WEBVTT - Surveillance: Walsh Says Economy Moving Forward 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:12.719 with Jonathan Farrell and Lisa Brown Witz Jay Leye. We 0:00:12.880 --> 0:00:16.800 bring you insight from the best and economics, finance, investment, 0:00:17.079 --> 0:00:22.440 and international relations. Find Bloomberg Surveillance and Apple Podcast, Suncloud, 0:00:22.840 --> 0:00:26.280 Bloomberg dot com and of course on the Bloomberg terminal. 0:00:30.120 --> 0:00:34.400 Here's our John Farrell with the Secretary of Labor. Let's listen. 0:00:34.600 --> 0:00:37.000 I'm very place to say on TV on radio. We're 0:00:37.080 --> 0:00:39.720 joined now by US Secretary of Labor Marty Walsh, to 0:00:39.760 --> 0:00:42.280 get the White House response to these tremendous jobs numbers 0:00:42.280 --> 0:00:44.640 that we've seen so far this morning. Mrs Extra great 0:00:44.680 --> 0:00:46.200 to have you with us this morning. Let's get straight 0:00:46.240 --> 0:00:48.279 to it. Demand has been stellar for a while now. 0:00:48.479 --> 0:00:50.800 We've been waiting for the supply to turn up. A 0:00:50.920 --> 0:00:53.440 youth confident was saying scientific that with this job's report 0:00:53.479 --> 0:00:56.360 this morning, we certainly I mean, I think adding four 0:00:56.400 --> 0:01:00.640 million jobs since the inauguration of President Biden, an average 0:01:01.040 --> 0:01:03.560 of you know, eight hundred thousand plus jobs over the 0:01:03.640 --> 0:01:06.520 last three months. We're seeing our economy were moving forward. 0:01:06.880 --> 0:01:09.080 We're seeing people going back into all sectors. It's not 0:01:09.160 --> 0:01:11.720 just leisure and hospitality, although that was our biggest game 0:01:11.760 --> 0:01:14.080 again this month, but we saw people in education and 0:01:14.520 --> 0:01:18.760 uh government education and also in manufacturing, so we're starting 0:01:18.800 --> 0:01:21.759 to see different sectors getting busy as well. Mr Secretary, 0:01:21.800 --> 0:01:24.800 What do you think is driving those supply constraints starting 0:01:24.840 --> 0:01:26.080 to ease just a little bit? What do you think 0:01:26.080 --> 0:01:28.160 it is driving that some people have pointed put towards 0:01:28.520 --> 0:01:31.280 the expired unemployment benefits in some states half the states 0:01:31.280 --> 0:01:33.800 across this country. What do you think it is? I 0:01:33.840 --> 0:01:36.440 think there's more people vaccinated, more people feel uncomfortable. Now. 0:01:36.600 --> 0:01:38.240 We obviously have to keep an eye on the delta 0:01:38.280 --> 0:01:40.360 variants and where that takes us. But I think people 0:01:40.400 --> 0:01:42.640 are feeling safer going out when you go to a restaurant, 0:01:42.640 --> 0:01:45.039 more and more people coming out. Here in Washington, I 0:01:45.040 --> 0:01:47.319 see more and more people doing doing on those tour buses. 0:01:47.560 --> 0:01:49.920 So people are starting to travel. We were seeing more 0:01:49.920 --> 0:01:52.520 travel in the airport. So it's comfort, it's it's people 0:01:52.560 --> 0:01:55.640 feeling safe. Seventy of the American population has at least 0:01:55.640 --> 0:01:57.960 one vaccination shot. But we have to we have to 0:01:58.000 --> 0:02:00.480 be very cognizant of the delta variant and make sure 0:02:00.480 --> 0:02:02.360 we don't let that spike and get out of control. 0:02:02.560 --> 0:02:04.480 A higher wage is making it happen. Do we need 0:02:04.480 --> 0:02:06.840 a higher price to bring that supply back in line 0:02:07.000 --> 0:02:09.799 with demand? Four percent wage growth? Mr? Secret do you 0:02:09.880 --> 0:02:11.440 think do you think we do we need to see 0:02:11.440 --> 0:02:14.799 more of this? I think higher wage wage growth is good. 0:02:14.800 --> 0:02:16.600 It's good for the American worker, it's good for people 0:02:16.720 --> 0:02:18.840 going back to work. I think in some sectors we're 0:02:18.840 --> 0:02:21.120 definitely gonna need to see higher wage growth for people 0:02:21.160 --> 0:02:23.119 to come back to work. But but I think where 0:02:23.120 --> 0:02:26.200 we're headed right now, I mean all signs are incrementally 0:02:26.200 --> 0:02:28.960 going in a good positive direction. Companies have starting to 0:02:28.960 --> 0:02:32.280 respond on the vaccine front, Tyson Food requiring all staff 0:02:32.320 --> 0:02:34.280 to be vaccinated by November first. We heard the same 0:02:34.320 --> 0:02:37.960 from the United Airlines. From your standpoint, is there something 0:02:38.040 --> 0:02:42.600 you and the administration support companies mandating vaccines for their 0:02:42.639 --> 0:02:46.799 labor force? Certainly the President said he supports companies when 0:02:46.800 --> 0:02:49.280 they put those mandates in place. H He's taken the 0:02:49.480 --> 0:02:51.560 different We're taking a different approach to the federal government. 0:02:51.680 --> 0:02:53.960 We're asking people to get vaccinated, and if they don't 0:02:53.960 --> 0:02:56.200 get vaccinated, we're going to do lots of testing. So 0:02:56.600 --> 0:02:58.359 anything that we can do to encourage people to get 0:02:58.360 --> 0:03:00.560 back into the workforce is important. I think there are 0:03:00.560 --> 0:03:02.880 people that don't want to get vaccinated because of whatever 0:03:02.919 --> 0:03:05.519 reason it might be. Some people have good, legitimate reasons, 0:03:05.560 --> 0:03:08.600 but the majority of people that aren't getting vaccinated, it's 0:03:08.639 --> 0:03:10.680 a political thing, and it shouldn't be a political political 0:03:10.680 --> 0:03:12.359 issue if it's a political thing. So why do you 0:03:12.360 --> 0:03:14.760 think minority groups in some cities like Washington, d C. 0:03:14.919 --> 0:03:17.400 The city you're in, like New York City, Why some 0:03:17.480 --> 0:03:20.280 of those minority groups have not been getting vaccinated? Why 0:03:20.320 --> 0:03:23.120 those vaccination rates are so much lower? Is it just 0:03:23.200 --> 0:03:26.560 politics or is something else happening? No. I think in 0:03:26.560 --> 0:03:28.920 the community of Carlor, particularly in urban areas, it's a 0:03:28.960 --> 0:03:32.040 distrust in the healthcare system over generations. I've seen it 0:03:32.040 --> 0:03:33.880 when I was Mirror Boston, and we had to do 0:03:33.919 --> 0:03:35.280 a lot of work to go out there and build 0:03:35.280 --> 0:03:39.040 trust in the community. People of color, particularly African American community, 0:03:39.560 --> 0:03:42.080 felt in some cases abandoned by hearts of the hospital 0:03:42.080 --> 0:03:44.080 systems over years. So we have to do more work 0:03:44.120 --> 0:03:46.240 there to encourage people to get vaccinated. And that's the 0:03:46.240 --> 0:03:48.920 issue at playing right now. So, Mr Secretary, I wonder 0:03:48.960 --> 0:03:50.840 what your thoughts on the following might be if we're 0:03:50.840 --> 0:03:53.520 in a position now where large companies are starting to 0:03:53.560 --> 0:03:56.280 say if you're not vaccinated, you can't work for us, 0:03:56.560 --> 0:03:58.720 where cities like New York is starting to say if 0:03:58.720 --> 0:04:01.400 you're not vaccinated, you can't dine here when you and 0:04:01.440 --> 0:04:04.920 I buy both. Now, the vaccination rights of minority groups 0:04:04.960 --> 0:04:07.280 just aren't high enough. You worried that they might be 0:04:07.320 --> 0:04:10.480 frozen out of this economy. You know, I'm concerned, but 0:04:10.600 --> 0:04:12.640 we But it's it's also outreach and marketing. We have 0:04:12.720 --> 0:04:14.560 to go out into the communities and talk to people 0:04:14.800 --> 0:04:17.000 to make sure people are comfortable with the vaccine. So 0:04:17.080 --> 0:04:20.080 you can't just which really say, in certain communities in America, 0:04:20.160 --> 0:04:22.440 like for example, in Boston, the communities of color that 0:04:22.480 --> 0:04:24.480 you know force people to get vaccinated, we have to 0:04:24.520 --> 0:04:26.360 go out and do an educational component of whites and 0:04:26.440 --> 0:04:28.359 point to get vaccinated, just like we had to do 0:04:28.400 --> 0:04:30.680 an educational component at the very beginning of the pandemic 0:04:30.800 --> 0:04:33.159 to express why it was important to wear masks, fizzicle distance, 0:04:33.160 --> 0:04:35.159 washing hands, and do all of those things. So what 0:04:35.200 --> 0:04:37.240 are you doing right now to make that happen. What 0:04:37.279 --> 0:04:40.160 does the outreach look like? Well, I mean I think 0:04:40.200 --> 0:04:41.919 a lot of it. It's gonna be up to local governments. 0:04:41.920 --> 0:04:43.520 I think that that you know, we're gonna be working 0:04:43.520 --> 0:04:46.400 with mayors and states around the country about that to 0:04:46.440 --> 0:04:48.560 reach out there. And I know that the COVID Task 0:04:48.600 --> 0:04:50.480 Force at the White House is working on it as well. 0:04:50.560 --> 0:04:52.480 Right now. I haven't had a meeting with them in 0:04:52.480 --> 0:04:53.760 the last couple of weeks, but I know that they're 0:04:53.800 --> 0:04:55.800 working on how do we deal with this issue of 0:04:56.200 --> 0:04:58.560 the people in America that have decided not to get 0:04:58.640 --> 0:05:01.120 vaccinated for whatever reason they are, How can we encourage 0:05:01.120 --> 0:05:03.120 them to get vaccinated? So it's still it's still work 0:05:03.120 --> 0:05:04.880 in progress. Do you think we need to get past 0:05:04.960 --> 0:05:08.159 this lazy media narrative that it's just politics, that there's 0:05:08.240 --> 0:05:10.640 much more dom and gone so that one more time 0:05:10.640 --> 0:05:11.839 I missed that. Do you think we need to move 0:05:11.880 --> 0:05:14.920 past the lazy media narrative that this is just politics, 0:05:15.160 --> 0:05:17.520 that there's more going on in this country. You touched 0:05:17.520 --> 0:05:20.200 on the distrust of government that's a lot more pervasive 0:05:20.200 --> 0:05:22.479 than I think some people are willing to acknowledge. MS 0:05:22.560 --> 0:05:25.720 the Secretary, would you agree, Yeah, there's no question about it, 0:05:25.720 --> 0:05:27.480 And I'm acknowledging it because I saw it first hand 0:05:27.520 --> 0:05:29.440 as the mayor of the City of Boston. But but 0:05:29.600 --> 0:05:31.080 I do think there's a lot I think a lot 0:05:31.080 --> 0:05:33.240 of this also has to do politics. I think that 0:05:33.240 --> 0:05:34.720 that you know, when you look at some parts of 0:05:34.800 --> 0:05:36.760 rural America, you look at some parts of what's happening 0:05:36.800 --> 0:05:40.680 down in Florida, people refusing to get vaccinated. Uh, it's 0:05:40.680 --> 0:05:43.400 not a political issue. Getting vaccinated is not a Democrat 0:05:43.480 --> 0:05:46.679 or Republican issue. It's not a progressive or conservative issue. 0:05:46.880 --> 0:05:48.919 It's about taking care of yourself and your family and 0:05:48.920 --> 0:05:51.840 your livelihood and keeping yourself alive. So I wish it 0:05:51.880 --> 0:05:55.239 wasn't political. It shouldn't be political. Uh, wearing mass shouldn't 0:05:55.279 --> 0:05:57.440 be political. It's has nothing to do with politics. It's 0:05:57.480 --> 0:06:00.200 about your public health. It's about keeping yourself safe, and 0:06:00.320 --> 0:06:03.000 ultimately it's about keeping our economy moving forward and keeping 0:06:03.000 --> 0:06:05.120 our country moving. Mrs Extra, I know you've got to 0:06:05.200 --> 0:06:07.000 keep moving. You've got a busy morning this morning. Thank 0:06:07.000 --> 0:06:08.600 you for being with us. We appreciate at the U 0:06:08.600 --> 0:06:11.000 S Secretary of LABE that Manti Walsh from New York 0:06:11.040 --> 0:06:13.320 City for not audience worldwide. I'm ready out on TV 0:06:14.000 --> 0:06:23.320 this as Bloin bug Jeff Rosenberg joining with black Rock 0:06:23.400 --> 0:06:25.880 and what's so important here is so holistic and fixed 0:06:25.920 --> 0:06:29.040 income and doing wonderful work in multi strategy as well. 0:06:29.560 --> 0:06:33.039 Is it a regime change today, Jeff Rosenberg? When you 0:06:33.120 --> 0:06:35.560 see the revisions, when you see one point eight eight 0:06:35.640 --> 0:06:39.560 one non firm payrolls over sixty days, does it shift 0:06:39.800 --> 0:06:43.120 the black Rock view? You know, it's a It's a 0:06:43.160 --> 0:06:45.479 really good question, Tom, because I was thinking the exact 0:06:45.520 --> 0:06:48.080 same thing that you know, we've had a lot of 0:06:48.240 --> 0:06:51.440 kind of negative surprises, you know, focused really on the 0:06:51.480 --> 0:06:55.200 delta variant. You know, it's important to remember that this 0:06:55.240 --> 0:07:00.400 payroll report is really pre the CDC mask wearing change 0:07:00.400 --> 0:07:03.640 in guidance. It doesn't really incorporate some of those more 0:07:03.680 --> 0:07:07.360 recent changes yet to the extent that we follow the 0:07:07.440 --> 0:07:10.280 pattern that we've seen in India and the UK where 0:07:10.320 --> 0:07:14.120 the variant surges, but it's not a permanent surge. You know, 0:07:14.200 --> 0:07:17.560 we could be seeing kind of the peaking of the 0:07:18.680 --> 0:07:22.040 negative news that has has been really about the second 0:07:22.040 --> 0:07:25.200 derivative and the slowdown, and that's manifested itself in a 0:07:25.280 --> 0:07:29.200 pretty protracted rally and interest rates. You know, since interest 0:07:29.280 --> 0:07:31.760 rates peaked at the beginning of March, I think the 0:07:31.840 --> 0:07:34.280 next focus here, and you were just talking about it 0:07:34.560 --> 0:07:37.560 in terms of average hourly earnings, Mike McKee spot on, 0:07:37.640 --> 0:07:41.720 it's really hard to digest and and decouple the mixed 0:07:41.760 --> 0:07:45.880 shift from the underlying data. But it's a strong print 0:07:46.080 --> 0:07:49.160 even with the mixed shift that Mike was highlighting, and 0:07:49.200 --> 0:07:51.680 that's really going to turn the focus on inflation. If 0:07:51.720 --> 0:07:55.320 we add labor market strength, and let's be clear, this 0:07:55.400 --> 0:08:00.480 is a very strong report across all metrics. There's there's 0:08:00.600 --> 0:08:03.920 very little that you can point to here that's disappointing. 0:08:04.080 --> 0:08:07.200 And if we add to that, you know, some signs 0:08:07.360 --> 0:08:10.840 of a broadening out from that inflation that we're seeing 0:08:10.840 --> 0:08:13.760 in the in the wages here, you know, this could 0:08:13.800 --> 0:08:17.240 be that regime shift in terms of the direction that 0:08:17.320 --> 0:08:19.880 we've had on interest rates that you were asking about, Jeff, 0:08:19.880 --> 0:08:24.240 if the Fenent May team was tomorrow, what would I decide? Well, 0:08:24.280 --> 0:08:26.480 I think you hit it, or someone talked about the 0:08:26.480 --> 0:08:30.600 taper discussion. You know it's important here. The Fed is 0:08:30.800 --> 0:08:36.240 very focused to separate the interest rate tightening path from 0:08:36.520 --> 0:08:39.960 the tapering discussion. And so when you look at that 0:08:40.040 --> 0:08:43.280 bond market reaction and and earlier, you know, we were 0:08:43.320 --> 0:08:45.840 looking at talking about the two year versus the back 0:08:45.960 --> 0:08:49.760 end of the curve, still a pretty muted response in 0:08:49.800 --> 0:08:54.280 the very short maturities of the treasury market, the actions 0:08:54.320 --> 0:08:56.400 in the back end of the curve, and that tells 0:08:56.440 --> 0:08:59.720 you that, you know, the market is separating the path 0:08:59.840 --> 0:09:04.360 of tightening from the pace or the calendar on tapering. 0:09:04.400 --> 0:09:07.880 I think, you know, if anything, it pulls forward, maybe tapering, 0:09:08.120 --> 0:09:11.320 but the Feds being very clear they want to avoid 0:09:11.360 --> 0:09:15.440 the taper tantrum. And remember the taper tantrum was about 0:09:15.559 --> 0:09:22.080 the market conflating tap tapering with earlier tightening. This is 0:09:22.080 --> 0:09:24.000 not going to be an earlier tightening, but it could 0:09:24.040 --> 0:09:26.160 be an earlier tame And Jeff, that's exactly what President 0:09:26.200 --> 0:09:28.760 Kaplan tried to do this week, aggressively de link kiss 0:09:28.800 --> 0:09:32.320 commentary about que from any kind of idea about hiking 0:09:32.440 --> 0:09:34.200 rates anytime soon. Mike McKay, I want to bring it 0:09:34.200 --> 0:09:36.440 back into the conversation. It is there reason to believe 0:09:36.800 --> 0:09:40.400 that this can persist, These jobs gains can persist into September? 0:09:40.760 --> 0:09:43.120 And was this a stress test for the theory that 0:09:43.160 --> 0:09:46.520 if you remove additional unemployment insurance, the workers will show 0:09:46.679 --> 0:09:48.480 Some people have made the argument I don't hold a 0:09:48.520 --> 0:09:50.880 position here. I'm just wondering, Mike, is the proof of 0:09:50.920 --> 0:09:53.440 that this morning? Now there's no proof of it this morning. 0:09:53.800 --> 0:09:56.800 We don't have data that show that. The research that 0:09:56.920 --> 0:09:59.640 has been done suggests there has been no effect from 0:09:59.640 --> 0:10:02.280 it over are all. In about two weeks, will get 0:10:02.320 --> 0:10:05.319 the state employment numbers and we'll see if any particular 0:10:05.360 --> 0:10:09.120 states that cut off unemployment benefits see arise. But one 0:10:09.200 --> 0:10:11.719 thing that may be at work here, John, is that 0:10:11.840 --> 0:10:15.480 in the summertime, schools are never in session, so the 0:10:15.600 --> 0:10:19.480 daycare issue may have not been a problem UH in 0:10:19.520 --> 0:10:23.160 the sense of the seasonal adjustment that is done because 0:10:23.200 --> 0:10:25.920 they expect people to be out of the labor force 0:10:25.960 --> 0:10:28.880 to a certain extent taking care of their kids. And 0:10:28.960 --> 0:10:32.880 let me also mention that the education component that was 0:10:32.960 --> 0:10:37.480 expected to add two jobs certainly did. UH. Jobs in 0:10:37.720 --> 0:10:41.440 education two hundred and twenty three thousand more in the 0:10:41.520 --> 0:10:46.520 seasonally adjusted UH area than in non seasonally adjusted so 0:10:46.559 --> 0:10:49.400 they've added two hundred twenty three thousand jobs to the total. 0:10:49.440 --> 0:10:51.840 Otherwise we would have had seven d and twenty thousand. 0:10:52.080 --> 0:10:55.600 So definitely a major seasonal adjustment question here. But UH, 0:10:55.640 --> 0:10:57.960 the issue is does anybody at the FED really care 0:10:58.000 --> 0:11:00.680 about seasonal adjustment and when are trying to think of 0:11:01.360 --> 0:11:05.120 whether it's substantial additional progress. Jeff Rosenberg as an investor, 0:11:05.160 --> 0:11:08.240 what do you do with this information? Well, as we 0:11:08.360 --> 0:11:11.320 as we talked about, I think this is a possible 0:11:11.440 --> 0:11:15.000 shift here in the rate dynamic. You know, we we 0:11:15.080 --> 0:11:19.200 really have to follow this up with some inflation data 0:11:19.200 --> 0:11:20.920 if if that's gonna if that's really going to be 0:11:20.960 --> 0:11:24.640 the case. But just going back to the labor market peace, 0:11:24.679 --> 0:11:28.240 because you know, you look at what's driving the FED 0:11:28.360 --> 0:11:30.760 and and and market expectations around the FED, and it's 0:11:30.800 --> 0:11:33.280 it's it's labor markets, and it's inflation. And on the 0:11:33.360 --> 0:11:38.880 labor market side, this is certainly contributing to accelerating mostly 0:11:38.960 --> 0:11:40.800 the taper discussion. I think the FED is going to 0:11:40.880 --> 0:11:44.000 do a lot to try to separate out taper from 0:11:44.160 --> 0:11:47.040 from tightening, and I think that's the main takeaway. I 0:11:47.040 --> 0:11:50.079 want to just add that there is some little piece 0:11:50.120 --> 0:11:54.079 of information here that participation rate did tick up a tenth. 0:11:54.480 --> 0:11:57.440 That's quite helpful. Uh, We're gonna be focused on that 0:11:57.480 --> 0:12:00.160 participation rate as we roll off the rest of the 0:12:00.240 --> 0:12:04.160 unemployment insurance to see whether the supply side starts to 0:12:04.280 --> 0:12:07.120 ease and you start to see the labor market grow 0:12:07.200 --> 0:12:10.040 from that end. Jeff, does this report it change the 0:12:10.080 --> 0:12:13.599 balance of risks with respect to overheating in the economy 0:12:13.840 --> 0:12:18.840 or perhaps going into more of a sagflationary environment. I 0:12:18.880 --> 0:12:21.400 don't think it does. I mean, I think that you've 0:12:21.480 --> 0:12:24.360 had that balance of risk. You know, look at Clarita's 0:12:24.880 --> 0:12:27.600 speech from a couple of days ago, and I think 0:12:27.640 --> 0:12:30.240 the balance of risk that he highlighted is is to 0:12:30.320 --> 0:12:34.440 the upside on inflation. And while that you know, there's 0:12:34.480 --> 0:12:37.520 certainly hawks and doves, both within the Fed and within 0:12:37.559 --> 0:12:41.360 the market. I think that balance of risk to higher inflation, 0:12:42.000 --> 0:12:45.720 uh is something we had before the report. But certainly 0:12:45.800 --> 0:12:49.800 this report, particularly you know what Mike highlighted on average 0:12:49.800 --> 0:12:55.079 hourly earnings, only reinforces that risk on the balance of 0:12:55.160 --> 0:12:59.240 risks being towards higher inflation. John Farrow Jason Furman with 0:12:59.320 --> 0:13:02.679 a blister rain tweet He's never seen a more constructive 0:13:02.679 --> 0:13:05.920 report like this. He calls it a wonderful set of data. 0:13:06.280 --> 0:13:09.600 Neil Dutta is heated that this is a massive start 0:13:09.920 --> 0:13:11.880 to qu three. It's what we all wanted to say. 0:13:12.080 --> 0:13:14.400 Jeff is going to catch up set Jeff Roisenberg of 0:13:14.480 --> 0:13:23.679 black Rock Gina Martin Adams now on the equity market consequences. 0:13:23.960 --> 0:13:28.079 Gin I see a churn to equities, but nevertheless a 0:13:28.240 --> 0:13:32.520 VIX that signals a bowl market. Neil Dutta at Renaissance 0:13:32.559 --> 0:13:35.680 suggests this is a bang up start to queue three. 0:13:35.920 --> 0:13:41.440 How will that change the standard and poor's estimate game? Yeah, 0:13:41.440 --> 0:13:44.080 I think that analysts are still pretty cautious frankly on 0:13:44.120 --> 0:13:46.720 the outlook, and certainly what we've seen over the course 0:13:46.720 --> 0:13:48.959 of the last six weeks or eight weeks or so 0:13:49.559 --> 0:13:52.720 is a rotation into more defensive strategies really driving the 0:13:52.760 --> 0:13:56.079 market higher. So to the degree that we have much 0:13:56.160 --> 0:14:00.679 faster than expected growth and persistent growth, two things are 0:14:00.760 --> 0:14:03.720 very important. We get both of those. Over the course 0:14:03.720 --> 0:14:05.480 of the next several quarters, we're going to continue to 0:14:05.480 --> 0:14:09.119 see upward estimate revision. So far, analysts are only revising 0:14:09.240 --> 0:14:12.880 estimates higher because second quarter numbers beat, and that's been 0:14:12.920 --> 0:14:17.280 consistent throughout the entire pandemic. Analysts are very cautious with 0:14:17.320 --> 0:14:20.160 respect to the outlook, and even though numbers are still 0:14:20.200 --> 0:14:22.640 going higher, they're only going higher because companies are telling 0:14:22.640 --> 0:14:25.080 them that they should go higher. It's not that analysts 0:14:25.120 --> 0:14:27.360 are getting overly optimates. So if we continue to see 0:14:27.400 --> 0:14:29.640 numbers like this, we're going to see upward estimate revision 0:14:29.880 --> 0:14:34.120 all the way into how is use of cash changed 0:14:34.440 --> 0:14:37.960 or your gues estimate of use of cash. Robert Schiffman 0:14:38.040 --> 0:14:41.720 published moments ago of a forty billion share buy back 0:14:41.800 --> 0:14:45.640 up Microsoft. They've got the powder to do that, etcetera, etcetera, 0:14:45.920 --> 0:14:49.840 all of Bloomberg intelligence. How has use of cash changed 0:14:50.240 --> 0:14:53.960 to sustain this bull market? Yeah, so so far this 0:14:54.080 --> 0:14:56.560 year it's all been it's been all about buy backs 0:14:56.560 --> 0:14:59.080 and M and A. Those two things have really been 0:14:59.160 --> 0:15:02.960 the dominant fact 's behind cash utilization by companies. So 0:15:03.080 --> 0:15:05.160 to degree that they're willing to part with their cash, 0:15:05.240 --> 0:15:08.560 which is still a limited amount of companies doing so, 0:15:08.920 --> 0:15:11.640 they're spending it on re engaging in buying buy backs 0:15:11.640 --> 0:15:15.720 that they cut in and increasing buy backs over time. 0:15:16.160 --> 0:15:19.120 They're also buying companies. We are seeing M and A 0:15:19.200 --> 0:15:23.040 trends improve and we've seen that really since. What they're 0:15:23.080 --> 0:15:24.840 not doing so far, and I think where we have 0:15:24.880 --> 0:15:28.080 the greatest potential to sustain a longer term, faster pace 0:15:28.160 --> 0:15:32.080 of economic recovery is capital spending. Companies are still not 0:15:32.240 --> 0:15:35.520 parting with their cash in the most optimistic method, and 0:15:35.560 --> 0:15:40.200 that is spending it on future business potential outside of 0:15:40.240 --> 0:15:42.320 buy backs and m and A. So we've got to 0:15:42.360 --> 0:15:46.280 see capital spending improve. There's certainly capacity to do so. 0:15:46.360 --> 0:15:49.280 Just to get back to average share of capital spending 0:15:49.360 --> 0:15:53.360 relative to sales, we should see capex rise twenty over 0:15:53.400 --> 0:15:55.840 the course of the next twelve to eighteen months. If 0:15:55.840 --> 0:15:58.520 we get that kind of figure, that's going to increase 0:15:58.600 --> 0:16:01.880 the confidence that analysts have of and certainly increased the 0:16:01.960 --> 0:16:06.040 durability um and the perceived durability and rate of growth 0:16:06.080 --> 0:16:07.920 that we likely are going to see over the course 0:16:07.920 --> 0:16:10.120 of the cycle. Gina is stick with us. We're just 0:16:10.120 --> 0:16:12.720 sort of parsing through the numbers. Michael McKee is looking 0:16:12.840 --> 0:16:15.280 at the more granular aspects of this report. And when 0:16:15.280 --> 0:16:18.520 we talked about the dissonance between corporate earnings coming in 0:16:18.600 --> 0:16:21.640 so much harder than people had expected yet economic data 0:16:21.680 --> 0:16:24.880 lagging behind, perhaps the economic data just had and caught 0:16:24.920 --> 0:16:28.200 up with itself. Mike, what are the details, Well, we're 0:16:28.200 --> 0:16:31.320 looking at revisions to the prior months. You add in 0:16:31.800 --> 0:16:37.000 the numbers that were added back for June and May 0:16:37.080 --> 0:16:40.680 nine hundred and thirty eight thousand jobs were created in June. 0:16:40.680 --> 0:16:43.960 We had thought that was eight fifty, so a significantly 0:16:44.040 --> 0:16:47.880 better report for the month of June and total one 0:16:48.440 --> 0:16:51.400 nineteen thousand over those two months, so job creation has 0:16:51.440 --> 0:16:53.400 been a lot stronger than we had thought it was. 0:16:53.480 --> 0:16:56.320 We had some reports we thought were disappointing. Turns out 0:16:56.320 --> 0:16:58.920 they weren't as bad. Meanwhile, Gina Martin that I'm still 0:16:58.960 --> 0:17:01.080 with us, and I'm looking at the action in the 0:17:01.120 --> 0:17:03.560 equity market in response to this, pretty much as you 0:17:03.560 --> 0:17:07.440 would expect. NAZAC futures a way underperforming the SMP, which 0:17:07.480 --> 0:17:10.920 is basically flat. NASTAC futures are down a little less 0:17:11.080 --> 0:17:12.760 than a half a percent, or they were in just 0:17:12.840 --> 0:17:15.320 a couple of minutes ago. I'm wondering, from your perspective, 0:17:15.640 --> 0:17:18.760 if the NASAC can post gains through year end if 0:17:18.760 --> 0:17:23.400 treasure yields continue to rise, very unlikely. Um at least 0:17:23.400 --> 0:17:26.080 they will lag the NASTAC should certainly lag the SMP. 0:17:26.200 --> 0:17:30.920 Five and more cyclically oriented, sort of value centric segments 0:17:30.960 --> 0:17:33.880 of the market could rise faster in an environment where 0:17:33.960 --> 0:17:37.840 rates are rising in inflation expectations are rising. In my mind, 0:17:38.200 --> 0:17:41.200 the recovery that we saw in the NASAAC in big 0:17:41.240 --> 0:17:43.800 cap tech in particular, over the course of the last 0:17:43.840 --> 0:17:48.199 couple of months, what's really about analysts and investors generally 0:17:48.200 --> 0:17:50.480 getting a little bit more cautious about the growth outlook. 0:17:50.520 --> 0:17:53.600 So if you continue to have surprises on growth, continue 0:17:53.640 --> 0:17:57.280 to have surprises on inflation numbers, that trade depletes over 0:17:57.320 --> 0:17:59.160 the course of the rest of them of the year, Gina, 0:17:59.160 --> 0:18:01.720 Marty adamsyk you soone's too short of visit this morning. 0:18:07.200 --> 0:18:11.080 It's the only reason Jerome Schneider agreed to appear with 0:18:11.160 --> 0:18:16.159 us this morning was sure sureser. Max Scherzer killed it 0:18:16.440 --> 0:18:20.360 for the Dodgers in the last forty eight hours, striking 0:18:20.359 --> 0:18:24.679 out ten against the Astros. Schneider is so buffuddled by 0:18:24.720 --> 0:18:27.560 West Coast baseball. That's the only reason we got him 0:18:27.560 --> 0:18:30.440 on air. He's dazzled. I mean, Jerome, it's fun from 0:18:30.480 --> 0:18:34.440 Seattle on down to San Diego. It's West Coast Baseball time, 0:18:34.520 --> 0:18:37.880 isn't it? It is? It is? Unfortunately, you know the 0:18:37.920 --> 0:18:39.600 angel through of our hit and myths, and you know 0:18:39.760 --> 0:18:42.440 you don't mention him. But but you know what I'll 0:18:42.480 --> 0:18:44.199 tell you. You know this, I'm a Yankee stand so 0:18:44.320 --> 0:18:46.879 I trade that have gone on. You know, it's uh, 0:18:46.920 --> 0:18:49.760 it's very funny, funny. Hopefully that pizzas will come together 0:18:49.760 --> 0:18:52.400 in I can't I don't know, I can't continue this. 0:18:53.800 --> 0:18:57.480 I'm gonna just I don't know. Jerome, watch out. And 0:18:56.640 --> 0:18:59.440 I've got to say, folks, they went back and forth 0:18:59.480 --> 0:19:02.560 with Doug asked the Yankees, I left for dead, and Jerome, 0:19:02.600 --> 0:19:05.160 You've got to admit with the trades, this is gonna 0:19:05.200 --> 0:19:08.480 be fun. You know, we always talked about inciting actions 0:19:08.480 --> 0:19:11.159 for markets. This is definitely an exciting action for for 0:19:11.280 --> 0:19:13.320 the the team. But you know, it's a long season. 0:19:13.400 --> 0:19:15.119 It's all stats. We'll see how it comes together. A 0:19:15.119 --> 0:19:17.080 couple of home runs, you know, get the ball rolling. 0:19:17.200 --> 0:19:20.119 So you are in the trenches, Jerome, on a bond 0:19:20.119 --> 0:19:24.119 desk of global repute, and you get a regime change 0:19:24.200 --> 0:19:28.240 like this job's report and its revision. How does your 0:19:28.320 --> 0:19:31.760 desk think when you get a sea change like this? 0:19:32.840 --> 0:19:34.800 I mean, I'll be honest, Tom, regime change is a 0:19:34.880 --> 0:19:38.040 pretty strong word. Um, I think it. You know obviously 0:19:38.560 --> 0:19:41.080 hints that progress and some of that progress we've seen 0:19:41.160 --> 0:19:43.320 for quite some time. You know, we shouldn't be surprised 0:19:43.320 --> 0:19:46.760 by that healing process and growth continuing. Uh and and 0:19:46.840 --> 0:19:50.040 necessarily I don't think it necessarily changes they calculus all 0:19:50.080 --> 0:19:52.880 that much. Some of it's some goods back from last month. 0:19:53.320 --> 0:19:55.919 We clearly see that in a household report. Um. But 0:19:56.000 --> 0:19:59.359 I think ultimately what it does is puts bear in 0:19:59.400 --> 0:20:01.920 the center. It's really your goal, you know, similar to 0:20:01.960 --> 0:20:03.800 the Inkies trying to get to the World Series. The 0:20:03.840 --> 0:20:06.240 goal of dead is to is to effectively get to 0:20:06.280 --> 0:20:07.720 the end of the year and get to that point 0:20:07.760 --> 0:20:10.600 where they view ustential further progress is being made. And 0:20:10.880 --> 0:20:13.200 that's sort of been the mantra that we've been operating 0:20:13.200 --> 0:20:15.679 here at PIMCO, is that that growth will continue, that 0:20:15.680 --> 0:20:17.720 you'll see an unemployment rate close at about four and 0:20:17.760 --> 0:20:19.840 a half percent by the by the end of the year, 0:20:19.920 --> 0:20:22.600 and and those things are the metrics social help that 0:20:22.720 --> 0:20:26.600 tapering process and digested rather easily. The concern for us 0:20:26.680 --> 0:20:28.919 is that digestion, and I think that's the focus for 0:20:30.080 --> 0:20:34.960 we need to make substantial further progress. With a Mets fan, Yeah, 0:20:34.960 --> 0:20:37.359 it was about to say, I take issue, are you 0:20:37.480 --> 0:20:41.000