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Is the labor market showing signs of weakness? · The Financial Exchange Show

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Speaker 2: Kicking things off today on the Financial Exchange, Chuck, Mike
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Speaker 2: and Tucker with you, and I want to talk a
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Speaker 2: little bit about the economic data that we have been
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Speaker 2: getting this week, all.
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Speaker 3: Jobs related or mostly jobs really, there's been some manufacturing
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Speaker 3: and services data too.
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Speaker 2: Yeah, it's been mostly jobs related. Hold on, I gotta sneeze,
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Speaker 2: you gotta take this. Okay.
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Speaker 3: So we received the ADP Employment Report just yesterday. That's
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Speaker 3: a report that's done by private payroll company ADP. They
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Speaker 3: release it a couple days before the big jobs report
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Speaker 3: every single month, and honestly, they oftentimes don't correlate all
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Speaker 3: that much. But it was a really weak report on
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Speaker 3: jobs from ADP. This morning we get the weekly jobless
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Speaker 3: claims at eight thirty, also weaker than the previous week.
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Speaker 3: And then tomorrow we'll be getting the monthly jobs report.
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Speaker 3: And pressure is now mounting, especially from the Trump administration,
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Speaker 3: on the Fed to do something in the face of
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Speaker 3: this very early signs of weakening job data.
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Speaker 2: Yeah, and I think let's talk about what we saw
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Speaker 2: from weekly jobles claims. There are two components to it.
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Speaker 2: The first is initial jobles claims. How many people are
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Speaker 2: claiming for the first time. YEP. What we've seen now
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Speaker 2: in this data series is over the last three weeks
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Speaker 2: we've gone from two hundred and twenty six thousand to
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Speaker 2: two hundred and thirty nine thousand to two hundred and
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Speaker 2: forty seven thousand, So you got a little bit of
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Speaker 2: a two week trend of things moving up. The reason
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Speaker 2: why I'm not too nervous about this or excited about this,
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Speaker 2: whatever phrase you want to use, is the last two years,
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Speaker 2: starting right around this time, we saw a jump in
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Speaker 2: the weekly jobless claims numbers up into that two forty
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Speaker 2: to two sixty range, where it stayed for about four
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Speaker 2: to six weeks and then started to come back down.
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Speaker 2: Some kind of weird residual seasonality where the seasonally adjusted numbers,
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Speaker 2: which are the ones that we're talking about here, for
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Speaker 2: some reason have just not been, you know, coming through cleanly.
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Speaker 2: So that could be.
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Speaker 3: Part of it, according to Neil. According to Neil Data,
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Speaker 3: you know, someone who follows this stuff a heck of
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Speaker 3: a lot closer than you or I. You know, that
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Speaker 3: jobless claims number in the two fifty to two sixty
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Speaker 3: range is where he classifies it as neutral on the
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Speaker 3: job market meeting if you're seeing people file for unemployment
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Speaker 3: at a pace of two hundred and fifty thousand, then
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Speaker 3: you wouldn't really expect net job gains in that monthly
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Speaker 3: job's report were to continue at that kind of pace.
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Speaker 3: And so we're closing in on which would mean, by
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Speaker 3: the way that the unemployment rate starts to go up,
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Speaker 3: are seeing the labor force growing over time at least historically.
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Speaker 3: We can talk a little bit about why that may
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Speaker 3: be different this year, but ultimately, you know, two weeks
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Speaker 3: of jobless claims starting to move up. It's kind of
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Speaker 3: meh at this point, like it's it's something that I watch,
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Speaker 3: but I've seen this the last two summers, and so
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Speaker 3: in order for me to think that this is something
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Speaker 3: new relating to labor market weakness, we've got to see
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Speaker 3: I got to see a print where the first two
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Speaker 3: digits are you know, two and seven and hopefully not
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Speaker 3: you know, seven hundred and twenty thousand, because that would
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Speaker 3: be very bad. But you know, if we get up
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Speaker 3: to two hundred and seventy thousand claims for any week
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Speaker 3: this summer, I at least start saying, Okay, there's something
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Speaker 3: different that's potentially going on here. Than just this weird
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Speaker 3: residual seasonality that we've seen the last couple of summers
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Speaker 3: on this data series.
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Speaker 2: I would agree, and I do agree.
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Speaker 3: However, I think it's important to take this in context
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Speaker 3: of that ADP report whenever we get tomorrow as well,
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Speaker 3: and look, we're gonna cover Procter Gamble just announced layoffs.
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Speaker 3: Disney did a few weeks ago, Microsoft did a few
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Speaker 3: weeks ago.
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Speaker 2: Did Walmart two? Or am I making that one up?
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Speaker 2: Am I confusing?
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Speaker 3: I don't know that Walmart did, but I know that
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Speaker 3: proct Gambled, Disney, and Microsoft have all announced layoffs in
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Speaker 3: the you know.
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Speaker 2: The low single fifteen hundred corporate employees.
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Speaker 3: Yeah, okay, so you know you can't take those one
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Speaker 3: off announcements to mean anything in and of themselves. But yeah,
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Speaker 3: combine all this stuff together, and if we get a
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Speaker 3: week job support tomorrow, I think this stuff gets taken seriously.
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Speaker 2: The other piece is continuing unemployment claims, which came in
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Speaker 2: at one point nine oh four million. That's down slightly
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Speaker 2: from one point nine ozho seven, which is the revised
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Speaker 2: number from last week. The concern last week that number
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Speaker 2: was originally like one point nine almost one point nine two,
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Speaker 2: and it was something where the year over year acceleration
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Speaker 2: was starting to look a little bit dodgier. As long
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Speaker 2: as that number of continuing claims stays under one point
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Speaker 2: nine to five million, really under two million, there's not
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Speaker 2: really much there that I think you can point to.
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Speaker 2: If that number starts to move up, you know, worth
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Speaker 2: of two million, then you start getting into a situation
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Speaker 2: that historically has you know, shown a significant rise in
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Speaker 2: the pace of unemployment based on the change in year
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Speaker 2: over year continuing claims. So I think that looking at
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Speaker 2: this weekly claims data, and the reason that we are
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Speaker 2: is because there are some things out there that are
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Speaker 2: starting to get a little concerning in the labor market.
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Speaker 2: I think you look at this and you say, okay,
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Speaker 2: this is not good. That claims are rising new claims,
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Speaker 2: continuing claims are showing a little bit of stability, which
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Speaker 2: is fine, which is better. So overall, you know, the
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Speaker 2: picture on this is a labor market that may be slowing,
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Speaker 2: but we just don't know enough yet, and we're gonna
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Speaker 2: need a few more weeks of data on this to
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Speaker 2: be able to tell what's going on. I know I've
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Speaker 2: been saying that for a while now, but I've kind
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Speaker 2: of had this view that, look, July and August is
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Speaker 2: where we're going to know what the state of the
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Speaker 2: US economy looks like. We're starting to get a sense
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Speaker 2: of it, but it's still too early, and we still
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Speaker 2: need a few more data points to be able.
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Speaker 3: To tell again what this weekly claims number gives us.
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Speaker 3: Just to remind folks, I know it's kind of in
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Speaker 3: the name, but it's giving you the filings for unemployment,
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Speaker 3: and so there's some key things that aren't included in here, right.
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Speaker 3: It doesn't tell you the opposite side of that equation,
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Speaker 3: which is how many hirings are taking place, and we
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Speaker 3: get some semblance of that in the monthly jobs report.
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Speaker 3: We also got it earlier this week on jolts, but
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Speaker 3: that is quite backward looking. It also doesn't give you
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Speaker 3: a sense for how many, you know, newly graduated seniors
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Speaker 3: in high school who are entering the labor force or
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Speaker 3: college grads are entering the labor force looking for work
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Speaker 3: and not finding it. Because they are not eligible for unemployment,
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Speaker 3: they may or may not be having luck finding those jobs,
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Speaker 3: and they will eventually start showing up in other surveys,
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Speaker 3: you know, it's only you know, most of those graduating
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Speaker 3: seniors just graduated in the last few weeks. They're not
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Speaker 3: being included in any surveys when it comes to labor
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Speaker 3: market today.
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Speaker 2: No, what we are seeing is and again like those
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Speaker 2: ones that graduated. But again the data tries to parse
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Speaker 2: that out anyways, just through how they do, you know,
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Speaker 2: the different seasonal adjustments and things like that. But most recently,
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Speaker 2: the most recent data that we have, the unemployment rate
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Speaker 2: amongst college grads age twenty two to twenty seven is
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Speaker 2: almost six percent right now, which is above the national
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Speaker 2: unemployment rate of four to two. So it is telling
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Speaker 2: you recent college grads you know, in that demo, are
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Speaker 2: having a harder time finding work. And I think that
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Speaker 2: meshes with every the general data we see. The other thing,
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Speaker 2: I was talking to a friend of mine who is
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Speaker 2: a professor the other day, just a tangent on this topic,
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Speaker 2: and in the last maybe eighteen to twenty four months,
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Speaker 2: he has seen a shift in his students in terms
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Speaker 2: of their overall all I guess, their overall outlook on
9:08
Speaker 2: their degree and employment prospects. And you know, again I'm
9:15
Speaker 2: gonna do a horrible job of explaining this because again,
9:18
Speaker 2: it's he's the one who's actually experienced this, and you know,
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Speaker 2: is teaching hundreds of students and this and that. Basically,
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Speaker 2: what he is hearing from college students at the moment
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Speaker 2: is a significant amount of trepidation with regards to artificial
9:36
Speaker 2: intelligence and its ability to render their degree obsolete from
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Speaker 2: the perspective of the labor market, and concerns about you know, hey,
9:48
Speaker 2: I went to school to learn even you know, something
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Speaker 2: like computer science, and now so much of the coding
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Speaker 2: at you know, big tech firms is being done by
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Speaker 2: artificial intelligence and and you know, what was the point
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Speaker 2: of this? Why did I do this? And this is
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Speaker 2: across different majors also, but it's something that he's been
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Speaker 2: hearing more and more, and it meshes also with you know,
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Speaker 2: the labor market data where new college grads are having
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Speaker 2: a hard time getting in. Maybe some of that is
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Speaker 2: just due to the overall slowness of the labor market,
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Speaker 2: but I think we have to ask the question from
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Speaker 2: a causality perspective, is that slowness in the new college
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Speaker 2: grad job market is that because the economy is slowing,
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Speaker 2: or because those entry level positions are being replaced and
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Speaker 2: or augmented by AI to the point where you don't
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Speaker 2: need as many of them coming in, right. It's an
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Speaker 2: interesting question.
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Speaker 3: It's all that anybody wants to write about, you know,
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Speaker 3: whether it's the coding sector, whether it's the investment banking sector.
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Speaker 3: I've seen the same story written that, Hey, these entry
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Speaker 3: level jobs we're having a better success of replacing with
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Speaker 3: artificial intelligence.
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Speaker 2: Is it really true?
10:54
Speaker 3: Is it really there just to spark a story and
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Speaker 3: to spark interest in their company and their use of AI.
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Speaker 2: It's a question that's not answerable in the short term.
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Speaker 2: Let's take a quick break. When we come back, if
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Speaker 2: we talked enough jobs we want do we want to
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Speaker 2: talk about tomorrow's jobs report a little bit first?
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Speaker 3: Yeah, let's get there, and you know what we're seeing
11:12
Speaker 3: in bond market and pressure on the FED.
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12:16
Speaker 2: Mike, we get a jobs report tomorrow. The expectations on
12:19
Speaker 2: the headline numbers are nothing crazy. One hundred and thirty
12:23
Speaker 2: thousand jobs expected to be at at an employment rate
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Speaker 2: expected to stay at four point two percent. I think
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Speaker 2: the again, we've gotten some other data this week that
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Speaker 2: indicates some potential weakness in the labor market. Could this
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Speaker 2: move in the same direction, Yes, but there are plenty
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Speaker 2: of times where this diverges from that ADP report. There
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Speaker 2: are plenty of times when it diverges from what's going
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Speaker 2: on in jobless claims, and so I don't think it's
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Speaker 2: crazy to say there's the potential for this to come
12:54
Speaker 2: into the upside. But if it were to miss to
12:57
Speaker 2: the downside, especially if it were to be a meaningful miss, say,
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Speaker 2: you know, under fifty thousand jobs created, then all of
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Speaker 2: a sudden, you've got three data points in the span
13:06
Speaker 2: of three days pointing in the same direction, and while
13:10
Speaker 2: they are still viewing the same period. It doesn't make
13:12
Speaker 2: a trend, but it does give you, you know, a little
13:15
Speaker 2: bit of confidence that, hey, the month of May did
13:18
Speaker 2: not look good for the labor market. If that were the.
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Speaker 3: Case, does the Fed go running at the first sign
13:25
Speaker 3: of employment weakness?
13:26
Speaker 2: They can't.
13:28
Speaker 3: I don't think they should. But let's be very clear,
13:31
Speaker 3: this Fed has displayed a very a not insignificant bias
13:38
Speaker 3: towards paying closer attention to employment and being and being
13:43
Speaker 3: dubvish when it comes to rates and an unemployment.
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Speaker 2: So here's the thing. The Fed's got a meeting in
13:49
Speaker 2: two weeks. They meet two weeks from yesterday. Markets are
13:53
Speaker 2: pricing in a ninety nine point one percent chance that
13:55
Speaker 2: they don't move rates. They're not going to surprise anybody.
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Speaker 2: The only way I think you get even a marginal
14:02
Speaker 2: chance for a rate cut in June, in two weeks.
14:07
Speaker 2: Is if payrolls tomorrow princes negative, agreed, And even that,
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Speaker 2: I'm not sure. Even that, I'm not sure they do,
14:13
Speaker 2: because here's the other piece. We're also going to be
14:17
Speaker 2: getting next week on Wednesday CPI data, and we have
14:22
Speaker 2: no idea what that's going to be, and so just
14:25
Speaker 2: run out of hypothetical here. Let's say that NFP nonfarm
14:29
Speaker 2: payrolls prince, you know, negative job growth tomorrow, and unemployment goes,
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Speaker 2: you know, to four point three or four point four
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Speaker 2: percent next week. Headline inflation is expected to come in
14:41
Speaker 2: at point two percent for the month. Let's say at
14:43
Speaker 2: prince point three or point four. What does the FED
14:46
Speaker 2: do in that case? I don't I don't think they
14:49
Speaker 2: can do anything. I would agree, I'm not sure.
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Speaker 3: That's the most The more interesting question to me is
14:54
Speaker 3: if we continue to get expectation inflation prints and this
14:57
Speaker 3: unemployment data starts to weakend. Because I'm not sure that
15:00
Speaker 3: they should cut in that face of that, but I
15:02
Speaker 3: think that they would. And we've had this argument before, right, like,
15:06
Speaker 3: what do you do if you're faced with both higher
15:09
Speaker 3: unemployment and higher inflation? My guess is if you are,
15:13
Speaker 3: they're not going to come on the same timeframe, right,
15:16
Speaker 3: we haven't seen energy prices move. I tend to think
15:19
Speaker 3: that if we get the inflation, it's not going to
15:21
Speaker 3: happen for a little while, and so I get I'm
15:24
Speaker 3: coming to this more. It's still maybe an unlikely scenario,
15:29
Speaker 3: but a possible scenario here where unemployment data and weak
15:32
Speaker 3: joblessness numbers show up before any sort of inflation data does.
15:38
Speaker 3: And I do wonder in that scenario what the FED does,
15:41
Speaker 3: because previous experience tells me they cut in the face
15:45
Speaker 3: of weak unemployment.
15:47
Speaker 2: It's basically, hey, there is there a negative report tomorrow,
15:51
Speaker 2: and as long as you know inflation doesn't print the
15:55
Speaker 2: following Wednesday, it would potentially open the door to June.
16:00
Speaker 2: The next meeting is in July. It's July thirtieth, so
16:02
Speaker 2: you're gonna have another set of employment data, another set
16:04
Speaker 2: of CPI. That CPI, though, is where you probably start
16:08
Speaker 2: to get a sense of tariffs, you know, really coming in,
16:11
Speaker 2: because that's the June data and we've seen I don't
16:14
Speaker 2: know if you read through the Fed's beaygebook report yesterday
16:18
Speaker 2: some of it. In any case, they also did a
16:23
Speaker 2: study on tariffs. In addition to that, and basically what
16:27
Speaker 2: they found was that the vast majority of companies that
16:32
Speaker 2: are impacted by tariffs are saying, yeah, we're passing on
16:35
Speaker 2: at least a quarter of that tariff impact to our
16:41
Speaker 2: end customers. And that's just going to show up in
16:43
Speaker 2: the data when it finally does. Because for the month
16:46
Speaker 2: of April, basically anything that was already in the US
16:49
Speaker 2: you didn't have any tariff impact. May you might have
16:52
Speaker 2: had some, but it's really June, July, August where that
16:55
Speaker 2: starts to show up. Now, the reason why I suspect
16:59
Speaker 2: that the FED is probably not going anywhere in June
17:03
Speaker 2: or July is for the very reason that the last
17:08
Speaker 2: thing the FED wants to do is cut rates, only
17:11
Speaker 2: to have to hike them. That the ideal j Powell's
17:15
Speaker 2: ideal day is that he wakes up, does a lot
17:18
Speaker 2: of really hard thinking and doesn't push a single button
17:23
Speaker 2: because it means that they're in the right spot and
17:24
Speaker 2: they're just kind of navigating these ebbs and flows of
17:27
Speaker 2: the economy, which is fine most of the time. You
17:29
Speaker 2: don't have to do anything with monetary policy or remember
17:33
Speaker 2: all the people Jeremy Siegel included freaking out last you
17:37
Speaker 2: guys remember the seagull freak out. We do. I'll remind
17:40
Speaker 2: you of it, probably for the rest of my life.
17:44
Speaker 2: Everyone in their grandma. Last September, Fed's got to cut
17:47
Speaker 2: one hundred and fifty bases points before their next meeting.
17:51
Speaker 2: We're all gonna die if they don't cut rates. They
17:54
Speaker 2: didn't say that, but they did say they had to
17:55
Speaker 2: cut one hundred and fifty basis points before the next meeting.
17:58
Speaker 2: And in hindsight, if the FED funds rate it was
18:00
Speaker 2: a two and a half right now, we'd all feel
18:02
Speaker 2: kind of dumb, like, Hey, we didn't really need to
18:06
Speaker 2: do that because unemployment stabilized and it turned out you
18:08
Speaker 2: didn't need an extra one hundred and fifty bases points
18:10
Speaker 2: of cuts. So marcuts tend to agree with you.
18:14
Speaker 3: By the way, the h you mentioned the ninety nine
18:17
Speaker 3: percent chance of no cut in the June meeting. The
18:19
Speaker 3: July thirtieth meeting, according to the Chicago Merketallics, change is
18:22
Speaker 3: sitting yet seventy percent likelihood of again no cut, And
18:26
Speaker 3: I do think that's the likely scenario. But if I'm
18:30
Speaker 3: looking at the dual mandate here, I'm more worried about
18:34
Speaker 3: the employment side of things.
18:36
Speaker 2: Showing before the inflation side of things, even with the
18:40
Speaker 2: you know, the last couple of weeks the rise in
18:42
Speaker 2: unemployment claims that we've gotten a couple things to note.
18:45
Speaker 2: They're both after the data collection period for the made
18:48
Speaker 2: jobs report, So they're not going to be included in there. Nope,
18:53
Speaker 2: even if they were, they're not to the point where
18:55
Speaker 2: that report looks really bad based on you know, kind
18:59
Speaker 2: of how this typically triangulates. And so as we start
19:04
Speaker 2: looking out, you know, the June collection period for the
19:07
Speaker 2: June Jobs report starts, I think next Sunday or Monday,
19:12
Speaker 2: and so maybe you start to get some of this
19:14
Speaker 2: included in here. But this is why it's kind of
19:17
Speaker 2: a tough putt to be like, hey, they're going to
19:19
Speaker 2: cut before you know the September meeting. Is a lot
19:22
Speaker 2: has to go wrong in a really short period of time,
19:25
Speaker 2: and there's just not enough that's printing right now to
19:27
Speaker 2: show that that's happening. The most likely case is that
19:31
Speaker 2: everything's just fine or slightly worsening. Right quick break here.
19:35
Speaker 2: When we return, it's Wall Street.
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19:54
Speaker 1: Wall Street watch a complete look at what's moving markets
19:57
Speaker 1: so far today right here on the Financial Exchange Radio Network.
20:02
Speaker 4: Well, markets are relatively muted at the moment as traders
20:05
Speaker 4: monitor ongoing trade developments between the US and China, where
20:09
Speaker 4: a Chinese media outlet this morning reported President Trump and
20:12
Speaker 4: President g held a phone call. Investors are also digesting
20:16
Speaker 4: jobless claims data that came in slightly higher than estimates.
20:20
Speaker 4: Right now, the Dow is off by two tenths of
20:23
Speaker 4: a percent, SMP five hundred is down by only eight points,
20:26
Speaker 4: and the Nasdaq is shedding only sixteen points. Or also
20:30
Speaker 4: two thousand is off by about a third of a percent.
20:33
Speaker 4: Ten year Treasury yield currently flat at four point three
20:36
Speaker 4: six percent, and crude oil up just over one percent
20:40
Speaker 4: higher trading its sixty three dollars and fifty eight cents
20:44
Speaker 4: a barrel. Procter and Gamble said it would cut seven
20:47
Speaker 4: thousand jobs, or about fifteen percent of its non manufacturing
20:51
Speaker 4: workforce over the next two years. Executives also said they
20:54
Speaker 4: planned a trim its product portfolio, exiting some categories and
20:59
Speaker 4: divest it of some smaller brands in certain markets. P
21:03
Speaker 4: and g stock is down about one percent. More news
21:07
Speaker 4: on the consumer goods front after Kimberlee Clark agreed to
21:11
Speaker 4: a three billion dollar deal to sell its Kleenex and
21:14
Speaker 4: tissue businesses outside of North America as it aims to
21:18
Speaker 4: focus on.
21:19
Speaker 1: More profitable areas.
21:21
Speaker 4: Kimberly Clark shares are almost two percent lower.
21:24
Speaker 2: Elsewhere.
21:25
Speaker 4: Discount retailer five below posted stronger than expected first quarter
21:28
Speaker 4: results earlier this week. Other discount retailers, including Dollar General
21:33
Speaker 4: and Dollar Tree, said that an influx of middle and
21:37
Speaker 4: upper income customers was boosting sales. Five Below shares are
21:41
Speaker 4: jumping seven percent higher today, Mango dB surging seventeen percent
21:47
Speaker 4: after beating earnings and revenue expectations. The software company also
21:51
Speaker 4: raised its annual guidance, and after today's closing bell, we'll
21:55
Speaker 4: see more first quarter earnings from Broadcom, Lululemon, and Docus.
22:00
Speaker 4: Sign on, Tucker Silvan, that's Wallstreet Watch.
22:02
Speaker 2: Let's talk a little bit about a couple pieces here,
22:06
Speaker 2: one from the Wall Street Journal, another from Bloomberg. And
22:09
Speaker 2: what it's taught. What they're talking about is the Department
22:12
Speaker 2: of Labor announced it. I don't know if it was
22:15
Speaker 2: yesterday or the day before that. Beginning with their upcoming publications,
22:25
Speaker 2: they are going to have to use fewer inputs for
22:29
Speaker 2: their inflation data series that the CPI, the Consumer Price Index,
22:32
Speaker 2: than they previously did. And the reason why is that
22:37
Speaker 2: there is a hiring freeze at the doll and so
22:41
Speaker 2: because of that, they can't replace economists or analysts who
22:45
Speaker 2: have been collecting the data, and so they have to
22:48
Speaker 2: collect less data.
22:50
Speaker 3: And this isn't Yeah, this is not a computer program
22:54
Speaker 3: that goes out and reads a whole bunch of data files.
22:56
Speaker 3: There's no requirement for businesses to report to the Bureau
22:59
Speaker 3: of Labors Tistics what they charge for stuff. What they
23:01
Speaker 3: literally do is have hundreds of people that fan out
23:04
Speaker 3: across the country and go ask all sorts of businesses
23:07
Speaker 3: what are you charging, or actually physically visit the businesses
23:10
Speaker 3: and check what they're charging.
23:11
Speaker 2: Yeah, and so the reason why this matters is not
23:15
Speaker 2: because the government always produces the right data. There is
23:21
Speaker 2: no right data. No. Any way that you are collecting
23:26
Speaker 2: information on anything, you inherently have to sample it. You
23:31
Speaker 2: don't actually look at every single thing out there because
23:35
Speaker 2: you can't. It's just not physically possible to do. So
23:39
Speaker 2: this is when you do a census every decade. Yeah,
23:42
Speaker 2: this is whether we're talking about jobs, whether we're talking
23:45
Speaker 2: about inflation, imports, exports, this, that, whatever. So why should
23:51
Speaker 2: anyone care about this? Couple different reasons that I personally do.
23:59
Speaker 2: The first is, Mike, let's say that you're making a
24:03
Speaker 2: purchase decision. Let's say you're buying a Let's do a
24:07
Speaker 2: couple different ones. Let's say you're buying a stick of gum.
24:12
Speaker 2: Do you care whether that Have you ever bought one stick?
24:16
Speaker 2: I want?
24:16
Speaker 5: I'm just gonna see if you were going to go
24:18
Speaker 5: with a hat. Maybe No, No, you're buying a stick
24:20
Speaker 5: of gum, one stick of I'm gonna ride this out.
24:24
Speaker 5: You're buying a stick of gum? Do you care whether
24:27
Speaker 5: it costs twenty five cents or twenty seven cents aside
24:30
Speaker 5: from needing exact change if you're paying that way, No,
24:33
Speaker 5: you don't, because ultimately it's not going to affect your
24:36
Speaker 5: life in any meaningful way, shape or form.
24:40
Speaker 2: True. If you are buying a car, how hard do
24:45
Speaker 2: you negotiate to get the price from twenty six thousand
24:48
Speaker 2: to twenty four thousand? Pretty hard, harder because that two
24:51
Speaker 2: thousand dollars is a much bigger deal. If you were
24:54
Speaker 2: buying one hundred million dollars worth of bonds for the
24:59
Speaker 2: next ten years, you are lending someone one hundred million
25:03
Speaker 2: dollars for the next ten years. How much do you
25:06
Speaker 2: care about whether the interest rate is three point four
25:09
Speaker 2: percent or three point six percent? Quite a bit, quite
25:12
Speaker 2: a bit. And this, my friends, is why having accurate
25:18
Speaker 2: or as accurate as you can get them, measures of
25:21
Speaker 2: things like unemployment and inflation matter. Let's say that I
25:27
Speaker 2: am an insurance company. I think the Lord each and
25:31
Speaker 2: every day that I'm not because I would just not
25:34
Speaker 2: want to be an animate object. I would and I
25:36
Speaker 2: like being animated. If I'm an insurance company that needs
25:41
Speaker 2: to go out and hedge liabilities over the next ten
25:43
Speaker 2: to twenty years, I gotta have a pretty good sense
25:46
Speaker 2: of how those liabilities are evolving in terms of the
25:50
Speaker 2: cost of them and the odds that I'm gonna have
25:52
Speaker 2: to pay out. Now, the odds that I'm gonna have
25:54
Speaker 2: to pay out, I'm gonna calculate those myself, but on hey,
25:59
Speaker 2: how much is this going to cost? I need a
26:01
Speaker 2: reliable way to figure out what my claims may look
26:04
Speaker 2: like down the road, And so if I can't trust
26:07
Speaker 2: published inflation statistics to be able to guide me in
26:10
Speaker 2: that fashion, I'm going to demand an additional premium above
26:14
Speaker 2: and beyond what the statistics are saying in order to
26:19
Speaker 2: make the purchase of the bonds that will ultimately hedge
26:21
Speaker 2: that risk for me. And so what I'm getting at
26:24
Speaker 2: is it comes.
26:25
Speaker 3: Down to the credibility of the United States system, which
26:28
Speaker 3: is the.
26:30
Speaker 2: If you can't trust the data, you're going to demand
26:33
Speaker 2: more of a premium for what you're paying to lend
26:36
Speaker 2: to the United States, and as such, interest rates move up. Yeah.
26:40
Speaker 3: Now, the good news is nobody's questioning the political credibility
26:45
Speaker 3: of this. Right in China, we question the credibility of
26:47
Speaker 3: the data for entirely different reason because it's manipulating, because
26:50
Speaker 3: they change it and manipulate, or they just get rid
26:53
Speaker 3: of it, or they just say, yeah, we don't like
26:55
Speaker 3: this data points. So we're no longer going to report
26:57
Speaker 3: on the unemployment rate of our youth. We don't have
27:01
Speaker 3: that issue. But anything that affects the credibility of what
27:06
Speaker 3: our system states about growth and inflation is an important
27:14
Speaker 3: hit to that credibility, and in and of itself wouldn't
27:17
Speaker 3: be a problem, but when compounded with other issues, could
27:19
Speaker 3: eventually become one. I don't I just don't know that
27:22
Speaker 3: this is a story that most are going to care about.
27:27
Speaker 2: I don't think most people need to think about this
27:31
Speaker 2: on a daily basis. No, and in fact they shouldn't.
27:34
Speaker 2: It's not good for your health to be us. But
27:38
Speaker 2: I do think everyone should care about this, Not because
27:43
Speaker 2: the government's always right and all you got, but trying
27:46
Speaker 2: to get data to be as accurate as possible is
27:50
Speaker 2: hugely important in being able to identify what problems may
27:54
Speaker 2: be popping up in the country and then being able
27:57
Speaker 2: to fix them before they become bigger ones. The whole reason,
27:59
Speaker 2: by the way, that we even have government published economic
28:02
Speaker 2: statistics is World War two. The reason that like the
28:08
Speaker 2: University of Michigan does all of its surveys and the
28:10
Speaker 2: BLS exists, it was to win the war effort. It
28:13
Speaker 2: was so that effectively FDR could be like, hey, what
28:17
Speaker 2: do we need, Like do we have enough people to
28:20
Speaker 2: be able to build the bombers and tanks and all
28:23
Speaker 2: this stuff that we need. How quickly are we producing that?
28:25
Speaker 2: How do we move the labor force around? How do
28:28
Speaker 2: we win the war? So that's why we have these today.
28:33
Speaker 2: You can make the case like, yeah, there is no
28:34
Speaker 2: World War two right now, so like you don't need
28:37
Speaker 2: it for that, but you still need to have a
28:39
Speaker 2: sense of what the problems are to be able to
28:41
Speaker 2: try to identify them and then fix them if needed. Again,
28:46
Speaker 2: if if all we did in twenty twenty two was
28:50
Speaker 2: walk around being like, man, stuff's more expensive. Can't tell
28:54
Speaker 2: you what and I can't tell you about how much?
28:57
Speaker 2: What would we do with that? Yeah, let's take a
28:59
Speaker 2: quick break. When we return, let's talk a little bit
29:03
Speaker 2: about Procter and Gamble and what they are doing right
29:06
Speaker 2: after this.
29:08
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29:15
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29:19
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29:22
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29:25
Speaker 1: This is the Financial Exchange Radio Network.
29:38
Speaker 2: Proctor and Gamble earlier today announced that they are going
29:41
Speaker 2: to be cutting seven thousand jobs, about fifteen percent of
29:44
Speaker 2: their non manufacturing workforce around the world over the next
29:49
Speaker 2: two years. They've got about one hundred and eight thousand
29:50
Speaker 2: total employees. But if you do the math that only
29:53
Speaker 2: about half of those work in the corporate offices, and
29:57
Speaker 2: so they are going to be the latest company embarking
30:01
Speaker 2: on a little bit of job cutting in order to
30:05
Speaker 2: try to maintain margins the best they can.
30:08
Speaker 3: Two years is a long timeline to be announcing job cuts.
30:12
Speaker 2: Right, Like you're just gonna have like the sword hanging
30:14
Speaker 2: over people's head for twenty four months. Like that's not
30:16
Speaker 2: really a positive work environment.
30:18
Speaker 3: It's miserable as a worker there, so like that is
30:22
Speaker 3: not fun to just have that, Yeah, constant threat of
30:25
Speaker 3: losing my job because my company announced that they're going
30:28
Speaker 3: to kill seven thousand jobs or fifteen percent of the jobs.
30:31
Speaker 3: But two Like, as an investor, what do I even
30:33
Speaker 3: do with that information? Okay, the workforce is going to
30:36
Speaker 3: be fifteen percent smaller two years from now, what is
30:41
Speaker 3: the profit impact on that in the short term? Negligible
30:45
Speaker 3: would be my guess.
30:47
Speaker 2: Yeah, I just I mean, I do put it in
30:49
Speaker 2: the basket of other layoffs.
30:50
Speaker 3: It's been announced, But rarely do we see what it was, like, Yeah,
30:52
Speaker 3: we're gonna do this over the next two years.
30:54
Speaker 2: Usually it's you know, over the next three.
30:55
Speaker 3: Months, we're going to be coming out with packages for
30:58
Speaker 3: our employees. Yeah, and you know, figuring out which jobs
31:02
Speaker 3: are cut, and that's that.
31:03
Speaker 2: I also just want to read one one paragraph here,
31:06
Speaker 2: just because this one got me when I saw it.
31:09
Speaker 2: P and G said it, staff cuts are part of
31:10
Speaker 2: a reorganization intended to create a better work structure with
31:13
Speaker 2: broader roles and smaller teams. The layoffs aren't for cost
31:17
Speaker 2: cutting purposes. The company said, well, what are they for then?
31:20
Speaker 1: Just cuz.
31:22
Speaker 2: What what does that even mean? They're not for cost
31:25
Speaker 2: cutting purposes? Why would you ever get rid of labor
31:29
Speaker 2: if it wasn't to cut your costs? That's literally the
31:34
Speaker 2: definition of what you're doing. You just employ a bunch
31:36
Speaker 2: of Karens that you really don't like.
31:38
Speaker 3: They're super productive and you pay them nothing, but god
31:42
Speaker 3: are they annoying?
31:43
Speaker 2: Like, what are we really doing here? Yeah, the layups
31:47
Speaker 2: aren't for cost cutting purposes? What so you just you
31:51
Speaker 2: don't like Bob anymore, so you're just gonna get rid
31:53
Speaker 2: of him and give his money to someone else.
31:55
Speaker 3: Yeah, somebody over there just really gets an endorphin high
31:58
Speaker 3: from laying people off.
32:00
Speaker 2: Better watch out, Steve's angry again.
32:03
Speaker 3: I'm just gonna come try to come up with silly
32:06
Speaker 3: reasons to fire people, and that's all I got.
32:10
Speaker 4: Summer in New England is nearly upon us. The kids
32:13
Speaker 4: are home from school almost I think the sun doesn't
32:17
Speaker 4: set until after eight, and it's likely time for you
32:20
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32:23
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33:18
Speaker 2: I thought this was kind of funny.
33:19
Speaker 3: I was down I was down there a few years
33:21
Speaker 3: ago and somebody I heard it overheard in a conversation.
33:24
Speaker 3: I wasn't participating in it, but it was a woman
33:26
Speaker 3: talking about how she's from the Massachusetts area and she
33:30
Speaker 3: used to spend you know, a week or two vacationing
33:33
Speaker 3: down on the Cape. And she's like, I can fly
33:36
Speaker 3: down here to the Virgin Islands in June or July,
33:40
Speaker 3: rent a property and save like thirty percent compared to
33:44
Speaker 3: renting a place on the Caper Islands these days, which
33:46
Speaker 3: I found it'd be kind of funny. It just in
33:49
Speaker 3: terms of the cost of vacationing here in New England
33:51
Speaker 3: during the summer.
33:52
Speaker 2: Speaking of which America's summer hotspots, wonder will the vacationers
33:57
Speaker 2: still come. This is a piece from the New New
34:00
Speaker 2: York Times, and I'll just read a couple of things here.
34:04
Speaker 2: Tim Cafferty, who owns a vacation rental business in North
34:06
Speaker 2: Carolina's After Banks. It's upbeat about the summer season, but
34:09
Speaker 2: also doing anything he can do to lure would be vacationers.
34:12
Speaker 2: His company, Outer Banks Blue ran a special promotion in March,
34:15
Speaker 2: offering a fifteen percent discount on bookings. He's encouraging property
34:18
Speaker 2: owners to drop their prices, and for the first time,
34:20
Speaker 2: he's allowing visitors to reserve many of the three hundred
34:23
Speaker 2: houses his company manages for just a few days instead
34:26
Speaker 2: of requiring them to stay a full week. All that
34:29
Speaker 2: has helped juice his sales, but there are still surprising vacancies.
34:33
Speaker 2: The week of fourth July, a highly coveted rental period,
34:36
Speaker 2: is very soft for some reason. And this messages with
34:39
Speaker 2: what I've been hearing from a number of vacation towns.
34:42
Speaker 2: And I don't know that it is, you know, one
34:46
Speaker 2: thing or the other. It's probably a combination of a
34:49
Speaker 2: number of different factors out there. ASTM international tourists still
34:56
Speaker 2: poo pooing the US and saying we're going to take
34:58
Speaker 2: our euros or Canadian dollars or Australian dollars elsewhere.
35:02
Speaker 3: Agreed, I also think those euros, Canadian dollars, and Australian
35:05
Speaker 3: dollars are not going as far in the United States
35:07
Speaker 3: as they did a few years ago that I agree
35:10
Speaker 3: they're going further?
35:10
Speaker 2: Are they going further? Weakening very recently but compared to
35:15
Speaker 2: last summer, it is yeah, okay, all right, fair enough,
35:17
Speaker 2: you know. Uh So I think that that's part of it.
35:20
Speaker 2: Part of it might be people just you know, generally
35:23
Speaker 2: concerned with where the economy might be going, saying, hey,
35:26
Speaker 2: we want to tighten our belts a little bit. You
35:28
Speaker 2: could be seeing some of that, yep. Uh. Some of
35:30
Speaker 2: it could be people who normally travel farther and saying, Okay,
35:33
Speaker 2: we don't want to go as far, and so we're
35:35
Speaker 2: just gonna, you know, stay close to home, and so
35:37
Speaker 2: maybe just not booking uh you know, the same you know,
35:41
Speaker 2: places they used to. Part of it could be people
35:44
Speaker 2: doing exactly what he describes here, saying, hey, last year
35:47
Speaker 2: we went away for a full week. We're gonna do
35:49
Speaker 2: three days this year, same spot, but not as long.
35:52
Speaker 3: All of which is culminating in seemingly to two factors here,
35:57
Speaker 3: foreigner is not willing to visit the US and Americans
36:00
Speaker 3: tightening the belt.
36:02
Speaker 2: Yeah. I think those are the two big ones.
36:03
Speaker 3: I always doubt a story or a narrative when I
36:06
Speaker 3: hear about consumers tightening their belts because rarely does it
36:09
Speaker 3: happen unless they lose their jobs.
36:10
Speaker 2: Here's the thing. I don't think in the aggregate there's
36:14
Speaker 2: a belt tightening and it's actually happening. There is one
36:18
Speaker 2: happening in travel because we see it delta in the
36:21
Speaker 2: airline data, we see it in the airbnb data, we
36:25
Speaker 2: see it in the hotel data. There is something happening
36:29
Speaker 2: in travel. Is that money being spent elsewhere? To this point, yes,
36:35
Speaker 2: water's finding its own level. So as an example, Hey,
36:39
Speaker 2: you know people are spending much less on air travel
36:43
Speaker 2: right now. Well, guess what in March and April they
36:46
Speaker 2: bought a bunch of cars. True, you know, that's true.
36:51
Speaker 2: So that's kind of what we're seeing. To this point
36:55
Speaker 2: where you start to wonder about you know, hey, is
36:57
Speaker 2: this going to be a longer term thing? Is if
37:00
Speaker 2: employment turns negative? Right, Because that's typically what stops Americans
37:04
Speaker 2: from spending, is when they lose a job. Yeah, and
37:07
Speaker 2: even then it doesn't necessarily stop them in some cases.
37:11
Speaker 3: So that always brings me back to that commercial from
37:13
Speaker 3: I want to say, like twenty ten with this happy
37:16
Speaker 3: dad mowing his law in the backyard, the kids running
37:18
Speaker 3: around by the pool, and it's like, I've got a pool,
37:21
Speaker 3: a great lawn, a you know, a nice house in
37:24
Speaker 3: a great community. How do I afford it? I'm in
37:26
Speaker 3: dead up to my eyeballs. I do remember that one
37:28
Speaker 3: great commercial, one of my all time favorite commercial. I
37:32
Speaker 3: don't even remember what it was for, but just a
37:34
Speaker 3: real solid commercial.
37:36
Speaker 2: I'm gonna see if I can find. Oh, it's the
37:40
Speaker 2: first thing that pops up on Duck Duck go. So
37:43
Speaker 2: lending tree. Oh god, see lending tree to make your
37:50
Speaker 2: problem worse. Well, so there's that. That's a dark turn. Yeah.
37:57
Speaker 2: I wasn't expecting uh to see that, you know, I
38:00
Speaker 2: was kind of expecting I mean, not bud Light, but
38:04
Speaker 2: like I was expecting, you know, something a little more innocent. Yeah,
38:10
Speaker 2: something not like, hey, consolidate all your debt with us,
38:13
Speaker 2: and you know your life will be better. Boy. Anyways,
38:17
Speaker 2: let's let's take a quick break right now, and we
38:21
Speaker 2: got a whole lot more coming up an hour two