Bloomberg Opinion columnist Jonathan Levin parses through cruise data and says it presents further evidence that consumers are resilient. Conor Sen with Bloomberg Opinion also joins to discuss the threat artificial intelligence poses to jobs. Lisa Jarvis explains the health risks of loneliness and columnist Leonid Bershidsky also joins to talk about the war in Ukraine and Vladimir Putin's ambitions. Amy Morris hosts.
You're listening to the Bloomberg Opinion podcast count US Saturdays at one in seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we look at artificial intelligence. After a year of mass layoffs, AI has put the tech industry back in the hiring mood, and later we'll look at the health effects of loneliness. Turns out being with each other may be just as important for your health as diet and exercise. Plus, the war in Ukraine continues, but will the support There may be shifting public opinion over how much money and equipment to send to Ukraine. We begin with the economy. Chief economist Vincent Reinhardt at Melon Asset Management tells Bloomberg Surveillance that the latest CPI data show some momentum in services inflation, a key indicator that the Federal Reserve monitors and that could trigger further tightening. In June, Chair.
Paddell Is indicated that the forward looking indicators of sheltered prices that he looks at suggests there's going to be good news soon, but it doesn't change the core problem. There's some momentum there. The core question to ask is was today's print disqualifying for FED action in June?
Make the answers.
No, Let's turn out a Bloomberg opinion columnist Jonathan Levin. Jonathan, you have a terrific column on the Bloomberg terminal this week. It really helps put these things into perspective, featuring the cautious optimism one might find on the deck of a cruise ship. If people are willing to fill up these city sized party ships, how bad could the economy be? Really?
Yeah, right now, I don't think the economy is very bad at all. In fact, you know, we saw this in the GDP report recently. Consumer spending has looked strong, up three point seven percent quoter on a seasonally adjusted basis. You know, it's easy to understand why things are still pretty good right now. The unemployment rate is still extremely, extremely low. There is still a ton of excess savings in this economy leftover from the sort of pandemic stay at home months. Economists estimated to be anywhere between you know, just four hundred billion and five hundred billion still in excess savings, and so you know, you have this phenomenon where a lot of people are still projecting recession. There are a lot of bears in the stock market. But you go on a cruise ship and people are just doing the electric slide like there's no.
Tomorrow it's right. So is that an anomaly?
Though?
I mean my question being is this more like pent up demand? Is this sort of a snap back from having to shut down because of the pandemic?
Right?
Well, so a couple of things. I think the pent up demand doesn't necessarily preclude a recession. In fact, it certainly doesn't, but it makes it a lot harder to topple this US consumer, which of course is two thirds of the US economy, And as long as there is that strength, that's going to be that much harder to go into a downturn. So is it anomaly? I think maybe yes and maybe no. So what is anomalous? The cruise industry is in the very unique situation that they essentially shut off supply for about fifteen months, right so starting in March twenty twenty and they're going through about June twenty twenty one. You couldn't get on a cruise ship, no matter how badly you wanted to do it. And then they slowly, slowly ramped it back up. There were some capacity caps for a while for safety reasons. And so this is an industry that does about thirty million passengers globally a year, and that if you just average out what happened from twenty twenty to twenty twenty two, you ended up getting far far less than that. So I estimate. I estimate that there's something like unmet demand of around sixty million passengers. So if you just were to spread that out over a couple of years, that is really something that could keep this industry going even as other industries suffer. So that is a bit of an anomaly. But what's interesting about this post pandemic economy is you find somewhat similar stories in other key industries as well. Right, you could tell a similar story about auto where you know a certain amount of people just need to buy a new automobile every single year, but during the pandemic a lot of people couldn't get them. So people say, well, you know, economic outlook is getting kind of dicey. Why isn't auto demand falling off a cliff? More? And I think again, pent up demand is part of that story.
Are you seeing similar reflections in the reports that we've been getting out, particularly in this past week, like in the earnings reports or CPI numbers. Let's just take them apart one by one. What did the earnings reports tell you?
Sure?
So, going back to the cruise thing, and the reason that I got on this whole kick about services and pent up demand is Royal Caribbean and Norwegian just had absolutely blowout quarters, like completely inconsistent with the idea that we're heading into a recession. And I said to myself, Wow, how is this possible? Because these are sort of like raw indications of where discretionary spending is. There's no business spending on a cruise ship, really, you know, the quarters were nothing short of spectacular. So I'll just highlight two indicators. Number One, bookings look absolutely phenomenal, either close close to or exceeding twenty nineteen levels, right, And so that's sort of your forward looking indicator. What's you know, how many people are looking to get on a cruise ship through the rest of the year and into twenty twenty four. And then what I think is maybe even more interesting is you're seeing record amounts of onboard spend, which I see as sort of like sort of a raw kind of sentiment indicator. These are your your bar tabs, these are your casino bills, you know, the gifts store, which we know those can be pretty overpriced. But people are people are are spending like they're not very apprehensive about maybe losing their jobs or going into a downturn.
Is that reflected in the CPI as well?
Yeah, I mean you could, you could sort of see that. I think what we have seen in the CPI recently, certainly going back to the last three or four quarters, is this idea that it's not rolling over like some people had thought. It's this resiliency, which sort of a word that I and a lot of people probably overuse in this context. But what I really mean is, you know, CPI went up really fast in twenty twenty one, sort of early twenty twenty two. It did roll over, It has peaked, but it's if you just look at like a three month annualized basis, it's basically just been going sideways. So is this, you know, the hottest inflation readings that we've gotten in the cycle. No, No, it isn't. But it's still pretty dog on warm out there.
Okay, So that means then, just basically taking what you've explained just now, it sounds like we've seen a post pandemic recovery, something of a boon. I'm wondering if that's ending. Are we watching this taper off now? Does this have momentum behind it?
Yeah, it all depends on a couple of factors. I mean, like I said, I think there is something self sustaining in some of these pockets of the economy with a lot of pent up demand. I think you can't underestimate the story that I told earlier in the broadcast about excess savings. Five hundred billion dollars is still a lot of money, and it could easily take you through the fourth quarter, maybe into the first quarter of twenty twenty four. None of this means that the economy is bulletproof. I wouldn't want to give anybody that impression either. I just think that it would take a much bigger shock or perhaps much more tightening of credit to really knock this economy off balance. I think that's basically.
Where we are.
How unusual is what we're seeing. We have these people, by these people, I mean, all of us, you know, going out and spending and not really worrying so much about a coming recession. And at the same time, the Fed is standing pat and they keep raising rights a little bit here, a little bit there. Have we seen this before where the mentality of the public doesn't quite match up with what may be happening, or what may be happening doesn't quite mesh with the emotion that we're seeing on Wall Street.
Yeah, I mean, there's no underestimating how strange this environment is. I really do think that, you know, the pandemic created a completely unique set of circumstances, and you know, I would again point to that excess savings that makes it such that sort of consumer sentiment could come off quite a bit. But there's going to be this difference between what people are saying and what they're actually doing until they're really feeling it in their pocketbooks. The other thing is, you know, it all really comes down at the end of the day to what happens with unemployment. People talk about unemployment being a lagging indicator, and it is, but the real impacts on the consumer side are not going to be felt, especially in this unique environment with the excess savings scenario until until you start to see an uptick in unemployment, and we absolutely have not seen that. We've seen a slow down in the amount by which companies are adding to their payrolls. But with the momentum being what it is, it's hard to think that unemployment is going to shoot up immediately in the foreseeable future.
Bloomberg Opinion columnist Jonathan Levin coming up on Bloomberg Radio, I'll look at the war and you and which way public opinion may be turning. You're listening to Bloomberg Opinion.
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You're listening to Bloomberg Opinion. I'm Amy Morris. This past week we got reports that Russia attacked the Kiv region in Ukraine with dozens of Iranian made drones. This as the European Commission has reportedly proposed sanctions on seven Chinese companies accused of selling equipment that could be used as weapons in Russia's war in Ukraine. A Secretary of State Anthony Blincoln says that between the military aid and the financial support plus training that many nations are giving to Ukraine's forces, he believes Ukraine can regain some of the territory that's been lost.
My own estimation is that they have in place across all of those dimensions what they need to continue to be successful in regaining territory that was seized by force by Russia over the last fourteen months.
But public opinion could be shifting on this. Throughout the West, support for supplying Ukraine with weapons is starting to waver, and in the US more people are starting to say that the government is doing too much for Ukraine. In Germany, a steady majority contends that diplomatic efforts are not sufficient. Let's talk about all of this with Bloomberg Opinion columnist Leonid Burshidsky with the Bloomberg News Automation team. Here's a column on the Bloomberg terminal about this very issue, and he joins us, now, so let's just get down to it. How is public support waning for Ukraine?
Ukraine has received tens of billions of dollars. It is now the greatest the biggest recipient of US military aid in history. You know, these are huge amounts of money, and they're hard to justify to the kind of taxpayer who wants the government to act solely in hazer her economic interest. So when you discard emotional arguments and those of solidarity with Ukraine as a country that faces an invasion and basically a war of choice, you know, there's enormous human suffering for people who don't really care about that, who mainly care about where their tax dollars are going. Such huge amounts of help are suspect. Both in the US and in Europe. There are, if not majorities in most countries, then at least sizeable numbers of such people.
You know, That's what I wanted to talk to you about. If this is a matter of cost and these astronomical numbers sort of make people give them pause, or if there are also concerns that this is a zero sum game. If you're giving all of this money and all of these weapons to Ukraine, then over here I am being left out. I am somehow not getting my fair share. Something like that.
To these people, this is money that is not going to that is not being spent on domestic means a lot of people, if not majorities again, but then sizable numbers of people do not understand why a foreign country quite far away. Even though Ukraine is a European country, it is about as far from Spain as Sudan in terms of sheer distance. So people don't understand why a distant country is getting all that money while there are all these domestic issues. There's high inflation, high energy prices that are being caused by the war. Well, they'll understand why they should be paying for Ukraine to defend itself against Russia. They don't really care. A lot of these people don't really care who wins in this war ultimately, as long as they don't have to pay.
I actually experienced that firsthand quite recently with someone in this country in the United States, and it sort of surprised me. This person said to me, Ukraine is traditionally a corrupt country anyway, they have scandals going on even now. Why should we send our American tax dollars to them to help them when they are just as corrupt as any other country? Or are they wrong?
There are There have been a number of corruption scandals in Ukraine since the invasion began, But that I think is actually a healthy sign because even in a country at war like Ukraine, they've got functioning media, a functioning free press that is exposing these cases of care option. And actually, like the Ukrainian society has been growing less and less tolerant of corruption in the last ten years, and during the war, I would say they've become especially intolerant. So I guess the degree of corruption in today's Ukraine is probably not as high as you would expect from a country like Ukraine in peace time. So that is perhaps not a very strong argument that this money is getting stolen. It's probably most of it is probably getting spent actually on strengthening the Ukrainian military. But to some people, you know, why should we strengthen the Ukrainian military, Why do we even care? And you know, I don't think governments in the US and in Europe and in other Western countries like Canada, Australia, I don't think the governments are doing enough to explain to these voters why they are also affected by this war and why they should want Ukraine to win and not want Russia to win.
And let's get into that. We're talking with Bloomberg opinion columnist leon Ed Barshinsky about how to shore up more public support for Ukraine and what governments need to do to make that happen. Okay, tell us what should they be doing? What are they leaving out that people are not getting?
In the column, I laid out a number of potential selfish arguments that the governments would make for voters who only care about, you know, basically themselves and how this affects them. It's quite a strong argument for that kind of person. The money is actually going toward. Well, it's expensive, of course, but it's very useful defense research and rearmament for the donor countries as well as Ukraine. A lot of new weaponry and a lot of new military tactics and strategies are being tried out in that war. It becomes clear on the battlefield with which technologies work well and which don't. That obviously, the military strategists in the West who have not really dealt with wars like this between very strong rivals such as Russia and Ukraine, they have not really seen you know, such uses of equipment and such fears fighting in years. So now they realize what works and what doesn't. That is extremely valuable. There's also the boost to the defense industries that are very important employers in many Western countries, in the US certainly and in countries like France and Germany. Then there's also the sort of the contribution that the whole war and helping Ukraine is having on the resilience and the flexibility of Western economies like for Germany, for example, shedding the dependence on Russian energy was a forced move caused by the war.
When those who don't seem to care now, who have not been won over yet, say what do I care if Ukraine ceases to exist?
What do you say as a Russian? I say, like Mputin is not going to stop if he wins this. This is not going to be the last country that he attacks. If he manages to destroy Ukraine as a nation. There are other targets. Some of them are natal members the Baltic States, especially because of their vulnerable geographic position, because of the uncertainty of whether the West is actually going to defend them in case they're attacked, The decision to de send them on the parts of the US and the West is going to be costlier, and if support for Ukraine ceases, and it's allewed to lose. There's also the matter of China versus Taiwan. If Putune wins this, China will be encouraged to make a move in Taiwan.
Bloomberg opinion columnist and member of the Bloomberg News Automation team, Leonid Bershinski, after a year of mass layoffs, fear of missing out on the artificial intelligence wave is boosting jobs in Silicon Valley. Companies and investors hyped up about what artificial intelligence could mean for future profits and worried about what that would mean if they're left behind, and all of that could wind up being good news for the entire economy. Bloomberg opinion columnist Connor Sen joins us now with some insight. Connor, as always, thanks for taking the time with us today. I have to say your column is about how AI could ultimately help not just the tech industry, but the entire economy. Rising tide lifts all boats, that sort of thing. But the conventional wisdom with AI is you don't really think of job creation. Most most people would think of job killer. So set us straight on this.
Sure, So I think it's possible that one day in the future. I don't know how long it's going to be that sure, maybe it will disrupt millions of people in their jobs and we'll have to figure out what to do about that. But those products and services don't exist yet, and we don't know yet what those should be, And so tech companies are really caught up in this frenzy, and both they and their investors feel like they have to make bets to be a part of this, and that means for now, at least, hiring and spending, hiring a lot of people, spending a lot of money to figure out if they've caught the winning lottery tickets, so to speak, or just prove that they're not the ones being left behind by the people who seem to be doing well.
Have we seen this before?
You could talk about any sort of boom we've seen before, whether it's dot com boom in the late night, maybe crypto in the twenty tens, thin mobile. Yeah, and I think most people would agree that there's more to this than there was to crypto, But we don't really know yet what it's going to be, and so for now it's just let's spend a lot of money and try to figure it out and our stock prices are now going up, So maybe that means investors want us to do this rather than to continue to cut costs.
Does spending a lot of money and hiring and going on these hiring blitzes to stop staff up for AI? Does that create a destabilization within the tech industry as far as employment is concerned, or do you see it more stabilizing, Like where does the employment part of this stand.
I think it's a stabilization from an employment standpoint, because really for the past year, we've seen the tech industry get caught by first the pandemic boom and demand kind of receded and that eroded profitability, made stock prices go down. Obviously higher interest rates are a part of that as well, and so tech companies got the message from their investors that just cut spending because we just need to see higher profit margins and a belief that you guys are are focused on cost consciousness, and that really persisted through the first quarter. But at some point a cost cutting cycle ends, and it's really been about a year now for most of the tech companies, and then now you have this big shiny AI thing to chase, and so I think it's kind of an interesting timing where maybe the cost cutting cycle was winding down anyway, but now there's actually a reason for it beyond Okay, we've cut.
Enough, you know that. And that's what makes me a little bit nervous, this big shiny AI thing to chase to, if I can quote you for a second, because if they're if the cuts can come to an end, so can the hiring blitzes, so can the surges. It seems like the pendulum is swinging kind of radically and there's no real balance yet, but you say, we're finding.
It for now, and you can see it in the sort of leading indicators or job openings I'm mentioned in my calm. The website. The job website indeed has really great real time data for job postings and for software developers. It's really spiked since in the middle of April, and that's coincided with tech companies reported earnings talking about AI, how much they're doing. And it's not just your Microsofts and your Googles who were talking about it. I saw Uber was talking about AI Zilo talking about what AI can do for them, So it's really everybody feel like Wendy's I think this morning talked about how AI can improve ordering for hamburgers at drive through windows. So everybody feels like it's there in their interest to talk it up and do something to move in that direction.
And you touched on it just now. I'll want to get into it a little bit deeper about how this shift from the job cuts to investing in AI is already showing up in the labor market data. What are you seeing right?
So indeed has a metric that they look at the number of job postings that were just posted in the past seven days. So in theory, this sort of accounts for stale postings that aren't real, and those were declining for the software development industry through the middle of April, and they've been declining since early in twenty twenty two, and then since then they've they're up about thirty percent. And this is we don't know how many jobs that is. It could be something with their index, but it's a meaningful spike that's not just noise. And we'll see how long it lasts for we'll see if those postings turned into hires. But to me, it shows that there's been a sentiment shift really just in the past month. And I'm skeptical about how effective this spending and hiring will be, but it just shows that these companies have decided it's in their interest to try.
We are learning about how AI can be a job generator. Our guest is Bloomberg opinion columnist Connor sin Connor, your column about this on the Bloomberg Terminal is taking a decidedly short term view. Right as you were just explaining, could it eventually still be a job killer or a job transformer?
I think it depends on where this goes a year from now. So right now, AI is new, it's buzzy, everyone wants it, but we don't really know what we're looking for. So is it profits, is it users? Is it productivity? I think everybody's just like, let's spend some money and see if we can make something cool that people like. And the question is how long that period will last for My guess is at least through the year, and we'll see someone will probably get traction, just because if you try enough stuff, something will stick. And then we'll have to see a few quarters from now. How to tech companies, the broader investment world, the business world think about how we're doing and is this money being well spent. Or is it just another thing that didn't pan out and it's time for Wendy's to go back and focus on hamburgers rather than AI.
Okay, that's a great point. I got to say. Part of this whole AI revolution revelation, depending on your point of view, is that it's moved so fast. Or am I just a lady of a certain age and I'm not used to the fast technology moving forward? But does it surprise you to see how it went from this idea and this thought and this occasional tweet and this, oh look, this is something new that's coming down the pike to this now a big chunk of the industry. I mean, it took no time.
I think the hype really built fast, and it really kicked off, I guess with the release of GPT for one of the open AI tools at the end of last year. And you know a lot of people have played with it. I've played with it, and it can do funny stuff. You can say, write me a limerick about hamburgers and it will do that, and it's very clever, and so you can just see like, well this can do lots of things, and voice assistants and all these things, and I think to some extent, maybe it's the fact that the broader tech industry doesn't have a lot of other stories to tell right now because Crypto kind of panned out, the metaverse are, you know, fizzled out? The metaverse hasn't seemed to stick. So it's to some extent it's like they need something, and this is the biggest thing you can talk about, the most interesting one, and so everybody's kind of putting their bets on this hoping it works, because if it doesn't, it's not clear what the other thing they should be focused on is.
Right now.
Where's it going? Do you see AI becoming ubiquitous like Facebook, book, like Twitter?
I feel like the sort of easiest analogy for me to think about as spreadsheets, where spreadsheets took off in the early nineteen days, and they're definitely a valuable productivity tool that I use.
All the time.
A lot of people do. I am a little more skeptical about it's going to change everything overnight, and you know, if you're not doing it now, you're gonna be left behind. I think we have more time than that, and it's going to be the kind of thing that rolls out through society over time, and it makes sense that people are investing and spending in it. But I think we have time for this to play out, and it's not the kind of thing that six months from now our whole world will be different.
Connor, let's briefly before I let you go, let's take a big, thirty thousand foot view of this, because one of the points of your column is this is really going to save the industry. It's going to help with the economy. How is a stable tech market? How is AI good for staving off a potential recession?
Well, I think the tech industry is such an important bell weather for just broad business sentiment if nothing else. And when the biggest tech companies in the world are cutting ten thousand people at a time, it's hard not to wonder is that are those layoffs going to spread to everything else? And so if that industry is done with its layoffs and it's hiring again, you can start to feel more confident that an important leg of the economy is stabilized. And then it just becomes much harder to create a recession if you don't have that area of weakness spreading elsewhere.
All right, Connor, what are you going to be watching for now with this going on.
I think it'll be sort of how the stock prices react and do you actually get traction in terms of a product that people are responding to. We've seen the hype really boost the stock prices of Microsoft and Nvidia. We're seeing the spending, I believe, and you're certainly seeing corporations talk about it. But will that be sustained or will people sour on it the way they have on other sort of buzzy things in the past.
Connor, thank you for taking the time with us.
Thanks Amy, Bloomberg.
Opinion columnist Connor. Since stay with us, Bloomberg Opinion continues will take a look at how loneliness can actually be hazardous for your health. And don't forget We're available as a podcast on Apple, Spotify, or your favorite podcast platform. This is Bloomberg Opinion.
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You're listening to Bloomberg Opinion. I Mami Morris the US is experiencing an epidemic of loneliness. The US Surgeon General Vivek Murphy says loneliness and isolation can be as detrimental to your health as smoking fifteen cigarettes a day. Lisa Jarvis is a Bloomberg opinion columnist covering biotech, healthcare, and the pharmaceutical industry, and she joins us now of all things, for taking the time with us. But I want to clarify something in your column. Being lonely is as bad for you as smoking.
I know it's a hard thing to wrap your mind around this idea that loneliness in social isolation affects not only our mental health but our physical health. It's so it's become so clear that there's this connection between being socially connected and our health that even the American Heart Association put out an alert a year ago noting that there's a connection between loneliness and heart disease and strokes. There's a whole list of kind of health consequences to not having that kind of supportive environment.
Now, are we lonely because of the pandemic or are we aware of our loneliness because of the pandemic.
That's such a good question. So we were lowly before the pandemic, and the numbers probably got worse during the pandemic, and I think a lot of us became more aware of the challenges of isolation and loneliness. Maybe people who hadn't experienced that before really now understand how that can affect your well being. And I think one of the researchers that I spoke to, Julianne holtlund Lundstad, who is at Brigham Young University and she's done a lot of the work connecting loneliness to physical health, said to me, you know, I think we really need to understand that when we go back to normal, normal was still not okay. We need to go back to something that's better than we were before the pandemic. When it comes to social connectedness.
You know, during the pandemic, I sort of went eyeball deep into social media, and I'm wondering if that makes it kind of worse.
I think there's really mixed evidence on that front, and it's hard right now to par when it is good and when it is bad. Certainly for certain communities that may not have some you know, a connection in their area, like if you're a part of a minoritized group, and you live in some place, a rural area where there's just one of you or a handful of you. Having social media to make connections to others can be really important and supportive. But then there's a flip side to that, of course, and so I think, you know, on balance, it's been hard to tell whether it's a bigger risk or you know, can be a benefit. And I think the answer is, really it depends.
So how does one overcome loneliness? What are some ways to do that? Did they give you some hints and suggestions.
Some of it is just being kinder to each other, looking someone in the eye and saying hi to your neighbor when you walk by them. Resisting I put this in my calm because I thought it was an important one, Resisting the urge to say the negative comment. You know, I think, especially in a politicized environment, we've grown used to that, you know, reactivity, but just resisting that urge. But then I think some things that are like trying to become involved in your community, because community connectedness is really important, So that could be by volunteering. That's something I decided to do during the pandemic when I was feeling a little isolated. It could be joining a class, you know, finding something that helps you feel like you have a wider, broader community. And then really basic things texting your friends regularly. You know. I yesterday texted my college WhatsApp group and said, thank you for being the group that helps me not feel alone on a regular basis.
You know.
So I know that sounds very basic, but it's things that we can quickly lose track of, you know, in a busy life, in a busy society.
Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, healthcare, and the pharmaceutical industry. And that does it for this week's Bloomberg Opinion. We're produced by Eric mollow. You can find all of these columns on the Bloomberg terminal, and we're available as a podcast on Apple, Spotify or your favorite podcast platform. Stay with us. Today's top stories and global business headlines are coming up. I Mammy Morris, This is Bloomberg.