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Jobs Day, FTC, and Global Markets (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
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Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast.
0:20
Speaker 2: I want to switch gears and bring in our next
0:23
Speaker 2: two guests. Michael McKee, who's here in studio. He's the
0:26
Speaker 2: international economics and Policy correspondent as we know with Bloomberg News.
0:30
Speaker 2: And Alice Andre who's are us interest Rates and FX
0:33
Speaker 2: reporter with Bloomberg News, joining us on zoom Mike, I
0:37
Speaker 2: have to start with you and get your take from
0:39
Speaker 2: this morning's jobs print.
0:41
Speaker 3: Well, it's a pretty good outcome. Put it that way.
0:44
Speaker 3: It depends on where you sit whether think gets a
0:47
Speaker 3: good report or not. For the fan, it's a good
0:49
Speaker 3: report in the sense that it validates their view that
0:52
Speaker 3: unemployment would have to rise to bring down inflation and
0:56
Speaker 3: that their rate increases would put pressure on the labor market.
1:00
Speaker 3: And it does show the labor market is loosening up.
1:02
Speaker 3: Unemployment goes up to three point eight percent, seven hundred
1:05
Speaker 3: and thirty six thousand people join the labor force. Now,
1:07
Speaker 3: some of that is probably a senior, a seasonal adjustment issue,
1:13
Speaker 3: but it does show people coming back into the labor force,
1:15
Speaker 3: which is what the FED has also been looking for. Now,
1:18
Speaker 3: if you're a worker who's worried about keeping up with
1:21
Speaker 3: inflation with your wages, wages didn't rise as much two
1:25
Speaker 3: tens of a percent. Good news on the inflation side.
1:28
Speaker 3: Bad news and keeping up with inflation side. And then
1:31
Speaker 3: those who didn't get jobs or who lost their jobs
1:35
Speaker 3: and the unemployment went up, it basically not good news either.
1:39
Speaker 3: So a kind of a mixed report with the numbers,
1:41
Speaker 3: but in terms of the overall macro economy and the
1:44
Speaker 3: Fed outlook, good news, Alie.
1:46
Speaker 2: I want to bring you into this conversation break down
1:49
Speaker 2: what we're seeing in the bond market reaction to this report.
1:55
Speaker 4: I think that overall the bond market is viewing this
1:58
Speaker 4: as a weaker report, which was as expected, but not
2:02
Speaker 4: outright weakness. I think that traders are viewing it as
2:06
Speaker 4: a moderation accelerating. But that's exactly what the FED wants,
2:10
Speaker 4: you know, they want the labor market to come back
2:12
Speaker 4: into better balance. And I think that what the bond
2:16
Speaker 4: market is saying is that this probably puts the majority
2:20
Speaker 4: of the FED participants on hold. And I think that
2:26
Speaker 4: it also really doesn't take the final hike off of
2:29
Speaker 4: the table. And I think that bond yields are reflecting
2:31
Speaker 4: that today.
2:32
Speaker 5: Yeah, initially it was at least a ten basis point
2:35
Speaker 5: drop in the more policy reactive two year we're back
2:38
Speaker 5: to what the down three two basis points right now
2:42
Speaker 5: for eighty three. One of the questions I want to ask,
2:46
Speaker 5: did I miss the boat on rates putting all my
2:48
Speaker 5: money in nice, safe treasuries that a really healthy yield.
2:53
Speaker 6: No.
2:54
Speaker 4: I think you have some time on that. Like I said,
2:56
Speaker 4: I think that people think that the Fed's going to
2:58
Speaker 4: be on hold for a little bit, and I mean,
3:01
Speaker 4: you know, rates are probably just going to trade a
3:03
Speaker 4: bit of a range, and they're definitely going to be
3:06
Speaker 4: very data dependent. I mean, that's when we're going to
3:09
Speaker 4: see big moves is on big data days. You know,
3:11
Speaker 4: probably the next one being CPI, and you know you'll
3:14
Speaker 4: have your chance. But I think that I think it's
3:17
Speaker 4: pretty clear that the economy is not falling into recession.
3:21
Speaker 4: And I think that rates are going to stay high
3:23
Speaker 4: for a long time. I think that there's been a
3:26
Speaker 4: move in the back, you know, further out in like
3:31
Speaker 4: June and May Fed funds, and now they're reflecting that
3:33
Speaker 4: the first cut'll come in May instead of June. But
3:37
Speaker 4: you know, it was kind of a small move. I
3:40
Speaker 4: think that the thing that you really got to keep
3:41
Speaker 4: your eye on is the November Fed Funds, and they're
3:44
Speaker 4: still pricing a very good chance of another hike coming.
3:47
Speaker 5: Yeah, we have in this since it's Friday, we have
3:49
Speaker 5: a drinking game in the studio. Every time somebody uses
3:52
Speaker 5: the phrase goldilocks, we have another show. Is this goldilocks?
3:56
Speaker 5: Michael McKee, goldilocks? John, thank you.
4:01
Speaker 3: I want to see you crawl out of here.
4:05
Speaker 2: You could.
4:05
Speaker 3: That description is being used on this because it basically is,
4:11
Speaker 3: as she said, slowing, which is what the Fed wants
4:15
Speaker 3: without crashing. I mean, the economy is still growing and
4:19
Speaker 3: we're still adding jobs at a pace above the level
4:22
Speaker 3: needed to absorb new entrance to the labor force. So yeah,
4:27
Speaker 3: things are pretty much in a fairy tale world.
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Speaker 2: One thing I'm curious about, Mike, is July had two
4:34
Speaker 2: more weekend days than June. How does that affect the
4:37
Speaker 2: wage print.
4:39
Speaker 3: It doesn't affect the wage print. It affects it can
4:42
Speaker 3: affect ours work. But the wages are going to be
4:46
Speaker 3: based on what you're being paid in the month, in
4:49
Speaker 3: the week that includes the twelfth of the month, the
4:51
Speaker 3: pay period that includes the twelfth of the month, which
4:53
Speaker 3: is very complicated because if you get paid once a month,
4:55
Speaker 3: it's the entire month. If you get paid every two weeks,
4:58
Speaker 3: it maybe just you know, you get into part of it.
5:02
Speaker 3: And sometimes people aren't included at all if you're a
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Speaker 3: freelancer and you get unusual pay periods, which is one
5:12
Speaker 3: reason we did not see the SAG after a strike
5:15
Speaker 3: show up until this month because some of those people
5:18
Speaker 3: aren't paid on a regular basis.
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Speaker 2: Also, no coming into this, you wrote a piece on
5:23
Speaker 2: the team talking about how bonds were at risk for
5:25
Speaker 2: rally based on what potentially could happen with this August data.
5:28
Speaker 2: How do you viewed the direction of the bond market
5:31
Speaker 2: and particularly yields and the ten year moving forward in
5:34
Speaker 2: the next couple of weeks To your point, because we
5:36
Speaker 2: do have that September CPI print on the thirteenth.
5:40
Speaker 4: Yeah, so, I mean it was a really pretty easy
5:43
Speaker 4: setup for the bond market today. I mean, all the
5:45
Speaker 4: metrics showed most of them. I think there was two
5:48
Speaker 4: indicators that was one of the S and P globals
5:51
Speaker 4: and claims was really the only positive thing for this
5:56
Speaker 4: payroll report. All the other ones were negative. All the
5:59
Speaker 4: sad reports, saw the isms, they were all pointing to
6:02
Speaker 4: a weaker report. And so the setup for the bomb
6:05
Speaker 4: market was pretty easy. I mean, everybody knew that it
6:08
Speaker 4: was going to rally and then we were going to
6:09
Speaker 4: sell off right away. I'm sorry that, yeah, that we
6:13
Speaker 4: were going to sell off right after that. And I
6:15
Speaker 4: think that part of it is a function of what
6:17
Speaker 4: we're waiting for on Monday, and we're looking for a
6:19
Speaker 4: lot of corporate supply to come into the bomb market,
6:21
Speaker 4: and so bond traders are just preparing for that. They're
6:25
Speaker 4: either selling because they're going to take down some of
6:27
Speaker 4: this corporate supply on Tuesday, or you're seeing issuers coming
6:31
Speaker 4: in in ratelacking. So that's part of this pullback today
6:35
Speaker 4: in prices and yields going higher as it as it
6:39
Speaker 4: moves forward. I think, like I said, we're just going
6:42
Speaker 4: to trade the range. I think that they're going to
6:45
Speaker 4: you know, bond traders are going to part and parcel
6:48
Speaker 4: every single piece of data. And one of the pieces
6:50
Speaker 4: of data that I thought was pretty interesting was yesterday's
6:54
Speaker 4: Chicago Purchasing Manager's report, and they really don't give you
6:57
Speaker 4: a whole lot of information in the report, but what
7:01
Speaker 4: you can glean from it was that new orders and
7:04
Speaker 4: production moved from contraction to expansion. And also employment, I
7:11
Speaker 4: had heard had a very big uptick, and in fact
7:13
Speaker 4: it did slow. It did it contracted, but at a
7:17
Speaker 4: slower rate. And so to me, that just really kind
7:20
Speaker 4: of gives the same picture of one that the economy
7:26
Speaker 4: is showing some glimmers of starting to pick up, which
7:29
Speaker 4: is what we've been anticipating, that we're going to see
7:31
Speaker 4: a big pickup starting in the second half, and that
7:34
Speaker 4: that's why people are hoarding their labor and they're just
7:39
Speaker 4: using layups as a complete last resort. The other thing
7:42
Speaker 4: that I wanted to say is that on Monday, the
7:47
Speaker 4: Dallas SPED Manufacturing Report talked about the fact that they're
7:50
Speaker 4: going to most participants think that they're going to raise
7:54
Speaker 4: wages at a rate of five percent this year, and
7:57
Speaker 4: so that's far and above inflation and above what we're
8:01
Speaker 4: seeing in average hourly earnings, and so you could get
8:04
Speaker 4: an uptick in inflation based on wages. Again, and most
8:08
Speaker 4: of the FED surveys had talked about this year, even
8:11
Speaker 4: recent ones, that they're just going to have to continue
8:14
Speaker 4: to raise wages, you know, first of all to keep
8:17
Speaker 4: up with the demand that's expected, but also because they
8:21
Speaker 4: just they can't afford to let go of their labor force,
8:24
Speaker 4: so they're just going to have to raise wage.
8:25
Speaker 2: Right.
8:26
Speaker 4: The other thing was is on that work week. I
8:28
Speaker 4: thought that that was pretty consistent with what we've seen
8:32
Speaker 4: from some of the FED surveys, that the uptick in
8:36
Speaker 4: the work week was consistent with you know, you put
8:40
Speaker 4: your workers to work doing other things on the factory
8:44
Speaker 4: floor or in your shop to keep them busy.
8:48
Speaker 5: Right, Mike McKay final thought in twenty seconds.
8:51
Speaker 2: Next week, number of FED speakers, Yeah, we have a
8:54
Speaker 2: number of five speakers.
8:55
Speaker 3: We have John Williams, the New York FED President, coming
8:57
Speaker 3: in here to Bloomberg and we'll get their views. But
9:00
Speaker 3: I think this kind of unless we get on the
9:02
Speaker 3: thirteenth of September a really surprising CPI report, is probably locks.
9:07
Speaker 5: In a pause. The FED does not have to raise.
9:09
Speaker 5: It doesn't make the case for raising at this.
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Speaker 2: Point, right, So John Williams next week. Former Fed official
9:15
Speaker 2: Jim Bullard also on the calendar, as well as Susan Collins,
9:17
Speaker 2: So Michael McKee, International Economics and Policy correspondent with Bloomberg News,
9:22
Speaker 2: and Alice andre Us, Interest rate in FX reporter with
9:24
Speaker 2: Bloomberg News.
9:26
Speaker 7: You're listening to the tenth Can't Live program Bloomberg Markets
9:30
Speaker 7: weekdays at ten am Eastern on Bloomberg dot Com, the
9:33
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9:37
Speaker 7: demand wherever you get your podcasts.
9:39
Speaker 2: Continuing the fund. So I'm glad you gave us an
9:43
Speaker 2: update obviously on what's going on with those bond yields,
9:46
Speaker 2: especially when you're looking at the ten year as well
9:47
Speaker 2: as the two year. But who better to break us
9:50
Speaker 2: down when we're looking at what's happening in the fixed
9:53
Speaker 2: income market than Ben Emmon's head of fixed income at
9:56
Speaker 2: New Edge Wealth, who I've known for a long time,
9:59
Speaker 2: joining us to talk to It is also about how
10:01
Speaker 2: markets are responding to this latest jobs report, but it's
10:03
Speaker 2: always a pleasure speaking with you. Let's start off with
10:06
Speaker 2: your take on this morning's jobs report and your sort
10:09
Speaker 2: of view on how this could impact the fixed income
10:12
Speaker 2: market ahead of the feed decision on September twentieth.
10:16
Speaker 8: I just hi, John, Happy, happy, happy labor jobs day.
10:20
Speaker 2: Right, thanks for joining us on a quieter day here heading.
10:24
Speaker 8: Day we can. Yeah, and I'm all casual here. I'm
10:27
Speaker 8: seeing myself streaming live on YouTube. You know, anguel shared
10:31
Speaker 8: in California. But you know, let's do it. So I
10:35
Speaker 8: kind of echo Mike McKee's points, like, you know, this
10:38
Speaker 8: is a job support where if you're seeing that many
10:41
Speaker 8: people getting pulled into the labor force, which is like
10:43
Speaker 8: seven hundred and thirty thousand or so, it tells you
10:46
Speaker 8: that the that the labor market is spokeled in demand
10:50
Speaker 8: from people wanting to be to get back to work
10:52
Speaker 8: to try to make more money. And that's good for
10:55
Speaker 8: the economy, right, that's productivity. That's actually a very positive
11:00
Speaker 8: and so it is an interesting reaction to bomb market.
11:03
Speaker 8: How the number came out, it was sort of in
11:05
Speaker 8: line the headline and then people go through the details
11:08
Speaker 8: to see like, yeah, there's loosing of the labor market here.
11:11
Speaker 8: That's what the Fed wants. So the yields on the
11:13
Speaker 8: short end two year go down. But then as we
11:16
Speaker 8: go on a little bit in the session, you see
11:19
Speaker 8: long term indistry started a rise a little bit and
11:21
Speaker 8: it said ICEM date that just came out, which was
11:23
Speaker 8: a bit stronger than expected. But the employment component in
11:26
Speaker 8: there too better and expected as well as prices paid.
11:29
Speaker 8: You see this shift in the YEL curve with long
11:31
Speaker 8: rates going up, and I think you take the payroll
11:34
Speaker 8: support and ICM together, it tells you like, there's not
11:38
Speaker 8: a weakening economy. This is just more people coming into
11:41
Speaker 8: labor force, so loose a labor market. But the FED
11:44
Speaker 8: is looking for. On the other hand, you know the
11:47
Speaker 8: soft landing no recession scenario stays in place, and this
11:50
Speaker 8: is why you're getting this steepening of the yel curve
11:54
Speaker 8: on both the shorter end of the yl curve and
11:55
Speaker 8: the longer hand. So that's I think very goldilocks moment.
11:59
Speaker 5: Are called Billy And you know about our drinking game
12:03
Speaker 5: here this you're guests to say Goldie lockskepally as far
12:08
Speaker 5: as inflationary components, how much bargaining power to workers have
12:13
Speaker 5: over employers?
12:16
Speaker 8: Yeah, they still do, John, because I think that the
12:20
Speaker 8: the weaighte trackers from the Atlanta fats still show a
12:23
Speaker 8: big difference between those who can quit their job and
12:27
Speaker 8: those who stay in the job, for example, and meaning
12:29
Speaker 8: people quit their job to try to find, you know,
12:32
Speaker 8: better paying jobs. That's still a difference there. You also
12:36
Speaker 8: could think of that the job openings ratio to employment
12:40
Speaker 8: that's still elevated to pre pandemic also indicates right that
12:44
Speaker 8: you know, companies are still actively looking for positions to
12:48
Speaker 8: be filled, but all of those metrics have moderated from
12:51
Speaker 8: the real elevated level. So these strikes that we're talking about,
12:55
Speaker 8: and these these weight settlements that were going through currently,
12:58
Speaker 8: it does show that labor is really having control here.
13:03
Speaker 8: Nowaw strike actually happens, it would be a negative for
13:07
Speaker 8: the economy. So it just looked like they want to
13:10
Speaker 8: try to get bargaining to a better deal. I would
13:13
Speaker 8: point that though, that this, if this leads to a
13:15
Speaker 8: real good deal for the workers, there's a little bit
13:18
Speaker 8: of that seventies idea of better than bargaining. Right, one
13:20
Speaker 8: union wins a good agreement, other unions to try to
13:23
Speaker 8: do the same thing. So I think we'll say a
13:25
Speaker 8: little bit in that dynamic one thing.
13:27
Speaker 2: I've been thinking a lot about ben is just the
13:31
Speaker 2: ten year in relation to or the S and P
13:33
Speaker 2: five hundred is trading. So say, earlier in August, we
13:39
Speaker 2: did see the ten year peak out around four thirty three.
13:41
Speaker 2: If you looked at where it peaked out back in
13:44
Speaker 2: last autumn, it was around four to twenty two. But
13:45
Speaker 2: at that time the S and P five hundred was
13:48
Speaker 2: trading around thirty five hundred. Now it's one thousand points higher.
13:52
Speaker 2: What's the difference.
13:56
Speaker 8: I think the difference one is just the economy in itself,
13:59
Speaker 8: just that at that moment in time we had much
14:02
Speaker 8: higher inflation and not growing as fast as you currently.
14:07
Speaker 8: This year turned out to be an economy that's just
14:09
Speaker 8: much better than last year, even though last years still
14:12
Speaker 8: looked like I guess if you came in in early
14:14
Speaker 8: twenty twenty two is a really boom pandemic economy. But
14:18
Speaker 8: in fact, actually we have a batter economy this year.
14:20
Speaker 8: So I think that explains the thousand points differences. In
14:24
Speaker 8: addition to that, we obviously have earnings that have not
14:27
Speaker 8: gone to do any recession. If anything, they actually showed
14:30
Speaker 8: some bottoming in that fall period and they've actually moved
14:33
Speaker 8: up higher. And the projection is still higher. That makes
14:37
Speaker 8: it also the difference. Lastly, well, the thing you're topping
14:40
Speaker 8: out of at full point three and change, just like
14:43
Speaker 8: we had this month. I think it does tell you
14:45
Speaker 8: a story about this inflation being very successful by the
14:48
Speaker 8: Federal Reserve, both on inflation and now also showing up
14:52
Speaker 8: in the labor data. I think that too expresses itself
14:55
Speaker 8: into this higher stock market, showing that one we can
14:59
Speaker 8: keep pricing, we don't have wages really spiring out of control.
15:03
Speaker 8: We certainly don't have any recession here term given the
15:05
Speaker 8: strength of the labor market. So I think that just
15:08
Speaker 8: leads you to this conclusion that you're having a stock
15:11
Speaker 8: market being better because of a better economy.
15:13
Speaker 2: So what's the level on the tenure that you're watching
15:16
Speaker 2: to where other asset classes would need to reprice, including
15:19
Speaker 2: the stock market depending on where it would be headed, say,
15:22
Speaker 2: would it be four to five?
15:25
Speaker 8: Yeah, it could be. You know, it's kind of signing
15:27
Speaker 8: boss Bill grows like it was the other day on TV,
15:30
Speaker 8: and kind of agree with him, like, there's still that
15:33
Speaker 8: risk at it. You have four point five as a
15:35
Speaker 8: level where if you do break that or test set
15:38
Speaker 8: that we're getting a different situation because there's another aspect
15:43
Speaker 8: here happening. That is that the economy is strong because
15:46
Speaker 8: we were investing in the economy with infrastructure out of
15:49
Speaker 8: projects and just business spending itself. But we're also borrowing
15:53
Speaker 8: there for a lot of money, right, and that will
15:56
Speaker 8: continue that could actually keep rates at least higher or
16:00
Speaker 8: potentially test that level of four and a half, So
16:03
Speaker 8: that we do want to watch. Despite a little bit
16:05
Speaker 8: of a rally down now from the last high, you know,
16:09
Speaker 8: just seeing it this morning, the ism data being just
16:12
Speaker 8: surprisingly a bit stronger, Price's Bay component goes up a
16:15
Speaker 8: little bit, and then you yields immediately moves up from
16:18
Speaker 8: four point oh seven to four point fifteen. That you know,
16:21
Speaker 8: that seems like an inter they move, but it's it
16:23
Speaker 8: does signify this idea of yeah, is in the economy
16:26
Speaker 8: that stays strong, be wary of how inflation could return
16:30
Speaker 8: and higher again if it stays that strong.
16:33
Speaker 5: So September off the table. What's in play at this
16:38
Speaker 5: point before the Federal Reserve?
16:41
Speaker 8: I think markets John F f calculated that the Fed
16:45
Speaker 8: needs a bit more time to assess this economy. Therefore,
16:48
Speaker 8: another meeting could be skipped, even though none of the
16:52
Speaker 8: FAT members actually has indicated any of that. By the
16:54
Speaker 8: way it's it's it still seems to be much of
16:57
Speaker 8: a live meeting. Therefore, all the data that we're getting
17:01
Speaker 8: right up to that meeting will count in that decision.
17:05
Speaker 8: But it seems that as we had several data points
17:08
Speaker 8: a bit soft on labor and inflation trending sort of sideways,
17:13
Speaker 8: that there's a possibility that the FAT said, okay, we
17:16
Speaker 8: can skip another meeting to assess a longer period of
17:18
Speaker 8: data and then make our next decision. That seems right,
17:22
Speaker 8: But we got to keep in mind that what's happening
17:24
Speaker 8: in energy markets and what's happening also with China in
17:27
Speaker 8: terms of it's all its efforts to try to boost
17:29
Speaker 8: its economy in the third fourth quarter, and on our
17:33
Speaker 8: third quarter, GDP is actually kicking off better. And now
17:36
Speaker 8: that I think we have to keep in mind that
17:39
Speaker 8: the FAT may well use the settement meeting to hike
17:42
Speaker 8: after all.
17:43
Speaker 2: So with the backdrop of all this, how are you
17:46
Speaker 2: advising clients to position in the fixed income market?
17:51
Speaker 8: So most of this year just we have been a
17:53
Speaker 8: shorter duration in the index, and that proved to be
17:56
Speaker 8: the right way because I judged that base upon the
18:00
Speaker 8: economy's resilience and strength. But then you want to what
18:04
Speaker 8: I say, follow the you curve. So if it's still
18:06
Speaker 8: an inverted you curve, if we continue to see this
18:10
Speaker 8: sort of grinding loosening of the mark of the labor
18:13
Speaker 8: market and this this inflation on inflation front go on,
18:17
Speaker 8: I continue, I would think that the UK would start
18:20
Speaker 8: to normalize. And so the real good position to be
18:23
Speaker 8: in is that intermediate part of the you curve. And
18:27
Speaker 8: then ultimately, if we do get up in a situation
18:29
Speaker 8: where employment rate is at four percent and inflation is
18:33
Speaker 8: a little lower, that you can extenduration further. So I
18:35
Speaker 8: think the intermediate part of you curve that that's what
18:37
Speaker 8: we've been advising to clients.
18:38
Speaker 2: Hey, Bin, we only have about thirty seconds left. What's
18:40
Speaker 2: the top question you hear from your clients?
18:44
Speaker 8: Well, how high can rates go and how high do
18:46
Speaker 8: they stay? And that's definitely on the top of mind.
18:49
Speaker 8: You know that, and I think that will continue to
18:52
Speaker 8: be a debate. You know, we don't know how high
18:54
Speaker 8: it will actually go from here, and I think that's
18:58
Speaker 8: an uncertainty going into twenty twenty four.
19:01
Speaker 2: Well, Ben, thanks so much for joining us. Ben Emans
19:04
Speaker 2: head of fixed income at New Edge Wealth, joining us
19:07
Speaker 2: on a slower trading day a little bit.
19:09
Speaker 7: Here, you're listening to the tape Can's our live program,
19:13
Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
19:17
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19:20
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19:23
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19:26
Speaker 7: Bloomberg eleven thirty.
19:29
Speaker 2: I want to get straight to our next guest, I mean, John,
19:32
Speaker 2: You know, we've been talking about the jobs report all morning,
19:35
Speaker 2: but I want to bring in Julia Pollock, who's joining
19:37
Speaker 2: us on zoom. She's the chief US economist at ZIP
19:40
Speaker 2: Recruiter who's going to break down some of these job numbers.
19:42
Speaker 2: So we've gotten the sort of the service level take
19:44
Speaker 2: here from the macro side of things, but I wanted
19:47
Speaker 2: to get more of your thoughts when you're looking from
19:49
Speaker 2: an industry level in the job market, what particular corners
19:53
Speaker 2: are holding up better than others at this point.
19:58
Speaker 9: Sure, so we've seen the job makes sort of shift
20:01
Speaker 9: back to normal, with healthcare and professional business services leading
20:06
Speaker 9: the way. This is an interesting report because it really
20:10
Speaker 9: shows you very clearly what's happening in certain industries.
20:15
Speaker 10: We saw.
20:17
Speaker 9: Truck transportation lose more than thirty six thousand jobs. That's
20:20
Speaker 9: largely results of yellow freight, that that business's closure. We
20:25
Speaker 9: also see signs of the Hollywood strike in this report,
20:28
Speaker 9: with more than sixteen thousand jobs lost in the movie industry.
20:33
Speaker 9: So you know, you really get a very granular look
20:36
Speaker 9: in this report at how differently things are playing out
20:39
Speaker 9: in different industries.
20:40
Speaker 5: Okay, so what does this mean for the panther A
20:42
Speaker 5: head for the federal reservist as far as the indust rates.
20:46
Speaker 9: So you know, I would liken this report to an
20:48
Speaker 9: aircraft sort of cruising at the perfect cruising altitude. If
20:53
Speaker 9: a plane goes too high.
20:54
Speaker 5: You know, got you know when you say goldielocks, we
20:57
Speaker 5: that's our drinking game.
20:59
Speaker 2: So every time I guess, so we're keeping a talent.
21:03
Speaker 5: That's a new metaphor. I like that one.
21:04
Speaker 9: Here's a new one exactly.
21:07
Speaker 8: Yeah.
21:08
Speaker 9: I was worried that perhaps the long and variable lag
21:12
Speaker 9: of monetary policy would would start to squeeze too much
21:16
Speaker 9: air out of the room and choke growth. And it
21:21
Speaker 9: doesn't appear that that's happening yet. This slave market appears
21:24
Speaker 9: to be running at a sustainable, solid pace that is
21:30
Speaker 9: not going to fuel inflation, but that is going to
21:33
Speaker 9: continue creating opportunity for workers.
21:35
Speaker 2: We did see earlier this week, we also had, as
21:37
Speaker 2: you know, the Jolt stata that came out that did
21:39
Speaker 2: show that US job openings did decline to the lowest
21:41
Speaker 2: level since early twenty twenty one. What are you sing
21:44
Speaker 2: when it comes to some of the quit rates.
21:48
Speaker 9: Yeah, So this report suggests that FED chair Waller was
21:52
Speaker 9: right that high interest rates would slow the labor market,
21:55
Speaker 9: but because there was so much excess demand, that slowing
21:58
Speaker 9: would come in the form of fall job openings, not
22:01
Speaker 9: of falling employment. And that's still what we're seeing. The
22:06
Speaker 9: labor market does appear to have come pretty much all
22:08
Speaker 9: the way back to normal when you look at just
22:10
Speaker 9: sort of the labor market dynamics, the quits rate is
22:13
Speaker 9: all the way back to normal. Online job postings on
22:16
Speaker 9: zib Regruter are all the way back to normal. Jalt's
22:19
Speaker 9: openings are still high, but they lag a little bit
22:21
Speaker 9: and they may also be a little inflated for a
22:24
Speaker 9: number of reasons.
22:25
Speaker 5: Do you see evidence there of what do we call
22:28
Speaker 5: it labor hoarding where especially small businesses that had such
22:32
Speaker 5: a difficult time at least according to the NFIB statistics,
22:37
Speaker 5: finding qualified workers. They just hanging on to the people
22:41
Speaker 5: that they have right now.
22:43
Speaker 9: You know, there are a few industries, very unique, peculiar industries,
22:47
Speaker 9: where employers are hoarding labor that is relatively idle. The
22:53
Speaker 9: examples I could give are things like consulting companies your
22:57
Speaker 9: Baines and McKenzie's. With the tech industry entering this year
23:02
Speaker 9: of efficiency, tech companies are not paying for management consultants
23:08
Speaker 9: to come in and run all kinds of projects for them,
23:12
Speaker 9: and as a result, you have all these Ivy League
23:14
Speaker 9: educated consultants sitting there watching Netflix with very very few
23:19
Speaker 9: projects to work on. That's a rare case in normal
23:24
Speaker 9: industries across America, when workers are idle, they get furloughed
23:27
Speaker 9: or laid off. That's not happening in some of these
23:30
Speaker 9: organizations because they worry about the long term impacts. You know,
23:35
Speaker 9: you don't want to lay off a bunch of Harvard
23:37
Speaker 9: graduates of who are going to be future Titans of
23:39
Speaker 9: the universe and then shoot yourself on the foot come
23:42
Speaker 9: the next recruiting season. But that's a very unique situation
23:46
Speaker 9: in most of the country. I would say the country
23:48
Speaker 9: is still understaffed. Go to a restaurant, go to an airport,
23:52
Speaker 9: you'll see lots of check in counters and very few
23:57
Speaker 9: check in associates and so long weights, low customer satisfaction.
24:02
Speaker 9: Those are still big problems in the economy. And for
24:05
Speaker 9: the most part, employment levels are below what would be
24:08
Speaker 9: predicted by spending levels and activity levels.
24:10
Speaker 2: What are you seeing when it comes to temporary employment?
24:15
Speaker 9: Very interesting. So we've seen a very large drop over
24:18
Speaker 9: the past couple of months, since since early twenty twenty
24:21
Speaker 9: two in the number of temporary health services employees. Over
24:24
Speaker 9: two hundred thousand of those jobs have been lost, and
24:28
Speaker 9: that typically is a signal of a recession. It's caused
24:32
Speaker 9: many of us that are leading economic indexes to suggest
24:36
Speaker 9: that we're going to we're in for a big downturn.
24:39
Speaker 2: So how much we are potential lag would that signal?
24:42
Speaker 2: As far as looking ahead to that, like, how far
24:45
Speaker 2: ahead would that signal potential recession?
24:48
Speaker 9: Usually it's only about three to four months ahead. But
24:51
Speaker 9: we've been seeing this indicator decline now for a year
24:53
Speaker 9: and a half, and I would argue that this time
24:56
Speaker 9: is different. The decline is a return to normal.
25:00
Speaker 2: It is a good because of the pandemic.
25:02
Speaker 9: Yes, so during the pandemic, companies were so short staffed
25:05
Speaker 9: that they were forced to rely excessively on overtime hours
25:08
Speaker 9: and external agency staff. Now, as they build up their
25:11
Speaker 9: own internal staff, they no longer need to rely so
25:14
Speaker 9: heavily on external agencies.
25:16
Speaker 5: Using the ZIP recruiter data, can I tell my college
25:19
Speaker 5: graduates where to what industries to look in? Where the
25:23
Speaker 5: biggest self? What do you get when you're a philosophy major?
25:27
Speaker 5: What are they paying philosophers these days?
25:31
Speaker 2: Right?
25:31
Speaker 9: So there are big, big differences across college majors. We
25:35
Speaker 9: have a college grad report that discusses these in some
25:38
Speaker 9: detail on our website. It is those stem fields that
25:41
Speaker 9: are still getting graduates the biggest paychecks, computer science and
25:46
Speaker 9: all the healthcare fields. Healthcare is showing unstoppable demand for workers.
25:54
Speaker 9: There are huge staffing shortages and many different occupations there.
26:00
Speaker 9: Physicians are retiring in huge numbers. We expect by the
26:03
Speaker 9: end of this decade that forty percent will be over
26:05
Speaker 9: the age of sixty five, and that's creating huge opportunity
26:11
Speaker 9: all the way down. So nurses are moving up into
26:13
Speaker 9: becoming physician assistants and nurse practitioners. Hospitals are having to
26:19
Speaker 9: pull out all the stops to retain nurses. They're increasingly
26:22
Speaker 9: offering training programs for CNAs and less educated workers to
26:27
Speaker 9: enter those kinds of roles.
26:28
Speaker 2: Julia, we'll leave about twenty seconds left. What's the top
26:30
Speaker 2: concern that employers have when you speak to them.
26:34
Speaker 9: They are still worried that there could be a downturn ahead.
26:37
Speaker 9: They're worried that the US consumer will be hit by
26:39
Speaker 9: these high interest rates on credit cards and auto loans,
26:41
Speaker 9: and they worry about the student loan debt resumption. Just
26:44
Speaker 9: around the corner, all.
26:45
Speaker 2: Right, Julia Pollock, chief US economists at ZIP Recruiter, joining
26:49
Speaker 2: us to break down the latest jobs numbers.
26:52
Speaker 7: You're listening to the Team Can't Live program Bloomberg Markets
26:56
Speaker 7: weekdays at ten am Eastern.
26:58
Speaker 11: On Bloomberg dot Com.
27:00
Speaker 7: I heard radio app and the Low Park Business app,
27:02
Speaker 7: or listen on demand wherever you get your podcast.
27:07
Speaker 2: So this morning's jobs report seeing employers adding one hundred
27:11
Speaker 2: and eighty seven one thousand jobs in August. You also
27:15
Speaker 2: see the unemployment rate tick up to about three point
27:17
Speaker 2: eight percent, but it had been hovering around three and
27:19
Speaker 2: a half percent, about a half century low for a
27:21
Speaker 2: while here. So I want to bring in Tom gimbal
27:24
Speaker 2: CEO of Losal Network to break down some of these
27:28
Speaker 2: hiring trends and some of a kind of a deep
27:30
Speaker 2: dive here within the data. Tom, thanks for joining John
27:34
Speaker 2: Tucker and myself this morning, especially on a slower Friday
27:38
Speaker 2: heading into the Labor day weekend. What's your take when
27:41
Speaker 2: you are looking at some of these headline numbers, because
27:43
Speaker 2: I know that the unemployment rate did climb a little
27:45
Speaker 2: bit to its highest level since last year, but is
27:48
Speaker 2: a lot of that due to more people just coming
27:51
Speaker 2: back into the labor force.
27:53
Speaker 8: Yeah.
27:54
Speaker 11: Absolutely, participation rate increased a little bit, which is a
27:57
Speaker 11: good sign. And we had one hundred and eighty seven
28:01
Speaker 11: thousand jobs that were added, which is good. And you
28:04
Speaker 11: got to remember the prediction was one hundred and seventy
28:07
Speaker 11: five thousand, so we exceeded that. We're not over two hundred,
28:11
Speaker 11: but we are exceeding with the average jobs that were
28:14
Speaker 11: added between twenty sixteen and twenty twenty, which was one
28:18
Speaker 11: hundred and seventy eight thousand jobs on average, So it
28:21
Speaker 11: really signals it might not be the strongest economy we've
28:24
Speaker 11: seen in the past three years, but it's definitely not weak.
28:27
Speaker 5: Now, I'm not going to give you an opening to
28:28
Speaker 5: do a commercial, but what does the Sound Network do.
28:32
Speaker 11: So we're a staffing and recruiting firm for white collar jobs.
28:35
Speaker 11: So we do search for accountants, technology, sales, marketing, et cetera.
28:41
Speaker 11: And then we also have an interim or temporary staffing
28:43
Speaker 11: group placing people in those same fields.
28:45
Speaker 5: Okay, can you gauge for us how much they're getting paid,
28:50
Speaker 5: whether it's more the salaries are increasing or what I'm
28:54
Speaker 5: trying to get a gauge of the inflationary components in
28:57
Speaker 5: all this.
28:58
Speaker 11: Totally salaries over the past during the pandemic, salaries increased
29:02
Speaker 11: the same way you saw it on the hourly side,
29:05
Speaker 11: with Target and Amazon getting up into twenty and twenty
29:08
Speaker 11: five dollars an hour. It happened in the same thing
29:10
Speaker 11: within supply chain and marketing and HR and accounting and
29:14
Speaker 11: technology is always growing. And that continued really up until
29:19
Speaker 11: the end of last year. And then now we're sitting
29:22
Speaker 11: at a standpoint where it stabilized a little bit, where
29:27
Speaker 11: we've seen that the employee isn't in control the way
29:30
Speaker 11: they were in twenty twenty one in twenty twenty two,
29:33
Speaker 11: where they could work when they wanted and demand whatever salary.
29:36
Speaker 11: And I think we see that by the labor force
29:39
Speaker 11: increasing and the unemployment rate going up, that companies are
29:42
Speaker 11: not in as much of a high demand as they
29:45
Speaker 11: were before.
29:46
Speaker 2: What industries are seeing wage increases the most. I know
29:49
Speaker 2: you were talking about obviously technology and some others over
29:52
Speaker 2: the past year, but are there some less obvious particular
29:55
Speaker 2: groups there.
29:56
Speaker 11: Well, I think it's really less about the industry and
29:59
Speaker 11: more more about the roles. You could have somebody in
30:02
Speaker 11: technology that's working in a manufacturing company and they're going
30:06
Speaker 11: to get paid more. You could have a salesperson for
30:09
Speaker 11: a technology company being paid less because all the layoffs
30:14
Speaker 11: that exist. So I think it's really more about the
30:17
Speaker 11: individual roles of people than it is about sectors anymore.
30:22
Speaker 11: And that's usually what's happened since the Great Recession is
30:26
Speaker 11: that it's been less industry. It's been industry agnostic when
30:29
Speaker 11: it comes to the recession, and more about the individuals
30:33
Speaker 11: and the roles that are in high demand. Cybersecurity continues
30:36
Speaker 11: to be super super hot. You have healthcare that continues
30:40
Speaker 11: to be really, really hot and people that are willing
30:43
Speaker 11: to do that, whether whether it be in the on
30:45
Speaker 11: the software and the technology side of healthcare. You know,
30:48
Speaker 11: remember three years ago you couldn't find a nurse, you know,
30:52
Speaker 11: pun intended to save your life, and now we don't
30:55
Speaker 11: have that same problem. So things stabilize a lot quicker.
30:59
Speaker 11: And I just don't talk about that as much as
31:01
Speaker 11: we do when things are in short supply.
31:05
Speaker 2: What are you saying when it comes to sort of
31:06
Speaker 2: the work from home dynamic and some of the concessions
31:10
Speaker 2: that employers had been giving the past few years. Is
31:12
Speaker 2: there any sort of shift you're beginning to see happen
31:14
Speaker 2: here as obviously COVID begins to easier.
31:17
Speaker 11: Yeah, I think COVID has ease. I don't think that
31:21
Speaker 11: that's really the driver anymore. And what we're dealing with
31:23
Speaker 11: now is companies that are getting out front and leading.
31:28
Speaker 11: And I think what you'll see after labor Day is
31:31
Speaker 11: more and more of companies that will be demanding people
31:35
Speaker 11: to come into the office three days a week and
31:38
Speaker 11: four days a week and the occasional five. Now they'll
31:41
Speaker 11: always be the outlier company that, in order to recruit
31:43
Speaker 11: people will say we'll let you work fully remote, but
31:46
Speaker 11: it's going to be few and far between. And I
31:48
Speaker 11: think on the big companies, you're going to see the
31:52
Speaker 11: majority of them over sixty or seventy percent, they're going
31:54
Speaker 11: to have mandatory days in the office.
31:57
Speaker 5: Is there a predictive capability to a temporary help employment?
32:01
Speaker 5: What does it tell us about what businesses view of
32:05
Speaker 5: the economy.
32:06
Speaker 11: Yeah, temporary help traditionally has been a leading indicator of
32:10
Speaker 11: when temporary wages and temporary staffing increases. It's companies putting
32:15
Speaker 11: their tone in the water following a recession or a
32:19
Speaker 11: slump in the economy, and that's how they bridge in
32:22
Speaker 11: now what we've seen. There was an article in The
32:24
Speaker 11: Journey yesterday that said temporary staffing's lagging, which really lends
32:28
Speaker 11: itself to saying that the market's cooled down a little bit.
32:33
Speaker 11: I think it's really a different, different segment of that.
32:36
Speaker 11: I think that as unemployment and participation rates increase, that
32:42
Speaker 11: companies are able to find some people on their own
32:45
Speaker 11: a little bit more, a little easier, and that's an indicator.
32:49
Speaker 11: And we're seeing that people from the gig economy are
32:52
Speaker 11: now starting to re enter the workforce, and the big
32:55
Speaker 11: one is going to be that we're still seeing, and
32:58
Speaker 11: I think this is an important indication. We're seeing tempt
33:01
Speaker 11: to perm fees continue to be steady. And what that
33:03
Speaker 11: is means is that companies bring in people to do
33:06
Speaker 11: temporary work and then they'll pay money to buy out
33:09
Speaker 11: the agreement and bring them onto their payroll. And when
33:12
Speaker 11: that's happening, the economy is still strong because companies weren't
33:16
Speaker 11: planning to hire those people permanently, but they end up
33:19
Speaker 11: doing it, and that's a really strong indicator. And I
33:22
Speaker 11: still see those numbers as being on the strong side.
33:25
Speaker 2: Hey, Tom, whenever you have particular economists who want to
33:29
Speaker 2: argue about a potential recession on the horizon in the
33:33
Speaker 2: next couple of quarters or just weakness in the economy,
33:35
Speaker 2: I mean, to your point earlier that you were alluding to,
33:37
Speaker 2: you still see that strength there.
33:39
Speaker 11: What do you tell them, Well, I think the good
33:42
Speaker 11: thing about economists is they'll stick with their prediction even
33:45
Speaker 11: if it goes for quarters and years, and then they'll
33:47
Speaker 11: eventually have it happen and they'll say I told you so,
33:49
Speaker 11: even though it has been going on for three years.
33:51
Speaker 11: And I think that's not real life. I think real
33:54
Speaker 11: life is that companies are hiring people. There's jobs for
33:59
Speaker 11: people that still don't have ideal backgrounds, which tells me
34:02
Speaker 11: it's still a strong economy. And it's not always about
34:07
Speaker 11: how much you pay somebody, it's our people willing to
34:09
Speaker 11: do the work. And you know, we've gotten to a
34:12
Speaker 11: standpoint of entitlement in the country where we've got people
34:16
Speaker 11: that simply don't want to don't want to do jobs,
34:19
Speaker 11: no matter what the dollar amount is. And that's where
34:21
Speaker 11: the disconnect is in our in our economic society. So
34:25
Speaker 11: I tell economists all the time, let's look at the
34:29
Speaker 11: companies that are hiring and the people that are taking
34:32
Speaker 11: the jobs, and what the turnover and attrition rates are
34:35
Speaker 11: and that'll tell you real things. But that's not captured
34:37
Speaker 11: in the BLS.
34:38
Speaker 5: You talked about the sectors. What about the regions of
34:42
Speaker 5: the country. Who's doing what, who's doing best and worst?
34:46
Speaker 5: And can you break that down?
34:48
Speaker 11: Yeah, I think we're starting to see that, you know,
34:50
Speaker 11: some of some of the policies and the regulations on
34:53
Speaker 11: the on the West Coast is really starting to affect
34:57
Speaker 11: some of that. And we've seen that obviously the moves
34:59
Speaker 11: of companies into Texas and Tennessee and other states. But
35:03
Speaker 11: we're seeing that if there's an area of the country
35:05
Speaker 11: where remote work is being offered more, it's coming out
35:10
Speaker 11: of California companies because a lot of people don't want
35:14
Speaker 11: to pay the taxes and have the regulation there, so
35:18
Speaker 11: we're seeing a lot more remote work there. It's easier
35:20
Speaker 11: to fire and terminate people who aren't working in the
35:24
Speaker 11: state of California. And I think the Coast sarn is
35:27
Speaker 11: as desirable as they as they once were Sands Florida.
35:31
Speaker 11: So we see a lot of uptick in Texas. We
35:34
Speaker 11: see a lot of it in Tennessee, which are you know,
35:37
Speaker 11: there's big growth areas in Austin and Nashville, and those
35:41
Speaker 11: tend to be really, really strong and hiring. In the South,
35:45
Speaker 11: the traditional you know, I call it the SEC South
35:48
Speaker 11: from Alabama over to South Carolina tends to be strong
35:53
Speaker 11: areas for small to medium sized companies.
35:56
Speaker 2: Tom, we only have about thirty seconds left. What's some
35:58
Speaker 2: of the top questions or concerns you hear from employers.
36:02
Speaker 11: Oh, I think the biggest thing is, you know, we're
36:06
Speaker 11: going into an election year, so there's a lot more
36:10
Speaker 11: there's less concern thinking that DC will want to have
36:13
Speaker 11: the economy humming going into it. But the biggest challenge
36:18
Speaker 11: that they're feeling is that of concern is if the
36:22
Speaker 11: overtime exemption salary is going to increase what they're talking
36:26
Speaker 11: about from thirty I think it's thirty eight thousand to
36:28
Speaker 11: fifty four thousand, and that'll be something that could really
36:32
Speaker 11: hurt if inflation doesn't settle down and having to pay
36:35
Speaker 11: overtime for people at entry level jobs.
36:38
Speaker 2: Tom, thanks so much for joining us. Always a pleasure.
36:40
Speaker 2: Tom Gimball, CEO of La Salle Network, breaking down what's
36:44
Speaker 2: happening with the jobs picture in hiring.
36:47
Speaker 7: You're listening to the tape Kenser Live program Bloomberg Markets
36:51
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
36:54
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App.
36:57
Speaker 7: You can also listen live on Amazon Alexa from our
37:00
Speaker 7: flagship New York station, Just say Alexa playing Bloomberg eleven thirty.
37:06
Speaker 2: I want to get straight to our next guest, Eddie
37:08
Speaker 2: Vanderwold of Bloomberg News. Eddie, we really appreciate your patients
37:12
Speaker 2: sticking with us this afternoon. As we just heard from
37:15
Speaker 2: President Biden, I want to get your thoughts on his
37:17
Speaker 2: comments as well as the labor market data this morning,
37:21
Speaker 2: in the manufacturing data sort of, what is your takeaway
37:23
Speaker 2: when he is talking about the resiliency here with the
37:26
Speaker 2: US economy in the job market.
37:28
Speaker 6: Yeah, absolutely, you know what I think. I think he
37:30
Speaker 6: probably has a reason to be satisfied with some of
37:33
Speaker 6: those numbers that came out today. The non fun payrolls
37:36
Speaker 6: obviously came in above expectations and in fact above the
37:39
Speaker 6: prior month's revive revisions. Now, we did see the unemployment
37:44
Speaker 6: rate tick high at a three point eight percent, but
37:47
Speaker 6: that's partly of a reason, partly because people are coming
37:50
Speaker 6: back to the jobs market. We've got more people participating
37:53
Speaker 6: in the jobs market. Now, we saw the participating participation
37:57
Speaker 6: rate pick up. Subsequently to those numbers, we had the
38:01
Speaker 6: PMI numbers come in, which showed that manufacturing in the
38:04
Speaker 6: US actually slow the less that was expected, and that
38:09
Speaker 6: turned the markets around. We're now seeing you know, the
38:12
Speaker 6: S and P pretty much flat on the day. But
38:14
Speaker 6: I think the real action for me is in the
38:16
Speaker 6: bond market, we were seeing a real steepening. We're seeing
38:20
Speaker 6: thirty year yields and ten year yields rise by about
38:23
Speaker 6: seven or eight basis points, much more than at the
38:26
Speaker 6: front end of the curve. And what that tells us
38:29
Speaker 6: is that the markets are pricing out a little bit
38:32
Speaker 6: recession risk, and of course Biden will be very happy
38:35
Speaker 6: about that coming into an election next year.
38:37
Speaker 10: I mean, talk to me about the bond market though,
38:39
Speaker 10: I mean earlier this week the two year was above
38:43
Speaker 10: five percent. Was that the last we're going to see
38:47
Speaker 10: in that or do we think that there's a potential
38:50
Speaker 10: here to kind of reverse some of the movements that
38:54
Speaker 10: we've seen over the last couple of days.
38:56
Speaker 6: Yeah, you know what, the two years tried above couple
39:00
Speaker 6: of times and hasn't light it. I don't think many
39:03
Speaker 6: in the market think that the FED is going to
39:06
Speaker 6: raise rates much more. And really the two year end
39:09
Speaker 6: of the curve is a bet on whether the Fed
39:10
Speaker 6: is going to be able to hike at going into
39:13
Speaker 6: next year or will be forced into hiking going into
39:16
Speaker 6: next year, and with inflation doing what it is doing
39:19
Speaker 6: at the moment, which is, you know, coming down slow
39:21
Speaker 6: and steadily, not many people think that. The bigger risk
39:27
Speaker 6: I think for most economists is that that the that
39:30
Speaker 6: the FED will have to cut that they will be
39:32
Speaker 6: forced into cutting because inflation slows. But at the same
39:35
Speaker 6: time the US goes into a recession, you're seeing the market,
39:39
Speaker 6: the the the you know, main street starting to shad jobs.
39:43
Speaker 2: But we're not.
39:44
Speaker 6: Seeing that at the moment. What we're seeing is that steepening.
39:46
Speaker 6: And we're sitting now with about about seventy basis points
39:50
Speaker 6: of inversion between the two year and the ten year
39:54
Speaker 6: points on the yield curve.
39:56
Speaker 2: I want to get your thoughts on China, world's second
39:58
Speaker 2: largest economy here. You know, there's concerns about some of
40:01
Speaker 2: its flagging growth, but is some of the disinflation that's
40:04
Speaker 2: happening Is that actually in favor of the FED in
40:07
Speaker 2: maybe some other corners of the global markets here as
40:10
Speaker 2: far as when you're looking at these other central banks
40:11
Speaker 2: that are still trying to fight inflation.
40:14
Speaker 6: I think China has been an exporter of this inflation, right.
40:18
Speaker 6: I think this inflation that we saw there is feeding
40:21
Speaker 6: through into goods that we buy here and therefore also
40:24
Speaker 6: into services and also into wages. But I think it's
40:28
Speaker 6: wider than that, right. I think it's more worrying because
40:31
Speaker 6: if China is slowing, that's because people across the world
40:34
Speaker 6: is not buying their goods, right, And if we're not
40:37
Speaker 6: buying their goods, that means that we're not spending money,
40:39
Speaker 6: and that's a recessionary flag. Now they've been slowly and
40:43
Speaker 6: steadily they've been you know, people were hoping for this
40:46
Speaker 6: kind of big bang stimulus in China. Instead they've been
40:50
Speaker 6: getting fairly small measures. But somebody the newsroom said to
40:53
Speaker 6: me earlier today that maybe those small measures are starting
40:56
Speaker 6: to look like a machine gun.
40:58
Speaker 1: Right.
40:58
Speaker 6: They're delivering them over and over and over. Every day
41:00
Speaker 6: that you come in there, there's a little bit more stimulus.
41:02
Speaker 6: So maybe it's not a Maybe it's not a bazuka.
41:05
Speaker 6: Maybe it's a machine gun. But the market's starting to
41:09
Speaker 6: pay attention and we are starting to see, you know,
41:11
Speaker 6: Chinese stocks doing slightly better. They still have a lot
41:16
Speaker 6: of trouble in their property sector though.
41:18
Speaker 8: Yeah.
41:18
Speaker 10: I mean every day you come in, mortgage support here,
41:22
Speaker 10: tax breaks here, stocks support here. I mean, just very quickly,
41:25
Speaker 10: we all have about twenty seconds here. But do you
41:29
Speaker 10: see more of a risk that China of China contagion
41:32
Speaker 10: than the markets are pricing in?
41:33
Speaker 4: Just yes or no?
41:34
Speaker 9: Please?
41:36
Speaker 6: I think probably yes. I think China. If China slows
41:40
Speaker 6: down significantly, that's going to be a problem for the
41:42
Speaker 6: rest of the world, right well.
41:44
Speaker 2: World's second largest economy behind US and of course Japan
41:47
Speaker 2: third largest economy. Eddie, thank you for being patient sticking
41:51
Speaker 2: with us. We really appreciate Eddie Vanderwold of Bloomberg News,
41:55
Speaker 2: of course breaking down what we were seeing with the
41:58
Speaker 2: obviously the jobs picture, and then on the back of
42:00
Speaker 2: those comments from President Joe Biden.
42:02
Speaker 7: You're listening to the tape kens our live program Bloomberg
42:05
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42:09
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42:12
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42:21
Speaker 2: When you are looking at what's happening with Amjen as
42:23
Speaker 2: well as Horizon, so Amjin can move forward with its
42:27
Speaker 2: around close to twenty eight billion dollar takeover of Horizon
42:30
Speaker 2: Therapeutics after the FTC did say Friday that it accepted
42:34
Speaker 2: a binding settlement that the combined company would bundle would
42:38
Speaker 2: not bundle together two of Horizons blockbuster drugs. I want
42:42
Speaker 2: to bring in Jennifer Ree, senior litigation analysts at Bloomberg Intelligence.
42:47
Speaker 2: She's always on top of all things when it comes
42:50
Speaker 2: to when it comes to actually stories and deals like this,
42:54
Speaker 2: joining us to talk about this FTC settlement on this
42:56
Speaker 2: Amgin Horizon deal here, Jennifer, thanks for joining us this afternoon,
43:01
Speaker 2: walk us through what this means moving forward with this deal.
43:05
Speaker 12: Well, thanks for having me. I mean, I think this
43:07
Speaker 12: was a really smart move by the STC. To be honest,
43:11
Speaker 12: they have sought a way to try to slow down consolidation,
43:15
Speaker 12: particularly in the pharmaceutical industry, and I thought, I think
43:19
Speaker 12: that they thought, you know, this is a great opportunity
43:22
Speaker 12: with this merger to try out a novel theory, try
43:25
Speaker 12: to push the law out to make it easier to
43:27
Speaker 12: block pharmaceutical deals, and to try to go to court
43:30
Speaker 12: to get a judge to stop this deal using kind
43:33
Speaker 12: of a novel theory. And what that theory was was
43:37
Speaker 12: that those two blockbuster drugs of Horizon that you just mentioned,
43:40
Speaker 12: one for chronic gout and the other for I diybory disease,
43:44
Speaker 12: would be in Amgen's hands. Amgen would be able to
43:47
Speaker 12: maintain the monopolies for those drugs because it would bundle
43:50
Speaker 12: it and provide rebates for those bundles with other blockbusters
43:53
Speaker 12: drugs that Amgen already has, and it could do that
43:56
Speaker 12: better than Horizon could on its own, and it would
43:59
Speaker 12: lock the future and of other drugs. And here's the thing.
44:02
Speaker 12: That kind of theory could almost be used in almost
44:05
Speaker 12: any pharmaceutical deal. So it was kind of a big
44:08
Speaker 12: deal for the industry. So the fact that it's settling
44:11
Speaker 12: is also a big deal for the industry because it
44:13
Speaker 12: shows that the STC kind of backed off that theory,
44:17
Speaker 12: which really is a broad theory.
44:19
Speaker 10: Okay, but dig into the details a little bit for
44:22
Speaker 10: me here. So Tapeza and christis right, apologies. Does how
44:29
Speaker 10: does bundling an agreement not to bundle those drugs accomplish
44:35
Speaker 10: this purpose?
44:38
Speaker 12: So the idea is that they if engine provided really
44:42
Speaker 12: seed rebase let's state of pharmacy benefit managers or insurers
44:45
Speaker 12: to bundle those drugs to put it on a drug formulary.
44:48
Speaker 12: What that would do would be to block out other
44:51
Speaker 12: potential up and coming new FDA approved drugs that can
44:55
Speaker 12: compete with those two. With christecks that I can't say
44:58
Speaker 12: it either any other drugs.
45:00
Speaker 2: It's always avousible, you know, they always are.
45:03
Speaker 12: I don't know why they named drugs with they really do.
45:07
Speaker 12: But the idea is that if there are other innovators
45:09
Speaker 12: out there trying to come up with a drug or
45:12
Speaker 12: get FDA approval for a drug that could treat the
45:14
Speaker 12: same condition and potentially bring prices down across the board
45:18
Speaker 12: for drugs that treat those two conditions, that they really
45:21
Speaker 12: wouldn't be able to get into the market because these
45:23
Speaker 12: bundles rebates would be too enticing for the pharmacy benefit
45:27
Speaker 12: managers to they'd have to accept them, and to accept them,
45:30
Speaker 12: they'd have to put the horizon drugs on the formulary
45:32
Speaker 12: and not these competing drugs, And so the competing drugs
45:35
Speaker 12: can't get into the market. They can't get in a foothold.
45:38
Speaker 12: So if Amgent can't bundle them, it opens up that avenue.
45:42
Speaker 12: It takes away that blockade, right and if it allows
45:45
Speaker 12: for the possibility down the road for other rivals to
45:48
Speaker 12: try to come in and compete against those two drugs, who.
45:51
Speaker 2: Do you consider to be the biggest rivals at this
45:53
Speaker 2: point for them?
45:56
Speaker 12: You know, I think that's the most speculative part of
45:59
Speaker 12: this entire law. They're really they really couldn't really name
46:03
Speaker 12: any I mean, now there may be in phase three
46:07
Speaker 12: or phase two somewhere along the FDA process, some rivals,
46:10
Speaker 12: other analysts would be better off, who know what's going
46:13
Speaker 12: on in the biotech space to speak about that. But
46:16
Speaker 12: here's the thing. It was so speculative because the FTC
46:19
Speaker 12: couldn't really say, hey, X drug or Y drug or
46:22
Speaker 12: ABC company has something coming soon. They couldn't do that.
46:27
Speaker 12: It was really speculative that maybe down the road, maybe
46:30
Speaker 12: there will be something that might compete and might not
46:33
Speaker 12: be able to So it was a tough theory for
46:36
Speaker 12: the FTC to try to win in court. And that's
46:38
Speaker 12: why I say that it was probably a smart thing
46:41
Speaker 12: for them to do to get this settlement instead.
46:44
Speaker 10: Yeah, I mean, also, what do you think that this
46:47
Speaker 10: says about the broader FTC task here? You know, we
46:54
Speaker 10: had Black Knight Ice dropping the challenge there yesterday as
47:01
Speaker 10: the FDC's realize that it's run up against the wall,
47:05
Speaker 10: you know, I sort.
47:05
Speaker 12: Of think it has. I think the FDC got a
47:08
Speaker 12: little bit tired of losing. You know, they lost two
47:11
Speaker 12: big merger challenges that were really well publicized that was
47:14
Speaker 12: a challenge to Meta trying to buy a small virtual
47:17
Speaker 12: reality company called Within, and then Microsoft trying to buy Activision.
47:21
Speaker 12: You know, these were really well known, kind of sort
47:24
Speaker 12: of spectacularly public court losses, and I think that they
47:29
Speaker 12: pulled back a little bit. They have been very aggressive.
47:32
Speaker 12: I think they do want to continue to be aggressive,
47:34
Speaker 12: but maybe they've pulled back to think about, Look, we
47:37
Speaker 12: can be aggressive, but maybe we need to pick and
47:39
Speaker 12: choose our challenges to deal just with a little bit
47:41
Speaker 12: more discretion, because when we go into court with a
47:44
Speaker 12: really tough theory, particularly if you don't have the evidence
47:48
Speaker 12: and the facts to back that new theory that you're
47:50
Speaker 12: asking a judge to accept, you know, we're really there's
47:54
Speaker 12: a good chance we're headed for a loss and we
47:56
Speaker 12: need to get a win down the road. So yeah,
47:58
Speaker 12: I think it probably show is that the STT is
48:01
Speaker 12: going to exercise a little more caution and going forward
48:04
Speaker 12: with respect to challenging specific types of deals.
48:07
Speaker 2: Jennifer Ree, senior litigation analysts at Bloomberg Intelligence, Thank you
48:11
Speaker 2: so much for joining us.
48:13
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
48:16
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48:20
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Speaker 1: at Matt Miller nineteen seventy three. And I'm fall Sweeney.
48:27
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48:30
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