Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 3: Happy Friday, everybody.
Speaker 4: We cover all the news that you need in business,
Speaker 4: economics and finance. There are lens of our Bloomberg Intelligence folks.
Speaker 4: They cover two thousand companies and one hundred and thirty
Speaker 4: industries all around the world. And we also tap our
Speaker 4: expertise outside of Bloomberg Intelligence as well. And for that
Speaker 4: we go to Lindsay Piezga, she is chief economist over
Speaker 4: at Stefold, to talk about the job support. Okay, so
Speaker 4: we get the jobs number. Then a couple hours later
Speaker 4: we get Chris Waller coming out and talking about the
Speaker 4: current batch of data requires action and if appropriate, he
Speaker 4: will advocate for front loading cuts.
Speaker 3: What does if appropriate.
Speaker 4: Mean to frontload cuts for fifty bases point cut in September.
Speaker 5: Well, I think that means that if we see a
Speaker 5: material weakening in the employment data, if we see a
Speaker 5: material weakening in the inflation data, the Fed is poised
Speaker 5: to take a more aggressive stance. That being said, the
Speaker 5: lack of meaningful downward momentum that we've seen in price
Speaker 5: pressures coupled with still a somewhat benign employment report. Remember,
Speaker 5: we saw that downtick in the unemployment rate, stronger wage games,
Speaker 5: So it doesn't seem that at this point, to Waller's
Speaker 5: to use Waller's characterization, it is appropriate to result in
Speaker 5: a more aggressive policy response. And as such, I think
Speaker 5: the Fed is going to take a more tempered approach
Speaker 5: until we see a more clear indication of weakness as
Speaker 5: opposed to just normalization in the economy.
Speaker 6: All right, somebody comes up to you to Starbucks this
Speaker 6: weekend and says, lindsay, how's that labor market?
Speaker 7: How would you respond?
Speaker 5: Well, I think right now we're still seeing solid conditions
Speaker 5: in the labor market. Now, certainly we have lost momentum
Speaker 5: from earlier peak levels. Top line hiring has slowed, but
Speaker 5: let's put the unemployment rate in perspective, it's still on
Speaker 5: a relatively low basis. Wage games are still solid, jobless
Speaker 5: flames continue to tick down, so there's still indications again
Speaker 5: that the labor market, yes is cooling, losing momentum, but
Speaker 5: more to the prospect of normalizing as opposed to indications
Speaker 5: of outright weakness suggesting that the FED needs to take
Speaker 5: expedited or more aggressive action to help supplement or stabilize
Speaker 5: like market conditions.
Speaker 4: Actually that happened to Michael McKee. It was on a
Speaker 4: train and someone like random guy was like.
Speaker 3: Hey, Mike, what are you from the FED?
Speaker 4: So lindsay, is this is the FED going to go
Speaker 4: twenty five or fifty? And I guess the better question
Speaker 4: is how much do you care about that versus us
Speaker 4: still pricing in two hundred and forty basis points of
Speaker 4: cuts in the next you know, fourteen to fifteen months.
Speaker 5: Well, I think the FED is going to take a
Speaker 5: guess low and temperate pace. I think out of the
Speaker 5: gate twenty five basis points is a appropriate and the
Speaker 5: FED has been very clear they're not on a predetermined pathway.
Speaker 5: And should we see the data come in better than
Speaker 5: expected or weaker than expected, the next policy response will
Speaker 5: reflect that data. And so that's going to really be
Speaker 5: the driver of how the FED responds over the next
Speaker 5: year or two years in terms of slowly returning US
Speaker 5: more to a normal position and policy as opposed to
Speaker 5: taking an aggressive approach and reversing us to neutral or
Speaker 5: well below.
Speaker 6: So, lindsay, put this labor data together. I guess for me,
Speaker 6: one of the next questions is how does that frame
Speaker 6: out how our US consumer is doing.
Speaker 7: What's your view there?
Speaker 5: Well, I think the US consumer is struggling at this point.
Speaker 5: The US consumer feels the weight of these higher prices,
Speaker 5: feels the weight of a slowing economy.
Speaker 8: But the consumer is still.
Speaker 5: Holding its own it's still spending out in the marketplace,
Speaker 5: and it's still the backbone of the US economy.
Speaker 3: We love that.
Speaker 4: We love crying babies in the background. That's super cool.
Speaker 4: You can definitely bring them on air. We love that
Speaker 4: for you and for us. So I guess when we
Speaker 4: talk about how the data will evolve, what are.
Speaker 3: We going to really be looking at.
Speaker 4: Is CPI really that important next week or is it
Speaker 4: just like, let's get past this twenty five or fifty
Speaker 4: or whatever and then we see how the labor market evolves.
Speaker 5: I think the CPI the PPI are key data points
Speaker 5: that are really going to determine the trajectory of the
Speaker 5: fence pathway for race.
Speaker 7: All right, lindsay, thank you so much. We appreciate it.
Speaker 6: Lindsay the Eggs, a chief economist for Stiefel.
Speaker 7: She joined us on his zoom from Chicago. She can
Speaker 7: do it all.
Speaker 6: She can talk economics and she can then go take
Speaker 6: care of the little ones.
Speaker 7: I mean, yeah, that's why you guts are the best.
Speaker 7: I don't know how to do it.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just say Alexa play Bloomberg eleven.
Speaker 4: All right, let's get more in this market reaction here.
Speaker 4: Matt Miskin Co, Chief Investment Stratus, John Hancock Investment Management
Speaker 4: joins us. Now, hey, Matt, if I just take a
Speaker 4: look at what's happening within the market and the reaction.
Speaker 3: Oh god, I hate to say it. Is this a
Speaker 3: Goldilocks move?
Speaker 9: That looks a little bit like that, But the fact
Speaker 9: that the tenure treasury yield isn't backing down much actually
Speaker 9: to me suggests it's not as favorable.
Speaker 4: But a huge it had a huge run, it did.
Speaker 9: It did, and mortgage rates are coming down on that,
Speaker 9: and then you're gonna get borrowing costs coming down on that.
Speaker 9: And we had oil prices lower, and all these things
Speaker 9: eventually are going to be good for the consumer.
Speaker 10: But if economic growth is weakening, if you're not as
Speaker 10: confident about your job, you're not going to be as
Speaker 10: confident about spending.
Speaker 9: And right now there is a you know, September weakness
Speaker 9: that's always seasonal. So we're sitting here saying is this
Speaker 9: seasonals or is this some more sinister? And for us,
Speaker 9: the economic data is weakening. We like defensive parts of
Speaker 9: the market. We like intermediate to longer term bonds, and
Speaker 9: we're gonna sit here and wait for a better opportunity
Speaker 9: to look at risk assets.
Speaker 7: What's defensive in your mind? Met good one?
Speaker 2: Yes?
Speaker 10: So good old utilities. Utilities are a part of the market.
Speaker 9: That were left for not you know, no one wanted
Speaker 9: to touch them for much the last two years. They
Speaker 9: were only two percent of the market, the lowest level
Speaker 9: or sector weight in history. They've been on a tear here.
Speaker 9: And we actually like long lived assets. I mean, you know,
Speaker 9: alex as you said, I mean like this week, treasury
Speaker 9: yields are meaningfully lower and longer duration equities should be
Speaker 9: rallying on that. Utilities are, roots are even healthcare is
Speaker 9: getting a bit of a bid. But then you've got
Speaker 9: things like financials, which have done pretty well here that's
Speaker 9: an odd mix, and tech, which used to be the
Speaker 9: long duration asset.
Speaker 10: Is getting can hit.
Speaker 9: So it's not making a ton of It's not the
Speaker 9: dots are not connecting all at once here.
Speaker 10: It's it's one week. But the trend in terms of
Speaker 10: the macro.
Speaker 9: Data is what it is, and it looks like softening,
Speaker 9: and we want to grab some good defensive parts of
Speaker 9: the market while they're still here for us.
Speaker 4: Yeah, And I don't want to make light of the
Speaker 4: fact that texts down one percent and calling that goldilocks,
Speaker 4: but just the idea that that sort of play versus say,
Speaker 4: I mean, I'm looking at DOWT Transport. It's only down
Speaker 4: quote unquote three tens of one percent. So I'm just
Speaker 4: wondering if it's more of a rotation within the market
Speaker 4: versus sort of a broad based selling. Do you think
Speaker 4: that when we get a Christopher Waller talking at eleven,
Speaker 4: is that going to be an event risk for you
Speaker 4: right now?
Speaker 10: It could be. I mean, you know, right now.
Speaker 9: I think the Fed, if they push back too hard
Speaker 9: and say, look, we're not we're not going fifty basis points.
Speaker 10: We're not ready to cut.
Speaker 9: I think if they do that at this juncture, you're
Speaker 9: going to be upsetting the bond market. And there's few
Speaker 9: times in doing this it's it's you know, nowadays we've
Speaker 9: got the forward guidance, so we've got you know, pricing
Speaker 9: in of how many cuts.
Speaker 10: You know, you rewind ten fifteen years ago, people.
Speaker 9: Didn't focus on that as much, but now that it's
Speaker 9: one hundred percent probability of a cut in September, if
Speaker 9: not more, because you're saying, hey, it could be fifty
Speaker 9: basis points. If the FED says no, we're not cutting,
Speaker 9: that is going to be bad news for everything. And
Speaker 9: so I think you need to hear the FED speakers
Speaker 9: come out and say yeah, we're gonna cut, and if
Speaker 9: anything against that, I think is going to cause some volatility.
Speaker 6: Hey, Matt, on the fixed income side, how much credit
Speaker 6: risk are you guys comfortable taking these days?
Speaker 10: Not much at all.
Speaker 9: Frankly, we started the week at three hundred basis points
Speaker 9: spread between junk bonds, high yield bonds, and treasury bonds,
Speaker 9: And to.
Speaker 10: Put that in perspective, last time that's.
Speaker 9: Happened twenty twenty one before spread wide and twenty twenty two,
Speaker 9: two thousand and seven before two eight, nineteen ninety nine,
Speaker 9: before two thousand and three hundred b points is historically
Speaker 9: really tight spreads.
Speaker 10: And to us, that's just not a lot of value.
Speaker 9: We prefer if you're going to go even in investment
Speaker 9: grade corporate bonds, more of a single a kin type
Speaker 9: of average portfolio.
Speaker 10: Credit rating, and then we like agency nbs.
Speaker 9: We like all those bonds or all those mortgages that
Speaker 9: people locked in low mortgages.
Speaker 10: I don't think there's any prepayment risk. People probably aren't
Speaker 10: going to be moving.
Speaker 9: Again to and it's good for their balance sheets. So
Speaker 9: you know, they're yielding about five percent for four to
Speaker 9: five percent right now. So we're just looking some high
Speaker 9: quality bonds add that to the portfolio.
Speaker 10: Lock in these.
Speaker 9: Yields while you got them, because that cash balance that
Speaker 9: everybody's loves so much, that money market interest rate, in
Speaker 9: our view, that's gone into twenty twenty five, not completely gone,
Speaker 9: but it's gonna be.
Speaker 3: I mean, I'm waiting for it.
Speaker 4: We still hit another record high at the end of
Speaker 4: last week, according to the data that came out. So
Speaker 4: do you think that it matters if it's twenty five
Speaker 4: or fifty in September and or is it really how
Speaker 4: many cuts we're going to be getting. I mean, we're
Speaker 4: still pricing in something like almost ten cuts through the
Speaker 4: end of next year, right.
Speaker 9: And you know, I think about it as like you know,
Speaker 9: getting lost in the forest.
Speaker 10: Wait, is it the forest and the trees?
Speaker 4: You can't see the forest from the trees, right, Yeah,
Speaker 4: something like that.
Speaker 9: The fast couple of cycles, on average, the FED is
Speaker 9: cut from peak to trough seventeen times. Now that's twenty
Speaker 9: five basis point cuts, but seventeen times is how much
Speaker 9: the FED usually cuts in a cutting cycle. So whether
Speaker 9: or not they cut one time or two times at
Speaker 9: the first cut, don't get lost in that.
Speaker 10: Don't overdo it. What you want to.
Speaker 9: Do is set up for where this Where does the
Speaker 9: end of the FED Fund's rate go? Where do we
Speaker 9: go on the tenure yield? Our view, based on the
Speaker 9: last three cycles, the tenure yield ends with a two
Speaker 9: handle and the FED Fund's rate ends with a one handle.
Speaker 9: If that is the world we're in, we're having a
Speaker 9: different conversation.
Speaker 10: Right now, we want to get while the these yields
Speaker 10: are where they are right now.
Speaker 9: I know it's been a quick move, but still don't
Speaker 9: let it the volatility, you know, get you off course.
Speaker 9: Bonds are going to be likely recovering all that in
Speaker 9: our view majority, if not all they lost in twenty
Speaker 9: twenty two, and we still got upside potential in the
Speaker 9: Bontdom market.
Speaker 7: All right, Matt, thanks so much for joining us. Really
Speaker 7: appreciate it.
Speaker 6: Matt misk And he's a co chief investment strategist at
Speaker 6: John Hancock Investment Management.
Speaker 7: And look it up there in Boston.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: Happy Friday, Longest Forday week Out there. I'm Alex stan
Speaker 4: alongside Paulsman Need. This is Bloomberg Intelligence Radio. We are
Speaker 4: broadcasting to you live from Interactor Brooker Studio right here
Speaker 4: in cloudy midtown Manhattan. So the equity market really rolling
Speaker 4: over here, Big tech in particular getting hit the NASDAC
Speaker 4: is off over two percent below it's fifty and one
Speaker 4: hundred day moving average. Quick work of getting to that
Speaker 4: two hundred day moving average as well. Not helping is
Speaker 4: what's happening in Broadcom. That stock down by over ten
Speaker 4: percent on earnings that came out yesterday after the closing bell. Now,
Speaker 4: the money they made from AI and their forecast was
Speaker 4: really quite good. It was just everything else that seemed
Speaker 4: to disappoint investors sort of waiting for that trough, despite
Speaker 4: the CEO saying yeah, okay, we might have found the
Speaker 4: bottom and all of that, but nonetheless that stock is
Speaker 4: off quite a bit. Dana Wolman is Bloomberg Senior Technology editor.
Speaker 4: She joins us, Now, there's a lot to get through
Speaker 4: in tech, but I just wanted to hit on Broadcom.
Speaker 4: When you're looking at the stock reaction to the news
Speaker 4: like they delivered on AI. They made a boatload of money,
Speaker 4: They're going to keep making a boatload of money on AI.
Speaker 4: Do you think it's an overreaction from what you're hearing.
Speaker 11: A little bit and my background is not in equities,
Speaker 11: but to your point, you would think that the worst
Speaker 11: news imaginable would be that the company was not keeping
Speaker 11: up with expectations and AI. In fact, it beat expectations
Speaker 11: in all the parts of its business that are related
Speaker 11: to AI. Somehow, it's really its legacy businesses that were
Speaker 11: flagging in the forecast, but that, as you said, was
Speaker 11: enough to just send the stock down.
Speaker 6: It's interesting, it seems like Broadcom is well positioned for
Speaker 6: this AI you know, kind of phenomena here because investors,
Speaker 6: as you know, are trying to figure out a way
Speaker 6: how do I play AI? And really do I just
Speaker 6: buy Nvidia? Are there other ways to play it here? So,
Speaker 6: but tell us about Broadcom and it's exposure to AI,
Speaker 6: maybe how it's positioned.
Speaker 11: So I think Broadcom gets less attention in part because
Speaker 11: I think it's in a highly technical field, a field
Speaker 11: that's already just very technical and sometimes difficult to explain
Speaker 11: to play people. I think sometimes Broadcom's equipment is even
Speaker 11: more so.
Speaker 3: But it's everywhere. I mean, it's legacy businesses.
Speaker 11: It's chips were already in everything from automotive to smartphones,
Speaker 11: and its components are included in.
Speaker 3: Just AI setups as well.
Speaker 11: Yep, and the it's not necessarily a one form one
Speaker 11: comm to what Nvidia is producing, but just complementary components
Speaker 11: and piece of hardware that people might not know the
Speaker 11: names ever think of, but are necessary in these larger
Speaker 11: AI setups.
Speaker 4: And also what I was reading is that if a
Speaker 4: company winds at making their own AI tips in house,
Speaker 4: they need Broadcom to do that.
Speaker 3: So there's that part of the business as well. Let's
Speaker 3: go to Intel because that stock is also off over
Speaker 3: three percent.
Speaker 4: It's considering some options for its steak in its struggling
Speaker 4: automated driving system provider Mobile Global. Can you remind us
Speaker 4: what Mobile Eye Global actually does.
Speaker 11: Mobile Eye makes automated and automated driving system So is
Speaker 11: it self driving stuff yes, autonomous vehicles yes. And Intel
Speaker 11: has had a steak. It actually sold part of its
Speaker 11: steak last year. I believe we reported profit of netted
Speaker 11: around one point five billion from that. But it's looking
Speaker 11: to sell more of its steak, and as we report
Speaker 11: in the story, it's picking if it's going forward with this,
Speaker 11: it's picking a not great time. Mobilized stock has been
Speaker 11: down a lot, and so Intel would not exactly be
Speaker 11: recouping on its investment if it chose this moment. But
Speaker 11: as we reported more broadly, Intel is in a dire moment,
Speaker 11: it does seem to be considering some really desperate severe
Speaker 11: measures to keep itself afloat.
Speaker 7: Yeah, I mean, I'm just I mean, it's Intel.
Speaker 6: It's down sixty two percent year to date, fifty two
Speaker 6: week low, down three point six percent today. You've covered
Speaker 6: this tech industry for a long time, Dana.
Speaker 7: What's going on with mo? With Intel?
Speaker 6: Did they just miss I guess the technological evolution of
Speaker 6: the chip business or is there?
Speaker 7: Is it management? What do you think is going on there?
Speaker 11: Certainly management doesn't help. I mean, it had that big
Speaker 11: CEO shake up a few years ago. That was when
Speaker 11: Brian Krisanich stepped down. It took a while to replace him,
Speaker 11: and since Pat Gelsinger has been in the role, has
Speaker 11: bet big on the company's foundry business, and that is
Speaker 11: in fact dragging down the company performance and seems to be,
Speaker 11: according to our reporting, something that the companies at least
Speaker 11: considering splitting off.
Speaker 4: Well okay, but that's confusing, right because their whole pitch
Speaker 4: was that, yeah, yeah, we're Intel, yay, but now we're
Speaker 4: gonna make chips too and be a foundry for us
Speaker 4: and for also us. You can come to us, We'll
Speaker 4: make our chips. So why has this gone so south?
Speaker 11: At least for now, the foundry's biggest client seems to
Speaker 11: be Intel itself, gotcha. Yes, So, for whatever reason, that
Speaker 11: part of the business has not taken off as expected.
Speaker 11: To the extent the company has brighter hopes, it does
Speaker 11: seem to be on the chip design side, less the manufacturing.
Speaker 6: So but weren't they a beneficiary or are they not
Speaker 6: going to be a beneficiary of the US government's investment
Speaker 6: in domestic chips.
Speaker 4: I think they'd like to be if they had to
Speaker 4: delay their plan, right.
Speaker 11: Yes, So that that is something that our reporters are chasing,
Speaker 11: is not just the fate of the company, but the
Speaker 11: possible ramifications for the government's investment plans in strategic areas
Speaker 11: that of course include.
Speaker 4: The chip industry.
Speaker 6: And they're based in Santa Clair, California, where everybody who
Speaker 6: is anybody in the chip business is based in that.
Speaker 6: Santa Clara, San Jo's a area there. University of Santa
Speaker 6: Clara is right there as well. Dana Woman, thank you
Speaker 6: so much for joining us. Dana Woman, senior Technology editor
Speaker 6: for Bloomberg News, joining us live here in our Bloomberg
Speaker 6: Interactive Broker studio which we appreciate.
Speaker 7: On a Friday, I mean, people come in on it.
Speaker 3: He likes some people come in, come in on a.
Speaker 7: Friday special gold Star.
Speaker 6: But you're right, the Intel stock is just getting crushed,
Speaker 6: and you know, it's just a it's almost like a
Speaker 6: shadow of its former self here with down sixteen percent. Dana,
Speaker 6: thanks so much for joining us there.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and androyd
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Speaker 2: say Alexa playing Bloomberg eleven thirty.
Speaker 6: So let's see, we're getting some moves here in the
Speaker 6: currencies a little bit. I'm looking at the Bloomberg Dollar
Speaker 6: Index a little just a smidge higher on the Bloomberg
Speaker 6: Dollar Index, Pound Sterling a little bit weaker, the Euro
Speaker 6: a little bit weaker on the backs of some of
Speaker 6: this economic data we've got, including today's jobs number. Audrey
Speaker 6: Child Freeman joint Is. She's a team leader and chief
Speaker 6: f X strategist at Bloomberg Intelligence. Audrey, what are the
Speaker 6: currency markets telling me about some of the economic data
Speaker 6: we're seeing, including the jobs data today.
Speaker 1: Well, the US dollar was already very much weaker getting
Speaker 1: into the non fund pay rolls, and I think in
Speaker 1: the end, from a currency perspective, for as long as
Speaker 1: we didn't get any major supplies one way or the other,
Speaker 1: it wasn't going to be a game changer for the
Speaker 1: outbook for the dollar, which we know by now has
Speaker 1: become a lot more negative with the start of the
Speaker 1: is in cycle looming and most likely now likely on
Speaker 1: September eighteen.
Speaker 4: So to that point, how much more downside than is
Speaker 4: there too? Dollar yeen?
Speaker 1: In particular, I think dollar yen is being driven lower
Speaker 1: by both both by the US side of the trade
Speaker 1: and the US more Davich cyclical narrative, as well as
Speaker 1: the Japanese side of the trade, and I think in
Speaker 1: that respect there's probably room for more downside. You know,
Speaker 1: it's still very difficult to assess the extent to which
Speaker 1: you know the unwind of the carry trade is complete.
Speaker 1: You know, some seeing some some people saying it's almost complete.
Speaker 1: I think, you know, time will tell on that. It's
Speaker 1: very complicated to assess, but I think that you know,
Speaker 1: the the rate differential that's been drive driving dollar year
Speaker 1: lower from one sixty to one forty two is going
Speaker 1: to continue into Q four.
Speaker 8: We're most likely.
Speaker 1: Going to see a great height from the boju and
Speaker 1: potentially even.
Speaker 8: More next year.
Speaker 1: So I feel that, you know, the dollar yen pick
Speaker 1: is probably for me in the G ten currency space,
Speaker 1: the most obvious one to expect to continue lower, with
Speaker 1: the main question being how fast does it go lower?
Speaker 1: For me, I've been in the camp that we're probably
Speaker 1: going to see a slide as opposed to another slump.
Speaker 6: So, Audrey, what currency out there offers the best value
Speaker 6: from your perspective?
Speaker 7: Do you think?
Speaker 1: Well, if your dollar bear and I think for now
Speaker 1: we still are dollar bearish, even though you know, I
Speaker 1: kind of feel that this narrative that I've been describing about,
Speaker 1: you know, weakening the US economy lower fat rates, it's
Speaker 1: in the price, and I kind of feel at some
Speaker 1: point the risk would be that there's too much dubbishness
Speaker 1: price in the fact because the US economy has to
Speaker 1: be clear, is not really falling apart, is just decelerating.
Speaker 1: Inflation is coming down, and that means that we can
Speaker 1: normalize interest rate in the US and that's fine. But
Speaker 1: you know, in terms of which currency to play against
Speaker 1: that I said, the Yeni is a good one. I
Speaker 1: also kind of like the Swiss Frank just because I
Speaker 1: feel that, you know, euro dollar upside at the moment
Speaker 1: is a very tricky one because there's one element in
Speaker 1: the Europe euro dollar bullish story that I'm still waiting
Speaker 1: to unfold, and that's a pickup in economic activity. We're
Speaker 1: not saying that happening in Europe. When that happens, I
Speaker 1: think there'll be more momentum to the upside on the Europe.
Speaker 1: And until that happens, I think dollar Swiss downside maybe
Speaker 1: more appealing. And the other advantage of the Swiss Frank
Speaker 1: I think at the moment is the fact that you know,
Speaker 1: we've seen some episodes recently of more hesitant market risk advertise,
Speaker 1: and this would do better if we were to see
Speaker 1: another phase of risk of markets. So Dollar Swiss downside
Speaker 1: is another very good and interesting pair. I think as
Speaker 1: we conteah yeah into.
Speaker 4: In just about thirty seconds, what do we get from
Speaker 4: the ECB next week?
Speaker 1: We get another cuts and I don't think that's going
Speaker 1: to be too damaging for the Euro, but the euro
Speaker 1: badly needs an improvement in the economy. That's what we
Speaker 1: need for euro dollar upside to go through one twelve
Speaker 1: and one fifteen.
Speaker 4: All right, thank you so much. I really appreciate addit,
Speaker 4: Child Freeman joining US team leader and chief FX strategist
Speaker 4: at Bloomberg Intelligence. Need a better economy, Like how do
Speaker 4: you get that?
Speaker 3: You just take a look at Germany.
Speaker 4: And then the news maybe that Volkswagen's gonna close on
Speaker 4: some of its plans. Their industrial economy is just really suffering.
Speaker 4: How do you get the whole Eurozone to really start
Speaker 4: to outperform when Germany is really in adult drums here?
Speaker 6: Yeah, and that kind of a lot of it stems
Speaker 6: from there. Just a big exporter, particularly to China, and
Speaker 6: if the Chinese economy is slowing, it has been slower
Speaker 6: than expected in that impact big export nations like Germany.
Speaker 6: And I saw that in that German reporting about the
Speaker 6: auto factors Amy close auto factories since nineteen thirty seven,
Speaker 6: So I mean that's not in their DNA to downsize.
Speaker 4: Yeah. There was an interesting report out by no Moura
Speaker 4: that talked about how it's really tourism that is keeping
Speaker 4: services up and keeping the your economy afloat, so we'll
Speaker 4: see what then happens when you get out of the
Speaker 4: summer with John.
Speaker 6: Tucker and I are the only people I know that
Speaker 6: haven't been to Europe like the last year, so we're.
Speaker 4: Just I haven't got anywhere in a year and more.
Speaker 11: I haven't been out of New Jersey twenty five.
Speaker 7: That's not for you.
Speaker 3: Come to the city.
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Speaker 6: Thirty Jony Biley, She's a chief workforce analyst at employ Bridge,
Speaker 6: joining us from Omaha, Nebraska via zoom. Jony, you and
Speaker 6: employee Bridge, you know exactly how employers are feeling here.
Speaker 6: What did you make of this job's print here today?
Speaker 8: Well, this report definitely proves we have a weakening job market.
Speaker 8: We've been saying that certainly for some time. We feel
Speaker 8: it in the temporary help industry, our industry, the staffing
Speaker 8: and recruiting you know, of temporary workers has really been
Speaker 8: on a decline for about two years, and those are
Speaker 8: always the jobs that go first. I think we've talked
Speaker 8: about that in the past, so it's pointing to, you know,
Speaker 8: more weakness. Obviously, this report did not meet the expectations.
Speaker 8: I kind of thought we might see this just because
Speaker 8: you know, I'm constantly talking to employers of all sizes
Speaker 8: across the US, and there's a lot of uncertainty. There's
Speaker 8: economic uncertainty, and then there's also the uncertainty, and so
Speaker 8: I think right now we're seeing a pause on hiring
Speaker 8: and employers are just not adding to their payrolls due
Speaker 8: to that uncertainty.
Speaker 3: So, Johnny, that's such a great point.
Speaker 4: So they're not adding to payrolls, what do you think
Speaker 4: it's going to take for them to start laying off
Speaker 4: their payrolls.
Speaker 8: Well, we are seeing some layoffs here and there. So
Speaker 8: that is, you know, concerning what I think will maybe
Speaker 8: reverse the trend. I mean, it's going to be a
Speaker 8: number of things. You know. I hate to say it,
Speaker 8: but we might have to get past this election, regardless
Speaker 8: of who wins, until employers can say all right, I
Speaker 8: have to find my path forward and here's where I'm
Speaker 8: going to invest and hire I think interest rate cuts
Speaker 8: will help certainly, and you know, maybe we'll see a
Speaker 8: little bit of relief if we do see, you know,
Speaker 8: an interest rate cut, which I think we're all in
Speaker 8: agreement that we're probably going to see one. The big
Speaker 8: question is how large of a cut will they do,
Speaker 8: And there's going to be a lot of scrutiny certainly
Speaker 8: around that because that could signal, you know, are we
Speaker 8: maybe in a worse economic picture than people had realized.
Speaker 8: But I do think an interest rate cut will definitely
Speaker 8: help because employers will then start to loosen up, you know,
Speaker 8: those purse strings and start investing again in their businesses,
Speaker 8: and that can certainly lead to more hiring.
Speaker 6: Jenny, I like in your notes here something very interesting.
Speaker 6: Employers are focused on employee retention, but they're very cautious
Speaker 6: about hiring and adding to their current payrolls. How long, Yeah,
Speaker 6: how long have employers kind of been in that mode?
Speaker 7: Yeah?
Speaker 8: No, that's a great question, because that pendulum definitely swings
Speaker 8: from one side to the other. But I would say
Speaker 8: that we've seen over the last year employers very focused
Speaker 8: on retention strategies. Now there's a few dynamics of what's
Speaker 8: happening certainly in the supply chain world. You know, most
Speaker 8: of those workers are on site. In the professional and
Speaker 8: business services, we've seen employers trying to bring people back
Speaker 8: to the office, but they're balancing that with also trying
Speaker 8: to give them flexibility. So they're very focused on what
Speaker 8: types of benefit programs they can give to them. Of course, wages,
Speaker 8: you know, need to stay competitive. Flexibility is certainly important.
Speaker 8: But creating a great work environment where people want to stay,
Speaker 8: you know, where they enjoy the work that they're doing,
Speaker 8: that really has become a top priority. And we're also
Speaker 8: seeing that that's what workers really want, you know, they
Speaker 8: want to enjoy the work, they want to enjoy the environment,
Speaker 8: and they do want to feel like their employers appreciate
Speaker 8: them and respect them. And so we've we definitely have
Speaker 8: seen a switch that employers are very focused on that
Speaker 8: retention strategy right now.
Speaker 4: That feels like a young kid thing, but whatever, Johnny,
Speaker 4: When you take a look across sectors, what sectors are
Speaker 4: are sort of stronger and what are weaker and sort
Speaker 4: of how do you foresee that playing out over the
Speaker 4: next six months as we get past the FED cut,
Speaker 4: as we get past an election.
Speaker 8: Yes, so certainly we've seen you know, healthcare continues to
Speaker 8: be the strongest sector that is adding jobs, and I
Speaker 8: think we will continue to see that certainly. You know,
Speaker 8: as we look into twenty twenty five and twenty twenty six,
Speaker 8: that sector will remain strong. There's a high demand, there's
Speaker 8: lots of you know, opportunity in many different roles in
Speaker 8: the healthcare sector, so that will be continue to be strong. Construction,
Speaker 8: it was good to see that we added you know,
Speaker 8: over thirty thousand jobs in the construction Construction is a
Speaker 8: good sign that maybe we're starting to see some things
Speaker 8: pick up a bit. But again on the other side,
Speaker 8: we're losing jobs in manufacturing. The professional and business service
Speaker 8: sector only had eight thousand jobs created. Again I mentioned
Speaker 8: temporary help actually lost jobs for the month, Retail lost jobs,
Speaker 8: you know, so overall this this really was a week report.
Speaker 8: We're only seeing that job growth in healthcare and in government,
Speaker 8: and then it's you know a little bit kind of
Speaker 8: trickled out through the other sectors. But healthcare will remain strong.
Speaker 8: I'm really looking for manufacturing to come back, but we
Speaker 8: probably won't see that until next year.
Speaker 6: And another data point for the labor market. Earlier this
Speaker 6: week was the Jolts report continuing to come down. How
Speaker 6: do you use the data that that JILT state is that.
Speaker 7: Important to you?
Speaker 8: It is important, you know, to watch the trends. We
Speaker 8: really want to see that number start to reverse and climb.
Speaker 8: Unfortunately it's it's lagging. It's a lagging report. But when
Speaker 8: you look at seven point seven million open jobs, to me,
Speaker 8: that's concerning because month after month we're seeing that number soften.
Speaker 8: What we need to see is that number start to increase,
Speaker 8: and that is going to be the first sign that
Speaker 8: employers are going to be hiring and adding to their
Speaker 8: payrolls because the first thing they do is advertise those jobs.
Speaker 8: If they decide to hire, they're going to be posting
Speaker 8: those positions online and that's what that report is truly measuring.
Speaker 8: So we want to see that employers are having more
Speaker 8: optimism about the job market, that they're going to invest
Speaker 8: and expand their payrolls and add And I'll be looking
Speaker 8: closely to see, you know what next month reports for
Speaker 8: the Joltsy report. Hopefully it moves in the right direction,
Speaker 8: but right now it does seem, you know, to be
Speaker 8: kind of status.
Speaker 4: Quo before all you go, what did you make of
Speaker 4: the wage number and what are you hearing?
Speaker 8: Yeah, So it's interesting on the wage number because the
Speaker 8: wage number is still showing that wages, you know, are
Speaker 8: strong and certainly competitive, but that really has to do
Speaker 8: with the mix of jobs. When it comes to that
Speaker 8: wage number, we are seeing a lot of the lower
Speaker 8: leveled skilled jobs you know, have been either outsourced or
Speaker 8: you know, whether they've gone overseas or maybe technology, automation,
Speaker 8: artificial intelligence has eliminated some of those jobs. So it
Speaker 8: has a lot to do with the mix of jobs.
Speaker 8: I can tell you employers are not raising wages right now.
Speaker 8: They are kind of steady. They're not decreasing wages, but
Speaker 8: they are not in a situation where it's that competitive
Speaker 8: of a job market that they need to increase wages
Speaker 8: at this point. So it's a little misleading of an
Speaker 8: indicator when you look at it in the bl US report.
Speaker 6: All right, Jenny, thank you so much for joining us.
Speaker 6: Jenny Biley, she's a chief workforce analyst at employee Bridge,
Speaker 6: joining us from Omaha, Nebraska via zoom here. So I
Speaker 6: think in his jobs report there's something.
Speaker 4: Else for everyone.
Speaker 3: I was gonna say it's like a rorshack test.
Speaker 7: Yes, exactly, you can.
Speaker 3: Make a bit of what you see.
Speaker 6: We'll get one more I guess data point next week's CPI.
Speaker 6: So for the FED, I mean Ira Jersey from Bloomberg
Speaker 6: Intelligence just put out a note here and saying, you
Speaker 6: know that'll have some meaning as well for the FED
Speaker 6: in terms of inputs about whether they go twenty five
Speaker 6: basis points or more.
Speaker 10: So.
Speaker 4: I think it's interesting is that if we get to
Speaker 4: read from from where do we have the FED speak
Speaker 4: coming with Waller who couldn't get that name, Maybe get
Speaker 4: a little bit more of a temperance there, and maybe
Speaker 4: the markets are as pricing in twenty five. I am wondering,
Speaker 4: with a front end of the curve winds up, doing
Speaker 4: do we need to kind of sell off a little
Speaker 4: bit because we've had such a massive run into the
Speaker 4: bond market, particularly in that front end, really flattening or
Speaker 4: disinverting that curve of the two tenths. I'm kind of
Speaker 4: paying attention to that.
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Speaker 6: Let's go back to this jobs reporting, Abigail suggested, that's
Speaker 6: a big part of what's driving to sell off in
Speaker 6: today's market. We welcome Christopher Smart. He's a managing partner
Speaker 6: in our growth group. He's a former Special Assistant to
Speaker 6: the President for international Economics.
Speaker 7: He joins us from Boston, Massachusetts. And if you're listening
Speaker 7: to us.
Speaker 6: Up in Boston, our new home is now ninety two
Speaker 6: nine FM in Boston. Christopher, how do you think the
Speaker 6: folks down in DC that really think about this economy,
Speaker 6: worry about this economy, try to manage this economy. How
Speaker 6: do you think the folks down at DC are taking
Speaker 6: this labor data we saw today.
Speaker 12: Well, first of all, welcome to ninety two point nine
Speaker 12: in Boston. We're all very excited to have you.
Speaker 7: Thank you for the plan on a new channel.
Speaker 12: In terms of what they're doing down in Washington, I'm
Speaker 12: afraid they're probably spend a lot more time thinking about
Speaker 12: the election implications of all of this. I'll just pause
Speaker 12: and not answer your question right away. I think it
Speaker 12: is quite remarkable that we are talking about a FED
Speaker 12: cut of twenty five or fifty basis points two months
Speaker 12: out of election, and most of the market and most
Speaker 12: of the nonpartisan analysis would be that this is totally
Speaker 12: unrelated to any political calculation on the part of the
Speaker 12: FED or the Biden administration. So I think that's kind
Speaker 12: of a nice plug for FED independence. In terms of
Speaker 12: the jobs report, there was something for everybody, I think
Speaker 12: in this report. For the hawks, there was, you know,
Speaker 12: the unemployment rate notched down a little bit, hourly earnings
Speaker 12: were up a little bit, and so that would give
Speaker 12: them fuel to argue for twenty five basis points. For
Speaker 12: the doves, you know, we still have a miss in
Speaker 12: terms of the headline jobs growth number, and we have
Speaker 12: downward revisions in the past couple of months. So I think,
Speaker 12: you know, as I say, there's plenty to fuel both
Speaker 12: sides of the debate. My bias would still be that
Speaker 12: we're going to see fifty basis points because of the
Speaker 12: other data that we've seen accumulating, and because you know,
Speaker 12: as long as they are able to signal maybe as
Speaker 12: a hawkish cut that this is not you know, we're
Speaker 12: not going to get three to fifty basis point cuts
Speaker 12: for the next three meetings. We're going to do fifty
Speaker 12: now and then wait and see till the end of
Speaker 12: the year.
Speaker 4: You're right, So it's not like they're overdoing it. They're like, okay,
Speaker 4: we'll go now, but then let's just see what in
Speaker 4: the economic data tells you that we need fifty, Because
Speaker 4: the other part of the argument is like, look, if
Speaker 4: you go fifty, you're saying things are a lot worse
Speaker 4: than you might have thought.
Speaker 12: Well to me, you know, maybe to argue with your
Speaker 12: previous guests that you know, inflation is really not the
Speaker 12: problem anymore. It is a problem politically, it is a
Speaker 12: problem for consumers, it's a problem for low, lower income households.
Speaker 12: But the numbers are coming down the If you're in
Speaker 12: the monetary policy business, you see that you're from fighting
Speaker 12: inflation now to boosting growth. And I think they have
Speaker 12: plenty of room to move from current levels down to
Speaker 12: something a little bit a little bit easier. If not,
Speaker 12: you know, it's certainly going to be still in the
Speaker 12: in the tight range. The economy is slowing in the US,
Speaker 12: there's much more slowing going on in Europe. China is
Speaker 12: obviously stuck right now, So I don't see the risks
Speaker 12: to inflation right now. And I really think as you
Speaker 12: see you know that is those are big headlines coming
Speaker 12: out of Governor Wallace's speech. If that's the broader message
Speaker 12: he intends to deliver, you know, I think that's going
Speaker 12: to increasingly turn markets towards expecting fifty next time.
Speaker 7: Chris, you mentioned kind of the timing here.
Speaker 6: We're in an election year and it looks like this
Speaker 6: Federal Reserve is going to be pretty active in terms
Speaker 6: of making some policy changes right around this election.
Speaker 7: How uncomfortable do you think that makes the Fed?
Speaker 12: I think it makes them very uncomfortable. I mean, Jay
Speaker 12: Powell has been asked about this through a couple of
Speaker 12: different meetings. He's been very forceful and I think very credible.
Speaker 12: It's saying, look, you can read our minutes. We don't
Speaker 12: talk about this, we don't talk about the election, we
Speaker 12: don't talk about any of that. We look at the data.
Speaker 12: It's hard enough getting the data right, and it's hard
Speaker 12: enough setting monetary policy for this dual mandate, let alone
Speaker 12: taking other election implications into view. So I think it
Speaker 12: is notable that they are they feel free to do
Speaker 12: it now. I think they don't love the fact that
Speaker 12: they have to do it now, but they, I think,
Speaker 12: feel that this is the right time. The data is
Speaker 12: pointing in that direction, markets are expecting it, and that
Speaker 12: they can move ahead. I don't think they'll get any
Speaker 12: more cuts in October or anything like that, but they'll
Speaker 12: pick up after the election and see where the data
Speaker 12: guides them.
Speaker 4: You're also a former Special Assistant to the President for
Speaker 4: International Economics. Back in your previous life from twenty thirteen
Speaker 4: to twenty fifteen, we've been getting alive and from about
Speaker 4: economic plans, particularly when it comes around corporate taxes, and
Speaker 4: I'm wondering if you've been able to think about our
Speaker 4: model out the different outcomes on corporate tax policy.
Speaker 3: Like, clearly, yes, lower.
Speaker 4: Corporate taxes will be good for the SMP, but in
Speaker 4: terms of say reinvestment and economic growth, well, the devil.
Speaker 12: Is always in the details. President Trump's proposal is eye
Speaker 12: catching in terms of a dramatic cut in the headline rate,
Speaker 12: but that seems to be linked with manufacturing things in
Speaker 12: the United States, and I think he talks about, you know,
Speaker 12: one hundred percent manufacturing in the United States very little
Speaker 12: as you know, is one hundred percent manufactured in the
Speaker 12: United States, given the inputs to manufactured goods that come
Speaker 12: from many, many other countries. Sometimes, you know, I think
Speaker 12: they say that if you buy a car in the US,
Speaker 12: there are parts that have crossed the Mexican border five
Speaker 12: or six times before it reaches the dealer's lot. I
Speaker 12: would guess what markets are expecting is that, you know,
Speaker 12: corporate rates are probably not likely to move much much
Speaker 12: more from where they are right now. Vice President Harris
Speaker 12: is in line with the Biden proposal to raise them
Speaker 12: to twenty eight percent. President Trump is talking about fifteen percent.
Speaker 12: You know, we have this thing called Congress, which is
Speaker 12: a big toss up and more likely than not, you know,
Speaker 12: it may move one or two bases, one or two
Speaker 12: percentage points up or down, but it's not going to
Speaker 12: be a significant shift.
Speaker 6: I don't think so, Chris, to what extent are you
Speaker 6: your team folks.
Speaker 7: In Washington, DC?
Speaker 6: Are they talking about, you know, annual deficits, I mean
Speaker 6: annual deficits the national debt. Is this something that any
Speaker 6: gets any serious conversation?
Speaker 12: Yeah, I mean, I'm sorry, debt deficit.
Speaker 4: Yeah, yeah, totally.
Speaker 12: I think people like us do talk about it. People
Speaker 12: in the markets do worry about it. But if you
Speaker 12: are a politician and you're looking at the next election,
Speaker 12: why should I worry about this thing that's going out
Speaker 12: ten twenty thirty years when I've got to win in
Speaker 12: no member yep so and and and you know you're
Speaker 12: telling me that credit markets are going to punish me
Speaker 12: for bad behavior, Well when I haven't seen it yet.
Speaker 2: And you know why, why.
Speaker 12: Take on that, that that thorny issue now when I
Speaker 12: don't have to.
Speaker 3: Well, this is what gets confusing.
Speaker 4: I think about the trade deficit too, like to that point, like,
Speaker 4: don't we need the trade deficit because we need foreign
Speaker 4: investors and countries to buy our debts. So if we
Speaker 4: close the trade deficit, there's less money for them to
Speaker 4: do that. And that's where I think I get a
Speaker 4: little confused on all of it.
Speaker 7: Well, you're not at all confused.
Speaker 12: I mean, you're absolutely right that we you know, we
Speaker 12: those things are intimately related, and nobody likes to talk
Speaker 12: about that, you know. I think the focus on the
Speaker 12: trade deficit raises a lot more issues around our savings rate,
Speaker 12: our investment incentives and that sort of thing. Rather, you know,
Speaker 12: the proposals that we tend to go to easily as
Speaker 12: policymakers and politicians, which are tariffs generally don't tend to
Speaker 12: do much to redress those differences in trade deficits that
Speaker 12: people want to because we are so interlinked in so
Speaker 12: many ways with our foreign markets and with other foreign markets.
Speaker 12: A bilateral trade deficit gets a lot of attention between
Speaker 12: the US and China, but really the over it's really
Speaker 12: the overall balance of trade that we have with all
Speaker 12: of our trading partners that will matter.
Speaker 7: All right, Christopher, thank you so much. We appreciate that.
Speaker 7: Doctor Christopher Smart.
Speaker 6: He's a managing partner at our Growth Group and a
Speaker 6: former Special Assistant to the President for International Economics.
Speaker 7: I googled what our growth is. Apparently it's a berg
Speaker 7: in Scotland.
Speaker 4: Okay, there you go.
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