Looking Ahead To Jobs Day

at Bloomberg dot com slash podcast. Tomorrow is Jobs Day and important jobs Day, of course, as we continue to see this US economy trying to reopen here uh in the face of the delta variant, and of course the job situations country, the labor market, given that the economy is seventy consumer spending, so it's important to get folks back to work and earning a good way. Let's get a preview of what we might find tomorrow. David Riley,

chief investment strategist at Blue Bay Asset Management. David, what do you expect to see tomorrow from this job's report and kind of what are the key issues you're gonna

be focusing on. Yeah, high cool Um, You're absolutely right that it is a key report also because it's the ultimably the most important data point that we're going to have before Um, the next FOMC meeting on the of UM September, and I think if we get a reasonable, you know number sort of upward surprise, you know, eight hundred thousand plus payroll gain, I think that actually puts the September FED meeting in play in terms of a

potential announcement for Queie tapering. If if if it comes in much lower, you know, six hundred thousand or so, UM, I think there will really be some disappointment. I think the Fed will sort of um want to see some kind of more evidence and sort of sit on their hands for a little bit longer until November. So I think it's actually one of those reports where from a market point of view, it's quite kind of a metric. I think the market is kind of inclined to think

that it might be a little bit disappointing. The August number often comes in a little bit lower than expectations in previous years. But if he actually comes in, you know, eight hundred thousand plus, then then then I think we'll see a bit of volatility in the rates market and market more more generally, because because I say, I think it put September FED meeting right into play. David I can understand, um, why they would be looking at those

two um boundaries. On the other hand, and you have a ton of experience as an economist in you know, previous roles at ubs and that I think that that was your degree in economics as well. You must know that this number isn't really exact, right, I mean the margin of error. I've heard some people say it could

be three to two to three hundred thousand. Yeah, absolutely right, And um, we know that it is subject to significant revisions, which which is why it makes sense to try and track a sort of um, you know, three months moving average.

What we have been seeing over recent months is the you know, the trend has been one of increasing job gains, and you know, I think j Power Jackson Hole kind of expressed his confidence in the recovery of the labor market in some respects there really you know, I think what would be a really interesting numbers is, well, obviously we get into September and you know, whether schools are fully reopening, because that will have an impact in terms

of labor supply, labor participation, the participation of a lot of um, you know, parents is still actually somewhat lower than it than it was um pre pandemic and so you know, the reopening of schools is it's kind of a key issue, and that actually ties us back into two tomorrow's number as well, because one of the sources of uncertainty is the counting of um uh, you know, teachers being hired for for for the new school school year.

So you know that that creates some some some noise I think to some extent within within within the data. But you know, I think, as I say, you know, we were kind of the clock has been set. I think now for an announcement around taper, Pal said, you know they're gonna start tapering this year in all likelihoods um, and so I think that's going to make each of these data points increasingly um you know, important from a

market perspective. All right, David, assuming that's all true, we do get some more color about tapering perhaps later in the year. How are you allocating your capital as as you think about generating returns? Again, we've had a huge run up here in the SMP so far this year. What do you do for these remaining months here as we're looking at two? Yeah, I mean it's it's actually quite a tough um sort of outlook I think for UM investors because you know, the broad macroeconomic outlook you know,

in our view is still pretty positive. We're expecting you know, still solid growth. It's a good backdrop for corporate earnings. UM, it's a good back job for UM. You know, credit markets more and more and more broadly, but against that, valuations are very you know, are very stretches. I know something that you've been UM discussing. You know, obviously equities, uh, you know, all time highs. Credit spreads are you know, at or near sort of they're sort of all in

tights all in Yields are very low as well. So you know, the way that we're allocating capital is to stay fully invested. But we have UM it's like take dial down some of the risks in our portfolios. UM. You know, we're just concentrating on those sectors that we particularly like. We still like UM financials. UM. We do think we're gonna get some steepening at some point of the the yield curve and also the improving outlook and

improvement in asset quality. So we like things like subfinancial UM debt, but we we've kind of scaled back on some of the sort of cyclical exposure. Um, you know we have just because say a lot of the evaluations of such that you're just not really getting paid to take. I think, too much risk at this point in time. Stay invested, but don't kind of go too far away

from home. Don't take too much risk onto the portfolio. David, thanks very much, great to get your insight in these markets as we hit you know, yet another record high. I think it's important to be cautious, right, I mean, after how, after all, how many years can you see gains of this size? And I mean there are some good points to be made still in the in the long camp, but I think you've got to you've gotta

watch the obvious signpost. David Riley, their partner and chief investment strategists at Blue Bay Asset Management, talking to us about the non farm payrolls numbers tomorrow. As a reminder, if you're a Bloomberg terminal user, you can tie w h I S. Go there. You'll see under number twenty eight the change in non farm payrolls, the whisper number

so far seven and twenty thousand. This is Bloomberg. Rebecca Ray joins US executive vice president of Human capital at the conference board, and she's here to talk about They're back to work survey. A conference border return to work survey shows it as delta surges. Anxiety about the return to the workplace has nearly doubled. What exactly does this mean? I mean in terms of anxiety like my seventy five year old mom is afraid to get COVID or what

kind of anxiety do you do? You do? You mean, well, good morning, and thank you for asking me to join you.

They're very concerned about a few things in particular, and we had seen a decline in the number of people in our earlier very similar surveys indicate that they were concerned about personally contracting COVID or bringing it back home to go in their home, and that had dropped a bit when we last died this in June, but it has popped back up, and I think that's attributable to a few things, largely the headlines around the rise of

the delta variant. So again, I guess, Rebecca, the issue is that we're coming up here on Labor Day, and that seemed to be a day a lot of businesses were saying, Hey, we're going to start bringing people back to work once the summer's over and all that type of thing. Now we've seen companies kind of push that back to October something even the new year. Is that in a reflection of what they're hearing from their employees, I think in part, I think also they're watching the

same headlines. They're concerned about the ability to keep their workers safe, which I think, to their credit, almost every business has had that as the number one priority. But they're also watching to see what kind of local government or state government mandates there maybe around mask usage or spacing. And so you know, this is a very fluid changing situation, and so you know it puts businesses in a tough spot.

They have to make a call, and you know, new information comes along and they made need to revisit that. So I think there's an awful lot of re examining all the time as to whether or not the plans that they have in place are indeed correct for the latest situation. There are some people who just don't want to ever go back though, right. I mean, I'm not saying they would answer um questions on a survey, uh untruthfully, But there are people that clearly are happier working from

home and maybe even more productive. So does this does does the way we work look changed forever? I think it's certainly changed for the foreseeable future. I think there's a great experiment about working remotely, and certainly I want to acknowledge that many companies and many workers don't have that opportunity. You know, they had to consuldier on and they had to adapt their you know, manufacturing plans who

were you know, continue to have frontline workers. But for those who were able to work remotely, we've proven I think we knew beforehand, whether it was research from the conference board of that of others, that remote work was as productive in most cases as work in a physical work site work site. So we have truly proven that now. And I think the longer that this has has gone on, the more people have become accustomed to balancing their work

and personal lives. And there are some benefits. Certainly, there are some risks, and we identified some of those in the survey, but for an awful lot of people, the ability to have a better grip on integrating their work and personal lives. I hate to use the word balance,

but but let's say integration. People have realized that they can do it, and many people, particularly those who have maybe a good twenty years of work ahead of them, are saying, I do not want to go back to the way things were with doing a commute five days

into the office. The lost productivity of the commute time is when I think on a lot of those decisions, Rebecca, We've seen some reporting that says employers are saying, Okay, you can work remotely, but if you're relocating from the Bay area of San Francisco, for example, to Boise, Idaho, we're going to make an adjustment in your compensation. Um is that going to be an issue as well? Well.

I think these are early days, and I do know that a lot of the diet your Rose with whom I interact have talked about the fact that this is not I mean, this is uncharted territory in a way. I do know this that workers want flexibility, and the people who are offering a rigid work arrangement, they are going to run the risk of losing their top talent to their competitors. Now, I think the same thing is going to happen when you start to look at compensation.

We've already seen in the financial services area some uh, some entities who have Look, we said, they're going to offer flexibility and they're looking to pick off top talent. So when you start to play with compensation, I think the same thing is going to happen. There are going to be other entities who want that top talent and they're going to match or make a very attractive compensation offer to top talent. So I'm not sure it's a

winning strategy, but it is early days. Yeah. No, we just got a story a couple of days ago Deutsche Bank says anyone who wants to walk through the doors of its headquarters needs to be vaccinated. UBS comes right out two days later and says, hey, if you don't want to be vaccinated, you can apply to work from home. That could work. So it does look like employers are starting to see opportunities here are we Are we seeing it all results of productivity? Is it? Is it really

as productive if you work from home? Is it less? Is it more? You know? I think they're certainly gonna be variations, But in the main, I do think productivity has remained as high. Now. I say that with the caveat there are there are some downsides to a continued remote working, particularly when offices are closed perhaps and people don't have the opportunity to interact with colleagues in quite the same way. So I do think that we're going

to be watching this very closely. But I do think that the concerns around isolation and mental health, the concerns around career advancement, you know, we're seeing in the headlines today. Even some organizations are saying, if you're not vaccinated, please don't come to our you know, our leadership development center because this is just not something that you can take advantage of. All right, I have to leave it there just because of time, but thank you so much for

joining us. Rebecca Ray, executive vice president of Human Capital for the Conference Board. Well, well, the delta variant raging in various parts of the country, folks are thinking about maybe staycation might be the call here for this Labor Day weekend, maybe not doing so much traveling. Let's check in with Brian Fields. He's a chief commercial officer for group On based in Chicago, Illinois. Brian, thanks so much for joining us here again as we head into this

Labor Day weekend. What are you seeing in terms of the experiences that that some of your users are are looking for. Hey, Paula, Matt, thank you for having me on the show. Very excited to be here. We are very excited about the upcoming Labor Day weekend, and we do believe we can help consumers find something amazing to do in their local communities or wherever they may be. Uh really coming back coming out of the pandemic, we all want to get back to experiences to bring us

joy and allow us to connect meaningfully with others. As a result, what we're seeing is consumers gravitating more towards uh, towards more of what they did pre pandemic, despite what's happening with the delta variants. So top trending local experiences at the moment in North America, we're seeing our return to trampoline parks and bouncy houses, amusement parks, museums, and zoos animal looks. So um. We obviously have a ton of options available for all this. H on the group

on mobile app. I get into a trampoline park. Do you have to be a kid or kind of? No? I don't know. I don't know if there's any upper limits on size, but you absolutely do not have to be a kid. I speak from personal experience. There are a lot of fun that sounds awesome. I've never I was thinking you're gonna tell us like race tracks or skydiving, but it's actually I haven't been bowling and so long. I would love to go bowling right now. What what

what about the kind of higher end experiences? What are what are people looking at on the luxury front? Yeah? So, um, you know, so we we think outdoor activities are at the forefront at this Labor Day weekend, but we're seeing some other big trends. Uh that that kind of hit your point on some some higher end services A couple

of couple of massages really popular. Um, and we're seeing, you know, people are kind of making themselves look look better and more conscious about being on zoom all the time as we use technology to communicate with others more so, uh, looking at services such as botox and white Bow to be zoom ready, it's been has been very popular as well. Hey Brian, you know you're just gonna let that one lie. I'm gonna let that one due. I wonder if they could light at one of my chains, you know, just

get rid of one. I think you can you can find just about any any service that that you want out there for a needy group on, I need somebody else. If Paul weren't in such good shape, you could join me. Yeah, well, you know, I'll talk to Al from Jersey on that. Matt, see see what see what we can do? All right? So group on Brian, I know you guys deal with a lot of small businesses and they got really hit

hard with the pandemic and the economic disruption. Here. What are you seeing with some of your small businesses around the country, So you know, the bottom line is is resilience. Um, it is amazing how resilient. Uh, these small businesses have been. They've been creative, they've they've you know, in the restaurant space, they've pivoted to take out the delivery over the last year, UM,

you know, in the healthcare space, moved to virtual. We've just seen just incredible resilience, uh, within our merchants that we work with. And you've got to it's not just in the US, right because I see group on dot d so you can access these. I'm in Berlin by the way, Brian, so you can access these in all different countries. Um, what kind of growth do you expect or what kind of growth are you seeing now that we've reopened, I guess, and what kind of growth do

you expect throughout the year? Yeah? We um, look, we're um ah, we're seeing growth in a lot of our traditional categories. Um what we uh what we you know, we we certainly have a bit of a bump here we delta um, which which you know we're all working through. But um, you know, the will be watching the macro environment very closely. But again, due to the resilience of our merchants, we think that these challenges will just ebb

and flow over the second half of the year. They are transient and we are continuing to focus on what we can control, which is just helping our merchants recover from these devastating impacts of COVID and giving our customers back some sense of normalcy. How about different parts of the country, Brian, you're seeing regionality to to your business. Some some parts of the country seem to be in a more open mode than than others. Yeah, that's right. Um,

so you know we've seen this over the last year. Again, as as as the pandemic kind of uh you know, as works its way through different regions, but a lot of it is, uh is weather dependence. Right. So at certain points of the year, depending on on you know, where you live, there's the the outdoor activities uh kind of spike up and down. UM you know so uh East Coast colder weather climate. UM, right now it's you know,

prime outdoor activity time. UM as the winter comes around. UM, we do have seasonality in what people do, and depending on people's comfort levels. UM, you know, we'll have something there for them, uh, to to take care of regardless of the weather. Um, you can going back into the trampoline parks if that's what they're feel safe doing. I'm

gonna look for one. I'm not sure how safe it is um in my shape, but uh, maybe maybe I'll stretch this month, I'll stretch, I'll do a little bit more training, and then in October, I'm gonna hit the the trampoline park. Brian, thanks so much for joining us.

Brian Fields is the chief commercial officer at Group. On coming to us out of Chicago, go with uh some ideas in terms of what to do this Labor Day weekend, and also a little bit of color in terms of the bump that we're hitting in this reopening because of the delta variant of the coronavirus. This is Bloomberg. I want to bring in a lim Ram tool right now.

He's a partner and co had a private equity investing at developing world markets, and he's going to talk to us about UM what they can do for Afghan refugees. A lame. You have firsthand experience with forced displacement as UM. What your Your family was driven out of East Africa and put into the U S And Canada, resettled in the U S And Canada. Yeah, that's that's exactly right.

My own family faced UM force expulsion from from East Africa in the mid nineteen seventy amidst UM the xenophobic rhetoric and the discriminatory policies associated with South Asian is at the at the time and similar to today's ftps, left without asset and any any means of income, and we're we're forced to, you know, kind of resettle and start over here. So I just want to point us you went on though to get You went to Princeton

and then got your MBA at Harvard. Uh, you worked on Wall Street at JP Morgan and now what what is developing world markets. Explained to us, UM, what what you're doing at this company? Sure, I mean we're we're an impact investment firm UM, and essentially without means is that we invest into companies with the intention to generate you know, measurable beneficial and social and environmental returns alongside

a strong financial return. UM. You know, impact investors operate kind of across the spectrum between capital preservation and commercial return UH. In our particular brand of impact investing is that we we are able to generate commercial returns UH, commercial risk adjusted returns UM, while still UM, you know, generating this measurable kind of beneficial impact on on the community and our lines. Solyan, we're seeing lots of reporting

and lots of video of the refugees from Afghanistan. Just give us a sense, based upon your experience, what can they expect as they are resettled in different parts of the world. Sure, you know, I think there's there's certainly, Um, much of the discussion here in the West has been focused on, you know, the hundred and twenty thousand Afghans that have been evacuated you know, in in August alone.

But I think what many failed to realize is that is that they were already nearly three million people that were internally displaced within the country UH, and a comparable number that were that were outside of the country. Right and because of decades of conflict and insecurity, frankly poverty and and recent impacts of climate events, you know, across all of the province provinces in Afghanistan. You know, we've we've seen a majority kind of flew flee from you know,

rural areas into into kabble UH. And you know, you know kind of again a comfortable number in Pakistan, Iran and in Germany. So UM, you know they are they are likely to see UM, you know, significant influxes across the across the globe, and we'll need to be ready both you know, with with humanitarian response mechanisms as well as ongoing kind of economic UM you know, kind of

the economic opportunity and lively have bad ways. What can investors do, alim who don't want to just donate to charity outright, but do want to UM understand and maybe execute on some impact investing. That's a great question, you know, I think, UM, from our perspective, you know, governments and civil society alone can't be asked to address this this issue in its entirety. You know, the private sector needs

to be a part of the solution. And I think that the two main elements of this are going to be patients and affordable capital right impact investments that our space has innovated UH significantly of the last decade around blending of finance models that both align investors expectations UM with the return UH and and the perceived risks associated with UH you know, certain investments. And I think importantly

UH impact investment actually brings an alignment among stakeholders. We already have a portfolio of investments that has already been serving displaced communities. We have an investment in Georgia that

was started by internally displaced populations. And and frankly, the portfolio quality and and the loans that have been made through some of those financial institutions are performing on par, if not better than than some of the general you know, you know, kind of general population and commercial loans that

have been made across the board. Yeah, that seems you know, your investing seems like a particularly challenge a lean because in just in terms of doing due diligence on maybe who you're lending to, who you're investing in, and just give us a sense of how your team goes about due diligence in this part of the world and is part of investing. Yeah, sure, it's I mean it's a great question, you know, at at at our and we've we've been active in across um you know, fifty countries

and and two hundred financial institutions. So we're very much uh financial sector um UM experts here in terms of kind of you know, bringing the right parties to the bringing the right parties to the table. Um. You know, well, certainly look at kind of the profitability and the underlying growth characteristics of the financial institution, but we'll also want to make sure that again there's various you know, stakeholder alignment in terms of the types of teams, uh, you know,

management teams and boards that we're actually dealing with. And so you know, we have local country presence, we have kind of on the ground presence, uh, and so are able to actually benchmark all of our investments across the

top performing institutions in in in those countries. UH. And then on top of that, we layer another screen around the social impact and the environmental impact of those institutions and would want to make sure that we optimize both on on the profitability and return characteristics as well as the impact that each of these institutions are making on their clients. Heliam, thank you so much for joining us. We really appreciate your time fascinating the topic here in

best of luck to you and your team. Alem Mtula, partner and co head of Private equity Investing for Developing World Markets. 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, three pt on Fall Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio