Duffy Warns of More Flight Cuts If Government Shutdown Drags On

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2:23Carol Massar:The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio. All right. We want to stay on airlines. And we're curious about what's going on, you know, at Newark, but around the country. And, you know, ultimately, what could be the impact on the carriers themselves, especially if we see a reduced flight schedule? Also on the ground at Newark Liberty International Airport is Bloomberg Intelligence Senior Aerospace Defense and Airlines Analyst George Ferguson. um george there you are you just flew in right how you doing hi i did i just came in hello i just came in from miami yes how did it go yeah it was it was pretty smooth like i would i would expect when they knocked down you know the initial call was 10 or normalinda said maybe less than that of flights to the 40 most important airports i'd expect that things would run a little easier i I feel bad for people that had their flights canceled, but I think if you're going to a core market for an airline, and I was coming up from Miami, that's pretty core for United.

3:29Airplane was absolutely full. I don't think there was another seat empty on it. They're going to get that traffic through, right? Because they're going to look at the most efficient and best profit making flights and make sure they push them through. George, we are less than three weeks away from one of the busiest travel days of the year. That would be the time around Thanksgiving. And I'm wondering if we do see continued government shutdown, these workers not getting paid, if indeed what happens comes true, what Transportation Secretary Sean Duffy said earlier, that we could see up to 20 percent disruption.

4:06What does the holiday season look like for these air carriers? Yeah, I mean, that's what we're concerned about. So we have a report that will go out Monday on the Bloomberg terminal. You know, look, we were looking at sort of total seats put into the market during 4Q. 4Q isn't typically a very busy time for the business, right? It's not a high profit season for them. And November is actually the lowest of that season. It's got the least number of seats flown. But it's deceiving because, you know, November is when the business traveler kind of stops. I was just down at a conference in Miami. that's about the last conference i think you'll see before we roll into thanksgiving here in the u.s so business kind of rolls off here in the middle of the month and leisure picks up very big in a big way by the end of the month so i think if we don't have the government shutdown stopped thanksgiving will be an absolute mess because i would expect there'll be even more cancellations uh and then you get another ebb between thanksgiving and christmas hopefully we're not talking about sort of Christmas year end sort of celebrations, you know, having the government still out by then.

5:15I don't think they can make it that long.

5:16Carol Massar:But hey, George, just real quickly, you know, when do you start to like kind of rewrite some of your, you know, expectations in terms of earnings or revenues, the balance sheets, the financials for the airlines? Does this have to go on for several days, for several weeks before it becomes something material for the big airlines and all of them, really? Yeah, I think you're right on it, right? I think if we get into Thanksgiving and this is still going on, we're cutting back capacity, then we're going to start to get much more concerned and start rethinking about where profitability, profits, cash flow go for 4Q.

5:52Right now, this could even be a slight pickup where airlines sort of knock down their least performing flights and get maybe a little bit of a margin pickup. Maybe profit ebbs a little bit on it, But right now it's not major. Get into Thanksgiving and we've got an issue on it. George, before we let you go, you were down in Miami. You were there for a conference on corporate jet travel. Just give us an update there. It's an area that certainly you and other analysts watch. Those flights, not disrupted right now? No, and that's an advantage of having private aviation. And one of the reasons people go there is because of that.

6:29Less security issues. That market continues to stay strong. I'm pretty impressed. We've had earnings this week from Bombardier and Embraer. You know, the backlogs continue to they're steady. They're not declining, even as those manufacturers increase the number of airplanes they build. And there's been a number of people that came to private aviation after the pandemic and it cures they've stuck around. And so that market doing pretty good. You know, it's a pretty nice thing. All right.

6:57Carol Massar:Good to know. Good to know. Especially, you know, I guess when we get on our private jet for our next trip. Our? Yeah. Our private jet? Yeah. George, you have that, right? You hold that on me? I don't know. George is at Newark, not Teterboro right now. So we know how he got back from Miami. All right. Safe travels to the rest of your way home. George Ferguson, Bloomberg Intelligence Senior Aerospace Defense and Airlines Analyst. Of course, George Ferguson there at Newark Airport. Stay with us. More from Bloomberg Businessweek Daily coming up after this. What if data didn't sit still? What if intelligence moved with us?

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10:08Carol Massar: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. All right, we want to get back to kind of the things that are coming at investors in the U.S. economy. You know, certainly the economic activity, perhaps out of the airline industry, if it's prolonged, this impact as a result of the government shutdown could impact, and most expect it would, if it's a prolonged, even further shutdown in terms of the impact on the U.S. economy. I will say we did get a data point.

10:44Carol Massar:U.S. consumer sentiment tumbling to near the lowest on record today as the government shut down weight on the economy and the outlook and high prices soured views about personal finances. Consumers perceive pressure on their personal finances from multiple directions and anticipate the labor markets will continue to weaken, Tim, in the future. That's according to Joanne Hsu, who is director of the survey. So there's concerns about the labor market. I want to bring in Karen Kimbrough, chief economist at LinkedIn, for a check on the health of the U.S. labor market. She joins us from Dallas. Karen, you have incredible data, real-time data on LinkedIn.

11:18This is a source of alternative data today. In one word, how would you describe the state of the labor market in the U.S. right now? Softening. Softening. Yeah, it's continuing to soften. The data that we have through the end of October tells us that the labor market is just on its continued softening path. And that kind of means there's a little bit of fragility there.

11:42Carol Massar:How much? There's a little fragility. And like, where are you seeing the fragility? Especially when we constantly, Tim and I talk about the K-shaped economy. And, you know, we've had, you know, we've seen resilience in the U.S. economy. But a lot of it is, you know, spending by the higher income folks. And we've, you know, it's kind of underlying weakness among low and middle income households. So those higher income Americans continue to drive growth. Are we seeing that disparity in the labor market that higher paying jobs continuing to hire and lower not? Or what are you seeing? Yeah, actually, it's a little different than that.

12:19So I would say, as I said, some fragility, but actually some bright spots. So there are sectors, think of like construction, leisure and hospitality that are hiring. And those are segments that often will hire hourly workers, lower income workers. So ironically, in some sense, some of the sectors are doing a little bit better in terms of hiring rates year over year, are the ones where we see more hourly salaried workers. So there are bright spots. There are challenges. One thing I would kind of mention is that the story we're telling didn't change appreciably between last month and this month.

12:56You know, it's not like it took another huge leg down. It's more like it's kind of continued same softening of decreased hiring rates. Confidence is down. I heard you mention the consumer confidence overall, the confidence in workers and their ability to find a job and keep a job is also a little bit weaker now because they can see how competitive the job market is. What about trends that you're seeing in real time on the LinkedIn platform? Hiring trends. Hiring is down. We know that. What about other trends that you're seeing? What can you tell us? Yeah, absolutely. So we are also seeing increased mentions of layoffs.

13:33And these, of course, just mentions. These people engaging on the platform talking about it. We're seeing by our own measure of quits. So it kind of mirrors the BLS's measure of quits. We are seeing quits that are also coming down just slightly. So people are kind of staying in place, not quitting as much. And that's usually a sign of a more fragile market. But I think the biggest trend that we're seeing right now is really this fact that every industry seems to be having a different experience. So if you think about what employers are looking for, they're posting jobs on the platform. And they are all almost really quite a lot of them are looking for skills like AI literacy.

14:16So that is one of the fastest growing skills. They want candidates who can come in and actually know how to use AI to increase their efficiency and productivity. So it's not like being scared of it. They're looking to extend their adoption. So 70 % increase in jobs that are looking by employers looking for AI skills. We think more than 85 % of the members on our platform are in roles that are going to be transformed by AI. So we're in this period of like evolution of the job market, but it's going to take some time.

14:46Carol Massar:All right. We've got to run. Hey, listen, great stuff. And so appreciate your time on what's supposed to be a monthly jobs report this morning. But it's a little bit of a different jobs, right? Welcome to Bizarro World, everybody. Karen Kimbrough, she's chief economist over at LinkedIn. Stay with us. More from Bloomberg Business Week Daily coming up after this.

15:10This is the Bloomberg Business Week Daily podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 1130. I want to bring in Alexis Brown-Roberts, COO and Portfolio Manager at Alexis Investment Partners. The firm has about$185 million in assets under management. That's as of the end of July of this year. She joins us from Montgomery, Texas. Alexis, the environment right now, I mean, even as Carol was reading her introduction to you, we're getting breaking news from the president targeting certain companies, in this case, meatpacking companies.

15:53That sends shares lower. What is the market environment right now? How do you define it?

15:58Carol Massar:Well, hi, Tim and Carol. Thanks again for having me on right now. Volatile is a pretty good way to describe the market currently. We've had a pretty great run, although this year in general for investors has been a little difficult. It's hard to realize now that we're basically a broken record, having been breaking records over and over again, just breaching 6 ,700 recently. that back in April, we took a pullback of, what, 19 percent? And that was hard because it spooked some investors. But it also gave a great buying opportunity back then. But since this big runoff since then, we have predicted a bit of volatility.

16:39Carol Massar:We've had a great run. And so markets were due for a pullback. And that's exactly what we're seeing right now. So do we get more of a pullback, Alexis, in your view? I think that with valuations being so rich as they are now, we were due for some type of pullback or a correction. I don't necessarily think that it's going to be a huge one, though, especially as today is a perfect example, right? We had that pullback, but then before we even got this government shutdown news, we started to see some folks coming in and really buying the dip. And I think we're going to continue seeing that support, particularly as we work through a seasonally favorable period through the end of the year.

17:22Carol Massar:We're seeing the Fed move in the right direction, lowering interest rates. And that's making a money market where people were happily earning 5 percent or more to now earning less than 4 percent. Maybe you're going to see that money going into some more productive investments from here. So that may support the market to go higher from here. Although maybe not quite as big of a shoot up as we've experienced out of the pullback. Well, it's a Friday afternoon with less than 15 minutes to go to the close of equity trading, which means we are getting a lot of headlines, Carol, including John Thune says that the Democratic proposal not to close, not excuse me, not close to what needs to be done.

18:02So getting more information on the Republicans rejection of that offer from Senate minority leader Chuck Schumer that we heard during the two o 'clock hour. And then also completely separately, Samsung in talks with Barclays to launch a U.S. credit card. This, according to The Wall Street Journal. Alexis, on the John Thune headline, he says that the Democrat proposal not close to what needs to be done to reopen the government. How do you think about the government shutdown with regard to your portfolio and the money that you manage?

18:34Carol Massar:Yeah, from a personal perspective, I mean, obviously, it's disappointing to see the government not working. as a taxpayer. But from a portfolio perspective, so far, the stock market's done a good job of kind of brushing this off, which is pretty in line with history. That being said, the longer that this drags out, the more that it'll be difficult for the stock market to really continue to brush it off, especially as we head into a pretty heavy spending period and some folks are going to continue experiencing pain they just don't really need. So, you know, we've talked We talked about the overweight when it comes to big tech and infotech.

19:11Carol Massar:The S &P 500, infotech's weight in the benchmark, S &P 500, now accounts for more than 35 percent. Last month, overtaking the previous peak set at 34.88 percent. That was back in March of 2000 when the tech bubble burst. You know, we've got a chart up for those who are watching on YouTube and Bloomberg original. So you can see on the left, the tech overweight, where the rest of the market and the S &P 500 there, the weighting has gone down. That overweight, where do your investors that you are working with, where do they want to put their money or new money to work here? And just got about 40 seconds.

19:50Carol Massar:So we're lucky in terms of where new money is coming in because we do run a fund that is diversified and tactful. So for any new money that's coming in, we're really looking to add incrementally, mostly there, recognizing that absolutely technology has gotten overdrawn. We still like tech names, but we have pared back exposure there. Maybe if we go down more, then we'll do something that looks like buying there, probably just covering some covered coffins that we have on some of those names. But that being said, should you go diving straight into even more big tech at these valuations? That depends on what you're winning as your portfolio now.

20:29Carol Massar:But I think there's more interesting opportunities, more diversified right now. Interesting. So some diversification going on, certainly that you're suggesting for your investors. Alexis, thanks so much. Have a great weekend. Alexis Brown-Roberts, Chief Operating Officer and Portfolio Manager at Alexis Investment Partners. Stay with us. more from Bloomberg Business Week Daily coming up after this.

21:16Carol Massar:If my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC.

21:54Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States. but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's Unstoppable Energy.

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