Latest / Bloomberg Intelligence / Staffing CEO Sees Unemployment Maxing Out At 13-15%

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Staffing CEO Sees Unemployment Maxing Out At 13-15% · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa brahma Witz. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:18
Speaker 1: at Bloomberg dot com. Well, US pay rolls fell seven
0:22
Speaker 1: and one thousand in March, just extraordinary. The unemployment rate
0:26
Speaker 1: jumped to four point four percent, the highest level since
0:29
Speaker 1: two thousand seven teen. We had those jobs claims yesterday,
0:33
Speaker 1: six point six five millions of the jobs numbers. The
0:36
Speaker 1: uh employment situation in this country deteriorating just extraordinarily rapidly.
0:42
Speaker 1: To get a sense of kind of how bad it
0:44
Speaker 1: could get, we welcome Tom gimbal CEO of Global Staff
0:47
Speaker 1: and Company, Last Sound Network. So Tom, thanks so much
0:49
Speaker 1: for joining us. Let's start right there. How bad do
0:51
Speaker 1: you think this is going to get on the jobless front? Oh?
0:54
Speaker 1: I think it's going to get bad. But the numbers
0:56
Speaker 1: that the government reports aren't going to be that applicable
0:59
Speaker 1: because what you're going to see if you see the
1:01
Speaker 1: jobless claims come in at such a high number, then
1:04
Speaker 1: the unemployment claims come in and under a million. Hard
1:06
Speaker 1: to believe. I'm saying that's an optimistic thing. But then
1:09
Speaker 1: with the p p P program, you're going to see
1:12
Speaker 1: that the unemployment claims go down because these people that
1:15
Speaker 1: filed will be back on their employer's payroll for the
1:18
Speaker 1: companies that get that money. And then we'll see in
1:20
Speaker 1: a higher unemployment number when traditional non restaurant, non hospitality
1:25
Speaker 1: companies have to let people go and those people file.
1:28
Speaker 1: So I think the May and June numbers are going
1:30
Speaker 1: to be a lot different than than what we're seeing,
1:32
Speaker 1: and it's really not maccurate read on what's going on. Tom.
1:35
Speaker 1: I think that everyone agrees on that nobody kind of
1:38
Speaker 1: put too much faith into the actual number. However, they
1:41
Speaker 1: did try to dig in to get some signs of
1:43
Speaker 1: how the economy was doing before the real shutdown began
1:47
Speaker 1: in the United States. I was really looking forward to
1:49
Speaker 1: speaking with you, in particular, because you've been particularly optimistic
1:52
Speaker 1: about a lot of some of the dark clouds for
1:55
Speaker 1: a long time, and I'm wondering, based on the fact
1:58
Speaker 1: that we saw companies freeze high airing before even the
2:02
Speaker 1: US economy shut down in Earnest and the true pain began.
2:06
Speaker 1: Are you revising some of it optimism? Well, I mean
2:10
Speaker 1: this is gonna go. Yes, my My whole perspective has
2:13
Speaker 1: changed immensely based on this. And I think we're gonna
2:15
Speaker 1: be in a in a bad place economically for probably
2:19
Speaker 1: longer than a lot of economists are saying. Is from
2:22
Speaker 1: what I'm seeing and and and what I believe to
2:24
Speaker 1: have happened. Now, what I think was going on with
2:26
Speaker 1: some companies prior to the shutdown was there's always a
2:29
Speaker 1: little bit of paranoia of are we in the last
2:31
Speaker 1: innings of the ballgame? And that was coming on. And
2:34
Speaker 1: there was also the fear that while it hadn't hit
2:36
Speaker 1: America before the shutdown, we had seen what was going
2:39
Speaker 1: on in China, and there was some precursor to that.
2:42
Speaker 1: So there were some bigger companies that really saw a
2:44
Speaker 1: little bit of the writing on the wall and started
2:47
Speaker 1: to prepare for it. But I was extremely bullish. Most
2:49
Speaker 1: of the companies I talked to, their first quarter numbers
2:51
Speaker 1: were really really good in going into March, and so
2:55
Speaker 1: now but with this, we're going to see an extended period.
2:58
Speaker 1: What's really going to happen that I'm quite certain of
3:00
Speaker 1: is a cash crunch coming in Q three and maybe
3:03
Speaker 1: even into Q four. So companies that are still spending
3:06
Speaker 1: right now to an extent, they're not going to be
3:08
Speaker 1: paying these bills for three, four or five six months,
3:11
Speaker 1: and that's gonna hurt some small and medium sized companies.
3:14
Speaker 1: So tom just thinking a little bit forward, where do
3:16
Speaker 1: you think unemployment rate, the real unemployment right in this
3:19
Speaker 1: country will will go over the next couple of quarters.
3:23
Speaker 1: I think there's no doubt that it will be double digits.
3:24
Speaker 1: The question is going to hold at fifteen percent, twelve percent,
3:28
Speaker 1: or is it going to get to twenty I think
3:30
Speaker 1: the estimates oft are very high and a little bit
3:33
Speaker 1: the sky is falling. I don't see that happening from
3:36
Speaker 1: what we've seen in China, that the rebounding of that,
3:40
Speaker 1: and then while spending may not come back as fast
3:42
Speaker 1: as we like, the consumer programs that we've set up
3:47
Speaker 1: the government has with PPP and the rebate checks, I
3:50
Speaker 1: think that it will come back and I think it
3:52
Speaker 1: maxes out probably around thirteen to fifteen. Tommy said that
3:56
Speaker 1: you thought that the pain would be felt for a
3:59
Speaker 1: lot longer than many economists even think how long will
4:02
Speaker 1: it take? Now? My guess is that we're looking I mean,
4:05
Speaker 1: for a real ian think about this. In two thousand nineteen,
4:08
Speaker 1: there were people saying we were still in a recovery
4:11
Speaker 1: from two thousand and eight. So this is while it's
4:15
Speaker 1: it's much faster and everything's happening at once, so there's
4:18
Speaker 1: a belief that it will come back faster. My guess
4:21
Speaker 1: is we're looking at at late early where it really
4:25
Speaker 1: feels que quote unquote normal from from a standpoint of
4:29
Speaker 1: hotels and travel and restaurants and and then and and
4:32
Speaker 1: traditional corporations hiring, it's going to be a little bit
4:35
Speaker 1: of a of a long sladre. So Tom, give us
4:38
Speaker 1: a sense of kind of we've seen obviously from some
4:40
Speaker 1: of the restaurant industries, some of the travel industries. Where
4:43
Speaker 1: do you think the next industries that are going to
4:44
Speaker 1: be at risk for significant job losses? Well, my my
4:49
Speaker 1: take on that is is you really don't know. However,
4:53
Speaker 1: what I think is going to start happening is and
4:56
Speaker 1: this will be an interesting thing to see through the
4:58
Speaker 1: big payroll companies, the a DP in the paychecks because
5:01
Speaker 1: as companies lay people off. They're not processing payroll for
5:05
Speaker 1: the same numbers, and the way payroll companies get paid
5:08
Speaker 1: on their traditional lines of businesses how many checks they
5:11
Speaker 1: processed a period. So as those numbers dip, you'll see
5:14
Speaker 1: that it's starting to affect the technology and software companies.
5:17
Speaker 1: And then you have software user licenses like a sales
5:22
Speaker 1: Force or linked In, And these companies, while huge and
5:25
Speaker 1: can withstand a setback in the economy, they get paid
5:28
Speaker 1: on a per user license and there's contracts the companies signed.
5:32
Speaker 1: But if you start to see that employee companies layoff employees,
5:36
Speaker 1: anything that's build out to their vendors on a per
5:39
Speaker 1: user basis, like software like payroll, you're gonna see those
5:43
Speaker 1: get hit as well. So I think it's going to
5:45
Speaker 1: come into areas that a lot of people aren't even
5:46
Speaker 1: talking about yet. Tom Gimble, thank you so much for
5:49
Speaker 1: being with us, and I hope you do come back
5:51
Speaker 1: and give us a sense of the progress being made
5:54
Speaker 1: and instr update us on your views. Tom Gimble is
5:56
Speaker 1: chief executive officer of the global staff and company Lascell Network. Paul,
6:02
Speaker 1: a mystery listener, made a suggestion to me recently, um
6:06
Speaker 1: that we have a dad joke of the day and
6:09
Speaker 1: that during this period of time, everybody needs a little
6:11
Speaker 1: bit of levity, and he had a suggestion for one.
6:14
Speaker 1: So we're gonna start this, and it is why can't
6:17
Speaker 1: a nose be twelve inches long? Why? Because then it
6:22
Speaker 1: would be a foot Okay, So if you think you
6:25
Speaker 1: could do better, if you let's start this though, And
6:30
Speaker 1: if anyone wants to write in suggestions, you can. You
6:32
Speaker 1: can email me l Abramoids at Bloomberg dot net. Um,
6:37
Speaker 1: and let's do this. Let's have a dad joke of
6:39
Speaker 1: the day throughout this whole period because everybody kind of
6:43
Speaker 1: needs a little bit of a break because it's only
6:45
Speaker 1: going to get worse when we look at the numbers
6:47
Speaker 1: and there's a lot of gloom and doom and Lisa
6:49
Speaker 1: Bromoids along with Paul Sweeney and this is Bloomberg Markets.
6:56
Speaker 1: While we keep hearing reports about how the hospitals are
6:59
Speaker 1: completely over whelmed, nurses and doctors working around the clock,
7:03
Speaker 1: having to buy all this additional equipment, having to pay
7:06
Speaker 1: for hundreds of thousands of new patients coming through their
7:10
Speaker 1: doors for extensive hospital stays, unventilators, all very high cost,
7:15
Speaker 1: and there's a question who's going to pay for it? Donathan.
7:18
Speaker 1: Dr Jonathan Grouper as a professor of economics at the
7:21
Speaker 1: Massachusetts Institute of Technology. He was one of the key
7:24
Speaker 1: architects of Obamacare and Romney Care, and he joins us
7:28
Speaker 1: now from Cambridge, Massachusetts. Dr Grouper, thank you so much
7:32
Speaker 1: for being with us. How big of a cost do
7:36
Speaker 1: you expect this to be for the health care system?
7:39
Speaker 1: Do we have any ballpark figures at all? Yeah, it's
7:43
Speaker 1: it's a great question. So there's sort of two ways
7:45
Speaker 1: to think about it. One way is how big is
7:48
Speaker 1: the cost of COVID nineteen And here I've seen estimates
7:51
Speaker 1: ranging from a hundred billion to five hundred billion. Uh,
7:55
Speaker 1: A hundred billion would be fairly manageably absorbed, five billion
7:59
Speaker 1: would not um But that's not really the right number.
8:03
Speaker 1: The right number is what is the net effect, which
8:06
Speaker 1: accounts the factor losing a lot of other business. So
8:09
Speaker 1: there's a lot of of places that are a lot
8:12
Speaker 1: of services aren't being delivered, in particular elective surgery. So
8:15
Speaker 1: figuring out the effect and healthcare sector has actually been
8:17
Speaker 1: complicated because on the there's being scissored. On the one hand,
8:20
Speaker 1: there to increased demand for this COVID nineteen services. That's
8:23
Speaker 1: gonna cost a lot of money. On the other hand,
8:26
Speaker 1: they are being um, they're losing all their sort of
8:29
Speaker 1: elective surgery business. So professor Okay, So a hundred billions
8:34
Speaker 1: to who at the end of the day pays for that,
8:37
Speaker 1: is that part of some federal fiscal stimulus that goes
8:41
Speaker 1: to the healthcare system directly? Uh No, A lot of
8:45
Speaker 1: it's gonna be private insurers. Um So, basically, once again,
8:48
Speaker 1: the scissors is exactly the opposite for private insurers. So
8:52
Speaker 1: to the extent that um, the elective surgery that doesn't
8:56
Speaker 1: happen never happens, then that hurts providers, but help private insurers.
9:01
Speaker 1: To the extent that there's more COVID nineteen cases, most
9:04
Speaker 1: of those people will have private insurance, and so that
9:07
Speaker 1: hurts private insurers. That helps the writers because they're not
9:09
Speaker 1: getting paid for that. Um So, I think really a
9:13
Speaker 1: lot of the costs are going to come from government
9:15
Speaker 1: and government through the Medicare and Medicaid program, but really
9:18
Speaker 1: private insurers with the primary payer. And then finally we
9:21
Speaker 1: have the uninsured rapidly increasing number with the huge job
9:25
Speaker 1: lost numbers we've seen and they're the questions who's gonna
9:28
Speaker 1: pay for them? And we haven't resolved that yet. Well,
9:30
Speaker 1: and I'm wondering, do we have a sense of how
9:32
Speaker 1: organized the effort is to try to coordinate payments and
9:36
Speaker 1: not necessarily create a complete mess of bills and and
9:41
Speaker 1: and bankruptcies personal bankruptcies is people try to grapple with
9:45
Speaker 1: the new reality after a visit to the hospital here,
9:48
Speaker 1: you know, I I think there's a huge issue, and
9:51
Speaker 1: there's a huge coordination issue, because remember a lot of
9:54
Speaker 1: our private health insurance is built around restricted networks, and
9:57
Speaker 1: the last thing you want to do is restrict where
9:59
Speaker 1: someone can go. You at them to go to the
10:00
Speaker 1: hospital has a space for him. Then you've got the
10:03
Speaker 1: fact that many people have high cost sharing deductibles and
10:06
Speaker 1: things where they haven't spent much health care yet this year,
10:09
Speaker 1: so they're gonna hit with their full deductibles. And then
10:11
Speaker 1: you've got the fact that many americ twenty million Americans
10:14
Speaker 1: and growing are uninsured. So I I think we have
10:17
Speaker 1: a big problem. I think the federal government hasn't taken
10:19
Speaker 1: very seriously as far as I can tell um, when
10:22
Speaker 1: they've been pushed on it, they've just said, well, we'll
10:24
Speaker 1: just divert. The latest is President Trump's announceds can divert
10:28
Speaker 1: some of the hundred billion dollar fund for hospitals into
10:30
Speaker 1: helping care for the uninsured, which is the last thing
10:32
Speaker 1: we need because the hospitals need that money. So I
10:36
Speaker 1: I think we need, we we urgently need much more
10:38
Speaker 1: action on dealing with these uncovered healthcare costs. So does
10:42
Speaker 1: that bring back some type of Afformable Care Act? Do
10:44
Speaker 1: you believe you think there's political will there for that? Well?
10:47
Speaker 1: I think you know, the Affordable Care Act was actually
10:49
Speaker 1: designed for situations like this. Remember the whole idea is
10:53
Speaker 1: that are you know, our reliance and employer sponsored insurance
10:56
Speaker 1: is a little fragile to situations like this. Unfortunately, the
11:00
Speaker 1: Affordable Careacter set up exchanges that people will be able
11:02
Speaker 1: to go to if they lose their jobs. And so
11:05
Speaker 1: I I think we're well prepared for that. UM in
11:08
Speaker 1: terms of having this exchange, that should make people appreciate
11:11
Speaker 1: the fact Affordable Care Act is there. Uh. That said, um,
11:15
Speaker 1: many people uh still can't afford insurance on the exchanges,
11:18
Speaker 1: so we're gonna have to think what we're gonna do
11:19
Speaker 1: for them. UM. And many people also if they have
11:23
Speaker 1: UM private insurance. UM, they might not want to go
11:26
Speaker 1: in exchange insurance. They wan't want to keep their employer insurance.
11:29
Speaker 1: They can do so buying buying COBRA, but that's quite expensive.
11:33
Speaker 1: Dr Gruber, if if you would, can we walk through
11:35
Speaker 1: a scenario in which the exchanges aren't reopened and Obamacare
11:40
Speaker 1: is not expanded, and there is no sort of redux
11:44
Speaker 1: in with respect to widening of the of the healthcare
11:48
Speaker 1: safety net. What happens, especially to the hospitals. If you
11:52
Speaker 1: have an increase in uninsured of newly laid off people
11:55
Speaker 1: without their their corporate insurance coming to emergency rooms for
11:59
Speaker 1: prime care, what is that due to the hospitals. Okay,
12:03
Speaker 1: so so let's let's let's be clear about this. So
12:06
Speaker 1: when we talk about the a c A did, there's
12:08
Speaker 1: two pieces. There's the Medicaid expansions, which means that everyone
12:11
Speaker 1: losing their job in thirty and thirty five states, everyone
12:14
Speaker 1: losing their job who's falling to be very poor will
12:17
Speaker 1: have free public coverage, and the other states they're totally
12:20
Speaker 1: out of luck, unfortunately. So one thing we can do
12:22
Speaker 1: is we can try to get those or calciern states
12:25
Speaker 1: to actually serve the interests of their residents rather than
12:28
Speaker 1: nasty politics, and actually span their Medicaid programs. In terms
12:31
Speaker 1: of the exchanges, there's no issue of reopening the exchanges.
12:34
Speaker 1: The exchanges actually have a provision that if you lose
12:37
Speaker 1: your job, you can sign up, So this is there's
12:41
Speaker 1: a bit of this kind of idea of a special
12:43
Speaker 1: Roman peer is a bit of a red herring. Um
12:45
Speaker 1: for people who lose their job, that's called the qualifying event,
12:48
Speaker 1: they can always sign up for the exchanges. So the
12:50
Speaker 1: exchanges are there for people. Um that said, um, you
12:55
Speaker 1: know states that haven't expanded Medicaid and people who don't
12:58
Speaker 1: go on the exchanges will be insured. And we're going
13:01
Speaker 1: to have to deal with the fact that hospitals are
13:04
Speaker 1: going to have to are going to be unable to
13:05
Speaker 1: eat those bills, and so part of part of the
13:08
Speaker 1: Hospital Bailout Fund is designing to help with that. But
13:11
Speaker 1: it's not enough money, and we're going to have to
13:13
Speaker 1: really have a new initiative either expanding access to these
13:17
Speaker 1: exchanges for people, or you could all think about a
13:21
Speaker 1: federal uncompensated care pool of the nature of the type
13:24
Speaker 1: that other states that some states have, where we basically
13:27
Speaker 1: absorb the uncompensated care costs of hospitals for COVID nineteen patients.
13:31
Speaker 1: We're gonna need some kind of initiative of that type.
13:34
Speaker 1: Jonathan Gruber, thank you so much for joining us and
13:36
Speaker 1: giving us that color on the health care system is
13:38
Speaker 1: that it grapples with the coronavirus. Jonathan Gruber, Professor of
13:41
Speaker 1: Economics at m I T just really interesting stuff. Least,
13:45
Speaker 1: it's a big issue, I gotta say, Paul. I mean,
13:48
Speaker 1: I'm struck by all of these needs, and they're all
13:51
Speaker 1: so important, and they're all so expensive, and really my
13:54
Speaker 1: question is just going forward, how all of these different
13:57
Speaker 1: needs are going to be prioritized at a time of
14:00
Speaker 1: crisis and when there isn't necessarily the economic growth to
14:03
Speaker 1: back it. Yep, and the states are dealing with at
14:06
Speaker 1: the federal government's dealing with it, and individuals are dealing
14:08
Speaker 1: with it. We've been listening to Governor Andrew Cuomo of
14:16
Speaker 1: New York talking about the latest from New York State,
14:19
Speaker 1: which is the epicenter with the number of cases crossing
14:23
Speaker 1: the one hundred thousand level. He talked about the dire
14:28
Speaker 1: shortage of equipment and the need for it and the
14:31
Speaker 1: idea that the state will take ventilators and other gear
14:35
Speaker 1: from businesses that do not need it right now, they
14:38
Speaker 1: will either return it or compensate those businesses for those
14:43
Speaker 1: items later. Also, he was talking about the apex coming
14:47
Speaker 1: very quickly and how all the hospitals here are now
14:50
Speaker 1: essentially COVID nineteen hospitals and that the jab At Center
14:54
Speaker 1: was going to be entirely a COVID nineteen facility. As
14:58
Speaker 1: the US tries to battle the epicenter of the crisis,
15:02
Speaker 1: which is at the moment in New York, saying that
15:06
Speaker 1: people are getting together volunteering, that there are hundreds of
15:10
Speaker 1: healthcare professionals coming to the city to volunteer their efforts
15:14
Speaker 1: in the city. New York City is uh the predominant
15:17
Speaker 1: majority of the cases currently. Paul really really dire situation
15:23
Speaker 1: that he talks about four healthcare workers in the hospitals
15:26
Speaker 1: and UH and laying it out is he becomes sort
15:29
Speaker 1: of the spokesman for the crisis right now in the
15:32
Speaker 1: United States. He really has been his UH these daily
15:35
Speaker 1: briefings that we can kind of must listen to, must watch,
15:38
Speaker 1: uh kind of to get information to get a sense
15:41
Speaker 1: of how this is really playing out uh down on
15:44
Speaker 1: the front lines and talking about an interesting concept Lisa
15:47
Speaker 1: about you know, we need the equipment. We being New
15:49
Speaker 1: York State, need the equipment now when we're done with it,
15:51
Speaker 1: and we will be done with it, but probably first
15:54
Speaker 1: uh then we will deploy redeploy the resources, including personnel
15:58
Speaker 1: to other parts of the country. So interesting concept about
16:00
Speaker 1: a national response. Yeah, and a real focus on equipment
16:04
Speaker 1: and making equipment. Telling even small businesses, if you could
16:07
Speaker 1: have cloth and put the strings on the sides, you
16:10
Speaker 1: can make a mask, you can make some medical gear.
16:13
Speaker 1: Do it. We will compensate you for it is a
16:15
Speaker 1: business opportunity, and you would think it was a business
16:17
Speaker 1: opportunity for three M, one of the biggest manufacturers of
16:21
Speaker 1: a lot of items, including things like face masks, and
16:25
Speaker 1: yet there has been controversy over their efforts. I want
16:28
Speaker 1: to bring in Karen evil Heart, who covers all things
16:30
Speaker 1: industrials for us at Bloomberg Intelligence. Karen, can you just
16:33
Speaker 1: lay out what the controversy is around this company? Uh?
16:38
Speaker 1: You know, um the president is saying that a they
16:42
Speaker 1: didn't UM, they dragged defeat in ramping up production. Number two,
16:46
Speaker 1: they're sending UM product to other countries and three that
16:51
Speaker 1: they're not doing enough to fight the price gouging that's
16:53
Speaker 1: going on in the in the personal youth market market. UM.
16:57
Speaker 1: And UH number one, they've doubled production in UM since
17:02
Speaker 1: since January. In the US UM production they're doubling it
17:06
Speaker 1: again UM over the next several months. UM. One of
17:09
Speaker 1: the problems is a lot of this production doesn't The
17:13
Speaker 1: masks aren't not that many are made here. UM. A
17:16
Speaker 1: lot of them are made overseas, and a lot of
17:18
Speaker 1: the countries have been holding the masks for themselves. UM.
17:22
Speaker 1: You know, honney Well barely makes any masks in the US.
17:25
Speaker 1: They largely import everything. Um G three M makes about
17:30
Speaker 1: a third of their masks here, but it's not enough.
17:33
Speaker 1: So it's uh, you know, it's hard to say. And
17:36
Speaker 1: on the price gouging, they have stepped in front of
17:38
Speaker 1: that and they've been, UM, you know, trying to fight that.
17:41
Speaker 1: Who knows if they did it quickly enough, It's hard
17:42
Speaker 1: to know. So, Karen, I mean, is there an opportunity,
17:46
Speaker 1: Is there an ability from some of these companies, these
17:49
Speaker 1: manufacturers like three M to significantly ramp up production and
17:54
Speaker 1: really make a difference in the near terms. Governor Cuomo
17:58
Speaker 1: so earnestly, you know, asked for I think collectively, Um,
18:03
Speaker 1: it could matter like um, honeywell, just now repurpose the
18:07
Speaker 1: plant in Phoenix to make some masks in the US,
18:09
Speaker 1: because most of them don't come from here. But it
18:12
Speaker 1: cannot happen overnight. And there's a supply chain impact as well.
18:15
Speaker 1: There's there's shortages of certain products, parts that go into
18:19
Speaker 1: the production of these masks and the productions of the ventilators.
18:22
Speaker 1: I mean I I read an article where Phillips that
18:24
Speaker 1: it's six hundred and fifty parts go in components go
18:28
Speaker 1: into ventilators, which is more sophisticated than the respiraries. But nonetheless,
18:32
Speaker 1: that's a lot of parts to round up and round
18:34
Speaker 1: up overnight. You know, companies typically take time to ramp
18:38
Speaker 1: up um and everybody scrambling to get up as quickly
18:40
Speaker 1: as possible. But it cannot happen over and that's the issue.
18:44
Speaker 1: I would think though that with the masks it would
18:47
Speaker 1: be a lot easier or why can't there be a
18:49
Speaker 1: more domestic supply chain if there is an issue of
18:52
Speaker 1: importing some of the parts, Well, they do have to
18:56
Speaker 1: they do have to reprioritize a lot, but a lot
18:58
Speaker 1: of you know a lot of componentry for a lot
19:00
Speaker 1: of things like I cover h VAC, A lot of
19:02
Speaker 1: the componentry comes from someplace else. Um, we have really
19:06
Speaker 1: I don't want to say decimated are our domestic supply chain,
19:09
Speaker 1: but we certainly shrunk it. And I think people started
19:11
Speaker 1: with the tariffs. We've seen companies, um change, you know,
19:15
Speaker 1: make alterations in their supply chaine to have more products locally.
19:18
Speaker 1: But that is a structural change that takes time. Um.
19:21
Speaker 1: You know, Um they three and the other thing is
19:24
Speaker 1: three M said of their masks. So went to industrial
19:29
Speaker 1: and the reason is that, you know, they have all
19:32
Speaker 1: these requirements, health requirements and social requirements. You could not
19:36
Speaker 1: use industrial mass, which was the US production for health
19:40
Speaker 1: care use now you can. They there was a monthorization
19:43
Speaker 1: that allowed them to do that, but only ten percent
19:45
Speaker 1: on what they made here went into healthcare. So you
19:47
Speaker 1: ten percent of sixteen million is not even enough for
19:51
Speaker 1: you know, two weeks in New York. So, um, it
19:54
Speaker 1: will happen. It is happening. It can't happen overnight. And
19:57
Speaker 1: now that they will have all the supply chain prior
20:00
Speaker 1: ties towards them. And you know, um, which is another
20:02
Speaker 1: step that the government is taking that anything in the
20:05
Speaker 1: supply chain is also going to be under the d
20:07
Speaker 1: p A so that all the need so that more
20:09
Speaker 1: of the needed componentry, etcetera. UM, and a lot of
20:12
Speaker 1: it's like chemical you know, like polypropyline stuff like that
20:15
Speaker 1: can get to the manufacturers of these masks very quickly.
20:19
Speaker 1: I kind of note that hunt Well isn't getting that
20:21
Speaker 1: banged at all and honeywell does we produced many here? So? UM,
20:26
Speaker 1: just so, how how is how is three M responded
20:29
Speaker 1: to some of the attacks from the administration. Well, you know,
20:34
Speaker 1: I know this management micro Roman is a pretty you know,
20:37
Speaker 1: even level headed guy, much more low key than the
20:41
Speaker 1: prior CEO. But he's come out as well as he
20:44
Speaker 1: can swinging and you know, if you hear some of
20:47
Speaker 1: his commentary, you know it's worded very diplomatically in the releases,
20:51
Speaker 1: but you know, on on TV today said the claims
20:54
Speaker 1: are completely false. Um, that we're not doing enough. We're
20:58
Speaker 1: killing ourselves to get this production up and the ray
21:00
Speaker 1: scouching thing. We've been very vocal on how we're trying
21:02
Speaker 1: to fight that. UM. But a lot of the distribution.
21:04
Speaker 1: A lot of the masks go through distribution, particularly industrial
21:08
Speaker 1: masks go to distribution and then they can go anywhere.
21:11
Speaker 1: So they have to take control of that so that
21:14
Speaker 1: everything that comes from them, they know where it's going.
21:16
Speaker 1: You can't just go to a distributor at this point,
21:18
Speaker 1: and all of it's being reallocated to healthcare. Anyway, the
21:20
Speaker 1: distribution was largely the distribution part was through the industrial chain,
21:24
Speaker 1: and a lot of that's being re jittered to go
21:26
Speaker 1: to healthcare. So, I mean, he's pushing back, and you
21:29
Speaker 1: know there are costs and benefits of doing that, you know,
21:32
Speaker 1: So maybe because Honeywell is laying low, you know, they're
21:35
Speaker 1: being left alone. I don't know. Count ubal Heart, thanks
21:38
Speaker 1: so much for joining us. We appreciate that, Count ubal Heart.
21:41
Speaker 1: She covers all things industrials for Bloomberg Intelligence, the research
21:45
Speaker 1: arm of UH Bloomberg and looking at three M right
21:47
Speaker 1: now in the stock is down about two point two today,
21:50
Speaker 1: down about a year to date, so uh, interesting time
21:54
Speaker 1: for a lot of these companies. Say they try to scramble, Lisa,
21:57
Speaker 1: and it doesn't help to get pressure from book, pressure
22:01
Speaker 1: from the president via Twitter. So but we'll see companies
22:05
Speaker 1: kind of revamping, rejiggering, trying to react as aggressively as
22:08
Speaker 1: they can, and then include some of those industrial companies
22:11
Speaker 1: like three M and Honeywell that Karent just mentioned. I'm
22:16
Speaker 1: so pleased to say we're joined by Tim O'Brien, a
22:19
Speaker 1: senior columnist for Bloomberg Opinion, joining us after a hiatus.
22:23
Speaker 1: Thank you so much for being with us. Tam, you
22:25
Speaker 1: wrote a column but I thought was fascinating looking at
22:28
Speaker 1: the fate of small businesses following the coronavirus shutdowns, a
22:33
Speaker 1: pretty dismal assessment. Why do you think so many small
22:36
Speaker 1: businesses don't have a chance of coming back after this
22:40
Speaker 1: whole thing is over. Well, you know, you know the
22:43
Speaker 1: stimulus plan right now, Lisa essentially envisions getting them across
22:49
Speaker 1: a bridge for the next two months or so. It's
22:52
Speaker 1: a meaningful amount of money. You know, it's a two
22:54
Speaker 1: trillion dollar package. Billion of it is four small businesses.
22:59
Speaker 1: Small businesses employ the lion's share of American workers. Uh.
23:04
Speaker 1: You know, they contribute a huge portion uh to annual GDP,
23:09
Speaker 1: nearly half um. But the reality is as as mammoth
23:14
Speaker 1: as this bill is and as well intentioned as this
23:17
Speaker 1: aid is it may end up being just a gigantic
23:21
Speaker 1: band aid. And I think the things that small businesses,
23:25
Speaker 1: policymakers and Americans have to come to terms with is
23:29
Speaker 1: this is probably just phase one, and you know, is
23:34
Speaker 1: it being engineered regardless of that in a way that
23:37
Speaker 1: actually puts small businesses on their feet for the long term.
23:42
Speaker 1: So I think that's the first issue. The second issue
23:44
Speaker 1: is how's it going to be administered? And there's already
23:47
Speaker 1: a lot of signs that the Treasury Department has not
23:50
Speaker 1: given banks clear signals for the standards around uh, lending
23:55
Speaker 1: the money out and handling applications. The banks are complaining
23:58
Speaker 1: about it. Small bisusinesses are already wary of it, and
24:02
Speaker 1: it could end up being a bit of a train
24:05
Speaker 1: wreck if it's not managed well. All right, So Timson, again,
24:09
Speaker 1: what are the They're key issues is to get capital
24:12
Speaker 1: into some of these small businesses. How much how much
24:15
Speaker 1: you know reserves does a typical small business have it?
24:18
Speaker 1: I just don't think it's that much. It is not
24:21
Speaker 1: even Paul. You know, even in the best of times,
24:24
Speaker 1: running a small business is a perilous endeavor. Uh they
24:28
Speaker 1: you know, the failure rate is always high because small
24:30
Speaker 1: business are risky. But even for established small businesses that
24:34
Speaker 1: have been in in business for a while, they rarely
24:37
Speaker 1: have enough cash on hand to cover more than a
24:40
Speaker 1: few months of payroll and operating expenses. Payroll is usually
24:44
Speaker 1: the biggest piece, which is why a large portion of
24:48
Speaker 1: this of this three fifty billion is targeted at payroll costs. UM.
24:53
Speaker 1: So you know, it's it's going to be extremely tricky
24:58
Speaker 1: and uh, and we'll have to give it a little
25:01
Speaker 1: time to roll out. But Steve Manuchin this week touted
25:05
Speaker 1: UM the launch of the program today to help small businesses,
25:08
Speaker 1: which is today UM. And there's again already signs that
25:13
Speaker 1: it's hard to get this, you know, the blood flowing
25:15
Speaker 1: around this. We have to give it a little time
25:17
Speaker 1: to wait and see. But it's you know, it's going
25:20
Speaker 1: to be tricky and and the thing about small businesses
25:22
Speaker 1: too is that they're very tied up in people's hopes
25:26
Speaker 1: and dreams. Small business owners, you know, run companies in
25:30
Speaker 1: all of our towns. They give a lot of character
25:32
Speaker 1: and flavor to the life of a town, and and
25:35
Speaker 1: they tend to very deeply personal connections to their business.
25:38
Speaker 1: And the poignant and sort of tragic piece of all this.
25:41
Speaker 1: Beyond the economic impact, is the loss of all those
25:44
Speaker 1: hopes and dreams too, Tim. I have to wonder, you know,
25:47
Speaker 1: there is sort of the program, and we have heard
25:49
Speaker 1: about the unclarity around exactly the interest rate and how
25:54
Speaker 1: banks are exactly going to make these eligible for a
25:57
Speaker 1: guarantee by the government. There are all sorts of question
26:00
Speaker 1: in the rollout of this. But putting that aside, there
26:02
Speaker 1: also is the question of the transformation in the economy
26:05
Speaker 1: stemming from the coronavirus. Is effect move towards Amazon in particular,
26:10
Speaker 1: and I'm wondering how much that will accelerate this beyond
26:14
Speaker 1: any kind of financial program that the that Congress could pass.
26:19
Speaker 1: That's a fantastic question. You know. Uh. President Trump is
26:22
Speaker 1: referring to himselves as a wartime president. There's been a
26:25
Speaker 1: lot of talk about this whole event, the financial and
26:28
Speaker 1: public health, the epic sides of all this. That this
26:32
Speaker 1: is a like a you know, a wartime moment, and
26:36
Speaker 1: we know historically that that society changes immensely before and
26:41
Speaker 1: after any wars. It happened before and after World War
26:44
Speaker 1: One and World War Two. I think the thing you're
26:46
Speaker 1: hitting your finger on right now is UM, I don't
26:51
Speaker 1: see how inevitably digital commerce and and distance commerce UH
26:57
Speaker 1: don't come out of this even more triumph and than
27:00
Speaker 1: they were before the virus took off. Brick and mortar
27:05
Speaker 1: retailers were having longstanding troubles competing. You know, Macy's UH
27:11
Speaker 1: furloughed a hundred and thirty thousand, the majority of a
27:13
Speaker 1: hundred of its hundred and thirty thousand workers earlier this
27:16
Speaker 1: week because they're having had had trouble competing before the virus,
27:21
Speaker 1: and they may never really be competitive again. So I
27:23
Speaker 1: do think you're going to see this epic transformation in
27:26
Speaker 1: the way that business is conducted and how consumers interact
27:30
Speaker 1: with businesses. Hey, Tim, thanks so much for joining us.
27:33
Speaker 1: We really appreciate you coming on the program. Good to
27:36
Speaker 1: have you back. Tim O'Brien, senior columnists for Bloomberg Opinion,
27:41
Speaker 1: in his column three fifty billion dollars won't save us
27:44
Speaker 1: small businesses, suggesting LI so that UH it perhaps needs
27:49
Speaker 1: to be even more, needs to be more direct, but
27:52
Speaker 1: even that small businesses unfortunately are going to be in
27:56
Speaker 1: for a very tough road ahead over the next several months.
27:59
Speaker 1: Are that with the initial claims that we got yesterday.
28:02
Speaker 1: I mean, we'll only see more of it, right, but
28:05
Speaker 1: we got a sense that basically, if you can't keep
28:07
Speaker 1: the lights on, then you fold. And there isn't much
28:11
Speaker 1: by way of resources to keep things going or diversification.
28:15
Speaker 1: And the question is, just from my perspective, how quickly
28:18
Speaker 1: can things get ramped up and will they ever return?
28:21
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
28:23
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
28:26
Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm
28:29
Speaker 1: on Twitter at pt Sweeney. I'm Lisa Abram Woods. I'm
28:32
Speaker 1: on Twitter at Lisa Abram woyds one. Before the podcast,
28:34
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio