United States, Bloomberg Economics, Bloomberg discussed on P&L With Pimm Fox and Lisa Abramowicz
Podcasts as well as at Bloomberg Dot Com we're sitting here in our Bloomberg actor Burgers studios trying to peg what my co Co host and colleague very correctly politics be smoking gun or the red flag with the smoking the smoking gun smoking flag for why markets are feeling being so low today a lot of people pointing their fingers at the ADP report Cadena. Who is the chief economist for Bloomberg Economics sitting here here. Maybe agreeing right. I mean this. Is this a surprise the disappointing ADP reproach showing the payrolls US employers cooled in September. I don't think it is a surprise price. I mean it's a little bit weaker than what the consensus was looking for but not materially just five thousand or so but we are slowing down relative to what we saw earlier in the year that that being said this kind of negative sentiment in the market was evident during Asia our intensify during Europe trading hours and then now l. what spreads into the US although not quite to the same degree as what we saw in Europe so I don't know that there's a a single smoking gun it's more of a confluence of events so ADP DP tells us the labor market's a little weaker Boris Johnson continuing to try to wrangle heartbreak for today's pessimism mm-hmm as every few bars song right you have WTO talking about trade sanctions with Europe over you you know squabbling over Airbus and Boeing and whatnot so there's just a lot of little things adding up which kind of build on what we saw yesterday which was a big surprise in the manufacturing IFM alright policy blame Boris Johnson. Yes I always like to blame breath among other among others among others Carl. Is this the good folks down and Bloomberg Economics Komo crunching the numbers. You've seen the you know. The manufacturing are they. I assume for the latest month was weaker than expected so we know that manufacturing is is weak and probably weakening certainly in the US and we know what's happening internationally. Sorry taken down your outlook or preparing to take down. Your outlook is maybe the the consumer isn't quite as strong as we thought well. We took our outlook down on August first when the next round of tariffs were announced back after the July. I Fed meeting the very next day. president trump announced that tariffs would go into effect at the start of August star Tober. Excuse me and also again in in December. They moved that DOC Tober first deadline back to October fifteenth but it does look like the twenty five percent tariffs will go up to thirty percent in the middle of this month it. Doesn't you know they've been very little indication indication that we're actually moving away from that at this point in time and you see the impact of those trade friction showing up and things like the IFM survey yesterday additionally had another roughly one hundred fifty billion of product subject to tariff in middle of December so the price tag on tariffs is about two and a half times larger in twenty nineteen at compared to two thousand eighteen so that does move the needle on growth and we're in a slower moving economy already so when you have slower growth the economy is more susceptible title to those types of shocks that being said I know there's been talk this morning about one handle on. GDP and whatnot all speed we have been looking for about one point eight one point seven percent of GDP growth in the back half of the year and we moved to that callback on August first when the tariffs went into effect so we've all speed the tone we were seeing in the market cricket was not consistent with sub two percent. GDP growth now. We're starting to see that reality set in as job creation manufacturing activity all looks more consistent sent with a sub two percent number but to answer your question stole speed for the US economy. It's about one point four one point five percent growth so we are closer to stall speed but we're not there yet and that's why my team thinks that we can actually muddle through the soft patch. Thanks very much to consumers remaining resilient so that was my question right. At what point do you reach a tipping point. How much pessimism should be baked in right now. Is it a recession that we're facing or is it simply lower inflation lower or growth and just lower asset increases well it's not recession and it's not even growth recession and there's a distinction between recession and growth recession and everyone knows what recession is growth recession is a period where growth slows down so much not that we fall into contraction but actually that things start to unravel the unemployment unemployment rates starts to drift higher. I don't think we'll even get to a growth recession in the back half of this year so labor market continues to produce job gains in in excess of eighty five to one hundred thousand per month that will keep the unemployment rate out relatively steady at current levels so I think we're just accepting a reality ability of a of a much more sluggish profile to the economy here in the US and then much weaker conditions abroad Germany probably slipping into technical recession UK on the cusp of recession once Brexit is executed twenty twenty just Bloomberg economics GDP forecast GDP growth for twenty twenty will be about two to two and a quarter percent so we're kind of refining things as we look at that that being said one thing. We should keep in mind here right. Everyone's talking about the R. Word. What would the ground is very fertile for a significant rebound in activity if these trade headwinds are removed so the Fed has policy rates set in a very very accommodative stance right. They're giving the economy steroids so to speak so rates are accommodative corporate. Profit growth is positive corporate. Balance Sheets are in good condition condition in the unemployment rate is the lowest since Vietnam draft was in effect so things are well positioned that if we don't just squander the saul with increase in tariff increase in tariff the economy could rebound a quite nicely in two thousand twenty and beyond Carl Riccadonna chief economist for a Bloomberg economics so much for joining us here in our Bloomberg interactive brokers studio.