Surveillance: Weak Jobs Report

hopefully jerking Congress into more action. At least that's the implication from Marcus Jeffrey Rosenberg Blackport black Rock, portfolio manager of the Systematic Multi Strategy Fund, joining us right now. Your thoughts, Jeff on this report, Yeah, I think you guys have it exactly right. You look at that market reaction and you see slightly higher yields on what is a very disappointing board. And it's really about looking through this report to its implications for monitors for fiscal policy.

And yes, you know, fiscal policy expectations were high. This report just underscores the likelihood that will see significant additional fiscal stimulus in the new administration from the new administration, from the new Congress, and that's why you're seeing a little bit higher yields. You know, the report is remarkably weak with regards to leisure and hospitality, down a five thousand jobs. That's really what's taking the headline number down.

And that's just very clearly about the COVID resurgence here that we're seeing, and that's just underscoring again the need for more fiscal policy. So it's a it's a very kind of different bond market reaction, but but I think it makes a lot of sense that we're looking past the near term weakness towards the policy response and that means better growth and and higher rates. And that's really higher rates and steeper curve that's been a trend. I don't think this report is going to take us off

that trend. Futures up, nine, futures up, a little bit of an ease back inequities at this moment. Jeff Rosenberg, I know at Carnegie mel And you took Horse and Cart two oh two an important course. The research this morning is extraordinary about inflation expectations and how they fold into the yield market, about oil surging, about a weaker dollar and the presumption of a weekend dollar, which is the horse and which is the cart real world dynamics

like dollar in oil or is it the fixed income market? Well, the first of all on on on oil that's going to affect the headline levels of inflation markets and longer term inflation expectations are really gonna focus on on core. Now. The expectations here and the developments are really about a reflationary trade rolling through the fixed income markets. You see it in terms of market based measures of inflation tips,

break even measures breaking out to the upside. You see it in phenomena yield measures, and see it in the steepening of the yield curve. The overall conclusion here is expectations for significant monetary and fiscal policy coordination to deliver a reflationary thrust to the economy that then flows through into financial markets. But it starts with financial markets expectations, and that's what you're seeing building. It's been building for

some time. It's certainly got some acceleration hosts the Georgia runoff election results and certainly today UH and this negative news is going to be looked through to its implications

to further the reflationary fiscal policy response. You know, I don't want to read too much into the immediate market response, but I do think it's interesting, Jeff, that you see the bond market reacting more than the equity markets, That equities actually took a little bit of a dip in futures trading, whereas you saw bonds take a definitive move

price lower, yield higher on the expectation of stimulus. Have we reached a point where higher yields with such a lagging economy on the in the backdrop, becomes a headwind for stocks. In other words, it sort of threatens the thesis of going into stocks at such high valuation simply because there is no alternative. Jeff, It's it's a great question.

I don't think we're there yet. You've got to take a step back from these changes in in yield levels that you know, from an environment where yields were exceptionally depressed, and certainly when we think about the tenure yield being significantly below one percent throughout the post COVID environment, you know we've recently breached that level, but these yields are still exceptionally low out the yield curve, and the FED is telling you they're happy to see that now, they're

not going to be happy to see a disruptive increase in interest rates basis points higher on the day. But you look at all of the forecast for the year and they center around twenty basis points for the year. That's fine in terms of fiscal stimulus boosting market expectations without the market expectations on doing the financial stability that the FED is targeting here. So I think if we have these kind of gradual increases in rates, that's not going to get in the way of financial stability and

having to have the FED intervene. Jeff Rosenberg where this is black Rock, and also Michael McKee of Bloomberg with his wonderful analysis. He says, some time to dive into the report. Jeff Rosenberg, Michael McKee mentioned the five hundred thousand statistics on bars and restaurants. I think no surprise to anyone in New York. Michael McKee, Can you extrapolate anyway to the early February report, early February next month or a year as January? Can you get January are

right now? In a sense you can, because it doesn't look like any of the lockdown situation has changed and as a matter of fact, we're seeing more cases, more deaths every day, we're setting records, So it looks like

we're gonna be perhaps even in worse shape. A lot of what happened in December came about in the early part of the month UH and the survey has taken the week of the that includes the twelfth of the month, So at the twelfth of the month in UH in January is not looking good right now, and so I would imagine that we will not see any additional hiring. However,

I have people already lost their jobs. That's going to be the question if if we lost so many in December, do we see a significant number of people who go

off payrolls or are they just remaining off payrolls. So let's just hie us all together and just sort of highlight how a pivotal week this really has been, how an exceptional start to a year following an unprecedented and Jeff Rosenberg we started this segment talking about how people have had to rewrite their year, had THECES in the past week after just writing them days earlier, after what happened with the Georgia election, and given what we're seeing

with the surprise now with a labor market that is much weaker than many had expected. Jeff, are you changing any of your sees based on the week's action. Well, you know, I don't think that. The thing that has happened in the over the course of the week is the expectations were already going into the year that growth would be better than expected, and so the Georgia elections have only added to the confidence that market participants have that growth due to fiscal policy support will be better

than expected. And that's that's providing some cushion, that's providing some safety net to the positive sentiment around financial markets and for the bond market for the expectations that yields will continue to gradually rise. So I don't think we're seeing a significant change from that. I think we're seeing it reinforced with today's news and with the news on the elections in the outlook for fiscal policy. Jeffrey Rosenberg,

thank you so much. With Blackbrook, greatly appreciate your time with us on this job's report, and of course are FED meetings as well, string of PLOSO for the discussion. It will be an eventful Friday. The resignations of the Secretary of Transportation, the Secretary of Education. This morning, we were resigned to speak to french Kill, the Republican from Arkansas, French Hill of Little Rock, and of course has been a consistent Republican voice giving us conversation on Bloomberg surveillance.

Congressmanni Hill. There seems to be a divide, as we just saw from Senator Sass of Nebraska the language at the Senator from Nebraska used as compared to the Senator from Missouri Holly and the Senator from Texas Uh Ted Cruz. How do you bring together a Republican party to be in minority with President Biden. Well, happy new year, Tom,

thanks for having me. This is a critical issue and at this moment in American district, I think all the leaders in boat parties, on both sides of the Capitol and on both sides of the aisle need to focus on our peaceful transfer of the presidency on noon January and we need to and not add to the brinksmanship that we've seen from Speaker Pelosi in the last day on the amendment, or that we saw from Senator Cruz or Senator Holly on this uh false narrative that somehow

we're going to have a different outcome on January six by action of the Congress, which was never in the Constitution, was never going to happen. And I think the rhetoric since the election contributed to the disaster we saw here the afternoon of January six, where people were misled, they had a misunderstanding of what might happen on January six.

In Washington, d C. It's almost of a Whig Party of another time and place, and I would suggest the Whig Party not so much associated with Arkansas, but mostly to the eastern Kentucky. Do you risk becoming a minority party with this great fracture between say Ted Cruz and

Ben Sas. I think we need to remind our ourselves of what the Republican tenants are and go back to advocating for those limited government, limited scope of regulatory and tax burdens on the American people, equal justice under the law, more opportunities for people of all incomes, in a strong, robust national security, in leadership in the world. Those are the tenants of the Republican platform. I've heard a Senator a Cruise speak passionately about them. I've heard Senator Sas

speak passionately about them. That's what the Republican Party needs to get back out and advocate for and step away from what we've seen since the election. Congressman, are you happy with how President Trump and the Republican leadership has handled the rollout of the coronavirus vaccine? Well, look, first, let's say that the vaccine will go down in history.

This development effort from late January to the rollout of a vaccine around the first of December is one of the great global health initiatives and success stories in history. So the CARES acts ten billion dollars for coronavirus pandemic vaccine development. The President's quick UH direction of the FDA and ni H to work on that is a success story. The roll out UH and the manufacturing of it around

the world I think has been impressive. It's gotten to the States, but we need to make sure the States focus where it's needed, on essential workers and our elderly population. You all, we're talking about incidences of death and you look at that compared to accidental death by any choice, and again it's concentrated in the older age groups are more vulnerable to the coronavirus. So after essential workers. There's no doubt that's where the vaccine should be focused. So Congressman,

that is true. And yet the states really have been the ones in charge, and only about a third of the vaccine that's been circulated on average has been deployed, and there has been reports of, for example, doctors who are not in the main lines having to call up their pharmacies and their contacts and say, how do I get vaccine? Do you regret that there isn't a more federally central organized rollout plan that would have smoothed out some of these kinks. Well, it possibly could have been better.

We've never done this before, but the defense logistics getting the vaccine with the private sector produced, approved, and shipped has been again, I think, an extraordinary accomplishment. In Arkansas, speaking to our governor, we're generally pleased with the distribution to hospitals and to pharmacies, and we're working hard to get that out to the people who needed first. And of course, you know, the storage has been a challenge.

Everyone recognizes that, particularly in the Visor vaccine, and so that's limited distribution. With the Biderta vaccine that's going to go out to more rural counties, and more regular pharmacy used that I think will expand the vaccine. You've been faster French show. To get back to the politics of the moment, and we consider the two gentlemen from Vermont, Lady and Sanders. Maybe we'll have chairmanships within a new Senate. Perhaps the Democrats will manage to the middle. That seems

to be how they won this time around. How does the Republican Party within the primary process managed to the middle. Another good point. I mean, this is a center right country. We saw that with Nancy. Yes, we saw that. And it's up to both in both parties. They both have a primary challenge from the left and the Democratic Party and from the right. I guess you say the more right in the Republican Party. We do that, I think by again focusing on our basic tenants that I went

over a moment ago. That's what we have to do is do more education and more communication with our primary voters about what the Republican Party's goals are. Why are we being elected, why do we run? That's our obligation as Canada. Okay, but this is so important, carkisman Hill very quickly here. This is so important because there is a social overlay of social policy and issues over general Republican issues, how do you combine those forward to two

thousand twenty two. In two thousand twenty four and win. Well, I think we won with our message of what we said was our commitment to America in we picked up. We didn't have a single incumbent lose in the House this year, and we have a new, diverse, aggressive group of new members in the House. I think we'll continue that momentum going into two particularly if you see the Biden administration, as you say, not government from the center, with a divided Senate in a divided House, but try

to again of interesting of progressive left policies. French Hill, have a pleasant weekend after this historic the Congressman Hill of Arkansas with us, and we thank you. This first week of Nuary, it is about Eurasia group. Dr Bremer and Mr coushkinsch Coupchins. I'll get it out. I can't talking to Friday folks ever. Uh, they're wonderful. Top risks of two thousand twenty one in that is Europe in the changing of the Guard of Angelo, miracle. Moving on,

Mr McCraw with huge issues. Ms Raman joins with an update with Eurasia Group. Midge, we haven't talked to about enough about the travails of France and mccrawn. Why should America worry about the fragility of Mr McCraw Because I think Tom Europe's medium term stability depends more on what happens in the French election than the German one. That you know, the outcome of the German election is kind of known. Is going to be a black Green government.

We don't know who will replace Miracle, but it doesn't really matter that much because it will be it will be a mainstream leader sitting on top of a very pro European coalition in France. In France, you have a health crisis, an economic crisis, and a security crisis, I think for the terrorist incidents that took place a very back end of last year, and they're all converging and

I think brings into questions the Macron question. And I think on top of that, of course, because instability in France would be a big problem for Europe in a big problem for America. Does France have a Trumpian equivalent? I mean Guy Johnson and I folks there for the French elections, and the stunning side of Mr McCraw walking across that magnificent courtyard, I mean a guest from the nineteenth or eighteenth century and in the j RAM. And the question is that the right, if you will of

France does it exist. You've got a very weak center right and a very weak center left. Lapen is always, as you know, Tom waiting in the wings, and next year will be no different. What's interesting is Marine Lapin has not really been able to capitalize on COVID. She's not really been able to capitalize on the challenges and the troubles that Macron has been facing both personally and

his government. But the question is depending on how he deals with potential risk of the third lockdown, in this mutant strain that's crossed the channel from Great Britain now into France, the glacial pace of the vaccine rollout, there's a lot of expectation of high profile business closures and math unemployment in the first four to six months of this year in France. You know, depending on how Macron deals with those challenges could impact the dynamic heading into

the race next year. And I think most people expect, and I think this is correct, that it will be a Macron La Penn runoff again in May next year. Mitch, you mentioned just across the channel to the UK lockdown. There rollout of the vaccine slower as we see in many parts of the world. Give us a sense of how things are going in the early days of the

lockdown in the UK. I mean, it's a big mess, frankly, because Boris Johnson is just not across the crisis is you know, he's not good at taking and leaning into decisions. He's waiting until the very last moment. He gave a very big interview with a very high profile presenter here on Sunday where he effectively told everybody will be fined to return to school the following day. That evening he

plunged the country back into a third lockdown. So I think the government's control of the pandemic, Boris Johnson's competence, the competence of his administration, his cabinet, they're all really I think, in the firing line. And that's on top of he has delivered the deal on Brexit, that's correct, but now the implications of that deal are really beginning

to be felt. Delays at the port's delays getting into the UK, and I think that just it creates a set of questions really about the credibility and competence of the government that I think are going to stay with Johnson for some time. What type of risk did those challenges to Prime Minister Johnson? What are they posed to

his his government going forward? I think there's not a lead a ship concern in the short term, but but the pandemic now and I think the government of the perception of how the government has managed the pandemic really really hangs on the big bet the government has made on the vaccinations. So they really got I think, start getting jobs in people's arms and getting the population vaccinated.

And if the government is able to do that effectively, So let's say we're moving towards the east to break in a large part of the vulnerable population has been vaccinated by that time, as the government is claiming will be the case, then he may be able to emerge. You know, if you're thinking a year, two years down the track, relatively unscathed from this crisis. If the vaccination that does not work out, um, then I think the

government's in trouble. And then I think Boris Shawn's in trouble, and that will be a question in Mr Rahman, where does demand come from in Europe? I mean, basically, it's underperformed America for a jillion years. I know there's glimmers of you know, real pop and all that, there isn't much of a tech sector. Is well, what is the might of the European consumer now to help jump start

everything like happens routinely in the United States. I think this is a great question, Tom, And you know senior European policymakers I talked to they basically think the EU has missed the boat on digitization. I think you're right. You know, we don't have that technical, technological, that innovation dynamic that you see in the state where the EU

is now placing it. That is on the green transition, on greening the economy, and you'll see the big seven hundred and fifty billion recovery fund that was agreed at the end of last year is really being used and seen as a vehicle to try and promote that green transition. And the UK is obviously at the forefront of that and will be with the cop climates from at the end of the year, are implementing a one billion recovery plan that again is very much focused on the green transition.

So I think that's where the EU sees it, so being a possible leader, whether or not will work out again, we'll we'll need to see about the area right point to that's one of big growth to the Ouropean economy over the medium term. Mid Roman. Thank you so much and thank you to all of your raising groups. Just brilliant work, and we're just going to frame where America's economy is. Tiffany Wilding joins from Pimco. Tiffany, I don't want a lot of numbers. I just want to know

what the next six months looks like. You guys are acclaimed for the new normal. Is this the new normal? Well, I certainly hope not, Tom. I mean, you know, the it was clearly a very weak employment report for example this morning, which I think you know, clearly show that the economy is still hurting from the virus pandemic, you know, and as a result of you know, the targeted business closures that had to had to happen in order to try to contain that pandemic. We certainly hope that's not

the new normal. But you asked me to to think about the next six months ahead, you know. And I think we're really you know, we're really optimistic that the key word here will be re acceleration. Um. And I say that because you know, we you know, we we do have a vaccine. We hope that the vaccine uh distribution can be rammed up, you know. But in addition to that, we have fiscal policymakers in Washington which we think will will will certainly support the recovery, continue support

the recovery. We just got a nine billion dollar stimulus bill in late December to help bridge the gap for people, uh, you know, while we're kind of dealing with the winter and the COVID virus. We think you could see under a democratic control of Washington, another trillion dollars you know, that could be that could come about in March, and that's really going to help the economy sort of bridge

this and re accelerate into the back end. And I don't want you to put a number on it, because I don't need the General Council PIMCO calling me up and saying I was out of bounds. But Tiffany to take Claudius some is just one example the liberal economy US in Europe, in America, who are saying, you guys are nuts at the margin of this billion or that trillion, and we're going to need a certain percentage of g d P, which is six or seven or eight trillion

dollars of aid no matter how it comes. Are we closer to that view with the news of the last week, Yeah, so we think you could get um another another so basically a total of two trillion this year, So another trillion,

and that's just in COVID relief. UM. And it's certainly possible, uh that that Outside of that, you can also get you know, some infrastructure spending or investment in education and health care UM that you know that the Democrats have been talking about, UM, you know, which which would obviously be spending you know, over a longer time frame, you know, but that would help UM. And I think that's something that is certainly needed. UM. It would be positive over

the longer term. You would hope for things like productivity, uh, you know, labor force quality, uh you know, you know, things like that. So you know, I think certainly we're you know, we're in the right track in terms of first let's think about the pandemic. Let's you know, kind of help the folks that need it during this time. Let's bridge the gap there, let's set ourselves up, um, you know, for not having the longer term damage in

the economy, you know. And then after that focus, after we've sort of dealt with that, um we're getting vaccine distribution, then let's think about some of these longer term trends and what can policy do, uh, you know, to lift productivity in the future. Tiffany mentioned, you know, as we take a look at some of this unemployment data that we received this morning, how concerned are you about, uh, perhaps the permanence of some of this unemployment of some

of these folks who are out of work. You know, at the beginning of this pandemic, we kind of thought, oh g you know, it's kind of temporary their quote unquote furloughed. How concerned are you about the permanent nature the damage done to our employment situation? Yeah, I mean that's something that that we always have to worry about, you know, and we want to try to you know, reduce the extent to which you get that permanent damage,

you know. And I think that the issue here is that, um, it is really kind of you know, as as more people are unemployed for longer, you have skills that start to atrophy, etcetera. So you know, really what you want to try to do is when you have these kinds of shocks, you want to get people back in the labor market, get them working as as soon as you possibly can, so you don't have some of that longer

term damage. You know. I think you know, one thing to consider here that's very important that we're monitoring is that you will have some what we call economic reallocation that happens. You know, in other words, there will be some sort of longer term scars in certain industries um from this pandemic, you know. But but but there also be some some good things probably that come out of it as well. So for example of that, you know, maybe the leisure and hospitality sector never fully gets back

to normal, even though it will recover. UM. But on the other side of that, you'll have some uh, you know, improving trends and kind of things like warehousing, you know, transportation.

You know, as more people continue to shop online or things like that, um, you can do more things that are um you know via zoo room or you know, tele telecommunications, you know, so I think that you you need to be able to bridge the gap for people so they can get new jobs and new industries and you can get that economic reallocation that happens quickly and smoothly and you don't get the longer term damage, you know, And we certainly are optimistic that you know, we'll be

able to do that, you know, given the stimulus that we've gotten to date, and you know, on our expectation for for more support from the government going forward. Tiffany, we're hearing you know, you know, kind of somewhat tongue in cheek comparisons to the nineteen twenties. Here, how much pent up demand do you think there really is out there in the economy. I'm trying to fast forward a

little bit to kind of June July August. Um, do you think people are going to kind of just kind of burst out of their homes and apartments and go out there and spend um. Well, you know, I think, you know, again, like one thing, one sort of measure.

You know, obviously love to look at data and measurements and things like that, you know, one measure I think to look at the potential pent up demand is is really the savings rate, um you know, and as we've seen, the savings rate you know, has gone up a lot. And I think that's important. You know a lot of you know, we some of the spending and the household relief that that people have gotten, they have not been able to spend because uh you know, things are shut down,

um you know. And and so I certainly think that um you know, you will get some some pin up demand for for that type of spending when when things reopened. Certainly, um you know, but again, as I mentioned, you know, I don't I don't think things will be quite the same as they were prior to this pandemic, you know, because I think people have figured out that uh you know, they can they can work from home more seamlessly, um you know than they could before, for example, and things

like that. But but I think you will get some pin up demand you know, leisure, hospitality sectors for travel and things like that. You know, that will certainly rebound pativity. Well, and thank you so much with PIMCO. Greatly appreciated after jobs report. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, Sun Cloud, or whichever podcast platform you prefer. I'm on Twitter at

Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio