Job Switchers, Not Stayers, Will Get The Wage Increases: Slok

did get those jobs numbers earlier today. They were great by almost all accounts, with you participation increasing the job right following to the lowest and two thousand and even wages accelerating. But Kennis continue and what does this mean about the path fed rate hikes? To answer all of these questions for us, I want to bring in Torsten Slock. He's chief international economist at Deutsche Bank, also a publisher of charts that are ex jraordinary and timely tours and

thank you so much for joining us. So first, just can you please just give us your take on today's jobs report. No, absolutely, you just summarized it very well. This is indeed some very good numbers, both on the headline, of course, a number of jobs creative, the unemploying rate falling, and most importantly we've been waiting for wages to go up, and it's in some sense finally happening after quite some time, and in some sense it's a really good day for

the economics profession. We have been looking for wages to go up. We've seen in the number of indicators, the employment cousindics have gone up, the quitch rate has been high, and now we're finally also seeing the last few drop here in the average old learning Stata today also checking higher. So overall it is it is very good news both for the American consumer and for the US economy. Are

you basically saying that the Phillips curve works? Yes, So now of course the forensics can begin that we can begin to discuss why has it not worked, or has it been dead, or is it waking up, or what was the reason why it took so long time. One answer to that is that we have seen a structural change over the last several years where the number of people who are staying in their jobs. If you do that,

you tend to get basically very little weight increase. So what we have seen more recently is that the number of people who are quitting jobs, they have tended to get higher weight growth, and the fact that the data to day shows you that we are at the highest level of people who voluntarily are leaving their jobs in

twenty years. And that's also voting quote unquote wealth for more wage pressure going forward, simply because people who stay in their jobs tend to get very little weight increase, whereas if you switch jobs, that's when you get the big wage books. And the more people who are switching jobs, the more we will see wege increase. In some sense, looking at it today, it does make sense to say that wages have been going up because the Phillips curve structurally changed so that you had to be a job

switcher to see an increase in wages. Rather if you were a job stayer, then you would not see an increa reacent wages. So it's implicitly a recommendation for everyone here to go out and switch jobs, because this is the main way today to get away increase. Okay, let's say you don't want to switch a job. Let's say you're just looking for a job, or indeed you're out of the labor force. What's your thought about the labor

force participation rate? Yes, so that has as you implicitly having your question that has been not been tacking up as much as we all would have thought. But that being said, there are a number of reasons why people are still outside the labor market. Some people are structurally

difficult to get into the labor market again. But we are beginning to see, and this was in the basebook this week, anecdotes that the employers are beginning to relax conditions for drug testing and also conditions for criminal records testing, and those anecdotes are telling us very importantly that we are beginning to reach the outer stock of the labor force in terms of how much available labor there is.

So I understand that the participation rate could potentially be slightly higher, but the generally speaking, the fact that wages are going up is indeed already selling us that if there really were all these people sitting outside the labor market, then we would not see where just go up at this point, So we still believe that the labor market is very tight, and therefore that we are again going to see more upward pressure on wages going forward, so

towards in. One thing that struck me was that the yield curve flattened after this report. In other words, the gap between ten and two year treasury yields flatten. It's about the lowest since two thousands seven. It seems to indicate the people think that the Federal Reserve is going to high rates more frequently this year then basically stimmy growth in the longer term and pause and not hike more in the years after. Do you think that that

is an accurate assessment? Yeah, So the challenge here is that the front end of the cove UT two year rates and and even should in have been driven a lot by fit expectations and fattic between just generally have been and including today, driven a lot by what is the macro data telling us for the US, and the data today basically says, you know what, the Fed has been right, The Fed has been on the right trajectory, and it's actually probably likely that they will be raising

race that they have the way that they have promised us. What's more complicated, and which is in a very important part of of your point here, and that is to think about what a long rate doing A long rate in the US of course this week in particular, but generally move around for global reasons and for reasons that are unrelated to what's going on in the US economic data.

So the fact that the Yell curve has moved away it has today, I think it just tells you that for now, the market is back to believing, and you could also see on your Bloomberg screen expectations to what the FIT will do over the coming meetings, that the market is back to believing, that the FIT is still raising rates, and we are still on an upward trajectory, and for now that continues to be a race strong outlook for the US economy overall. That's simplicit in that Towardsten.

But I wonder if we could just switch topics for a second and get your thoughts about Italy. We've got the swearing in of the new government, President Sergio Mazzarella at the Quernale Palace swearing in the new government today. What are your thoughts about what that means for the euro and the European Central Bank. So, of course, the challenge for the ECB here is that they have been for a long time now on track to say that

they would end quee later this year. You can discuss if it's September or December, and then they would most likely they have also been saying that several members of the Governing Council have been saying at the ECB have been saying that they would probably high rate sometime by the second quarter of next year. The good news is that we now have a government in Italy. This is at least more clarity and much less turbulent than what we had earlier this week, where we had a lot

more uncertainty. So in some sense that's probably a bit of a sigh of relief at the ECB today that then now we can go back both of the c B and in markets and look at the economic data.

Inflation was a little bit better in Germany and the your area this week, including also in Spain, and if the fundamentals still justify it, which we absolutely believe, then we do still think that the CB is on track here to gradually exit with ending queue later this year and raising rates sometime in the second quarter of next year.

But it is complicated situation, of course, where you have on the one side all the economics, which in some sense it's very simple because that's telling you should they exit or should they not exit, and on the other side of the table you basically have these political winds and forces and the epp and tide of different things that are happening. That makes a quantification of those risks rather complicated. Thank you very much for being with us.

Touristen Slock is the chief International economist at Deutsche Bank, talking about today's non farm payrolls report as well as events in Europe. American workers are finally starting to see their paychecks increase. According to the jobs numbers that we got out earlier this morning, average hourly earnings increased by two point seven percent from a year earlier. That is more than projected. But are these wages increasing quickly enough?

And why have they been so slow to rise? To answer some of these questions, I want to bring in David While. He is dean of the Heller School for Social Policy and Management at Brandeis University, also the former head of the Wage in Our division of the US Department of Labor back in two fourteen. Dean While, thank you so much for joining us. So I want to get your take first on the numbers that we got out this morning. Uh from the Labor Department, pretty much

across the board solid read what's your take? Uh? Yeah, I think that's right. I mean, it's certainly good news when the economy adds that many jobs to the economy and UH and when the unemployment rate falls so overall, you know, we have the long recovery that certainly began

well into UH back in the Obama administration. UM. I think the continuing concern is with unemployment rates as low as they are, just the fact that wages still look very slow in recovering, very different than what we've seen in the past. I wonder if you could speak a little bit about the labor force participation rate and when maybe your students come to you and say, can you

explain why it remains low? Well, the labor force participation rate really is about whether people's optimism about whether or not they're going to be able to find the kind of employment they're looking at in the labor market. And it's measure of the difficulty and the continuing difficulty of coaxing UM. You know, an important part of our labor

force back into the labor market. And I think one of the reasons we again have seen what looks like historically lower rates of labor force participation than in past recoveries, UM, is the kinds of jobs that are out there, the kinds of opportunities that people are seeking, um, just are not as attractive as they once were. We've really restructured our economy in ways that just are are less and

less favorable to working people. So, but that said, we are seeing, uh, we are seeing what we just increase at this point. So I'm wondering, you know, first of all, is it enough because we have seen rents increase at a much faster pace, for example, than wages, as well as energy costs of late and other sort of fixed costs in people's lives. Is a two point seven percent increase enough in your view? Uh, well, it's not, and it's not for both the short term reasons you site.

I mean, there's a lot of costs, particularly that lower income households are vulnerable to, like the cost of gasoline and housing, um. But there's even a more fundamental, longer term reason why these levels of wage growth just aren't sufficient, and that's that real wages for working people for decades have stagnated and there's just an immense there's a wage

gap that we really need to recover. There's just a big part of the growth of the economy that in the past workers shared with people who you know, owned own capital and and and who had labor they shared those games. That hasn't happened. This is a really important point why. I mean, this is not a past five years issue of past ten years issue. This is a

decades long issue. Why that's that's exactly right it is. Uh, it really goes back to the late nineteen seventies and the eighties and and grew much more in the post Great Recession period. And that the answer to your question is employment now looks really different than it used to look. Employers used to the major businesses that drive our economy across the different sectors. Manufacturing service used to directly employ millions and millions of workers. That is no longer the case.

That the whole structure of employment has shifted out, whether it's through outsourcing or subcontracting or third party management. Uh. And it used to just be about low wage workers. Now, with what people like to call the gig economy that goes way beyond just the digital platform world. Uh, there are more and more jobs where the people who actually employ you are no longer the main companies that really still drive the economy. And that means the way wages

are set look really different. A lot of those gains that go from increasing productivity and expansion of our economy are no longer being shared because the people setting those wages are are sometimes these lower level subcontractors or other parties who simply cannot pass on the wage gains the

way they used to. But is it possible that they can't pass along the increased cost because as you describe, you have a new economy wh there's always someone else breathing down your neck that doesn't have legacy costs or legacy employees that they have to shoulder the burden for absolutely right, and unfortunately many of the reasons why you have leading companies in the retail sector and manufacturing and hotel industry really across the board shifted out those jobs

as they wanted to get rid of those legacy costs. They wanted to get rid of the costs of expensive costs about employing people. Um that used to be part of the social contract that we thought this was part of employment. You kind of shared the burdens of whether it was employment insurance or worker compensation or just meeting basic wage and our requirements. That used to be my

job in the labor department. Um that has been we our laws and the structuring of our economy have allowed that burden to be shifted out two employers who, as you correctly say, are in direct competition with a bunch of other employers who are less able of doing that, and uh, the party that bears the burden. The risks that have been shifted more and more are on on working people. Just quickly give you ten seconds. Is there a role that the government will play or do you

believe that that's over as well? Well? I think uh, you know, certainly in the next few years, I would would doubt it, although we're seeing at the state level government is jumping in with increases in minimum wage and other kinds of ways of helping helping working people. In the long term, I think government is going to have to play a role. Uh. In really writing this, I want to thank you for very much for spending time

with us. David Wild, dean of the Heller School for a Social Policy and Management at Brandeis University, former head of the Wage and Our Division of the U. S Department of Labor. In March of our next guest UH was before the US Senate Select Committee on Intelligence hearing the topic disinformation, a primer in Russian active measures and influence campaigns. Clint Wants is a Senior Fellow for the

Foreign Policy Research Institute. He's also Senior Fellow at the Center for Cyber and Homeland Security at the George Washington University. He can be followed on Twitter at Selected Wisdom, and he is the author of a new book, and I Messing with the Enemy, Surviving in a social media world of hackers, terrorists, and Russians and fake news. Watts, thank you very much, thanks for having Why did you write this book? I actually had a proposal for the book

together before I testified, and no one wanted it. They were not interested. And getting people interested in the Russian descent fo in Sen was very difficult. Uh, the Islamic State was the focus of everything. People weren't buying into the Russian stuffor that it mattered, and that all changed in about a year. And I wanted people to understand that a lot of these phenomenons had played out repeatedly. So the Arab spring, if you remember that was the

Facebook revolution, didn't really turn out that way. In the end, UH, the Islamic State overtook al Qaeda on social media. If you look at our own politics, social media populism, the Trump wave overtook the GOP and now you look at the resistance and sort of it's offspring, you know, with the Democratic Party. So we're seeing the social media populism

pop up in different contexts around the world. You said that the book introduces us to a frightening world in which terrorists and cybercriminals don't hack your computer, they hack your mind. What does that mean? I mean? And what's the difference between hacking your mind and disinformation and just a good campaign? Right, So that we used to always worry about, for example, hackers hacking into the US power grid, uh, you know, and turning it off or or breaking it down,

our foreign country doing it. The real art of it now is you can convince an American potentially unwittingly to turn the power grid off for you. That's the different objective because it also gives you plausible deniability of actually doing it. And you're using an unwitting ally, which is a low cost and very effective way to achieve your objectives. And that's really what the Russians figured out was they combined some different techniques. If you remember anonymous and lull sect.

The original hackers, they were going around stealing people's information and dumping it out onto the internet. The Russians understood that too. They've they've been doing compromising information for a long long time. So when they hit the d n C, John Podesta, General Breed Love, they understood, I'm going to do this out there, but rather than try and hack just for the information, I'm going to use it to

drive influence. And it's a much more powerful technique because you're changing the way the audience that you're targeting is perceiving not only information, but their own politics, or own country, their own institutions. I want to mention that you're a graduate of West Point, US Military Academy. You served in the infantry. Thank you very much for your your service. UH. You also worked as a special agent for the Federal Bureau of Investigation and served on the Joint Terrorism Task Force.

Do we face terrorism or do we face criminals? You face both, and it really comes down to you know what their objectives are in the objective is either money or is it ideology? You know, changing governments, taking down uh the United States. We face both and what's interesting is that they learned from each other. So criminals activists they both learned from each other in terms the tools.

You know, when we look at criminal hackers, they came after if you remember the old activists, the hackers, you know, the people that did it for fun and for just learning. Criminals recognized that and said, well, you know what else we could use this for. We see the same thing going on now, by the way, with disinformation. The Russians are brilliant at the art of disinformation, but now everybody is copying their playbooks. So I've been talking a lot

about the elections. I'm not so worried about the Russians as I am. Everybody else's copying it. And so what you're seeing is those who can amass data from lots of social media companies you're purchasing preferences, and use advanced technology like machine learning. They have cutting edge ability to do influence campaigns on steroids and do them much quicker.

So those that are you know, political public relations companies, are political campaigns, they really will have more capability on the horizon than any of these nation states we've been worrying about so far. Yeah, and when you add artificial intelligence into it, you can start to imagine that this

disinformation becomes incredibly effective. I'm just wondering, you know, what is sort of the counterbalance to this, How how is there anything that could kind of, I don't know, get in the middle of this, because basically this is just the old propaganda campaigns on steroids, right, it is just taking it to cyberspace, where you have it's much more cost effective and much more effective in terms of moving populations.

I think we've seen that ultimately. I think, you know, sort of a big part of the book is what happens to us over time when we're in this and you start to see what I call preference bubbles, and so you see social media nations emerge that overtake physical nations. And by that, I mean if you're spending three to five hours a day on your cell phone, you were with virtual connections more than physical connections, and you're starting

to build relationships online that overtake your neighbors. And so that is truly devastating for real companies and countries, uh in terms of how they do their business. Who governs cyberspace? I think we saw with social media companies there are only they're the only ones that really understand how their systems work. Governments are struggling to regulate them or understand the dangers that are there. And I think for the private sectors, a big issue with banks and law firms.

If you want to do a compromising campaign where our secrets held and seek secrets are held at banks and law firms, that's where the information warfare battlefield really takes place. So the implications are devastating and will ultimately come down to civil society to solve this. And we have to get a you know, we have to restore a basis of fact and fiction. You can't have policy debate if you have your facts and I have my facts, and

we're debating about whose facts are right. You can't even debate the policy because we don't even agree on where the playing field is. And we're seeing that today. The other thing is we're seeing these bubbles start to emerge in the information space where I like you, you like me. We build our own nation, we build our own history, we start our own institutions which reinforce our preferred facts and our preferred science, and we don't come together and

we don't discuss, so we'll have implications for science. They will have amplifications for government. And really it's about do you want to your relationships in the virtual world to be about people who look like you and talk like you, or do you want it to be about your fellow Americans.

And that's really the challenge moving forward. We have to restore what we believe in as a country and and really what we want to push around the world and about the Is there any nation or group of people that are doing this better than we are here in the United States in terms of meeting these challenges. Yes, I think European countries they are actually smaller, they move quicker, uh, they understand how to talk to their nations and what their value stand for. Sweden is a good example. They've

been much more resilient to this. A lot of the Scandinavian countries in the Baltics, they've been dealing with disinformation for a long time, so they're just better equipped to deal with this over the over the near term at least and maybe breaking some of the uh. I don't know, smartphone addiction. I'm serious, it's just if you think about it,

if people spend five to six hours online. I actually saw a survey today of him that showed that teenagers that almost half say that they're nearly always online when they are awake. Clint Watts, I could speak with you for the next hour. Thank you so much for being with us. Truly a fascinating topic and I look forward to reading your book. Clint Watts, Senior Fellow at the Foreign Policy Research Institute. He's also a Senior Fellow at the Center for Cyber and Homeland Security at the George

Washington University. Author of new book, Messing with the Enemy, Surviving in a social media world of hackers, terrorists, Russians, and fake news. Steel and aluminum tariffs what do they mean for producers in the United States? Well? Debbie sean is a partner a trade lawyer at Quinn Emmanuel based in Washington, d C. Previously, MS sean On was the Vice president of International Trade in Public Policy at U S. Steal and a trade official in the Clinton administration. WI Sean,

thank you very much for being with us. Uh, do these trade is sanctions, these tariffs on on aluminum and steal, did they actually help anyone? Well, thank you very much. UM. Well, we know this. UM. It's not a zero sum game. It's much too complex In the global trade community to

distill it into a winter losers situation. But we do know in the short run there are two games, and that's the political gain for an administration who's delivered on a political campaign promise which almost two years to the date, UM he enunciated in a rally ticking off all the trade tools he was going to use commercially. As you wanted to address him. Is that for the protected industry, so will be an uptick on sales prices will increase UH,

and their stock values will likely go up as well. UM. The consumer UH and also the downstream UM suppliers and consumers that actually purchase steel in a luminium will see higher prices. So that will affect the construction industry, transportation industry, equipment industry. So the downside is UM, it will be UH. Well will also surface UM in the short term. Well, Debbie, you know, I guess that I'm wondering what's the right question to ask in order to understand and observe the

consequences of these tariffs. So a lot of people are pointing to the decline in economic output UH and that it's diminimus in the long run. Other people point to UH sort of higher steel lumber prices and other commodities um and and sort of bleeding into higher higher consumer prices. What what metric are you looking at determine how big

of effect this has? Well, we obviously all of your show um and those economists around the globe, but that try to um calculate um numerically what the impact will be on different economies. As a lawyer, I look at how it impacts clients as well as the market UM. So the short term as I sort of enunciate it, which is the commercial and the political gain, but the

damage is also incalculable on the long term. The long term damage that is our standing in the world, which are manifest in the view of our allies as being untrustworthy perhaps and also places at risk UM our own standing as the world's largest and most open economy. But by erecting barriers, you diminish that the the trade um the trade with other nations and uh and and consequently handcuffed your own economy. UM. So we're looking at it on not only a commercial legal but also the to

the geo political as well. But it is consistent with this president's view of the world. I mean I'll share it. But he's been very consistent since day one. And what's interesting is the outliers China, and instead we are focusing our our tariffs on our allies. So it appears at least the optics that we're coddling our adversaries will harming our allies. But which all the one second, I'm sorry to break in here, but you know, the geopolitical side is an important one. But I want to talk about

what you mentioned. I want to pick up on a point that you said, which is when you talk to your clients about this, and you work with some of the biggest companies in the US, what are they saying about this. Well, those who are in the protected industries are have actually have actually advocated for these different political tools to be used in order to advance and what we what has been always stated as leveling the playing field.

Much of this happens um as a result of a view of the of the United States and being put upon right this is this is the view that is articulated the narrative of grievances of how we've been taken advantage of. Except this, what what's happening is is the

administration is actually treating a symptom, not the disease. So if if the structure, if the In fact, I think yesterday the director of the World Trade Organization articulated this, it's time for these constructs to actually come into the twenty first century and deal with a lot of the issues that have hamstrung the domestic industries in the United States from getting their fair share or getting their day

in court. So, whether it's the trade laws that haven't kept up and have been written since nineteen seventy nine, I think it's time for a modernization and and bringing these these tools into the twenty first century because many of the tactics that are being used were never thought of or never even envisioned when these laws were created.

By Sean, thank you so much for being with us t B. Sean is partner and trade lawyer at Quinn Emmanuel Law Firm in Washington, d C. She also was formerly the vice president of International Trade and Public Policy at US Steel and It's a trade official in the Clinton administration. Thanks for listening to the Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on

Twitter at Lisa Abramowits one before the podcast. You can always catch us worldwide on Bloomberg Radio