Bloomberg Surveillance: ‘Fed-Friendly’ Data, Retail Earnings, Biden-Xi Meeting

Ellen Zentner, Morgan Stanley Chief US Economist, says the nearly two-year high in US continuing jobless claims represents a needed softening in the labor market. Bill Dudley, former New York Fed President & Bloomberg Opinion columnist, says there needs to be significant changes to the treasury market in order to restore strength . Chuck Grom, Gordon Haskett Senior Retail Analyst, says Walmart, Target and Burberry's earnings indicate pressure on the entire retail sector . Michael Hirson, 22V Head of China Research, analyzes President Biden's meeting with Xi Jinping and its implications for both countries. Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance Full Transcript: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best an economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. Joining us now, we're thrilled to every usually for big events, So today's a big event. It's always a big event. When Ellen Zenner joins his chief US economist, Morgan Stanley Ellen on claims, I go to the four week moving average. How do you interpret claims with this two hundred thirty one thousand statistic? And can you say there's finally a vector in place of higher claims more pain. So I hope that there's a higher vector in place. I disagree that higher claims will be more pain. We're coming off of extraordinarily low levels. As you said, we look at the four week moving average to smooth through volatility, and it has been lifting, but it is still very low. And so what does that tell me? Something that Mike and Lisa alluded to as well, normalization slowing in normalization, good god man, that's what we've been needing, and I don't see this accelerating at an extreme pace. I've been on the road the last few days in several states meeting with corporate clients. They are finally seeing some relief in terms of how tight the labor market has been in terms of the availability of the kinds of employees that they need. We're seeing not just claims rising a bit here, but I focus on continuing claims. People that have been losing their jobs are staying unemployed for a bit longer, and that's been rising since October, so it's getting more difficult to just get re employed right away. This is the kind of softness in the labor market that we have needed, and of course it takes pressure off the FED to raise rates again. Right going on extended hold, what is the distance between normalization and an outright downturn? So well, the difference is jobs stay positive, So normalization is you've got more supply coming back into the labor market, so you see participation rates rising, which we have. That is what puts upward pressure on the unemployment rate. And we've been seeing that, and if people are having taken longer to be able to get re employed, then that should produce further upward pressure on the unemployment rate. But that just takes pressure off the labor market, pressure off of businesses, off of margins. You see wages grow more slowly, and you'll see confidence build among FED policy makers that they have done enough here. I don't think we're anywhere near getting to negative job gains. I think negative jobs would mean that companies have stopped hiring. What I hear is that they're doing selective hiring, that they stop hiring, and that they start firing, and I mean firing up broadly. And that's just not what we're seeing. But I'm ever watchful, especially reading earnings transcripts, to see if that's something that's around the around the corner. I'm glad you mentioned earnings because we were talking about Walmart, and I understand their idiosyncrasies here, but they talked about potentially seeing outright deflation over the next year with consumers clearly pushing back. You do see margin pressure, you do see a market deterioration and consumer appetite over the past ninety days. How concerning is that to you about the nonlinearity of where things could be. So, Lisa, we put out a consumer survey that goes out into the field every two weeks, and one of the biggest areas of trade down that households have been doing is within stores themselves, say, going from a high priced branded good to the generic good within the store. And that means that those retailers are going to see some deflation. And we've been hearing from businesses that input costs are falling, but prices that they're charged or falling faster. And that's important because we all started to think we the economics community at large, not myself though an exception, started to think that households just have unlimited price tolerance, and that is not the case. Finances start to slow, we run through