Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Marin
Speaker 1: Dogs Money Market Wrap, where we talk about the biggest
Speaker 1: moves in the markets this week and what is driving them.
Speaker 1: I'm Marin Sum's Web editor at Large for Bloomberg UK Wealth, and.
Speaker 2: I'm Joined Stairpek, Senior report and author of the Money
Speaker 2: Distilled News.
Speaker 1: Later, welcome back from more of your lovely holidays.
Speaker 2: John, thank you they were excellent.
Speaker 1: Well, I'm very glad to hear it, right John, Listen,
Speaker 1: I know we want to talk about we want to
Speaker 1: talk about interest raise, we want to wet the fair,
Speaker 1: we want to talk about the UK etc. But before
Speaker 1: we do anything, I want to bring you with me
Speaker 1: to look at the half year report from next which
Speaker 1: is always really well written, always really interesting, and always
Speaker 1: focuses on stuff that everyone should be focusing on.
Speaker 3: And so there's everyone.
Speaker 1: I'm going to put the link in the show notes,
Speaker 1: go to page twenty two and start reading, because this
Speaker 1: is a bit where they look outside the performance of
Speaker 1: the company to look at wider trends in the economy,
Speaker 1: and they're looking at something you and I have talked
Speaker 1: about a lot, John, Where are the job vacancies?
Speaker 3: Going is AI affecting things? What is happening?
Speaker 1: So there's a chart, I'll pop it on Twitter for
Speaker 1: you shows how the continued for in UK vacancies is
Speaker 1: beginning to be reflected in the actual number of employed people,
Speaker 1: and those trends are echoed in NeXT's own data. They
Speaker 1: tell the same story. So vacancies at their stores are
Speaker 1: down thirty five percent, down thirty five percent more in
Speaker 1: some stores, and applications for jobs at Next have gone
Speaker 1: up by seventy six percent. So applications per vacancy to
Speaker 1: work at Next are two zero point seven times higher
Speaker 1: than they were two years ago. That's really something. Those
Speaker 1: are big numbers. And then you look keep going down.
Speaker 1: I'm telling it page twenty three now, listeners, page twenty three,
Speaker 1: because you want you to go and look at this yourself.
Speaker 1: He then looks at it in terms of inflation, a
Speaker 1: decade of above inflation increases in the employment costs of
Speaker 1: entry level work at or around the national living wage,
Speaker 1: something that's been compounded by the recent increase in employees'
Speaker 1: national insurance increases. So if you look at the chart,
Speaker 1: you can see that since twenty fifteen, inflation has gone
Speaker 1: up thirty eight percent, the national living wage has gone
Speaker 1: up eighty eight percent, and the cost of part time
Speaker 1: employment by having someone work for sixteen hours a week
Speaker 1: has gone up one hundred and two percent.
Speaker 2: I'm not surprised by those figures, but it's extraordinary whenever
Speaker 2: you put it like that. Yeah, and you can also
Speaker 2: sell so I guess I know he does mention the AI,
Speaker 2: but it's pretty clear what the actual driver it is.
Speaker 1: Yeah, And what he says then is is that mechanization
Speaker 1: will be driven by this. So the increasing costs is
Speaker 1: likely to have accelerated the rate at which businesses have mechanized.
Speaker 1: The effect of automating some work is married and likely
Speaker 1: amplified by the potential for AI to improve the efficiency
Speaker 1: of many desk work activities. So you may say, and
Speaker 1: this is another a conversation that you and I've had
Speaker 1: a lot over the years, that if you make labor
Speaker 1: more expensive, in some ways this isn't a bad thing,
Speaker 1: because it means that there will be a huge rise
Speaker 1: in productivity. So we'll have mechanization. AI will take over
Speaker 1: those boring, lowly played clerical clerical jobs, and that is
Speaker 1: in some ways a good thing. Will have a more
Speaker 1: productive economy, except for if those people don't go on
Speaker 1: to be employed elsewhere. The fact that some people are
Speaker 1: more productive doesn't help the people who don't have a
Speaker 1: job at all.
Speaker 2: Well, no, and also you know, obviously there's a knock
Speaker 2: on impact on the benefits bill as well, which because
Speaker 2: part of the problem with this is, I mean a
Speaker 2: lot of this messing about with the minimum wage was
Speaker 2: the offset the issues raised about people being in work
Speaker 2: and still haven't any get tax credits, which all goes
Speaker 2: back to Gordon Brown's kind of entire revamp into the
Speaker 2: UK economy for the worst. But the problem is if
Speaker 2: you then, as you say, if you don't have jobs
Speaker 2: for people who go in and if you're basically pricing
Speaker 2: people out of employment, then the entirety just ends up
Speaker 2: falling in the state. And yeah, so I do think
Speaker 2: and put this way, I don't think the productivity again
Speaker 2: was the driver for these changes, and I don't think
Speaker 2: it's going to be something that we get out of
Speaker 2: these changes for exactly the reasons you've just outlined.
Speaker 1: Okay, deep side it all round on from that, John,
Speaker 1: and I you know, listen, as we do not have
Speaker 1: a solution to this problem. We are simply pointing out
Speaker 1: what is happening. If you make it employing people more expensive,
Speaker 1: a fewer people will be employed, and that there are consequences.
Speaker 1: Are you listening, Rachelryes, Please please occasionally listen to us.
Speaker 3: We would really appreciate it. Anyway.
Speaker 1: This kind of thing makes life difficult for the Bank
Speaker 1: of England, though of course their mandate is not employment,
Speaker 1: it is inflation. But they found themselves in a situation
Speaker 1: where we have this increasingly obvious employment problem, but we
Speaker 1: also have inflation.
Speaker 3: So what do they do?
Speaker 2: John, Well, they did, Actually, they did exactly where everyone
Speaker 2: expected them we do. They've kept interest rates at four percent.
Speaker 2: The chances are very high now that there won't be
Speaker 2: another rate cut this year. The thing that everyone was
Speaker 2: keeping an eye on this time was quantitative tightening, which
Speaker 2: is the rate at which they're getting ready of the
Speaker 2: gelts on their balance sheet. But even then that wasn't
Speaker 2: particularly exciting because they did roughly what the market expected.
Speaker 2: And I mean it's meant to reduce pressure on the
Speaker 2: very far out maturities, so like thirty years gut yields,
Speaker 2: ten years gult yields doesn't actually seem to have because
Speaker 2: I guess the market had already praised, and them cutting
Speaker 2: back on and selling the longer dated gilts, so really
Speaker 2: all around sort of a damp squab and really just
Speaker 2: points to what we've already, you know, already been saying
Speaker 2: kind of rubbish labor market, rubbish inflation figures. I mean,
Speaker 2: of course, but they kind of The next chief execus
Speaker 2: said something quite similar. He was saying, I don't expect
Speaker 2: the UK accordomay fall off a cliff, but I do
Speaker 2: expect and you make growth and this general sense of
Speaker 2: a lack of dynamism, and I think the Bank England's
Speaker 2: kind of the dilemma is that it can't actually do
Speaker 2: anything about any of that.
Speaker 1: As an aside, I think i'd ask everyone who hasn't
Speaker 1: yet to go and listen to our podcast with the
Speaker 1: Professor dta Helm on energy costs. There's a lot of
Speaker 1: discussion and energy costs at the end of this week,
Speaker 1: because in video the CEO of Vidia pointing out that
Speaker 1: if we want to have an AI revolution in the UK,
Speaker 1: we're going to need to use an awful lot of gas,
Speaker 1: which doesn't fit into the UK's ideas at the moment.
Speaker 1: So it's worth listening to that podcast just to.
Speaker 2: It was just a really good podcast.
Speaker 3: It was fantastic, Yeah, very well explained.
Speaker 2: And I thought, I just it's the first taine that
Speaker 2: I've properly heard someone explain in normal human language. But
Speaker 2: the actual problem.
Speaker 1: It's so it's important to listen to that one, and
Speaker 1: then to go back also and listen to the one
Speaker 1: we did a few months ago with Callum Pickering where
Speaker 1: we talk about the effect that expensive energy really has
Speaker 1: on growth. These two things are so important at the
Speaker 1: moment as we languish around the place with rubbish employment,
Speaker 1: rubbish growth, highish inflation, and interest rates not quite where
Speaker 1: people would have liked them to be. And I actually
Speaker 1: can't remember now, which is the way, of course economists
Speaker 1: like it to be. But I can no longer remember
Speaker 1: what everyone was predicting interest rates in the UK would
Speaker 1: be at the moment this time last year.
Speaker 2: It was definitely lower. It was it started with a
Speaker 2: three rather than a four.
Speaker 3: Yeah, yeah, yeah.
Speaker 1: And I will say you know that we are planning,
Speaker 1: and this is very exciting for all of you listening.
Speaker 3: We are planning to start videoing our podcast.
Speaker 1: And with that in mind, I have been tidying my
Speaker 1: bookshelf shot Corra. I know that no one knows me
Speaker 1: welcome really put the word tidying and merin in the
Speaker 1: same sentence. But along the way, I'm finding all sorts
Speaker 1: of fascinating books which are a reminder of just how
Speaker 1: many mistakes everybody makes all the time.
Speaker 3: So I've got hang on.
Speaker 1: So two that I pulled out this morning, The Coming
Speaker 1: Collapse of China, written by Gordon G.
Speaker 3: Chang in twenty twelve.
Speaker 1: World on Gordon, and then in the early nineties Bill
Speaker 1: I'm at the editor of The Economist Japan's Global Reach,
Speaker 1: all about the amazingness of Japanese, Japan's multinational companies. That's
Speaker 1: not quite so idiotic. Well recently that was I think
Speaker 1: nineteen ninety two.
Speaker 2: Oh, fantastic, two years after the bubble hit already.
Speaker 1: Yeah, yeah, yeah, And of course you know Japanese companies,
Speaker 1: many of them are still amazing still with still huge multinationals.
Speaker 1: But obviously that was still a bubble book. So it's fascinating.
Speaker 1: And I'm looking out now as you should, as should
Speaker 1: you be, John, for the book that's going to tell
Speaker 1: us that the AI bubble is bursting. It should come
Speaker 1: out just at the very top of that, how AI
Speaker 1: makes everything different, changes the world, et cetera, et cetera.
Speaker 3: God, God, we're getting old. We're getting old. We've got
Speaker 3: to stop this right.
Speaker 2: This one's just coming out. Oh god. It was basically
Speaker 2: if anyone builds this, everyone will die. So that's quite
Speaker 2: a top of the market Headley, I think it is.
Speaker 1: And that's exactly the kind of thing that makes me
Speaker 1: really glad that most books are wrong.
Speaker 2: Yeah, well, yeah, exactly. I would prevail that that is
Speaker 2: not the keys.
Speaker 1: Yeah, okay, let's move ourselves over to talk about the FED,
Speaker 1: which actually managed to cut interest rates. So we now
Speaker 1: have a divergent policies between the easy be the Bank
Speaker 1: of England and and the FED, which has now cut
Speaker 1: Where are we now, don't you four point two five
Speaker 1: four point two five percent?
Speaker 3: So hi Evan was but nonetheless coming down.
Speaker 2: Yeah, I think the interesting thing is basically the FEDS.
Speaker 2: I mean, obviously the US and much better economy, but
Speaker 2: the Fed's kind of facing a similar issue in the
Speaker 2: Bank of England and the inflation still persistent, but employment
Speaker 2: looks wobbly, and so the kind of conversation around this
Speaker 2: cut was because some people had thought they could either
Speaker 2: they could maybe go for a big half point cut,
Speaker 2: or they could even have possibly stayed flat, but most
Speaker 2: people expected the quarter point and that's that's what we got.
Speaker 2: And the kind of conversation around it was not that
Speaker 2: different to the conversation here, which is, well, inflation is
Speaker 2: still kind of a bit too strong for comfort, but
Speaker 2: employment could go either way. And I think within that
Speaker 2: there was a lot of talk about whether political pressure
Speaker 2: would make the Fed act in a certain way, a
Speaker 2: more dubbish way, obviously, because Trump would like them to
Speaker 2: cut interest rates, but it's not clear to me that
Speaker 2: that's actually had any effect. I mean, I think that
Speaker 2: in the absence of political pressure that they've done exactly
Speaker 2: this same thing. So at the moment, I feel that
Speaker 2: this idea that we're going to go back to a
Speaker 2: kind of nineteen seventies after Buddn's situation getting bullied by
Speaker 2: you know, Richard Nixon, it doesn't strike me as holding
Speaker 2: as much water as some people would like it to hold,
Speaker 2: but we'll see.
Speaker 1: Okay, It's important to remember that, you know, the FED
Speaker 1: do have more of a focus on employment than the
Speaker 1: than the Bank of England, so it is slightly different.
Speaker 2: Yeah, it's easier for them rationalized rate cuts on that basis.
Speaker 2: But I said, I don't think that's really to do
Speaker 2: with Donald Trump getting under your own power. Skinning is
Speaker 2: more about this is just what you would do in
Speaker 2: this situation. You know, we put too much stock in
Speaker 2: central bank's abilities to control the economy. Anyway. But that's
Speaker 2: a that's a whole other podcast.
Speaker 3: I'm looking forward to that one.
Speaker 1: It's been a whole half hour complaining about central banks,
Speaker 1: a central bank and their god delusions.
Speaker 2: We've never done that before.
Speaker 3: We have it anyway, John, I don't want to go
Speaker 3: on for too long because I know you're still recovering.
Speaker 1: From your holidays, so we'll leave We'll leave it there
Speaker 1: and more on all of this next week.
Speaker 3: Thanks for listening to this week's Merrin Talks Money Debrief.
Speaker 1: If you like a show, rate review, and subscribe wherever
Speaker 1: you listen to podcasts. Also be sure to follow me
Speaker 1: and John on x or Twitter at marinas w and
Speaker 1: John Underscore Stepic. This episode was produced by Samasadi Production,
Speaker 1: sport and sound design by Moses and Questions and comments
Speaker 1: on this show and all our shows are always welcome.
Speaker 1: Our show email is Merri Money at Bloomberg, dot nex