WEBVTT - Surveillance: U.S. Jobs Report with Walsh 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.000 dot Com and of course on the Bloomberg termament, The 0:00:29.120 --> 0:00:32.160 Mighty Worlds, the U S Secretary of Labor Secondary worlds. 0:00:32.240 --> 0:00:34.519 This is not the conversation that maybe you were preparing 0:00:34.560 --> 0:00:37.599 for yesterday or I was preparing for overnight. Can we 0:00:37.640 --> 0:00:40.040 just recall what you said earlier this week going into 0:00:40.040 --> 0:00:43.720 this number. Let's listen into that together. We're living in 0:00:43.920 --> 0:00:47.040 very interesting, unique times. This is unlike anything that that 0:00:47.159 --> 0:00:49.800 any White House has ever experienced before, well maybe a 0:00:49.840 --> 0:00:52.320 hundred years ago. Uh So, you know, we're going to 0:00:52.360 --> 0:00:54.640 continue to follow the President as he continues to put 0:00:54.680 --> 0:00:57.080 plans out there to move our economy forward and moving 0:00:57.080 --> 0:01:00.720 people forward. You were preparing us for a soft secondary 0:01:00.760 --> 0:01:02.880 what which we got a Mega one, a fantastic one, 0:01:03.440 --> 0:01:06.559 and sixty seven thousand. It's some interesting details beneath the service. 0:01:06.760 --> 0:01:09.399 Just give me your take first of all, place, well, 0:01:09.520 --> 0:01:11.399 first and foremost, just from the clip to just to 0:01:11.560 --> 0:01:13.760 stay in line here, we are still living in very unique, 0:01:13.800 --> 0:01:16.240 interesting times in the first in a in a in 0:01:16.240 --> 0:01:19.200 a century pandemic. But you know, we look at these reports. 0:01:19.680 --> 0:01:22.880 Let me just touch on this two ways. Number One, 0:01:23.120 --> 0:01:24.960 the report for the month of January was was a 0:01:25.040 --> 0:01:28.000 very good report, a very solid report, UH. And I 0:01:28.040 --> 0:01:30.959 think underlying what it's telling us is that we're in 0:01:31.000 --> 0:01:33.880 a very different position than we were in March, April, May, June. 0:01:34.880 --> 0:01:38.360 We're seeing people in economies and workplaces and workers and 0:01:38.360 --> 0:01:42.200 employers really learning to live with a pandemic and adjust. 0:01:42.319 --> 0:01:45.160 So we are in a different place there. Number one, UH. 0:01:45.319 --> 0:01:48.560 The adjustments, UH, certainly is great to see. Two b 0:01:48.760 --> 0:01:51.640 ls UH is the gold standard when it comes to 0:01:51.840 --> 0:01:54.280 taking in numbers. We all know that in this country, UM. 0:01:54.320 --> 0:01:56.720 And they're very transparent. And when when I saw that 0:01:56.800 --> 0:01:58.600 number today, that was actually more surprising to me a 0:01:58.640 --> 0:02:00.640 little bit than than the month of January. And I 0:02:00.680 --> 0:02:03.520 asked them, you know, how did we revise seven hundred 0:02:03.520 --> 0:02:05.960 plus thousand jobs? And what was explained to me was 0:02:06.000 --> 0:02:07.720 over the last ten years, we've had about the same 0:02:07.720 --> 0:02:10.880 revisions over that same period of time. So we're excited. 0:02:10.919 --> 0:02:13.080 I'm excited today, but you know something, we still have 0:02:13.120 --> 0:02:15.640 work to do. And you know, this celebration can last 0:02:15.639 --> 0:02:17.440 for a little bit, a couple of hours while I 0:02:17.440 --> 0:02:19.280 do these TV hits and then we got to go 0:02:19.320 --> 0:02:21.040 back to work. But let's talk about what we've got 0:02:21.040 --> 0:02:23.720 to work on. The consumer at the moment, Secondary Wolves 0:02:23.800 --> 0:02:26.000 just doesn't fail it. I can go through the data. 0:02:26.040 --> 0:02:28.120 I can talk about where unemployment is, where wages are, 0:02:28.919 --> 0:02:32.480 they feel the seven percent inflation, they feel crude prices 0:02:32.480 --> 0:02:36.079 where they are crude through the nineties, at ninety two. 0:02:36.360 --> 0:02:39.760 You saw consumer sentiment last week decade low. What's the 0:02:39.880 --> 0:02:42.440 disconnect there at the moment for you, Secondary Walsh, And 0:02:42.480 --> 0:02:44.640 how do you in the administration fix that? How you 0:02:44.680 --> 0:02:46.880 say things are and how they look and how people 0:02:46.880 --> 0:02:49.160 fail at the moment. Yeah, I don't know. I don't 0:02:49.160 --> 0:02:51.000 know if it's necessarily disconnect. I think it really is 0:02:51.040 --> 0:02:53.400 about how people people feel at the moment. You know, 0:02:53.680 --> 0:02:56.120 the American people and and and folks in this world 0:02:56.120 --> 0:02:57.800 have gone through a lot in the last two years 0:02:58.240 --> 0:03:00.000 with the pandemic, and I think there's a lot of 0:03:00.040 --> 0:03:02.919 concern about their family, a lot of concern about the virus, 0:03:03.000 --> 0:03:05.000 a lot of concern about if you if you if 0:03:05.040 --> 0:03:07.200 you've been vaccinated the people that are vaccinated. If you're 0:03:07.200 --> 0:03:09.359 not vaccinated, you don't want to get vaccinated. So there's 0:03:09.360 --> 0:03:11.080 a lot of concern there. But all I know is 0:03:11.120 --> 0:03:13.679 that the President laid out a plan the beginning of 0:03:13.760 --> 0:03:16.120 last year to get people back to work. Uh six 0:03:16.160 --> 0:03:18.920 point seven million Americans got back to work. The President 0:03:19.000 --> 0:03:22.080 laid out a plan to deal with inflation a little 0:03:22.120 --> 0:03:25.440 bit into one. We're working on those supply chain issues 0:03:25.440 --> 0:03:27.280 and other things. So we just need to continue to 0:03:27.280 --> 0:03:29.560 our job. I think that you worry about the poll 0:03:29.639 --> 0:03:31.799 numbers later on, but right now, you worry about doing 0:03:31.800 --> 0:03:34.520 a job. And as a former elected official, you know 0:03:34.720 --> 0:03:36.480 obviously you want to see the great numbers and you 0:03:36.520 --> 0:03:37.960 feel good about it. But at the end of the day, 0:03:38.080 --> 0:03:39.560 you still have to do your job. And the President 0:03:39.600 --> 0:03:42.040 is very focused on making sure he does everything for 0:03:42.040 --> 0:03:44.960 the American people, including not just bringing down inflation, but 0:03:45.000 --> 0:03:47.880 also bringing out wages. Let's talk about the inflation side 0:03:47.880 --> 0:03:50.160 of it. Sneake pay can next week for you seven 0:03:50.160 --> 0:03:52.960 point three to meet an estimate, the high seven point six, 0:03:53.320 --> 0:03:55.760 the low seven. Going through some of the estimates, Lloyd's 0:03:55.760 --> 0:03:58.520 Bank at seven point six credit Sweets at seven point four, 0:03:58.960 --> 0:04:01.600 Morgan Stanley at seven and point three. Caught it with 0:04:01.600 --> 0:04:03.240 an in cetera of Morgan Stanley. They're looking for a 0:04:03.240 --> 0:04:05.960 punchy number next week. Secondly, Welsh, what's the message going 0:04:05.960 --> 0:04:08.280 to be from the administration as we just keep seeing 0:04:08.440 --> 0:04:13.119 inflation kick higher? And from where I sit, my job 0:04:13.240 --> 0:04:14.920 is to make sure that we continue to get people 0:04:14.960 --> 0:04:17.159 back to work. Uh. And you know, I had a 0:04:17.200 --> 0:04:19.400 meeting with Secretary Yellen earlier this week. We talked a 0:04:19.440 --> 0:04:21.920 little bit about inflation. We talked about the job market, 0:04:22.040 --> 0:04:24.599 we talked about creating opportunities for people. We talked about 0:04:24.800 --> 0:04:26.919 the infrastructural law that was passed and the investments are 0:04:26.920 --> 0:04:28.760 gonna be made there. So I'm going to continue to 0:04:28.800 --> 0:04:31.080 do my job in in different parts of the administration 0:04:31.120 --> 0:04:32.880 are gonna be working on the inflation side. I'm part 0:04:32.880 --> 0:04:34.800 of that as well with the supply chain. But but 0:04:34.880 --> 0:04:36.800 you know, again, we're taking this day at the time. 0:04:37.080 --> 0:04:38.440 What does that mean when you say we're going to 0:04:38.520 --> 0:04:40.839 help people get back to work, What specifically are you 0:04:40.839 --> 0:04:45.000 and in the administration doing to try and achieve that. Well, certainly, 0:04:45.120 --> 0:04:47.440 we'll work. I'm working with governors and mayors across the country. 0:04:47.440 --> 0:04:50.559 We're making investments in job training programs. We're making looking 0:04:50.560 --> 0:04:52.840 at the way we do job training and workforce development 0:04:53.120 --> 0:04:55.320 in the infrastructural law. We're making sure that we're gonna 0:04:55.320 --> 0:04:58.320 be working on pre apprenticeship programs and apprenticeship programs to 0:04:58.360 --> 0:05:00.479 get more people into the building trades. We're gonna be 0:05:00.480 --> 0:05:02.640 working working on the supply chain. We're working on the 0:05:02.680 --> 0:05:04.719 on the trucking industry to get more people on the 0:05:04.760 --> 0:05:07.360 trucking side of supply chain demands that are happening our 0:05:07.360 --> 0:05:10.200 country now last mile UH. You know, a lot of 0:05:10.240 --> 0:05:12.280 the concerns we have is not just bringing ships in 0:05:12.400 --> 0:05:14.840 off off the coast to to unload them. We also 0:05:14.880 --> 0:05:16.680 need to make them sure that the products that are 0:05:16.720 --> 0:05:18.840 on those ships get to stores, get to warehouses, get 0:05:18.880 --> 0:05:22.360 to main street America. So we're working to increase other jobs. 0:05:22.800 --> 0:05:24.960 We also saw one of the participation rates that we 0:05:25.000 --> 0:05:28.320 saw in UH that's growing as younger people sixteen twenty 0:05:28.360 --> 0:05:30.680 one people getting into the workforce. We need to make 0:05:30.680 --> 0:05:33.000 sure that as those folks get into the workforce that 0:05:33.040 --> 0:05:34.800 we're training and not just for the job today, but 0:05:34.839 --> 0:05:36.839 making sure they have really pathways into the middle class, 0:05:36.960 --> 0:05:38.640 so that that's what I mean by that. The secondly, 0:05:38.680 --> 0:05:40.400 well was just a final question from me, and allow 0:05:40.480 --> 0:05:43.360 me to go here. The Bank of England Governor Mr 0:05:43.440 --> 0:05:47.000 Bailey yesterday faced a lot of backlash from what he 0:05:47.080 --> 0:05:50.480 said about pay rises and workers, and he effectively said 0:05:50.480 --> 0:05:53.159 that the people in the UK shouldn't demand a big 0:05:53.200 --> 0:05:56.240 pay rise this year because it might cause more problems. 0:05:56.279 --> 0:05:58.640 I just wonder, as a union guy yourself, how you'd 0:05:58.640 --> 0:06:01.480 respond to a line like that, what your position would 0:06:01.480 --> 0:06:03.880 be on that debate At the moment, I think any 0:06:03.920 --> 0:06:06.480 time that we see increase increases in wages for people, 0:06:06.560 --> 0:06:09.279 that's a good thing. We saw a thirteen thirty orroughly 0:06:09.279 --> 0:06:11.960 thirteen and fift percent wage increase in hospitality and what 0:06:12.080 --> 0:06:13.960 do we see. We saw more participation of workers in 0:06:13.960 --> 0:06:16.680 that industry. I think it's important to pay workers more, 0:06:16.880 --> 0:06:19.360 it's important to respect our workers, uh and it's important 0:06:19.400 --> 0:06:21.880 to keep our corny moving forward. Money Welsh, the u 0:06:21.920 --> 0:06:24.560 S Secretary of Labor Money, thank you. I know you're 0:06:24.560 --> 0:06:26.840 super busy trying to explain this one to a lot 0:06:26.839 --> 0:06:28.920 of people. After setting us up maybe for seft print, 0:06:28.960 --> 0:06:31.280 we've got a really really good print secondly, Welsh there, 0:06:31.560 --> 0:06:39.120 thank you very much. John. I want you to bring 0:06:39.160 --> 0:06:41.400 in Jeffrey Rosenberg is the markets movie here, but I 0:06:41.440 --> 0:06:43.440 really want to rip up the script John in the 0:06:43.480 --> 0:06:45.920 next thirty minutes of Little McKee here to give us 0:06:45.960 --> 0:06:49.920 further study and the most stunning miss I've ever seen, 0:06:49.960 --> 0:06:52.320 and that sounds perfect. This is a monster upside surprise 0:06:52.440 --> 0:06:55.640 for sixty seven is the number one was the estimate, 0:06:55.680 --> 0:06:57.920 but the range was huge to fifty at the top end, 0:06:58.120 --> 0:07:00.920 negative four k at the bottom, and you just look 0:07:01.000 --> 0:07:03.640 fantastic the two years responding, you'll tie there by nine 0:07:03.640 --> 0:07:06.360 basis points. We approach one thirty on a US two 0:07:06.440 --> 0:07:09.120 year John, Jeff, sure you want to jump in mind, 0:07:09.240 --> 0:07:10.640 I just want to jump in with one number here 0:07:10.680 --> 0:07:13.239 because we didn't even notice this that seven nine thousand 0:07:13.280 --> 0:07:18.960 you're talking about December was revised up from the There's 0:07:19.000 --> 0:07:22.720 a note in here that suggests that the seasonal factors 0:07:22.720 --> 0:07:27.000 have been updated to better distinguish what was COVID and 0:07:27.000 --> 0:07:30.560 what was seasonal. And so it's not just that there 0:07:30.600 --> 0:07:32.480 was a huge game this month. There was a huge 0:07:32.480 --> 0:07:35.240 game last month as well. Let's get to Jeff now 0:07:35.320 --> 0:07:38.160 from blank Rock. Jeff, we've been told to ignore this one. 0:07:38.800 --> 0:07:42.360 We're not ignoring it now, Jeff hy, Well, you can't 0:07:42.360 --> 0:07:45.120 ignore this one. It's got a lot of moving pieces 0:07:45.200 --> 0:07:49.080 as as we're dissecting here real time. You know, I 0:07:49.120 --> 0:07:52.000 think Mike's got it right in terms of the you know, 0:07:52.040 --> 0:07:56.600 the revisions is really important. You don't see the expected 0:07:56.600 --> 0:07:59.280 on macron impact. A lot of that can be due 0:07:59.320 --> 0:08:04.000 to the difficulty of seasonal adjustments. But the other pieces 0:08:04.040 --> 0:08:06.560 of this report are also very strong in terms of 0:08:06.600 --> 0:08:11.080 the wage piece and the labor force participation rates. So 0:08:11.240 --> 0:08:13.720 you know, taken in total, you talked about the market 0:08:13.760 --> 0:08:17.360 reaction and Neil's comment, you know, this really is not 0:08:17.640 --> 0:08:20.800 the kind of little bit of we can look past 0:08:20.920 --> 0:08:24.360 this one, but much more about both what it tells 0:08:24.440 --> 0:08:26.680 us in terms of those revisions as well as what 0:08:26.760 --> 0:08:31.120 it's saying today. This is the labor market really screeching, 0:08:31.640 --> 0:08:34.520 uh screaming, I should say, uh. And that's going to 0:08:34.679 --> 0:08:37.520 continue to keep the pressure on the FED. And that's 0:08:37.559 --> 0:08:39.880 why you're seeing the move in the front end, because 0:08:39.920 --> 0:08:44.920 the market is pricing this acceleration in near term tightening. 0:08:45.520 --> 0:08:48.040 Uh And and I think that will remain the theme 0:08:48.120 --> 0:08:50.920 here for a while. This report does a lot to 0:08:51.000 --> 0:08:55.480 continue to accelerate that theme of upfronting the pace of 0:08:55.480 --> 0:08:57.960 of FED hikes. Maybe you know, I don't know if 0:08:57.960 --> 0:09:01.240 that's necessarily fifty, but it's really about how many, how 0:09:01.360 --> 0:09:04.320 quickly do they get it in uh this year, and 0:09:04.360 --> 0:09:08.000 a very rapid change from you know, expecting a quarterly 0:09:08.080 --> 0:09:10.199 pace to now you know it's going to be every 0:09:10.240 --> 0:09:13.160 meeting to Niel's common about now they need to throw 0:09:13.160 --> 0:09:17.000 in a fifty in there. But definitely here the surprises 0:09:17.080 --> 0:09:21.040 that this is just again telling us how overheated this 0:09:21.160 --> 0:09:24.080 labor market is. Can you put this report together with 0:09:24.160 --> 0:09:27.199 what we heard from the Bank of England European Central Bank, 0:09:27.480 --> 0:09:30.360 the shift that we have seen this week in market 0:09:30.600 --> 0:09:33.680 as globally there is a feeling that the labor market, 0:09:33.720 --> 0:09:36.240 that in general inflation is getting too hot. And have 0:09:36.360 --> 0:09:42.040 you shifted your your investment perspective at all. Well, there's 0:09:42.040 --> 0:09:45.880 still this distinction, you know, between the US, the Bank 0:09:45.920 --> 0:09:48.080 of England and the ECB were heard we heard a 0:09:48.080 --> 0:09:52.800 lot about that yesterday from from Leguard. But but overall, 0:09:52.840 --> 0:09:56.559 in terms of particularly the outlook both for all three, 0:09:57.000 --> 0:10:00.200 you know, the labor market will very much sit at 0:10:00.240 --> 0:10:03.280 the center of that debate. I think for Europe that's still, 0:10:03.679 --> 0:10:06.199 you know, to be seen. I think what you're seeing 0:10:06.240 --> 0:10:08.959 here in today's report for the US as well as 0:10:09.000 --> 0:10:11.160 for the Bank of England is that the strength in 0:10:11.200 --> 0:10:14.720 the labor markets is is really the risk of a 0:10:14.840 --> 0:10:19.439 more persistent inflationary outcome, because that's strong of a labor 0:10:19.520 --> 0:10:23.160 market is about the fears of wage price spiral, and 0:10:23.200 --> 0:10:27.640 so it shifts from the supply side COVID disruption narrative 0:10:27.920 --> 0:10:32.679 to something that's much more difficult for policy makers to 0:10:32.720 --> 0:10:34.880 reign in, which is which is which is a waste 0:10:34.920 --> 0:10:39.160 wage price spiral source of inflation. Jeff Frozenberg the tenuere 0:10:39.400 --> 0:10:42.760 inflation adjusted yield as a measurement of a negative zero 0:10:42.840 --> 0:10:45.760 point five four This on a day where we really 0:10:45.800 --> 0:10:49.680 consider finally a positive rate regime across most, if not all, 0:10:50.160 --> 0:10:53.640 of Europe. I'm going to assume the path from here 0:10:54.200 --> 0:10:58.280 to a flat or positive tenure real yield has non 0:10:58.360 --> 0:11:01.719 linearities in it. What's going to be the impact to 0:11:01.840 --> 0:11:06.440 the overall financial system and to the overall economy is 0:11:06.520 --> 0:11:12.240 that tenure real yield migrates up towards zero. Well, you know, 0:11:12.360 --> 0:11:15.160 it's it's a question in your question is it a 0:11:15.760 --> 0:11:20.360 slow migration or is it a nonlinearity. The FED doesn't 0:11:20.400 --> 0:11:24.960 like nonlinearities because the market doesn't deal well with nonlinearities. 0:11:25.000 --> 0:11:28.520 That's too rapid of a tightening on financial conditions. The 0:11:28.559 --> 0:11:31.200 FED wants to tighten financial conditions, but it doesn't want 0:11:31.200 --> 0:11:35.080 to crash confidence and overtighten. So it's a very tough 0:11:35.880 --> 0:11:38.400 uh path for the Fed to try to take. That's 0:11:38.440 --> 0:11:42.120 the argument against the fifty basis point shock because it 0:11:42.200 --> 0:11:45.560 is a bigger shock. It risks sort of a narrative 0:11:45.559 --> 0:11:48.560 getting away from the FED that that they're way behind 0:11:48.600 --> 0:11:51.760 the curve and that inflation is accelerating out of control, 0:11:51.800 --> 0:11:56.680 whereas in their forecasts and the market consensus forecast is 0:11:56.720 --> 0:11:59.600 that inflation will start to come down. So you don't 0:11:59.640 --> 0:12:03.520 want to over tighten and overshocked the market. Yet the 0:12:03.640 --> 0:12:07.480 path towards real interest rates here globally, and I think 0:12:07.480 --> 0:12:11.160 that's the message for the week is that we're going 0:12:11.240 --> 0:12:15.880 to exit this era of persistent negative real interest rates. 0:12:15.920 --> 0:12:21.439 The challenges can you exit that era without a bigger 0:12:21.520 --> 0:12:25.680 financial tightening, a bigger financial accident. Clearly that's what the 0:12:25.840 --> 0:12:28.600 policymakers are going to be aiming for, and so the 0:12:28.600 --> 0:12:30.720 guidance around that is going to be to try to 0:12:31.120 --> 0:12:34.960 tighten without overtightening. Jeff, just as an investor PM at 0:12:34.960 --> 0:12:37.480 the moment, are you having fun in this market? Is 0:12:37.520 --> 0:12:41.240 this fun or is this brutal? Well, you know, it 0:12:41.320 --> 0:12:44.520 depends on your investment process and and what you have 0:12:44.720 --> 0:12:49.320 for levers. If if if you have a diversified portfolio 0:12:49.400 --> 0:12:53.199 across both directional which is you know, are we are 0:12:53.200 --> 0:12:55.360 we betting on interest it's going up, our interest rates 0:12:55.440 --> 0:12:58.760 going down? That's a very difficult uh set of tools. 0:12:58.800 --> 0:13:01.520 But the other thing that happening here that is quite 0:13:01.520 --> 0:13:05.880 advantageous to a different toolkit, That is a toolkit that 0:13:05.960 --> 0:13:11.520 exploits differences across interest rates, differences in dispersion in both 0:13:11.720 --> 0:13:15.560 micro and macro markets. It's actually starting to become a 0:13:15.640 --> 0:13:19.480 much better environment for those types of strategies. And so 0:13:19.720 --> 0:13:22.559 while it's difficult in terms of kind of direction, will 0:13:22.600 --> 0:13:25.240 markets go up? Will markets go down? As the Fed 0:13:25.320 --> 0:13:28.240 and global central banks pulled back from this era of 0:13:28.360 --> 0:13:34.480 incredible liquidity and policy accommodation, that is compressed differences that 0:13:34.559 --> 0:13:38.960 reduces opportunity, you actually see opportunities arise in the calling 0:13:39.040 --> 0:13:42.640 the cross section and differences across countries and different companies. 0:13:42.679 --> 0:13:46.080 So a little bit of glass half empty, glass half full. There. 0:13:46.200 --> 0:13:47.880 For those of you who think they've been living in 0:13:47.920 --> 0:13:49.480 the real world for the last two months, you haven't 0:13:49.520 --> 0:13:52.199 been a Macron did not happen for sixty seven is 0:13:52.240 --> 0:13:56.280 the number for January? The previous rate five ten at least. 0:13:56.280 --> 0:13:58.800 This stuff is just unbelievable. Just to get your teeth 0:13:58.840 --> 0:14:00.680 into we've been told to pay to do this morning. 0:14:00.720 --> 0:14:03.920 Ignore the payrolls number big on Macron impact and then bang, 0:14:04.160 --> 0:14:07.480 you'd explode in up eight or nine basis points. I'll 0:14:07.480 --> 0:14:09.839 discuss this with Jeffs colleague a little bit later. Rick 0:14:09.880 --> 0:14:12.600 Reader of Black Rock talk to him about how on 0:14:12.640 --> 0:14:15.040 earth he's handling this situation. Just the cash allocation. I 0:14:15.040 --> 0:14:16.439 wonder how large that is at the moment, and a 0:14:16.480 --> 0:14:19.080 stage Ramarosa will join in Mike Collins to PGIM two 0:14:19.400 --> 0:14:20.880 and then later all catch up of the White House. 0:14:21.280 --> 0:14:24.080 I imagine Lisa the interview that secondary Welsh thought he 0:14:24.120 --> 0:14:26.480 was going to do yesterday. It's very different. It's a 0:14:26.520 --> 0:14:27.920 different one than the one he's about to do now. 0:14:28.000 --> 0:14:29.680 I think it was about town with all the differences 0:14:29.720 --> 0:14:32.600 between the household, surf and the other survey and why 0:14:32.640 --> 0:14:34.600 this number was so bad and this is going to 0:14:34.640 --> 0:14:36.760 be a different one. Yeah, it's about an hour. It's 0:14:36.760 --> 0:14:38.640 gonna be one about inflation. It's going to be one 0:14:38.720 --> 0:14:42.480 about a labor market that looks increasingly tight. I keep 0:14:42.560 --> 0:14:45.160 going back to this idea that the European market right 0:14:45.200 --> 0:14:47.880 now is really in shock style from the e CPS 0:14:47.880 --> 0:14:51.560 pivot yesterday. Why has the US market not reacted? It 0:14:51.600 --> 0:14:53.960 looks like the reaction is coming today, Jeff. Do you 0:14:54.040 --> 0:14:56.200 think that there is more to come in terms of 0:14:56.200 --> 0:14:59.520 this recalibration of as what you said is we're moving 0:14:59.520 --> 0:15:04.920 to a new regime or negative real rates are no longer. Yeah. 0:15:04.960 --> 0:15:06.720 I look, I think there's a lot of room to 0:15:06.760 --> 0:15:09.760 go there, and I think there's a big debate growing 0:15:09.960 --> 0:15:13.000 around the pace of how quickly the c B has 0:15:13.040 --> 0:15:15.640 to move. You know, there's still a lot more, as 0:15:15.720 --> 0:15:18.720 Leguard said yesterday, a lot more data dependence. And so 0:15:19.120 --> 0:15:23.080 you saw the first crack in European inflation data, right, 0:15:23.160 --> 0:15:25.600 So that's really what has kind of changed the narrative 0:15:25.640 --> 0:15:29.320 and forced the ECB off of the you know, somewhat 0:15:29.360 --> 0:15:32.200 conditional promises of no rate hikes. They've been kind of 0:15:32.320 --> 0:15:35.400 mugged by the data, mugged by the reality, uh that 0:15:35.520 --> 0:15:38.520 inflation there is is rolling now, they again have a 0:15:38.560 --> 0:15:42.880 different underlying fundamentals between wages than what we're seeing here 0:15:42.920 --> 0:15:45.280 in the US. And that's partly Lisa, I think you saw, 0:15:45.560 --> 0:15:48.160 you know, less of a reaction in the US relative 0:15:48.240 --> 0:15:51.160 to a very strong reaction. But also look again in 0:15:51.160 --> 0:15:56.800 that cross section, where was the biggest reaction. Uh. Jonathan 0:15:56.840 --> 0:16:01.880 mentioned it earlier, the spectacular increases in Italian yields, because 0:16:02.040 --> 0:16:06.360 in the cross section of European Central Bank support, it's compressed, 0:16:06.760 --> 0:16:12.720 it's it's muted the fundamental differences in where yields should 0:16:12.760 --> 0:16:16.080 trade across the European complex. And so as you pull 0:16:16.160 --> 0:16:19.240 back not only on the level of that interest rate support, 0:16:19.240 --> 0:16:22.080 you're gonna see a lot more in the cross section. 0:16:22.120 --> 0:16:24.800 That's going to be a challenge to the ECB. But 0:16:24.880 --> 0:16:27.040 it is very much part of what I think we're 0:16:27.040 --> 0:16:30.680 gonna see re emerge as the CBS forced to pull 0:16:30.760 --> 0:16:34.520 back on this tremendous era of policy accommodation. Jeff Frozen Worg, 0:16:34.560 --> 0:16:36.360 thank you so much. The Black Rock. What a busy 0:16:36.400 --> 0:16:46.040 day you're gonna have at your shop. Tiffany Wilder here 0:16:46.080 --> 0:16:50.480 to translate. Boy, do we need Tiffany Wilding today with Pimco, 0:16:50.560 --> 0:16:54.080 their chief US economists. Tiffany, I'm gonna cut to the 0:16:54.160 --> 0:16:57.600 chase with an open question. I never do this, but 0:16:57.800 --> 0:17:00.920 it's so chaotic. What are you going to write about 0:17:00.960 --> 0:17:04.439 this weekend? Give us a I want to frontload. I 0:17:04.480 --> 0:17:08.040 want to frontload Jerome Schneider. Tell me before you tell 0:17:08.119 --> 0:17:11.879 Jerome Schneider what you're going to write about. Good morning, 0:17:11.920 --> 0:17:13.439 Tom and Paul. I mean, so, first of all, I 0:17:13.440 --> 0:17:15.880 think this the headlines on this report were a little 0:17:15.920 --> 0:17:20.680 bit tough to interpret just because of the revisions. Benchmark 0:17:20.720 --> 0:17:23.800 revisions were incorporated, and they also revised the seasonal factors, 0:17:23.800 --> 0:17:26.840 so that actually contributed um to some of the big 0:17:26.880 --> 0:17:29.120 month over month jumps in in like the labor force 0:17:29.160 --> 0:17:33.160 participation rate, in the EPOP employment to population ratio um 0:17:33.160 --> 0:17:36.160 and some of the big monthly revisions. But I think 0:17:36.280 --> 0:17:38.200 just you have so you have to take a broader look, 0:17:38.280 --> 0:17:40.200 and I think once you do that, what you still 0:17:40.280 --> 0:17:43.359 see is that this was a very solid report on 0:17:43.400 --> 0:17:46.280 a number of fronts. First and foremost, I think is 0:17:46.280 --> 0:17:48.959 on the labor force participation rate. So this has been 0:17:48.960 --> 0:17:51.959 a bit of a conundrum. All year. UM, we like 0:17:52.040 --> 0:17:54.920 many forecasters, had expected, you know, some recovery in the 0:17:55.000 --> 0:17:58.240 labor force participation rate and it just wasn't happening. The 0:17:58.359 --> 0:18:02.320 data today basically change that. I think, change that narrative, 0:18:02.359 --> 0:18:04.439 and it looks like the labor force participation rate is 0:18:04.440 --> 0:18:07.720 actually UM accelerating in quite a big way. And it 0:18:07.800 --> 0:18:09.960 lines up with some of the expirations of the you know, 0:18:10.040 --> 0:18:14.440 government income subsidies, you know, like enhanced unemployment benefits. UH 0:18:14.560 --> 0:18:17.680 that was last September or obviously did the December expiration 0:18:17.720 --> 0:18:20.320 of the child tax credit. So it looks like people 0:18:20.320 --> 0:18:24.920 are coming back and that's ultimately good. Nevertheless, you had UM, 0:18:26.040 --> 0:18:28.320 you had wages that were also very strong. So in 0:18:28.400 --> 0:18:31.440 terms of the Federal Reserve, to me, this argues more 0:18:31.640 --> 0:18:35.240 for UM, you know, a sequential pace of rate hikes 0:18:35.600 --> 0:18:39.399 maybe in the UM you know, March May June of 0:18:39.440 --> 0:18:42.960 this year. Maybe doesn't still yet argue for a fifty 0:18:42.960 --> 0:18:44.720 basis point rate hike in March. I mean, the FETE 0:18:44.760 --> 0:18:46.440 is not going to want to squash out this labor 0:18:46.440 --> 0:18:49.239 force participation gain, but you're gonna want to They are 0:18:49.240 --> 0:18:51.040 going to want to ease off of wages. So I 0:18:51.080 --> 0:18:53.960 think that's really the balance here. Paul from New Jersey 0:18:54.000 --> 0:18:56.520 emails in he says, Tom, do log rhythms. Let's do 0:18:56.560 --> 0:19:00.560 it on a Friday, folks. I did Tiffany a log 0:19:00.760 --> 0:19:06.560 extrapolation of the trend of average hourly earnings before the pandemic, 0:19:07.320 --> 0:19:11.159 and that statistic is roughly three point nine percent up. 0:19:11.280 --> 0:19:14.960 We're not up three point nine percent, We're up five 0:19:15.040 --> 0:19:19.200 point seven percent, a big, big lift induced by all 0:19:19.280 --> 0:19:23.800 this is wage inflation entrenched. Well, if I think you 0:19:23.880 --> 0:19:27.920 also have to keep in mind that UM inflation headline 0:19:27.960 --> 0:19:31.479 CPI inflation is still seven percent. So even though we 0:19:31.520 --> 0:19:34.800 are getting a nice adjustment in wages, wages on a 0:19:34.880 --> 0:19:38.760 real basis are still negative. So people the economy as 0:19:38.760 --> 0:19:41.680 a whole, in aggregate are not fully getting cost of 0:19:41.720 --> 0:19:45.960 living adjustments UM. And I think that's important. Obviously, that's 0:19:45.960 --> 0:19:48.800 important for welfare, but it's also important in this whole 0:19:48.840 --> 0:19:52.080 debate about UM. You know, are we on the precipice 0:19:52.160 --> 0:19:55.720 of a wage price spiral? And really the first kind 0:19:55.760 --> 0:19:58.560 of step in that wage price spiral is that you 0:19:58.640 --> 0:20:01.520 do actually get people that are able to bargain for 0:20:01.560 --> 0:20:04.280 full cost of living adjustments or if not more you know, 0:20:04.320 --> 0:20:06.240 and companies are then able to pass that on to 0:20:06.359 --> 0:20:08.760 consumers again and that sort of starts off the spiral. 0:20:09.080 --> 0:20:11.440 You know, this data obviously we're strong average, I really, 0:20:11.480 --> 0:20:14.359 earnings also obviously strong, but we're still not at that 0:20:14.480 --> 0:20:16.360 level where you are getting a full cost of living 0:20:16.359 --> 0:20:18.960 adjustment and wages UM. You know. So I think as 0:20:19.000 --> 0:20:21.760 I kind of look at the evidence, you know, it 0:20:21.880 --> 0:20:23.800 still seems to me that we're you know, we're not 0:20:23.880 --> 0:20:28.000 on the precipice of that. You know. Nevertheless, though, you know, 0:20:28.080 --> 0:20:30.239 as a result of an underlying strong economy, you are 0:20:30.280 --> 0:20:32.920 getting some some wage pressures and ultimately that's a that's 0:20:32.920 --> 0:20:37.240 a good thing for workers. So, Tiffany, you know, coming 0:20:37.280 --> 0:20:38.840 up at the top of the hour, Jonathan Farer from 0:20:38.840 --> 0:20:40.760 Bloomberg Television is going to sit down with you as 0:20:40.800 --> 0:20:44.119