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Troubling Signs Lurk Within Shocking Job Gains: LaSalle CEO · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you,
0:05
Speaker 1: along with my co host Lisa Brahma Ways, each day
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Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money. Whether at the grocery store or
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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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Speaker 1: Podcasts or wherever you listen to podcasts, as well as
0:18
Speaker 1: at Bloomberg dot com. Fascinating numbers that came out today
0:22
Speaker 1: absolutely blew away any and all projections via US economists
0:26
Speaker 1: and frankly raised a lot of questions given the anecdotal
0:30
Speaker 1: data that we keep getting, Tom, what did you make
0:32
Speaker 1: of this information? I think a lot of it's the
0:35
Speaker 1: PPP money. I think, if if I read the data correctly,
0:39
Speaker 1: the report that a lot of the people coming back,
0:42
Speaker 1: or a decent percentage were furlog were the furloged folks,
0:45
Speaker 1: which means, and I listened, beggars can't be choosers. We're
0:48
Speaker 1: adding people to work who weren't working. But these aren't
0:51
Speaker 1: newly created jobs. They're old jobs bringing people back, which
0:54
Speaker 1: is a positive sign, and to look at it any
0:56
Speaker 1: other way as crazy, and we should be very optimistic
0:58
Speaker 1: from this number so interesting, Tom, it's um I think
1:02
Speaker 1: no matter either. Are some nuances in this number time,
1:05
Speaker 1: but it's just signal to you kind of at the
1:08
Speaker 1: very least setting a bottom for the employment picture. I'm
1:13
Speaker 1: not necessarily sure about that. I think for the short term,
1:16
Speaker 1: meaning sixty days, it's probably abottom. But what we've got
1:19
Speaker 1: to see is what happens in the end of the
1:21
Speaker 1: third quarter, in early fourth quarter, if the airline travel
1:24
Speaker 1: doesn't pick up, in the airlines lay people off, and
1:28
Speaker 1: hotels UH don't continue to grow. If if we do
1:31
Speaker 1: get another spike from COVID, and what happens in that
1:35
Speaker 1: regard um to working in the in the restaurant service space,
1:40
Speaker 1: I think we could have another big, big hit, Tom.
1:43
Speaker 1: I think it's fascinating to get your view. I know
1:45
Speaker 1: you've been more optimistic than a lot of economists have
1:49
Speaker 1: over the past months and years when we've had you
1:51
Speaker 1: on and always added really good perspective. Right now, you
1:55
Speaker 1: sound less optimistic than a lot of people are when
1:58
Speaker 1: they take a look at these numbers. What are you
2:01
Speaker 1: seeing on the ground that's making you less optimistic? So
2:06
Speaker 1: what's happened in a in a in a true recession
2:08
Speaker 1: which I believe we're in is companies stop hiring in volume.
2:12
Speaker 1: They have key hires they need to make, and they
2:14
Speaker 1: may get a new project and they bring people on,
2:17
Speaker 1: but there isn't growth for few there is. They are
2:19
Speaker 1: isn't hiring for future growth because they believe they're gonna
2:23
Speaker 1: need it. And that belief is what's been fueling this
2:26
Speaker 1: bull market for ten years, is that companies keep thinking
2:29
Speaker 1: it's going to get stronger and better, and it has been.
2:32
Speaker 1: And now what we've seen, uh is companies are not
2:36
Speaker 1: hiring in volume. We're not seeing sales hiring, which is
2:39
Speaker 1: a really big indicator. When companies are building up their salesforce,
2:43
Speaker 1: it means they're anticipating that they'll be more revenue growth,
2:46
Speaker 1: and that leads to other areas of the business not
2:49
Speaker 1: seeing that in volume. A few hires here and there,
2:51
Speaker 1: but again not in volume, and that gives me some concern.
2:55
Speaker 1: And then temporary staffing, which we have a large business
2:58
Speaker 1: practice in that area, is usually a leading indicator, and
3:01
Speaker 1: it's not It's not as terrible as the search business,
3:04
Speaker 1: but it definitely isn't starting to grow at the rapid
3:07
Speaker 1: volume that we've seen over the past ten and really
3:10
Speaker 1: past twenty years, so I'm a little bit apprehensive. And
3:13
Speaker 1: then the liquidity issue is what's going to happen after
3:16
Speaker 1: the p PP money rolls off and companies don't have
3:19
Speaker 1: to keep their employees anymore. And if revenues aren't there,
3:23
Speaker 1: whether it's due to COVID, whether it's due to social unrest,
3:27
Speaker 1: is are we going to have a situation where companies
3:30
Speaker 1: have there's more bankruptcies? Tom, This is an incredibly important conversation. Frankly,
3:35
Speaker 1: what you are telling me finally is giving me some light.
3:38
Speaker 1: I've had so many questions this morning. This is one
3:40
Speaker 1: of the most confusing data dumps I have ever seen
3:42
Speaker 1: in my life. And even with the p PP taken
3:46
Speaker 1: into account, as Matt Bosler of Bloomberg News was just
3:49
Speaker 1: talking about, that still would only bring not only I
3:51
Speaker 1: mean it's still catastrophic, but it would bring the unemployment
3:54
Speaker 1: rate up to about six still well below consensus. So
3:58
Speaker 1: is it that the market is better than people expected,
4:01
Speaker 1: but not as necessarily good as the headline numbers here imply,
4:05
Speaker 1: or is it closer to what people had expected. We
4:08
Speaker 1: just aren't seeing that level of actual layoffs just yet.
4:13
Speaker 1: Well we've seen is is that the service level can
4:15
Speaker 1: only get hit so hard. It's that's the difference between
4:18
Speaker 1: restaurants and hospitality versus white collar. Is if the restaurants
4:23
Speaker 1: lay everybody off, which is what essentially has happened, there
4:26
Speaker 1: is no more cutting. If you have a company, a
4:28
Speaker 1: Fortune five company that's done layoffs like a bowling or
4:32
Speaker 1: who are an airline or whomever else, they're not laying
4:35
Speaker 1: off the entire company. And that's what the restaurants have
4:38
Speaker 1: done for the most part. And so what we see
4:41
Speaker 1: now is there there really isn't that much more room
4:44
Speaker 1: to go on the service side on the hospitality side.
4:47
Speaker 1: So now it is does part two of the real
4:50
Speaker 1: white collar layoffs we've had them, but we haven't had
4:53
Speaker 1: If you eliminated all the service jobs and you just
4:56
Speaker 1: had the white collar layoffs, it wouldn't be anywhere nearly
4:59
Speaker 1: as at a stropic. We'd probably be sitting at seven
5:02
Speaker 1: and a half percent unemployment and it wouldn't be that bad. So, Tom,
5:05
Speaker 1: do you expect that? Is that something that you kind
5:08
Speaker 1: of survey some of the companies that you're in touch with,
5:10
Speaker 1: you expect kind of more white collar office level type
5:14
Speaker 1: of layoffs across the economy coming up. Well, that'll be
5:18
Speaker 1: the really interesting thing. And we have to see. I
5:20
Speaker 1: mean to me, that's the difference between the V curve
5:23
Speaker 1: versus the you or the L curve of of does
5:26
Speaker 1: things do things bounce back? Now? The one opportunistic or
5:30
Speaker 1: or optimistic both probably is the strength of the stock
5:34
Speaker 1: market is seeing that the market is saying we're looking
5:38
Speaker 1: at companies from the long term. We're not looking at
5:40
Speaker 1: a month over month or even in the quarter that
5:42
Speaker 1: we're saying who's the strong company and will they be
5:45
Speaker 1: strong at the end of this year in the early
5:47
Speaker 1: part of next year. And that lends me to believe
5:49
Speaker 1: that companies are going to have the liquidity to be
5:51
Speaker 1: able to hire people. So there is optimism on that.
5:54
Speaker 1: But I think all of the BLS numbers until we
5:57
Speaker 1: get into the July reports the first week in August
6:01
Speaker 1: are a little bit of smoke and mirrors to really
6:03
Speaker 1: see how things level off. Stands the p P P alright,
6:07
Speaker 1: So looking forward, there is a question about whether this report,
6:11
Speaker 1: given how much better than expected it was, whether it
6:14
Speaker 1: reduces the pressure on Congress to pass additional fiscal and
6:18
Speaker 1: and and stimulus, whether it takes the pressure off the
6:21
Speaker 1: Federal Reserve to keep its bazooka wide open. I'm totally
6:25
Speaker 1: conflating different metaphors there. I'm just wondering, though, from your perspective,
6:29
Speaker 1: how worried you are about that. I think that we
6:34
Speaker 1: should not do any more stimulus at the time being.
6:37
Speaker 1: I think I think the government uh overshot quite frankly, now,
6:41
Speaker 1: I'm not I'm not being critical of it from the
6:44
Speaker 1: standpoint of in a in a catastrophe, you have to
6:46
Speaker 1: do things at the moment, and it's easy to have hindsight.
6:50
Speaker 1: But writing the check to everybody who makes under seventy
6:53
Speaker 1: five thousand employed or unemployed really wasn't necessary. And what
6:57
Speaker 1: we saw was that comping people wanted to have jobs
7:00
Speaker 1: and companies needed to have jobs. And the real challenge
7:03
Speaker 1: we're gonna face in Part two or Part three, however
7:06
Speaker 1: you look at it, is the federal stimulus on the
7:08
Speaker 1: unemployment and people who are making more money being unemployed
7:12
Speaker 1: in these service jobs, and when they go back to work,
7:14
Speaker 1: that's where the dynamics going to be felt come July.
7:18
Speaker 1: All right, So, Tom, we've had differing states have different
7:22
Speaker 1: kind of schedules for reopening their economies. Are we seeing
7:24
Speaker 1: any regional impact unemployment data that might be reflect that.
7:29
Speaker 1: You know what, I'd be frank with you, I haven't
7:31
Speaker 1: had a chance to study that that much, but I
7:33
Speaker 1: do think that that from what who I've been talking
7:36
Speaker 1: to c e O s and finance and HR leaders
7:39
Speaker 1: in the in the southern below the Mason Dixon line,
7:42
Speaker 1: that it really is two different economies, and we're seeing
7:45
Speaker 1: that those those areas, geographically speaking, are much more prone
7:50
Speaker 1: to be proactive um and optimistic versus versus the northern
7:54
Speaker 1: the Northern States. Just real quick here, Tom Gimble, before
7:57
Speaker 1: we let you go, is there any color sector that
8:01
Speaker 1: you are most concerned about from here that you expect
8:05
Speaker 1: would suffer the first or the next round of layoffs.
8:10
Speaker 1: Here's the really interesting thing for this recession versus the
8:13
Speaker 1: last two where I was running a business in OH
8:15
Speaker 1: one and O eight No. Nine, is this isn't sector focused.
8:20
Speaker 1: It's company focused across all sectors. So you could have
8:24
Speaker 1: an airline that actually ends up being okay and and
8:28
Speaker 1: the majority of others that are that are in the toilet,
8:31
Speaker 1: and that could be for every single company. I'm seeing
8:33
Speaker 1: it in insurance and technology and manufacturing that that many
8:37
Speaker 1: companies aren't doing great, but there's a few outliers that
8:40
Speaker 1: really are doing well. So but if I had to
8:43
Speaker 1: put my finger on it, I would say that that
8:45
Speaker 1: a lot of technology based companies, I think you're gonna
8:48
Speaker 1: see if things don't pick up, are gonna be laying
8:50
Speaker 1: people off because their profits are lagging and they don't
8:54
Speaker 1: have the A lot of them don't have the funding
8:56
Speaker 1: to go out and just hire people. And that's a
8:58
Speaker 1: real interesting dynamic, the nonprofitable companies that exist in the
9:02
Speaker 1: tech space. Tom, thanks so much for joining us on
9:05
Speaker 1: this historic jobs Friday. Tom Gimbal, founder and CEO of
9:09
Speaker 1: LaSalle Network based in Chicago, breaking down those numbers. Joining
9:16
Speaker 1: us now is someone with incredible history just surveying the
9:20
Speaker 1: ground and the research in every aspect of the economy.
9:24
Speaker 1: Danielle de Martino Booth, chief executive officer and chief strategistic
9:28
Speaker 1: Quill Intelligence, also a Bloomberg opinion columnist who spent years
9:32
Speaker 1: of the Dallas Federal Reserve as an adviser there. She
9:35
Speaker 1: is joining us from Dallas. Danielle, as you pass into
9:39
Speaker 1: the numbers that we got today showing that the jobless
9:42
Speaker 1: rate actually declined even though it had been expected, to increase.
9:46
Speaker 1: What's your main takeaway about the strength of the U. S. Economy?
9:50
Speaker 1: You know, my biggest takeaway is that if you look
9:53
Speaker 1: at the continuing claims number and you compare that to
9:57
Speaker 1: the size of the workforce, you get to thirteen point
9:59
Speaker 1: one percent, and so this is bizarrely so really, I
10:03
Speaker 1: mean truly. I was one of the people who said, typo, uh,
10:07
Speaker 1: it's kind of reflective of where the U. S. Economy
10:10
Speaker 1: is right now with thirteen point one percent of the
10:13
Speaker 1: population collecting unemployment benefits at the moment um. My other
10:18
Speaker 1: takeaway was that the BLS is error, UH is equivalent
10:22
Speaker 1: to what the unemployment rate was a few months ago
10:26
Speaker 1: that they're they're saying possibly three percent distortion in the
10:29
Speaker 1: unemployment rate. I think that's where we were back in February.
10:32
Speaker 1: So it's just this is really incredible data to see.
10:36
Speaker 1: I think you have to keep your focus on the
10:39
Speaker 1: weeds right now, look at what companies are doing, not
10:43
Speaker 1: what the data are saying, because it's obviously completely thrown
10:47
Speaker 1: off by many different factors. And that's what I try
10:49
Speaker 1: and do. I try and pay attention to what individual
10:52
Speaker 1: companies are doing around the country on a daily basis, So,
10:56
Speaker 1: daniel I mean, as President Trump was just saying in
10:58
Speaker 1: the Rose Garden, he from his first spective, he believes
11:01
Speaker 1: that the worst is over, and then you know America
11:03
Speaker 1: is on its way back. Does a data point like this,
11:06
Speaker 1: you know, kind of confirm that or again, are you
11:09
Speaker 1: going to step back and maybe look at a lot
11:11
Speaker 1: more data at the more granular level. I'm gonna keep
11:16
Speaker 1: focusing on granularity at Bloomberg put out a great report
11:20
Speaker 1: this week that showed that the next wave of higher
11:23
Speaker 1: income paying jobs could be up to six million UM.
11:27
Speaker 1: And you know, I've just been following the past few
11:30
Speaker 1: days and whether you're talking about a K Steel or
11:32
Speaker 1: Auto Nation or UM Stitch Fixed, which was a Unicorn
11:37
Speaker 1: in San Francisco laying off of its workforce, Carpenter Technology
11:41
Speaker 1: in Philadelphia of its workforce UM and another you know,
11:45
Speaker 1: Perella Weinberg seven percent tied to deal making Lazy Boy
11:49
Speaker 1: ten percent of its workforce, UM, Saber, the software technology
11:53
Speaker 1: company for for for the global travel industry eight hundred
11:56
Speaker 1: in additions to the four hundred and committed voluntary early retirements.
11:58
Speaker 1: I'm talking about the last four day hours. Yeah, Danielle,
12:03
Speaker 1: So if you're focused on the granularity, I'm wondering what
12:06
Speaker 1: you're seeing on the ground in the daily and weekly
12:09
Speaker 1: statistics that we're getting, and I'm wondering if you could
12:13
Speaker 1: compare that with the headline figure from the Job's report.
12:16
Speaker 1: In other words, you know, people are saying it's as hypo,
12:19
Speaker 1: it's an error, they questioned the data. But are there
12:23
Speaker 1: obvious discrepancies or is this just very explainable classification issues
12:28
Speaker 1: with the p p P program and other issues that
12:31
Speaker 1: will come to the four over time. But the bottom
12:33
Speaker 1: line takeaway here is that the labor market isn't as
12:35
Speaker 1: bad as many people expected. Well, I think that that
12:39
Speaker 1: is is partially mathematical. We are going to have mathematically,
12:44
Speaker 1: we are going to have a tremendous uh improvement in
12:48
Speaker 1: the numbers in going forward, regardless of what area of
12:52
Speaker 1: the economy you're you're talking about, because we have to
12:54
Speaker 1: come off the bottom. We can't stay on the bottom
12:57
Speaker 1: and reopen at the same time their diametor really opposed.
13:00
Speaker 1: We've seen the same phenomena in Italy. We've seen a
13:03
Speaker 1: tremendous decline in their unemployment rate, for example. So we're
13:07
Speaker 1: going to have this happen. But if you look at
13:10
Speaker 1: Google trends on unemployment insurance searches, that is completely flatlined,
13:14
Speaker 1: meaning it's no longer improving. If you look at people's intentions.
13:18
Speaker 1: Fresh data out of Cox Automotive this morning, people are
13:21
Speaker 1: saying that they're going to delay a car purchase for
13:24
Speaker 1: the first time since early March. It's it's popped right
13:27
Speaker 1: back up to the hive. So we are reopening. But
13:30
Speaker 1: my question is going to be, once we get past
13:33
Speaker 1: the less bad, what is the follow through going to
13:36
Speaker 1: look like? And I think that that is a great unknown.
13:39
Speaker 1: But in real time data, we're starting to see weakness
13:43
Speaker 1: re emerge despite the reopening of the of the economy.
13:46
Speaker 1: So where do you think that's going to leave Congress, Danielle,
13:49
Speaker 1: I mean, we do have uh, some more fiscal stimulus
13:53
Speaker 1: kind of winding its way through Congress. Doesn't seem to
13:55
Speaker 1: be a lot of uh. I guess, you know, impetus
13:59
Speaker 1: to get this thing done quick. Where do you think
14:00
Speaker 1: the next step is going to be from Congress in
14:02
Speaker 1: terms of stimulus? Well, you know there's the irony, right,
14:06
Speaker 1: You've got potential legislation being proposed to have a job
14:10
Speaker 1: credit paid to pay people to come back into the
14:13
Speaker 1: workforce because so many are collecting more with this additional
14:16
Speaker 1: six dollars a week. Small business owners that have reopened
14:20
Speaker 1: are like, well, I can't get my employees back by
14:22
Speaker 1: the same token. What kind of extra incentive do we
14:27
Speaker 1: have now to pass this legislation? Now that the president
14:29
Speaker 1: has informed the country that it's not a V shaped
14:32
Speaker 1: recovery but a rocket ship, So why do you go
14:35
Speaker 1: back to the to the drawing board and say that
14:37
Speaker 1: we need to to put more stimulus into this economy
14:39
Speaker 1: if it's fully recovered. So going forward, what are you
14:43
Speaker 1: watching in order to determine how much some of the
14:47
Speaker 1: labor market is declining? I guess I'm I come up
14:50
Speaker 1: with speechless just because this has been such a fast
14:53
Speaker 1: moving labor market and economic recession that it's hard to
14:57
Speaker 1: pinpoint the numbers, and the data has been all over
15:00
Speaker 1: the place. I mean, some people could say that there
15:02
Speaker 1: is discrepancy with the state and local claims in part
15:05
Speaker 1: because of processing issues there, So perhaps this is a
15:08
Speaker 1: more comprehensive number. What are you looking for to confirm
15:11
Speaker 1: your view that, yes, the labor market is weak, and
15:15
Speaker 1: yes there was a bit of an improvement, but it
15:17
Speaker 1: appears to be plateau ng, so I'm actually following. I'm
15:21
Speaker 1: trying to be as stringent as I possibly can with data.
15:24
Speaker 1: I'm looking for permanence. And I actually checked in with Challenger,
15:28
Speaker 1: Gray and Christmas yesterday just to confirm that what they report,
15:32
Speaker 1: which has seems so really low compared to some of
15:34
Speaker 1: the large numbers we're seeing, but they did confirm that
15:37
Speaker 1: they only report permanent layoffs. So we're at one point
15:41
Speaker 1: four million or so. Uh, since this whole thing has started,
15:44
Speaker 1: the highest level in history is almost two million. It
15:47
Speaker 1: looks like we'll get there by July or so. So
15:51
Speaker 1: I'm going to continue to watch things like bankruptcy filings. Uh,
15:54
Speaker 1: these are companies that are going away and not coming back.
15:56
Speaker 1: I'm going to continue to watch permanent layoffs. I'm going
15:58
Speaker 1: to stay in the weed and and continue to run
16:02
Speaker 1: my Twitter polls and asking people what they're actually doing,
16:05
Speaker 1: if they're if they're truly I am ready to go
16:08
Speaker 1: back and spend like I used to spend, or if
16:10
Speaker 1: this reticence remains. So, I think the weeds are going
16:14
Speaker 1: to be the right place to be because it's so
16:16
Speaker 1: difficult to follow data when everything every economics textbook in
16:21
Speaker 1: the world tells you that the unemployment rate is the
16:24
Speaker 1: most lagging of all economic indicators, and yet it lad
16:27
Speaker 1: coming right out of the gate because we shut the
16:29
Speaker 1: economy down, So the old rules don't apply if unemployment
16:33
Speaker 1: is leading us into recession. So Danielle, as you look
16:37
Speaker 1: at your GDP model, and you're obviously, uh, employment is
16:40
Speaker 1: a big, big factor, and it does the data we
16:43
Speaker 1: got today materially change kind of your outlook for how
16:47
Speaker 1: the rest of this year and into next year is
16:49
Speaker 1: going to unfold in terms of kind of the economic growth. Well,
16:53
Speaker 1: I mean, at this point you could you could take
16:56
Speaker 1: a guess. I mean, there's no methodology today because my
16:59
Speaker 1: mess atology has been throwing out the window. But if
17:01
Speaker 1: I was just throw spaghetti on the wall and see
17:03
Speaker 1: if it's six, I would say maybe the second quarter
17:05
Speaker 1: is not going to be as bad as some of
17:06
Speaker 1: the most dire predictions out there. If you look at
17:09
Speaker 1: the spectrum of Bloomberg consensus estimates UM. But that by
17:13
Speaker 1: that same token again, if you're seeing reticence and if
17:17
Speaker 1: you're seeing higher income paying job growth come down UM,
17:22
Speaker 1: then you're going to see a more sclerotics third and
17:25
Speaker 1: fourth quarter growth than what's being anticipated based on the
17:28
Speaker 1: original kind of we're gonna see a U shaped recovery.
17:31
Speaker 1: So one of the things I'm following the most closely
17:34
Speaker 1: I suggest you do as well, is every Thursday in
17:36
Speaker 1: the Bloomberg Consumer Comfort data, I've been following those who
17:39
Speaker 1: make seventy dollars a year their confidence. Unlike overall, the
17:45
Speaker 1: consumer comfort headline has yet to come back. It's continued
17:48
Speaker 1: to pick down week after week, and that would indeed
17:51
Speaker 1: reflect whether or not worth seeing hire income paying job
17:55
Speaker 1: job losses. Danielle, Just to wrap this all up, I
17:58
Speaker 1: know you can follow the consumer credit space very carefully,
18:01
Speaker 1: and one thing that I found, uh surprisingly positive is
18:04
Speaker 1: the lack of the increase in defaults and delinquencies that
18:07
Speaker 1: many people had expected. And one of the reasons why
18:10
Speaker 1: is because people said the enhancement employment benefits, the checks
18:14
Speaker 1: that everyone got mailed that who earned a less than
18:16
Speaker 1: eventy five tho dollars helped pat out the resources. How
18:20
Speaker 1: much do you think that has been a cushion against
18:23
Speaker 1: losses in consumer credit versus actual strength and rehiring that
18:28
Speaker 1: we saw hinted at with this job's report. Oh look,
18:32
Speaker 1: I'm going to use the President's favorite word here. I
18:34
Speaker 1: think it's been tremendous. Um. Look, we we have seen
18:39
Speaker 1: the We've seen an arresting in subprime auto delinquency because
18:43
Speaker 1: again one in five people receiving an employment benefits are
18:47
Speaker 1: making double what they made before. We've seen obviously the
18:51
Speaker 1: forbearance on mortgages, but even though we've still got nearly
18:54
Speaker 1: nine percent of all mortgages in forbearance, you haven't seen
18:57
Speaker 1: that play out because they put a hold on people's
19:00
Speaker 1: on that being reflected in people's credit reports. We haven't seen.
19:03
Speaker 1: We haven't seen evictions go up. We haven't seen you know,
19:06
Speaker 1: renters are not in major distress. Again, this stimulus has
19:09
Speaker 1: been extremely powerful for the lowest income earners in America,
19:14
Speaker 1: more than two thirds of whom are bringing in more
19:16
Speaker 1: than they did prior to this. Daniel thanks so much
19:19
Speaker 1: for joining us. I really appreciate your thoughts and comments.
19:21
Speaker 1: Danielle di Martino Booth CEO and chief strategist for Quill Intelligence.
19:29
Speaker 1: Markets are ripping on the back of that job's number.
19:31
Speaker 1: Let's see where the real action is. We welcome Bluebrick
19:34
Speaker 1: Stocks editor Dave Wilson as well as Matt Bosler. He's
19:37
Speaker 1: a Bloomberg fed reporter. We'll get his thoughts on these
19:39
Speaker 1: jobs and numbers. Dave, what are you looking at right here? Really?
19:43
Speaker 1: I mean, if you want to understand what's going on
19:46
Speaker 1: today here, here's one way you can frame it. Best
19:50
Speaker 1: performing of the eleven main industry groups in the SMP
19:53
Speaker 1: five hundred by far is energy. Of course, you're talking
19:55
Speaker 1: about an economically sensitive sector there, and so you know,
19:59
Speaker 1: if oil prices are going up, you figured it's not
20:02
Speaker 1: great for the likes of airlines and cruise lines and
20:07
Speaker 1: you know other companies that you know that they use fuels,
20:11
Speaker 1: they are gonna be facing higher costs down the line.
20:14
Speaker 1: Forget that. I mean you look, you see Americans shares
20:18
Speaker 1: up twenty two and a half percent after rising forty
20:22
Speaker 1: one percent yesterday. You see Carnival in Norwegian among the
20:26
Speaker 1: best performers, Royal Caribbean too, So those are your three
20:29
Speaker 1: cruise line stocks in the s and P five up
20:32
Speaker 1: at least thirteen and a half percent. So you know,
20:35
Speaker 1: this is really, you know, a market where given what
20:40
Speaker 1: we saw on the jobs front, people are figuring the
20:43
Speaker 1: economies coming around that people are gonna want to spend,
20:46
Speaker 1: that they're gonna take the plane trips and the cruises
20:50
Speaker 1: down the line that they have been putting off because
20:53
Speaker 1: of the coronavirus. So put it all together, I mean,
20:56
Speaker 1: it's it's a market that's showing real straight too. And
21:00
Speaker 1: let's just give some perspective on what's driving this. The
21:04
Speaker 1: expectation was for seven and a half million jobs to
21:07
Speaker 1: be lost in this May non farm payrolls report. Instead
21:11
Speaker 1: there was a two point five million jobs gain. And
21:15
Speaker 1: I want to dig into what we actually were seeing. Matt,
21:18
Speaker 1: come on in here. Some people saying, how did Wall
21:21
Speaker 1: Street economists get this so wrong? Based on the anecdotal
21:25
Speaker 1: evidence coming out of states, coming out of federal official
21:28
Speaker 1: data sources. Yeah, so there are definitely some important caveats
21:33
Speaker 1: to note with this report, some of which the BLS
21:35
Speaker 1: actually did note in the text of the release they
21:37
Speaker 1: put out. I think the biggest one is that, um,
21:40
Speaker 1: there might have been a classification issue wherein um, you know, uh,
21:46
Speaker 1: some people who were should have been classified as unemployed
21:49
Speaker 1: and contemporary layoff we're actually classified as employed but absent
21:53
Speaker 1: from work for various reasons. And so the BLS says
21:57
Speaker 1: that the unemployment rate actually would have been about three
21:59
Speaker 1: points higher than reported if those people have been classified correctly,
22:04
Speaker 1: and so that would have, you know, manifested in an
22:08
Speaker 1: increase in the unemployment rate in May to something like
22:11
Speaker 1: sixteen point three percent. So that's um, you know, definitely
22:16
Speaker 1: an increase, but still well below the media and estimate
22:21
Speaker 1: in our survey. So um, you know, definitely a better
22:24
Speaker 1: than expected report none the less, although maybe not quite
22:27
Speaker 1: as good as as that headline number indicates. Matt, how
22:31
Speaker 1: do you think the US Federal Reserve is gonna look
22:32
Speaker 1: at this number? So? I think the said for the
22:35
Speaker 1: moment is pretty resigned to um, you know, a long
22:38
Speaker 1: and slow recovery here, and so this doesn't really bring
22:41
Speaker 1: interest rates into play obviously. But one interesting thing to
22:45
Speaker 1: note about the Fed is that they're actually going to
22:47
Speaker 1: be putting out presumably forecast for the unemployment rate for
22:51
Speaker 1: the first time since before this pandemic began next Wednesday
22:55
Speaker 1: when they announced their um policy decisions. So we're going
22:59
Speaker 1: to get the first look at how they're kind of
23:01
Speaker 1: looking at the labor market situation going forward. So far,
23:04
Speaker 1: in public comments, they've been pretty vague and talking about
23:08
Speaker 1: just all of the uncertainty, So it'll be interesting to
23:10
Speaker 1: see what numbers they actually finally do put down to paper. Here,
23:14
Speaker 1: all I can say, Matt, is that somebody cutting the
23:16
Speaker 1: lawn behind you. That's me, that's you. But it's actually
23:20
Speaker 1: it actually adds to the whole moment of time, people
23:23
Speaker 1: getting back to work and getting things back up into order.
23:27
Speaker 1: I'm wondering, you know, just from your perspective, Dave, whether
23:31
Speaker 1: what we saw out of this job's report confirms the
23:34
Speaker 1: optimism that the market has been expressing. In other words,
23:37
Speaker 1: we're seeing the narrative shift from markets are divorced from
23:41
Speaker 1: reality to markets got it right and economists got it wrong.
23:45
Speaker 1: Is that correct? Well, I mean you'd be hesitant to
23:49
Speaker 1: do it off just you know, a couple of sets
23:51
Speaker 1: of data here. I mean that said, you have to
23:55
Speaker 1: remember that the stock market is always forward looking. I
23:59
Speaker 1: mean that's the idea. You can't buy last quarters profits,
24:02
Speaker 1: you can only buy next quarters and the quarter after that.
24:05
Speaker 1: And the focus has been one uh in terms of
24:09
Speaker 1: perhaps when people are expecting earnis to rebound. Certainly shows
24:13
Speaker 1: up in the estimates for SMP five hundred profit that
24:17
Speaker 1: we've compiled from analysts. You know, you don't start to
24:20
Speaker 1: see renewed growth until next year. That said, uh, people
24:25
Speaker 1: are anticipating that you're going to get some kind of
24:29
Speaker 1: a recovery in the second half. And you know, if
24:31
Speaker 1: maybe things aren't so bad this quarter and the recovery
24:35
Speaker 1: comes sooner or stronger than people are anticipating, you know,
24:39
Speaker 1: you put it all together. In the very least, you
24:42
Speaker 1: can understand why investors have taken the position they have,
24:45
Speaker 1: even in the face of all the economic data they
24:47
Speaker 1: had seen before the Job's report. Hey, Matt, do you
24:50
Speaker 1: think this job's number brings the V shaped recovery discussion
24:55
Speaker 1: back on the table. You know, that's a really interesting question.
24:59
Speaker 1: One of the things I have been thinking about this
25:00
Speaker 1: morning is one thing we did see was that the
25:03
Speaker 1: unemployment rate for white Americans fell, but the unemployment rate
25:06
Speaker 1: for Black Americans actually still rose, and so it's kind
25:09
Speaker 1: of widening that gap. And you know, one of the
25:12
Speaker 1: things we've been talking about in terms of the V
25:14
Speaker 1: shape recovery and whether that's going to be possible is
25:17
Speaker 1: the response from Congress here, and so so far it's
25:20
Speaker 1: it's kind of looked like Congress is really dragging their
25:22
Speaker 1: feet on the next um phase of some sort of
25:25
Speaker 1: potential stimulus or income support and I just wonder if
25:30
Speaker 1: you know, given all the unrests were seeing, if those
25:32
Speaker 1: kinds of numbers, those disparities that are being reinforced in
25:35
Speaker 1: this report, even though it was better than expected, might
25:38
Speaker 1: provide some you know, additional impetus for that kind of
25:42
Speaker 1: congressional response. And if that's the case, maybe it does
25:45
Speaker 1: perhaps raise the odds of quicker snap back. But I
25:49
Speaker 1: think absent that sort of response from Congress, we're still
25:52
Speaker 1: looking at a situation where, um, it's going to be
25:55
Speaker 1: hard to bring these numbers down quickly because even though
25:58
Speaker 1: you've got people reopening, people going back to work, there's
26:02
Speaker 1: still that crucial question of consumer psychology, um, and how
26:06
Speaker 1: long that's going to take a toll on some of
26:08
Speaker 1: these sectors like leisure and hospitality, where people you know,
26:11
Speaker 1: may not be willing to go out and and spend
26:14
Speaker 1: at restaurants so quickly. Given these lingering concerns we're going
26:17
Speaker 1: to be having about the virus going forward. We're speaking
26:20
Speaker 1: with Matt Bosler, who covers the FED for us here
26:22
Speaker 1: at Bloomberg, as well as Dave Wilson, Bloomberg Stocks editor,
26:25
Speaker 1: and as we speak, markets ripping higher on the heels
26:28
Speaker 1: of that way better than expected employment report. The expectation
26:32
Speaker 1: we're seven and a half million jobs lost. Instead there
26:34
Speaker 1: were two and a half million jobs that gained. Although
26:37
Speaker 1: we are grappling to understand the classifications underneath this. Bank
26:42
Speaker 1: stocks soaring or looking at the SMP up two point
26:45
Speaker 1: two percent three thousand one and eighty one points means
26:49
Speaker 1: while the Nasdaq is up by one point six percent. Again,
26:52
Speaker 1: that rotation is into the cyclicals, not necessarily the quote
26:55
Speaker 1: havens which have been big tech. Matt, I want to
26:58
Speaker 1: dig a little bit deeper here in terms of how
27:01
Speaker 1: long lasting this optimism can possibly be in the reclassification
27:06
Speaker 1: of some of the employers who allowed employees to stay
27:10
Speaker 1: on the payroll because of the p p P loans,
27:13
Speaker 1: how long do we have for that? How much can
27:16
Speaker 1: we really depend on that to be the reality for
27:19
Speaker 1: the longer term and cushion any further job cuts going forward. Yes,
27:25
Speaker 1: so we have a story out on the terminal this
27:28
Speaker 1: morning about um, you know, looking at employment and uh
27:32
Speaker 1: sort of the bailout package that was passed in March.
27:35
Speaker 1: It's important to keep in mind that, you know, those
27:37
Speaker 1: p p P loans to cover payrolls were really only
27:41
Speaker 1: for small businesses, which account for forty some percent of uh,
27:45
Speaker 1: you know, overall employment in this country, whereas um, you know,
27:49
Speaker 1: more than half of employment is in large companies that
27:52
Speaker 1: did not receive any sort of grants or payroll support
27:56
Speaker 1: to keep employees on the payroll. And I think what
27:59
Speaker 1: we're seeing a lot of those larger companies is that
28:02
Speaker 1: they are announcing these big layoffs. And even some of
28:05
Speaker 1: the companies that took money directly from treasury, like the airlines,
28:09
Speaker 1: with employment strings attached, those strings are only attached until September,
28:14
Speaker 1: and then some of those have announced that they're planning
28:16
Speaker 1: to do layoffs after that as well. And so um,
28:19
Speaker 1: this is kind of a tricky situation where we we
28:22
Speaker 1: may have uh, you know, some some issues with cascading
28:25
Speaker 1: job losses that aren't necessarily showing up right away in
28:29
Speaker 1: these numbers, and we still, unfortunately have to wait for
28:32
Speaker 1: those to come over the coming months. And so again,
28:35
Speaker 1: that really just underscores, um the need for some sort
28:39
Speaker 1: of game plan here and coordination to to prevent that
28:44
Speaker 1: from happening. And so um, the other thing that people
28:48
Speaker 1: are looking at is these weekly jobless claims data that
28:51
Speaker 1: we're getting. We saw yesterday and the latest report that
28:55
Speaker 1: you know, another one point nine million people filed for
28:58
Speaker 1: initial claim aimes even this far into this at the
29:01
Speaker 1: end of May, and so those numbers are just so huge, um,
29:06
Speaker 1: and they don't look like they're really going down anytime soon.
29:08
Speaker 1: That's going to keep overall unemployment high ostensibly for the
29:12
Speaker 1: foreseeable future. Here, Dave Wilson, you know, as I think,
29:15
Speaker 1: as I look at this market, another two percent move
29:18
Speaker 1: higher here, and that's in the face of you know,
29:20
Speaker 1: really ugly earnings revisions on the downside, here are we
29:24
Speaker 1: starting to get some evaluation concerns coming off a Wall
29:27
Speaker 1: Street or strategist saying, boy, this market from evaluation standpoint
29:32
Speaker 1: is getting ahead of itself. Well, there are certainly a
29:35
Speaker 1: number of strategies, you know, looking at things like uh
29:39
Speaker 1: forward price earnings ratios where you're you're you're looking at
29:42
Speaker 1: projected profit rather than historical learnings and saying, look, I
29:47
Speaker 1: mean you're you're back to where you were, you know,
29:50
Speaker 1: near the highs and two thousands. So that becomes an
29:53
Speaker 1: issue for some investors anyway, I mean, others kind of justified,
29:59
Speaker 1: you know, looking at the potential for a rebound here
30:03
Speaker 1: you know, in earnings that would kind of bring down
30:07
Speaker 1: the ratio, and that's you know, a potential going forward.
30:11
Speaker 1: I mean, analysts estimates have kind of figured in the
30:14
Speaker 1: worst at this point, and if what we're seeing on
30:16
Speaker 1: the economic front kind of carries over in terms of
30:20
Speaker 1: companies results, then maybe they have to go back and
30:24
Speaker 1: kind of redo the numbers there in terms of what
30:27
Speaker 1: they're anticipating on earnings. So I me, you know, the
30:30
Speaker 1: concerns they're sure there are, uh, is it possible that
30:33
Speaker 1: those concerns maybe you know, mitigated by what we're seeing
30:37
Speaker 1: on the economic front. I mean, that's looking like a
30:40
Speaker 1: possibility as well. Let's talk about the bank stocks. They're
30:43
Speaker 1: ripping higher. I'm looking at S and P sub index
30:47
Speaker 1: of financials. There are more than four percent today and
30:50
Speaker 1: it's the biggest one day gain, uh since April, since
30:54
Speaker 1: early April. I'm trying to understand if this is just
30:56
Speaker 1: a yield curve bat with the two tens spread at
30:58
Speaker 1: the highest since two thousand and eight teen, seeing a
31:01
Speaker 1: similar kind of widening in the five thirties spread, Is
31:03
Speaker 1: that really what this is? Or is it also optimism
31:06
Speaker 1: that perhaps there will not be necessarily consumer defaults delinquencies
31:10
Speaker 1: and business will actually pick up. One kind of gets
31:12
Speaker 1: you to the other to some extent. I mean, if
31:14
Speaker 1: you think about it, you know, the idea that what
31:17
Speaker 1: we're seeing in the bond market is a reflection of
31:20
Speaker 1: what the jobs numbers are suggesting about the economy, and
31:23
Speaker 1: if indeed that holds up and this is not just
31:26
Speaker 1: some one month wonder, then you know, consumers may well
31:30
Speaker 1: be in a better position than they were before in
31:32
Speaker 1: terms of being able to keep up payments, in terms
31:35
Speaker 1: of being willing to spend more. And as you know,
31:37
Speaker 1: all kinds of businesses open up as a results of
31:41
Speaker 1: the easing of the coronavirus pandemic. I mean there's a
31:44
Speaker 1: potential for more business down the line coming out of that.
31:47
Speaker 1: So you know, it's kind of a both and as
31:50
Speaker 1: opposed to when either or in terms of you know,
31:53
Speaker 1: what's being reflected in the financial stocks at this point,
31:58
Speaker 1: and Mattic just wondering, you know, it's again it's better
32:00
Speaker 1: than expected job number. We're gonna have President Trump and
32:02
Speaker 1: moments doing a victory lap by well deserved victory lap
32:05
Speaker 1: for this number here, followed up by Larry Cuddlo with
32:08
Speaker 1: John Farrow, What does that mean for the folks in Congress,
32:11
Speaker 1: is that reduced the odds of getting this next round
32:14
Speaker 1: of stimulus, even though the needs still may very well
32:18
Speaker 1: be there. As you listen to Governor Cuomo talk about
32:20
Speaker 1: the need for stimulus at the state and local level,
32:23
Speaker 1: you know, this is really just a multi trillion dollar question,
32:26
Speaker 1: I think, right because, um, like you said, you know,
32:29
Speaker 1: there's some cross currents here, we're getting some mixed signals,
32:31
Speaker 1: and I think one of the interesting things about what
32:33
Speaker 1: we're seeing in the economy and the stock market is that, um,
32:37
Speaker 1: you know, we've kind of been really holding out hope
32:39
Speaker 1: since the beginning of this pandemic that um, you know,
32:42
Speaker 1: things would turn out okay and maybe better than expected.
32:44
Speaker 1: There's so much uncertainty right now, um, and we don't
32:48
Speaker 1: really know much about you know, the nature of the
32:50
Speaker 1: virus itself. Um, And so that kind of you know,
32:54
Speaker 1: leaves us to be able to hold out for hope.
32:56
Speaker 1: You know. It's I just remember back to mid March
32:59
Speaker 1: when initially the lockdowns were going to be two weeks,
33:02
Speaker 1: and then um, they were extended another two weeks after that,
33:06
Speaker 1: and we just kind of kept extending things every two
33:09
Speaker 1: weeks and now We're in a situation where a lot
33:11
Speaker 1: of us are, you know, maybe going back to eat
33:14
Speaker 1: at a restaurant for the first time in several months,
33:17
Speaker 1: and so that makes us feel good and you know,
33:19
Speaker 1: gives us some optimism. But um, we we definitely have
33:22
Speaker 1: some key milestones or flag posts I think coming up here. Um,
33:27
Speaker 1: the the next big one for the economy is um
33:30
Speaker 1: these extended or expanded unemployment insurance benefits that are set
33:34
Speaker 1: to expire at the end of July. So that's going
33:37
Speaker 1: to be a big um, you know, potential flashpoint for
33:41
Speaker 1: for Congress to debate and keep an eye on. That
33:43
Speaker 1: will determine how things go going forward. And Matt, thanks
33:46
Speaker 1: so much for joining us. We really appreciate your thoughts.
33:49
Speaker 1: Matt Bostler, Bloomberg Fed reporter, also Bloomberg Stocks editor Dave Wilson,
33:53
Speaker 1: thanks so much for your color here on this very
33:56
Speaker 1: strong job to report and very strong equity market. Thanks
34:00
Speaker 1: for listening to the Bloomberg pen L podcast. You can
34:03
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
34:05
Speaker 1: podcast platform you prefer. I'm Paul Sweeney, I'm on Twitter
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Speaker 1: at p t Sweeney. I'm Lisa Bramwoyits. I'm on Twitter
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Speaker 1: catch us worldwide. I'm Bloomberg Radio