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What else you want to go? That way?
All right? So check it out. Everybody check you calendar. It's been ten years since Google now Alphabet bought Ways for one point fifteen billion. That was back in twenty thirteen. Oil Levine, of course, co founded a Ways. He's also an investor and move it. Intel bought that one for a billion back in twenty twenty. And last time around he joined us. We talked about his new book, fall in Love with the Problem, Not the Solution, a handbook for entrepreneurs. So delighted to have ARII back with us
here in our Blueberry Interactive Brokers studio. Hello, Hello, we weren't dissing you as you walked in, and so forgive us. How are you do it?
Okay?
Do it okay? Trying to make sense of all the creeze when it comes to AI, Can I just jump in with you? Because I feel like when you were in February.
I just wanted can I just say thank you? Because I was using Ways yesterday all on my way to City Field, and it got me there in a timely manner.
I drove a cab driver crazy earlier this week because he was following something else. I'm like, I'm on Ways and here's what you're gonna do talk to us about. First of all, do you ever regret selling it?
No? I you know, people have regrets of the stuff that they haven't done.
I think we might have talked about this, but you don't.
You just you know, I moved on. I left after the acquisition so I can build more startups and and I am very happy with the decision back then. And at the end of the day, look, when you're making a decision, it's the right decision, the right decisions, or no decisions. And this is it.
So you got a T shirt on is fall in Love with the problem not the solution? So those on our streaming service and YouTube can see this. You've also got a book out with that title. AI. Is it a problem? Is it a solution? Is it both?
Is it yet to be determined? But it's definitely a solution. We just not clear what is the problem.
Yet, Well, as a startup guy, you've got to look at the technology like that and automatically start thinking of applications, right of ways to use it for progress or profits. What do you think about the potential of AI?
So, in general, my approach would we start with the problem, right, start with the use case, and only then build a solution. I mean this key is because the generative language is very powerful. Right then if we ask one hundred people on the street have you tried that? Then probly all of them are going to say yes. The challenge is that if you're going to ask them are you still
using it? And very few are going to tell you yes, which basically means that we are not a product market yet, or it's not applicable for the for the consumer market, for the mass market. Yet there are some cases that I would say this is awesome, right, So if you are if you are in the business of generating content, this is going to be very helpful to you can generate way more content based on that.
Or are you investing in it?
Nope, not yet. Many of my companies are actually using AI, but not that generating language yet.
Why not?
Because you know it was not available until recently. And now I have one company in the medical space that is actually having the knowledge and requires the language generation for that, and this is going to be a leapfrog for them.
Do you still think about I know Ways was ten years ago, but do you still think about navigation and the possible the possibilities that AI could help in in that space. I mean, my first thought when I heard your name and AI was I wonder if this could help me avoid speeding tickets more often? Because that's one of the benefits of Ways is that I can see where others have pointed out that the costs.
Because at least are waiting.
So do you think AI could help at all in making you know, Google Maps a better product for example?
So so Ways is based in a lot of cases on crowdsource on one hand, than AI on the other hand. Right, and so we can understand right contry, we can use the they you know, we can look at different users and from their behavior understand what is going on. And so we have built the AI system before we even knew how to say that, right, And I think that many companies have built an AI capabilities into their product before we actually had the region or the generation of the language.
Do you think of generative AI as akin to some other tech development? I mean, I don't know. I think folks are been talking about the creation of the Internet. I don't know, how do you think about it?
People are saying that this is, uh, the biggest revolution ever, right, and I would say, no, no, no, wait a minute, It's not there yet. It's definitely not as big as the Internet itself. It's definitely not as big as the mobile phone itself. It's definitely not as big as the smartphone. Right, yeah, the PC yet?
Is it a yet?
Or is it might be yet? But because at the end of the day, what all the other tools that I've mentioned did is that they interconnect people and they enable people to become better, better, to communicate, better, to access the information better for anywhere, anytime, anywhere, And this increased the abilities of the people. Now we are looking into a system that may be able to generate content by itself, but less likely to be creative.
Well, you know, if you're talking about falling over the problem. All of the things that we just talked about, the Internet, the mobile phone, the PC, right, they were solving the problem of I guess connectivity in some ways, but now those things are the problem, or connectivity is the problem. I have how many email accounts? I have three cell phones, I have you know, ib and Facebook, and I want
to be less connected. So for me, the problem that AI could solve is helping me deal with all of this connectivity that I have.
Absolutely, I agree. Right, So what you're basically saying is that I'm overwhelmed with information and I would like something to you know, scan out from this information and figure out what is really important and bring that to me in a better way.
Just the signal no more noise please?
Yes? Definitely yes. And is that something that the current engine can do, probably with enough training, definitely yes. Is that the use case that we will end up with? Maybe yes?
So would you say, and I'm thinking about our audience and investing audience, you know, who have just watched this AI euphoria and we've seen something like an Nvidia, but some other names just go kind of off the charts. Would you say it's too early to make that investment play?
No.
I think that if you don't play in this game, then definitely you are going to.
Lose, right, So it's not too early to go into.
Some of these, it's not too early. And to a certain extent, what I would like to also mention is, look, we look at it and we say, okay, wait a minute, that chat GPT just appear in our life about six months ago. Right, So you look at it and you say, in six months it's done so much. Right, Wait a minute. Open AI is seven years old. It takes a lot
of time to create value. And the first part of this value or the value generation journey was about creating the technology, and now we are looking for the use case that will make it valuable. In some cases it's already there, but in some cases it's not there yet.
Do you have an overarching investment strategy?
I mean, you've.
Created and sold two billion dollar businesses. Probably people come to you with pitches left and right.
All the time.
Is there one kind of overarching strategy that you use to drive your investments?
I do, right, because at the end of the day, my mission in life is to create value, and I can create value through different ways. One of them is you building solutions to a problem that will help you to become better. And so this is ways or movie or pont Era or Zumka or C three or Fairfly or many of my startups, and that other one is through guiding and mentoring and teaching others, right. And the book is about fulfilling my destiny of creating value as
sharing the know how. And to a certain extent, when you share the know how, when I go into a company and I help them, at the end of the day, what happens is that they sign up to my know how and that increased their likelihood of being successful. So my methodology is not about guessing what's right, is creating what's right.
So for entrepreneurs, you might grab your book and kind of get, you know, fall into your philosophy and benefit from it. I do wonder or what you think is one of our biggest problems today that needs solving.
You know, we can look at many problems, right. So a lot of us are speaking about, wait a minute, we are way too much connected.
Right.
You look at the younger generation and they are connected into social media in the levels that are beyond imagination, right, and in some cases they're not happy. Right, And so happiness of younger generation is a challenge. You look at medical services, right. Medical services in the US are five times more expensive than they are in Germany.
Now, it's not to live in Germany, he talks about all the time.
And it's not that they're better in Germany. In here that in Germany. Right, it's simply five times more expensive. So you look at it and say, okay, wait a minute, this is waste of free sources.
Right.
We started weighs in two thousand and seven in order to help people to avoid traffic jams. There are more traffic jams today than the work in two thousand and seven, right, So obviously this problem is not done yet and we will need to address that as well. And so there are a lot of big problems that needs to be addressed. And I think that at the end of the day, it's the entrepreneurs that are going to change the world. And yeah, our role is to encourage it.
Well, love it and love when you come in so great. Uri, Thank you so much, Olivine, co founder of Ways.
Of Course.
Check out the book fall in Love with the Problem, Not the Solution.
If 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 wants us live on YouTube.
A Bloomberg News team of Pema Parmer, Lin, Ley Lynn and Sarah McBride reporting today that secondary market, you know where backers of postal health startups can sell their stakes to other investors, are drawing increasing interest from venture capital and other money managers that are really looking to snap up chunks of private companies on the cheap. It's a sign of the times, Matt.
Yeah, Well, I mean I've seen this sign of the times before, so it's a sign of the times again. The warning warning. Well, no, I mean, for example, before Facebook, iPod you know, secondary markets were all the rage at the time, and if you've gotten this dock then you'd have had a lull, but you would be very wealthy right now.
No, it's a really good point, so let's get into it. Bloomberg News hedge fund reporter Hemla Palmers here and Javier Avolosi is co founder and CEO of Caplit joining us and they are a provider of pre IPO class market data. And he is with us on zoom from San Francisco. Heima, set up your story, give us the background.
Right, So there's a few things that are going on right now in the market. We're seeing founders, employees, investors of startup companies really under pressure right now, a lot of them seeking liquidity, and so they're looking to get cash, you know, maybe because the job market is difficult, maybe
because interest rates are arising. There's fewer exits for employees now if there's not as many IPOs, and so they need cash, and so they're looking to increasingly in this environment sell their shares on the secondary market, or firms, hedge funds or venture firms maybe looking for liquidity as well for the similar reasons, also looking for liquidity selling those shares on the secondary The other side of that is that there's great opportunity to buy stuff because the
prices are incredibly attractive in this environment as valuations have fallen.
So, Javier, is your company then kind of like a Bloomberg for private companies.
I think that's the exact right way to characterize it. Matt, So, first of all, thank you for having me on, Carolyn Matt and Himma for including us in the article. What we do is we really work to aggregate a lot of the market activity that's happening in the secondary market and bring transparency to the market by centralizing this pricing
activity into one place. So when him or others want to shine a light through the form of media, cap like can be a resource in terms of saying what the pricing of these private companies is based on what we see in secondary trading.
So do secondary markets then use your data in order to make the transactions more transparent.
That's exactly right. So the biggest users of the Caplite platform are actually brokers who have a responsibility to their clients, as Hima described. In some cases that's employees or founders. In other cases that's institutional investors who are looking to sell their stock pre ipo for whatever reason. We would serve the broker who is then building that client relationship and effectively helping them to buy or sell something.
So what your data is actually what Emma said, is that valuations have gone down a lot, correct, And this is why you know, whether it's a hedge fund or other private investors, they're saying, wait, here's an opportunity for me because these are really distressed it seems like assets.
That's exactly right, Carol. So and to quantify that a bit. On average, we see pre IPO Unicorn type companies trading at about a fifty percent discount from where the VC that invested in them last valued them, and that discount has been increasing for the past twelve months and is
finally starting to stabilize. So there's an old adage in the private markets that private markets tend to lag what's going on in the public markets, and that has played out almost exactly in this latest cycle, where private company data is about a quarter maybe a little bit more lagging behind publics. And so when we saw the public market turn in October and start to rally, private markets are following that trend very closely, just in a quarter or two delay.
So as we see the buying that's increasingly prominent in the space, how do we tell whether someone is buying because they believe in the company and they think that they can get it at a very attractive price, or are we if we're seeing some buying of companies where the firm is I invested in over so long that they just really can't afford to have that company struggle. Therefore we'll want to buy more shares and provide them with liquidity or something.
Yeah, you are right to point out it's absolutely a function of both. So we have seen quite a bit of existing investors snapping up shares, especially back in Q three and Q four, mostly Q four and leading into Q one of this year, where investors who are already on these companies cap tables who have full information into how these companies are performing, saw the fifty percent drop that had been happening over the past couple of quarters and saw that as a perfect entry point to kind
of start building on exposure that they already owned. But our market is pretty thematic, and so when I think about answering this question of what are investors looking for, how are they picking the right ones? Oftentimes they're playing certain themes. This is not dissimilar than the public markets. A massive theme that is being played on right now is regenerative AI, right, and so a lot of what's pushing the public markets up is also pushing private markets up.
So you have companies like Open AI or Anthropic or data bricks or salonists who are sort of benefiting from these tailwinds that are pushing the markets up.
More broadly, we've seen a couple of times xavier where private markets have gotten secondary markets have gotten really big As I mentioned before the Facebook IPO, when there were so many unicorns out there, we saw that as well, employees just looking at cash in buy a big house or whatever before they went public. What do you think is driving it right now? Is it just the valuation drop and the fact that there's a lack of exits.
So I think that lack of exits piece is a point that probably deserves more attention. This might sound like crazy to say than it's already received, and a sort of a loser in that situation that is not often talked about is the employee or even some of the very earliest investors like investors, These are folks who expected an exit event to happen in late twenty twenty one or early twenty twenty two, and for really market driven in macro reasons, their company, their private company, shelved that
offering and have sort of like basically put it on hold indefinitely. And so what's been driving a lot of liquidity seekers to the market is you have in your head that you're about to receive a very large payout for work that has been happening for years, and suddenly that's delayed indefinitely. Now you're turning to the private markets to help get you some of that cash that you had already sort of mentally been budgeting for the reason so that's kind of where the cell side comes from.
The reason the buyside is coming back very strongly is that IPO window is starting to crack open. So every time you have an article talking about Klavio filing or Rubric hiring bankers to row, refreshing a registration statement for a public offering, these are bits of news that get pre IPO investors really rushing back into the space to help clean out some of the supply that's being that's being added to the market by employees, founders, and early investors.
Heavier in terms of what you're seeing and these depressed valuations, but obviously investors finding some opportunities. What it does it give you any kind of clues about the broader market environment as we are kind of in this funny place where I feel like every day we're debating what, you know, a FED speaker says, or Jay Powell says, or what's going on with the economic environment. So I'm just curious if it gives you any clues about kind of the health of this overall financial market.
It does. I mean, I really think about the pre IPO and private markets generally as a proxy for risk appetite. And so, you know, when we start to see the bid to ask volume ratio at Caplight starting to flip towards more of equilibrium between the amount of buy interests that's in the market and the amount of sell interest and that that's the closest it now is the closest time we've been to that equal really since twenty twenty one. That starts to give me confidence in the broader rally
that's happening across capital markets. You know, I think we've worked with private company CEOs CFOs to help them kind of understand when they should even be thinking about raising additional primary capital and or if they should be thinking about a public exit for the first time in twelve or twelve or so months. And so, in a way, the adage that I referenced earlier that said private markets
lags public markets. While that is true from a pricing standpoint, the risk taking sentiment that happens in our market can sometimes be predictive of when companies are going to come out and raise primary rounds or even potentially listed on the public markets.
On that point about the bit ask spread, you know, we're seeing not as many deals actually done compared to the opportunity. I'm curious what you think it'll take for the transactions to actually increase.
And just got about thirty seconds half of here.
Of course. Yeah, So keeping it brief, the biggest necessity was a reduction in valuations, and now that that has happened, we're seeing more bids come into the market, larger bids come into the market. And whenever we see these three factors reducing prices, more bids and larger bids, we tend to see closed transactions. So I actually and we ourselves
are seeing a lot of these through our platform. So I actually think this next quarter Q three of twenty twenty three is going to be a pretty active quarter in terms of reporting out closed secondary transactions.
Really cool perspective, Very cool.
Yeah, agreed, Very awesome.
Javier, Thank you so much. Javier Avalos, co founder and CEO Caplit, joining us on Zoom from San Francisco courtesy of our own Hema Palmer. Thank you so much. Thank you Marie bringing us Javier. Here's she, of course's hedge fund reporter at Bloomberg News.
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, playing Bloomberg eleven thirty.
As we continue to explore our world where equality and diversity inclusion are lacking, today, we're going to look at it mat from the perspective of small business and diversity. You and I talk about it in a million times. I mean, if we had a buck for every time we cite the McKenzie study and diversity and the importance and how it, you know, impacts the financial bottom line. This should have been solved years ago.
Yeah, no, absolutely, But you know, one of the problems is the structural impediments to wealth creation for black and other minorities in this country have really held them back from, for example, home ownership, you know, or small business ownership. And that's what we're gonna focus on right now.
All right.
Tina Ashley is with us, president of the Insight Center over at Capital One. She is with us on zoom in DC. Sheina, nice to have you here. Tell us a little about the program, this stuff that you guys recently did.
Yes, great to be here, Matt and Carrol, thank you so much for having us. We took a study, a deep dive into sort of looking at this question. There are a lot of efforts right now that are focused on small business ownership as a pathway to addressing the racial wealth gap, but it's a very much understudied topic in that we haven't had a lot of research out there in the field that really looks at the returns to wealth for the business owner himself or herself from
owning that business. And over history, we have seen for the average business owner that business owners generally have greater wealth than non business owners. But that's looking at the average American and that's typically looking at the white business owner. So we wanted to disaggregate the data look very specifically
at black and Hispanic business owners. And while others have looked at this question nationally, we wanted to take a place based blens on this and we went into a mid size city in Richmond to see that at that level, do we still see patterns of which business owners yield a wealth return from their business ownership. And what we found was a bit surprising that business owners actually had half the wealth of non business owners through the time
period from the study. So looking between twenty seventeen and twenty twenty two, non business owners had greater wealth gains than business owners, and that enrichment we think though that some of that could be the academic Yeah, definitely, yeah, definitely.
You know, this was a time where there was just a lot of government support to non business owners and also the business owners too, but business owners were trying to pour a lot more of that capital back into their business so that they could just survive, and so the business owners may not have been looking to capture some of that for their own wealth building.
What is the.
What is the difference between black owners and white business owners in terms of the wealth effects.
Yeah, so even in the study where we did see some black and Hispanic business owners really thrive and build the kind of wealth that we want to see, thirty five percent of business owners in the study gained at least one hundred and eighty eight thousand dollars of return from their business. And that number is significant because it's the difference in the racial wealth gap on average between
black and white people in this country. But even those that had that high level of wealth gain, it was still only twenty five percent of the wealth gain that a white business owner in Richmond had, So the racial wealth gap still persists.
You know.
What we found though, that for those that were able to actually make wealth gains, it was under the right conditions. So there's access to capital, which is number one a
condition that helps business owners thrive. But more importantly, what we found in this study was that social capital and knowledge capital were essential, and so access to the kind of networks and incubators and sponsors and mentors that really help business owners understand when it's the right time for growth, how to price their products, how to tap into new markets.
We found that those business owners, regardless of race, that had that kind of access to networks and knowledge were those who were able to succeed.
So what do we do about it?
Then?
You know, we hear these kind of statistics all the time and they're disturbing to say the least, depressing probably is a better word.
But the persistence of it right that we're yeah, we continue to talk about it and doesn't change that.
But what can be done to create you know social knowledge networks if you will, for black and Hispanic you know potential business owners so that they can reap bigger benefits.
That is a great question. Yes, this is a not a study to highlight the problems once again, but want to seek solutions. And one of the things that we were interested in because this is a time of massive public investment in small business the historical levels of funding coming out of treasury and out of the private sector to support small business owners and their growth. Much of that is going directly to small business owners themselves through
the form of grant and different kind of capital. But what this study raises as a different solution that we also need to think about in addition to the capital that's going directly to the business owner is support to create an ecosystem that will provide that kind of network effect and the access to knowledge and insight and expertise that the business owners need not just to start a business, but to continue to grow and expand that business over time.
And so what we're calling for is just greater investment in technical assistance and more use of technology to be able to bring that technical assistance to the business owner in real time. We saw that black and Hispanic business owners, even though they're in communities like Richmond, which are so rich in these resources. There are accelerators and incubators and CDFIs all who exist within the community, but black and Hispanic business owners aren't tapping them at the same rate
as white business owners. And part of that is because it's not offered online in a virtual environment where you could work on it at different hours of the day, or tailored from a cultural competency perspective so that it really reaches them in the way that they want. And so we think this is a time for increased investment in technical as systems that draws on technology to be able to deliver expertise in real time and democratize access to that information.
All right, Well, good insight and fun to get some time with you you and and really shed some light on this. Sheena Ashley, president of the Insight Center over at Capital One, joining us on Zoom from Washington, d C. I agree with you, though, Matt, like I feel for everyone who's trying to make this better because I just feel like we have to do this a long time, and we feel like the problem just continues to persist.
Right.
I was just looking up Robert Smith, for example, you know, the billionaire at Vist Equity Partners. But of course he went to MI I T and at Columbia University and he builds that kind of network.
Also, both of his parents are doctors.
All right, you are listening and watching Bloomberg Radio, brother Marc a journal How about you.
Let me drive? Oh no, no, no, no, who's going to honey?
Please gravel?
I want to drive.
It's a good question.
This is the drive to the clues for th Well brid on Bloomberg Radio.
All right, everybody just got about seventeen eighteen minutes left in today's trading session. Are you yawning?
Are you can come on?
All right, everybody's watched on YouTube in Bloomberg originals. That was a yawn.
I was just refreshing my lungs because I only got about five hours of sleep.
So okay, what did your daughter say to you this morning?
Daddy? Are you tired?
Yes?
Indeed, I feel like the markets are a little tired when it comes to the bounce that we've seen in a big way. Right on the equity side of things. We've got, as Charlie mentioned, a little bit of a gain on the S and P Nasdaq really the opperformer once again, I'll eat tens of a percent down a little bit lower. But as Romaine said earlier, it really does seem like it's a rat story again.
With J.
Powell back up on Capitol Hill, did have some economic news, so let's get to it. A really cool guest, Veronica Clark, economist, Everett City Group. She's with us on Zoom in New
York City. Veronica, I love that we have you here as we count down to the close, because I really feel like in terms of equity markets or financial assets, we really have to have a good understanding about the economic backdrop to kind of understand maybe where financial assets go from here, where they should go from here based on the fundamental economic backdrop. So where are we?
Yeah?
Yeah, it is a really confusing backdrop right now. Unfortunately, I mean we're all waiting for this recession that still is not happening. And of course, you know, with that recession not happening, we're not getting the slowdown in spending or activity, and that means inflation is still high, that means the Fed is still raising rates. It is a very confusing, confusing backdrop. But of course we had Powell
today and yesterday. This is still a FED that's focused on on raising rates and slowing activity a bit more.
So, what kind of rate increases do you expect going forward? Are we going to see the two that were indicated in the dot plot, or as Raphael put it, or we're going to see passive tightening that doesn't include actual rate hikes, but just a reduction of inflation to bring the real rate up.
Yeah, those we're a bit dubbish comments from Bostic, but I think you know, we are with most of the FOMC members right now with the committee and seeing two more rate hikes. We'd actually seen that even ahead of last week's meeting, you know, had been penciling in potentially that they could have even raised rates last week. Of course we didn't get that, but we've been penciling in a five fifty five seventy five terminal rate for this year for a while. Of course, the median dot last
week did come up to that range. So we are still penciling in two more hikes right now, thinking that they'll be in July and September, but of course a lot of variability on when we might get them. But yeah, still think that the rates are rising a bit more just because you know, inflation is still pretty persistently high.
How often do you guys say, maybe J. Powell might get this right, or how many times do you say he might just get this wrong?
Yeah, I mean, I think the Fed is is doing the right thing here. You know, they were, you know, potentially a bit behind the curve, you know, when we had inflation coming up, but you really, you know, I think it does need to be. Inflation is still the number one focus, and we heard that from him, you know, today and yesterday they have met their you know mandate. On the employment side, you know, we have a very
low unemployment rate. We're still running you know, monthly job gains that surprise to the upside every month, you know, three hundred and thirty nine thousand in the last report. But we are not there on the inflation side of things, and we do still have persistently high inflation. So I think they're they're doing the right thing, and that that has to be your focus right now.
You know.
I got an email from Torsten Slock this morning over at Apollo showing the average new mortgage payment across the country, and it is a shocking chart. I had a messag him to make sure the data is correct, because we average between one thousand and fifteen hundred dollars over the last twenty years, and now we're looking at a three thousand dollar or average monthly payment for a new home purchase. Is this an environment in which the consumer is going to be able to keep up? Yeah?
It is. It is pretty incredible. I mean, housing affordability is not good right now. Obviously that's partly due to higher mortgage rates, but it's also because home prices, you know, they they did come down a little bit, but not that much, especially relative to the last three years of you know, really substantial home price increases. We of course had some existing home sales data out this morning. Those median prices on a seasonally adjusted basis are actually really
rising again. We saw that in the May data. I think it's just an issue of yeah, housing is still very unaffordable. But you know, if you did lock in a lower mortgage rate over the last couple of years, which a lot of people did, then you're not going to sell that home. You're not going to sell your home, You're not going to give up that rate. So supply of housing is still really constrained, which of course we
know from the last years of supply is constrained. That means upward pressure on prices.
Yeah, and we've done a bunch of stories. I think everybody has right this. Yeah, here's a US home resales barely rises, inventory constraints worsen. I mean we now, I know, I have a lot of relatives or they're not leaving their homes because they've.
Got really low rates.
Having said that, Fronick, I'm curious what's more important though, in terms of economic growth. Is it that the labor market stays strong and people keep on working, or is it that people are buying homes?
Yeah, it is. It is really fundamentally going to come down to what happens with the labor market. You know, we we've been surprised, I think on you know, the degree of excess savings that was built up over the pandemic that you know, how much that's been able to come out and support spending come out into the economy. But the main thing that you know, will continue to drive you know, spending, will continue to have people wanting to buy homes, you know, to at least in an extent,
is if people still have a job. That is, you know, the number one issue is, you know, as long as the labor market is still just as strong, then there's really not a lot of that downward pressure on inflation at least, you know, and that's a bit of a worry for the Fed, you know, they of course, you see inflation and labor market as very linked.
We have seen.
The initial jobless claims finally kind of jump up. I know that they keep being revised down, so the first readings are always like above two fifty, and then they get revised down significantly. What do you think the chances are that the labor market cracks here? And if so, how fast can it go? Veronica?
Yeah, that's that's really what we're all looking for now. I mean, I think you know, we are included in this. We have an expectation, a lot of people do, for you know, a mild recession later this year. Have been expecting it for a while, been expecting the labor market to slow. I do think that claims data, you know, is probably the best leading signal of that. But you know, it would be if we saw initial jobas claims trending higher week after week, for you know, a number of weeks.
If the increase in claims was broad based across states, that's really not.
Well, That's what I wanted to ask you of Veronica, right, because the run up has been concentrated in just a handful of states. So I'm just nationally the U States, the claims remain below the twenty nineteen average. So if we start to see a broad now that's more worrisome.
Yeah, I would think. So, you know, we've seen claims higher in California. Of course, we know about tech playoffs. We've seen that in other data, so that's not too surprising. It's still there. Of course, we know maybe a month or so ago had this increase in Massachusetts that turned out to be fraud. It looks like maybe that could be some issues in some other states the last couple weeks of claims, and maybe even more so in the
next couple of weeks. We did get a law change in Minnesota where education workers are able to file for unemployment over the summer break. Yeah, so that actually is a you know, an idiosyncratic you know, it's not layoffs, but could mean that claims are a bit harder to interpret. So yeah, I really do want to look at detail.
Scott It you'll see where it is. We got to run Veronica Clark over at Citygroup. Citygroup. Excuse me, an economist there on zoom in New York City. This is Bloomberg Radio.
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