tv Bloomberg Markets Americas Bloomberg July 2, 2020 10:00am-11:00am EDT
of money. we have authorization of $3 trillion. that is an extraordinary amount of money. a lot of that money is not in the economy yet. that is why we are extending things like the ppe. -- ppp. havingready conversations with certain members of democrats and republicans to get ideas, but we want to see the economic numbers. people thought we would have 30 million people unemployed right now. are 15 million unemployed and we had 5 million unemployed before this, so 10 million people were put back to work. the president is committed to do what we need to do in the next bill to protect kids, jobs, and liability. in the back. yourter: mr. secretary, can take a look at the president's twitter feed, where he tweeted a supporter of yelling "white a lot" and he tweeted
about confederate statues and not wanting them to come down. we are in the middle of a pandemic. is the president more focused on preserving or celebrating the confederacy than getting the pandemic under control? sec. mnuchin: let me just say i think the president is focused on everything.i think this issue of statues is a complicated issue. there was an operating "the wall street journal" from the cardinal in new york about the bible and everybody other than mary and jesus christ. i think it is a complicated issue. we need to have a balanced view of history. reporter: what about the white power video? sec. mnuchin: we are here to talk about economics. secretary, where is the treasury department on sending stimulus checks to families? are you guys going to be doing that anytime soon? or are you going to leave it to the court to decide whether the treasury department has to do it? sec. mnuchin: i did not understand the question. was it on stimulus checks?
reporter: mixed status families, with citizen children, people who are married or undocumented? sec. mnuchin: our position is legal americans, american citizens, should get the payments. that is our focus. if people are here illegally, they are not going to get economic payments. let me just say we are very focused as part of the next cares act, we are going to seriously consider whether we need to put more payments and direct payments. it worked very well. thank you. how much aid for state and local governments? sec. mnuchin: we will consider that in discussions. jonathan: you have been listening to a prescott -- guy: you have been listening to a press conference initially delivered by the president and then we heard larry kudlow and we will hear from him shortly, and treasury secretary steven
mnuchin. focused on what is going to happen next in terms of the next round of stimulus, and we will wait and see exactly when that comes through. you do have to wonder whether or not today's strong payroll number will make it harder for those in washington that are trying to push this next round, cares four through, alex, to actually find ourselves in a position where that becomes more difficult. i think that is a question a lot of people will ask after the payroll number today but we will see. alex: to that point, guy, i think the question is if you were worried the extra $600 unemployment boost that everyone gets until the end of july is hurting unemployment, but then you look at with the unemployment number is, you cannot have both. you cannot have a better jobs picture and then say that $600 prevents people from working. so how that conversation evolves is partial. i also think it is interesting
president trump did not take any questions and steve mnuchin and larry kudlow were specific on staying laser focused on the economy and getting people back to work. in the markets, no doubt, we have had other jobs numbers. we are flying higher. with aund the high modest selloff into the bond curve and the dollar weaker with commodities flying, as well. all of that contributing to what we are seeing in the market. we want to get to our guest, bloomberg's michael mckee and he joins us now, as well as lara rhame. mike, give us the lay of the land on what we learned for the jobs number, initial jobless claims and where we are. michael: right now we are looking at an economy that may be better than what we expected, although there was a feeling we would see a relatively fast snapback once the virus started to go down. 4.8 million jobs restored last
month, not new jobs but people going back to work basically. the unemployment rate falls to 11.1%. the labor department said they still had the misclassification issue but it is a smaller.if you added in the people misclassified, it would 12.1%. that is significantly lower than the 19% we had a couple of months ago. but it is also higher than at any point during the great recession. we have to keep that in perspective. we did see an increase in continuing claims. that is dated from two weeks ago because we are also seeing now, as you mentioned, state starting to close off again some of their economies. about isre not sure 4.8 million people going back to work and 14.6 million still out of work. do the people who got their jobs back still have those jobs now? will they have them when the july survey comes around? that is going to be the real question. my problem with this
number, and it is clearly a good number, and understandably, therefore, the white house is trying to do a victory lap. however, you break down the numbers, mike, and the biggest gains, north of 50% in the retail sector and in the hospitality sector in the largest sector, this number was pre-spike in cases that we are seeing. as a result of the spy, we have seen bars and restaurants shut spike- as a result of the , we have seen bars, restaurants and retail and leisure shut down. how many people will be unemployed the next time around that you allude to? michael: when you look at what governors are saying, they have closed bars or restaurants, or at least cut back on the service they provide. they are saying it is for something like 30-days, which takes us past the july survey period past the 12th of the month. so will they see a drop off?
leisure and hospitality were the big areas that lost jobs before, so it is natural a number came back. now the question is, do they stay employed? now we are going to get to that point in the economy where people ask, ok, do those companies that come back still have viable businesses? they want to reopen and try to reopen, but are they going to be able to make enough money? a lot of restaurant owners say 50% capacity is not going to do it. now if you cannot even have indoor dining, not going to do it. can they still hold up? those are the questions everyone is looking to as july goes on and receive the economy continues this kind of momentum. you cannot blame the president for taking credit today. they get the blame when things go wrong. politically, yeah, that is going to be a separate thing. if big danger, too, guys, is this cuts back on stimulus and then we find we need it again. that will be the question that
occupies washington. think mike makes a good point in that when you have more lock downs over the last couple of weeks, what does that mean for the retail and restaurant set? do we actually learn anything from the jobs report and the initial jobless claims considering where we are today versus 10 days ago? lara: with things moving so fast in the economy, we are adding on to big traditional indicators we have always watched. we are looking at high-frequency indicators that are also now available. the google mobility data showed a strong snapback to the beginning of june, but it has plateaued. when i think about the economy going forward, the number one word that comes to mind is attraction. we are past are low at the end of april, so that data has looked better, but how much traction is there going forward? or are we in a situation where gains, of got the easy
and we see them fast doesn't get harder from here? what happens to a bunch of companies that are trying to reemploy people and now are looking at a situation where covert cases are beginning to climb? a huge part of the u.s. economy is the service sector. manufacturing in many ways is easier to handle. the service sector is hugely difficult with retail and hospitality. all of these areas are difficult. do you think companies thinking of bringing people back on will continue to do so? do you think if they have brought people back on, they will lay them back off? and lay them off again, back on? how do companies manage the process at a granular level? lara: this is the big question. we need to differentiate between
the easy gains and what the decisions that now get so much harder. point, to mike mckee's the survival rate of these companies and restaurants and everything from the small businesses that take out the ppp goes and what happens when have expires to win a real threat and the resurgence closes restaurants? all of these things are what we are staring down. there are so many issues that have yet to be worked out. even though we did get an important upside surprise today, it is way too early to declare a victory. something that comes to mind is what we saw in march, when a lot -- weres give out eight eight or 10 did not have mandated state-level shutdown orders and still saw economic activity, restaurant spending,
and a lot of activity in those estates falls dramatically. we don't even need to get to havendated shutdowns consumers become concerned about contagion and for whatever reason stay home. i think we are still really at the tipping point. we got a positive consumer confidence number and optimism is so important, but i think the traction that we can maintain here into july and august because clearly we are going to have setbacks. that is going to be important. when and to that point, you look at what has happened with the market, the fed gets most of the credit. therefore, markets can go higher and beat this if the fed is that backstop. mike, i want to cover a chart here that points out something interesting. the total compensation for workers and the unemployed is actually up from before the
crisis because of the unemployment benefits, which has helped to support the economy. i wonder if we are underestimating the effect that has had on economic both, and if that goes away, how detrimental it may be to the growth projection for the third and fourth quarters? do you have a real understanding yet, mike? michael: we have a pretty good understanding. economists realize this has been a boon to the economy. we are not able to go out and shop. we are just starting to be able to do that, and people are spending that money. the savings rate which had skyrocketed came down as more people spend that money. it does keep people, or at least it did, keep them afloat. the two problems we have are is it is still not enough to help people pay all of their rent if don't have full-time work. if it goes away, that is going to be a real problem. the arguments on the other side is if you are asked to go back to work and you do, you
probably, if you are one of those leisure and hospitality workers, are going to bring back less than you were if you had that extra $600. so there is a disincentive to work. it is hard to figure out the best plan going forward. congress was talking about that. whether they drop it entirely now that we see the payrolls were ordered not remains to be seen. there are arguments on both sides. yes, it has clearly been a benefit for people at the lower end of the income scale. lara, let me pick up on that point and talk about stimulus. mike talks about the disincentive to work and clearly politicians are going to want to fix that. we had a strong payroll number. what do you think the contours of the next stimulus plan look like? the team in washington are talking about -- the team at the white house are talking about it
be more focused but what do you think the contours are starting to look like? lara: i actually think it is going to be really hard for congress to come together around another plan, even though i personally think they will absolutely need to. transfer payments directly to household is a good, effective way to quickly bridge that gap. just keep money circulating through the economy, but it is getting more and more politically loaded as you have noted with strong payroll numbers like this. it is not necessarily the solution that you may be able to come around. to me, something that is really is the aid that cities and states are going to need badly. i think we often underestimate their impact on the economy. the cities and states employ 10 times more workers than the
federal government does, and after the last recession, their budgets were so gutted, they did not really provide support and they were a drag on gdp for five years. this time around, arguably, their budgets are in worse shape. tohink that is an area where me i would like to see policy focus, but there is no doubt government will have to do more. the question of politics become so contentious that they have trouble coalescing around one thing. alex: what is the number, lara, that you think we need? one trillion? is it more? what is your data tell you? lara: i think one trillion in september because we are in a race against time with small businesses, with the lower income households, with a variety of the cities and states, and then it is really markets and the economy needs the door open to do more after.
i think that is something, a place where the fed has been effective at communicating with wall street, giving them a lot and saying there is more behind this. that is something the government did well with the initial cares act. we have seen continuing legislation afterwards. one trillion is a reasonable number against the backdrop of our $20 trillion economy. the numbers are huge, but i think it is the knowledge that there could be even more to come that at the end of the day could bolster consumer confidence. is there a case for waiting in any shape or form, lara? i appreciate that probably is not the smart thing to do, but in the folder, we are going to see big events take place. they will have a massive impact on shaping what happened. are you able to eat and drink inside? are you able to go to venues inside, which have a lot of other people in them?
once the weather gets worse, that will be a problem, particularly in the northeast. our schools going to go back and in what form? because, clearly, parents are struggling right now with the childcare situation. these are things that are going to become really big issues in september, october. do we need to have clarity on those before we make big decisions on what the next round of stimulus looks like? or am i thinking about the stimulus beyond the stimulus that we are talking about here? think waiting until september to pass, another big phase four package, is waiting. things are changing so fast. we look at where we were two months ago, and, you know, the balance experiencing a in the economy and the second colder means that there is less room for a balance of the third quarter. know,hink arguably, you
waiting until september is already waiting a significant amount of time. as households start to see the end of those supplemental unemployment payments, they will start to soon get more cautious. i think that is the real concern here. you know, the need to stay focused to make it smart legislation is something clearly that is critical, but we cannot let perfection get in the way of a rapid response should we see the economy, either sort of experience a double-dip or worse. trump talkednt about small businesses and optimism and sort of focus on hiring people feeling good about their chances for a job. i want to dig deeper into that, mike, because i am wondering how this will pair up with the payroll protection plan, which
has been extended, but which many complain it is confusing and it takes too long, and a medium-sized facility has come under criticism, so lara the next leg of gains may be tough, so walk us through where we are in terms of lending facilities. michael: you put your finger on a real problem. that is at this month, july, is do or die for the paycheck protection program, as well as other aid programs. when it first passed, it provided eight weeks basically for companies to hire back employees and keep them on payrolls before they would then apply to see if they could have loan forgiven. eight weeks turned out not to be long enough, and congress extended that to 24. the problem is if you base your budget on eight weeks, you will probably be out of money right now. the paycheck reduction program may not help. the other issue, as you
mentioned, is because it was confusing and difficult, people who could get it rushed to get it and then stop area there are still $130 billion left in that pot -- rush to get it and then stopped. there are still $130 billion left in that pot. will new businesses try to get money or will it sit there? you have been cardin of maryland and marco rubio florida looking at ways to use the money in a different way to be able to make it available to companies that may be running out now. and the companies who could be viable, if they keep going, rather than running out of any and closing up. that will be a real issue through july, how much this is going to help. the interesting thing about the mainstream program from the fed's point of view is almost nobody wants to borrow. they found money somewhere else because it took so long to set up. alex: and also on regulations without 1, 2. this is the best news i have
last as apparent in the five months. according to the mayor, new york schools will plan to reopen in september with social distancing. you have already sent your kids back, and this will be a huge game changer for parents in new york city. i have to wonder how they're going to do that with social distancing. public schools are crowded, and with budget cuts in new york, if we don't get aid from the federal government, how i they going to do that with the capability they have now, guy? i would have thought with a lot of staggering in terms of when you arrive and leave, in terms of maybe you do not go in every day. maybe that is a factor, as well. the ageher you go up cohort, you find it easier and easier to manage and maintain social distancing. it is pretty hard with small children, but i think that is a huge economic moment for new york and the whole country,
actually. if you think about the opportunity that frees up in terms of people returning to work and not having to worry so it, the childcare, maybe therefore being able to keep in mind that you make sure i am one of those people that do not get laid off. all of these are important things for parents to say and .ave clarity on let's get lara's take on this. has?rms of the impact it lara: it is really hard and it is an important part of conception. it speaks to an improvement of employment in that sector. again, just the ability to return to normal to some degree. this fall is not
going to be the one where we get some kind of return to kind of anything recognizable to normal that we have seen. 2021 or evenall beyond, but at the end of the day, flexibility is just going to continue to be important. that reopening, we have said this before, it seemed obvious but now we are experiencing it, it may be two steps forward, one step back, and i think that could keep households, markets, everything on somewhat uneven footing for some time. for longer than i think any of us want to accept. alex: i think that is a great point and you may have rounded up earlier that whether or not things are open or shut, it also depends on the individual and if they feel comfortable that you may have the restaurants open but you do not want to go there.
that is also a distinction. mike, clearly you are pumped that schools reopen, but that does not mean we will revert back. that feeds into investor and consumer psychology. how comfortable do you feel going out and spending money? michael: the interesting thing is, alex, back in march when this started, and lately in june, some of the high-frequency indicators we look at started virusg off before the numbers started spiking. people were hearing that things were happening and then they got cautious again. that is an issue going forward. the biggest thing we have to keep in mind as it does not matter what this jobs report says in the long run or what the president points at all, and it does not matter that alex would like her daughter to go back to inool because what we see the sun both right now, it is going to be the virus that decides. if the virus is tamed and if we keep the numbers down, than all of this can happen and maybe
people feel more confident and go back out. if we see the spikes we see in those states returned to other states, no matter how hard we work, they may have a problem. and it will not get better until maybe next year. get a vaccine -- forget a vaccine. guy: mike, to that point, i am looking at your perspective and experience on this, you cracked the numbers carefully. lara was talking about the easy gains made thus far. we are getting to the point where we have to ask tricky questions. before it was binary, you locked down or you do not. now we are getting into the nuanced. how difficult is it going to be to tease apart what is happening in the economy? we have used things like mobility data, but in terms of the varied ability of the data we will start getting through the process, is it going to become harder to determine what happens in the economy as decisions become more nuanced? michael: for a little while it
will be harder. particularly when you look at july and the fiscal cliff's and things expiring in the possibilities of extensions, we are not going to really have a clear picture. we will look at the high-frequency data to try and tell us in general terms what is going on, but we will not have a real picture of the economy and the recovery prospects for some time. i imagine the same is true in britain, as well. you will have a wait. rein,ike mckee and laura thank you. larry kudlow is standing by to speak with jon ferro. let's have things over to jon. from new york city, good morning on bloomberg radio and on bloomberg t.v. i am happy to say that larry kudlow joins us now in reaction to the payrolls report. always great to get your
thoughts this time around. i think everyone wants the initial reaction to the jobs report and what it means for the next fiscal package. how do these numbers shape the fiscal effort in washington? dir. kudlow: first of all, it is a spectacular number and helps the overall situation enormously. that is the key point. we have created a lot of jobs the last couple of months, and the trends continue. one thing i listen to earlier in that conversation, i do not think people understand that relationships, the rescue package that the president led with bipartisan support in congress, and the ptp that secretary mnuchin fostered and implemented, it is the temporary layoffs, jon, the furloughs, that are coming down. we kept people connected to their employers. they did receive assistance, but we kept them connected so that andhe economy reopened
businesses reopened, roughly 80% of small businesses reopened, and we saw it again today. 63.5% of unemployed are now temporary workers. that number was 75% to 80% and 7.7 million. i don't see why the trend cannot continue. that is the point i'm making. i'm not sure if there is an intellectual disconnect but why can't the trend continue? a lot of temporary layoffs will go back to work. jonathan: a lot of people believe you cannot extrapolate it out too far because we have had to reverse openings. for that reason, many people think more help is needed. this is what the president had to say when asked about more direct payments for individuals. he said i support it, but it has to be done properly. and i support large numbers compared to democrats. it does not sound like a consideration but the president made a decision. is that a fair characterization? dir. kudlow: no, i don't think a
final decision has been made at all. done in at to be smart and targeted way. i think shape of any kind of package is up in the air. he has emphasized a number of programs. again, negotiations will not formally begin until after their july recess. he talked about payroll tax cuts . he talked about reemployment benefits and bonuses because we do not like the $600 plus up on unemployment. it is a disincentive to work. he talked about helping the restaurant industry, tourism, and entertainment with better business write-offs. he has talked about capital gains and investment write-offs. there is a very large package here still, and we will not know until we go into the negotiation. he is right that everything is on the table or many things are. it is a question of shaping it and do it smart.
i thought that original rescue package was very smart. i do not know if everything has to apply all over. we will see. we assessed the economy, that is the key point. jonathan: let's assess the data. what is the evidence of the enhanced unemployment benefits being a disincentive in terms of work? dir. kudlow: right now i can only give you anecdotal evidence. i hear this, secretary mnuchin lot of us here this, so many business people have said to us, particularly the smaller businesses, and the most vulnerable to the pandemic. the rest are small shops. they cannot hire people back because the unemployment benefits are very generous. generousto think that unemployment package was probably a good thing at the beginning of this pandemic when we put it on the table in mid-march and late march. working with the ppp program, i
think the unemployment compensation could be a good thing, but that moment has passed. we are moving into the reopening , and as these numbers show spectacular jobs numbers, people want to go to work. i think we have to look at this differently now, and i think reemployment benefits probably will help fill the little, and those, too, have to be targeted to the right people who may have had trouble getting a job or competing with unemployment and $600. it will be a better story for the small businesses. they will be able to afford people. that is the key point. jonathan: unfortunately, i only have 60-seconds left to the interview, which is unfortunate, so let me get to china. journal" thestreet last couple of weeks, it was referred to secretary mnuchin as a panda hugger and you are a free trader. they said there was a
non-fractured approach for all things china. he said the president was leaning on president xi to get the best outcome and to lean on states to buy soul beings -- to buy soybeans to help him win the election. those were his words. kongestion is, myth hong in the news and the likes of secretary pompeo going out and making noise on how hard you will be on china, how can we take that seriously when a former employee of his administration is saying all the president once is for president xi to help him win the next election? dir. kudlow: i have not read the book. many people who were at that dinner in japan completely disagree and say that was an un-factual remark, ok? that is what i know. china is a huge problem. we are engaging with them on trade. what they are doing in hong kong , as well as other problems,
comes a larger and larger difficulty in our relations. has saidary pompeo time and time again. i want to put it to a better story. july 1, the usmca trade deal went into place. that is a hugely important progrowth job creating trade deal, which will help ag workers and farmers and manufacturers, and the blue-collar boom can rise. we had currency stability and intellectual property protections. it is a tremendous deal. i don't know why doesn't get more coverage. the leaders will probably come next week to celebrate with president trump. and its a solid winner will be pro-growth and add to growth next year after i think we have a strong second half. that is looking forward and i don't see any reasons to block that. that they people know
must exercise best practices. do not forget the guidelines, ok? distancing, the testing, and the personal hygiene are important to negate this higher flashpoint in the southwest. it is not necessarily nationwide , just a few states in the southwest. use those best practices, and we will get out of that and wrote the economy in spectacular fashion. jonathan: larry, i'm not sure how we got from foreign leaders to wearing a mask, but i'm pleased it is the approach of the administration at the moment. i would talk about usmca, but i have to cut the interview short and hopefully we can pick up another time. larry kudlow there, national economic council director.enjoy . the long weekend then thank you from new york, this is bloomberg. ♪
we have the good job data but markets are looking at the breaking news of florida with covid cases rising 6.4% above the seven day average and death is rising, as well, guy, and cases climbing. we can look at the data and feel good about it and talk about stimulus, but at the end of the day, these numbers will matter, particularly to investors with s&p with flows of the session. guy: yeah, and it will keep bars and restaurants closed, and as we pointed out earlier, these are where we saw the biggest gains. i appreciate what larry kudlow had to say, but these are where we saw the biggest gains and where the fragility exists. nevertheless, there is a significant danger and many
businesses are forced to relay off people as a result of closures. let's talk about what happens with the covert story and how it relates to china. the former deputy assistant secretary for asia at the u.s. treasury joins us now, and resident senior fellow now. robert, thank you for your time. as we continue to see cases climb in the united states and in key portions, like florida, texas, california, and the kind of extension from that is the united states is still far from through the crisis. as that continues, can relations with china improve? given the genesis of the crisis. how do you think the administration is going to position itself? kind of looking at what is have --ame and its view of what
kind of looking at what has happened and its view. robert: they are definitely interlinked. as you point out, there are huge uncertainties about the u.s. recovery. there is the virus itself, the united states is taking its policy shot at containment, but we are politically divided and too eager to abandon our measures as a result of cases and deaths continuing and they will be much longer and higher thought.nce second, the huge uncertainty is consumer behavior. it is much more in the hands of consumers how competent and how safe they feel. that depends on business actions, but it also depends on the rate of covid cases, not simply in their own localities, but nationwide and how big of a risk they face. and the last uncertainty we base how long we can continue the huge stimulus
measures we have taken, and when stimulus 50 and rent forbearance and utility company forbearance begins to recede and individuals and firms are forced to pay up, and they think because they do not have the ability to stay above the waterline. the chinese i think see this as an episode in which their approach and their ability to control their economy and population is much better and in fact much superior to that of the united states. estimates, this will be one of those episodes where chinese, the size of the chinese economy jumps perhaps by 15% relative to the united states and the space of two years because of differing success in responding to the covid epidemic. that will make the chinese less willing to compromise and more assertive in their actions. and then the period in which
the united states' attitude towards china is hardening and much more confrontational rapidly. alex: i am wondering if we throw the third thing in there, and that is happening with hong kong in the u.s. rejecting a special status with sanctions and certain banks doing business with those involved in cracking down on protesters in hong kong, you throw that into the mix, and doesxi have a bigger incentive to aggravate the west? does the balance of power shifted him, or is the u.s. going to be successful in separating the trade and economics? xiert: i think president and china's government have made their policy commitment to policy law, and they are now sitting back and facing the consequences. they have hinted on several occasions to the united states
that their success in carrying out the phase i trade deal will depend on the united states respecting chinese guidelines in the general atmosphere of u.s.-china relations. i do not see the sanctions that we put in place so far as changing with the chinese do on hong kong or really on u.s. relations more generally. do you think hong kong's special status will disappear? that is a really big event, and it will have far-reaching consequences. colony butr the currency. what do you see on policy toward where that special state is going? robert: u.s. policy, we have already determined that hong kong is no longer autonomous from china. declaration that secretary pompeo made.
we have taken a limited number of adjustments on visas, technology and exports, and we have announced that we may sanction individuals and financial institutions that participate in the denial of democratic rights to hong kong citizens. for hong kong itself, the chinese want desperately to maintain the one country two system view outside hong kong. they want very much to assure the rest of the world that hong kong is still an independent economic entity. i think that is going to be difficult to maintain. certainly the way the national security law was put in place, that could have bypassed the hong kong legislature.
the fact that it in principle extends to extra territorial terms, i think it will change the character of the economic system in hong kong in a way that will be difficult to avoid. ceo that doesa business in hong kong, do i need to move my business yesterday? how should i be thinking about it? robert: it depends on the business you are in and how visible it is. it would be one of those things that struck me under the new national security law, the national basketball association coach who tweeted in support of hong kong protesters and freedom would be chargeable and possibly convicted under chinese law for violating the national security law. will reassess their
situation into to hong kong and how vulnerable they are. how likely their public statements, including why their employees are to get them into trouble and react accordingly. also, i think for many firms that particularly are for security firms, i think people that rank companies i do sovereign ratings will think more carefully. guy: wow. ok. hsbc rightrunning now, how would you approach this? robert: [laughter] is already headquartered outside of hong kong but has such a large hong kong presence. i think it is there for the long term and has to adjust accordingly as best as you can.
do you feel they have developed differently getting pushed back from shareholders in the u.s. with facebook and racial advertisers pulling back because of what they see is not good practice in pursuing racial hate speech? do you feel like it will be a bigger precarious position because of this time around? know.: i don't i think hsbc's situation is different from that of facebook. considerably different than that of facebook's so the analogy does not work very well. i think i pushing me on areas that i am not very strong on, but i think hsbc has no choice to do the best they can in the current situation. robert, thank you. don't want to put you in an
live from new york, i am alix steel with guy johnson in london. happy friday. this is bloomberg rockets. as we try to reopen individual states and others get relocked down, citigroup is pulling back plans to bring employees back to the office across the u.s.. it is a big challenge employers face, and now let's look at how spaces are adapting. andrew cogan is the chairman and ceo of knoll think. you have eight residential workplace brands and over 8000
employees. andrew, it is always great to catch up with you. you make really fancy pants office furniture and people are working at home. what are you doing to shift your business model? andrew, can you hear me? it looks we will try to get andrew back up. when you get headlines like florida, where hospitalizations and cases are rising and companies are paring back when they are bringing workers back, what do you do if you actually furnished offices? guy: here is the question one to answered, what does the office now look like? how many offices have been fitted out currently working with what is going to be required? because potentially there is a huge amount of money to be made
with three fitting officers and social distancing will be required and density will have to go down. all of the spaces will have to be retrofitted. i don't know if it will be with plexiglas or something else. it feels like it is going to be the return of the cubicle. orit in one shape or form another. it feels like that is ultimately what we are heading back to. it will be interesting to find out. alex: i used to have an office with a door. that was like 20 years ago, so that was crazy. andrew is now with us. thanks for your patience with our technical difficulties. are we going back to the cubicle here? andrew: i to get will be a hybrid and a blend of working things. it will be an element of working from home and in the office. in the office what we are seeing as our clients are retrofitting to all the things you are talking about with additional screens, changing layouts, creating more open meeting areas that are not as enclosed,
demarcating how many people should occupy a room. all the things we see in our own building are very much things our clients are doing, but we hear that people want to be back from work and there is a work from home fatigue. issues,e economic social inequality issues and cultural issues. i do not think the workplace in the office is by any means going away, but it will be one of a handful of clients that businesses use going forward. guy: how long is it going to take offices to be ready? we all wonder when we can get back to the office. how big a process is this? i'm thing about my desk at work. podrk in a circular kind of that other people sit in and i face other people. i am wondering what it will take to get offices covid ready. andrew: we have aggressively worked over the summer with clients to retrofit, so there
are a lot of editions of screening going on, plexiglas screens, glass screens, and we are seeing some of the largest clients retrofit their offices in those ways and over the summer. we are expecting that we will see an increasing number of people moving back to their offices in the fall, so they are not only retrofitting but changing layouts and placing limits on how many people can be in any one area of the office. i think you will see 10% to 40% of the people start go back and you may see people work in shifts, and you may see a group continuing to work from home. that is probably one of the most explosive parts where we have seen e-commerce sales go up over 130%. this is one of the reasons why you do not want to work from home. we have seen increases in demand for our work from home and e-commerce initiatives. alex: great point as guy and i
work from home. can you talk me through your margins? i assume you make more money off of office furniture versus home. are your sales good enough to offset that? this is why you do not want to be working from home. [dog barking] alex: we get it, do not worry. [laughter] workw: what we see is the from home business, while it grows dramatically, is offsetting the core part of our business. 30% of our business is residential or work from home. the other 70% is more traditional workplace. clearly, in the industry data and the reports of others, you are seeing a decline, but i think that will lessen if folks come back. we are starting to see projects put on hold and start to free up and loosen up. we are definitely looking at a variety of real estate strategies. maybe not all headquartered but they may do some light officers.
generally, any change in the work ways, creates a demand for office furniture. i think long-term this will be positive for us. guy: final question. how do meetings work? andrew: it is interesting. we have a product called rockwell and scripted, an architectural room you can drop into an area, but you don't have to have a feeling -- ceiling on it, so you are not in an enclosed box. the air is circulating, and you can create a framework where you can socially distance and meet. we are seeing a great demand for meetings and those rooms that are not fully enclosed, and then you link it with all of the zoom and virtual technology to be able to hang screens and other communication devices off of the freestanding architecture.we think it is part of the hybrid and why we are launching knoll's work
from home initiative at knoll.com where we will help client support their employees as they work from home, as well as the interface with how they work with folks working in the office. i think that hybrid will be the model until then and maybe even after a vaccine. guy: ok. andrew, great to have you and the dog on. thank you for joining us, andrew cogan, the knoll ceo. coming up, senator chuck grassley of iowa join us. this is bloomberg. ♪
>> live from new york, i am alix steel, with the johnson in london. this is "the european close." happy friday. at least for me. [laughter] we had good jobs numbers, but there are battling with numbers in florida in terms of cases and hospitalizations rising. but you can handle that tomorrow solo. [laughter] guy: and we also have the other factor heading into the long weekend, though you want a carry rate through the long weekend not knowing what could happen? as you say, the situation where the covid numbers are having a meaningful impact on what the markets are doing, to you want to put yourself in a position where you will be carrying that risk? nevertheless, we do obviously have the long weekend. i will be here tomorrow. [laughter] it is friday for alex, but frid