1 00:00:02,529 --> 00:00:04,210 Speaker 1: Bloomberg Audio Studios. 2 00:00:04,670 --> 00:00:05,390 Speaker 2: Podcasts. 3 00:00:05,690 --> 00:00:07,070 Speaker 3: Radio. News. 4 00:00:09,170 --> 00:00:12,050 Speaker 4: This is a breaking news update from Bloomberg. 5 00:00:12,910 --> 00:00:17,320 Speaker 1: Instant reaction and analysis from our 3,000 journalists and analysts 6 00:00:17,540 --> 00:00:18,360 Speaker 1: around the world. 7 00:00:19,790 --> 00:00:22,630 Speaker 5: The October job numbers are crossing the Bloomberg terminal and 8 00:00:22,670 --> 00:00:24,850 Speaker 5: they show improvement from September. 9 00:00:25,170 --> 00:00:25,630 Speaker 6: The U.S. 10 00:00:25,750 --> 00:00:31,660 Speaker 5: Economy adding 165,000 jobs in October, more than double what 11 00:00:31,700 --> 00:00:34,640 Speaker 5: Wall Street was estimating at 70,000 and much more than 12 00:00:34,659 --> 00:00:38,339 Speaker 5: the 29,000 we saw in September. And we also saw 13 00:00:38,380 --> 00:00:42,479 Speaker 5: the jobless rate now slipping to 4.1% versus estimates for 4.2%. 14 00:00:42,479 --> 00:00:45,010 Speaker 5: It was at 4.2% the prior month. Now, this jobs number, 15 00:00:45,159 --> 00:00:46,990 Speaker 5: this gain of 165,000 in line with the highest estimates 16 00:00:47,010 --> 00:00:56,690 Speaker 5: and above what most see. As the so-called break-even rate, 17 00:00:56,720 --> 00:00:59,320 Speaker 5: that's the pace of job gains needed every month to 18 00:00:59,380 --> 00:01:02,320 Speaker 5: keep the unemployment rate stable. Taking a look at the 19 00:01:02,360 --> 00:01:05,940 Speaker 5: inflation component of this report, we are talking workers' wages, 20 00:01:06,180 --> 00:01:09,970 Speaker 5: average hourly earnings month over month up four-tenths of a percent, 21 00:01:10,030 --> 00:01:12,170 Speaker 5: about a tenth of a percent better than expected and 22 00:01:12,230 --> 00:01:14,530 Speaker 5: much better. Then the tenth of a percent rise we 23 00:01:14,569 --> 00:01:18,350 Speaker 5: saw in September. Year over year, average hourly earnings up 24 00:01:18,390 --> 00:01:22,030 Speaker 5: better than expected. 3.1% versus the 3% we saw in 25 00:01:22,090 --> 00:01:27,160 Speaker 5: September and the 2.9% estimate. The labor force participation rate 26 00:01:27,760 --> 00:01:29,940 Speaker 5: also improving a bit. 61.9% versus estimates for 61.8%. The 27 00:01:29,959 --> 00:01:31,020 Speaker 5: underemployment rate increasing. 28 00:01:35,050 --> 00:01:35,390 Speaker 2: At 7.9%. 29 00:01:35,390 --> 00:01:39,910 Speaker 5: Estimates were for 7.6%. Just want to point out today's 30 00:01:39,970 --> 00:01:43,200 Speaker 5: report follows recent jobless claims data showing companies are holding 31 00:01:43,280 --> 00:01:45,640 Speaker 5: on to workers. So it appears this is still a 32 00:01:45,760 --> 00:01:49,360 Speaker 5: low fire, but maybe a more higher environment. Once again, 33 00:01:49,400 --> 00:01:53,140 Speaker 5: the unemployment rate At 4.1% for the month of October, 34 00:01:53,190 --> 00:01:57,670 Speaker 5: we added a much more than expected 165,000 jobs. That 35 00:01:57,750 --> 00:01:59,790 Speaker 5: is a look at the October jobs report. 36 00:01:59,830 --> 00:02:00,830 Speaker 2: Back over to you guys. 37 00:02:00,890 --> 00:02:02,390 Speaker 4: She just like lights out. 38 00:02:02,450 --> 00:02:02,779 Speaker 2: Nailed it. 39 00:02:02,790 --> 00:02:06,230 Speaker 7: You have no idea the skill of what Karen Moscow 40 00:02:06,590 --> 00:02:11,090 Speaker 7: and Alexis Christophers does. This gives Dr. Sam time to 41 00:02:11,150 --> 00:02:14,850 Speaker 7: look at this data. Claudia, I see two Americas. I 42 00:02:14,950 --> 00:02:22,920 Speaker 7: see a boom with revisions 249,000. boom number on nonfarm payrolls, 43 00:02:23,500 --> 00:02:27,669 Speaker 7: and I see the green span underemployment rate going from 44 00:02:27,710 --> 00:02:34,429 Speaker 7: a 7.6% up to 7.9%. Is this a fully employed America? 45 00:02:35,030 --> 00:02:40,030 Speaker 8: The labor market has had this really uncomfortable, curious balance 46 00:02:40,250 --> 00:02:44,209 Speaker 8: of the low hiring, but the low firing, right? So 47 00:02:44,590 --> 00:02:47,660 Speaker 8: it really still is a difficult environment if you are 48 00:02:47,690 --> 00:02:50,720 Speaker 8: looking for a job or a better job to get that. 49 00:02:51,200 --> 00:02:53,360 Speaker 8: But people are holding on to their jobs, which is 50 00:02:53,400 --> 00:02:55,280 Speaker 8: a good thing, right? The layoff rate is low. It's 51 00:02:55,380 --> 00:02:58,480 Speaker 8: very unusual. So I think it does give this view 52 00:02:58,500 --> 00:03:01,600 Speaker 8: of like there's two two Americas in the labor market. 53 00:03:01,740 --> 00:03:03,119 Speaker 6: And there's some truth to that. 54 00:03:04,139 --> 00:03:06,200 Speaker 8: But we do like to see, I mean, the payroll 55 00:03:06,240 --> 00:03:07,990 Speaker 8: numbers surprise to the upside. 56 00:03:08,660 --> 00:03:10,070 Speaker 6: As I said before, we've. 57 00:03:09,930 --> 00:03:12,750 Speaker 8: Seen some big surprises like this earlier in the year, 58 00:03:13,110 --> 00:03:15,690 Speaker 8: and then they ebb away. So I've got to see 59 00:03:15,730 --> 00:03:18,410 Speaker 8: some months of this before I'm really convinced we're seeing 60 00:03:18,450 --> 00:03:20,070 Speaker 8: an acceleration of the labor market. 61 00:03:20,130 --> 00:03:21,639 Speaker 6: But good news is good news. 62 00:03:21,740 --> 00:03:24,859 Speaker 8: And the unemployment rate The overall unemployment rate did tick 63 00:03:24,900 --> 00:03:27,100 Speaker 8: down with participation going up. 64 00:03:27,740 --> 00:03:30,520 Speaker 6: So, like, that's a good setup. So we're going to 65 00:03:30,540 --> 00:03:32,980 Speaker 6: take the good where we have it. But we have 66 00:03:33,000 --> 00:03:34,080 Speaker 6: been head faked. 67 00:03:33,840 --> 00:03:37,260 Speaker 8: By this labor market in terms of acceleration several times 68 00:03:37,300 --> 00:03:37,700 Speaker 8: this year. 69 00:03:37,720 --> 00:03:40,740 Speaker 4: Paul, am I right? Kevin Hassett of the White House will. 70 00:03:40,600 --> 00:03:41,450 Speaker 2: Be with Bloomberg? 71 00:03:41,670 --> 00:03:42,930 Speaker 4: Yes. Nine-ish? Yes. 72 00:03:43,090 --> 00:03:43,690 Speaker 2: We're going to have him. 73 00:03:43,730 --> 00:03:43,910 Speaker 7: Okay. 74 00:03:44,510 --> 00:03:45,210 Speaker 2: Get his thoughts here. 75 00:03:45,250 --> 00:03:46,530 Speaker 4: Paul Sweeney with Claudia Sam. 76 00:03:46,790 --> 00:03:49,490 Speaker 2: Average hourly earnings on a year-over-year basis, Claudia Sam, came 77 00:03:49,510 --> 00:03:51,960 Speaker 2: in a little bit better than expected at 3.1%. Are 78 00:03:52,480 --> 00:03:55,680 Speaker 2: you surprised that number's not even higher given how tight 79 00:03:56,180 --> 00:03:57,920 Speaker 2: the labor market is? Why can't I walk into my 80 00:03:57,940 --> 00:03:59,960 Speaker 2: boss and say I need 10% increase if you want 81 00:03:59,980 --> 00:04:00,290 Speaker 2: to keep me? 82 00:04:00,680 --> 00:04:02,500 Speaker 8: Well, I think the boss will be like, good luck 83 00:04:02,990 --> 00:04:05,290 Speaker 8: in that job. I mean, that's the thing right now. 84 00:04:05,330 --> 00:04:06,250 Speaker 8: And I watch really. 85 00:04:06,090 --> 00:04:08,210 Speaker 6: Carefully the quit rate. So we did get an update 86 00:04:08,250 --> 00:04:09,130 Speaker 6: on Jolt's this week. 87 00:04:09,730 --> 00:04:11,670 Speaker 8: And there was a little tick up, but it's still 88 00:04:11,710 --> 00:04:12,370 Speaker 8: pretty low. 89 00:04:12,530 --> 00:04:15,060 Speaker 6: And that's a good sign of the bargaining power. 90 00:04:15,120 --> 00:04:17,760 Speaker 8: If workers are out there quitting to get better jobs, 91 00:04:18,200 --> 00:04:20,440 Speaker 8: that's when they have the leverage for the higher wages. 92 00:04:20,930 --> 00:04:23,310 Speaker 6: It just does— it' s just not there right now. 93 00:04:23,630 --> 00:04:26,440 Speaker 8: If you don't have hiring being strong, the workers just 94 00:04:26,520 --> 00:04:28,180 Speaker 8: don't have that ability to bargain. 95 00:04:28,200 --> 00:04:32,520 Speaker 7: Can we like do like— there' s no recession talk, but can 96 00:04:32,540 --> 00:04:37,070 Speaker 7: we do like Claudia Sam wheelhouse here? Sure. Claudia Sam wheelhouse, folks. 97 00:04:37,550 --> 00:04:42,100 Speaker 7: She's famed for looking at how an economy slows. Let's 98 00:04:42,130 --> 00:04:44,619 Speaker 7: go to the opposite way, Claudia. So when you studied 99 00:04:44,660 --> 00:04:49,580 Speaker 7: at Michigan, you never, never thought about a sustained 6% 100 00:04:49,580 --> 00:04:53,840 Speaker 7: or more nominal GDP. How do you presume with our 101 00:04:53,880 --> 00:04:59,750 Speaker 7: new politics that we will bring in this boom economy constructively? 102 00:05:01,500 --> 00:05:04,599 Speaker 8: So, you know, there's a lot of pieces to that. 103 00:05:04,720 --> 00:05:08,620 Speaker 8: I do think going back to the question about immigration policy, 104 00:05:08,730 --> 00:05:11,890 Speaker 8: labor force policy, like I'm less looking at, you know, 105 00:05:11,930 --> 00:05:14,230 Speaker 8: the downturn in the labor market, but I am worried 106 00:05:14,270 --> 00:05:16,770 Speaker 8: about some of the structural pieces of the labor market. 107 00:05:16,830 --> 00:05:19,050 Speaker 8: And I think without a growing labor force, it's going 108 00:05:19,070 --> 00:05:22,260 Speaker 8: to be hard to to really consistently have. 109 00:05:22,100 --> 00:05:23,159 Speaker 6: Those GDP gains. 110 00:05:23,300 --> 00:05:25,980 Speaker 8: I mean, I am optimistic about some of our technology 111 00:05:26,000 --> 00:05:29,500 Speaker 8: improvements on the horizon, but that is really tough to 112 00:05:29,720 --> 00:05:32,919 Speaker 8: string together quarter after quarter, year after year, improvements in 113 00:05:32,960 --> 00:05:35,980 Speaker 8: productivity growth, right? And so I think you've got to 114 00:05:36,000 --> 00:05:38,980 Speaker 8: have a multi-prompt approach in terms of the policy. Hanging 115 00:05:39,040 --> 00:05:41,440 Speaker 8: our hats on AI is not the way forward. to 116 00:05:41,480 --> 00:05:44,810 Speaker 8: go in terms of really wanting to keep those strong 117 00:05:44,850 --> 00:05:47,310 Speaker 8: growth numbers. I think there are some structural pieces on 118 00:05:47,350 --> 00:05:49,890 Speaker 8: the labor market that deserve attention and may very well 119 00:05:49,930 --> 00:05:53,279 Speaker 8: get some attention given the election results this week. 120 00:05:54,040 --> 00:05:58,420 Speaker 2: Labor force participation rate, again, a little bit better, 61.9%. 121 00:05:58,560 --> 00:06:01,560 Speaker 2: Where's a healthy number? Like, what should we be looking for? 122 00:06:01,600 --> 00:06:03,960 Speaker 2: Is that a good number, 61.9? Should it be higher 123 00:06:03,990 --> 00:06:04,349 Speaker 2: or lower? 124 00:06:04,370 --> 00:06:06,110 Speaker 6: Yeah, I mean, it is hard. 125 00:06:06,120 --> 00:06:09,130 Speaker 8: You know, work is onerous, right? We don't want 100. 126 00:06:09,130 --> 00:06:10,770 Speaker 8: People should have a choice as to what they do. 127 00:06:10,850 --> 00:06:14,330 Speaker 8: I think given the fact that we have so much 128 00:06:14,410 --> 00:06:17,730 Speaker 8: aging of the workforce. probably keeping a focus on. 129 00:06:17,830 --> 00:06:18,670 Speaker 4: The prime age. 130 00:06:18,730 --> 00:06:20,490 Speaker 6: So yeah, no, I'd say, well. 131 00:06:20,529 --> 00:06:22,630 Speaker 8: You know, people should get to retire at some point 132 00:06:22,670 --> 00:06:26,640 Speaker 8: if they want to. But I think looking at the 133 00:06:26,680 --> 00:06:31,860 Speaker 8: prime age statistics, which have been really pretty solid, but 134 00:06:31,880 --> 00:06:35,190 Speaker 8: there's always, you know, there's the separation of like, we 135 00:06:35,200 --> 00:06:37,470 Speaker 8: look month to month, quarter to quarter at the labor market. 136 00:06:37,490 --> 00:06:38,750 Speaker 6: And then there's the big picture. 137 00:06:38,770 --> 00:06:41,670 Speaker 8: I mean, we've had some demographic groups that for decades 138 00:06:41,690 --> 00:06:45,730 Speaker 8: have been puzzling, like men, prime age working, used to 139 00:06:45,910 --> 00:06:48,490 Speaker 8: all work, and there's been declines over many decades. So 140 00:06:48,510 --> 00:06:52,330 Speaker 8: then there's questions about why is that happening? But that's 141 00:06:52,370 --> 00:06:55,479 Speaker 8: not this near-term discussion. So I don't have a ready 142 00:06:55,570 --> 00:06:57,979 Speaker 8: answer of what's the right number because it depends on 143 00:06:58,040 --> 00:06:59,260 Speaker 8: people and their lives. 144 00:06:59,560 --> 00:07:06,180 Speaker 4: Spearheading our labor coverage, I should say. Claudia's with us. 145 00:07:06,240 --> 00:07:08,380 Speaker 4: Thank you. Thank you so much this morning. 146 00:07:08,400 --> 00:07:11,490 Speaker 7: Look for her publications and, of course, wonderful out on 147 00:07:11,550 --> 00:07:14,770 Speaker 7: Twitter and particularly on LinkedIn as well. With a bigger, 148 00:07:14,810 --> 00:07:18,440 Speaker 7: broader picture, futures up 10, NASDAQ up where it was 149 00:07:18,480 --> 00:07:23,500 Speaker 7: pretty much level 1.3%, but yields higher today, 10-year yield 150 00:07:23,520 --> 00:07:26,780 Speaker 7: by a solid four basis points as well. Constance Hunter 151 00:07:27,160 --> 00:07:30,280 Speaker 7: joins us, Chief Economist, EI at you and her work 152 00:07:30,320 --> 00:07:35,440 Speaker 7: with Julia Coronado, Macro Policy Perspectives as well. Constance, I 153 00:07:35,500 --> 00:07:39,990 Speaker 7: look at this and it's clearly a fully employed America, 154 00:07:40,830 --> 00:07:44,070 Speaker 7: Link it to what we observed in the election. I 155 00:07:44,150 --> 00:07:47,980 Speaker 7: see two Americas, and there's an America that isn't in 156 00:07:48,040 --> 00:07:49,660 Speaker 7: the jobs report this morning. 157 00:07:49,980 --> 00:07:52,100 Speaker 3: Well, if we look at the voter turnout, a lot 158 00:07:52,120 --> 00:07:56,420 Speaker 3: of the voters probably had jobs, right? So I wouldn't 159 00:07:56,480 --> 00:07:59,770 Speaker 3: say that this was an election determined by the unemployed. 160 00:07:59,830 --> 00:08:02,990 Speaker 3: We have a very low unemployment rate. And of course, 161 00:08:03,070 --> 00:08:07,370 Speaker 3: remember that 33% of the population are made up of independents, 162 00:08:07,630 --> 00:08:08,970 Speaker 3: and those are the swing votes. 163 00:08:09,330 --> 00:08:11,150 Speaker 6: That put the sort of moderate. 164 00:08:10,800 --> 00:08:17,740 Speaker 3: Democrats in states like Iowa and Nevada and Texas into office, 165 00:08:18,240 --> 00:08:19,040 Speaker 3: even in Ohio. 166 00:08:19,100 --> 00:08:19,620 Speaker 6: I would say. 167 00:08:20,780 --> 00:08:25,200 Speaker 3: So I think that this election is a reflection of 168 00:08:26,180 --> 00:08:29,280 Speaker 3: what's happening in foreign policy with Iran and possibly Ukraine, 169 00:08:29,640 --> 00:08:30,800 Speaker 3: what's happening with inflation. 170 00:08:30,840 --> 00:08:32,000 Speaker 6: That was the number one issue. 171 00:08:33,500 --> 00:08:37,140 Speaker 3: And it doesn't necessarily mean that that the economy isn't 172 00:08:37,280 --> 00:08:41,970 Speaker 3: churning and working underneath. It's just people are still feeling 173 00:08:41,990 --> 00:08:45,210 Speaker 3: the effects of the price, the level changes we had 174 00:08:45,230 --> 00:08:48,850 Speaker 3: during covid. Then they didn't dissipate. Then we've had another 175 00:08:48,929 --> 00:08:51,970 Speaker 3: step up in levels. And and that is what people 176 00:08:52,210 --> 00:08:52,790 Speaker 3: voted about. 177 00:08:53,070 --> 00:08:54,729 Speaker 2: So that kind of goes to the issue. Again, we 178 00:08:54,750 --> 00:08:57,650 Speaker 2: look at average hourly earnings on an annualized basis, constants 179 00:08:57,690 --> 00:09:00,570 Speaker 2: of three point one percent. That's better than then forecast 180 00:09:00,590 --> 00:09:03,380 Speaker 2: better than last period. We had an upper revision for 181 00:09:03,410 --> 00:09:06,939 Speaker 2: last period, actually, to 3.2%. But that's just not keeping 182 00:09:07,000 --> 00:09:11,280 Speaker 2: pace with inflation for most people. Something's got to give there. 183 00:09:12,460 --> 00:09:14,360 Speaker 1: Well, it's a double-edged sword, right? 184 00:09:15,340 --> 00:09:18,020 Speaker 3: Certainly what we don't want to see is we don't 185 00:09:18,040 --> 00:09:21,770 Speaker 3: want to see runaway inflation that's demand pull. And so 186 00:09:21,950 --> 00:09:24,710 Speaker 3: what we see here is a lot of costs push inflation, 187 00:09:25,170 --> 00:09:27,390 Speaker 3: and the Fed is trying to curb that. 188 00:09:27,870 --> 00:09:29,710 Speaker 1: You had Beth Hammack and Barkin. 189 00:09:29,429 --> 00:09:32,080 Speaker 3: Coming out yesterday, Barkin, who will be a voter in 2027, 190 00:09:32,070 --> 00:09:35,530 Speaker 3: saying the Fed should raise rates. And what I'm looking 191 00:09:35,590 --> 00:09:38,349 Speaker 3: at in this labor market is sort of how durable 192 00:09:38,570 --> 00:09:40,400 Speaker 3: is it? And when we look at things like the 193 00:09:40,440 --> 00:09:42,640 Speaker 3: diffusion index, we had a solid increase there. 194 00:09:43,059 --> 00:09:44,960 Speaker 6: And one of the things that I've been watching. 195 00:09:44,620 --> 00:09:48,679 Speaker 3: This year is the mix of cyclical versus non-cyclical jobs. 196 00:09:48,720 --> 00:09:52,420 Speaker 6: And now let's remember the big concern when we were 197 00:09:52,500 --> 00:09:53,130 Speaker 6: coming off the. 198 00:09:53,110 --> 00:09:56,430 Speaker 3: COVID highs, that we were still having high headline prints, 199 00:09:56,809 --> 00:09:59,950 Speaker 3: but it was dominated by health care and government. 200 00:09:59,630 --> 00:10:02,260 Speaker 6: And social assistance workers, non-cyclical jobs. 201 00:10:02,760 --> 00:10:05,839 Speaker 3: Now we're in a situation, really starting this year, where 202 00:10:05,860 --> 00:10:09,780 Speaker 3: we can see a surge in cyclical jobs, and cyclical 203 00:10:10,020 --> 00:10:14,510 Speaker 3: jobs are dominating the hiring, that suggests that there's some 204 00:10:14,650 --> 00:10:18,370 Speaker 3: underlying economic momentum. Now, it may take time for people 205 00:10:18,410 --> 00:10:22,310 Speaker 3: to feel that, but it's certainly there in the data. 206 00:10:22,750 --> 00:10:26,229 Speaker 2: So given the labor backdrop, what's your view of the 207 00:10:26,270 --> 00:10:29,260 Speaker 2: consumer going forward here? It's kind of, boy, if you 208 00:10:29,280 --> 00:10:32,050 Speaker 2: have a job, you're in That's a big, big part 209 00:10:32,090 --> 00:10:34,170 Speaker 2: of the game here. Is the consumer OK? 210 00:10:34,190 --> 00:10:36,010 Speaker 9: I think the consumer is OK. 211 00:10:36,050 --> 00:10:37,650 Speaker 3: And a lot of it is going to depend what 212 00:10:37,730 --> 00:10:41,209 Speaker 3: does happen, for example, with the Iran war and with 213 00:10:41,250 --> 00:10:44,729 Speaker 3: gas prices. You know, we're getting oil out of the 214 00:10:44,770 --> 00:10:49,579 Speaker 3: Gulf because we are engaged in escort operations. But it's 215 00:10:49,650 --> 00:10:52,380 Speaker 3: very expensive to get that oil out. And so the market, 216 00:10:52,420 --> 00:10:55,260 Speaker 3: the oil market, is pricing in all risks around that. 217 00:10:55,860 --> 00:11:00,110 Speaker 3: If we see a resolution to the Iran war, and 218 00:11:00,150 --> 00:11:01,240 Speaker 3: you see a really. 219 00:11:01,040 --> 00:11:04,520 Speaker 6: Durable a structure. 220 00:11:04,860 --> 00:11:07,300 Speaker 3: Built around getting oil and gas out of the Gulf 221 00:11:07,340 --> 00:11:09,500 Speaker 3: of Hormuz, or the Strait of Hormuz, then you're going 222 00:11:09,559 --> 00:11:11,800 Speaker 3: to see oil prices come down. That's going to give 223 00:11:11,840 --> 00:11:13,880 Speaker 3: immediate relief to people's pocketbooks. 224 00:11:14,220 --> 00:11:16,360 Speaker 7: Constance, what are you going to write about this weekend? Folks, 225 00:11:16,400 --> 00:11:19,350 Speaker 7: commercial free for you for the next 20 minutes. Christina 226 00:11:19,380 --> 00:11:23,650 Speaker 7: Katmany coming up with Invesco, but right now, Constance Hunter, EIU. 227 00:11:23,790 --> 00:11:25,530 Speaker 7: What are you going to write about this weekend? I mean, 228 00:11:25,790 --> 00:11:29,210 Speaker 7: you have such a broad mandate. I'm just fascinated. What's 229 00:11:29,250 --> 00:11:30,550 Speaker 7: the Constance Hunter theme? 230 00:11:31,410 --> 00:11:34,250 Speaker 3: Well, I'm looking at really what is happening with this 231 00:11:34,330 --> 00:11:38,170 Speaker 3: global AI sell-off, right? So you had Hong Kong down. 232 00:11:38,260 --> 00:11:41,260 Speaker 3: You had Taiwan down. Taiwan is engaged now in pricekeeping 233 00:11:41,320 --> 00:11:45,480 Speaker 3: operations to stabilize that market. Where are those fault lines? 234 00:11:45,980 --> 00:11:50,079 Speaker 3: We still have Japan engaged in this massive carry trade, 235 00:11:50,800 --> 00:11:52,900 Speaker 3: invested in equities around the world. 236 00:11:53,420 --> 00:11:54,780 Speaker 1: Are we at a tipping point there? 237 00:11:55,840 --> 00:11:58,770 Speaker 3: What is happening with regard to economic policy that the 238 00:11:58,809 --> 00:12:01,910 Speaker 3: Democrats are going to be able to enact? Obviously, this 239 00:12:01,950 --> 00:12:04,330 Speaker 3: comes down to the state level, and one of the 240 00:12:04,370 --> 00:12:06,870 Speaker 3: big themes that the market has been focusing on over 241 00:12:06,910 --> 00:12:10,110 Speaker 3: the last several days is this sort of curb of AI. 242 00:12:12,530 --> 00:12:13,770 Speaker 6: Build-out. 243 00:12:14,890 --> 00:12:16,929 Speaker 3: Really, the thing is, to what extent is that happening, 244 00:12:16,970 --> 00:12:18,910 Speaker 3: and are we talking about an end, or are we 245 00:12:18,950 --> 00:12:21,670 Speaker 3: talking about some more sensible policies that make it more 246 00:12:21,750 --> 00:12:23,660 Speaker 3: palpable to the general public? 247 00:12:23,720 --> 00:12:23,860 Speaker 7: Right. 248 00:12:24,809 --> 00:12:27,929 Speaker 3: Public is really against the AI build-out, and we don't 249 00:12:28,030 --> 00:12:30,570 Speaker 3: do anything about it. Then we would have such significant 250 00:12:30,630 --> 00:12:33,429 Speaker 3: backlash down the road. So I'll be looking at all 251 00:12:33,470 --> 00:12:36,530 Speaker 3: of this and really thinking about what are the economic 252 00:12:36,650 --> 00:12:39,250 Speaker 3: vectors we need to look at going forward. But if 253 00:12:39,330 --> 00:12:42,380 Speaker 3: I were looking at just this jobs report, and not 254 00:12:42,429 --> 00:12:45,640 Speaker 3: thinking about the shock of the election, I would say 255 00:12:45,679 --> 00:12:49,560 Speaker 3: that we are on solid footing based on this jobs report. 256 00:12:49,940 --> 00:12:53,239 Speaker 7: Thank you so much. Excuse me. Constance Hunter with us 257 00:12:53,280 --> 00:12:57,050 Speaker 7: here from EIU. The last time Christina Kampany came in, 258 00:12:57,090 --> 00:13:00,010 Speaker 7: for whatever breaking news reason, we were so rude. 259 00:13:00,030 --> 00:13:01,390 Speaker 4: You were here for. 260 00:13:03,350 --> 00:13:06,329 Speaker 7: Two questions or something, and Vesto called up from Atlanta 261 00:13:06,390 --> 00:13:07,150 Speaker 7: and said, how can. 262 00:13:07,050 --> 00:13:08,390 Speaker 4: You treat her like that? 263 00:13:08,809 --> 00:13:12,870 Speaker 7: So for a long conversation this morning, Christina Katmany on 264 00:13:12,910 --> 00:13:17,270 Speaker 7: this crazy global bond market and what it says to us. 265 00:13:17,400 --> 00:13:19,840 Speaker 4: Were you in college at Villanova with Jalen? 266 00:13:20,760 --> 00:13:22,360 Speaker 1: I wish I could say I was. He's a number 267 00:13:22,380 --> 00:13:26,410 Speaker 1: of years younger than me. But we have cheered him on. 268 00:13:26,940 --> 00:13:28,680 Speaker 2: They're just over in Rome? Yes. 269 00:13:29,040 --> 00:13:29,780 Speaker 1: Yes, they were. 270 00:13:29,800 --> 00:13:31,059 Speaker 4: Did that work out? Did you go? 271 00:13:31,400 --> 00:13:32,500 Speaker 1: We did not end up going. 272 00:13:32,570 --> 00:13:36,470 Speaker 10: I was actually in Rome with a Villanova crew in May. 273 00:13:36,610 --> 00:13:39,729 Speaker 10: But I feel like with the marathon and Halloween and 274 00:13:39,770 --> 00:13:41,989 Speaker 10: the little kids, stayed stateside this time. 275 00:13:42,150 --> 00:13:44,160 Speaker 4: We're dying on yield this morning. 276 00:13:44,340 --> 00:13:46,500 Speaker 7: What an honor to go from Priya Misra to you, 277 00:13:46,520 --> 00:13:50,720 Speaker 7: Ira Jersey, coming up. later with Tony Crescenzi as well. 278 00:13:50,800 --> 00:13:53,770 Speaker 7: As I said, in this blur that we're all in, 279 00:13:54,190 --> 00:13:56,750 Speaker 7: what will you write about or think about through the 280 00:13:56,790 --> 00:13:58,290 Speaker 7: weekend on Yield? 281 00:13:58,700 --> 00:14:01,339 Speaker 10: Well, it's interesting because we were even saying coming in today, like... 282 00:14:02,070 --> 00:14:03,290 Speaker 10: It's payroll Friday. 283 00:14:03,429 --> 00:14:04,929 Speaker 2: I completely forgot. 284 00:14:04,950 --> 00:14:08,890 Speaker 10: And you're like, the market is most not focused on payrolls. 285 00:14:09,580 --> 00:14:12,860 Speaker 10: And again, that's a big number. Those are big revisions. 286 00:14:13,440 --> 00:14:15,480 Speaker 10: Even if you look at the three-month, I was looking, 287 00:14:15,500 --> 00:14:17,809 Speaker 10: there are three-month moving average now for payrolls is 119. 288 00:14:17,780 --> 00:14:21,229 Speaker 10: The six-month is only 73%. There's sort of like big gaps, 289 00:14:21,670 --> 00:14:24,030 Speaker 10: but I don't think that's where the market's focused at all. 290 00:14:24,090 --> 00:14:26,470 Speaker 10: I mean, it's been such a roller coaster week between 291 00:14:26,930 --> 00:14:30,170 Speaker 10: elections and changes in oil prices and what's going on 292 00:14:30,190 --> 00:14:33,150 Speaker 10: in the Middle East and obviously equity markets and AI. 293 00:14:33,230 --> 00:14:34,750 Speaker 1: And it's just this confluence. 294 00:14:34,770 --> 00:14:37,710 Speaker 10: Everyone's like, where are we and what is the driving 295 00:14:37,750 --> 00:14:39,480 Speaker 10: path forward? And it feels like there's a lot of 296 00:14:39,530 --> 00:14:42,120 Speaker 10: like fear and agita in the market for sure. 297 00:14:42,340 --> 00:14:45,000 Speaker 2: How did the debt markets change? perform over the last 298 00:14:45,620 --> 00:14:48,650 Speaker 2: few days? Because even during all this craziness, Meta came 299 00:14:48,670 --> 00:14:51,370 Speaker 2: to market again with your bond offering. So, I mean, 300 00:14:51,570 --> 00:14:53,910 Speaker 2: how's the bond market these days? 301 00:14:54,290 --> 00:14:57,570 Speaker 1: We've actually, again, we sold off. 302 00:14:57,790 --> 00:14:59,740 Speaker 10: I mean, it's been a drift to higher yields across 303 00:15:00,740 --> 00:15:03,480 Speaker 10: the board across the curve across the globe all year. 304 00:15:04,200 --> 00:15:06,280 Speaker 10: And we kind of got the peak five or six 305 00:15:06,320 --> 00:15:09,490 Speaker 10: weeks ago. And for five or six weeks, we've retraced 40, 306 00:15:09,490 --> 00:15:12,610 Speaker 10: 50 basis points kind of in every point across the curve. 307 00:15:12,970 --> 00:15:16,050 Speaker 10: It feels a bit overdone. I think some of that 308 00:15:16,090 --> 00:15:19,210 Speaker 10: was positioning. I think some of that, again, is this 309 00:15:19,330 --> 00:15:22,750 Speaker 10: fear about AI. But I'm not sure that the underlying 310 00:15:22,850 --> 00:15:25,270 Speaker 10: has changed so much. We also, I think, are still 311 00:15:25,310 --> 00:15:28,660 Speaker 10: grappling with this Fed that's doesn't want to have forward 312 00:15:28,700 --> 00:15:30,910 Speaker 10: guidance from the chair, but the rest of the committee 313 00:15:30,930 --> 00:15:33,370 Speaker 10: is giving forward guidance, and we have very different messaging 314 00:15:33,410 --> 00:15:38,239 Speaker 10: meeting to meeting. I think there are people out there 315 00:15:38,300 --> 00:15:41,980 Speaker 10: that think there are real recession fears and this is 316 00:15:42,020 --> 00:15:42,820 Speaker 10: the end of AI. 317 00:15:43,120 --> 00:15:44,300 Speaker 1: We're a little skeptical of that. 318 00:15:44,440 --> 00:15:46,500 Speaker 10: I think the base case is still that the Fed 319 00:15:46,560 --> 00:15:48,040 Speaker 10: is going to go in December. 320 00:15:48,100 --> 00:15:50,020 Speaker 1: And if you didn't get that. 321 00:15:49,940 --> 00:15:54,430 Speaker 10: Communication ahead of the last inflation prints, you would have 322 00:15:54,470 --> 00:15:57,430 Speaker 10: expected them to go in October as well. 323 00:15:58,120 --> 00:16:01,700 Speaker 2: All right. So, again, the Fed probably is going to 324 00:16:01,780 --> 00:16:04,100 Speaker 2: do what it does in markets pricing in certainly one 325 00:16:04,140 --> 00:16:06,870 Speaker 2: for December, maybe one or two more for next year. But, again, 326 00:16:06,880 --> 00:16:09,230 Speaker 2: I kind of go back to all the craziness this 327 00:16:09,250 --> 00:16:14,130 Speaker 2: week about AI and about what it means for AI. Again, 328 00:16:14,210 --> 00:16:16,730 Speaker 2: Meta just came out with this mega euro bond offering. 329 00:16:16,750 --> 00:16:18,090 Speaker 2: So it kind of feels like the market. 330 00:16:18,110 --> 00:16:18,820 Speaker 4: Did you buy it? 331 00:16:20,340 --> 00:16:22,880 Speaker 10: We have been a bit cautious on some of the 332 00:16:22,900 --> 00:16:26,280 Speaker 10: hyperscaler issuance, so we were not involved. But I think 333 00:16:26,620 --> 00:16:29,750 Speaker 10: the market is also grappling with there are these massive 334 00:16:29,770 --> 00:16:34,050 Speaker 10: CapEx numbers out to 27, 28, 29. 335 00:16:34,050 --> 00:16:35,190 Speaker 1: And so I think. 336 00:16:35,050 --> 00:16:38,560 Speaker 10: It's a question of does this blue sweep, does that 337 00:16:38,640 --> 00:16:42,420 Speaker 10: change the speed of all of this buildup? 338 00:16:42,440 --> 00:16:43,100 Speaker 1: Does it change that? 339 00:16:43,420 --> 00:16:46,000 Speaker 4: I love that. It's about the speed. It's about the 340 00:16:46,040 --> 00:16:47,420 Speaker 4: first and second derivatives. 341 00:16:47,500 --> 00:16:48,160 Speaker 1: I think it is. 342 00:16:48,220 --> 00:16:52,200 Speaker 10: I mean, we have had just exponential growth. And CapEx 343 00:16:52,320 --> 00:16:55,070 Speaker 10: has been what has driven U.S. growth this year, right? 344 00:16:55,090 --> 00:16:58,430 Speaker 10: That's not a deniable thing. It has been in the 345 00:16:58,470 --> 00:17:05,610 Speaker 10: driver's seat. But I think people are still credit spreads 346 00:17:06,050 --> 00:17:09,649 Speaker 10: have moved but are still tight by historical standards. I 347 00:17:09,690 --> 00:17:13,280 Speaker 10: think People are being choosy and they know that because 348 00:17:13,300 --> 00:17:15,100 Speaker 10: of this pipeline, there's a lot more to come. 349 00:17:15,320 --> 00:17:17,780 Speaker 1: But I mean, deals are still being taken down for sure. 350 00:17:17,900 --> 00:17:18,560 Speaker 4: Absolutely. 351 00:17:18,600 --> 00:17:22,139 Speaker 2: Focus this week here was on U.S. domestic elections. You 352 00:17:22,160 --> 00:17:26,450 Speaker 2: guys think globally. So what's your non-U.S. call these days? 353 00:17:27,350 --> 00:17:31,189 Speaker 1: So I think FX is a little trickier. When we 354 00:17:31,210 --> 00:17:32,149 Speaker 1: take a step back, we. 355 00:17:34,590 --> 00:17:37,510 Speaker 10: Still are a bit more negative, the dollar. But that 356 00:17:37,550 --> 00:17:40,210 Speaker 10: has been a bit challenging. You haven't had participation from Asia. 357 00:17:40,310 --> 00:17:44,570 Speaker 10: I think that is, or dollar Asia. And I think 358 00:17:44,609 --> 00:17:47,209 Speaker 10: you need to see dollar Asia resume lower. So the 359 00:17:47,290 --> 00:17:51,190 Speaker 10: likes of the yen finally participating and strengthening. Corona coming 360 00:17:51,230 --> 00:17:54,540 Speaker 10: back to the table. Some of those to see a 361 00:17:54,600 --> 00:17:58,760 Speaker 10: broader FX rally, weaker dollar. 362 00:17:58,780 --> 00:17:59,700 Speaker 6: Okay. 363 00:18:01,040 --> 00:18:05,419 Speaker 10: And then globally, again, we still say we've rallied now 40, 364 00:18:05,420 --> 00:18:07,560 Speaker 10: 50 basis points in the U.S. The rally has been 365 00:18:07,720 --> 00:18:09,940 Speaker 10: driven by the– or has been led by the U.S. 366 00:18:10,000 --> 00:18:11,520 Speaker 1: More than the rest of the world. 367 00:18:11,800 --> 00:18:14,480 Speaker 10: So we do still think that there's value in some– 368 00:18:14,740 --> 00:18:18,110 Speaker 10: we think Europe has probably more value. It's a kind 369 00:18:18,130 --> 00:18:20,410 Speaker 10: of weaker underlying growth system. 370 00:18:20,430 --> 00:18:24,659 Speaker 1: And– In EMs, too. I mean, Brazil, obviously. Was that 371 00:18:24,740 --> 00:18:25,320 Speaker 1: only this week? 372 00:18:25,380 --> 00:18:25,680 Speaker 11: I know. 373 00:18:25,700 --> 00:18:27,280 Speaker 10: The second round election, maybe that was last week. 374 00:18:27,320 --> 00:18:32,160 Speaker 1: I don't know. It's been a whirlwind. It's been nuts. 375 00:18:33,060 --> 00:18:34,399 Speaker 1: October was a long month. 376 00:18:35,060 --> 00:18:38,920 Speaker 4: Rob Waldner of Invesco wore a bow tie. Oh, yeah? 377 00:18:39,880 --> 00:18:40,520 Speaker 4: I'm sorry. 378 00:18:41,180 --> 00:18:43,619 Speaker 1: He had to match your style. 379 00:18:43,820 --> 00:18:47,500 Speaker 7: It was amazing. Rob Waldner driving all the research at Invesco. 380 00:18:47,520 --> 00:18:50,030 Speaker 7: So let's summarize this for mere mortals. I mean, you 381 00:18:50,119 --> 00:18:55,449 Speaker 7: and Paul are like pro-discussion. In this uproar, if I 382 00:18:55,670 --> 00:18:59,290 Speaker 7: have fear of missing out in the Christina Katmany world, 383 00:19:00,290 --> 00:19:03,949 Speaker 7: am I buying credit? That's a Paul Sweeney question. Am 384 00:19:04,030 --> 00:19:08,600 Speaker 7: I extending duration? How do I express fear of missing 385 00:19:08,800 --> 00:19:12,169 Speaker 7: out Because to me, what no one's looking for is 386 00:19:12,250 --> 00:19:13,350 Speaker 7: price up, yield down. 387 00:19:13,770 --> 00:19:14,629 Speaker 1: Yeah, so it's funny. 388 00:19:14,690 --> 00:19:17,970 Speaker 10: Our latest big right on our whiteboard in the office 389 00:19:18,170 --> 00:19:21,180 Speaker 10: says less FOMO. So we're not doing fear of missing out. 390 00:19:22,240 --> 00:19:26,340 Speaker 10: But I think a global fixed income portfolio still makes sense. 391 00:19:26,580 --> 00:19:28,379 Speaker 10: We don't have to just be concentrated in the U.S. 392 00:19:28,420 --> 00:19:32,149 Speaker 10: We're coming off. 10, 15 years of U.S. exceptionalism, we 393 00:19:32,210 --> 00:19:34,010 Speaker 10: still think there's a case for. 394 00:19:33,660 --> 00:19:34,760 Speaker 6: Global fixed income. 395 00:19:35,040 --> 00:19:36,300 Speaker 4: Can you buy French paper? 396 00:19:37,300 --> 00:19:41,360 Speaker 1: Not before the election, no. There's no need. We need 397 00:19:41,400 --> 00:19:42,840 Speaker 1: to be wise about our choices. 398 00:19:42,859 --> 00:19:44,670 Speaker 9: I think, again. 399 00:19:44,890 --> 00:19:46,350 Speaker 1: I love harassing her. 400 00:19:46,530 --> 00:19:48,050 Speaker 4: Thank you, Cy, for that question. 401 00:19:48,070 --> 00:19:49,230 Speaker 2: It was very rude. 402 00:19:49,270 --> 00:19:49,770 Speaker 1: We have another. 403 00:19:49,900 --> 00:19:52,820 Speaker 10: six months before the election in France. I think it 404 00:19:52,859 --> 00:19:56,200 Speaker 10: will be noisy. Will there be opportunities to play? Yes. 405 00:19:56,820 --> 00:19:59,720 Speaker 10: Are European government spreads exceptionally tight? 406 00:20:00,070 --> 00:20:00,609 Speaker 1: Absolutely. 407 00:20:00,640 --> 00:20:04,669 Speaker 4: So what that comment was is so Rob Waldner hears 408 00:20:04,710 --> 00:20:08,850 Speaker 4: her say that, so she gets a junket. to Paris 409 00:20:08,910 --> 00:20:10,090 Speaker 4: to do research, Bob. 410 00:20:10,210 --> 00:20:11,310 Speaker 2: Post-election, absolutely. 411 00:20:11,369 --> 00:20:13,669 Speaker 1: I'm heading to Atlanta next week. Don't get me in trouble. 412 00:20:14,690 --> 00:20:18,320 Speaker 2: Christina, in your portfolio, how do you guard against... AI 413 00:20:18,380 --> 00:20:21,580 Speaker 2: concentration here, because it's not just owning an Invesco bond 414 00:20:21,600 --> 00:20:24,080 Speaker 2: or something, but boy, if you own a utility bond 415 00:20:24,580 --> 00:20:26,040 Speaker 2: in Virginia, that might be. 416 00:20:26,300 --> 00:20:26,619 Speaker 4: Yeah. 417 00:20:26,830 --> 00:20:27,090 Speaker 3: Yeah. 418 00:20:27,380 --> 00:20:29,650 Speaker 10: It really, again, I think it goes back to that 419 00:20:29,690 --> 00:20:31,510 Speaker 10: has been the driving story and the driving force of 420 00:20:31,530 --> 00:20:32,630 Speaker 10: the U S economy this year. 421 00:20:32,690 --> 00:20:35,190 Speaker 1: So it has been, it's been utilities. 422 00:20:35,310 --> 00:20:38,560 Speaker 10: It's been the chips. It's been the hyperscalers. It, It 423 00:20:38,740 --> 00:20:41,879 Speaker 10: feeds into all of these things. We have been, and 424 00:20:42,380 --> 00:20:44,870 Speaker 10: you guys know this from our conversations, a bit more 425 00:20:44,900 --> 00:20:48,930 Speaker 10: cautious of our three levers, FX credit, foreign exchange credit, 426 00:20:49,010 --> 00:20:51,670 Speaker 10: or rates. We've been the most cautious on credit just 427 00:20:51,750 --> 00:20:54,159 Speaker 10: because of how historically. 428 00:20:53,660 --> 00:20:56,180 Speaker 1: Tight we are. I think that still kind of remains 429 00:20:56,240 --> 00:20:56,720 Speaker 1: our bias. 430 00:20:57,080 --> 00:21:00,430 Speaker 10: I think- There's still not really a case that you 431 00:21:00,470 --> 00:21:03,590 Speaker 10: need to extend out the curve to duration yet. 432 00:21:03,930 --> 00:21:06,489 Speaker 7: One question from Stephanie Ross. People are like, let's get 433 00:21:06,530 --> 00:21:08,330 Speaker 7: to Stephanie. I'm like, okay, I got one more to 434 00:21:08,350 --> 00:21:14,090 Speaker 7: Christina here this morning. I can't emphasize enough the hysteria 435 00:21:14,230 --> 00:21:15,790 Speaker 7: around hedge funds, bonds. 436 00:21:16,490 --> 00:21:16,820 Speaker 4: What is it? 437 00:21:16,890 --> 00:21:17,410 Speaker 7: Coreweave? 438 00:21:17,880 --> 00:21:18,680 Speaker 2: Yeah. 439 00:21:19,320 --> 00:21:22,120 Speaker 4: It's like a 16%, 15% yield or whatever. 440 00:21:22,760 --> 00:21:27,290 Speaker 7: How should our listeners and viewers separate the noise of 441 00:21:27,330 --> 00:21:32,050 Speaker 7: AI garbage paper from the real world of capturing a coupon? 442 00:21:32,910 --> 00:21:33,530 Speaker 1: Look, I think. 443 00:21:34,609 --> 00:21:38,470 Speaker 10: like anything else, like with stocks, with bonds, especially as 444 00:21:38,510 --> 00:21:41,149 Speaker 10: an individual investor, to go be chasing the one name, 445 00:21:41,210 --> 00:21:44,930 Speaker 10: the highest yields, like there's obviously all inherent risk in that. 446 00:21:44,990 --> 00:21:50,619 Speaker 10: I think broad portfolios, diversification, you want exposure to the theme. 447 00:21:50,740 --> 00:21:52,899 Speaker 10: And I think when we take a step back, the 448 00:21:52,960 --> 00:21:56,160 Speaker 10: theme of AI is because of the election or because 449 00:21:56,260 --> 00:21:58,880 Speaker 10: of a wobble in the equity markets is not going. 450 00:21:58,720 --> 00:21:59,360 Speaker 6: Away, right? 451 00:21:59,780 --> 00:22:01,219 Speaker 1: The pace may slow down. 452 00:22:01,240 --> 00:22:01,310 Speaker 7: The. 453 00:22:02,869 --> 00:22:06,050 Speaker 10: Way it's implemented may change, but I don't know. Even 454 00:22:06,090 --> 00:22:07,830 Speaker 10: we look at our own world and how your job 455 00:22:07,869 --> 00:22:10,260 Speaker 10: has changed in the last six months and what we're 456 00:22:10,280 --> 00:22:12,899 Speaker 10: trying to incorporate. That's not stopping on the switch of 457 00:22:12,980 --> 00:22:13,800 Speaker 10: a dime, right? 458 00:22:14,150 --> 00:22:17,480 Speaker 4: Christina, thank you. Christina Kemeny with Invesco here this morning. 459 00:22:18,220 --> 00:22:19,340 Speaker 4: Greatly appreciate it. 460 00:22:19,619 --> 00:22:21,640 Speaker 7: As we go to Stephanie Roth here, we say good 461 00:22:21,700 --> 00:22:25,899 Speaker 7: morning across America. I guess it's a fully employed America. 462 00:22:26,310 --> 00:22:30,610 Speaker 7: Changing nonfarm payrolls, two-month revision. Even I could do the math. $ 249, 000, 463 00:22:30,490 --> 00:22:38,859 Speaker 7: a big 165 number, plus $ 84, 000. A nice revision upwards. 464 00:22:38,880 --> 00:22:43,219 Speaker 7: A lot of other data which bent price down, yield up. 465 00:22:43,280 --> 00:22:47,780 Speaker 7: The 10-year yield now three basis points. Two-year yield explodes. 466 00:22:48,220 --> 00:22:51,890 Speaker 7: Higher yield by six basis points. Stephanie Roth to look 467 00:22:51,910 --> 00:22:55,830 Speaker 7: at the economics of the moment. Stephanie, can you program 468 00:22:56,090 --> 00:23:00,150 Speaker 7: out with this jobs report, with the inflation reports, with 469 00:23:00,170 --> 00:23:04,830 Speaker 7: the data, can you program out a continued buoyant nominal 470 00:23:04,890 --> 00:23:05,530 Speaker 7: GDP rate? 471 00:23:06,690 --> 00:23:08,129 Speaker 9: Yeah, I think that's the environment that we're in. 472 00:23:08,220 --> 00:23:10,080 Speaker 11: I think it will be slightly less than where we've 473 00:23:10,100 --> 00:23:12,880 Speaker 11: been running. You're probably talking more like a 4.5% nominal 474 00:23:12,900 --> 00:23:16,310 Speaker 11: GDP for 27 as opposed to something that's notably higher. 475 00:23:16,070 --> 00:23:16,710 Speaker 6: As where we've been. 476 00:23:16,730 --> 00:23:20,690 Speaker 11: But it's still a robust economy and one that's incrementally 477 00:23:20,710 --> 00:23:23,810 Speaker 11: going to be driven by real growth as opposed to inflation. 478 00:23:24,190 --> 00:23:24,600 Speaker 6: This year. 479 00:23:25,270 --> 00:23:27,080 Speaker 11: you know, the mix was a bit different because inflation 480 00:23:27,119 --> 00:23:29,419 Speaker 11: was just running so hot for a variety of reasons. 481 00:23:29,460 --> 00:23:32,740 Speaker 11: But like overall, the economy's buoyant and it's not just AI. 482 00:23:33,540 --> 00:23:37,120 Speaker 11: The economy's running on firm footing outside of just the 483 00:23:37,160 --> 00:23:38,480 Speaker 11: sort of the AI CapEx space. 484 00:23:39,160 --> 00:23:41,719 Speaker 2: So again, the change in non-farm payroll data we got 485 00:23:41,760 --> 00:23:44,020 Speaker 2: today says, you know, the U.S. labor economy is in 486 00:23:44,040 --> 00:23:44,610 Speaker 2: pretty good shape. 487 00:23:44,619 --> 00:23:45,139 Speaker 4: All right. 488 00:23:45,160 --> 00:23:47,690 Speaker 2: If that's the case, let's turn to inflation here. What's 489 00:23:47,710 --> 00:23:50,830 Speaker 2: your inflation call for 2027? Because I've got, you know, 490 00:23:50,950 --> 00:23:53,190 Speaker 2: energy prices whipping all around here based upon whatever the 491 00:23:53,490 --> 00:23:54,139 Speaker 2: latest tweet is. 492 00:23:55,200 --> 00:23:57,090 Speaker 11: Yeah, well, when you think about sort of forecasting into 493 00:23:57,109 --> 00:23:58,450 Speaker 11: the future, energy prices are. 494 00:23:58,400 --> 00:24:00,330 Speaker 9: Not going to repeat. I certainly hope they don't. 495 00:24:00,510 --> 00:24:03,790 Speaker 11: Repeat what happened in this year in terms of sort 496 00:24:03,810 --> 00:24:07,290 Speaker 11: of year-over-year growth rate. So you're naturally going to get 497 00:24:07,330 --> 00:24:09,889 Speaker 11: disinflationary pressures from oil prices, even if. 498 00:24:09,890 --> 00:24:12,010 Speaker 9: They stay where they are. And there's good reason to 499 00:24:12,050 --> 00:24:12,550 Speaker 9: believe that. 500 00:24:13,420 --> 00:24:17,230 Speaker 11: Oil prices may sustainably come down a little bit. Therefore, 501 00:24:17,250 --> 00:24:19,690 Speaker 11: you're going to get disinflation on a year-over-year basis from 502 00:24:19,730 --> 00:24:23,050 Speaker 11: the things that were elevated this year. So anything related 503 00:24:23,109 --> 00:24:28,310 Speaker 11: to sort of energy prices, anything from airfares, you're going 504 00:24:28,330 --> 00:24:28,730 Speaker 11: to have the. 505 00:24:28,690 --> 00:24:30,620 Speaker 9: Tariffs roll off the data. 506 00:24:31,560 --> 00:24:34,340 Speaker 11: All of these factors that kept inflation elevated this year 507 00:24:34,359 --> 00:24:37,640 Speaker 11: because they were largely one-off will fade into next year, 508 00:24:37,660 --> 00:24:40,830 Speaker 11: and we're looking for about 2.5% inflation, which is certainly 509 00:24:40,850 --> 00:24:42,310 Speaker 11: higher than what the Fed would like, but something that's 510 00:24:42,330 --> 00:24:43,050 Speaker 11: a lot more tolerable. 511 00:24:43,270 --> 00:24:46,330 Speaker 4: Stephanie Roth goes right to where I want to go. 512 00:24:46,390 --> 00:24:50,210 Speaker 7: It's like the budget lab at Yale, Natasha and Martha 513 00:24:50,250 --> 00:24:53,850 Speaker 7: and all that. Stephanie, do you frame out an amendment 514 00:24:53,990 --> 00:24:58,730 Speaker 7: to our tariff policy given the political bombshell two days ago? 515 00:25:00,490 --> 00:25:02,010 Speaker 9: Tariff policy is largely unchanged. 516 00:25:02,869 --> 00:25:03,090 Speaker 4: Really? 517 00:25:03,109 --> 00:25:05,830 Speaker 11: The revenues are kind of too high to really make 518 00:25:05,869 --> 00:25:07,050 Speaker 11: any adjustments from that perspective. 519 00:25:07,070 --> 00:25:08,030 Speaker 9: So tariffs are going to remain. 520 00:25:08,050 --> 00:25:09,250 Speaker 4: Come on. Come on. Stop. 521 00:25:09,330 --> 00:25:12,070 Speaker 7: We're addicted to tariffs at a fiscal basis. 522 00:25:13,840 --> 00:25:14,970 Speaker 9: Kind of at this point. 523 00:25:15,020 --> 00:25:16,730 Speaker 11: And I don't even think even if we have a 524 00:25:17,040 --> 00:25:20,840 Speaker 11: Democrat in, you know, when in 2028, I'm not even 525 00:25:20,960 --> 00:25:22,960 Speaker 11: sure they're going to bring down tariffs all that much, 526 00:25:23,000 --> 00:25:24,260 Speaker 11: maybe on a targeted basis. 527 00:25:24,300 --> 00:25:27,270 Speaker 9: But My expectation is the tariffs. 528 00:25:27,030 --> 00:25:30,330 Speaker 11: Will remain elevated for quite some time because from a 529 00:25:30,390 --> 00:25:33,930 Speaker 11: deficit perspective, it's not really attractive to trim them so much. 530 00:25:34,040 --> 00:25:36,820 Speaker 7: I believe my recollection is the president of the United 531 00:25:36,900 --> 00:25:41,720 Speaker 7: States touched on this with our John Micklethwaite in conversation. OK. 532 00:25:41,980 --> 00:25:45,910 Speaker 4: Once the tariffs are in. They're like an addiction to politicians. 533 00:25:46,190 --> 00:25:46,750 Speaker 2: Yeah, I guess so. 534 00:25:46,950 --> 00:25:47,989 Speaker 4: You and I are paying them. 535 00:25:48,250 --> 00:25:48,490 Speaker 7: Yeah. 536 00:25:48,550 --> 00:25:49,970 Speaker 4: Look at the tariff on your Vespa. 537 00:25:50,070 --> 00:25:50,370 Speaker 3: I know. 538 00:25:50,510 --> 00:25:51,330 Speaker 4: That was unthinkable. 539 00:25:51,369 --> 00:25:55,560 Speaker 2: That was unthinkable. So, Stephanie, given this backdrop here of 540 00:25:55,600 --> 00:25:58,679 Speaker 2: a pretty firm labor market, a market where in 2070 541 00:25:58,680 --> 00:26:02,139 Speaker 2: you should see inflation come down somewhat, what does that 542 00:26:02,180 --> 00:26:03,310 Speaker 2: mean for our Federal Reserve then? 543 00:26:04,690 --> 00:26:07,230 Speaker 9: So base cases, they still go in December. 544 00:26:07,250 --> 00:26:10,609 Speaker 11: They get that markets have been pricing the odds down 545 00:26:10,630 --> 00:26:13,250 Speaker 11: the last couple of days, just given the concerns around AI. 546 00:26:13,270 --> 00:26:15,640 Speaker 11: Provided that the financial markets kind of hold up well 547 00:26:15,680 --> 00:26:19,340 Speaker 11: enough between now and the December meeting, they're very likely 548 00:26:19,359 --> 00:26:20,040 Speaker 11: to go in December. 549 00:26:20,260 --> 00:26:22,600 Speaker 9: They certainly communicated that they want to hike again. 550 00:26:22,640 --> 00:26:26,270 Speaker 11: The data have been firm. It's not accelerating a bit. 551 00:26:27,180 --> 00:26:28,740 Speaker 11: And then we think they'll probably go once more at 552 00:26:28,840 --> 00:26:30,679 Speaker 11: the beginning of next year in Q3, probably at the 553 00:26:30,700 --> 00:26:32,899 Speaker 11: March meeting. And then at that point, you'll see the 554 00:26:32,940 --> 00:26:36,290 Speaker 11: inflationary pressure subside a bit. You might see activity cool 555 00:26:36,310 --> 00:26:37,310 Speaker 11: down modestly. 556 00:26:37,450 --> 00:26:39,010 Speaker 9: And then the Fed can just kind of wait and see. 557 00:26:39,050 --> 00:26:40,970 Speaker 11: And then they'll be kind of on hold for quite 558 00:26:40,990 --> 00:26:41,370 Speaker 11: some time. 559 00:26:42,470 --> 00:26:45,270 Speaker 2: So, again, that's a pretty interesting backdrop because that sounds 560 00:26:45,330 --> 00:26:49,030 Speaker 2: like things are generally in pretty good shape. How do 561 00:26:49,050 --> 00:26:51,440 Speaker 2: we think about it from the consumer level? Because, again, 562 00:26:52,300 --> 00:26:55,260 Speaker 2: we have the K-shaped economy, but we don't see it 563 00:26:55,280 --> 00:26:58,330 Speaker 2: in consumer spending. Consumer spending continues to hold up pretty well. 564 00:26:59,990 --> 00:27:00,870 Speaker 9: Haste for a lot of this year. 565 00:27:00,890 --> 00:27:03,940 Speaker 11: The consumer has held up really well, even though the 566 00:27:03,960 --> 00:27:07,220 Speaker 11: bottom end of the consumer has certainly been a lot 567 00:27:07,540 --> 00:27:11,260 Speaker 11: more challenged than everybody else. But because the strength has 568 00:27:11,280 --> 00:27:17,290 Speaker 11: been persistent across the spenders that spend more, it's been 569 00:27:17,470 --> 00:27:18,929 Speaker 11: masking any softness. 570 00:27:18,650 --> 00:27:20,770 Speaker 9: That's been happening at the bottom. That will probably just continue. 571 00:27:21,109 --> 00:27:23,850 Speaker 11: We're likely to see, especially given the data that we 572 00:27:23,869 --> 00:27:26,130 Speaker 11: got today, is just further confirmation that the labor market 573 00:27:26,170 --> 00:27:29,420 Speaker 11: is good. you're likely to see spending continue to remain 574 00:27:29,480 --> 00:27:33,980 Speaker 11: fairly robust. It's largely a function of nominal income growth, 575 00:27:34,020 --> 00:27:35,820 Speaker 11: which is tied to the labor market. How much are 576 00:27:36,140 --> 00:27:38,520 Speaker 11: people working? How much are they getting paid? All of 577 00:27:38,580 --> 00:27:42,080 Speaker 11: those trends are moving in a positive direction. Energy prices, 578 00:27:42,100 --> 00:27:43,980 Speaker 11: you know, the margin might come down a bit, which 579 00:27:44,020 --> 00:27:46,340 Speaker 11: could then fuel a bit of a pickup in consumer 580 00:27:46,359 --> 00:27:47,080 Speaker 11: spending for next year.