Welcome to the Bloomberg Markets Podcast.
I'm Paul Sweeney alongside my co host Matt Miller. Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news. Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast small.
Let's get back to the macrofront, because this payroll report really is It's like, it's good news, right if you're an employed American, Right, if you're Chairman Powell, you're probably having kind of a breakdown in Washington somewhere. You are seeing futures higher off this. I'm surprised we're not seeing more of a dent. But just to sum it up, three hundred and thirty nine thousand new jobs reported last month.
The estimate was about one hundred and ninety five thousand according to the Bloomberg Terminal.
But that coupled with an unemployment rate which rose by its biggest one month increase since April twenty twenty three point seven percent. Now, is that people coming back in the job market?
Where is that? You know? Is that? Does it a broader sign of enthusiam people coming back.
Yeah, but you know, we'll discuss this and plenty more with Tom Lacel.
He joins us. Sorry, Tom Gimbal, excuse me from the network. I've been called worse Friday morning.
Yeah.
I appreciate your joining us.
That's good to be with you, guys. I'm a nerd too, by the way, if we can get I want to be to the nerd party.
Welcome.
Yeah.
So talk me through some of what you were seeing from this job report, what you're seeing from trends and staffing and recruiting across the country, and does it dovetail with this positive numbers that we've seen today.
I mean, first and foremost, the news today was fantastic, and any anybody painting it as anything other than fantastic, in my opinion, is crazy. I think what we've got now is that people don't talk about is versus two thousand and nine or even two thousand and one, is that there's more companies that exist to start art up space is easier, there's more venture money on the sidelines, so there's more companies for people to go work at when they get laid off from big tech. So we
saw and we have these gig economies. I mean my theory, which hasn't I haven't had a chance to prove it out yet. But is that unemployment rose when we had added over three hundred thousand jobs because the gig workers were going back to work, right, So you had the unemployment rise because more people were filing from being laid off from big tech, but you had more people re entering the workforce from the gig economy. The dog walkers are going back to work, guys.
So if I had to hypothetically big emphasis and hypothetically go find a new job, how hard would would that really be? Or would I be kind of scooped up? Broadly speaking? When we're looking just how tight this labor market is.
Is this still.
A job lookers market?
I think it's I think the playing field has been even. I think what would happen eighteen months ago is you would have gotten a forty thousand dollars increase, right or a thirty percent increase or whatever the numbers were today. You'd go and maybe you get a bump if you know, you've got a great resume and what have you. But there's still a standpoint where companies are hiring people and great people are in demand.
Where are you seeing most of the.
Strength you know, one of some of the things that came through today, big boost and construction, employment, leisure and hospitality. Those still significantly below pre pandemic levels.
Are we going.
Back to a to a pre pandemic sort of environment in terms of the sectors that need people.
Yeah, My opinion is that the effect of the pandemic is really behind us. And I'd love to say that a year from now, no one will even talk about it. But whenever there's bad news, people want something to blame. And where we're at right now is healthcare continues to grow. You're right about the service economy and hospitality. We haven't seen that yet. I believe in the summer months we'll get that bump with summer travel coming out of the
Memorial Day holiday, which always tends to happen. It continues to be I mean, when you have the security breaches to continue to have, it is not going anywhere. Accounting and finance continues to be extremely hot of hiring, which means companies are doing back office work, which means M and A is continuing to be there because there's money on the sidelines and it might not be IPOs, it might be more companies going private, as we're seeing the smallest amount of IPOs that we've had in years.
Right.
Well, one of the pieces of this report, which kind of made it a little bit of a mixed report and not just kind of polarized, was that there were pieces of the support that suggested maybe not all is great in the labor market, like productivity, for example, being
substantially lower. How do you measure that though, and how can you really say, Look, you're starting to see a trend here where things like work from home or benefits, or the idea that it is a very tight labor market isn't perhaps having a bigger read through into the broader economy.
Yeah, I think the productivity measurements, you know, put five economists in a room and get five different answers. I just think that that's not where we want to go. I think what we've seen is is that in the second half of twenty twenty and in twenty twenty one, productivity from remote work and homework was great because people couldn't leave their houses. There was no travel, there was
no going to restaurants, you couldn't do those things. And today you can do whatever you want in productivity drops. And now we're seeing that the smartest people in the room big tech, they over hired. They didn't know, they didn't know what they were doing. And now we're on an even playing field and we're seeing that companies are laying people off. They're saying get back in the office, and and why are they because they're not seeing the growth that they want to have.
Well, let's go back there to the big tech story. I feel like in retrospect it's this bay like, oh wow, the Apples and the Microsoft, they made this wrong call. But here we are talking.
About them doing this big, massive.
Investment things like AI and the cloud and in stem and not really laying off workers in the way that say Gold miss Axis for example, or third round of layoffs or some of the industrial names are talk to us about the sustainability of war tech right now.
Yeah, So I think there's a couple of things. Number one, and touching on the AI thing that you were talking about before I came on, is that AI today is what e commerce was twenty years ago. Okay, right, so you know that the whole we've all heard the pets dot com thing. Eight thousand times, right. But that's what we're talking about right now, is that if brick and mortar companies would have gotten on the e commerce train right off the bat, a lot of e commerce companies
wouldn't have. If Walmart died e commerce as fast as Amazon did, Amazon probably wouldn't be Amazon today, right. And that's what's going to happen with AI, except people get it now every company is going to be using AI. So the playing field is basically going to be even.
Right.
Is there even the labor to support that?
Though?
Well, there's Now we're going to go into a whole nother thing that I know you guys probably don't want to talk about with me, But that's the immigration problem that we have. Right. The problem with technology hiring is we're educating really, really right people and we're sending them back to where they're from instead of allowing them to
stay into the work. And the layman on the street things that immigration is people coming from Mexico and Central America, and that is one an aspect of the labor problem on the blue collar standpoint for the most part.
Sure, And I guess you know you talk to food service companies and they say they're chronically understaffed.
It's very hard for them to find, you know. So one of the things that the FED is looking.
At is a year and forecast of four and a half percent employment. We're up to three point seven percent today, but that's still a pretty wide gap.
We're not going to hit four and a half this year. Okay, really, yeah, we won't hit four and a half this year. I think that. I just believe that number one, per my earlier comment that there's more companies. So if Salesforce or Golden Mien or whomever lays off every company, this isn't nineteen seventy five, right, where if a company, if General Motors lays off, no one's going to hire those people. Right. If Salesforce lays people off, General Motors would hire them. Right.
Everybody goes cross industry now and the world's flat, and industries are flat, and now people don't If you're in the car business, you don't have to stay in the car business. If you're in big tech, you don't have to stay in big tech. So there's a lot more transferable skills, and companies will start if you've got extra cash, you'll start a new division with talent that you have.
We have more of an entrepreneurial spirit and people to do that, So I think that unemployment will come close to four and a half.
Yeah.
Well, Tom Gimble, CEO at Lasal Network.
You're listening to the Team Ken's live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Let's talk about the macro though here, because I think still the shocker of the day is this perils report three hundred and thirty nine thousand, when that's SMATE of just one hundred and ninety five thousand, and I think it's a surprise to everyone both on Wall Street and Main Street as well. We even arguing in Washington, let's bring a true expert here. Amy Glazier, Senior VP of
Business Operations over at a Deco. She boasts two decades of experience and things like staffing management, business operations, so she really is the expert to kind of talk about what is going on.
On the ground.
Amy, how does this work exactly? We keep waiting for this momentum out of the labor market to kind of slow, if not dissipate completely, and it just seems to be getting stronger.
How does that work on the ground.
Yeah, I think the word of today happens to be resiliency as it comes to the labor market. You know, this is the fourteenth straight month of job creation really beating expectations. And although we see a lot and hear a lot about fears of alumining recession and a lot of negativity, at the end of the day, there's still almost two open jobs for every single job seeker. And it's something my team and I see on the ground
every single day. Emplawyers are still fighting for top talent, They're still trying to get creative, they're being more flexible, and really the data speaks to what I think a lot of hiring managers are seeing in their day to day world.
Amy.
Where are you seeing the most strength? What sectors are leading this charge?
So it's interesting you have to go almost region by region, industry by industry. We continue to see leisure and hospitality are hot. We've seen a lot of business services, healthcare always in demand. An interesting thing to notice that, you know, we just wrapped up the main jobs report. We're heading into June, and I'm already talking to our seasonal hires about quarter four. So we're used to talking about Christmas in July, and we're pretty much talking about Christmas in
May in June right now. So I think employers are forward looking based on the lack of availability of talent in the market. So we continue to see those shifts based on a lot of different nuances.
You know, that's interesting because one of the things that came out in this jobs report was that leisure and hospitality are still significantly below pre pandemic levels. Does the enthusiasm you're hearing from executives, from hiring managers at the moment suggest that will change anytime soon.
I think they just have such a faraway to go, and the gap was so wide in their def sit it's taking them longer to crawl out of it than they expected. So we continue to see momentum. We continue to see the hospitality and leisure sector try and do everything they can to really attract those workers and not only attract them, but also retain them. You know, not only in hospitality, but specifically in manufacturing and some of our other employers. We're seeing this huge trend on bringing
back retirees. And the great thing about that is we're also seeing the appetite from those that have retired to return from the workforce. In fact, we're seeing about one in every six retirees are looking to return to the workforce. Part of that due to a little bit of economic uncertainty, so employers are really leveraging and capitalizing on that as an opportunity to fill this gap.
So bring that.
Down kind of sector wise here in a previous segment, we were talking about perhaps some of the sustainability in the tech sector. For example, when we're talking about these kind of labor market qualities, is it equal among all sectors.
Definitely not. So when you look at like the manufacturing sector, retirees are a perfect opportunity. They've got the skills needed to keep production moving and high productivity output less of a training time. And that's an industry where we're seeing this huge skills gap. So that's a different problem than
what we see in the tech sector. What we're seeing in the tech sector today is that although you know, we've heard about layoffs from massive employers and we keep continuing to see challenges there, we are seeing that folks that have lost their job are finding a new one very quickly. So I think there are a lot of different factors each industry is having to battle when it comes to their talent strategy.
You know, this is that's interesting that you say that because an earlier guest on this program was talking as well about how some of these folks laid off from tech companies are it gets diverse in their skill sets and able to go out there and find Yeah, talk to me more about that.
We have just about a minute left.
Yeah, So I think there's a big difference between an industry and a skill set and occupation. So although the tech sector is an industry maybe declining, those skill sets are in hot demand across all industries. So the need for technology professionals exist in those that are still growing, so in the hospitality sector and the healthcare sector, they still need those unique skill sets that happen to lie
over in the technology sector. So they're capitalizing on that as well, which is partially what makes it great news for those that have faced some you know, some hard times with recently.
Yeah, certainly something we're gonna be keeping an eye on very very closely.
Amy Glacier, Senior VP over at a deco. We thank you.
You're listening to the tape canser our live program, Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
I think everyone's really really psyched for this weekend, at least the equity market certainly, certainly is. And a lot to digest there, Maddy from the payrolls. As John had mentioned, you've got the Chinese stimulus, you've got some good earnings, some bad earnings, a little bit of a mixed pot there.
Yeah, and I'm so glad pretty that you flagged the China story to me. I was reading in a little bit this morning, and I was confused about why we were seeing green on the screen. But to your point, the China stimulus, that's a big deal.
Yeah. I mean, look, I think the stock market and the bond market are responding to two different things. Again, this is just my theory. We'll ask the experts here in in a second. But to me, look, we didn't have a ton of pre market action. Even as early as five am, we had, you know, stocks only a future tire by like two tens of one percent. Certainly we're not seeing the rally that you are seeing right now, and I think a lot of it does have to
do with the Chinese stimulu story. Because again I'm gonna nerd out. Bear with me, Ben Emmons, he's gonna join us in just a second. But you know, fifteen years ago, when we were getting out of the global financial crisis, infrastructure investment from China was a really big story, and Chinese growth has been a big concern when you look at kind of the day to day trading outside of the debt ceiling saga. So let's get some expertise and see if my theory is right here. Ben Emmons joins us.
He is the head of fixed income over at New Edge Wealth. Ben, talk to us a little bit about the read through of China. Is the read through of twenty twenty three the same as it was fifteen years ago.
It's it's clearly different, you know, because you do have an open and debted properly sector and that is a drag on the Chinese economy. So as much as you have sawt as a V shaped recovery from the reopening, which is similar as we saw here in the US and in Europe. The subsequent cooling of that through the manufacturing sectors then really dragged down further by this property sector.
And I think the stimulus measures that you're seeing overnight coming out are really addressing the property sector from not being too big of a drag on that reopening momentum. And so China has that ability right to very quickly inject liquidity into the system and in fact the economy almost instantly YPMI data in China if it goes blow fifty, I think it's not always an alarming thing because China
could just boosts that in a moment. But at the same time, there are structural issues in China that are just like we have pose financial crisis, you gent into some sort of a new normal idea too in China, so it will be with us. But I think this stimulus story overnight is at least assigned that China wants to have this reopening continue to be having momentum and trying to reach their growth target for this year, which they said at five and a half percent.
Ben is it a recognition from China that the reopening has not been as bullish, for lack of a better word, as we initially anticipated.
It could be medicined, But I think if you look at the granular data of that, you know leisure activity in China has moved just as sharply up as as we had here in the initial stages of the reopening. Lots of mobility is happening. To this data out from Goldman Saxon that they're seeing a lot of outbound flights coming out of China. So I do think that the momentum is there. I think what China deed doesn't want is that that starts to falter driven by structural factors.
So think to that sends, You're right about that China's addressing this head on. Now, will we get this resurgence and all this demand coming out to people are so anticipating this entire yet us to be seen China as also to an extent, like I said, the tactical with its measures right, it wants to address the economy but not potentially overheated. So I think we have to keep that in mind.
Ben.
Let's come back to the story Stateside here, which is this payrolls report three hundred and thirty nine thousand relative to a one hundred and ninety five thousand estimate a blowout perils report for I think the fourteenth time in a row. Ben, let's talk about this bond market. Read through the two year yield at four forty let's four forty seven, a move of twelve basis points higher. How high does a two year yield go?
It could go a bit higher because my view, you know, this report just underscores one the economy obviously is not in a recession. And although I second the work by Ana Wong and then her team on the state level announces that they've done and I was actually talking to her right before the program it created as some parts of the country that are or sluggish or may have for session, the job support doesn't show it, and it
comes again from similar sources. Our leisure sector continues to expand, constructions expanded, which maybe pointing to the Infatial Reduction Act. So there is this torque underneath the economy that actually should lead you to somewhat higher yields. Again, so the two year as the sort of the forward looking yield for fat policy should be closer to where the fat funds rate actually is. And that's a long way from
here though, so but that's not entirely impossible. So I say, still think of a higher rate environment from here, given the strength of the economy.
I want to talk about that strength that we saw in the jobs report, because if you look at the total hours worked, it did decline just a tiny bit zero point one average hours decrease. So I know that's not a lot, but I wonder if productivity decreases is something that you look at and think about when sussing out the impact of a job's report like this.
It's relevant because productivity has had, you know, really ups and downs since we reopened the economy. In fact, actually the official the official numbers are negative and uh and this hour's work does say like, okay, there are probably sports of people that are again out of the labor force for periods of time, but that affects that productivity or it's still this sort of very stop go, you know,
stay at home and at work environment that written. But I don't think it's that alarming for the health of the labor market in itself. It is to be a report of broad based gains across most sectors instantly that temporary employment again picked up. The only things I think was in the household household service and weaknesses in terms of the duration of employment, for example, that that went up a bit. You know, I think that this is a report that shows that the economy is not off
the rails. It keeps that resilience and and I feel that the leisure sector can back to That is such a big driver of this report, and at some point that will change, I guess because it's a very cyclical sector. But I think it's also a story of global reopening
that's affecting our labor market. If tourism is impacting leisure, if immigration from the Mexican border is impacting maybe the construction sector or other sectors, then you know, expanding labor supply from those areas, yeah, keeps this labor market heart. So despite the decline in hours work.
Right, and I think it really speaks to kind of the future of how you actually calculate kind of the inputs of this economy.
And in a post COVID world, Ben, let's talk a.
Little bit about kind of the cross asset messages that you're getting in terms of the bond market specifically. Of course, you know the front end of the curve is going to be tied to the hip of what the Federal
Reserve does. How quickly could the Fed change its toun and when it comes to growth, when it comes to needing to stimulate the economy, and perhaps to some extent, although this is to be fair and exaggeration taking a page out of the China playbook, how quickly could that transition happen?
I think it only happen, critic if we see material weakness and employment, because on inflation, it's sort of a saying like they're on a course to try to bring it really down to two percent, that they're very determined to do that. So in order to change that regime of like basically they're having currently to say, a single
mandate focusing just on inflation for the time being. So if you're seeing a sudden, really quick uptick in unemployment and broader losses, that I think does change the reaction function, and that's happened in the past step way in a way, because I think that what they do then is plug in the losses of jobs into the possibility that the inflation rate starts to decline. So fast, so quick that they end up on the wrong side of that, meaning much too low inflation rate again with risk of deflation.
I think we're at this point, not at the point at all, given the strength of the labor market. But I do think the first reaction function to stimulus is driven by, you know, rapidly deteriorating employment picture, and so we're not there yet. The fact, I think were the opposite way. If this report shows his strength and services continue to be really robust in the economy, then their preferred measure of course services will not blutch much down and it means they have to continue to raise raise.
Yeah, certainly a conundrum.
I got to say, you cannot pay me a million dollars to be chairman Powell right now. A lot to digest, Ben Emmons. They had to fix income over at New Edge Wealth. We thank you as always talked about this bond market, this jobs market, and of course the growth story in the economy.
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We have a really exciting guest, I think, and who could probably answer a lot of the questions we have on the not just the payrolls report, but kind of the future of.
Hiring as well, Mattie.
As we talk about all this investment going into AI and all of this investment going into kind of the tech sector, but how does it actually play out on the ground.
And what does it mean in terms of net positive or negative for the consumers at the end of this, whether that's less jobs available or you know, more efficient laborer that could could benefit us.
In the end.
Yeah.
Absolutely, And you know, the trends here are almost hard to keep up with because they on the surface you're seeing you know, a hot, hot, hot payrolls report for by the way, fourteen times in a row, wild But on the ground we definitely want to hear kind of that perspective as well. For that, we bring in Kara Brennan, the chief people officer over at Lattice, tell us a little bit about this AI story and whether we're prepared for it. Kara, thank you for joining the program. Let's
start there. You will want this massive investment. We have the sector that's growing super super quickly, do we have the people infrastructure to support it.
That's the question chief people officers, HR folks, executives are asking across the board. We just at Lattice where I work, we have about six thousand companies that are small to mid market, and we have a community of more than twenty thousand HR people that interact and talk and ask each other questions of what are you seeing which has GPT, what are you seeing in future of AI, what kind of tools are you buying, what kind of policies are
you setting? And some themes are emerging there. One is that employers are understanding that employees are already using these tools, so they're wanting to get ahead of it with policies and practices that are sensible, but also taking to account
really important things like security. I think in general, and at least this is my opinion and what we're seeing at Lattice, is that there isn't this palpable fear that jobs will be eliminated, but we are trying to get ahead in terms of our workforce planning, especially at large enterprises, which could see a significant shift in the types of workers they hire and the types of workers that those
workers do depending on the tools that they purchase. They're trying to get ahead of planning and looking at this as a five year a ten year transition rather than an immediate jolt or something that should drive panic. And then I think the last piece is really understanding what
tools they should be buying. And we get down to this as people leaders, what tools should we should we invest in in our tech stack to make to continue to drive great employee experiences, to continue to help employees develop, and to enable the business to get a lot more efficiencies in pockets where we already are starting to see those tools arise.
Yeah, so Bloomberg Intelligence has a report on how the generative AI market could fuel a one point three trillion dollar addition to markets by twenty twenty three by the end of the year. But then we've also done some reporting on how the AI boom is going to delete a lot of jobs traditionally held by women. Which of
those two is the winner here? Is the addition to the market going to lead to more jobs for folks or is it going to be something that deletes jobs specifically for groups of people that have maybe had some lack of access to jobs previously.
Well, unfortunately, I don't have that crystal ball. I can tell you on the ground that these are definitely things we're thinking about and talking about in the HRC realm. What the consensus is of the folks that I've heard and I'm talking to is really looking at who do we have in seat now and how can we help them be better at their jobs? And definitely strong sensitivities around folks and underrepresented groups and women, and those are folks that we want to continue to stay in seat
and continue to diversify our workforces. But what we all know is upskilling and reskilling is really the path to the future. And the good news is that's what's always been the case when you're managing workforces. So those folks who are willing to learn about the possibilities of AI and learn how to use those news tools within our companies is what we on the HR side are looking to respond to and continue to drive understanding around.
Carol, let's talk about kind of the scary word in markets here, which is the our word recession.
At the end of the day, A lot.
Of the consensus of years that we're we're going to see a proper recession by the end of twenty two twenty three, if not early twenty twenty four. In these next twelve months, are you starting to see a hints of kind of widespread layoffs or is this starting to look like this inevitable recession whenever it hits, may at the end of the day be a job full recession. What do you think.
It's interesting because a lot of the conversations, again among the HR community have baked in a mindset of restraint and have baked in a mindset of conservative hiring, of really driving efficiency and productivity. And that started two quarters ago when we started talking about what a recession would look like this year. What this means practically in the seat of HR folks. And a lot of this is a talent platform, so we talk a lot about these things.
It's really understanding the talents that we have in our companies, how to ensure that talent is set up to succeed and drive the business to succeed, driving real alignment between employees day to day work and key business priorities, knowing that those business priorities could shift in a down market or a recession, and really really focusing on building a culture of high performance, prioritizing feedback clear performance management, making
sure that our best performers are rewarded, and having clear and transparent philosophies around things like compensation, so people have a future that they can look to in the companies in the company. So, I think a lot of the behavior chains that would be driven by a recession is
already being adopted within organizations. And it doesn't surprise me that we're seeing some additional jobs being added because I think this conservative mindset is something that kicked in months ago before maybe even the market's new.
Yeah, Kara, that makes a lot of sense. Thank you so much for joining us. I think we're gonna have to leave it there because we only have about thirty seconds left, but thank you so much for that insight.
And it's so important forre you we talk about it all the time, the impact of AI, whether or not it's going to lead to more or less jobs, and it sounds like something that is going to still be a question mark for even the greatest minds on this, the chief people officers who deal with this big question every single day.
Yeah, absolutely, Cara brun and chief people officer over a lot is giving us some crucial insight on that.
You're listening to the tape. Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Look, we talked a lot about what's going on the US in Europe, let's talk about the EM story as well. Who better to bring in than Kristin Seva, managing principle over at Paydon and Regal to talk to a a little bit about the EM outlook and Kristin, there's so much digest in the EM world. Top of mind for me is China, but we could I really feel like we could pick any country in the world and go there.
But let's start with the Chinese story. Madison knowses.
I've been obsessed with the headline that we got this morning around five am that they are potentially looking at extra stimulus for their property sector.
We know that's where a lot of the slowdown has been.
Your take on just how much of a difference that might.
Make, Well, I think China overall, right now, just in terms of the big picture. We had such a weak economy in twenty twenty two and this year is going to be very different. I think it's really going to be a consumer led growth story in China. You know, as you've seen some of the data come out very strong. Retail sales at eighteen percent. The industrial production numbers disappointed, but that really didn't surprise us. Really thinks it's going to be a consumer led growth story. Q one was
very very strong. We think that has to come down, but we're still going to get five and a half percent growth. As far as the property sector goes, I think additional stimulus will be helpful, but the property sector itself is quite has been quite problematic. I think they're looking to stabilize that, but not to overstimulate because I think the government is concerned about the potential that that could have for really causing problems overall in credit market.
So I think they're going to be fairly cautious on any sort of a stimulus going forward, not to overdo it.
One thing I've been wondering about with the China story is just that the reopening has felt like more of a trickle than a wave. Is that wave going to start to pick up through the second half of this year and into twenty twenty four.
Well, again, I think that the first quarter was so much stronger than expected that some of the data that's been coming out has been lower than expectations, but expect expectations were very, very high. So that eighteen percent retail sales number that I mentioned was a bit lower than expectations of twenty one percent, but still quite high. So we think that again we're going to be set up for a year that's going to be around five and
a half percent growth. Next year, we're probably going to see something around four and a half percent growth with some sort of level of moderation to this consumption lens boom that we're seeing.
How are you looking at the US growth story? Then, in terms of kind of the ripple effects visa v. The dollar, I know Madison has been I don't know why it's called you, Madison, Matty has been looking very closely at the ripple effects of the dollar. When you're looking at a federal reserve that is potentially ending their tightening cycle, whether that be.
Right now or at the end of the summer.
The ripple effects through the dollar on the EM space. How do you look at that from a broader complex.
Well, the end of the FED hiking cycle is a good thing for emerging marketed. That was one of the things that really weighed on the asset class last year. So now that we've got that risk behind us, and also have the China weakness behind us, we think that that all spills a positive signal in terms of where we can see EM currencies go. So our view is that the dollar is going to be weak versus EM currencies going forward. We've come off a ten year very
strong cycle of the dollar. The dollars overvalued, and it's not a story anymore where we can point to US exceptionalism versus the rest of the world. Now with the US potentially going into recession at some point and slower growth in the US, so we think that that growth differential between the US and other countries, and in particular emerging market countries, is going to continue to widen, which should be a positive thing for emerging markets currencies.
Yeah, Kristin, I know you spend a lot of time on the macro here, but going micro, I talked to an analyst this week who gave me a really cool example, he talked about how chlorox wipes are highly adopted in the US, but that's a huge opportunity internationally because of their higher margins on the wipes, and they're not used as much in other countries, particularly in Latin America, so that's a big growth opportunity for them, particularly as the
dollar does decline. Are there any other examples like that that you think that investors should be thinking about and looking at as potential growth opportunities in the EM space.
Yeah. I think in the emerging market debt space, it's really a sovereign story. This s A class is primarily about countries and picking the countries that you think are going to improve. And we also have a growing emerging market corporate space though as well, so I think on the corporate side there are definitely opportunities within various emerging market corporate markets, well managed corporations that we think could
do well in this environment as well. And that corporate space also in terms of the duration, is a bit lower than the duration of the sovereigns. But I'd say
in general, we think there's a lot of opportunities. You mentioned Latin America, a lot of opportunities in Latin America, particularly where central banks have done a good job of proactively tightening and so get getting a hold on their domestic inflation and having inflation start to come down in many of these countries because they did such a good job of being very proactive and even hiking earlier than
the FED. So we think that overall macro environment should be very positive in many of these countries for that business cycle and for these businesses to be able to operate in a lower inflation environment.
Talk to us a little bit about the carry trade here. I mean, look, carry has always been popular when you're when you're looking for kind of a hunt for yield. But in this kind of era of where perhaps the markets are looking through the recession that everyone expects to be just around the corner, just how popular is the risk taking? Just how popular is the carry trade right now?
Well, I think in fixed income, in the higher yielding parts of fixed income, like emerging markets, you're getting starting yields now, if you were to get and buy into the emerging market that asset class right now, you're getting starting yields that are very very high, so over eight
percent on most emerging market portfolios. And you know, even in an asset class like the emerging market local asset class, where the overall index yield is six and a half, there's a significant dispersion in there in many countries are
offering eight to twelve percent local yields. So we think that no matter what you're investing in, even if you were investing just in the overall index right now, in emerging markets, your starting yields are going to be very, very high, and that would indicate from the previous looking at previous historical periods where you have these kinds of yields, that your total return expectations are also going to be high, say in the eight to twelve percent range over the
next three years. So I think the em asset class overall right now is a good carry story. I think within the asset class you really have to pick and choose and not just rely on on only carry. You really have to pay attention to fundamentals into what you think your overall total return is going to be. So we have a nice mix in our portfolios of both investment grade and high yield opportunities in the portfolio. And keep in mind that emerging market debt, even though it
has this high yield. It's very highly rated, so all three asset classes our overall investment grade with a high percentage over sixty percent in investment grade security.
Certainly in involving market. Kristen Seva, we thank you as always. She is a managing principle over at Hayden and Regal.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
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