Podcast Summary
August Jobs Report: The August Jobs Report is crucial for the Fed's monetary policy decisions as economists expect job growth and a decrease in unemployment rate, but the labor market remains a concern
The upcoming August Jobs Report is crucial for the Federal Reserve as they consider their next moves on monetary policy. According to Michael McKee, Bloomberg International Economics and Policy Correspondent, the labor market is now a major concern for the Fed, as inflation remains contained and the unemployment rate is expected to decrease. Economists anticipate a return of job growth with a strong number of new hirings, potentially between 150,000 and 200,000, and a decrease in the unemployment rate to 4.2%. Despite historically low jobless claims, there are still concerns about the labor market, but recent increases have been attributed to retooling factories and hurricanes, and not layoffs. The Fed will closely monitor the August Jobs Report and its implications for the labor market before making any decisions at their September meeting.
PCE report, labor market: The PCE report showed decreasing inflation and higher spending, but a historic low savings rate. The labor market is strong, and the Fed is expected to cut interest rates in September, with a focus on present and future conditions.
The latest Personal Consumption Expenditures (PCE) report showed inflation continuing to decrease, with spending still higher than expected, but the savings rate reaching a historic low. The Fed is expected to cut interest rates in September, with the size of the cut being the main question. The labor market is strong, and the Fed's preferred 25 basis point cut is likely, but a larger cut could be considered if there's a significant economic downturn. The markets had been pricing in a larger rate cut by the end of the year, but this is starting to change as the data comes in. The Bureau of Labor Statistics reported that there were 818,000 fewer jobs than initially reported in the year leading up to March 2023. Factors contributing to this revision include a surge in immigration, decreased response rates from companies, and errors in data submission. The Fed is currently focusing on the present and future economic conditions and is not overly concerned about the job market revisions at this time. The August non-farm payrolls report will be released on Friday.
AI servers market: HPE, a leading IT infrastructure provider, is benefiting from AI server sales and expects continued growth despite smaller exposure compared to competitors. AI technology upgrades and partnerships with NVIDIA hold potential for revenue growth.
The demand for AI servers is driving strong earnings results for companies like Dell, and this trend is expected to continue for HPE, despite having a smaller exposure to AI server sales compared to Dell and Super Micro. HPE, a leading provider of IT infrastructure solutions, is seeing businesses continue to spend on upgrading and updating their AI technology. HPE's partnership with NVIDIA to build a private cloud business is still in its early stages but holds potential for both parties. While HPE's earnings are not just limited to AI servers, a broader IT spending recovery is anticipated for their server and storage businesses. However, consumer demand for PCs and laptops may be sluggish in the second half of the year, and a global recovery in PC demand is awaited. Overall, the AI server market is a significant growth area, and companies like HPE are well-positioned to benefit from this trend.
UK's new Labour government challenges: The UK's new Labour government, led by Keir Starmer, is focusing on the serious state of public finances and acknowledging the need for difficult decisions on tax and spending.
The UK's new Labour government, led by Prime Minister Keir Starmer, is facing significant challenges and has set a cautious tone for the coming months. Starmer's speech warning of painful decisions and a difficult financial situation was seen as a conventional move in the early days of a new government, but the context has been changed by the riots and the scale of the spending black hole. While some may view this as a surprise, many believed that difficult decisions on tax and spending were inevitable. The government's focus on the serious state of public finances is a stark realization of what was always there. Elsewhere, industry leaders will gather at the Bloomberg Power Player Summit to discuss disruption in the global sports industry.
Labour Party's economic promises: The Labour Party's ability to deliver on their economic promises will be put to the test in the upcoming budget, with scrutiny on their thin manifesto and lack of clear post-election policy plans, while managing finances and maintaining economic growth, all while avoiding public exhaustion from constant economic challenges emphasis.
The political judgment of the Labour Party's ability to turn things around economically, as promised in their slogan, will be heavily scrutinized in the coming months. Former Chief Speechwriter to Tony Blair, Philip Collins, raises this question in light of the Labour Party's thin manifesto and lack of clear post-election policy plans. The upcoming budget in October, where Chancellor Rachel Reeves will lay out tax and spend plans, is a significant moment for the Labour government to demonstrate their capabilities in managing the country's finances while maintaining economic growth. The risk of public exhaustion from the constant emphasis on the economic challenges ahead also exists, as seen in the past when George Osborne successfully convinced people of a global financial crisis due to a slight labor overspend. The success of the Labour Party in handling these balancing acts will be a major focus as Parliament reconvenes.
Labour's Tax Increases, Party Pressures: Labour's new government, led by Starmer, faces challenges implementing unpopular taxes amid internal pressures, while key policies like immigration, NHS, and winter fuel payments may cause discord
The new Labour government, led by Prime Minister Starmer, is facing significant challenges in implementing unpopular policies while managing internal party pressures. During the election campaign, Labour promised no new taxes, but they are now planning to increase taxes due to unexpected financial circumstances. Rachel Reeves, the Chancellor, will face pressure from both Labour MPs seeking more public spending and the public for policies like lifting the two-child benefit cap. Key policies to watch include Starmer's plans on immigration, fixing the NHS, and addressing winter fuel payments, which has already caused internal party discord. Despite a large parliamentary majority, Labour unity is at risk, and Starmer's reputation for unity and professionalism will be put to the test. Additionally, the Tory leadership race in opposition will be an interesting dynamic to watch.
UK Conservative Party Leadership, Tech Industry: The UK Conservative Party leadership race remains uncertain as Kenny Badernock faces challenges from Robert Gemmick and other contenders. In the tech industry, the demand for high bandwidth memory chips, particularly for AI infrastructure, continues to grow, with HBM chip makers facing supply constraints due to production issues with NVIDIA's new GPU chip.
The race for the UK Conservative Party leadership is wide open, with Kenny Badernock currently leading but Robert Gemmick gaining ground through active campaigning. The upcoming school term and Tory party conference will be crucial in determining if Badernock can maintain momentum, while James Cleverley and Tom Tugenhatt aim to make a splash in the media. In the tech industry, the demand for high bandwidth memory chips, particularly for AI infrastructure, is expected to remain robust, with HBM chip makers facing the challenge of keeping up with the demand. NVIDIA's production issues with its new Blackwell GPU chip may impact HBM chip makers, as they too are facing supply constraints. Overall, both the UK political landscape and the chip industry are experiencing significant growth and change, making for interesting developments in the coming weeks.
High Bandwidth Memory Chips, Advanced Packaging: Samsung and SK Hynix will dominate HBM market discussions at Semicon Taiwan 2024, with TSMC playing a crucial role in packaging due to increased collaboration between Taiwan and South Korea, and governments continuing to support the chip industry.
The conversation at Semicon Taiwan 2024 will be dominated by high bandwidth memory chips (HBM), with both Samsung and SK Hynix prominently featuring in the keynote speeches. This shift in focus is due to the increasing importance of HBM in the tech industry, particularly for companies like Nvidia. As Samsung tries to enter the HBM market and compete with SK Hynix, it will need to work with TSMC for packaging, leading to increased collaboration between Taiwan and South Korea. Additionally, advanced packaging technology will be a major focus, as it is essential for bringing different chips together and overcoming the limitations of Moore's law. Governments, including those in Taiwan and South Korea, will continue to play a significant role in supporting the chip industry through tax incentives and large programs. However, it's important to note that the Chips Act in the US, while aimed at resolving supply chain issues, does not completely solve the problem, as the chips still need to be shipped back to Asia for further processing.
TSMC's control & investment in advanced packaging: TSMC, controlling 60% of semiconductor market, invests heavily in advanced packaging to meet tech giants' demands, while geopolitical changes cause a shift in business towards Taiwan due to export restrictions on advanced semiconductors to China.
TSMC, as the leading foundry in the semiconductor industry, controls over 60% of the market and is investing heavily in advanced packaging to meet the demands of tech giants like NVIDIA, Broadcom, and AMD. The Semicon Taiwan conference, while not typically a place for major announcements, has created excitement due to potential appearances by industry leaders like NVIDIA's Jensen Huang. However, recent export restrictions on advanced semiconductors from the U.S. to China have caused a shift in business towards Taiwan, impacting Asian companies significantly. The restrictions have hindered China's ability to build AI servers, leading to a noticeable change in trade numbers for AI server-related parts between China and Taiwan. The semiconductor industry continues to evolve with these geopolitical changes and business adaptations.
Bloomberg Daybreak Asia, 92.9 FM Boston, AI event: Listeners can tune into Bloomberg Daybreak Asia for business news and insights, attend the AI event for strategies and networking, and Boston residents can listen on 92.9 FM starting September 3rd.
Important business news and market insights are available to listeners every day through Bloomberg Daybreak Asia. Doug Kriesner and Brian Curtis broadcast weekdays starting at 8 a.m. Hong Kong time or 8 p.m. Wall Street time. Listeners in Boston can tune in to Bloomberg radio starting September 3rd on 92 9 FM. Additionally, executives are invited to attend Bloomberg's business value of AI event on October 8th in Los Angeles or virtually. This event will provide opportunities for business and technology leaders to share their strategies for deploying AI for a desirable return on investment, learn from successful AI implementation stories, and network with peers. This program is proudly sponsored by IBM. Register at BloombergLive.com/AI/radio. Stay tuned for top stories and global business headlines.