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Much better than expected jobs report sends markets flying · The Financial Exchange Show

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Speaker 2: Chuck, Mike and Tucker with you here on a Jobs
1:18
Friday that I think can only be described as look,
1:23
a jobs report that was quite honestly outstanding in just
1:29
about every single metric that we look at when we
1:34
take a look at the key numbers. First, right off
1:37
the top, the headline number for jobs created, two hundred
1:40
and fifty four thousand jobs creating. Now, obviously you can
1:44
have revisions and so on and so forth, but hey,
1:46
it's always good to get a big number on the
1:48
first one. The unemployment rate fell again two months in
1:53
a row now, from four point two percent to four
1:56
point one. By the way, Mike, do you know what
1:58
the unrounded number one for this for unemployment rate?
2:03
Speaker 3: The unrounded unrounded, No, because they it's they rad four
2:08
to one.
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Speaker 2: The unrounded was four point h five to one, meaning
2:12
we were within point zero two of this being a
2:16
four percent unemployment rate. So again, good numbers there. Beyond that,
2:22
the last two months had upward revisions. July revised up
2:27
from eighty nine thousand to one hundred and forty four thousand,
2:29
and August revised up by seventeen thousand, from one hundred
2:32
and forty two thousand to one hundred and fifty nine thousand.
2:36
So the headline numbers, Mike, exactly what you want to see.
2:39
There any other thoughts on on those pieces.
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Speaker 3: Chicago Federal Reserve President Austin Gilsby is being interviewed right now,
2:45
and his description of this report I think fits most
2:48
of ours, which is superb. Could not ask for a
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better report. That's that's the only way to describe this.
2:54
And it may serve counterduive to what people are feeling
2:59
right now, but it doesn't matter because this Job's report
3:02
really killed it on every single expectation. I we talked
3:07
about it before the show check, but I don't know
3:09
of anywhere in this job report that you can look
3:11
at this and say, oh, that part's ugly.
3:14
Speaker 2: No, I mean, like you go through it and again.
3:17
On the household daity had the number of unemployed people
3:20
dropped by two hundred and eighty one thousand, you had
3:23
the number of employed people rise by four hundred and
3:25
thirty thousand. Remember two different surveys, one of households, one
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of businesses. The one that actually came in at two
3:31
hundred and fifty four thousand jobs created is the Business
3:33
Survey the establishment one uh, the labor force participation rate
3:38
holding steady at sixty two point seven percent, the employment
3:42
to population ratio ticking up from sixty percent to sixty
3:46
point two, and then when you look at where the
3:50
jobs were actually created, you end up saying, hey, out
3:54
of that two hundred and fifty four thousand, it wasn't
3:56
a bunch of government hiring. Two hundred and twenty three
3:58
thousand of those were private sector jobs, including continued increases
4:04
in construction twenty five thousand more construction jobs added. Manufacturing
4:09
does have some weakness. He did see a loss of
4:11
seven thousand manufacturing jobs twenty seven thousand down on that
4:14
series in the month before, So the ISM manufacturing index
4:18
is kind of telling us something on manufacturing that, hey,
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there's not as much going on there. I don't know
4:24
if the Boeing strike happened at a time where that
4:26
would have played into this month, I'm not sure, So
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I'm not going to comment on whether it did or
4:31
didn't affect it. I don't know, quite honestly. But then
4:35
you will get the rest of the data, and it's
4:38
again continued increases across the board. When you look at
4:43
the overall jobs numbers and where they're being created. The
4:48
only places that you did see pullbacks aside from manufacturing,
4:53
you had, let's see it was transportation and warehousing, which
4:58
would make sense if there's a manufacturing sure back, you
5:00
might have that as well. And then also this continued
5:04
story where temporary help services continuing to decline, and that
5:08
typically is a bearish indicator for the future. So if
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you do want one really small knit to pick just
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on the job creation numbers, it's there, and that you'd
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like to see temporary help services showing some stability and
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they're really not still down another thirteen thousand, almost fourteen
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thousand this month. But that's a really small nit to
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pick in what is otherwise a Again, it's you don't
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normally see one like this where you just say, wow,
5:39
everything looks great. Yeah, it's really impressive. Quite honestly.
5:43
Speaker 3: Can we go back a couple months and talk about
5:46
the some rule again because something interesting is happening in
5:49
that space as well, So quick summary here. The Psalm
5:53
rule created by Claudia sam was just an observation that
5:56
she made that every single recession since nineteen sixty has
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been defined by a half percent increase in unemployment over
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twelve month time period. And I'm simplifying here. Actually what
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she did was take a rolling three month average of
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unemployment on the low side and the high side to
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get to this back in August, when we were observing
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the labor market in July, we triggered a Psalm rule recession,
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meaning we got to an average increase of point five
6:24
to three, and then with the August report had an
6:27
average increase of point five seven on that Psalm rule.
6:30
And generally everything over point five triggers that Psalm rule
6:34
recession indicator. And if you can, by the way, if
6:37
you just go to the Saint Louis fed's website and
6:39
search for Psalm rule recession indicator, you can look at
6:42
this yourself. I'm not just you know, subscribing to some
6:45
super expensive exclusive club.
6:47
Speaker 2: Here.
6:48
Speaker 3: You can go look at this. It's available to the
6:49
public in every single recession that I've seen since nineteen sixty.
6:54
And you can look at this. Once it hits point five,
6:57
just keeps on going up. There are no bit dip
7:00
back down below until you get to a peak of unemployment. Well,
7:03
into the recession. With today's jobs report, we're sitting at
7:08
zero point five zero. We are right back on the
7:11
very edge of whether or not this trigger of recession
7:14
indication is still signaling recession. That's never happened before. It's
7:19
never been the case in modern history that this has happened.
7:21
And so, as we've discussed, this is an observational interesting
7:26
fact that hey, every single time we've had a recession,
7:29
this type of thing has occurred. It does not dictate
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that we will have a recession, and in fact, right
7:35
now is sending a very mixed signal about which direction
7:38
this economy is going in.
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Speaker 2: We've talked at length about how this business cycle has broken,
7:46
just a long list of previously reliable indicators about where
7:51
you are in the business cycle. And it would be
7:55
wild if this ends up being and I'm not saying
7:59
that we're we're there, but listen, like the next few
8:02
months will tell us, It'll be absolutely wild if this
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ends up being the first case where the SOM recession
8:08
indicator fires but does not act actively trigger an imminent,
8:13
you know, recession warning, it would be it would be
8:17
it would be so on brand for what this business
8:21
cycle has has been that something.
8:24
Speaker 3: To disrupt everything. Yeah, it's it's it's just amazing.
8:28
Speaker 2: So when we get back to looking at some of
8:30
the other employment data here, I look to look at
8:33
what's called aggregate payrolls, which is a combination of, hey,
8:36
how many jobs were at it, what percentage did the
8:38
labor force grow and not labor force, but the employed
8:42
population grow, And what did we see from weekly wages
8:46
during you know that time and generally pre twenty twenty,
8:52
the economy had settled into a pretty healthy spot where
8:55
aggregate payrolls were growing about five percent year over year.
8:59
And if you if you think about this, the way
9:01
that this works, I use it as a proxy for
9:03
consumer demand. Hey, if payrolls are showing growth of you know,
9:07
five percent a year, meaning companies are paying out on
9:10
the whole five percent more year over year in payroll,
9:14
then hey, if GDP growth is coming in at two percent,
9:17
which is kind of where it was, and inflation is
9:20
running about two percent, then you got kind of one
9:23
percent left over for kind of like just dead weight
9:25
or you know, waste and stuff like that and things
9:29
along the lines of, Hey, our economy is not all
9:31
consumer spending. Some of it is manufacturing, and maybe that
9:34
creates some drag. Hey, now you've got a situation where
9:37
you've got you know, stable two percent growth and stable
9:40
two percent inflation, and that's kind of a good place
9:43
to live. It's not great. You want faster growth in
9:45
a perfect world, but it's fine. And this month, when
9:50
we look at that aggregate payrolls number year over year,
9:54
four point eight percent, it's right in that four and
9:57
a half to five percent range, and it's showing some
9:59
stability over the last couple months as well. So this report,
10:03
I don't think you can take away from this and say, hey,
10:06
everything's fine, but we now have a little two month
10:10
mini trend of decreasing unemployment. And that's not something that
10:15
normally happens as you're heading into recession. Normally, unemployment is,
10:20
as Mike said, it increases, you know, half a percent
10:23
than one percent, and then it kind of keeps going
10:24
up and then it accelerates up before it finally caps out.
10:29
This is not what you normally see. But this is
10:31
not a normal business cycle. And so we'll see where
10:35
this goes. But we the more data we get. Look,
10:39
we had this battle that we were talking about where
10:41
on one side you had slow hiring, a rising unemployment rate.
10:45
You had, you know, the Jolts report that was sluggish,
10:48
like all that stuff was kind of kind of bad.
10:51
And on the other side, you had, hey, retail sales
10:54
have been better, housing showing some stability. You know, you've
10:58
got other things that are pointing towards you know, the
11:00
economy is starting to recover and you know, not dip
11:03
into recession. And this week, look, we had a Joltz
11:06
report that was mixed, where the hiring rate continued to
11:09
decline but job openings went up, so you know, kind
11:12
of I don't know what to make of this, and
11:15
then you had a really good jobs report. So if
11:18
if you're bearish on the US economy, I don't think
11:22
it's unrealistic to say, hey, there's still some concerns out there,
11:26
but the last week or so of data you have
11:29
to reevaluate your priors and say it looks less likely
11:32
that there's going to be a recession now than it
11:34
did a week ago.
11:35
Speaker 3: Yeah. To be really clear, this report plays directly into
11:39
the hands of those in the soft landing camp.
11:42
Speaker 2: Yeah. Yeah, we've talked about this. This is what the
11:47
soft landing ends up looking like. It's a week where
11:50
you're terrified you're going into recession, and then a week
11:52
where you're like, hey, this might be all right. Like that,
11:55
it's not linear, it's you kind of oscillate back and
11:58
forth before you finally.
11:59
Speaker 3: Like, yeah, that's the way it will develop. And this
12:07
is where we are. Where this is again, just to reiterate,
12:11
two hundred and fifty plus thousand jobs created, unemployment rate
12:14
dropping down from a recent high of four to three
12:17
now to four to one, closer to closer to four
12:20
point zero five ultimately, and so a reversion back to
12:26
a lower unemployment rate and a more stable labor market,
12:29
which is exactly what you need for that soft landing
12:32
to land.
12:33
Speaker 2: Mike, anything else that you want to cover on this
12:35
when we come back, or do we want to move
12:37
on to additional topics.
12:39
Speaker 3: Let's go to additional topics, but I'm certain one of
12:42
them will be interest rate impacts and what it means
12:45
for the FED going forward as well, in addition to
12:48
obviously the big news overnight of striking workers potentially ending
12:53
that strike. So a lot more to cover next on
12:55
the Financial Exchange.
12:56
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13:26
Speaker 2: All right, Mike. One topic that I do want to
13:29
cover that you mentioned at the end of the last
13:31
segment is, Hey, we've got this new jobs report that
13:35
was really good, you know, just a bumper of a
13:39
bumping one. You know, it's like things are cranking in
13:42
this month at least. Again, it's one month, so it's
13:44
not get ahead of ourselves. But what does this do
13:47
to the calculus surrounding the Federal Reserve and where they
13:53
need to go with interest rates? And I think it's
13:56
an interesting thing to discuss because the rationale for the
14:00
FED cutting rates and projecting in the rate cuts that
14:03
they are projecting is very simple. Hey, the level of
14:07
interest rates that we have today is restrictive on the
14:11
US economy, and as such, we want to lower interest
14:14
rates to the point where the where interest rates are
14:20
no longer restrictive but instead neutral or even accommodative if needed.
14:24
That's why the FED projected that by the end of
14:26
next year, the FED funds rate would be down to
14:29
three point four percent, And you're you're effectively talking about
14:34
rates that even from here, are about one and a
14:36
half to one and three quarters percent lower than where
14:39
they stand today. So in a vacuum, you see one
14:43
jobs report like this and it doesn't mean a ton,
14:46
but it's still adjusts those probabilities a little bit. The
14:48
US two year treasury it's up point one five percent
14:51
today and now it's sitting there at three point eight
14:55
six eight percent. The US one year treasury is up
14:58
point one to three percent today at four point one
15:01
four percent. So the market today is saying, look, two
15:05
weeks ago, three weeks ago, you told us you'd have
15:08
interest rates down to three point four percent by the
15:10
end of twenty twenty five. We don't believe you, because
15:15
if the data comes in this good, you don't have
15:17
to cut that far.
15:18
Speaker 3: Yeah, So I mean a few things. In the short term,
15:20
the odds of the FED cutting rates by fifty basis
15:24
points at either of the next meeting is approaching zero.
15:29
In my view, that's pretty darn close to zero unless
15:32
the truly unanticipated happens. If you take a look at
15:36
the Chicago Mercantallic Exchange. As of a week ago, it
15:39
was like a coin toss fifty to fifty that they
15:41
would go fifty basis points at the next meeting. With
15:43
this job's report pretty much eliminates that possibility.
15:47
Speaker 2: I think the.
15:47
Speaker 3: Interesting question on my end is less so effectively, what
15:50
markets are now pricing in for the next two meetings,
15:53
which occur on November seventh and December eighteenth, would be
15:56
for the Federal Reserve to cut rates by twenty five
15:58
basis points at each of the those next two meetings.
16:02
I'm now wondering if there's a case for the Fed
16:04
to not cut at maybe one of those two meetings,
16:07
or not cut at all. I have a tough time
16:10
getting there because they seem to be on this path,
16:13
and I don't think even higher oil prices would disrupt
16:16
them from it. But that to me is the more
16:19
interesting question is, hey, does the FED at either of
16:21
these meetings say, now, you know what, with the labor
16:23
market and with oil prices and potential for higher inflation,
16:27
we're gonna leave rates right where they are for now.
16:30
Speaker 2: I think the path there. I think oil prices they'll
16:33
disregard just because they always do. Yeah, they say, look,
16:37
there could be you know, the conflict in the Middle
16:39
East could get worse, but ultimately, then you know, the
16:43
way the fiddle looks at is Okay, it could get worse,
16:45
or if it does get worse, hey it's gotten worse,
16:48
but it will also get better Eventually. It's not gonna
16:50
be that forever. So they they don't look at oil
16:54
prices that way. But the path to them saying I
16:57
think by December, hey, we're not gonna cut it anymore
17:01
has to be something that is pretty meaningful on the
17:04
growth side of things, and I don't think there are
17:06
enough data points before that December meeting to say that definitively.
17:12
So we've talked about how, look, the next jobs report
17:16
is going to be horrible because you have this hurricane
17:21
that has devastated the southeastern part of the country, and
17:25
typically when you see a hurricane of that magnitude pass
17:28
through the United States, it drags the job growth numbers
17:32
down anywhere from you know, twenty five thousand jobs on
17:35
the light side to one hundred and fifty thousand jobs
17:37
on the heavy side. So you could easily see a
17:40
job's report, you know, next month where Hey, if it
17:42
were going to come in, let's say that this was
17:44
the outlier to begin with, and then we're back to
17:46
like the trend of one hundred and forty thousand jobs created.
17:49
You can very easily see a job's number that's zero
17:52
or negative next month, if you know, if the hurricane's
17:56
worst impacts are realized. As far as how they tabulate
17:59
the data, so the October data you're gonna have to
18:02
throw out, which means you get the November jobs data,
18:05
and yeah, you'll get retail sales for a few months.
18:08
You'll get some housing data and things like that, but
18:11
it is a two or three month trend of strength
18:14
enough for the FED to say, hey, we got to
18:17
pump the brakes. Probably not unless it's a lot of strength.
18:21
And the other thing that that I come back to
18:23
with this FED, it's a FED that is, you know,
18:28
kind of.
18:28
Speaker 3: Pointed in the Dubvish direction to begin with. Yeah, they've
18:30
got a bias towards lower rates.
18:32
Speaker 2: They do. And and so I would find I would
18:36
be hard pressed to say, yeah, you're gonna go and
18:39
stop cutting rates at the next couple meetings. But hey,
18:42
if the data improves and starts to you know, turn
18:44
up for you know, three four five months. If we're
18:47
sitting here in February of next year saying, man, what
18:50
a run of job creation. Now we're seeing you know,
18:53
two hundred thousand jobs created, you know, repeatedly unemployments back
18:57
to three point eight percent or something like that, then
19:01
I could see a path where hey, by the March
19:04
meeting of next year, Hey, we cut fifty basis points
19:07
to start. Then we did twenty five at you know,
19:10
the next three meetings through January, and now the Fed
19:13
funds rate is sitting at you know, four and a
19:17
quarter percent or something like that. Yeah, we we could
19:22
have a path to a pause in March, maybe, but
19:24
I feel like that's the earliest we get there. Quick
19:28
break here, We got Wall Street Watch coming up next,
19:30
and then we'll talk about middle class wages after this.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at
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19:51
Street Watch. A complete look at what's moving markets so
19:54
far today right here on the Financial Exchange Radio Network.
19:58
Speaker 4: Markets are pulling back after their initial strong open and
20:02
our in mixed territory as investors react to the September
20:06
JAWS report unveiled this morning, where two hundred and fifty
20:09
four thousand jobs we're added last month, well above vestimates
20:13
of about one hundred and fifty thousand. The unemployment rate
20:16
also ticked lower to four point one percent. Right now,
20:19
Dow is off by six points, sm P five hundred
20:24
up by six points, and the Nasdaq up by about
20:27
a third of a percent or fifty five points. RUSS
20:30
two thousand is rallying up over one and a third
20:33
percent as well. Tenure treasure reeled is up by ten
20:37
basis points now a three point nine five percent, getting
20:41
closer to four percent there, and crude oil up about
20:44
one percent higher, trading at seventy four dollars and forty
20:47
cents a barrel. According to the Wall Street Journals. Spirit
20:50
Airlines has been in discussions with bondholders over the terms
20:53
of a potential bankruptcy filing in the wake of its
20:57
failed merger with Jet Blue Airways. Spirit shares down by
21:01
twenty nine percent. Meanwhile, Rivin shares are sinking seven percent
21:06
after the electric vehicles start up lowered its annual production
21:09
forecast for twenty twenty four, down from fifty seven thousand
21:12
units to between forty seven and forty nine thousand. The
21:15
company cited a production disruption due to a shortage of
21:19
shared components for its R one vehicles and commercial van. Elsewhere,
21:24
the FDA granted Summit Therapeutics cancer drug for fast track designation,
21:29
sending shares in Summit up by about half a percent
21:32
and shares in Chubb up by about a third of
21:35
a percent after Bank of America downgraded shares of the
21:38
insurance company to underperform from neutral, where the firm noted
21:42
that Chubb's growth is slower than that of its peers.
21:46
I'm Tucker Silvan, that's Wallstree.
21:48
Speaker 2: Watch Mike. There's a piece from CNBC today and it
21:52
talks about how over the last forty five years as
21:55
a whole, one of the things that we've seen has
21:59
been knownating middle class wages. That trend is reversed a
22:02
little bit really in the last seven or eight years,
22:05
kind of since twenty fourteen, twenty fifteen ish, but I
22:09
guess that's ten years now, time flaws, I guess. But
22:13
there still is this longer term trend that that is
22:15
still intact that we haven't completely broken free from. And
22:20
there's a piece that's written from the Economic Policy and
22:25
Student there chief econmist Josh Bivens explains to CNBC, Look,
22:29
there's this thing out there called the natural rate of unemployment,
22:32
which is the lowest that unemployment can go without generating inflation.
22:36
It's theoretical. It's not something that is etched in stone.
22:39
It's not something that's always the same either. It can
22:42
change depending on labor market characteristics. But Bivens basically says, look,
22:48
in that forty five year time period, we've spent very
22:51
little time near what we would measure to be the
22:54
natural rate of unemployment. And so when the labor market
22:57
is looser, you don't see as robous wage gains because
23:01
people are just happy to have a job and they
23:02
don't negotiate as hard or they don't change jobs as quickly.
23:06
And there might be something to this because look, one
23:09
of the things we mentioned the last decade now has
23:12
been better look at where unemployment has been over the
23:15
last ten years. It's generally been a lot closer to
23:19
that natural rate of unemployment, or in some cases even
23:22
under you know where that rate is projected to be,
23:25
and so wage growth has been stronger, and so there
23:28
might be something to this. Actually, this is a great
23:32
argument to bring up here, I think.
23:34
Speaker 3: So I guess what my question is would be the
23:38
next step If this is your conclusion, Is it that
23:40
the Federal Reserve has done a bad job of understanding
23:43
that natural rate? Is it that Congress has adapted policies
23:48
that don't allow for.
23:49
Speaker 2: The Fed to get to the natural rate of unemployment?
23:51
Speaker 3: Like he seems to prescribe policy decisions that have actually
23:57
suppressed wages and kept them lower than they need to be.
24:00
And I'm sure we can all point to a few
24:02
of them, you know, outsourcing and offshoring of jobs, but
24:06
that's not really what he seems to be, you know,
24:08
focusing on here. It really has to do with what
24:11
can the United States be doing to keep a lower
24:14
overall unemployment rate.
24:16
Speaker 2: There's Mark Fandetti has the actual quote. I forget exactly
24:19
what it is, but I think it's something like, you know,
24:23
business cycles don't die of old age. They're like put
24:25
out to pasture by the Fed and shot like it's
24:28
you know, it's something like that. And I think what
24:32
would probably be the policy prescription is, Look, the Fed,
24:36
ever since the nineteen seventies has really feared inflation, and
24:39
every government fears inflation because it sucks. Like we we
24:44
we just went through it. Raise your hand if you're like, hey,
24:47
I want to sign up for twenty twenty one, twenty two,
24:50
and twenty twenty three again, right, Like, no, we'd prefer
24:53
to avoid that if at all possible. But if we
24:57
look at the period from you know, call it nineteen
25:00
five through twenty twenty, which is, you know, thirty five years,
25:06
there was no period in there where inflation was you know,
25:11
a real cause for concern. And yet the Fed, whenever
25:15
the unemployment rates started getting towards where they thought the
25:19
natural rate would be, they started tightening monetary policy. Yeah,
25:24
and so we ended up with this asymmetric thing where hey,
25:27
we had basically no meaningful inflation over a thirty five
25:30
year period, you know, outside of a couple brief instances
25:33
usually around war or something like that, there was, you know,
25:37
no meaningful inflation to speak of. And so that was
25:42
not a problem. But the Fed kept reacting preemptively as
25:45
if it was, but wouldn't give the same preemptive you
25:49
know shift in policy, you know, as early on the
25:52
unemployment side. I mean this this would be hey, there's
25:54
no signs of inflation, but unemployment, you know, got down
25:57
to five and a half. Great, it's time to start
25:59
tightening policy. Well, unemployment starts rising and it gets to
26:03
you know, five point eight, five point nine. No, we're
26:06
gonna wait, Okay, now it's time to loosen and it's
26:08
already too late.
26:10
Speaker 3: Right, And this is the tricky thing about economics. So
26:13
you can sit here and look back and say, you know,
26:15
what would have been different had the Fed been more
26:18
accepting of the risk of inflation and less accepting of unemployment,
26:22
And objectively it seems like, hey, wages could have been higher,
26:24
and people middle class could have been rescued. You can't
26:29
turn back time, and you can't you can't know with
26:32
certainty that we wouldn't have experienced more inflation over the
26:35
last few decades had the Fed gone this route. But
26:38
there's there's a fair bit of evidence I supposed to
26:40
support it. I don't think. I think the danger of
26:44
this type of argument to me is, oh, Congress should
26:48
be doing something dramatically different. We should be you know,
26:51
punishing companies that look to you know, automate jobs away,
26:55
or we should be you know, implementing more tariffs on
26:59
products made not in the United States. I think there
27:02
are some mistakes to interpreting some of this as well.
27:05
And it's not that offshoring has had no contribution to
27:09
lower wages. Of course it has, right, Like how many
27:13
phone service jobs used to be done the United States
27:15
that are now done elsewhere and have brought down wages
27:19
because of it. But I think the real policies for
27:23
prescription that they're talking about here is let's be a
27:27
little bit more willing to see the inflation before we
27:30
go and act here. And then the question is can
27:34
the American people actually stomach that.
27:35
Speaker 2: Again, Yeah, it's easy to sit here and play armchair
27:38
economists to be like, oh, we should have done this before,
27:41
like we have no idea what that would have done.
27:44
I mean, maybe part of the reason why inflation has
27:47
been so subduesed because the FED was so aggressive and
27:50
tamping down the whole time. And if they weren't as
27:52
as Mike said, yeah, maybe we would have seen a
27:55
couple of other bouts that popped up because they weren't
27:58
as aggressive there. So it's it's easy to sit here
28:01
and be like, oh, like, this is what they should
28:02
have done over the last thirty five years, but it's
28:07
not really how like, we can't actually do that. And Yeah,
28:12
in terms of you know, from a congressional and legislative
28:16
policy perspective, I think we we have to be cognizant
28:21
of the fact that, Look, there's a reason why economies
28:27
with large levels of intervention from the government tend to have,
28:32
you know, adverse outcomes in the long run. It's because
28:36
you get these huge dislocations and misallocation of capital because
28:39
it's not going where it should be based on where
28:43
actual supply and demand is. And so I think we
28:46
need to caution against you know, prescribing things that are
28:50
inherently inefficient and quite honestly bad for the long term,
28:57
you know, capital formation and capital appreciation that you like
29:01
to see in order to generate more wealth in societies. Yeah,
29:07
take a quick break here when we come back. Port
29:11
Strike it's over. We're going to talk about that when
29:15
we return.
29:18
Speaker 1: Thanks to us six one, seven, three, six, two, thirteen
29:21
eighty five with your comments and questions about today's show,
29:24
and let us know what you think about the stories
29:26
we are covering. This is the Financial Exchange Radio Network,
29:30
breaking business and financial news first throughout the day only
29:35
here on the Financial Exchange Radio network.
29:40
Speaker 4: The Financial Exchange has built an incredible partnership with the
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30:22
Speaker 2: The ports are open again.
30:23
Speaker 3: They are they reopened after do we make it a
30:26
full two days?
30:28
Speaker 2: We made it three days? Three days? Okay, yeah, three days.
30:31
So look, this was something where I had been. Again,
30:36
I don't have any insight into the ports, but there
30:39
are some people that work in this line of business,
30:42
and a couple of them indicated that they thought this
30:44
would get done before the end of the week, and
30:47
it did. Now, the deal that was agreed to yesterday,
30:51
it's a sixty two percent increase in wages over six years.
30:55
It does not come to a full agreement as far
30:58
as automation and things like that. But basically, workers will
31:01
continue to work under the previous deal until January fifteenth
31:06
while they negotiate these other pieces out. But by and large,
31:09
workers have now given up most of their leverage in
31:13
agreeing to the wage side of things, and so you're
31:15
going to see, you know, whatever deal ends up getting
31:17
made on automation, it'll be the deal that ends up
31:19
getting made here. A couple things in terms of how
31:23
this deal ended up coming together. I think there are
31:27
a few different things that were at play here yesterday
31:30
that kind of ramped up pressure for this to get done.
31:33
And this again just from what I've heard from people
31:35
that work in the business and no more than I
31:38
do about this. The first is the ISLA did not
31:43
expect the backlash that they got from the general public.
31:48
You know, generally, when you talk about blue collar workers
31:51
and union negotiations, there's usually you know, pretty good level
31:54
of sympathy like hey, you know, go get paid, you know,
31:56
YadA YadA, And in this case, I don't know if
32:00
it was you know, the wages that were published about
32:02
you know, the New York and New Jersey ports. I
32:04
don't know if it was you know, the stuff that
32:06
was written about Harold Daggett in terms of, hey, he's
32:09
got this mansion and you know drives this Bentley sometimes
32:12
and you know whatever. I don't know what it was,
32:14
but there wasn't as much support there. But I think
32:18
also just a really interesting way that yesterday played out
32:21
in terms of combination of state and federal pressure to
32:25
get something done. I think it was around noon yesterday,
32:29
Ron DeSantis, the Florida governor, came out and said, look,
32:31
we've got you know, hurricane damage that's here. You know,
32:35
in the state of Florida. We've got real problems. We
32:39
can't afford to deal with a strike at our ports
32:42
right now to get critical materials and stuff in. As such,
32:45
I'm going to order the Florida National Guard to take
32:47
over port operations. And you know, so it's like, oh,
32:51
like you're calling in the military to take over the ports.
32:55
This is something that we didn't expect, as you know strikers.
32:58
So that's you know, part one, part two. The Biden administration.
33:03
You send out pete footage edge on a couple different
33:06
shows and things like that saying, hey, you know, the
33:10
US whatever the Port group is, it's abbreviated by like
33:13
the USWX I think it is, or XW what I
33:16
don't even know. Hey, you guys have got to come
33:19
together and make a deal because we've got to get
33:21
things cleared at these ports as well. And so you
33:25
basically saw this combination of pressure saying hey, guys, hurry
33:29
up and make a deal here. And so I think
33:31
that's ultimately why it ended up coming together yesterday. It
33:34
was both sides started to look at this and say, yeah,
33:37
we don't really have public opinion on our side given
33:40
where things stand right now, and even though we can't
33:43
agree to everything, look we don't want this to become
33:46
a political football for anyone, and so let's just do
33:50
a quick three month, you know, extension on the current deal.
33:53
Basically agree on wages and then we'll figure out the
33:56
rest in a few months. And that way, no one's
33:58
upset at us and we can just go back to
34:00
both making good livings for ourselves.
34:05
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35:05
Speaker 3: A couple of things I'll point out on this Jack
35:08
with hindsight too. I think the union refused to negotiate
35:11
starting back in June is when they really walked away
35:15
from the negotiating table entirely.
35:17
Speaker 2: And so part of this too.
35:18
Speaker 3: I think if you're a union member, if you're a
35:21
part of this union and there's been strikes going on,
35:23
I think you probably want to remind your employer and
35:25
remind the general public just how important your work is.
35:27
And I think I certainly did that. I mean, hell,
35:30
we had you know.
35:31
Speaker 2: I'm gonna use the word idiots.
35:33
Speaker 3: We had idiots making runs on toilet paper at the
35:35
grocery stores of Can we talk about this? Yeah, we
35:37
have to because if you weren't aware ninety percent of
35:43
toilet paper that we consume in the United States, do
35:47
you know where it's manufactured Chuck Canada? In the United
35:50
States wasn't coming in on the ports.
35:53
Speaker 2: So yeah. I have a buddy of mine who works
35:55
at a large regional grocery store chain. There's only a
35:59
few c can you know, take your guests. But I
36:02
asked him, I'm like, hey, what's the stuff that you
36:05
are seeing? You know, people making runs on the number
36:08
one thing, toilet paper? Like what is it with the
36:11
freaking toilet paper here? Don't know what is it with
36:14
the toilet paper?
36:16
Speaker 4: Just buy Ada people?
36:18
Speaker 2: How freaking delicate are heinees?
36:21
Speaker 3: Is it just because it's like the the main item
36:24
that won't rot on you? At least I'll have my
36:27
toilet paper. I can eat that.
36:29
Speaker 2: Mike? What are we doing? Mike? You know what? The
36:31
number two thing that he said was what water? We
36:35
don't import water. It's not even a thing unless you're
36:40
like buying the Fiji water. Whatever the heck it is, smatwater?
36:45
Why are you buying bottled water? What do you think
36:47
this is?
36:49
Speaker 1: Like?
36:50
Speaker 2: This is in New England. It's not like there's no
36:52
hurricane coming here. Get the milk and bread, other things.
36:56
Canned vegetables, why are you buying them now? Why don't
36:58
you just have a basic stock of han vegetables to
37:00
begin with? Pasta soup? Here is one that does make
37:05
sense in my opinion, baby formula. Sure, totally get it,
37:09
you know, like you normally don't keep, you know, a
37:11
huge supply on hand, coffee, olive oil, butter, cream, cheese,
37:18
citrus and bananas.
37:21
Speaker 3: Also, though on the item of baby formula, I don't
37:26
know that there's any of it that we import, we
37:29
don't because of the rules and regulations it anyways, Yeah,
37:34
stock workers is not going to prevent you from getting
37:36
your baby form not necessarily.
37:37
Speaker 2: The precursors for it might be imported. Okay, I could
37:41
see that being a thing. And we've had baby formula
37:44
shortages before, so I could see people being like, hey,
37:46
I gotta do that. But guys, give it up with
37:51
the toilet paper.
37:53
Speaker 1: So silly.
37:55
Speaker 2: I mean, come on.
37:57
Speaker 3: I mean, I don't care because, like you know, it's
38:00
it's stupid, but it's so dumb and panicky.
38:05
Speaker 2: It's just here we are, twenty first century America. What
38:10
are you doing. There's a crisis, buy toilet paper. Let's
38:14
take a quick break here. We got Hour two coming
38:16
up in just a little bit.