WEBVTT - S&P 500 Climbs as Earnings Kick Into High Gear 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.600 --> 0:00:28.040 Joining us. 0:00:28.120 --> 0:00:32.360 Nancyl is our chief global economist, Hyper Sandler. You killed 0:00:32.400 --> 0:00:37.239 it in July about we can't get private enterprise to 0:00:37.560 --> 0:00:41.680 employ people. Has the song changed in the last six months? 0:00:41.720 --> 0:00:42.159 Near term? 0:00:42.280 --> 0:00:44.720 No, employment's going to be on the week side. Companies 0:00:44.760 --> 0:00:48.000 are still really focused on their profit margins, but employments 0:00:48.040 --> 0:00:52.240 a lagging indicator quite quite frankly, the government did crowd 0:00:52.280 --> 0:00:54.680 out employment earlier over the past couple of years, the 0:00:55.160 --> 0:00:59.080 healthcare industry crowded out the private center education, so we're 0:00:59.120 --> 0:00:59.480 kind of. 0:00:59.480 --> 0:01:00.800 Unwhining that right now. 0:01:01.160 --> 0:01:03.840 So that's also a headwind along with the private sector 0:01:03.880 --> 0:01:06.759 still a little bit focused on protecting their profit margins. 0:01:06.800 --> 0:01:07.760 When do we get. 0:01:07.560 --> 0:01:12.240 Back to job formation that doesn't involve healthcare workers and bartenders. 0:01:12.880 --> 0:01:18.080 Probably in mid twenty mid twenty twenty six. You're seeing 0:01:18.120 --> 0:01:21.720 green shoots for the labor markets. You have profits improving 0:01:21.760 --> 0:01:23.959 across the board, both s and p. Five hundred s 0:01:24.000 --> 0:01:26.840 and P. Six hundred Russell two thousand, So you're getting 0:01:26.840 --> 0:01:29.640 the breadth of now profits companies are willing to spend. 0:01:29.680 --> 0:01:32.520 They always first spend on technology to further improve their 0:01:32.560 --> 0:01:36.080 productivity and their profitability. And then you get employment. Employment 0:01:36.160 --> 0:01:38.480 is a lagging indicator, so you're setting the stage for 0:01:38.560 --> 0:01:41.280 employment as you move into the second third quarter of 0:01:41.319 --> 0:01:44.560 twenty twenty six, and you are getting some indications that 0:01:44.640 --> 0:01:49.280 it is incrementally improving. Small businesses have stopped firing, which 0:01:49.320 --> 0:01:52.520 is again the first step in getting job job hiring. 0:01:52.560 --> 0:01:54.400 As we go through twenty twenty six. 0:01:54.480 --> 0:01:58.520 We've had a little bit of hindsight here, Nancy with tears. 0:01:59.040 --> 0:02:00.000 What happened with tears? 0:02:00.040 --> 0:02:02.240 How did they kind of impact the economy? 0:02:02.240 --> 0:02:02.720 How are they? 0:02:02.800 --> 0:02:04.440 How are they impacting the economy? 0:02:04.600 --> 0:02:07.920 So first they are attacks. Tariffs are attacks. How much 0:02:08.560 --> 0:02:10.880 as a share of a share of GDP you're about 0:02:10.919 --> 0:02:13.639 over ten percent as a hit, up from two percent 0:02:13.760 --> 0:02:15.680 at the beginning of the year, And it's really a 0:02:15.720 --> 0:02:19.640 regressive tax on that lower end consumer, on smaller on 0:02:19.760 --> 0:02:24.480 smaller businesses. There have been some offsets where some durable 0:02:24.480 --> 0:02:27.239 good prices have gone up, other service prices have gone down. 0:02:27.280 --> 0:02:30.359 Some food prices have gone down, but net they have 0:02:30.720 --> 0:02:34.200 kept inflation. They have kept inflation sticky, sticky, sticky this. 0:02:34.200 --> 0:02:37.800 Year going forward here, I mean, I'm looking at some 0:02:37.880 --> 0:02:40.960 of the early retail sales we got from Black Friday, 0:02:41.320 --> 0:02:43.720 Cyber Monday, whatever it's called, and so on. Seems like 0:02:43.760 --> 0:02:45.960 the consumer is still okay out there. 0:02:45.960 --> 0:02:47.200 How do you view the consumer? 0:02:47.360 --> 0:02:51.720 So a consumer out of a slump, consumer spending always 0:02:51.720 --> 0:02:53.880 turns up. I went back and looked at all cycles 0:02:53.880 --> 0:02:57.720 since nineteen sixty. Consumer spending always turns up before jobs 0:02:57.720 --> 0:03:01.600 turn up. Why they're highly sticklical. Interests are down, banks 0:03:01.639 --> 0:03:06.119 are willing to make loans, they're refinancing their credit card debt, 0:03:06.160 --> 0:03:09.200 they're using helock, going from something over twenty percent to 0:03:09.280 --> 0:03:12.080 something less than less than ten percent. So it's not 0:03:12.320 --> 0:03:15.360 jobs that actually drive consumer spending. It's it's the FED. 0:03:15.600 --> 0:03:17.959 And then as you go into twenty twenty six, we're 0:03:17.960 --> 0:03:20.720 going to get a big booster shot to disposable income 0:03:20.880 --> 0:03:23.080 from these tax from these tax refunds. 0:03:23.440 --> 0:03:26.240 Nancy Lazar, where this folks across the nation, We welcome 0:03:26.360 --> 0:03:28.920 all of you finishing out the year. Are we drowning 0:03:28.919 --> 0:03:32.519 in outlooks? Sam row has like forty seven outlooks to read. 0:03:32.600 --> 0:03:35.120 Just today he's in charge of reading outlooks. We listen 0:03:35.200 --> 0:03:39.440 to Sam row Ro look for him on substack as well. 0:03:39.440 --> 0:03:42.080 But when Nancy Lazar, we have someone steeped in the 0:03:42.120 --> 0:03:45.800 linkage here of a nation's history into our economy. I 0:03:45.840 --> 0:03:49.480 look at ken Burns's magisterial American Revolution. There's a little 0:03:49.480 --> 0:03:52.800 bit of grievance there which they highlight versus just simply 0:03:53.120 --> 0:03:55.960 you know, Philadelphia against the King is a little more 0:03:55.960 --> 0:03:59.600 complicated than that. The Element Trust Barometer this year the 0:03:59.680 --> 0:04:03.400 high level of grievance towards government, business and the rich. 0:04:03.920 --> 0:04:08.840 And it's his daily carrievance in agony within the news media. 0:04:09.200 --> 0:04:12.400 You fought that for decades. Yeah, is it morning in 0:04:12.440 --> 0:04:14.560 America and we just don't know it. Oh. 0:04:14.600 --> 0:04:17.520 I think that's been unfolding for fifteen years. We've called 0:04:17.520 --> 0:04:20.680 it the US manufacturing Renaissance started back in twenty ten 0:04:20.960 --> 0:04:23.760 Middle America as our favorite emerging market. 0:04:24.320 --> 0:04:25.880 You're seeing it certainly. 0:04:25.760 --> 0:04:29.359 Within unemployment rates around individual states that are more business 0:04:29.400 --> 0:04:32.680 are more business friendly. So in current policies certainly are 0:04:32.680 --> 0:04:35.960 going to reinforce bringing back blue collar jobs to the 0:04:36.040 --> 0:04:38.159 United States. And so we're quite excited. 0:04:39.000 --> 0:04:39.360 At first. 0:04:39.360 --> 0:04:42.440 The private sector started back in twenty ten, the corporate 0:04:42.520 --> 0:04:45.840 tax cut in seventeen reinforced it, and now full capex 0:04:45.920 --> 0:04:49.960 appreciation is going as another major booster shot for the 0:04:50.040 --> 0:04:54.000 kind of reindustrialization of the of the United States, which 0:04:54.040 --> 0:04:57.480 is a necessary backbone for every economy. I worry about 0:04:57.560 --> 0:05:00.440 Germany Europe in general by allowing I need to come 0:05:00.440 --> 0:05:04.479 in and dump cars. You need a diverse source of 0:05:04.600 --> 0:05:07.080 jobs because we have a diverse labor force and we 0:05:07.120 --> 0:05:11.400 need a big, big consumers need to have a choice 0:05:11.440 --> 0:05:13.359 of what kind of job. Not every wants to go 0:05:13.400 --> 0:05:16.040 to college. Nothing wrong with blue collar jobs, nothing wrong 0:05:16.080 --> 0:05:17.520 with getting. 0:05:17.240 --> 0:05:21.040 Out of nothing wrong with blue collar jobs. Paul missus 0:05:21.120 --> 0:05:25.800 Keenan sists, we're hanging wallpaper. Have you priced out wallpaper hangers? 0:05:25.800 --> 0:05:25.960 Oh? 0:05:26.040 --> 0:05:27.679 Yeah, absolutely, I mean. 0:05:27.560 --> 0:05:29.880 I mean, yeah, there's physicians. It mounts cinide. 0:05:30.040 --> 0:05:31.880 Don't make that Sis's up. 0:05:32.200 --> 0:05:34.800 So, I mean, is the give us a sense of 0:05:34.960 --> 0:05:38.760 kind of the labor market here, because we it seems solid. 0:05:38.839 --> 0:05:42.360 The unemployment rate, the headline number that we all look 0:05:42.400 --> 0:05:44.800 at seems fine, seems kind of full employment ish. 0:05:46.160 --> 0:05:47.320 Is it as strong as it looks? 0:05:47.760 --> 0:05:47.920 Well? 0:05:48.000 --> 0:05:48.560 Under the hood. 0:05:48.600 --> 0:05:50.880 You have had some significant layof announcements here in the 0:05:50.920 --> 0:05:52.760 fourth quarter, and so there is a chance that the 0:05:52.839 --> 0:05:56.039 unemployment rate does grind higher as we go into the 0:05:56.040 --> 0:05:59.480 first part of twenty twenty. Twenty twenty six, maybe around 0:05:59.480 --> 0:06:02.000 five sent some of the leading indicator's point to about 0:06:02.000 --> 0:06:04.840 five percent, But that's historically, as you just said, still 0:06:05.200 --> 0:06:08.800 not high, and the labor market is a lagging indicator, 0:06:09.360 --> 0:06:11.520 and as we go through twenty six, I think it 0:06:11.560 --> 0:06:13.839 is incremently going to start to heal. 0:06:14.320 --> 0:06:15.440 Tell me about it. I'm looking. 0:06:15.839 --> 0:06:18.359 Paul taught me this screen to Wi screens, s and 0:06:18.400 --> 0:06:22.120 P up sixteen percent year to date, nasdak full nastack 0:06:22.520 --> 0:06:26.520 up twenty one percent year to date. I'm going to suggest, Nancy, 0:06:26.600 --> 0:06:30.240 that's on the back of a sprightly nominal GDP. 0:06:30.839 --> 0:06:33.240 I see all sorts of opinions our government shutdown. 0:06:33.320 --> 0:06:35.680 I get that, But do you just assume we can 0:06:35.720 --> 0:06:41.000 sustain four percent plus nominal GDP and at least okay 0:06:41.080 --> 0:06:41.919 real GDP. 0:06:42.440 --> 0:06:45.600 Oh I think to be sure, policy is very supportive 0:06:45.640 --> 0:06:49.400 of growth, and our corporate backbone is very very healthy 0:06:49.400 --> 0:06:52.800 from a productivity perspective. So combination of the FED cutting 0:06:52.880 --> 0:06:54.919 rates one hundred and fifty basis points over the past 0:06:55.000 --> 0:06:58.799 over a year now, banks easing lending standards, very productive 0:06:58.880 --> 0:07:01.800 fiscal policy, not government spending, but tax and centers for 0:07:01.839 --> 0:07:05.640 the private sector to invest, tax refunds for the consumer. 0:07:05.880 --> 0:07:08.080 I think four percent is actually probably on the low side, 0:07:08.240 --> 0:07:09.200 could be stronger than that. 0:07:09.920 --> 0:07:12.040 Corporate earnings they seem to be pretty good. I mean 0:07:12.080 --> 0:07:14.559 the third quarter numbers, the low double digits. Second quarter 0:07:14.640 --> 0:07:15.240 was strong, and. 0:07:15.840 --> 0:07:18.560 Now it's off for cliffs. Yes, terrible, exactly. I have 0:07:18.600 --> 0:07:21.400 no idea where we'll be in January exactly. 0:07:21.040 --> 0:07:23.440 No, no, no, what's happened with the corporate profit backdrop. 0:07:23.480 --> 0:07:25.800 It's definitely broadening out, which is what we needed. It 0:07:25.840 --> 0:07:28.120 was led by you know, the mag seven or eight 0:07:28.240 --> 0:07:31.080 or nine or whatever. And now it's into the smaller 0:07:31.080 --> 0:07:33.280 cap space, which is crucial because that's where the jobs 0:07:33.320 --> 0:07:37.200 are created. And so again with that healing. In with 0:07:38.080 --> 0:07:41.720 with that healing in small cap earnings, you are setting 0:07:41.800 --> 0:07:43.760 the stage for a healthier labor market as you go 0:07:43.760 --> 0:07:44.360 into twenty three. 0:07:44.360 --> 0:07:47.080 The way we rolled this morning at the nine o'clock hour, 0:07:47.280 --> 0:07:51.000 Michael Green will be with us. His sub stack on 0:07:51.080 --> 0:07:55.720 the poverty line created a firestorm across the nation. 0:07:55.920 --> 0:07:57.120 Michael Green will join. 0:07:57.080 --> 0:08:01.080 Us for first extended comments on this, and we start 0:08:01.120 --> 0:08:05.119 here with Nancy Lazar of a Piper Sandler as well. 0:08:05.440 --> 0:08:08.800 Michael Green says, a poverty line, you know, it's constructed, 0:08:08.800 --> 0:08:11.400 it's a formula and all that. But there's a lot 0:08:11.440 --> 0:08:15.120 of Americans struggling at a higher income level than the 0:08:15.160 --> 0:08:15.840 poverty line. 0:08:15.880 --> 0:08:16.400 Do you buy it. 0:08:19.000 --> 0:08:21.800 I'm not that school on his analysis. I think that's 0:08:21.840 --> 0:08:24.720 probably a little bit of an exaggeration. I grew up 0:08:24.720 --> 0:08:26.560 in Middle America. The cost of living there is a 0:08:26.600 --> 0:08:29.840 lot lower than it is in the East Coast. 0:08:30.400 --> 0:08:33.040 He based it on cool Paul helped me Caudwell, New Jersey. 0:08:33.160 --> 0:08:39.199 Yeah sure, yeah, yeah, I would agree that the low 0:08:39.280 --> 0:08:42.040 end consumer has been squeezed. I think that's going to 0:08:42.120 --> 0:08:44.080 change as we go into how is it going to 0:08:44.160 --> 0:08:46.200 change that you are going to see a broader and 0:08:46.240 --> 0:08:49.679 broader footprint of industries hiring, making it possible for people 0:08:49.720 --> 0:08:51.760 with many different skills actually to get a job. 0:08:51.800 --> 0:08:53.960 She's too optimistic to be in the show, Paul, do 0:08:54.080 --> 0:08:56.880 something exactly given that back job, Nancy. 0:08:57.400 --> 0:08:59.280 I guess we're going to hear from our fed next 0:08:59.280 --> 0:09:02.680 week a week from today and presumably the market's discounting 0:09:02.760 --> 0:09:05.960 a rate cut. How aggressive does a FED need to 0:09:06.000 --> 0:09:07.000 be in cutting race? 0:09:07.040 --> 0:09:07.400 Do you think? 0:09:07.520 --> 0:09:09.720 I don't think they need to be aggressive. They probably 0:09:09.720 --> 0:09:12.199 will continue to to cut given the sluggishness in the 0:09:12.280 --> 0:09:16.280 labor market. They classically even when the economy picks up again. 0:09:16.280 --> 0:09:18.360 I went back and looked at all cycles. Even when 0:09:18.360 --> 0:09:20.880 the economy picks up, the FED tends to continue to 0:09:20.880 --> 0:09:23.000 cut rates because they are focused on the labor market, 0:09:23.200 --> 0:09:26.360 and the labor market is a lagging is a lagging indicator. 0:09:26.480 --> 0:09:29.040 I'd be careful in cutting too aggressively, because you do. 0:09:29.080 --> 0:09:31.120 They've already cut one hundred and fifty basis points, and 0:09:31.200 --> 0:09:32.240 you have this fiscal sport. 0:09:32.440 --> 0:09:36.120 Years ago it was Hymen Lazarre. Everybody thought Hymen could 0:09:36.160 --> 0:09:40.160 be chairman. Everybody thought Lazarre could be chairman. Let's take 0:09:40.200 --> 0:09:44.040 that perspective. If you look at Nancy Lazar, now. 0:09:43.880 --> 0:09:46.640 Are you threat? Is there a threat to FED independence? 0:09:47.840 --> 0:09:48.319 I don't think so. 0:09:48.440 --> 0:09:50.719 I think the bond vigilani is going to make sure 0:09:50.760 --> 0:09:52.600 of that. We saw the bond chairman. 0:09:52.440 --> 0:09:54.080 Hasse it's going to be told what to do by 0:09:54.080 --> 0:09:54.880 the bond market. 0:09:55.120 --> 0:09:58.600 I think so. I think last year we It's something 0:09:58.679 --> 0:10:01.280 that happened often in the sixties and seventies. It happened 0:10:01.360 --> 0:10:03.679 last fall when the FED cut too aggressively when inflation 0:10:03.800 --> 0:10:06.840 was still too was still too still too sticky. So yes, 0:10:06.880 --> 0:10:08.640 I think the bond market will be that vigilanti. 0:10:09.160 --> 0:10:13.599 So what's the opportunity here for We're talking about a 0:10:13.600 --> 0:10:15.800 lot of this reshoring and the growth of manufacturing in 0:10:15.800 --> 0:10:18.640 the US. Is that going to fundamentally change our economy 0:10:19.160 --> 0:10:20.800 in any way shape for big time? 0:10:20.840 --> 0:10:21.760 I mean, how is it? 0:10:21.760 --> 0:10:25.520 It's again, you need labor force participation to continue to increase, 0:10:25.520 --> 0:10:27.520 and the only way you do that is through offering 0:10:27.559 --> 0:10:31.079 a broader footprint of industries hiring. With this on shoing, 0:10:31.200 --> 0:10:33.400 you also have a huge job multiplier. It's not just 0:10:33.520 --> 0:10:35.440 people complain to me, well, not many people work in 0:10:35.440 --> 0:10:37.760 factories today. It's like I know that I grew up 0:10:37.760 --> 0:10:40.360 in that environment. It's changed dramatically over the decades. At 0:10:40.360 --> 0:10:42.480 the end of the day, though, it's the multiplier supporting 0:10:42.520 --> 0:10:47.440 these these these these factories, smaller businesses, restaurants, grocery stores. 0:10:47.600 --> 0:10:51.400 Right, the industry we're guilty of this, Lisa is the 0:10:51.400 --> 0:10:53.800 only one who's not. We're based on the three zip 0:10:53.840 --> 0:10:57.439 codes in Manhattan. Lisa has a much broader perspective than that. 0:10:57.840 --> 0:11:01.280 Piper will always in forever be the right northwest. It 0:11:01.280 --> 0:11:04.400 will be Minneapolis as well. What are the fancy people 0:11:04.440 --> 0:11:08.160 in New York City and Washington not get about business 0:11:08.200 --> 0:11:10.800 formation north of the Mayo Clinic. 0:11:11.800 --> 0:11:12.720 That you do need. 0:11:13.640 --> 0:11:15.640 I'm being very redundant here, and I and I and 0:11:15.679 --> 0:11:16.400 I apologize. 0:11:16.559 --> 0:11:17.880 We like that it's so retired. 0:11:18.960 --> 0:11:21.280 It's it's it's that you you do need a diverse 0:11:21.320 --> 0:11:23.720 set of jobs. You don't need to go to college. 0:11:23.760 --> 0:11:27.160 I was tickled Pallunteer announced that they are hired a 0:11:27.200 --> 0:11:30.360 bunch of high school kids to to to to you know, 0:11:30.440 --> 0:11:33.000 check out the work, the work of the work ethic 0:11:33.040 --> 0:11:34.520 and do you want to go to college or do 0:11:34.559 --> 0:11:35.720 you want to stay dose? 0:11:35.840 --> 0:11:38.720 AI help the kids that go. I just don't want 0:11:38.720 --> 0:11:42.880 to take Shakespeare in one O two. AI help those kids. 0:11:42.960 --> 0:11:46.520 Technological innovation has always made education better, from you know, 0:11:47.000 --> 0:11:49.840 using my Bomar brain to eventually going to to Excel, 0:11:49.960 --> 0:11:54.000 et cetera. So absolutely, technological innovation is great for kids 0:11:54.040 --> 0:11:55.640 as long as it's properly used. 0:11:55.880 --> 0:11:56.120 Yep. 0:11:56.200 --> 0:12:00.080 So going forward here, I'm thinking about kind of where 0:12:00.120 --> 0:12:02.720 we need to go here. I mean, it seems like 0:12:03.679 --> 0:12:08.280 this economy is in pretty good shape. Is that your consensus? 0:12:08.360 --> 0:12:10.680 I mean, I know there's some crosswinds and headwinds out there, 0:12:10.720 --> 0:12:12.800 but I mean I'm seeing growth out there. I'm seeing 0:12:12.840 --> 0:12:16.720 and instrates coming down. I'm seeing corporate profits pretty darn steady. 0:12:16.760 --> 0:12:18.520 It seems like it's a pretty solid position. 0:12:18.679 --> 0:12:20.480 I've been listening to people talk about the dollar and 0:12:20.480 --> 0:12:22.000 how the dollar is going to go down, and I 0:12:22.160 --> 0:12:23.960 just tend to disagree with that. I mean, I think 0:12:24.040 --> 0:12:26.839 your growth will be okay in twenty twenty in twenty 0:12:26.840 --> 0:12:29.000 twenty six because of the stimulus that they've put in place, 0:12:29.000 --> 0:12:31.720 both monetary and physical. But if we can get to 0:12:31.760 --> 0:12:33.360 one and a half percent, that's good news. 0:12:33.480 --> 0:12:35.320 We got you here. We've got a breaking headline. 0:12:35.360 --> 0:12:39.400 This was made for Nancy Lazar Automatic data Processing. 0:12:39.600 --> 0:12:43.400 Nobody knows that's like Minnesota May mining and manufacturing. Thanks right, 0:12:43.760 --> 0:12:45.760 Automatic Data Processing. US. 0:12:45.880 --> 0:12:50.400 November private employment falls thirty two thousand. 0:12:50.840 --> 0:12:53.440 The estimate was plus ten thousand. 0:12:54.240 --> 0:12:57.240 What happens emotionally when we go over four point five 0:12:57.280 --> 0:12:58.600 percent unemployment rate? 0:12:58.840 --> 0:13:00.640 Is that critical? Or do I need to get to 0:13:00.679 --> 0:13:01.520 five point zero? 0:13:01.920 --> 0:13:04.400 I think five percent is worth. I think I give 0:13:04.440 --> 0:13:06.280 you earlier that you know something with a fore handle 0:13:06.360 --> 0:13:08.800 is still pretty on the tame side. But we do 0:13:08.840 --> 0:13:10.680 think you could move above above five as you go 0:13:10.720 --> 0:13:14.880 into early twenty early twenty twenty six. But again that 0:13:15.600 --> 0:13:17.440 is a lagging indicator. It's not going to change our 0:13:17.440 --> 0:13:19.840 outlook where we think growth is going to reaccelerate. We're 0:13:19.880 --> 0:13:22.200 two percent GDP growth this year with all the headmans 0:13:22.240 --> 0:13:25.160 that we had, the shutdown the tariffs. Next year it's 0:13:25.200 --> 0:13:28.200 going to be stronger than that given all the stimulus. 0:13:27.960 --> 0:13:30.480 Is I said in my intro, like I don't remember 0:13:30.559 --> 0:13:33.040 who was on the show two hours ago. Lisa has 0:13:33.080 --> 0:13:35.920 to remind me. I certainly don't remember who was on 0:13:35.960 --> 0:13:39.719 the show three days ago. I remember Crystal Clear with 0:13:39.880 --> 0:13:43.000 the Sun coming through in July when Nancy Lazaar talked 0:13:43.000 --> 0:13:46.120 to us about the American labor Absolute true, truly Nancy 0:13:46.200 --> 0:13:49.200 one of the great insights of Bloomberg Surveillance this year. 0:13:49.520 --> 0:13:51.240 She is a Piper Sandler. 0:13:51.559 --> 0:13:55.760 Stay with us more from Bloomberg Surveillance coming up after this. 0:14:03.000 --> 0:14:06.600 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:06.640 --> 0:14:09.840 weekday afternoons from seven to ten Am Eastern, Listen on 0:14:09.880 --> 0:14:13.560 Applecarplay and Android Otto with the Bloomberg Business app, or 0:14:13.720 --> 0:14:15.200 watch us live on YouTube. 0:14:15.600 --> 0:14:21.280 Joining us now, Michael Green, pinata a c management. How 0:14:21.320 --> 0:14:22.000 the hell are you? 0:14:22.960 --> 0:14:25.120 I definitely have taken a few waks with the baseball 0:14:25.160 --> 0:14:25.440 at this. 0:14:25.400 --> 0:14:26.840 Point, I'm going to defend you. 0:14:26.920 --> 0:14:29.640 Okay, I get it. There's people Michael Green's an idiot. 0:14:30.080 --> 0:14:32.640 How dare you think one hundred and forty thousand is 0:14:32.680 --> 0:14:37.600 a poverty line? You say, up front, it's where you live. 0:14:38.240 --> 0:14:40.440 And you go and Paul, you know this better than me. 0:14:41.000 --> 0:14:45.520 You go to Caldwell, New Jersey, near Cedar Grove, just 0:14:45.560 --> 0:14:49.120 south of Little Falls Township and say, I'm sorry, the 0:14:49.120 --> 0:14:52.240 poverty line in Cardwell, New Jersey is not the way 0:14:52.240 --> 0:14:54.280 it is eighty miles south of Louisville. 0:14:54.320 --> 0:14:57.560 Discuss Yeah, this really is the underlying story. First, there 0:14:57.560 --> 0:15:00.200 are multiple poverty lines right across the country. In a 0:15:00.280 --> 0:15:02.040 high cost region, you're going to have a very different 0:15:02.080 --> 0:15:04.000 experience than if you live in a low cost region. 0:15:04.800 --> 0:15:07.840 But the overall point was when you start thinking about 0:15:07.880 --> 0:15:10.240 what we define as the poverty line currently at about 0:15:10.240 --> 0:15:13.200 thirty one two hundred dollars for a family for two 0:15:13.240 --> 0:15:16.840 earners two children. That doesn't come anywhere close to meeting 0:15:16.880 --> 0:15:18.840 the needs of a family that is living in a 0:15:18.840 --> 0:15:21.440 place like called Well, New Jersey, where the calculation works 0:15:21.440 --> 0:15:23.320 out to about one hundred and thirty six thousand, five 0:15:23.360 --> 0:15:25.640 hundred dollars needs to be made before you can even 0:15:25.680 --> 0:15:29.400 start saving a dime. Wow, that's an extraordinary feeling of 0:15:29.480 --> 0:15:32.400 percarity when we talk about the dynamic that most American 0:15:32.400 --> 0:15:36.200 households can't afford something to break, can't afford an emergency expense, 0:15:36.240 --> 0:15:36.680 et cetera. 0:15:36.800 --> 0:15:37.720 That's why. 0:15:38.320 --> 0:15:42.080 So who sets the poverty line? Again, it's around thirty 0:15:42.120 --> 0:15:46.160 two thousand nationally in the US. Who sets up poverty line? 0:15:46.200 --> 0:15:51.560 And how does that impact policies and support group levels 0:15:51.560 --> 0:15:52.080 and policies? 0:15:52.200 --> 0:15:53.680 Yeah, I think this is one of the really critical 0:15:53.680 --> 0:15:55.720 things that keeps coming out. Right, many people will point 0:15:55.720 --> 0:15:57.880 out that poverty lines are arbitrary. Right, we can define 0:15:57.880 --> 0:16:00.320 twenty percent of the population as or its, et cetera. 0:16:00.440 --> 0:16:03.440 It really doesn't matter where it is unless it affects policy. 0:16:03.840 --> 0:16:06.000 And that number, which is maintained by the Department of 0:16:06.000 --> 0:16:08.920 Health and Human Services, is updated by the CPI from 0:16:08.960 --> 0:16:11.760 the BLS is used to define the point at which 0:16:11.760 --> 0:16:15.760 we begin withdrawing benefits for many types of activities, things 0:16:15.920 --> 0:16:18.119 like housing, things like healthcare, things. 0:16:17.880 --> 0:16:19.200 Like food support. 0:16:19.600 --> 0:16:22.680 That creates a value that I call the value of death, 0:16:22.680 --> 0:16:26.000 but more accurately is described as the benefit cliff. Once 0:16:26.040 --> 0:16:29.440 you start passing those thresholds of earnings, the government starts 0:16:29.480 --> 0:16:31.960 taking away the benefits and it actually leaves you in 0:16:32.000 --> 0:16:35.120 a position where between about forty thousand and one hundred 0:16:35.120 --> 0:16:38.920 thousand dollars, largely on a nationwide basis, you find yourself 0:16:39.000 --> 0:16:41.760 with marginal tax rates that can exceed one hundred percent 0:16:41.800 --> 0:16:42.880 in some situations. 0:16:43.760 --> 0:16:47.040 So what are some of the areas where maybe the 0:16:47.080 --> 0:16:51.440 government numbers aren't correctly calculating the true cost of what 0:16:51.480 --> 0:16:53.720 it means to live in? It is it housing? It 0:16:53.760 --> 0:16:55.000 is it childcare? 0:16:55.080 --> 0:16:57.960 It's a healthcare No, It's the crazy part is it's 0:16:58.000 --> 0:16:58.760 all of those things. 0:16:58.840 --> 0:16:59.000 Right. 0:16:59.040 --> 0:17:02.360 So, the simple reality is that the CPI is devised 0:17:02.360 --> 0:17:04.159 by the BLS. You are not going to find me 0:17:04.200 --> 0:17:06.920 in here arguing conspiracy in an attempt to suppress it, 0:17:06.960 --> 0:17:10.199 et cetera. But it's used to define certain types of 0:17:10.320 --> 0:17:13.600 price changes. The CPI that we quote for policy purposes 0:17:13.640 --> 0:17:16.480 is the CPI Urban wage journers. This is what you 0:17:16.520 --> 0:17:19.360 would expect to experience if you are buying a representative 0:17:19.400 --> 0:17:22.040 basket across all of the workers in the United States, 0:17:22.160 --> 0:17:24.719 high mm, low income, et cetera. People who are at 0:17:24.720 --> 0:17:27.719 the poverty line or near the poverty line don't have 0:17:27.800 --> 0:17:30.160 the same choices that you and I have when they 0:17:30.160 --> 0:17:32.720 make purchases. They don't get to decide, hey, I'm going 0:17:32.800 --> 0:17:35.840 to wait until tires go on sale. Nor are they 0:17:35.880 --> 0:17:38.399 benefiting from gosh, the air conditioner that I had thirty 0:17:38.480 --> 0:17:41.800 years ago suddenly costs a lot less or works much 0:17:41.840 --> 0:17:42.640 more efficiently. 0:17:43.080 --> 0:17:44.240 In most situations, they. 0:17:44.119 --> 0:17:46.800 Aren't even evaluating do I buy an air conditioner? And 0:17:46.840 --> 0:17:49.920 so a really simple example of this is in housing, 0:17:50.440 --> 0:17:53.960 we incorporate features like air conditioning through a quality metric, 0:17:54.000 --> 0:17:57.159 a hedonic adjustment that basically says, look, I understand that 0:17:57.200 --> 0:18:00.240 the apartment went from one thousand dollars to eleven hundred dollars, 0:18:00.640 --> 0:18:03.680 but because they installed air conditioning for you, right, it's 0:18:03.720 --> 0:18:06.520 really only one thousand dollars you actually had under. 0:18:06.320 --> 0:18:08.840 Granite slabs in the kitchen as well. Part one, My 0:18:08.960 --> 0:18:12.280 life is a lie. How I've broken benchmark quietly broke 0:18:12.320 --> 0:18:16.480 America a sub stack which lit on fire across thinking 0:18:16.520 --> 0:18:19.919 America Michael Green where this was simplify asset. We'll get 0:18:19.960 --> 0:18:21.800 to his view on the view four to twenty six, 0:18:21.840 --> 0:18:25.680 but this is too important discussion. My basic take off 0:18:25.760 --> 0:18:29.159 your good work, the critics of your work, the supporters 0:18:29.160 --> 0:18:33.520 of your work, is the poor get to a point, 0:18:33.560 --> 0:18:37.080 as you stated moments ago, where things are taken away 0:18:37.119 --> 0:18:39.520 from them and they have almost a discentive to work. 0:18:40.000 --> 0:18:43.000 We talked to Hugh von steinis this sounds like United Kingdom? 0:18:43.119 --> 0:18:46.240 One oh one? What does a mayor mam Dami do? 0:18:46.800 --> 0:18:51.080 What does the next president, Republican or Democrat do to 0:18:51.119 --> 0:18:55.520 incentifize people besides taking government programs away? 0:18:56.040 --> 0:18:59.360 Well, in the most most extreme version of this right, 0:18:59.480 --> 0:19:01.960 they are actually solving for what people are saying, which 0:19:02.000 --> 0:19:05.040 is I'm not being listened to. So when Domi addresses 0:19:05.040 --> 0:19:08.720 affordability and says people are struggling, they recognize that he's 0:19:08.760 --> 0:19:12.199 telling the truth. His solutions would not be my solutions. 0:19:12.240 --> 0:19:15.280 And that's part of my frustration with the rights perspective, 0:19:15.320 --> 0:19:18.440 or the conservative component of this. If we're putting people 0:19:18.440 --> 0:19:21.200 in a position which they're forced to turn to somebody 0:19:21.200 --> 0:19:24.720 who is listening to them and offering bad solutions. We 0:19:24.800 --> 0:19:28.439