WEBVTT - Bloomberg Surveillance TV: December 6, 2024 0:00:00.120 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.239 Terminal and the Bloomberg Business app. Let's turn to retail. 0:00:37.479 --> 0:00:40.320 Lululemon up in its full year outlook thanks to strong 0:00:40.400 --> 0:00:43.520 sales in international markets. The company seeing flat sales in 0:00:43.360 --> 0:00:46.800 the United States last quarter, but a thirty nine percent 0:00:46.880 --> 0:00:50.520 rise in China. Sigurary to Gatalia Forrester, saying, athletic gear 0:00:50.560 --> 0:00:53.559 still seems to be strong. The affluent, fitness focus consumer 0:00:53.680 --> 0:00:56.360 is still spending sigury to join us now for more 0:00:56.400 --> 0:00:59.040 Sigurary to welcome to the program. What is Lulu get 0:00:59.120 --> 0:00:59.880 him right this time? 0:01:01.320 --> 0:01:03.400 Well, I think a lot of this is just the 0:01:03.520 --> 0:01:06.280 entire sector is doing really, really well. When you look 0:01:06.319 --> 0:01:11.040 at the numbers for other companies that are selling similar products, 0:01:11.080 --> 0:01:14.680 whether it's on running or you're looking at Dick's boarding goods, 0:01:14.720 --> 0:01:19.039 they are doing incredibly well as well. So the shopper 0:01:19.280 --> 0:01:23.240 is just spending in this category. Lulu has been performing 0:01:23.400 --> 0:01:27.559 incredibly well for years, and this year it was more 0:01:28.040 --> 0:01:30.520 just because of some lower guidance that some of the 0:01:30.600 --> 0:01:33.680 numbers are soft and it's been underperforming the market. But 0:01:33.920 --> 0:01:37.240 the story is that their overall top line has been 0:01:37.280 --> 0:01:40.400 strong and some of these international sales, as you point out, 0:01:40.440 --> 0:01:42.840 have been a big driver in its success, which is 0:01:42.880 --> 0:01:46.800 interesting because that is perhaps one of the areas where 0:01:46.920 --> 0:01:51.160 it may have some softness in the future if tariff's 0:01:51.200 --> 0:01:53.680 actually become more prevalent. 0:01:53.400 --> 0:01:55.520 Well situated to It's interesting also because so many have 0:01:55.560 --> 0:02:00.640 struggled in international markets, particularly in China. What undepends success 0:02:00.800 --> 0:02:01.480 that that have a. 0:02:02.480 --> 0:02:04.760 Yeah, it could a lot of it is likely just 0:02:04.920 --> 0:02:09.680 newness to the Chinese consumer. Chinese consumers, like many consumers 0:02:09.720 --> 0:02:12.960 around the world, are often interested in purchasing whatever is 0:02:13.000 --> 0:02:16.600 on trend, whatever is new there is influenced by social 0:02:16.639 --> 0:02:19.919 media as consumers anywhere in the world, and I think 0:02:19.960 --> 0:02:23.920 that Lulu has had a strong formula for success and 0:02:24.000 --> 0:02:27.320 that is that that has been an enormous driver in 0:02:27.360 --> 0:02:31.079 the US. Some of it's interesting that some of these 0:02:31.160 --> 0:02:34.080 numbers were softer in Q three, but I expect in 0:02:34.200 --> 0:02:38.960 the next quarter, particularly as that will be the holiday numbers, 0:02:39.000 --> 0:02:40.600 it should be even stronger. 0:02:40.880 --> 0:02:42.920 We'll see treated I might be revealing too much about 0:02:42.919 --> 0:02:46.800 my social media habits, but all over TikTok Instagram, I 0:02:46.840 --> 0:02:49.960 see all these influencers saying, hey, these pair of sweatpants 0:02:49.960 --> 0:02:52.200 from Lululemon, you can get the exact same thing on 0:02:52.280 --> 0:02:55.080 Amazon for a third of the costs. What is the 0:02:55.080 --> 0:02:58.720 bigger threat to Lulu? Is it the Alo Yoga, the Viory's, 0:02:58.760 --> 0:03:01.000 the high ends of the world, or is it Amazon 0:03:01.040 --> 0:03:01.840 in fast fashion? 0:03:03.000 --> 0:03:03.680 Well, that's a. 0:03:03.639 --> 0:03:07.639 Great question, because the biggest threat to Lulu is likely 0:03:07.919 --> 0:03:11.200 that competition where they could be become the new middle 0:03:11.280 --> 0:03:14.520 and that's absolutely where they don't want to be. They 0:03:14.600 --> 0:03:18.440 need to continue preserving their premium positioning. They need to 0:03:18.440 --> 0:03:21.480 be very very careful about promotions and discounting, because you're 0:03:21.520 --> 0:03:26.320 absolutely right, they're competitive threats that are at the high 0:03:26.400 --> 0:03:29.560 end and they're absolutely the knockoffs at the low end, 0:03:29.919 --> 0:03:32.040 and you don't want to be either. You need to 0:03:32.080 --> 0:03:35.520 make sure that every part of the brand, the logo, 0:03:36.200 --> 0:03:40.680 all of those elements are preserved and protected, and that 0:03:40.920 --> 0:03:44.880 discounting doesn't become too prevalent in its business model. 0:03:45.280 --> 0:03:47.840 How are they on that front on inventories and fighting 0:03:47.880 --> 0:03:50.680 off discounting suit tread Are they doing a good job 0:03:50.720 --> 0:03:53.040 there to fend off falling into the middle. 0:03:54.160 --> 0:03:57.800 It seems at the moment that they are fairly strong. 0:03:58.440 --> 0:04:02.200 This is a company that seems to have pricing power 0:04:02.360 --> 0:04:06.040 and seems to be able to get away with minimal discounting. 0:04:06.800 --> 0:04:12.480 You don't necessarily see the huge, huge Cyber Week and 0:04:12.560 --> 0:04:16.200 Black Friday promotions that other brands and the deep discounts 0:04:16.200 --> 0:04:19.279 that other brands are forced to reckon with. They did 0:04:19.279 --> 0:04:22.000 have an inventory situation earlier in the year, it seems 0:04:22.040 --> 0:04:25.600 like it has stabilized a bit, so it appears to 0:04:25.720 --> 0:04:28.839 have some They seem to be in a better position 0:04:28.920 --> 0:04:31.960 going in to Q four and I expect that that 0:04:32.000 --> 0:04:34.200 will also carry through twenty twenty five. 0:04:34.680 --> 0:04:36.960 So true to when it comes to the international business 0:04:37.160 --> 0:04:39.840 analyst for noting that it was the legans category that 0:04:40.120 --> 0:04:41.960 was seen as strength for the first time in a while, 0:04:42.240 --> 0:04:44.440 But I thought the Lulu problem was the fact that 0:04:44.440 --> 0:04:48.159 they were leaning too much into tight fitting clothing and 0:04:48.200 --> 0:04:50.400 how to go into a more baggy look. Which one 0:04:50.440 --> 0:04:52.560 is it well. 0:04:53.279 --> 0:04:56.000 A lot of this is also very dependent on regional 0:04:56.040 --> 0:05:02.320 preferences too, So the challenges are that that certainly that 0:05:02.360 --> 0:05:05.560 they're going to have to figure out from their merchandising standpoint, 0:05:05.640 --> 0:05:10.040 from their product development standpoint, what is appropriate in which markets, where, 0:05:10.360 --> 0:05:14.920 which colors, which styles are going to resonate more with shoppers. 0:05:15.120 --> 0:05:17.040 A lot of that is going to be influenced by 0:05:17.080 --> 0:05:19.760 social media, much of it is going to be influenced 0:05:19.760 --> 0:05:22.760 by even store associates in stores, So a lot of 0:05:22.800 --> 0:05:25.919 this is going to fluctuate it. That is one of 0:05:25.920 --> 0:05:29.440 the challenges of being a fashion retailer. But also what 0:05:29.560 --> 0:05:34.320 Lulu has is the ability to actually shape what shoppers 0:05:34.400 --> 0:05:36.720 want by what it has in the store and what 0:05:36.760 --> 0:05:41.279 it's positioning as what is on trend at any given moment. 0:05:41.400 --> 0:05:43.480 When you look at the US and also consumers around 0:05:43.480 --> 0:05:45.520 the world, which do you see right now in terms 0:05:45.560 --> 0:05:48.240 of who is the most picky, where's the pickiest consumer? 0:05:49.920 --> 0:05:50.960 I will, oh, that's. 0:05:50.800 --> 0:05:55.200 A great question, because consumers everywhere are pretty picky, and 0:05:55.600 --> 0:05:58.080 this is one of the things that we are certainly 0:05:58.120 --> 0:06:01.719 seeing is that certainly at the low end, consumers are 0:06:01.760 --> 0:06:05.720 incredibly fickle because they're the most economically distressed. But even 0:06:05.800 --> 0:06:08.320 at the high end, we see a lot of fickleness 0:06:08.360 --> 0:06:12.760 because those consumers, while they're still flush with cash, they 0:06:12.760 --> 0:06:15.479 have so much choice. And we see that in some 0:06:15.560 --> 0:06:19.599 of those US numbers. And that's absolutely an issue that 0:06:19.600 --> 0:06:24.640 that every business that is trying to to attract higher 0:06:24.720 --> 0:06:26.200 end customers has to face. 0:06:27.040 --> 0:06:30.480 To catch jump. As always sat there forrest the research. 0:06:40.440 --> 0:06:42.880 I want to cross to Tom post of page Jim. 0:06:42.920 --> 0:06:45.359 Tom joins us now for more. Tom, your first reaction 0:06:45.400 --> 0:06:46.800 today one what jumps out to you. 0:06:47.480 --> 0:06:49.080 Yeah, it's so good to be with you all. 0:06:49.360 --> 0:06:51.240 Look, I think at the end of the day, you know, 0:06:51.279 --> 0:06:53.560 this report is pretty consistent with what our you has been, 0:06:53.600 --> 0:06:56.000 which is to say, you know, the labor backdrops has 0:06:56.040 --> 0:06:57.000 slowed down quite a bit. 0:06:57.240 --> 0:06:59.120 I think there are some cracks in the. 0:06:59.080 --> 0:07:01.640 Labor backdrop, but if the floor is not falling out 0:07:01.640 --> 0:07:03.680 from beneath this year, I mean, if I look, we 0:07:03.800 --> 0:07:05.719 like to look at something called cyclical hiring, and so 0:07:05.720 --> 0:07:07.919 basically you just take private jobs, you strip out healthcare. 0:07:08.400 --> 0:07:10.400 You know, we we gain one hundred and twenty one 0:07:10.400 --> 0:07:11.400 thousand jobs this month. 0:07:11.440 --> 0:07:13.960 I mean, you know, even if we exclude the prime month, 0:07:13.960 --> 0:07:16.360 which was you know, impacted by all the things that 0:07:16.400 --> 0:07:19.280 we know at this point, Boeing and the hurricane, you're 0:07:19.320 --> 0:07:21.640 averaging about one hundred thousand jobs from a sickle go 0:07:21.760 --> 0:07:25.240 hiring perspective. So again, our view has been that continued 0:07:25.280 --> 0:07:29.440 economic expansion will roll into the coming year, but you know, 0:07:29.440 --> 0:07:31.760 you're going to do it with a labor backdrop that 0:07:31.760 --> 0:07:33.880 that has slowed down, and I think, you know, we'll 0:07:33.960 --> 0:07:36.080 kind of will remain soft. 0:07:36.360 --> 0:07:39.440 Tom. Just to be clear, does this change anything when 0:07:39.440 --> 0:07:42.560 it comes to December to December cuts the rhetoric we've 0:07:42.560 --> 0:07:44.040 heard from FED officials. 0:07:44.120 --> 0:07:46.520 No, Danny, I think I think you're quite right to 0:07:46.560 --> 0:07:48.640 ask this question. No, I don't think it changes anything. 0:07:49.040 --> 0:07:50.160 I think at the end of the day, I think 0:07:50.200 --> 0:07:52.320 that this is a kind of number that will support 0:07:52.840 --> 0:07:55.800 the FED cutting rates in December. I think that you know, 0:07:56.160 --> 0:07:57.760 looking for you know, two or three more cuts in 0:07:57.760 --> 0:08:00.440 the coming year. I think is completely reasonable. But again, 0:08:00.560 --> 0:08:03.320 I think it's interesting, right because people were really looking for, 0:08:03.640 --> 0:08:05.840 you know, sort of that are hopeful that this report 0:08:05.880 --> 0:08:09.640 will really bounced back in a more notable way than 0:08:09.680 --> 0:08:12.080 what we've seen, and it didn't. And I think that 0:08:12.120 --> 0:08:13.760 really drives home that when you look at all this 0:08:13.840 --> 0:08:16.880 other labor market data, all those other labor data really 0:08:17.000 --> 0:08:18.880 have really slowed down quite a bit. I mean, if 0:08:18.880 --> 0:08:22.400 you're waiting for the payroll report to crack, it's too late. 0:08:22.480 --> 0:08:24.560 I mean, this is one of the most lagging of. 0:08:24.560 --> 0:08:27.880 Economic indicators, and as I think we all appreciate now, 0:08:28.240 --> 0:08:31.480 is revised relentlessly. So I think when we look at 0:08:31.520 --> 0:08:33.400 some of the leading metrics, it does seem like things 0:08:33.400 --> 0:08:34.080 are slowing down. 0:08:34.240 --> 0:08:36.480 Does that mean that the bigger risk for volatility in 0:08:36.520 --> 0:08:39.520 this market, for volatility of policy is next week CPI 0:08:39.679 --> 0:08:41.640 PPI import prices. 0:08:41.960 --> 0:08:43.839 Yeah, Danie, And that's again one of the sort of 0:08:43.880 --> 0:08:46.000 the unfortunate realities, right. I mean, when you think about 0:08:46.000 --> 0:08:48.840 the things that really drive monetary policy decisions, a lot 0:08:48.840 --> 0:08:51.319 of them are lagging indicators like the payroll report, like CPI. 0:08:52.040 --> 0:08:53.520 So I think you're again, I think you're right. 0:08:53.559 --> 0:08:56.360 I think that we're probably going to be swung around 0:08:56.360 --> 0:08:59.360 by some of this data because while this report at 0:08:59.400 --> 0:09:02.400 twenty seven and it's pretty reasonable, I mean, you can't 0:09:02.440 --> 0:09:04.400 discount that next month you're gonna have a low one handle. 0:09:04.440 --> 0:09:07.040 I mean, that's how the data have been rolling. And 0:09:07.120 --> 0:09:08.600 then of course you then build. 0:09:08.400 --> 0:09:10.360 In the revisions. It's like you're not just looking at 0:09:10.360 --> 0:09:11.320 the current month anymore. 0:09:11.880 --> 0:09:13.559 You have to look at what the prior month did 0:09:13.559 --> 0:09:15.200 from a revisions perspective. 0:09:15.240 --> 0:09:17.120 So yeah, I do. I think that things actually might 0:09:17.160 --> 0:09:18.560 have been pretty bolts on that regard. 0:09:18.679 --> 0:09:20.640 If you are just joining us, welcome to the program. 0:09:20.679 --> 0:09:22.680 You just missed out on the job's number two twenty 0:09:22.679 --> 0:09:25.160 seven a small upside surprise. The media estimate was two 0:09:25.240 --> 0:09:28.120 twenty unemployment came at four point two percent. That is 0:09:28.160 --> 0:09:30.040 the wrong kind of upside surprise. We were looking for 0:09:30.120 --> 0:09:32.760 four point one percent. Way, just come again, just a 0:09:32.800 --> 0:09:35.320 little bit hotter than expected, in line with the previous 0:09:35.320 --> 0:09:37.880 month at zero zero point four percent. Joining us now, 0:09:37.920 --> 0:09:40.440 Muhammad al Erman a, Queen's College, Chambridge, Mohammed, You've had 0:09:40.480 --> 0:09:43.400 about seven eight minutes to choose over these numbers. What 0:09:43.480 --> 0:09:44.400 stands out to you, sir? 0:09:45.800 --> 0:09:49.000 Thank you? John. As Jim Bianco pointed out, the challenge 0:09:49.000 --> 0:09:51.000 for the market and for policy would have been a 0:09:51.360 --> 0:09:55.680 consistently strong report. This is a somewhat strong report, but 0:09:55.760 --> 0:09:59.560 not consistently strong. So it is strong on the earning side. 0:09:59.760 --> 0:10:03.480 It is is strong on the labor participation coming downside, 0:10:03.559 --> 0:10:07.720 let's supply, and is also strong on a small beat unemployment. 0:10:07.840 --> 0:10:11.560 But the fact that the unemployment weight went up means 0:10:11.640 --> 0:10:15.640 that the FED will be comfortable cutting by twenty five 0:10:15.640 --> 0:10:18.679 basis points means that the market will increase the probability 0:10:18.679 --> 0:10:22.319 of this happening. So on the policy front, this did 0:10:22.360 --> 0:10:26.480 not complicate what would have been in messy situations for 0:10:26.520 --> 0:10:29.600 the reasons that Jim pointed out. On the economy side, 0:10:29.640 --> 0:10:33.360 join just a confirmation that the labor market remains solid 0:10:33.800 --> 0:10:36.320 and that US exceptionalism is set to continue. 0:10:36.920 --> 0:10:39.240 But it makes a decision easy to cut twenty five. 0:10:39.440 --> 0:10:42.800 Maybe still got to wait for CPI next Wednesday. I wonder, though, 0:10:42.920 --> 0:10:45.480 if it's still just as hard to signal anything for 0:10:45.520 --> 0:10:48.160 twenty twenty five in the news conference, what is that 0:10:48.240 --> 0:10:50.520 exercise going to look like in two weeks time? 0:10:52.040 --> 0:10:54.319 So it would be hard for this FED because this 0:10:54.400 --> 0:10:58.480 FED is so reactive, is so data dependent, that it 0:10:58.520 --> 0:11:03.280 will simply tell us that it will remain la data dependent. 0:11:03.320 --> 0:11:05.440 And I suspect that while their range is going to 0:11:05.440 --> 0:11:07.800 compress a little bit, he's still going to have quite 0:11:07.800 --> 0:11:12.400 a wide range in terms of the terminal rate. You know, 0:11:12.640 --> 0:11:15.240 the FAT always has two options. The option it took 0:11:15.240 --> 0:11:18.040 in twenty twenty one and got completely wrong, which is 0:11:18.040 --> 0:11:20.800 to look forward, And now it's shied away from that 0:11:21.240 --> 0:11:23.520 and went to the option of being excessively data dependent. 0:11:23.600 --> 0:11:26.080 And I suspect they'll stay excessively data dependent. So we're 0:11:26.080 --> 0:11:30.680 not going to get any strong signals other than we 0:11:30.720 --> 0:11:31.960 will remain data dependent. 0:11:32.480 --> 0:11:34.480 Tom, can I get your opinion on this? What it 0:11:34.520 --> 0:11:37.400 looks like in December with the summary of economic projections, 0:11:37.440 --> 0:11:40.720 looks like what they can project forward if at all? 0:11:40.840 --> 0:11:43.440 Yeah, Look, I think Muhammad is quite right. I think, 0:11:43.640 --> 0:11:45.920 you know, prudence, I think is demanded right now. You know, 0:11:46.280 --> 0:11:49.040 Powell's in a he's in a slightly tricky spot, and 0:11:49.080 --> 0:11:50.920 I think he's laid the groundwork for that, right Like 0:11:51.080 --> 0:11:53.840 you think about his speech at the Deal Book the 0:11:53.880 --> 0:11:57.000 other day, you know, I think what he laid out 0:11:57.000 --> 0:11:58.839 there to me, I think made a lot of sort 0:11:58.840 --> 0:12:01.920 of practical sense. You know, they're just going to continue 0:12:01.960 --> 0:12:04.600 to wait and see how the data unfold from here. 0:12:04.679 --> 0:12:05.880 They're not going to pre commit. 0:12:05.640 --> 0:12:07.440 Him, and he's already sort of put He's already laid 0:12:07.440 --> 0:12:11.120 the groundwork for you know, sort of a skip after 0:12:11.200 --> 0:12:13.280 the December meeting. I mean he's been pretty clear and 0:12:13.280 --> 0:12:16.040 that not just that that the Deal Book meeting, but 0:12:16.120 --> 0:12:18.480 during the last press or two so so I think, 0:12:18.520 --> 0:12:19.959 you know, when I think about the sort of the 0:12:20.240 --> 0:12:22.800 step at large, I mean, look, I don't know that 0:12:22.800 --> 0:12:24.800 they have to make any wholesale changes here. I mean, 0:12:24.960 --> 0:12:27.440 you know, the economy is more or less evolving in 0:12:27.480 --> 0:12:29.720 a similar fashion to what they have there for. 0:12:30.640 --> 0:12:31.480 Twenty twenty five. 0:12:32.000 --> 0:12:33.440 So again, I think it would be in their best 0:12:33.440 --> 0:12:37.200 interest to not really make any wholesale changes. 0:12:37.240 --> 0:12:39.600 This is a nipping and tucking outcome. 0:12:39.600 --> 0:12:41.360 I think, Well, when it comes to the data, and 0:12:41.360 --> 0:12:44.280 we're still waiting on CPI next week, Muhammad, last time 0:12:44.320 --> 0:12:46.439 you were on for the job Suport, you said inflation 0:12:46.600 --> 0:12:48.679 is not dead. What kind of number could we see 0:12:48.880 --> 0:12:51.520 that could potentially change the fence of thinking at this 0:12:51.600 --> 0:12:54.559 upcoming meeting, Denry, and you. 0:12:54.559 --> 0:12:57.840 Heard from from the chair saying that inflation has been 0:12:57.880 --> 0:13:02.680 more stubborn than he extended he and the FED expected. Look, 0:13:02.720 --> 0:13:05.000 we're going to see inflation stuck in the two and 0:13:05.080 --> 0:13:09.880 a half to three percent range for the Fed's preferred measure. 0:13:09.920 --> 0:13:12.360 The core measure, and the FED is going to have 0:13:12.360 --> 0:13:15.000 to make a decision. My gut feeling is that it 0:13:15.120 --> 0:13:19.440 will run with this number there, promising us two percent 0:13:19.559 --> 0:13:23.040 down the road, and I suspect we'll see seventy five 0:13:23.080 --> 0:13:26.600 basis points of cut still, but they're going to be 0:13:26.600 --> 0:13:29.760 spread out like like you just heard. It's going to 0:13:29.840 --> 0:13:33.080 be cut, pause or skip and then cut, and then 0:13:33.080 --> 0:13:37.040 we're going to have a huge conversation. Was this a 0:13:37.120 --> 0:13:40.280 Hawkish skip? Was it a Dubs skip? So we're going 0:13:40.320 --> 0:13:42.400 to we're going to go to the third differential now 0:13:43.200 --> 0:13:46.160 because we don't we lack proper policy guidance. 0:13:46.320 --> 0:13:48.319 Maham as you went there, So what kind of skip 0:13:48.440 --> 0:13:51.640 or cut? Are you expecting? A Davish cut, a Hawkish cut? 0:13:51.720 --> 0:13:52.600 What are you looking for? 0:13:53.400 --> 0:13:56.120 Look, no one is going to predict this when when 0:13:56.160 --> 0:13:58.360 you know that the reaction function of the FED is 0:13:58.400 --> 0:14:01.800 backward looking because it will depend on the latest number. 0:14:02.040 --> 0:14:06.440 Unfortunately, and CPI drops next Wednesday. Bon yolds right now 0:14:06.640 --> 0:14:09.480 are lower by about four basis points on a tenure, 0:14:09.520 --> 0:14:12.160 We're down by about two basis points. Equity futures still 0:14:12.240 --> 0:14:14.040 higher on a session on the S and P five 0:14:14.120 --> 0:14:16.400 hundred by close to two tens of one percent. The 0:14:16.480 --> 0:14:18.559 numbers topped about twelve minutes ago. I want to cross 0:14:18.559 --> 0:14:20.800 back over to Mi McKee for a little bit more. 0:14:21.040 --> 0:14:24.000 Mikey went through what was behind that uptick in unemployment, 0:14:24.280 --> 0:14:26.320 the snap back that we didn't really get. I think 0:14:26.360 --> 0:14:27.760 a lot of people in the market were looking for 0:14:27.800 --> 0:14:30.920 a big snapback in payrolls. Where did we get some 0:14:31.000 --> 0:14:33.080 growth and where did we miss out? 0:14:33.400 --> 0:14:37.120 Well, what's really interesting is we saw a decline in 0:14:37.240 --> 0:14:41.200 retail sales hiring minus twenty eight thousand in the month 0:14:41.240 --> 0:14:44.400 of November, when people are usually staffing up, which leads 0:14:44.400 --> 0:14:46.600 you to believe that there may be some seasonal effects 0:14:46.600 --> 0:14:49.960 to this. The seasonal adjustment factors may be holding down 0:14:50.040 --> 0:14:53.040 the number of jobs created a little bit. Trade and 0:14:53.080 --> 0:14:57.360 transportation jobs also down twenty three thousand, and that's usually 0:14:57.400 --> 0:15:00.920 when we're seeing the additional ups and X drivers and 0:15:01.000 --> 0:15:02.840 that sort of thing, So a little bit of a 0:15:02.840 --> 0:15:06.920 surprise there. We did see manufacturing rebound with thirty four 0:15:06.960 --> 0:15:11.120 thousand jobs, so good news there. Construction only ten thousand, 0:15:11.360 --> 0:15:15.600 and we're looking at the government hiring is one of 0:15:15.600 --> 0:15:17.880 the highest at thirty three thousand, but almost all that 0:15:18.000 --> 0:15:21.520 was state in local federal government lost two thousand jobs, 0:15:21.760 --> 0:15:25.600 and our old friend leisure in hospitality did rebound fifty 0:15:25.680 --> 0:15:28.600 three thousand jobs totally. About twenty eight thousand of those 0:15:28.960 --> 0:15:32.920 were in the restaurant business, so people getting jobs there. 0:15:33.040 --> 0:15:35.320 And then I do want to point out the three 0:15:35.400 --> 0:15:41.200 digit unemployment rates four point two four to six for November, 0:15:41.280 --> 0:15:45.800 so basically just below a four point three percent reading 0:15:46.280 --> 0:15:48.440 would have gotten the Fed's attention if not worried them. 0:15:48.480 --> 0:15:51.680 Remember they forecast in September four point four percent by 0:15:51.680 --> 0:15:52.360 the end of the year. 0:16:02.040 --> 0:16:03.520 Good catch, MI, because we can't get down to the 0:16:03.560 --> 0:16:05.760 open and bound in about forty six minutes time. You'll 0:16:05.760 --> 0:16:08.560 see the outperformance on a small caps the Rustle by 0:16:08.640 --> 0:16:10.680 something like eight tens of one percent at the moment 0:16:10.680 --> 0:16:13.480 on the screen, by point eighty one off the back 0:16:13.520 --> 0:16:14.840 of this move lower at the front end of the 0:16:14.920 --> 0:16:17.760 yield curve, with yields down something like four basis points. 0:16:17.840 --> 0:16:20.200 Jeff Rosenberg of Black Rock joins US now to get 0:16:20.200 --> 0:16:22.480 his input on the program. Jeff, Welcome to the program. 0:16:22.480 --> 0:16:24.440 The panel is so far suggesting the door is still 0:16:24.440 --> 0:16:27.360 pretty much wide open for twenty five basis point reduction. 0:16:27.440 --> 0:16:29.320 It's not your sense of thing as well for two 0:16:29.320 --> 0:16:29.800 weeks time. 0:16:31.120 --> 0:16:33.840 Yeah, I think that's the read. This is clearly just 0:16:34.000 --> 0:16:37.720 reiterating a gradual slowing in the labor markets. As Mike 0:16:37.840 --> 0:16:42.120 just pointed out to three digits that unemployment rate kind 0:16:42.120 --> 0:16:45.080 of helps the FED come in December to cut. The 0:16:45.120 --> 0:16:47.960 market was already pricing seventy percent of an outlook for that, 0:16:48.200 --> 0:16:50.800 and I think the bond market reaction, the initial reaction, 0:16:51.240 --> 0:16:53.760 is just kind of increasing that on the kind of 0:16:53.760 --> 0:16:56.760 gradual labor market slow down. So I think that's very 0:16:56.800 --> 0:16:59.160 much the read. And as the panel was just discussing, 0:16:59.400 --> 0:17:02.720 we're going to pay to this, you know, pause skip 0:17:02.840 --> 0:17:06.760 debate and what kind of message that means. But the 0:17:06.760 --> 0:17:11.280 big debate is over the degree to which cuts have 0:17:11.359 --> 0:17:14.320 to take place in twenty twenty five, and the disconnect 0:17:14.520 --> 0:17:18.480 between financial conditions which are going to be easier after today, 0:17:19.440 --> 0:17:22.000 and the degree of restrictiveness that you still see some 0:17:22.040 --> 0:17:27.199 of the committee members believe justifies that that number of 0:17:27.240 --> 0:17:29.640 cuts that they're forecasting into twenty twenty five. 0:17:30.040 --> 0:17:32.679 Jeff, are you arguing then that you need to have 0:17:32.720 --> 0:17:36.080 a FED who starts paying attention more to these financial conditions. 0:17:36.080 --> 0:17:38.920 That conversation is kind of gone by the wayside. Are 0:17:38.920 --> 0:17:41.080 they going to have to rethink cuts because of what 0:17:41.119 --> 0:17:41.960 this market is doing? 0:17:43.400 --> 0:17:44.760 You know, it's gone by the wayside. 0:17:44.800 --> 0:17:46.719 But then there was a little bit of acknowledgment of 0:17:46.760 --> 0:17:49.919 it in Powell, kind of acknowledging, yeah, we cut fifty 0:17:50.000 --> 0:17:52.880 and then the data revised. You know, the whole issue 0:17:52.920 --> 0:17:54.959 is really about the strength of the economy. And as 0:17:55.000 --> 0:17:58.800 Muhammad rightly points out, this is a very very data 0:17:58.880 --> 0:18:02.960 dependent and reactive fed and the data that's key here 0:18:03.119 --> 0:18:06.679 on how restrictive policy is is really economic growth. And 0:18:06.720 --> 0:18:09.920 you don't see economic growth well below potential. You see 0:18:09.960 --> 0:18:14.159 economic growth above potential, and that's telling you that monetary 0:18:14.160 --> 0:18:16.840 policy is not as restrictive as they think it is. Now, 0:18:16.840 --> 0:18:18.680 there's a little bit of a disconnect between whether you're 0:18:18.680 --> 0:18:20.960 looking at the growth measures, whether you're looking at the 0:18:21.040 --> 0:18:23.959 labor market. Take out about one hundred thousand from today's 0:18:23.960 --> 0:18:27.959 payroll print, that's hurricane and strike payback. The labor markets 0:18:27.960 --> 0:18:31.359 are moderating, that's the best evidence of the restrictiveness. But 0:18:31.440 --> 0:18:35.760 outside of that, you really see the impact of financial conditions. 0:18:35.840 --> 0:18:40.720 Animal spirits is a very supportive financial conditions environment, and 0:18:40.760 --> 0:18:43.520 that's how monetary policy transmits so maybe you don't need 0:18:43.560 --> 0:18:48.159 to keep pushing into financial conditions easing by this degree 0:18:48.160 --> 0:18:49.440 of cuts that they've been signaling. 0:18:49.480 --> 0:18:52.400 Well, Mohammad mentioned it earlier about now in the third degree, 0:18:52.600 --> 0:18:54.679 if the door's open for this cut and there's going 0:18:54.720 --> 0:18:57.119 to be a bias to twenty five basis points, then 0:18:57.160 --> 0:18:59.320 what is the tone and the rhetoric around that. Is 0:18:59.320 --> 0:19:01.800 it going to be a hawkish cut because they're going 0:19:01.800 --> 0:19:03.280 into twenty twenty five and there's going to be a 0:19:03.280 --> 0:19:05.280 lot of change of fiscal policy in Washington. 0:19:07.400 --> 0:19:11.040 Well, it's hawkish in this relative to expectations. Right, So 0:19:11.960 --> 0:19:14.720 two weeks ago, four weeks ago, the market was expecting, 0:19:15.000 --> 0:19:17.840 you know, a very aggressive pace of FED cuts. Now 0:19:17.840 --> 0:19:21.040 we've priced that out from the markets, and so there's 0:19:21.080 --> 0:19:24.040 a little bit less of a disconnect between the Fed 0:19:24.280 --> 0:19:27.359 moderating the pace of cuts into twenty twenty five in 0:19:27.440 --> 0:19:30.080 market expectations. So that may read hawkish, but if it 0:19:30.119 --> 0:19:34.400 confirms market expectations, not so problematic. If there's a even 0:19:34.480 --> 0:19:37.280 greater acknowledgment of that, I think that would be surprising 0:19:37.320 --> 0:19:38.640 and that would read hawkish. 0:19:38.840 --> 0:19:39.880 I think when you get. 0:19:39.680 --> 0:19:42.560 Into twenty twenty five, it is going to be about 0:19:42.880 --> 0:19:47.760 understanding this pace of cuts has to slow because the 0:19:47.840 --> 0:19:52.280 economy and the data doesn't support the amount of restrictiveness 0:19:52.280 --> 0:19:52.960 that the FED thinks. 0:19:52.960 --> 0:19:56.399 They currently have another round of FED speed coming up today, 0:19:56.400 --> 0:19:58.320 and then obviously we're going get into the quid period. 0:19:58.359 --> 0:20:00.440 I think they've been quite consistent for the weeks so far. 0:20:00.680 --> 0:20:03.080 We've mentioned this quote from Governor Waller in a speech 0:20:03.119 --> 0:20:05.800 from him earlier this week, cuts or skip, this is 0:20:05.800 --> 0:20:07.720 what he has to sound the neutral rate. There is 0:20:07.760 --> 0:20:10.680 still some distance to go in reducing the policy rate 0:20:11.000 --> 0:20:13.200 to neutral, to post sudy over a PHM. I just 0:20:13.240 --> 0:20:14.919