Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
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Speaker 1: Now placed the side Chris Hobby West fogout Securities, head
Speaker 1: of Equity Strategy, momentum is too rich for our blood.
Speaker 1: Whilst Fog Chris, what does that made? So? What that
Speaker 1: means is excuse me. Momentum strategies have gone too far right.
Speaker 1: Everyone during the recession ran to momentum strategies. They bid
Speaker 1: them up to a level that I don't think is sustainable.
Speaker 1: And this setup is very much what we've seen in
Speaker 1: two thousand three, two thousand and nine. You have a recession,
Speaker 1: everyone runs to the safety momentum, they bid them up
Speaker 1: to a level that's not sustainable. Recovery comes around and
Speaker 1: PM say, oh, I need to get cyclicality. They run
Speaker 1: from momentum. It becomes a contra indicator and next thing
Speaker 1: you know, somebody says we have a two thousand sigma event,
Speaker 1: which isn't true. We have a point of inflection, which
Speaker 1: is what happens when momentum strategies, because ultimately you make
Speaker 1: a deal with the devil. You you buy momentum. It
Speaker 1: continues to go up, it performs, but when it turns,
Speaker 1: it turns very badly, and you need to get out quickly. Chris,
Speaker 1: given the unusually uncertain in the United Kingdom and the
Speaker 1: United States and frankly everywhere else, what is your revenue
Speaker 1: and down the income statement call? What's your actual fundamental
Speaker 1: call on what the stock market will do? So our
Speaker 1: our stock market call for is very pedestrian. We're looking
Speaker 1: at mid single digit returns. And what we've been saying
Speaker 1: to clients for sometimes, if you want higher returns, if
Speaker 1: you want more competitive rates of returns, you need to
Speaker 1: look down the market capitalization, smaller caps, you need to
Speaker 1: add more cyclicality, higher COVID beta, and you need to
Speaker 1: start going into the financials. All right, So Chris, right
Speaker 1: now you say that your antim no MO, You're not
Speaker 1: going to go at the momentum. The price of admission
Speaker 1: is to hy So what do you do with your money?
Speaker 1: So what you do is it's very simple that the
Speaker 1: opposite of MOE is contraring you're looking for opportunities that
Speaker 1: are less picked over. And again I'm gonna sound like
Speaker 1: a broken record. Obviously small caps have worked in it.
Speaker 1: I worked for the last couple of weeks, last couple
Speaker 1: of months, but if you look at a multi year basis,
Speaker 1: they've really underperformed. And we want to look for things
Speaker 1: that give you more value, things that that will work
Speaker 1: in an early recovery, more cyclicality. And you can find
Speaker 1: that in financials, you can find that industrials. You can
Speaker 1: even find that in the commodity space. So we want
Speaker 1: you to be diversified, but we want you to have
Speaker 1: these certain characteristics in your portfolio. Do you stand the
Speaker 1: knot of spice? For that, Chris um you go across
Speaker 1: the globe. So so typically when value works, when cyclicality works,
Speaker 1: it works better overseas. US is very growth heavy, is
Speaker 1: very tech heavy. So I think you can source that
Speaker 1: in a number of different places, including the States, but
Speaker 1: I think the rest of the world is going to
Speaker 1: act a lot better in Chris. If that's the case,
Speaker 1: where's the opportunity now? Where is it running away from US?
Speaker 1: I mean some of these are moon shot trajectories right now, right,
Speaker 1: which is why we say we're antim A lot of
Speaker 1: these companies have had these parabolic moves. There will be
Speaker 1: a day of reckoning the value that you're paying, what
Speaker 1: the costum admission is just too high. And ultimately, when
Speaker 1: you have an alternative, when the economy begins to recover,
Speaker 1: which is what it's doing, people will come back to cyclicality.
Speaker 1: They'll want the old economy and they'll run very quickly
Speaker 1: from it. But to answer your question, yes, every day
Speaker 1: we go higher, we feel like we're stealing from tomorrow.
Speaker 1: There's a limited amount of opportunity here and it's getting
Speaker 1: less and less every day. An time out. You've been
Speaker 1: at home with the kids too long. Chris could not
Speaker 1: be more right. Chris crib to catch up. Thanks for
Speaker 1: depend My best to you and a family. Sell me
Speaker 1: that wowst Fago. I can't say I've never done this,
Speaker 1: but I don't think I've ever done this. We just
Speaker 1: talk about a job's day twenty twenty one days ahead
Speaker 1: of schedule. It's a late job's day. January eight. Tom
Speaker 1: Purcelli joins with RBC Capital Markets. Tom frame up that
Speaker 1: key January eight report. How grim is it gonna be? Yeah?
Speaker 1: I mean, look it's still a little early, but we
Speaker 1: we are acknowledging that you could see another decline UM
Speaker 1: in for that December report, and you just haven't seen
Speaker 1: a lot of real improvement in in UH continuing claims.
Speaker 1: Obviously we've seen UM initial claims arise at it, but
Speaker 1: it's it's a continuing part that's really gonna feed most
Speaker 1: UH into the you know, sort of what our what
Speaker 1: our call is going to be as relates to the
Speaker 1: peril reports. So yeah, I think I think, Look, it's
Speaker 1: not just this December report. I mean, I think the
Speaker 1: reality is UM, if states continue to shut down, then
Speaker 1: you're going to see UM perhaps even the January report,
Speaker 1: the report for January come in come in negative. So
Speaker 1: I think we're gonna go through a rough patch. Now look,
Speaker 1: let me be clear, UM and I'm happy to talk
Speaker 1: about sort of the near term as as much as
Speaker 1: you like. But while we're gonna go through his rough
Speaker 1: patch here, we have to recognize that twenty one is
Speaker 1: shaping up to be a pretty good year. You know,
Speaker 1: all the p or I should say it this way,
Speaker 1: all the pieces are in place for twenty one to
Speaker 1: be a pretty good year. What does Q two Q
Speaker 1: three look like when does the service sector go back
Speaker 1: to work? Based on RBC research. Yeah, so we as
Speaker 1: my daughter rolls through the shot up that you gave
Speaker 1: her ten of time, you gave her ten dollars? Did
Speaker 1: you give her ten dollars to shovel the driveway this morning? Time?
Speaker 1: You gotta go bigger, You gotta go twenty dollars. Welcome
Speaker 1: twenty dollars. You gotta go twenty dollars. They won't shovel
Speaker 1: it for anything under that. Yeah. Um, and and now
Speaker 1: I see through the corner. My my dog is about
Speaker 1: to walk through as well. We love. I think the
Speaker 1: question was about when do we get back to uh
Speaker 1: gaining jobs? And look, I think the reality is we
Speaker 1: we could be gaining jobs. Um, you know, sort of
Speaker 1: shortly into the into the new year. You know, it
Speaker 1: was funny, Tom. I think one of the things that
Speaker 1: I think is being really underappreciated is think about, um,
Speaker 1: some of the recent reports that we got from the
Speaker 1: n f I B or from I s M or
Speaker 1: even the Beige Book. They were talking about labor tightness.
Speaker 1: We think about that they were talking about labor tightness
Speaker 1: and it's all of this. So I think, what one
Speaker 1: up happening is as we continue into the year, as
Speaker 1: states start the process of reopening again, we think you
Speaker 1: could easily be back down toward full employment by the
Speaker 1: middle of the year. I mean, I think that that's
Speaker 1: a foregone conclusion from our perspective. I think the bigger
Speaker 1: question is, you know, how much progress do we make
Speaker 1: over the balance of the year, beyond beyond the middle
Speaker 1: of the year, so you could be below full employment
Speaker 1: by by the end of twenty one, Tom, I feel
Speaker 1: like we're part of your family. It's really lovely, I've
Speaker 1: got to say. And you're doing a great job just
Speaker 1: plowing through with all the distractions in the background that
Speaker 1: you clearly see in the back of your eye. I
Speaker 1: do wonder, you know, a lot of people discount some
Speaker 1: of the data that we're getting, saying it's messy, it's noisy,
Speaker 1: it's complicated because the numbers are so big, and they're
Speaker 1: reporting from states. Has been called into question. But there
Speaker 1: has been a transformation in the labor force to a
Speaker 1: more technological society. And I was looking today at a
Speaker 1: story that talked about Amazon warehouse workers and how they
Speaker 1: are paid pretty low wages and a great number of
Speaker 1: them have to receive food stamps. What are we going
Speaker 1: to see on the other side of this pandemic in
Speaker 1: terms of the transformation and they and the ability for
Speaker 1: people to get middle income jobs on the other side. Yes,
Speaker 1: so look, I think again the Job Openings report is
Speaker 1: going to be pretty instructive in this regard. And I
Speaker 1: think what we have to keep in mind be able
Speaker 1: the most seven million job openings um and and they're
Speaker 1: fairly broad based. I mean again, look when you look
Speaker 1: at the IM report, you know, the i M Report,
Speaker 1: they're not necessarily tough about how you know, lack of
Speaker 1: of ability to hire for you know, ultra um you know,
Speaker 1: high level executive jobs. I mean, they're they're looking for
Speaker 1: people on basically you know, sort of UM in the
Speaker 1: manufacturing space UM. And they're having a hard time finding
Speaker 1: workers in that capacity. So there are jobs out there.
Speaker 1: I think it's just gonna take time for for this
Speaker 1: healing process to to to continue. UM. But I think
Speaker 1: by the time again, I think next year at this time,
Speaker 1: and you know, let's let's let's promise to have another
Speaker 1: conversation on December seventeenth, assuming that's not a weekend UM
Speaker 1: And I think, well, the story will be very, very different.
Speaker 1: I think that it's you're going to be below full
Speaker 1: employment by that point next year, we'll be talking about
Speaker 1: how hot the fetes running it some you think in
Speaker 1: nine months, I do, Jonathan. I think that you know
Speaker 1: again here too, we think the conversation is going to
Speaker 1: change pretty abruptly. I mean, I've said many times I
Speaker 1: think even to you all, that you know, Powell is
Speaker 1: not incentivized to talk pause typically about the economic backdrop,
Speaker 1: right He's he's more incentivized to, you know, say, hey,
Speaker 1: we're we're we're cautious, we're ready to do what we
Speaker 1: can in etcetera. But I think there's gonna have to
Speaker 1: be at some point of pivot over the course of
Speaker 1: twenty one where we move from this, hey things are
Speaker 1: you know, sort of looking really bad too. Hey, actually
Speaker 1: things are looking pretty good and we're actually starting to
Speaker 1: see some inflationary pressures really start to build. We wouldn't
Speaker 1: be the least bit surprised if the FED moves away
Speaker 1: from this notion of you know, hey, we're gonna we're
Speaker 1: not gonna be able to raise rates until twenty three
Speaker 1: or beyond. We can easily make an argument that you
Speaker 1: could see a rate hike in in twenty two. Now,
Speaker 1: before anyone falls out of their chair, I think what
Speaker 1: people have to keep in mind is we're not talking
Speaker 1: about you know, there's a difference between hiking rates and
Speaker 1: actually having tight policy. The removals and combination in and
Speaker 1: of itself doesn't mean that you have tight policy. It
Speaker 1: means that you're removing some accommodation. And so if the
Speaker 1: backdrop evolves as we think, which is to say, you know,
Speaker 1: five percent growth with upside risk uh core inflation, that's
Speaker 1: you know, north of two percent and even touches two
Speaker 1: and a half percent over the course of twenty one,
Speaker 1: I think it's gonna be really difficult for the FED
Speaker 1: to latch onto this notion that they're not going to
Speaker 1: do anything until twenty three. I mean that, uh you
Speaker 1: know that, that to me is just entirely too far fetch.
Speaker 1: Even Powell himself has acknowledged that things in the medium
Speaker 1: that they're upside risks in the medium term. Um you
Speaker 1: know that, that to us is he's he's right to
Speaker 1: say that because we think that there are um and
Speaker 1: in that context, there's gonna be no scenario again short
Speaker 1: of things really collapsing again that they're gonna, you know,
Speaker 1: not be able to touch rates until twenty three and
Speaker 1: and I would be mindful of time, but I think
Speaker 1: we have to keep in mind. I think everyone's looking
Speaker 1: for the steepener in in one look, and I'm sympathetic
Speaker 1: to the idea of a bit more steepening here in
Speaker 1: the immediate term. But I think as the year progresses again,
Speaker 1: as you get towards the back end of the year,
Speaker 1: I can make the argument that the curse actually starts
Speaker 1: to flight because I think the front end of the
Speaker 1: market will start to sniff out pretty early. The FED
Speaker 1: is actually gonna be late to the party, and thus
Speaker 1: I could see again the curve is gonna rise in general,
Speaker 1: but I see two year yields rising faster than tents,
Speaker 1: and you can actually see some curve flattening as the
Speaker 1: year progressive. It's the time. Let's build on this. Let's
Speaker 1: think about a little bit more of the communication that
Speaker 1: we've had in the last twenty four hours. It's the
Speaker 1: quantitative outcome based guidance. A feature or a buck do
Speaker 1: you think? Uh So? I love this question. Um, they
Speaker 1: wanted to be a feature, but I think it's a bug.
Speaker 1: I mean I think it's really hard. Look there, the
Speaker 1: reality is we don't know, you know. Powell's asked one
Speaker 1: of the reporters asked him a great question yesterday and
Speaker 1: it was basically and it was basically, how do we know,
Speaker 1: you know when when when we've sort of when when
Speaker 1: we've met your objectives? Um? You know, is the step
Speaker 1: a good summary of economic projections? Is that a good
Speaker 1: guy post? And basically said no, He's like, it's not
Speaker 1: a good guy post because he doesn't know exactly what
Speaker 1: it is. And I'm sympathetic to that, but I think
Speaker 1: there's the problem with this, this you know, quote unquote
Speaker 1: outcome based guidance. If we don't really know what output
Speaker 1: we're aiming for, then how do you know when you've arrived? Um?
Speaker 1: So I think this whole notion of of of shifting
Speaker 1: the framework, I think it's gonna want to proving to
Speaker 1: be quite messy for the FED down the road because
Speaker 1: we just don't have the guide post in place. And
Speaker 1: again I'm sort of sympathetic to them on some level,
Speaker 1: but on the other you know, I don't know why
Speaker 1: they had to actively down this path, um, particularly if
Speaker 1: you're not going to set up the right guid post
Speaker 1: and we don't know what they are within your enthusiasm?
Speaker 1: Do you just assume service sector inflation reverts to its
Speaker 1: three percentage? Mean? Yeah, Tom, So I think we do.
Speaker 1: I mean I think you know. One of the things
Speaker 1: that people I think are are you know, seem to
Speaker 1: forget is that we we we are from a service
Speaker 1: sector inflation perspective, it just persistently runs it around a
Speaker 1: three percent page um. And guess where we have a
Speaker 1: lot of room to make up from a spending perspective.
Speaker 1: In twenty one services right, goods have killed it. You know,
Speaker 1: they're well north of where we were pre COVID. Services
Speaker 1: is the ladder um and that's going to be the
Speaker 1: area that we really make if services are lagging? Does
Speaker 1: that mean you pay fifty dollars to your daughter to
Speaker 1: shovel the driveway? Actually, that's why she just ran away.
Speaker 1: She's she's going right. Who we really want to meet
Speaker 1: is young Preston, poor Sally who understands up to date?
Speaker 1: Is he around? Tom? He's crushed it this year. He
Speaker 1: has set from our VC. Send our regards to the family, Tom,
Speaker 1: thank you. I love about this year. There's only one
Speaker 1: thing I love about this year because this year has
Speaker 1: been terrible for so many reasons for everybody. How natural
Speaker 1: that's now become. Remember when they have an interviewers in
Speaker 1: Hong Kong several years ago and the child walked in
Speaker 1: and it was like, whoa, there's a child in the room.
Speaker 1: And then at the start of this everyone was like, whoa,
Speaker 1: there's Now it's just yeah, everyone's working at home. Who
Speaker 1: else is going to come in? Bring the dog? Right now?
Speaker 1: We're gonna migrate to this pandemic into what to do?
Speaker 1: What to do can be personified by a given restaurant
Speaker 1: in New York, in Chicago, in l A and points
Speaker 1: in between. The Lieutenant Governor of the Empire State is
Speaker 1: Kathy Hokel, and she joins us this morning on any
Speaker 1: number of topics. Cathy, there's snow in New York. It's
Speaker 1: not gonna work outdoors today. It's not going to work
Speaker 1: indoors either. How badly the small business? How badly do
Speaker 1: local and state need this fiscal stimulus? We definitely need it.
Speaker 1: I've been saying this for months. Governor Como has been
Speaker 1: saying this for month. Governor Como leaves the National Governor's
Speaker 1: Association a bipartisan group, every one of them, Republicans and Democrats,
Speaker 1: have been clamoring for help from Congress to give to
Speaker 1: state local governments, but also direct relief for our small businesses.
Speaker 1: In particular. I was in the city just yesterday day
Speaker 1: before the restaurants. I sat down with restaurant owners. They
Speaker 1: are starving, They're literally starving. We have to help them.
Speaker 1: The Settle government can right now help with a stimulus plan.
Speaker 1: It doesn't help the state local governments, which is pathetic,
Speaker 1: the abdication of their responsibility. So we are in trouble,
Speaker 1: but at least get some money to the small businesses.
Speaker 1: Right now, the reporting, including our Kevin surreally is state
Speaker 1: and local aid won't be in this bill. I guess
Speaker 1: it's gonna get done. You know the timeline as well,
Speaker 1: What is your and Governor Cuomo's timeline to where things
Speaker 1: fall apart if you don't get aid in the stimulus
Speaker 1: we right now, our expectations are that it's not going
Speaker 1: to be in there, and what we're being told unless
Speaker 1: there's some uh you know howiday gift that's going to
Speaker 1: come our way, which we pray for, but not if
Speaker 1: we manage our expectations, it doesn't come. What we're going
Speaker 1: to do is to be able to allocate one point
Speaker 1: five billion dollars of state money to the essential services
Speaker 1: that otherwise would not be funded. You cannot have a
Speaker 1: plan to have a mass distribution of vaccinations throughout the
Speaker 1: state and at the same time cut healthcare workers from
Speaker 1: hospitals and clinics. It doesn't work. So we're planning on
Speaker 1: a Joe Biden presidency. We expect that we'll be able
Speaker 1: to get more help from from the federal government. And
Speaker 1: I'll tell you it all comes down in Georgia. Amazing
Speaker 1: that the destiny of New York State is going to
Speaker 1: come down to who wins the election in the Senate races,
Speaker 1: in the in the runoffs in Georgia in the early January.
Speaker 1: If it's if we can have a majority of Democrats,
Speaker 1: they understand this, they've lived this, they actually have empathy
Speaker 1: for people, they'll be able to get the job done.
Speaker 1: Short of that, and we're gonna have to deal with
Speaker 1: this in our budget in March, and we'll have to
Speaker 1: make serious, serious cuts at that time. But right now,
Speaker 1: we're just not going to do We're not going to
Speaker 1: lay off teachers, We're not going to lay off health
Speaker 1: care workers. We're not going to lay off police officers
Speaker 1: right now just because Washington is failing abjectively. So we're
Speaker 1: going to get it done in New York State will
Speaker 1: be in financial trouble, but we'll have to deal with
Speaker 1: it in on budget in March. All right, let's talk
Speaker 1: about what that means. You say major cuts, Does it
Speaker 1: also mean raising taxes? That is absolutely on the table.
Speaker 1: The last thing we've wanted to do in New York
Speaker 1: State is to raise taxes, particularly in these troubled times.
Speaker 1: We understand that that is not a good plan. The
Speaker 1: plan A, it's it's not a good plan. B. It's
Speaker 1: not a good plan. See. But we may get to
Speaker 1: that point if we don't get that that essential assistance
Speaker 1: from the federal government to help offset the fifteen billion
Speaker 1: dollars that we're now faced and the whole we're facing. Uh,
Speaker 1: we're going to need to do something we don't want
Speaker 1: to have to do that the federal government can alleviate that. Again,
Speaker 1: this is not because of how New York manages its finance.
Speaker 1: This is because of a global pandemic. This is not
Speaker 1: anything we had any control over. We're doing the very
Speaker 1: best we can and we get this vaccine out. I'm
Speaker 1: telling you sure that I'm standing here in New York
Speaker 1: State will be the very first state to be COVID
Speaker 1: free because we're going to be very aggressive about this.
Speaker 1: That should be good news to businesses in New York
Speaker 1: to know the states across this country. I'm not going
Speaker 1: to be what we are in a few months. We're
Speaker 1: going to be very aggressive about this. It requires us
Speaker 1: to have money for healthcare workers to get that vaccine
Speaker 1: in people's arms. So let's talk about the process of
Speaker 1: rolling out the vaccine. You said that New York State
Speaker 1: will be among the first. What is the timetable for
Speaker 1: the rollout as you see it now? It's going on
Speaker 1: right now. We have different phases. We are in Phase one,
Speaker 1: which is nursing home residents, staff, high risk costol workers.
Speaker 1: Those are literally out there being administered in hospitals all
Speaker 1: over the state of New York. And we're proud that
Speaker 1: New York State had the very first individual one of
Speaker 1: our footline workers in Queens be the first in the nations.
Speaker 1: So we're excited about that. So we are also planning
Speaker 1: for phase two. Phase two will be essential workers and
Speaker 1: priority general public meeting knows with co morbidity underlying health conditions,
Speaker 1: so will be focusing on them as well. So we
Speaker 1: don't think that's going to come until later January. But
Speaker 1: I'll tell you, if we can get more supplies begin
Speaker 1: this would be a wonderful gift. Or we can get
Speaker 1: more supplies when Maderna gets approved and Fightser is able
Speaker 1: to come up with more, we will have no problem
Speaker 1: getting this out two New Yorkers. We have a very
Speaker 1: crest of plan that we've been working on since last
Speaker 1: July to get this into communities all over the state
Speaker 1: and in rural areas and in communities of color that
Speaker 1: have been hard. As said, we're going to have to
Speaker 1: overcome a lot of reluctance and that's part of our
Speaker 1: public relations campaign that's going on as we speak. Lieutenant Government,
Speaker 1: we only have so much time, about sixty seconds left.
Speaker 1: But if you could tell me where we are just
Speaker 1: in terms of considering another lockdown, We've had a lot
Speaker 1: about that in the last couple of weeks. What's your
Speaker 1: take at the moment, we don't have to do that.
Speaker 1: There's there is a plan if people right now change
Speaker 1: their behavior. Those who have been ignoring the mask mandates
Speaker 1: and ignoring our request that they stay socially distance. If
Speaker 1: they change their behavior, literally, we can get through these
Speaker 1: holidays and we'll start seeing a decline. Right now in
Speaker 1: New York state is about six per that inspection rate.
Speaker 1: That is still the fourth lowest in the nation. So
Speaker 1: I give a lot of credit to New Yorkers for
Speaker 1: its hearing to this, but it's trending upward, and we're
Speaker 1: worried about hospitalization capacity. Right now, we're about for the
Speaker 1: state available and if that starts getting much lower, then
Speaker 1: we have to talk about shutdown. But that is not
Speaker 1: our that that is where we hope not to end up.
Speaker 1: And we're not going to talk about that right now
Speaker 1: because we don't know what the behavior of people will
Speaker 1: be over the holidays. So we can't control that. Individuals
Speaker 1: can control that, and we may not have to talk
Speaker 1: about any more shutdowns. That is the last thing you
Speaker 1: want to do here in the state of New York. Kathy,
Speaker 1: thank you, New York LI Toennant Governor that Kathy, Kathy,
Speaker 1: thank you very much. I'm going far away and John
Speaker 1: Farrell knows this shows matthre Wererik and Steven Stanley lived
Speaker 1: it with AMers Pierrepont. It was called plug and chug.
Speaker 1: You got a formula something new Tony and and you
Speaker 1: throw in the data and come up with an answer.
Speaker 1: Steven Stanley, can you plug and chug now on the
Speaker 1: American economy? Me? Can you take the data, throw it
Speaker 1: in and actually come up with an outlook? Not if
Speaker 1: you're using your pre pandemic formulas. There's no doubt about
Speaker 1: it that the data have changed. I think with the
Speaker 1: claims numbers, you know, a big part of the issue
Speaker 1: is the changes in the program. The extra benefits that
Speaker 1: were on offer UM earlier in the year just led
Speaker 1: to a lot of unusual activity, people filing that were
Speaker 1: ineligible before, probably a lot of people filing that didn't
Speaker 1: you know, shouldn't have gotten benefits. So the levels of
Speaker 1: those claims numbers are definitely off UM. But I think
Speaker 1: to Mike's point from before, the fact that it is
Speaker 1: rising is consistent with what we're saying out there, which
Speaker 1: is that as the pandemic intensifies UM, you're starting to
Speaker 1: see a little bit of retrenchment some of those high
Speaker 1: contact industries. Thanks maving in the wrong direction state and
Speaker 1: it's the semi seven st still early. But if you
Speaker 1: have two pencil in a cold for the payrolls report
Speaker 1: for this month, what would it be right now? Yeah,
Speaker 1: my forecast, but I'm gonna say probably UM, still positive,
Speaker 1: but certainly weaker than in November. UM. I think, you know,
Speaker 1: the areas that are most sensitive to the pandemic, restaurants
Speaker 1: and some of the service categories are probably going to
Speaker 1: be down in December. But there's still, you know, a
Speaker 1: good amount that's going on that's good in the in
Speaker 1: the economy right now, certainly housing, I think, manufacturing, UM
Speaker 1: and some other categories. So we'll see how it plays out.
Speaker 1: But I think, you know, the markets have concluded that
Speaker 1: whatever happens in November December, UM, things are going to
Speaker 1: turn up next year. So you know, I think in
Speaker 1: some ways it's less important now what happens in the
Speaker 1: near term because of the prospect of vaccines, experience, the
Speaker 1: experience of this year staven that we can turn the
Speaker 1: economy off, turn it back on again, and it was
Speaker 1: snapped right back really quickly, and that the parallel is
Speaker 1: not what happened ten years ago in the financial crisis,
Speaker 1: it's what happened maybe in China through this year. If
Speaker 1: we can get a vaccination program ramped up, then what
Speaker 1: China has managed to achieve we can achieve in Europe
Speaker 1: and the United States. Do you share that view, Stephen,
Speaker 1: I've heard so many times in the last couple of weeks.
Speaker 1: I absolutely do. I I thought that from the beginning
Speaker 1: that the recovery would be faster and more vigorous than
Speaker 1: than most people thought. I mean, that was certainly true
Speaker 1: in the spring and summer. UM. We've had a bit
Speaker 1: of a setback now, which is understandable given the evolution
Speaker 1: of the pandemic UM. But you know, I do see
Speaker 1: the economy getting back to something close to normal in
Speaker 1: the second half of next year. One thing that John
Speaker 1: was talking about is this churn that we're seeing in
Speaker 1: the labor market. Initially people who are getting laid off
Speaker 1: for the lower wage workers. Is that changing, I mean,
Speaker 1: is this churn leading to more higher paid UH wage
Speaker 1: higher paid wage employees getting laid off and trying to
Speaker 1: find something perhaps with lower income Well, I mean, I
Speaker 1: think the impetus at the margin um is still going
Speaker 1: to be that low paid. It's it's those high contact industries.
Speaker 1: I mean, restaurants is kind of the poster child for
Speaker 1: that dynamic, and those are still going to be mostly uh,
Speaker 1: lower wage jobs. I think the you know, the white
Speaker 1: color um phenomenon that you discussed is one that's gonna
Speaker 1: be much slower moving. So it is there in the background,
Speaker 1: but it's gonna get overwhelmed most months, I think, until
Speaker 1: the pandemic is done, simply because the greater churn is
Speaker 1: occurring in those service industries. Meanwhile, given the uncertainty that
Speaker 1: you're talking about, Steven, with respect to the actual numbers,
Speaker 1: when do they matter? When do they change the trajectory
Speaker 1: of the recovery too well? I think when when we've
Speaker 1: kind of turned the corner on the pandemic really. I mean,
Speaker 1: it sounds like from the public health officials that we're
Speaker 1: talking about probably the spring, when most people will have
Speaker 1: access to a vaccine. And I think at that point,
Speaker 1: you know, the the that's when we're really going to
Speaker 1: have a sense of how much of what we've seen
Speaker 1: is going to be structural as opposed to just strictly
Speaker 1: short term. And I think that's the real question from
Speaker 1: the markets perspective. I mean, do you do you get
Speaker 1: all the way back to where we were in February
Speaker 1: of or are you only going to get part way
Speaker 1: back or you're gonna have an unemployment rate at six
Speaker 1: percent or five percent UM? And you know, I think
Speaker 1: that's really the question at this point that the markets
Speaker 1: are probably most focused on UM heading into next year.
Speaker 1: Steven Stanley, You've got a great clarity about what they do,
Speaker 1: not what they say. What are corporations in America doing
Speaker 1: right now? Not the pr not the lip service, not
Speaker 1: the CEO blather, What are they really doing in terms
Speaker 1: of investment and in terms of strategy given this economy? Well,
Speaker 1: I mean, certainly, the durable goods numbers that we've gotten
Speaker 1: so far this year have been surprisingly and consistently better
Speaker 1: than expected. So investment, especially in equipment has been UM
Speaker 1: I think encouraging. It suggests that businesses are willing to
Speaker 1: look past this and and certainly I think businesses have
Speaker 1: a longer UH time horizon and their decision making than
Speaker 1: most households. So that makes sense. UM. Again, as the
Speaker 1: as the hope that we can get back to something
Speaker 1: close to normal UH gets closer and closer, I think
Speaker 1: businesses are gonna get back more and more toward a
Speaker 1: business as usual approach. That's I think, you know, to
Speaker 1: your point, though, that's mostly for big businesses. If you're
Speaker 1: a small business and you're in one of these sectors
Speaker 1: that's being restrained by social distancing rules, then obviously it
Speaker 1: becomes a day to day, maybe week to week endeavor
Speaker 1: just to stay alive. So, um, you know, hoping to
Speaker 1: see something from Congress this week, but there are a
Speaker 1: lot of businesses I think that are just hoping to
Speaker 1: make it to next month and next year. Small business
Speaker 1: in the labor markets certainly asking for it much much
Speaker 1: more loudly. In the last couple of wait stament. Thank
Speaker 1: you Stamen Stanley ms Pappon, Chief Economist, Thanks for listening
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