♪ caroline: from bloomberg world headquarters in new york and right here in london, joe: caroline hyde. i'm joe weisenthal. romaine: i'm romaine bostick for the second day, concerns about inflation. joe: the question is, what'd you miss? caroline: looks like a semiconductor church we were one about at the end of 2020 is your. gm with a cautious cover

forecast as it is damaged from a shortfall being felt throughout the global industry. semiconductors, they are a bellwether of the world economy, and this supply issue has the potential to spill over to everything from cars to mobile phones to fridges. and it speaks to the concerns romaine just mentioned, the supply-side struggles and warnings about inflation that many have been wringing their hands about. joe, where is the inflation -- totally muted. but are pressures perhaps building as these shortages and semiconductors seem to show? joe: inflation is right around the corner. it's coming, i swear, i promise. i know it didn't happen last month or the year before or five years. it's coming, though. data still not showing any real signs of burgeoning price pressure.

it will probably start to turn up again in the next few months because of what economists call base effect comparable to the crisis last spring. in terms of the real broad based sustained increase that would unnerve the fed, not seeing it yet. romaine: we heard from powell a little bit earlier and he put you much made that point--he pretty much made that point. joe: he agreed with you, romaine. he looked at your tweets earlier. romaine: he's my biggest fan. he watches every day. joe: for more, were joined by reade pickert a bluebird economics. was there anything in this report at all that seemed inflationary? we were talking the used car prices and stuff like that. anything like that this time around? >> as you guys were talking about, today's data showed us how the pandemic is continuing

to constrain inflation. the softness was really driven by price declines for items used in a vehicles and things like airline fares and hotels. we continue to see that the pandemic is having this devastating impact on demand for services more generally. we saw services prices excluding energy unchanged for a second month. but there were a couple little parts that accelerated a bit in terms of -- apparel, for instance, increased 2.2%. medical care services picked up a bit. more elective surgeries. but really, inflation pressure, at least for now, quite tame. caroline: medical care can always count on it to increase. meanwhile, what about labor part of the equation? we know we will have perhaps

transitory inflation at some point, the base effect way in. but underneath it all, with powell talking about the labor market not being where he wants it to become is there any sort of wage inflation coming through? reade: you know, i think that is a key difference between have a lot of economists looking at inflation and markets are looking at inflation. we have markets really basing inflation expectations on another huge round of stimulus and the idea that when the vaccinations are more widespread, americans can travel and prices for services will go up. even larry summers mentioned the potential of biden's $1.9 trillion plan for inflation. the main basis for the economists expecting inflation to be tamed is the fact that you still have high unemployment and still have the labor market lag.

powell really leaned against the idea that the economy might overheat with additional stimulus earlier today. romaine: i want to stop and take a quick listen to what powell said on that point. mr. powell: there could be upward pressure on prices. again, my expectation would be that that would be neither large nor sustained. we are looking at actual inflation. romaine: embarq, largely -- and look, large inflation seems to be -- everyone knows i'm inflation truther, but you solve bill dudley talking about driving up prices. adding about half a percentage point just because of the way the comparisons shakeup. is there any reason to believe that the long, sustained part that powell is focusing

on could be long and sustained if the short-term issues don't really had?-- rear their head? reade: it could be, but that is one of those things we are really not going to know for a while in terms of how the pandemic shakes out and the numbers we are seeing about monthly effects from various prices for various goods and services jumping or falling or whatever it may be. it is going to be hard to see substantial trend until we get past some of these month-to-month drivers, if that makes sense. romaine: yeah, that makes sense. always great to have you, reade. always makes sense to us. come out next, when area where there might be inflation, the semiconductor area. we heard about chips shortages. this is bloomberg. ♪

romaine: welcome back. today we are focused on inflation, or lack thereof. one area that might be a concern is what is going on in the chips space. we heard a lot about shortages, and we talk about the auto sector, the week or so ago we had earnings and they said the ship shortages might be widespread. joe: starting to get more and more attention, the fact that yes, there is a shortage of chips and basically everyone is feeling this, whether it is tech companies specifically, gm,

ford, apple, sony, and nintendo, all of them, there is such demand. you had car companies canceling orders a year ago and then having to reorder them. big shortage affecting all kinds of companies. joining us with more insight is the bernstein research managing director and senior analyst who knows chips actually well. how big of a problem is this, and how long is it going to take, in your view, to get worked out? >> i think i'm going to separate auto versus every thing else we are seeing. the shortages are most acute within the auto space. you alluded to some of the reasons. obviously come in the heat of the covid depression a year ago, automotive was hearst with-hit the worst- on the supply as well as the demand situation. people didn't want to buy cars, at lease momentarily. all of the auto factories shut

down because of covid. because of this, auto vendors cut their orders to the semiconductor companies and the semiconductor companies reduced factory loadings and didn't make parts. coming out of covid, a lot of parts of the world were covered much quicker than we thought, especially here is that buy cars like china and asia. demand picked up quickly because people did not want to take republicans rotation from they wanted to drive for -- people did not want to take public transportation, they wanted to drive. fort lee can you cannot turn on the semiconductor supply -- unfortunately computer cannot turn on the semiconductor supply like a light switch. it is a massive supply disruption within automotive coupled with significant demand increases causing these problems will it will last a while. the channel, the inventory channel is bone dry. the auto channel tends to run in time and they don't all of a lot

of buffer inventory. it is bone dry right now. they will be selling everything they can make the next several quarters. if you look at the forecast for auto recovery, it is still below the level where things were running pre-covid. the auto recovery has some legs to it. in some sense peripherally related, as the auto guys cut their orders, that capacity got backfilled by our the place because overall commanding general was remarkably resilient. --overall demand in general was remarkably resilient. a lot of it requires leading- edge capacity -- cpu's, 5g chips, graphics chips, all that kind of stuff is a general, leaning into capacity is near and dear right now for the year is reason they put out a $28 billion rise.

supply was tight even before covid, now with these things showing increased demand, that is causing problems. that is what qualcomm was alluding to. you have different drivers depending on which end market and every thing else. tights up like and in some cases reduced supply commit is going to be a while. caroline: moving from what is driving it to the outcome, i want to bring in adam jonas of morgan stanley. he was speaking about the auto impact. adam: it is a short-term blip. i don't want to minimize it, x number of weeks production. if we are having this conversation a year from now you will look back and no one is talking about this chip shortage. they will be talking about the battery shortage, the biden administration's infrastructure project and where taxpayer dollars are going to work there. that will be the discussion. the chip shortage thing is just

a blip, with all due respect, and investors are looking way beyond that. caroline: stacy, you told us what was driving this. is it a blip in the longer-term? stacy: by definition, over a longer period of time supply has to meet demand and integrate over the timeframe. that is definitional. yes, it will work its way through fulton i think it is little more than a blip. you have had blips before. we had the thai floods in 2011 that inundated the hard drive class and impacted pc production. those were blips. this seems to be widespread for covid has been a global catastrophe. we have not had one of those before. this is going to last a while. if i'm looking at a year or two years, eventually this will work its way out. the worry people have within semis, all the committees have been putting up good numbers and

the -- we have seen this movie before. typically what happens when the leadtimes stretch out and supply gets very tight, customers order more, more than they need. there is a phenomenon on double ordering. it is something that is difficult to get a handle on, how much is occurring or not. usually what semiconductor investors watch for is the lead times pullback in an supply gets more balanced, that is when the order cancellations happen. romaine: with regard to some of the orders that might be coming in now, are the companies considering the orders now, is there the capacity for the chipmakers to do something about it or take advantage of it, or basically just get in line and wait until we are ready? stacy: right now in many cases it is get in line. the auto committees are selling everything they can make. we want -- we will have to see how this sort of thing plays out. some semi companies are

putting policies in place to minimize the risk. broad, few quarters ago -- microchip just said the other day that they are putting in the preferred customer program where if you give them 12 months of visibility, they will give you priority. they are trying to minimize these trends. this is the normal way inventory cycles tend to play out. my suspicion is that the numbers from the companies will look very good for the next few quarters and then we will see. it is anybody's guess. caroline: stacy, great to have you, great dagger focus across all of this. --great to have your focus across all of this was the we are talking about stimulus little more. our next guest says the debate around targeting relief may be

overemphasized. this is bloomberg. ♪

caroline: today we are focused on inflation, or the lack thereof at the moment. we have been talking about semiconductors. joe, u.s. stimulus efforts might fuel the debate a little bit further at least. joe: exactly right. we don't know the exact shape of the stimulus and some of the questions will be about the direct checks, who gets them, what the cut outs will be, what the phaseouts will be. there is a push for the inclusion though the $15 minimum wage. almost certainly it will be a go it alone think, unlikely to get republican support, whatever it looks like. maybe some actual votes, perhaps some actual news in the final week of february.

let's welcome claudia sahm, bloomberg opinion contributor and former federal reserve economist. you have done as much as any economist in america to popularize the idea of direct checks. you have been talking about it since long before this crisis, and now it is a prominent thing in this crisis. we are likely to get some more with the next stimulus. you think they should go broad. what is the best simple argument for going as wide as possible with who gets the checks, including the people who perhaps still make good money and have kept their jobs? claudia: the best argument is it works, right? this is my very strong opinion that we need to get this money out and we need to get it out broadly. none of these checks have gone to the top 10% of households by income. we should get these out to hundreds of millions of people. we did that in 2008 -- this is

something i followed at the federal reserve as a forecaster. i have done research on it. i looked at all of the programs after the great recession, making work pay tax credit, payroll tax cut. by far the best way to both support people and to get that economy going again is to give them money and make it big. i think this is good. and also popular, which is not real . romaine: i guess the pushback is why now. it is an easier sell your ago. now some people look at the economic data and say do we really need that right now. claudia: i think the reality is we have become so normalized to what we are living right now. one thing to keep in mind is that we are still missing 10 million jobs relative to before covid. that is a larger shortfall than we saw even in the depths of the

great recession. we are in a place of immense suffering that frankly, something we haven't seen since the great depression of the 1930's and its breadth. the census bureau tells us that in january, half of u.s. households lost employment income during the crisis. that is massive. it is not 80%. and that is with the $75,000 cut off, 80% of every man, woman, and child in this country gets money. that is a lot of suffering, and to those who say i want to get into those most in need, i answer you don't know who they are. two people use it to set it aside for a rainy day -- better to get into people who use it to set it aside for a rainy day then to ms. people who are hurting. caroline: totally understand the argument to get to people who are hurting, on the poverty

line. to people who are able to save it, and what that might mean for the demand-supply mismatch when finally you might be able to go out and spend? claudia: what we know from over a decade of research, past stimulus checks, what happened in the cares act is that people spend half to two thirds of their checks within two or three months after they get the check. it is very fast. yes, there are people who save it. yes, there are people who pay off debts. anything we can do that helps households feel better about where they are financially is good. on the savings rate, i hear a lot of people talking about the aggregate savings in the united states, and we need to remember that all of those aggregate statistics mask the fact that we have massive inequality. that top 10% is really bringing it in. and we know from past experience

they are more than happy to put it in their wealth savings account. i think we will see some pop as the economy opens up. i think we will be disappointed -- there ain't gonna be a lot of pop. we have not seen a recession like this before, we have not lived through pandemic like this in memory. we have to be clear that there are upside risks and downside risks, and we really gotta think about the balance of them and look to lessons. this stuff works. joe: it seems like we are likely, if vaccination rollout continues apace and things are improving on the virus front, we will get this reopening and hopefully that will be associated with a strong recovery. you have done a lot of work on this idea of automatic stabilizer, tying these things to fundamental thresholds into

the real economy. if you could have your dream situation right now in which we have some sort of expanded ui, director checks, etc., what are the triggers you would look for to ensure that money keeps going out the door until when? what would you want to see? claudia: i would absolutely think about conditions in the labor market. to me, whatever coverage for all means is everybody wants to be back at work is back at work-- what a recovery for all means is everybody who wants to be back at work is back at work safely. the concept of full employment, that is what our metric should be in terms of when we are getting close enough as i've done a lot of work on using the unemployment rate, which is a great way to trigger into a recession and tell us we are there. i still think the unemployment rate, despite the issues it is having at this point in the recovery, is going to be a really clear way to communicate it. but employment to population ratio -- am not going to argue

about it, but it should be tied to the labor market, and what we should be looking for, not necessarily all the way back in february, but we need to have something that's clear from got that oopmh to get it -- oomph to get into the finish line. i would've loved to the unemployment insurance benefits. that should be tied to labor market conditions for obvious reasons. if we let that stop too soon, we have real problems. reauthorize it, kick the can down the road three months, four months, that causes a lot of strain on those families and a lot of strain in general. caroline: well put. claudia sahm, we thank you so much. bloomberg opinion contributor and formerly with the federal reserve as an economist. quite amazing. powell is speaking to that in terms of how many people have

fallen out of the workplace. joe: i thought powell's speech today was one of the most full throated, compelling arguments for focusing on labor markets i have heard in a long time. caroline: that does it for "what'd you miss." joe: "bloomberg technology" is next. romaine: this is bloomberg. ♪ is bloomberg. ♪

♪ emily: i am emily chang in san francisco, and this is "bloomberg technology." coming up, the house gamestop hearing has a date. melvin capital, sagittal securities expected to testify. we will talk about meme stock and short-sellers with someone who has an