WEBVTT - Traders Brace for Economic Data Flood 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 --> 0:00:31.920 Chambov joined us absolutely definitive at Blackrock here Global had 0:00:31.920 --> 0:00:36.000 a research for Blackrock Investment Institute and with the Canadian 0:00:36.720 --> 0:00:40.960 feel as well. Jean, I see the moment here. I 0:00:41.000 --> 0:00:45.640 was reading very carefully way Lee the other day synthesize 0:00:45.680 --> 0:00:50.080 the Blackrock view of the software shock of four or five, 0:00:50.200 --> 0:00:51.040 six days ago. 0:00:53.200 --> 0:00:57.000 Yeah, I think it's interesting maybe to start by comparing 0:00:57.040 --> 0:00:59.080 this to last fall. Right, So, last fall we had 0:00:59.080 --> 0:01:01.200 market selling off and that was all on the back 0:01:01.280 --> 0:01:04.360 of doubts about whether AI with the real thing. And 0:01:04.400 --> 0:01:06.440 now we got this kind of as you say, shock 0:01:06.520 --> 0:01:08.360 over the last few a couple of weeks, which is 0:01:09.160 --> 0:01:12.200 also a sell off, also a sell off story, but 0:01:12.280 --> 0:01:15.559 it's it's because of AI is a real thing this time, 0:01:15.920 --> 0:01:18.720 and now market extrapolating to the disruption is going to 0:01:18.800 --> 0:01:22.000 really cause So I guess one takeaway is that you know, 0:01:22.200 --> 0:01:24.560 we see that as increasing the conviction of this AI 0:01:25.120 --> 0:01:30.119 mega force being real, it's happening, it's disrupting now, uh, 0:01:30.160 --> 0:01:33.080 and now markets are starting to think through what that 0:01:33.240 --> 0:01:34.920 means for winners and losers. 0:01:35.160 --> 0:01:36.959 I think it's early though on that question. 0:01:37.080 --> 0:01:39.800 So we're going to see markets start to run to 0:01:39.880 --> 0:01:45.720 conclusion and make big, you know, sweeping software type labels 0:01:45.720 --> 0:01:47.720 and stuff and run with this. But I think it's 0:01:47.760 --> 0:01:50.480 going to be a story that's gonna, you know, be 0:01:50.680 --> 0:01:54.400 a much more nuance. And yeah, I think we're gonna 0:01:54.600 --> 0:01:56.680 likely to see overreaction along the way as we've seen. 0:01:57.120 --> 0:02:00.680 John, I'm wondering if this market can perform if technology 0:02:00.800 --> 0:02:04.800 is not leading it. We've become so accustomed to technology 0:02:04.840 --> 0:02:08.680 and then most recently the magazis magnificent seven leading this market. 0:02:09.600 --> 0:02:11.560 Do you sort of have confidence that that's the case. 0:02:12.880 --> 0:02:15.799 Yeah, Well, I mean the we we in our outlook 0:02:16.240 --> 0:02:19.200 we call that micro is macro, right, So the idea 0:02:19.280 --> 0:02:22.280 that like it's it's a it's a mega for story's 0:02:22.360 --> 0:02:24.880 AI is at the center not only of this market 0:02:24.919 --> 0:02:27.480 but of the economy, to be honest. So the growth 0:02:27.520 --> 0:02:29.840 we've been having and we're going to continue that is 0:02:29.880 --> 0:02:34.000 heavily dependent on AI continuing to grow. But I would 0:02:34.040 --> 0:02:35.359 say that what we've seen in the last couple of 0:02:35.360 --> 0:02:40.440 weeks is now visibility into that breaking out of you know, 0:02:40.520 --> 0:02:43.360 out of the pure kind of builders. So yes, we 0:02:43.400 --> 0:02:46.560 are focused on the potential losers, but that means that 0:02:46.600 --> 0:02:48.000 they're losers because there's going. 0:02:48.000 --> 0:02:48.959 To be windfalls. 0:02:48.919 --> 0:02:51.079 They're going to be very significant for the others where 0:02:51.160 --> 0:02:52.359 it's going to get monetized. 0:02:52.840 --> 0:02:55.680 So you know, you know, I think we get Yeah, 0:02:55.720 --> 0:02:57.480 everything dependent on the AI story. 0:02:58.120 --> 0:03:01.120 I think the build out, the need to build this 0:03:01.200 --> 0:03:04.600 out is that THESUS is intact, even maybe reinforced, and 0:03:04.639 --> 0:03:06.160 that's an I perfrescat. 0:03:06.200 --> 0:03:08.560 Our story is killing me. 0:03:09.040 --> 0:03:11.920 Ticos micro's macro. You know, I got a shift to 0:03:11.960 --> 0:03:14.760 a FED discussion Jean Beauvan with us, with all of 0:03:14.760 --> 0:03:19.120 his great work and academics at Princeton. Does Kevin worsh 0:03:19.200 --> 0:03:24.400 have any understanding Jean Beauvan of the micro dynamics of 0:03:24.600 --> 0:03:29.600 Monetary policy study or is it all big concept stuff? 0:03:31.800 --> 0:03:33.120 I mean, I I don't know. 0:03:33.160 --> 0:03:36.960 I don't know that I have visibility into that specific question, 0:03:37.160 --> 0:03:41.040 I think, But you know, I know I've known given 0:03:41.080 --> 0:03:44.000 for for some years and I've followed like his comments 0:03:44.040 --> 0:03:46.119 and so on. I guess one thing you could say 0:03:46.200 --> 0:03:49.480 is that this is only somebody that has like a 0:03:49.600 --> 0:03:52.600 macro view of my policy that is incurred in like 0:03:52.920 --> 0:03:56.440 crisis experience, and I would say that as like a 0:03:56.440 --> 0:03:58.960 good understanding of the global ramification of that. 0:03:59.160 --> 0:04:01.680 So I guess that's uh, that's an important point. 0:04:01.920 --> 0:04:04.720 And has also been very focused on the AI piece, 0:04:04.760 --> 0:04:07.440 which I guess is uh is more of a micro 0:04:07.840 --> 0:04:11.600 lench something. So so that suggests that like both are 0:04:11.960 --> 0:04:13.920 at play here with Kevin And what's. 0:04:13.720 --> 0:04:16.320 Really interesting here we had another guest in earlier is 0:04:16.360 --> 0:04:20.520 talking about the productivity boom is not only AI, but 0:04:20.720 --> 0:04:25.680 is efficiency learned off the pandemic. Describe how you see 0:04:25.839 --> 0:04:27.920 America's burgeoning productivity. 0:04:29.600 --> 0:04:32.359 Well, I would say that the productivity we've seen in 0:04:32.400 --> 0:04:34.720 the data so far, to my mind, our mind, has 0:04:34.960 --> 0:04:37.080 not much to do with AI yet, So I think 0:04:37.080 --> 0:04:39.960 that would be would be more sympathetic to uh, you 0:04:39.960 --> 0:04:43.440 know what we've learned from the pandemic and uh and 0:04:43.480 --> 0:04:44.200 that feeling true. 0:04:44.200 --> 0:04:45.640 And also I think a big part of this is 0:04:45.839 --> 0:04:47.160 just cyclical. 0:04:47.200 --> 0:04:51.159 Uh, you know, where when when growth is accelerating, we 0:04:51.320 --> 0:04:54.080 tend to be more productive before we hire more people 0:04:54.480 --> 0:04:57.040 and there's also this kind of no fire, no higher 0:04:57.120 --> 0:05:01.040 dynamic with the uncertainty that I think manifest itself in 0:05:01.040 --> 0:05:02.360 increased measure productivity. 0:05:02.400 --> 0:05:04.360 So first point is, I don't think we've seen the 0:05:04.400 --> 0:05:05.679 II productivity yet. 0:05:06.240 --> 0:05:09.760 I do think that this is the potential is real, right, 0:05:09.800 --> 0:05:12.320 I mean, and I think it's going to take some 0:05:12.360 --> 0:05:13.000 time to see it. 0:05:13.040 --> 0:05:15.039 But like we for the we think for the first 0:05:15.080 --> 0:05:16.239 time it's. 0:05:16.080 --> 0:05:20.160 Conceivable that AI could be powerful enough to finally break 0:05:20.240 --> 0:05:22.800 us out of a two percent road world, which we 0:05:22.880 --> 0:05:23.880 haven't broke in. 0:05:23.839 --> 0:05:25.560 The US for one hundred and fifty years. 0:05:25.600 --> 0:05:29.520 All the ingenuity of humans over the last one hundred 0:05:29.520 --> 0:05:31.240 and fifty years has just been enough to keep us 0:05:31.279 --> 0:05:34.279 on a two percent road pad. I think it's conceivable 0:05:34.279 --> 0:05:36.120 that AI for the first time could change that. 0:05:37.440 --> 0:05:38.400 And the key thing. 0:05:38.279 --> 0:05:40.720 Will be if it actually leads us to accelerate the 0:05:40.800 --> 0:05:41.560 rate of innovation. 0:05:41.680 --> 0:05:44.400 That's the key thing to track for us. But that 0:05:44.480 --> 0:05:45.919 I don't think we've seen that yet. 0:05:46.480 --> 0:05:49.279 Jehan, twenty twenty five was a year where emerging markets 0:05:49.360 --> 0:05:53.159 really asserted itself as a performer. Here is that can 0:05:53.160 --> 0:05:54.360 extend in twenty six. 0:05:56.160 --> 0:05:59.320 We are we are positive for an emerging market for 0:05:59.320 --> 0:06:04.000 twenty twenty ses. I think the backdrop macro backdrop continues 0:06:04.040 --> 0:06:08.039 to be you know positive for EM in general. Do 0:06:08.120 --> 0:06:12.200 we have you know, a weaker dollar environment that I 0:06:12.200 --> 0:06:15.640 think we were not like subscribing to the idea that 0:06:15.680 --> 0:06:18.400 there's an ongoing kind of trend downward than a dollar 0:06:18.400 --> 0:06:20.200 in twenty twenty six, But I don't think it's trend 0:06:20.240 --> 0:06:23.280 any either, So I think that's going to be conducive 0:06:23.360 --> 0:06:26.960 constructive for EM. We have you know, a Paulsey landscape 0:06:27.000 --> 0:06:29.680 in EM that has been you know, surprisingly strong the 0:06:29.760 --> 0:06:32.280 last couple of years. I think that continues and for 0:06:32.400 --> 0:06:34.960 us then it's about tracing those mega force and now 0:06:35.000 --> 0:06:37.560 they play out in EM. So those that are exposed 0:06:37.560 --> 0:06:40.960 to AI, I think are set to do well. You know, 0:06:41.040 --> 0:06:45.760 Korea is obviously like the super story of twenty twenty five, 0:06:46.839 --> 0:06:49.120 but I think that hass the room to continue. 0:06:49.360 --> 0:06:52.680 What is the study at Black Rock? Joan Bovan of China? 0:06:52.960 --> 0:06:56.200 Are they finally recovering? We're seeing it in retail a 0:06:56.240 --> 0:06:59.000 little bit caring Gucci out today with a better tone, 0:06:59.000 --> 0:07:02.400 but this Black see China doing better. 0:07:04.160 --> 0:07:07.479 I think I think that the marginal the evolution is 0:07:07.520 --> 0:07:12.119 towards a more positive you know, investment landscape. I think 0:07:12.240 --> 0:07:14.160 the and there's a couple of things. I think the 0:07:14.200 --> 0:07:17.440 AI story again, I mean, there's this more in AI 0:07:17.520 --> 0:07:19.240 in life. But that's the key that's certainly the key 0:07:19.240 --> 0:07:21.239 thing right now, and it's also true in in China. 0:07:21.280 --> 0:07:21.880 That's a key thing. 0:07:21.920 --> 0:07:24.760 I think we we have not paid enough attention in 0:07:24.800 --> 0:07:27.680 twenty twenty five has been a big story and it 0:07:27.720 --> 0:07:31.240 has really been pretty powerful. I think the other the 0:07:31.280 --> 0:07:34.040 other key drivers or yes, there's a bit of a 0:07:34.120 --> 0:07:36.760 of a brunnening of growth that could be part of it. 0:07:36.800 --> 0:07:40.560 But I think also the authorities shifting their stands on 0:07:40.640 --> 0:07:43.840 copper China and allowing maybe a bit more breeding room 0:07:44.560 --> 0:07:46.600 I think and learning those lessons from the last few 0:07:46.640 --> 0:07:49.920 years could also be constructive. So on a technical basis, 0:07:49.960 --> 0:07:53.320 we see more opportunity in China than we would have 0:07:53.400 --> 0:07:54.800 had seen a year ago. 0:07:55.040 --> 0:07:57.600 Jean, thank you for the time, particularly those comments on 0:07:57.640 --> 0:08:03.800 the federal reserve nomination process. You champavent at Blackrock. Stay 0:08:03.840 --> 0:08:07.720 with us. More from Bloomberg Surveillance coming up after this. 0:08:14.960 --> 0:08:18.559 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:08:18.600 --> 0:08:21.760 weekday afternoons from seven to ten am. Eastern Listen on 0:08:21.840 --> 0:08:25.520 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:25.680 --> 0:08:27.120 watch us live on YouTube. 0:08:27.400 --> 0:08:29.760 True that we here with all the government shut down, 0:08:29.800 --> 0:08:33.760 short shutdown, nice restart, but the economics forward through the 0:08:33.800 --> 0:08:37.200 week is exhausting. To help us out, Francis Donald it 0:08:37.280 --> 0:08:39.840 joins us right now, thrilled to have her with us 0:08:39.880 --> 0:08:43.800 year this morning with RBC. I look, Francis at where 0:08:43.840 --> 0:08:46.719 we are, and I got to get to Friday. Do 0:08:46.760 --> 0:08:51.200 you have any guestimate or bestimate of where you'll be Friday? 0:08:51.320 --> 0:08:54.240 It's a quarter of nine, quarter of nine. 0:08:54.280 --> 0:08:57.640 Well, we will be still reviewing the CPI data, but 0:08:57.920 --> 0:09:01.520 probably taking the entirety of the week together, which is 0:09:01.559 --> 0:09:04.680 we've got retail sales, we've got a jobs number coming through, 0:09:04.760 --> 0:09:08.040 we've got inflation, and yet behind the scenes, the problem 0:09:08.120 --> 0:09:10.800 is a lot of our data is still distorted coming 0:09:10.800 --> 0:09:13.800 off of the shutdown. We've got seasonality issues, which we 0:09:13.880 --> 0:09:16.320 always do in the first quarter, and then we have 0:09:16.400 --> 0:09:18.880 a lot of known unknowns like where is tariff policy 0:09:18.920 --> 0:09:20.880 going to settle? We still don't know the answer to that, 0:09:21.320 --> 0:09:23.880 and we're wrestling out with all of these data points. 0:09:24.040 --> 0:09:26.559 What is a cyclical trend versus what is a structural 0:09:26.600 --> 0:09:27.920 that's never been more important in. 0:09:27.960 --> 0:09:32.240 Microre smart people in Atlanta have the Atlanta GDP now, 0:09:32.360 --> 0:09:36.520 which is now it's coming down. Is that a vector 0:09:36.559 --> 0:09:39.200 in place that are we going to get real GDP 0:09:39.440 --> 0:09:40.320 under three percent? 0:09:40.640 --> 0:09:42.560 We're probably going to get something for the fourth quarter 0:09:42.640 --> 0:09:45.280 around three percent, maybe a little bit of upside about that. 0:09:45.440 --> 0:09:48.760 But again, what is the composition of that growth. We're 0:09:48.800 --> 0:09:51.920 seeing growth that is great for markets, but not great 0:09:52.160 --> 0:09:55.040 great for the people. We're seeing growth that is really 0:09:55.080 --> 0:09:59.720 biased towards capex Ai data centers. Now, that's not necessarily bad. 0:10:00.280 --> 0:10:03.040 Different type of growth. It's not a tide that lifts 0:10:03.280 --> 0:10:05.200 all ships, and it's not one that's going to create 0:10:05.240 --> 0:10:08.560 a significant amount of job growth associated with it. It's 0:10:08.559 --> 0:10:11.840 not growth that's going to save the affordability issues facing consumers. 0:10:11.960 --> 0:10:13.599 In fact, it's not growth that's going to solve the 0:10:13.640 --> 0:10:16.160 k shaped elements of this economy. So it's growth, and 0:10:16.200 --> 0:10:18.600 that's good, and I'll never knock a great GDP number, 0:10:18.679 --> 0:10:20.760 But what's happening under the surface is going to be 0:10:20.800 --> 0:10:23.800 far more important for companies operating in the United States 0:10:23.840 --> 0:10:25.360 and ultimately for markets too. 0:10:25.720 --> 0:10:27.880 I like notes you say we're about to hit the 0:10:28.000 --> 0:10:31.120 five year anniversary of inflation running above two percent. I 0:10:31.120 --> 0:10:34.680 didn't think about it in that terms. The a IFED 0:10:34.760 --> 0:10:38.000 can't be happy about that, But b who cares about 0:10:38.000 --> 0:10:40.160 two percent? I mean, where did that number come from? 0:10:40.280 --> 0:10:43.120 And should we really care? It feels like inflation. It's 0:10:43.200 --> 0:10:45.600 higher than maybe we'd like it, But it's isn't it 0:10:45.640 --> 0:10:47.040 just kind of where we are in this economy. 0:10:47.160 --> 0:10:48.600 Well, I guess that's a great way to put it. 0:10:48.640 --> 0:10:50.199 That's kind of where we are. Where does it come 0:10:50.200 --> 0:10:53.400 from central bank research? Predominantly, I think originating out of 0:10:53.400 --> 0:10:55.840 New Zealand. The two percent was a great place to be. 0:10:56.160 --> 0:10:58.160 And I remember even a few years ago, folks would 0:10:58.200 --> 0:11:00.360 say things like, oh, well, what if we end up 0:11:00.400 --> 0:11:02.400 with three percent being the new two percent? This was 0:11:02.400 --> 0:11:05.079 a really scary type of development. But when I think 0:11:05.080 --> 0:11:07.520 about three percent, I think that while people got worried 0:11:07.559 --> 0:11:10.800 about inflation surging like it did during the post pandemic period, 0:11:10.880 --> 0:11:13.840 you know nine ten percent as being the real big problem, 0:11:13.920 --> 0:11:17.360 But here we are actually sort of embedding higher inflation 0:11:17.440 --> 0:11:20.840 expectations going forward, and the issue is based on our outlook, 0:11:20.840 --> 0:11:22.720 we're going to stay in the high twos and around 0:11:22.800 --> 0:11:24.959 three percent through the end of this year. So it 0:11:24.960 --> 0:11:26.679 wouldn't surprise me if you have me back a year 0:11:26.720 --> 0:11:29.280 from now that we're celebrating the six year anniversary of 0:11:29.320 --> 0:11:31.080 inflation above the two percent target. 0:11:31.120 --> 0:11:32.319 All right, let's go to the other side of the 0:11:32.600 --> 0:11:36.319 FEDS mandate, the labor market. We'll get some labor data 0:11:36.559 --> 0:11:39.480 this week as well, and the unemployment rate. I think 0:11:39.520 --> 0:11:43.200 the forecast is for four point four percent. Again, that 0:11:43.240 --> 0:11:46.080 feels kind of full employment ish, although you tell that 0:11:46.120 --> 0:11:48.440 to a recent college grad and they probably wouldn't feel 0:11:48.480 --> 0:11:49.920 that way. So how do you feel about the labor market? 0:11:50.000 --> 0:11:53.000 Well, employment ish, I'd say that's downright full employment right there. 0:11:53.000 --> 0:11:55.840 There's only two periods in history when we've had unemployment 0:11:55.920 --> 0:11:58.040 rates that were this low. We actually have a four 0:11:58.080 --> 0:12:01.120 to three in our forecast this week, but for three 0:12:01.160 --> 0:12:04.320 four four we're sort of splitting hairs here. So what's happening, Well, 0:12:04.360 --> 0:12:07.240 we are going to have far less job creation. You're 0:12:07.280 --> 0:12:09.640 not going to see new jobs being posted, so non 0:12:09.640 --> 0:12:12.080 farm payrolls those it going to continue to decline. We 0:12:12.120 --> 0:12:14.960 have about sixty sixty five thousand this week coming through 0:12:15.280 --> 0:12:17.520 could be lower, and it will trend lower through twenty 0:12:17.559 --> 0:12:20.440 twenty six, but that unemployment rate is not going to 0:12:20.600 --> 0:12:23.840 rise meaningfully. Why because there are not enough people who 0:12:23.880 --> 0:12:26.720 need new jobs coming forward. We only need to create 0:12:26.760 --> 0:12:29.559 about forty thousand jobs per month or less in order 0:12:29.600 --> 0:12:32.240 to keep those who want jobs with jobs coming through 0:12:32.240 --> 0:12:33.480 this year. That's going to take a lot of re 0:12:33.640 --> 0:12:35.520 education for markets to really understand. 0:12:35.559 --> 0:12:37.840 With the Royal Bank of Canada, Francis Donald with us 0:12:37.880 --> 0:12:40.520 to get us start. It's joining Terry Reisman on deck 0:12:40.600 --> 0:12:43.720 in the next hour, Ander Slimming from Morgan Stanley, Ian 0:12:43.760 --> 0:12:47.199 Bremer in the nine o'clock with Jellebovan Blackrock. Just a 0:12:47.240 --> 0:12:53.120 fabulous set of conversations today to launch into February and Marsh, 0:12:53.240 --> 0:12:55.520 I'm going to digress here now for thirty seconds. I 0:12:55.520 --> 0:12:58.240 think it's very important. One of the great moments for 0:12:58.320 --> 0:13:01.080 your Canada was to see the back Nordiq's on the 0:13:01.120 --> 0:13:04.079 ice with the Montreal Canadians eer of course at Colorado 0:13:04.160 --> 0:13:07.520 Avalanche play. Really emotional, Actually, folks, to see these two 0:13:07.520 --> 0:13:10.319 teams Pictures and Catchers right now? Do we need to 0:13:10.360 --> 0:13:14.200 see Montreal expos next year at Pictures and Catchers. 0:13:14.400 --> 0:13:15.520 Sure, let's go for it. 0:13:15.559 --> 0:13:16.920 I have to tell you just over this weekend My 0:13:16.960 --> 0:13:19.640 husband and I were having a conversation that everyone wanted gold, 0:13:19.679 --> 0:13:22.720 everyone wants critical minerals. Everyone was running after silver, whereas 0:13:22.760 --> 0:13:26.000 up in Quebec we're always running after nordiq a swage. 0:13:26.080 --> 0:13:28.600 We just want Nordique cots butters, and if we could 0:13:28.600 --> 0:13:30.800 monetize that, we could actually beat this market. 0:13:30.840 --> 0:13:32.880 When you were a kid, did you see the expos? 0:13:32.880 --> 0:13:34.280 Do you have any memor morse? 0:13:34.320 --> 0:13:36.640 We saw the expos. We saw UPI who is the mascot? 0:13:36.640 --> 0:13:38.720 It's still embedded in my montreal life. 0:13:38.720 --> 0:13:40.720 It's like up there, it's like it's. 0:13:40.559 --> 0:13:44.480 Like hockey exposs in, skiing on the mountaint being cold. 0:13:44.559 --> 0:13:46.760 Yeah, that kind of track care with the economics, finance 0:13:46.840 --> 0:13:50.559 investment with Francis Donald. I look at the makeup here 0:13:50.600 --> 0:13:52.680 and the number one thing I get from our listeners 0:13:52.679 --> 0:13:55.800 and viewers, you guys are idiots. The unemployment rate isn't 0:13:55.840 --> 0:13:58.320 four percent. We had somebody a couple of days ago 0:13:58.400 --> 0:14:02.720 say the unemployment rate calculated around hiring a dearth of 0:14:02.840 --> 0:14:07.360 hiring is eight percent ish. What does our unemployment rate 0:14:07.720 --> 0:14:08.920 feel like right now? 0:14:09.040 --> 0:14:11.040 Well, it depends who you are. I mean, Paul, you 0:14:11.200 --> 0:14:14.120 highlighted young folks. Right now, we've seen a huge surge 0:14:14.120 --> 0:14:16.360 of what we call youth unemployment, those under the age 0:14:16.360 --> 0:14:18.720 of twenty five. That's not just an American phenomenon, by 0:14:18.720 --> 0:14:22.000 the way, that's happening globally. Maybe some AI issues in there, 0:14:22.160 --> 0:14:25.880 maybe some hesitancy around how much will tariffs actually burn us? 0:14:26.040 --> 0:14:28.400 Should we be bringing on new labor here. But we 0:14:28.480 --> 0:14:30.560 have another theory as well, which is we talk a 0:14:30.560 --> 0:14:33.640 lot about this no hire, no fire environment, which is 0:14:33.640 --> 0:14:36.960 so atypical, but there is a shadow hiring market that's 0:14:37.000 --> 0:14:39.920 happening in the background, which is that if you retire, 0:14:40.360 --> 0:14:43.320 and we know there's mass retirements about two million folks 0:14:43.360 --> 0:14:46.440 in America are retiring every single year right now. That's 0:14:46.480 --> 0:14:50.520 sixty thousand folks more per month than before two years 0:14:50.520 --> 0:14:52.360 ago at delta sixty thousand. 0:14:52.600 --> 0:14:55.080 And you bring in a young person to replace that rule. 0:14:54.960 --> 0:14:57.920 Will not count as new job creation, It will not 0:14:58.040 --> 0:15:00.960 come up in non farm payrolls, will actually just be 0:15:01.000 --> 0:15:02.280 a replacement higher. 0:15:02.480 --> 0:15:04.280 So we know that there's hiring happening. 0:15:04.320 --> 0:15:06.200 That's a little bit more in the shadows and where 0:15:06.240 --> 0:15:08.480 we see and Tom, I'll tell you again, like if 0:15:08.520 --> 0:15:11.400 you are in trade or manufacturing right now, your unemployment 0:15:11.440 --> 0:15:14.040 rate is higher if you're in healthcare, the job market 0:15:14.080 --> 0:15:18.480 is extraordinarily tight. So my friend and colleague Amy Wi Silverman, 0:15:18.520 --> 0:15:21.120 I think here yesterday, friend of your show, she has 0:15:21.200 --> 0:15:24.600 this metaphor of a duck that is calm on the water. 0:15:24.440 --> 0:15:25.920 With the feet paddly. 0:15:27.520 --> 0:15:29.600 This today, I'm going to reduce it because it's a 0:15:29.640 --> 0:15:31.960 brilliant way that she describes it. It's also how the 0:15:32.000 --> 0:15:35.600 economy is operating with that unemployment rate stable on the surface, 0:15:35.800 --> 0:15:39.280 but extraordinary churn and transition happening underneath the surface. So 0:15:39.320 --> 0:15:41.920 it makes sense that Americans feel like they're not well 0:15:41.960 --> 0:15:43.280 represented in the number. 0:15:43.240 --> 0:15:45.240 A because the number is not telling us the whole story. 0:15:45.280 --> 0:15:47.760 But also because there's this huge fragmentation. 0:15:47.360 --> 0:15:48.920 Underneath retail sales. 0:15:48.960 --> 0:15:51.080 We're going to get a thirty this morning. How's the 0:15:51.120 --> 0:15:51.960 consumer doing it there? 0:15:51.960 --> 0:15:55.480 Do you think the consumer is muddling through? They've got 0:15:55.600 --> 0:15:59.520 real wage growth around one percent. That's enough they have 0:16:00.400 --> 0:16:03.440 going forward, so you'll be okay on retail sales. But again, 0:16:03.760 --> 0:16:08.400 incredible fragmentation underneath the surface. High income consumers holding up 0:16:08.440 --> 0:16:11.320 a lot of the rest, but not entirely. And I 0:16:11.320 --> 0:16:13.360 think this is the challenge, is that we're looking for 0:16:13.480 --> 0:16:15.920 a lot of cyclicality in that consumer that's going to 0:16:16.000 --> 0:16:18.600 be reduced because if you want a job in America, 0:16:18.760 --> 0:16:21.520 you probably have one on average. Again, we talked about 0:16:21.560 --> 0:16:24.360 some other areas. So for a very long time, economists 0:16:24.400 --> 0:16:26.760 would say the best way to measure the growth of 0:16:26.840 --> 0:16:30.560 the US economy is to say, if a consumer is employed, 0:16:30.760 --> 0:16:32.040 then all is right with the world. 0:16:32.040 --> 0:16:33.560 The consumer is two thirds. 0:16:34.080 --> 0:16:36.000 But that is no longer going to be the way 0:16:36.000 --> 0:16:38.520 that we measure the strength of the American economy, or 0:16:38.560 --> 0:16:40.400 the way we measure the strength of the consumer. It's 0:16:40.440 --> 0:16:42.120 going to be what type of job do they have, 0:16:42.600 --> 0:16:44.680 is it enough to offset the cost of living? Again, 0:16:44.760 --> 0:16:47.720 five year anniversary of inflation above two percent? And what 0:16:47.880 --> 0:16:50.360 sectors are actually seeing some of that strength moving forward? 0:16:50.400 --> 0:16:52.360 So I'm looking for more information on that today. 0:16:53.000 --> 0:16:56.000 From the Canadian perspective, where are we on tariffs here? 0:16:56.400 --> 0:16:59.400 Because I don't think we've heard a lot about them recently. 0:16:59.520 --> 0:17:01.160 I mean we had down on the Greenland thing a 0:17:01.200 --> 0:17:04.919 while ago. But from your perspective, the Canadian perspective, what 0:17:05.000 --> 0:17:05.880 is the tariff situation? 0:17:06.080 --> 0:17:09.679 Well, it depends what country you're speaking from. And actually 0:17:09.800 --> 0:17:12.760 trade policy is still very much in flux, right. We 0:17:12.800 --> 0:17:15.280 have the IEPAS Supreme Court decision that may come through. 0:17:15.640 --> 0:17:19.000 We have USMCA, Mexico, Canada and the United States are 0:17:19.080 --> 0:17:22.960 up for review of this very important trade document. And 0:17:22.960 --> 0:17:25.280 of course every day we see new information about trade 0:17:25.280 --> 0:17:27.920 deals that the US is embarking on. So our view 0:17:27.960 --> 0:17:31.600 is that actually American companies are not sure where tariffs 0:17:31.640 --> 0:17:34.480 will land, will they get reduced, and that's really implicating 0:17:34.720 --> 0:17:36.359 or slowing some decision making. 0:17:36.480 --> 0:17:39.359 You've been brilliant on this and the answer is we 0:17:39.400 --> 0:17:42.880 are a two to three percent blended tariffs. We did 0:17:43.000 --> 0:17:46.640 a jaw boned moonshot out of the rose Garden up 0:17:46.640 --> 0:17:50.800 to some ginormous William McKinley gilded age number, and there's 0:17:50.800 --> 0:17:53.040 a beautiful chart in the FT. I think Toby Nangoli 0:17:53.119 --> 0:17:57.440 had it coming back down and we're at tennish right now. 0:17:57.480 --> 0:18:00.000 For you, what would be the number to come back 0:18:00.119 --> 0:18:02.920 to where you'd say we'll survive. Do we need to 0:18:02.960 --> 0:18:04.359 get back to two to three percent? 0:18:04.640 --> 0:18:06.600 Well, I think the issue with tariffs is we always 0:18:06.600 --> 0:18:08.840 think about them in absolute as if it's the only 0:18:08.880 --> 0:18:11.240 shock happening to the US economy, and so I hear 0:18:11.280 --> 0:18:14.240 all the time, well, look, tariffs didn't impact the US 0:18:14.280 --> 0:18:17.199 inflation is you know, high twos, about three percent. The 0:18:17.280 --> 0:18:20.879 unemployment rate is fairly well contained. Where was the big 0:18:21.200 --> 0:18:23.359 you know hoop law that economists. 0:18:22.840 --> 0:18:25.479 Warm towards well Number one. I still think it's early. 0:18:25.600 --> 0:18:28.520 So companies, we believe, held onto market share over the holidays, 0:18:28.520 --> 0:18:31.760 and you're going to actually see tariffs rise into CPI 0:18:31.840 --> 0:18:34.240 data into the second quarter of this year. So it's 0:18:34.240 --> 0:18:36.720 too early to say we didn't see it. But secondly, 0:18:36.840 --> 0:18:39.120 we have seen this impact. We've seen it in rise 0:18:39.160 --> 0:18:42.040 and goods. We've seen it in layoffs in manufacturing and 0:18:42.119 --> 0:18:45.080 trade exposed sectors. And I think the better way to 0:18:45.119 --> 0:18:47.480 think about this is if we hadn't had tariffs come through, 0:18:47.640 --> 0:18:50.679 you would probably see higher growth, you would see lower unemployment, 0:18:50.680 --> 0:18:52.840 and you would see less inflation. So you have to 0:18:52.840 --> 0:18:55.280 compare it to what would the world look like without tariffs? 0:18:55.480 --> 0:18:57.760 Not why didn't the economy break as a result. 0:18:58.040 --> 0:19:00.639 So given all that background, what's are fed going to 0:19:00.680 --> 0:19:02.560 do over the next two three four five months? 0:19:02.600 --> 0:19:04.800 You think two three four five months, well, we think 0:19:04.800 --> 0:19:06.840 that they're going to stay on hold just because they 0:19:06.880 --> 0:19:09.960 won't have enough data to justify cuts. 0:19:10.000 --> 0:19:12.600 I mean of the year, we do have. 0:19:12.560 --> 0:19:14.960 A whole call through the end of twenty twenty six. 0:19:15.280 --> 0:19:18.520 Now here's the challenge. It's going to depend on some 0:19:18.600 --> 0:19:21.200 of the biases within the committee and how reactionary they're 0:19:21.240 --> 0:19:23.560 going to be. Because the unemployment rate is going to 0:19:23.600 --> 0:19:25.920 take up a couple beeps here, we could go from 0:19:26.000 --> 0:19:28.359