Fed Defies Skeptics With Dynamic Response: BI's Riccadonna

you listen to Chairman j Pal. You know, what do you take from the Fed's actions this morning? Well, defense actions which we expected them to come in with some additional measures to support main Street, but this did go beyond those expectations. The FETE is really showing UH to to use Mario drags word, that they're doing whatever it takes.

So those who thought the FED maybe running low on ammunition prior to this crisis are getting a very rude uh and welcome awakening, I should say, as we see them really pulling out all the stops, showing tremendous dynamism and creativity and also aggressiveness in terms of providing support

to UH financial markets really across the spectrum. There's some concern just going forward about the political ramifications for the Federal Reserve as they choose which bonds to buy and backstop and which not to what's sort of the precedent when it comes to the Fed's role in this capacity and the fallout afterwards. Well, there's there's really no precedent for what we're seeing the FED doing at the moment. The FED tries to just step into general markets and

not pick winners and losers. So they won't be saying we'll buy company X and UH and skip company why. Instead, they'll purchase a broad spectrum of the securities, whether it's in the mortgage market, corporate bond market, and also these additional lending facilities. So I think as we think about political outcomes here, UH, certainly the FED will be viewed favorably.

Favorably post crisis when we're looking back to a second quarter swoon and economic activity that could rival some of the contractions we saw during the Great Depression and unemployment rate that's the highest since the Great Depression, and an economy that comes out the backside of that, UH actually functioning reasonably well with certainly casualties. UH. There will be bankruptcies and UH and and businesses that are shuttered, but come through that much more readily than the experience than

prior experiences where we saw that kind of economic dislocation. Carl, Every economist who I've spoken with applaudse what the Federal Reserve is doing right now, saying that they're acting quickly and aggressively at a time of incredible stress that's affecting individuals both on a health and financial UH. Financial manner that is unprecedented in many ways. There is a question though, going forward of the Federal Reserves rule and how they

extricate themselves. And when you say that they buy broad markets, one way they're trying to do that is with e T s and I'm wondering how that changes the dynamic at a time when exchange fitted funds, at least in credit markets have taken on an outsized role and can be viewed as winning or losing based on what the FED does. Sure, if if there's a big market and there's signs of strain, the Fed is absolutely step stepping in to help bus stabilize financial conditions. What we're seeing here.

We really shouldn't think of this as economic stimulus. Certainly, the FED has cut industrates to zero, and all the measures they're taking should help to prop up the economy, won't see lockdown ends. But what really what the FED is doing here is financial market stabilization, right, So they're not picking winners and losers and industries or credit sectors

or whatnot. They're looking at core components of the capital markets, the municipal market, corporate bonds, also small businesses and whatnot, and they are stepping into stabilized conditions so that liquidity strains don't become solvency strains, uh in the in the longer run. So, Carl, it's it's fairly cleared. I think that most observers at the US economy right now is in a recession. How does Bloomberg Economics kind of map

out the remainder of the year in terms of GDP? Sure? So, well, you know, it's difficult to map out what the recovery looks like when you still can't see the bottom and we don't know how far we're going to fall. So until we see some signs of stabilization in the economy in those earliest indications will be something like the number of unemployment claim filings starting to recede. We haven't gotten

there yet. Right each week, we're seeing millions and millions, six million filings UH in the in the latest week alone, So until we see jobless claims start to pull back, then we don't really know how high the unemployment rate

is going to go. So based on our projections U we're about fifteen million filings of jobless claims so far, if we get to twenty million by the middle of April, so with next week's data, we're looking at an unemployment rate heading to about fifteen percent or potentially higher in the second quarter. That kind of baseline expectations how many workers were shut out of the economy gives us some context to understand how deep the economic dive will be

in the quarter as well. Right, it takes a certain number of workers to bruce a certain amount of GDP, So if we know unemployment has gone from three and a half to fifteen, then we can map out what that looks like for GDP. Wow. Carl ka Dona, chief US economists for Bloomberck Economics, thanks so much for joining us. We always appreciate your commentary and thoughts on particularly today that you know that we got the jobless claims LEASA and then the this this really aggressive uh move by

the Fed. I think looking back, as Karl suggested, you know, we're gonna look back and say on this and say, the Federal Reserve really really formed. Well, they were aggressive, Uh, they were early, um, and they were consistent um, and they really thought outside of the box here. So the Fed is certainly trying, uh it's most to keep ahead

of this, Paul. Today is a historic day. I think that we all are going to look back on today as reaching a tipping point with the Federal Reserve absolutely solidifying its role at the forefront of trying to save the economy of the world's biggest economy. What we've seen, I mean that that to me, I feel like is a fair assessment of what we saw today. I think

you're right least I think they were. You know, they've been early, I think relatively speaking relative to fiscal policy certainly, and they've certainly been aggressive here and again another two point three trillion dollar package today, really focusing on small and midsized business as well as state and local municipalities. Yeah, it also raises some philosophical questions about the Central Bank

to the world, which it increasingly has becommon. When we talk philosophical questions, no one better to talk to them with than Barry rid Holts, who is a Bloomberg Opinion contributor as well as the co founder of rid Holts Wealth Management and of course the host of Masters in

Business on Bloomberg Radio. Barry, I want to talk about the FEDS rule here J Powell kind of drawing the distinction between lending versus giving money and saying that they were a lender, and the congressional leadership they were the givers. And yet it does seem like Congress moves just by nature of the body and by design slower than the FED can. And the FED has taken the central role. What are the consequences for the FED steps and the

measures that we have seen so far? So let me just push back a tiny bit against your question, because historically, outside of the O eight oh nine crisis, we have seen Congress move quickly. They moved fairly quickly in the Great Depression, they moved fairly quick immediately after Pearl Harbor, after September eleven, so they can step up to the plate when necessary. They really were just a wall in

O eight oh nine. And in fact, the biggest distinction between the crisis and the O eight crisis is that it is both monetary and fiscal in its response. And I think J. Powell added exactly right. The said is the central bank bankers to other bankers, and they're there to make sure that the loans flow and that there's plenty of liquidity. If you're going to give money away or spend money, well that's a decision that must come

from Congress. So Barry, give us a sense of kind of how you think all this FED action is really going to impact the markets markets. Obviously it's a risk. On day today we're seeing the equity markets trade up in response to the FED move here, how do you think that the actions were really plat in the market over time? So all my technical friends are looking at

what's taking places more or less a dead cat bounce. Hey, we'll bounce the lows and that's when the snapback rally will run out of steam and then we'll either retest or make new lows. I understand how they feel that way. I'm not a in that camp, because if we do, you know, just today Fiser came out with testing a

new treatment for this. If we can actually get to the point where we see the light at the end of the tunnel and the lockdown ends, well the FED will have done their job, Congress will have done their job, and we'll start moving towards a more normal footing. It's going to take a while, but it's not oblique, and there are signs that you know, there is a natural

end to this crisis. Comment. There has been a general feeling that the Federal Reserve is acted appropriately given the magnitude of the shock uh that we're seeing right now. Still a lot of questions remain about how the Federal Reserve will extricate itself from this program, as well as how it chooses which exchange did funds to buy. We're seeing For example, h y G, the biggest hiled bondy t F in the United States, surged the most in

October two thousand and eight. Today, are you concerned about questions of moral hazard and choosing winners and losers that will inevitably dog the FED following this? Sure? Always and and in fact, you know, we don't even have to wait five years to look do a post mortem on this. There was no reason for the Fed to go to zero. It looked like they were panicking. They could have cut a half half a point and left it there. It

makes it that much more difficult to extricate themselves. I give Ben Bernankee high ratings for how he managed the period from O eight oh nine. He was he was way too accommodative beforehand and arguably stayed on emergency footing way too long. It's very easy to show up at the party, uh with the punch bowl, which is what the Fed is doing. It's much more challenging to take that punch bowl away. We'll see if J Powell is that are any better than Janet Yellen or Ben Bananke

at bringing rates back to more normal levels. It's very, very difficult to do. So Barry is he is he kind of take a look at this market place here again where we've had a number of updates here, how are you really thinking about it? Here? Are you thinking that this is a a real move or it's just kind of a bounce within the context of a bear market.

So I love to think in opposites. I love to stake out of position and then try and say, okay, what is the exact opposite position, and might that be right? You know, the real optimistic perspective is this is an externality. This is a one off event, and once we get through it, we'll go back to business as usual and the priorable market will resume its former trend and the economy will will recover and everything will be fine. You know, historically, look at seven, not only was that the day, but

Pique the trough. It was more than and that uh down draft never derailed the economy or the bull market. So best case scenario, this is sort of like that worst case scenario. We're in a recession that lasts a long time. The drawdowns continue. This is a dead cat bounce, and we make new lows below doubt twenty and maybe down to I don't know, pick the number two thousand on the smp UM, and it will take a while

to heal from this. The truth reality usually falls between either extreme I doubt that this will all disappear once it's over, once we get a treatment and a vaccine. It's not all going to go away. There's a lot of damage in the economy revealed by the collapse and I also doubt that this is a seventies era decade long problem. This will take a couple of years to fully recover from UM. But you know, you're starting to

see some positive signs of this peaking. We still have a lot of work to go, but it doesn't feel like this is gonna last forever. Barry Dholts, thanks so much for joining us. As always, Barry Ridholts, founder, Redholt's Wealth Management is also Bloomberg Opinion calumnists and host of

Masters of Business podcasts. Well as we talk about the Federal Reserve is two point three trillion dollar extra bailout money for credit markets and beyond, we have perhaps buried the lead, which is that six point six million individuals in the United States filed or I guess we're able to file for unemployment claims in the past week, bringing the total three week claims figure too well above fifteen

million people. The jobless rate on track to exceed, well exceed ten per cent for the first time since the nineteen eighties, leading to a question of just how bad is it and how quickly will some of these individuals be able to get their jobs back? Joining us now, Hayden Brown president and chief executive officer of up work, based in Mountain View, California, which up work is a job placement agency that focuses online, which is perfect for the environment that we're living in. We're all in our

on our screens and in our cyber worlds. Hayden, thank you so much for being with us. Do you have a sense of how quickly people are able to sort of reroot their skills find jobs, say in you know, warehouses or other necessary rules as they wait this period of tumult out. Certainly this is affecting different parts of the economy, varied differently. You mentioned work workers and warehouses and those types of jobs. I think they're just getting pummeled and there's not a lot to do to move

those online. But in other sectors of the economy where the work is more about knowledge work and digital work, we're seeing clients and freelancers on our platform just moving rapidly to expand their remote work deployments and get more and more talent through online platforms like upward. So interesting, Heyden, do you think this is maybe accelerating a trend which may have already been there, which is kind of the work from home type of situations and maybe expand new industries,

new functionalities. Is this something that you think will be a longer term trend when we come out on the other side of this, Paul, I think you're right about that. This has definitely been a long term trend where more and more workers have been demanding freedom and flexibility and how they work and really clamoring to get more of that, and employers have started to see some of the benefits.

But the current crisis has no doubt accelerated massively people's adoption of both the tools and technology that enable remote work, as well as the cultural and behavioral things that people need to do to really collaborate successfully together remotely. So I think that those patterns of behavior will be here to stay, and this is going to be a seismic shift that lasts well beyond the current crisis. Hayden, what does the research show as far as the percentage of

the workforce that can go online at this point? You know, the numbers on that vary, But what we've seen in the US already recently m I t to the study where of the workforce or more has moved from commuting to offices to online, and so I think there have been some myths where people felt like this is something

that they potentially couldn't do. But we've seen you more than an eight fold increase in people moving their work online in the last couple of weeks alone, which I think does indicate people are realizing there's a lot more they can do online than maybe what they previously saw it. So, hey, didn't you know it's interesting here? You know a lot of we get the jobs number of jobless claims again

this morning. You know another staggering number six point six million people that you know, cumulatively about sixteen or seventeen million people over the last three weeks. What can recently downsize employees do to maybe try to secure a new job quickly given all the uncertainty that's out there. Yeah, I think one of the first things for people to focus on is making sure their skills are up to date.

This is a great opportunity for reskilling or brushing up on knowledge of tools and technology that really are required both for the digital economy that just exists today, as well as for working remotely. The second thing that people can do is coming onto online work platforms like a work assembling a really detailed profile that showcases what they can do, an examples and testimonials from past clients or

employers of of how great their skills are. And then finally, I'd say, as they reach out to perspective future clients, really be tailored and how they approach those clients and and address the specific needs that clients have outlined in a scope of work or a post in that they've made, so that the it's clear that the worker has really thought through and is ready to commit to those specific needs of the client, not just kind of is generally

skilled in the area. Taking a step back, I'm wondering how much hiring there's actually going on right now, given the fact that we talk so much about the actual jobless claims that are blowing all historical precedents out of the water. Yeah, I think it's really kind of two different stories out there today. You know, there are sectors of the economy that essentially are frozen and hiring and

so much activity has come to a screeching hope. But then what we're seeing is a lot of businesses they're just really working on business continuity and they still are

moving forward. They are hiring, they are trying to get work done, and they're just trying to figure out how to do it in this new context and frankly figuring out that a lot of the traditional ways that they were, for example, hiring traditional staff just aren't working in a world where we're you know, sheltering in place, and that the changes have been so rapid, and so I think a lot of businesses there is light in the edge and at the end of the tunnel for them, but

they're just having to adapt to new channels to find talented individuals outside of kind of the normal ways that they've done that. So, Hayden, what is your sense, you know, we we've seen these historic numbers, as Lisa's just referencing, what is your sense of how this labor market might play out over the next you know, year or so. It's obviously gonna be really ugly here. We're going to get unemployment, you know, some numbers for suggesting today maybe

as high as fifteen percent. But do you think it's going to play out over time? It definitely as hard to say where this is going to go, and we don't feel like we're at the bottom yet, so it's going to be a rough couple of quarters. I think been back. Some of the trends that we're watching are really around the freelancing trend in America, which has been a big trend on the rise. More than fifty seven million Americans were freelancing last year, contributing over a trillion

dollars to the economy. So I think in this time of crisis, people are increasingly turning to alternative where they can drive income through freelancing, either part time or full time, trying to figure out how to make ends work ends meet, and I think we'll see that trend continue to be both accelerated by the crisis and kind of endure even

after things start to recover. It's interesting that that you talk about freelancers because people have been talked about the gig economy and how people who are in that area have suffered disproportionately because their income has been cut off that much faster. Do you expect it to actually come back online that much more quickly, or perhaps even before the shutdowns end, just because jobs are so much more

fungible and flexible on in an online world. Absolutely, So, I think that people will realize that they need to be very cautious about a lot of their hiring and we'll look to freelancers as an alternative where they can get really skilled talent and not have the same level

of long term commitment. Frankly, uh. And they're going to realize also that this is a great way that they can tap into skilled people that actually are not in their own backyards, and they can find freelancers across the country, across the globe who can help fill a lot of the skills gap that they have been facing even before this crisis. And it certainly is going to continue to increase as they work to evolve into even more digitally

oriented businesses and workplaces. So I think that the freelancing trend is definitely going to continue to accelerate and we'll rebound even more quickly once the recovery starts happening. Heyden, where just give us a sense of where corporate America is in terms of working from home? I know, you know, certain companies really embrace it, a lot of other companies not so much. Kind of where do you think we are? And I think that's going to play out given what

we're experiencing right right here. I think all what we're seeing from our customers is everyone is scrambling to figure out how they can obviously work from home more successfully. And we're trying to help them because we've been actually doing work from home for twenty years inside of our own company as well as running the largest online platform

that lets people work from home. So uh, clients are reaching out to us right now and asking questions about how they can expand the types of work that gets done working from home, even if they had previously you know, smaller populations of employees or freelancers doing this kind of model.

And so with that appetite and when I think a lot of thoughts to business continuity even outside of this specific crisis, a lot of the companies are talking to us about how do we create more of these flexible talent benches that help us maintain continuity even in situations where people have to work from home in mass and that's I think going to be something they care about

again well after this current crisis passes. Haydon Brown, thank you so much for joining us to really appreciate your thoughts on this whole working from home concept which is

now being embraced by many many U S workers. Haydon Brown, she's the CEO of up Work, giving us her thoughts on kind of some of those jobless numbers, Lisa, and that's growing, growing UH evalence of people working from home, and now it's being forced on a lot of people, it's being forced on a lot of UH companies, and I think everybody's trying to adapt and he's trying to

optimize the situation. Well, as we've been talking about, the Federal Reserve stepped up once again with a very aggressive financing package, liquidity package for the marketplace two point three trillion dollars. We can't say the same about Congress. Is commerce goes back and forth on a set another fiscal stimulus plan, back and forth that Democrats Republicans really at odds today not able to move that forward. To get the latest, we welcome Billy House. He's a coggressional reporter

for Bloomberg News. So, Billy, what's the latest on this latest round? Is A two billion? Is five billion? Where are we? Well? That just happened in the last half hour that Senate UH could not come in agreement on which one to do. UH. Democrats would not go along with expedited approval of Mitch McConnell, the Senate Republican leaders. Two billion our version that's reflective of Treasury sectory of

Nutin's proposal. Instead, Democrats want twice as much. They want more money for at additional aid for state and local governments and hospitals and other matters, not just small businesses. Billy taking a step back. We've been talking a lot about the Federal Reserve's response, and some people have been drawing parallels or perhaps contrasts with Congress and how they've acted and how they've been a lot slower. What's the sort of consensus on whether they've acted quickly or whether

they've been behind the eight ball. Well, I mean, when you look back two weeks ago at the massive two trillion dollar stimulus bill, you don't have to give them, I guess, credit for acting swiftly on that, even though in just a matter of days from it being proposed to pass by both chambers and then signed by the President. There were some wrinkles in between, but that was very

swift and that was within a week. Uh, they didn't pivoted to winning a larger infrastructure package, but and realized they needed this added stimulus boost for small businesses and were to do something quickly on that. But now they hit this sprinkle, and it appears that nothing's going to be resolved till next week. So I got you gotta give mixed marks. At the same time, the Fed today may have given them a little breathing room with the

actions they took on helping small businesses. So, Billy, is the sense that you know it really assistant question of to or is there other issues involved there as well? There's issues on how that aid would actually work within the programs for instances. For instance, Democrats want more tailored UH directives to minority owned businesses, women owned businesses UH, and in their bill they would actually classify farms also

as a small business that had been uncertain. So I mean there are more distinct directives within the language and the Democratic bill in the Republican bill, Billy. There's also a question about the existing legislation that you mentioned. It's been passed a two trillion dollar bill. A lot of

people did say they moved quickly. However, there have been a series of stories throughout a variety of different news channels talking about the kinks in the system, the fact that banks have been reluctant to lend out to companies they don't have prior relationships with or without more better guidance as far as how to get those loans back stopped. What's the latest in rolling that out? And that's that's exactly what the Democrats were saying on the Senate floor today.

There were a couple of most of the lawmakers in Washington are not in town. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woy. It's I'm on Twitter at Lisa A. Bramwoits one before the podcast. You can always catch us worldwide on Bloomberg Radio.