alix: we are moments away from the closing bell. i'm alix steel. joe: i'm joe weisenthal. s&p bounces back into the close, treasuries fluctuating in afternoon trading before tomorrow plus jobs report. joe: the question is, "what'd you miss?" the fourth quarter starts with a bump in global equity falters. jobs, september pass big report. -- september's big report.

joe: and china, things may not be as bad as you think. alix: we have to begin with stocks. it was an interesting day. at one point the dow was down triple digits. all of a sudden we are pretty much flat on the day. volume also picked up, slightly positive on a 10 day average. interesting. was pretty quiet all day, markets were significantly lower, but it did not feel like the -- thishis is is the start of a quiet q4. alix: i was looking at the 10 year yield. at one point it was headed to the 2%, 1.9% level. it ended up 2.4%. at one point it was a nail gripper.

are investor so anxious that we will see a 1.9% or something. you've had so many fed heads say this year, december. they have not been able to convince the market that is going to happen. it is right around 40% odds. alix: let's talk about volatility. looking at glencore, down 30%, now up 17%. it was pretty ugly. that white line is one month. the orange line is three months. the green line is six months. volatility is not going anywhere. investors are expecting a bearish outlook when it comes to glencore. joe: that insane day when it

fell 30%. already, the stock has recouped a lot. people will be watching glencore as a bellwether. i want to dive into my terminal. i made a messy chart to tell the story of the global economy. there's no hope breaking down what each line is. here are a few of them. the white line is chinese pmi. the green line is south african power consumption. there is a common theme. they are all going down. this is the story of the world economy now. anything related to emerging markets, commodities, china, manufacturing, all going down right now. u.s. and europe manufacturing still growing, but not the direction we want to see. we have those killer auto sales reports coming out today as well. joe: there is a positive domestic u.s. story, but global

manufacturing, commodities, continues to be ugly. alix: tomorrow, we get the all-important jobs number, employment data for september. joe: a bloomberg survey of economists says 201,000 jobs were added last month and that the jobless rate will hold steady at 5.1%. alix: joining us is the chief international economist at deutsche bank securities. what do you think for tomorrow? >> 200,000 jobs and 5.1, close to the consensus. joe: one of the questions is, what will happen with wages? are we about to see that wage pressure that people have been watching forever? you point to what is going on in the u.k. as an instructive example. >> it is popular to say that we will never get inflation, never see wage pressure, but you need to look at the u.k. data to see that wages have gone up nicely.

joe: we have that chart here. you can see the purple line of wages, average weekly pay accelerating nicely. >> the puzzle is why this is not happening in the u.s. something is brewing. the atlanta fed has a number of indicators, suggesting tightening of the labor market. we will see tomorrow. alix: talking about the atlanta fed, if you look at wages that that they track for men versus women, you are seeing a rise in men's wages. women's are falling slightly, which i don't like. >> the general trend is they are trending up. there is a mystery here white men's are going higher and women's are dipping.

the labor market is getting tighter, 5.1, u.s. domestic economy looking better. now we have only the inflation question left. joe: another way of looking at labor market tightness is how long does it take to fill jobs. you point out that it is getting harder to fill. >> it is getting more and more difficult. if it takes an average 27 days also much ab, it is sign of the labor market being quite tight. the fed has the luxury of saying they are not seeing that yet, but an important leading indicator. joe: you talk about how it hit a certain number in the u.k. and just took off. what is the level in the u.s.? >> the fed has been lowering that number. it wasn't long ago that the fed said when we hit a threshold of six and a half, we will start

thinking about hiking rates. it is 5.1% and they are barely thinking about hiking rates. we have a constant downward relation to that question. the clear thing is that once we cut to that level, the fed at the moment thinks it is 5.0%. we will start to see inflation grow from this to up, and that's what rates markets should be worried about. if there is a nonlinear effect, that could start to take off. long-term interest rates will start to move. that has been an expensive bet to have on, but this is very important as to why rates continue to be so low, because we haven't seen that uptrend. alix: is there a number that indicates a hot labor market versus a too hot labor market?

andhe closer we get to 2.5 above, that is still not quite there. going.s time to get the the phillips curve, idea there is this inverse relationship between the unemployment rates and inflation, it is not dead. it does seem that people are confused and have not understood the cycle. what has changed? why have people been so confused? >> the phillips curve is in hibernation and will come out eventually. the fed action still has that in mind, otherwise why are they talking about raising rates in december. we had wages continuing to be so low, people are slowly coming back and holding wages down. if more people come back, more unskilled labor will come back and that will make sure we don't see wage pressure. there is a huge debate at the fed that there is labor that can come back and hold wages down.

others are saying no, we have to keep wages down because others are not coming back. alix: after the break we will talk about hidden labor slack in the market. ♪

alix: i am alix steel. joe: i am joe weisenthal. "what'd you miss?" latvia.

an 80 million purchase of shares in the pipeline and terminal operator. only 5 of 93 world markets tracked by bloomberg have gained since june. alix: we do want to get to the top headlines. we want to begin with the latest on a mass shooting in oregon, at least seven people dead, 20 wounded after gunmen opened fire at community college. authorities say violence is over, but was not immediately clear if shooter was killed or taken into custody. it happened at umpqua community college. joe: hurricane joaquin. where does it go next? joaquin is now a category four storm. forecasters predict it will turn northwest, but some computer models say it could head out into the atlantic. alix: good thing that gasoline

inventories are about 12%. -- 12% above its average. amazon flexing e-commerce of muscles, banning sales of apple and google, can no longer list products. the retailer says prime video does not run easily on the devices and want to avoid customer confusion. those are your top stories. joe: we're back with the chief international economist at deutsche bank securities. alix: labor slack and u.s. jobs report tomorrow, one of the issues is wages have not grown as we have been talking about. a possible explanation for this, jobless rates versus the unemployment to population ratio. people not in the job force that want to work. is that an explanation for this divergence you see? >> they are a very important part of the story.

people basically lost their jobs when the recession hit, and fed has concluded that half of those basically were baby boomers retiring and not coming back. the other half was people who went into studying and went to university and got more education, more likely to come back. the question is that we have not seen a dramatic increase in the employment to population ratio quite yet. the debate is, will these people come back or not? joe: what is the answer? >> most of them will not come back. if they are coming back, why are they not coming back when the unemployment rates is 5.1%? i would not have expected them to come back already. alix: bloomberg intelligence

tracked the cost index versus the employment to population ratio and plotted it on the graph. historically, these indicators track each other. it is not the eci and unemployment rates. if the labor slack is there, it does make a difference in terms of wages. the lower to employment to population ratio, lower wages, higher, higher wages are. >> that's true. the most important thing that's supporting we need to hike soon as something need to be done is more anecdotal evidence of shortage of labor and construction, labor in transportation, various industries with anecdotes of shortages of labor. that is an important part of the story. something moving, something brewing, we did not hear that two years ago. the lingering picture here of something happening on wages is an important part of the world, but it has been a lot slower than we expected.

joe: is there any better measure than u3? if you had to go u3 or something else, would you go with the headline? >> janet yellen had a speech where she said that u3 was a best measure of slack in the labor market. people leaving the labor force makes this recovery different, but most members have said this is still the best measure we have. alix: what ones are keeping you up at night? -- what winds up keeping you up at night? >> one issue is that when the fed does hike, will that be volatility reducing or increasing volatility? this is important for rates and vix and fx. a lot of questions i get, we have, when the fed finally takes out the champagne bottle, is that a sign that people will

say, know everything is stable, or is that a sign that they actually did hike rates so we have more volatility? this is important for all asset classes. joe: awesome stuff. alix: thanks to the chief international economist at deutsche bank securities. joe: why does one analyst known as "mad dog" -- believe the yen will strengthen beyond 100 per dollar next year? ♪

joe: he believes japan's

quantitative easing worked only slightly. pretty fascinating. joe: times of stability in china's economy? just how sustainable is china's growth model? with us, gordon chang, author of "the coming collapse of china." thank you for joining us. lots of attention on china right now. you think things are not as bad as the china headlines we see almost every day? you say things on the ground are ok? why do you see things so differently? theyu don't have to think are significantly better than people think right now. in august people thought china would fall off a cliff. people are still thinking about that. people are worried. there is a slowdown underway.

you are not about to see the economy falter. joe: why not? >> we see the entire economy. the manufacturing sector is weak . but that's not the entire economy. we have shown for the past two and a half years that the manufacturing sector is not a bellwether of the economy, it's one of several sectors and we are seeing strength elsewhere. alix: where? >> services. alix: what the you think of that, gordon -- do you think of that, gordon? >> of course services are growing, but they are not growing robustly. we look at the q2 earnings of s&p 500 companies. a lot of them look to china and said, not very good at the exception was nike. apple has stunned well with its success sales. otherou start to look at

factors and consumption, it is problematic. the big issue is not so much the way the economy is going but what people think. we're seeing net capital outflow at the rate of 135 alien dollars a month --$135 billion a month. number turning up in china is land sales are accelerating. we have a chart from deutsche bank which shows this measure is improving. when you look at that, you see a sign of an improving economy or another bubble? >> the national bureau of statistics said land sales for the first eight months of the year were down 32.1%. in cities like beijing and shanghai, things are pretty robust. people are starting to buy apartments. overall when you look at third and fourth tier cities, where the ghost cities are, you are just not going to see very much in the way of new property development. for a staff of the year construction starts by area were down 15.8%.

that is a real indication where things are going. alix: what do you think when you look at that chart? the government wants to help first-time homebuyers. clearly this is something the government is invested in. >> the biggest thing about property is they don't want it to be the problem area. our data, we saw weakness in q3, but we showed a slight improvement year on year. very mediocre to mid link data. -- middling data. property is not looking good but it's not looking terrible yet. there's not many places they can go. thing picking up is government spending card looks like they are pumping the fiscal levers again. is this sustainable and will it work? >> it's interesting question. monetary stimulus cut the reserve rate requirement. we have shown that the data is the last two quarters, real

interest rates are falling and the share of firms capital still going down. there is not a monetary policy solution to china's growth worries. the fact that they can shift on the this go stimulus -- do they have any tools? they do, but they've never tried this before. alix: gordon, you were nodding. >> everyone says they have tools in the toolbox, but you look at five reductions in the benchmark interest rate since november, for reductions in the reserve requirement ratio. no appreciable effect. just talking up the stark market in august, that was puzzling. fiscal stimulus, they can build another subway line like are talking about in beijing but that just adds to debt, just a big problem for them. that's going to be the big issue going forward. alix: adding to all this murkiness is what does beijing want to see the u.n. do?

what are they going to try to do to manipulate -- to fix it, to help it? they clearly want into the sgr basket. one of the things they seem to be doing is trying to shift the legitimacy from being one of economic growth to being one of global power. they see the imf as part of that and as a result they are trying to follow what the imf is telling them, to go to a more market-based rate. to do that they have to step in creating floor for it. u.s. congress gets mad. the whole thing is a circus. >> they are spending $20 billion of theefending the value currency. they are not just doing that in the internal currency market, they are doing it offshore. ft pointede, the out, they could exhaust their foreign exchange reserves in a year. that is assuming the burn rate

does not increase. this is going to be critical. this can intervene in or stock market all they want because they can print rim the be -- remnibi. dollars of the only thing they can really use to defend their currency. that means they are in trouble. alix: it's so great to put the data point to both of you guys and you agree with the data point, just have different interpretations of it. it's fascinating. thanks so much. gordon chang, author of "the coming collapse of china." ♪

joe: like all the economic hipsters are going to be looking

at measures of slack, wage growth and the unemployment rate. as long as we're in the 200-ish range, people ignore that. that is it. we will be back tomorrow on "what'd you miss?" ♪

"bloombergme to advantage prime time." you a we are bringing special hour a bloomberg programming credit we will be dividing into a wide-ranging conversation. we will talk about exchanges in trading with ed knight of the nasdaq. then we will look to the current media scape, and we will round it out with technology and companies you should be invested in. we will talk to an all-star analyst. ed knight is the executive vice president and general counsel of nasdaq. good to see you here.