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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg

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Speaker 1: dot com, and of course on the Bloomberg terminal. Mike,

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Speaker 1: this has been a tremendous report, and luckily we get

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Speaker 1: some information from Minneapolis Fed President. I believe you have

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Speaker 1: him online. Good morning, Neil, Good morning, How are you good.

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Speaker 1: Neil cash Carry is the president of the Minneapolis Fed,

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Speaker 1: and he's joining us now on Job's Day, and we

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Speaker 1: thank you very much for doing it. We we've just

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Speaker 1: been tied up here talking about this big surprise of

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Speaker 1: a number. I know you haven't had a chance to

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Speaker 1: digest all of this, but does it tell you anything? Well,

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Speaker 1: I mean, I think it confirms that I feel very

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Speaker 1: good about our policy approach, which is outcome based monetary policy,

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Speaker 1: which is, let's actually allow the labor market to recover.

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Speaker 1: Let's not just forecast that's going to recover. Let's actually

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Speaker 1: allow the labor market to recover, get back to what

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Speaker 1: we call maximum employment. And get back to two percent

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Speaker 1: inflation and then would be in a position to talk

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Speaker 1: about normalizing monetary policy. So, as Chair Powell said a

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Speaker 1: week ago, we've had one great jobs report, Let's not

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Speaker 1: declare victory yet. Let's let the labor market heal and

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Speaker 1: then we can move from there. Well, let me ask

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Speaker 1: you the question John Farrow was just posing, and that

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Speaker 1: is is this because the week hiring? Is this because

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Speaker 1: of the generous unemployment benefits? Or is there something else

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Speaker 1: going on? Well, we hear all the same anecdotes. I

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Speaker 1: was listening as I was checking my emails. I was listening,

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Speaker 1: uh and trying to process the report to your conversation.

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Speaker 1: I think it's all of the things you talked about, Mike. Yes,

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Speaker 1: of course there are people who are on the sidelines,

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Speaker 1: who are getting generous unemployment and they say, look, we

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Speaker 1: know this is going to expire in three or four months.

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Speaker 1: And I think the and they're individually saying, we think

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Speaker 1: the job market is going to be strong than three

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Speaker 1: or four months. So why don't I just wait? We

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Speaker 1: know that dynamic is there. We also know there are

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Speaker 1: still massive healthcare excuse me, child care shortages that are

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Speaker 1: holding back families from fully reentering the workforce. That's disproportionately

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Speaker 1: affecting women. And there are still a lot of people

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Speaker 1: who are nervous about the virus, who maybe have not

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Speaker 1: yet been vaccinated, or who would need to get back

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Speaker 1: on a mass transit in order to get to their job,

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Speaker 1: and they're nervous about getting onto a crowded bus or

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Speaker 1: getting onto a crowded subway. So I think there are

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Speaker 1: a number of factors, but most of these factors should

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Speaker 1: work themselves out over the next few months, if the

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Speaker 1: vaccinations continue, if the variants don't flare back up again.

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Speaker 1: That's why I feel pretty confident that most of the

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Speaker 1: pricing pressures that we're going to see are in fact

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Speaker 1: going to be transitory, and we can get something back

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Speaker 1: to a full economy, you know, in the not foreseeable

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Speaker 1: I mean in the foreseeable future. Well, I guess the

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Speaker 1: word to describe the folks on Wall Street this morning

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Speaker 1: with this number is gobsmacked. But you don't seem to

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Speaker 1: be you're not surprised. Well, it's not that I forecast this, certainly,

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Speaker 1: not at all. But this is a highly uncertain environment

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Speaker 1: that we're in. This is this is not the financial

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Speaker 1: crisis that we experienced, so it's going to be a

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Speaker 1: different recovery. This is a healthcare crisis, and how the

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Speaker 1: American people respond. You know, it wasn't simply it was

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Speaker 1: not simply about lockdowns that led to the economic downturn

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Speaker 1: a year ago. We locked ourselves down as Americans because

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Speaker 1: we were scared, we were nervous. I certainly haven't been

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Speaker 1: out to the movies in a year or year and

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Speaker 1: a half. I'm getting for the first time taking my

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Speaker 1: family on a plane tomorrow because my wife and I

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Speaker 1: have been vaccinated. So a lot of this is about

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Speaker 1: individuals feeling safe to go back to normal, to get

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Speaker 1: back on the buses, to get back on the airplanes,

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Speaker 1: and how do we get there so that the vast

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Speaker 1: majority of Americans feel safe again. I do think it's

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Speaker 1: gonna take time, and it's gonna be They're gonna be

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Speaker 1: ups and downs. Do you think it's gonna take significantly

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Speaker 1: higher wages to attract workers? Are we're going to see

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Speaker 1: kind of a wage push here? I mean to be

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Speaker 1: honest with you, I hope so. I hope we see

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Speaker 1: employers step up. That was one of the things that

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Speaker 1: was extraordinary about the last recovery, it took ten years

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Speaker 1: to return to something like maximum employment, and I'm not

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Speaker 1: even sure that we quite got there before the pandemic hit.

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Speaker 1: And it was only in the last few years of

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Speaker 1: the recovery, after many years of businesses complaining that they

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Speaker 1: couldn't find workers. Only in the last couple of years

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Speaker 1: did we finally see way to start to pick up,

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Speaker 1: especially for those lowest income workers. Businesses will do anything

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Speaker 1: they can do to try to meet their labor needs,

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Speaker 1: and the last thing they want to do is raise wages.

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Speaker 1: And so if we can get them to say, you

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Speaker 1: know what, I raised my prices for every other input

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Speaker 1: into my business, maybe I ought to pay fair market

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Speaker 1: wages for my wage for my labor. I hope that

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Speaker 1: process happens more quickly. We can draw people back in

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Speaker 1: return to something like maximum employment and then really drive

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Speaker 1: this economy. I read a story to Morning and Analysis

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Speaker 1: this morning ahead of the payrolls report. It said, this

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Speaker 1: job's number is gonna be bad news for Joe Biden

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Speaker 1: because it's gonna make the case we don't need more stimulus.

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Speaker 1: Do you think the fact that we get this low

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Speaker 1: hiring level makes a case for more fiscal help, well,

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Speaker 1: I think there's a lot in the pipeline from obviously

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Speaker 1: the Cares Act and the Recovery Act that was passed

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Speaker 1: that's very large, that's still working its way, still getting

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Speaker 1: out there, um and so I personally, I think that that,

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Speaker 1: combined with monetary policy is probably going to be enough

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Speaker 1: to restore and get you know, get through this pandemic

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Speaker 1: and get to something like full employment or maximum employment

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Speaker 1: and get the economy recovered. Now. I know the Administration

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Speaker 1: and Congress are debating other fiscal measures for longer term

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Speaker 1: economic competitiveness, and I think those are important debates to have.

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Speaker 1: But in terms of just bridging the downturn from the

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Speaker 1: pandemic from the COVID crisis, I think there's a lot

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Speaker 1: of fiscal stimulus still in the pipeline, and uh, monetary

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Speaker 1: policy is still you know, on full throttle to to

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Speaker 1: get us through this, and then you know, Congress and

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Speaker 1: the Administration can debate their longer term priorities. Speaking of

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Speaker 1: monetary policy, on Frontal A last night, the FED warned

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Speaker 1: that elevated risk appetite is raising risks of what your

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Speaker 1: report euphemistically called a repricing event. Many on Wall Street

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Speaker 1: blame you for that. They say you're no longer taking

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Speaker 1: away the punch bowl, but you've become the bartender. What's

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Speaker 1: your reaction to that? Well, you know, um, I haven't

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Speaker 1: done the math on what the how many Americans are

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Speaker 1: still out of work? From you? As of yesterday? The

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Speaker 1: number in my head was around eight point five million

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Speaker 1: Americans roughly call it eight million out of work who

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Speaker 1: were working before the pandemic, and the labor force has

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Speaker 1: grown or the population has grown since then, so it's

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Speaker 1: probably closer to nine or ten million who want to

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Speaker 1: work and should be working, who are out of work.

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Speaker 1: So for Wall Street, my friends on Wall Street, and

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Speaker 1: I have a lot of them, I hear from them

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Speaker 1: all the time complaining about the Fed's policies that are

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Speaker 1: you know, mucking up their trading strategies. I have zero

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Speaker 1: sympathy because there are still eight to ten million Americans

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Speaker 1: who want to work, who ought to be working, and

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Speaker 1: we we need to rebuild this labor market and put

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Speaker 1: them back to work, and then at that point there

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Speaker 1: will be plenty of time to normalize monetary policy. And

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Speaker 1: if we're if we're wrong, if these inflation surprises are

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Speaker 1: not transitory, but end up being more persistent. We have

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Speaker 1: the tools to deal with that. We have the tools

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Speaker 1: to tighten monetary policy to keep inflation in check. I'm

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Speaker 1: not worried about that. What I am worried about is

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Speaker 1: not having another ten year recovery for our labor market.

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Speaker 1: That's devastating to millions of Americans, and we need to

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Speaker 1: put them back to work much more quickly. Yet, the

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Speaker 1: question a lot of people ask is do you still

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Speaker 1: need to do a hundred and twenty billion a month

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Speaker 1: or would less get you the same result that you're

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Speaker 1: getting now? You know, I would say this quantitative easing

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Speaker 1: is in exact science, and what we're doing right now

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Speaker 1: I think is supporting certainly the housing market, supporting financial markets,

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Speaker 1: and generally keeping the yield curve lower, keep than ten

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Speaker 1: year down, which bleeds through in all sorts of other

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Speaker 1: different interest rates across the economy. So we're providing a

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Speaker 1: lot of support to accelerate that recovery. You know, could

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Speaker 1: could somebody argue, all, instead of one twenty, it should

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Speaker 1: be one ten. Sure, we could have that debate, But

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Speaker 1: this is uh, you know, it's an in exact science.

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Speaker 1: So I'm firmly in the camp of what we are

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Speaker 1: doing right now is providing a lot of support. Once

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Speaker 1: we've actually seen substantial further progress, which is the forward

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Speaker 1: guidance that we've given uh to get back to our

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Speaker 1: dual mandate goals, that will be the time to consider

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Speaker 1: changing it. I don't see any reason right now to

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Speaker 1: change something that is working and providing support to the

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Speaker 1: financial system into the economy. Interestingly, there's a forty billion

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Speaker 1: dollar options bet that at Jackson Hole J. Powell will

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Speaker 1: say something to change the market's perception of when you

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Speaker 1: might taper. What would you say to that kind of

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Speaker 1: timing in terms of when you when the markets might

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Speaker 1: hear from you. I'm not going to speculate on that.

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Speaker 1: I'm sure there are multi billion dollar bets on all

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Speaker 1: sorts of different things. Uh, you know, let the markets

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Speaker 1: have their fun and make those bets. We are focused

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Speaker 1: on returning to our dual mandate goals, uh, you know,

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Speaker 1: getting back to maximum employment, and we've said we want

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Speaker 1: to see substantial further progress. And today's jobs report, for

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Speaker 1: all those people who've been saying, oh my gosh, the

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Speaker 1: Fed needs to normalize quantitative easing, today's jobs report is

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Speaker 1: just an example of we have a long way to go,

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Speaker 1: and let's not prematurely declare victory. Does this change your

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Speaker 1: forecast for what happens the rest of the year in

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Speaker 1: terms of growth and employment. I need to look at

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Speaker 1: the details underneath the numbers, which I haven't obviously been

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Speaker 1: able to do. My gut tells me no, I think

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Speaker 1: I've been in the camp that it's going to It

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Speaker 1: may take a few years before we get back to

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Speaker 1: full or maximum employment, because we still have a deepole.

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Speaker 1: Remember this eight nine, ten million number of Americans who

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Speaker 1: ought to be working, who want to work, who are

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Speaker 1: not working. That is still roughly like the Great Financial Crisis,

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Speaker 1: the deepest part of the Great Financial Crisis. So, yes,

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Speaker 1: there are sectors of the economy that are doing great.

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Speaker 1: They're set is the economy that are fully reopened. But

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Speaker 1: we are basically in a labor market like we were

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Speaker 1: in in two thousand nine, and it's gonna take time,

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Speaker 1: and I hope it doesn't like I'm saying, I don't

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Speaker 1: want it to take ten years. Hopefully we can put

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Speaker 1: this back together in a year or two. But I

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Speaker 1: just don't want to declare victory prematurely. I guess I

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Speaker 1: gotta ask you one more question before we go, and

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Speaker 1: that is everybody was predicting that we were going to

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Speaker 1: get the FEDS inflation target met by the end of

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Speaker 1: the year or sometime early next year. Do you think

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Speaker 1: that could be off, that maybe it's gonna be a

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Speaker 1: little bit harder to pull prices up. Well, I think

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Speaker 1: mathematically it's not gonna be that hard to do it,

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Speaker 1: because we had such low inflation readings more than a

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Speaker 1: year ago, and those numbers are now rolling out of

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Speaker 1: the math. So I think between energy prices and arithmetic,

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Speaker 1: you're going to see a short term pop, but just

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Speaker 1: those that short term pop in inflation is not at

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Speaker 1: all going to convince me that actually that actually means

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Speaker 1: underlying inflation is back to two percent or above two percent,

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Speaker 1: And that's what I'm really going to be focused on.

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Speaker 1: And so we're gonna look at you know, if you

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Speaker 1: look at infla action expectations based on market based measures,

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Speaker 1: the inflation expectations for the next few years have ticked up,

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Speaker 1: but they're basically where they were for the longer horizon,

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Speaker 1: and so, uh, we have a lot of data that

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Speaker 1: we need to look at to try to try to

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Speaker 1: determine Is this just math or is this actually underlying

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Speaker 1: inflation that has picked up. I do think it's gonna

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Speaker 1: take more time for underlying inflation to tick up, and

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Speaker 1: I do think it's going to be tied to the

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Speaker 1: labor market. I'll be very surprised if we think that

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Speaker 1: underlying inflation is actually climbing back to two or above

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Speaker 1: two percent when we still have millions and millions of

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Speaker 1: Americans out of work who ought to be working and

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Speaker 1: who ultimately will want to work. Neil cash Carry, the

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Speaker 1: president of the Minneapolis Fan, thanks so much for joining

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Speaker 1: us this morning on this job's day. The markets have

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Speaker 1: shifted off the shocking labor report. That means it is

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Speaker 1: a good time always for us to speak with Martin Walsh,

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Speaker 1: Secretary of Labor. Here is our John Farrow by TV

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Speaker 1: and radio is Muddy Wols, the U S Secretary of

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Speaker 1: Labor Secretary. Will it's great to see you again, great

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Speaker 1: to catch up. Let's just start with the payrolls report,

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Speaker 1: and I would love just to get your initial reaction,

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Speaker 1: so a big downside surprise at least for many of

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Speaker 1: the people on Wall Street. Yeah, you know, we had

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Speaker 1: a two hundred and sixty or six thousand jobs this month. UH.

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Speaker 1: In under normal circumstances, that would be a great month.

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Speaker 1: When you look at the last three months here in

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Speaker 1: the United States, we've added an average of over five

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Speaker 1: hundred thousand jobs for a month, and that's a change

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Speaker 1: from the previous three months we were sixty tho jobs

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Speaker 1: were added. We still have a steep climb, we still

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Speaker 1: have ways to go. Another positive number he had two

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Speaker 1: positive numbers, is that the leisure economy, which includes restaurants

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Speaker 1: and and travel, is up significantly as far as job

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Speaker 1: job gain, and more people looked for jobs in the

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Speaker 1: month of April than the previous months. So we're seeing

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Speaker 1: positive signs as we continue to move forward here. Secondly,

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Speaker 1: wolves the things to be a ton of demand everywhere

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Speaker 1: you look, you see and all the data points. The

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Speaker 1: conversation we've had since eight thirty east and as soon

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Speaker 1: as this number to opped, it's what is happening on

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Speaker 1: the supply side, what is holding people back, whether it's

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Speaker 1: the p M I or the is M data that

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Speaker 1: we've seen earlier this week. In America, the labor pool

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Speaker 1: is tight. Labor is the biggest issue. Logistics and supply

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Speaker 1: can't keep up. There's a labor shortage in your opinion,

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Speaker 1: in the administration's opinion, what do you think is holding

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Speaker 1: back the labor market at the moment on the supply side,

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Speaker 1: not in demand. Well, I think what's happening is in

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Speaker 1: some way some areas, these industries have gone from zero

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Speaker 1: and they're they're they're ramping up to a hundred overnight.

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Speaker 1: And I think that again, it's about getting people into

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Speaker 1: these jobs. I think that's going to be key as

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Speaker 1: we move forward here. I also I think that there

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Speaker 1: are some barriers still. People still concerned about the virus.

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Speaker 1: We have issues around childcare. We have issues around schools

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Speaker 1: are open in America, but some are hybrid where people

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Speaker 1: are learning in persons, some are learning outside, so we

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Speaker 1: have issues around that. We also have people the vaccine

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Speaker 1: and making sure that people get vaccinated, so that I

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Speaker 1: think there's a little bit, there's a little bit in

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Speaker 1: different areas. One of the things that that probably concerns

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Speaker 1: me the most is that the community color employment rate

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Speaker 1: is nearly double or not quite double, but it's higher

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Speaker 1: than uh the unemployment rate is an average in the country,

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Speaker 1: and those are numbers that really concerned concerned me. And

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Speaker 1: also getting women back into the workforce. So I still

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Speaker 1: think I still think there's there's lots happening here, and

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Speaker 1: I think as we get through the next month or so,

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Speaker 1: we will sat to see a lot of that clarity

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Speaker 1: happening where people will be going back into the workforce

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Speaker 1: in bigger numbers. Um As as we move forward, You're

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Speaker 1: well aware of what the governors of Montana and South

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Speaker 1: Carolina think of the additional unemployment benefits, and for the

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Speaker 1: benefit of our audience, Secretary Wich, I'm going to read

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Speaker 1: out some of the quotes just to get your reaction

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Speaker 1: to them. The vast expansion of federal unemployment benefits is

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Speaker 1: now doing more harm than good. That was the Montana

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Speaker 1: governor earlier this week. The governor of South Carolina saying

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Speaker 1: what was intended to be a short term financial assistance

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Speaker 1: for the vulnerable and displaced during the height of the

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Speaker 1: pandemic has turned into a dangerous federal entitlement. That's the

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Speaker 1: talking points coming from the government of Montana and South Carolina,

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Speaker 1: and also around the country to and in part on

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Speaker 1: Wall Street, from some of the economists as well. I

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Speaker 1: haven't heard the administration's response to that, Secretary Walsh, what

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Speaker 1: is your action to that psychle of situation. My reaction is,

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Speaker 1: we sell millions of Americans are out of work. We

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Speaker 1: sell millions of Americans worried about putting food on the table,

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Speaker 1: paying their mortgages, paying their rents, keeping keeping keeping them

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Speaker 1: their families moving forward. Uh. You know in the stil

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Speaker 1: concern here that there's been lots of industry as well

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Speaker 1: in this in this country that that have have disappeared.

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Speaker 1: Businesses and companies that people work for disappeared during this pandemic.

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Speaker 1: So again, we still, as they mentioned earlier, we still

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Speaker 1: have a steep hill to climb, and we're going to

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Speaker 1: continue to climb that hill as we move forward here. Uh,

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Speaker 1: and and and and and can hopefully work to get

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Speaker 1: every American who wants to work back to work. And

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Speaker 1: that that's that's the goal of the President, that was

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Speaker 1: the goal of the American Rescue Plan, that's the goal

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Speaker 1: the administration. That's my goal here at the Department of

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Speaker 1: Labor to continue to add those numbers and get people back,

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Speaker 1: get the economy continuing moving forward. People won't be surprised

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Speaker 1: that that's your position. And often when someone comes on

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Speaker 1: a program like this, Secretary, I will site to them,

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Speaker 1: How would you know if you're wrong? And when we

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Speaker 1: look at the additional three hundred dollars a week in

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Speaker 1: unemployment benefits that run through September, how would you know

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Speaker 1: if you're wrong? The child care issue is clearly an issue,

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Speaker 1: and I mentioned earlier this morning that anyone who was

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Speaker 1: brought up by a single parent understands that issue. That

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Speaker 1: if the school is closed, there's a problem getting back

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Speaker 1: to work. That's playing is simple, it's very clear. But

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Speaker 1: for you, sir, how would you know if you were

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Speaker 1: wrong that the more complete picture actually has something to

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Speaker 1: do with the additional unemployment benefits. I mean, I think

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Speaker 1: I talked to the American people every day, and when

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Speaker 1: I'm talking to people, I mean there's concerns with childcare,

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Speaker 1: that's concerns with education as far as schools not being open.

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Speaker 1: There's also concerns with people's personal health. They're concerned about

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Speaker 1: the virus, that're concerned about their family. Uh, this this

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Speaker 1: concern there. And I'm not saying that's the only reasons.

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Speaker 1: But you know, when when I think about, uh, the unemployment, unemployment,

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Speaker 1: Thank god we had unemployment because of of the the

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Speaker 1: what the economy would have would have happened to the

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Speaker 1: economy if we didn't have the unemployment insurance program during

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Speaker 1: the Kars Act when they gave additional six hundred alls

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Speaker 1: and during the Rescue Plan where it's three hundred alls.

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Speaker 1: It's it's significantly less than what it was under the

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Speaker 1: first plan that went through Congress. Uh. And again, as

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Speaker 1: we think about recovering, I'm not focusing on unemployment. I'm

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Speaker 1: not focused on unemployment benefits. I'm focusing on how do

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Speaker 1: we get these sectors opened up again? And we're working

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Speaker 1: to make sure these sectors are opening up. That's what

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Speaker 1: the presidents focused on, That's what his team is focused on,

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Speaker 1: making sure that we open up these sectors. And again, Uh,

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Speaker 1: there's some good highlights and bright spots in this report.

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Speaker 1: Today we're seeing the retail sector picking up. So again,

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Speaker 1: to answer you a question, how do I know, I'm

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Speaker 1: not sure. I guess I can give you an accurate

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Speaker 1: answer other than saying that unemployment is important right now

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Speaker 1: still in America for too many Americans. The governants of

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Speaker 1: Montana and of South Carolina are looking to remove these benefits.

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Speaker 1: So I I don't think of a surprise any anyone if

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Speaker 1: other states followed in the weeks to come. Have you

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Speaker 1: spoken to them, Secretary Welsh, if you talk to them

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Speaker 1: this week? No, I haven't talked to them yet. I

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Speaker 1: know they've been having contacts with different people in administration.

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Speaker 1: I believe you know, the unemployment rate in Montana is

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Speaker 1: about three and a half percent, which is significantly less

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Speaker 1: than what we're talking about today in the country, which

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Speaker 1: is over six percent. So again, every state has different

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Speaker 1: factors and they're in different spaces, so there's different reasons

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Speaker 1: for for people, uh concerns that if you look at

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Speaker 1: the state of Massachusetts, whor you look at the state

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Speaker 1: of New York, you look at California, other places, the

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Speaker 1: unemployment rates are hiring those places and because a lot

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Speaker 1: of those industries are still just coming back. So you know,

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Speaker 1: you can't compare Apple. You can't compare it's apples. Orange

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Speaker 1: is not apples to apples. Well, do you think it's

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Speaker 1: apples to oarraannges to allow each and every state to

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Speaker 1: have the same additional unemployment benefits and next time around,

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Speaker 1: Secretary Walls, do you think we need to rethink how

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Speaker 1: he distributes some of those benefits. Well, I think I

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Speaker 1: think in the American Rescue Plan. The one thing that's

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Speaker 1: in there is a two billion dollar investment for us

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Speaker 1: to look at the UI system. And I think that

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Speaker 1: that's something that the pandemic has showed us, is that

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Speaker 1: we have we have an opportunity right now to look

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Speaker 1: at what worked, what didn't work, and how do we

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Speaker 1: strengthen the system for the country, in for individual states

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Speaker 1: and territories in this country. Secondary wells gonna catch up,

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Speaker 1: looking forward to catching up against doing some big questions

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Speaker 1: and hopefully we get some answers in the months to come.

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Speaker 1: Jeff Rosenberger, Black Rock. He will recalibrate, as we all will,

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Speaker 1: off to stunning report. Jeff, how you presume the FED

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Speaker 1: will recalibrate? Well, you know, I think the first thing

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Speaker 1: is that not any one single report is gonna is

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Speaker 1: going to determine the FITS change or it's it's projections

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Speaker 1: and and and the expectations are here for a string

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Speaker 1: of reports. Obviously, this report is disappointed that, but the

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Speaker 1: FEDS outlook was not to react to just one report.

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Speaker 1: Now that's on both the good news and the bad news,

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Speaker 1: and so we'll move on. You know, this report is

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Speaker 1: very much at odds with all the other data. So

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Speaker 1: so clearly there's something going on here. When we look

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Speaker 1: across the broader ranges of the reopening economy, it is

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Speaker 1: still consistent with a very strong recovery in labor markets

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Speaker 1: and the economy. And the broader message from the broader

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Speaker 1: range of indicators is what the Fed is going to

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Speaker 1: be looking at for determining their policy. You know, near term, obviously, yes,

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Speaker 1: markets are going to react, there's positioning near term that

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Speaker 1: will enter into sentiment, but I think the longer run

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Speaker 1: trajectory is still in place. Jeff. I gotta say Bespoke

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Speaker 1: Investment coming out and saying that this is the biggest

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Speaker 1: miss relative to expectations for norm farm payroll payrolls going

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Speaker 1: back since at least. This is a massive miss and

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Speaker 1: it really speaks to the mystery underpinning this job's market. Jeff.

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Speaker 1: When you take a look at these numbers, I understand

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Speaker 1: it's just one data point, but it's what we've got.

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Speaker 1: Is there any conclusion you can draw perhaps at the

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Speaker 1: economy is moving a bit slower than people are already

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Speaker 1: pricing in, at least with respect to equities, So so

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Speaker 1: again we need to be a little bit careful here. Um,

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Speaker 1: this is a very different labor market report in that

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Speaker 1: the scale of the numbers that we're looking at, the

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Speaker 1: gross inflows and outflows, are unprecedented relative to any of

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Speaker 1: those other historical reports. So the comparison is really unfair,

431
00:21:10,000 --> 00:21:13,119
Speaker 1: and it's something that people are missing in that, underneath

432
00:21:13,160 --> 00:21:16,719
Speaker 1: the hood, the degree of flows that are coming as

433
00:21:16,760 --> 00:21:20,240
Speaker 1: a result of first the collapse, the closing down of

434
00:21:20,280 --> 00:21:23,679
Speaker 1: the economy in an unprecedented way, and then the reopening

435
00:21:23,680 --> 00:21:27,760
Speaker 1: of the economy in an unprecedented way makes the variability

436
00:21:27,800 --> 00:21:31,560
Speaker 1: in these reports at a different level. So I think

437
00:21:31,560 --> 00:21:34,520
Speaker 1: it's a very unfair comparison to say it's a big miss. Now,

438
00:21:34,640 --> 00:21:37,360
Speaker 1: of course it's a big miss, but there are large

439
00:21:37,480 --> 00:21:41,000
Speaker 1: flows going in and out of this labor market in

440
00:21:40,760 --> 00:21:44,640
Speaker 1: in very unprecedented ways. Other things is that in that

441
00:21:44,760 --> 00:21:49,440
Speaker 1: context there are very large seasonal adjustment factors that really

442
00:21:49,480 --> 00:21:54,560
Speaker 1: have a very difficult time in processing this unprecedented degree

443
00:21:54,560 --> 00:21:56,960
Speaker 1: of reopening. So and be careful about that that kind

444
00:21:57,000 --> 00:21:59,880
Speaker 1: of interpretation. I think, you know, to the broader question,

445
00:22:00,440 --> 00:22:05,560
Speaker 1: you know, it remains that the broader range of indicators

446
00:22:05,600 --> 00:22:09,320
Speaker 1: are still very supportive of the reopening and the recovery.

447
00:22:09,440 --> 00:22:11,919
Speaker 1: Jeff some people will say bonds were right and stocks

448
00:22:11,920 --> 00:22:14,160
Speaker 1: were wrong. We've been talking all week about this divergence,

449
00:22:14,200 --> 00:22:18,600
Speaker 1: bond yields remaining steady, well, stocks to display some belief

450
00:22:18,640 --> 00:22:21,920
Speaker 1: in inflation, some belief in higher yields. Is that your

451
00:22:21,960 --> 00:22:24,920
Speaker 1: takeaway that bonds are right and believing the Fed will

452
00:22:25,000 --> 00:22:28,359
Speaker 1: hold rates and frankly their bond purchases where they are

453
00:22:28,400 --> 00:22:31,160
Speaker 1: for a much longer time than perhaps stock investors are

454
00:22:31,160 --> 00:22:35,520
Speaker 1: preparing for. Well. I think the comparison at the top

455
00:22:35,600 --> 00:22:39,560
Speaker 1: line levels very difficult to make because underneath the stock

456
00:22:39,600 --> 00:22:41,760
Speaker 1: market is where all the action. It's like the duck

457
00:22:41,800 --> 00:22:44,000
Speaker 1: on the water. It's very calm on the surface and

458
00:22:44,040 --> 00:22:47,880
Speaker 1: everything's underneath. So there's tremendous rotations going on that are

459
00:22:48,000 --> 00:22:51,280
Speaker 1: very indicative of a lot of changes in investor viewpoints

460
00:22:51,480 --> 00:22:54,199
Speaker 1: on the bond side. You know, the bond side priced

461
00:22:54,200 --> 00:22:58,320
Speaker 1: in a very rapid increase in growth expectations that we

462
00:22:58,359 --> 00:23:02,920
Speaker 1: saw through the March period, and those repricings basically kind

463
00:23:02,920 --> 00:23:05,440
Speaker 1: of ran their course. There are a lot of technical

464
00:23:05,480 --> 00:23:08,359
Speaker 1: factors that people are pointing at, we're pointing at, you know,

465
00:23:08,480 --> 00:23:13,399
Speaker 1: around the decline and interest rates in April, and the

466
00:23:13,440 --> 00:23:19,120
Speaker 1: bond market faces this technical challenge between demand and supply,

467
00:23:19,240 --> 00:23:23,080
Speaker 1: where the largest provider of demand, the FED, is expected

468
00:23:23,160 --> 00:23:26,159
Speaker 1: at some point, right, that's the debate around tapering to

469
00:23:26,600 --> 00:23:31,000
Speaker 1: pull back while treasury supply increases in an environment of

470
00:23:31,080 --> 00:23:36,080
Speaker 1: funding that tremendous amount of fiscal stimulus. So a lot

471
00:23:36,080 --> 00:23:40,520
Speaker 1: of what you're seeing isn't necessarily directly this reflection of

472
00:23:40,680 --> 00:23:43,280
Speaker 1: you on inflation. Certainly that shape of the curve is

473
00:23:43,280 --> 00:23:47,119
Speaker 1: steep in inflation expectations and tips have increased, but the

474
00:23:47,160 --> 00:23:49,760
Speaker 1: pace of those increases is certainly slowed as we priced

475
00:23:49,760 --> 00:23:53,040
Speaker 1: a lot of those changes and expectations, and recently, Jeff,

476
00:23:53,080 --> 00:23:55,200
Speaker 1: thank you so much, Jeff Rosenberg. Where this with black

477
00:23:55,280 --> 00:24:04,159
Speaker 1: Rock historic day, there's no other way to put it.

478
00:24:04,200 --> 00:24:08,240
Speaker 1: Within a natural disaster that spans oh back to Valentine's

479
00:24:08,280 --> 00:24:11,120
Speaker 1: of a year ago. There have been surprises and shocks

480
00:24:11,240 --> 00:24:15,040
Speaker 1: along the way. The short term paper market, full faith

481
00:24:15,080 --> 00:24:18,359
Speaker 1: and credit and things outside Full faith and credit is

482
00:24:18,520 --> 00:24:21,760
Speaker 1: truly the depth of the market. It is the the

483
00:24:21,760 --> 00:24:24,639
Speaker 1: the the touch that you have, the pulse of the market.

484
00:24:25,080 --> 00:24:28,320
Speaker 1: Tick bike tick. Jerome Schneider is expert at this at PIMCO.

485
00:24:28,840 --> 00:24:33,080
Speaker 1: A perfect guest, Jome Snyder. When you saw the employment report.

486
00:24:34,040 --> 00:24:37,840
Speaker 1: What did you look at on your Bloomberg terminal or

487
00:24:37,960 --> 00:24:40,000
Speaker 1: what did you say, I need to look at this

488
00:24:40,080 --> 00:24:44,280
Speaker 1: in the next thirty minutes. Yeah, good morning. Um, there's

489
00:24:44,320 --> 00:24:46,640
Speaker 1: a there's a variety of things that obviously are coming

490
00:24:46,680 --> 00:24:50,200
Speaker 1: to mind. One, you know, clearly the tradeoff with regards

491
00:24:50,240 --> 00:24:54,359
Speaker 1: your job and job openings and unemployment. That's going to

492
00:24:54,400 --> 00:24:57,840
Speaker 1: be a structural discussion that's going to obviously create implications

493
00:24:57,840 --> 00:24:59,760
Speaker 1: for the shape of the yok curban. Frankly rates as

494
00:24:59,760 --> 00:25:01,840
Speaker 1: we it and then you know, as soon as the

495
00:25:01,920 --> 00:25:03,480
Speaker 1: number came out and you started to digest it, you

496
00:25:03,520 --> 00:25:06,800
Speaker 1: can quickly see that, you know, some of the data

497
00:25:06,880 --> 00:25:09,320
Speaker 1: is more volatile. We had here PIMCO thought that some

498
00:25:09,359 --> 00:25:11,200
Speaker 1: of the high frequency data stalled of it in the

499
00:25:11,240 --> 00:25:14,320
Speaker 1: past month. We didn't forecast this kind of you know,

500
00:25:14,640 --> 00:25:17,480
Speaker 1: you know, with revisions and downward and downward spike. But

501
00:25:17,560 --> 00:25:20,879
Speaker 1: I think that we expected that, you know, that that

502
00:25:20,960 --> 00:25:23,760
Speaker 1: some of the jobs would come back, and we actually

503
00:25:23,760 --> 00:25:25,760
Speaker 1: did see some of the bright spots in the report,

504
00:25:25,760 --> 00:25:27,440
Speaker 1: if you want to put a call at that, where

505
00:25:27,440 --> 00:25:30,800
Speaker 1: that some of the COVID sectors actually did okay during

506
00:25:30,840 --> 00:25:33,159
Speaker 1: this period. Um. And so I'm not saying that the

507
00:25:33,160 --> 00:25:35,120
Speaker 1: market is looking through it at this point in time,

508
00:25:35,119 --> 00:25:38,480
Speaker 1: that we're clearly lower nields, although it has rebound substantially

509
00:25:38,600 --> 00:25:42,040
Speaker 1: from the kenure clearly. Um. But I think what we

510
00:25:42,080 --> 00:25:44,919
Speaker 1: are is recognizing the fact that the FED will probably

511
00:25:45,000 --> 00:25:48,639
Speaker 1: use this to continue to remain vigilant, remain patient, and

512
00:25:48,680 --> 00:25:52,480
Speaker 1: remain dubbish for the foreseeable future. And in the context

513
00:25:52,520 --> 00:25:55,480
Speaker 1: of the report looked through and try to highlight some

514
00:25:55,600 --> 00:25:58,880
Speaker 1: of the some of that structural question question that goes

515
00:25:58,920 --> 00:26:00,720
Speaker 1: on for us in the short term markets. I think

516
00:26:00,720 --> 00:26:03,600
Speaker 1: it says one thing that short term benchmark rates are

517
00:26:03,640 --> 00:26:05,960
Speaker 1: going to remain very low for a long time, well

518
00:26:06,000 --> 00:26:09,080
Speaker 1: into two thousand twenty three. You have overnight repro rates

519
00:26:09,119 --> 00:26:11,439
Speaker 1: at zero, t builds close to zero. And this is

520
00:26:11,480 --> 00:26:14,880
Speaker 1: the challenge for investors is trying to balance safety, which

521
00:26:14,920 --> 00:26:17,680
Speaker 1: is not paying you a lot right now, versus being

522
00:26:17,760 --> 00:26:21,240
Speaker 1: more opportunistic and where you think risk appropriate risk adjuster

523
00:26:21,320 --> 00:26:23,240
Speaker 1: returns might be. And that's going to be the challenge

524
00:26:23,240 --> 00:26:25,280
Speaker 1: for the next uh, not just the next few months,

525
00:26:25,320 --> 00:26:27,080
Speaker 1: but probably the next one to two years as we

526
00:26:27,160 --> 00:26:31,720
Speaker 1: evolved out of this. Alright, So, Jerome, just this seems

527
00:26:31,720 --> 00:26:34,720
Speaker 1: this data point here as as as you know, Uh,

528
00:26:34,840 --> 00:26:37,080
Speaker 1: exceptional as it was, seems to play right into the

529
00:26:37,119 --> 00:26:39,879
Speaker 1: rhetoric of FED Chairman j Pal in terms of lower

530
00:26:39,920 --> 00:26:42,560
Speaker 1: for longer, until we see the whites of their eyes,

531
00:26:42,680 --> 00:26:44,919
Speaker 1: you know, we're going to remain on the sidelines. Uh.

532
00:26:45,320 --> 00:26:47,919
Speaker 1: Is that your expectation, is that the rhetoric you expect

533
00:26:47,960 --> 00:26:51,480
Speaker 1: to continue to hear from this photo reserve. Yeah, I

534
00:26:51,480 --> 00:26:53,800
Speaker 1: mean the FED has actually been very well coalesced around

535
00:26:53,920 --> 00:26:56,520
Speaker 1: that rhetoric U And is surprising how well you know

536
00:26:56,560 --> 00:26:59,439
Speaker 1: he's He's effectively corralled some of the dissenting voices, at

537
00:26:59,520 --> 00:27:01,800
Speaker 1: least in the in the recent future, the recent past,

538
00:27:01,960 --> 00:27:04,159
Speaker 1: I think in the future as we look forward, you know,

539
00:27:04,200 --> 00:27:06,280
Speaker 1: this probably gives a little bit more ammunition to Pal

540
00:27:06,640 --> 00:27:08,760
Speaker 1: to be into that double sentiment, to be patient, to

541
00:27:08,800 --> 00:27:11,720
Speaker 1: see what happens in ovalls, and to do so clearly

542
00:27:11,720 --> 00:27:13,879
Speaker 1: in the face of central banks around the world who

543
00:27:13,920 --> 00:27:16,760
Speaker 1: are looking to reduce their are to to taper, to

544
00:27:16,840 --> 00:27:18,840
Speaker 1: reduce their stimulus. And we've seen that from the Bank

545
00:27:18,880 --> 00:27:21,000
Speaker 1: of Canada, We've seen it from the Bank of England.

546
00:27:21,000 --> 00:27:24,159
Speaker 1: Even this morning the e c B we saw discussion

547
00:27:24,240 --> 00:27:27,160
Speaker 1: of potential tapering to begin in June. And I think

548
00:27:27,160 --> 00:27:29,640
Speaker 1: that that is something that he's gonna have to press again.

549
00:27:29,720 --> 00:27:32,440
Speaker 1: So clearly the Fed and Jerome Poet wants to be

550
00:27:32,520 --> 00:27:35,480
Speaker 1: last in that sequencing to even begin to taper and

551
00:27:35,560 --> 00:27:38,880
Speaker 1: begin that discussion of removing some of the accommodative policy

552
00:27:38,920 --> 00:27:41,560
Speaker 1: measures that we've seen. So just goes back to the

553
00:27:41,560 --> 00:27:43,440
Speaker 1: point that these low rates that we're going to see

554
00:27:43,480 --> 00:27:45,560
Speaker 1: are going to be here for sometime, and they're going

555
00:27:45,600 --> 00:27:48,119
Speaker 1: to do so in the context of making sure that

556
00:27:48,160 --> 00:27:50,840
Speaker 1: the economy is on firm folk flooding, making sure that

557
00:27:50,880 --> 00:27:54,520
Speaker 1: some of these structural challenges unemployment are somewhat resolved, maybe

558
00:27:54,520 --> 00:27:56,800
Speaker 1: not entirely resolved, and to get some of the eight

559
00:27:56,840 --> 00:28:00,000
Speaker 1: to nine million jobs that are still remaining out um

560
00:28:00,119 --> 00:28:03,800
Speaker 1: you know, in in a in in the uh in

561
00:28:04,119 --> 00:28:08,879
Speaker 1: basically into the discussion points for the market. So simply

562
00:28:08,920 --> 00:28:12,240
Speaker 1: put his he's gonna have a long runway. Yeah, alright,

563
00:28:12,480 --> 00:28:15,280
Speaker 1: dron lower for longer. What is a guy like you

564
00:28:15,359 --> 00:28:18,040
Speaker 1: in the short term end of the market, dude? Where

565
00:28:18,040 --> 00:28:22,080
Speaker 1: do you guys go for any type of yield? Right now,

566
00:28:22,200 --> 00:28:24,800
Speaker 1: we are what we're doing is basically looking to the

567
00:28:24,880 --> 00:28:30,040
Speaker 1: market and trying to create diversified portfolios. Those diversified portfolios

568
00:28:30,320 --> 00:28:33,040
Speaker 1: are really consisting of looking at high quality structure, credit

569
00:28:33,359 --> 00:28:36,840
Speaker 1: assepact of securities, steering a little bit away from corporate bonds,

570
00:28:37,080 --> 00:28:41,440
Speaker 1: and just being more sensitive to the sector's selection. Right now, Trump,

571
00:28:41,520 --> 00:28:44,400
Speaker 1: can I ssak a question? Man, I want to digress

572
00:28:44,440 --> 00:28:48,240
Speaker 1: here in this huge jobs report. When you're leading the

573
00:28:48,320 --> 00:28:52,200
Speaker 1: good life in Newport News, do you guys when you're there,

574
00:28:52,240 --> 00:28:55,840
Speaker 1: like Newport Beach, excuse me, Newport Beach, California, do you

575
00:28:55,880 --> 00:28:59,640
Speaker 1: guys look south to San Diego or north to Los Angeles?

576
00:28:59,760 --> 00:29:02,440
Speaker 1: I don't know the answer to that, folks. Does the

577
00:29:02,480 --> 00:29:04,800
Speaker 1: build does the building we look? We look all around

578
00:29:04,920 --> 00:29:08,920
Speaker 1: for opportunity? Come on, But like as a community, are

579
00:29:08,960 --> 00:29:12,920
Speaker 1: you like North San Diego? Are you like South Los Angeles? Yeah,

580
00:29:13,000 --> 00:29:15,440
Speaker 1: we're perfectly situated between the two. You know, I think

581
00:29:15,440 --> 00:29:17,959
Speaker 1: we get the best of both worlds in this regard um,

582
00:29:18,000 --> 00:29:19,840
Speaker 1: you know, a little bit of independent thinking, but at

583
00:29:19,840 --> 00:29:22,640
Speaker 1: the same time the ability to to you know, start

584
00:29:22,640 --> 00:29:25,120
Speaker 1: early mornings and have a fresh look both what's going

585
00:29:25,160 --> 00:29:28,160
Speaker 1: on in London, New York and then to Asia. You're

586
00:29:28,160 --> 00:29:31,480
Speaker 1: missing it. I know I was talking Padres or Dodgers.

587
00:29:32,400 --> 00:29:35,520
Speaker 1: I mean, I mean Yankee stand you know that it's

588
00:29:35,520 --> 00:29:38,719
Speaker 1: like it's like, folks, for those of you worldwide, in Connecticut,

589
00:29:38,840 --> 00:29:41,520
Speaker 1: there's a line, it's a secret line in the woods

590
00:29:41,520 --> 00:29:44,200
Speaker 1: of eastern Connecticut, and on one side there were in

591
00:29:44,240 --> 00:29:46,720
Speaker 1: red Sox ats. On the other side there were in

592
00:29:46,840 --> 00:29:49,360
Speaker 1: Yankee ats. I just wanted to bring that up on

593
00:29:49,440 --> 00:29:53,040
Speaker 1: this historic day. Jerome's going, what are we talking about here? Jerome?

594
00:29:53,280 --> 00:29:55,480
Speaker 1: We we will look at this and as you mentioned,

595
00:29:55,640 --> 00:30:00,080
Speaker 1: the chairman has massive runway here. How far out we

596
00:30:00,160 --> 00:30:03,000
Speaker 1: really pushed the debate? Are you saying like the debate

597
00:30:03,040 --> 00:30:07,360
Speaker 1: for two thousand twenty two is done? The debate for

598
00:30:07,400 --> 00:30:10,880
Speaker 1: two thousand twenty two is likely not done, but it

599
00:30:10,920 --> 00:30:13,000
Speaker 1: seems to be seem to have an idea who the

600
00:30:13,040 --> 00:30:15,720
Speaker 1: winner is. I think the idea to put, simply to

601
00:30:15,760 --> 00:30:19,640
Speaker 1: put it, is that the discussion, if you will, around

602
00:30:19,760 --> 00:30:23,240
Speaker 1: inflation will sort of coalesce as we sort of get

603
00:30:23,280 --> 00:30:26,080
Speaker 1: better inflation, you know, more from inflation into two thousand

604
00:30:26,120 --> 00:30:28,360
Speaker 1: twenty two. We believe here that inflation is a little

605
00:30:28,360 --> 00:30:30,160
Speaker 1: bit overdone right now, at least the fear of inflation

606
00:30:30,200 --> 00:30:31,840
Speaker 1: is a little bit overdone right now. But in two

607
00:30:31,880 --> 00:30:34,280
Speaker 1: thousand twenty two it's going to come back again as

608
00:30:34,320 --> 00:30:38,240
Speaker 1: the economy strengthens, as we see PCs move to closer

609
00:30:38,280 --> 00:30:40,440
Speaker 1: to two, as we see cpis move from two point

610
00:30:40,440 --> 00:30:42,560
Speaker 1: three to two point five. These are all discussion points

611
00:30:42,600 --> 00:30:44,600
Speaker 1: for two thousand twenties two. And then you have a

612
00:30:44,600 --> 00:30:46,760
Speaker 1: sequencing issue, Tom, and I think this is a key

613
00:30:47,080 --> 00:30:49,800
Speaker 1: is that simply because you begin to taper and then

614
00:30:49,840 --> 00:30:53,040
Speaker 1: finishing taper, we're gonna probably likely see a sequence which

615
00:30:53,080 --> 00:30:55,600
Speaker 1: allows you a period of let's call it six months

616
00:30:55,640 --> 00:30:58,280
Speaker 1: between the end of the tapering and potential discussions of

617
00:30:58,360 --> 00:31:01,000
Speaker 1: rate hikes. And I think that really put this on

618
00:31:01,040 --> 00:31:04,960
Speaker 1: a prolonged path to to to that normalization process. So

619
00:31:05,000 --> 00:31:07,680
Speaker 1: we have a long road ahead of us. Now, you know, effectively,

620
00:31:08,000 --> 00:31:10,719
Speaker 1: you know, at this point in time, the the you know,

621
00:31:11,120 --> 00:31:15,600
Speaker 1: the the ghost the ghost UM right now of infleation

622
00:31:16,080 --> 00:31:18,320
Speaker 1: UM and maybe VOLCA has has left the building and

623
00:31:18,320 --> 00:31:19,959
Speaker 1: it's going to be gone for quite a while. I

624
00:31:20,000 --> 00:31:22,200
Speaker 1: like that. Jerol Schneider, thank you so much. And Paul

625
00:31:22,360 --> 00:31:26,720
Speaker 1: with PIMCO, I should say in Newport News, California, and

626
00:31:26,920 --> 00:31:31,120
Speaker 1: I nailed that. This is the Bloomberg Surveillance Podcast. Thanks

627
00:31:31,120 --> 00:31:34,440
Speaker 1: for listening. Join us live weekdays from seven to ten

628
00:31:34,480 --> 00:31:38,960
Speaker 1: am Eastern on Bloomberg Radio and on Bloomberg Television each

629
00:31:39,080 --> 00:31:42,800
Speaker 1: day from six to nine am for insight from the

630
00:31:42,840 --> 00:31:48,040
Speaker 1: best in economics, finance, investment, and international relations. And subscribe

631
00:31:48,080 --> 00:31:53,000
Speaker 1: to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com,

632
00:31:53,080 --> 00:31:56,320
Speaker 1: and of course, on the terminal. I'm Tom Keene, and

633
00:31:56,440 --> 00:31:58,280
Speaker 1: this is Bloomberg