♪ >> the data is important, but it is really the data not right now. it is going to be the data in august, september, when we can say the reopening is behind us. >> our forecast suggests at the end of this year, we will be better than we were projected to be before the pandemic. >> we should all recognize that the economy right now is experiencing a demand shocks the likes of which we have not seen since world war ii. >> a lot of people left the labor force, and the question is, will they start to come back in? >> the last thing in the world i really care about is that wages are going to explode. they are not.

>> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on this jobs day, on radio, on television, across america, extraordinary history will be made. the estimate, one million jobs. i am going to cut to the great debate which spans everything we talk about. professor blanchflower of dartmouth nails it. what will wages do? he says wages will not explode. jonathan: the lower wage group earners come back into the market in a bigger way, that is going to distort the overall number. you have to reverse engineer what happened 12 months ago. separating the two is going to be pretty difficult at 8:30 eastern. the difficulty for me, overwhelmingly the focus on how the market responds to this, both in upside surprise and downside surprise. is there some asymmetric risk around the bond market going into payrolls? tom: our hallmark is to look across equities, bonds,

currencies, and commodities. suddenly, commodities front and center. they are sending a signal. jonathan: copper, all-time highs. it is a demand shock working its way through the commodity market , working its way through the labor market as well. we have heard again repeatedly in the ism, the pmi, there is a struggle to find workers. maybe that is a risk around the headline number. you don't just bring up an excel sheet and type up one million. that is a real process of actually hiring real people, and that is really difficult. tom: the demand shock here, 28 minutes away from this important report, michael mckee with neel kashkari afterwards, to me, the demand shock is the social shock of two americas. one million jobs, and they are only going to one america. lisa: this is the reason why the fed is looking at the dispersion of those job gains in the composition of the. everyone is looking at the fed to look for cues on how to

respond in the market. i want to go back to the danny blanchflower versus ellen zentner distinction. the question of which will these wage increases be sticky that we have seen in response to tight labor markets as we deal with these frictions of bringing the economy back online? danny blanchflower says they are not. ellen zentner says yes, they are. it goes back to the question with respect to savings. will people go out? how much will they spend? tom: jon, you will have the distinction of speaking with the secretary of labor, a feat on the ground mayor of boston, martin walsh. what is the distinction you see in this report that you are going to drive forward to the conversation with the secretary? jonathan: of course, it depends on the numbers, but the tension between republican governors and some of the politics coming out of the administration, the additional $300 in unemployment benefits, the additional amount of money offered to the unemployed in states across america, and pushed back from

south carolina. they believe it disincentivizes work. those benefits don't end until september. the south carolina administration, the governor of south carolina would like that to end in june. montana is moving more quickly. i wonder how this powers up across america in the months to come. i still haven't heard the administration's position on this. i would like to hear that in a couple of hours' time. tom: real yield doesn't give me much. yield just churning in the nominal space. futures are big, and the vix 18.3. savita subramanian is with us, bank of america head of u.s. equity and derivative strategy. it is a shocking call. i am waiting for savita subramanian's entry point to buy the first chair. jonathan: 3800 is the price target on the s&p 500 over at

bank of america. we have moved really quickly in this equity market since early november. i imagine you had some pushback recently. can you shine a light on the conversation you have with clients at the moment? what do they sound like? savita: emphatically bullish. equity sentiment is increasingly euphoric. conversations we have with investors of all types, hedge funds come along only's, individuals -- hedge funds, long only's, individuals, this is what we are hearing from all types of clients. this is how bull markets typically end. i don't know if we see a full-fledged bear market, but we are really well set up for a 5% or 10% pullback, which happens super frequently. 5% pullback's happened three times a year on average. 10% pullbacks happen once a year. we haven't had one since last you to -- last q2.

i just think this is a market you don't necessarily want to enter here. valuations are super stretched. every valuation we look at except for price to free cash flow, the market looks incredibly expensive. sentiment is super bullish. this is a situation where all of our models are getting a net bearish message, whereas 10 years ago, all of our models were giving us a net bullish message. tom: i want to go to the denominator of a lot of these different ratios right now. the bull case is earnings will deliver, that we will see some form of high single digit, double digit growth. that will drive-thru to free cash flow. you say maybe not. is it a question of earnings lack of confidence? savita: no, it is not. i think earnings are going to be strong, but i think you are going to start to see -- i mean, we are looking for 30% earnings

growth this year. but if you look at multiple expansion last year, it was essentially anticipating that. so i think the market gains are likely more in on earnings in the market anticipates. but i think the other thing to watch is free cash flow. if the s&p looks cheap on free cash flow right now, the reason is companies have been under investing, underspending. now you've got guidance -- now you've got capex guidance through the roof. everyone says they will see it on shoring or refurbishing plants. got a different infrastructure bill, which has been encouraging capex. so i think that free cash flow generation is also compromised by the idea that they will be spending more money. then of course, inflation. that is what we are really keeping an ion because if you look at the key theme this earnings season, inflation mentions increased by 800%

year-over-year in terms of companies talking about margin risk, higher costs from either labor or raw materials. i think that is the other risk we haven't necessarily seen play through to margins on earnings. i think earnings are going to be fine this year. i think the market has anticipated a lot of that recovery. but i do think that inflation risk is what we want to watch here. i don't know if it is going to be as transitory. lisa: do markets have a correction if the fed keeps policy where it is for the foreseeable future? savita: i think there are a lot of things that can cause a market correction. look at some of the events we had just over the last few months. we've had de-risking, forced selling of institutional investors that has caused little air pockets in the market, forced selling across other parts of the market. i think liquidity risks for the

s&p are actually higher than average. the other thing i worry about is if you look at where pension funds and big-money money have moved, they have actually moved into a lot of illiquid parts of the market like private equity, spac's, this sort of low interest rate beneficiary. if anything happens to rattle some of the parts of the market, i think what big investors are going to be forced to sell is the s&p 500, the most liquid asset class. that could put undue pressure on equities for totally nonfundamental reasons, for technical reasons. so just the crowding of the s&p 500, the bullish sentiment, the fact that everyone is betting on low rates and higher earnings, i think all of that just sells an environment that is very conducive for a pullback. jonathan: thanks for casting up -- for catching up with us this morning. by definition, a year end price

target cannot be wrong because it is not year end, it is may, and it is not a thing double to have a 10% correction through the summer when you talk about a federal reserve potentially tapering. for a lot of people, that message might resonate with them. tom: and she nuance to it. it is not just a 10% correction come up at these pullbacks of 5% or 10%. we make jokes about it. stoxx crater today. come on. fancy people look at the standard deviation. forget about that. just use what's aveda -- what savita has got. jonathan: this market has moved so quickly, so fast. lisa: savita said something that i think is very important, the idea that investors are increasingly going into un-tradable assets. the idea that if there is a disruption to other markets, you could see an undue selloff.

i think we have seen that before. to what degree has leverage built up in a different kind of way i think will be represented in large-cap equities. jonathan: here we go, seeing around corners. in fact, what you mentioned is interesting because we saw the opposite of that with archegos. there were some longs in particular names and potentially a short on the index. wasn't the s&p actually up that day? lisa: yes, but the whole point is that these other markets, these other influence not related to fundamentals, and of undue influence because of where we are. and yes, it is a corner worth looking at. jonathan: but we are vulnerable, according to the federal reserve, for a shift in risk appetite. isn't that the most ridiculous line? if someone came to you and had written that article, that we are vulnerable to risk appetites shifting -- lisa: third person. jonathan: -- what would you say back to them?

what would you say? tom: it is just the back-and-forth. jonathan: someone trying to write that here at bloomberg, markets over nobl -- markets are vulnerable to a shift in risk appetite. we would be sending it back, saying, what are you doing? tom: what is secretary yellen going to say today at this press conference? lisa: absolutely nothing. tom: she's the secretary of treasury. i guess she says something about the budget. jonathan: i think for the mainstream media, for the political channels, they want to explain away what is about to happen with wages and 18 minutes -- wages in 18 minutes. tom: i think that's fair. jonathan: coming up, jim glassman of j.p. morgan chase. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. president biden stunned european

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>> all of the earnings, it is

hard to underwrite price volatility day-to-day, but i think the demand is going to play out for far longer than people expect as corporations and valuations continue to behave in the way they have behaved over recent months. jonathan: this is a demand shock. charles kantor of neuberger berman there. economists on wall street looking for a number of one million. here's the price action going into the job sprint. the s&p 5 -- the jobs print. the s&p 500 up nine points. euro-dollar unchanged, yields unchanged, too. big moves in the commodity market your to date. crude putting together back to back weekly gains again. down about 0.7% going into the jobs report. tom: an historic moment for this show. all we have done on economics on

"bloomberg surveillance," we start this historic moment with james glassman, j.p. morgan chase commercial banking. we are thrilled he could join us. particularly with his affinity to northwestern and robert gordon. you and professor gordon, the giant of labor economics, have never seen a jobs report like this. what will you search for at 8:30? james: we've never seen a report like this because we have never really seen the collapse we had last year, so i think it is important to remember things are moving very quickly. business is opening up again. so we don't really know. there's a lot of ground to cover here. even with the one million, employment is still 10.5 million below where it would have been had there been no pandemic. so we are getting a good start here. i think we are expecting to see hospitality and leisure, the

education system, school buses driving everywhere. that tells me there's lots of jobs coming back. i think until we get the bulk of the 10.5 million jobs back, it is going to be hard to figure out. we are not really there yet. tom: you led decades ago on teenage employment and unemployment. we all observe that teenage jobs have basically disappeared. what is your observation right now on every window in america having a help wanted sign in it? james: this is a huge demographic thing going on because as people are moving to retirement, there's an outsized group of people moving to retirement. there's a lot of jobs opening up. the people who are really unemployed who worked in bars, restaurants, fitness centers, they don't have the skills for those, so it is weird to hear that we still have 10.5 million jobs to go before we get people back to fully on the market, and yet businesses tell us we've got 7.5 million jobs we can't find

people for. japan knows this story. so do many people in europe. it is a demographic issue. what it tells you is if you are young and looking for a job coming into the market, there's going to be a lot of opportunity. you like to come into a market where the demographics is opening up possibilities. but the problem is you need to get the skills and the training, and that is a big challenge for america. lisa: one thing you do so well is you get in your vw bug and drive around the country, and get a sense of what it looks like on the ground. how much do you buy into this idea that people are not going back to work because of benefits they are still receiving from the government, versus just the friction of a demand shock coming back from where we were a year ago? james: that might have been a good story last summer when unemployment benefits were quite generous come up those things exhausted. people are not coming back because we had these

restrictions on hospitality and leisure, and it is only now that things are opening up. so those jobs, as they open up, you will find a lot of these people stepping back in again. in the early days of the pandemic, it made sense to be generous with people. it did create disincentives, but i don't think that is the reason why we have so much in employment right now. lisa: let's push -- so much unemployment right now. lisa: let's push that forward into wage increases. people are saying that maybe one reason people are staying out of the labor force. they are waiting for wages to rise. do you think they are stickier than what the fed is saying? james: i don't really know. one thing we are noticing is that wages do respond to unemployment and labor market conditions more than you see in prices. all of the different things that are going on, it is very confusing because the pandemic has created all kinds of dislocations, which is hurting

low-wage workers, and the demographics, opening up jobs that people don't have, a lot of my clients are complaining they can't find people, so they are having to offer more pay. that is good news to me because that will solve the problem. but you've got to have the skills and the right skill set to get those jobs. tom: eight minutes away from this report, bridgewater of connecticut puts out a note about inflation worries, and they see the key is to understand this economy from bottom to top. boy, does that sound like the gym glassman prescription we have known for years. what does powell need to know about the bottom of the economy right now? james: i think he's got his hands around this. bottlenecks have happened in the pandemic, so the fed expects there are a lot of price pressures you are seeing in the commodity area. but the fed is saying it's chill. a lot of this will sort out as we get moved on the road.

if you look at futures prices, you will see lumber and a bunch of commodities. the market agrees with the idea that things are going to slow down here. i think the fed's right to be patient because you don't want them having to fundamentally shift policy just because of some short-term problem related to the pandemic. so bottom up, i think the conversation in my world has changed dramatically. everyone is talking about price pressures, but we know why that is happening. there's a lot of bottlenecks and things going on because of the pandemic. i think that will settle down, and personally, i think when the economy is still not back fully to where we want to be, you don't worry about inflation problems when you see a thing like that. i think the fed's right to be patient on the inflation picture. they want to take a long-term view because they want to make sure inflation expectations don't keep going below 2%. that puts a real cap on what they can do in the event of a new crisis. you can only put rates at zero. jonathan: jim, great to catch up

as always. going into the payrolls report five minutes away, your estimate is one million, a nice round number for you. unemployment set to come down from 6% to 5.8%. wage growth year-over-year could be negative. just room number what happened i year ago. a lot of the individuals at the lower end of the workforce, the low-wage earners had to drop out. that since the wage number up. you've got to reverse that going into these numbers. tom: as ellen zentner said, the size of the labor force will be key. it will be interesting to look at the underlying data of these two surveys. lisa: i am looking for how jobs are coming back. i am looking for whether the decline that we have seen in the leisure jobs, the deficit that can still exist, whether that is still getting made up or whether we have a long way to go. jonathan: but i am looking for is how the bond market responds to whatever the number may be.

in the equity market, up 10 points on the s&p 500. we advanced 0.2%. we are looking for one million, and the range is wide. the report on tv and radio next on "bloomberg surveillance." ♪

jonathan: from new york city for our audience worldwide. here comes the jobs report in the united states of america. equity futures positive. with your payrolls report, here is michael mckee. michael: we are waiting for the numbers. they are coming out slowly. we have a real surprise. it looks like a downside number. 266,000. this is going to get wall street's attention. i will tell you that. the unemployment rate does not change. 6.1%. here is a slap in the face to those who thought we would have a massive rebound immediately. let's take a look at the unemployment rates for different groups. that is what the fit is

watching. unemployment for blacks went up by .1%. for hispanics, 7.9%. little changed. it seems some of the story about having trouble finding work were exaggerated, or a lot of people got jobs in the prior month, in march. let me check the revisions. tom: i want you to check the revisions. 30 seconds. we are seeing junk condition moves in the market. jonathan: a big downside surprise delivering a big bid into the bond market. down eight basis points. your two year yield in a basis point. in the equity market come the s&p 500 futures stay positive. there is the move in the bond market. i think we need to be careful with this number. really careful. let me go through some of the reasons. it is clear we are going through a demand shock in this country. it is in every single data point in the united states of america. the number one complaint you see

in the pmi and ism is the ability to hire. labor shortages. i do not know if you should see this report this morning as a reflection of sub optimal demand in the economy, but rather may be some of the technical issues in the labor market. the ability to rehire. we heard it from about vermont and, from the governor of south carolina -- the governor of montana, from the governor of south carolina. tom: this is very odd. michael mckee, this goes to the appendices that are put out. what will you search for in the sub articles by the bureau of labor statistics that explain this stunning change? michael: let's take a quick look at some of this. the interesting thing that is putting a weight on the market is march, 916,000 revised down by 146,000. the february payrolls were revised up by 68,000.

net, you have 78,000 fewer jobs in the prior two months than we thought, and we get this low report. the participation rate, 61.7, does rise .2%, which suggests the labor force rose by 440,000. that is a healthy number. that may suggest the reason the employment rate did not move. we saw 328,000 in the household survey for the newly employed, whereas only one people were reporting they were newly unemployed. the unemployment rate is not really a surprise. the job creation rate is the shock. lisa: i will let you check. i want to bring other aspects here. another big surprise is the average hourly earnings increased much more than people thought. some people were expecting them to decline. i wonder how much this signifies

that some of the lower wage workers were not brought back in because travel has not restarted fully, their store closures, or whether it is these frictions -- there still are closures or whether it is the frictions we are seeing. michael: we do not know what is going on. we know because the lower numbers are not coming back at the rate we thought, that has added to the average hourly earnings this month. they were up 4.2% in march. .3% rise is much smaller. it was expected to be a .4 percent drop. one of the problems is people may want to go back to work in their jobs are not there, or they may be waiting on unemployment checks as a lot of employers are saying, or schools are not opened yet through much of april, and in many places are still closed. people are still dealing with childcare problems and cannot go back to work. what we are seeing is a backup,

not a labor shortage, but a backup in the ability of matching people to jobs. i just looked at the service industry jobs and they were up 234,000. almost all of the jobs are in the service industry. manufacturing fell 18,000 jobs, which is odd because as john mentioned we had the big ism numbers. we are seeing a lot of manufacturing stories about how companies are running full out. that is interesting manufacturing jobs fell 18,000. motor vehicles and parts were down 27,000. that also may be contribute into this. you cannot get chips, and the automakers are shutting down assembly lines. there is 27,000 jobs that probably would have been there but are not this month. jonathan: the bond market bouncing back a little bit. back through 1.50. a clear downside surprise.

at the front end, we are in about a basis point. your equity market still elevated about .2%. i want to go back to something we were discussing all morning. the risk around the number. not about inadequate demand in the economy. it was about the ability to rehire, and why may be people were hanging back and not going back to their jobs. there is one consistent story. maybe just too early to talk about it. i think you have to be careful. there is one consistent story in the data. great demand in the eye sam. the one thing that came up again -- in the ism. the one thing that came up again and again was the difficulty hiring. we heard from republican governors in montana and south carolina they believe the additional unemployment benefits is holding back the recovery. i'm going to catch up with secretary walsh in about an hour. you will speak to the minneapolis fed president. i think they are the epicenter of this debate. is this jobs report a fluke, or

is it evidence some of the spending of last few months is holding back the recovery? michael: that is a real question that has been debated for weeks by employers. we do not have evidence on that. we have anecdotal reports. we also have some of the other reasons i mentioned. it is probably a pump nation of all that. lisa: this has bit -- probably a combination all of all of that. lisa: luckily we get some information from the minneapolis fed president. i believe you have him on the line. michael: good morning, neel. neel kashkari is the president of the minneapolis fed. we have been tied up talking about this big surprise of a number. i know you've not had a chance to digest all of this but does it tell you anything? >> it confirms i feel good about

our policy approach which is outcome based, which is let's allow the labor market to recover, let's not just forecast it will recover, let's actually allow the market to recover, let's get back to maximum employment and 2% inflation, then we are in a position to talk about normalizing monetary policy. as chair powell said we have had one great jobs report. let's not declare victory. let's let the labor market heal and move from there. michael: let me ask you the question jon ferro was posing. is this because of the generous unemployment benefits or is there something else going on? pres. kashkari: we hear all of the same anecdotes. as i was checking my emails i was listening and trying to process the report, to your conversation. i think it is all of the things you talked about. there are people who are on the sidelines are getting generous unemployment and they say we know this will expire in three or four months, and they are individually saying we think the

job market will be strong in three or four months, so why don't i wait? we know the dynamic is there. we know there are massive childcare shortages that are holding back families from fully reentering the workforce. that is disproportionately affecting women. there are still people who are nervous about the virus, who may be have not been vaccinated or need to get back onto mass transit to get to their jobs. they are nervous about getting onto a crowded bus or a crowded subway. there are a number of factors. most of these factors should work themselves out over the next few months if the vaccinations continue, if the variants do not flare backup. that is why i feel confident most of the pricing pressures are going to be transitory and we can get something back to a full economy in the foreseeable future. michael: the word to describe the folks on wall street is gob smacked. you do not seem to be.

you are not surprised? pres. kashkari: it is not that i forecast this. not at all. this is a highly uncertain environment we are in. this is not the financial crisis we experienced. it'll be a different recovery. this is a health-care crisis. it was not simply about lockdown that led to the economic downturn a year ago. we locked ourselves down because we were scared, we were nervous. i certainly have not been to the movies in a year and a half. i am for the first time taking my family on a plane tomorrow because my wife and i have been vaccinated. a lot of this about individuals feeling safe to get back on the buses, to get back on the airplanes. how do we get there so the vast majority of americans feel safe again? i think it will take time. there will be ups and downs. michael: you think it will take significantly higher wages to attract workers? will we see a wage push?

pres. kashkari: to be honest with you, i hope so. i hope we see employers step up. that was one of the things extraordinary about the last recovery. it took 10 years to return to something like maximum employment. i'm not sure we got there before the pandemic hit. it was only in the last two years of the recovery come after many years of business is complaining they cannot find workers, only in the last few years have we finally seen wages pick up for the lowest income workers. businesses will do anything they can do to meet their labor needs. the last thing they want to do is raise wages. if we can get them to say i raised my prices for every other input into my business, maybe i ought to pair fair market wages for my labor. i hope that process happens more quickly. we can draw people back in, return to something like maximum employment and drive this economy. michael: i read a story this morning ahead of the payrolls report that said this jobs

number will be bad news for joe biden because it will make the case we do not need more stimulus. do you think the fact that we get this low hiring level makes the case for more help? pres. kashkari: there is a lot in the pipeline from the cares act and the recovery act that was passed that is still getting out there. personally i think that, combined with monetary policy is probably going to be enough to get through this pandemic and get to something like employment or maximum employment and get the economy recovered. i know the administration and congress are debating other physical measures for longer-term economic competitiveness, and i think those are important debates. in terms of bridging the downturn from the covid crisis, i think there's a lot of stimulus still in the pipeline. monetary policy is still on full throttle to try to get us through this. congress and the administration

can debate their longer-term priorities. michael: speaking of monetary policy on full throttle, last night the fed warned elevated risk appetite is raising risks of what your report called a repricing event. many on wall street blame you for that and say you're no longer taking away the punch bowl but you've become the bartender. what is your reaction to that? pres. kashkari: i have not done the math on how many americans are still out of work. as of yesterday, the number in my head was around 8.5 million americans, call it a million out of work, who were working before the pandemic. the population has grown since then. it is probably closer to nine or 10 million who want to work and should be working who are out of work. my friends on wall street, i hear from them complaining about the fed policies that are mucking up there trading strategies. there are still eight to 10 million americans who want to

work who ought to be working and we need to rebuild this labor market and put them back to work. at that point there will be plenty of time to normalize monetary policy. if we are wrong, if the inflation surprises are not transitory but end up being more persistent, we have the tools to deal with that. we have the tools to tight monetary policy, to keep inflation in check. i'm not worried about that. what i am worried about is not having another tenure recovery for our labor market rate that is devastating for millions of americans and we need to put them back to work more quickly. michael: the question a lot of people ask is deal still need to do 120 million a month or would less get you the same result you're getting now? pres. kashkari: i would say this. quantitative easing is an inexact science. what we are doing now is supporting, certainly the housing market, supporting financial markets, and generally

keeping the yield curve lower, keeping the 10 year down which bleeds through another interest rates across the economy. we are providing a lot of support to accelerate the economy. consummate argue instead of 120, it should be 110? sure. we could have that debate. it is an inexact -- it is an inexact science. once we have seen substantial forward progress to get back to our dual mandate goals, that will be the time to consider changing. i do not see any reason to change something that is working and providing support to the financial system. michael: there is a $40 billion options bet that at jackson hole jay powell will say something to change the perception of when you might taper. what would you say to that timing of when the markets might hear from you? pres. kashkari: i will not speculate on that. i am sure there multibillion dollar bets.

let the markets have their fun and make their bets. getting back to maximum employment. we have said we want to see substantial further progress. today's jobs report, for all of those people who been saying the fit needs to normalize quantitative easing, today's report is an example we have a long way to go. michael: does this change your forecast for what happens the rest of the year in terms of growth in employment? pres. kashkari: i need to look at the details underneath the numbers, which i have not been able to do. my gut tells me no. i am in the camp it may take a few years before we get back to maximum employment. we still have a deep hole. this 10 million number of americans who want to work who are not working, that is still roughly like the great financial crisis. the deepest part of the great financial crisis. there are sectors of the economy that are doing great, there are

sectors of the economy that are reopened, but we are basically in a labor market like we are in in 2009. i do not want it to take 10 years. hopefully we can put this back together in a year or two. i do not want to declare victory prematurely. michael: everybody was predicting we would get the fed inflation target met by the end of the year or early next year. do you think that could be off. maybe it will be harder to pull prices up? pres. kashkari: mathematically it will not be that hard to do it because we have low inflation readings and the numbers are rolling out of the math. between energy prices and arithmetic you will see a short-term pop. note the short-term pop and inflation will not convince me that means underlying inflation is back to 2% above 2%. that is what i'm am going to be focused on. if you look at inflation expectations based on market

measures, the inflation expectations for the next few years have ticked up but they are where they were for the longer horizon. we have a lot of data we need to look at to try to determine is this just math, or is this actually underlying inflation that has ticked up. i will think it will take more time for underlying inflation to take up. -- to tick up. i would be surprised if we think underlying inflation is climbing back up when we still have millions of americans out of work who ought to be working and who will want to work. michael: neel kashkari, president of the minneapolis fed. thank you so much for joining us on this jobs day. we will send it back to you. tom: michael mckee, do not run away. i want to talk to you to get your perspective. we have some first looks as we look at the data. catherine judge at cibc in toronto makes it clear dovish tone intact. ian lyngen with a smart note

says watch the pushing out of the fed lift off. red and green on the screen. nasdaq 100 explodes. spx up .3%. the dow goes the other way. the vix in 18.23. in the yield space, we had a 1.46 print on 10 year for a cup of coffee. back up to 1.51%. six basis points lower on the 10 year yield. jeffrey rosenberg of blackrock will recalibrate off of this stunning report. jeff, how will you presume the fed will recalibrate? jeffrey: the first thing is not any one single report is going to determine the fed change or its projections. the expectations are here for a string of reports. obviously this report has disappointed that. the fed's outlook was not to react to just one report.

that is good news and bad news. we will move on. the report is very much at odds with all of the other data. clearly there is something going on. when we look across the broader ranges of the reopening economy, it is still consistent with a strong recovery in labor markets and the economy. the broader message from the broader range of indicators is what the fed will be looking at for determining their policy. near-term markets will react. there is positioning. near-term that will enter into sentiment. the longer run trajectory is still in place. lisa: bespoke investment saying this is the biggest missed relative to expectations for nonfarm payrolls going back to at least 1998. this is a massive ms. and it speaks to the mystery of this jobs market.

i understand this is one data point, but it is what we have got. is there any conclusion you can draw that the economy is moving slower than people are already pricing in, at least with respect to equities? jeff: again, we need to be careful. this is a very different labor market report. the scale of the numbers we are looking at, the gross inflows and outflows are unprecedented relative to any of those other historical reports. the comparison is unfair. it is something people are missing. underneath the hood, the degree of flows that are coming as a result of the collapse, the closing down of the economy in an unprecedented way, and the reopening of the economy in an unprecedented way paints the variability at a different level. it is unfair to say it is a big

miss. of course it is a big miss, but there are large flows going in and out of this labor market in a very unprecedented way. in that context there are seasonal adjustment factors that have a difficult time processing this unprecedented degree of reopening. i would be careful about that kind of interpretation. to the broader question, it remains that the broader range of indicators are still very supportive of the reopening and the recovery. lisa: some people will say bonds were right and stocks were wrong. bond yields remaining steady while stocks display some believe in inflation, a belief in higher yield. is that your takeaway that bonds are right believing the fed will hold rates and their bond purchases where they are for much longer time than stock investors are prepared for? jeff: i think the comparison of

the topline level is very difficult to make because underneath the stock market is where all of the action is. it is like the dock on the water. everything is underneath. there is a lot of changes in investor viewpoints. on the bond side, the bond side priced in a rapid increase in growth expectations that we saw through march. those repricing's ran their course. there are a lot of technical factors people were pointing at around the decline in interest rates in april. the bond market faces this technical challenge between demand and supply where the largest provider of demand, the fed, is expected at some point to pull back while treasury supply increases in an environment funding that diminish amount -- that

tremendous amount of fiscal stimulus. a lot of what you are seeing is this reflection of a view on inflation. certainly the shape of the curve has steepened. inflation expectation has increased. the pace of the increases has slowed. we price a lot of those changes in expectations in. tom: thank you so much. jeffrey rosenberg with blackrock. the 10 year yield .46 is now up six basis points at 1.51. michael mckee, we have to get to a jobs report on june 3, a fed meeting on june 16. my answer this morning is jerome powell is the smartest guy on the block. he looks like a genius after what we've just seen. michael: he looks pretty good. the wall street economists do not look so good. we have a chart i want to put up quickly. this is the biggest missed on payrolls ever. it is because the scale. tom: a natural disaster.

we have to cut them some slack. michael: we have not seen anybody be this far off since -- ever. you can look at the number of jobs created. tom: what did you learn from neel kashkari? it was talking about other to look at the maps or the economy. -- at the math or the economy. michael: i was told there would be no math. he was making the case the fed was right and jay powell is the smartest guy in the room. the fed saying we will see the data. the data validated their view. tom: to continue your june 16 question, this massively reemphasizes an expost analysis. michael mckee, absolutely fabulous with president kashkari. we will continue on this historic jobs report. we will look at the administration response. marty walsh will join of the labor department. mohamed el-erian from cambridge.

rick rieder from blackrock as well and michael collins. this is really something. stay with us. global wall street reacts to this historic jobs report on bloomberg radio and on bloomberg television. ♪

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set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: from new york city for our audience worldwide, good morning, good morning. the countdown to the open starts right now. equity futures up and a big bit into the bond market. let's get straight to the big issue. a monster downside surprise on the payrolls report. this was the reaction of neel kashkari. president kashkari: i feel good about our policy approach, which is outcome based. let's actually allow the labor market to recover. let's not just forecast it will recover. let's actually allow the labor market to recover, get back to what we call maximum employment and back to 2% inflation, then we are in a position to talk