Latest / The Financial Exchange Show / Trump considers naming next Fed chair months ahead of schedule

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Trump considers naming next Fed chair months ahead of schedule · The Financial Exchange Show

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Speaker 1: a donation today. Face is the Financial Exchange with Mike
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Speaker 1: Armstrong and Mark Vandetti.
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Speaker 2: Well, Mark and Tucker.
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Speaker 3: I was a little concerned there for a minute that
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Speaker 3: we would we would break our New England weather streak
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Speaker 3: that we've been on.
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Speaker 2: But we pulled it out.
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Speaker 3: Thirty degree temperature change and continued rain on the weekends
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Speaker 3: here for New England coming this weekend. So I'm relieved
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Speaker 3: and can finally stop running the air conditioning twenty four
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Speaker 3: hours a day. So excited about the new high of
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Speaker 3: seventy degrees that we're gonna be facing over the next
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Speaker 3: five days. It's Mike, Mark and Tucker with you on
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Speaker 3: a Thursday, where we've got new jobless claims out this morning,
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Speaker 3: we've got revisions to Gross Domestic Product, and we've got new.
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Speaker 2: New kerfuffles toffles.
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Speaker 3: How we can describe what's going on at the FED
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Speaker 3: right now or what's going on in the White House
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Speaker 3: and the Fed right now?
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Speaker 2: Is kerfuffle a good word for it?
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Speaker 4: Unprecedentedly stupid?
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Speaker 5: Yeah?
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Speaker 4: Sure, you were looking for a few words, Yeah, you're
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Speaker 4: looking for something put the year.
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Speaker 2: Let's start off with GDP because that just came out.
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Speaker 3: Mark, what did we see in the revisions to GDP
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Speaker 3: and was there anything shocking in the data that has
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Speaker 3: investors concerned this morning.
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Speaker 4: Well, the first quarter's growth was negative. We knew that
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Speaker 4: according to the first and second estimates. It's been revised
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Speaker 4: further down to minus point five percent from the previous
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Speaker 4: estimate of minus point two percent, and those numbers are annualized,
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Speaker 4: so you can more or less divide them by four
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Speaker 4: to get the actual YEP figure. So a negligible decrease,
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Speaker 4: but a substantial change from the pace of growth over
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Speaker 4: the past couple of years. We grew it a little
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Speaker 4: over two and a half percent last year, which is
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Speaker 4: well above most researchers estimates of potential or trend growth.
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Speaker 4: We grew it close to three percent the year before that,
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Speaker 4: so it was a big reversal. Some of it was
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Speaker 4: due to buying, an anticipation buying imports and anticipation of tariffs.
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Speaker 4: Imports don't push down GDP, but you have to subtract
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Speaker 4: them so that they don't get double counted, is the
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Speaker 4: bottom line. But consumer spending also retrenched somewhat. We saw
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Speaker 4: indications of that elsewhere too, so a pretty remarkable reversal
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Speaker 4: relative to what we've been experiencing previous couple of years.
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Speaker 4: That said, most now cast estimates, as you know, we
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Speaker 4: talk about the Atlanta FEDS GDP now estimate. There are
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Speaker 4: others suggest reasonably strong at are about trend, maybe a
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Speaker 4: little above trend, and by trend, I just mean around.
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Speaker 3: That was my SEXD question, where most of the way
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Speaker 3: through Q two, now, what are expectations for this quarter
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Speaker 3: and the rest of the year at this stage.
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Speaker 4: Well, for this quarter for what it is worth. And
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Speaker 4: again I'll use Federal Reserve Bank Regional bank now casts
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Speaker 4: as a reference point because I don't have a better model.
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Speaker 4: Atlanta Fed's got US somewhere in the mid twos, maybe
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Speaker 4: a little bit higher. In fact, New York Fed's got
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Speaker 4: US one in change.
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Speaker 5: Yep.
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Speaker 4: Both of those are within hailing distance of what most
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Speaker 4: researchers think is the economy's potential or non inflationary output,
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Speaker 4: a growth rate of about two percent.
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Speaker 3: Mike, We've also been keeping a close eye on weekly
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Speaker 3: jobless claims. These are released from the Bureau of Labor
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Speaker 3: Statistics puts this out. BLS and DL put these numbers
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Speaker 3: out every week. So we've get our monthly jobs report,
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Speaker 3: which will be coming out I guess next Thursday.
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Speaker 5: At Tucker Correct the third.
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Speaker 3: Yeah, so we'll be getting that next Thursday. That gives
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Speaker 3: you the unemployment rate. This report gives us some more
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Speaker 3: up to date. It's probably the most up to date
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Speaker 3: figure you can get when it comes to the labor market,
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Speaker 3: and it's telling you how many people are filing for unemployment.
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Speaker 3: For the last four weeks, the average that we have
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Speaker 3: been seeing was around two hundred and forty five thousand.
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Speaker 3: This week came in at a slight decrease. We came
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Speaker 3: in at two hundred and thirty six thousand, So nothing
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Speaker 3: alarming there on the headline number of the new people
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Speaker 3: filing for unemployment, But what some have pointed to as
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Speaker 3: a growing concern would be those continuing claims, meaning the
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Speaker 3: people who went on unemployment previously and haven't jumped back
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Speaker 3: off because they've fin found that new job. That number
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Speaker 3: has been relatively unchanged. But the number for the insured
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Speaker 3: unemployment during the week that ended June fourteenth came in
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Speaker 3: at one point nine seven to four million. If that
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Speaker 3: has no context for you, that's fair, it doesn't for
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Speaker 3: me either. It's the highest level for continuing claims for
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Speaker 3: unemployment that we've seen since November of twenty twenty one though,
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Speaker 3: and so some are pointing to that to say, hey,
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Speaker 3: you do have to go back now four years, three
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Speaker 3: and a half years to get to a number that's
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Speaker 3: been quite as bad as we are seeing right now
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Speaker 3: on the people that are sitting on the unemployment numbers
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Speaker 3: at this point in time. I can't point to that
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Speaker 3: to say, hey, this is a recession that's about to happen,
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Speaker 3: but it does, I think speak to what we've been
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Speaker 3: seeing in this labor market now for a good six
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Speaker 3: to twelve months, which is, if you don't have a
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Speaker 3: job right now, it's becoming increasingly difficult to find one,
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Speaker 3: and more and more employees are uninterested in trying to
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Speaker 3: make a jump from their employer, and employers themselves are,
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Speaker 3: while still generally interested in holding on to their people,
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Speaker 3: are not hiring at a terribly quick rate.
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Speaker 2: That how you describe it.
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Speaker 4: I think I've seen people who labor economists or people
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Speaker 4: who profess to be, and you do have to be
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Speaker 4: careful there, just you know, pining on a data point
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Speaker 4: is not really useful. We're forced to do that here
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Speaker 4: because we're not specialists. And everything we talk about here
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Speaker 4: and I almost I try to preface things. I say
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Speaker 4: by pointing out this is not my area.
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Speaker 2: I'm Mark Fandaddy and I know nothing about this.
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Speaker 4: What I'm about to tell you is is totally made up. No,
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Speaker 4: but we have to be Look, we we report the news,
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Speaker 4: a pine on it a little bit. But unless you're
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Speaker 4: putting it into a model, a model that you've tested
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Speaker 4: and that you update and that is reasonably good at forecasting,
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Speaker 4: I don't know how much good my gut is about
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Speaker 4: any of these things. So that said, people who should
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Speaker 4: know more about this than I do seem to detect
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Speaker 4: some softening, but it's very very it's almost imperceptible, and
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Speaker 4: it's not clear that that is indicative of a broader
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Speaker 4: slow down, broader economic weakness. Indeed, the GDP now cast
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Speaker 4: don't show that sure, or a continued normalization of the
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Speaker 4: labor market. It was it was unnaturally unusually an unnaturally
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Speaker 4: tight coming out of COVID.
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Speaker 2: Well, I would agree with you.
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Speaker 3: I don't know what we can say about the labor
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Speaker 3: market and its weakening stance over the.
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Speaker 2: Last few months.
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Speaker 3: It's fair to say that it's certainly weakened over the
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Speaker 3: course of the last year and a half.
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Speaker 4: I'm just wondering if normalization is not a more appropriate
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Speaker 4: advert adjective or adverb.
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Speaker 5: Whatever we tell you, Yeah, I mean whatever.
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Speaker 3: I would tend to agree with you that a three
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Speaker 3: point four percent unemployment rate was uniquely.
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Speaker 4: Yeah, and it was associated with very high inflation, just
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Speaker 4: as you'd expect. We push the economy beyond its productive capacity.
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Speaker 4: So those models, those economic models, even if you're only
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Speaker 4: applying them in your head, not formally, they worked pretty well.
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Speaker 4: Question now, at four.
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Speaker 5: Four point two, is that still too low?
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Speaker 4: I don't know. We hit something close to in the
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Speaker 4: late nineties, alarm bells went off. It was a different era,
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Speaker 4: didn't cause inflation hit it in again the late twenty eighteens, right,
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Speaker 4: didn't really inflation was creeping up, but it still wasn't
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Speaker 4: on anybody's radar at that point.
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Speaker 5: Right.
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Speaker 4: The structure of the economy changes too, So you never
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Speaker 4: really know what the true natural or nontelting. Well, yeah,
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Speaker 4: check that helpful check back in. No, it's so true, though, Mike,
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Speaker 4: isn't it. You don't really know till you get plenty
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Speaker 4: of evidence. You can discern the trend. We talk about
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Speaker 4: signal and noise all the time, discerning the real trend
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Speaker 4: and whatever inflation, unemployment, you don't know it for years,
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Speaker 4: never in real time.
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Speaker 3: Let's take a quick break. When we come back a
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Speaker 3: little bit more fed talk. The President was asked some
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Speaker 3: questions about his direction for the next Federal Reserve chair.
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Speaker 3: There's now rumors that he may announce an appointment a
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Speaker 3: good year in advance of j. Powell's end of turn.
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Speaker 3: Let's cover that next year on the Financial Exchange.
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10:19
Speaker 3: As we've been covering here on the Financial Exchange, FED
10:22
Speaker 3: Chairman Jerome Powell, a Trump one point zero appointee. His
10:27
Speaker 3: term is up for the Federal Reserve come May of
10:31
Speaker 3: next year. Yesterday, the President said, quote, he's a very
10:35
Speaker 3: stupid person. This is the FED chair that he himself appointed,
10:40
Speaker 3: but nonetheless calling him a stupid person for keeping interest
10:44
Speaker 3: rates at the current level, and that this is a
10:47
Speaker 3: disagreement the two have had for quite some time now.
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Speaker 3: Unsurprising the direction that he has criticized him in this,
10:55
Speaker 3: I will say so, Jerome Powell has been testifying in
10:58
Speaker 3: front of the How and Senate over the last two days,
11:02
Speaker 3: and I don't know if you caught one clip, but
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Speaker 3: it was in his first day of testimony in front
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Speaker 3: of the House and he was asked a question from
11:09
Speaker 3: a congressman whose name escapes me. He's a California Democrat
11:13
Speaker 3: who basically gave the same pitch that President Trump has
11:18
Speaker 3: been doing, which is just saying, you know that we
11:21
Speaker 3: all want to lower interest rates, right.
11:23
Speaker 4: And politicians always want to always to do.
11:25
Speaker 3: And this was the first peak that I saw of
11:29
Speaker 3: kind of a just exhausted Jerome Powell. He took a
11:33
Speaker 3: big long pause. Yeah, waited quite some time where I'm
11:37
Speaker 3: sure he was just waiting to say, are you bleeping
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Speaker 3: kidding me, at which point he said, you know, no,
11:44
Speaker 3: I actually get a lot of, you know, behind closed
11:48
Speaker 3: doors compliments from members of Congress and others saying that
11:50
Speaker 3: we are doing the right thing by keeping interest rates.
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Speaker 4: It's funny because lower rates are not in politicians interest,
11:55
Speaker 4: as we saw when monetary policy was too slow to
11:59
Speaker 4: react to the COVID burst and inflation.
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Speaker 2: Right, it very arguably lost Joe Biden, really.
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Speaker 4: Cost him and a lot of other politicians, not just
12:09
Speaker 4: here but globally. Yeah, they're positions well, of course costs
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Speaker 4: the Democratic Party a hole on the white it's position
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Speaker 4: in the White House anyway. So I don't I don't
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Speaker 4: know how you know, the the the theatrics of whatever
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Speaker 4: be Trump has in his bonnet every day, you have
12:31
Speaker 4: to put to one side because he pretty much uses
12:33
Speaker 4: the same bullying techniques. And I say bullying, i't mean
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Speaker 4: that is a criticism. It's how he does the art
12:39
Speaker 4: of the deal. Sure, he he badgers and humiliates and
12:43
Speaker 4: harangues you into giving him his way, and that's worked
12:46
Speaker 4: for him. That is not a good idea when it
12:49
Speaker 4: comes to monetary policy, though, because people's expectations of future
12:54
Speaker 4: inflation and its stability could become unanchored. They arguably already
12:58
Speaker 4: are arguably already are you look at the for example,
13:01
Speaker 4: Michigan survey and other measures too, and inflation expectations are
13:04
Speaker 4: an important part of the inflation process. So if we
13:06
Speaker 4: are worried about the next Fed chair being a lackey,
13:10
Speaker 4: being subservient to the White House's political interests, that suggests
13:15
Speaker 4: to me higher, not lower inflation. And once that horse
13:19
Speaker 4: is out of the barn, as we discovered in twenty
13:22
Speaker 4: twenty two, it's very tough to put back in. Although
13:25
Speaker 4: we sort of got away with a minor miracle in
13:29
Speaker 4: twenty twenty two and that inflation came down without much
13:31
Speaker 4: economic sacrifice, So this could be very destabilizing. Mike, It's
13:34
Speaker 4: a very bad idea. I hope Trump moves on to
13:37
Speaker 4: bullying somebody else very soon.
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Speaker 3: Well, so here's what's being considered. Is President Trump, according
13:43
Speaker 3: to some reports, is considering naming his pick for the
13:46
Speaker 3: next FED chair, which this morning I don't know what
13:49
Speaker 3: it's doing now, but this morning had some effects in markets.
13:52
Speaker 3: You were seeing the US dollars sell off. They're seeing
13:55
Speaker 3: treasury yields moved down a bit.
13:57
Speaker 4: Wait, why would yield hold on? Why do you move down?
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Speaker 4: If the next FED chair is going to be political
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Speaker 4: effectively an instrument of the White House, I would expect higher,
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Speaker 4: not lower inflation, which should translate into higher future short
14:10
Speaker 4: term rates because the Fed's going to have to get
14:12
Speaker 4: an under control at some point, yeh, or just higher
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Speaker 4: uncertainty which increases the so called term premium. So I'm
14:16
Speaker 4: not sure I get what's going on in the treasury.
14:18
Speaker 4: I get what's going on with the dollar, which may
14:20
Speaker 4: be reacting to the treasury market. By the way, lower
14:22
Speaker 4: yields less attractive US assets. Sorry I interrupted you, but
14:25
Speaker 4: I have to any clarity on this.
14:27
Speaker 2: Yeah, I don't have a ton to offer you.
14:29
Speaker 4: That's great.
14:30
Speaker 3: Yeah, I think treasury yields coming down could just be
14:33
Speaker 3: if the FED chair is going to make a determined
14:35
Speaker 3: effort to bring yields down across the board. I suppose
14:38
Speaker 3: they have the tools to do so, but there would
14:40
Speaker 3: be a temporary phenom.
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Speaker 4: And you know there's no guarantee by the way you
14:43
Speaker 4: lower short term yields if it increases expectations of inflation,
14:45
Speaker 4: that should increase, not decrease short term yields. As we
14:48
Speaker 4: saw when the FED eased policy between last September and December. Right,
14:52
Speaker 4: longer term yields have gone up, not down. The cost
14:55
Speaker 4: of financing to the US government because of the complexion
14:57
Speaker 4: of US debt issuance has increased, not decreased. So they
15:02
Speaker 4: may get politicians in haranguing the FED. If they're successful
15:06
Speaker 4: in putting a toady in his FED chairman who will
15:09
Speaker 4: carry water for the White House, they make it exactly
15:11
Speaker 4: the opposite effect of what they're looking for.
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Speaker 2: So why all this matters? Again?
15:15
Speaker 3: The FED is an independent agency that the President himself
15:17
Speaker 3: has kind of acknowledged that he cannot remove the sitting chair.
15:21
Speaker 5: See he said he won't.
15:22
Speaker 4: Not he can't, he won't. He won't con see that right,
15:24
Speaker 4: which is another destabilizing variable here.
15:27
Speaker 3: And so the problem that some are theorizing if you
15:31
Speaker 3: if you name your successor at this point is then,
15:34
Speaker 3: you know, observers of the FED, which there are many,
15:37
Speaker 3: ourselves included, now need to start paying attention to the
15:40
Speaker 3: commentary from both the sitting chair as well as the
15:44
Speaker 3: next pick for the FED and kind of balance you
15:46
Speaker 3: magications on you. I can I can see how it
15:52
Speaker 3: would be destabilizing. I'm also just unconvinced of how successful
15:56
Speaker 3: this will be. The President is going to as is
15:59
Speaker 3: this wall Stree journal at Bloomberg. As the journal points out,
16:02
Speaker 3: the president is going to need to not only find
16:04
Speaker 3: someone who will be loyal to his desires for an
16:08
Speaker 3: easier interest rate policy, right like, he's got to find
16:10
Speaker 3: that and actually believe that it's going to be the
16:12
Speaker 3: case that hey, I've got somebody that's going to be
16:13
Speaker 3: loyal to what I want rather than what's good for
16:16
Speaker 3: the US economy.
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Speaker 2: And that's going to be you know, there are.
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Speaker 4: Find somebody with credibility who will do that. You're not
16:22
Speaker 4: gonna find.
16:22
Speaker 3: You have to get them appointed, you have to get
16:24
Speaker 3: them through the Senate, and then they also have to
16:27
Speaker 3: be loyal to you. The second piece, though, is that
16:31
Speaker 3: person then has to go about convincing the board of
16:34
Speaker 3: twelve policy makers who actually vote on policy that they're
16:38
Speaker 3: right about all this this is not and this is
16:41
Speaker 3: where I come back to, I'm not sure how big
16:43
Speaker 3: a deal this ends up being, because ultimately the chairman
16:48
Speaker 3: of the Federal Reserve has a lot of clout. They
16:51
Speaker 3: do all the speaking on behalf of the FED. But
16:53
Speaker 3: if they stump their feet and say I want lower
16:55
Speaker 3: interest rates and they don't give good evidence, then the
16:59
Speaker 3: board governors are going to vote against the.
17:00
Speaker 4: FED chair will ultimately get his or her say he's
17:04
Speaker 4: going to do what Kennedy has done at HHS, which
17:06
Speaker 4: is drive out all the all the scientists of good
17:10
Speaker 4: repute and replace them with people who are ideologically simpotico.
17:15
Speaker 4: That's what's going to happen here. They're not going to say, oops,
17:19
Speaker 4: well we hit this obstacle, we tried. They will drive
17:22
Speaker 4: out the people who are people who are credible will leave.
17:28
Speaker 4: They're not going to put up with getting berated because
17:30
Speaker 4: then the President and that whole apparatus and the Fox
17:33
Speaker 4: News channel will start to come down. They'll bring the
17:35
Speaker 4: hammer of MAGA down on people who don't conform. Austin Goolsby,
17:39
Speaker 4: he'll be out. He'll say I'm sorry, I can't do it.
17:41
Speaker 4: My family's being threatened, like they will drive these people out.
17:44
Speaker 2: I'm not sure I have in other areas, I'm not sure.
17:46
Speaker 5: Yeah you think, well, you think you.
17:47
Speaker 4: Think the president's going to give up just because his
17:49
Speaker 4: FOMC chairman. It's just because his FED chair meets some
17:52
Speaker 4: resistance by some say unelected or unappointed. Even regional bank
18:00
Speaker 4: is RELENTI I do.
18:01
Speaker 3: Only because let's say you go that route. I think
18:05
Speaker 3: it's pretty predictable how the markets react.
18:07
Speaker 4: Yeah, and they went, and then they'll be chastened and
18:10
Speaker 4: then maybe back off.
18:11
Speaker 2: And when markets have reacted to.
18:14
Speaker 3: What are arguably not very good ideas, such as Liberation
18:18
Speaker 3: Day tariffs averaging forty seven countries, the president has been
18:23
Speaker 3: kind of pushed into a corner and say, yeah, okay,
18:25
Speaker 3: this this maybe was not the best idea, and I
18:27
Speaker 3: need to back off of it a little bit. And
18:29
Speaker 3: so yeah, I could see him now, I could see
18:31
Speaker 3: him announcing his success the successor to drum Powell. And
18:34
Speaker 3: I don't I don't love that idea, because then you
18:36
Speaker 3: have these two competing forces on who's actually going to
18:39
Speaker 3: influence policy.
18:40
Speaker 2: But I'm just unconvinced.
18:43
Speaker 3: That even if you have a true Trump loyalist as
18:47
Speaker 3: the governor of the sorry as the chairperson of the
18:51
Speaker 3: Federal Reserve, that it's going to genuinely change policy.
18:55
Speaker 2: I'm I'm unconvinced.
18:56
Speaker 4: Okay, I like that. I like that path. Like there
18:59
Speaker 4: could be rough period when he pushes up against norms
19:03
Speaker 4: and constraints like he did after Liberation did but then
19:05
Speaker 4: he backs down because Treasury yields spikers. Yeah, okay, I
19:08
Speaker 4: could see it unfolding, right.
19:10
Speaker 5: We'll see, But that makes a lot of sense.
19:12
Speaker 3: There is a reason that the Fed has maintained its
19:14
Speaker 3: independence so fiercely. I think they will continue to do so.
19:17
Speaker 3: And yeah, appointing the next president of the Federal Reserve.
19:20
Speaker 3: I'm just not convinced how effective it will be in
19:23
Speaker 3: changing policy. Let's take a quick break. When we come back,
19:26
Speaker 3: Wall Street Watches next.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:53
Speaker 1: Watch a complete look and what's moving markets so far
19:56
Speaker 1: today right here on the Financial Exchange Radio.
20:00
Speaker 6: All markets continue to add to their gains as investors
20:03
Speaker 6: digest a new batch of economic data. Points this morning,
20:06
Speaker 6: including jobless claims, revised first quarter GDP, and durable goods.
20:11
Speaker 6: Wall Street's also digesting a report from The Wall Street
20:14
Speaker 6: Journal that President Trump was considering naming his pick to
20:17
Speaker 6: succeed FED chairman Jerome Powell early. At the moment, the
20:21
Speaker 6: Dow is up by two thirds of one percent, or
20:24
Speaker 6: two hundred and seventy three points. SMP five hundred is
20:28
Speaker 6: up nearly six tenths of one percent, or thirty five
20:31
Speaker 6: points in the NASDAC also up by six tenths of
20:34
Speaker 6: one percent. Russell two thousand is up seven tenths of
20:36
Speaker 6: one percent. Ten year Treasure reeled down by two basis points,
20:40
Speaker 6: now at four point two six percent, and crude oil
20:44
Speaker 6: up just over one percent higher, trading at sixty five
20:47
Speaker 6: dollars and seventy six cents a barrel. Nvidia shares rising
20:52
Speaker 6: another one percent after the chip in ai giant rally
20:56
Speaker 6: to a new record high yesterday, make it him once
20:59
Speaker 6: again the largest company by market capitalization, surpassing Microsoft, another
21:04
Speaker 6: chip maker, and Micron notched a big leap in quarterly
21:07
Speaker 6: sales and earnings. However, that stock is actually now down
21:10
Speaker 6: by two percent after being higher in pre market trading. Meanwhile,
21:14
Speaker 6: Meta shares rising nearly two percent after CEO el not
21:18
Speaker 6: Elon musk Mark Zuckerberg successfully poached three Open AI researchers
21:23
Speaker 6: in a recent recruiting initiative intended to boost the Facebook
21:27
Speaker 6: owner's AI effort. After the Wall Street Journal reported yesterday
21:31
Speaker 6: that Shell was in early talks to buy BP, Shell
21:34
Speaker 6: has come out and denied the report. Shell shares are
21:38
Speaker 6: up by two percent while BP stock is dipping. Elsewhere,
21:41
Speaker 6: Walgreen's posted better than expected quarterly sales and earning, sending
21:45
Speaker 6: shares nearly one percent higher. The drug store chain is
21:48
Speaker 6: slated to go private lead this year. Food spice maker
21:51
Speaker 6: McCormick beat earnings expectations for the previous quarter, sending that
21:55
Speaker 6: stock jumping. Excuse me, that stock is now jumping by
21:58
Speaker 6: five percent. And after today's closing bell, we'll see earnings
22:02
Speaker 6: from Nike on Tucker Silvan. That is Wall Street Watch.
22:07
Speaker 3: College grads alligedly facing the toughest job market in more
22:10
Speaker 3: than a decade. Mark what do we mean by this?
22:12
Speaker 3: Because as we just got done talking about the unemployment
22:16
Speaker 3: rates sitting at four point two percent, you and I
22:18
Speaker 3: aren't even sure if that could be inflationary, if it's
22:21
Speaker 3: even a sign of weakness in the economy. And yet
22:24
Speaker 3: I am hearing echoes of this reverberating around college campuses
22:30
Speaker 3: and elsewhere that it is a very challenging job market
22:33
Speaker 3: for younger college graduates in particular. So where's the data
22:39
Speaker 3: stacking up in your mind.
22:40
Speaker 4: On, Yeah, there's not a lot, but that which we
22:43
Speaker 4: do have suggests that well shows that unemployment among college
22:48
Speaker 4: grads twenty two to twenty seven is this article points out,
22:51
Speaker 4: is nearly six percent, the highest in fifteen or so years,
22:55
Speaker 4: thirteen fifteen years.
22:57
Speaker 5: So there's that.
22:57
Speaker 4: And we also know that hiring, as reported in the
23:01
Speaker 4: Jolts survey that we told you about now was a
23:04
Speaker 4: few weeks ago, we're doing new one in a couple
23:06
Speaker 4: of weeks, has slowed a lot in the past year. Indeed,
23:10
Speaker 4: so employers not adding is aggressive now. Again. A lot
23:14
Speaker 4: of this, though, is just a hangover from the feverish
23:18
Speaker 4: pace of hiring and the very tight labor market we
23:22
Speaker 4: saw during the early stages of our exit from COVID lockdowns.
23:26
Speaker 4: It seems like ancient history now, but it's echoing into
23:29
Speaker 4: the present.
23:29
Speaker 3: So according to the BLS, they break this out a
23:34
Speaker 3: few different ways. And so I've got a data series
23:37
Speaker 3: up right now mark where it's measuring the unemployment rate.
23:40
Speaker 3: It's not seasonally adjusted, so you kind of have to
23:43
Speaker 3: look at this in just specific time periods. But the
23:45
Speaker 3: unemployment rate for folks with a bachelor's degree that are
23:48
Speaker 3: between the ages of twenty and twenty four, which is
23:50
Speaker 3: a different data series than who is this The Globe
23:54
Speaker 3: Associated Press the AP put together here the unemployment rate
23:58
Speaker 3: as of May of this year. So last month for
24:01
Speaker 3: that demo was six point one percent, and so I
24:05
Speaker 3: was curious, so.
24:06
Speaker 4: How does that compared to May a year ago?
24:07
Speaker 5: Right?
24:07
Speaker 3: So May a year ago we were also at about
24:12
Speaker 3: six point two percent, So it's been fairly.
24:14
Speaker 2: Weir for a while another year.
24:18
Speaker 3: Yeah, So if I go back further May of twenty three,
24:21
Speaker 3: it was four point four percent, okay, so you know,
24:24
Speaker 3: and then May of twenty two again weird time there,
24:27
Speaker 3: but four point eight percent. And so outside of COVID,
24:30
Speaker 3: this is, you know, pretty pretty high unemployment. I did
24:35
Speaker 3: look back during the twenty tens decade as well, and
24:37
Speaker 3: it coincides with what the article cites, which is, yeah,
24:40
Speaker 3: you know, May of twenty nineteen, for example, five point
24:42
Speaker 3: eight percent relatively low unemployment rate. I do have to
24:46
Speaker 3: go back to twenty thirteen before I see an unemployment
24:50
Speaker 3: rate according to this data series that is as high
24:52
Speaker 3: or higher than what we're seeing.
24:53
Speaker 4: Nobody's denying hiring slow. Jolts tells us that and on
24:57
Speaker 4: the margin, you're going to hire the least productive. You're
25:01
Speaker 4: going to ease hiring of least productive people first, yep,
25:06
Speaker 4: which would be those with no experience.
25:08
Speaker 3: Here are the two things that I think people are
25:12
Speaker 3: asking about this is it a sign of recession? I
25:16
Speaker 3: don't know any model that you know dictates that, Hey,
25:19
Speaker 3: youth unemployment or you know, young college grad unemployment, you know,
25:23
Speaker 3: indicates anything about looming recession. The second piece that is
25:28
Speaker 3: getting asked over and over again, which I don't think
25:31
Speaker 3: anybody has an answer to, is is artificial intelligence to
25:36
Speaker 3: blame here? And so this is another area where everyone's
25:39
Speaker 3: going to try and answer this question in different ways.
25:43
Speaker 3: One individual, Matthew Martin, a senior US economy economist at
25:47
Speaker 3: Oxford Economics who probably knows more about the labor market
25:49
Speaker 3: than I do, has calculated that employment for college graduates
25:54
Speaker 3: twenty eight and older in computer science and mathematical occupations.
25:59
Speaker 3: So I don't know what data set that is. I
26:01
Speaker 3: don't know how many people work in that space, but
26:03
Speaker 3: that group twenty eight and older working in that space
26:06
Speaker 3: has increased by just only zero point eight percent. So
26:11
Speaker 3: employment in that area has generally increased over the last
26:17
Speaker 3: year or so. For folks age twenty two to twenty seven,
26:21
Speaker 3: it's fallen by eight percent. You could blame that on
26:25
Speaker 3: a million different things. But our artificial intelligence certainly is
26:29
Speaker 3: a use case in that space. If you talk to
26:31
Speaker 3: anybody that does coding for a living, that does any
26:34
Speaker 3: sort of you know, computation work, artificial intelligence is having
26:38
Speaker 3: a seemingly quick impact in those areas. And so is
26:42
Speaker 3: there something there?
26:44
Speaker 2: I don't know?
26:44
Speaker 3: You know, could it also just be that, hey, those
26:48
Speaker 3: same companies are not looking to hire quite as quickly
26:52
Speaker 3: in this point in time with the concerns about the economy. Also, yes,
26:56
Speaker 3: and so I just have a very difficult time answering
26:59
Speaker 3: that question. Is artificial intelligence affecting hiring it?
27:02
Speaker 4: What are we gonna know? I hate to keep going
27:04
Speaker 4: back to this very generic and not very satisfying point,
27:07
Speaker 4: but we're not gonna know about it. We're not gonna
27:09
Speaker 4: have answers to any of these questions. Yes, is the
27:11
Speaker 4: economy running too hot at the fed bee cutting rates
27:13
Speaker 4: like three years. Unfortunately, I do buy the theory like
27:17
Speaker 4: it's to test it, But to test.
27:20
Speaker 5: It you need data.
27:21
Speaker 4: And then someone's gonna quibble with the way you specified
27:25
Speaker 4: your model. They'll do it differently, come up with a
27:26
Speaker 4: different result. Of researchers will make careers out of arguing
27:30
Speaker 4: about this. Look, the labor market is big and fluid.
27:33
Speaker 4: Over three point one million people left their jobs voluntarily,
27:37
Speaker 4: as Joltz told us a few weeks ago. Last month,
27:41
Speaker 4: something like three percent of manufacturing jobs turn over every month.
27:46
Speaker 4: It's it's hard to put into words and hard to
27:49
Speaker 4: conceive of exactly how dynamic the labor market is.
27:53
Speaker 3: Would I'm trying to think through the answer to this
27:56
Speaker 3: question in my own case, and I think the answer
27:58
Speaker 3: is probably not. But would your first white collar job exist,
28:04
Speaker 3: mark the first college grad job you had, Would it
28:08
Speaker 3: exist today with the advent of artificial intelligence?
28:11
Speaker 4: Yeah, I was doing financial advice in a four to
28:15
Speaker 4: one k call center environment, So yeah, I take that job,
28:18
Speaker 4: and you know, robo advice was just coming on the
28:21
Speaker 4: scene at that point. Too, and rather than rather than
28:25
Speaker 4: be displaced by it, we found ways to position it
28:28
Speaker 4: as complimentary to what we were doing.
28:31
Speaker 5: So there were it.
28:32
Speaker 4: Wasn't AI, but it was more automated. So my point
28:35
Speaker 4: is we were all faced with the threat of automation.
28:38
Speaker 4: At some point, you find ways to either retrain or reposition.
28:42
Speaker 3: What's your long term yeah act benefit I'm just thinking. So, Yeah,
28:45
Speaker 3: my first job I was question. I was a spreadsheet jockey.
28:50
Speaker 3: I think that job probably still exists, but they might
28:53
Speaker 3: not have needed me.
28:54
Speaker 4: Well, you're still going to need Look, you could tell
28:56
Speaker 4: AI I want to do this analysis in whatever your
29:00
Speaker 4: favorite statistical you maybe use Python, maybe use R which
29:03
Speaker 4: I use. That doesn't mean anything to anybody, I'm sorry,
29:05
Speaker 4: but this is a specific, real life example. You can
29:07
Speaker 4: ask chat GPT to write you code to do something complicated,
29:11
Speaker 4: and I have and it's usually wrong. You have to cuse,
29:13
Speaker 4: you have to be seriously modified. So I don't even
29:15
Speaker 4: bother anymore. My point is you will always need someone
29:18
Speaker 4: with domain expertise to check the output of the AI model.
29:23
Speaker 4: So that may mean more jobs for people with the
29:26
Speaker 4: greater expertise and people who otherwise would have taken those
29:29
Speaker 4: entry level jobs that require less skill, we will go elsewhere.
29:31
Speaker 3: That would be my point is, I'm not sure that
29:33
Speaker 3: my entry level job doing what I was doing would
29:36
Speaker 3: be necessary today. But someone would still have to check
29:39
Speaker 3: the Somebody else, somebody higher qualified than I will will
29:43
Speaker 3: still need that job, and maybe they wouldn't have been
29:45
Speaker 3: able to lay off the person that was doing this,
29:48
Speaker 3: you know, with a higher skill SKT than I was
29:51
Speaker 3: able to. But yeah, I'm not sure that my first
29:54
Speaker 3: job ever actually exists. Now, let's take a quick break.
29:57
Speaker 3: When we come back and Vidia shares setting a new high.
30:01
Speaker 3: China also still choking some of those rare earths. Apparently
30:06
Speaker 3: we'll come back with that next year.
30:07
Speaker 1: On the Financial Exchange, Breaking business news as it happens
30:11
Speaker 1: only here on the Financial Exchange Radio Network. The Financial
30:17
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30:20
Speaker 1: stay up to date on breaking business news all morning.
30:23
Speaker 1: Long Face is the Financial Exchange Radio Network.
30:36
Speaker 3: We received a couple of texts when we were talking
30:38
Speaker 3: about the Federal Reserve and interest rates setting policy and
30:41
Speaker 3: direction of all that. By the way, you can text
30:43
Speaker 3: the show too at six one, seven three, six two
30:46
Speaker 3: thirteen eighty five that that number again six, one, seven, three, six, two,
30:50
Speaker 3: thirteen eighty five, and we'll try to address the questions
30:52
Speaker 3: on air. We're going to uh take this question though
30:56
Speaker 3: at the eleven oh five hour. Like I said, it
30:58
Speaker 3: had to do with interest rates where they go and
31:01
Speaker 3: benefits to Americans for lower interest rates or higher interest rates,
31:04
Speaker 3: what it all means. But we'll cover that in just
31:07
Speaker 3: a few minutes. But before we get there, report from
31:09
Speaker 3: the Wall Street Journal China is still choking exports of
31:13
Speaker 3: rare earth despite the pact with the United States.
31:16
Speaker 2: So this has been.
31:17
Speaker 3: The really leverage point that China has over the United
31:23
Speaker 3: States and frankly the rest of the world. Who knew
31:26
Speaker 3: when it comes to trade battles and trade what's the
31:31
Speaker 3: word I'm looking for imbalances now, not quite, but they
31:34
Speaker 3: pretty much have a monopoly on rare earth, especially rare
31:38
Speaker 3: earth magnets, which are used in almost every complex manufacturing
31:43
Speaker 3: process out there. And while they have generally opened up
31:48
Speaker 3: supplies a little bit, they're being pretty intentional and deliberate
31:53
Speaker 3: with this now, given that this was such an easy
31:57
Speaker 3: negotiating point for them. So first of all, exports of
32:03
Speaker 3: rare earth magnets to the United States declined ninety three
32:07
Speaker 3: percent in May from a year earlier. So clearly China
32:11
Speaker 3: is quite flexing their muscles on this one a little bit.
32:15
Speaker 3: What companies are saying is happening now is there is
32:19
Speaker 3: a new application process to be approved for rare earth materials.
32:23
Speaker 3: There's a you know, litany of different questions that they
32:25
Speaker 3: have to answer. Some of them cover things that would
32:28
Speaker 3: generally be considered intellectual property about their businesses. So some
32:33
Speaker 3: businesses have said, hey, I'm not going to answer that question.
32:35
Speaker 3: Their applications immediately get rejected for any rare earth materials.
32:40
Speaker 3: Some are describing it as bureaucratic drag, because you know,
32:43
Speaker 3: the Chinese commediest parties need to review all of these applications.
32:48
Speaker 3: I'm not sure how I would describe it that way.
32:49
Speaker 3: It's intentional bureaucratic drag. If it is bureaucratic drag, what
32:53
Speaker 3: they are doing is very intentional. They are slowing down
32:56
Speaker 3: the delivery of these things. They are preventing Western companies
32:59
Speaker 3: from developing a stockpile of rare earth magnets, and they're
33:03
Speaker 3: using fun things to blame it on. You know, they're saying, hey,
33:06
Speaker 3: this review process is really necessary to make sure it's
33:08
Speaker 3: not going into military applications.
33:12
Speaker 2: Blink.
33:12
Speaker 3: If you've heard that term before, that's the exact language
33:15
Speaker 3: the United States uses whenever we're talking about things like semiconductors.
33:19
Speaker 3: Is Hey, we've really got to vet this all out
33:21
Speaker 3: to make sure it doesn't end up in the hands
33:23
Speaker 3: of the Chinese military. They're turning around and using the
33:26
Speaker 3: exact same language against us now, so we will see
33:31
Speaker 3: where this goes. It's going to continue to be front
33:33
Speaker 3: and center and negotiations most certainly, I think the world.
33:38
Speaker 3: The good news about this is the world has now
33:40
Speaker 3: woken up to the fact that, oh, we can't let
33:43
Speaker 3: China have a monopoly on rare earth materials. Should have
33:46
Speaker 3: been probably noticed when they did this to Japan ten
33:49
Speaker 3: years ago, but everybody kind of ignored it. The bad
33:53
Speaker 3: news is, we don't have a great answer to this
33:56
Speaker 3: from anything that I can see.
33:59
Speaker 4: No, if we do, we're keeping it secret.
34:01
Speaker 5: Yeah.
34:01
Speaker 4: If we do have an ace in the hole here,
34:05
Speaker 4: I don't know what we're saving it for. I'm sure
34:07
Speaker 4: I'm embarrassed that I didn't know this fact. I was
34:09
Speaker 4: all gung ho for for national security reasons, seriously constraining
34:13
Speaker 4: exports of sensitive stuff to China. To me, that made sense. Now,
34:17
Speaker 4: that's but that's not my area and I'm not a
34:19
Speaker 4: policy maker. Sure, So, while I feel stupid for not
34:22
Speaker 4: knowing this fact and knowing what kind of leverage China
34:24
Speaker 4: could actually apply, one hopes that those initiating trade wars
34:29
Speaker 4: did know this fact and have a plan. B.
34:32
Speaker 3: Yeah, in the meantime, China has the capability. They're not
34:36
Speaker 3: using this capability, but they have the capability to bring
34:40
Speaker 3: non Chinese manufacturing to a screeching halt. There are again,
34:46
Speaker 3: I have a family member who designs complex machinery, and
34:51
Speaker 3: I mean, we can't bottle soda without magnets. There's so
34:56
Speaker 3: many things that we cannot do without these magnets. And
35:00
Speaker 3: we saw it briefly with Ford having to shutter a
35:02
Speaker 3: plant briefly to deal with which is a.
35:05
Speaker 4: Lot more expensive and slower. I even bottling soda for
35:08
Speaker 4: a while. We can still do it as very small machines, right, yep.
35:15
Speaker 3: So there are ways to do this stuff that it
35:18
Speaker 3: does not involve these rares China slow growth. It's just
35:22
Speaker 3: very problematic. And so I think China is doing this
35:27
Speaker 3: in a pretty smart way. They're they're doing it they're
35:30
Speaker 3: releasing enough of them to not piss off the rest
35:33
Speaker 3: of the world, but they are making sure that nobody's
35:37
Speaker 3: able to stockpile and compete with.
35:38
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36:43
Speaker 3: Back to the China piece for a moment. Here my
36:45
Speaker 3: read on some of this one. They're also not almost universally,
36:49
Speaker 3: they are banning the export of the rare raw earths,
36:53
Speaker 3: meaning they don't want anyone developing the refining capability that
36:56
Speaker 3: China has, So they are basically just saying you can
36:59
Speaker 3: have the finished product, but we're not giving you the rare,
37:01
Speaker 3: the you know, raw material. If i'm them, this is
37:06
Speaker 3: a delay tactic, right, It's okay. I'm going to give
37:09
Speaker 3: you enough of these to keep your manufacturing base happy.
37:12
Speaker 3: And I'm gonna wait and see what happens with the
37:14
Speaker 3: US Supreme Court on these tariffs and whether or not
37:16
Speaker 3: they can actually be used against us in the way
37:18
Speaker 3: that President Trump wants to. So we'll see how all
37:21
Speaker 3: of that develops. Tesla's Robotaxi launch showing that Google's Weimo
37:25
Speaker 3: is worth more than forty five billion dollars, I'm not convinced.
37:29
Speaker 2: I have a question for you. I know you have
37:31
Speaker 2: you ridden a Weimo.
37:32
Speaker 3: Mark, No, how much would you pay to retrofit your
37:36
Speaker 3: car with complete self driving technology to the point that
37:39
Speaker 3: you could sit in the backseat and it would drive
37:41
Speaker 3: you to work.
37:41
Speaker 4: It Yeah, pay zero nothing, No, I would pay.
37:44
Speaker 5: So much money for that.
37:46
Speaker 2: I would.
37:46
Speaker 3: I would gladly pay ten thousand dollars to retrofit my
37:48
Speaker 3: car to be able to do that.
37:50
Speaker 5: Yeah.
37:51
Speaker 4: You you do long trips regularly.
37:53
Speaker 5: Yeah, so, yeah, I get that.
37:55
Speaker 6: I would spend the money too, But yeah, to.
37:56
Speaker 4: The isn't another interpretation of what happened with Tesla the
38:01
Speaker 4: other day that Tesla is over valued?
38:03
Speaker 5: Yes, I know, I knew you were going to say it.
38:05
Speaker 3: Yeah, we got to take a quick break. Markets strongly
38:09
Speaker 3: in positive territory, flirting with all time highs. We'll cover
38:12
Speaker 3: that and more next year on the Financial Exchange