then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> in order to really ensure that inflation is back to target, we think that you need to see more labor market loosening. >> we have more evidence pointing at the labor market softening. >> i think there is underlying strength in the labor market. >> coming into question as to how resilient it really is. >> we will probably have a heart--ish landing. >> bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is payrolls friday. good morning. this is bloomberg on tv and radio alongside tom keene and lisa abramowicz i am jonathan

ferro. your equity market is just about positive on the s&p 500. your estimate, 183. tom: yesterday the claims came out and it was a snooze fest. we have a snooze fest today? either way, do we get some form of major market response? it has been interesting how markets have locked down since 6:00 p.m. yesterday. jonathan: the first chapter of a three-part act. lisa: how are they going to interpret this given that they haven't pushed back before the quiet period as much as some thought that they might to the easing financial conditions. to give you a sense how much financial conditions have eased, the extra yield on high-yield bonds it is now the lowest going back to 2021. we are talking about a massive retracement of some of the risk on types of fields which raises the question, have we eased too much given the fact that we still have a robust labor market? jonathan: the pushback this

morning comes from j.p. morgan. here is the quote on the risk reward and equities and other risk assets, worse than cash or bonds? he calls it a catch-22 situation that we would need to see market declines in volatility before easing of monetary conditions and a more sustainable rally. tom: he leads it with a single sentence of 2023. he thought that it would be slow. it wasn't. he was wrong. period. he re-calibrates, like everyone else, and bets for a more subdued market. lisa: hold on. there was this question where people are betting on how to slow and grow. do you bet on growing before the slowing? can you expect some kind of rebound in growth if we haven't even seen the downturn that is necessary to get there? jonathan: thank you for

clarifying. lisa: you're welcome. jonathan: on the s&p, futures just about positive by 0.05%. three days without gains on the s&p. we bounced hard led by big tech, found market yields a bit higher. on the 10 year, 4.1797. lisa: there's only one event today, the payrolls report for november. even if we get a good payrolls number, do we see an ongoing tick upward and the unemployment rate? the expectation is it to stay at three point 9%. if it gets to 4%, even though it's a good number, does that change the nature of who is getting hired and staying in the labor market? in the 9:00 hour, our bloomberg economist and julie su will join jonathan ferro. i am excited for this one

because this is important, it actually is, the five to 10 year inflation expectations ticked up with the highest levels going back a decade. do see that continue or come back down? the expectation of 3.2%, which went up even as gasoline prices went down. tom: how can we look out five to 10 years? who is making that guess? jonathan: you ask that question every month, tom. it's a beautiful thing. tom: i don't know what the value is. jonathan: a lot of weight on it and all of a sudden did not put a lot of weight on it. kind of turned its back on all of that. the chief economist at citi, good morning. before we get to the big outlook for 2024, let's talk about a: 30 this morning. >> the forecast for 180,000, this is not the seasonal extreme

of the year. we are still in a seasonal upswing in hiring in the month but not as extreme as october. the big picture on this is this year employment gains, a little more than half of last year's gains. what is coming will be slower still. that will matter for the fed. it will be in a different situation further parts of the economy where we have had this very large rebound on labor-intensive services hiring for a couple of years now. it has given us this period of monetary tightening deep into a period where a lot of industries have adjusting but labor has been strong. it will be interesting when that reverses in the coming year. lisa: you agree that bad news is now bad news? essentially, if you get a rally and treasuries that is going to be negative for risk assets? steve: bad news for who? for what? i don't believe this.

i think the productivity growth is rebounding. it may have gotten exaggerated in the third quarter. the labor market has been strong. measured inflation will come down. the federal reserve will swerve to try to protect expansion that we have and that will be good for financial markets. tom: first of all, bad news is bad news is defined as one soto going to the new york yankees -- juan soto going to the new york yankees. you are the single best i know at folding profits into our economics. the key thing on lisa's wonderful observation of grow and slow is can you get both? can you get a slowing economy and corporations will adjust to a lower nominal gdp and will still grow profits? steve: if we look at this year, for the most part it hasn't been a great year for profits. the midyear eps was down 6%.

the majority of industries had a decline in profits. this is why the s&p equal weight index is up 6% and the headline is up 19 for market cap. this is why most stocks are not doing well, right? this is not a collapse. this is not a depressed period where you can have a v-shaped recovery. profitability i think will be coming back. manufacturing across the world is contracted for a year, trade falling as much as 9% across the world. it is quite coincident with what is going on with profits. you had this pre-recession in industry. the employment side, again, has been held up i rebound in services.everything has been out of sync since the pandemic, and everything focuses on that, but that's the piece that i think slows going forward. tom: give us the sp x parlor game. i don't know what citigroup

says, just your basic idea. if corporations grow can we have a more optimistic result? steve: a new record high in corporate profits by 2025. he won't be as good as the consensus estimates, but those are known to be biased upwards. i think we will beat estimates for the next couple of quarters handily while rates are coming down and the fed is swerving. tom: you are whispering 6000 on spx? steve: someday. jonathan: unbiased to this call on stocks? steve: we, for the last three or four months, have been focused more in on u.s. performers, small and mid-cap growth stocks that are under levered. why were they all left behind? last year's magnificent seven had eps declines and now they had big gains. if you look at that reversal, i think that we will get other

pieces of the u.s. market to rebound. then we can broaden out to the world later on in late 2024 into 2025. jonathan: are banks part of that story? steve: it is interesting. they are trading at 45 record lows in terms of performance. they could bounce back. this isn't about long-term growth. we see interesting long-term growth that i think would be sustained for a longer period of recovery then bounce back. lisa: looking at credit intensively, because it has been moving along with equities and then some. high-yield bond spreads were the lowest going back more than a year, april 2022. outperform the small caps, outperformed a lot of aspects of the equity market. people talking about a golden era for credit of all sorts. is that fading? steve: i'm not sure that the rate environment should be discounted entirely. if you look at private credit yields, 12%.

companies that are not part of the bond market paying 15% that are money good. yield levels, borrowing costs across the economy are up a lot. lisa: riddle me this. how we can have companies that grew up with paying 4% or 5% for their debt suddenly having to pay 15% and that doesn't somehow diminish their credit worthiness in a material way? how have we got to the space where they can suddenly manage payments that five years ago people said was an impossibility? steve: we never really got to the point to embedding zero forever. i think the forthcoming maturity wall is pretty empty for 2024 for both high-yield and high-grade. further out it starts to become an issue.i think that we overshot on rates. these are more normal yields than 2020. we aren't going to 1980 either. tom: 2023 has been one big value

trap. it is a general statement. what are the signals where all of a sudden value is not a value trap, it has a value? steve: 2022 was the period where defensive value performed really well. large cap pharma. now you have interesting stories, talking about a narrow market, drugs with two companies. jonathan: it is more than just that. steve: through tech, through health care, it is an incredibly narrow take. the value trap is partially a consequence of things are not that great for most companies. where are they headed? they should hire everyone, they should have 230,000 jobs a month? no, they won't. a lot of the cyclicals i think will recover in the coming year. jonathan: energy too? steve: we are at an oil price,

let's remember the last sessions where brent reached lows averaging $24 a barrel after the last four downturns. we think that our take on opec, they are managing to decline in terms of their output and influence but boost the oil price in the process. they are giving a gift to oil producers. tom: you had to call the year. what did you do when morris walks out the door? he has announced his retirement. what do you do on hydrocarbons if a guy like morris exits stage right? steve: he has been a great partner and we will continue to use a strong commodities team. 75, not 24. jonathan: the average is 24 over the last four downturns. steve: there is a lot of risky

oil around the world. russia and iran are 20% of world output. they have all of the incentives in the world to keep producing, the oil price on average that we think opec cuts will be higher and that will benefit all sorts of conventional handholds compared to where they would be before the collapsed oil price. jonathan: the numbers could be distorted from the negative prices we had three years ago. steve: i'm not counting futures, i am counting spots. jonathan: interesting. appreciate that clarification. broader price action going into payrolls, the equity market, futures just about positive by 0.05% on the s&p. yields north of 4.1%, getting closer to 4.20%. lisa: really, this is the stability that people were looking for. the sense that we are not cratering or skyrocketing even on the heels of a potential shift in the bank of japan policy.

that we are getting such minor moves highlights how much the landscape has shifted and how much people are stable in this landscape. jonathan: there is nothing stable about dollar-yen yesterday afternoon. 3.8%. that currency cratered in the afternoon. tom: some of the movement persists this morning as well. it sets us up for sunday evening our time. they are going to do this over the weekend. jonathan: hike rates over the weekend? tom: i have blown out my entire weekend calendar. i was going to decorate the tree, but we will wait. jonathan: from new york city this morning, good morning. ♪

>> they say they will eliminate hamas. i don't think that that is a possible goal to achieve because hamas is in lebanon, the leadership everyone knows is in qatar, the west bank, and so on and so forth. what is needed, really, is a situation in which palestinian unity should be allowed the function on a very clear agenda. lisa: that was the -- jonathan: that was the palestinian prime minister and the west bank on

the challenges that israel faces in its goal of destroying hamas. payrolls are just around the corner into two hours and 13 minutes. this morning, t.k., very close to 180k. equity futures are going absolutely nowhere. tom: i will go to where lisa was earlier on something as boring as the unemployment rate. you will have conversation with the department of labor. there's a difference of 3.9 to 4.0 to three .8 that may be -- 3.8. that may do more than any other data point. lisa: half a percent increase is a key metrics as we head into whatever is next. tom: there is over analysis, except today it may matter. jonathan: everyone will be talking about that rule, maybe

butchering it. we will get clarification on what she thinks it means. tom: into the weekend we will see more news and mystery out of the war in the eastern mediterranean. the huge advantage of the services, former senior u.s. intelligence official and nonresident senior advisor of the transnational threats project, thank you for the friday visit this morning. i see secretary blinken essentially lecturing the israelis. it is the israeli military, i believe four miles from the egyptian border, there seems to be two conversations. a military prosecution of war, conflict, and, as lisa has beautifully said, the after the debate matter. which is more important? >> good morning.

both are not only important but they must take place in parallel. there are several conversations in the region. you have the issue that israel remains committed to the eradication of hamas as a military threat. the united states is committed to providing them with material support in the political space to get this done and recover hostages. you have a very real humanitarian crisis that is getting worse daily that must be addressed. this will put limits on israeli operations. the day after, you have a series of growing diplomatic efforts involving multiple international partners to put together a structure that doesn't have very strong scaffolding. the palestinian authority, israelis, even the international community is not well structured to support a day after architecture at present. lisa: you are saying that

israel's goal has not changed and we were just hearing from the prime minister of the palestinian authority saying that is not possible to get rid of hamas. what is your sense on that? norman: it is possible for israel to kill hamas' seniormost military leadership, and they are doing a pretty good job within gaza right now. they have taken out several dozen hamas leaders. they will also be able to destroy much of hamas' military capability, but i don't think that israel believes it will be able to kill 33,000 fighters. there are operatives in the west bank, lebanon, and qatar. if you go into the palestinian prime minister's comments, if he wants to make, say junior member of the palestinian coalition will they accept the state of israel or will we have a coalition in palestine has a prominent partner that would likely win an election that is dedicated to the eradication of the state of israel? lisa: i have to wonder what

israel is losing in the process as this drags on, because there are thousands dying and you mentioned the humanitarian crisis that is mounting. a lack of access to clean water and health care, crowded conditions. this is creating and breeding disease and hunger that could potentially kill more people than the conflict. at what point do you get on board with lloyd austin when he says that israel risks a strategic defeat even if they win in their objective? norman: israel probably has a matter of weeks left to conduct these operations through mid to late january.it is important to understand that hamas knows this and is using these humanitarian losses to build world opinion against israel. hamas' survival rests within the concept of there is enough treasure on israel to stop operations hamas survives, the resistance is proven successful, and that could doom a two state solution because hamas, which

survived, is committed to the eradication of israel. tom: how do you have a two state solution with a state like,'s? -- like hamas? norman: you can't. you need a palestinian government that is willing to accept israel just like you need an israeli government for palestine. tom: you are suggesting based on decades of experience that israel is done with whatever they are done with. then what? norman: there is a significant, robust, diplomatic effort behind the scenes now to build this. this is very challenging. will prime minister netanyahu survive? can the palestinian authority run gaza? is the international community willing to put skin in the game and resources for what will be long-term contentious negotiations? none of this should be taken for granted but all is required if

we are to prevent this from happening again. iran and its proxies won't stand by idly while this is occurring. they will want to do the same thing in two-states talks going forward. jonathan: what can we do about the iran issue? norman: iran has traditionally constrained its activities when it faces multilateral pressure, economic pressure, diplomatic isolation, and a genuine feeling of military retaliation. frankly, all three of those are absent at present. its proxies fire with little response, the international community is fragmented, and at present we just have to have assets in place for a worse case scenario and accept that iran will keep things bubbling in various locales, much like they are doing at present. jonathan: norman, thank you. we have to go back only a couple of months. we are on the brink of some kind

of diplomatic agreement between saudi arabia and israel that is not in iran's interest at all. tom: every time he is on i learned something and all of a sudden i have a five-week window. he is experience saying that this military effort is five weeks, four weeks, six weeks, give it some wiggle room. it is extraordinary. lisa: there has been a quiet from saudi arabia. i think it is important to note that there is a real question around what the political pressure is to stop this war from other countries that were previously putting out rhetoric that did not match their actions. it raises the question, what role will saudi arabia play? what about qatar and some of its negotiations to get more hostages? tom: i did a panel years ago that i won't name the university with fancy people and they were trying to figure out what the afghanistan society will look

like after the war. seriously, it was the most surreal panel i've ever done, and there have been some doozies. the answer is that is how i feel about this. we are talking about what will be out there and we are prosecuting a massive hand-to-hand combat four miles from the egyptian border. jonathan: i don't know the secrecy is all about, but all right. we will turn to the labor market two hours to go. your estimate, 183,000, the previous number 150k. from new york city, this is bloomberg. ♪

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jonathan: two hours from the jobs report, the s&p 500, descent day of gains. the nasdaq doing nicely as well. this morning, little bit lower by .1% on the nasdaq, a little higher on the s&p 500. going absolutely nowhere. in the bond market we have been going somewhere. down a ton from the morning of the last jobs report no close to 4.50 .dow - 12,123.45 (no comma -- close to 4.50. tom: 4.99 percent the last jobs

day. just the day before to 4.62 on the two-year. the 10 year yield was four point whatever. i think that frames it across a jobs report lower yields. jonathan: is there a split between the economic data, the pricing and what we are getting in terms of communication from the federal reserve? tom: there has been a consensus view that the job market will weaken and we are waiting. jonathan: lisa, has this been validated by the data? lisa: not with respect to economic data. we heard steve whiting basically say, bad news for who? i have seen an increase in productivity and employment in different metrics. the disinflation has been notable and that is the data that has shifted and spurred people to have a bid into bonds

even with a constructive back drop in the labor market that we could get immaculate disinflation, that it was transitory. it is the return of a narrative that no one is saying that this is the narrative they are following. jonathan: the data was decent, disappointing to expectations but the outlook was strong. we haven't seen a re-acceleration of inflation. the best way to capture that this week is the ism headline number was decent. to lisa's point on productivity, better. labor costs, and down. these are things that the fed was shooting for 12 months ago. tom: the disinflation benefits the haves within the financial within the american experiment. those doing finance win and the rest of america, there is a lot of pain. in the last 48 hours it was grim. lisa: you can see that the dollar stores are not doing as

well as you would expect during this kind of time. there are many different layers, and this is why we keep talking about rolling recessions, rolling economies, rolling market shifts. nonetheless, the bottom line is, can we have a job slow down without any pain? can we get some slowing and cooling with it not being bad news? to everything being goldilocks until it is just amazing? is there a baked in understanding of what 2024 will look like? how much of the rebound have we set off the back of the federal reserve? how much has been about federal reserve policy? if you do believe it is yet to come through, it is coming to an economy near you? lisa: that is what we have to keep in our minds and why i was asking about credit. you have to think companies that got used to paying 5% will blink again if they have to pay 15%. a lot of people would say that

the tightening and disinflation is the immaculate disinflation, transitory, and has to do with year-over-year comps on the heels of the pandemic. tom: you mentioned transitory three times. lisa: because that is what people are saying. jonathan: big on the t-word, this one. let's get to the euro against the dollar shaping up as follows. 1.0783. here are your top stories on surveillance this morning counting down to the jobs report two hours away. the median estimate on our survey calling for 183,000, a wide range of views on the street. deutsche bank down the low end at 130k. ian shepherdson of pantheon economics, 275. lisa: i have this in every labor market report, but is it going to matter or will it be in the

pay raises, the jobless rates, other metrics that people are looking at to confirm either goldilocks, slowdown, or reacceleration down the line? jonathan: what is the uaw bump? 40k? we have to subtract that and focus on unemployment wages. that is like the guidebook for later. out of china, the top party leaders pledging to boost the economy. president xi jinping saying the country will step up and be flexible with monetary policy having previously talked about being forceful. we are reading the tea leaves. china looking to fend outflows in the property market and a credit downgrade from moody's earlier this week. the financial times giving a bit of color. the lead paragraph, moody's advise staff in china to work from home ahead of its cut to the outlook for the country's sovereign credit rating. a suggestion that staff believed

was prompted by concern over beijing's possible reaction. tom: on liberty, john gray, the bottom line is that you have to clear markets. how do you clear a balance sheet challenge like property markets with the goings-on, the income statement-like matter of the chinese people and chinese economy given a totalitarian regime? this is an original experiment. lisa: they don't really want to increase leverage, so they will have the markets basically taking some of these proclamations of we will support rings, we will support you, and everyone is saying, you have been saying that. tom: how do you write down balance sheet loss? jonathan: can we trust research on china right now for anyone who has a presence in china? moody's reportedly kept people at home ahead of the downgrade because they are worried about retaliation and what would happen?

lisa: this, building on the fact that china advised research arms of banks not to publish anything negative. it raises the question, what do you want to publish. if you cannot be analytical and you can't be skeptical, what are you doing? tom: it is a wait-and-see issue. we have seen the cycle many times before on the chinese balance sheet. does it unravel with write-downs and policy prescriptions of thousands of people in congress? is there a new calculus for president xi? we don't know. jonathan: the family behind the luxury brand hermes is europe's richest with wealth of more than $150 billion according to bloomberg reporting. the family fortune up 59% from last year while shares of hermes have risen 35% this year far outpacing rivals. t.k., you know this family inside and out? tom: this is the first of the

weekend, not because it is a fancy luxury thing, but because it is where a family said no. 15 years ago, they said to the guy that runs lvmh you are not going to take us out. that is part of the story and is the way that they did that. the one thing that i would say is important with the family and hermes is that they have taken over the craft french labor economy by setting up little outposts all over france basically to co-opt the politicians. it works like a charm, particularly on friday jobs day with guilt you have to make an appearance. lisa: they're good with select restrictions in terms of scarcity and really good at saying choice words to lvmh after rising 1000%. jonathan: what are those choice words? lisa: they are fantastic words i

won't share, but a great way of spurning lvmh. [laughter] jonathan: lisa. tom: saving us shopping daily at hermes. jonathan: there is an extra layer to bramo. you just have to keep pushing. tom: high-frequency economics, i love your report. it is very what i will call centric. predictable about this jobs report. what is the unpredictable item at 8:30 this morning? >> good morning. looking beyond the headlines number we are seeing jobs growth is strong. it has decelerated a little from the 2023 numbers from 2020 tube, but it is the unemployment rate. we saw a decline in the civilian labor force and that is the part that i would expect -- the labor

force part was an anomaly. it is the employment portion of it, will that persist? the unemployment rate will be important and is something the fed will be watching because as inflation continues to accelerate -- to deaccelerate, we think that is still in the pipeline and will affect the growth trajectory, labor market and growth trajectory. lisa: one thing we haven't talked about is the hours worked every week. this is something that i see increasingly and economic reports, that they are coming down. this is the precursor to a more significant softening. how important is the hours worked each week? >> extremely important. it gives a signal about the conditions in the labor market and how much labor is being put to use.

the end of the day we also have to think about the underlying momentum. that is still strong. the underlying momentum in the economy is still positive. we are getting signals of job openings declining, but we are normalizing. we are not seeing yet any signal about the substantial weakening that will be the last signal for policymakers. lisa: how much of what we are seeing with a disinflation and normalization is due to fed policy and how much is due to the t-word that i keep repeating because no one else will? this is transitory and a normalization after the pandemic? >> this is something that we discussed frequently and we find that when we look back years from now that maybe this will be referred to as a transitory period of inflation.

a lot of it is supply side effects. demand is still strong in this economy and the fed's rate hikes have worked on certain sectors like manufacturing and housing, but the household sector has been extremely robust and resilient. this is where we think that the risks lie. but the full effects will show up. pandemic-related effects, like demand for certain services, those will recede and we will see a more substantial slowdown. we are still looking for a soft landing, we still think that recession is not the most likely outcome, but we think that recession risks are little higher now because of the effects of what the fed has done and what that will due to the demand-side of the economy. jonathan: this is why for so many bad news is just bad news. tom: i look at this on a demographic basis.

everyone disagrees with me on this. i disaggregate labor statistics. to me there are three americans in this jobs report. there is a whole part of america that witnessed the bankruptcy chart that i saw the other day that is not participating in the fun and festivities. jonathan: thank you, high-frequency economics. in the last 24 hours at j.p. morgan in the investment bank, a catch-22 situation. we need to first see market declines and volatility before the easing of monetary conditions and a more sustainable rally. to your point, you need to slow before you see the grow? lisa: do you have to? like we heard from steve whiting, if you get disinflation the fed does not need to see this low in the economy just the slow in inflation. then everything is copacetic and they can keep cutting rates. the bottom line, actually yesterday i want to apologize for something.

there is essentially a stimulus effort to individuals. jonathan: i love this. you got home. i walked back this show every day -- tom: i've never done that. jonathan: i am listening to lisa and i'm thinking that this is too bullish. you did the same thing yesterday. lisa: i realized i was missing something. i got it. people are going to spend more and it will fuel inflation because of the tax cut. jonathan: what was yesterday about? you said, i was too bullish and i need to correct it? [laughter] ♪

>> all health care, it feels like, has been discounted because of what these drugs will due to the system. again, it will do some good

probably to the system long-term, but not all med devices, not all health care companies in general will be hurt from this. there will be some that benefit from it. jonathan: bullish on the health care sector. health care likely to play a big part in today's jobs report according to the team at bloomberg economics. and -- anna wong, writing we expect to see flat to marginal gains and other sectors with outright declines in manufacturing, financial activities, and professional and business services. lisa: ian shepherdson, 275,000. back out 40,000 from the strike and 50,000 from government hiring and health care, can you say that is a bullish sign from our economy when these are staples and hiring that goes to

something other than growth? tom: i'm glad that you brought up this quote from anna wong, because she has had a terrific 2023 going up to high rates and boom it turned on a dime. for someone like wong, that is what happens. you get the call and, boom, it changes like that. today it will be boom for people who look at labor economics. jonathan: you can get a fed call right, the call on the economy dead wrong. it has been like that for so many people. even if you called 550 what would you call on the economy? q3, north of 5% gdp. shocking to so many people. tom: is this report at eight: 30 that kind of boom statistic that upsets the apple cart of people trying to make three calls? lisa: how much is health care bullish, a bullish sign of the

economic trajectory? i don't know. honestly, this is one of the things that people are backing out to understand the components when you break down this employment report. tom: i will give jon ferro major, major credit for driving this forward. i was like, whatever, i will try to walk another mile. my physical trainer, fine training, ted fine -- he runs marathons. he wants me to run a marathon. it is front and center right now. we will digress with the senior pharmaceutical analyst who barely describes his competency on the moment, which is ozempic and the rest of it. sam, what is the future of this weight loss expensive drugs? sam: thank you for the wonderful compliment, as always. the future, for one thing

talking about expensive, the future will be reduced prices, no doubt. there will be more competition, more drugs on the market, and the prices will continue to fall, even if you are not seeing them in the net price, certainly the net price that's coming to payers is where you will see pressure. and the volume will keep going up. lisa: you hold the answer to the mystery that we see every month when we look at some of the inflationary's and job rates. when people say that health care costs create a lot or health care hiring increased a lot, what is going on and how much of it is three inflationary versus disinflationary versus costs in a lot of other sectors? sam: it is interesting with regards to the health care employment being a key driver in the read that is coming later today. i think if it is it will be focused in specific areas.

on the corporate side, what we know from the large sector in october 2023 was responsible for 800,000 jobs. in the innovative drugs world. that has been losing people on average 6000 to 9000 per month. hiring has become much harder. harder for employees than employers. for each job there are now 50 to 100 applicants. it is other areas of health care that are potentially driving this possible increase. i have to say that is probably likely because we are still dealing with an aging population. that has not changed. that is what the basic demographic driver is of health care and health care spending. lisa: health costs are one of the biggest costs for a lot of households. we talk about gasoline, food, and basic goods that people buy. those things are going down in terms of price. we talk about health care costs.

how much can this continue? how much are these efficiencies likely before weight loss drugs take effect and in the light of the fact that people are getting older and frankly the age expectancy is going down, but not in a good way? sam: i think part of the life expectancy issue is because of what we went through with the pandemic, etc. you know, there was a hiatus in treatment for many people. that compounds the situation. in terms of the future impact, the sorts of drugs and therapies that really reduce the burden on the health care system, vaccination is one of them that is unfortunately going in the wrong direction in terms of attitudes, and drugs that are now generic and achieve that reduce the risk of heart disease, weight loss drugs, weight loss and general -- you don't need a drug to lose weight, but unfortunately the impetus to do it, exercise and

diet, is very tough as we see in the evidence around us. jonathan: can it be about treating addiction? sam: i think that those drugs, in general, tend to be addressing your increased appetite for things. be it food, alcohol, smoking. can they be proven to be that effective? time will tell. if they are, this could be something that could pay off in 10 to 15 years time. jonathan: it could be massive. thank you. we have talked about this a million times, i know. the use case of these drugs, still trying to figure it out. still trying to work out addiction and other spaces with what has been unveiled over the last couple of years. tom: jon, you provided great leadership on this. look at the causes of ozempic, nausea, diarrhea, it is the same

as tang. the same side effects as tang. where is this going to be in a year is the money question. jonathan: no one knows but it is always about a story. at the moment you look at the statistics. one of the biggest killers in the west is heart disease. tom: can i see people on tv or walking down the street taking ozempic? lisa: of course. sam came on and said, people are tarring and feathering it but it has been used for long. time. there are these corollary effects to being obese that are significant. not to mention what jon was talking about which is addiction and their studies that suggest that they can curb certain addictions. it raises a question about how much we could potentially lower costs going forward. we were talking to mark rowen of

apollo and he was -- and he said people will find ways to kill themselves in other ways. jonathan: you think we stop shopping and take up extreme sports? pull back on the booze -- lisa: and increase the skydiving. tom: why are you looking at me? jonathan: i'm not sure who is left listening. tom: you have nailed this. people are riveted by this debate. $9,000 per year drug. jonathan: as they should be. we go over the statistics and when you're talking about a nation when close to 40% -- tom: obese. jonathan: this could revolutionize not only the lives of those people but the economy around them that we have built up over the last few decades. you see how this could be so big. tom: am i wrong that there is a free lunch this? is that too calvinist that it is

too good to be true? jonathan: there is no free lunch. we talked about the side effects. lisa: when you talk about how much we spend on dialysis every year or the concept of kidney transplants, some of these corollary things, these are new things. tom: could you see her at thanksgiving dinner? lisa: i was the one that mentioned side effects. jonathan: at the moment i prefer thanksgiving dinner with bramo. you're talking about shooting up ozempic on the streets. tom: if you walk by someone, can you tell they are taking ozempic? jonathan: in the dark alley ways. lisa: i think that he meant in other ways. jonathan: j.p. morgan asset management coming up shortly on this bond market on jobs and not on ozempic. the bond market yields look like this. yields are up higher up by three basis points on the 10 year. from new york city, this is

bloomberg. ♪

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>> you are going to see a slowing economy at the beginning of the year. >> the real side of the economy does need to slow. >> if rates are higher for longer we will see carnage. >> will see a hardish landing. >> the path to a soft landing looks like slower economic growth. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: payrolls friday.

for our audience worldwide this is bloomberg surveillance. alongside tom keene and lisa abramowicz i'm jonathan ferro. your equity market pulling back just a touch, down .1% sub our surveys says 183,000. tom: i am more engaged than i was an hour ago. the conversation shows how interesting the data will be. not just wage dynamics but back to course numbers. you will speak with the department of labor at the 9:00 hour and they will go to the on rate. what will it do? jonathan: for you disengage the previous hour? tom: no evermore engaged in the 8:30 report because i think it is a huge mystery. jonathan: 183,000 the headline number. unemployment 3.9%.

the drift towards 4%. lisa: which component of this report will take the headline? it is roulette around the headline number people will talk about. is it going to be the pay rises? or is it going to be the headline unemployment rate given the fact that it has been creeping higher and if you engage with all of the caveats, it has reached the point where he there will be some sort of recession. jonathan: resilient jobs report will continue to provide the fed with cover as to not have to move prematurely in cutting interest rates. tom: rates coming down not because of the fed but because of gross donald gdp in real gdp shrinkage. atlanta gdp now under 2% this morning. lisa: i am not sure the fed has any reason to hike rates further.

the question is how big is the threshold to cut rates. tom: priya misra will join us. she is taking notes will she is talking. lisa: she is definitely not. tom: tom does not know what she is talking about. jonathan: they give that to guests when they come on. they give them out. let's get to the scores on the s&p 500. guilds higher three basis points. the 10 year 4.18%. lisa: i am watching the headline number, how much we get the 3.9 unemployment rate hired a 4% or does it stay around 3.9% to dictate the next move for the federal reserve? today jeff rosenberg of black rock after the report and then at 9:00 we hear from mohamed el-erian as well as acting labor secretary julie sue.

curious to hear the administration's take on a market that looks perfect. can they keep celebrating? i am sure they will great time dancing rather numbers because it is a perfect scenario for them. jonathan: visit that what they always do? dance around the numbers. tom: it is not working. look at his poll numbers, it is terrible. the bidenomics thing is not working. lisa: sentiment has come out and it has not been as bad as people expected. this is the key rate. how much people's inspection -- expectations for inflation continues to remain at the highest levels for more than a decade. is this part of what is underscoring people's skepticism about the economic backdrop? jonathan: thanks for the promo for 9:30. it will work. tune in as they dance around the jobs numbers.

lisa: what you think they will say? jonathan: i get it. you asked a good question. how high or low is the bar for interest rate cuts. priya misra writes "i think the fed starts to cut later than march but cuts 250 basis points in a soft landing scenario, 400 in a hard matic scenario so there is more room for rates to fall from here -- in a hard landing scenario so there is more room to rates to fall from here." priya misra joins us. how are you thinking about that? priya: the fed raised rates because the economy was strong and inflation was much higher than target. the reason we are talking about cuts is because inflation has come down. all of the factors to bring inflation down are still there. the market is pricing in a quick pace of decline.

the market is saying we have this immaculate pace. the fed can start to cut. i'm not sure about the immaculate aspect or the disinflation continuing to 2%. i will be watching the average earnings number closely. if you get .3, year-over-year wages running at 4%, how does the fed look at that and say inflation is 2%. they want complete confidence inflation is going back to 2%. we have had years of much higher than the 2% number. recessions are nonlinear. the economy does not necessarily respond to rate cuts. in a soft landing scenario they will want to take rates back to normal, 3%, 2.5% to 3% but they will start late and that is when all of those cuts will happen. in a hard landing they start late. unless the unemployment rate

spikes a lot they have a lot more work to do because they have to take rates to accommodate. lisa: you said two things that are polar opposite outcomes. one is the immaculate aspect you do not by. there is pain or inflation that is stickier. there are two polls that seems to be at play. which seems more likely? priya: the economic data suggests cracks, but not enough for me to say a hard landing is right here. we should all be very humble about recessions. they never have been right when you expect it. we are not following any recession label. i would say the data suggests slowing down. on the inflation front i would suggest the data suggest it is slowing but the trajectory down to 2%, that speed is what i struggle with. i would say we are looking like a soft landing. immaculate disinflation is what is happening but we have to get

humble the data get done quickly. lisa: it seems like everyone is buying transitory without saying transitory. maybe the fed has something to do with it, maybe not, maybe we are just immune because they will cut rates back to where they were before. do you buy that? is what we are seeing entirely the transitory aspect and not due to the fed policy rate? priya: i think that word has been banned from fed speak. the supply-side, which i hope the fed brings up, the supply-side work. supply chains are much better. goods inflation has been declining. i would say there are components of demand. i do not want to say inflation will re-accelerate from the housing sector. i think rate inflation will continue to decline slowly. what i struggle with is forces ex-shelter.

that can get sticky on the way down. if it gets stuck at 2.5% the fed is telling us our target is to percent and not 2.5%. that is why the target for them to cut rates is higher than what they're pricing. tom: i do not think business people understand the nonlinearity you can have the inflation-adjusted yield. are we going to get a rapid decline in the real yield in 2024? lisa: for the real yield -- priya: for the real yield to decline that much you need to have the fed starting to cut in economy into a hard landing. as much as i think really yields are what you should put on your christmas list, it will only come down below 1.5% when the fed starts to respond. they need to see the unemployment rate get closer to 4.5% or 5%.

that is when they say this is not a soft landing. tom: the real yield going up has been extraordinary. are you talking 1.50 at the end of next year? priya: i think the economy is heading into a hard landing or a hard soft landing. jonathan: what is that? priya: the other implement rate is at 5%? i would argue it is a hard soft landing, or a soft heartland a. -- or a hard soft landing. and of cycles are always hard. -- end of cycles are always hard. i think it will stay volatile. jonathan: you have said this before and lisa has talked about this, when you start to see these contradictory signals we are getting, i wonder what that means for the federal reserve? let's play sep roulette. you get the summary of economic projections.

talk to me about where they will be next week once we get the new forecast from the fed? priya: i think there forecast for the employment rate will be higher in the forecast for inflation will be lower. the dot plot had shown 50 basis points of cuts. i think it will show 75, it even 100. that is less than what the market is pricing in but the market as the price economic outlook and reaction function. the reaction function will sound hawkish but the market could price and we will have inflation. jonathan: -- priya: i think it shows three cuts. jonathan: is that enough or is that pushback? priya: i think it is enough for the markets to put those cuts in there. depending on what happens on payroll the market might increase cuts in 2024 but it worked rods in 2025. if we see the slow down, does

every cut of the fed matter? the hikes did not matter. will 75 of cuts help the economy? we should be ready price and more cuts in 2025. jonathan: if the hikes did not hurt will the cuts help? priya: they help financial conditions. then we have to look at the data and realize it might take a lot longer. the lags worked both ways. we are in for a volatile next few years. jonathan: thank you. a soft heart mandate or a hard soft landing. did you get that? tom loves this stuff. tom: it is parsing it too near. i'm interested in where the ambiguity of where the real yield is going. jonathan: session lows on the s&p 500, no real drama. down .2%. yields up two or three basis points.

4.17. good news good news today or bad news bad news? how are you playing that? priya: if you get a week number there is nervousness in the market and we are priced for a soft landing. if you get 100,000 on payrolls the rate market is saying the fed starts to cut right away. risk assets are saying that is not so great, this looks like a hard landing. you get a bigger reaction with a week number. the stronger number is priced in. jonathan: ed good news is good news at the moment. 100 so 100. if i wanted fantastic entertainment at 8:31 that is the number i would pick. i'm not saying that is what i want, i am saying you would learn a lot. if it is 90 something what you do with that? tom: what you do is call david kelly at j.p. morgan. david kelly nailed it.

he has been calling for this trajectory to a negative nonfarm payroll statistic. jonathan: -- lisa: to me what priya misra said is lags worth -- lags worked both ways. they will matter for the movement of cash. at some point people will not want to hold their money in money markets. interesting dynamics. jonathan: forever cycles. payrolls at 200000 and everyone is happy. lisa: where did we put jon ferro? jonathan: i will enter miss universe. that will be 200,000 every single friday and they will be like what are you talking about. lisa: you will be like hi. (sfx: stone wheel crafting) ♪

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>> israel probably has a matter of weeks left to conduct these operations. hamas is using humanitarian losses to build opinion against israel and hamas survival is in the concept that if there is enough pressure on israel to stop operations hamas survives. that could doom a two state solution, if only because hamas is committed to the eradication of israel. jonathan: he has been one of the absolute best on this topic. norman rolle, former senior u.s.

intelligence official. your equity mark on the s&p 500 looks like this. -.2%. near session lows after the bounce yesterday. the nasdaq flying. if you're talking about ai, md, gemini, getting everything excited. going into a jobs report just around the corner. i will go through the numbers for your benefit. 183,000 is the estimate. tom: estimate is down a little bit, it was 188,000? jonathan: michael mckee tells me the whisper number is lower than that. tom: put it up on the screen if you can. i know you're having doughnuts. put the screen that is all of the different nonfarm payrolls. that is not what i wanted but i will go with that. there is.

goldman sachs 238, deutsche's 230,000. look at the whisper number now is higher. 200,000. tom: we are learning by the minute. jonathan: the whisper number. people type a number on the terminal. lisa: people give you a sense but they do not want to put the firm's name. tom: joining us the whisper of washington, and reordered, bloomberg -- annmarie hordern, bloomberg washington correspondent. there is nothing festive this weekend in the eastern mediterranean from the far north down into a stressful egypt as well. what will be biden approach this weekend to what we see in gaza? annmarie: today the president is headed to los angeles, ramping up on his fundraisers as he

looks ahead to the presidential election. obviously there is tremendous pressure on him and this administration when it comes to what we are seeing in gaza. this morning you heard from the director of the yuan agency that works with palestinian -- the director of the u.n. agency that talks about wild streets in gaza, civil order breaking down, and norman roule was pointing to this about the humanitarian issues in southern gaza. this will become a big issue today for secretary blinken because you have a number of arab foreign ministers in the united states like the prince of saudi arabia, the qatari foreign minister, they are here to talk about the situation in gaza. i imagine there'll be pressure in those meetings. tom: we are not hearing from the secretary of defense. i look at all of the different newspapers and it is blinken, blinken, blinken.

what does the secretary of defense say? annmarie: we heard from him last weekend when he was speaking and he talked about the fact that he wants to make sure that what israel does is complying with international law and he put a warning out there. you had senator lindsey graham call him naive because he said we should not turn a strategic win into a strategic defeat. he was talking about palestinian civilians and driving them into the arms of extremist groups. that was his warning. you are dealing with a situation now that has become incredibly difficult. if the israelis are trying to go after hamas leaders in the south, the south south of gaza is where they told palestinians in the north to flee. a humanitarian front is incredibly challenging and the death toll continues to rise. lisa: house and affecting the poll numbers for president

biden. they went down significantly but has it evolved? annmarie: there needs to be more work done on this polling because we need to see how this plays out. we know the president is suffering in the poll numbers in the youth vote and a lot of reports about palestinian americans, muslim americans, who do not like how this is being conducted from the israeli side. we had five democrats talk about the fact they want to see more being done on u.s. aid sent to israel to make sure how that is being conducted, how those u.s. missiles are being used. there is a tremendous amount of pressure on this administration. we have talked about it a lot on this program, even within the administration, there are a lot of individuals who do not agree with the u.s. policy. lisa: just to shift gears, i've been fascinated by what can get done in the house as we deal

with very real issues, whether some of the conflicts you're talking about internally over aid to israel, eight to ukraine, border security. punch ball came out and said there is an infinite's do-nothing congress of the 1940's and what you call this year? the less than nothing congress? the congress that is completely unworkable? is there any hope that will change next year? annmarie: no. there is no hope that will change. next year potentially gets worse. the numbers get tighter for republicans on the house side. they ousted the representative from new york's third congressional district. we know kevin mccarthy is retiring. they have a number of dead lights. -- a number of deadlines leading up to a potential government shutdown. they are trying to get the supplemental package done.

next week the houses also focused on trying to impeach president biden or starting up the formal inquiry. look at the senate. that is where the deal will get struck. right now all of the tension is about quarter policy. republicans want to see more, harder asylum process, stricter parole. democrats want to make sure they are doing this in a compassionate way when it comes to individuals looking for asylum and refuge. this is where the fight is. tom: how alone is senator mcconnell? annmarie: i don't know if he is alone. people want to also see stricter border policy. -- keep will -- p -- he will want to see stricter border policy. the white house put out a statement talking about the fact there is not a pot of money at

the end of the year, it all dries up. it'd that since his colleagues have not heeded his advice just yet. -- in that sense his colleagues about heeded his device just yet. this bleeds into february. jonathan: let's talk about december before we get to february. january and february will be ugly in washington. i want to go back to the whisper number. 175,000. climbing through the month of december. lisa: just to show that early in december they were talking about 150 and they have been edging at higher highlights how much people have been surprised by continuing strength. we talk about bad news is bad news. so far we've gotten good dues and it is treated as good news. that is what we have heard from some people who say treat news on face value. jonathan: can i imagine if you

turned into the show after this? priya misra about 15 minutes ago was talking about anything 100,000 or below would be treated as bad news for this market and i think she is right. lisa: 100%. if you back out 40,000 and the government hires is almost negative. jonathan: people do not do job guesses. tom: once i got it right and i have never done it since. jonathan: what year was that? tom: a million years ago. lisa: we used to do that. the whole newsroom would erupt when the number came out. dramatic moment. ♪

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jonathan: 60 minutes away from the payrolls report. on the s&p 500 pulling down just a touch. the nasdaq with the decent bounce yesterday. best day of the month so far. this morning we are negative a quarter of 1% on the nasdaq. the bond market a riproaring rally. yields much lower. 4.1778 on the two year. last time we paid this game going into payrolls yields near 5%. this morning for .62. lisa: that conversation used to

be what to raise rates again? how quickly can they cut rates quickly? the way the narrative has shifted everyone is saying how many cuts, not will they raise again? jonathan: not just the federal reserve but the ecb. the euro at 1.0 784. the ecb, they will go first. tom: i do not buy it but it is in the zeitgeist. jonathan: matt hornbach yesterday at morgan stanley looking for a stronger u.s. dollar. lisa: you want me to get it on the game? jonathan: this is a big -- tom: this is a big deal on ecb. 150 basis points largely priced. lisa: at a certain point you have to wonder how much pain they experienced. will that be enough for them to

cut as much as they are? jonathan: top stories today. one hour away from the november payrolls report. median estimate calling for a gain of 183,000 jobs. wall street's biggest banks with a wide range of forecast. goldman at the top looking for 238,000. ian shepherdson looking for 275,000. lisa: the question will be how much is wage growth, how much are we seeing the unemployment rate rise or stay stable, and i am watching hours worked because that will give you a sense of where people are starting to pay her around markets. jonathan: you have to look -- tom: you have to look at cpi reports. look at it with the data next week, including retail sales. will have a real snapshot of where we are. jonathan: we are talking about

cuts to the fed, cuts to the ecb and the boj expected to end the air of negative rates. more than two thirds of economists say the boj rising into positive territory, boosting beds after a meeting with the governor and the japanese prime minister. the yen rallying the most in nearly a year. the next meeting for the boj is december 19. tom: huge deal. the other deal is the culture of it and robert feldman of morgan stanley in tokyo and the morgan stanley team is who i read first. credit suisse, had a great team before the blowup with ubs. to me is also about japan, the people come the demographics, the fact they are living 3% inflation and that is undoable psychologically in japan. jonathan: 3% is like what? tom: it will be a solid 5%.

jonathan: amazing to see the guidance we will get from the boj when they say it will be difficult to conduct monetary policy. lisa: the one complicating factor is the economy is not doing that well and there was data overnight that the japanese economy contracted in the third order the fastest pace back to the depths of the pandemic. are they going to be overcome by events in the opposite direction when they will not be able to move away because marketing inflation is not being accompanied with the same growth they're looking for. jonathan: the u.s. and the palestinian authority working together on a postwar plan for gaza. the palestinian prime minister telling bloomberg the preferred outcome would be for hamas to become a junior partner under the palestinian organization and to build a new independent stake that includes the west bank, gaza, and east jerusalem. benjamin netanyahu vowing to eliminate hamas. tom: i will go to general commit

who has been 8 -- general kimmit who talks about hand-to-hand combat. i do not care about all of the punditry and the diplomacy. where are we in this war and battle on a morning? jonathan: ongoing and increasingly difficult. tom: and email from robert. he emails in. what we do with this? bearish. joining team lisa. jonathan: didn't most people join team lisa? it is a big team. tom: know what is on team tom. is there a team john? jonathan: what is team john? it is a lonely place. lisa: we are a pessimistic place. jonathan: -- tom: we have had sarah will fear with us.

she joins us -- we have had sarah wolfe with us. you people do hyper accurate consumer economics. what is the state of 70% of the economy into this jobs report? sarah: consumer spending is slowing down. we are seeing the down step in consumer spending. we got an early read on holiday shopping. sluggish but as expected. we know e-commerce was stronger but you had looking for discounting and we expect more slow down next year as we get more of that pressure from higher interest rates, tighter lending standards, and a slower labor market. jonathan: by now and pay later is booming. what are you and the team saying? tom: -- sarah: buy now pay later has a larger uptick especially for gen z. it is showing the demand for

credit is slowing, the availability for credit is slowing. this is more available to lower income borrower. jonathan: do we have space to lever up in households in america? households -- sarah: households have space to lever up. 90% of household debt is locked-in in a fixed rate and we know no one is buying and selling homes. we are seeing that households are not super levered. tom: this is the heart and soul of zentner economics. everyone is hysterical about consumer debt, and i think we just heard we should not be hysterical. sarah: i would agree with that. we are seeing pressure on the consumer but interest rates are 5.5%. we should be seeing pressure on the consumer but i do not think we need to say the consumer is falling off a cliff because we are seeing a rise in delinquencies and pressure on the credit space. lisa: we heard things similar from priya misra that the longer

things look good and there are not that many warning signs the more likely a hard landing is. you agree with that? sarah: of course. the longer rates are high, and makes the fed's job harder and harder. they are in a difficult position into next year and markets are pushing on for a march cut but the inflation data will not feel comfortable enough for them to do so. even as economic activity is slowing we think inflation data will put them to stay on hold until june. jonathan: which is the reason -- lisa: which of the reason torsten slok said the market is underestimating the fed commitment to 2% inflation. this is what we are feeling from guest after guest. where is the market most mispriced to what you and so many others say is the reality, which is the fed will not cut rates aggressively. sarah: we think they are mispriced for march. chair powell is looking at the six-month, the 12 month annualized pace.

he said the six-month pace is 2.5%. if you look at the path ahead, core pce six month annualized pace will be accelerating and it is not into the second quarter it starts to fall again. we will get the data of core pce pushing up and we think that could push march pricing further out. tom: picking up a tent the 1% come is it a pickup that will upset our viewers and listeners? sarah: you have this negative airfare prints from earlier in the year falling out of the mix. you have upward pressure on car insurance. we will need to get into april to get it back down to 2.5%. tom: i was just reading david rosenberg. there are single items within the inflation report that will push up the mother ball jerome powell inflation statistics .5% airfare, car insurance. sarah: we will have to look through the noise but it will

all matter. there'll be a lot of focus on core services x housing and housing itself which will continue to moderate. you have to pay attention to the totality of what is going on. jonathan: three-part story wednesday. can you give us the guide? sarah: we are expecting a very little change in the statement but we are expecting powell to constantly changes communication from how high to how long the of the summary of economic projections and also via the press conference. they will be taking a. down for this year -- they will be taking a dot down for this year. they left a mark inflation down to 3.5% next year, 20 basis points lower. he will have to keep pushing back they are not yet talking about easing policy. jonathan: does the 2024 dot opera kies -- does the toy 24 d

-- sarah: it does make his job very difficult where we have seen over 100 basis points of easing in financial conditions. markets are getting ahead of themselves so he will have to be more explicit in his communication that it is too soon to be talking about cuts. lisa: which is the reason i find fascinating the question has the fed already lost its credibility? sarah: the fed is doing the best it can in a complicated environment. jonathan: so diplomatic. almost rehearsed. chariman powell is doing the best he can. at some point does of the market always does the federal reserve? sarah: of course. the fed is trying to figure it out. there's lot of time between march and june. we have jobs, we've inflation, we've retail sales. a tremendous amount of data.

jonathan: mohamed el-erian thinks it is a communication problem. we will catch up with him in the next couple of hours. it is what is not happening in markets. last friday the chairman got steamrolled. if that was pushback this market laughed in his face and rallied hard. lisa: that is exactly it. it was almost like gabe operate because he was saying one thing -- it was almost like a mockery. the question is do they care? do they care that market conditions have eased? if they do not care and he will not be that much harder in his communication, does that send a message itself? tom: the bloomberg financial conditions index positive .56. the answer is they do care. it is moving away from the zero number. jonathan: sarah, thank you.

sarah wolfe of morgan stanley. equity futures -.1%. a similar story in the fx market. in the bond market yields higher three basis points. the most confusing story of the week, crude back in the 70's. $70 and $.74. lisa: even though there are incremental moves, now the speculation is that saudi arabia, who met with vladimir putin, who is apparently running for reelection again, there's a question of whether he is cooperating with saudi arabia. jonathan: who will win? can you bet on that? tom: can you see the debate? jonathan: any challenges? tom: i deferred to annmarie hordern. jonathan: we want to talk about

airlines. earlier this week level airlines poised to generate record revenue and will extend the gains into 2024. the turnaround for this industry. tom: the turnaround is there but i wonder where the prophet is. they are making profit but the stocks have not responded. they are not academic close, but are they booming? -- they are not at pandemic lows but are they booming, no? jonathan: coming up bloomberg's brooke sutherland on airlines and demand. this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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we remain cautiously optimistic about 2024. should give the industry reason for optimism. jonathan: that was the iatsa deputy general. the improved forecast after deltas president signaled strong demand into the end of the year. jetblue picking up a little bit. tom: do you think fuel is into it? we have a panic when the price of oil goes up but now the price is down. does it pay into the financial part of aviation? jonathan: the peak for discretionary stocks was july. tom: i have had trouble. i had to book a flight for one of the offspring in the last 24 hours and i was shocked how inexpensive it was.

the answer is it has gotten cheaper, even the short little junket flights. it is amazing. jonathan: things have turned around. i would still say it is expensive. tom: let's do the mac on this with brooke sutherland of bloomberg opinion, expert on aviation and all the moving parts. i went to google flights and i looked at one of the international flights that john and i look at all the time. it used to be $7,000 and i remember a pandemic $9,000. right now it is $2800, down from 5300 media. this is new york to paris. how did we get here? why is that flight so cheap? brooke: the airline ceos are

trying to argue that the transatlantic travel season will extend deep into the winter and so that price data point is not in line with the philosophy they have been espousing. part of the problem is airlines did not have enough capacity when we came out of the pandemic. they got stumbled by the sheer volume of demand and did not have enough people and planes and so they overcompensated. they added back a ton of capacity and it is not like demand has fallen off a cliff for the transatlantic flights or domestic flights. there is a lot more available seats. airlines are having to offer discounted tickets to philip those seats, which creates a very dangerous dynamic for their profit margins at a time when costs are also up, not just for fuel but for labor. tom: forget about the pr for the aviation. let's do the brooke sutherland gas. what does later 2024 look like?

are they taking capacity up? how do they respond to these realities? brooke: i would be surprised to see them cancel plane orders because the wait times are so long. if you cancel it you are setting yourself back years. i think we need to see substantial capacity cots. we have seen a little bit in the first quarter but this is a trimming around the edges. we have yet to see this big capacity can't i think the industry needs to level us up. i think that time will, because they are banking on a in corporate travel that has not materialized yet. we thought we would see it in the fall as companies put people back into their offices. that did not end up laying out. if you don't have the corporate travelers airlines are dependent on leisure markets. jonathan: -- lisa: on the other hand how much of a boom is it that gas prices have gone down as much as they have?

brooke: it definitely helps. to see these prices coming down is a boost but you have to wonder if you can bank on that. fuel prices tend to be a volatile metric. lisa: we've been talking about how can you call for a recession when you have record demand but still incredible amounts of travel. thanksgiving was booming. records including pre-pandemic times. is it just a matter of expectations being higher or are we seeing some sort of softening in demand? brooke: it is interesting because there was weakness over the summer on those domestic routes. what the airline said is people were pivoting and traveling internationally because those markets were much more open and they have been in the post-pandemic period. the pressure will be on to see whether people take those

international trips. i am skeptical. if you are a family who went to europe in 2022 or 2023, do you need to go back next summer? i do not think the answer is yes. i think we will start to see some pressure on the consumer. we are already seeing it on big-ticket items, things like washing machines. i think that extends to international travel. tom: to your kansas heritage, which is where aviation is centered, sorry folks, not the carolinas. what you see in the difference in engineering between boeing and airbus? boeing is wicked traditional, airbus is more fancy computers, fly by wire. where are they in five years? do you feel like one of them will radically change or are they said in their ways? brooke: i think five years is a short time horizon.

both of them are trying to figure out what the next-generation technology looks like in terms of reducing carbon emissions. airbus is experimenting with hydrogen technologies and they have a couple of other projects. they are taking different paths but the goal is how we make these plates more fuel-efficient. that will be the driver for the next generation of aircraft. it commit to improve been's from engine technologies is not going to get you there or be a motivator for these airlines. as boeing and airbus think about their future pipeline that is their priority. tom: they will go down to one engine. brooke: for maybe no pilots. tom: the idea that we are down to one engine, where does the efficiency come from? brooke: i would argue we are pushing the efficiency limits of the technologies we already have.

when you look at the issues these engines have had, whether it is the gtf from rtx which had acute problems. rolls-royce has had issues with its engines. we are pushing the bounds of this technology in terms of what it can do. to make a quantum leap forward in terms of fuel-efficient seat we will need different technology. what that looks like i do not they the industry has settled on. they are pursuing different paths. jonathan: you are awesome. love hearing from you. brooke sutherland of bloomberg. payrolls report 36 minutes away. neil dutta just publishing this morning. "i continue to see analysts noting the threshold to cut rates is high because the fed wants to be sure inflation slowing down before the ease policy, i don't get it. the threshold is conditional on the inflation outlook and the threshold for price moderation

is not very high." the disinflation is in the pipeline, already baked in. you will see it. tom: david rosenberg seconds the motion with neil dutta saying this is the trend, get used to it. jim bianco was articulate on this in the last 24 hours. he was out front with the idea of leveling inflation or even up as we heard from morgan stanley and sarah wolfe. the end of the weekend is where the debate is engaged. lisa: i love the neil dutta watches the show and watches the consensus call and then writes in hate mail saying they are all wrong. i think the threshold is even lower. it creates real dialogue. jonathan: he has been right. tom: a few more people right in. jonathan: i am sure he feels right about 2024. tom: can i ask you the question

after the wonderful conversation with brooke sutherland. have you flown the gigantic airbus plane? you are a keystroke and there is this thing -- you are at heathro w and there is a thing twice as large as a boeing 737. jonathan: i have never flown it. would you like to? tom: i don't know. i think is gorgeous engineering. lisa: to like it when there are five seats together in the middle? jonathan: no. you think he sits in the cabin with five seats together in the middle? lisa: i have experience that. jonathan: he doesn't even know what that looks like. [laughter] jonathan: payrolls 33 minutes away. tom keene has not turned right on a plane in years. nadia level is coming up next.

this is bloomberg. ♪

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we still have evidence pointing that the fed is waffling. job growth is wrong -- strong.

labor markets are strong. a strong number is largely priced in. this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning everyone, it is jobs day on radio and television and worldwide. where will we be at 8:31 in the market reaction. the whisper number says it may be a little weaker than the published number. jonathan: the estimate is 183,000 and what you are basically asked king is it bad news? is bad news bad news? will people start to sit there and think oh, that's bad.

the rate because off of disinflation, great if growth is robust. but if you have an economic downturn? tom: ian shepherdson, it goes the other way. that will be a shock to the market as well. jonathan: is good news good news? lisa: it depends on which aspect? doesn't matter if they were to go down significantly if what you are seeing in terms of quits are going down and job openings are going down? can we get a read through at a time where the distortions from the strikes, government hiring, medical hiring? tom: the difference in the two

gdp measurements, gdp, gdi don't match. what will the revisions look like? do we have any veracity of the last two jobs reports? tom: and then we have cpi, fed, retail sales. so for meal data, this labor market is no longer a reason to be hawkish. at what point does that tip and not be bearish? based on jobless claims, it's too early to expect god. lisa: services inflation tends to be stickier and that's concerning. people are underestimating the fed's commitment of getting down to 2%. jonathan: a tough meeting for chairman powell, really difficult. tom: more difficult in this last

two weeks. jonathan: the market is pricing in a hundred basis points and they have to put in dots in 2024, that's difficult to do. tom: we will do a longer data check as we go into the jobs report. the vix it 13.1, i think that says bull market. jonathan: after the move yesterday, that's absolutely ridiculous and more ridiculous when you think about what people were looking at the start of the year. tech was honest nice and then we ripped off the back of the ai story from nvidia, alphabet. lisa: and nobody is willing to push back.

there is a change in rhetoric, not tech will lose value but may not outperform. don't bet against attack and everyone is terrified. jonathan: the two-year is up, 10 year is up at 4.18. tom: when we had our early morning meeting in the answer is the two year yield at 4.62. jonathan: that's a big turnaround. does the data validated? tom: we will do that with michael mckee coming up here, nadia level briefs us. we are almost beyond the idea of

it being the bull market. is it a bull market with breath into 2024? nadia: we think so but some of the leaders from this year will continue next year but a lot of this will depend on the data. it does feel on the growth front we are probably back in the two much good news is bad news. given how much rate cuts are priced into the market but this could create some volatility if the macro data continues to support a soft landing that this market can move higher from here. this past week we got some interesting commentary including

tech financials and companies are not seeing any slow down in the consumer remains resilient. that shift continues to support the market. jonathan: good morning nadia, we have tech and energy. the winners of 2024, are they the winter of 2023? nadia: we think it will continue into 2024. ai enthusiasm remains and we continue to see a monetization increase. we are also seeing alternatives produce in that field. our view on tech is not solely ai. on a relative basis, this is

about improving fundamentals and the rest of tech. they are starting to see a optimization come to an end. previously depressed markets improving because of a new growth cycle when you look at smartphones and pcs. this is a sector they could see twice as much revenue as the bond market with market expansion which is why we think tech could continue to outperform. jonathan: let's do energy. we dropped into the 60's, they were looking for 90's and brent. what's going on in the commodities market? nadia: you could see why market wanted stabilization considering what went around last week and the cuts into 2024.

given where oil prices are that will likely increase the commitment from opec-plus and you could see a high compliance for that 200 million barrels a day cut into next year. volatility will remain but the demand picture remains in the man. growth is in demand led by emerging markets. oil remained strong especially with jet fuel. patience is required but we think this market will be a deficit in the first half of the year. and it could get back to $90. lisa: when you look at the exxon chairs that are down 17% since september? nadia: what we say to clients that this is an opportunity to add exposure because we think

there is a limited downside from here we think opec will step into support oil prices. when you look at these companies they fundamentally are in great shape. and returning cash to shareholders with massive buybacks so there is an opportunity to add to energy. lisa: pretty much everything will be bad news even if it's good news because if it's not goldilocks with respect to the job report we get. how will you position on the heels of this? do you use it as an excuse to sell or buy? nadia: we would be surprised to see weakness in the labor market in terms of the other data coming in. in the past three labor markets

have been promising but expectations are high given the rate hikes priced in for next year. if payrolls remain in the high 100 thousands but if you see something below that it does give a reason to pause and question whether there is consumer resiliency in the labor market. but we think the numbers will be fine but this is a market on edge and remain on edge and is very much data dependent. jonathan: nadia, thank you for checking in on payrolls friday. this is the second time we have heard this, nadia lowell from ubs.

100,000 and below would spook this number. tom: 110, 120. on twitter there is a really smart note on stock selection and nadia talking about mixed indexes. i would suggest 2024 typically in a bull market, it's like baseball. the winners of ai, the winners in aerospace it will be selective. jonathan: are you went to baseball again? tom: the yankees just made the trade of the year. he has the most patient batter in the game is totally different when he steps to the plate. jonathan: what if they convinced him to come to new york? tom: the food sucks in yankee

stadium. jonathan: the food does suck in yankee stadium why is that? they put chicken wings in the soda. tom: what's amazing is that tottenham with their meat sticks? jonathan: unbelievable, a knife and fork to eat applied. do you want to do our accident again tom? tom: no. jonathan: that almost sounded threatening. thank you for joining us this morning. futures are lower down 2.24%. tom: did you see the goal where the totts lost to west ham?

the defense of guys saying i'll give it back to the goalie? jonathan: you watch more football than i do. i didn't even watch the game. lisa: did you actually watch the whole game? tom: no, i watch the highlights. jonathan: jeff rosenberg at 8:30 a.m. the drumbeat to payrolls is about 17 minutes away.

>> we will focus on a couple of things in this report. how stable is market growth?

in the unemployment rate, is drifted up this year despite the economy being so strong. one month doesn't make a trend so the market will react to the data we get but the general start is the economy slowing, inflation is coming down. jonathan: that was bill dudley looking ahead to the jobs report saying the fed is pretty happy with how things are going. there's a rebalancing of the labor force, supply-side doing better. tom: where are we in the post-pandemic? going back to 1921, we are not in the roaring 20's. coming out of the pandemic is

the study of productivity. jonathan: i can tell you where we are right now. 13 minutes away from that jobs report and we look like this in the market of .02% and we are looking for 183,000. tom: after the jobs report is michael mckee and jeff rosenberg is scheduled to be with us and we are happy to bring to you the chief strategist at roth. the dynamics of the american economy it comes down to nominal gdp. how quickly this hour topline animal spirit exploding? >> if you look at the tracking

numbers for the fourth quarter of looks like the expectations are running for 1% gdp growth and with inflation running at 2%, 3% that looks like there has been a dramatic slowdown in type line growth from q3 to q4 which looks below trend. we really don't know what the underlying trend is but it is safe to save it is a slowing trend and this is what the fed wants after all the monetary tightening they did last year. the question is do we stop out a dime on trend growth and continue to enjoy this immaculate disinflation? or is it something more malignant that looks like a recession? tom: what kind of trend

signifies a slowdown? lisa talks about nonfarm payrolls but is it sub 100,000? michael: i think is subjective. if the relationship between the ism nonmanufacturing survey reverted to the pre-pandemic relationship with payrolls we would be getting 70, 70 5000 which is way below the expectation of 185, 190. anything that is over 200 injures the bond market which has been in the throes of a big rally. we have five rate cuts preston for next year. i am a bit skeptical we can have a soft landing, double digit earnings growth rate for the s&p

and five fed rate cuts. this is a little too good to be true in terms of the story being cooked up by wall street strategist. jonathan: what do you think has to give? michael: the business cycle will give here. i will be watching the unemployment rate with the expectation we set up at 3.9. we are up 5/10 from april. which is what you would see at the beginning of a recession. it is not a decisive signal. on a 12 month basis you want to see an increase. if we drift higher on the unemployment rate, that was suggest we are entering a recessionary. period. we are moving in a

decisive upward direction. jonathan: i just want to get her away from that. what are the chances we would stop there are not go higher? michael: only once in the 1950's. it is happen zero times without a recession over a nine-month interval and we were 3/4 in april and 5/10 is untenable without a recession. these payroll figures can still be positive for a while into the early months of a recession and they can be revised dramatically over time. the unemployment rate in terms

of slightly lacking indicators will let us know if where in the growth or recession phase. lisa: when you talk about the potential for a weakening in the economic cycle i have to ask, have we not christ that in? if you look at the underperformance of the russell and outside of the magnificent seven, are we not prepared for the weakness? michael: i think so because small caps have dramatically underperformed in the cyclicals have been struggling, energy, materials. the valuation would say there's not much downside from here. i'm worried about the value trap was cyclicals of we fall into an actual recession. when not as obvious in the

consensus view that we are in recession, thus the time you will want to buy cyclicals that have already been beaten up pretty badly. that's an important point for investors. jonathan: stick with us we will get back to you after payrolls. and also, happy birthday. he is so chiseled, suave? lisa: it's like paradise city. i am looking at the guns and roses poster behind him. sweet child of mine. jonathan: 185 is the new estimate. michael: i would love to be 50 again. we have moved up to 185 in the

whisper number has followed up out was 77. not only do we have a higher number in terms of payroll change than justified but wall street is suggesting. michael: we did see downward revisions in the past and you want to watch for that. mike was just saying these things get revised a lot and sometimes when you think there is a lot of strength, it disappears. jonathan: how difficult this is further chairman powell? michael: the meeting itself is not so hard because they can just say they're not doing anything but how they frame the dot plot.

as many people have shown, the market trades differently at 2:00 when we get the statement and then at 230 time when the chairman speaks. jonathan: mike will stick with us but coming up jeffrey rosenberg, the numbers look like this. 185,000 is the previous read. going into futures negative as 0.1% and yields drifting higher. from new york, your jobs report is up next. is up next.

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jonathan: 20 seconds away from the payrolls report the scores look like this on the s&p equity futures slightly negative, yields are a little bit higher on a 10 year up three basis points and in the fx higher number the dollar is a little stronger against the euro. with your jobs report here is mike mckee. michael: we are waiting for the numbers to drop and we come in a little bit higher. 190 nine, just under the 200,000

level. 199 jobs created during november and 150 in the private. a rebound in manufacturing after the uaw strike. it is still higher than people anticipated after the map. the unemployment rate is 3.7%. remember people telling us we would go over for? i will have to check the numbers in terms of why that has happen which will do in a second but that's a stunning number. average hourly numbers were waiting on in labor participation at 62.8.

there seems to be an issue with the website. let's see if everybody is going through that. we are not getting the data we normally get. jonathan: an upside surprise at 199, unemployment at 3.9. yields higher are up 11 basis points. the 10 year is 10, 11 basis points. wage growth in number higher month over month. michael: double than what we saw last month. it means nothing compared to the year-over-year. it's a 4% year-over-year basis so that tells us we are still seeing the progress you want to see in wages and that even with the large jobs number.

the revisionists and and that's with the decline of 37,000. we don't know which months those are apportioned to but a smaller number for the net revisions than people anticipated. jonathan: a stronger dollar against the euro. we were talking about the prospect of a downside surprise and this is good news with jobs better-than-expected, participation is higher. the script is not going to change on wednesday. lisa: he will have to have a hawkish message after this shows strong numbers. unemployment dropped from the

prior month is surprising. and hours worked has also increased wage growth also increased. tom: the elephant in the room is a small revision hundred 64,000 is a middling number but a sigh of relief from the gloom that is been whispered out there. jonathan: three minutes after payrolls the price action doesn't stick. of 10 basis points at the moment, what do you see? michael: let's break down unemployment 532,000 but we also

get 740 7000 of people employed which is a huge number and unemployed drops by 215,000. this looks like a good reason unemployment is falling. a surprisingly strong household report and establishment report is also very strong. 40,000 jobs in leisure and hospitality which is higher than it has been, that category still looking for people. i wonder how many of those are department store senses? government a little lower than the average but still adding a lot and health care at 77,000 jobs. tom: that's my side gig.

jonathan: you would be a good santa. michael mckee thank you for that equity futures, bond yields are a little higher and on the euro against the dollar, a stronger dollar 1.07 a tremendous lineup we have mohamed el-erian, mike collins of fixed income and a very happy labor secretary will be joining us from the white house soon. tom: we will continue our conversation with michael dive.

is this the productivity overlay, technology overlay and the non-technological sectors where things are better than we perceive? michael: it's hard to say the productivity statistics of been strong but they were insanely week before that. we just faulted back to the pre-pandemic trend so far which was 1.6. to be determined on that. this is a good report. we were talking about the unemployment rate moving up as a recession signal and we have pulled back at 3.7 so this is a report that the fed will feel like they won't have to embrace these early rate cuts. this could change with december

data but at face value a strong report. it's still the fully employed micah. we are seeing a little bounce in bond yields. lisa: does this make you rethink your thesis about the cycle moving average? michael: it's not a decisive signal. if we are up above for for this report that would suggest that we are falling into recession. we are not in recession right now but not necessarily an all clear signal for next year. tom: what is the darda xp call.

michael: for the overall s&p 500 we will have a challenging period in these leading sectors they are too high. investors will need to look at other areas that have been underperforming. tom: michael darda thank you so much. the vix under 13 at 12.90. 11 basis points on higher yield lower price on the two-year and now down eight. lisa: if anyone was doubting goldilocks, you could continue to try to doubt it but each data point place with that idea with more people entering the workforce. tom: a difficult way to manage

money in this environment. jeffrey rosenberg is blackrock. west a strategy that works forward given the treacherous economic waters we way? jeffrey: this is a good report and we have been discussing across and stronger-than-expected, maybe not on headline payrolls but underneath and that will push back which is why you've seen the market reaction we just described. juan markets are really starting to price and a lot of cuts into next year. the unemployment rate is hard to see where the restriction is coming for this fed policy. you will have pushback in the

narrative and that you won't see the slow down. most of the support is coming from the inflation side. on the gross side you are not seeing the level of her strict nose show up in the labor market. that will push back on how quickly the fed will be able to cut rates to keep up with the fall in inflation and avoid the increasing real rate. tom: the bloomberg financial condition index explodes to 6.2. this is what powell does not want to see. lisa: he didn't pushback as much as people thought. to that point, when you say inflation is in the front minds of people. how is their view

damaged by hourly earnings rising? how does that suggest a stickiness to wage growth that flies against this narrative of bed rate because? jeffrey: what you have had on the inflation side is this dichotomy between goods and services and it is the goods part that is been the disinflation fueling the enthusiasm for the cuts into next year. the services side has held up in services inflation is the map into broader inflation. that remain supportive. this report supports continued support for the broad inflation picture from the services side

in that debate will continue. what you've seen in the market is a little bit of pullback in terms of the enthusiasm. the first reaction is not necessarily be and reaction. the take away is that there is a very strong labor market and support of services inflation driven by the good side. you are not seeing that supported on the services side. lisa: doesn't matter how much the fed cuts rates next year considering the fact that it didn't seem to matter how much they seem to raise rates. are they underestimating how much affect the market if they don't cut rates? when you see an economy chugging

along at businesses the hiring? jeffrey: doesn't matter for the real economy or the financial economy? in terms of the sensitivity to the economy to interest rates, is a different question to the sensitivity of the financial markets. for the financial market it matters a lot. that has everything to do with the expectations of the soft landing and allowing the fed to cut interest rates is highly supportive of financial markets. but with the real economy is less significant but for investors that will be the financial market. tom: let's pretend your carnegie mellon you have a chat, does this good labor economy support ebullient assessment of our real

gdp? jeffrey: that's kind of the issue here for monetary policy, there is a question of what is neutral and real interest rates of what is restrict live? we think we are there but we don't know until it shows up. we have had the benefit from the inflation side but the gross side, less so. that's been the message from labor markets. it's been a steady normalization but we are still seeing a large labor market presence, rates are not really consistent with restrictiveness. that is good from the gross side but it may not be good to get the last smile of 3.5 down to the 2% target. tom: jeffrey rosenberg often

here with us on jobs day from blackrock. what is beneath the headline data? mike: hourly earnings is double than expected but on the three month annualized basis they are down 3.4 from 3.7. the trend is moving in the right direction for wages. 3.5 is the stable level for wage increases. in terms of jobs, manufacturing of 28,000. we saw a big strength in the health care area which is always the case. 76,000 and the government 49,000 , you can see political attacks but all of it was in the state and local government with the

federal government with the federal government was zero additional workers. this is november, retail lost 38,000 jobs. it isn't exactly clear how that happened. tom: do you know what amazon is doing and those big buildings outside of fargo, north dakota? mike: performance of transportation and warehousing was down 5000. we often see an offset to retail as more people move to online shopping and we did not get it this time. it's not clear to me whether we are going to see a big change in december or the seasonals of change. tom: mike is going to dive into the data. it's truly driving all of our economic analysis.

jim arnett is scheduled to be here. why don't you bring in iraq, the two year yield we had a 12 basis point move. lisa: what i find interesting is the headline number was suggest you might as well pare back your bets on the march rate cut but they were not pared back that much. 55 to 47. a significant chance pricing a market cut. i read, what is your take on the fact that markets moved but they are retracing that even though there is nothing in this report to suggest that the fed needs to cut rates in the future. ira: the market us and risk management mode because it thinks that we are seeing a

significant slowdown in this is a speed bump and that narrative that the economy is slowing quickly. like michael mckee said part of the issue is the dispersion and distribution of the job gains or losses. anna wong talked about the sag strike in the uaw strike having some effect on this. inflation is still the key to all of this. next week's cpi number will probably drive some of the narrative we have from the fed next week. that's where you can probably see changes in market pricing. tom: your team is not only the economics of this, but the confidence in the fixed income market. i have seen a lot of gloom

articles and a lot of pros pushback. should we worry about liquidity? should we worry about trust? ira: i don't think we should be worried about trust in the government's ability to pay. we will have a debt ceiling crisis just because of the partisanship going on in washington. in terms of the size of the market versus the pipes the market runs through, there is concern there. they are trying to nip at the margin but i'm not sure they wanted take the steps to help increase liquidity in a substantial way. i wouldn't worry about t-bills, they are still very liquid. when it comes to five-year, 10 year and 30 year bonds, you will

see these massive moves on not a lot of liquidity but today liquidity seems today. there are a lot of days when we get numbers like this and all of the bids and offers disappear and when that happens you see these outside moves on data that you would necessarily expect. lisa: which is why they're trying to identify consensus. you save this axis a a speedbump with respect to the slowdown narrative, does that mean the narrative seems to be the consensus and they will continue to price out in? ira: i agree with that assessment. i think if we see that in december the jobs report is due you said we could price out

march and may income cuts. when 10 year and two years were out 5% and five .25 we were pricing for any cuts. we could easily go back to the other way. the barda cut rates is much higher than the markets are thinking. tom: thank you so much i really appreciate it. on the others of the aisle, gina martin adams. we are looking at the job yields in the fed. i am so far behind in this market, what do i do given this jobs report? year to date standard & poor's 500 up 13% in the dow up 5% in

the gina martin out a nasdaq is out 400%? how do you take this jobs report better than good folded into a better than good gdp which is clearly a better than good stock market? gina: that's a great question and one then everyone's contemplating. i would point first to the difference between the dow and nasdaq return. there a similar difference between s&p and small caps. portions of this equity market are in an extraordinary bear market. as everything but the job market indicators have been pretty sour over the course of the last two years. the equity market has been stuck in this recession malaise.

with the exceptions being tech related stocks which have performed incredibly well. this is clearly not about the economy and the equity market. they are keeping most return surprised, international return slow. that sets you up with a good strategy for 2024. tom: my strategy is to get to lisa abramowicz. i want to note that equities are beginning to lift with futures only negative far, dow futures at -35. if we have a come back into next year after month after month this resilient job economy do

we underestimate where those tech estimates will be in june? gina: there's a strong chance the market is mispriced for 2024 and most people would say is mispriced because analyst expectations are too high. the market is anticipating close to 0% earnings growth and if anything near 11% growth that will be a second year of an upside surprise. while we been captivated by this data the other half is what is going on with their earnings and we could be set up for an earnings surprise. lisa: part of what is interesting here is people are underestimating the capacities these companies have for hiring. if they see a downside to being insufficiently staffed than the

upside from cutting costs. we are now 2 million jobs above the cbo pre-pandemic projection and wear out a better spot than before the pandemic. where do you see the biggest game to be had from the figures we are seeing with respect to hiring and where people are really hoping to beef up? gina: i think the biggest potential gains will come from the areas that already cut. if you think about what's happening in the job market we had job because through the pandemic and the sectors that did not cut those jobs they cut them in 2022 and 23 and sectors like to knology, communication and financials. those are the groups that are experiencing earnings recovery including the tech sector which is producing strong growth.

those are the segments of the market that are leading what is going on in the broader market with those of the segments where they are already cut to the bone. if they continue to produce higher growth we will see a hiring grow back. lisa: at what point do fed rate because for equity valuations? gina: they definitely matter when you look at the small caps sector. they have been trading at multiyear discount which is clearly depressed. if you exclude the tech sector you have a multiple closer to long-term average. there is pent-up demand that could be sitting on the sideline for equities based on valuations alone. cut could go along way for

valuation expansion and all the groups and sectors that have been left behind in this tech specific market. tom: absolutely brilliant. thank you for that analysis. a look ahead into next week and that inflation data. in what we will do with our 201 case. lisa: it was a pretty good report but not good enough to make a good news, bad news or cause hysteria. it's so good that people are rethinking when the fed could really start cutting rates. tom: i thought it was brilliant because she walked away from the fed analysis to what corporations are doing in there is a gross underestimate of the resiliency and adaptability of corporations a different sectors.

we know media is flat on its back but we see futures come back. for those of you on radio, s&p futures we have made a run to plot. lisa: people aren't fully repricing anything because it's only one data point. how much of people underestimated how much strength there is in if that is the case people overestimating the fed's response next year? it will be important to understand whether that matters. tom: on december 13 we will do a show in the fed decides. lisa: especially now when we are in this uncertain time and i'm curious whether they care about the easing of financial conditions or they say it doesn't matter because we see a slowdown in the works. tom: thank you to our team is

always a really interesting conversation. jonathan ferro will be in conversation with the acting labor secretary, good morning. jonathan: that was fun for about 30 minutes. your equity market a touch lower on the s&p. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: live from new york, coming up the u.s. payrolls report coming in hot with the latest read on inflation coming up next. chairman powell's next move less then a week away.