This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrell and Lisa Abramowitz. Join us each day for insight from the best an economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app.
Joining us now from Washington is Jully Sue, the Acting US Labor Secretary, Acting Labor Secretary wander for to catch up with you, it always is. I want to go back to eight thirty, just briefly, if we can. I got a lot of feedback at eight thirty Eastern time about not being able to access the BLS website to get this information, to get this data. I'm told that the message they got on the screen was you were blocked from the BLS website. What was going on at eight thirty? What was the difficulty?
I don't know what happened with the website.
I will say that our jobs numbers today show that one hundred and ninety nine thousand jobs were added last month. That we have the lowest unemployment rate for the longest period of time since Diana Ross was at the top of the charts, and it reflects continued steady growth in our economy. I'm sorry to hear that you weren't able to get that, but I'm happy to talk about any of the data.
That's come out.
Well, let's talk about it coming out next month, and the month after that and a month after that. Can we revisit the lockup, Julie and have a lockup and make sure this data gets out efficiently and effectively, given it's probably the most important data point on the planet.
I completely agree on the importance of the data. You know, we come out to talk about it every time because it demonstrates the health of the economy.
It demonstrates, you.
Know, whether our economic policies are working. And what we've seen is steadily since President Biden came into office, fourteen point one million jobs created, again broad based across numerous sectors, low unemployment rates, and real wages rising. So we're very happy to make sure that you were getting the information that you need to help us tell the story about the impact of Bidenomics across the country.
You really don't want to talk about this to you.
No, no, I'm not trying to avoid it.
I obviously believe that the data has to be available, but it's not.
To all of you, and it wasn't, So how can we fix that for next month?
I hear you on that.
Okay, maybe you should can respond to me in the future at some point in the next week or so, and I can share that answer to our listeners and our viewers. Let's talk about the data. On the surface, it looks great. This is from Catholic Economics this morning. The response from them this morning, just going beneath the surface,
respectable organization saying this. The one ninety nine increase in November payroll employment included forty seven workers forty seven thousand workers returning from strikes, stripping out that one off boost. The one fifty two game was roughly the same as the mutant increase in October. Moreover, of that one fifty two, forty nine thousand, with government jobs a further seventy seven
k in healthcare. Excluding those non cyclical sectors, the economy added only twenty six thousand jobs, which adds to the evidence that after a very strong third quarter, growth is slowing to a crawl. In the fourth quarter, Ginny, what would you make of that?
I think what we're seeing is, again we look at overall trends in the economy. We've seen job growth at record rates, certainly faster than anybody predicted coming out of the pandemic. But it wasn't just like you know, one time boost in the immediate post pandemic months. It's been year over year growth. We're also seeing it across numerous industries, and we're seeing it in you know, overall, right, over eight hundred thousand jobs created in construction, over six hundred
thousand in manufacturing since President Biden came into office. And yes, we also saw workers come back on the payroll after strikes that resulted in record wage increases and other kinds of benefits, retirement benefits, health benefits that we really associate with what we want for working people.
Right.
It's what gives families a sense of security. It's what gives individuals what the President always talks about, which.
Is some breathing room.
And that's the kind of economy that we want to build that we are seeing. We have more work to do, and we'll continue to build on the progress that we've made. Many of the investments that the President has helped to make possible are showing up in communities. Forty thousand some infrastructure projects across four thy five hundred communities all across
the country. But we're just beginning with that, and so we'll continue to see more of that, and the jobs numbers are just another indicator of that growth and what its impact means.
What do you think this is not resonating with the elector our share and pos CNN more than four and ten saying that seriously concerned rising costs could push them at their own community Splimberg together with Morning Conso only thirty five percent of voters in seven swing states trust Binden on the economy. Where's that disconnect coming from?
Right?
So one thing President Biden does talk a lot about to your point, is we want to make sure that there are jobs in communities so people can get jobs and build, you know, build a family, and join the middle class without leaving the place that.
They work they live. I was with.
Him when we went to Velvedere, Illinois, where a plant that had been shuttered is now being reopened because of the agreement between the UAW and the Big Three.
I do think some of this is still you know, we had global uh you.
Know, pandemic, and you know, and the economic wreckage that resulted immediately in the aftermath of that.
Again, we've grown back.
From it, but the sense of insecurity I think remains, and that's that's legitimate.
The other thing.
I you know, just from traveling on the country and talking to folks, is I think that part of this is that people really do see there's jobs being created, there's training programs that are connecting them to those jobs. But there remains deep inequities in our society. And part of that is the huge gap between CEO pay and
frontline worker pay. So I talked about Diana Ross, I talked about the good news that we are having unemployment levels at record lows for the longest stretches since nineteen seventy. In nineteen seventy, the disparity between CEO pay and frontline pay was something like twenty percent.
Today it's over.
It was seventeen times hire the ceopay from worker pay. Today it's something like three hundred and forty four times. That doesn't feel fair to people, it doesn't feel good, and that's why President Biden talks about building an economy from the middle out and the bottom up, where working people and working families do well, not just the wealthy.
Yeah, he's had a lot to say about corporate America as well. I'm going to share a tweet from the President with you, and I want your thoughts on it. A way to translate it if you can, because I don't understand it. It says, let me be clear, to any corporation that hasn't brought their prices back down even as inflation has come down, it's time to stop the price gouging. Give American consumers a break. What is the president talking about.
The President is saying that we have a job to do this country, and we want working people and middle class families and every community across the country to have for things that they need to live a decent life.
We want safe roads and new bridges.
We want clean drinking water to flow out of every Fara's great.
I want that too, But just this tweet specifically, inflation is slowly but it's still positive, so prices are going up. But the President's saying inflation has come down, why corporation is still price gouging. That's just economically speaking, just absolutely flawed. So Acting Labor Secretary who writes these tweets, what's he talking about.
I mean, he's saying that we're all in this together, and we will pursue economic policies that help to bring down prices and control inflation.
But everyone's got a job to do on that.
And you know, when there are record profits by companies who are continuing to keep prices high, we'd like them to play their role in making sure that people can afford the basics they need in life.
Appreciate it. JNS. Thank you, the Acting us LEBIS Sancitary.
We continue our conversation with Michael Darta, chief economist macro strategist at Roth mkm Michael, once again, it is a confounding report of somewhat towards a fully employed America. Is this the productivity overlay? Is this the technology overlay in the non technological sectors where things are just simply better mother than we perceive.
Well, it's hard to say, Tom. I mean, the productivity statistics have been really strong over the last two quarters, but they were insanely weak before that. So on productivity, we just vaulted back to the to the pre pandemic trend so far, which was one point six percent per annum, so to be determined on that question, this is a good report, you know, almost two hundred k with the downward revisions you know, were added just below the consensus expectation.
But we were talking about the unemployment rate moving up to the cusp of a recession signal. Now we've pulled back to three seven on the unemployment rate. So this is a report the Fed is going to look at and not really feel compelled that they need to embrace these early rate cuts next year that the market has priced in. Now, this could change again, and you know with the December data obviously, but at face value, strong report, almost two hundred k on payrolls, unemployment ticks by two
tents to three seven. That's going to be viewed as still a very tight fully employed labor market. And so you know, it makes sense that we're seeing a bit of risk off here and a bit of a bounce.
In bond yields.
Michael, does this make you rethink any of your thesis about the business cycle rolling over?
Not so far. I mean, certainly it's not a you know, it's not an additive decisive signal. It Okay, this is you know, if we're up at you know, up above four in the you know for this report, then you know, to me, that would suggest that perhaps we've fallen into recession. So this says we're not in recession right now, but it's not necessarily an all clear signal for for next year either.
Michael, you've followed with Bloomberg data your economics into your equity coverage. What's the data SPX call for when you're fifty one years old?
Yeah?
Tom, You know, we were talking before about the market really being dominated by two sectors and seven stocks, so you know, I think for the overall it's five hundred. We're going to have a challenging period. The valuations in these leading sectors are simply too high, So I think investors are going to have to look to some other areas that have been underperforming where the valuations are low will have opportunities with rising volatility next year.
Michael Darter, thank you so much. With Roth MKM. This job's Dave Jeffrey Rosenberg's portfolio manager for the Systematic Multi Strategy Fund at black Rock. Jeff with great respect, what's the strategy that works forward given the treacherous economic water as we weighed.
Yeah, this is a this is a good report, and as you know we've been discussing, you know, across the board, it's a bit stronger than expected.
You know, maybe not on the.
Headline payrolls, but certainly underneath. And I think that he really is going to push back, and I think that's why you've seen the market reaction. The initial market reaction that you just just just describe is markets, bond markets in particular, really starting to price in a lot of cuts into next year and pricing.
Them earlier and earlier.
Three point seven percent on employment rate. Hard to see where the restriction, the restrictiveness is coming for this FED policy. So I think you're going to have a little bit of pushback in that narrative and that you're not really seeing the slow down, particularly again with the wage picture.
You know, most of the support here is coming from the inflation side, and we'll have that conversation next week, but on the growth side, you know, you're really not seeing the level of restrictiveness show up yet in the labor markets, and I think that's going to push back on how quickly the FED is going to be able to to cut rates to keep up with the fall and inflation and avoid you know, the unintended increase in real.
Real rate and the Jeff's observation, Lisa, I miss this stunning the Bloomberg financial conditions index. I'm going to use this word carefully. It's explodes to an accommodate of point six y two. It's Greek, right. All you got to know is explodes the right word. This is what Powell does not want to see.
Although he didn't push back as much as some people thought, at least last week in his speech. But you're right to that point, Jeff, when you say the inflation is really the front in the front minds of people who are betting on this Goldilock's narrative and even rate cuts without the pain. I wonder how much their view is damaged by average hourly earnings rising more than expected and
rising from the prior month. How much does that suggest a stickiness to the labor market strength and wage growth that really flies against this narrative of FED rate cuts next year.
A little bit, and there certainly goes in the opposite direction. But what you've had on the inflation side is really this psychotomy between goods and services, and it's the goods part that has really been the disinflation that's fueling the overall enthusiasm for the cuts into next year. The services side is held up, and services inflation is really the mapping of today's labor report and the wage picture into the broader inflation and so that you know, remains very supportive.
So again it's kind of the easy disinflation is behind us. This report kind of supports continued support for the broad inflation picture from the services side, and that debate I think will will continue. And obviously what you've seen in the market is a little bit of pullback in terms of the enthusiasm. You know, as Jonathan says, the first reaction isn't necessarily the end reaction. But I do think the overall take from this report and the wage picture
is again very strong. Labor market supportive of services inflation. Yes, it's still coming down, but most of that is being driven by the good side. You're not seeing that supported as much from the services side.
You know.
Priam Israe of JP Morgan earlier this morning said does it matter? She raised this question, does it matter how much the Fed cuts rates next year? Considering the fact that it didn't seem to matter how much they raised rates. It didn't tighten policy that much. The long lags are
long in both directions. Do you think that people are overestimating whether it matters if they cut rates in March or if they cut rates in June, or if they cut rates in September, if they have stopped raising rates, and if right now what you're seeing as an economy that still is chugging along a business is still hiring, well.
I think the question is does it matter for the real economy or does it matter for the financial economy. I think the points well taken in terms of the sensitivity of the economy to interest rates is a different question than the sensitivity to financial markets. And I think on the ladder the financial market it matters. It matters
a lot. And I think that easing in financial conditions that you're just talking about has everything to do with the expectations of soft landing, the collapse in inflation, the immaculate disinflation proving out to be correct, and allowing the FED to cut interest rates. That's highly supportive of financial markets. The real economy point, yes, I would can side that may be less significant, but for investors it's gonna be the latter. It's gonna be the financial market.
Jeff. Let's pretend you're in carnegiemail and you've got to sum this over from your financial chat over into the GDP chat. Does this good labor economy support a more buoyant assessment of our real GDP?
Well, I think so, Tom, And I think that's, you know, kind of the issue here for the monetary policy outlook is that there is this question of just what is neutral, what is real interest rates? What is restrictive? And we think we're there, but you don't know until it shows up. And we've had the benefit from the inflation side, but the growth side less so. And I think that's been
the message from labor markets. It's been a steady normalization, but we're still seeing very strong labor market prints here, very strong wages, strong unemployment rates that are not really consistent with restrictiveness. And that's good from the growth side, but it may not be good to get that last mile of that three percent three and a half percent inflation down to the two percent target.
Jeff, Thank you. Jeffrey Rosenberg most often with us here on Jobs Day with Blackrock and his good work in shorter term paper as well. What we're going to do now is wrap around that important Washington interview with the interview that matters for Global Wall Street Jerome Schneider, legendary at PIMCO in the short term paper space, and we're thrilled he could join us this morning. Jerome, not so much what this job report does. How hard is it to manage the risks of short term paper right now?
Good morning, Good morning Tom, and good morning Manus. The reality is is that a lot of clients are in positioned to be pretty defensive in twenty twenty three. And I guess when you see this latest data, we find ourselves in a confluence of events which the outlook will
continue to recalibrate. The issue with short term paper really is it's quite attractive, and that issue is one where investors may define balance between harvesting the attractive yields at the front of the R curve with the opportunity set to own a little bit of interest rate exposure and income further out the curve, and that challenge will continue to be reconciled as we get into twenty twenty four. So that's the prospect where you know the challenge from
understanding the data and more importantly, the investment the investment landscape. Really, it will tend to reconcile any one data point as a witness this morning isn't necessarily as important. And the Federal Reserve will continue to sort of put the emphasis on the longer term views when they meet next week.
So for investors, they should do the same thing. Take a longer term view, Understand the industrates have greatly recalibrated from where we've come from in twenty twenty two, and more importantly, look at the broader landscape of opportunity sets that yes, you might have a software economy, but the likelihood of a soft landing, while a possibility, isn't a high probability, and that pretends to be a fairly attractive investment outlook for at least for fixed income over the next twelve months.
Good days here, Jern, good to be on.
Are with you?
I mean, we're a wonderful line from Mike McKee a moment ago where he said, look, you know, the bond market traders and salespeople have the attention span of a two year old. Having been slaughtered by the bond market in nineteen ninety four. You get moments like this of where tens and twos and tens have bolded higher this morning. Is it just a bit of a wake up call that the trajectory on rates is not one way, It's
not a collapsing falling knife all the way. There will be moments of interruptions which present opportunity.
Well, yeah, you're trying to get insight to the practitioners frame of mind, and then right, honestly, manness, it's one of those things that from a data dependent point of view, yes, the attention span might be one of a two year old if that's the view you take, and that's why we suggest a PIMCO to take a longer term view. The practicality of it is is that the bond market has effectively challenged in many ways. The Feds resolve many times this year, probably five or six times by my account,
and they're going to continue to do so. One of the largest challenges will be actually over the next week as we take a look at the dot plots that will be revealed, and that will ultimately suggest that perhaps the Fed only suggests a handful of rate cuts versus the Feds remaining five plus versus the markets rather five plus rate cuts that they're expecting, and that is a fairly big reconcilation that can have fairly large impacts across
the curve. But where I might have main is, which is in the front end of the eal curve.
How do you respond to risk of reinvestment the idea as somebody is picking out a duration and financial advisor site. Oh, but the risk of reinvestment, how do you respond to that your own?
Yeah, that's where you have to have a diversified portfolio.
And while there is attraction to be at the front of the YEO curve, and you know Tom that I'm a big proponent of being being in just outside that cash landscape of the money markets, the reality is is that there are attractive yields both in real terms and nominal terms at this point in time, and the risk of reinvestment is one where you actually want to balance the income which is a heck of a lot more attractive right now with the opportunity of capital preservation and
more importantly, total return, which is going to be emphasized by capital appreciation over the course of the next few years as spread as spreads normalize and more importantly, as you perhaps get to an economy which is more supported by the SAD, which might be in later twenty twenty four or twenty five, which means those rate cuts means
bond prices go higher. So that's where you want to think about that reinvestment risk and sort of takes them off the table by moving ever so slightly out of the YEO curve and adding a little bit of interest rate exposure.
Jerom, I'm just trying to work out what kind of flow comes into the shoulder end of the curve across twenty two twenty four money market funds and you peak five point nine trillion dollars much a former bond trader, Well, it was a very bad sale. I was a terrible crackspread and oil commodity trader, but I didn't do too bad for all.
So authentic, I sound like a fool.
You start to floating.
No, I think you know you get I think we've got Pinko on the line here. They're the pros.
Please please, Well, man, if you sound sound, you sound a bit of an expert, So maybe we'll take you for a Maybe you got a.
Job of PIPCO. Listen that that's a long time ago, first Chicago, many many many years ago, money market funds five point nine trillion. How much of that flows out of cash and into the short end of the curve. Is that a bump that you.
Get We begin to see it happen that you know, the effect is going to be the trade off between the Fed's outlook, which will be cautious but yet perhaps pivoting to that dubbish aspect later on in twenty four and at the same time, investors still want to harvest those high yields, so the resolve of the money market fund investors will be actually quite high. We expect that the investors will continue to be in that six proroximately
six trillion money market fund for quite some time. But we're actually quite quite excited by the fact that investors are beginning to see that balance, to begin to rationalize the risks in a more quantitative way, if you will, because they're thinking about the volatility in the market, the outlook of the market, and realizing that the story of capital appreciation, which has been so relevant and prevalent in the landscape of risk assets, equities, et cetera for the
past decade, might be changing, and that might require a slightly different allocation.
Jerome Schneider with us with Pimco had a short term portfolio management. We're thrilled you can find time to stay with us on the early West Coast. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on the Bloomberg terminal. Thanks
for listening. I'm Tom Kane, and this is Bloomber