Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. If I came back
Speaker 2: from a year off, never mind a month, and you
Speaker 2: showed me one data point and it was sharpless claims,
Speaker 2: and I looked at that, I'd be like, everything's okay,
Speaker 2: there's nothing wrong here. Labor markets from rock solid. That's
Speaker 2: very very impressive. And to your point, yards up at
Speaker 2: the front end are by three basis points on a
Speaker 2: two year on tens up by two still very very
Speaker 2: range band on a ten year maturity that yield at
Speaker 2: the moment about four fifteen four sixteen. Nila Richardson of
Speaker 2: ADP needs to explain what's going on here. Nil can
Speaker 2: good to see you kid morning, How do you explain
Speaker 2: how we're sitting here word about labor market? If has
Speaker 2: just cut rights by what's seventy five basis points over
Speaker 2: the period of six months or so, and yet we've
Speaker 2: got job as claims at one ninety eight.
Speaker 3: Well I wrote on Tuesday that the labor market is
Speaker 3: tighter than we think, and that's how you explain it.
Speaker 3: What we're seeing is that it's a labor market where
Speaker 3: there's has been said before, little hiring, little layoffs, but
Speaker 3: also pay growth has been robust throughout twenty twenty five.
Speaker 3: And let me tell you what that means. Let me
Speaker 3: unpack that. Because we spend a lot of attention on
Speaker 3: the monthly jobs numbers, we need to spend more attention
Speaker 3: on the wage numbers because they tell the complete story.
Speaker 3: And that story is that workers are largely staying put.
Speaker 3: They have very little desire to rush out and quit
Speaker 3: their jobs, but employers are having to pay them more
Speaker 3: to stay in place. So when you look at the
Speaker 3: wage premium between a job stare and a job changer,
Speaker 3: it is very low. We calculate it. We clock that
Speaker 3: at less than three percent going back over the course
Speaker 3: of the year. But the pay levels. The growth levels
Speaker 3: are high four point four percent for job stairs, six
Speaker 3: point six percent for job changers who are sensitive to
Speaker 3: this labor market. It's taking more pay growth to keep
Speaker 3: a worker, and that's adding to costs.
Speaker 4: Now.
Speaker 2: Typically that's what you say in an expanded economy. Typically
Speaker 2: it's what you say in a very tight labor market.
Speaker 2: I still don't understand why the Fed's counting in that
Speaker 2: kind of environment. What's gone wrong here? What's happened?
Speaker 3: The theme of twenty twenty six is perception versus reality explained.
Speaker 3: When I look across the board at all the economic indicators,
Speaker 3: they are so strong. I mean, wage growth is strong.
Speaker 3: You look at GDP growth is strong, Retail sales is strong.
Speaker 3: The only thing that seems leak to me other than
Speaker 3: these pretty modest job games is consumer sentiment. Why is
Speaker 3: sentiment so sour when everything it looks so great? Even
Speaker 3: our infrastructure graters, the civil Engineers recently put out a
Speaker 3: report that America's infrastructure is getting a solid c engineers
Speaker 3: are the hardest graders in the world. Everyone knows that
Speaker 3: my son is finding it out this year, but they're
Speaker 3: still grading at higher grade levels than they have historically.
Speaker 3: So America looks strong, but sentiment looks bad, and there's
Speaker 3: a reason for that. Perception is different than reality.
Speaker 1: Well, how much is this also that we're talking about
Speaker 1: averages and not necessarily the different tiers of earners. And
Speaker 1: it could be that, say, the top tiers of earners
Speaker 1: are doing really well or seeing their productivity increase, and
Speaker 1: are seeing their pay weight and their wages or take
Speaker 1: home pay increase substantially, and the people at the lower end,
Speaker 1: who are employed in low wage work are not seeing
Speaker 1: those increases and are seeing the inflation that are coming
Speaker 1: on the heels what's happening at the top tier.
Speaker 3: Lisa, you just hit the point right, underscoring that perception
Speaker 3: versus reality. Another way to say that is micro versus macro.
Speaker 3: And when you look at the granularity of job changes,
Speaker 3: what you're seeing is it is not equal work. Where
Speaker 3: we're seeing the highest page growth is not where we're
Speaker 3: seeing the most job growth, and that is key. You're
Speaker 3: seeing high k growth and in trades like construction tied
Speaker 3: to data centers, for example, but you're not seeing a
Speaker 3: lot of job growth there. And there are demographic and
Speaker 3: structural reasons to that. And even if you unpack this
Speaker 3: wage distribution over time, what you're seeing is that low
Speaker 3: income workers are not keeping pace with inflation, and that
Speaker 3: is very different than three years ago when they were
Speaker 3: out pacing in terms of income gains. So, yes, there
Speaker 3: is a lot of action going on underneath the service
Speaker 3: of the macro indicators that point to a widening and
Speaker 3: widening of the top learners in the bottom.
Speaker 1: And just adding to the sentiment that is very reality based,
Speaker 1: which is that people who are making a lot of
Speaker 1: money are also seeing the use case for their jobs
Speaker 1: go down. I'm looking at some of the earnings that
Speaker 1: we saw Bank of America coming out saying that they're
Speaker 1: going to let their head count shrink as they deploy
Speaker 1: more artificial intelligence, City Group saying that they are going
Speaker 1: to over the time use automation and expect automation and
Speaker 1: AI to potentially reduce some of that headcount and also
Speaker 1: just increase efficiency. I mean, how much is that also
Speaker 1: hanging over sentiment in a way that these numbers don't
Speaker 1: pick up, right.
Speaker 3: So that's the structural change that no one saw coming
Speaker 3: maybe four years ago. I shouldn't say no one, but
Speaker 3: very few workers saw coming. And it's now part of
Speaker 3: the conversation. It's part of the hiring strategy in a
Speaker 3: way that hasn't been before, and it's hitting professional, white
Speaker 3: collar jobs which you thought would be immune to this
Speaker 3: kind of stuff, this immune to this kind of automation consideration.
Speaker 3: But AI has changed all that. And so I do
Speaker 3: think that that harkens back to the sentiment and to
Speaker 3: the company long term strategy. But this is a transition
Speaker 3: that's not the end of the story. I think that
Speaker 3: this will be a short lived transition because the productivity
Speaker 3: around AI is so vast that it is yet to
Speaker 3: hit the worker.
Speaker 5: How does the FED think of this moment so challenging.
Speaker 3: I think what they they're very focused on is the
Speaker 3: data point that drives a decision. This is a data
Speaker 3: driven FED. But the problem is the data doesn't stack
Speaker 3: up to the decision in the way that it has
Speaker 3: been in the past.
Speaker 4: The data is.
Speaker 3: Pointing to a pretty strong economy, the data is pointing
Speaker 3: to a pretty low unemployment rate, and the data is
Speaker 3: pointing to a structural, not cyclical change in monthly job gains.
Speaker 3: And so it does put them on the back foot
Speaker 3: when you're trying to interpret data and use that data
Speaker 3: to make a decision.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this
Speaker 2: A Center Washington. President Trump reaching across the alp asking
Speaker 2: Democratic Senator Elizabeth Warren to support his efforts to credit
Speaker 2: card interest rates are ten percent after facing opposition from
Speaker 2: his own party. The Republican can Wressman French Hill, Chairman
Speaker 2: of the House Financial Service Committee, join us now from
Speaker 2: Capital Hill to respond to that and a whole lot more. Congressman,
Speaker 2: it's good to see history is littered with examples, full
Speaker 2: of examples that when you introduce price controls, you end
Speaker 2: up with restricted supply. Congressman, is this proposal going to
Speaker 2: end up any differently?
Speaker 4: Have you new year? Jonathan?
Speaker 6: Great to be with you, Congratulations on becoming a dad.
Speaker 6: So happy for you and your family. Look, this proposal
Speaker 6: is a price control, and I think I've heard from
Speaker 6: Republicans and House that they have concerns about it. What
Speaker 6: we are in agreement with President Trump on is that
Speaker 6: we want to reverse the curse of the Biden years
Speaker 6: and taxation, regulatory and government policies. So we want to
Speaker 6: work to pass my twenty first Century Housing Act, which
Speaker 6: would lower home construction costs. We want to pass the
Speaker 6: Main Street Capital Access Act, which would compliance cost and
Speaker 6: refocus the bank regulators on safety and soundness, tailoring regulations
Speaker 6: to bank complexity. And when you think about the regional
Speaker 6: banks you just talked about and the community banks, particularly
Speaker 6: those banks under ten billion dollars, they make sixty percent
Speaker 6: of the one to four family home loans in this country.
Speaker 6: So we believe that with the tax benefits from the
Speaker 6: one Big Beautiful Bill, lowering compliance costs, focusing and tailoring regulations,
Speaker 6: and focusing on dropping the regulatory burdens, and trying to
Speaker 6: build homes in this country, these are bullish signs for
Speaker 6: the GDP for the nation.
Speaker 4: We don't want to do anything.
Speaker 6: That throws off that gross domestic product. And one of
Speaker 6: the things I heard from colleagues is two thirds of
Speaker 6: GDP and the US is consumption. And so if credit
Speaker 6: availability is denied or reduced, that could impact growth for
Speaker 6: twenty twenty six.
Speaker 2: The congressman, do you think they proposal as it stands
Speaker 2: could have a chilling effect on credit?
Speaker 4: Well, I think this is what.
Speaker 6: People that I've heard from in the House Republican Conference
Speaker 6: have said to me, is they think, gosh, this could
Speaker 6: mean that those Americans with lower credit scores had their
Speaker 6: credit curtailed in some way, even by temporary and proposal
Speaker 6: like this. And you know we've campaigned against the government
Speaker 6: price controls in the twenty twenty four election in Kamala
Speaker 6: Harris's efforts to put in nationwide rent control, for example, Congressman.
Speaker 5: Which is why it's so curious the President is getting
Speaker 5: on the phone with the likes of Senator Elizabeth Warren
Speaker 5: and continuously has this tex exchange we've learned through axios
Speaker 5: with Zorammmdani. Do you think he is moving two far
Speaker 5: to the left and almost out of where your party is.
Speaker 6: Well, I just think that Republicans want to work with
Speaker 6: President Trump to accomplish his goal reverse the curse of
Speaker 6: the Biden policies and regulation, taxation, open up the economy.
Speaker 6: Besides our tax policy, the Big Beautiful Bill, I really
Speaker 6: believe that our mainStreet Capital Access Act will make capital
Speaker 6: more available for small businesses all across the nation, produce
Speaker 6: economic growth, particularly in the home building area. Mike Flood's
Speaker 6: twenty first century housing build that we put together lower's
Speaker 6: regulatory costs on building new homes, opens up things like
Speaker 6: the Home Program and the CDBG program to private sector
Speaker 6: partnerships to build more housing. We want more housing available,
Speaker 6: we want better at better prices, and that's the tact
Speaker 6: that we're taking. I think these are the priorities of
Speaker 6: the President.
Speaker 5: Congressman, as the chair of the Financial Services Committee, have
Speaker 5: you spoken to Chair J. Powell since the subpoena was
Speaker 5: delivered to him from the DOJ?
Speaker 6: I have Chairman Powell called and told me that this
Speaker 6: process was taking.
Speaker 5: Place, and does he have plans to come to the
Speaker 5: Hill to testify.
Speaker 6: Well, we've invited the Chairman to testify for his semi
Speaker 6: annual Humphrey Hawkins testimony and we're working out.
Speaker 4: The date now.
Speaker 6: We'll do that typically in coordination both with the FED
Speaker 6: and with the Senate Banking Committee, so that we can
Speaker 6: get the FED chairman up for his semi annual testimony
Speaker 6: on the Hill.
Speaker 1: Congressman, do you agree with the efforts put forward by
Speaker 1: Senator Tillis talking about potentially stiming any of the candidates
Speaker 1: that President Trump is putting forward or will put forward
Speaker 1: for the Federal Reserve until the subpoena is removed or
Speaker 1: this issue is resolved.
Speaker 6: Well, you know, my attitude about this is really simple,
Speaker 6: which is FED independence doesn't mean the Fed's immune from
Speaker 6: criticism or governors at the FED or immune from criticism.
Speaker 6: And if people have questions and concerns about the construction
Speaker 6: project down there about how expensive it is to build
Speaker 6: something in Washington, d C. How expensive it is to
Speaker 6: build something after a forty year high in inflation from
Speaker 6: the FED and fiscal policy mistakes made at the end
Speaker 6: of the pandemic, those are legitimate questions. I try to
Speaker 6: criminalize it and threaten people with a grand jury over disputes.
Speaker 4: About that construction.
Speaker 6: I don't agree with that, and I think the Congress
Speaker 6: can do oversight about the construction project. And I think,
Speaker 6: as I said in my statement, I think this is
Speaker 6: a distraction from our partnership with President Trump in lowering
Speaker 6: cost of living for our citizens through access to increasing
Speaker 6: access to capital, lowering the cost of building a home
Speaker 6: in this country, getting the economy growing along with all
Speaker 6: the improvements, the tremendous improvements we've had for working families
Speaker 6: that we passed in the One Big Beautiful Bill last year.
Speaker 1: Do you think that it's actually illegitimate this particular subpoena.
Speaker 6: Well, I don't know that it's illegitimate. Because I'm not
Speaker 6: at the Justice Department and I'm not the US Attorney
Speaker 6: for the District of Columbia, I'd say it is, in
Speaker 6: my personal opinion, an over reaction to concerns about the
Speaker 6: construction at the FED.
Speaker 4: Don't agree with that approach.
Speaker 5: You've been friends with him for decades. Do you think
Speaker 5: he added to this distraction by coming out with a
Speaker 5: rare video as the markets were opening up an Asia
Speaker 5: instead of just replying to the subpoena.
Speaker 6: Yeah, I think we'll always second guess whenever we make
Speaker 6: a public statement as a public figure. I won't second
Speaker 6: guess the decision that he took about that.
Speaker 4: I'll just let it play out the way it is.
Speaker 6: But I do believe that trying to criminalize that kind
Speaker 6: of behavior, I just don't agree with that.
Speaker 5: How delayed do you think this could make going through
Speaker 5: the process of the next FED chair?
Speaker 4: Well, I think it could throw it off track.
Speaker 6: I think it's a distraction to Treasury Secretary Bessence very
Speaker 6: able partnership with the President to identify a new FED chair,
Speaker 6: something they've worked on for months, and the President has
Speaker 6: had interviews consistently over the last few weeks, and he's
Speaker 6: close to taking a decision and that this decision. Whoever
Speaker 6: made the recommendation to do this, I think was a
Speaker 6: mistake because I think, as I've said, it distracts from
Speaker 6: economic agenda benefiting working families with lower cost and more
Speaker 6: accessibility to capital and housing. And it's a distraction to
Speaker 6: Treasury Secretary Vesset and President Trump's excellent work to identify
Speaker 6: a new leader for the Federal Reserve, something that we
Speaker 6: want and we want clarity on on Capitol Hills. So
Speaker 6: that's why I think whoever made a recommendation like this
Speaker 6: was not wise.
Speaker 5: It hasn't been a distraction from markets, though they pretty
Speaker 5: much shrugged it off. Do you think the markets don't
Speaker 5: view this as real threat to independence?
Speaker 4: That's possible.
Speaker 6: I don't know that it's a threat to independence. I
Speaker 6: think it's a distraction to the work we're trying to
Speaker 6: do here to move the economy forward. To complement the
Speaker 6: big tax changes we made to benefit working families last year,
Speaker 6: we want to do the same thing this year, to
Speaker 6: open up regulatory policy, make it easy, not only just
Speaker 6: to permit the growth of the energy industry in the
Speaker 6: country and the critical minerals. These are goals of the President,
Speaker 6: but we also want to reduce that regulatory burden on
Speaker 6: how's it construction and capital access for the American economy.
Speaker 6: And if we don't have a nominated and confirmed for
Speaker 6: a Reserve chair, that's a distraction to getting that done
Speaker 6: in the right way, and I think it throws the
Speaker 6: President's mission off track.
Speaker 4: That's why I called it a distraction. I'm sticking with it.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this, John,
Speaker 2: I guess not to discuss as Terry Hayes of Pancheepolicy. Terry,
Speaker 2: it goes with us saying that Iran's non Venezuela. The
Speaker 2: population is three times the size. I think the population
Speaker 2: of Tehran is equal to New York City. It has
Speaker 2: very very complicated power structures. How difficult is it going
Speaker 2: to be if the President chooses to intervene.
Speaker 7: It's going to be very difficult, John, and good morning.
Speaker 7: But what you have to look at here is a
Speaker 7: very different geopolitical situation and Iran than in Venezuela. What
Speaker 7: I mean by that is kind of what I think
Speaker 7: of as the concert of nations in the Middle East,
Speaker 7: most of which want not only want a more peaceful region,
Speaker 7: but they want and want Ran marginalized, but they want
Speaker 7: that done without dramatically escalating tensions in the region.
Speaker 4: That's a difficult locked pick.
Speaker 7: But the President needs to bring those folks along, just
Speaker 7: as he has in the Israeli Gaza matter over the
Speaker 7: past few years. And you know, just contrasts that with
Speaker 7: the Venezuelan situation, which is very different.
Speaker 5: Terry, will he have the support of Congress if he
Speaker 5: were to intervene in Iran?
Speaker 4: That's a very good question.
Speaker 7: It's a bit and it's a better question, uh, after
Speaker 7: the after the Venezuelan vote earlier this week. All White
Speaker 7: Houses do things well or badly at any given time.
Speaker 7: One of the things that this White House is doing
Speaker 7: badly right now is bringing Congress along with it on
Speaker 7: a lot of different fronts. And you know, the warning
Speaker 7: shot on Venezuela really is I think a confirmation of
Speaker 7: my view there. You know, they need to do a
Speaker 7: lot more spade work with Iran and geopolitically overall before
Speaker 7: they make a move here to try to either have
Speaker 7: the active support of Congress or of neutralized opposition.
Speaker 5: This is just the second week into twenty twenty six.
Speaker 5: We've already seen the President take action in Venezuela. How
Speaker 5: does he convey these moves to the American public in
Speaker 5: a midterm election year. How does he go out and
Speaker 5: say this is part of quote America.
Speaker 7: First, well, he should and you know, and then the
Speaker 7: easiest messaging there is something along the lines of, you know,
Speaker 7: the you know, we're keeping national securities, economic security, we're
Speaker 7: trying to keep America safe abroad in order to make
Speaker 7: America safer at home, that sort of thing. And but
Speaker 7: beyond that, you know, he needs he needs to get
Speaker 7: much more contextual with the American public and start really
Speaker 7: explaining the stakes of a lot of things a lot more.
Speaker 7: He's got a lot of division in his coalition right now.
Speaker 7: I wouldn't say a lot of them are actively opposing him,
Speaker 7: but there's a lot of people who have colder feet
Speaker 7: than they did a few months ago. He's going to
Speaker 7: need to warm that up. The same, of course, exists
Speaker 7: with domestic policy, but he's really going to need to
Speaker 7: start having people understand what the stakes are of his
Speaker 7: part of his base gets that, part of it doesn't terry.
Speaker 1: What the stakes are includes who the friends are and
Speaker 1: who the enemies are. Do you think that it's clear
Speaker 1: which international allies have the loudest voice when it comes
Speaker 1: to talking with the President right now.
Speaker 4: Do I think it's clear?
Speaker 6: No.
Speaker 7: I think there's there's an awful lot of folks who
Speaker 7: are who are jockeying for attention, and you know, just
Speaker 7: some extent, that's the way the president likes it. I mean,
Speaker 7: if you've got people swirling around you, kind of spoken
Speaker 7: wheel style, it increases your freedom of maneuver, and that
Speaker 7: fundamentally is what Trump wants. He doesn't want just the
Speaker 7: ability to act. The ability to act implies the freedom
Speaker 7: to maneuver. So a lot of his strategic ambiguity, as
Speaker 7: Tyler put it, is designed to achieve exactly that. So,
Speaker 7: you know, the more he's got competition for his ear,
Speaker 7: and the more he's got competition for potential geopolitical goals.
Speaker 4: I think that bit frankly, the.
Speaker 7: Better he likes it, that makes it more difficult to
Speaker 7: translate into into clarity for the American public. But that's
Speaker 7: a chance he's willing to take right now, judging by
Speaker 7: how he operates.
Speaker 1: Terry, something we've been talking about over the past couple
Speaker 1: of weeks, and i'd love your thoughts on that. How
Speaker 1: do you understand sort of the flurry of different orders
Speaker 1: coming out of the White House, the different folk focuses,
Speaker 1: whether it's geopolitical or whether it's domestic. That to be
Speaker 1: whip sawing markets and whipsawing Capital Hill.
Speaker 4: Well, I think he I think what.
Speaker 7: Markets see is a lot of different a lot of
Speaker 7: different smoke being thrown up for a lot of different reasons.
Speaker 7: I mean, there's the strategic ambiguity on Iran we've already
Speaker 7: talked about, for example, same thing applies on a lot
Speaker 7: of domestic things.
Speaker 4: You know.
Speaker 7: The credit card matter is a perfect example of this.
Speaker 7: I feel like I've been talking about swipe fees literally forever.
Speaker 7: I think the first time it came up was twenty
Speaker 7: years ago. But a lot of that's being put up, frankly,
Speaker 7: as part of the affordability pitch to appeal to his
Speaker 7: independent base, the one that helped him get elected in
Speaker 7: twenty twenty four. I'm not pooh poohing this by saying
Speaker 7: it's just about politics. Trump Trump has a history of
Speaker 7: following through, but people need to understand that. You know,
Speaker 7: he's going to do everything he can do to goose
Speaker 7: his own coalition to keep Republicans in the majority in
Speaker 7: the House in the Senate next year. Part of that
Speaker 7: is making sure that he's flooding the zone and we're
Speaker 7: kind of even stealing ideas from the other side and
Speaker 7: kind of relegating that to niche stuff, whereas everything else
Speaker 7: sought to be about him and ought to be about
Speaker 7: goosing his vote. I hope that helps.
Speaker 2: This is the Bloomberg SURVANAHS podcast, bringing you the best
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