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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business App. Joining us now the one person I wanted to talk to her commercial free year through the fur Good morning, huge audience on YouTube. Good morning to all of you Lindsey Pigs. It joins us who's pushed way again consensus and it said, this is a fed of stability or even rate increase. You look like a genius this morning. Are you going to look like a genius in thirty days for the report come July?
Well, I think so. Even if we did see a hotter than expected print in even the next one or two inflation reports, it's not going to be enough data to convince the FED, particularly against very clear tight conditions in the labor market. And the most concerning component of this report for the FED is going to be that wage component. We continue to see pressure on wages as labor demands outpaces labor supply. And this is not something
that's going to be fixed overnight. This is a rebalancing that is going to have to occur over months, a prolonged period. And so when we look to the FED, who's telling us they need very clear evidence of disinflation, many months of that evidence that says that while raycut may be eventual, eventually does appear to increasingly be a twenty twenty five event.
You know, Tom, This top Live blog continues to be my go to when you get these big things. And here's something just posted there. The two hundred and seventy two thousand payroll gain was bigger than every last one of the seventy seven estimates in the Bloomberg survey. So there you go, Lindsey, where's this demand for labor coming from? I mean, who's hiring all these people?
Well, I think it's pretty broad based. There isn't one sector of the economy that's booming. What we're seeing is an overall steady level of expansion across several key categories of the economy. Now again, I don't want to overseell what we are seeing in the labor market or the broader domestic economy, because we are starting to see somewhat
of a rebalancing. Labor market conditions. Absolutely, they're still tight, but they are somewhat less type than what we saw not just at the start of the year, but over twenty twenty two, twenty twenty three. So we are starting to see a rebalancing. But the problem is the overall impact, or that that rebalancing is occurring at a much slower case than the market or specifically the FED had anticipated. Still positive, but we are starting to see that second derivative decline.
And Paul aw you get out the HP twelve C. I mean, you know, if you have pigs on, you got to get out the HP twelve C. And I do the three months moving average, which in March was a big number OMG. April was a lesser number. And now we just got another big number. Lindsey, I'm rocking two hundred and fifty thousand ish over the last ninety days per month six years ago. That's a boom statistic. Are we in a boom labor economy?
Well, I do cost and against reading in too much to the headline payroll number, because we are starting to see somewhat of divergence between the payrolls and the household survey. Payrolls are consistently reaching new highs month after months, but the household survey really has shown somewhat of fatigue plateauing over the past I would say, six to eight months.
The disconnect, of course reflecting the fact that we consistently underaccount the working age population, particularly now as we see these large flows of immigration coming into the economy, legal and illegal.
But also what.
We're seeing is this shift in the demand or the type of jobs being created in terms of full time versus part time. Now, I haven't dug into the details of this report specifically, last month was almost entirely full time, but if we go prior to that six to eight months, that was almost entirely part time employment, which, as we know, part time hires typically have more than one gig. And then of course you're counted more than once in the
payroll report, which could artificially inflate. That number again still positive, but I do think there's some underlying signs of the economy starting to cool that that rebalancing. As I mentioned, so.
We had four point one percent average hourly earnings year of year four point one percent. That's well above the three point nine percent consensus. Last month was also revised a little bit higher. Wage inflation, Is that a thing?
Well, it's certainly a concern, absolutely, and concern not just for the FED, but wages. Surprisingly strong wage data for the BOE the ECB. That was also noted as a
concern for the pathway going forward. So even as we see some of the supply side components providing ample relief to inflation as economy is reopened, tradelines come back online in the aftermath of COVID, what we're seeing is some of these variables under the purview of global central banks are showing less improvement as we have allowed in some ways inflation to become entrenched in the economy, with central banks sitting on the sidelines and allowing above target inflation
for a long period of time.
Lindzi, when you were taking your PhD, you had the unenviable task of studying the terror for Michigan Claudia some and of course Claudia has been forceful that we don't have enough evident data for recession. Clearly she's been right. She's on with us in a moment, folks. Clearly Lindsay Piggs has been right that the economy is much better. But how bifurcated is the economy now between the haves and the have nots.
Well, I would push back. I don't think the storyline is between the rich and the poor, the have and the have not. I think the divide is between the asset holders and the non asset holders. Because what we've seen is while the average American household is still outspending, they are feeling pain from higher prices, higher borrowing costs,
the resumption of student debt payments. But there's another category of consumers that have experienced asset increase in net wealth to the tune of twelve trillion dollars over the past year. And that's possible thanks in Part two, this massive increase in asset prices via the equity market, via the housing market.
So when we paint with a broad brush, the consumer remains resilient, that's very much true, but the level of resiliency is very much divided between the asset holders and the non asset holders in this economy.
Lindsey think of someone doctor figs. It was Stifel here, and of course she's done a yeoman's job of pushing against they're going to cut, cut, cut, just saying everybody calm down and wait for the data to let you know where we are. Now. We got Claudia sim coming up in moments because of is it Roaring Kitty? Do I have that right now?
I don't know.
Jess's going to brief here. I was like, you know, why do we need to talk to Jess Metton about Roaring Kitty? And the answer is we've gone from sixty seven to thirty six. We're now breaking down to a new loath this morning, so we'll get to Jess Matton. Yeah, on Roaring Kiddy.
Game stop down twenty three percent pre market trading time. They had some news that they filed to sell up the seventy five million shares to take advantage of this what had been one hundred and sixty percent increase in the stop the year.
Speaking of Hello Kitty, Claudia sam joins right now where there cats that she heards on a weekend basis. Claudia Sam, of course, providing all sorts of important economic analysis, hugely influential right now with New Century Advisors. Claudia, you nailed it. Just everybody's saying, Claudia Sam's right, recession, recession, and you're like,
wait for the data. Is this a numph of Is this enough of an oomph positive jobs report where you're not looking out to the first week of July, but you've got to get out further to get any kind of caution on this economy.
This is good news today. Jobs days have been good news in the past couple years. We see a resilient labor market. We have had a job full recovery for the first time in a very long time, and that's good. So you know, I understand that sometimes markets think good news is bad news and it's bad news for the Fed. No, this is good news for the Fed. People have jobs. It is good.
I mean, I mean the FED starting when they look like a genius right now in terms of the parlor game, which I don't care about, but the overlay of that is a sub two percent GDP growth. Is that embedded into your study now where you're looking at finally real GDP growth actually pulls down.
So I will channel FED chair J. Powell and say we look at the totality of the data. Right, we have to bring all the pieces together. You can't just look at the labor market and say recession or not. I don't lean just on the song rule and it's my rule, right, So, and it's very important a couple of pieces. Always look under the hood.
Right.
We need to see the consumer we're keep going. We need to see the businesses investing. We've largely seen that it's going to be bumpy, and never take one month and run with it, like, we really have to look three months, six months, and if you do that story, you've got the moderation today is not throwing that off, but it's a good moderation. It's a sustainable path we are on.
Paul, I'm going to go this three month moving average is like two fifty and firm payrolls ten years ago.
That was a boom mcconna, that was a Boomcconnay, it looks like we're fully employed. I guess let's look at the wages here, Claudia. We had last month we revised up a little bit to four percent this month that came in at four point one percent on an annualized basis, is that wage inflation. Are we looking at the wage inflation there?
We have seen no evidence of a wage price spiral its entire cycle, and if you didn't see it in twenty twenty two, I have there is no story for it right now. Again, we need a resilient economy. We need paychecks out there so people keep spending. The FED is going to wait, that's just kind of how they roll. So we want to make sure that that patient side does not take us all down. And it looks like they got some resilience and that's a good big picture, not just for the Fed and their waiting game.
So Chloudia, how do you think about the immigration, both legal and illegal and how that impacts some of the data we've been seeing over the last I don't know, six or twelve months, it seems to be getting a little bit more play out there.
So, first, from the lens of the economy, the immigration, the pickup and immigration to this country has been good for the economy. We had widespread labor shortages and those really buy and large are taken care of. Wasn't just immigrants. We had women coming back strong, we had other people and marginalized groups coming in. But we needed workers. They weren't displacing workers. They were filling job that weren't getting built.
That's good, of course. Bigger picture, there's a you know, conversation to have about how we do that in an orderly way right now. So that's the economy what you asked about with the data. Throw one more measurement challenge at the beer of labor statistics, right like, it is just very hard to survey these people. They might show up in household survey, they might not. They might show up an establishment survey. So but we have a lot of things that are making the data hard to read right now, a.
Threat to society. Paul is always an economists that pulls out Miriam Webster. Claudia Sam with a blistering essay for Bloomberg Opinion here in recent days. Claudia Sam on inflation, What did you learn in your study? I mean, of course you have to quote University of Michigan statistics. I get it, it's the franchise out there. But Claudia, what is the character of the inflation into this summer?
Right?
So the point of the piece was, yes, there is when we talk about inflation. People are upset about inflation, and economists try and convince the noise getting better. This is more than economics, right, because we are talking about the same thing and increase in prices. That is an economic phenomenon, But there's a lot more that's getting wrapped
up in inflation. And if we're going to have a productive debate, we need to get the economics sorted out with the economist in that bin, and then there's another discussion and bring in other experts, like let's stop pretending this is all about the economy.
So Claudia, where does this federal reserve go from here? It sounds like and I'm looking at the market here, boy, they can just wait, no problem waiting here and maybe even into next year.
The Fed has a dual mandate, so regardless of what the Fed quote unquote can do, the FED, when inflation is back down on a sustainable two percent, they're supposed to be out of the way. Their goal is not to lean on nor is it their mandate to lean on the economy as long as possible. So I think that's you know this, today is a good day in saying, hey, we're not creating towards a recession that could lead to
really fast cuts, very disruptive. Right, and yet I don't think there's anything here that says, oh, the Fed's gonna wait until next year.
Okay. Clouding that one final question, we need to go to Claudia Sam territory. Claudia Sam, you know that the Science Diet CD stress bag for cat food it's a moonshot. It was one hundred dollars for an eighteen pound bag, and that puppies pop on one hundred and fourteen dollars. I'm seeing the same thing for the for vet bill and kennel feet as well. Claudia Sam, you're seeing inflation in your cat food discuss.
Yeah, so I think I'm doing what a lot of Americans are. When things get more expensive, you go switch to a cheaper brand. Puffy, my kitty, She's more than happy to eat drive Purina cat food. It was on sale last week.
There we go, Doctor Sam, Doctor Sam, how the substitution affect Puffy is Parina catfood. Just man's going to walk out of the studio, Doctor Sam, Thank you so much for joining us in congratulations, without question, the most influential academic economist, one of our interns.
Bennett's killed it today with guest sequence, because right now we're gonna look a much more almost philosophically at what this boom labor economy means forward for your investments. Nicholas cohosts co founder Data Truck Research, and joins this morning. You know, Nick, there was a phrase from another time in place that it's a morning in America. I guess it's a morning in America for a select group. How narrow are the halves right now in America? Bang up
jobs report, bang up consumption. We see it across the Tri state area. But how are the havelves doing as we go into the summer.
Surely the halves are having it all. I mean, it's a very good market. It's a very good economy for the upper twenty percent of the income distribution. But let's be fair, it usually is right the wealthy tend to have an easier time of it. The bottom eighty percent have not had an easy time of it. And we see that in data like gasoline consumption. For example, gasoline consumption has actually been down year over year for the last two months. So as much as the top twenty
percent are doing well. There is a lot of stress in the broader market.
Paul Sweeney, bank Rade, thirty year mortgage seven point five six April twenty fifth, and then two cups of coffee. We're down to seven point twenty five percent.
Yeah, yeah, still not where we needed to go for a lot of folks. So, Nick, given some of the economic data we've seen, and we've got a FED reserve that says it is data driven, how do you think this the Fed plays it out over the next several months.
Oh, I mean, it's pretty clear at this point this Job's report doesn't leave a lot of room for interpretation. Let's put it that way. The economy, labor market's still strong. Demand for labor is still strong, wages are still strong. They have to at best be on hold. Which is interesting to see how many dots are how many cuts they put into the plot next week. I'm guessing it's
one now, not two. And they've got to play it pretty close to the vest and acknowledge the fact that as much as they want to see the economy slow and wages slow and inflation slow, it's happening only.
Slowly, right, Nick, we s the two year Treasury of moving higher by twelve basis points today to four point eight four percent. But we've seen all year this equity market can perform with rates at those levels, even a little bit higher. How do you think about the equity market for the remainder of this year?
You know, I think large caps certainly still fine. The semb'f F one hundred, absolutely fine. It's up call it twelve percent year to date and the face of higher rates. As you point out, we've got the Jenai story, We've got Nvidia, We've got all those things pushing large caps higher. Small caps not so much. Right, Russell's up what two percent year to date? It's telling a very different story.
It's telling a rate sensitive story, as it always does, very good for large caps and kind of not for small caps.
Nick, there's such a respect on the street for your research across assets. What is the character of this bull market?
The character this bull market is very narrow relatively speaking. Actually, we just did a piece of clients last night looking at the whole decades returned so far, the all of the twenty twenties, because let's face it, it should have been a really bad decade. It's going to be a pretty good decade. But it's narrow. So it's Lewis large caps, not small caps. It's Europe is doing okay, but emerging markets are not for every India. You've got a China,
so it's a very narrow rally. And obviously bonds have gotten destroyed for the last four and a half years. Going forward, I think it will still be narrow. It's going to be narrow till us large caps, us technology and hopefully we get enough of a pullback in rates to get bonds to work.
But I can't say enough Paul, how this is a Nick Coolis difference. And then we have so many people rationalizing and destroyed bond market priced down, yield up four five, six standard deviations by looking at spreads, looking forward, forget the past. What I hear in emails and on YouTube. So many people are underwater in some way or form with them.
Let's top the clawback to what happened from twenty twenty two. But Nick, I go out and buy it to your treasury. I'm getting near five percent here today. What's wrong with buying some fixed income.
Here these days? I think you're right. I think it's a great trade. I think two years are probably the easiest trade on the planet right now. Five percent risk free, no need to worry, no need to fuss. Maybe maybe US equities do ten, but you're getting five for doing absolutely nothing and taking no risks. So fives feel pretty good. The interesting part of the curve, obviously is ten to thirties. What do we do with TLT or the long range of the curve? And I think you can own that
section of the curve here. I don't see inflation rich ricocheting higher again, and I think you'll make a little bit after inflation, even at the long range of the curve.
Hey, Nick, so in the equity markets, you talked about the breath or the lack thereof breath. I mean I learned in business school that's not a good thing. I mean, doesn't this market have to see a broadening out here or we're set up for maybe a big fall somewhere along the line.
You know, it's it's a great question, and you're right. I mean, the classic theory is, you know, you want real, the broad broad based. We just don't have a broad based equity story right now. We have one thing. We have Generative AI. We have one stock we have in Nvidia, and so the philosophical or the fundamental leadership here is sound. It's a good idea. Jennai is a powerful trend, but there's not a lot of ways to play it. So you have a very narrow set of leadership as basically
as we all know five names. So I don't think that's necessarily unhealthy, but it does mean like small caps aren't way to play Jenny. I there's no there's very few Jennai plays in small caps. You've got to go large caps.
Nick on a reading list this weekend for all of Wall Street. It's Michael Morbison over at Morgan Stanley doing a wonderful study. I have already read it, folks on concentration in the market, Nick call Us, how to mere mortals, I mean, forget about the phrase a carefully diversified portfolio or balanced portfolio, all this mumbo jumbo from thirty years ago. How do you partake, Nick Cholis? Given the concentration that Michael Mobison writes.
About, Yeah, well, first of all, I've known Mike for thirty years. He's a genius level intellect and that's a great piece to read that. Putting that aside, what he says, is the way the stock mark's behaving is rational. We are getting a lot of profit growth in technology and generative AI kind of themes. So it doesn't say it's fairly valued or over on your value. But there's a reason why stocks have worked out this way. And the
question is we'll continue to work out this way? Well we have this concentration of returns and the short answer I think is yes, where else does human innovation kind of hit the full com point of profitability harder than in technology and jen ai. That's why tech works, That's why the stocks are working.
Nick, don'tk go away. I got to scream out on YouTube. They're like, Tom, give us a data check. Here with all that we've done here this labor secretary, we miss that. Here's what you need to know, folks. Futures are negative to they're now improved negative twelve off the shock of a boom jobs report, the VICS twelve point eight three as well, NASTAC doing better, down only two tenths of
a percent. The Sweeney yield four point eight four percent of the two year yield, a ten year real yield two point one point one percent, up a solid ten basis points I got to bring it up, Paul. I mean, we're gonna get an eighty dollars print on bread crude. Yeah, you know, I mean we were looking at sixty nine dollars in West Texas. Ye, Intermediate didn't get there. A little excuse me lift to oil here in the last couple of days.
I gotta ask Nick this question. Nick, you're at Haverford College. You call up your parents and you said you want to major in Near Eastern archaeology.
What did they say to that? They were oddly accommodative. I got to give him a lot of credits. They said, do whatever it is you want to do. And I think it's because they knew me well enough to know that that wasn't going to be the endpoint for my career. They knew that ultimately I wanted financial success and I wasn't get that as a professor, and so they kind of trusted their judgment and they're absolutely right, you know, majoring.
And then Nick barbelb dot he saved the day by getting his NBA from the Universe Chicago.
Yeah, I mean, that'll do it. Yeah, So Nick, we're gonna walk away from you here right now. But let's get one final question, and do you suggest in the nearies that Iran will continue with a theocracy or can they find their way back to a more representative government.
Oh, police states are very difficult to unseat. Unfortunately. I think for the people of Iran, they're going to have to live with that government for a while longer.
And International Relations, Nick Coles, thank you so much. Nick, greatly greatly appreciate it. You got to get through the newspapers, folks, because Paul's completely been out of shape about the song we're going to end, so we got to explain that. Your daily look at the front pages with Lisa Matteo brought to you by Interactive Brokers. Interactive Brokers they charge dollar margin loan rates some five point eight percent rates
subject to change. Learn more at ibkr dot com slash compare Lisa, what are you having a Friday?
Well, we got the Associated Press are saying the number of zombie companies on the rise. We're talking about companies so much debt they're struggling to survive, barely able to pay even the interest rates on their loans. So here are the numbers. Associated Press analysis. The numbers stored nearly seven thousand publicly traded companies around the world two thousand in the US alone, and that includes like companies that
run Carnival cruise lines, Jet Blue, Wayfair, Pelotons. So these are big companies and the AP is saying a lot of them won't survive because the dates are approaching when they have to start exactating those loans.
Two years ago, Paul, my theme for the year was a great zombie roll up. Yeah, maybe that was early, but here it is.
Yeah, you've got companies that you know, have higher levels debt and they have them a low rates. Now they got to refinance these things, and the rates are so much higher here it really calls into question their ability to pay interest, to pay the principle, and all those type types of things. So it's not it's not unusual in this type part of the cycle, but here we are.
And if they go bankrupt that it's even worse because they have all these workers and people, but.
The debt's here. It's like it's like the commercial real estate, the office buildings Class B, class C. You know, you extend and pretend and you wait and you wait until you can. I mean, I wonder over the weekend, what will we see nationwide in foreclosures and the other things.
But carnival cruise lines, they will earn their way out of it, you know, like the market doesn't have any concern about it.
Something like that just got you know, have you ever done that? Like the fifteen story tall cruise was in Venice once and one of those boats went right by, just like in the movies. It was like it was to me it was rude. But there they are. They're huge, man, next do it.
You were just talking about this the NBA and the broadcast rights and all that, so this is kind of a sidebar you have. The NBA Commissioner Adam Silver, he said the league is going to turn to expansion, probably go overseas, you know, beyond the Toronto Raptors, you know, go beyond after this whole TV deal thing works out. He said he's thinking long term. Mexico City actually considered a contender for a new NBA franchise. But you'll have a lot of people who are interested in owning teams.
If Lebron Jamee retires, Lebron James could be a part of it. Shaquille O'Neil says he's express interest in ownership of times.
I mean, what's interesting here, Paul, And let's go to rule four at the next game where Paul swinging Hold's scoring, and the answer is will it dilute the game? I mean, are there enough players out.
There to YEA plenty of players, particularly internationally tom So many players in the NBA come from Europe in particular. I mean, they could start a league. The NBA could start a league in Europe tomorrow. That's how global the basketball league is.
Basketball. So you need so much more global than even American football, a separate league or London player New York Knicks.
I don't know. I mean, I think the logistics there would be very difficult. But I'm just saying that the basketball as a sport is a global sport, more so than say American football. American football. You bring that over to London year.
I've done in a bar.
It's right, it's fine. I mean people but it's but if they don't. But you know, in Europe, Spain, all over it it's it's a global business.
I've done the NFL just outside the Tower of London in a bar selling to Americans and it's just not I mean, it's foreign. It's all there is to it? What else do you have to do?
So the New York Times talking about concerts and if they're starting to die out. You Jennifer Lopez, she canceled her concert twenty twenty three.
It was a good year, right, You had.
Taylor Swift, you had Beyonce, Drake, Bruce Bringsteen, you know, he was twenty twenty three. But there have been cancelations. Some sales are slowing. You had Coachella. Those tickets normally sell out, but there were still some available when it opened. So they're saying that the market for concert tours could be slowing. But other people are saying, you know what, it's good Live Nation saying so far sales are up from the same point.
What do you think? I mean when you go to see Bruce, what's the night costume? Oh it's car, Yeah, yeah, it's dinner.
Yeah.
Yeah, it's crazy, but it's a it's a once in every two or three, four or five year tech type thing, so you just blow it off.
But I think the.
Issue for concerts time was that was one of those businesses coming out of the pandemic, when we switched from just buying goods like Peloton bikes, experiences, and one of the big experiences was going back to concerts and that we've had twenty two twenty three were just blowout years.
What I learned, what I learned on this this week is liz Ane Saunders is never going to see Taylor Swift. Now, you know, maybe she'll see Black Keys or something with an edge to it. But the major thing we learned in surveillance is liz Anne Sanders is not going to be in Paris with Stephanie r there at a whole watching Taylor. I think Lisa was there, she just won't admit it. What else do you have?
This one?
This is for sleep away camps. Okay, this is what we're talking about. Not sure if you ever send your kids over to summer sleep away camp. But moms and dads are dishing out even more money. They're hiring people to pack for them to pack their kids. So the sleep away camp itself is like fifteen grand out of control.
We fortunately Paul has to talk about a song to save me. This is a total American scam. In America, you basically pack up the bedroom and move ity bidty to camp.
It's just a ridiculous Damien was talking about this.
I wanted to say that afterthought, We'll be going to a camp in Scotland, and basically the page is they may bring one knapsack and one suitcase.
That's it.
That's it. That's my kind of camp.
See the problem is these camps now they have like one hundred items.
That's that's the packing list.
Unbelievable.
So they're hiring these organizers for like one hundred and twenty five dollars an hour to get them there and also to pack them when they come back. So that way the kids have their suffpacked, their laundry is done. They come home, Mom just opens up the case and that's it. They could spend more time with the kids.
Lisa Mateo Lisa Mateo with the newspapers on a Friday. This is the Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio.
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