Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week 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.
Okay, everybody, The good news for consumers wanting to transition to an electric vehicle EV prices are falling fast in the United States. The not so great news is the cheapest models remain far more costly than what other countries have to offer.
Tim, So, where is America's twenty five thousand dollars EV and why can't we get there? With more on this story on the Bloomberg Today. Back with us is Bloomberg News auto reporter Keith Nonton, who joins us from Detroit. Keith, first, up, the good news. EV prices around the world and around the US they're falling right.
Yeah, and you know there's no place where they're falling farther than China, where BYD sells an V for under ten thousand dollars. So that competitive threat is really getting the attention of the automakers in America. Who are hustling.
To try and come up with a twenty.
Five thousand dollars VS. That's the new bogie.
Can we come out with a twenty five thousand dollars EV?
So wait, can they make money on a twenty five thousand dollars EV?
Well, so a couple of things, Carol, They think they can. And here's why. One is it's going to be a smaller vehicle, so we'll require less battery, and the battery is the most expensive.
Component by far of an EV.
And because it's priced so low, you would get higher volume. So they think the combination.
Of higher volume and lower battery.
Costs will lead to profitability.
In fact, Ford's.
CEO Jim Farley has said the twenty five thousand dollars EV they're.
Developing that will.
Come in late twenty twenty six, needs to be profitable in its first year.
So why can BYD do a ten thousand dollars EV. Other Chinese automakers do a ten thousand dollars EV. But it's such a struggle and such a challenge for US automakers to do it. Is it all just because of labor costs?
No?
No, there's also the government of China that provides absolutely free money to those automakers, so government support, full government support that would not be legal in the United States or other Western countries. There's a lot of what gives China the competitive advantage they have, but yeah, they do have the lowest labor costs pretty much in the world. They're lower than the labor costs in Mexico, and that also gives them a big lag up.
Hey, Keith, one thing I do wonder does it make sense that we're it's taken longer to get the cheaper EV or the less expensive EV if you will, because you know, so many of the automakers came out with, you know, some really interesting models that folks like, but
they were super expensed. Is that logical as we kind of transition from you know, or transition, if you will, to more evs, that it's it makes sense that they were more expensive to begin with, and now we can start to think about how we make them less expensive.
Yeah.
I think the idea, Carol was, you know, like with any new technology, you start at the luxury end and then hopefully it trickles down.
But I think what the automaker's.
Discovered was coming straight out of the gate with seventy eighty one hundred thousand dollars evs really narrowed your market. There's only so many people who can afford those sorts of vehicles. Maybe they should have been more middle market. GM now has an equinox that is EV that is more middle markets, a medium sized SUV that will come down by the end of this year. Supposedly they're going to have a base model that with the government incentive,
would put it at twenty eight thousand dollars. So you know, and as we know, Elon is developing a twenty five one thousand dollars EV as well.
So he says, or so he says, not giving you a hard time, but it does seem like he says we will publicly. Right, we've all been kind of waiting for this mass market Tesla and then reporting and so on and so forth. As he's saying something else behind closed doors, then.
That will actually happen.
Is the robotaxi that he's now talking about, because he really wants everybody to view Tesla as.
An AI company and not an auto company.
It's the same platform, it's the same vehicle as the twenty five thousand dollars Tesla, So it seems to me they will produce a twenty five thousand dollars car, some of them will have steering wheels, and some of them won't.
All right, hold your breath for August eighth, is what Elon Musk would say, because that's when the unveil is supposedly happening.
Keith, we can't talk to you and not.
Talk about historical parallels when it comes to what's going on with evs in China, because you've been covering the auto industry for so many years, and I'm wondering, even though we don't see these gpvs coming from China to the US and increasingly not looking like Europe either, is there still any sort of historical parallel we can look at when US automakers have had to react quickly to a foreign automaker, maybe Japan in the nineteen eighties nineteen nineties.
Yes, absolutely, this is the nineteen eighties all over again, except on steroids, because while certainly the government of Japan supported their automakers, nothing like the government of China supports its automakers. So you have this competitive threat coming. And sure, Joe Biden's one hundred percent tariffs on Chinese evs can keep them out for a while, but ultimately they'll be here, just like the Japanese came and the Koreans came. I
mean before that, the Germans came. Ultimately they will be in this market. And that's why the American automakers and the European automakers are rushing to catch up. You know that Jeep now is owned by Stilantis, which is based in Europe.
They are going to come with this twenty.
Five thousand dollars Jeep colors Tavaris. Their CEO just sat a couple weeks ago. So you know, everyone is rushing to be prepared for when the Chinese come into the Western markets.
Hey, you know, Keith, for someone who's watched the auto market for a long time and understands it and understands competition, does the US market need to be protected a little bit, especially when it comes to an EV mass market before opening the floodgates, if you will, to foreign competition, Because sometimes I wonder if competition gets people to move a little quicker in terms of development or so I'm curious how you see it understanding development cycles and the markets.
Absolutely, and tariffs, let's be very clear tariffs are inflationary. Ask any economists, they are inflationary. They don't protect the consumer, they protect the industry while it gets us act together. And that's what's going on here. Detroit made bets on big expensive vs. One hundred thousand dollars Hummer evs and the F one fifty lightning when you get it all
tricked out, is way up there. So you know, they made bets on big electric vehicles that require big batteries to power them, and that turns out to be the wrong bet.
So they need a little.
Time to scramble to go back to the drawing board literally and go down to the low end of the market and address the primary concern from mainstream buyers. I know we talk a lot about charging infrastructure, and that's a legitimate thing. But price, price, price, that's the impediment to ev adoption.
Keith, who's in the US is closest to pulling this off right now? Is it Ford?
Is?
I know I can't really call Stilantis to US company, but they certainly own some US companies.
Is it GM? Is it Stalantis? Who is it?
I think it might be GM? I mean Ford's twenty five thousand dollars. EV isn't coming until late twenty twenty six. GM says they'll have their revived and revised Chevy Bolt out next year, and that already was the most the cheapest EV on the American market before GM stopped building it in December. But they're coming back with the new
and improved one next year. And as I said, they have this Equinix that's out there, so you know, they may be the first ones to be out there with an EV that starts in the twenties, but everyone is going to catch up real quickly. Javares wasn't specific when he was talking about the Electric Chief. He just said it will come to the US very soon. So you know, within the next two years, we're going to see a whole bunch of more affordable evs from the US makers.
Okay, they're not US makers, but I'm wondering where the Korean companies and are are with all of these, like the Hyundais and the kias well.
Hundai and Kia have some really nice evs that have been popular with consumers and so.
And you know they don't qualify it, particularly.
The ones that are made in Korea. For the seventy five hundred dollars tax credits. So Hyundai and Kia, which is the same company, are just biting the bullet and still giving that discount to their to their buyers and just taking it out of their high So you know, they are being very aggressive and competitive. Hyundai feels like they can completely reset their and become an eed maker in America.
Let's just hope the charging systems are ready for this mass adoption of Gprev's fingers crossed. I see it at the highway stop centers. There's not a lot of places necessarily to charge up. Keith Notton always appreciated Bloomberg News auto reporter Keith not and jutting us from Detroit. All right, we're going to stay with kind of alt energy renewables to one of the richest individuals in the world who's getting supercharged over nuclear energy.
On that it's one of our most read stories on the Bloomberg terminal about the world's sixth richest person who says he's ready to invest billions in nuclear power.
We are talking about Bill Gates, who made the media rounds this past week and talking about his investments in nuclear power and got into the political momentum behind Nuclear on CBS faced the nation this past weekend.
Of all the climate related work I'm doing, I'd say the one that has the most bipartisan energy clind that it's actually this nuclear work. If we unleash the innovation power of this country, we tend to lead. And I feel great about the support we're getting from the federal government in this nuclear space.
All right, with more on what Bill Gates is up to, the political will behind the nuclear power and the rebirth of what it seems like nuclear return again to Will Wade. He's Bluemberg News Power and Renewables Energy editor right back in our studio. So well, good to have you back. It feels like this is becoming a weekly thing when it comes to nuclear. Bill Gates investing in next generation nuclear power a plant project in Wyoming. What do we know about it? And why is it next gen?
Okay, So Bill Gates is invested in this company called Terra Power and they're investing or they're developing a new kind of nuclear reactors. So traditional reactors use water. The fission reaction heats up the water, the water makes steam, steam makes electricity. He uses liquid sodium, so it's not water. It stays liquid at a much higher temperature, so that allows it to use more of the heat from the fission reaction, so it's a more efficient type of reaction.
So it sounds really cool and if it works, it will be cool. But what's different if it works, Well, he hasn't built it yet, no one. He hasn't built it yet. No one's built one yet. But the theory is very solid. There's a lot more energy there. It's years away from completions, so there's obviously a lot of risk between you know. Now, they just broke ground on it last week. They don't even have permission from the NRC to actually build the reactor part. So yeah, there's
a lot that still needs to happen. But it's a new technology. That's why they call it advanced to nuclear.
Any other countries doing this right now?
Oh, there's a lot of companies working countries. There's a lot of countries working on advanced nuclear designs. There's a lot of companies there's.
But has anyone pulled it off yet?
Oh?
No, No, that's what I'm talking about. No, we're like, the thing.
About nuclear is that it goes for skeptical a little bit.
Oh, don't be that's okay, or.
Should we not be that?
You should be?
No, you should be. The thing about nuclear is that it just goes really slowly. So you can have me in here every week, but not lot's going to change between them.
Build a preview from will wait, right.
But you remind us that some of it has to go slowly to make sure that it is safe. It is secure.
Yeah, they nuclear has some risks. This is real, which is why they are very careful about how they take every step. But all of these things are new designs that have to be perfected. I mean, we were just talking about all the new evs that they've been around for a long long time and they're just getting perfected.
Why will are people betting on this smaller new type as the way to move forward with nuclear rather than the proven tech that yes, is expensive, yes, takes years, but we know works.
So the model that people want to get to is they call it an SMR, a small modular reactor where you can build the pieces in a central factory and they're small enough that you can put them in a shipping container and deliver them on site and it just bolt them together. So once we get the technology perfected, which may be is a mid twenty thirties type of thing. But if that happens, you just have them turning off the assembly line and being delivered.
Tim's shaking his head. I mean, the timeline and all of this, Like I understand we have to be safe and careful and secure, but it is it's kind of mind blowing when we think about we're watching climate We're talking about a killer heat wave which we're going to talk about later this hour here in New York, but across like six for sixty million Americans this week, and we just see the effects of climate change rapidly changing our environment.
And will you got to forgive me being so skeptical when it comes to timelines. Here, you're just back from Georgia and Vocal four. Sure, and you know, remind us about the timeline there for something that had proven technology.
Yes, the Vocal three and four project, it was just completed and the fourth one went online just a couple months ago. It was seven years behind schedule. It was one hundred and fifty percent over budget. I just did the math earlier. It came in about thirty five billion something dollars to build these two big reactors. It was a painful process, but people are happy that they've got it done. They're happy they got it across the finish line.
Whether it is something that is a motivator to get people to do another one, or if it's going to scare people away is still the question.
What do you see? I thought it was interesting Bill Gates saying that the country, I feel great about the support we're getting from the federal government in this nuclear space. What have we seen in terms of the political opinion, if you will, on this? I mean, people's opinion is certainly one thing. But what we are seeing in terms of politics, and we're politicians, and also the federal government, how they are weighing in.
Oh.
I literally twenty minutes ago, I was watching Jennifer Grohnholm at the Energy Secretary do a presentation out in Vegas at the Big Conference. She was talking up all of the things that the Biden administration done has done. They are very supportive of the nuclear industry. They've got the production tax credit they came in as part of the Inflation Reduction Act. They've got the loan Program's offices trying to throw billion and billions of dollars of companies to
try and develop nuclear power. I've talked to Jiggershaw, the guy in charge of the LPO office. He's like literally begging people to submit application so he can throw money at them.
Will remind us in terms of the overall power that's used by the US when we are on this path to net zero, what portion of that will be powered by nuclear energy?
Well, hopefully a lot more. Right now, it's nineteen percent that's of the US energy mix.
This surprises me because I think I thought it just had gone away.
But that's just my Actually, if you look at the charts of where nuclear fit, it's been rock steady. It it has hardly changed. But their goal is to triple it by twenty fifty, which is just a lot. It's an enormous amount.
And we're also using more energy too.
We're using that's the thing. We are going to start using a lot more energy. Like get energy demand in the US has been more or less flat for the last twenty years, but we're seeing projections to go way up in the next.
Couple of administration. Bill Gate says he's ready to invest billions more so, he's ready certainly to do his part. Great stuff. Thank you appreciate being able to check in once again with Will Wade, He's Bloomberg News Power and Renewable Energy editor.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on applecar Play and and brout Auto with a Bloomberg Business app, or watch us live on YouTube.
Sometimes technology innovation and disruption actually involves a company doing just that to itself. Enter Google, home to two elite AI teams, Google Brain and DeepMind, and disrupting that tim by combining it into one AI superunit that it calls Google deep Mind.
Let's get to this Bloomberg BusinessWeek story. You can read it on the Bloomberg and at Bloomberg dot com. Slash BusinessWeek with more with us in the Bloomberg studio is BusinessWeek Technology editor Joshua Brustein, who joins us in New York. So, Joshua remind us what these two labs were doing separately and why Alphabet, the parent company of Google, decided to bring them together.
Yeah. So Google has for about a decade been pursuing AI in various ways, and it has a history of kind of doing things very far away from trying to make a product out of it and also actually as a history of having two competing departments trying to do
the same thing. So they had a homegrown unit called Google Brain, which came out of Google X, which is its Moonshot lab, and they spun that out of X and started working on some AI products that we're making into that we're actually ending up in some of the commercial products. And then I believe in twenty fourteen it acquired a UK based AI shop called DeepMind, which was working on using AI to beat video games, and this was seen as sort of a foundation for much more ambitious AI projects.
Maybe years ago people would have heard of deep Mind because it was able to beat a human at Go, which I think a lot of people when that happened they were like, let's go because it's not very popular game.
In the US my reaction to it.
But that was also a really seminal moment exact eye development like this was seen as like groundbreaking and sort of scary for a lot of people at the time, like if I can do this, what's next.
Well, speaking of seminal moments or important moments, open AI's own work a paper that they were talking about GPT three that was back in twenty twenty a bit of a wake up call for Alphabet and Google in terms of their own work on AI.
Yeah.
Absolutely, So what happened was Google had built some of actual the foundational technologies that went into GPT three. They built a type of technology called a transformer, which we don't have to go into, but you just it is the basis.
So many questions always go ahead by the basis of.
A lot of the modern large language models. And Google read what open ai was doing in twenty twenty and realized, oh, man, we are building the science here, but someone else is building the products, and that is not where we want to be. And so that kind of kicked off a you know, a sort of self examination to figure out, like, why aren't we doing the things that are actually going to make AI work with consumers out.
In the world.
So bring us up to speed on where we are today, because I think a lot of people probably saw a few weeks ago when those viral Google search results went around that suggested that people were okay if they were to eat rocks, for example. Yeah, because doctors said.
That was fine, exactly exactly.
Exclain what happened here.
So about a year ago, Google ended up combining those two labs that we mentioned in an attempt to have a more open AI like process to get stuff out to you know, really start putting things in front of Google customers. The event you're referring to was from a particular product that would sort of summarize search results in using large language.
Models, which everybody who's Googled recently has seen this. Yeah, this was like, it's the first thing that shows up on the page when you search for something, and it says this is a lab result. It's experimental, but nonetheless oftentimes it's right.
Yeah, absolutely, they wanted to have some of this. It started showing up a lot of people think that, you know, chatbots will eventually replace the way that we do Google search, and Google's very word about that, obviously, because that's where a lot of their revenue comes from. But like all, like all large language model based products, it the Google product had a tendency to hallucinate, which basically just meets
make stuff up. They started summarizing the web by taking things that were in fact on the Internet, but we're not great ideas. I believe one of them was to eat rocks. Another one was to put.
Glue on your pizza. Okay, do not be fair.
Sometimes they were using the onion as.
You do not put glue on your pizza.
Do not eat although, but what if the cheese is falling off?
Carol?
Do not put glue on your pizza. Okay, just you know, use your brain here. Everybody combining the labs. So what does Google alphabet? I never know which one to choose. But what are they gained by doing that? What might they lose? Because sometimes folks say internally they like to have different units because they kind of compete against each other and everybody gains or everybody smarter because of it. So what are they gained by doing this? What might they lose?
Yeah?
So the thing they were hoping to gain was to put everyone who was working on advanced AI within Google and get them pulling in the same direction. And that direction was to not only be pursuing AI projects that might be interesting, but to actually have AI projects that would be products sooner than later.
Yeah.
So that's what they would gain. And you know, they have been releasing products. There have been some pickups, as we've talked about. That is par for the course.
In AI.
Frankly, the thing that they could lose is that Google really has done a lot of the foundational research with AI, and they did that by giving by giving researchers a lot of freedom to kind of pursue what they wanted. They worked on small projects they didn't weren't given you commands from on high and.
You get to more today, right and think about, well, really like that free time right to kind of figure out what could we maybe.
Do exactly like the classic Google like twenty percent time is you know, it's that's always been part of Google's culture to kind of experiment and do things that we trust will pay off eventually.
Search and advertising fundamental to Google's business. I mean, make no mistake, this is an advertising company that makes its money from advertising.
But if we think.
Beyond what alphabet is trying to do when it comes to AI, what are the quote unquote moonshots for lack of a better term, like, like, yes, we understand that it wants to protect its search business, Joshua, but what else does it want to do beyond that?
In a you mean, yeah, I think at this point there's a little bit of lack of clarity throughout the industry of exactly what the AI business is. It's been coming up on two years since the release of chat GPT. We've spent a lot of time talking about chatbots. They are out there in the world. They are being used in various ways, maybe to replace Google Search. I think that Google also has some other products and projects that we think about as AI that are not kind of
in the discussion about, you know, like CHATCHYBT. I mean Waymo for instance, an enormous AI project. Those things are driving around the streets of San Francisco. The Deep Mind Lab is working on Alpha Fold, which does a lot of work that could be really important healthcare work. But right now, like looking for the Google Search sized AI business is.
Not that is not emerged yet. It's not clear.
This is where we're going, and we just need to.
Get there, you know, you talk about that. You know, ultimately alphabets want wants products that are going to pay off for the company, right, that makes sense. They want all of this work to kind of have a payoff, whether it's in like I said, offerings. Having said that, when they were allowing the two labs, right, they were kind of you know, offering up certain you know, computing power.
AI takes a lot of computing power, right, and so they kind of had to allocate it too among labs and researchers, right, So there was a little bit It sounds like almost a competition internally, Like I wonder if that was how that played into it, just the practicality of hey, guys, this is a lot of computing power. So where do we kind of focus our efforts to you know, get that payoff.
Yeah, that's a good point. I think that this is actually part of getting at Google to all pull in the.
Center grown up a Google a little bit.
Yeah, like you had not only do you have researchers, like three researchers doing this, eight researchers doing this, you have all of this computing power, and to build a model along along the scale of a GPT four or Gemini that's Google's model, you need to be using most of your computing power, or at least a whole lot of it on one thing. And that means having a top down structure where you say, this is the one
thing we want to do. And that's really new compared to how Google had been doing things up until a year ago.
So combining these two Labs, Josh, I know that Mark Bergen and Julia Love, who wrote the story you edited it, spoke to a lot of folks out there about whether or not it has been successful thus far.
What's your read on it.
I think that Google is one of the leading AI companies. They are clearly doing things that keep them in the running, and there are things that the market's very unsettled. The tech is very unsettled.
I think.
An interesting thing actually that's come up with the last year under this is up until around that time, people inside Google were unsatisfied because it wasn't commercializing things quickly enough. There were a lot of researchers who left, even ones who did some of the core technology for Google, saying I want to go to a startup where we actually get a ship product. Now Google shipping product. And there are people withinside Google saying why are we doing this?
It was more fun when we could just work on whatever we wanted. So there is a tension here between within Google about like what is it you want to do? And you're always going to think, well, the grass is greener?
Interesting, right, like yeah, the payoff? Yeah, I was curious about kind of what the mood was internally, So it sounds like it's a bit of a mixed bag.
Yeah, it seems like it all right.
Great stuff as always in this story by our Bloomberg Business Week team, Joshua, thank you so much, really appreciate Joshah Brustin, his technology editor at Bloomberg BusinessWeek. You can find this story on the Bloomberg and also at Bloomberg dot com.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Now to sort of the economic outlook. After a big week last week where we heard from the Fed, we also have this week, Carol, a half dozen FED speakers between tomorrow and Friday, we got retail sales, industrial production. Let's bring in Francis Donald, global chief economist at Manual Life Investment Management, joining us this afternoon from Montreal. I mentioned some of the stuff going on this week. The
big news next week is PCE. But before we get there, just give us an idea for how you're looking at the economic environment right now post FED.
Well, we are looking at it very closely. We're actually in the middle of our quarterly forecast revisions. And when we look at the Fed's forecast, it's almost like they didn't see how much better that inflation print was on Wednesday, and it's almost as if the Fed's outlook feels stale. Thirstday we got another indication that inflation is progressing to lose use the Fed's language, and then on Friday we had inbore prices which demonstrated again that there's disinflationary pressure
in the economy. That's good news, and we expect that combined with unfortunately deterioration ahead by September, the Fed we'll have what it needs to cut.
Is there something smart though in maybe waiting for PCE and just really kind of getting some more certainty, if you will, Francis when it comes to the inflation print, I mean and making sure. I mean the FED doesn't want to be behind the curb, but it also we know,
doesn't want to do things too early. I know some would say it's already behind the curve, but something to making sure that, okay, CPI PPI check check, but just to really kind of wait maybe for next week, and just I don't know if the reports that they get before July, I mean, I don't know. It's interesting we had a guess before that. Charlie Pellett was talking about that maybe you could go away for the summer. Nothing's gonna really come to life for the fedal September.
Yeah, that's exactly how we're looking at it. We're not talking about does the FED have enough to cut in July. We're just talking about, you know, were we really in an inflation scare for the first quarter when those numbers were too hot? Was not a trend that was going to persist through year end? And what we've seen in the last month is some evidence that actually, know tightening does work. It does help bring down that year over year number. We're not just gonna wait for the PCEE.
We have three more inflation prints, three more job prints, three more retail sprints, actually maybe even four by September. And that's why just about everyone is agreed the FED is in a holding period until that September number comes. But here's a little trick. Actually, we don't really need to wait for pcee to come through because we can map CPI, PPI and import prices really closely. That's why PCE numbers are not really market movers, because they don't
tend to surprise to the upside or the downside. We have the calculation we're going to see the PCE continues to decline in the right direction. But you're right, we've just gone through the largest price level shop in most people's lives. The FED is going to want to be absolutely sure, and I think they're going to have to see some deterioration in the job market. It's just that
our forecast includes this deterioration in the job market. That's why we feel comfortable with a base case for September.
Francis.
How close to two percent are we going to get on PCE by the end of the.
Year's probably not as close as the FED wan. So we're kind of believers that we're not going to get back to two percent for the next several years, that we're going to float between two and two and a half percent on a structural basis. One of the reasons is that inflation is just not as intrate sensitive as it has been for many of our careers certainly for the past several decades. The Fed's going to have to contend with that. We call it a critical concession. Already
we're seeing this globally. We've had the Bank of Canada, We've had the ECB, we' have likely some more central banks this week that we'll cut with inflation above two percent. That's not atypical. Central banks tend to cut on the way down towards two, not waiting until they arrive. But it's an indication as well that they don't want to sacrifice jobs, that don't want to create a recession us to reach it two percent, which might not be reachable.
I'm glad to use our word. I mean, can we assume that we don't hit a recession anytime soon? I mean, it's kind of remarkable where we are and maneuvering that we've seen by the US Central Bank that we still have a strong job market, although some might debate that as well. But are you in your modeling and anticipating a recession anywhere in the next six to twelve months.
We do have two quarters of negative GDP in our outlook. We didn't impose that we're not trying to make a big opinion that a recession is coming for the US, but we can just slow down in the consumer driven by its simple econ one on one higher interest rates. Remember, it takes two years for that first rate HiPE to work its way through the economy completely, and we're just two years and a little bit past that first rate hike.
So we believe that the impact of rate cuts isn't behind us, it's in front of us, and so recession risk is being underappreciated by markets. At the same time, they're two shallow negative GDP prints. If we were disagreeing between one and one point five, no one would really make a fuss of that. It's just that when you talk about two negative GDP prints, suddenly it makes it like there's this huge binary outcome recession versus non recession.
We're just talking about a slow down and growth, which the Fed wants.
Francis, I can't tell what your dog wants. They want to slow down or I'm just kidding.
Uh yeah, so, uh exactly. I think he has strong opinions in a really big fan of Bloomberg Radio.
You know what, he can come on or she can come on anytime.
I mean, Carol bringing back memories of you working from home during the pandemics. When Scott would show a little bit.
Scott was very loud on the show. It's really interesting, Francis. I mean, you know, I keep wondering. There's still a lot of liquidity out there in the market, so I do wonder are we still kind of working? I mean, I think we are still working right that liquidity through the system, and so we're not really still quite sure what the true picture is of our economy post pandemic. Is that fair?
Oh, it's completely fair. And that's one of the big challenges with forecasting right now is we're still grappling with that pro cyclical government spending and what's the path for that ahead. We're still grappling with what exactly are consumer is going to spend on and pull back in. We know that their consumption basket has changed. We're grappling with are their excess savings left? We really have a good measurement for that. We know that wealthy individuals have more.
We know there's less now than a year ago. But the entire profession I'm actually writing my midyear outlook right now is grappling with how forecasting has changed, how what's happened in the past few years to change our biases. For example, should we cut later and allow more disinflation in the economy. There is no such thing as no such thing as a sure thing, even as the Fed's
Tarker today, I saw the quotes across Bloomberg. It could be one cut, he said, or could be zero war two, and I thought, well, it's pretty honest and exactly how the rest of us are thinking right now.
Thanks.
It's data dependent, Carol, We're hear it over and over again. Francis thirty seconds. Speaking of the data, Just give us your view on the job market right now, at least here in the US, because we're we are getting some confusing signs that, yes, things are slowing down. But then we had, you know, the May payrolls report just blow everything out of the water.
The payrolls did, but the household employment, if you ask households, is actually much worse. Consumer confidence is doing really poorly. All the big question has been when is everyone going to stop talking about normalizing and start talking about weakening of the labor market. And I think we're actually on that cusp right now. Just about every labor market indicator is back to just about before COVID, back to what they would call normal levels. But economies don't come halfway
down the hill and then stop. They have momentum behind them. So right now, in level terms, we're doing just fine. It's not a labor market to be afraid of. But if we continue to see this deterioration in job openings, quit levels, hiring rates, it's going to flow into non farm payrolls and we're not going to be talking about normalizing of the job market. We're going to be talking about a softening of the job market that's more concervable.
Well, that's how I ask you ten seconds. You got to be quick. So when we do start to see things turn differently for the job market, is it a slow turn or is it happen rapidly, very quickly if you could.
It's never slow. Parallogic's exponential. We can only hope that it doesn't go to levels as we've seen in the past.
All right, such, good staff. What's your dog's names?
Love Louis?
All right? Listen, great to have both of you with us. Presis Donald as Global chief Economist at Manulife Investment Manager, joining us from Montrealistic.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and then brout Auto with a Bloomberg Business Act or want us Live on YouTube Carol.
We chatted about it a bit earlier with Will Wade. How Bill Gates has said he's prepared to plow billions of dollars into a next gen nuclear power plant project in Wyoming that's to meet growing US electricity needs. Carbon free nuclear power increasingly seen as a key part of fighting climate change, and more companies are promoting smaller reactors.
Yeah.
Absolutely, and so it's interesting and it really got us thinking a little bit more about what we need in terms of the labor market to support it. And so that kind of gets us to our next guest, who says there's a skills gap when it comes to driving the transition to net zero with us.
Is Sudukes, president of Global Public Policy and Economic Graph at LinkedIn.
She joins us from Dublin Ireland Tonight.
LinkedIn's members generate about five million updates each second, according to the company, and the Economic Graph draws insights from those updates.
Su Good to have you with us. How are you.
I'm good, It's great to be here. Thank you for having me.
Yeah, thanks for joining us.
Hey, we're going to get to green jobs in just a second. But because you're at LinkedIn and you have all this data, we got to ask you about the greater jobs market, especially here in the United States. What is your data tell you about how the job market is here in the US right now?
We have, as you know, over the past couple of years, seen a slowdown in hiring. Of course, a lot of sectors. That slowdown was coming off the back of the hiring frenzy that we saw over the course of the pandemic. But over the past couple of months, we have started to see some improvements in that slowdown, particularly in some key sectors like retail and real estate.
Interesting, okay, are there certain sectors that you're seeing right now that are particularly strong.
Sectors like that we are seeing some improvement in. And a key area where we're seeing high demand is when it comes to these green skills and these green jobs. There we see hiring in this space outpacing general hiring by up to forty four percent. So this is an area of real strength. Across the board in the US well.
So you know, it was interesting on our planning call with our producer and team one of the things like we started talking what is a green job, What exactly is a green job and what are the particular skills that are needed for a green job? Love for you to kind of digg a little bit deeper into that.
Yeah, it's a great question. A green job is a job whose core focus is combat and climate change. So think of jobs like energy engineer, solar panel installer, wind turbine technician, and of course to do one of these green jobs, you need lots of green skills, their skills that are either preserving natural resources or taking pollution out
of environment. And what's really interesting is that we see these green skills of course showing up empowering those green jobs, but they're also showing up in a whole range of traditional jobs like data scientists, fleet manager, healthcare worker, jobs that aren't traditionally thought of green jobs per se, but jobs that are going green all the time.
You argue that there is a skills gap between what is needed and what's available right now, What do the data tell you about what people don't have in terms of qualifications for these jobs.
That's right.
What today's research and LinkedIn shows very clearly is that Gen Z, a generation that's most concerned about climate change, is the generation that's least prepared to fight climate change in their careers. Today, only one in twenty Gen Z has a green skill, and that means that they are not set up to take advantage of the opportunities that this transition presents and and work in these roles, both those green roles and those roles that are starting to go green all the time.
You know, it's interesting. I always think about go back a few years when a lot of the big tech companies were worried about coders and not having the right job, you know, right workers for what they were going to need, and so they were tapping not just colleges, but high schools to make sure that they had a pipeline of
workers for what they needed. Where we seeing kind of private public sector or what kind of collaborations are we seeing within the green industry to make sure that they've got the workers they need.
We're not seeing enough training, We're not seeing enough collaboration, We're not seeing enough of those partnerships. Fully, four in five of these gen Z workers are telling us I would love to get a job in this space, but I don't know where to go to get that training
and break into those roles. And you're exactly right as exactly those kind of partnerships across government and across the private sector that we need to see scaled much more rolled out at a much faster rate than what we're seeing right now, if we're going to get to grips with this skills mismatch that we see across the board.
You know, I'm going back to like what you said earlier about a solar panel installer. And you know, we have talked here at Bloomberg about people within the construction industry or home market, if you will, whether it's a plumber, electrician, like they're just not enough out there in terms of meeting demand. And I do also wonder that there's kind of a view of a lot of the younger generation. You're like, I don't want to do that, you know,
That's not what I want to do. And I do also wonder in these green jobs, how many maybe are wanting to do something to protect the climate, but they don't necessarily want a lot of these jobs.
What our research is telling us loud and clear, is that these young workers they want these jobs, they want
to get into these worlds. But currently there is this skills mismatch, and there is this awareness mismatch, which means they're struggling to break into them and their role quite right across the board, including the roles that you're talking about there, And one of the key things that we need to focus on is that for some of these roles, for example, to get from being a general installer to a solar panel installer, as you say, often that's a
handful of skills photovoltaics, energy efficiency. And we can get these workers this targeted training and get them into these roles and accessing these opportunities that are out there today. And we know our only grow are going to grow tomorrow to.
What extent or what portion of these jobs that you define our quote unquote trades versus quote unquote professional jobs, because we're at a trade skills gap here in the US right now. I mean, we can't find enough plumbers or electricians at this point, So how do we get enough.
Solar pa There's no yeah, there's no question, but there is a huge demand for those kind of workers, right Now, there's two key areas. When we look at the fastest growing and most in demand green skills in the US, there's two categories that jump out at you very quickly. The first is in that energy space, including an energy infrastructure. So some of the fastest growing in demand skills are energy efficiency, solar energy, wind power, energy efficiency. Huge demand there.
And the second category that we see growing all the time, again showing up in the top ten most in demand green skills in the US, skills related to the regulation and oversight of carbon emissions, so energy audits, carbon credits, those kind of skills surging in demand all the time.
And as you say, in both areas, we are seeing this mismatch and this lack of talent coming through despite the fact that we know the appetitus there, we know the commitment and the passion it's there from these young people. We need to tap into that and harness that so that we can get to grips with this mismatch.
So I am wondering, you know, I'm thinking about folks who are listening, whether they've got kids, are in college, or think about colle how should we be guiding kind of the next generation here.
For three things for these young workers to think about us they think about getting these opportunities and open the door to these kind of jobs. The first is think about your next role. What is that first job that you want and how do you use it to activate your role in the green economy. Secondly, skills, what are the specific skills that you need to get into that role. There are a ton of resources out there, including on LinkedIn, that can help you gain those skills. And thirdly, think
about your network. There is a big, vibrant, active community out there in LinkedIn that can give you advice, help you figure out what skills you need, and help open up those doors to you as you think about your role in this space.
Hey, just real quickly twenty seconds. I mean, how many of the jobs that are on LinkedIn, how many of them are actually green jobs that are out there and open.
When we lock across the board at the jobs that are out there beyond green jobs, it's jobs looking for green skills, and that is a very significant and growing demand all the time. For example, in the UK today, every one in three jobs on our platform is looking for a green scale and so that really gives you a sense of the scale and extent of the demand that's out there.
All right, that actually is helpful information. All right, Sue Duke, thank you so much. Sue is vice president of Global public Policy and Economic graph at LinkedIn, joining us from Dublin, Ireland.
Marco Journal.
Now about you, let me drive?
No, no, no, no, who's gone to drive?
Honey?
Please out of the riding gravels.
Let's mate, I want to try it.
It's a question.
This is the drive to the globe. We'll bring on Bloomberg.
All right, everybody, Just about eighteen minutes left in the trading session. Charlie Pella just breaking down the trade for you. We're pretty much hovering near our best levels of the session. It does look like we're going to get what the thirtieth record this year on the S and P five who's counting? We are, That's what we do. We love data points. Let's get to it because we are seeing us doc Bulls getting even bolder, Goldman boosting it's year end target for the S and P to fifty six hundred.
That's nothing compared to Evercore. We talked about this with Abigail, which updates called a six thousand city meantime, upgraded US equities to overweight, so you know, like it's a big poker game all in on the US. That's what it feels like.
Let's get into it with Paul Christopher, head of Global Investment Strategy over at the Wells Fargo Investment Institute. Paul, good to have you with us this afternoon.
How are you?
Yeah?
Good, I'm happy you have to be on the drive home.
Depending on where you're going, you could be driving to lunch too, if you're out there in California.
True.
Hey, I'm wondering what you're all in on at the Wells Fargo Investment Institute. It certainly seems like investors here in the US or around the world are all in on US equities. But how are you thinking about things?
Yeah, we like US equities better than international. We like US equities large caps better than mid caps and small caps. So we'll play along up to that point, but we'll also note things like, you know what, last June, we also had a very narrow leadership like we're having this June. That the top stocks in the index top ten up to about two and a half, and you know, the bottom three hundred and fifty down about two and a half.
So We're going to be a little bit selective.
Here, So explain that. Carry that one out. What does being selective mean in this environment?
Yeah, I was.
Hoping you'd asked for the follow So we like things that have sectors that have a good long term prospects based on what we're seeing in the economy, and that really haven't necessarily participated to the same extent as the Magnificent seven or ten or five or however many you want to count it any on any given day.
We like industrials.
Right we're seeing lots of billild out in factories, We're seeing build out in data centers. We're expecting a lot more building around electric utilities as we get into green energy. We like materials as well. You're going to need materials for all that building. We like healthcare. We think healthcare really the pandemic exposed what we might call a lack
of capacity. We have another pandemic or even a significant health emergency, we're still going to need to be able to treat broken knees and append appendice operations.
So we like health care and we like energy.
We think probably the green energy future is on its way, but not quite here yet, and we're gonna need more fossil fuels going forward. So those four really appealed to us, especially from a valuation standpoint, but long term investors really should pay attention, we think, to the sectors like those, and that's that's how we're trying to be selected here.
Well, I didn't hear from you anything about commercial, about technology and communication services just now.
Yeah, we're neutral those sectors. We like them going forward, but in fact, we were overweight them until last June and then they really just took off, and we just don't like these valuations here. You know, we tend to follow that old saying on Wall Street that disruptive technology tends to be overestimated in the short run and underestimated and appreciated in the long run.
So we've got reports out there. We like artificial intelligence.
We just don't think that the companies that are being bought right now are necessarily going to be the winners. One of my favorite questions to ask clients is do you remember what the maker was of the first PC you ever owned? I can tell you that the maker of mine no longer exists, and that was just a few decades ago.
I think ours was Gateway. Do you remember yours.
That sounds familiar.
I don't remember what our first one was.
You know what's interesting, though, is I believe I'm trying to think if it was AMD or Pentium or AMD or Intel.
I mean, I'm sure it was like intell.
I'm just trying to think of like the internals got me. But there is thinking.
But there is something about well, so what is that kind of a warning sign to those who are all plowing into Nvidia?
Well?
Yes, and and you know, and maybe there's there's a certain extent to which even some of these high flying tech stocks have become defensives if you think about the upcoming elections. If you think about the economy slowing down, Gee, should I buy staples or should I buy discretionary ad?
To heck with it?
I'm just going to buy something reliable, and I'm going to go to tech. I think that's the mindset of some investors today.
Also interesting.
Okay, I want to think about this from the perspective of the Federal Reserve because that's something we watch closely here, of course, and I know all certainly investors do. How are you thinking about the rate environment right now? Because there obviously is a big connection between rates and what you're seeing with equities.
Yeah, Well, the FED has the sort of on the one hand, on the other hand, the way good economists always do. On the one hand, they've got an economy it's slowing nicely for them.
The whole thing isn't falling into a ditch.
You've got manufacturing, construction that's strong, a home building is still strong. But you've got maybe mortgage rates that are too high, and the consumer is under a lot of stress. And the longer you keep these rates up here, the
longer the consumer stays under stress. So you've got good things going on, you got bad things going on, And probably from the FEDCE perspective, that means that the balance between those two means you can afford to wait a little longer, and you don't have to feel like you're going to drive the economy into a ditch and then need five or six rate cuts.
In a real big hurry. They're going to be able to take their time here.
September is potentially still on the table if we get.
A weaker inflation readings over the rest of the summer.
If not, then November and December probably we think there's a couple of rate cuts coming this year and then potentially more next year. So the problem for the FED is that the longer they are patient and the longer they leave these rates rates in place, the more pressure they put on consumers.
And that's where it gets a little bit dicey.
Does the consumer just sort of slowed down and post pony expenditures. We've heard stories about people, for example, maybe they're not buying the summer where in April. Maybe they're waiting until June or July right before they go on the trip. Hey, maybe they're getting a little bit more selective about where they shop and so forth.
So that's that's the risk for the FED.
We are seeing it not even maybe we definitely are seeing like some choices being made. Paul having said that, you know, I feel like for a while the narrative was, Hey, there's all this money sitting on the on the sidelines, that's in you know, cash or cash like investments that's getting you know, four to five percent right now, and wait till that comes into the stock market, you know.
Our story buyer Alexandra Semenova saying some stock market optimists have speculated that that swath of the roughly six trillion sitting in money market. You know, maybe we'll not actually come in to the market. So it's kind of interesting. Is your upbeat out look if you know, in terms of the equity play, is it based on more money that's been on the sidelines coming in or no.
We're still seeing more money come in from the sidelines, but we're also watching for the potential for liquidity to really go away. If we got a nice pullback in stocks, that would help do it. The Treasury has a lot to say about that in terms of how they raise money and how they spend money. April was a down month for the treasury, a lot of tax money, a lot of I mean spending, a lot of tax money coming in. So liquidity goes out of the market and the market falters a little bit.
May.
In May, the Treasury starts spending again.
Liquidity comes right back into the economy, and tech stocks are flying high again. So we're watching liquidity here very carefully. And I don't think that six trillion, to your point, does find its way into the equity market. We've been watching clients hold lots of cash on the sidelines since two thousand and eight, two thousand.
And nine, all right, good to leave it there, Hy Paul, Thank you so much for Christopher, head of Global Investment Strategy at West Pargo Investment Institute, joining us from Saint Louis.
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