caroline: from bloomberg's world headquarters in new york, i am caroline hyde. romaine: let's look at where markets ended the day. they started higher. but the ended the day in the red. caroline: we are in the red because of that growing growth concern. producers still grappling with persistent bottlenecks. going to dive deep into the good old ism report. meanwhile, some encouraging

pickup in employment data. one sector being slammed, restaurants, a mask mandate and contagious variants that have people thinking twice about eating out. let's look at the numbers first. the manufacturing data seemed to make people pretty nervous. they sort of rushed to the good old haven that was bonds. joe: even earlier today when we saw the equities risk on, there was this persistent bid into bonds. check out 10 year real rates, record low, extraordinary how persistently this continues to decline. the confidence and assumption that there are no rate hikes happening anytime, or not many rate hikes. pretty striking action continuing to be seen. for more, let's welcome read. what is your take overall on

this data? i guess the headline manufacturing a little bit weaker than expected but some signs of easing maybe? >> i think you guys really hit the nail on the head. that is that, yes, the index eased, but it eased to a strong level of growth. looking at the details, it is clear that input constraints remain a clear problem. but there were some hints of things improving. as one analyst said, supply chains are very slowly filling up. some of the things that i was looking at was that the price gauge eased off, still remains quite high but not as high as it was in june. lead times did ease from that record in june. romaine: when we talk about the

employment index, it seems there is still a little bit of optimism we can read into that. >> this was one giant silver lining, that in june, we saw the index fall into contraction. in the july report, we saw it bump backup into expansionary territory, which is good news ahead of friday's jobs report, with economists expecting about 30,000 manufacturing jobs. caroline: encouraging from that labor read. what was most discouraging. you are saying, look, it is still among and at a good clip, yes, we are still very much above that 50 level of growth. but, was there anything about inventories or details that meant that perhaps some of these bottlenecks are not receding anytime soon?

>> the customer inventories measure actually hit a record low, which really reflects this narrative that we talk about for a couple of weeks now about how companies are having to dive into those inventories because they are not able to keep up with the pace of orders. thinking about some of the industry comments, which is my personal favorite part of the ism report, you had several companies talk about how long they expect these shortages to persist. for instance, there was one panelist that said, while sales are above last year by a good percentage, meeting demand is just not possible. and they do not anticipate these pressures really ending until well into 2022. joe: be jobs report on friday. how much is riding into that,

especially going into the rates conversation. big expectations. how are you thinking about the impact of that? >> we are expecting a pretty solid job gain. analysts are expecting 900,000 jobs to be added in the month. as powell has said, we are still a ways away from a full labor market recovery. but, i think, for instance, the federal reserve governor wallace said today that a couple of solid jobs report might end of spur bore of the taper discussion. that is what we are really looking for, to see if this pace of hiring we have seen in recent months continues for several months going forward. i will be watching that and, more generally, something to keep in mind this particular month is we will get a bit of a boost from seasonal adjustments.

so, education related jobs are set to add a good bit to the overall jobs numbers. keep an eye on that. it might be worth taking a look at private payrolls. caroline: reade pickert, always bringing the energy when it comes to her favorite parts of the ism data. infrastructure moves forward in the senate. more on the $550 billion infusion of federal spending. how it impacts the recovery. this is bloomberg. ♪ ♪

romaine: welcome back. today, we are focused on some of the chokepoints in the economy. we saw that in the gdp report last week. this morning, that ism report. it cooled a bit but still remains pretty high. this is basically about an economy doing well but not necessarily with regards to supply. joe: we could maybe be growing a lot faster if there were not so many shortages. just a smidgen of cooling from this ism prices paid index. you've got to start somewhere. still extremely elevated. that greenline, it is a little bit of an improvement. joining us to discuss, the director of research and analysis at employee america. when you look at the ism, do you

see signs of may be some of these constraints starting to ease? or is it too early to say? >> i think it is too early to say but you are starting to see a couple of signs that i think are encouraging. the reading, which i think will be sensitive to commodity prices moving. but if you look at things like delivery times, which is a good measure of supply chain tightness, how long it takes for you to get your goods delivered after you order them, those typically widen out after the economy is running really hot. we have seen signs that firms are reporting that with less frequency now than previously. you see anecdotes which it is interesting to see how they confirm or disprove the macro story. what you hear is there is progress being made toward actually meeting current demand. current demand is very strong. we are seeing that with new orders and backlogs.

inventories are very low. all of that should be positive for the forward outlook, production outlook, overall economic performance. on the other hand, you are seeing signs that there are areas where supply is seeing signs of catch up. i think that confirms some of the things we learned from industrial production. we are seeing shortages are also places where we are seeing production ramp-up. supply catching up to demand. you are seeing steel production, steel product production has accelerated in recent months. it is still in short supply but we are seeing progress. that is something to look to in the coming months and quarters, if we see that kind of endogenous improvement on the supply side to meet what currently demand is for, areas where there is clear tightness and opacity constraints, where firms are figuring out how to overcome. caroline: do you have like a

figure of how much this friction is holding back economic growth? paying an awful lot of lip service to this this time, but it happens each time the economy runs superhot. >> i think because of the nature of the supply-side constraints are different each time, it is hard to know ahead of time if you will need to know more. maybe a little bit of foresight is helpful to say, maybe this is where outfit -- where output could have been, if you just took it as a raw translation of how much the fiscal stimulus and reopening dynamic just did not translate into inflation, you could create more output to meet the demands of the current economy, then you are obviously talking about an economy running closer to double digits if that was the case.

but that is also like the nature of the beast, in terms of as you try to ramp-up demand so quickly, there will be places where there are dislocations. in some ways, it is good because it fosters new economic activity, new investment, new capital spending to remedy these sorts of problems. that is healthy. we want to have an economy that is able to withstand that in the future. that is part of what i think this infrastructure plan does right, at least conceptually. it could be done at a higher scale. there is an emphasis on investment to create that kind of resilience, create more capacity for the future but you are not caught off-site the moment the economy turns on after a pandemic. romaine: monetary policy, i am looking at that book over your right shoulder, william brighter's great home.

i am not even sure a lot of that applies today. but how does monetary policy sort of shift if at all in this type of environment? >> in some ways, monetary policy cannot say a lot about these types of problems. in some ways, the best thing it can do is do no harm. you can ask yourself, how much is an interest rate increase going to help solve these kind of supply-side problems. businesses trying to scale up so they can meet the current demand versus, ok, if we raise interest rates to try and cool inflation on the demand side, will we unlock new potential in the economy? probably not. with each problem, there is a delicate balance between how much to allow the economy to endogenously improve on the supply-side. but you are seeing signs of that right now, which should be

encouraging, that a lot of these problems can be worked out on their own and do not necessarily require to come in and raise interest rates and keep price check -- keep price pressures intact. joe: do you think the white house is taking seriously enough this idea of expansion of supply-side capacity? >> i think it once since they are at least putting out the prospect that these type of investments can be really good for longer-term standard of living, lower your cost of living. in some ways, there is room to connect the dots even further. we think about something like the used-car shortage. the used-car shortages something that you see and you say, that may be a sign that demand is just too hot. if you look at the guts of it, it is mostly about, we can't produce cars. a lot of companies that liquidated inventory had to buy it back quickly. there is not as resilient a system as you could have if you

had more transportation options. a lot of this is how do you reduce people's cost-of-living over time? if we can't produce cars for a even moment, are there other transportation options? there is actually room to maybe make it a little clearer that, if you have this type of infrastructure, capital stock in place, there is more that is possible, more available to do, and price pressures should not be a problem when people have a greater ability to move from point to point without necessarily relying on a particular mode of transportation. romaine: i am focused on this book, "the secrets of the temple." when i was in high school, my literature professor actually gave us that book. i did not actually read it until probably 10 years later. always great to get your

thoughts. the director of research and analysis over at employee america. coming up, we will continue on this theme, we will talk about food costs, labor shortages, how it is hitting restaurants struggling to keep up with this demand. we spoke to some restaurant tours around new york city about the challenges businesses face as they work to reopen. that is coming up next, right here. ♪

caroline: today, our focus is the frictions we are seeing in the economic recovery, or the brakes on it. the delta variant, for example, remaining front and center in cases today. mask requirements right here in new york city as well, requirements as to whether we have to mask up again.

romaine: it is kind of surreal. a few months ago, everyone was going out to restaurants, starting to talk about going to theaters, packed places again. now we are seeing all this talk about maybe we need to be wearing our masks once again. joe: there are so many crosswinds in the economy. just now, we had a segment about demand is so hot, so there are these supply constraints holding impact. also, there are concerns about the delta wave, whether that will cause a slowdown in consumption. we saw it in the market, stocks higher in the morning. i think we are really in a period where there is a lot of ambiguity about which way the market is going. romaine: we went out and spoke to a couple of restaurant tours. i think you were supposed to do that. joe: no one wanted to talk to me. romaine: we did in all seriousness go out and contacted

much of restaurants around new york city to get their thoughts on reopening, whether they could, how they are reopening, with the crowds are like, what kind of measures they are taking to protect workers. one restaurant i interviewed, on the upper west side called marlowe's bistro. the woman who ran -- the woman who runs it qamar husband is also her -- who runs it, her husband is also her business partner, they talked about how difficult it is, supply chains are so disrupted, costs are so disrupted. >> for me, personally, i was having anxiety of not knowing what was happening or where this is going. it was not as clear in the beginning. no one had answers, everyone was in the same place. but, the difference was, because

everybody was in the same place, we felt we were not alone. it was a sense of a community. romaine: what did you do with all those people? >> we kept them, luckily. in the beginning, my husband said, let's just do some food. because we had some of the workers who were really struggling. more than others, i would say, because there were not options for them at that time. and because when you see fear in someone, and that is a reflection of your own fear, you just don't want to admit it. we were immediately thrown into the idea of just cooking food and donating it to people who are in need. so, it made them feel that they

are working, so you are not focusing on thinking of the problem, or the situation, because everybody, all they were talking about. as you recall, it was covid. so, it gave us a good feeling and it started from there. romaine: this is the first restaurant. we would walk hard every day, see the windows papered up, is marlowe's bistro coming back? what did you have to do to prepare and can everyone back in the door. >> we had to do everything. we had to redo most of the construction work.

but, that is the easiest thing for us. the hardest part is actually getting the staff, and it still is. romaine: getting the staff back. have you had to pay higher wages to get them back? >> yes. we are part of highroad restaurants. i am not sure if you're familiar. even prepend emmett, we are offering certain bonuses or benefits to employees who are retained employees. so we always invest in our staff here. because we see it as an asset. romaine: in addition to staffing costs, we have heard from a lot of other restaurants about the additional costs of food, of supplies, the much higher costs. >> all of us. everything goes up now. we are all connected. again, it is very odd, this

time, you don't feel you are disconnected. the struggle is there for everyone. it is not something i am going through s and individual. -- going through as an individual. it is a shared struggle. we have wine deliveries at 10:00 at night because they are understaffed. they are apologizing. we are understaffed. so, you feel it. there is an understanding what is happening right now, which is an understanding may be among the industry. but, we are open that the patrons as well, because you do want to provide them the same service, the quality before the pandemic. but, it is harder. romaine: that was my conversation with the co-owner of marlowe's bistro.

that is just part of our series we are featuring here on "what'd you miss?" throughout restaurant month in new york city. we left continued coverage. caroline: amazing conversation. joe: "bloomberg technology" is next. romaine: this is bloomberg. ♪ and there you have it -

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>> from the heart of where innovation, money, and power collide in silicon valley and beyond. this is "bloomberg technology" with emily chang. emily: foursquare, and one of the biggest tech deals of the year. square agreeing to buy australia's