>> the thing that gives me the most anxiety is a cut that comes too soon. >> markets assume they can move as soon as the next few months. we think that will be too soon. >> think about if they have to restart the rate hike cycle. >> i don't think we are at an inflection point. >> signals have turned long. it suggests we are going through a regime change. >> this is "bloomberg surveillance" with tom keene jonathan ferro, and lisa abramowicz. jonathan: live from new york city, good morning to our audience worldwide.

this is "bloomberg surveillance" on tv and radio. your equity market, negative by .2%. the nasdaq making it -- payrolls are around the. tom: average hourly earnings, 3.9%. i don't know how that moves but if it moves enough next he stuck it which is opening graham for 2024. jonathan: it has been a struggle coming out of the gate. the longest losing streak on the nasdaq since 2022. the big banks between 117 to 119. lisa: with the whisper figure being 188,000 on the terminal. good news is bad news and bad news is good news. is that the paradigm? that is what we keep seeing.

the better the data, the worse the markets. jonathan: the jobless claims number, the downside surprise, will payrolls follow that to make it three out of three? tom: we are desperate for information. we had a strange first -- strange fourth quarter, some people taking the 1970's. we are begging for a narrative. jonathan: some people begging for it cuts. check out this quote. quote now that inflation has come down, before the next shot materializes, the fed should start cutting its. the fed should start cutting. lisa: that is what everybody is hoping and we can see baked into markets and the fed is starting to push back, the data is starting to push back. what point do people wake-up to the data is confirming that we have enough to start cutting rates, especially oil prices keep climbing. we see this other strengthening

trend. tom: matthew klein on social agrees with. he says it is a restrictive policy now and they have got to get started. the distinction here and the fed meaning we are going to have in january is do you have a measured approach by the fed? i don't know why they are waiting for march. , in -- come out in a few days and say this is when we do the first rate cut. jonathan: we have this gap in market and the federal reserve. the market coming toward the federal reserve. off of the back of recent data, just interfered of better-than-expected data in the last couple days. lisa: yesterday -- said it is a little optimistic today to think it is going to happen so soon, talking about rate cuts, as soon as march. people have been able to bully

fed into doing their bidding. they have not been able to this time around. where do people realize their hopes do not create reality? jonathan: jobless claims at 202,000 yesterday. payrolls are two hours 27 minutes away. equity futures coming down. the dollar stronger, euro thing 1.09. yields up by four basis points. lisa: the last time they closed above 4% was december 13 on a fed meeting day. i am watching the payrolls report, the fact that expectation is 185,000. i watching hourly average earnings. the expectation is for do come in at 3.9%, but still too high for the federal reserve. that might indicate stickiness.

it has been an expansionary territory for every month except for one going back to the emergence from the pandemic in may 2020. can we continue this expansion? richmond's fed president is expected to speak. we are also hearing, we are lucky to have randall kroszner and bill dudley joining. i am curious about the former fed officials. what do do with an unclear moment that harkens back to 1948 period? jonathan: looking forward to that. with us, steve whiting. happy new year. steven: happy new year. jonathan: i want to bring up that word from bob michele. have a read at this. "now that inflation has come down before the next shot materializes, the fed should start cutting rates." what do think about that?

steven: conceptually that sounds good, is that something the federal reserve is in practice of doing? no. you have to give them some time. monetary policy is restrictive. let's zoom out and say what we learned last year's you don't have to crush the economy. you don't have to have any economic labs to get the inflation rate lower. there were numerous pieces of what happened in the upheaval of the economy that made price stability impossible. as we normalized, inflation has come down and it will continue to slowly come down. are we in any environment where the federal reserve is going to primitively say let's get back to a neutral position? it is nice in rectus, but the committee dynamics, it is not going to happen that quickly. tom: others are talking about a

fed behind the curve here. does a fed restriction to enough where it slows down the economy and gives us a more diminished corporate earnings? steve: we think things are little different this time. last year, take out the max seven which had a bad it would you do, it looks like we had a 6% drop last year. that is consistent of no collapse in the economy. many things look like have been in mild recession. we have not had growth since 2021. production has been down. global trade was downloaded 10% at its low point -- down at 10% at its low point. cyclical industries have dragging for some time. we are in a position where

earnings are recovering more broadly. tom: if we are restrictive, can you get a growth you? -- growth year? steve: i think 2025 will be the year when we look back and say it was a stronger here. a fall in inflation is a sign we can have a healthier economy. that is where we are headed. if we went from discounting and that it is good to be doomsday at high in inflation forever to perfect goldilocks, there is for to be some give and take. people are very superstitious this is happening at the beginning of the year. lisa: does it matter if the fed cuts in march? for the earnings recovery you are talking about. steve: it will not make a difference in the earnings environment. may be make a difference on how the market traders in a short period of time. lisa: when you look at your wager on the stock market, you are bullish on equal weight

because it has been underperforming to a degree. how much that predicated on anything related to the fed? how much is good news good news? steve: if the economy unfolds as we expected -- the fed does not know when it is going to take is. everyone says it is going to be march, it is going to be may. around mid year, turning away from trying to crush the economy , turning away from trying to forced on inflation and willing to sacrifice the economy with recession is a big deal. that is what we had a big fourth quarter. if we come to grips, if the demand-side is not collapsing and the production side is going to start to catch up with demand , we have rising corporate profits this year. i think it will be a better 2025. we see that more companies and sectors have a better performance.

it is no 26% s&p return. jonathan: we settle that last year and then we got one. we said no 26% gain and we got a 24% gain. where is the consumer now relative to where it was? steve: it has been positives and negatives. people have to have this balance. there are several different ingredients in its recipe. some are sweet, some are sour. we are seeing slowing employment growth. on the employment growth -- employment numbers, they were about the same. this is an environment where there are some cyclical industries shedding employment. we will seasonally adjust that. the baseline we have been seeing is slower and slower gains. inflation has come down at a headline level and that is meant for people who are already employed. a massive drag on their income growth.

you see plenty of signs that the aggregate consumer, while there are plenty of stretch consumers, too. it is in this middleground. it is hard for people to say this is going on. this is a mild upturn in a moderating consumer environment. tom: i went ballistic this week on underweight, sell, other nuances of the security business. are you underweight the max seven? are you selling the max seven? steve: when they fall, i think the ra bu -- i think they are a buy. when they have corrections -- they are any earnings growth. you should not be staking out a big position in max seven. i love that mid-cap growth companies are trading at 16 times when their long-term average is 21 times. jonathan: jobless, what are you

looking for? steve: i don't think there is a bond with consensus. given seasonal biases, i would expect something softer. the revisions alone could make that almost immaterial. jonathan: 175 is the estimate today. good to see you. 175,000 is the estimate in our survey. the previous number, 199,000. unemployment expected to come in at 3.7%. wage growth, year-over-year or month over month? tom: i would say year-over-year. jonathan: i will give you both. .3% for month over month. the estimate for year-over-year, 3.9%. tom: jason at harvard leaning on this which is how you annualize this we're talking about. six-month, 12-month, whatever.

i have a tendency to look at 90 days and then take it annual. jason has a big fancy formula that blends all of that together. lisa: take the time frame that most justifies your thesis at the time being and push that forward and then shift when you shift your thesis. that seems to be the way it has been going. people are talking about six-month annualized and all the sudden calling victory. at what point is the direct measure? it is a tricky one. tom: wage growth is key. i used to look at duration of unemployment and other social issues. i am focused on the wage dynamic today. jonathan: a word we heard yesterday, confusion. just how broad-based are some of these in the job market? how healthy is the 175,000? kyle of the parable pointing at we see early weakness -- of bnp

paribas pointing out we see some early weakness. tom: across the nation, there are some real pockets of slowdown. jonathan: we will catch up with morgan stanley about that. coming up, priya misra of jp morgan asset management on the bond market and what they're looking for. the jobs report, two hours 20 minutes away. the estimate, $175,000 -- 175,000. coming into friday, on a trigger losing streak. we are negative this morning. we are down 2%. good morning. ♪

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attack on iran, we are in addition to doubt that. difficult to make a quantitative -- of their strike based on this one event. i would say what we said before which is that isisk does remain a threat. jonathan: that was john kirby speaking yesterday as antony blinken heads to the middle east to ease tensions. good morning. it is payrolls friday. the state of the play this morning, a losing streak on the s&p 500 and on the nasdaq. four days on the s&p, day five on the nasdaq. pulling back again. negative by .25%. yields are higher by four or five basis points. 4.04 percent. the data better than expected, any -- an adp report with a

surprise. lanky foundation for -- laying the foundation for later. tom: the whisper number early on there as well, but i never trust this because it is a december report. i am old enough to know -- that his company off the mark but that is the collective memory of the first of january. jonathan: i think it is on the market, a lot of people pointed that out, the end of december number, how much should you pay attention? devoted has become so loaded to the one side, looking for rate cuts that you get this trip feet of economic data. deviated again this morning start to push the better the other way? tom: we will have to see. january 11 is the inflation report. we are data dependent. we will have that to the morning. -- that through the morning.

our geopolitical realities, no one more qualified to do that then bobby ghosh of bloomberg opinion with decades of experience in the broader mediterranean, including public service and tours of duty in iraq. i have geographies this morning and i thought of you when i saw irani killings in iraq where you have such experience. is ri off the radio? should we be looking at this tradition should between iraq and iran, sunni and shieh is the stereotype, is that as important as it should be? bobby: good morn. not so much sunni and shia, but iran and a number of bad actors. these militias that have been depreciated and are financed by

iran that have been over several years, but much more recently in an increased base flying missiles and rockets and drones at u.s. positions within iraq and syria. these are guys who basically do what iran tells them. they may be iraqi, but the survey run's purposes -- they serve iran's purposes. they are similar to hezbollah. they are part of the puppets that iran uses. it is not a quonset and's are all very active. tom: our member is a technocratic excellence, over the horizon we storm in desert storm some 30 years ago. that is not where we are now. it is almost as if it is a separated out war of religion. do we know how to fight it religious war in america? bobby: what we are facing in the

middle east is a new kind of war. we are not facing any army that will stand up and fight and if we defeated them, sign for peace and go away. that era is over. what we are facing is a network of actors who are hit and run. they tend to be all shiite, but not all of them. hamas is not initiated group, primarily a sunni group. they are working with shiite actors. they are all individually fired by religion but they serve the interests of a nationstate and that nationstate is iran. iran has shown itself to be adept at pulling different strings. oftentimes it is religion, sometimes it is just money. sometimes it is getting a group of people the weapons and the training they need, even if they

do not agree with you on religious grounds. that is what makes this also much more complex. it is hard to define if you belong to this group you are likely to be -- this is what you believe and therefore this is how you feel about us. it is a much more complex landscape now than it was during desert storm or during the attack on iraq. this is a much messier theater of conflict for the u.s. and for rls -- for a lot of us. lisa: isis claim to the blame for the attack. we are all thinking, where did isis come in? wasn't this a proxy war for u.s. and iran? what is antony blinken going to do with this tender box when he goes overseas for the millionth time in the past month?

bobby: the isis arrival on the scene is completely out of left field. these terrorist attacks on people mourning the death of soleimani who was killed by an american drone. isis has not mounted any attack of this ambition within iran and certainly not out of afghanistan. this is a rare instance where your enemy's enemy is also your enemy. iran and isis are enemies, as and the west are enemies -- isis and the west are enemies. antony blinken is going into this situation with a long wish list. from the israelis, he wants with the biden administration has wanted witches to go easier in gaza. start thinking about what happens after the cease-fire and how gaza should be administered and how this damage being done

is to be rebuilt. that is what he is going to be asking of the gulf arab states, the oil states that have the resources. he is also going to turkey. i would be curious to know what he says. the last time he went to cut his ears chewed out for not including the turks in the discussion. he is going to jet which is the border with gaza. that is where humanitarian aid is to go in. he needs to get israelis to allow that aid to go in. everything begins when the shooting stops. is number one priority has to be to get the shooting to stop. this would be difficult even if it was not for the arrival of isis, the increased activities of the hutus. we honor that is a vital trade route -- we all know that is a vital trade route. 12% of the whole world's trade passes through that one

waterway. this is normal or something that only concerns the middle east. this concerns everybody everywhere. jonathan: getting an update on that right now. here are the headlines. it is decided all vessels due to transit through the red sea will be diverted south around the cape of good hope for the foreseeable future. that is a change in language, the foreseeable future. last update said until further notice they would pause, no deciding to do so for the foreseeable future -- now deciding to do so 40 for super future. continuing the update from mirsk. all would be diverted around the cape of good hope for the foreseeable future. tom: it is a one-week longer trip and you go from 12,000

miles through the suez canal,, from china to new york, to 40.5 -- 14 thousand ave miles. the suez canal is so easy. jonathan: this situation is constantly evolving and remains volatile at all available intelligence has concerns that the security risk continues to be at a significantly elevated level. much more a matter still to come. from reno city, good morning. -- from new york city, good morning. ♪ hey you, with the small business...

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jonathan: a nine week winning streak on the s&p 500, we are about to snap that. the s&p on a four day losing streak. the nasdaq monday five -- the nasdaq, day five. a bit of we is going into the weekend. tom: a little better take yesterday. we were backing support or resistance. on the plastic day, we started breaking through a lot of some levels. yesterday is technically a different point than we were

guessing. jonathan: the bond market, a full handle on a 10 year. yields higher by four or five this is points. the 10 year, 4.04%. lisa: better than expected unemployment data, people expecting a robust number today. there is this question of are going to be worried about inflation for two reasons. also supply shocks, i know we will be talking about that. jonathan: 18%. i always got back to this in a survey, 18% of respondents looking for high yields. that tells you where the consensus was. tom: i am going to the you decide at 4.04%, where are going to go on a three basis point basis? any i think that -- i think that

is a really important point. jonathan: let's wrap it up with foreign exchange. the euro against the dollar looks like this, dollar strength and euro weakness, negative .3%, 1.0911. payrolls out in a few hours time you would expecting a print of 135,000 and any uptick to 3.8%. bloomberg economics expecting an increase of 144,000 jobs in government, health care, and hospitality. that will be the report. how broad base or narrow are these? lisa: if it is all coming from specific sectors that have to hire right now or government funding which might not last, does this represent a strong market or is this a sign of weakening under the hood? tom: a statistic there is a slowdown period.

there is no other way to get to it. even with a 140 number today, i don't think you can go there yet. if we get a socket to which, it is just that -- a sake data point, it's just that. jonathan: isis claiming responsibility for an attack that killed more than 80 people in iran. the attack coming as crowds market the death of the top iranian commander killed by the u.s. four years ago. tensions rising in the middle east. antony blinken is for another round of diplomacy. tom: i don't think there are enough airports to land in. as we mentioned with bobby ghosh with his tangible expertise, this went to baghdad. iraq as well as iran for death and murder of iranian officials. for me, it is not just about

sick of diplomacy. it is a multitude of stops that antony blinken has to make. jonathan: we are seeing the disruption to global trade, linked to what we are talking about. mirsky -- maersk has decided all vessels will be diverted south around the cape of good hope for the foreseeable future. they are encouraging people to prepare for distant -- for disruption to the global network. lisa: how much more disruption has to have been? this is a significant story and it has been leading in the background. there is a story that showed how much they cost to ship from asia to northern europe has skyrocketed. increased 173%. how much further does it have to go if some consumers realize this is not good to end anytime soon?

if maersk thinks we have to go this other route and stop in cape town, whatever the case may be, it is going to be more expensive. maersk is a legitimate company out of copenhagen and double digit return over the last decade. they margin off of the pandemic is giving way. how much more does a giveaway as they go another 2500 miles? jonathan: that is a massive question. houthis, how they have managed to shut it down. tom: way out in front on this. jonathan: you have companies within military presence trying to prevent this from happening and seemingly they can't. tom: i was looking at the pentagon yesterday, believe i saw 21 countries involved in any allied effort. lisa: the only ones in the middle east is bahrain which is interesting.

saudi arabia, qatar are not involved in trying to prevent this. the fact that isis came on this in with this attack shows how much of a tinderbox the middle east is right now. tom: our team will follow antony blinken's travels to the weekend. joining us on this jobs friday, sarah watt house. following the heritage with john silvia and wells fargo, what is your key attribute in the jobs report at 8:30? bobby: -- sarah: i think we will be looking at not just the overall rate of hiring but looking more under the surface given the juncture of the cycle. as you guys were discussing, what is the brats -- the breadth of job growth? is it as we have seen the past

six months or are we seeing some stabilization? that is one the cracks we are seeing under the surface. we are seeing concerns that make us worried about the sustainability of the jobs expansion we have seen thus far. tom: jon ferro rights my questions and put them in the teleprompter, he's doing that now. what matters on hourly earnings? is it month or year-over-year? sarah: year-over-year and three month annualized. that is the more salient point. inflation is still a concern and that is driving the fed's decisions. what is happening in that more recent pace, there is a lot of volatility month to month, even with the annualized rate. it at least gives you a more recent look than the year-over-year number which

tends to be smoother. at the end of the day, this is just one data point on wages and arguably it is not the most important. we see the fed and other policymakers give much more weight to implement cost numbers. jonathan: tom was to know about the quirks of december. talk about the quirks of december, how reliable is the jobless claims number we got? how reliable will this data be? sarah: with the jobless claims numbers, seasonality is usually issue. even if you look at the nonseasonally adjusted numbers, they are running below the numbers we saw in 2017, and 2019. it is clear the layouts remain low. where we get concerned is what is happening on the other side, what is happening with new hires. we saw that with the jolts report, new hires coming down to the lowest rate since 2014.

the jobless claims numbers are genuinely showing the layoffs. there are still concerns about the pace of hiring. you ask about the quirks of december, you will likely get a boost from the end of strikes coming from mac trucks, the casino trike -- casino strike in detroit. seasonal hiring can also be difficult this time of the year. they will be some noise in the december payroll numbers. lisa: is there going to be anything that can give credence for fed rate cuts in march? sarah: if you see a faster weakening in terms of the payroll numbers, if you get something comfortably below consensus, if you see those which numbers indicating labor costs continue to slow on trent -- trend, that could be a

possibility. when you look at the fed, there is not that consensus for a march rate cut. if you look at some of the major data points, today we get three payrolls reports, two cp reports, there is some concern that we have seen progress on inflation. cannot be sustained? lisa: last year when people were laughing at protections of where unemployment rates were going to end up, those were too high given what we have seen. i am wondering whether you buy into this idea that we could end up with a 4.1% unemployment rate which is up from where we are now and get inflation back down to 2% by the end of this year? sarah: we are more pessimistic on the unemployment site. we think and implement will be closer to 4.5% by the end of the year.

we think inflation will be lower than what the fed expects. closer to 2.2% by the end of next year. you are getting benefits of the normalization of supply chain's, softness feeding into the original numbers. that is helping in addition to the broader dampening and the demand picture we are expecting. tom: what is your gdp call for q4 and all of 2024? sarah: for q4 we are looking for a pretty marked moderation, closer to 1%. full-year 2024, we are looking closer to 1%. that is not going to be even throughout the year. we still have a mild recession in our forecast where there is a chance we will get one to two negative quarters around midyear. that is weighing down the average we are expecting for the

fourth quarter. jonathan: which month do you have penciled in for that first cut from the federal reserve? sarah: right now we have a june cut but given that inflation data has come in a little bit lower than expected and the fed's thinking has changed, they seem to be more comfortable not only where rates are now but where they are beginning to have that conversation around when they do eventually cut, i think the risks are skewed toward earlier than that call. jonathan: it feels that way. happy new year. sarah watt house there. payrolls coming up shortly and the federal reserve route the call from wells cargo, june penciling in that cut it ultimately it could come sooner. two reasons, one is the data and the fed is thinking around that data.

thanks have shifted. tom: it has shifted into the point where the revisions are as aborted as the actual job statistic we see. i am way more focused away from the fed story toward the real economy story. they already 1% q4 gdp. that is a tepid statistic. i don't know what percent of america that puts in, but that is a huge number. lisa: i have one eye to the supply shop -- supply shock. i keep going back to the maersk story. the idea that shipping costs are going to increase and could increase significantly more as they reroute, you have to pay attention to that. that effect costs of goods. jonathan: we will return to that news later this morning. returning to the payrolls

number, fantastic numbers, 8:45 eastern time. we'll get william dudley to respond to the economic data. a column later this week on vanke regulation. we will make time for that. tom: every word was of value. it is a blistering essay from the former head of the new york fed. it is a really important column about risks of the broader american banking system. jonathan: that analysis about two hours away. the jobs report is on the way, our estimate 175,000. the price action has been week to week. four day losing streak on the s&p 500. this morning we are down three. ♪ how am i going to find a doctor when i'm hallucinating?

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>> turn signals -- trend signals have turned long and this is an

epic signal for the market because we have been short nine quarters. this has been one of the longest shorts over the last 20 to years. this is important because it signals the end of the tightening cycle and suggests we are going through a regime change and that we need to start looking at the next phase of the bond market. jonathan: katy kaminski, the first few months of that quarter, super painful. your 10 year yield shaping up as follows, a little bit higher. 4.0381. yields higher by 60 basis points. -- 16 basis points. the 10 year was down in november, close to 45 in december. encouraged by better than expected dated to start the new year, yields pushing the other direction. tom: how important is jp morgan

earnings? one week away and they say they are capturing one out of five dollars in american banking. maybe that is as big as the job market. jonathan: the important one is from apple, early february. a big run up through 2020 three, multiple expansion, sales of the iphone not great. tom: to their credit, they write a blisteringly clear report when it comes out. their ir staff get an a from me for clarity. one of the things you can read is into one -- economic literature. each one is 40 pages long except for when she stops at a traffic to tweet. anna wong.

you stopped me yesterday with a famous red pencil on the birth and study of the bureau of labor statistics. do we actually know what our job numbers are or are they changed by the births and deaths in america? anna: bls adjusts their survey number with a model estimated that aims to capture the growth of small firms. those estimations are based on benchmark results from a year ago. what oftentimes happens is when you have turning points in the economy, you have a lot of volatility with bankruptcies. as we saw in 2023, we had elevated bankruptcy rates.

that is when the model tends to overestimate the amount of job growth. in 2023, 42% of the payroll gains is do to estimated increase of jobs in the birth and death model. it is open to skepticism. tom: we are getting tons of emails on this for the job numbers are not as rosy as people like you are telling us. you are 140,000 so you are beneath the survey for today. are we going to sit here in march or july or november and say everybody got the small business birth-death model wrong and the economy is weaker than we knew? anna: the most important is what the fed thinks. i think the fed is aware of the flaws with the birth and death model. they actually do think the real situation is weaker than with

the job number thanks. my tweet yesterday is coming from the fed's green book from 20 and one -- from 2001. the fed is aware that his is not as rosy. this is why in turning points, the fed tends to focus more on an notes and what their business contacts told them. one of the key reasons for the last december powell dovish pivot is they put more weight on what the district contacts have been telling them. that was reflected in the beige book which was the most downbeat beige book since 2020. lisa: we have seen a lot of pessimism. is sentiment has been underwater for a while. yet the economy has underperformed again and again, suppressing a lot of people who

expected a recession last year. why have the numbers not coherent with that? -- the numbers not been coherent with that? why do we expect something different this time? anna: is not clear that the economy did not slip into recession the last three years -- the last three months of the year yet. the gdp number is very strong. in the quarter before recession declaration, gdp was also running up. the business to committee recognized themselves that gdp is not a very good real-time measure on what is really going on with the economy. on the other hand, if you look at capex intentions and what the fed regional surveys are describing the economic

conditions to be, it was quite weak. for what matters for how the fed get therefore -- their information, at this point i would say when you have a turning point you put more weight on what your business contacts are telling you. right now i still see the reason we possibly see positioner dynamics have begun come all of the reasons are still there. lisa: if we have already seen this recession, does that mean we are almost out of it, we are almost to recovery because people are shaping around a new post-pandemic economic realty? sarah: that is a fair point -- anna: that is a fair point. one of our reasons for a soft landing or a very mild recession is if the fed comes to the rescue early, if they cut early

and fast. we found powell's pivot in december is equivalent to 13% rate cuts. you don't need to wait for the rich cut whether it be in march or may. de facto, the pivot by powell is equivalent to have a rate cut. that could make this recession externally mild. jonathan: the market has been cutting rates for them. we appreciate you, anna wong there. that jobs data, just around the corner. the estimate, 175,000. it is hard to get your head around this. when you hear people talk about positioner dynamics and jobless claims around 200,000, unemployment south of 4%, at least it is at the moment, we will get in the update, and jobs growth of 175,000.

tom: if you parachuted in from 20 years ago, you would say you have to be kidding me. it is pandemic induced. it shows the confusion of birth-death study. terrific work by anna wong. if anyone tells me they have certitude on what the technology impact is on america, i am going to ignore them. no one has a clue. jonathan: people would say the which outlook is improving. goldman was talking about the tailwinds for 2024 and the hard parking over. lisa: the optimists would say we had a rolling recession. the averages did not show it and now we have the recovery. where are we in the cycle? are at the end of the last one or the beginning of the new one? this is some of the discussion point. you throw in a number. what do the numbers mean anymore

if you are trained to cobble together these industries? jonathan: 8:30 eastern when this number drops, the number we are looking up, 175,000. priya misra will give us a preview. you are familiar with the moves over the last four days, four losing streak on the s&p. on the nasdaq, a five-day losing streak. the longest losing streak through all of last year to late 2022. we have not had a five-day losing streak on the s&p that long. tom: one series, i believe it was 1978. real carnage here. we will keep the coverage going. the next five minutes, i am going to try to figure 20 fa cup is -- to figure out the fa cup. jonathan: how many times have i explained it?

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>> the thing that gives me anxiety is the cut that comes too soon from central banks. >> they could move as soon as the next couple of months. we think that will be too soon. >> we should be thinking if they restart the rate hike cycle. >> trend signals have finally turned long. it signals the end of the tightening cycle and suggest we are going through a regime change. announcer: this is "bloomberg surveillance" with tom keene,

jonathan ferro, and lisa abramowicz. jonathan: what is your hangover cure? what is your go to? tom: the morning martini. jonathan: inquiring minds want to know. tom: i'm very careful. jonathan: tang. tom: tang is a start. jonathan: the hangover continues in the market. good morning, good morning. i was expecting better than that. this is "bloomberg surveillance" on tv and radio. your equity mark negative by .25%. four-day losing streak on the s&p, five days on the nasdaq 100. the losses building to start the new year. tom: two or three days down to his support. guess what? on many cases we are going through support or through resistance. something that is nuanced is the

swiss franc. persistent bid on swiss franc. one global example in the first couple of days. jonathan: a new number to look at with a four in front of it on the ten-year. yields up this morning by four basis points. it's about payrolls today. 175 the estimate. lisa m.: -- lisa: one of the crowded trades was the federal reserve was going to cut rates aggressively this year in response to weak economic data. the data has not been particularly weak. how far do they have to retrace that if they get better-than-expected numbers today? jonathan: we need to talk about the risk in the middle east as well. a shipping giant says all vessels transit through the red sea will be diverted around the cape of good hope for the foreseeable future. that update in the last hour. tom: the foreseeable part is very tangible. we walked through it.

a 2500 mile extension from china to new york. i wonder what it actually means versus the absolute miracle that is the suez canal. it's been a miracle for decades and decades. tom: mike shepard joining us in about 10 minutes from washington, d.c. look out from that conversation. here is the price action on the s&p 500. -.2%. pushing through foreign-exchange, dollar strength against the euro. 109.16. lisa: we are watching the big deal. 8:30 a.m., nonfarm payrolls report for december. the last one for 2023. a lot of the labor market data has been coming in stronger-than-expected. 175,000 is the estimate. i'm watching average hourly earnings. if the increased 3.9%, is this good enough for the cutting

rates as soon as march? ism services data. the services sector continues to be strong. it's been an expansion territory for about a year. since may of 2020, can that continue? we hear from tom barkan who has spoken a couple of times this week. we have a number of former fed officials who are joining us today, including bill dudley to give us their unfiltered thoughts. jonathan: always nice to get the former officials. they always seem to say what they really think. tom: you see their academic distinctions. that includes dr. dudley and the work he did at berkeley years ago. jonathan: that's at 8:45 eastern time. priya misra, portfolio manager at j.p. morgan asset management. happy new year. priya: thanks for having me. tom: fantastic to see you on this payrolls friday. what are you looking for? how do you expect the bond

market to respond to it? priya: we are looking for this 170, 17=80 -- 180 number. we are seeing this pullback. the risks are somewhat asymmetric. if we get a high average earnings number, this immaculate disinflation will allow the fed to cut rates as early as march. i think that gets pared back. i think we get a bigger reaction to a strong number. we are in a very interesting time. we are in this inflection point. the fed is clearly done in terms of how much they will raise rates. when did they start to cut? how much do they cut? are they easing? we are in this tenuous period which is why the market will be volatile. this year is about uncertainty. today's number might suggest that economy is continuing to normalize but not weak enough to cut early. we will remain -- it's about the

fact in the last two months we have been through 5% on the ten-year to 380. i think anything of a 4% is an attractive level if you own risk assets. that correlation will come back because it's about windows -- how quickly can the fed try to get that soft landing. jonathan: how big is the spread between with the fed will do and what they should do? your colleague bob michele said the fed should cut to get ahead of the neck shock. -- next shock. priya: i think there is a big spread because it's about how restrictive policy is right now. long and real rates are clearly in restrictive territory. we have seen that in the data? no. we have seen cracks in the data. we are nervous the cracks will deepen and the fed should remove restrictions and start to get to neutral. the fed wants to really put that inflation genie back in the bottle.

inflation has been surprising to the downside. we are in this immaculate disinflation. it will not be a straight line down. i think that's going to make the fed a little nervous. there is that big gap. the longer the gap increases between when the fed should start to cut, how quickly they cut, i think the odds of a hard landing start to increase. tom: geometry on jobs day. the real yield is hugely extended. i looked at the two-year. i was stunned. the answer is what is the urgency for the fed to get the ten-year real yield down and give us a level where we begin to see that? 170? do we need to get to 150 fast to provide some comfort? priya: i think it would help. i would say closer to 1%. that's the lever you sort of need. priya: great entertainment. are you kidding me? 1.00? priya: that's the neutral level.

if they want to ease they have to go below that. are we going to get there soon? not with qt. you really need either qt to stop or at least are to pare back. they have started to talk about it but they are not close to getting that done. the fed is starting to talk about cutting rates. the struggle is when they start the market will price in all the way down to 2%, 2.5%. the fed wants to new once that message and say we are only cutting to normalize and reduce restrictiveness. the messaging problem for make the fed slow in terms of trying to bring those long and real rates low. you need to that 1%. look at housing affordability. tom: if she gets this wrong, she's going in the basement at the new building on park avenue. that is a bold call from priya misra. lisa: the two-year real yield is close to 2.4%. that's a pretty big decline if this were to transpire.

this is coming at a time when you are saying they want to see the disinflation. they want to put the inflation genie back in the bottle. he pointed at europe. it's important to look at why inflation reignited. oil costs surged, subsidies rolled off. some of the government fueled ejections also willing off. how much is that going to be a problem for the fed if supply chain disruptions spurs inflation? if the middle east oil shock spurs inflation? is that enough to keep them from cutting rates even if that's not good for the economy? priya: i think they will look at the labor market to raise. if it is sticky on the way down, the supply chain issues, even though it is not good for the consumer, if it keeps inflation elevated they really want to get inflation trending close to that 2%. it can slow them down. i think the fed will say we can cut a lot faster. they can always go faster once

they start. if you have geopolitical -- it is something we are dealing with, multiple wars. what's happening in the red sea. that can make the fed reluctant to cut unless the labor market slows down and is not slowing down fast enough for them to be concerned. lisa: what is the threshold given the fact people are respecting 175 thousand for the nonfarm payrolls number -- 175,000 for the nonfarm payroll numbers? how low would have to be? priya: around 100,000 would be that level. that's the level where the unemployment rate starts to rise and the fed knows inflation is a lagging indicator. if you get close to 100,000, wages will start to come down. that is when the fed says this is not normalizing. maybe the lags are finally taking effect. i think for wages it is something in the 3.5% average hourly earnings over a three to

six month annualized base. that's the level they say maybe we have more faith the inflation genie is heading back into the bottle. jonathan: what are the chances of a pickup in growth over every acceleration after the massive easing of financial conditions in the last couple of months? priya: that has to be a concern but i can go back to real rates. if real rates are that high, i don't know if it be accelerates growth. it can slow down how quickly things are slowing. the fact that financial conditions have eased and offset these high real rates. i struggle with the reacceleration narrative. we are debating how quickly things are slowing down. are they slowing down enough to that threshold question that the fed can afford? are they really trying to get that soft landing? they are trying to get there with the market -- get there. will the market in inflation allow them to go there? tom: your bold call insight two years. what does it do to the sofa market?

it's every financial's asian of finance -- refinancialization of finance. no one is listening. it is just jobs day. if we get up priya misra world -- a priya misra world, we refinancialize our finances. priya: 275 in a hard landing. the market has run away with the thesis of the soft landing here we come. if the real rates are going to force things to slow down as everyone who has been locked into the low real rate start to refinance and realizes the real rates are high, the sofa rates are going below 2%. that is not priced in at all. jonathan: you think this 4% year on the 10-year is a buy?

priya: it is a buy. the data is not weak enough. anything north of 4% -- we are not going above 4.2%. that is what they told us in december. the bar the cut is not that high. anywhere between 4% and 4.2% is a buy. jonathan: looking ahead to the year ahead. priya misra of jp morgan asset management. you heard the scores on the s&p 500. equity futures negative by 25%. -- .25%. we need to be talking about happening in the middle east and what isn't happening. the latest from shipping giant. lisa: they will reroute away from the red sea. we are seeing since december these reroutings huge surge in the cost of shipping and insuring some of these container ships.

does this material cause any kind of inflation? does this cause any kind of supply shock that suddenly reignite memories of the pandemic? how much does this have a real effect on the economy when we are focused on jobs and metrics? jonathan: mike shepard just moments away dinah washington, pc -- in washington, d.c. looking ahead to the jobs report and the year ahead for equities. ubs view just around the corner and the payrolls report. from new york city this morning, good morning. ♪

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wrongly, chaos follows him and we can't have our country in disarray in a world on fire and go through four more years of chaos. >> if you have run before, promised things, did not deliver, and then you're running on the same things, wouldn't it be reasonable to say i don't know i fecund take that to the bank going forward? yes, i think the fact he's campaigning on something, that does not mean he would actually follow through on it. jonathan: presidential candidates nikki haley and ron desantis speaking yesterday in back to back town halls on cnn. both taking aim of the former president. from new york city with payrolls an hour and 15 minutes away, the state of play. equity futures negative again. down one quarter of 1%. on a nine-week winning streak on the s&p. lisa, well on course to snapping that later on this afternoon. lisa: do we end up seeing a

trend that can follow through the rest of the year or is this just people resetting after a blockbuster last couple of months? i don't have a clear answer. we have -- this is normal. volatility means a little settling and then you buy. jonathan: looking for rate cuts. a little bit of better data. did pushes things the other way and we have seen that in the last 24 hours. yields up three basis points today on the 10-year. tom: the tape has shown it. the equity tape is a little soggy. the fact is day after day -- i thought we had a turn yesterday and it did not turn out. jonathan: just the weakness continues. phenomenal to see the nasdaq on this five-day losing streak, the longest since 2022. i think that talks to the strength of last year instead of the weakness of 2024. tom: after that incredible interview with priya misra, the

10-year real gilt market down -- -looking for substantially lower inflation-adjusted yields. today is an august day. it happens every four years. i read a memo on the iowa caucuses. i like what pbs says. both republicans and democrats holding caucuses and i with this year? the answer is sort of, providing us with wisdom this morning on the political season is michael sheppard driving all of our u.s. government coverage for bloomberg news. i love this oven. i am biased to the new hampshire primary. give us the so what on the iowa caucuses. michael: iowa matters even more this year. thank you for having me. this is where donald trump, who has been running his campaign as an incumbent among the republican field is looking to score a decisive victory to put

nikki haley and ron desantis far in the rearview mirror. he will need that from a state that he has ties to from his prior administration when he was in office. his ambassador to china, one of his top targets during his years in office was a former governor of iowa. he had other people including an acting attorney general who are not active in helping him in his comeback bid. tom: how is it we have a nation's incumbency decide if i told people sitting on the fireplace in somebody's living room? it is january. is he really going to wrap it up that early? in new hampshire? michael: the way trump has worked with the republican party to set of the rules over the past year from all the primaries through the course of 2024 has worked to his advantage. if he scores a big win, it builds up momentum. even if nikki haley keeps a close in new hampshire, by the

time we get to a lot of the other states it will be much harder for her or ron desantis to make of that lost ground and pick of the delegates they would need to secure the nomination. to be fair, and iowa it is more than just a handful of people huddled around the fireplace. there are bigger meetings there. a number of people will turn out. they are actively engaged in the state's politics. we've had reporters out there over the course of the past several months, including in december. we will be there with our bloomberg teams to find out what is on voters' minds. we are hearing the economy. the other is also immigration and border security. those are things that donald trump is using to his advantage in this campaign. lisa: with the economy we are going to get a job support today. we have been talking about why people have been so pessimistic given the economy has been performing pretty well.

the expansion in december was pretty significant. what is the x1 nation for both republicans and the democratic side -- the explanation for the republicans and the democratic side about how people are feeling? michael: right question. we have been looking at this ourselves. the bluebook -- the bloomberg poll. we are finding people do not trust president joe biden on the economy. they are disappointed and they are concerned about where the national economy is going. they feel unease and they say they trust donald trump more by a nearly 20 point percentage point margin to handle the economy. you can look at it this way. when you go to the grocery store, we see reports that inflation is easing. goods like milk and eggs and cheese are still high from what people remember three or four years ago. lisa: there was a story in the

new york times that caught my attention. it's unprecedented to see this disparity about how people feel and the overall economy. they pointed to harry truman in 1948 when he was looking at a north of 7% inflation rate but also sell 4% on appointment right. -- sub 4% unemployment rate. people would have been willing to see a pay cut rather than see prices rise in the grocery stores. how similar is now to then versus the 1970's and a very different kind of time? michael: it is such a different economy that is hard to make a clean comparison. there are elements that really carry over. for the biden team it's a huge source of frustration. they have been trying to pitch their successes and getting the president's domestic agenda passed in his first two years in office. that included a big infrastructure package, the inflation reduction act which brought these big subsidies and initiatives to promote the

construction of new electric cars. they are not seeing any reward from that. the whole bidenomics pitch has fallen flat with voters. jonathan: they are herding cats at the moment. international security. we have issues in the red sea. we have been talking about the latest this morning. it does not feel like it features. it just keeps coming back to domestic security. the southern border. is that the story at the moment in this campaign? michael: the southern border really is emerging as a major issue. we saw earlier house speaker mike johnson heading to texas with 60 of his republican colleagues to visit the border and see what's going on there. then use that as ammunition and their argument to president biden and the democrats in congress for tougher border measures. they are using that to hold up aid to ukraine for months. president biden asked for $60

billion assistant package for kyiv. that was back in october. we have not seen action by congress to pass that and get that through. that has been frustrating to the president but even more so worrisome for ukraine. the president of ukraine was here in december trying to make his case. to no avail. this is raising concerns america might be losing its will in something president biden called very important, making sure russia was held to account for its invasion of ukraine and to help ukraine as much as possible and expelling that invasion. jonathan: the fighting continues. michael sheppard done a washington, d.c. there are many issues. it is like herding cats for this administration. the southern border quickly becoming the big issues for 2024. tom: i remember the day.

there is no other issue. you hear it from republicans and particularly folks in manhattan hear it from mayor adams. you hear this from democrat city mayors. there is a different tone in their voice. jonathan: talking about 175,000 and you asked people how they feel about this economy and this labor market. it does not speak to those headline numbers. coming up, sarah wolfe from morgan stanley. the number we are looking for, 175,000. sarah joins us next. equity markets are lower. -.2%. ♪

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jonathan: coming into the new year, coming into this week we were on a nine-week winning streak on the s&p 500. the longest going back to 2004. we are about to snap it based on the price action of the last four days. negative, negative, negative. down five on the nasdaq 100. on the nasdaq we are down by .3%. the russell small caps suffering. down about .8%. lisa: there is a real tension right now. can you see a rotation with some of the pressure we have seen so far? people saying you can see a

selloff in big tech. you can see the broadening out. i don't think so. tom: we are seeing a rotation out. the java port and the revisions today i think will fold into the market. the bulls are desperate for some optimism here. maybe they get it. you get 110 with revisions, rounded up to 150. that is the tendency in the right direction to keep the song and dance going. jonathan: so far not great. big rally in the bond market in november, december. unwinding some of that the kickoff january. yields are up again by three or four basis points. 10-year, 4.03%. up a couple of basis points. lisa: what i think is interesting, priya misra basically saying it's a buying opportunity anytime the 10-year yield is between 4% and 4.2%. a lot of this coming with the

idea it will be a 60/40 balance, the idea that phil kemper really was talking about. interesting moment that seems to be a real shift at a time when we are recalibrating after last year. jonathan: the data so far has been better-than-expected. the right side of downside surprise on jobless claims. it is pushing the market in the other direction. take the bond market, pushing through foreign-exchange. dollar stronger against the euro. 109.16. that is the price action. under surveillance this morning, an hour away from jobs data in the u.s. big banks out with estimates. jp morgan forecasting again of 150,000 jobs. goldman and citi looking for 190,000. sarah wolfe expecting close to 180,000. she will join us in just a moment. the big banks somewhere around 150,000 to 190,000.

tom: the revisions are absolutely vital here. i will take a three month moving average and see if we have a tendency towards a lower nonfarm payrolls. we are not getting that tendency in claims as a secondary statistics. jonathan: that data 58 minutes away. developing story in the last couple of weeks. more news, more headlines on this. mersk deciding all vessels will be diverted south around the cape of good hope for the four viewable future. dissing -- foreseeable future. they expect significant disruption to the global network. lisa: it's being priced through some of the shipping rates. at what point is this an idiosyncratic story for the shipping companies? at what point is this a broader economic issue for costs going up and supply chains disrupted? tom: i have stereotypes of this and i'm wrong. it's at the 35th latitude south

where the cape horn and south america is way down, way more treacherous, the straits of magellan. it is not as treacherous as what we learned in school about shipwrecks years ago. jonathan: it's a much longer journey. tom: 2500 miles, shanghai to new york city added to the journey. jonathan: demand for popular weight loss drugs threatening to drain state and local government health care budgets. medicaid reimbursement for the drugs has more than doubled over the last two years to $8 billion from $3 billion. prices can rise above $1000 a month. novo nordisk, eli lilly claiming the drugs will pay for themselves with the cost and the health care system of 173 billion u.s. dollars everything liu. -- every single year. lisa: there's been a host of

different stories. this is a real question. who bears the cost? oneness is going to be covered by insurance? how do you calculate who benefits? who will pay for dialysis and these other things associated with obesity and diabetes? these are some of the questions as we parse out is this the same macro trend is artificial intelligence? all just living in an ozempic world? you have a different kind of consumer experience. tom: i'm walking down lexington avenue. there's a sign out like they are selling m&ms or pizza. come in and get your ozempic. these little signs. jonathan: you sound like you just walked pastor local bodega. delis?

lisa: sort of storefronts that have unclear kind of signs that say come in. jonathan: have they replaced the old covid testing places? lisa: covid and cbd distribution. jonathan: no stores have been empty for a long time. lisa: let's make it back to the economy. jonathan: they did say they will pay for themselves. tom: i'm sitting up here with sarah wolfe. we have been deciding when to take your huge christmas tree down. i'm way behind. ferro headed out on the street on december 27? jonathan: i hate the tree. the tree graveyard i find depressing. i find it very upsetting. i have a fake tree. they came down on january 1, before the sun came up. tom: help me out on twitter and linkedin to see if i should take the tree down this weekend. i'm holding out for february. we will have a better look at the jobs market.

sarah wolfe joins us now from morgan stanley. what is your call today? are you coming in below consensus, above consensus? what is your level of enthusiasm for labor? sarah: more in line with consensus around 175,000. jobs will look quite a bit like they have been looking the last couple of months. we don't see their israel material downside. construction, typically a big downside in december because of the weather. we had a warm, enjoyable december. we got quite a bit of softening and retail trade in november. we shouldn't see quite as much weakness going into december. tom: dr. wong looking at the birth-death dynamics of midsize businesses. is the un-implement report hiding or masking -- unemployment report hiding or masking challenges in the american economy? libby revised six months to a year from now? sarah: it's possible heading into a slowdown it's a bit of a

laggard indicator. it is not really capturing in real-time the death of businesses. we are probably getting a little more softness showing up in the adp data that's been consistently running slightly below the nonfarm payrolls data. because does a better job capturing small sized businesses where the debt has been concentrated. lisa: adp matters. mattering more than nonfarm payrolls? sarah: adp does not necessarily matter more but when you think about where the weaknesses in hiring, more has been among small businesses. adp samples more small businesses in real-time the nonfarm payrolls. we could get some of that revision downside later on in the nonfarm payrolls report. lisa: you have these varying measurements and disparate kinds of economies that are moving at different paces. how valid is it to look at the payrolls number to get a gauge of where the economy is? and alon -- anna wong says

maybe we are in the recovery already. sarah: we have been in a rolling recession. we have not been in a labor market recession. maybe the housing market was in a bit of a recession. equipment investment. i don't think we can look back and say the labor market was in a recession in 2023. the market is still strong. jobless claims are very low. the jolts data showed openings are coming down. quits rates are coming down but layoffs have barely inched up. the labor market, the kiefer in an overall economic recession -- key for an overall economic recession is still holding up. lisa: essentially this is what you get because companies have been conditioned by the pandemic to hoard labor. because people are getting jobs in industries that were so understaffed heading into the pandemic do you think we can stay here and not rise above 4.1% on the claimant?

sarah:sarah: there are two things happening. a group of industries are backfilling. think about health care and education. they have quite a bit of hiring they need to do. that vlad at cushion. health care allete has been adding 70,000 to 80,000 jobs a month. government as well has quite a bit of hiring, adding 30,000 to 40,000 payrolls. catch up industries are going to payrolls. you have labor hoarding. we have a lot of scarring for not having enough workers for three years. even industries think about retail trade, wholesale trade, construction. maybe they have right sized their workforce and are hesitant to let go of workers. i talked to a lot of consumer corporate companies. whether they are food services, retailers, they are saying they're focused on worker retention and not looking towards layoffs next year. tom: wage growth today. there is month over month, year over year. three month annualized matters. what is your magic of the

inflation component, the vector of wage growth? sarah: the preferred metric is the employment cost index. it's more steady. we get it at a legged indicator. it's been coming off its peak for about a year. still quite elevated today. uncomfortably high. tom: is there value today in ahe given the importance of eci? sarah: we not seeing as many dislocations. we are getting a lot of volatility due to where we are seeing layoffs and hiring back. i think average hourly earnings is still worth looking at as a pass-through. we are looking at .3% on the month. that's a step down from last month's .4%. jonathan: your conclusion this week, no cuts soon? sarah: no cuts soon. when we looked at the minutes on wednesday nothing indicated they are getting ready to cut soon. they were going to talk about cutting at the december meeting because of economic projections.

they had to acknowledge it. it does not mean they are getting ready to cut. there's a wide variety of views and when they should even start cutting. if they are not a consensus about when to start cutting, march will be too soon. the data will not be there either. 180,000 in payrolls is not screaming a rate cut in march. jonathan: you mentioned variety of use. a huge spread on the dot plot. is a very long way as the market expects cuts, cuts, cuts? sarah: sitting on the consumer side, i talked to equity clients and fixed income client. the equity guys are very bullish. fixed income clients are a lot more bearish. when we think about market pricing for march cut, some clients are pricing in a recession starting this year. equity clients are really on board with the soft landing call. i year ago it was hard to convince them of the soft landing. tom: you work early -- jonathan: you early. thank you for being here.

sarah wolfe on this payrolls friday. welcome to the program. equity futures -5.2%. deals hired by -- equiy futures negative by .2%. lisa: here's the weird thing. what if stock traders are ahead of the curve rather than bond traders? what if eventually they are right and have been right more often than some of the bond traders that have been shifting around yields like penny stocks? at a certain point you have to wonder. ok. who is actually right? jonathan: it's an anticipatory asset class and your job is to sell dreams of a better future. good stories to sell stocks. that is always been the way. no different than it was years ago. tom: i strongly agree with that. it's a big argument i've had every single stock from the idiot robinhood gamestop thing

up to apple computer, you are always telling the story of the future. you are selling a story. everybody needs an iphone. that's it. lisa: this is why i gravitate towards fixed income. if i come up with a store it will be existential and angst he. -- angsty. it might be ok. jonathan: across wall street on every fixed income desk. we will catch up with former fred president bill dudley and renny crosner. tension in the middle east and what is not happening in the commodity market and the atlantic council. from new york, good morning. ♪

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what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. >> i think we can't just sit by and see shipping lanes in the red sea or the persian gulf to stay undefended. this is a tinderbox with the red

sea and the persian gulf being crucial for oil. i suspect things may get more tense before they get better. this will call for tough rhetoric at the very least. jonathan: things are getting more tense. hef chief u.s. investment strategist. maersk says all vessels will be diverted south around the cape of good hope for the foreseeable future. the quote from that company early this morning. to repeat that for people just joining us. it's encouraging customers to "prepare for complications in the area to persist and for there to be significant disruption to the global network." tom: i wonder what government officials will say about this. the many different nations involved, particularly the united states. did maersk make this decision in consultation with the pentagon? i wonder how the response will

be from the government trying to protect all these ships in the red sea. jonathan: i will say this based on what we do know. they have tried to prevent this from happening and clearly failed. it may well take longer to address the issues. tom: you go back to the traditional wars of 1948, 1967 and on. there is nothing traditional here. we heard from elliott ackerman earlier this week. this is absolutely original what we are living in. we will do this from the land of the hydrocarbon. ellen wald is definitive with her one volume on saudi arabia and the family. we are thrilled you can join us now. senior fellow at the atlantic council. let me begin with a blunt instrument. why isn't the price of oil moving? ellen: that's a very good question and i think the answer is mostly u.s. production is very high and has been very

high. we are not seeing any kind of significant disruption in terms of supply getting to where it has to go. the oil can be transported on these very large crude carriers that cannot even go through the suez canal. we have definitely got disruption or potential disruption to the oil trade but it is not as bad as people might have hoped. however, i think the potential for risk to oil supplies is growing basically every day. tom: if we can shut down the red sea, can be cut down the arabian or persian gulf? ellen: i'm not sure that would be quite as easy but we can definitely threaten the safety of shipping in that area. i do think this is almost a case study or a very important inflection point to see what is

the international community which depends on safety in the waters? we are talking about global international shipping. we are not just talking about what goes through the red sea, what goes through the suez canal. these actions the houthis are taking are having reverberations around international shipping. rates are up 88% pre-pandemic simply because of what we are seeing in the red sea. this isn't just an isolated issue. this is having large-scale reverberations. lisa: i saw your comments this morning on twitter or x. you were saying freedom of the seas is a global issue. the houthi's actions will have broad-based ramifications. why aren't we seeing saudi arabia, qatar get on board with the united states to try to prevent these attacks? ellen: the short answer is it's complicated. the relationship between saudi arabia and the houthis is very

complicated and is much deeper. we have not heard a lot about it unless you are really zooming in on the middle east. the conflict between saudi arabia and the uae and the who the houthis, there were missiles they were shooting at riyadh and that were finding locations there. riyadh used some of the missile systems from the u.s. to counteract these missiles. eventually, they reached -- i don't know if you call it a detente wherever they cool down. -- where everything cooled down. if the houthis threaten saudi rm roddy shipping, the pressure -- or emirati shipping,

those are pretty important ports and areas for them. if they are able to threaten those ports then i think we would see them get involved on the side of the united states. i think until that happens they are pretty strong -- there are pretty strong reasons keeping them out of this conflict. lisa: when you zoom out how do you put this genie back in the bottle? if you can't, does not mean people with u.s. production, hydrocarbon costs have to go up materially if not only shipping is interrupted but the shipping of the hydrocarbons? ellen: exactly. we are not just talking about hydrocarbons going to the suez. hydrocarbons that go through the sumita pipeline. unless they are coming from saudi arabia they have to go to the red sea point even get to the pipeline that's a workaround for the suez canal. it is more than just transit

through the suez canal. i think euro will see the biggest -- europe will see the biggest effects because they are getting a lot more their oil from the middle east right now. they are going to be affected by a much longer shipping time and higher rates as the ships are going around africa. i don't think we will see shortages but there is definitely potential for higher costs. if we see oil prices getting higher, that will compound these issues. i think united states will have to make a decision whether this is a defensive operation or they will go on the offensive to some extent and actually frighten me ho -- frighten the houthis and show there is real consequences. lisa: a lot of people look to you for insight about the kingdom and the region. based on everything you have seen, how much have the chances

of an escalation really increased from your vantage point? ellen: i think the chances are higher than we are seeing priced into the market right now. i think there is very strong deterrences dissing the conflict spread. saudi arabia does not want to get involved. it's not good for business. it is not good for the oil business to start any kind of conflict with iran. at the same time we are seeing escalation that may not be able to be quelled unless some offense of action is taken by parties -- offensive action is taken by parties that is not just israel. if israel escalates into lebanon and something against hezbollah, we are likely to see greater attention, greater potential for terrorism across the middle east. we have seen things happening in iraq and iran. we are definitely at a higher risk of conflict then we were even in october. jonathan: just put a bow on it.

how much do you expect these disruptions to continue? ellen: i would say they can continue for the foreseeable future unless this coalition decides to go on the offensive. this is a low-cost, high return event for the houthis. unless there supply weapons is cut off or someone tells them to cut it out in iran, i don't think there is any real sign they are going to stop. jonathan: amazing. appreciate the insite. ellen wald echoing what we heard from maersk earlier this morning. crude, $78.20. wti about $78. tom: heated about this. he did not say where is the

offense? let's go get them. he said what is the plan to shift from a hugely defensive characteristic in the red sea? maybe with this maersk announcement we will hear something into the new cycle. jonathan: crude positive by almost 1% this morning. coming up shortly we break things down with nadia lovell from ubs. county uganda payrolls. that report at 8:30. fantastic lineup for you. randy crosner, bill dudley and gina martin adams as well. that is a lineup for the next 60 minutes or so. tom: mike mckee will give you what is it mean for the market. jonathan: the payrolls report coming up shortly. the estimate, 175,000 and the bloomberg survey. from new york city this is bloomberg.

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>> the jolts data, straight openings to unemployment. all of this signals there is

normalization. >> we are expecting a slowdown. we think we will see a softer, monthly growth. >> we are looking for job growth to be settling in the 1000 a month range. >> higher unemployment, that is something we have to watch out for. >> business, the consumer and jobs market will play an important role this year. keyword to watch out for is resilience. >> "bloomberg surveillance" "bloomberg surveillance" this is with tom keene, jonathan ferro and lisa abramowicz. tom: it is jobs day in 29 minutes. an interesting jobs report. everything about, a normal december report. all my radar is up in 29 minutes. jonathan: the number is four on a 10 year yield, 4.04 percent. yields higher today and yesterday off the back of

better-than-expected data. jobless claims came in lower. payrolls and 29 minutes. tom: we can correlate that to that interesting discussion with real yield back up. there has been reversal in the joy of december. you wonder what aspect of the jobs report will move the reversal forward, stronger or worse equity market or will it reverse it to the nirvana of december 15? jonathan: 175 is the estimate. that sounds pretty good. unemployment below for performance -- below 4%. when you ask economists on this program in the last day talking about many the service, he is going to look at diffusion. how strong is the payrolls growth? a select few industries, or across the economy?

there is a concern in a select few industries the last six months. tom: lisa, what is important is diffusion is the signals given by the market and one of them is a spread bargain where spreads have widened out. does that indicate tension on the real economy? lisa: that is the same story as in the stock market. there are two things we are going to learn. one is the granular economics under the hood. what we see in terms of composition. the other is, where is the market over its skis? how is the market going to respond if we get a 1, 2, 3 punch with nonfarm payrolls capping it off? do you see a escalation of the selloff in bonds and stocks? tom: 200,000 statistic or 220,000 statistic. jonathan: two leases point, we turned last year upside down. in the last year, credit spreads were tighter, yields were lower. what is happening now? equity selling off, credit

spreads wider, dollars spread stronger and yields are higher. can we squeeze out --think about where the 10 year treasury was. 60 basis point lower in september. a market that locked onto this idea that rate cuts are around the corner. tom: from ubs, -- the hugely accessible note, he says it is a roller coaster. get over it. this is what, the normal market. to have a roller coaster. lisa: a roller coaster that ends in 6000. it is a roller coaster. people are leaning into the roller coaster rather than a long-term bet because of economic data being as mysterious as it has been. tom: i'm going to go to west texas intermediate, $73 a

barrel. jonathan: picking up a bit. brent crude up by .9%. equity futures -5.3% on the s&p. four a losing streak on the s&p 500. about to snap a nine week winning streak on the s&p 500, the longest week going back to 2004 for the s&p. tom: michael mckee scheduled to be with us in 25 minutes. randall crossan are, bill dudley scheduled to be with us today, the former new york fed president. we turn now to the equity markets. the senior u.s. equity strategist at ubs, joins this morning. i'm going to go into your research note. you say earnings are "skewed to the upside." where does that enthusiasm come from? >> it is a momentum that we are

seeing in the economy. since we produced our year end outlook in late october for clarification, the s&p is trending more towards the upside scenario because the macro data has been coveted better than expected with inflation coming down faster than expected. if the forecast is correct in that 2.5% range for gdp and that continues into 2024, you can see some upside to earnings from their. tom: the upside off of q3 four number, that atlanta gdp number is up because of the american consumer and does that american consumer dues he has unfold into this morning's jobs report? nadia: we think the consumer remains in solid shape. yes, you're seeing areas of consumer stretch. spending during the holiday season, pretty strong. that should continue into 2024. this will be at a slower pace.

there are signs the broader consumer -- the inflation is coming down. you are seeing wage growth, income is picking up and that should be a positive. jonathan: leading sectors going into year end, tech was one and is cautionary was another. is that where you are looking for leadership into 2024? nadia: we do not think you are going to see a massive outperformance from tech like we did last year but we think that tech will continue to outperform. let's put this into context. yes, a great year in 2023 but pullback the charts amtech is only up 5% the last two years. the magnificent seven up only 10%. when you think about that from a valuation standpoint, tech is trading a 10% discount to where it was last year. we take the fundamentals and tech could continue to outperform. we think that outperformance will broaden out this year as the more cyclical areas of the market, particularly if we can see that the fed can land this

economy into a soft landing and economic growth holds him a that is how cyclical areas and helps small cap. jonathan: i'm going to reference your note. we are less bullish. what has changed? tom: [laughter] oil data reach $95 target, that is clearly not the case. demand did have surprise to the upside. we saw a strong trend from china and india. when we look into 2024, we think you will still get demand growth, just less slow and we think -- will continue to manage supply. we are not seeing a massive deficit in the oil market in 2024, just a slight deficit that will be enough to push prices back to $85 a gallon from the

$95 we had thought previously. we think that will provide a better offramp. as you happen talking about all morning, tension in the middle east is not part of our base case and that could provide upside to oil prices. lisa: what do you make of the fact we were hearing about equity analysts leading into this soft landing attitude? you have got bond analysts talking about recession in a much more pessimistic -- and are much more pessimistic. how do you navigate that at a time where it seems like a soft landing is the base case or pretty much everyone in the equity world right now? nadia: it is not unusual for equity investors to be more optimistic than bond investors. but, when you look at the data, the data is speaking towards a soft landing. we will see what perils is coming in in a few minutes. all indications says the job market is holding up well. there is not any reasons today to be overly pessimistic. we do thank that 1.5% gdp growth

for this year is reconciled with inflation coming down faster than the fed's target. our expectation is, you're going to see rate cuts, not as much as the market is pricing in. we are looking for up to four rate cuts for this year and that will help bring down bond yields and support the equity market. lisa: i'm going to make stuart kaiser fall off his. at one point is good news, bad news? you are talking about how you want to see economic data that is good and that is going to support your bullish thesis. if you look at the bond world, which is much more pessimistic, they are saying this can't cut rates as fast as they would think. nadia: at some point, you will start to shift to good news being good news and bad news being bad news. that tipping point remains to be seen. a lot of this is contingent on the labor market. whether the fed cuts in march or

may, probably is not that big of a deal as 25 basis points difference is the fed that is going to cut this year. that is what is important. those cuts are likely to happen by around midyear, particularly if inflation continues to decline. we know core pce six months annualized is that 1.9%. we will be watching that closely. if we can get a couple more months of below 20 basis points month over month increase, that could move forward rate cuts at the end of the day. jonathan: nadia, thanks for catching up. happy new year. good to hear from nadya going into payrolls, 19 minutes away. lisa mentioned stuart kaiser from citi. i'm going to read his quote. how he things the market responds, consensus expects payrolls at about 170,000. the unemployment rate has risen to 3.8%. stuart says, we see that mix of

data as positive for equity markets as it continues to trend to strong labor markets with modest loosening and wage inflation on a down trade. that is one opinion. that is stewart's opinion going into payrolls and 20 minute. tom: my first question to nadia is what does earnings growth do? i've got too many people i respect including nadia saying they have it wrong. the bad news, good news thing is wrong. earnings growth is going to surprise optimistically. lisa: that is not what happened this week. the good news has been bad news this week. maybe people will say eventually good news is good news. i can't keep saying this. whatever. [laughter] i realize i sound ridiculous. if people are selling off in response to better-than-expected economic data. jonathan: yields higher on the back of this. here is the price action starting with the bond market. yields upon a 10 year, 4.05%. s&p lower by .3%.

two this is point, that has been a story of the week so far. better data than expected, pushing yields up. lisa: wet somebody said -- tom: what somebody said, it is a continuation. at some point, the year is going to start. maybe it starts in 13 minutes. jonathan: last year was a decade. with the price action in 12 months, didn't we? lisa: it is kind of like a year in a week. we will have a millennium by the end of 2024. jonathan: former fed governor joining us shortly to break down his thoughts on the federal reserve, what to look for from the fomc and what he is anticipated to see from the payrolls report in about 17 minutes. the state of financial markets look like this. equities up, yields higher. that has been the story of the week. yields climbing by 17 basis points on a 10 year and equity

market on a quiet losing streak, four days on the s&p, five days on the nasdaq and nine day winning streak, longest winning streak since 2004. that is how good things have been. weakness we have seen this week, some of the stats speaks to how good things have been the last two months. tom: are we on our way to a correction? i would suggest corrections are a normal part of the work. you do not have to get enthused by the roller coaster. that is what it is supposed to be. jonathan: next, bill dudley, former new york fed president. your payrolls report, 8:30 eastern time. from new york, this is bloomberg. ♪ i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

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xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. >> if we look at the hiring trend, it has been a linear trend since the start of last year. there is a float to that line

aiming lower. there is a hissing sound and the labor market. nonfarm payrolls averaging to 200,000, that is a healthy income and wage dynamic for the economy. jonathan: the brilliant carl riccadonna referring to the hissing sound, the air coming out of the labor market a bit. from new york city, your payrolls report is around the corner. 8:30 eastern time. the numbers by now, the estimate 175,000 in our survey. the scores look like this. equity softer on the s&p, yields higher by four basis points a 10 year to 4.04%. equity futures negative .2%. tom: alexander tansey, i steal from him every day of the year. his magnificent work. he sends in the standard error of the nonfarm payrolls report. it used to be 100,000 plus or

minus and he says the new regime and the pandemic, we were near 130,000. you could be 130,000 off on your job guess and say, that is part of the statistical error. jonathan: the spread is between 155 thousand. the high estimate is 255,000. the low is 180,000. tom: randall crossan are, the former fed governor, understands the standard error. randy, i'm going to where i was earlier. she said, it is messy out there and particularly the birth death mystery of the hero of labor statistics. do we have a clue how we count the labor economy, or are we making it up as we go post-pandemic? >> i would not go so far as we are making it up as we go. there have been fundamental changes in the way people

participate in the labor force and work from home. things are more difficult to track than they were before. but, i think we have a beat on things. you said center deviations are up a bit. sure, it is up. i think there is information. tom: the information content is about half of america going, what does kroszner know and the rest? half of america is flat on its back. you see it in rising bankruptcies. can we aggregate our economy off of today's data or are there to or three or four america's? randy: i think there are multiple americas. what the fed has to do is look at the economy overall. policies can have more or less impact on different groups. one of the groups that has the biggest impact on his potential homeowners. but, it has to try to put the

pieces together to make national policy. not always perfect, but that is what they need to do. lisa: are we creating the right kind of jobs, randy? randy: so, i think we are creating good jobs. the challenge is making sure people have the skills for those jobs. that is one of the challenges that we have seen the last few years. this mismatch between what firms want and what people have. making sure that we are investing in education, investing in the right people is crucial not only for the job market for today but economic growth over the longer run. lisa: i asked because a lot people are talking about the composition of jobs we are expecting to see today i'm a whether it is government officials, health care workers. i think of some of the service sector side that have been doing hiring. is this the kind of hiring that can sustain the growth we have seen in the u.s. economy the past 12 months? randy: i think as we have seen

since the pandemic, we have seen waves going in different directions. everyone wanted goods. then, everyone wanted services. health care is starting to grow. tech is very important. many of the tech firms cut back on workers. there are a lot of tech startups. that is an area that will need to be mindful of going forward. lisa: what are you watching most closely? you mentioned wages. i have been looking at wages, this idea that 3.9% growth wages is not commiserate with the inflation rate for the federal reserve. what do you see when you look at the dynamics of pay? randy: that is one of the key things the fed is going to be focusing on, not just the labor market, but what does a robust labor market mean for inflation? that is going to be through wages. if wage growth is still strong, that is the key cost for most

firms. certainly the services firms but even manufacturing firms. if wages are growing at four%, to get inflation down 2% is the big boom in productivity growth of 3%. we have seen good productivity growth recently. i do not know if that is going to be sustained. that is the key thing to focus on, looking at wages and productivity growth. jonathan: before we get drowning in the numbers we get in eight minutes, what are your thoughts about the communication from the fed we have had the last month or so? it felt like the chairman was pivoting toward the conversation of that cuts next year. john williams said something else. what was your take on it all? randy: i think jim may have gotten ahead of the skis, whatever the metaphor is, on getting people excited about rate cuts coming to soon. i do not think where the consent

-- that is where the consensus is. i do not think that is where jay wanted to be. he said there is pushback from a number of the fed speakers. hold on a second, this does not mean we are starting to cart in march -- cut in march. we are on a path to cut. i think he had the right message there. markets got a little too excited. i think the minutes help clarify that. jonathan: a lot of people feel the same way. stay close, he is going to respond to the payrolls report in seven minutes time. mike mckee is alongside us in the radio studio. talk to us, what are you looking for in seven minutes? michael: the forecast is for 175,000, a reasonable number given the inputs we have had from other data statuses -- sources. go below 150,000, that is when i think you could get a market reaction to the idea of when the fed will be cutting rates.

you get down to 100,000, the fed would not be concerned with the markets -- but the markets would probably panic. 3.8%, a tick up for the un-limit rate. the interesting question that has been in the markets for a while is, when do we trigger the solemn rule? it is not today. you would have to go up to 4.4%, for the rule to be triggered and recession be forecast by unemployment. tom: what is the greatest aberration of december? the tradition is, it is retail shopping. amazon blew all of that up. what is the accountability oddity of december? randy: we do not have the same oddities as we used to. michael: a lot of the temporary hiring that takes place for the holiday season has moved earlier into october and november. there has been a shortage of workers anyways. he may not see the kind of giveback that otherwise we would

in january. it has traditionally been the month you see layoffs with holiday workers and that has not been happening. do we see changes in any significant other categories? did restaurants put on more people because people were going out to celebrate the holiday season? that kind of thing. we do not really have an oddity anymore in the holiday numbers, once they are seasonally adjusted. jonathan: mike mckee is going to be with us in five minutes time. 175,000 is the headline estimate. unemployment, 3.8% is the estimate. you've got wage growth, .3%. what are you looking for? lisa: i am watching wages and revisions. if you see wages take up more than expected, that is going to cap a good news bad news type of week. as far as the headline number, i feel like every month we get this sort of response, the knee-jerk response to the

headline number and you take a look beneath the surface and those indicators drive action. tom: i look at a four week moving average, a bloomberg function i have memorized. i am going to look at the three-month average. lisa, to your point on revisions. take immediate revisions. we will do that math. then, i want to look at three-month nonfarm payrolls. jonathan: what a fantastic lineup for the next 30 minutes. we will break things down with randy, the former new york fed governor and bill dudley. your payrolls report next. equity futures down by .2% on the s&p 500 on a four day losing streak. the data, up next. ♪

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jonathan: your payrolls report 20 seconds away. the scores going into it and financial markets, s&p looks like this. equity futures on the s&p slightly negative by .2%. on the nasdaq, down by .2. on a five day losing streak, potentially day six. bond market, yields higher on a 10 year by three basis points. 4% on the tenure. here is mike mckee. michael: a strong one. 216,000 jobs were created in the month of the timber according to

the bureau of labor statistics. the unemployment rate stays unchanged at 3.7%. strength in the labor markets. average hourly earnings up port 4%. average hourly earnings on a year-over-year basis go up to 4.1% from 4%, higher than the 3.9% forecasted. we get surprise in the numbers here. the two month net revision, however, is -71. we are seeing a decline in the number of jobs that were reported in october and november. for december -- for november, the number was 173,000. originally reported as 199,000. changing private payrolls, very strong. people have been talking about government hiring driving this. 164,000 are on private payrolls,

up 136,000 month before and well over the 130,000 that had been inspected. manufacturing payrolls come up 6000, 1000 more than forecast, down from 26,000 the month of november. labor force participation rate falls to 62 point 5%. average hours worked falls to -- yeah, falls to 34.3. very strong report. considering the circumstances. i am sure, i'm going to bet there is a market reaction. jonathan: you can guess in which direction. mike mckee, thank you. rate cuts, what rate cuts following this one? equities down, yields up, dollars stronger. session lows, negative point 5%. yields higher across the board, up 10 basis points on the front end of a two year, 4.88. 10 year, up by nine basis points, closed out four point

9%. 30 year, up seven basis points. yields up, dollars stronger, the euro negative and taking out 1.09 and dropping the 1.08. negative by .6%. tom: you should see the yen dynamic, a solid .9% yen weaker move right now. what i see is anna wong is brilliant. take out the 71 revisions, you have 145,000 is the sums statistic with the revisions for this nonfarm payrolls. clearly, the wage inflation is there. jonathan: headline number 216,000 against the estimate of 175,000. wages hotter than expected. unemployment rate stays at 3.7%. mike mckee, we talked about breadth. how broad-based were the job gains? what do we see beneath the service desk surface? michael: broad-based.

health care adding jobs, the category that is always in need of workers. social assistance up by 21,000 as part of that. construction employment up 17,000, that had been a weak point in recent months. builders looking for workers because there is demand for housing these days. transportation and warehousing dropped by 23,000. couriers and messengers were down by 32,000. if you drove around new york in december, you could not get up and down the street because there was a delivery truck parked everywhere. it is interesting there were fewer jobs this time. leisure and hospitality as always, adding jobs. 40,000 jobs, an average of 39,000 for the whole month, the whole year of 2023. retail employment was up by 17,000. we are looking at a fairly broad dispersion of the number of jobs created. i should mention, i was wrong. government employment was the

biggest change, up 52,000, most of that in state and local, not federal. we did see a strong month in december. i think tom's point is good. the revision, you take the revisions outcome you have a weaker overall number. we will have to see if the december number gets revised when we get to february. jonathan: early days. thank you. we will see if this moves sticks, taking a bite out of rate cut bets for march. lisa: i am focused on the wage increase we saw, the 4.1% year-over-year is the wrong direction. what is interesting is there are signs of weakness in an odd way. participation rate went down, 62.5% and the underemployment rate ticked up. not consistent. it is early days, but consistent with this incredible efficiency. jonathan: the initial reaction, stocks down, yields up, dollars stronger. let's get reaction from randy kroszner, the former fed

governor. your first reaction to this one? randy: as we were saying before, the fed focuses a lot on wage growth. we have seen wage growth above expectations. it is clear the fed is going to be waiting a while before it starts cutting rates because the labor market is still quite strong. the wage growth is still quite strong. wages are the key thing that feed into services, as well as manufacturing inflation. tom: randy, not the simple arithmetic of a real wage but almost a cultural and societal note. do you see here wage growth being beneficial across america and the people have more inflation adjusted, cash in their pockets? randy: oh, it is super great to have real wage growth, finally. even though nominal wage has been growing rapidly, they were not growing as fast as inflation. so, people were feeling left

behind. they were left behind, because they wanted food on the table for their families and the food was more expensive than it was before. now, they started to earn a bit more than inflation, which is great for them. what is -- what that is going to mean over time, it was great to be hiring people when labor was relatively cheap in real terms. now, you are going to start to see a little bit of softening in the labor market because it is not going to be as worthwhile for firms to be hiring when workers are relatively more expensive. lisa: why is it we have seen so many downward revisions of the prior month's? does that mean we can significant -- expect a significant revision of this upside surprise come the data we get in february? randy: this goes back to what tom was talking about. the center deviation has gotten wider so there is more noise. i do not think you can take something specific out that is

always going to be downwardly revised. we just know there is going to be substantial revisions. jonathan: randy, appreciate the updates. for anyone in sling march, i think there is a re-think, especially if we get another one of these this month, next month. hot jobs report, 216,000. unemployment estimate, looking declined from 3.7% to 3.8%. it stayed at 3.7 percent. mike mckee is alongside us, breaking it down. what do you see on a second, third, fourth look? randy: if you are going to look for bad news, you might look at on a play meant. michael: unemployment was changed at 3.7% because there was a big drop in the civilian labor force, falls by 676,000. hiring drop in the household survey by 683,000, only 600,000 were unemployed -- only 6000 were unemployed.

it looks like and not a balancing of the household survey inputs to unemployment, that suggests maybe it is not as strong on the employment side as the overall number show. the other thing people were looking at was the revisions to the unemployment rate in the last year. there were some expectations it could move the needle on something like the report if we got higher unappointed rates last year, always revised in december and comes out. the only month that was revised was october, down .1%. the rest of the year was unchanged. jonathan: we will get a final word with mike before the end of the sour. equity futures on the s&p going into the opening bell, lower, near session lows. nasdaq 100 up .5%. small caps getting absolutely hammered. yields higher by eight basis points. in alan ruskin's world, the dollar is stronger, the euro is

weaker. we have broken1.08. alan joins us now. let's get into it. what did you think of that one? >> certainly, good news as far as growth is concerned. more worrying as far as the underlying and flaying picture, wage inflation in particular. i think one thing the market should take into consideration is that the state of the economy in december was reflecting tightening financial conditions from months earlier, probably more reflective of a bond market set 10 year 5%-year-old -- 5% yield. tom: we are misguessing gdp. third quarter was a shock. we are hearing that fourth quarter maybe the same. more diminished, but still the same.

are we miss guessing the strength of the american economy off this jobs report? is it simply better than we expect? alan: i think it is simply better than we expected. for more than a year, look at the employment report misses. there are few downside misses. there is a pattern here of underestimating the strength of the u.s. economy. i do not think this is that different. the now cast gdp numbers are close to 2.5%. when looking at the data, we are anticipating if there is a january weakness, it is going to start showing up in the first half of this year. that is the highest probability in terms of negative growth. tom: are we misjudging to a dollar? that seems to be the zeitgeist here. alan: that is true in terms of the short-term. what we have seen for 2024 so

far is this pushback in terms of rate cuts for the first half of the year, second half of the year, as well. the dollar is a reflection of that. we are seeing big moves now. the biggest question mark is over dollar-yen. a lot of people anticipated that this is the year of the yen. i do not think it is going to be the year of the yen, at least in the first half of the year. lisa: we can talk about bank of japan policy another time. i am curious with respect to rate cuts, you are a few in the back half of the year. if this continues, we have to see weakness in the first half of the year. when do you revise your call and maybe do not call for as many rate cuts and get incredibly bullish in the dollar versus the euro and a whole host of other currencies? alan: this is something that my colleagues would revise in terms of any reconsideration. i think if you had the first

quarter generally put up some solid numbers, these kinds of numbers, you would have to question whether the economy is slowing down materially at all. i think the fed's bias, in the short-term, they could hike rates. that could come back on the table. that is leaping ahead a long way, but certainly, taking back rate cuts is a relatively easy call. it is what jon said, in terms of march, that two thirds probability of a rate cut that we had effectively before this data looks exaggerated. jonathan: you mentioned some big moves we are seeing. i wonder whether we are learning more about market positioning in the u.s. economy, which one is it? alan: i think a lot of what we saw in november, december looked like a real squeeze of positioning. and exaggerated move, and relatively thin markets. people wanted to jump on what is

seen as a sea change, move from rates no longer going up. i think that made sense, but then the market got ahead of itself. now, we are in retreat. jonathan: off the back of data like this, i have no idea where we are going. absolutely no idea. if the overwhelming consensus is not just cuts, even people who do not think we get cuts soon, they think this fed is done. is there a chance they need to hike interest rates again based on information like this? alan: i would say if you are flatlining consistently and you still had wage inflation running at these kinds of levels, then the fed would have to think in terms of whether it could get inflation all the way down to 2% at a reasonable timeframe. i think they are quite a long way away from that reconsideration of rate hikes it is not totally out of the realms of possibility. lisa: i want to pick up on this

idea we are learning more about the work positioning at a time where every month, the previous month's data gets revised significantly and you have seen that gap increase over time. does that make you less confident in these numbers? do you not look at these numbers as you do the three month rolling average that looks perhaps less rosy than this one? alan: you have to take a holistic view of the data. it is not just the employment report. it is the number one release, absolutely look at the two month, three month, four month moving averages. look at things like the diffusion index, which has shown the breath of employment growth has narrowed over time. i would still say the labor market is slowing. all of the underlying dynamics that we have seen in things like the quick rate, the openings data to some degree, does suggest that the breadth of employment is weakening. lisa: do you think that the

accommodation we saw in the market effectively gave a rate cut to the market over the past couple of months? do you think that turbocharged the economy on the margins? alan: i would say is much more than run -- one rate cut. if you have a 100 basis point reduction in the 10 year yield, that is going to equate to 150 basis points on the outside of 200 basis points of fed funds rate cuts. there is a lot of potential stimulus that is going to kick in and spill over to other finance or conditions. the equity market is going to keep that wealth effect on the consumer side. there is a lot of stimulus. jonathan: what a startup 2024 -- what a start to 2024. let's turn to price action. the number, 260,000. the estimate, 175,000. unemployment came to 3.7%. wage growth, hot.

the estimate, .3%. tom: wage growth is the key determinant. we said that earlier. i am already staggering forward. we have got to get out of february 8 -- get out to february 8, get the revisions report. -71,000, is that weight that shows the slowdown. jonathan: in front of us next week, the cpi report. the end of the month, we hear from the federal reserve. we are rethinking the fed's next move if you were looking for there to be a cut. bond market on a two year yield higher by six basis points. on a 10 year, up by seven. joining us now is bill dudley, former new york fed president. we have had the benefit of 17 minutes to go over some of this. what is your reaction to this? >> it reinforces the notion the

fed is not in a rush to cut rates. last couple of weeks, there has been a change of view the fed rate cuts might materialize more slowly with less force. i think this reinforces this. the economy is still doing pretty well. looks like we are going to have growth in the corner of .2%. i think the fed is going to keep rates higher for longer. tom: an unfair question. why is the economy doing well? is it productivity, a follow-on of endemic stimulus? what is the why of q3, what atlanta gdp says about q4 and maybe a few people optimistic about the first half of 2024? bill: the biggest thing is there was such a physical transfers that occurred ring the endemic that households and businesses are in good financial shape for this late in the economic cycle. people have the ability to

continue to spend. typically what happens, people get over there skis, that tightens and that bites a bit on the economic activity. i do not think people are over as -- are as overextended. hikes have had less restraint on the economy. lisa: given that, especially since you have said the fed is not going to be in a rush to cut rates, do you think the market is pricing in rate cuts if talking about a 50% chance right now? bill: i do, i do. i think may is more likely. if the fed wants to cut rates, they have made it clear that if inflation falls, monetary policy is tightened and they need to follow inflation down. to do that, they have to get some signs the economy is slowing sufficiently enough to bring inflation down to 2% and keep it there. the wage trend is something that is going to concern them. if wages are rising faster than 4% a year, that is probably not -- inflation in the medium-term.

lisa: given the fact we are seeing rate cuts being priced into the market more than you think is warranted by the federal reserve, how much do you think it would setback fed officials that the markets didn't rally as much as they did into year end? how much do you think that turbocharged the u.s. economy? bill: i do not think it turbocharged the u.s. economy that much. it has only been a couple of months. i think the fed is frustrated i the fact the market always wants to be more dovish than the fed wants, because that makes the fed's job more difficult. if the market rallies, that adds impetus to the economy, which means there is more for the fed to do rather than less. i think they are a bit frustrated. powell was asked about this in his last press conference. he said, these things have to come -- what the fed does determines where the markets are going to end up.

the fed will get their way. tom: i have to do a surveillance audible and look at the celebration by you and the new york fed. and dr. musso joining the st. louis fed. bullard, an outlier, his dot plot was always unique. what kind of dot plot are we going to generate with him taking over the st. louis fed? bill: i do not have a strong view of alberto. i think he's going to take the information as he sees it and respond accordingly. what he brings to the federal reserve is the fact that not only is he a really good economist, but he understands markets. that combination of macroeconomic knowledge and market experience is rare in the federal reserve system. he brings a good rate toolset to the fed. tom: within the crush of the

jobs report, we have to look at your spirited essay. not the fragility of our banking system, but just the idea of where we are going in 2024 and shoring up the supervision of our banks. are you optimistic we can get that important job done? bill: i think that it is clear based on events that happened last march. they need to be more forceful in forcing banks to remedy problems more quickly. one way i think to do that is to release some of these supervisory findings that are currently secret. if you knew that the supervisory findings would come out with a lag, that would create huge incentives on bank management and banks to keep going to remedy the problems. right now, a lot of these problems are not known by people in the marketplace. i think that makes it easier for the banks to delay and not

proceed as quickly as they need to to remedy their problems. jonathan: phil, fantastic column that came out from you earlier this week. i wanted to squeeze one further question in if i can. you have been ahead of the curve on how far this fed would have to go. do you think there is still a risk they have to move again, that another hike could be in our future? bill: i think it is pretty unlikely. i think part of raising rates again would be, they have to totally reevaluate their whole framework. i think more likely, the short story is if things turn out stronger, they will keep rates higher for longer. jonathan: thank you, appreciate it and happy new year. mike mckee has had about 23 minutes with this jobs report. . he has more to say some final thoughts going into the opening bell in 37 minutes. bill: interesting aspects to all of this. michael: interesting aspects to all of this.

the wage number gets people's attention. when you look at the gains in wages, it is across the board, lining up .5% manufacturing, .5% durable goods manufacturing. service providing up .5%. retail up .8%. everybody was getting raises for the most part during the month of december, which is interesting. the idea that maybe we are seeing a slowdown and things are going to get worse is lagged by the unemployment news because when you look at the categories of on a plummet, white unemployment rose by .2%. lack unemployment fell by .6%. asian by .4%. you look at the people who are usually last in, first out and you see the unemployment rate though up if things were getting worse. they are not for them. it is an interesting situation. it leaves you scratching your

head about where we go from here. jonathan: they will be doing that for a while. thank you, fantastic job this morning as ways. on the surface, things look decent. beneath the surface, mike mckee says things look decent. let's get you set up for the opening bell. equity futures pulling back but recovering, down by point 2% on the s&p 500. we have been selling off all week on the s&p 500. four bay losing streak on the s&p, five days on the nasdaq. to get you ready for the opening bell, our chief equity strategist for bloomberg intelligence joins us now. gina, good for the economy, is it good for the economy -- market? >> the equity market is in a sticky spot to start 2024. we ended 2023, the backdrop headed into this report was not particularly conducive to gains for the equity market to start with. i would suggest the report is

likely to have mixed results on the equity market. the consensus view is for slower growth and slower inflation headed into 2024. while this is definitely a positive sign for growth, it is a potentially inflationary signal with the wage numbers that we are significantly above spec patience. above the three point 5% bogey the fed is launching on wages. that mixed result is probably net negative for the equity market considering the backdrop. tom: moments ago, citigroup pushed against the gloom on apple. he has a 27% total return on apple out. i do not want you to speak specifically about apple, but i want to speak about what i have talked about all week, the acclaimed martin adams optimism on earnings growth right now. what does the gloom crew get wrong? gina: i think, frankly, the

expectation embedded in markets is far too bearish. as much as the consensus is saying we are likely to get about 11% earnings growth, our macro models say the market expectation is closer to 0% earnings growth for 2024, which would be nearly unprecedented concerning -- considering earnings fell on the s&p 500 as inflation is decelerating. it is a tough call to make. that is what is priced in stocks. this is what i mean when i say growth expectations are very, very low. no one is expecting acceleration in gdp growth, nor is the market apparently expecting much acceleration in earnings growth next year. if you are optimistic about earnings, you are reliant upon the inflation deceleration continuing. where we get earnings optimism is we are not expecting a recovery in revenue growth but margins are continuing to improve because inflation is decelerating. companies are becoming more

cost-efficient. they are continuing to cut costs across the board. they are generally very lean and ready for incremental revenue improvement. you have a lot of upside potential surprise on the growth line. i don't the the market is expecting anything there. but, you have some potentially stickier than expected inflation which could stuff the view of it. lisa: how much is the wage gain in the employ metric report really challenge that -- unemployment report really challenge that? gina: not much because wages are a small percentage of overall operating margin changes on the s&p 500, where we are getting a grazed degree of tailwind because import prices are falling, allowing companies some degree of pricing power. we have not had much net improvement in wage over the course of the last 18 months. i would certainly love to see

deceleration in wage growth as a component of potential margin expansion for companies over the course of this year. not too much because it ultimately eats into the top line. we would like to see a little deceleration to help boost the margins story. this has not been part of the tailwind so far. i would not say it is a huge risk to margin growth, it could become a tailwind over the course of the year. jonathan: great to catch up, happy new year. following the payrolls report. coming in a bit stronger, equities take it ok. futures down by .2% on the s&p. tom: we started with steve whiting of citigroup this morning. he said the same thing, the same vector direction as gina martin adams. gloom corporations witness the week gloom from barclays and others and the bottom line is simple. these pros and equities are saying earnings are two negative right now. jonathan: jp morgan results next.

we have had a drip feed of data. cpi a week away. coming up, from new york city. good morning. ♪ manus: i am manus cranny, in for jonathan ferro. you have had your heart jobs report. -- your hot jobs report. countdown to the open starts now. >> everything you need to get started for u.s. trading, this is bloomberg "the open" with jonathan ferro. manus: coming, u.s. pals