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The S and P is still up one percent, but if you take a look at an inter date chart, it is a nice straight line down after we got that ism services number, Paul, when you have prices paid higher in next slipping below fifty and that employment number coming in at forty five point nine for the service sector, which does echo what we saw in terms of hospitality jobs and sort of the meager edition that we saw in today's jobs report.
Yeah, I think so. I mean, I think the labor market, we had a lot of guests on Bloomberg survants, a lot of economists, and I think the consensus kind of is still a solid labor market, but just cooling. And that's probably all. Maybe the Federal Reserve might need to pull maybe rate cut.
We'll be a little bit forward in a year.
And if we dot together all the things we learned from say bookings and Expedia, et cetera. The kind of service economy is starting to slow. So let's get more with that. Anthony Javis, he joins us. He is the ISM chair Services head. He is the chair of the ISM Services Business Committee. Let me get that title right, So talk to me about how you understand these numbers. So, services and next slipping below forty nine point four, how would you describe that?
Well, what we're seeing here is a pullback in the leading indexes that comprise this composite index Business activity fifty point nine. That's down six point five percentage points. Still growing, but as you said, it's cooling, it's definitely pulled back. Some new orders still growing fifty two point two, but
down two point two percentage points. And the employment market continues to be just as this index indicates forty five point nine, down two point six percentage points, attributed to a combination of things that we've seen in the past ongoing. Either they can't find applicable workers for open positions, or they're controlling that labor expense. And the last one, supplier deliveries continues to be faster due to waning demand as well as improved capacity.
So Anthony, can you kind of give us some context here, because context matters, and give us a little sense here of the trend here in some of this services data.
That's a great point.
This is one month we've contracted here first time since December of twenty twenty two. Well, we thought it might take a little bit longer to balance back. It came right back the following month. Not trying to be the consummate optimist here, but again one trend, we're just under the baseline. Based on responded comments, they indicate that they see the next part of the year that it will be some improvements there. So we'll just have to wait and see how it trends out over next couple of months.
Where are the worry spots within all the respondents? Where are the weak links?
Well, it's inflation is a big one. You know, Pricing is definitely impacting their various industries and their companies that make up this sector, as well as the challenges and employment. You know, construction still seems to be an area where they can't backfill positions, and you know, geopolitical issues as well also is on the forefront of our respondent's minds right now.
All right, great stuff, Anthony, Thank you so much.
Anthony Avis. I love that you hop on with those. We know you have a busy day. He's the chair of the Ism Services Index.
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You know there's a luck going on out there in the marketplace. Here and again, it's economic data, it's earnings data. Henrietta Trez joins his managing partner and director of Economic Policy for Veda Partners. I believe from Zoom, I mean from Louisiana via Zoom. Hey, Henrietta, what do you make of this job's report? I mean, to what extent is this labor market cooling? In your mind?
Well, first of all, I have to just say, the Stones played last night the jazz Fest down in New Orleans.
So y'all just all that down.
Oh fantastic, It'll be going all weekend, so can't wait. But no, the jobs number continues to be really I think just a goldilocks moment the market participants are focused on FED interest rate cuts, and this reignited opportunities and sort of optimism for a FED rate cut in September, which is a market difference from just earlier this week, and expectations for the last couple of weeks. I've been pushing it out till November or even next year, or
even say that there could be a FED hike. So I think this job's number, while slightly lower than it has been in the last couple of months, I.
Mean, continues this ridiculous trend.
Of some four percent unemployment, which is full employment in the United States and really just paints the picture of a very robust, strong economy that is the longest running since the nineteen sixties.
So I think it's sort of a perfect number, to be honest.
How fast, though, can the job market cool?
Someone pointed out on m Live, which is the great sort of blog that we do here at Bloomberg, that health and private education excluding public school teachers, accounted for over half of the entire gain and payroll, so if you back that out, it was actually a lot weaker. And so I'm wondering how fast we can cool here.
I mean, I think that the ridiculous strength in job growth for the last couple of months. It's just been blowing out expectations. It's almost like where were those jobs even coming from. It's hard to sort of wrap your head around those numbers so consistently for what is it, twenty four.
Months or something.
I think that this job's number reflects more of a reality. I saw the same post, you know, some similar comments about the weather over the winter period, maybe just bringing this back down to earth, and I think it reflects, you know, a very strong economy that really doesn't have much room to continue growing jobs the way that it has been.
All Right, So I guess when we combine this jobs print today, Henriette, with what we heard from FED Chairman J Powell earlier in the week, does this kind of alter the way you think about how the FED may proceed for the remainder of the year in terms of perhaps cutting rates.
You know, I don't subscribe to the theory that the FED is politically motivated.
I know a lot of.
Investors are in that headspace, but you know, I've worked with Federal Reserve folks for many years, going back to when I was in the Senate and here and work with many of the former FED chairs, former FED employees now, and I think the understanding that they are not a political animal is something that Jay Powell tries to relay over and over and over again, as you did on Wednesday.
But you know, investors don't necessarily all want to hear that.
I think that if the FED feels it to contain inflation and keep its dual mandate going, they will cut as needed. I mean, one of the things that I'd point out is that we have elections in the United States all the time. Granted they're only every four years of presidential election cycle, but we've got generals, We've got different elections across individual states, constitutional referendums.
I mean, this happens all the time.
So to assume that the FED is somehow not going to cut from you know, July to November because the election, that's a big swath of time that they're just going to let the economy run.
Unregulated, you know, that's not really how they operate.
And so I would just encourage folks to say, if they do need to cut, they will, and I think they'll do that x any political considerations. One more thing I'd add is that there's this view that if they don't cut in March or April or even June, then they can't come in and cut in September. I've read that repeatedly from investors and the idea of being it'll look to partisan, too politically oriented, and I disagree with that. But it's interesting to see the market move since Wednesday
and today's jobs report. Now there all of a sudden pricing in cuts again in September, so it seems to vacillate quite a bit. And I just point that out. So it's an interesting dynamic from investor perspective.
Yeah, I mean even before this is already happening, they had that article last Friday right about potentially the Trump campaign talking about eroding that independence regardless, So there's that.
Before I let you go.
The way labor market slows, When could we be in a higher unemployment environment in this election cycle.
I mean, I think to your earlier point, it could happen pretty quickly.
You know, it's only a three point nine now, it wouldn't take much to take up to four four point one. And I think the revisions are something to watch certainly as well. And as we get into the summer months, you talked about school teachers. I think that there's opportunity for change and they can imagine us being higher than four percent come election day without question.
All right, Henriette, thank you so much for joining us. Henrietta trees A Managing partner and director of Economic polse at Veda Partners.
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Carol Pepper is one of them, founder and CEO of Pepper International. She joins us now from New York City. Carol, the market seems to be taking the report is goldilocks. Im services number might have put a little bit of dent in that, but either way, does this give you confidence to the market.
Yes, I mean I think we are in a very nice sweet spot. I'm not necessarily want to buy the market. We look at sectors and see where the growth is going to be. So, as you know, I'm a big tech bull for the long term. I think you buy tech on fear days and the United States really leads in technology and innovation and artificial intelligence, and those sectors of the magnificent six if you will, out of seven are really powering the market forward and we'll continue to
do so. I think it looks likely that you know, the FED will ease at some point this year, and that's very good for growth stocks. So I'm in a happy place with the report.
What did you make of that Apple print we saw last night after the clothes What are your takeaways?
Well, I just think again it's you know, everybody wants to keep counting tech out because they missed the rally. And what I tell everybody is you can't time when all the good news will come in. So things are looking up for Apple. You just have to get in there hold your knows. If you're a value investor and you think everything's overpriced, because it's not. If you have a long term time horizon, as you know, I manage money for family offices, generally people with over one hundred
million dollars, and we make long term bets. And the long term bet to make right now are the Magnificent six. I leave out Tesla because I think they have a lot of problems, but if you look at all the other stocks these are this is a good basket. Or if you can't buy all the stocks individually, you can look at QQQ, get a broad based of American technology exposure and global technology exposure, and set it and forget it, you know, and you will see continuing upside surprises. Sometimes
we'll miss the quarter. Look at what Microsoft just did. They're reinvesting to buy more AI. So the earnings might be down for a quarter, but that is only going to translate into double the earnings two quarters later. So you can't just go, you know, month to month and say it uperates down. You have to make some long term bets if you want to make money over the long term.
So if I'm hearing you right, you're saying buy on fear Big ten because it's a good value value plus tech.
Yes, it is the real value. The real value today is not the value stocks. The real value today or the big tech stocks because they have the balance sheet, they have the cash, and they're leading the entire country. Because their technologies will impact every single other industry in this country. AI is going to touch everything. So if you really want to make long term money, if you want to fund your retirement or your kids education, put money in tech and leave it there. Don't try to
trade it daily. It's very hard to guess which quarter the yearnings are going to pop up when people are going to be more or less fearful. But when they are fearful like there were a few days ago, that's when you jump in and buy.
So, Carol, what do you think about healthcare here? And recently I asked us, I'm looking at Amgen here. Here's a company with the one hundred and sixty billion dollar market cap company up twelve percent, and it seems like in the healthcare space, if you could talk about a GLP into your portfolio, it's kind of like saying you got a eye exposure in technology kind of works.
How do you think about.
Healthcare, Well, I really think that healthcare right now is being driven by the whole weight loss craze, because that is a huge trend that's going to keep going up, and I do predict that eventually it might take another year. We're either going to get pills or we're going to get the price of the shots coming way down, and that will just bring a flood of new patients into the market. So that is a trend that you definitely want to jump on. I think for the next four
or five years. At some point the governments will put their foot down and start to mandate lower prices for these drugs. But for now, it's definitely a trend that will make money for you over the medium term for sure, because what most of America is overweight and this is a way to help them get their weight under control.
Yeah, Paul, sitting at this current moment, Carol, before let go, what else do you like right now?
What else do you want to buy on fear?
Well, I think the main thing is just you know, those are my favorite picks. I also think you should buy estate, frankly, because real estate is going to come back again. You have to be a little bit patient, but if you're willing to sit through the summer, you can get some beaten up real estate and development stocks and home building stocks. Real estate will come roaring back the second that the rates come down. The rates aren't going to come down. Do we know if it's two
months or six months. We don't know, but we do know we're going to get there. So those of you who loved a bargain, look into the real estate sector right now. Look at home builders and people like that. That's really a place where you're going to be able to get in there early and patch yourself in the back when the rest of the world catches on your trend that you got in early.
All right, Carol, thank you so much for joining us. Kyle Pepper, she's a founder and CEO of Pepper International, joining us from New York City via zoom Here.
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Let's get back to that labor data, because that is certainly the big play here for the markets here. We want to always like to chat with Tom Gimble. Tom is the founder and CEO LASAL Networks. Tom, talk to us about this number here, A little bit a slowdown in hiring, but still a pretty healthy number. What's your perspective.
I tell you, I'm not sure that it's not actually a better number than people think. If you look at how small the government hiring was, all right, break it down for you. So we've been averaging. Government's been averaging about fifty five thousand jobs a month. This month it was eight thousand. So when you look at the percentage of non government jobs added, this was one of the better months.
Interesting because it I heard that.
So then why is the Why is the rhetoric like, ooh, if you back that out, the overall number wasn't that great?
Oh, because economists are depressing people. I think that. I think that that in reality, you know, the as we talk about every week, adding jobs is better than losing jobs. So the economy is good. I think where we have a problem that everybody knows about is inflation. And for some reason we've got cost of things going up, stock market going up, but it's being driven by by a few of you know, the Magnificent seven and all that good stuff. And then we're sitting here looking at at
at people working, and the labor market is healthy. Now what we're seeing is a lot of the jobs are in healthcare, and they're in hospitality, and they're in construction, and so those are a lot of hourly jobs. They're not the highest earning jobs. And we're seeing a little bit of white collar stalling in the hiring side.
So, Tom, it's early May. It means kids are gonna start graduating from college.
What's that job market look like. It's there. It's there, It's just not as healthy as it was. And what I mean by that is it's the jobs aren't going to be if you want, you know, a lot of kids, oh I want to work remote, I want to work from here, that you're gonna have to go into an office. I think for a lot of the jobs. Number one, Number two, the salaries aren't going to be as high starting salaries as they have been historically for recent college graduates.
And number three, you're not going to see as high a volume of hiring at companies, so you might not get the company that you want or the job you think you want, but there are jobs available.
Do you what sectors do you still feel like are pretty strong? I anecdotally was speaking to a friend of mine who's pretty high up in the tech sector on the data side, and she is just like, I can't. It's really hard to get a job, and there's been so many rounds of layoffs over the last year and a half or so that there's a plethora of people trying to get in on the same jobs. At this point, where are the jobs where they're not talk us through all the dynamics.
Yeah, so I think the real challenge is where were I think things are going to move over the course of the next couple of years. Is less industry and more skill set. Meaning technology might not be hiring, meaning big tech companies, but people who do sales may be getting hiring, and people who do development or product maybe getting hired, but they're not hiring in marketing or HR. So I think it's more of what your skill set
is versus the overall industries. Right, so, healthcare may be stalling. We don't there the nurse shortages at what it was three years ago. However, they're hiring a ton of doctors and they're hiring a ton of of medical records people. As they move to AI, they still need to get the work done. So it's really in the roles versus the industries. But if I could wave a wand and give myself a skill set, it would be in security.
In technology security. You guys see the hacks that Microsoft had a couple months ago, and there's a new one every week or every month coming out. And if somebody is really talented in the cyber security space, that ain't going anywhere.
Hey, Tom, I wonder from your perspective how the influx of immigrants, legal and illegal into this country and a surge it's been, how does that impact A lot of folks are saying that's been a net positive for the labor market in the economy. What do you see from your perspective.
I don't necessarily see that yet, So I think on the legal side, the problem with the layman, as you guys know, is people think that coming in is purely south of the border for immigration, and legal immigration is people who want to get married or they're just going to move here. We educate. There's different laws for non citizens to come into the country to be educated at a lot of our best schools and then you have
to leave at after that. And so the legal immigration of educating people and then not allowing them to work here, especially in technology fields and engineering the stems. Right, we have this population, we educate and then we send away. It's almost a non with this country was built on methodology. And then number two on the illegal side. I think the negative on the workforce isn't that we don't need people at an entry level and blue collar skill set.
It's a matter of how it's affecting society and what businesses want to do and people being scared and where things are at, and it overloading the system on some social issues and that has ripple effect into corporate America.
That's my concern. And then the last thing, you know, you know it's the third rail, right, But I think I was doing an interview the other day about how, you know, we're seeing an influx from our clients at state schools doing finance and consulting recruiting because they don't want to just touch the ivs with a ten foot poll.
Well, that's really interesting. What what what's the why there?
No, I think there's you have so you have a smaller student population base at the IVY leagues. So companies don't want to spend their time trying to to look at social media and figure out who's in the protesting, who's not, who might have been abusive to other students, who wasn't right. It's easier to say, you know what, we're not going to discriminate against people within the ivys. We're just not going to recruit from the ivys.
That's real, Tom.
So what's kind of your view here as it relates going forward in terms of how do you think this labor economy is going to evolve for the remainder of this year.
I think it's going to continue to be be fine. I think what we have is, you know this intersection, this then diagram if you will, of where it meets of the overall stock market, a change in Washington d C with the election, potential change with the Washington d C with the election coming up, and then and then just where we're at with inflation and things like that, and and interest rates and so we got today is to me, it doesn't seem like the Fed's going to
lower rates. And if that happens, I think the status quo continues. And I think it's going to be just this emotionally purgatory world we're going to live in for the for the next six or eight months.
Okay, but let's let's game that out. So that's the FED not cutting rates.
If the FED does cut rates, or do the companies and industries you talk to, how would that influence their hiring?
Oh?
Most it really depends, right, twenty five basis points, you know, not that much. What it what it does is what it'll do is if it has the desired effect that a lot of people in corporate America think, which is send the economy back into a hyper drive state, then they continue to The theory would be they'd continue to lower interest rates, and then when money got cheap enough, you could hire people in the in the classes of
twenty fifty one hundred. But I don't think twenty five basis points in the next or two sessions from now is going to all of a sudden turn three hundred or four hundred thousand jobs a month. I don't see that. Hey, Tom, is there.
Any regionality out there into the hiring market. I'm just guessing, you know, Texas, Florida going crazy? But is there any regionality out there.
No, I think you're right. On the Red States. We continue to see Nashville, we continue to see at Birmingham and Alabama and cities like that, and the Triangle in North Carolina just being a hot sector. But now I think other than that, it's I do think you're starting to see a little bit of it move in from the coasts, and I just think that's more of social issues than anything else. So it's where companies will go.
I mean, look at I read an article. Don't quote me on it, but that Goldman Sachs has more employees in Salt Lake City than they do in New York. So I think that tells you that second and third tier cities are deaf. A place where corporate America is going.
And we're going to Nashville.
We are going there.
Yeah, I'm super excited. I booked my hotel and I booked the airfare. Okay, so this is big for me.
Water slide to die for water? Yeah, Oh it's a water park.
Oh no, we go we go to this.
Okay, there we go. Bloomberg Intelligence on the road from a water park.
Tom Gimble, founder and CEO over at lasal Network, thank you so much. We really appreciate all of that for you, But that's so interesting. It's like, you know, when you stay on the West coast or the East coast, you forget that there's a lot of building happening, particularly in Red states, particularly from some of the infrastructure bills that we've seen. Any respective of that, there's still a lot of build out as well, so that's actually quite interesting.
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We bring you all the news and economics and finance, and we bring it to you through our lens of Bloomberg Intelligence analysts. They cover two thousand companies and one hundred and thirty industries worldwide. They've been doing it for decades and they are really good at what they do. So on that point, we want to go to anurrog Rana, Bloomberg Intelligence senior technology analyst to give us the breakdown
for Apple earning. So we're looking at the best rally in almost eighteen months from Apple stock is up by six percent. I should point out that the S ANDP is really starting to roll over. We're now up only eight tens of one percent, so we'll see how long the rally and Apple lasts. But an a wrong, What was the biggest standout that justifies the rally for you?
Yeah?
When the results came out, you know, I remembered the code from late Charlie Manger that the secret of happiness and successful marriages low expectations. So I think this is exactly what happened with Apple that you know, people going in were like so pessimistic that any bit of good news was just hailed with you know, the stock react that you're seeing right now.
So An Rag, I guess before the print you're talking about what you really want to hear regarding China and their business in China was stabilization?
Stabilization? Did you hear that?
In fact, he said they were doing very good in China, which is contrary to every data that out there. In fact, a couple of analysts this as asked him that, like, you know, how do you reconcile with all this data on shipments being down versus your comments in China. He's like, I'm not responsible for them, but we are doing okay
in China. So it's it's a big dichotomy right now in the market as to you know, who to believe, whether the third party data providers are that are that are talking about a massive decline in iPhones versus Apple that's saying, you know, China is okay.
Did you like them spending one hundred ten billion dollars on a buyback. I'm guessing you didn't because Paul was into it.
No.
Actually, to be very frank they spend over about one hundred billion right now, so the one hundred and ten is a minor upgrade. You know that the real new would have been if they said they're going to do about one hundred and fifty. Frankly, so I think, I know, the headline number looks really big, but they do already spend currently close two hundred billion dollars buying back you know, their share. So I mean, I like it, there's no problem about it. But but I think that's not really
what got the stock going. The fact that they said that they're going to grow in you know, those single digits after forever about you know, close to two hundred basis points, you know, impact on FX.
That's I think the biggest news at this point.
Hey, Ana Rock, I guess their developer conference coming up in June is going to be big for Apple from an AI perspective. What will you be looking for at that conference?
So, I mean, my personal preference would be if they do a tie up with Google and use Google's model to run.
Some of those stuff, because you know that there is a big unknown out there as to what's going to happen between their relationship with Google when it comes to the default search engine and Google you know, supposedly pays them twenty billion dollars for it. I think that's under
a lot of regulatory scrutiny. If Apple were to refine and do another deal with Google where they can you know, mix both those things, it will really help their AI costs because I don't think organically they can do something this quickly. There are news by Margament that they're going to either tie up with Google or Open AI.
You know, my preference would be if they tie up with Google over there.
So what is that risk for Apple from Google?
It is there, but to be honest, it's a it's a it's a it's a one or a zero, which means there's no way to predict which way the judge
is going to go. But I also feel that if they if this does come down to that, you know, some kind of illegal issue, the two parties are willing to pay each other or you know, there is a transaction there, so they'll find another way to make it look less like that, you know, a payment for default search engines, maybe per click, or there's some there could be some economics there, but it is a headline issue you at least in the near term for Apple.
I have to say anag you do not seem that thrilled or that you've you know, you don't see that thrilled after Apple's quarter.
No, no, no, no, that's that's not true. I mean I'm very happy with this.
I'm actually skeptical. How about that?
No I I no, no, not at all. I'm relieved of what happened from last night.
I just need to get to some of these one or two different things that are pending, because I see, at the end of the day, Apple.
Is one of the most phenomenal companies right now.
There is nobody with an ecosystem that's stronger in the retail world or in the consumer world.
But the question is how do they get back to the growth rate and can they get.
Rid of some of the regulatory handles Right now, their fees is under a lot of pressure, both in EU and perhaps.
Even in the US. So there are a few things.
You know, it's not a clear cut story as a Microsoft or an Amazon or an Nvidia at this point.
There are certain things that need to be cleaned up. But yeah, no, I'm I'm always a big fan of Apple.
Nothing about it.
All right, Very good Anna, rog rn I thank you very much. We appreciate that. As always on a Rogronic Technology Analyst or Bloomberg Intelligence.
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