tv Bloomberg Surveillance Bloomberg April 5, 2024 6:00am-9:00am EDT
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>> the jobs market is showing resiliency. >> it's the most critical piece of data that we will be looking for, what happens when you average hourly wages? >> do they pick up or stay sticky? we will have to adjust expectations for the fed. >> there's more resiliency in the labor market. >> this is amazing. it's a 214 or a 250. it definitely demonstrates a resilient labor market. >> this is "bloomberg surveillance." jonathan: live from new york
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city this morning, good morning morning, good morning, this is "bloomberg surveillance." its payroll friday. your estimate this morning, looking for a number around 200 k, pushing forward from yesterday, whipsaw on the massive or's -- massive reversal. the equity market is all over the place this week. lisa: and it was incredibly confusing as to why, some people pointing to the comments from field kashkari and people looking to the oil complex in particular, with a sudden surge taking the rally to something like 7%. and now it's for all the wrong reasons. jonathan: commodity market in the driving seat. brent crude, back in the 90's. $.84, wti right now, 8650 eight, tension in the united states and israel. annmarie: that's where we saw
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the crude market move coming after these comments. coming out the phone call it was president biden, saying that whoever is attending to harm us, we will harm them. he was talking about iranian proxies and now you see some movement in israeli communications in gps planning for an attack. the escalation is just going to breeze through the crude market. lisa: they've been great on this at citigroup, pointing to the fact that it sets us up for a wobbly response to a surprise, whichever way the labor market report goes, saying that the view was that most investors would focus on other things. crude above $86 seems high enough. seems like it is setting the backdrop for a bit of wobble ahead of, already, questions around how the fed can cut. jonathan: pushing through that treasury market, the front-end of the yield curve has been
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stabilized, and the lowest has been 418, the highest on 442. where are we? 434. i talked about the equity market being all over the plus -- place. the back end of the curve has been all over the place, to. lisa: and it's a confusing message. the treasury market isn't cooperating much. if you want to take a look at oil prices, it raises the question -- is this disinflationary or a risk off knee-jerk reaction? i'm glad that you have been pointing towards oil. maybe that's the cleanest read on getting ahead of central bank buying or a risk off move immunized from a bond market that has been confusing. jonathan: all-time highs. if you are just joining us, welcome to the program. price action for you, the s&p 500 is bouncing back from its biggest loss since february. yield time again, up and away this week by three basis points.
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there's crude, inching higher off the back of gains. 8671 on wti. coming, kevin thorson with raymond james and president biden texting on netanyahu. we are counting down to u.s. payrolls. top story, head of the main event of the week, the u.s. payroll report. cameron thorson watching wages and saying this, if they moderate further and we continue to see gasoline prices rise, could we see a reversal in the recent improvement of real income growth, weighing on consumer sentiment? cameron, when you think about it, the driving seat, good morning to you, is that the driver right now? cameron: we think the fed is living in the second half of 2023 where crude prices were falling and it looked like we were on a path towards 2%. they have been ignoring the
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messages from commodities your to date. we have seen a big jump in gasoline prices, gold, copper, and inflation breakeven. we don't think that they can continue to ignore that. it calls into question the willingness of powell to say that rate cuts are coming. -- lisa: so far, when asked if it is a disinflationary force? cameron: the challenge is that they are something the fed cannot control, but when they become endogenous, proliferated through the economy, you have a challenge. watch the forecast for household consumption, it's gone up significantly. 2% growth from just above 1% a
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few months ago. if you have oil prices continuing to move higher, it could pinch consumer spending. gdp forecasts rollover, that is where you see a broader risk off move. annmarie: oil has only broken out because of geopolitical risk. do you think it's just temporary? cameron: it's interesting. in the context of a strong dollar, we expect to see oil weaker, but now that you have it at the same time as high oil prices, it speaks to supply and demand. we are starting to see a cyclical manufacturing recovery. not just in the u.s., but globally. there's better activity out of china. look at japanese machine tool orders. they often just hit global manufacturing recovery. jonathan: really got this market
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move going. your words, breaking above the important resister of 433 and if it holds, the 10 year could make a run on the back of higher growth, higher inflation, and more treasury supply. right now we are just above 433. why is that level so important? cameron: it's important because of the high level earlier in the year and we saw that as the resistance level in 2023. if we break through that, we would think that higher yields would be in play with short covers, etc., so we think that there is the potential for something that people are not positioned for. the equity market is not positioned for it. there's a lot of expectation that yields will fall, the feds will cut rates and there will be a sigh of relief. if that doesn't happen there will be riskier equity struggling. jonathan: what's different about this set up?
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cameron: because growth went up so much. you added 100 points in the first few months of the year, equities love that. that's why credit spreads are so tight. once it moves and the other direction, yields become an issue for equities. lisa: we talked about the idea of goldilocks and if continuing. the goldilocks narrative is under pressure in a significant way. are you seeing signs that it is significantly deteriorating and that they knee-jerk response will no longer be higher yields, but stronger growth? cameron: we are still technically in an uptrend. breaking support levels, under the surface you can say that there is a growth story at play. brent has gotten a lot better, we have had a lot more market participation, but tech has large weighting in this market.
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if tech goes from lagging to being outright week, that is when we could see a bigger issue for the market. lisa: that is where i wanted to go. the nasdaq underperformed. the rest of 2000 lost less. did you take anything from that in terms of how much people want to broaden out their exposure? with segments and the good times? ethan: the finance -- cameron: financials were a cyclical value trade bringing us back to the financial recovery. it could be the area where there is upside on earnings growth forecast. the tech sector is extraordinarily crowded. every other sector is outflows. the high valuation has a high bar for upside surprise, which is why we are probably seeing
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rotation under the surface. jonathan: hot yields, each one? cameron: it's initially encouraged because of the relationship between the sectors but if those prices get you back to cutting growth forecasts, that's when we see the value start to stumble. jonathan: cameron: that make sense? cameron:you can find high value without balance sheets that are bad benefiting from higher commodity prices and a risk on approach. you are just saying that if energy prices go up, a lot of that falls to the bottom line, buying back shares, good for equity. lisa: two hours 20 minutes away from non-foreign payrolls. right now it seems like everyone is just watching what's going on with the price of oil. what are you looking for and how vulnerable is the market, given
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how wobbly things have been in the past 24 hours? cameron: a hot print would push the upward pressure, but you might say that earnings and growth could hold up better. we think that bad news is bad news for the equity market. a soft print means that all of us who are pricing out a hard landing means all of everybody is on the boat of no landing soft landing, does it challenge that narrative? jonathan: quickly that is good news good news, so what is good news today? cameron: eventually the initial reaction might be negative because of the yield pop, but if you continue to see resilient data that supports forecast credit spreads, eventually good news is good news. jonathan: let's clear that up. lisa: if bad news is bad news and good news might eventually be good news, have we moved away from the reverse of good news is bad news and bad news is good
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news? i'm losing. jonathan: i'm caught up. [laughter] thank you. cameron, thank you. 214,000 is the estimated previous number, 200 75. let's get an update on elsewhere stories with your bloomberg brief. >> the argentinian president told bloomberg that he will not change the existing trade he has with china, a change of tone from the libertarian leader who had previously likened beijing to an assassin. john micklethwait asked him if he stood by his comments. javier gerardo milei: as for the chinese government, if people want to do business with china, they can carry on. business as usual. i said i would not aligned with communists. yahaira: he said he had no
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intention of touching the currency swap between the countries. samsung sales missed forecasts in the first quarter, but preliminary operating profit rose, underscoring how demand for memory chips powering electronics are starting to rebound after a severe downturn in the industry. plus, "the wall street journal" reporting that they are planning to raise chip investments to attune a 44 billion dollars. mortgage rates rose in the u.s., but only slightly. freddie mac said the average rate was 6.8 2%, up from 6.79 last week. the chief economist weighing in saying that incoming economic data indicates lower inflation and they don't expect rates to come down meaningfully in the near term. that is your bloomberg beer -- brief. jonathan: i wish you can see the smug grin anytime anybody talks
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about mortgages. i saw that. lisa: i was actually thinking about all the people who come on the show saying that they were ember one mortgage rates were 40%. affordability issues, i wasn't thinking about that. jonathan: thinking about the small people out there like us in manhattan. this from bank of america this morning, the zeitgeist, they jacked up my rent 20% and i have to move again, a colleague in new york city. lisa: and there's a sense that there is not clear relief because it is hard to buy right now. that's what i hear. jonathan: waiting for rate cuts, then you can get supply on the market. lisa: and then prices may go down? jonathan: that's what i'm told. what happens is another thing altogether. up next, escalating tensions in the middle east. >> the american israeli alliance, it has always been necessary, but it is more necessary now. this is a battle not only
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between israel and hamas, but i would say the access of iran. jonathan: that conversation, next. live from new york city, good morning. ♪ (upbeat music) there's more to business than the business you're in. if you use data, that's the privacy business. manufacturing on demand? you're talking cloud business. got a few million hyper-connected customers? digital experience business. that was fast. that's where deloitte comes in. with the right combination of talent and technology to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. 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.
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jonathan: it's payrolls friday. here with the scores for you on the s 500, yields are bleeding higher again by two or three basis points. all eyes on crude, wti, 80 685, brent crude in the 90's. this morning on brent, $90. escalating tensions in the middle east this morning. >> there's a long of the american israeli alliance having always been necessary, but it is more necessary now and it's a
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battle between not only israel and hamas, but i would say the axis of iran, the terror a xis of iran putting the middle east into the dark ages. jonathan: netanyahu preparing for retaliation from iran and president biden is calling for him easy it cease-fire in gaza after a direct conversation with net and yahoo!. the writing is that the pressure is building on johnson for the supplemental, expect the pressure to step up if we see an expanded middle east conflict that has markets on edge. talk to us about the possibility of expanded middle east conflict. ed: the prime minister's right, but this is a both/and. the biden administration is in support of israel and its right to defend itself, but they are not necessarily in support of
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netanyahu. from the u.s. lends, we have a long-delayed defense supplemental. when congress returns next week, it's the first time since september when they are in d.c. without a looming fiscal cliff, the government will not shut down, there is time to do other things, so pressure is building on speaker johnson to get something done. the expectation is that absolutely something will get done. probably not next week, it probably goes a week later, but in d.c. whenever there is an increasing crisis, there is increasing pressure on congress to deliver. if we have any increase in tensions over the next couple of days or next week, that is where the real pressure comes on the house to pass the bill, to make sure that our allies have the resources that they need to defend themselves. lisa: ed, secretary blinken had even shopper language -- sharper language, talking about changes
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to our own policy. how much more difficult is it to pass a bill in the house when basically the administration is putting conditions on aid for israel? ed: it is not just israel. it's also aid for ukraine, support for taiwan. but, what we have seen is this desire to make sure that the allies of the united states have the resources they need to. this package is absolutely needed. it absolutely complicates things. we have domestic clinical situations to deal with here. speaker johnson is facing pressure from his right flank with a possible motion to vacate and push him out. there is never a straight line in u.s. politics, but if there is a broadening out of this conflict and a real sense that aid is absolutely needed now, it could be the catalyst to get this across the finish line,
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with some changes and conditions. if the house changes the bill, it has to go back to the senate and you have senators on the democratic side who had supported the aid that will want to make sure the provisions are added. i think that the biden administration is trying to preempt that, making sure that the aid can get past and delivered in a way which we support israel but ab not the political infrastructure within their government. yahaira: i'm unclear -- amory: -- annmarie: i'm unclear, we have heard the rhetoric hardening over the last few weeks and a feeling that there needs to be more done by the u.s. to support israel, so how significant is the shift? ed: the shift largely deals with the fact on the ground and the political implications. when we look at polling data, the three things that are really dragging president biden are
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inflation, the border, and geopolitical unrest. if the conflict widens out and things continue to have a humanitarian crisis within gaza, those are hard things for the president to win reelection with. especially among portions of his base. so, with the death of the seven members of the world central kitchen, it crystallizes things for a lot of folks in d.c., where they had started to push this towards a solution that allows them to deal with their military needs but also recognize the real humanitarian issue. jonathan: the civilian death toll is tragic and i wonder if the message yesterday was for netanyahu or for the people in michigan. which was it? ed: i think it was both. if president biden doesn't win
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the state of michigan, he's not likely to be president next year . the humanitarian toll here is also catastrophic. the more that this is pursued without what the biden administration has been pushing for for months now, which is more humanitarian relief and a level of cease-fire within gaza, if they are not able to get the government on board with their actions, they are not going to be willing to have an open ended commitment and when we have the aid package sitting there ready to be delivered, that is a crucial point at which the biden administration can force some of these conditions, so they are using that leverage. jonathan: we would love your thoughts on the tension between the u.s. and china. strong words overnight around unfair practices of foreign firms and coercive actions against american companies. that's been the story for the last two decades. what can they do about changing
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it anytime soon? ed: the keyword is back. tariffs will be discussed sooner rather than later. we heard the biden administration was close to a tariff package by the end of the year and i think this is their signal that a new tariff package is coming, increasing certain ones like ev's, semi conductors, solar, decreasing tariffs on a lot of consumer goods, meaning inflation reduction package for the american people. inflation is an important issue for president biden in this juxtaposes the tariff message coming from the other team, president trump, seems to want to have across-the-board. so, having a debate over how to do tariffs versus the inflationary concerns of those tariffs that president trump has talked about. that's the signal i get from the conversation overnight. lisa: -- annmarie: if they bring
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up the tariffs, is this another form of election messaging? ed: it's messaging and national security driven. ev's, semi conductors, solar, those are areas within the inflation reduction act where the united states is building capacity. we can't build capacity here and have china flood the market and undercut that. we are doing that for national security purposes. if we can have inflation relief on consumer goods, so that when you go to your store and there is something made in china it doesn't have the 25% tariff, you can see pricing relief, it has a benefit for the consumer. i think you will actually see things that will be impactful for the folks going to the polls in november. on semi conductors, we had tariffs and there was a significant drop in semi conductors from china but only if her percent in use in the
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costs of semi conductors, so they will point to that as policy that actually works. jonathan: interesting. always appreciate your insight on the packs that take place in china. lisa: all i can say is that michigan is so much front and center in these geopolitical discussions. jonathan: both stories. lisa: jonathan: geopolitical epicenter. jonathan:we'll talk more about that in a moment. high risk, that conversation is up next. live from new york city, payrolls around the corner, [speaking another language] -- corner, this is bloomberg. ♪
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jonathan: equity futures right now, trying to balance on a quarter of 1% in the s&p 500 heading towards potentially the biggest weekly loss of the year so far. the nasdaq, whipsawed about what's happening. let's start with fixed income treasuries, the two-year has been stable through the week. around 465, 483, the 10 year has been on quite the ride and we will catch up on this later. the high, north of 440 in a couple of days. lisa: it has to do with the prediction that the federal
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reserve will remain restrictive long enough to get on board. yesterday neel kashkari said, coming out saying that we might not cut rates at all this year. not sure how much that was market moving, but it percolated out through the week. jonathan: let's switch it up on the board and go to brent with wti, pausing one third of 1%, the comments from that? yesterday on iran, and all this week over the last few days, the risk of direct conflict, a broader regional escalation feeding into high crude prices for the week. annmarie: biden basically said that whatever happens in israel, there will be conditions that are determined by the assessment and how much israel is going to
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deal with civilian humanitarian and net me yahoo! saying that they will intentionally preempt any strike that they are prepared for. jonathan: payrolls friday, the bloomberg survey calling for 214,000. and for averages to rise month over month. morgan stanley is leading estimates, citi 50 k. that's interesting one. looking for real weakness in the labor market, triggering more than 100 basis points of cuts this year. lisa: they were on the bandwagon that the fed wouldn't cut until june before anyone else, a notable call considering that they were not on the leading edge of the rate cutting discussion. my issue, something cameron said earlier, bad news is bad news. i wonder if good news is bad news, too. is the market set up a surprise
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in the print on unraveling the goldilocks feel that has already brought deep challenges in a time when there are high oil prices and other challenges. annmarie: if the fed were to come in and put june as, with conviction, a june cut, does it need to belittle -- b below a two hander? jonathan: let's get to the quote, "if we continue to see inflation moving sideways, it would bring the question of whether we need to do the cuts at all." how lonely is kashkari, how lonely is bostick, how much company do they have? lisa: austan goolsbee, firmly not enjoying lunch with them at all. saying that if you take a longer arc on inflation coming down, he's the resident dove and wants to cut rates. lower investor, -- lauren
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vester, a little bit different. they need to see evidence that inflation is coming down for the majority to get on board. jonathan: i still sense a grand compromise that could change with incoming information. i think that is how you get everyone on the same page at the moment. lisa: although again we have just seen how economic data moved past them. yes, there were upside surprises, but the downside surprises are going to begin. jonathan: we will continue to go through the numbers for you. strong comments from janet yellen, accusing china of taking coercive action against american companies. she says she can -- will continue to bring up the issue as her trip continues, ramping up chinese subsidies and manufacturing against -- in the election. we just spoke to ed mills about
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10 minutes ago. he gave me the impression, alluded to it, pretty directly in fact, this feels like the packed that comes before a big policy shift. annmarie: like she's going to beijing and in the province that, interestingly, is the home to huawei and byd, highlighting the tension, she's there to warn them almost that the tariffs are coming. she has been saying this past week and says she will continue to say it. european, japanese, american businesses. it's not just us that feels this way, it's the rest of the world. lisa: great story overnight about china shock and the preparation for unleashing another flood of goods. those goods will be unleashed by everyone else, and the reason why it is a market moving kind of event, how long can everyone
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keep building bridges to nowhere? how long can anyone keep building goods with the demand to suck up? that's one of the questions between demand being higher or lower. jonathan: is that the wrong kind of disinflation going into november? lisa: that's what janet yellen said, she used to say thank you and now she says no thanks. jonathan: quite a change for janet yellen, what a journey from economist to politician. quite a round-trip. annmarie: quite a round-trip for the globalists dealing with the aftermath of the sectors of the economy that have been blown out. it's a huge shift from when she entered the treasury department. she was one of the few around the table who said maybe we should be looking at tariffs. she moved towards the jake sullivan's of the world. jonathan: i just read comments
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like this and think -- where have you been? everyone talking this way, unfair practices, that was the story for ages. go speak to tech firms on the west coast for much of the last decade. taking coercive actions against american companies? seen that repeatedly time and again. the question i would ask is what took so long? why did it take the election of donald trump and 2016 to make this the consensus position in washington, d.c.? lisa: great question. have lines gotten harder or is it the reality of meeting this academic idealism a lot of people had when they worked on policies from the ivory towers as opposed to going out in seeing the practical effects and the lack of offsets so many countries have had when it comes to unemployment. buying goods. jonathan: ford, making a shift away from ev's, saying there will be hybrid versions of all models by the end of the decade.
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hybrid sales jumped 42% in the first quarter. we have more now with craig. how much of a change is it for ford and how long before i see headlines crossing the terminal from gm? craig shout out to keith in the tory -- detroit bureau, he had reported that they were going to make this move and push back on the introduction of a electric suv. the plan had been to put that into production next year, pushed back to 2027 now. they have also just talked a lot about the demand they have seen for hybrids, the f-150 hybrid that has been in the market for some time, a dramatic increase in sales that they have seen. the first quarter, those sales were really what sort of drove the increase for the company. we did hear from mary barra earlier this year that she will also pivot a bit and make more
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of an investment in hybrids. that was a big departure from the message out of gm, for some time they had been talking about all electric. they had the tagline of everybody in. really pushed for fully electric vehicles. found that -- one, they were having trouble making them, and two, on the others either consumer was not necessarily interested. there was interest a few years ago in teslas, which led the let -- the rest of the industry to say we should get there fast. i think that once they arrived, they realized demand had been met, to some degree, and they have had a hard time competing with tesla. i love your comments -- lisa: i love your comments on what the u.s. is preparing for in terms of a policy shift around china. do you think that ford would welcome incoming tariffs on
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electrical vehicles from china or does it not really matter because they are moving away from that anyway? craig: it's interesting, trump already took tariffs for the high on chinese vehicles. there is talk and the biden administration on taking those higher. i don't know that it will necessarily make a lot of difference in the sense that the chinese manufacturers -- even the likes of byd, which have been on fire the last couple of years, they have viewed the u.s. as off-limits. maybe there is some attempt down the road to enter the u.s. through the backdoor of building a plant in mexico and bringing ev's in that way. there is already some looking at that on the part of the administration to try to guard against that possibility. i certainly think that ford would rather not have to compete with byd in the u.s., but i also sort of doubt that they really see that as a high likelihood, given the stance washington has
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taken on china and how much everyone is sort of racing to be anti-china in d.c., protecting american jobs. annmarie: the nissan american chairperson said that the administration blew it. you think the push into hybrids would have happened sooner if there hadn't been a massive push into electric vehicles? craig: that's a good question. in some ways i think this is enabled by the administration pushing for a localized battery industry. even if we don't go fully electric, if we have batteries to supply to hybrid vehicles, it is not a loss for the administration or for the u.s. auto industry. it does mean sort of more incremental progress and we would've course love to see the -- and we would've course love to see the world -- and we would, of course, love to see the world jump to electric cars
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and more work needs to be done to bring them over the line, it's a matter of coming to grips with reality. but i also think that it is just a complicated and difficult thing to do, here, to get the american car buyer to make that jump and get the industry to come along for the ride as well. you have toyota, the hybrid leader that has been really the loudest voice critical of this administration in their policies to try and get the industry to go fully electric. they have really dragged their feet over this. jonathan: and they dominate because that is where the market is right now. in terms of getting to grips with reality, some think difficult to do in the auto market at the moment, when you talk about clean cars you're talking about zero tailpipe emissions. i'm yet to be convinced that these large suvs in detroit, michigan, and elsewhere in the united states of america with giant batteries that have pieces coming from around the world,
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natural resources china, are actually in cars. have we settle that debate? craig: absolutely, we have. and you are right, i'm referring to the tailpipe and from the matter of on the front-end to the omissions of making electric vehicle are higher than a gas vehicle, but over the lifecycle, bloomberg new energy finance just recently has looked at this new and virtually everyone who has crunched the numbers on lifecycle emissions finds significantly less emissions for electric vehicles than combustion cars. i do think that the point that you make here is interesting. the idea of a full-sized suv or three row suv that has been delayed, it makes a lot of sense in that we have seen ford sort of front load their investments in electric vehicles in these big pickups and suvs. they kind of came to a realization of -- we are putting
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these big batteries in, you need more battery to move more weight and move bigger structures, meaning more costs, meaning less attractive to the consumer, what are we doing here? they have had this re-think where they need to go with smaller silhouettes, invest in some of the smaller suvs, maybe even cars, which they did away with years ago. it's interesting that we have seen such dramatic strategy changes, talking about ford or gm, speaking to have complicated and costly the transition has been. jonathan: we appreciate your clarity, it's been amazing to follow this story with your help . the market is in a different place, pro-hybrid right now a big way. lisa: that is where the demanded -- is, all in from ground to product. what strikes me is how much it's becoming clear that the chinese ev policy is driven by different
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motivations than the u.s. ev policy and how it doesn't necessarily cohere in terms of how successful both can be. jonathan: welcome to the program if you are just joining us. the jobs number is just a few hours away. getting an update on stories elsewhere with yahaira. yahaira: the bank of japan signaling it may hike interest rates again this year. saying in an interview that the bank inflation targets will become increasingly likely to be maintained through the rest of the year, suggesting that doj wants to maintain an impact on service pricing before raising rates again, saying that they will respond to foreign exchange movements if it affects wage and price growth. a united airlines flight crew is being investigated after an airplane slid off the runway last month in houston. the berlin area report saying the captain appeared to stray from united procedures for
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landing and slippery conditions. the 61-year-old captain told investigators that the runway appeared drive but his copilot thought it was wet. marking the latest in a series of issues for united and the boeing 737. apple has laid off more than 600 employees after scrapping projects for a car and a new smartwatch display. the tech giant wound down both initiatives at the end of february with more than 350 workers released from the main car related offices. the car project was canceled amid indecision among executives about its direction and costs concerns. that is your bloomberg brief. jonathan: i hate to do this as people are heading to the airport, but does air traffic control not tell them if the runway is wet or dry? lisa: why is that in the story? why do we know about that? i don't want to know about a
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disagreement in the cockpit. annmarie: there are people on the tarmac. how do they not know? lisa: this is not a debate i ever want to hear about again. annmarie: i think it's dry, keep going. jonathan: all this time, i didn't realize they were eyeballing the runway. lisa: that's good. jonathan: going to leave that story there. jobs data, on deck. >> a report that says the economy is still strong, but not something that isn't sending a signal to the fed that they need to cut very soon here. jonathan: that conversation, up next. ♪
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—last one everyone. i asked myself, why doesn't pilates exist in harlem? so i started my own studio. getting a brick—and—mortar in new york is not easy. chase ink has supported us from studio 1 to studio 3. when you start small you need some big help. and chase ink was that for me. earn up to 5% cash back on business essentials with the chase ink business cash card. make more of what's yours. jonathan: equities right now, bouncing by .25%, after the biggest loss since the middle of
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february. new highs for the year on crude. 8675 on brent crude. surveillance this morning, jobs data on deck. >> so many people are coming into the labor market, so when you talk about a goldilocks scenario, that report says that the economy is still strong but doesn't give the definitive signal that they need to cut soon. jonathan: less than two hours away from the march payroll, expecting a gain of 220,000 jobs , slightly higher than the median estimate in our survey. sarah, writing that as we move through the year we expect to see payroll shifting further, but with growth flying north of 200 k, there's more to lose before the fed is faced with the price stability side of its
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mandate. sarah joins us with more. do you think that we have now that asymmetric function of the federal reserve where there -- they are more sensitive to weaker data than stronger data? sara: i do think that that is the case. with the labor market chugging along, it gives the fed the sense that they have time on their side to see what the next few inflation prints do and if you can expect to see it resume moving lower after the past couple of months. they are attuned to the fact that if you see the labor markets get softer, maybe they don't need to wait as long on the inflation side. lisa: given that we haven't seen that whisper number from bloomberg estimates, how close are we to seeing a real shift at the fomc? maybe not with real rate cuts, but as john said, just two this
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year as a baseline. sarah: it wouldn't take much at this point, the march s&p was by one voter, hanging on by the hair of their chinny chin chin. if you get a couple of strong pci prints, it wouldn't take much to push back the timing of that potential rate cut in the magnitude of how much they actually get done this year, given how customary that is for their thinking at this moment. annmarie: we've been talking a lot about the view we got from andrew on the sudden deterioration of the labor market that they foresee for the second half of this year. are you still on board with that type of deterioration being a high likelihood event, given that we continue to see strength? sarah: the base case is that we think the jobs market will
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soften and payroll growth moderating. about 230,000 jobs, we think that the trend for the last three quarters will be somewhere close to 130,000. i think we will see some more weakness, but i don't think it is going to be a sharp deterioration in terms of an emergency type situation. in part it's just the lag in monetary policy feeding into some hiring decisions and the fact that they are back to fully staffed after what have been hard years to get workers back in their seats. with that, we will see the pace of job growth slow. there is a lot of altitude to lose before you get to a point where payroll growth is worrisome for the fed at this point. jonathan: it's been impressive to see jobs growth north of 200 k without squeezing wage growth. it hasn't been as inflationary as we would expect it to be.
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is that about fed policy or a leaking southern border? which is it? sarah: it has been about the overall growth in the labor supply. part of that has been strength in terms of the foreign-born workers, seeing them grow about four times as fast as nativeborn workers over the past couple of years, but we have had pretty strong growth in terms of the native population with participation coming back. if you look at the labor supply going forward, while we continue to see strong population gains, the other part of that labor force to sue patient, that has really leveled off over the past six months or so. it's going to limit how fast the labor supply can continue to grow. if you are not seeing strength in there, it's going to get harder for wage growth to pull further without seeing a meaningful slowdown in demand and hiring. annmarie: jay powell talked
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about that earlier this week, saying capacity moved up because of the output around immigration flow. can you quantify exactly those numbers in terms of immigration flow with the u.s. labor force participation? sarah: bls does try to capture this in terms of foreign born and it nativeborn workers. as i mentioned, we have seen the foreign-born labor force grow four times as fast. right now the 12 month rate of increase in terms of the household measure is closer to 140,000, where we saw the nativeborn decline by i think close to 40,000 to 50,000, 12 month average. there are numbers around this coming from the household survey where there is volatility, and you have to see that cautiously, but we have seen a lot of the labor force growth come down in recent years. jonathan: appreciate your words
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there, this morning, sarah house of wells fargo. it's not this one, but if this is about the southern border and not fed policy, really raises questions about how you set monetary policy for a labor market like this one. how do we know that they've got the appropriate set when it has nothing to do with what they are doing? annmarie: you don't, which is why everyone has a completely different view on the neutral rate in what they should be doing, like maybe considering a rate hike if they are pricing out rate cuts this year. jonathan: the nato secretary-general and john micklethwait, alongside the president of argentina, all coming up in the next hour of "bloomberg surveillance." ♪
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>> we think inflation is going to be showing progress over the next few months. >> there are some structures in favor of inflation. >> inflation is an insidious thing. it takes a while to get rid of. >> inflation will probably average higher than 2%. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the payrolls report is
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19 minutes away. the second hour of bloomberg surveillance begins right now following the biggest one-day reversal that we've seen in some time. the biggest one-day loss on the s&p 500 since the middle of february. price action has not been about stocks or even treasuries, it's the commodity market and brent crude. lisa: oil prices rallying 20% this year. when i think about how big that is it is a gut check in terms of creeping higher and all at once. it raises the question, julian emanuel, how challenged is the goldilocks narrative? that is giving people pause. jonathan: it has a number 91 in front of it. brent crude, $91 six cents positive by .5%. brent crude getting closer to $87. we talked about the tension between the u.s. and israel and this is the tension of
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great confrontation between israel and iran. annmarie: rbc came out with a note saying that it's their understanding the iranian response to this israeli bombing at the consulate in damascus will be more forceful than previous retaliatory actions. that's why you are seeing this risk creep into the oil market. jonathan: this has caused vague swings throughout this week. let's get to it. equity futures posited by .3%. bond yields are on quite a ride. we talked about the low and hi, 4.18 at the low end and 4.40 at the high end, somewhere in between right now. lisa: why is the fed speak necessary, and the next day we explain why it was so important to the market action the day before. the minneapolis fed president neel kashkari saying if we see inflation move sideways that would question if we need to do rate cuts at all. feeding into a feeling that may be on the margins we may not get the rate cuts that people had in pricing in. all of a sudden, it didn't matter until it did. jonathan: might come with strong
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growth and higher inflation. that's the added risk with the move in crude. lisa: especially since we seen manufacturing pay increasing. you are seeing the push to make everything more cheap land more significantly than every country around the world fueling commodity prices and industrial investment leading to inflation that is more of various than just goldilocks. jonathan: coming up, jp morgan looking ahead to payrolls data. the nato secretary-general on plans to fund ukraine. and argentina's president. our top story come investors waiting the payroll report after a wave of fed speak at a co-data throughout the week. if the fed is not cutting rates, the market has to put probability of the fed hiking rates. and that brings out very unpleasant memories of september and october. the only safe place is cash. a very bearish sentiment around the table. i'm sure that you have plenty of nuance behind that quote. are you saying that we could be
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confronting a september-october moment all over again? >> the economic outlook and fed reaction are both important. we are hearing patient on inflation but they can only be patient for that long. if inflation continues to go higher and this was not a bump in the road, if they push out rate cuts further, talk about no rate cuts, the market has to put probability of hikes. the moment that you talk about hikes the money coming into fixed income going into equities starts to retreat, stays in cash. and then risk. that is the feel for the first time i have to say this year i saw that. rates have risen through the first quarter. we went from below 4% to 4. 30%. i think what is given the fed confidence to be patient on
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inflation is that wages are moderating. 200 50,000 payroll growth but wages are moderating. you have a .4 on wages and think that's bad news, irrespective of what the nfb number is. .4, .5 will make the fed inc. the policy isn't restrictive enough we don't need to cut. and then the soft lending narrative unravels. jonathan: is it a risk i need to confront now? priya: i think the market is dealing with that now. i would say let's wait for an hour. we get the payroll report. our view is that the supply-side is working, meaning the foreign-born population. the fact that supply chains have improved. our sense is the labor market is normalizing. the extent of growth in the population will allow wages to continue to moderate. .4, i think we will see some members of the fed say maybe we don't need to cut. we heard from one fed official. even the hawks have not talked
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about hikes or not needing to cut. even the fed is looking at cumulative progress on inflation and we are not at the target. you can't relax even after today. if cpi comes in at .3, .4, can the fed maintain their view that inflation is moderating close to 2? the next three days is extremely important for can the soft lending narrative continue? lisa: i love the parental, let's wait for an hour. no one can wait and everyone is trying to figure out how to trade. am i hearing from you that you are questioning the long-duration trade as you see cash as the haven asset class? priya: it is about valuations. if the 10 year was 4% i would say that we shouldn't be getting into duration. we backed up -- i think the rates market saw this and said maybe inflation is high and the fed doesn't need to cut three to four times this year.
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at 4:13 we would be buying backups. we are buying it nervously. maybe you don't put all of your risk on, because if you get a .3, .4 on inflation next week rates can go back up. as long as they are not hikes, 4.50 is the high. i would say by backups unless the next couple of data point suggest that the disinflation narrative is in a bump in the road but the start of the new trend. lisa: two aspects. the duration trade would you have nervously liked and the credit trade which you also nervously liked at a time when we had supposedly been seeing this ongoing strength. what would you have to see in the labor report to challenge one of those in a more aggressive way? priya: duration is the clearer one where i would get nervous. if we get a .4 on wages and .4
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on cpi you're supposed to stay away from duration. on credit i have to say that the fundamentals stay strong. we are looking at company earnings. companies are not levering up. the fundamentals of the corporate sector are extremely strong. hi rate, high investment rate, i think the fundamentals are strong. the other part is technicals. we are seeing yield-based buyers. spreads are extremely tight, but people are looking at 6%, 8% in high-yield. that money is continuing to come in, so i more confident around credit. but if people start to get nervous that the ag's down on the year end to the money starts to leave, then you start to get nervous. lisa: you disagree that the risks are balanced to a weakening potential in the economy and you see the risks as balanced -- i might be paraphrasing -- as overheating inflationary environment that got checks if the federal
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reserve is good enough? priya: i think that the federal reserve is telling you that the risks are balanced. all we heard was inflation the last year and now you are hearing inflation and growth. they keep talking about the dual mandate. i think they are telling you that if things slow down they will cut a lot more. they're trying to say that risks around those are balanced. the economic data, given the easing in financial conditions, given how strong the corporate sector is, how resilient the household spending numbers are, that is when the risks are asymmetric. the economic data suggests that growth is accelerating and inflation with the oil move -- if it is just oil that is a tax on the consumer. it doesn't mean the fed should hike a lot more. what if service inflation doesn't decline? that is where the asymmetry comes from which is making me nervous around durational credit. if the economic data doesn't cooperate.
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the south landing has had the fed working for it. we just need the inflation number to work. jonathan: your question is a key pillar of the rally, the perceived dovish central-bank stance. the perceived dovish policy reaction function. you say it's the wrong interpretation of what's happening in the federal reserve? priya: i think it is a patient narrative. i think they are saying that it is a bump. bogged is the new transitory. when their telik -- bump is the new transitory. when they're telling us it is not moderating, if you get a couple more months we know that goods inflation is done. if service disinflation doesn't continue to slow down i think that that is where this patient narrative is going to run. jonathan: can i quote you that bump is the new transitory? i think that's brilliant. can you tell me how many bumps are not just a bump and is a problem? what does that look like? priya: i think a couple more.
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the first one you can ignore come the second one you get nervous. the third one, not to draw a trend with three data points come you start to say ooh, and at the margin people get nervous. the next two months, and then we have an election, so no cuts this year would be a big problem. i think that it is key. a soft landing requires the fed to cut rates. this is why not everyone is on board, but i think with real rates at 2%, that is restrictive. not for the entire economy but for certain parts. if the fed does not cut rates this year we have to question, can the economy stay this resilient? lisa: to go full circle, how far away from pricing and rate hikes, not just cuts? priya: if we get more fed officials saying let's not cut rates the market will start pricing and some probability.
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you see it in the options market because we should price an all outcomes. if they say no cut, some on the fringes will say maybe monetary policy is not restrictive enough and we have to raise it. i think that you get a couple more saying no because and hikes come back on the table. jonathan: equity futures are posited by .3% on the s&p. stories elsewhere, here is your bloomberg brief. >> argentina's president praising donald trump's protectionist policies in an interview with bloomberg. the former u.s. president's prayed barriers were justified with china refusing to float its currency during the financial crisis. >> the value of donald trump's policies is he has identified the enemy, socialism. >> his comments are in line with
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his decision to speak at a pro-trump political convention outside of washington in february. emergency crews in taiwan are continuing efforts to reach the hundreds of people stranded under debris after the areas worst earthquake in 25 years. emergency personnel saying on thursday that over 600 people remain trapped as a result of the 7.4 magnitude earthquake. the government announcing that the death toll has risen to 10 people with over 1000 more injured. the oakland a's will be making a pit stop ahead of their planned move to las vegas, announcing that they will be playing in west sacramento for three seasons beginning next year. they will play in a 10,000-seat minor league stadium while the future ballpark undergoes construction. the move marks an end to the a's 57-year run in the bay area. jonathan: next, a resurgent u.s. dollar. >> meaningful dollar weakness in my mind begins with an
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jonathan: payrolls report, jobs report one hour and 15 minutes away. equity futures positive .3%. i saw you trying to keep it together. it is like a joke for you. yields up to basis points on the 10-year, four point 333 five. a resurgent u.s. dollar. >> meaningful dollar weakness begins with an aggressive rate easing cycle. some midcycle adjustments were pricing and for this year are
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probably not going to do it. what we need to do more. jonathan: the greenback gaining against all of its major peers in 20 to any foreign investors wonder how much more room it has to run. we think that this will support risk appetite and lead to moderate dollar weakness, even if other g10 central banks follow suit. can we start with the fed? bostick and kashkari, how much company do they have on the f1 see? steve: they seem isolated. kashkari isn't a voter this year, so you -- so he can say what he wants. while there sounds like they weren't willing to dissent given that they were voters and were so adamant about cutting in the second half. i think that the fan and chair powell has been prepping the market for dissent. he had a
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couple questions and said basically that we would like unanimity, but we can live with dissent. lisa: i don't understand why the idea of the dollar weakening is the most likely path. if the u.s. economy continues to outperform? there are increasing questions if the fed can cut at the same kind of people are saying that it's a given that the ecp will go in june? steve: i think that that logic is why we are where we are. with the dollar-euro around 1.0850. you are seeing an ecb that -- i don't want to say desperate, but committed to cutting in june. they cannot cut the door completely talking about spring cuts. i think that the other side is that if the fed does go ahead and cut in june as we expect, other central banks cut. barring geopolitical events, it
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should be a pretty risk-on environment. that risk-on type of environment tends to be dollar-negative. not a super dollar-negative, you would need yield compression, but it is still there. you look at the market. the one characteristic of the market all year long is that the market seems happier selling and buying dollars. the same quantum of dollar-positive information doesn't take the dollar up as far and for as long as the same dollar-negative information. that tells you where the market wants to go. lisa: some people are probably screaming at the screen saying this is a loss of fiscal dominance by the united states. how much is this a part of the story as we see gold rallying that they are betting on the fringes that central banks will diversify with gold rather than consolidating holdings with the u.s. dollar?
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how much is that behind the desire to sell and not buy as much as previously expected? steve: i think that it started with the geopolitical stance of the u.s. and willingness of using the dollar clearing system as a tool, a weapon in geopolitical disputes. there are a bunch of countries that would prefer to avoid the if they can. i think that the fiscal dominance picture is there. it is probably cold positive, -- gold positive but people would love to have another asset that is more liquid and bigger in terms of avoiding fiat currencies. it is pretty clear that the dollar -- or the u.s. isn't the only country with fiscal issues. their debt profile looks like everyone else's. annmarie: what other currencies are countries trying to avoid because of what's going on in u.s. policy when it comes to the
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dollar? steve: you know, i think if you're talking politics, it has been a g10 nato-type of move over years over sanctions and other issues. the european debt picture isn't great. nobody's debt picture is that good except for a few small countries. it is a very hard choice to say "what else?" the market is constantly probing if it is bitcoin or gold or some asset that will be bulletproof in the event that fiscal issues become more important than they have been until now. jonathan: thoughtful stuff coming in on the bloomberg. what are you looking for? he said, above zero, below 11 k. if the fed thinks that labor supplies is the reason that jobs growth is strong there is an
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asymmetry. a strong number will not push them away from cutting as much as a week number we'll push them to a cut. do you endorse that view of things? priya: i agree but think it is all about wages. a strong number with .4 wages, the fed will get nervous about the idea that they can be patient around inflation. jonathan: would that challenge the supply-side narrative and would we see that in wages? priya: if you have the labor supply that should moderate wages. if the wages are picking up and at market is tight enough and it is not moderating, i would say watch that average. it's not a perfect number for wages but it's the most high-frequency number that we get for wage inflation. lisa: i want to go back to the quote of the morning. is bump becoming the new transitory? our some bumps -- are some bumps more significant than others? potential economic reads that could come in hotter than
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expected and change the narrative in a more material way? priya: wage inflation today. it would be in the cpi report, cpi services. perhaps the cpi services shelter. what is happening to the rest of service inflation? shelter is a function of rent growth, which is slowing but taking time. service inflation moderating, if the cpi number is as expected with service inflation not moderating, the fed will get nervous because we had significant moderation in the second half of last year. that slowed. if that slows or goes the other way, that is when they will get nervous. lisa: i would love to weigh in on the steve englander point that people are looking to diversify away from the dollar. that potentially this could be a trend going forward. are we seeing signs of that in peripheral buying in the treasury market? that there is a question,
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despite the strength, that this is not going to be the haven asset or place that people want to park there money -- their money? priya: it is the haven market so far. you can buy and sell treasuries easily.but look at foreign demand for treasuries. it has been weak for the last few years. some because the effects hedging costs were high. some because people are looking to diversify.who will be the marginal buyer of treasuries? we have to get used to the u.s. market being the marginal buyer of treasuries. that is mutual funds. these are price-sensitive buyers which is why it is important that if rates go higher and you realize where is the cap and the distribution starts to widen, the price-sensitive buyers step away.we have tax cuts expiring next year. this is something the congress has to grapple with next year.
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the entire treasury market demand is all u.s., then they have to have a sense of the fiscal trajectory. we don't have a great fiscal trajectory right now. that is a long-term issue. the fed can drive where those rates go. if they aren't talking about hiking treasuries are capped. annmarie: the fed would have to step in if households can't do it? priya: the fed will step in if the dual mandate makes them. now, growth is strong and inflation is above target so the fed cannot step in now which is why we had the october timeframe. the fed is doing qt. you have to wait for the u.s. household to step in to buy. if you realize that they might hike, you are not buying at 4%. jonathan: it is great to see you. why bumps in the road might be the new transitory in the economics field. lisa: it is a fantastic quote because it highlights why people
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haven't paid attention to the bumps in the road and all of a sudden they matter more. the whole quantitative tightening thing, yesterday at 4:30 pm the balance sheet comes out and i always looking at it. jonathan: thank you for telling me that yesterday was thursday. lisa: if you wanted an update come today is friday. it has gone down $1.5 trillion over the past number of months. significant. paint dry, apparently. jonathan: it is important to stimulate the economy. don't watch qt. it doesn't do anything. lisa: what has it done? we don't know. jonathan: next on the program, the nato secretary-general jens stoltenberg. that conversation around the corner. ♪
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jonathan: 60 minutes, one hour from the payrolls report around the corner. equity futures, positive one third of 1% on the s&p, up one third on the nasdaq, one quarter of 1% on the russell with small caps bouncing back from the biggest one-day loss on the s&p 500 since the middle of february. plenty of you writing with really interesting things. talking about a quote month ago, if the fed thanks labor supplies are the reason jobs growth is strong there is an asymmetry. a strong number won't push them from cutting as much as a week number will push them to a cut. that is how the market perceives this dovish central bank right now. lisa: it has been implied in the
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market action we've seen for a while. the one caveat, the shift in the narrative over the past couple of trading sessions, may be the growth picture isn't cooperating. if you get the sense that there is true weakness, what the fed will respond to, that's not the greatest news for risk assets and potentially sniffing that out. jonathan: the federal reserve is embracing the supply-side narrative and don't see strength as a problem. wage growth. if you see wage growth come through more strongly off of the back of higher-than-expected payrolls growth, does that question the supply-side story? does that disrupt this market move? lisa: it raises the issue if you have a tight labor market that is not being offset to the same degree as immigration and potential increases to the labor market. if that is the case, they might be challenged to believe and have conviction that inflation is heading down to 2%. neel kashkari, raphael bostic, will others come along and bumps
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become the new transitory? jonathan: i love that line. talking to swings, not just the equity market but bonds as well. the range of the 10-year. to see sub-4.20 and above 4.20, tons of fed speak. is it about the data, the fed speak, or the price of crude in the last 24 hours? lisa: is crude and isolated metric considering we've seen a rally and a host of commodities and industrial production increased? we heard from priya if it is crude it is inflationary everything, not so much. taking a step back, we are looking at a market questioning goldilocks. that i think is an issue for whatever week it today out of the jobs market. you won't be as much of a knee-jerk buy because the fed has your back no matter what. jonathan: priya said a moment
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ago, i really interesting conversation, you can find that later on this morning. foreign-exchange, finishing on the euro, just about unchanged, bit of this news. 1.0834. the question that we return to his did this ecb need to come for the fed cutting signaling they wanted to go further? lisa: there's a host overnight saying the ecb would go in june and now it's a countdown clock and they don't need the fed. how long can they go alone before the fed has to either join forces and keep cutting or start cutting or see a protracted weakness in the euro? jonathan: euro-dollar just about unchanged. the march payrolls report due out in an hour. the median estimate calling for 214 thousand. wall street out with a wide range of estimates. morgan stanley at the high-end looking at 245. citi calling for 150 k. annmarie: if you look at adp
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leisure, ism manufacturing employment, he is saying that potentially today nonfarm payrolls could come into 25 to 250 -- come in 225, 2 to 50. what does that mean in terms of risk on, risk off? cuts on, cuts off. jonathan: the fed speak, neel kashkari of the minneapolis fed, the president saying that the fed may not need to cut rates at all this year if inflation continues to move sideways. the cleveland fed president suggested that the central bank could be getting closer to the level of confidence needed to begin lowering interest rates. when we catch up with loretta mester of the cleveland fed, it often sounds like she is on the hawkish side that's not what i got from what i heard yesterday from loretta. lisa: the jury is out and she needs more months, but otherwise things seem to be moving on the same trajectory. the same kind of comment that we heard from fed chair jay powell. there is the question about
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going forward. what it will take to dunmore the confidence by some of these officials that inflation is truly going -- to unmoore the confidence by some of these officials that inflation is truly going to 2%. jonathan: president biden in a call with prime minister netanyahu saying support for the war in gaza depends on israel taking new steps to protect civilians. israel bracing for potential attack from iran after they vowed revenge for the alleged strike in syria that killed senior military officials. it was this story that started to evolve in a bigger way through the middle of yesterday, starting to feel the move in crude. annmarie: analysts are talking about that they are expecting a bigger retaliatory measure than we saw when omani was assassinated by the united states. a ruptured u.s.-israeli relations would be in a victory for terrorists in hamas and iran. the growing divide between jerusalem and washington is helpful to tehran and hamas.
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jonathan: a big move in exxon. 20% year to date for exxon. lisa: the biggest outperformer's where a lot of people are saying they benefit even if crew doesn't rally this much because they have a lot of cash and are returning it to shareholders. crude turbocharging the effort. given that they have so much of the shale patch with acquisitions and they are the outperformance of the year. jonathan: a big move in energy stocks in a big way. nato allies a canoe plan to provide over $100 billion in aid to ukraine over five years. this foreign ministers meeting, jens stoltenberg proposing ukraine be given long-term multiyear support from the organization reshaping nato's current role in the country's conflict with russia and limiting ukraine's reliance on washington. jens stoltenberg, the nato secretary-general, joins us. wonderful to catch up with you again, sir. some comments from the french president macron over the last month. i would love your response. he has not ruled out eventual
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boots on the ground in ukraine and recently suggested sending personnel, including the possibility of training troops in the country. have you spoken to him directly about some of these proposals? unsg stoltenberg: i am in regular contact with the french president as well as leaders in the nato. nato has no plans of deploying combat troops into ukraine, but we will step up our military support to ukraine with ammunition, equipment, and weapons so that ukraine can liberate more territory and prevail. that not only matters for ukraine but for allies. jonathan: sending personnel to train troops, how risky is the training option in your view? unsg stoltenberg: again, we are providing training, nato allies
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providing training for tens of thousands of ukrainian troops. we have done that for many years. that takes place now outside of ukraine. so, our support is to provide training, ammunition, weapons, but not combat operations inside ukraine. annmarie: i want to ask about the former president coming back. that is looming large on partners and -- partners in nato when it comes to the ukrainian defense contract group run by the united states.is there a chance that you bring that in-house so that nato controls that and safeguards it no matter who runs the u.s.? unsg stoltenberg: we agreed that the nato foreign ministers deal this week to start planning for a stronger nato role in providing and coordinating support to ukraine. the u.s. said content for
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ukraine plays an important role, but nato can ensure that we have an even more robust and predictable framework for our support to ukraine. that is needed, because ukrainians need to know that we are there for the long haul. that is what we are starting to do at nato, and i expect a decision before july. annmarie: are there other areas that you are trying to shore up nato control because you are concerned about political instability? unsg stoltenberg: my proposals on a stronger nato role is based on the situation on the battlefield in ukraine, the urgent need that they have to have more reliable, predictable support. the need that we have within nato to ensure more fair burden sharing among allies. 99% comes from nato allies. we have to be sure that that burden is shared equally among allies. of course, we need to send a message to moscow that we are there for the long haul.
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now, president putin believes that he can wait us out. he has to understand he will not win on the battlefield. he cannot wait out ukraine and nato allies. therefore a stronger institutionalize nato framework will send that and forced him to sit down and negotiate an agreement where ukraine persists as a sovereign, independent nation in europe. annmarie: we talk almost every morning about the potential for ukraine funding in the u.s. to be past and how it has gotten hung up by politics again and again and again and again. how difficult does it make it for you to wrangle support to get to the 100 billion dollar fund that you plan for the next five years for ukraine? unsg stoltenberg: of course it matters that the united states has delayed its decision to provide support ukraine. that is one of the reasons why the ukrainians have to ration the number of shells that their forces can use. why ukraine is outgunned by the russian forces.
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at the same time, we have to remember that european allies are providing roughly 50%, half, of the military support to ukraine. it isn't all united states. it is nato allies. but the united states being by far the individual ally providing the most, it matters. therefore, i hope that the u.s. congress can make a decision as soon as possible. this is important for ukraine but also in the security interest of the united states to prevent president putin from winning. that will send a message to him and president xi that when they invade another country, when they violate international law to achieve their aims, that will reduce the threshold for future use of force.what happens in ukraine today can happen in taiwan tomorrow. therefore it is in the national security interest of the united states to provide military support to ukraine.
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lisa: annmarie was talking about former president trump coming back to power and how that is looming large. i wonder how much those criticisms are looming large that are not isolated to donald trump but others as well saying that nato members haven't contributed enough to the spending and the financing of some of these efforts. how much reluctance are you hearing from some of the nato members who have not traditionally contributed as much to helping fund or disproportionately fund $100 billion? unsg stoltenberg: i strongly believe that it has been a valid point for the united states that allies have not invested enough in nato defense. that has really changed. we made the pledge in 2014 when president obama was the president of the united states to ensure that all allies spend 2% on gdp defense. at that time only three allies
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spent 2% of gdp on defense. this year we expect around 20 allies, 2/3, to spend 2%. that is a huge difference. it is a significant improvement. when it comes to the money for ukraine, one of the reasons why i want a stronger nato remark, institutionalized framework of support, is that that is a way to ensure fair burden sharing to actually agree on some kind of cost shares. to agree on a way to finance. by doing it through nato, we can ensure fair burden sharing, and that makes it easier to get all on board, also the united states. jonathan: we appreciate the ongoing conversation. jens stoltenberg of nato. your equity market s&p 500 near session highs up .4% with payrolls around the corner. let's get to your bloomberg brief. yahira: home prices in the u.k. have come down for the first
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time in six months. the average house price dropped 1% to just under 290,000 pounds in the month of march. that follows a 0.3% gain in february and a slight increases the previous four months. the market responding to a dip in mortgage costs and expectation that interest rates will fall this year. mortgage approval went in february to the highest level in 17 months. blackrock unveils new incentive rewards as part of the succession planning. the world's biggest asset manager announcing the coo and global business heads received a .5% in performance-based stock options. it was approved for a select group of senior leaders who we believe will play critical roles in blackrock's future. in total, blackrock says that it handed out a total of 120 million dollars of the stock options. samsung sales missed forecasts
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in the first quarter but plymouth area operating rose sharply ending a string affordably declines. results underscore how demand is starting to rebound from memory chips that power electronics after a severe downturn in the industry. the wall street journal is reporting that samsung plans to raise chip investments in texas to about 44 billion dollars. that is your bloomberg brief. jonathan: next, argentina's inflation problem. >> today, wages are miserable. not through our own fault. that is due to 20 years of populism. jonathan: live from new york city, this is bloomberg. ♪
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your equity market trying to balance session highs up by zero .4% on the s&p 500. based on our survey the median estimate is around 200 k, the data drops and 43 minutes. yields higher by two basis points. or point to -- 4.3295. crude, 80 $6.49. the argentinian president javier milei facing an uphill battle. in an exclusive conversation with the bloomberg news editor and chief he details his ambitious reform plans. pres. milei: despite the options, what we inherited from the previous government after having lost almost $12 billion, as regards to the fiscal
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surplus, the money base hasn't changed. we are cleaning up the balance of the central bank and in so doing the long-term price level shrinks, because we are shrinking the nominal scale in the economy and the slope is reduced and inflation rate comes down. this is why it is so important to clean up the balance sheets of the central bank, to get rid of that pressure. once we achieve that and are able to undertake the financial reform in order for there till no longer be the possibility of discounting, have to move to a free banking system integrated with capital markets so there are no runs and all of the imbalances are cleaned up through prices. in that context, if you also have your public government accounts in order and don't use the central bank to finance deficit, and if you also lift
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the currency restrictions -- well, the first thing you need to do is clean up the central bank balance sheets. once we have done that there is the anti-issuing law. one very key attribute of which is that this will make it a crime against humanity and not time barred if you issue money. it may be the case that once we leave office someone may want to change that. they may do that someone might come back and lock them up in prison for doing that. >> these might be admirable reforms, but at the moment if you are an argentine living here at the moment there is short-term pain in the same way that there was with margaret thatcher, all of the people you admire. i looked at the statistics and they are frightening. the average salary in argentina is at its lowest level since
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2003. 57% of argent -- of argentines live in poverty. so far the interesting thing is that your support has stayed high at 50%. do you accept that there is a time limit on how much pain argentines can take to take these reforms? pres. milei: first thing is, the way that we see it has been constant change in argentina. most argentines have understood that the solution isn't populism. today, wages are miserable. not through our own fault. that is due to 20 years of populism. when you take the average wage of argentines in the 1990's and update it to today's currency
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come that would be $3000. jonathan: you can catch the full interview on bloomberg.com and the terminal. can you share how things are going on the ground after the first 100 days? john: it is one of the most extraordinary economic experiments i think anyone has seen. coming to argentina since the 1980's, since carlos mena, who also had magnificent sideburns, he tried to bring down inflation and it ended up in riots and civil unrest. this man, milei, is a free market fundamentalist. he calls his dogs after people like milton friedman. he used to be an economics professor. you heard that he profoundly hates the idea of central banks printing money. his long-term aim he still claims is two dollarsiae the -- the dollarize the economy and
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replace the peso with the dollar. what is happening in between -- and he is somewhat discursive in his answers would be one way of putting it -- behind that it looks like he is having to compromise a little bit for two reasons. first, he hasn't got much support in congress. he himself is popular but he doesn't have many in congress. secondly, because there's a limit to how much pain argentines can take, the inflation rate -- he has reduced it to 13% a month. it is still unbelievably high. savings are disappearing regularly. jonathan: what do notice is the difference between the man on the campaign trail and what he has executed in the first few months? john: he has calmed down a bit.on the campaign trail he called china an assassin. here he sidestepped that saying
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they had to get on with people. he called the pope communist. he called the people who run congress, he runs on a very trumpian i am against the establishment way of looking at things. the fact is, he has to get some kind of a deal through congress. he sent in an enormous series of reforms which congress shoved back at him. now he is trying to go through the governors. to give you an idea how much he is thinking of taking outcome of the argentine state is 37% gdp. the current set of reforms he sent to the governors is reducing to 22%. this is thatcherism on steroids. it is much bigger, more dramatic, and the only thing he has going for him i think is the fact that argentines have had 100 years of false storms and false promises.
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this used to be the fourth richest country in the world 100 years ago and has gradually gone down. he is promising honesty and truth, but that's very difficult if you have just seen your pension reduced by 13% in a year. it is a very tough series of proposals he is trying to push through. annmarie: you mentioned china. how is he grappling with the reality of dealing with china as opposed to the plans that he had? john: in theory, he is very against china because he hates socialism and he hates -- again, he called them assassins. the basic fact is, he has an $18 billion swap line with china and reserves. that exercises some degree of caution. there is a route at the moment to do with the space station -- row at the moment to do with the
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space station with the chinese are building a patagonia, which i didn't get to visit. the u.s. is saying that this is a military purpose. that was sort of an opportunity for milei to say we are going to shut it down for you. it's obvious at the moment he is unlikely to do that. he is having to deal with it. it is not a big take about this today. you have this man who has come in really advocating exactly the opposite of everything that china is, but he has to make compromises. one part of it is that the chinese are no longer investing quite so much in latin america as they did. argentina is unusually on the hook to them, so they have dramatic degrees of leverage here. jonathan: a fantastic exchange, fascinating stuff with one of the biggest characters in international politics and one of the biggest experiments taking place in international economics. coming up, we will catch up with
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is, what happens with the average hourly wages? >> if those wages tick up or stay sticky, then we will have to adjust our expectations for the fed. >> there is more resiliency in the labor market. the economy continues to power forward. >> this economy is amazing. we see a 230 or 250, i would not be surprised anywhere in between. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz. jonathan: it is payroll, 30 minutes away. 214,000 is the estimate. the previous number, 275,000. all eyes on this one as this market has been whipsawed over the last week. lisa: how many bumps can we tolerate before it becomes something stickier that we have to take seriously? she is pointing to average hourly earnings aside from just
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the benchmark number. how much will we start to see a resurgence in what people are arguing paid? jonathan: the federal reserve is embraced because they don't have to worry about strength in the economy anymore. you get wages starting to surprise to the upside, do you disrupt that goldilocks theme in the stock market? lisa: yes, potentially because all of this is inflationary. today's print will show, what will the fed start to lean towards? they care about both. jay powell has asked about this, if you had a crystal ball, which one would you look into? he said you are trying to make me single-minded, we are dual mandate. lisa: the man -- jonathan: the man we want to talk about is not powell, it is kashkari. kashkari and bostic are saying maybe nothing in the whole of 2024. you might have to wait until the
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end of the year before we even do anything. that introduces all the politics. that's something they don't even want to talk about. lisa: the data has not cooperated. the strength we have seen has given a lot of people pause about how much the fed is effectuating a restrictive policy. do we get signs that ongoing strength for the labor market is coming from the bottom up? not just people who are flooding into the country from other places and taking jobs for lower wages, which are driving down potential inflationary forces and leading to a robust economy? how long can that story keep holding for this federal reserve? jonathan: it's a big debate. equity futures near session highs on the s&p 500. in the bond market, yields higher by let's call it a couple of basis points. in the commodity market, $86 and about $.70 on wti, positive by 0.1% and printing new highs for 2024. we will catch up with nadia of
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ubs, the former fed governor randall krozner, and we speak to mohamed a el-erian reacting to the payrolls report. why don't we go to that? lisa: she looked like she was coming from never ever land and then we started hearing about other fairytales. how could you pessimistic? >> i thought we were going to be going to lake como. jonathan: not the trade apparently because i thought the same thing. t.k. goes with you and then this stop tapping. lisa: false advertising -- stopped happening. lisa: false advertising. jonathan: the payrolls report 30 minutes away and stocks are looking to bounce back from yesterday selloff. nadia lovell of ubs saying we expect the s&p 500 to be well supported by further easing of financial conditions and earnings growth momentum.
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nadia joins us now for more. it's been quite a journey already through 2024 and it's good to catch up with you. originally something like 4 cuts, then it was three. where are you at for 2024? nadia: we have been at three cuts starting in june. it is clear this is a fed that wants to cut rates and is willing to look through some of the hot inflation data. we think the fluctuation in the market and pricing is quite reasonable. we think the easing cycle is imminent. you have the more hawkish tilted lorraine a master who pointed to -- loretta mester pointing to three cuts may be reasonable this year. financial conditions will get easier later this year. at the same time, the u.s. economy is growing and that's what's really important for stocks. lisa: i got a lot of analyst notes over my desk worrying about goldilocks' health.
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it seems like you are embracing goldilocks as the most likely narrative. how do you push back some of the gloom with respect to higher oil prices, inflationary inputs and the idea that growth could potentially continue but with some of these other experts as well? nadia: yes, of course, we are closely watching the pick up in oil prices, the implications are kenaf or inflation, and more importantly -- of the implications it could have for inflation, and more importantly, consumer spending. our attention is really shifting to the earnings season, which is upon us, which we know will kick off next weekend we think companies will be able to beat the relatively low expectations. we have consensus looking for low single-digit earnings growth. if the reports are any indication, we can see earnings are come in at mid to high single digits. we could see some upside from the more cyclical areas of the market. remember, you have atlanta gdp
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tracking at 2.5% and recovering globally in pmi's. reality is this higher for longer interest-rate environment should be positive for financials, too. tech is still holding in from ai demand. with think ingredients are there that even though we might see some breather here or there, the ingredients are there for the bull market to continue. lisa: how much are you expecting or what could you see in the nonfarm payrolls report that could make you change your view at some level? nadia: well, i think if you see, of course, something in the low 100 or below that. that will call into question the growth outlook, that maybe the fed is too late and we are slowing down faster than expected. if you see something close to 300, then of course, we would get concerned again about inflationary pressures. but we know historically what we have seen on payroll friday is that the market has knee-jerk
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reactions, but within a few days, it sort of sorts itself out. we think earnings is going to be that differentiator next week. lisa: is there anything you could see that could really shift the fed in terms of not just know hikes but potentially having a debate about another rate hike? nadia: i think if you see, you know, upward pressure on wages. we know average hourly earnings tend to be volatile and are prone to revision. i would not put too much weight on that. we know the fed's preferred gauges pci. if we see a pickup in that number, that could give the fed pause, and if we see continued upward pressure on oil prices, that could also be an issue. we know that historically what you have seen, sort of a rule of thumb for a $10 increase in oil prices, that tends to add about 40 or so basis points over a three-month period for cpi but the fed tends to look through shocks and it is more focused on
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core. but that could give the fed pause if we see continued pressure upwards or any sort of re-acceleration. lisa: how hard will it be for the fed, even if they want to look through the commodity resurgence we are seeing and the uptick in oil prices? even if they want to look. how different -- look through it, how difficult is it going to be for them to communicate around and, given we are expecting potentially more strikes and geopolitical risk out of the middle east? nadia: it will be challenging. it's a needle they will have to dread. in terms of the oil outlook, we don't think oil prices will be sustained too long above these levels. are core view is for brent to be at $86. and yes, right now it feels about five dollars or so are attributed to, you know, geopolitical risk premium. oil prices we don't think will be sustainably over $100. the reality is there is excess capacity right now, particularly coming from opec.
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we would expect saudi arabia to come in and sort of balance the market and also protect market share. we know it happened last year when oil prices spiked up. we did see a pickup in production from the u.s. oil prices moved back down lower. we think oil prices will probably come down back towards the $85-$86 range. jonathan: can we just play a game quickly? forgive me for doing so. he wants to handicap payrolls, nonfarm payrolls. and negative read would be under 150k, given other subtle signs of weakness and labor data, or about 250, which would introduce inflation risk but medium-term good growth is good. how would you frame what is good news or bad news in about 20 minutes? nadia: i would tend to agree with what stuart has put forward of sort of that knee-jerk reaction at thinking that news
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of under 100 would cause the market to sell off. and something closer to 300 would cause concerns about inflationary pressure. i think this would just be temporary and earnings over the next month or so are really going to determine the course of this bull market. jonathan: wonderful to hear from you. it always is. good to catch up on payrolls friday. nadia lovell of ubs. 57% of survey respondents said they would buy if treasuries fall after the release, this is payrolls in about 20 minutes. if treasuries rally following the report, around two thirds of investors said they would do nothing, only 19% would sell, compared to a six month average of 29%. what does that tell you about the bias of a income investors at the moment? lisa: they believe the fed has their back and that rates will go lower and there is a natural, inherent a bullish tilt. generally towards duration. how many bucks do we need to see before that gets shaken? that's been holding down the
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long end from being overly volatile pastorals triggers. jonathan: if the bears capitulate, and the equity market i'm not sure the bulls have in treasuries -- in the equity market, i'm not sure the bulls have in treasuries, right? lisa: this idea has been, even options don't seem to matter, despite all the big picture. jonathan: despite how much you try. lisa: i have tried. people say keep trying. jonathan: supply dynamics start to reassert themselves maybe later this year. lisa: depends on whether we get a policy shift, whether the election could potentially be that shock. jonathan: precisely. we spoke to the former house majority leader about a decade or so ago in washington, d.c. at what point does washington come up with a policy proposal that this market, fixed-income, totally rejects? in a similar fashion, and this is what you been talking about, to what we saw in the u.k. a couple of years back? lisa: neel kashkari kind of
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leaned on that and said the u.s. is not going anywhere and still has the fiscal dominance with the dollar. can we face a liz truss moment? other people say you start to get tariffs, tax cuts, deficits and you acted that potentially weaker growth, that could be a pretty toxic recipe that could lead to re-thinking. jonathan: treasuries right now up two basis points. here is your bloomberg brief. >> mortgage rates rose in the u.s. but just by slightly. freddie mac says the average rate on a 30 year fixed loan was 6.82%, up from 6.79% last week. freddie mac's chief economist wayne in saying while income and economic data indicate lower inflation, they do not expect rates will come down meaningfully in the near term. tesla is heading back to court and it is enlisting the help of apple. the ev maker's him to prove the safety of its autopilot system after an apple engineer was
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killed on his commute to work back in 2018. tesla claims the driver was playing a videogame on his phone when the crash occurred and aims to call an apple engineering manager as a witness. the victim's lawyer says apple is secretly helping tesla blame the accidents on distracted driving. and elon musk is giving away some blue checkmarks on x for free. musk pledging to start handing out the future to people who have more than 2500 verified followers. several users noticed this week that the blue checkmarks have suddenly reappeared on their profile. it marks a change of strategy for musk, who has criticized the old twitter's decision to handout checkmarks to prominent accounts. that's your bloomberg brief. jonathan: i am proud to say i am one of the chosen ones where it reappeared earlier this week. i saw a lot of people virtue signaling around it, saying i did not ask for this. i was happy it. came back lisa: how many bots
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did it take before people realized the system is working? how many boston you have? jonathan: quite a few -- bots did you have? jonathan: quite a few. lisa: there was one that was verified for a while. >> musk trying to make money off the check did not work. lisa: this reminds me of the sneeches, dr. seuss, they got stars on their bellies, everybody wanted stars, then they wanted them taken off. jonathan: of next on the program, i didn't know about that, the report just around the corner. >> this labor market is just amazing. we'll continue to see strong numbers. if we see a 213 or a 250 tomorrow, i wouldn't be surprised anywhere in between, which definitely demonstrates a very resilient labor market. jonathan: tomorrow is 15 minutes away. the jobs report, just around the co
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minutes away from the jobs report, looking for something in or around 200k. s&p futures a little firmer on friday so far. the jobs report just around the corner. >> this labor market is just amazing. we continue to see strong numbers. if we see a 213 or a 250 tomorrow, i would not be surprised anywhere in between, which definitely demonstrates a very resilient labor market. we are seeing a bit of rebalancing from the post-pandemic highs and lows. employers are taking a more measured approach. we are not seeing layoffs spike either. people are staying put, companies are holding onto workers, for the most part, and we are starting to see some evenness in terms of demand, some stabilization i would call it. jonathan: the march payrolls report due out in a few minutes time. the median estimate calling for 214. average hourly earnings coming in at 4.1% and the
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unemployment rate down a basis point. can we just talk about what you are looking for at about 8:30 eastern time, in 12 minutes, what you would be focused on if you are back on the fomc? >> really focused on the wages. because there is a lot of variation month-to-month, the number of jobs being created. but the key for thinking about firm's costs and where it is are going to go are wages. lisa: do you think the balance of risks still is pretty tilted toward potential weakness in the latter half of this year? already starting to rethink that given how strong the data is? >> well, i do think that we will start to see some weakening in the job market in the latter half of the year. as i've mentioned before, it's only about six months ago that real interest rates, that is the inflation adjusted interest rate, became positive. we've only seen real wage growth over about the last six months.
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it used to be great when you could hire people at 4% more but sell stuff at 8% more. you are hiring people at 4% more and only getting 2% or 3% more. that's not a good trade. lisa: what would you have to see in today's number that would make you rethink that? that would make you think that maybe there's a bit more strength people previously assumed? randy: i think there is a fair amount of strength in the market. i think it is something that is going to come with classic long and a variable lags and really it's when real interest rates and real wage rates are starting to grow, that's when you might start to see a little weakness in the labor market. typically, that takes 12-18 months to hit. jonathan: it is the supply side of the story that has dominated conversation on this program over the last few months or so. we are trying to work out whether this easing is down to the federal reserve or a very leaky southern border.
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economists start to lean more towards the latter and not the form. i wonder what that means if you are setting monetary policy at the fed, when you're acknowledging that some of these developments have nothing to do with what you are doing. how on earth do you set policy for the year ahead? randy: shocking, shocking that something could happen without the fed determining it. sometimes when you are in those positions, you sometimes think that maybe you are a little more powerful then you actually are. and there are many of these factors, as you said, supply-side factors that could be very important. they are going to take that into account. and certainly, that could account for some of the strength that we see in the labor market. that there are actually far more workers than we had originally estimated. and that would lead to stronger growth. so, that would mean that they would probably hold tight for a while. >> how difficult is it to forecast a future labor market if we get new immigration policies would potentially a new president? randy: well, that certainly
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would be quite a while off. because even if there were a new president elected in the fall, those policies would not start coming into effect until sometime next year. so it would be a year from now. i think the fed is probably focused on this year at the moment rather than next year. but it will take that into account going forward and it will do some alternative simulations. they will say, what if? what if labor market policies are this? would if immigration policies are this? and try to decide, what is most likely? jonathan: do think this raises questions about whether they are truly restrictive? : randy that's one of the key questions, is what is the long run neutral rate? and i think that it has gone up quite a bit from where it was before. we have seen a lot of different changes globally. we have seen aging of populations, particularly in china, so less savings when people are older. when you're university of chicago economist, you're good
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to think in supply and demand. . when there's less supply and savings, that means all things being equal that interest rates are going up. . i think the long-term interest rate is a little bit tighter, little bit higher. they are probably not going to push rates down quite as much ultimately as many market participants think. jonathan: you said a little bit higher. bill dudley said a lot higher. i will share the quote from him. "the fed is wrong about how low rates will go. this time around, the market has it right. the federal funds rate will probably stay a lot higher than one officials are projecting." can you give us what kind of numbers you would be projecting? randy: i think that's right. i think the fed is now thinking things are going to go and little bit more back to where they work just over the last few years. but i think they are more likely to go back to where they were kind of pre-global financial crisis. that would mean that the long great and the longer run -- the long rate, and the longer run, it's going to be closer to 3%,
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3.5%. it used to be closer to 4%. >> earlier last month, you talked about the idea that potentially you are not in the business of predicting markets, but stocks seem fairly priced to perfection from your point of view. they are even more priced to perfection, given the fact we've made new all-time highs several times since then. how much is this the fed's issue, that frankly, the fed has fueled the rally that has caused priced to perfection, that basically they have not batted away any of the financial concerns, and basically said the balance of risk for them seems to be to cut rates in the near future? randy: certainly, we see a lot of economic strength, i think more than the fed predicted, more than most economists predicted. you are starting from hear from them that they are going to hang tough for a while rather than start cutting rates quite as quickly as the markets expected. you have seen a pretty big shift
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towards where the fed is. you know, we have been on this program many times where i said, you know, the markets are much too optimistic about all those rate cuts. now the market is much closer and maybe even a little bit tighter than where the fed is. that strikes me as reasonable. at least for the peace that they have some impact on, the market expectations have moved closer to them. jonathan: it's always great to catch up with you on the first friday of the month on payrolls friday. former fed governor randy kro szner. mike mckee ready to break that down. what's the big focus? >> the headline number. jay powell has told us that is what they are looking at. the strength of the labor market, if it starts to get weaker, they would consider cutting sooner. that could be reflected in the unemployment rate. we are seeing all these people coming into the labor force, which affects the unemployment rate more than it affects the headline numbers. jonathan: which are rather be here or in lake como with the mohamed el-erian?
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where would you rather be? mike: if i were to be honest, i would go to the lake because i could get on the internet and watch the bloomberg numbers. jonathan: this is basically me lobbing to take us to the forum next year. and mean, seriously. lisa: mohamed a el-erian saying it is rough for him because he is there with all the cameras. jonathan: shocking. coming up very shortly, mohamed a el-erian in lake como to break down the jobs report. and jeff rosenberg slumming it at blackrock hq. catch up with them in just a moment. from new york city, this is bloomberg. ♪ ok y'all we got 10 orders coming in... big orders! starting a business is never easy, but starting it 8 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.
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numeral jonathan: ok, this is a. we are about 23 seconds away from the jobs report. 214,000 is the estimate. the previous number is two and in 75,000. equity futures positive. .4% up on the s&p. similar on the nasdaq. right now yields higher by about a basis point with the jobs report here is mike mckee. mike: good morning, and we did it again. 303,000. the labor market is not falling down. we can tell you that. two and 75,000 is -- 275,000 his
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last months revision. change in private payrolls, 2000. the unemployment rate does take down to 3.8%. -- take it down to 3.8%. we had that good ism manufacturing number. average hourly earnings come in as forecast, up .3% for the month and up or .1% for the year. it was 4.3% last month, and even though the monthly number was higher, base effect come into play there. average weekly hours, up one, which is suggesting additional strength in the economy. the participation rate is up to 62.7%. the quick look at these headline numbers suggests the economy is strong, the labor market is
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strong, and we are still seeing people coming into the labor force. i will get some more detail for you. jonathan: the equity market, dazed and confused. as we often say, the first move is not always the right one. equity futures on the s&p 500 just about positive. in the bond market, yields higher by six basis points. the high of the year earlier this week was 4.4274. we have been all over the place this week. yields up, dollars stronger. the you are breaking down to about 1.08, just about holding on that level. going through the numbers here, lisa, 303,000, wage growth, even though jobs beat, comes in line with expectations. the question you have to ask, does it change the overall theory, the thesis of the federal reserve right now, that they don't have to worry about strength because it is not coming with big inflationary pushes higher?
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lisa: that is where my mind went one i saw how little the bond market reacted to this. if you believe this was a headline-driven number you would expect a bigger selloff in the bond market. you are seeing yields climb. if you look at some of the revisions, there were not revised downward so much last month in terms of the headline numbers. this is a market creating an incredibly above average number of jobs. i will note this. yesterday the revisions for last month's wage increases were revised up. you start to put this together on the margins, it is a robust labor market that still does have that inflationary pressure underneath. jonathan: we come in at 303,000. if you are looking for unemployment, that came down to 3.8 percent, in line with expectations. wage growth month over month, the estimate was .3%. we got 0.3%. what are the details that jump out for you?
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mike: the household survey employment number. it has been negative the past few months and people worse jesting -- were suggesting that is why immigrants coming into the labor force was not true. had more people employed in the household survey then we did in the establishment survey. for 98,000 added after four months in a row of negative prints. so, we have a reversal there, suggesting noise in the earlier numbers. we have the labor force rising by four and 69,000, so people -- 469,000, so for people saying we might see an immigration effect, might be right. we have more people searching for jobs last month. in terms of where they got jobs, health care, 72,000, as always. and we are looking at government increasing by 71,000. construction, 39,000. some people thought we might
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have shot the entire arsenal last month with construction work. but it looks like they were able to find workers. that looks like housing is going up at a faster pace now that some infrastructure work is being done. leisure and hospitality, 49,000. returning to its pre-pandemic, february 2020 level. lisa: this is the 39th straight month of growth we have seen in the united states. he raises the question of how long this can go on before growth itself can still remain something that is not a problem for a federal reserve. when you take a look at wage growth, does that offset the potential positive inflationary shock of these numbers? is this enough to give the fed a little bit of an easy feeling that even though we are getting such positive numbers it is not necessarily inflationary? mike: it tells us that the narrative is not turning the other direction. that we are still seeing wage rates come down.
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they are above where the fed would like them to be. they think we .5% is what is sustainable. you don't see inflationary pressure necessarily in the wage numbers yet. now the question is, the other things happening out there like vaseline prices going up, are they going to push people to go back to the boss and say, inflation, we need more money? most people don't get raises in the middle of the year. we have had the big contracts already at the unions. this may keep the fed on track to cut rates. i don't think the strength of the numbers makes an argument to do that anytime soon. annmarie: is this report mean the fed needs to be more focused on inflation and can give itself more time for inflation to come down? because the jobs market is not deteriorating? mike: that is the argument they have been making. that they have time. they don't need to jump into this because the economy is strong and the labor market is a reflection of that. companies wouldn't be hiring if
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they thought we were going into recession. the fed doesn't need to cut rates right now. jonathan: later and fewer is different than hiking again. you look at data like this and you start to think about later, maybe later in the summer, perhaps september, and fewer. perhaps two. you're not having a conversation about hiking interest rates. lisa: which is the one thing that people say is keeping some sort of floor under this market. we do see in some swaps trading right now the idea of a full rate cut being priced in. in september rather than july. so, later and fewer seems to be where the market is at. mike: but later, next tuesday, cpi gets even more important now because the fed is going to be looking to see if inflation is coming down or if we are starting to see a rebound. jonathan: things could change quickly. we have been whipsawed already this week across five different days. the payrolls report comes in at 303,000. it is a big upside for product -- upside surprise.
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the unemployment rate came down to 3.8%. average hourly earnings month over month, .3%, in-line with the estimate. the equity price action looks like this. you're up by .4% on the nasdaq. the bond market price action looks a little something like this. yields up by seven basis points on a 10 year. in close to 4.40 again. the 2-year yield higher by four or five basis points. i will give you a snapshot of foreign exchange. dollar stronger against absolutely everything. euro-dollar at the moment, 1.0815. to break down this is jeff rosenberg. joining us alongside him is mohamed el-erian. what is your big takeaway? mohamed: it is a jobs report that confirms u.s. economic exceptionalism. you are having a strong
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supply-side, strong demand-side, so if you look at the economy, the economy continues to benefit from the favorable supply shock. if you look at the fed, that's not going to change much what the fed is thinking. and believe me, the administration will be celebrating this report. overall, a very strong report that confirms the u.s. is an economic exception among the advanced economies. jonathan: jeff rosenberg, do you believe this report is a report the federal reserve can fully embrace? jeff: it can fully embrace it, but it is a little bit challenging around the timing issue. the key thing in this report we haven't talked about his labor force participation. and its impact offsetting some of the wage concerns. i think that is the good news. lisa, you asked why a more modest reaction out of the bond market for such a headline beat, and i think that is it. you are seeing the, well, it is a strong labor market, but the wage picture is not, at least in terms of what you see in the
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print today, taking up beyond expectations. and you look at that labor force participation rate taking up, that is good news. lisa: why cut? given the fact that the u.s. labor market seems to be doing great, what is the onus on the federal reserve to ease policy that doesn't seem like it is hampering this economy? mohamed: it is because policy acts with a lag. these favorable supply shocks are not going to last forever. there are signs of weakness elsewhere. you have to navigate this. no, you have heard me say this over and over again. the mistake the fed will make, if it makes a mistake, is being overly data dependent, coming a play-by-play commentator, and not looking through various things. you have to look for. we are having a wonderful supply shock. has a lot to do with immigration. that is why the wage numbers are
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restrained. they are still not low enough, but they are restrained. but if you go forward, 6, 12 months, you've got to be conscious that a lot of what has powered u.s. so far, including excess savings, is going away. lisa: jeff, what is your take on that? why cut rates if you have a labor market that seems to be chugging along? especially if you have commodities inflation that people can afford to keep paying because they are still employed? jeff: yeah, i think it is about, really, the debate between what i call in the market calls maintenance counts -- maintenance cuts. don't want the lag in policy to eventually become too restrictive by holding real interest rates at these high -- at least relative to historical levels -- and the threat that may lead down the road to more tightening than what you would
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otherwise want. but that is different than saying we need to calibrate the cuts to a slowdown. i think what neel kashkari is talking about is pricing out what already happened in the bond market. we came into the year pricing out seven cuts. we are now three, may pushing down between two and three. i still think that is right, in the sense of you want to have that insurance. this is a fed that is very much weedded to securing the gains of the soft landing. jonathan: how dependable is this -- do you think this economic data is? jeff: no, you know, it is really interesting. the backdrop to what is going on in the movement to reprice away from seven cuts to three cuts is that you have this debate between two big sources of data. both for growth and the labor market. on the growth side a was the debate between gdp and gdi.
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gdi had been lagging the strength shown. they gave a lot of people in the market a lot of evidence that this economy is a lot weaker than we thought. what did we learn most recently? gdi rose to gdp and validated the stronger story. similarly, on the labor market you had the gap between the household and establishment survey. and a lot of people saying, the establishment survey, the headlines is overstated. look at the household weakness. now what we are seeing -- and that is the latest thing. no, it is the immigration that is not being captured. the labor market is much stronger. bama both cases with respect to alternative data you had a debate. that debate is pushing more on the side of, no, this is a stronger economy than we thought. that is what is validating this move to push back from seven cuts to three or less. jonathan: it is the supply-side story we all struggle with. what the federal reserve is telling you is do not worry
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about strong data like payrolls growth. because it is not coming along with stronger wage growth. because we are embracing this big supply-side phenomenon. at the same time they are pointing to the labor market as evidence they are sufficiently restrictive. i struggle to reconcile the two things. how can you view something as evidence of being sufficiently restrictive but also acknowledge the majority of it is supply driven? mohamed: because they are trying to have maximum optionality. that is what they want. it is the same thing that led chair powell at stanford to say on the one hand, the inflation story has not changed after the harder than expected print in january and february, but on the other hand we need more evidence that the inflation story is what we think the inflation story is. i would be doing the same thing. they are trying to maintain optionality and having complete -- competing claims. don't forget that the positive
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supply-side story is countered by a very negative international supply-side story. they have to balance these things are. lisa: i'm struck by what you said, when you are saying this is going to be a federal reserve that ultimately will accept a 2.-something inflation rate. this figure selloff is in the long and. this is confirmation that this market believes the fed might make good on its promise it will cut rates at some point this year while allowing inflation and growth to continue to run at a somewhat hotter speed. at what point does that become concerning for you? mohamed: it only becomes concerning if it de-anchored inflation expectations. i think there was a slow like gratian in markets, even among policy observers, and certainly among quite a few economists to review that, yes, we are going
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to get above 2%, closer to 3%, and that is going to be stable. and the policy mistake would be to go after 2% inflation too quickly. you heard bill dudley yesterday, and i agree with him, saying think more about 2.5% inflation rate on average. you have heard about how symmetrical the fed is. when it misses on one side or the other side on inflation. look, we have to settle into an inflation world that is higher than 2%. and i suspect that is stable. the risk is to try to force it down when the economy can sustain a slightly higher one, because then undermine economic well-being. lisa: it raises this question of at what point the bond market will price in a higher inflation future? jonathan was talking about how there is an inherent bias among bond investors to buy duration on selloffs, simple because they
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believe the fed will achieve their goal and continue to set rates at a lower rate. how much can you get behind that and how much do you push back and say there is something else afoot in the long and of the treasury curve that makes you not like them? jeff: i think with rates at this level we are going to shift away from that view that the long and is the best place for the hedge. it used to be a long time ago that flight to quality meant the curve with steepen. at the best performance in terms of yield change would be in the short and. i think that is the environment we are in. if you go back a year ago that was what you saw happen in the curve. the best performance in terms of yield change, granted that you would need the right notional amount to make this a fair comparison, happened in the front and. the strongest negative bond was in the 2-year. the weakest was in the 30 year. that is the environment we are in. as we start to see more evidence
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of that that is going to help bring back some term premium. part of the flattening of the term premium was the pinning of zero interest rates in the front end, which meant a flight to quality had to be in the backend, because you didn't have the room to run in the front end. you go back to that earlier textbook, that flight to quality in the front and, and a steepener, and that i think is going to help to bring back a higher level of term premium. more consistent with the inflation narrative we just heard from mohammed. jonathan: want about -- i want to talk about stocks with you as well. is this a stock-from the jobs report this morning? jeff: it is ok. when you look at the stock market what we have seen is less dependence on the denominator. last year was all about inflation, inflation expectations. the five-year driving headline equities. you have seen a lot less of that, so i think it is less of
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an issue because so much of what we have seen is really coming out of the enumerator -- enumerator. the power of secular growers, really overwhelming the much smaller concerns in terms of the degree of change that we are seeing in terms of the denominator. jonathan: i know you have to run because you are at work today. we are not all in late,. jeff rosenberg has to run. mohamed el-erian is going to stay with us, i'm pleased to say. jobs report, about 20 minutes old now. these are the numbers for you. 300-3000 against an estimate of 214,000. we .8% was the unemployment rate. -- 3.8 was the on employment rate. wage growth, .3 percent, in line with the estimate. here is the reaction to it. the third of 1% higher on the s&p, and the nasdaq as well. yields do bleed higher. on a two year maturity, yields
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are higher by six basis points. when you get higher yields typically you think about a stronger dollar. it is what you have against everything in g10 today. the euro is weaker. the dollar is stronger against the yen, the aussie, you name it. we are breaking down to about 1.08 on euro-dollar. mike mckee with us to break down some of this jobs report. you have had about 20 minutes. anything else jumping out at you? mike: obviously the big rise in the labor force is going to intrigue a lot of people because of this debate over whether undocumented workers and immigrants are propping up the labor force and helping it grow. we don't have exact numbers. they break down by foreign-born and nativeborn, but he foreign-born slipped a little. the nativeborn rose a little bit, but it doesn't really tell us the answer to that question. the other interesting thing is, government employment continues to rise significantly, up
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72,000. the biggest part of it was in local government excluding education. we have been seeing big gains in education. now it is local government, not education. it is not the federal government, so you can leave that out of the politics. only 9000 jobs related -- created there. looks like none of those were in the postal service. they were, 9000 in the postal service. beyond that, it is not a fan. jonathan: mohamed el-erian alongside us. let's get into american exceptionalism. you have mentioned that a few times. what you didn't mention was something you pointed to in the peace and really highlighted. it is the difference between what is happening in germany -- germany and the bond market. how does that spread between the two of them at the moment? mohamed: it is important, and it is the reason why you have seen the dollar strengthened. it has gone up about 200 basis points. if you look at the last three
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years the low was 97 basis points and it reflects two things. one was that u.s. economic growth has and will continue to outpace germany and the rest of europe. the second thing is that inflation welcome down in europe faster than it will in the u.s., and you may well end up with more ecb cuts than the fed, even though the ecb did not hike as much as the fed. the markets are starting to incorporate these two things, and that single differential captures really well these different factors. annmarie: i'm struck by the idea that the u.s. immigration story is different from other areas that are facing demographic problems, like the euro region. from that point of view, when does the euro become a problem in terms of weakness, or is that a welcome development, so that the european region can compete against american exceptionalism? mohamed: would be a welcome.
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i think more concerning is what happened to oil prices. that is something we don't talk enough about. but when you see brent in the 90's, that is going to have a stagflationary impact on europe. you know, is good to come and visit and participate in these european conferences, and the one here. -- and the one here is excellent. because you hear a completely different narrative about the economy, about what is happening to the supply side. and you realize how exceptional the u.s. is right now. and this diversions is not just going to stay, it is going to increase over time. that is something important. when people rush to fade the u.s. in terms of equity allocations elsewhere, just look at the underlying stories. they are very different. lisa: just to put together things you said, given the fact we are seeing oil prices rally, could that be a stagflationary shock for the european region
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and only widen the divide between europe and the u.s.? it also stands to benefit on the others from higher order prices. mohamed: yes. i would not say shock as much as i would say stagflationary headwind. and it makes a transition that europe needs to make, which is the u.s. is making from an older growth model that dependent on exports to china, that depended on things that are no longer happening to a new growth model that stresses things like generative ai, life-sciences, sustainable energy. it makes that transition for your partner. so, it is an important factor to keep in mind, because europe doesn't need additional headwinds right now. jonathan: we would love a final thought of more we got this morning and what it means for fed policy. this from apollo. the source of the strength is easy financial conditions. we are sticking to our view that the fed will not cut interest rates this year. what is your reaction to that and do you agree?
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mohamed: i understand where he is coming from. even had a non-voting member of the fomc yesterday make a statement. i think if the fed is continuously overly data dependent, maybe we don't get cuts. but i'm hoping we will see through the backward-looking data and look forward, and we will end up with two cuts this year it may not start as early as a lot of people thought initially, but i do think we will get two cuts. jonathan: this was great. thanks for making time with us today. home and all area and, working to another -- mohamed el-erian, working to another upside surprise. lisa: the economy is accelerating. that is going to be one discussion point for a lot of people. how much acceleration is going to be a problem for the fed? or is it welcome for one that is
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prioritizing inflation coming down even a little bit being the most important aspect? annmarie: i like to mike's point earlier, when he said this will be welcome in the white house. his good news actually bad news for them? it means going into an election year they might not get a rate cut. jonathan: you haven't said once all morning, let's get you into the weekend. annmarie: thank you. jonathan: 45 minutes away from the opening bell. equity futures positive. a big upside surprise. the source of their strength, we can debate it all day. it is not coming with runaway inflation. what does this mean for this market? yields approaching the highs of the year, close to 4.40 on a u.s. 10 year. on monday morning, jeff yu, jimmy chang. to all of you out there, have a wonderful weekend. we will see you monday. from new york city, this was "bloomberg surveillance."
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manus: from new york city, i'm manus cranny. 303,000. up went the yields in the market, but the equity markets now embraces the good news story on payrolls friday. the countdown to the open kicks in right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. manus: coming up, it is another hot u.s.
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