Surveillance Fed Special: Low Inflation Nerves with Evans

talking with Robert Kaplan. He is the president of the Dallas Federal Reserve, the eleventh District and the FEDS set up and thank you for getting up early joining us this morning on Bloomberg TV and radio worldwide. I gotta start with j. Powell. Wall Street took his comments yesterday as opening the door to a rake cut. Do you think that that door is open? Uh? I think it's need to make a judgment on that. We're going to be very vigilant about understanding these heightened trade tensions, see

if they feed through to the economy. More most importantly, see if they persist. Uh and uh. And so I think it's too soon, though to make a judgment as to whether we might or might not take an action. I'd rather be patient here and let events unfold a little bit more well. Investors have priced in three rate cuts, and the Wall Street economists over the weekend basically joined the consensus that you're going to cut rates. You've been in the watching Wade camp Um. What would tip the

balance for you? When? When would you think that you need to make a decision. I would need to see some evidence that there's a deceleration or further deceleration of economy. We've expected that growth would slow from eighteen and nineteen, but we're still growing above trend. We're still seeing a tightening in the labor market, and our Dallas trim mean, which is our measure of core inflation, is now at two percent. We think we'll end the year around two percent.

So I would need to see some evidence that there's a worsening in those trends. We may well see it. I'm very I'm on I'm on watch as to whether we see a further deceleration. But that's what I'm watching for. The data are lagged cost benefit. What's worse cutting too early or waiting too long? So it depends on where you are uh in the in the in the cycle and UH, and what our stances and my own assessment of our stance is, we're in the neighborhood of neutral

right now. So if if we were to cut, that would that would be me making a judgment that we need to add stimulus to the economy. That might ultimately be a judgment I need to make. But if on the other hand, you're you've got a restrictive stance and you decided to cut, that's something different. Or if you're highly accommodative, it also is a different judgment. But right now we're pretty much of a neutral setting. UH. And the question is should we be stimulus to this economy?

That's a question I'm asking. I'm open minded about it. I think the risk to the downside in the last five or six weeks have increased because of these heightened trade tensions. So I'm watching it very carefully. But that's the judgment I'm gonna I'm gonna and that's the question I'm gonna be asking. Well, they say that the Federal Reserve decides when the raise rates, but markets decide when you're going to cut them. How much pressure do you

feel from markets right now? I've spent my entire career in the markets, as you know, and I've learned that markets can change on a dime. For example, there's been a dramatic change in the markets since May first, or approximately May first, last five or six weeks, and UH, as we've seen, you could see a dramatic change UH in a different direction over the next five or six weeks.

For example, what's happening to the treasury curve I think is very much in response to heightened trade tensions, and some of those decisions or some of those tensions could be reversed in the next several weeks. So I've learned to watch markets, but but I don't want to overread or overreact to what they're saying and UH, because they can change on a dime. Well, what are CEOs in your district telling you about what they they see in the business climate and what are they asking you to do? So?

UH the biggest issue for businesses today, and I think this is the vulnerability for the US economy. It's not the consumers in good shape, it's for businesses. There's a high level of uncertainty, and businesses are using UH logistics and supply chain arrangements heavily to remain competitive. They have they don't have uh much pricing power. Technology and globalization

have limited their pricing parts. They're using some of these other techniques uh to manage their costs, and what they're seeing is a lot of uncertainty as to how they're going to be able to do that. And I think these recent uh, these recent threats against Mexico have further put more uncertainty into their minds. So what do businesses do? What they're telling me they're doing is be more careful, hold off on capex, be more cautious. So I think

this is having some chilling effect. I think the businesses will also remark cost the capital is historically low, access to capital is historically high, and so uh, they're not that sensitive for many of the businesses I talked to, other than say the home builders, they're not as sensitive to the policy setting as they are all these other uncertainties and managing their business. You mentioned the Mexico tariffs. No district would be more vulnerable than the eleventh district yours?

What would be? Have you modeled what the impact would be on your district and then on the national economy. Yeah, so we're By our estimate, we're probably a third of US trade with Mexico. Texas is the largest ex boarding state in the United States. Uh, We've taken a number of looks at it. I don't even want to throw out statistics because I'm still hopeful that that uh there actually won't there won't actually be a follow through on

these tariffs. And the reason I'm hopeful is this is a very different trade relationship than the one with China. This is substantially an intermediate goods relationships which allow US companies to manage their logistics and supply chains, be competitive domicile in the United States, and it's allowed North America in the US to take share from Asia, so as opposed to the trade relationship with China, which is primarily

a final goods deficit. And so it is so overwhelmingly in the interests of the US to have a strong trading relationship in North America with with Mexico and to some extent Canada, that I don't want to go too far expecting that we're going to do something that was going to further jeopardize that relationship. It's so clearly in our interest to have a strong trading relationship with Mexico. Well, we have seen the impact, just as you say, in uncertainty,

how do you think the Mexicans would react? You speak to their positive maker, did you know we're very close to senior officials, they're ahead of the central bank. So it's not been as reported as much in the press. But over the last two years, Mexico has actually is the one country in the world that's fighting an inflation problem. Uh. They've had a very volatile currency. They've raised their domestic

interest rate substantially over the last couple of years. I think there was hope that there would be some stability uh with U S m c A. This just further puts volatility in their currency, makes it harder to manage their economy, and we see slowing and economic growth in Mexico. Uh, they're actually slipping. Uh. They've got a new president. There's uncertainty with that. So it's a very challenging time in Mexico.

You put it all together, what's what the impact has there been on your economic outlook for the rest of this year. So our forecast for the year still is in the neighborhood of two to and a quarter percent GDP growth, who could be a little higher, could be a little lower. Still think the labor market's kind of tight, and we still think we're gonna end the year in

the neighborhood of two percent on core inflation. Dallas Trim mean, I think this These recent events have have raised the risk to the downside, and so I'm much more vigilant. I'm much more cautious about how events are going to unfold. And the question is are these tensions going to persist? And if they do, they're likely going to have some negative effect on our outlook. But I think it's a little too soon for me to make a judgment about that.

But we're on heightened alert as a result of these tensions. You're here in Chicago for a FED Listens conference on the monetary policy framework. Is the framework broken? Do you need to fix it? No? I think our framework is working reasonably well. Uh. There There are a couple of big issues though that that we're that we've been talking about. One is inflation has been running for the last eight or nine years, not completely, but for a lot of

that time below our two percent target. I think a lot of that has to do with technology, technology enabled disruption, globalization, I eat structural trends. Should we be revisiting elements of our framework, uh so that we can be more confident that we're meeting our two percent target and that we're

anchoring expectations around two percent. And then the other big issue, which is somewhat related to that as well as the economy is performed over the last number of years, there's a number of underrepresentative groups that have not fully participated in this recovery. That may be due to educational attainment, other impediments uh in their lives that make it harder for them to join the workforce and stay in the workforce.

And I think running a somewhat hotter labor market may help those groups get in and stay in and help create somewhat more inclusive growth in this country. And I think that's another issue that we're actively talking about. Can you generate inflation if you cut rates? Say, would that

raise inflation? So you've heard me say before, the the monetary policy has a pretty potent effect on the cyclical aspects of inflation, tightness of the labor market, other elements of the cyclical elements, the part that might be a little less susceptible to monetary policy or the structural drivers of again technology, technology enabled disruption, globalization, which are limiting the pricing power of business, improving the negotiating leverage of consumers,

making it harder for businesses to raise prices even if they have wage increases. And so I think it's muting the inflation effect. And so uh, I think these are this dynamic is one we just need to take into account as we think about monetary policy. Is there any suggestion, and there have been many of them made for policies you can adopt that you find intriguing or interesting. Well, I'm I'm open minded on all these proposals, nominal GDP targeting,

elements of price level targeting, inflation averaging. I think the key for me is do we want to come out of this framework review saying there are two or three new factors we want to take into account, or we want to update our framework, for example, to take into account average inflation over a period of time. It's one thing to take those factors into account. It's another thing to make a commitment or create a rule that would

bind future actions. I'm reluctant, uh to uh to bind ourselves to future scenarios that we you know, we can't predict, but I am in favor of alternating, probably updating our framework to take a few additional factors into account, which I think may serve us well in meeting our dual mandate. Are you're worried at all that the FENS raised expectations for what's going to come out of this process and you may disappoint the market. I think we have to

be careful. The commune AKA clearly that, uh that I think it's a healthy thing to do a framework review. I don't think it should be a one time thing. I think it's something a good organization does regularly. Uh. But because we haven't done it in a long time, it may raise some expectations. But I think we're gonna have to just communicate what we're thinking and how we're doing it, so we we we sort of balance how we're going about this. All right, Robert Caplan, thank you

very much, President of the Dallas Federal Reserve. We'll send it back to you. Michael McKay, thank you very much, sir. A fantastic interview with the Dallas Fed President. An ugly a DP report, a massive downside surprise ahead of payrolls Friday in the United States, the number coming in at twenty seven k, the median estimate one D eight. He five. It sparks a big bond market rally, and now we can get reaction from the Federal Reserve. The Chicago Fed

president Charles Evans sitting down with Bloomberg's Michael McKay. Well, thank you very much, and welcome back to Chicago where we're speaking with the president of the Chicago Fed and our host for this conference, Charlie Evans. Thanks for joining us of Morning on Blueberg Television and radio worldwide. Got to start with the news. J Powell yesterday his comments taken by Wall Street as suggesting the Fed is putting a rate cut on the table for consideration. Did you

take it that way? Is a cut as the door open to a cut? Uh? Well, I think we've been looking at the data and you know, talking to businesses and thinking about how the forecast is evolving. I still

think that the fundamentals are solid for the economy. There is uncertainty and you you know, might be wondering if businesses are you know, delayne a little bit more taking stock of you know, what the international situation looks like I think it would be prudent to take a look at you know, our you know setting for monetary policy, as we do each and every time, and as I've said, um, you know earlier, I'm a little nervous about the low inflation rate and so um, even though we expect it's

kind of temporary. I think that that by itself could be a reason for a little bit more accommodation. But I think we're just gonna have to look at how things are evolving. Cut rates basis points. Will that generate inflation hasn't so far? Well, I think that's a good question because I think it depends on just supporting and an accommodative fashion. We've been under running inflation. We're about

one point six percent year over year. We ought to be at two too and a quarter by now this late in the cycle, sort of averaging higher inflation at least defending our symmetric objective. And so I think more accommodative stance would be supportive of that. Um, you know, it depends on the evolution of the economy to whether or not that supportive of that or not. I think additional nervousness would you know, also um, you know, call

some of that into question. Something changed with inflation dynamics that maybe they Fed an economists in general don't understand. At this point. We've certainly been under running two percent now for quite some time. We've had moments where we've gotten up to two percent, and certainly a year and a half ago, as we were tightening raising rates, I was more confident that we were going to be able to get to two percent on a sustainable basis. I

think that's really important, that would be sustainable. It turns out that we weren't. We haven't been able to do that, and it seems to be one cycle of temporary uh downside risk to inflation after another one after a while. I think you really do have to wonder about the inflation process and whether or not we just need more accommodation. But you're hosting a conference that's part of the fed's review of its monetary policy framework designed to sort of

solve that problem. Have you heard any uh suggestions, and there's been a lot of them for different policies you could adopt that you think actually would produce the result that you want. Well, I think the conference papers have been very good. We had a panel yesterday where we had people, um, you know, labor, business people in the community talking about what maximum employment means for their constituents.

And I think that, uh, we had a very nice paper looking at evaluating different approaches that the FED has taken over the last ten in fifteen years. I took away from that that it's very important that we continue to demonstrate credibility that with all of our actions, we want to indicate that we're here to generate symmetric two

percent inflation and maximum employment. Some of that could be, um, another reason for sort of pushing a little harder further into the cycle in order to average higher inflation to ratify symmetry. I think we're today's papers are going to be on that point even more so, and I think it will be very interesting to listen to those. Your district is sort of at the center of manufacturing in the United States. We've seen the I s M reports,

We've seen the the manufacturing vase suggests ongoing weakness. They keep grinding lower, but some say is reminiscent of two thousand fifteen. What do you see in manufacturing, Well, we've definitely seen the I S M moved down it's still expansionary for manufacturing, but there's definitely more uncertainty about you know, you know CAPEX orders business fixed investment and you know how that's likely to proceed, So that obviously hits the

manufacturing sector in a pretty big way. UM. I also think that the tariffs on agricultural products are really big in that effects of farm equipment manufacturers as well, and so um, you know, that's just another headwind that the economy has got to work its way through in order to achieve growth at potential or above potential. I'm looking for two percent growth this year. That's actually a pretty

good growth rate in terms of trend growth. But uh, you know, we're gonna have to navigate, um, all of the headwinds that we're facing right now. What are your district CEO telling you about what they think is going to happen to the economy and how they're reacting to it. Um, you know, my information from CEOs is a little bit stale. It's you know, six weeks since we almost six weeks since we had our cycle. I've got my directors meeting today.

I look forward to their comments. I believe I'm expecting sort of a little bit of a continuation of their balls up in the air. There's uncertainty. The fundamentals for their operations are pretty good, but of course if you start making adjustments to the effect supply chains and how you move product over and back across the border with Mexico, that would have, you know, a negative effect. And so I think we have to be aware of all of that and make sure that the FED is not getting

in the way of continued good growth. The FED may not be getting in the way, but trade policy maybe getting in the way. Have you seen measurable impacts? We all talk about the possibility of faster inflation when we talk about slower growth. Can you quantify an effect so far in the data? So I think that's a challenge. I think most of what I've been hearing what I just indicated is that this is on the soft data

kind of side. It's uncertainty. It does get at business attitudes towards putting precious capital at risk over a longer period of time, when the actions might be undone by a change in trade policy or other actions. And so I think it's a more difficult time to take a longer perspective. And so people are waiting and just sort of seeing how things play out. Could come out fine. Um, you know that's what everybody helps with the trade policies,

your cost benefit analysis. Is it better to be slow to cut if needed, or better to be cutting through seeing Yeah, that's that's a good question too. And and I'm gonna I'm gonna pause a little bit and just sort of say it gets at the strategy. And my own take on things is that inflation is just a

little light relative to our symmetric two percent inflation. So before we even talk about, you know, more trade uncertainty, I'm a little more inclined to kind of think, you know, we might you I wonder if we've got the appropriately accommodative setting in order to generate inflation at two to two one a quarter per cent and two and a half percent inflation would not be um against our symmetric inflation objective as long as it was relatively contained. So

I think that there's scope for that. Now if you layer on top of this additional uncertainties as to the real economy and just you know, there are insurance reasons to talk about adjustments, I think, um, you know, there's more to talk about these days when it comes to monetary policy, and we'll be doing that in Washington before too long. One of the things you've gotta be talking about is what's happening overseas and the impact that comes back into the US. And one thing we have seen

is much stronger dollar companies feeling that impact in your district. Um. You know, I think that there are you know, a number of headwinds that they're facing, and obviously relative prices would have one effect on that. I think commodity prices have been another. But they've sort of come off those kinds of pressures mentioned agriculture. I wanted to ask you about that because of course this is a huge agricultural district. You've got tariffs and you've got floods. Uh, you've got

reports that farmers aren't gonna be able to plant. How how bad is it? Um? Yeah, the weather effects have been really uh you know, um, not good obviously. UM. You know, a lot of flooding, a lot of just navigating going around the area. You know, bridges are out and things like that in the fields are more difficult. So um yeah, everybody struggling with that, and the uh, crop prices aren't supportive of you know, that profitability either well,

what's that going to do to inflation or to growth? Um, you know, crop prices have been low, so obviously if supply was curtailed by some effect, you might predict that prices would go up a little bit, you know, somewhat, But it's going to depend on the entire um, you know, the market where planting takes place, elsewhere in world conditions. So it's hard to say. I'm not really concerned about

the inflationary consequences of that, nor the tariff effects. Um, even larger tariffs I think would sort of be a one off effect on overall prices, and so I don't think that would risk our inflation objective at the moment. Well, then where do you get the symmetric two percent that

you want from? Well, I think we're trying to find the appropriate setting for monetary policy, and uh, you know, so far, we sort of decided that settling on the low end of the range of neutral uh interest rate seems to be a good place to sit because it supports the economy and helps support inflation a little bit. If all of a sudden, we you know, realize that that's a little bit more contractionary than we thought. If we're getting in the way of the economy, I think

we would have to rethink that and make adjustments. But that's a determination that we need to look at the day to talk to people about and UH come together as a committee on We had a viewer a question come in that kind of gets at one of the

panels that was here yesterday about FED communication. UM, and I think back to when you and I were down in Florida recently and Kevin Walsh, the former FED governor, said we could have chosen a one point five percent inflation target, and then everybody thinked we great because we keep hitting that. Um, what's magical about two percent? And why is it off the table that you would want to change that number? Yeah, I didn't agree with that assessment.

I worry that, UM, you know, if you if you choose a lower inflation objective, that conservative central bankers are always going to be a little bit nervous about going above their inflation objective. I think the real issue and that we have is UH UM stating very clearly what we mean by symmetric and stating that you're comfortable with

inflation half a point above your objective. If we had lowered the objective to one and a half, for all I know, we'd be down at one and a quarter, and so I don't really think that's a great idea. It also wouldn't give us enough capacity to cut rates. One and a half was reasonable discussion back in the mid two thousands when productivity was so much stronger, real interest rates were higher, and the threat of the zero

lower bound was not really what it is now. But currently, with lower trend growth rates, lower labor force growth expected UH, and productivity growth, I think that would you know, we need to defend our two percent symmetric inflation objective very strongly. We mentioned capex slowing down. Do you see any evidence that productivity is picking up other than cyclically? And will or will? I mean, we've certainly seen stronger productivity growth in the first quarter and last year it was stronger

than it has been UM. I think you're right to point out that it's been cyclical, and I think that if you look at us sufficiently medium term and longer term perspective, it's far more likely. UM. I'd love to see stronger productivity growth, there's no doubt about it, and more innovation would be helpful for that, but it's got to hit business practices, it's got to hit the factory floor, it's got to be integrated into all of the offices

in a way that leads to higher productivity. And there are a lot of disruptive technologies coming about that get in the way of that adoption for for everything, and so, UM, I'm kind of with John Fernal and others where I think that productivity going forward it's gonna be stronger than seventy three to nine five, but it's not going to be it's unlikely to be as strong as ninety five to two thousand five. And so I'm looking for about one and a quarter percent productivity combined with half a

percent labor growth over the medium term structural sustainable. That's one of three quarters percent trend growth. We need to make sure that we've got the accommodated, the appropriate policy in place so that we can achieve that you have now, Um, you know, I've been optimistic that we did on the basis of the most recent data and the fact that we think that we're on the low end of the

neutral rate. But with all the uncertainties coming about, and you know, new data We're gonna have to take a look at that, all right, Charlie Evans will watch for what you do at the next time. Thanks for joining us today. I'm Bloomberg Radio and Television worldwide. We'll send it back to you. Mcal McKee, thank you so much.

What a tour to force. Michael McKee with two very different interviews with two very different presidents, Camplain of Dallas and then Charles Evans, truly one of a great monetary theorist, Evans of Chicago, with a more PhD like I guess I think Mr Kepel would say, yeah, fancier economic analysis. It is a perfect time to speak to a guy with a big fancy title executive editor Economics Holding Court

out of London. Uh. Simon Kennedy, who of course led our our nascent Brexit coverage and put together all that team as well, but far more important Simon Kennedy of a few years back, a younger Simon Kennedy working in Washington saw during the financial crisis where institutions have to

catch up and institutions adjust. Simon, I want to go back to a moment you and I shared at the St. Regis Hotel a million years ago, with John snow Treasury Secretary, where he adjusted with a card soil or appendix to whatever the blah blah blah statement was. Are we near a point within all of our economic reporting where elites and institutions are going to have to radically adjust? And will we see that from the Fed? Um? Well, we

we saw some scientists that they're open to it. They in some ways of talking with Carna earlier economists and cast money. This is just what Jerne Pals from the FED suggested was a statement of what the said, does you know it monsitors things and it ad just as as as needed. But I think in the past you've had some criticism of your own powers fect chairman for his communications with the market, maybe appearing a little tone

deaf from time to time. Uh, And so I think from the boxic point of view, it was a welcome thing that he at least acknowledged the debate that's going on on Wall Street, and and even if he didn't say that the rate comes coming here, at least said you were aware of the we're aware of the debate. And perhaps the risk had been if he'd just stood up and talked about out the monetary policy framework for the long term, which obviously the theme of that conference. Um,

the markets would have fallen out of bed. So I think he's the center of gravity. As as as we report today, central garrity has moved towards the cut. Is it there? Yeah, it doesn't look like it. Um. Is the feed aware that the debates going on? Absolutely? The Jazz report is tomorrow, excuse me, two days. But in between there is an ECB meeting and certainly we've heard Simon this morning from all that all of a sudden it's a very important ECB meeting. State from our team

in Frankfort. Why Mr drag sire tomorrow is so important. So I think you've got a few few moving parts. You've got one that global backdrop that that they we're talking about, that Pal's talking about the trade war and the light and there's a chance that Europe actually ends up the loser both ways. You know, the expert powerhouse that Germany suffers with a trade war. If there's the US China deal, um to create a kind of a trading block within those two powerhouses, than the neural gets

squeezed out either way. So there's a global picture. Um. There's also stents that like the FED, the ECB thought it was was on the way out, had had obviously stopped que um and was looking to raise rates even even at some point a year now pushed that into the future. UM. And so you've got to what they're gonna do tomorrow is some bad new bank loans that they previously had hoped not to do. So they're going to release these bank loans to two banks, or at

least detail the framework or how they'll do it. Um. There's obviously pressure on them to be very generous on the terms their attack. But now yet again the ECB is now back into a debate about there whether it can do more stimulus. UM. Story on the Bloombow terminal to day about what those options could possibly be a couple of things. On that one, there's not much room for the ECB two cart Remember when we're talking about FED lacking ammunition. The FED height the FED created a

little bit of a buffer between itself and zero. The e CP doesn't have that buffer in ever got to hike UM even last year when the economy was doing okay. So it's got less room to um uh to uh well come to the rescue. It need be and thirdly, you've got the sense that Mario Druggi leaves UM the

ECB in October. He's he's done, he's term limited, he's out. Um. You know, it could be that he tries to hum as a city group just today, it could it could be that he tries to overcome that lame duck status um that he risked having by actually going going harder doing it now, maybe doing a favor for to whoever exactly. And and also what's changing. We saw this this morning in a blur of headlines, folks. I really can't convey

from our London studios the global sense of news flows extraordinary. Mean, really, all we haven't seen, maybe in the last twelve hours is a Chinese say something. But Simon Kennedy, there was Italy finally chastised by the European Commission. How does the ECB fold into the arch debate between mean, the Germanic austerity crew in an Italy desperately trying to deal with one currency and no combined fiscal policy. Well they should be has done quite a bit for Italy in the past,

obviously with its contrib easing. But the messages are staying that countries have to get there are the debts in order the death. It's not it's interesting in that the European Commission is that is trustising Italy. It's probial trustis in France exactly. Debt metrics are not not opticity great either. And then it comes back to the plane facts and

this will obviously inform the CP appointment. The euro is a is a political construct and um and and and making the economy kind of work within that place construct is that is the challenge of the times for for European policymakers. The same in Kennedy and Shortners, thank you so much, executive or running all of our economic coverage worldwide, I'm gonna turn to the experts time when it comes

to economic theory. And she didn't. Unfortunately, you know, an expert just darkened the door here of our Bloomberg and actor, Elena Shulietteva Bloomberg Economic senior US economist. So, Elena, let's just go back to yesterday. What did you take away from Chairman Pal's comments? Not as much as the market seem to have taken from it. So I think J. Powell just used a simple boilerplate language when he talked about how AFMC will react to slowing in economic growth.

So obviously they're watching and monitoring what is happening in the economy with respect to tariffs and otherwise, he did not, in our of you, signal any um biased towards uh the rate move. I don't think not yet. At least it's interesting because the market clearly is ahead of where the Fed is. The market is you know, pricing in you know, a couple of discounts, maybe even you know, a rate cut, maybe even this summer. Um is the

market too far ahead of itself, do you think? I think so, although the data seemed to be starting to signal that things are actually filtering into the real economic activities. So the Ladies da DP print this morning actually was quite shocking, not that much the extent of the drop in the hiring pace because it comes on the back of a very strong reading, but rather than the breadths of of trouble in in in terms of hiring. So

you saw manufacturing payrolls continue to be weak. You see some tangential services industries starting to get a hit from trade tensions. If you look at trade and transportation industries, that is slowing as well, so that that is telling us that all this trade judice are starting to filter into the mystic real economy. So, Lena, do you think any of them it's interially when you think about that.

I guess on the jobs number today, my question is, is a job's number like that again well below were expectations. Where is that consistent with an economy that's slowing to a two and two and a half percent kind of rate. Today's number clearly over states the trundlining weakness. I think you have to look at the three months moving average, for example, but that has slowed quite considerably, so in February.

If you look at the numbers in February and now, it has slowed by about a hundred thousand jobs, so that is quite significant. And we actually revised that. Or reading for payrolls uh this morning? What do you do? Where'd you go one sixty down from two or five? Okay, we saw Chris wrap you over the MUFG go from two hundred down to and twenty. Everybody adjusting numbers and they're allowed to do that. Helena, I want to get

theoretical on you and that. Vice Chairman Clarata, of course acclaimed with Clarata Golly Girdler, which is immense mathewness that to be honest with the jet leg Helena, I'm too tired to go through. But John Cochrane, who's always controversial and always smart and interesting in Chicago pushing against everybody out there, really emphasizes in a a classroom note that the problem with all these theories is they don't assume a policy shock, and they don't assume the serial nature

of many many policy shocks. By definition, right now we're going through extraordinary policy shocks. How do people like you do their job given policy shock? Well, it's it's absolutely it's very difficult because uh, you know, I hate to say that that, but this time is different. So you made me say that. Um, yes, so, But I think you know, what we see right now is really a mixture of some unusual circumstances but at the same time

some really familiar trends. So you do see wage acceleration, and we will probably see that in the Friday's jobs report, and we do see the unemployment rate is low, and

that is what's starting to push wages higher. So it's probably not as clear given all the policy things that are happening around us but the key cyclical momentum, I think is still there and we just need to look through all these uncertainties and uh, you know, market jitus and whatever, give us an update on yquill ce, pussy, pus, je pus and X. On the I part, where's investment

right now? Is a confidence so evaporated that that we're going to use the Charles Evans mentioned to Michael McKee today that we really don't know what the confidences of businesses and their investment may drop. I think that's the weakest link in the economy. And unfortunately, all growth will be concentrated in the consumer sector again, which makes it vulnerable to any major shock. So you keep all your

eggs in month basket and that's not ideal. You know from CFA books, you learn diversification is you know, matters, and it's still applying to economic growth as well. Investment will continue to be non existent, I think, at least in the near to him, actually, in that respect, Thomas Barking speaking a couple of weeks ago, he he made a really great speech and he basically said, we can talk ourselves into a recession if we continue, uh and

at that pace, and actually business sentiment, business investment really matters. Well, that's what exactly where I was going to go next. I've been hearing the recession word in much more frequently over the last several weeks and a half in the past. Is that's something that's in the forecast of Boomer economics. No, we're not there yet, and that is exactly for the reason I just mentioned that consumers are still in a

good shape. So you look at consumer sentiment, you look at wages, you look at jobs, even like given today's numbers, you know, the momentum is still above the trend pace. So that means we will continue to see unemployment rate falling from where we are right now. In fact, we already at the level that the Fed penciled in for the end of the year in terms of the unemployment rate, so they will have to revise it down again when

they meet UH this month. So I think the consumers are doing still quite well, so that means growth in the economy we will continue to be abuff potential, which means better labor market, better economy. Still. So, Elena, thank you so much at table with us with Bloomberg Economics, and I think it's been pretty cool Paul to go from Kaplan to Evans to Sherlott Tabor, I think it's just to go certain certain walk to it. Thanks for

listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio