Speaker 1: This is Bloomberg Surveibans. We think we're heading into an
Speaker 1: eighties and nineties type environment where it's a Warren Buffett
Speaker 1: slash Peter Lynch type world where you buy good companies
Speaker 1: and you stick with them. We live in a world
Speaker 1: which is more more witless in tangibles are such an
Speaker 1: important part of the economy. I think it's pretty clear
Speaker 1: that if you only looked at the economic data and
Speaker 1: not at the market, the FED would be raging. Radis
Speaker 1: to hen March Bloomberg Surveillance your link to the world
Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning everyone,
Speaker 1: Michael McKee and Tom Keene worldwide Bloomberg Surveillance. Who welcome
Speaker 1: all of you on Bloomberg Radio. Plus. I'm Bloomberg's thrilled
Speaker 1: that you listen on iTunes. Are podcasts that are out there.
Speaker 1: Bloomberg twelve Boston, Bloomberg eleven three on New York, down
Speaker 1: to Washington FM and Good Morning, Good early morning on
Speaker 1: the West Coast and across Sirious and next M channel
Speaker 1: one nineteen in Bloomberg nine sixty the Bay Area. In
Speaker 1: this uh half hour, in this hour, I think I
Speaker 1: can say it is the beach read of the year
Speaker 1: for thinking people. Jeff Garden to join us from his
Speaker 1: Yale University and we'll talk about what we don't know
Speaker 1: about globalization and what we need to know as well.
Speaker 1: Bloomberg Surveillance Watch You by Cone Resnec Accounting Tax Advisory
Speaker 1: just sees opportunities in commercial real estate. Your businesses market
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Speaker 1: Find out how a Cone dot Com Michael you okay
Speaker 1: over there, Peyton Manning retiring, You're gonna survive. We're We're glad,
Speaker 1: He gets out while getting good. Dean Garden Michaels sedated
Speaker 1: after rooting for the Bloomberg the Denver Broncos called the
Speaker 1: Bloomberg Broncos as well. Um From Silk to Silicon Jeffrey
Speaker 1: Garten The Story of Globalization through ten Extraordinary Life. I
Speaker 1: want to get to the book, but first I have
Speaker 1: to talk about this political process and the discourse you
Speaker 1: teach with Steve roachump at l Roach gives out seas,
Speaker 1: you give out a's we know how the dance goes,
Speaker 1: and and when you talk about Wall Street in Washington.
Speaker 1: I go back to him sitting with a son of
Speaker 1: arguably the most decorated military officer of America in the
Speaker 1: last century. Your father, who fought in three wars World
Speaker 1: War Two, he was at pork Uh pork Chop Hill
Speaker 1: in Korea, he was in Vietnam as well, your head
Speaker 1: must be forget about the politics. Your head must be
Speaker 1: spinning at the discourse that your father served in three wars.
Speaker 1: To get us to this point, well, you know, my
Speaker 1: father died a couple of months ago, and he died
Speaker 1: in in his sleep, which I was grateful for, and
Speaker 1: I'm I'm glad he died when he did. I think
Speaker 1: if he will were watching the primaries now, Um, he
Speaker 1: burst a coronary because you know, he and and and
Speaker 1: and his comrades, they fought for in America that is
Speaker 1: a lot different than the one that is being discussed.
Speaker 1: They fought for a country that was a leader on
Speaker 1: the global stage. They fought for a country in which
Speaker 1: UM immigrants came in and had upward mobility. I mean,
Speaker 1: I don't know about you, but you know I'm the
Speaker 1: third generation. My father was second generation, my wife's parents
Speaker 1: were second generation. Our grandparents all came from somewhere else,
Speaker 1: and UM that's what that's what this country stood for.
Speaker 1: And those wars were fought to defend a way of
Speaker 1: life that was an open that was an open society
Speaker 1: that basically said to the rest of the world, UM,
Speaker 1: we can take you and we can do some great things.
Speaker 1: But that's not the discourse that that exists. Now we
Speaker 1: gotta get to your book, but I gotta follow up
Speaker 1: and ask how did that change change? How did we
Speaker 1: get to a country where people are so afraid of
Speaker 1: the rest of the world. I think we dropped. I
Speaker 1: think we became very complacent. That is for if you
Speaker 1: look at the end of the Second War, World War
Speaker 1: and when my father came back from the Pacific, UM,
Speaker 1: there was no country in the world that can challenge us.
Speaker 1: We basically created and Tom alluded to this, before you
Speaker 1: know a world. We created the rules. It was an
Speaker 1: open global economy. It was open to our companies, which
Speaker 1: were the most powerful in the world. UM. We had
Speaker 1: the best education system, we had the best technology, and
Speaker 1: so we could flourish in that global economy for a
Speaker 1: long time. But somewhere around the nineties, UM, a lot
Speaker 1: of other countries began to catch up, and we were
Speaker 1: asleep at the switch. And I think now what we're
Speaker 1: realizing is that we have a lot of work to
Speaker 1: do internally in order to continue to flourish, in order
Speaker 1: for most of our people to continue to flourish in
Speaker 1: this global economy. And that's what we have to do
Speaker 1: rather than close is down. We were just speaking with
Speaker 1: Admiral James dadis from the Tough School, and he said,
Speaker 1: one of the most important things for new president coming
Speaker 1: off is to have good advice, good people around him.
Speaker 1: What advice would you give the next president to whomever
Speaker 1: he or she is. What's the most important thing they
Speaker 1: need to do to change that? Well, I think if
Speaker 1: I had to put my finger on the single biggest thing,
Speaker 1: it's the workforce. If we have if everybody is employed
Speaker 1: in decent jobs, I think many of the issues that
Speaker 1: we're concerned about, we'll go away. Okay, we're getting to
Speaker 1: your book now. In terms of the workforce, globalization has
Speaker 1: affected the workforce in profound ways, and it's not as
Speaker 1: easy as saying we just want to, you know, get
Speaker 1: everybody into good jobs. That just doesn't happen. No, that's right,
Speaker 1: And but the thing is, the jobs of the future
Speaker 1: are not the jobs of the nineteen seventies of the
Speaker 1: nineteen eighties, and we need an internal system that is
Speaker 1: going to be able to prepare more and more people
Speaker 1: for these new jobs, whatever they are. I don't think
Speaker 1: we can know exactly what they'll be, but we need
Speaker 1: an education system that is far more effective. We need
Speaker 1: the most modern kind of infrastructure so the economy is
Speaker 1: more um um competitive, and that itself will also generate
Speaker 1: lots of jobs um And I think we need a
Speaker 1: kind of social safety net that allows people to be
Speaker 1: unemployed for a while while they're training for something else
Speaker 1: and not fall all the way down the rabbit hole
Speaker 1: if you're just joining us. Jeffrey Garten serving with Nixon, Ford,
Speaker 1: Carter Clinton, and also serving in who have in Connecticut
Speaker 1: for decades. The book is from Silk to Silicon, a
Speaker 1: story of globalization through ten extraordinary lives. Everyone yearns for
Speaker 1: technological progress. It will provide investment that will put American
Speaker 1: jobs for work. We did that with the underwater cable.
Speaker 1: My most enjoyable chapter of your book is linking the
Speaker 1: old World to the New World. Cyrus Field did that
Speaker 1: a zillion years ago, and we know it created a
Speaker 1: lot of jobs. You got Indigo grow of Intel later on.
Speaker 1: I believe he created a lot of jobs. Why can't
Speaker 1: we reduc that in your eleventh, twelve or thirteen person
Speaker 1: you would write about in five years? Well, I think
Speaker 1: we can. But let me just drop back and say,
Speaker 1: what I tried to do in the book was to
Speaker 1: talk about globalization in a way that people could better
Speaker 1: understand and relate to. So rather than talk about big trends,
Speaker 1: I talked about people who did something really They did
Speaker 1: something really spectacular, and they changed their world. And they
Speaker 1: not they not only changed the world they lived in,
Speaker 1: but the impact was so great they continue to change
Speaker 1: our So let me let me comment on the two
Speaker 1: people use and I think you're absolutely right that major
Speaker 1: breakthroughs can create all kinds of jobs that are future oriented.
Speaker 1: So one of these chapters is about cyrus Field, who
Speaker 1: UM lived in the mid eighteen hundreds, and he's the
Speaker 1: guy who built the Transatlantic cable. UM to tell you
Speaker 1: how monumental that was. UM on the day before that
Speaker 1: cable was absolutely it was was constructed and was concluded
Speaker 1: when when it it linked Europe and the US. On
Speaker 1: the day before, news traveled across the Atlantic no faster
Speaker 1: than it had for four thousand years that it was
Speaker 1: it is. It was a question of the wind on
Speaker 1: one minute. When that cable was actually joined, we had
Speaker 1: real time communication between the US and Europe, and within
Speaker 1: two or three years after that, the entire world was wired.
Speaker 1: Think of think of the discontinuity. In fact, the Transatlantic
Speaker 1: cable was a far bigger advance and civilization than the Internet,
Speaker 1: because when the Internet came along, we already could look
Speaker 1: at our TVs and see uh, you know, we could
Speaker 1: see Vietnam real time. So um, the incremental advance of
Speaker 1: the Internet was far less than going from zero to
Speaker 1: real time. Les Robert Gordon's point in his in his
Speaker 1: book that the big advances have been done and now
Speaker 1: it's incremental change. Well let's let's let's come back to that.
Speaker 1: But I just, um, I want to I want to
Speaker 1: reinforce Tom's point, which is that Transatlantic cable was the
Speaker 1: forerunner of the radio, of the telephone, of the and
Speaker 1: of the Internet, and so it was a huge job changer.
Speaker 1: I mean, it basically put the United States into a
Speaker 1: totally different era of global communications. And you think about
Speaker 1: the jobs that were created with all the new cables
Speaker 1: that were you know, being liked and all the equipment
Speaker 1: that wait with it, but not only that, all the
Speaker 1: business that took place that couldn't place before. Well, we
Speaker 1: have to come back. Jeffrey Garden with US of Yale
Speaker 1: University has a wonderful new book, From Soak to Silicon.
Speaker 1: Mike wants to follow up. I know where the important
Speaker 1: thought is, Well, we will do that. From Soak to Silicon,
Speaker 1: The Story of Globalizations or ten Extraordinary Lives Futures of
Speaker 1: negative seven down futures, negative assuring to the market. You
Speaker 1: see that the Monday after Job today. Coming up Jeffrey Garden,
Speaker 1: and we'll talk to him about Andrew Grove. We'll talk
Speaker 1: to him about some of the other names of Michael
Speaker 1: McKee I know, and some thoughts as well. Also Jeffrey
Speaker 1: Garden on the potato bosel for TATA, talk about that
Speaker 1: as well. First, I check in with Michael Barr. We
Speaker 1: want to get the latest World of National headlines. Blank, Tom,
Speaker 1: thank you very much. Vice President Joe Biden told American
Speaker 1: troops and the United Arab Emirates the US will wipe
Speaker 1: out Islamic state militants in Iraq and Syria. Biden is
Speaker 1: on the Middle East trip. Biden also told the troops
Speaker 1: the US has carried out eighteen hundred air strikes against
Speaker 1: ISIS since October. The verbal battle between Hillary Clinton and
Speaker 1: Bernie Sanders took a more pointed turn at last night's
Speaker 1: Democratic presidential debate in Flint, Michigan. Clinton accused Sanders of
Speaker 1: turning his back on the auto industry. Sanders said Clinton's
Speaker 1: friends on Wall Street destroyed this economy. Republican presidential candidate
Speaker 1: Donald Trump says Nancy Reagan, the wife of a truly
Speaker 1: great president, was an amazing woman. She will be missed.
Speaker 1: Nancy Reagan died yesterday in Los Angeles at age ninety four.
Speaker 1: Global News twenty four hours a day, powered by our
Speaker 1: twenty four hundred journalists and more than a hundred fifty
Speaker 1: news bureaus from around the world. Michael Blarn, Mike Tom
Speaker 1: and macn thanks so much. Yields elevated off the jobs
Speaker 1: report on Friday, the tenure year of one point nine
Speaker 1: zero percent with Jeoffrey Garden from Silk to Silver com
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Speaker 1: Business Flash and I'm Karen Moscow a US stock index
Speaker 1: futures are lower. Let's go to the first Word breaking
Speaker 1: news desk for today's morning call. And here's Bill Maloney.
Speaker 1: Good morning, Bill, Good morning Karen. That's right US. You
Speaker 1: just remain under pressure today. Down futures lower by forty
Speaker 1: two points, SP futures drop seven and NAZAC futures declined
Speaker 1: by seventeen U S ten Uel at one point nine
Speaker 1: per cent. Main up of markets are also trading lower.
Speaker 1: Energy names, telcom and financials need to drop in deal
Speaker 1: news b A s F said to be a valuing
Speaker 1: rival takeover bid for DuPont Another news value to hold
Speaker 1: call on March fifteenth on preliminary Q four and Dinan's
Speaker 1: and sell X plunges fifty percent pre market after study
Speaker 1: eating this endpoint. Finally, some of your key wallsheet upgrades
Speaker 1: and downgrades Archer Daniels cut your neutral over at Bank
Speaker 1: of America. Stratus has cut the underweight to JP Morgan,
Speaker 1: Michael's cut the eagle weight at Morgan Stanley add no
Speaker 1: more Micron cut to reduce and anger sol Rand raised
Speaker 1: to buy Finally Win Resorts raised to buy versus neutral
Speaker 1: over at ubs live on the first Breaking news desk
Speaker 1: on Boumloney Karen thanks to Baible to hear live breaking
Speaker 1: news over your Bloomberg type squawk and go on your terminal.
Speaker 1: That's squ a w k go. That's a Bloomberg business flash.
Speaker 1: Tom and Mike Karen, thanks so much, Bloomberg Surveillance Brunch
Speaker 1: you by indesco. Have you considered all of your investment alternatives?
Speaker 1: Non traditional asset classes and strategies may help you achieve
Speaker 1: your goals? Find out more in investco dot COM's slash alternatives.
Speaker 1: And Michael McKee and I were an esteem because Michael,
Speaker 1: did you notice that Yale Hockey once again does it?
Speaker 1: They host Dartmouth in the E C A C S
Speaker 1: seven all ivy picks. They're just the powerhouse. Well we are.
Speaker 1: Congratulations to them and no doubt all reading Jeff Carton's
Speaker 1: new book. Yeah there, Well, you know it's funny. It's
Speaker 1: gonna be seventy one degrees or so in the middle
Speaker 1: of this week. So Tom is already in beach mode
Speaker 1: and he's declared from Silk to Silicon. His beach reading
Speaker 1: book of the Year, The Story of Globalization Through Ten
Speaker 1: Extraordinary Lives, written by Jeffrey Garden. He is the Dean
Speaker 1: emeritus of the Yale School of Management. We were talking
Speaker 1: about how, uh, one person, through their efforts, can make
Speaker 1: a major impact on history. You've got ten extraordinarily lives
Speaker 1: in there, but these are lives that have been lived.
Speaker 1: Whom do you see out there as someone who who
Speaker 1: could be the next the next chapter is there is
Speaker 1: there a person or a subject matter that you would
Speaker 1: tout as perhaps the next big thing? Well, um, you know,
Speaker 1: before I answer that, I just want to I just
Speaker 1: want to re emphasize the criteria I used, because by
Speaker 1: any account, there are lots of really extraordinary people who
Speaker 1: are doing extraordinary things. The ten that I picked had
Speaker 1: a big idea, but they also were the ones who
Speaker 1: executed the idea, So that really limits the That limits
Speaker 1: the pool. I mean, there's been many big thinkers, but
Speaker 1: to be a thinker and a doer on an extraordinary scale.
Speaker 1: That that puts you in a much more rarefied environment.
Speaker 1: And the second kind of criteria I had is that
Speaker 1: what these guys did kicked off an entirely new age.
Speaker 1: So for example, I write about my first character, Genghis Khan,
Speaker 1: he really kicked off an age of global empire. Or
Speaker 1: I write about um Cyrus Field, and he kicked off
Speaker 1: an age of global communication, you know. And I write
Speaker 1: about John Rockefeller, who kicked off an age of industrialization. UM.
Speaker 1: If I use those categories is very very hard for
Speaker 1: me to I think for anyone to identify someone now,
Speaker 1: um you know, the the usual suspects. Let's say Jeff
Speaker 1: Bezos you know, or or maybe um you know Steve
Speaker 1: Jobs or maybe um uh Elon Musk. I don't know
Speaker 1: that they're kicking off new ages. Now. The person who
Speaker 1: kicked off the new age in my book, the one
Speaker 1: I picked that relates to all of them, was Andrew Grove.
Speaker 1: Because Andrew Grove, as the head of Intel, UM didn't
Speaker 1: create the microprocessor, but he figured out how to make
Speaker 1: it to commercial to global commercial scale. And it's the
Speaker 1: microprocessor that's at the center of every Internet digitalization gadget
Speaker 1: that we talked about. It could be phones, it could
Speaker 1: be three D printers, it could be all kinds of sensors,
Speaker 1: but without the microprocessor, none of it would be possible.
Speaker 1: So you know, that's that was my thinking. So who who?
Speaker 1: I can identify a person, but I could identify maybe
Speaker 1: a a an arena that I think someone is going
Speaker 1: to come along. Let's say, and um be the person
Speaker 1: who may eradicate certain diseases that would have an enormous
Speaker 1: global impact in terms of populations. I think someone might
Speaker 1: come along and have a technological breakthrough when it comes
Speaker 1: to climate change. You know, someone anyone who can figure
Speaker 1: out how to capture the coal emissions or forever that
Speaker 1: would be. But I don't know who those people are. UM,
Speaker 1: I've got to rip up the script here. I put
Speaker 1: out a slight article of fabulous article by Dana Goldstein. This,
Speaker 1: uh we can on Andrew Hacker in his hugely controversial
Speaker 1: book basically saying the liberal arts curriculum doesn't need math.
Speaker 1: I went suitably ballistic, as I believe you would as well.
Speaker 1: Would you explain to our audience why people that aren't
Speaker 1: going to be engineers like the people in your book,
Speaker 1: like Grove or or Um the others, why we need
Speaker 1: math at every level of our education, Well, I just
Speaker 1: think we. First of all, I agree with you, and
Speaker 1: I think we have entered in era where the kind
Speaker 1: of reasoning that math induces is absolutely critical to understanding
Speaker 1: various relationships. That, let me put another way, We're living
Speaker 1: in an era where you need deep knowledge, but you
Speaker 1: also need to be able to relate it to other things.
Speaker 1: And math is the ultimate sort of relational kind of discipline.
Speaker 1: And so I think we need math. I thought what
Speaker 1: you were going to say is do we need poetry?
Speaker 1: And I think we need that. We need that as well.
Speaker 1: We need that's the house I grew up. So I
Speaker 1: think we need people who because because we can't anticipate,
Speaker 1: but the world is going to be and I really
Speaker 1: believe that because I think the change is moving so fast.
Speaker 1: We need people who have technical capabilities but also the
Speaker 1: ability to reason critically, to ask the right questions. We
Speaker 1: could go for hours. Jeffrey Garden with a Samarith Yale
Speaker 1: University of the School of Management. The book is From
Speaker 1: Silk to Silicon, and it is the early advances we
Speaker 1: have seventy degrees temperature uh this week in New York.
Speaker 1: It is the beach read of the ear. It is
Speaker 1: a fabulous ten chapters. I didn't even have time to
Speaker 1: mention Sean Money, which is a wonderful chapter. Jeff Garten
Speaker 1: with us from Silk to Silicon. This is Bloomberg's surveillance
Speaker 1: coming up there, with all due respect highlight. Brought to
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Speaker 1: is Bloomberg Surveillance. Good morning as a thorny on Wall
Speaker 1: Street at Michael McKee along with Tom Keene and our
Speaker 1: economic indicators are brought to you by Commonwealth Financial network.
Speaker 1: When it's time to change the conversation, talk with a
Speaker 1: broker dealer, r I A that's ready to listen college
Speaker 1: six six or six two three six three eight, or
Speaker 1: visit Commonwealth dot com to learn more. A slow week
Speaker 1: ahead jobs week, the first week about always very big
Speaker 1: for indicators. Uh, this week not so much today. The
Speaker 1: other thing we really have are the FEDS Labor Market
Speaker 1: Conditions Index, a lot of labor market numbers, especially out
Speaker 1: of the jobs report mushed together is supposed to come
Speaker 1: in at one from zero point. For surprise, it didn't rise.
Speaker 1: And then consumer credit later this afternoon, we'll see if
Speaker 1: we get any kind of indication of whether Americans still feel,
Speaker 1: you know, happy enough to borrow. Mushed came out of
Speaker 1: econometrics after World War Two. Yeah, I took a mushed
Speaker 1: class the Jolts. You make a big deal about the
Speaker 1: Jolts server. Yes, it's delayed data, but it does tell
Speaker 1: us a lot about um, the state of the labor market,
Speaker 1: how many jobs available, et cetera. The of course, everybody's
Speaker 1: still reacting to Friday's jobs report better than forecast in
Speaker 1: terms of headline numbers. But the big quest was why
Speaker 1: did we see ours work and particularly compensation go down.
Speaker 1: Wages fell after a big jump the month before. H
Speaker 1: Ian Shepherdson from Pantheon Macroeconomics had a unique explanation. We
Speaker 1: wanted to get that from him, he joins us now,
Speaker 1: and you were the first out of the gate to
Speaker 1: note that even before the report you were expecting a
Speaker 1: disappointing wage number. What have you found. Well, this is
Speaker 1: a technicality, like it's a calendar quirk UM. So the
Speaker 1: peril survey is the week of the twelfth UM, and
Speaker 1: when the fifteen falls on the following Monday or Tuesday,
Speaker 1: people who are paid semi monthly, some of them get
Speaker 1: missed out of the WEDGE numbers. And this isn't supposed
Speaker 1: to happen UM. Employers are supposed to recognize when those
Speaker 1: people are being paid outside the survey period and count
Speaker 1: them anyway when they report their WEDGE data into the
Speaker 1: Bureau of Labor Statistics. But some of them clearly don't.
Speaker 1: And so there's a very very consistent pattern going back
Speaker 1: over the past decade when when with the data first
Speaker 1: started to appear in their current form, showing that nine
Speaker 1: times out of ten when the fifteen is a Monday,
Speaker 1: or Tuesday, the wage numbers come in way below their
Speaker 1: previous trend, and then they tend to rebound a month
Speaker 1: or two later, so we don't lose anything permanently, but
Speaker 1: we do suffer what appears to be these sort of
Speaker 1: substantially volatile monthly swings in numbers, which really ought to
Speaker 1: be quite smooth, but they're not. And it turns out
Speaker 1: that a huge amount of that variation is because of
Speaker 1: this calendar quirk. December was one of those months, and
Speaker 1: we came in with a zero and expectedly big rebound
Speaker 1: in January. Then February another one of these crazy months,
Speaker 1: and we get a minus zero point one. So it's
Speaker 1: pretty consistent and absent any other substantive explanation for the
Speaker 1: February weakness. That's what I'm going for. Well, you'd be
Speaker 1: looking for, then a big rebound. What is the underlying
Speaker 1: state of wage growth once you've move all this stuff out, Well,
Speaker 1: it's accelerating, certainly accelerating. The trend is stripping out. The
Speaker 1: calendar quirks is probably now at about two point five
Speaker 1: two point six year of the year this time last year,
Speaker 1: it was two the year before, it was two point
Speaker 1: zero the year before it was two point zero. So
Speaker 1: this has been quite a marked acceleration after our a
Speaker 1: long time of very little action going on. Because if
Speaker 1: funny thing is if you look at the wage numbers
Speaker 1: in real terms rather than in nominal terms, you'll find
Speaker 1: that they've been accelerating for quite a while, and they've
Speaker 1: been picking up in line with the tightening of the
Speaker 1: labor market that you can see in a whole bunch
Speaker 1: of surveys n SID and others um and that tightening
Speaker 1: is continuing, it has continues for some time, and it's
Speaker 1: signaling that real wage growth has to pick up further.
Speaker 1: What makes us difficult or interesting is that given that
Speaker 1: inflation has now bottomed out, and I think everybody agrees
Speaker 1: with that, now that we've we've we've had the downward
Speaker 1: pressure on inflation starting to move a little bit to
Speaker 1: the upside um. The only way you can get real
Speaker 1: wage growth accelerating is phenomenal wages to pick up faster.
Speaker 1: And this is where things get interesting, because I think
Speaker 1: this is the year when we hit the sort of
Speaker 1: rates of wage growth at the FEDS pass begins to dislike,
Speaker 1: we don't know what that is. But Stan Fisher said
Speaker 1: about a month ago that he'd be comfortable to see
Speaker 1: wage growth at about three. Well, we're not there yet,
Speaker 1: but I think by the end of the summer we
Speaker 1: will be, and by the end of the year will
Speaker 1: be more like three and a half. And that's when
Speaker 1: things get very tricky. I agree with that nicely explained
Speaker 1: on these dynamics and whether you're an optim mr a
Speaker 1: pessimist in the economy, the backdraft of wages animal spirit
Speaker 1: in nominal is sustained real GDP growth? Are you suggesting
Speaker 1: ian that real GDP could be two point eight or
Speaker 1: Dare I say three is a run rate? Three is
Speaker 1: going to be difficult for the full year because we've
Speaker 1: got a horrible base effect at the end of last
Speaker 1: year because the Q four so weak. But that but
Speaker 1: in terms of the courtly run rate, I think three
Speaker 1: is is plausible, probably off for the first quarter, but
Speaker 1: for the second, third, fourth, three is is kind of
Speaker 1: my base case. And if we get that, then of
Speaker 1: course that means of the firth that the plan in
Speaker 1: the unemployment rate is more or less inevitable. You know,
Speaker 1: we've seen a big pick up in the labor force
Speaker 1: in the last few months, but it's not sustainable at
Speaker 1: this rate. So I think unemployment drops further, puts greater
Speaker 1: pressure on on real wage growth. And again because inflation
Speaker 1: isn't going down anymore, that means that to get that
Speaker 1: real wage growth, you've got to get the nominal and
Speaker 1: the fad. You know, looking back over the last thirty years,
Speaker 1: there's a pretty consistent pattern of behavior on their part
Speaker 1: that when wedge growth accelerates substantially, they tend to panic.
Speaker 1: And this happens quite quickly, you know, in the very
Speaker 1: last cycle. Yeah, you know that we went from two
Speaker 1: percent wage two and a half where we are now
Speaker 1: to four percent in just over a year. And during
Speaker 1: that year the FED went the FED went from being
Speaker 1: quite relaxed about everything to being in you know, we've
Speaker 1: really got to slow this down mode and rate throws
Speaker 1: very substantially. We've got to continue this discussion because the
Speaker 1: heart of the matter is if you assume of FED
Speaker 1: do nothing in March, where are they the next FED
Speaker 1: meeting after that? In terms of getting back to the
Speaker 1: framework that Ian Shepherdson sture way behind, it's even worse
Speaker 1: than that because they gotta wait till June. Really, if
Speaker 1: nobody thinks they would move in the April seven meeting
Speaker 1: because there's no press conference, so that you know they
Speaker 1: got waited several more months. I don't know. I find
Speaker 1: it fascinating what you just heard their folks was very important. Again,
Speaker 1: Ian Shepherdson looked for that across the Bloomberg terminal. Will
Speaker 1: continue with Dr Shepherdson here, but I also want to
Speaker 1: point out all of our interviews Jeff Gardener and Shepherdson
Speaker 1: and the rest out on iTunes and podcasts here. Uh
Speaker 1: in a bit negative eight on the SMP The Deal
Speaker 1: Future is a negative forty two. What check in with
Speaker 1: Michael Barr now get the latest world in national headlines.
Speaker 1: Mike tom thank you very much. The two Democratic candidates
Speaker 1: squared off in the debate in Flint, Michigan last night.
Speaker 1: State has a hundred forty seven delegates up for grabs
Speaker 1: for tomorrow's presidential primary. Senator Bernie Sanders, continuing his argument
Speaker 1: to invest in municipal projects and the wealthiest country in
Speaker 1: the his theree of the world. We have got to
Speaker 1: rebuild our crumbling infrastructure, our water systems. I've got a
Speaker 1: build for a trillion dollars. Greg's thirty million jobs rebuilding
Speaker 1: Flint Michigan Clinton during the presidential debate on cnntegrad with
Speaker 1: Sanders that Michigan's governor should resign after lead contaminated water
Speaker 1: in Flint's drinking water. People should be held accountable wherever
Speaker 1: that leads, if it leads to resignation or recall if
Speaker 1: you're in political office, if it leads to civil penalties,
Speaker 1: if it leads to criminal responsibility. Nancy Reagan will be
Speaker 1: buried next to her husband at the Reagan Presidential Library.
Speaker 1: The former First Lady died yesterday at age ninety four.
Speaker 1: Spokeswoman for Jimmy Carter says the former president does not
Speaker 1: need further treatment for cancer. Global News twenty four hours
Speaker 1: a day, powered by our two hundred journalists and more
Speaker 1: than a hundred fifty news bureaus from around the world.
Speaker 1: Michael Bark Night, Tom, thank you, Michael. Time now for
Speaker 1: the Boomberg NBC Sports Update, with thanks Mike. Rangers and
Speaker 1: Islanders longtime rivals, but now when they play, it is
Speaker 1: truly a battle of New York City teams, and this
Speaker 1: year it's been all Islanders. They've won all three meetings.
Speaker 1: At the Guarden, they led three nothing. Five minutes in
Speaker 1: they led four to three third period, when the Rangers
Speaker 1: tied it with a minute and a a half to go,
Speaker 1: Cal Clutterbuck scored off the face off isles one six
Speaker 1: to four, two goals for Johnny Boyjack. Islanders go six
Speaker 1: and one on their road trip in Newark all Penguins,
Speaker 1: they beat the slumping Devils six to one, Golden State
Speaker 1: Warriors an amazing fifty five and six. But when they
Speaker 1: have lost, it's always been on the road, mostly by
Speaker 1: wide margins and mostly the bad teams routed by the
Speaker 1: lowly Lakers one twelve to ninety five of Steph Curry
Speaker 1: and Clay Thompson together shot one for eighteen on three pointers.
Speaker 1: There could be several local teams in the upcoming n
Speaker 1: C Double, a tournament assured of one coming out of
Speaker 1: the Metro Atlantic as Monmouth but play Iona in tonight's
Speaker 1: final and Albany at the Colonial in Baltimore. Hofstro will
Speaker 1: play in North Carolina Wilmington for the right to go
Speaker 1: to the n C Double. As encouraging news for the Yankees,
Speaker 1: Masahiro Tanaka to scoreless innings of this first outing since
Speaker 1: elbow surgery last year. Not many of the all time
Speaker 1: greats and their careers with a championship victory, Peyton Manning did.
Speaker 1: He had already hinted this could be his last rodeo,
Speaker 1: as he says, and it was. He retires with five
Speaker 1: m v ps, two Super Bowl wins, almost all the
Speaker 1: career passing records. He'll meet the media in Denver today
Speaker 1: way at the Bloomberg NBC Sports Update. I'm John stash All. John,
Speaker 1: thanks so much, appreciate that. On a Monday, as we
Speaker 1: moved forward through the week, we always do it looking
Speaker 1: at equities, bonds, currencies, commodit. He's quite on a Monday always,
Speaker 1: it seems after a job report. We did see adjustment
Speaker 1: yields higher off the jobs report, but the curve really
Speaker 1: didn't steep in all that much. It did a little
Speaker 1: one hundred one basis points right now, one point zero
Speaker 1: one percentage points between the ten year and the two year.
Speaker 1: That's a little bit steeper over the last number of
Speaker 1: days of tenure one point nine zero percent to two
Speaker 1: year point eight nine percent. Even three month T bill
Speaker 1: lofty at zero point to seven SMB futures of negative,
Speaker 1: eight down futures negative. And the yen is that global
Speaker 1: barometer churning one fifty four. This is Bloomberg Surveillance earnings
Speaker 1: for US corporations up one and a half percent if
Speaker 1: you leave out energy, is that enough to keep wages growing?
Speaker 1: Will continue our conversation with Panton macroeconomics Ian Shepherdson here
Speaker 1: on surveillance, Global business news twenty four hours a day
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Speaker 1: e t F. European shares are falling with copper and zinc,
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Speaker 1: US dock index futures are lower, SNP EVENI futures down
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Speaker 1: both down more than one percent as well. Ten Your
Speaker 1: Treasury down eight thirty seconds, the yield one point nine
Speaker 1: zero percent yield on the two year point eight eight percent.
Speaker 1: Nimex Screwed Oil up six tenths percent or twenty one
Speaker 1: cents to thirty six thirteen a barrel. Comex Gold is
Speaker 1: down three tenths percent or three dollars forty cents to
Speaker 1: twelve sixty seven forty announced the euro a dollar oh
Speaker 1: nine six one, the yen one thirteen point five zero,
Speaker 1: and selled X Therapeutics of Nita, Massachusetts is now down
Speaker 1: fifty one percent in early trading after saying it will
Speaker 1: stop a five no stage study of an experimental brain
Speaker 1: cancer vaccine. That's a Bloomberg Business flash. Tom and Michael
Speaker 1: Churn thanks Future Negative nine A bit of a deterioration
Speaker 1: in the tape on this Monday. It is on Wall Street.
Speaker 1: The following is from Bloomberg View, opinions and commentary from
Speaker 1: Bloomberg columnists. I'm Paula Dwyer, a columnist with Bloomberg View.
Speaker 1: The Republican establishment with Mitt Romney and the lead is
Speaker 1: hitting back against Donald Trump. Yet no matter how many
Speaker 1: party elders pile on, Trump keeps winning and poles show
Speaker 1: fortent of Republican voters support him. Let's face it, the
Speaker 1: Republican elite has lost control of the agenda. To win
Speaker 1: it back, author and social scientist Charles Murray says the
Speaker 1: GOP should rethink bedrock policies, including a relentless focus on
Speaker 1: tax cuts, endless attempts to repeal Obamacare, and opposition to
Speaker 1: improvements in the social safety net. Such ideas are heresy
Speaker 1: among the Republican elite, yet they'd be good for Trump's supporters,
Speaker 1: mostly white, non college educated, and lower income voters. They
Speaker 1: haven't seen wages go up since the nineteen seventies, the
Speaker 1: factories that once employed them have shipped out. Seen through
Speaker 1: his base, Trump's anti immigrant and anti free trade views
Speaker 1: makes some sense, yet the GOP has done little to
Speaker 1: help them. Trump exposes the ineffectiveness of Republican policy, but
Speaker 1: he does so by manipulating and encouraging racial and ethnic animosities.
Speaker 1: To the condemnation of Mitt Romney and many other Party elders,
Speaker 1: Let's hope they're not too late. I'm Paula Dwire, a
Speaker 1: columnist with Bloomberg View. For more commentary and opinion, please
Speaker 1: go to Bloomberg View dot com. This has been Bloomberg
Speaker 1: View and bloom Review commentaries. Com Here to hourly weekdays
Speaker 1: on Bloomberg Radio. Michael always going to talk to Ian Shepherdson. Yes,
Speaker 1: it's terrific to have him on with us. And Uh,
Speaker 1: you were talking in as of course the chief economists
Speaker 1: at Pantheon. You were talking before the break about the
Speaker 1: outlook for the picking up as the year goes on
Speaker 1: and for earnings rebounding. But we're not seeing the same
Speaker 1: thing in corporate earnings. I'm wondering how whether the growth
Speaker 1: pick up actually translates to earnings and whether companies can
Speaker 1: continue to give raises if we don't see earnings rise. Yeah,
Speaker 1: it kind of depends where you are, really. I mean,
Speaker 1: if you're a manufacturing exporter and you're selling things to
Speaker 1: Asia and you're competing with exports and other countries, it's
Speaker 1: going to be very difficult for you because the dollars
Speaker 1: the problem. It's very strong. Um, you're suffering weak demand
Speaker 1: in some of your key markets. Obviously China's one of them,
Speaker 1: but others as well, and for you things are going
Speaker 1: to be a real struggle. So unfortunately, for those sort
Speaker 1: of businesses, the pickup and wage growth, which they can't
Speaker 1: really avoid because they're all competed for the same pool
Speaker 1: of labor, that's just a margin hit. But if you
Speaker 1: are a domestic facing business, as a service sector business
Speaker 1: in particular with mostly domestic customers not worried about the
Speaker 1: strength of the dollar, then fore you it's much more
Speaker 1: manageable because the given wage growth, of course, just means
Speaker 1: your customers have got more money to spend. Now. It
Speaker 1: doesn't mean you're going to be able to recruit recoup
Speaker 1: every dollar of extra wage growth, because you may lose
Speaker 1: a bit of market share somebody else might come into
Speaker 1: your space. But in aggregate it should be okay. And
Speaker 1: so for those businesses, which remember are the overwhelming bulk
Speaker 1: of US corporations in that domestic consumer facing space, the
Speaker 1: wage pressure is not the end of the world. But
Speaker 1: certainly there's a minority of companies externally focused dollar sensitive
Speaker 1: and for those it's going to be extremely difficult. It
Speaker 1: already is extremely difficult. This is not a news story.
Speaker 1: It's just likely to intensify over the course of the year.
Speaker 1: But I got to say, it doesn't mean that the
Speaker 1: whole manufacturing sector, which of course has most of the
Speaker 1: exporters in it, is going to perform as badly as
Speaker 1: it did last year. Because one of the big drags
Speaker 1: last year was the massive collapse in capital spending in
Speaker 1: the oil business. And that's pretty much over now. You know,
Speaker 1: it's fallen so far that it cannot fall again as
Speaker 1: far as it did last year. We we we've probably
Speaker 1: taken capex in oil from a peak of about two
Speaker 1: billion annualized down to about fifty so it cannot fall
Speaker 1: as far again. And that was a really big hit
Speaker 1: on manufacturer, So less pain from that source. But they're
Speaker 1: going to have to deal with that wage problem. Yeah.
Speaker 1: I don't want to catch you by surprise. You're I,
Speaker 1: but you're so good at this. When I look at
Speaker 1: full and part time employment, Joe Malinsky rights it up
Speaker 1: at advisor perspectives, and the bottom line is part time
Speaker 1: employment is better. There's less of it and more full time,
Speaker 1: but part time employment is is thirty five percent higher
Speaker 1: than it was at the bottom. We were at thirteen
Speaker 1: point five percent a million years ago. We get up
Speaker 1: into the twenties and we come back to eighteen point
Speaker 1: two percent. So we've moved from thirteen point five percent
Speaker 1: to eighteen point two percent of America. Which way is it?
Speaker 1: Is it part time America? Are we actually moving in
Speaker 1: the right direction? Well, we we are moving in the
Speaker 1: right direction. But there's still an enormous legacy from from
Speaker 1: the crash period which distorted so many of these labor
Speaker 1: market numbers, and not all of them, many of them
Speaker 1: haven't yet reverted to where they were before the Great
Speaker 1: Crash um. This is a you know, there still an
Speaker 1: awful lot of people in these part time jobs who
Speaker 1: want full time jobs. But at the very same time,
Speaker 1: surveys of businesses are telling us that they're saying they
Speaker 1: can't find the people they want to hire. And this
Speaker 1: is one of these apparent contradictions that we can't really
Speaker 1: resolve with the data that we've got. I mean, why
Speaker 1: would it be if you've got millions of people who
Speaker 1: want to work full time, they're currently employed. It's not
Speaker 1: like they, you know, dead, be two, I'm going to
Speaker 1: get a job. They've got a job. They want to
Speaker 1: work full time, And at the same time, employers are
Speaker 1: saying we can't find the people we want to hire.
Speaker 1: So I don't know whether nobody knows whether this is
Speaker 1: a geographic problem that the people are in the wrong place,
Speaker 1: or whether it's a skills problem. I think that's more likely,
Speaker 1: or maybe it's a sector problem that you know, we've
Speaker 1: got a lot of people maybe working part time insectors
Speaker 1: where the growth isn't very strong, and where growth is
Speaker 1: stronger they don't have the right skills. We don't know,
Speaker 1: but certainly there's there's several million people who would love
Speaker 1: to have a full time job and several hundred thousand
Speaker 1: companies who want more full time employees. You would think
Speaker 1: it would work out, but it isn't. So someth there's
Speaker 1: a mismatch somewhere. All The one thing that is clear
Speaker 1: is that even with all that, the FED is pretty
Speaker 1: much there with the employment part of their mandate. What
Speaker 1: do you see happening with inflation going forward? Well, here's
Speaker 1: the thing. Janet Yellen said back in December that temporary factors,
Speaker 1: the strong dollar and dropping oil prices are holding down
Speaker 1: the core PC deflator, which is a FEDS target measure
Speaker 1: of inflation, holding it down between a quarter and half
Speaker 1: a percent the target too, and the current rate the
Speaker 1: latest state that we have is one point seven, So
Speaker 1: you add back in those temporary factors, and core inflation
Speaker 1: on the fed's own target measure is already at two
Speaker 1: to two and a quarter. The FEDS forecasts don't show
Speaker 1: them reaching that two percent target until the fourth quarter
Speaker 1: of two and a half years from now, and yet
Speaker 1: the very same data that the FED targets are showing
Speaker 1: already using Yellen's own calculations, that the underlying rate is
Speaker 1: already there. This really worries me because I think a
Speaker 1: FED that wasn't so rabbit in the head it's when
Speaker 1: confronted with slow down in China, would have been hiking
Speaker 1: rates much more quickly. And the longer that they delay it,
Speaker 1: and the more they find excuses looking at international developments
Speaker 1: and worries about overseas economies, none of which are very
Speaker 1: much bearing on the US domestic labor market, the more
Speaker 1: the danger rises that eventually inflation bites them and they
Speaker 1: have to catch up very quickly with very disruptive and
Speaker 1: destabilizing right tags. But funny thing is, of course that yeah,
Speaker 1: and it keeps referring to this danger, saying, well, if
Speaker 1: we leave it too long, then we'll have to go
Speaker 1: more quickly and that could be very damaging. But the
Speaker 1: action that they're taking seems to me to be raising
Speaker 1: the very risk that they're setting out in those sort
Speaker 1: of statements, and I really don't get it. I think
Speaker 1: they're hugely overplaying the danger post by China slowdown, and
Speaker 1: overplaying the danger players by the manufacturing slowdown, which is real.
Speaker 1: No question, manufacturing is very weak, but it's a teeny
Speaker 1: bit of the economy and the rest of it's doing
Speaker 1: much better. And the danger is that that tightening in
Speaker 1: the rest of it is going to catch them underwares.
Speaker 1: And you know, looking at the data, by their own terms,
Speaker 1: they're already at the sort of rate swearing thestry policies
Speaker 1: should be much nearer in New Trall and he isn't. Okay,
Speaker 1: So quickly, here's summarized for us. Do you agree with
Speaker 1: more I heard from Michael McKey, you know, my suggesting
Speaker 1: that with an opinion, But March, no decision, next meeting,
Speaker 1: no decision because there's no press conference. Unfortunately. You know,
Speaker 1: it does look to me like if if they don't
Speaker 1: go in March, and it seems extremely unlikely that they're
Speaker 1: going to move now. Um, then June is the most likely.
Speaker 1: And the danger is that by the time we get
Speaker 1: that things have moved on significantly. Uh, you know, they're
Speaker 1: already at their mandate in terms of the employment picture,
Speaker 1: and I think they're very close on the inflation front.
Speaker 1: So I think that that if they do wait till June,
Speaker 1: then they'll be going very rapidly after that, and they'll
Speaker 1: have to be a significant adjustment in the markets in
Speaker 1: terms of thinking about what the FED is going to
Speaker 1: have to do, and it will all be triggered by
Speaker 1: the wage numbers, because ultimately it always is the added
Speaker 1: sort of free song, if you like, is that the
Speaker 1: actual inflation, which was supposed to be something we didn't
Speaker 1: have to think about for another two years, could also
Speaker 1: be forcing them to move at the same time. And
Speaker 1: the history tells you that when you've got accelerating inflash
Speaker 1: and wages at the same time, things get very messy,
Speaker 1: very quickly. Ian Shepherdson is always brilliant, Thank you so much.
Speaker 1: With panther Young Mike, I'm gonna put out on Twitter
Speaker 1: on the part time full time question, Jill miss Lynskey.
Speaker 1: It's important when economic data and reports are constructed by
Speaker 1: a physics and astronomy major from the University of Chicago.
Speaker 1: I mean, is that qualifications or what Jill mss Lyndskey.
Speaker 1: I'll put it. I'll get it out on social just
Speaker 1: super work. Rob Low tweeting out Peyton Manning's retirement timed perfectly.
Speaker 1: He could step in as a candidate in a broker
Speaker 1: Republican convention. We want IK or whatever the phrase was
Speaker 1: from fifty two Tim Keenan, Michael McKee and Peyton Manning.
Speaker 1: Good morning,