Jobs, Quantitative Tightening, And EVs (Podcast)

It came in a little bit better and expected unemployment rate ticked up, but we had some, you know, higher participation, which is something people have been talking about for a long time. Let's check in with our good friend Tom Gimble. He's a founder and CEO of LaSalle Network. Tom, and look pretty solid from my perspective. And I love to get your thoughts because you're talking to these companies every day about filling open slots. I feel like we're doing

Groundhog Day every month, guys. I mean, three hundred and fifteen thousand jobs and participation rates up. What it shows is is that the ADP numbers are crazy. They don't know what they're doing. It shows that the economy me still strong and like the football season, the college football season that you omitted a few minutes ago. Correct, that starts tonight. Uh, we're kicking off the fall season, the last third of the year, with a great economy and

a great jobs are board. The TCU horn Frogs are coming into Boulder, Colorado tonight to take along the Colorado. But I graduated ninety four. Boulder isn't what it was really how so? Well, I mean I was saying from football, from the economy, Boulders unbelievable and expensive. The football team. It never should have left the Big twelve. But that's the whole another time three So but um, this isn't really helpful in terms of lowering inflation though, tom is it?

I mean, we did have a ton of job openings, but uh, well, we had a ton of job openings, were adding a ton of jobs. Average hour, early earnings are up more than five Um does that help bring down inflation? You know? Uh, it's funny. Uh, you go out for dinner and things maybe a little bit more expensive here and there. People want to say that we're

in the mid nineteen seventies again, and we're not. Now there's a difference between this economy and every other that we've ever been in and and those differences are a it's truly a global world. Number two, we have a real supply chain shortage that we've never had in this country before. And number three, we're still feeling the after effects of a global pandemic. And people want to have A plus B equals C according to normal historical economics,

and it's just not that way anymore. Tom When you talk to your clients, your companies that are looking to fill jobs, kind of give us a sense of what their biggest challenges are. Do they do they just have to pay more, Do they have to be touchy feely and have fun things in your office? What are some of the challenges that they really face and filling these openings.

The number one challenge that every company is facing is they want to get their people in the office more than what they currently are, and they're afraid of turnover. And as long as unemployment as a record lows, even with a two tenths of a percent uptick today, as long as it's a record lows, they're afraid to do

what they think is best for the business. And the only way that it's gonna turn is when unemployment really rises and you see it a four and a half five five and a half, which I don't see it happening in the near future, but that will eventually happen because everything runs in cycles, and then it'll go back and and we'll go through a cycle again. That's that's how things work. Well. The FED probably wants to see that as soon as possible. I know everyone's a macro

tourist these days. Um, I'm very guilty of that. But doesn't this just give the FED ammunition to go seventy five and seventy five? It does, and and and I got news for you. That's what it should be doing, and it should have done it last year. And we need that because if we ever get into an air quotes real recession, we're gonna need that lever we're not in a real people say, oh, they're gonna kill the econo of he's doing great. What it shows is is the economy is so strong it can run when money

isn't free. Isn't that the whole point? Yeah, well that's a great point actually, And um, that's something I haven't heard a lot of people saying lately. But you might as well build up a war chest. I know, that's not the primary reason to raise rates. But if that's a secondary effect, I'll take it. Wait wait wait wait wait wait wait wait, what do you mean it's not the primary reason we started raising the feed started raising interest rates before there was inflation, and everybody said it

should have happened last year when there wasn't inflation. The primary reason to have interest rate inflation already inflation was already last year was the transitory debate, right. Last year was, dude. Last year was when housing prices started going insane. Last year was when you couldn't buy a car. Last year was when used cars cost more than new cars in supply chain issues, not because of inflation, because you couldn't get a car. It was a supply and demand issue,

not an inflationary issue. Tom. If I go down to Austin, Texas, can I get job or in Florida, that's for everybody's flowing. Are the regional differences out there? Yeah, there's always regional differences. And I've said that on your show a million times. Is that the problem is is that we look at unemployment for the most part as a United States issue, and it's really, uh, it's very regionally driven and and

the same with wages. Who cares what the wages are in New York City versus it's really what they are in Tulsa, Oklahoma. Right. I mean, we've got to figure out how to how to look at things more regionally and that will attract people. But we live in a world where people are so entitled. This isn't the seventeen hundred. People aren't gonna go out west for a job anymore. You are gonna leave Manhattan to go to work in Oklahoma when they know that the government's gonna bail him

out to live in New York. It's right, He's right. You know, it's a shame job says only one day a month. Because we get have Tom on like you know much, we should take our show to him. Where is him? I don't know where he is in Chicago? Right? Okaga? Yeah? I guess all right, Tom Gimbell, he's a found in Cea of La Sound Network. That's right. Uh. And let's sell Network the one of the big staffing recruiting companies

in the country. So Tom knows what he's talking about when it comes to how do you fill up these jobs? All right, let's get some more color on these jobs numbers. John Gollneck, vice president for a Deco, joins us, Hey, John, what's your takeaway from these jobs numbers today? Again a little bit better than expected, weaker than the prior month, but still pretty decent. Yeah, you know, I think, um, I think this is a good report. And the term said friendly, I think you guys are putting the right

color on this right now. I think there's two things from this report that really stand out to me. Um. One, you know, the average hourly earnings month over month, we were expecting point four percent and it came in point three percent. And I think that wage deceleration. It's still growing but not not as not as hyper as it was before. Good point. I think that's said friendly. I think that's a thread friendly metric right well, in the sense that they want to bring inflation down, but um,

it doesn't give them ammunition to hike. Maybe that's why that's a really good point. The other thing I mean, I guess is participation rate right right, participation rate is up, which drives unemployment rate a little bit. So even though that we've seen the unemployment rate at three point seven versus the three point five, the participation that we saw in the labor market was more than expected. It's not a one for one correlation on the math there, but

there's a driving force. So for me overall, I look at the last three months. You know, we've averaged three seventy eight thousand jobs. I mean that that was a hundred and sixty four. I think the economy is resilient. We still have a lot of need out there for a lot of employers. Um. You know again, I think, like everybody else, I think the Fed is happy with this report. I think I'm hopeful that it's not a

full seventy five and hopeful that it's a fifty. And then to your guys point, we wait for the next seven day. Have to come out John, because you've just answered that what was a big question mark over my head. Um, And it's really a reframing of my idea. What the Fed wants. Um, they really want at the end of the day to bring on a inflation down and they probably don't want to have to hike as much as

they can. So um, a DECO is the biggest uh, you know, workforce placement, workforce solutions firm in the world. So um, maybe you can answer another conundrum that we've been struggling with. Here we're getting layoff announcements left and right, and not little ones, right, um, big or of whole workforce job cuts. And yet the JOLTS number was eleven point eight million job openings. I mean, almost a record high amount of job openings. How can you um put

those two things together? Yeah, you know, I think it's there's a lot of things you have to look at in our economy, and you have to look at it from sector to sector. Right. You know, we saw we saw in July that you know, service based, hospitality, leisure. It was crazy highs ninety six July and only thirty one thousand this month. Wow, what a dip, right, Well,

not really what a super spike. Right. People people are in the summertime season, they're getting some traveling done, They're getting some traveling done before the school season starts again. It makes sense a little bit more people are are are free to travel with you know, pandemic restrictions, um, and they want to get back out there. So that makes sense. But what we look at, that's that's really driving you know, retail. We saw huge retail layoff announcements.

You know, when we saw Walmart announced plans. We saw some other folks, but we're still seeing a massive need. I can't go to I can't go to any storefront without seeing what we're hiring sign you know, hey, we're hiring key holders. We're looking for managers, assistant managers in retail um. The demand is huge because I think our workforce that used to fill these jobs, right, they were

impacted in tremendously from COVID. Your servers, your bartenders, your waiters, You're people that relied on the tips business, right, the foot traffic. They had to find other ways in a gig economy. So so now returning back to that nine to five, you know, let me be in one place, let me let me punch a cock. There's a culture

shift we're we're adjusting. So I think that's part of it, as as we look for more labor participation in that you know, sixteen to twenty two year bucket to fill some of these roles they're has historically been filled by them in the past. But what I'm most excited about, to be honest with you about about the job need and demand is there's there's a huge need in demand

and manufacturing and supply chain logistics. When when when COVID impacted us and we were dependent on foreign goods man, that woke a lot of people up that we needed to research our manufacturing base here and and that's where we see continued demand fill in second third shifts. How do how do we get more participation there? So and so we solve that riddle. I think I think we're going to see some steam, you know, in this job's number for quite some time. That's good stuff, good numbers,

good analysis. John Galnack, Chief Researcher VP at A DECO and a shout out to your former or your future job, I should say my future job as a great Oh, darn wright at Walmart, greaterer at Walmart. I'm gonna be a darn good one, and they've better be ready for me coming up in a few years. Bringing on our next guest, Kate to Shane, CEO of r g P r GPS Resources the Global Professionals. It's the operating arm

of Resources Connections, which is a publicly traded company. Our GPS a ticker you can put into your Bloomberg terminal. I've got a six hundred sixty million market company based in Irvine, California. The stocks up about uh this year. The company provides consulting services a consert wide range of business issues. Okay, thanks so much for joining us here. You know, we had a pretty good jobs number today.

I'd love to hear what your companies that you talked to and you consult with on the human resources from what's their biggest issue? Is it just getting bodies in the door, or are they even trying to still figure out the hybrid work thing. What are some of the big issues that you're hearing from your clients. Yeah, thanks for having me. I'm certainly happy to be here. So it's a multitude of issues. I think certainly the war

for talent is still tight um. But as we're seeing um jobs increase and labor participation increase a little bit, that's good news. But I think going forward, one of the biggest issues is how are people working when they return to the workforce, And so that means is that hybrid um when do you work? How do you work? And building more flexibility and agility into workforce planning. Uh, those are the kind of discussions that we're really having

with clients, especially in the face of recessionary worries. You know, how do you get work done in more creative ways? So you advise primarily financial firms, right, I mean finance accounting, and maybe I financing accounting right is our core because management. I've been thinking about this UM from the client perspective. Right, if I hire a finance firm, I'm gonna pay good money for their staff to do what I want when I on. I don't want their staff to be working

from home. I don't want them to be taking off labor day weekend. I don't want them to be worried about work life balance. I just want them to do what I want when I want. So how do you, um, how do you square that with companies that are trying to like be kinder and gentler to their workforce. Well, I think we all have to recognize that the world of work is fundamentally changed post pandemic, and talent is

really in the driver's seat. So I understand the perspective that you just shared, but really the world is different, and I think that what creative companies and what companies that are really thriving understand is that there isn't a black and white answer here. That you have to find a middle ground. That works both from a business perspective and from a talent perspective. And so there's a lot

of creativity happening. There's a lot of work that's been delivered remotely, or we use a term borderless talent, meaning that we can better match in today's environment to the exact client need if a client is willing to be more creative about when, where, how that work gets done. Um So we might find the perfect financial professional for a client engagement, but that person might sit in Dublin

UM or in London or in Atlanta. And so if a client's thinking can shift to say, I don't need them in the cubicle next door, it really opens the aperture of the talent availability. How do you think about

I mean, Kate, I'm a little bit old school. I you know, I kind of came up on Wall Street where you really did put in the hours and then you built up that camaraderie and you built up your relationships um and still today at this later stage of my career, the relationships are are absolutely the most valuable thing I take away from my career. And I think a lot of people generally agree with that. But that seems like it might get lost here in this new

hybrid world or work from home world. How do you think about that? How do your companies think about that? Well? I think that the balance is important, and so you know, we go back to the word hybrid, but I think it's a little of both. Um. There's certainly benefits to be UM found in collaboration learning. So what we're talking to clients about is spend those days in the office in really meaningful ways. Don't spend them on zoom calls

or on individually oriented work. When you're in the office, be together, have learning moments, have collaboration sessions, and when you're not in the office, that's when you do your head down work, which we all have a lot of that as well. UM, So you need you need to learn to work differently, and and that I think will be the predominant UM path forward as we continue to recover in this economy, not all one way or the other.

This is something that Paul and I talked about all the time because I'm convinced that a lot of that can be done in the can act really be done in the metaverse or whatever we're calling this world right now. UM, I could be wrong about that, but listen, I want to ask about your company. You have, at least from a stock perspective, trounced um, whatever benchmark index I want

to put you up against. If I look over also any period over the last year, over the last two years, over the last five years, you've beaten the UM, SMP Small Cap Index, the Russell one thousand, two thousands, three thousand, the SMP five dred Um. What are you doing right? You think that investors appreciate we're taking care of our people.

I mean we're really listening. We've we've become really a learning and a listening organization, and that's listening both to how companies need to get work done, especially around project orientation as they face transformation and disruption, and we're listening

to people and how they want to be treated. I mean our core workforce UM Paul and Matt are experienced, hire diverse professionals who you know they're in the middle probably or later stages of their career, so they already know their work, they know their subject matter and their expertise, and they want to be appreciated and work with more flexibility, transparency, choice and control. And we're really giving the talent market what they want today and that's really helped us thrive.

How about the industry, I mean, do you think more UM. You know, financial leaders who are you know, like Paul's age, are coming to you for help in this new world. They are because what we see. You know, twenty years ago, a large enterprise might have one transformation project going on at the same time one or two. Fast forward to today, transformation is happening everywhere in large organizations. So your transformation agenda works something like twenty to twenty five concurrent projects.

No organization is staffed up for that much change, and so you need a trusted partner to say, can you bring the expertise in the additional bandwidth I need? And that's really where we play. We partner with our clients to co deliver on their transformation projects and a lot of them are related to UM finance systems, transactions, regulatory change, etcetera. So we're a perfect UM adjunct to the initiative business initiatives they're trying to accomplish. All right, Kate to Shane,

thank you so much for joining us. We appreciate getting your perspective on the workforce, on the hiring environment, on the work environment still a work in progress for a lot of companies. Kate to Shane's CEO of r g P. I saw some news met over the last week or so, Goldman, Sachs, Morgan, Stanley, Jeffreys all talking tough. Yeah about this time, we mean it. After Labor Day. We want you guys back in the office.

But I have to agree with Kate that it's a different It's going to be a different work environment that was pre pandemical. So yes, they want you to come in probably um three four five days a week, but not every single week. And they're willing to be more flexible than they were before. And they realized they can get a lot more done for cheaper than they could before. We'll see how that plays out, but certainly that's kind of where it appears to be moving. Good jobs day today.

All right. We know our Federal Reserve is raising rates, but they're also engaging in something called quantitative tightening. I'm not really sure what that is. I don't really do that stuff for a living, but Kevin Mirror does. He's a prop trador for Windoor Capital h He's also the author of the Macro Tourist newsletter, and he's also a Bloomberg opinion contributor. And Kevin, I know you had a column out recently we say we shouldn't really fear QT.

But first, for equity geeks like me, what is quantitative tightening and how's the FED doing it? Well? Good morning, paul Um. The quantity of tightening is the opposite of quantitative easing. Quantitative easing is when the Federal Reserve goes out and buys bonds or other assets for its balance sheet, basically putting money into this system and taking financial instruments out.

Quantity of tightening would be the opposite, meaning that it shrinks its balance sheet and either by letting those bonds run off or extreme cases, actually selling those bonds. So should we be concerned that the Fed is talking about quantitative tightening and or just kind of what do we know about their policies and what do you think about QT? Well, first of all, the Fed's doing a lot more than

talking about quantity of tightening. They've actually scheduled it, and they've so far they've agreed that they're going to let the balance sheet run off by forty seven and a half billion dollars per month, and they're increasing that to billion starting in September, and this is what the market is a little concerned about because that seems like a

large number. And if we think about quantitative easing, quantitative easing was the process of putting money out into the system and trying to make things better, and it actually has the kind of the intended consequence of easing financial conditions. If we think the quantity of tightening, is you off us that we should expect that to tighten financial conditions, i e. Sen Stocks down. Unfortunately, there's a there's a lot more to this story, and that's kind of what

the topic of my letter is. That it's not as easy as just taking the SMP five and superimposing the FEDS balance sheet on it and saying one one's going up, the other one's going you know, the smple follow and then when the FEDS balance sheet goes lower, that the

SMP will follow it lower as well. So, Kevin, the size of this is what matters here when it comes to they've done this before, and that they've tried to at least a massive rate high cycle where they did try to pull back on quantitative easing, But this is only the second time that they've done it in the first time they tried. They didn't even do it completely. What are the odds they're actually successful in this operation?

So creany are absolutely correct. The in the post g FC era, the Federal Reserve expanded their balance sheet from one trillion dollars to roughly four and they went to four and a half trillion, and they tried to go in and put the their the economy on a policy where they would shrink that and they only managed to get it back to three in three quarters before they had to halt the quantitative tightening, and that was for

a variety of different factors. And that is why the market is very concerned about this quantitative tightening that the Fed's going to embark on down But I would contend that this is a much different situation than in when they tried to do quantitative tightening. And the main point that is often missed is that with the extraordinary amount of stimulus that the Federal Reserve did in the post COVID era, and it wasn't just the Federal Reserve, it

was also the fiscal stimulus that it did. There is so much extra liquidity in the system that the Federal Reserve needs to engage in what's known as reverse repost, and reverse reposts are when they take the collateral, the high quality bond that are on their balance sheet and they go and lend it out into the market for a short period of time so that it soaks up

some of the liquidity. Imagine that there's just so much money out there that if the Federal Reserve didn't do this, what what happened would be the target rate would fall below the interest rate that they're trying to set. So there's this overnight reverse repo has gone from zero a year ago to two point two trillion dollars. And that's just a function of how much liquidity is out there.

And so when we think about this quantitative tightening and we think, oh Jesus, you know what, we're going from forty seven and a half billion to a month, it's sure sounds like a little big number. Well it's a big number, except that there's two point two trillion dollars of excess liquidity out there that the Fed is soap soaping up, soaking up every single night in reverse repos.

And so when I think about what potentially could happen, Yes, there is a duration mismatch, meaning that the Federal Reserve doesn't own the exact same thing that the market players that are engaging in the reverse repos want, but in terms of the total amount of liquidity, they're having to soak up all this extra liquidity. So as they let their balance sheet run down, I suspect the reverse repo

will also run down, off setting it good stuff. All right, Kevin, thank you for That's what I call inside baseball, that's the plumbing of the markets. Kevin m you're a prop trader for wind Or Capital. Talk about some quantitative tightening, it's uh, you know, it's critics pointing out it's something we don't experience in the marketplace that often. It does,

It does happen, but not that often. It just seems like we've been talking about forever quantitative easning in the easy money conditions in the marketplace, and that is clearly changing here as we talked about the Fed raising interest rates. We heard from Jackson Hole last week they are on a tear there to fight inflation. All right, Let's talk electric vehicles and we're not. It's not just electric cars.

We got trucks. They're on the way. I drove the four D F one fifty lightning and uh it's awesome. Matt read a story about boats, all kinds of stuff coming to the e V space. Regie's did you recr is an executive director for Auto and farm sectors at MA Hinder Group. He joined us talk about what they're doing. Regie's love to just know what you guys that group are doing in the e V space. Yeah, Well, first

we thanks for having me on the show. It's a pleasure to be with you here this morning, and especially to talk about our electric plans. As you know, we are a leading SUV player in India actually number one by revenue, and as we look at the future, we believe that electric SUV's will be a significant part of

that long term plan. So when we started thinking about where we should be headed from here, we thought, when we have planned for about any type percent of our volumes in a sus coming out of electric vehicles by around the eclic pointing seven, So we put together a plan to help us get that end of a electric

sue vehicle volume in the ind in dostic market. In the beginning with talk to us about just kind of where India is right now in terms of the ev market here in the States, obviously, I'm sure you're where Tesla has led the way completely. But now we've got all the major global O E M s, you know, kind of throwing their hats into the ring. Talk to us about the Indian market, So so Paull. In India, the electric penetration at the moment is at a very

nascent stage of evolution. We are seeing in much faster electric penetration and these small commercial vehicles, which is really the three wheeler space, and we have a strong presence there where are three wheeler electric vehicles have a market shot. And here the electric penetration is as high as ten percent and we are seeing it grow very rapidly month in month. The penetration, as I said, in the passenger

vehicles space is still very small two to three. We are expecting this to grow very significantly over the next for five years, as a better technology comes into vehicles, as charging in fry improves, and of course evolving into

consumer who is now inclined who adopt electric vehicles. The government in the Indian government is also putting a lot of emphasis on promoting electric vehicles, enabling electric vehicle conversion and have put in place several subsidies to enable that as well as investment linked incentives to promote investments in the electric working space. I know, Mahinder is you know, obviously a large player in any tractor business and that side of the vehicle business. How is the EV revolution

going to impact that party? Think uh, Paul, So you know, like right he said, in the Indian market, we have a strong presence in the tractor business. Were number one one to send market share a very large volume, so we sell over three hundred thou tractors Elier in India. We also have a very good presence in North America and building a very strong brand and I think some of some of your listeners would have seen us on the NASCAR more recently doing very well there, so you

know the brand is getting strong. We are a number three player in the less a hundred horse par segment. We think the electric part of the tractor business in North America will you know, evolve faster than it will in India. And the reason for that is in India, in mainstream agg applications typically you know, the tractors the prime mover for other implements and that means a very high talk or a backup talk, and that doesn't quite

come as easily, uh, you know, with electric. But in North America where you know, in the smaller, let's one hundred horsepower segments, we see you know, law moving a you know application to the kind that we participate in with Google lifestyle ers. We think electric will follow the next two to four years. Talking about you know, one of the challenges logistically even here in the United States, as as more and more uh people go, electric is

gonna be the charging station infrastructure. And there's just for a lot of parts this country, I just don't see it happening. You know, it's gonna take a big, big undertaking, and I would think it would be by orders of magnitude even more difficult. In India. How does how do you and other industry participants see the roll out the

evolution of the charging infrastructure in India? Yeah, so you know, the government is committed the ball to create a charging and a lot of the fuel stations there's a road map to convert them into energy stations as we go forward. A lot of startups are getting in the space as well about what we're seeing as you know, the first stage adoption of the electric revolution India will happen a

lot around private charging station. Okay, people in their house, either in their homes or your houses, or in housing complexes or at place of work would start moving into you know, private charging. And to begin with, we think that in the personal segment, electric penetration will happen with in those households who either have to just operate within a non operating circles like example, doctors going to their hospitals for work, you know, the nature movement is predictable.

Or people with multi cards you know, who are less worried about range anxiety and hence less worried about charging in FRA. And which is why we think for the next four to five years at twenty percent penetration of this segment using electric is a reasonable assumption. Just to quick beyond that is one of the cycle. Just real quick, Just where are the non Indian manufacturers in India, the Volkswagons of the world and and and others? Are they in India in a big way in electric? H No,

so actually not at all at the moment. So we have you know, quite significantly Tata and then we are launching revealing actually in the eighth and nine to September, which is the word ev day, A product called the actually Be four double which is a four point to

meet a vehicle electric which we will launch. We interestingly do don't have a tie up or our in Glow platform with Volkswagon where we will be using the components from the enemy by platform, more specifically the battery, sales and the motors as a part of the Innglow platform on which will be building for the five universities. Great stuff for g Juror Car Executive director, Auto and farm sectors for Mahinda Group out of India. They are going

electric like everybody else, it seems. Coming up balance of power. Joe Matthew sitting in for David Weston today. He'll drive the conversation forward. 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. P On Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio