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A Look At Markets, Mental Health, And Jobs Day · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. It's checking with a professional,
0:22
Speaker 1: see what it all means. We do that with Marcus More,
0:24
Speaker 1: assistant portfolio manager at Zero Capital Advisors. Marcus, you know,
0:30
Speaker 1: in these equity markets, at least we're seeing this volatility
0:34
Speaker 1: over the last six seven eight trading sessions, kind of
0:36
Speaker 1: one percent moves in either direction. What does that tell
0:40
Speaker 1: you other than I guess if you're a good trader,
0:42
Speaker 1: this is a kind of market, Like what do you
0:44
Speaker 1: make out of it? Um? And first of all, thanks
0:47
Speaker 1: for having me today. Um. Actually, the interesting we're having
0:50
Speaker 1: that conversation today actually in the office and virtually UM,
0:57
Speaker 1: and I've been I've felt for some time now that
0:59
Speaker 1: the market is just lacked a direction. Um. It's felt
1:02
Speaker 1: that way at least since you know, late summer. Um.
1:05
Speaker 1: I think there's so many headlines and so many things
1:08
Speaker 1: to be concerned about. UM. You've got obviously supply chains, inflation, UM, employment, UM,
1:15
Speaker 1: people try to get back UM, delta variant, and so
1:18
Speaker 1: all of these things political with it with the you know,
1:21
Speaker 1: we have a deal reach now, but you know, we
1:23
Speaker 1: weren't sure what that was gonna look like, you know,
1:25
Speaker 1: just yesterday. UM. And so with all of that, I
1:28
Speaker 1: think the market understands that there are a lot of
1:31
Speaker 1: risk out there, and so when those risks popped to
1:33
Speaker 1: the surface, I think it's a response of the market.
1:36
Speaker 1: Response has been to move and move relatively aggressively. UM.
1:40
Speaker 1: We felt for some time that there was more volatility
1:42
Speaker 1: to come in the markets, and we when we're seeing that,
1:45
Speaker 1: and so UM, to some extent, this is what I was.
1:49
Speaker 1: I've been expecting more of myself throughout most of one
1:54
Speaker 1: has been relatively benign. One way upward traffic. UM. I
1:58
Speaker 1: feel like this, given where we are, all of the
2:00
Speaker 1: things that we have in front of us to deal with, UM,
2:03
Speaker 1: this makes sense to me that we're seeing the volatility
2:05
Speaker 1: that we have that we have recently well and Marcus,
2:07
Speaker 1: I wonder how this translates to the bond market as well,
2:09
Speaker 1: because for a long time the bond market was sending
2:11
Speaker 1: a different signal than the stock market. Was the stock
2:14
Speaker 1: market continuing to climb the wall of worry and yet
2:16
Speaker 1: yield staying really low, reflecting that there was still some
2:19
Speaker 1: kind of you know, hesitation out there. Now, yields are
2:23
Speaker 1: higher than they were, but still around you know, one
2:26
Speaker 1: five percent, they're relatively low. Can you be a buyer
2:28
Speaker 1: of bonds in this environment? I mean, I think, um,
2:32
Speaker 1: you know, you'll let me talk my book as if
2:35
Speaker 1: someone who focuses on high yield. UM, I definitely think
2:38
Speaker 1: there's still uh, hi yield is still relatively attractive. UM.
2:42
Speaker 1: I think the benefits and hi yo currently are the
2:45
Speaker 1: fact that while we do have a lot of kind
2:49
Speaker 1: of concerns and headwinds in the short term, fundamentally a
2:53
Speaker 1: lot of these companies are performing much better. UM. I
2:56
Speaker 1: think I looked at the S and P stimate for
2:57
Speaker 1: two two earnings, UM the vague rou versus Q two
3:01
Speaker 1: nineteen about sevent and so that's as an SNP as
3:06
Speaker 1: a whole, that suggests that big picture, now again there
3:09
Speaker 1: are some winners and there's some losers in that, but
3:11
Speaker 1: big picture, we're kind of well beyond quote unquote recovery
3:17
Speaker 1: and kind of moving into a kind of phase or
3:19
Speaker 1: a period of growth. And so high are you could
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Speaker 1: offer us, I mean fundamentally better companies, more cash flow,
3:26
Speaker 1: and so that's an attractive thing if you think about
3:28
Speaker 1: how yield right now, UM, the makeup has more double
3:32
Speaker 1: b UM rated bonds in it than it has at
3:34
Speaker 1: any other point in its history UM. And so you
3:37
Speaker 1: still have a lot of high quality names within the portfolio.
3:40
Speaker 1: And then from a duration standpoint, the average duration for
3:43
Speaker 1: HW yield right now three and a half three and
3:44
Speaker 1: a half years UM relative to investment grade which is
3:47
Speaker 1: eight and a half. So as you think about where
3:50
Speaker 1: you'd rather be in a rising interest rate environment, I'm
3:53
Speaker 1: comfortable taking you know, high yield with improving credit, stronger credit,
3:58
Speaker 1: and much less duration. Marcus talked to us about credit quality.
4:02
Speaker 1: It's I think actually just amazed, you know, being a
4:05
Speaker 1: former credit analyst myself, how well corporate America has done.
4:09
Speaker 1: And is that simply a focus of as we came
4:12
Speaker 1: out of this eighteen month pandemic, is that just a
4:14
Speaker 1: function of the FED was kind of backstopping everybody, and
4:17
Speaker 1: we had a lot of fiscal stimulus. Well, I mean definitely.
4:20
Speaker 1: I mean, I mean, I think the FED has been
4:23
Speaker 1: a friend to markets for some time now, and it
4:26
Speaker 1: definitely was a friend of markets during this period. Um,
4:30
Speaker 1: the ability to access capital at a time which there
4:33
Speaker 1: was great uncertainty was very important. UM. And then the
4:36
Speaker 1: other piece of FED stimulus is that it put a
4:38
Speaker 1: lot of money in consumer's pockets. And so as we
4:42
Speaker 1: got through kind of the initial rollout phase and the
4:46
Speaker 1: I don't I guess it, I call it the reopening,
4:49
Speaker 1: but then we'd reclosed. I don't know how you really
4:51
Speaker 1: want to characterize it, but um, you know, there was
4:55
Speaker 1: a lot of pent up demand in the marketplace. And
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Speaker 1: so if you take on if you look at companies
5:00
Speaker 1: that aren't or haven't been directly impacted by COVID in
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Speaker 1: terms of shutdowns or limit or limited activity, many of
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Speaker 1: these companies are reporting record sales growth and earning given
5:12
Speaker 1: you know, the amount of FED stimulus and monetary stimulus
5:16
Speaker 1: that we've seen in the marketplace, and so, um, it's
5:19
Speaker 1: been a benefit for sure, and that has helped drive
5:21
Speaker 1: much better credit quality throughout the high space and credit
5:25
Speaker 1: space in general markets. Just quickly, in about thirty seconds,
5:28
Speaker 1: what does the impact of policy normalization then have. I mean,
5:33
Speaker 1: I think that's gonna be the big question as we
5:36
Speaker 1: go forward. Right, Um, we consumer balances are in great shape. Um,
5:42
Speaker 1: there's low levels of debt. But given the supply chain challenges,
5:47
Speaker 1: how long is the consumer going to stay engaged and
5:49
Speaker 1: wait through those supply chain challenges and be willing to
5:51
Speaker 1: pay higher prices? I mean, I think that's really the
5:54
Speaker 1: huge question that we still don't have an answer to.
5:56
Speaker 1: But as a credit analyst, what I've really focused on
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Speaker 1: is just making sure that these companies can kind of
6:01
Speaker 1: manage through the best case scenario and then definitely managed
6:04
Speaker 1: through the worst case scenario. And Marcus, thanks so much
6:07
Speaker 1: for joining us. We really appreciate you taking the time
6:09
Speaker 1: and sharing your expertise with us. Marcus Moore, he's an
6:12
Speaker 1: assistant portfolio manager at Zeo Capital Advisors. UH seeing some
6:17
Speaker 1: even though we've got a big rally, we've had a
6:19
Speaker 1: big rally UH in bonds, pushing those yields down. Still
6:23
Speaker 1: see some opportunities in a high yield space here and
6:26
Speaker 1: so again, as Marcus was suggesting, getting some normalization of
6:29
Speaker 1: policy coming out of Washington over the next uh several weeks,
6:32
Speaker 1: I guess next several months is going to be one
6:35
Speaker 1: of the near term catalyst one or the other. We'll
6:38
Speaker 1: have more coming up and all of that. This is Bloomberg.
6:43
Speaker 1: You know, there's this wall of worry out there, the
6:46
Speaker 1: Katie and I talked about a lot of Yet you
6:48
Speaker 1: still see these markets moving higher despite some issues, whether
6:52
Speaker 1: it be coming out of Washington, or be supply chain
6:54
Speaker 1: issues or the FED. I mean, lots of issues out
6:57
Speaker 1: there for investors to figure out to discount into their
7:01
Speaker 1: valuations and their outlook. Let's turn to a professional now,
7:04
Speaker 1: Lisa Erickson, Senior vice president and co head of the
7:06
Speaker 1: Public Markets Group at US Bank. They have over one
7:10
Speaker 1: billion dollars in assets under management, so they know what
7:13
Speaker 1: they're talking about. Lisa, thanks so much for joining us here.
7:16
Speaker 1: We got a little bit of good news out of
7:18
Speaker 1: Washington this morning. Looks like the US government is not
7:20
Speaker 1: going to at default at least in the next couple
7:22
Speaker 1: of days or weeks. Um, give us your thoughts on
7:25
Speaker 1: these markets here as we you know, climb higher but
7:29
Speaker 1: with some increased volatility. Absolutely well, Paul, thanks for having
7:33
Speaker 1: us today, and to your point, we still see the
7:36
Speaker 1: outlook for the US equity market is upwards. Through the
7:40
Speaker 1: end of the year, but with some back and forth
7:42
Speaker 1: and volatile movement just because of the number of issues
7:45
Speaker 1: going on. And the reason we really have that view
7:48
Speaker 1: is if you look at the underpinning for where the
7:51
Speaker 1: market has headed, we really see actually a still nice
7:55
Speaker 1: macro environment. As we track hundreds of indicators across the
7:59
Speaker 1: US and the global economy, we still see most readings
8:02
Speaker 1: at pretty high absolute levels and actually a good trend
8:06
Speaker 1: in the direction of those factors, meaning that if you
8:09
Speaker 1: compare their most recent reading to the last month, we're
8:12
Speaker 1: still seeing the majority of those have growth in the
8:15
Speaker 1: direction they're headed. But that being said, to your point,
8:19
Speaker 1: there is some wall of worry that the stock market
8:22
Speaker 1: is having to climb, and those really have to do
8:25
Speaker 1: with potentially the range of outcomes in the next few months.
8:28
Speaker 1: You know, our hope is to continue to see some
8:30
Speaker 1: normalization in the supply side and the labor market, which
8:35
Speaker 1: would hopefully then also relead some of those inflationary pressures,
8:38
Speaker 1: but the trend on that is not clear, so we've
8:41
Speaker 1: got a little bit of back and forth with that
8:43
Speaker 1: and some of the policy issues. Then we think again
8:46
Speaker 1: the trajectories up in the near term, but will continue
8:49
Speaker 1: to monitor the situation. Well, you were talking about growth
8:53
Speaker 1: there in the inflation price growth that we are seeing.
8:58
Speaker 1: It seems that every now and then the more get
9:00
Speaker 1: all of a sudden has one day and it's a
9:01
Speaker 1: reckoning of inflation and oh my god, inflations here it's
9:04
Speaker 1: going to be persistent. Sell everything, and then the next
9:07
Speaker 1: day everything is fine. Why is it so hard to
9:09
Speaker 1: get a handle on that? Yeah, great, great question, Kaylee,
9:14
Speaker 1: And we really see what's going on is just that
9:16
Speaker 1: concern over the near term outlook being murkier. So if
9:20
Speaker 1: you look at the inflation curve, which really measures what
9:23
Speaker 1: the expectations are going out over time, what you actually
9:25
Speaker 1: see is a relatively unusual situation for history, which is
9:30
Speaker 1: that the further out of several years out of inflation
9:33
Speaker 1: expectations are actually lower than what they are today. And
9:36
Speaker 1: so I think, really what the market is having a
9:39
Speaker 1: hard time coming to grips with is just in the
9:41
Speaker 1: near term over the next few months and quarters, Really,
9:44
Speaker 1: what is that trajectory going to be And are we
9:46
Speaker 1: going to continue to see the the higher levels that
9:50
Speaker 1: we've experienced over the last few quarters continue on, or
9:53
Speaker 1: will we get a more near term resolution you know,
9:56
Speaker 1: our base case when we look at our forecast is
9:58
Speaker 1: that that inflation rate, while still elevated compared to history,
10:02
Speaker 1: will come down over the next few quarters. But again
10:05
Speaker 1: a lot of that depends on the ongoing resolution of
10:08
Speaker 1: the supply slide constraints as well as what happens with
10:11
Speaker 1: the labor market. LISA earnings start in earnest next week
10:16
Speaker 1: with the big banks starting. What are you looking for?
10:19
Speaker 1: What are you concerned about as we go through this
10:21
Speaker 1: third quarter earning season. Well, the cheap issue on our
10:25
Speaker 1: mind really is around margins, and certainly there's been a
10:28
Speaker 1: lot of talk across the press on the margin issue,
10:32
Speaker 1: and over the last few quarters, stretching back for some time,
10:35
Speaker 1: there's been talk of peak margins. I think the interesting
10:38
Speaker 1: issue has been that despite the fact that everybody's worried
10:42
Speaker 1: that the margins have already peaked, companies have continued to
10:46
Speaker 1: be able to turn out the numbers and maintain those figures.
10:50
Speaker 1: So h third quarter will actually be obviously a really
10:53
Speaker 1: interesting time to see how that story is unfolding. Clearly,
10:57
Speaker 1: as as you guys just pointed out, we are seeing
10:59
Speaker 1: some prior increased pressures and so the question is really
11:03
Speaker 1: going to be the ability to pass through those pressures,
11:06
Speaker 1: and we've had mixed readings so far from companies in
11:10
Speaker 1: recent announcements over the last few weeks, so that is
11:13
Speaker 1: really going to be a key issue that we're going
11:15
Speaker 1: to be looking at. Also. I think the other the
11:17
Speaker 1: second key issue really is going to be the high
11:20
Speaker 1: bar of expectations. We've had some nice numbers coming out
11:24
Speaker 1: in terms of earnings estimates and sales estimates, but conversely,
11:29
Speaker 1: because the expectations are robust, that made me make it
11:32
Speaker 1: more difficult for companies to be That being said, we
11:36
Speaker 1: are overall still optimistic for what the earning seasons is
11:41
Speaker 1: going to look like. We've had again very nice performance
11:45
Speaker 1: year to date, and as we track some of those
11:47
Speaker 1: companies bottom up, we're seeing continued good momentum and how
11:52
Speaker 1: they're managing themselves. So we're hopeful, but we want to
11:55
Speaker 1: see how the numbers actually turn out. Yeah, Paul, I
11:58
Speaker 1: feel like this is a pretty consistent theme for you know,
12:01
Speaker 1: quarter after quarter, expectations are always at the highest do
12:06
Speaker 1: you think they could possibly be going into the print,
12:08
Speaker 1: and oftentimes they are exceeded. They've been exceeding expectations by
12:12
Speaker 1: a pretty sizeable amount in the past, you know, five
12:15
Speaker 1: quarters or so. The question is if they can continue
12:17
Speaker 1: to do that given some of those price and crushers
12:18
Speaker 1: that are out there. Then I saw also very much
12:20
Speaker 1: about the forward guidance that these companies were able to provide. Lisa,
12:24
Speaker 1: thank you so much for joining us. We really appreciate
12:26
Speaker 1: you lending us your time and expertise. Lisa Erickson, Senior
12:29
Speaker 1: vice president and co head of the Public Markets Group
12:32
Speaker 1: at US Bank. They were billion dollars in assets under
12:35
Speaker 1: management based in Minneapolis, getting that good Midwest look of
12:40
Speaker 1: the economy and of the markets well during this pandemic
12:46
Speaker 1: over the last eighteen months. The work from home option
12:49
Speaker 1: has been a godsend for many people, um, but for
12:52
Speaker 1: some it's kind of added to the job stresses. If
12:55
Speaker 1: you want created some new stresses. Let's get some some
12:57
Speaker 1: details here. Rebecca Ray, executive vice president of Human Capital
13:01
Speaker 1: for the conference Board, joins us, and we should note
13:03
Speaker 1: that the World Mental Health Day is this Sunday, October tent,
13:07
Speaker 1: so it's good timing. Rebecca talked to us about some
13:09
Speaker 1: of the new I guess work stresses that folks are encountering.
13:13
Speaker 1: Here is who go into you know, the eighteen month
13:16
Speaker 1: of this pandemic and people been working from home. Sure, thanks, Paul.
13:22
Speaker 1: So I'm delighted to share a little bit of the
13:24
Speaker 1: survey results. We asked American workers how they were feeling
13:28
Speaker 1: about their mental health concerns, and we had about eighteen
13:32
Speaker 1: or so come back and tell us that they're very concerned.
13:37
Speaker 1: There's nearly eight in ten who are concerned about their
13:39
Speaker 1: mental health. You know, we asked this question, uh, six
13:43
Speaker 1: months ago and it was and now it came back
13:46
Speaker 1: sevent We're just very concerned about two things, in particular,
13:50
Speaker 1: the workload which is grown exponentially and blurred boundaries between
13:55
Speaker 1: you know, their work lives and their personal lives. And
13:58
Speaker 1: what surprised us about this is that that was well
14:00
Speaker 1: above the percentages that said they were afraid of exposing
14:04
Speaker 1: loved ones to COVID or contracting it themselves. How is
14:08
Speaker 1: it different for women and men? Sure? Well, you know,
14:13
Speaker 1: women uh did indicate that it was a greater concern
14:17
Speaker 1: for them versus men at sight. You know, I think
14:22
Speaker 1: all of us have been impacted and right wrong or
14:25
Speaker 1: in different I think elder care and childcare still falls
14:29
Speaker 1: disproportionately to women, and so if they feel that greater heights.
14:33
Speaker 1: It's a combination of those two things that has really
14:37
Speaker 1: taken a toll on women in particular, and I think
14:39
Speaker 1: that's evidenced by the exodus of many women who have
14:41
Speaker 1: had to make some difficult choices and leave the workplace. Rebecca,
14:45
Speaker 1: I've heard from and read a lot of news articles
14:49
Speaker 1: saying that, you know, people are working more, um, it's
14:53
Speaker 1: tough to switch it off, and as a result, kind
14:56
Speaker 1: of the burnout factor is higher than ever. What is
15:00
Speaker 1: your data show, Yeah, we're seeing the same thing. Burnout
15:04
Speaker 1: concerns you skyrocketing. And I think part of this is,
15:08
Speaker 1: you know, early on, I think we asked a lot
15:11
Speaker 1: of workers, and workers I think for the most part,
15:13
Speaker 1: tried to step up so that they didn't let their
15:16
Speaker 1: customers down, with their clients, or their or their teammates,
15:19
Speaker 1: and and certainly those who are on the front line
15:21
Speaker 1: or central workers, there's an additional level of the things
15:26
Speaker 1: that we've asked from them. So so I think that
15:29
Speaker 1: at the beginning, we were all happy to do what
15:31
Speaker 1: it wanted to do it. We were all swinging for
15:33
Speaker 1: the fence, and I think we thought that this was
15:35
Speaker 1: going to be a sprint, not a marathon. And so
15:38
Speaker 1: now we're eighteen nineteen months into this and it has
15:41
Speaker 1: become a marathon for many folks, and I think that
15:43
Speaker 1: has taken a long toll. We we asked about optimism
15:47
Speaker 1: back in April. We've been asking these similar questions for
15:49
Speaker 1: some time now, and there was a great deal more
15:51
Speaker 1: optimism back in April, more excitement about thinking, you know,
15:55
Speaker 1: the vaccines are here, We're going to get back into
15:57
Speaker 1: the workplace will be quite the same, but it's the
15:59
Speaker 1: next them or whatever that might look like. And then
16:01
Speaker 1: we realized that even those plans, you know, had to shift.
16:04
Speaker 1: So it you need a light at the end of
16:07
Speaker 1: the tunnel. We need people to be optimistic. And that's
16:10
Speaker 1: just not what we're seeing in the data because this
16:12
Speaker 1: is just dragged down for so long. And maybe that
16:14
Speaker 1: helps explain why participation has still remained so low. Even
16:18
Speaker 1: though there's ten million job openings in the US, there's
16:21
Speaker 1: a real struggle to get them filled. If a company
16:24
Speaker 1: is struggling to hire, what, based on the data you've seen,
16:27
Speaker 1: do they need to recognize and be offering workers to
16:30
Speaker 1: make them feel comfortable. Sure? Well, you know, when we
16:34
Speaker 1: asked about the various things that organizations had done to
16:37
Speaker 1: support their mental health of their workers, you know, and
16:41
Speaker 1: many companies have done some really lovely things and put
16:43
Speaker 1: together a panoply of options for employees. But when we
16:47
Speaker 1: asked employees what was really helpful, they said most of
16:49
Speaker 1: them were either not helpful or slightly helpful at best,
16:52
Speaker 1: and that was more than half of them. But here's
16:54
Speaker 1: what did work. Those who said that they had the
16:57
Speaker 1: option for formal policies that support work life balance and integration,
17:01
Speaker 1: they said that those were the most helpful. So I
17:05
Speaker 1: think companies need to really think about what the flexibility
17:09
Speaker 1: need to look like to attract workers back to the workplace.
17:13
Speaker 1: How can work get done where, by whom, on what
17:16
Speaker 1: under what circumstances. I think they have to be very
17:19
Speaker 1: thoughtful about this. And the concern that I think companies
17:22
Speaker 1: should have is that flexibility is the key and the
17:26
Speaker 1: path forward, because employees have figured out that they have options,
17:30
Speaker 1: and you've got to figure out how you're flexible. But
17:32
Speaker 1: also what's the compelling reason for bringing them back to
17:35
Speaker 1: the workplace. It can't simply be so that you can sit,
17:38
Speaker 1: you know, socially distant and in some cases, some parts
17:41
Speaker 1: of the country having to wear masks. You need to
17:43
Speaker 1: think about why are we re recruiting our employees to
17:46
Speaker 1: come back to the office. Is this going to be
17:49
Speaker 1: I mean, how competitive of an issue is this? Are
17:53
Speaker 1: employees saying, Hey, I'm not going to go work someplace
17:56
Speaker 1: uh where it's mandatory that I come to the office.
17:59
Speaker 1: That's right. You are seeing some people make different choices.
18:02
Speaker 1: They've had some time now to think about this, and
18:04
Speaker 1: for many they have figured out that this level of
18:07
Speaker 1: flexibility and the ability to integrate their work and their
18:10
Speaker 1: personal lives is where they want to be. We've also
18:13
Speaker 1: got some people who are at the tail into the
18:15
Speaker 1: boomer generation who are saying, hey, you know what, I
18:17
Speaker 1: can do this virtual thing from an RV and Yellowstone Park.
18:21
Speaker 1: I can I can screeze this out for another couple
18:23
Speaker 1: of years. And then you've got some people who are
18:25
Speaker 1: at the apex of their career who are saying, I
18:27
Speaker 1: cannot go back into a commuting or a rigid schedule
18:31
Speaker 1: for the next X number of years of my working life.
18:34
Speaker 1: Just not doing it. Rebecca, fascinating stuff. We appreciate you
18:37
Speaker 1: sharing the contents of this survey. Rebecca Ray, Executive vice president,
18:41
Speaker 1: of Human Capital for the conference board and Kaylee, we
18:43
Speaker 1: thought kind of labor day, post labor Day, folks will
18:46
Speaker 1: be coming back, but that's not really the case. Yeah.
18:48
Speaker 1: I was supposed to be the great return to the office,
18:50
Speaker 1: and it's gotten pushed back and pushed back and push back,
18:52
Speaker 1: And now it seems a lot of companies are saying, hey,
18:54
Speaker 1: we'll see you in We'll see two. We're seeing some
18:57
Speaker 1: better numbers and better trends on the COVID and cases,
19:00
Speaker 1: so maybe that will be a catalyst. Well more coming up.
19:03
Speaker 1: This is Bloomberg Markets. All right, let's talk the labor
19:09
Speaker 1: market here. We had a dp uh some I guess
19:11
Speaker 1: the US companies added the most jobs in three months.
19:14
Speaker 1: That was a good report. US initial jobs claims this
19:17
Speaker 1: morning came in better than expect that. That's good. I
19:19
Speaker 1: kind of feel like we're getting set up for a
19:22
Speaker 1: good non farm payroll data tomorrow morning. Are we getting
19:27
Speaker 1: set up for some disappointment? I don't know, but it
19:28
Speaker 1: feels like it should be a decent number. Sarah House,
19:31
Speaker 1: senior economists and director for Wells Furgo Security, joins us. Sarah,
19:36
Speaker 1: what are your thoughts here? What are you gonna look for?
19:38
Speaker 1: Tomorrow because it feels like, you know, the consensus is
19:41
Speaker 1: for five thousand. That would be a nice game from
19:43
Speaker 1: the prior month. But what are you looking for? All right,
19:47
Speaker 1: So we're looking for a rebound as well, so somewhere
19:50
Speaker 1: near a consensus at five thirty five thousand. I think
19:54
Speaker 1: a big factor in what we're looking for is going
19:56
Speaker 1: to be what happens in terms of participations. Are we
20:00
Speaker 1: seeing some of those supply constraints on the labor supply
20:04
Speaker 1: beginning to ease and is that filtering through to a
20:07
Speaker 1: bigger pool of available workers that companies can actually tap
20:11
Speaker 1: into and get the overall hiring numbers up. Well, let's
20:15
Speaker 1: talk about participation then, because that was supposed to change
20:18
Speaker 1: in the month of September. Kids were back at school,
20:21
Speaker 1: no more additional unemployment benefits. This was supposed to be
20:23
Speaker 1: the month where it a difference was made in that regard.
20:28
Speaker 1: Do you really think we're going to see that? Well,
20:30
Speaker 1: I think we we are going to see some improvement there. So,
20:33
Speaker 1: as you mentioned, we did see some notable constraints at
20:36
Speaker 1: least begin to eat. So the fact that schools are
20:39
Speaker 1: back in person um that you did see the end
20:42
Speaker 1: of unemployment insurance across all states, not just some of
20:45
Speaker 1: those those early enders, and so I think that's going
20:48
Speaker 1: to push the labor supply in the right direction. But
20:51
Speaker 1: let's not kid ourselves that these issues aren't going away overnight.
20:54
Speaker 1: So I think, you know, as far as the child
20:56
Speaker 1: care issue go, there's still a lot of concerns about
20:58
Speaker 1: well our kids going to be in the classroom consistently.
21:02
Speaker 1: We have still very limited daycare capacity, which is an
21:05
Speaker 1: issue for parents of young children. And then with the
21:07
Speaker 1: unemployment insurance, you know, we've we've seen only a pretty
21:11
Speaker 1: limited impact in the states that ended early. And I
21:13
Speaker 1: think we have to remember that there's a lot of
21:15
Speaker 1: frictions that are involved when searching and getting a new job,
21:19
Speaker 1: So you have to identify those jobs, apply, interview, get
21:23
Speaker 1: on boarded. And so I think this is going to
21:25
Speaker 1: be factors that that play out over months, not just
21:28
Speaker 1: in September. September is not going to be a silver
21:31
Speaker 1: bullet just because we turned the calendar. Sarah talked to
21:34
Speaker 1: us about wage inflation. You know, there's definitely inflation concerns
21:38
Speaker 1: in this marketplace, in this economy. Um, when you look
21:40
Speaker 1: at commodities and oil for example, but you know, a
21:43
Speaker 1: lot of folks say, hey, you're really not going to
21:45
Speaker 1: have problem, problematic or worse in inflation unless you get
21:50
Speaker 1: meaningful wage inflation, and we haven't really seen that. How
21:53
Speaker 1: are you thinking about wage inflation as we reopen, Well,
21:56
Speaker 1: I think we have seen some some pretty market increase
21:59
Speaker 1: in in way. Just so, yes, the headline average early earning,
22:02
Speaker 1: the number has been distorted by some of the compositional effects.
22:06
Speaker 1: But actually, when you think about hiring over over the
22:09
Speaker 1: past year, so the fact that hiring in Lesion hospitality
22:13
Speaker 1: is up twelve percent UM compared to much more modest king.
22:16
Speaker 1: More broadly, that's your lowest pay industry. The fact that
22:19
Speaker 1: we're still seeing wages up four point three percent over
22:22
Speaker 1: the past year, I think does speak to the fact
22:24
Speaker 1: that employers are opponying up for for those workers. And
22:27
Speaker 1: this really marks a big change from what we've seen
22:29
Speaker 1: in the past cycle, where companies were just loath to
22:33
Speaker 1: raise pay. And yet we've seen um small businesses right
22:36
Speaker 1: now reporting the most number of small businesses are reporting
22:40
Speaker 1: increasing pay than at any time we've seen in history,
22:44
Speaker 1: and so I think this really does set up the
22:46
Speaker 1: chance that in inflation does remain perhaps more persistent than
22:51
Speaker 1: a lot of folks are are expecting UM just based
22:54
Speaker 1: on looking at what's happening in the good sector on
22:56
Speaker 1: the on the supply chain side. Well, and of course
22:59
Speaker 1: the FED is king at that inflation, but it's also
23:01
Speaker 1: looking at the labor market and looking for improvement. And
23:04
Speaker 1: Jerome Pale said at his press conference last month, I
23:06
Speaker 1: want to see a decent report. I will leave the
23:08
Speaker 1: definition of decent up up to you, you're the economists.
23:11
Speaker 1: But does it basically mean unless something catastrophic happens with
23:16
Speaker 1: the print tomorrow, a November taper is baked in. I
23:20
Speaker 1: think the chance of a November taper is exceptionally good
23:23
Speaker 1: at this point. I think the bar for tomorrow's payrol report,
23:26
Speaker 1: as far as the Fed is concerned, is pretty low.
23:30
Speaker 1: So you know, probably somewhere you would only need a
23:32
Speaker 1: ball park of three fifty thousand. Even then, it might
23:35
Speaker 1: depend on if we we see some movement in terms
23:37
Speaker 1: of participation, if we continue to see ongoing wage pressures
23:41
Speaker 1: that UM that raised that inflation risk even even further out.
23:45
Speaker 1: And so I think when when we factor in UM,
23:49
Speaker 1: chances of what the Fed might do, this is really
23:52
Speaker 1: the last obstacle to overcome. So I think an unsaid
23:55
Speaker 1: risk was they were waiting to see what happened in
23:58
Speaker 1: terms of does the government actually shut down in October?
24:00
Speaker 1: What happens with the debt feeling? Well, there's more breathing
24:03
Speaker 1: room on that. So I think it's really going to
24:05
Speaker 1: come down to what happens with the jobs report tomorrow.
24:08
Speaker 1: As far as that November taper announcement, Yes, sir, you
24:11
Speaker 1: mentioned the you know, the temporary raising the debt ceiling,
24:13
Speaker 1: but it's just kicking a can down the road. How
24:16
Speaker 1: much does all this uncertain yet of Washington as it
24:18
Speaker 1: relates to fiscal stimulus and spending plans and taxation. How
24:22
Speaker 1: does that factor into your outlook? So it certainly raises
24:26
Speaker 1: raises the risks surrounding the outlook. But I think just
24:29
Speaker 1: even the fact that they punted a little bit to
24:31
Speaker 1: give themselves more time illustrates that, you know, particularly when
24:34
Speaker 1: it comes to the debt feeling. I think they will
24:37
Speaker 1: eventually do the right thing. We've seen this before, and
24:39
Speaker 1: so um I think while there's certainly some risk there,
24:42
Speaker 1: I think our basicline expectation is still that this will
24:45
Speaker 1: get worked out and that we shouldn't see detrimental effects
24:49
Speaker 1: feed through in terms of the broad the product economy. Sarah,
24:53
Speaker 1: thanks so much for joining us. Really appreciate UH discussing
24:57
Speaker 1: jobs reporting and kind of the economic outlook. Sarah House,
25:00
Speaker 1: director and senior economists for Wells Fargo Corporate and Investment Bank.
25:04
Speaker 1: And again the job's number. Looking at the Bloomberg terminal here,
25:07
Speaker 1: the consensus is for five hundred thousand UH jobs. That's
25:11
Speaker 1: up markedly from the prior month when two five thousand
25:14
Speaker 1: jobs were added. So again, folks looking for some improvements,
25:18
Speaker 1: some consistent improvement in the job picture tomorrow. Thanks for
25:22
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
25:25
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
25:29
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
25:33
Speaker 1: Miller three on Ball Sweeney, I'm on Twitter at pt Sweeney.
25:37
Speaker 1: Before the podcast, you can always catch us worldwide at
25:40
Speaker 1: Bloomberg Radio