Jobs, Markets, and The Economy

bit of a disappointment there. Um, the jobs number was a little bit of a disappointment to four and thirty one thousand. We were looking for four ninety although still um solid, robust is the word being used, and we had an upward revision last month. But as Katie, as you pointed out earlier, the UH two's ten still inverted? Is it still inverted? Still inverted? Oh mg? Sarah House

joins us right now, senior economist at Wells Fargo Securities. Sarah, we are terrified now because you know, the yield curve was able to predict the pandemic before we even knew COVID existed. What is it telling us now? I told us a little about the potential for a recession over the past cycle or so, especially given the feeds involvement

in in asset purchases. And I think one of the things we learned from today's employment report is that even as we have some moderation and growth, momentum overall remains strong in the US economy. So I think there's still a lot more growth to be squeezed out out of the economy before we need to get too worried about recession fears. Right now, Okay, so growth to be still squeezed out of the economy. What about the labor market?

Because again Headline disappointed, there were definitely some bright spots in their net net. What is your takeaway net net? I think this is a still solid report. So yes, it was a little bit lighter than expectations, but you know, only by roughly sixty versus of the Bloomberg insensus, So that's not a big miss in the grand scheme of the post COVID recovery. And I think in certainly it showed that we still have pretty decent momentum. So you have to remember this is a much cleaner read on

the underlying trend and hiring. So in January that number was boosted by some really favorable seasonal factors. February was likely reflecting a bounced back of the amicron waves that was hidden by those those favorable seasonal factories in January. So we're still seeing a real solid pace of of hiring, and importantly, it's still strong enough to keep that labor market tightening even as you have more workers coming back into the labor force. Yeah, we see wages up five

point six percent year over year. That's a number I like to see as high as possible, Sarah, because I love it when people get paid more. But are we going to start hearing people worry about a price wage spiral? I think, if anything, some of those fears have have

abated a little bit over the past couple of months. So, yes, you're seeing wages up five point six percent over the here, but if you look at what the recent trend is, so over the past three months, average hourly earnings have increased at a four and a half percent annualized rates, we're actually seeing a little bit of moderation. And this fits with the fact that while overall demand for workers remains really strong, that the pace of increase in that

demand has has really leveled off. So you know, from from outright standpoint, demand remains strong, but it's not increasing without abandoned. So I think that's keeping employers perhaps a little bit more um. They're they're able to perhaps um not to raise wages at such a frenzied pace and and hopefully prevent that that wage price file. Let me ask you to be so dangerous. Let me ask you kind of a political question, Um, are the wage increases

keeping up with inflation? I mean, it's not really a political question, right, it's a matter of fact, depending on which indexes you look at. Yeah, I'd say that's more of a mathematical question. So whether you're looking at the PC deflator, the CPI on an average hourly earnings basis, no, they're not keeping up for the typical worker. But I think you have to take take into consideration the fact that we've added so many jobs over the past year.

So we've added six and a half million jobs, and so when you look at the aggregate income being derived from the labor market, it is enough to outpace inflation. And so that's limiting or at least blendings on the impact of the fiscal support of stride up and what that means for real household income um over over the coming months. So it is certainly tight for you know, for individual workers and individual households. But in terms of the aggregate income picture, the fact that we're adding so

many jobs is supporting the overall income outlook. Well, Sarah, I am going to ask you political questions since we are awaiting remarks from President Biden on today's numbers. Curious how you think the administration is probably reacting to some of the figures we saw this morning. So I think in as I said, I mean, overall, this is a pretty decent report. So we see that the labor market

continues to tighten. We're getting more workers back into the labor force, so that's signaling that they are able and willing to work. And so I think this is this is still strong, strong report, even if we did see that that pace of hiring temper versus versus the past few months, and we'd expect that pace of hiring to just slow as we get into a more mature phase

of the recovery. Sarah, Um, just just looking at inflation here looking out, are you sanguine that it's going to come back down as we get into um, you know, as we get into the base effects of what we saw at the end of last year. So the base effects will certainly help, but I think it's still going to be pretty painful over you know, the next year year and a half or so. So we're still looking for the core PC deflator, so you know, kind of

level setting with with the fence two percent target. So we still expect that to be around four and a half percent at the end of this year. So while we're probably close to a peak um here in the next month or two, a lot of that depends on just what happens with the oil and gasoline prices. We're still looking at a pretty painful rate of inflation for consumers and for policymakers for that matter. All Right, Sarah, great to get um your inside. Thank you so much

for joining us. Always a pleasure talking to you. Sarah House there, senior economist over at Wells Fargo Securities. I am sitting in the interactive broker studio with four unmasked people. It's amazing. It brings a tear of joy to my eye. Um, Lisa Brahmowitz and Tom Keene in here at Bloomberg Surveillance Fame. Katie Greifeld she'll be famous someday for Bloomberg et f i Q. That's a show that we co host together. Actually, thank you every Monday on one PM. That's the middle

of surveillance NAP. I had quite a rudening route awakening, I should say. Last week. You guys are all apartment dwellers, right, you all live in the city. I got a gas bill for five hundred and fifty dollars natural gas for the month that I wasn't really counting on, and I just thought, yeah, that that kind of thing can throw a real wrench into your finances. And the reason I bring it up is because overnight in the UK the cap was lifted on the natural gas um for residential customers.

Their bills are going to go up more than fifty percent overnight. That for a lot of people can drive you into poverty. That can cross the line. And this is what we're talking about earlier, which is the new inflation is frankly a memory for those with a bit of gray hair of the frenzy we lived in where it was item to item. I looked at cheese pizza slices today, But like you say, it's utilities as well, and certainly every report we have from Europe is as

grim as the appropriate word, and not just Europe. In Sri Lanka, I saw there were uh riots, people gathered around the palace. Social issue in Indonesia. This is really serious. And this is where you get into this word controls or you have price controls and such. And it goes back to Lisa. This goes back to Japan and y CC yield curve controls. It is institutions trying to control

whatever cards are dealt right now. The big card is inflation and then of course how much people are getting paid and how that dovetails into it in otherwids can they afford it? And okay, if they kind of afford it, and this is sort of the big fear. Does that mean that companies will just keep jacking up prices more? I mean, yes, you're getting the like that's the spiral, right. I wonder how much of this average hourly wage growth real people see? I mean, how many times a year

do you get a raise if you're um an hourly worker? Actually, you know what? I will take the other side of that. There have been a number of reports about how Amazon other manufacturing kinds of jobs, other areas where there's scarcity of labor, they're actually getting quarterly raises. There even some places you're starting to see doing away of the annual review and a regular pace of increases in doing the way of the annual review. That's music to my ears. No,

but I mean I've heard of this time. I mean honestly, I we hear about it all the time and how much wages are going up. To me, I have a daily review with alf New Jersey. No, it does not most definitely not lucky. The badge works the next day. You know, it's it's been a crazy march. It's it's truly an historic quarter. And as I said to Lisa eight hours ago, the measurement of uncertainty into this April is we're where we were in January. We have no

clue what's coming. Well, I just am concerned about the inflation. And a client wrote in this morning and said, could this be, you know, the beginning of a new Arab spring where we start to see real uh social str life when it comes to rising prices. Imagine if you imagine you're in the UK, you're someone barely above the poverty line, and all of a sudden, your monthly gas bill, which you have to pay to power your appliances and heat your home goes up. Let's not conflate all inflation

as the same. Right, The Arab spring is partly because of the idea of Ukraine and what's going on there with the wheat output, the idea that a lot of that goes directly to Northern Africa, goes to some of these areas that are less privileged, So you're gonna see wheat prices surge. You're seeing oil and gas prices surge in certain places on the heels of what's going on all all places, in all places in the US. It is a unique story because they're also is wage inflation.

There's also positive signs, and it's stemming not just from the stiflationary shock that we're seeing out of Europe. And I think that that's an important distinction. There's not much going on. We have fourteen and a half percent nominal GDP last quarter. This court will be half that. I like what Neil Irwin said over to Exios in the hour. He said, this is a boom economy. It's a boom economy for everyone. No, it never is, but look around New York City, right now, I mean rents are ridiculous.

The home price I I, at least I can't get used to home prices. No, that's also not the case. It's also not just a US problem, right, that's another problem that you see, at least in the UK and in Germany. Um, I think prices rising are more painful than maybe do you think even if wages are coming up? And I think, um, when I when I hear about the boom economy, I wonder, then how come recession odds

are so high for next years? Katie, question Katie. The path for those younger is you live with four people in Chelsea or the Lower East Side, and then you live with two people, and then there's that big jump where you live with yourself. Someday I'll live in Brooklyn. If hip and cool and all that is that broken with this New York City inflation, that path, It's interesting. I was having a conversation with a friend my age. It's okay, it's surveillance. You can say I was having

a conversation in a bar with a friend of mine. Okay, we're actually a rooftop bar. It was lovely. The weather wasn't as terrible as it is now. But she moved to London after college to work at a bank over there, and she would like to come back to the US. But she was saying, I am almost thirty. I don't want to live with a room. Are you ready for this? But that's the only way that I can live in New York. I can't believe I say I'm saying this. Paris was cheap. I can't believe I'm saying that Europe

right now. That was her point. My quality of life in London is so much higher than it would be in New York. This is a huge deal for Mayor Adams. It's very true you left the city. Well, look, I just moved from Berlin. Childcare is free to Scarsdale, where it's going to cost me three grand amuntiple by kid in a basement. You know, oh crime a river in Scarsdale. I mean, into all honesty, okay, this is like, you know, top tier. You just hold on a second. I mean

it's somebody who raised your kids in the city. And I will be honest. You're right, You're not wrong to bring this up, So I'm not I'm not undercutting this issue. There is a larger point here, and this is what I'm wrapping my head around right now, So I apologize because you're all my guinea pigs and what I'm trying to think about. But that actually one of the biggest good things that could happen in the U. S. Economy that could keep the boom economy that you're talking about,

Tom going, would be a profit margins strike. Basically if companies paid employees more and then just took it out of their profits rather than passing it along to consumers, so you actually got a better living because you're not paying that much more. But we see from the earnings reports that they are passing a consumers exactly who are being order in the stock market, well, I mean the stock market. Basically the stock market is not the not the economy, and vice versa. And at the stock markets

benefited the economy's lag behind. Are we seeing a reversal of that? Not quite yet, but could we. Tobb's looking at me like, go just jump off a bridge. I don't know if that's going to be a good thing. If she said that with me and Pharaoll early in the morning, we'd be apoplectic. I'm just I just am surprised by the optimism here. Let's bring in Rebecca Ray right now. She joins us from the conference board, where she is executive vice president of Human Capital. Rebecca, let

me first get your take on the job's number. Um, what does it mean to you as you passed through the data? Good morning and thanks for having me Um. You know, I think it's very encouraging. We've got another strong report. We're closing the gap on the number of jobs that we lost since the pandemic hit US, and I think all that's very encouraging. There's some very bright spots. I think we've got a tightening labor market and people who want to to work or having I think some

some good luck in finding positions. You see wages rising in many industries, So I think there's a there's a that's a great deal to be to be pleased with. But I think at the point that you just made, UM, some of that may be mitigated by rising inflation, and so that's that's going to play that's going to play into this as well. And we're back on the topic of the labor market. The conference Sport has a new survey out on work life Balanced Struggles, and I want

to hear about this. What your findings found because it's been an interesting labor market and that it took a long time to fill that whole and employment because you know, we're it feels like workers have had more, say, more power. But what did your survey find? Yes, so we just are about to release it today and I'm pleased to

to share a bit about what we found. You know, I think in these last couple of years, certainly everyone has had their own particular reaction to the events of the world and what they did in terms of their work arrangements. But there are many who are very concerned that during that time, the work and the life, the boundaries get very blurred, and some of that hasn't necessarily

shaken back out. And in fact, some of the concerns that we UH that we saw among both those who are fully remote and those who are UH and and hybrid you know, sometimes in the workplace and sometimes not as well as those who are full time, they're all

a little concerned about blurred boundaries. I think the balance, the pendulum will swing eventually, but I think a lot of people are concerned that the advent of technology, regardless of the way in which you work, is going to mean that people are going to expect the continuation of being always on, always available, and particularly for those who are fully remote workers, that's a real concern. Yeah, because remote workers we hear often that they put in more time,

um than those who come to the office. How does this return to work thing than pan out? Rebecca, What do you think? Are we just looking at a hybrid model for the future. Do we ever go back to the old days of you just come in from you know, eight to six every day, five days a week. How does it? How does it turn out? You know, I think most most of us begin to feel that they're going to be in a hybrid situation of some type or another for a very long time. I think the

game has permanently shifted. And I know that in this latest survey, those who are millennials in particular, very concerned about the increased cost of commuting. Many workers have found that they made great strides in work life integration and they're reluctant to give that back now. You know, companies will argue that they need to come back to the workplace because they're concerned about you know, the absence of network working and building relationships that it's going to have

an impact on collaboration that their culture will suffer. I think those are all valid reasons. I think employees workers tend to agree that those are some really valid reasons for going. But I think we need to begin to think about the workplace, the physical workplace as sort of the way we used to think about an off site. You know, you planned for an off site, you knew when it was happening. There was a reason to go. You had expectations, but what was going to be accomplished.

Give workers a reason to return to the workplace. It isn't simply about returning to the way things were checking a box. Make it about celebrating your accomplishments, or understanding a new product launch and how you're gonna be successful in the marketplace. Make it about developmental opportunities. To be intentional about it. But give give a really good reason for coming back, not simply let's just get back to normal, because I think those days are gone. Rebecca, thanks so

much for joining us. Great to get your insight. As always, Rebecca Ray, their executive vice president at the conference board, Let's continue to talk about the jobs numbers. Then with Tom Gimbal, founder and CEO of the sound network when of leading staffing firms, UH the biggest staffing firms in the country. Tom, thanks so much for joining us. I gotta ask first about UM, the people you're placing. Are they getting paid a lot more? Well, they're getting paid more.

There's no doubt about it that this market is what people are seeing is talent is hard to come by. There is a labor shortage. We have yet to place anybody for two and twelve million dollars. That would be quite a fee, um. But but overall we're seeing it. You know, it's it's not usually you say, oh, in the tech based developers, elite sales people, things like that, But in this market, people are getting five sometimes increases

when they make moves. And are they also demanding Tom to work from home or to be able to UM or to not be required to go to the office five days a week. Well, that's the interesting thing is now more and more companies are moving away from fully remote and looking for people who are within a commuting distance for some sort of hybrid. The more unique the skill set or UH in high demand and individual is, the more preference they have. But we're not seeing that

to be a big deal. What you are seeing is people won't even listen to a job. If something there are people who want remote so badly they won't even listen. It's not something that comes up in the negotiation. If you're going into interview for a job, you're under the assumption that usually it's gonna be a hybrid at the very least, unless they're telling you upfront. So what does this report? Then? If you step back, Tom and look at this report from the thirty five thousand of you, Um,

how does it look to you? It looks fantastic. If I would have said to somebody a year ago, uh, that twelve months later we'd have our twelfth consecutive month of over four a thousand jobs, Unemployment would be at three point six percent UM and uh, the wages would be increased and the participation rate would be increased. Everyone would say, sign me up for that program. And if the economists had predicted four thousand jobs instead of five thousand,

we'd be doing backflips, right, you know. The the the economists get to get the judge statistically what they think will happen, and us on on main Street, we're actually doing the heavy lifting. And this job market is still as good as I've ever seen, and we're seeing the CEOs I'm talking to every single day. They're they're not worried about the Ukraine, they're not worried about Russia. As far as what's going on, they only have one fear, and that's inflation. And and that's where I think we

should be really focusing our concerned domestically. Yeah, I mean, um, it's okay for now. I guess as as companies pass on inflation to consumers, they're able to increase wages. But how long can that last. You're gonna be in a in a real tough situation. And I don't want to be the doomsday guy. I think we're gonna be in a really good market for the next twenty four to thirty six months. However, you get people that are renting places and buying places, uh, based on an inflated salary,

and you hit a real recession. And what we had wasn't a recession, it was a blip, you know. Two thousand one, h two thousand nine, those were recessions. You get that situation. People aren't gonna be able to pay those rents and people are buying above their means. So I do worry a little bit about inflation that continues at this rate. Uh. And it's gotta it's gotta impact commutes as well. Right, This is something that I guess employers,

or at least many employers are paying. Yeah. It's an interesting dynamic, man, because what you have right now are people that want to work from home or they want subsidies to come in. But then they also want their Walgreens to be open seven, They want the stores to deliver all the time, they want the products on the shelves, they want their athletes and spring training. You know, white collar workers have a very um selfish view from time to time about what should be remote work and what

shouldn't be. And I'm I'm a firm believer that if we want society to come back, we want inflation low, uh at at a lower rate. We've got to make sure that we can get the dry cleaners back open in the sundry stores, and and people going back into the office because that goes to auto repair shops and keeps the gasoline prices lower and and all of those things that fuel the economy. So you can't you can't

have your cake and eat it too. Yeah, you should see the I mean the stores around here in Midtown Manhattan, which is an office society or an office culture, half of them are still closed. It's just unbelievable because you know, the entire workforce that used to supply all these delays with the revenue, UM, has just stayed in Long Island, New Jersey or Westchester rather than coming in and and

buying sandwiches. So yeah, I I totally understand what you're saying. Um, do you think about the possibility of a wage price spiral? Are you concerned about that? Our employers concerned about that? No? I don't think so. I think right now things are gonna things are starting to level off a little bit. It's gonna be interesting because you know, every May, June, July, we've got recent college graduates and none of the workforce, and those salaries are a lot higher, it looks like

coming out than they were a year and two years ago. Um, you know, the worst time to have come out was in right, wages were really low. They've jumped up now this year that they're they're a lot more. But I don't think anything is gonna be too crazy, all right, Tom, Great to get your take as usual, Tom, gimbal Is, the founder and CEO of the Sound Network, talking to us about the jobs report. 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. Yet on Fall Sweeney I'm on Twitter at pt Sweeney. Before of the podcast. You can always catch us worldwide at Bloomberg Radient. M