just a in america. nonfarm payrolls topping consensus that august results have miss for the past six years. a taxent trump considers increase in the debt limit, funding request for hurricane harvey. will mario draghi fill the euro store? subdued inflation and a strengthening euro underscores draghi's dilemma. a very warm welcome to you on this friday, september 1, by the way. when did that happen? i am alix steel. jonathan ferro and david westin are off today to about an hour and a half until the older did not our payroll reports. -- until the nonfarm payroll reports. the only big mover is oil, down by about 1%. other asset classes, we have seen a huge move in a pass on some of them, and one is the 10-year yield, down 12 basis points in august.

rally, bitcoiner up 75%, and emerging markets up about 2%. the best winning streak since 2004, the best month since 2014. a lot of momentum moving into emerging markets as the dollar stays flatter throughout the month. at ang the economy moderate pace at best, the u.s. jobs market keeps on shining. 108 k thisorecast is month after 200-9000 in july. in july.00 i joining us as michael mckee. it is a snoozer. michael: everyone says they will not do anything until december at the earliest. what people have been worrying about, though, is whether or not we will see the phillips curve come into play in a time the

phillips curve of course that's when unemployment declines, wages should go up, and we should get some inflation, and we just have not seen that. this month, as you know, they are predicting a little bit of an increase, if there is some evidence out there that just maybe this is beginning to happen. take a look at this chart. these are jobs openings for the jolts numbers. they got to a record level, but for a very long period of time, hourly movings were flat. maybe there is some progress being made. t satisfy thet fed will bring of overall data, but we are starting to get there. may be the report later this morning will help add to that sense of momentum. alix: let's talk about market expectation, mike. nonfarm estimates, bloomberg estimates, and the wicker number estimates. the better report on adp wednesday is the blue line. are we at a risk for

disappointment in the august consensus? michael: certainly the risk is there. the disappointment may be contained by the fact that so many other things are affecting the bond equity markets. even if we come in low, has low as it is not too school is starting back up again, j summer is ending, it has come in six years in a row under expectations. at some point, you think the numbers would account for that. there is a good chance we do see some disappointment. equities, bonds, currencies, commoditie the lastalix: mike, this is clean jobs report we get in a while, right? michael: yes, i am the last guy talking about harvey because it will not show up in the august data. it will show up in november. people who cannot get to work

because they are still busy dealing with problems at home, so yes, we will see something in september. be spending day that will distorted, jobless claims data, so it is going to be hard for the fed to look through all of this. these aredo that, and generally passing affairs, they will call a temporary, as they did after katrina in 2005. alix: go figure. bloomberg's michael mckee joining us from d.c. andmoore is paul richards greg daco. happy friday. happy september. when did that happen? no idea. we are all feeling the same today. alix: an hour and a half. >> i call it 160,000 jobs. the number will be under the estimate, and we will also be under the small term moving average on a monthly basis.

as michael explains, there are sees now the issues. produce as many jobs, and the labor market has diminished and fallen to quite lower levels. alix: so your was under 60,000 is not a slow jobs market but reaching the?unemployment call -- reaching the unemployment call? greg: it is less so than it was a year ago, so we are having to be more aggressive in the job numbers in the 160,000 range. alix: i have been waiting to hear that for the last 18 months. paul, what is your call? paul: higher. month is already a tough to take. a year ago, we were thinking 180,000. i think a phone number, say 160,000, does not upset the

market today. i think a surprise in the market would be above 200,000 today. the anomalies in august, i think that is more possible. up in aat really rings nehru.ngs up we are already below that. does the fed have to lower na iru? do we have a mild undershoot or a big undershoot? greg: we will continue to fall. the breakeven rate is $120,000 on a monthly basis. we continue to see some downward pressure on the unemployment rate. we also continue to see a cyclical uptick. they are very strong

demographics weighing down, but we are continuing to see, if you factor out those demographics, positive of ticks in term of labor force, and that is what is encouraging for the labor market. alix: if we do see a trend lower, paul, aesthetically that horvath a from where you said? is that a good thing or a bad thing from where you sit? nairu.tters for paul: the fed is really well positioned. they have done to or three major heister december is clearly on the table. inflation, and it is about today just saying well, look, we see higher numbers, it is the unemployment rate is the 4.3%, for point -- 4.4%, that should happen at the anything of the day. alix: forget december.

talk about january 2019. that contract is like 1.4%. paul: the problem with effect next year is the market is worried about how we're going to move. it is not going to be yellen in that seat. alix: we don't know. [laughs] alix: do you think it will be gary cohn? you five dollars. this is one of the risks of next year. the market, the project ability of the new head chair, as good as gary cohn will be. that is what my clients are saying tell me about cohn. we do not really know, but we know it will not be yellen. ke my bed?ink yellen maybe you [laughter] greg: there was a lot of talk hole speech,kson but this was her last speech, and taking away financial market andlation is used to trump

that matter. i think she has stayed true to her colors. she is very academic, she stayed true to her position, and she is above in terms of interest rate positions, and trump really highlighted that a few weeks of before, saying she is a low interest rate person. i think she has the option of being in effect come 2018 and 2019. alix: thank you for an much, paul richards of medley global advisers and gregory daco of oxford economics. join us,imself will gary cohn, national economic director. this is bloomberg. ♪

alix: please violated politics today goes to senator mccain at rupees in the "washington post" less like calling for congress to come to order. regarding president trump, mccain says "we must respect his authority and constitutional responsibility. we must cooperate with him, but we are not his subordinates. we do not answer to him. we answer to the american people. we must be diligent in discharging our responsibility as a check on his power, and we ast value our identity members of congress more than our party affiliation." olorunnipa.s toluse toluse: no response yet from the white house. president is usually on twitter at this hour, and we can be sure that he has seen these scathing comments from senator mccain, saying the president is new to the job, is

"often impulsive," and "lacks information to do the job." this is a clear attack on the president, a scathing review of his job so far in the white house. we will be definitely looking forward to hearing what he has to say about it later today. alix: the story when president trump was in missouri giving the rally on tax reform, he was talking to senator mitch mcconnell, speaker paul ryan, now you throw mccain and that during how does that set of a white house versus congress debate when it comes to debt ceiling budget impacts? toluse: it is clear that several members of congress are frustrated here and we have heard grumbling from senator -- people around senator mitch mcconnell. we have heard him on the record, denunciations from speaker paul ryan. but you have to put those differences aside for the time being because they have so much on the agenda, including meeting to raise the debt ceiling between now and the end of september. the issue of hurricane harvey may give him a reprieve.

president trump wants to link the funding for hurricane harvey with the debt ceiling, hoping those two issues will get over the finish line together. it is also clear that congress does not want to shut up the government, does not want to be the first congress to default on the debt. it appears that there may be enough goodwill to at least get through those crises that we have over the next few weeks. tax reform and other issues are made on the table. alix: we only have 19 or 22 days or something. i want that kind of schedule. toluse: only 12 more working days between now and the end of december for congress. they have a lot to do. in a short time they have been on holiday commodification for the last five weeks. they have a lot of work to do between now and the end of the fiscal year. in terms of bringing all the leaders of congress to the white house next week to meet and to discuss a very heavy agenda and the heavy lifting that they have to do between now and september 30. alix: bloomberg's toluse

olorunnipa, thank you very much. with that, paul richards of medley global advisers and greg daco of oxford economics -- i'm taking a vacation, i am working 12 days. see you later. how does that set up the next 12 days for congress? paul, what do you think? paul: at the end of the day, i fork it is hardly the stuff the american people is the unifier of washington. if there will be issues around the debt ceiling, it will not happen. republicans will get demolished in the midterm, and they know it. there is one thing that could reform this country -- it is harvey. alix: when you look at the debt ceiling debate, for example, is it one moving it forward were pushing it back? you could argue some issues could provide relief. greg: essentially, what we think is we will have a short-term funding gap, and we will have a

short-term extension of the debt ceiling. i think it pushes back the problem to probably the end of 2018.ear, early there is a big risk in terms of a government shutdown. attentionen a lot of within and between the republican party and this president. you are right that the hurricane relief fund inclusion in some government funding will prevent the president from vetoing it come even if there is no funding for the wall, but that funding will be short-term. caucus inalso hear a a health saying look, we need spending cuts. is that debate over, to your point? where does that leave tax reform, that, paul? you wind uphav -- having thinks sailing through, so do they work on tax reform, or does mccain coming out make it harder? paul: i think they have to work

together. alix: are they going to? paul: yes. the you talk about putting gilt outcome "i need my wall or i will shut this thing down to i think texas needs something other than a wall in terms of money. i think that leads us through september. then it is all about tax reform. building forrump this winter you can see steve mnuchin and gary cohn getting ready. republicans know they need it. this will be a tax light bill. butay not be done by 12/31, something is going to be done. , would say the chance is good with all that is going on, we think this is move back into the 60%, 65% chance right now, and that is real. i think the market, critically,

alix, is keeping the trump trade alive. alix: what needs to be repriced the most? paul: the dollar. equities have already got it. the dollar could really rally on this situation. and then after that, i think treasuries. , $2.35.s greg: we are barely above 50. we have fiscal stimulus next year, but we are barely above 50. we think it will be a coin toss. alix: does that boost growth or does it just wind up sustaining it? greg: it would essentially boost growth in 2018, but not by much. traditional growth in 2018 on a tosure of some tax cuts businesses, some tax cuts to households, a little infrastructure spending. a very modest boost. i think the odds are declining.

thee start to see over next few months ongoing intraparty dissension, i think there will be more and more unlikelihood of a major fiscal stimulus package passing through. in that case, we do not see the uptick in the dollar or in long-term, and we do not see a repricing of funds. alix: this is how we make a market on friday. [laughter] this, whered say you are, i respect that, and the reaction, if i am right, 60%, 65%, will be quite traumatic in q4. we completely repriced the arts in december for the fed as well. alix: great conversation. paul richards of medley global advisors and greg daco of oxford economics, over sticking with us. steven armstrong will be joining us. we want to get his take on the diesel scandal over in germany. this is bloomberg. ♪

in the german auto industry, the future of diesel continues to face some pressure, it is a big election issue as well. i am joined by bloomberg's matt miller in berlin who has some insight knowledge of what is going on therem, matt. alix, thanks so much. here in germany, stepping up their game, angela merkel in her social democratic party will come face-to-face with it on sunday night. one is the distro issue -- diesel issue, was has cropped up your after the scandal and california. this morning, martin schulz called for a class-action cell lawsuit. they are currently not allowed .n germany to give german consumers the chance to fight against automakers. christian: i would first and foremost allow a class-action lawsuit so that citizens could defend themselves because of the

editing of the day, all of the issues will land in front of the court, in order to ensure that consumers can implement their right against corporations are not have to wait for legislation -- legislative process is to push through. if not, we will need the process passed through. matt: the only american automaker here is for you did new ceo of europe, steven armstrong, joins us from europe. mr. armstrong, thank you for joining us on the program. let me ask first about your exposure to the german auto market, your older to do -- exposure to diesel. how significant i of a problem s this for you? steven: it is a big part of europe, and it makes of about 50% of what we sell across the region. part in our a big vehicles, it obviously it has been a big contributor of the ability to reduce co2 emissions

over the last few years. it is an important part of our business. what effect do you think it is going to have, then come on your profitability this year? are you allowing for some losses due to possible lawsuits, due to the fixes you will have to make? steven: we have not had to make any specific fixes. the vehicles we sell in europe comply with all of the respondents from and omissions point of view. emissions point of view. we have not been caught up in what some competitors have been in europe. we have not faced a specific lawsuits against ford motor company. we continue to sell diesels that comply with the standards. we are seeing some declined in sales, but weel have a great lineup of diesel and petrol that we can sell, so

we're not really worried about discussions about reductions. matt: talk to me about the mix. are you already seeing diesel sales significantly drop? are you losing pricing power in diesel? and how are you making up for that if so? steven: we have seen some reduction in the diesel mix this year, down about 6% since the start of 2017. mix backhaving some into petrol engines, but we have a perpetual manufacturing system in europe, so we are able to mix between diesel and petrol. with respect to offsetting some of the margin differences between diesel and petrol vehicles, obviously we are working hard to reduce costs generally to ensure the margins we have are not generally damaged by whatever the market shift is on engine tech rates. of course it causes us some

challenges, but that is part of a role in life to figure out how to offset the mix shift out of diesel back into petrol. matt: are you planning -- i know that forward in dearborn already is putting so much effort into alternative power trends. it has been for some time. are you planning to shift focus more to alternative powertrains here? steven: yeah, we announced earlier in the year that we would be working on a number of electrified vehicles. we were really pleased with the news that we made last month where we announced our collaboration with dhl and street scooter to start to sell fully electric transit vans. we have the number one commercial vehicle in europe with our transit line of commercial vehicles. so the commercial vehicle

business is important to us. the new collaboration with street scooters will be the largest manufacturer of electric commercial vehicles in europe. in addition to that, we will start fleet trials in london hybridhis year, our transit customer vance, which we will introduce in 2019. so we have been planning a shift toward electric or electrified charge in our vehicles, particularly our commercial vehicle lineup, which is important here in europe. i think we are well-positioned moving forward to transition to the new electrified powertrains. matt: do you need to shrink your lineup? i noticed a ton of small suv's to vans, from the be max to the max, the the s eligibility t -- the edge.

you have so many products. do you need to shrink it? steven: i do not think we need to shrink the product line. we are in the middle of a refresh of our product line with a chief launching here in germany and across europe. we will bring the echo sport to market later this year as well. i think the growth in crossover and suv's in europe is an important part of the industry, and getting the right powertrain mix will be critical as we move forward. we also have a really good lineup of small petrol engines, smaller suv's you were just talking about, so we're pretty well moving forward to shift. the: how do you feel about euro pound right now, steven? i am looking at a chart i have had over the last year. it has been a pretty substantial chart.

if you are making vehicles here and selling them in the u.k., that has got to be painful. yeah, we said at the start of the year, coming off the back of a record profit in 26 in that we've seen headwinds driven by a number of this is among one of which is the exchange rate following the brexit decision last year. we knew we would see a wiggle in the pound, and that desk also problems -- that does cause some problems. we do manufacturer a lot of powertrains in the u.s. we will move somehow to manufacture in europe. we will find a way to offset those exchange headwinds. it is part of the business for us to look at ways of increasing the revenue we get in the business that we sell. of the year, we expected about a 600 million dollar headwind in combination with the exchange rate issues : matt: volkswagen has gotten

hit because of its reputation. transition.a this should be a time for ford to be taking market share in europe. are you confident you can do that? >> yes. had four straight years where germany has become a very important market for ford. we have grown our share in the commercial vehicle business. we see share growth across the region. the competitors are taking stock of the area that is part of our strategy to grow our share in the region.

matt: thank you so much for your time. if he is the new president of ford appeared -- 40. alix: we have one hour to go before the jobs number comes out. it is pretty muted. bit of a little stronger equity market emerging in europe. thether asset classes, dollar is coming off a bit. euro is trying to peek a little higher against the dollar. yields are backing up a little bit more than they did before. there is a little bit of movement coming in on the jobs report. gold is flat on the day. let's in an update on what taking headlines. the death toll has risen

to 39 from tropical storm harvey area authorities are searching for the him's. floodwaters are asked acted to be gone by early tomorrow. firefighters are monitoring a chemical plant after an explosion and fire. there could be more explosions. it's a decision of it may reshape kenya. the supreme court has nullified the reelection of the president and ordered a new vote to be held within 60 days. they ruled in favor of a position -- edition. he said the voting was rigged. it is a very political decision. and johnch hickenlooper there have come out with their own health care plan. it would keep the individual mandate, a feature of obama. >> we disagree on a bunch of

stuff. i think that's what this country has got to do on health care. sometimes, buted he is doing this for the right reasons. we are not going to run together for president. from six otherrs states of signed on to the plan. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. alix: thank you so much. thursday.ets on factory output is jumping and inflation is creeping higher. it's really all about energy. the euro has made a big move against the dollar. joining us is paul richards. this is what we heard today. he said we are where we were when the euro was introduced.

interpret orer dramatize. help me make sense of this. we had a report that said the ecb has a lot. saying let it go. very bravethat is talk and he is right. to taper the way if we had an to, issue in the u.s., they do not want that. they are going to look at the economic forecast next week. it will drop i .2%. they have an inflation mandate. , but it's brave talk not what they are going to discuss. they're going to have a tough discussion next week. they are not ready for it.

they are not ready for next week. it's a new game plan. draghi did not mention the euro at all. he would have knows that would have caused the rally. >> it's interesting to see that. we are of the view that next announcever, they do tapering of asset purchases along the lines of what is priced in, a reduction of purchases. is that because they want to? or because they have to? they have to position themselves in a way that is more hawkish. you have stronger data in terms of appointment. inflation is going down 2%. you have had some upward movement. i think the ecb would be

confident in tapering asset purchases. expecting taper. you go down to zero. that is the difference. atis probably going to end this. we're going to reduce. we are going to go longer. that is really important. i think is likely going to put that back in. at 120. is this is the game changer. not a dollar. this is the problem with the euro, if you are selling the dollar, you have to buy the euro. alix: you can't do anything

about that. >> you mentioned about him not talking about this in jackson hole. if it wasn't on the agenda. i will tell you why. there was absolutely no talk. he knew that september was going to be when he had to address it. he's got to say something next week. i think he will. you have a real sense. i'm not going to try to predict him. does he say the word it euro? to likely come out with something in late over. everyone is going to be talking about tapering. a year ago, they put the tapering bullet in the air and they'll miserable -- failed

miserably. >> he can hint at some form of tapering and noticed that there is a message that they will taper and it will be very cautious and make sure there is a persistent increase. it that is unlikely to happen. that does put downward pressure on it. i think he does have the ability to announce some form of tapering, but to announce cautiousness. we have seen a lot of flows into your. we saw the biggest outflow in half a year. why? is it a euro story? >> see that in the way bank stocks of,. the cb's intentions.

up 10%.the s&p upside they need to invest in. is interest-rate expectations. that was the favored trade this year. you may need to pause for a couple of months and look at the u.s. again. basis, europe is not as attractive as it was. alix: they need more tech stocks. >> you've got apple coming up with major announcements. there are more interesting things to focus on. alix: that's the story that never dives -- dies. it was good to see you. it's always a pleasure. the jpmorgan

international chairman will be joining us. is bloomberg. ♪

taylor: coming up, janet henderson. this is bloomberg. now to your bloomberg business flash. the group largest fund is raising fees. the fee will increase fees.

the is twice that much. david einhorn is falling further behind. in hedge fund lost 1.5% august. the fund is down 1.8% for the year. microsoft is taking a software upstart. will have ahey startup. getanies taking part will competing credit and access to investors. that is your bloomberg business flash. floodwaters are receiving in houston they will be gone by tomorrow is estimates report the storm flooded 136 thousand homes and is this is in harris county. refineries are starting.

shut downs inting louisiana and texas. can anyone who needs the supply actually get it? 2.5he pipeline moving million barrels a day. areblue parts of the map when the pipeline is active. is it gettingee hit hard. there are lots of closures. what is the outcome? the importancet for the southeast of this pipeline? >> it is the main conduit that takes oil from the refinery epicenter in the gulf coast area. refineries in 13 that area. andoves up to the northeast

north carolina. it is a significant amount of gasoline supplied and it is under threat. what we have now is this shuttered west of lake charles as we have refineries in corpus christi. they begin to retool. you're only left with access to refineries in louisiana. movement.tting slower it is a significant event in the short term. you're going to have inventory issues and short-term price events. thatshould be something moves. the houstonking at and galveston and look at when refineries can get back online.

we are in the process of that. only import 5% of the product. heard stephen talk about this being a short-term issue. what has been restarted? what is up and running? >> thank you for having me. capacity cut the at this point. is lakeopen right now charles. to reopen corpus risky. i think their a miss sunday. production is cut. right now, there is 10% of u.s.

fracking. alix: that could be delayed. we saw the government release one million barrels to help. the question becomes how much is needed? is basically how much you have stockpiled versus the demand. in 19 days, that's not bad. walk me through, are we going to have enough gasoline western mark >> yes. there has never been a good time for a natural disaster. go,ar as gasoline supplies better now than happening in the spring it. the holiday driving season is over. halloween, and demand is going to drop by at least $1 million per day as the refineries go into their fall maintenance schedules. seeking inerally

late october. we are moving that forward. that structure is still going to happen. it's just happening earlier. the demand will add. events juxtapose these and the availability, we had money of time to shut down. there will not be any lasting long-term issues with the refineries. they will be able to start. get corpuse able to up on sunday. with in a week of the storm, that is a fairly good note at this point. we like to look at history. you can't go forward without looking back. the last time we saw this was

hurricane ike. as i said before, i expect this. during katrina, we saw a $.30 spike in prices. those prices quickly regressed as we got into the demand falling. alix: that is great stuff in we really appreciate it. thank you so much in houston. .out tv it you can it watch us on tv and interact with us directly. you can watch any segment you may have missed. this is bloomberg. ♪

alix: we are just 40 minutes

away from the jobs number. 's is where we stack up before those numbers. we have a little bit of a rally in europe. the dax is up 1%. that momentum is moving in the u.s. as well. the dollar was the winner of the session, but it is losing some steam. you've got treasury yields going nowhere. truth is backing out from loss is earlier. gold is flat on the day. they had that monster move up 4%. it was really breaking through that 1300. we are counting down to those jobs numbers. while their political views may differ, they both served as chief economist of the labor department had diana is a senior fellow and served under president george w. bush.

of presidentber trump's transition team. she leads the team that tracks wage and employment policy. she served under president obama. it's a pleasure to have you both here. i want to start you. the expectation is we will see the jobs numbers move lower. what does that mean for the white house? >> the expectation is we will see it be lower. we could see it move higher. no one knows with the numbers are going to do. fall,get tax reform this we are going to get a lot more jobs created as funds flow into the country from abroad. corporate tax rate is so much higher. if we can lower are pretty tax

rate and have a territorial tax system rather than a worldwide system, companies can bring in their funds without a big tax bite out of it. more funds a lot flowing in. that will be a big stimulus and translate to more jobs. tax reform is the crucial thing to look at. >> if we are near full employment, do we need a tax reform if we are already at full employment? >> just responding on a couple of levels, it is true the u.s. has high corporate tax rates. if you look at the effective tax rates, they are right in line with here countries because of loopholes. one of the key things to look at

, we can look to what happened in kansas. the governor in kansas cut corporate taxes dramatically. it's an experiment as to what happened. was happened in can't growth was slower than surrounding states, slower than the u.s. as a whole. kansas thanlower in it had in. , it was such a failure the republicans in kansas actually voted to increase taxes over the veto of the governor. very clear measure of what will happen on the ground if we cut taxes. comparison no between what happened in kansas and what might happen with our tax rate. effective tax rates might be low

for some manufacturing companies that are allowed to write off some of their expenses and they are not low for other service they companies and financial firms that do not write offs. many write-offs you get. tax rates are an average and do not a out for rates paid by different. alix: i would love to talk with you more. thank you very much. it is half an hour until the jobs number. as is bloomberg. ♪

alix: it is jobs day in america.

missed forlts have the past six years. disasterdent considers aid funding. the european factory out put rises. draghirscores the dilemma. a very well -- warm welcome to. where did summer go? i am alix steel. jobse 30 minutes until the number. we do have a little bit of selling in the 10 year yield. stronger dollar earlier in the session. that has been reversed a little the. 119 is the print there. it has been a tremendous month for some asset classes. you have the 10 year yield moving 12 basis points lower.

we saw an unbelievable rally in the treasury market. emerging markets have seen their 2014, a hugence continuation of the rally we saw. payroll comes out in 30 minutes years were not good. the august payroll has estimates.y missed is the economist and a former deutsche bank u.s. economist. by economisted named stephen. you can't get the august consensus right. >> august is a working month.

it is good at getting the final number right. wellata 10 to come in below the forecast and are subject to revision and eventually come back to where it's looking. if you have the expectation for the number and some tract 25 to 45,000 from that, that's probably where we come in. is probablye 200,000, subtract all of these weird idiosyncrasies and you get closer to something closer to 160. right will atnt least hold near recent levels. there is a chance we see a decline in the report. >> it's true that the last couple of years have seen weaknesses in august.

the true consensus is between 160 the same time , the other indicators just anything saw. -- saw. -- soft. you just the market much of it. don't market is positioned strong numbers. >> per seven years, the average increase in employment has been at 200,000. when you look at july what forecasters have done in august, it reflects some decline. we don't have to care that much.

the future of the economy does not depend on august. don't turn off the television. it's going to be important. >> the bias has gotten us. eventually, that's going to get ground away. that has not been the case until it heated up. cycle, the course of the every trend turns out to be wrong. the same basic regime. massive,nge something that was going to have an effect for year. have you affect long-term economic growth? that's going to come down to technology and labor capital. that is the harder story. we have not and hitting below are wait.

jobs a month and every sayr measure, everyone will find an unemployment rate in the takes out all the people who would look for jobs if they could. that number is down. >> the one thing we have been punching under our weight last on has been wage creation. you are talking about the structural issues. that is 122 million workers. think of how far down we can go in the unemployment rate if we don't show signs of an overheating economy. we can go lower and lower.

inflation expectations are a huge help for the economy. if you see prices spike up, you think there temporary. bargain, demand picks up. expect patient regime and that has been very helpful to us. alix: jump in here. >> we are going to say this was best. badcan imagine, the complainant missing inflation. would we be better off getting 2% when the unemployment rate was explained i've percent. we're going to defeat unemployment rate at .5% to let's missing discussion is the recognition that when you are chopsg downward price

that is possibly correlated. we all feel miserable now. in five years, we will back and say that was pretty good and forget about the political shenanigans and ups and downs we are set with right now. reservee federal decides to run the economy to, that's going to be right. it's about to begin a process of normalizing the balance sheet. be -- i don'tll think the economy is at sensitive to rates. , next month if inflation is low, i think we

will talk about talking on the reins, not enough to damage the economy, just up from getting out of control. the zero couldom be an important thing. they will find a way of eating around that. >> just before we started this segment, if you look at the future on the bloomberg terminal, you can say it's of drifted all the way out into the cap of next year. we heard from a number of like they startedley, expectations back. was theink i heard owner's you week. we will hear from the dallas fed president.

you will see a push saying don't completely clear the deck for expected rate increases at this point in time. alix: you don't even need me here. i could have gotten my copy. this is rate. both of your sticking with me. cohn will join us live from the white house. there might be a question about the fed it. it this is bloomberg.

alix: we are 20 minutes away from the jobs report. labor department is having tech problems.

michael mckee may be trapped at the labor department. we will have more information as we had to john mccain out with a scathing piece in the washington post calling for risk to return to order. it knowledge differences with the president and acknowledged the role in government. joining us now is our washington correspondent any response from the white house? where the tweets? >> the president has not addressed senator mccain yet. we know the senator is dealing with a cancer die gnosis and maybe the president has that in mind. pieceas a scathing

talking to the president directly. not doingpresident is a great job. he described the president as lacking information and being impulsive. hear a not what you republican senator talk about the republican president. he is voicing frustration we have heard about kind the scenes in the republican caucus in we will wait and see if other republicans join him in that frustration. they are going to be facing these types of questions. that's what we will be expect in over the next two days. >> what pressure does this put on paul ryan and mitch mcconnell western mark >> they have a high lever of pressure.

they need to pass a budget and raise the debt ceiling. there is a request for funding for the harvey hurricane situation in tech. now they have to face questions and they believe the president is impulsive leader. you are frustrated with the white house. they are frustrated lack of focus so far. we will see of that bubbles over into public discussion. it was a they're trying to get their agenda passed. alix: thank you so much. there is landscaping going on behind you. to gary cohn at 9:45 a.m. what questions should i ask?

>> when the going to put a detailed proposal on the table we can assess whether there is any chance it's going to pass. ask,ther question i would the focus is on the white house. it would be a pity if we did not get tax reform because every democrat said no to everything. i think a should be pressured to look at it in the same way. alix: i struggle with this. you have mccain and what he says and that makes it difficult for something to get done. the flipside, you have harvey which unites congress and a midterm election. >> the debt ceiling is something that will have get done. we have had 74 increases in 55 years.

whether it's an increase or a suspension, let's get past that. the idea that republicans will do things and that congrats will agree to is unlikely. i think the thing for mr. cohen would be the you have enough agreement between different parties to have a single plan that isn't us. it has been like one party gridlock with competing ideas. they cannot come to agreement with their own party. alix: what needs to happen? peso is up more than 15%. small cap u.s. stocks have trailed european stocks by 14 basis points. wouldhought the u.s.

disrupt world economy. it has come a complete circle around the idea there is low probability there will be something. it will not be that large and decisive. >> the remarkable thing is how well the u.s. asset markets of done this year. we had a lot of beachfront running on it tax return. we started off the year with a high. the disappointments, there is some underlying strength in the u.s. economy. it would be best if we use the opportunity to get that reform. it is probably quite a bit of overlap between the centrist democrats and the republicans. i think there is a possibility

we could do it. markets are really not counting on anything happening. there is only upside. well withets of done everything we've done. >> we are likely to have 10% for the year. share prices are up. it should not be surprised that 200,000omy has produced jobs a month for seven years. we've seen a recovery in profits. it is doing better. if you look at the u.s. perspective, global earnings outside the united states are going to rise 15%. it's been a powerful global market in the u.s. has trailed.

we have seen revisions start to come down. does it last? estimates on average, if you take the recession the, it is nine percentage points to high. they really don't require us to those numbers. we should expect slower returns going ahead. you will be level higher. unless it's going to have an effect of the potential economic growth, you will not to that repeated through history. you will see a bounce back. >> if you were an investor the investor, it's amazing how that has held up. where the not responding in kind western mark

>> there are two stories in the bond market. one is the disappointment on tax return. these rice checks are good for the economy. people were surprised by this. we dried up.ght there are bigger forces out there than the phillips curve. they are good for equities and good for her. that is a surprise it is not discussed often enough. everyone thought china would be a mess. in makingucceeded these the most attractive assets. you have done it that are in your money inside china then

taking it out and asked what it. , think the strength in china it's been ok. the u.s. is doing ok. this is part of the story the fed in the ecb are going to look at. if they have the opportunity, they will begin to nudge up rates. alix: thank you so much. frankel will be joining us from italy. that is a beautiful area. the inside scoop on central banks. this is bloomberg. ♪

alix: for this movie watching the labor numbers, it's going to be trickling out or you.

they are having some technical problems. we will have the numbers live or you on television. if you're watching from the terminal, they may be delayed a couple of minutes. the other big policy meeting will be next week at the. -- ecb. effectively driving price gains. hit 120. did does mario draghi talk down the euro? >> i don't think he is going to be very successful talking to down. you don't want to leave monetary policy. is they areoblem

still at -40 basis points. the economy is going great. if we think the fed is out of nextition, we have the five years of ammunition. they really want to do this. what you really want to listen that. for them to say f they say that, alix: if they made that sense, i would you view $100. euro, theve up in the been, a lothere has

of people thought it was qe. unless they think that a strengthening of the eurozone, they need plans. they need to purchase something other than german bunds. that's not owing to make sense beyond 2018. there is going to be a significant shift down. years, we havex seen a powerful u.s. dollar trend. u.s. was going to have a significant rate cycle. the rest of the world was going to continue to ease. i look at other parts of the world, interest rates have risen. untilcies have fallen up

this. the rally in currencies around , they are positioned against fleshed out long positions on the dollar. alix: we are 30 minutes away from the jobs numbers. trade westerne mark brad: probably less important time we get asame surprise on the earnings. that could lead to more dollar strength. this is the same position we we correctedth and a little bit of the euro length. we took out 120 recently.

we could see a little bit more dollar strength. there are a lot of traders given the holiday weekend in the u.s. the short squeeze is definitely in the cards. the debt ceiling issue is going to give us a lot of noise, which will be negative dollar. we could see signs of inflation working up. dollar will spark a rally. we are probably a few weeks away from that now. what you want to do on the short-term jobs number western mark shorthink the market is dollars. i think we will see a dollar rally. what are you looking at western mark -- at? arounde are still stuck

110. i agree with stephen on that comment. the dollar yen good rally a decent amount or it it's probably not more than a percent. that is the one i am focused on. to build really trying excitement into a number no one seems to care about it -- about. you guys are sticking with me. we are 50 seconds before the jobs number. you have some strength over in europe as well. in the morning, it was a stronger dollar story. today, up .1%. from its losses in the session. gold is going to be the one to watch. they had a monster rally pass

$1300 and now stabilizing at that level. are we going to get any stabilization? that is really what we are watching as we head into this number. is at the labor department. just 156,000 jobs and the unemployment rate rises. earnings are up just .1%. 2.5%. and that is not all. -- revisedment lower. a drop of 21,000. july revised lower, 21,000 109,000, and loss of 141,000 jobs.

inre was some strength manufacturing and construction. health care up 20,000. a hiringyone went on spree in august, it is not supported by the data. and there were no: mining jobs. and -- and there were no coal mining jobs. and the labor department added only 300 teaching jobs. that will obviously rebound in september in a big way. temporaryust be a disappointment. it does interrupt the narrative of the ever-increasing strength of the labor market and makes it that much harder for the fed to sell another rate increased to wall street. ix: we have been hearing that this is too big of a print. is this giving back normal? than al job level rather

disappointing job level? surpriseit is always a when we ratchet down as quickly as we did. it's not a bad report. unemployment is only 4.4%, but disappointing in comparison with what we have seen in previous months. alix: and the market moving on this. thank you, michael mckee. here is what happened to the markets. although much stable, off the highs of the session, in the real difference currency and the treasury market. it is down by one basis point. we had seen some selling. now we see some buying. the dollar, as you can guess, also moving lower. trading very close to that 120 level on that news. i want to take a quick look at and see how skittish markets can be. gold up by five dollars. a little safe haven buying. .ot a goldilocks

to reiterate those numbers, you -- nonfarm coming in at let's go to tom keene and david gura on radio with a very special guest. keep working, alix steel. i'm looking forward to the comments of gary cohn from the white house lawn. the how does this fold into most interesting september in washington? gross, i look at this in see the revisions down, and it is once again putting a good month back together with another good month and another good month after that. we can't seem to get there. i think that is true. i think august historically has been different.

the wage revisions, i think, strike me the most. growthon, not job dominates central-bank thinking these days. when i think unemployment rages have traditionally left to a higher wages and inflationary pressures, i think it appears to be broken. its increasing it only 1.4%. only one point 4%. i think the fed is focused on wages. this is a weak report. tom: let's synthesize, mr. gross's outlook there, folks. koreawith the angst of

five days ago we got down to 2.0 9%. steve major over at hsbc says we can go below tim -- we can go below 2%. do you agree there is a set of news or economic data that will 1.99% 10-yearen a yield? bill: geopolitical perhaps. north korea is certainly important and money moves when global events threaten. global bonds have rallied 10 basis points on the past few months to, in my opinion, not thessarily north korea, but ecb and the boj -- they have written $1 trillion of checks for months which keeps there's happyere and investors for moment and you see our 10-year is attractive and

perhaps it can go down to 2% because these alternatives are extremely low and moving lower. bill, we are making our annual pilgrimage to the edge of the fiscal cliff, it seems. there will be a question of whether they will raise it, cleanly or something else attached. how much have you perfected your playbook with how to deal with this disaster? we have faced it time and time again. this one is extraordinary and the numbers are still uncertain. 100 billion -- is it more, is it a little bit less. certainly it extends the budget deficit. this is something that has to be reckoned with. how do we do it? usually the republicans have some type of measure. and then they normalize it over the next few weeks. important'ss very

and it absorbs money and it absorbs credits and puts supply into the treasury market. no doubt that is important. the tax-cut situation, presumably will be addressed in the next two to three months. david: when you look at the debt ceiling, did you have any anxiety it was not going to be raised or raised on time? oh, not at all. i wrote yesterday, i tweeted yesterday, it was a sham. it's just a political maneuver. and the spends money treasury has to raise that money. it's a one to relationship, symbiotic, and to the extent that congress would not approve their own spending, to me, is ridiculous. it's just a political maneuver to get something. i think there is no doubt u.s. credit is solvent, will be for as long as i am on this good earth and we should not worry about it. bill gross you

have been billion about the idea financial repression. you will have low yields and when you take out inflation nothing is good to be there. all sorts of people we are wageng about better growth. did not happen this month. they talk about vectors that move upward. do you have any hope that financial -- america gets out of the financial repression you so well predicted? repression to the extent that you might find it at 0% real short-term interest rates versus 2% or 3% 10, 20, 30y the past years. that is a huge gap. i don't think central banks -- not only the fed, but the ecb and boj -- they can't raise interest rates back to normal because there's a lot of debt, increasing amounts of debt and the cost to cover that debt increases by 2% to 3%. tom: yeah, but --

i don't want to cut you off, but this is so critical. you live this. you live this as almagro trader desk you lived this as a monroe trader. that is the deficit to gdp growing out. if you get back to what you and i recall as the day of munro deficit to gdp, i that suggest respectfully happen. are we going to revisit that in the next 24 to 36 months? on the tax-cuts program. i do not think it will be that radical. you make a good point. the u.s. current account alan's, which is reflective of this deficit -- not one for one, but deficithere has been a for the last 20, 30, 40 years. bizarre, but a

privilege that the u.s. has relative to the rest of the world. i do not see the pressure to reduce the deficit despite the republican rhetoric. i see it increasing perhaps not by 4% or 5%, but to 2% annually. the problem being the interest rate and to the extent that interest rates go up -- i don't think they will or they can, the economy is threatened. we will come back with bill gross on radio, but very quickly, do you begin -- do you believe in a 3% gdp economy? not. i do those numbers together -- they produce real gdp and to present at max real gdp economy. bloomberg's tom keene and david gura with bill gross. in august.s added

that was below estimates. prior months will revised as well. you also had average hourly 1% which meanst earnings year on year were flat month on month. you also have the unemployment rate rising at 4.4%. it points to a weaker jobs report. respond to those numbers, we were up gary cohn, joining us in just about an hours time. how can he he explained the inflation -- how can you explain the inflation wage growing? this is bloomberg. ♪

alix: we do have breaking news on the ecb. they may not be ready to analyze their decision for bond purchases this year until december. they have no appetite to rush into a decision and the complexity of the topic means will not be mean it settled until october. we see the euro-dollar coming off the highs of the session. guests,o bring in our -- hen englander and i think it may be a subtle way of suggesting there's

a lot of disagreement within the ecb. mario draghi is a major dove and there are hawkish consist -- constituencies there. the do not have to say anything. this may not be -- this may be a backhanded way of leading to the euro a little bit, implying there's a lot of debate about how low it can go. i do not think it changes the big picture, but i think it will get the market to think twice about buying a lot of euros in the short-term. i think getting an announcement of the ecb on september 7, that is precisely what they are trying to do. i think it would be a little harsh to make that program -- that would be a new program put in place at the exact same time. the: so, what will be deciding factor for them? what are they going to know in the next seven days? or are they just going to have to tough it out? he is right.hink

this is their taper tantrum. this is the push back on a policy that went full 10. bill gross was on talking about bond yields. we have corporate bond yields half the level of u.s. treasuries. policy.dramatic easing it comes back to what they did in 2001. faced significant inflationary pressures. their economy is doing better now. it is outgrowing the united states for the moment. maximum monetary policy accommodation, it's hard to argue that. there are technical reasons why. -- hey just run the foren e: there's no reason them to announce what they will

do in 2018 four months in advance, but steve is right. waiting until the very end of the year, i think, could be an issue in markets. my guess is, they will back off of this. it gives them a little more flexibility. alix: joining us from frankfurt with more is paul gordon who leads our coverage on european central banks. look what is happening with euro. we are just off by 1/10. is this inappropriate reaction for what we heard? difficult to decide. i would have to ask a currency trader about that. i heard the comments of your guests. i think that those are spot on. we are not hearing from the fed governing also it will december.y be there are two concerns. incredibly is complex. it's all the other stimulus levels and also, what is happening in the economy with inflation failing to pick up.

and the second issue, some governors are nervous. they are not seeing much inflation. they are seeing growth and they wellorried that any sign derail their own efforts. are we at risk the ecb is being forced to move because of technical constraints even though they may not want to> paul: i think it is no doubt technical constraints on issue. they are already running up into areas like cyprus. those are probably up for debate. policyknow that some members on the record are saying they do not think that they should be changed. alix: why leak this now, paul? say? why what,

alix: why say this now? into ae are going meeting. this is the first time there will be talks in the council going into 2018. this is the timetable. the fed started the conversations on its tapering program in june 2013 and it had already been flagged by ben bernanke. it may cause tension. there's a high level of debate right until be fed took its decision in the summer. the ecb is following a similar path and that is causing frayed nerves. englander, what is the downside for your dollar? technically, does it go back to water, upside risk? steven e: it would be tough to go back to 1.15 at this stage. alix: thank you so much.

steven wieting, stephen engle under, you are sticking with us. they said that they would wait to see any change in their qe plan. they may not be ready for that. you also hear nomura pushing back there called to october as well. really trying to move the market expectations further off into the year. ,n terms of the jobs numbers 156,000, the unemployed at 4.4% hourly earnings, no growth than in the market, you see the markets holding on to some gains, but the real market has been in the treasury market. we have had a stronger dollar into the session. it's now moving lower and you may see more selling off the

10-year. coming up to react to these jobs numbers, gary cohn. with got to squeeze it in and five minutes. stay tuned. this is bloomberg. ♪

alix: the market in a tug of war. nonfarm payrolls coming in at 150 6000, the unemployment rate rising as well. did have the treasury market coming up on the number, -- buying and the treasury market going up, but then selling again on news that the ecb may be pushing back on tapering. steven wieting, your reaction to jobs numbers? steven w: it is a start. i remember several years earlier we had in august that printed zero and it was like the end of the month. -- the end of the world. we have learned now the initial

print really does not matter. it is on the softer side. it benefits all of our positions in international markets where we think returns will be higher, but we should not forget this number will be back on track before very long. alix: steve engle under? steven e: i agree. claims are much more stable than payrolls. they are not showing any problem. when it's not confirmed by other strong. remains i think the market will blow this one off. alix: what about the wage rate? it's flat. steven e: everybody has a job, but nobody likes the job that they have. alix: ok, what does that mean for wages? steven e: it is soft. alix: first of all, did he say that he did not like his job? [laughter] steven e: looking at average hourly earnings is an indicator

for when we know the income gauges going up. it's looking at the wrong data. these are literally the types of jobs that require hourly payments and consistent work per hour in compensation is much more complex than that. employmente that the plus index is modest. but overall compensation is moving up. it's actually good news for sustainability if we are not overheating. know that our employment gains are not sustainable. this is again a reason to believe we can allow this expansion to go wider and employs more people. i think the returns to job specific human capital are going down, which means in practice, if lawyers are not afraid of people quitting say, i they sake -- they can get someone more junior to do the same job. maybe not 100%, but 80%.

there's technological factors operating on the labor market as well is on the price side better putting the lead in terms of what wage gains we see. alix: you know, the san right?co taper, they make more, they make less at the same time? talk about the shortage of skilled jobs. whatever is in short supply, we call a skill. experience trying out new work, that is going to be huge. that's very, very potent. lessut people with experience into positions where they work. alix: it seems like the rate hike was going to be a about inflation. what does this rate hike me for september and october? steven w: the rate hike was never in the cards.

so low, this is the opportunity to do it. if you will come up in the middle of the night, they would probably say that you can strengthen the balance sheet i think they a would still like to do december. this will be reflected in the next 3, 4 payroll numbers. alix: to that extent you see the off.r continuing to go you would think that they would want to keep hiking or be able to. --steven w: that's absolutely right. -- whethercheating achieving the inflation rate is an thing they can do. i think they will not be able to balance financial stability, from employment, you always see it at 2%.

to prison exactly. we will never get a at 2%. basically the economy has done very well through these initial modest tightening steps. they have the freedom to add gradually into a allow them to look at conditions and see whether they are on the right path. alix: is it a call to buy emerging markets than? steven w: i think it is a call to i emerging markets which are trading at the second lowest value relative to the u.s. on record. -- a call to buy emerging markets. alix: stephen, it has been glad to have you by my side. stephen engle at her, stephen white and. gary cohn up next. this is bloomberg. ♪

in america.jobs day

your employees added unexpected. we just disappoint. the discipline over -- the december rate hike gets by seven market -- the september rate hike gets priced out by the market. mccain writes a scathing op-ed on president trump in the facesngton post" as trump the debt ceiling, tax reform, and hurricane are the. happy fall. i am alix steel. we are 30 minutes until the opening bell in new york. here is where the markets stack up. it is a tug of war with the ecb potentially pushing back purchases in their market. the futures are still holding on .2 percent. you have yields and there was

job number, but that reversed with the ecb headline. crude oil still down by .3%. that is how we trade across as is. let's head over to abigail doolittle who is looking at individual stocks. , hey, abigail. ofgail: we have lots earnings it numbers. happy friday. lululemon trading higher by more than 6%. they beat estimates. the cop sales up 4% versus the opt -- cop sales up 4% versus up.opposite of the ceo says they are on track to put up $4 billion of revenue in 2020, well above fiscal year 2017. not surprisingly this trade is very bullish on the little limit

quarter. aother winner, paulo votto -- little out of networks. they beat earnings estimates by 16%. , versus 1%es up 11% in the previous quarter and an upgrade of these shares by first analysis to overweight. one laggard on the day, the chip maker plunging in the plea market. the actually beat, but it is a forecast that investors do not like. they cut it. they hadhed that and been looking for 20% to 30% and to downgrade that, alix, including credit suisse at 2%. amarilla taking it on the chin. alix: it was a surprise that employers only added 150 -- 156,000 jobs.

joining us for more, michael mckee, bloomberg's international economics and politics reporter. he joins us and we have our guest joining us from princeton. michael mckee, are we not at full employment yet? michael: we are at full employment. the numbers are explaining the rise.oyment we had 74,000 fewer people with jobs and 151,000 more reporting they were unemployed. a downside there, but those are not numbers that could easily reverse in the next month. that's important to keep in mind . it's disappointing, but not out of line with a reasonably healthy labor market. it does not suggest any problems ahead. there may be seasonal adjustments. alix: which ones? which seasonal adjustment, mike? michael: the number one with

schools back in session is teacher hiring. they always have a problem adjusting for august. people are leaving summer type jobs. kids who had jobs are going back to school. there are lots of problem's around the august number and this is the seventh year in a row it has come in below expectations. a, definitely not anything to provide support for the dollar? o, not the dollar. you mentioned that treasuries were starting to rally. thoseb added to headlines. even though they are thinking about tapering their own program, it is likely to have a bigger impact on the rates market then today's numbers. alix: when you look at the probability of a writ hike, we are looking at 33% in december. we do not see 50% chances until

next june. can we recap the 208 we saw earlier this week? ira: i think that is possible. with the backdrop of the ecb, that is the one piece of news that could potentially strengthen yield curves. you see higher yields there, and i think even though it is a very small move, the fact that you just provesaction that point. in december, you end up with the fed not hiking. that is dovish. that should mean slightly lower yields or slightly unchanged yields. mean that you will end up with slightly higher yields on the backend. alix: im waiting for that. waiting for those yields. thank you.ee, ira, joining us on set, timely and jay,.

your take on the jobs market, tom? consensus. it is noise. i think the next few months will be noisy because of the hurricane. i'm not sure investors should confidence in those numbers? alix: is this the dreaded g word, the goldilocks number? will we be talking about this for the rest of the day? talk about to another dreaded g word. this is not bad for friday morning. we are in a global synchronized recovery. capital is cheap. labor on a relative basis is expensive. you have an employment cycle lows, not only in the u.s., but in the u.s. and japan. wage gains are very muted. this is positive for equities. the fact that we have a global, synchronized moderate recovery

is bullish for financial assets and equities in particular because they can generate earnings. if you have a sharp rise in wages, you tend to have higher interest rates, neither of which financial assets. we are in one of the best global synchronized recoveries in decades and that is alleged for financial assets -- that is bullish for financial assets. alix: tom, i think you are going to disagree? tom: yeah, it's overly generous to consider a global goldilocks scenario. i think what is really suggesting is, as an investor is sitting on cash, there is a lot, this is making cash expensive, right? the rise in financial assets or interest rates is higher, what we are seeing in

the dynamic this year is because there is no other alternative, equities have been capturing a lot of this money staying on the sidelines. but i think u.s. labor markets are not in a goldilocks scenario. we have written about this pretty extensively. years, the number of workers is going to be lower than the population growth. we have a pretty severe shortage of labor supply. something we have not seen since the 1950's. two years from now, it's going to be completely flipped on incentives. i think it means you want to be betting on technology. alix: how do you square that with the shorter term moves question mark you have the goldilocksar, the scenario, equities moving higher . how do you transition to that? -- i think wee

ask every investor how many stocks to they think are great aping most will say our institutional clients do not think there are great injury points for equities. it's not like stocks are cheap, but from an asset allocation perspective, they are cheap because they have a dividend yield, they are growing earnings. i think the aggregate earnings power is overestimated at the moment by investors. alix: is it a margin issue? as we see costs go up, whatever margins we see will not exist. whatever margins exist are not the same margins 10 years from now. but more importantly, i don't think every company in america aserves to be gaining multiple.

there are secular growers that jen europe -- the generate higher rates, but should the ecb the highest and 30 years question mark i think that is tough. , your response? jay: i have a slightly different take. we have been in a rising market for equities to read you had to be involved if you are an investor. if you have not been involved in the last 18 months, you are suffering from a business risk, particularly as an active investor with the rise of capital. we have an economy where investors need to be invested, but they also need protection. so, you have an environment like yesterday where the s&p was up .6%. gold and silver were up 1%. for the month of august, gold and silver were up 1%.

the s&p was flat. ,eople have to stay invested yet they want protection, so you have this fargo market where you are long and securities, buying equities, rather, and you're as anong on gold and investor, the only mistake for the last 18 months would be not becausevested, period, everything is up. whether that is sustained goes back to my point about a synchronized global economy where stocks can continue to rise generally. alix: the issue over the medium-term is that you see earnings adjusted and use of the weakness in the jobs market came from the service sector. so, isn't that a concern? we are starting to roll over? manufacturing will not make up the service sector. right.s, that's

tom is right. it's not like every stock deserves a great multiple. tom is also right that we should be looking -- i think we should be looking for laggards. i wrote a piece last week called ,"eering through the midst and i talked about fall surprise. discounted.een no one will be surprised by anything except a positive outcome on a legislative priority like tax reform. i think we are in for a positive supply on the -- surprise on the political front which is completely not expected and the way to play it is the small-cap stocks and the u.s. dollar which have been underperformers. alix: tom, what do you think into the end of the year isstion mark tom: i think it important to get something done so i've said the probability is quite high. alix: both of them are sticking with me. coming up, the j.p. morgan chase

& co -- is beautifultaly, there. we are going to talk about the divergence between the fed and the ecb. this is bloomberg. ♪

alix: breaking news over the last half-hour, the ecb may be pushing office tapering of any asset purchases until december. for a look at the fed and the ecb and the state of the global economy we want to head over to our london bureau. our mark barton will be speaking with a very special guest. hey, mark. ix, yes, joining us,

jacob frenkel. frenkel, thank you for joining us. what is the fed's big kick? does this change what the fed might do this year? frenkel: i doubt it. the fed is focused on the medium-term. the u.s. recovery has been reasonably robust. they are not just looking at the numbers of this morning. they have also been very satisfactory. unemployment is low. i believe whatever the fed was planning to do, they should go ahead and do it. does that mean the fed will raise interest rates will more time in 2017? dr. frenkel: i believe the fed should raise rates. i cannot tell you what they will

decide. but basically, if you read all of what they said up until now, conditionslly set up in order to bring about another set of normalization. they should recognize and we should recognize that the globalization also has a significant cost in the financial markets. this markets can be vulnerable to futures trades it trades are two low for too long and we should find the earliest bring interest rates closer to their normal levels. takes an action in the next couple of months, it will not be the last one.

tore are still several steps go to get close to where the fed should be. pce: look at yesterday's data. below 2% here and there are concerns with and the fomc about the path of inflation. you clearly do not share those concerns? are,renkel: those concerns of course, valid, but at the the same token they need to weigh the concern of delaying normalization. delaying normalization helps the economy. we are basically providing incentive for companies to buy back their shares rather than invest in plants and equipment. it is investing in plants and equipment that generates jobs, not shares.

it's another disconnect between and thencial sector real sector messing up the and nation of markets. so, i believe whether we are below the 2% target, we are moving closer, even though it is a slower pace, delaying ratessing with interest may create more vulnerabilities, especially to the financial market. mark: 1-wood talk about personnel, do you think janet yellen deserves to be -- when we talk about the personnel, g think janet yellen deserves to be read nominated as chairman of the fed in february? i do notel: normally go into personnel. clear i dow is so not mind doing it. she obviously deserves to be renominated. she has been professional and consistent. in terms of being deserves,

there is no question in my mind. fed: what would a gary cohn look like relative to a janet yellen led fed? what is your view on that? dr. frenkel: you remember i told you it is not a good idea to go into personnel? , gary cohn is a very competent professional, but i think we should focus the conversation. i think we should allow the numbers to speak for themselves. mark: that is fine. let's talk about the ecb. you might have heard of this story that has just broken. the ecb, according to various eurozone policy officials, is the qesee the charms of plan may not be unveiled until

december, a few days before the current plan ends. does this tell us the challenge the ecb faces in the trade-off between strong growth, but muted inflation? well, the ecb indeed faces a significant challenge, a challenge that reflects a great diverse city of economic situations among their members, challenge that reflects constitutesnt that governments that do not have their acts together. but, you know, mario draghi is the ecb.ent leader of i am sure he and his colleagues will find the appropriate balance. , moving thesay calendar one or three months does not really make a big

difference for the medium-term. what matters for the medium-term is setting up the strategy, explaining the markets to the public and executing it. i am not impressed by a delay of the funds. they probably will get together and discuss it. there is no question that they are lagging behind the federal therve, and the reason is federal reserve is having a stronger economy under their hands. but the fact of the matter is europe has improved very, very significantly and that is .ncouraging news mark: dr. jacob frenkel. x, i will hit it back to you in new york. alix: thank you, mark. see you.e to

ford light vehicle sales down 2.1%. the estimate was going to be down 3.5%. remember, july was a really rough month. they were off by 2.1%. we are waiting on the other big guys in the next half hour. a big day for the central banker , the u.s. economy adding fewer employees than expected. fed a good excuse to stay on hold and then we heard from the ecb as we just inke with jacob frenkel italy, the ecb may not be ready to finalize their decision on next year's plan until a current -- a few years before the current one expires. the street wasn by europe, by europe, by europe, europe is underperforming the s&p. does this change that call? jay: no, not for me at all.

big fan of buying the non-u.s. developed markets. they are in the early stages of taking global equity leadership from the united states. you're absolutely correct. the u.s. has lagged. really since the spring. i think a large part of that is due to the fact that the euro has had this depreciation. to me, the most important thing i've seen this morning is the dollar is not settling off -- selling off radically. we have pushed off the rate hike . the dollar is flat. what do you have? dollar, thesold the dollar is due for a reversal, due to strengthen a little bit. that should provide room for european equities to do better, because europe is growing faster and stronger than the united states. the recovery is broader across the whole europe and company earnings are better than in the united states. may have a fall

surprise. small caps should do well. i like industrials. i think the big opportunity is equities have basically been a flat since late spring and that is the opportunity. better that you wish and, better earnings growth, and i think the currency is going to reverse. the yen for example. you had north korea fire a missile over japan. yet the yen strengthened. that tells me the yen is ready to reverse. alix: tom, what do you think? tom: in in agreement. i do not think u.s. valuations are attractive, but the rest of the world -- it is clearly not a valuation issue to be buy it -- to be buying europe. alix: do you by europe because of fundamentals or ecb? tom: fundamentals, a lot of the

fundamentals people talk about -- this is a version number right? -- this is aversion, right? probably 80% of improvement in the s&p is commodity shock. growing at 3%, which is what it has been growing at for the last three years. in europe you had austerity and pent-up demand. the only way economies grow faster is of population picks up or productivity is improving and neither of those of change in the u.s. alix: great stuff. both of you are sticking with us. the opening bell is up next. this is bloomberg. ♪

alix: happy friday, happy jobs day. this is bloomberg daybreak. i'm alix steel. here is where we stack up. take a look at equity futures, on the upside.

nasdaq futures up 5.3%. s&p futures up six points. the dow 553 points. above 22,000 in the futures market for the data. in other asset classes, you will doubt having a stronger dollar into the day, weaker on the jobs number, now relatively neutral. same thing with the 10-year yield. 2.13 is your print on the 10-year. crude oil off by .4%. gm sales for august coming up , blowing through estimates. estimates were for a rise of 3.7%. trading up by 1% in premarket. sales fell byiat, 10%, double than what we expect it.

ford was down 2.1%, not as bad as some expected. now let's see where stocks are opening across the board. abigail doolittle is joining us. >> mildly bullish for the state of september. major averages trading higher by about .2%, slightly more. this follows august gains, monthly gains. the three major averages higher on the month, higher on the week. the nasdaq and s&p 500 on pace for their best week since the middle of july. tensions,opolitical fear of a government shutdown, investors don't care. , tolet's look at the movers see what is going on. tenet healthcare up 2.3%, after the ceo steps down the mid-activist pressure. plus, the company has adopted a poison pill.

investors seem to like that. tech data plunging. the forecast, lower-than-expected on the earnings front for the third quarter by about 14%. shares getting punished. dowpudpont, first day after the deal closed. trading down. an interesting divergence between some of the real world fundamentals feeling shaky but stocks going higher. despite stocks being higher, there is some reason to be concerned. this is a one-year chart. buyers are in control, however, in blue, we have the numbers above the 50-day moving average. the s&p has recently been below. reclaiming it over the past two days. however, the number of days above that number declining. earlier this week, putting in a

low for the year of 2017. trying to climb higher here. someone say the internals, the breadth is deteriorating. perhaps some volatility ahead. september is often a bumpy month for stocks. alix: that is one of the reasons tom lee sees a 4% or 5% decline in the s&p in the next month, perhaps heading for 2300. this week, it was still by the di -- buyu the dip. >> you want to be invested in equities over the long run. you have to have some exposure to volatility when you do that. valueslong run, equity grow with the value of the world economy. there is nothing else out there that does that consistently. >> it is a little bit aggressive to say weakened by this debt just like every other

geopolitical thing in the past. dip their dividends dying a slow but steady death. trump have this huge reflation rally. that has come up and then some. -- risks are to the outside upside, absolutely, mainly around tax policy. that is the story that people are underestimating. we are having an earnings recovery. of time focusing on politics but it is more about the earnings recovery. >> if we make decisions based on geopolitical risk, most likely, investors will never be in the market. i think we need to pay attention as human beings but as investors focus on the long-term. alix: still but us is tom leave. believe the dip is not happening the way you see it. well, you know, i guess we

have to frame this correctly. isthink the stock market long-term still in a bull market. we have been bullish since 2009. do we think you need to be buying stocks today? i think it make little sense. our strategy this year has been which hasght fang, accounted for a huge percentage of s&p gains. if you take up a top 10 stocks in the s&p, the market is up 4%. literally, 10 stocks are accounting for six percentage points this year. divergence,hat whether it is the percentage of stocks above their 50-day or 200-day, the market has deteriorated. percentage of stocks above the 200-day is just above 50%. it was close to 90% six months

ago. whenever the market makes a move below 50, and it has done it 24 times since 1995 when it first started, you tabulate that index , 23 out of 24 times, the market at or below the 200-day. if we don't visit it, it would be the second exception. even when you hear people talk about earnings recovery, again, i am a former equity analyst. the primary driver of the earnings recovery this year has been financials and energy. both are essentially margin- reverting strategies, yet, those two sectors have been terrible. it is almost like the stock market is getting credit for any errors recovery which is being driven by energy and financials,

terrible sectors. pretty significant divergences that i don't think really support a broad equity narrative. we know you disagree because you are looking at a bigger global aspect. it seems like tom is buying the dip longer-term, but you are looking more shorter-term. .> i think tom is right to me, the risk is in technology. i think it's in the crosshairs of governments around the world. i think that is a real risk on any medium-term basis. i like the idea that we were talking about before about investing in, plant equipment. i think we're on the cusp of a ex expenditure. a 30-year high for companies to spend on capex. i like industrials, ge.

i love tom's point of view on this. i think ge is interesting. industrials are interesting. i would buy small caps on the idea that we have a small surprise. get done in some fashion, so there are opportunities in the market. globally,e, opportunities are in developed markets outside of the u.s., europe, japan, and some of the laggards sections we discussed. alix: what are you thinking in industrials? is ae of the things that way to look at stocks over any period of time, whether there are natural monopolies. is so good,hy fang even though they don't meet the criteria monopolies, they have created natural monopolies. is,of the tough things industrials over the last 10 years, or less differentiated

among global peers. it is harder to make the case are better businesses today than they were 10 years ago. energy is differentiated, banks certainly have, so they deserve higher multiples long-term but industrials is a tough case. even this argument of tax cuts, one of the big unknowns is how much tax cuts will actually lead to capital spending. capital spending should only take place if it's in response to pent-up demand or replacement or huge technology changes. i think technology spend will rise because of labor shortages. industrial spending? i don't know. bige are on the cusp of a cycle. it has not been invested in in 15 years. ge is on a 15-year low. tt 10-year, so you get paid to wait.

it is a stock that has been beaten down, nobody really likes it. like thee in a market u.s. market that has had a big run for 18 months, i think the opportunity should be looking for things that have not performed, where you can make a case like industrials or small wait,or you get paid to ge paying dividend yields. upx: general motors was 7.5%, past estimates, chrysler, ford doing well. auto sales have been going through a rough patch. a good indicator of consumer spending, also building more cars. i want to get some details on that. joining me now is james albertine, an automotive analyst. thanks for joining us. what is your initial take on auto sales for august? >> thanks for having me.

first and foremost, keep in mind, there is one more selling the year-over-year. the numbers we are seeing are higher than they are on an apple's two apples basis. i would say gm looks like the winter so far. 1% to 2% retail, 3% to 4% adjusted overall, a very strong result in a month where we had heard, in particular pre-hurricane harvey, week in texas. they lost certainly the last selling weekend, the better part of last week. and chrysler, weaker, about what we expect it. overall, the silver lining here is that gm at retail is doing better than the street anticipated. anythinge you heard about the potential affects of harvard down the road, more manufacturing of cars because of those destroyed, any impact on

demand? >> general consensus, as with withstorms, we have seen hurricane sandy, katrina, you do expect replacement demand to come back. at some point in the next one to sixquarters, three to months. it is not sustainable, first and foremost. fullveryone carries replacement insurance, so it's hard to say all of that replacement demand will come back for new vehicles relative to new and used in aggregate. given -- the houston market tends to be a big pickup truck market, suv market, i would argue for, gm, chrysler probably better position than some import counterparts. slightly more positive outlook for them. alix: toyota august vehicle sales up 6.8%, a little shy of estimates. tom, you had an interesting call

on how much you think harvey will end up costing, and it is well above any estimates i've seen. tom: it is a basic framework. we went through the fema data, and a report which really detailed cost of katrina and sandy. it basically comes down to four costs, the replacement of lost property, autos, homes damaged and destroyed, but that it is insured losses. what is covered by property and casualty companies. then a noninsured component. amazing consistency, actually. noninsured losses run about 200,000 per person in hurricane sandy and katrina. aggregate,s, in 100,000, and housing. if you use that on houston alone , comparing 450 four new orleans, the total number will

be close to $500 billion. of which, $200 billion will be uninsured losses. in other words, not covered by insurance. 1% hit to gdp. it is in aggregate affect that ultimately government stimulus will replace but that is the real economic loss. alix: jay, how do you understand the payback? does it payback as much as it lost? >> i have not heard those numbers, so i am staggered by them. alix: that is the biggest i have heard. jay: the first thing that comes to mind of the government's response of putting in $500 million for disaster relief is a joke. in mind, original estimates for katrina and sandy were under by 10 times within the first week. media reports are showing these headlines of underestimating by a factor of 10. jay: the upside is in the capex

cycle. consumers in the u.s. are kind of tapped out. the consumer's affect is completely tapped out. what we need is capex. stimulates some capital expenditure activity, which i believe the pump is primed, companies are ready to do it, then that is the upside opportunity. if we get tax reform and infrastructure, which are big, heavy lifts. d.c. is dysfunctional, no doubt. done withot get anything if the terms were not next year. the upside is we have a capex cycle which is maybe catalyzed by harvey, we have an opportunity to really replace a big part of the u.s. industrial base, which would be very bullish, frankly, for the sector i like. alix: it's been a pleasure to

have everyone here. thanks, guys, for joining me on this labor day friday. here is where the markets stand. 15 minutes into the open of trading on the first day of september. the data over 22,000. the s&p also up by six points. following the rally we saw in europe but continuing the strength despite the weaker jobs number. a round-trip for the dollar and yields. up by two basis points as treasuries are on offer. the euro a little lower after that ecb news earlier today. gold flat. crude down by 1%. the markets are torn between data news and ecb. as the august overshoot economy added fewer jobs than expected last month, just 156,000, as unappointed rose to 4.4%.

joining us now is gary cohn, directoreconomic counsel. how do you interpret the number today, are we back to normal in the jobs market, or is this the beginning of a weaker cycle? >> before i get started, i just want to reach out to everyone in louisiana and texas and remind all of your viewers of the tragedy they are still going through, remind everyone that we at the white house are not forgetting about them, we are laser focused on what is happening. data, it is part of the natural growth we are seeing in the economy. we had a gdp number of 3% this week, jobs number that is still very good. if i would've told you at inauguration day we would be at 3% gdp and 4.4% unemployment, you would have said those are great numbers. overall, we are very pleased with where we are in the

economy, in the cycle. we know there is a lot more upside and the president is focused on that. that is why we launched our tax agenda this week because we think we can grow the economy from here. alix: jobs are consistently very solid. on the flip, wages are not going anywhere. 2.5% year on year. also, inflation stagnant. what is the right monetary policy or something like that? thee are concerned about wages, and that has a lot to do with our tax policy. if you listen to what the president outlined this week, he talked about our business tech system and how inefficient our business tax system is, and how we analyze businesses to be in america. when you do that, they don't hire american workers. we need to get our tax rates down to be competitive with the rest of the world. when we get our tax rates down, you compete for labor.

you get more labor by paying wages. wagee concerned about growth, we want wage growth back in the system. saw the numbers, the first thing i looked at was the wage number. it has been flat for a long time. we need to put more money back in u.s. consumers pockets. that is what we are trying to do with wage growth and tax efficiencies. alix: you kind of divergent my question. it is a fiscal policy issue not a monetary policy issue. do you think monetary policy can help with the wage inflation debate? >> it has to come to demand for war workers at higher price. and we we create demand for more workers is we create a better operating environment. you create a better operating environment by making the united states more competitive, you create the competition by lowering the business tax rate and having businesses want to be here. that is exactly what the president laid out this week. alix: let's go to tax reform.

we have been feeling mixed messages from the white house and lawmakers in terms of the next that. are you going to have to release additional details this month? that is what we heard from secretary mnuchin yesterday. are acutelyou aware, secretary mnuchin, myself, leadership of the senate and house, we have been working literally since november and december on a tax blueprint. we met nonstop since then. the six of us have agreed on a blueprint. we agree on what we need to do for tax or form. we are now working with the house ways and means committee and senate finance committee to finalize what that blueprint will look like. that will get released in the next whatever -- weeks or months -- as those committees get together and finalize the details, as the natural governing process happens. is the legislation in the

hands of a tax-writing committee right now? >> the legislation is in all of our hands, we are working together. the six of us will be you with the president next week -- alix: i get that, but in order to move forward, it has to be with the tax-writing committee. have you pass it on to them? >> there is a communal effort. we are working very collegially together to get tax reform done in a way that everyone buys in every step of the way. ultimately, tax reform has to be voted on in the house and senate. yes, we are working with the house and senate to do that. you are talking moreover all working together, but you have senator mccain coming out with a very, very scathing review on president trump. compromise,eed to even if we had take something off the table that we didn't

want, saying we have a present without any experience, poorly informed, we answer to the american people. doesn't that make cooperation you are talking about impossible? >> we have a lot of momentum on tax reform. a lot of us understand the importance of getting texas right, simplify and the tax code . returning more of people's hard-earned income back to the american public, not spending it for the government, the basic principles of the president laid out earlier this week appeal to everyone in this country. why shouldn't we get out of the way and allow more americans to keep their hard-earned wage? i agree with you, there is no person in the world who would disagree with that, but mitch mcconnell has said very disparaging things. you have senator mccain coming out giving a scathing review. you may want it, but how you get there matters.

it doesn't work if we are like this in congress. >> i am confident we are working well with congress. we are speaking to those people you mentioned. we have great momentum on taxes now. alix: what will you do in february, what job will you have? >> i will be here doing what i'm doing. alix: will you be in the white house or at a different building? >> i will be here where i am now with all this beautiful new infrastructure being dealt out. alix: i asked the question because a lot of heat has been made that you were not mentioned in a speech by president trump on wednesday in terms of those working for tax reform. there are questions about whether you would want to stick around to be considered for fed chair. >> i'm happy doing what i'm doing, i have a once-in-a-lifetime opportunity, something that has not been done in 30 years to reform the tax code. to be donet needs

and i'm one of the luckiest people in the world to have the opportunity. alix: so you do not want to be the head of the fed. >> i'm really excited about doing what i'm doing. let's go to harvey. you brought your condolences to those in texas and louisiana. many say it could be the most expensive natural disaster in u.s. history. how much harder does the tax and budget debate happen now that you have budget hawks in the republican party? >> we have to deal with the harvey situation, it is not a debatable issue. what people in texas and louisiana are going through is unimaginable. you have seen the data. we are analyzing it 24 hours a day. we have to help the people, we have to help houston return. we will have to spend money, we will have to pass some incremental relief bills. it is not a choice. governing,part of part of running the government

is dealing with unforeseen issues. we will deal with this and move on. the part that will be more troubling is it will have impact on a lot of the ink -- economic data. this on implement data is probably the last of the clean data we will have for many months as we go through the recovery process and people go in and out of unemployment as they rebuild their houses and lives. we will have data that may be will not make as much sense for the next five months. normalizing data for hurricanes will beral disasters more difficult for us to get a bigger picture of what is going on in the economy. alix: gary cohn, thank you for joining us, pointing to the infrastructure happening behind him on the white house lawn. we are 25 minutes into the session. let's get a check on the markets. we are having a little bit of an upside on this first day of september. by three points on the s&p,

leading sectors, consumer discretionary, financials, industrials, materials leading the way. i have to expect we are seeing some light volume. there is that rally going on in europe. in other asset classes, it is a war between the negative jobs and what is happening at the ecb. now some treasuries on offer, yields higher by two basis points. a different story after a lot of buying came in, but then the ecb took precedence. 118 is the print. crude weaker on the day and gold flat entered labor day weekend. that wraps it up for bloomberg daybreak. this is bloomberg. ♪

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. >> it is 10:00 in new york, 3:00 in london, 10:00 in hong kong. >> live from new york, i am mark barton. welcome to "bloomberg markets."

vonnie: we start this hour with more breaking economic data. two key pieces coming in after this morning stopped report. here is abigail doolittle. abigail: we are looking at a beat for ism manufacturing. the survey called for 56.5 but the actual print for manufacturing came in at 58.8. anything above 50 tells us the economy is expanding, so this is a much better reading than the survey had called for. as for the second piece of economic data, university of michigan consumer sentiment index. it is a little bit of a mix. the survey had been calling for 97.5. the index calling in at 96.8 versus the prior reading of 97.6. the bigger piece of data is the nu