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The State Of Labor And The Economy In 2022 · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
• 0:15
  Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Markets are clearly being
• 0:22
  Speaker 1: driven by the geopolitical issues coming out of Ukraine, but
• 0:25
  Speaker 1: there was a lot of eco data this morning on
• 0:29
  Speaker 1: primarily on the labor fronts. Pretty good numbers two in
• 0:32
  Speaker 1: terms of nonfarm payrolls coming in better than expect that.
• 0:34
  Speaker 1: Let's break it all down with Sarah House, senior economist
• 0:37
  Speaker 1: at Wells Fargo Securities. Sarah, thanks so much for taking
• 0:40
  Speaker 1: the time to join uh US. What did you make
• 0:42
  Speaker 1: of the labor data this morning? Overall, this was a
• 0:47
  Speaker 1: really strong report. So obviously we had much stronger growth
• 0:50
  Speaker 1: in terms of parel numbers and broad based across sectors.
• 0:53
  Speaker 1: We also had an increase in the work week, and
• 0:56
  Speaker 1: so I think that points to growth here in the
• 0:58
  Speaker 1: first quarter certainly being stronger than what was generally expected.
• 1:03
  Speaker 1: And I think one thing we saw was that stood
• 1:07
  Speaker 1: out was that flat reading an average early earnings. And
• 1:10
  Speaker 1: so this coincides with some moderation we've seen in the
• 1:13
  Speaker 1: e C I, some of the moderation we've seen in
• 1:16
  Speaker 1: things like the Small Business Survey compensation Plan. So I
• 1:19
  Speaker 1: think in some ways that that's good for the overall
• 1:22
  Speaker 1: inflation outlook and therefore the overall growth outlook. Considering that
• 1:27
  Speaker 1: it suggests that wage growth isn't isn't running away and
• 1:30
  Speaker 1: taking inflation with it? Is it a good thing? I mean,
• 1:33
  Speaker 1: this is what I was wondering as I was looking
• 1:35
  Speaker 1: through the numbers. Wages kind of have to go up
• 1:39
  Speaker 1: pretty quickly for people to maintain pace with the with
• 1:42
  Speaker 1: the increased inflation and with the oil and commodity shock
• 1:45
  Speaker 1: more generally. Doesn't this just reduce purchasing power? Essentially? It
• 1:50
  Speaker 1: does in the short term, But I think in terms
• 1:53
  Speaker 1: of keeping the inflation environment somewhat reined in or at
• 1:57
  Speaker 1: least reducing the risk that it gets further out of control,
• 2:00
  Speaker 1: I think it's an It's an important it's an important
• 2:02
  Speaker 1: print in that matter, and I think it suggests in
• 2:05
  Speaker 1: some ways that the FED can actually be a little
• 2:08
  Speaker 1: less aggressive in terms of their tightening tightening plans in
• 2:11
  Speaker 1: light of the inflationary pressures that we're seeing on the
• 2:14
  Speaker 1: commodity front. All right, Saras, and what do you what
• 2:17
  Speaker 1: do you expect this photo reserve to do on the
• 2:19
  Speaker 1: back of this data set? This morning, I look at
• 2:22
  Speaker 1: the w I R P GO function on the terminal
• 2:24
  Speaker 1: and it shows the streets thinking about six rate hikes
• 2:28
  Speaker 1: this year? Is that kind of how you're seeing it?
• 2:31
  Speaker 1: So right now we're at five rate hikes for the year.
• 2:33
  Speaker 1: But obviously there's a lot of uncertainty and a lot
• 2:36
  Speaker 1: of things that could change even between now and the
• 2:38
  Speaker 1: March meeting. So we're still looking for the Fed to
• 2:42
  Speaker 1: raise twenty five basis points here at their next meeting.
• 2:44
  Speaker 1: I think we saw that not only from Pal this
• 2:47
  Speaker 1: Pal this week, but also from Evans this morning. Now,
• 2:49
  Speaker 1: I think that's notable considering he's traditionally been one of
• 2:52
  Speaker 1: the most dubblish members on the committee. But I think
• 2:55
  Speaker 1: when you step back and you look at where the
• 2:57
  Speaker 1: labor market is, the fact that the inflation side of
• 3:00
  Speaker 1: the mandate has been more than met that until we
• 3:03
  Speaker 1: see more significant still over effects to to the U
• 3:06
  Speaker 1: S economy, the FED is in the position where they
• 3:09
  Speaker 1: need to adjust policy, They need to to try and
• 3:11
  Speaker 1: get it more centered in light of that labor market
• 3:14
  Speaker 1: and inflation back drop. Sarah, this is what I was
• 3:17
  Speaker 1: thinking about all morning. Does it really matter? I mean, yeah,
• 3:21
  Speaker 1: from perhaps a visual standpoint, it matters if the FED
• 3:23
  Speaker 1: hikes rates, But what's it actually going to do right now,
• 3:27
  Speaker 1: given the disruption that you're seeing in markets, given how
• 3:30
  Speaker 1: low yields are, even with the prospect of inflation running
• 3:34
  Speaker 1: at the hottest pace. Since I think you're right that
• 3:38
  Speaker 1: it is more a signaling stance at this point, and
• 3:42
  Speaker 1: that when we look at the tightening and financial conditions,
• 3:45
  Speaker 1: you know, a lot of this has already been priced in,
• 3:48
  Speaker 1: but I think it also gives the FED some additional optimality.
• 3:51
  Speaker 1: So not much with the basis point increase, but I'll
• 3:55
  Speaker 1: sequel a little bit more. And again it goes back
• 3:57
  Speaker 1: to that signaling, especially at a time when inflation expectations
• 4:02
  Speaker 1: have have moved significantly higher. So even at the long end,
• 4:05
  Speaker 1: they're up towards the top end of the range we've
• 4:07
  Speaker 1: seen over the past decade or so, and I think
• 4:10
  Speaker 1: the SAD wants to make sure that they do not
• 4:11
  Speaker 1: break out further from that and that's going to be
• 4:13
  Speaker 1: very difficult in light of this commodity back drop, given
• 4:16
  Speaker 1: that energy prices and food prices are are some of
• 4:19
  Speaker 1: the most influential factors in consumers inflation expectations. So, Sarah,
• 4:25
  Speaker 1: the unemployment rate, the headline number, three point eight percent,
• 4:29
  Speaker 1: is that the new full employment for this economy. So
• 4:33
  Speaker 1: I think when you, I think it is consistent with
• 4:36
  Speaker 1: a full employment. So it's below where the FED estimates
• 4:39
  Speaker 1: that is, and I think when we step back and
• 4:41
  Speaker 1: we look at the overall wage picture, so yes, we
• 4:44
  Speaker 1: saw some softness today, but obviously the trend has been
• 4:46
  Speaker 1: very strong, and so that's all consistent with the labor
• 4:49
  Speaker 1: market that's at full employment. But it's not just the
• 4:52
  Speaker 1: unemployment rate that we see that we see it in
• 4:54
  Speaker 1: things like measures against an unemployed persons versus job openings,
• 4:58
  Speaker 1: the overall employment popularlyation ratio among prime mage workers, and
• 5:02
  Speaker 1: even even under employment. Although we did see the U
• 5:05
  Speaker 1: six pick up today, Sarah, before we let you go
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  Speaker 1: just real quick, how much did you ratch it back
• 5:11
  Speaker 1: your expectations for growth after seeing the events of the
• 5:14
  Speaker 1: past two weeks. So we haven't published a new forecast,
• 5:18
  Speaker 1: but I think when you look at the sensitivity to
• 5:20
  Speaker 1: growth around some of the increase in in commodity prices,
• 5:24
  Speaker 1: and we are looking at potentially somewhere around half a percent.
• 5:27
  Speaker 1: If you saw energy and UH and food prices increase
• 5:31
  Speaker 1: about thirty five percent. So oil prices are are past
• 5:34
  Speaker 1: that point, but food prices haven't gotten quite there. But
• 5:38
  Speaker 1: I think importantly with the starting point for the U.
• 5:41
  Speaker 1: S economy, there is some room to give on growth
• 5:43
  Speaker 1: where before it slips below trend, let alone a recession inflation,
• 5:47
  Speaker 1: we don't have that room to give. All right, Sarah,
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  Speaker 1: thank you so much for joining us on this job today.
• 5:53
  Speaker 1: Sarah House, senior economist at Wells Fargo Securities. Here another
• 5:58
  Speaker 1: week day to the tape. Here at least, I think
• 6:00
  Speaker 1: again the geopolitical issues are really what's driving a lot
• 6:04
  Speaker 1: of this market. Yeah, you know, this should have been
• 6:06
  Speaker 1: payrolls Friday, and the President Biden just put out a
• 6:08
  Speaker 1: statement on the job's report talking about how people are
• 6:11
  Speaker 1: getting back to work. But right now pandemic might be ending,
• 6:15
  Speaker 1: but the focus is elsewhere. Yeah, I guess it takes
• 6:18
  Speaker 1: a good old fashioned European work to get the pandemic
• 6:20
  Speaker 1: off the front pages. I mean, we just have I
• 6:22
  Speaker 1: could do without. I gotta say, yeah, I know, it's
• 6:24
  Speaker 1: it's a pick your poison, I guess in these things.
• 6:31
  Speaker 1: All right, let's talk a little echo stuff here and
• 6:34
  Speaker 1: you go Eco go on. The Bloomberg terminal brings up
• 6:37
  Speaker 1: all the salient economic data coming out of the U. S. Government. Again.
• 6:41
  Speaker 1: The data point today was change in nonfarm payrolls came
• 6:44
  Speaker 1: in it plus six seven six seventy eight thousand versus
• 6:48
  Speaker 1: a consensus of four hundred twenty three thousand, So a good,
• 6:51
  Speaker 1: good beat there. We had a revised upward revised to
• 6:54
  Speaker 1: the prior month there, so all good on the labor front.
• 6:56
  Speaker 1: Let's break it down with Russell Price, chief economists with
• 6:59
  Speaker 1: AMERP as a financial Russell looked like a really solid number.
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  Speaker 1: What's your view of the US labor market these days? Yeah, Paul,
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  Speaker 1: you know, I think it really is very solid backdrop
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  Speaker 1: for the job market right now. I think that's even
• 7:13
  Speaker 1: and not just in today's report, but in the reports
• 7:16
  Speaker 1: that we've seen over the last few months, and as
• 7:18
  Speaker 1: far as other um side reports that we've seen, as
• 7:22
  Speaker 1: far as the job openings and labor turnover survey. What
• 7:26
  Speaker 1: we're the reports that we're hearing from individual companies as
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  Speaker 1: far as is the strength of them finding it difficult
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  Speaker 1: to find workers. Um, so it's a very strong market.
• 7:38
  Speaker 1: But from one thing that's a very apparent parent from
• 7:41
  Speaker 1: today's report is that we're finally starting to see a
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  Speaker 1: little bit of improvement in the pace of people returning
• 7:47
  Speaker 1: to the job market. The labor force participation rate over
• 7:50
  Speaker 1: the last two months grew by four tenths of a percent.
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  Speaker 1: I don't know. That doesn't sound like much, but it's
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  Speaker 1: equal to the game that we saw uh in all
• 8:01
  Speaker 1: of two thousand and twenty one. So as COVID eases,
• 8:05
  Speaker 1: I think that we should continue to see more people
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  Speaker 1: be willing to rejoin willing we're able to rejoin the
• 8:13
  Speaker 1: job market. That's good because it puts more people to work,
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  Speaker 1: and it also should take some pressure off of wage
• 8:19
  Speaker 1: gains as well. So there's this idea right now, and
• 8:21
  Speaker 1: you're seeing this in currency. Is certainly with the dollar
• 8:24
  Speaker 1: strength and the era weakness, that the US will be
• 8:27
  Speaker 1: able to avoid stagflation even in the face of this
• 8:30
  Speaker 1: commodity shock, but Europe will not. Do you think that
• 8:34
  Speaker 1: that is consistent with what you're seeing? Yes, I do
• 8:39
  Speaker 1: think so. I we believe right now that when you
• 8:42
  Speaker 1: look at stagflation that is weak or stagnant pace of
• 8:48
  Speaker 1: economic expansion, well during periods of very high inflation. We
• 8:53
  Speaker 1: do think that at current crew oil prices, and it's
• 8:57
  Speaker 1: really a story about energy prices, particularly when you're talking
• 9:00
  Speaker 1: about the difference between the United States and Western Europe. Um,
• 9:04
  Speaker 1: it's the impact of those higher prices for energy here
• 9:09
  Speaker 1: in the United States with crude oil prices as was
• 9:11
  Speaker 1: just mentioned, the crude oil and about one, we think
• 9:15
  Speaker 1: that anywhere between a hundred and a hundred twenty should
• 9:19
  Speaker 1: have a negative impact on our real GDP by about
• 9:23
  Speaker 1: half to one full percentage point. So our estimate for
• 9:28
  Speaker 1: this year coming into the year was for real GDP
• 9:31
  Speaker 1: to go by three and a half percent UM. So
• 9:35
  Speaker 1: uh So, then current West Texas intermediate price is a
• 9:39
  Speaker 1: drag on that number, but there's still plenty of underlying
• 9:43
  Speaker 1: room for growth. In our view. It's more negatively impactful
• 9:47
  Speaker 1: for Europe because they import much more than we do.
• 9:51
  Speaker 1: And uh those imports not only do they pay a
• 9:55
  Speaker 1: higher price, but it's a greater risk because they import
• 9:58
  Speaker 1: so much from Russia. All Right, So, Russell, how do
• 10:03
  Speaker 1: you think the data that we've seen over the past
• 10:05
  Speaker 1: several days, including today's jobs data and the geopolitical risk
• 10:09
  Speaker 1: that we're all witnessing in Ukraine. How do you think
• 10:13
  Speaker 1: that impacts what our federal Reserve is going to do
• 10:15
  Speaker 1: for the remainder of the year. Yeah. I think they
• 10:18
  Speaker 1: still have to be concerned about the negative influence of
• 10:21
  Speaker 1: energy prices and the which is the ex uh, the
• 10:24
  Speaker 1: extrapolation from the problems and in Europe and uh, the
• 10:28
  Speaker 1: war in Ukraine. I think that's still has to be
• 10:32
  Speaker 1: a very significant component of their calculations. So I agree that, Well,
• 10:38
  Speaker 1: we already know from the Fed Shair citing the other
• 10:41
  Speaker 1: day that he's going to support a twenty five basis
• 10:44
  Speaker 1: point hike here in their meeting next week. UM. So uh,
• 10:49
  Speaker 1: we expect twenty five basis points, and we expect for
• 10:52
  Speaker 1: the full year probably four or five basis point hikes, uh,
• 10:57
  Speaker 1: including the one we see possibly you know in the so. Um,
• 11:04
  Speaker 1: the Fed, they do are able to look at the
• 11:07
  Speaker 1: job market and lean into that as a position of strength.
• 11:11
  Speaker 1: In other words, one of the things that they would
• 11:13
  Speaker 1: be most they don't want to do is slow the
• 11:16
  Speaker 1: economy to where it slows the job market to where
• 11:19
  Speaker 1: we're seeing net job losses, but we're in such a
• 11:22
  Speaker 1: position of strength that gives them some leeway to hike
• 11:27
  Speaker 1: um as as they feel needed to constrain inflation. Uh
• 11:31
  Speaker 1: So it is still the wild card with energy prices,
• 11:34
  Speaker 1: and that is at the moment at least very highly
• 11:38
  Speaker 1: dependent on the situation in Ukraine, which is m remains
• 11:42
  Speaker 1: uncertain and unknowable. All right, Russell, thank you so much.
• 11:45
  Speaker 1: We really appreciate getting your thoughts and perspective there, Russell Price,
• 11:49
  Speaker 1: chief economists at Amera Price Financial. The jobstd again better
• 11:57
  Speaker 1: than expected numbers, and we want to break it down
• 11:59
  Speaker 1: a little bit. We can do that with Tom Gimbell,
• 12:01
  Speaker 1: founder and CEO of the Lassal Network. Toms, some pretty
• 12:04
  Speaker 1: solid numbers on the labor front. Looks like folks are
• 12:06
  Speaker 1: getting back into the workforce. What's your takeaway? Pretty solid?
• 12:11
  Speaker 1: I'd say they're outstanding. Yep, these things see things bouncing back.
• 12:16
  Speaker 1: And you know, I'm I'm a realist and I'm an optimist,
• 12:19
  Speaker 1: and I look at this and it says, uh, corporations
• 12:23
  Speaker 1: are very bullish on where things are. They continue to
• 12:27
  Speaker 1: hire people were coming into the spring, the summer. The
• 12:30
  Speaker 1: masks are off companies continue to grow, and I'm very
• 12:35
  Speaker 1: optimistic and we'll see what happens when the basis points increase.
• 12:39
  Speaker 1: But I think things are continuing to grow and we're
• 12:41
  Speaker 1: gonna have a great summer of hiring as well. Tom
• 12:43
  Speaker 1: talked to us about kind of the wages we had.
• 12:46
  Speaker 1: You know, the street was looking for zero point five percent,
• 12:48
  Speaker 1: gained an average hourly earnings on a month a month
• 12:51
  Speaker 1: basis came in at zero point zero. And how do
• 12:54
  Speaker 1: you think about wages here because we've certainly seen, you know,
• 12:57
  Speaker 1: the Walmarts of the world, the McDonald's of the world,
• 13:00
  Speaker 1: ramping up their entry level per hour wages. How do
• 13:03
  Speaker 1: you think about wage inflation? Yeah, I think the fact
• 13:06
  Speaker 1: that it was zero is actually a good thing. It
• 13:09
  Speaker 1: means that people aren't moving and the wages aren't increasing
• 13:12
  Speaker 1: just because people are throwing money. It means that we're
• 13:15
  Speaker 1: getting a little bit of a more stable job market
• 13:17
  Speaker 1: and economy, that we're not ribing people for certain things,
• 13:21
  Speaker 1: that people are re entering the workforce, that COVID settling down,
• 13:24
  Speaker 1: and that companies are hiring due to growth and not
• 13:27
  Speaker 1: ribing people, and that we're seeing a really really strong
• 13:30
  Speaker 1: labor market that's based on both it's almost an equal
• 13:34
  Speaker 1: of h of supply and demand kind of you know,
• 13:37
  Speaker 1: when when you have a short supply, wages are going
• 13:40
  Speaker 1: to increase to get people. When you have an almost
• 13:43
  Speaker 1: an equal supply and demand and you don't have wage increase,
• 13:45
  Speaker 1: it actually shows that you've got a market that's working.
• 13:48
  Speaker 1: So I'm very optimistic about where this thing's at right now. Tom.
• 13:52
  Speaker 1: When you talk to your client companies that you work with,
• 13:56
  Speaker 1: what are they doing to UH that might be different, unique, new,
• 14:00
  Speaker 1: different from pre pandemic levels in terms of trying to
• 14:02
  Speaker 1: attract workers. The number one thing that we're emphasizing with
• 14:07
  Speaker 1: our clients and we're seeing them do is learning and development.
• 14:10
  Speaker 1: You've got to invest more money to make your people
• 14:13
  Speaker 1: better and that creates continuity, It creates a sense of collegiality,
• 14:18
  Speaker 1: and it also lets them know that you're invested in
• 14:21
  Speaker 1: their career, in their future and they feel a bigger
• 14:23
  Speaker 1: connection to the company. And so when you have that,
• 14:26
  Speaker 1: they're gonna be more A more stable company is a
• 14:29
  Speaker 1: better attraction of talent, and when you have more turnover,
• 14:32
  Speaker 1: you're always backfilling in addition to growth. People can sense
• 14:36
  Speaker 1: that and they don't want to join those companies. So
• 14:38
  Speaker 1: we're every company is gonna try to do recruiting bonuses
• 14:41
  Speaker 1: and retention bonuses. They're gonna try to do more happy
• 14:44
  Speaker 1: hours and fun things to get people in the office,
• 14:47
  Speaker 1: or they'll go the other way and let people work
• 14:49
  Speaker 1: from home just to try to stay. But it's really
• 14:52
  Speaker 1: the learning and development and investing in people that sends
• 14:55
  Speaker 1: a culture that people want to join. Tom, I'm back
• 14:57
  Speaker 1: in your office every day, but I'm the aberration. And
• 15:00
  Speaker 1: how do you think this shakes out. I think we'll
• 15:03
  Speaker 1: end up seeing for the most part, uh no, less
• 15:06
  Speaker 1: than three days a week, and really four days a week.
• 15:08
  Speaker 1: I think Friday is going to be remote Friday like
• 15:11
  Speaker 1: it was casual Friday, and it's gonna be You'll have
• 15:14
  Speaker 1: a few places, maybe law firms or banks or something
• 15:17
  Speaker 1: that are in the office on Friday, but most companies
• 15:19
  Speaker 1: will be uh not in mandatory in the office remote Fridays,
• 15:23
  Speaker 1: and the majority of companies will be three to four
• 15:25
  Speaker 1: days a week. It sounds pretty good to me, I
• 15:27
  Speaker 1: guess um, but I come in every day, so we'll
• 15:30
  Speaker 1: see how it plays out. Tom. Thanks there, I'm right
• 15:32
  Speaker 1: there with the right exactly. Someone know, someone didn't give
• 15:35
  Speaker 1: me a choice, as I recall, but here I am anyway.
• 15:38
  Speaker 1: Tom Gimbell, founder and CEO of LaSalle Network, talking to
• 15:41
  Speaker 1: us about this blowout jobs number we had today again
• 15:45
  Speaker 1: came in well above expectations. We had an upward revision
• 15:48
  Speaker 1: to last month's jobs data as well, so again, folks
• 15:52
  Speaker 1: are kind of getting back into this labor economy. You know,
• 16:00
  Speaker 1: when I saw Jeffrey Cleveland on our list of guest today,
• 16:02
  Speaker 1: I said, there's something odd about this dude. I just
• 16:04
  Speaker 1: can't remember what it is. But it's even more than odd,
• 16:07
  Speaker 1: it's troubling. Jeffy Cleveland, Director in chief Economist Payton and Regal.
• 16:11
  Speaker 1: What's odd is he's an avid swimmer, but that doesn't
• 16:13
  Speaker 1: really capture He swam across the English Channel in two
• 16:15
  Speaker 1: thousand and eight, across the Catalta Channel in two thousand nine,
• 16:18
  Speaker 1: and around Manhattan. This triple crown of open water swimming
• 16:23
  Speaker 1: has only been completed by forty people. So what's wrong
• 16:26
  Speaker 1: with this guy? Anyway? Jeff you're a good economists. I
• 16:28
  Speaker 1: guess that's what all we talked to you. I mean,
• 16:30
  Speaker 1: perfectly good boat would do just fine here, um, but
• 16:33
  Speaker 1: congratulations on being amazing swimmer. Would you take out of
• 16:37
  Speaker 1: the jobs day. But data today it seemed pretty darn
• 16:40
  Speaker 1: good to me. Well, it was, yeah, solid reports, best
• 16:44
  Speaker 1: report in rough yeah eight months. In terms of the
• 16:47
  Speaker 1: headline non farm payroll number, we seem to be in
• 16:51
  Speaker 1: this this range of monthly paywroll growth of around five
• 16:55
  Speaker 1: d thousand or so. That's that's really strong. I think,
• 16:59
  Speaker 1: you know, I really you always like to look at
• 17:01
  Speaker 1: the employment to population ratio for five to fifty four
• 17:06
  Speaker 1: year olds. I think that's your core working age population
• 17:09
  Speaker 1: and that's probably your best you know filters. You can
• 17:12
  Speaker 1: filter out a lot of the noise, you know, aging workforce,
• 17:15
  Speaker 1: all these kind of things, and that that jumped again
• 17:19
  Speaker 1: seventy nine point five. We're still shy of where we
• 17:22
  Speaker 1: were pre COVID, but we've improved on that measure mightily
• 17:27
  Speaker 1: in the last twelve months. Um So, no sign, I
• 17:30
  Speaker 1: would say, no sign of stagnation here. We're seeing very
• 17:34
  Speaker 1: strong growth in the in the first quarter. If you
• 17:37
  Speaker 1: look at jobs as yours, your key indicator three headline unemployment,
• 17:44
  Speaker 1: is that the new full employment for this economy. No,
• 17:47
  Speaker 1: I think we can go lower. We think we'll get
• 17:49
  Speaker 1: to three three by the end of the year. That's
• 17:51
  Speaker 1: our forecast. We did see labor force participation tick up
• 17:57
  Speaker 1: UM a little bit this month, and we think there's
• 18:00
  Speaker 1: there's more room. There's there's some folks that are sidelined.
• 18:03
  Speaker 1: You know that it's not retirement, it's they were a
• 18:05
  Speaker 1: sidelined because of the virus, because of childcare responsibilities, etcetera.
• 18:08
  Speaker 1: And they will we think, come back in as the
• 18:10
  Speaker 1: year progresses. That's not unusual in you know, the last
• 18:14
  Speaker 1: three cycles. You saw that as the unemployment rate got
• 18:17
  Speaker 1: lower and lower, people were enticed to re enter, come
• 18:21
  Speaker 1: back off the sidelines. And so we think that will happen.
• 18:23
  Speaker 1: But three point eight is not the the end point here.
• 18:25
  Speaker 1: We'll get we'll get we'll get lower on the unemployment
• 18:27
  Speaker 1: rate later this year. How do you think the FED
• 18:29
  Speaker 1: looks at, you know, a job print like we saw today, Well,
• 18:33
  Speaker 1: I think, you know, there's some concern people are talking
• 18:35
  Speaker 1: about GDP growth in Q one being flat or even negative.
• 18:40
  Speaker 1: And you know my advice is, you know, I prefer
• 18:43
  Speaker 1: job growth to GDP growth in real time in terms
• 18:47
  Speaker 1: of getting a getting a sense of the economy. So
• 18:49
  Speaker 1: I would I would overweight the jobs data versus the
• 18:52
  Speaker 1: GDP data. So That's that's one. And as I said this,
• 18:55
  Speaker 1: this is telling you the economy is still growing very strongly,
• 18:58
  Speaker 1: very swiftly in the first quarter. So that's the first
• 19:01
  Speaker 1: thing there. There's some concern in some quarters, some some
• 19:04
  Speaker 1: folks I talked to in the bond market, bond traders, friends, colleagues,
• 19:08
  Speaker 1: they'll say, you know, they're they're they're concerned about a
• 19:11
  Speaker 1: wage price spiral, but you're you're not really seeing that
• 19:15
  Speaker 1: here in this in this job support obviously flattish month
• 19:19
  Speaker 1: to month average genially earnings, average genially earnings up five
• 19:23
  Speaker 1: percent year on year. If you factor in inflation, you
• 19:26
  Speaker 1: get negative real wage growth there. So you're not seeing
• 19:29
  Speaker 1: some worrisome signs of a waste price price. So the
• 19:32
  Speaker 1: Fed probably okay with that. I mean, it argues I
• 19:34
  Speaker 1: guess for the twenty five basis point versus the fifty
• 19:36
  Speaker 1: basis point doing something more dramatic. So that's that's probably
• 19:39
  Speaker 1: your key takeaway. I just don't want people to make
• 19:42
  Speaker 1: too much out of one month. Uh, you know, in
• 19:44
  Speaker 1: terms of the wage data, I think there could be
• 19:47
  Speaker 1: some noise in their compositional effects um in terms of
• 19:50
  Speaker 1: the hirings done during the month. So I think job
• 19:53
  Speaker 1: or wage growth will continue to pick up as as
• 19:56
  Speaker 1: the year goes. How do you factor in here? So
• 19:59
  Speaker 1: we have a strong labor market, healing and improving labor market,
• 20:02
  Speaker 1: but we've still got energy prices going through the roof. Here,
• 20:05
  Speaker 1: I got w T I crewed up another three and
• 20:07
  Speaker 1: a half percent to a hundred and eleven dollars a
• 20:09
  Speaker 1: barrel I've got. Now I've got a worse. I've got
• 20:12
  Speaker 1: the geopolitical issues out there. I've got supply chain issues
• 20:15
  Speaker 1: staring commodity prices. How do you factor that into your
• 20:18
  Speaker 1: GDP Outlook? Well, what we've done is we've shaved GDP
• 20:22
  Speaker 1: growth for the year due in large parts of the
• 20:25
  Speaker 1: factors that you're describing. So we started the year thinking
• 20:28
  Speaker 1: the U. S economy would grow about four percent. We've
• 20:30
  Speaker 1: now shaved that down to three tents p percent, so
• 20:33
  Speaker 1: we're at three point seven. We've raised our inflation, so
• 20:36
  Speaker 1: we do think inflation will fall over the course of
• 20:39
  Speaker 1: the year. So core PC, for example, we have a
• 20:43
  Speaker 1: getting to three three by the end of the year.
• 20:46
  Speaker 1: Previously we thought it was gonna fall maybe to three
• 20:48
  Speaker 1: years been below. So we've we've shaved GDP, we've raised inflation,
• 20:52
  Speaker 1: and that puts the central bank in a tough spot. Right,
• 20:54
  Speaker 1: you still have decent growth, you don't have a recession,
• 20:57
  Speaker 1: but you you have the risk that inflation will come
• 21:00
  Speaker 1: in higher than forecast, and so they should be hiking.
• 21:06
  Speaker 1: Uh you know how quickly they hike, You know they're
• 21:09
  Speaker 1: you know, onentary policy is very accommodtive right now. I
• 21:11
  Speaker 1: think we're at nine trillion on the Fed balance sheet,
• 21:14
  Speaker 1: We're still at zero and we've got inflation, So I
• 21:16
  Speaker 1: think they need to get going with that. But I mean,
• 21:20
  Speaker 1: I guess the concern I have here is the financial markets.
• 21:23
  Speaker 1: The signals we're getting from financial markets are not giving
• 21:26
  Speaker 1: a green light to tightening policies. So what do I
• 21:29
  Speaker 1: mean two stends, two stands curve flattening Now we're under
• 21:32
  Speaker 1: thirty BIPs. That's usually a precursor to slower growth. When
• 21:36
  Speaker 1: the two s tends curve inverts, you mean, you know
• 21:38
  Speaker 1: you have a recession on the horizon. There's some flags there,
• 21:41
  Speaker 1: of course, but that's worrisome. The crude oil situation that
• 21:44
  Speaker 1: you mentioned, like sharp rises and crude oil tend to
• 21:46
  Speaker 1: proceed recessions, So I'm I'm concerned about that. And then
• 21:49
  Speaker 1: I'm watching you know. Our chart of the week this
• 21:51
  Speaker 1: week was the Bloomberg financial conditions in debt and when
• 21:55
  Speaker 1: financial conditions do tighten, that gives central bankers reason to pause.
• 21:59
  Speaker 1: So um, good stuff. Lots of things to worry about
• 22:02
  Speaker 1: to put into that equation. Certainly, Jeff Cleveland, director and
• 22:05
  Speaker 1: chief of Connerss, have paid in rewal joining us. Thanks
• 22:08
  Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
• 22:12
  Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
• 22:16
  Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
• 22:19
  Speaker 1: Matt Miller V three and on Fall Sweeney I'm on
• 22:22
  Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
• 22:25
  Speaker 1: catch us worldwide at Bloomberg Radio