Jobs Report Reaction & Tech in Wind Turbines

market here smph up slightly, dow up about sixty points. Uh. Not much movement in here after this job's report, but let's see where the action might be. We've welcome our good friend Vince Signarella. Vince is the global market macro strategist for Bloomberg. Vince, thanks so much for joining us here in a Bloomberg in act the broker studio. What did you take out of the jobs data this morning? We'll tell you. Larry's right and he's stealing my thunder

the rat. I wrote about this about seven years ago when I was with Wall Street Journal. August is a seasonally adjusted month um It often is revised higher. Last year, in two thousand eighteen, the number was a blowout like two eighties something, and then September was revised lower. So you kind of look at the August jobs data and you treat it like figure skating. You throw out the high and the low, and you get somewhere of an average over the summer. Let's just get your big picture

takeaway from the jobs report. When I looked at it, my impulse was, this is a choose your own adventure jobs report. There's good, there's bad, pick the narrative you want go with it. The Fed certainly will the cut rates come September eight. The question is what they're going to do with it going forward, probably going to be, you know, watching the data, as they've been saying for

a long time. Does this maturely shift markets in any way over the next few weeks Ahead of that f o MC getting its shut And I mean, I think you were exactly correct. If you look at the private payrolls numbers, they were disappointing. So if you if you wanted to look at a week job's report, you could look at that. You could look at the wage growth, which was substantially higher than estimates, and that would give you the positive narrative to the story. So there's it's

definitely a mixed job report. And as I said, August is a month I kind of throw out, and I think the FED and everybody else in the long run will do the same. I think you also correct about September. Um. My take for the FED for September is that they will do They'll utter the draggy narrative, we don't want to stand in the way of economic growth. This will be an additional insurance cut, perhaps to keep things smoothing along.

They've They've shown us they could turn on a dime if they need to have data changes, so there's no harm, no foul by cutting basis points. And I wonder what their messaging will be tho Vince. You know, I think the you know, an insurance cut. I don't think it's something that the market wants to hear. The market wants to hear that we're into an easing cycle. Do you think the FED will go that far? I doubt it.

I don't think they'll change the narrative from the last statement that drastically, because the economy and the data don't call for an easy cycle right now. They call for the potential that they may have, you know, and you won't hear this realistically from the Fed, either that they've hiked a little bit too aggressively. If you if you look at the natural rate of interest, which Williams has put out a paper on the Feds Williams a couple of years ago, the natural rate of interest right now

is some forty basis points below the FED funds. Right you can easily see a fifty basis points cut in the Fed fund rate just to bring us back to sort of neutral ground. And they have the room to do, all right. So before we dig too much into the Job's report, we're gonna be getting more on that coming up in the show. But I want to dig into the China news overnight. Uh, the fact that they are

in fact engaging in more stimulus. And you said out a note this morning that I thought was really important, which is China wouldn't be engaging in additional rounds of stimulus if they thought that we were anywhere close to a trade deal. Yeah, and I think that that is definitely the case. But I will the caveat to that, honestly, is my sources from China last tw weeks have gone dark,

uh no news. So that sort of coincides with that if you will, that I'm not hearing anything, which means there really isn't any positive news that I can take from, which which then raises a question, right, can additional Chinese stimulus offset what we have seen in terms of a slowdown, and that could actually ameliorate markets or calm them even with how a trade A greatment, not not really a China stimulus is for their own domestic economy. It's to

support their businesses. The hope is that the reserve requirement cut will add liquidity, which Chinese banks will then lend to businesses. And it's a it's a tax season coming up at the end of September, so if business demand

requires capital. China wants to keep the domestic engine going because they know the international engine is not there with the tariffs, so they need to prop up the domestic economy and I think that reserve re cirement cut is to do that and that alone, and that to me sends a signal that they're not anticipating the international economy to lift them anytime soon. Let's bring a good friend, Carl Ricka Donna Bloomberg Economics chief US economist. So Carl, welcome,

You're in our Bloomberg Interreactor Broker Studio. We'll love having you here. I want to get your thoughts on the job's number again, as we've kind of discussed, you're kind of a goldilocks type of report. What was your take. I'm gonna go on the side of whichever bear said things were a little bit that too cold, So I'm not gonna say goldilock scept for this report, although I

know some analysts are saying that, uh. And certainly if we look at the reaction in the treasury market, it also seems to have that sentiment that things were a little on the chili side here. So what's impressive is that the economy is holding up as well as it is. So even the manufacturing sector, which is really front and center in this trade skirmish and economic uncertainty and strong dollar,

still managed to eke out positive job games. Now, mind you, the I s M earlier this week fell into minor contractionary territory. I think it's going to stay there for a couple more months. So the economy is weathering the storm, but it certainly is not immune to what's happening. And we can see that in this slowing pace of job creation.

So while that headline number one thirty, uh, not very impressive, we have to factor out twenty five thousand census workers that were hired for is to get an even better sense of underlying momentum in the economy. But when we do that and instead look at private sector hiring nine thousand,

that that goldilocks Paul. But I want to push back because honestly, you did see better than expected wage growth, which indicates that perhaps the labor market is tight and that we're not adding as many jobs since simply because there aren't that many people looking for work. Sure we should be getting some wage pressure as the unemployment rate is plunging below four percent. I think the unemployment rate could actually hit three point four percent or three point

five percent by the end of this year. So things absolutely are tightening. But remember one thing, Lisa, inflation is a lagging economic indicator, and wage inflation is also a lagging economic indicator. So what's more important is the activity based metrics, things like the pace of hiring, in the hours worked, and the aggregate income growth, and those were on cooler trajectories in this report. How do you think

the FED should interpret this data? Well, the Fed has to look at this data and say, yes, the economy is losing some momentum. We're not at recession risk territory here, but we're definitely looking at sub two percent growth in the back half of the year. In that environment, the Feds should be trying to take some of the steam out of the trade weighted dollar, which is at record high levels. Uh and therefore they should be cutting twenty

in September, October, December. In December, they should look at their Bloomberg screens. If the yield curve is still inverted, then keep those twenty five basis point cuts coming right into the new year. Vince, is that what the market is looking for? Just cut to zero basically on a monthly trajectory. I didn't say zero, but the ten year treasury yields at zero, they be They Fed better go to zero as well. I think the market would like

them to do that. I personally would like to see them get the ioe R closer to where the tenure is, to keep that yield curve a little flatter and not so inverted. Um. It makes absolutely no sense to have FED funds right seventy five basis points above the tenure yield. So the market is definitely asking exactly what Carl said, give me that seventy five basis points. Give it to me in a little bit out of time. We can't really handle it all at once because that'll scare the

heck out of us. Um whether or not they'll get that, that's a good question. I think they'll be a little bit more reluctant to go that quickly. All right, Well, we'll continue the conversation. Car Down and Bloomberg Economics Chief US Economist, Thank you so much. Vince Ignarella, global macro strategist for Bloomberg, both of you in our Bloomberg Interactive

Progra Studios. Thank you so much for being with us. Well, it is Jobs Friday, and I think the mixed report that we got from the Department would suggest that the Fed probably has a little bit more ammunition should they decide to cut rates at their next meeting. They get a sense of kind of how this may play out. We welcome our next guest, Chris Louse. He's a senior fellow at the University of Virginia Miller Center. He was

former Deputy Secretary of Labor under President Obama. He joins US from Virginia on the phone, Chris, thanks so much for joining us. What was your take of the jobs numbers that we saw this morning. You know, it's basically what you'd expect in UH, an economy that clearly is slowing down. How much is the unclear issue at this point. And when you combine this with the consumer confidence numbers from last week, the manufacturing numbers from earlier this week,

this is about what you'd expect. And you when you look at the trend not only but particularly compared to twenty eighteen, UH, this is a slowing economy and so it will leave policymakers not only in Washington in Congress, but also in the said trying to figure out, you know, what the next step is. So the headline number missed,

but the wage increase beat. And I think this is actually really important because a lot of people have said it's been interesting, UH that the headline numbers of job creations have been as high as they have, given where we are in the credit cycle and the economic cycle, and given how many jobs have already come back to

the market. You know, I'm wondering whether the lower than expected number paired with better than expected wage it indicates a tight labor market, getting that sort of sweet spotmentum

that people have been waiting for. Right. You know, the wage growth I think with three which is pretty good, but again, given the fact that we've been at below four percent unemployment for you know, most of this year, if not longer than that, you would expect higher wage growth in that And I think what confounds us is why that hasn't happened, and it may simply reflect a changing economy at this point, is that a lot of these low wage shops are going to stay low wage jobs,

in particular with a federal minimum wage that hasn't gone up in ten years, and that the economically, the economy is just fundamentally different than what we have seen during previous economic expansions. It's interesting, Chris, I was just commenting recently that you know, you walk down Main Street, USA anywhere, and it's almost every single store, every establishment has a help wanted sign out there. Um. It just again it

kind of goes to that wage story. What do you think, given where we are in terms of three points seven percent unemployment, would you expect to see wages even higher in terms of growth than here. Well, I would normally expect to see that given everything we've always learned about markets.

And the other thing that's sort of interesting is that labor force participation, while it picked up a little bit UH this month, UM, it's essentially kind of been in the same band over the last four or five years. And so people really are not coming off the sidelines right now to get jobs. And in part it's because the demographics of this country have changed. People are retiring earlier, UM,

people are staying in school longer, UM. But a lot of the traditional ideas of what it means when you have low unemployment, higher wages people coming off the sidelines just haven't happened so far. Chris, I want to shift gears a little bit because it seems like the job's

report didn't necessarily shift market expectations that much. And and speak to a Bill Dudley column of Federal Reserve, former New York Fed President for Bloomberg Opinion where he was talking about how right now, given where we are in the economy, the Fed shouldn't really be cutting rates all that much because it could potentially incentivize President Trump to ramp up his trade war and basically hurt the economy more in the long run, And I'm wondering whether you'd

weigh in on that, especially because the Chief Economic Council Director, Larry Cudlow is just uh sort of railing against it on Bloomberg Television moments ago. So what's your what's your take? Well, I think, look, I mean, the what the President has been able to do over the last couple of years is he knows that the US economy is strong, and that it's a it's certainly the strongest of any country

in the world that's resilient at this point. It's given him a fair amount of latitude in waging this trade war, not with just with China, but with Europe and our friends in North America. It may turn out that he has much a much shorter leash now in doing that, and it may cause them to rethink this kind of uh score short strategy that they're doing and maybe try to cut a deal sooner rather than later. Be is whether it's will interest rates or frankly, whether it's the

trillion dollar budget deficits that we're running right now. There's not a lot of you know, the traditional levels that we would use if this economy really starts to go south this point and so um, I you know, I'm not sure I can comment one way or another and on Bill Dudley's column, other than to say that, Um, if the President thinks the economy can withstand these headwinds, um,

he may be mistaken. Let's sort of shift the question on its head, then, which is if the Federals were too cut rates to zero, would that materially improve the labor market at this point in the economic cycle. Look, it certainly would help a little bit. I think the challenge we also have to recognize is that we are now, you know, nine plus years into this economic expansion. When you look historically, Um, that's a long period of time.

And it's not just what's happening here in the United States, but it's a slowing Chinese economy, it's Germany possibly going into recession. It's the uncertainty around Brexit. So the U s can certainly do a and the FITS can do a lot um, But in this global economy, you know, if other countries start to move south, it's hard for the US to resist that as well. So Chris, do you and your kind of outlook, are you discounting a

recession in the next six to twelve months? Or do you think that the consumer can continue to support growing US economy. Well, and that's really what has propped up, UM, the US economy. I mean, we've seen business investment not certainly be what we expected after the tax got in, with the consumer confidence numbers from last Friday suggesting that

people might be pulling back on their own spending. Um. Look, I don't think we're heading into recession before the next election, but I certainly think you'll see economic growth that's well

below two percent. And I think, um, the President will be running for re election essentially in a similar economic time that he criticized Barack Obama for when he ran for office in twenty sixteen, So I think that will Um, I don't think we're heading into recession, but I think for the President's purposes that challenges his re election bid. Is consumer spending a leading or lagging indicator from your

bantage point? You know, that's actually an interesting question. I mean, you know, UM, you've what you see now is consumer debt at levels we haven't seen since, um, since before the recession. So I think sometimes consumers are it's a little bit lagging. They're they're kind of spending money, they're taking out loans until they realize, wow, you know, maybe the plant place I'm working at is not expanding as fast, or you know, I was expecting in this pay raise,

so I'll say it's probably lagging. Um. But you know what I'm also troubled by is the fact that, again, as they said, not only consumer debt, but you see these statistics about Americans not being able to come up with four hundred dollars for an emergency expense, and what you realize is that even a period of low unemployment, a lot of people really are living paycheck to paycheck, and it wouldn't take much of a downturn in the economy to affect millions of people. Chris Lou thank you

so much, as always for spending time with us. Your insights are very welcome. Chris slew is former Deputy Secretary of Labor and senior Fellow at the University of Virginia Miller Center. He worked under former President Obama. It took a couple of hours, but bond investors have taken a look at the job's data and said, no, not so great.

The economy ain't so hard. We're gonna keep buying right now, Let's get a view from one such bond investor, Tad Ravel, chief investment officer for fixed income at TCW, joining US from Los Angeles. Tad thank you so much for spending the time. First, I'd love to get your read on the jobs report. Does that sort of confirm your bullish stance currently on duration on US treasuries? I thought it

was a week report. Actually, I think that um when you look at the year over year change in the actual non farm payroll numbers a number of people at work, it's at the lowest growth rate since I think maybe two thousand and eleven. It was rising something like one point three on a year over year basis very disappointing. It's possible, of course, that it could get revised, but notwithstanding that, I think it's actually pretty clear that the

jobs market has slowed down quite a bit. The uh the rise in hourly earnings is superficially a could be viewed as a as a positive sign, but in point of fact, when companies start to pull back on their hiring or start to let people go, it's oftentimes felt by the lower wage cohort of those companies first, and so consequently, when you look at numbers like the hourly wages and even the average work week, those are not necessarily indicative of actually the underlying health of the of

the labor market. But this shouldn't be surprising to anybody. In our view, we do view ourselves in a pretty late cycle type of type of environment. And um, well, employment is something of a lagging indicator. It's the slee uh follows on the heels of very weak manufacturing data. And we have a manufacturing sector that both the US and globally is either in recession or on the verge of it. So it's it was a weak number, and um,

not a big surprise, I think. So, Ted, how do you expect our friends at the Federal Reserve to interpret this data? Oh? I don't actually think that they I don't actually think that we should take their their rhetoric at at face value. I don't really believe that they're that they're data driven or when they say things like they are data driven, as they have maintained for a long period of time, they never say exactly what kind of data that they're looking at. They're gonna ease. Um,

they've committed to that course of action. We're going to get another twenty five fifty basis points of rate reduction.

I think that that's all baked into the cake. But there is a there's almost an absurd disconnect, I think, between the both the rhetoric and the actions of the Federal Reserve on the one hand, and um the the longer term understanding of what monetary policy is supposed to be about, and for the idea that the central bank is supposed to be independent taking a long term view of the UH prosperity of the country as opposed to responding to near term blips in the employment data or

whatever it is that they want to latch onto. But the bias from the FED and from central banks around the world, complete ridiculous nonsense of how do you really feel? Since you ask, well, so look, look, I guess that you know. We we can debate what the Fed is going to do and how much they should cut, etcetera, um, for for for days, and we will. But I'm curious how much it matters. I mean, right now, it's not

as if monetary conditions are particularly tight. I mean, we're watching this bond bonanza right now with any company that wants to sell bonds can sell bonds, and they can borrow at record low rates. So I'm looking at this and wondering, let's say the FED cuts to zero, will it matter. It's not going to matter in the long run, right, Just as you said, seventy five billion dollars worth of US corporate debt came to market this week. This idea that if you simply lower the cost of borrow the

cost of credit, that you can maintain prosperity forever. That's I think what I was getting on my soapbox about a few moments ago. That's kind of the absurdity that essentially economic growth is a function of very deep fundamental factors that basically relate to having labor and capital work together on a ongoing basis to find ways to be more efficient and more productive over the course of time. Simply lowering the input costs of financing and doing it

in an artificial way doesn't lead to higher efficiency. In fact, it probably does the opposite, because it ends up maintaining inefficient enterprises over leveraged enterprises and activities that are probably supposed to be even though sort of a politically incorrect thing to say, they're supposed to be swept aside. Eventually, consumer tastes change, things become obsolete. You need to you need to facilitate change, and one of the ways you

facilitate change actually is through normalizing rates. You failed to do that, and maybe you end up in places like uh where Europe and Japan have gone, which is just long term inefficiency, and you get absolutely nowhere, which I guess was sort of the point of your question. So, Ted, given where we are late this latent cycle, as you mentioned in presumably a continued Doubbish fed how are you

positioning your portfolio at the current time. Well, I think that this is a point in the cycle where you're supposed to first and foremost in your thought process is supposed to be capital preservation. You're supposed to make your bones in the early and mid stages of the cycle when it's easy, so to speak, to make money. You can almost almost anything you do in those periods is going to work out. Well, there's their a beta trades, there's lots of dislocation left over from the demise of

the last cycle. When you're this late in the cycle. If you've been fortunate and you've and you've made your bones, now you're supposed to be thinking about at least with respect to a fixed income portfolio, is how do I make my fixed income portfolio truly be a safe asset class in the late cycle. If you want to take risk elsewhere, I suppose that's that's perfectly reasonable and fine. But at least with respect to your fixed income you should be biased towards risk off type assets that would

include treasuries and agency mortgages. You should be looking really carefully, in our view, at your high yield and emerging markets and thinking, really, if you want significant exposure to these asset classes so late in the cycle, a time when they oftentimes perform or they will ultimately perform very badly, so defensive with respect to credit, slightly overweight with respect to duration. And that's I mean, that's those are two of the most significant themes. How much have you reduced

your high old in emerging markets allocations recently? Not much recently. UM, I guess we've been on the soapbox that we're in a late cycle environment for a couple of years, so, uh,

we haven't. We haven't had to adjust it because we actually moved to a pretty conservative stance going back a couple of years ago, and we still think that that's appropriate UM, although we did add in the fourth quarter of last year, so we with the widening out and spreads, we did add to our high yielded on corporate positions, but UM as a as a general statement, uh, the idea is to be underweight the investment grade component and also to be very wary of the fallen angel risk.

There's been a lot of talk about the growth in the triple B minus sector of the investment grade index and the concomitant level of rating agency um discretion. I'm sure that's exactly the word I'm looking for there. But the idea that the forbearance I think is probably a better way to put it, that the rating agencies have allowed companies to take on levels of leverage that are not consistent with long term metrics of being investment great.

Their companies out there right five turns and more of leverage. They shouldn't be investment great, and they won't be basically because the rating agencies will swing the axe on them when the time comes. Got it. Excellent, stop there, very good, Thanks very much. Tad Revelle, chief Investment Officer Fixed Income for tc W, joining us on the pode from Los Angeles well, it is jobs Day, and what better than to talk to actually someone who is instrumental in creating

those jobs. And then, as the CEO of American Superconductor, Daniel McGann, he joins us here in our Bluebgood Active Broker Studios. Daniel, thank you so much for being here. You came in two thumbs up. We're hiring. So first before we get into the fact that you're still hiring. Um, what is American Superconductor. American Superconductor is a systems based technology provider that provides resiliency for the electricity grid as well as for naval ships that go in harm's way.

So we try to move power with a purpose. So for the electrical grid, I actually read the book called The Grid about the electrical power business, so I'm I was like Keith Grossman recommendation. Shout out to our old Frank Keith. Um. The big issue for when people think about power grids is security of the grid. Uh, give us your sense of kind of where we are and how your company fits in there. Yeah, it's the traditional system kind of works as a hub and spoke, So

think about like a bicycle wheel. So anytime power moves to where you need it. There's really typically only one way for it to get there. There's no way for it to get back if you're starting to generate clean energy on the ali edge of the grid, and our company is about trying to turn that grid really more

into a network like communications network or computing network. We have multiple point connection to multiple point built in redundancy, which increases resiliency UM either for outside threats or natural threats with climate change. UM. We help bring more renewables onto the grid, be it wind onto the transmission grid, or be it solar onto the distribution grid. Okay, this is such a fascinating topic to me, especially because you

came in you said we're hiring. There has been actually a tremendous amount of hiring when it comes to renewable energy sources and when it comes to that entire industry and all of sort of the ancillary businesses that arise around it. I'm wondering, have you continued to see strong growth among your peers, competitors, etcetera. Because this is a growing industry, even as people say that industrial production generally

is slowing down, the coal industry, losing jobs, etcetera. I think you generally answer to your questions, Yes, I think we're a little bit unique in that we have a very high proprietary technology that UM offers a solution today that's really needed. Now. We also are starting a new business with the U. S. Navy to protect ships. That's really where we see a tremendous amount of hiring here in the US and across the spectrum of JABS. Be at people with former military service that help us in

field service. Be a production engineer, engineering, be it manufacturing engineers, be it support staff and accounting. Where we've been hiring across the board. Tell us about the business you're doing with the Navy. What's the technology there, what's the goal? Uh, and just give us a little sense about that business. Yeah, so this is UM. I guess the easiest analogy to say is if you understand how noise canceling headphones work.

You know the idea that you're trying to UM limit the ambient noise by putting in almost the opposite signal, right and having it be completely quiet. It's that kind of stealth technology. We're bringing two ships to protect them against mine fields. The way mine fields detective ship UM is through a change in magnetism around the ship. The Earth is a big magnet. Everything kind of goes in

the certain directions. Why compasses work. Um, A ship disrupts that field locally, which means mind can see it or feel it as it passes by. What our technology is. It dynamically disguises that ship. Why it's underway, so the minefield can't see the ship. Minds are a big deal. Um. Non nation state actors can acquire them. Um. It's it's a main way to to change or thwart movement of our ships at sea. It's something our allies are certainly very much involved with in concert with the U. S. Navy.

So it's very topical and now, but there's a future business and power moving power, generating power either to move the ship or or make the weapons go. Electrification of the Navy is happening now and probably over the next decade or so. We're in a very unique position with a host of proprietary technology that we can deploy with the help of the U. S. Navy. Fascinating. How easy is it free to hire people for this expansion. It's been great because we try to hire people that have

a certain level of technical skill. Um. We're based in Massachusetts, which is where we do our manufacturing for our grid and a Navy business UM, and we've been able to find a tremendous amount of talent. We've been able to identify that talent, we've been able to retain talent for you know, our of our average time of services very much longer than our peers, so we're able to retain that town as well. It really comes down to the

mission of the company. UM Smarter, Cleaner, better energy is something that people really can get emotionally behind that they realize that when they go home to their significant other, the things that they're trying to do at work are helping humanity. So just looking at your stock, it's kind of a I'm not sure how to look at a year to date stocks down, that's the bad news. The good news over trillion twelve months, it's up thirty seven percent.

So what's what? What? What? What investors kind of focusing on with your company and your stuff. If you go back over say the past year we've had UM, you know, go back a little bit. We made a decision to diversify our product line and expand our total available market. That's a mission that we've been on for a few years now we're seeing the beginning of that to start

to pay off. So part of the change in the positive inflection points in the stock have been around delivering an order for this new resilient electric grid to do multipoint connection throughout the grid, delivering not one but to ship orders for this new ship protection system. So this is a company that's been a lot about a dream and a vision for a long time. We're now starting to pay that dream often to growth and uh profit. We actually we're positive operating cash flow for um to

two of the four quarters last year. Damn again, thank you so much for joining us. Dana is the CEO of Americans super Conductor. Joining us here in our Bloomberg Interactive Broker Studio American super Conductor stock symbol a m SC on your terminal. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcast or whatever podcast platform you prefer.

Paul Sweeney I'm on Twitter at pt Sweeney and Lisa abram Boyd's I'm on Twitter at Lisa A. Bramoyd's one before the podcast. You can always catch us worldwide I'm Bloomberg Radio