>> is the unemployment rate goes up a job growth stays strong, that is the perfect scenario. >> i think we're going to a more normal job creation. >> we should be talking about the other risk. employment could weaken. >> i don't think 150 would be a bad number. >> telling us the economy stinks. it is the hard data that is going to move the needle. >> this is "bloomberg surveillance." jonathan: live from new york city, good morning.

good morning. this is "bloomberg surveillance." coming into pedro's friday, of all-time highs. equity market heading toward a decent week. the payrolls report 8:30 eastern. the estimate, 180k. look out unemployment. if the unemployed rate stays beneath 4%, marking the longest stretch of supper percent unemployment for the u.s. since the 1950's. >> the parallel in tremendous physical support following -- fiscal support following the war. you have that and the other side of things, this is going to be the pivot at which we see real weakening with 140,000 on the perils number. jonathan: the call from citi and jp morgan, hanging by a thread with their called in july.

lisa: andrew said the bay employment data will be crucial for reaffirming or contradicting a growing market realization of the downside at risk for previously resilient u.s. economy. i would argue when you take a look at the peripheral data, especially with a k shaped economy, households retrenching some of their spending, if we don't see it in the data, are we saying we are not one is seated their seat in the data? or is this going to be pushed out? jonathan: 180 is consensus. the guy sitting next to us headline payrolls below 150 would be worth some. lisa: also the rise of the unemployment rate i think could be worrisome. in addition to potentially downward revisions to prior months, particularly april. it is not going to just come

down to the headline number. it will come down to average hourly numbers -- although that has been deemphasized. it is about the unemployment rate as well as the internal dynamics people get a sense up. jonathan: welcome to the program. the equity futures look like this. totally unchanged. close to all-time highs. bond yields have been much lower over the past week. just a little bit higher by a basis point. plenty of talk about the ecb. we will save most of that for later. did you see the necklace yesterday? lisa: i missed it. look, she is in charge of than afterwards everyone says, ok, put it. -- quit it. what became clear as his press conference went on, you got most of the council to agree on a rate cut and a nod to them,

concession price, was to basically say, the guys will be incredibly hawkish and basically take it off the table for the rest of the year. that explains why you have this completely nonsensical phenomenon where you are upgrading inflation forecast but cutting rates. jonathan: we said something yesterday that turned out to be true. we should pause. it is never about the ecb statement, that is conference, something uniquely european. in the hour after the news conference finishes, all of the sun sources saying what they really think about policy and where it will be and that is precisely what happened yesterday. fantastic reporting from the team at bloomberg. lisa: people are ratcheting back. this goes -- we're talking about divergence. what do virgins -- what divergence? jonathan: coming up this hour,

we will catch up with stuart kaiser. win thin on the ecb hawkish cut. and michael pugliese expecting another strong payrolls print. u.s. stocks sitting near record highs as we await the jobs report. stuart kaiser saying payrolls may be a banana peel. headline payrolls below 150,000 would be worrisome. good morning. what is it about 150 that might shake this market up a bit? >> there is a debate. rule of thumb, 150. when you get below that level, should see inflection higher in unemployment rate. would be going from a run rate in the 275 range for three or four months and stepping down, 175, 150. back to back arch losses, important as well -- back-to-back large losses, important as well. there are a lot of moving

parts. 150 is the number we are going to work off of. jonathan: no news is good news? you don't believe in bad news is good news. >> not even a little. it is like rooting for yourself to sprain your ankle because you like the physical therapist. i don't understand it. u.s. equities are a nominal asset. if you want growth to remain strong. right now i don't agree with you because if you're hoping for payrolls and the fed may cut, you're trying to thread a needle. once you get payrolls set 150, the chances you inflect negative really increases. now you're saying i want payrolls to be low but not too low so the fed will do a few cuts but not too many. too many contingencies you are relying on. i would rather bring 175 and not worry about it. lisa: the analogy if you sprain your ankle to see the physical

therapist you like, is complicated. i digress. jonathan: you like your vizio? lisa: let's move on. [laughter] >> i am sure he is very cute. lisa: it is payroll fridays. jonathan: you did this. lisa: potentially the response of equities to bonds. he sees lower bond assisting negative for stocks for the same reason you do. are we saying any rally in ponce is not going to give any extra juice to stocks in the future because there only be a rally in weaker data? >> unless you can thread the needle. soft landing plus insurance cuts. if you're able to kind of soft landing economy, keep payrolls in the 100 k-150 k rage, that is bullish. my view would be as payrolls are decelerated to the level, the

market is going to get spooked anyway. as payrolls slow, have to increase the odds they overshoot to the downside. i think it is a very narrow window in which lower yields can help you and that is an insurance cuts scenario. lisa: it sounds you are more bearish then you have been in a while? >> i would say the last 12 months give or take -- the last 12 months, three times we were recommending hedging and being careful. in august you had claims tick up . in october, payrolls get revised down to 105. we had dated that kind of look like this in the last 12 months. the differences it feels a little broader in the economics has been quite negative. you are missing in a broad-based fashion plus you have s&p at all-time highs. that combination does make me a little uncomfortable. we are looking over our shoulder a little.

lisa: nvidia. nvidia. that is all you have to say. it will drive everything higher. but what when can you bet against? >> i think earnings are interesting. i'm not going to get my t-shirt signed or anything. jonathan: we will go there. >> you're in a situation where the past earnings season if you claim to be ai but did not show it in your revenues, your stock got kind of hit. the nvidia story is there but this ai adjacent story has come under a little pressure. it also creates the sensible risk or weakness in the market around the edges. if nvidia can keep posting to billion of beads on a consistent basis that is positive but love large numbers, you run into that as well. it is huge and i will not poopoo it. people are starting i think to

ask jitterbug questions about can anyone other than nvidia actually demonstrate ai-based revenues? jonathan: does that apply to you as well given the run-up as well? >> utilities would be in that camp. i think the differences you have easy rollout, yet ai, potentially quantum computing stuff, inflation reduction act of those revenues are just now hitting. i would put utilities in that category but they at least have a couple of other things they can fall back on as "protection." jonathan: a lot of people think ai is in the job destruction business. why would nvidia care what jobs report looks like? why is a relative? >> that is a narrative. maury ai, less jobs -- more ai, less jobs. lisa: it is a good question. there are these potential changes supposedly going to happen.

michael put out this idea we are not seeing a real boost in productivity and it is actually falling off. he said in the second half of last year like we had little to do with artificial intelligence. is that basically your readthrough that this whole idea of the productivity boom on the heels of ai was a bit overinflated and isn't going to really create this virtuous playing field for a lot of these companies? >> there are two things. a lot of companies are already doing some form of ai are ready. a lot of banks have some form of ai. a lot of the help centers use a little ai already. the next step of ai productivity gains is probably not immediate. it will take a little time to bake in. the promise of ai productivity gains is not here and now which may be 4, 8, 12 quarters out. the internet going from zero to

100. ai feels like you're starting in the 40 to 50 range and now accelerating from there. the inflection is potentially a little less. lisa: let's finish where we began, what would you have to see him payrolls not to be bearish but to be bullish? to say i am completely positive more that i have been just yesterday? >> anything over 175 we will be feeling pretty good about things. lisa: 150 is misery and 175 is great. >> welcome to the internet economy. social media. get is since markets are going higher. what is the payrolls report did you terms of fomc? if payrolls are weak, i think the fomc become a bigger event. it payrolls are solid, it becomes a little less important on margins. jonathan: let's address it, really strong?

>> i am so positive. reprinted to 25 where your average hourly was .4, the market would maybe be a bit of a negative and that brings the fed back to play. adjust payroll, headlines themselves, can't be too strong. lisa: what about 290? [laughter] >> 320 plus .2 we are ok. jonathan: i love that, when 75 plus, great. -- when 75 plus, great. let's get your bloomberg brief. >> saudi arabia's getting ready to cash in on a secondary offering of aramco shares. the government is expected to sell more than 1.5 billion shares for 272 of these at the bottom half of the proposed range. according to people familiar with the matter. these sales is expected to raise at least $11 billion.

the biggest global deal in three years. it will help fund the government's multitrillion dollar push to transform the kingdom's economy. the israeli prime ministers and yah accepting -- netanyahu accepting an invitation to the house and senate on july 24 as he faces intense criticism over the civilian death toll from the war in gaza which has led to public disagreements with this president joe biden. a joint statement from both house speaker johnson and senate minority leader mitch mcconnell, both republicans, saying the meeting symbolizes the u.s. and israel's relationship. tsmc is getting a boost from the artificial intelligence rally. the cup the reporting made sales rose 30% to 7.1 billion dollars. tsmc's exclusive manufacturing of nvidia's most advanced ai accelerators and also makes semiconductors for apple and amd, which is nvidia's closest competitor.

emerging from us slump, strong orders of global chips which would be a boon for tsmc. that is your bloomberg brief. jonathan: up next, a hawkish call. >> domestic price pressures remain strong as wage growth is elevated and inflation is likely to stay above target well into next year. jonathan: how can he make it as boring as you possibly can after you have just cut interest rates. lisa: i was looking at her necklace because i missed it. jonathan: i will shoot you over a picture in a moment. large and in charge. live from new york on this payrolls friday, good morning. ♪

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jonathan: welcome to the program. it is payrolls friday. we are looking for something like 180,000. equity futures going nowhere. in the bond market, yields higher by single basis point. plenty to discuss in europe. a hawkish cut on surveillance this morning. >> despite the progress of recent quarters, to mystic price pressures remain strong -- domestic price pressures remain strong. likely to stay above target well into next year. we are not committing to a particular rate cut. we will continue to follow data dependent and meeting by meeting approach. jonathan: the ecb maintaining a hawkish town after yesterday's 25 basis point cut. doubling down on comets thing

there cannot pre-commit to a particular path. writing "the euro relief rally will be limited. with the fed likely to deliver a hawkish hold next week, the monetary policy diversions is will continue to widen." i what are your point of view, the divergence can continue. how far can this go? close it is not as wide as they were three to six months ago. i do it knowledge the eurozone was not as deep as i expected. it was pretty shallow. i the same measure, the recovery is going to also be shallow. we will not get a huge burst of growth in a v-shaped recession. i think -- we will know more today after the jobs and next week after the fomc data.

to me, pushing back hard against the pre-committed path but it is clear the way data is coming in, they will most likely be cutting and september and december. tree cuts already. it is quite unusual ecb ran the fed and they are cutting earlier and cutting more than the fed. i think an economic perspective, the u.s. is still growing somewhere around 2% in q2. jonathan: and the 20 plus year history of european central bank, it is not rare, it is unprecedented. let's deal with europe a little more. why do you think they will go again in september and perhaps again before the end of the year? what you think will drive that? it is starting to turn a little higher the last few months. >> i am reading between the lines. several theories. one is that they are more

concerned about growth. the cover is likely to be shallow as well. i think relief the data sort of turned but for germany's biggest partners china. -- partners china. i've been negative on china. the u.s. is still the only game in town. the market bowled up on the eurozone story. i think we can read between the lines. i think the ecb is concerned about growth going forward. i know that is not part of the band-aid. lisa: couldn't you say the same about the u.s. in the federal reserve? clubs at this point there focus purely on their inflation data. we are basically at full employment. they have the luxury -- many times those two mandates are at odds. right now they have the luxury of one checked off.

unofficial mandate is financial stability, check that box as well. that is why i think are single-minded -- mr. powell, they do not want to cut too soon come have inflation start to grow again and have to take back the cut. we had a very dovish hold back -- i'm having trouble with the new terminology. hawkish cut is new to my lexicon. i'm having trouble saying those words. but here we are. anyway. i think divergences are rising everywhere. it is not just monetary policy, it is economics. we seen that in developed. the ecb i think is the fourth central bank ahead -- cut ahead of the fed. many cut back in 2023. i think there's a sense -- i think divergences in general

worldwiden. better opportunities for investors. lisa: it sounds like the u.s. is still in an island itself. it seems that would suggest the dollar has quite a bit more to rally. is that essentially what you are hinting at? >> i am. the relative story has gotten a little less in favor of the dollar. we are seeing some signs of slowing and the economy. we will know more and a couple of hours. the pmi's have been mixed. the services remain blockbuster. i think the economy is slowing but there are still pockets of strength. inflation remains elevated. we will know more next week with the data. the fed has the luxury of being in a strong position they can pull off, the patient cup and

see how things play out. they're not dealing with a recession were economy fallen off a cliff. -- or economy falling off a cliff. jonathan: we mentioned this yesterday, can you imagine if the federal reserve cut interest rates and in the same meeting raised their expectations for inflation? can you envision what the market fallout would look like that day if chairman powell try to do that? were talking about having the luxury of waiting. why does he have so much more pressure on him in this not? i did not feel that are the same way with the ecb yesterday come their ability to deliver a cut and simultaneously raise the forecast for inflation. i don't think it is something available to chairman powell at all. >> it is puzzling. many clients have reached out and said, what is really going on? they are concerned. if they really were raising the

inflation forecast and concerned about inflation outlook and expectations, not cutting right now. the fed. look. as for his the eurozone is, the fed is the world central bank. the world's reserve currency. the fed is the driver for so many rates markets around the world. some central banks try to front run. the fed, it is a dangerous game to play. so for the ecb has gotten away with it. all the central banks that cut aggressively early last year were faced with crazy weakness. it is a check and balance. the markets had come hold on. you really can't cut this much. how the market can still turn on many economies around the world. jonathan: we will see the same thing happens. thank you, sir.

swiss have gone. the president to see the major -- unprecedented to see the major banks. lisa: 4g10 countries have already cut rates. it seems like investors are on board with this and to expect the fed to join this incredible rate cutting party. as you saw coming that second strongest inflows in global bonds since july 2021. jonathan: can you imagine if chairman powell did the same thing? the political blowback in d.c. coming up, we will catch up on gamestop delivering a surprise. more on that next. this is "bloomberg." ♪ [whoosh] ♪ trains that sense what isn't on the schedule. ♪ trains that use the power of dell ai and intel. ♪

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jonathan: two hours away from the jobs report. equity futures going absolutely nowhere. the stock market going nowhere yesterday as well. the bond market looks a little something like this. at the end of last month, we came close to 5%. we have backed down. we've had a string of softer than expected economic data. will we repeat that? a little bit different than the past. lisa: a week ago, it would have

been primed to have a rally. for yields to go lower. now it seems a little -- the bar is higher. we heard yesterday about this from a number of traders saying it just seems like we baked it a downsize surprise a little too much. jonathan: the 10 year is a great example. that currently is about 4.29. this time last week, friday morning, 4.54. a big move lower in just a hand flip sessions. lisa: we heard from michael at bank of america, stuart kaiser echoing that, if you see a number that since bond yields materially lower, that could be incredibly negative for equities because it signals the beginning of more significant weakening. that is the tipping point i find compelling on a day like today. jonathan: rate cuts yesterday, negative in europe.

this is what happens when you cut interest rates and raise inflation forecast. why the expected pretty much universally. ultimately to do that at the same time, raising inflation forecast. yesterday's decision raise a lot of eyebrows around london come across europe come here in the u.s. as well. lisa: there is a feeling it is deeply personal. you can fill the personalities in this decision. you get the sense, you precommit it and have to do it. it is a matter credibility but give us something. this is not the beginning of a rate cutting cycle, just something you committed to. it is essentially the message we got. it was his personal battle he felt come to the fore, twisted response. jonathan: the central bank. the staff come up with the forecast. at the same time, the ecb president saying real confident about getting it under control

going into this meeting. i could feel the tension. it is so uniquely european to see a play out this way. typically with the fomc, chairman powell reflected the consensus. for about a week you'll just hear from everyone five times. it can work out for yourself. in europe, see the story but 60 minutes of the news conference and finished to work out where everyone else already thinks about it. saying, no thanks. lisa: it feels like this is the u.n. trying to cobble together from different nations and everyone feels like they are being misunderstood, misheard, underrepresented. they feel left out. there is the feeling of basic resentment there isn't some sort of recognition of their economic trajectory. in the u.s. it is a little different. it seems like there is a little bit more at least a one nation approach to it.

leads with a different flavor. jonathan: not having this pushback but you can start to see a built in a little bit more. relatively speaking in europe. u.s. payrolls that 8:30 eastern time. expecting 180,000 added for the month of may. the number coming after a busy week of data. 180 is estimate for payrolls. unemployment, 3.9%. that would be like a run of sub 4% unemployment rates. lisa: if that ends up being another mother of 3.9%, it will be the longest read of monthly reads at 28 months low 4% going back to the 1950's from deutsche bank jim reed. are we more in the 1950's type of scenario, especially given we are not coming out of a war? stimulus, reminiscent of wartime postwar recovery. it raises the question, is that

the paradigm rather than the 70's and mid 90's and late 90's? how far do you have to go? jonathan: we will talk about the markets. the fact you're going to have potentially 28 consecutive months of unemployment and president getting terrible reviews in the polls about his handling of use economy is quite something. we talked about that paul from the guardian a week or so ago when you ask americans right now where unemployment is, there's a decent segment of society who believe unemployment is near 50 year highs. even though the equity markets -- unemployment looking at a streak you just mentioned, back to the 1950's. this book i read a report about sentiment around inflation. i will post it because i think it is interesting. even when the economy is doing well, people feel more how their overall costs are going up even if the overall paychecks are going up more. they feel bad because they know how much what they pay for should be or has been and what it is now.

there is a real psychological dampening effect of just how much prices have risen over the past three years. there is not a lot he can do about that. a lot of people say that is just time because you're not basically going to say you should feel better. that is not what anyone wants to hear. jonathan: the price of nvidia. vsco i would argue is some case, why does the division of people willing to invest in nvidia and those who are not. also sewing a lot of dissatisfaction. jonathan: today the president joe biden meeting with ukraine's president zelenskyy to discuss the country's war effort against russia stuff the president will deliver another address in normandy head of the state dinner with france's president. this goes back to a conversation we've had, if you go to the polls consistently, the top two issues for a lot of people, immigration is one of the southern border, and never what is the u.s. economy. it is not foreign policy. lisa: which is why the

headlights coming from the speech and this event, reminiscent of reagan and all that, but really what happens with russian assets to fight ukraine and the reason why that will be the focus of whether there can be some sort of agreement on how to unlock this money is because joe biden cannot get the support to mystically to provide those funds. there is not the willingness to fund these conflicts. it is more interesting to see what they can do with some of the other countries rather than the messaging back home. jonathan: the g7 meeting in italy and you know who got the short straw. sort of like settled in italy. time difference. just take a week to get used to it. more on that next week. gamestop reporting the missed estimates of the company taking investors by surprise. it was not expected to report order results until tuesday -- quarterly results until tuesday.

and livestream in three years. tom mackenzie joins us with more. what can we expect later this afternoon? >> the earnings come out, the share equivalent in terms of the loss for about 30% for the first quarter in terms of the sales drop of 30% i should say. the details, they have cash equivalents of about $1 billion. does that matter when you have roaring kitty doing the first livestream in three years? probably not. it is worth noting he has according to the screen grab, the options in terms of the calls around $20. he is sitting pretty as things stand on that front. there is going to be a lot of volatility around this stock on the first livestream in three years. the stock is up about 190%.

lisa: #sitting pretty, his stake of 120,000 calls, expiring to 21st, now worth about 325 million dollars, giving him an unrealized profit of about $260 million. this is not just small money for keith gill. what did you make of the new disclaimer on the website, on youtube screen grab talking about this potential conference -- basically saying, we are not under obligation to update or change, not necessarily a recommendation to buy or sell. though classic legalese. this is the first time we have seen anything like this. how significant is that? >> flashbacks to maybe before congress. does that really shelter him, protect him from regulatory scrutiny? we know hedge fund guys and girls talk their book. is there a risk here he will

face that bad scrutiny? is that 10 blake going to isolate him from that? i wonder whether or not he is more cautious in terms of the concept to puts out on these livestream's given what he is gone through over the last fears. the fact so many eyes will be on this livestream, roaring kitty. it is intriguing he has put it there and maybe get a more cautious livestream when he takes the airwaves. lisa: a lot of people are expecting anything by. looking at gamestop shares up 17%. it raises the question, how much is the gamestop story of fundamental stop mattering and they just put out earnings that were hugely disappointing versus something that is broader? >> how much does it tie back to the conversation you and john were having that central banks?

the argument for some the conditions remain relatively loose. if there's all that money that can be put to play. clearly, it is not about the fundamentals when you have per and estimates and drop in sales training. 880 million or so in the first quarter. this is a speculative way would be the argument. there is a big short position as well and gamestop. the shorts are feeling the squeeze. i think about a 20% stake in terms of the short position. that is potentially ramifications as well. jonathan: you have watched the movie and i have, typically the institutional money looking down on retell money. the done money this time was institutional money. -- dumb money this time was

institutional money. keith gill, everyone else has a row of lawyers in front of them telling them what to do, getting them ready. i wonder this time around given the resources that keep gill has come how much legal advice he has taken go into the street. i think tom is right that would be the number one question i have, how much legal advice has he taken going into this one? lisa: which is why i thought the disclaimer was fascinating. video casting from his basement wearing off and a rebbe bandana so it raises this question of has his investment posse change -- policy changed based on his eyes being open a little more? jonathan: or more refined. stock is up a little more than 20%. lisa: refined? jonathan: yes, taking advice on what he can and can't say. lisa: i think he would lose support.

i think it would diminish his appeal. jonathan: we will see what we get. let's get an update on stories elsewhere. here's your bloomberg brief. >> exit because pay so sank after a leader in the ruling party said lawmakers would seek to pass reforms that could remove from power. outgoing president and low will discuss what new congress will see in september. overhaul before president-elect claudia sheinbaum takes office in the fall, sending the peso tumbling near 3% come on track to close at its weakest since october. hurts is considering a sale of at least $700 million in secured debt -- hertz is considering a sale of at least $700 million in secured debt. no final decisions have been

made. the u.s. team has pulled off one of the biggest upsets in cricket world cup history. a shock win over pakistan. the victory puts the u.s. and a strong position in their group after the earlier win over canada. the u.s. will face another heavyweight on the score on wednesday when they meet india in new york. jonathan: pause. that is like pakistan beating america in basketball. that is how ridiculous that is. lisa: the fact even i know tells you something. jonathan: jobs data on deck. >> i think the car for the fed to be cutting sooner than the market is pricing is pretty low, we think we will see 140 thousand barrels which is a further slowing from the slowing

we had in april. jonathan: that conversation just around the corner. the estimate in our survey, 180k. payrolls report 8:30 eastern time. this is "bloomberg." ♪

jonathan: who said fundamentals don't matter. check out gamestop. fundamentals may sell out class a stock, headline dropping just months ago. lisa: keep talking. seems to be whipping around at this point. jonathan: let's say the dip -- stock is now negative by about 4% in the premarket. more on that a little later. jobs data on deck. >> i think the bar for badly

market for fed to be cutting sooner than the market is pricing is pretty low. i think we will see 140,000 payrolls, which is a further slowing from what we had in april. the level of job growth is still a pretty healthy level but it is the trend that is concerning. jonathan: the latest, may jobs data due in less than two hours. the median estimate and bloomberg survey: for payrolls to rise by 180,000. the team at wells fargo expecting 195k. think the pace of jobs growth will look more like the pace -- april pace. michael joins us for more. talk about the expectation it's not just on headline payrolls but also unemployment and wages as well. what are you in the team looking for? >> i would say we can get a little bounce back in april just given payroll growth was pretty

weak and a couple of categories in april that have been so slow in things like government and leisure and hospitality that were slow now though the month but strong -- slow in the month but strong in the quarters before that. i think being get to the 195,000 number we are forecasting. untrained it looks like things are slowing down some. whether it is the unemployment rate ticked higher or the u6 that is creeped up. you side in job openings and other data this week. i think even if we get a little bounce back today you are still single labor market coming into better balance and cooling on trent. lisa: stuart kaiser set the tone. how narrow is the gap between what we could get that could really shift my intimate either this is an economy that is really on a downward track or this is really stable and we're doing great? >> i don't think it is that

narrow. i don't view it as take this one and be super bullish or bearish. even with the slow down, still 242 thousand. even if that downshift to something like 200 k, 175 take, that is still a pretty healthy separate job growth. you look across other economic data we have downshifted but i think some of that was to be expected. even if it is 140,000 today, i am not going to be too worried. lisa: when you dig into the internals, i'm cursed how important it is to see where the job growth comes from? if it is government jobs, probably will be a little bearish for some just because that can't continue forever. to see a revival in leisure and hospitality because we have seen a real slow down, can you give us a sense of which sectors will be responsible for the book,

hiring, and why that is important? >> i get asked that a lot. i think we have seen signs of it slowing down and that is a good example where easy job growth that is narrowed up. it is just not as strong as it was across industries. job growth led by sectors that are less cyclically sensitive. things like government and health care. i think that is another area i am looking to to see, ok, even if we get an upside beat, is it concentrated in those industries like government, health care, major positive at -- hospitality ? if so, i think that is evidence a labor market is coming into better balance and not nearly as tight as it was 12 or 24 month ago. lisa: how relative our average early earnings? a lot of people use to emphasize this as the most important part of the report. this time it is deemphasized. why? >> it is been noisy. it is a bit of accrued metric stop you saw it spike dramatically in april and may

2020 that was really just sort of a function of how it is calculated then you saw this big drop in 2021 and there was noise. i think that is why fed and others have put more visits on labor cost growth. i think as we get further and further from the pandemic, because back to be as relevant as it was maybe in 2019. i don't think we're quite there yet but getting closer. you've seen slowing their tubes -- you have seen slowing there, too. even there again that data has been more noisy than it has been historically but even there i think you've seen some signs of labor market cooling. jonathan: as we come down to 150, 160, what is the strongest argument this is just rebalancing and not something worse? >> i think the strongest argument is you have to get back to steady state eventually. all roads lead to a slowing down to something like 150, 125,000.

what is hard for the fed is sticking that landing. you want the economy to slow down from the 600,000 plus jobs we were adding a couple of years ago. that is what we have seen. i think the hard part is sticking that landing at around 150,000 give or take a little and not having the inertia carry you even further lower. i think the risk of monetary policies have gotten two-sided. the inflation is still above target in the fed has to be cognizant of that but it doesn't want to see an employment growth slow from 150 to negative and then find itself in recession later this year in 2025. jonathan: do you think the federal reserve is as sensitive to the data this morning as wednesday morning? >> i do. i think cpi reigned supreme in terms of the inflation data but i think the unemployment data is something people are keeping an eye on, particularly the doves and in light of the more recent data we have gotten, whether it be the somewhat softer number in april, creeped higher, job

openings numbers we talked about that are down one third. i think cpi is still going to have the bigger wait for markets and the fed but nfp will matter particularly as you start to see some slowdowns below that 200k mark. lisa: it seems soft landing is pretty much consensus across the street. i'm wondering if it is got less confident. have you seen or heard, believe a chance of a harder landing is looking more likely than it did, say, a month ago? >> i think the probabilities may be gone up a little but it is more directional that it is a big magnitude. ultimately, it is only been a few weeks of softer data. two, we were booming and had job growth that was growing and inflation numbers high. it was always our expectation as the year progressed we would move slower and activity and

hiring and inflation relative to what we had in q1. maybe on the margin that probability has gone up a little but it has not gone up for us -- i think what is encouraging, do have a fed cognizant of these two risks. it is pretty easy to envision a different federal reserve that looks at inflation that has been above target for three years and says, we're not going to really consider the employment side at all, just full steam ahead while slowing down the inflation side. i don't think we are seeing that. jonathan: michael pugliese, looking for 195. it doesn't matter what this number is, that debate will be wide open. is this rebound -- why would we stabilize this perfect 165, 170, 175? lisa: why not? why not feel good? things are fine. that is what everyone is sensing, there are not the signs of with this. you can make an argument never seen this kind of protection at

last for long period of time and you could also make the argument in the k shaped recovery, there are two different economies battling at out. one has a sledgehammer and one has a toothpick in terms of spending power. those are the things that are battling with each other. jonathan: whatever happens, at 8:31 we will still be vulnerable to whatever happens at 8:30 on wednesday. you can see how sensitive we have into the economic data every single morning so far this week. lisa: it is frustrating. it is frustrating. there isn't a cohesive narrative coming out. it is clear slowing but not necessarily slow. that doesn't mean anything to people who are looking for a trend. jonathan: the conversation continues. up next -- looking ahead to the payrolls report just about 94 minutes away. ♪

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>> as the unemployment rate goes up and job rates stays strong, that's a perfect scenario. >> we are going to a more normal, gradual pace of job creation. >> we should talk about the other risk. employment could really weaken. >> 150 wouldn't be a bad number. >> it is the hard data that will

move the needle. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, annmarie hordern. jonathan: good morning, good morning. let's get straight to the numbers and straight to the big estimate. our survey says 180. that is the median estimate and our survey. the last month, 175. the unemployment rate looking for that to stick at 3.9%. it is a two-part story going into the federal reserve next wednesday. payrolls this morning cpi next week. lisa: we saw last month the weakest pace of job creation in six months albeit coming off of a pretty high level. can we start to see some trend? that's a reason many say this is a pivot point. take away what is bullish or bearish, it seems like we are reaching an inflection point to understand whether the weakening has become a trend and then we can debate whether trajectory is.

jonathan: is it rebalancing or something worse? chairman powell has a big job in the news conference to do. we will be joined later with chairman palette for sizing patients in this news conference. looking for powell to put july firmly on the table in the news conference next week. those are two very different views of the same chairman. lisa: it comes down to cynicism. i don't mean this in a negative way just that ellen zentner has said that she doesn't believe in political interference or the idea that the politics will hangover the fed's decision. peter scheer says that that is not the case and he sees a july rate cut because any closer to the election and they will open themselves up to political accusations that they would like to avoid. jonathan: would you like to see volatility? game stock in the premarket. it was up by 20%, down by 10%, now it is positive again. it was down off of this headline 15 to 20 minutes ago that the

company may sell class a stock and use the proceeds for general corporate purposes. lisa: this is a battle between the people who follow keith gill, roaring kitty, and the hedge and others who are short-sellers and still have a short position on gamestop. it raises the question, is this just an idiosyncratic issue with this one name or a broader signal to the markets about what froth there is in the markets? i'm not going to get into that debate, but you could make the argument that if people have money to be playing around in stocks and throwing away that it raises the question around the margins -- i don't know if it is frothy in this or a desperation to get into the casino. jonathan: just because you found a casino doesn't mean the whole place is las vegas. it doesn't mean that everything counts. this has been going on for years. what has the equity market done?

up and to the right. lisa: i can take that a step further. this is in some cases like a lottery ticket. people are looking at a lot of people being rich off the market, putting their money in the market saying we can do this and this and these nuances and make money, and we want in on this too. if this guy can get us there, we will go. it is not being able to access the market that has bolstered a lot of household income sheets. jonathan: first quarter net loss for the company $32.3 million. there won't be a conference call later -- well, there will be with keith gill himself. there will be a livestream on youtube. lisa: with a complete legal disclosure that is new about what not to follow and this is not necessarily a recommendation. jonathan: it is notable. on equities, the s&p 500, we come into friday really close to all-time highs. down by not even 1/10 of 1%. payrolls, quite a rally on the bond market.

this time last week we were in the four 50's. we are down to the 4.20's. lisa: the markets readjusted and any downside surprise might have a more limited effect on any treasury rally that we get. it would be if people talk about a adjustment, recalibration, or if this will be the beginning that people sniff out that has deeper legs. we keep hearing rebalance, normalize, adjustment, and then we stabilize, everything will be a -- will be ok. lisa: pick your poison, basically. jonathan: this is the lineup. the jp morgan on why markets are focused on growth over inflation. mike shepard with nvidia and microsoft facing antitrust probes. and ellen zentner looking for a payrolls print of 220 k.

we begin with our top story, the jobs report 90 minutes away. the median estimate looking for 100 80 k. jp morgan writing, the market is more focused on growth than inflation. rates and risk assets have reacted more to downside surprises this week. maybe the fed can cut, but the lags work both ways so i slowdown in growth would be trouble maddock. are we saying payrolls this morning is more important than cpi next week? priya: the fed has dual mandates and both are important, but look at inflation, the re-acceleration risk with away with april. the fed has to be careful. i don't think that they will signal rate cuts. look at what is happening on the growth front. there is no question the economy is slowing. are we slowing to a normal slightly below trend or continuing to slow? recessions are typically non-linear.

i think the market is focused on that. we are priced for a soft landing. what is the risk to that? a recession or a bigger slow down. i slow down below trend closer to zero i think is the risk that the market is starting to zero in on. jonathan: are you saying you don't buy the rebalancing story or that you don't think the opposite is well priced in the bond market? priya: i would say the latter. the market is pricing in this soft landing. the fed cuts just enough to keep everything going. what is the fed is not able to cut until the end of the year? what if inflation remains a sticky? they don't want to sound political so they cut late and cautiously. in the meantime, the economy is slowing down. the lags we have been talking about work both ways. if you have with the market has priced and you won't get further easing. i think the preemptive cuts are essential for the soft landing

to continue. if inflation doesn't let them do that we are looking at a bigger slowdown. jonathan: what do you buy right now? priya: it is hard. if you want to give up on risk assets it is expensive. i think you're supposed to own high quality. i think fixed income mix a lot of sense for the first time in years you are getting real income. but i think that you are supposed to hedge the downside risk. the correlations that have been extremely unstable, i think that if you look at the risks the fed is telling us that they will respond aggressively of the economy slows down. buy duration, buy 10-year bonds. i would say at 4.30 on the 10-year, what is the market pricing in? two cuts, three cuts, the endpoint at 3.5. the neutral rate is probably above two .6. it's probably not 3.5. where is the recession risk? you own risk assets carefully, you have to know what you own and understand the balance sheet, what are companies doing

with debt, and own duration for the downside risk of thing slowdown faster. lisa: you seem to agree with renaissance macro. he says that he thinks the fed will make a mistake if they don't cut soon because they will avoid achieving the soft landing, which seems to be what you are saying. preemptive cuts are essential for getting the soft landing? priya: i struggle with if they make a mistake. i give the fed a lot of credit. they pivoted, and the markets do this. we overdid it but the fed pivoted in time. the fed said we are done with hiking, effectively, as much as they could say that here they said again that it is a bumpy inflation road. the fed is trying to create room. if they still talk about two cuts as the baseline media, they're giving the optionality they can cut in september. they will cut in september, december, the market will then price in more cuts.

does inflation allow? do we continue to decelerate. inflation is hard to forecast. the wednesday number is important. if you get 2.3 i think it gives them room to cut. i don't think the mistake is here. if you don't get the inflation number and they aren't able to cut, that is where the policy mistake is. lisa: we talked about why this is frustrating. i've heard people that i have respect for make arguments on both sides and i buy every argument and they are making opposite arguments. a week ago someone said there is a risk of the reacceleration of inflation next year and there could be potentially a rate hike in next year. it made logical sense from a policy perspective, from year-over-year, from dis inflation data. how can you have confidence? where can you get confidence that that is not one of the scenarios baked in at all? priya: i think that you look under the hood.

it is a k-shape economy. the cost of economy is the so high for certain part of the business and household sector and not restrictive for another part. which one wins out? they could take longer than the market wants to figure out who is winning. i would look at underlying trends like job opening slowing down. when the rate is below 5% i get nervous. governor waller's at 4.5%. the unemployment rate starts to rise. i think 150 is priced in. you get below 150. we thought anything below 100 was a problem. given labor supply what is 200? even if the number is 150, are we slowing too much? that will be the debate. you look at everything, the totality of the data, keeps us all in business looking at company fundamentals, macro data, the distribution of outcomes, i think that it's

important to look at the distribution because it is a bifurcated economy. jonathan: can we do scenario analysis? the difficult call for a bond manager right now. what happens if we have payrolls disappointment cpi coming in at a punchy .4%? what does that mean for fixed income? where do you buy? priya: i would say that you buy fives. if inflation is sticky it will be hard for the fed to communicate cuts that day. i think you buy further out because of the inflation numbers high and the fed doesn't cut the risk of a hard landing is higher down the road. then the fed will keep the front end anchored. by the time the economy slows down it will be too late for the economy -- too late for the soft landing. i think if you buy fives, inflation is stable, i don't think that you need weak inflation.

then you start to buy twos, front end, the curve will steepened significantly. lisa: there is a real question, and i see this in the research come about if unemployment has become more important than cpi because the dual mandate is taking on a different meaning. when you say that that is the case? priya: i think the market is paying more attention to it. the fed told us they are paying more attention to it. inflation a year ago was 4.3. it is now 2.7. we are getting close to the 2.5, and that range. the fed is telling us that the unemployment site is what they will respond to. the market, the fed, we need to look at the growth side, which we haven't. for the past few years we've taken growth for granted and focused on inflation. i think that we are in the shifting inflection point here. jonathan: the nightmares if the dual mandate goes into conflict. the nightmare for any policy official. it is good to see you on

payrolls. equities on the s&p 500 just a little softer down about 1/10 of 1% as we count you down to the payrolls report. here is your bloomberg brief. yahaira: shares of gamestop website and in the premarket. the company announcing that it may sell up to 75 million class letter a-shares and plans to use the proceeds for what it says are general corporate purposes. the news coming alongside disappointing first-quarter results and ahead of a youtube livestream by keith gill, known online as a roaring kitty. the social media posts have sent the stock soaring over the past week. hong kong will no longer close it's a stock market during typhoons and heavy rain storms. starting as soon as september, according to sources, hong kong exchanges and clearings is expected to announce the plan in the next few weeks. hong kong has been an outlier among major financial hubs to have rules to close its 5.2

trillion dollars market amid inclement weather. the official start of summer in the u.s. might be two weeks away, but the southwest is already experiencing its first heatwave of the year. temperatures soared past one hundred 10 degrees fahrenheit from southern california to arizona. the national weather service extending its excessive heat alert until friday night and most of the region. and through saturday in las vegas. at a trump campaign rally in phoenix 11 people suffered from heat exhaustion and were taken to the hospital. that is your bloomberg brief. jonathan: more in about 30 minutes. next on the program, ai under the microscope. >> i worry that ai models with access to huge amounts of consumer data in the hands of very few companies could pose enormous risk.

jonathan: we talked about this earlier this week. what if nvidia wanted to buy something? we talked about ability, willingness, possibly, what about approval? would washington approve? you are like, i don't think so. lisa: right on cue, we are very concerned. jonathan: 8:30 eastern, payrolls, looking for 180 k. from new york this morning, good morning. ♪

jonathan: stock market for you, equity futures a little softer with no drama down by about .1% on the s&p 500. to wrap up the conversations we've had so far, citi firmly in the camp that bad news is bad news and good news is good news, and the difference between the two is 175 and 150, apparently. ultimately for the market the job sprint this morning, in her view, is more important than cpi

on wednesday morning. lisa: citigroup and jp morgan base case is that both of them are calling for a july rate cut. they're coming from the same place, singing from the same hymnal, that this is an economy that is weakening, the question is, how much? jonathan: that is dependent on the economic data between now and then, particularly the cpi print. ai under the microscope. >> i worry about the concentration of ai models with access to huge amounts of consumer data in the hands of a few companies could promote serious risk around economic decisions and access to opportunity, information, and privacy. it is our responsibility and obligation to support open and fair markets and prevent monopolies. jonathan: u.s. regulators opening antitrust investigations into microsoft and nvidia over

the rapidly emerging field of artificial intelligence. the probe focusing on microsoft's ties with openai and nvidia's dominance in ai chips. we are joined from the nation's capital with more. mike, what are they focused on, disappointed by, worried about? mike: the inquiries at this stage are very early. we learned about them earlier this week. what we are seeing is a focus on two things. for microsoft, it is the relationships it is forging with companies, namely openai. there are others as well. rather than by the businesses outright, microsoft is making investments and swapping employees and having an exchange of information. but all of it is taking place away from the radar screens of antitrust enforcers. if there was an acquisition of openai they would have to go to the fence for blessing. but these investments have so

far evaded scrutiny. it is a lot of money at stake and a lot of technology and people too. likewise with nvidia, looking at how this company has been allocating chips in the marketplace, in practice -- a practice it has acknowledged. getting semiconductors that it makes for ai use the most likely to use them the most quickly. this is in part because there is a natural scarcity of these chips out there. it is something characteristic to the industry. it is something that raises questions about the company's dominance. lisa: we had this question with mandeep singh in terms of what acquisitions would be in the crosshairs of regulatory scrutiny. it sounded specific for nvidia. i wonder based on the wording of the federal statement if this goes beyond that to data acquisition. if it goes to, in terms of a dominant position overwhelmingly in a marketplace that can be

more ambiguous at a time when everything, every input could be added to the advantage that some sort of machine computing technology can offer? michael: i'm glad that you asked, lisa. this is going beyond the simple question of acquisitions. it is in the relationships that are being forged. it is in the investments being made. it is in the technology that could be exchanged or discussed between different companies. really, every move will be under scrutiny now. one area that is part of the agency's focus are the interlocking directorates that you see between some of the bigger companies and some of the startups. if you see too much overlap, that is a cause for concern among antitrust enforcers. jonathan: ultimately, a company like microsoft doesn't have to buy the company, they can just hire the talent and offer them a lot of money to bring them over which is what lisa is alluding to. what can they do about that?

michael: they can go pretty far. it will be interesting to see what they have in mind as remedies. the catch is, for them, ai is such a rapidly emerging and nascent field that the industry is saying if you keep cracking down on us at this stage of the game you're going to stifle innovation. yet, at the same time, you have heard the federal trade commission official today saying that they are concerned that if the government does not act it will set the stage for market dominance for decades to come. what we would look at is, what sorts of handcuffs with a put or restrictions would they put on for example the types of investment? the types of relationships? the exchanges of employees? what they have to report to the government? how much they have to ensure that the playing field is open for other competitors? lisa: let's build on the

politics at the moment. you have the question of how do you regulate this? the procedural aspect. but then you have governor newsom to your point who warned against overregulation saying that we need this innovation. he was speaking at an ai event in san francisco, so it seems like a logical place to talk like this. is it an argument that is breaking down along partisan lines? is there clear-cut division in congress as for who wants to regulate more and who wants to regulate less? michael: traditionally you see democrats favor more government intervention in markets, especially in areas of competition. we have seen republicans urge a more hands-off approach so that industry doesn't feel like it's being stifled. we heard caroline hyde interview eric schmidt a few weeks ago. he really railed against the whole idea of too much regulation to early against artificial intelligence

technology and investment. he said that it would be something that would hurt innovation, hurt growth. he specifically cited efforts in the european union as being premature and not very well thought out. he urged u.s. regulators to take a more cautious, thoughtful approach. so far when it comes to congress , we have seen lawmakers from both sides of the aisle expressed concern about the risks posed by ai. it isn't so much on the competition front. it is on the larger question of data privacy and how is the technology being used? we see some within the industry warning about existential threats. it is something new and a little scary to people in a way that some lawmakers on both sides of the aisle are not afraid of talking about regulation in an open way. jonathan: if i were a politician i would be worried about the prospect of job disruption and

societal upheaval. mike sheppard of bloomberg. it's almost bizarre that we are talking about an industry in its in the -- in its infancy after we talked about a market cap on nvidia at $3 trillion. lisa: it feels like someone regulating a kid on their iphone that has had it for five years and has it attached to their other devices and has waist to access it. on your iphone you will delete this app, and they are like, ok. jonathan: come on. coming up, the quote steady as she goes job market. this is bloomberg. ♪

her uncle's unhappy. i'm sensing an underlying issue. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

jonathan: jobs report 60 minutes away, equity futures negative by almost 0.1% on the s&p 500, totally unchanged on the nasdaq 100, softer on the russell small caps down 2/10ths. treading water, going nowhere in the stock market. >> it's interesting if the first reaction will be the right one because it seems like there's so many different iterations of this jobs report. the headline, the revisions come etc. you can imagine it will be a whipsaw. jonathan: it is like i thought

that headline mattered, firmer than expected, but then it is like the unemployment component is the big piece. that is what you need to focus on. lisa: this is a frustrating moment where everyone is an incredible salesman drawing together ideas that represent their case and they make a good case. jonathan: a strong case. we believe you. both sides come apparently. lisa: of course. jonathan: the jury says, got no idea. the two year yield is higher by a single basis point. about 4.74. the 10-year last week in the 4.50's back down to the 4.20's. think about the data we've had. adp came in softer than expected and job openings came in softer than expected. we talked about the employment component. ism manufacturing, putting it altogether, it inspired a bond market rally coming into this morning's number.

lisa: you can see two full rate cuts being priced and starting in september and then in december.this raises the question of the readjustment you are talking about or if this is the beginning of a trend. talking about no rate cuts, continuing to sound out missives. he is talking about how it is a reacceleration. you can make an argument on all sides to point to this and explain why this is a downshift and something that could re-accelerate or the other way around. it is confusing at this moment. jonathan: not just the federal reserve. the fx market, we can talk ruefully about the euro, we are down to 108.90-something. you go in july, perhaps later in september, and you think about doing the same thing later this year. all of a sudden talking about maybe one and none. that is a major change. a lot of people in his camper

thinking that the fed doesn't cut for the rest of 2024. what about the ecb? does the call sound crazy that the ecb won't cut interest rates at this year? lisa: n, some people are coming around to one instead of three or four. how big is the diversions between the ecb end the fed? what divergence? we are talking about a very similar paradigm. at this point, a lot of people are betting on a global rate cutting cycle. can we say that is going to be a rate cutting cycle or just small tweaks on a really bumpy road that we cannot define yet. jonathan: the dot plot, does it show one or two rate cuts and then we can talk about how much daylight there is between with the federal reserve is projecting and what we hear from the ecb. israeli prime minister bennett emma netanyahu accepting an invitation to address the u.s. and senate july 24 according to speaker johnson's office. some democrats, including burning sa -- bernie

sanders and nancy pelosi say that they will boycott the address which is shocking considering israel is a big ally of the u.s. lisa: this will be an interesting division between republicans and democrats because republicans plan to embrace wholeheartedly benjamin netanyahu. we heard mike johnson talk about how happy he was he was coming. then you have the likes of chuck schumer saying that we support israel regardless of who is the leader but he thinks that this is someone who should step down. how do you thread the needle in expressing displeasure about what is going on while not backing away from an ally of the united states that is crucial for the regional security according to some people? you start putting these things together and you wonder, at what point are people messaging for the election and at what point are people sending a geopolitical message? it gets pretty hairy. jonathan: particularly the election. it is just another date to circle on the political calendar for the next couple of months. gamestop shares whipsaw in in

the premarket. i'm not even sure that whipsawing covers it. we were up by 20%, down by 10%, now down by 9%.at one point weaver climbing 37%. the company reported disappointing first-quarter earnings and that it may share 75 million shares. gamestop had been scheduled to release earnings on tuesday. they come early ahead of a planned youtube livestream by keith gill, known as roaring kitty, who has powered meme stock mania and driven gamestop shares higher with his social media posts. lisa: some people think about the iron it would be for keith gill to become a billionaire which would potentially happen if shares get up to $65 after basically trying to -- the billionaires out there. gamestop shares at the peak of meme stock mania was almost $87. even with the whipsaw action and

yesterday's action and rally we've seen over the past trading sessions, $46.55. the people who bought at the peak are still underwater. you don't know who will win but it is a cage fight. jonathan: a lot of people are going much lower and then where we are now. let's turn to payrolls. the u.s. jobs report a: 30 eastern, the median estimate calling for a print of 180,000. becky francowitz writing, staying put holding steady at 2.2% and we are not as rewarding leaving a job as we use to. said yes she goes job market where demand is still strong but softening. becky, you have been a good friend to the show and it's wonderful to catch up with you. last time you said this was a goldilocks labor market. how would you classify things currently? becky: this time last year we were talking about the great resignation. now we are talking about the

great staycation. employers are not -- employees are not leaving their job and employers are not laying off workers.we are seeing pockets of spend in wallet-friendly locations like staycations. the new surprise is starbucks, an affordable treat, coming in top 25 today. great staycatiotio -- staycation. jonathan: strong but softening, goldilocks staying put. we had a lot of guests talking about rebalancing and normalization. they say that we are weakening but we are not weak. what is the distinction between the two? becky: great language. we were enamored by the huge demand increases post the crisis and now we are seeing that

rebalance. a data point on the last show as you asked me about manager hiring. we were not seeing it a month ago and now we are seeing manager hiring increase. why? employers prioritize the front line after the crisis. now they need managers to help guide their companies to this transformation. it is a rebalancing. lisa: how do we understand the numbers we are talking about? and then characterizing that a stronger that it was pre-pandemic so that probably that is a pretty robust market anyway. how do we understand that in the tenor of the growth of the labor market in the influx and some of the workers that we've seen over the past couple of months? becky: if you're speaking to immigration, lisa, we have seen new workers come into immigration but also off of the sidelines. you as we what i am watching, it is the participation rate. not overall, yes that is interesting, but i'm interested

in the participation by education level. we have been watching for two months the participation declined for those without a high school or college degree. we would expect that to increase into the summer with seasonal labor. that is one that i will be watching for. lisa: a lot of people are saying and i'm thinking of jp morgan and citigroup that it is not usually linear, weakening. how is the picture that you are currently observing to more material downturn? is that something that you could foresee happening? or is the hiring things that have legs that can propel growth going forward in a way that gives you conviction we are seeing that anytime soon? becky: this is where we get confused on how to translate it and who can see the future. this has lasted longer than most would have expected in terms of the downturn. we are seeing softening across almost every sector of the economy. the challenge is it is softening but not softer than it was

prior. we are seeing similarities to the 2019 labor market with the exception of the low unemployment we are having now. that is where it gets confusing. in terms of where do we see things sticking, we see it in jobs that support it. the number two job in demand in the country today continues to be software available as peer the new entrant is the jobs that support this cost-conscious consumer. retail, retail stockers, and drivers. they make up three of the top five jobs in the country today. we know that consumers, even though consumer spending went down in the first quarter, they are continuing to spend on affordable treats to fuel their lifestyles into the summer. jonathan: what would typically happen in a downturn that isn't happening at the moment? becky: it has been surprising that we have not seen the overall unemployment rate go up fairly significantly.

it has been stubborn. the difference in this crisis and what we've seen in the past, the financial crisis or before, is the pandemic paranoia around employers holding on to their workers. we would normally see more layoffs, the quick rate would go down -- quit rate would go down further than we see now. we aren't seeing that, it's an overhang of the mentality that i couldn't find workers. we are seeing normality, manager hiring coming back into things leveling off, but we would expect a much higher unemployment rate then we are seeing in a normal bottoming out before recovery. jonathan: it is great to hear from you, as always. lots to unpack. i think the last point is the ultimate point. the post-pandemic environment has been so difficult to read. at the start we were printing 4000 jobs, upside surprise after upside surprise for two years.

the conversation we would have every payrolls friday is is the downturn just around the corner? lisa: thinking about what she said, things like cashiers, do cashiers have one job or do they often have several jobs? are these jobs sustainable? you talk about ai and technological advancements. forget ai, some are wondering what disruption there will be an cashier land if the new technologies get underway? there are interesting trends underpinning this that are confusing. jonathan: this has been a big thing over the past few years that we are trying to get into. payrolls estimate 180,000. that number drops in about 50 minutes. the previous number, 175,000. let's get you an update on stories elsewhere with your bloomberg brief. yahaira: apple is set to introduce a new app called passwords allowing customers to easily log into websites and

software. the company plans to introduce the app as part of its latest update to the iphone, ipad, and mac software at the worldwide developers conference. the out will ramp up -- app will ramp up competition with password managers like one password. netflix is facing a defamation lawsuit from a woman claiming to be the inspiration for a character featured in the hit series "baby reindeer." the woman is suing the streaming service for $170 million alleging creators of the show exposed her identity and ruined her life. the show, which amassed 22 million views in three weeks, follows an aspiring comedian stalked by a woman. the nba commissioner adam silver says the league is looking to expand internationally.speaking ahead of game one of the finals, silver says that this is a consideration as he things more long-term. now he is busy negotiating tv

deals. las vegas and seattle are looking at favorites for nba franchises. the only foreign nba team at the moment is the toronto raptors. jonathan: this has london written all over it? is there baseball in london over the weekend? lisa: everyone is going to london. baseball, taylor swift, who is next? jonathan: one of us? lisa: and draw that kind of crowd? jonathan: why shouldn't we be in europe? lisa: we will find something. jonathan: we will find a reason. counting down to the jobs report. >> on trend it looks like things are slowing down some. even if we get a little bit of a bounce back you are seeing the labor market coming into better balance and cooling on trend. jonathan: rebalancing. back on trend. apparently it is not weak just weakening. that conversation continues. this is bloomberg. ♪

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jonathan: equities on the s&p 500 just turning green, still unchanged. basically unchanged at the close yesterday as well. close to all-time highs going into this one. lisa: why would anyone trade ahead of this? it is like the casino is closed, let's have all the chips in and down to you at a: 30 a.m. jonathan: same thing cpi on wednesday. why do anything the next couple of days? lisa: it is true, but this is the problem. is anyone going to change materially? it could. if it is sub 140, below that all of a sudden that changes the mood music. jonathan: that would be worrisome going into the fed next week. under surveillance, counting down to the jobs report. >> on trend it looks like things are slowing down some. whether it is the unemployment

rate higher or the underemployment rate that is creeped up a percentage point. you saw job openings and other data this week. i think even if we get a little bit of a bounce back you are seeing a labor market coming into better balance and cooling on trend. jonathan: less than one hour from the major jobs report. expecting payrolls to rise 220,000. above the median estimate of 180. expecting some slowing in labor demand over the year because of the ongoing, gradual downtrend and job openings, however, there's no immediate sign of strain. the difference between weakening and weak, what is the distinction for you? ellen: weakening is slowing and weak would be below the level -- we use the term breakeven. you need to keep the unemployment rate study.

weak has taken on a new meaning because we think you need to create and 50,000 jobs to keep it steady. does that mean weak is below 250? there is a range, but 150 would be a weak number. jonathan: do you buy into the rebalancing story? ellen: the rebalancing is -- everything, you always get worried when it feels like there is a turning point. is this a turning point? we have had false starts of a feeling of a turning point before. things are slowing globally and in the u.s., but is it significant or is it a slowing that would be what you would expect given that fed interest-rate policy is working? besides the unemployment report, we get important data from the fed around noon on borrowing.

borrowing is slowing and fed rate hikes are having an effect. we are past the point of discussing if they are having an effectu -- if they are having the effect on the economy or labor market. feels like investor conversations that i've been having is, it is slowing more than we think. is it slowing so much that the fed is going to get started in september? maybe even earlier. lisa: where do you fall in that camp? we heard from j.p. morgan that if the fed does not cut next month it will be making a policy error. do you agree? ellen: we are seeing the bets of cutting next month rise because it is a pretty cheap trade to put on. the fed may go in july. even if they don't, doesn't push people forward to july if we get a weak number, a downside surprised to cpi? erases the probability that they

go in july, but i think that the bar is insurmountable for july. i think it makes it pretty apparent that there would be messaging that they are ready to go. we have had a long-standing call of three cuts this year. i know the market still isn't there, but i still expect they start in september and go to the middle of next year. lisa: you had a soft landing conviction call. you thought this would be a soft landing. you raise the point that a lot of people have been surprised how quickly the weakening has been happening. it has been accompanied by fewer immigrants. you are seeing immigration numbers come down. the labor market has been one of the offsets to the increase in average hourly earnings, etc. have you gotten less conviction around the soft landing? ellen: not at all. let me preface this. one reason why people dislike economists is because soft landing is positive.

we have had the soft landing call since early 2022. 2022 is a long time for the same call. we -- it has been a matter of what is the positive sign in front of gdp? how positive is it? i have no recession call on the table. that doesn't mean that there are not risks that abound. an election year, anything that changes immigration materially can provide a lot of downside pressure to the economy because immigration flows into the labor market have been so supportive of economic growth. naturally, with the presidential proclamation intended to slow immigration at the border, and we have seen immigration flows slowing, that has raised questions and gotten investors thinking about, could we see a real slowdown? i will say when the policies come about we tend to jump immediately and assign them as perfectly implemented and perfectly affective.

perfectly implemented and perfectly effective, you would slow the rate of inflow into the country quite a bit and slow the rate of inflow into the labor market, which has been hugely helpful at a time that we can't talk about immigration because it is the second greatest concern among voters. it has been hugely helpful to the economy. jonathan: a feature of your outlook has been eager, not tighter. how would that change your outlook the way that your cuts are mind up on the calendar? september, november, december? some people say seriously that that is not possible because of the politics? ellen: the fed is not political. i think chair powell has done a good job of tamping that down. the fed has to be patient when they get asked these questions because of the 1970's. we did have political pressure on the fed and they responded. this is a body of 19 people. we are at full capacity on the

fed. 19 people with varying degrees of political views. all 19 that have a strong sense of civil service. it's one reason why i feel more comfortable when decisions are made by committee. you can argue that if they cut in september it looks political. you can argue that if they don't cut in september it looks political. i think that what they will do is make sure that the data firmly supports cutting. one message that you will get from chair powell which folks have glossed over that he said is that this is not the year-over-year rate of change in inflation, it is sequential monthly pace. the year-over-year rate, think how fast the acceleration was last year. we are about the comp to that end it will keep the year-over-year rate high. this is sequential place and it is coming down. lisa: how much has what has transpired changed your view about not this year but next year, 2025, when there are

number of people debating if it will be a shallow cutting cycle or something that goes more deep, the citigroup side of things? have you shifted your view at all? ellen: we have shifted our view from june, expecting them to start in june was our view last year. that they would start in june this year. that has shifted to september. shifting it further output you further into the area where we have month over month core pce coming down to 2.2% and below 2.2 percent, which starts to get consistent with the 2% goal before we hit the end of the year. what we did was go to cutting at every meeting. where we had them being very gradual and cautious, this is simply dropping rates in line with falling inflation. you don't need to be as restrictive. it is not easing policy, which is a difficult message for the fed to sell. you are cutting, not easing.

dropping rates in line with falling inflation has them cutting every meeting, but we have them stopping at the middle of the year. we have them stopping earlier than before. 3.5% funds rate is not far off from what consensus is, but consensus has them getting in there at the end of next year and we have them in the middle. clients have to think about where they go from there. i think that powell can be noble around the incoming data. i think that you will get a game of cat and mouse with the fed with the housing market responding strongly to lower rates and then they could be holding at hiking again. jonathan: that is quite a call. it is good to get your perspective as always. 2025 is such a difficult call. lisa: my goodness. from rate hikes to cutting at every meeting until mid year? the cat and mouse game, i love that. that was put so well. jonathan: super tough. in the next hour, count to get down to payrolls with a former

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>> as unemployment goes up but job growth stays a strong, that

is a perfect scenario. >> i think that we are going to a more normal, gradual pace of job creation. >> we should be talking about the risk of employment could weaken. >> i don't think 150 would be a bad number. >> it is the hard data that is actually going to move the needle. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: we have been anticipating this number all week. the wait is almost over. the number drops in 30 minutes. live from new york city, good morning, good morning. the third hour of surveillance begins now. here are the guesstimates. emphasis on guesstimates. 180 is the median in our survey. the previous 175 or 3.9% unemployment, set to stay below 4% all over again. plenty of opinions over the last week. talked about it a few times.

he thinks the fed cuts rates in july. here is the line from andrew. we expect the furthest line in unemployment data, 140,000 is their estimate for may. unemployment rising to 4%. this would be the most important factor in chair powell leaving all options for rate cut. lisa: i think j.p. morgan would agree that right now the labor market has taken on an increased emphasis over even cpi that we get next wednesday head of the rate decision. what morgan stanley's ellen zentner said is important to highlight. our understanding of what the numbers mean. she said 250,000 is what you need to keep growing at the current level, keep unemployment at the current level. that brings out some of the numbers differently than looking at historical precedents. jonathan: what is weak? when they say that we are weakening but not weak, what is weak?

citi's stuart keiser says anything below 150. bank of america was something like 125. that will be a potential conversation and 28 minutes. lisa: some say that this isn't that important, but revisions matter because they have been messy and we have seen downward revisions. we saw the weakest growth in six months last month, so it has been pretty punchy. if we get that revised significantly lower could that shift the needle? that is a legitimate question. jonathan: it doesn't matter what the number is, at 8:31 those debates won't change. they will continue into next week. cpi wednesday morning before the federal reserve decision and news conference with chairman powell. those projections have to say something about 2025. if you ask me about 2025i would put up my hands and say that it is impossible to forecast without knowing the outcome of november. lisa: we had adam posen of the peterson institute saying that he expects a rate hike next year

just because of some of the policies that could come through that are quite inflationary. ellen zentner saying that they may cut every single meeting to 3.5% by midyear, which is the consensus by year end. on the flipside that might be where they stop and the next would be a hike because of the economic and market-based activity that generates. you put this together and a lot depends on the policies. that is what they are, how they are implemented, which won't be decided for quite a bit. jonathan: it is quite a week and quite an hour. why she sees equities grinding higher, the former fed governor why he sees a slowdown, and mohamed el-erian on why he is hoping for july rate cut. the payrolls report is out under 30 minutes. we believe the macro environment remains favorable for equities with gradual cooling of the economy and labor market.

this, along with easing financial conditions as the fed cuts rates, we'll push equities to new highs. nadia joins us for more. you believe the fed is in play. why do you believe the week data is not bad news, it might be good news? nadia: you know the fed remains in play even though there are some participants who would be willing to raise rates if the data warrants it in its ongoing debates about restrictiveness of policy. we think policy is restrictive enough and the biases to the payroll data. if you see any weakness in the labor market, the fed stands ready to adjust monetary policy. our point of view is that we are looking for two rate cuts starting in september. we have been at that for some time. we will see what happens next week. we could see a downgrade to two cuts in the s&p. we could see in go down to one. it depends on what happens with

payroll and cpi. there is a narrow margin. we think the fed would want to maintain the option for a cut./ oscillating between one and two cuts between april. as of this morning it is two cuts. don't expect major surprises from the market. jonathan: what about this morning could potentially change your mind? nadia: i think this morning, it is becoming more difficult to predict the market's reaction around any single macro data points. if you see that payroll comes in strong, some of that market reaction could be feted next week depending on cpi. if cpi comes in hot, because it could change the fed's reaction function. we think that the sweet spot for the labor markets is probably in the mid 100,000 to under 200 k. those increase in terms of hourly earnings given the sensitivity around inflation.

we think that we will probably get something around that in that 150 to 200 range and that should be enough to keep the market cool and continuing to move higher, focus on the fundamentals. lisa: michael hartnett at bank of america has been harping on this point for a couple of weeks, he is saying that if there is some sort of railing and the bond market going forward, on the heels of weaker data, it will be negative for stocks. that this is actually a bad sign . why do you disagree and think that that would be supportive? nadia: i don't necessarily disagree with that. just look at the performance of the s&p over the last couple of weeks. while we are not high, not megatrends, not necessarily cyclical components of the market you are seeing. the market breath has gotten narrower. you are seeing 25% of s&p 500 companies outperforming in the index on a day-to-day basis.

a month ago it was closer to 40%. why has that gotten weaker? the data has been coming in mixed. even though you have seen a pullback of bond yields, it's not because inflation is coming down or people are on the disinflation bandwagon. it is more because of the mixed data on the growth side causing a bit of volatility in non-megatrend areas of the market. that is why we don't completely disagree, any sort of weakness we are seeing would necessarily be a negative for the market. lisa: it is interesting that it is a time when a lot of people have been betting frankly for six months that there would be a broadening out for big tech and they say that a rising tide lifts all boats. now it is a rising tide lifts one vote, nvidia. how much do you buy into the broadening out trend, especially given the fact that we are seeing an entrenchment of that. only consolidation in the names that have been winning? nadia: we have to continue to react to the data.

you are seeing some parts of the economy slow, but it has now fallen off of the cliff. once you have second-quarter gdp numbers, we saw a pretty solid first-quarter earnings season. the second-quarter earnings season will also be a good one. that will give the market a bit of confidence in the sustainability. but we also need to see is, as we know the s&p 500 earnings are more geared towards the good side that -- goods side than services side. 50% of earnings or more coming from goods and that the economy is closer to one third driven by the goods side. if we could see a pickup in pmi's and more sustainability, we think we will because when you look at inventory inventory is clean and lean compared to where they were post-pandemic. we think that that can pickup. if that can come through in the second half of the year that could help the market get a cyclical bill. we do, as i noted earlier, think

that ultimately these megatrends are less focused on the sectors and more focused on some of the megatrends around ai, around energy transition, around health care around obesity. jonathan: it is worth repeating to get your response, how relevant is jobs, the outlook to the fed, for the megatrends you are discussing? nadia: it is not as relevant. yes, you can have some knee-jerk reaction and that itself in terms of any downside. that is something that we think is an opportunity. we look at the megatrends and we think that these will be multibillion-dollar opportunities over the next decade and we think that there is more to go. it isn't just a one sock story. yes, nvidia continues to dominate the market over the last couple of weeks, but the spend in the buildout of data

centers is being spent across utilities, across industrials. so, we think that there is a longer-term opportunity to use and disconnecting markets to add to this exposure. lisa: to wrap that together, are you saying that you could see this stock market continuing to climb, even if there is a material downturn in the labor market? akin to something that is a downturn in the economy because of the secular megatrends? nadia: yes he not over the past few weeks in terms of 22 new highs, a couple of them coming in in the last couple weeks. a lot of that is being driven by the megatrends and diabetes. it is not only ai, although ai is the more dominant trend. that is how we are investing for clients and less focused on some

of the cyclical aspects. we later in cyclicals as we come back that will start to catch in the second half of the year. the undercurrents of the megatrends we think of is quite powerful. jonathan: nadia level of ups, thank you for your time and payrolls friday about 20 minutes -- 20 minutes away. doesn't matter to nvidia how much gets printed in 20 minutes time? lisa: probably not. only if advertising spending goes down and then suddenly the big four companies buying all of the nvidia chips in bulk made by less. but that is a lot of steps. jonathan: it goes back to the mandeep singh point, how long is the runway for some of the names? we will ultimately find out, we always do. i know that is not helpful, forgive me.

the jobs number is just around the corner. let's get an update on stories elsewhere, your bloomberg brief. yahaira: president joe biden announcing a new $225 million aid package for ukraine during a meeting with his counterpart, volodymyr zelenskyy. pres. biden: we are not going to walk away from you. i apologize for the weeks of not knowing what is going on in terms of funding. we had trouble getting the bill passed that had the money in it. some of our very conservative members were holding it up. yahaira: biden met with zelenskyy impairs ahead of the state dinner with emmanuel macron this weekend. shares of game stock whip song in the premarket with the company announcing it may share up to 75 million class a shares and plans to use the proceeds from what it says her general corporate purposes. the news coming alongside

disappointing first-quarter results in a youtube live-streamed by roaring kitty whose social media posts have sent the stock soaring. porsche shareholders calling on them to ease off of ev plans. this eeo was asking why he was sticking with the goal for vehicles to make it more than half of sales next year. investors .2 slowing sales in china and rivals walking back expectations. still all electric models are to account for more than 80% of sales by 2030. jonathan: it is another one, another one. lisa: you have pointed this out, that it's not necessarily a wholesale revision of the ultimate goal, but that the pace has been too fast. we hear that again and again. jonathan: a long list of news

items this year to speak to tha t. next, the morning calls plus the former fed governor as we count you down to the may pale -- may payrolls report 60 minutes away. ♪

jonathan: the payrolls report at 8:30 is known. going into the scores look like this on the s&p. treading water positive by 0.05% on the s&p. yields up by single basis points, 4.2986 on the 10-year. no drama on this board. that will change by 8:30 eastern. jp morgan downgrading their results to underweight on the back of disappointing earnings, noting headwinds including trends normalization as passed

unit sales slowed down. the stock is down. next to me is bramo nodding her head repeatedly. lisa: it was tough with the snowmaking and whipsawing temperatures that made it difficult for resorts in the northeast. jonathan: bank of america upgrading lyft to buy, highlighting the ridesharing company's first-ever investor day. the stock is up by 3.25%. truest is downgrading exxon to hold. forecasting stock underperformance thanks to near-term valuations. down by 0.4%. the payrolls report is moments away. the median estimate calling for 180,000 jobs added in may and unemployment is expected to hold steady. randy, it is always great to get you on the show on payrolls friday. what is the focus for you going into this one?

randy: where wages are going. the fed is laser focused on that because employment costs are the most important input into all production processes, services or manufacturing. that is going to have a big impact on costs, prices, and where inflation will go. jonathan: we spoke to jp morgan's priya this morning and she said that this number was more important than the wednesday morning cpi print.how do you think that stacks up for the federal reserve? which is the more important number? randy: i will give you the economist number. it depends which fed person you're speaking to. some focus on the actual inflation number. others look at the labor markets to see where inflation will be going. we have two different camps at the fed. some are looking for any excuse to say that we better be

cautious, we don't want inflation to take off again. others saying it seems like there are signs of weakening. they will interpret whatever data as we need to be moving sooner rather than later. lisa: it speaks to our frustration because there are people making arguments on both sides of the camps and both are completely logical and makes sense. adam pozen saying that it would be a mistake to cut rates and year the fed may have to hike again depending on the policies implemented later this year. then you have the likes of what we heard from priya, what we heard from neil at renaissance macro saying that it would be a policy error if the fed does not cut next month. where do you fall? randy: we have to see what the date of will say and that will inform the decision. i can see why the fed is hanging tough. you have the burden of history about what happened in the early 1980's when they moved too quickly and lost credibility.

that is the last thing they want to do. if they are going to lean in one over the other they will lean towards caution. they won't do with the ecb did and do a quick cut and say that inflation is still rising so we better not move anymore. they will wait until inflation is actually coming down in a way that they feel is sustainable before moving. that could mean that there is more of a downside risk, but the consensus i think would be willing to make that trade-off. lisa: you were talking about how there is no chance that a statement like that will come out of the federal reserve akin to what we heard from the ecb yesterday. we heard from peter scheer that he sees a greater likelihood of july rate cuts because it gets the fed out of the crosshairs of being accused of political interference or some sort of manipulation ahead of the election come even if they only cut the same number of times this year. how much would you push back on that? randy: it depends on what the data are saying.

if they are clear they will cut. if we get a weak now and next month and inflation numbers are coming down, it provides a sensible basis for them to move. if we get reasonably strong numbers coming out of the labor side, reasonably strong wage growth, and inflation stubbornly kicking along where it is, they will wait. jonathan: you have witnessed a big turning points. this feels like a turning point. we have a lot of guests around the table talking about rebalancing and normalization, phrases that we've heard on repeat through the week. what we are trying to understand is, what would guide you, a former member, to really understand where this is going? whether it's rebalancing or going somewhere darker? what would be guiding you? randy: we will look at wages. obviously, we would look at the strength of the labor market. we will also be looking at things like quick rates.

how do people feel about where the economy is going? we will look at a gdp update to see where overall activity has been. i think that those will be some of the things to look at. of course, core inflation. core inflation probably has the expenditure index that has more information about where things are going. it is by no means perfect, but those are the key things i would look at. i wouldn't be making any move right now. jonathan: i appreciate your insight given your experience. the former fed governor waiting for the data, like the rest of us, with no real conviction about where this is going. lisa: this is the argument mohamed el-erian has been talking about that you have to have the framework. it seems like no one has the framework because we don't know where we are. you talk about how confusing this is. we won't know until it is too late if the fed is behind the

curve or went too fast. we won't know. that will be where we are at. jonathan: we will have the outcome shortly in seven minutes. mike mckee is in a room ready to go. what are you looking for? michael: i come in every month and i say that this is not a particularly exciting number and you give me a side i. this one will be more interesting because there are a lot of factors at play. i even made an under the hood checklist. first, seasonal adjustment factors because may is one of the biggest volatile job months. you get all of the teachers who leave the payrolls, the kids going to part-time or summer jobs, and the nonfarm seasonal payroll adjustment usually pushes down the rate significantly. the whisper number versus the forecast, the first time that we have seen wall street think that the number will be smaller than the economist's forecast.

168 is the whisper number. average hourly earnings calendar quark. the survey for the main week it did not end until the 18th, so there was an extra pay period that could influence pay higher, hours worked. if the economy is slowing hours worked should click down. how any people are working for part-time reasons? that number has been quietly going out for economic reasons. that number goes up when we see a real slowdown in the economy. there are a lot of things to watch under the hood. lisa: i love the checklist, the under the hood checklist. big fan. i wonder about the point that you made. this is the first time that the whisper number has been below the consensus going back to last november. what does that tell you based on what we've seen in terms of upside surprises, in terms of sentiment and expectations

heading into this? michael: wall street is buying into the slowdown story and the idea that the fed might be cutting rates sooner. we have seen that in the trades in various asset classes. i would point out that this is the first time since last november, but wall street and the consensus were wrong last november and the number came in higher than both. so, we could go anywhere. jonathan: we have said a few times that it doesn't matter what the number is the debates will rage on and we could get whipsawed in either direction when we get cpi. the jobs number is coming up next. mike mckee is breaking down that number and we will break it down with mohamed el-erian and jeff rosen burke. the number that you are looking for in our survey is 180 k. ♪

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jonathan: 25 seconds away, the job support just around the corner. equity futures just about positive on the s&p 500. 0.02%. two-year, ten-year, 30-year. unchanged on the morning. ten-year, 428.31. here is mike mckee. michael: well, more than we expected. 272,000, which will define the note ties -- no ties.

private payrolls up. unemployment rate rises to 4%. average hourly earnings coming in .4%. we talked of that in the under which pushes average hourly earnings up to 4.1%. a move up from 3.9% the prior month. average hourly hours worked, 34.3, which is unchanged. it does not look like there is any kind of change in the economy. we have some revisions to look at. the total payrolls for the month of april. 10,000 less than initially reported. we have 4% forever charlie earnings on the year-over-year basis. only a tick up from that.

total revision, 15,000 for the month of march and april. i'm sure this one is probably getting people's attention. jonathan: that was the door shutting on july. that was that noise in the last 90 seconds or so. goodbye july. we are negative by .4%. on the russell, down bigt ime. the bond market. two-year yield with a double digit move in the other direction. up by 11 basis points. ten-year up by 11 basis points. think about where we have been. a week ago, it was in the 450's. then a string of weaker than expected data that took us to the 420's. the 30-year is back to basically where the ten-year was last week. 451.85. when you have seen that screen you know what is happening next in the fx market.

take a look at the euro. we gapped lower by half of 1%. monster upside surprise on payrolls. the attention on a hot wage print. lisa: i'm sorry to everybody. i was so surprised to see these numbers. it came in all the wrong ways for the fed with wages coming in higher than expected and on a planet coming in a tick higher. this is a confusing read at a time when we are supposed to be seem a slowdown. it does take off the table a july rate cut and raises the question to the numbers we should be looking for with a tree slowdown or expansion? it is getting noisy at there. jonathan: the federal reserve is looking at the totality of the data. that is what they would say. mike mckee, can you reconcile the numbers this morning with the data we have heard all week? michael: no. you can maybe -- some of the

consumer confidence numbers that went up in the last month. the ism readings were lower. jobless claims back in the survey week were still low. this is an ongoing source of strength. the interesting thing is the labor force fell significantly during the month, which tells you maybe this wasn't a story of a lot of immigrants coming in. 250,000 lower in the labor force. the unemployment numbers in the household survey up 157,000. the employment never down 408,000. a significant difference between the household and the establishment surveys. i can see 10 foil hats being dawned on both sides of this conspiracy that's about to be hatched that there is something going on here. we get a lot of volatility in the household numbers.

only 25,000 gain last month. now 408,000 bloomberg. -- lower. it's either payback or there is something different between the two things. we have to look into it. lisa: very strong payrolls and upside to wages. we need to talk about inflation again. ? ? lisa: that is the key question. the stock market reaction talking about stuart kaiser, how good news is good news. is this good news? there is more employment and that's positive for growth. why are stocks down? this is not good news for equity markets. even the s&p 500 and the russell 2000. people are not taking this as a robust economy. they might take this as inflation running hot. it is not good news is good news. jonathan: it is all relative. the moves on the screen may or may not stick for the rest of today. let's start with the bond market.

where it is right now. let's start with the two-year. a move of 14 basis points the front end. if i showed you that and then showed you this, equities down a third of percent on the s&p 500, not a big move. lisa: history meant a lot by consumer cyclicals. people are getting hurt by higher rates where they are. it raises a question about how much dynamism there is. shouldn't you see a broadening out and some of the equity performance if you buy into the idea of the expansion midcycle or something akin to that? a lot of questions. very difficult for the fed to know how to parse through this at a time when they want to cut rates. they are worried about the tail risks to the employment market. on the data is not giving them the open door. jonathan: bought into the program. 272 i guess an estimate of 180 -- against an estimate of 180.

we got .4%. the year of your figure has a four handle. what jumps out now for you? michael: it looks like there was a big seasonal effect on nonfarm payroll numbers. 917,000 jobs created in the month of may according to the nonseasonal numbers. that comes down to 272. we have seen that in the past. the number was so big that it did not push us into the kind of down numbers people were expecting. manufacturing tables up by 8000 during the month. we had seen a 40 handle on manufacturing in the ism. that suggests there is something wrong with the way people are responding to the ism numbers. the retailers only 13,000. they are still hiring. maybe consumers are not going away.

construction, 21,000. it was only zero hired in the month of april according to the revised figures in construction. there was talk they were running out of workers. the number of immigrants coming into the country, even illegally was dropping over the last couple of months. a lot end up in construction. there are a lot of things in this number that are interesting to look at. government numbers were up significantly. federal government up by 4000 total government state -- but local government was 43,000. the seasonal adjustment factor working in the favor of a higher number. jonathan: stay close. let's get to the panel. joining us now is mohamed el-erian alongside jeff rosenberg. mohamed, you had time to pour over this one. mohamed: i like to look at this

in four ways. this is a really strong report on the demand side, not the supply-side. strong in terms of demand for employees and in terms of wages paid, etc.. it does close the door on a july rate cut. i think that's it. almost regardless of what the cpi number says next week. then step back and asked the question of reconciliation with other data. the story gets a lot more interesting. we have a situation with a backward looking data is strong. forward-looking data is weak. we have to reconcile these things which leads us to the point that lisa raised. what is your view of the economy? if you don't know or have the view peopl -- you will get whipsawed for a few months and miss windows of opportunity that are important. jonathan: it's a question we

both asked mike mckee. can you reconcile the data this morning with the data we had all week? your view on this morning's number and second, can you reconcile this elsewhere? jeff: the big market reaction is not only because this is a strong report but it is stronger than what people were expecting going in. two things that were undermining relative to those expectations. as mike was talking about, the seasonal flows expected to push down. we overwhelmed those. there was a pull forward argument around warm weather and the construction number mike mentioned was very strong. you did not see either of those things. mohamed mentioned closing the door on july. reopening the door wider on the debate about whether or not policy is indeed restrictive as the fed thinks it is. this is a little more evidence to bring that debate back into

the fore. you have big financial conditions easing that's offsetting the tightening. we may not be as tight as we think we are. lisa: mohamed, i love your thoughts at a time in your framework does expect a more significant weakening. does the data change that? the slamming the door on a july rate cut seem reasonable or are you concerned this is the wrong signal at a time when what comes next looks different than what came before? mohamed: is reasonable for a fed that is data dependent there is no way they can cut or signal a cut in july with this data. they would have to change their reaction function and the public about it. i don't see the fed doing this. that is why the door is shut. should it be shut as a more interesting debate. you know my view. we are in a weakening economy. there are no spare tires to speak of anymore, no pandemic savings, no fiscal impulse

coming. there are no spare tires in this economy. if you get it wrong and you weaken too quickly it's a difficult mistake to correct. the problem is we are living in a secularly inflationary world. secularly inflation will be higher because of the transitions going on domestically. we no longer talk about liberalizing. we talk about trade restriction. we talk about industrial policy. we talk about fiscal irresponsibility. we talk about fragmentation. all that means a more inflationary world which raises the question as to what should be the right inflation target. if you brought all this together it does shut the door for this fed. it will not shut the door on a very active debate going on that tries to look forward, not back. lisa: mohamed, to follow-up, are

you saying the chance of a harder landing increases the longer the fed does not cut rates even if it appears strong on the surface? mohamed: i do because they focus on the forward-looking data. that is weakening significantly. yes. that is where i am. i understand if your data dependent there is no way you will come anywhere near my view, because you would have to completely change your paradigm. jonathan: jeff, would you agree with that? jeff: i think there is a little bit of a segmentation going on in terms of where the interest rate policy is biting. it is in the lower end of the consumer side. the flipside is the wealth effect. this is a fed basically saying if inflation is stronger, if growth is stronger we will just wait. could have given us an asymmetric outlook with regard to their reaction to their data

dependence. that has basically given the green light for financial market conditions to be very easy. the transmission of that into the economy is a very strong wealth effect for the predominate sources of where most of consumption comes from. you see the weakening that mohamed is talking about but the waiting -- weighting is less. it is slowing to a level above trend. you don't get as much of the constraint and push down on inflation. the fed is basically saying we are ok with that. i think that is why you are pushing back with this data today on this notion of we are really restrictive. i'm not sure they are as restrictive as they think they are. the policy of asymmetry to data reaction is pushing against that by pushing up or easing financial conditions. jonathan: welcome to the program. 14 minutes ago, a blowout job report.

a monster upside surprise. 272 is the number. 180 was the estimate. wage growth coming in harder than expected at 0.4% versus the estimate of .3% month over month. market reaction. equities gapping lower. equity futures down by .5% on the nasdaq, .5% on the russell. the bond market. the front end up by 11 or 12 basis points on the two-year. you have to point out that this is below everywhere a week ago. we had a string of weaker than expected data going into this print. the bond market rallied heart coming into this morning. lisa: the conversation we have with both mohamed -- the way he's talking about the idea that the weaker data does point to something that is more sustainable that cannot be offset from these numbers and

jeff says this reintroduces the debate about arbery restrictive, this is the seesaw. the markets are kind of tipping it one way or another. that is all we heard from ellen zentner. the more enthusiastic the market gets the harder it is to get to the fed's goal. it becomes a chicken and egg race. this is what is making it difficult to understand where we are at. it's like the experiment that we effect the experiment as we observe it. jonathan: we shape the events we anticipate, that kind of thing. imagine kashkari coming into the meeting this week banging the table. i told you so. lisa: he would be right at that moment. there will be people who believe what mohamed el-erian just said. if you look at the data there is weakening coming down the pipe and you can't ignore that. it is a fraud moment. -- fraught moment. jonathan: let's talk about what they will do . how is chairman pala going to

navigate this news conference given the information we just received this morning? mohamed: i think he will maintain maximum optionality. he will retain his data dependency mantra. he will say, you know, we need more confident. he will use the words confidence and patience. i find it fascinating. it is a shame we have broken the record of 28 straight months of the underpayment rate below 4%. that was a nice record to have. what i find really interesting and you referred to it is the bond market has been much more volatile on the data than the stock market. the downside surprises we had moved yields in a massive weight. moved the complex in a massive weight. it had relatively little impact on equity. it's fascinating. i'm curious to hear what jeff has to say about this difference in actual volatility between the

segments. jonathan: what do you make of that? jeff: it's a great point. it is explained by this other big topic that another context would be the only thing we are talking about, the ai boom. you look at technology as a share of the s&p 500. it is 43% market cap. this is a different story. where you see or look for to see the interest rate impact is in small caps. i think we will see that this morning in a much bigger outcome. numerator versus denominator. the numerator effective technology is incredible amounts of cap accent cash flows. it's overwhelming the denominator for the index. you see that in growth. you see it in the s&p 500 with a very high waiting -- weighting. you also see it in macro. look at the move and interest rate volatility relative to fix volatility.

-- vix volatility. it is compressed because of the tech story and cross market coalition -- correlation going on right now. the translation of macro data into these indices and the micro stories going on and equities hours powerful or overwhelming the macro story of the variability that lisa mentioned. are we too hot or too cold? you see that reflected in the bond markets and the data print. lisa: the macro environment is whipsawy. jeff, you raised the point about this questioning how restrictive we actually are. from your vantage point does the print of 272,000 new jobs created in the month of may change your view about the balance of risk for the fed and for rates? jeff: it is not my view that really matters. will the fed change its view? i don't think they will. this asymmetric response that if

inflation slows, if growth slows -- i think the growth picture will be as important. the fed will increase its probabilities. it will want to cut rates for the reasons that mohamed said. they are more worried about losing the war. they won the battle on inflation. they don't want to lose the were on the soft landing. because of the asymmetry i think that eases the market reaction. the broader market reaction. not from the day reaction to today. i don't think much as changed. if they were to start talking a little more about the concerns about maybe we are not restrictive, if you had more growth data, they will give the question again. what about hiking rates? they will dismiss it. the asymmetry is still with us and that is supportive to the financial market outlook. i don't there is a huge change there. jonathan: we care a lot about what you think.

the story written yesterday by rich miller at bloomberg. i have to share this with you. some are asking do the numbers this morning overstate the strength of this economy/are we measuring -- economy? are we measuring things the right way? data suggest payrolls might have grown about 60,000 less per month on average last year than in roughly 250,000 run rate derived from the agency's monthly employment report. mike mckee, the question is going to reverberate through the weekend after that number this morning. michael: it's interesting. you have debate over this because steve stanley from santander points out we had basically the same situation at this time last year. then the q ce w numbers were revised and we basically did not have much of a significant change in payrolls overall. they don't give us the number until august. we will be waiting for that. it is just before jackson hole.

it may be that it's not as bad as these numbers suggest. if it is, this does not fit with that. jonathan: probably having the right conversation? something we have to think about. michael: here's what you have to worry about. the fed has to deal with the numbers it has. if the numbers come in much weaker when they're revised later on, everybody will say the fed missed it. they don't know. lisa: it's wonderful to have mohamed on. this is what he says is one of the fatal flaws of data dependency when the data is messy. that's the number we are clearly in. jonathan: do you think we are having the right conversation based on what you told us in the last few weeks? you don't think we are. mohamed: i think we are having the right conversation based on the data we have. it is difficult to have a conversation on counterfactual data. what we are being reminded over and over again is how difficult this economy has become to understand. jon, go back to august of 2022.

the famous eight minute speech with pain. go back to the bloomberg headline of october of 2020. 100% probability the u.s. goes into recession. look what happened. it gives you a sense that if you become too data-dependent and don't take longer-term views you end up risking real mistakes. that is what i'm worried about. there are some very clear secular trends going on. jeff mentioned what's going on in ai. that's one of several trends that will be with us for a while that we have to incorporate and stop looking simply at the rearview mirror. you have to look at the rearview mirror and through the windscreen. lisa: jeff, your big takeaway? jeff: it's clearly a big surprise. a big downside surprise relative to expectations. july's door is closed. opening the door on the debate

on how restrictive fed policy really is. jonathan: your best guess for the dot plot next week? 241? t -- two or one. mohamed: one. jeff: contrast i will go with two -- for contrast i will go with two. jonathan: appreciated, gents. lisa: does anyone raise the prospect? are we going to start seeing no rate cut camps? this is supportive of that. there was this great quote. this number is a not for the camp. we are quietly swimming against the tide. that is the feeling right now. jonathan: i'm waiting for the no from andrew to see if they throw in the towel on july. michael: july 5 is the next

release. the day after the fourth of july, it's a friday. everyone will be in a bad mood anyway. it will be interesting to see what happens. it is clear that july 5 is no ties. jonathan: no ties. hot labor market. usually they don't care about dressing up. who cares about what you look like? lisa: as much as people will try to say where is the flaw in the data because it doesn't cohere with other things? you really need to start talking about the idea we are not that restrictive. jeff made the right point. if you take it on face value entered data dependent, how can you not have a conversation about what kind of level of actual restraint is the fed policy actually putting on the economy that's growing by 272,000 jobs in the month of may? jonathan: if things can change wednesday morning when we get cpi data going into the fed, but

you have to imagine they will go into the meeting. neel kashkari has a skip in his step going into this meeting. lisa: talking about potential for hikes. jonathan: at least for now the hawks have it. coming up on monday, mike schumacher of wells fargo, sarah hunt of alpine saxon woods, and amanda lynam. we have to get through today and talk about these numbers. 272 k. a big upside surprise. this was "bloomberg surveillance ." ♪

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katie: a hot job spread sends yields up and stocks day -- and stocks down. "countdown to the open" starts now. katie: we begin with the big issue. that is jobs day in america. let's get straight into the number with bloomberg's mike mckee. this was a beat. michael: i saw your jaw hit the floor when this happened.