This is Bloomberg Business Wait Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news the Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Well, as we mentioned earlier, the US job market remains resilient, to say the least. Job growth in April broad based, reflecting gains and healthcare, professional and business services, as well as leisure and hospitality. We're going to talk a little bit more about leisure and hospitality later on with the CEO of Trevago. Keep in mind, though the two prior months apparels were revised lower by a combined one hundred and forty nine thousand, so important to factor that in as well.
Well.
Back with this on what she is seeing in terms of employment needs is Becky Frankowitz. She's Chief Commercial Officer, President of North America at Manpower Group. She joins us via Zoom from Milwaukee. Becky, good to have you back with us. Tell us we got another strong jobs report. We saw some revisions the prior to What are you seeing specifically, what words would you describe or use to describe the current labor market and how it compares to maybe the last few months.
Yeah, so I would say, you know, better than expected job numbers. I like to do the analogy. It shows the promise of spring. You know, very low unemployment three point four percent CAROL, matching the all time low of nineteen sixty nine, so very tight labor market. Two hundred and fifty three thousand jobs created. Not so, you know, there's some clouds on the horizon. We're not seeing labor force participation come back at the rate that we want.
You mentioned the revisions are now material. One hundred and forty nine thousand is material, and I would say that the third kind of storm cloud we want to keep our eye on is temporary staffing is now in decline, which you know is often referred to as the canary in the coal mine in terms of going into an economic slowdown. So I think very good overall numbers. Another positive, by the way, is reabsorption, and so as people are laid off, their being reabsorbed very quickly, as we saw
continue to unemployment claims tick down. So there's lots of in a few storms on the horizon we want to keep our eye on.
Becky I'm curious to hear about what industries are seeing some strength when it comes to job growth, whereas other industries that are struggling right now.
Yeah, so medical IT and sales are making up forty four percent of all the open jobs in our country right now, Medical IT and sales, So lots of strength there. And again this is we know the job's numbers are looking backward. I'm giving you real time data today in the country. We're also seeing strength and you mentioned it in your opening in hospitality and leisure. Retail starting to
come back in a very interesting fact. So you know, the probably the last two years we've talked about the three most in demand roles in our country have been registered nurses, software developers and logistics or truck drivers. It's been the same for at least two years. We've seen, for the first time in two years, truck drivers drop down.
They're not in the top five or ten, and surprisingly in the number three position now after registered nurses and software developers is stock clerks definitely indicating the return to retail, So nurses, software and now for stock stock clerks, so that clerk, So that plays into the retail sector specifically.
Absolutely, what does that tell you that's an interesting switch because I would kind of say that you need logistics and supply to bring the stuff to the stores so that the stock clerks can do something with it.
Yes, well, it's still but it would think about the way. What it indicates is the way we're shopping has changed. Logistics is still you know, in the top twenty in terms of jobs in demand, but it's the first time I've seen it fall out of the top three. And it tells you that the way we are shopping has changed. So you know, we're going back in physical retail, still
shopping online, but back in physical retail. And it tells you that, you know, people are traveling more and so going and stocking up before they head out for spring break or head out for summer travel with retail expenditure and so it's the other interesting fact is if you think about who's hiring, what companies are hiring. You know, Clips the hair company shipped, so you know a little counter they're now back on the hiring and then back
in the top five and they had dropped out. Surprisingly Amazon top three companies hiring in the country today.
Oh wow, I'm curious to hear more about what you're seeing on the wage front, because we did. When you're looking at these month over month numbers in this latest report, it rose about five tenths of a percent. Animals, we're thinking you'd be round three tens of a percent. Obviously, wages have been such a big thing that we know the Federal Reserve is watching. What do you see there?
Yeah, so we have continued to see robust wage growth. I would say the rate of increase has slowed, but I like to look at it in two parts, and Jess, I think that was your question. I love to look at it in two parts. What is the wage growth for people staying in their job, and that's about five point six percent increase year over year if you stay in your job, and if you change jobs, it's up to a thirteen point two percent increase. So we still are in a labor market that's in sinning movement and
senting people to change jobs. So wage growth continues. The pace is a little slower, but the increase divided by those who stay in those who move jobs, still very robust.
That's interesting. So you know, maybe that is what we continue to see pop up in a jolt surveys because there's still a lot of movement around here. So you know, Becky add it all up. Does it say to you have recession?
Folks?
Are you crazy? Or I continue to I've been kind of asking this for a long time. Could we see slow down, recession even but with a strong job market.
I think that's a that's actually a fantastic question. What I would say is we do anticipate some cooling. We've seen some slow down in demand in a couple of areas. I've talked about the top demand, but a little slow down in finance and accounting, in research and development in terms of demand. So some of the professional manufacturing industrials, you know, slowing down a bit in demand. So I
think we're going to see a cooling. But I think we may see a recession or a slow down with a strong job market than we've seen historically in those times. I'm not sure it will it will have the free fall that we're all expecting.
Are people still labor hoarding? Which has been like a new which has been a new phrase that has come out of all of this. But this is basically companies, because they know it's such a tight labor market, saying I'll hold on to these workers because I know things are going to turn around, rather than let folks go.
Well, it's a little bit of an overhang of pandemic paranoia.
You know.
I had to let people go that I couldn't find anyone, so then I hoarded all the labor and didn't let them go. And yes, we are seeing people hold on to the talent they have and in addition hire for really specific in demand roles. I do want to caution all of us though, this tick down and temp hiring is traditionally the leading indicator for going into an economic slowdown.
And yeah, temp powering fall. In fact, it's down, you're over year almost one hundred and seventy thousand jobs, and so that we all need to keep an eye on that.
What's a particular threshold when it comes to that metric that would be more of a red flag to you.
Yeah, so I think the decline is the first, you know, the month over month decline. We've seen it for several several months now, and it's been a little sporadic. Like everything else. It'll decline and it goes back up, and it declines again. But I'd say we're in the territory now where labor hoarding people will hold onto their permanent workers, but in fear of recessionary conditions, they won't hire the additional flexibility from a temporary workforce. And so I would
say we see enough of a yellow flag. I will't say red flag, a yellow flag now to keep a very close eye on it.
Go back to when you said Amazon now was among the top three companies in terms of hiring. They had dropped out. That's based on what data. And I'm curious how who else is in that top three?
Yes, so in the number one position is great Clips, so the hair haircutter. Then you have shipped the online retailer who had been not even on the list, so you know they what happened there is they weren't hiring at all, and now they have some needs to catch up with the summer travel and stocking up. And then
number three was Amazon. So what's happening there is we're starting to see those stocks, you know, a different version of stock clerks, but seeing that same retail phenomenon start to come back into the economy.
Where's that data from?
Oh, yes, I'm sorry to answer that. That's we actually scan all of the open jobs in the country. We scan them all and we aggregate the data and that's the source, so any without duplication, so there is a duplication in the data.
We only have about forty five seconds left, but I wanted to follow up because you had mentioned obviously those finance jobs where we saw those starting to lose that momentum. Is that clearly the obvious reason of what we've been seeing the past few months there with those what's been happening with the stress and the regional banks.
Yes, I think they're definitely related. You know, if you think about the macro trends that drive changes in the labor market, one of course is banking and the other, you know, depression of demand we're seeing is anything related to inflation, so durable goods starting to be under pressure. So it's all tied to the economy.
That's why we like talking to you man. You give us the specific stats, you give us perspective. I am like blown away by that Amazon right figure, because it's they've certainly been among those, you know, who are cutting coming off of the pandemic.
So retailers in the summer, stalkers as well.
Stockers did you say, are stokers.
Stalker's access accent.
Becky, thank you has always have a great week. And Becky Frankowitch. She's Chief Commercial Officer, President of North America Manpower Group.
You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or watch us live on YouTube.
All right, as promised, we want to talk a little bit about the travel and use your in hospitality space, and we have a great guest with us. We've talked a lot about folks traveling again again continuing post pandemic. So we'll see what Axel Heefer is seeing firsthand. He's CEO at Travago. He joins us on Zoom from Dusseldorf, Germany. So nice to have here with us. Axel. First off, how are you.
I'm good. I'm good. Traveler is coming back now even in Asia, so yeah, well getting better every day.
Well, tell us a little bit and we want to drill down a little because we've gotten from a lot of companies. Your company reported earnings. We've heard from Expedy and Booking, They Booking Holdings, they both reported double digit increases and gross bookings in the first quarter. Investors reacted a little bit differently to each of those. You guys came out and reported on Tuesday, shares did sell off
on Wednesday. I just want to go there first of First off, what are you hearing from the ALS community investors about your results specifically?
Yeah, so, I guess they if you're looking at our results, and we've we've seen solid growth in the first quarter, and we've we've seen a slightly lower margin that we had last year because we started to invest into our brand marketing and into our hotel direct initiative to prepare for the sum The reaction on earnings is always against expectations, so so apparently expectations have been higher than what we delivered.
But we're we're happy with with our results and we think we are on good track forward summer, So you.
Expect and then those investments that you're making to work and get through the summer, that'll you'll see that in subsequent quarters that will pay off.
Yeah. I mean, I guess you have obviously your your your direct direct performance marketing investment that have an immediate payoff. And then we've always been very strong in in brand marketing, and they're in particularly in TV. You produce our spots in house, we we test them in house, et cetera.
So that's that's one of our core strengths, and they're the payoff is it's not immediate, but you get significant payback within the first year, and then you're obviously building it up and coming out of the pandemic, we obviously need to build up that that brand equity and and revamp it in a way so you will see the positive effect of the campaigns really of the quarters to come.
Something that I thought was interesting, you did have a survey recently that showed that consumers they were comparing prices more than they had been, especially as we are going into the summer travel season. What is this telling you and telling all of us really about the consumers as far as just trying to find cheaper prices at this point when inflation obviously is still troubling for some of these ticket prices.
I mean, that's exactly the reason. I mean, the inflation is sky high in most of the western countries and there real wage contractions in quite a lot of countries, so consumers need to save money and they saved money in the daily groceries, and they saved money when they are traveling. But what is interesting is that that people do want to travel. So what they do is they
compare more prices. As you said, So in the US and our survey, more than sixty percent of Americans said that they are comparing more hotel prices than they've done before. Travelers are cut in their trips short slightly, so the length of the average trip is contracting. And the third, which I think is probably the most interesting, as travelers are becoming more and more flexible in terms of destination, so they are going for a similar experience, but a
cheaper destination. So if you're looking at at the two most interesting pairs from a US perspective, Canada is down relatively speaking, Mexico is up in terms of nearby a new shore international travel, UK down, and Turkey up. But the theme is the same. So it is a trip abroad,
but it is a slightly cheaper experience. And that's how consumers, and that's not learning in the US, that that's pretty much everywhere in the Western world, are trying to compensate for some of the price increases that that you see everywhere.
Does what you're seeing axels say to you recession in terms of what consumers are doing, are just being prudent.
I don't think I would talk about a recession. I mean, we think that the travel market overall will be up, but it will not be up as much as the prices are up also, so consumers are obviously trying to soften the impact of the price increases. But still, I mean, it's a good market, but people cannot print money, so they can only spend a dollar once.
And you're talking about these different regions. I mean, how much of a boost when it comes to the reopening in China in particular, do you think that'll have on that particular corner of the market, I.
Mean the Asia. I mean this is the year of Asia, that's for sure. I mean we don't only have China. We also have Japan that reopened more recently. We don't operate in China. So China for US is only a destination, but it's a very very important destination for many of our Asian markets, Singapore, Hong Kong, Taiwan, and South Korea, Japan,
et cetera. Japan is for US both. I mean the country will operated so it's it's an outbound inbound market and we see very strong growth there and we see exactly the same thing that we've seen in the West last year and the year before that. There there is a huge pandal demand of people that do want to see their friends, they do want to visit family, they do want to see business partners, and then there's a wave of travel coming, you.
Know, axel over over the last few years, certainly, you know, during the pandemic. Out of the pandemic, we've talked about a lot of bigger, broader macro issues of running a company, and you know, one of the things is accessing a workforce and you tap into a global workforce in a big way. Where are you on that Are you hiring? Do you need to hire? What can you tell us about that? On a day where we were focused on us jobs.
Yeah, I mean we we are. We are hiring, of course, I mean you need to hire. The labor market in particularly for for highly skilled labor is very tight and Europe and we are in a fortunate position that we do have a global brand and we can attract people from all over the world. So right now we are down to fifteen percent of our new colleagues are from Germany. Eighty five percent are from outside of Germany. India is
a strong country where we are recruiting from. Russia actually has become a lot stronger in the last twelve months for obvious reasons. Yeah, so I think you absolutely need to recruit internationally if you want to fill a specialist positions.
Tell me about India specifically, because I feel like in the last couple of months the discussion and narrative around India has changed dramatically, and some of it has to do with Apple in terms of it increasingly focusing on that not only as a place to produce, but also to sell. Is that something too that you are pivoting more towards or is that Just talk to us a little bit about that if you would.
Yeah. I mean for us, it's a bit different because we just operating out of one office. So for us, it's more the strength of our brand and the local market. And India is a very big market for us because it's a very big country and we we're not operating in China, so it's the biggest country that we operate in,
and that's why there's always been strong Russia. As I said has become a more important market to recruit and Africa actually is also growing very quickly as as a region where we can recruit top talent from.
We only have about a minute left, but Carol and I have talked to so many different people about how AI has impacted their business. It's curious. How do you use AI when it comes to your platform.
Yeah, it's it's an interesting question. I mean our platform has been run on AI or on machine learning for a very long time. I mean we use machine learning algorithms to to to ensure that we show the right hotels in the right place and the right prices. If you if you think more about CHEDGPT and the next generation of AI, that's very very interesting for certain applications
on the travel space. It's more for the inspiration phase from our perspective, So if you don't really know where to go and when to go, and then it is obviously extremely valuable if you want to generate a lot of content in an automated way. So it will make a difference with the industry and you need to stay open minded of course, and then that's what we've always.
Been doing well.
Ax.
We always appreciate the time with you. I know it's a little bit later over there, so thank you so much. Have a great weekend. Axl He for his chief executive officer of Travago. On zoom from Dusseldorf, Germany.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa play Bloomberg eleven thirty.
On the Bloomberg story I read in earlier this morning about New York Attorney General Letitia James proposing a state a lot of titan rules over cryptocurrency companies. It's her latest swing at an industry she claims is suffering from quote rampant fraud and dysfunction.
Now.
Under her proposal, New York would require independent public audits of crypto exchanges and bar people from owning both brokerages
and tokens to prevent conflicts of interest. In the statement today, James calling her proposal quote the strongest and most comprehensive set of regulations at cryptocurrency in the nation and I got to say, just one thing we know for sure, after the carnage of the last year or so, regulators are looking very very closely at cryptocurrencies and anything related with it, and.
Even just the dynamic of how say, Bitcoin in particular was performing, especially in March, right in the midst of what was happening with the banks, I mean, especially after we just got off of April. This is the longest winning streak for bitcoin since twenty twenty one.
But a lot of holatility and still trying to understand how it all fits together going forward. And on that. In our weekly crypto segment, we have with us Christopher Alexander. He's Chief Communitycations Officer at Liberty Blockchain. They're a blockchain provider. He joins us via zoom from Seattle. Christopher, nice to have you here on Bloomberg Radio.
How are you good?
Good?
Thank you. Checked in on what was going on with the news, and it came across the decision in New York, so an eventful day.
What do you make of that specifically, Well, I haven't.
Looked closely at it, to be honest, kind of skimmed it listening to your description of it. The concern that I have is a lack of understanding by regulators of crypto, and I think the biggest breakdown is understanding the difference between blockchain and crypto. And you know, crypto is the byproduct of essentially time sharing your computer to serve as a server excuse me, on a form of internet, and you can speculate, sorry, excuse me, you can speculate on
exchanges with coins. Blockchain is the technology with is amazing potential. And when you conflate the two and treat blockchain mining and certain things the same as if we're crypto, that's where these problems really break down. And I'm a little concerned about what they're trying to do in New York and how they're stunting the technological development in order to deal with a exchange type of issue.
In what ways would this end up impacting the technology behind When we're looking at blockchain in particular, whether it's in New York or when we hear obviously officials in Congress debating about different regulations.
Well, I'll give you a great example. There's a mining brig of sorts, and it is essentially a piece of computer hardware and the signal from the SEC who won't actually give us rules as an industry, despite our repeatedly asking and Coinbase now suing to compel them to start
making rules instead of just regulating by enforcement. Their argument is that it is a security well by way of analogy, what they're saying is, if you buy stocks with the computer because you're day trading online, your computer is a
security that could be regulated by the SEC. Now, I'm going to presume they don't mean to do that, but I think it perfectly highlights this problem of not fully understanding again the difference between buying bitcoin on an exchange and being part of a blockchain and looking at developing Web three applications could have amazing impacts in the future.
That's interesting too as far as the regulation that could potentially becoming. What are you expecting on that front, as far as what other things could be rolling out.
Because would you agree that there needs to be some transparency and oversight considering what we've seen in the last year.
Oh, I don't dispute that for a second. And I think it's very interesting that two of the recent SEC actions that have been notable was a wells notice to Coinbase and find a crack, and those are two groups that want to work with the SEC and have been begging essent to the SEC to provide a clear framework. There is a very clear framework in Japan and Switzerland
for example. I've done an amazing job France as well. Yes, there does need to be that there should be rules, and industry welcomes any effort by the SEC to actually maybe so tell.
Us, you know, and I would agree with you on a certain level that I agree that blockchain is different from cryptocurrencies, but yet they do certainly go hand in hand. Tell us about liberty blockchain, specifically your company, what you are doing, because you're not the only blockchain out there, So tell us a little bit about what you guys are up to.
I will, and just to clarify, so you can have a blockchain with no crypto Deloitte, I believe in Amazon Web services both run pieces on the blockchain. I mean the California DMV is now putting files on the watchchain so you can separate them. But it's very an usual and when people think about this, and this is really what they're talking about. It is a blockchain that produces a proof of work or proof of steak, which is
a coin, but as as for liberty. We're at a veteran led organization and what we believe in is a free and open society. And what we're doing is we're building the infrastructure from the ground up and then we work, which is with a dial with the community of people. We're going to decide what we're going to do with with that, with that blockchain and those capabilities. And one of the things we're working I'm very excited about is, you know, we want to look to build a a
free and open society for the future. We also want to learn from the mistakes of the past and trying to do it. So we're kind of a fusion of those. So one of the first things we'll probably roll out it's in development, is a historical explorer app. So you can go to save Fort McHenry in Baltimore where I live, see what the star Spangled banner was, and then you might get a reward, a digital reward for participate and it's kind of learned to earn it too.
I know you also have talked about when it comes to the off ramping of crypto. Can you explain a little bit about what that is and maybe how there's some relation there whenever we're talking about the squeeze obviously on some of the banks that we've seen in recent ones.
Off ramping is is where for me personally, when I listen to discussions about crypto, the fair critiques and the ones that perhaps are not, it really frustrates me. Off ramping is how you take your Bitcoin or any other form of digital currency and turn it into a fiat
currency to pay locally for something. So you're paid saying I'm paid with the US dollar coin so it's a stable coin, and then I convert that to dollars to a number of different ways when I want to When I want to buy something or move my money out, well, I do it to a bank, and if I don't do it through a bank, I do it through visa
MasterCard and they've they've certified everything. So with some rare exceptions, it's very hard launder money because there's a transaction and there's a point where you have to turn that into a local currency. Now you can launder in countries where you can easily launder money, but this is not something that's in any way inherent or essentially a part of the blockchain. In fact, what you find is you know, you have a group out in DC that supports US
government investigations. The transparency of the blockchain allows them to roll all of these transactions up like they did with sobrowth. So off ramping is turning your crypto in your currency. And when you say the crypto industry is rampant with all these problems, well, the only place you can really off ramp is a bank. So I'm not sure how you don't critique banks and in all of it on
crypto it's an issue that's being resolved. And it goes back to your point about yes, we do need regulations and off ramping is the point where you can very effectively tamp down on terror financing and other issues if.
I may, because we only have about a minute or so left. I mean you're interesting too, and you have a very very varied background in terms of some of the different companies you've worked with, Disney, IBM, Coca Cola, and then you know, tell us attle bit about the folks that are involved specifically at Liberty. I know veterans is a big part of it. Just what that means in terms of your perspective.
Yeah, we mostly met in the special operations community, working in Iraq, Afghanistan. I was an information warfare planner.
I gues should say.
Some of us had other other jobs, and we were fascinated by the potential of blockchain. We wanted to have something that again promoted the principles of a free and open society. We're going to look to do a lot for veterans as well, and so we just knew and trusted each other from you know, the most trying of circumstances and the most steer environments, and that's kind of how we coalesced and started working.
On Christopher, you know, just thirty seconds here. Who do you perceive will ultimately be using your blockchain or are already?
I think it's a mixed clip. But I think if you're concerned about authoritarianism, if you're if you're concerned about some of the some of the creeping sort of censorship and things that we see in in social media platforms and the like, uh, you're great for us. If I had to summon in a word, we're kind of the libertarian blockchain.
I think, all right, well, interesting, and I'll be curious to see about the future for you guys, So look forward to checking back. Christopher Alexander's chief communications officer at Liberty Blockchain, joining us via Zoom from Seattle on this Friday.
The Journal, Now about you, let me drive? No, no, honey, please gravel. Let's wait, I want to drive.
It's a good question.
This is the drive to the globe down well on Bloomberg Radio.
All right, everybody, just under eighteen minutes left, and it's a broad based rally on Wall Street. So you are seeing a lot of buying into the trade. We're just coming off our best level. As you just heard Charlie giving the market update, you did see yields moving up certainly at the shorter end. So let's get to it with our next guest with us. Is Michael Sheldon back with us, I should say he's executive director, chief investment officer over and High Tower RDM Financial Group, joining us
once again on zoom from Westport, Connecticut. Michael, nice to have you here, Jess says Man. I talked to Michael all the time. Have for a long time, interesting market cycle. Again, I feel like we have said that a million times since we've come off the pandemic. What are you more optimistic right now about the outlook or more pessimistic.
Well, we had a lot of news this past week, and I think going into the week, we sort of had a very bifurcated market. It's strange to sort of think of that, but we've had Going into this week, we had three sectors of the S and P five hundred that were up double digits, and we had four sectors of the market which were actually negative. So it's a very strange kind of market. It's been a very narrow market, with a lot of the gains led by
a few stocks. If you look at the sort of health of the market, back when the market peaked earlier this year, we had something like eighty percent of stocks in the S and P five hundred above their two hundred day moving average, and today we only have less than fifty percent of stocks above their two hundred day moving average. So it's a really kind of difficult market to sort of navigate right now. I think we had some interesting news this week. We had obviously the FED meeting,
and I think we were hoping for two things. We were hoping to hear whether the FED was done. We didn't really hear about that, although we know they're closer to the end, and Unfortunately, the FED did not say that they were about to cut rates, even though the Fed fund futures market is focus currently pricing in three cuts this year. So that sort of difference between the fan and what the investors are thinking is yet to
be determined. And then we also got a lot more news on earnings, and then today we had the jobs number.
So how do you position in this type of environment when investors are so split? What are you buying? What are you selling?
Well, it's important. As investment advisors, we do a financial plan for most clients that come in and then we sort of figure out what the rate of return is they need in order to meet their long term investment objectives. So we have different models. We have a more growth oriented model, we have a more income oriented model. Some clients need to be more aggressive, some can afford to
be more defensive. I can tell you over the past few weeks, for example, we've over the past month or two, one thing we've been doing is we've been buying more corporate bonds. So we used to own a lot of corporate bonds in the past, but many of them matured and the yields were just too low to reinvest. But more recently, yields are the highest they've been in quite a while. So I'd like to say this some income
and fixed income now. So we've been buying a lot of corporate bonds and it's great that we can lock in that four and a half maybe five and a quarter percent yield, and that's on the fixed income side of clients' portfolios.
One of the things I thought was interesting along those lines that you shared in notes with our producer Paul Brennan, is that despite the concerns that are out there about the outlook, corporate bond credit spreads remain healthy, indicating fixed income investors are not overly concerned about the outlook for economic growth right now. It's a great indicator, correct.
Yeah, absolutely. I mean there's so many things going on right now. You have the worries about the regional banks, you have problems in corporate profits. There's the lagged effect of the ten rate hikes that we've already had by the FED so far this year. But corporate credit spreads, which are often a leading indicator of trouble, especially high yield spreads, have really been pretty pretty well maintained, pretty narrow,
and I think that's a fairly healthy sign. You could argue that in the high yield bond market, many of the corporations have sort of stretched out or refinanced in the past, so the quality of the high yield market is higher than it has been in the past. But if you really thought we were going to a major downturn, credit spreads should be widening as opposed to narrowing.
I know we're going to get the Senior Loan Officers Survey on Monday, and this is important because obviously it's going to be the first reading since it's quarterly of obviously what we saw happen last March. What specifically are you going to be looking in this report when it comes to credit conditions and banks.
Yeah, that's a great point. I think that comes out very soon, maybe next week. I'm not quite sure the date.
On Monday, it actually comes out Monday.
So there are a few sort of red flags that we've looked at which historically appointed to a weakening or a downturn in the economy. There's the monthly Leading Economic Index, which has been down something like twelve months in a row. There's a yield curve which is negative right now, and I'm sure You've talked a lot about the predictive powers
of that. And then there's the FED Senior Loan Servage, which doesn't get a lot of press, and basically what it shows right now is I think the number we're somewhere around forty percent to net forty percent of corporation of banks have tightened lending conditions for various loans, whether
it's commercial, industrial, or consumer loans. And typically that sort of when you see those types of numbers, when banks are pulling back in credit, that tends to have a negative impact on the economy looking ahead over the next two to three quarters. So we haven't really We've seen some weakness in manufacturing and housing, but overall the consumers
held up pretty well. So it'll be interesting to look at the FED Senior Loan Survey in Monday to see if it gets even see if banks are getting even tighter than they were four months ago.
Having said that, just coming off of Milken and so many participants in the private lending market and private credit market were there, many of them were saying the message was that listen, banks haven't been lending generally for a long time. When it comes to certainly folks in the middle market space, middle market companies, and then that's where
the private credit has has jumped in. Is there some comfort to be found because we do have a shadow banking system, so that that is out there to keep kind of the economy going. And I'm curious how you see.
That, Michael, Well, that's a good question. We do have in addition to owning individual stocks, mutual funds, and ETFs, we're appropriate, we do own private investments for clients when appropriate for certain clients. So we're familiar with the direct lending market, and there has been a shift over the years from loans made from banks to the I don't know, I wouldn't call it. I don't know if you'd call
the shadow lending or to other sources of funding. I think the way to sort of look at this is that deposits in the banks were something like seventeen trillion dollars several months ago or six to twelve months ago, and we've started to see money coming out of the banking system, and that sort of coincides with the money supply actually having been negative recently on a year of
a year basis. So I think generally speaking, it's not a healthy thing when people are pulling their deposits out of banks because banks need that money to make loans, even if on the margin they're making less loans than they were in the past.
Well, you've also noted that what we have some five point three trillion in money market funds assets today versus three point nine trillion at the peak of the last economic crisis, a great financial crisis in seven oh eight, at least at Bramo. It's tweeting about that earlier today. So that's another concern certainly out there. Smart conversation, Michael, have a great, great WEEKND Michael Sheldon, Executive Director, chief Investment Officer at High Tower RDM Financial Group.
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