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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business App. If I came back from a year off, never mind a month, and you showed me one data point and it was sharpless claims, and I looked at that, I'd be like, everything's okay, there's nothing wrong here. Labor markets from rock solid. That's very very impressive. And to your point, yards up at the front end are by three basis points on a two year on tens up by two still very very range band on a ten year maturity that yield at
the moment about four fifteen four sixteen. Nila Richardson of ADP needs to explain what's going on here. Nil can good to see you kid morning, How do you explain how we're sitting here word about labor market? If has just cut rights by what's seventy five basis points over the period of six months or so, and yet we've got job as claims at one ninety eight.
Well I wrote on Tuesday that the labor market is tighter than we think, and that's how you explain it. What we're seeing is that it's a labor market where there's has been said before, little hiring, little layoffs, but also pay growth has been robust throughout twenty twenty five. And let me tell you what that means. Let me unpack that. Because we spend a lot of attention on the monthly jobs numbers, we need to spend more attention on the wage numbers because they tell the complete story.
And that story is that workers are largely staying put. They have very little desire to rush out and quit their jobs, but employers are having to pay them more to stay in place. So when you look at the wage premium between a job stare and a job changer, it is very low. We calculate it. We clock that at less than three percent going back over the course
of the year. But the pay levels. The growth levels are high four point four percent for job stairs, six point six percent for job changers who are sensitive to this labor market. It's taking more pay growth to keep a worker, and that's adding to costs.
Now.
Typically that's what you say in an expanded economy. Typically it's what you say in a very tight labor market. I still don't understand why the Fed's counting in that kind of environment. What's gone wrong here? What's happened?
The theme of twenty twenty six is perception versus reality explained. When I look across the board at all the economic indicators, they are so strong. I mean, wage growth is strong. You look at GDP growth is strong, Retail sales is strong. The only thing that seems leak to me other than these pretty modest job games is consumer sentiment. Why is
sentiment so sour when everything it looks so great? Even our infrastructure graters, the civil Engineers recently put out a report that America's infrastructure is getting a solid c engineers are the hardest graders in the world. Everyone knows that my son is finding it out this year, but they're still grading at higher grade levels than they have historically. So America looks strong, but sentiment looks bad, and there's a reason for that. Perception is different than reality.
Well, how much is this also that we're talking about
averages and not necessarily the different tiers of earners. And it could be that, say, the top tiers of earners are doing really well or seeing their productivity increase, and are seeing their pay weight and their wages or take home pay increase substantially, and the people at the lower end, who are employed in low wage work are not seeing those increases and are seeing the inflation that are coming on the heels what's happening at the top tier.
Lisa, you just hit the point right, underscoring that perception versus reality. Another way to say that is micro versus macro. And when you look at the granularity of job changes, what you're seeing is it is not equal work. Where we're seeing the highest page growth is not where we're seeing the most job growth, and that is key. You're seeing high k growth and in trades like construction tied to data centers, for example, but you're not seeing a
lot of job growth there. And there are demographic and structural reasons to that. And even if you unpack this wage distribution over time, what you're seeing is that low income workers are not keeping pace with inflation, and that is very different than three years ago when they were out pacing in terms of income gains. So, yes, there is a lot of action going on underneath the service of the macro indicators that point to a widening and widening of the top learners in the bottom.
And just adding to the sentiment that is very reality based, which is that people who are making a lot of money are also seeing the use case for their jobs go down. I'm looking at some of the earnings that we saw Bank of America coming out saying that they're going to let their head count shrink as they deploy more artificial intelligence, City Group saying that they are going to over the time use automation and expect automation and AI to potentially reduce some of that headcount and also
just increase efficiency. I mean, how much is that also hanging over sentiment in a way that these numbers don't pick up, right.
So that's the structural change that no one saw coming maybe four years ago. I shouldn't say no one, but very few workers saw coming. And it's now part of the conversation. It's part of the hiring strategy in a way that hasn't been before, and it's hitting professional, white collar jobs which you thought would be immune to this kind of stuff, this immune to this kind of automation consideration. But AI has changed all that. And so I do think that that harkens back to the sentiment and to
the company long term strategy. But this is a transition that's not the end of the story. I think that this will be a short lived transition because the productivity around AI is so vast that it is yet to hit the worker.
How does the FED think of this moment so challenging.
I think what they they're very focused on is the data point that drives a decision. This is a data driven FED. But the problem is the data doesn't stack up to the decision in the way that it has been in the past.
The data is.
Pointing to a pretty strong economy, the data is pointing to a pretty low unemployment rate, and the data is pointing to a structural, not cyclical change in monthly job gains. And so it does put them on the back foot when you're trying to interpret data and use that data to make a decision.
Stay with us. More Bloomberg surveillance coming up after this A Center Washington. President Trump reaching across the alp asking Democratic Senator Elizabeth Warren to support his efforts to credit card interest rates are ten percent after facing opposition from his own party. The Republican can Wressman French Hill, Chairman of the House Financial Service Committee, join us now from
Capital Hill to respond to that and a whole lot more. Congressman, it's good to see history is littered with examples, full of examples that when you introduce price controls, you end up with restricted supply. Congressman, is this proposal going to end up any differently?
Have you new year? Jonathan?
Great to be with you, Congratulations on becoming a dad. So happy for you and your family. Look, this proposal is a price control, and I think I've heard from Republicans and House that they have concerns about it. What we are in agreement with President Trump on is that we want to reverse the curse of the Biden years and taxation, regulatory and government policies. So we want to work to pass my twenty first Century Housing Act, which
would lower home construction costs. We want to pass the Main Street Capital Access Act, which would compliance cost and refocus the bank regulators on safety and soundness, tailoring regulations to bank complexity. And when you think about the regional banks you just talked about and the community banks, particularly those banks under ten billion dollars, they make sixty percent of the one to four family home loans in this country.
So we believe that with the tax benefits from the one Big Beautiful Bill, lowering compliance costs, focusing and tailoring regulations, and focusing on dropping the regulatory burdens, and trying to build homes in this country, these are bullish signs for the GDP for the nation.
We don't want to do anything.
That throws off that gross domestic product. And one of the things I heard from colleagues is two thirds of GDP and the US is consumption. And so if credit availability is denied or reduced, that could impact growth for twenty twenty six.
The congressman, do you think they proposal as it stands could have a chilling effect on credit?
Well, I think this is what.
People that I've heard from in the House Republican Conference have said to me, is they think, gosh, this could mean that those Americans with lower credit scores had their credit curtailed in some way, even by temporary and proposal like this. And you know we've campaigned against the government price controls in the twenty twenty four election in Kamala Harris's efforts to put in nationwide rent control, for example, Congressman.
Which is why it's so curious the President is getting on the phone with the likes of Senator Elizabeth Warren and continuously has this tex exchange we've learned through axios with Zorammmdani. Do you think he is moving two far to the left and almost out of where your party is.
Well, I just think that Republicans want to work with President Trump to accomplish his goal reverse the curse of the Biden policies and regulation, taxation, open up the economy. Besides our tax policy, the Big Beautiful Bill, I really believe that our mainStreet Capital Access Act will make capital more available for small businesses all across the nation, produce
economic growth, particularly in the home building area. Mike Flood's twenty first century housing build that we put together lower's regulatory costs on building new homes, opens up things like the Home Program and the CDBG program to private sector partnerships to build more housing. We want more housing available, we want better at better prices, and that's the tact that we're taking. I think these are the priorities of the President.
Congressman, as the chair of the Financial Services Committee, have you spoken to Chair J. Powell since the subpoena was delivered to him from the DOJ?
I have Chairman Powell called and told me that this process was taking.
Place, and does he have plans to come to the Hill to testify.
Well, we've invited the Chairman to testify for his semi annual Humphrey Hawkins testimony and we're working out.
The date now.
We'll do that typically in coordination both with the FED and with the Senate Banking Committee, so that we can get the FED chairman up for his semi annual testimony on the Hill.
Congressman, do you agree with the efforts put forward by Senator Tillis talking about potentially stiming any of the candidates that President Trump is putting forward or will put forward for the Federal Reserve until the subpoena is removed or this issue is resolved.
Well, you know, my attitude about this is really simple, which is FED independence doesn't mean the Fed's immune from criticism or governors at the FED or immune from criticism. And if people have questions and concerns about the construction project down there about how expensive it is to build something in Washington, d C. How expensive it is to build something after a forty year high in inflation from the FED and fiscal policy mistakes made at the end
of the pandemic, those are legitimate questions. I try to criminalize it and threaten people with a grand jury over disputes.
About that construction.
I don't agree with that, and I think the Congress
can do oversight about the construction project. And I think, as I said in my statement, I think this is a distraction from our partnership with President Trump in lowering cost of living for our citizens through access to increasing access to capital, lowering the cost of building a home in this country, getting the economy growing along with all the improvements, the tremendous improvements we've had for working families that we passed in the One Big Beautiful Bill last year.
Do you think that it's actually illegitimate this particular subpoena.
Well, I don't know that it's illegitimate. Because I'm not at the Justice Department and I'm not the US Attorney for the District of Columbia, I'd say it is, in my personal opinion, an over reaction to concerns about the construction at the FED.
Don't agree with that approach.
You've been friends with him for decades. Do you think he added to this distraction by coming out with a rare video as the markets were opening up an Asia instead of just replying to the subpoena.
Yeah, I think we'll always second guess whenever we make a public statement as a public figure. I won't second guess the decision that he took about that.
I'll just let it play out the way it is.
But I do believe that trying to criminalize that kind of behavior, I just don't agree with that.
How delayed do you think this could make going through the process of the next FED chair?
Well, I think it could throw it off track.
I think it's a distraction to Treasury Secretary Bessence very able partnership with the President to identify a new FED chair, something they've worked on for months, and the President has had interviews consistently over the last few weeks, and he's close to taking a decision and that this decision. Whoever made the recommendation to do this, I think was a mistake because I think, as I've said, it distracts from economic agenda benefiting working families with lower cost and more
accessibility to capital and housing. And it's a distraction to Treasury Secretary Vesset and President Trump's excellent work to identify a new leader for the Federal Reserve, something that we want and we want clarity on on Capitol Hills. So that's why I think whoever made a recommendation like this was not wise.
It hasn't been a distraction from markets, though they pretty much shrugged it off. Do you think the markets don't view this as real threat to independence?
That's possible.
I don't know that it's a threat to independence. I think it's a distraction to the work we're trying to do here to move the economy forward. To complement the big tax changes we made to benefit working families last year, we want to do the same thing this year, to open up regulatory policy, make it easy, not only just to permit the growth of the energy industry in the
country and the critical minerals. These are goals of the President, but we also want to reduce that regulatory burden on how's it construction and capital access for the American economy. And if we don't have a nominated and confirmed for a Reserve chair, that's a distraction to getting that done in the right way, and I think it throws the President's mission off track.
That's why I called it a distraction. I'm sticking with it.
Stay with us. More Bloomberg surveillance coming up after this, John, I guess not to discuss as Terry Hayes of Pancheepolicy. Terry, it goes with us saying that Iran's non Venezuela. The population is three times the size. I think the population of Tehran is equal to New York City. It has very very complicated power structures. How difficult is it going to be if the President chooses to intervene.
It's going to be very difficult, John, and good morning. But what you have to look at here is a very different geopolitical situation and Iran than in Venezuela. What I mean by that is kind of what I think of as the concert of nations in the Middle East, most of which want not only want a more peaceful region, but they want and want Ran marginalized, but they want that done without dramatically escalating tensions in the region.
That's a difficult locked pick.
But the President needs to bring those folks along, just as he has in the Israeli Gaza matter over the past few years. And you know, just contrasts that with the Venezuelan situation, which is very different.
Terry, will he have the support of Congress if he were to intervene in Iran?
That's a very good question.
It's a bit and it's a better question, uh, after the after the Venezuelan vote earlier this week. All White Houses do things well or badly at any given time. One of the things that this White House is doing badly right now is bringing Congress along with it on a lot of different fronts. And you know, the warning shot on Venezuela really is I think a confirmation of
my view there. You know, they need to do a lot more spade work with Iran and geopolitically overall before they make a move here to try to either have the active support of Congress or of neutralized opposition.
This is just the second week into twenty twenty six. We've already seen the President take action in Venezuela. How does he convey these moves to the American public in a midterm election year. How does he go out and say this is part of quote America.
First, well, he should and you know, and then the easiest messaging there is something along the lines of, you know, the you know, we're keeping national securities, economic security, we're trying to keep America safe abroad in order to make America safer at home, that sort of thing. And but beyond that, you know, he needs he needs to get much more contextual with the American public and start really explaining the stakes of a lot of things a lot more.
He's got a lot of division in his coalition right now. I wouldn't say a lot of them are actively opposing him, but there's a lot of people who have colder feet than they did a few months ago. He's going to need to warm that up. The same, of course, exists with domestic policy, but he's really going to need to start having people understand what the stakes are of his part of his base gets that, part of it doesn't terry.
What the stakes are includes who the friends are and who the enemies are. Do you think that it's clear which international allies have the loudest voice when it comes to talking with the President right now.
Do I think it's clear?
No.
I think there's there's an awful lot of folks who are who are jockeying for attention, and you know, just some extent, that's the way the president likes it. I mean, if you've got people swirling around you, kind of spoken wheel style, it increases your freedom of maneuver, and that fundamentally is what Trump wants. He doesn't want just the ability to act. The ability to act implies the freedom to maneuver. So a lot of his strategic ambiguity, as
Tyler put it, is designed to achieve exactly that. So, you know, the more he's got competition for his ear, and the more he's got competition for potential geopolitical goals.
I think that bit frankly, the.
Better he likes it, that makes it more difficult to translate into into clarity for the American public. But that's a chance he's willing to take right now, judging by how he operates.
Terry, something we've been talking about over the past couple of weeks, and i'd love your thoughts on that. How do you understand sort of the flurry of different orders coming out of the White House, the different folk focuses, whether it's geopolitical or whether it's domestic. That to be whip sawing markets and whipsawing Capital Hill.
Well, I think he I think what.
Markets see is a lot of different a lot of different smoke being thrown up for a lot of different reasons. I mean, there's the strategic ambiguity on Iran we've already talked about, for example, same thing applies on a lot of domestic things.
You know.
The credit card matter is a perfect example of this. I feel like I've been talking about swipe fees literally forever. I think the first time it came up was twenty years ago. But a lot of that's being put up, frankly, as part of the affordability pitch to appeal to his independent base, the one that helped him get elected in twenty twenty four. I'm not pooh poohing this by saying it's just about politics. Trump Trump has a history of
following through, but people need to understand that. You know, he's going to do everything he can do to goose his own coalition to keep Republicans in the majority in the House in the Senate next year. Part of that is making sure that he's flooding the zone and we're kind of even stealing ideas from the other side and kind of relegating that to niche stuff, whereas everything else sought to be about him and ought to be about goosing his vote. I hope that helps.
This is the Bloomberg SURVANAHS podcast, bringing you the best in markets, economics, an gio politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg terminal and the Bloomberg Business app.