Surveillance: U.S. Jobs Report With Sec. Walsh

Bloomberg dot com and of course on the Bloomberg terminal. Secondly, Wolves, joining us now on the labor market report we got a little bit earlier this morning, Dan in Washington, d C. Secondly, what is great to have you with us on the program, Sir. I just wanted to start right here with the wage story. We heard from the President of United States in the past week on this just listening with me about what he had to say. Take a listen. The wages have

gone up higher faster than inflation. Uh, and we have generated real economic growth. It doesn't mean these dislocations aren't real. They do affect people's lives. Secondly, Wolf, she said, wages have gone up higher faster than inflation. What data is the president looking at? Sir No, I think I think what the president one that was really talking about is inflation is reflecting our economy reviving, uh, and was seeing this a worldwide issue. I mean, certainly, Uh, we've seen

over the last couple of months, wages increasing. We've seen that that number catching up to inflation. Not quite there yet, but it's heading towards that number. Again, I can't predict what's going to happen over the course of the next six eight months, but there's obviously a hope. All I can say is that the President laid out a plan in January for an economic recovery. UH. Since that time, five point six million people have gone back to the workforce.

This month's report, there's a lot of positives in it because it's it's a diversified group of businesses that have seen increases in their in their job market, in manufacturing and business related issues. Uh, in a whole bunch of different sectors, in healthcare, it's not just in hospitality. So you know, I still think that that we're moving forward. I didn't hear the president's whole speech there, so I'm

assuming there was some context before and after what he said. Well, I don't think the context is already benefit when you have the statement there for all to hear, for all to see, we listen to the whole news conference ourselves. He said in his words, the wages are growing faster than inflation, and so I don't see that in the data. IF had some uncomfortable moments in the past with the previous administration when they used to say things that weren't accurate.

It's not accurate to say, is it, Secretary Walsh, that wages are rising faster than inflation in America right now? Well, certainly in the in the last couple of months. And I asked that question this morning when I when I sat down with our economous team and I was asked him about wages growth and inflation. And clearly, in the first part of this year we saw some wages some inflation going higher than wage growth. In the last couple of months, we've seen some of that changing. So hopefully

that train continues. Let's sorry, I don't know if that's what the President was referring to. The president's statement is the president's statement, it's not backed up by the dates. From my screen, I've got inflation with a five handle and wage growth year over year, I've got growth of four point nine percent. Secretly, well, so I want to talk about the vaccine mandate as well. You've put that out there in a US today place earlier this week.

The participation right is not recovering in America. I want I want to stand from your perspective, how you think that mandate is going to win pack potentially vantakes a point. Well, this report today shows that about three point eight million Americans and directly not coming back to work because of the pandemic. That's that's the reason for not coming back. Uh. And what we put out yesterday in the Emerging Temporary Standard wasn't a mandate. It was a companies over a

hundred people either testing, exsuming vaccine or testing. And that's there's an option here, and that's what we're pushing for here hopefully to see uh. And hopefully when when this gets put into effect and it goes into full effect by January, we will start to see hopefully some of those three point eight million people who right now are saying they're not coming back because of it, because of the pandemic, will start to see those folks feel safe

enough to come back into the workplace. So it's a it's a it's a it's a vaccine. If you don't get vaccinated, you get tested, and then in the workplace you have to wear a mask. Uh, and in your own area, it's at the mascot. But it is about protecting the health and safety of workers. I'll avoid the semantics and I want to focus on a Goldmen Sax

piece you referenced in the US Today USA Today piece. Secondly, Welsh, when you reference Goldmen Snax, can you want me through the conclusion of that piece that you referenced in that outped pace early this week, can you say that one more time? I'm sorry you referenced the Goldman Sax piece of research on what would happen with some of the policies if they were introduced for labor supply. Can you want me through the conclusion of that piece. Well, what

we're seeing. What we're seeing as companies that have put put in place vaccine mandates and this isn't the minute, but they put him in We've seen eight participation rate of people getting vaccinated, and we're seeing people go back to work. I mean, it's happened all across this country in those cases. And again, this is about making sure that we wanted to do and what that BED was all about was really trying to explain to people that we want to create safe working environments so people feel

safe about going back in Uh. You know, I would rather be talking about something else today and in in this period of time in history. But unfortunately, you know, we're still living in the midst of a pand American and I think that we can't overlook the fact that people are afraid to go back to work. That's one of the reasons. There's other reasons, childcare and other reasons. But I think today's report is positive and we just have to continue to build up the momentum, AMK of

this report. I want to read out the conclusion of that government SAX piece that you referenced in this piece earlier this week, the research from Nhatsas and his team. Here's the conclusion. We are therefore not adjusting our employment forecast, but we see some downside risk to employment at the end of twenty one an upside risk by the end

of twenty two as a result of the mandate. Now, I want to understand from your perspective, sept to be Welsh, do you accept that that as you introduce these policies for supply in the labor market, there is some near term downside risk, but ultimately potentially further down the road some upside potential. And I don't think this is any upside risk. I mean I think that this is this

is clearly all a positive that we're doing here. I mean, what we're doing is we're asking companies with a hundred and more people to have their employees vaccinated or if they're not vaccinated tested, uh. And I think that we we can't forget that a year ago this time, we had people dying in this country at high numbers. We had high infection rate and high numbers. Since this pandemic began,

seven and fifty thousand Americans have died. Five million people in this in this world have died because of a pandemic. And I think that you know, by by by putting an emergency temporary standard in place, isn't going to impact our economy negative manner. If anything's gonna have a very positive impact on it. It's so just to be clear, are we cherry picking the bits we like of the government Saxon research and not the conclusion I just want

to finish that, Secretary Wolf, is that what we're doing here? No, I wouldn't necessarily cherry picking anything. I think I'm just stating a fact about about I think people are cherry picking what we did with the t S and I don't think that we have to look at the whole plan here. It's just like me coming on here today and talking about five one thousand jobs is a good report. Last month I was on it was a hundred three

thousand report. If I only focus on the good reports and didn't focus on the bad reports, that's cherry picking. I don't cherry pick. I come straight at it. Hopefully we get more of the same. Thank you for joining us today. Secondly, wolfh, thank you the Labor Secretary. Thank you, sir as always creed positive w C I of nine cents if one PC on w C, I tell Brent w C, I ya today up six. Well you got a one dollar thirty cent delta between West Texas and

media Brent crude. And this is an oil you know, I'm gonna use a word from Generations Ago, John, it's an oil market boxed up where there's a lot of mystery out there, different meaning up in the UK. Maybe, well, you know, we'll just comment on that now he canry on to see. What we're gonna do right now is speak to the general Lady from from the state of Michigan. She is the Energy Secretary of the United States and

has been enjoying the fair climbs of Glasgow, England. I always say, Governor Grant Homes, Secretary Grand Home, welcome to Bloomberg. We're thrilled to speak with you this morning. Let me cut to it if I may, and Sturgis, Michigan. It is two dollars eighty nine cents a gallon. I guess that's better than in California. What is the grand Home plan to increase oil production in America? Oh? That is hilarious. Would that I had the magic wand on this. As

you know, of course, oil is a global market. It is controlled by a cartel. That cartel is called OPEC, and they made a decision yesterday that they were not

going to increase beyond what they were already planning. So you know, the interesting thing is, you know, the Department of Energy has an Energy Information Agency, and that agency does the forecasting of what oil and gas prices are going to be as of As of right now, their forecast for the beginning of December is that on average gas prices, gasoline prices will be about three dollars and

five cents at the beginning of December. They will do an adjustment to that forecast in the next week or so, so we'll see if that holds. But clearly the Biden administration is very concerned about the price at the pump and certainly the price in people's wallets for natural gas as well for this winter, including I would say propane

and heating oil, particularly in the northeast. What is the American solution If they're the bad guys, Russian and OPEC at the global price of the market, we all understand the economics. What is the Biden plan to jump start energy production across America? Well, here's the Biden plan. I'm

here at Glasgow. The Biden plan is to diversify and to make sure that we move in a direction of clean energy where we're not reliant upon cartels and we're not reliant upon geopolitical adversaries who may be um creating choke points for our ability and our people to be able to access energy. So that's obviously a longer term strategy and we will continue. This is why this is called a transition. But if a d plus dollars a barrel doesn't incentivize oil companies to get off the sidelines.

I'm not sure what well. For those of you on radio today and John Ferroll, I must note that the former governor of Michigan is wearing East Lansing green today. That's what the color re And are we on opaque? Plus? I do wonder and I don't think it's funny. Said an imagine had this to say early this week. Let's take a listen. I say that we can basically do more for ourselves. We've been energy independent for the first time in sixty seven years. Why can't we do more?

Why can't we produce more? We've got plenty of natural gas. My state, beautiful Stata West Virginia, has an ocean of natural gas under it. If they just let us build a pipeline, we can get the product to market. And why don't we do more drilling? And why don't we do more basically production in the United States. I'm not depending on OPEC. I'm not depending on other countries for my energy anymore. We know how to do it, we

have the technology. We should be relying on ourselves. The words of the Senator, the Democrat, Mr. Mansion, that these as the words of the Pioneer CEO. Madam Secretary, let's pick up with the words of the Pioneer CEO. The president's efforts to restrict drilling on federal land and offshore have been stunning. To backfast some his quote, he's got to back off his rhetoric on federal leases going forward. Do you think it's true that we are reliant on

opeque plus in the United States of America. We are reliant on a global gas market. I mean the global gas market. We can't just produce oil for the United States. It is on a global market. And let me just say the President has not banned oil and gas leases. There are twenty three million acres of public lands that includes offshore and onshore where there are leases that have that are not being used right now by oil and gas companies. Over seven thousand leases have been issued and

the oil and gas companies are not using them. They're sitting on them, their stockpiling these leases. Why is that so we need? You know, if the production issue is not at the foot of the president, there is not a band on oil and gas leases unfederal lands. Amount of Secretary, you know, I'm careful with my words. I didn't sight band I said restrict And in addition to that, you're talking about why they won't invest. We know why

they won't invest. They won't invest because this administration is speaking so highly of this big energy transition that you're actively supporting. So I think it's misleading to say that we are in the United States America increasingly dependent on opaque plus when we've seen all production in this country increase over than last several decades. Now, there are some options out there for you, as you know, with the SPR, with the options on the table, to address the situation

we're in. At the moment, the United States of America is in control of its own destiny here. I do wonder if the SPR is an option for you to address what's happening in the commodity market. The SPR is certainly on the table as an option, and the President will have more to say about that. But let us

be clear. I mean, just to go back to your other point, I mean these the oil and gas companies have leases that there is no slow down, There is no whatever the words were that you use, there's no restriction, no ever on their ability to use those leases, over seven thousand of them on public lands. Right now, So I just don't want to let that stand. It is not the President's doing that is causing the oil and

gas companies right now to decide to slow down. Actually they were slowed down because of COVID, and we're seeing some movement of oil rigs getting back online. But it's it is curious about why they are not incentivized more at eighty dollars a barrel. Let me just say, and you're right about us moving to clean energy. That is the future, and that is the long term strategy, and we must do that so that we're not reliant upon fuels that pollute the air that we see that are

accelerating climate change. To that point, Secretary Grant Home, some people say that the best cure to get to a greener future faster is to allow gas prices to go higher. They are much higher in places like United Kingdom. Why isn't there a school of thoughts saying this is just fine. Perhaps people will reduce their reliance on fossil fuels and diversify more quickly because real people use fossil fuels, and

real people's wallets, uh livelihoods are at stake. The President does not want to see the price of fuel hurt and pinch real people. Poor communities have about third up to thirty of their monthly income is based upon fuels. It's not right to raise the price of fuels. That would actually hurt real people. That is not in the President's plan, and he doesn't want to see that amount of sextuary. When can we expect a decision with the

spr Is that something you're thinking about imminently? Um. I know that the President is looking at it and he'll have more to say about it. Okay, thank you very much for joining us this morning. Monam. Secretary Jennifer Granhume on this oil market, the importance of this. Pharmaceutical companies are coming up with a pill of various means and types and styles, and in the case of Merk, they're allowing it to go genera immediately. That is the urgency

here on COVID nineteen. And of course the news today and the key numbers Feiser with a pill that they say has efficacy in a clinical trial. To translate. Andrew Pekos of jenn Hopkins University, Andrew, is this pill like aspirin? Well, it's a lot better than aspirin. It seems to be incredibly effective at reducing that disease severity linked with covid

UH infection. And the population they tested had to have at least one pre existing condition that pre exposed them to severe covid so they were targeting a population that was more likely to have severe disease and it worked that amazing percentages in that population. What's the chemistry? Is it m R n A in a pill form like in the syringe that hurt me so much? I mean, is it the same medicine. No, it's a it's a

very very different approach. This drug targets um, one of the enzymes of the virus that the virus needs to make its proteins replicate its genome, you know, so, so it targets replicating virus and it really does stop that virus from replicating relatively quickly. And because we're talking about chemistry, will turn it over to well, that's a I was going to talk about the efficacy of this chemistry because we talked about efficacy rates of when we first started

talking about the vaccines, the MR and A vaccines. Is this going to be a similar story we're talking now, But there's asterisk asterisk and we might see a less rosy future for such for such remedies. Well, here, here's the big problem with antiviral treatments is they have to be given early after symptom onset. And in this study, everybody got the drug within five days of symptoms, and there were even better results if you if you started

taking the drug within three days of symptoms. Translate that to the real world and it becomes a bit more problematic. You have to come up with symptoms, you have to go get a COVID nineteen test, you have to get the results from those tests, and then go get a prescription. So the implementation of this in the population is going to be a challenge. Um if we continue to have delays in terms of getting test results back going forward,

how much the game changer is this. It's a tremendous game changer because right now we have vaccines which give you your first line of protection. And now even if you're if you come up with symptoms after vaccination, you'll have this additional pill to take, and we also have marks pill that's also going to become available soon too that gives you that extra layer of protection from disease severity.

So we really have the tools in place that, if used effectively, you can really eliminate severe disease from providaccio. How do you envision the distribution? And this is it going to be a bottle of bear rafts forrin it? You know, do Ane read the local pharmacy? Is it going to be by prescription? I mean, how how are we? Oh, I feel bad today, I need a COVID nineteen pecos

Still what do you do? So right now, it's really going to be limited to individuals who are probably in a high risk group and who all have COVID nineteen positive test. That's what the clinical trials tested, So that's probably what's going to be first approved. But you know, Fiser itself was talking about using these UH pills as a prophylaxis, meaning if Tom gets sick, um, Tom's family can maybe get the pill before they used to show

any symptoms to prevent infection. And I think that's where some of these antiviral drugs will really be even greater game changers if they can be shown to work in those levels. Can these dr packos? Can these anti virals bring us back to a time that feels more familiar pre where it's not that big of a deal to get covid um. It will bring us back to a time where we can manage this disease. UM. It will

probably never come back to zero um. It will probably be a disease that we deal with like influenza, which can cause severe disease but is controlled because of vaccines and anti virals. And we now have that last piece of the puzzle that's needed to control let covid nineteen and that's the effective antivirals and more than one of them. Andrew Peckers, thank you so much. We're just exciting news. Just greatly appreciate it. With JOHNS. Hopkins this morning, this

is a really important conversation. Part of what a list and I invented with John Farrell is a bit of laughter and that you've got to keep this going about economics, finance, investment with laughter and with lightness and for thousands and millions of American retirees. And we say good morning to all of you around the world as well. This isn't funny.

There are negative real yields. And if I look at Jerome Schneider's track record it in short term paper at PIMCO or he is world class five year percentile eight percentile, which is all you need to know. The numbers have gone down. Jerome Schneider joins us now to speak to retire these worldwide. Jerome, this is grim. Is there a social urgency to push rates higher and push short term

rates like c d s higher? Good morning to both. Uh. There probably is some pressure building, and I think really what you think about is the punishing of sects of the zero yields we've seen here in the United States of the past year plus, combined with the growing inflationary expectations,

it has been a giant erosion of purchasing power. And I think that's become front and center in some in terms of the dialogue of not only how corporate treasurers think about it, i e. How they spend their capital and on capex and manufacturing goods and things like that, but also what the savers ultimately are going to be doing, which is saving now for you know, purchasing power later, and that has been obviously eroded. What I think is important also that is to put it in context. And

I think that the context here is important. Everybody gets really focused on the big data, the big headlines of where inflation is going. CPI has clearly been higher, and that's been mostly done because of supply supply constraints in the intrap But in the medium term and longer term, what we really need to be focused on is are

those inflationary expectations. Are those higher inflationary expectations going to be embedded in the psychology And it's too early to tell, but that's really what is going to be moving and citing said to move into action to a larger degree rather than to a lesser degree. So undoubtedly you're going to see rates move higher over the course of perhaps late two thousand two and into two thousand twenty three. But that's gonna be good for savers. But how far

they go is really the question at hand. At least wants to dive in here because this is your wheelhouse. But I want to ask one more selfish question, and that is from your purview, and trust me, folks, drum Schneider's on a ginormous aircraft carriers see with billions in short term paper, are you seeing yield hoggishness right now from where you sit looking out duration? Are there yield hogs? Well?

I think that there's people who really get scared about how the effects of having too much cash sitting at zero for a while, and so people became very agnostic

in terms of the risks at hand. And and unfortunately we saw that come into play over the past two weeks a short term industrates moved unabashedly higher, really as markets became more concerned with hawkish rehetoric, et cetera, and initially in manating for the Bank of England as you know, and then Australia than Canada, and obviously in the US

is more tempered. But I would say that that is a situation whereby people have been probably less vigilant in terms of how they're thinking about risk, both credit and interest rate risk, specifically in the short end. And more importantly, the focus on the need to adapt to how to think about the gradual trend toward higher rates, and and

that's and that's really the focus. That's how to play a little more defense, how to be a little bit more conservative, perhaps give up a few basis points today for the benefit of having a little bit more upside in terms of how your cash performs tomorrow and over the course of the next two years. That's really what it's about. And so from the short term market perspective, people were taking a rather blinded view in terms of whether the risks were and I think the past two

weeks have really opened their eyes to that drome. It's wonderful to have you for many reasons. You have a bird's eye view on the institutional side of things, managing money for retirees trying to support themselves on a negative yielding world at least on a real basis. And then on the flip side, you see people parking their money and savings trying to find safety to then take that

money and use it for something. When we return to some kind of normal what do you see in terms of people taking that money out of short term funds and putting it back into the economy the way that we expected to happen with a savings glut beginning to normalize. Quite honestly, it's going to be a bit of a longer road. You have. Obviously, the the Federal Reserve and other central banks have created these giant tidal ways of liquidity to you know, really really drenched parched soils from

last year or so. And I think, really what that does that creates effects, and that one of the effects that we have to be mindful of is that there will be sort of this this tempest of volatility similarly similar to what we saw over the past week or two um and we don't want to downplay that it was actually pretty substantive, even though it was very confined to short term interest rates. But that will result in

temperamental tinkering from these central banks. Ultimately, what it means is that investors are going to move from a psychology of playing you know, playing defense from from situations by the macro economy to more one about thinking about liquidity management in a proactive sense, because there is going to

be more volatility in the market. And this isn't just a situation over the next few weeks or months as the Fed gets more clarity in terms of how that reaction function goes, but it's actually something more structural that's going to be more embedded into the psychology of investors over the course of the next three, five, seven, ten years.

That a lot of the a lot of the volatility it was removed to the market from the responses from the global financial crisis are actually now going the other way. And so as we get into this more new neutral based economy. It's an age of transformation where we specifically

have to think about how to manage that volatility. This is actually the time when the short term strategies come more into play, not necessarily as a cash management mechanism, but to embrace the higher yields that we're going to see over a longer period of time. Number one and number two is a volatility management to ELSA, and I think that's really what becomes part of the dialogue and psychology for investors, specifically those savers sitting on the sideline.

This is huge because when you talk about temporary tinkering, we talk about the temper tantrum uh that that that we saw certainly in the short end of world rates. I mean that we saw this and then from a Bank of England, we saw this, from the e c B and the the U S rates followed. How do you then actively manage this to capture the benefit? How do you work around this as an active manager? Well, number one, you have to have degrees of freedom simply

going and buying certificates of deposit and commercial paper. That's one avenue and it's been sort of about there for obviously about five decades specifically when money market funds came however, it's it's it's grossly mispriced, and frankly, one of the things we've learned in numerous crisis but specifically highlighted with COVID, is that some of those markets actually become increasingly ill liquid, as we've seen, and regulatory responses are going to be

to cover that. But I think the more important thing here is having degrees of freedom, having the ability who have flexibility, and I think when you get into those situations is not simply about defense, it's a it's about more about having albums. Okay, I got to ask the question that your general counsel doesn't want me to ask, but here we go. Do we risk price down, yields up, or break the buck on money market funds? No? And in fact, I think that's one of the things that

we've been pretty vocal here at PIMCO A bounces. Money market funds need to be fairly bifurcated with government money market funds, those that invest in US trudguries, those are those are remains step Ashton fine, and we actually think that's a foundation of the economy. That's how we manage our liquidity. And cash here at PIMCO as a foundation

using US treasuries and US Treasury back to repo. But I think when you get into other areas that are more credit sensitives, such as prime money market funds, you should be going to those with a wide open eye with regard to the focal points of they're highly concentrated financial risk, etcetera. And so that is where we sort of preach diversification. Prime miney market funds don't necessarily provide that diversely, so we just want to be more proactive

in that regard. Jerome sent me a note once. He said, Tom, you're an idiot to go into the triple ever still cash fun He said, you are just an absolute check And what did you say? I said, come on, we'll have you on the show. Jon Snyders, thank you so much with Pimco. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten a m Eastern. I'm Bloomberg Radio and I'm Bloomberg Television each day from six to nine am for insight from

the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast, on Apple Podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keane, and this is Bloomberg