it is friday here in new york city and it is job stay in america. you are watching "market makers." i erik schatzker. stephanie ruhle is out today. at 8:30 a.m., we have the august labor report, which economists predict 217,000 jobs. we will cover that with the current and former chairman of the council of economic advisers. alan krueger will be back in jason furman, who holds the job currently. let us get the five things you need to know this morning. we have a panel discussion to start. matt miller is that and carl is here and jack rivkin. off bute can we start

the august jobs report? phil mattingly will bring those numbers. they expect 217,000 jobs were added and the unemployment rate fell to 5.3%. futures are down and stocks in europe and overnight in hong kong, they are always on our numbers but this is where i need to bring you in. the august jobs number is woefully unreliable. jack: yes, very unreliable. of 217,000 may be with the number ends up. i think it will end up higher than that, but it could start lower. you are making this point, carl. you know the historical data. carl: i have to take issue with historical data you are referencing.

you're going back to 2011. matt: i do not think that gives you a great sample size. erik: revisions, revisions. the --'m interested in i'm not interested in the august number. i'm more interested in the revisions for july. erik: this is a chart showing what jobs are like before. matt: this is the average from 2011. carl: over the last five and 10 years, the average miss in august has been about 30,000. lower thands to be the trend going in. matt: i have on my terminal a ten-year average. it is a really great bloomberg function and you can see the columns of the month and the rows are years. and you can see two

years back that the average -- 25,400.400 and jack: i would agree, but you are also looking at adjusted numbers. i never met a seasonally adjusted person. [laughter] you raisedo glad this point because i have to prepare this chart as well. and we cannot even talk about this. adjustedasonally august jobs data. this is really more about trends. let us bring you the chart that shows you 10 years of nonseasonally adjusted august jobs gains. carl: i will tell you about that chart because if you do not like this , be on his report is what you like the most. the seasonal adjusted factor is

the smallest of the year in august. erik: that is what jobs in losses looks like over the past 10 years. jack: i do not care about august. i care to see what happens with the july revisions. on the nonseasonally adjusted basis, it is a layoff month. over one million people are taken out of haverhill in the month of july and somehow they just that to a positive number. the adjustments -- i cannot figure out. matt: this is largely teachers who are not working during the course of the summer. jack: no no no. a shutdown month for a a lot of plants. as an economist, do teachers quit every summer? my mother is a teacher and she did not file for under when it comes alive. come july.ment, and july

school lot of unrelated positions are laid off, like the strikers. jack: matt, you fall the auto industry closely. this month is typically a shutdown month. matt: but they do not get laid off. jack: actually. matt: to carl's point, there are a lot of temporary hires and a lot of contracted workers that maybe get laid off. the factory workers that take a ,onth-long or two week vacation they do not get laid off. erik: we do have to move on. call, i know you are all to listen to just lack here -- jeff rates speak about raising as soon as possible. carl: he is making a speech about the case against further

delay. that is dangerous just 20 minutes before the jobs report. that shows you how much the fed is ignoring the broader data point. matt: i will take you to number in hong kong sink to a two-year loow. it is worst-case scenario that the city has come true. "our black skyt scenario it perpetrated that other than the current environment." jack: what does that mean? what is the black sky scenario? matt: ubs has its worst-case scenario. about hong kong and the hong kong stock market -- that market is made up primarily of real estate related companies. if you are looking at hong kong to give you some sense of what is going on in the big world,

you're not getting a picture. you are getting a decent picture of what is happening to property in asia and china. matt: hong kong is one of the most extensive cities in the world. erik: let's move on to number three. if you think we are entering a bond bear market, put this in your-and smoke it. says that the people being punished for the financial recession will still buy treasuries and 10 year yield at 3%. a former economist at morgan stanley evokes the same theory to explain why rates are as well as they are an unlikely to rise , at least very much as the fed tightens monetary policy. do you buy that? will see ank we slowdown in economic growth and that by itself will keep rates lower than otherwise. erik: the spectrum inflation

will rear its ugly head. jack: i'm not shows sure it is the sabres. you'll see a lot of institutional money move into treasuries because they are scared to death of what is happening of where -- elsewhere in the world. i'm not sure that you can point to sabres for the reason why these rate will stay. thingse doing a lot of other than saving here. they are trying to do their best to find something that will provide them with income, but they are certainly not going to get it out of treasuries. erik: no, they are not. it makes me wonder, if you were making this decision and wanted to be in fairly rocksolid fixed income, why not then just go a tiny bit further out on the risk her and own agencies or invest in u.s. corporate debt? jack: i would go further out on the curb. if i could find a really good

credit manager or high-yield investor who is actually paying attention to what is going on with individual companies as opposed to buying an index. saverthe average american is not doing something that sophisticated, even as simple as it sounds to you. jack: they will chase field. if they chase it generically, they will have a problem. i think that is one of the biggest mistakes that one can make right now. matt: i found this fascinating. i even quoted it at the bar last night. we can expect a lot more volatility and a lot more selling. traders employing a technique called risk parity. they will have to get rid of $100 billion in stocks in the next 1-3 weeks. while that is down from an

estimate of $300 billion last week, investors should not consider that this risk has passed. that is who we are talking about and this is a guy who has had spot on calls me past couple of weeks. have you followed his research? jack: i am in the camp that we do have a problem. part of it is risk parity. we have some risk parity managers and a move around like a secret there is not liquidity in the market to support that . you're going to see enormous volatility out of these quantum traders. matt: are they using the same signals because that was a big problem during the financial crisis? not understand how they can use other than the same signals. erik: the algorithms or programs sell stocks once realized volatility. jack: you are always looking for that one that has the special sauce in the perfect algorithm.

way data processing speed up, everybody ends up with the same. in the meantime, inventory levels by the major banks are way down so the support for all this sudden movement is less available as well. i think he is right. i do not know how you can come up with a specific number, but i think we are in for continued volatility here for quite some time here. erik: man versus machine. lut? oil g andy hall, the trader who made $100 million for citigroup, said that the oil market slump is not a result of oversupply the way it was in 1988 or 2008. he told investors that the world is "not a wash in oil." he expects output will drop 6% second half of this year.

putting his money where his mouth is. matt: has he been bullish this whole time through the entire slump? jack: he has been able on oil. every time it has gone down, he views this as a buying opportunity as well. erik: it was a $49. matt: you will see a lot of money in this downturn. jack: it will take opec led by saudi arabia doing something to change the mix on supply and demand. of five.excess and we have found a lot of hydrocarbons. -- extractionon costs are just going down. jack: a big cost is energy. with energy prices down, it makes it easier. that applies to all commodities, not just oil. oil, butee bounces in

we are stuck in the $40-$60 range. a good trader could make money in that range. i do not think we are finding ourselves moving back up to what -- 90 or whatever. matt: i think carmakers should make more he 10 agency that the 1 -- the 10 engines again. jack: i think the u.s. automakers ought to be spending more on figuring out how to use fuel cells. japan is way ahead of them on this. erik: we have so much more ground to cover, plus the jobs report at 8:30 a.m.. we believe the conversation there and take you out to the newsroom where vonnie quinn has headlines. vonnie: the world largest economy says the interest rate hike is a risk to global markets.

turkey is meeting in inan chilcote is there. ryan: they are focused on two things. the top of the list is china. the fundamentals of the chinese economy are fine and that the currency in china is more or less stable. big concerns, not just for investors, but for the other 19 countries that make up the g-20. the other big issue is the united states and how to play the faced. that is a huge thing they want to get right. we have got our hands on the draft communicate and it was a not-so-subtle reference to the fed in it weather was a call from the 20 countries to effectively make sure central banks communicate your policy when tightening and make sure it

is calibrated with other countries. the two big things are china and united states. vonnie: ryan chilcote, thank you. vice president joe biden says he is not sure he will run for president. he spoke at a synagogue in atlanta with the was asked what it would take for him to enter the race. >> the most relevant factor in my decision is whether my family and i have the emotional energy to run. is notght think that appropriate. son beau diedden earlier this year. contempt -- kentucky county clerk kim davis is in jail after being cited for contempt of court. she vowed not to issue licenses to same-sex couples. not his one who will status is unfit federal prosecutors have laid out there case against the british trader

blamed in the flash crash. he has been indicted by a grand jury in chicago. in three weeks, the u.s. will try to have him extradited from london. open, andy murray murray had to rally to make it to the third round. he left the first two sets before coming back to win in five sets. the second-seeded roger federer one his match in straight sets. those are your top headlines. i know you'll be out to flushing meadows sometime next week. erik: it could be this evening. vonnie quinn, the latest from the newsroom. jack rivkin is staying with me and alan krueger will be along very shortly to help us dissect the august payroll data. you will hear from phil mattingly with the headline numbers. in the meantime, we are monitoring a speech from jeff lacker, who says it is time for

the fed to end the era of zero percent interest rates. the jobs report is at 8:30 a.m. stay with us. ♪

onk: it is friday here "market makers." , the yearbook game. class of 1972 in durham, north carolina. she is known for her work as a seasonally executive. at marketour guess makers. here is a question for you. the economist surveyed are looking for 217,000 jobs in the month of august. what about you? jack: the first number will be about 200. you are forcing me to say a number? how about 240,000?

i think we could be surprised. i could look beautiful list what i look like i knew what i was talking about. -- foolish or i look like i knew what i was talking about. erik: there is a reason that on twitter they call it #guesses. jack: when it comes to the seasonally adjusted numbers in particular, i do not think anyone knows what that number is going to be. erik: what will bill gross have to say about the august jobs report and the volatility in the financial markets? find out on the other side of the break. with u.s.utes away equity futures pointed to a lower open. it could all change in the space of eight and a half minutes. stay with us here on "market makers."

it is a 20 5 a.m. in the morning -- 8:25 a.m. in the morning. minutes from now, phil mattingly down in washington will ring is the jobs numbers for the month of august. economists predict that he will be to our 17,000 jobs. here to talk about what is coming is alan krueger, former adviser under president obama. jack rivkin is still here. alan, you are on with tom keene and the rest of the surveillance crew. we have only got a few minutes.

let us talk about what is most important here. month, the headline number does not seem to be quite as important as what is underneath it. it is what underneath that seems more important. alan: we have been through a period of study job growth. i'm looking at the wage numbers closely. i'm looking at long-term unemployment and the sectors that are growing. what is happening to manufacturing? what is happening to temporary help? from franklyber 150,000 on. erik: you talking about revisions to the july data. could 80 theyi be? alan: the average revisions are around 50,000. on the upswing, companies tend to report late and that is

boosting numbers of. erik: how they all upward? i look at the absolute weekly earnings which combines the hourly wage and what happens to the work week, etc. at that number has been up year-over-year daily substantially. in the four plus range. -- wages andjust salaries have grown. i look at that particular because that is where we will see things start to heat up first. jack: what you have got going on the oil patch, you have layoffs there and you are cutting back as well. those wages are well below the average. if you are pulling those other number, i'm not so sure you will see the average move up pretty quickly here. alan: i think that is the right observation. look that employment cost index. jack: that's right. it's going to be interesting.

i agree with you on the details. i keep refreshing here. alan: i did the exact same thing. [laughter] waiting for them to screw it up published some number, but it does not like they will. erik: clearly, something is working. job growth is fairly consistent and the unemployment rate has been dropping since instantly. the skeptics point to two things -- average earnings in the labor force participation rate. we talked about this before, but i want to go to detail. alan, you have a couple of good answers about why we have not seen more progress on both of those figures. alan: labor force participation rate -- i do not expect much of a bounce back. i have said that for the last four years. i will keep writing it until it changes.

employment will make it likely to find a job. once they leave the labor force, it is unlikely they come back. you have baby boomers retiring and fewer women entering the labor force that before. jack: we also have a great economy that continues to expand and those do not show up in the statistics. erik: are you a buyer of this theory that temporary employment , the self-employed economy, the task rappers out there, are actually muddling the jobs numbers? alan: no question, but they do show up in the statistics to some extent. they show up in the household survey often in the wrong way. they do not think of themselves as self-inflicted -- self-employed. jack: what do they think they are? uber driver may think

they are employee. erik: we have 10 seconds to go before we had to phil mattingly. the futures down all to full percentage point as we take you down to washington right now. phil mattingly of the labor department with breaking news. phil: 173,000, that's the number. 5.1% of the unemployment rate, 217,000 missing the estimate. the article in the rate 5.1%. bettering the 5.2% estimate. you look at average hourly earnings, 3% increase month over month, up from .2 last month and from estimates that were also .2% last month. increase.over-year some positive news there. 140 thousand private sector jobs were created, way down from last month which had 224,000.

let me take you to revisions. over june and july, and july, edition of 44,000 jobs from 231,000 245,000. in june, that's plus 14,000. july, 215,000 to 245,000. that's plus 30,000. labor force participation rate staying steady at 62.6 for the third consecutive month. i want to take you back to the employment rate, the lowest it's been since march 2008. industries are industry right now, mining down 17,000 jobs compared to last 12000 and july. health care was a positive note, up 41,000. financial activities of 19,000. professional and business services up 33,000. manufacturing the 17,000 down. mining was 9000 down. when hundred 73,000, short of what was expected by the median average of economists. 5'1" percent on the employment rate. that's the lowest since march

2008. .2% from what was last month. erik: the headline number is 173,000 jobs added in the month of august. on the basis of that alone, you might be tempted to call this a disappointing report. as phil mattingly explained, there are other things going on like slightly better-than-expected wage growth. force or less flat labor participation rate. a drop in the underemployment rate. we will dig into it in just a moment with alan krueger. let's take you to matt miller who has the market reaction. mats: an interesting market reaction. we initially saw a big spike in futures. as you recall, right as you were phil mattingly, we are down almost 14% on equity and futures. we were seeing the loss of .9% on dow futures, s&p futures, nasdaq futures.

all three contracts jumped or dropped to a loss of well over 1% for a moment. and now we have come back down. it looks like the market is saying this isn't the kind of sol the fed is going to need that it must raise interest rates in september. on the other hand, take a look at the dollar index. if you want to look at the ex-wife, it doesn't include emerging-market currencies, but it's a basket of 16 currencies commonly used. you saw a big spike that would seem to indicate that the market expects the fed to actually move because that would give us a stronger dollar. a little bit of a mixed result as far as the market reaction. definitely some fascinating route -- moves. erik: alan krueger and jack rivkin, what does this mean for the fed? is the number:

you can't avoid. you had the wage gain up, you can't ignore that as well. you know that the august number starts out fairly low. mayink the market reaction not be so much that the fed is going to delay. it could be the economy is all right. maybe it's time to buy stocks. read of the same way. if you look at the revisions to june and july, you are exactly to do 17. there's a good coincidence. these hills look very solid. i don't exist going to change the fed's course at all. what we think you tom keene and michael mckee of bloomberg surveillance, talking to janice l the same question. what these numbers mean? , stocks concerned prices, yield spreads, that means money moving into various

asset classes that suggest some type of potential bubble. financial conditions of the key for her fed, and perhaps, the doe. tom: what do you think from bill gross is perspective about financial conditions? bill: it's hard to call down a bull market, or to speak to comles such as the dot bubble, but there is a speculative further in the market and the lack of liquidity. i can't leave for the bathroom and come back without the market having moved by 1% upward down. the marketsndicates are certainly not stable or study. they may not be overpriced, necessarily. but they are volatile, and volatility itself is something they want to zero in on.

tom: if we assume that everyone has fed exhaustion over the linkage of economic policy to microanalysis of the jobs report, let's pass out the blame right now. it's lame friday. who do you blame for the silliness that we have boxed ourselves into? bill: i blame forces and factors and analysis. there's a slowdown in china. blame the uncertainty in terms of what the fed is going to do, and when they are going to go, and how much. blame the, i guess i leverage and debt in these models. some of which are levered independent upon the value of , they've been around for a long, long time. it's not a new deal. the thing is, when a market move

significantly in one direction or another, the value and risk changes because of the volatility. it induces selling or more buying. tom: a nice summary from bill gross a janus capital. overnight, we saw china, hong kong pmi, we know those are things a fischer pays attention to. will that matter september 17? should.think it my think any central banker, certainly those of the imf and other global agencies are well aware there are significant imbalances in the global economy. that speaks to not only trade balances, but financial markets and currencies. the brazilian reality just mentioned is still on a real basis, highly overvalued. one would suggest has further to go.

these conditions exist in asia in terms of the currency levels. investors are being concerned by the draining of reserves of these countries, china included. how long i can continue. imbalance is everywhere. afterthought or an aftermath of the great recession. tom: what are you doing on brazil? are you out of brazil, do short brazil, or is there an opportunity? bill: it's enticing. you can invest in the currency and earn 14.5% overnight, over a week. tom: that's better than mike mckee does. bill: it does. the question is does the currency depreciate? you pick your poison. countries, myese

favorite emerging market country , the strongest one in my opinion is mexico. has half the debt of the united states, with 2% growth. inflation is under 3%. it has the cap of emerging markets, the risk appears on the screen, mexico will do well. i think there's some emerging-market countries that can do well. and by the way, just to point out, mexico's forward yield curve going forward in the next two years as perhaps 300 basis points higher in terms of a future increase that in the united states. i think it's really overextended. we wille a minute left, ask you the money question we come back. in the meantime, all the things you mentioned -- if the fed moves, if the fed doesn't move, does it affect those things? or are we talking about this

volatility in fitted him until they do? on the pressnds conference in september where the plan is supposedly laid out. they don't want to make it conditional. but they know they have to make in orderat conditional to dampen volatility. so we will listen to janet yellen very closely. i think they are one and done for six months. i think that's all they can do. if any other language pops up, it's going to see more volatility. tom: we are going to be back with bill gross, and look at the enticing opportunities that he sees. gross,hat was bill talking with bloomberg's tom keene and michael mckee. i knew with jack rivkin and alan krueger. bill gross for this in writing, reiterating the idea that the fed is one and done, even if

they do move in september or october, were december for that matter. it's going to be a long time before we see the fed go from one hike to the next hike. jack: let's hear from alan. alan: i think they're going to move slowly. my don't know if they would say wanted done. i think he will be data dependence. i think we will see a gradual increase. monetary policy, even after they left office, is still going to be very accommodating for the u.s. economy. i agree. it's going to be a slow process of rate of the amount increases, and secondly, how much the rates themselves are increased. i worry that if they don't do something in september and october, then it is next year. i don't think the fed wants to actually impose another variable when it comes to year-end rebalancing of portfolios around cash movements etc..

they've got their chance in september and october. you are" full employment. you saw waves over the was pretty good and gives them an excuse to raise the target rate, the effective rate may turn out to be lower than that. i think they have a good excuse. alan: the fed may not erik: -- erik: the fed may not want to muddy financial markets. in some respects, they can't. to berank is ordered them stewards of financial stability in a way that they weren't before 2010. alan: they also don't want to be cowed by the financial markets. it's very important they make their decisions based on what they think is best for the real economy. if the volatility settles down and doesn't look like it's going to cause a systemic risk, i don't think the movements in the financial markets are going to affect them all at much. you guys were saying that there are reasons to be optimistic about the pace of recovery in the labor market and

economy based on what we see inside the report, not that headline number. missing economists expectations. the key question is if we think about it in the context of financial markets, if the fed was on track to raise on center 17, is this strong enough, a strong enough counterbalance to the turmoil we have seen in financial markets to keep them on track? jack: to meet would be a good sign if the fed started raising rates. it's an indication that they believe the economy is on track, it's time to move towards normal, whatever that's going to be. i agree with alan, it will be a slow process. reasonshere's a lot of why this should happen right now. erik: when we come back, we talk more about the fed. the richmond president says it's time to end the rate of zero rates. we'll bring you more when we come back. >> and unemployment rate that's

falling. ♪

erik: here's a look at u.s. equity index futures. we have the jobs numbers, and the market has reacted. non-foreign payroll coming in for the month of august, 100 73,000 jobs added. in a blender rate dropping from 5.3% to 5.1%. better-than-expected wage growth, there was a drop in the underemployment rate, there are so many details in this report that help to confuse the picture. in the meantime, the federal reserve bank of richmond president jeff lacher has been speaking throughout this time. he says the fed had better get on with it. it's time to end the area -- the era of no interest rates. >> of 173,000 jobs. after the great recession in 2007, 2008, 2009, it ended in the second quarter of 2009. many initially expected rates to

rise pretty soon. within a couple of years. we are now entering the seventh year of what seems like an epic waiting game. erik: an epic waiting game. alan krueger, economic adviser under president obama is here with jack rivkin, ceo of l tigress. let's continue and help to put that into perspective. it has been an awfully long time. just because it's a long time, does that mean we need to hurry up and get on with it? to hurrymeans you need up, but we are at the same level we were at the start. economic the same position as we were when we absolutely needed to do something here? the answer to that is no. we need to get on with something. erik: did the fed message window of opportunity? whoe are a lot of people

say april, june, that's when the fed should have raised rates. alan: i don't begin matters when you're talking about two or three months here and there. i would rather than air on the side of being too late rather than too early. i think it will be hard for them to go back to a very a commenting policy. -- accommodating policy. inflation is quite different than what we were before the recession. i think it's a somewhat different environments. the rest of the world is in a different position. on the other hand, the economy has progressed enough that we have the luxury of thinking about normalizing monetary policy. i think that's a good problem to have compared with the rest of the world is facing. inflation?'s the i know oil prices are a factor. there are economic indicators, but you have hourly earnings of 2.2% year on year, the slow progress in that direction.

shouldn't some of this, shouldn't this lack of being taken up in the labor market translate into a little bit of inflation? alan: i think it will. we see inflation moved towards the fed's. i don't think it will get out of hand. the blue curve exists, but is not that stupid. we will see inflation start to move up as wage growth puts pressure on cost and a filter through the higher prices. some of the big drivers of inflation really out there. health care costs, which had been running much higher than overall inflation have come way down over the past few years. erik: if you read the headlines, and other health insurer is backing away from some of the policies offered under the affordable care at. many are seeking permission from state regulators to raise premiums because they are losing hundreds of millions of dollars. their problem, frankly. when i see going on in the health care area is you are seeing a shift of responsibility

for what is happening to health care costs going back to the hospitals. towardsitals are moving -- per procedure. the insurance companies want to get paid per procedure. you will see more and more hospitals self-insure because they are bringing costs down. in the meantime, the insurance companies are not doing well. i don't think they should. there,e have to wait jack rivkin, thank you. allen, great to see you. formally whiter, house economic adviser to president obama. keeping our eyes on the market that we will bring in more detail on the jobs report when analysis continues on "market makers." a quick break, then we are back. ♪

erik: another selloff is underway in u.s. equities this morning.

you can see down futures down 285 points. the s&p 500 futures shelling stocks or at least suggesting that stocks are going to drop at least 1% this morning. the jobs number came in at age: 30. 170,000 jobs graded in the month of august. a big revision, up 30,000 for the month of july. i have to draw the conclusion that investors and traders don't think this is enough to put that on hold on the 17th of this month. would draw the same conclusion. if you look at different asset classes, you might draw a different conclusion, which is what makes this open so interest in to watch. let me give you some of the analyst action from today. upgrades and downgrades, caterpillar is one of them downgraded to neutral, one of the reasons that baird neutral from outperform is because of joy global which missed third-quarter estimates and is

having a hell time convincing meet itsis going to revenue target. as a result, number of people are making -- have analyst actions on joy as well. interestingly, baird, which cut the rating on caterpillar because of joy holds outperform rating on joy, just lysing the price target in more than half, $24 from $50. ubs cutting its price target on joy to half, leaving its rating on a neutral. take a look at brent crude today. obviously, this is one of the assets we are going to be watching closely. the market is tracked so well with crude over the past couple of weeks or barclays is out, saying the damage you guys going to average $50 a barrel in 2015, cutting its estimate on debbie ti as well as on brent today. matt miller with the latest on financial markets. we have more reaction on the

jobs report coming from dallas mayor mike rawlings will be back with us after the break. ♪

erik: good morning, it's a friday here at bloomberg world headquarters in new york city. i'm erik schatzker, you are watching the second hour of market makers. --"market makers." stephanie ruhle will be back in a few minutes. i've been missing my partner inclined -- in crime it. a down day for u.s. stocks in the wave of a disappointing jobs report. we hear more details about their jobs right now from vonnie quinn. --v -- vonnie: the level

of federal reserve considers for employment. employers added 173,000 jobs in the month. fewer than expected. revise numbers show the economy added more jobs in june and july. richmond fed president jeffrey lacher says it's time to end the era of zero interest rates. he says it's time to align our military policy with a significant progress we've made. he is one of the voting members of the open market committee. shares of blackberry rising. the company has agreed to buy good technology. blackberry used to be the world's leading smartphone maker, the ceo has shifted the company's focus to software and services. gas prices meanwhile are at an

11 year low this holiday weekend. you againstm plaintiff the road. it will be plenty of them, it's going to be one of the busiest labor day weekend's on u.s. highways in seven years. more than 30 million people are expected to travel at least 50 miles from home. those the top headlines. august jobs showing employers added 173,000 divisions, the jobless rate down 501%. phil mattingly is in washington, he broke the numbers for us out of the labor department. memphis, bill, let's go back to you. headline numbers suggest a bad report, but as is the case, release has been the case in august, underneath the headline number, things look a whole lot better. kevin: that is true. i want to point out a few specific numbers. bonnie mentioned the revisions, 44,000 over the last over june or july, particularly, 30000 and july is important.

we'll have to look in a couple other components. one is the increase in average hourly earnings. up to .3% from .2%. the estimate was .2%. as an increase. 2.2% year-over-year increase in hourly earnings up from 2.1%. positive they are, in an area that has been frustrating for a lot of economists and certainly to people in the in administration. they just has not been growth in that area over the past year. another thing to pay attention to, the u six number, the, nation real unemployment number that some people point to come at its lowest since june of 2008. down to 10.3% from 10.4% last month. as another thing people may be pointing to. a broader gauge of things, the total number of employed is 196,000. total number of unemployed decreased by 237,000. again, a top line number was amiss. it was a lot of people were looking for. if you dig deeper into the report, it does look like there are positive numbers which might explain some of the market reaction you seen in the

immediate aftermath of this report coming out. erik: let's get reaction from kevin get us. head, help me my figure this one out. we are looking at interest rate probabilities as indicated by futures. they suggest there's only a 32% chance of a rate hike comes at denver 17, in a less than 50% chance of a rate hike in october. the equities are selling off anticipation the fed is a stronger case to raise rates in the short-term. avin: you are right, there's clear decoupling between equities and fixed income markets right now. we saw the curve at 145 basis points between the two-year and to 143. it didn't dipped.dn't -- the bond market is not convinced the fed needs to go in september. if you do, it's not a big deal.

the equity market seems to be not only a foregone conclusion, is an all-out preparation. , the twoith phil things that suck our average hourly earnings and revisions. august is a number that tends to get revised higher, historically. if you look in the september, not only will the september payrolls be important, but the august revision may be with the fed is really going to look for erik: in erik: october. -- in october. erik: i know you are biased. is this bond market stronger? here's the first time in years that the fed may actually tighten monetary policy with an increase in rates, or is the equity market smarter? kevin: it's hard to go against on -- ismarket based been fairly patient in showing

the fed where the market is going to react. then the bond market got convinced that the fed, if nothing else wants to get off zero, whether that's a 15 basis point increase or 25 basis point increase. the key to all of this for the bond market is the lack of inflation. it does give the fed a little bit of ability to raise short-term rates without majorly affecting the long-term rates because inflation is so low. based on that, i think the bond market is probably the wiser parent at this point. erik: phil mattingly, you still with us in washington? we are trying to balance the good against the bad. in this jobs report, we see some inect of the volatility currencies and the volatility in commodity prices. the goods producing industries tend to be more susceptible to increases and decreases in those areas. they were week. jobs, including 17,000

manufacturing coming way under the 5000 increase that economist looking for. mining down 10,000, construction adding just 3000. manufacturing was up 12,000 last month, not a huge number, but going down 17,000 this month was a surprise. well below estimates. mining as well, and health care continues to be a positive come over 40,000. you look at those numbers dropping down, that's absolutely were the impact has been. one of the interesting things was, looking with this report -- it was brought up earlier. if you look in august and the revisions in general that happened over the last couple of years, look at the last four years. economists have overshot the estimate for this month by 50,000 jobs per time. the revisions over the last four years have been more than double what they have been the other 11 months of the year.

you look at what's going on on job losses in specific industries, but you also look at the broader report. i wonder how that factors in. someone was saying before the report came out, how could the fed factor in that august is the walking month? you wonder if there's a look at that coming from the market. mattingly broke the numbers from the labor to permit this morning, that's where he is. also sending our thanks to kevin giddis, have yourself a great labor day long weekend. we are all about jobs today. we have to be. and that made us wonder with oil prices tumbling, how many jobs are being lost in the oil patch? as with the to tex mayor of dallas, to see if oil is still bringing opportunities in the lone star state. this is what's happening in u.s. equity futures. it looks i got a big selloff for stocks, at least in america. we know they are down in europe, down overnight in hong kong,

almost 260 points this morning. ♪

marketll morning long on makers and bloomberg television, we have been talking about jobs. the jobs report came out today from the bureau of labor statistics showing 173,000 jobs were created in america in the month of august, missing economist expectations. in 2013, dallas-fort worth led the nation in new jobs created. that was before the plunge and oil prices. earlier this year, the federal reserve bank of dallas lowered its forecast of job growth in taxes and revise it slightly higher more recently. let's check in with the mayor of dallas, mike rollins. .- mike rawlings today's jobs report for the month of august makes clear it's a very mixed picture for america. some positive signs, wage growth, and for that encourages you. and a drop in underemployment.

but the headline figure, 173,000 jobs -- nobody seems pleased about that. and the equity market is running scared right now. mica: it feels pretty good right now. it's the start of football mike: dallas-fort worth is so diversified that we have not been hit as much by the drop of oil prices. arestors in town definitely the hunt family, the boone pickens, the exxon mobil corporate headquarters are here. we have to watch out for that. because of the growth in technology, the growth in automotive, the growth in aviation, and so many different industries, there's a positive side to this as well. you have diversification, perhaps more of that going for you that place like houston

does. but i have to imagine with oil at $46 today, just a few days ago, at $38, we see happening in west texas and elsewhere in the state has to have an impact on dallas-fort worth. it does. oil prices for dallas-fort worth are a slight wind in the back were a slight wind in the face. is no question that wind is in our face right now. from a pure jobs standpoint, energy is really a small sector in jobs, from economic standpoint, investors standpoint, it's a huge part of this. i was with a ceo of american airlines yesterday, this has been a very positive wind at their back. their prices are going up, they are hiring more people and they have ever hired before. so many industries like that are multinational here in dallas.

there's a real benefit with it. erik: help me with your perspective as former chief executive -- former president at pizza hut. extrapolate for the rest of the american economy. as you pointed out, oil can be a head wind or a tail wind, depending on which side of the trade you are on. it can work counterintuitively. it get help part of the economy and hurt part of the economy. at the same time, and headwind for many employers is the effort to raise wages. walmart has gone to a minimum living wage, ross, t.j. maxx, target going in the same direction. how can that hasn't had more of an impact on job growth and unemployment, which is down to 5.1%? we're almost a full employment. mike: i believe the consumer part of the economy has to be lifted up. you can't do that when you are paying someone seven dollars and $.50 an hour. it created tied on the economy

forever and ever. knowsiler like walmart they can digest those things in a smart way, and help their company have a their loyalty, help their turnover. at the same time, help the economy. i think that's one of the key things we have to understand in business. , we wents at pizza hut through a minimum wage increase. and we were able to do that. we were able to digest it and continue to plow on erik:. housing prices, what's the living wage in dallas? it's an amazing chart to see what's happened to dallas housing prices versus the rest of the nation. they are not back to where they were pre-. but dallas is almost 30% higher than it was a decade ago. that has got to make it more expensive for the typical dallas resident to live month-to-month. mike: it does.

your point is a great one. we have a bit of a barbell economy. we are a wealthy city, a lot of folks are moving in. toyota has decided to move their headquarters here to the dallas area. prices,riven housing but there are a lot of people that are still making the minimum wage working in our hospitals, in our facilities across the city. it's tough for them. week, $500 area this a month is still a lot for a person to rent with three kids. it really hold back the economy, i think. if you could unleash all these investors, and put some money in those consumers hands, i think it would but we up this country like we never thought of. erik: you have your work cut out for you. mike rawlings, thank you.

coming up, netflix is down again. it's down big over the past 90 days. what is happening with netflix? we will tell you when we come back. ♪

erik: we are taking a break from jobs coverage to talk about netflix, in a bear market through yesterday. the stock was down 21% since august 6, 21% drop in 20 sessions. netflix is still the best performer by percentage gain in the nasdaq 100 and s&p 500 this year. of 107%. what is weighing on netflix, and can't recover? paul sweeney is here. changed? that much as

the market is looking for high data, great performance stocks. it still outperforming great. investors i talked to were taking profits off the table. there are fundamental issues, number one is competition. the competitive landscape is getting more and more competitive. erik: you have the existing players plus apple. weighs in on apple any consumer market, the incumbents have to be concerned. that's clearly been a case for netflix for a long time. the case of when will apple get in, how will apple get in, and to what extent will they make a big commitment to programming? erik: it's hard to say. --t you hear from people is is the risk priced into netflix 's stock? paul: that certainly reflected in the stock.

if apple were to come in really big, which they haven't done, and really big with a television offering, that would be a negative. they've not indicated that. if anything, we've seen apple continue to push back on their tv offering for years now. apple knows this is a really difficult market to get into. it's a very expensive market to get into terms of content. it's not just licensing movies and tv shows. anyone can do that. you have to be committed to original contents, really get in bed with hollywood studios and commit them capital. list is apple willing to -- risk margins for gain? sweeney, we are back with more coverage when we return. ♪

erik: futures are pointing to a lower open in 3.5 minutes here on u.s. equity markets. left of things are still trading, futures are trading, we

have fixed income on the move. currencies on the move, it all has to do with the jobs report this morning. showing the u.s. economy had fewer jobs than economists expected. the wage rate is strong, and employment is down, some good, some bad. alloway withracy the three things ready to be looking at. also with this is michael for rolling -- feroli. tracy has the first of three things. tracy: let's talk about the headline number. if you look at every thing except that, it was a pretty good jobs report. the only problem is we had 173,000 jobs, instead of what analysts were expecting. there is a huge amount of seasonality that plays into this report. august, for some mysterious reason, tends to always get revised significantly higher.

if you look at the screen now, you can see what's called the august 1 for payrolls illustrated on the screen. those of the revisions that happened for almost every single year for the past 10 years. erik: how much do we discount the my -- the august numbers by virtue of the august curse? michael: i think the august curse israel. there are some issues with response rates in august that tend to give you upper revisions. secondly, i would keep in mind that in the grand scheme of 30,000,missing by 40,000, 50,000 is not that big a mess when you think about normal sampling variability. 173, even without upper revisions is solidly above trend. net 44,000 of revisions. i think the picture on job growth, even without the august curse looks pretty good. you throw back in the august curse and things look like they are coming along in terms of job creation. erik: go deeper into the labor

report. what else to do you see beyond the headline number? i mentioned wage growth, declined in underemployment. what stands out for you on the good side, so to speak, and the bad side? michael: the number one good thing is the decline in unemployment rate, which now is at most people's estimate of what normal unemployment is at. the average workweek tipped up, hours worked in the third quarter is running pretty strong, labor increment is running strong, that may be why we are seeing pretty good numbers on things like retail sales and auto sales. overall, i saw a lot of pretty good things. in terms of bad things, we have a slight miss on the headline number. beyond erik: tracy has been looking through the numbers. i think you pinpointed at least a couple of the things that are worth highlighting. >> some of the mentioned, for

instance, let's take a look at average hours worked per workweek, which have stayed steady, actually increased by 34.6.six minutes, that, by the way, is the highest level since mid-2007. that is a pretty big deal. we saw average hourly earnings of pardon expected. -- up higher than expected. even though inflation is still below its 2% target, even -- erik: tracy is slipping into dashboard mode. >> even if signs of the wage growth moving through, they can flip through existing inflation. by the way, let's not forget slack, which is also on the decline. janet yellen plus favor measure, something like 10.2%, also below its 10 year average. fresnoichael, rank order right now the things -- for us right now the things that janet yellen and fellow policymakers care about the most.

>> in terms of the labor market, it is whack. the unemployed at rate remains the single best measure, so that is really improving. to be up there in terms of another factor there looking at. momentum inives you the economy. those three things are not hidden numbers that no one knows about, but they are important for the fed. i think this report is pretty consistent with a fed -- i think this is supportive of the call for september, given what they've been saying about what gives them confidence and inflation coming backup is -- slack.n slack am a you've seen it across the board and continuing at a pretty steady pace over the past year, six months, whatever. erik: the beauty of financial markets is that everybody gets an opinion and everyone gets to

express it by buying and selling financial instruments like stocks where we see the dow industrial down about 175 points from s&p 500 down a little more than a full percentage point does the market seems to agree with michael that there's enough here in this jobs report to justify a rate hike at some point in the near future, whether it is september 17, whether it is the unexpected move in october without a scheduled press conference, who knows? i think this is a good segue to number three. >> it is. this is not a slamdunk for september rate rise, but we're seeing treasuries move on the back of this. let's take a look, hopefully, at the two year treasury yield erik:. it moved right off the number. morning.ped this the last time i looked at the fed futures, mr. pricing something like 26% chance of september rate hike. that was off the back of drug

commentsaghi's yesterday. market definitely seeing september moving closer. erik: michael, i mean, look, it is hard to disagree with the point tracy is making, but we are so much volatility as of late, it is little too hard to take one days worth of early trading and draw further conclusions about it. >> the one thing i want to agree with tracy about is september or any meeting is not a slamdunk. there is a lot of uncertainty. it seems like the fed is going to make the decision at the meeting. in terms of the markets, you are right, these have been pretty volatile markets. i think it will be interesting to see next week when we all get , we will seew people coming back from holiday if that gives us a little more

calm in the markets or not. still a number of trading is to go between now and the meeting, and i think if we see some blowups like we did a week or two ago, that could change the picture. erik: thank you, michael farrelly and tracy alloway, three things -- tracy, thank you. have yourself a great labor day weekend. it is not the biggest selloff we have seen in recent days, but it is a triple digit move for the dow, down more than 200 points, s&p 500 down board then 1.2%. what is moving most? close where we opened, then we will be looking at the second worst week of the entire year for the s&p 500, off 3% for the week. not the biggest drop, as you pointed out, but it hasn't been a good week going into this labor day weekend. take a look at gap. i want to show you some

individual movers. gap had august same-store sales down 2%, as opposed to limited l rates had up 6%. gap, looks like unchanged. it could fall this morning. take a look at netflix. it has dropped below $100 come off like 15% this week. not yet at its 100 day moving average. then it could fall to another support. take a look at library -- blackberry. we see gains. finally, verifone systems pay, third-quartere on profit, but it's outlook was disappointing, making as much as $.48. analysts wanted to see $.51. verifone systems down this morning.

i will keep my eye on the markets. erik: thank you. for more analysis of the jobs report, let's go to washington on the where jason is a white house on. you know clicks of the fed policy, critics of the administration are going to point to this headline miss. us it is your job to tell what you think is most relevant in the jobs report. i know you considered a positive report. what are you going to highlight for us? >> what i always do is, don't try to obsess over any given month number and look at a longer term trend. i do that when a number in the month is about expectations and when it is below expectations. if you had asked me three years ago in september 2012 would we be adding 8 million jobs over the next three years with the unemployed at rate coming down by three percentage points to

5.1%, you know, i would have been thrilled out of our minds. the american economy keeps adding jobs month after month, keeps bringing the implement rate down month after month. that is a very -- that is a good trend. erik: is there a double-edged sword in this report because on the one hand, there are some wage growth and on the other hand, the owner climate rate is down? there are many positive things. by some estimates, we might be at full employment for the u.s. economy given the structural changes we have seen since the financial crisis. but on the other hand, it might be enough to justify a rate hikes of summer 17, and that is why financial markets, in particular stocks, are selling off this morning. >> i will let the fed make the decisions on monetary policy and financial markets make whatever interpretation they want. the truth about the labor market, we have made a lot of progress since the devastating recession that we went through.

but we're still not all the way there. in terms ofe to go getting more people back into the labor force, getting some part-time people working. would love to see wage growth strengthen. we have made a lot of progress in all of this. erik: how do you do that? how do we collectively do that? how to get people long-term unemployed is to stop giving up and leaving the labor force? >> a lot of that comes down to the strength of the overall economy. one of the nice things we have seen, the unappointed rate has come down. that is been disproportionally reductions in long-term unemployed. what can we do for the overall economy? the first thing is, don't mess it up. with 27 days left in the fiscal year, don't send us back into another shutdown. don't bring back austerity. then we have summer positive opportunities -- domestically, when it comes to investing in infrastructure and raising the

minimum wage as well as working with countries around the world including china about what they can do to be engines for the global economy will stop -- economy. erik: what about young people? alan krueger pointed out, and he knows the data the way you do, it is still very hard for young people to get that first job. depends againat on the strength of the overall economy. you have seen the youth unemployment rate coming down. it is always in economies for decades has been higher than the overall and implement rate -- unemployment rate, but that is an important issue. erik: jason furman, thank you. call him the chief economic advisor to president obama. it is friday. in addition to the jobs report, it is the yearbook game. here she is, she graduated the class of 1972 from jordan high school and her arm.

she is known for her work as a c suite executive. that is all of the hands i'm getting for my professors -- from my producers. we want to know if you know who this is. ♪

>> having their best month in over four years as nervous investors rush to hedge their portfolios come here to look at the wild world of vix etf in which when does the best job, an analyst europe bloomberg. was august their backs month or september -- their best month or september? >> basically, the past three

weeks. it has been the best and the european debt crisis of 2011. that was worse. there talking for years, they're having a breakout month, not only inflows coming in and out, but the volume is basically insane. they're basically trading about 9 billion to 10 million to 12 billion it only a 4 billion in assets. the turnover per day is 400%, which is more than stocks turnover in a year. i think that is a good sign because these are products that obviously are tracking futures on the vix, so they eat the products alive over the course of months in a year, so you're looking at these products that should be short-term. if there ever was a case in all of etf's we one a lot of trading, it is in this space. >> does this not make it difficult for managers of the etf's to keep up? >> all they have done is turn the front months and second months vix futures and equities.

people like the convenience of clicking buy. when you look at how these products tracked the vix, vix is a calculation -- >> who doesn't know that. >> you can track that. it has a differential. when you look at how they perform on black monday, so to speak, vix was up 46%. >> in one day. >> the most popular way to track this was only up 20% -- 18%, actually. when you look at the leveraged futures trackers, they were much closer -- >> why was vxx less than half than vix, and wouldn't you be unhappy if you are an owner of that etf and not making as much money? >> exactly. but 18% was more than inverse etf, so is your best bet terms

of hedging against this market loss. >> so not as much game, but not as much on the downside. >> that's right. i would think most people are unaware you're only getting move 30% to 40% of the vix when you are in vxx. that is why the double leveraged 80% ofo you more of the the move, but on the downside, you get hurt worse. i guess it is a picking your poison situation on how much you want the vix -- >> i enjoy picking your poison situation. thank you. when we come back, you will hear about disney and star wars toys. stay with us. ♪

erik: that is a snapshot of stocks on this jobs friday. they will go down in history for more than just that reap port they give us the ammunition to

raise rates, maybe, the star wars hype is high. and now is force friday, you can purchase toys based on the new movie. many did that, lining up as if they were a buying an iphone. our next guest says sales could amount to $5 billion in the first year. shares.disney also, david westin. you know this devil with a blue dress sitting next to me, stephanie ruhle. princess leia for the segment. lot inion is a merchandise sales. would that be the most ever? >> not even. it does sound like a big number, of course, but we look back at how the "cars" franchise has done for disney in terms of consumer merchandise and "frozen" came out nearly two

years ago, but it is done over $5 billion merchandise. erik: all of those wands. >> lots of little girls and little dresses. " had more. overall generated more than $10 billion. i don't think $5 billion for "star wars" is such a big number. erik: is a conservative estimate? >> i think it is. that is retail sales gross. >> typically disney licensing might be 5%, a percent, 10%. if you take 10%, let's say $500 million of revenue from disney in your one. erik: you used to work -- >> i did. erik: david is former president of abc news. you know the leadership well. disney owned six are when you were there. -- pixar.

bob iger has three feeling pretty done good about disney's movie properties given what pixar and marvel has done. this is going to be the big first title for the lucasfilms purchase. >> i'm sure he does feel pretty good, but it is just not movie titles. they have exploited in so many and marvelf pixar and will be for lucasfilms. he has done an exceptional job and focusing on big things. he goes for a few big things, then he really executes beautifully across all platforms. watch this online to streaming, using their maker studio people around the world. in sydney, australia and tokyo with kids and wrapping these toys from star wars. >> half a million people have watched it. that.i did not know stephanie: "frozen" is all about six-year-old girls. "star wars" 50-year-old men.

erik: talk about how disney is going to trade on the fact it is disney and not dreamworks. they can do things that dreamworks, for example, cannot. >> it is the immense's franchise value. it is the films that translate into the merchandise. it is the tv programming that follows on with that. >> the theme parks. >> don't forget, over the next years, there will be star wars themes and multiple disney parks. why analysts get are not modeling and higher gross models for disney overtime -- margins for disney overtime? shouldn't they be higher going forward if you're getting this brand-new licensing revenue out of a film like star wars? >> eventually, quite possible. there are two things. there are heavy promotional costs for star wars in the months going into the film's release. disney is also putting up a

shanghai theme park in the spring of next year. huge investment, 5.5 bullion dollars and that will be dilutive earnings in your one. we're expecting that to be profitable, probably even in year two. and this is where disney stands out versus a lot of its peers, they're not just a cable tv company. they have so many other properties that generate revenue and earnings, but disney was the first company to come out and running for a month ago calling out and impact of court cutting on its earnings. every other media stock fell off on the back of that. this is a structural issue for the industry. it will not go away. i happen to be less errors than some on how quickly -- bearish than some. nobody can deny the industry is changing. that is 45% of disney's earnings, cable networks. , thank you for coming. you're here on a special day because this is the last edition of market makers, a show that we brought to life on bloomberg

television from three years ago, in which i have enjoyed cohosting with stephanie immensely. it was fun. we have to move on. stephanie: the party is not ending. >> we will be working with you. erik: looking for to it. something in store for october. are not going to disclose much by way of details. stephanie: when bloomberg comes back to bloomberg lp and everyone says, what is this guy doing in the organization? what is going on? something pretty special in just a few weeks. i have loved having this guys my partner. back.ou have to come the party is just getting started. erik: there's no way we could end the show without concluding -- stephanie: don't,, the yearbook game. erik: i chose a woman just for you. she graduated class of 1972, jordan high school, durham, north carolina. those are the only hints. stephanie: what industry? erik: somebody who has

frequented the c suite. stephanie: carly fiorina. sadly, it is because there so few women in business, it was easy to guess. when it is a white guy with gray hair, much harder. will wrap up, we "market makers" forever. coming,timk you for for being here. stephanie, muah. u.s. equities are down. go out there and trade and have yourself a fantastic labor day long weekend. see you next week. ♪

>> it is 10:00 a.m. the jobs numbers come up short but wages climb in the unemployment rate falls to 5.1%. will today's report take a

september rate hike off the table? is dr. doom changing his tune? he says markets are overly pessimistic about china. we speak to him in italy. sports friday. new star wars toys went on sale at midnight around the world. we speak to has brought -- hasbro toy genius from the first film in 1977. olivia: good morning. dayks are falling on labor friday only appear to be at session lows. we now have a dow off nearly 300 points with all the major benchmarks off by 1%. a couple of notes from traders saying,