good wet, cold, but no hurricane coming to you morning. i am michael mckee. tom keene is in boston. he will be with us because it is jobs day and he would not miss this, unless the boston red sox signed him. let's get you a quick market check, because everybody is waiting for the jobs numbers. these numbers are all going to change. forchinese markets closed the day and not much moving in japan, but europe has been bouncing around. onestoxx 600 is higher by and a half percent, as is the footsie in london. the dax 100 points higher. some expectations for better news today from the united states. we see the same thing in futures here. points,500 up eight 4/10 of a percent.

nasdaq is 24 points higher, 6/10 of a percent. the bond market essentially quiescent but moving a bit higher in anticipation of perhaps a reasonable day. a 10 year note yield, 2.5%. 66 basis points for your two year yield. i would not put a whole lot of stock into any of these numbers before 8:31 this morning after we get the jobs report. .e are watching the jobs report ,000 jobsast is for 201 to be created and we are supposed to get a 2/10 gain an average hourly earnings. we are also watching hurricane . is beginning to look like you can move that when off your radar screen. the latest computer models show

it taking a turn when it comes to the north, and may brushing by the coast of cape cod but no direct hit on the united states at the moment. watching talks in paris between european leaders. hollanderkel, francois , and vladimir putin are there, on the future of ukraine and what is going on there, but no doubt syria comes into all that. three days of bombing campaigns by the russians. a report they did attack isis locations as well as the locations that have been attacking of those who have opposed the syrian president. watching what is going on, the white house, people in washington, a great interest in what president putin is doing this week. president obama met with

vladimir putin, did not seem to get very far. chuck todd is the host of "meet the press." you can hear it on bloomberg radio at 11:00 and 3:00. this is an interesting problem it seems. vladimir putin can talk all he wants but seems to have impunity in his actions. chuck: i think some of the president's critics will say this is what you get for not checking him sooner, for trying to bring him in when you needed russia to do the iran deal but ended up empowering him a little bit. there fors if, i was you, i am going to start in syria. it is a reminder of what a failure the syrian policy has been. the president has basically never been able to figure out syria. yes, it is an interactive

problem, but it has been paralysis. there has been such a fear of getting drawn into a quagmire that that has become a quagmire. point,ink at this basically putin has forced the united states to have to consult this andia on essentially change its policy on assad. they are trying to claim they are not trying to do this, but they have no choice or we could get into an accidental military confrontation with russia. i say accidental, because they are bombing people we are training on the ground. how does that end? mike: those kind of questions are why i was asking the other day why anyone would want to run for president. at the other end of capitol hill, 80 things are beginning to

sort themselves out after john boehner's resignation. what can you tell us about the leadership? know who thek we speaker's going to be, kevin mccarthy, but he has had a horrible week in getting his campaign off the ground. he blew it in his comments about the benghazi committee on he talked about it in political nots and said hey, if it is great what we have been able to do to the clinton campaign, and a bunch of republicans have criticized mccarthy for his words on this. a bunchhe has misread of republican base. they have always feared the leadership is a way to calm the troops, throw them a bone. the leadership never wanted a benghazi committee and they slipped as they waved to get conservatives on board when they reopened the government last

time. still goingrthy is to be speaker but he is not going to get a honeymoon, and he is starting in a weaker position. mike: i could see why you would want to be host of "meet the press" but i do not see why anyone would run for president. who is on the show this weekend? chuck: i have donald trump. i will sit down with him face-to-face. i also have cecile richards from planned parenthood, and we will deal with syria and rusher -- russia. mike: we will be listening to chuck todd, host of nbc's "meet the press." as i mentioned, tom keene is up in boston. has john henry agreed to give you a tryout for the red sox? we have a lot of people trying

out for your job. tom: we are looking at it. it depends if mr. ortiz decides to hang him up because they want somebody slower than david ortiz on the base. my name came up on the list as well. year as weery quiet get ready for bruins hockey and celtics basketball. the season ended seriously about may 1. we say good morning to everybody on bloomberg radio, bloomberg television or wide -- worldwide. see how the experts at: resnick can help you navigate these complexities. find out more at cohenr esnick.com. jim glassman, what is different this time? within your research going up to -- 8:30, what is

different? jim: trying to make sense of what happened in the third quarter. the little bit of evidence we have from the gdp is indicating the economy has slowed down quite a bit, but everything about the job market has been steady. for me, the most important focus is what is going on. hours worked appear to have accelerated. joblessmarket including claims, which i think are the most reliable and most comprehensive picture of the u.s. economy, they are telling us the u.s. economy is doing fine at worst, and maybe picking up a little bit in the third quarter. gdp, wethe problem with have learned by now we should be a little skeptical of the quarterly gdp estimates as the early reads are very volatile and based on limited information. revisions, and it is

a complicated thing to try to figure out what is going on broadly. about theful thing job data, it is very comprehensive. you're getting a snapshot of what is going on across america. with the jobs data, they are heavily revised as well. what do you tell the president when you have got the numbers and you know in a month from now they're going to be changed? alan: those are smaller revisions then you get for gdp. said, the best short run indicator is the unemployment insurance claims. one of the things that is nice about the jobs report is you get the household survey as well as the establishment survey, and the household survey covers jobs that are not covered in the establishment survey, like workers who are paid by 1099s. it is the combination of the household survey which gives you

labor force precipitate -- participation, that paint a broad picture. it does not always move together , it tends to be noisy. i would smooth out the noise recovery over the past few years . the job market has been gradually healing and i expect that to continue today. 01,000, not too far below average. alan krueger with princeton university. tom keene is in boston ahead of the report the two year yield is .66%. this is bloomberg surveillance. ♪

mike: welcome back to bloomberg surveillance. i am michael mckee along with vonnie quinn. vonnie: thank you so much. it is all about payrolls today but we are watching what is ,oing on in paris because today for leaders are looking to broker a peace deal between russia and ukraine. we are speaking with ryan chilcote of bloomberg news, live in paris. you are very close.

merkel and the french president or all meeting. we hope they are all talking. ryan: they are all talking. it is called the normative group and it was put together during the d-day celebrations last year , which were more about trying to find a way to solve the war in ukraine. just beforeay and they began, the russian president also met separately with the german chancellor and president of france. vonnie: is it a little embarrassing that this is going ahead, even as syria is becoming a bigger and bigger problem with russian involvement? ryan: it is awkward. i think in a perfect world, neither the german leader or the french leader and certainly not the leader of ukraine would want to be here in paris right now with theg ukraine

russian president at a time when they know they also need to hear from him on other issues. at least the germans and french do. the russian president sort of was able to dictate the agenda to a certain extent when he started bombing syria three days ago. vonnie: what will they be looking for out of today's meeting? angela merkel and francois hollande, are they going to look to talk more about syria then ukraine at this point? the ukrainian president will be looking to make sure he is not forgotten, that ukraine is not forgotten. the german and french leaders will want to keep ukraine and so in theparate, four-way talks i ensure they will insist on only discussing ukraine. we do know that in the bilateral talks, they both intended to discuss syria as well. it will be a mixed or of the two.

the two.ure of vonnie: ryan chilcote, we will return to you and a little bit. watching out for those jobs numbers coming in about 20 minutes. we bring you those numbers at 8:30 eastern. are watching on bloomberg television, listening on bloomberg radio. ♪

morning, everyone. bloomberg surveillance on bloomberg television and radio worldwide. minutes away from an important jobs report. first we need to go to our breaking news desk. bill: markets are higher by gains in france and italy. u.s. futures are rising in sympathy.

the yield at 2.5% held the key to percent level yesterday. unemployment rate estimate, 5.1%. york andive, isn new 10:00, factory orders. a specialsets dividend of $4.85 a share. albertsons to offer 65 million shares. -- the casinow names in the u.s. have pledged to support maccallum. -- mccallum. taxan stanley on the buyer -- bio techs. raised to buyls with a price target of 50 and t. rowe price cut a neutral versus by over at ubs.

i'm bill maloney. tom: on the bloomberg terminal, you can go to squawk go to hear more. tom, we are here with as always jim glassman on jobs friday from j.p. morgan chase, and alan krueger. while you were checking the latest box scores in boston, these two gentlemen were talking about what we know to be true about the job report, that whatever number we get today is not the real number. it gets heavily revised, particularly the month of august. jim: the month of august, the first estimate has been revised up by about 40% on average. august is a particular bias. that is one of the reasons we

were downplaying the low number last month. they reported 173,000 gained. we were expecting that to be revised up. the initial estimates that you see often get revised. difference, one of the wonderful things about jobless claims is that tends to be a pretty accurate indicator. it is pretty much always the final answer. numbers we see initially can get revised so net revisions are as important as the headline numbers. mike: allen, how do policymakers deal with it, the uncertainty of the numbers that we talked about? you cannot make policy based on jobless claims alone. alan: and jobless claims do vary from week to week so is a good idea to look at the four-week moving average. in general, what policy makers like to do is look at a wide number of indicators to paint a

collage and not put too much emphasis on any particular statistic because we know there is a lot of noise in our measures of the economy. also, to look over a longer period. i found it reassuring to look at job growth over a 12 month. as opposed to month and month. 2012, had done that in you would not be so concerned about the job growth. krueger.ok at alan i'm bringing it up right now. i have a 12 month number of 243,000. jim glassman, is that 243,000 in 2006?243,000 it was jim: this job growth is more broad-based. it is better jobs coming as the recovery matures. 240,000 was coming

from what was going on in the energy field. there are aector, lot of projects that have shut down and that pace has slowed to about 212,000. that is pretty solid. that tells us we are still growing faster than our long-term trend, which is why the unemployment rate is coming down. people have this idea that the u.s. economy has been awfully slow. havecomes from what you seen in gdp growth, but when you look across the economy, if you look at all the different pieces and put it all together, car sales and 18 million, that is large. the underwater problem pretty much gone. capital spending not that bad when it comes to gdp. when you a race from your mind the impression you get from gdp, everything else is looking kind of normal. we are probably not there yet

fully, but that is what inflation and wage trends tell you, but the job market has been the first to tell you that the recovery was looking pretty good, steady, and solid. alan: if you look particularly at the private sector, the recovery looks stronger. one of the unusual things is that we have had u.s. austerity. decline in a big government spending, defense spending, nondefense discretionary spending. state and local governments cut back. headwind, this recovery looks about as strong as the one we had in the previous decade. alan krueger and jim glassman with us as we get ready for the jobs report this morning . it is cloudy and reining in new york, that these gentlemen bringing some sunshine to the view. we will see what the forecast is

once we get the payroll numbers. they are due out and about six minutes. payrolls, note jobs in manufacturing. that is something we will talk about when we come back. ♪

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get proactive alerts 24/7. comcast business. built for business. vonnie: this is bloomberg surveillance. i am vonnie quinn. we are moments away from getting the september jobs report. the economy probably added 201,000 last month and the strength of the labor market

will help determine when the fed raises interest rate. there are reports the shooter at the oregon community college targeted christians. one witness said the gun man was asking students if they were christian. those who said yes shot in the head. at least nine people were killed before police killed the gunman in a shootout. hurricane joaquin may bypass the u.s. altogether. it has been pounding the bahamas. center,onal hurricane models indicate it will move north over the atlantic and stay off the east coast. several models still predict it will turn toward the coastline. up.ave s&p futures 111.59o is trading at with the dollar index up about 1/10 of 1%. mike: welcome back to bloomberg

surveillance. it is time for the september payrolls number, the forecast 5% unemployment rate. phil mattingly is at the labor department. :hil the unemployment rate stays at 5.1%. the numbers across the board missing all around. to revisions to august revised down from 173,000 to 136,000. july was revised to 245,000. down 59,000. the labor participation rate dropped to 62.4%. the lowest since september of 1977.

werege hourly earnings expected to take up, dropped by one cent month over month year over your. industry through industry, health care numbers of 34,000. mining was a bad number, down 10,000. up 24,000.trade professional services of 31,000. construction and manufacturing, no real change. .t was a big miss it was the revisions more than anything else, revised down august and july by 59,000 jobs. positive --ip of

across the board, whether it's the topline number, the labor participation rate or the average hourly earnings come all big misses. mike: phil mattingly at the labor department. a shock in the markets are reacting to the 10 year .ote falling below 2% the two-year has dropped all the to .56. nasdaq off 31 points. the screen can barely keep up. an enormous amount of trading volume right now. expect inat you would this kind of situation when the markets are so disappointed.

, i'm sure they did not see this coming. they certainly are in the right place with their lack of movement in september. jim: the real issue for the fed, keep in mind here that this is disappointing, but as long as job growth is in excess of 75,000-95,000 month, that is in excess of our trend. we will have to get used to this notion later. there's no reason that that has to do anything now. the compelling reason is the funds rate is at zero. if they want to move policy in an orderly, gradual way, small steps, you need to be willing to start this process. what do you think the economy will be looking like over the next several years? not in one month. where are we going. this trend is a little slower the people had thought but the job market is still recovering.

is zero compelling case is not the right answer. one or two percentage points above inflation is the right answer. the slower they can do it, the more orderly it will be. i just put out on twitter, the chart for labor participation in america. to 1977. is there a policy prescription to improve the number of bodies in the labor force? >> yes. we can make work more flexible. if we look at why labor force participation has been declining , it's primarily because we are getting older. it's a leftover effect of the recession. , what fueledtly the rise in labor force participation in the u.s. was increasing participation by women.

when we compare us to europe, europe has continued to see labor force participation rise by women. we see it going down. maternity leave policy, sick leave policy, more flexible workplace, that's something employers can do on their own and something which i think public policy could help. by providing child care or preschool education. tom: i look at the unemployment rate, the three decimal points. a 4.99se are we to unemployment rate? we are down to 5.05. alan krueger and president obama have to take a victory. but we feel so miserable. mike: we are getting very close. a 10re basically down to figure percentage point to get to -- 10th of a percentage point to get to 5%. drive up wages, which

we are not sing at the moment. the average hourly earnings stuck zero. we have not gone up at all. when you factor in base fx by the end of the year, we will not be anywhere better off in terms of wages. i'm wondering -- i'm looking at these numbers here. the number that really sticks out is, when you look at average hours worked, it drops by a tenth. seems to suggest there is some kind of slowdown underway in the economy. ,> when you look at the index so far in the third quarter, and grew 2.7% or so. that is an improvement over what we've seen. these things can be very noisy. the general drift of things is that we are seeing more hours

worked in the quarter as a whole. one of the things going on in the labor force, we've had 3 million young people drop out. realized theyave need more training, more , college will not guarantee you a job. this is a temporary thing going on. as people get finished with these programs and come back in, we will see as some people flow back into the jobs market that downward pressure on the labor force participation losing -- tom: tell me how the optimist reacts to this. the struggle to get it going -- you and others agree, they are more optimistic. how do they respond to this report? jim: most of us will be slightly disappointed by the report. we were expecting upward revisions.

when you think about the job market, you have to think about all the information we have on the job market, not just one report. and you put this together with a steady trend we have seen in jobless claims which is the best measure of all the things we look at and you look at the gdp measures, we are slower this year in terms of hiring. at the economy broadly, there's all kinds of reason to be pretty constructive about what's going on here. growth we will see job may be run a little slower than we are used to. we are still growing faster than our underlying trend. mike: we will continue our conversation -- 142,000 jobs created, well below what was forecast by the consensus. -- rankedndicators

highest in independent advisor satisfaction. visit commonwealth.com. this is "bloomberg surveillance ." ♪

a disappointing jobs report. vonnie quinn has all the details. vonnie: disappointing to say the least. let's get to phil mattingly outside the u.s. department of labor force in washington. line 142,000 is the top jobs at number. there's not a lot else positive you can take from this report. worked was down. average hourly earnings down. the labor force participation 62.4%.opped to is three-month average now one hears of the revisions -- 177,000.

july revised from 245,000 down to 223,000. the total revision down 59,000. markets with instant reaction. let's bring in julie hyman for the major moves. julie: let's take a look at the stock futures this morning. futures, you see across the board a very dramatic and immediate reaction in the various assets. you see that on the right side of your screen, the big drop we saw in the s&p futures. especially remarkable is the movement we are seeing in the treasury market. the magnitude of the drop in yields and the suddenness of the drop in yields, down cap basis points right now.

-- down to basis points right now. vonnie: it keeps dropping. julie: what has been remarkable throughout the past month or so is that we have been hearing from the federal reserve officials saying it is likely we will see an interest rate increase by the end of the incumbent upon market has not been behaving that way. decreasen seeing a in yields and they are going down even more. -- interest-rate increase by the end of the year. but the bond market has not been behaving that way. u.s. is also a problem, that is even more of a problem for monday's. -- for commodities. , goldset class rising prices as people look for a place to hide. onnie: do you have a word

what this might mean for any federal reserve decision in 2015? phil: it puts it in question. it will be testing to see how the market reacts. vonnie: phil mattingly at the department of labor. we will be speaking with the labor secretary at 9:00 a.m. eastern. you will be able to see that on bloomberg television and bloomberg radio. our thanks to julie hyman. you are listening to "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." we particularly welcome all of you in boston. enjoying the non-hurricane weather in boston. michael mckee in new york with our important guests. one final question with alan krueger. we are brought to you by invesco. experts are just a click away. s.e two invesco.com/u.s. follow them on twitter. history may today with a labor participation rate back to 1977.

all of us thought it would be a ho-hum report. features -25. -- futures -25. a stunning 1.9387. alan krueger with us. .ne final question if you were sitting on the couch today in the oval office with the president and the president said to you, wait a minute, this is a surprise. do that theories that janet yellen and alan krueger use, do those work anymore in this modern labor economy? alan: i think they do. i had a lot of days like that. when i first started, the initial report was zero for august 2011. it's important to keep the volatility in these numbers in

perspective. i would not make too much out of this report even though it is a surprise. we need at least two or three more to see if there is a trend developing. the labor market is certainly evolving. evil throughout the last century. it's important we stay ahead of the evolution in terms of being able to measure it. despicable throughout the last evolved throughout the last century. of changesbeen lots in the labor market that are suppressing wages below where we might expect. lowation has been unusually for some factors be on our control. -- beyond our control. the way we view the labor market still holds. , i know yourueger have to run.

he works at princeton where there are trees and flowers and they can wait a couple of months for additional reports. hollandco and michael work in the financial markets where grass never grows under their feet. they are not waiting for any kind of additional information. everybody in the equity markets is selling, everybody in the bond markets is buying. --s is a complete rethink jim vogel pointing out that to two-year trendline has now gone amy lee negative, which is hard to do -- now has gone immediately negative. saidpresident williamson october is the live meeting. that died 10 minutes ago. it is an uptick from the now revised weaker number for august. the poor numbers we saw in the survey, the market is putting in a percent chance that it will raise rates in october.

-- 8% chance in october and 30% chance november. this report had a big effect. tom: there it is. nicely explained. michael holland with us. and measured perspective on the equity markets. i look at a yield that provides no competition to dividend growth. --disabled market indicator is this a bull market indicator? mike: what's going on is continuing reverberations from the fence non-decision at their last meeting. they disrupted the markets. since 2008, they were a constructive force. ben bernanke he created new tools and was very constructive for the markets. he wanted to get asset prices up. he did. we are in the process of undoing

some of the good that was done. i was very disappointed that help theischer did not last decision. zero interest rates at this point without emergency process behind it doesn't make any sense. if they don't do something in december, the markets will continue to be rattled. mike: an interesting point. i don't trust the fed funds futures market these days. you have written about how inaccurate it can be as far out. traders are pushing out a pen move until march. -- pushing out a fed move until march. jim: it says that the market does not expect the fed to move. warm partly, is telling us that it is not priced in. -- more importantly. there will be even more volatility than we've seen right now. the fed has been in business of raising asset prices.

it has been effective to raise asset prices. we can argue whether or not that his crated jobs. now, they want to get out of that game of manipulating the price hiring is turning out to be a very difficult process. this report is a total shock. alan krueger has to get me the academic, responsible, public official answer. are we working under normal economic theory of the zero bound? jim: i don't know what we are working at normal economic theory because the economy seems to be slowing. it isn't slowing throughout the summer. you cannot blame it on w eather. , thatod economic report

stands apart from what we have seen with a lot of the other data. there's good evidence that the economy has been slowing for the last few months. maybe it's a temporary slow. right now is not the time for the fed to be aggressively raising rates. mike: the equity markets at this point selling off, the opposite of the pattern we seen. equity markets would have gone up in the future. our equities discounting a real slow down or a possibility of recession next year? mike: you are giving the markets to much credit for clearing thought. the markets are looking for a better number. they are trading up because the number was really not a good number whatsoever. the markets would have been much happier had been done a very small 25 basis point -- increase -- dovish increase. the markets have this

uncertainty facing them. this number causes more uncertainty. options which he was cry best possibilities for the market, those are not even -- they are just worrying about what's going on. i was in beijing a week ago. i look at the numbers from the auto market yesterday, 18.4 million. both economies are slowing. they are still growing of it. divorced frome the reality of the slow economies. tom: thank you so much. we greatly appreciate it this morning. what is the quality of revenue and earnings growth in american companies? jim: it is not looking that good right now. earnings season start next week. we are expecting -5% year-over-year earnings growth and -3% of revenue growth.

if you took energy out, it is still not very good. mike: jim beyond go, thank you very much. michael holland, some really interesting statistics coming in from alex on the data team. he sees a sharp drop in the newly employed, people who were unemployed but found a job. students, people who are 15 years old turning 16 and got a job. job dropped into a off significantly. tom: i will go with that and say it's a one-off report. we need to see more data. i have a 10 year yield well below 2% which tells me this is a central bank that is boxed in. we will continue our coverage. it is never at all on "bloomberg

surveillance. ll on "bloomberg surveillance." mike: this is "bloomberg surveillance." ♪

tom: good morning everyone. a stunning labor report. no one expected nuances. michael mckee will take you beneath the headlines data. the markets are on the move. i will focus on foreign exchange. rocky by interactive brokers. the 2015 award for the best retail for x trading platform. idkr.com. i will turn to the bloomberg terminal. these eyes will not do it. dollar-yen, 119. he visited the world headquarters this week. ¥122.s 121, even

at 112.ollar, right now give me in our audience some perspective on what you see. mike: it's not just the poor headline number. 142,000 jobs. everybody was thinking the august number would be significantly revised. it was revised, but in the other direction. they initially reported 173,000. down to 136,000. we saw a 20,000 drop in july payrolls. the economy weaker going into the fall than anybody had thought. 9000 manufacturing jobs. that not so much of a surprise but not a lot of service jobs create 131,000 in total. we had zero average hourly earnings gains. 0.0. it went down by one penny. it went down to zero on a

percentage basis. 34.5 fall from 34.6. as adam kruger was saying we have to wait for confirmation for a couple of months before you can say there is a significant slowdown underway. it certainly plans a question about it that was not there before. joining us now in the studio's peter fisher. former official at the new york federal reserve. i will ask you to put on that hat. where both at the same time. and both will -- baseball cap it is to build. -- two bills. the markets now are pushing out any chance of a fed move until march. -- much does what the half does what the market at the state influence their move? >> i think it's been influencing them too much. it looks like they've been driven by market sentiment more of the last couple of months than we would like.

i think this data does show the economy week and it reinforces the? from the back of my mind for a few months whether the fed has missed the window. it missed it may be a year ago when they should've tried to normalize rates. that is behind us now. we are left with the uncertainty that they have told us they all raised voices same to expect a move for the end of the year but they did not leave us with that impression of the last meeting. now this data just raises that question again. i don't think it changes things that much from the uncertainty we had going into it. weak or the economy weaker? we have to see more data to confirm if we are on a downtrend now. this raises that question. i think the fed has posed the problem that they are looking or an uptick in inflation. they have told us the labor market yield compared what was three years ago.

we are almost balanced in the outlook is what they have been saying. certainly there's been a lot of healing in the market. this report is a damper on that. numbers doesourly not give them any comfort to back up any inflationary pressure. tom: you are associated with tuck at dartmouth. there was another professor that needs to take a massive victory lap this morning. blancheflower is a great authority on austerity and its bad function. are we in an austere america? are we doing policy, finance, investment? is it dampening our economy through policy? sensehink we are in a would much rather have the stimulus comments that's coming from a fiscal channel. i think the monetary general has laid itself out.

zero rates is not moving anyone's expectations. i would rather have monetary policy a little normalized for the positive fed funds rate. i am not looking for tighter monetary policy. i think we did see real investment coming through the fiscal channel. mike: it sounds like you say the fed has walks itself into a corner. but they can't because market expectations are so bad. >> sometimes a central bank is to get up and change marketing citations. if they let the expectations dictate what they will do they put themselves into a box they will regret. they have told us, all the voices say they respect to move rates this year. 's report raises a question. i think that the cannot strongly in tell us what their view is. i think janet yellen did that in a speech of the university of massachusetts. it told us she expects inflation to show its normal path over the

next couple of years. that the speech was so different from what you said in the press conference. if she said that in the september meeting inside the committee i would've thought the committee would attend a 25 basis point dovish tightening that they did not. i don't have as much uncertainty about the data. i have uncertainty about what their reaction function is. tom: i'm in boston and scheduled to come back if hurricane dartmouth does not get on the way -- in the way. stan fischer is trying to come north from washington to give what is all of a sudden mike mckee an incredibly important fedch at 1:30 at the boston macro credential monetary policy conference. mike, what will you looking for from vice-chairman fisher this afternoon? mike: we would've been listening or some of his thoughts on regulation and how you might manage banks and other financial institutions in these kind of conditions.

it will be interesting to see the -- if he adds anything. my guess would be when you're in a hole, stop digging. let the market settle down a little bit and figure out exactly what you want to say before you do anything. but it will be interesting to see. peter, you said the fed needs to have sometimes courage to lead the markets. given the environment that we are in and the numbers that just came out and the inflation numbers we have, what would you say if you were janet yellen? allergy set a predicate for a move? >> i think she's been trying to do that for the last six months. when they start moving is lessened orton than the expected path of the funds rate. it's all about the expected path. to -- back yourself into a corner like it really

matters were they begin which is the opposite of the message he is been trying to get out -- she has been trying to get out. those long-run dots are suggesting to people a path of the funds rate is higher than at the committee really believes. i think you're putting the stocks of their and suggesting 2% inflation is in the cards because they want to have an anchored inflation equitation, not because it is their best forecast. there was a tension going on between her forecast and inspected pat on the fun rate in gdp in one hand, and the inflation rate. i think it should come out and explain that they want to normalize rates but the path forward is much more in certain. they don't know if they will march up to 3.5%. tom: what you're good at is the political dance of what you just described. is this a fed that cannot speak of the political and social ramifications of a new lower terminal rate, i do know work nominal -- new lower nominal gp

rate? >> i hope it's not a damper on american exceptionalism and it's a gloomy outlook for productivity for the next couple of years. it was explicit in the staff forecast that was mistakenly released. they have a rather depressed you with activity growth. i don't think he will get a pickup in inflation. simply a narrowing of the output gap that takes place because of a slowdown in productivity. i don't think it gives us the same kind of inflation pressures as exhilarating to man to close the output gap. mike: peter fisher is with us. we are watching a markets react to this. futures down 29 points right now, 1.5%. 10 year note yield up almost a full point.

the yield down 13 basis point whichnow to 1.25% essentially confirms that peter was saying about inflation outlooks. tom: there is a momentum to the shift in the market. this is not a 20 minute move. we are still seeing that the rest of change markets. mike: there were a a lot of people leaning one direction and they're all trying to reverse, plus it does seem the way fed peopleutures of moved have rethought with the fed is going to do in repricing the markets for the expectation right now. future say nothing from the fomc until march. ♪

mike: certainly the payroll report to document as he market had thought. a rapidly moving market reaction. >> let's bring in our senior market or spotted, julie for the major moves after these disappointing numbers. julie: the market reaction sort of happened and now just settled lower when you're talking about stock in any type of risk assets. you're seeing this risk off board,appen across the

whether you are talking about stocks with a big decline in futures that you see there. futures remaining lower. sometimes you get a sharp downward and then and little bit of a bounce. the bounce is not really happening this morning. i think the yields are worth talking about. the treasury market is notable this morning. >> we saw a sharp drop. julie: you been talking about the fed funds futures now only pricing at about a 30% chance of an interest rate increase at the december meeting. that is down from 40% just yesterday. now you have to go to the march meeting to get a chance of over 50% being priced into that fed funds future. velocityinteresting with which we're seeing these reactions. >> what else is happening? let's look at the dollar index right now. usually when things are good and the fed rate potential he rises, the dollar index goes up.

by cigna look at that and see how that is performing. exact reactione there. if you look around the world and look at where people are looking for safety, it's not the u.s. dollar. the euro is up versus the dollar this morning. the british pound is also up versus the dollar. there are a couple of notable moves. the japanese yen is up against the dollar as well. and gold is higher as well. talking about people looking for safety in this risk off trade. gold was down in the fourth quarter and had a dismal quarter. >> i'm looking at the terminal right now. it's up by 1.8%. typical reactions as you would expect from data points as low as this. julie: exactly. if you look across together

commodities, metals performing largely ok. we are seeing declines in the energy complex. oil prices are lower. that it'sn here is demand is weaker in the u.s.. what will that mean for things like commodities? >> no doubt we will be talking about this the entire day. coming up, tom and mike will be joined by tom perez. ♪

mike: welcome back. tom is with us from boston today. we are discussing the jobs report for the month of september which surprised everybody. 142,000 jobs created, 60,000 taken away from august. we thought that would be revised higher. the unemployment rate unchanged in earnings and changed.

fed funds futures a push that the idea of a fed rate move until march. we've been joined today by peter fisher from blackrock. we thank you for coming in today and being with us. he is the investment institute in your director, but you were at one point a senior official at the federal reserve bank of new york. i have to ask you the fed was russell defended -- threshold dependent, then time-dependent, then data dependent which is where we are right now. why can't they make up their mind on what they want to do? you said they were late and moving. why are they not moving? >> they started on a bad qe, the forward path, the calendar and they are trying to move their data -- their way back to data dependency. i think they are having different arguments. we see it in public with voices like very summers. -- larry summers.

there was a view thinking dealing in working is zero interest rates. there was another that thinks zero interest is not working. that is not a matter of degree or a question of timing. viewsare very different of whether the interest rate channel is working the way they think it should or the way we would like it to. i think that is what is giving this markets so much uncertainty. they give a press release or press conference or speech that tells us to look at this or that data point. but somehow the decisions don't seem to come back to that. it is not seem to be pretty reaction function is even though we go looking around at the data. tom: the reaction funds in today is a global reaction function. 39 one models from hicks through world war ii and the economics you studied and i studied, are those models broken because we are such a global

economy? --t imploding global economy that imploding commodities could change u.s. economics? are in ak the models difficult place and i think the central banks have admitted that. up until the crisis that did not have a financial sector. they seemed assets and liabilities of banks canceled each other out. they did not have the banking system in the den i have finance -- did not have finance. i think we're trying to get the banking system. in when you see how big our capital markets are and how important the trading of volatility is in equity markets and interest rate markets, none of that is in their models. stop a minute and think. monetary policy only works the financial conditions. the vix is a good proxy/ there are some fancier ones but the vix does a good job. in the central

bank models don't have the banking system and they don't have the volatility markets and yet that is the only way the influence us, via financial conditions. i think the model seven broken for a while. mike: is the fed's ability to input the economy absent some sort of extraordinary policy, broken now as well? >> i don't take it is broken. i think it is dampened. i think it was a mistake for them to try to compress the term premium that is dragged down long-term interest rates. that hurt the net lending margins of the entire financial sector. yes, it's simulated demand for credit that he weakened the supply of credit. we have a very flat yield curve. the question is will they be of the send us signals that will suggest or influence the shape of the yield curve? i think they can but it will take more effort than they are prepared for. tom: if you look at the data here at 9:22l say

we have a little bit of stability in the markets right now. >> people have repriced quickly. we will see how the day develops. the 10 year note yield that goes points and10 basis the no price itself goes up a full point in that happens in about five minutes. tom: you think it would be physical -- feasible for them to be the next fed governor? mike: with his view it would start a store near policy. , on a sort of related but separate topic, very short-term -- negative yields in the market a function of what is happening with the debt limit debate. it looks like at this point that assist another complication for the fed when they do want to move.

to try to be able to move rates at all. anchorcentral bank and the short end of the yield curve if it tries hard enough. they can use deposit facilities and create a channel around where they want the short end of the yield curve to go. negative fixed-rate rp's. they can anchor it. it will take a long time for the fed funds markets a look at the fed funds market i grew up in for the fed can get supplied into such a small level that you can get supply and demand dynamics to tell you what price should be. mike: it just gets work obligated. >> i don't think that should hamper our ability to price the yield curve provided the fed is clear about this. they have to tell us what they deem the short end of the curve to be. i don't think we should worry that much about the fed funds market being a little sloppy. mike: it looks like at this point they will not be telling us anything along those lines

until march. peter fisher, thank you for being with us today from blackrock investment institute senior director. we will continue to follow the market futures, down by 30 points right now. ♪

♪ >> welcome back. gloomy, slightly rainy new york city this friday morning. the gunman who killed nine people at an organ campus reportedly singled out christians. the father of alluded student

says the gunman asked those in the class if they were christians been opened fire. nine people were killed and seven wounded. one woman said she survived by playing dead. it happened yesterday at a committee college in april town 18 -- 180 miles south of portland. the gunman is again if i'd is 26-year-old chris mercer. at least 60 people have died in u.s. school shooting since 2006. a news agency in russia reports the latest syrian airstrike reported in islamic state base. the u.s. and six other countries are asking them to stop the attacks. they say they target syrian rebels, not just islamic state. pentagon officials are discussing whether to protect the rebels. those are your top headlines. a second look at the futures were for the market opens. they are all down by about 1.5%.

back to mike and tom. "bloomberg surveillance" opening bell on wall street. 142,000 jobs created. when asset management is unconstrained by infrastructure, see how the global operating platform can do your catalyst for business expansion. seic.com. markets opening lower. s&p 500 down 13 points right off the bat. the dow jones opens 70 points lower. the nasdaq taking it on the chin. down 60 points to begin the day. 1.3%. s&p continuing to fall, down 14. markets completely repricing. what is going on in their minds as far as the future and the fed and what that means for equities? tom: i assume we will test the

dow. adjustments, you go 8:39:30, do adjust and then you move on. we are testing new lows about five minutes ago. we are trying to find that new level. mike: indeed. as we open up the day, interesting sector move because it is text book. utilities are higher and every thing else is down. >> financial companies, group ,ou would expect to be down bank of america shares down more than 3%. citigroup down 3%. jpmorgan, chase, wells fargo down about 3%. you look at the companies that own macau casinos and they are higher. ae chinese city reported

strong -- smaller dropping gaining revenue last month. they report that china's government is studying ways to revive the city's economy. las vegas sands of 3.5%, mgm resorts up 2%. wynn up 2% and no coke roundup about board half percent -- 4.5%. pfizer a little lower. the firm also lowering its rating on the drug distributor. that stock is down 2.5%. micron technology chairs up 3.3%. the biggest u.s. maker of memory chips posted smaller declines than analyst suspected. -- expected. nordstrom shares higher. that apartment store chain completed a $2.2 billion sale of its credit card unit. they will use the net proceeds for a special dividend of $4.85

per share and stock i backs, adding $1 billion to its repurchase program. sprint up 2.5%. they planned their second round of cost cuts. in this round sprint plans to say between $2 billion and $3.5 billion in the next six months. job reductions will be part of that plan. price group, down 2.2%. they were cut to neutral from buy. green mountain down about 4.5%. uereghappening as ke start selling a soda maker online this week. >> things to watch in the market today. s&p down 25 points right now. a 200 point drop. 205 points down for the dow jones industrials.

everyone surprised by the week job report in the month of september. only 142,000 jobs created in july and august revised much lower, helping compile the numbers is thomas for as. the- thomas perez, assistant secretary of labor. >> we always aim high in the obama administration and last year was the best year in job creation since 1999. this year is as good as to the 12 or 2013 which was solid. we always aim high. when you have a report that does not meet expectations you are always looking to see what is behind a report and what can you do. we are still the end of the world in terms of our economy but we can do better and we know what we need to do to get better, past the transportation of her structure bill. we need to pass the reauthorization of the bank. get rid of these ridiculous

sequester cap's. that exactly what we need to pivot to. this report highlights we have six to seven months of private-sector job growth to the tune of 13.2 million that we can do better and we know how to do better. i hope the next 30 days the republican congress will partner with us and set of focusing on these ideological riders and things like that. the american people what results. they want progress. tom: mr. secretary, good luck with that. you grew up in buffalo, new york and i grew up in rochester, new york. we knew lake affects us know you get buried by snow coming off the great lakes. --t is the great effects lake effect snow right now for the market economy? what is the draghi gives you some prizes -- surprises like we saw this morning? >> the challenges we have to

deal with our we are in a global economy. we have a strong dollar right now. when you have a strong dollar exports become more expensive for other countries. that is certainly a factor. the fact that the price of gas is down significantly from a year ago is good for consumers. it puts money in people's pockets, but when you look at the numbers the investments in tracking and other industries is and otherakking industries is down. the essence of an infrastructure build means we are not creating jobs that we know are good middle-class jobs. tom: i can't but the dollar policy go by. should you suggest that the fold and an begin to strong dollar into her

calculations of the nation's monetary policy? >> i leave the monetary policy to the fed. and her team are very learned and confident to do that. but we do is control we can control here in the administration. we can control making sure we passed infrastructure bills, making sure we deal with the sequester caps. dealing with the debt ceiling and doing her best to create jobs. we know how to pick up the pace of growth. my biggest frustration is that the lake affect as you point out, those are acts of god and nature. we have human made failure that gives getting built into the republican congress. we have to clap because we get it too much budget. we can do so much better than that. in the next 30 days we need to pass the xm reauthorization. get rid of these sequester caps. the cbo has shown the effective

sequester right now is about 500,000 jobs the year. if we did not have the sequester, we would not be having this conversation about a disappointing jobs report is would have another 40,000 or so jobs. we know what to do here. this is not an act of god. this is an act of political failure and the republican congress and that is what we need to do, move forward. i meet people all over this country. they don't have the time to sit and listen to these ideological debates about riders. they want a good job and grow their wages for their family and either families. mike: thank you for joining us. someecretary of labor with strong words for john boehner, mitch mcconnell, and republicans on capitol hill. ask something that would create jobs. we will see of president follows that up today with any kind of political call to action. markets are calling for action,

or at least for margins. margin payments. dow jones industrial down 220 points right now. s&p 500 off 25. this is "bloomberg surveillance." ♪

♪ "bloomberg surveillance."

a disappointing jobs friday. julie is tracking all the reaction. she is looking at etf's this morning. julie: we are looking at quarterly performance rates. not just how they are doing this morning. we had the biggest slide since september 2011 in global equities. only 10% of etf's are up so far for the year. we talk about this uglier, will take a pause from jobs from a moment. eric is here. there are actually other things to talk about. looking at your list of etf's that are up, we are not talking about the most glamorous or sexy etf's? these are the nice middle of the etf's.ore boring >> the trend is they are unloved. this is a small group of misfits that of taken over the leaderboard.

normally we see biotech, china, solar energy. biotech getting killed. great sample of one that is up is up 20%. -shares momentum etf. socks along with 200 doing the best and shorts the 200 during the worst. it rides momentum up and down. the reason it is up 20% is on the short side. it shorted twitter at the right time. it has this boost from that strategy but people -- it is $2 million and nobody even knows about it. these little ones sometimes need a breakout year to get some action. julie: in an up here today tend to do well? 8%,p 5%, a percent -- when you are market neutral you're trying to cancel out and get market momentum in this case.

when you short, there is extra cost. the total cost of 3.6%. julie: relatively high. another one has to do with china? >> there is a china etf hanging on bites fingernails. there is been a huge crash in china. it tracks medicinal companies on the junior boards at the singin exchange. is up 18%. it is down 45% june but because it was up 106% until june, is hanging on. it's probably one of will fade off soon. care? japan hedged health >> this is the most specific etf ever known to man. i can't imagine there is a large audience for this. everyone anticipating more stimulus from japan although their etf are sprinkled through the leaderboard. they are still alive. julie: we have a denmark cap etf and in ireland cap etf?

>> they are having a killer year. that one stock is at 23%. in ireland, a good -- the austerity medicine it second 2012 is paying off. -- 114%.ed 14% julie: thank you very much on some of the best-performing etfs of the year. up next, the managing director of pimco. this is "bloomberg surveillance. " ♪

tom: good morning everyone. we welcome all of you to a shocking "bloomberg surveillance ." markets on the move and they have yet to stabilize. we will do that in a second. brought to you by powershares. for thewershares.com up-to-the-minute etf holdings in pricing and trading information. invesco powershares leading the etf revolution. michael, i want to go to you in new york. the 10 year yield has yet to find any kind of yield bid.

1.9161. -- begin to think about a that is a stunning way to start october. mike: the two-year data when 55. 55 basis points after 100 82,000 jobs created. 162,000 jobs created. from paul ashworth, while it is always important not to overreact to one single data release, we will make an exception in this case." that seems to be what the markets are doing today. it is not a good day to be an equity investor but it is a good a to be holding fixed income securities. scott mather has a lot of them. managing director of pimco. the choices from their offices in newport beach. thank you for being with us.

stunning is about the only way you could put this. as a fixed income guy is like you the lottery today. >> good morning. a pretty good day for bonds, that assure. mike: what you make of it? been -- certainly, one has to think the fed will want to keep december on the agenda. i think the market's reaction is understandable. -- tooobably to notch much further to run as far as yields falling and bond prices going up from here. with the first fed move on until the beginning of next summer. there is a lot of data between now and december and as we head into the new year. our own forecast is what we describe as a more successful re--- reflation. as we head into the new year we will see probably inflation bouncing back, heading back to

's and core inflation move up as well. that will probably take some of the wind out of the sale in the bond market into the new year. mike: what would you trade now? we are seeing a flattening of the yield curve. the 10 year really way down. do you set yourself up for the return of inflation at that and -- end for moving into the two-year? >> one interpretation of today's data is that perhaps 5% unemployment rate is full employment and therefore we should expect monthly payroll gains to slow down. down to a level somewhere between 50,000-70,000 a month. that is not exact the great news if you're expecting growth to persist at 2.5% over long.

of time higher -- long amount of time apart -- or higher. what we think this will do is cause other central banks to move into a time of monetary easing. will be watching ecb and the bank of japan. that rings forward their response and probably should inspect to see easing out of them between october or the latest december. tom: that's really the first time i've heard that. you look at how the knocked down effects will occur globally. folks in india look like a genius last week with that aggressive cut in a very different economy. i want to ask you the arch question. growth a substitute for no yield? i think you have to anticipate the dividend growth

will be under pressure in this sort of environment. we have to think that earnings growth, we have seen a slowdown, to think that companies can expand dividend growth at the pace they have the last several years is somewhat mistaken. from here i think it is going to be a much more stable, low yield environment. investors should focus on whether there are overshoots or opportunities to position for additional monetary easing. we are focused on what that means for opportunities in europe. at the moment. and a fixed income market in the u.s. we've seen a dramatic spread widening and a lot of high-quality corporate bonds because of these of life. mainly because of supply. there is some opportunities to position for some higher yields and we have seen in quite a while. mike: junk spreads widening. of looking at one high yield spread. 12 basis points on the day. is this suggest that it is not

going to have an impact on m&a activities and that sort of thing going forward? this is really a treasury event? >> i think there is some truth -- but it is certainly harder over the last few months were a corporation to issue debt. the market is less willing to accept riskier bonds in this sort of environment. we don't think it really means we are anywhere close to a fundamental turn in the corporate default cycle. it is right to show some reluctance to find business models that are built on a much higher growth trajectory than is likely. and it is certainly right for the market to its backed -- expect restructuring going into the energy sector and commodity producers. the rest of the market is probably overshot encircling on the cheap side of their value. there is a real opportunities

there. tom: your framework is a framework of optimism with an extended bull market from early ened versus all the weak top something we will hear about the market? >> we think that is probably true. not the kind of environment where should inspect double-digit returns but normal sorts of returns. that is our forecast. mike: i have to note you just mentioned opportunities overseas. some of them may be closing and you need to move quickly. the german six year note yield dropping below zero. germany negative out to six years. function like that in an ongoing basis? >> europe is creating some major challenges.

it means that investors there will continue to search for yield and they will look to other countries, their neighbors , italy and spain were there are not so different where they are in the u.s.. there is quite a bit of room for those spreads to fall closer to german yields. investors will be pushed further up the risk spectrum. there is certainly alternatives. the reason they are priced when they are is because the ecb is taking 70 out in such a big -- taking so many out. they are more or less trapped in the german market. there are many other investments in fixed income landscapes in europe that will perform very well as the ecb expands their easing policy. mather of pimco, thank you for joining us today on this crazy market day. not just for bonds but equities. speaking of equities, janus capital just posted a tweet

suggesting a bear market and equities is coming. "low job growth, no which growth leads to low consumption. smell the coffee investors. growl."ck market, tom: this is also about a lack of wage growth as well. we saw that and 8:30 this morning. this,teen years of doing if not so much a miss or wrong but this was truly a genuine surprise people of all different persuasions and economics. the 10 year yield, 1.91 08. wiow. mike: s&p down. it is a crazy day. 142,000 jobs created in september. we lost 59,000 in august in july from where we thought we were.

unemployment stays at 5.1%. that wraps up "bloomberg surveillance" for today. are global technical director will get tom back from boston on monday. ♪ .

pimp: good morning. let's get to the morning's headlines. the september jobs report is out and the numbers are underwhelming. we will go into the details of the data and discuss what this means for federal reserve policy makers. and then a meeting of global importance taking place in paris. vladimir putin sits down with french and german leaders to assess the situation in ukraine. and we continue to track hurricane joaquin. where is it headed and how hard will it hit? we will give you updates. julie hyman is here with an update on the markets and we are seeing a big selloff following that jobs report. julie: indeed we are. the jobs report so much worse than had been estimated. we're seeing the major averages selloff ready dramatically. if you look within them to see were the most pain is, it is financials. if