fed president why waste growth has not accelerated and why we are in a goldilocks economy. emerging markets officially slip into a bear market as investors weigh dollar direction from jobs and trade. your move, president trump. business leaders try to convince the white house not to put new tariffs on china and the world waits for a response. day, i am to jobs david westin alongside alix steel. paulson ago today, hank went in front of the press and says we will seize fannie mae and freddie mac and eject a couple -- inject money. it became the financial crisis. alix: it was a hybridization. david -- privatization.

congress still cannot figure out to do what fannie mae -- with fannie mae. alix: what were you doing? : david running abc news -- david: running abc news. all next week, we will speak to the biggest voices from that time spanning across all of the sectors affected by the financial crisis. on monday, housing, tuesday, we speak with james rollo, and wednesday, regional banks with kelly king of bb&t, and ray dalio. just some of the guests as we look back 10 years to the financial crisis. waiting response from washington. euro-dollar firmer this by the fact softer economic data like

german exports with the dollar playing defense today. 210 spread is flat. crude goes nowhere. david: let's talk about the numbers. at 8:30 eastern time, nonfarm payroll additions for august. we may hear from president trump on imposing tariffs on another $200 billion on chinese imports. willnday, swedish voters go to the polls in a tight race where a populist anti-immigration candidate are challenging to take over the government. alix: we are joined by carl riccadonna and sarah ponzi. welcome to your super bowl, carl. [laughter] alix: a good laugh, thank you.

what is your call? carl: a weaker than expected number. 100,000 put the peril change and the reason is not related to deteriorating fundamentals in the economy or labor market but august is a quirky month, the most quirky with payroll statistics. payrolls tend to disappoint relative to expectation and trends and compared to the adp survey in august on the first front. august payrolls tend to be upgraded substantially. do not take august at face value. david: we care about wages. not -- wages do not have quirky issues and are more aligned with the trend, about 2.7% in year in your terms. that means that if we grow at sub 3% on average hourly

earnings, 2% core inflation on the fed preferred metric is not sustainable just yet. that is why they prevaricate around this notion of whether we have arrived at a sustained inflation in line with their objective. alix: prevaricate, wow! david: i love it. carl: you said it was the super bowl, have to bring me a game. alix: here is what the fed president said, a bit of a goldilocks economy from a policymaker point of view, the fact that wages have not grown faster and a sign the economy has room to run, we do not feel the need to raise interest rates more quickly than otherwise. what did you make of that? >> what is going on with wages and why aren't we seeing a pickup? report.back to the jobs it will take a big surprise to see any major movement in the

markets. if two point 7% is what is expected from hourly average earnings, it may take 3% for an upside surprise or 2.5% for a downside surprise to see any major movement, especially within the bond movement. it will take a big surprise to see movement. david: not just the united states but around the world. showing,ut up a chart yesterday close to a bear market and it is now in a bear market. this was going on when there seems to be a pause. pause, but as a we see more strong economic data out of the u.s. and the head maintains -- fed maintains a plan to hike in september and maybe a december rate increase, that contributes to this sucking sound in emerging markets in the capital flight. uncertainty with the brazil

elections in october and there in ae a apuse -- pause much larger storm. david: currency, a little blip up. if there are strong job numbers, how does that affect the rest of the world in a sense it may say to the fed you may keep raising and what does it do do emerging markets? >> a strong market would entail the u.s. dollar to rise and that has been a big weight on emerging-market currency and the u.s. dollar has been rising. making a more difficult. they move in relation to one another. one camp says the emerging market rout has gone far and now everything looks cheap. this is the time to jump in and maybe time for it to go up. someone said he is bullish on emerging market equities because of the fact that we have seen such pain lately.

on the other side, people say no , this is related to fed tightening, other larger issues and has more room to run. david: the third story is trade. trade, put up a chart that shows, jpmorgan dozen index of companies that have 15% or more revenue from china. you see what it has done this year. to 3% over the year and 11% from the peak. it is affecting the valuations of companies involved in china. and we areear waiting on these headlines to pass on whether we will get these $200 billion worth of more tariffs on chinese goods. we could get a comment any hour. we could have gotten it at midnight last night. we have seen the effect through the markets. something weighing on emerging markets.

you look at the emerging market index, some big china tech companies are large weightings bear come alibaba, tencent, if we got some further escalation of trade with china, we could see more pain in emerging markets. alix: banks started to revise their base case for trade, meaning they some bigger fx than before. what do you think? markets. carl: forecasters to this point have been surprised by the lack of impact on the broader macroeconomy by the trade issues with steel and aluminum, or the initial tariffs on china. the pattern to date has been overreacting to these trade concerts and now when we talk about $200 billion, a bigger piece to digest. we could see some broader impact in the economy. to the chinesegs economy, growth is struggling and the export sector is important. as the u.s. comes in with tariffs, a great problems and china seems to be unwilling to

fully the value their way out of this. -- devalue their way out of this by the move in chinese currency exacerbates the strains about other emerging market economies. david: i wonder, do we have a tough time hitting our arms around china because it is such a massive economy and so diverse? it is not like belgium. is it going well or badly? a complicated story. carl: a complicated story with big questions about how to view the data and transparency and accuracy of the data. that further clouds the problem in a new player on the broader economic seeing in terms of the banks of economic output. david: nothing against belgium. some of the best food. alix: what is better than the super bowl, ola vix -- olympics? david: world cup soccer.

riccadonna and sarah, thank you. by all of the charge on gdb -- find all of the charts on gdb go -- gtv go. we will discuss the jobs report with constance hunter coming up. this is bloomberg. ♪

taylor: the largest shareholder in deutsche bank is getting out. sold there aup has prison stake in the german largest lender as part of a

chinese government demand that they focus on their airline business. the sale would add to present -- pressure on deutsche bank who shares are down 39% this year. fiat chryslerf has reaffirmed their plan to stay independent. he told shareholders in amsterdam that the future is one of building, not breaking your he has been questioned about what is next for fiat chrysler following the death of their longtime ceo. there was speculation they would seek a merger. british airways has been rocked by a data breach with shares in the current company falling by the most in seven months after the airline revealed hackers made off with credit card data from 380,000 transactions. the break in lasted for more than two weeks. that is your bloomberg business flash. hour away froman the jobs report and expecting hiring to rebound in august with employers expecting to have it

-- having added jobs leading to a september rate hike. joining us is constance hunter from kpmg. the new york fed president said yesterday about the economy, said it is a bit of the goldilocks economy from policymaker point of view, the fact wages have not run faster is a sign the economy still has room to run. we do not feel the need to raise interest rates more quickly than otherwise. will anything we hear today change that statement? constance: probably not and you need to dovetail it with the remarks of alan krueger from jackson hole when he talked about this conundrum of why aren't we growing? there are many reasons are colonists are thinking we do not have to do with traditional wage inflation relations or labor tightness and inflation relationships. one of the things alan krueger says was that develops curve,

the relationship between wages market, arelabor felt at the low end of the low skill end of the labor market. letting the labor market run a little hot or goldilocks felt ad of the low skill end of the labor market. allows some of those people to experience higher wages which overall is considered by policymakers to be a good thing. david: a chart that illustrates what we are talking about would be why like hourly earnings in the blue line is unemployment rate. is it a conundrum? what happens if the fed to decide to address this 5 -- >> two ways you can look at ways inflation, running hotter -- wage inflation, running hotter is grown good -- is good if you have productivity growth. 2.9%. second quarter, you can have a little wage inflation and have labor costs

and improving. a positive for the market. constance: i feel that is always the holy grail. we have to get productivity higher. it has been very low, not just the u.s. but around the world during this recovery. this is something everybody is happy to see. alix: that is the economic backdrop. it feels like the market is interpreting things differently and we are seeing calls to go defensive like morgan stanley. citi wrote that the potential for faster wage gains could generate another 5% pullback this time. as geopolitics and trade sanctions and international economic weakness is challenging to pinpoint the catalyst but the vulnerability exists. is that a narrative you have to start place in bets on? economy is that the going to slow down from its

sugar high in fiscal tax reform and fiscal stimulus. to a more sustainable place. that allows the fed to been -- to be at the end of the rate raising. backdrope constructive , to what extent is the constructive backdrop because wages are not going up? we are giving equities a pass because it is not affecting profit margins because we do not have to pay workers more? >> margins are still elevated, companies got a tax break. topline is still growing relatively strong and the consumer -- we are about to have the 95th consecutive month of job growth. the consumer has been the backbone of the recovery and topline is growing at a healthy pace. if we start to see wage increases, that will be a test point for the equity market. that shows thet

extent to which profits go up while wages -- real wages are going down. >> it is ok as long as productivity increases. david: not so good if you are a worker if you're real wages is going down. >> good if you are a shareholder. >> helpful to have the an employment rate going down. expanding the opportunities for workers. you have had valuations come down since the beginning of the year. 19 times forward earnings and 17 times now due to the better than expected earnings growth. a positive backdrop for the market. alix: when you mentioned the economic data started to slow, do you want to play the late cycle? what is the correct portfolio allocation? >> we are constructive on u.s. equities and u.s. high-yield because you will see the slowing in economic activity, which

allows a continuous accommodative monetary stance. that is a good thing versus the economy heating up and having a monetary policy. david: we can have this divergence between the united states and the rest of the world. emerging markets have taken a battering. can we keep going and misdirection, whether currencies or equities or bonds? constance: yes, this is the question and one thing we have been thinking about seriously is -- are the ripple effects? we started with argentina. in the backdrop, turkey worsening. and then turkey hit the forefront of the news. and south africa now in official recession. we say, or else are there own abilities? a lot of dollar denominated debt and like turkey, a market growing based on real estate, which is a debt fueled business.

only does the economy turned down if that turns but the collateral, dollar strength plays into it and the elections in brazil. if those things he doubt, we think -- heat up, we think a risk of more contagion and spillover. alix: to approve -- account deficits, you have to export more but in a trade war that will not happen but are there any reality to those things happening? constance: for the u.s.? alix: emerging markets. constance: it is a self correcting, turkey, the extreme devaluation means they're going to him for less. they will become more competitive and export more. even if they do nothing else. but it will be a long and painful recovery which does not happen in a quarter and everything is good, it takes several quarters and there are political ramifications while it

is going on. alix: both of you are sticking with us. coming up, larry kudlow, u.s. national economic council director joining us at 9:30 a.m. eastern time. forget about funding, elon musk brings whiskey in weed to the spotlight. his wild interview next. this is bloomberg. ♪

david: time for some company stories we're watching today. , killing hedge fund managers they are still in business -- telling hedge fund managers they are still in business. they're looking at cost cutting but you are the exception. alix: most banks woo their top clients and want to keep them happy. david: rumors they will pullback in new york. fargo from bad to

really not good to really, really, really bad. doj is probing the wholesale banking unit. , potentially employees in the unit and properly altered customer data to meet regulatory deadlines. i told you, why would you think that is ok? david: a pattern of let's make it up. darius employees, let's make it up. is there a cold roll issue -- cultural issue? alix: it has to be a systemic vibe. they cannot be one tiny portion needs to get the numbers up. this will go from bad to worse. david: the department of justice now is going after you. alix: this is a real deal. -- cbs, and viacombs, and viacom, les moonves may be

leaving cbs. he had a conflict with sherri redstone. it looks like she has won. is lessplain it, members being out that's less moonvesbeing -- les being out, are they different things? david: i suspect there are connected. he said he did not want sure redstone to be putting people on my board. she is under investigation for allegations of improper conduct. if he is out of the picture, he is not the force you once was. -- he once was. the deal will be, sherri redstone money.: cbs saving

face package was in stock. musk smoking weed and working whiskey. -- drinking whiskey. a podcast of him doing that. he says he is not a regular smoker of weed. what are you doing? --id: form must -- foremost for most, telling the board to fire him but not him. alix: we will discuss what has changed since the financial crisis with the overall skin --neil barofsky. ♪

alix: this is bloomberg daybreak am alix steel. s&p futures off and as they

futures hit pretty hard yesterday. -- s&p futures hit pretty hard yesterday european stocks getting hit and euro banks, lowest level since november of 2016. -- a reportly said said their license to operate could be threatened but they denied the report. a nice internal memo to get there no problem. the dollar is on the defense today. euro-dollar rising. down .1%. soggy economic data out of europe. particularly warm and exports. -- german exports. david: let's get an update on what is making headline from outside the business world with taylor riggs with the first word news. trump will announce

tariffs on $200 billion of chinese products. a public comment time ended yesterday and some of america's tech companies and retailers have asked the president to reverse course. they could be heard if the u.s. imposes the tariffs and china retaliates. unlikely there will be a deal on nafta this week according to a canadian government official who says the talks with the u.s. in washington have seemed upbeat. paul krugman spoke to bloomberg about the negotiations. if thear, it looks as the status basically quo. my original prediction was that we would get cosmetic changes to nafta, enough so donald trump could say i won and business would go on. that is mostly the way it is

looking. the leading candidate in the brazilian presidential race is in stable condition out of a -- after a neil -- near fatal stabbing. the attacker said he had been sent by god to kill the candidate. the elections are next month. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: thank you. , a sunday,o today when hank paulson when in front of the press to announce the government was taking over fannie mae and freddie mac. >> fannie mae and freddie mac are so large and so interwoven in our financial system that a failure of either would cause great turmoil in the financial markets at home and around the globe. we have determined it is

necessary to take action. the action should accelerate stabilization of the housing market and ultimately benefit financial institutions. they will no longer be managed with a strategy to maximize common shareholder returns, a strategy which encourages risk-taking. we will make an error if we do not use this time to permanently address the structural issues presented by the gse's. david: someone who was at the center of the financial crisis, neil barofsky, and still with us is constance hunter from kpmg. let's start with fannie mae and freddie mac. we will put up a chart of what went on, they were responsible for $5 trillion in mortgages. the government says 100 -- we

will wipe out the shareholders and replace management. hank paulson says this is temporary. 10 years later it is still in conservatorship. >> shocker. listening to his words 10 years later, he talks about how these entities are so large and so interwoven that the failure of either one, the havoc on the global economy, but we need a permanent change. not only with fannie mae and freddie mac, but think of other large financial institutions fit that definition back then which triggered the bailout of fannie mae and freddie mac but all of our giant and commercial investment banks and how treaty definitions are today and little has been done to make permanent changes. they may and freddie mac are still so huge and interwoven and -- david: we hear too big to

fail is not fixed. but on the other hand, a much safer system with more reserves. how do you square those things? >> a big difference between safe and safer. eve of the financial crisis, we are safer with more capital in the big financial institutions. that is good. that does not mean we are where we needs to be because the institutions are bigger and just if not more interwoven. the failure of one what still bring the same global havoc as it would have been. less likely because of the increased capital but not enough capital, particularly with what is going on in washington and the pressure to make them less safe. alix: the issue with fannie mae and freddie mac, the government privatization, that is a political bipartisan issue and

not about their health. constance: i think that is accurate. we see in trenched institutions, it feels -- it is hard to change them even when we have immense cooperation across the aisle as we did after the financial crisis. there was a suspension of partisan politics for a time. we do not have that suspension of partisan politics now. making significant progress will be more challenging. david: fannie mae and freddie mac have to return all of the profits they make. is this a partisan issue about how we handle housing, or a drug for the government? they are getting a lot of money. alix: i want them to keep giving me money. david: i think they have repaid all the money plus, a good deal for the u.s. government. >> i totally agree that if we

talk about how the system has changed since the global financial crisis to now, specifically that the banks having higher capital gives you more of a buffer to limit contagion but will not -- as you said, not where we need to be. same with fannie mae and freddie mac. abouttim geithner talked how applying constraints on risk-taking to only part of the financial system, just the banks , and allow other financial institutions to operate outside the constraints, you leave the overall financial system less resilient and banks may look more stable but there role in the system will shrink over time. it in h where money -- companies get their money. -- it in cap legs were -- encapsulates where companies get their money. large difference between

financial institutions and companies in the private sector, they are not guaranteed by the federal government. it has been a good deal for the taxpayer that the sweep of profits for fannie mae and freddie mac, but they are not recapitalized. when the market turns and they suffer losses, it will be a bad deal for the taxpayer. david: 10 years ago, did hank alstom bailout fannie mae and freddie -- did he do it because he had huge bondholders around the world including japanese institutions and the japanese government, and whether guaranteed or not, a lot of the big players, blackrock, berkshire hathaway, if they went south, there would have been a lot of disruption in gold. back then, not only did you have the big banks but then he may and freddie mac, aig -- fannie mae and freddie mac, aig, too big to fail, have we really solve the problem at large with

institutions explicitly on the government's dime, and those implicitly guaranteed, which creates situations like fannie mae and freddie mac where bondholders lent money to fannie mae and freddie mac even though they knew they were undercapitalized and took too much risk because they would be bailed out. how many other institutions still look like that today? continuing this centuries-old cycle of boom, bust, bailout. alix: not just banks. this is just the leverage loan and junk bond market. there is a lot more money out there. since 2008, how high we went in 2017. my concern is that the leverage not reflected in this chart. shadow banks. banks that have offshoots they are lending to risky areas, private equity, because banks were regulated so strictly that

companies and individuals got money somewhere else and that is an unspoken leverage that could unwind. thatance: one thing is even the regulated institutions have risks with the regulators did not foresee. the idea that shadow banks contain risk we do not know much more risky than when everything was under the regulatory umbrella is a red herring. when things were under the rate of for a umbrella, risks that were not seen that preceded the financial crisis. i do not think there is possibility for a crystal ball unless you're specifically looking for cracks in the system. now, yes a risk with shadow banking and i was a be levered loan market is an area where one should be paying close attention because it is a place cracks will come. if you think of this risk, i use an analogy like an avalanche,

avalanches are difficult to forecast. a lot of science trying to understand how to forecast of them. a mathematical procedure called critical state theory which analyzes each snowflake fall. stable and falls lance on the mountain and everything is good but occasionally snowflakes fall that are not stable. when you get a cluster of unstable snowflakes, you get an avalanche and i would look not with just what is going on in the u.s. with the debt market but around the world for a possible cluster of unstable snowflakes. that is what we need to be looking for. david: you were part of fighting the last war and prepared -- where is the next crisis going to come from that we do not anticipate? >> if i knew, michael lewis would write his next book about how i became a billionaire. leverage loan markets for years have been a source of risk, especially when you see

protections that helped fuel a lot of the problems in the residential mortgage space and how it is being replicated. my bigger concern is, we will have another crisis. -- the question is the depth and severity of the crisis. that is where the concern is. that is where we need to make sure that, rather than an doing reforms, we need to double down, particular -- particularly with capital. alix: central bankers say they do not have ammunition to fight another crisis. they have been hamstrung. aside from regulation, that is the second tier risk of another crisis. >> absolutely, we have made incremental progress since the financial crisis with banks having more capital and transparency and financial products, even global debt is similar to 2008 levels but more

is held by governments that consumers and governments have more tools to handle it. that is why we think the fed is closer to the end of the rate hiking cycle than the beginning so as not to trigger, especially when you do not see inflation in the economy. david: neil barofsky, constance thomas,and sunitha thank you for bring with us. , we will talk about people afecting -- we will speak to former fed governor and ray dalio next week. alix: how miami is becoming one giant puddle. the next -- the water crisis next. this is bloomberg. ♪

alix: this is bloomberg daybreak. taylor: coming up, alan krueger, princeton university professor. let's get to the bloomberg business flash. daniel loeb reportedly will launch a proxy fight to replace the entire board at campbell soup. the wall street journal says he is unconvinced by the company's plan to sell two unit.

others are pushing for a sale of the company. but john's founder is accusing the ceo of plotting to oust him from the company. he says that he was accused of racism to try to save his own job. the owner stepped down as chairman after admitting he used a racial slur. papa john's says the allegations are without merit. qualcomm shares rising in premarket trading as they give a quarterly sales forecast that the estimates thanks to strong demand for data center semiconductors. that helped counter concern that year-long surge in demand for chip equipment and memory chips is coming to an end. alix: we cover three things wall street is buzzing year-long surr chip equipment and memory about. it is businessweek beat. drinking water crisis

with rising sea levels means time is running out for drinkable water. jeff bezos and paul allen transform seattle with amazon but is it better off? three words, one world. one startup trying to map of the entire world through word that a -- one word at a time. david: let's start with miami, in terms of climate change and the ocean coming up and taking upbeat from property but a more immediate problem. >> we are talking about the aquifer in disdain. the water so permeable and makes it cheap to access the water and makes it very vulnerable. waterr away you have table rising and you increase -- likelihood of that tocsin tocsin breaking into the aquifer.

toxin breaking into the are prefer to that is about saltwater -- breaking into the aquifer. that is about saltwater. david: i thought about this as being taking upbeat from property. the groundwater is not so far below and that's what makes it so cheap. miami, most000 in places have been replaced by sewers but not in miami. alix: they say anytime you talk about water contamination, that is bad. a broader investment topic, dissemination -- adapting over the last decade or longer. >> the caribbean islands, it is expensive to do. david: middle east, saudi arabia

and that israel investing in it. >> they say it may be $13.5 billion to solve the miami-dade area in terms of making sure they have clean water. that is problematic. alix: let's go west and seattle. an interesting story. you have individuals go to seattle, the director for special projects, he wanted to see what amazon did to transform the city. >> a reconnaissance mission. david: detroit was competing for amazon headquarters. >> everybody wanted it and they wanted the amazon effect. two billionaires impacting seattle. jeff bezos creating a lot of jobs and making the first headquarters there. paul allen, cofounder of microsoft, he helped them build their massive facility. , he made hist know first fortune through microsoft

that made billions of dollars the real estate. david: seattle is wonderful, he turns, it turns out what they have done in seattle is not so great. >> affordable housing problems, homelessness is at a crisis. you have protests. the infrastructure, even though they made investments, they are having problems. if people look about wanting to do the second headquarters, they have to look at the first headquarters. to be fair, amazon is saying that when you're thinking about building a second headquarters, thinking about housing affordability and infrastructure. think about how to do a better. david: mapping the entire world in three words. it starts out in sub-saharan africa, some guy trying to get his music equipment to a place outside of rome. >> it does not work out so he creates a company called what three words.

you can put your address in an app. you are a math nerd? are you? he basically divided the whole world into three meter by three meter squares and came up with 57 trillion and took the cube root and figured out three word combinations to 10 point every point on earth -- 10 ,lix: so many areas in africa they cannot go there to find places. they cannot go with vaccines and medication, now they can. system want the everywhere by 2020. tech: another example of

leaving infrastructure -- leaping infrastructure. --tter on catcher on does david: senior white house officials raised to deny being the anonymous author of the new york times op-ed article a president trump. more on what i am watching next. this is bloomberg. ♪

david: this is what i'm watching. we will watch it all weekend long, senior white house officials denying they are the author of the op-ed. including people like wilbur ross, the secretary of state, james mattis, even the vice president's office saying it was not us. you understand why but you have to wonder -- alix: surprised we do not have tariffs on china.

this will be the administration. how can they get other things done? will we hear more aggressive rhetoric out of president trump? david: a smaller issue, if you are the white house, who do you put on the sunday shows? alix: sarah huckabee sanders? nikki haley? coming up, the countdown for the latest jobs report. we will break it down with alan krueger, former white house chief economist. this is bloomberg. ♪ xfinity mobile is a new wireless network

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so you just pay for data -- by the gig or unlimited. saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. alix: show me the wages.

new york fed president john williams is puzzled why wage growth has not excited. he says we are in a goldilocks economy. emerging markets officially slip into a bear market. trump,, president business leaders make a last-ditch effort to convince the president not to impose tariffs on china. david: welcome to "bloomberg daybreak." it is jobs day. i am alix westin with -- david westin with alix steel. the government putting $200 million into fannie mae and freddie mac. it was early stages of the financial crisis. 10 years ago this coming sunday is when lehman brothers was. i am having a hard time

talking because it is a different world we were in. in terms of the next crisis, i am struck by the fact that we're talking about the financial crisis, and president trump's latest tweet is about the woodward book. we have moved from a financial crisis to the white house seeming paralyzed. david: i read the hank paulson book recently, and whatever you think about the administration, george w. bush, ben bernanke, they were focused on this. they had their act together. they were organized and disciplined. i don't know that this white house would be in a position with a crisis like that. alix: the rhetoric does not match up with what comes out in terms of policy. speaking to will be the biggest voices from that time. we will be talking with cheryl palmer on monday.

tuesday, former fed governor dan .arullo ray dalio of bridgewater's coming up. david: really looking forward to that. alix: markets, we are waiting, half an hour from the jobs data. s&p futures are down after closing at its lowest level in two weeks yesterday. the euro-dollar was stronger despite softer data out of your. -- europe. seeing a little selling on the margin. a little more on the front end. going to be dictated by any trade conversation today. david: it is time for the morning breeze. coming up this morning, it is going to be u.s. nonfarm payroll for the month of august. president trump may be imposing tariffs on an additional $200 billion on chinese imports.

so they come a swedish voters go to the polls where once again population into immigration candidates are challenging to take over the government. for news outside the business world, we go over to seb saleck. seb: president trump got some pressure to not impose $200 billion of tariffs on chinese products. countries largest retailers are pressuring the president to withhold on imposing tariffs. china has vowed to tell you. it is unlikely there will be a deal on nafta this week. a canadian government official beentalks with the us have upbeat. yes nutrition has warned it is willing to sign a trade guild that only includes mexico. in result, the leading candidate in the presidential race is now

in stable condition after a near fatal stabbing. the attacker told him he had been sent by god to kill the candidate. elections are next month. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. salek, and this is bloomberg. alix: bear market blues. you have emerging-market stocks slumping. that is ahead of u.s. payrolls and a pending decision on tariffs on chinese goods. man in thenow are seksaria and alan krueger. have we seen the bottom? mayank: positioning in emerging markets is very stressed just as the dollar long is very stretched.

we do a weekly report that tries to take various measures, put them together, and get a sense of where things are. our sense is that while positioning is stressed, there is an interesting dynamic happening within emerging markets themselves. we have noticed the effects of volatility on emerging markets is so much higher than emerging market equity volatility, something we have not seen in many years. that tells us there is something more than what the headline shows. even the correlations between the various fx crosses are not anywhere near the highs that would normally be suggested when we say the overall volatility has picked up in e.m. what this suggests to us is the fundamentals are diverse across various e.m., and so far to spend an idiosyncratic stargate maybe things change -- story.

maybe things change. there has not been any clearer signaling if the bottom is in or this could continue longer. david: that is interesting. alan krueger, this suggests it is case-by-case rather than the fed raising rates and tightening the dollar and trade concerns. how much of this is idiosyncratic or because of the fed? alan: i think it is a bit above. -- of both. you would have said the same thing 11 years ago before the u.s. financial crisis that everything looked like it was contained, and this was just a problem at bear stearns. correlationsthese remain low until they become and we are temporarily solving some of the problems, but we are not solving the root of the problem. alix: that brings up the problem

of hedging risk. if you are hedging risk ahead of some big event, brexit or italian elections for example, you would not be rewarded for that. how do you had yourself? yourself? mayank: that is the critical question. we try to price in the risks on the horizon. index is 15.e vix real-life volatility is 7.5. vol is really expensive to hold at current levels. the assets we think that are attractively priced are s&p put spreads despite the selloff this week, especially because we think trade concerns are not to go through the month of

september. you can have anything from china, europe, nafta. any of these things could shift the market sentiment. alix: there is always the fed hikes through all of that. mr. williamson speaking yesterday. he said one of the concerns is emerging markets, but also the yield curve. he said, we need to make the best analysis in terms of our dual mandate goal. if that requires us to move interest rates up to where the yield curve flatter, that is not something i would find worrisome on its own, and get that would wreak havoc on different asset classes around the world. looking at this from two perspectives, one, what is the economic impact? typically, the yield curve has inverted in previous cycles before recession hits. when it comes to risk assets, we

think this signaling mechanism is quite next. -- mixed. the much more interesting thing to look at in terms of when the yield curve starts to steepen is equity markets and cyclical assets, not so much when the yield curve inverts. zero does not seem to hold any special value. it is hard to predict where this is going. we have been telling our clients to wait for the curve to start to steepen. david: we have a chart on cpi. if you look at that and just worry about inflation, what is the fed facing in terms of being too late instead of two early? at certain levels, the fed is at its sweet spot. it looks more at pce inflation rather than cpi inflation.

pce inflation is at a good spot. it needs to be forward-looking i think it believes expectations are well anchored. we will not see inflation shoot from 2.5% to 4% or 5% because of the anchoring. i think it is concerned about losing credibility, but it has its at the time being. that allows it to him about the gradual pace they have been moving. mayank seksaria, macro risk advisors, thank you for being with us. we will look at paychecks next. this is bloomberg. ♪ this is bloomberg. ♪

alix: this is the wall street journal reporting, tim armstrong, the executive emerged aol is with a well is -- in talks to leave the company. david: that is not a surprise. tim armstrong is very effective, a great advertising i when it comes to online. there's been a change at the top at verizon. they are taking a very different approach. before they were going to go big intermediate. not so much now. they are going big into 5g now. that is not surprising. tim armstrong was mentioned as a candidate for wpp. alix: interesting. that did not happen. david: he is a superb sales guy. he is really good at advertising

sales. alix: let's get more on your business news. : the largest shareholder in deutsche bank is getting out. startedhna group has selling it's almost 8% stake in the german lender. the cash-strapped conglomerate is focusing on its airline business. shares for deutsche bank are down 39% this year. the chair of fiat chrysler has reconfirmed the companies plan to stay independent. questionn about what is next for fiat chrysler. there was speculation that the company would seek a merger. is accusingfounder conspiring to of himhim from the -- oust

from the company. the founder step down after admitting to using a racial slur. alix: thank you so much. we will drill down on wages and the impact of a has had on the sector. companies like nucor, alcoa may have benefited from the increased tariffs on steel and aluminum. will they pass that on to their workers? gina smiley, are we seeing a positive impact from the trade war on this front? gina: one interesting thing in the way this has played out on the ground is you have seen one ine bonuses, not increases base pay. what steelworkers are campaigning for is that increase in base pay that they have not been seeing. they have seen increased money from profit-sharing, but with a

want is something more sustainable that can last. i think that is interesting because it plays into this broader story in the labor market where you are seeing a lot of one time or nonwage benefits rather than sustained pay increase. alix: real wages have not really done that much, and they are in negative territory. you can look at the real average hourly earnings and weekly estimate. why? guy: one of the things happening with wages as they are barely keeping pace with inflation, or they are not depending on which index you are looking at. it is not clear to economists. it is a mystery as to why that is happening. john williams yesterday said it is one of the lasting puzzles of this expansion. it is not obvious why you are not seeing stronger pay pressure. david: alan krueger still with us.

you have done fascinating word more broadly on wage increases and plotting against the real tax cuts, the effective tax cuts, looking for any correlation. alan: there is a mystery that weight growth has not been stronger, especially in the last year with the enormous tax cut we have seen. we have seen real wage growth slowed. how has the pace of wage growth varied across industry because the corporate tax cuts led to a much greater cut in the race according to industries. david: we have that chart now. the bottom number is the percentage reduction in effective tax rates. manufacturing with down about 6%. basically, they have hired a modest number of people. alan: across the board, there is no relationship. you have much bigger tax cuts in

construction and utilities there manufacturing and restaurants. there is no correlation between implement growth and wage growth and the magnitude of the tax cuts. david: why not? alan: it is pretty clear they are going into profits. we are seeing dividend buybacks. that is where the money is going. there is not much bargaining power for workers. i gave a speech at jackson hole where i emphasized worker bargaining power is weaker now than it has been in the past. workers are not able to take advantage of the low unemployment rate. david: the bottom line is real wage growth. they are just going apart. as profits go up, earnings go up for the company, real wages are going down. alix: that is a comparison to gdp. the bigger the economy grows, workers are getting less of that share. alan: the share of national income going to workers has been

declining for the last 20 years. that is symptomatic of the decline of worker bargaining power. one less thing to connect this to the discussion on tariffs and trade, steel prices have gone up. we're seeing the prices of washing machines rise because of the trade policy. because nominal wage growth is not picking up much from that is causing worker pay to drop across the board. whatever benefits there might be in the still sector, that is getting wiped out across the board for other workers. alix: i was struck when you look at lower income workers and expectations of wage gains over the next six months is starting to rise. is the next six months going to be different? alan: it could be. we have seen gradual strengthening in wage growth. today, we might see a little bit of a pop up because of basic effects.

that will help as we replace the base month. more at the bottom in a strong economy. we are seeing more of that. that is probably raising expectations. we are not seeing as much wage growth in the broad middle as we would ordinarily. david: another example of where the economic models are not proving out in the world. what is the perfection in the model or the world that is causing that? alan: the world changes. bargaining power has gotten weaker. we have seen changes in employment and output at superstar companies. that was the theme at jackson hole this year. many industries are becoming dominated by a small number of firms. that is enabling them to increase their bargaining power with workers because workers have fewer options. alix: then you see in unemployment rate below 4%.

that inou understand the context of lower wages? alan: participation has been remarkably stable. if you go that over the last three years, it bounces down a little bit month-to-month, but there is not been much change. i think that is related to the fact that wage growth has been relatively weak. things will be worse if the job market was not this type. david: let's go back to the government. you have a couple of alternatives, one through labor law provisions, antitrust to go to the employer side. what about the monetary side? can the fed running hot? alan: i think is less clear that antitrust policy would help.

general ofy washington state has done that. alarmed by how many agreements there are. by how manyshocked of these agreements there are. the question on monetary policy is more confident. if we run the economy higher, that could cause executive practices to break down, and that will be positive. it could be that running the economy too hot creates problems like in the financial crisis 10 years ago. krueger will be sticking with us. later, we will be speaking with larry kudlow, u.s. national economic council director.

has the dollar rally run its course? dollar take a look at policy on the greenback. policy on the greenback.

alix: the dollar trading will change today ahead of the jobs report. can the greenback continued to strengthen? still with us is alan krueger. brad bechtel joining us. data give it another boost or peak out? looking for something around 1.70 at jefferies. at averagelooking hourly earnings percent of inflation. with the u.s. economy looking good, the fed on course, it looks like the dollar is higher

from here. alix: presenting a risk off theme? brad: it depends on the magnitude and timing of the move. sudden moves in currency markets lead to risk off. if it is a gradual grind, that is generally ok. we had this broader theme of normalization of monetary policy, which is also driving emerging-market weakness. as u.s. rates continue to grind higher, that is going to great tensions in emerging markets. that is likely to continue. it does point the dollar higher. if the jump sire, that would be bad. -- jumps higher, they'll be back. david: how much of this is the fed raising rates and how much of this is the uncertainty of going to a safe harbor because of trade? brad: trade uncertainty is definitely driving safe haven flows.

you can see that showing up in the dollar and the swiss franc. the swiss franc has been outperforming the yen as a safe haven currency. you can see that through the swiss yen cross. trade tensions are going to drive the trade. and is both idiosyncratic the broader macro theme. both of those things will drive safe haven flows and dollar strength generally. alix: how much strength do you think is left in emerging markets, and working that prices spread next? brad: that is a good question. we have been looking at political risk like in brazil and turkey. where they example are blaming it on external factors for driving currency weakness. the red is another story where increasingly domestic affairs look ok, but political shakiness

get people concern. it is always talk to tell where people will get concerned next. david: what about indonesia and chile? those dosing to be political problems. not: definitely not -- do seem to be political problems. definitely not political problems. copper obviously getting hit over the last several weeks. trade tensions related to tear talk, either way it is going to slam someone like chile and indonesia. alix: thank you very much. do we see 3.5% unemployment rate or 3% sustained yield on the 10-year? alan: i was hoping you were

going to ask me about wage growth. i think i once said on the show there would be a 3% handle on wage growth. i'm not sure you want to trust my judgment on that. i'm sure the unemployment rate will get down to 3.5%. we will see. alix: s&p futures off about two points yesterday. nasdaq saw heavy selling. those features are off 0.2%. european banks lower. reports that ing in an internal theiraid there license -- license to operate could be threatened. you saw softer data out of rts.pe in german expo canada has their unemployment data out as well.

a key backdrop for nafta and how the central bank might react. oil stained steady. as werket goes nowhere wait for those employment numbers. let's get right to the numbers. michael mckee is at the labor department. michael: wages are up. 201,000 jobs created. unemployment is onunchange d. average hourly earnings rise going to theonth, highest since june 2000 and -- 2009. while there was a big decline in household implement from the unemployment rate was unchanged because the labor force shrank by 469,000. u6 unemployment, the discouraged

workers at their dropped to 7.4%. 34rs worked unchanged at .5. despite complaints about a shortage of construction workers, they still managed to find more than last month. sales r and electronics fell. little impact visible from tariffs. 4100 jobs.cers added of 700 jobs in logging. retailers lost 5100 jobs. 22,000.tation gained it is impossible to find truck ofvers still found 5700

them. stay local government employment continued to drop in the education sector. i don't know if you can tell us not, if there were more jobs in the steel and aluminum industry in they got paid a lot more money, where would it show up? michael: it would show up in the manufacturing hourly earnings, which i would have to look up for you. there were not enough jobs created in those areas to move the needle. alix: a quick look at the markets, good news and that is for the equity markets. s&p futures rolling over. the dollar spiking. 10-year yields popping. hikes being priced in. the three-month euro-dollar dropping like a stone.

subadra rajappa , alan krueger, and michael mckee. alan: this is almost a spot on report given what the forecasts were. what is surprising to me is that labor force participation rate declined. you put that together with slightly stronger wage growth, part of it because of the base, but not all of it, this suggests the fed is on the right course. i think that is going to be the market reaction. i think that is the appropriate reaction to this set of numbers. alix: this is a good day for you. you like shorting the numbers. how quickly will the markets react? subadra: what stands out in the data is the average hourly earnings. we are at 2.9%, the highest we have been in a wild. the bond market is looking for some signs of inflation, some

signs to price higher. we are getting that in the data. this is what fed president john williams was talking about yesterday, which the markets took as a dovish signal. you don't have to go that fast. the markets rallied on that. now you are seeing confirmation that there are nation signs of -- nascent signs of wage pressure. david: what about those which numbers coming you don't think those are more important than the participation numbers? alan: i don't. the fact that labor force participation is down despite seeing wage growth and job growth suggests we are pretty close to full employment. that does not mean the labor market is perfect, but we are around the classic definition of full employment. wages,alk more about the

how widespread are they and the sustainability. michael: they don't give us a percentage breakdown in the tables. david asked about manufacturing workers, 0.2% wage gains. -- gain in production. in the hole sell trade area -- wholesale trade area, we saw gains. those are truck drivers. subadra, you obviously had a good day because you shorted the 10-year. congratulations on that. does this change what the market expects out of the fed? the market was more reluctant to price in changes based on what

the fed was indicating. read tooyou cannot much into one print. you will see it go up one month and then down the next. this number tends to be volatile. when i look at wage pressures, you want to see a consistent rise in wages, not just one month, but a few months consistently good that is the strongest signal that there is inflationary pressure in the market. david: mike? michael: what's interesting to look at is economists thought we ust, insteadweak aug we saw june and july, which are strong and weak both revised lower. when do the labor force gains

start to flatten out. we don't need to hundred thousand jobs a month to keep the unemployment -- 200,000 jobs a month to keep the unemployment rate falling. a large number of people are not going to continue to come into the workforce. if there are jobs out there, we will see the rise in compensation because companies will have to pay up to find those workers. alix: are we in the position where the fed needs to look at them being behind the curve? is this still goldilocks? alan: i think there risk is behind the curve. i don't think it is an enormous risk. the fed has earned credibility of stable inflation. i don't think things will get out of hand. . think there is a little risk

you are looking six months, nine months down the road. that is a risk they need to consider. david: as we look at all of these numbers, we have about $1.5 trillion into the u.s. economy through fiscal stimulus. what is the timing effect of that? to what extent do we get a rise up that is shorter term and we may eventually come back to the mean? subadra: growth will start slowing down next year. we have seen good numbers in the second and third quarter. the momentum will last for the remainder of the year. the real question is next year. does that momentum continue to sustain, or do we see a slowdown? we think we will see a slowdown. ecast is fed's own for calling for a slowdown next year. alix: we still have this gross

divergence and market divergence. in particular with bonds, everywhere you look, the spread has blown out compared to the u.s. how much wider in those spreads go? -- can those spreads go? subadra: not much more. the bund market is doing well. they are tracking 2.1% growth in europe. bund yields look rich. that is where i see the potential for a greater rise in yields. right now, it is sort of a goldilocks scenario in the u.s.. you are starting to get very strong growth, fiscal stimulus, ieldshat is pushing y higher in the u.s.

europe is still playing catch-up. one questionhad for the white house right not on this number, what would it be? michael: do you read into this the idea that tariffs are helping? seehe metals area, we don't any effect. a few jobs have been added. the president can say we are raising wages. we did see an effect in computer manufacturing. if he puts more tariffs on china, we might see more effect there. the auto industry lost jobs. given how to find they are on just-in-time inventory and how often products go across the border before they are finished, that could have an immediate effect. this is good news? they may not be. this is an interesting question

for the white house. david: thank you to subadra rajappa societe generale and jeffries, andf alan krueger will be staying with us. in the meantime, there is some breaking news out of tesla. the chief accounting officer has said he is stepping down. he says there are no disagreements with financial ,eporting or company leadership but he is stepping down. his duties will be taken over by the chief financial officer. there are personal changes at tesla. the stock is moving down almost 6%. alix: what i love about it is the why. he said the pace within the company exceeded expectations, and he also did not like all of the attention. he is also saying he doesn't have any issues with tesla, but the idea that the public

attention was the issue. do you know how long he was there? one month. david: wow. august 2018.hired i don't think i have ever had a job that just lasted a month. david: the pace at tesla, if you have been paying attention, the whole idea is pace. alix: is he talking more about the public pace? david: what whiskey and dope smoking on a podcast? alix: that as well. david: i'm not sure about what tension he is talking about. sebastian salek is here with bloomberg first word news. cleared foras been president trump to announce tariffs on $200 billion worth of chinese products. some of america's test known technology companies and retailers have urged the president to reverse course.

president trump says he would like to shut down the u.s. government to force congress to fund the wall across the mexican border. he probably will not do it before the november election. the president said he did not want to do anything that could chances.blican syria.oops are in summit inoke at a tehran. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek. alix: thank you. just a recap of the jobs numbers. very strong, 201,000 jobs added in august. the unemployment rate is flat at 3.9%. the big number is the average

hourly earnings coming in at 2.9%, trumping expectations. labor force participation shrinks a little bit. if that is not a full employment situation, i'm not sure what is. the market is reflecting that. you get a jump in the dollar. you get a spike in yields. you have s&p futures dropping double what they were before, down about eight points. market, of the equity how can the u.s. leverage even more in monetary policy -- diverge even more in monetary policy? david: that seems to be what we are doing. that is a pretty tight job market. coming up, the latest in our education series, tech ed, how technology is changing the education sector with pearson ceo john fallon.

this is bloomberg. ♪

>> this is "bloomberg daybreak." you are looking at the hewlett-packard enterprise agreement. in the next hour, larry kudlow, white house economic council director. this is bloomberg. ♪ alix: it is that time of year, when students prepare to head back to the classroom. this week, we are hitting the books and learning about different aspects of education and what can be done to improve it. yesterday, we explored preschool education. today, we are zeroing in on education technology, which is changing the way students learn and how teachers do their job. david: on the forefront of that

is john fallon, ceo of pearson, the world's largest education company. welcome. give us a sense of the role of technology in education right now around the world, but particularly the u.s.? john: i thought your piece on the student debt crisis was important because that is at least in part a college completion crisis. americans over the age of 25 who have started college but have nothing to show for it in terms of an associates or bachelors degree. one of the things i think education technology can do is help more students be successful. how do we do that? we make the whole experience much more pleasurable, much more engaging, much more like the

way they engage with other aspects of modern life with you and technology -- video and technology and helping them to see more quickly and how what they are learning can translate to earning and employment. i can give you some specific examples of that. it is really about making it much more personal, much more immediate with feedback. enhancing the productivity of teachers as well. david: do we have any data in that higherws education can be stickier? john: one of the major reasons working adults go back to community college struggle is because they struggle with development on that. they have not learned -- developmental math. they have not learned the map they should have in high school.

we have decades of data that tells us that by using personalized technology, you can dramatically improve completion and success rates. the exciting thing is we are only just at the foothills of what is possible. to give you a specific example, one of the things we have learned over the past decade is not about the machine replacing the human, it is working with it. the best way to solve a math problem is to get a piece of paper, write out the problem, and work it out in real time. we have technology that enables you as a student to take out your phone, take an image of your answer, and send it to the machine. in real-time, it does not just tell you the answer, but it tells you if there are five items, it tells you you got four elements right and one wrong.

it can provide that same feedback to the teacher professor. people talk about precision health care or medicine. this is precision education. it is transformational if we get this right. alix: alan. alan: that is a really exciting development. i have said in the past one reason for optimism about the future is the economy runs on human capital. we can take advantage of the human capital to provide greater access. i am curious, which countries are doing the best job? where are you finding schools willing to experiment, willing to train the teachers to use technology? john: it is helpful having followed the debate this week, pretty much every country in the world is agonizing about the future of education, and every country has its challenges and

things it does well and things it needs to do better. one i would pay special attention to is china. some really interesting, innovative, dynamic things being done in the consumer education space. every parent very focused on making sure, for example, you were talking about early childhood education, real focus on early childhood education. parents not waiting for school districts or governments to come up with the answer. they are taking personal responsibility. in a school in one of the poorest neighborhoods in kenya last week. i am interested to see the way they were using basic technology through a tablet pc to ensure every child through first grade was learning basic reading and numeracy.

as the head of the company that , americaily u.s. based undoubtedly is the world leader in education technology, and some of the most interesting things that are happening, especially in the higher education sector, are happening in the u.s. looking at the growth in online learning, really exciting. alix: thank you very much. john fallon of pearson. alan krueger, great to have you with us for the hour. what i am watching next, this is bloomberg. ♪ bloomberg. ♪

tesla,hat i am watching, chief accounting officer dave morgan announces he is leaving one month into the job. here is a quote from september 4, since i joined tesla on

august 6, the level of attention placed on the company as well as the pace within the company has exceeded my expectations. this has caused me to reconsider my future. i believe strongly tesla, its mission, and its future prospects. i have no disagreement with its leadership or financial reporting. david: the kitchen was too hot. chief accounting officer. that is not good. alix: that is the shortest tenure i have ever seen on a job. david: especially position with that. alix: bloomberg markets, larry kudlow joins on that blowout jobs report. this is bloomberg. ♪ bloomberg. ♪ . .

jonathan: from new york city, i'm jonathan ferro. 30 minutes until the start of trading. this is the countdown to the open.

counting off another solid jobs report, payroll reports and which accelerating. u.s. companies making a last-ditch plea the president to reduce -- reversed course on tariffs. investors waiting for the next market in the trade dispute. , good morning. 30 minutes away from the opening bell with features -12 on the s&p 500 in the treasury market looking soft with yields higher by six basis points in the fx market, the bulk of the flips against the euro-dollar. the board, here comes tesla, the chief accounting officer leaving and the stock down by more than 5%. much more on this story coming up. later in the program. we begin with a top story, the payrolls report. the economy added 200,000