>> it's hard to have much of an impatient -- of an inflation problem if wages are still quiescent. >> people will get more comparable coming back to work, but they are demanding more wages to do it. >> the market is a little too complacent about the fed not even talking about talking about tapering. >> 2022 is going to be a year of deceleration. the economy is going to be strong, but it is going to be growing slower. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on a jobs day in a jobs hour

on radio and television, we welcome you worldwide. we welcome you in england and across the nation as well. coming up, david jones. this is a really important discussion we are going to have on linking investment and finance into the market. but this is exciting. taylor, made more so by the miss 30 days ago. taylor: a great chart on the terminal that we will put up for the radio audience as well, that markets love the uncertainty because it means we still get the punch bowl. tom: the punch bowl is out there, and the dynamics of what the fed will do. we heard from bill dudley, we heard from glenn hubbard at columbia. there's a lot of that assumption in the market. we are waiting for the fed to do something. it is not there. tom: at least this will give us -- romaine: at least this will

give us more groundwork for what to expect, assuming the data comes in around what excitations are. i think the question is if we do get another downside miss like last time, that really changes the calculus for a lot of folks. tom: i want to go to the many nuances we see, and carl riccadonna of bloomberg intelligence was good about the two-part jobs report we may witness in 28 minutes. that two-part jobs report yes, the obvious that we see, a lot of jobs are coming back. but beneath it, there is some real nuance, some unsettled trends where b is it is -- where maybe it is a pause of those 8 million unemployed. taylor: ellen zentner said it great. the hours worked per week coming down. michael gapen of barclays seeing the opposite. it really highlights the discrepancy would continue to see. you do want input. you tweak it slightly, you get a broad range of outcomes on this

report. tom: i do want to mention christine lagarde and jerome powell at a summit with the bank of international settlements. very important summit trying to link climate change into the future of central banks. as we speak, the leader of russia speaking at the st. petersburg international i comic forum. many -- international comic forum. many at bloombergtechtv -- international economic forum. many at bloomberg have attended this before. mr. putin speaking on things european this morning. we are going to digress to a data check right now. euro weaker, but much more on where we are in the equity markets. tom: -- romaine: s&p futures up about 0.1 percent. nasdaq futures up as well. really not doing much of anywhere. this is pretty much where we have been camped out around the 4200 level for the past six weeks. a similar story with regards to fixed income. you are looking at a 10 year

yield camped out around the 162 basis point level. the dollar spot index also in stasis as well. to say we are now in a holding pattern, waiting for what is going to transpire in about 26, 27 minutes would be an understatement. tom: the real yield coming into a better number, -0.88% is now -0.82%. look for "the real yield" this afternoon. ferro and -- ferro in england with some serious family matters. i think he's also doing an interview with the tots. they need a coach as well. david jones with us to begin the sour this job stay, with bank of america securities, their global investment strategist. i want to talk about your tour of duty at the fed, and then at the international monetary fund. you wrote many things on taper tantrum's. is the tantrum to come like

anything that you wrote about years ago at the imf? david: well, the thing about tantrums is of course, they are unexpected by their very nature. the work that we did at the imf, even at the fed we were obviously very concerned with these issues. when you start to see the fed move towards tightening, when you see the fed reduce its monetary accommodation, that allows volatility to pick up again. there are mechanisms in which fixed income is self augmenting, and you could have a sudden surge of volatility. when that happens, where that happens, you can never completely predict. tom: the inertial forces here are critical, and you have a subhead in your report where you say the fed is dithering. how does a fed did the ring play into -- fed dithering play into this morning's jobs report? david: the fed wants to see the

whites of the eyes of inflation before they actually make their move, so they have to see these numbers pickup. what we are expecting today is if you are able -- a bull, for instance, is you want to see average hourly earnings very low. that is really what you are going to need to continue with that attitude. romaine: what if we get to a stage where the inflationary pressures do improve, but we start to see a pullback, and at the same time start to realize some of the growth estimates in the future here? what does that do for how the fed is going to calculate its next move? david: that is actually not our expectation. our expectation is that inflation is going to be less transitory than people think,

and more permanent. we also think that growth is peaking, and that in the second half we are going to see some slower economic growth and move more towards the stagflationary outcome. that is our belief, and our market recommendations are based on the framework. if you do see something along what you have just outlined, very high and very low inflation, you are probably going to have to see the fed move up and start to indicate it is going to move faster, start to wind down qe perhaps at an earlier date and a quicker rate, and then you're going to see the back of the yield curve pickup quite true medicaid. taylor: romaine -- yield curve pickup quite dramatically. taylor: romaine and i have a

debate. how does the 10 year yield respond? david: the first half of this year, you could describe it as an inflationary boom. you saw the 30 year running and an annualized loss of close to 30%, which is really just a staggering number. it is the largest loss for the 30 year treasury and 100 years. you see similar numbers on the 10 year as well. so as far as equities, this was very positive for cyclicals, but it did temper some of the upside for technology and corporate bonds as well, and in the second half, we think as we move towards a slower growth outcome and continue to see inflation sick around, we think that then argues for a later cyclical in the equity market, you should start thinking about some of the quality defensive's, particularly staples and utilities. tom: the two halves of 2021, i'm

going to take the two halves back a decade, and they overlay the change of technology. how does technology play into your bank of america work as we come out of this horrific pandemic? does technology advance equity prices or not? david: technology really benefited from low interest rates. if you think of technology, it is correlated with duration in that when interest rates come down, technology outperforms. we think we are now in an environment where interest rates are going to rise, and that necessitates a switch in your asset allocation framework. that means perhaps fading technology a bit. particularly at these valuations. tom: david jones, thank you. don't be a stranger. david jones, global investment strategist with bank of america securities. i think that underscores all of

the movements out there. taylor: you asked me, barbell strategy or not. i think david summed up so much of what we heard, that technology is a long-duration asset. if we start to think of it as a bond-like scenario, when rates go up, that rotation out of bonds, just a little bit out of tech, back into some of those cyclical assets. romaine: the rotation we are seeing is really one of duration here, and that is why you saw that pickup and cyclicals for quite some time. once you start to get not only the data today, but to add to that cpi data, maybe you will see people get more comfortable with that duration with clarity. tom: 20 and its way from jobs, again, i can't emphasize enough -- 20 minutes away from jobs, again, i can't emphasize enough the humbling we saw 30 days ago from jobs. there is the bet in the market? i don't have a clue beside the meme stocks. romaine: i don't either, but one thing i think is different this time, we haven't seen as many

people ratchet up their forecasts the way we saw after the last report. i think that gives you a better sense that people are being a little bit more cautious this time around. i know at bloomberg economics, they are around the 850,000 level. that's what the non-economists seem to think could be the sweet spot they are aiming for. tom: we are at 675,000, and that was 674,000 just a bit ago. you talk about 1000 and change, but with the 70 plus economists, what it takes to move that number is a lot of inner show force -- a lot of inertial force. let's do a data check 15 minutes away from this jobs report. red and green on the screen. tellingly and importantly, the vix has come in from 18.50 to 17.95. the s&p under 4200, 4196, and

always on jobs day. the dow cratering, down 13 points, on our way to the jobs report. please stay with us on bloomberg radio, bloomberg television. it is jobs day. ♪ ritika: with the first word news, i'm ritika gupta. european union regulators have opened a formal investigation into facebook. they want to new if the social network violated competition laws and classified ads. they spoke says it will cooperate with the investigation to show that they are without merit. president biden is turning to taxes as a way to get a compromise agreement on infrastructure. the president has pitched republicans the idea of a 15% minimum tax on u.s. corporations. for now, the president is

setting aside his proposal to raise the corporate tax rate from 21% to 28%. given the is in talks to sell 10% of universal music group to a blank check firm backed by billionaire bill ackman. a deal would value the world's largest music company at more than $14 billion, including debt. vivendi plans to spin off most of its umg later this year and list it in amsterdam. bloomberg has learned apple is working on a new ipad pro with wireless charging. it is also redesigning the ipad many for the first time in -- the ipad mini for the first time in six years. shares of amc are lower. yesterday, the company put its investors on a wild ride. it lost 40% of its market value, then regained half of it. mc raise more than 540 $7 million by selling new stock in the midst of the frenzy -- amc

raised more than $547 million by selling new stock in the midst of the frenzy. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

tom: good morning, everyone come

on a jobs day. lisa and jon off today. with us, romaine bostick and taylor riggs, 12 minutes away from this important report. we are going to go to michael mckee off the report. jeffrey rosenberg will join from blackrock, on fixed income dynamics as well. then we will turn to the equity markets with gina martin adams. i think it is really must watch, must listen through the 9:00 hour. i will speak to the secretary of labor, and yes, i will grill him on the wage dynamics of the nation. right now, red and green on the screen. james glassman joins, with jp morgan and their commercial banking sector, truly with one of the great fingers on the pulse of the nation. the macroeconomics was beaten into you at northwestern years ago, and that is this great

distinction of is this about more hours worked by the employed, or are we going to get to actually more jobs. which is it? james: that is the key, and it is more jobs that really counts the most, which is why the fed says we are far from achieving their maximum employment mandate. the national economy has gotten back to normal, but business is i talked to, everybody is much more efficient. they are able to produce a lot more with limited resources they have. but the key to this whole story is employment, and we hope that is coming. frankly, employment is 10.5 million below where it would have been had there been no pandemic. compared to last february, we are 8 million below, but there's a lot of work to do. tom: i will be addressing that with marty walsh, the circuitry

of labor, after the jobs report. as we look at it, the age old angle is i can't find employees, and i believe i am going to hear from james glassman, raise the wage. james: that's one way to do it. but right now there's a huge dislocation because most people don't have the resources to hang around in manhattan when there's no restaurant job to go to. so it is taking time to get everybody back into those markets again. but really the fundamental problem that we've been dealing with for 10 years is there is a demographic issue. our workforce is not growing as rapidly as it used to, and it is getting harder and harder to find people. you've got a lot of people leaving, and a 65-year-old, it is hard to pick up another career. when you have 8 million jobs

that businesses say they can't find people for, it is throughout the country, throughout the industries. that tells you there is a demographic issue going on. i think the japanese know about this, the italians know about this, but we have never really had to deal with it because we always get immigration when we don't have the workers at home. tom: i look at where we are, and again, we come off the economic mystery at the moment. it comes right over to the market mystery of the yield at a 1.2633% -- a 1.633%. romaine: when you look at some of the data, you would think that rates would be higher, particularly with some of the language we have gotten out of the folks at the fed here. is there asymmetry right now, or -- is there a symmetry right now, or asymmetry, with what the market is pricing right now and what we are seeing out of economic data? james: i don't think so.

the europeans, the japanese, the u.s., we are all buying assets, and that is deliberately to hold down long rates. it is difficult for people to get the timing of when this changes. when you have the fed telling you will we -- telling you we are far from achieving that maximum employment mandate, there seems to be no rush. so there is a dichotomy. rates don't belong here if everything is normal, but we are not normal yet. it is going to take a little but of time to get there. we can sit around and worry about how this is all going to work out, but i think we have been through this many times, and when you've got central banks buying so much sovereign debt, it has a big impact. taylor: i've increasingly heard that as you bring workers back and you raise wages to keep them in, raising wages isn't transitory. it is more sticky, if you will. i am trying to get my words out. how are you thinking about higher wages, and is inflation

transitory? james: i think wages are going to go up, partly because they are having a hard time finding people. that is also encouraging them to think about ways to automate and innovate. i have talked to so many clients in the manufacturing sector that are actually working this through in their own heads, and i think the workers in the hospitality and leisure, it is going to dampen wages, but the truth is workers are going to be doing a lot better because when you're living in a time when there aren't as many workers, it takes time for businesses to figure out how to automate. so they will see benefits, i think. tom: very quickly, dan alpert, who has been absolutely fabulous on the labor economy and his classic book "the age of oversupply," he notes that what is important today is the sectors that will hire. what will you and jp morgan look for? where will the surprise be of

who does the hiring? james: it will be in the areas that have been crushed during the pandemic. the service sector, health care, social services, hospitality and leisure. most of us were able to transition from office to home, but it is the service sector where the lockdowns hit, that is where you are going to see most of the revival, i think. because that is where there's a lot of work to do. tom: jim glassman, thank you so much. it is an historic jobs day just because of the fickle -- the faculties in getting it right. what are your thoughts as we go into this report? taylor: great guests coming up. rick rieder of blackrock, michael collins of pgim, going to be asking them about if this changes anything in the way we invest and the way we think about real yields, those financial conditions, rising inflationary trends, and the magnetism of a 10 year yield at

1.60%. of course, as we migrate into the world of equities, the insistent repeated calls of a sort of reflationary cyclical trade, and big tech. where does that leave us? romaine: the one thing we really haven't seen was cash coming out of the market. this still remains a market that people are deeply invested in, and they are really just waiting for a signal as to where we are going. tom: that is a really important insight away from the news on amc, and i know mike mckee has loaded the boat on gamestop. i'm not sure how that is going. but i look at the idea that you say there is still this did to the market. that is the undeniable fact. romaine: we have seen that continue, and a lot of the strategists have said once you finally do get that clarity from the fed, assuming it is what people expect, then you are going to start to see more movement higher. jon from coventry emails in and said you've got to quit the real yield. we will do that, -0.81%. we've got a much better real yield tone off of claims

yesterday, of adp yesterday. coming up, we focus on the american labor economy. we will go beneath the headline that i with our michael mckee. stay with us on radio, on television. ♪

tom: bloomberg surveillance. it is not a special edition but it is jobs day. taylor riggs and romaine bostick in for lease and jonathan ferro. -- in for lisa abramowicz and jonathan ferro. michael mckee looks at the first glance. you see taylor riggs mount. -- you see taylor riggs moan. i will call a modest disappointment. michael: 550 thousand jobs restored in the month of may. the unemployment rate goes down, about half of what was expected. unemployment was supposed to be at 5.9 according to the bloomberg survey and it was 6.1 in april. the number of jobs created in april, 218,000, even lower than

the initial print. there is a bit of a disappointment in the way the numbers are coming in right now. the total change in private payrolls, 492,000. the estimate was for 610,000. manufacturing in a 23,000, but not the 25,000 we were expecting. the average hourly earnings are up .5%. on a year-over-year basis that makes it a 2% gain, up from .3%. this is what jim glassman was talking about. we are going to see a lot of bouncing around in the numbers as people come in and out of the labor force. leisure and hospitality increases by 292,000. tom: is that a disappointment? michael: it is probably a good number. it is not with the adp number suggested. it is the people at the bars and

restaurants coming back. drinking places up 186,000. tom: i will have you dive into the data. i want to do a data check. features up 12, dow futures up 28. the nasdaq, rebound off of the last three to four days. up .4%. i would note the 10 year yield is trying to find its way. it moved lower. the dollar with weakness as well. there is real activity in the street. michael mckee, i want to go to the labor force participation rate. which for anyone, including martin walsh, is not a successful statistic to see that. we are not participating like the optimists would like to see. michael: it tells you people are not coming back into the labor

force at the rate the fed would like to see. part of the problem is we do not have workers coming in, then you do not get that kind of tight labor markets you would expect to push up wages. there is disappointing numbers. construction employment fell by 20,000. it would be understandable if it did not grow because they running out of workers. the fact that they let 20,000 jobs go away is hard to comprehend. retail trade, 6000 jobs lost. if i were telling you a story i would suggest that is because people are going back to retail stores that do not exist. tom: but i see is the manufacturing perils. the number below survey and the revision of bit below. carl riccadonna absolutely nailed this. taylor: 100%. i want to try to have michael mckee nail it again. can you explain average hourly

earnings? if you are up .5% month over month, i believe a forecasted decline into the service sector as tom talks about manufacturing , you bring the services sector back, how do you get an increase of average hourly earnings? michael: one could be the length of the survey period. probably the most important thing is the composition of people who are going back to work as we get more leisure and hospitality jobs coming back, you would think it would pull down average hourly earnings. that is what happened in april. this time we do not see that and it may be because a lot of those jobs pay at the lower end. we will see if that holds true the last couple of months. it is an encouraging trend but we will have to see several months of it if we want any kind of progress and a clean read because the composition effects we have seen. the participation rate dropped

to 61.6 from 61.7, but the employment to population ratio did pick up just a little bit to 58 from 57.9. that includes the people who are out of the labor force but would like a job. they are not looking for work because maybe they do not think there was any or maybe they are getting extended unemployment benefits. we do see more people coming back into the labor force. the civilian labor force rose on the month. 107,000. that is a very low number. we want to see people coming back into the labor force and that will tell the fed we are healing. romaine: going forward, you expect to see more swings like this where the asymmetry into who is coming back in the labor force, who is dropping out? michael: yes.

the fed is keeping an eye on certain categories to see who is coming in and out of the labor force. women in particular. the fed is looking to see if women are coming back. adult women, people 20 years and over unemployment rate does fall from 5.6% to 5.4%. black unemployment, a big drop to 9.1% from 9.7%. that was in the 5% before the pandemic began. hispanic, seven point 3% from 7.9%. we are seeing improvement but not the kind of improvement the fed is looking for. tom: michael mckee diving into this. i want to underscore the kind of economist to look for it does feel part american labor economy . people let carl riccadonna have nailed it. the tone of the report, the struggle as we come out of this truly national disaster. let me reset and welcome all of

you to our coverage of this historic jobs day. futures up 11, dow futures up 60. taylor riggs with us and romaine bostick as well. lisa abramowicz and jonathan ferro off on other duties. the 10 year yield has barely moved. jeffrey rosenberg, blackrock portfolio manager of their systematic multi-strategy fund. what i see in the calculus of your carnegie mellon is forget about the y axis. what really changes with these back to back labor reports is our estimate along the x axis. how does your ex axis -- how is your x axis change across 2020 one and into next year? jeffrey: it is a very difficult headline number two forecast.

the news on this payroll report is you are seeing signs of supply-side constraints to the labor market, so you're seeing that in some the headline numbers, you are seeing that in some of the industry numbers. go back to the conversation you had a minute ago on average hourly earnings. despite a likely mixed shift that should otherwise pushed average hourly earnings downward , we are seeing that increase. it is a similar story to what we saw in april in the average hourly earnings figure before. for a long time we have ignored these figures because they have been very distorted. the fact you are seeing increases in spite of the mixed shift is going to feed into this narrative of supply-side constraints pushing up wages. the push up in wages will fuel and continue the debate on whether transitory becomes more

permanent because it flows into wage expectations. that is to be seen but i think that is the important news out of this report. taylor: that is exactly why want to go. wages are not transitory, they are stickier. once you raise a wages harder to cut it so you will keep it there . how does this folded to some of the breakevens, inflationary expectations, and full over into a two year yield? jeffrey: the short-term reactions are parsing the headlines slightly disappointing number versus some of the wage numbers. the longer-term dynamic is not only our rage increases sticky, but wage increases are what helps maintain your real purchasing power. maintaining real purchasing power is how companies can afford to get passed through. for the decades in which we heard about the inability to pass through price increases to the final end consumer, now you

are seeing possibly a loosening in that dynamic that will feed into the debate around transitory versus permanent. it is an important contribution to that debate from today's report. romaine: for those folks in the market trying to price this out going forward, we saw earlier in the year there seem to be brought conviction about the pace of monetary policy. you saw the term premium shoot up during the first months of the year. i'm am wondering if today's report and a couple of other economic data points we have had over the last couple of weeks will change anyone's mind? jeffrey: i don't think so. what we have had was a rapid re-estimation of the economic outlook, the fed outlook. that flows through the report, through the market. now we are seeing a much

stronger consolidation. the next phase is the movement towards the impact on tapering. if you look at the totality of today's report, i do not think it changes the market expectations on the trajectory. we will see some signaling to june. mostly the end of the year. i do not think today's report changes the timing. tom: i have to go to the obvious. the ocean of cash out there. it can be overnight reserves, it can be some fancy way you blackrock account for it. what are we doing to the weekend , what we do these summer when we observe this wall of cash doing nothing? jeffrey: the excess liquidity in the market has been the dominant feature of everything we are seeing going on, from financial markets to the meme stock craze. it is not going away anytime

soon. the fed is starting to talk about starting to talk about talking about tapering. may be turning down the pace of increase. for the short run we are still awash with excess liquidity. that helps to support a lot of valuations which you see in the fixed income market across the sectors. very tight levels of spread, low levels of risk premium. it is a reflection of excess liquidity. nothing in today's report will change that. that liquidity is staying with us for a while. taylor: you mentioned valuations. gina martin adams writes in and says the entire wage inflationary pressures are the next thing to hit margins when it comes to some of these companies. is that a valuation concern as well, the squeeze we might see on margins? jeffrey: it is, and in the equity market it is a huge theme because it is about inflation

protection. so much of what we talk about in the fixed income market, yield curve steepeners, how do you find inflation protection for your portfolio? in the equity market it is about margins and identifying which companies have the pricing power to pass through and not absorb that increase in wages, increase in commodity prices, increase in prices across the board, and not affect their margins. that is where you are seeing the winners and losers, you are seeing the inflation basket focus on these companies where there is pricing power and pass-through as an effective place to put investments for this inflationary fear for inflationary hedges. it is about margins and identifying where you have margin compression and margin stability. romaine: when you look at the economic recovery and the pace is on in the u.s. and overlay it with what we are seeing in other developed countries, do you see

a little bit more resynchronization of the recovery story? jeffrey: it is an interesting story. it is less about resynchronization and more about sequencing. the u.s. has been ahead. a lot of this is linked to reopening and the success with vaccinations. europe is expected to catch up. not there quite yet, but that is not so much resynchronization as it is sequencing. u.s. success in vaccination opening first, europe following. not often thought of as a developed economy with respect to how you preface the question. a very different dynamic going on in china. partly a story of sequencing. much earlier into the covid crisis, much earlier in terms of the reopening. now to different phase in terms of its monetary and fiscal and

credit policy, looking to be more on the tighter side. that is not really about synchronous recovery and reopening as much as it is about the sequencing. tom: jeffrey rosenberg, thank you so much. good to have you. i want to point out, you have a lift in the market and a little bit of red and green on the screen. a nice move. taylor, what you have forward? taylor: uncertainty is good news for the equity markets. we will have blackrock's rick rieder and michael collins of pgim fixed income. jill carey hall. we will go across asset and take a look at the dollar weakness. tom: on the data, i want to frame out what we see on this report before we get to michael mckee. dow futures up 74. nasdaq with the move higher as well. the vix in with a vengeance.

18.5 becomes 17.2. i think that is critical as well. you'll read moves. that sustains -- real yield moves. a less the negative deal of what we have seen the last 48 hours. the yen 109.86. euro 1.2152. michael mckee is looking yet what we have wrought. you've had 15 minutes to get deeper. what have you seen? michael: an economy that is returning but not as fast as people anticipated. we did see revisions to the prior two months, another 12,000 jobs found in april and march. 27,000 additional you can add into this 559,000. not as many as people thought.

they thought we would see a much faster rebound then we have seen. the question is is the average hourly earnings rising because of composition effects, who is coming in and out of the labor force, or does it reflect the idea that people are offering more money? it seems they are in the leisure and hospitality space, but that is the lowest paid of all of them. romaine: with regards to supply chain issues we have been talking about, how much of that factors in to some of the numbers we saw, particular with regards to manufacturing jobs? michael: is interesting. the biggest supply chain issue we have had is the shutdown of auto plants because they cannot get the computer chips. the auto plants and another 28,000 jobs during the month. it looks like that may be over with at this point. what may be happening is we are seeing a lot of companies that have business but do not have

parts so they have not added people. we are talking about small contractors who will not show up in big numbers in these statistics. tom: did the june 16 that beating just change? we are trying to get you to ask a question earlier in the session rather than the last question of the session. did the june 16 meeting change 20 minutes ago? michael: i don't think so. $120 million a month is more money going into the economy then we need. it is mostly asset prices. they do want to begin scaling that back. they do not want a taper tantrum. you probably get some hint they will be talking about tapering. i would not think they would do any more than that. tom: i have liked 14 more questions but we cannot do it with the news flow today. michael mckee, thank you so much. reported through the morning on the state of the american economy. dow futures up 82.

futures up 17. gina martin adams has been absolutely spectacular before her attendance at bloomberg intelligence and with bloomberg intelligence, our chief equity strategist has nailed the market. do i want to acquire shares this morning? gina: it depends on what industry you are looking at. i think we are seeing a significant consolidation in the s&p 500. this morning's employment report only confirmed my view with lower-than-expected both and overall employment market gains but faster than expected wage growth. this piles onto an effect we have been noting for the last six weeks of cpi growing but slower than ppi. now wages are starting to get into the game. there is a messy margin outlook emerging for the index, which historically means you want to be much more geared to an

inflation sensitive sector in the commodity space and stay away from consumer and retail. tom: i've got to get ready to talk to the secretary of labor and you are my expert on this. are we seeing the wage dynamics and its relationship to corporations and small business, how is that playing out right now? is it going into margins? are the entrepreneurs losing profit? what is the dynamic? gina: it is all about shortage. it is not just supply chain shortage but it is also labor shortage. you are seeing a loic -- you are seeing a grower -- a growing number of industries now and they cannot attract labor. it is only starting to poke its head into the employment numbers but you certainly see it in company acknowledgment. we saw that through the first quarter earnings season, mentions of inflation pressure, mentions of supply chain risks have emerged to a degree we have

not seen since the midst of the shocking tariff news in early 2018. companies are suggesting to us that they are likely to see these pressures result in some degree of compression from margins. it is not necessarily across the entire index. where you see wage pressures emerge most is tight for the consumer space. consumer durables and apparel, retelling at large are historically the industries where you will see these pressures start to pick away at the margin outlook. we are seeing the spread between ppi and cpi impacting health care, it is impacting other portions of staples. it is impacting utilities companies. there's a lot of different moving parts on inflation. labor is one part of it not the only thing we want to keep our eye on for the index at-large. romaine: talk more about some of

that divergence between the producer side with regards to pricing and the consumer side, particular with regards to staples, which had been in outperform or for a good portion of the year -- which had been an outperformer for a good portion of the year. one of that still provide an attractive opportunity for some investors given the broader dynamics in the market? gina: the trouble with staples is you cannot painted with one brush. there segments that do very well . there segments that do very poorly. it depends on the type of inflation. as i mentioned, the one industry that is most prone to experiencing margin pressure due to average hourly earnings growth which we saw this morning's food and staples retail. that is a component of the staples index. across the rest of the index, some food producers are in a great position because they take the price increase, they pass it

along. they pass it along to the retailer who has to absorb some of it in order to get the food off-the-shelf. the other story is what is happening with household products. that is also a consumer staple. we are seeing household product companies reduce margin forecast. there is a big divergence happening and staples were investors are migrating to food and away from household products . i think margins is the region. staples is at the middle of our school part -- our scorecard. romaine: i want to get your thoughts on the software side of the tech sector, because when we talk about some of the price pressures we have seen anecdotal evidence some companies have not had as much success passing on costs to business consumers. i'm topping in that space. -- i am talking in that space. what happens if we continue to see inflationary pressures

there? gina: software as part of tech which is towards the middle of our scorecard. software does have some sensitivity to rising ppi. it is not unusual to see software company margins take a little bit of a reduction as a result of the fact that ppi are increasing so quickly and consumer prices are not, reflecting the increase in ppi. for software companies is more about business spend than anything else. they have spent an arm on a leg on upgrading their software package given the work from home environment. will that continue into 2022 is a huge question. the other big thing overwhelming the software play is valuations. this is a group where valuations expanded enormously in 2020. valuation trading reached an all-time high. are we going to sustain that in an environment where spending is going elsewhere is a huge question. tom: gina martin adams, chief

equity strategist for bloomberg intelligence. john from coventry emails in. john from coventry notes the dow jones industrial average is less than 1% below its peak. that is been a massive drop out. romaine: the equity markets are hanging in there. we talked about the dow being slightly off its peak. the s&p 500 is down a fraction of a percent. the market is in a place gina had been reiterating that it is consolidating but it is still investing. tom: we finish the our strong and we do it with behavior. we can do all of the theory you want, mmt, fiscal and monetary, but if you generate the motion of cash, it has to go somewhere. ira jersey is expert on this. rather than the long-term, i want to go to what the crew will

talk about over the weekend. are you gloomy, are you worried, do you have fear of the massive and record amount of overnight reserves we see? ira: i am not. there has been a lot of consternation about the amount of reserves in the system as the federal reserve has been buying a lot of assets, a lot of treasury and mortgage bonds. they have flooded the banking sector with this. this is not new. we did this before in 2013, 2015. we have experience doing it. for whatever reason we all forgot. now there are things like the fed reversal facility getting a lot of attention. it is working as advertised and doing the job it is supposed to, which is keep interest rates above zero. barely above zero, but nonetheless keeping rates above zero. romaine: unlike some of the previous cycles, the fed seems to have more components it can

normalize before it finally does get to rates. ira: that is true. one of the things the federal reserve will have to do is stop buying assets. that has to be a necessary condition before the fed thinks about hiking interest rates. the question is when will that happen. when you look at the employment rate today, not quite as good as people were expecting. they were on the path we had were laid out in december where the economy is getting better but it is getting better at an uneven pace. there are sectors, and gina just mentioned this, there are some sectors doing well, some sectors are lagging. until you get a more generalized increase, i think the federal reserve will reign -- the federal reserve will remain cautious. i think they will have enough ammunition to say we do not need the type of accommodation that has been pumping into the

market. we are going to taper into the first quarter of next year but they will lay that out in the summer. tom: thank you so much. too short a visit. ira jersey. you'll see a lot over the weekend, global wall street come on the wall of cash that is out there and deposited. i think the most interesting thing, and this goes back to what we heard from jim glassman and others, including carl riccadonna, the dynamics away from what everybody is focused on. we are guilty of this in new york city. we will not mince any words about it. this insane focus on restaurants and bars. there is a whole other economy besides restaurants and bars. romaine: absolutely. that is what needs to be addressed. it'll be interesting how the administration addresses this. this is something we have heard, that there is an underlying economy that has not been served. tom: this goes to the conversation we will have with martin walsh, secretary of labor

, and goes to what the president will say today. this is not just about short-term solutions. it means policy prescriptions and that dovetails with jerome powell. as i mentioned with jeffrey rosenberg, maybe this morning we change our x axis. romaine: i think a lot will change. if you get some of these proposals marty walsh and president biden are pushing, if it gets through congress it does change the dynamic. tom: 61 days ago i never thought i would see the two jobs reports we have just seen. that will be the core of our discussion with marty walsh and the 9:00 hour. stay with us. taylor: from new york city for our viewers worldwide, i am taylor riggs in for jonathan ferro. "the content of the open -- the

countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ taylor: we begin with the big issue. u.s. payrolls picking up in may but falling short of expectations. joining us to get through the data and the market reaction is michael mckee and abigail doolittle. your reaction? michael: a good news, bad news situation. the bad news is the numbers do not meet expectations, but they are improving. they show the economy in the labor market are improving. 559,000 jobs restored in may. i am calling at that instead of new jobs. 27,000 jobs added to april and march payrolls.

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