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Let's take a little deeper into that labor data we got today. We're joined by Joni Biley, chief workforce analyst at She's also the chair of the American Staffing Association, So we appreciate chatting with Jony every time we get these jobs numbers. Jenny, what do you make of this number that the print right across that the you know, the surface looks really solid.
Yeah, well, hello Paul and Emily. Great to be with you today. Really interesting report this morning. You know, the headline number looks very strong, you know, over two hundred and fifty thousand, and it's interesting listening to Austin Gooles. We talk about, you know, the numbers and how this might relieve you know, a lot of pressure. But I have a little bit of a different take when you
dig into these numbers. You know, most of the jobs that were actually created in the month of September were in the healthcare sector and then also in the leisure and hospitality sector. Those two sectors alone had about one hundred and sixty thousand jobs created. So then if you dig into the details here, we can see, you know, construction was good, twenty five thousand jobs created, the government added thirty one thousand jobs. But then we're not seeing
robust growth in many of the other sectors. And so I think that headline number can be a bit misleading when you look at the actual data that is in the Establishment survey.
So what then is it telling you about the current state of the US economy when you do seem to have noticed this kind of maybe distorted picture of the labor market at least just looking at the numbers and the data that we got this morning.
Yes, I think there are some sectors that are doing well. I'd like to see growth come back, you know, in the manufacturing sector, stronger numbers in the professional and business service sector. We still saw a decline in September of almost fourteen thousand jobs in the temporary help staffing sector. And that's something that I always pay attention to because it's part of the industry that I'm in. So Emily I think what it's telling me is that we're still
in a soft job market. Though some of these indicators look good, and I do believe, you know, Austin did mention it, there are other indicators that are showing we're still in that soft job market. Maybe we've gotten to a point where we do have that soft landing and things will start to improve over the next few months. And I certainly hope that that is the case, But I don't think that we are out of the woods just yet.
So that's a more cautious take than we've heard throughout the morning here, Joony. Just in terms of this market, as you characterize the labor markets, maybe a little bit softer than it appears here. What are people missing do you think?
Well, I think if you look at the report, you know, and seeing almost eighty thousand jobs come back in leisure and hospitality, those jobs are lower leveled skilled jobs and lower wage positions. So what we're not seeing come back
yet are the higher skilled, more professional positions. Certainly in the healthcare sector that remains very strong, but we're not seeing jobs like in accounting and finance and and really that stem field, which there is a strong you know, demand in the future for you know, the skilled jobs in science and engineering, but we're not seeing a ton
of job creation in those sectors right now. I also is very surprised that when you look at, you know, some of the numbers in like transportation and warehousing, those numbers were very soft, which tells me we're going into the retail season. We're not seeing you know, the companies really get ready for a strong, you know, retail holiday season. We're also seeing employers that normally hire this time you know, of the year and start to ramp up for the holidays.
Their projections are a bit softer of the amount of people that they are going to need. So that's where I think I take a little bit more of a cautious approach. I'm not saying that we're going to fall off cliff by any means, but we still need you know, a few more months of job growth and really start to see some of that growth come from other sectors, you know, if you know, in addition to healthcare and leisure and hospitality.
All right, Jenny, thank you so much for joining us. We really appreciate getting your perspective when we try to break down some of these jobs numbers here today Jonny Biley. She's a division president at employee Bridge and she's also the chair of the American Staffing Association. So a great voice to speak to speak with on these important job stays.
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Thirty again on the labor front of the print here, as Lisa was just just reporting very strong jobs or print for the non farm payrolls today, much better than expected. Some good unemployment rate numbers as well. Let's check on Ben Emmons because we want to see what this means for the Federal Reserve. Ben Emmons is a founder and chief investment officer of Fed Watch Advisors, joining us from Washington, DC. So Ben, again, a strong labor number today non farm payrolls.
How do you think this Federal Reserve is going to interpret this data?
Hi? Paul Well listening to Austin Goolsby, You know he does continue to indicate that more cuts coming, right, I think they feel that although these could be sometimes outliers on a multi basis, it's interesting it still happens because of the pandemic effect with all this distortion in the household versus establishment survey. It's nonetheless a labor market does show the vation. Like if you look at the median duration of unemployment and there's now risen to twenty two weeks,
that's the highest since I think twenty twenty two. If you take you know, the percentage of people you know of twenty seven weeks, so long we're out of work, there's no our twenty three percent of total employed. So there's some underlying deterioration. I think this feat is keen on bringing that back in and trying to control for the worst thing of the picture given the restrictive stance. So I think the fatal could either look at this
saying we have room to cut. This is a good labor market, but we can cut rage because we just have very restrictive policy to keep the labor market in good ship.
I'm wondering, if you know, a lot of people talk about how monetary policy happens and comes with a lag, and yet we're only about a month after the first rate cut. So Ben, would you say that the rate cut is already working or is something else also driving the strength in the labor market right now?
So I think it's part of the signaling effect from raycuts. If you step back actually going to the June July period when all that softness start to come through and the fat speaker start also look at that and start
to talk about raycuts, all that signaling happened. If you look at the ISM data that's coming through now, including regional data, you see all the forward looking indicators some sort of a turn upwards, right, and that's your new orders and inventories, and that's sort of like cyclical indicators. And again bring basically back each time to Bostic, who who are so outspoken on this, saying that they're in
their surveys with local businesses. They got a lot of feedback like, okay, fed, if you're going to cut rates, we're going to see a lot more sales activity, a lot of things going happening. And I think that may be a reason. Right, So in surveys it shows up. Whereas this employment report itself. I was talking to your economists and A Wong about this. There's some alternative data out there that's that indicated that that may have been a really strong month, but it could be because of
just a lot of shifts happening underneath. So I think the basis points of custo that we just had that is just hitting the economy as we speak, but that may take some time for truly works through. Why this fat I think is not that they're cutting rates from here despite this number, but the signaling of cuts is interesting that is coming through the fore looking indicators.
Hey, Ben, we kind of came into this morning with a reasonable likelihood that fifty basis points was on the table for the next meeting. I'm looking at the work function here and that seems to be kind of off the table. Seems to be pricing in a twenty five bas point cut in the November meeting. How do you expect the Federal Reserve to proceed over the next you know, three four to five meetings as we get into next year.
Yeah, these these probabilities are so fluctuating. In Paul, like, I looked at that too. It was thirty percent before the number now dropped to seven and a half percent for fifty base point cut. So it is definitely sensitive to anything that's stronger of data, very versus the weaker of data. I think that's the mechanics of the markets.
So the Fed will ultimately come down to the back, but they didn't at this meeting at this minute sound in a couple of weeks, I think they just continue to look at like where the policy is in broader sense of how restrictive it really is. And it looks since the last two CPI reposts reports the real interest rate that the fat funds rate has only risen a little further from here, so it's gotten even more room
to cut rates. We get CBI on Wednesday, I believe it's probably going to be not a sole of a CPI data either, so that that real FET funds rate remains quite high, drifting towards three percent. I think that is what they're looking at to say we can take some off, so we'll keep cutting rates until at some point that does information that shows some stabilization maybe turning higher, and you're seeing the economy accelerating, really accelerating growth, what does that.
Mean for investing in bonds? I mean today I'm looking at you know, the two year up fifteen point eight basis points the ten year up ten basis points. I guess those expectations that maybe the Fed is not going to cut as much. Is that bad for people trying to make money in bonds here?
It could be because you know that when we were at roughly the lows on the tenure was somewhere three sixty five or so a few weeks ago. I mean, I'll almost back to four percent, right, so call it thirty five basis points of change. You know, the industry sensitivity bounds is still really high, and noted from the index duration, it's a sensitivity of interest. Rates has climbed up again since we had this decline from interst rates from the spring from April all the way into the summer.
And so it does show that if you're getting a little moving rates higher, you immediately get these accruing losses. So be mindful of this volatility that's that's basically caused by this interstrate sensitivity. The short end, the yucave alwys remain a bit more attractive because the yucreve has slowly normalized, but not as much. But there's still much more yield there.
That's been said a lot, but I think I say on that that that's a view too, But bouncing itself will remain at the basically at the whim of this data movement. So there's volatility in bounds that's higher than we have pre pandemic, which makes it not always that easy to go all in bounce, and that says that would be more careful with long duration bounds here.
All right, Ben, thanks so much for joining us. Always appreciate getting a few minutes of your time. Ben Emmon's chief investment officer and founder at fed Watch Advisors.
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The story of the day, one of the economic stories of the day is certainly that job's number and he came in really strong and non farm payroll here. So let's break it down with somebody who does this stuff for a living, Tom Gimble. He's a founder and board member of LASALM Network. LASAL is founded in nineteen ninety eight and it is one of the leading staffing and recruiting firms in the country. So this is Tom's business.
Hey Tom, you guys put up being the labor markets a pretty strong data point here today.
What do you make of it?
Well, I think number one, I went to the UVA of the Rocky at the University of Colorado. Oh yeah, we can get if we can get a go buff's real quick.
I bet go buffs, go buffs.
There we go. Now listen, this report is If you're anything but optimistic after this report, you're crazy. This is an unbelievable number with unemployment dropping and higher than expected jobs numbers, and it's a really good sign for the economy.
So what do you make Tom? Where a is some of this demand coming from?
There are a lot of.
People that want to maybe poke a little bit of a throw some shade on this to say it's a it's coming from leisure, it's coming from healthcare, and not really the higher paying jobs. How do you make the how do you when you go underneath the service? What's the what's what's it look like?
Yeah?
I think I always find that interesting. Right, So they would rather not have people being hired in hospitality and leisure and construction. It's it's the fact that we have consumer spending that happens at hotels and restaurants and service industries means that consumers are making more money and they have more disposable income, which is a positive sign for the economy. So that hiring is really good, and what will end up happening is that continues to fuel it.
That if people are spending more than the companies that make those retail products, we'll be hiring more people at those companies and so on and so forth. And without getting too reaganesque, but it's trickled down economics, and you're going to have a situation where it keeps fueling more better employment numbers, which is exactly what we want to have happen now. The one soft spot I continue to
see is in recent college grads. I'm not seeing the volume of hiring at people coming right out of college a year out as I have during other bull markets, but I think that'll change post the election.
From your neck of the woods, how much are people actually talking about the Federal Reserve and the impact of rate cuts on the labor market, Because obviously at Bloomberg, we are just obsessed with every piece of data that comes out and what it means for the FED. But how much do you actually talk about it at lasal network?
Oh.
I think that whether it's the Sound network or the CEOs and CFOs and heads of HR that I talked to on a regular basis, the FED rate is really important to people, and I would say more on mid and large cap companies because they're looking at the cash flow, the borrowing rate, how they're going to be able to hire people, how their wages affect their bottom line, and so I think it's a really important indicator that people look.
Even if people don't understand exactly what the FED rate means, they do get that when rates were really low, there was nothing stopping hiring in the economy and what's going on. So when companies see that the fed's dropping rates by fifty basis points, people get excited. Now. The biggest difference, and I've been preaching this with you guys and elsewhere for a long time, is that we have more employers
in this country now than ever before. And what I mean by that is if you would have gone back sixty seventy years ago, if somebody lost their job at
Ford or General Motors, they were car people. They could only get jobs at the car industry, excuse me, rebounded Today skills are so transferable due to technology, and while I think it's not going to last forever, but remote work that you can lose your job in Detroit and be working for a company in Silicon Valley as well, And so we have that opportunity, and then the startup nature that companies and individuals can raise venture money and startups that I don't think we're ever going to have
an employment lag like we had in the seventies really ever Again.
Tom, I guess I haven't asked you this in a while, but where are we on that whole remote work? Have we settled into a new normal? And I guess that's company by company three days, four days, five days. Where do you think it is these days?
Yeah?
I think right now it's three days. I still see. It still amazes me, Paul, how many CEOs are afraid they'll they'll talk to me, they'll talk to each other, and they'll God, we got to get people in, but they won't lead, they won't say it, And that to me is really the disturbing part. I think the Amazon statement last week was really powerful, and you'll start to
see some follow the leader type statements coming out. I think where we're going to get to is four days a week, and some companies going five and some going three, but the average will be four. And come twenty twenty five, we're not going to remote work and people wanting that isn't gonna happen. And you're going to see when companies start to downsize, and that will happen and other companies
will hire them, so it won't affect the numbers. But when you see companies lay people off, it's going to be the remote workers that get hit first.
Just going back to the print that we saw this morning, hourly earnings rose four percent from a year ago, the biggest advance in four months. I'm wondering what you make of this upside surprise in wages and you know what that tells you about the strength of the labor market.
Well, I think it's interesting, and I have to dive a little bit deeper into the hourly wage increase and I saw that as well. But it really comes down to you have more people working more hours, and in the retail space, it's so hard. I mean, listen, I'm in Chicago, I was in New York a few weeks ago. I was in Nashville last week. It's really when you go to a restaurant, the service is lacking because there
aren't enough people. And I talked to the managers when I'm there to find out on the ground what's happening, and I think what you're seeing when you see hourly rates increase, hourly wages increasing, it's because you can't find the people, and so you got to pay a little bit more to make sure that your people stay. And if you find somebody that you're getting the best that you can get.
Tom you mentioned just about college graduates still having a tough time. Why do you think that is?
I think company because usually what happens with kids out of college, and I'm not talking about accounting degrees or pre law or whatever, but more liberal arts education, the massive state colleges and people coming out is that companies hire in volume, whether it's sales or marketing, or they're going to do a training class and all of that
type of thing. And when you hear the sky's falling every day from both sides of the political spectrum during an election year, companies put the brakes on massive hiring
at individual companies. So we're seeing sporadic hiring in small medium sized business hiring, But we haven't seen the huge uptake of late stage venture companies, private equity companies that are really pouring money into hiring and mass and that's the biggest difference I see versus twenty oh one and twenty eighteen twenty nineteen when the market was really on fire.
We only have about a minute left. But what's the outlook here for job growth for the rest of the year, particularly when you take into consideration the hurricanes in the Southern United States.
Yeah, well, I think that's an interesting one, and I'm sure you'll have a lot of people talking about it. My take on it is you're actually going to see a lot of additional employment in the Southeast because we need people to do the work to clean it up, and the companies that do that, whether it's the government
or private industry, don't have enough body. So you're going to see a lot of hiring going on down there, and the companies that employ the people who can't get to work, those people aren't going to be fired most likely and not being filing unemployment. So I think we'll actually maybe see a spike in the October jobs report coming out that first Friday in November due to the hurricane, that we'll have a mass of people going to work in the southeast to help that situation.
All right, Tom, thanks so much for joining us, as I always love talking to you on Jobs Day. Tom Gimble, he's a founder and board member of LaSalle Network, giving us a breakdown there. Obviously, he's taking a very positive take on those strong jobs numbers. And again I'm glad you put it up, Emily, the wage number, because that's been strong and it's been higher than inflation for the
last almost two years now. So the real income for most of Americans after the very difficult time coming of during the pandemic, has actually been quite positive real income. So that's visa the inflation, Yeah, purchasing power there, so that is good news.
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Demily Grafeo is sitting in for Alex Steel on Paul Sweeneyer live here in our Bloomberg Interactive Brokers studio and are streaming live on that internet thing. So go over to YouTube dot com and search Bloomberg Live Radio and that's where you'll find the video portion of this program.
I mean, again, as Charlie, just reporting a very strong print there on the payroll data stocks hire, although they're off their highs of the day, yields moving here, particularly on the short end of the curve where we've got to chew euro up nineteen basis points. How about that kid's three point eight nine the tenure run a four percent? Watch here three point nine six percent. Let's talk to
somebody who actually gets paid to do this stuff. Brian Levitt, global market strategist for Investco doing the zoom thing from the home office. Good for him, Brian, what do you make of this print and how does it maybe change your alter or your view of kind of where your client should be putting money these days.
It's a strong number. You know, these things will get revised, so we do take it with a little bit of a grain of salt. But it's a strong payroll number, and I do that as a good thing. It's you know, investors had been so focused on inflation. The shift really is now towards the sustainability, the resilience of growth, and so when you get a strong number like this, it's it's a positive.
Now.
The markets took it very favorably initially, As you mentioned, some of those gains have come back, that's cause interest rates have jumped up a lot. But I still view it as if you're in an environment where you have resilient growth and less rate cuts. So that's that's still better than weak growth and more rate cuts.
So, Brian, is it fair to say then that the Fed has engineered a soft landing when you look at how the stock market is reacting and also just how strong the payroll print was today, Well, that's.
The preponderance of evidence suggests a soft landing. Now, I don't think we can be absolutely certain yet, there's still some weakness too. If you notice in that report, in the payroll report, the manufacturing sector did lose jobs. We've seen some of the purchasing manager in the sas sitting below fifty for a bit here. But yeah, I mean, the preponderance of evidence still suggests a soft landing and a good backdrop for investors.
So, Brian, if it is, you know, continue to be a risk on environment, how much risk stocks, bonds, credit, treasuries, how do you think about it?
Yeah, if so, we've been in an environment now the leading indicators of the economy have actually been been pointing to below trend growth and we needed easing, and so easing comes along and the economy's actually been more resilient. Then, Yeah, you want to be in stocks, you want to be in riskier credit, you want to be in if you expect growth to pick up, you want to be in
cyclicals and value. So it's a broadening picture. If you get the soft landing, as we suspect we will, you should see broader markets than we saw last year, and again a good backdrop for risk taking.
What does broader mean? I'm thinking about an ETF house at your very own shop RSP that plays of course on the equal weight s and P five hundred. Is that where you kind of see the gains for the rest of the year or is it better to kind of stay in the market cap?
Equal Weight's a great equal weight, it's a great point, and so marketcap can have long periods of outperformance. It tends to shift towards the end of a cycle, when you're going into a recession and coming out, that's when equal weight tends to do well. Now we've been in this long environment of market caap outperformance. Can we do it with a soft landing, you know, rather than see it a shift with you know, the market cap outperformance coming to the recession more along the lines of a
soft landing and then a reacceleration in activity. That would be my view. We're starting to see it in some places. Small cap again having a very good day today on the expectation of this economy is in good shape. So yeah, a lot of the reason why the market cap outperformed last year is the market priced in a small cap rally or an eco boy rally in two months at the end of twenty three and then we had to back out all the rate cuts. I don't think that's
the case this time. The FED is likely to continue to lower rates. So long as the economy remains resilient, then yeah, equal weight should outperform.
Brian your global market strategist, So, how do you think about the US versus rest of the world.
It's a little bit of a challenge here in the short term because the dollar strength and you know what you would want to see is US growth differentials moving back towards the rest of the world, US interest rate differentials moving back towards the rest of the world. Today's report throw a little bit of the challenge to that because US growth continues to look quite good, and interest rates may remain higher than many have thought, and the
dollars moving up pretty significantly. So that's a little bit of a headwind to capital flowing around the world. Now you play this out over the next few years, the FED goes through it's easing cycle and rates starts to come down. Rates do come down, the dollars should weaken some. But in the short term here this is a report that's more favorable for US assets.
Okay, so we did stocks, we did FX, we have to do bonds as well, Paul Brian, I mean, we're seeing a really large spike up in yields today in the US. How are people making money in bonds?
Well, remember in twenty nineteen and investors were begging for four percent, and so it's back again today. In twenty nineteen, the answer to the question he do you get four percent? Was well, land money to the Russian government and a lot of people weren't willing to do that. So today you can lend money to US corporates, the US Treasury, to US municipalities and get these nice yields. Now, the total return story may be a little bit behind us,
but the yields are there for the taking. And you know, if you're sitting in money markets, remember those fields will likely come down over time, so there is reinvestment risk. So it's still a very good opportunity for income investors to lock in the types of yields that they were begging for five years ago.
Brian, your offices are they done in a world financial center?
They are?
So that begs a question.
Is a Jersey guy.
Fairy or path?
It's the path.
I spent. There's a cost conscious guy there because the ferries fair well.
No, it is when you live in New Jersey, though, you get on the you park at the first station you can and for me that's Harrison. There's no way I'm driving all the way to the water.
Very good, all right, Brian, we got that down. Brian Lettt, global market strategist at a Vesco. He is a path guy. Good to know you can talk to these Jersey guys and they work downtown. You got to figure out how they get across the river. I, on the other hand, was a fairy guy because it's because and then every night at home we took a cook car home.
It's a lot of fun. I often take the ferry from it is marks men. If you go from Manhattan to Brooklyn. Yes, but I just like to romanticize my life load.
I'll tell you the ferry now. They live down the Jersey Shore. The ferry down to the Highlands where John Tucker lists.
That is a good voyage. There. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar 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.
All right, So we had a good news story on the labor front today. We also had some good news last evening, also on the labor market. We've got the US doc workers agreeing to go back to work as talks extended into January. So that's a good thing for those folks. It's a good thing for the US economy. Let's break it down and see what it really means. Hey, we could do that a leak clasical senior transport logistics and shipping analysts for Bloomberg Intelligence joining us from Princeton.
So Lee, what did the the shippers and the dock workers, what did they actually agree to last night?
Well, they agreed to go back to work and go back to the negotiating tables. So you know they're going to go back to work until an agreement is made. The new deadline now is mid January, so you know that's obviously on our radar, much like how this last deadline of September thirtieth was on our radar.
And so what that means is that they're going back to work.
You know, it's going to take some time to clean up the mess at the ports because there was a backup. Roughly speaking, it takes about a week to clear congestion created by one day of a strike. So call it three to four weeks until things quote unquote back get back to normal. And my guess is that the unions, when they do go back to work, they're not going to be going at full throttle.
They might be kind of dragging their feet, if you will.
So this apply chains are getting back to normal, and hopefully the two sides can come to an agreement where, you know, truly the efficiencies and the throughput is returned.
To where it should be.
What do we know so far about why the workers actually decided to end the strike?
The why, that's a great question. I don't I'm not you know, in those meetings. But my guess is that both sides of being pressured significantly by the Biden administration. The Biden administration said that they did not want to enact the Taft Hartley Act, which pretty much tells the two parties that they got to go back to the
negotiating table and cool off for eighty days. You know, they didn't want to do that because obviously the Biden administration wants to be considered a pro union president.
And then you know, and then on the other side.
Biden administration also doesn't want to see anything to hurt this fragile economy that we're currently in. You know, growth is expected one to two percent, tepid growth, but it's growth nonetheless, and obviously a prolonged strike could impact those growth numbers. But I don't think it's going to have much of an impact on overall GDP, maybe delaying some things, and on freight rates. You know, you're seeing some of
the marine shipping names like Mares. They're down mid single digits and trading, and that's really being driven by the fact that if there was a prolonged strike, rates would have probably been bouncing higher. And what we see now is that maybe they're not going to get that bounce. They're still a lot higher than they were last year, but they're still not going to get that extra boost created by the congestion and issues from.
A labor strike on the East and Gulf Coast ports.
Lee.
It sounds like, you know, there's a couple issues there between the two parties. One is just the wages, and presumably that is something that you can bridge the gap and get something done. The other one is productivity and mind modernization and you know, bringing technology or that would threaten jobs. That seems to be a lot harder to deal with any sense of how far away they are or how close they may be.
On the money side, you know, from the last numbers that we saw, you know, the union has been very vocal and wanting seventy seven percent increase over six years, which is roughly a little.
Under ten percent a year.
And then you know the ports came back at around they opted it from forty percent to fifty percent. I'm assuming they're going to get closer to that seventy seven percent over time. The automation is probably a lot more sticky. The ports do want to have more automation, and automation isn't necessarily. You know, a robot comes in, it takes out a job, it just might be a different job.
And there are sports where you know, workers are not necessarily there's one in New York one of the ports within the ports system in New York and New Jersey where they have some automation where there's people kind of operating joysticks, if you will, in an office and they kind of take control the last couple of minutes or the first couple of minutes of moving something to ensure
it's safety. You know, it's not only your productivity standpoint, but also obviously the less people you have on the port,
the safer it is. You know, accidents do happen, and so you know, I don't know where they're going to come out on this, but obviously the ports want to be more efficient, and the union wants to save jobs, and they just need to figure out, you know, some sort of middle ground, because at the end of the day, there's great technologies out there, whether it's you know, letting trucks in and out and report a lot quicker, and that's not only good for port throughput, but it's also
good for you know, if you want to take an environmental standpoint, you know, you don't have.
A queue of trucks a mile long waiting to cut into wait to get to the authority of New York.
All right, I got you.
Lead. Great stuff is always Lee Classical senior Transport Logistics and Chipping Antos for Bloomberg Intelligence, giving us the latest US stock worm go back to work as talks extended to January. That is good news.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android 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.
All right, let's talk about electric vehicles, and you talk about electric vehicles, I feel like you got to talk about tariffs, because it seems like everybodys slapping tariffs on everybody else's EV's, particularly the ones coming out of China.
The EU.
The latest he announces that they're imposed some tariffs of up to forty five percent on Chinese electric vehicles. How big of a deal is this for that market? David Weltz joins is Bloomberg Detroit Bureau chief. So if I'm a Chinese EV, I mean, am I welcome anywhere on this planet outside of China? What's going on there? David?
So far, they've had growth in Brazil, not just TV's but Chinese car makers in general. In the Bazilian government hasn't he at them yet. But yeah, look, the Chinese benefited greatly from American, Japanese, Korean, European companies going to their market, and we split the profits with them, We gave them our technology, and you know, now there, you know a lot is happening that's squeezing out all those foreign interlopers. And they have tons of excess capacity in China.
I mean we're talking tens of millions of vehicles and access capacity, and they don't want to lay Chinese workers off the governments. They are willing to absorb some losses, but they want to turn the country into a giant export base. That of course would be at the expense of everybody making and selling vehicles in the US, in Europe, Southeast Asia, where Toyota does a lot of business. So yeah,
everybody feels threatened by this. The Chinese government subsidizes its companies in other ways like free land, paying for factories, funding R and D, and you know, the government's local and national owned some of these companies, and they're willing to absorbble losses while they all go for market ship.
They're getting subsidies in every way possible. And you know, the foreign governments are saying, enough is enough here, and we're not going to just give our car market away to a Chinese export giant.
So why is the EU voting to impose these tariffs now? Bring us up to speeding kind of the context here and the relationship between the EU and China.
Yeah, the EU years ago decided diesel wasn't their thing for clean air, and they really pushed for adoption of VS and the Chinese seized on that and they've been growing a lot of market share in all the different European markets within the EU, and that does hurt the
domestic companies. Interestingly, with this vote, Germany voted against it, which I thought was kind of fascinating in the sense that this sounds like a very tactical vote by the Germans because they probably knew that there'd be enough votes
to implement the terriff. By voting against it, they signal to China that they're they're open for business and they need that because Volkswagen, Mercedes and BMW are big players in the Chinese market and they don't want to be penalized there for what the EU governments are doing.
Interesting, So if I am a Western automaker, you know, whether it's Volkswagen or Afford David, what do I How do I think about the Chinese market? Is that an opportunity for me? Is that more of a risk here?
Look, it's it's going away, and okay, I think it's a matter of time before the Western companies are mostly squeezed out. I mean, you know, you have two factors or played. One is the Chinese product. The domestic products a very good so it's tough to compete there. They have a cost advantage because of the subsidies, but also
because labor is cheap. Arguably Western companies enjoy some of that which is cheap labor, but they don't necessarily benefit from all the government subsidies and money for factories, money for R and D and so forth. But the Chinese government is increasingly pressuring people by domestic and the product is that. So you're seeing market share losses from everybody. GM's market share is down by a third, Volkswagen that's
taken hit. Hyundai's down like eighty percent because there was tension between the Korean soft marene government and China's government in the South China Sea a couple of years ago, and then suddenly nobody wanted to buy Hyundais and Kyas in China. So you see a lot of these domestic pressures in China against foreign name plates, and it's just tough and tougher for everyone to new business there.
All right, David, thanks so much for joining us. I always appreciate getting your reporting and your perspective. David Wellchi's a Detroit bureau chief for Bloomberg News. Again, kind of some concerted effort on a part of some of these Western countries in a form of terraffs against the Chinese electric vehicles, a competitive market. To be short in developing story to be short.
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