How The Shrinking Immigrant Pool Is Creating a Labor Shortage

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Since the beginning of this year, when President Donald Trump took office, arrests have suspected undocumented workers have jumped thirty eight percent, and this is causing some alarm in some unlikely corners, including Haskell County, were of the voters cast ballots for President Trump. Michelle dre Risco, who highlighted UH this issue, is joining us now. She is an economics reporter for

Bloomberg News. And you took a look at how certain resident and UH company owners are getting increasingly concerned about the crackdown on Mexican immigrants. Can you can you explain? Yeah? So, um, I mean, especially in the agriculture industry, that's kind of

where we focused our our efforts and trying to understand this. Uh. You know, employers are just worried because they have so many foreign warn workers, and they want to protect these workers not just for humanitarian reasons but also economic reasons. So this is a part of the country and a part of this Kansas. We went to southwest Kansas, where

it's incredibly tight labor market. Uh. You know, unemployment is in some cases almost half the national rate of four point three percent, So they're seeing two five to three even percent unemployment, and that just it just means there's a scarcity of workers and they need to hold on

to what they have in order to keep business going. Michelle, maybe you could tell us a little bit of the detail of Congressman Roger Marshall and how he has become at least a public face for this debate because he's the congressman from the first district Sure Congress is Arsa was a very interesting to speak with. UM. So he's a freshman Republican for the first district in Kansas, which covers much of southwest Kansas but also some northwest Kansas

and a little bit of northeast Kansas. Is a large district. UM and it got larger, right because it moved a little bit east in Sure and and and and just because you know that the population is a little bit more sparse than it would be in other states, but but it still is a significant, uh you know, significant

amount of landa's innificant amount of employees and employers. Um. But the way he sees it, I mean, he talked about how a year ago, um, you know, immigration was maybe the three year number three or number four issue for him with its constituents, and just over the course of uh, you know, the later part of the campaign, and then of course when President Trump took office, it's become definitely the number one issue and one that he

continues to hear about when he goes home. Um. So he's hearing it not just from a security standpoint, um, but definitely from an economic standpoint. He talks about, you know, the folks the businesses that are are worried, but also the folks on the ground, families of immigrants who may be documented or undocumented, but both being so worried about the uncertainty right now are on policy, you know, Michelle.

One of the big arguments that President Trump made when he was signing rules to crack down on immigration a legal immigration was it was important to have people employed in the US from the US, people who would get wages that would be appropriate. Why aren't these companies just raising wages in order to attract more people from the US to work for them. Well, I think that's a great question in general, and that's of course one that

we asked of these farmers. I mean, I think in their case, especially where we were in southwest Kansas, they said, you know, look, this isn't about cheap labor. We've tried to hire people through higher wages. There's just not the people that are willing to do it outside of the foreign born labor um. So, you know, take the case of someone like Kyle Aberhoff, who's general manager of a dairy farm, and he said, look, we went to high

unemployment counties and Ransas. We said, here's our pitch we're giving. You know, some of these jobs are no skills required in the entry level forty dollars, which means a lot in an area where the cost of living isn't high. And even then he said, it's hard to get people if you talk about native born versus foreign born, it's hard to get the native born unemployed to come to that area of Kansas. He just he said, we tried,

and you know, we're willing to pay big bucks. And you know, the only people that have taken these are foreign born workers coming in. So that's that's what they want to protect, is those those workers that they can get. So, Michelle, given this economic concern for these producers, is there any talk about them going to Washington and trying to change

the policies in order to get labor? I mean, even if they're willing to, can they show that they've been willing to pay more to people who are you know, native residents and they just don't have enough staff. Well, I think they're trying to make their voices heard both

on the state and the national levels through different organizations. Um, of course there's a pretty powerful lobby and you know American Farm Bureau and and others in the dairy industry and and and some smaller ones in the farm industry that are certainly making their case for this and have for a while. I, you know, I think the the onus is on Washington now to kind of get something going.

But of course, with with all the other things going on, it's it's hard to say where immigration will fall and in terms of priorities. But but yeah, they're still pushing. I mean they're they're trying to be practical about this and ask for very specific things, um, in terms of kind of getting year round visas instead of just the seasonal workers that the Trump administration has highlighted, and and

really try to put this before people. I mean they've they've credited Agriculture Secretary of Sonny Purdue was really being familiar with the problem and proposed solutions. But we'll see how far you can get with Congress and with the rest of administration. Michelle, are they going to get practical before milk goes to six dollars and forts a gown? Well, we'll see. I mean, you kind I know, you've seen what the dairy Lavia said could happen um, and you

know that's just one figure. I mean they're they're talking about, you know, some nightmare scenarios if we lose those workers, and of course it's anyone's guests what would happen. But so it's all about the money, Well it could be, yeah, I mean, I mean for the companies, it's all about the money. They want to stay in business and they

want to make more money. You know, I would think that, yeah, on a on a massive scale, yes, But I think when you talk to people who are especially in these small towns, who know their workers, who whose kids play with each other, you know, they go out to the baseball games together, and they see these people, they definitely have a humanitarian concern and that that was one thing that you know, ring true for a lot of the farmers I spoke with, they said, look, this this is

about economics, is about business, but you know, we need to protect our workers, and we care about these people. These are friends, um, not just their employees. So you know, you do, you do see that hit home, especially in the small town areas of the country that are dealing with this. And yet you point to one Haskell County where cattle Empire is the biggest employer. Cattle Empire relies in big part on immigrants for their labor. Seventy seven

percent of voters cast ballots for President Trump. Did they talk at all about changing their views at all on his policies and their opinion of his tenure? Well, I think they were. They were frustrated. Um some of them. You know, we didn't talk so much about who they voted for specifically one on one, but you know, some of them would say things like, you know, I think

the rhetoric needs to kind of get toned down. I think, you know, he's proposed some some good things in terms of, you know, being focused more on the criminal deportations than than anything else. But I think there's they all kind of recognized as broken channel communications where there's certain things being set out of Washington that are not helpful on the ground, and even if it doesn't match with what's going to happen with policy, it's it's already generating some

fear and uncertainty. So they're they're hopeful that you know, this kind of gets worked out communications wise, and then that that pays the way for some policy changes that will be practically helpful down the road. Well, Michel, it's certainly sounds like there's going to be a topic that keeps on being of vital interest to the But just quickly, the Member of the House, right, Roger Marshall, again, give

you twenty seconds. What's his position, what's he doing. Well, he's he's trying to make it clear you know that yes, we should be focused on security and on a national level, he says, you know, as a congressman, I still think security is a number one, UH concern around immigration, but he said, look, I think the president will come around of the economic practicalities of this, and this is certainly

a huge concern of my constituents. But one quote that I really really stuck with me Um when we were talking about this, he said, I wish the Republicans could translate the sincerity of their hearts. He thinks that a lot of his Republican colleagues really do care about these

immigrants as as workers and as people. And he he doesn't you know, he thinks lost in this debate is uh is sort of political um, politically charged debate, but he thinks it's more about the economics and humanitarian concerns. Thanks very much, Michelle jem Risco, economics reporter for Bloomberg News, reporting from Washington. Great story, much appreciate it well. Oil prices crewed is into the lowest level since August of last year, with current price of less than forty three

dollars of barrel. Vincent Piazza has been watching this shaking his head saying, MM, can it go lower? He has senior equity energy analyst and global sector leader for Bloomberg Intelligence, and he joins us here in our Bloomberg eleven three, oh studios. So, Vince, do you see that this could go lower? Uh? And what exactly prompted this latest leg lower that broke through a certain technical thresholds that people had.

Sentiment is obviously poor, all right there? Ope, Uh, we were looking for OPEC could do more than just reaffirm or extend those cuts. We were looking for deeper cuts just given the fact that we did not see any any any of that storage dilute over the course the past year or so. UM, and so these cuts. Extending these cuts really doesn't do much because you have an enormous amount of capacity coming out of the US that

has been underestimated. We have drilled uncompleted wells that present this just in time inventory of capacity that can really fill that void. Uh. And therefore you have imbalances that will last for longer. You do not have a clear view on the sustainability of demand growth, but we do have a clear view on the output coming out of the out of the US, which is pushing past nine point two nine point three million barrels a day. It will likely reach at this level uh ten million barrels

in the docun distant future. Put that into perspective, and what was it say, five years ago. Well, so in two thousand and seven, two thousand and eight, we bound we we we bottomed that around five million barrels. We peaked just before uh the announcement by OPEC at nine point six million barrels. We dropped to around eight point six. We have recovered very sharply off that low again. And that's because of this just in time inventory that can react more quickly to any kind of price signal, any

kind of price response. That's a that's a point you got you should underscore, right, because this just in time ability to turn on and turn off, the ability to get hydrocarbons out of the ground is something that is particular to the technology and the advances that have been made in the United States. Yeah, um, horizontal drilling, hydraulic fracturing.

The the advantage has really been hasually been underestimated by those outside the US and and and probably outside the industry, right, they don't under the it's this is a turn on, turnoff thing. Unlike many other kinds of drilling technique, longer dated projects take longer to bring these hydrocarbons up. But

exploitation of on land US oil and gas. Tight tight oil and gas allows for a very quicker response, quicker response than exp So okay, so then let's use that maybe as a jumping off point for this e q T Rice Energy deal that was announced. I guess it was yesterday. UH, tell us about this. Why this is the Marcella shale. So it's a western Pennsylvania area, so it's the broader Appalachian basin. UM it includes Pennsylvania, West

Virginia and also parts of Ohio. It touches the Marcella shale, but also uh a newer shale, uh, the Utica as well. What you have here is a lower cost, more economic basin, and you have a consolidator who now becomes the largest natural gas producer in the U S. E q T EQTT they paid six point seven billions the price. Yeah, and when when once you assume the debt, you're north

of eight. But the general theme here is that I now have capacity that's lower cost coming out of the Appalachian Basin that can push out into the Midwest and also the Gulf Coast and depress natural gas benchmark prices

in other hubs. And therefore you have as b I as mentioned in the past, a lower for longer output of lower for longer price of NACK gas given the higher output coming from a lower cost basin, given the outlook for lower prices for longer, how does that affect mergers and acquisitions that are in the pipeline that they have uh dropped just because it's getting harder to evaluate

the worth is? Yeah, So so Q one H e M p US deals numbered somewhere around twenty three billion dollars UH in two Q. As of last week, roughly about eight billion were announced. Now, if you add in e q T and and RICE, that brings it up a little bit. But you have this period of of of uncertainty, of a clouded backdrop on certain fundamentals, and that's sort of pushing the pushing the prospects of of deal making out some. You have Coude oil which is

down roughly Natty is down year to date. You still have in balances across the petroleum value chain and that is causing pause for a lot of these e MP management teams. That's natural gas, Yes, it is, okay, just making sure Natty, all right, I'm gonna tell you, Natty, Uh, it's actually up a tenth of a percent right now, two dollars eighty nine cents for uh well British normal unit. Right,

that's what we're doing, a ten b TU. Thanks very much for joining us, Vincent Piazza, he's always expert when it comes to energy analysis for Bloomberg Intelligence. Let's say stay international a little bit and go to Simon Ballard here is our global credit strategist for Bloomberg News based in London. Simon, always a pleasure to get your thoughts on what's going on. I just want to set the context if you can, which is we've got a rally

in US treasuries. Taking a look at the long end of the curve, specifically, the tenure is up seven thirty seconds. We're to sixteen and for the thirty year, we're under two seventy five. We're just at two seven four right now, up more than twenty four basis points thirty seconds. I beg your pardon, go ahead now. Absolutely, we've got to rally across here in Europe as well. And I think there's that that underlying that underlying sort of uncertainty if

you wish to to global macro to politics. Um, and while you've got you know, we're looking at two sixteen on the tenure treasure as you say, we're we're down to sort of twenty seven basis points on the tenure bound in the front end of the German curve is negative to the extend of sort of sixty four basis points on the two year, which exacerbates the lack of yield for investors over here in Europe even more than

in you're in in the US. Yeah, it's Simon. You know, you wrote about this paradox, and I thought that it was really compelling. Basically, you've got issuers, companies that are selling dead at an accelerating pace. Right now. I'm looking at the European Corporate Bond Index almost two trillion dollars two trillion euros i should say worth of debt in that index, up from less than one point four trillion

euros back in two thousand nine, a dramatic increase. And basically, you've got companies that are betting that yields will eventually rise and they want to lock lock in borrowing costs at these low rates now. And then you have investors who are betting that interest rates are going to stay low and that it's worthwhile buying this, I mean somebody has to be wrong. Well, somebody has to be wrong in the long term, but in the short term they

probably live alongside each other quite happily. UM. And you've seen a compression in yield spreads UM here in Europe as well as in the US over the course of the last year. If we take the European high Yield Index on Bloomberg for example, that's that's tightened about a

hundred basis points during the course of this year. Those sub investment grade rated corporates that investors have been chasing and looking to invest in to try and get the incremental yield against that backdrop of you know, to sixteen and twenty twenty seven basis points on tena bundeer in Europe that you know, people have been looking to to to to try and maximize the yields in their portfolio.

So from an issue as perspective, why wouldn't you want to raise funds in this sort of an environment at these sort of funding levels, And from an issiute, from a from an investor's perspective, then yes, you want to look down the quality curve in order to try and get as much yield as you can from these corporates into your portfolio. At the end of the day, you know, yields aren't going to continue to compress and too narrow,

and there will be a correction. It's a question of these both both sides of this equation looking to make sure they get their timing right, Simon to the to The buyers ultimately believe that the European Central Bank, as many central banks have done, would come in and bail no matter if anything went wrong, particularly if well it was a big collapse. Well, hasn't that But hasn't that really been the sort of the the the belief across markers.

Really you've got the buyer behind you who's willing to put up the bid, right the European Central Bank, And then you've got the actual investor. And you've got the actually investor. And that's the problem. The actual investor has been crowded out to a certain extent by the quantity of easing purchases of the of the central banks. We has exacerbated the move tight and the decline in yields,

if you wish so. Going forward, you know, there is this assumption that the central banks have always got your back, will always be there but you know, as we we look towards sort of the unwind, the tapering, you know, be that later this year, be at the course of two thousand and eighteen. It's the rhetoric, it's the language that leads us to that position. Probably more importantly in the short term, that's going to drive risk asset sentiment and risk appetite as we start to learn about you know,

central banks potential timing for moving towards that taper. Even if we're not talking about tapering itself, the language will be critical. Simon, there is a cliche in debt markets that Europe is about eighteen months to two years behind the US in terms of credit cycles, and we are seeing we are seeing in the US companies levering up and you know, their credit quality deteriorating. Do you see a similar trend in Europe? How are the issuers that

are coming to market? And can you give us some examples? Yes, no, exactly. I mean we've we've we've got a number of issueres I guess during the course of this year, as we've seen this compression in high yield spreads, as we've seen the reach for yield across the across the investor base. Then the market has been opened up increasingly to too sub investment grade borrowers um in order to you know,

to to to get funding on board. When interest rates start to rise, when yields start to increase, then the debt service costs of these weaker rated corporates will become more onerous, and that's when investors have to start looking at the fundamentals for the for the individual companies that they've been buying into in in terms of their ability to service those debt services, their ability to pay those

debt service costs um in a high yield environment. So we've seen everything from you know, cypresses in the market. Today's sub investment grade on a sovereign level probably has a little bit more credibility in terms of your your underlying fundamental belief than than than a high rated corporate.

But then we had the likes of you know, the Accardo um retail chain only early on this week last week, coming in Sterling and again and sort of reflecting the the ability of weakerated credits to come and with some fanfare as well. Um, but you know, the fanfares fine wire the music explaining, but at some point the music will stop when when the central banks suggest that they're

going to turn the volume down. And Simon, real quick, what's the over under in the fact that the ECB is unlikely to announce any kind of taper in the near term. Yeah, I mean no, no, no taper in the near term. I think that as soon as we could look for any language or hint from them that they're looking in that direction would be September. But for the time being, you know, the market remains well supported.

We have the latest corporate sector purchase program data that came out yesterday that showed that okay, slightly reduced level last week, but they're still buying corporate bonds, They're still supporting fixed income markets very very significantly. Um and in that sort of context, investors want to continue to buy what the central banks are buying. Thank you so much

for joining us. Simon Ballard, global credit strategist for Bloomberg News, training us from London where they are a wash in liquidity from the central brank without any sense of when it could end, fueling this corporate debt boom and everything boom as we are seeing