Instant Reaction: US Job Growth Falls Short, Sets Up Fed Pivot

This is breaking new loose from Bloomberg. Last month was 0:00:07.160 --> 0:00:10.760 one hundred and fourteen thousand. It is revised under one 0:00:10.840 --> 0:00:16.680 hundred thousand, eighty nine thousand positive eighty nine thousand, So 0:00:16.720 --> 0:00:18.960 I've got one hundred and forty two thousand is the 0:00:19.079 --> 0:00:22.880 jobs report and the two month revision is eighty six. 0:00:22.920 --> 0:00:25.520 So Paul, do the math with me. Six takeaway one 0:00:25.520 --> 0:00:29.360 who is thirteen eight is fifty one thousand, yep, I 0:00:29.400 --> 0:00:33.680 think fifty six thousand, excuse me, fifty six thousand positive 0:00:34.360 --> 0:00:38.280 is the summation with the revision. We job on along here, folks, 0:00:38.280 --> 0:00:41.760 to give Neil Dutta time to look at these statistics. 0:00:42.080 --> 0:00:44.720 Neil, what does this signal for Chairman Powell? 0:00:45.120 --> 0:00:50.000 Get going? That's what it says, go fifty with a 0:00:50.080 --> 0:00:53.720 promise to do as much as necessary to stabilize labor 0:00:53.760 --> 0:00:54.880 market conditions. 0:00:55.360 --> 0:00:58.520 So again, Neil, I mean, and you think about these 0:00:58.600 --> 0:01:01.520 numbers and the revisions as to almost just summarizing here 0:01:03.680 --> 0:01:05.959 the labor market, I guess it kind of falls into 0:01:05.959 --> 0:01:08.280 what we were just saying many minutes ago, not nearly 0:01:08.319 --> 0:01:09.480 as strong as people think it is. 0:01:11.560 --> 0:01:12.240 No, I mean, the. 0:01:12.200 --> 0:01:15.959 Three month trend on non farm private pails is running 0:01:15.959 --> 0:01:19.279 below one hundred thousand. I mean, that's not a good number. 0:01:20.480 --> 0:01:24.680 You know, that's barely break even, and I think it's 0:01:24.800 --> 0:01:28.120 arguably actually worse than that because one of the reasons 0:01:28.120 --> 0:01:29.959 why the number even looked as good as it did 0:01:30.040 --> 0:01:32.880 is because we saw an uptake in construction employment among 0:01:33.040 --> 0:01:39.319 I think civil engineer contractors. And so that's not going 0:01:39.319 --> 0:01:42.240 to last because everything we know about construction right now 0:01:42.319 --> 0:01:45.800 is that units under construction are under constructure collapsing. So 0:01:46.440 --> 0:01:48.760 why are we hiring all these people to build one 0:01:48.840 --> 0:01:52.760 exactly that That implies a margin squeeze for builders, which 0:01:52.800 --> 0:01:56.400 I don't think they can tolerate right now. So I 0:01:56.440 --> 0:02:00.640 think it's the goods producing side. I mean Tom mentioned benfacturing. 0:02:01.280 --> 0:02:03.400 I think that's notable because a lot of people were 0:02:03.440 --> 0:02:06.320 thinking maybe you'd see some uptaking manufacturing because of the 0:02:06.600 --> 0:02:07.800 unwind of the retooling. 0:02:08.600 --> 0:02:09.560 It just didn't happen. 0:02:09.800 --> 0:02:12.160 Right on the good side of the economy's week, cyclically 0:02:12.320 --> 0:02:16.839 sensitive industries are sluggish, and you know, this is all 0:02:16.880 --> 0:02:19.760 about the FED trying to create a handoff from income 0:02:19.840 --> 0:02:23.680 lead growth to credit led growth. That's what this is about. 0:02:23.720 --> 0:02:25.880 So they need to keep cutting until the credits active 0:02:25.880 --> 0:02:27.280 area of the economy turn. 0:02:27.280 --> 0:02:28.200 Joining us worldwide. 0:02:28.280 --> 0:02:31.120 Neil dotta, we are commercial free to the nine o'clock hour. 0:02:31.240 --> 0:02:34.440 Claudia sam Mark Zandi will join in a moment. Ben 0:02:34.520 --> 0:02:37.920 Ladler will join us on the equity market reaction in 0:02:37.960 --> 0:02:41.840 the view forward here Later in these twenty minutes, futures 0:02:41.880 --> 0:02:45.320 at negative seventeen, the vixers A twenty two level comes 0:02:45.360 --> 0:02:50.320 in nicely twenty point seven six. Major bond market adjustments 0:02:50.760 --> 0:02:53.440 make it eight basis points. Two year yield three point 0:02:53.560 --> 0:02:56.800 sixty six thirty year bond well under four percent, three 0:02:56.840 --> 0:03:00.360 point nine eight percent, ten year yield three points sixty 0:03:00.400 --> 0:03:04.240 seven percent. Neil, I want you to frame out for 0:03:04.360 --> 0:03:10.720 us what inflation will do given a depressed GDP in 0:03:10.800 --> 0:03:13.959 the job market, moving the second derivative here is moving 0:03:14.320 --> 0:03:20.200 to a worser space. What does inflation then do further disinflation. 0:03:21.720 --> 0:03:23.519 I mean absolently, I think so. I mean if you 0:03:23.600 --> 0:03:28.280 look at core goods, not housing services, and housing rents, 0:03:28.360 --> 0:03:30.160 I mean those are those are the three ways to 0:03:30.200 --> 0:03:35.280 slice the inflation data. The entire shortfall relative to the 0:03:35.280 --> 0:03:37.600 FEDS target is in housing rents, which we know will 0:03:37.600 --> 0:03:40.720 continue to normalize given the lagged You know sort of 0:03:40.800 --> 0:03:44.360 nature of that indicator relative to market based rents. Everything 0:03:44.360 --> 0:03:49.040 else is basically normalized. So you know again, I mean, 0:03:50.120 --> 0:03:52.600 what's the upside risk for inflation if growth is running 0:03:52.600 --> 0:03:55.600 below potential and the momentum under the unemployment rate is higher. 0:03:55.920 --> 0:03:57.440 I mean that's kind of it's kind of I mean, 0:03:57.520 --> 0:04:02.440 unit labor costs are running basically flat for the last year, 0:04:03.040 --> 0:04:05.440 so there's no more of an inflationary impulse coming out 0:04:05.480 --> 0:04:09.680 of the job market. That story is completely over, and 0:04:09.720 --> 0:04:12.760 the FED continues to run a very very restricted policy stance. 0:04:12.960 --> 0:04:15.560 Well, Paul, get one more in here, and Neil, and 0:04:15.760 --> 0:04:17.479 you know, the unemployment rate, just for those that are 0:04:17.480 --> 0:04:20.159 gonna be watching the headlines, stay steady at four point 0:04:20.279 --> 0:04:22.920 two percent here, right in line with expectations. What does 0:04:22.960 --> 0:04:25.159 the FED think about an unemployment rate of four point 0:04:25.200 --> 0:04:26.080 two percent? Do you think? 0:04:28.360 --> 0:04:30.320 I don't think they should think about an unemployment rate 0:04:30.320 --> 0:04:32.040 of four point two percent. I think they should think 0:04:32.080 --> 0:04:34.320 about what's gone on over the last six months. 0:04:35.440 --> 0:04:36.680 Here you going, what's gone out? 0:04:37.000 --> 0:04:39.240 That's absolutely Neildudda, I know you got a publish, will 0:04:39.240 --> 0:04:40.359 feature that out on Twitter. 0:04:40.440 --> 0:04:42.080 Neil Dudda with Ron Mack will publish. 0:04:42.240 --> 0:04:46.440 We thank him for careful market economic analysis. So now 0:04:46.480 --> 0:04:50.120 bring you Claudia S'm chief economists New Century Advisors, and 0:04:50.200 --> 0:04:53.600 doctor Mark Zandi, chief economists at Moody's. We had them 0:04:53.640 --> 0:04:56.640 on here, oh thirty or sixty days ago, can't remember. 0:04:56.720 --> 0:05:00.080 It was just lights out, great, great analysis, Claudia. I 0:05:00.160 --> 0:05:02.560 want to get this out of the way so we 0:05:02.600 --> 0:05:05.120 can move on to the real Claudia, Sam, I'm sick 0:05:05.160 --> 0:05:09.640 of the palm recession. Pinata, Can you just give us 0:05:09.680 --> 0:05:14.080 an update without tire and feathering your reputation? Are we 0:05:14.160 --> 0:05:16.600 close to a recession? Doctor somem? 0:05:17.720 --> 0:05:20.880 So they increase the unemployment rate is in a range 0:05:21.000 --> 0:05:24.120 where we have historically been in recessions, right, But that's 0:05:24.120 --> 0:05:25.239 a history, that's a past. 0:05:25.720 --> 0:05:27.160 We're not in a recession right now. 0:05:27.200 --> 0:05:30.320 But we do have a weakening labor market, right, So 0:05:30.360 --> 0:05:31.640 that's the important takeaway. 0:05:31.640 --> 0:05:33.760 But like, not a recession right now, but a risk 0:05:33.960 --> 0:05:34.520 as risk. 0:05:34.600 --> 0:05:36.560 And what I remember from two thousand and eight is 0:05:36.560 --> 0:05:37.359 a Zandy rule. 0:05:37.680 --> 0:05:40.440 There's a Psam rule, but there's also the Zandy rule, 0:05:40.480 --> 0:05:44.280 which is to be optimistic about America, Mark Zandy, if 0:05:44.279 --> 0:05:46.760 we get the deck of cards, I hear from Neil 0:05:46.839 --> 0:05:50.320 and others in you frankly at Moodies as well. Can 0:05:50.400 --> 0:05:56.240 corporations adjust and sustain off of a lower nominal GDP 0:05:57.080 --> 0:06:00.599 decent revenue and decent earnings or do you just suggest 0:06:00.680 --> 0:06:01.720 everything goes. 0:06:01.480 --> 0:06:06.240 Down, Tom, I think they're doing just fine. I mean, 0:06:06.279 --> 0:06:08.800 looking at corporate earnings, they feel pretty good. I mean, 0:06:09.400 --> 0:06:12.960 through Q two of twenty twenty four, double digit ear 0:06:13.000 --> 0:06:16.039 or ear growth, and you know, expectations of analysts always 0:06:16.080 --> 0:06:18.440 are on the high side, but they're still pretty good 0:06:18.480 --> 0:06:21.840 as well. So I think the economy is doing fine 0:06:22.040 --> 0:06:27.360 and producing enough enough revenue growth to keep profitability going strong. 0:06:27.480 --> 0:06:29.960 So yeah, I'm not worried about that. And you know, 0:06:30.160 --> 0:06:34.200 just broadly, yeh, you know, I'm all on board with 0:06:34.240 --> 0:06:37.359 the view that the BET should be cutting rates and 0:06:37.440 --> 0:06:41.599 normalizing them very quickly. But today's report I thought pretty 0:06:41.680 --> 0:06:43.880 much down the strike zone. I mean, you know, the 0:06:43.960 --> 0:06:46.520 kind of right underlying job growth is one hundred and 0:06:46.520 --> 0:06:48.359 one hundred and fifty k that's kind of where you 0:06:48.400 --> 0:06:51.480 want it. Four point two percent unemployment, that's kind of 0:06:51.520 --> 0:06:53.800 where you want it. You saw a tick up an 0:06:53.800 --> 0:06:56.599 hour's work per week, that's, you know, feels pretty good. 0:06:56.680 --> 0:07:00.760 Wage growth is almost exactly where you want it. I mean, yeah, 0:07:00.800 --> 0:07:03.280 you can just put hairs. Come on, what are we 0:07:03.320 --> 0:07:05.200 going to say this? This is a good report, this 0:07:05.279 --> 0:07:07.680 was this felt like a really good report to me. 0:07:08.279 --> 0:07:10.560 Is it to the point there marked where the FED 0:07:10.640 --> 0:07:13.040 can stay at twenty five basis points or is this 0:07:13.120 --> 0:07:15.760 something that some are suggesting may push them to a 0:07:15.760 --> 0:07:17.440 fifty basis point cut in September. 0:07:17.640 --> 0:07:20.880 Yeah, I think it's twenty five. I mean, I would 0:07:21.080 --> 0:07:24.440 expect the FED to cut fifty only in emergency if 0:07:24.520 --> 0:07:27.080 you know, markets are really evaporating or there really was 0:07:27.120 --> 0:07:30.920 some serious deterioration in the economy, job market. But I 0:07:31.240 --> 0:07:33.400 don't see any of that. So I think it's a 0:07:33.440 --> 0:07:36.040 core point, and there's you know, I think there's good 0:07:36.160 --> 0:07:39.920 arguments to cut and cut in a consistent way, but 0:07:40.000 --> 0:07:43.800 I don't think we need to dramatically cut all at once, 0:07:44.200 --> 0:07:47.840 because there's a lot of uncertainty as to reasonable uncertainty 0:07:47.880 --> 0:07:49.960 as to you know, where the FED should be going here. 0:07:50.000 --> 0:07:53.480 What is the so called equilibrium federal funds rate? What's 0:07:53.520 --> 0:07:56.280 the rate where policies either supporting or restraining growth? That 0:07:56.920 --> 0:07:59.720 is very uncertain, And I think given that, I go 0:08:00.000 --> 0:08:03.080 obiously unless push to do otherwise, And in this report. 0:08:03.160 --> 0:08:06.960 I don't see any reason to feel like they have 0:08:07.040 --> 0:08:08.640 to move very quickly. 0:08:08.320 --> 0:08:09.080 Here, Claudia. 0:08:09.080 --> 0:08:11.640 Over the weekend, you'll be at some fancy cocktail party 0:08:11.640 --> 0:08:13.760 and somebody's can come up to you and say, hey, Claudia, 0:08:13.800 --> 0:08:16.400 how's the US labor market. What's your response? 0:08:18.880 --> 0:08:22.520 It's not headed in the right direction. This is the 0:08:22.560 --> 0:08:24.600 thing I am most concerned about. Again. 0:08:24.800 --> 0:08:28.480 Just you know the numbers, like the numbers themselves. Okay, fine, 0:08:29.000 --> 0:08:31.360 It's just things have been slowing and we can and 0:08:31.400 --> 0:08:34.920 not because I am you know, hair on fire, that 0:08:34.960 --> 0:08:38.360 are recessions around the corner. I'm really concerned that we're 0:08:38.440 --> 0:08:40.920 losing a slipping away of a. 0:08:40.960 --> 0:08:42.600 Really good labor market. 0:08:42.760 --> 0:08:45.240 And we need this as good as it gets and 0:08:45.600 --> 0:08:47.880 there should be nothing weaker than what it takes the 0:08:47.880 --> 0:08:50.520 get inflation down. And we are like the train is 0:08:50.559 --> 0:08:52.840 still moving and is not in the right direction. 0:08:53.360 --> 0:08:55.199 I mean to both of you, and then, folks, we've 0:08:55.240 --> 0:08:57.599 got huge academic caliber here. Mark, I'm going to go 0:08:57.640 --> 0:08:59.640 to you first, and then Claudia. Is the same question 0:09:00.160 --> 0:09:03.520 the ECB is trying to teach us about being non measured. 0:09:04.080 --> 0:09:07.559 Are we slaves? Mark Sandy to a green spanny and 0:09:07.960 --> 0:09:12.640 measured approach, careful, careful, careful. Why can't we go X 0:09:12.720 --> 0:09:17.079 beeps or why beeps or Z beeps and see what happens? 0:09:17.400 --> 0:09:18.439 Why can't we do that? 0:09:18.520 --> 0:09:21.920 Mark Sandy, Well, I don't know Tom that you need to. 0:09:23.040 --> 0:09:25.439 I mean, if the you know, the labor market was 0:09:25.480 --> 0:09:28.600 falling apart, yeah, absolutely, If you know financial system was 0:09:28.640 --> 0:09:33.920 in turmoil, yeah, i'd move quit more quickly. But you know, 0:09:34.640 --> 0:09:38.760 the economies, it's throttling back. But that's exactly what you'd 0:09:38.800 --> 0:09:41.520 want to see, to throttle back it, for it to 0:09:41.520 --> 0:09:44.600 throttle back here it's been growing too strongly and it's 0:09:44.720 --> 0:09:47.960 kind of coming right into where you want it, and 0:09:48.400 --> 0:09:52.559 no reason to to move quickly otherwise. And again I 0:09:52.720 --> 0:09:56.400 keep going back to I don't think anyone knows reasonably 0:09:56.440 --> 0:09:59.640 so where we're headed here. You know, it feels like 0:09:59.679 --> 0:10:02.400 I feel like the equilibrium rate is higher than it 0:10:02.400 --> 0:10:06.280 has been typically. Uh, and it's moving, so you know, 0:10:06.360 --> 0:10:09.240 why not go cautiously and you know, if things start 0:10:09.280 --> 0:10:12.640 to really deteriorate, if you know, we do start to 0:10:12.679 --> 0:10:16.720 see really significant job loss or or even very weak 0:10:16.800 --> 0:10:19.760 job growth. Hey, one other quick point I wanted to make, please, 0:10:21.360 --> 0:10:24.360 you know the August data is always weak. You know, 0:10:24.440 --> 0:10:27.360 we get very low response rates, initial response rates in 0:10:27.360 --> 0:10:29.600 the month of August, I think for obvious reasons, people 0:10:29.600 --> 0:10:32.760 are on vacation, and we always get an initial print 0:10:32.760 --> 0:10:36.600 that's on the sauce side. And almost invariably, if you 0:10:36.679 --> 0:10:38.160 cast me back a year from now, we're going to 0:10:38.160 --> 0:10:42.000 be talking about upward efficients to the data. So you know, 0:10:42.400 --> 0:10:44.079 you just have to take that into consideration. 0:10:44.240 --> 0:10:46.840 Claudia, I got a scree month moving average of one 0:10:46.920 --> 0:10:50.760 hundred and sixteen thousand, three hundred and thirty three one 0:10:50.840 --> 0:10:54.679 one six three three three. I'm sorry, but that's way 0:10:54.720 --> 0:10:57.520 below anything I've seen as a normal rate of unemployment 0:10:57.720 --> 0:10:59.960 if you take the screen month moving average Jason Firm 0:11:00.040 --> 0:11:03.160 and I'll help out on this at Harvard. I'm sorry, Claudia, 0:11:03.360 --> 0:11:06.640 is measured in place or is this a fed that's 0:11:06.640 --> 0:11:08.440 got to go and hoc forward? 0:11:10.320 --> 0:11:12.440 Well, I think again, it's like looking at how the 0:11:12.520 --> 0:11:15.439 variables are changing. The unemployment rate has been rising. Yes, 0:11:15.520 --> 0:11:17.640 it is still relatively low historically. 0:11:17.720 --> 0:11:19.000 We also have an older workforce. 0:11:19.000 --> 0:11:22.120 Four point three percent is not that far from and 0:11:22.320 --> 0:11:26.640 experienced and esteemed right, and so there's no magic number 0:11:26.640 --> 0:11:30.520 with the unemployment rate. It's watching the dynamics. It's watching 0:11:30.760 --> 0:11:34.520 the change and knowing that once that changes in place. 0:11:36.080 --> 0:11:38.720 The FED has been trying for two years to cool 0:11:38.720 --> 0:11:41.240 off the labor market. That's why the funds rate is 0:11:41.240 --> 0:11:44.360 at five percent and other types of demand. Right, so, yes, 0:11:44.440 --> 0:11:47.000 things are cooling off, and now it's like, okay, now 0:11:47.360 --> 0:11:48.079 we need to slow. 0:11:48.240 --> 0:11:51.560 We need to turn that around. We don't need that slowing. 0:11:52.120 --> 0:11:53.760 So I think that changes everything. 0:11:53.960 --> 0:11:56.320 Wonderful, Zamon Sandy with us right now. They move the 0:11:56.320 --> 0:11:56.959 market higher. 0:11:57.000 --> 0:12:00.800 Futures negative thirty now negative twelve, deterior in the Sweeney 0:12:00.880 --> 0:12:04.480 yield two year yield from negative seven basis points down 0:12:04.520 --> 0:12:07.520 to negative nine. Those levels three sixty five, two year, 0:12:07.640 --> 0:12:09.920 three sixty eight, ten year, thirty. 0:12:09.760 --> 0:12:12.040 Year bond hut or four percent. Paul you home shopping 0:12:12.080 --> 0:12:13.000 this weekend. 0:12:12.720 --> 0:12:16.839 I might be absolutely red headline crossing the Bloomberg terminal. 0:12:16.880 --> 0:12:20.240 Traders pricing fifty percent chance of half point FED cut 0:12:20.559 --> 0:12:24.240 this month, crossing the Bloomberg terminal, Mark Sandy. Given the 0:12:24.760 --> 0:12:27.120 labor outlook here in some of the data we got today, 0:12:27.160 --> 0:12:30.719 as it relates to total payrolls and wages, what's your 0:12:30.760 --> 0:12:34.040 view of the US consumer here? How healthy or how 0:12:34.040 --> 0:12:37.120 at risk is the US consumer, I. 0:12:37.080 --> 0:12:40.280 Think and aggregate, you know, looking across all Americans, they're 0:12:40.360 --> 0:12:43.280 continue to do their part. They're hanging tough. I mean, 0:12:43.360 --> 0:12:45.280 the train is being driven by folks in the top 0:12:45.360 --> 0:12:47.640 part of the income distribution. And you know, I don't know, 0:12:47.760 --> 0:12:50.080 I don't think it's hyperperctly, but their financial situation is 0:12:50.080 --> 0:12:52.680 probably as good as it's ever been. You know, got 0:12:52.720 --> 0:12:56.720 a job, strong, real wage gains, They own stocks, stocks 0:12:56.760 --> 0:12:59.160 or near record high zone home home vows or near 0:12:59.200 --> 0:13:01.520 record highs. If they've got any debt at all, it's 0:13:01.559 --> 0:13:04.040 a thirty or fifteen year or fixed rate mortgage locked 0:13:04.080 --> 0:13:06.360 in And seems like everyone I talked to us mortgage 0:13:06.400 --> 0:13:08.839 is at two and a half or three percent kind 0:13:08.840 --> 0:13:11.719 of locked in. So I again, and in my by 0:13:11.720 --> 0:13:14.839 my calculation, they still have some excess cash that they 0:13:14.880 --> 0:13:17.440 build up during the pandemic when they couldn't spend that 0:13:17.480 --> 0:13:21.480 they're spending down now. So I think they're fine. I 0:13:21.520 --> 0:13:24.920 do think the soft spot obviously is lower income households. 0:13:24.920 --> 0:13:28.400 They clearly are struggling. You know, they got nailed by 0:13:28.440 --> 0:13:30.400 the high inflation. They took on a lot of debt 0:13:30.840 --> 0:13:33.960 to supplement their income, to maintain their purchasing power. And 0:13:34.080 --> 0:13:35.920 it's one thing when rates are low, but when rates 0:13:35.960 --> 0:13:38.680 are really high. They mean, the credit card rate is 0:13:38.720 --> 0:13:41.480 twenty two percent, a record high. That's very painful. They 0:13:41.520 --> 0:13:44.240 don't own stocks, they don't own a home. They rent, so, 0:13:45.000 --> 0:13:47.240 you know, very different kind of perspectives. But you know, 0:13:47.320 --> 0:13:48.959 at the end of the day, it's the folks in 0:13:49.000 --> 0:13:51.240 the top middle parts of the distribution that here we 0:13:51.280 --> 0:13:52.280 are critical here. 0:13:52.600 --> 0:13:53.920 I mean, I mean, I can't keep up. 0:13:54.559 --> 0:13:57.199 I tried to get John Williams on the show, Claudius, 0:13:57.440 --> 0:13:58.560 Mark Sandy, John. 0:13:58.320 --> 0:13:59.960 Williams, that would have been good. 0:14:00.520 --> 0:14:04.200 New York Fed President John Williams says, now appropriate to 0:14:04.280 --> 0:14:07.560 lower FED funds rate, Claudia, when you were studying this 0:14:07.600 --> 0:14:13.120 in Michigan, this this this ex post lag Is this 0:14:13.360 --> 0:14:16.079 unusual the way our FED is acting. 0:14:19.240 --> 0:14:22.760 Yes, particularly in the way monetary policy is quote unquote 0:14:22.840 --> 0:14:25.720 supposed to be done like in the theories, right, but 0:14:25.760 --> 0:14:29.160 that's a very clean, not realistic state. I understand why 0:14:29.240 --> 0:14:33.040 the FED when tools start breaking down and data don't 0:14:33.040 --> 0:14:36.000 make as much sense, then you kind of you, you know, 0:14:36.080 --> 0:14:38.920 crawl your way along and you want evidence. I think 0:14:38.960 --> 0:14:41.800 this FED did lean into a very FED like tendency 0:14:41.800 --> 0:14:44.680 of being super super cautious, and they have been kind 0:14:44.680 --> 0:14:47.040 of greedy in terms of how much data they wanted 0:14:47.080 --> 0:14:50.200 on inflation. And if I had to hear so many times. 0:14:50.280 --> 0:14:52.440 We have the luxury of time because the labor market 0:14:52.480 --> 0:14:54.640 is so strong, it's like, well, well guess what it 0:14:54.680 --> 0:14:57.560 actually wasn't as strong, and so there's a cost. Like 0:14:57.640 --> 0:15:02.240 they took time to get comfortable with inflation, but that 0:15:02.360 --> 0:15:05.480 probably means they do not have time to get right. 0:15:06.120 --> 0:15:07.440 Is the lever market really weakening? 0:15:07.520 --> 0:15:10.320 Like they may need to recalibrate some and get going 0:15:10.640 --> 0:15:12.080 I think would be the appropriate But. 0:15:12.040 --> 0:15:14.680 This, this is really outside of their playbook. So I 0:15:14.760 --> 0:15:17.480 understand why this is a hard case to make. 0:15:17.640 --> 0:15:20.680 Doctor Xandy, your opiniata for the Gloom Crew, I mean 0:15:20.960 --> 0:15:23.840 seven eight oh nine, you said, everybody shut up, We're 0:15:23.840 --> 0:15:27.560 going to fix this Zandy pandemic. Everybody shut up, We're 0:15:27.560 --> 0:15:31.040 going to fix this. Give us an optimistic touch here 0:15:31.200 --> 0:15:37.239 on how America will clear these traumas post pandemic, Shinas 0:15:37.280 --> 0:15:42.080 slowing down, Claudia Sam's cats are miserable. Mark Zandy, just 0:15:42.520 --> 0:15:44.520 as directly as you can give us. 0:15:44.560 --> 0:15:45.080 I need some. 0:15:45.160 --> 0:15:48.280 Xandy optimism now, or I can't get through the weekend. 0:15:49.360 --> 0:15:51.880 Really, I've got that reputation. I didn't know that I'm 0:15:51.880 --> 0:15:56.720 that optimistic. Well look, uh just look at the numbers. 0:15:56.920 --> 0:16:00.080 I mean, top four point two percent on employment. I mean, okay, 0:16:00.160 --> 0:16:03.080 be nicer if it were four I'm I'm on board 0:16:03.120 --> 0:16:05.560 with that. I mean, it's maybe on the soft side 0:16:05.560 --> 0:16:08.720 of one point four point two percent unemployment. We're creating 0:16:09.000 --> 0:16:11.320 a lot of jobs across lots of different industries and 0:16:11.360 --> 0:16:16.080 have been for you know, quite some time. Inflation that's 0:16:16.280 --> 0:16:19.680 back in the bottle almost no matter how you measure it. 0:16:20.560 --> 0:16:23.440 So you know, we're growing at a potential. And by 0:16:23.480 --> 0:16:26.240 the way, here's the thing that's really you know, makes 0:16:26.240 --> 0:16:30.360 me encouraged. The economy's potential is very strong. I mean, 0:16:30.400 --> 0:16:32.480 we're seeing a lot of labor force growth. Well that's 0:16:32.480 --> 0:16:34.760 one of the that's the key reason why unemployment is 0:16:34.800 --> 0:16:38.040 not tired here over the past year. That goes to immigration, 0:16:38.160 --> 0:16:39.600 and you know there's a lot of costs there, but 0:16:39.800 --> 0:16:42.320 the benefit obviously is the strong liver force growth. And 0:16:42.360 --> 0:16:45.880 look at those productivity growth numbers, and you know, I 0:16:45.920 --> 0:16:49.080 mean it's hard to argue that whether it's sustainable or not, 0:16:49.200 --> 0:16:50.600 but it feels like there's a lot of good things 0:16:50.680 --> 0:16:53.320 happening underneath all the business formation we beginning since the 0:16:53.320 --> 0:16:56.040 pandemic hit. It's probably reaping benefit. And this is all 0:16:56.040 --> 0:16:58.440 before AI kind of kicks in. So you add of 0:16:58.480 --> 0:17:01.280 all the productivity gains, yeah, in the labor force growth, 0:17:01.280 --> 0:17:05.040 and that's a strong growing economy and the FED. The 0:17:05.119 --> 0:17:07.240 trick for the FED here is, you know, let the 0:17:08.080 --> 0:17:10.720 take the foot off the brakes sufficiently to allow the 0:17:10.760 --> 0:17:13.480 economy to grow at its higher potential. That's a very 0:17:13.480 --> 0:17:16.920 different issue or problem. Demand we're evaporating. That's not what's 0:17:16.960 --> 0:17:20.320 going on here. So you know, objectively, take a step 0:17:20.359 --> 0:17:23.440 back and take a look around. This economy is good. 0:17:23.680 --> 0:17:26.359 Paul, one quick question to Claudia sim because futures just 0:17:26.359 --> 0:17:30.240 went green, which is a signal. Go Ben Ladler, so 0:17:30.320 --> 0:17:32.600 quickly here Paul, go to Claudia. And then we got 0:17:32.600 --> 0:17:34.000 to drag Ben Laidler in here. 0:17:34.240 --> 0:17:36.400 Claudia, Sam, I mean again, how do you just when 0:17:36.440 --> 0:17:37.800 you sit back, you've had a few minutes of the 0:17:37.840 --> 0:17:40.040 digestis how's it fed? How do you think they're going 0:17:40.080 --> 0:17:41.280 to digest these numbers today? 0:17:43.280 --> 0:17:46.119 I think the payroll numbers are going to be the 0:17:46.200 --> 0:17:48.680 concern and frankly, the piece of it that I found 0:17:48.760 --> 0:17:53.720 most is concerning you are the July revision, the earlier revisions, right, 0:17:53.840 --> 0:17:57.439 that's the hiring rate has gotten too low of a place, 0:17:57.640 --> 0:17:59.640 and we're seeing it in the job gains. 0:17:59.359 --> 0:18:00.240 And then to it. 0:18:01.560 --> 0:18:04.120 You know, July was actually even a little worse than 0:18:04.119 --> 0:18:08.639 we thought on the jobs number, and so that I 0:18:08.640 --> 0:18:10.040 think that takes some pause. 0:18:10.280 --> 0:18:12.520 She said, So I'm supposed to have dinner with Claudia 0:18:12.520 --> 0:18:15.080 and Jackson Hole. You know what they served. 0:18:15.040 --> 0:18:18.800 Elk and the health's food was venison. I mean there's 0:18:18.840 --> 0:18:21.000 no fish or nothing, Claudia, some we got to go. 0:18:21.080 --> 0:18:24.280 Thank you so much, Claudia, Sam just nailing these revisions. 0:18:24.320 --> 0:18:26.280 I want to want to mention Anna Wong as well 0:18:26.280 --> 0:18:29.880 at Bloomberg and Mark Zandy, thank you so much for 0:18:29.920 --> 0:18:33.280 being where us really appreciate from Moody's his optimism on 0:18:33.320 --> 0:18:38.400 the American economic experiment. He is the bull strategist who 0:18:38.440 --> 0:18:41.600 has nailed the trip from twenty eighteen. 0:18:41.680 --> 0:18:44.880 From Christmas Eve of twenty eighteen. 0:18:44.800 --> 0:18:48.280 Ben Laidler joins us. Right now in this market, Ben Ladler, 0:18:48.320 --> 0:18:52.280 are you going to cash? 0:18:52.800 --> 0:18:54.040 No, I'm just busted. 0:18:54.080 --> 0:18:59.880 My shops just killed my keyboard head. No, I think 0:19:00.520 --> 0:19:02.240 this is a I think we're at the early innings 0:19:02.280 --> 0:19:04.720 of the bull market. I think the FED cut, which 0:19:04.760 --> 0:19:07.080 is just around the corner and which we're all sort 0:19:07.080 --> 0:19:09.280 of naval gazing over, I think is the trigger for 0:19:09.359 --> 0:19:12.960 this bull market to broaden, both by sector and by 0:19:13.240 --> 0:19:16.119 and by geography. I think the data today probably a 0:19:16.160 --> 0:19:18.520 little bit weaker than you know, bulls like I would 0:19:18.520 --> 0:19:20.480 have liked, and it's probably a recipe for a little 0:19:20.520 --> 0:19:23.560 bit more uncertainty. But bottom line, I don't think it 0:19:23.680 --> 0:19:26.720 really changes the trajectory. I mean, this is an economy 0:19:26.760 --> 0:19:29.840 that is slowing. We want it to slow to pull 0:19:29.880 --> 0:19:32.160 forward those rate cuts. FED has a lot of room 0:19:32.240 --> 0:19:35.400 to uh to cut here. I think that will stabilize 0:19:35.440 --> 0:19:37.200 the US economy, and I think that would be very, 0:19:37.320 --> 0:19:38.640 very bullish for the rest of the world. 0:19:38.960 --> 0:19:40.080 He's from the United Kingdom. 0:19:40.080 --> 0:19:43.480 We should properly introduce some Ben Ladler Bridesco PBI with 0:19:43.600 --> 0:19:45.520 us right now, Paul Ben. 0:19:45.480 --> 0:19:49.080 So again, Yeah, the same the same question I asked 0:19:49.200 --> 0:19:51.679 Claudia some Ben is, how do you think the Federal 0:19:51.720 --> 0:19:54.480 Reserve will digest this labor data today? 0:19:56.640 --> 0:19:58.919 Yeah, so it's probably a little bit weaker than you 0:19:58.960 --> 0:20:01.000 know I would have liked probably that they would have 0:20:01.160 --> 0:20:02.720 liked me. I guess we'd all be looking for that 0:20:02.760 --> 0:20:05.920 sort of goldilocks number that last month was was an aberration. 0:20:06.320 --> 0:20:11.560 Last month probably wasn't an aberration, even though you know, 0:20:11.560 --> 0:20:13.920 the numbers were revised down a little bit. Today, I 0:20:14.240 --> 0:20:16.640 think they're probably leaning a little bit more towards fifty. 0:20:17.080 --> 0:20:19.560 But I think, bottom line, you know, they're going to 0:20:19.640 --> 0:20:23.360 get started. Inflation break evens are at two percent. They've 0:20:23.440 --> 0:20:25.399 a lot of room to cut here if they feel 0:20:25.400 --> 0:20:28.200 that they need. I would like to see them get started, 0:20:29.000 --> 0:20:30.960 and I think the chances a fifty basis point cut 0:20:31.000 --> 0:20:33.679 probably increased a little bit. But you know, I'm not 0:20:33.720 --> 0:20:36.320 sweating the pace I think too much. I think, you know, 0:20:36.320 --> 0:20:38.560 there's a lot of moving parts here. I think overall, 0:20:38.640 --> 0:20:41.840 this is an economy which is which is slowing. But 0:20:41.920 --> 0:20:43.560 you know, let's not lose some perspective here. I mean, 0:20:43.600 --> 0:20:45.120 this is an economy that we just had a three 0:20:45.160 --> 0:20:49.080 percent inflation GDP print last you know, last quarter, that's 0:20:49.160 --> 0:20:54.960 nearly double potential GDP unemployment just over four percent. I mean, 0:20:55.040 --> 0:20:58.120 we're coming from the start point is a very good. 0:20:57.920 --> 0:21:00.879 Place, given that backdrop, ben given effect that we've got 0:21:00.920 --> 0:21:03.880 Rachs likely coming down, got through a pretty solid earnings 0:21:04.160 --> 0:21:06.560 period in Q two. What are the sectors at screenwall 0:21:06.600 --> 0:21:07.119 for you guys. 0:21:09.520 --> 0:21:12.639 I think the biggest call right now is not necessarily 0:21:12.640 --> 0:21:15.080 the direction of the market, which I think is pretty 0:21:15.080 --> 0:21:17.560 well set and you know, up and to the right. 0:21:17.880 --> 0:21:20.119 I think it's more about the sectors you own and 0:21:20.440 --> 0:21:22.080 which parts of the world you own. I think this 0:21:22.160 --> 0:21:25.080 is a broadening ball market. I think Tech's being a 0:21:25.080 --> 0:21:27.879 great place to be. It's nothing wrong with Tech, but 0:21:27.920 --> 0:21:30.040 I think you know the bits of the world and 0:21:30.080 --> 0:21:34.000 the sectors that are much more sensitive to these interest 0:21:34.080 --> 0:21:36.320 rate cuts which are coming. It's not the US and 0:21:36.320 --> 0:21:38.919 it's not Tech, it's basically everybody else. All there's are 0:21:38.960 --> 0:21:41.000 the bits of the market that we've forgotten about for 0:21:41.040 --> 0:21:43.240 the last ten years. That's I think where you know 0:21:43.280 --> 0:21:44.840 you should be kicking the ties on right now. 0:21:45.000 --> 0:21:47.000 Ben, I don't have Apple in front of me, but 0:21:47.080 --> 0:21:48.200 you are way out front. 0:21:48.400 --> 0:21:50.760 Twenty eighteen, twenty two, twenty three. 0:21:50.800 --> 0:21:52.880 In all I'm here in Paul, you earn a lot 0:21:52.880 --> 0:21:56.719 of death of big tech. I am Ben Ladler, the 0:21:56.760 --> 0:21:59.720 Mag seven, the Mag eight, including Berkshire. 0:21:59.560 --> 0:22:03.040 You still got to own them, right, Yeah. 0:22:02.920 --> 0:22:06.200 I think so. You know, the earning numbers are decelerating, 0:22:06.240 --> 0:22:08.960 but that's still you know, no one else comes even close. 0:22:09.040 --> 0:22:11.840 You've got these fortress balance sheets, You've got these huge 0:22:11.840 --> 0:22:14.440 profit margins. You know, with all that, I can more 0:22:14.480 --> 0:22:18.280 than justify you know, the valuations. You know, but we 0:22:18.359 --> 0:22:20.720 all know that they're posting strong growth. You know, the 0:22:20.800 --> 0:22:24.199 valuations are you know, already a premium numbers. That's not 0:22:24.600 --> 0:22:26.360 I don't think where the surprise is going to come. 0:22:26.440 --> 0:22:28.840 That's not where the sensitivity to low interest rates is 0:22:28.880 --> 0:22:32.840 coming from. It's everybody else that has those shrivel profit 0:22:32.920 --> 0:22:36.960 margins that has those you know, depressed earnings expectations, who've 0:22:37.160 --> 0:22:40.040 just come out of an earnings recession where valuations are 0:22:40.040 --> 0:22:42.640 forty to fifty percent lower. That's where I think you're 0:22:42.640 --> 0:22:44.600 going to get the bank of your buck in this 0:22:44.800 --> 0:22:48.480 sort of broadening ball market and potential changing leadership. 0:22:48.760 --> 0:22:50.680 To sort of visit, we got to get Ben Laylor 0:22:50.800 --> 0:22:53.919 on again. Next time Tottenham wins will get Ben Leablor on. 0:22:54.160 --> 0:22:54.800 Ben Laylor. 0:22:54.840 --> 0:22:58.640 Thank you so much with Bradesco this morning. Paul. 0:22:58.680 --> 0:23:01.520 Your observation here, Yeah, I think, as you know, Claudia, 0:23:01.600 --> 0:23:06.359 Sam Mark Zandi kind of highlighted here. It's still a strong, 0:23:06.920 --> 0:23:10.359 fairly strong labor market, but slowing. I think Neil Duddo 0:23:10.480 --> 0:23:14.320 is more embarrassing. Hey, the underlying weakness, I think Claudia 0:23:14.359 --> 0:23:16.240 Slam is there as well. The underlying weakness is probably 0:23:16.240 --> 0:23:19.679 the more pronounced aspect of the labor market that the 0:23:19.800 --> 0:23:24.360 recent trends have been weakening, and those recent trends argue 0:23:24.400 --> 0:23:26.919 for the FED to step up here. And whether it's 0:23:26.920 --> 0:23:29.720 twenty five or fifty basis points, the market right now, 0:23:29.760 --> 0:23:32.320 as our Bloomberg News is reporting, is pricing in a 0:23:32.359 --> 0:23:33.680 fifty basis point rate cut. 0:23:34.000 --> 0:23:38.480 In September, Paulo out on YouTube, we are listening to witty, 0:23:38.640 --> 0:23:40.959 smart not young people. 0:23:41.320 --> 0:23:45.280 Okay this morning. We're not young, all right, except. 0:23:45.240 --> 0:23:45.840 At least is young. 0:23:45.920 --> 0:23:47.360 I'm not young. 0:23:47.800 --> 0:23:49.760 Second morning to all of you New to the Jobs 0:23:49.840 --> 0:23:53.600 Day ninety two nine FM Boston from Millanocket down to 0:23:53.640 --> 0:23:56.280 Black Island, which means you play Jay. 0:23:56.119 --> 0:23:58.439 Giles for Joan Jet. Good morning 0:24:02.400 --> 0:24:23.160 Shown, Love Steaks, Loves, Loves, Loves Takes