>> in our eyes, it all comes down to the labor market. >> the markets have definitely moved from worries around inflation to worries around labor. >> the labor market can turn very quickly, which is why fed officials have to be cautious. >> a strong report is probably not going to prevent them from cutting, but obviously, a weak one could. >> the risks are the -- on the employment side are increasing. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: it is payrolls friday. live from new york city, good

morning. for our audience worldwide, "bloomberg surveillance" starts now. coming into friday heading towards a third week of losses and a selloff deepens, spreads through asia, europe, back to the united states. equity futures, down by more than one full percentage point on the s&p 500. on the nasdaq, down 1.8%. the winner of july, the loser of august, the russell down 1.9% to the focus is on one thing -- payrolls pay the difference between the fed having more time and running out of it. our guests this morning look -- our guest this morning looks a little something like this. 150,000 -- 975,000 is the estimate. the focus on unemployment a big focus. we will catch up with kit juckes later. is the last 24 hours a canary in the coal mine? annmarie: mohamed el-erian said

it took a while, but it is now happening in a notable manner. markets are realizing the slowing of the u.s. economy is faster and broader than many thought. is this a paradigm shift in the sense that is u.s. exceptionalism starting to wane? jonathan: we can get to the earnings in a moment. i wanted to talk about the data of the last 24 hours. u.s. manufacturing, contracted the most in eight months. the employment component the worst since june of 2020. in addition, we had the highest print on jobless claim's comeback to august. we are all trying to figure out the same thing. is this another head fake or is it the real deal? dani: and what we need to see is whether the jobs weakness is just this market where supply is plentiful, immigrants are coming into the country, and that is why you are seeing some of the data, or are we seeing real layoffs? that will be the difference, when we really get worried about

labor. is unemployment moving up because you have companies like intel letting go of 15,000 employees because they are facing issues? jonathan: check out the names in the premarket. intel delivering a total duck of a quarter, apple reporting weakness in china, amazon's forecast disappointing. we can sit here and say it is idiosyncratic, but i've sat here many a morning over the last weeks and talked about things being idiosyncratic. idiosyncratic adds up. those job losses add up. dani: it is not just intel. you can say mcdonald's did not do a saver menu quick enough, delta mispricing their seats -- the important thing is these army steps, and they are being punished -- these are missteps, and they are being punished. idiosyncratic these -- they matter. annmarie: and it is hurting

investors. intel has been paying out a dividend sense 1992, and now they will not. i am glad you mentioned mcdonald's. this is something mohamed el-erian has been talking about for years. do not look at just the hard data coming out, listen to what ceos are saying. what did mcdonnell say? that consumers are coming in and discriminate against higher prices. you are seeing the push back when it comes to consumers, higher credit card to sees, and pandemic savings have dried up. jonathan: we have seen that repeatedly the last few weeks. let's get to the scores more broadly. if you're just joining us, welcome to the program. equity futures negative by more than 1% of the rally on 10 year treasuries continues into a seventh consecutive session. down for basis points en tens, a break of 4% in the last 24 hours. your yield 393. coming up, we will catch up with christopher verrone, mandeep singh, and kit juckes singh u.s.

markets being priced for policy perfection. treasuries rallying going into the jobs report. chris verrone of strategic writing the question coming up is to what extent do lower yield suggests the bond market see something it does not like? this is a rally you have been on top of for quite a while. you were looking for a break lower. are there good reasons for it? chris: if you go back all year, what has been the pattern on the chart? it is lower highs on yields and lower lows. we peaked at 5% over a year ago, and every successive rallying since then has failed at a lower high. 10 or 15 days ago, we broke below that level, and we broke below 645 on 2. at the end of the day, the

question we are attempting to answer is what does the bond market no? is it simply anticipatory of easier policy, or is it suggestive there is some meaningful growth issue? we will use equity market to help answer that question, are we seeing the big weakness in financials, yesterday notwithstanding, but i think it is little early to jump to the conclusion that the bond market is dead set on some imminent recession? i would also say credit conditions have largely been pretty benign. there has been -- you're not seeing the complete blow up in credit you would typically see ahead of a major problems. jonathan: do commodities confirm or deny? chris: it depends where you look at gold has broken to a new high this morning. crude has been weak. at some point, you have to start to wonder, when do lower yields

and lower crude recapitalize some of the growth story? so there is some of that to come in the back half of the year. copper has certainly been weak to the extent that reflects china, but the commodity picture is very mixed here. the strongest trend, without question, remains gold. dani: even with bonds, it is are markable they are ill rallying. you can say we move from -- to under 4%. we have completely obliterated the higher for longer narrative. is this now and asymmetric risk that everyone coalesced around this bearish story? chris: we have seen in the positioning is a massive shift. people got caught off sides. you see that in the price action, you see that in the follow-through of the last several days. what happens if you get a soft number and put low and bond year yields?

that is not out of the question. yields are oversold. 375 on 10's is a good interim low. what does the market really know about the economy i have not figured out yet? that would be my line in the sand here particularly the two year yields are oversold. i would not be shocked, irrespective of payrolls, if we get a bounce over the next six to eight weeks. i think that will ultimately fail at a lower hi, you get consecutively bullish bonds. dani: i am just trying to understand what the reaction to equities would be to that. finally say it is only a few days, but it seems that a shift, that bad news is bad news, and we have a growth scare. yields go lower and sodas oppressive equity markets. chris: 80% of stocks are over the 200 day moving average. i will not say this is a market that has been dying internally for the last six to 10 weeks. if anything, it has been improving.

that is not where your big problems usually come from. we are into an election season. could you get can tolerate -- consult the -- in line can you get consolidation? yes. i think we change the sentiment fast here. whatever residual bullishness was out there i think will decay quickly. i would be careful getting too worked up about this. annmarie: not just the weakening u.s. economy but there's also a flight to safety due to geopolitical concerns. chris: something we have always said in our work is have to kind of differentiate between what you think should happen and what will happen, and i know, all year, there has been all this anxiety and angst about a couple bad auctions come about this untenable debt situation we are on pure the market does not care right now. those may all be things that care in the future -- jonathan: are you shading lisa

what she is on vacation? [laughter] chris: i am shading lisa. gold has been the decider between what could happen and what should happen what should happen -- should the fed be cutting into a relatively strong economy all year? probably not. gold knew they probably would, and the strength affected that. annmarie: cutting through the noise, what on policies will impact 2025, and how do you remotely plan for that? chris: when we were planning for the likelihood of a trump policy, what seemed more likely than, would it result in two feet off the accelerator, particular on the fiscal side? maybe a month ago, we are talking about what were bond yields starting to pick up? they were starting to pick up that maybe you get much less fiscal impulse in 2025, and certainly, that has been on display. i am curious to watch how what

were described as the "trump trade" over the last six or seven weeks, financials in particular, may be small caps to a next, how they behave over the next six to eight weeks. there has certainly been an attitude shift towards the left in terms of a better chance of winning this election. does the equity market continue to reflect that over the next six to eight weeks? i am reluctant to believe any election signal in august that i think it will be a noisy month. let's talk labor day and see how these things are shaping up. jonathan: you are drawing a distention between what will and should have an. outside the united states, the dollar-yen has ripped lower. we have talked from 160 to 140. the nikkei over the last two days, two sessions were down over 8%. we have had people come on the program and say the japanese equity trade is not about what is happening with the currency, it will not be upset about what happens at the boj, and what happens -- it is falling apart. what do you make of the move?

chris: my favorite part of the business is picking up little clues and putting a call around it. the little clues we were getting in april, may, june come all the japanese exporters started to meaningfully underperform. if yun was going 170, that should not have happened. you are seeing stocks like toyota really weakening. some part of this market knows something. this market knows yun is about to strengthen. what does that mean? we are very oversold in the short-term on dollar-yen, in the 140, 150 range. could you bounce from here? yes. a bounce would fall at 153, 155. you get meaningful strengthening. it is different from 2012 when there was our performance for a weaker yen. what are the implications? cell yen, biotech, has been the mobile carry for as long as many

of us have been doing this. i wonder if the tech trade is refracting that. jonathan: you think these two stories are connected? chris: absolutely. jonathan: is it a train you want to step in front of? chris: absolutely not. the change in yen has tentacles far beyond what it means for japanese stocks or what it means for dollar-yen for us. there is a really important push against this global kerry. jonathan: given what you said, you couldn't sound more bearish, because you said we get many for appreciation in the japanese yen through the rest of the year. that makes it difficult to be constructive for the rest of the market. chris: we are starting the process where path of least resistance for yun is stronger, not weaker, and that is a change from where we have been for a decade. i think, in the very short term, the rubber band has been pulled to far. 155 on dollar-yen would be good or resistance. something like 420 on tens would be good resistance if you rally

them here, but we have started to change really big trends. jonathan: good to see you. great call on the bond market over the last few months. chris verrone of strategas. we are lower by more than one full percentage point to pay let's take the opportunity to get an update on stories elsewhere. with your bloomberg brief is yahaira jacquez. yahaira: president joe biden telling is really prime minister netanyahu it is time to agree to a cease-fire with hamas. in a call thursday, biden pledged to support israel against hezbollah, but the president was direct with netanyahu, saying they have a basis for a cease-fire, and yet now should move on it now. venezuela's opposition leader calling for nationwide protests to defend what her party sees as it rightful electoral victory p this coming ask u.s. secretary of state antony blinken says he backs of the transition of power.

president maduro warned two maximum-security prisons would be ready for the thousands of venezuelans who have protested election results. and a joint sports streaming venture between disney, fox, and wanted -- warner bros. discovery has a name and price. venu will launch this fall and cost $42.99 per month. it will provide live coverage. venu will compete with espn plus and the hulu plus live tv package. smaller competitor fubo filed against the companies. jonathan: thank you. i cannot spend more money on sport. i am right here, the limit. annmarie: you have hulu and this

is direct competition to hulu, so you might be covered. dani: who is naming this stuff?venu? what is that? jonathan: i'm done. coming up, threading the ai needle. >> if you end up with too low capacity, you have service disruptions. however, if you actually deliver too much capacity, the economics are pretty woeful, and you do not like the returns in the operating income. jonathan: disappointing from big tech titans. live from new york city this morning, good morning. ♪

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colts a soft or no landing. equity futures going into payrolls, the selloff continues. down more than one percentage point on the s&p. in the bond market, the rally continues. yields down for basis points. the 10 year, it down to 3.93. under surveillance this morning, threading the ai needle. >> if you end up with too low capacity, you have service disruptions, which really nobody does, because it means companies cannot scale operations, so most companies deliver more capacity than they need. however, if you deliver too much economic -- too much capacity, the economics are pretty woeful. while we are investing a significant amount in the ai space and infrastructure, we would like to have more capacity than we already have today. jonathan: amazon falling in the premarket, the company's outlook falling short of estimates, telling investors earnings would

take a backseat to earnings. meanwhile, apple expecting new iphone features to drive device upgrades. to break it all down for us is mandeep singh of bloomberg intelligence. let's start with a dog of a quarter for intel. intel looks absolutely awful. the stock -- we do not use this word often, but i think we can say it -- the stock is essentially crashing in the premarket. what is going on? mandeep: clearly they are losing their share on the data center side. there is a reason nvidia's doing so well. not only is it getting all of the incremental spend, it is actually taking share from the likes of intel. that is one. the other is intel has been investing on its foundry business for the last three years, and there is to show over there. no revenue, not even a ramp in terms of what they are doing on the foundry side, and that is what spooked investors, because

that is impacting the gross markets. now you're talking sub 30% growth. that share was unimaginable five years back. annmarie: 15% of its workforce it is letting go care where are these jobs they are laying off from? mandeep: it is across-the-board. i think they realize come on the chips side, they do not have much exposure in terms of gpu's, so clearly there are cost cuts on that front. the foundry business is where i think they need to make a decision whether to divest it, whether to keep it. they will not keep getting a pass, because all the subsidies the government has given them is not helping them either. all -- the time is running out on it comes to showing seclusion. dani: intel is showing one of the worst reactions, but it is

arm and qualcomm, falling 15% after their earnings. this is a cyclical market, but can we tell where we even are in the chip market, in a chips cycle, when you have distortions coming from covid and now ai? mandeep: this quarter is all about ai. that is where you are finding out who the real ai winners are. clearly, that is nvidia. everyone thinks they are getting there, but they are so far behind when it comes to showing the growth around ai relative to nvidia. qualcomm and others are the same. they do not have as much exposure as nvidia does, and that is where the market is separating where the real winners are. jonathan: there with me. i will go over nvidia over the last three days. yesterday down almost 7%. wednesday up almost 13%.

the day before that, we were down 7%. that is real volatility on one of the biggest companies on the planet. what is going on with that name? mandeep: i think everyone realizes they will have a great order. in fact, the next two quarters will look great, because the market is still undersupplied. but the market -- the stock market will look ahead. 12 months from now, 18 months from now my what kind of quarter nvidia will have, and that is where there is volatility. will this growth continue, or will it taper slightly? but there is no doubt nvidia is the real winner when it comes to this ai wave. every company increase their capex this quarter, barring apple, and that goes to show, from the hyper scalars, they will see 35% to 40% growth the next six months. annmarie: can we talk about china for a moment? broadly, how concerned are you

about potential slowdown in china based off what we saw from apple, the fact that there iphone market is still hitting some bumps? mandeep: i think there is no doubt long-term that apple business in china is going to taper, it will decelerate. no matter how they try to maneuver it in terms of asp's or trying to make sure the chinese government is still on their side, but longer-term, it is going to go down. apple has done well in terms of making sure they smooth out the transition as opposed to doing it in a knee-jerk way. credit to them, the services business grew 14%. that is what sort of insulates the steep decline in eps and margins everyone was hoping we do not see yet apple. annmarie: can i just ask? what happened to their vr headsets? it literally was not in the earnings anywhere, and they made such a big deal over it. mandeep: if you're not talking

about ai this quarter, there something wrong with you as a tech company, and clearly, i think they are realizing they need to make that pivot. look at meta. they had the best quality beats on race this quarter because the whole call was about infusing ai into their apps and actually benefiting from it. i think apple realized they need to focus more on ai, although, still, they are very disciplined when it comes to the side, but clearly, the narrative is shifting. jonathan: do you think a strong currency is a good excuse for the weakness we saw? mandeep: fx does have an impact, but it shifts from quarter to quarter, so i would not make much out of it. in the end, it will come down to ai. that is the story, that is what everyone is focused on, and that is where you will see the mega caps separate. like, microsoft feet. 80% revenue growth for an $80

billion business is impressive, and that is where you will see the separation. jonathan: appreciate the update. mandeep singh of bloomberg intelligence. particle he apple, looking ahead , this upgrade cycle we have an talking about, for months and months, years, a lot of people think that will be significant, the a lot of people will upgrade. annmarie: i wonder if we are contending for how week the consumer is. annmarie: jon's my litmus test for this. he does not like upgrade on the iphones, but will he upgrade for the artificial intelligence tools? jonathan: i will let you know later this year. kit juckes is up next. the jobs report two hours away. ♪

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jonathan: equities look like this. negative by a little more than 1%. down by 1.6% on the nasdaq 100. the russell, the small caps down by two full percentage points. is this the real deal? we have had a few had fixed. jobless claims are back to where they were last august. we play this game last summer. is this an unwelcome deterioration in the labor market? dani: it will all matter if it is layoffs. you have these companies that are letting go of their

workforce because they are realizing cutting costs is not going to save their margins. they need to let people go in force. that is when you get the nonlinear move in maybe 50 basis points is on the table. jonathan: volatility has been unreal. we took it all back the following day as we kicked off the month of august. let's set on a 10-year yield. seven consecutive days it's been rallying. yields are dropping again by four basis points. a drop of more than 30 basis points over this period. dani: you take it back to april. 4.7% under 4%. multiple cuts priced in. 150 basis points of cuts in the next 12 months. how much more juice is left in the rally? is the risks not asymmetric? you have this narrative built in. things are really bad right now. the job stated will be horrible. 175 is still fine.

that is not the world falling apart. debbie overdue the bond market rally? jonathan: what is a really bad print? dani: the thing i worry about is there will be confirmation bias in the numbers. regardless of what we get, people decided things are bad. even a slight tick lower will be enough to continue this bond market going as it is. jonathan: there's a feeling if we get strength we will ignore it. if we get weakness, it will confirm previous. the foreign-exchange market. the dollar-yen. from the one 60's down to the one 40's. we broke below -- 160's down to the 140's. the fifth week it has moved lower. i think we are down another three percentage points. it is the nikkei 225 that gets your attention.

this stock market is getting hammered. the japanese equity market is down by almost 6% in a couple of sessions. dani: you put this so well. so many people said look what's happening with japanese corporate. there is a fundamental shift happening. warren is in this market. you want to -- warren buffett is investing. you can see it in the price action. a strengthening and the yen is a problem and the technicals of it. japan is a more liquid market than the rest of asia. if you're looking on a day like today where your portfolio is getting beaten down, japan is an easy place to sell. a lot of people overlook the technical factors in the market. jonathan: the consensus calls of the last six months get unwound in a vicious way in the last month or so. under surveillance, shares of amazon falling in the premarket after warning profits will take a backseat to ai spending. apple seeing poor sales in china

overshadowing an upbeat earnings report. the doj is investigating the company's acquisition of run ai on antitrust grounds. annmarie: this seems like a small acquisition in terms of nvidia. $700 million. it feels like potentially you have the doj looking at these ai leaders because i don't than to become the social media or e-commerce behemoths we already have in the united states. they are getting in ahead of it and potentially some concerns they have shaping a lot of this when it comes to safety, national security concerns. you will see a lot more these crackdowns coming from washington when it comes to these ai players. jonathan: we have seen this massive spend on ai. mandeep singh, what did he say? nvidia wins and intel loses. dani: the great thing for nvidia is all the hyper scalars, despite the market not liking

what they heard, they talk about this huge spent. amazon was something like over $60 billion for the year. if you look at where nvidia gets its revenue from, it is meta, amazon, microsoft. microsoft's, 20% of its revenue. these companies are spending and who does that benefit? nvidia. jonathan: let's take a beat and pause. fantastic scenes on a mac and soil. -- american soil. the president and vice present welcome home parent gershkovich and the largest prisoner swap with russia since the cold war. 16 people going to the west. eight returning to russia. beautiful scenes on the side of the world. dani: our photographer on the grand has this pretty incredible photo of evan gershkovich lifting up his mother, just pure joy. you can listen to the conversation president biden had with their families phoning into the airplane as they were in

turkey coming over to the united states. incredible moment. obviously i think in the next few weeks after people start to recalibrate what this means, the u.s. got back civilians and they traded for assassins and criminals basically. dani: this prisoner was swapped in germany that the german government did not want to give up. someone who assassinated summit in broad daylight. the wall street journal has such a good piece on this. it is something to have been working on for years. it is was saying there's a pro forma form you need to send to putin when released to say please release me. people usually don't fill it out. he filled it out and then asked for an interview. annmarie: i can't wait to read his book. i hope it includes a sit down with putin, not in russia but maybe on an overseas trip. jonathan: fantastic scenes in the last day or so. let's turn to the economic data. the u.s. jobs report just over

two hours away. looking for 175k. the job state has more potential to move markets and usual. "the u.s. manufacturing sector has been losing momentum and employment growth has been slowing for months. the question is whether we are near tipping point where the pace of slowdown picks up in enough to make the fed which had started to cut rates sooner than it has." kit, great to catch up with you. i read the first line when it dropped early this morning. the canary in the coal mine or red herring? which one is it? kit: we won't know until september or october. we are at that time of the where if you think people leave school looking for jobs and companies look ahead to next year or make plans and if they feel nervous about it they hire fewer people are lay people off because they don't need them. when people come back from vacation they decide whether there being cautious with money or the fancy going out and spending more. it always feels like -- august

is a fascinating month and a terrifying month. illiquid. a great guide to where we are going next. i think we will know more by then. the unemployment rate is superlow. the employment rate is superhigh. the economy is not week. it is just -- not weak. did is just losing a bit of momentum. we need to look at the private payrolls number. that was just under 140,000 last month. 136,000. i think there will be some fireworks in the markets it was under 100,000. this has been an extraordinary cycle. it feels time to me that -- i said the same thing last year. it is so resilient. i will watch the numbers for this month and next month. then we will know. jonathan: is it time because we are tired of it or are there

signals the cycle is ultimately tired? we have had skiers like this before. had fixed in jobless claims. what is the difference between last august and what we are seeing now? kit: there is certainly less post-covid money floating around for a large chunk of the aiken population. lesser -- american population. less external drivers of strength. other parts of the world are clearly slowing. there is a lack of things you can put your finger on that says this could be ok. i think that is probably the single beat. i'm with you. this mad cycle has -- you would never have guessed we had gotten this far from 2020 without having had a proper recession. how did we manage to keep this plane in the air and in the sky for so long? it would be nice if it keeps

happening. i think he gets tougher each mini cycle to do that. dani: that is what has had people thinking they will be a recession for over the past year plus. this has been a good year to fade those impulses. six cuts priced in at the start of the year. and then no cuts priced in at the moment for the next meeting, september. 33 basis point cuts are priced in. even odds for a 50 basis point cut when we just heard from powell on wednesday who was cool, calm and collected. are we not getting ahead of ourselves? kit: yes, and a sense we always

are. something dramatic has to happen for us to get a 50 basis point cut next month. i mean dramatic. i don't know what is doing. it's driving along at 55 miles per hour. it is doing perfectly all right. you worried that it is unlikely to accelerate. fading recessions is always the right call until the day they start to happen. we will learn a lot this summer. i will be fascinated to see if the number comes out. we know that when the momentum slows, it slows quite quickly. in most cycles. if you look at the economy, inflation is coming under control, the fed will cut rates and the economy is not weak it is. trundling along better than anyone would have thought 18 month ago. annmarie: when you say dramatic, what is that mean in the payrolls report? what is a dramatic number? kit: sub 100 on private-sector payrolls. that puts it in context if you come in with 120,000 on overall payrolls. i will try to phase out the public sector employment piece

to keep going. under 100,000 on the private sector. that is more of a problem. it has to be something like that, otherwise this is summer noise and we might be overreacting to it. jonathan: i wanted genvec to dollar-yen. -- jump back to dollar-yet. we are looking to add to it going the other way. is the move exhausted? kit: if the fed gets rates most of the way back to where the started in 2020, we will get back to 100. you cannot go with the speed. -- at this speed. it is the change of the value of the currency that affects inflation and businesses. this is hurting the equity market because it's having a really aggressive impact on profitability and what people do. we have to pause perhaps. we can't keep going at this pace for much longer. if the fed is cutting i don't think we can be above 140 next

year. if they are cutting a long way, a serious slowdown, yeah. we can go back to 120 and see where we go from there. there is a long way to go. this is very much a function of what u.s. interest rates are. possibly the biggest carry trade we have seen because the japanese kept still while the fed hiked and hiked and hiked. everybody else goes all the way back, it will go a long way. the appreciation hurts profits, cuts inflation, and the rate of change is massive. we need to pause. i'm not sure we can pause much in the middle of august. jonathan: we will see what happens in the next month. kit jukes. we have to pause to read through one quote from one op-ed from 1 wall st giant. in the washington post, jamie dimon. people often say why do we

always talk about jamie dimon and going in the government? he's encouraging the conversation this morning. "the private sector has huge wells of expertise and produces 85% of our nation's jobs. it should have a seat at the table. in recent years government leaders have often failed to engage those in industry. a president should put the most talented people, including those of the opposite party into their cabinet. dani: this is the most blatant part to be at ask to be a part of an administration i have ever seen. it's all like professor jamie dimon. he's talking about the u.s. as inflection point. he's going back in history but he keeps saying that she was president, the next u.s. president. who steamer yuan? is it -- whose team are you on? donald trump r, harris -- or kamala harris? he wants a seat at the table regard this of who is in the white house. dani: i wonder if some points he's making exclude him from one ticket. he talks about the need to

support our allies, to have diplomacy, trade, the active promotion of democratic values. i don't know if that seems like one administration or not necessarily. jonathan: i suggest everyone will have a read on that on wall street, including j.p. morgan please. -- employees. yahaira: chevron missing second-quarter earnings expectations, putting renewed pressure on the ceo of mike wirth as he pursues a $53 billion takeover of hess. he was agreed to nearly 10 month ago but has been delayed by an arbitration case by exxon which claims to have right of first refusal over hess's oil developments. chevron will relocate from san ramon, california, to houston, texas. full migration of operations completed in the next five years. chevron shares are falling, down

more than 2% in the premarket. intel shares are plunging in the premarket after the chipmaker forecast revenue for the third quarter that missed analyst estimates, along with making a string of disappointing announcement. the company said it would suspend its dividend starting in the fourth quarter and begin slashing 15,000 jobs. andy murray ended his tennis career for the quarterfinals defeat in men's doubles at the olympics. the multiple grand slamer joked he never even liked tennis anyway. he said this summer's olympic games would be his last event. over the course of his career he won two gold medals, one in london and the other in rio de janeiro in 2016. he won the u.s. open once in wimbledon twice. his first win at the all in the club aching of the first british man to win that trophy in 77 years. what a run. that is your bloomberg green. jonathan: yahaira, thank you. i'm not sure what it is about

these olympics that are making me cry. dani: i cried at simone biles and andy murray. the reception he got afterwards. everyone gave a standing ovation. the americans were clapping. jonathan: super emotional. a lot of people cried about the opening ceremony but for different reasons. a different kind of crying. up next, all eyes on the labor market. >> the labor market is not necessarily on the precipice of breaking. nonfarm payrolls with increased volatility but an average pace of over 200,000 thus far for 2024. that is indicative of a relatively solid labor market. jonathan: that conversation is up next. you are watching bloomberg tv. ♪ ♪

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( ♪♪ ) morgan stanley is partnering with the women's tennis association to remove boundaries... ( ♪♪ ) because this game is for everyone. jonathan: payrolls one hour and 41 minutes away.

the number you're looking for on the headline print, 175. we are down another one percentage point on the s&p 500. bonds are rallying. yields are lower. we are rallying for the seventh consecutive session. 10-year, 393.95. all eyes on the labor market. >> the labor market is not necessarily on the precipice of breaking. we have seen a loss of momentum. nonfarm payrolls with increased volatility but an average pace of over 200,000 thus far for 2024. that's indicative of a relatively solid labor market. jonathan: counting down to the july jobs report at 8:30 eastern. the median estimate calling for 175k. sarah house has this to say. our previous call was 180. we are incorporating the jobs market data in the last few days. sarah joins us for more.

that's a good place to start, the data in the last few days. it was a little jarring enough to bring down your forecast. sarah: it was really a confluence of the data this week. it started with the last of the fed services pmi's that showed on average he saw hiring in the service sector. be index -- the index defined about 2.5%. the gross hiring rate back to 2014. you look through later in the week, more drift in jobless claims i think the cherry on top was the ism manufacturing and employment print, which points to the trend in hiring has downshifted over the past month. dani: what number today if any could mean the fed will cut 50 basis points? sarah: i think he would have to be pretty low. certainly below 100,000. maybe even closer to negative. it's also important in terms of what was driving that. to what extent we see some potential effects from hurricane

beryl hitting during the survey week. we will have to try to strip out part of that. i think it would take a pretty weak number to get the fed to move 50 basis points at the next meeting giving you still have some hawks that are concerned about the overall inflation backed up and making sure they don't want to ease up too soon and they are ok with a little pain in the labor market. dani: you get the sense the fed is behind the curve and they need to cut a lot to catch up to where the labor market is going. people underestimate how much lower rates need to go to stimulate a weak economy. if some 500 basis points of hikes on the way up did not act that quickly to bring inflation in, what is to say what is needed on the downside to make sure the labor market does not deteriorate further? sarah: i think the fed -- they do have ammunition to stimulate the economy in many ways.

there were so many unique circumstances around this pandemic that i think cap growth strong and made it take a while for inflation to come down. the supply shortages impacting inflation but also as they recovered helping the growth picture as well. as we get back to a more normal environment you could see the impact of rate cuts may be taking on a more traditional role. ultimately, the fed needs to get going soon given that we have seen market deterioration in the jobs market in the past year. annmarie: you think they have already made a mistake? sarah: it is still a little too early to tell. given that you have seen some pretty unique circumstances it's hard to parse out how much of the slowdown over the past year has been this idea of normalization versus outright deterioration. right now it is more a matter of normalization.

given the negative momentum, something has to change to arrest that. that change is a policy change here soon. jonathan: i got a message from a bloomberg terminal subscriber. they would like to ask about hurricane beryl and the impact we might see in this particular job sprint. what kind of number will that subtract from the overall number? sarah: i think it will heavily some impact. not looking for a huge impact. if you look back when you had hurricane harvey and hurricane irma hitting in 2017 you saw a negative payroll print initially. those were larger storms. the hurricane hit in the second week of the month. potentially you could see workers who are may out following the hurricane who are still on the payrolls in the first part. we are not given us much of an impact given to get paid even in the impacted area.

jonathan: got it. sarah house of wells fargo looking for 165 at 8:30 eastern. that was down from 180,000 in the previous estimate. is the mistake trade already building the last one he four hours? at 8:31, we will have a very different conversation. either it will be yes, growth scare mistake trade on, or the other is we all get a nice weekend. dani: so much of that might hinge and with the unemployment number is because of this hyperfocus on it. 4.28% triggers a roll. so much of this has been baked into this. if you get a whiff of that, even close to that you have the feeling this is a bond market that is ready to run away with it. an equity market that has changed to bad news is bad news and will selloff alongside it. annmarie: i think that is what sarah is waiting for, to find it with the on employment rate might be -- unemployment rate

might be. it's a big debate. jonathan: blackrock when he gets the grain on wednesday. we will catch up with them later. the biggest risk is the blowout jobs number strength. we will catch up with jeff after the number drops at 8:30 eastern time. we will catch up with mohamed el-erian next of queens college cambridge. he will be with us for the next two hours. we will be speak to priya misra, ed mills, nela richardson. we have to say thank you to dani burger. good to see you. dani: i will read some news for you. jonathan: we will get your thoughts on the payroll reports later. why not? good morning. payrolls friday. the number is 175,000. a bit of a scare in the last when he four hours following jobless claims moving in the wrong direction. equities lower. we are done a percentage point

on the s&p. from new york, good morning. ♪ we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

>> the labor market is showing some weakening. get set considera -- considerable cooling taking place. >> we have seen a loss of momentum but we are talking about a 4% on the planet rate. >> i don't know if unemployment will say they are not. >> we think unemployment probably is around where it is now. the labor markets are normalizing. >> labor market renormalization

should not be mistaken for any labor market weakness. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: 90 minutes away from the payrolls report. the second hour of "bloomberg surveillance" starts now. let's start with the price action and that we can turn to the estimates. price action negative. it continues on the s&p 500. down by a full percentage point on the s&p. nasdaq down by 1.6%. small caps down by 1.8%. the bond market rally continues. yields lower by more than 30 basis points on a 10-year maturity. two-year jumped 50 in july alone. that move continues. 10-year, 394. estimates are 175,000 is the median estimate of the survey.

unemployment, 4.1%. after the weakness of yesterday, jobless claims, manufacturing, is this a head fake or the real deal? mohamed el-erian with us for the next two hours alongside annmarie. head fake or the real deal? mohamed: the u.s. economy is slowing faster and in a broader sense than most people anticipated, including the fed. the market is catching up to that possibility which has become a probability. jonathan: i have asked repeatedly, welcome cooling or unwelcome deterioration? is this starting to sound like the latter than the former? mohamed: it is the latter. there is no need to have an excessive slowing in the economy. this room is a robust economy. if we do get it, it's because the fed was late in recognizing the economy is slowing. annmarie: there's a debate the fed needs to cut deeper into

timber. do you think they should go to 50 basis points instead of 25? mohamed: i am laughing because so many people now are saying 50 basis points. to start with a 50 basis point cut means you made a mistake. this is a fed that surprised a lot of people by having to hike four times in a row by 75 basis points. we are late starting. if they cut by 50, they will signal they are late starting to cut. it will be a mistake to cut by 50 but the fact that some people talking about it is where the information is right now. jonathan: we will go to the jobs number together. i want to sit on the biggest piece of your call, listen to corporate america. it worked the first time and seems to be working the second time. what did you make of the tone for the news conference with chairman powell will he reappeared to dismiss evidence were signs of weakness? mohamed: i think he was trying to strike the delicate balance,

first extending what they did not cut but signaling they are likely to cut. on the whole he struck it quite well. he did come across more dovish than the statement and you saw the market react again. that is his habit of becoming more dovish. i understand. it is not like the bank of england. five people voted for, four people voted against. he respond by saying it's good that everybody votes the same way. it is not good everyone votes the same way. you don't get a sense of how difficult the struggle the call is. jonathan: i wonder if we will get a sense of that in speeches from fed officials. your line up in the next hour. priya misra from jp morgan. we will catch up with ed mills of raymond james as kamala harris prepares for a tour. and nela richardson. priya misra of jp morgan

writing, "given recent data, all markets are getting nervous about a recession and i think will react more to a downside surprise. we are all focused on whether it is slowing to trend or below." good to see you. let's get the conversation started. we have had a massive rally in the bond market. what is the limit of the rally given the move we have seen at the front end of the curve on the two-year and 10-year? priya: we talked about how near the path is. i think it got narrower in the last few weeks. if we remain in the soft landing, rates are fairly priced. if the economy slows down more there is a lot more room. we are focused on when do they start, you the go 50 or not? we are priced for 3.2%. that's a soft landing right. if the economy slows down and the fed realizes maybe they should have cut earlier, they

need to cut faster, they will land a lot below that. you talked about the 10-year getting closer to 3%. i don't think we're there yet. the end of cycle data is always fickle. you are getting mixed signals. you have to figure out the signal from the noise. if the economy starts to weaken, bond yields are going a lot lower in that front end. we should start to price in the fed taking rates into not just neutral rate but into accommodative territory. mohamed: you mentioned the balance of risk for the report coming up is that it is weaker than what people anticipated. there's the other view. look how much bond yields have moved. the balance of risk is the other way around. the technicals have changed. how do you just the balance of his for today's numbers? priya: we've had a really big move this week. if you get a 200 to 250, we

should debate what is breakeven. back in the day people thought 100,000 was breakeven. i argue it is closer to 200,000. i think rates can rise. we can give back some of the move this week. here is the thing. we were debating the labor market is slowing to trend. it is slowing. the economy is slowing. the labor market is slowing. we are not talking about rate hikes. it limits how high the 10-year can go and the front end can go. the fed is getting ready to cut rates. i think it is a series of cuts. the fed. jay powell said it multiple times. the labor market is back to where it was pre-pandemic. monetary policy is significantly restrictive. let's say the economy is not slowing down. we stay in the soft landing. the fed has room to get rates to neutral. maybe it is 3% or 3.5%. it's not 5%. mohamed: how quickly should

they be going there? priya: i would like the fed to cut 50. look at the starting point. i don't think they are going to get there. they will spook the market. what does the fed know that we don't know? i think the started 25 but we should take them at their word. the unemployment rate rises to 4.5%, they speed up. just like the hiking cycle was not a series of 25. 25, 50, then a series of 75's. i think the cutting cycle will look similar. they start slow. if things worsen, they will really crank it up. annmarie: that means september, november, and december? priya: i don't understand let's go slow. if the economy is back to normal, get monetary policy to normal quickly. the market is starting to price that in. we have not taken down terminal rate estimates that much. they have moved the cuts into 2025. if you went to normalize policy,

go every meeting, 25 every meeting. if things start to slow down you can really start to accelerate. annmarie: the market will react to a number below 150,000. kit jukes was on. they said below 100,000 would be a dramatic market move. what would be so low that it starts to unnerve the fed and maybe we would see a bigger cut in september? priya: below 100,000 will do it. it is the totality of data. we have the claims number. that's the best high-frequency measure of the labor market. it has been inching up. that continues. you could start to -- the fed can try to finesse the message by saying we are at 5.5%. we are not panicking. we are not going to zero but just normalizing. the 50 is the start of normalization. monetary policy works with a lag. we have lived through these long

and variable lags. if you get below 100,000, jobs continue to follow. the ism manufacturing was scary. give services is that weak, 50 gets -- jonathan: what component spooked you? priya: we know manufacturing is weak and that's what and waiting for services. the economy is not really a manufacturing economy. it tends to be more cyclical. tends to lead the move. it's a broad-based slowdown. at cycle lows you were if that's a leading indicator. here is why you don't want to overreact. is there overinvestment in any sector? not really. corporate balance sheets look healthy. we are still in a soft landing but soft landings are about risk management and the risk management now is for hedging the downside. mohamed: two or three weeks ago the narrative was they had

plenty of time. the economy is fine. there were cuts in july. suddenly,'s they should have cut in july. they could do 50 in september. what has changed? what has made this narrative change so radically? priya: markets tend to overdo things. if you look at the inflation data, we have seen very welcome slowing. the only thing that is high is shelter. you look at the totality of data. one thing holding all this up with the job market. that is showing signs of slowing. i think we don't know enough, whether it is slowing board to normalize -- slowing to normalize. i think powell hopes this is normalization. the labor market slowdowns are often nonlinear. if the unappointed rate starts to rise, does it just rise faster? what is a 25 basis point cut do? i'm hoping they can be fast, get

to some sort of normal level, neutral or whatever that is, and then they can respond. at least reduce the restrictiveness. we have a very restrictive policy right now. jonathan: august 2, jobs report. august 14, cpi report. september 6, the first try to the month is a jobs report. september 11, jobs report. the fed decision is about new projections. you talked about finessing the message. they have to finesse the forecast, don't they? the unappointed rate for 22 for his 4%. the unemployment rate for 2025 is 4.2%. some people think we might be there in about an hour and 20 minutes. i wonder what that looks like in september. what is a get revised to? priya: i think the rejections are a function of appropriate monetary policy. we should look at the dots and the projections.

they might keep the projections that forward to percent and just beat of the rate cuts. if they think monetary policy will work, they can cut rates and keep us in the soft landing. you may not have a big increase in the unappointed rate. what was word me is if they have an increase in the unemployment rate and don't have more cuts. that indicates they are ok with the slowdown and that is not is what jay powell was saying. i hope they can cut in order to keep us there but that's the big question. are we less interest rate sensitive today? . we need to -- i argue that we are. we need time for interest rates to work. jonathan: you think even if they do start cutting it is not going to be enough to slow this down? priya: it is tricky. we don't know. we should think about this scenario where they cut even 50's at 5.5%. if they are cutting 50 a quarter, even 50 a meeting you might just a bucket that stop. they are doing qt.

they need to ease. we are on a knife edge right now. the economy, the elections. there's a lot of unknowns. we should be looking at the outcome where you don't get anymore and monetary policy is adjusting to slowly. jonathan: how quickly this conversation has changed in a couple of months. mohamed: i'm absolutely stunned how quickly it has changed. a lot of what you said we knew. we you monetary policy adds to the lag. it's amazing how the market has gone from lower interest rates as a good thing for credit and equity risk to lower interest rates signal something really bad for credit. jonathan: a major change in this conversation. the bond rally continues. let's get an update on stories elsewhere. here is dani burger. dani: exxonmobil reporting earnings that beat expectations. shares of .7%. the company's acquisition of

pioneer natural resources pushed the output to a record. it provides assurance to investors that exxon is well-placed to push there was planned 50% ramp-up in share buybacks up to $20 billion a year. exxon is the best performing major oil stock this year. chipmaker nvidia is facing antitrust investigations. the probe is focused on the company's business practices and the acquisition of a startup called the run ai. it helps users do more processing with fewer chips. regulators want to know if nvidia is just simply buying the company to bury it. both the doj and run ai did not ,. jamie dimon writing in the washington post that the private sector should have a seat at it table -- at the table in a future presidential cabinet. the president should put the most talented people in the opposition party in the cabinet. it leads with a call for strong american leadership to bolster

u.s. influence and strength, saying the country is at an inflection point they could determine the fate of free and democratic nations for decades. jonathan: thank you. that is the sound of priya running out of the room with no comment. new dynamics for november. >> the common theme is the populism that's taken on a nationalistic fervor. >> even if the other side, if kamala harris were to win, she is not joe biden. let's see what that means. jonathan: live from new york city, good morning. ♪ ♪ (♪♪) (♪♪)

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jonathan: if you just tuning in, welcome to the program. pulling back a little bit on the s&p 500. i see a little because we have gotten used these moves.

the rally continues in the bond market. yields lower by four basis points. they grow 4% yesterday. 493.57 on the 10-year going into payrolls later this morning. new dynamics in play for november. >> the common theme is this populism that has taken on a nationalistic fervor. our country is not immune from that either. i look at the left and they have always been about populism versus business and main street. we will be set up in the republican party for a real debate now going forward. there is no incumbent running. even if the other side, if kamala harris were to win, she's not joe biden. let's see what that means. jonathan: the harris came announcing a record-breaking fundraising call of $310 million in july. more than double the nearly $140 million donald trump's campaign pulled in. ed mills has this to say. "it arguably could not have gone

better for her but we are on the cusp of her first major decisions with her selection of a vice president." ed joins us for more. i want to start with this column in the washington post. it's from jamie dimon of jp morgan. i will share the quote with you so the audience can see it. "the private sector produces 85% of our nation's jobs. it should have a seat at the table. in recent years government leaders failed to engage those in industry and the president should but the most talented people, including those from business and the opposite party, into the cabinet." is that wishful thinking? ed: it depends on who wins. i think there has been a frustration in d.c. i talked with a number of folks in the financial services industry. they feel they have it's almost impossible to get a senate confirmation on any physician that requires to go to the

senate banking committee or elizabeth warren. i think jamie dimon is setting up the possibly be a treasury secretary and a trump administration -- in a trump administration. if trump wins, will there be people that join his cabinet? join his administration that the market likes like we saw back in 2016? i think op-ed like the one this morning say the answer is most likely yes. i do think to majority leader cantor's point, kamala harris is different from joe biden on a lot of things. in personnel. i think she would be more open to certain individuals serving in the administration. a big debate over ftc chair lina khan state. her term expires in september. which he put in some of that is more tech friendly given she's the former senator from california and has strong ties within the tech industry? annmarie: why do you think it is

a treasury secretary position under trump? he does not mention trump or harris. we have seen this individual talk badly about trump openly but also give him credit when credit is due. it is not like he is very obvious about what team he's playing for. ed: i think i made the comment space upon what he said back in davos where he seemed to open up this opportunity. we have gone through possible lists of treasury secretary's. we put him on the list in the trump election. i would not have put them on the list in a biden reelection. it's a maybe should harris win. it's an important point. i think given some of the comments he's made, it is slightly more likely in talking about having someone from the other team, he is viewed in d.c. as a democrat. the other team would be the republican party. jonathan: based on the comments we have seen from him, the team

he is on his united states. that is the point he's trying to make in the piece this morning. the difficulty i have at the vice president, and a lot of people do and is still early days and we will find up more about her position on a range of things, it's difficult industry stand -- difficult to understand what the policy platform will be. there's been some distance created between her and a sitting president, between her interviews back in 2019 when she was running for 2020. what is your understanding of what the policy platform might look like? ed: first and foremost, it's easy for her to say this is a continuation of the biden-harris administration should she win. divide administration would point to the successes they have had on the inflation reduction act, the bipartisan infrastructure built. what biden was trying to make as a campaign promise for his second term is the full implementation of those. that is where we start.

you are right. she was only in the senate for a relatively short period compared to other candidates. with donald trump, we had him as president so we have a much greater understanding. we go back to her time as attorney general of california. what stands out the most is her settlement with 50 attorneys general on a foreclosure settlement against the largest banks in the country. its a lot of things that are popular within the democratic base. she has led on reproductive rights. in politics, what i always said is when you're explaining you are losing. right now she's in a honeymoon period of her campaign to go out there and launch that 10 point plan to go through the details. they think that gets her into the explaining part of the conversation. they would rather have the honeymoon when last as long as

possible so the fewer policy details you give today, the easier it is for the honeymoon to continue versus really going through this conversation as to wide did the comments about fracking or medicare for all back in 2020 could be so different than today. a lot of that is because states like pennsylvania are probably the tipping state. it makes it much harder to win in swing states when it's states that have a lot of fracking. if you give the former physicians. allow the independent validator's to make your case and step back and see how long it can be until you have to take some of these positions. jonathan: ed, we appreciate the update. we have been following the news in the last few weeks. what do you make of all of this? mohamed: i think that the vice president's campaign is gaining traction or faster than anyone anticipated. 310 million dollars in july is a lot of money. that is quite a reaction from the base. suddenly we have a really

interesting race going on. jonathan: i've heard this phrase repeatedly, honeymoon, vp pick, honeymoon continues, big audiences, drum up enthusiasm. then we get to the explaining as we get closer to the dnc. annmarie: the dnc will be the celebration. they will have a ticket. then the real election starts. you really have to sit down and answer in an interview policy questions. if she wants to win pennsylvania, she needs to decide whether or not to ban fracking. that will be replayed constantly on trump ads. jonathan: i go back to what libby cantrill said. go to the beach and come back on labor day. then we will talk about politics. from new york, this is bloomberg. ♪

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jonathan: if you thought july was exhausting, welcome to august. check this out. down by more than 1% across-the-board on the s&p 500. nasdaq 100 down by 1.7%. small caps up 10% in july. down 2% this morning. we are heading towards a third week of losses on the s&p 500 unless we get a turnaround sparks potentially by payroll report in 60 minutes time. let's get into the bond market. two-year and 10-year. two-year down to 4.1%. down four basis points.

we were down 50 in july. we dropped four. 10-year, seven consecutive sessions this maturity has been rallying. the yield has dropped by more than 30 basis points after breaking through 4% for the first time since spring of this year. i want to turn to foreign-exchange. we have engineered this massive unlocking of yen strength promoted and endorsed encouraged by the boj earlier this week. we are down to 148.93. dollar-yen down for a fifth consecutive week. that has unlocked some real weakness in the japanese equity market. look at the nikkei to 25. it's all poison -- 225. it is all poison. we are down sunday like a percent on the nikkei -- 8% on the nikkei 225. what is developing worldwide in places like japan? it has not just been the u.s.

market move. it's been global. mohamed: japan is an outlier. that is why you are seeing the bigger move. the equity market is having to cope with the weaker currency -- stronger currency and higher rates. these things are adding or amplifying the pressure from the outside. ironically, that is what they needed to do. they did not need to normalize faster. we got that message clearly this week when the governor said that a weak currency is problematic for inflation and he sees no limit, no ceiling to that. it does not surprise me. they are doing some thing they should have done earlier, mobilize at a faster rate. jonathan: based on the guidance, looking for another rate hike. we have spent months talking about the prospect of central-bank divergence. we have been talking about the ecb versus the federal reserve. i'm now wondering about the boj versus federal reserve. mohamed: it could a skinned --

extend quite far. the fed and the bank of england. that trades in a similar world. with japan, divergence could extend quite far. jonathan:148.97. negative on the currency pair. under surveillance this morning, president biden sending more u.s. supported israel as israel faces fresh threats following the assassinations of hamas and hezbollah leaders. fighting pressing netanyahu to move forward with cease-fire efforts -- biden pressing on netanyahu. annmarie: he is a lame-duck president. if he is going to have a legacy it will be to sure up some of these deals and put a bow on these negotiations he's been working on. i find this comes after the assassination. biden said israel should move on

this deal fast but it hasn't helped this individual was assassinated. he potentially got the phone with netanyahu to say what you did did not help negotiations. what i find interesting, the end of may. biden came out with a cease-fire proposal. i looked at the text. he said israel should move on it. biden presented this cease-fire result at the end of may think israel is now offered, israel has offered a conference of new proposal. which is it? is the net estate -- united states pressuring israel or was this israel's proposal that they outlined these three steps. jonathan: kamala harris is not known for foreign policy expertise. how closely will she be aligned with the president for the rest of the campaign? annmarie: if he gets a cease-fire, she will want to bask in that and that will be helpful when it comes the young voters and progressives. you have seen her try to take a slightly different tone when it comes to netanyahu. that's especially important with

democratic politics heading into november then you sell this week. she had a separate meeting with benjamin netanyahu. netanyahu comes here and has three different meetings. biden, harris and trump. november 6, it's unclear who he's going to get. he needs to deal with the sitting president. jonathan: i want to turn to chandra. poor sales in china despite an upbeat earnings report from one of the biggest companies on the planet. the company proceeding -- predicting iphone upgrades in coming months. it's a different story for intel. a grim growth forecast and will/50,000 jobs. -- slash 50,000 jobs. they will attribute this to the fx market and the strong u.s. dollar. we have seen this repeatedly in china over the last few weeks from corporate america and corporations worldwide. what can they do to address this weakness? what we hear in the last week or so is that they have some room

to move on the fiscal side. they want to wait to see what happens in the election before they do it. they want to keep the dry powder for 2025. what is your interpretation? mohamed: china is going back to the old game of trying to use the global markets to turbocharge their own growth. we see it in exports and the currency. what they need to do and they know that is they need to fundamental -- need to have fundamental reforms. they need to develop new engines of growth. right now they do not want to suffer the consequences of structural reforms. they want the benefits on long-term and the costs upfront. you see them going back to some old plays. china is going to be slower for longer. i do think people realize this. apple has an extra disadvantage. it's an american company. one headwind from the economy

and two from the fact that china is slowly diversifying away from american companies. jonathan: that's the important point. the chinese consumer's backing away. is that a trend that has legs? will that be difficult for american companies that are looking at china and to have a big presence and self of the chinese consumer? mohamed: any mayor kinca -- any american company not putting this in projections is making a mistake. jonathan: let's talk about countries that have to engage on the issue. an opinion column you wrote a number of years ago you talked about the fence sitters. the countries that one of the security like it from america and at the same time wanted the presence in china. how sustainable is fence sitting in the world we are going into no? -- now? mohamed: it depends who you are now. you can play both sides while you have some thing special. if you're new zealand, australia, singapore, mexico,

fence sitting is not a sustainable approach. you have a third category we never talk about. the countries left out completely. some countries in africa. you will see the middle powers, some of them able to fence sit. a second category is forced to make a choice at some point. the third category gets the worst of both sides. annmarie: what about a fence sitter like germany? they are pressured by the u.s. to put of the walls but they are desperate to be in the chinese market. mohamed: i do think they will be a fence sitter long-term. italy is another example where the prime ministers trying to fence set. europe will align on national security rather than economic. jonathan: interesting. let's turn to this. earnings from big tech. disappointing results. profits for neville take a backseat to heavy ai spending. the company providing conservative revenue guidance for the third quarter as well. this came from the cfo.

"we are seeing a lot of the same consumer trends we have been talking about. consumers being careful with their spend, trading down, looking for deals." poonam goyal joins us now. mohamed el-erian is with us and talked about this repeatedly as well. png, slower price increases. pepsi, consumers more challenged. nestle, value seeking behavior. how was amazon dealing with that at the moment? poonam: amazon is focused on price so you are right. the consumer remains selective. they are trading down. they are playing for value. in that instance this a discount and we saw that over -- we expect them to continue to question the price which is a part part of the reason for their weaker operating margin guidance for the third quarter. mohamed: i want to focus on all the investments we are hearing about and what that does for the

structure of the industry. if the mega companies are investing so much money, what happens to the belly of the curve? what happens to the midsized companies trying to establish a footing here -- here? poonam: the bigger you are the more power you have to invest. when it comes to the small and middle companies, they have to find a way to lease some of the infrastructure, some of the technology investments. they don't have the capital to invest like an amazon or walmart. they will be challenged. we are seeing that. the investments amazon, ebay has made in technology and ai, many the other retailers i follow, they are nowhere near that today. they are scrambling and picking and choosing where they invest in small pockets of opportunity. mohamed: what do you tell people that are concerned about consumer protection and competition? that are seeing a natural

tendency for the big to get bigger and the smaller to get squeezed. poonam: they have to figure out the big can't get bigger through acquisitions anymore. it is hard for amazon to buy something today. the growth is organic. that said, will there be pressure from washington on allowing companies like tamu, which are creating the added pressure on the consumer side, these rock-bottom prices, it's challenging everyone. not just the big but the mid and small sized businesses. you can't compete with those prices unless you are big and can afford to take a loss. annmarie: it's a pretty tough experience with how much is locked behind cabinets. he's talking about u.s. drugstores. you have to press a button to get some it is a come out, open the cabinets and shoplifting in the stores. how much of the issues that americans face at drugstores actually benefiting amazon right now? poonam: amazon benefits largely

from convenience. yes, it is uncomfortable to have to go into a store and have to estimate to open up these cabinets. it is not the best shopping experience. we are seeing that shift online really help with that. that said, it depends on when you need it and how you needed when you're at a drugstore. if you need your medicine in the next 30 minutes, the next hour, you will walk into a cvs or somewhere else. if you can wait a day, go to amazon and have it fulfilled or any other online retailer. jonathan: the retail extremes with some companies is dead on. it's awful. you don't ago when. annmarie: the combination of what's happening in the physical real world and how much progress amazon is making in their e-commerce pharmacy is helping them tremendously. people don't want to wait around 10 minutes and then have the sales attended hover over you while you decide which to toronto by. -- deodorant to buy.

jonathan: name your franchise. do i want them to unlock the thing to get the toothpaste out? who wants to do that anymore? it's ridiculous with annmarie: not when you have the convenience of amazon and they are stealing their market share. jonathan: literally stealing. poonam goyal, thank you. here is your bloomberg brief with dani burger. dani: speaking of not winning the shop and physical stores, doordash shares are up 9.5% premarket. they reported a soccer than expected profit forecast for the current quarter. that defied the consumer slump elsewhere. analysts praised his resilient demand and growth in categories beyond restaurant orders. it expanded the marketplace to include items like grocery, beauty, home improvement and sporting goods. there's a bit of bad news for bankers in london. say goodbye to your business class flights. according to bloomberg reporting, travel is the latest target for u.k. lenders trying to cut costs. as standard chartered employees

now misled economy for flights under five hours. at lloyd's, they are being told to take public chance rotation is set of taxis. hsbc employees can only book work travel if they set up at least three meetings a day for that trip. andy murray has ended his tennis career with a quarterfinals defeat in men's doubles at the olympics. the multi grand slam or jokingly posted on x he never liked tennis anyway. murray said his summer's olympic games would be his last event. he won two gold medals. he won wimbledon twice, the first british man to do 777 years. that is your brief. jonathan: thank you. if this stuff is free, can you just walk out with it yourself? we should do a package on this. i'll do the camera work. we will see how much you can get away with. this takes place at lululemon. annmarie: why are you behind the camera and i'm the thief? jonathan: you want me to be the

thief? annmarie: just in case. jonathan: i was going to do the hard work. you probably don't want to get involved in this. i'm not sure management wants us to do it either. up next, the data. >> i'm not worried about the labor market. that said, the on and plummet rate has moved higher. this is typically the tough part to really navigate, getting the under plummet rate to move slowly up and not just shoot higher in an asymmetric way. jonathan: that conversation just around the corner. the jobs report 45 and it's awake. from new york, this is bloomberg. ♪

♪ [suspenseful music] trains. [whoosh] ♪ trains that use the power of dell ai and intel. clearing the way, [rumble] [whoosh] so you arrive exactly where you belong. jonathan: counting you down to the jobs report. 43 minutes away. the headline number, the expectation about 175. let's talk about the price

action. equity futures negative. the bond rally continues. yields lower by three or four basis points. under surveillance this morning the data in the driving seat. >> i'm not worried about the state of the labor market. the unemployment rate has been tired. this is typically the tough part to really navigate, getting the under plummet rate to move slowly up and not just --unemployment rate to move slowly up and not just in an asymmetric way. the next six month will be important for the unemployment. rate jonathan: --unemployment rate. jonathan: two cpi prints before the next fed decision in september. "the preponderance of job status shows a cooling but solid labor market. what is playing in the fed's favor is how low the under plummet rate continues to be so they can afford to be patient." nela, good to see you. nela: good to see you. jonathan: let's talk about the

jobs market. you sound more constructive than some of the guess we have spoken to this morning. you have a load of data in front of you. what is i give you more confidence the federal reserve has some time? nela: we are still seeing the hiring that is robust and it's different than what it was two years ago. is not just lower. it is less replacement hiring. this was the time of the great resignation. that meant if you had 30 employees and you on a small firm, you might have seen 100 employees over the course of a year because your turner -- turnover rate was so high. we are not in that situation now. when a firm is hiring today, they are trying to expand their workforce, not replace it. that's an important point to keep in mind. when we are looking at the under plummet rate we are also seeing more people coming into the labor market. may be by higher wage growth.

this jobs market is robust in some ways. there are concerns in the other. one concern i have is how lopsided our job gains are right now. how positioned towards the service sector and only certain sectors within the service sector are releasing strong growth. that's a concern going into the second half of the year. mohamed: people pointed two things. you are right. hiring is not concentrated which makes it more vulnerable. second, the nonlinearity of the labor market. we start weakening. companies feel they are safe to lay off people. the consumer gets more cautious. then you start a process that is self-defeating. how worried are you about the second point, that is nonlinear behavior when it starts weakening? nela: companies are dealing with a lot of things right now. one thing when i talk to

companies dealing with this, people are not leaving. they are staying. you see that in the jolt report. they are staying longer than anticipated. companies hired thinking that would be more turnover than they saw. the layoffs you are seeing is not just a firm trying to right size because of margins or profit concerns. there is some of that but there's also a correction to maybe over hiring a year ago or two years ago. yes, there is a tendency for that employment rate to reflect weakness. it must also reflect a little bit of self correction on the part of companies instead of trying to right size their employment going into a weaker d dp growth demand averment. mohamed: we are at a 4.1% unemployment rate. the fed things we in the year at 4%. nela: i think we end around 4%. i think that's possible given

the hiring. given how strong consumer demand still is. it's fairly resilient. it is weakening in spots but still overall good. where you are seeing growth in the labor market is in those consumer facing industries. overall i am constructive. that doesn't mean i have rose-colored glasses on this hot summer day. jonathan: constructive relative to the gloom we have heard around the table. nela: when you look at the labor market like i have been through the pandemic, we have seen the highs in the lows of the market -- and the lows of the labor market. highs that were unsustainable. yes, it's a more normal labor market but normal is not always going up. there is a little volatility even in normal. normal is dynamic in the labor market. that is what i think we are seeing in this particular one. one that is dynamic and very responsive to economic conditions.

annmarie: we've had a lot of doom and gloom using the 'r' word. even a 10th of a percent higher on the under plummet rate could go to 4.2% would trigger the psalm role. a tick up higher in the under plummet rate? nela: i'm always concerned about the unemployment rate. blessed now than usual -- less now than usual because levels matter. we started at a record low level of unemployment. yes, the rates are ticking up but they're starting from a low level. it matters where you start. it matters are you finish. if we are finishing at 4%, finishing under 4.5%, i will take that. that is different than finishing at 6% or 7%, which has happened at other recessions. that context is really important. jonathan: you have data on job changes, people not leaving.

what is happening with the wage growth they can achieve from leaving if they wanted to if they can't find a job? nela: it's shrinking. jonathan: quickly? nela: very. you can see a 9% pay bump from your old job to a new job. that's a pretty significant pay raise, especially if you're not making a lot. if you're in a narrowly job like in a consumer retail or restaurant or leisure and hospitality writ large. the premium from switching jobs has shrunk, which is why people are staying in place longer. why the labor market and why we might see less hiring over time. jonathan: is that what we saw in the jobs data? did we start to see some of that? nela: we are not seeing as many openings. quits are down double digits for last year. there is no returns for the worker. there returns for switching are getting smaller over time.

that is what we are seeing in the data. jonathan: fascinating. nela richardson of adp. super rosie given the doom and gloom. it's all relative. we have gone from talking about soft landings like that. in the last 24 hours consensus shifted towards a hard landing story very quickly. mohamed: is at the market-leading the market or the market-leading the narrative -- market leading the narrative. jonathan: the employment component. jobless claims getting close to 250,000. we have had if had fakes over the last 12 months. we have claims at the highest since august of last year. august was a head fake and then claims pulled lower again. nela was talking about the dynamism of the labor market. 8:30 will be a big part of the story and how people writ

about thise. mohamed: dynamic at the labor market. jonathan: coming up, we will catch up with robert tip, jeff rosenberg, dana peterson. your jobs report is 34 minutes away. your estimate is 175,000. the previous month, 206,000. a big focus on unemployment. does it carry on creeping higher? mohammed talked about the market narrative. it's running away over the last couple of days and running lower. equity futures down by more than one full percentage point. on the bond market the rally continues. but jobs report is 34 minutes away. ♪ ♪ the all new godaddy airo helps you

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> in our eyes, it all comes

down to the labor market. >> markets have moved from worries around inflation to worries around labor. >> the labor market can turn very quickly, so the fed has to be cautious as they watch the data. >> the strong reports won't prevent them from cutting, but a weak one could. >> you might want to put more weight on that. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: 30 minutes from the jobs report, let's do one thing first. check out price action. then the guests. price action is still negative, down across the board right now. the s&p, down by 1.8. down by 1.6 on the russell. small caps, in lower. list turn for what we are looking for later, jobs guesses, 175 is the estimate. the previous read was 206.

big focus on unemployment. they talked about wage growth, climbing higher. 4.1% is now the estimate in line with the previous number. citigroup, they just published, the title of the piece is -- you mentioned this in the last hour or so, how quickly the conversation changed. citigroup today looking for 150000 and unemployment to get the four point 2%. the title today is 75 basis points of cuts to 2024, might be too few. how quickly has the story changed in a couple of weeks? >> incredibly quickly. it's amazing. i'm stunned. consensus is moving so fast jonathan:, i'm actually stunned. does it make sense that it has -- so fast, i'm actually stunned. jonathan: does it make sense? based on the information coming

in? mohamed el-erian: it has overshot where i am, it, when i heard people say 50 in september, i thought that's really difficult for the fed to start a cutting cycle with 50 basis points, but that is where the narrative is going. annmarie: you think that if they cut 50 in september, it's a mistake? mohamed: absolutely. they should have started cutting in july. having said that, i think they need to be careful to handle the start of the cycle. it does impact behaviors. we haven't talked about this but the major issue is behavioral. our people feeling more insecure and are they cutting down on the income now? that will be the major question. jonathan: they have certainly cut down on spending based on what we heard from corporate america. september 18 is the next fed decision but they need to produce some new forecasts and at the moment they have year end unemployment of 4%, 2025's

around the same number in that is basically where we are right now. for the data point to still come, after 8:30 this morning we got a cpi report with another report september 6 and another september 11. a key feature on your call that you wrote about, going into the decision this week, you said that we were two decisions away from a policy mistake, including july and september. the reason you said that is you think this federal reserve could be pushed away from cutting interest rates based on one freaky cpi print between now and then. after that conference when the chairman backed away of data point dependency, has he done enough to convince you after you blessed him with your thoughts on what the federal reserve should do? are you can sit -- convinced he is seeing your way on things? mohamed: i'm glad that he picked up on the christine lagarde

phrase of not being data-dependent. he stressed that by saying that we look at the entire data cut being pushed. look, john, in your series of updates coming up, don't forget jackson hole. the star becomes much more important. what is your destination, if people push to start the journey earlier and are building and quite a few cuts in the journey, what is the destination. the fed needs to spend a lot more time thinking about destination issues than it has so far. jonathan: we can explore that in this hour as we catch up with nadia at ubs. fixed income, risk aversion spiking a major market rally. dana peterson is at the conference board with why she doesn't anticipate hard landing. top story, payroll report under 30 minutes away. the fed will be watching ahead of the decision.

the fed remains on track to start cutting in september with the economy on course. it's a further broadening out, nadia, so good to see you. let's talk about the call in the economy. soft landing was the consensus for a long time and it feels like things are changing. why are you and your team sticking with that? nadia: we think that the economy is floating -- slowing, but what we heard throughout the earnings season is it feels like things are slowing without deteriorating at a fast clip. we think that you can get economic growth in the back half of the year. as it should be supported for the market. with a pause around the consumer.

mohamed: what do you make of the fact that people have become so negative about the economy? jonathan: nadia: we had shifted from where good news was good news to bad news being bad news, so it was clear for us with a rate cuts, and september, the cut. yesterday, ism spooked the manufacturer, but it has been the low on average, 50 since late october. to my understanding, going back to where things are slowing, the market has gotten ahead of itself, particularly the rate market at 90 basis points this

year, we think it will be 50 starting in september with another in december. mohamed: distribution of outcomes, i put soft landing in a big scenario for hotter because of the positive supply shocks. let's focus on soft landing. is it higher than 50% in your mind nadia:? i don't think it's much higher than that, but again, 50 or 60 range, we still think it is hard to see the economy go from 2% in the first half of the year to than significant contraction in the second half. particularly when you have a labor market that is softening but still producing job growth. annmarie: reading through the responses, there is serious concern. consumer behavior changing more than normal, but one company said they were hoping for increase in customer demand or

they would need to make organizational changes, i.e. layoffs. if you are viewing the soft landing, what does it take for you to see in the data to pivot and say that this will be a hard landing? nadia: obviously, the labor market is quite important. we all know that and we are seeing that pickup and claims with some of the data being risked. some of what you are seeing has to do with reality where the consumer has been under clerk -- pressure from inflation. food inflation has been up since the start of pandemic. feels like that what companies are experiencing, they got used to the last few years of increasing prices, passing them on to the consumer who is continuing to spread and things are going back to pre-pandemic and it feels like companies have forgotten what it felt like. jonathan: one of your least preferred sectors, can group -- consumer discretionary, does

that speak to it? nadia: our view on that is less about the consumer, which we think of as ok on the whole, but when you think about the wealth effect, you think about equity markets at record levels, and it has more to do with the mix of skewing more towards goods. starting to see it, yes, with weakness translating into a pullback on travel. jonathan: airlines? nadia: exactly. consumer is broadening back a bit. it's less more about the consumer deteriorating, but the fact that it skews towards more goods for home furnishings in the last week that are down a lot. jonathan: broadening, where does it come from? who is leading it? nadia: comes more from typical value, if you will. think about like whether you think about financials having

benefited from rates moving on, from basil three endgame and that easing regulation as well. that is where it's hit abroad. even the industrials, the longer cycle industrials are benefiting from the increase in spending that we are seeing in ai electrification in automation. the broad areas we are speaking of are not small cap, per se, but that has become a hot topic with more of these cyclical values. mohamed: looking at the s&p, there were three drivers of performance. one was the notion that the sky is the limit for anything that has to do with ai and the second is economic exceptionalism continuing to support the market. third, a responsive fed. over the last few weeks we have seen all three questioned in a significant manner. looking forward, do we pay a process?

how far does it extend? nadia: i think the fed needs to start in september. the ai capex cycle, we are not, i would put more confidence in that than the other two you spoke about. reality is again, as you can see listening to these companies, what we have heard is capex continuing to go higher. if you look at microsoft, 10k capex is higher beyond the 2025 with skills spending a lot of money that continue to emphasize , as would said, would rather have the capacity today linked to that. when we think about positioning within 10, we want to position those towards ai infrastructure. let's not forget utility as a part of that. that is where the broader numbers are coming from. that is where we put our confidence. because at the end of the day

what matters for the market is earnings growth. we think it will continue to be led by tech. and then the fed behind it. jonathan: powerful quote from zuckerberg, picking up on the same thing. nadia, good to see you. nadia lovell, there. the equity market is lower, jobs report at 17, 18 minutes away. let's take the opportunity to get you an update on stories with a bloomberg brief from dani burger. dani: the president and the vice president were home -- were at joint base andrews to welcome home americans as a part of a large prisoner swap with russia, the largest since the cold war. in return, rusher -- russia received the release of a chechen separatist killer. germany had long resisted that release. chevron had made plans to move

headquarters in california to texas, the latest major company leaving the west coast complaining of excess regulation , ending 140 years of chevron in california. they already have 7000 employees in houston versus 2000 and california. in january they lashed out at what they called increasingly harsh regulatory environments in california, writing down the value of assets in the state. the olympics today, seven u.s. teams are competing across five sports and in swimming there are five finals on the schedule with the attention turning to caleb dressel. track and field, all eyes are to shikari richardson in the 100 meter -- running in the preliminary of the event. the u.s. is still leading the overall medal count. china has 12, 26 overall. that's your brief. jonathan: going to do that for you next week.

someone will do it? we should do that. up next, the morning calls. plus fixed income on the bond market rally heading into july payrolls. that report is 15 minutes away. market lower in new york, this is bloomberg. ♪ ♪

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jonathan: it's ajonathan: question i've thought of and a question that i know that any of you in an office working away on have thought of, what happens if the jobs numbers are really sunk? how does the -- how does the jobs numbers change? nsp is the biggest near-term risk event, even if it is one-sided, investors will be quick to dismiss strength as status quo with a sharp slowdown

interpreted as a game changer for the fed. we are going to find out in about 13 minutes. equities on the s&p 500 are negative by 1.1% with yields down on the 10 year, 39376. first up, raymond james, analysts saying that they turned out to be a bigger headwind than anticipated. intel is getting hammered. next up, barclays is raising price targets to 235. web services have to deliver the goods with increased trading, city's rating price target on apple to 200 35 ai futures, fed cycles, that's the story for the morning calls.

payroll report just moments away. treasuries are rallying as they boost bets for rate cuts. how weak is the jobs market? employment statistics have been moderating but not evenly. non-foreign payrolls have the potential to fill or kill market expectations for a steady stream of rate cuts. robert joins us now for more. this jobs market, what are you expecting 11 minutes? robert: i think that, you know, the market pricing here has gone right through the middle of next year. this market is pretty much based for a steady downturn in the job market where the fed is going to meet with at least 25 basis points per meeting this year. on average, will hit every meeting to the middle of next year. so, i don't know what's going to

happen, but i can tell you that the numbers to date have hollowed out in terms of the cyclical aspects of the economy, smart government, more health care. you can make the case that seeing a big drop off in the numbers today is to be expected and that the fed, if they get another set of week numbers, just like two out of three of the last cycles, could end up cutting into meeting. -- intro meeting. two out of three. if you think about it, there are 2.5 on growth, 2.5 on inflation, looking backwards you could make the case -- why on earth would they go intro meeting? because the numbers hadn't broken. but we had seen surveys suggesting that things are going down and their priority is that they are restrictive, that the

growth end of the mandate is at risk. they did not hammer it, they stayed away from hammering it. you had people at the meeting talking about they should be cutting here today. so, it becomes clear as you get today's number, which includes revisions for the prior month, next month's number, often what happens is the number breaks to the downside and is revised down and is revised down out from under the outlook. that is why you end up with intro meeting cuts. i don't think that's going to happen. it's more likely that we have a more moderate slowdown aside from any hurricane side effects or that kind of thing. if the fed ends up in a gradual string of rate cuts, we are going to have an orderly bond market that is range bound, albeit in a range that is lower on yields than we have seen. but it is wide open and i think that's worth keeping in mind. mohamed: we have seen a massive

move in yields over the last few weeks. where you think the pain trade is now? can you speak to treasuries and credit? robert: i think that we have seen these pain trades drive the market because there are so many powerful factors out there. september of last year, yields shot up to 5%. they would have gone further. the economy was doing well, inflation was not under control. the issuance was burgeoning. the treasury issuance weighing on the market, the fed stopped that with verbal intervention. right now, you know people are clearly worried about the bottom dropping out from under them, like the 2008 scenario. believe me, i don't think that is what is going on. i think that the underpinning here is solid. we have a very modest growth with a big slow down to something subpar.

but i don't think that we will drop off like we have in 2008 or like we saw in 2001. but that is the fear. that this will be more like 1995, where they get the numbers under control and cut on a moderate basis. if you think about it, we have seen a couple of good inflation numbers and before that we saw worry someone's. if it turns out things are higher, the fed doesn't want to be wrong and the other direction. jonathan: robert, great to get your thoughts. that's a lot to think about. we often joke around the table that the jobs number we are about to get is the most important one since the last one and until the next one. mike mckee joins us and mike, i have to say this one feels more important this time. mike: it doesn't -- it does seem to carry a lot more weight. not the most important since our lifetime, but maybe most important since june.

this is where everyone wants to fill or kill the idea. if it is a turning point, you're going to maintain the trends we have had in the last couple of days and a strong report, that will be interesting to see what happens. the big question is our good friend, mohammed, is he wrong in the two meetings away from policy mistakes? bad numbers today, might be one meeting away from policy mistake. mohamed: what's going on? everyone was comfortable, yesterday it could wait until september, there was no reason to rush. suddenly i'm hearing 50 basis points in september, intra- market, what is going on? mike: i think what you are seeing is the panic that one normally sees in markets when there are turning points, as someone once said, in the fed is a reaction function, markets having an overreaction function. i certainly don't think we will get an intermediate cut.

first of all, one number isn't going to change anything. but i do think that they are probably more divided in the last meeting then chairman powell let on. they all agreed in the end, but what did they say in the middle? we have to check the minutes. jonathan: portugal, it wasn't that long ago when chairman powell spoke about the strength of the labor market as a reason for them to be patient, giving them time to wait. you got a sense of that in the news conference this week, he didn't stray far from the line. what would upset them today? looking at what's in front of us, what would upset them today, what would change that? mike: biggest concern is unemployment rate. they want to make sure it doesn't go up. 4.2% is their view on sustainable unemployment, where the neutral level of unemployment would be. 4.3% today would trigger the psalm rule, scaring the verses

in the markets. non-foreign payrolls, that would have to be a significantly low number, because they have been expecting it to fall, expecting us to gradually ratchet down to the 150's and 130's. so, i think it is much more on the unemployment side, with earnings maybe affected by the hurricane. jonathan: we'll talk about hurricane beryl as well in just a moment. mike sticks with us to break it down, mohammed is going to react to it. up next on the program, the most important payrolls report since the last one until the next one. estimate, 100 75. the number, just around the corner. ♪ (♪♪) (♪♪)

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jonathan: the jobs report 25 seconds away. the estimate, 175 k. on unemployment, the estimate 4.1% in our survey going into a discourse equity futures down. on the nasdaq down 1.7. getting to the bond market, treasuries rallying for yields low by five basis points on the 10 year. with the data is mike mckee. michael: a downside surprise will catch the markets attention. 114,000 jobs created last month according to the bls, a

significant lower than the numbers john was giving you for what was anticipated. the unemployment rate, a 4.3%. that's going to really move some markets. let me give you some quick other numbers. average hourly earnings 2/10 of a percent lower than the 3/10 anticipated, we will have to check that, that might be related to the hurricane. same thing with hours worked. 34.2 down from 34.3. the two month net revision to payrolls is only 29,000 lower. much of that seems to have been in june as that is revised down to one 79 from 206. managing payrolls up, all the pre-indicators including ism suggesting that might be bad news, looking at the labor force

participation rate, 62.7 up from 62.6 before. jonathan: we have a growth scare up a let's get to the price action. equity futures on the s&p down. on the russell down 2.6. we will see something dramatic. a word that gets overused on wall street. switching up to the bond market, a front-end of the curve on a two year yield look at this move on a two year yield down 25 basis points. the two-year is now below where the 10-year was only about 20 minutes ago. two-year is down to 389. down to 379, mike mckee what do you see? michael: one note in this report that's important to put out there, hurricane beryl had no discernible effect on the jobs data so this is just what it is and it is i think the way you characterize it a growth scare is a great way to put it. jonathan: dollar-yen gap lower

down by 1.2%, a stronger japanese yen. jobless claims yesterday higher than expected, some manufacturing lower than expected. the employment component with this market. based on this for good reason. the estimate was 175 for payrolls. unemployment coming in at 4.3, the estimate was 4.1. you can guess what this market is doing. bonds rally and the dollar weekend. what is your view on the totality of the economic data. looking back at that fed decision on wednesday. how bad was that call to wait until september? >> i'm hearing the market scream two things. growth scare, a policy mistake. that is what i'm hearing, that's what you are seeing from the price action. i think the market now fully understands that the fed may be late in starting its cutting

cycle. michael: i need to give one small correction here. we did not technically trigger the psalm rule because the three digit unemployment rate is 4.253 rounds up to 4.3. you would've had to have four point -- we come in at four point 085 -- 4.085. we are very close to the sahm rule. jonathan: markets trading as if we have triggered the rule and we already in recession trade is that what it feels like to you? >> bill dudley explained really well the notion all you have it all you need is people to start worrying about something and then ate on ashley have to have it happen. people underestimate the behavioral aspects when it comes to the labor market. i do worry, i've been worried for a while. that's good to be really interesting to hear what the fed speakers say after the blackout

period and what they will tell us. jonathan: we've had growth scare's before in the cycle. a lot of people of been humbled by how well this has held up. why does this moment feel so different compared to those other moments over the last few years? >> this is the first time i've had a growth scare. in the past as it is no reason for the u.s. to fall into a recession. people underestimate the lag effects of higher interest rates and these are in a much bigger way now. chair powell admitted on wednesday speaking to that. i do worry that we may lose u.s. economic exceptionalism because of a past mistake. jonathan: we have payrolls just moments ago, 114 against an estimate in our survey of 175. the unplanned rate climbing to four point 3%. the estimate was 4.1. that's unlocked a lot of weakness in this equity market. on top of the weakness we've

already seen. we are down across the board, equity futures negative on the s&p. on the nasdaq and the russell. on the nasdaq 2.5. look at this move in small caps negative by four full percentage points. this was the chief in july, this was the big rotation, the broadening. we get low interest rates but we would not get the growth scale with it. that's what's changed on the back of this economic data. keep going to the front-end, of two-year is lower by 26 basis points. once you've seen that board you know what foreign-exchange is doing. yen strength you get some more through this market, dollar-yen gap lower to 147.35. joining us is dana peterson. you had about six minutes to go through the detail, what do you make of this?

a lot of people around this table say this is the growth scare and there's good reason for it. do you agree? dana: i think there is a bit of a overreaction paid 114 is a strong number. we were used to these outsized numbers recovering from the pandemic when we know millions of people were let go and you had to recover them. this is probably about normal for the labor market now and when you look at an unemployment rate of 4.3%, that is still very low. what we are hearing from ceo as they are not looking to let people go. they are holding on to their workers. onnet we are still adding jobs here. mohamed: the reason why people say this may be different and there is pushback on this is that there are no more buffers for certain segments of households. there are no more pandemic savings, there's very little credit availability for them. it's all about labor income and

if labor income starts falling, then you will get a much quicker sort of nonlinear reaction in the economy than otherwise so pushback on this notion the problem is there no other buffers in this economy. dana: it is correct that the pandemic excess savings is gone but most people are working who want to work. wages are still rising year on year and they are still above what we saw during the great financial crisis in pandemic. so we are seeing people lever up on debt. this is suggesting the economy is going to slow, that's what happens when you raise interest rates. the fed is closer to its goal at 2.5% but we are not there yet. certainly there are number of factors putting upward pressure on inflation. fed chair powell says he doesn't want to see cereal further weakening. i'm not sure this report gets us there. it will probably want to see next month's report plus the

inflation data. mohamed: reading out a few of the quotes from yesterday's report about companies thinking do we now have to unlock cost side given what were seeing on demand. how seriously should we take these comments? dana: i think some companies are probably running out of room to raise prices for customers and that's the goal, the fed wants companies to start cutting prices which will help lower inflation. on the demand side everything is working according to plan but the risk here is you have wages growing pretty aggressively and that does raise labor costs of companies and smaller businesses are passing that along to the customers. so that leaning against the fed's desire to get inflation back to 2%. there is a signal september will be the first cut but the fed will move cautiously and may spread out those cuts over time so they can watch and make sure the economy is not

going into recession but also inflation is slowing. inflation impacts everyone. annmarie: how can they move slowly and cautiously if they are potentially behind the curve. a dramatic figure under 100,000 for them to maybe go 50 basis points in september. if you take into account the revisions as well from last month we are basically there. dana: the revisions were small and in june. if you average out the second quarter we've had roughly 165,000 jobs added, that is a lot and i'm not sure the fed is behind the curve. i think the fed has been moving cautiously and even look at gdp for the second quarter. it was stronger especially domestic demand and consumers went out and bought cars and also continue to spend on first -- on services. we do think the economy will continue to slow and according

to plan. as long as the labor market is still printing positive payrolls and the unemployment rate does not rise too much and approach 5% i think the fed can move cautiously and potentially 25 basis points. jonathan: appreciate your perspective. dana peterson there of the conference board. a lot of this sticks. equities down hard. stocks first on the s&p 500 down 1.8%. small caps down by 3.7. coming in off the back of these numbers, turning the page we will look at the two-year together. the two-year is lower by 23 basis points. we can talk about levels and change. you look at levels coming into this 4.3 percent unemployment, payrolls around 114. if we came back and looked at the jobs report like that it doesn't look terrible. the change from where we were and where we are now is what the market is training on.

this market is trading as if it is behind the curve this morning. mohamed: it is, it is taking change as much more important than levels. interesting, you were in the room mike when the chair pushed back and said look at the levels. do you think this report makes them worry more or do you think they think this is as planned in normalizing, nothing to worry about, the levels are not far off. michael: they would probably say this is what we are looking for with a more upfront move then perhaps we were looking for in terms of overall job creation. the unemployment rate isn't terrible at 4.3, it is a rounding issue so it went up by about a half point overall. you look at average weekly earnings and on a year-over-year basis it is significantly down. down to 3.6 and they have been

looking for that, they've wanted to get that below 4%. inflation pressures in service jobs back down to a level that they think is sustainable so they will see good things in this. the problem is to go back to what you said earlier it only takes according to bill dudley it is a confident situation and that is what people will be worried about. are people going to stop spending and companies have to lay people off. mohamed: when they look at what's happening to the short end of the curve, do they think this is an overreaction? annmarie: i suspect -- michael: i suspect they will. the short end of the curve is pinned to the fed so what people are saying is we think there's going to be a rate cut but that was already sort of priced in so now you are going way beyond where the fed thinks it needs to be. if they are already planning a september rate cut, this certainly pushes in that

direction. it shouldn't change the short end yields that much. jonathan: at the start of the year there was one trade everyone wants to put on, they were looking for this massive rally at the front-end to the curve and this big rate cutting cycle at the federal reserve and it's been delayed. here we are in august talking about september. i can tell you what's developing now, the difference between the two year is about 11 basis points. that yield curve in version is dis-inverting. if you're just joining us i want to recap these numbers. payrolls comes in much lighter than expected. softer at 114. the unemployment rate climbs to 4.3%. back on wednesday, after the federal reserve decision and the chairman pal new conference we called him jeff rosenberg of black rock and i said how will we view this federal reserve meeting at 8:31 eastern time on friday once we get the payrolls report and chef promised me his

response. he joins us now for more. how do we view that federal reserve meeting after seeing this data this morning? >> the data changes and so does the view on what happened on wednesday. the big reaction is almost entirely across-the-board this is a disappointingly weak number so i'm sympathetic to what dana was saying earlier. markets react to data relative to expectations so this is disappointing, particularly the lack of a hurricane impact. there is your 20,000 additional right there. the issue going forward is what is priced into the bond market is 50 basis points of a cut in september. it is this issue of reflexivity we will get into and it sets up the jackson hole speech really importantly to try and calibrate what is the fed going to do relative to bond market

expectations. we had dudley on earlier talking about how the fed incorporates that and it is priced in at 50. does it mean the fed has to go 50 and so the pushback will be important around jackson hole. jonathan you highlighted what is the most interesting market price reaction just within the bond market it's in the stock market and that russell 2000 leading the way downwards so this absolutely -- and you pointed out that had been the rotational trade and it is maintenance cuts and the fed can just ease us into a soft landing than the denominator is driving the movement into the russell 2000. you see the movement today, this is about a growth scare and worries the new earnings and cash flows are falling, they are fleeing the rotation trade into small caps. it's really important observation and market reaction.

we can debate if this is overreaction or not can debate s overreaction or not but the reaction is clearly almost entirely across-the-board a disappointing report. mohamed: the0 -- jeffrey i know would have -- is that where you are now? jeffrey: the data changes, you change what you do, i think we've had a little bit of a string here of disappointment on the data and that is pushing more on your point about the laggards of monetary -- lags of monetary policy so it's hard to stand too firmly against that. it is still valid that you have financial conditions which we haven't heard from policymakers in this cycle, financial conditions are much easier. that has been supportive.

they could change and tighten very quickly and unwind. so i think the reaction here is probably the right reaction, maybe it is a bit of an overreaction. but you will push on changing the trajectory from the maintenance cuts to calibration cuts the policy needs to move a bit faster. mohamed: is a calibration cut a 50% cut and what probability would you put the 50 basis point cut in september? jeffrey: i think there is what the markets want them to do. i think they want to push back against 50 basis points. that's why jackson hole becomes important to get that message out. the fed doesn't want to overreact. i put a little less probability on 50 basis points and we are getting today. a little bit of an overreaction. the market wants to push for the 50. jonathan: talk about some of the

things i've heard over the last few months. the fed put is back. i'm told it's back because inflation is coming down and they have the ability to respond to adverse shocks if they need to. another thing that's come up repeatedly. there are two different kinds of rate cuts and they are not created equally. you can cut interest rates because you have disinflation and growth is holding up for risk. you can cut interest rates because inflation is no longer a problem ultimately the problem now is the market. do you think we have shifted to the latter and if that is the case, could you make an argument for markets to do well in the face of interest rate cuts into year end? jeffrey: it's what i was highlighting. you are mentioning the russell 2000 performance, there is a shift here. to dana's points you have to be careful if you talk about the first reaction isn't the only reaction. you're introducing into the debate a higher probability

mistake into the debate that it's no longer about maintenance cuts, that it is more risk of the hard landing as opposed to the soft landing narrative and calibration cuts, they can cut interest rates and that's a good story for risks. you are adding more probability mass on the downside scenarios. it's relatively still strong but the pace of change i think as we highlighted earlier is a little bit worrisome. annmarie: is this deterioration not normalization? jeffrey: the knee-jerk reaction is clearly this is deterioration because the pace of change is accelerating and we see the totality of data it's all kind of piling into that side. it's obviously affected by some other things. you have the tech earnings side,

middle east uncertainty. we have to be careful about lumping in all the market moves into the economics but clearly the reaction, this is a reaction to the acceleration to the downside relative to that more expected consensus view. it is a bit worrisome. jonathan: awesome to catch up. just got to know, here's one for you. 50 basis points is absolutely on the table after the rise in unemployment rate with the sample triggered in financial conditions tightening as equity selloff. the fed may need to overdeliver on even the more dovish pricing in the market. high inflation meant the fed wanted cut rates. waited to cut rates. another need to cut more sharply. they waited to cut rates and now they need to cut more sharply. we are conversation in the last 15 minutes, one guest has been constructive and they've talked

about the levels and then we've spoken to a market participant who talks about the change plus the pace of that change and how it is the latter driving this market this morning. mohamed: i think rightly so because we are seeing a rapid deterioration in the economy. i'm really glad you brought up inflation because we have stopped talking about inflation. the assumption is the inflation is conquered and conquered per the fed's 2% target. i'm not sure that's quite correct. i think inflation is conquered if you're willing to live with 2.5 to 3% but if you're willing to live at 2% we are not there yet. that will complicate the fed's policy reaction. jonathan: jackson hole will be fascinating after payrolls report like that. mohamed: if he's willing to address the major monetary policy issues. jonathan: a lot of fed speak through the next week or so

including mr. goolsby of chicago. prison goolsby and michael mckee. i imagine that interview has changed after that data. michael: the first question might be different than the past. holding up on the other day. the interesting thing is what comes next in a month where there is maybe going to be speeches although no one at the fed has speeches scheduled for next week. we have rates on the end of the month tear from chairman powell. it is no meeting in the month of august. so if these numbers coming in poorly. what does the fed do about that? mohamed: do we get any speakers between now and -- michael: we have the schedule for the board of governors.

they are on vacation. i hope they have a good time. jonathan: all the data points between now and jackson hole. a few more jobless claims, a cpi print in the mix as well. you look, a base case for 50's on the table for september. we been through a couple of these growth scares in the past. do you think 50 is on the table for september? michael: i still do not think so. i think that would be read as panic. obviously they will have another hundred thousand jobs and unemployment continues going up that could change everything but as of today they will say we've a lot of data in front of us, let's see what that says. markets have to price minute by minute if the fed doesn't so think you will see some volatility in this and they will push back on that. mohamed: what do you think they do with the 4.0%.

michael: that is something they will probably have to adjust. 4.1% is what they thought they would have and we have just blown through that. we have to see if it comes back. interestingly got a quote from omar sharif who takes this stuff apart at minute levels and he notes most of the rise in unemployment was people who were on temporary layoff. permanent job losers only went up by 40,000 and he thinks we might see a reversal next month in the unemployment rate in which the fed comes out and says you are right. annmarie: do you think the white house and democratic leaders will turn on jay powell? michael: no. they recognize it is out of their control and we are talking abut every blunt instrument. you cannot find tune the economy that well. but if we continue to see this and we don't get a rate cut than they might.

but you heard from the governor of illinois saying fed rate policy is slowing down companies. jonathan: we will hear more of that in the next few weeks. final word, what a morning, what a week, what a start to august. mohamed: i thought what a week before today. jonathan: it is august 2. amazing. i thought july was exhausting and august is exhausting. i want to run you through next week because this is what it looks like. some important data on monday when we get s&p global pmi's. lots of fed speakers as well through the week on tuesday the trade balance. on wednesday we get more corporate results and thursday another round of jobless claims braided thursday and jobless claims is like the big data ism services for the week ahead. on monday what a lineup. claudia of new century advisors. lindsay rosen of goldman sachs. andrew of city.

on thesahm rule. a 50 basis points point cut in september. this is bloomberg surveillance. ♪ (♪♪) (♪♪) sandals rhythm and blues caribbean sale is now on. visit sandals.com or call 1-800-sandals.

ryan t. writes, "moving is stressful. visit sandals.com can you help me take one thing off of my to do list?” ugh, moving's the worst. with xfinity, you can transfer your internet in just a few taps. just a few easy moves. did somebody say “easy moves”? ♪ ♪ oh no. no, i was talking about moving your internet. this will move the internet. ♪ ♪ ooh, ooh. -let's keep it professional. professional dancers! -ok! stay connected during your move with the best in home wifi. easily transfer your services in the xfinity app. bring on the good stuff.

katie: a soft earnings plus a week jobs report means a wipeout in futures. i'm katie greifeld. sonali: bloomberg open interest starts right now. katie: coming up, the global selloff in stocks intensifies as a week jobs report adds fuel to that fire. big tech troubles mount, i,