Surveillance: US Hiring Tops Forecasts

And this has become a wonderful tradition at Bloomberg to give pause to look at the data and then to speak to the Secretary of Labor of the United States former Mayor of Boston John Farrell, with Murty Walsh, the US Labor Secretary Marty while she joined us from Washington. Secredy Welsh. Fantastic to catch out with you, Sarah. Happy New Year to you. Let's get straight into the Job's Report. I remember a few months back asking you how can

we get in ancient dawn without unemployment climate? Well, I think it's Jelf's report is just for you, sir. Can you tell me what's in this that you think makes it sustainable? Well, I hope we continue the steady growth that we're seeing, uh, seeing the unemployment number come down, I think we have room to grow in communities of color, particularly the black community. Let's, you know, community get those

numbers down a little bit. We've seen, you know, wages are still year over year up four point one percent. We went down about one tenth of a percent. I think, you know, I think, well, we're in a very interesting economic time and I don't think that a recovery that that we used to coming out of recession and going intercession is compatible to what we're experiencing today. So I hope we can continue to see these job numbers moving forward.

We saw good greens and construction, hospitality, leisure, education, and health those areas in the last couple of months. We haven't seen the growth we've seen today, so we just want to see it across the board. I think companies realize it too, that it's important for us to continue move our economy forward. They're bringing people on and we need to keep bringing inflationary pressures down. It's not just the numbers today, it's the jumps numbers we've seen a week.

The job openings numbers still elevated, the quicksrate elevated, indicating some confidence. I'm looking at this at the moment. Secondy Wolst and I listened to the tech companies who are making these massive layoffs. How do you distinguish between what's happening there and what you see in the official data. Well, I think the tech companies are actually looking the way their business models are. They're looking at how inflict the

inflation rate impacts their business. And a lot of these folks that are being laid off in the tech industry are finding jobs in areas that quite honestly, people looking for tech experts all across the country. But these tech companies had garbled up so much talent. Certainly I would like to see a lot short tracking in the near

future these tech companies rehiring folks back. We don't want to see any industry in the United States of America going through a process of laying large amounts of people off. We want to see them are being successful. A lot of people arguing that we have still a tight labor market, and with that secondary worlsh You and I have been talking about the return of labor power, So let's touch on that a little bit. Can you give us an

update on the West Coast sports situation. We've gone back and forth on this for I think about nine months now. Secondary WOLVESH what's coming on and how close are we to deal? Yeah, I went out there. I was out there a lot this week. Actually, Monday, I went out to the West Coast Ports. I had a meeting. I walked the port in in l A and uh in Long Beach, and we had good conversations. I asked both sides, the union and the company. Uh, they're back at the table.

They're moving forward. UH, and they're having conversations and dialogues and UM. You know the one thing I did ask them, they didn't give me a date. I'd like to see. You know, the quicker week can get this resolved, the better because it will bring a little peace of mind to people, particularly in industries of shipping. And I think that, you know, I think both sides are committed to getting it done. I'm not concerned. This is a very different

situation than the rails. The rails were a situation where both sides, in the beginning of the conversation weren't having conversations. In this particular case, the shipping companies and the unions have been talking all consistently all along. What would make you concerned? Um, if if we don't. It made me concerned if they have a breakdown and conversation. Uh, this contract like the like, like the rail contracts, the massive contract.

There's lots of different pieces to it. But but if if one side indicate to me that they felt they would be in there was an obstacle in the way. And that's not the case, at least not as yet. I was you know, when we started talking about this in the very beginning, I was hoping that we'd have a contract by labor Day, but clearly I was very wrong. Well, we've gotta wait, and hopefully don't have to wait too long. Another story that involved the union movement secredy WLS. So

you're also involved in Conico Phillips. You're aware of this situation with its Alaska operations, this eight billion dollar all project in the Arctic. On the one hand, you've got huge union support for the project. On the other hand, the environmentalist hates it. And what more involvement from the administration. Where are you won this? Secretary Wals Do you have

a side in this one? No? I haven't in neittially had to sign this one, but I was asked earlier, and you know that the labor unions are certainly putting lots of pressure in calling me on this all the side because they're concerned about it. So we're kind of seeing as we move forward here, what's going to happen. Is there a compromise and what does that compromise look like. I'm not I'm not dead involved in the conversation, so I can't I can't answer that question if there's a compromise.

Final question to you, then, on the situation in Washington struggle to vote a House speaker. Secondly, Welsh is someone who works in the administration. I think it's important. I saw some criticism of the situation in the United States from Chinese state media, and I asked the question at the time when I saw that criticism, what would we prefer some of the features of democracy where you get

some chaos or what takes place in dictatorships. And I want to understand from you, do you see the situation in the House right now? Secondly, well, she's a feature of democracy or something worse, not yet, but but I do hope that the Congress can get a speaker of the House, even something that that I might not agree with completely, but we need to get we need to

get our government up and running fully. Uh, certainly. And I think that you know that there the Republicans are going through some challenges right now and they're trying to figure out what's going to happen there and hopefully it will be worked out shortly. Secondly, Welsh, we appreciate your time, so happy New Year. We'll catch up soon, no doubt. Thank you. Right now, let's go to Randall Crossner. He

is a former FED governor. I want to take this big green broaders Mike Gains Lisa says, massages the data. This with an equity lift in the market, bonds and determinant. Right now we have curb a little bit of curbing version. I don't want to oversell that. Randa Krasner to me, this is an Elizabeth Warren jobs report. We are employing America's Americans. These are good numbers. We need to revisit this. Why does the FED want unemployment? Why do they want

us to have less jobs? I think that's a huge confusion for our listeners and viewers. I think that's right. It's an important point to make because it's not that the FED wants fewer jobs. What they want is lower wage growth more because they're worried about persistent inflation. Ument of all of the costs of UH of of our production in the US is related to jobs and wages, and so if that's going up really fast, that can make it very difficult for inflation to come down on.

This is the immaculate disinflation report. UM that you're starting to get lowered wage growth, but um lower unemployment rate, continued high growth in jobs. As I had said before, this has never happened before where we've been able to bring the growth of wages down and the inflation rate down without having the unemployment rate go up. This is one of those new theories we're talking about before that

the FED is putting forward. It would love to see this happen, that the the wage rate growth comes down without a significant increase in the unemployment rate. This is just one month's number, So let's not say that we've got that victory here, but it's consistent with this very optimistic view that that people have that potential, or that some people have that maybe we could get through this

without a significant procession. Ready, let's say that this is the science of the immaculate disinflation that should talk about. And let's say we get another read like this next month and the month after. How many does it take for the FED to adjust given the balance of risks that this is not actually an accurate picture and that inflation is still strong and that the labor market is too strong for the Fed's wishes. So they're certainly going

to continue to buy buy insurance. They're not gonna say, oh, h the the inflation wage inflation is coming down, just like overall inflations coming down, We're done. They're not going to say that at all. They're certainly going to continue to to raise rates at the end of this month, likely continue to do that in uh in in March, but it may make it more likely that they go twenty five basis points rather than fifty basis points at these meetings. I think that's really where it's going to be.

But there's gonna be buying some inflation because they know that this is sort of a new and untested hypothesis. Um, maybe it'll work, but they're not going to take the risk that AH declare victory and then the wage rates start to go up. Inflation rates start to go up, and then they've really got to move in uh interest

rates up because they worry about using credibility. And Randy, thank you, just wonderful converis from you as always lucky to catch up with Randy Cruiser that the University of Chicago and of course fullmerly the Federal saf Right now, Jeff Rosenberg joins his portfolio manager of the Conundrum Fund at black Rocker Thrill you could join us this morning, Jeff, I want to ask you the question I was gonna ask Professor Krassner, but instead I'll go to Professor Jeff Rosenberg,

and that is, can you substitute a duration or a stasis in FED policy for going up to a higher rate? Can you actually get away with that shell game? Uh? You know, it depends on what we're looking at today in in the data and what it implies about inflation today is about you know, wage inflation, and you know, can the Fed get away with a pause is really about whether they're making good on the inflation uh trajectory

as the market is expecting it to decline. So they'll pause if inflation is declining, but they won't be able to if they're not achieving their inflation objectives. Uh. You know, I just want to comment second on the report is mixed between the unemployment rate and the and the and

the wages. As we have seen for a number of reports, the payroll report has really become kind of the stepchild of of economic reports relative to next week's cp I. So what's really important here is what can we look through into this report as to what it says about inflation. And obviously the headline on that is average hourly earnings and that's a little bit positive. But what I want to highlight out of this report is something we haven't

talked about yet. You know, the big expectations in inflation is that you have this persistent expectation that goods deflation is going to support the consensus expectation for declining inflation. One thing out of today's payroll report I think that's interesting to highlight is that if you look at the goods components whosale, trade, retail transportation, those are up total twenty six k in terms of UH. In terms of

UH the monthly payroll gains. That's a significant change relative to the pace of about a three month average of negative four six month average of around six, and if you look through and you squint a little bit, it is worth noting that this is a little bit of a different story that we've had an expectation that the good side is deflating. If you look into today's payroll report, it tells you a little bit of a different story that that maybe you're seeing some signs of life in

the goods. If we see that into next week's pay CPI report, that's gonna be a big change relative to market expectations. I think that's one of the interesting takeaways from today's payroll report. People don't do nuance well, JEF, especially after living under the Fed's thumb for so long in terms of don't fight the Fed. So there is a question of as you pass through the nuances of this data, what do you do? How does it shift what you actually do in the markets which you buy?

What your thesis is, Yeah, well, this is the thesis for the market consensus. Thesis is that goods deflation is supporting the p inflation expectations. That supports the bed pause and really feeds into the market the bond market expectation that the FED can can pivot, so you have the tension is really on the services inflation today. On the headline, you get a little bit of support for that because you see average eily earnings coming down. But this is

still a strong labor report. It's still a strong labor market, and we are not yet seeing a significant tightening in labor markets from the significant tightening and interest rates. That maybe lags, but it may also point to a lack of interest rate sensitivity in the broader economy outside obvious candidates like real estate. I'm looking right now at the market reaction as market participants passed through this, you could see yields significantly lower on the front end. This to

me is interesting. Down to four point four percent, it's something to write home about considering some of the follow toty we've seen. But would you lean against this, Jeff, would you actually say this labor market report is nothing particularly shocking in order to go against what people think in terms of a hawkish FED and that they're going to hold rates at five percent for much longer than currently priced into markets. I think you can't read too

much into today's report. As as I said, it's it's mixed. It's got a little bit of everything, or a little bit of something for every point of view. Uh. And then I think if if you stare really closely at some of the data, there is a suggestion here that this consensus view on the good side, you know, maybe

undermined a little bit. I wouldn't read too much into that, And I think the kind of mixed messages reflective in a relatively muted bond market reaction to the report so far, if you're joining us on radio and television, Jeffrey Rosenberg, where this black rock? We continue here with a nice lift of the market's features up down, features up two forty seven. The vix comes in nicely, so it is a better equity market off the report. A bit of

disinversion in the two stents spread. We are on negative seventies six basis points, a less inversion here, uh seen by the report. Michael McKee calls it a conundrum, jeff F. Rosenberg, How do you allocate here? The hallmark of what we've seen the last two days in surveillance and conversation is everyone extending out their view. It doesn't matter which shops sell side by side, everybody's is reaching out. How do

you allocate a portfolio given all this uncertainty? Right now, where the safety maybe just to take a stasis bet, not a dynamic bet out into two thousand three. Yeah, you know, there's a there's a lot of sort of false changing in positions that associated with you know, year ahead outlooks in the turn of the calendar. We haven't really changed much in terms of the arrative from where we left off at the end of last year. This is a market that is is split between kind of

soft landing and hard landing scenarios. But where the consensus expectation around declining inflation, you know, leads the ability for the FED to pivot. And what's interesting and what we saw, you know, in the minutes earlier this week, is the tension that that creates with this financial conditions component of monetary policy transmission. That is, you know, the FED wanting to push back on markets getting too far ahead of

of a FED pivot. And I think that means for portfolio positioning, you've got to take what the market gives you, and I think you've got to be pretty cautious going into that uncertainty. What the markets giving you right now in the fixed inco market is an inverted yield curve.

Your best yields are found with the least amount of risk, and I think that's what you've got to take here until some of the clarity around hard soft landing, consensus views around inflation being realized start to get validated in the data. F Rosenberg, thank you so much with black rockets. So I'm let's talk about the explosion of hiring. The numbers out of Amazon, it just they're unimagined, just where

airplanes are trucks. It's unamagine the tomp to add a million people to the workforce, and my single company and in what three is it's just phenomenal. We're gonna do this. I just used my fancy new iPhone to take an expanded shot here of Lisa Brand. What's Jonathan fair on? Our guest Dan ives he has senior equity research channelists Wedbush Securities. And we're supposed to talk Apple, except Tesla's not cooperating, So we will go over to Tesla printing

on one or three point zero zero? Do you have in your head a price of Tesla where ms Mr Musk's world unravels. Look, I don't think we're there yet, I mean, but I will say that, look about sixties seventy hours of the sell off has been must Twitter driven. Now now, clearly this part is the demand story, the

price cuts that we're seeing in China. Know, but I believe a look at a hundred hours, we're getting to a point that I believe this is starting to get to just a massive risk ward to own despite going into a Q four where clearly that they're gonna lower

guide into and I think that's really the fear. Can you help me understand the demand backdrop, particularly in China, specifically in China, do you think I was off the back of the lockdowns just a lack of spending more broadly in that economy, or off the back of competition. I'm trying to work out what lasts here and what fights. Yeah, I think about thirty to view is COVID driven in terms of the lockdowns and really what we've seen in country.

But but no doubt. I mean it's an arms race that's happening in China from from Neo X being to you know called twenty and thirty other o e M s that are really going after Tesla. But when I look at the e V market in China, we're still in the second third inning I just view this as the market going from hyper growth two more moderated growth

incession when they've reopened. I think a lot of people would make the argument right now that this is a more actionalistic Chinese consumer when they reopen it, they've got the spare cash to spend and buy a vehicle and they buying Tesla's or they go in local. Well, that's been the being. Ultimately, the brand of Tessla continues to really be unmatched, and I think that's why if you look at the Chinese consumer, especially on the higher end, if they're going for E v s, I'd say two

of every three is going for a Tesla. And now the problem is competition price. Competition was I due to margins and that's why the clock struck midnight for TESTSA in terms of hyper growth, and that's what you're seeing

reflecting the stock. Although the as we said, seventy of the sell off we believe has been musk Twitter driven all right, well, and not to get into the whole drama there, but there is this question, if you strip out that isn't related to that, how much Tesla is representative of a bigger story within the text sphere in particular that you're seeing with a lack of demand, a saturation after so much buying of certain types of electronics

during the pandemic. How much have we already seen a right sizing some of the tech companies if they do layoffs versus they're more to be going more to more room to actually cut. First of all tech companies, if you looked the last four or five years, and they were spending money like rock stars, so at that pace, if you look at it, that was not sustainable clearly, and then now going into a recessionary environment and will call a hangover post COVID from a growth perspective, you're

gonna see the cuts. But I look, I view the cuts similar to as I view him in O. Nine and No. One oh two. It's ultimately the start of a right sizing that weeds the next up cycle. Is this Silicon Valley adulthood upon them given crisis and they saved us all with the cardboard boxes when we couldn't go out, just as one example. But is it now finally Silicon Valley, with cost cuts, with shocks financially finds a new adulthood, a new sobriety to act like other

American companies. I think they're transitioning toward that, towards that adulthood because I think they have learned from their mistakes, and I think all Microsoft never had this problem. Well look if you look at Redmon and how Microsoft did ultimately, they've been tacticians as long as i'd say with Apple in terms of everything that cooks done. But I think when you look at the rest attack, I mean it was really an arms race to really outspend because of

the talent level and what demand looked like. And now it's really happening. I think we go into this Q four earnings numbers get cut. I believe Texas under owned today's two thousand nine. The New York City cab drivers barrash on Tech, and then I think we sit here in February March, April to spend. Also what happens on macro.

I think tech stocks ripped higher from here despite sentiment, which you know, many yelling fire in a crowd theater, but you think we've got a guy through the kitchen sinking moment the kitchen we has to happen the last two weeks of January across the board, and that in my opinion, marks what I view as a core bottle to the real question for a lot of people then is how much more down side is they're off the back of that kitchen sinking moment or do you think

that kitchen sink leads to a roundy Because you get this release whisper numbers usually or i'd say eight tim percent above street. Today they're probably eight to ten percent below the street. And I think that's the difference from institutional perspective. You've alreadys these byside numbers come down across the board, a lot of bad news baked in here and look fundamentally, especially on enterprise software cybersecurity across the board.

I mean we're seeing nine deals still get done. And also remember if you look at Apple, given everything we saw with COVID in terms of China, all the supply chain issues, you would be like, Okay, they're gonna pre announce negive, not even a question. They already announced their date. So again it just goes to a point demand. Despite what I think you know in terms of the clock striking midnight in the eyes of many, I think it's

holding up better than expected. Specifically in Cupertino. The story of two thousand twenty two is a real bifurcation of big tech. It was no longer big tech. It was specific industries that they're catering to. With technology is a preeminent business. Are there any big tech companies that you don't think will revive, that you don't think will be under priced, that you think kitchen sink it and then have to kitchen sink it again later on this year. Yeah,

I think that's really more on the social media. I mean, like when you look as where a meta play is that they have significant headwinds because of what's happening on Apple iOS and just digital advertising, and obviously more money spend to a metaverse. But it goes back that they cut costs. Look at that stocks in Zuckerberg actually peeled back spending. John, Let's look at this. This is the reality.

Take a photo, run it to forty eight mega petzels, which is a new magnificent resolution, edited in another app, Throw it out to tree and house sitting in the studio. She nails it, gets it done, and we get it up in twelve seconds. That's the Dana I's world. You love this camera, don't you? I do? I do? I love the chip. No, no, let me rephrase this. This has helped me here. The chip is what matters. Nobody in the financial media talks about the A this or

the A chip in whichever toy you're talking. It's the biggest innovation to a matter of Apple in the last six or seven years in terms of chips. They they're basically being intel at their own game. I've fantastic to see you just brilliant shares your stylus tkah looking great. I mean loving the jacket. But it kind of for New Year's great. This is all right, tom fordy yesterday from Davidson and Dan Eves today. These peaks are encyclopedic on this stuff. It's not a lot of blah blah.

But for somebody's take first, think about how long they've been around. They've never had to live with five percent interest rates. Yes, And I'd also make the argument in the United States they've never really faced truly a cychnical test, because the pandemic for some industries, of course, was a

cygnical test. For these tech firms, it was. Now they've got an acceleration of demand for many of these firms in their current form, this year could well be if we do get that recession, the first cychnical test they faced. That's a new sobriety I'm talking about. And the other side of it is and you know, we'll talk to Dan about this in the coming weeks. We're gonna go to earnings. I believe February second for Apple seven. I

think January. It's February. We at the end of January, the big we Amazon, We're gonna go to earnings and they're gonna go, hey, we're selling all these stupid phones through the mobile phone companies for next to no money. John Parrell needs one of these, don't you think. I think Pharren needs and iPhone. I think I'm rocking it. I think I'm rocking a twelve. I don't want to change this down. I'm not ready to do that just yet. We'll see what am I waiting for? The fifteen six? Yes,

the sixteen Okay, keep going. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten AMI 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 keene In. This is Bloomberg. H