U.S. Posts Robust Job Gains, Mixed Inflation Signs

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. Alright, so, as we talked about US hiring advance at a robust pace in April, yet a smaller labor force may increase pressure on employees

to boost wages even more to bring workers back. And in case you missed it, we talked about at the top of the show, non farm payrolls rose four hundred twenty eight thousand last month, broad based advance, matching the game in March, and then, of course, had the unemployment rate holding a three point six percent Averagearily, earnings rose, albeit at a more moderate pace from a month earlier.

Something you Lena definitely focused on. Let's get into it with Relea Pollock, the chief economist at ZIPP Recruiter, joining us on the phone from Santa Monica, California. Julia, how are you in Santa Monica? I know you'd be much more hill are you. That's that's the East coast versus West coast right there, you know, Uh, Julia, I want to talk about the labor labor numbers of course, um. You'll initially at from Bloomberg Economics earlier told us that

this jobs report had had something for for everybody. What stuck out to you? Well, I think you know, any day you have a big number like this, and the games are that broadly distributed across the economy. It's a good day for workers, uh, and for hundreds of thousands of companies that managed to feel vacancies despite all the odds.

Um As you dig deeper, the unemployment rate a little bit higher than everybody force forecast, labor participation rate going down a little bit, average hourly earnings increasing a little bit less. So as you dig a little bit deeper, how do the data points from the Labor department kind of cross with what you are seeing special effectly at ZIP Recruiter. Sure, so it's hard to know from what we're seeing in the report whether there's any cool down

happening in the labor market. Yes, average wages are growing a bit more slowly, but still at quite a high pace. From six point four percent wage growth for non supervisory employees is you know, nothing to sneeze at um eleven twelve percent pay increases in leisure, hospitality, and in transportation warehousing for for ranked file employees, and those are very large numbers. Of course, inflation is outstripping pay gains for for most employees, but there are still many workers coming

out ahead. Um that said, we have so many low wage workers. Whoops, we're just a little technical difficulty there. So hopefully we'll come back to Julia polit Chief Economists and ZIP Recruiter, because it was interesting she was gonna

get into the lower end of the labor force. You know what I thought was really fascinating about about the way that that she just spoke to us is she she presented it in a sense of the employers being fortunate to have found labor, which I think is really speaks volumes as to where we are right when we think about the labor report, we oftentimes look at it from the perspective of the worker correct and how many Americans are working with the unemployment rate is And she

said ZIP recruiters, so she knows that the struggles that these companies are having actually finding employees. So she said that you know more than one of the companies that were able to find employees. Think about coming just from Milkin and I know the panel I did with the CEO of Lowes and Kroger Um stitch fix. I mean, top of mind is labor and finding the workers they need. Um, let's get back to our guests, Julia Pollock, she's chief

economist and ZIP recruiter. You know, Julia, Tim and I were just at the Milken Institute Global Conference and we were talking to CEOs from all industries and top of mind is being able to find the workers that they need. UM, tell us if that's what you're finding in the data points that you guys are tracking as well. Well. There are two job openings to every unemployed worker right now. Historically it's been the reverse, there have been more than

two unemployed workers per opening. So this is the tightest lave market on records. It means that employers are having a really tough time finding you candidate to the vacabuse. And at the same time they're seeing these record breaking numbers of quits each month, they're finding it harder than ever to hang onto the workers they've got. There are a bunch of reasons that's happened. The switch to remote work rise and remote work is a big, big reason.

It means that jobs switching costs are much much lower. You can leave the job now and stay in the same industry, in the same occupation, while staying in the same room without having to disrupt your family and up reason. We certainly see that in the Jolts data often in terms of how that plays out. What's interesting is what else do you see? I mean, you guys have a lot of data that's in front of you as people

are searching and looking and tone and so forth. What is it that's interesting about the trends um also in this particular employment environment. So one exciting trend is that we are seeing this full and healthy return of the labor market. Today's numbers notwithstanding, uh, you know, the entire household survey portion of the report today was a bit of a doozy. Everything went down in the household report, even the employment level. That's just not consistent with twenty

eight non farm payroll gains. So I think we should discount the household report today. What we've been seeing over a longer period is a sustained return of workers to the labor force. UH. That is exciting there seeing the search behavior pick up. And then we're also seeing this sustained interest in remote work and that's causing employers to have to adjust what they're offering and to lean into

the hybrid remote model. Julia, was there anything just in the last forty seconds that we have with you, was there anything in this report that you didn't see coming based on the data that you have on the ZIP recruiter platform, Like, was anything a surprise in here? Yes? I was surprised to see the uptick in government tie airing. Uh. That is an area where we've seen tremendous weakness. Government agencies are seeing terrible retention numbers at the moment. The

private sector is posting much stronger wage games. Non unionized workers are getting stronger wage games than unionized workers, So the government is struggling to catch up. But it looks like they might be turning the tide around. That's interesting to see. It is always so good to dig into the different sectors and see what they're seeing. Hey, Julia, thank you so much. Have a great weekend. Julia Pollock, she's a chief Economisturan CIP recruiter. On the phone from

Santa Monica, California, where the Senoi signs. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Just ment to the Cynthia Coon's story that is in Bloomberg Business Week magazine about the abortion pill. We want to get to another story that's in the new issue a Business Week, which is out on newsstands, online, and of course always on the

Bloomberg terminal. You know, we've been following and Charlie's been talking about shares of Zelo, which are tumbling today start getting a two year low after putting out a disappointing outlook. We've got a great story that's in the magazine that actually looks at the CEO of Zillo. We're talking about the CEO Rich Barton. Patrick Clark is real estate reporter for Bloomberg News. He's with us now in the Bloomberg Interactive Broker Studio. Pat story featured in the new issue

of Bloomberg Business Week magazine. It is available on news stands, on the Bloomberg and at Bloomberg dot com Slash business Week. Also joining us is Joel Webber, the editor of Bloomberg Business Week. He is joining us on the access line right now, Joel, I want to go to you first, Um, B Hag. Explain what the hag is. I've never heard of it before reading Rich's story. Yeah, Bi, hag is certainly one place we could start, and I think I'll get there with with Pat's help. But you know, to

back up a second. You know, Zillo was and has been an app and website that people have been obsessed

with for on the real estate front for years. Um, what maybe the company especially interesting within the last couple of years was this effort to get into house flipping, and so Zilo, looking for growth, sort of became the intermediary that was hoping to like actually and and did actually buy houses, and then you would actually buy a house from Zillo and as Pat, Pat basically broke these stories about Zillo's algorithms starting to go off the rails.

Um and that started sort of happening last year, and so this story is sort of the culmination of a lot of Pats reporting and he got to spend some exclusive time with the CEO and talk to him about those efforts and what the heck is a b hag. It's a big, hairy, audacious goal. It's obviously, um, it's it's a moonshot. It's a it's a you know, a

big swing. Um. Those are things we hear about, though, like moonshots or that's like, you know, common in the vernacular is like it's a it's like a nine early nineties formulation from Jim Collins is sort of management guru, built good to grade and built to last and and and you don't at some point, uh So Rich Barton, the CEO of Zello, likes he likes the phrase b hag. Where others say moon shot, he says be had very often.

At some point I did check the terminal to see how many other quarterly earnings calls be hag has come up or big Harry Auday shows, and it's very very seldom. It's it's it's basically the other No. I didn't well what does it mean in terms of how he runs this company and how he thinks about, you know, taking risks and when it pays off and when it doesn't. The way I think about it, it's it's a way that he sort of marshals his employees to pursue something ambitious.

And in this case, it was transforming Zillo from a company that basically sold ads to real estate agents to a company that bought houses and tried to capture sort of a spread on the flip of each house. And then I thought it could attach all these other revenue streams to that. And it's not a small effort, right, I mean, there's there's um you have to know why home prices are going to be now what they are

in three months from now, which nobody knows. You've got to manage portfolio risk like you're a hedge fund and you've got to manage a contractor. Network was actually going in and pulling up old carpet in and putting up paint, you know, all stuff that Zello, all stuff that Zillo hadn't done. Go ahead, joll Yeah, So this was Zillo offers, right, and it was uh, you know, pat, where where was it most successful and what what went wrong? And how did uh when it went wrong? How did rich feel

about it all? Well, everybody loved them and not everybody love this. What I should say is, um, it was successful. I mean it found a consumer audience. People wanted to pay Zello for this service. Now. One of the reasons people wanted to pay Zello Zillo was sort of giving it away, right, I mean, Zillo was buying homes at some point in the second half of last year for you know, on average twenty dollars or more than it could eventually sell the homes for. So Zello would you know,

you'd go on zillo dot com. You'd say, make me an offer on my house. They would offer you something. You would say, well, that looks like thirty thou dollars more than I could sell it for right now, and that's awesome. What to do it? And so okay, So they were successful in buying a lot of houses, and they you know, in a in a long term sense, they thought they needed to buy a lot of houses

to get the scale to make this business work. Um. As Zillo started to realize and as Barton started to realize what had gone down, which is that they had you know, overpaid by four d million dollars or so for for ten thousand houses or twenty thou houses. Um. He said, well, hold on, maybe this isn't um, you know, the key to transform in my business into a much

bigger company and solving consuper problems. Maybe I'm about to blow up and um and he thought about it, and he said, maybe it'd be better not to do this. You know, you bed, you gotta be willing to pull the plug on it. Sometimes, you know, you take a big swing and sometimes you miss, and you and you try to move on from it. And you know what

Rich has done when Zillo is done is um. You know, they sort of took their medicine at the end of last year and and um and and and they came back out with a new b HAG because that's what well, let's talk about that, because I'm wondering where Zillo goes from here. You write about the destruction and the value of Zillo at least in the on the public markets. It's down more than from highs back in February of last year. What's next for the company. How's it trying

to turn itself around? So they at the end of the day. They want to do more than just sell ads to real estate agents. That's that's a limited business. They need a bigger business, okay, And so they did what they decided was, um, they still want to They're still gonna do some of that. They're going to change their revenue model around it. They want to be a

mortgage lender. Um, they want to. There are these more new kinds of mortgage products, basically new kind of bridge loan, you know, to help you make a cash offer on a house so you don't get beat out by an investormer somebody who's got stock options or family money to buy a house with. And so they're gonna do all of that. And the way they've organized that, they say they're gonna they call it a super app for housing and you know, go on your phone and manage the

whole transaction. And uh, they still you know, so it came out and said, well, we're gonna double, we're gonna double our revenue, we're gonna increase our conversion rates and so forth and so on. So it's the new it's the new bi HAG. It's not as tangible as we're going to transform the company and buy and sell five thousand houses a month. It's a little harder to kind of get your head around, but nonetheless they've set a new target for themselves. Okay, Pat, last thought, can you

tell us about the moat? And just got about Sure, there's Enrich's office on the forty floor of a tower in downtown Seattle. When you walk in through the front sort of door of the office, there's a there's there's a moat, a pool of water that you crossover. And Rich told me he was going a little bit cheapishly. He was like, well, somebody told me once that crossing water makes people feel like they're leaving their troubles behind them. And I was designing my office at the time, and

so I decided to put this here. We need one for the studio, Carol, we do have a fish pond when you walk in. I'm just gonna it's not exactly a mode here at Bloomberg, but end of the same theory, it does like troubles behind when I enter work. Oh man, b hag, I'm going to start using that around here. What do you think? Sure, go ahead the next management meeting. I've got an idea. Let's see how that goes. Yeah, I wouldn't see how that goes um such fun and

such great reporting. Patrick Clark, real estate reporter at Bloomberg News. Here in studio. Joe Weber, editor of Bloomberg Business Week, on the Access line in Brooklyn. Check out this story. It is in the new issue of the magazine online on the Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Speaking of someone who's not quite on the West Coast. He spends a lot of used to be right. He

used to call that home. Hasn't for a while. We're talking about Elon us. This story, by the way, among the most right on the Bloomberg. It's about Elon Musk's fixer who is quietly tending the world's biggest fortune. Leanna Baker is one of the authors on that story. She's Deal's team leader for Bloomberg News. She joins us on the phone from New York. Lenna tell us about the man behind the man, who is Jared Birchall. So, Jared Birchall has been working with Elon Musk for the past

six years. He's a former Wall Street Guy he started his career at Goldman Sachs. Then he worked at Meryl where he was fired. Finally he found a home at Morgan's family, which is where he started to sort of manage wealthy clients and he had a knack for it. And certainly that's uh, you know, come in handy here with Elon Musk trying to buy Twitter and all sorts of different projects that he's put Jared Burchell on. And he's also the only employee, it seems, of the family office.

So for the world richest man, that is a tall order. So it's so interesting. I feel like with Elon Musk's universe, right, he is certainly the face and all things he's on

Musk in his world. But then we start to quietly find out about these really smart individuals who are behind the scenes where they're at SpaceX or whether it's Tessa you know, Um, did you have to do a lot of digging or did the company say, hey, maybe you want to write about this dude, especially with everything that's going on, and I think people are worried about, you know, Elon Musk, can he take another thing, you know, put another thing on his plate? Um, My colleague on the

Wealth team. Sophie Alexander did a lot of a heavy listing and a lot of the digging and to filings to find out more about Jared Burchell. I'm more the person that talked to Wall Street and M and A professionals, And from what I understand, h Virtill is very much in the inner circle and he was instrumental at putting

together as a Twitter bid. He was sort of the face in front of the banks and helped coral them along with the help of his former employer, Morgan Stanley, to get Musk the money, uh to do this deal. So he's really a key person here. What do we know about just the way he just his career and and what he does. And it's interesting because he's sort

of the antithesis of Musk in some senses. You and Sophie in the story compare and contrast the two men, and note that, uh that Birchall is part of the Mormon Church and went to b y U and has kids and is married, whereas Elon Musk, you know as seven kids, has been divorced three times, and there are

a lot of differences between the two of them. For sure, Sometimes you need someone to kind of balance you out, and as a Mormon family man who's very much out of the headlines and stuff from the story today, Burchill definitely serves that role for musque Um. People I spoke to who know him just describes him as very nice. Uh. He just you know, gets things done. Even though he didn't have experience putting together multibillion dollar deals for big

Internet companies like Twitter, he made it happen. Being a manager of a family office also involved taking on odd jobs. Apparently he's in charge arch of helping us get nanny's for all his kids. So it's not a job for everyone, but virtual certainly you know, fits the bill here well. And I do think about you know, Ellen's relationship with the financial community, especially as he's trying to do this Twitter deal and right over the last week or so,

we keep getting more pieces about it. It It really looks like he has lined up so much of it. But I do wonder about having someone like Bertill, you know, who worked on Wall Street, understands the financial community, Like, what, how does the financial community see this dude? Right? So he was definitely someone who's coordinating behind the scenes. Let's say he would come on a video call first to say okay, I'm you know, I'm getting Ellen next on

the call. But Virtu will be the first person you see. Um, he's the one with Tyson Morgan Stanley, as I mentioned as a former employee. But I also heard that he's just a nice guy and he's not going beyond his capabilities. He'll rely on experts and help hire people to bring them in to do what has to be done for Mosque's financial empire. Lea, this is he's managing the family office of the world's wealthiest person within churring sixty billion

dollar net worth? How much billion dollar net worth? I mean most of us tied up in tesla. Take a tesla. As you guys write, Um, how lucrative is this? Is this for someone like birch Ally? You do? You mentioned the story that about a two point five million dollar home in Dallas, But you know we're talking We're not

talking tens of millions of dollars yet. Maybe so we don't have any filings or anything to show what a salary is, but we do know that, UM, managing a family office could be very lucrative, as you can make millions a year. One expert set up to three million. But considering he's one of very few employees for the world's richest man's family office. Uh yeah, but you know, the sky's the limit. Some billionaires family offices have a hundred employees, and uh, you know, Musk only has one

or two. So um, he's really the only guy sais there's someone to pay, it would be him, But again we don't have the reporting to show what he's making. I do feel like it's Ellen's world and we're all just living in it. That's because that's because you spent so much time on Twitter. It's so true. Utlianna, thank you so much, really appreciated. Leanna Baker. She is Deal's team leader of Bloomberg News. I'm roc journal. Yeah, but you let me drive. No, no, no no, honey, please, I'll

do the riding gravels. I want to drive. It's a good question. Good drive. This is the drive to the clothes thin well driver Don on Bloomberg Radio. All right, TikTok, it's just about ten minutes left in today's trading session. Getting ready to wrap up another Vaulatil day and another vaulati a week. Although it's interesting, we are seeing some Bundy into the clothes. So here we are ahead of the weekend, and we're seeing certainly all the major equity

averages bounce off their loads. We're still down, but just barely lower. Dowd just went into uh positive territory. It's now up about five points asps. We heard from Charlie. Still down, but you know this is what we're seeing here. Yeah, Volatility is the name of the game right now. Steve Brown his senior portfolio manager at American Century Investments. They've got two billion dollars in assets under management. Steve, how are you very good? Thank you? Hey, good to good

to have you with us. Um, what are you thinking when when it comes to this volatility right now? I mean, it's it's really surprising to see that this is just continuing even after we got more insight into how the fet is thinking about interest rates and its balance sheet for sure. I mean basically, the Feds that they're gonna raise the Fed funds rates this year to address inflations concerns, and it it's taken a while for its price into the equity market. The bottom market is sold off pretty

dramatically this year because of the higher rates. The equity market has been fighting a little bit, but it's starting to price in the higher rates than the impact of higher rates on the U. S economy. So what does it mean for a sector that you focus on, and that is specifically the real estate area. And I'm looking at for the week overall, real estate UH. If I look at the eleven major industry gips in the SPID, the real estate index was the worst performer, down about

three point six UH for the week overall. If I look at year to date, real estate is down about but near the bottom of the pack. Higher rate environment obviously very tricky can be, and we're watching it very closely when it comes to the residential market. How about for the assets that you oversee, whether it's in the Global real Estate Fund or the real Estate Fund of Right American Century. Sure, a great question. Um, Well, the rate have sold off blood last week, frankly because of

concerns higher rates. So higher rates investors have concerns that cap rates, which is used about commercial real estate, will go up. So that's a valid concern. I would say though that um, real estate, commercial real estate also benefits from inflation, so they've had, you know, expanding earnings over the last twelve months. And actually pretty good earning so far in the first quarter of this year because with inflation, you've got um an impact construction costs, makes new construction

more expensive. And secondly, there was a slow down in construction during COVID, so demands been better than supply. And first quarter earnings look good and we're expected about sent earnings growth for the read sector this year. But in terms of when the investors focus on interest rates, the real estate does show up as an asset class that has a negative impact on race in terms of evaluation

of the properties. But if they focus on inflation, generally that's a positive environment for real estate earnings performance and stock price performance because inflation is commercial real estate's friends. So when you're thinking about these rates and analyzing them, how how do you think about inflation and the stickiness of inflation right now? We didn't even hear the word transitory wants from that J. J. Powell earlier this week that debate is no longer a debate. Uh, But you

think that inflation has peaked, well, we think, um. We think as we get to June to the cops, the comparables for inflation will be easier. So you have that going for it. UM, I would say that eventually they're gonna we believe the FED will win the battle. As they continue to raise rates, it will slow down economically, which will the economy, which will slow down demand for a lot of activity. So it shouldn't have a you know, cooling off on prices and the CPI sometime in the

second half of this year. There are some property sectors that have done actually pretty well this year. Uh. They're more defensive, such as healthcare and open air shopping centers. But the you know, the healthcare space which has reads it owned senior housing. They're up about actually five percent year today because um, the fundamentals are improving and if if people are concerned, it looks like they are about higher rates slow down the economy than a more defensive

property sectors such as healthcare reads. Uh, their their demand for their product type will probably be less impacted by a slow on the count even many other sectors. So right, so we understand the benefits necessarily, you know, in terms

of inflation or arising interest rate environment. What about though, obviously the other side of all of this is and we talk about this Steve in terms of the FED overdoing it and leading to some type of recession UM and then you know, you wonder how long that recession potentially could last, um, how much does that maybe were you or or kind of shape the type of investments you want to be in right now that you want to kind of get ahead of in case we do

fall into recession. Sure, we definitely believe that the you know, the Fed's gonna continue to raise rates until they get the results they want. And I think one of the after effects of their rate heights will be a slowdown and g d P in the second half of the year in the United States, as well as the reduction and earnings estimates for many companies within the SMP five hundred.

So in that environment, you know we've shifted is the more defensive property sectors such as healthcare, such as open air shopping centers such as power reads. Also, I mean that may in for their product wireless connectivity will remain strong, and we've we've reduced in some of the more or

reduced quite a bit. And some of the more volatile sectors such as uh let's say, regional malls and or the office sector, which will be impacted by perhaps slowly and hiring in the second half this year, he Steve, I want to go to some specific names here that you've got your eye on. You like Kite Realty Group Trust ticker KRG. What's appealing to you about Kite? Okay, sure,

it's an open air shopping center company. They didn't make a large acquisition last year and basically what they're benefiting from is a strong leasing environment UH low bad debt into part of their tenants and um open. The reopening trade is working very well for them and their type of tenants such as a Target of Walmart, Thick Supporting Goods, etcetera, etcetera. They're opening stores and their their blending that are in

store presence with their online presence. What that means is that they're very comfortable having buy online and pick up at the store as a team, and so they're benefiting from that trend. And so we see very good actually any growth for the open air centers and picker Kite. Kite bought another read last year r P a I at a very attractive rate and they dealed and closed to say the fourth quarter of two one, So they're

getting the benefits of that transaction. In two thousands, twenty two and they'll have some very good earnings this year and beyond. Yeah, and recently raised the two guidance, so certainly they're uppeat about the outlook. Hey, Steve, We've got to run, but really fun to drill down into this sector. Certainly something we talk about a lot here at Bloomberg.

Ste Brown. He's senior portfolio manager of our American Century Investments, roughly two fifteen billion dollars in assets under the under management, and he's involved in both their real estate fund their Global Real Estate Fund. Joining us on the phone in New York City. Thanks for listening to Bloomberg Business Week.

Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News