WEBVTT - FOMC, Labor Strikes, and Earnings (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.000 you listen to podcasts, and at Bloomberg dot com, slash 0:00:20.040 --> 0:00:23.200 podcast rate and smack in the middle of earning season here, 0:00:23.360 --> 0:00:25.480 lots going on, but we do have a big day 0:00:25.480 --> 0:00:27.639 tomorrow for the market, and then as a Federal Reserve 0:00:27.760 --> 0:00:28.880 is going to meet and we're gonna hear what they're 0:00:28.880 --> 0:00:30.760 gonna do with interest rates and get a little bit 0:00:30.760 --> 0:00:33.120 of a preview. Here, Lydia Bussor joins us. She's a 0:00:33.200 --> 0:00:36.800 senior economist at e Y Parthanachi joins us live here 0:00:36.800 --> 0:00:39.920 in our Bloomberg Interactive Broker studio. So, Lydia, what do 0:00:40.000 --> 0:00:42.199 you guys at Ey, what do you think you're going 0:00:42.280 --> 0:00:44.760 to hear from this Federal Reserve tomorrow when we hear 0:00:44.800 --> 0:00:46.040 from Fed Chairman J Powell. 0:00:46.640 --> 0:00:49.240 Sure? So, I think at this stage the twenty five 0:00:49.240 --> 0:00:51.639 bases front rate hike is pretty much baked in, so 0:00:52.280 --> 0:00:55.080 the focus will really be on the press conference, I 0:00:55.080 --> 0:00:58.960 think Fetcher Palell, we'll want to maintain that hockey Ish 0:00:58.960 --> 0:01:02.680 stilt and keep the options open in terms of you know, 0:01:02.920 --> 0:01:05.880 potentially hiking again before the end of the year. So 0:01:05.920 --> 0:01:08.679 we're likely to see, you know, to still have that 0:01:09.319 --> 0:01:12.800 hockey tone and at the same time also you know, 0:01:12.840 --> 0:01:16.560 sticking to that slower pace of tightening. So in our view, 0:01:16.600 --> 0:01:19.880 we're likely to see the Federal Reserve skipping another rate 0:01:19.959 --> 0:01:24.840 hike in September, and by November, we think that the 0:01:25.240 --> 0:01:28.600 economic activity will have slowed significantly and we will have 0:01:28.720 --> 0:01:33.000 seen inflation also coming back down quite significantly as well, 0:01:33.040 --> 0:01:35.600 and that will you know, lead the Fed to stay 0:01:35.800 --> 0:01:38.920 on the sidelines. And so we think we tomorrow is 0:01:38.959 --> 0:01:40.600 going to be the last rate hike in the cycle. 0:01:41.040 --> 0:01:44.240 When it comes to economies in the recession calls, it's 0:01:44.400 --> 0:01:47.480 really become dicey. If you look at the ECFC function 0:01:47.680 --> 0:01:50.640 in the Bloomberg terminal, the revisions for the second and 0:01:50.760 --> 0:01:54.200 third quarter have been adjusted higher. How do you view 0:01:54.440 --> 0:01:58.200 wherethy economy is projected to go in the US? Because 0:01:58.240 --> 0:02:00.280 even just looking at the IMF this morning, we ended 0:02:00.320 --> 0:02:02.560 up lipping the world out look just based on the 0:02:02.560 --> 0:02:04.400 strength that we have seen in the US and the 0:02:04.440 --> 0:02:05.240 stability there. 0:02:05.480 --> 0:02:08.720 Yeah, I mean, we've seen some encouraging science for the economy. 0:02:09.240 --> 0:02:11.440 When we look at the latest economic data and from 0:02:11.520 --> 0:02:14.720 you know, our conversations also with our clients, we are 0:02:14.800 --> 0:02:18.320 seeing more caution from consumers and businesses, but we're not 0:02:18.360 --> 0:02:23.160 seeing a private sector retrenchment in terms of activity. So 0:02:23.200 --> 0:02:26.880 we are seeing you know, downshifting economic activity. We are 0:02:26.919 --> 0:02:30.359 seeing that moderation and inflation, and we are also seeing 0:02:30.440 --> 0:02:33.080 that you know, soft rebalancing in the label market and 0:02:33.160 --> 0:02:37.200 that's definitely led you know, forecasters to raise their expectations 0:02:37.200 --> 0:02:40.919 for growth this year, and also it has also led 0:02:41.000 --> 0:02:43.760 us to you know, lower our odds of our recession. Now, 0:02:43.800 --> 0:02:46.320 I think in this environment, it's still important to remember 0:02:46.400 --> 0:02:50.520 that there are some strong headwinds currently facing the economy 0:02:50.560 --> 0:02:54.320 and that includes tighter credit conditions and that's going to 0:02:54.360 --> 0:02:57.080 continue to put downward pressure on the economy in the 0:02:57.080 --> 0:02:59.560 second half of the year. So we are expecting to 0:02:59.560 --> 0:03:02.480 see some recession conditions later this year. 0:03:02.960 --> 0:03:05.560 You know, the US Consumer Conference came out as John 0:03:05.600 --> 0:03:08.360 Tucker was just reporting a two year high. I found 0:03:08.360 --> 0:03:10.440 the Federal Reserve and I see that data point, I'm 0:03:10.480 --> 0:03:12.680 like I can raise rates some more. 0:03:13.400 --> 0:03:17.160 Yeah, risk, Yeah, I mean, consumers have showed some resilience. 0:03:17.200 --> 0:03:21.480 We've seen consumers continuing to spend despite higher interest rates, 0:03:21.520 --> 0:03:24.600 despite the fact that you know, credit has become harder 0:03:24.600 --> 0:03:28.359 to access and more expensive. And so that resilience has 0:03:28.400 --> 0:03:30.640 been you know, tied to excess savings and the fact 0:03:30.680 --> 0:03:32.959 that they've been able to draw down on these excess 0:03:32.960 --> 0:03:36.440 savings to continue to spend. And at the same time, 0:03:36.480 --> 0:03:39.320 you know, it's important also to think about some of 0:03:39.360 --> 0:03:42.280 the headwinds facing the consumer. We still have high inflation, 0:03:42.960 --> 0:03:45.160 they can no longer rely on these excess savings to 0:03:45.240 --> 0:03:47.880 support spending. And when we look at you know, the fall, 0:03:47.960 --> 0:03:50.600 we're going to have the restart or the student loan repayments, 0:03:50.880 --> 0:03:53.360 and that's also going to be a headwind for the consumer. 0:03:53.600 --> 0:03:56.560 So the consumers continue to spend, but they are more cautious. 0:03:57.000 --> 0:03:59.279 They are also more selective with their spendings. 0:04:00.160 --> 0:04:03.119 On Friday, we actually get the Employment Costs Index, which 0:04:03.120 --> 0:04:05.640 is quarterly. We all know Pala and other policy makers 0:04:05.760 --> 0:04:08.680 wash up very closely the gauge wage inflation, but also 0:04:08.760 --> 0:04:11.280 their preferre gauge when it comes to PCE. And then 0:04:11.320 --> 0:04:13.960 in between this decision and then the one on September twentieth. 0:04:14.080 --> 0:04:16.760 We still have a batch of other CPI data PPI 0:04:17.120 --> 0:04:19.839 as well as PCE. Will that be enough to where 0:04:20.000 --> 0:04:22.279 if it continues to be enough for the Fed to 0:04:22.400 --> 0:04:24.480 actually conclude this tightening cycle. 0:04:24.839 --> 0:04:27.120 Yes, that's the real question. I mean, the FED has 0:04:27.200 --> 0:04:30.719 become extremely data dependent, and so you know they're going 0:04:30.760 --> 0:04:33.279 to be closely looking at all these incoming data between 0:04:33.360 --> 0:04:35.800 non and September to make a decision. And that's a 0:04:35.880 --> 0:04:38.839 key reason why they really want to keep options open 0:04:39.279 --> 0:04:42.279 to that, you know, to a potential rate hike. When 0:04:42.320 --> 0:04:44.480 it comes to wage growth, we know that the FED 0:04:44.600 --> 0:04:47.080 is going to be closely looking at the ECI. I 0:04:47.080 --> 0:04:49.000 think there are some good reasons to think that we're 0:04:49.000 --> 0:04:52.160 going to see some moderation on the wagefront. We've seen 0:04:52.720 --> 0:04:55.919 that rebalancing in the label market making some progress, and 0:04:56.000 --> 0:04:58.240 at the same time we are also seeing the services 0:04:58.279 --> 0:05:01.600 side of inflation also starting to cool as well. So 0:05:01.960 --> 0:05:04.840 we're expecting, you know, wage growth to moderate, to show 0:05:04.880 --> 0:05:09.240 some slight moderation on Friday, and then also looking at 0:05:09.279 --> 0:05:10.000 the rest of the year. 0:05:10.839 --> 0:05:13.680 LYDIA, can you explain to me and to our listeners 0:05:13.720 --> 0:05:17.400 why inflation in Europe is so much more persistent and 0:05:17.480 --> 0:05:19.679 difficult than it is here in the US. 0:05:20.480 --> 0:05:22.680 I mean, I think in when you look at what's 0:05:22.680 --> 0:05:24.880 been happening in Europe, part of the story has also 0:05:24.880 --> 0:05:27.799 been tied to label markets. So there is some label 0:05:27.800 --> 0:05:31.520 market tightness and that's also what we've seen in the US. 0:05:32.160 --> 0:05:35.000 And then you know, if you look at the economy, 0:05:35.000 --> 0:05:38.680 we've also seen some resilience in the European economy. We've 0:05:38.720 --> 0:05:42.000 seen you know, the europe and European economy performing quite 0:05:42.040 --> 0:05:44.839 well over the winter when we were expecting things to 0:05:44.839 --> 0:05:47.200 get worse, and so part of that, I think is 0:05:47.720 --> 0:05:50.760 also helps explain why, you know, inflation pressures have remained 0:05:50.760 --> 0:05:52.000 persistent in Europe. 0:05:52.320 --> 0:05:54.880 Can the US pull off a soft learning because the 0:05:54.960 --> 0:05:57.920 dynamics with inflation being very different here than overseas. 0:05:58.520 --> 0:06:01.159 If we continue to see some of the dynamics we're 0:06:01.160 --> 0:06:03.800 seeing right now in the economy, I think there is 0:06:03.839 --> 0:06:05.919 a chance that we could see a seft lending. I 0:06:05.920 --> 0:06:08.440 think the runway for the selft lending has become wider 0:06:08.800 --> 0:06:12.000 as we've seen that moderation in inflation, as we've seen 0:06:12.040 --> 0:06:16.040 that you know, resilience in economic activity, the economy is slowing, 0:06:16.080 --> 0:06:20.080 but it's not retrenching, so you know, consumers and businesses 0:06:20.120 --> 0:06:23.800 still spending and hiring, and the label market as well, 0:06:24.000 --> 0:06:26.320 we need to continue to see that rebalancing. I think 0:06:26.320 --> 0:06:29.279 when you look at the label market, what's really encouraging 0:06:29.279 --> 0:06:31.680 as well is that rebound in the labor supply and 0:06:31.720 --> 0:06:35.320 the fact that labor force participation has also been rising 0:06:35.360 --> 0:06:38.640 when you look at primate liber force participation. So if 0:06:38.640 --> 0:06:41.360 we continue to see that rebalancing between supply and demand, 0:06:41.960 --> 0:06:45.000 and we continue to see that moderation in inflation, there 0:06:45.080 --> 0:06:47.599 is a chance that the economy, you know, could you know, 0:06:47.640 --> 0:06:48.719 pull up that self lending. 0:06:48.880 --> 0:06:50.760 I think the economists are going to have to rewrite 0:06:50.839 --> 0:06:53.760 some of these textbooks going forward because I don't understand 0:06:53.760 --> 0:06:56.480 it and can't explain really why our labor market is 0:06:56.520 --> 0:06:58.880 as strong as it is here in the United States. 0:06:59.360 --> 0:07:00.000 Do you have a theory? 0:07:00.920 --> 0:07:03.359 I mean, the tightness we're seeing in the label market 0:07:03.440 --> 0:07:07.240 right now is reflecting some of the label market dislocations 0:07:07.240 --> 0:07:10.040 that we've seen during the pandemic. We had this dramatic 0:07:10.080 --> 0:07:14.360 shock that really led to a huge decline in the 0:07:14.400 --> 0:07:17.920 labor supply, and that came at a time when labor 0:07:17.920 --> 0:07:21.040 demand became very strong, and so that mismatch in the 0:07:21.080 --> 0:07:24.600 label market has really generated a lot of label market tightness, 0:07:24.600 --> 0:07:28.160 and we saw wage growth, you know, raising very rapidly. 0:07:28.520 --> 0:07:31.480 Some of these labor shortages have eased, and so that 0:07:31.560 --> 0:07:34.880 has led to the beginning of moderation in wage growth. 0:07:35.280 --> 0:07:37.680 But some of these labor shortages are also going to 0:07:37.720 --> 0:07:41.200 continue moving forward. And then we also have some demographic 0:07:41.240 --> 0:07:44.400 factor acting in the background as well and pulling down 0:07:44.560 --> 0:07:45.840 on labor force participation. 0:07:46.320 --> 0:07:49.800 So if the Fed does indeed raise rates at least 0:07:49.800 --> 0:07:52.600 two more times this year, could that potentially be the 0:07:52.640 --> 0:07:55.680 policy mistake If we're waiting for those lagged effects after 0:07:55.720 --> 0:07:59.560 the last ten meetings where they raised rates that investors 0:07:59.800 --> 0:08:03.080 in everybody in the US is like projecting where this 0:08:03.200 --> 0:08:05.520 recession could be headed that everyone was waiting for. That 0:08:05.560 --> 0:08:08.800 could actually end up potentially tilting the economy into either 0:08:08.840 --> 0:08:11.640 recession or just a regime of slower growth. 0:08:12.240 --> 0:08:14.920 Yeah, I mean, it's it's really hard to gauge, and 0:08:15.160 --> 0:08:17.280 and that's you know, the key question, you know, how 0:08:17.280 --> 0:08:20.480 to calibrate policy just enough to get that soft landing. 0:08:21.240 --> 0:08:24.440 We do think, you know, given our forecast for inflation 0:08:24.640 --> 0:08:28.280 to come back down quite significantly, significantly. We have head 0:08:28.360 --> 0:08:30.880 on infision at three percent by the end of the year, 0:08:30.920 --> 0:08:34.280 we have core inflation between you know, around three point 0:08:34.280 --> 0:08:36.520 five percent three point three point seven percent by the 0:08:36.600 --> 0:08:38.480 end of the year, and then when we look into 0:08:38.480 --> 0:08:41.400 twenty twenty four, a further moderation in inflation. So we 0:08:41.520 --> 0:08:46.280 do think that given the outlook, you know one, that 0:08:46.400 --> 0:08:49.600 those rate hikes would be unnecessary in this context. 0:08:49.920 --> 0:08:52.720 So just lastly quickly, on the core PCE, we're going 0:08:52.760 --> 0:08:55.640 to get that on Thursday, consensus is four percent, down 0:08:55.679 --> 0:08:58.080 from four point nine percent the prior period. It's going 0:08:58.120 --> 0:08:59.720 in the right direction, yes. 0:08:59.600 --> 0:09:02.960 I mean PC infliction is going in the right direction, 0:09:03.080 --> 0:09:06.320 and core inflation in general. I think if you look 0:09:06.360 --> 0:09:08.559 at the rest of the year, we're likely to see 0:09:08.640 --> 0:09:13.079 headline inflation moving sideways as we got past these base effects, 0:09:13.280 --> 0:09:15.000 and I think it's the action is really going to 0:09:15.040 --> 0:09:17.520 happen on the core inflation side, and we're likely to 0:09:17.559 --> 0:09:21.880 see further on this inflation in core services inflation heading 0:09:21.920 --> 0:09:22.880 into twenty twenty four. 0:09:23.120 --> 0:09:25.800 Sounds good to me. I don't know, Lydia Bussor, she's 0:09:25.840 --> 0:09:29.000 the expert, she's the senior econdomists at ey Parthann kind 0:09:29.080 --> 0:09:31.199 enough to come into our Bloomberg and Actor Broker study. 0:09:31.200 --> 0:09:34.200 We appreciate that, Thank you so much, Lydia. Looking at 0:09:34.240 --> 0:09:36.480 these markets just real quickly, just a little bit of 0:09:36.480 --> 0:09:37.880 green on the screen, I think people are kind of 0:09:37.880 --> 0:09:40.040 sitting on the sidelines waiting for what we're gonna see tomorrow. 0:09:40.160 --> 0:09:42.960 And also on Thursday will be the first reading of 0:09:43.080 --> 0:09:45.920 second quarter GDP that did get revised a bit higher. 0:09:45.920 --> 0:09:47.600 If you're looking at the Alana Fed now though, they're 0:09:47.640 --> 0:09:50.880 thinking it's going to come in around two point four percent. Okay, Yeah, 0:09:50.920 --> 0:09:52.199 so that's something we've got to keep an eye on. 0:09:52.320 --> 0:09:57.439 Verste So some decent GDP growth, moderating inflation. What's not that? 0:09:57.640 --> 0:09:57.720 Like? 0:10:00.000 --> 0:10:03.480 Listening to the teenth Ken's a live program Bloomberg Markets 0:10:03.520 --> 0:10:06.599 weekdays at ten am eastering on Bloomberg dot com, the 0:10:06.679 --> 0:10:09.840 iHeartRadio app and the Bloomberg Business app, or listen on 0:10:09.880 --> 0:10:11.880 demand wherever you get your podcasts. 0:10:13.600 --> 0:10:15.720 Let's talk to Dana Peterson because I don't know do 0:10:15.760 --> 0:10:17.520 we have Danna yet? Because I want to get right 0:10:17.559 --> 0:10:18.040 to that data. 0:10:18.120 --> 0:10:21.720 Yeah, she's here, Yeah about that conference consumer confidence, that 0:10:21.800 --> 0:10:24.560 monthly report that obviously came in around a two year high. 0:10:24.559 --> 0:10:24.760 There. 0:10:24.960 --> 0:10:26.440 Yeah, I want to get right to that because it 0:10:26.480 --> 0:10:29.200 came in and really surprising, I think on the upside. 0:10:29.720 --> 0:10:33.400 Dana Peterson joints us here. She is the chief economist 0:10:33.440 --> 0:10:35.760 at the conference board. Dana, talk to us about this 0:10:36.400 --> 0:10:39.880 consumer confidence data we got today. Something really got everybody's attention. 0:10:41.080 --> 0:10:44.560 Absolutely, it was definitely stronger than what markets expected. And 0:10:44.640 --> 0:10:46.800 what's important is that we broke out of that range 0:10:46.840 --> 0:10:48.800 that we had been in for a very long time, 0:10:49.160 --> 0:10:53.120 seeing the highest reading SUNS two years ago. And it 0:10:53.160 --> 0:10:58.040 was not just present situation present confidence being elevated, but 0:10:58.080 --> 0:11:01.400 it was also expectations. So we saw breakouts for both 0:11:01.400 --> 0:11:02.880 of the underlying indicators. 0:11:02.880 --> 0:11:03.120 Here. 0:11:04.000 --> 0:11:06.160 One thing I'm curious about because last week when you 0:11:06.160 --> 0:11:08.959 were talking to us about the monthly report, when it 0:11:09.040 --> 0:11:12.960 comes to the leading economic indicators still pointing toward a 0:11:13.000 --> 0:11:15.880 potential recession in the US, how do you rectify when 0:11:15.880 --> 0:11:18.360 you're looking at that data versus when it comes to 0:11:18.400 --> 0:11:21.520 this sentiment and consumer confidence data. 0:11:21.720 --> 0:11:26.280 Sure, well, the leading index does include expectations, so probably 0:11:26.320 --> 0:11:28.880 in the next reading we'll see the improvement in leading indicators, 0:11:28.880 --> 0:11:32.760 but certainly up through the last measure it's collecting information 0:11:32.880 --> 0:11:35.200 on the yield curve, which has been negative for some time. 0:11:35.559 --> 0:11:38.640 It's also collecting a lot of information on manufacturing. We 0:11:38.679 --> 0:11:41.600 know there is a manufacturing recession going on right now, 0:11:41.960 --> 0:11:45.119 so it's gathering up that info, and it's also collecting 0:11:45.760 --> 0:11:49.880 some of the declines we've seen are rather worsening. We've 0:11:49.920 --> 0:11:53.480 seen in jobless claims, which I mean are still incredibly low, 0:11:53.600 --> 0:11:57.080 but it does capture monthly movements, and so when you 0:11:57.080 --> 0:12:00.079 pull all those things together, it's still flashing red for 0:12:00.200 --> 0:12:03.480 recession at some point over the next year. So it's 0:12:03.920 --> 0:12:07.480 it's not necessarily inconsistent. Consumers are saying that they're not 0:12:08.080 --> 0:12:11.920 as concerned about recession going forward, but there's still that 0:12:12.080 --> 0:12:14.640 risk out there that the leading indicators is showing us. 0:12:15.200 --> 0:12:17.160 So one of the numbers that really jumped out of me, 0:12:17.600 --> 0:12:20.280 Dana was the Conference board expectations came in an eighty 0:12:20.320 --> 0:12:24.640 eight point three. That's versus a revised hire eighty for 0:12:25.200 --> 0:12:28.440 last period. Put into context what an eighty eight point 0:12:28.520 --> 0:12:29.120 three means. 0:12:30.360 --> 0:12:34.040 Yeah, so anything above eighty means that consumers are not 0:12:34.320 --> 0:12:38.360 expecting recession, and anything below means they are expecting recession 0:12:38.400 --> 0:12:41.560 within the next six to twelve months, so we've been 0:12:41.600 --> 0:12:43.920 hanging out below eighty for some time. So it really 0:12:43.960 --> 0:12:46.280 is significant that we had one reading that was right 0:12:46.320 --> 0:12:48.560 on the button and then one reading that's been that 0:12:48.679 --> 0:12:49.560 was notably above. 0:12:50.400 --> 0:12:53.400 Where are the pain points when it comes to consumers? 0:12:53.440 --> 0:12:55.760 Because it looks like when it comes to stay some 0:12:55.880 --> 0:12:59.400 red flags bubbling up, especially when you're looking at auto delinquencies. 0:12:59.480 --> 0:13:01.800 What is that telling us right now? And at what 0:13:01.920 --> 0:13:04.360 threshold does it need to end up happening and hit 0:13:04.679 --> 0:13:06.480 to be more of an issue when it comes to 0:13:06.520 --> 0:13:09.120 a pullback in consumer spending and what that could mean 0:13:09.120 --> 0:13:10.480 for the trajectory of GDP. 0:13:12.120 --> 0:13:14.560 Sure, So I think for you have to break it 0:13:14.640 --> 0:13:18.000 up into goods and services. For goods, consumers have been 0:13:18.040 --> 0:13:21.800 feeling the pressure from higher interest rates, and certainly if 0:13:21.800 --> 0:13:24.720 you're starting to see delinquencies go up, that's because interest 0:13:24.800 --> 0:13:29.840 rates are rising. So anyone who had been financing something, 0:13:29.960 --> 0:13:32.120 but usually not a car because that's usually a five 0:13:32.200 --> 0:13:36.280 year fixed rate, but anything that might be increasing in 0:13:36.320 --> 0:13:39.160 the rate, then that's going to be a weight on 0:13:39.240 --> 0:13:41.600 consumers and they're probably going to pull back on durables. 0:13:41.600 --> 0:13:43.640 So when we look at the six months mooth or 0:13:43.760 --> 0:13:47.880 moving average, of the conference boards buying indicators, but the 0:13:47.960 --> 0:13:51.040 most part they're showing some weakness. But we also ask 0:13:51.120 --> 0:13:54.439 a special question about services and what consumers are saying, 0:13:54.440 --> 0:13:57.559 and services don't usually get affected by the interest rate, 0:13:57.600 --> 0:13:59.360 which is a big challenge for the FED. But they're 0:13:59.400 --> 0:14:02.520 saying there will to buy fewer things that they want 0:14:02.720 --> 0:14:05.360 and more things that they need. And so I think 0:14:05.360 --> 0:14:07.880 that's significant in terms of a shift in what people 0:14:07.920 --> 0:14:10.560 are actually spending on. When it comes to services, they're 0:14:10.559 --> 0:14:13.640 spending on things that they can't live without and less 0:14:13.679 --> 0:14:15.880 on the things that they may just desire. 0:14:16.800 --> 0:14:20.480 Dana, you know the consumer confidence number of one seventeen here, 0:14:20.520 --> 0:14:23.200 the highest in two years. I would think that a 0:14:23.240 --> 0:14:25.480 strong labor market has to be a big component of that. 0:14:26.160 --> 0:14:29.120 Just explain to us how labor kind of weaves into 0:14:29.200 --> 0:14:30.680 that consumer confidence number. 0:14:31.800 --> 0:14:34.320 Absolutely, we ask about labor in a number of places. 0:14:34.360 --> 0:14:38.040 We ask it for the present situation and for the expectations, 0:14:38.080 --> 0:14:41.360 and in both of those measures, consumers are saying, yes, 0:14:41.440 --> 0:14:43.880 we think the labor market's doing well in terms of 0:14:44.000 --> 0:14:49.600 current conditions. There are more jobs out there than we 0:14:49.640 --> 0:14:52.480 even need, so jobs are easy to get. When it 0:14:52.520 --> 0:14:55.040 comes to expectations, they're saying, yes, we still think we're 0:14:55.040 --> 0:14:57.680 going to be employed in the future. And certainly when 0:14:57.720 --> 0:15:00.840 we ask CEOs what they're doing with respect to the 0:15:00.880 --> 0:15:03.920 labor market, many of them are still saying they're hiring, 0:15:04.040 --> 0:15:06.320 and then a lot of them are actually just holding 0:15:06.360 --> 0:15:08.600 on to workers. They're hoarding workers, they're not looking to 0:15:08.680 --> 0:15:11.480 let people go. So I think that's also showing up 0:15:11.480 --> 0:15:16.800 in consumer sentiment of confidence with regard to the labor market. 0:15:16.840 --> 0:15:19.960 And certainly, if you're working and your wages have risen 0:15:20.000 --> 0:15:22.600 a bit and you're seeing inflation come off and your 0:15:22.640 --> 0:15:25.160 real wages a rising, you're going to feel better. And 0:15:25.200 --> 0:15:28.520 I think that's what's being exhibit here, exhibited here in 0:15:28.560 --> 0:15:29.360 today's report. 0:15:29.560 --> 0:15:31.240 Yeah, one of the things that's a new concept to 0:15:31.280 --> 0:15:34.240 me is hoarding workers. I don't think i've heard of 0:15:34.240 --> 0:15:37.200 that before. Is that something you economists have seen before. 0:15:39.400 --> 0:15:42.080 I'm sure that's happened in the past, but this is 0:15:42.120 --> 0:15:45.440 definitely something that is very noticeable now. And I think 0:15:45.640 --> 0:15:49.080 the reason why we're having hoarding is because of labor shortages. 0:15:49.160 --> 0:15:53.240 And many businesses worked really hard to attract labor, and 0:15:53.280 --> 0:15:56.480 they're also working really hard to retain labor, and so 0:15:56.560 --> 0:15:58.640 they don't want to let people go, especially if they 0:15:58.640 --> 0:16:01.200 think that maybe they're might be a recession. But it's 0:16:01.200 --> 0:16:02.760 not going to be that bad. It's not going to 0:16:02.800 --> 0:16:05.480 be that long. So if that's the situation, you hold 0:16:05.520 --> 0:16:07.520 on to your workers, you hold on to your talent, 0:16:07.840 --> 0:16:09.640 and you don't let them all go and then have 0:16:09.680 --> 0:16:12.280 to come back six to nine months later and bring 0:16:12.320 --> 0:16:15.320 them back. We hire them at a higher price point. 0:16:15.600 --> 0:16:19.000 So that's something that is a phenomenon that I mean, 0:16:19.040 --> 0:16:21.880 I can't necessarily say if that's ever happened to before. 0:16:21.880 --> 0:16:24.200 I'm sure it has, but certainly we're seeing it right 0:16:24.240 --> 0:16:28.600 now and it's an important development that's affecting the labor market. 0:16:29.080 --> 0:16:32.400 Dana, as an economist, how many more rate increases do 0:16:32.480 --> 0:16:35.480 you think the US economy can handle as we're waiting 0:16:35.520 --> 0:16:36.600 on those lagged effects. 0:16:38.000 --> 0:16:40.320 Well, that's just the thing. It's the Fed has already 0:16:40.400 --> 0:16:44.240 raised rates by five hundred basis points, and nonetheless, consumers 0:16:44.280 --> 0:16:47.680 are out there spending and businesses aren't letting people go 0:16:48.840 --> 0:16:52.080 very much, so the economy can still handle it. So 0:16:52.400 --> 0:16:56.120 we expect at least two more interest rate hikes from 0:16:56.160 --> 0:17:00.440 the Fed, definitely this week and then potentially in September. 0:17:00.600 --> 0:17:04.040 Although that September hike, maybe later if the FED says 0:17:04.080 --> 0:17:06.320 that they want more time to sit and wait and 0:17:06.359 --> 0:17:09.399 see how those lags play out. But certainly, for the 0:17:09.440 --> 0:17:12.879 most part, the economy has been able to manage the 0:17:12.960 --> 0:17:16.040 increases in interest rates, and it's not clear like how 0:17:16.080 --> 0:17:19.680 far the FED can go before something, well, the economy 0:17:19.720 --> 0:17:20.600 itself breaks. 0:17:21.359 --> 0:17:22.960 So what do you expect or what's what are the 0:17:23.000 --> 0:17:25.240 good folks at the conference board A conference board expect 0:17:25.280 --> 0:17:26.840 to hear from FED Chairman j Pal tomorrow. 0:17:28.400 --> 0:17:32.000 Well, we expect that the chair will say that there 0:17:32.040 --> 0:17:34.480 have been positive developments. I mean, they're looking at these 0:17:34.480 --> 0:17:37.200 consumer confidence measures just like we are. We send them 0:17:37.240 --> 0:17:40.959 to them and they well they get it when everybody 0:17:41.000 --> 0:17:45.320 else does, is to be clear, and they're looking at that. 0:17:45.400 --> 0:17:48.240 They're also looking at the fact that CPI inflation has 0:17:48.240 --> 0:17:51.520 come off. That's not their preferred measure. But they're going 0:17:51.560 --> 0:17:56.240 to get the BEA data later this week and I'm 0:17:56.280 --> 0:17:58.159 sure some of the action that we saw in the 0:17:58.200 --> 0:18:02.240 CPI will be reflected there. So calmer inflation, lower consumer 0:18:02.480 --> 0:18:08.920 inflation expectations, a more upbeat consumer. Also, we're seeing that, yes, 0:18:08.960 --> 0:18:12.920 there is this very weak growth in manufacturing, but services 0:18:13.000 --> 0:18:15.960 are still doing okay. So with all of that, I 0:18:16.000 --> 0:18:19.000 would say the FED would be pleased with the slowing inflation, 0:18:19.119 --> 0:18:22.600 but not happy with the ongoing straight that we've seen 0:18:22.640 --> 0:18:28.240 in the labor market. That's challenging keeping inflation or helping 0:18:28.280 --> 0:18:31.720 inflation to fall further. So I think with that we're 0:18:31.760 --> 0:18:34.800 probably going to see another hike, certainly this week, and 0:18:34.840 --> 0:18:36.920 then another one before year end. 0:18:37.119 --> 0:18:39.560 We only have about twenty seconds left. But the dissents 0:18:39.640 --> 0:18:41.679 when it comes to the FED decision, what are you watching? 0:18:43.320 --> 0:18:45.560 Well, certainly there may be some descents in terms of 0:18:45.600 --> 0:18:47.679 those who think that the FED is done enough and 0:18:47.720 --> 0:18:51.439 we should pause. We've heard that, you know, from a 0:18:51.520 --> 0:18:55.920 number of participants in the FOMC. So it'd be curious 0:18:55.960 --> 0:18:58.000 to see if they actually put that down on paper 0:18:58.040 --> 0:18:59.640 and say, look, we've done enough. We need to sit 0:18:59.680 --> 0:19:02.640 and wait and see how all these lags work through 0:19:02.680 --> 0:19:03.359 the economy. 0:19:03.920 --> 0:19:05.679 I would be one of those people, just so you know. 0:19:06.160 --> 0:19:09.120 Dana Peterson, chief Economists for the Conference Board, joins us here. 0:19:09.160 --> 0:19:11.400 We appreciate getting her thoughts here. We had some good 0:19:11.640 --> 0:19:14.960 consumer confidence data coming out from the Conference Board today. 0:19:15.880 --> 0:19:19.920 One seventeen consensus was for one twelve, so much better 0:19:19.920 --> 0:19:22.600 than that, and it was the best in two years. 0:19:22.640 --> 0:19:25.120 So how about that consumer? Hanging in there tough. 0:19:25.440 --> 0:19:29.040 You're listening to the tape cancer Live program Bloomberg Markets 0:19:29.080 --> 0:19:32.480 weekdays at ten am Eastern on Bloomberg Radio, the tune 0:19:32.520 --> 0:19:35.480 in app, Bloomberg dot Com, and the Bloomberg Business App. 0:19:35.520 --> 0:19:38.320 You can also listen live on Amazon Alexa from our 0:19:38.359 --> 0:19:43.400 flagship New York station Just say Alexa playing Bloomberg eleven thirty. 0:19:45.080 --> 0:19:48.280 Paul. We have this potential ups strike from workers that 0:19:48.359 --> 0:19:51.440 might be coming up very soon. So joining us now 0:19:51.520 --> 0:19:55.280 is Lee Klascow, who at Bloomberg Intelligence, he's the sector 0:19:55.359 --> 0:19:59.119 head and senior analyst of Free Transportation at BI. Is 0:19:59.119 --> 0:20:01.639 going to walk us through this. Lee talk to us 0:20:01.680 --> 0:20:06.040 about what's happening here, where to stocks, where do talks stand, 0:20:06.520 --> 0:20:09.880 and what should we expect to happen from here out. 0:20:10.960 --> 0:20:13.240 Yeah, so what we know as of right now is 0:20:13.240 --> 0:20:17.440 that the two parties are at the negotiating tables. They 0:20:17.480 --> 0:20:21.080 took a time out because they're really far apart on 0:20:21.680 --> 0:20:24.639