Solid Jobs Report, Visa CEO, Opportunities in Equities

Week on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. So US hiring was unexpectedly resilient in the month of October. Priirements saw sharp upward revisions, validating the FED signal of a pause from interest rate cuts and really indicating consumers will extend the record long expansion despite week business investment and despite trade tensions of

the little lightning of that load as well. Chris lu Is, former Deputy Secretary of Labor under the Obama administration, now senior fellow at the University of Virginia Miller Center, on the phone from Charlottesville, Virginia. Chris, so great to have you back here on Bloomberg It's been an interesting week, chock full of news on so many different fronts. You know, the thing came out and I think initially I was like, you know, where's the Fed getting all their optimism from.

But you know, you look at these jobs report, there are reasons to be optimistic. Yeah. Let me, I'll take a slightly contro of you on this. I mean, this was a very solid report, and I think in part because the initial expectations had been so low. Um, not only just based on other signs that the economy might be slowing, but obviously the GM strike. UM. I think

this one. If we had simply said, hey, this is going to come in at a hundred and twenty eight thousand in the abstract, we would say, you know, this is kind of a so so report. And so again we always say don't look at one month. This was a solid report given where I think we thought it was going to be. But I think when you look at some of the other signals in the economy, the economy is still slowing. It just may not be slowing as much as we all thought it was. All right,

so synthesize that for us. Chris said, what else should we be looking at? To essentially sort of compliment or give us a more holistic picture that of what's it there. Well, we saw today's manufacturing in deck that showed for the third straight month, uh, the manufacturing session UH sectors in recession. We obviously have the third quarter GDP numbers that came out this week, again not as bad as expected, but still at one point nine a slowing from where it

has been. Uh. And even in these numbers, UM, we're seeing us slowing from eighteen to UM. And so again there's a bunch of other you know, farm bankruptcies are up with you know, there's a bunch of indications that show we're kind of flowing, but we're probably not moving into recession. And I think the other sort of interesting and probably concerning thing for me as well, is that wage growth still is not what we thought it would be.

In for all the people talking about full employment. Uh, you know, we're still only seeing three point uh year over year wage growth, which is really not what you would expect to see at this point in an economic expansion. But to be fair, I think this economic expansion, Chris, is unlike any we've seen before. Just it's already you know, the longest on record in terms of duration. Isn't it still surprising to see the kind of strength that we are seeing in the labor market, you know where we

are considering where we are in this cycle. Yeah, no, you're absolutely right. I mean this has gone on, I think, far longer than anyone thought it would go. And you know, when I think the SAIDs move this week probably gives a little bit of more oxygen to this recovery. But it does feel like we are, you know, I don't know for three months to the end of this recovery, six months a year, but it does sort of feel

like it is slowing down. Um, although just as I said, not as dramatically as I think we all thought it was. All right, So Chris, help us understand one one thing that I think caught our attention, because you know, we're bloomberg. We look at the numbers and we see this tweet from the President earlier, um, you know, celebrating as as many gave him credit for, uh, you know, a really solid number. But he put a number out via Twitter.

I believe it was three three thousand, with adjustments and whatnot. Can you help me understand what what he may be talking about there. Yeah. Look, I mean you don't do this. I mean, you know, the jobs numbers are what the jobs numbers are. You know, we can all say, look, a hundred twenty thousand was good, especially given you know, the forty to sixty thousand GM workers that were on strike.

But then to somehow then start to lump together you know, the previous months revisions, which again we're good, Uh, and then sort of speculate what the GM effect was. And then they also did this kind of UM addition for census workers. Uh, they somehow come up with three hundred and three thousand. I mean, the numbers are what they are. I mean, you don't say, well, but for the Great Recession,

Barack Obama would have created x million jobs. I mean, you know, we we look at these numbers in the broader context, and I think the President of all people, who sits atop these statistical agencies UM should not be gaming around with these numbers, are trying to put a different spin on them. You know. As the Deputy Secretary of Labor, i UM was in charge or oversaw the Bureau of Labor Statistics. This is one of the premier statistical agencies in the world. Uh. They just do such

fantastic workman, we should just let the numbers speak for themselves. Well, And Chris, and this is I'm certainly not making an excuse for endorsing it, but this is a very important political number as we get closer and closer to November. Right, Yeah, no, absolutely, I mean, looks for all the president's political problems, Um, the economist states strong on his watch, um, and he will obviously be trying to that that will be really

the cornerstone of his reelection strategy. So it's certainly in common upon him to put the best positive spin on it. But you could simply say, look, we created a hundred twenty thousand jobs and given everything else that that's a really positive number. But then to put out their three hundred and three thousand, I think it's just horribly misleading, and I think it sort of does a disservice to the UM, not only just to you know, the career employees at the Bureau of Labor Statistics, but I just

think it's horribly misleading. All right, Well, we're gonna leave it there. We always appreciate your context. Chris Lew Senior Fellow at the University of Virginia Miller Center and the former Deputy Secretary of Labor under President Obama. He joined us on the phone from Charlottesville. I've checking in with Chris Well. Earlier today at Bloomberg headquarters, Jason I caught up at the CEO of the world's largest payments network. We're talking about Visa. They are huge, three point three

billion Visa cards and use. We got some details on the business. This was for another edition of Business Week Talks. Al Kelly is Visa's chairman and CEO. We began by asking, with his vast network advantage point, what is the state of the consumer and the economy? Actually, you know, despite all of this thought that there was a recession coming, we don't see it. You know. In fact, our fourth quarter numbers, which for US were September thirty numbers, were

better than the third quarter. In the US it was up eight percent, the internationals up twelve percent excluding China, uh, Europe was up percent when you exclude the UK, which has done a little bit of self inflicted wound to this. What's wrong with everyone that we're talking so much about recession. I think it must just be the cycle. You know, it's been a long time that we've had this upswing, and I think that people just look at the history and say it's it's got to go down at some point.

But you know, the consumer has stayed extremely strong around the world. The only place we see any weaknesses in the UK, and as I said, that's kind of related to the whole Brexit situation. But other than that, the world looks pretty darn good. And so let's talk about consumers and go a level down because you have more insights probably than almost anyone into where they're spending, how they're spending, what they're buying, what are they buying, where,

where is where's their money going? Is it experiential like everybody keeps saying, well, and in our world, there's a couple of things that are really driving the increases in the number of transactions were seeing. One is obviously e commerce. You know, people are jumping on their phones and jumping on their iPads and jumping on their computers and and buying in big ways. We're seeing every month those numbers.

The growth in eCOM is anywhere between two and three times the growth in the face to face world every every single month. Uh, we're also seeing people continuing to travel. UH, there was a real downturn and travel back in December and January. If you remember, that's during the height of the U. S. China trade talks. It was during the height of the Brexit conversations, and then we had the forty day US government shutdown and almost immediately consumers started

to just stay at home and not travel. But we've seen that pick up, especially in the last six months, and that's always a good sign that when people are willing to leave their home country and go to another country, that's a that's a very very good thing. The other thing that we're seeing is an increased amount of smaller ticket items being used using digital payments, and a lot of that I think is driven by mass transit. We are really excited about mass transit. Just in the last

uh ninety days, we've seen open systems in Edinboro and Salpallo. UH. We started in July, I guess June here in the m t A in New York where we're only at eighteen stations from Grand Central Station to Atlantic Avenue in Brooklyn, but by the end of October of the MTA hopes to be in all four and twenty four subway stops are people using it to and go? Absolutely, it's tap and go. It's so convenient, it's better experience for the merchant,

it's better experience for the consumer. We we had a million transactions in the first seven weeks and we had no and that's at eighteen stations. Uh, it's truly amazing, absolutely continuing to grow. Tap to pay has grown hugely around the world, with the exception of the United States. Interestingly enough, Well, I was going to ask you about that because we've done a lot of work in the magazine about the adoption of those sorts of systems, especially

in Asia, especially mobile payments, all of these things. What is it about the United States, which is usually pretty innovative in many ways and early adopting in terms of technologies.

Why is the US lagging? The US is lagging because it first it goes back you have to go act about six or seven years at least, where the US was much slower to adapt chip in the card, and they it took so long to adopt chip at that point in time, people around the rest of the world we're moving past actually just dipping the card to actually tapping. And the reality is that the other countries have moved

hugely ahead of US. You have countries like Poland and Hungry that are over tap to pay in the face to face world. In the US, we have a very interesting situation. The vast majority of the businesses are set and plumbed to be able to facilitate tap to pay. It's replacing the hundreds and hundreds of millions of cards, and the banks rightly so want to do it on

their normal cycle. So by the end of this year, we'll have over a hundred million cards in the United States that will be tapped to pay uh Enable, and by the end of next year will be over three hundred million. So this will take a little time. Right now, tap to pay in the United States is about two percent penetration. I think we'll get to five or six next year, and then based on our experience around the world,

it will really take off. And that is Al Kelly, he's the CEO chairman of Visa, speaking with us earlier today at Bloomberg headquarters. And this is part of a series that we've been doing for a little less than a year now. It's been a lot of fun. It's called b W Talks, So you'll get the full extent of that conversation in a few weeks in Business Week magazine. So much going on in the world of economics, So

let's break it down. Alex Harris, Bond, reporter for Bloomberg and Elena shall Letcha, a senior US economists for Bloomberg Economics. They're both here in our Bloomberg Interactive broker's studio. You're pointing because I know it's important. I know your guns. I know I know, But Yelena, I want to I want to ask you when Richard Clara says what he said today, he's the vice chairman of the FED, what's the significance of him of he speaking versus one of

the other speakers. I think all of them, including the Vice chair have just been ret rating the same exact message that we heard from Cheer Powell and UH. I guess that's the idea, right, So you hear from the chairman and then all of them come back and talk about it, just to really get the message across. If you didn't hear, that's what we are going to say. So we heard the same from UH, you know, from

other board members, from Randy Quarrels. We so we heard that from UH President coupland I think, and it's really where they believe the current stance of policy is. But let's see what happens comes the December meeting. Where we are in terms of economic growth, consumer spending and things like that. All right, so Alex, come on in. What did you see in the bond market today? You were not literally but figuratively yawning at some of what we heard.

You were doing the opposite of finger guns. Yeah. And I think the the data and the headlines coming out on trade sort of it's the epitome and echoes why I think the FED is on hold right now, because it feels like after looking at everything, after looking at jobs, after looking at I s M, and looking at the myriad FED speakers, that it was like and and the trade headlines, it was like riding a bike, and it's like the scene where it's like it looks like you're

riding a bike really fast and moving and then they pull it back and you're in fact going nowhere. That's what it kind of felt like today because you know, you still have one rate hike Priceton for or excuse me, one rate cut Priceton for. And it was sort of vacillating between the end of the first half of the year and the second half of the year. So now I think we're back to somewhere in the second half

of the year. Um so nothing really changed. You just kind of saw all these like, um, you know, they were they were sort of working against each other. You know that jobs looked okay, but I s M did not.

And then you had, oh, they've agreed to something in principle in terms of the US and China on trade aid, but really, like what are the details, and and the market kind of went, yeah, great, but we don't have any details, and we really don't know what those brings, and so we're just kind of running in place, essentially.

But the equity markets rallied, and the equity markets rally, but I think, you know, everyone wants a reason for the equity markets to rally, But I honestly think the bond markets are a little bit tired here and they're going to need a little bit more information to make a move one way or another. I think we're just kind of stuck here for a bit until we get some confirmation that you know, there there are more downside risks in place, or you know, we're getting really some

sort of resolution. Why are you making that face because you're sort of a Debbie downer here. But the bond market tends to, I think, move ahead of the equity markets here, and I think the bond market tends to read things a little bit differently than the equity markets as well. And look, every you know, equity markets are still making record of highs, and I think you do have some people who are getting nervous. Isn't see continuing to go up and there's no correct and insight. Okay,

let's just step back and look at some facts. Okay, So obviously everybody was talking today about how great the job's report was, and yes, it was better than expected number. The impact from GM strike was not as big, but you know, you have to look at some details and it's not that rosy if you just look at the headline numbers. So first of all, income growth is decelerating. So we have seen deceleration to the levels we've probably lost so back in thousands seventeen, and it's been happening

since since the end of last year. So, uh, really, what you are going to get if this trends continues, you will get deceleration and consumer spending, which is the only engine running now behind economic growth. Why is that, Yelena. If people still have jobs and they feel comfortable and confident about, you know, keeping those jobs, even though they're not getting higher wages, why does that mean we're going to see a slowdown in consumer space. That's the fact

that we all have enough stuff. But that's got another story. This makes them vulnerable to exogenous shocks. So something happens, consumer confidence goes down, and they don't have enough of this extra cash in hand. What are they going to What kind of shock considering the amount of shocks that I feel like the consumer has lived with over the past year or so, what kind of shock would would make that Well, if I knew that, I would make

a lot of money. But I mean, I don't think that, you know what I mean, you know, I feel like there's a resiliency out there when it comes to both the markets, the financial markets, and the consumer. I'm not saying the consumer is cracking. That's the word that Reach

Clara they use. But you know, if if they have less of accursion, you know, if they have less of a little bit of this cash cursion, at some point and they feel like they to save because the confidence is not that great in economic cult Look, that will impact economic grows to a disproportionate degree at the time when they remain the only engine behind economic grows. All right,

we're gonna leave it there with both of you. We appreciate it as always, Elena shall let you have us in US economists for Bloomberg Economics to Alex Harris Bond, reporter for Bloomberg Newsroom Journal. Yeah, but you let me drive. No, no, no, no, drive home an night, please out of the right drivel let me I want to drive, Just drive, baby, the questions trying This is the drive to the globe. Fumm, thanks, We'll try us Dawn Radio. It is time for the

drive to the close. Wrapping up this trading, we packed full of news. Uh and we did see the equity markets rally on that jobs report today. Let's get into this with Melda Morgen. She is Deputy Global head of Equities of at Columbia thread Needle Investment. She joins us on the phone from Boston. The enthusiasm, Melda, that we're seeing in the equity markets today, does it make sense to you? Um? Yes, because we know that US economy is pretty much driven by consumer and if the consumer

balance sheet is healthy, it's good for the economy. We know that we had the challenges in the manufacturing part of the economy, but even that is coming to a trough in our opinion, which gives another like for the for the market to be excited. And so when you look at a day like today, Melda, how much of it do you feel like it is driven by jobs and the jobs report? And how much of it is driven by the enthusiasm maybe that the trade all the sort of trade drama, maybe at least coming to something

resembling a conclusion. I think both of them are the factors today, again for different reasons. The job report is the confirmation as the US economy staying strong uh in that part of the of the g d P. And then the trade is important from here of course, to get the manufacturing sectors and the global growth accelerating. So uh and and it looks like both sides are trying to to make this work and showing the willingness to to be at the table and make the first phase

one deal. Hey, Meldon, I want to ask you, you know we caught up Jason myself caught up with the CEO of Visa and we asked him, you know, they've got a great vantage point in terms of what's going on with the consumer. They're seeing transactions where people are spending money, whether trends are growing. He doesn't see any

signs of a recession. And what's interesting a loyal viewer a Bloomberg Radio, you know, reached out message means that, you know, if the consumer is so strong, you know, why do we see folks, you know, so many like retirees and minimum wage jobs trying to pay their bills. We're talking about you know, homeless and cities trying to give people you know, um, you know, some support and and and um assistance. I mean, it doesn't feel like

everyone is doing so well. And increasingly automation and AI uh, you know are really kind of up ending the workforce. And maybe we haven't you know, filled or or educated the public in the jobs that really are in demand. So how do you reconcile it? How do you see it? Um? Definitely not everybody's doing great, and there's a lot of concentration, I would say where the problems are in big cities

with the homeless and other problems that you mentioned. Uh, the economy itself and where the investment is being made and how the economy is growing from here is different again in the sense of manufacturing still an important part of it, but not the primary driver of the economy. And within that group, there's definitely, I agree with you, there's a gap in education, the skill set what today is manufacturing environment required versus what we have with um

some of the of the workforce. So that gap, as long as it's not filled, is going to be a problem, and that part of the of the population will definitely feel more pressure from here. But on the other hand, we have the technology sector, we have service sector, health care. All those areas are really um growing and and then growing in a in a pace that helps the other part of the population really earning more wages and spending more.

And so talk to us about the US versus the rest of the world, Melda, because it feels like we continue to try and figure out whether this is a global situation. The rest of the world doesn't feel maybe as good as the US does at this point. And so how does that inform your choices as an investor? If you take the developed markets and look at x US,

specifically Europe and Japan. Uh, there's definitely more dependence on the manufacturing factor and the health of the global economy, and we know that it slowed significantly in and those parts of the developed market struggled, and then the emerging market. Of course, the global liquidity is a big factor for that part of the market, which is also improving with what FED is doing and our other central banks stimulus

to do to the liquidity in the global markets. So for US going into twenty UM, those those inflection points is going to help overall the global market, but we definitely experience a lot of pain in in the in the rest of the of the world x US. So what's your advice to investors at this point then? UM? Again, for US, UM, everything starts and ends with the with the companies and the environment they are really operating in. Given that we see and a better environment going into

we want our clients to be invested in equities. UM. It would be really in our opinion, UM depend on the company UM selection, stock selection, but generally we really don't want them to shy away from equities at this point. All right, We're gonna leave it. They're great to have you with us Meldamergen, Deputy Global head of Equities at Columbia threat Needle Investments, joining us on the phone from Boston.

Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio. H