Judge Blocks Federal Firings During Government Shutdown for Now

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2:50A federal judge just ordering the Trump administration to pause plans to fire thousands of federal workers during the government shutdown, a shutdown that is now in its 15th day, Carol, really stretching on here. And a lot of folks there in Washington, in the federal government, more broadly, I should say, outside of Washington, too, really dealing with a lot of uncertainty who are furloughed or have been laid off. This now going before the courts, this pause in place. And we're going to talk about it more with Laura Davison, who's our Washington Deputy Bureau Chief. She joins us now. Laura, I mentioned that uncertainty.

3:19I can't put too fine a point on that. Where do things stand now, now that we have this judge's ruling, not a final decision on the merits of the case? What does it mean for those workers who are very worried about their position here in the government going forward? So it means that federal agencies right now have to stop and halt all the plans for the firings that took place last week. So that means that those people will be able to keep their jobs for now and that any future rounds of firings, as the White House suggested yesterday, is coming will also be halted. This is just a temporary block, as you mentioned, they are just paused, and there will be a decision to come later on the merits of the case about whether these can proceed.

3:56It was quite a dramatic moment this afternoon, because just before this ruling came out, Russell Vogt, speaking on a Charlie Kirk podcast, said that he expects that layoffs would exceed 10 ,000 people. Right now, we've seen about 4 ,000 or so that have received layoff notices. So this is very much a clash of where the White House sees things going as where the judge came in and said, hey, look, you got to hold your horses here. Laura, what's the status of conversations among lawmakers on Capitol Hill, among lawmakers and the White House, the Trump administration, just about sort of where we are in this shutdown and where it's going from here?

4:30I know there's a lot of concern about back pay. So the president was able to arrange for members of the military to be paid this week by moving some money around. The uncertainty begins to kind of compound and amasses as time goes on here. What's the status of those negotiations so much as there are negotiations here between Republicans and Democrats? Yes, there are no negotiations happening. The House is still out. They've been out for the full three weeks of this shutdown. We're now on day 15. The Senate is in session, but they've continued to vote on the same bill, and they have had no progress, and there's been no really behind-the-scenes discussions happening.

5:04You've had small groups of moderate members trying to talk together, but those haven't really yielded anything. But the thing about a shutdown is that the first couple days, there's not much pain. But as the shutdown goes on, the pain compounds. You see, You know, today, this week and last week, we've had, you know, millions of federal workers who have missed paychecks. You know, military members are getting paid at least this first paycheck in this August 15th or rather October 15th paycheck. They'll be paid, but it's unclear if later in the month that the shutdown persists, if they will. You know, we've already started to see some delays with air travel.

5:34Those could mount as the months go on here. So this is very much unknown about how this ends. But we do know that as the shutdown continues, things get more and more painful and unsustainable from a political standpoint. Not good for that. Any workers, though, that might be furloughed and not getting paid. But I want to ask you something about this because it made me kind of scratch my head. Laura, my understanding is that this isn't the final decision on the merits of the case, but also it has to do with union workers. How many of government workers are union workers? I didn't realize that there was a distinction.

6:08Yeah, there's a high percentage of federal workers who are unionized. I don't know the exact figure, but there's a patchwork of unions that represent various agencies, and they've been very involved in the process here. We really saw them start to mobilize earlier this year in regards to the Doge firings that happened very swiftly. This is one of the things that they've kind of realized is they need to get out in front of these cases a lot. Because once workers leave the building, they have their badge taken away, they have their email taken away. It's really hard to bring some of those people back, even if the firings are later ruled illegal.

6:40So you see sort of a change in strategy here of wanting to make sure that those workers don't leave their posts, get out the door while the merits are being decided. Laura, always appreciate it. Laura Davidson, of course, joining us from our D.C. Bureau. She's Bloomberg News, Washington Deputy Bureau Chief. 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. Hey, listen, we're going to talk a little bit about earnings right now. I am also curious to see what our next guest has to say about some of these big macro issues that are coming at us.

7:17Dan Letter is president and incoming CEO of Prologis. He takes over as CEO in January. He joins us from our San Francisco studio. And we should point out that the company shares are rallying. They're up after they reported better than expected quarterly earnings. They boosted their forecast. They talked about data center opportunities, which is always something that catches investors' attention. Stock, by the way, is up 15 % year to date. Dan, great to have you here with David and myself. I do want to talk earnings, but we got to ask about the macro backdrop, whether it's trade talks between U.S.

7:51and China, government shutdown, rare earth materials, minerals. What what do you really watch when it comes to some of these big macro issues? Well, thanks for having me. It's great to be here coming off this earnings call. This was certainly a topic for us. We had a tremendous quarter. As a matter of fact, we broke a record this quarter for leasing. We leased 62 million square feet of space throughout our 1.3 billion square foot portfolio. And you think about that in context, 62 million square feet is the equivalent of leasing Central Park in Manhattan twice over again in one quarter. So our team working tirelessly around the world, at least 1 million square feet a business day during the third quarter.

8:44And certainly these macro business trends are telling by our customers who are the front line of the economy. You look at the softer data, and there is still some anxiety among a lot of business leaders about where things are headed. Maybe that's restricting them from making some of the CapEx expenditures that they would have otherwise. You're detailing for us very strong numbers, And I wonder what that says to you just about the capacity of these business leaders to look through or pass the uncertainty surrounding policy, including trade policy. Just give us a sense of the moment that we're in right now as you understand it from talking to your customers about how they're feeling about the business climate going forward.

9:21Sure. It's a great question. One of the things we're most proud of at Prologis is our customer franchise. We have unique proprietary data and we have unique relationships just given the size and scale of these relationships. And after what has really been two to three years of uncertainty, going back to rate hikes two and a half years ago, we see our customers actually getting off their back foot. What we've seen over this last quarter is actually customers moving from caution to optimism. Wow. Why? Because things are getting settled in terms of trade tariff? Like, what is it that has calmed some of your customers?

10:01I think our customers realized after a couple sluggish years of not making many decisions that they have to make long-term decisions. And that's what they do when they do business with Prologis. And they have to look through the short-term noise in order to ensure that they're positioned for growth going forward. So you're talking about Amazon, Home Depot, FedEx, UPS, Giga Cloud Technology. I mean, these are some of your big customers. So you're talking about these guys are feeling more sure about the outlook than maybe they did over the last couple of years. Yeah, precisely. as a matter of fact, coming out of a cycle, we're really in just a classic real estate cycle right now.

10:35And what you're seeing typically at this point in the cycle is it's the big, well-capitalized customers that lead the way out of this part of the cycle. This is a basic question you'll forgive me for, but when we talk about warehouses, what are we talking about? Are these just simply places to store stuff or are they places where there's a lot of movement, a lot of products coming in and out? When we talk about sort of the bread and butter of your business, what are you building? and what are you leasing out? Yeah, thanks for that question. We own nearly 6 ,000 buildings. These buildings are located in 20 countries in markets that represent about 78 % of the world GDP.

11:12As a matter of fact, in 2024, we had the equivalent of nearly 3 % of the world GDP go through these buildings. Our focus in building this portfolio, curating this portfolio over the last 42 years is having the highest quality, best located logistics real estate close to consumers. So where are you geographically building out the most? And where are you looking to kind of increase your square footage or buy properties or buy land? Well, the way we've set this organization up is our teams are calibrated to look for good deals around the world. And we're heavily focused, certainly this year, on build-the-suits with our customers.

11:56We're actually going to, we're on track for maybe our highest build-the-suit volume ever. And what does that mean? That means we have a contract in place with these customers before we start building for them. And we're seeing that broad-based across most of the sectors, as well as geography spread throughout the world. I bet you can't do an interview without being asked about AI, so forgive me. We're going to do it. And I want to ask about it in two ways. The first is sort of how it's changing the way that you conduct your business. And then the second question is picking up on what Carol said.

12:24You looking at the demand for data centers, maybe changing your business tack as well. Where do you see opportunity as this revolution, as it's called, continues and there's the need for more space for processing all of this data? Yeah, AI is here and it's big and it's big at Prologis. Certainly, we have all sorts of different operational and tools that we're building. to make our teams more efficient and to be able to help them move faster. But when you think of AI and Prologis, we announced today we now have 5.2 gigawatts of power, either secured or in the advanced stages of being secured, in sites mostly Tier 1, Tier 2 sites in the United States, and then the Tier 1 markets called FlapD or the Double M in Europe.

13:15So Prologis is now, we've long been in the higher and better use business. But again, given that footprint we have close to these consumers, well, the next wave in the modern economy is the digital economy. And AI and data centers are the logistics of that digital economy. We're talking about Dan Letter. He's president of Prologis. He is incoming president, incoming CEO, excuse me, takes over that spot come January. Wait, Dan, so give me an idea just to explain your business. How much is logistical warehousing right now? How much is data center? And where do you see the most growth going forward?

13:55Especially on a day where Meta, Microsoft, BlackRock, there's more. All doing data center deals. And it feels like a lot's happening in Texas, to point that out as well. So give us an idea of your mix today and where the growth is happening. Well, I look at our growth in our base portfolio. We own or control 14 ,000 acres of land close to these consumption centers that I mentioned. We can build out another 240 million square feet out of that land bank. That's a tremendous amount of space. And when it comes to data centers, this power that we've secured, we've long been in the higher and better use business.

14:37Think about the fact that logistics and warehouses is typically the cheapest house on the block. We've always been in the business of optimizing that real estate value for our investors. And data centers are certainly a trend right now that we're able to capitalize on, given the footprint and the raw material that we own and control. I just want to note a headline here across the Bloomberg terminal that a judge has blocked federal firings during the government shutdown. For now, we were talking about that a few moments ago as we were talking about the Beige Book from the Federal Reserve, Dan, and what that was telling us about the state of this economy.

15:05And one thing therein is how difficult it is to find workers, particularly workers, to do construction. And I think a theme to the AI story is amid all of this demand, it's hard to get folks to build the data centers that we need to buffet all of it. And I wonder if your company is dealing with that as well, just the difficulty of kind of keeping pace with how fast all this is moving. Yeah, thanks for that question. I think about that as we look at what is the replacement cost rent to build the next marginal building, whether it's logistics or data centers. And we look at that right now and the cost, the rent to build that next building is actually 25 % higher than market rents today.

15:51And then I look at that relative to our in-place rents today, it's actually nearly 45%. And one of the key issues is the cost to build are getting that much more expensive and labor is certainly a factor there. Interesting. Hey, one thing just to follow on, going back to data center and your build out, you talked about also the acquisition of 5.2 gigawatts of power. It's a lot. How much, though, is in terms of the build out for data centers, you've got to track it with having access to power? And does that slow some of the build out? Just got about 30 seconds. You know, this 5.2 gigawatts that we're quoting is just a portion of the universe of opportunities we actually have given our size and scale.

16:31with our 6 ,000 buildings, there's 14 ,000 acres of land. We already own this land in these buildings at logistics bases. And so we brought in in-house expertise. We have a very large energy business. We've got one gigawatt of power that we'll be generating off our rooftops by the end of 2025. So we've been building that energy capability that gives us just a better relationship with the power companies. And so we're in great shape there. Listen, a great interview and I want to keep going. I wish we could. Dan, come back soon. Dan Leder, president, incoming president of Prologis joining us here on Bloomberg.

17:02Stay with us. More from Bloomberg Business Week Daily coming up after this.

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20:57Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. The AI world, Walmart kind of moving in on this, I feel like. As a result, it's on track to kind of join the elite crop of companies with a trillion dollar valuation. It announced a partnership, we might remember, with OpenAI, and that really kind of pushed the stock to a record high. And there's one analyst that's really noticed this, and this is David Bellinger. He's over at Mizuho, and he is joining us right now to talk a little bit about his thinking.

21:33He is Senior Consumer Analyst. He's got an Apple Forum rating on the stock,$115 price target. You've had this rating for a while. You upped your price target in early June. The stock's up, I think, about 12 % since then. Good to have you here. Talk to us about your call. Great. Thanks so much for having me on. Yeah, Walmart, we launched on this company back in April. We made it a top pick in June, and this is actually our e-commerce top pick. Just given all that they've done, and we've pointed out since 2015, these guys have spent more than$200 billion in cumulative CapEx spend. We think they basically caught up to Amazon now over this past decade.

22:10It's essentially taken that long. You've got the e-commerce business in the U.S. almost at about$100 billion annual run rate, and that's actually starting to turn profitable now. So you're seeing all these levers come into play. What is Amazon's run rate? Significantly higher. That's what I thought. It's not disclosed, but if you get back into it, there's some estimates that the annual GMV of all the sales that they push through is in the$500 billion plus type range. The phrase is agentic commerce. Help me understand what that is and sort of what Walmart is saying it's going to deploy here across its website.

22:42Great question. We spent a lot of time working on this about three months ago, but somewhat foreign to us, right? And so we dove into it and it's essentially you could have a software or a synthetic agent that researches products, finds products for you and could essentially buy it on your behalf. So you're essentially going from. You're terrified, aren't you? If you've got kids, you should be terrified. It's going to show up at the front step. Yeah. You essentially go from an assistant to an agent who knows your preferences, has all your credit card information and could make purchases on your behalf if you give it that functionality.

23:16And just think about things like your weekly grocery run, something really easy. They know what 20, 40 items you buy. They could do it. Say, hey, Dave, do you want to do your weekly grocery order? Yes, and go for it. There's also some other use cases that Walmart's starting to talk about, about like a solution based of I've got my kid's birthday party. What do I need? There's going to be 20 kids there. Make me gift baskets. Get me food. All these things. There's a theme. Like it essentially helps you do that. Yeah. Yeah. It's kind of fascinating. I think about when you're on Amazon and they're like, hey, do you want to just do one purchase or do you want to set it up?

23:48So it's like taking this all to the next level to some extent. Even when we do grocery shopping, it's like a list comes up because we do it online. It's like this is just taking this to another level. Pretty much. But it's also as a discovery angle of we saw this chat GPT. They have this overnight new product of things that they think you would like as a recap in the morning. Certain things like that, we could see products being pushed to you or things that you've searched for in the past. And, hey, this could be a nice complementary product for your recent purchase. And now you'll basically have the ability to put all of that product from Walmart into that summary.