers. Have we turned the corner 0:08:44.400 --> 0:08:46.240 or is that just an aberration and we're going to 0:08:46.280 --> 0:08:49.520 get back into these really low low numbers. 0:08:49.679 --> 0:08:51.360 How do you think the Fed is going to react 0:08:51.400 --> 0:08:54.640 to these numbers? Claudia, Again, they change non farm perils 0:08:54.679 --> 0:08:56.600 coming in for the month of January much much better 0:08:56.600 --> 0:08:57.160 than expected. 0:08:58.160 --> 0:08:59.600 Yeah, so the FED knew about this. 0:09:00.280 --> 0:09:03.720 We you know, your Labor Statistics published its preliminary estimate 0:09:03.760 --> 0:09:06.440 of the benchmark revision back in September it was for 0:09:06.520 --> 0:09:08.040 a negative nine hundred thousand. 0:09:08.080 --> 0:09:10.400 My goodness, it was almost you know, right on the money. 0:09:10.880 --> 0:09:15.120 And this is certainly you've heard FED Governor Waller mentioned 0:09:15.120 --> 0:09:17.960 this in his descent, but also FED cher Powell talked about, 0:09:18.200 --> 0:09:22.200 you know, revision. So these numbers aren't surprising. I mean, really, 0:09:22.240 --> 0:09:25.920 the news today maybe the most recent months. 0:09:26.480 --> 0:09:27.679 This you know, the January. 0:09:27.760 --> 0:09:30.040 Again, not to overplay it, but you know it's good 0:09:30.040 --> 0:09:32.040 news to see that kind of number and the unemployment 0:09:32.080 --> 0:09:34.760 rate taking down. So this is not a surprise to 0:09:34.800 --> 0:09:36.360 the FED. Right, we knew this was going. 0:09:36.240 --> 0:09:36.920 To be in the data. 0:09:37.000 --> 0:09:39.880 But you published a chart last night, folks that was 0:09:39.920 --> 0:09:43.439 in English, unlike anything I would do. And Claudia Sam, 0:09:43.840 --> 0:09:46.560 I mean you said within the dynamics of the labor 0:09:46.640 --> 0:09:50.960 economy that the dearth of immigration plays into this. I 0:09:50.960 --> 0:09:54.000 mean your chart's a little spike up, a little line up. 0:09:54.080 --> 0:09:57.479 Are we at four point three percent because if immigration 0:09:57.640 --> 0:10:01.040 dynamics where we ought to be at say five point percent? 0:10:03.000 --> 0:10:06.679 So I think the immigration dynamics and we've seen a 0:10:06.720 --> 0:10:09.680 big swing, a lot more immigration than had been. 0:10:09.640 --> 0:10:11.920 Typical, and then a big slow immigration. 0:10:12.400 --> 0:10:16.120 That certainly is important and understanding what is with these 0:10:16.240 --> 0:10:19.040 jobs numbers that just really hit a wall. So that's 0:10:19.200 --> 0:10:21.480 but it is not the only factor behind it. Like 0:10:21.520 --> 0:10:24.480 we have still seen the unemployment rate drift up. We 0:10:24.840 --> 0:10:29.400 are not like labor demand for workers is not keeping 0:10:29.480 --> 0:10:31.959 up with the supply of workers, right, But so the 0:10:32.040 --> 0:10:34.080 unemployed rate is giving us a much better picture of 0:10:34.120 --> 0:10:38.520 this kind of gradual problem that's building the payrolls because 0:10:38.520 --> 0:10:42.880 it has the supply of workers has just shifted so abruptly. 0:10:43.520 --> 0:10:47.000 The message from the payrolls looks a lot scarier than 0:10:47.080 --> 0:10:49.360 it is. But I don't want to write it off, right, 0:10:49.440 --> 0:10:52.640 Like we still see wage growth slowing, unemployment rate drifting up, 0:10:52.840 --> 0:10:55.960 and certainly for groups like you know, people new to 0:10:56.000 --> 0:10:59.200 the labor market, this is a very tough job market. 0:11:00.080 --> 0:11:00.760 Tough job market. 0:11:00.840 --> 0:11:03.520 Just real quickly that eight hundred and sixty two thousand 0:11:03.600 --> 0:11:06.160 final benchmark revision just put that into context for us. 0:11:07.440 --> 0:11:13.120 It's big, Like no, it's it should be about six 0:11:13.360 --> 0:11:16.640 tenths of total payroll employment something like that, five to 0:11:16.679 --> 0:11:20.920 six tenths, and a typical before last year typical had 0:11:20.920 --> 0:11:22.840 been more like a tenth of the level. Last year's 0:11:22.880 --> 0:11:25.600 was pretty big too, So you know, the average over 0:11:25.600 --> 0:11:27.560 the last ten years hasn't been about two tents, so 0:11:27.600 --> 0:11:30.400 this is like three times larger, and we've had two 0:11:30.440 --> 0:11:31.920 of these in a row. And again I want to 0:11:31.960 --> 0:11:33.880 stress this is not a signed the Bureau of Labor 0:11:33.920 --> 0:11:36.400 Statistics is asleep at the wheel. This is just we 0:11:36.520 --> 0:11:39.800 have some major dynamics happening in the economy and it's 0:11:39.840 --> 0:11:42.360 really tough to measure them in real time, and so 0:11:42.400 --> 0:11:44.720 we're kind of catching up and it should help them 0:11:45.200 --> 0:11:47.960 with you know, people try and understand the labor market. 0:11:48.120 --> 0:11:50.120 Still a lot of puzzles, but we've got better data 0:11:50.160 --> 0:11:52.200 today and that is a really good starting point for 0:11:52.320 --> 0:11:55.720 understanding where we're going and what policy makers might want 0:11:55.760 --> 0:11:55.920 to do. 0:11:56.200 --> 0:11:58.680 So Claudia helping are for folks studying SWAT coming up 0:11:58.679 --> 0:12:01.600 and Eric Winnegretti in a moment with Alliance burnsting. So 0:12:01.800 --> 0:12:05.240 Eric Winnigrad's up in darkness freezing. I'l like the cushy 0:12:05.240 --> 0:12:09.320 ann arbor weather. Claudia sam he's taken the sevens. He's 0:12:09.360 --> 0:12:14.240 taken labor economics. Is this you're brilliance Claudia out on 0:12:14.280 --> 0:12:18.120 Twitter last night. The academics right now of our labor 0:12:18.320 --> 0:12:22.320 economics is this in the textbooks, Eric Winnigrad. 0:12:21.920 --> 0:12:26.640 Studied, I mean, every session has its own dynamics. But 0:12:26.679 --> 0:12:29.360 ever since the pandemics showed up, the labor market has 0:12:29.360 --> 0:12:33.000 been doing things that are just unusual, if nothing else 0:12:33.040 --> 0:12:37.800 in their magnitudes. We've just had some really abrupt swings. 0:12:38.000 --> 0:12:42.840 And so like, I think this cycle, this business cycle 0:12:42.880 --> 0:12:45.840 really does stand out right, and it may. 0:12:45.720 --> 0:12:46.720 Stand out in good ways. 0:12:46.840 --> 0:12:50.319 Maybe that gradual rising unemployment rate without a recession, maybe 0:12:50.360 --> 0:12:53.160 that's what a soft landing actually looks like. Like we 0:12:53.160 --> 0:12:55.040 don't ever get those, So this doesn't have to be 0:12:55.080 --> 0:12:58.640 a bad news story. But there's certainly tensions, and I 0:12:58.760 --> 0:13:01.080 just want people to do just because we avoid a 0:13:01.120 --> 0:13:02.840 recession doesn't mean it's good enough. 0:13:02.920 --> 0:13:05.120 She's you know, I mean, we lost a million jobs 0:13:05.160 --> 0:13:07.840 in summary vider stand and she's telling us it's not 0:13:07.880 --> 0:13:10.560 a bad news. Sorry, Claudia, can you stay for five 0:13:10.640 --> 0:13:11.200 more minutes? 0:13:12.200 --> 0:13:12.640 Of course? 0:13:12.800 --> 0:13:15.199 Okay, thank you so much. Joining us now, Eric Winigrad 0:13:15.240 --> 0:13:18.240 with Claudia. Some I think that the two of them, 0:13:18.520 --> 0:13:21.520 Eric has a much more international feel, maybe, but the 0:13:21.559 --> 0:13:24.200 two of them are the market economics at Alliance Bernstein 0:13:24.240 --> 0:13:27.320 of Eric winnigred with the academics of doctor, some I 0:13:27.320 --> 0:13:31.280 think it really dovetails here. Eric, how do you translate 0:13:31.400 --> 0:13:36.160 Claudia SOM's brilliant work on the labor economy, not on recession. 0:13:36.600 --> 0:13:39.440 But she's been on fire the last twenty four hours 0:13:39.840 --> 0:13:43.800 about these odd Newtonian dynamics of our labor economy. 0:13:44.120 --> 0:13:45.960 It is a very strange economy. And to answer the 0:13:46.000 --> 0:13:47.560 question that you asked, No, none of this was in 0:13:47.600 --> 0:13:49.880 the textbooks that I was looking at a dartmouth. But 0:13:50.080 --> 0:13:51.640 I think you want to put this in perspective. You 0:13:51.679 --> 0:13:53.480 just said a minute ago, Tom, we've lost eight hundred 0:13:53.480 --> 0:13:56.000 and sixty two thousand jobs as a result of this revision. 0:13:56.120 --> 0:13:59.160 That's not true. Nobody has lost a job. We're just 0:13:59.280 --> 0:14:01.560 counting it better, right, So so that is not the 0:14:01.559 --> 0:14:03.840 case that people lost jobs. 0:14:04.280 --> 0:14:05.280 It's just that the data. 0:14:05.120 --> 0:14:07.680 Helps we counted weren't there. 0:14:07.880 --> 0:14:10.720 That's correct. But again, what are we really interested in? 0:14:10.760 --> 0:14:13.080 Are we interested in the statistical minutia or are we 0:14:13.120 --> 0:14:15.920 interested in the way that people in the economy experienced this. 0:14:16.880 --> 0:14:19.440 We're more interested in the way people experience this, and 0:14:19.480 --> 0:14:22.960 nobody actually lost their job. I agree with Claudia one 0:14:23.040 --> 0:14:26.480 hundred percent that the true signal in today's report is 0:14:26.520 --> 0:14:30.000 the unemployment rate. Because the revisions to the headline series 0:14:30.040 --> 0:14:34.400 are so complicated, there is statistical artifact the unemployment rate 0:14:34.520 --> 0:14:37.880 is balancing supply and demand in the economy, and it's 0:14:37.880 --> 0:14:40.920 telling us that things are okay, not great, right, but okay. 0:14:41.040 --> 0:14:44.240 Does it reaffirm doctor some the idea of two rate cuts? 0:14:44.240 --> 0:14:46.040 I mean, how do you go to four rate cuts 0:14:46.040 --> 0:14:48.680 with a four point three percent unemployment rate? 0:14:51.560 --> 0:14:53.800 My base case is still two rate cuts this year, 0:14:53.840 --> 0:14:56.200 But we're going to get a lot more information and 0:14:56.280 --> 0:14:58.880 the Fed is going to watch the labor market extremely 0:14:58.960 --> 0:15:02.680 carefully in terms of how they adjusted going forward. 0:15:03.280 --> 0:15:05.920 Eric, how do you think AI is impacting this labor 0:15:05.960 --> 0:15:08.680 force here? Because people say it's really tough to get 0:15:08.680 --> 0:15:11.040 a job, and maybe that's the entry level job, and 0:15:11.080 --> 0:15:14.280 maybe that's the job that's being impacted by AI at 0:15:14.320 --> 0:15:15.160 least initially. 0:15:15.200 --> 0:15:16.600 Does that factor into your work at all? 0:15:16.640 --> 0:15:18.120 So it's just one of the ways in which this 0:15:18.200 --> 0:15:20.840 labor market is confusing and complicated. And I would actually 0:15:20.920 --> 0:15:22.480 refer you to a speech that the Governor of the 0:15:22.520 --> 0:15:25.120 Bank of Canada made last week, Tiff Macklin, where he 0:15:25.160 --> 0:15:27.640 said that if part of the reason the labor market 0:15:27.680 --> 0:15:30.440 is so tough is because of these structural changes, because 0:15:30.440 --> 0:15:34.000 of artificial intelligence, for example, it isn't appropriate for central 0:15:34.000 --> 0:15:36.880 banks to respond to that by cutting interest rates. You 0:15:36.920 --> 0:15:39.360 can't boost labor and demand with interest rates if the 0:15:39.400 --> 0:15:43.200 problem is AI. I think it's premature to draw that conclusion. 0:15:43.520 --> 0:15:45.440 Claudia has said, and she's right that there is some 0:15:45.480 --> 0:15:48.840 evidence that entry level workers in particular are struggling. But 0:15:48.880 --> 0:15:51.000 we're still very very early days on this. 0:15:51.160 --> 0:15:53.520 One final question, Claudia SAMs, I know you have to 0:15:53.560 --> 0:15:56.320 publish for a new century. Claudia, I want you to 0:15:56.400 --> 0:16:00.160 speak to the huge body of the nation that's not 0:16:00.280 --> 0:16:04.760 worried about their stock options on a mag seven equity holding. 0:16:04.920 --> 0:16:09.239 They're not part of the profit machine of technology in America. 0:16:09.560 --> 0:16:13.320 How flat on their back is the rest of America. 0:16:13.160 --> 0:16:15.800 Right Well, for that group of Americans, I mean, their 0:16:15.880 --> 0:16:20.120 jobs are so critical to their well being. And for 0:16:20.200 --> 0:16:22.440 people who have a job and like their job. Right now, 0:16:22.440 --> 0:16:25.440 things are really pretty good, right Wages aren't, you know, 0:16:25.560 --> 0:16:28.160 going gangbusters. Workers are not sharing in all of this 0:16:28.240 --> 0:16:31.680 productivity that it seems to be out there necessarily, but 0:16:31.960 --> 0:16:32.840 it's pretty okay. 0:16:32.880 --> 0:16:33.800 But it's the. 0:16:33.680 --> 0:16:36.640 Ones who are on the margins who don't have the 0:16:36.720 --> 0:16:39.520 job or want to switch job like, they are a 0:16:39.520 --> 0:16:41.560 lot more stuck right now. And so I think, really 0:16:41.600 --> 0:16:44.560 the labor market it has always been and will continue 0:16:44.560 --> 0:16:46.760 to be central to people, particularly those who are not 0:16:46.920 --> 0:16:48.880 plugged into the asset markets. 0:16:49.000 --> 0:16:52.160 Claudia, So I'm thank you for your commitment to Bloomberg Surveillance. 0:16:52.240 --> 0:16:55.400 Doctor Simus of the New Century advises, I can't say enough 0:16:55.480 --> 0:16:59.720 about a workout on Twitter and LinkedIn, just hugely informed. 0:17:01.560 --> 0:17:05.760 Stay with us more from Bloomberg Surveillance coming up after this. 0:17:13.000 --> 0:17:16.560 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:17:16.640 --> 0:17:19.800 weekday afternoons from seven to ten am Eastern Listen on 0:17:19.880 --> 0:17:23.520 Applecarplay and Android Auto with the Bloomberg Business app, or 0:17:23.680 --> 0:17:25.160 watch us live on YouTube. 0:17:25.440 --> 0:17:27.560 So when you get this huge report coming up and 0:17:27.600 --> 0:17:29.119 you get the data, what do you do well to 0:17:29.160 --> 0:17:31.720 impress Lisa Shallat, I go to the ten year real yield, 0:17:31.960 --> 0:17:34.440 which is sitting at two standard dv sits under one 0:17:34.440 --> 0:17:36.880 point eight one percent of breakdown there in the ten 0:17:36.920 --> 0:17:39.200 year real yield would be a big deal. And then 0:17:39.280 --> 0:17:42.040 she knows, I go to Swiss Frank That's what you 0:17:42.119 --> 0:17:44.920 do with Morgan Stanley and I'm sorry. I got a 0:17:45.000 --> 0:17:48.160 Swiss Frank at the CUSP along with Yeana one fifty 0:17:48.240 --> 0:17:51.879 three fifty nine joining us on Lisa Schellet at Morgan Stanley, 0:17:51.880 --> 0:17:54.399 probably on a plane heading for Tokyo here at some 0:17:54.440 --> 0:17:57.600 point chief investment officer at Morgan Stanley, let me cut 0:17:57.640 --> 0:17:58.399 to the chase. 0:17:58.840 --> 0:18:02.200 Yes, sir, Brad hints my old buddy, is. 0:18:02.280 --> 0:18:05.119 AI going to replace Brandigins? 0:18:08.400 --> 0:18:12.160 So look absolutely not. You Know, what I can tell 0:18:12.200 --> 0:18:17.320 you is that, like every other technology, we fundamentally believe 0:18:17.440 --> 0:18:22.320 that AI is an enabling tool. It is an enabling 0:18:22.400 --> 0:18:26.760 tool for expertise. While there are many things that we 0:18:26.880 --> 0:18:31.240 do that can be automated in terms of a process 0:18:31.320 --> 0:18:34.800 that are repetitive, that require us to capture and intake 0:18:34.920 --> 0:18:40.679 information and summarize it, the real beauty of expertise is 0:18:40.760 --> 0:18:43.959 creativity and interpretation. And as far as I can tell, 0:18:44.200 --> 0:18:48.520 at least thus far my interactions with the technology, is 0:18:48.520 --> 0:18:51.639 that we're far, far, far away from being able to 0:18:51.760 --> 0:18:57.000 rival America. You know, an analyst, a human beings. 0:18:57.200 --> 0:18:59.119 It's tough to see you because we saw in just 0:18:59.280 --> 0:19:02.000 this year, let's several weeks, last couple of months, this 0:19:02.160 --> 0:19:04.760 AI story's evolved a little bit from how much can 0:19:04.800 --> 0:19:07.400 we spend, how big can it get to be? Who's 0:19:07.400 --> 0:19:10.719 at risk from the deployment of AI technology, and then 0:19:10.720 --> 0:19:12.080 over the less several weeks, we really hit a lot 0:19:12.080 --> 0:19:13.120 of these software companies. 0:19:13.240 --> 0:19:17.320 Yeah, so the software sell off on one level doesn't 0:19:17.520 --> 0:19:21.440 surprise me in the sense that some of these business 0:19:21.480 --> 0:19:26.239 models are ultimately you know, going to be disrupted. But 0:19:26.359 --> 0:19:29.600 what I think people have to remember is a lot 0:19:29.640 --> 0:19:33.840 of the enterprise software companies in particular, what they have 0:19:34.240 --> 0:19:39.639 done with companies is they've come to dominate, organize, optimize data. 0:19:40.320 --> 0:19:43.879 And you know where we are in terms of AI 0:19:44.000 --> 0:19:48.080 implementation in most companies is you need the data. You 0:19:48.160 --> 0:19:52.480 can't train these tools to do anything without the data. 0:19:52.600 --> 0:19:54.600 And I think it's going to be really hard to 0:19:54.640 --> 0:19:58.320 do it without some of these enterprise software companies participating 0:19:58.320 --> 0:19:59.120 in a major way. 0:19:59.359 --> 0:20:02.640 So twenty two was a solid year for US equity investors, 0:20:02.720 --> 0:20:06.200 solid returns, solid returns in the fixed income market. Here, 0:20:07.880 --> 0:20:10.359 I don't know what's the call here for twenty six 0:20:10.440 --> 0:20:12.360 that we more the same? 0:20:13.080 --> 0:20:13.800 What are you looking for? 0:20:14.080 --> 0:20:17.160 So look, I think our tagline for twenty twenty six 0:20:17.280 --> 0:20:22.360 was simply, you know, price to perfection, which means the 0:20:22.400 --> 0:20:25.960 window for upside surprise is narrower. So our view is, 0:20:26.200 --> 0:20:29.320 you know, this will be a good, solid average year 0:20:29.440 --> 0:20:33.240 in stock markets that means seven to ten percent total returns. 0:20:34.000 --> 0:20:36.080 But it's going to be a little bit more of all. 0:20:36.320 --> 0:20:38.800 It's going to be a little bit more idiosyncratic. It's 0:20:38.800 --> 0:20:41.240 going to be about fundamentals. It's going to be about earnings, 0:20:41.280 --> 0:20:44.040 achievement and surprise, and that stuff's hard. 0:20:44.560 --> 0:20:47.000 Lisa show it with us with Morgan Stanley, and this 0:20:47.119 --> 0:20:50.720 is breaking news, and it's absolutely perfect for mischell with 0:20:50.800 --> 0:20:54.000 all over decades of work of working out companies, of 0:20:54.040 --> 0:20:57.600 deciding what not to own, all the focus. And I'm 0:20:57.640 --> 0:20:59.760