Labor Secretary Scalia's 'Double Talk' Is Shocking: Ritholtz

and on Bloomberg dot com. I want to point out that we'll be speaking with the Labor Secretary Eugene Scalia in just a few minutes Alex Steele and Guy Johnson with that interview on the current state of the American economic recovery. Also jobs, of course, not such a pretty picture. Weekly jobless claims coming in today. They did fall, but still coming in at one million, four hundred and eighty

thousand initial jobless claims. That was down from one point five four million, but not as big of a drop as economists had estimated. PAULI ensured unappoyment rate falling as well, but to thirteen point four percent. I mean, it's a massive, massive number of no doubt. The Labor Secretary will suggest that it would have been even more massive were it not for everything that a government did. But it's it's very hard to look at those numbers and not feel

like there's a big problem out there. There really is. And I think that one of our guests earlier mentioned that it was, you know, fourteen weeks into this and we're still having these types of number. Right, let's send it over now to Bloomer TV and Alex Steel and Guy Johnson with the Labor Secretary. You help black employment, well, Uh, the economy before the coronavirus hit, of course was uh the single best economy that African Americans had experienced in

in in in in this country. Uh, it was an economy that was great for Americans all around, with unemployment that hit a UM fifty year low. Job creation was more than three times what had been predicted when the president came in, but unemployment for African Americans was particularly low, and that was one of the really great achievements of that economy. So I think looking for word, I was gonna say, Mr Secretary, undoubtedly correct, but no one expects

us to get back to where we were. So when you take a look at say, wages, uh, for for black employees are lower than whites, any unemployment raised continually higher for those in the community. You need to fix that. So how do you do that? UM, well, you know, Alex, UH going forward the same policies that delivered the record low unemployment that we had until the virus came, or

going to the policies that matter going forward. That's UH lightning the tax burden on American business, it's eliminating unnecessary regulatory burdens that read led to a great job creation and as you know, it also led to UH wage increases that were greater for people in lower income brackets. So those are all very good things for African Americans.

I think a couple other things going forward. At one is the President's proclamation on Monday UH suspe bending UH immigrant workers until the end of the year to provide a buffer to give American workers a greater opportunity to get back into the workforce. I think that's going to help African American workers, it's going to help the economy

more broadly. And then we have reforms that we're going to be looking to make to some of those immigrant worker programs too, that I think are going to deliver benefits across the board. The other thing I've mentioned is the U s m c A goes into effect next week.

And that was one of the President's great achievements earlier this year, bipartisan legislation that could create as many as five hundred thousand new manufacturing jobs in this country, and that's going to be a boon again for all working Americans. It's the secondary Guy Johnson in London, why does keeping smart people out of the United States help the US economy? Well, Uh, the change that we've made is to give smarter Amricans a better opportunity to get jobs in an economy where

we've made We've made progress over the last few weeks. Uh, with two and a half million jobs add in May. We know we've had a lot of jobs since then, but we've still got too many Americans out of work. We want to give them, uh an opportunity to get back to work. Uh. If in fact, a business can't find an American worker and there's a critical need to be filled, there will be an exceptions process under the

President's order. But guy, long term, UH, we're going to reform this program precisely so it does a better job of bringing super talented workers into this country rather than low wage workers who are competing with Americans and undercutting American workers. Wages. We pivot and talk a little bit about today's claims data. Um, the indications are from from this this high frequency data. The what was thing in the US economy is a stabilization at a relatively high

level of unemployments. UM. Do you think we're starting to see a more realistic kind of view of what is happening emerging from the data, because up until now we've seen a very strong bounce back. Do you think we're now starting to see evidence that that bounce back is slowing down? I don't read this data that way, guy, although I think it's a fair question. Because the initial claims number was a bit higher than had been projected.

The number that really caught my attention was the continuing claims, that is, the people that are remaining on unemployment, and that dropped by about seven sixty seven thousand, a big drop. But there was also a correction for the prior week. You put them together, and we've got a million fewer people on unemployment UH today than we thought we had a week ago. That's that's progress. And the big report, as you know, will be a week from today when

we put out our June jobs report. And UM, I'm hopeful that that will show really significant progress along the lines of what we we saw in May. I think that will be a more reliable indicator than you know. Initial claims are just claims file. They're not necessarily claims that are going to be accepted by the state. So even if we do get a better number for jobs Friday, it's still going to be bad. It will be a

less bad kind of number. Um And at the same time, at the end of this month, that additional assistance in the unemployment checks from the Cares Act wears off. Anecdotally, Secretary, I have friends who literally will not be able to live without that extra money. What are you going to

do for them? Well, Ax, you're right. The six benefit that was in the Cares Act, which was a really important benefit that the President and Congress provided when the economy was being closed down in March, that expires at the end of July. UM. But we're gonna be a very different situation at the end of July. Let's see what the report shows us next week. But we know the economy is reopening. We're we're not in a situation anymore where government authorities are saying, essentially you can't go

to work. So I don't think that six benefit is the right policy in an opening economy. Uh, come August. So I wonder if there's a happy medium, because specifically I'm talking about the services industry, because if you're a waiter and you're going back and you work on tips, you're not going to be getting back to where you were pre COVID, So your tips might go from a hundred dollars a day of fifty dollars a day, so you're losing that money. Would you think about an income

subsidy for example, like France is doing. President at Cross has something very similar today, working with unions to help subsidize work or pay for it to compensate from the loss they're missing. Can you do that well? Uh. Something that we already have is what we call a short time compensation. The idea is that a workforce can be brought back, but maybe not all work full time. They've they're brought back on a part time basis, and they

get a blend of pay and unemployment benefits. That's that's being done some now, and I think that's that's a concept to look look at. Obviously, we have UH continuing state unemployment benefits are available, and we'll take a look at whether there are any federal approaches that remain necessary. But you have that state benefit, you have the opportunity for a short time compensation. And we're focused most of all on growing the economy again, on creating those jobs.

The President did such an extraordinary job of that up until the virus came. We have no reason to think that the economic fundamentals of UH the country are substantially different when they were just a few months ago. So I'm most focused now on reinforcing the policies that lead to record job creation and getting people back to work, rather than UM focusing so intently on the unemployment system itself.

It's a secretary. There are large parts of the United States where the hospitalization count is now rising and rising dramatically. We're saying it in Texas, We're seeing it's in Florida, We're seeing it in California. Did these places reopened too quickly? Is there too much emphasis being placed on reopening the

economy at this point at the expense potentially of public health? Well, guy, I don't think it's quite right to say that there are large parts of the country that are seeing these flare ups, but we are we are seeing some flare ups in parts of large states and it certainly has to be and is being taken seriously. No, we did not reopen too early. We knew that as we opened, UH,

that there would be some increased cases. We know far better now how to deal with this virus than we did two three months ago, and we have a much greater capability to address it in terms of the tests that are available, ventilator capacity and all of that. So these are these flare ups are serious matters to take a look at, uh, the viruses out there. Americans do need to continue to exercise discipline so that we can stay open um. But you look across the country as

a whole. The reopening is going well, it's going safely, but we will continue to focus on these flare ups as they occur. Mr. Secretary, It's it's really hard to agree with you on that though. When you have Texas, California, and Florida, I mean Texas suspended all elective surgeries. They're looking at reaching hospital big capacity in certain areas, and Houston is a huge medical center and they're having some serious problems. Uh. The government seems to no longer have

control over shutdowns or not. If I'm living in Houston, I'm probably not leaving my house and I'm not going shopping. So how does that then trickle through to the labor market. You're going to have more layoffs potentially, or second round layoffs just because people just want to stay home themselves, because these are huge states with a huge rising cases. Well, Alex, I gotta disagree with you. I think you're these are ups are serious. I think you're exaggerating the current situation.

That local authorities are well aware of it, they're looking to address it. We here uh in the administration are in contact with them and looking for ways to help. But again, you look across the country as a whole. Uh, the reopening has gone very successfully, and uh what's happening in these specific locations is a reminder of the importance of discipline, of being careful about the virus that it's still out there. It's not a judgment on the reopening

as a whole. To pay it's away from what we've just been talking about. Mr Secretary UM, Let's talk a little bit about investing and how public money, public pension money via funds should be invested. You have written that the profit motive is ultimately the final arbiter of whether or not decisions should be made versus one investment, sorry, versus another investment. Why is impact investing wrong? Why is

E s G investing wrong? Particularly at a time when we see such need for changes in the way we approach the climates and changes in the way we approach society.

We started this conversation talking about black lives matter. Well, guys, you're referring to a rule that the Labor Department put out earlier this week regarding so called E s G investing in in the context of of a private pension plans here in the U s and uh Uh Obviously people uh like the opportunity to, as I put it in an op ed, I wrote, to do good while also doing well financially. But some questions certainly have been raised about some of the E s G rating systems

out there. How reliable thorough are they really? You see systems that uh, one rating is high for a company, another rating system rates it low. There have been questions raised by the SEC about how some of these funds are are being promoted. That the key under our law for pension plans is simply that pension plans are to be managed with one goal. That's maximizing Americans retirement savings.

That's a really, really good social objective. It shouldn't be compromised by fiduciaries to those retirees who are pursuing political ends that cost those retirees money. That's what our proposed rule addresses. Okay, interesting in the light of what the business round table is kind of moving towards. But we have to leave the conversation that Mrs Secretary, thank you

very much. Indeed, Eugene Scalia, the US Labor Secretary. This that was US Labor Secretary Eugene Scalia speaking with Bloomberg anchors Alex Steel and Guy Johnson on a wide reaching conversation from all things from the pandemic and the impact on the economy to the current state of the jobs market. Again, we had jobs claims today came in a little bit higher than expected, so really weighing in on the employment

situation and the economic uh situation within the US. Right now, let's pivot right now and talk to our good friend Barry Ridholtz. He's found of Ridholts Wealth Management, Bloomberg opinion columnists and host of Masters of Business, Barry, what was your takeaway from the discussion with Secretary Scalia? Kind of shocking to hear the Department of Labor secretary doesn't seem to know what the word fiduciary means. I kind of

had to rewind that and do a double take. His his take on e s g IS is malignantly malinformed. The data on this shows that this has performed at least as well as other actively managed accounts, especially over the past couple of years. And if people want to express their views through their portfolios, that's up to the individual investor, the fiduciary, the advisor who is working with a client their job just to put the client's best

interest first. It's kind of shocked the way he spits that word out as if it was acid in his mouth. You know, the studies have shown that having non fiduciaries advise on four oh one case and other retirement accounts coasted seventeen billion dollars a year. If he's really concerned about maximizing investors retirement savings, enforce the fiduciary rule and make everybody who advises on that that account have to put the investors first. Best interest first, it's a really

simple solution. I was shocked by the double talk I just heard. I mean, it's so interesting because obviously the Labor Secretary can propose whatever he wants, right Barry, But this is something that would be pretty detrimental. I think to a lot of workers out there at a time when there is, you know, a skyrocketing unempoyment rate and initiate all those kids. They just are not coming down fast enough, and so much uncertainty out there. You know. I don't to let my politics get in the way

of of responding to the Labor Secretary. But I have a full dashboard of COVID nineteen data and I look at this every day, along with all the other data I run through. And I don't know if he's looking at the data, but but what we're seeing is an increase um in testing and an even larger increase in infection rate, and the whole Sun Belt is doing poorly. Look at rt dot live shows you the the are

one measures of state by state. You have thirty three states that are still showing a greater contagion and the numbers going in the wrong directions. The early States, New York, New Jersey, Connecticut, Massachusetts. Their numbers are coming down. The early infection states from international travel, mostly from Europe. But now we're seeing the states that reopened. Looks the facts are a lot of these states. It's ignored the White House guidelines, ignored the CDC guidelines. It's hard to look

at the date and say this is going great. The reason the market got she lacked earlier this week, at least in some narratives tellings, is because, Jeeves, we're not even waiting for second waves. The first wave hasn't run its course, and the numbers are heading in the wrong direction. Florida, California, Texas. That those are both red, blue and purple states. The virus doesn't care about your politics. It's going to infect people when given an opportunity, and we're continuing to give

COVID nineteen an opportunity to spread. We we are not doing this well compared to other countries. It's interesting. So Barry, given again, that's shlacking you mentioned earlier in this week. I agree that in large part due to some of the virus news. It seems like, you know, I'm just wondering how we play this again. I mean, is it just steady as she goes and recognize that this is probably gonna be a longer pull than maybe we had initially hoped for. So we've kind of gone full circle.

The initial fear was this is a multi year process to get a treatment, get a vaccine developed her immunity where we're knowing near her community, yet you need well over people to either have a vaccine or exposure to to get that. And you know, we we kinda got very enthusiastic. There is lots and lots of positive news coming out in terms of treatment and vaccine testing and

the amount of treatment we're doing. Those have been moving in the right direction, but they are also being confronted by a lot of um let's call it lazy and unfocused behavior that can lead to the spread of this That The other factor that I think is important from a market perspective, not from how rapidly we're spreading the disease, is is simply at a certain point, markets and investors lose their ability to get shocked and and and once you cross a World War two number of American deaths,

you know a lot of the horrific, stunning shock of that you become somewhat in order to it and so hey, the good news is the death rate is going down, partly because a lot of the spread of COVID is taking place amongst the younger and younger. The average age of infection is going lower. Um, but that's still dangerous. And you're remember you're always on a two to three week lag from testing to infection to mortality. Well, and

it's going down for now. But we're hearing today that you know, Texas is overwhelmed and even the governor is coming out saying you're sweeping problem Houston. Yeah, exactly. And you know, obviously with people on ventilator is you know, you don't want to to forecast it, but it would seem more likely than not that there will be more

deaths in Texas. Barry. You know, our market participants looking to the next presidential cycle, and are they assuming that no matter who it is, does it doesn't really matter because the federal reserve is in there and there's plenty of back stopping of this market and it won't change no matter who the next president is. That's always an

interesting question. You know. The traditional wisdom has has been for a long time that markets like a divided government, one party has the Congress, the other party has the the White House, and everybody has to reach across the aisle to um to work together. UM. I think that that's sort of a glib overstatement, and we do all have a tendency to put too much emphasis on what the White House or where Congress has done. For the most part, markets are going to do what they're going

to do. The economy is going to do what it's going to do. There is very little correlation between between the two. It certainly feels that way on a day to day basis. I haven't seen any indication that that the market is um is discounting one side or the other winning. Whenever I read that, it tends to be filled with people's personal bias and they take what the

market is doing and somehow crafted into a narrative. UM. I had a little disagreement with my friend Jim Cramer on on Twitter yesterday who said the two percent fall in markets had to do with Biden's uh increase in in ratings. It's like, wait, this market is up while the incumbent was in free fall. Why are you picking on Wednesday as your indicator. Isn't that a little bit of a personal bias there, Jim, who I was just kidding. Barry,

thank you so much. It's always great to talk to Barrier at alls, who doesn't pull us punches and always has the smart take on what's going on in the mark get and then political life and generally in investing. You don't forget to listen to his Master's in Business podcast. Just another brilliant episode week over week over week. So thank you for that very well. It is time to

check in with the Bloomberg Opinion. First, I want to reiterate the Supreme Court decision that came out today bolstering the government's ability to quickly deport people who enter the country illegally. You know, it's again siding with the Trump administration on that refusal to give asylum seekers abroad right to make their case to a federal judge. So Supreme

Court rules against court access for asylum seekers. It's a separate story but slightly related in that it goes to the tendency of Resident Trump to keep people out of the USA. He signed an order on Monday temporarily halting access to several employment based visas, and that affects hundreds of thousands of people seeking to work in the United States. These H one, B and H war visas used by tech workers primarily, let's bring in someone who's written a

great column, honest, take him of Bloomberg opinion. Okay, why is this generally not a good idea for the United States and its productivity? So I see where Trump's trying to do what he's saying that by restricting this immigration

within a free up jobs for Americans. But we're usually risking one of the most important strategic assets that the US has, which is the Silicon Valley innovation machine, which is the end of the world and it's where the most ambitious, best, brightest entrepreneurs and engineers around the world want to start their companies, which is here. And we're kind of risking this braking that we have um just needlessly.

And if you look at the history of the Valley and American tech companies um, Bond, Cappell have this great slide where six of the most highly valued US tech companies were founded by either first generation second generation immigrants were talking Google, Video, Qualcom, even Apple was second generation with deep jobs. So we're easily risking this most important thing and already companies and countries like Canada. The CEO Shopify is going out there saying, oh, come to Canada.

That So I just I just argue that it's just very shortsighted to risk this thing that we have that's so great UM by limiting these visas. So Tay, I know, at one point, you know, these visas were so so important for the technology companies because quite frankly, America wasn't producing enough engineers, enough computer scientists. Is that still the case? I think, yes, that's the case. When you talk to

these companies, are we don't have enough engineers? Um shopifies us all the time that their biggest constraint is they're not finding enough talented computer engineers. So that's still a huge constraint. And when you see this avalanche of criticism in the last couple of days we're talking that's on Facebook, Micro everyone's coming out saying they're up at arms. Even startups are saying this is it's going to hurt our ability recruit talent, it's going to hurt the economiccovery. One

of the other visas is uh. One of the the other visa suspensions stops internal transfers inside these companies where they can't move managers around, So it just throws a wrench into the operation of these countries and also puts a massive amount uncertainty when we're trying to recruit the best and brightest people in the world. I mean, it seems to be almost you know, a reflex on the part

of President Trump. As soon as things are not going particularly well at the White House, he does something to block access to this country. Is there an argument for that going too far at some point? And for these companies like Google and Facebook to just continue to set up operations abroad. I mean, their tax headquarters are usually in other places anyway. I mean I agree with that, like if we can't bring people here, why all these companies are going to start international offices and try to

recruit people to those international offers. But I think the bigger problem is, um it might attract all these immigrants to go elsewhere, like go to Europe, go to China, or even stay where they are, instead of coming to American companies and generating innovation that we need. And I mean, this is not a zero sume game. This is not like, oh we don't have this, We're not gonna It just takes up an American person's job if we miss out

on the next Google or in video. These are the thousands and thousands of jobs and economic growth that we're not going to get. I mean, it's it's not a zero sum game. We just we can miss out on huge innovation, economic growth and job creation that we just will totally miss out on. So tell you about their thirty seconds. Are there other industries besides technology they're going to be impacted by this move? Yes? Um, I think a lot of wort tram workers. There's restrictions like camp

counselors or pairs. So this is not just tech. This is across the board. All these work visas are getting restricted for the rest of the year, and then green cards the band for green cards is extended to to the rest of the year too, So this is just a vast kind of visas suspension for an immigration altogether. Well, and definitely some of the offices are closed these days anyway, both in the US and in other countries, so you know,

you could argue that it's just disruption. You know, it doesn't mean that all these people that are seeking you won't eventually get these visas, but for the moment they certainly won't. And we don't know if that will be reversed, so we don't know what the situation will be in coming months. It's certainly fascinating. And you know, I noticed the other day on Twitter the Shopify CEO tweeting out, look, this might have happened. So then come come to Canada.

I've seen that. Yeah, you know, open for business. Yeah exactly. Hey, thank you. Always great to dig into these orders in a lot more detail, because there's usually a little more there than meets the eye. Initially that has taken him of Bloomberg Opinion. We do like to check in on Bloomberg Opinion at least once a day. Paul, would you

go to another country of a tech company? Were to ask you, well, I think if you're an immigrant, you're looking for the best opportunity, and now historically that's been in the US. But if you know, I think you're absolutely gonna be flexible there. Yeah, I mean, if you're

moving anyway, why not move where you're wanted? Right, Well, what we've seen from this pandemic is the how it's really impacted pretty much every industry, every company out there, in terms of how the executive team and the managements

kind of think about their strategies, their daily workflows. A lot of companies and a lot of management teams have had to completely rethink how they do their business and to get a sense of kind of what they're thinking about what's on the top of their to do list. We welcome chrish Nan Ramano Jump. He's a president and head of Business and Technology Services at Tata Consulting Services. Christna, thanks so much for joining us from Mumbai. UM, give us a sense of kind of boy, I just can't

imagine the conversations you're having with your clients. But what are the two or three things you're asking your clients, are suggesting to your clients that they think about as they navigate a new world order impacted by this pandemic. Good morning, Paul. Thank you for having me on the show. It's suppaser to be here, so I would probably talk

about three or four things, Paul. The first and foremost, UM, we've been telling our clients about how it is not it is extremely important for transformation to be looked at not as a one time moon shot, but it's something that needs to be navigated on an ongoing basis. This is a phenomenon we call as perfectual transformation gone off the base. You can take one moon shot at transformation

and then live happily a roster. The technology and so many other factors are changing, ever so often enterprises need to have the ability to navigate multiple transformations, smaller transformations perpetually. That's a key capability. That's the first and perhaps the most important advice I give to my clients. The second one I talk about is about location independent workforces. There is this concept called agile in our line of business. It's extremely um effective and there there was a trend

that said the teams had to be co located. But over the last five years, Teachings as a company has been a pioneer in terms of advocating how location independence is a key if agile has to realize its potential. And I think the pandemic has only um clearly demonstrated. How precient, however, U forecast was around that. And the third thing that I would probably say is about being

boderless collaborative. I think it's extremely clear the the winners of the future are going to be enterprises that can collaborate very well among themselves, internally within the company as also with the partners. So there are many many technologies that enable this, being data centric, leveraging, cloud and so on and so forth. UM that in term the selves in so many other benefits, but I'd probably stoppered these

three things. Perfectual transformation, location, independent workforce and collaborative boderless mindset. Those are the three things I would pick as a top three advice pieces of advice that I give to my clients. Christen, and give us an idea of how you managed to relocate four hundred and fifty thousand employees to working remotely. I mean, that's a phenomenal exercise. Yes,

thank you. It still looks so surreal to me. Um. If you ask me around mid to late March when this pandemic hit us Vaney whether I'd be three months later or whether I'd be sitting comfortably in my home and almost back to normal in terms of working from a remote location, I'd have said the odds are completely against it. So I was extremely nervous, and so were all of my colleagues in the senior management team there

at Tires. But um Thesis is very well known for its um you know, I never say the attitude and we love the challenge. It did require a heroic effort from many of our employees. But the fact is that everyone knew that all of us had to come together to make it happen. And as a company, we put customer centricity as the top of our priority list. So unless we very very quickly became effective in terms of working from homes, many of the critical and essential services

for our customers would suffer in a big way. So once that pressure is on us, it's extremely important for us to make it happen. Also, the government here, the local authorities, everybody cooperated as also our people demonstrate an excellent sense of responsibility and work ethics. So it required a huge effort. But a combination of support from the government and the huge demonstration of work epic and customer

commitment from our employees that's what made it happen. But to say that today we are upwards of person of our employees working from home is indeed remarkable. And all of this happened in a matter of what four to five weeks, So Christian about thirty seconds. Love to get your sense of kind of how things are in India right now. We're starting to see some resurgence in cases here in the US. How is the virus trending in India right now. In India still the curve is going up.

But the encouraging news is that the test positivity rate is either flat are actually coming down. That is an important thing. That which means two things, which means we are testing enough um and the fact that the test positivity rate is not going up probably means that it is not out of control. Of course, in a country like India at one point three billion people, the numbers are going to be staggering, of course, but I think so far, so good, even though that's not to say

what will happen tomorrow? Call as I'm sure they can imagine. Well, these days we never know what to expect. Christian, thank you for joining us today. Fascinating company and the fascinating industry to be in right now. Christian Roman Nujam, President of Business and Technology Services Atata Consulting Services, coming to us from Mumbai there and he obviously had to relocate you know, his staff Poul or the company's staff board and fift. They're also dealing with everyone else's staff working

remotely as well, so it really boggles the mind. He's been offering serious advice to C. E. O s during the pandemic, including you know, perpetual transformation. A lot of people get stuck during a time like this because there's so many logistical concerns, but really, now is the time to be transforming and to continue to move forward. Yeah, technology is a Christman mentioned is just a key part of that trying to help people remain productive during this

remote time. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio