Surveillance: U.S. Jobs Report With Kudlow

us now in reaction to the payrolls report. Larry always great to get your thoughts on payrolls Thursday this time around, and I think everyone just wants the initial reaction to the job's report and what it means for the next fiscal package. How did these numbers shape the fiscal effort in Washington over the next several weeks. Well, look, first of all, it's as spectacular number and it helps the overall situation enormously, So you know, that's really the key point.

We've created a lot of jobs in the last couple of months, and the trends continue. I want to say one thing I was listening to that earlier conversation. I don't think people understand that relationship. The rescue package that the President led with bipartisan support and Congress, and the p p P that Secretary manution Uh fostered and implemented. It's the temporary layoffs, John, it's the furloughs that are

coming down. We kept people connected to their employers. Okay, they did receive assistance, but we kept them connected so that as the economy reopened and the businesses reopened, roughly of small business reopened. So we saw it again today. I mean, sixty three and a half percent of unemployed now are temporary workers. That number was seventy and was seven point seven million. I don't see why that trend can continue. That's the point making I don't. I'm not sure.

It's like an intellectual disconnect why that trend can continue. A lot of temporary layer us will go back to work. I think a lot of people believe you can't extra polay this out too far because we've had to slow down or reverse the reopenings elsewhere, Larry, and for that reason, many people think more help is needed. This is what the President had to say in the last twenty four hours when he was asked about more direct payments for individuals.

He said, I support it, but it has to be done properly, and I support actually larger numbers than the Democrats. So that doesn't sound like a consideration anymore. It sounds like the President's made a decision. It's not a fair characterization. Larry Well, No, I don't think final decision has been made at all. Uh. President has always favored that, but he wants it to be done in a very smart way, in in a targeted way. So I think the shape of any kind of package is still very much up

in the air. Look, he has emphasized a number of programs now again, negotiations won't formally begin until after the recess to life worth recess. He's talked about payroll tax cut. He's talked about reemployment benefits and bonuses because we don't like the six hundred dollars plus up on unemployment. It's a disincentive to work. He's talked about helping the restaurant industry, the tourism ministry, the entertainment industry with better business write offs.

He's talked about capital gains, He's talked about investment rite offs. There's still a very large package here, and you know, we won't know until we go into these negotiations. So he's right, Uh, everything's on the table. Where many things are on the table. It's just a question of shaping it and do it smart. I thought the original rescue package was very smart. I don't know if everything has to apply all over again, we'll see. We assess the economy,

that's the key point. Well, let's assess the dates up. What's the evidence of the enhanced unemployment benefits of being a disincentive through sense of work? Well, right now, I can only give you anecdotal evidence. I hear this a lot of his Here this secretary minution, here's this um Jane Scalia at labor. So many business people have said to us, particularly the smaller business, particularly some sense the most vulnerable to the pandemic, the restaurants, the small stores

and shops. They can't hire people back because the unemployment benefits are very generous. Now, I happen to think the generous unemployment package was probably a good thing at the beginning of this pandemic when we put it, when we put it on the table in mid March and late March. Okay, working with the p p P program pay or protection. I think the unemployment compensation could be a good thing.

But now that moment has passed, we're moving into the reopening and as these numbers shows spectacular job numbers, people are starting to move back. They want to go to work. So I think we have to look at this a little differently now, and I think reemployment benefits probably will help fill the bill, and those two have to be targeted to the right people who maybe we're having trouble getting a job or competing with the unemployment at six It will be a better story for the small businesses.

It will be more manageable. They'll be able to afford people. That's the key point, Larry. Unfortunately, you were the team have only given me another sixty seconds for this interview, which is unfortunate because I have so much to cover with you. So let me get to China. A caught up with Ambassador Bolton in the last twenty four hours in the Wall Street Journal. In the last couple of weeks, he referred to Secretary Manuchin as a panda hugger. You

came off lightly. You were called a free trader, but he said there is an intellectually fractured approach to fit all things China. He said that the president was leaning on President g to get the best possible outcome, to lean on States and by soybeans, etcetera, to help him win an election. They were his words that the president of the United States was leaning on a foreign leader

to help win the election. Now, Larry, my question is, at the moment with Hong Kongan, the news and the likes of Secretary Pompeio, go and get that, I'm making a lot of noise about how hot you will be on China. How can we take that seriously? When a former employee of this administration is gona around saying the older president wants is the president she to help him win the next election, Well, I'll just say I haven't

read Mrs Bolton's book. Uh. Many people who were at that dinner in Japan completely disagree and say that that was an unfactual remark. Okay, that's what I know. Uh, China is a huge problem. We are engaging with them on trade, but what they are doing in Hong Kong as well as other problems, becomes a larger and larger difficulty in our relations. As Secretary Pompeio and National Security Advisor O'Brien have said time and time again, I want

to pivot to a much better story. July one, the U s m c A trade deal went into place. That is a hugely important, pro growth, job creating trade deal which will help agg worker and farmers and manufacturers and the blue collar boom can re arise. We've got currency stability, We've got intellectual property protections. It's a tremendous deal. I don't know why it doesn't get more coverage. The leaders are probably gonna come here next week to celebrate

it with President Trump. U s m c A is a solid winner and it will be pro growth and by the bye it will add to growth next year after. I think we have a strong second half and that's looking forward and I don't see anything reasons block that. As long as people know, and I'll end with this, John,

people know they must exercise best practices. Don't forget the guidelines. Okay, the masks, the distancing, the testing, and the personal hygiene are important to mitigate this higher flashpoint in the Southwest. It's not necessarily nationwide. It's a few states in the Southwest. Use those mitigation best practices and we will get out of that more as and we will grow this economy

and spectacular fashion. Larry, I'm not sure how we got from leaning on foreign leaders to wearing a mask, but I'm pleased that is the administration's approach at the moment to where a mask. Larry. I would talk about U S. M c A, but unfortunately, because of your team, I've got to cut this interview short and hopefully we can pick up where we end this another time in the next couple of weeks. Larry, count love that National Economic

Council Director. Right now, we have to look systemically at the systematic, multi strategy approach of black rock, and we can do that with Jeffrey Rosenberg. He joins us now hugely prodigious on the dynamics of the market and how it folds back into fixed income. Jeff, let me get out front of your next July note. What is the distinction right now in bond dynamics that has your attention well on the on the bond dynamic side, away from

the payroll report. You know, it's it's really about yesterday's news, and it's about the discussion around yield curve control or what the FED wants to call it. Yield curve targeting because the front end of the yield curve is pinned at zero. There's no doubt about that. The uncertainty in the bond market is about the shape of the yield

curve as you move further out in the maturity. That's really where monetary policy and the uncertainty is centered, because you have these two great unprecedented pressures on that curve. On the one side, the fiscal policy that Jonathan just talked about, UH support for the economy, for financial markets is being funded in the treasury market, and it is an historic expansion in the amount of supply of debt. On the other side is the FED that it's set

up till now for markets functioning. They're going to expand the balance sheet to maintain that market functioning. So we're going to start to pivot away from that market functioning conversation to a conversation around chewy, around l steps, around further accommodation, and so in the bond market, that's where all the uncertainty lies. It's about the ship in the curve, about yield curve targeting. When the market moves, you do more data checks for your futures. Up thirty seven Dow

futures up. It's a round number, so I'll mention it four zero zero up, four hundred points right up, buttressed on twenty six thousand on the DALLA. The VIX comes in a big stick one point six six points twenty six point nine six on the VIX. Jeff Rosenberg's bond markets asleep UH to year yield point one six percent. Jeff doesn't care about the ten year or the thirty year. I look, Jeff Rosenberg at the bond dynamics here and come on, equity market up looking out to two thousand

twenty one. Is there a risk here that the bond market looks out to two thousand twenty one and all of a sudden it's yield up, price lower. Possibly. You know, we're talking about the back end of the curve, and that's what you know where you're just highlighting there's no movement in the front end of the curve because that's all pinned. You know, it is really going to be about whether or not we've had success on the virus and the combination of fiscal and monetary policy getting success

around inflation expectations. Very hard to see that today at historical levels of inflation and inflation expectations. But if you're going to have a scenario where you could have the bond market up and the equity market up, getting back to a little bit of inflation could be a positive. It's a tricky conversation because there could be a slippery slope from a little bit of inflation being good to

a little bit of inflation being uh, not good. And so that's going to be that further out one dynamic, certainly not the dynamic today in terms of inflation and inflation fears. But remember this is the goal fighting inflation from below, meaning we have too little inflation. So if there's good to be higher interest rates, it might be welcomed by the Fed in a little bit steeper of

a curve pricing in a little bit higher inflation expectation. Jeff, In a day like today, we're getting all this data with respect to the US labor market, would you trade on any of it? You know? I think that Mike McKee had the framing of the data exactly right, that

this is old news. It's good news, but it's news that it was already reflected in prices and we've moved beyond the kind of early June market to in a high frequency basis really having the debate in market prices about the next payroll reports, which is, if you look at this one, you know the biggest category of improvement is leisure and hospitality. It was down over seven million in in in April, it was up in May, it's

up today over two million. That's going to go down in July if these shutdowns, if the spread of the virus remains uncontained, and that's what the markets focused on in the high frequency data. So I think this is a little bit of good news, but not news to move the market. So, Jeff, this is what surprises me. You're saying it was priced in and people are looking

to the potential bad news going forward. The higher frequency data that we got the eight thirty release was the initial jobless claims data, which was worse than expected with more than one point four million jobless claims coming in and with the ongoing UH the ongoing claims also coming in higher than expected. Why is the market focusing more on the upside surprise in the June jobs report when that is farther backward looking than the initial jobless claims,

which point towards an acceleration of reclosure. Well, you know, it's a it's a it's a great question. I think it's really important to remember just the scope of flows that we're talking about here. So these are unprecedented leads, large flows into the labor market and out of the labor market. So when you're looking at that four point eight million number, that's a net number her of maybe fifteen million uh leaving uh and and and or ten

million leaving and fifteen million entering. And so these are really really large gross flows. And inside of that, the scope of uncertainty is just you know, we are we really don't know what to expect. Remember the range in the Bloomberg survey was was was minus five thousand plus nine million. I mean, no one really knows how to forecast these flows in employment. So to one point four to seven on initial jobless claims versus you know that survey,

it's within the margin of error. And that's why you're not really seeing a market reacting to that higher initial jobless claims. It's more the story of this report, which is the story of June economy, reopening flows back into into the economy, big increases in retail, leisure and hospitality.

The change, as Jonathan highlighted, the decline in hourly earnings is a reflection of the labor force starting to redistribute back to the lower wage workers that were most harm So all of that is consistent with what I think we were pricing in back in early June. Jeff rozen very one final question, and I'll keep it sort of philosophic here on a sleepy summer Thursday. The Powell put has never been more putty than the put is right now. Is this a normal bond market? I mean, it's almost

like the systems rigged by central bank action. Are you working systematically within a normal bond market? No, it's a really good question, Tom, And you know you read the Minute and they talk a lot about the historical precedence. So it's it's not normal in any sense of what we thought of as normal functioning of the bond markets. We have had experiences with yield curve control, with financial

repression in the United States. It was the aftermath of World War Two up until the fifty one Treasury Set accord. That is the period that is more like where we are today. So when you think about the treasury market and you think about the functioning of risk free rates in our financial markets as a base for understanding financial market pricing, you really have to reassess your assumptions from

a systematic point of view. We have to re look at what's in the data, what's underlying the data that we see, and how that changes. When the fundamental underpinnings of the structure of the Treasury rates are now really pinned that zero the zero lower bound, and we're going to debate over the next couple of months how far

out that control or that targeting moves out. The correpect to answer your questions, is absolutely a very different environment than anything in the in the post different one environment. Jeff Rosenberg of black Rock, thank you so much. Today it's all about the jobs data coming in much better than expected. Let's dig a little bit deeper with Jay

Bryson Wells Fargo Chief Economists. I'll speak slowly, Ja for you, because I know you're a graduate and a PhD graduate of the University of North Carolina at Chapel Hill as a Dukie here as a Dukey alumni, I'll speak a little bit slowly, okay for you, doctor, So Jay, thanks so much for we really appreciate it. What do you make of this job's data here? Is this just kind of catching up as we kind of reopened here or do you see anything a little bit deeper in there? Well?

So yes, there is uh some catching up that to be done here. Um. Recall that we lost between you know, February and April, we lost twenty two million jobs. Um. Now we have gotten about seven million backs. So you know, as the economy reopened in you know, in May and in June, this is what you're kind of seeing, you

know here. Um. I think it's gonna be interesting when we get to the July report because you know, if there's any bad news here at this morning, and I don't want to stress that, but you know, initial jobless claims remain high, continuing jobless claims remain high, and we all know that some states have started to go into reverse um recently in terms of reopening, and so these big employment games are probably behind us at this point. Jab Ryson with us, and wonderful to have you with us,

Jay today. Futures up forty Futures continue to advance up four thousand, sixteen in the Dow, almost in two big figures in the vix point six A Jay when I saw the numbers, and I get the idea that this is as good a get as it gets. And now we really learned the cost of this pandemic. Great will economists over the weekend, particularly Wells Fargo. Will they readjust the level the percentage of unemployment rate we're gonna see at the end of the year, or will they just

simply bring it in closer? These are better numbers. Is the recovery of December now the recovery of October? Well, yeah, I think Tom that there is something to be said of that. I mean, it's interesting when you look at the technical details here. What what the uh BLS has been saying is that there's been people who have been

misclassified up until this point. That is, when the BLS calls these people and ask them questions, these people were saying, yes, I'm on, I didn't work, Um, I didn't work this week because of quote other reasons. And you know it's because of the pandemic. They were they were furlowed from their jobs. And and so when you calculate the unemployment rate, these people were considered to be employed, um, but they

really weren't. They were really furloughed um, and so there was some sense that that was that was bringing down the unemployment rate by too much. And what we we've learned with this June report is that misclassification error is a lot lower. So this eleven point one percent unemployment rate seems to be closer to you know, the quote true unemployment rate at this point, and so we're probably

not going to get a bounce back up. And so yeah, I would think that we we are already pretty low in terms of our unemployment rate at the end of the year. So I don't know if we're going to be making a lot of adjustments than that, but I could see other shops bringing their unemployment rate numbers down. Those sirens, you hear, folks, we welcome all of you worldwide. That is the North Carolina State Police running to the rescue of how we have someone from Duke and North Carolina.

And at the same time, those sirens are that's right, just a little you know, trying to prevent a little bit of a issue here. Jay. You know, it's interesting here, what is your sense of kind of the underlying health of the labor market here. I mean, again, we kind of had a couple months here where we came back better than expected. But as we shake out to the other side of this thing, but it looks like we're having some significant resurgence and some key markets, I think

about California, Texas, Florida, those are key labor markets. Do you expect to see kind of some less than good news over the next month or two. Yeah, so, I far I was given a letter of grade. You know, the unemployment or the tough of the economy, the labor market back in February would have been in a where are we now, We're you know, kind of at a sea And I understand that because he is a really good grade there, but you know, for most of us,

kind of bediocre. And you know, so, um, we have, as we said earlier, we have gotten the bounce uh from furlough workers coming back, but there are probably millions of businesses that aren't coming back. They've closed for good, and those key people aren't going to go back to a job anytime soon. And so you know, by the end of next year, you know, we're still thinking the unemployment rate's going to be at six percent um and in February was three point five percent. I mean, we're

not going back to that anytime soon. And so yeah, you know, we're moving in the right traction. Things are getting are better, but there's still gonna be millions of Americans who are going to be unemployed, and they're probably going to be unemployed for a long period of time. It's too short a time, Ja Brison, we gotta do this again soon, Jay Brison, Wills Fargo, Thank you so much. This is a year you could pack it in. But that was never the spirit of Arthur Fiedler. And I'm

gonna go back, folks to my childhood. Keith Lockhart doesn't know this, but I was weaned, absolutely weaned on the Boston Pops. I would sit in Swellesley Hills. My grandparents had that eighteen twelve Tchaikovsky overture from the I think it was a Minnesota Orchestra, and I was ordered a gunpoint to listen to it six times a day around July. And then something happened. Arthur learned from institution he had the audacity to get old Paul. This was like Williams

to his dream Ski. It was that bad. I have the clearest memory of Keith, who he came in under the greatest pressure of anybody. I'm sure of anybody maybe when Bernstein was thrown up New York Philharmonic. Other than that, No, this was the toughest shoes to fill in the history of classical music. And Keith Lockhart absolutely nailed it with the Boston Pops twenty some years ago. We're throwing you can join us right now. Keith, what was it like

the first Pops when you had to step into those shoes? Hi, Tom High, Paul. Uh, you left out that other guy, John Williams in between Arthur and Mike. He went off the Hollywood made both well, you know, but he whatever happened to John Williams exactly. Um, it was my first season, so this would have been fourth of July, and uh, it all went by on a blur. I started in

May with concerts. I did probably thirty five cons just before the fourth of July, but I don't remember any of them because I was just too busy, you know, watching my world turn upside down. But I came out to the fourth I think it's really the first moment I noticed, because I walked out on to that stage on the hatshell and saw a sea of people and even the people I couldn't see because you can't see five dred people. They can't all sit close enough for

you to see them. Um, and you could feel like the humanity that that that incredible concentration. And I walked out on that dads briskly to the center to take a bow, and I was thinking to myself, WHOA, what have you done now? Yeah, you look at this, Keith. And of course this year is so different, folks. We've pieced together the greatest hits of before because you can't cut the crowd together as well, what do you do

with the orchestra? I mean, what do you do this year to keep the cellos away from the violins because of the pandemic, and how are you going to handle that? Well? This year we are not there's no live there's no live performance in the Bust Pops. There's no way we you know, we announced it about a month ago, but honestly, you know, by late March we're looking at each other, going, this thing gonna happen. You know, nobody is going to green light five people in the audience and eighty people

on a tiny stage. People on a tiny stage. So we started looking at what to do, and we decided to do a retrospective concert that will air on Bloomberg at eight o'clock on fourth of July on all your platforms, and uh it is some of the best moments, the greatest guest artists we've had over the last three years of content, which really gives us an a list like you wouldn't believe because we could never have ordered to

have all those people on the same year. But it's new introductions that I have done along with the Bloomberg hosts for the telecast. We shot them on a early empty hat shell a week ago to put into the show, and some new content that is reflective of the time we're in recording of some of the heroes that has done virtually with all the orcs to members in their basements and they knew socially distance performance between me and an amazing gospel singer name Bernice King that I hope

will really stick in people's minds. Keith, how how are your musicians faring here? I mean it's been you know, several months here. They've obviously not been able to get together as an orchestra. How are you keeping in touch with them? How are they doing? What's going on there? Well, this is, you know, the tough time for a lot of people. But the performing arts industry has been particularly badly hit because there is simply no outlet, no viable

outlet right now. People talk about coming back and having capacity controls in the houses and things like that, but you've gotta understand that the arts were a marginal business at best um before all of this, and you can't make the numbers work at a thirty percent house capacity. So we have a situation the the Boston Symphony and Boston Pops have hunkered down. There have been furloughs on the staff, and they agreed to reduction of all those

full time players. But the people you normally see on the um Esplat on the fourth of July are all freelancers who work for us, and they have all been uh loose for the moment. So it is it's a very it's a very difficult time in some cases, an existentially difficult time for a lot of my colleagues and friends. She's a lock hard to look worldwide. And of course, the leadership of the Boston Symphony for years, I mean truly, folks, decades,

if not generations. If you're a read Grammophone magazine or the others of the classical industry. Right now, what do we need to do to get the kids engaged in the expanse of classical music? What is your with all your experience, all of our listeners want to know how to get I get my kids interested in this? What's the lock our prescription? Well, I would to say two things.

One of them is that the whole industry, especially us at the Boston Pops, have really taken a giant step forward in terms of our virtual presence and our ability to reach people virtually. The online presence of the Boston Pops and the Boston Symphony has grown immensely, uh, you know, many fold over these last three months. And that's a tool that we can continue to use to bring people to live performance, which is our ultimate goal. And it's obviously a tool by which our younger people get the

vast majority of their stimulation, good or bad. Um. And the other thing I'd say to everybody, and this is in the face of you know, a lot of school distances are gonna have a hard time with this. People are gonna be laying off specialists. Participation is the biggest uh, is the biggest key to a and an audience of people who are interested in in the great things like

the performing arts and like music. Giving your kid via one lessons when they asked for them, supporting them when they want to play the trumpet, having them play in the school band, the school orchestrasting in the choir. It's just like baseball wouldn't survive if none of us had ever played baseball. Uh, you know it's Uh, it's something you really have to have an appreciate creation for what's going on on the stage to really be eager to

find out more about what's in it. So I would say that when people are looking at the easy things to cut, like arts programs, that they should think very carefully about that. From Arthur Fiedler to John Williams to Keith Lockhart, thank you so much, Keith Lockhart. We really look forward to the Blostom pop across all of the Bloomberg platforms. 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,