Banks, FTX, and Jobs (Podcast)

was even better. But then the traders at Goldman Sachs are doing a lot better this year than they did, like record, but the bankers not so much. Right, So, if you're doing I P O s and stuff like that, M and A trades, not so much. I'll tell you what though, if I'm working in the business for you, Paul, and I make you a lot more money this year than I made you last year, you should pay me more this year than you paid me last. So this is how the conversation goes. And you're right the conversation.

I'm gonna your boss. I'll say, yes, you had a great year, we appreciate it. But the bonus pool is down because overall going across the street. Yeah, that's what happens. So Shrie not AAJ and he's hopefully not going across the street. Uh. He's here in a Bloomberg Interactive broker studio. He's a Bloomberg News. He covers all things kind of just Wall Street financial services, all the big you know, mucky MUCKs on Wall Street. So shreet, how tough is

it gonna be on Wall Street here? Because we're it's December. This is bonus discussion time, just front center for everybody. So let me give you just a window into some of the discussions happening. As heated as Matt sounded just that horrified at the thought that he would not be paid for good performance, I can guarantee you some of the discussions happening inside Goldman Sachs have been much more heated.

The initial plans that they have discussed, especially for their traders who have had a bumper or on their way to pretty phenomenally are the best since two thousand nine. Of course, two thousand nine has all other audities that sort of led to that record. Here the best year in thirteen, the best year in the best time in thirteen years. Black kids weren't even there thirteen years ago, right, and some of them were there now are in much

more senior position than expecting much bigger payouts. But the initial round of discussions, as they typically tend to happen across Wall Street post Thanksgiving. Around Thanksgiving, the conversations and the numbers relate to deskheads have led to somewhat of an allergic reaction, and you can see that, and that's

why it's a surprise across the street. There is no doubt that do You Making has come off its highs of last here if you've had a massive slowdown invest banking across the board, revenues are down about and the culture of Wall Street is today as it has been yesterday and for decades in the past and will be in the future, is pay for performance. So you expect banker bonuses to be cut significantly. Not so much traders.

And that is why it was a bit of a surprise for us that even though they've had a pretty good year at Goldman, the traders, they are talking about cutting their bonus pool. But in some ways the smoke signals coming out of Goldman sacks will make a lot of people across the street and c and twitchy because fine, and they may not. The delta between the revenue performance said Goldman and the bonus discussions might be pretty large, But there will be a gap elsewhere in every other

major bank. This thread of austerity will carry over across the street. So so what does what does that mean for me? If I would say I'm going across the street, I go across the street and they're facing the same problems. Are we going to see a big This is exactly what I was wondering when I was reading probably your story this morning. I was I was thinking, does this mean a bunch of traders are gonna leave Goldman Sachs

and they're gonna go over to Jeffreys? But Rich Handler is saying it's gonna be a tough year here too. But boys, you know, so are they going somewhere else? And that's a good point because banks are not the only game in town. There is still a really strong bid from hedge funds and other by side firms. And if you're in the top quartile, top decile of performance at any institutions, you will still be bid up. Yes, we're talking about an uncertain twenty three. Yes, there are

other challenges on the horizon. But if you're at a bank, a trader, I cannot live in a vacuum. Right. You are not on the only division at the film. It is, after all the culture of one large bank. There are other divisions. And as one of the executives that pointed out to me, you can only be as happy as your unhappiest child. So for safe, for instance, at Goldman, you have a consumer business that's losing not of a billion dollars in a year. Two bad traders. If you

did really well, we still can't pay you that. Hedge funds don't have that same risk exactly right, And that's the argument you cannot make to your top people. So um, one of the story I want to read free So if you know, if you know a reporter covers this sector, let me know is the story that was a year ago, and they were great stories. Every investment bank had to raise the pay for their junior bankers and they were doing it almost on a weekly basis to one up

each other. Does that ever reverse itself? I mean, because you know we'll literally the assarch and and also come into a investment banking at eighty five grand, and I think where we ended after a six month period was like a hundred fifty grand or something like that. Does it ever go back? Do you think? I mean, you've you've you've seen wal Street over the years, Paul, And like you know, King today, Paper tomorrow, and King again. Sometime in the future, these cycles will repeat themselves. It

was certainly top of the cycle last year. The war for talent was was a phrase that made its way into eight K filings across the street as they were lavishing bonuses left right and center. Not so much right now. Clearly you can't walk across the street to another bank because they're dealing with the same challenges. Last year they were talking about pay, the pay for performance culture that embodies and exemplifies sort of the month ro on Wall Street.

Today it feels like pay for someone else's performance. And unfortunately that's how twent and this is when it gets ugly, is it's it's one thing to have a conversation we're gonna cut your bonus, profits down when it's really ugly because profits, we're gonna cut your bone us and profits are up is apart for some people, but for something when it gets really ugly is when they craft these creative equity like instruments to give to you, um, you know,

restricted stock units. We had them at one point. Um. That's when it gets funky. Now you know they try to say, hey, you know they're trying to incentivize you, but you already have way too much exposure to your employer exactly, so they try to give you some deep dis kind of things that we haven't seen those stories yet. And when you start to see those stories, that's when it gets bad, because that's when they say, we don't even want to give you equity because we know you're

not gonna take our equity because our equity sticks. So we're gonna give you these leverage restricted stock units that will pay out two to one in five years if we turn things around. Let's take a trip down the rabbit hole. Two thousand eight. Goldman Sex terribly across the street. Goldman actually made money. Goldman actually did well do your

of the financial crisis. What I love the scene if people were told it's really gonna be hard to pay you, our police accept some equity five six, ten years down the line that paid off in speeds that was worth a few billion dollars they made off like any credit suite. We got that in either two thousand one or two thousand two, you know, when the dot com thing had at burst and that thing ripped. Man, that which the one thing that in my years that really had like

a three four, five x twenty years later. Would you take credits to ees Equity today? No? No? And you also had a policy right of anything invested you sold sell it right away. Yeah, so I sold Swiss francs and it isn't that the normal you would want to do that, right? And if a majority of your Stearns and Lehman brothers they didn't sell because when you sell, it's perceived as you're not supporting your firm and all that kind of stuff. But let's talk about smart financial policy. Yes,

I can see top management. You know, the optics are just as bad. You don't want to do this. You want to be seen as having skin in the game. But for almost everyone else, because the majority of it is linked to stock and prudent financial advice says you need to be diversified more off them. They're not as soon as it best. You know, as it is, you're

pretty much attached to the firm you're working at. Your fortune is tied to them, so as soon as you stalk best, you might as well take it out and put it in an index fund if you again that we saw it the Great Financial Crisis. Unfortunately, too many people at bear Stearns and Lehman Brothers did not do that, and they just got wiped out, wiped out. Bummer. But at least a lot of them could go become teachers. Yes, they good, all right, So I guess we'll get some

more color on this over the next several months. And the payofs are usually February right three, kind of February March timeframe. So so don't be too happy to have your initial discussion and decided to leave it. Leave it, leave at your end, because then you will not get you. You gotta stick around at least until don't read our stories and leave. Yeah, exactly right. So that's when you see the turnover on Wall Street is kind of in that February March. When people get paid, then they can

start moving around street. Not Rodging does all that stuff for Bloomberg News. We appreciate that. All. Let's talk a little global investment banking, little European investment banking. Credit Suis in particular, that is a story that just keeps on giving. It was once a proud, proud uh you know, European and global investment bank. Now it's having some hard times. Marion Hoftemeyer, financial reporter with Bloomberg News. She's based in Switzerland.

She joins as does senior banks analysts at Bloomberg Intelligence. Alison Williams. Uh, Mary, I want to start with you here, give us the latest on what's going on with Credit Swiss. What can you tell us? So? The latest that's going on right now is we have this ongoing volatility in the share price that's partially related to the capital race. There's currently a rights issue happening um that will help

them shore up their balance sheet. But separately to that, last week we had quite some concerning news around profitability and asset outflows at their wealth division, which has caused some concern because we've seen four billion francs leave the bank. So and this is an important business to them, right Allison. I kind of romanticize the Swiss banks as these asset managers that give you, um, you know, anonymous numbers. I know they don't really work that way anymore. At least

they divulge everything when any country asks. But is it the most important business? For credit sweets as well as u B s it is the most important business. And and keeping in mind that this is where they're pivoting to focus more on, given some of the changes. But I think you know, what was important that we heard this morning, UM, actually from from a Bloomberg interview with the chairman, was that, uh, the outflows have stemmed and the hood is improving, so you know, signs that things

could be setting UM. To Marian's point, we think that the shares will remain volatile until they're done with the capital raise. I mean, it's it's difficult when we know, or when investors know, um, you know, money is coming at at a price that's below it's being traded in the market. I think that inherently there is going to

be pressure. But I think that the key thing is that the fundamentals for the banks steady, and and the other insights were you know, it wasn't institutional people backing away. It was retail so UM and and sort of the significance there is that the retail investor UM was perhaps more worried than a lot of the headlines that were coming across in early October and the social media and um.

The second point that that the chairman made was that, um, it's not clients leaving, it was clients pulling some funds and so that the significance of that is that those can come back. Well, you know, then the client is gone that you know, then then they're really gone. But if it's a matter of you know, moving funds around because they're worried that that money can come back, I'll go ahead and plug that interview. That was Francine Laquais

this morning interviewing so Leman and uh. I recommend people go on Bloomberg dot com to watch that, especially if you you know, work at Credit swee exactly, Mary, and how much do we know how much they have in total assets under management? Because it was like ninety billion dollars that left, right, Yeah, so at the end of three Q they were looking at around I think one

point four trillion across their wealth management businesses. UM, so it's it's it's a it's a decent amount that's gone down, but it's it's you know, as Alison was saying, you know, it could come back, especially if the client hasn't totally left the bank, Um, they'll they'll eventually come back when they feel that the bank can offer them what they

need and offer them stability. Um. So it's definitely a dip down, especially when you compare it to UPS, which is looking at three trillion working Stanleys more in the four to five trillion range in terms of wealth management assets. So it's it's you know, they're starting to look a lot smaller than they used to be. Marrying you're based insert You've got to feel for, you know, kind of

what's going on within the country here. How much is it I don't know, for the national government or just the people or the country, is this is kind of like a national embarrassment or how concerned are they about what's happening to the once great credit Swiss name. Definitely for you know, private banking. This is a private banking country, So for private banks across the country and the people in the industry, it's not a good look. Everybody feels

like they're suffering, you know. I've I've talked to private bankers at competitors who are having to defend Swiss private banking to their clients internationally, even though they don't even work at Credit Suite, So there's a little bit of you know, having to to grapple a bit with the reputational hit that the bank has had and that has had on the whole country in terms of you know, politicians, government, etcetera.

It is definitely something that's on top of mind because you have one of your big champions and banking is a huge part of GDP here in Switzerland. UM, that's really undergoing kind of an embarrassing suffering that goes from mismanagement to scandals despiring to just problems in business and

then risk implodion. So Allison, UM, somebody's going to take advantage of the situation, right, another bank has to be holding now those nine billion, and then some who's benefiting from the problems that credit sweez so UBS is the

one UM that that has featured in some Bloomberg News reports. UM. Their management actually has spoken as well and said, UM, the comments are along the lines of, yes, some money is coming to them, but they're not you know, it's not something that they're proactively seeking and it's not UM you know, they're not looking to benefit UM from their peerist troubles. But there is some money flowing there. Uh, And as I said, it's not the clients leaving, but

the clients are diversifying. So it would make sense UM to be diversifying UM across the close competitor UM. But I think that and you know when when we did get that eight billion number, to put it in context, that those outflows were basically more than the inflows of the past two years combined from credit suites. And I think that's what really took people, took people back, But

it is it is something of UM. You know, it was news I guess too two investors when they announced it last week, but it really related to early October. And I think that just the fact that things that are studied and they're heading in the right direction. UM. It will help UM eventually gives give some studiness to to the shares. We are awaiting comments from President Biden from Washington, d C. Commenting about the the averting the rail strike, and we'll bring those two in just moments

when he appears. Als. I wanted to ask you just about Credit sweet. I mean, you know, when I was there back in the day, we consider ourselves a bulge bracket firm. We could compete with anybody anywhere in the world. Are those days gone for Credit Swiss. I think it's it's a tough time for them. But I think that um, you know, and you know, and you're the business you're referring to is really the the investment banking part of it,

which for everyone has been a very difficult year. I mean, if you look at the industry while it is down or so, and especially on the equity side of things, uh, you know, I P O s or something like of what they were uh last year. So I think that's been tough for everyone. And you know, Credit Sweets is taking this approach. They're going to spin out their investment bank. They're bringing back the name Credit Sweets First Boston. UM. They also had some comments this morning that they are

getting interest in that unit. So so again that's a positive. And I think by trying to spin out the bank and separate the bank out um from some of the businesses that have given them a little bit more UM pressure, UM, they're hoping that they can isolate that. And so it's it's gonna be tough to see when the environment is bad, um, you know, it's tough to make a turnaround. It's tough to make a turnaround when the market's going against you. Um, but we'll see how that plays out. Marian, tell us

a little bit about Zurich. Right now we have you know, at this time of day, probably most of our listeners are are in the US. It's a little bit later obviously, six hours later where you are five hours later in London. Um, the main what square is it? Paradha plots? What do you what do you call it? Is that where ubs and credit? Is that where all the bank all the private wealth managers are located, many of them? Yes, we have we have pie not so far Julia Sparry if

g uh Saffra is also around the corner. And and what's what's the environment like? I mean here in New York on Wall Street, everybody's worried about bonuses. I guess it's got to be much worse. They're considering the problems that credit sweete. Although maybe ubs bankers are doing well. I think the mode is definitely around, you know, trying to get to the end of the year and hopefully turn a page and move on to three and hopefully

things go up from there. Um. You know, it's been it's been a hard year for everybody across the industry, as Alison was saying, and that that includes wealth as well. I mean, you know, with the stock markets not doing as well as they have previously, that means a lot of billionaires have lost some wealth. Um, and that definitely is impacting both you know, ubs and credit sweetes among other private banks in terms of asset outflows and and

just a little bit of nervousness around market. Right So you know, just like bonuses on Wall Street in New York might not be looking so great, I think, um, a lot of bankers and private bankers in Switzerland product lats will be anticipating, you know, looking at that and maybe not being so pleased at what might be coming for them as well. Is the Swiss finance industry, you know, centered in Zurich or is a lot of it in Geneva? I know I always hear about you know, hedge funds, funds,

guys and women working in SOUG. Is it spread out or is it is it all there? It depends what part of the fine industry you're looking at. When you're looking at the global quote unquote investment banks which were ubus and credit spees which are both now more wealth management. They're they're very Zurich based UM, but private banking has historically been very big in Geneva. Now it's become a

little bit more split between Geneva and Zurich. And then if you look at hedge funds, yes, you're still looking at some of the smaller towns just outside of Zurich, like Zoom. You mentioned UM, and then a lot of commodity trade finance is also in Zoogan and in around Geneva. So we're a little bit split between the two sides. Yeah, So Alison, you know, aside from Credit Swiss, the other name out of Europe that is just as intriguing to

me is Deutsche Bank. I mean, at one time they were absolutely you know, in the top five seven globally in terms of global investment banks, commercial banks. Where are they now? Give us the latest on Deutsche Bank? I think, you know, Deutsche Bank is is uh is perhaps the future that credit suites can look forward to in a way they uh, you know, sort of left behind. We're gonna try to be all things to all people and said we're going to pick our shots and focus on

those businesses. And they really have focused in on fixed income trading. They you know, largely get out of the equities trading business. They do have sort of a small effort that supports UM their capital markets franchise, but they really said we're gonna focus on fixed income trading, and you know they when they made that decision, it was a tough market, a tough time for fick UM. But as that's improved, they have really sort of ridden the wave and if you look at their numbers, they are

showing that they are competing in that business. So not everything to everyone, but but winning in the business that they want to. All right, well, we'll continue to cover obviously what's going on at credit Sweets and UH it did seem for a while like it was in the spotlight, UM in terms of problems. Now, UM, we're looking across the industry and looking at uh issues as we get closer to the bonus season, UM for bankers at an

array of different um. Yeah, so all right, Marion Hofftemeyer, Financial reporter, Bloomer News in Zurich, which is very cool to get somebody ready. I love Zerich so much. By the way, you know, a lot of people think it's a little bit provincial. It's a little bit small, but I like that about it. That's the charm. And we also had Alice and Williams, by the way, Bloomberg Intelligence joining us there as well. This Sam bank Man freed FTX story, it just is the gift that keeps on giving,

and it's journalists. It's not a gift for anybody who was invested, obviously, you know exactly in in the exchange, a lot of people lost a heck of a lot of money. I think a lot of people lost life savings, life savings. I mean billions of dollars of customer money is missing. And you know, and he's talking to pretty much the media at large here, which seems odd from

a you know, a legal perspective. But anyway, Zeke Fox has got a great, great article on the Bloomberg terminal, the big take story here today about some time with Sam Bankman freed again, because Zeke already had spent a lot of time with him in the Mamas after the collapse, he went back, Zeke went back down there. Actually, correct me if I'm wrong, Z. Did you not go back after November eight to hang out with him in his

kind of abandoned penthouse. Yes, so I had profiled him in the winter when things were like at their peak and it was going great, and last winter, like in February, I've been down there. I spent two days with him at the at the office and seeing like what I thought was a bunch of like you know, genius kids making billions of dollars trading crypto um. Then the whole

exchange blew up. I was clearly my impression was dead wrong, and I decided to come back to the Bahamas to speak with him about what happened, to try and figure out why what I had missed. I'm some people after FTX collapsed, a lot of people are saying this was all a total scam from the start, and I was just wondering, like maybe the story is a bit more

complicated than that, like what really happened? And I decided, even and if you I couldn't believe everything that this guy was gonna tell me to be worth hearing him out and trying to figure out his side of the story and maybe there'll be something to learn from that. So Zeke, I mean, you've had again, as you mentioned, a lot of exposure to Sam Bank Ben Freed. I watched his interview with the deal Book interview. That was

the first time I had seen him speak. Thank thanks for never watching our interviews with him, Paul, I don't know. I'm sorry, I've show like three times. I know I was behind the curve, I admit, But what do you think is going on? Zeke? Is he do you think, like some suggest there's some fraud involved here? Was he lying? Or is he an idiot? Which one is? There? You go? Thank you? So I came. I went to go interview him, open to both possibilities, and I think both things are

still possible. I came down on the fraud side. I think it's quite likely that there was intentional misconduct here, and that his argument is essentially like I don't pay any attention whatsoever to like my billions of dollars and what I'm doing with them. Meanwhile, he's like a genius soup, studied physics and m I T and was trained as a trader at Jane Street Capital, which is for like, uh, you know, one of the most elite trading firms on

Wall Street. So well, it's certainly possible that he anything is possible, like, but he's sitting on a pile of like tens of billions of dollars. He's all about this, and now he's trying to say I didn't pay any attention to my money, Like, what was he doing? I mean, I can think of some things, but it just seems unlikely. His version of the story doesn't make sense to me. Well, he was playing video games, right. He was big into

some kind of Dungeons and Dragons role playing game, wasn't it. Yeah, I mean the first time that this it at him, Um, I just pulled up a chair next to him. Like most corporate executives would be like really nervous. It would all be like stage managed. He really didn't seem to care. And he was doing other interviews. He was doing taking

like important calls, emailing with other billionaires. And then on one of his many screens, he was playing a kind of it's kind of like a Magic the Gathering type computer game where you have an army of fairies and nights, which is, by the way, kind of ironic now, Zeke, because you know Mount cox h is the first big explosion and that stands for Magic the Gathering online exchange Mount cox Um. True, I know I always got to kick out of that one, Zeke. All Right, he's down

in the Bahamas. Still, what is he? Is he there because there's no extradition? Is he there for legal protective reasons? Why is he? Surely there is extradition. I think the question Paul wants to know to have answered, is why hasn't anybody grabbed him yet? Like, why haven't the cops grabbed him? Why hasn't the Department of Justice gone down there and gotten him? Or Russian mobsters that lost two hundred million dollars on the exchange, Like, isn't somebody gonna

get him? His parents should bring him home, really, his parents should get him. I certainly had that feeling when I was in his penthouse, just like the curtains were drawn and I just felt like, you know, I could feel the presence of these invisible enemies drawing closer from outside. And when it comes to the Department of Justice, I mean there are certain you count point to examples where

people got arrested really quickly. Also you can, yes, but like you could think of other cases where it took them years to figure out whether to bring charges and so like he's, uh, you know, as of now they opened an investigation that's known, but um, it's possible they could decide not to are Jim See just wrote real quickly, based upon your most recent experience. Do you think he's a sound mind. At this point when I was talking

to him, I felt like he was delusional. He was trying to tell me that he was going to save the company. It just seemed so improbable, and that he's smart enough he should know better. As I thought about it some more, I thought that, Um, this could be sort of a self serving position to take like it's It could be part of sort of his defense that it was all just a mistake. I'm going to save the company now I'm still trying for everybody. So, um,

all right, that's it's just fascinating stuff. Zeke Fox Bloomberg News. He's got the big take story on that. Check it out on Bloomberg dot com. Okay, let's talk it. You know you got a job. Some of it comes in strong again. I mean, if you're the Federal Reserve, how do you put that into the blender of things you're looking at. Let's check on Jeffrey Cleveland, Rector in chief economists that paid in and regal. You know, I'm not sure I'm buying this recession talk, Jeff, I mean, I

got a fully employed economy out there. How do you really kind of take into context of what we saw this morning with the jobs print. Well, I think we have to go back to chair pal speech on Wednesday at Brookings UM. You know, you know, kudos to chair Pal or FED staff whoever put that together. But I mean, I think he laid it out really nicely in terms of the key drivers of inflation. You know, sure there's goods prices, but you know that seems to be fading.

Everyone knows the rents, the housing story that that probably fades next year. But it's that third category that he highlighted, the non housing services that could be, in his words, the most important category for understanding the future evolution of core inflation. And then he ties that category two wages. And then this morning low and behold, what do we see? Wage growth accelerates? So he set that up nicely. I

think this is the situation we're in. The Labor market is still pretty strong, UM tight labor markets, supply constraint on the on the labor supply side, and wages are arguably accelerating. Here in the latest set of data that is going to keep the Fed on guard against inflation. That's gonna keep them in tightening mode. So maybe there were some hopes. I don't know, the hope springs eternal for the FED to pivot. Yeah, talk to bond traders all day, you'll you'll get a lot of that over

the last nine months. But it's been it's been wrong every time. I think it was wrong against equity bowls as well. I mean, they've been hoping since the summer that, um, the FED was gonna pivot. They can't go on. I would hear so many people say, wait till there's a recession, and you know, millions of more more people are added to the unemployment list, but it just isn't happening in terms of in terms of inflation. Jeffrey, what, um, what's

the trajectory look like for non housing services? Because as you mentioned, goods prices are coming down. We're already you know, we're worried about inventory and that um in in those prices. And then the rent story is one that people can put aside because um, you know, it's it sticks around for a year. But what about non housing services? Are they are they as well going to come down in

three Are they still on an upper trajectory. Well, if you believe the FED chair then they're highly correlated with wage growth and rage growth. Running let's say five to six percent year on year is telling you that the non housing services prices could be could be pretty elevated. We laid this out, you know, if you want a pictorial be portrayed this as best we could in our chart of the week this week, and um, you know, it just tells you that maybe inflation won't subside as

quickly as people expect. At the very least. The way I would phrase it is this hopes of getting back let's say below three on core inflation like core PC by this time next year, I think are really premature or far fetched. It seems far more likely to us that will be maybe four on core inflation. And the risk is you're you're a bit higher than that based

on beast on that data. So that's the I think that is the take home message here your chart of the week you just mentioned, where do listeners who are interested see that? Do you have a Twitter account? Do you pologize? I apologize with a commercial? You can go to paidon dot com p A Y D E N dot com that's probably the best way to go. But yeah, I think we do have the Twitter, and we do have the LinkedIn so Twitter fall. Paul only has like

ten thou followers on Twitter. What's your what's your Twitter handle? At pt sweeney at pt sweeney, So everyone listen up, get on that thing alright. Follow Paul on Twitter at pt sweeney. He actually tweets stuff, stuff important, complain about airlines, Complain about airlines. So I mean, essentially, Jeff, the average hourly earnings on a year of year basis came in at five point one percent. That's well above that four point six percent the street was looking for. It was

well above kind of what we saw last month. That kind of gets your attention, doesn't Yeah, because you still have labor force participation is constrained, whether it's by the pandemic or lack of immigration, early retirements, all sorts of factors are keeping labor supply constrained. Labor demand still is very strong. We see that in terms of job growth. We also see that earlier in the week in terms

of job openings. Job opening has been come down from their pandemic high, but they're way way above anything in history, right, So very strong labor demand, soft labor supply. There you got wage growth. Um. I like to look at that Atlanta Fed wage tracker. You know that's closer to six percent year on year. So I think the question is for for bond traders, bonding is five to six percent nominal wage growth consistent with let's say two percent inflation.

The FETE chair says, no, that that was the message on Wednesday in watching the d C in that speech, because wage growth ties back to non housing services cost, non housing services cost of core inflation. So that's the that's the picture you're in, all right, Jeff, thanks so much for joining us. Always great talking to Jeffrey Cleveland there from Paydon and Regal, and you can check out his chart of the week by going on paydon dot

com or following on Twitter. Is the Job's days Nathans was mentioning, and again the actual print came out at two hundred sixty three thousand jobs added. The consensus on the street was two hundred thousand. And also note that the prior month was revised higher pretty substantially. The prior month was an ad of two hundred sixty one thousand that got revised hired to two eight four thousands, so pretty strong across the board, and that's kind of what

we've been talking about this morning. Certainly had an impact on the markets. Tom Gibbel joins us. We like to talk to Tom every time we get these jobs data points to get his sense of what he's seeing on the ground. And he's a founder and CEO of LaSalle Network, one of the biggest staffing networks out there, and he's a proud University of Colorado buffalo who was still in search of a football coach. Uh, Tom, what do you

make of the data today? Well, well, yeah, the Dow Jones is only down sixty where the futures were showing it was going to be down four hundreds. So the market settling in and realizing that a good labor market is not a bad thing. And I think that's the message that we're seeing, Uh excuse me, that economists are talking about, and I'm not sure economists are right, Uh, is that the Fed's gonna have to raise interest rate if the market is strong. And what we're learning is

the market, the labor market is strong. So what's our definition of a recession is what we've really got to recalibrate here, What do you expect in terms of next year um from from your advantage point? I mean, have you started have you started seeing sectors cut job Do you think we're gonna see uh more widespread job cuts as rates continue to rise? No? I think were you

see it vertical by vertical? So what I think we have here is big tech realizing that they weigh over hired during the pandemic, thinking that was gonna last for forever, which just proves that even the smartest people in the room aren't always the smartest people in the room. And and now all those people that they cut, that's the talent that the small and medium sized businesses were losing out for that they couldn't afford because big tech could

pay whatever they wanted. Well, now we've got a flood of those types of people on the market, so the small and medium sized businesses can make it. And then we've had a run on saying with interest rates higher, the VC firms are not investing as much in pre uh profit and pre revenue companies. So where's the recession. The recession is hitting big tech, which are still very profitable, and it's hitting small companies that don't make money Okay,

So what's doing well? Healthcare? Uh, professional services, UH, manufacturing in the United States. And now we've got the situation that China is opening up from COVID, which is going to open up a whole another revenue stream for everybody in this country. I think things are gonna be much better. We just did a survey. It showed that of companies

surveyed plan on hiring next year. Now they don't plan on hiring as many as they did last year, but it's the highest number of companies we've ever had reported a plan on hiring in the next year. And Tom, you know, another data point that people focus on on these jobs days is the average hourly earnings on a year of year basis came in at five point one percent. The consensus was four point six percent. So wages are still very strong at there. How do you think about that?

So wages are growing and and and that's because companies are making money. And you also have this this pressure that exists that says, if inflation is so high, we've got to pay people more money. Um, which is which is fine. But the real problem I see, if there's one dark cloud hanging over things, is the increase you seeing of consumer debt and people buying things on credit

and not being able to pay for it. That that's what scares me is we have people that think that over the past ten years, with the bailout stirring um, COVID and and all the checks that the government was writing, that that's just gonna be okay. You're always gonna be taken care of. And I feel that that's a little bit of a cloud hanging over us. But I think that with wages increasing, they'll settle down. Is unemployment ticks up, which it will, uh just naturally over the next few months.

There's still an out number. The biggest thing we don't talk about skills gap. Yeah, and the problem why there's so many jobs out there is because of of our tight immigration laws. Right now we're educating foreign students in our best colleges and then we're not letting him stay here. And the technology and the other areas is there's a skills gap. And then on the low level, the people

for the who's gonna do the infrastructure package? When we start doing that from one point five trillion dollars, when Americans have an entitlement that they don't want to do the blue collar work. So Tom, what is going on here? I have heard reports that UM, the US Citizen Chip and Immigration Services U S c i S, has a huge backlog of work permits to hand out. And you know, we kind of expected this machinery to start turning once Biden UM came into office after Trump, but it just

really hasn't worked out that way. Yeah, I think what you have is there's so much pressure to fight on the on the things that get UM people really excited and heated, whether it was and I'm not saying it's good or bad, I'm just saying, you know, Roe v. Wade and getting a justice nominated, and then you had mid terms and immigration wasn't a sexy talk because you had the the economy that was still doing well and and the jobs number. So we had a two D

and fifty thousand jobs. What's the problem with immigration? The problem is we still have way more job openings than we have people that are looking, and we have a skills gap, but no one wants to talk about that because it's America first, and they think that if we let people in the country after we educate them, we're not giving Americans the best job. The fact of the fact of the matter is the Americans one of the

skill set to do the jobs that are needed. So Tom on the other end of that job spectrum is you know, you think about immigration, whether it's legal or illegal, and you know, it just seems that you look at the Jolts number, it's still north a ten million, you know, job openings out there, and it just feels like a lot of those jobs would ordinarily be filled by you know, immigration, legal and illegal, and that doesn't seem to be the

case right now. I'm not sure how that changes. Well, I think what ends up happening is be careful what you wish for. Is everybody wanted tighter borders, and we got into this this battle, this cultural battle, this social battle over over what we want and in a lot of ways it was necessary to tighten things up. But if we don't have immigration coming from south of the border and Americans don't want to do lower wage jobs,

we've got a real problem in our hands. And now we've got a situation where you have municipalities, certain people talking about raising the minimum wage even again, you know, getting it from fifteen to twenty or even five. I mean, you just get to a point where you can't pay people more just because you want to. If the market doesn't allow, what your milk is going to be seven dollars a gallon. And that's what we're staring in the face, alright, Tom,

good Stuff. Always appreciate checking in with you on Jobs Day, Tom Gimble. He's a founder and CEO of LaSalle Network sALS and National Staffing Recruiting UH firm, and they fill lots of jobs on a permanent basis, on a temporary basis, and we'll love checking out with Tom getting his perspective. Here's thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on

Twitter at Matt Miller V three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.