BNP's Shulyatyeva Says Fed to Cut Amid Slowing Job Growth

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Bloomberg Aug 21 23:50 · 18.7k Views

Yelena Shulyatyeva, BNP Paribas senior US economist, says the US labor market is showing signs of slowing on "Bloomberg The Close." The number of US workers on payrolls will likely be revised down by 818,000 for the 12 months through March, showing US job growth was probably far less robust in the year than previously reported.

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  • 00:00 It's all about expectations and there were some expectations that we would get a downward revision of a million jobs.
  • 00:06 Instead we got
  • 00:07 818,000.
  • 00:09 So this was how, how, how would you characterize this revision?
  • 00:15 I, I mean, there were, there was a wide range of expectations and some people including us expected to slightly less of a of a downward revision.
  • 00:25 It's really about what you make
  • 00:29 of this number
  • 00:31 as it applies to the forward trajectory of payrolls.
  • 00:34 It's not really about what happened in the past.
  • 00:37 It's, it could be revised even further
  • 00:41 to the upside included.
  • 00:42 So I think
  • 00:44 what is worrying here in that revision is that maybe there's like
  • 00:49 this kind of an error in the numbers that will we will see
  • 00:55 included in the payrolls numbers going forward.
  • 00:57 So that's a risk here, right?
  • 00:59 So we still see decent payroll growth, but maybe it's not as good as we as the numbers are telling us.
  • 01:07 But having said that, if you look at the economy, the economy continues to grow.
  • 01:12 We still get decent
  • 01:14 numbers on on economic growth consumption and you know the signals from companies are
  • 01:20 that the consumers continue to spend.
  • 01:22 So I think
  • 01:24 that All in all this is just telling us that, you know,
  • 01:27 very strong robust numbers that we saw
  • 01:31 last year, we're not as straight and we were all surprised when we were getting them anyways.
  • 01:37 So it
  • 01:38 gets the household survey
  • 01:40 with the establishment survey closer and that that's that's what I make out of it.
  • 01:44 So the trajectory is not all that different even if the numbers and the and the scale of the gains that we saw might be revised lower here.
  • 01:52 What does this mean in terms of how you're thinking about the August payrolls number?
  • 01:56 Right now, the consensus estimate is for 155,000 jobs.
  • 01:59 Are you revising that down based on what you saw with this revision?
  • 02:04 Absolutely no impact on our
  • 02:07 projections for
  • 02:09 August payrolls.
  • 02:11 We think that we're going to see a rebound.
  • 02:13 We still think that despite would be a less set
  • 02:17 in the
  • 02:18 report that there was no impact from the weather.
  • 02:21 There was some impact from the weather in that in that July report.
  • 02:25 So we may see some rebound here
  • 02:29 in August,
  • 02:30 but
  • 02:31 nonetheless, I think
  • 02:33 job growth is slowing regardless of what we saw in the revisions.
  • 02:37 You can see that in the more recent data like jolts and openings and things like that.
  • 02:42 But there are no layoffs to a big extent because claims are still pretty low.
  • 02:47 But even if people aren't necessarily losing their jobs, you know, and I'm sure you know this as obviously being a much smarter on on economics than than me and Scarlett
  • 02:55 is that it has sort of a psychological effect on a lot of folks.
  • 02:58 Those who are still employed, they're not going to spend the same.
  • 03:00 And there were a bunch of to retailer
  • 03:02 earnings that came out this morning.
  • 03:03 And they all, while the
  • 03:05 reports were sort of different in nature,
  • 03:07 the common thread
  • 03:09 was that people are searching for
  • 03:11 value.
  • 03:12 They are much more budget conscious.
  • 03:13 I interviewed the CEO
  • 03:15 of Macy's earlier this morning, Tony Spring, and he really hit home with this idea here
  • 03:19 that basically they are seeing a customer that is much more discerning and now they are retrenching the company itself to trying to find ways to accommodate this.
  • 03:27 And he sees a really rocky
  • 03:28 next, you know, few months ahead.
  • 03:30 And I'm just wondering and when you're hearing these type of comments out of the companies, even though it hasn't shown up in the official data, should we be worried?
  • 03:40 We should be cautious and obviously watch the data very closely.
  • 03:44 I don't think that we are going to see a deterioration.
  • 03:48 We definitely are seeing some slowing moderation and the comments basically confirm,
  • 03:55 confirm that narrative.
  • 03:57 I think it's, it's really, you know, about
  • 04:00 the different types of consumers, right?
  • 04:03 High end income
  • 04:05 consumers are still spending.
  • 04:07 They,
  • 04:08 we still have this massive deleveraging that happened since the Great Recession.
  • 04:13 You know, people can borrow
  • 04:15 and
  • 04:16 they can borrow pretty easily if if you have good credit and high income
  • 04:21 and the wealth effect is still present.
  • 04:24 It's look at home prices, look at equity markets.
  • 04:28 I think that kind of buffer will help us
  • 04:32 in, in terms of consumer spending, even though like a lot a large group of consumers is probably struggling indeed
  • 04:40 with high prices.
  • 04:41 Well, that gets to a tricky question here about where what the Fed should be reacting to.
  • 04:45 So because you're kind of describing a little bit of a tale of two cities here, should the Feds reaction function be on those aggregate numbers basically just looking at the totality and then shifting rates accordingly or should they look at that bifurcation
  • 04:58 and then make adjustments?
  • 05:00 Used on that
  • 05:02 well, that's why there are a lot of smart people who work at the Fed and basically, yes, the, the the mandate is
  • 05:09 unfortunately pretty blunt, right?
  • 05:11 You have to react to overall the totality of data
  • 05:15 and that's why we expect them to start cutting rates in September.
  • 05:19 So they will they're ready.
  • 05:21 The minutes
  • 05:22 from the previous meeting told us that they were ready to start
  • 05:26 the cutting cycle,
  • 05:28 but the cutting cycle will be too, to reduce that unnecessary restriction in the economy.
  • 05:34 Not trying to catch up Falling knife
  • 05:37 Yelena, very quickly.
  • 05:38 I mentioned earlier on that these revisions were supposed to be released at 10:00 AM.
  • 05:42 They weren't.
  • 05:42 It took about 1/2 hour or more, but you may actually get a hold of the numbers a little bit earlier than a lot of people did.
  • 05:48 What happened there?
  • 05:50 So I,
  • 05:51 we were just thinking maybe there's some technical glitch as you mentioned.
  • 05:55 So we just called the public line and we we were given the numbers and that seems like that the whole story.
  • 06:03 So.