great to wow! only at a sleep number store... find the lowest prices of the season, going on now. save $600 on the #1 rated i8 bed. know better sleep with sleep number. francine: state-sponsored rebound, chinese stocks gain at the close after the government abandons circuit breakers, the national funds supporting the market. the fed expects four rate hikes this year. the market doesn't believe them. u.s. jobs data today will provide clues. and european stocks stabilize after a brutal week. the dax is above 10,000 points today, but forecasts on the ftse have been lowered. good morning. this is "surveillance." i'm francine lacqua in london. tom keene in new york. it's been an epic week, because we saw all the fears in 2015 being fulfilled in the last

week. tom: what a surprise this week has been. i would suggest we saw a china recovery overnight. francine will do data check. did you know there's a jobs report in america today as well? i had forgotten about that yesterday at 5:00. francine: yeah, an important one. it may give you clues on whether the market is realigning. now let's get straight -- tom: we have michael daugherty today, and then bill gross and jim glassman join us at 8:30 as we go beneath the data. francine: i'm really looking forward to it. first, let's get to "first word" news. >> in china, the government did come to the rescue. chinese stocks rose today after the market plunged the first few days of this year. the government suspended a controversial circuit breaker system that shut down the market yesterday. the central bank set a stronger yuan, and state-controlled funds were set to buy stocks. tougher sanctions on north

korea for its test, nancy pelosi says a new measure aimed at the regime could be voted on as early as next week. each of north korea's three previous nuclear tests throde a tightening of international sanctions. european governments are showing little interest in opening a new fund against slamic state in libya. they say the priority in libya is to get a functioning government. british prime minister david cameron says he's confident he can reach a deal in the renegotiation of the u.k.'s place in the european union after meeting with hungary's leader, cameron says he still wants to go ahead with his proposal to curb benefits for e.u. citizens living 2349 u.k., but the prime minister pushed back, saying hungarians in the u.k. shouldn't be treated as such. and a warning from the british government, cut down on your alcohol consumption to help

avoid cancer. tom: really? francine: new guidelines say people should drink no more than six pints of beer or glasses of wine per week. and they say during the week, several days where you don't drink at all. we'll disregard that one. the news 24 hours a day powered by our journalists in more than 150 news bureaus around the world. tom: you're so damned depressing. >> it turned out to be a week. tom: there it is. let's give some nutrition with investigation and finance. equities, bonds, currency, commodities, let's get some nuance here. futures run. it's a nice rebound, but remember, we closed modestly ugly yesterday. the real story, deutch bank adamant will yields saying a lot. they did not move yesterday like a lot of other asset classes moved. euro is stronger. you get a fwoid oil, but let's not oversell it. this screen further informs the

v.i.x. nicely above the long-term average. my major story is to watch the german two-year. it barely budged. it does not say all clear for the markets. ollar-yen was 117. as francine mentioned yesterday, copper gave up the goat. francine, i'm getting out in front of the london metals exchange with a chicago quote. zproip this is reflecting what we're seeing in europe. stocks.the euro it's taking four days, but finally these markets are stabilizing a little bit. and the china story dominating everything. you can see crude oil, gold, look, it's down for the first time this week, and yen is up for the first time this week. that kind of encapsulates everything, right? tom: a lot of nuance today, and we'll have a great chart here on the chinese market here in a

bit. i know francine knows this as well, you hear these little nuggets, little whisper as cross five hours every day. i heard a whisper yesterday from john herman of mitsubishi. let's go to the bloomberg terminal and see what herman is smart about. this is a chart, manufacturing employment back to pearl harbor. all you got to know is manufacturing boom up here in the 1960's and 1970's. we are back to where we were in 1941, and critically, the five-year moving average a little hard to see, this yellow fine, the five-year moving average of manufacturing employment now even with population growth, lower than it was coming out of the depression into world war ii. >> which could be scary, but manufacturing is the lesser part of the economy. they point out the difference between the p.m.i. is what we should be looking at, the divergence on how that's changing. tom: i would agree with that, but i would say it really

underscores if we're going to be little switzerland and come back and this growth here in jobs. we have so far to go to get to anywhere like what we remember from some of us from our youth. francine, there on american manufacturing. francine: travesty, my favorite word ever. china has been a big source of volatility, and now we await the u.s. jobs data. for more, we're joined by the head of global asset allocation. great to have out program. when you look at what china is saying and doing this week, good morning, you know, do we understand what the chinese are thinking? how difficult is it to actually figure out what their next move is? they promise transparency. they promise us stabilization. we have not gotten that either. >> no, i think it's too early to call for a stabilization of

the situation in china. we are all waiting for fiscal policy, some kind of volatility reflation, and then especially on the state-owned enterprises. at this stage, it's much too early to call for a stabilization in assets. francine: do you think the market reaction took the chinese more by surprise than even our markets here, our market participants in the west? alain: i think at this stage, the news flow we is very clear. we have huge outflows from the china currency, and it's accelerated to the tune of $130 billion u.s. dollars in december last year, and the speed of policy means that not count at these stages. and this is why markets are so

worried. it's not big enough to revive the economy and not go on. tom: you helped build derivative analysis and derivative markets. let's look at the intraday chart of the shanghai composite. down we go, the red rec tang sell when they shut markets a number of days ago, two days ago, rather, and then the helped recovery today. when you look at the volatility globally, what is the level of correlation as we go into the weekend? alain: i think at this stage we've seen we are living where one comes from the u.s. and the other one from china. and in the latter months, china has been much more important, and the news hasn't been negative. in august, we have a second step of that. we expect that to be very long,

but markets are very highly correlated at this stage, but it would gone correctly, and hen the policy reflation comes . francine: do you agree with george soros when he says this is 200 again in the making? alain: i don't think so, because in 2008, the market was not better for a major policy effort. and later on you have the yuan policy makers. it is coming from the u.s. but at this stage they're talking about lack of confidence, 10%, which is a uge level, huge undervaluation of china. i don't think we are on the evil of a major event like this. francine: thank you sore for

all of your insight. our guest host is the global head of ethics, steven. great to have out program. we were talking about china. we bring you back in 2016, and guess what we're talking about, china. what have we learned this week, apart from the fact that's a policy mistake that creates the messiest markets? >> i think if we look at it more broadly, our view is there's two big themes in the markets at the moment. one is exactly what you just said, what's going on in china, we're nervous about the currency. on the other hand, it's the fed. the fed has already hiked. we discuss that had at the end of last year. the big question is how far they go in 2016. i think these unequal market factors or opposing market factors. so from our p.e., i think it's china that's been holding back. having said that, i think overnight we've had two significant developments which could give us the first glimpse of some hope.

the first one is we saw a rebound in chinese stocks, clearly with the removal -- francine: that's intervention, isn't it? steven: well, the removal. the second one is the signal from the pboc, people's park of china, as far as the currency is concerned. if you look at the v.i.x. overnight, that suggests on monday morning we'll actually dollar. ronger those two factors, certainly in our mind, positive for risk. tom: television links into the jobs report, but maybe it doesn't. the basic idea is to make the call and the u.s. dollar. we saw a strong yen, one of the surprises of the last 48 hours is relatively strong euro as well. do you have to amend your dollar call into 2016? steven: great question. not yet is my answer.

i think the key point we would say is, we start it off by saying we see a more positive turn to risk next week. you mention the payroll. clearly that's the focus this afternoon near london. our view is the market is lagging. even having said that, the dollar is lagging behind what markets are prizing on the rate side so. we think there's a strong upward bias to the dollar, particularly if we see a positive payroll tonight, but probably more importantly, if we see a reduction, an increase in risk taking as we go into next week, based on an improvement in china. tom: thrilled to have you this morning, steve saywell, to pick up the pieces of the last few days. alan and jim to join us later. michael at length in the next hour. and then a conversation with bill gross. we spoke to him yesterday

afternoon. he made worldwide headlines. we'll try to do it again after the jobs report. bill gross of janus capital. francine in london, i'm in new york, blood vessel "surveillance."

tom: everybody on their cell phone at 8:00 last night, at midnight, people waking up at 2:00 a.m. to peek at the screen to say where are we? what a week it has been. you need to listen to a friday business flash. here's bonnie. bonnie: we expect 20106, the bank today planned a drop in the value of the bank's foreign

currency holdings. they're abandoning its currency cap early last year. the swiss appreciated. volkswagen is considering a massive car buyback in the u.s. because of that emissions testing scandal. according to people familiar with the matter, v.w. may buy back tens of thousands of cars with diesel engines that can't be fixed easily to comply with u.s. standards. talks are still going on. and the december jobs report is out at :30 eastern time and may give a hint about the sturdiness of the u.s. economy. economists surveyed say bloomberg added 2,000 jobs last month, and they also forecast the jobless rate will stay at 5%. the survey was completed well before this week's turmoil. tom, you look you're about to say something. tom: that's bigger than .1%. are we surprised? that's a lot of statistics. bonnie: i would say any kind of wage growth would be better. so let's get more to this

fect on the jobs report with steven saywell from b.n.p. paribas. what kind of number would move the dollar today to an appreciable extent? steven: i think we need to keep this in perspective now, because as you said, wee had a lot of turmoil in the markets since then. i think what the market is looking for is continuing of strong jobs growth, which will keep the today track. for example, our view is with 200,000, we also see unemployment dropping below the key 5% level. and also we see jobs, average hourly earnings picking up to around the same level we've seen at around .2%. but i think the key point to focus on here is the u.s. bond market responds at the short end. i think two-year yields in particular are going to be key.

we've seen yields increase to above 1% recently. we think that's going to continue, and i think that's going to be very important for the bond market, but also key for the dollar. tom: yeah, .99%. let's bring up the chart of the morning, and we all know, the unemployment rate chart. i didn't know this, bonnie. the average before the crisis, that red line, is where we are right now. bonnie: right, yeah. tom: i didn't know we're back to average. i think that's a great starting point for any analysis. bonnie: is this unemployment? steven, you say the 4.9% is what we could see today. what would that mean in terms of modeling, in terms of the ed forecast for next year? steven: i think the key point is there's a difference between what the fed is already forecasting, a full rate hike this year, and the markets really only pricing in two. there's a disconnect between the fed and the market. we do see unemployment rates

fall, but it means there's more pressure on the fed to continue tightening because we are very, very low levels. that's where i look at this. francine: what's your call on dollar, and how much is that driven by what the fed does and the rest of the world? steven: i think the fed is going to be super important here. our view is the dollar continues to move higher. but what's interesting, if you look at what's gone on in china, it created some disconnects in the market. for example, the dollar has been very strong against the commodity bloc, against the canadian dollar, but very weak against the yen. the big opportunity, in our view, at b.n.p. paribas, is that you should see dollar-yen come back very, very strongly, particularly if you see a tabilization in china. tom: coming up in our next hour, we're thrilled to bring you an extended conversation with michael darda. a nominal g.d.p., the animal spirit of the nation, michael

darda. ♪

francine: welcome back. i'm francine lacqua in london. tom keene in new york. but he will be in london today. it's sunny. we're excited to have you here, tom, and then we have you next thursday, the move on sterling. now it's time for my morning must read away from london. we go to riyadh. liam writes in bloomberg. this is about ramco.

change is clearly in the air. he said they're going to unval a national transformation plan aimed at streamlining a public sector where wages swallow up nearly a fifth of g.d.p. and diversifying the country's tax base. very hard not to talk about aramco as a defensive move, when you look at all the challenges saudis have this week with the military, but also the financial and political front. tom: i think it's hugely telling. i was stunned when i saw the headline. what it means for me is there's been a massive lack of transparency, sort of like alibaba, you wonder if we're going to get u.s. accounting and balance sheet transparency off of aramco. francine: and, tom, there's so many questions about how you vault and the amount it has is -- you know, it's in the trillions of dollars. steven, how do you read this? we spoke a lot about february the last couple of months

because of the price of oil. this is a kingdom that has always been very lavish, always had a lot of money, and that is now coming under extreme pressure. steven: well, i think the point i would make here is to remember or to focus on saudi's involvement in opec. remember, yes, we have a very low oil price, but remember opec could try to influence that if they wanted to. from that perspective, i think you would have to see saudi as comfortable with the low oil price. to bring it back to foreign exchange, there's been a lot of speculation on whether the dollar saudi peg would break. our view is it will probably hold because they're in control of this. they don't seem fazed with the oil price, so there's no need for a panic reaction here. francine: what does it mean for how you view the rest of the countries? steven: well, knowing a similar situation here. most of these countries have their currency pegged against

the u.s. dollar, very strong economic and political ties with the u.s. but again, going back to that link between a lot of these countries and opec, they seem to be comfortable with the low oil price. so i think that's pretty much the driver here in that region. tom: futures up 21. dow futures up 170. coming up, we continue the conversation on oil. brendan warner will join us of bank of montreal, bemo capital. we'll speak to him about that marginal barrel and what it costs to get it out of the ground. this jobs day from london and new york, this is "bloomberg surveillance." ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. tom: we got you 47 data checks yesterday. let's try to do a few less today. we go the other way, futures up 22. sigh of relief around the world. the euro with that strength

yesterday, 1.0870. 33.59 for crude. the v.i.x., i'm watching german two-year, as steve saywell is watching u.s. two-year off the jobs report today. cooper of note yesterday, the bid floated away sometime mid-morning. let's get to our first word news. here's bonnie quinn. bonnie: stocks in china steadying today, one day after a selloff that rattled the markets worldwide. the rebound is anybody's guess. state-controlled funds purchased shares. the government also suspended a circuit breaker system that stopped trading yesterday. china's benchmark index gained 2%. meanwhile, secretary of state john kerr a urging china to take a more aggressive stance with north korea. kerry says he told chinese officials after the nuclear we cannot women,

continue business as usual. president obama took his case for gun control to the public last night, two days after he unveiled executive action that is expanded background checks for gun sales. he answered questions at a town hall-style meeting in virginia. the president said this a large part of the public is skeptical of gun control. >> issues like licensing, registration, that's an area where there's just not enough national consensus at this stage to even consider it, and part of it is people's concern that that becomes a prelude to taking people's guns away. bonnie: president obama says he will not campaign for any politician who does not support what he calls common sense gun reform. jury selection begins monday in an insider trading case that sent shock waves through the financial community. five former professionals will go on trial. they were arrested almost six years ago. the u.k. markets regulator

started the probe after criticism over the way it handled the financial crisis. global news 24 hours a day, powered by our 2,400 journalists around the world. i'm bonnie quinn. francine? francine: bonnie, thank you so much. let's look more at the markets nd the oil and energy markets. this has been contributing to the oil slide earlier in the week. prices also way down. so let's try and figure out if it bottomed out. brendan joins us now be a senior oil analyst. steven saywell also joins us. thank you so much, brendan, for coming on. when you look at oil, have we touched bottom? how much further can it go? brendan: it looks like there's been some breaking by shell i think the difficulty in an oversupply market, it's hard to say we're at the bottom. i think this is reminding us,

we're in a cycle, that is a commodity, but certainly a lot works presanction supply at this price. >> what are the chances of an oil shock? we either stabilize, but actually there's so much investment that we go back to 70 in a couple of months. brendan: i think the bulls are hoping for an oil shock. maybe if we saw scud missiles or opec supply coming off line or risk of call it an opec member, call it collapsing, remembering venezuela is struggling, that could eventually, but i think this is both an oversupply situation, and most recently china, the question marks on reduction of the demand combrothe. tom: let's look at the oil chart right now. brendan, tun very well, as i know you like total and you're away from royal dutch. down we go. october was lovely, $50 a

barrel, west texas, just for a cup of coffee. we roll over. i want to you tell me what you're going to see to right size the balance sheets of france or royal dutch shell. i mean, what do they do with their goodwill, their bad will, no will? what do they do with their intangible calculations? brendan: good question, tom. i guess for total, for shell, i mean, my thesis for being long total and underweight at shell, at this price, none of the dividends are covered organically. we've got royal dutch saying they need to fill assets. a third that have would be 2/3, difficult in the market. tom: well, you beautifully state that the dividends aren't

covered. what we want to know, is this going to be a year of financial engineering for oil, or is it just flat out a year of desperation? brendan: 2016, remember, the oil industry is pretty slow to turn. tom: yeah. sort of like "surveillance." brendan: cost cutting, further reductions, any project of presanction, but if it doesn't make sense, certainly month $50. it's tough for the majors to react to the front month pricing. they look three, five, 10 years. but i'm looking at companies saying balance sheets will go up. remember, a lot of the majors came into this period, typically geared around the 20%. they don't do that. tom: don't let brendan and

steve know about the sanctions we have at "surveillance." francine: i was going say, cost cutting does, that mean you're getting rid of the jet? tom: the gulfstream goes. francine: when we look at oil, this also has a major impact on the world you live in. steven: this is a very interesting connection. clearly the strongest link is with oil. so in the g-10, the developed world, that's canada and norway, and what we've seen recently with the new lows in the oil prices, again, new lows in these currencies. if we continue to go lower, should weigh on the currencies. the way to look is australia. now, this is interesting. i know it's very important for australia. i know it's also at scomplow will probably continue to go lower. but the australian dollar is nowhere near as weak as the canadian dollar. a key trade we like is that australia captures up on the downside, so the australian

dollar weakens more as oil prices remain subdued. francine: brendan, how do you view saudi aramco if it were to come on the market now? brendan: amazing announcement for speculation yesterday. i think it's going to be complex, as aramco was listed. we'd have to understand what the reserves, what they may look back. remembering back in 2008, when they spun off part of the business, maybe part of the business would be -- francine: do you try to calculate that? brendan: we had some of the fastest clients asking that question. francine: what was it? brendan: this is a big, complex animal. we truly don't know the full extent. transparency is going to be key with aramco. tom: you come at this from an engineering background, doing securities analysis on the individual companies. how do you use the macro economic oil babble day-to-day?

what do you do when you read bout it? how do you synthesize their ork? brendan: a lot of clients are asking to us run the model, and i think we're in a period with the supply and demand, with uncertainty, it's almost anyone's guess where we could bottom, where the outlook would be. as far as i don't believe this is the price out to 2020, verts are looking at what's the dive dent coverage, what do the balance sheets look like and cash flows. tom: thank you so much. really look forward to speaking to you again from london. we have a terrific jobs day for you. michael darda in the incomes hour, bill gross, jim glassman, the former chairman of the president's council of economic advisors will join us. ♪

tom: good morning, everyone. "bloomberg surveillance," futures up 21. dow futures up 163. i'm not going to call all clear. you heard steve saywell say this jobs report this morning matters, to say the least. there are many topics that have been off our radar this tumultuous first days of 2016. for us in america, part has been my desperation. horrific news. our hans nichols joins us in berlin. hans, what has changed in dialogue after these terrible reports that we hear? hans: well, there's a lot of talk in merkel's party about what you can do to accelerate deportations, if indeed any new

arrivals, new migrants to germany that have come in the last couple of years were part of the sexual assault. last night we had new polling out, tom, 37% of german females say that they are reluctant that they will avoid going to big public places with big crowds. tom: almost a clash of civilizations. in a conversation with henry kissinger, he spoke about the importance of the migrant issue in europe is being absolute front and center and a linchpin of all else in europe. would you agree with that assessment when you look at the mood of germany? hans: yeah, and i think we'll know more in march when we have regional elections. there's a great deal of tumult. the question, is when is it going to manifest itself at the ballot box? we'll get a sense, these regional elections, some of the local states have regional elections. so far merkel's party, she's even up two points in the latest polls to 39%.

merkel's party has held firm. st of the law has been s.p.d., so she's fine. but her party popular sit down. one other thing, 57% of germans want to see a reintroduction of border control. that is up 11% since the last time they polled. francine: i was going to ask about you that. we spoke to one of angela merkel's key allies. we were trying to get from him if she had to also change her stance, for example, on capping the number of foreigners allowed in. hans: well, the tapping issue is one where they're having a cap, that's what the sister party down south wants. that's what they want. this latest round of polling actually shows that the number of germans for an upper limit has actually declined a little bit. i'm not quite certain how to read that. it's clear there's going to be, if not perpetual conflict

between the c.d.u., which are basically the same party, either perpetual conflict or some sort of rupture between them and maybe polling potentially of ministers. they just keep repeating themselves. we say we're for this, and merkel says we're not. i don't know how long you can have a party, a coalition that's that divided maintain unanimity and power. francine: i want to ask you, the mayor of cologne is an independent, right after she shers was attacked in 2015. how is this narrative playing into the media, the media treatment of all these attacks? hans: well, yeah, there's a regional element to this. the local police in cologne have been criticized by interior ministries and officials here in germany. we're hearing union reports and some more confidential reports that are starting to leak out in the press from the night in question. it's much worse than had been previously reported. and at least according to one

report, they have that many of those potential or alleged perpetrators were indeed new arrivals from syria. now, again, it's very hard to trace all this back, and the police were so overwhelmed, they couldn't actually take accurate reports and couldn't actually, let alone protect those who were being violated, they couldn't actually get the real-time report. so some of the data on this is missing, and that allows people to extrapolate and to project what they want to for political reasons on to a very sensitive, potentially explosive subject. francine: yeah, very, very sensitive. thank you so much, hans nichols with all the latest from germany. steven, when we look at germany, and we're just talking about possible political fallout, the refugee crisis and the impact it could have on angela merkel's popularity, we also need to look at germany as one of the wealthiest countries which attracts refugees, but it's now hurt by the relationship it has with china. talk us through how this impacts german exports.

steven: as you know, germany exports a huge amount to china, particularly i would say the large car or automotive manufacturers. it's a very important market for them. now, what we're seeing with the renminbi is this weakening that's in place. if that continues, it diminishes the purchasing power for chinese consumers, which represents a risk. i think it's quite good to sit back and look at this in perspective of the eurozone recovery. europe is a great exporter, and germany is the biggest exporter within the eurozone. so there's a lot of pressure on germany to continue the successful exporting to china. what they won't to want see is a sharply lower renminbi, which will make it difficult for chinese consumers to continue to be able to afford german products. francine: this is one of the points that the leader was making to me earlier, saying china is very important partner, we need to look for stabilization, but also watch the exchange rate.

what is the ideal level of euro to make it not artificial, but attractive enough to continue exporting? steven: i think it depends really on the different countries. francine: and the product, i imagine. steven: exactly. this is where germany has an advantage. we would say the break-even level for german exports is much better, more advanced than some of the other countries. we've seen this in the past. you could argue that the e.c.b. , maybity scomplee spain need a lower euro than germany does. but the key point i would make is that china is the one to focus on here, how far does the renminbi go. tom: we're going back to steven saywell, look at the jobs report. i also want to look at the flatter yield curve. don't forget, our coverage of jobs day, we will go beneath the headline data on bloomberg radio and "bloomberg surveillance" with jim glassman and bill gross joining us at 8:30 for his perspective on the

nation's political economics. ♪

tom: this jobs day, you noticed a data check. not like you needed a data check yesterday, but it's a nice scene. futures up 20, a little less than an hour ago. 2.17 on the 10 over. oil at 33.34. i'm still not used to that number. we're going to fold in sterling, the german, the spread, the flatness of the curve. right now, a friday business flash. here's bonnie quinn. bonnie: thank you so much, tom. we begin in germany. regulators in the e.u. have given fedex unconditional approval to buy its rival, more than two years after u.p.s. was blocked from a similar takeover. the deal still needs to be secured in china and brazil. a slowdown in emerging markets may hurt the economy. this week the german trade group warned that a hard landing in china could push germany into a recession. and u.s. law enforcement and intelligence officials meet today with tech companies about terrorist threats.

the attorney general and the f.b.i. director are flying to northern california. they want to counter terrorists who use social media to recruit and spread propaganda. facebook, twitter, google and apple are among those companies who will take part. and that's our news flash. francine? francine: thank you so much, bonnie. now, we started the week worrying about saudi. we continued the week worrying about north korea. then we had china. worry began about china yesterday. and then today, u.s. jobs. steven, we talked a little bit about jobs at the start, but what is the one key figure that you will be watching out for today? what kind of level do we need to make sure that we have an interest rate hike next time? steven: well, i think the rket is fairly ok with the consensus. i think somewhere north of 150, 160, the headline number, should be key. but remember, there's already a dict connect between the market and the fed.

the market is disbelieving of the fed's intentions to thike year. it's a real test of whether the fed will have to reconsider those expectations. francine: does it have to go with the figure and wage growth, to have full employment or strong employment recovery, you need that wage growth. steven: i think you do. we're starting to see signs that have coming through, particularly if you look at it on a year-on-year basis. as far as today is concerned, it's really going to be the headline number, really just to confirm that we're on trend. clearly the unemployment number is important, particularly, if we think at b.n.p. paribas, we fall below the 5% to a psychologically 4.9% level. i think that would also give the market an added boost and probably see u.s. yields ohioer. francine: what are the chances of a rate cut in the next six months? [laughter] steven: pretty low, i would say. if you look at the unemployment trend in the u.s., it's moved dramatically, like the u.s. from around 8%, down to 5% with

rates pretty much at zero. this is not an environment in which a central bank would cut. tom: give me the sum of the parts analysis. you mentioned the markets pushing pack against all central banks. francine mentions weaker sterling. you look at the german two-year, lower yield there, depressing draghi yield. and then the spread, the back story this week is that flatter yield curve. i've noted it. robin over at the f.t. noted it. the sum that have screams contraction. does it scream global recession or global mediocrity? steven: probably not. i think it's interesting. i would say different factors are driving these points. you mentioned the flatness of the yield curve in the u.s. is very important. i would argue it could get flatter if we see u.s. two-year yields move higher. tom: recession flatter or just mechanically flatter due to chair yellen? steven: i would say probably the hatter in the sense that

the fed is continuing to hike, but there's still no inflation problem yet. i think what you really need to see to get the 10-year moving in the u.s. is a big hike in inflation. we're not seeing that yet. but the market knows that it's on its way to tighten it. that's where we look at the u.s. in europe, it's very different. you mentioned the german two-year yield. that's a good point as well. that's much more driven by inflation, and we saw the lower inflation prints in europe this week drive yields lower. that's because we know it's really inflation driving the e.c.b. that's the market speculating the e.c.b. will need to do more. tom: are there market vigilantes out there telling the bankers what to do? [laughter] tom: are you one of them? steven: look, i think there's a very strong link here between markets and central banks, but i think what the market is doing is watching the central bank rhetoric.

certainly the e.c.b. is a good example at the moment, because what they're telling us is that the activity or the growth side of the eurozone is actually not that important, because it's doing pretty well. you look at g.d.p. growth expectations in the eurozone, it's fine. where they're failing on the mandate, it's inflation. that's why we need to focus very strongly on this as a guide to policy. tom: thank you so much for getting us started this morning. steven saywell. we're going to continue our discussion. michael darda will join us from m.k.m. holdings, along with alan crueger and bill gross. next week in london, we will have esteemed guests. ♪

"national team" comes to the message.

global markets content -- global markets attempts to get to the wicked. it is jobs they in america. -- we consider .razil, russia there challenges for this year. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene, and in london, francine lacqua. francine cannot wait to get there. a great set of guests. francine: i like that you called it chindia in your headlines. look at the german 10 year. it has gained the most in a month. tom: there are some real dynamics here as well. we will dive into that with michael darda in this hour. let's get to first word news with vonnie quinn. vonnie: china's government comes to the rescue of the country pus

skidding stock market. state-controlled funds were said to buy stocks. the government also suspended the circuit breaker that shut the market yesterday. south korea is angry about the north's latest nuclear bomb test. starting today, they are letting the north hear about it. loud propaganda broadcasts are being lasted across the border. this criticism of the north's economy and human rights abuses, along with south korean pop music heard the last time the south cranked up the speakers, the north took a pot shot at them. inre is little interest opening up to islamic state in libya. france and britain are currently bombing islamic state targets in syria, but they say the priority in libya is to get a functioning government. british prime minister david cameron says he is confident he can reach a deal for the you k's

place in the european union -- for the u.k.'s place in the european union. hungarian prime minister viktor or been pushed back saying that they should not be treated as parasites. president obama is challenging the national rifle association. during a televised town hall last night with anderson cooper, he mocked conspiracy theorists who think that the government wants to seize weapons. pres. obama: are you suggesting that the notion that we are creating a plot to take everybody's guns away so that we -- it ise martial law a conspiracy. i would hope you would agree with that. president obama it is a modest first step toward tackling gun violence in america. i am vonnie quinn. tom: a little weight to the tape

right now. the first glimpse of happiness to the tape. let's get through the data check and get to michael darda. now 19.up 20, change oil was on the screen a little bit ago. watch oil. a great economist, totally focused on oil. on to the second screen, if you would. , 24.99. the yen, a sigh of relief off yesterday. copper gets a bid after a rough day yesterday. francine: it follows on from what you have. yen stocks in europe getting to 0.1%. off today's highs. gold has a reversal from what we were seeing on yen. yen was a safe haven. it is now declining for the first time, vice versa for gold. tom: let's get to michael darda.

we will get to the jobs day first. let me go to china first. let's go to enda curran in asia to set up michael darda on what we witnessed in the last 24 hours. enda, i'm sorry, it was the national team. do you assume the national team acts on monday morning? enda: we do have a veneer of stability, but we also have the hand of stay behind. no indication the state will pull out of chinese markets anytime soon. we see the authorities do not have the confidence to step away from it. in a waybuying stocks that will inflate the overall index. yesterday we saw one arm of the thernment pulling against stock market regulator. it goes to show you that ultimately it is still

government involvement. tom: we did some out to be yesterday on correlation. let's go geometric for you. actually, trigonometric. that noise on the right side, they manipulated market, to me is a classic sign of drift. -how about that? the it means to me, it is massively manipulated market. what is their game plan monday and into next week? big: right now there is a over high onset orders in the market. there is a feeling out there was if the circuit breaker not enough to try and put a slow on things, it is going to require more and more liquidity from the government. there is no confidence that the government will step away, the national team will step away from buying stocks. that is going to be the theme until we see some form of

stabilization, but there is no hint of that yet. francine: we have learned that we were promised more transparency but we are not going to get it yet? enda: you have got to ask the question, what kind of markets has china been left with this week? they are inviting capital into the country, but the stock signt has been seeing no of the state pulling out of it. we have a currency market that is pretty confused as -- that is pretty confused at best. tom: headlines from the central bank of enda curran, is china. it is a sign of desperation. the pboc repeats they want to maintain a basically stable yuan. they -- there is no one in the world who believes that. why are they making those headlines this morning? enda: this has been their

consistent message to the market, and this is why the market participants are so confused. the authorities have said we ofe no intention devaluation, and we will keep currency stable. but they cut their interest rates to the lowest since august yesterday. it is hard to thread out what the narrative his. i suppose we know that china wants to free up the currency, and along the way there will be bumps in the road. but that is a fairly generous pace in terms of what is happening. tom: sunday evening in new york, we are thrilled to bring you this morning, michael darda. economics inking the market with a real attention to the animal spirit of the nation. i want to get to the jobs report in a minute. we have never seen what we saw yesterday. to amend and adjust your equity exposure because of the turmoil in global markets? think the turmoil is

a reflection of a set of confused policies. the pboc is putting money into the system, the government is buying stocks, and they are taking money right back out of the system to prevent the yuan from falling as much as it otherwise would. if you look at the pboc's balance sheet, it has collapsed i $422 billion. tom: do they have a lot of firepower? is there a good set of reserves, or is there a lot of the liquidity? michael: they do not have control over monetary policy. they are following the fed into a tightening and probably premature one. that is why financial markets are sputtering. china was already slowing. now it is moving into a contracting monetary policy. the dollar has been appreciating. the fed is tightening, and china is along for the ride. tom: the fed is tightening. they are doing that alone,

aren't they? michael: china is among for the ride, and that is creating a lot of volatility and an absolute tailspin. the chinese want to keep playing they will not have a flexible and independent monetary policy. francine: if this is -- this is a simple question but difficult to answer. a stock market crash mean for the chinese economy? what is the linkage? losing: investors are confidence, and they should be losing confidence. the government is trying to print money to manipulate stock prices. chasing itso a dog tail. it makes absolutely no sense, and investors are losing faith and confidence in the growth outlook. tom: can you take michael darda over to where willem buiter is? is that what you have observed

over the last few days? michael: over the course of the last few years, total nominal dollars gdp is slowing sharply. tom: and world trade as well. michael: we may be close to a contraction. we are a few years into this situation where commodity prices have been coming down, certainly well over a year into a bull market on the dollar, and that tends to be an unfriendly environment for emerging markets that are pegging or quasi-pegging to the dollar exchange rate. francine: you can see what happened in china this week as the bubble bursts. what happens if the bubble extends to chinese debt? michael: that is exactly where we are headed. if you have a central bank that is contracting its balance sheet amid the backdrop of drastically slowing nominal gdp growth, which is exactly what is happening in china, that alone can cause a debt crisis. there was --

essentially is the resource to pay back debt, and it is sputtering. tom: we have a great nominal gdp animalo indicate the spirits of the nation. greatm gross -- what a conversation yesterday with mr. gross. we will continue the discussion at a: 30 on bloomberg radio. stay with us on "bloomberg surveillance." ♪

francine: welcome back. this is "bloomberg surveillance. " this is a rare sight. it looks like a turner painting. we are seeing a little bit of sun.

let's get straight to the bloomberg business flash with vonnie quinn. volkswagen is considering a massive car buyback because of the pollution testing scandal. vw might buyback tens of thousands of cars with engines that cannot be fixed to u.s. standards. the bank today blamed the drop in the value of the foreign currency holdings. the swiss franc appreciated. today's jobs report could tell a theabout the stability of economy. -- we will give you the numbers on bloomberg with expert analysis. that is our latest bloomberg business flash. speaking of jobs, let's get more with michael darda. he is our guest of the hour.

what number would tell us that the fed was right, that it was ok to make the first increase? i am not sure we will get that knowledge today. what i will be looking for is a continued slowdown in the six month moving average. we are right around 200,000. that is usually a good guess for where the underlying trend is, but we were running at 280 last year. there seems like an underlying slowing. the fed wants an underlying slowing, and unfortunately they will end up with more than they bargained for. we may not see that in the numbers until midyear. at that point it may be too late. vonnie: underlying slowing could be a good sign because it could -- that we are michael: if payrolls are slowing on the back of nominal gdp growth, there is a 200 basis point slowdown from where we

were in 2014. the fed things that is temporary. if it turns out that is not the case, if there has already been a passive and tightening conditions, the fed is raising short-term interest rates, i fear we are late into the business cycle and the fed is not going to get far along in the rate hiking price us -- in the rate hiking process. nominal gdp do a chart with a single best chart. you are up to speed on this and then you look at the chart and you go, wow, here is where we are. the average unemployment rate before the crisis, we are basically back there. stan fischer says it is absolutely unthinkable how ultra accommodative we are. to your classic work, is it all about a lack of aggregate demand? at the end of the day, you run up your iso on theory, the fact is it is a bizarre situation we

are in. we need aggregate demand. michael: i wish i could be as optimistic as stan fischer. tom: he is paid to be optimistic. you are paid to be gloomy. prime age adults 25 to 54, we sidestepped the demographic issues. and 80pecifically handle. the unemployment rate does not tell the whole story. nominal gdp growth has been weak. there is an aggregate demand deficiency. the fed thinks essentially we are back to potential because of low unemployment. tom: it is a new potential that politically is not acceptable, right? michael: it is an interesting question. i do not think many in washington understand monetary policy. exclusive -- washington

does not understand monetary policy. manufacturing is employment across 60 years. here is pearl harbor. here is the boom time when michael darda was living fat and happy. down we go, no manufacturing. then we are back to 1941. the five-year moving average has never been lower in goods producing, things fall on your feet stuff. francine: that goes back to the dollar. is there an ideal level? a pointoint -- there is where if we see much more dollar strength, it starts hurting the economy to where we cannot see a further rate hike. michael: that is a great point. the strong dollar, along with widening credit spreads, equity volatility, sinking inflation expectations, all are symptoms of slowing nominal gdp growth and aggregate demand.

the real problem for the fed is if this is already underway, it does not take much tightening in terms of lifting short rates. the equilibrium interest rate is lower, even falling. tom: it does not take much to upset the apple cart. is why there is so much criticism of the fed starting this process too early. tom: usually michael darda takes out of the markets. i am watching oil carefully -- 33.28 per barrel. we continue this conversation particularly on the american labor economy, with alan krueger of princeton university. he will have something to say about goods-producing america. stay with us. from london and new york worldwide, "bloomberg surveillance." ♪

francine: european markets stabilizing but inching downward slowly. this is "bloomberg surveillance." it is time for the morning must-read with vonnie quinn. vonnie: we have michael darda with us for the entire hour, so we are looking at "the financial times" today. it is timely with all the hedge funds we are seeing having difficulty. taken forgo it was granted by most western investors that economies could

be analyzed with rational models. the financial crisis of 2008 show the limits of this approach. waves of capricious government intervention that has taken place since have offered a second lesson in unpredictability." are volatilee markets and we are at a risky point now for the u.s. business cycle, and certainly for china. hedge funds -- as a whole they have not been performing well. there are tough times ahead, no doubt about it. most of what we are seeing in global financial markets does conform to a basic supply and demand model, and i think deserving the effect of monetary policy shocks, they are not recognized as such, but this essentially fits into that theme, at least from a monitor's perspective, which is my bias. francine: her conclusion is that the model base work

will be the norm again. do you subscribe to that? michael: it depends on what is in the model. if the model has poor assumptions, it can end up blowing up. -- theng that is related fed is very confident about its phillips curve models in the inflation process. that is why they are starting to move short-term interest rates up and plan to continue increasing rates every quarter for the next two years, even though markets are skeptical. that has not been a good track record for the fed to defy the credit market in the past. when the fed is doing something and defying credit markets, typically, it is the fed that ends up having to capitulate and move the other way. we will see if that is the case this time. francine: we are on friday, and every day we see a new risk crop up. what is the most difficult thing to model? michael: i think that one thing

that is probably moving global financial markets around a lot is uncertainty about global nominal gdp growth, so monetary shocks. how do we model that? not easy, but we can look at model based proxies for nominal gdp growth. credit spreads. a lot of our work is done monitoring those variables and trying to divine turning point in the business cycle. tom: michael darda with us with mkm partners. all week we have addressed the risks we will see for 2016 with ian bremmer's eurasia group. we will take a look at neil ferguson's chindia. stay with us. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. tom: breaking news. you need to know that the pros are in awe of this transaction. that would be the transaction of the century in oil and gas.

it goes back to standard oil and mr. rockefeller to get the perspective on what that means. there is a statement from saudi aramco this morning. our statement on jobs day is a stable but fragile take. we need to get to first word news with vonnie quinn. vonnie: stocks in china are steady today, one day after the global markets were rattled. sources say state-controlled funds purchased shares. shanghai's benchmark index gained 2%. secretary of state john kerry is urging a more aggressive stance for china with north korea. he talked with chinese officials after the nuclear test and said we cannot continue business as usual. biggest north korea's trading partner, supplying most of north korea's food and fuel. president obama takes his case

for gun control to the public, during a nationally televised town hall meeting. president obama said many americans are skeptical of gun control. pres. obama: issues like registration, that is an area where there is just not enough national consensus at this stage to even consider it. part of it is people's concern that that becomes a prelude to taking people's guns away. vonnie: in a "new york times" op-ed column, president obama obama says he will not support candidates who are not aboard with gun control. the u.k. market regulators started a program to criticism over the way it handled the financial crisis. nearly 100 homes in western australia are in ashes, consumed by a raging wildfire. nearly 200orched

square miles and is threatening other towns. officials think it was sparked by summer lightning storms. i am vonnie quinn. tom: thanks so much. beware the exogenous shock. christopher garman is with in bremmer -- is with ian bremmer in the eurasia group. looking at 2016, many of them like the hollow alliance across the atlantic, the tension between europe and germany and the united states being front and center. christopher garman, looking at the kitchen sink of the exogenous shocks that are out there, let's start with brazil. it is on the cover of "the economist." we keep following it, but why do i care? sell me on why brazil is an exhaustion is shocked. chris: the reason why we put brazil as one of our top risks for this year is brazil is one

emerging market economies out there. it is emblematic of the political difficulties we see across a lot of these markets. in brazil we are in for a bumpy ride in 2016. the country is going through a deep multi-year recession. tremendousnt is in political difficulties, facing impeachment. investors are looking at the brazilian market and asking themselves, is this the floor and are we in a good eye bank opportunity? -- are we in a good buy opportunity? the president will probably face an impeachment vote in march or april in congress, and we do not see an easy way out. if she survives an impeachment vote, which we think is likely, she will emerge we can then -- she will emerge ewweakened.

if the vice president assumes office, we also think he has significant liabilities, most likely and potentially on the massive corruption probe into petrobras, also the party of the vice president. the ballet look at of brazil and compare it to that of russia, one of the issue is clearly on a microeconomic basis markets. is anybody clear out the oversupply of oil this year, or do brazil and russia go down in flames? chris: what we look at is the combination of economic vulnerabilities to the drop in commodity prices, to a lower oil prices environment. we look at the political capacity of leadership to react to the shocks and move forward on an economic reform agenda that can reduce vulnerability not only to commodity experts

but more importantly to move on reforms that can increase growth potential. on this front, we are more bearish. we are more bearish on russia medium and long-term because we see politics deteriorating. in brazil, we see that this year is going to be particularly more negative. francine: going back to what you were saying about brazil, you say you expect an impeachment but you expect her to survive it. you say she will be weaker, but will it tilt her to the left? what kind of policies will we see out of that? is a very good question because there is a silver lining to what we see as a deepening economic crisis in brazil. we do not see the president moving more toward the left. we see the president reacting in a way that as the confidence in the fiscal prices -- in the fiscal crisis grows bigger, we

see by the new minister of finance to the extent that he announces the government wants to move on pension reform. the problem is that the political class is beholden and awestruck by a massive corruption probe that is not only implicating petrobras but most of the political class. stocks are frozen with the headlights before them and focused on whether or not the president survives and who will be implicated next. we do not see that generating conditions to moving reforms this year, and that is why investors will be spooked. but over the course of this year, at least the right reforms are put on the table and potentially in 2017 and 2018 the markets will look at rizzo and say at least the politicians are looking at the right issues. when we head into the elections, -- brazil will be a good story

in the medium-term, but this year we are in for a lot more volatility. francine: what do you make of argentina and the new president elected there? will that change a little bit of the neighboring state as well? chris: i think what we are going to see in argentina is isicative will what -- indicative of what we will see in emerging markets over the next three to four years. tipping point and you have a new election, then you have a government that is going to correct some of the imbalances that have accrued over the years. political jobgh before him. he does not have the majority of congress. he will make some important adjustments, corrections. will this have a demonstration effect in the region? probably not directly, but we think that the very fact that argentina was a poster child of

the irresponsible economic policies, and they got booted out of office, at least the kershner political faction, it does suggest that the irresponsible left in latin america is running out of steam. tom: thank you so much and to all of eurasia group for your perspective. 2016 -- weks of thank ian bremmer and his team for getting our international relations started for a year of "bloomberg surveillance." it is jobs day. alan krueger will give us perspective, and bill gross will join us to look at the linkages. next, michael darda on the american labor economy. ♪

tom: we welcome all of you worldwide. next week, "bloomberg surveillance," from london. we are thrilled to bring you an extended conversation with rbs , theman sir howard davies former director of the london school of economics. those are only some of the guests you will see during our week in london, as we bring you a conversation on economics, finance, and investment. what a different london it will be this time as everybody tries to piece together -- maybe we will try to find a stable market next week. francine: these are just the ones we told you about. we have great guests to tell you about, and we will talk about monetary policy. what will surprise you coming

here is that the debate over the has five days on grexit become that much bigger. tom: the first time you mentioned it, i said are you kidding me. now it is front and center. right now we need a massive outlier business flash. here is vonnie quinn. vonnie: regulators in the e.u. have given fedex unconditional approval to buy a small rival. that is after two -- that is after two years ago ups was blocked from a similar buy. so -- the comedy risks losing customers -- campbell's risks losing customers. if a ramco goes public, it would be among the world's richest

companies. saudi arabian oil company decision will be made in the next few months. that is our bloomberg business flash. i have to point out a story that has appeared on bloomberg by three wonderful reporters. bankersto a group of who said that this idea of going public was hilarious, and that the company could be worth literally a trillion dollars, to operate $10 trillion. tom: within an economy that is worth $17 trillion. it is huge. onhave to get daniel yergin to talk this up as well as a number of our hydrocarbon experts. fran, what is the buzz in london on aramco? francine: everyone is excited because when we heard about it yesterday, you think how much is it valued?

ranging via.a wide it is interesting that aramco felt they needed to put a statement out saying they are confirming they are considering an ipo. tom: on the animal spirits of america at nominal gdp, ring up that puppy right now. it is a great chart. there is where we were. there is where we are now, back 20 some years. the green is at 6%. life is great. animal spirit. i'm sorry, michael, it has dampened. oxygen that basic the fed does not look at. they look at a real analysis versus a nominal analysis. discuss. michael: i think they look at this, but they are more focused on these measures of label markets slackened -- of labor markets slackened.

we are on the core pce deflator at 1.3. headline is close to zero. if core levels are off, the headline will go back to where core is. do not expect the fed to hit its inflation target over the next generation. tom: look at vonnie when you say that. ishael: nominal gdp equivalent to the right hand side of the equation of the exchange, mv=py. weak, itt has been tells us that monetary policy has not been as easy as everyone assumes. the fed balance sheet is high, but velocity is low. you really want to look at nominal gdp to see where things are netting out. this isthe surgeon that

the third episode were nominal gdp has faltered after the fed has altered the growth of this balance sheet. this is all just a giant when students, but i am afraid that it probably is not. francine: where do you see the most important correlation in these markets? for our viewers also, we just saw a lot of the european markets -- in fact, all of them, apart from the ftse -- reverse. what is the important correlation? michael: there are critical linkages between the fed backing away from monetary stimulus, the rise of the dollar, and obviously china is tied to our monetary policy through its cause i paid. but what about bonds? if you look at treasuries compared to a 10 year yield, it

makes very little sense. because of the expansionary modes from the ecb, at some point it has to normalize. michael: it may make little sense on the surface, but consider the weakest growth has been in the u.s. in thebeen much stronger eurozone and in japan in terms of nominal gdp growth. those two regions are improving, but the low bond yield is really a reflection of much more depressed business cycles, double-debt deflationary recession on the eurozone in ink of an errant tightening 2011, and japan fighting its way out of 15-plus years of inflation stagnation. in america we see curve flattening. are you suggesting the business cycle has only a little more to go? we have been doing this for a number of years. michael: i am afraid we are in

the late innings of the cycle. it looks like the profit cycle has peaked, particularly on a gdp basis. tom: this is important. we have guys like carl riccadonna who are slit-my-wrists gloomy all the time. to make things more balanced, we ccadonna comel ri out with us. asl gross from janus capital well. thrilled to bring you jim glassman with his perspective on bloomberg radio before the jobs report. from new york city, we are balanced, optimism and gloom. "bloomberg surveillance." ♪

tom: let's start with foreign exchange markets, on the move. as francine mentioned, the yen with a little bit of strength in the last hour. the mexican peso, i am watching. i do not even know why it is weak. it is 17.82, a stunning statistic, renminbi, which i am supposed to put up there. futures are up 20.

we are giving it away a little bit. we have read on the screen in oil. you have to watch oil. francine, what do you have in europe? francine: when you look at u.s. addedata, it takes on importance because of the market turmoil of the past few days. we are not seeing a reversal. the stoxx600 down -- 600 down .2%. tom: david westin, what are you concentrating on this morning? david: the aftermath of what you call the carnage yesterday. we will have michael holland of holland and company. , and david haro of oakmark. expect is thewe jobs numbers, breaking those at 8:30 eastern time. we will also be joined by alan

krueger, former president of the council on economic advisers to the president. we will be delighted to join you for a simulcast of your radio show with bill gross. all of that coming up on "bloomberg ." tom: carl riccadonna has important insight today. i want to cut right to the chase. you may see a 4.9% unemployment rate. what is transient here is for the wrong reasons. are crossing below 5% sometime soon, and the risk is today. the fed expects the unemployment rate to level out around 4.7% by the end of this year and holding that level for three years. we have never seen that amount of stability on the unemployment rate. a number ofing for reasons, some good and some bad. the bad being the participation issues. we are blowing through full employment. that will increase wage inflation, and that is a game

changer for 2016. everyone is looking at the past years as a tied for future growth. tom: i get more mail on this than anything including gold. sell me on a jobs economy. carl: we have been on this show time and time again talking about low productivity growth. clocking payroll gains above 200,000. that is the short-term blessing of low productivity growth. thank god there is slow productivity growth, otherwise we would say negative to zero. tom: are we more productive than we think? michael: i think you do have a productivity slowdown. is problem is that the data revised and subject to cyclical variation. but if you look at the median growth rate of productivity from the last cycle peak, it has slowed considerably.

there is a debate as to how much, and i think one problem with the unemployment rate is if you look at other broader bit mores, there is a slag in the labor markets. tom: are we becoming elements of japan? michael: i do not think we are quite there yet. japan had nominal gdp stagnation at zero or negative for the past 15 years. if carl is right and we start to see hourly wages push up, say 3.5 or 4 -- carl: that is what turns productivity around. do not invest in capital, hire more workers. that has been the trend over the last couple of years. segment,k to the last i want to agree with one thing. we are in the late innings of the business cycle. adisagree that it is double-header. this will be a long economic cycle. michaell riccadonna and

darda with us. francine, i really look forward to seeing you. francine luck while in london, and we will do that next week. coming up, a conversation with alan krueger on the american labor economy. many other esteemed guests through the morning, including jim glassman and bill gross. next week, sir howard davies will join us. and lord turner will join us as well. he has written some blistering exit in his united kingdom. stay with us this jobs day. this is "bloomberg surveillance ." ♪

david: futures indicate stocks will open somewhat higher. it is jobs day.

it may prove to be the second-best year for hiring since 1999. and oil rises from a 12-year low. still, crude is being battered by a perfect storm. turmoil in china, and overflowing u.s. stockpiles. welcome to "bloomberg ." i am david westin. jon: i am jonathan ferro. stephanie ruhle will be returning. , rolling overzing it seems into the open. s&p futures just up nine points this morning. inopean equities now negative territory after being in positive territory throughout the morning. to break this down through the next 60 minutes, michael