WEBVTT - Surveillance: We Are Not Late Cycle, Clarida Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.800 Bloomberg dot Com, and of course on the Bloomberg. Right now, 0:00:27.840 --> 0:00:30.640 Ellen Zenter with us Morgan Stanley. Ellen, We've got a 0:00:30.680 --> 0:00:32.960 lot of focus on the American labor economy, but I 0:00:33.000 --> 0:00:36.160 want to get your call because you've been so good 0:00:36.200 --> 0:00:39.680 about lower g d P. If you take the consumer 0:00:39.960 --> 0:00:43.800 and x them out, was this is zero percent economy 0:00:43.880 --> 0:00:48.120 in the last ninety days. No, not a zero percent economy, 0:00:48.120 --> 0:00:50.239 but I mean it's clear that the consumer has been 0:00:50.320 --> 0:00:53.440 propping up the economy, which is good because it's of 0:00:53.479 --> 0:00:58.080 our economy. But you know, economists always like better balanced growth. 0:00:58.440 --> 0:01:00.959 We wish the growth wasn't just being sure them by 0:01:01.160 --> 0:01:04.479 to say the consumer and housing um And I think 0:01:04.480 --> 0:01:06.840 we will get better balanced growth next year. But that's 0:01:06.840 --> 0:01:10.279 going to hinge importantly on whether trade policy is less 0:01:10.400 --> 0:01:14.000 uncertain and global growth is a bit stronger. And I 0:01:14.040 --> 0:01:17.240 know those are two big ifs, but if you give that, yeah, 0:01:17.319 --> 0:01:18.840 two big is. But if you get that then it's 0:01:18.880 --> 0:01:22.640 better balanced growth next year, even though slower growth compared 0:01:22.680 --> 0:01:24.200 with this year. So I wanted to be clear this 0:01:24.280 --> 0:01:27.319 tug of war between consumption and business investment. You expect 0:01:27.319 --> 0:01:32.160 to see business investment improved before consumption tracks. Yeah, that's 0:01:32.160 --> 0:01:34.720 what we're expecting. Um. If it doesn't, then you would 0:01:34.720 --> 0:01:37.520 be talking about recession. We're just not seeing that in 0:01:37.560 --> 0:01:39.679 in the of the indicators, and certainly not any of 0:01:39.720 --> 0:01:43.560 the leading indicators. You know, if if businesses crack and 0:01:43.600 --> 0:01:45.880 start laying off workers, and it doesn't matter how healthy 0:01:45.920 --> 0:01:49.320 the consumer is, they'll stop spending. UM. But if you 0:01:49.400 --> 0:01:52.240 get better tone on trade, then you know, you have 0:01:52.280 --> 0:01:58.000 to ask yourself what happens following manufacturing slowdowns that don't 0:01:58.120 --> 0:02:00.200 lead to recession? And you can see the at the 0:02:00.240 --> 0:02:03.800 I s M starts bottoming and then starts to move up. 0:02:03.840 --> 0:02:07.160 My guess is probably later this year into Q one, 0:02:07.200 --> 0:02:09.519 we'll see that it formed a bottom and started turning 0:02:09.560 --> 0:02:11.720 back up. And so that's a nice thing. But what 0:02:11.760 --> 0:02:14.680 what happens in environment where doesn't lead to recession, but 0:02:14.720 --> 0:02:18.760 you still got this undercurrent of incredible uncertainty? Will eventually 0:02:18.800 --> 0:02:24.400 investor UH firms have to invest in replacement capital? Just 0:02:24.440 --> 0:02:27.440 to support even domestic demand. And so you get at 0:02:27.480 --> 0:02:30.639 least some modicum of business investment UH, and so that's 0:02:30.680 --> 0:02:34.399 positive rather than declining investment as we've had this year. 0:02:34.600 --> 0:02:36.160 And then how difficult would it be to get a 0:02:36.200 --> 0:02:39.880 clean rate on this payroll support in forty minutes? It'll 0:02:39.919 --> 0:02:43.320 be near impossible, UH, just because we know how many 0:02:43.360 --> 0:02:47.840 GM strike UH workers were on strike official report came 0:02:47.840 --> 0:02:51.880 out forty six thousand. But how many downstream manufacturers furloughed 0:02:51.919 --> 0:02:57.079 workers UM or in an idled UH their their productions 0:02:57.080 --> 0:03:01.400 for those weeks of October that the strike UH harried on. UM. 0:03:01.480 --> 0:03:03.959 You know what we do as forecasters. As you've got 0:03:03.960 --> 0:03:07.480 a model, UM, you forecast payrolls for that month. There's 0:03:07.520 --> 0:03:10.360 nothing that suggests payrolls were very soft over the month. 0:03:10.440 --> 0:03:12.519 And then on the back end of that, you shave 0:03:12.560 --> 0:03:15.640 off the number that you think would be associated with 0:03:15.680 --> 0:03:17.400 the GM strike. And that's how we come up with 0:03:17.440 --> 0:03:22.560 our number of around ninety thousand for private payrolls. You 0:03:22.600 --> 0:03:25.679 add the strikes back into that, UH, and you've got 0:03:25.720 --> 0:03:29.360 something around a hundred and fifty private payrolls. Nothing really 0:03:29.440 --> 0:03:33.640 pointed to a deterioration in labor growth consumers still very 0:03:33.720 --> 0:03:38.600 upbeat about the labor market. In October. Initial jobless claims 0:03:38.600 --> 0:03:41.720 would suggest that the knock on effects from the GM 0:03:41.800 --> 0:03:44.840 strike we're not that large. I mean the striker the 0:03:44.920 --> 0:03:49.000 striking workers cannot file jobless claims, but other workers that 0:03:49.040 --> 0:03:52.600 are affected can and jobless claims were still extraordinarily low 0:03:52.680 --> 0:03:56.200 during the survey week. So that's why there's nothing fundamental 0:03:56.280 --> 0:03:58.520 there that says is a horrible labor market. You're just 0:03:58.560 --> 0:04:02.120 gonna have an ugly looking number because of GM. And 0:04:02.160 --> 0:04:04.040 I'm glad that chair Pal addressed it in his Q 0:04:04.200 --> 0:04:08.440 and A uh this week. Um, he doesn't see he 0:04:08.440 --> 0:04:10.480 would not have seen the full employment report, but he 0:04:10.520 --> 0:04:14.240 would have seen the manufacturing segment of it because they 0:04:14.280 --> 0:04:16.200 have to have that to put out the Federal Reserve 0:04:17.160 --> 0:04:21.680 Industrial Production Report. Ellen, I'm wondering about hourly earnings. The 0:04:21.720 --> 0:04:25.160 expectation on the survey is three percent uh, and that's 0:04:25.200 --> 0:04:27.360 up from two point nine percent, and the prior reading 0:04:27.400 --> 0:04:30.839 average hourly earnings expected to be higher as well. What 0:04:30.920 --> 0:04:33.000 do you take away from that? What do you need 0:04:33.080 --> 0:04:36.719 to see to sustain the strength in the consumer? Yeah, 0:04:36.800 --> 0:04:40.080 highly so, so it is it is um. Uh. You 0:04:40.120 --> 0:04:43.120 know how many jobs are we creating our way? Is 0:04:43.160 --> 0:04:47.800 wage growth holding up? Uh? What kind of financial market 0:04:47.839 --> 0:04:52.039 income are we getting? The top income quentile represents of 0:04:52.080 --> 0:04:55.880 all consumer spending and they can at time spend out 0:04:55.880 --> 0:04:58.479 of that increased wealth. But labor market income is the 0:04:58.560 --> 0:05:02.640 overall over our waching driver. And you've got slower job 0:05:02.680 --> 0:05:06.480 growth and wage gains that aren't picking up materially. And 0:05:06.560 --> 0:05:10.640 so we've had, uh, you know, we've got I wouldn't 0:05:10.640 --> 0:05:14.960 call it weak, um, but less of a firm backdrop 0:05:15.080 --> 0:05:17.880 for consumer spending just from labor market income. And that's 0:05:17.920 --> 0:05:21.120 one reason why we expect spending to be slower going 0:05:21.160 --> 0:05:25.479 into compared with with this year. But that's not saying 0:05:25.520 --> 0:05:28.360 anything terrible, right, We've got about two point six percent 0:05:28.360 --> 0:05:31.680 growth and consumer spending this year. That's incredible, and mostly 0:05:31.720 --> 0:05:34.680 from lower interest rates. Next year, you don't drop it 0:05:34.720 --> 0:05:37.800 interest rates further, but you still maintain that support. But 0:05:37.920 --> 0:05:41.160 job growth continues to slow, and so that does mean 0:05:41.720 --> 0:05:44.679 less support for consumer spending. We're expecting around two percent 0:05:44.720 --> 0:05:49.480 consumer spending growth and if we get that is very 0:05:49.560 --> 0:05:51.960 unlikely that we get a recession. Well, let's turn to 0:05:52.000 --> 0:05:53.680 the FEDOM what it means for the Federal Reserve. There's 0:05:53.680 --> 0:05:55.720 a debate at the moment, Allen As. I'm sure you 0:05:55.760 --> 0:05:58.440 know that the benchmark, for further reason is now a 0:05:58.480 --> 0:06:02.039 material reassess of the outlook at the FED. That's the 0:06:02.080 --> 0:06:04.760 benchmark for another cod if you've got an idea of 0:06:04.760 --> 0:06:08.479 what the material reassessment of the outlook actually is. Yeah, 0:06:08.480 --> 0:06:10.400 when I think about it, I just think about, well, well, 0:06:10.400 --> 0:06:12.760 what are the positive things that that chair pal and 0:06:12.839 --> 0:06:16.679 if I keep pointing to jobs, jobs, jobs, consumer, consumer, 0:06:16.720 --> 0:06:21.159 consumer and UH and the two are linked, right, So 0:06:21.520 --> 0:06:24.840 you gotta watch initial jobless claims as that trend. So 0:06:24.920 --> 0:06:27.000 that's four week moving average, so we're not looking at 0:06:27.080 --> 0:06:30.640 natural disaster effects, we're not looking at holiday effects. When 0:06:30.760 --> 0:06:34.000 that starts trending higher, you could pretty much put a 0:06:34.080 --> 0:06:37.760 time stamp on how much longer UH the expansion will last. 0:06:37.800 --> 0:06:39.960 And so that's that's something that they certainly would be 0:06:40.400 --> 0:06:43.560 watching closely. The number of things. And what's so important 0:06:43.600 --> 0:06:46.520 here is everybody trots out the jobs claims is a 0:06:47.000 --> 0:06:50.600 is an optimistic thing. To five percent of my mail 0:06:51.040 --> 0:06:54.440 doesn't agree with the vector of jobless claims. A huge 0:06:54.640 --> 0:06:58.880 part of America, it feels there under employed. Good morning 0:06:58.960 --> 0:07:02.800 David blanche Flower at Dartmouth or they feel that they're 0:07:02.839 --> 0:07:06.960 not participating in all this good news at one G 0:07:07.080 --> 0:07:10.040 d P. I mean today's jobs report, is it really 0:07:10.040 --> 0:07:13.600 a picture of America? Yeah, I think it's a picture 0:07:13.640 --> 0:07:16.040 of America because the job's report, if you look into 0:07:16.080 --> 0:07:19.720 the unemployment uh numbers you've got, you've still got a 0:07:19.800 --> 0:07:23.360 high amount of folks that are underemployed. You've got some 0:07:23.440 --> 0:07:27.360 better unemployment rate numbers uh that are that are partly 0:07:27.400 --> 0:07:30.920 reflecting simply people leaving the labor market. Um. But I 0:07:30.960 --> 0:07:33.280 would caution here that when you look at a lot 0:07:33.320 --> 0:07:37.040 of those metrics under employment metrics, they're no worse today 0:07:37.800 --> 0:07:41.280 uh than they have been in prior expansions. Uh. In fact, 0:07:41.360 --> 0:07:45.040 they're back at at lows before the financial crisis. And 0:07:45.160 --> 0:07:48.320 so they're always going to be underemployed, they're always going 0:07:48.360 --> 0:07:50.720 to be part time for economic reasons, they're always going 0:07:50.760 --> 0:07:53.560 to be discouraged workers. But I don't find that they're 0:07:53.600 --> 0:07:56.760 particularly higher much higher amounts than we have had in 0:07:56.800 --> 0:07:59.119 the in the past. But to pick up on Time's point, Alan, 0:07:59.280 --> 0:08:03.160 we have seen delinquencies and defaults picking up with credit 0:08:03.160 --> 0:08:06.320 card receivables auto loans. People talking about a two tier 0:08:06.320 --> 0:08:10.200 economy with the lower income Americans falling behind UH and 0:08:10.240 --> 0:08:13.160 increasingly have to access credit. How much does that matter 0:08:13.240 --> 0:08:16.120 for the overall economy? And it certainly matters on the 0:08:16.120 --> 0:08:20.280 specific level. But from an economic perspective, so I think, 0:08:20.600 --> 0:08:24.600 so there's a socio economic UH story to tell here, 0:08:25.200 --> 0:08:28.040 and there's an overall economic story to tell here. We 0:08:28.120 --> 0:08:31.440 always want the consumers to participate across the board, across 0:08:31.520 --> 0:08:33.560 income groups, and one of the best ways to do 0:08:33.600 --> 0:08:36.960 that is a very strong labor market. As you know, 0:08:37.120 --> 0:08:39.600 we can see when we look at delinquencies. And what 0:08:39.720 --> 0:08:41.840 I would UH say is that if you if you 0:08:41.920 --> 0:08:46.920 strip out subprime UH from the rest of UM UH 0:08:47.400 --> 0:08:50.240 credit UH, you can see that that is the area 0:08:50.280 --> 0:08:54.240 that's driving up credit card delinquencies at driving up auto delinquencies. Now, 0:08:54.240 --> 0:08:57.320 that is what we should be seeing at this late 0:08:57.440 --> 0:09:01.360 stage of an expansion. You always see credit dynamics or 0:09:01.440 --> 0:09:05.400 credit deterioration turn up in the low income subprime groups first, 0:09:05.520 --> 0:09:07.679 and then it spreads out to more credit products and 0:09:07.720 --> 0:09:10.000 then marches up the income chain. So to me, this 0:09:10.080 --> 0:09:12.960 is something natural that we should be seeing now. Now 0:09:13.000 --> 0:09:16.920 from a socio economic standpoint now, it's terrible. It's terrible. 0:09:16.960 --> 0:09:20.240 If you look at rents and healthcare as a share 0:09:20.280 --> 0:09:24.840 of overall income, it's an increasing burden series burden for 0:09:24.920 --> 0:09:28.080 low income groups UM and that just continues to add 0:09:28.120 --> 0:09:30.920 to income inequality in the US and is much more 0:09:31.080 --> 0:09:34.200 long term and long lasting issue than just what are 0:09:34.240 --> 0:09:36.000 they going to do over this cycle. This has been 0:09:36.040 --> 0:09:38.520 wonderful Allen Saner, thank you so much again. Chief of 0:09:38.600 --> 0:09:56.400 Coloms Stanley is well this morning. Why don't you bring 0:09:56.400 --> 0:09:58.600 in our steam guest series. He helped us a lot 0:09:58.720 --> 0:10:01.360 on said happy to say Jeff Rosenberg joined us now 0:10:01.360 --> 0:10:05.760 blank Financial Senior portfolio manager. Money to Jeff, morning, your 0:10:05.800 --> 0:10:09.480 first tight place. That's a strong report, and you know 0:10:09.559 --> 0:10:11.720 this is you're talking about thirty one under it on 0:10:11.760 --> 0:10:14.320 the SMP. This is this is all about, you know 0:10:14.320 --> 0:10:16.280 what we'll get a little bit later this morning in 0:10:16.400 --> 0:10:19.319 terms of I s M, but it's about really pushing 0:10:19.360 --> 0:10:23.199 back hard against this recession risk that had been on 0:10:23.200 --> 0:10:25.560 the top line. We'll see what happens at at ten am. 0:10:26.040 --> 0:10:29.480 Market expectations are for that to also rebound, and you're 0:10:29.480 --> 0:10:32.120 going to have a story coming out of today which is, 0:10:32.600 --> 0:10:35.560 you know, good news on the trade. Uh, you know 0:10:35.600 --> 0:10:38.800 the Fed, yes, there may be done cutting rates, but 0:10:38.840 --> 0:10:41.960 they did what they needed to do, and the economy 0:10:42.000 --> 0:10:44.760 is showing signs that it doesn't need as much support, 0:10:45.240 --> 0:10:48.000 you know, and that's a pretty good story. The president 0:10:48.320 --> 0:10:51.160 needs to job own a need for a rate cut 0:10:51.280 --> 0:10:55.839 or certainly gross accommodation. And let's say politically, Jeff Rosenberg, 0:10:55.920 --> 0:10:59.080 that goes to one point nine g d P with 0:10:59.240 --> 0:11:02.920 this better than good report, can black rocket? Can you 0:11:03.840 --> 0:11:09.520 model a higher GDP statistic forward? Not not hugely? You know, 0:11:09.559 --> 0:11:13.120 we're we're basically yet trend. And and the issue is, 0:11:13.160 --> 0:11:16.199 and again it goes back to that I S M figure, 0:11:16.360 --> 0:11:19.679 is that you know, the consumer side of the economy 0:11:19.720 --> 0:11:23.480 has not been affected. And what the Job's report today 0:11:23.600 --> 0:11:27.600 is about is a stronger than expected report really eases 0:11:27.640 --> 0:11:31.479 the concern. And the concern has been will this trade uncertainty, 0:11:31.640 --> 0:11:37.640 will the manufacturing uncertainty, the decline in in the business 0:11:37.720 --> 0:11:41.000 side spill over in the form of decreased hiring that 0:11:41.160 --> 0:11:45.480 eventually shows up in consumers that seems to certainly be 0:11:46.080 --> 0:11:49.400 diminished as as a risk. And and so you know 0:11:49.440 --> 0:11:52.760 that's a that's a that's strengthening the outlook for the 0:11:52.800 --> 0:11:55.640 ability to avoid recession. That doesn't necessarily get you back 0:11:55.679 --> 0:11:58.439 up to the three percent level because the investment side, 0:11:58.480 --> 0:12:01.720 the business side, there's been a drag. Jeff, you and 0:12:01.720 --> 0:12:03.480 I talked about this in FED day and again thank 0:12:03.520 --> 0:12:06.200 you to you and black Rock for your contribution. While 0:12:06.240 --> 0:12:08.480 we saw the press conference, and you and I talked 0:12:08.520 --> 0:12:11.000 about one indicator, which is a three month tenures spread. 0:12:11.040 --> 0:12:12.480 It's come in a little bit in the gloom of 0:12:12.520 --> 0:12:15.360 the last couple of days. Andrew holl And Horset City Group, 0:12:15.400 --> 0:12:17.760 I think had the same tone you have, which was 0:12:17.760 --> 0:12:21.480 where whatever series Global Wall Street looks at, we're right 0:12:21.520 --> 0:12:25.040 now at a tipping point, almost on a knife edge, 0:12:25.040 --> 0:12:28.560 a constructive knife edge. We really don't know which way 0:12:28.600 --> 0:12:32.080 this is gonna tip. Do you agree with that idea? Yeah, exactly. 0:12:32.120 --> 0:12:34.360 And and just to to frame it, you know, what's 0:12:34.400 --> 0:12:38.000 going on is there is an elevated risk of recession 0:12:38.640 --> 0:12:41.880 coming mainly from you heard you heard Powell. You know 0:12:41.960 --> 0:12:47.600 layout the reasons global growth slowing, trade uncertainty, US manufacturing, 0:12:47.640 --> 0:12:52.960 and business confidence declining. And and that is in contrast 0:12:53.000 --> 0:12:56.120 to the strength you know, today's payroll report, the revisions. 0:12:56.160 --> 0:12:58.400 This is about the strength of the consumer, the strength 0:12:58.400 --> 0:13:00.960 of the labor markets. And so when you see these 0:13:01.000 --> 0:13:05.400 increases in recession risk recession risks, which way does it go? 0:13:05.640 --> 0:13:07.880 Most of the time it goes back to expansion, But 0:13:08.160 --> 0:13:11.880 one out of four times it turns into recession. And 0:13:11.920 --> 0:13:14.480 so that's been the concern. I think today it's going 0:13:14.520 --> 0:13:18.080 to be about easing some of that concerns UH and 0:13:18.360 --> 0:13:22.400 risk on fields to the market. Jeff Rozenberg of Black Rock, 0:13:22.559 --> 0:13:25.880 I'm looking right now, I'm wondering if this strength is 0:13:26.080 --> 0:13:29.720 enough to make this not just a noisy, dismissable report, 0:13:30.000 --> 0:13:34.760 but something very significant showing ongoing strength, ongoing bringing of 0:13:34.800 --> 0:13:38.319 workers into the labor force. Well, well, you know, particularly 0:13:38.320 --> 0:13:41.080 with the revisions, which which gets you back up to 0:13:41.120 --> 0:13:45.880 the faster than the most recent pace. You know, certainly 0:13:45.880 --> 0:13:47.520 there was a lot of noise around the strike and 0:13:47.559 --> 0:13:49.720 as Jonathan's leading was saying, there's gonna be a lot 0:13:49.760 --> 0:13:53.200 of kind of apologies for the week report today. Now 0:13:53.240 --> 0:13:56.160 it's more a little bit of head scratching of maybe 0:13:56.320 --> 0:13:59.560 it's not weakening as much as we thought, and a 0:13:59.559 --> 0:14:04.199 lot of these concerns are are less likely to show up. 0:14:04.320 --> 0:14:07.080 You know, it's it's a high frequency report. So you 0:14:07.080 --> 0:14:09.800 know what, we'll move on to the next data release here, 0:14:10.080 --> 0:14:13.880 but there's certainly a trend here with the pivot at 0:14:13.920 --> 0:14:16.800 the beginning of the month. On trade is really the 0:14:16.880 --> 0:14:20.240 critical issue here, that's the source of the recession risk. 0:14:20.320 --> 0:14:22.520 Now we can debate whether or not that's going to 0:14:22.640 --> 0:14:27.400 be for the long run a permanent state of trade uncertainty. 0:14:27.440 --> 0:14:31.040 You can't really argue that is the case. But you know, 0:14:31.080 --> 0:14:33.840 the market's focus on what's right in front of their faces, 0:14:33.840 --> 0:14:35.600 and what's right in front of their faces is some 0:14:35.720 --> 0:14:39.960 good data, some easing on the trade front, and all 0:14:40.000 --> 0:14:44.160 of that is supportive of of of a good economic backdrop. 0:14:44.720 --> 0:14:46.840 Does this mean your interview with Mr Cudlow is an 0:14:46.840 --> 0:14:50.520 hour long? Now? Unfortunately he be about fifteen minutes because 0:14:51.440 --> 0:14:53.720 he's gonna want to talk this morning. Jeff, this is 0:14:53.760 --> 0:14:56.520 why it's so so difficult right now for market participants. 0:14:56.520 --> 0:14:59.040 You know that famous line there's two types of forecasters, 0:14:59.120 --> 0:15:03.000 those that a wrong and those that don't know. They 0:15:03.000 --> 0:15:05.520 don't know, And Jeff, I just wonder if we all 0:15:05.600 --> 0:15:07.920 don't know what's going to happen with the trade story, 0:15:08.240 --> 0:15:10.200 how can we make a market cool when it's so 0:15:10.200 --> 0:15:14.040 so crucial to developments into next year. Well, yeah, you 0:15:14.120 --> 0:15:17.640 have to recognize the uniqueness of the of the trade 0:15:17.760 --> 0:15:22.080 risk in that it is inherently political, which means nobody knows, 0:15:22.120 --> 0:15:25.360 there's no distribution, you can't really predict it. So you 0:15:25.440 --> 0:15:30.680 have to build in the uncertainty into your portfolio allocation, 0:15:30.760 --> 0:15:33.560 your process. That's what we do. Uh. And then you 0:15:33.680 --> 0:15:37.720 just have to be able to react to the change 0:15:37.800 --> 0:15:40.280 in the environment. And that's what's going on in the markets. 0:15:40.320 --> 0:15:45.560 That's why October basically is back up across markets, is 0:15:45.560 --> 0:15:48.600 because they're reacting to the change and and and the 0:15:48.720 --> 0:15:52.120 market will be highly reactive if there's a change to 0:15:52.160 --> 0:15:55.040 the negative, much as we've seen in the pattern on 0:15:55.160 --> 0:15:58.960 the trade negotiations. They're hot, they're cold. You can't really 0:15:59.000 --> 0:16:02.440 predict it, but it's certainly is the driver right now 0:16:02.560 --> 0:16:05.440 moving markets. Jeff, before we let you go, just a 0:16:05.480 --> 0:16:07.800 word on the markets in the bond market right now, 0:16:07.960 --> 0:16:12.360 where's the team at black Rock really focused? So we're 0:16:12.440 --> 0:16:16.880 focused on this, this recession risk notion and and and 0:16:16.920 --> 0:16:19.400 how do you build portfolio is in that kind of environment, 0:16:19.440 --> 0:16:24.560 and it's about resilience. You can't deny that there is 0:16:24.800 --> 0:16:29.120 a late cycle aspect to our markets. There is a 0:16:29.200 --> 0:16:33.160 heightened sense of recession risk again today. Yes, high frequency 0:16:33.200 --> 0:16:35.360 that's going to take some of those risks down. But 0:16:35.440 --> 0:16:37.800 the stance of where we are in the bond markets, 0:16:37.800 --> 0:16:40.000 as Tom was asking before, you know, it's on a 0:16:40.120 --> 0:16:41.720 nice edge. And so when you're in that kind of 0:16:41.800 --> 0:16:45.320 environment bond investors, you know, we we have to play defense. 0:16:45.400 --> 0:16:48.120 That's our job in the portfolios. So that's what we're concentrated. Jeff, 0:16:48.120 --> 0:16:50.680 thanks so much, greatly appreciate your effort with US. Is 0:16:50.720 --> 0:16:53.560 on FEDS Day, FED Day with Jeffrey Rosenberger Black Rock 0:16:53.640 --> 0:16:56.440 in here today on a better than good jobs report. 0:17:10.000 --> 0:17:12.960 We are right now, just moments away Jonathan Faraoll Tom 0:17:13.040 --> 0:17:16.040 Keene sitting down with Richard Clarada, vice Chairman of the 0:17:16.080 --> 0:17:19.439 Federal Reserve. They will be breaking down this strong jobs numbers, 0:17:19.440 --> 0:17:21.880 getting a look at what that means for the FED 0:17:22.000 --> 0:17:25.560 going forward. Right now, John Farrell, Tom Keene joining us 0:17:25.560 --> 0:17:28.959 now from Bloomberg Television and Radio exclusive interview. I'm pleased 0:17:28.960 --> 0:17:31.720 to welcome to the show. Richard Clarenda Federal is a 0:17:31.840 --> 0:17:35.879 vice chairman and my surveillance radio co host. Tom Keene 0:17:36.119 --> 0:17:38.480 making his debut on this set as well. Good morning, Jens. 0:17:38.520 --> 0:17:40.280 It's good to see you, and it's a change. This 0:17:40.400 --> 0:17:43.120 is different than you and I expected two hours ago. 0:17:43.200 --> 0:17:45.119 It's a solid JOLS report that we thought we might 0:17:45.160 --> 0:17:47.840 have to make some excuses for maybe sixty minutes ago. 0:17:48.080 --> 0:17:49.560 It comes out a lot better and I think it 0:17:49.600 --> 0:17:51.520 would be great here. Maybe i'll take a broader chech 0:17:51.600 --> 0:17:53.440 with a vice chairman, and I know there's lots coming 0:17:53.440 --> 0:17:56.600 off of Michael McKee's first question at the FED press 0:17:56.680 --> 0:17:58.800 conference the other day. Vice chairman, thank you again for 0:17:58.880 --> 0:18:02.080 joining us or at Bloomberg. I want to go back 0:18:02.080 --> 0:18:04.760 to a word identified with the vice chairman of the FED, 0:18:05.240 --> 0:18:07.800 and that is solid. We just had a more than 0:18:07.880 --> 0:18:11.320 solid jobs report. The President of the United States tweeting 0:18:11.320 --> 0:18:13.880 out about it a few days ago, he tweets out, 0:18:14.200 --> 0:18:16.840 maybe we need lower rates to find for us as 0:18:16.840 --> 0:18:19.639 a starter. What is the new solid that you see 0:18:19.880 --> 0:18:22.280 into next year. Well, this was certainly a very solid 0:18:22.320 --> 0:18:25.320 labor market report. As we sat in our statement, you know, 0:18:25.359 --> 0:18:27.840 we have ongoing growth in the economy. We have inflation 0:18:27.920 --> 0:18:30.640 near our objectives, so the economy is in a very 0:18:30.680 --> 0:18:33.880 good place. You know, growth is as we've characterized growth 0:18:33.920 --> 0:18:37.680 as moderate, right Now, the global economy has been slowing 0:18:37.680 --> 0:18:39.720 and that and that's a factor, but the U. S 0:18:39.760 --> 0:18:42.639 economy is very resilient. Uh and the and these are 0:18:42.640 --> 0:18:45.639 good numbers. Both the GDP number and the labor market 0:18:45.720 --> 0:18:47.679 number surprised a bit on the upside, So that's a 0:18:47.680 --> 0:18:50.359 good thing. And those numbers, those g d P numbers, 0:18:50.359 --> 0:18:53.840 are they politically acceptable to this nation? Is great for 0:18:53.920 --> 0:18:57.520 economists like you to talk about one point nine as 0:18:57.560 --> 0:19:01.199 a center tendency, but is that politically well, I'm not 0:19:01.200 --> 0:19:03.840 going to get into the politics tom our job at 0:19:03.840 --> 0:19:06.879 the FED. We have a dual mandate maximum employment, price stability. 0:19:07.200 --> 0:19:09.800 We've made some adjustments in our policy right we think 0:19:09.840 --> 0:19:12.720 they are and will continue to give significant support to 0:19:12.800 --> 0:19:16.000 the economy. And we're we're we're a favorable outlook for 0:19:16.000 --> 0:19:18.159 the economy. Let's talk about the outlook, the balance of 0:19:18.240 --> 0:19:20.480 risks around the outlook right now, how would you describe 0:19:20.640 --> 0:19:23.240 the balance of risk around that outlook? Rich Well, John, 0:19:23.240 --> 0:19:25.000 I would say for most of the year, the balance 0:19:25.040 --> 0:19:27.080 of risk had probably been tilted a little bit to 0:19:27.160 --> 0:19:29.320 the downside, not so much because of the US, but 0:19:29.359 --> 0:19:31.960 we're part of the global economy. We've got a global slowdown, 0:19:32.359 --> 0:19:35.479 there are some pretty powerful global disinflationary pressures, and as 0:19:35.520 --> 0:19:39.040 we said in July, uh in, in September, and this week, 0:19:39.119 --> 0:19:41.679 we felt it was appropriate to make some adjustment in 0:19:41.720 --> 0:19:45.000 our policy to provide some insurance or cushion against really 0:19:45.040 --> 0:19:47.160 sort of a softening global economy. You know, you saw 0:19:47.200 --> 0:19:49.400 that at the IMF a week or so ago, downgrading 0:19:49.440 --> 0:19:51.679 the global outlook. So we think the economy is in 0:19:51.720 --> 0:19:53.960 a good place. We think monetary policies and the balance 0:19:53.960 --> 0:19:56.320 of risk that still tilted to the downside, I would 0:19:56.359 --> 0:19:59.359 say somewhat Yeah. Looking at the economic assessment of the 0:19:59.400 --> 0:20:01.960 Federals of Shaman, we're trying to understand what a material 0:20:02.000 --> 0:20:04.879 reassessment of the outlook would be to reach that benchmark 0:20:04.960 --> 0:20:07.320 for another move. Can you give us some clamority on that. 0:20:07.440 --> 0:20:10.600 What is a material reassessment of the outlook? How much 0:20:10.640 --> 0:20:12.480 data does one need to make that assess? Well, first 0:20:12.480 --> 0:20:14.760 of all, let's remember what is the baseline outlook. The 0:20:14.760 --> 0:20:18.800 baseline outlook is for ongoing continued growth, a very solid 0:20:19.040 --> 0:20:23.399 labor market, and inflation near our objective. Obviously, if we 0:20:23.440 --> 0:20:26.920 saw accumulating evidence that we were missing on employment, we 0:20:26.920 --> 0:20:30.439 were missing on inflation, and we were missing on the 0:20:30.480 --> 0:20:33.440 growth needed to suspain full employment and price stability, then 0:20:33.640 --> 0:20:35.320 we would have to factor that in. We will be 0:20:35.400 --> 0:20:38.560 data dependent, but we're saying our baseline outlook now is 0:20:38.960 --> 0:20:40.760 policies in a good place. The next meeting is a 0:20:40.840 --> 0:20:44.240 live meeting. Every meeting is alive. We're just trying to 0:20:44.280 --> 0:20:46.080 figure out what the next meeting actually is. Do you 0:20:46.119 --> 0:20:48.080 need a month of data to take another look at this? 0:20:48.200 --> 0:20:50.000 Do you need three months of data to take another 0:20:50.000 --> 0:20:52.280 look at this? How long does one need? Well, well, Jonathan, 0:20:52.280 --> 0:20:54.440 we meet eight times a year, and as we indicated, 0:20:54.520 --> 0:20:56.840 as we did back in October, we need to we can. 0:20:57.000 --> 0:21:00.280 We have had meetings in between. So yeah, we're just 0:21:00.280 --> 0:21:02.600 take the data as it comes in. The data comes in. 0:21:02.720 --> 0:21:05.240 But the fact is there's an arch debate about two. 0:21:05.280 --> 0:21:09.480 America's David blanche Flower up at Darkness talks about the underemployed. 0:21:09.840 --> 0:21:12.280 It's fine, day of models, it's fine to speak is 0:21:12.280 --> 0:21:16.000 a public voice as you are now, Professor Clarata. But 0:21:16.080 --> 0:21:18.920 the truth of the matter is there's two. America's chairman 0:21:18.920 --> 0:21:22.240 Powell is addressing this with a more social mandate from 0:21:22.240 --> 0:21:24.680 the Fed. How do you address in the next year 0:21:25.080 --> 0:21:30.360 two America's one employed fully employed and the other really struggling. Well, Tom, 0:21:30.440 --> 0:21:32.480 let me talk about that, because I think Chair Pale 0:21:32.640 --> 0:21:36.320 has has very effectively conveyed what we at the FED believe. 0:21:36.440 --> 0:21:38.520 You know, we have basically one instrument, which is to 0:21:38.640 --> 0:21:42.040 raise or lower the policy rate. So obviously it's a 0:21:42.119 --> 0:21:44.400 very complex economy. But what we do know, and we've 0:21:44.400 --> 0:21:46.600 had these FED listened to events. We've had fourteen FED 0:21:46.680 --> 0:21:48.680 listened events this year, and what we've heard from those 0:21:48.720 --> 0:21:52.879 events is the substantial, robust benefits of having a fully 0:21:52.880 --> 0:21:55.320 employed economy, the wage gains at the lower end of 0:21:55.359 --> 0:21:58.639 the income distribution opportunity. Now, Congress has given us a 0:21:58.680 --> 0:22:01.840 dual mandate max employment and price stability. We have the 0:22:01.880 --> 0:22:04.760 privilege not to be presiding over time when we're close 0:22:04.800 --> 0:22:07.120 to full employment, and we think there's a real benefit 0:22:07.160 --> 0:22:09.240