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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and a Marie Hordern. 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. Joining us now
for a long discussion. Jim's out to the president of Apollo Global Management. Jim, good morning, Good morning driving, and happy birthday. Sarah's good time very much.
I appreciate it.
We spend too much time on the Federal Reserve. But I do want your reaction to this journal piece overnight.
Well, I think I think that the President's already won. It's a great distraction of headlines. I personally don't think he's going to name anybody too early because right now he's in the catbird seat of blaming without accountability, which is classic Trump playbook. So I think the fact that we're talking about. It is interesting. It's a great diversion from the reality I think he does. There's no doubt
he wants rates lower. That's what's part of his plan for many, many years, and that's how he doesn't like to pay debt and he likes to pay low coupons on it. But the fact that you know, I just don't think that if you're Trump right now and you take his playbook, he'll make this a conversation. But I don't suspect he's going to do anything premature because he's able to put blame on the current resident of the Fed, and he likes to be in that position.
Your word's blaming with accountability without accountability. Is this something you think he should be accountable for.
Well, certainly, I think if you think about what's going on in the last three or four months, the issues of tariffs, it feels like that's a little bit on the sidelines right now. I know we haven't resolved, but the marketplace has absorbed the idea of a ten percent plus or minus tariff, maybe a little bit higher, but to Trump's benefit, in the administration's benefit, the market has absorbed that, moved on the issues about the Middle East
and all the challenges of foreign policy. There was a lot of action last ten days ago and a week and a half ago, and now that has been sort of absorbed in the marketplace. The big elephant in the room is still our deficit issue. You guys have talked about it quite a bit. It's obviously the topic of appropriate conversation, and so I think that is an important topic that still remains. But we talked earlier in this
year about the decline of US exceptionalism. I think Mark Twain was right that the PREMI that my death is a bit premature, and certainly the market has moved on. So I think the tariffs are a little bit off on the side, the foreign policy issues are a little bit off the side. Right now. The deficit issue is a real issue. We can talk a little bit about what's going on with the dollar. I personally think what's
going on with the dollar. I think there was a lot of investors around the globe that invested in US assets and they made money both ways on the currency and on the underlying assets for almost ten years. And they turned around and they found themselves really unhedged. And I think you're going to see some pretty good numbers out of the big banks this quarter because investors around the globe have been rushing to hedge their dollar exposure. But I think it's a ten year catchup that people
just didn't hedge their portfolios in massive scale. So I don't look at this dollar decline is I look at it as more of a technical factor than a long long run impact on the health of the US economy.
There's a lot to impact there, including the breakout of the hedging profits at some of the big banks, which we'll all be now looking for. To build on what John is asking about is the FED on the brink. I don't want to say I have a policy error, but it being too late kind of to build on what President Trump is accusing him, because you are seeing the weakening and the dollar accompanied by the biggest negativity, the biggest in in downside economic surprises that we've seen in a year.
If you look at the Bloomberg page on rates of the G seven economies other than the UK, where the outlier in terms of where our ten year yields are and our yield curve is. You know, I sit in my seat and I see a variety of inputs that. Some tell me the economy is slowing down a little bit with consumers. Some tell me inflation is still a little bit more represented in the economy. I see, we see inflation around three percent, three three and a half percent.
And I don't think it's obvious that the FED should be cutting right now. I think it is a very legitimate question to be asking what's the trajectory of the FED activity? And so I don't think it's a slam dunk decision. I know the market that the futures would tell you three cuts in the next the rest of the year, three three and f cuts, you know, Tors and I are a bit skeptical on that. We see what's going on, and I think there's maybe one cut.
Your basic question, is the FED conversation a really important one right now? It is. I have a view that rates are going to be a little bit stickier and higher in the US than people think. We've had that view for quite some time. But so it is a good question for the administration to have right now. But I'm not sure that's the primary question for the market.
One of the reasons why people keep asking this question is would the FED be considering cutting for.
The right reasons for the wrong reasons.
The right reasons being disinflation, which you reject, but the wrong reasons being because we are seeing a weakening in the labor market as we see as an increase in jobless claims. What's your sense of that based on what you've seen with portfolio companies, what you've seen with your investments, is that valid?
Yes, I think long term you can't argue with the long term deflationary impact of technology and AI that is out there now, whether that's six twelve, eighteen, twenty four months, there's a massive deflationary impact from that activity. I just don't think it's on the center of the plate right
now in the markets. It's out there, and I think that you're fighting with short term still supply interruptions, hiring interruptions, and some short term challenges that are inflationary versus a long term backdrop of deflationary trends because of AI around the globe. I think that's sort of the center converge. When I'm back here in twenty twenty six and twenty twenty seven, I think rates will probably be a bit lower because of the technology impact. But I think in
the next six to nine months. I don't think rates are going to be dramatically lower.
If you'd taken six months OFLF and came back to work and look where the market was, I don't think you'd have a clue when I think it happened here. Equity's close to all time highs, credit spreads are very tight. It's not a market is screaming count for rate cuts. From your standpoint at Apollo, when you look at valuation, underwriting, any red flags getting your attention, that's all at the moment.
You know, the me is amazingly resilient in the US. When I was here three or four months ago, there was concern, handeringing about the trajectory of the economy. There was handeringing about non US investors, global investors investing in the US. I've been all around the world the last twelve weeks. American exceptionalism is front and center. Back you talk about where valuations are and levels of equities and raids, they're back. Global investors want to invest in the US.
They made a lot of noise. They thought they were going to diversify themselves away, and they realized that breadth and depth and the strength of the US economy and the scale of what they need to invest, and the US is the primary place to invest. It still is, so you know, it's sharing as I was in Europe a few weeks ago as well, your folks, I want to talk about that. Amazingly is going on in Germany
right now. The reality is public markets are the narrative, but private capital drives the economy and we're seeing it. We've been amazingly active. Edm F last week a louto matica what's going on in a variety of financing. So it's been a very very busy time, but I'm not seeing any red flags going off, and I really I want to make sure we talk today about this concern about the private capital private credit bubble versus just an
economic cycle. We're due for a credit cycle, but that does not mean it's a bubble and private capital is playing a bigger and bigger role. Look what we did last week for ED and F in the UK and Germany four and a f billion dollars strowing private capital financing long duration debt to finish out their nuclear power plant build. Really really important that we're playing that role.
Well, sit in Europe, let's just stay there. Off the back of your travel. So you mentioned AD and F big staling transaction. Also big target from you and the team to invest was it one hundred billion in Germany over the next ch title set.
If you're a leadership of journey right now, your goal is to get a four trillion economy to a six trillion economy, and you are I was with the administration. You can talk to Murz. You know, they really are the role of private capital along with government spending over the next five or ten years.
They've been so dependent on the banking system in Europe for such a long time. Can they get away from that? Because I feel like I've been talking about this for more than a decade.
Well, I think the evidence is hereto if you look at the last twenty four months and what's going on with the leading Italian banks. Look what's going on with HSBC, what's going on with Barkley's and Deutsche Bank. They're operating in a much different capital regime, with a focus on shareholder value, with a focus on roe and they're really, you know, not taking all the policy lending on their balance sheet like they had in the past. So they're
actually operating the right way. What you didn't really see before. Is the government really embracing in Germany, in France, in the UK they want private capital to be part of the solution because they know the government balance sheets cannot do all that's needed in terms of the massive cappex of transmission, line of transportation, of AI, of data centers.
They know they're behind. So if anything, this administration in the US, the memo they sent out about what's going on in the US and Europe stepping forward, European leadership has taken notice. Let there be no doubt. I go to Europe three four times a year. I've never been so embraced as we were three weeks ago in Germany and France about the role of private capital in this build out.
How much is that driven by this US administration?
A lot? I mean, it's clear that they know that. The European leadership has even if you look this morning about how they're stepping up on defense spending with NATO. So I think, you know, when I think about the globe right now, again, taros are a little bit off on the sidelines. They're part of the conversation. It's a
question of how much, not if or when. And I do think they feel like there's a responsibility that they have for their citizens, because when you look at the last fifteen years and where the US has grown versus europe growth, it's startling. You know, when I got out a college a few decades ago, it was all about Japan. Japan was going to take over the world. It was all about Germany industrial taking over the world. That did
not come to play. And I know they have a lot of catching up to do, and I just think it's a very very power now. You know, if you watch, if you listen, if you read the Draggy letter and what he put forth eighteen months ago, Now if they followed that all one hundred and fifty six pages in great detail, it would be a watershed economic opportunity. And I think parts of that will to come forth. But
they're already making moves on securitization other activities. And to Jonathan's point, the European banks are a bit behind the US in terms of the fundamental focus on roe and shareholder return and capital efficiency, but I think they're I don't want to say they're catching up, but they're getting in line. Clearly.
You've talked about macro paralysis in the past. I don't see any sign of paralysis when I urt site high yield issuance, when I look at activity, do you see paralysis at all?
I don't. And back to this last topic. I mean, as you point out, at least a pointing out, the two big topics that they need to really deal with right now is the tariff on July ninth and the big beautiful bill. But we're not talking about that this point. We're talking about a FED chairman in nine months. And I look at everything through. What this president has been in the past is a real estate developer. It's all
about location, location, location. The FED pick will be about loyalty, loyalty, loyalty. Let's not get confused. There isn't paralysis in the market. As I mentioned before, you know the public markets in the narrative, the private capital is really the driver of the economy. A lot of activity going on in the US on refinancing, in Europe, on the global industrial renaissance.
So we are on pace to have our busiest quarter in origination we've had in a number of years, a tremendous amount of activity across our equity platform, our infrastructure platform, our credit platform. So I do think there was a lot of handeringing, as I said six six or three four months ago, and I think that's now on the sidelines, maybe not on the narrative, but certainly on activity.
Is that activity in lieu of some of the deals activity that we were expecting. Was it sort of expected to be the deals and the IPOs and the big boom for the banks, and instead it's a Powell coming in and doing a lot of financing deals in the.
Back Well, I think too. I think the beginning of the year, people projected that the busiest folks on Wall Street would have been the ECM equity capital markets teams and the M and A teams, And while they've both been busy, the busiest folks have been their rate hedging and derivative teams because of what's going on in the dollar and concern about tariffs and such. But it's an interesting back up. Even listening to your program this morning,
the fundamental economy is doing fine. It's doing well, maybe not to the growth expectations that people had earlier this year, and will come out somewhere around a two percent growth with about three percent inflation. But whether it was Nvidia, whether it was Micron. You know, a lot of cappec still going, a lot of companies in the AI space raising tremendous amounts of capital at high valuations with long
list of investors coming in, and the activity. As I said earlier, what's going on in Europe right now about that industrial renaissance. It's still going on. So again, I think there's the headlines and then there's the reality of the underlying economy and the role of private capital, which is a much much bigger, longer term story.
How do you think you're going to decipher the reality versus the headlines? When it comes to New York City. You have a huge company here in New York and a lot of people are concerned about a democratic socialist becoming the mayor of the city.
You know, it's probably one of the most complicated jobs in the world on the political stage in terms of bringing a variety of the five boroughs together, the business, the community, the unions, all the folks that make New York the special place it is. As I've mentioned before, three out of every hundred college graduates a year come to New York. In the US, it's still the magnet
of talent and ambition. Uh So when you see somebody that on the surface does not appear to have a long resume of leadership and making tough decisions, really concerning. And I think that we'll see now just winning the primary. While in the past it might have been the litmus test for being the mayor, I think there's still a long time coming until November.
Build down the office in Florida. You're hearing.
There was a diplomatic response.
We are resid we we are, we are, we are a New York company, got we we are. We are determined to be here. I'm determined to be here. Our leadership is determined to be here. We have people in the office five days a week, is running. You know.
It's uh, Jim, It's good to see you. Happy birthday, Jim Jelpless.
Claims initial claims lower that expected, continuing claims higher than expected, and creeping higher over the past few months. From your advantage point, President Dadi, how much weight would you put on one versus the other and what's the labor market picture look like in your point of view your opinion, Well.
The labor market shaping up to be solid, and the data today confirmed that now continuing claims are going up because it takes a little longer to find a job. That's consistent with the hiring numbers just being slower as the economy comes to a more sustainable pace. But when I look at the labor market, there are really no warning signs that it's weakening.
Will continue to.
Watch that, but right now it's progressing solidly, although more slowly than before.
President Daily A lot of people have said that it is a data dependent federal reserve, and yet we haven't seen enough data to really understand or whether inflation is the primary objective or whether it really is some of the weakening that we've seen the labor market, albeit from a strong place. When will you have enough data to really make that determination.
Well, one of the challenges of central banking that you just have to accept is that we never have perfect data, So you're always making judgments, and you want sufficient data to make a judgment that is really going to be best for the American people. So right now we have incoming information on the labor market which does not signal real weakness, It just signals slowing.
So we'll continue to watch that, and.
Then on inflation, the data have been good so far coming in If we were only backward looking, we would say, oh, it's time to adjust the interest rate. But we have to be forward looking, and then you have to make judgments about how you think inflation will shape up going forward. And they always really see three scenarios, and I'm leaning towards one, and I'll tell you more and more. But the one scenario, of course, is that it's just delayed.
The tariffs are going to have some impact on inflation. It is after all, increasing costs, and that will be a more persistent effect. The second opportunity or possibility is that it's delayed but it will be a one off. And a third, of course, which I think is increasingly possible.
It's not my modal, but it's increasingly possible, is that this just doesn't amount to as much as the models in history would tell us, because businesses find ways to absorb the costs and they split it down the production chain and ultimately consumers pay less of that. So I think those last two scenarios, it's delayed, but it's a one off, or it doesn't materialize to the extent that
the models would suggest. Those are where you know, I'm putting increasing probabilities it will just have to collect some more information to make a decision. But you know, ultimately we can't wait for perfect information or we'll be behind and we can't do that to the American people.
It sounds like President Dailier leaning toward a sooner rate cut if it is confirmed that this tariff impulse isn't as inflationary as people expected.
Is that correct?
Well, sooner than what?
I mean, my modal outlook has been for some time that we would you begin to be able to adjust the rates in the fall, and I haven't really changed that view. It does seem like that. Of course, if the tariffs are one off, you can look through them, and if they're just not going to materialize, and you have to watch both sides of the mandate. And I think that's really important. It's not one or the other.
It's both sides of our mandate that have really come into frame since we brought inflation down from the really high levels to something that's closer to our target. Ultimately, we have to watch both sides, and that's what I'm doing. And then the fall looks promising for a rate cut, I don't know for sure. I mean, we have to be open about what we don't know. Humble is I think the word that comes out of the inflation run up and so, but we will. You know, there's a
lot of differences of views on the committee. I see that as real positive right now because people bring their perspectives and the data will guide us to what is the one that ultimately looks like reality.
President Daily John was talking about the Palace intrigue, and I do wonder about how the increasingly political overlay to the FED has complicated your messaging, given that there is this debate about the dual mandate, etc.
How much has it affected the way that you communicate?
You know, not really.
One of the things that I recognize on a regular basis is if I go out and talk to the people who live in the twelve Federal Reserve District, so that's nine states, very diverse states in the West, they don't actually bring this up at all. What they bring up is what do you think is going to happen to inflation? Will you be able to restore inflation to two percent? Will you be able to restore price stability? Do you think the labor market is going to be
preserved during it? Because ultimately, I really want both jobs and lower inflation. I want to be able to get ahead, and so far, the people in my district are cautiously optimistic overall, thinking that the economy is weathering some of the worst concerns and the uncertainties, but continuing to move along.
So cautiously optimistic is where where they are, and I think that reflects what's top of their mind, less about what's happening in Washington, and more about what's happening in their lived experience in their communities.
So, President Daily, would you dismissed some of the discussions around shadow fed and all of that is simply palace intrigue and not necessarily affecting what would happen on the feder You're concerned about.
That, you know.
Ultimately, what I'm concerned about is the two mandates Congress gave us full employment, price stability. There's work to do there. That's where all of my focus is. And the Federal Reserve is an institution, it weather's a variety of different points in time. Ultimately, because we only think of one thing, how our work and further the American people in their lives and livelihoods, and how we do that through our
congressionally mandated goals, So that's what we think about. We've had a durable history since nineteen thirteen, and I would consider that to be continuing to do our job well.
President Addy.
One argument we've heard to reduce interest rates sooner than maybe say the fall, as you indicated, is that basically the labor market right now is no longer a source for inflation, and with that in mind, there is space to reduce interest rates because the Fed beliefs that the policy rate is still restrictive. Does that not convince you enough right now?
Not completely, because remember, inflation has been above our target for some time, well above our target during periods of time, and there's a sense where people really want us to get that down. Inflation is a tax on people, and every time we let people continue paying that tax, it erodes their well being. So I'm very focused on getting inflation down to two percent us. Being sure that we're on that sustainable path as long as the labor market
doesn't show signs of weakening is really important. So you have to make a view. You have to have a view about what you think tariffs will do to inflation. Now, my own view is that they will potentially raise inflation that's my modal outlook, but they should dissipate over the period. It's not going to be something that builds into inflation expectations, and thus we really have to lean against it. But we can't just be assuming we know just because that's
our modal outlook. We have to really collect the information and understand. Remember, data dependence isn't a backward looking activity, it's a forward looking activity. Right now, we're looking forward by talking to our contacts, and they still feel uncertain about what they will do. They're going to try to pass some along, but they, as a number of people you've had on your show have mentioned, firms don't have all those abilities, whether they're managing their brand or just
they have exhausted consumers who can't take anymore. That's what we're waiting to find out. But I don't think we're behind.
In our waiting.
Policy in a good place.
The economy is in a good place, and that's what we'll continue to monitor President daily.
How much of a lesson was it last year when the FED cut by one hundred basis points only to see long term yields rise significantly in the face of growth and inflation expectations. Is that something that you worry about could happen now?
You know, really, financial markets are an input to our to my decisions, not an output that I'm worrying about. And ultimately, you know, we want to see financial conditions align with what we're trying to do for the economy and we'll adjust as need it. But you know, we make policy. There's many things that affect yields. We make policy that we believe will be with the lags of
monetary policy, supportive of both of our goals. And so I haven't I don't spend a lot of time wondering what the bond market will do, especially given there's so many things going on in the bond market right now.
It's been quite volatile.
So really it's about what did financial conditions overall do and what does that do to growth and activity and inflation? Does it restrain it or or support it? And that's that's where my focus is on input just present.
Just want to squeeze this in. What would life be like with a permanent role in Washington, d C. Compared to say, San Francisco?
How would that feel hotter?
But seriously, you know, one of the things that I've my experience with the Federal Reserve is you have to contribute from wherever you sit. And that's what we all do when we get around that table. There's nineteen of us, and we don't think about who is in what role.
It's really how do.
We debate, discuss, bring our best thinking and our best disagreement to bear so we can make right decision at the right moment for the people we serve.
President dealily, appreciate your time. Very diplomatic.
Let's turn to NATO member countries agreeing to a defense spending target of five percent of GDP. Mike Schumacher of Wells Fargo writing, just say no to thirty year bonds. Rising defense spending means heavier issuance, meaning pressure on the long end.
Mike joins us now for more might Welcome.
To the program Sir, provocative piece, and I think a lot of people will agree with you and Mike. The interesting thought that you and the team have god, is this is not just the United States. This seems to be a global story.
It is, joannal. We think it's got legs.
See you think about a secular shift in defense spending. We're talking probably five ten years something like that. It's going to have a long time to go, and I get it. There's a lot of skepticism. People say, well, NATO's target's been two percent for a long time, how many countries have actually hit that? Not many would they go to a three point five percent or five percent, Maybe they don't get there, But really the point is they go up in terms of spending, and I think
most countries probably ratchet. They're spending up in the next couple of years. So if your runway is two or three years, you say, well, if your average NATO country boosts defense spending by zero point five percent of GDP through the math, that's a lot of bonds. We think, a lot of long term debt, and I doubt that it's fully priced.
A lot of people have pushed back on the argument that issuance matters, and I know that this is sort of the popular idea, and yet in the US it hasn't because we've increased our debt dramatically in periods where we saw rates at near zero.
So I'm just wondering at what point, what.
Sort of the tipping point where people become bond vigilantes and pay attention to issuance rather than just inflation.
Yeah, it's interesting. I think issuance does matter. So think about not just nominal rates, but real rates. I agree inflation is high, that's why you've got high break evans. But think about your nominal interest rate. Decompose that break even inflation real rate. I'll give you a couple numbers. So, in the decade prior to COVID, the average real rate on a ten year Treasury was forty basis points four zero. Today it's about two percent. That's a massive premium. Issuance
does matter. So the market's saying, look, we've got the US, which is profligate. It's got six percent something budget deficit, a lot of bonds to come out, we have to charge a relatively high penalty. So I think the market's been opposing that for a while.
Germany is considering this fifty year bond. Mike, who's best position to tap their debt markets when it comes to this defense spending.
Ooh, fifty years tough.
I remember when the US talked about a fifty year back in the first Trump administration. I personally hold probably forty or fifty clients. How many buyers do we find?
Zero?
So perhaps the Germans have more luck today, But I think when you look at really long term debt it's tough. But I would say in general, whether it's a fifty year or a thirty year, the countries that are best positioned are the ones that are starting with a relatively low budget deficit and low issues. Germany is the obvious example. When you think about the outstanding volume of boons, it's
less than two trillion dollars. Just to put that in contact treasuries, you've got twenty four trillion Germany as a pristine credit rating. Germany will find buyers for long term debt relative to other countries, but probably has to focus more on twenty and thirty or less on fifty.
In my opinion, what is the idea of higher rates for longer What does that do to valuations over a longer time. We've already seen what that's done to the housing market and sort of the stasis that sits there. But do you expect equity returns globally to be substantially lower over the next five years, ten years because of rates that are permanently sort of pegged at a higher level.
It probably makes people think about that trade off a bit more carefully and It's interesting. We used to do a lot of comparisons between the equity risk premium and bond yields. The problem is that model has shown the equity market, whether it's the US or elsewhere, to be rich for a long time. But I do think that
if bond yields are persistently high. So let's say that the quote average rate on a US tenure for the next five or ten years is three and a half four percent instead of two something, does that impact the equity market?
Probably?
Is it something people can trade today, I don't think so, But when you consider longer term allocations, it probably does play a role and probably eventually makes bonds more attractive.
Mike.
Some of the naysayers that NATO, though, we're saying that this defense spending, this five percent target of GDP is only because Trump is there, he has a four year term. How much of this analysis you have on only because Trump's president and then potentially in four years they're not going to reach even close to that spending.
That's a great point. That's why we focus really just on the next few years. So for US, we'd say, look, Trump is going to harangue NATO members to spend more on defense. That's pretty clear. He's done it already. He's been successful. Look at Canada, it's going to spend two percent of GDP on defense in the upcoming fiscal year after being one three or one five something like that.
So he's already getting that done. So for US, it's not so much about what happens in twenty thirty or twenty thirty five when who knows as the US president. But if you think about the path for the next two to three years, when Trump will be very visible, very loud, I think it's reasonable to say that most countries in NATO will ratch up there spending quite a bit. So for US, that's the big impact on the markets. It's much less about what happens in the out years.
My quick final question a question I think we'll ask a few times this morning. If the next FED share is a White House puppet, do we have to introduce some kind of em premium to the long.
End of the curve?
Yeah, I'm skeptical about that, John, And here's why. When you think about the nominee, it's pretty clear if people want to act a bit dubbish to try to get that job, to get the interview to.
Get the nomination.
But once the FED share is in place, how much control does the president actually have?
Not much?
It was a great point. Powell's a Trump nominee, trump appointee. Can Trump really control what he does? No, So, if it's Kevin Hassett or if it's Waller, who gets the job. Once that person's in the seat, once that person's been confirmed, I think he or she is going to take his own direction. So I'm not super concerned about that right now, but I think the markets might overreact between now and September October, whenever that nomination comes out.
I appreciate the input. My thank you, Sir, Mike Sheen macroflasfanco.
Joining us NAS.
Nita Richardson of ADP NATI, Good morning, Ernie. You and others have talked about this so called loachha and dynamic in this labor market. Is it getting harder to get a job?
It is, and it is especially for new graduates. We've seen that be in a predominant story. So what companies are doing is they're taking a pause on welcoming.
Younger workers into the workforce.
They're taking a pause on hiring, maybe even hiring senior roles. They're still in that weight and see mode a slowdown in the hiring the momentum that we saw at the beginning of the year.
Can there be this.
Low turn type of dynamic for a really prolonged period of time without there being some at least perceived weakness in the labor market. That becomes reality.
You know what, it's interesting how concentrated hiring has become. If you look at that last government report, what you see is ninety six percent of the hiring has come from healthcare and leisure and hospitality.
Two thirds came from healthcare.
There's a lot of company can do other than let go of a worker. One thing they can do is cut hours. Fifty five percent of workers in the United States are hourly. So we may not be seeing the slowdown in the initial job list claims numbers, but they are showing up in hours worked and I think that's a number to watch, continuing claims as a number to watch.
And then the concentration of the employment that's coming mostly in a very non cyclical sector, a structural sector like healthcare, that's an indication that everybody else.
Is in wait and see most You know, this is such a difficult market to get a hand around, because is it weakening or is it week? Is this normalizing or is this really problematic? And does it highlight potential crack to come. What's your take on that? What's the sort of tell.
There's nothing normal about the economy that's not dynamic, especially a US economy.
It feeds on dynamism.
So I would read the labor market is as in a stasis. There's no movement, and that doesn't plan. You asked me if how long does this happen until we call it a weak market?
Well, it shows up in productivity.
If you have a labor market that's not dynamic, that is not you know, ingesting new talent, it is not moving and workers are going to higher paying jobs and being promoted. That feeds into the productivity numbers. And we saw that the last read on productivity was quite weak one point four percent. The power of exceptionalism comes from not just workers, but output per worker, and that's what's slowing.
That's where you're going to see the weakness.
First, Neil, you say it's harder to get a job, but is it easier to get fired?
Right now? Are they the same?
You know it can be are quite easy to get fired depending on what you do.
I might take out some of like personal issues. Are people are companies laying people off?
It doesn't look like that. It looks like people are holding on to their workers. And in fact we've seen at ADP and the data and the payroll data, not only are they holding on to existing workers, they're actually re hiring workers that have left and come back. And I think, I mean to your question, hiring has become more cautious. They change the composition. Employers are less likely to take a new bet.
On a worker they don't know.
They'd rather hire someone they do know who can onboard quickly, who is very efficient, or not hire at all. That's what we're seeing in the data, and that again feeds back into the lack of dynamism that we might be experiencing.
I'm going to ask the question Jonathan always asks, if you're hired right now you have a job, are you going in and asking for pay rises?
You're probably going in and asking for a pay raise, yes, and not getting it. So yeah, the ask is there, but the action is not. And you can see that in how our initial job switcher data is looking. Yes, you get a bump from switching jobs, but it's not the same bump that you would have gotten two years ago, and it's not the premium of getting that bump versus what your pay growth would have been if you stayed
at your previous employer isn't really there. So yeah, you can ask, be careful how much you.
Asked for Kate Poskin, Kate Paskin. I always say that, Kate Paskin. The companies don't want you to ask. Stay well, and they want to have that leverage. Get comfortable, not end enough.
Yeah, keep asking because the firing rate isn't that high, So you know, go for it.
Keep pushing.
Mi McKay's going to keep pushing my mcas more tax for us. Mike, you wanted to focus on the trite numbers, right.
Well, trade numbers and durable goods. There's a couple of interesting things here. The exports for the United States fell five point two percent. That is the most since the largest drop, shall we say, since twenty twenty. It isn't clear why that would be because for US goods have been dropping as the dollar drops. So this is in the trade business pretty much a story about exports not living up.
Now on the.
Durable goods side, we saw a rise of sixteen percent, which is the largest since two thy fourteen, an increase of sixteen point four percent, But it's almost all Boeing one hundred and fifty eight percent rise in Boeing non defense aircraft sales or orders during the month, and some mixed news underneath because factories, the stuff we normally think about, like machines and primary metals, fabricated products those rows, but computers,
communications equipment, electrical equipment, and appliances all fell orders for those during the month, so it isn't clear exactly how strong durables are even though the headline number is pretty strong.
My McKay appreciate the update. My thank you. Nada still with us.
NATA wanted to tenci on the feder itself, just briefly, not as any of Deutsche Bank set. This is no uncertainty, he says. You can see in the forecast a lot of division. Do you hear and see a lot of division?
Yeah, I think that's to be expected. When things are really bad are really good, you should see a lot of consensus. The gray areas or where it's hard to drive that consensus, and it really depends on whether you want as a policy maker to make a preentive move because you may think that the economy is weakening and rates are too restrictive, or you're still in wait and see mode and you can see that various actors are
playing or responding to different parts of the economy. It's like we all are looking at a puzzle with missing pieces, and you're trying to figure out what's in the center of that puzzle, and you don't have the pieces at the ready, and those pieces probably won't materialize for months and in.
Some cases years.
If you're talking about long term capital investments, so you're guessing, you're guessing what the center of the economy is. You're guessing about policy over the next six months, over the next even six years. Because many companies that are manufacturers are making tenure investments, not three month investments.
Do they have sufficient information to sit there and say, we're forced to make a guess right now, and we've got to make a call.
Is that as soon as July?
Or can they keep on waiting because the chairman keeps saying we can wait the economy solid? Is the economy solid?
If you're looking at the unemployment rate, you can go with a solid message. It has not budged in a couple of months and it's still quite low if you look at it historically. So there is a reason to wait. If you're looking at an economy where if you look at all the typical median projections, they are expecting slower growth, higher inflation, higher unemployment. If that is your forecast, you may want to make a preemptive move, and that's what some of the committee is doing.
But overall the consensus looks.
Like to wait and see, and they have the data support to do so.
Nita, it's going to see. As always, Thank you nither Rich of them, there of ADP. This is the Bloomberg Sevenans podcast, bringing you the best in markets, economics, angiopology. 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 opp