>> what we expect to get from payrolls is from the hot print we saw last month. >> i think the labor market held up just fine. a touch stronger. >> i think it would be a sound number and it would be 250,000. >> there's potential for the economy to grow faster than expected. >> another really strong february, history could repeat again. >> this is bloomberg surveillance with jonathan

ferro, lisa abramowicz and annmarie hordern. jonathan: lisa told me off last time we did this, let's get to the weekend. i will start every hour with that. live from new york city, good morning for audience worldwide. it is payrolls friday, equity futures on the s&p 500 positive by .1%. the most important payrolls print since the last one, until the next one. will a double down on the booming 353,000 of last month. lisa: we are positioned for heads i win, tails i win, ultimately no one is betting on a re-accelerating inflation growth and that's what we are expecting from the payrolls report. >> 200 k is the estimate this morning. we've had the adp, the services component, the employment component.

none of it was this big blowout upside surprise that we all feared a few weeks ago. >> i was going through this and every time i kept kicking myself everything about the data has been goldilocks. it's the reason why people are pricing out the idea of re-inflating the economy or true real weakness either. it's basically what everyone wanted to see. >> another week of gains. we need to head down to washington dc in a few months. catching up with bloomberg's and marie. the save the union taking aim at trump talking abut his predecessor without mentioning his name. is this good to be the approach to the election later this year? lisa: he's not to mention trump winning. also not to mention abortion rights with reproductive freedom is the new catchphrase as well. he's setting it up as we are the alternative not necessarily making a true pitch about a new

vision he has talked about new ideas but it's doubling down on what he's done saying i'm better than the other guy. jonathan: let's go through those stats together. 800,000 new manufacturing jobs in america and counting. unemployment at 50 year lows. do any of those stats resonate with americans right now. lisa: they are starting to resonate more but essentially the answer is no and it simply because of accumulative inflation has been too much to overwhelm. this is something i found interesting and i want to keep digging into. how much can joe biden keep doing to juice the economy heading into the election. whether it's relieving student loan debt, pumping more money into infrastructure spending. how much more could he do to try and give more leeway so people's memories reset in lower inflation and higher growth world.

jonathan: we will catch up with amh in just a moment. right now let's get you set up for payrolls. almost unchanged positive by .1% on the s&p. yields coming in a little bit down a basis point 4.07% on the 10-year. anything but on dollar-yen. yen strength again. the report says following the reported bloomberg this boj is getting closer and closer the hiking rates this month. lisa: we always think they are going to hike rates and go back to zero and then it's pushed back but this time seems different. we've heard that rhetoric out of the government out of officials and the market all the pricing and with definitive kind of conviction that in the march 18 and 19th meeting the bank of japan will after a decade, more than a decade lift rates to zero with what you're seeing in the bond market with yields of the highest-paid jonathan: possibly

maybe perhaps. we will see. negative by .7%. coming up cameron dorset counting down to the latest payrolls report. president biden frames his race against donald trump and ira rodriguez on powell's heated exchange with senator warren on capitol hill. counting down to payrolls. bloomberg survey expecting 200 k with unemployment at 3.7%. saying the opportunity for the fed to start cutting may be narrow. the fed putting cuts in may and june without being too close to the election with the perception that they are being political. the data may not support cuts. cameron joins us for more. what are you looking for this morning. >> if we see upside surprises to the job prints it's very likely you can see these rate cuts pushed back.

we watch things like pmi's and manufacturing data that suggest there is a cyclical recovery brewing in this economy which may not support that may or june cut which then close the window to be able to cut this year or at least put us in a place where they are having to cut after the election. >> you're talking what a cyclical re-acceleration. john powell saying we are very restrictive. those two things don't really add up do they. >> we are simply not seeing the weight of these interest rate hikes on this economy because this is economy is still left lever to short-term interest rates than it has at any other hiking cycle in recent history. this is because of the great refinancing we had in 2020, howard talked about that yesterday. you refinance your debt, the fed hikes rate spring you are not seeing these go up like you have in prior cycles. that's what we are looking for in refinancing kicking in. that's where we could see some

economic weakness because of stress on balance sheets. until then you're seeing the cyclical recovery because of fiscal stimulus as well. >> i want to double down on the question john asked which is really compelling. basically we are really close to cutting rates despite the fact people like yourself are saying there is this risk of re-inflation. so what do you see the likelihood of a rate cut accelerating that reinflation of the economy. how do you lead that through a market that seems pretty complacent about this risk. >> we know there is a relationship between financial conditions and nominal gdp growth but its financial conditions that are sustained at easy levels. if we continue to have these financial condition stay at the levels where they are today at 2021 would suggest it is supportive of growth and supportive of inflation moving higher. we also to watch things like oil on the move, gasoline prices up

11% over the last month. let's not forget copper moved a lot yesterday. this is all signs there's this cyclical reacceleration brewing which doesn't necessarily say the fed needs to cut today or now in order to get in front of some weakness. >> what are the risks that aren't being priced in. where is the asymmetry in the market. it strikes me the idea of reinflation is not being priced in. where is it most not priced in? >> if you look at cyclicals versus defenses. it seems to suggest there is some reinflation going on, some cyclical reacceleration which just means yields at these levels probably are mispriced if that reacceleration happen simply because you've seen this movement lower in the two-year and the spread still suggests the fed will cut soon if the fed does not cut soon maybe there is up or pressure on yields. jonathan: eight days of gains on

gold. the longest daily winning streak going back to 2020. what is behind this chart? cameron: we've been calling it the curious case of the gold in the night. does it mean real rates are peeking out? gold is associated with a weaker dollar and lower real yields. if inflation is moving up that pulls real yields lower. >> i'm trying to figure this out. we start to think about shifting away from the u.s. dollar towards something else and then we see this roll up in gold i'm wondering if it's more than just saying the macro backdrop. cameron: you've seen central banks favor gold purchases really since the russian invasion and the response to that. using central banks move into gold. you haven't necessarily seen investors. this is not the rush into gold

like you typically do it peaks. this would suggest investors are the source behind it but it central banks. i wouldn't go so far as to say this is the ultimate sign the dollar is losing its reserve currency. the worry about the list -- jonathan: you've been following. [laughter] lisa: finish your thought. cameron: simply there's not a better option out there. you're not going to see a complete removal of the dollar as the central reserve currency because where else will you go. there's always been talk of a basket of currencies but i do think at the end of the day from neither party are we hearing any talk of budget restraint which just means we still have to keep in the back of our mind there could be some volatility in yields when it comes to the funding side of things. lisa: i'm so glad you don't understand what gold has been doing either.

i'm very grateful that i was validated on some level. when it comes to this question the budget overhead, some of the come on. the liz truss moment is perhaps over your skis in terms of an analogy but there is this feeling it has to matter at some point that this is a historically unique moment where the u.s. is basically borrowing its way to keep its economy booming. at what point is it common -- become an issue. >> i think that it has to come along with stronger economic data. it's been interesting we've seen a step up in coupon issuance year-to-date. in yields of move lower. yields we think are moving lower because economic surprises are moving lower meaning economic data isn't coming in as hot as expected. there's a very strong relationship between the 10 year economic surprises. it seems to be more important than what the treasury is doing

with its refunding. jonathan: we just haven't had those upside surprises going into payroll. lisa: it's been trending significantly through the lowest levels. to your point sort of raising this question of people taking that toll risk of reinflation off the table. >> we are looking for 200 k today in payrolls. 4.0 7% on a two year yield. cameron dawson's get a stick with us. let's get you up to speed and up to date with stories elsewhere. here's your bloomberg brief. >> posed to secure enough support for a second five-year term as the imf managing director. to ensure the success of any potential bid. sources say their pursuit of a second term would come with the understanding that she is the support of france and germany. boeing's linking worker bonuses to safety following the alaska

blowout earlier this year. employees will now see 60% of their annual incentive score based on safety and quality metrics. previously 75% of the score was based on financial metrics. it's the latest of their moves to address quality issues of the company. the battle to ban tiktok heats up yet again. steve scully said he would bring a bill to the floor next week would force tiktok to sever ties with the chinese communist party. he posted on x and called it critical for national security. tiktok said the push notifications of some of its users encouraging them to call their representatives and ask them to vote against the bill. it -- urged users to speak up now. that's your bloomberg brief. >> the business of interfering in politics within the interfering politics by sending you push notifications. >> it sort of pick your poison.

jonathan: we will avoid that one today. up next on the program president biden setting the stage for november. >> taught me to embrace freedom and democracy. a future based on core values and a defined america. honesty, decency, dignity. i believe in america. i believe in you the american people. >> that conversation next down in washington dc live from new york city, good morning. ♪ get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside -

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jonathan: equities on the s&p 500 slightly positive. yields a little bit lower. down a basis point on the 10 year. under surveillance this morning president biden setting the stage for november. >> i've been around a while. my lifetime is told me to embrace freedom and democracy. if future based on core values and a defined america. honesty, decency, dignity, quality. what makes this rare is the freedom of democracy under attack at home and overseas. if anybody in this room thinks putin will stop at ukraine i assure you he will not.

my predecessor and some of you here seem to bury the truth about january 6. you cannot love your country only when you win. i believe in america. i believe in the american people. jonathan: do you think that joke landed at the start there? lisa: i think it landed with a couple of people but not that many. jonathan: here's the latest this morning. the president outlining his land -- move forward as a rematch against all trump is all but certain. looking at key issues. biden continuing to trail the former president in several swing states. anne-marie joins us now for more. how has this one gone down in the aftermath of the speech delivered? annmarie: let's look to terry haines this morning, the bar was so low. if you look at with the polling was heading into this speech, the economist said only 16% of americans polled had something big to expect from president

biden. with the bar that low he was able to pretty much overcome it. he immediately went after the predecessor as he's calling him never wanting to name him by name but clearly this was a political speech. for more insight i want to bring in -- everyone's talking about this was about how he came out and not so much the substance of what he said. >> the president had to set this out. reelections are about a referendum on the current income and or does he make this a choice alexion. biden's numbers are down. it is a referendum and he needs to change that trajectory, making it a comparison between him and trump. he really tried to lay out between him and trump. it made the base very happy.

we have to see if that makes a difference for the key voters will decide the selection. >> whether it was nato, abortion, january 6 he wanted to show that big gap between him and former president trump. to these issues do voters actually care about. jeannette: different pockets will care more about different things. to some extent he might be looking to this nikki haley voters talking about nato and russia and ukraine. he's going to make a big focus about women voters and talking about abortion rights and reproductive rights and he also wants to remind people of what happened under trump. what happened with january 6 and play that up as well. >> president biden early on in his administration had democratic control of the house and senate and he's talking about tax policy he could not get through them. as any of this have a future or is it all political talking to the base. >> here's the one thing i think is important a lot of this was talking to the base. if you took it just as he would

have complete power this a lot of spending in there, tax increases to pay for middle-class tax cuts. the big thing we will be watching for is at the end of 2025 with this fiscal cliff with a trump tax cuts expire. we are currently in a situation where we have a higher deficit, higher interest rate costs and to no longer congress can say we don't have to pay for something so if we are going to extend this tax cut which both the democrats and republicans want to do they have to start thinking about whether there could be other tax changes in play prayed we have the house budget chairman saying he now sees tax changes might have to be on the table because of these concerns. annmarie: what kind of changes could we see. he's talking about cutting taxes even more. >> how they will pay for that will be difficult. one of the things he's trying to say is he could use his trade policy to pay for it since he wants to implement a tax on all imports coming into the u.s..

that's good to be tricky because when the reality comes next year we have to figure out whether or not we can pay for any of these things or are they knocking to go through. >> americans are clearly struggling it felt like he was speaking directly to elizabeth warren when he talked about this. could you see that happening and how they pay for that. helping americans get on the property line. jeannette: he's definitely talking to the affordability issue which is one of his weaknesses in the election cycle and that's can it be an expensive program to put into place so i don't see it likely to happen but it is something he is trying to talk about he could try to bring down costs for americans when there still disinflation problem buried annmarie: -- inflation problem. annmarie: some of them coming back after the covid pandemic. we will get a jobs report today where people are expecting

around 200,000 at least. what is this not resonating with the american people? jeannette: the price level of goods we see is the bigger issue. that sticks. even if we have inflation coming down. so voters still see that, they see that every day and every week. that's where some of the problems are. you do have the issue where if you are paying a new mortgage you are looking at a 7% rate versus a 3% rate a couple years ago. those of the bread-and-butter issues that goes to what people actually feel and that makes it more difficult for people to know the economy is doing well but i am paying more or feel like i'm paying more and that's the difficult hurdle for him to get over. annmarie: thank you for your time this morning. president biden trying to talk to americans about issues that still matter to him when it

comes to inflation. maybe this idea of the mortgages, getting on the latter could help. i'm not sure if shrink felicia and landed the way -- shrinkflation landed where he wanted to. jonathan: people can get on the housing latter what is the solution. we are thinking build more homes, more houses. what politicians always do, demand side. give them more money, exacerbate the problem. lisa: there is this question of how long they can do this to say i will hand you a few bucks. there's a question of how long you can do that before it becomes counterproductive and that will be a conversation for another day. jonathan: we can do it again. 15 million new jobs in just three years we can have an argument about those jobs restored from the pandemic. 800 thousand manufacturing jobs in america and counting.

unemployment sat at 4%. it's amazing to see the federal reserve has gone from zero to 5.5. how do you think we achieved that in this economy. if i told this to you maybe a year ago saying unemployed will be much higher than 4%. 3.7%. how do we do this? lisa: where's the pain -- cameron: part of it is because of the fiscal spending and the support from the fiscal side of things. you tighten monetary policy but loosen fiscal policy keeps things resilient but it comes back to the sensitivity of short-term interest rates in this economy. we can contrast what happened in europe where there's a lot more sensitivity to short-term interest rates and yet growth has been much weaker and that's the key reason why this economy has held up so well. jonathan: ecb versus fed, ecb? cameron: the data already

supports it. jonathan: about april now, did you hear that whisper? lisa: to your point why didn't they cut yesterday if they thought it would be that big. my question is why we not seeing more dollars strength. you've got europe saying we will cut first, we will cut aggressively. the fed -- it's an interesting cross. >> the dollar index negative by .1%. good to see you. cameron dawson of new age wealth. wells fargo expecting unemployment to hold steady at 3.7% after a very hot payrolls report back in january. that conversation up next. ♪ how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now.

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jonathan: all-time highs going into payrolls. adding weight to the rally on the s&p 500. equities looking at the nasdaq a little bit negative softer. down by 0.06%. we are headed towards a third consecutive week of gains on the s&p 500. getting to the bond market to year yield and down a single basis point. a couple mondays ago, we backed away the data has not blown our expectations the same way as it did a month ago. jonathan: this bid -- lisa: this

bid into bonds we've seen. global bonds of the strongest inflows in the past week since january of 2023 focusing on developed markets in particular the united states people flooding in with the idea of rate cuts, economic data doesn't seem to be a risk. >> the ecb seemed to unlock some of that enthusiasm eastern time. just forecasting inflation a little bit softer than expected in the previous round of forecasts. hitting 2% by next year which begs the question why go sometime soon or the ecb. lisa: what is the argument against that. you also have 100 basis points a full percentage point of a cut at the ecb. it raises some real questions prayed if the u.s. economy is so strong wouldn't you expect this divergence to play into the currency cross. if you think about it wouldn't you sort of expect incredible

dollars strength if the fed were going to cut less then the ecb if the fed had that incredible strength they are facing off cutting outlook growths? why wouldn't this be an obvious catalyst. jonathan: we are back to 1.09 on the euro. a bit softer this morning. what a move this week. japanese yen, dollar-yen, amid strength. big time in the last couple of days down another .7%. japanese yen strength in the face of several boards. yesterday we had two reports prayed one of government officials who seem to be ok with the near-term hike for the boj. another, boj officials who seem to be gaining confidence in the wage data. could be critical based on the report this morning suggesting maybe we could be good to go for lift later this month. lisa: wage negotiations i've already had the biggest wage

gains going back decades. we are seeing bond yields at the highest going back to 2011, what i am looking at is a market allowing the bank of japan to normalize without enormous disruption. saying if they were to move it would cause the unrest to the surge in yields. that is telling. jonathan: march is not october. looking into october, the 10-year back all looking at a long list of reasons for why bonds could selloff more in yields could go higher. different story. it looks like they are getting a free pass to do something for a long time. lisa: people are saying they will. jonathan: under surveillance this morning, your top story. president biden setting the

agenda in last night state of the union address. biden looked to draw a line between him and trump as a slew of polls show the former president in -- key battleground states. and re-productive rights. for social media to respond. one hour, something like that, plenty of energy, little bit of anger at times. wanting to talk about the policy, of the substance. lisa: the one thing i took away from it was not the lead. i apologize in advance of people were looking for review of his cadence or some of the trolling by trump afterwards. what i was curious about was china and how he compared it to trump's policy and indicated he was harder on china than his presidents or -- predecessor

prayed saying advanced american technologies cannot be used in chinese. i was trying to extrapolate that out to understand what that would mean. essentially it seems to be, -- in a mature way. it seems biden is doubling down on that. >> i want competition with china not conflict. lisa: it seems to be exactly in opposition to what he was saying earlier which is banning certain american technologies from china especially at a time when you have actual policy in china to remove all american technology from a chinese government programs by something like 2037 and this is something they taking into consideration. it doesn't sound like just healthy competition. jonathan: that word conflict is loaded.

the word itself, you are conflict with china if you're looking to ban americans from selling vehicles and their country because you believe there are national security risks. >> i would reframe it to build it to say if this is what he considers competition expect a heated competition over the next few years that will lead to some real policy shifts as well. >> let's get to the central wrap up. this is this central bank wrap up 24 hours. fed chair jay powell giving two days of testimony pal repeating cuts are coming. and confident inflation is heading towards 2%. the ecb holding rate steady at its meeting but keeping the door wide open to a cut in april. some investors the ecb and fed could be on different timelines. the boj looking at a different policy. negative interest rates later this month. a growing number of bank officials leaning towards a hike which is why we've seen a little

bit of strength intraday so far this morning. two hours away from the latest payroll support. january scintillating report shows the labor market is holding up remarkably well despite tighter monetary policy. we look for the rate to be remain unchanged prayed for average hourly earnings to ease to 0.2 during the month normalizing supply and demand for workers. sarah joins us for more. why won't this data be a repeat of what we got a month ago? sarah: what we saw coming out of january is it is a real tough month for seasonal adjustment. we tend to feel a lot of layoffs and just the fact we see businesses hold onto workers more i think that was a support factor. we saw that and the weather may be helped in december prayed we step back and we look at the holistic view of the labor

market prayed we see a lot of signs of moderation. from hiring plans, layoff announcements rising again as well and so when we look at the underlying trend as welcome as these games are over the past two months have been we think that trend is probably closer to 200 right now and probably slowing down closer to 100 in the back half of this year. >> what we need to see when it comes to wage growth to do the last mile of this? sarah: we need to see wage growth closer to 3.5% on trend. and that accounts for that 2% inflation number but also that roughly 1.5% trend in productivity. we are getting that in terms of the employment cost index which is the fed's preferred measure of wage compensation cost but we didn't see that last month coming out of the average hourly earnings numbers but these are much more volatile, they are

prone to revisions so it will be interesting to see if we get that cooling we expect and how much that moderates the recent trend and if we are at least getting closer to that roughly 3.5% rate of nominal wage and labor compensation by cost the fed will be comfortable with. lisa: it seems like there's a greater number of economists that seem comfortable with this idea of the disinflation is not threatened by some of the higher-than-expected prince. we are seeing this gradual cooling in the labor market talking about the quits rate that we got. has there been anything to counter that thesis in your view. anything that makes you more concerned of the market consensus which is not really a risk. sarah: one of the concerns as we move through this year is what happens with labor supply so that has been hugely important in terms of bringing down compensation costs so you had a lot of supply improvements on the goods aside, the supply

chains normalizing. we think that will probably lead to less deflation in the goods sector which will make it tougher to see that overall rate of inflation decline at the rate we've seen over the past year but the big question in my mind is can we continue to see that cooling in labor costs back to that range that the fed is looking for if we don't have nearly as strong labor supply growth as we saw over the past two years. we saw some hints of that growth cooling in the back half, really the past few months of last year and then in the january numbers as well. that's one key element in terms of can we see that last push of getting inflation back to 2% on a sustained basis? jonathan: he said it can average hourly earnings. ignore it and focus on hours worked prayed is it a clean indicator to look at average hourly earnings? how much information does that have?

sarah: we much prefer the eci due to the volatility and the fact it's not composition adjusted and so it's not my favorite measure of wages by any means. i think the average weekly hours has been interesting so even if you ignore the big drop we saw last month you are already seeing the workweek back to where it was before covid suggesting while we are adding a lot of jobs businesses are using those workers less intensely. you also see part-time worker growth surpass full-time by a wide margin in terms of that growth rate so there some signs that show we are adding a lot of jobs but the demand for workers is slipping or at least the demand for that overall labor. that will be important to watch as well. >> composition. the composition of payrolls growth. around this table for a long time people were joining us talking about how the breadth of payrolls growth wasn't good.

just a couple of industries doing the heavy lifting prayed all of a sudden note say the opposite. what changed? sarah: january changed. so the big payroll gain number and a big increase in terms of the share of industries adding employment. very important this report as we move through perhaps some of those seasonal factors as well. even as we have seen that brett for widen out a little bit you are still seeing a very large proportion of jobs being added in government and health care so two of the less cyclically sensitive industries that's great in terms of its offering the ballast as we see the overall restrictive stance or at least not in accommodative stance of monetary policy weighing on some of those cyclical industries but i think as we move through this year we see those seasonal affective january became -- we are paying close attention to are we seeing that hold up or do we see a

continuation of the downward trend we saw over 2023. jonathan: the conversation flipped very quickly. good to catch up. 200 k the estimate in our survey the previous number 353. >> so many details under the hood. just how the hours or work i think will be interesting. i'm curious about the idea of productivity that's been one of these concepts behind this incredible rally. can that continue and in all these data points i think they will be try to put together that story of whether it has legs. >> that number is a few hours away. let's get an update on stories elsewhere. here's your bloomberg brief with dani burger. >> new york's private sector workforce hit a record for the year ending in january. the governor says it marks a full recovery from the pandemic prayed health care, leisure and hospitality drove those gains mainly coming from if the cut which had 6% jobs growth.

rivian halting plans on a factory in georgia. that's can give them more than 2.25 billion dollars in savings. the model will go to an existing plant in illinois. it is a cheaper model set to compete with tesla. the tire from a boeing 777 flight fell off the aircraft shortly after takeoff from san francisco. the japan bound flights all of its -- saw that in the employee parking lot. it caused minor damage and debris. it prompted an emergency landing in l.a.. that's your bloomberg brief. jonathan: all these stories i think need a warning. for anyone going through the airport this morning it's like more airplane news. lisa: i don't want to think about my tire falling off the airplane. jonathan: ridiculous prayed equities about unchanged. chair powell and senator warren

squaring off. >> you were the leader of the fed and when the heat was on last year you talked a lot about getting tough on banks and now the giant banks are unhappy about that and you've gone weak need on this. jonathan: i think it's a soundbite saying we won't be using today. did you see that? lisa: which one? jonathan: my goodness. this is bloomberg. ♪ ll we got ten orders coming in... big orders! starting a business is never easy, but starting it eight months pregnant... that's a different story. i couldn't slow down. we were starting a business from the ground up. people were showing up left and right. and so did our business needs the chase ink card made it easy. when you go for something big like this, your kids see that. and they believe they can do the same. earn unlimited 1.5% cash back on every purchase with the chase ink business unlimited card. make more of what's yours.

jonathan: i've got everyone writing in, no one wants the kennedy -- the war and powell exchange every buddy wants the kennedy powell exchange. you can find it for yourself on youtube. i don't think we are going to play at. you need some bleeps in there. lisa: does it matter given the

substance? i thought maybe it was just dropping the aft bomb but it is so much worse than that. jonathan: sometimes you can wake everyone up. it's pretty impressive. lisa: did you see jay powell's reaction? next time he talks. so straight about it. equities right now on the s&p just about unchanged. on yields lower by a basis point. euro negative. under surveillance this morning, chair powell and senator warren square off. >> are you committed to finalizing the strongest version of the rules this year? >> we are taking many more steps to deal with problems with silicon valley bank. >> i'm asking about the basel three rules. >> they are not directly related. my view is it would be

appropriate to make material in broad changes. >> to strengthen the rules? >> if you read it again. you will see that i'm doing exactly what i said i would do. >> when the heat was on last year you talked a lot about getting tougher but now the giant banks are unhappy about that and you've gone weak need on this. jonathan: fed chair jay powell on capitol hill facing questions about proposals to bend capital requirements saying central bank won't hesitate to abandon particular rules or the proposal last year put forward as officials work towards a consensus. managing principal at mrv associates joins us. let's just get straight to the rules they will come down. can you help me understand what's on the table right now? and what's it can look like in the years to come? >> good morning.

the basel three rules are that the media refers to as are an update to very important capital liquidity and trading rules. >> these were already updated by over 20 countries several years ago. they could not be implemented in the united states because under the previous administration let's just say it was definitely not friendly towards regulation and the importance of the safety of banks. so a lot of this is caused because previously big banks could use their own models to determine their own risk rates. can you imagine if you and i could design our own tests. of course we would get an a. this update is very much a long overdue and chair powell's comments yesterday were a surprise and of course he's

entitled to his opinion, but his comments were very unfortunate. bank lobbyists are salivating at the idea of watering down regulations that are very important to the ordinary americans sick and tired of bailing out banks every time they get into trouble. jonathan: there have been -- lisa: there have been some serious criticisms about the current rules in their form and how they are overly punitive, they do not achieve what they set out to achieve which is to quick credit for the american economy. do you agree it's appropriate to roll back some of the proposals as they were put out there? >> absolutely not i think most of the criticisms are not valid. typical, you'll hear is bank regulations will reduce lending. if that were true, where is the data from the bank lobbyists to support this? american banks have grown in their assets and what our

assets? we are talking mostly about loans. they have grown over 60% since 2012 when dodd-frank and basel three first started being implemented. if these rules were punitive for the american economy, why has it continue to grow? the american economy has grown enormously as we stand head and shoulders above just about every advanced economy. if these rules really do as the bank lobbyists and executives say, why are they paying the exorbitant level of dividends, share buybacks, what about the billions of dollars they spend in fines over the last 20 years? unfortunately bank lobbyists have to produce real data, the reason they are criticizing these rules so much is because there were so much money at stake. you also have to remember importantly there's about 500

federal banking lobbyists with over $50 billion in assets so when you and i see repeatedly not just on television or social media even at bus stops the bank lobbyists have taken to advertising about the so-called ills. consumer advocates cannot withstand that millions of dollars that lobbyists spend every year criticizing any bank rule. lisa: i'm obviously waiting at the wrong bus stops. i think putting aside some of the debate around the role of credit creation i'm curious about where the risk currently lies on bank balance sheets. the quarterly report came out yesterday and it really had a sanguine picture, a loan delinquencies and charge-off rates were pretty low. the question was commercial real estate.

and credit card loans. do you see real material risk in any way building on these bank balance sheets? mayra: you are correct, there's always risks and yet delimits the rates of credit cards have been going up, you of corporate default rates rising. this is a topic i've been talking about for over a decade because american corporations are practically at record levels of indebtedness. with continued elevated levels of interest rates, absolutely we should be worried about those risks on the balance sheet and precisely because there's those risks and also cybersecurity threats, the fact banks are not taking into account how climate change can impact them, it is precisely the known risks and the ones that are hard to measure that this is absolutely not the time to require less from banks and this also means

bank supervisors have to do their job, the culture at the top of these bank regulatory entities changed dramatically because of trumps 2155. that's why silicon valley bank was not measuring liquidity under stress conditions. absolutely let's put everything on the table, let's talk about the real reforms needed to protect ordinary american taxpayers and let's talk about the fact that you've got to follow the money. all of these complaints are about the fact that bank executives and many bankers compensation is affected by bank regulation because yes, capital does cost. jonathan: i think you will find a good friend in the senator of massachusetts. thank you. i think they are probably on the same page. lisa: i wonder about elizabeth warren in terms of what level is

enough for some of the regulation. this is the ultimate question and the real question is what role should the banks play versus the shadow banking system. there's a bigger debate here obviously we are not having prayed -- not having. jonathan: where is the problem with cre if it becomes a much bigger issue. it's elsewhere. >> do you regulate more heavily the smaller banks? do you make them so they are not able to do much? do you prohibit them from tying together to become bigger banks. it creates this lack of consistency in the policies. >> people get very passionate about this stuff. coming up the brilliant libby cantrell of pimco, ellen of morgan stanley and congresswoman debbie dingell of michigan. good morning.

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>> the economy is turning out to be remarkably resilient in the face of challenges. >> we continue to have stronger u.s. growth and the exceptionalism story keeps coming back. >> right now i still see that risk of re-a celebration low. -- reacceleration. >> we are in the zone of reasonableness. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> the second hour of bloomberg surveillance begins right now. good morning. it is payrolls friday, the estimate on our survey, the previous number 353 thousand. what a difference a month makes. thinking about what kind of downside surprise to bring the rate cut into play. we are sitting here waiting for payrolls wondering what upside surprise it would take to blow out the forecast of any rate cut this time this year. >> the question is have we truly taken off the idea of re-accelerating inflation off the table. there was a survey conducted that shows 50% of investors think the payroll data would be risk on. 34% said mixed or negligible. this is basically everyone wins this is good to be great, and no one's position for weakness.

jonathan: wonderful. lisa: heads i win, tails i win. it's goldilocks forever. jonathan: there's a difference would you welcome loosening in the market. and an unwelcome deterioration. what separates, or divides the issue. >> it's an important distinction. the issue is there are no sides of a healthy deterioration in the market. on the margins quits are down you can see in places people aren't hiring as much. it's not coming in the numbers. anecdotally people's wages are going up in terms of real wages paid it's hard to make this bearish case. >> president biden sing the same thing in the state of the union. our economy is the envy of the world. i'm not sure about the 3%. direction of travel better. improving. >> psychology doesn't move as

fast as statistics. and some people say when their bills are higher it takes time for them to shake out. how many payments can you give someone before they say it's not that bad. what more can be done in the fiscal front heading into november to speed up the process feeling a little more optimistic. jonathan: houses are unaffordable. it's not unique to america, it's something we see in the united kingdom. why do politicians always reach for we will give you extra money. are you seeing this massive initiative to build more homes particular how much space is in a country like the united states of america. there is enough space to build more homes. lisa: people want their cake and they want to eat it too. they want to have affordable homes but don't want anyone in their back yard so you put those together and ring up some pretty conflicted policies. i'm not sure what can i through before november, what i'm

looking for is policy prescriptions that have been the backbones of the rally we've seen. jonathan: this is what it's about in the u.k.. no politician in the united kingdom wants house prices to go down because the people who own those homes who see that asset is a big percentage of their overall wealth those of the people who go to the polls and vote. every time there's an election they vote and they judge how well it's doing by the value of the home they are never going to sell and if they do they want to sell it to millennials for a whole lot more money. this is generational warfare in the housing market. this is a big issue and they always reach for demand-side solutions which exacerbates the problem instead of building more houses. lisa: that's very well said. household u.s. wealth is at an all-time high and climbing dramatically in part because house prices have not gone down. to your point what you want, you

want more affordability or really this continued rise in prices? jonathan: waiting for the hate mail. if you hate me, tk is on the radio, commiserate with each other. s&p futures look like this. negative on the s&p 500. yields are lower by a single basis point. the fx market euro-dollar, 1.0933. expecting the fed to cut in june. biden state of the union. looking for a payrolls print of 205 k for the fed to start cutting in june. we begin with our top story the fed payrolls report about 90 minutes away after a plot january print. they return to a more normal pace of job growth saying i think the economy is slowing and inflation is slowly maturing getting to 2%. i think the fed wants to cut to

get into soft landing mode. i think the fed will start cutting in june and cut four times in 24 and 25. not to talk about house prices. we will talk about the federal reserve and this market. what needs to happen in the months to come? >> it was interesting, it was what he did not say that was more interesting than what he said. what he said was consistent at the january fed meeting. a little bit more of the same data and when i say same data it's inflation heading lower. we get zero or .2, we get pce close to 3%. i think that's lower than where we were. the bar for the fed to start to cut is largely from the inflation front just showing continued moderation. i think a couple months of inflation numbers suggesting the 2% is within reach is enough for them to cut. i think cutting next year will

require potentially getting close to 2% or getting a bigger in the labor market. it's really not about growth. >> chairman powell said we are not scared of strong growth. if we get another big payrolls report should they be worried about that? priya: i think it will make this reacceleration talk louder but it's much more about wages. if you get 300 going to wages i think that will stay very much alive because it suggests service inflation will come down. it allows the fed to start normalizing the start of cuts is not about easing it's about normalizing. you get another point, i think then the market gets very nervous that these cuts in the second half we have the election. >> it strikes me there is an implicit thesis building into the consensus and that is that this year the fed will be

proactive and try to get ahead of cutting rates because of disinflation. but next year is when you have real refinancing risk and you see actual risk. that's when the effects, into the floor in a much more material way. is that consistent with what you feel? priya: i don't think the cuts are largely about inflation. next year will be about growth. if there are no signs of that lag. they are sure on those cuts next year. those lag start to show up. they could speed up the rate cuts. even if they cut three times this year we are at 4.5, it is fairly high. that's very high real rates. if they don't see signs of the labor market monthly payrolls that could make them think that's good to move the employment rate higher, recessions are always nonlinear. if you see a material weakening in the labor market they will extrapolate that and start to cut much faster. a long way to get to neutral.

this is two-sided. depending on how the labor market they can speed up those cuts and slow it down. >> do you think the risks are adequately priced now in the market. it seems a very few people are expecting inflation, they are expecting cuts and expect them to continue. do you think there hasn't been enough of the possibility of a truly resilient economy baked into this market? priya: i think the bond market might be pricing that in. if they actually accelerate we the bond market pricing pricing the endpoint after the cuts around 3.5. that to me is consistent with soft landing. yes u.s. rates can rise 25 or 30 basis points but where are equities? the soft landing starts to be questioned which is price to perfection in every market.

if the fed can cut anymore next year, i think some of the risk premiums in some of the riskiest part of the market is too low at that point. real rates will be high. does it mean a hard landing in 26? i think the risk asset complex might be more at risk in sort of reacceleration. jonathan: maybe you are constructive on treasuries further out on the curve but less so on corporate credit. is that fair? priya: we are very much in a soft landing and if the fed does deliver on these cuts next year, the cuts this year if the economy slows down but doesn't hold to a recession i think corporate credit spreads are tight for good reason. the soft landing continues. making sure want some treasures, i think that's how i would play it right now. if things slow down more if

things start to re-accelerate i think then you go along much further on treasuries. >> just to sort of double down on these points, why get into investment-grade credit with spreads that are so tight. long-duration treasuries. >> there's a fundamental reason, fundamentals of corporate credit are still strong you have to make sure you know what you own. if the balance sheet of these companies are strong. they've actually turned out debt , i think those spreads reflect the engine risk and corporate credit. they've been nervous about that hike. if the hikes are done that is starting to move out and then only 6% yield is attractive. owning corporate credit still makes sense. jonathan: john williams

participating in a policy discussion right now. my quote of the week from the fed speaker. coming from neel kashkari of the minneapolis fed. i think it's a great question. if we were run rate it's very attractive. why do anything is the question he's answering. -- asking braden >> potentially saying more cuts. essentially why have more. right now the data is screaming strength. i welcome the contrarian thought. that's where it's pushing. jonathan: priya staying with us. let's get you an update on stories this morning. here's a bloomberg brief with dani burger. dani: eli lilly facing further

delays. the food and drug administration will hold an advisory panel to further evaluate the site safety and efficacy of the treatment prayed it's a surprise announcement from the fda which is why it is expected to rule on approving the drug in the coming weeks. krista lean opposed to secure support for a second five-year term as imf managing director. she has the backing of -- to ensure the success of any potential bid. working in pursuit of us second term understanding she is the support of france and germany. the chipmaker is up 3% in the premarket trade and puts it on track for seven straight days of gains. it also added more than $1 trillion in value this year alone. inching closer to surpassing apple's market cap. the market cap is fallen significantly but would make it the world's second-biggest company. that's your bloomberg brief.

jonathan: the man who shall not be named. >> my predecessor. my predecessor. my predecessor. it never occurred to my predecessor. failing the most basic presidential duty. jonathan: i said earlier this was like baltimore for democrats. we might get a year of this. from new york city this is bloomberg. ♪

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jonathan: looks like jordan peterson with bramo in the break. i wasn't jordan by the way, bramo was. equity futures negative, yields

down a basis point. 4.07%. under surveillance the predecessor who shall not be named. >> now my predecessor, a former republican president tells putin do whatever you want. my predecessor determined to see that overturned. my predecessor and many in this chamber want to take prescription drugs away. my predecessor said he's proud he did nothing on guns. all the tough talk on china never occurred on my president -- predecessor to do anything. jonathan: it's the latest, president biden relating to donald trump without ever saying his name. during his spirited state of the union address setting the stage for a rematch in november. good morning to you. you sat through that i'm sure.

is this good to be the year ahead. talk about the predecessor but not mention his name? >> this was a very partisan state of the union for sure. this was effectively the opening salvo for the presidential election. biden was really trying to establish a contrast between him and the predecessor. on things like abortion rights, fiscal policy and foreign policy. more importantly what he said was how he said it. it was spirited, he was very energetic and given the questions around his age and his mental competence this should assuage particularly his base who was getting more concerned that he wasn't up for the job. jonathan: lisa's least favorite topic was good to be the performance. lisa: my issue is people will say it spirited, some say it shows energy, others say he

screaming into the mike. how does that help the perspective. jonathan: what came out of this with that was instructive? libby: it was more about fiscal policy than what we were expecting. the white house released a fact sheet of some of the fiscal policy priorities. the most detail we've gotten from the white house or from the campaign in terms of what a second term agenda would look like. he did lean into this idea of freezing the corporate tax rate and that fact sheet to 28%. he also talked about expansion of the tiled -- child tax credit. and in addition to a whole host of issues. i think this is where we are guiding our clients is it would need to separate the rhetoric from reality. the reality is if he does get reelected, what is the

composition of congress looking like? it is important. if we have a split congress, if the senate flips from democratic-controlled to republican-controlled. , if the houses flips from republican control to democratic control. it's important again to separate the rhetoric from the reality and understand it will depend on the composition of congress. lisa: i found the most interesting part of the speech what he said about china. the fact this is the one area almost certainly going to continue heating up regardless of who is president in a way we have maybe fully appreciated. the most advanced american technologist can be used in china's weapons. it never occurred to my predecessor, i want competition with china. what does that tell you. this will heat up at a time or we see china saying it will

strip american technology from some of the in the next decade or so. >> the biden administration to try to put a floor under this it -- under this relationship. however, that doesn't mean they are not going to continue with some of their more tactical measures against china including export controls including a continuation of tariffs and what have you. i do think there will be a big contrast between trump and biden on the campaign trail around china. biden was quick to say he wants competition not conflict. president trump has very much talking about 60% tariffs, i think we have to take him at his word. he has a lot of authority to do that. i do think we are -- we should continue to see these tensions. i think a biden administration will look quite different than a

trump administration. lisa: i wonder if you can have a real calibrated response without a more aggressive tit for tat. can you control how far this goes given the fact it can escalate pretty quickly given both sides are doing the same thing to cater to their electorates. libby: while trump was strong on china what he was focused on was the tariffs. president biden may be softer on the rhetoric in the beginning. he was focused on continuing the tariffs but also the export controls and the outbound capital executive order we've seen from that administration. in some ways from a policy perspective he's been almost tougher on china but i do think the temperature of the relationship will matter and will depend on the rhetoric and i think it will be hotter as we get into the election. jonathan: it sounds like bigger budget deficits and a problem for the treasury market.

priya: political risk is binary very hard to price in. on the inflation point of not so sure. if we look at the basket, 75 percent of that is services so it will be driven by what's happening on rent inflation which is slowing. the last cpi report we think it was one have to scan it continue to come back down. it's good to be about housing, auto insurance. you have to look at those components of service inflation and wages. if that continues to slow down, goods inflation is gone back to peak over levels where deflation there's a little more up on that front and maybe some price level move rather than continued inflation. i don't think it changes overall inflation because we are still a very service driven economy. lisa: is this decoupling of the u.s. and china disinflationary or inflationary? libby: we had our cyclical

economic foreman we had this exact discussion about the u.s. china relationship, but potential immigration reforms of trump were elected, potential tariffs. is this just inflationary or does this have consequences for growth as well because when you can see if there are more draconian tariffs on china if it's a 60% across-the-board tariff on china goods that could probably be inflationary but for growth perspective it actually is impacting gdp. i will say that the market likes to extrapolate from these headlines, the devil will be in the details either administration of president biden or president trump we are cautioning clients it is actually too early as well. to sort of make any sort of adjustments. they are so engaged. everyone wants to talk about --

they are two engaged. we love our clients. we love talking to our clients but usually at this point we usually have a primary cycle continuing so we are not already pivoting to the general election so the fact we are already talking about the market and policy locations of this, it is very early. it is still very early so don't extrapolate too much from the head-to-head polling. jonathan: sony people got it so wrong in november of 2016. equities are downhearted you get that acceptance speech, he mutters the word infrastructure spending and all of a sudden things pick up. focus on the policy or is the policy no longer good for markets? >> in some ways i think there's less uncertainty because we know -- we are familiar with what president biden means and represents.

we are familiar with what president trump represents. in some ways it will be a close election so we could have that market uncertainty as we go into the election but in terms of policy locations i don't think we are expecting this to be the big shot that it was. lisa: i love this. basically saying stop calling me, cut it out. >> we do love our clients. jonathan: the two of you, thank you. from new york city this is bloomberg. ♪

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jonathan: equity futures on the s&p right now pulling back a touch, down .1%. a little bit softer after a couple of days of gains. all-time highs going into payrolls one hour away. 2-year, 4.4881. 10-year, breaking 4% this week. lisa: we have seen under narrative ship this week. we have gone from the landing, inflation will never go away,

potentially we have to raise rates again to we are probably fine, goldilocks. that is giving into bonds. jonathan: framing is important. 200 k is still really decent for payrolls at a time when people think we are around the corner from a recession. lisa: i am most interested in the revisions. if353 was real, that would have a real effect even if we are in line with 200 k. jonathan: certainly felt unbelievable at the time. let's see if the data backs it up in about 60 minutes time. we have talked about the ecb, we have to talk about the boj. dollar-yen down to147. we may get a rate hike from japan this week. lisa: you called this policy operation stretch. -- ostrich.

when i find amazing, if they are able to kick it up to zero, while everyone is talking about raising rates, that would be a coup. trying to normalize, kudos to operation ostrich. jonathan: under surveillance this morning, president biden's state of the union address steering the narrative toward the november election and rematch against donald trump. the speech touching on a number of issues including immigration, health care, and the economy. alabama sanitary katie britt giving the rebuttal, describing biden as a dithering leader. not sure that that landed after yesterday's performance. lisa: he put to bed a lot of concerns that he would come out without a lot of energy. the only criticism is maybe it was too much energy but when you look at the criticisms, to me,

it is like playground name-calling at this point. if he is going to be as strong as he was last night, if they have a debate, when do we start talking about substance? the playground name-calling is too much. jonathan: eight months out trying to work out policies, what it means for markets, and it is too early. lisa: libby crushed it. saying politely, there is no trade here yet. it is too early to know any of these things. the only thing that i could glean was about china. regardless of the candidate, that is something to extrapolate out. jonathan: if you thought when we get a debate between the two leaders, i would say no, but that president trump says bringing on. lisa: i am not buying it. we can come up with a wager.

that is just my gut feeling. there were not really debates for the predecessor with respect to his other candidates. is this just going to be a screaming match? i don't know what would be in it for either of them. jonathan: jay powell offering insight into the fed is thinking, telling the senate banking committee, they are not far from having the confidence that inflation is moving sustainably toward 2%. the ecb keeping rates on hold, suggesting a june cut could be on the cards. the bank of france governor flirting with april. if these forecasts at the ecb belong to the federal reserve, we would be having a different conversation about policy that we are about ecb policy. lisa: the biggest mystery is while you are seeing the reaction in the euro-dollar. you are seeing an ecb with every reason and willingness to cut more aggressively than the

federal reserve, a sense that there is greater weakness in the economy than in the united states. at this point, why wouldn't you be talking about a significantly stronger dollar? jonathan: the euro, a bit stronger off of the back of strong data. have not seen any blowout data on the adp, ism. due out in one hour from now, payrolls expected to rise by 200,000. barclays at the high end calling for 225. citi at the low end calling for 145. ellen zentner at morgan stanley writing assessments of the labor market remains strong, despite softening slightly in february. ellen joins us around the table. great to catch up. 200,000 is still pretty decent against a backdrop of 353 before it. are we going to see that strength for a while?

ellen: i think so. there is a question, and, lisa, you touched on this. what if we don't get downward back revisions, another big number? the data we got in january took a long time downward trend and blew it out of the water. it looks like the trend was not just interrupting, there was no downward trend. the big question mark, and we have been focusing all of our time and attention on this, is immigration. immigration has been huge. it has boosted the labor force, boosted supply for labor, has boosted job gains. that means the breakeven level for jobs has likely been much higher than what we thought it was. not 353,000, but two hundred 50,000 is probably a normal pace.

that is really what we've been focused on. when i talked to policymakers, they are focused on that not in terms of do these population numbers tell us that we will be able to hold policy for longer or that we will not be cutting rates, it really tells them how they are looking at the incoming data. over the medium term, this is a big positive for the economy. that comes with its own issues though because as a politician it is difficult to point to immigration as being such a positive for the economy, because it is also a political issue. jonathan: are you talking legal or illegal immigration? ellen: undocumented immigration. it has made that much of a difference. you asked about the cbo numbers. estimates took 800 to 900,000 undocumented immigrants last year and raise that to 3.1 million, expects more of the same this year.

immigration policies can change at any time, so those flows can change, but right now it is adding to the economy. faster labor force growth. the misconception is that undocumented immigrants cannot work. they are getting somewhat counted in payrolls, probably undercounted in household surveys, which explains some of the divergence in those surveys, but it's a topic we are digging into. lisa: how much is the increase in the immigration, legal and not, and reason why some of the soft landing is happening, where you have wage growth coming in even though you have such robust labor market gains. ellen: this is all over that data, this is that narrative. how, in 2023, did we have such fast growth in the economy, better than 3% while inflation decelerated, wage growth decelerated? because of much more labor

supply. and supply chains normalized. 2023 was a huge story about supply-side normalization. the question is did we absorb these big flows and this year is the year of payback? this was something reflected in the fomc minutes, or does that extend into this year and we are just going through supply-side normalization, supply-side boost to the economy? so more of the same, stronger growth, slower inflation. lisa: just to extrapolate out, if you stripped that out, what is left? that is a key question if you are looking at whether or not we can push forward with the trends that we have seen in perpetuity. does that mean that the productivity boom that everyone has seen on the heels of ai may not occur in the way that some are expecting?

ellen: productivity is being impacted by a few things. some of the assumptions, could ai already be in those numbers? i think it is soon for that. we are very positive on ai's impact on the economy long-term. i think it will be a much faster diffusion across business practices that historically normal. normally takes about 10 years for technological advances to diffuse. this is probably a few years. this doesn't explain all of 2023's increase in productivity and i think it goes back to the population growth. these are legitimate numbers. immigration is extremely important to an economy. that is why immigration policy is extremely important. we cannot set that aside. do you say that this is a productivity boom and not a blip? i don't know that we can answer that yet.

what i want to see is that you have got these strong job gains while the workforce, the work week is holding out. right now even shrinking the work week and getting everyone employed. in january, those 350,000 jobs we created, no labor input in january because hours worked shrink. we want to keep those steady. jonathan: federal reserve, neutral rights. chairman powell talking about being super restrictive. super is my word. something similar from john williams, new york fed president, the neutral rate still seems quite low. what is your read on that? ellen: no one knows. policymakers are people. they are feeling their way with their toes in the sand. there is disagreement on just how restrictive they are. they will get more restrictive over time as inflation falls. real rates continue to rise even though the fed is doing nothing.

but to say they are significantly restrictive, they are working their way through the economy, higher rates, but it's been taking a lot longer than we thought. but this is about the right place for them to pause. rates are high. we can argue how restrictive they are. you really only know when the data is coming in, and that is why chair powell is prepared to been an bill and react around the data as it comes in. jonathan: neel kashkari pose an interesting question. want to ask of you. if we have a run right that is attractive, inflation coming down, why do anything? ellen: exactly. he is on the board for fewer rate cuts than the median. we don't expect a change at the march meeting. we think you trimmed the extremes based on fed speak, since december update. the median stays at three cuts.

you don't need to deliver them now. you can deliver them october, november, september, december. jonathan: you can go that close to the election? ellen: i try to put the election aside and just react to the economy. i have my fed goggles on, and that is what they would say. i still have the view that they do still first cut in june, being gradually. let's cut, pause, wait and see. that is bostick's view also. you promised we would do this carefully. and then we think toward later in the year, after the election, although it has nothing to do with the election, they are speeding up to every meeting. jonathan: you sound like a fed official there. one of the best. ellen zentner of morgan stanley on-the-job report coming out

later. let's get you up to speed on stories elsewhere this morning. here is your bloomberg refueler dani burger. dani: china is in the process of raising $27 billion at the tried to counter u.s. technology curves. the fund is amassing a pool of capital from local governments and state enterprises. it would be china's largest chip fund today, used to counter a u.s. campaign to thwart the rise of chinese chips. shares of cosco are down in the premarket 4.1%. the company recorded gross margin that missed estimates. it only narrowly missed estimates but analysts at citi maintain their neutral outlook on the stock and said it is hard to see catalysts to drive it higher. netflix is keeping the push into sports, announcing it will livestream a boxing match between mike tyson and jake paul.

it will be the streaming platform's third live event following golf and tennis exhibitions. jonathan: up next on the program, biting ramping up aid to gaza. president biden: i am leaving the u.s. to establish a temporary period in the mediterranean on the coast of gaza that can receive large shipments hearing food, water, medicine, temporary shelter. jonathan: that conversation coming up next on this payrolls friday. s&p, -.2%.

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jonathan: i'm not sure how he is doing this but new york fed president john williams appears to be simultaneously involved in a policy conversation and listening to the program. we don't talk about politics at

fed policy meetings, according to the new york president. lisa: basically saying, true, that is what we are doing. jonathan: i don't know how i feel about fed speak before payrolls. i wanted after the jobs number. lisa: they can wait for the data to roll in. jonathan: equity futures negative by 0.16% on the s&p. yields lower bicycle basis point. payrolls coming up a little bit later. 200,000 is the estimate. previous number, 353,000. under surveillance this morning, the president ramping up aid to gaza. president biden to establish a temporary pier on the mediterranean on the coast of gaza that can receive large shipments hearing food, water, medicine, temporary shelter. no u.s. goods will be on the ground.

we can massively increase the humanitarian assistance going into gaza every day. jonathan: president biden ordering the military to build a temporary port to ease the humanitarian crisis from the israel--hamas war. biden says he is working nonstop for a six-week cease fire and the release of hostages. annmarie hordern is in d.c. a serious issue to unite his party. annmarie: absolutely a serious issue when it comes to foreign policy. he said he was hopeful of a cease-fire that would have happened this past monday. we didn't see one. at the same time, he is facing an uphill battle with members of his own party. recently in michigan, 100,000 voters in his own party voted on committee -- uncommitted over his handling of the israel-hamas

war. joining me now is debbie dingell, representing some of those voters who voted uncommitted. this is a difficult issue for the president. he addressed it 60 minutes in. and his way to the capitol, he would have been witnessing roads blocked because of protesters in the streets demanding a cease-fire now. did he do enough last night to assuage concerns of your constituents? debbie: good morning. great to be with you. this is what i would say. i think he talked about the issue with the ability that he had to talk about the issue, what he could say publicly. i was disappointed. i am someone who things that we need a cease-fire. we have seen far too many people died. more than 30,000 innocent civilians, 12,000 to 14,000 of them are children, and they are starving to death. the situation on the ground is

one of the biggest crisis issues i've ever seen. the president, secretary of state, many other senior officials have been trying to negotiate a temporary cease-fire, negotiate getting more humanitarian aid in. i am not in those rooms. i hear lots of rumblings. so we didn't get any announcement of cease-fire. i know they will continue to press for it, i hope it happens soon, so i was disappointed by that. but we have to get aid in there. and israel is contribute into the difficulty of getting aid in. it is one of the most severe humanitarian crises we have seen. children are starving to death. israel cannot tell us what we can or cannot do, which we should not allow them to do anyway. what hamas did was a terrorist attack and i want those hostages

to come home desperately but i also don't want to see anyone else die in gaza. we have seen enough innocent deaths. annmarie: sounds like you were slightly disappointed when it comes to his delivery on gaza. debbie: i wouldn't say disappointed. annmarie: i want to get to one point. you were vocal ahead of the 2016 election that hillary clinton could lose to president donald trump, and you are correct to be vocal, warning your democratic colleagues. can biden win without the blue wall? debbie: michigan is critical. there is no road to the white house without michigan. i have said it before and i will say it again, we are a purple state, and will be until election day. the difference between 2016 and now, nobody believed me. they thought i was crazy. i was in those union halls. i knew what they were saying.

now we have to turn out women, and i know what the women are saying, and they are not happy about roe having been overturned, now further talk about legislation that will put the government in their individual health decisions, they don't like that. that is a group that we have to turn out. turn out the union votes. we have young people that need to be energized like they were two years ago. people believe me this time. we are working together. we will roll up our sleeves and get the work done. annmarie: i'm glad you mentioned union halls. today is jobs day. recently, autoworkers suffered job cuts at factories in michigan. when you look at what it takes to build a gas powered car, it is thousands of supplies. a lot less when it comes to ev's. do you think this electric occasion to ev's will actually

hurt union jobs? debbie: i don't think it will hurt union jobs that we have to do this transition in a way that we ensure that there will be new jobs, different kinds of jobs. we have to make sure the infrastructure is built out that people have confidence in these ev's. i could go into these plans and there are different reasons right now, there have been layoffs for a while, but very important that we all work together to make sure the groundwork and infrastructure is in place to make ev's successful and that we are training people for the new jobs of the future which is part of setting up the infrastructure. annmarie: when it comes to the ev industry, elon musk is synonymous with it. he recently met with former president trump. looking back, do you think it

was a mistake for the biden administration to snub tesla when they had that massive rollout in the summer of 2021? debbie: tesla is not a union company. i have spoken to many of the workers there. there are many complaints. i want to see our american auto companies -- tesla is based here in the u.s. -- and i want to see them be successful. and we have seen some changes. in the last year, building out that infrastructure for charging ev's is very important. tesla has reached out to the domestic companies, reaching out so that they can use their testing -- charging system. we will see where this goes. if tesla plays nice or if they continue on their past behavior, which has made some people -- i don't need to go more than

that, people know what i'm talking about. annmarie: thank you so much time for your -- thank you so much for your time this morning. michigan is a key state. we saw with those uncommitted but also rank-and-file union members. jonathan: great work down in washington. payrolls friday. job number just around the corner, 34 minutes away. the estimate, 200,000. unbelievable to see a three handle on on appointment. 3.7% is the estimate this morning. lisa: a lot of focus on how many hours were worked each week, because that is key on how companies are using their labor. jonathan: stacked lineup in the next hour. nadia lovell, betsy duke, michelle mayer of mastercard, and mohamed el-erian. from new york city, this is bloomberg.

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>> what we expect to get from the payrolls is a sequential: from the hot that we saw last

month, but still robust. >> the labor market probably held up just fine. a touch stronger with consensus at 215,000. >> we think it could easily be 250,000. >> potential for the economy to grow faster than expected because of productivity. >> another strong report in february. history could repeat again. >> this is bloomberg surveillance with jonathan ferro, lisa abramovitz, and annmarie hordern. jonathan: just 30 minutes and then we can all go home. lisa: we have another half hour after that and it will be scintillating conversation. jonathan: from new york city this morning, let's get you to the weekend. good morning for our audience worldwide. payroll, 20 minutes away. the number we are looking for, 200,000.

previous number, 353,000. will that leave the door open for the fed to increase interest rates? lisa: ellen zentner said it really only, do we know why we have such a strong job creation without immigration? it really points out, could you get rate cuts even if you have really big headline numbers sibley because there are other factors at play here that will allow disinflation to continue? jonathan: in short, yes. mohamed el-erian will join us in 30 minutes time. he wrote a piece in the last month about this federal reserve being held hostage by the economic data. what is interesting about that comment, i have not heard chairman powell be derailed at all by the data in the last month. the message has hardly changed. maybe mohammed will be happy with that. lisa: the data coming in below expectations that were built in.

even on a data level, surprises to the upside, we have gotten some with inflation, but it is mostly in the strength of the economy, which is why you are getting this goldilocks rally into everything, bonds and stocks. jonathan: earlier this week, it started with the ism services employment component. negative, not great. adp was a bit softer. all right. jobless claims around 220,000 in that range in the last week. the surface, it is just all right. takeaway expectations and look at it in absolute terms, absolutely fantastic. really decent data and tremendous for a while. lisa: the issue is it doesn't seem to be accelerating. it seems fine and doesn't seem to be moving in the wrong direction, which is why it is telling that very few people think there will be a market negative, risk off feel from

this data. only 16% of survey participants actually thought you would have a risk off type of move as a result of the data. what could trigger that other than a blowout number but also some inflationary umph? if you get strong growth, that is good. jonathan: would you like a survey? whatever that was. from the national federation of independence, small businesses from the month of february. 35% said they raised compensation. 12% indicated they expect to hire in the next three months, the lowest since the onset of the pandemic. we will talk about the headline number but we have to talk about what's happening with small business. high rates are not hurting some

people, they are hurting others. some small businesses are not really struggling. lisa: which is why, even in the beige book, there was a discrepancy. regions where we saw weakness, a negative view. it has been a confused moment. the russell 2000 have underperformed because of this. when you look at the quits rate, how many feel the freedom to quit their jobs? that has fallen dramatically. there is a less optimistic view, less rosy than it used to be. jonathan: i won't ask you how much freedom you feel personally. equity futures on the s&p, negative by 0.1%. yields are lower by a single basis point. 4.07 on the 10-year. coming up this hour, nadia lovell of ubs on why she thinks

a sustainable market is likely. betsy duke weighing in on congressional testimony. and michelle mayer reacting to payrolls data. stocks hitting all-time highs ahead of the payrolls report. the median estimate calling for payrolls to rise by 200,000 in february, a slowdown from the upside surprise last month. nadia lovell saying the evidence continues to build for solid economic growth that's driving earnings recovery, helping to offset headwinds of hire for longer interest rates. we remain instructive on the market and expect the s&p 500 you continue to notch new highs this year. nadia, great to see you in person. is lisa right? nadia: it is a combination. the economy remains on solid footing. you see a market that continues to grind higher.

we have had a 16 new highs this year despite the backup in rates. it feels like the market is already preparing for the possibility of rates being higher for longer earnings growth is really supporting this market. i think we are in a state where good news is good news, bad news is still probably good news because it accelerates the rate because that we get from the fed. lisa: back to what howard mark said, not a lot to do. what do you do? do you stay invested and keep a listing -- collecting that two percent gain every week? nadia: there is so much to do. when we look across the landscape of investment opportunities, yes, there is stuff to do in tech, but there is also health care and industrials, even small cap. we were talking earlier about the beige book strength and weaknesses, but in reality, you have two thirds of districts actually pointing to a pickup in activity. ism, it feels like the bottom is

behind us. we will get expansion in manufacturing in the next couple months. that should be positive for small caps. i think there are lots of opportunities here despite the market going higher. lisa: how do you track where the money is coming from, how durable it is into manufacturing sectors, when people are pointing to fiscal support dropping the strength that we see now? nadia: corporate balance sheets are strong, have a lot of cash on their balance sheets, as well as the consumer remains strong. we have mixed sentiment but they are still spending. that is what will support this market also these smaller companies. capital markets are open. jonathan: wide-open. nadia: look at the bond market. even the equity market from a secondary standpoint, massive pickup in secondary,

particularly from these small companies that can access the capital market. jonathan: let's draw down on your sector preferences. i want to talk about tech. i know you cannot speak to single names, but the breakdown of the mag seven is something that we are following. how magnificent is the so-called magnificent seven at the moment? nadia: not so magnificent. one of them is not even part of the seven largest stocks in the u.s. anymore. but at -- that is a good thing. you are seeing bifurcation among these stocks in favor of some of the other cyclical areas of the market. i don't think that you need the magnificent seven to all go up for this market to rally. look at industrials, financials, a pickup there as well. also it is healthy for this bull market to have that rally broaden up. look at the number of stocks

outperforming the index year to date, 40%. last year we were lucky to see 20%. 30% of stocks are within, or near all-time highs. jonathan: jp morgan, all-time highs this week. what is underpinning that pickup for the largest banks? nadia: a lot of the banks last year were pricing in recession. also even the number of rate cuts. expectations for a lot more rate cuts. a lot have come out of the market and you are seeing the economic momentum still there. the atlanta fed gdp is tracking at 2.5%. that is good for banks. capital markets. that is how banks make their money. that is picking up. that is why you are seeing this rally in the banks. concerns around commercial real estate seems to be idiosyncratic, more toward the smaller banks. larger banks have provisioned for this. jonathan: is -- lisa: is there

anything you don't like? nadia: it is not the time to be too defensive. we are underweight utilities and real estate. we think there are better opportunities in the other cyclical areas of the market. lisa: 20 minutes away from the payrolls report probably will not matter. it will be risk on. is there a number, something in the internals of that report that could give you pause? nadia: we are all watching wage growth. when you look at the wage growth tracker at 5% -- it feels like we are having some productivity gains, unit labor cost has come down, but the fed is sensitive. they have pointed out numerous times they want to see wage growth closer to 3%. if you have a hot wage number, that is something that can give us pause. jonathan: wonderful to see you, great to do this in person.

it is a heads i win, tails you lose jobs number. lisa: but nobody is losing. jonathan: you, the bears. lisa: bramo, you. jonathan: you ask a bull, is there anything that you don't like? they will just name defensive sectors. lisa: people are bullish right now. i keep going back to this research piece which shows a tiny minority of people think this will be a risk off move. jonathan: 18 minutes away. we will settle the argument in just a minute. s&p negative by 0.1%. here is dani burger with your bloomberg brief. dani: the u.s. and uae are launching -- and eu are launching plans to have a

maritime corridor. a temporary u.s. military port on the gaza coast will be built to help deliver aid. he also called on israel to allow more aid in. the new york private sector workforce hit a record of 8.3 million jobs in january. governor kathy hochul says it marks a full recovery from the pandemic. the battle to ban tiktok is heating up. house majority leader steve scalise said he would bring a bill to the floor next week that would force tiktok to sever ties with the chinese communist party. he called the bill critical to national security. tiktok then sent notification to their users asking them to express their opposition to the bill. that is your bloomberg brief. jonathan: amazing story.

it is an example that even when washington agrees, they cannot get it done. they agree on doing this. the former president was talking about this four years ago. lisa: the whole tiktok thing is tough for me. they are all on it trying to cater to the new demographic. jonathan: the president's campaign is on it. payrolls data on deck. >> if we continue to see upside surprises to the job print, it's likely you could see these rate cuts get pushed back. jonathan: let's see if they do in 15 minutes time. live from new york city, this is bloomberg. ♪

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get your business online in minutes with the power of ai. j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. jonathan: jobs data 14 minutes away.

equities going into it slightly softer, -5.1% on the s&p. yields lower, 4.06 percent. near all-time highs going into the payrolls report. under surveillance, payrolls data on deck. >> if we continue to see upside surprises to the job print, it's likely you could see rate cuts get pushed back. we continue to watch pmi, manufacturing data that suggests there is a cyclical recovery brewing in this economy which may not support that may or june cut. jonathan: roughly 15 minutes away from the february payrolls report. bloomberg economics estimating a print of 185,000. given our expectation that the labor market will cool quickly ahead, we expect the fed to cut rates in may, earlier than the market expectations for june. joining us now is betsy duke.

wonderful to catch up with you again. i want to start with a current fed official and a quote from them earlier this week. this was president neel kashkari. he said if we have a run right that is attractive, people have jobs, businesses are doing well, inflation is coming down. why do anything? do you agree with that? betsy: i think it raises a really good question. what will be the catalyst that gets the entire committee on board, for now is the time to bring rates down? it will not be enough that the real rate is getting wider. there will have to be some sense that the current level of rate is cutting into economic activity. if you have a strong labor market, still have pretty strong inflation, there is not a lot of reason with growth to cut rates. lisa: is there any sign that rates are restrictive?

to this question of have we seen it cut into growth at all? betsy: it's interesting. you go back to the beginning of rate cuts, the unemployment rate today is exactly as it was when the fed started raising rates. growth has been higher than potential through the entire raising cycle. it is hard to see that the rate cuts have actually impeded activity even it may very well be that this was a supply-side issue and most of the improvement so far on inflation front has come from supply-side factors, not from reduction in demand. lisa: some arguing for rate cuts would say it is trimming around the edges, maintenance cuts, to assure that things keep going. do you think one or 225 basis point cuts this year could we accelerate inflation later on? betsy: i think this will be a

good time for the fed to test where is the neutral level of real rates. when they originally calculated it, the original models saw the neutral interest rate somewhere around 4.5%. now the fed expected to be around three, i think. it is possible the neutral level of rates is much closer to where we are today than it is to 2% or 3%. lisa: which brings us to the report 10 minutes from now. what would you have to see to drive home the idea that maybe 5.25 percent to 5.5% is actually neutral, not restrictive? betsy: looking at wages is really important. if you look at just the number of jobs, that is problematic for a number of reasons. one, that number is massively revised on a number of bases. even if it comes in at 200,000,

that is more than twice the number of workers we are adding. if you look at the vacancies that exist in critical sectors, not just hospitality, but health care, child care, elder care, school teachers, school bus drivers, and you can go on and on about these critical pieces of our economy where there are still not enough workers to fill the jobs. jonathan: the first thing that lisa will look at is the revised number for the past month. that is what you care about, how real the 353 is. jonathan: given the information we have learned, information over the last month or so, what is the biggest risk now, they hold too long or cut too soon? betsy: i think they have room to be very, very patient. at this point, i don't see any large mistake by waiting and seeing how things develop.

the biggest risk is not that inflation spikes up again, but rather that it just stalls where it is now, stubborn coming down. jonathan: is that where they lack confidence, do you think? is that what it is about with chairman powell? did you sense that this week? betsy: i think so. traders want to look at one number. when you're at the bed, you have to look at a lot of numbers over a period of time and see where they are trending because you can get had fixed easily. jonathan: one final question on regulation. you are someone who knows what a financial crisis looks like, particularly at the federal reserve. what did you think about the comments on reserve requirements, the back-and-forth that we saw from the fed chair and the senator from massachusetts? betsy: i don't pay a lot of attention to that. that is more political than regulatory. jonathan: betsy, appreciate it.

i think that was a dodge of that particular question. lisa: also reflecting what a lot of people feel, the theater down there in washington. jonathan: mike mckee loved this yesterday. lisa: you are just trying to make everybody say something. jonathan: mike mckee put out a comment on that yesterday. isn't that the most bizarre thing that you have heard? mike: never heard any question like that. i have heard a lot of weird questions but nothing like that. lisa: i don't how we can talk about that without talking about this. you brought it up. mike: she want you to say the word. jonathan: i will not. jobs number, seven minutes away. 200,000 is the estimate. a lot of people talking about hours worked, wages. what are you focused on? mike: we are going to look at

those things because there were questions about january being seasonally affected. storms and cold weather that may have pushed down on hours worked, and that would have a composition effect on average hourly earnings. those things could have been distorted. same thing with a number of jobs. i will be looking at the revisions, too. the number of jobs was very strong. does that continue? do the markets see 200,000 as bad, given that is ahead of the average in the months before these revisions? lisa: does the headline number not matter anymore? at least if it is strong. if it is a strong number, does it matter if it doesn't come along with greater wage pressure and more hours worked? mike: it will be a combination of things. if we get a really strong number closer to 300,000, you'll see markets pushing back on the idea

of even a june rate cut. people will think that in march the fed will not be giving them any hints it is coming soon. that could all change on tuesday with cpi. people are looking at this as an indicator to where inflation pressures are going. jonathan: cpi and then retail sales. where is the consumer at? mike: the consumer has been holding in. retail sales have been declining in terms of the growth rate. i know we have people coming talking about that in a few moments. the idea is that people are still spending on services. that is the biggest thing that keeps it going at this point. if they keep doing that, the fed will look at that as hanging in. lisa: you are trying to put this on me, even though you are

bringing it up and want to talk about it. i will not allow it. mike: he was quoting one or more wall street journal pieces. we should make it clear, the fbi see, not the fed. which is why jay powell had that look on his face. lisa: everyone listening who has no idea what you are talking about. jonathan: sometimes indisposition, you have to assume a little knowledge. in this instance, they can google it. they have four minutes until the jobs numbers comes out. jobs number up next. 200,000 is the estimate. employment report just around the corner.

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jonathan: the payroll support 24 seconds away. equity market looks like this. all time highs going into the print. down 1% on the s&p. nasdaq, -.2%. 2-year yield down three basis points. 4.47. danielle you down three basis points. the estimate, 200,000. here is mike mckee. mike: it looks like we justified michelle meyer this morning. she wanted to look tearful. 275,000 job creation, way higher

than the 200,000 forecast. revisions are negative 167. i have to look at the monthly breakdown, how that is divided between december and january, but we do lose some jobs. private payrolls, 223,000, way above the 165 forecast. unemployment jumps to 3.9%. average hourly earnings come in very tame, just up 0.1. 4.3 percent. average hourly hours rise, giving some credence to the idea that there was a weather effect in january. let me break this down. we are getting a reaction. jonathan: that bid in the bond market returned. on the 10-year, down for basis points, north of 4%. in the equity market, s&p 500

positive by .1%. there was a reaction the other way for about 10 seconds and then flipped back. can you tell us about revisions to the previous month? mike: -167. but we need to see here, the change for december, revised down by 43,000 to 290,000 from the initial 333. january revised down by 124,000. which makes this month stronger than last month, which was strong. lisa: i am looking through the data, it really explains why we got the reaction in the job market that we initially did. the headline number is much higher than expected. hours worked, higher than it was in the prior month. revisions are lower, but the fact that wage growth is not coming in, some will dismiss

that as an relevant data point. how to be parsed through data that seems like it is incredibly positive with also a rising unemployment rate? mike: i will have to look at why the unemployment rate rose, probably more people coming into the labor force. give me a second on that. the unemployment rate is still below 4%. two years and two months we have seen below 4%. that is an incredibly low number. the fed thinks it will go to 4.1%. we are moving in that direction. there is a lot of composition affects here that may have to do with the weather. for example, the number of careers and warehouse people -- couriers and warehouse people, supposed to fall, but rose again significantly this month.

there are seasonal effects in this data that have to work themselves out. you have to look through that and get a general picture, which is a tight labor market in strength. jonathan: let's go back to deil dutta. he said this they were market is no longer a reason to be hawkish. when you see numbers like this, 275 on payrolls against an estimate of 200,000, and we can talk about hours worked in a moment, but is he right? when you look at a labor market like this one, even with the strength, is that reason to be hawkish on the federal reserve? mike: maybe cautious, not hawkish. you are looking at a strong economy which in theory should it reduce -- should produce inflation but it is not. inflation has come down a lot even though we have seen strong job growth and low unemployment, which is not what the theory would tell you.

the fed has to be cautious. doesn't mean they will be any more hawkish. jonathan: so this month was better than last month? mike: official until we get the revisions. we got 153,000 people entering the labor force which is not that much. employment fell in the household survey while unemployment rose by three and 43,000. . that is why the unemployment rate is a little bit higher. much more unemployment in the household survey that we are seeing in the establishment survey. jonathan: so the number for now is 275 against an estimate of 200,000. the previous month was 353,000, now 229. unemployment coming in at 3.9% against an estimate of 3.7. wage growth softer than expected. .1% against two. hours worked a bit

higher. equity futures positive by .1% on the s&p. positive territory on the nasdaq. yield lower by four basis points. 4.46 on the 10-year. dollar, a touch weaker, euro a little bit stronger. bramo, what is more important for you? this month's number or last month revisions? lisa: last month revisions. if you average it out, back out the 353, the new job creation this month, 153,000, which is lower than the expectation. if you put it together, if you trust these numbers, that is what you're looking at. this is not data that would dissuade the fed from moving because it doesn't seem to be accompanied with some sort of

inflation. but the fact that people are looking past this, thought that this would be good news regardless of whether this was good news or bad news, tells you about their position ahead. jonathan: let's get over to michelle meyer, mohamed el-erian joining us as well. your thoughts on where we got -- what we got moments ago? mohamed: people will see what they want to see in this report. if you think the labor market is too hot, you will point to the markets, increased hours worked. if you think this labor market is just right or softening, you will point to the revisions and hourly earnings. the bottom line for policymakers and most economists, we will see this as not containing much new information. the market, however, and as you noted, good news is good news, bad news is good news. the market will interpret this as good news.

so you have to have an even bigger separation between economists telling you things are uncertain and the market who sees things as all positive. jonathan: we want your opinion. what would you point to? mohamed: honestly, i wouldn't know where to point to. this is an ambiguous report. that is why 3, 6-month moving averages are so important. lisa: michelle meyer is also alongside us. what is your big takeaway? michelle: i would err this being a generally positive story. if you look at the past year, longer, jobs numbers have exceeded expectations consistently. every month for jobs friday coming in better than expected. that speaks to the underlying strength in the economy. it's a labor market where people are still looking for work, companies out there hiring and adding to their workforces.

if you look at the data, it is fairly broad-based. it is not just concentrated in one sector which tells me it can continue. to mohamed's point about the wage data, that is important when you think about consumer purchasing power, the federal reserve. wage growth is starting to moderate but the year-over-year growth rate is still strong, still positive in real terms, running above consumer price inflation. lisa: which is why a lot of people are looking at good news is good news and bad news is good news. the paralysis that a lot of people are feeling, what can you get done now when everything is just ok and moving along? what could change that? what data point are you watching, if not jobs, that could give us more information? mohamed: high-frequency indicators of economic activity. that will be essential in the next few months.

i am glad michelle brought this up. if you were assessing this not relative to expectation but in absolute terms, the message, as michelle said, is u.s. economic exceptionalism. we continue to produce jobs, contain monthly hourly earnings. the u.s. is just exceptional. look around the world. germany, recession. u.k., recession. japan, recession. china struggling. the absolute message is right, but markets have priced in expectations. that is why i see this as ambiguous as opposed to simply positive. jonathan: we want your views on the federal reserve and chairman powell. michelle, if i could get your thoughts on this. what did you think of his performance, is the door open for a cut in june? michelle: i thought it was quite

the performance, leaving options open, but he also gave some clarity. they are continuing to monitor, mostly focused on inflation. they think they have done a good job starting to get to a more normalized level of policy. and they don't need inflation to be at target to start cutting interest rates. they can start normalizing monetary policy as the broader economy reaches better balance. interest rate cuts are still very much in the picture. the markets pricing in the summer. that is reasonable. chair powell's statement is consistent with that, giving the federal reserve the flexibility to react on that data based on where they think they are heading. jonathan: mohammed, you recently wrote that this federal reserve was being held hostage by the economic data. did that performance this week dispel some of those concerns? mohamed: it did. economic data should always influence policymaking, should

not hijack it, should not happen without a view to the future. on monetary policy, he struck the absolute right balance. he was consistent, didn't get swung one way or the other by those saying we would get no cuts, those saying we would have to get five or six cuts. he held a really good course. he should be admired for that. i was surprised he left the door so wide open on the basel iii and game. -- end game. i felt sorry for him because some of the questions were so difficult. lisa: could you elaborate on why you found it so curious, the basel rule overhaul? what was your take away with policy? mohamed: the take away is there is tremendous political pressure and advocacy to not go for an

endgame that could be too tight and undermine lending. the reason why i was surprised how wide open you left the door to revisions and everything else is there is a counter argument. that is what regulators have to deal with. the argument is that banks are giving back capital to shareholders at an enormous rate. how do you reconcile the two views? we have to be careful that we don't end up with a regulatory environment that undermines economic prosperity. but i didn't expect him to open the door so wide. lisa: which raises the question about whether credit creation has been a problem. michelle, i know you track closely all of the credit card data, how much people have been borrowing, how much that is fueling their ability to spend.

is that creating more risk on the balance sheets of banks? is this something that is completely prudent in this part of the cycle? michelle: i think you want to step back and think about consumer spending holistically, what we learned today around the amount of job creation, aggregate wages being created. that is powerful and strong. that is the most important factor driving consumer spending. yes, you associate extension of credit, dropped out of savings, some spending out of the positive wealth effect. all of these other dynamics matter. but the most important factor, i think, when it comes to the estate ability of spending and this business cycle is what we are seeing in the jobs report. jonathan: let's talk about this more. 275 against an estimate of 200,000. i want to sit on this with five minutes. every payrolls friday we get a number. in this case 275.

we spent the next month talking about it. a narrative builds, and then you get a revision to the previous month. we spent the month talking about 353,000. mike mckee gets taken away like that, and then we are talking about something completely different. mike: the fed knows this and they can only work with the numbers they have. the meeting is march 20, so now they will have these more accurate lower numbers even though they are still quite strong. it is just the best we can get at this point. a lot of it has to do with the pandemic, the fact that it messed up all the seasonals. it is hard to know where that will go. as time goes on, they will fix them, but it will provide volatility. jonathan: it begs the question, mohamed, when we talk about being data dependent, how dependable is the data? mohamed: that is the whole point. you have two issues with

excessive data dependency. one is the data gets revised. two, for the fed, it has tools that operate with a lag. do we want to drive a car looking at the rearview mirror with a map that is completely revised? of course not. that is the problem with being overly data dependent. that is why i say of course the data should inform and influence whatever you are thinking, but you have to have a handle on what is the overall paradigm you are operating in. without that strategic view, that data will take on a roller coaster and you will get sick on it. lisa: i want to talk about what you think it should be. michelle, his point about the unreliability of the data. has there been any clear trend, clear line, that also has to do with the disinflation being an ongoing situation? michelle: has mohammed mentioned around the high-frequency data,

lots of data sources, i sympathize with that view. for us at the economics institute, we are looking at what the consumer is doing in real-time, which has been extraordinarily informative. we are seeing consumers still out there spending but they are spending differently. there are pockets of disinflation as you suggest. it is not a uniform story right now. in some sectors there is still inflationary pressure. think about how people eat at restaurants, lots of inflation. at grocery stores, even deflation. to look at not only a variety of data sources, and for the fed to look at a variety of high-frequency indicators, and also to realize there is not a consistent story across the economy. depending on what part of the economy you are focusing on, you can come up with a different conclusion, whether inflation is still running hot, or you are seeing a change in the consumer.

lisa: mohamed, i would love for you to weigh in on this. do you think people are underpricing the risk of re-inflation at a time when disinflation is inconsistent, where the data has not been entirely reliable? mohamed: i will pick up on what michelle said, and amount of dispersion. one of the biggest is goods versus services. you heard michelle refer to it. the risk we have is that goods deflation may stop before services inflation comes down fast enough. ultimately, this takes us to summer that i don't think we want to go to, which is what is the right inflation target? should the fed declare victory not at 2% but slightly above 2%, and do what jason furman calls opportunistic disinflation? the risk is if service inflation

is more stubborn than the fed thinks, service inflation is not sensitive to the interest rate as much as goods inflation is, you may end up sacrificing too much economic growth and may end up fueling too much inequality. jonathan: mike mckee. mike: a couple of statistics that fit into this argument. manufacturing lost or thousand jobs during february while service jobs were up 204,000, which might be scary even what mohammed was saying. but when you look at the average hourly earnings, manufacturing jobs were up .2%. service jobs only up .1% after a .6% gain in january. it doesn't look like we are seeing inflationary pressures. jonathan: mohammed, you open the door again to a different type of inflationary target. every time you do this, i get emails of people pushing back. it is deeply unpopular in this

country to have this conversation. why do you think it is so important? mohamed: people are afraid that we will de-anchor inflation expectations. let's not change the target, let's just pursue in a sensible manner, take advantage of openings as they occur. but let's not sacrifice the economy. i must tell you, on jobs friday, i always love the two rounds of interventions by mike. the first round is a quick interpretation of what has happened, and the second round is adding to it deeper analysis because he has time to look at the data. higher wages may have attracted more people into it, and that is a good thing. i don't have the data in front of me but i hope labor force participation went up. mike: it did. lisa: i am curious, michelle, you are nodding along.

it is a real fear that is really hanging over the federal reserve, which is they are willing to have a higher inflation rate, than risk a real recession that puts people out of work, because that has other consequences. how much is that looming behind a lot of these decisions? michelle: as mohammed mentioned around the debate over the target, for the federal reserve, they have a dual mandate, price stability and full employment. even around price stability, if you look at the changes to monetary policy that we saw prior to the pandemic, after the pandemic, they created a lot more flexibility around that target. i think that possibility will hold. to me, it is not the case that the fed has to see that core pce hit 2% for they can think about cutting interest rates. i think they are communicating that clearly. they have to feel as if the

groundwork is set for consistently lower inflation at price stability over the longer run. if they are seeing trends in the economy like they are seeing now, the immaculate disinflation that everyone enjoyed last year, goods inflation coming down, consumer expectation for disinflation, which is important, they can set the groundwork for starting to cut interest rates. also remember, the discussion around real rates is extremely important, normalization based on where real rates are going. lisa: mohammed, as you are talking about what we are seeing, messiness in the data, ellen zentner's words come back to me, looking significantly at immigration and how much that is changing a lot of the numbers that we are seeing. a lot of the hires are coming from people that are new to the shores, which is why you can get high job creation and low

inflation. how much do you think that is underpinning this? mohamed: it has been underpinning it, something differentiating the u.s. from the rest of the world. look, we are living in a multi-year paradigm of insufficiently flexible supply. multiple reasons for that. one of the insufficiently flexible supply elements has been the labor market. to the extent you can relax that, you get higher activity and you get higher demand, so you increase both supply and demand of the economy, which is a very positive thing. in terms of the economics of it, it's very clear. but there are political and social issues that you also have to bring into the debate. jonathan: 23 minutes ago we got the jobs data. 270 five k against the estimate

of 200,000. unemployment at 3.9%. wages softer, downward revision to that 353,000 in the previous month, unleashing a rally in the bond market. down seven basis points on the 2-year. 10-year, 4.05%. in the equity market, positive by one third of 1%. looking at foreign-exchange, the dollar weaker against basically everything in the g10. final thoughts, michelle meyer, together with mohamed el-erian. going into next week, cpi, retail sales, what are you looking for? michelle: it's a big week. four cpi, we should continue to see moderation continue -- particularly in the goods sector. trying to understand how much we can see some easing. to me, it is still a story of moderating inflation over the longer run even if you have some

quirks month over month, as we did in the cpi report. spending, we are seeing where consumers continue to spend. february looking better than the turn of the year, so we think that will reflect in the retail sales report. the economy is humming along. jonathan: mohammed, this payrolls report, does it change anything? mohamed: it will sideline more those who suddenly thought we were going to get no hikes or that we would get -- no cuts or even get a hike. you have heard me say the baseline remains two to three cuts starting in june. the data is consistent with that. hopefully now we have less chatter about either a hike or no hikes. jonathan: we have to catch up with those who are looking for no cuts in 2024. michelle, great to see you. mohammed, always appreciate it. 275, the number against an

estimate of 200,000. we got a downward revision for the previous month. growth for average hourly earnings came in softer than expected. this conversation continues into next week. just for bramo, i will do it again. let's get you to the weekend. you can leave. the week is over for lisa at least. from new york, this was bloomberg surveillance. ♪

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>> have good morning. a robust jobs report not enough to knock the rates market office decision. 25 basis points for june. cuts locked and loaded. we are counting down to the market open. it is robust this friday morning. announcer: everything you need to get ready for the start of u.s. trading, this is "bloomberg the open" with jonathan ferro. ♪ manus: coming