Surveillance: U.S. Jobs Report With Walsh

of Labor of the United States of America. Marty Walsh here with our John Farrell after this interesting jobs report again the Dow up a hundred nineteen points, New York. I'm place to say, joining us now on TV and on Bloomberg Radio on the payrolls report. First reaction from the White House with US Labor Secretary Marty Wall. Secretary Walls, great to catch up with you, sir, as always, how me with this one, because we've all struggled with this

labor market report this morning. How would you characterize the state of the labor market right now? Sexually? Welsh? In the United States, I would say, if you look at what's happened since President Biden's Tacond office, you dropped two points off the unemployment numbers, I'd say we have a strong, strong, strong market moving forward. Obviously, we have job openings that we have to work on, and we still have people

out of work. And as you mentioned in in the in the words before I came on here, we're still dealing with the coronavirus. We're looking at the new variant now to see what the impacts that will have. But overall, we feel good. I feel good about where we're going as an economy here. Obviously you brought out inflation up as well. You know, the President made a moves this week with with the oil reserves and also you know,

creating an economic plan. We're seeing people with with more opportunities and more more money in their bank accounts than this time last year or pre pandemic. I guess I should say. So, you know, we still have work to do, there's no question about it, but but I feel good where we're headed. Let's talk about that work and the

work we still need to do. As you know, we talked a lot about where wages are close to five pc, the low ware inflation is currently and going into next week up leave a lot of people in this economy, in this market on wall straight. Secondly, walls looking for something closer to seven on c P I, do you still see the benefits of running this economy? Halts? Secondly, well, so the benefits to doing that as you see things well, well, you know one of the things that's want to talk

this week, I went out to Los Angeles. I was out at the ports in Los Angeles and Long Beach, and when you think about the economy, you think about people coming back to work. One of the things when I was out there, you know we have the long show. I'm in working seven, not every day, but but the ability to work seven. We're seeing the ships come in with seeing the ships unloaded. And there's an issue with

truck driving. And when you think about when you think about this economy and we think about all the different aspects, we really we have to be more intentional now and focus in certain areas and how do we create better opportunities. So truck driving is one of those areas that we have to create better pathways to bring more people back to work. When you look at this report, you see manufacturing, uh, the numbers are high. You look at transportation, the numbers high.

You look at hospital care and healthcare, the numbers on as high. So we have to we have to start the focus now intentionally in different different actors of the economy to make sure we get we get people trained out and get people back to work. So this is not about a broad based effort to run an economy. Hall you think this is about specifically targeting certain sectors. Is that right? Right? Well, I think we have to target certain sectors now to bring those sectors back. I mean,

we look at some of these numbers hospitality this month. Uh, the numbers are kind of when I don't want to say flat, but we didn't see growth on hospitality. We didn't see growth in construction. We saw growth in construction in the sector. We didn't see any growth actually job loss in the government sector. So we really have to start looking at these different sectors and see what the

supports they need. And that's quite honestly why in the Build Back Better Reconciliation plan the President has put out there, there's twenty there's a couple of I think almost twenty billion dollars in job training, workforce development money that will allow us the opportunity here at the Department Labor to kind of focus on other sectors to help create and build them up. The reason I asked this question is because there was a big effort to get us back

to where we were before the pandemic. And one measure of that one metric was the employment of population ratio, which is back to about fifty nine before the pandemic, make it was at about sixty one. And secondly, what was the federal reserve? The administration has talked about getting back to where we were. Do you think that's achievable? How dependent do you think this really is on just the virus? Is there's something else going on here in this labor market? Well? Yeah, I think we have to.

I think we have to be realistic about the labor market and look at what is the future going to look like. I think that the pandemic has changed the way, or at least had conversations about the way the office looks people working, teller working. We've seen thirty percent I think last month if I get the number correctly, increase

in entrepreneurship in this country. So you know there is an evolution and a change going on to some degree, I think that measuring measuring the way we do our economy back to February of I don't know what if they look like that when we get beyond the virus. But I definitely think that with the President and the administration staying focused on creating opportunities, five point almost six

million jobs created since president by the Tacond Office. Four point two percent unemployment rate today, which is a good number. We obviously wanted to continue that number of going down. We've seen better participation in the black unemployment rate drop the whole percent women put unemployment rate four percent. We're starting to see some games here now, we do we still I think we have to continue to acknowledge his

work to be done. Do you personally have more work to do in the seat you're in right now, Secretary Walsh, No question about it. I mean we have a lot of work to do. We have to work on making sure that we implement the unemployment insurance UM work that we're doing and kind of reorganizing unemployment insurance two million, two billion dollars. We have an office created job Force workforce development training money. I really want to look at

changing the way we train workers. I think we want to make sure we're training workers not just for the jobs of today, but the jobs of the future, and thinking about more creating more pre apprentice programs. We have a lot of work to do here at the Department Labor the reason, so it's not a personal attack. There was just some news this week that maybe you might be interested in the seat that Charlie Baker might leave empty in the coming here. Do you want to respond?

Do you want to sponsored? You'll put that right over right head. I wasn't even paying attention as I said, I have a lot of work to do here at the devironment of latter, Lady Kelly says, you're weighing the run. Is that true or false? Well, listen to the governor myself have a great relationship. You know, we were partners for seven years, six years in Boston. I was one year of Governor Patrick. We did a lot of work.

We we what we started the pandemic together. We've got the city of Boston, the Carmalton, Massachusetts at least through the beginning days of the pandemic. And for the last week I've been I've been out in l a long beach, all over the country here in Washington today. So I'll leave it at that. Should I take a signal from your refusal to answer that direct question? There's no signal. I love my job here. Secondary Welsh will let you go, sir, I know you've got a busy morning. Thank you, thanks

for being with us. The US Labor Market Secretary Marty Welsh that it's not much here to steer the feed away from what they've discussed all week. When they get together on December fifty and this real you have sizes of me, John, They're just gonna wait for more data. With two different reports there and a lot of people partists, including Jeffrey Rosenberg, portfolio manager of Systematic Multi Strategy Fund

at black Rock. Jeffrey, when you get ambiguity like this, what do you do well, it's a really interesting report. I think you guys have broken it down well that it may not be so ambiguous when you when you look behind the headline. The headline is the disappointment on to ten. But as Mike McKee just went through, a lot of that looks like seasonality and the impact of seasonal flows coming in lower than what the seasonal factors would otherwise expect, and so you get some disappointment on

the headline. As Jonathan just went through, the initial market reaction is all the machines looking at that headline number, give it a minute and you look at what Lisa talked about, which I think is the much stronger message here, that decline in these unemployment rates, the impact of labor force participation finally coming back. This is the strength of

the underlying labor market that is speaking here. And I think when you look at the market reaction kind of fading, that initial disappointment is spot on, and that's really the bigger message. And Tom to your last point, I don't think this report really changes anything from the from the FED with regards to the labor market, but it is obviously the cross currents between the headline and the underlying components.

I think the underlying components here are much stronger. Jeff, we got to talk about the FED when they get together on the fifth. It's not just about the type of conversation. Let's discuss their fullecast year and next year they've got unemployment at three point eight percent. Jeff, were almost there at full point to how much of an adjustment do we need to see in a couple of weeks. Yeah,

we could certainly see the adjustments come down. Uh, you know, as they keep pace with how rapidly the labor market

is is improving. I think they're closer on the on the jobs front than the other forecast, which is of course the big topic, which is their their inflation forecast, and I think that's going to be the driver into December fifte And of course, you know the other big story, the elephant in the room here is that this report, you know, doesn't have any of the COVID, any of the O Macron issues that we still have in front of us. So over the next ten days we're going

to find out a lot more. That's going to drive that debate into the FED meeting on the fifteen. Jeff, I would agree with you that the underlying components are much more interesting and point to a very strong report. Aside from that headline, Miss I am though confused by average hourly earnings and how much we're seeing wages increase. That was a disappointment and to me it actually fell in terms of the pace of wage rises from month to month. What do you make of that? Yeah, it's

hard exactly to to know what's going on there. A lot of the month to month variability, Lisa is confu using based on the shift in the underlying mix of who's coming in, who's coming out. So when you look at average hourly earnings as opposed to other measures like employment cost index UH, what you end up seeing is, you know, a measurement of two things, what's the change in who's coming in and out and what's the change

and what they're getting paid. And so when you have more lower wage workers entering the pool relative to higher wage workers, it can push down what you see in average hourly earnings. Even if what we think of is kind of a fixed pool of workers, wages are going up. The message on those fixed pool UH metrics have been for a while now clear that we're seeing pricing power come back to wages. And I don't think this disappointment on average hourly earning should be overly interpreted as as

kind of challenging that story. I think it's still a strong labor market, with strong labor market racing and wage inflation. Fifty minutes away from the up and in Bow States side features up eighteen up four tents of one percent on the NaSTA and NaSTA one hundred features of six

tenths of one percent. Counting down to the up and in Bow will be catching up with Muhammad al Arian of Rick Reida, Mike Collins, and Anastasia Amarosso Tom to really break down this job to report and get first reaction as well from the White House in about fifty minutes time. The reaction as well of a market lifting up.

I note the nas deck one after all this up six tenths of a percent, and the VIX is a key statistic for me really escaping the thirty and twenty eight level in the twenty six point one eight Again, Jeffrey Rosenberg with us with black Rock, Jeff, I I want to talk about systematic and your responsibilities of black Rock, and I don't want to care about I don't care about systematic the twelve thirty one or even out in the January. How are you managing an allocating capital outter

the middle of next years, say the July FED meeting. Yeah, this is a really good question, Tom, because what we're really debating is, you know, the bigger picture away from today's report is the FED is talking about accelerating the pace of tapering, which is so that they can accelerate the pace of tightening. Uh. And you know markets have priced that in so so a lot of that changes with us. The bigger change that we all have to

contemplate is the impact on real interest rates. You've had a spectacular level of support for acid inflation across all markets, whether they be financial markets or otherwise, from exceptionally low levels of real interest rates, and the FED is basically saying it's time to change that outlook. So we should expect a very different financial market outlook in an environment where FED policy is reacting to the exceptionally accommodative UH

settings of negative real interest rates. And so that challenges a lot of investment returns that you've seen investment portfolio UH strategies, and so we're looking at, you know, where are their vulnerabilities and where are their opportunities in a rising real rate environment. I just want to point out that as we speak and as traders passed through this report, two of your treasure yields have turned positive or turned

positive on the day. I should say, uh, once again, zero point six people assessing the underlying components here and seeing a very strong report. Jeff, with respect to FED hiking, how many rate hikes can this market withstand and not be disrupted from a risk asset performance perspective? Really great question, because look at what the bond market is telling you with this massive curve flattening, right, So it's a very clear message from the bond market that it can't withstand

that much increases. So what you see priced into bond markets is an expectation that the Fed is going to do what they're telling you increase the pace of of rate increases. We've priced in from one hike in two thousand twenty two to two hikes, so it's not a

super aggressive increase. And when you look further out, you see that that pace of pricing in of interest rates by the Fed starts to fade relative to the feds dot plots, and that is reflective of the expectations that the market, financial market conditions tightening, the impact of rising real interest rates just can't handle as much of a normalization of interest rates as the kind of full trajectory of Fed normalization and the dot plots otherwise would say.

And that flattening of the yield curve, you know, is a message that we should pay attention to. It's basically saying as you move into an aggressive FED tightening policy, that the impact is going to slow the economy, tighten financial conditions, and is A is A is a warning of a recessionary indicator. Whether the FED goes there will see. But that's what the bond market is saying. Okay, I agree the bond market is saying that very quickly. Or Jeff Rosenberger, as we move on to the equity markets,

the ambiguity of today's report. Does it change the path or the belief the cadence of taper to titan. I don't think it. I don't think it does. I think that and as Lesa just highlighting, you know, the turnaround in the two years. I think the market figuring out that this isn't gonna this is not a disappointing a playrole report that takes the FED out. So I think the pace is as the market the narrative is is

still the same pricing in the acceleration. Now how far the market gets ahead of the Fed, or whether the market can push the FED to go even further than that. It's kind of the next phase. You know, we've priced in basically, you know, two hikes in two accelerating that first tike to June or July of next year. You know, will will we get more? I think we're gonna have to see more data, more worries from the Fed on inflation, and a willing this to be more aggressive before we

get there. Jeff Rozenberg, thank you so much for the treatment this morning, on this job's report, right now, on this economy digestingness of employment report, and of course markets, A Dow up eighty three points, a lift not like the futures lift we saw off of a thirty, but nevertheless up here the VIX point five five a state of the American economy. Tiffany Wilding joins us with Pimco, their chief US economist. Tiffany, your excel spreadsheet into twenty two.

What's the biggest economic plug in on your spreadsheet? What's the biggest mystery? Um? Well, with the labor market report today, I mean I think I would I would just point out the participation rate UM is going to be I think, really key UM, and how much labor supply you know, we do get back because you know, I think that, as Marty Wall sort of hinted at when he was speaking, I think the labor market post pandemic, you know, could

look different in many aspects than it is pre pandemic. UM. You know, it's it's obviously been talked about that we we've had a lot of retirements as a result of this pandemic, and I think those people probably won't be as quick to come back to the labor market. But in addition to that, I think that there there's more frictions, um in this labor market now and and those have to do with, um, you know, the types of jobs that people prefer are changing and where jobs are are located,

where they're demanded versus where the labor is supplied. That's also changed as a result of telework and people moving out of large cities. UM. So it's I think the question is how long do these things kind of take to resolve themselves. Um. And of course that's gonna that's gonna matter for the participation right next year. Yesterday Mark Kisel joined alber Intelligence Credit Panel and talked about how he was glad to see the FED changing its rhetoric

and that the Federal Reserve is way behind the curve. Uh. Does that represent your view as well, and does this labor market really feed into that? Well? I mean, I think that are certainly a risk. Uh. You know that we have higher and more persistent inflation that than the Fed. Uh. You know or or other forecasters are projecting um. But but ultimately, though, I do think that the FED is managing the risk of of higher inflation by you know, by talking about the fact that they're probably you know,

that they're going to increase the pace of tapering. We think they're now going to get the asset purchase programs done by March. That gives them more room this year to hike rates earlier, um than than we're previously thinking. We you know, we now think they probably hike in June. So I think the FED is is moving towards met or has moved towards managing these upside inflation risks, you know.

And and ultimately, although inflation has proven to be more persistent, um, you know, we have to remember that we had the delta variant and the the COVID cases that have been more elevated, I think for longer than many expected as well, and that had you know, implications for not only US inflation but also global inflation. So our you know, our own view is still that inflation does moderate next year, you know, And that and that the FED really isn't

behind the curve. But I think there's certainly a growing risk of that and a risk that the FED has to manage. There's also a growing risk that the FED is going to have to tighten conditions to deal with inflationary impulses that do not relate to monetary policy. The idea that Ellen Zentner raised of Morgan Stanley this morning that perhaps the Fed's response to omicron is to actually tighten sooner rather than later, simply because you see some

of the supply chain disruptions persist. What's your view on that, well, I think one of the reasons, one of the things that have contributed to the elevated inflationary princes is the fact that we've have seen people substitute away from services towards goods um and that overall, you know, obviously the um you know, the post pandemic stimulus that we've gotten, you know, has boosted consumption of goods and in the capacity,

and that's run up against a clear capacity constraints. So if you know, if if if a macron, uh, you know, you know, basically prolongs this very high, high high pace of of goods demand that we've seen over the last year, We're still going to have these sorts of capacity constraints. That we're running up against because it does seem like on the supply side, it's much less inelastic. In other words, it expands much less than we had fought, you know.

So I think I think that there is room for the Fed to try to alleviate some of that demand a little bit until the supply can catch up. Um. But but you also have to remember here that it's tricky because monetary policy works through long and variable legs, and so the tightening that the Fed does today, you know, that really starts to uh, you know, filter through the economy in a more meaningful way, you know, a year to maybe even two years out. So um, you know,

they have to be a little bit careful here. Is inflation going to come down by itself without the moving um, you know, or or is it going to be more persistent? I think that's really the key question. Let me circle back the one final question, which I guess takes us back six months. Is tapering tightening? Well, I mean I think it depends on what the market had priced in previously, right,

because I mean it's about market expectations. So if the Fed, you know, is announcing a faster you know that they're going to uh, you know, likely announce a faster pace of the per or tapering. Excuse me, you know then then I think that that's a you know, it could be a surprise to the markets. Markets have to price that in and that implies, you know, some of financial conditions tightening. The other thing that's important here is the link, even though the Fed has tried to delink it, the

link between tapering and rate expectations. You know it definitely if they get that purchase programs done sooner, it allows them, um, you know, the opportunity or or the option to to hike sooner as well. You know, so certainly that's tightening. Tiffany, thank you. Someone a Tiffany Welding a brief here from PIMCO right now on a Friday, as we plan for the weekend, as we try to stagger through this holiday season. With delta, amicron and the other Greek letters, I can pronounce,

we gain perspective for Andrew PEKOFS. He's professor virologists JOHNS. Hopkins Bloomberg School of Public healthon of Chrise. Mr Bloomberg has a modest interest in this TV and radio platform as well. Dr PEKOFS, I want to talk about the reality of Johannesburg, pretoria and the rest. And I want to look at Adrian Puran, who's an internationally acclaimed virologist in South Africa. Tell us the back and forth this weekend in South Africa as they inform pros like you

about amicron. Well, it actually starts before Thanksgiving. UH. Sequences were being distributed through the research networks that are focused on COVID nineteen before Thanksgiving, So we saw these sequences and of course they registered to US as being on of significant concern on paper. But then the Thanksgiving Day announcements of the spread of this virus through South Africa

really gave the entire world a headstart. I mean, my lab is ready this week to do omicron specific experiments and it's only because the South African public health, US and scientific community shared all of their information about sequences as well as case numbers UM. So early the world got a head start and we are better prepared now to handle this because of their efforts. When will we

see results from labs such as yours. Two things that I'm really looking for now right now Next week will be important to follow surges and hospitalizations in South Africa, because that's about that two week window post the emergence of this virus where we expect to see the hospitalization

rates move. Remember, hospitalization rates lag behind case rates. And then as soon as we get icelets and we have islets in the US right now, UM laboratories will be telling us how well the antibodies from vaccine and infection UH CROSS react to all macron and that will be that first hint about how widely we expect this virus to be able to transmit dr Packosh. Until we find out that information, it's hard to know whether we're underplaying

or overplaying this whole new variant. What would your recommendation be As people head to Christmas parties, as people go into the office, they want to engage with other people. Do you think that it is time to actually restrict activity a little bit more or do you think that people need to go about their lives and act as though this is just another kink on the way to recovery. Right now, I would suggest two ways to be proactive in a in a positive way. Number one, vaccines, Go

out and get your booster. Go out and get your vaccination if you haven't gotten it, If you've been infected, go out and get your vaccine, because we know that that increases your immunity. Right now, we've got a window of time where we as a population here in the US can increase our immunity. And even if some of that doesn't cross react to all macron, the more immunity the better, and it will it will protect us against

severe disease uh if omicron doesn't been to spread. And then the second thing is to think about testing protocols. One of the critical things in the Biden plan that may go under people's radar screens is the use of at home tests. That is an incredibly powerful tool for us to really intervene and stop people who are potentially trans going to transmit the virus. And utilizing those at home tests is going to be very, very critical to

really controlling this omicron surge. And let's not forget the delta surge that we're still in the middle of Andy. Because your laboratory is working specifically on O macron, what is your sense of its VIRU lens. I know that we're going to get the actual data next week, but on a preliminary basis, a lot of people have found that yes, vaccines do prevent a severe illness, and it does seem like perhaps you're not seeing as much of a surge in hospitalizations yet as you would might expect.

What's your sense of what the reality is? Yeah, I think we really need to wait one more week. You know, the vaccination yet, you know travel US are the primary people that have been picked up now with UM with with a macron, they have a tendency to be of more highly vaccinated population. So some of the data we're seeing now from the US and from Europe is really skewed to vaccinated populations. In the next week, UM in

South Africa will be the lead on this. We'll be starting to hear how the various populations are doing with respect to infection and disease of varry. So that's really going to be the critical thing, and they always great to catch up with. He said, let's get to hear from you, Andrew Pekosta of John's Health Kids. This is

the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on 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 keene In. This is Bloomer