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First Move with Julia Chatterley
U.S. Hiring in April Far Weaker than Hoped; Japan Keeps Lockdowns in Place Heightening Olympic Fears; U.K. To Greenlight Some Quarantine-Free Trips. Aired 9-10a ET
Aired May 07, 2021 - 09:00 ET
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[09:00:33]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need to know.
Jobs jolt. U.S. hiring in April far weaker than hoped.
Extended emergency. Japan keeps lockdowns in place heightening Olympic fears.
And traffic light travel. The U.K. to greenlight some quarantine-free trips.
It's Friday, let's make a move.
A warm welcome once again to all our First Movers around the globe. Fantastic to have you with us on this jam-packed jobs Friday and that is
exactly where we're going to begin.
Today's job numbers, a mere, and I use the word carefully, 266,000 jobs were created in the United States last month. That is far weaker than
consensus estimates, which were for one million new jobs added, just to be clear though, some had predicted jobs growth of more than two million.
Now, this is the crazy world we're in because on any normal occasion, 266,000 jobs added would be a brilliant number. The problem is, of course,
we were expecting more.
The U.S. also reporting a major downward revision in March. Jobs growth, some 151,000 fewer jobs than first thought. The U.S. also noting that
millions of Americans are still not able to work because of the pandemic despite evidence that employees in some sectors have struggled to find
enough help.
Remember, too, the U.S. is still some eight million jobs below its pre- pandemic peak and more than seven million Americans are still receiving some kind of employment assistance.
Now, we'll be discussing today's jobs numbers with Nobel Prize winning economist Paul Krugman a little bit later on the show. He says don't panic
over all of this conflicting data.
For now, the Dow, futures turning lower on this news with the Dow set to fall from record highs, but NASDAQ futures are rallying. You can see them
up some 1.3 percent. Why? Well, it suggests that rates won't go up any time soon despite inflationary fears.
But remember, it's not all about jobs.
Europe finishing the week higher as Siemens and Adidas raise the full year forecast. German export numbers rising, too, for the 11th straight month.
Asia? Well, the session was pretty noncommittal, but we did see some weakness in China. Reports say the Biden administration will keep Trump-era
restrictions in place on American investments in China.
Wow. Lots to get to this Friday. Let's begin with those nonfarm payroll numbers.
Clare Sebastian joins me now. Clare, I have to say, clearly, the net job adds here, far, far weaker than expected. What I wonder here is whether
this is a labor demand problem or a labor supply problem.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Julia, I think it's still both, but edging more towards the latter. This is a labor market
where we still have 8.2 million jobs fewer than we had pre-pandemic.
So it looks like it has a lot of slack, but it is behaving like a jobs market that doesn't. I think it is interesting to home in on at least one
of the sectors that showed gains here, 331,000 was the number of jobs added in leisure and hospitality, so more than the net total.
This has been a consistently strong spot over the past few months because it lost so many in that enormous route of jobs we saw this time last year,
but 331,000, that's still 5.4 million jobs added over the year. But it is still down by 2.81 million or 16.8 percent since February 2020.
So what we are seeing there is that there is still trouble recapturing those jobs that have lost. We talk about sort of secular shifts in the
economy. I think some of those jobs may not come back. We have seen businesses go under.
So really interesting to drill down on this. I think this report though exemplifies just how difficult it is to forecast in this economy.
And of course, looking to the Fed, this does strengthen their thesis that rates still need to stay low and I think that's why you see futures coming
out this morning.
CHATTERLEY: Yes, we've had 13 months of just not being able to forecast what on earth is going on in this economy quite frankly, but, I think to
your point when I see the National Federation of Independent Business saying that 42 percent of small businesses are saying they simply can't
find people to hire, and we know people have had stimulus checks that they are ongoing, of course, too, plus a bump up in unemployment benefits, you
wonder whether the tradeoff here is simply people aren't coming back to work in the size and scale that we were expecting.
[09:05:00]
CHATTERLEY: To your point about wages, this is a critical point. When you have labor shortages, people you hope, businesses you hope in fact have to
pay more to get people on to their work force and we are seeing that in these numbers, too.
SEBASTIAN: Yes, this is starting to show up. Last month, we saw wages tick down a little bit. This month overall up by 21 cents. That's hourly wages.
But looking closer at some of the different industries here because we're still sort of seeing numbers slightly distorted by comparisons given the
volatility of the numbers over the past year.
I want to look at construction because here, we had a report last month, Julia, from the Home Builders Association. They're warning of a shortfall
of 200,000 workers within that industry. Couple that with the huge increase in demand we're seeing for home building as people want to live in bigger
places and improve their homes and that you know, creates a potential problem not just for the industry, but for the economy.
So, 21 cents overall was the uptick in hourly earnings in construction, 73 cents. So, we are starting to see signs of wage inflation, and then we go
down to the big question of, you know, the Fed says inflation is going to go up, it's going to be transitory, but wage inflation is really a
different question.
Can that be temporary or is that going to be a sort of permanent uptick?
CHATTERLEY: Great question and a question I am most definitely going to talk with Paul Krugman later. Wages in the leisure and tourism sector up
6.8 percent year-on-year, that one grabbed me which is a different sector, and I was just doing some math, so bear with me on this.
But I looked at the average hourly earnings which, to your point, rose 0.7 percent month-on-month. If I combine that with the increase in hours
worked, I make the average weekly earnings up one percent month-on-month. It sounds like a small number, but that is the most in years.
Some signs there, and we will discuss them with Paul Krugman. Clare, great job. Thank you so much for that. Clare Sebastian there.
All right, to India now. Official figures say, over 1.5 million new COVID casings were diagnosed in just the past four days, and for the 10th day in
a row, the number of people who died from the infection was more than 3,000.
Vedika Sud joins us on the show once again. Vedika, great to have you with us. I have to say, you know, I am watching social media avidly overnight
and what is so horrifying in addition to what you're seeing here is the pleas for help that people are making on social media.
Just talk us through what you're hearing from people.
VEDIKA SUD, CNN REPORTER: Well, Julia, a lot of people have been saying that while they are angry with the Modi government here in India, they are
relying on people on social media. There are a lot of volunteers who are helping.
You'll hear desperate pleas, Julia, and if you have been watching them overnight, you would be quite dejected as someone who is closely monitoring
what is happening in India.
Being an Indian myself, I read them every day. I retweet to help people who are reaching out for help. They are asking volunteers to help with plasma
donation. They are asking volunteers to get them get one ICU bed for their daughter, mother, sister, anyone in the family, and more than anything
else, they are asking for oxygen supply.
Oxygen still is something that is in less supply across India. The government of India has strongly denied that they have been a bit slow in
distributing any medical aid coming in globally, but, yes, on the ground we've been sending you reports of some people who want oxygen and ICU beds.
So, it still remains a grim situation here, Julia. But just adding to the numbers you had, India has the second highest total number of confirmed
cases of COVID-19 after the United States. In the last one month, India has reported over 8.3 million confirmed cases of COVID-19.
Now, a western state of Goa where you know, a lot of people go as a destination kind of place, you know, foreign tourists visit it as well has
seen more than 51 percent active cases taking place out there, which again is a very worrying figure, which means one in two people who are testing
are testing positive.
You also have the northwestern state of Rajasthan that has gone ahead and announced a temporary lockdown, like many other states.
So, yes, there are curbs in place, but what really stands out is how civilians are coming together, communities are coming together relying on
each other at this moment because they're angry with the government and they claim that there has been inaction to a certain extent by the
government when it came to detecting the surge, the second wave surge here in India and that's why they are relying on each other which is heartening
in a way which is also saying a lot about the Indian government at this point in time -- Julia.
CHATTERLEY: Yes, heartening to watch, but also heartbreaking at the same time. Vedika Sud, thank you for that. Stay safe please.
Okay, to Japan now. A state of emergency is extended for Tokyo until the end of this month, the country struggling with the fourth wave of COVID-19
less than three months before the Summer Olympics, as Blake Essig reports.
(BEGIN VIDEOTAPE)
BLAKE ESSIG, CNN INTERNATIONAL CORRESPONDENT (voice over): Infectious disease specialist, Dr. Hideaki Oka is making his rounds.
For now, it is relatively calm here in the COVID ward at Saitama Medical University, but all of that can change in an instant.
DR. HIDEAKI OKA, SAITAMA MEDICAL UNIVERSITY (through translator): If two patients entered today and another two patients are admitted tomorrow and
all cases turn out to be severe, the day after tomorrow, we will already be in a crisis.
ESSIG (voice over): A crisis that has the potential to explode in just a few months when tens of thousands of people from more than 200 countries
enter Japan to participate in the upcoming Summer Olympic Games. It's a frightening scenario for chief nurse Kyoka Ioka who has treating COVID-19
patients since the beginning.
KYOKA IOKA, CHIEF NURSE, SAITAMA MEDICAL UNIVERSITY (through translator): I'm sorry for the athletes, but I'm terrified that the Olympics are going
to happen. Is it really worth it? We are in the middle of the fourth wave and what is the point of having the Olympic Games now?
ESSIG (voice over): Despite overwhelming concern from the medical professionals and the Japanese public, Olympic organizers remain determined
to hold the already once delayed games this summer pointing to COVID-19 countermeasures outlined in a series of playbooks.
ESSIG (on camera): It was only just a few months ago that a third wave of infection pushed Japan's medical system in some spots to the breaking
point. Here in Saitama, medical staff say they still haven't recovered.
ESSIG (voice over): While Japan's medical system as a whole is strained, the U.K. variant has brought the system in western Japan to its knees.
DR. HIROO MATSUO, INFECTIOUS DISEASE SPECIALIST (through translator): It's really like a natural disaster in our hospital, but it's a disaster that
people on the outside can't see.
ESSIG (voice over): Unlike previous variants, Dr. Hiroo Matsuo, an infectious disease specialist at Amagasaki General Medical Center in Hyogo
says the current virus variant is spreading faster and seriously impacting younger people with nearly 1,800 people waiting to be hospitalized.
MATSUO (through translator): Amid this fourth wave, hospitals are finding they can't admit patients or even treat them, some of whom are dying at
home. We are confronting a situation where we want to take more patients, but we just can't.
ESSIG (voice over): The same situation is unfolding in neighboring Osaka. According to the government website, the hospital bed occupancy rate is
maxed out at 103 percent and nearly 3,000 people are waiting to enter a treatment facility. The result, doctors like Ku Kurahara are left to
repeatedly make a heart wrenching choice.
DR. KU KURAHARA, KINKI CHUO CHEST MEDICAL CENTER, OSAKA (through translator): We are forced to make decisions on which lives to choose save
by providing a respirator or not.
ESSIG (voice over): With hospitals already struggling to cope with the sheer volume of sick patients, lacking enough beds and adequate staff,
experts feel the Olympics could take the entire Japanese medical system past its breaking point.
MATSUO (through translator): I think if we did allocate help for the Olympics, then our medical system would totally collapse. We're living
through a disaster at the moment, so we firstly have to find ways of overcoming this.
It's so difficult to be thinking about the Olympics while we're living through this disaster.
ESSIG (voice over): A disaster, Dr. Matsuo says, with no end in sight.
Blake Essig, CNN, Tokyo.
(END VIDEOTAPE)
CHATTERLEY: Green to go. Going on holiday, that is, the U.K. is set to unveil its green list of quarantine free holiday destinations later today.
The plan is as Brits can restart international travel on May 17th.
Scott McLean joins us now with all the details. Scott, so talk us through the traffic light that we are expecting to hear from the government today
and does it make a difference if you are fully vaccinated by one of those that have been authorized, a vaccine that's been authorized in the U.K.? Is
there a way around the traffic lights? I can't get my words out.
SCOTT MCLEAN, CNN CORRESPONDENT: Yes. The short answer to that question, Julia, is, no, which a lot of companies are certainly taking issue with at
this point.
I should remind you as well that right now in the U.K., it's not that Brits are just discouraged from going on holidays abroad, it's actually
technically illegal at this moment, at least for another 10 days.
And so, today is the day when Brits find out where exactly they can go on holidays, at least where they can go on holidays without much of a
headache. So as you mentioned, this is going to be a traffic light system. Green, amber, red. Green, no quarantine at all; amber, you can quarantine
for 10 days at home and get out early if you test negative; and then, red means you are locked up in a government hotel room for 10 days and no
questions asked, no excuses.
In all of these cases, tests are going to be required on day two when you get back and before you actually board the flight to get back to the U.K.
and all of these come at a cost. How does the government decide this list? Well, it is based on the factors you might imagine.
So, the infection rate, the testing level, the country's ability to actually spot new variants and sequence the virus, but the government has
not published a firm, firm list of criteria as to how they're going to decide this and so it's really anyone's guest until they announce it
sometime later today -- Julia.
CHATTERLEY: Yes, I'm going to have a very personal interest in this, of course, because I would like to come home and see my family at some point
soon. So, just understanding which countries are on which part of this list is going to be vitally important, too. But you also mentioned something
there that I think is vitally important if they are hoping to get people -- allow people to go and travel and go on holidays.
The cost. The cost of doing a PCR test, whether it's one or two, whichever country we're talking about.
[09:15:15]
CHATTERLEY: In certain cases, and I was just looking at it earlier today, 120 to 160 pounds? Though I know the government is trying to bring this
down. It's a lot of money.
MCLEAN: Yes. And that's one of the reasons, Julia, that the travel industry is taking issue with a lot of what the government has announced
here. A, because, well, even to green countries, you'll have to test before you get on your return flight and you have to test when you come back, and
number two, they're not going to take vaccination status into account.
And three, just the sheer number of tests, which you'll have to pay for most of these, and so you can imagine how the cost of these tests is going
to add up, especially if you're going to say, an amber country where they are going to require you to take a test before you go on your outbound
flight to that country and then maybe they will make you test when you arrive there as well, so that's two tests.
Then when you want to go home, you'll have to test before you board your return flight, another test on day two, it's an amber country. You want to
get out of quarantine early, test on day five and then another one just for good measure on day eight.
We're talking six tests there, Julia. So, yes, okay, travel corridors, they are opening. People can go on vacation this summer, but it's still going to
be a bit of a headache.
CHATTERLEY: Yes, and the quarantine, in addition to the added cost of all of the tests potentially and the fact that you've had a vaccine and it
doesn't qualify. I can understand what the travel industry is saying, you're not helping us. You're trying, but you're not helping.
Scott McLean, thank you so much for that.
All right, still to come here on FIRST MOVE. The bumpy boom. Don't panic about the surge in U.S. economy says Nobel laureate, Paul Krugman. We will
explain why next.
And the diamonds that weren't forever, Pandora ditches mined gems for the lab grown variety. We'll discuss. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from New York.
We are on the job for you this Friday as we break down today's disappointing U.S. employment report, 266,000 jobs were created last month,
far fewer than expected with notable weakness in the manufacturing sector that has been dealing with numerous supply disruptions.
[09:20:09]
CHATTERLEY: Jobs growth in March was revised sharply lower as well.
I have to say, U.S. futures holding up pretty well on the news, perhaps on the perception that this justifies the Fed being on hold for longer. You
can see the NASDAQ gaining some one percent premarket.
Also, today, lots of market chatter surrounding the Federal Reserve's latest financial stability report, which offers this sobering assessment of
the current market.
The Fed warning on hidden hedge fund risk, and saying that some asset valuations may be quote, " ... vulnerable to significant declines should
risk appetite fall."
Now April's jobs numbers is the outlier in a run of data signaling a strong U.S. recovery from the pandemic that had some pundits fretting about what
my next guest calls a big, bad boom.
To those worrying about an economy that is too hot to handle, he has two words of advice, don't panic.
I am pleased to say to you that Paul Krugman, "New York Times" columnist and Nobel laureate and author. His most recent book is "Arguing with
Zombies: Economics, Politics and the Fight for a Better Future."
Professor Krugman, Paul, fantastic to have you on the show. Your article is fantastic and I want to talk about that, but first I should get your view
on what you make of today's job numbers please.
PAUL KRUGMAN, ECONOMIST: Yes. I mean, the short technical summary is what the hell. That doesn't match anything that we're seeing in other data,
other evidence, and it could be that something is going on or it could be - - I mean, a general principle when you get an economic number that doesn't really look like anything else you're seeing is to question whether there's
some kind of data issue.
The BLS is a totally above the board agency, but stuff happens and, you know, people I'm talking to, obviously a huge flurry of e-mails back and
forth about this are saying, well, maybe there is some issue with seasonal adjustments. We are seeing some problems in manufacturing so maybe some of
these chip shortages are having an effect but, you know, I think the basic point right now is, okay, this kind of dents the narrative.
Certainly, it dents the narrative about a runaway boom, but I think we wait and see to figure out what is really going on here. It just is so much with
everything else.
CHATTERLEY: I was going to say, one data point does not a trend make. But anecdotally, and I was talking about this earlier on the show, I mean, we
do have signs.
I mean, the National Federation of Independent Business saying 42 percent of small to medium size businesses saying, look, they are simply struggling
to hire. Noises from the manufacturing sector that is saying, they are even struggling to hire entry level.
Do you think this could be a supply issue feeding into what was up until this point? A demand issue?
KRUGMAN: It doesn't look like it. I mean, you know, we have two surveys. There's the Enterprise Survey, which is the one that gave us the
surprisingly weak number, but the Household Survey is saying that several hundred thousand people entered the labor force, which is not consistent
with that story.
You had big job gains in leisure and hospitality, which is exactly the sector you'd expect people to be most inclined to stay home because of
either virus risks or unemployment benefits. So the details of the data don't actually look like a labor constraint story.
So -- and as I pointed out in today's column, the -- whenever the economy is recovering, you always get a lot of small businesses saying we can't
hire workers, which is really saying at least in the past, it's really said, well, last year we were able to get anybody we wanted because there
was a huge surplus and this time, we actually might have to offer higher wages, which they read as a labor shortage.
It's not -- I mean, I am not going to say that there is nothing there, but there really is nothing in these data to support that view.
CHATTERLEY: So, that brings us back to your big bad boom theory and the rising panic of things like inflation based on all of the things we have
seem in the past when we come into a recovery period. Admittedly, this one is -- to quote you in another technical term, "weird."
But, lumber prices, commodity prices. Why shouldn't we be alarmed?
KRUGMAN: Well, I mean, there's -- first of all, there's just the historical record which is that in the past, surges in commodity prices,
certainly in the past 30-plus years have not led to sustained inflation.
So I've been getting some mail already saying, have you looked at what's happening to copper prices? Well, I actually talked about copper in the
column and pointed out that there was a huge surge in copper prices in 2010-2011 which turned out to be nothing about future inflation. It's just
a bottleneck that tends to happen when the economy is recovering, and so, it is not such a big deal.
Lumber is a new one. I mean, this was -- we don't usually have sawmills guessing wrong about how much capacity to have online and that's because
this was such a weird recession and recovery.
[09:25:05]
KRUGMAN: But there's just nothing it -- everything is about not short term fluctuations in particular commodities, but it is about whether inflation
expectations are getting built into setting of prices -- not you know, raw material prices currently, but expectations of future inflation. And so
far, there's no sign of that.
CHATTERLEY: In earnings season, we had the most mentions of inflation since 2004. We had Warren Buffett saying, look, we are raising prices, our
supply chain are raising prices, and people are accepting it, and we're getting on with it.
These are again, anecdotal signs, and some or enough are talking about labor shortages, whether or not it is relevant for today's jobs number at
all. How important is this? Because the real question is, at what point do all of these things feed into future inflation, or at least future
inflation expectations? And then become entrenched?
KRUGMAN: Yes, that's a hard -- it's always hard to judge. Fine, you really do want to be looking for anecdotes, because the official data, well, you
want to be looking at some data as well. But you won't be looking for anecdotes, but you want to be looking for anecdotes, anecdotes to go
beyond, well, the cost of our materials is up, so we're having to raise prices.
You want to look for anecdotes where people are saying, well, you know, we're going to be setting our price for the next year, we're going to be
doing this. We expect that the overall level of price is going to be rising seven percent over the next year, so we need to get ahead of that.
So that that's the kind of thing you're looking for. And of course, that's hard to track down, but you look for it. And then we're looking for, I
think, at this point, we really need to be looking at measures of underlying inflation, which is a well-defined concept, but hard to map into
actual data.
But I'm looking at things like medium price inflation, trimmed mean price inflation, things that that strip out the bumper shortage, that sort of
thing, and then focus on what is probably more deeply embedded in the economy, and those things are not at this point, showing any signs to
things that we should be concerned about.
CHATTERLEY: So the shortage economy tends to work its way out, even in this kind of environment, which is plain weird.
KRUGMAN: Yes, I mean, you know, there's-- at some point, we won't have a large fraction of the world's containers aboard ships that are steaming
back and forth outside the ports of California. And so the container shortage will abate.
At some point, lumber supplies, it's not really even -- it's not trees, it's sawmills. At some point that will catch up. So those sorts of things,
and we've been here before. Again, we really need to -- maybe it helps to have been very involved with the debates around 2010-2011, when an increase
in commodity prices led to Congress people calling Ben Bernanke on the carpet and saying you're debasing the dollar, and it turned out there was
actually nothing there.
And that's the -- that's kind of where we are right now.
CHATTERLEY: Oh, I had a few options of what I was going to ask you, and now I've decided, yesterday on the show, I was making the point that 21
percent of dollars out there were printed in 2020. And someone pointed out to me, and he's a friend of both of you and I that we need to be looking at
the velocity of money, how much time, how many times and in over what time period money actually changes hands?
And of course, that's fallen through the floor and hasn't adjusted. What's more important for inflation and the inflation discussion? Is it the sheer
amount of money printing that's going on, or the velocity of that money?
KRUGMAN: Well, I mean, the velocity is -- I'm trying to find a way to say this in English -- but the velocity is important.
CHATTERLEY: I know.
KRUGMAN: When you have a -- you know, when we're in an environment of zero short term interest rates, there's not a whole lot of incentive to get --
that money is really burning a hole in your pocket. It's just another form of saving.
And so it's devoid -- anything -- the past 15 years have been absolute death on anybody, on the idea that the quantity of money is the big driver
of inflation. All of our monetary aggregates have gone through the roof without showing up in higher inflation because we're in a situation where
interest rates are very low, and there's no -- the velocity of money is basically at this point, if you put out more money, all that happens is
that the velocity goes down, it doesn't actually feed the economy.
So no, I mean, of the various things, I think, I take seriously concerns that we might be delivering a stimulus big enough to cause an inflation. I
consider it totally off point to look at M2 or M1 or high powered money or any of those things and say, oh, look, that's inflationary because that --
we're not in that kind of world and haven't been for a long time.
CHATTERLEY: Paul, I have 10 seconds. Nothing about what you're seeing is inducing you to buy crypto.
KRUGMAN: All right, that still looks to me like it's a combination of a libertarian derp and technobabble. Sorry, just because the price is high
doesn't make that --
CHATTERLEY: Just checking, just checking. Paul, great to have you on. Paul Krugman, "New York Times" columnist and Nobel laureate there.
KRUGMAN: Thank you.
CHATTERLEY: Thank you. We'll speak soon.
The market opens next.
(COMMERCIAL BREAK)
[09:32:31]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. markets are open for business on the last trading day of the week, and we've got a mixed open on news
that the U.S. economy added fewer than 300,000 jobs last month.
Just to remind you, we were expecting job growth of more than one million.
Now, bond investors reacting to the data, too, 10-year yields falling to almost one-month lows. Today's numbers all the more surprising given the
recent evidence of stronger U.S. growth, including widespread labor, parts and commodity shortages that might fuel inflation as we were discussing
with Paul Krugman.
Lots of talk too you now that the Biden administration might be forced to dial back on aggressive stimulus plans as the economy booms.
So what does this jobs number mean? Joining us now Julian Emanuel, the Chief Equity and Derivatives Strategist at BTIG. Julian, great to have you
with us. Your thoughts?
JULIAN EMANUEL, CHIEF EQUITY AND DERIVATIVES STRATEGIST, BTIG: Well, it's a lot to unpack, and we'll try and do it.
First of all, the number itself unequivocally disappointing, no question about that. But what it really shows you is that the last year that we've
been living in and for the foreseeable future, the uncertainty around both the actual data itself, and the ability to predict the data, the economic
volatility, day to day and week to week in the economy is very difficult for economists to model.
Now from our point of view, the reason that there it was the significant shortfall, again, couple of things stand out to us. Number one, the
participation rate continues to be very, very subdued. I think that's due to a combination of the supplemental unemployment benefits, which run into
September. But also when you think about it in terms of the service sector, there could be some residual hesitancy to wait until joining the labor
force, until the population becomes even more fully vaccinated.
And then the other thing that stands out to us and this is something we've been talking about a lot the last several weeks, is if you look at the
manufacturing number, it was actually down and what that points to is this whole idea of supply chain disruption.
Think about the news that we've had of all these auto plants being idled in terms of capacity because of the semiconductor shortage. That's something
that's likely to be with us in fits and starts for quite a while yet to come.
CHATTERLEY: Yes, chip shortages, the other one, I guess, it would be lumber as well with the construction sector if you either can't buy get
hold off or afford lumber, quite frankly, then that's going to impact him that part of the market, too. What does it all mean? Because you describe
the markets being in a pause phase and some part of the question here is whether we continue to see rotation within the aggregate stock market or we
see some kind of pullback, consolidation period. What do you think?
[09:35:20]
EMANUEL: Well, sure, to us for the time being and actually, if you think about it, today's data likely reinforces this psychology because what it
does is that it convinces the markets incrementally more to believe Chairman Powell's narrative that inflation is transitory, rather than more
permanent.
Now, regardless of the labor market weakness with regard to today's report, we are still likely to see some very high inflation prints. As you
mentioned, we're seeing it in the price of lumber, corn, and many other things.
But in essence, to us, what it likely does, and you're seeing it in the markets as they opened this morning, is that the reaction is to go back to
higher multiple, you know, sensitive names to rates, technology, we happen to think consumer staples is a very interesting area in that regard because
it has lots of bond like characteristics.
And there are a whole slew of consumer staples' names that are able to pass on the price increases that they're seeing through their supply chain. But
at the broad market level, it likely means continued churn, particularly if as some of the gains in some of the more deeper value stocks, financials,
energy, things that we like long term, come off a little bit, given the softer data.
CHATTERLEY: There's been some strange things going on, I think reaction during earnings season was key, sort of a weak response to the tech
earnings, even when bond yields are coming down, which should be a good thing for tech, the NASDAQ was sort of underperforming, volatility rising
even as the stock market rises. Can you just explain to us what we're seeing?
EMANUEL: So first off, on volatility rising, when the stock market rising, that is a bit of a yellow flag for us and again, increases the probability
that if the inflation data heat up over the coming weeks, as we expect possible, the likelihood of a pullback, not just rotation increases.
This happened last summer, before you saw a pullback in September. It happened at the end of 2018, we had a very difficult fourth quarter. It
also happened at the beginning of 2018. It's just the market expressing its discomfort with the rapidity of gains.
It doesn't say anything about the long term potential for stocks to rise higher, which we believe is the case, but it does warn of caution in the
near term, and then again, this whole idea that between technology and value, we have seen a lot of the meme stocks, biotech very weak, the former
leaders start to weaken. It does point to the potential for this pause to go on as earnings, which admittedly incredibly strong sort of play catch up
to where market valuations are.
CHATTERLEY: Yes, makes sense to me. I feel something. Julian, great to have you with us. As always, thank you for your perspective. Julian
Emanuel, Chief Equity and Derivatives Strategist at BTIG.
EMANUEL: Thank you.
CHATTERLEY: All right, coming up after the break, they're bold and they're beautiful, at least to me, they are. Diamonds with a difference are now
catching the eye. Stay with us.
(COMMERCIAL BREAK)
[09:41:54]
CHATTERLEY: Welcome back to FIRST MOVE. For generations, lovers of diamonds have been drawn by their scarcity, purity and natural beauty. They
are coveted as a precious natural commodity. Well now, there are signs that mined diamonds are being loved a little less, because of the environmental
and human cost of extracting them.
Instead, buyers are falling for stones made in a lab. You're actually looking at a range of manmade diamonds from Pandora, the world's largest
jewelry maker. It says that will no longer use mined diamonds and that's partly because consumer demand is changing.
Alexander Lacik is the CEO of Pandora and joins us now. Fantastic to have you on the show. What's been the response to your announcement?
ALEXANDER LACIK, CEO, PANDORA: The response to the announcement has been fantastic, at least from the media angle and our employees. We only started
selling them in the U.K. yesterday. So it's a little bit early to say how the consumer response is, but we're hopeful.
CHATTERLEY: How much do they cost? I mean, obviously, the cost of a mined diamond varies greatly, but just give me a sense of the cost of creating a
mined diamond because the cost has come down quite dramatically in recent years, too.
LACIK: I mean, the starting point for or the entry price for a ring at 0.15 carat in our range is going to be somewhere around $300.00, and then
it goes all the way up to let's say one and one and a half thousand dollars for a one-carat ring. And then that you can contrast to a quite more
expensive versions when they are mined, probably to the tune of both 2x and 3x what I just mentioned. So there's a large value difference.
CHATTERLEY: You talk about them being a symbol of innovation, I think and progress and beauty, but also sustainability. You know, I've read a number
of different reports. And obviously the source here and who is funding the report matters whether they are within the diamond industry themselves or
not.
But they talk about the carbon footprint of lab produced diamonds is actually being higher. Alexander, can you give me a sense of the relative
costs here outside of price.
LACIK: I mean, if you look at the environmental footprint, the vast majority of that comes into the production of the stone. And we -- and
there's a lot of electricity, of course that's being used in this instance, but we're using 60 percent renewable energy on the current production run.
And next year, it is going to be hundred percent of renewable energy.
So actually the footprint is a fraction in comparison to other alternatives out there.
CHATTERLEY: And you've also said you're only going to use recycled gold and silver products by 2025 as well. So this is a fundamental shift, I
think throughout Pandora's jewelry.
LACIK: Well, I mean, we've taken a stance as a company to move to becoming a low carbon business. And as part of that, we've looked at you know,
initially within our own four walls, what's the impact that we do? And of course the materials, the silver in particular, which is kind of the volume
product inside our four walls.
So we are already quite far advanced when it comes to using only recycled. Gold, most of it is actually recycled of what we are currently using, then
we've taken a stance on kind of only using renewable energy to run our plants in Thailand.
[09:45:22]
LACIK: And then we've also joined the science-based initiative where we're trying to figure out what our impact is outside of our own four walls and
we are going to publish some ambitious targets on that later this year.
So we're taking a holistic view on how we can become a much more responsible corporate citizen when it comes to this aspect.
CHATTERLEY: Because it is a consumer view, too, because I mentioned at the beginning, in the introduction, the exclusivity of a diamond, do you think
that ever goes away ultimately? Or are you just targeting a specific subset, because some of the images that we were seeing, I couldn't tell the
difference between a mined diamond there or a lab produced diamond.
But when I look at the amount of jewelry that you sold as pieces of diamonds, 50,000 versus 85 million pieces of jewelry that you sold last
year, it's just a fraction of your business? How much more business do you think you can capture with a lower price point and using this specific lab
produced diamond?
LACIK: So I'd like to talk about something else.
CHATTERLEY: Please do.
LACIK: I think the reason why you buy this is not because it's cheap, rather the opposite. There's an allure, there is a magic around this space.
And if you look at what, you know, the existing diamond market has been, you know, pegging their marketing idea around has been about this eternal
promise, which, you know, I think the biggest coin that "Diamonds Are Forever," and of course, has been much more directed towards the bridal and
engagement market naturally.
We have tried to kind of not copy that, but rather create our own marketing platform around this idea of infinite possibilities. So we really want to
celebrate women that have been through a transformation or they want to kind of maybe plan for a transformation in some aspects of their life.
That's the marketing idea, then, of course, we are turning to people that are coming into the Pandora frame today, and affordability is a very
important aspect for them.
So I'm actually not trying to compete with the people that are out to spend a very different amount of money for a bridal proposition. We are here more
as a self-purchasing idea and the affordability aspect is important for the Pandora customer.
So I think the starting point is very different. We still want to make sure that there is allure and magic around this proposition. This is not a value
grab. I think that that would be, you know, a failed proof -- I mean, that would not be a successful route if that was my only argument.
CHATTERLEY: No, but you did answer my question actually, in the end. So "Diamonds are Forever" and now they're for everyone, too, that can be your
mantra.
LACIK: Yes, it is.
CHATTERLEY: Alexander, great to have you with us. Yes, I agree. Yes. Alexander Lacik there, the CEO of Pandora. Great to have you with us.
All right after the break, strap on your diamond encrusted hardhat for what goes up must come down.
As man out of control rocket spirals to the Earth at thousands of miles an hour, the Chinese who put it up there say, it will probably be okay.
Stay with us. That's next.
(COMMERCIAL BREAK)
[09:50:34]
CHATTERLEY: Welcome back to FIRST MOVE. Tesla CEO, Elon Musk gearing up to host popular American comedy show "Saturday Night Live."
(BEGIN VIDEO CLIP)
ELON MUSK, CEO, TESLA: Hi, I'm Elon Musk. I'm hosting "SNL" this week with musical guest, Miley Cyrus.
MILEY CYRUS, SINGER: What's new with you, Elon?
MUSK: I just did a successful rocket launch this week.
UNIDENTIFIED FEMALE: Wow. Well, I did my laundry.
MUSK: Congrats.
UNIDENTIFIED FEMALE: Actually, no, I didn't.
(END VIDEO CLIP)
CHATTERLEY: And Dogecoin has been trading up in anticipation that he will use his time on "SNL" to promote the cryptocurrency.
Paul La Monica joins me now. Paul, I have to say, I'm not the best autocue reader in the world, but that was pretty dodgy, but most importantly
crypto. Does he dodge talking about the cryptocurrency or does he talk about Dogecoin? Et cetera? What do we think?
PAUL LA MONICA, CNN BUSINESS REPORTER: You'd have to think that the writers are going to let Musk have some free rein, you know in a nod to his
musical guest, will any comment wind up being a wrecking ball to cryptocurrency prices, that remains to be seen.
Very fascinating, though, that Elon Musk is in many respects almost a character now. So there's a lot that he can poke fun at himself and that
the writers can help him along. Dogecoin and Bitcoin, he may talk about that. He may talk about Tesla a little bit, so watch Tesla stocks on
Monday.
I doubt he's going to finally announce a Chief Operating Officer on "Saturday Night Live" for Tesla, but who knows? He has done crazier things.
It's going to be very fascinating to see if Bitcoin, Dogecoin or other cryptos actually move. Is there the audience that watches "Saturday Night
Live" religiously -- are they crypto fans? Maybe. Maybe not.
So I think it's going to be interesting to see if prices move or if it's kind of a nonevent because again, he is not likely to say anything that
would be material, one would hope, during this venue. It's not a shareholder event. It's not an earnings call.
CHATTERLEY: I have to say, I think we're very hopeful in saying that. I feel like Elon Musk is a law unto himself, quite frankly, and says whatever
he feels like in the moment and tweets about it.
But we have seen this dramatic run up in Dogecoin. And I was just looking at social media and the sheer excitement about references perhaps that he
makes to space and off to the moon and people saying that that's some kind of hidden meaning for the crypto space and the prices are going to rally
further.
This is going to be a unique moment, I think for "SNL," for Elon Musk and for cryptocurrencies and I loved your wrecking ball reference, too.
LA MONICA: Thank you very much. I mean, yes, it's possible that he could say something that moves the broader crypto markets. As you point out,
Dogecoin is now a top five coin. It is number four. It is trailing only Bitcoin, Ether and Binance. So it is legitimately a major presence in the
cryptocurrency world, even if it still may be just a canine-themed joke.
CHATTERLEY: Yes, and this is -- this is really important, the number of people that I have conversations with about this, that we're not talking
about cryptocurrencies before or haven't recently, this, in some ways captured attention.
And of course, what we can't get away from is there is a business aspect here because of course, Tesla has Bitcoin on the balance sheet and a lot of
it.
LA MONICA: Yes, that is something that is obviously -- it makes it material or Elon Musk and Tesla anytime he talks about cryptocurrencies, if
he is moving the prices, that obviously helps Tesla from the standpoint of their investment in Bitcoin, it could go up or down as the case may be.
CHATTERLEY: Yes.
LA MONICA: So yes, I think people will be watching to see what he says, but there's so much more that's ripe for comedy. I mean, going to Mars,
having a child with a name that when you look at it, it's reminiscent of a 70s prog rock album title.
So there's a lot that I think the "SNL" writing team can prod Musk into making fun of himself, hopefully. This self-deprecating humor for one of
the world's wealthiest persons, I think is what we all need right now. We don't want him taking himself too seriously on "SNL."
CHATTERLEY: I couldn't agree more, some self-deprecation, I think given all this success will make him well and truly loved.
It's going to be fascinating to watch. Paul La Monica, thank you. I'd keep him adlibbing versus reading autocue. Thank you.
All right, now it is that rocket that's out of control and is going to crash back to Earth this weekend. China says, the chances of anyone coming
to harm are extremely low -- phew.
[09:55:07]
CHATTERLEY: This is a video of last week's launch. Right now, the rocket's empty core stage is barreling around the planet at 18,000 miles an hour. It
is expected to re-enter the Earth's atmosphere over the weekend.
The good news, this is not the first object to fall to Earth and experts say, the rocket poses very little threat to our safety.
And here's to happy hour that's out of this world. A bottle of Bordeaux that was aged for 14 months on the International Space Station is now for
sale. It is expected to fetch a million dollars at Christie's.
The bottle comes with a decanter, glasses and a corkscrew made from a meteorite.
The European startup company, Space Cargo says it will use the proceeds to fund micro gravity experiments in farming.
That is pretty cool.
And that's it for the show. If you missed any of our interviews today, they will be on my Twitter and Instagram pages. Search for @jchatterleyCNN.
In the meantime, stay safe. Have a great weekend.
"Connect the World" with Becky Anderson is next.
(COMMERCIAL BREAK)
[10:00:00]
END
