Bloomberg Audio Studios, podcasts, radio news.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Playing and Broid Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Happy Friday, everybody.
We cover all the news that you need in business, economics and finance. There are lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. And we also tap our expertise outside of Bloomberg Intelligence as well. And for that we go to Lindsay Piezga, she is chief economist over at Stefold, to talk about the job support. Okay, so
we get the jobs number. Then a couple hours later we get Chris Waller coming out and talking about the current batch of data requires action and if appropriate, he will advocate for front loading cuts.
What does if appropriate.
Mean to frontload cuts for fifty bases point cut in September.
Well, I think that means that if we see a material weakening in the employment data, if we see a material weakening in the inflation data, the Fed is poised to take a more aggressive stance. That being said, the lack of meaningful downward momentum that we've seen in price
pressures coupled with still a somewhat benign employment report. Remember, we saw that downtick in the unemployment rate, stronger wage games, So it doesn't seem that at this point, to Waller's to use Waller's characterization, it is appropriate to result in a more aggressive policy response. And as such, I think the Fed is going to take a more tempered approach until we see a more clear indication of weakness as opposed to just normalization in the economy.
All right, somebody comes up to you to Starbucks this weekend and says, lindsay, how's that labor market?
How would you respond?
Well, I think right now we're still seeing solid conditions in the labor market. Now, certainly we have lost momentum from earlier peak levels. Top line hiring has slowed, but let's put the unemployment rate in perspective, it's still on
a relatively low basis. Wage games are still solid, jobless flames continue to tick down, so there's still indications again that the labor market, yes is cooling, losing momentum, but more to the prospect of normalizing as opposed to indications of outright weakness suggesting that the FED needs to take expedited or more aggressive action to help supplement or stabilize like market conditions.
Actually that happened to Michael McKee. It was on a train and someone like random guy was like.
Hey, Mike, what are you from the FED?
So lindsay, is this is the FED going to go twenty five or fifty? And I guess the better question is how much do you care about that versus us still pricing in two hundred and forty basis points of cuts in the next you know, fourteen to fifteen months.
Well, I think the FED is going to take a guess low and temperate pace. I think out of the gate twenty five basis points is a appropriate and the FED has been very clear they're not on a predetermined pathway. And should we see the data come in better than expected or weaker than expected, the next policy response will
reflect that data. And so that's going to really be the driver of how the FED responds over the next year or two years in terms of slowly returning US more to a normal position and policy as opposed to taking an aggressive approach and reversing us to neutral or well below.
So, lindsay, put this labor data together. I guess for me, one of the next questions is how does that frame out how our US consumer is doing.
What's your view there?
Well, I think the US consumer is struggling at this point. The US consumer feels the weight of these higher prices, feels the weight of a slowing economy.
But the consumer is still.
Holding its own it's still spending out in the marketplace, and it's still the backbone of the US economy.
We love that.
We love crying babies in the background. That's super cool. You can definitely bring them on air. We love that for you and for us. So I guess when we talk about how the data will evolve, what are.
We going to really be looking at.
Is CPI really that important next week or is it just like, let's get past this twenty five or fifty or whatever and then we see how the labor market evolves.
I think the CPI the PPI are key data points that are really going to determine the trajectory of the fence pathway for race.
All right, lindsay, thank you so much. We appreciate it.
Lindsay the Eggs, a chief economist for Stiefel.
She joined us on his zoom from Chicago. She can do it all.
She can talk economics and she can then go take care of the little ones.
I mean, yeah, that's why you guts are the best. I don't know how to do it.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Play and Android Auto with the Bloomberg Business app, and also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven.
All right, let's get more in this market reaction here. Matt Miskin Co, Chief Investment Stratus, John Hancock Investment Management joins us. Now, hey, Matt, if I just take a look at what's happening within the market and the reaction.
Oh god, I hate to say it. Is this a Goldilocks move?
That looks a little bit like that, But the fact that the tenure treasury yield isn't backing down much actually to me suggests it's not as favorable.
But a huge it had a huge run, it did.
It did, and mortgage rates are coming down on that, and then you're gonna get borrowing costs coming down on that. And we had oil prices lower, and all these things eventually are going to be good for the consumer.
But if economic growth is weakening, if you're not as confident about your job, you're not going to be as confident about spending.
And right now there is a you know, September weakness that's always seasonal. So we're sitting here saying is this seasonals or is this some more sinister? And for us, the economic data is weakening. We like defensive parts of the market. We like intermediate to longer term bonds, and we're gonna sit here and wait for a better opportunity to look at risk assets.
What's defensive in your mind? Met good one?
Yes?
So good old utilities. Utilities are a part of the market.
That were left for not you know, no one wanted to touch them for much the last two years. They were only two percent of the market, the lowest level or sector weight in history. They've been on a tear here. And we actually like long lived assets. I mean, you know, alex as you said, I mean like this week, treasury yields are meaningfully lower and longer duration equities should be rallying on that. Utilities are, roots are even healthcare is
getting a bit of a bid. But then you've got things like financials, which have done pretty well here that's an odd mix, and tech, which used to be the long duration asset.
Is getting can hit.
So it's not making a ton of It's not the dots are not connecting all at once here.
It's it's one week. But the trend in terms of the macro.
Data is what it is, and it looks like softening, and we want to grab some good defensive parts of the market while they're still here for us.
Yeah, And I don't want to make light of the fact that texts down one percent and calling that goldilocks, but just the idea that that sort of play versus say, I mean, I'm looking at DOWT Transport. It's only down quote unquote three tens of one percent. So I'm just wondering if it's more of a rotation within the market versus sort of a broad based selling. Do you think that when we get a Christopher Waller talking at eleven, is that going to be an event risk for you right now?
It could be. I mean, you know, right now.
I think the Fed, if they push back too hard and say, look, we're not we're not going fifty basis points.
We're not ready to cut.
I think if they do that at this juncture, you're going to be upsetting the bond market. And there's few times in doing this it's it's you know, nowadays we've got the forward guidance, so we've got you know, pricing in of how many cuts.
You know, you rewind ten fifteen years ago, people.
Didn't focus on that as much, but now that it's one hundred percent probability of a cut in September, if not more, because you're saying, hey, it could be fifty basis points. If the FED says no, we're not cutting, that is going to be bad news for everything. And so I think you need to hear the FED speakers come out and say yeah, we're gonna cut, and if anything against that, I think is going to cause some volatility.
Hey, Matt, on the fixed income side, how much credit risk are you guys comfortable taking these days?
Not much at all.
Frankly, we started the week at three hundred basis points spread between junk bonds, high yield bonds, and treasury bonds, And to.
Put that in perspective, last time that's.
Happened twenty twenty one before spread wide and twenty twenty two, two thousand and seven before two eight, nineteen ninety nine, before two thousand and three hundred b points is historically really tight spreads.
And to us, that's just not a lot of value.
We prefer if you're going to go even in investment grade corporate bonds, more of a single a kin type of average portfolio.
Credit rating, and then we like agency nbs.
We like all those bonds or all those mortgages that people locked in low mortgages.
I don't think there's any prepayment risk. People probably aren't going to be moving.
Again to and it's good for their balance sheets. So you know, they're yielding about five percent for four to five percent right now. So we're just looking some high quality bonds add that to the portfolio.
Lock in these.
Yields while you got them, because that cash balance that everybody's loves so much, that money market interest rate, in our view, that's gone into twenty twenty five, not completely gone, but it's gonna be.
I mean, I'm waiting for it.
We still hit another record high at the end of last week, according to the data that came out. So do you think that it matters if it's twenty five or fifty in September and or is it really how many cuts we're going to be getting. I mean, we're still pricing in something like almost ten cuts through the end of next year, right.
And you know, I think about it as like you know, getting lost in the forest.
Wait, is it the forest and the trees?
You can't see the forest from the trees, right, Yeah, something like that.
The fast couple of cycles, on average, the FED is cut from peak to trough seventeen times. Now that's twenty five basis point cuts, but seventeen times is how much the FED usually cuts in a cutting cycle. So whether or not they cut one time or two times at the first cut, don't get lost in that.
Don't overdo it. What you want to.
Do is set up for where this Where does the end of the FED Fund's rate go? Where do we go on the tenure yield? Our view, based on the last three cycles, the tenure yield ends with a two handle and the FED Fund's rate ends with a one handle. If that is the world we're in, we're having a different conversation.
Right now, we want to get while the these yields are where they are right now.
I know it's been a quick move, but still don't let it the volatility, you know, get you off course. Bonds are going to be likely recovering all that in our view majority, if not all they lost in twenty twenty two, and we still got upside potential in the Bontdom market.
All right, Matt, thanks so much for joining us. Really appreciate it.
Matt misk And he's a co chief investment strategist at John Hancock Investment Management.
And look it up there in Boston.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Play and Enroud Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Happy Friday, Longest Forday week Out there. I'm Alex stan alongside Paulsman Need. This is Bloomberg Intelligence Radio. We are broadcasting to you live from Interactor Brooker Studio right here in cloudy midtown Manhattan. So the equity market really rolling over here, Big tech in particular getting hit the NASDAC is off over two percent below it's fifty and one hundred day moving average. Quick work of getting to that two hundred day moving average as well. Not helping is
what's happening in Broadcom. That stock down by over ten percent on earnings that came out yesterday after the closing bell. Now, the money they made from AI and their forecast was really quite good. It was just everything else that seemed to disappoint investors sort of waiting for that trough, despite the CEO saying yeah, okay, we might have found the bottom and all of that, but nonetheless that stock is off quite a bit. Dana Wolman is Bloomberg Senior Technology editor.
She joins us, Now, there's a lot to get through in tech, but I just wanted to hit on Broadcom. When you're looking at the stock reaction to the news like they delivered on AI. They made a boatload of money, They're going to keep making a boatload of money on AI. Do you think it's an overreaction from what you're hearing.
A little bit and my background is not in equities, but to your point, you would think that the worst news imaginable would be that the company was not keeping up with expectations and AI. In fact, it beat expectations in all the parts of its business that are related to AI. Somehow, it's really its legacy businesses that were flagging in the forecast, but that, as you said, was enough to just send the stock down.
It's interesting, it seems like Broadcom is well positioned for this AI you know, kind of phenomena here because investors, as you know, are trying to figure out a way how do I play AI? And really do I just buy Nvidia? Are there other ways to play it here? So, but tell us about Broadcom and it's exposure to AI, maybe how it's positioned.
So I think Broadcom gets less attention in part because I think it's in a highly technical field, a field that's already just very technical and sometimes difficult to explain to play people. I think sometimes Broadcom's equipment is even more so.
But it's everywhere. I mean, it's legacy businesses.
It's chips were already in everything from automotive to smartphones, and its components are included in.
Just AI setups as well.
Yep, and the it's not necessarily a one form one comm to what Nvidia is producing, but just complementary components and piece of hardware that people might not know the names ever think of, but are necessary in these larger AI setups.
And also what I was reading is that if a company winds at making their own AI tips in house, they need Broadcom to do that.
So there's that part of the business as well. Let's go to Intel because that stock is also off over three percent.
It's considering some options for its steak in its struggling automated driving system provider Mobile Global. Can you remind us what Mobile Eye Global actually does.
Mobile Eye makes automated and automated driving system So is it self driving stuff yes, autonomous vehicles yes. And Intel has had a steak. It actually sold part of its steak last year. I believe we reported profit of netted around one point five billion from that. But it's looking to sell more of its steak, and as we report in the story, it's picking if it's going forward with this, it's picking a not great time. Mobilized stock has been down a lot, and so Intel would not exactly be
recouping on its investment if it chose this moment. But as we reported more broadly, Intel is in a dire moment, it does seem to be considering some really desperate severe measures to keep itself afloat.
Yeah, I mean, I'm just I mean, it's Intel.
It's down sixty two percent year to date, fifty two week low, down three point six percent today. You've covered this tech industry for a long time, Dana.
What's going on with mo? With Intel?
Did they just miss I guess the technological evolution of the chip business or is there?
Is it management? What do you think is going on there?
Certainly management doesn't help. I mean, it had that big CEO shake up a few years ago. That was when Brian Krisanich stepped down. It took a while to replace him, and since Pat Gelsinger has been in the role, has bet big on the company's foundry business, and that is in fact dragging down the company performance and seems to be, according to our reporting, something that the companies at least considering splitting off.
Well okay, but that's confusing, right because their whole pitch was that, yeah, yeah, we're Intel, yay, but now we're gonna make chips too and be a foundry for us and for also us. You can come to us, We'll make our chips. So why has this gone so south?
At least for now, the foundry's biggest client seems to be Intel itself, gotcha. Yes, So, for whatever reason, that part of the business has not taken off as expected. To the extent the company has brighter hopes, it does seem to be on the chip design side, less the manufacturing.
So but weren't they a beneficiary or are they not going to be a beneficiary of the US government's investment in domestic chips.
I think they'd like to be if they had to delay their plan, right.
Yes, So that that is something that our reporters are chasing, is not just the fate of the company, but the possible ramifications for the government's investment plans in strategic areas that of course include.
The chip industry.
And they're based in Santa Clair, California, where everybody who is anybody in the chip business is based in that. Santa Clara, San Jo's a area there. University of Santa Clara is right there as well. Dana Woman, thank you so much for joining us. Dana Woman, senior Technology editor for Bloomberg News, joining us live here in our Bloomberg Interactive Broker studio which we appreciate.
On a Friday, I mean, people come in on it.
He likes some people come in, come in on a.
Friday special gold Star.
But you're right, the Intel stock is just getting crushed, and you know, it's just a it's almost like a shadow of its former self here with down sixteen percent. Dana, thanks so much for joining us there.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and androyd Outo with the Bloomberg Business App. You can also listen live on Amazon Alexa from oursip New York station just say Alexa playing Bloomberg eleven thirty.
So let's see, we're getting some moves here in the currencies a little bit. I'm looking at the Bloomberg Dollar Index a little just a smidge higher on the Bloomberg Dollar Index, Pound Sterling a little bit weaker, the Euro a little bit weaker on the backs of some of this economic data we've got, including today's jobs number. Audrey Child Freeman joint Is. She's a team leader and chief
f X strategist at Bloomberg Intelligence. Audrey, what are the currency markets telling me about some of the economic data we're seeing, including the jobs data today.
Well, the US dollar was already very much weaker getting into the non fund pay rolls, and I think in the end, from a currency perspective, for as long as we didn't get any major supplies one way or the other, it wasn't going to be a game changer for the outbook for the dollar, which we know by now has become a lot more negative with the start of the is in cycle looming and most likely now likely on September eighteen.
So to that point, how much more downside than is there too? Dollar yeen?
In particular, I think dollar yen is being driven lower by both both by the US side of the trade and the US more Davich cyclical narrative, as well as the Japanese side of the trade, and I think in that respect there's probably room for more downside. You know, it's still very difficult to assess the extent to which you know the unwind of the carry trade is complete. You know, some seeing some some people saying it's almost complete.
I think, you know, time will tell on that. It's very complicated to assess, but I think that you know, the the rate differential that's been drive driving dollar year lower from one sixty to one forty two is going to continue into Q four.
We're most likely.
Going to see a great height from the boju and potentially even.
More next year.
So I feel that, you know, the dollar yen pick is probably for me in the G ten currency space, the most obvious one to expect to continue lower, with the main question being how fast does it go lower? For me, I've been in the camp that we're probably going to see a slide as opposed to another slump.
So, Audrey, what currency out there offers the best value from your perspective?
Do you think?
Well, if your dollar bear and I think for now we still are dollar bearish, even though you know, I kind of feel that this narrative that I've been describing about, you know, weakening the US economy lower fat rates, it's in the price, and I kind of feel at some point the risk would be that there's too much dubbishness price in the fact because the US economy has to be clear, is not really falling apart, is just decelerating. Inflation is coming down, and that means that we can
normalize interest rate in the US and that's fine. But you know, in terms of which currency to play against that I said, the Yeni is a good one. I also kind of like the Swiss Frank just because I feel that, you know, euro dollar upside at the moment is a very tricky one because there's one element in the Europe euro dollar bullish story that I'm still waiting to unfold, and that's a pickup in economic activity. We're
not saying that happening in Europe. When that happens, I think there'll be more momentum to the upside on the Europe. And until that happens, I think dollar Swiss downside maybe more appealing. And the other advantage of the Swiss Frank I think at the moment is the fact that you know, we've seen some episodes recently of more hesitant market risk advertise, and this would do better if we were to see another phase of risk of markets. So Dollar Swiss downside
is another very good and interesting pair. I think as we conteah yeah into.
In just about thirty seconds, what do we get from the ECB next week?
We get another cuts and I don't think that's going to be too damaging for the Euro, but the euro badly needs an improvement in the economy. That's what we need for euro dollar upside to go through one twelve and one fifteen.
All right, thank you so much. I really appreciate addit, Child Freeman joining US team leader and chief FX strategist at Bloomberg Intelligence. Need a better economy, Like how do you get that?
You just take a look at Germany.
And then the news maybe that Volkswagen's gonna close on some of its plans. Their industrial economy is just really suffering. How do you get the whole Eurozone to really start to outperform when Germany is really in adult drums here?
Yeah, and that kind of a lot of it stems from there. Just a big exporter, particularly to China, and if the Chinese economy is slowing, it has been slower than expected in that impact big export nations like Germany. And I saw that in that German reporting about the auto factors Amy close auto factories since nineteen thirty seven, So I mean that's not in their DNA to downsize.
Yeah. There was an interesting report out by no Moura that talked about how it's really tourism that is keeping services up and keeping the your economy afloat, so we'll see what then happens when you get out of the summer with John.
Tucker and I are the only people I know that haven't been to Europe like the last year, so we're.
Just I haven't got anywhere in a year and more.
I haven't been out of New Jersey twenty five.
That's not for you.
Come to the city.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven.
Thirty Jony Biley, She's a chief workforce analyst at employ Bridge, joining us from Omaha, Nebraska via zoom. Jony, you and employee Bridge, you know exactly how employers are feeling here. What did you make of this job's print here today?
Well, this report definitely proves we have a weakening job market. We've been saying that certainly for some time. We feel it in the temporary help industry, our industry, the staffing and recruiting you know, of temporary workers has really been on a decline for about two years, and those are always the jobs that go first. I think we've talked about that in the past, so it's pointing to, you know, more weakness. Obviously, this report did not meet the expectations.
I kind of thought we might see this just because you know, I'm constantly talking to employers of all sizes across the US, and there's a lot of uncertainty. There's economic uncertainty, and then there's also the uncertainty, and so I think right now we're seeing a pause on hiring and employers are just not adding to their payrolls due to that uncertainty.
So, Johnny, that's such a great point.
So they're not adding to payrolls, what do you think it's going to take for them to start laying off their payrolls.
Well, we are seeing some layoffs here and there. So that is, you know, concerning what I think will maybe reverse the trend. I mean, it's going to be a
number of things. You know. I hate to say it, but we might have to get past this election, regardless of who wins, until employers can say all right, I have to find my path forward and here's where I'm going to invest and hire I think interest rate cuts will help certainly, and you know, maybe we'll see a little bit of relief if we do see, you know, an interest rate cut, which I think we're all in
agreement that we're probably going to see one. The big question is how large of a cut will they do, And there's going to be a lot of scrutiny certainly around that because that could signal, you know, are we maybe in a worse economic picture than people had realized. But I do think an interest rate cut will definitely help because employers will then start to loosen up, you know, those purse strings and start investing again in their businesses, and that can certainly lead to more hiring.
Jenny, I like in your notes here something very interesting. Employers are focused on employee retention, but they're very cautious about hiring and adding to their current payrolls. How long, Yeah, how long have employers kind of been in that mode?
Yeah?
No, that's a great question, because that pendulum definitely swings from one side to the other. But I would say that we've seen over the last year employers very focused on retention strategies. Now there's a few dynamics of what's happening certainly in the supply chain world. You know, most of those workers are on site. In the professional and business services, we've seen employers trying to bring people back to the office, but they're balancing that with also trying
to give them flexibility. So they're very focused on what types of benefit programs they can give to them. Of course, wages, you know, need to stay competitive. Flexibility is certainly important. But creating a great work environment where people want to stay, you know, where they enjoy the work that they're doing,
that really has become a top priority. And we're also seeing that that's what workers really want, you know, they want to enjoy the work, they want to enjoy the environment, and they do want to feel like their employers appreciate them and respect them. And so we've we definitely have seen a switch that employers are very focused on that retention strategy right now.
That feels like a young kid thing, but whatever, Johnny, When you take a look across sectors, what sectors are are sort of stronger and what are weaker and sort of how do you foresee that playing out over the next six months as we get past the FED cut, as we get past an election.
Yes, so certainly we've seen you know, healthcare continues to be the strongest sector that is adding jobs, and I think we will continue to see that certainly. You know, as we look into twenty twenty five and twenty twenty six, that sector will remain strong. There's a high demand, there's lots of you know, opportunity in many different roles in
the healthcare sector, so that will be continue to be strong. Construction, it was good to see that we added you know, over thirty thousand jobs in the construction Construction is a good sign that maybe we're starting to see some things pick up a bit. But again on the other side, we're losing jobs in manufacturing. The professional and business service
sector only had eight thousand jobs created. Again I mentioned temporary help actually lost jobs for the month, Retail lost jobs, you know, so overall this this really was a week report. We're only seeing that job growth in healthcare and in government, and then it's you know a little bit kind of trickled out through the other sectors. But healthcare will remain strong. I'm really looking for manufacturing to come back, but we probably won't see that until next year.
And another data point for the labor market. Earlier this week was the Jolts report continuing to come down. How do you use the data that that JILT state is that.
Important to you?
It is important, you know, to watch the trends. We really want to see that number start to reverse and climb. Unfortunately it's it's lagging. It's a lagging report. But when you look at seven point seven million open jobs, to me, that's concerning because month after month we're seeing that number soften.
What we need to see is that number start to increase, and that is going to be the first sign that employers are going to be hiring and adding to their payrolls because the first thing they do is advertise those jobs. If they decide to hire, they're going to be posting those positions online and that's what that report is truly measuring.
So we want to see that employers are having more optimism about the job market, that they're going to invest and expand their payrolls and add And I'll be looking closely to see, you know what next month reports for the Joltsy report. Hopefully it moves in the right direction, but right now it does seem, you know, to be kind of status.
Quo before all you go, what did you make of the wage number and what are you hearing?
Yeah, So it's interesting on the wage number because the wage number is still showing that wages, you know, are strong and certainly competitive, but that really has to do with the mix of jobs. When it comes to that wage number, we are seeing a lot of the lower leveled skilled jobs you know, have been either outsourced or you know, whether they've gone overseas or maybe technology, automation, artificial intelligence has eliminated some of those jobs. So it has a lot to do with the mix of jobs.
I can tell you employers are not raising wages right now. They are kind of steady. They're not decreasing wages, but they are not in a situation where it's that competitive of a job market that they need to increase wages at this point. So it's a little misleading of an indicator when you look at it in the bl US report.
All right, Jenny, thank you so much for joining us. Jenny Biley, she's a chief workforce analyst at employee Bridge, joining us from Omaha, Nebraska via zoom here. So I think in his jobs report there's something.
Else for everyone.
I was gonna say it's like a rorshack test.
Yes, exactly, you can.
Make a bit of what you see.
We'll get one more I guess data point next week's CPI. So for the FED, I mean Ira Jersey from Bloomberg Intelligence just put out a note here and saying, you know that'll have some meaning as well for the FED in terms of inputs about whether they go twenty five basis points or more.
So.
I think it's interesting is that if we get to read from from where do we have the FED speak coming with Waller who couldn't get that name, Maybe get a little bit more of a temperance there, and maybe the markets are as pricing in twenty five. I am wondering, with a front end of the curve winds up, doing do we need to kind of sell off a little bit because we've had such a massive run into the bond market, particularly in that front end, really flattening or
disinverting that curve of the two tenths. I'm kind of paying attention to that.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecard Play and and royd Otto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa playing Bloomberg eleven thirty.
Let's go back to this jobs reporting, Abigail suggested, that's a big part of what's driving to sell off in today's market. We welcome Christopher Smart. He's a managing partner in our growth group. He's a former Special Assistant to the President for international Economics.
He joins us from Boston, Massachusetts. And if you're listening to us.
Up in Boston, our new home is now ninety two nine FM in Boston. Christopher, how do you think the folks down in DC that really think about this economy, worry about this economy, try to manage this economy. How do you think the folks down at DC are taking this labor data we saw today.
Well, first of all, welcome to ninety two point nine in Boston. We're all very excited to have you.
Thank you for the plan on a new channel.
In terms of what they're doing down in Washington, I'm afraid they're probably spend a lot more time thinking about the election implications of all of this. I'll just pause and not answer your question right away. I think it is quite remarkable that we are talking about a FED cut of twenty five or fifty basis points two months out of election, and most of the market and most of the nonpartisan analysis would be that this is totally unrelated to any political calculation on the part of the
FED or the Biden administration. So I think that's kind of a nice plug for FED independence. In terms of the jobs report, there was something for everybody, I think in this report. For the hawks, there was, you know, the unemployment rate notched down a little bit, hourly earnings were up a little bit, and so that would give them fuel to argue for twenty five basis points. For the doves, you know, we still have a miss in terms of the headline jobs growth number, and we have
downward revisions in the past couple of months. So I think, you know, as I say, there's plenty to fuel both sides of the debate. My bias would still be that we're going to see fifty basis points because of the other data that we've seen accumulating, and because you know, as long as they are able to signal maybe as a hawkish cut that this is not you know, we're not going to get three to fifty basis point cuts
for the next three meetings. We're going to do fifty now and then wait and see till the end of the year.
You're right, So it's not like they're overdoing it. They're like, okay, we'll go now, but then let's just see what in the economic data tells you that we need fifty, Because the other part of the argument is like, look, if you go fifty, you're saying things are a lot worse than you might have thought.
Well to me, you know, maybe to argue with your previous guests that you know, inflation is really not the problem anymore. It is a problem politically, it is a problem for consumers, it's a problem for low, lower income households. But the numbers are coming down the If you're in the monetary policy business, you see that you're from fighting inflation now to boosting growth. And I think they have plenty of room to move from current levels down to
something a little bit a little bit easier. If not, you know, it's certainly going to be still in the in the tight range. The economy is slowing in the US, there's much more slowing going on in Europe. China is obviously stuck right now, So I don't see the risks to inflation right now. And I really think as you see you know that is those are big headlines coming
out of Governor Wallace's speech. If that's the broader message he intends to deliver, you know, I think that's going to increasingly turn markets towards expecting fifty next time.
Chris, you mentioned kind of the timing here.
We're in an election year and it looks like this Federal Reserve is going to be pretty active in terms of making some policy changes right around this election.
How uncomfortable do you think that makes the Fed?
I think it makes them very uncomfortable. I mean, Jay Powell has been asked about this through a couple of different meetings. He's been very forceful and I think very credible. It's saying, look, you can read our minutes. We don't talk about this, we don't talk about the election, we don't talk about any of that. We look at the data. It's hard enough getting the data right, and it's hard enough setting monetary policy for this dual mandate, let alone
taking other election implications into view. So I think it is notable that they are they feel free to do it now. I think they don't love the fact that they have to do it now, but they, I think, feel that this is the right time. The data is pointing in that direction, markets are expecting it, and that they can move ahead. I don't think they'll get any more cuts in October or anything like that, but they'll pick up after the election and see where the data guides them.
You're also a former Special Assistant to the President for International Economics. Back in your previous life from twenty thirteen to twenty fifteen, we've been getting alive and from about economic plans, particularly when it comes around corporate taxes, and I'm wondering if you've been able to think about our model out the different outcomes on corporate tax policy.
Like, clearly, yes, lower.
Corporate taxes will be good for the SMP, but in terms of say reinvestment and economic growth, well, the devil.
Is always in the details. President Trump's proposal is eye catching in terms of a dramatic cut in the headline rate, but that seems to be linked with manufacturing things in the United States, and I think he talks about, you know, one hundred percent manufacturing in the United States very little as you know, is one hundred percent manufactured in the United States, given the inputs to manufactured goods that come
from many, many other countries. Sometimes, you know, I think they say that if you buy a car in the US, there are parts that have crossed the Mexican border five or six times before it reaches the dealer's lot. I would guess what markets are expecting is that, you know, corporate rates are probably not likely to move much much more from where they are right now. Vice President Harris is in line with the Biden proposal to raise them
to twenty eight percent. President Trump is talking about fifteen percent. You know, we have this thing called Congress, which is a big toss up and more likely than not, you know, it may move one or two bases, one or two percentage points up or down, but it's not going to be a significant shift.
I don't think so, Chris, to what extent are you your team folks.
In Washington, DC?
Are they talking about, you know, annual deficits, I mean annual deficits the national debt. Is this something that any gets any serious conversation?
Yeah, I mean, I'm sorry, debt deficit.
Yeah, yeah, totally.
I think people like us do talk about it. People in the markets do worry about it. But if you are a politician and you're looking at the next election, why should I worry about this thing that's going out ten twenty thirty years when I've got to win in no member yep so and and and you know you're telling me that credit markets are going to punish me for bad behavior, Well when I haven't seen it yet.
And you know why, why.
Take on that, that that thorny issue now when I don't have to.
Well, this is what gets confusing.
I think about the trade deficit too, like to that point, like, don't we need the trade deficit because we need foreign investors and countries to buy our debts. So if we close the trade deficit, there's less money for them to do that. And that's where I think I get a little confused on all of it.
Well, you're not at all confused.
I mean, you're absolutely right that we you know, we those things are intimately related, and nobody likes to talk about that, you know. I think the focus on the trade deficit raises a lot more issues around our savings rate,
our investment incentives and that sort of thing. Rather, you know, the proposals that we tend to go to easily as policymakers and politicians, which are tariffs generally don't tend to do much to redress those differences in trade deficits that people want to because we are so interlinked in so many ways with our foreign markets and with other foreign markets.
A bilateral trade deficit gets a lot of attention between the US and China, but really the over it's really the overall balance of trade that we have with all of our trading partners that will matter.
All right, Christopher, thank you so much. We appreciate that. Doctor Christopher Smart.
He's a managing partner at our Growth Group and a former Special Assistant to the President for International Economics.
I googled what our growth is. Apparently it's a berg in Scotland.
Okay, there you go.
This is the Bloomberg Intelligence Podcast, available on apples, Spotify, and anywhere else you'll get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, b iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal