I'm Carol Massar. This is Stacey Vanek Smith, in for Tim this week.
You guys go where we go. How much do you, in fact, much as it is every day?
Yes, we do. Oftentimes, markets get discussed as if they are a different universe, but I love watching your show come up, so I'm very thrilled to be here.
Our next guest will be on a little bit later in one of our later hours. In the meantime, Guesstimate is there if they come October 8, 2026.
Very good afternoon, everybody, across Bloomberg platforms, New York City. Stocks pulled back a little bit. We got the rally in oil prices again. Higher oil prices may mean higher inflation, and that means the Fed will have to raise rates again.
Yeah. It seems like there's quite a fragility on any given day when small things change and stocks and bonds go nuts, but it really feels like there's a lot of tension in the markets. Everyone is watching so closely.
Yeah. And sometimes sensitive, and sometimes they load off, so it is interesting.
We will have Dr. Ellen Wald. We will talk energy markets, tech in just a moment. Stepped out of the White House, Wall Street, there is so much stuff. There is so much more we can do.
Absolutely. She knows so much about the Federal Reserve, how the Federal Reserve's actions connect to our lives. She's a delight.
Coming from Mike's conversation, a K-shaped economy, we will talk about that. And then who knew, flag football apparently having a comeback. We'll get into that.
First up, we want to talk a little bit about what is going on when it comes to this tech scene.
We know President Trump has been calling it the new golden age. Summit in Washington, getting details, we are monitoring that, I should say. Let's get to our Michael Shepard to see what he is hearing, and he's in the Bloomberg News Washington bureau.
Mike, good to have you here with Stacey and me. We understand Elon Musk is supposed to be there, Jensen Huang of Nvidia. What do we know at this point?
Well, President Trump is at the Institute of Peace right now, delivering remarks, and he is trying to once again put his stance on tech and science here in the U.S. If you were thinking, wait, didn't we just have a Golden Age of America event here in Washington? Yes, we did. It was just last week at the Mellon Auditorium, where they talked a little bit more about artificial intelligence in particular. This event today is focused a bit more on science and research, but we are seeing some of the same usual suspects come, as you just mentioned, Carol, come at this event. Jensen Huang will be there, Elon Musk, Lisa Su, and they will be getting science medals from the president for their contributions in these roles leading these companies, which are really at the cutting edge when it comes to science and technology here in the U.S. And the companies are also kicking in some contributions of computing power to federal government initiatives. I think a total of about $2.4 billion in commitments altogether.
We are also seeing the president announcing some other initiatives aimed at boosting research here in the U.S. So this is kind of a daylong event. Trump is not the only featured guest and speaker, but he certainly is the highlight.
These are a lot of the same people we saw at the president's inauguration. I wonder if this ceremony serves the same purpose, or if you see a big difference?
Well, this is not only like the inauguration, but like a lot of other events in Washington where Trump has summoned the titans of Silicon Valley to really surround him and be with him. He likes having that entourage of business leaders and to really give a seal of approval to what his economic policies are doing. And they are intertwined, of course, with the technology industry.
They have made an all-in bet in the administration on artificial intelligence as a driver of job growth, investments here in the U.S. So having that association with the Silicon Valley elite is very important to Donald Trump, and we also saw him bring a lot of the same figures together for lunch just last week at the White House, where they talked about AI and the ICC.
Having said that, just before we go, Mike, we will talk about it later on in the 3:00 hour, but the U.S. suspending a visa program for tech firms, and that includes Microsoft, which I think has had some time in the White House as well. So, big deal? It is not the first time it has been targeted.
Well, this program has been under scrutiny, and this is an initiative that allows companies with workers on H-1B visas to start moving them toward permanent residency status. It allows them to sponsor them for it. But it has been targeted by the administration as something that is rife with abuses, and it also doesn't favor American workers, if you hear Vice President JD Vance in his response earlier today.
It does create a bit of an awkward moment, Carol, because guess who was at this Golden Age event today? Satya Nadella, who was set to receive a medal from the president.
Awkward! "Here's a medal, commended by the way, while we are at it." We are living in extreme times. Mike, thank you. A lot for you guys going on to keep on top of. Michael Shepard, he is the senior editor for technology and strategic industries for Bloomberg.
We could talk energy markets, don't you think?
Yeah. That's the big story today for sure.
WTI going above $90 a barrel, so this is happening as fresh tanker strikes by Iranian-backed Houthis in the Middle East come, adding to worries of rising inflation around the world. Interesting moves by Saudi Arabia.
Let's get to it. Dr. Ellen Wald, I say it a lot, but it is true, she's a go-to for us on global energy markets, senior fellow at the Atlantic Council, author of "Saudi Inc.," back with us, joining us on this Thursday.
Ellen, prices are up again. Prices have surged, as you know, as global refinery capacity remains troubled by the war in Iran, Ukrainian strikes on Russian refineries. There are things going on, storms going on. Is this going to continue, the volatility? Are we going to see spikes, then pullbacks, then spikes? Is it just going to keep continuing?
I think right now we are in the pattern of spikes and then some pullback. It really depends on what is going on.
We saw a spike when the Saudi petrol refinery was hit and offline for a little bit. This spike is really indicative of, you know, there's a big hurricane coming right now. It looks like it will hit the Florida Panhandle.
But a lot of production in the Gulf had to be shut down because this weather event has been a test. While this is a temporary shutdown, we are looking at a loss of nearly at least half a million barrels a day of production.
Not to mention significant and important refineries that are close by. It looks like the storm is not going to actually hit the refining center in Louisiana and Alabama, but still, this is a significant issue when it is such a tight situation. Remember, when this conflict with Iran started, we were at a point where oil stocks were high.
SPRs were filled to the brim. We now do not have that cushion. The baseline price for oil is now higher, and therefore every current event that potentially threatens the supply or does threaten supply, even temporarily, is going to cause these price hikes to levels that are pretty serious, at least in terms of the global economy.
Do you see any path toward oil prices actually coming down at this point, or are we pretty much locked into high oil prices for the end of the year? A lot of companies seem to be pricing this in as if it is already a foregone conclusion.
So I do think we are definitely locked into a higher level. When we are talking about oil prices versus like $60 a barrel, we are not really talking $40 a barrel here, but, you know, I think we are kind of in this range. Are we going to see a spike, you know, well above $100? It is actually a possibility.
But I do think we're in a range now for a significant amount of time, that even if you do see flows becoming normalized, I know there's a lot of talk that we are seeing more flow of oil coming out of the Strait of Hormuz, and somehow this could be, you know, synonymous with normalization. That is not the case. It is still very dangerous and costly to get oil out of the Middle East, out of the Persian Gulf. Just because you hit a particular number for a certain, you know, time does not mean things are normalized.
You've also exhausted commercial stocks and SPRs, so for a while after, we are going to see higher demand as particularly the strategic reserves need to be refilled.
One thing I want to ask you, Ellen, Saudi Arabia in talks with customers to offer oil loading next year outside the Strait of Hormuz and long-term contracts. So they are formulating a system that the kingdom has been using during the war with Iran, as it pushes for greater market share. I'm just wondering, are they slowly but surely figuring out a way to get completely around the Strait of Hormuz?
Does that mean longer term, Iran loses that incredible weapon of kind of bringing the world to its knees, because everyone is figuring out other alternate routes? Is that even real?
So, I don't think we are necessarily talking about a pipeline that is going to open. I think what they are seeing is that during the time period where the East-West pipeline was down, they did a lot more loading from their Persian Gulf ports, and they were successful at getting oil out to their customers.
Typically, Asian buyers of Saudi oil load in the Persian Gulf and then they meet. A lot of these tankers are unwilling to take the risks to go into the Persian Gulf. The insurance costs are very high. The risks of a very large tanker getting hit are much higher, and the risks are much greater. So essentially what Aramco is saying is we will work out a way to get this oil to you, either using our own ships or through this very successful kind of shuttle service that is running, where smaller ships filled with oil, and then they go dark, undercover, with U.S. naval support, out of the Strait of Hormuz, out of the Persian Gulf, and then transfer that oil to larger ships that are waiting.
Essentially what Aramco is saying is, yeah, this is a very risky thing we did not necessarily want to do a lot of, but, you know, we think we can pull this off, we can promise some kind of, you know, reliability to our customers this way. And that is why they are talking about this.
It also sends a signal that Aramco does not necessarily think this conflict will end, you know, in the next couple of months. They are looking at this now as a long-term issue that they need to simply develop more sustainable workarounds to.
I thought about that too, when President Trump came out and said the U.S. is not going to attack Iran before the midterms. It does not sound like a pause, like we might still attack, but we will put that on hold until we get past this election. Anyway. I'm wondering, is this very significant?
Or is it just that things are so intense that anything will spark a lot of volatility?
Yeah. I think it sparks a lot of the volatility. I think the markets have also learned to take everything Trump says like this with a grain of salt. So he could change his mind next week.
All right, you were really quick. I did not expect that. What do you think that caught our attention? Saudi tycoons, a bunch of them are building a $9 billion fortune off water instead of oil. Are we still in... back, we know the Middle East understands that fossil fuels, they are limited, folks, and we are going to have to figure things out. Is that still true, Ellen?
I think it is more that they understand, yes, fossil fuels are very important, but water is an extraordinarily important resource, particularly in that region. And if you can create fresh water, if you can bring fresh water, then you can make money, because they need that for everything, too.
Just ask Iran, right? That has certainly come up. Ellen, thank you so much. Dr. Ellen Wald, senior fellow at the Atlantic Council.
Coming up next, we will check in with friend of the family, Bloomberg Opinion columnist, anything you want to ask her, Claudia Sahm.
It is 2:21 on Wall Street. We do check markets all day long here at Bloomberg. Looking at losses for the U.S. equity market, oil pushing higher, a selloff in chipmakers sending stocks lower. A news report on OpenAI's revenue intensifies worries that the AI spending spree is becoming harder to justify. The S&P currently down 44, a drop of 0.6%. Dow Industrials lower by 69, a drop of 0.1%. The Nasdaq Composite, a drop of 1.3%. The Philadelphia Stock Exchange Semiconductor Index down 3%. 10-year, 5.23%. The 30-year, 5.61%.
Spot gold, meanwhile, up 0.3%, $4,124 the ounce. West Texas Intermediate crude back above $92 a barrel. A barrel of Brent began the day about $104, currently trading at $104.56.
Goldman Sachs said to hand out a bonus, the biggest the firm has ever awarded. About 20 executives are in line for equity awards that will be finalized later this month and exceed $500 million at the current share price. CEO David Solomon is in line for the biggest cut, raking in more than $100 million of that bonus pool. Goldman Sachs trading lower today, down by 1%.
Recapping, S&P down 0.6%, WTI up 4.1%, $91.87 a barrel. I'm Charlie Pellett. Carol Massar and Stacey Vanek Smith, that is a Bloomberg Business Flash.
Thank you so much. Claudia Sahm, no doubt about it, she is a go-to every time there's jobs data and certainly when there's a monthly jobs report. She's got the Sahm Rule, we follow it, indication of a recession. It is super important. She has got an incredible background.
Oh, yeah. A very human side of the Fed, even though her career is in the Fed, from a very human side of the Fed, unemployment, the things that impact us.
This is why we want to do a deep dive with her, because we talk a lot here at Bloomberg Businessweek Daily about the K-shaped economy. She is the founder of Sahm Consulting, regular Bloomberg contributor, section chief at the Federal Reserve, she also worked for 10 years on the Economic Forecast Group. She was a senior economist at the Council of Economic Advisers.
Thank you, thank you, thank you. I'm honored. I listen to you when you are on Surveillance. I love what you say about the labor market. We really want to dig into so much more.
What is your read right now on the U.S. labor market? We are just coming off a monthly jobs report. We got weekly jobless claims today. What do we need to know today?
I think it's great when people talk about the labor market, they point to stability, to balance. I think that is the right way to talk about the labor market, big picture, but I am so struck by the real differences in the labor market, and some of them are really unusual. This low-hire, low-fire economy is going strong, right? Two, three years of this, where, again, we saw jobless claims were under 200,000 last week. That is very low.
And the average of payroll the last three months, 50,000. That is low hire. And it is not normal, especially with the economy expanding. We would normally have a lot more hiring right now, given all the consumer spending growth, all the investment growth. So I find it puzzling. And I think Powell put it really well when he called it a "curious kind of balance," curious in the sense that it should raise a lot of questions, and we should keep a really close eye on this.
And really, you know, I was speaking to a group of college students in Duluth, Minnesota, and my heart goes out to those people getting ready to start their careers with the hiring rates so low. I worry for them, but I also worry about where we are 5, 10 years from now, if we don't have students coming out and getting into their careers right off the bat. I think we could pay for this stability over the long run, even though we are in a pretty good place right now.
I've been curious, George always got into trouble, so that makes me a little nervous. One thing I do want to ask, and our team is preparing, thinking about what we want to talk about with you, because we talk so much about the K-shaped economy. What is happening with real wages?
Folks are like, market is high, record economy, doing well, corporate earnings doing well. I don't know what the problem is, wealth is growing. And yet I know from conversations in the newsroom, a lot of folks are struggling, even folks you think would be OK. So, on wages, what do we need to know, and what do you find interesting when it comes to wages?
Yeah. So, real wages are one I think it's hard for people to grapple with, and for good reason. Most people, their jobs, if they get a wage increase, it is maybe once a year, sometimes when they take a new job, they will get a bump in their wages. That wage path is pretty set. Prices can go up at any point in time, right? Gasoline went up a lot earlier this year out of nowhere. It's not like bosses showed up and said, "Come on, we're going to raise your wages to match this," right? That's not how the system works. It's one thing where it can take time to adjust.
We see in this labor market that is kind of in balance. Workers do not have the upper hand in this labor market, not like, you know, coming out of the pandemic when there were labor shortages.
We see both wage growth has moderated, different measures showing it slowing, some kind of stabilizing, but it really has not been heating up. The thing I like to look for to see who has got the upper hand in the labor market is the quit rate, the people who voluntarily leave a job, it is typically for another, better job, and the quit rate is low right now, too. The workers do not have the upper hand, and the way the upper hand works is you can get a better paycheck. So that is just not what we are seeing overall.
So, you know, but it has really been this year on affordability, it has been more of the inflation picks back up, like, that has really been the pressure point, and people have not been able to adjust by getting bigger paychecks.
What about AI? What kind of a role do we see that playing in the labor market? You mentioned a weird moment, a lot of companies are investing a ton of money into AI, and people are blaming that for the low hire. How important a factor do you see that in the low-hire, low-fire situation?
So, in terms of AI, we are very much at the front end of it affecting the labor market. I mean, we get, you know, no numbers on revenues of the frontier labs. It is just showing that usage is moving a lot slower than the technology, right? Usage is not widespread across businesses. If they don't have it figured out how to, you know, make this, like, create efficiencies, well, then it is definitely harder to lay off workers.
I think it probably is affecting hiring on some margins, you know, there's a whole range of studies, it's a real mixed bag. But I think entry-level workers are under pressure, particularly in areas where the AI technology really fits into the kind of tasks they would be doing. But even there, there are some cases of businesses right now trying to figure out AI, so hiring people out of college to make it work, and then the jobs will go away.
But I think we are at the place where it is not an aggregate, but I do think this low-hire rate, there has to be a piece of it that goes to uncertainty that businesses have. Even if they have demand growth, services and goods, that could be because politics and geopolitics are confusing. It could also be because we have this new technology, and maybe we're not going to need as many workers, and most businesses don't want to bring people on board, train them, and then be like, actually we don't need you, and let them go.
So there probably is a piece of it, but I think AI probably fits more in the general uncertainty as opposed to AI has taught businesses how to automate away workers. I don't think that's what's happening, at least not yet.
Brace yourself, I'm going to ask about the bond market. Carol brought up affordability. I think that's just one of the huge issues we've seen over the last couple of years, especially with oil prices rising. You're talking about the strange hiring environment and AI. The other thing we've been hearing about all year is interest rates, the bond market, these kind of big, cerebral concepts and huge markets that don't feel very personal. How is that impacting consumers?
As with the labor market, it comes down to who are you? What's your situation? I do think that these higher interest rates, and we've seen a rise this year, but frankly, interest rates have been rising since we came out of the pandemic. Some of that is getting back to more normal. Really low interest rates are not a good time for an economy. So I don't think the level of interest rates that we have right now is a crushing level. The increase over the past year has been pretty swift.
So in terms of people adjusting, people who are borrowing, maybe they're using their credit cards to kind of make it all work, you know, carrying some debt that way. They are affected by higher interest rates. People who were on the fence about, maybe it's time to buy a home, like, this has been a tough piece.
So I think one where, if you're borrowing, this really does, you know, hit into spending. When Fed Chair Kevin Warsh is like, oh, raising interest rates, this is going to be a low cost, it may be low cost for the economy as a whole, but it is definitely a cost for people who are trying to make it work by doing some borrowing, and they're the ones whose demand is going to get pulled back and hopefully contain inflation.
Higher interest rates can be good for people who are holding interest-bearing assets. It's not like everybody loses from higher interest rates. But I think on net, in the consumer space, it probably is still, it creates some restriction, puts some drag on it, and it could spill over into the labor market to the extent it holds back businesses from hiring.
I feel like a higher interest rate environment makes investors a little bit more discretionary, and companies a little bit more discretionary in terms of their spend. One thing I want to ask you before we go, we have about a minute and a half, you've worked with Kevin Warsh, have an understanding that probably most of us don't. Jay Powell talked a lot about struggling Americans. Is this a Fed, in your view, that's looking at the entire economy, and what do we need to understand about Kevin Warsh, who's still new to the job?
The Fed, and I think it's really important, the Fed is much more than its chair. There's the committee as a whole. And even including the chair, they're going to look at a really wide range of information about the economy, and what sets the Fed apart, keep in mind we have a really limited toolkit, particularly when you think about monetary policy.
They have an interest rate tool that really is meant to smooth out the ups and downs in demand, keep us from overheating. But I really think, when we look at the U.S. economy right now, it's not these fluctuations in demand, it's all that's going on under the hood, like the slowing labor force growth and this general-purpose technology that we're trying to wrap our hands around. The Fed is paying attention to all this, but they have pretty limited ability to step in and change the course.
So I think that's -- the Fed is a lot like the Fed was before. Kevin Warsh is still learning on the job. I think he's pointed in the right direction. Definitely needs some improvement. I'd like to see some better communication. I think it really is important, not just to speak to financial markets, but to speak to the American people, to speak to the ones who are actually going to bear the brunt of the Fed's decisions.
