Jay Powell, Pride, And Public Companies (Podcast)

Good friend of the show. Uh, Jennifer, what did you hear or did you hear anything different from FED Chairman j Pale as he uh testified yesterday in front the Senate and today in front of the House. Yesterday people were saying maybe he wasn't as hawkish as we expected. And this morning the big headline was is going to be very challenging to hit a soft landing. Yeah, that was the headline. So, Jennifer, what did you take away?

Good morning everyone. So I thought he was again I think said his last few game He's been very clear and I'm giving him an a for his communications recently. But I thought the big takeaway was the fact that he did not dismiss the possibility of a hundred basis point right, like, um, you know, he said, and this is a smart thing to do, like I will never take anything off the table for any and all purposes. And that's a wise thing to say, because you can't

dismiss anything. So I don't lessons learned by the way Jennifer right, because remember a couple of meetings ago he said, oh, seventy now we're not going to do that. Yes, exactly exactly.

That was like, yeah, it was one of the first thing cause I thought about when the market rallied, um, you know last week when he said that, they said, oh, you don't he's uh, he's dismissing or he's saying that the semi five basis points is not comm and I can't remember exact words, but I was thinking a hold it. Back in May he also sort of dismissed the semi

five peoper in markets rally. Then look what happened. So I don't think anything can be taken off the table, as he said, And you know, I'm I don't think the hunter basis points it's going to be a thing. It's going to become a thing. But the fact that he's just or that the entire committee is not putting anything off the table, is seeks volumes to their commitment, um, you know, to bring insulation back. It's great that they

had that commitment. Obviously, inflation is the bay of our existence, as um UH President Biden said on one of the evening talk shows. But can he really do that much about it, Jennifer, I mean, um, you know, in all of your economics training, Um, what does monetary policy do to supply chain problems, supply side problems? Absolutely nothing? Um, Um.

You know, it's a it's a blunt monetary it's a blunt instrument, and it's you know, I'm sarting to hammer down on demand and we're already seeing the effects of that. But you know, as he has said, you know, um very very often that they cannot do anything to make those you know, widgets come off of the um, off of the conveyor belt even faster. Um. You know, there are all these other supply issues that are contributing to UM to the inflation, and that part they cannot um control.

But if they control the amount of demand that it's out there, that's you know, that's pushing on the supply chains. You know, then they will have I have done their job, which is again cooling demanded, and it's starting. We're starting to see that already. All right, Jennifer, I get asked you, Hannah, what's your recession outlook? Do you have a consent or a feel for whether this economy will roll into a recession? And if so, how deep, how shallow all that kind

of stuff. I don't know if you heard me, Jennifer, but this morning we heard from George Buckley over Numura. He thinks we're going to have five quarters of back to back in traction starting in Q four. I heard you. Holy, that's that's quite That's an outlier, right, he's an out Yeah, it's it's quite headline catching. You know, we've thought we've actually been trimming our our growth O. Look, we've got

we chopped next year down to one percent. We originally had one and a half percent of the last move But we do not have your traditional you know, back to back GDP negative GDP readings. But we do have growth grinding slower in the second half of the year. The first half is you know, pretty decent, notwithstanding that one and a half percent dropping. That's because of again, um sort of in the Q one that was because

of importance and in inventories. But this and half we have slowly grinding um slower into into the turn of next year, so you know, almost like barely zero percent growth in Q four and Q one for example, So not an official you know, again negative back to back reading for GDP, but enough to have growth grind down to about one percent next year. Jennifer, what's your view of the consumer? And Matt and I were just talking

about a story on the Bloomberg terminal. Dard And Restaurants reported some better than expected results, their same store sales at their restaurants up almost in the quarter ending in May. That kind of surprised me given some of the inflationary pressures. How do you what do you how do you think about the consumer here? I think you know I I we say this all the time. You know, you can

never ever underestimate the US consumer. Obviously, they're under pressure from these higher prices, from record gas prices at the pump um At the same time, the fact that the jawn market remains very tight, the fact that people are still getting a regular paycheck, which I think speaks volumes for all of this, and then they still have, you know, a little nice tidy pile of savings that they can fall back on. Um, hopefully they're just going to keep it there, I think, just to you know, just to

make sure everything is okay. But you know, consumers are still dining out. You know, you're talking earlier about Old Garden for example. You know the fact that they are still dining out. You're still um buying sporting goods for examples. UM. I think in the last retail sales report, I think speaks volumes that you know, the consumer, you can you cannot write them off just yet. What about obviously there's

gonna be What about the job situation. I mean people who were looking for jobs and they were being picky, is it time for them to uh, you know settle, settle? Or people who wanted to sell a house but they were kind of on the fence do it now? I would say, in terms of the job for the for the job market, I mean some you're already seeing you know, initial claims picking up already on a four week moving average basis, So the job market will not be as tight as a that's is already starting to ease up

a bit. And you know I've been using this example. If you are a company that has been looking for let's just say you know ten told people and you've been looking for a long long time and you still can't find anyone. At some point you're gonna think, maybe we don't need all those people. Maybe we can just do with what we have, Especially with demanding starting to ease up a bit, we don't we don't need to hire as many. So if you do have several offers

out there, I would say, take all right, Jennifer. Maybe some of our listeners don't know that BEMO stands for a Bank of Montreal. Give us a sense of how are things up? Is it Ontario? Bank of Montreal Ontario? No, that's back of Montreal. Yeah, the MO is just for Montreal. Yes, because Montreal is not in Ontario. That's correct. Quebec very good talk to us about. Just give us a sense how are things in Canada the days? How's the economy, how's the COVID, how are how's the consumer? How are

things to our good friends up north? So we are we're similar to what's happening in the US, but our our our lockdowns lasted longer, and we're definitely more prevasive,

pervasive than they were in the US. So because we opened up a lot later, well, we had a stronger start to the year UM and we're still seeing some some pretty decent numbers up until like up until the second quarter, but we also see things UM cooling down in the second half of the year UM into early next year as the banker Canda starts to raise rates UM. You know, we almost a lockstep with with with the US.

I mean, after the semi five basis point right high for the Fed last week and then at the strong signal that they're going to do it again in July, we also raised our our call for the bank to go seventy five basis points in July. So, you know, the same thing high prices. You know, we just got a very strong inflation report UM yesterday at seven points

seven percent UM. Again there is it's a similar story around the world where inflation is that decade highs UM or multi decade highs I guess I should say, and central banks that are continuing to um to titan and tighten sharply. And Jennifer, one of the things I think I understand about the Canadian economy, the Canadian consumers, the housing home is a bigger part of the personal asset. Give us a sense of kind of how the housing

market is there and how people think about that. So the housing market was one of the biggest drivers of our of our strong growth, just given years and years of super low interest rates and sometimes this this concept that you know that housing has nowhere to go up,

and that's you know, clearly not true. Um. So you know now that we've got central banks of the Bank Accunta tightening rates, warning that there's that they're going to be a lot higher, and you know, there is fear that the in that the housing market is going to to be in pain because of that, and it's already starting to drop considerably. And of course the pandemic didn't help with everyone sort of moving moving out of the

downtown core. I'm just speaking about Toronto right now, moving out to the bourbs and you know, getting more house for your money, and uh, you know, so that also added to the strong demand for housing. But that's starting to cool significantly already. All right, Jennifer Lee, thank you so much for joining is always appreciate getting your thoughts about the global economy and the Canadian economy. As well.

Jennifer Leasing, economist managing director for PIMO Capital, Mark gets the Supreme Court has struck down, as we just reported, the New York gun carrying restrictions. New York is famously or infamously depending on how you look at it, strict about concealed carry licenses and handing them out. You can, of course get a license for a handgun, but you would normally have to keep it in your home, certainly in New York City, certainly in Westchester County, and it's

very difficult to carry it outside your home. But the Supreme Court has avoided that and established your right to bear arms any place other than just in your house. Just Justice Thomas wrote the majority opinion and the ruling was six to three. So um Briar so to Mayor and Kagan dissented in the case. There the three and this is one of the big cases that we've been waiting for. Um. June Grasso is here in the studio with us to to give the background on this case

and tell us what it means. So June, well, you've done pretty well so far. Matt uh Well, the background on this cases we were we've been expecting this case to be decided in this way since the oral arguments, because it was pretty clear that the conservative justices and you mentioned it's six to three down audiological lines, the conservative justices saying that there is this right to carry and that New York is it's it's law, which is

very restrictive, as you mentioned, is unconstitutional. The three justices in dissent where the liberal justices. So the question is, and I haven't had a chance to read through this yet, but the question is just how far the court went in this, whether they say that all laws like New York's law are or whether or whether or whether there's there are certain restrictions for examples, you know, special areas

where you can't carry guns. Um, it's Justice Thomas has been a Second amend an advocate and not that's putting it mildly for years and the favor of the Constitution right, well, they all say that the that the Second Amendment allows you to turn differently, right exactly. I mean up until this point. This is the first gun law gun decision in a decade. So up until this point in a

decision written by Justice Scalia, very conservative. Um, you could carry, you could have a gun in the home, but this takes it another step, a big step, by the way. Not to be silly, June, but are there justices on the Supreme Court who believe the Second Amendment should be repealed? Are there any of those dissenters you think who don't believe Americans should have the right to bear arms? Well, you know, I think they all. First of all, you

can't repeal this. To take a constitutional amendment away would be it's never been done, my dad, it could be done, um, because you need to do so many things. But so but I think they all accept the fact in their heart of hearts, whether they believe that. I mean, there are many many scholars who don't believe that the Second Amendment goes in the direction that Heller has put it, that it means that everyone can has a right to carry a gun or to have a gun in their home.

I mean, there are many many scholars who look at the Second Amendment and say that's not what this amendment meant, and that the justices have read into it over the years. But I think that everyone at this point accepts the fact that the Second Amendment allows you to have a gun in the house. Well, and certainly at the time it was written everyone had a gun in the house. Well, but it was. We don't want to get into a

historical argument about it. But no, there are I mean, there are many many scholars of the Second Amendment who don't believe that it was meant to be as it is today. And there's a lot of difference between you know, the militia and having a gun for of course, protect your And of course there are many, uh, scholars and justices who see the Constitution as a living document field that it should change with the times. And then there are the originalists who or what do you call them?

The fundamentalists? Who? Who? Originalists? Sexualists exactly? Who? Who? Who want to really stick to the words on the paper? Um, in terms of what New York can do about this, because I know that at least at the state level, and I think I've heard Mayor Adams say on the city level as well, UM, legislators were preparing for this eventuality and trying to figure out ways that they could still limit, um, the amount of uh, you know, guns

in circulation here while adhering to the decision. Right, this is why you talk about I think what they call sensitive areas, right exactly, So It all depends on what this opinion says exactly, whether it's says completely no laws allowed that restrict the use of carrying guns in public. I mean, it's hard to believe that that that this says that, but as I said, I have to really carefully to see what it says. We know that New York's law was very, very restrictive. As you mentioned, it

required very many restrictions. So we'll have to see how did we can copy a celebrity or super rich basically one of those. Alright, thank you so much. During Grasso, legal reporter for Bloomberg News. All right, let's check in. We've got Fed Chirman j. Pal He's still in Washington, d C. Still in front of Congress today it's the Senate Um and along chief was economist for Bloomberg Economics and joins us. And uh, you know, I'm not sure what to take away from this. It seems like it's

more political theater than than anything. But as you as you think about the communication we've we've heard from Fed Sherman Powell over the last couple of days and you know, over the last week and so on, how do you

think he's approaching this inflation slash recession Balancing Act. Yeah, I think he is trying to um not sound too alarming about recessions, but he also wants to acknowledge that it is uh that that the FED officials are realizing that that there is a trade off in bringing inflation down and unemployment. Right, well, well right, you know, as

a policy maker, they could control the narratives recessions. So even if they internally think that a recession is a short thing, they will not come out and say it's a short thing. So so whatever he says about would be the day right when the FED chair says we're definitely headed into a recession next quarter, or a president the president can't really say it either. Yeah, exactly. It would be like being in a you know that the analogy of it being in a movie theater and somebody

screaming fire, everybody's running out. He did say, though, it would be very challenging to stick a soft landing. So he's getting closer and closer to making that admission, especially as um politicians question him about the efficacy of monetary policy when it comes to dealing with supply side inflation. It's just not that useful, and the only way you can do it is to buy damping down demand. Right. Well, you know he says that, right, but when you look

at what's happening now, it doesn't seem that way. After the FED raises rates by sony fight it, you see that everybody is darting to talk about recession spears and suddenly oil price plunged by what like almost like sixteen dollars for barrow already within a week. So through this, through influencing people's expectations and sentiment, suddenly he has an

effect on supply. Yeah. Absolutely, we we We saw oil trading for basically a hundred four dollars a barrel last Tuesday, and this morning we came down to one oh two thirty two. So yeah, we were actually down twenty bucks in a week and a half, not even a week and a half. Is that going to be enough? And uh, I mean, um is the jaw owning and a few seventy basis point how it is going to do it? Well?

I think that even before last week there there were some disinflationary signs happening in the economy, but just not food and energy prices. Um I I spoke to you guys previously telling you that I think headline inflation would get to nine percent before the end of the summer. I still think that that is likely going to happen, precisely because you know, food prices going to ride, gasoline prices,

um um. There's some seasonality with it and and it has to fall sharply in order to see the situation and improved um. So I still see like nine percent being attainable in a couple of months and in terms of inflation year over year in lation. But at the same time, if you look at core measures, those are

coming down in a more sure footed way. And I think that after I if the FED does one more seventy five and a couple more fifty bits, I think they could uh downshift bits by the end of the year and and get to four percent next year and we will be well. I think that will be an optimistic cap for our bringing inflation back to two percent. And one of our good friends of Bloomberg Economics, are

you calling for a recession at any time? Officially yes, we have a officially adopted a recession um as our baseline, and we think it will be happening in the second half. We estimated that a recession before the end of next year. It could happen with seventy two percent probability. Pretty distinct number. There is it gonna be a shallow one, a deep one. I mean Matt was quoting says five quarters in a

row of traction. Oh wow, Okay, we are seeing it more of a short and shallow one because typically you need uh financial distress and some banging sector um instability and uh you know uh to to get the deep recession the type that you see in two thousand and eight. And right now I'm just seeing very healthy household balance sheet. Um, you know, mortgage services as a share of income is

that historical lows. So even though the housing market the debt, you know, with the urge and mortgage trade, people will pay more, it's still historically kind of low as a share of their income. And and so I just don't see those kind of financial frictions that generate that could generate is huge and deep recession. I want to talk about school for a second, and because I note, um, you got your bachelors in economics at Berkeley UM, which I think of as you know, a school where you

come at things from a Marxist perspective. And then you when got your PhD at the University of Chicago, which is much more of an Austrian school. Right, how do you, um, how do you compare and contrast those two experiences. Yeah, I think you Chicago might like to accept Berkeley a lump just try to convert them for fun. But uh, but yeah, I think Berkeley definitely. It's one gets an

education Berkeley. You attend to think that government stimulus, um you knows Ukansian economics works and bringing an economy out of recession because you think that prices are sticky. Then

the uh you think about externality there. That's why there's a paste for why government stimulus can I can you know, get an economy out of you know, liquidity Trafford, you know some story situations, whereas the Chicago school is more of more places, more focused on um rationality, like you know, they look at a situation like today, they would be like poor sentiment in response to inflation, like the a

little irrational because nominal money illusions people. People's nominal wages are rising in para all right, and a good good stuff. They appreciate it as always are very well educated. Anna Wong chief US economist for Bloomberg Economics, bringing us some thoughts here as fat Cherman j pal Uh. You know day two of his testimony in Front of Commerce explaining inflation, explaining monetary policy and the Balancing Act. June is Ride month and a month when we're focusing on equality issues

here at Bloomberg. Today we bring in Edward Moreno, labor and Employment reporter for Bloomberg Law. He joins us to discuss the pressure companies face and advocating for inclusion during Pride Month. Edward, thanks for what you're joining is here. What did you find? What are companies doing? Are they paying lip service to this whole inclusion diversity equality thing?

Are they really making inroads? Yeah? Thank you for having me. Um. You know what I learned was that UM, when companies do take stand on lgbt Q issues, it's almost always because they are facing or have at some point face pressure from employees to do so. UM. And this is generally in the past this has always been the case, but in the past year this has come up more often as a lot of state legislator lachers have been proposing anti lgbt Q bills, such as Florida's don't take

a bill uh. You know, bathroom bills across the nation targeting transfuse UM and things of that nature. UM. One example of this was, you know, in Disney, we all saw you know, employees stats to walk out UH and basically pressured their CEO to take a stand against Florida's don't take a bill UM. In Texas, dozens of companies spoke out about a director from the governor UH directing the state to investigate parents who are seeking gender affirming

care for transgender children. UM. And you know, one of the pitfalls that employees are still asking for is, you know, sometimes a company may take a stand on a particular bill but still support financially politicians who propose those those So that's an area where employees are certainly still pushing

for companies to do more. So wait have we? So there are two issues right there is inclusive and diverse hiring UM and then the issue of what a company does in terms of support for political candidates or statements that it makes if a company does that. Right, not all companies have to get involved in politics. Some of

them probably just want to stick to business. UM. In terms of the first issue, how are we doing Edward, because that's probably um, you know, I don't really think that Disney or Craft need to get involved too much in any political issues, but I do want them to be uh not to be discriminating against employee candidates and and hiring, especially if I'm a shareholder, as broader range of people as possible so that I can get the

best of the best. Right. So, UM, you know, actually what I learned, UM, was that corporate America is generally, at least from the folks I talked to, UM, generally pretty ahead when it comes to internal inclusivity and you know, having lgbt Q friendly policies for their employees. UM. But you know what tends to be the motive for employees to push companies to get into those political discussions is you know a lot of times those bills affect employees.

They may b trends themselves or have um, transgender children. So you know, it's not always There's only so much a company can control that impacts their their employees. And from their standpoint, you know, they probably they have a business interest in making sure that employees are happy and not being targeted by lawmakers because of their identity. And Edward gives a sense of how much you know, not just above the c suite, talk about the board. Is

there board support for a lot of these things? I mean, I know there's pressure for E s G investors, Uh, there's a board. You get a sense at the board level in this country that there's is really support for all of this. No, I think it may be getting closer to that right now. UM. You know that was definitely on the lower end of what companies have reported as like, um, you know, impacting there how they approach

these issues. UM. One thing that has uh you know kind of ramped that up is an effects new more diversity rule, so more we now know that more boards are disclosing um if they have lgbt Q members in them. Um, that kind of puts the spotlight on them to you know, just like with any diverse member of a board, uh,

to you know, take ownership of those issues. And you know that might be something that we see in the future, but right now it's definitely being driven more so by employees and boards or even shareholders or yeah, yeah, exactly by by profits. Right. You want to hire the smartest and most capable employees that you can UM, and you want them to feel as comfortable as they can at

work so that they can perform well. And of course you want your leadership to be diverse as well, so that you can make the right decisions to generate the most revenue. I mean, I think of this all from an economic perspective, but I guess not everyone does. Edward m Yeah. Um. And actually, you know, even among the employees that UM tend to be making those pushes. UM, from what I heard from the folks I talked to UM, A lot of times that comes from you know, the

executive leadership as well. You know, it's it's on the lower ranks. It's a lot of times managers, higher ups. So yeah, I think that's certainly correct. All right, good stuff. Edward Moreno Labor, an employment reporter for Bloomberg Law. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter

at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.