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- [00:01]
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Carol Massar
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- [01:39]
Bloomberg Businessweek Daily Announcer
Bloomberg Audio Studios Podcasts Radio News this is Bloomberg businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, business, finance and tech news as it happens. The Bloomberg businessweek Daily podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.
- [02:09]
Carol Massar
So let's get to it and let's get to the labor market and that report we got this morning at 8:30am Eastern. Here's just kind of some of the details. U.S. employers unexpectedly cut jobs in the month of July and hiring the prior two months was revised lower, suggesting that the labor market here in the US Is weaker than previously thought after surprising strength. Tim earlier this year, the decline in
- [02:30]
Tim Stanweck
jobs driven by cuts in government, leisure and hospitality. Also retail private sector payrolls rose by $30,000 for a second month. That was led by health care and social assistance, manufacturing and construction payrolls. Those continue to climb.
- [02:42]
Carol Massar
And then there was the participation rate. The share of the population working or looking for work fell to 61.4%, which, excluding the pandemic was the lowest since the 1970s. Among those between the ages of 25 and 54, known as prime age workers participation edged higher but remained lowest levels of the fast of the last few years. White House Director of the National Economic Council we're talking about Kevin Hassan Hassett. He spoke earlier on Bloomberg TV and radio on Open Interest with Danny berger and Michael McKee.
- [03:13]
Kevin Hassett
Labor force participation is kind of on a downward trajectory, which means that the break even jobs number, that is that the jobs number you need so that unemployment rate doesn't go up is has gone from maybe 120, 130,000 a few years ago to maybe about 40,000 now. And so what it means is that what market is used to look at, oh, it's like a normal tread the water kind of jobs number, if it's around 100 is no longer true.
- [03:40]
Carol Massar
All right. That of course is White House director of the National Economic Council, Kevin Hassett earlier on Bloomberg. Joining us with more is our own Michael McKee who was talking to Mr. Hassett earlier on Bloomberg. He is of course Bloomberg TV and Radio International economics and policy correspondent joining us here in studio along with and back with us Matt Lisetti. He's chief economist at Deutsche Bank. Guys, thank you so much. I do want to kick it off with you though, Mike. We've had a few hours for the D. Is this a report that was weaker? Like what's the assessment here?
- [04:10]
Mike McKee
I think the bottom line to just skip to the end of the book is that the labor market is weaker than it had appeared. But it's not weak. It's not a problem for the Fed to have to deal with. And there were as you mentioned, some quirks in the data this time and everything Kevin said was true about with the labor force declining, you need fewer jobs to employ people so the unemployment rate can go down. And that is something that the Fed's going to have to think about in terms of what is the level of interest rates that keeps the unemployment rate steady.
- [04:46]
Tim Stanweck
We'll dig into all of this and more in just a minute. First, I want to bring in Matt Luzetti, chief economist over at Deutsche Bank. Do you agree with with Mike's assessment here that yeah, on the surface it looks weaker, but it's not as bad as as sort of the headline number?
- [05:00]
Matt Luzzetti
Yeah, I think absolutely you got a downside surprise on payrolls. You had the 100,000 of downward revisions to prior months. But I think what it does is it confirms that that break even number is just lower. So there is various Fed estimates out there suggesting that the break even number could be as low as zero per month. Over the past three or six months, we're running at 20 to 45,000 on headline payroll numbers. With that backdrop, we've seen the unemployment rate decline to the lowest level in 18 months. We've seen other measures of labor market slack actually tighten on the margins as well. And so I think it actually fits more with a story where the break even number is quite low. We see payroll gains trending kind of around those levels, maybe a little bit above labor market slack, tightening at the margins, but it takes away some of the upside risk to the labor market that the Fed might have been contemplating.
- [05:43]
Carol Massar
All right, so when it comes to. We've got actually a question I want to bring in from a viewer and listener. It's Mark in Toronto and he says what impact do boomers retiring have on the labor participation rate and unemployment make? And if we could address that, I have to say I have some boomers in my family who've retired recently and or in the last few years, and they have at least three or four of them that have left the labor market. Matt, is that something that is certainly at play here?
- [06:10]
Matt Luzzetti
Absolutely. So if you look at the labor force participation of recent months, in June, there was a big decline in prime age, which, which I think you alluded to, and specifically the 25 to 34 age group that partially reversed. I think the bigger structural trend is labor force participation for 55+ continues to collapse. There's a question about whether or not that's worrying or not. I would actually argue that it's really in line with what you would expect from demographics. So if you look at different age groups with 55 plus, their participation rates are actually not moving around all that much. So what's happening is people are just aging into buckets where they work a lot less, where their participation rates are much lower. And we're in fact, much closer to what I would expect from a demographics implied trend from, from the labor market.
- [06:54]
Tim Stanweck
Mike, what about the other end of the demographic spectrum? And that would traditionally be new, you know, new entrants to this country entering the labor force and younger immigrants. We've seen that dry up significantly over the past few months. And it's certainly by design with this administration. You address that with Kevin Hassett a little bit in one of the questions that, that he answered. Does that work in our economy when we're not having enough kids?
- [07:19]
Mike McKee
It isn't good news for the overall economy. As we were talking about with Kevin Hassett the size of the labor force is one input into what potential growth is. And if the labor force isn't growing, you've got to get more out of productivity. Kevin and Warsh thinks you will eventually, not yet. So it is a problem for the economy overall, and you can see that in the overall participation numbers as well. Although prime age has ticked up a little bit, things have loosened up a little bit compared to where they were. But the demographics at the other end, as Matt was saying, that's been going on for quite a while as baby boomers from 1946 started retiring. And now we're past the peak of baby boomers being 65. So that'll be less and less of an issue going forward. But it still takes a lot of people out of the labor force.
- [08:09]
Carol Massar
Is it too soon? I feel like there's a million things I want to talk about because demographics is things. I know we've talked with you about it, but I do think about longer term. If we don't allow immigration into the country and we have an older workforce, you know how much the economy here in the US Is at risk in terms of growth. Matt, is that something you guys are thinking about a lot or studying?
- [08:28]
Matt Luzzetti
Sure. I mean, I think if you look at projections for population growth and the size of the US population, as you look out five or 10 years without positive net immigration flows, you have a declining labor force, you have a declining population. The US Is not the only economy, global economy, that is dealing with.
- [08:45]
Carol Massar
We've seen this movie, right.
- [08:46]
Matt Luzzetti
We see these issues before various parts of Asia, Europe. Many of these economies are actually worse placed than the US Is from that perspective. But, but no doubt we rely on positive net immigration flows as we look ahead. I think, as Mike mentioned, you know, the hope is that productivity growth can pick up. It has been pretty robust over these past two to three years and that that can be the supporting mechanism for overall growth. It's working out okay. Yeah, but it's a bigger question as you look at it.
- [09:13]
Tim Stanweck
Okay. I promise we. Oh, go ahead, Mike.
- [09:15]
Mike McKee
I was just going to add on to this. There is one aspect of this that the productivity can't really solve, and that is the fewer people that are working, the lower the dependency ratio is. And so Social Security gets less funding, Medicare gets less funding, tax base.
- [09:31]
Carol Massar
Right.
- [09:31]
Mike McKee
That is an ongoing issue and nobody has any idea when Congress is going to address this.
- [09:38]
Carol Massar
I keep saying if, you know, robots are going to replace us or it makes us more productive, but you know, robots don't buy lunch or robots don't need their shoes shined or robots don't need to go shopping for shoes. You know, like I just, I'm just.
- [09:49]
Tim Stanweck
They need to be oiled, though.
- [09:52]
Carol Massar
It depends.
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Tim Stanweck
Maybe rebooted sometimes.
- [09:54]
Carol Massar
It depends. It depends. Mike, I want to get to the conversation with Hassett, Kevin Hassett this morning at one point talking about hourly earnings. And he then brought up weekly earnings. You said something like, I don't know if the President's watching the Oval Office saying, you got your point, though. And Kevin, good job, good job. And Kevin said, I don't know if he's watching, but I'll find out. And I want to get both of your perspectives. But let's. Mike, speak to the President, who watches a lot of tv, we know that, and responds. Is that typical of a president, is it shows his involvement in what the message is that's getting out?
- [10:25]
Mike McKee
I think it's just unique to this President that he likes to do that and he likes to hear people talking about him. And he spends a lot, from all the reports we get from the White House, he spends a lot of time watching television and watching the various news programs. I don't know that he was watching Kevin Hassett today putting pressure on then
- [10:42]
Carol Massar
his members of his team when they're on air.
- [10:43]
Mike McKee
Well, yes, but every White House does that in a sense that you're sending out a spokesman for the White House. So that person is not going to say, yeah, we blew it, this was a bad policy, or something like that. They're always going to try to present the best numbers. And I was thinking when Kevin and I were having that conversation, you know the old saying about you can torture the state statistics any, any way you want to get the numbers that you want.
- [11:04]
Carol Massar
Right.
- [11:05]
Mike McKee
The bottom line to the White House, though, is that we are average hourly earnings are falling behind inflation. And whether you use one measure or another doesn't really matter because the public thinks that's happening and that's their political problem.
- [11:22]
Tim Stanweck
Well, speaking of communications, you and Danny Burger asked Kevin Hassett about the communications between the President and Kevin Warsh. Let's say, listen to what he had to say.
- [11:32]
Kevin Hassett
There have been some news stories that the President's talking to Kevin Warsh and of course he is, you know, and he talked to Jay Powell too. But the other thing is that Kevin Wash and the President have a very close long term relationship from New York City, from Florida, and they talk about the economy all the time. It's very, very natural for the President to do something like say hey, you know, Chairman Warsh, what do you think about today's job number? And that's a very normal thing for him to do. But I think that's the way you should think about the bounds of the
- [12:00]
Tim Stanweck
conversations earlier on Bloomberg TV with Danny Burger and Mike McKee. Matt, I want to toss this over to you because Kevin Assad also said that the President respects the independence of the Federal Reserve. And I'm curious, based on the reporting that we've seen around the conversations happening between the Fed chair and the President and what the President said publicly and on social media throughout this term and his previous term, is the view now is the market viewing that the President respects the independence of the Fed?
- [12:27]
Matt Luzzetti
Look, I think we don't really know the context of the conversations that are happening. It seems like it might be more frequent than what has the interactions between the President and the Fed chair than in the past. If you look at, you know, market measures. I think what we like to look at are our inflation expectations showing anything that is worrying. Are these suggesting that the Fed's credibility is at risk? I think last week you did see a notable rise in inflation expectations. I don't know that that was anything kind of tied to the President or. But I think it was tied to Chair Wash's specific comments around, you know, willingness to potentially raise rates, unwillingness to say that they were targeting 2% PC price inflation. And just the overall conversation I think, and the language that he used, I think raised some risks from a market perspective about whether or not the Fed would do what's necessary to keep inflation in check.
- [13:14]
Carol Massar
President Trump did an interview with Punch Ball today and he reiterated his preference for lower interest rates, but acknowledge it is not the central bank chief's decision alone. So kind of making or taking a little bit of a softer tone in some of the criticism. I mean, when it comes down to it, I know we are already thinking, okay, what does the Fed do next? We've got inflation prints to get through, right? Mike, we've got more economic data. Who knows where the Fed will be? And Kevin Wash and everybody on the FOMC at the next meeting.
- [13:43]
Mike McKee
Clearly you don't trade Fed funds futures. You're right, we don't know. But the people who do trade these things have to decide on a minute to minute basis what they're going to do. And they have backed off the idea of a September rate hike. But the important thing is we're going to have two more inflation reports. Two more? Well, one. One more after this jobs report. And so there's going to be a lot of data for them to hang a decision on. We don't know what that data is going to say. And so at this point it's too early to speculate. I mean it's been going into this, everybody was saying well if we get a bad number then the Fed might have to back off and we got a bad number. So they're saying the Fed's going to back off. Now we're all on to well let's see what we get on Wednesday with CPI and we'll make a decision.
- [14:31]
Tim Stanweck
Our favorite part, well, Matt, what is, what is, what should you know it's the Fed has a dual mandate but and I think for a lot of people last few months have said okay, the labor market is strong so the focus should be on getting inflation down. After today's print is does that view change? Should the Fed still be squarely focused on I don't that part of the deal?
- [14:50]
Matt Luzzetti
I don't think it changes. You know, clearly you had a downside surprise in payrolls but if you think the break even number is close to zero, you're actually running at or near those levels. The unemployment rates at 4.1%. It is below, well below what the Fed thought it was going to be at the end of this year. It remains, it remains our best measure of labor market slack. I think you have a shift of risk distribution on the labor market now. There's not as much upside risk, but September will be about the inflation data that we get over the next two months. Especially if you get a bounce back
- [15:17]
Carol Massar
in payrolls next month, inflation's still a problem. Right.
- [15:21]
Matt Luzzetti
So in our view it is. I mean if you look at PCE inflation which is what the Fed targets, it is the highest that it's been since 1992. If you strip out Covid and we agree with an evolving Fed assessment from many officials that it is more broad based, it is more demand driven, AI related investment is as a source of inflationary pressures underlying inflation is stuck closer to 3%. None of that changed today. You know, we'll get an update on that next week from the cpi.
- [15:49]
Tim Stanweck
Okay, I want to just throw this last one at you even though we don't have enough time. Mike. Lisa Cook, because in the conversation about independence of the Fed since we heard from Kevin Hassett this morning, our Bloomberg news team reporting that President Trump has revived his threat to file fire Federal Reserve Governor Lisa Cook over those unproven allegations, update us here on this.
- [16:07]
Mike McKee
Well, they apparently sent Lisa Cook a letter that said the president is considering firing you because of the allegations of mortgage fraud. And you have three weeks to respond to this letter. Remember, the Supreme Court said that the president couldn't fire her, but because she didn't get due process, they didn't decide the legality of her particular case. And so now the White House is coming back and trying to follow the dictate of the court and give her the opportunity to respond. And we don't know how this will all play out because even if she's found not guilty, the president could come back and say, well, yeah, but she was implicated or something. So this is just, it's Friday, put it that way. And this is the kind of thing
- [16:49]
Carol Massar
you get on Friday for the lawyers. That's all I'm going to say. Matt Lazetti, chief US Economist at Deutsche bank, thank you so much. And of course, our own Mike McKee, Bloomberg TV and radio, international economics and policy correspondent. Do more on the labor market what
- [17:02]
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- [19:03]
Bloomberg Businessweek Daily Announcer
You're listening to the Bloomberg Business Week daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [19:17]
Carol Massar
We have been reporting us employers unexpectedly, unexpectedly cut jobs in the month of July and hiring in the prior two months was revised lower, suggesting the labor market is weaver weaker than previously thought. Man, do I need a weekend. This is after some surprising strength earlier this year. We're going to stay on the labor market. We've been trying to look at this from different vantage points and that's where our next guest comes in.
- [19:40]
Tim Stanweck
We've got Laura Ulrich with us, director of economic research in North America at Indonesia Indeed Hiring Lab. She's also a former senior regional economist and senior manager at the Federal Reserve bank of Richmond, primarily focused on research related to higher education and workforce dynamics, which, by the way, we got some great questions from our audience coming in just about this. She was also an economics professor and associate dean for undergraduate programs at Winthrop University. She joins us from North Carolina. Welcome, welcome, welcome. How would you describe today's payrolls report and how it changes your view of the labor market, if at all?
- [20:13]
Laura Ulrich
I wouldn't say it necessarily changes my view of the labor market. We at the hiring lab and indeed have been kind of describing the market as a market that is cooled, not necessarily, that is cooling. We're kind of bouncing along the bottom. And, and I see that as the same today as I really did yesterday. However, I do think it is important to acknowledge that the payroll employment report came in about 100,000 jobs below consensus today. And so that's notable, right? It was much softer than what people are expecting.
- [20:44]
Carol Massar
So I am curious too, and tell us a little bit more if you would, Laura, about the activity you are seeing on the platform. What are the job listings? What are the jobs people are looking for? Give us an idea and give us some context about data today versus maybe six months ago or just trends because you guys see a lot.
- [21:04]
Laura Ulrich
We do, we do. We have access to a lot of data both on labor supply and labor demand. I would tell you that we've been in kind of a, I wouldn't call it a steady state because there has been a bit of turbulence right We've been bouncing a bit, but we've been at about a job posting index of 102 ish between about 101 and 102 since about September of last year. So that, that's kind of what leads partially to our viewpoint in that this is kind of a cooled market that's bumping along the bottom. One interesting point though, and you did see this reflected pot in today's payroll employment report. We have seen some strength in some sectors where we were seeing considerable weakness before. So software development jobs, for example, are up 15% since early 2025. And we had seen considerable cooling in tech jobs and in the payroll employment report. Jobs in both information and professional business services were up today. So we are starting to see some of those, I would say sectors that maybe are more exposed that where we had seen a lot of softness to turn the corner of it.
- [22:17]
Carol Massar
Okay.
- [22:18]
Tim Stanweck
You know, Brendan down in Maryland sent us a question during our last segment that would be great for you to weigh in on. It's about sort of these different areas of the, of the economy and what you're seeing in terms of, of different sectors. He writes that it seems many jobs were lost in education. To what extent do you think these are permanent job losses as many municipalities, school districts have exhausted and no longer can use the massive federal funding they received during the pandemic era?
- [22:47]
Laura Ulrich
Here's a great question. I did take note of that, that data point this morning. I think that the loss of those local education government jobs, that could be a bit of an anomaly with some issues with the seasonal adjustments. I think it'll be interesting to see what the number looks like next month. I will say though much of my background is in education, as you mentioned, and there is considerable pressure both on higher ed, but also K through 12, partially because of the federal funding cuts, but also because there have just been fewer and fewer and fewer students enrolled in public schools. And so if you look at enrollment for many of those districts, it's been declining. And so there's less need for staff and teachers at some of those districts as well.
- [23:31]
Carol Massar
Hey, I want to get to. Because one of the things we talk about, Laura, when it comes to the labor market is the impact of AI. Right. We're still trying to figure all of that out. And we thought, both Tim and I, when you talked about strength in software development jobs, we kind of were surprised at that.
- [23:43]
Tim Stanweck
I thought the bots were going to do it.
- [23:45]
Laura Ulrich
Yeah.
- [23:46]
Carol Massar
So that was, that was interesting to us. You have done a new survey, the indeed hiring lab Labor Market Outlook Survey. You talked to more than 100 U.S. economists and labor market experts. Tell us about the findings and what you heard.
- [24:00]
Laura Ulrich
Absolutely. So we're really excited. This is a brand new product for us. We released it earlier this week. So we'll be doing this on a quarterly basis where we ask over 100 very well respected labor economists to predict what they think is going to happen both to unemployment rates, but also our own job postings. And indeed, along with that, we're going to be asking them some special questions. This time we had a lot of questions on AI. It was really interesting for us to see the results because from a macro point of view, there wasn't a lot of disagreement amongst economists. Many of them did see that there would be a slight decline in job postings and a slight increase in unemployment rates over the next year, but not a lot of movement. But the AI question got a much broader array of answers. I will say a little over 50% of the economists that were that were surveyed, I think it's 57% believed that AI would lead to job losses on net. About in the 30% thought it would lead to job gains on net. And then some are unsure. And I think that that wide array of responses from like I said this, this group of very well respected labor economists really shows how much uncertainty there is in what path this might go in. But I will say at indeed we're starting to see, I mentioned that, that growth in software development, those jobs where we are seeing growth do tend to be what we're calling AI touch jobs. These are jobs that either have AI in the title, so think like AI engineer or machine learning specialists, something like that. A data center technician is another one that's growing a lot. Or they mention AI as being a skill or a characteristic of the job in the job description. So those jobs are on the rise on our platform for sure. They're also on the rise in terms of what people are seeking. And so really from our vantage point right now, I would say today from my perspective, it's much easier for me to point to some growth that we're seeing from AI in the labor market to actual destruction from AI doing people's jobs.
- [26:03]
Carol Massar
But as you pointed out in the press release, you guys said when a group like this converges on something like AI, as they did. Right. In terms of the impact, it's worth paying attention when it splits. That tells us something too. In this quarter it did both. Is that, is that fair in terms of how I'm reading it?
- [26:17]
Laura Ulrich
It did we, we asked one really interesting thing was we asked the economists, exactly what sectors do you think there will be the largest decline in jobs and what sector do you think there'll be the largest increase? And there were two, two occupational sectors from our data that ended up on both lists that was software development and data and analytics. So some of the economists thought this is where we're actually going to see the most loss, and others thought this is where we're going to see the most gain. That was a surprise to me. I didn't expect to see the same sectors end up on both lists.
- [26:46]
Carol Massar
It's just, it's a reminder that we're figuring our way. People say we're early in on this. Right. And understanding really the impact. I mean, we're trying to figure this out and we don't really know, right, longer term exactly how it plays out.
- [26:59]
Laura Ulrich
I totally agree. I think one thing that we do know, and we did another survey internally at Indeed, where we asked employers if they were seeking what we defined as AI Native or AI Fluent talent. AI Native talent has nothing to do with age. You can be a Gen Xer like me and be AI native, but it basically means that you default to AI technology to help you across multiple workflows. AI fluent is. You still feel comfortable across workflows, but you don't necessarily default to it. And 45% of employers said they were actively recruiting AI native talent, but only 14% of workers in the survey considered themselves AI natives. So I think one thing we do know right now is people who do have AI related skills and talent are being hotly demanded in the labor market.
- [27:48]
Tim Stanweck
Well, let's make this a little personal because our team told us that you have a couple of kids. I guess they're not kids anymore, but they're young men entering the labor market right now. And this is at, I think, I think it's fair to say, a really interesting time to enter the labor market. You're talking about this AI fluency and being AI native. What do you tell them about the skills that, that they need to succeed in this market?
- [28:16]
Laura Ulrich
It's a great question. And yes, I have three sons, 16, 19 and 22.
- [28:20]
Tim Stanweck
I'm sorry for the third one that I did not mention. You don't know who you are.
- [28:25]
Laura Ulrich
He won't mind, but the oldest just finished graduate school in data science, which in R and D data has been one of our softest areas. You can imagine for me in the work that I do, doing the research that I do, but also living life as A mom trying to help this young adult. He has landed his first full time job, which is excellent news for our household. But it was very tough. And what I kept stressing to him was that in my opinion it's really important for young job seekers to prove to companies that they are better off, the company is better off with AI plus them than AI without them. And that's a tough road to navigate right now, but I do think it's extremely important. So I think being an AI native is very important. I have stress that to my sons and I've stressed it to myself too as someone who is older. Only 11% of Gen Xers in our survey even define themselves as AI fluid. And I've had to work hard as an older worker myself to become an AI native and to really dig into it. So I think it's something that in my view is extraordinarily important as we do go into this period that is going to be so uncertain because I believe that for my children's generation, one of the most important skills they can have is adaptability.
- [29:43]
Carol Massar
I gotta ask you about one more data point from your survey finding. We've only got about a minute or so left, but it's you guys found a larger majority. 57% of panelists said they expect downward pressure on the wages of college educated workers over the next year versus 34% who said the same for workers without a degree. Forgive me, but just about 40 seconds. Why do you think that is?
- [30:05]
Laura Ulrich
Yeah, I think that the sectors that are most likely to be impacted, especially in the short run are many white collar sectors that college educated people flow into. I'll say too, we've done some work at Indeed looking at how that collides with the demographic shifts that you guys were talking about before. And what we've kind of predicted through this is that we might have an excess of workers moving into these white collar roles with a combination of demographic shifts and AI. And so if that happens and supply exceeds demand, seeing downward pressure on wages would be be pretty, pretty rational to expect.
- [30:41]
Carol Massar
All right, great stuff. Please, please come back and join us again. We would love to have you.
- [30:46]
Jacob Goldstein
Thanks for having me.
- [30:47]
Carol Massar
Have a good weekend. Laura Ulrich is Director of Economic Research in North America at Indeed Hiring Lab.
- [30:52]
Tim Stanweck
Stay with us. More from Bloomberg businessweek Daily. Coming up after this,
- [31:00]
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- [33:31]
Bloomberg Businessweek Daily Announcer
you're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [33:45]
Carol Massar
This story definitely caught our attention. Tim says set it up so well. It's about one sports fan and what he's paying to watch all of the streaming channels and sports that he loves on streaming channels and it turns out to be more than $2,000 a year.
- [33:59]
Tim Stanweck
He's got to share some passwords.
- [34:00]
Carol Massar
Yeah, like what is he doing? We know what goes on at the Stanweck household.
- [34:05]
Tim Stanweck
Okay, why so much as our team reports out, the rise of streaming services has made it difficult for us sports fans to follow their favorite teams without special subscriptions. With pro league, signing deals with multiple services and creating a bewildering schedule and some steep costs, we've got Randall Williams, Bloomberg News senior reporter and the co host of the Bloomberg Business of Sports podcast. That podcast is available@bloomberg.com Apple, Spotify, or wherever you get your podcast.
- [34:29]
Carol Massar
Also means it's the weekend because it's dropped. Hey, good to have you here. Lots of talk.
- [34:33]
Jacob Goldstein
Thank you for having me.
- [34:34]
Carol Massar
Well, it's great to have you. We're going to get into the streaming costs. I feel like we have to go to FIFA, though.
- [34:38]
Matt Luzzetti
Like, okay, start there.
- [34:40]
Bloomberg Businessweek Daily Announcer
Right.
- [34:40]
Carol Massar
Because last week we talked about. And it looked like they were trying to get outside investors. And that's done, right?
- [34:46]
Jacob Goldstein
It's dead.
- [34:46]
Tim Stanweck
They died after we talked to you?
- [34:48]
Jacob Goldstein
No, shortly. Shortly after. It died. And I think I ended up reporting on it, like, maybe three hours after, which is nuts. The thing that is going to. That remains to be seen is if Gianni Infantino, the FIFA president, is going to win his reelection next year. He was, I would say, reaffirmed as president this week in Morocco, where I believe the fight, he said the final is probably going to be played there. But UEFA has not. They have not said anything different. They still are not supporting him.
- [35:15]
Tim Stanweck
Many, many people who are just sort of joining the conversation right now about FIFA and post World cup might not understand. I certainly don't paint the picture. The tension between UEFA and, and FIFA was. Was this just the, you know, straw that broke the camel's back, or have there been tensions for a while?
- [35:36]
Jacob Goldstein
There have been tensions for a while. I think that when Gianni Infantino, of course, is looking at FIFA as a business, as most executives do, but there's also a pure, a purist mentality in all sports, in golf and tennis and football and basketball and everything else. And so you think about the innovations that Gianni Infantino, that's what he would call it and say, like, such as hydration breaks, commercial breaks that are used to sell ads. That's not typical in football. UEFA is very strongly opposed to that. And he's even said in the Euros that they won't be doing it. But that is something that if UEFA was trying to maximize TV dollars that they could sell. But they're talking about the purity of the game of soccer, and they're saying, no, absolutely not. So then you, you, you know, relay that into what's happened recently. FIFA made $15 billion from the world cup. And then after that, they're going to be like, you know, we're going to sell stakes, we're going to do this with Thrive Capital's Joshua Kushner. And UEFA is like, listen, no, we've had enough of you and we're going to be trying to probably get rid of you come next year.
- [36:35]
Bloomberg Businessweek Daily Announcer
Yeah.
- [36:36]
Tim Stanweck
Do they have the power to do that?
- [36:38]
Jacob Goldstein
I think it's going to take some rallying and they need, they need. There has to be another potential candidate. I have not seen any reports that someone has been trying to rally against him. It's just that they do not support him. I also don't anticipate that gianni Infantino in four months is going to be able to change UEFA's mind. So who can UEFA find to really go up against Johnny Infantino? And the reality is Infantino, as much as he has done with the Trump administration and for the World cup, it's hard to argue that he hasn't done a good job. You make $15 billion, the most ever. It's gonna be hard to get rid of anybody who's just made record setting profit.
- [37:15]
Carol Massar
And won't there always be that tension between FIFA and kind of the regionals?
- [37:18]
Jacob Goldstein
Of course, because FIFA owns the World cup, which is the. It's over the entire world. Whereas you have your concacaf, you have your soccer federation in South America, you have UEFA, and each of them have their own tournaments. You have the Euro, you have Copa America. But the World cup is when everybody competes, so there's always going to be some tension there.
- [37:39]
Carol Massar
They got to be a little jealous that this went so well. Just a little bit. So listen, there was a story on the Bloomberg to the next World cup and the money deals, Randall FIFA exploring selling US media rights for the next two World Cups together, which would keep the hydration breaks that boosted it, right?
- [37:54]
Jacob Goldstein
Yes.
- [37:54]
Carol Massar
They're not going away, are they?
- [37:56]
Jacob Goldstein
I don't think so. I mean, once, once you get a chase of Advertiser Money in 30 seconds and all, and you got to think about this is exclusivity at the super bowl and at other events. Those 30 second ads sell for $8 million a piece, but they never really rerun. And when you're watching the World cup, you see the same ads over and over and over and over again.
- [38:15]
Tim Stanweck
Well, yeah, my son's like talking to me about bank of America, Home Depot and like he's 7 years old and never watches other commercials and he knows those. And by the way, David Beckham's in
- [38:23]
Jacob Goldstein
all of these, of course.
- [38:24]
Tim Stanweck
So this is great news for David Beckham.
- [38:26]
Jacob Goldstein
I guess it's great news for all of FIFA's partners is because it really is one of the most exclusive, you know, advertisements that you can possibly have because it's going to run in every single match across various continents and in regions. So they are going to take this to market. They're probably going to shop around to whoever's willing to pay the most. But of course you want the reach angle of this.
- [38:47]
Tim Stanweck
There's not one inch of that screen that is not taken up by an ad even when the game is going.
- [38:51]
Jacob Goldstein
Absolutely not. Everything is an ad in there. So much so, so much so that even the stadiums, think about the stadiums. We're not calling MetLife Stadium, MetLife, we're calling in New York, New Jersey stadium.
- [39:01]
Carol Massar
That blew my mind. How the heck did they get that done?
- [39:04]
Jacob Goldstein
I mean, they obviously have an insurance partner and, you know, SoFi Stadium became Los Angeles State and so on and so forth. I just could not believe that they're willing to go that far to protect sponsors. But if sponsors are paying a premium and that's what they're asking.
- [39:18]
Tim Stanweck
So that's why they did it. I think it's part of it because those, those. But the naming rights that, you know, you get naming rights for a stadium protection, you expect that, that those that name to be used when the stadium is mentioned, it's twofold.
- [39:33]
Jacob Goldstein
The stadiums and their owners were willing, they wanted the World cup and they wanted those matches and that revenue that came from FIFA. And so they were willing to cover up the names. At the same time, FIFA is like, we don't want anybody profiting off the World cup except for us and our partners. And so even if it's Mercedes Benz Stadium in Atlanta, you know, Hard Rock Stadium in Miami, there were banners that were hung up that said New York New Jersey stadium. And it's like, it's hard for me to say New York, New Jersey stadium when the stadium is in New Jersey.
- [40:03]
Carol Massar
We saw it, we were like, is that a mistake?
- [40:05]
Jacob Goldstein
Like it came down to the fact in our backyard the host committee is called New York, New Jersey host committee in the. So that's why the stadium was named that. But nonetheless, it is a bit far fetched. I'm like, that's too far.
- [40:20]
Carol Massar
But anyways, we mentioned streaming costs coming into this media rights. What were they for the past World Cup? What might they be for the future World Cup?
- [40:26]
Jacob Goldstein
Believe the media rights were around 485 million around that half a million dollar. Half a billion dollar mark. I believe they will probably go for double that. I mean this is, this was probably one of the most successful World Cups.
- [40:38]
Carol Massar
So if they sell them for two, you're talking about a $2 billion deal.
- [40:41]
Jacob Goldstein
I'm saying at minimum a billion. I, I could see $2 billion. But that depends on who shows up
- [40:47]
Tim Stanweck
for who shows up and was that's U.S. meteorites.
- [40:49]
Jacob Goldstein
Yes.
- [40:49]
Tim Stanweck
But the challenge with that is going to be the time zone for the next time zone.
- [40:54]
Jacob Goldstein
Yeah, it's, it's five hours, six hours ahead. I believe in Spain, Portugal and Morocco that I think it's doable. They have to figure out the schedule and when the players are going to be playing. We're not going to see. I would be shocked. Unless the US somehow ends up in the final in 2030. I would be shocked that if the number surpasses what it was this year, which was, I believe, 64 million viewers, which is probably the most watched soccer ever here in the US I think you're gonna go. I probably will.
- [41:23]
Davide Barbuccia
Yeah.
- [41:23]
Jacob Goldstein
Bloomberg grants me permission.
- [41:26]
Tim Stanweck
Four years to make.
- [41:27]
Carol Massar
Are you listening anybody? Brenda Williams, Bloomberg News senior reporter, co host of the Bloomberg I Business of Sports podcast. Check it out.
- [41:35]
Tim Stanweck
Stay with us. More from Bloomberg Business Week Daily. Coming up after this
- [41:43]
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- [42:14]
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- [43:19]
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- [44:15]
Bloomberg Businessweek Daily Announcer
you're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [44:28]
Tim Stanweck
We are trying to figure out what's going on with AI debt so far this year. Amazon Alphabet, Nvidia, Metta, Oracle and SpaceX. Check this out. I know it's Together they've raised more than $200 billion from dollar bond sales. That dwarfs the 13 billion from high grade tech companies in the same period last year.
- [44:44]
Carol Massar
Think about the Alphabet offering yesterday. Ten tranches over. You know, so much investor interest and they're not done. That's at least all the analysis that we've been seeing. But there's a little bit of a chill.
- [44:57]
Tim Stanweck
I don't get it.
- [44:58]
Carol Massar
I don't know. It's a chill Engulfing linked debt. As tech borrowing surges, buyers have grown wary that massive AI spending will not pay off.
- [45:07]
Tim Stanweck
We've got Davide Barbuccia with us, Bloomberg News corporate finance reporter. He joins us here in the Bloomberg Interactive Brokers studio. Can you just, can you just settle for us the the distinction between what Carol mentioned that Thursday offering from Alphabet attracting roughly $115 billion of peak demand. That's according to people with knowledge.
- [45:25]
Carol Massar
And they raised only 25.
- [45:27]
Tim Stanweck
Yes, you were on this byline, by the way. So you know about this then? Today you have this story out that talks about the chill that's engulfing as we talked about this on our editorial call this morning, each of these companies is different and has different offerings. What did you find?
- [45:40]
Davide Barbuccia
So it's kind of interesting. So the, the Google deal comes after a string of. Well, there were three deals between June and July essentially where we had SpaceX, we had Nvidia, we had Amazon raising 25 billion each. And these deals did not do particularly well in the secondary market, which you know, traders and investors care very much about. Because if, if a bond doesn't do well in secondary market, then it becomes sort of difficult to pull sales off going forward.
- [46:12]
Carol Massar
Well, explain that.
- [46:13]
PayPal Advertiser
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- [46:13]
Carol Massar
It's important to see like kind of the movement.
- [46:15]
PayPal Advertiser
Right.
- [46:16]
Carol Massar
Of these investments. No, explain that. That's what I'm saying.
- [46:19]
Matt Luzzetti
Yeah.
- [46:19]
Davide Barbuccia
Well, essentially if a, when a bond is issued, there is a primary market where it gets absorbed and there are books or orders for that, for that bond sale and then the bonds just start changing ants in the secondary market and if it loses value, then the narrative around the asset in question, you know, becomes problematic. Right.
- [46:39]
Carol Massar
And harder for that entity. Right. To come back and do another issue.
- [46:42]
Davide Barbuccia
Exactly, exactly.
- [46:43]
Tim Stanweck
Okay, so enter the banks and sort of the narrative or like the narrative that's emerging around the attempt to sort of rekindle demand for at least part of this debt.
- [46:53]
Davide Barbuccia
So what happened after these three deals? There was a different deal by BlackRock, it was for a data center, so it was by BlackRock, but not just a corporate deal. It was still AI essentially. And with this deal, which was smaller in size, about half of those 12 and a half billion. Well, the banks on the deal essentially kept the orders limited to so called buy and hold investors. So institutional investors that are, let's say strategically invested in these assets or like these assets don't plan to essentially make a quick profit by selling these assets the moment that they start trading wasn't
- [47:32]
Carol Massar
like relying on the secondary market.
- [47:34]
Laura Ulrich
Right.
- [47:34]
Davide Barbuccia
Well, the idea of this was essentially to make sure that it wouldn't be like an offloading in the secondary market immediately. And so what happens is that they created what in sort of banker lingo is called the scarcity value. So the bonds were not easy, easily available and that made them more valuable.
- [47:51]
Carol Massar
As somebody who watches this market, are they creating an environment? And so it's not reflecting the real trade and demand that's out there. Like it's kind of, I don't want to say covering it up. Right. You're allowed to do this. There's nothing illegal, but I mean, speaks to the difficulty with some of these issues.
- [48:12]
Davide Barbuccia
Definitely. It definitely does. The fact that, I mean everyone knows that there's going to be, there has been already a ton of debt issuance to finance the Build out, there's going to be even more. So there's no doubt that the market is aware of that. There are still questions as to the pace and the cadence, like the frequency of these bonds. And so those three deals, one after the other, as I said, between the end of June and July kind of spooked the market a little bit. And so there was an, there was a need in the market for a deal that did well essentially. And, and so the Black deal happened and then after that we saw the Google deal yesterday which did particularly well.
- [48:51]
Tim Stanweck
Where do I mean, should we think about this from a yields perspective too on what these investors are being paid for taking on this risk? Like how does it vary from one company to another?
- [49:03]
Davide Barbuccia
Well, that's the thing. So yes, there was an order book or you know, the, let's say the quality of investors participated in the BlackRock deal was as I said, more buy and hold. But let's not forget that you know, the, what these bonds were offering in terms of yields was particularly high. So we're looking at like in the case of blackrock, it was like seven and a half percent which is shabby, right? Yeah, which makes it closer to a high yield credit rather than an investment grade, you know, blue chip type of credit.
- [49:32]
Carol Massar
What did Alphabet offer?
- [49:35]
Davide Barbuccia
I don't remember but it was like something like, if I'm not mistaken, 15 basis points above their existing curve. So that, that is a premium that makes the new bonds essentially attractive.
- [49:47]
Carol Massar
Davide, is it important to like what BlackRock did? This was a data center deal. So was this real estate? Was this like what versus what we're getting from Alphabet or you know, or what SpaceX or Amazon was doing. I mean like where do we think about, okay, these buckets are similar versus this. I'm trying to figure out too what this means in terms of the AI spend and trade and how investors are getting much more discriminatory.
- [50:18]
Davide Barbuccia
Yeah, it's, I mean data center debt, particularly in the investment grade market is a, is a new thing essentially. It started I think this year actually and it's essentially project bonds. So it's bonds to finance the actual project as opposed to for instance a corporate, straightforward corporate deal, senior unsecured bonds issued by a company where the use of proceeds can include for instance investment but it can also be a refinancing of debt or any other thing. In this case it's essentially project bonds where in the case for BlackRock, for instance, it was BlackRock Funds taking an ownership stake in the project company that is going to develop this data center meta at the other part of the ownership. And then the BlackRock funds raised the financing to essentially back their stake in the project.
- [51:10]
Tim Stanweck
We're speaking with Davide Barbusha, Bloomberg News corporate finance reporter joins us here in the Bloomberg Interactive Broker studio. Here we are. Oh, you want to, to say something?
- [51:17]
Bloomberg Businessweek Daily Announcer
I just want to.
- [51:18]
Carol Massar
Do you think it's interesting that Meta was part of this because people are questioning the meta strategy.
- [51:23]
Davide Barbuccia
Well, this is, let's just put this way, this is not the first data center of matter. They actually sort of inaugurated the, the data center trend with a very large transaction late last year. It was like this, the Hyperion data center in Louisiana Blue Hour, which was much larger than this one. So it's not the first time.
- [51:46]
Kevin Hassett
Okay.
- [51:46]
Tim Stanweck
So I was going to say here we are going into, we're done seven months of the year. So we a little over halfway done with this year. And so far already we've, We've seen what, 200 billion, more than $200 billion in bond sales. What do your sources tell you about what the rest of the year is going to look like?
- [52:04]
Davide Barbuccia
So like, as I said, everyone knows there's going to be a ton of that coming up.
- [52:07]
Tim Stanweck
Forecast Keep changing like 200 billion more, 150 billion more.
- [52:12]
Davide Barbuccia
There is a Barclays estimate which puts total hyperscaler that so large tech companies at 280 billion for the total of this year. So we're looking potentially at another $880 billion. But if you look at the whole space like so, including data centers, including the, you know, the broader tech sector, there are estimates, I think fresh JPMorganizers that put it at about $500 billion.
- [52:38]
Kevin Hassett
Yeah.
- [52:39]
Carol Massar
So what do you watch in terms of, you know, the big question that's out here, Davide? Like we're just trying to figure out again, going back to, you know, for here we are three years in. Right. Getting ready to I think enter our fourth year. When it comes to the spend and build and just trying to figure out when is it overdone. And I'm just curious the things that you watch or what you hear when you are reporting porting this stuff out, what are you hearing from folks in the industry?
- [53:03]
Davide Barbuccia
I mean, there is a, there is a concern obviously around that it's mainly driven by the pace of issuance and the pace of the financing. There is a concern of, you know, capacity overbuild. There is a concern that the technology may become obsolete. Obsolete relatively soon. Yeah. So that's another. Yeah.
- [53:27]
Tim Stanweck
What are we gonna do? Let's say this is not to be answered right now, but let's say that happens. What do we do with all these data centers? And I know turn them off, leave them there.
- [53:35]
Carol Massar
This is why, you know, you think about just other rushes, the energy market or two and the overbuild and to drill, drill, drill. You know, they have seen their cycles where booms and busts, booms and busts in a big way. And anybody in the industry is just very cautious. And I feel like is there are people being cautious?
- [53:54]
Davide Barbuccia
Well, I mean it does, it does have feelings like it, it does remind people of previous, you know, technology driven.
- [54:02]
Carol Massar
Right.
- [54:03]
Davide Barbuccia
Boom and bust cycles. But we'll see. Like we've, we've seen the tech earnings recently was, were relatively well, were positive. So they were positive also for this Google bond, for instance.
- [54:11]
Tim Stanweck
So okay, this just got me thinking and Carol, we've talked about this before but you know, if we think about this from the perspective of the LLM that people use just to chat the chatbots, you know, I woke up yesterday morning and asked Claude a question but it was like you need to upgrade in order to ask this question. So I just went to open AI and chat GPT and asked the same question there. And when I run out of space there, I just use, you know, the Google one.
- [54:34]
Carol Massar
You have no loyalty to anything.
- [54:35]
Tim Stanweck
No loyalty.
- [54:36]
Carol Massar
I know. And this is where like, like this is what we're trying to figure out or where we think about companies and the spend are saying wait, you don't really need to use this expensive tool to do what you are. Like there's going to be a point where people are not maybe necessarily offering it to everybody. Right. Employees. Like we're trying to figure this out.
- [54:55]
Davide Barbuccia
Yeah, we'll see.
- [54:56]
Carol Massar
Sorry we're doing this.
- [54:58]
Davide Barbuccia
I understand but like the, the, the scale of the finances suggest that there's a lot of demand. Yes, that's, that's what, like they wouldn't
- [55:04]
Carol Massar
do it unless they thought. Which is what we talk about with Mandeep Singh from Bloomberg Intelligence. There's the demand, there's the backlog, the customers. The customers, Right. So there's the sales and the revenue. You just wonder can it all come to a quick start, stop at some point? I don't know. That's the big question.
- [55:20]
Tim Stanweck
Davide, this is a great story. Thank you for stopping by the Bloomberg Interactive broker studio. Davide, Bart Boucha, he's corporate finance reporter for Bloomberg News. You can check out his reporting and the entire team's reporting on the Bloomberg terminal and@Bloomberg.com this is the Bloomberg Bloomberg
- [55:35]
Bloomberg Businessweek Daily Announcer
Businessweek Daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.
- [56:05]
Carol Massar
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Vital Proteins Advertiser
Aging is real, and so are the benefits of new vital proteins. Collagen, sparkling water. Because around the age of 30, your body needs backup to keep your collagen up. So get your daily glow up now in three fresh flavors. Strawberry blossom, lemon, lime and blood orange. Improved skin health in as little as 30 days thanks to collagen peptides. Cheers to that. So you can stay vital. Stay you. Visit vitalproteins.com to learn more and where to buy. These statements have not evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.